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drone-aircraft-in-clouds-wide

As Drones Hit the Sky Lawsuits Predicted to Fly

The rise of Unmanned Aerial Vehicles (“UAV”), also known as drones, is well-documented.  In fact, the global market for non-military drones has recently been estimated as a $2.5 billion industry that is growing at approximately 15 to 20 percent annually.  See Clay Dillow, Get Ready for ‘Drone Nation,’ Fortune, Oct. 27, 2014.  Companies large and small are heavily investing in drone technology and generating business capabilities based on their potential.

While some of the most highly publicized forays into drone usage include Fortune 500 shipping companies – such as Amazon investigating the potential use of drones for their delivery service – less publicized industries are ripe for drone operation.  These industries include agriculture, construction, energy, and mining.  Id.  All of which are industries in which it is easy to imagine the benefits of aerial data.

In fact, the Association for Unmanned Vehicle Systems International predicts that eventually 80 percent of the commercial drone market will relate to agriculture.  See Christopher Doering, Growing Use of Drones Poised to Transform Agriculture, USA Today, Mar. 23, 2014.  This is because a drone’s ability to assist farmers in identifying and analyzing insect problems, watering issues, crop yield, missing cattle, and fertilizing make for a natural union with the industry.

While some farmers may purchase and operate their own drones, it is expected that specialized companies will fill this demand.  One such company is goFarm LLC (“goFarm”)[1], a Michigan-based agri-data business – one of the few companies authorized by the Federal Aviation Administration to legally operate commercial drones in this arena.  GoFarm performs field surveys by drones operating at low altitudes that collect imagery in visible and non-visible bands to determine health of crops.  By analyzing hundreds or thousands of images, goFarm performs detailed assessments of the condition of entire fields and individual plants.

Whether such data is collected by end-user farmers or by specialized third-party companies such as goFarm, all individuals and companies involved need to be cognizant that with great opportunity also comes risk.

Beyond, the obvious risks of property damage that could result from wayward drones, many jurisdictions have, or are in the process of, passing legislation aimed at addressing privacy concerns.  The most recent example of such legislation comes out of Florida.  On May 14, 2015, Florida Governor Rick Scott signed a drone privacy bill into law.  This bill establishes a private right of action for people photographed in their homes by drones without their consent.  Some speculate that this legislation will trigger a wave of litigation.  See Carolina Bolado, New Fla. Drone Privacy Law Could Trigger Litigation Wave, Law360, May 15, 2015.

Legislation similar to that passed in Florida creates substantial risk to drone based companies, even those operating in rural locations typically associated with industries such as agriculture and mining. GoFarm’s Chief Technology Officer, Eric Silberg, explains that “when conducting their assessments, in order to ensure adequate coverage, inevitably pictures are taken of the areas directly surrounding the field goFarm operators are contracted to assess.  These pictures may include property that does not belong to goFarm’s customer, even if the drone never flies over land not belonging to the customer.  This extraneous data is removed during the analysis process, and is not available in any product.”  While companies utilizing drones for photographic purposes will need to alter their operations to comply with any local rules and regulations, inadvertent photographs could result in litigation exposure.

In order to protect themselves from privacy related claims, as well as other liability exposures, companies utilizing drones need to assess their insurance portfolios to ensure adequate coverage.  In particular, companies need to analyze the breadth of their liability policies, including the language of any potentially applicable exclusion contained therein – such as exclusions associated with aviation risk.  This analysis should be conducted with the help of an experienced insurance broker and/or insurance coverage counsel.

In the event that the company’s liability policies are deemed not broad enough to cover its contemplated operations, the company should investigate purchasing UAV coverage.  Given the relative infancy of the drone market, insurance companies are developing and releasing new products associated with drone activity at a breakneck speed.  Consequently, coverages and pricing will likely vary across carriers.  Risk managers should speak with their insurance experts to ensure that an appropriate and cost-effective insurance solution is identified and implemented.


[1] http://www.gofarminc.com.

© 2015 Gilbert LLP
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Apple-Samsung Trade Dress Case Demonstrates Potential Value of Design Patents

A jury awarded Apple more than $1 billion in damages after finding that smartphones sold by Samsung diluted Apple’s trade dress and infringed Apple’s design and utility patents. After a partial retrial limited to determining the appropriate amount of damages, Apple still arose victorious with a $930 million award. Samsung moved for judgment as a matter of law and for a new trial. The district court denied those motions, and Samsung appealed. On May 18, 2015, the Federal Circuit upheld the jury’s verdict of design and utility patent infringement, but reversed the finding of trade dress dilution.

Trade Dress Claims

At issue on appeal was whether Apple’s purported registered and unregistered trade dress associated with its iPhone 3G and 3GS products is functional. Because trademark law gives the trademark owner a “perpetual monopoly,” a design that is functional cannot serve as protectable trade dress. Apple Inc. v. Samsung Elecs. Co., Ltd., No. 14-1335, slip op. at 7 (Fed. Cir. May 18, 2015). The standard is even higher when the owner claims trade dress protection over the configuration of a product, as opposed to product packaging or other forms of trade dress. Slip op. at 8. In fact, the court noted that Apple had not cited a single Ninth Circuit case finding trade dress of a product configuration to be non-functional. Id.

Apple claimed the following elements as its unregistered trade dress:

  • a rectangular product with four evenly rounded corners;
  • a flat, clear surface covering the front of the product;
  • a display screen under the clear surface;
  • substantial black borders above and below the display screen and narrower black borders on either side of the screen; and
  • when the device is on, a row of small dots on the display screen, a matrix of colorful square icons with evenly rounded corners within the display screen, and an unchanging bottom dock of colorful square icons with evenly rounded corners set off from the display’s other icons.

Slip op. at 9. “In general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” Id. (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1982)). Because this case came to the Federal Circuit on appeal from a district court sitting in the Ninth Circuit, the Federal Circuit applied the Ninth Circuit’s Disc Golf test for determining whether a design is functional. Under that test, courts consider whether: (1) the design yields a utilitarian advantage; (2) alternative designs are available; (3) advertising touts the utilitarian advantages of the design; and (4) the particular design results from a comparatively simple or inexpensive method of manufacture. Slip op. at 10. Because this purported trade dress was not registered, Apple had the burden to prove its validity, which required Apple to show that the product features at issue “serve[] no purpose other than identification.” Id. (citing Disc Golf Assoc., Inc. v. Champion Discs, 158 F.3d 1002, 1007 (9th Cir. 1998)). The court of appeals applied those factors and found extensive evidence supporting Samsung’s claim that the alleged trade dress was functional. Slip op. at 12–14.

In addition to the unregistered product configuration discussed above, Apple also asserted a claim based on US Registration 3,470,983, which covered the design details in each of the 16 icons on the iPhone’s home screen framed by the iPhone’s rounded-rectangular shape with silver edges and a black background. Slip op. at 15. Although Apple enjoyed an evidentiary presumption of validity for its registered trade dress, the court again looked to the Disc Golffactors and found that Samsung met its burden of overcoming that presumption and proving the trade dress was functional and the registration invalid. Slip op. at 16. Because the court held Apple’s purported trade dress was functional, it vacated the jury’s verdict on Apple’s claims for trade dress dilution and remanded that portion of the case for further proceedings. Slip op. at 17.

Design Patent Claims

Apple fared better on its design patent claims. Here, Apple asserted three design patents directed to the “front face” (D’677 patent), “beveled front edge” (D’087 patent) and “graphical user interface (GUI)” (D’305 patent) of its iPhone products.

design patent claims - apple samsung

Samsung challenged the court’s claim construction and jury instructions for failing to “ignore[]” functional elements of the designs from the claim scope, such as rectangular form and rounded corners. Slip op. at 20. The court disagreed, finding that Samsung’s proposed rule to eliminate entire elements from the scope of design claims was unsupported by precedent. Id. Rather, the court found that both the claim construction and jury instructions properly focused the infringement analysis on the overall appearance of the claimed design. Id. at 21.

This victory was financially significant for Apple, as the court found they were entitled to Samsung’s entire profits on its infringing smartphones as damages. Like the district court, the court of appeals found that 35 U.S.C. § 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design, rather than an apportionment of damages based only on the infringing aspects of the device (i.e., external features and not internal hardware/software). The court of appeals interpreted Samsung’s argument as imposing an “apportionment” requirement on Apple—a requirement the Federal Circuit previously rejected in Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998). Thus, Apple maintains a claim to at least a significant portion of the $930 million damages award in the case.

Summary and Takeaways

Ultimately, after holding that Apple’s purported trade dress covering elements of the iPhone’s overall shape, black-bordered display screen, and matrix of colorful square icons was invalid, the district court upheld the jury’s verdict that Samsung’s devices infringed Apple’s design patents relating to the iPhone’s overall shape, display screen, and matrix of colorful square icons. The image depicted in Apple’s now-invalid trade dress registration is below on the left. Figures from two of its still-valid design patents are on the right. Although the overlap in what was claimed in these different forms of intellectual property is readily apparent, Apple lost on one set of claims and prevailed on the other.

design patent apple samsung iphone

It remains to be seen how damages associated with the design patent claims differ from damages associated with the now-invalid trade dress claims. But this much is clear: the Federal Circuit has given a reason for companies to reevaluate the role of design patents in their intellectual property portfolios. The time and expense associated with obtaining design patents will not suit all products, but for the right product, they can provide a valuable method of recovery in litigation involving similar product designs.

USCIS Suspends Premium Processing for H-1B Extensions

USCIS has announced that it will suspend premium processing for all H-1B extension petitions between May 26, 2015, and July 27, 2015. It will use this time to implement the Employment Authorization for Certain H-4 Spouses and ensure that these applications for work authorization will be adjudicated in a timely manner.

USCIS

Premium processing allows certain petitions and applications to be expedited. A decision or Request for Evidence (“RFE”) must be issued within 15 calendar days of filing the premium processing request. For this service, USCIS requires a $1,225 filing fee to be included with the petition.

USCIS will continue to process cases filed using premium processing prior to May 26, 2015. If an H-1B extension is filed under premium processing before May 26, 2015, but a decision is not issued within the 15-day period, USCIS will refund the premium processing fee. All other petitions are still eligible for premium processing.

Makeup

Are Cosmetics Gaining Higher Congressional and FDA Scrutiny?

Currently, FDA regulates cosmetics to ensure they are not adulterated or misbranded, but does not have the authority to order cosmetic recalls or require adverse event reporting.  Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) seek to change that.

On April 20, 2015, they introduced the Personal Care Products Safety Act (S.1014). The Act, if passed, would modify Chapter VI of the Federal Food, Drug, and Cosmetic Act (FDCA) to strengthen FDA’s oversight of, and regulatory authority over, cosmetic products.

Title I of the Act (“Cosmetic Safety”) gives FDA authority to order cosmetic recalls, as well as require manufacturers to:

  1. Report adverse events,

  2. Label ingredients not appropriate for children,

  3. Post complete label information (including ingredients and product warnings) online, and

  4. Register their facilities with FDA.

In addition to this significant new authority over manufacturers, the Act also requires FDA to work with industry and consumer groups to annually select and review at least 5 ingredients or non-functional constituents.

The first 5 ingredients, if the law is passed, will be:

  1. Diazolidinyl urea

  2. Lead acetate

  3. Methylene glycol/methanediol/formaldehyde

  4. Propyl paraben

  5. Quaternium-15

Title II of the Act (“Fees Related to Cosmetic Safety”) outlines the costs associated with enforcement of the new standards. With an annual implementation cost estimated at $20.6 million, it is to be funded by annual fees from all registered owners or operators of cosmetic facilities engaged in manufacturing or processing in the United States.

The Act has wide industry support, including the Personal Care Products Council (a 600+ member company trade association), large cosmetics manufacturers, and consumer groups.  Since it was introduced, it has gained two co-sponsors, Senators Barbara Boxer (D-CA) and Amy Klobuchar (D-MN).

The Act is consistent with FDA’s current priorities related to cosmetics.  Two of these priorities have been reporting of adverse events (with the majority of issues seen in hair care products), and maintaining a distinct line between over-the-counter drugs and cosmetics, because cosmetics need not currently undergo the additional scrutiny that OTC drugs must.

More information on the Personal Care Products Safety Act can be found in Senator Feinstein’s statement upon its introduction.

Side view of hacker using multiple computers to steal data at table

Executive Order Provides Sanctions Aimed at Fighting Cyberattacks

On April 1, the president signed Executive Order 13694, which created a new sanctions regime for fighting cyberattacks. This creates opportunities for companies that are facing or may face cyberattacks. The Executive Order provides additional tools for victims of cyberattacks to punish the perpetrators by working with the government. The Executive Order creates framework to allow the government to take action in response to attacks on private companies and take all measures necessary to punish co-conspirators. The Executive Order also creates several issues that individuals and companies with international dealings should consider taking into consideration to avoid potential liability.

The Executive Order grants the Secretary of the Treasury authority to “block” the assets of anyone who conducts or aids “cyber-enabled activities . . . reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States . . . .” The Executive Order also grants the power to sanction any individual or entity that gives support to, assists in anyway, or sponsors such a cyber-attacker. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) will work in coordination with other U.S. government agencies to identify individuals and entities that engage in prohibited cyber activities and designate them for sanctions. Persons designated under this Executive Order will be added to OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN List). U.S. persons are prohibited from engaging in most all transactions with designated individuals and entities named on the SDN List or entities owned by such designated persons. Additionally, designated persons sanctioned under the Executive Order will be blocked from entering the United States.

Given the growing nature of cyberattacks and the Executive Order’s potentially broad reach, individuals and companies with international business should consider taking steps to ensure their business partners do not meet the criteria of cyberattackers. For example, payments from persons designated as cyberattackers will be blocked by U.S. financial institutions and U.S. persons that engage in transactions with such persons could be subject to substantial penalties. Accordingly, U.S. businesses engaged in international transactions should consider updating their compliance programs and screening procedures to ensure they are not dealing with any persons designated on the SDN List, or that are owned 50 percent or more by such designated persons.

The Executive Order represents a turning point for the administration. It signals that the administration will take a more active role in fighting attacks that are often diffuse and difficult to investigate. Barnes & Thornburg has worked with the government to track down hackers who have levied corporate cyberattacks. In light of the Executive Order, there can be little doubt that the government will redouble its efforts to help victim companies, presenting opportunities for companies to work with the government in its efforts to track down and stop the perpetrators. This is good news for fighting cyberattacks.

© 2015 BARNES & THORNBURG LLP

 

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