Tag: Intellectual property

Trade Secrets Bill with Controversial Civil Seizure Provision Passes Senate

Recently, Congress and the courts in the United States have been active in reining in what many have seen as patent system that has run amuck. In the process, they have placed a number of limits on patent holders’ ability to effectively and successfully enforce patents. But as opportunities to enforce intellectual property through patent suits have been narrowed, another IP door appears to be opening.

For several years, Congress has been working on legislation that would, in effect, federalize what until now has been a state-by-state system of trade secret law. The current version, the Defend Trade Secrets Act of 2016 (S. 1890) (“DTSA”), was approved by the Senate on April 4, 2016 with bipartisan support.

The DTSA would operate to expand the existing Economic Espionage Act by, among other things, adopting much of the framework of the Uniform Trade Secrets Act (“UTSA”) and permitting private parties to bring civil trade secret misappropriation actions. UTSA-derived provisions are already in effect in 48 of the 50 states. Thus, while there are some differences between the DTSA and the UTSA, it is unclear whether the DTSA would represent a meaningful departure from existing trade secrets law, at least substantively. There are differing views.

The DTSA’s Civil Seizure Provision

What would almost certainly represent a significant new development is the DTSA’s civil seizure procedure, which is not contemplated under the UTSA. Under the proposed law, upon application by a party asserting theft of trade secrets, a federal court would have the authority to order law enforcement officials to enter land and seize property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” Most strikingly, the bill envisions an ex parteprocess under which seizures would be authorized and executed without any notice to the relevant property owner(s), including third parties—a process that naturally raises due process and Fourth Amendment concerns.

Supporters of the bill point to analogous ex parte seizure provisions contained in the Lanham Act1 (authorizing ex parteseizures of counterfeit goods) and the Copyright Act2 (authorizing ex parte impoundments of documents and things related to copyright infringement)—provisions that have survived constitutional scrutiny.

Moreover, Rule 64 of the Federal Rules of Civil Procedure authorizes prejudgment seizures of property under applicable state law (e.g., writs of replevin or sequestration remedies), and ex parte seizures under such state law provisions have likewise been upheld under many circumstances. Courts have also justified ex parte seizures under the All Writs Act.3 Thus, there is precedent for these types of procedures.

It is also worth noting that ex parte seizure procedures are used in intellectual property cases in numerous jurisdictions outside of the United States. For example, in the United Kingdom, so-called “Anton Piller” orders have been utilized for many years to secure documents and things on an ex parte basis, in exceptional circumstances.

Significant Controversy

Nevertheless, the prospect of ex parte seizures in the trade secrets context has generated significant controversy in the United States. One major source of concern is the fact-intensive nature and overall complexity of trade secrets disputes. What exactly is the information at issue and does it qualify as a trade secret? How, if at all, has it been maintained in secrecy? Does the target of the seizure really have the information in his or her possession, and if so, how was the information obtained? Was reverse engineering involved? And so on.

Even on a preliminary basis, the complex factual issues involved in trade secret disputes may not lend themselves to fair resolution through expedited and non-adversarial ex parte procedures. Indeed, it does not take much imagination to conceive how, in the wrong hands, one-sided ex parte seizure proceedings might be used for improper purposes.

For example, in one Lanham Act counterfeit goods case, the plaintiff’s attorney “ran roughshod over the applicable statutes and rules,” submitting an inaccurate and misleading affidavit and convincing the lower court to authorize a private investigator to conduct the seizure and hand the seized property to the attorney.4 In another, the district court described a scheme in which the plaintiffs obtained seizure orders in a succession of counterfeiting cases, only to dismiss each case approximately one year after seizing the goods, without having ever established that the goods were, in fact, counterfeit.5

Rigorous Procedural Safeguards

In an effort to eliminate potential mischief, and to ensure that the new DTSA scheme passes constitutional muster, the bill’s sponsors have included a number of key procedural safeguards:

  • Ex parte seizures would be reserved for “extraordinary circumstances” only;

  • A seizure order would only issue upon the plaintiff’s filing of an affidavit or verified complaint that sets forth “specific facts” establishing, among other things: (1) immediate and irreparable injury if seizure is not ordered; (2) a likelihood of success on the merits of the trade secret claim; (3) the balance of harms favors the applicant; (4) the identity and location of the material to be seized, with reasonable particularity; and (5) more ordinary procedures (such as a TRO motion under Rule 65) would be ineffective because the seizure target would evade the order or destroy the evidence;

  • The applicant would be required to post a bond sufficient to cover damages should the seizure turn out to be wrongful or excessive;

  • Any seizure order would “provide for the narrowest seizure of property necessary” and would be executed by law enforcement officials;

  • The court would be required to provide specific guidance to the officials executing the seizure that “clearly delineates” the scope of their authority and details how the seizure must be conducted;

  • The court would also be required to schedule an adversarial hearing for the earliest possible time after the seizure was executed, at which hearing the applicant would bear the burden of proof of establishing that the seizure order was proper; and

  • The bill provides for a civil action for damages based on a wrongful or excessive seizure.

Taken together, these safeguards are significant and may reduce the likelihood of erroneous seizure orders and/or abuse of the system. In fact, it is possible that the obstacles to securing a seizure order would be so significant that, as a practical matter, they would eliminate the seizure remedy as an alternative in all but the most egregious scenarios. That appears to be an intended result.

In any event, having navigated the Senate, the DTSA will now pass to the House of Representatives for further consideration. A companion bill to S. 1890, H.R. 3326, was introduced in July 2015 and has enjoyed broad bipartisan support. In an era of partisan rancor, the DTSA may yet be one instance—the ex parte seizure provision notwithstanding—in which legislators find ways to work together across the aisle to achieve results.

1See 15 U.S.C. § 1116(d).
2See 17 U.S.C. § 503(a).
328 U.S.C. § 1651.
4Warner Brothers v. Dae Rim Trading, Inc., 877 F.2d 1120 (2d Cir. 1989).
5NASCAR v. Doe, 584 F. Supp. 2d 824 (W.D.N.C. 2008).

The Smart Phone Patent Saga Continues: Apple Inc. v. Samsung Electronics Co., Ltd., et al.

In a case involving suits, countersuits and multiple appeals by the two giants of the mobile phone space, the US Court of Appeals for the Federal Circuit reversed a jury’s finding of infringement, voiding the accompanying award to Apple of more than $119 million. Apple Inc. v. Samsung Electronics Co., Ltd., et al., Case Nos. 015-1171, -1195, -1994 (Fed. Cir., Feb. 26, 2016) (Dyk, J).

In this case’s third appeal, the Federal Circuit was asked to deal with “the core infringement and invalidity issues with respect to the asserted patents.” At issue were five patents asserted by Apple against Samsung (four of which a jury found to be infringed) and two patents asserted by Samsung against Apple (one of which the same jury found to be infringed).

After the district court entered judgment on the jury verdict ($120 million to Apple and $160,000 to Samsung), both sides appealed.

The Apple Patents

With regard to the Apple “click structure” patent, the Federal Circuit found that no reasonable jury could have concluded that the accused Samsung devices included the claimed “analyzer server,” and reversed the judgment of infringement. Before trial, neither party sought construction of “analyzer server,” agreeing that it should be given its ordinary meaning. On the last scheduled day of the trial, the Federal Circuit construed this term (in the Motorola case) as “a server routine separate from a client that receives data having structures from the client.” The district court adopted this construction and permitted the parties to recall their expert witnesses to provide testimony under this construction. However, the Federal Circuit concluded that Apple failed to present sufficient testimony that the accused software library programs in the Samsung phones ran separately from the programs they served (i.e., the Browser and Messenger applications), as required by the Federal Circuit’s construction. Accordingly, the Federal Circuit reversed the district court’s denial of judgment as a matter of law (JMOL) of non-infringement.

Apple also asserted its “slide to unlock” patent, whereby a user can slide a moving image across the screen with a finger in order to unlock the phone, and its “auto correct” patent, whereby a phone automatically corrects typing errors. At the district court, Samsung sought JMOL that both of these patents were invalid as obvious. The Federal Circuit agreed.

For the “slide to unlock” patent, Apple did not dispute that the prior art combination disclosed all of the claimed features. Rather, Apple argued that the jury could have reasonably found that one of the references taught away from using the “slider toggle” feature, and that a skilled artisan would not have been motivated to combine these references, since the slide toggle reference describes a wall-mounted touch-screen device, not a mobile phone. The Federal Circuit  disagreed, concluding that “[t]he fact that [the prior art reference] notes that users did not prefer the particular design of the slider toggle is not evidence of teaching away.” The Federal Circuit reasoned that a motivation to use the teachings of a particular prior art reference need not be supported by a finding that the feature is the “preferred, or the most desirable” option.

The Federal Circuit also concluded that no reasonable jury could find that the reference is not analogous art since it concerned user interfaces for touch-screen devices, noting that the asserted patent and the reference both disclose essentially the same structure: a touch-screen device with software that allows the user to slide his or her finger across the screen to change interface states.

The Federal Circuit also dismissed Apple’s secondary considerations argument, noting that although Apple identified the unsolved problem as the lack of an “intuitive” method of unlocking a touch-screen portable device, it provided no evidence showing that the asserted need was recognized in the industry. With respect to industry praise, the Court noted that evidence of approval by Apple fans—who may or may not have been skilled in the art—is not legally sufficient.

With respect to copying, the Federal Circuit noted the only evidence of copying went to an unlock mechanism using a fixed starting and ending point for the slide—a feature disclosed in the prior art. Finally, with respect to commercial success, the Federal Circuit reasoned that Apple’s evidence was not sufficient to show a “nexus” between the patented feature and the commercial success of the iPhone. Accordingly, the evidence of secondary considerations was insufficient as a matter of law to overcome the prima facie obviousness case.

Apple also asserted its “universal search” patent that permits a user to search for results from both the phone and the internet based on a single search term. On appeal, the issue was whether the search feature on the Samsung phones “locates” information on the internet. The district court found that Samsung devices do not search the internet, but rather blend data previously retrieved from a Google server and a local database. Apple argued that the plain meaning of the claim covered search information previously downloaded from the internet, a construction the  district court denied. The Federal Circuit agreed with the district court’s denial.

The Samsung Patents

Samsung asserted a patent directed to capturing, compressing and transmitting videos. In its claim construction order, the district court construed “means for transmission”—a means-plus-function claim limitation—to require software in addition to hardware. Samsung argued that the district court erred in its construction because the specification did not “require any software for transmission, and including such software [in addition to hardware] as necessary structure was error.” The Federal Circuit agreed with the district court that the term “transmission” implies communication from one unit to another, and the specification explains that software is necessary to enable such communication. The Federal Circuit noted that software is necessary because hardware alone does nothing without software instructions telling it what to do, and affirmed the district court’s construction of the term and the judgment of non-infringement.

As for Samsung’s patent directed to a camera system for compressing, decompressing and organizing digital files, the jury found that Apple had infringed, and the district court denied Apple’s post-trial motion for JMOL of non-infringement. Apple argued that no reasonable jury could have found that the Apple products met the “compressor” and “decompressor” limitations of the claim because these limitations require components that compress or decompress both still images and videos, and its products use separate and distinct components to compress and decompress still images and videos. The Federal Circuit rejected this argument, finding that Samsung presented testimony that identified a single Apple design chip with circuitry that performs compressing/decompressing methods for both images and videos.

Practice Note: Assuming this decision resolves the utility patent fight, the only remaining battle shifts to the Supreme Court of the United States, which has now agreed to hear Samsung’s appeal on the issue of damages in connection with design patent infringement. See CertAlert in this issue of IP Update.

Article By

Nitin Gambhir
McDermott Will & Emery
© 2016 McDermott Will & Emery

Superman Breyer v. Batman Lourie Battle in Sequenom Petition for Cert.

This is an amplification of my last post on the Sequenom petition for cert. in Sequenom v. Ariosa. I have been arguing for some years that the patent world will never be at rest where diagnostic claims are concerned until the patent eligibility of a simple “If A, then B” claim is addressed by the Fed. Cir. and/or the Supreme Court.

This is the type of claim criticized by Justices Breyer, Souter and Stevens in the “Metabolite Labs dissent” of 2006, when the Court declined to decide the patent-eligibility of a method of detecting a deficiency of cobalamin or folate by assaying a body fluid for an elevated level of homocysteine and correlating the elevated level with a cobalamin or homocysteine deficiency.” Justice Breyer just called the claim a law of nature with a mental step.

Fast forward to 2012 and the Mayo decision (132 S.Ct. 1289), and the Supreme Court invalidated an awkwardly drafted claim that I will re-write here as a method of medical treatment claim:

A method of treating an immunoregulatory disorder by administering a [known drug] so that the metabolite levels of said drug in the blood are between 1 and 10 um/l. (I made up the concentrations, but they represent, on the low side, minimal acceptable efficacy and, on the high side, unacceptable side effects. This is what the Court viewed as a natural phenomenon or correlation).

The Alice decision led the Court to the “Mayo Rule,” that a claim reciting a natural law, phenomenon or abstract idea had to be inspected to see if, in combination with the additional steps, it contained a further inventive concept that would render the claim patent-eligible under s. 101. Little guidance has been provided by the courts or the PTO as to how this rule should be applied in the case of life science claims, particularly to diagnostic claims. (Dicta in Mayo suggested that the Court did not view the claim as directed to a diagnostic method.)

Enter Arisoa. The Fed. Cir. held that the Mayo Rule rendered all the appealed claims patent-ineligible as directed to a natural phenomenon combined with well-known laboratory techniques. And, in fact, most of the appealed claims are broad. Here is claim 1 of US 6,258,540:

  1. A method for detecting a paternally inherited[cffDNA] …which method comprises amplifying a paternally inherited nucleic acid of fetal origin from a serum or plasma sample [from a pregnant female] and detecting the presence of cffDNA in the sample.

That’s it. In an earlier post, I noted that only claim 21 recites that a diagnostic test is carried out of the amplified cffDNA. The final step of this claim reads: “providing a [prenatal] diagnosis based on the presence and/or quantity and/or sequence of the foetal nucleic acid.”

The Federal Circuit opinion below noted that this claim was on appeal but did not mention it again in its opinion. But, in Sequenom’s petition it is the only claim that is reproduced in full. Sequenom states that “Claim 21 situates [the steps of amplification and detection of cffDNA] within a larger diagnostic method that up-ended conventional practice.”

Sequenon knew both that a claim to cffDNA in maternal blood was unpatentable as a natural phenomenon. The isolated and purified cffDNA obtained after amplification and detection is a patent-ineligible natural product thanks to Myriad. So Sequenom’s decided that its best approach was to argue that the isolation and detection steps where not conventional because they had never previously been used to isolate and detect the target biomarker, cffDNA. So the Question posed to the Supreme Court might have been: “Is a method directed to isolating a biomarker from a patient sample where it had not been known by the art to occur, patent-eligible under s. 101?” But that is not exactly how Sequenom saw it in its petition, when it wrote that the Question Presented is:

“Whether a novel method is patent-eligible where; (1) a researcher is the first to discover a natural phenomenon; (2) that unique knowledge motivates him to apply a new combination of known techniques to that discovery, and (3) he hereby achieves a previously impossible result without preempting other uses of that discovery.”

The “Question” is more difficult to interpret than many claims, and raises more questions than it answers. Why does the method have to be novel to meet the requirements of s. 101? What is the “natural phenomenon”? But these are minor quibbles that Judge Breyer seems to have answered to his own satisfaction. In other words, any diagnostic test will be based on the discovery of a natural phenomenon. In this case it is not the correlation between cffDNA and any pathological state, it is the existence of cffDNA in maternal blood. Remember, only claim 21 recites carrying out a diagnostic assay based on the cffDNA, but the claim does not recite the condition that is detected.

To continue, the “unique knowledge” [of cff DNA in maternal blood] motivates researcher to apply a new combination of known techniques to that discovery. But the only conceivable difference between the known techniques used to amplify and detect cffDNA and the known techniques to measure elevated homocysteine, does not lie in the analytic techniques but in the marker that is being detected or measured. In other words, the known techniques are in “new combination” because of the marker to which they are applied.

The last factor in the Sequenom Question requires the researcher to achieve a previously impossible result without preempting other uses of the discovery. This can be no more than an tautological attempt to save the claims that do not recite carrying out a diagnostic test. But what is the impossibility that has been overcome? The previously impossible result can only be a blood test that can yield information about the state of the fetus. And all practitioners soon learn the danger of labeling the results of an invention as previously impossible.

But doesn’t any new diagnostic test achieve a result that is “impossible” before it was discovered? To come full circle, it was surely “impossible” to predict the likelihood of a man’s developing prostate cancer before the PSA assay was discovered – e.g., before it was discovered that PSA was a fairly reliable biomarker for imminent or present prostate cancer. (And there were other uses for the homocysteine assay as well – at least in 2006, lack of preemption would not have saved that claim from Justice Breyer.)

Until the recognition of the significance of a natural correlation by a researcher is given weight as an “unconventional step” per se, the relentless degradation of patent claims for both diagnostic methods and methods of medical treatment [remember my Mayo claim, above] will continue. That’s why Judges Lourie and Moore are my current superheroes, since, in their Ariosa concurrence, they wrote that “the patent’s claims merely ‘rely on or operate by, but do not recite [claim?] a natural phenomenon…and that barring such inventions under s. 101 would mean that ‘nothing in the physical universe would be patent eligible.’” Sequenom wants the Supreme Court to reverse on the basis that the Fed. Cir. is applying the Mayo Rule too broadly. I don’t think they are wrong. I just don’t like the condition of the horse they rode in on.

Article By Warren Woessner of Schwegman, Lundberg & Woessner, P.A.
© 2016 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

Supreme Court Agrees to Review the Appropriate Measure of Design Patent Damages

On March 21, 2016, the Supreme Court agreed to hear Samsung Electronics Co.’s appeal regarding what it must pay Apple Inc. for infringing the design of Apple’s iPhone. This will mark the first time in over a century that the Supreme Court will hear a case involving design patents.

In 2012, a jury found that Samsung infringed Apple utility and design patents and awarded Apple $1.05 billion in damages. On appeal, damages were nearly cut in half to $548 million, which Samsung later agreed to pay to settle the dispute, all the while reserving its right to appeal to the Supreme Court.

Samsung has challenged the Federal Circuit’s decision that the company must pay its entire profits from smartphones that infringed Apple’s design patents, which amounted to $399 million. In making the damages determination, the Federal Circuit relied on Section 289 of the Patent Act, which dates to the 19th century and provides in relevant part: “[w]hoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit.” 35. U.S.C. § 289 (emphasis added).

A number of tech companies, including Google and Facebook, submitted a brief in support of Samsung’s petition. In the brief, those companies argued that Section 289 is outdated and when enacted, failed to contemplate “products with significant functional features at all.” Thus, Section 289 is obsolete and should not govern awards involving the complex products available today.

When the Court hears the case later this term, the specific question it will address is, “Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?”

Article by Kevin P. Moran & Joseph P. Serge of Michael Best & Friedrich LLP
© MICHAEL BEST & FRIEDRICH LLP

March 2016 – gTLD Sunrise Periods Now Open

As first reported in December 2013, the first new generic top-level domains (gTLDs, the group of letters after the “dot” in a domain name) have launched their “Sunrise” registration periods.

As of February 29, Sunrise periods are open for the following new gTLDs:

.HOTELES

.xn--xhq521b (.广东 – Chinese for “guangdong”)

.xn—1qqw23a

(.佛山 – Chinese for “foshan”)

.xn--tckwe

(.コム – Japanese for “.com”)

.barcelona

.mom

.xn—vuq861b (信息 –  for “knowledge”)

ICANN maintains an up-to-date list of all open Sunrise periods here.  This list also provides the closing date of the Sunrise period.  We will endeavor to provide information regarding new gTLD launches via this monthly newsletter, but please refer to the list on ICANN’s website for the most up-to-date information – as the list of approved/launched domains can change daily.

Because new gTLD options will be coming on the market over the next year, brand owners should review the list of new gTLDs (a full list can be found here) to identify those that are of interest.

Article By Monica Riva Talley, Tracy-Gene G. Durkin & Shana L. Olson of Sterne, Kessler, Goldstein & Fox P.L.L.C.

© 2016 Sterne Kessler

Copyright Suit Alleges Huckabee Campaign Lacks “Eye of the Tiger”

Mike Huckabee’s poor performance in the Iowa caucuses – leading to his subsequent withdrawal from the race – isn’t his only concern lately. Huckabee’s presidential campaign organization faces a lawsuit for playing Survivor’s “Eye of the Tiger” without permission during a rally for Kentucky County Clerk Kim Davis, who was released from jail for contempt of court stemming from her refusal to issue marriage certificates to same-sex couples in the wake of the Supreme Court’s landmark ruling. (See Rude Music, Inc. v. Huckabee for President, Inc., No. 15-10396 (N.D. Ill. filed Nov. 18, 2015)). The plaintiff, Rude Music, Inc., owned by Survivor’s guitarist Frank M. Sullivan III, and the publisher of the musical composition, filed a copyright infringement action against Huckabee for President, Inc. in November of 2015. According to the complaint, as Huckabee led Davis from the detention center, a clip from Survivor’s Grammy-winning song “Eye of the Tiger” was used for dramatic effect. Rude Music alleged that this public performance infringed its copyright, and is seeking an injunction barring future unauthorized performances and monetary damages.

Made famous in Rocky III and regularly blasted from stadium speakers to stoke up the home team and the crowd, “Eye of the Tiger” was a number one hit on the Billboard Hot 100 Chart for six weeks in 1982 and features a catchy melody with lyrics that inspire listeners to prepare for life’s battles. In the movie, the song plays over dramatic scenes of Rocky battling opponents in the boxing ring before his triumphant match against Clubber Lang. Not to be outdone, Huckabee’s rally for Mrs. Davis attempted to use these same themes to paint a virtuous battle between a defiant state court clerk versus the federal government.

Like trash talk at a pre-fight weigh-in, Sullivan was quick to respond to the rally on his Facebook page: “NO! We did not grant Kim Davis any rights to use ‘My Tune — The Eye Of The Tiger. I would not grant her the rights to use Charmin!”….” After the suit was filed, Mike Huckabee responded, calling the lawsuit “very vindictive” and renewed his support for Mrs. Davis’s position. Unsurprisingly, Sullivan expressed his opposing view and went on to state that he does not “like mixing rock and roll with politics; they do not go hand in hand.”

In his Answer to Rude Music’s complaint, Huckabee asserted several affirmative defenses to the infringement claim, including fair use (arguing that his alleged use of a one-minute clip of the song during a noncommercial and religious rally should constitute fair use). Interestingly, Huckabee also counterpuched that the rally for Kim Davis was not a campaign event at all, rather a religious assembly within the meaning of Section 110(3) of the Copyright Act. Certain provisions of the Copyright Act (17 U.S.C. § 110(3)) create an exemption to copyright requirements for the “performance of a nondramatic literary or musical work or of a dramatic-musical work of a religious nature, or display of a work, in the course of services at a place of worship or other religious assembly.”  Huckabee claims that because “Eye of the Tiger” isn’t incorporated or performed in musical theater, it is a nondramatic musical work for purposes of the Copyright Act. Therefore, because he considers the Davis rally to be a “religious assembly,” the alleged improper use of the song does not constitute infringement under the Copyright Act.

Apparently “Eye of the Tiger” is a popular tune along the campaign trail, as this isn’t the first time that Rude Music filed a lawsuit against a presidential candidate for using its song at a rally. Newt Gingrich was sued by Rude Music in 2012 after Rude Music claimed that Gingrich played “Eye of the Tiger” at events going back as far as 2009. In any case, Huckabee will still need to start “risin’ up to the challenge of [his] rival,” only now his opponent is an 80s rock star instead of other Republican hopefuls, since, as the Iowa Caucus results proved, Huckabee wasn’t a Survivor after all.

© 2016 Proskauer Rose LLP.

Copyright Suit Alleges Huckabee Campaign Lacks "Eye of the Tiger"

Mike Huckabee’s poor performance in the Iowa caucuses – leading to his subsequent withdrawal from the race – isn’t his only concern lately. Huckabee’s presidential campaign organization faces a lawsuit for playing Survivor’s “Eye of the Tiger” without permission during a rally for Kentucky County Clerk Kim Davis, who was released from jail for contempt of court stemming from her refusal to issue marriage certificates to same-sex couples in the wake of the Supreme Court’s landmark ruling. (See Rude Music, Inc. v. Huckabee for President, Inc., No. 15-10396 (N.D. Ill. filed Nov. 18, 2015)). The plaintiff, Rude Music, Inc., owned by Survivor’s guitarist Frank M. Sullivan III, and the publisher of the musical composition, filed a copyright infringement action against Huckabee for President, Inc. in November of 2015. According to the complaint, as Huckabee led Davis from the detention center, a clip from Survivor’s Grammy-winning song “Eye of the Tiger” was used for dramatic effect. Rude Music alleged that this public performance infringed its copyright, and is seeking an injunction barring future unauthorized performances and monetary damages.

Made famous in Rocky III and regularly blasted from stadium speakers to stoke up the home team and the crowd, “Eye of the Tiger” was a number one hit on the Billboard Hot 100 Chart for six weeks in 1982 and features a catchy melody with lyrics that inspire listeners to prepare for life’s battles. In the movie, the song plays over dramatic scenes of Rocky battling opponents in the boxing ring before his triumphant match against Clubber Lang. Not to be outdone, Huckabee’s rally for Mrs. Davis attempted to use these same themes to paint a virtuous battle between a defiant state court clerk versus the federal government.

Like trash talk at a pre-fight weigh-in, Sullivan was quick to respond to the rally on his Facebook page: “NO! We did not grant Kim Davis any rights to use ‘My Tune — The Eye Of The Tiger. I would not grant her the rights to use Charmin!”….” After the suit was filed, Mike Huckabee responded, calling the lawsuit “very vindictive” and renewed his support for Mrs. Davis’s position. Unsurprisingly, Sullivan expressed his opposing view and went on to state that he does not “like mixing rock and roll with politics; they do not go hand in hand.”

In his Answer to Rude Music’s complaint, Huckabee asserted several affirmative defenses to the infringement claim, including fair use (arguing that his alleged use of a one-minute clip of the song during a noncommercial and religious rally should constitute fair use). Interestingly, Huckabee also counterpuched that the rally for Kim Davis was not a campaign event at all, rather a religious assembly within the meaning of Section 110(3) of the Copyright Act. Certain provisions of the Copyright Act (17 U.S.C. § 110(3)) create an exemption to copyright requirements for the “performance of a nondramatic literary or musical work or of a dramatic-musical work of a religious nature, or display of a work, in the course of services at a place of worship or other religious assembly.”  Huckabee claims that because “Eye of the Tiger” isn’t incorporated or performed in musical theater, it is a nondramatic musical work for purposes of the Copyright Act. Therefore, because he considers the Davis rally to be a “religious assembly,” the alleged improper use of the song does not constitute infringement under the Copyright Act.

Apparently “Eye of the Tiger” is a popular tune along the campaign trail, as this isn’t the first time that Rude Music filed a lawsuit against a presidential candidate for using its song at a rally. Newt Gingrich was sued by Rude Music in 2012 after Rude Music claimed that Gingrich played “Eye of the Tiger” at events going back as far as 2009. In any case, Huckabee will still need to start “risin’ up to the challenge of [his] rival,” only now his opponent is an 80s rock star instead of other Republican hopefuls, since, as the Iowa Caucus results proved, Huckabee wasn’t a Survivor after all.

© 2016 Proskauer Rose LLP.

February 2016 – gTLD Sunrise Periods Now Open

As first reported in our December 2013 newsletter, the first new generic top-level domains (gTLDs, the group of letters after the “dot” in a domain name) have launched their “Sunrise” registration periods.

As of December 31, Sunrise periods are open for the following new gTLDs:

  • .YACHTS
  • .BOATS
  • .xn--tckwe (.コム – Japanese for “.com”)
  • .HOTELES
  • .BET
  • .BIBLE
  • .barcelona
  • .PET
  • .istanbul
  • .ist

ICANN maintains an up-to-date list of all open Sunrise periods here. This list also provides the closing date of the Sunrise period. We will endeavor to provide information regarding new gTLD launches via this monthly newsletter, but please refer to the list on ICANN’s website for the most up-to-date information – as the list of approved/launched domains can change daily.

Because new gTLD options will be coming on the market over the next year, brand owners should review the list of new gTLDs to identify those that are of interest.

Article By Monica Riva Talley, Tracy-Gene G. Durkin & Ivy Clarice Estoesta of Sterne, Kessler, Goldstein & Fox P.L.L.C.
© 2016 Sterne Kessler

Criminal or Civil Liability for Sharing Streaming Accounts?

We are at the beginning of a new era of media consumption.  Traditional content delivery systems such as satellite and cable television are hemorrhaging customers to a wave of “cord cutting” that has been facilitated by the availability of streaming services such as Hulu Plus, Netflix and HBO Go.[1]  Now that smart televisions are becoming more common place, cord cutting is no longer limited to the technologically hip youth, as accessing a Netflix account is as easy as changing the channel.

1-26-2016 3-38-45 PM​But with the proliferation of streaming services, users have elected to share the benefits of the accounts―i.e. their passwords―with others.  A staggering 46% of accountholders admit to sharing their streaming account password with people outside of their household.[2]  This raises some interesting questions of federal and state criminal, tort and contract laws.  What sort of liability might someone have for sharing their account with friends or family?  For using a shared account of a friend?

But in order to figure out if sharing of passwords violates the law, we first have to see if it violates the streaming service’s terms of service.

Netflix

Netflix is arguably the pioneer in password sharing.  For years Netflix has allowed multiple user profiles to better enable its suggestion algorithm to tailor its offerings to a targeted user.  By tactical use of user profiles, parents can limit the likelihood that Netflix will suggest the latest episode of Barney and Friends based on their child’s viewing of Teletubbies the week before.[3]  Netflix has also long offered the ability to stream its services on a limited number of devices simultaneously. [4]  Netflix’s commitment to account sharing was recently echoed by its CEO Reed Hastings who stated:  “As kids move on in their life, they like to have control of their life, and as they have an income, we see them separately subscribe. It really hasn’t been a problem.”[5]  But Netflix’s position on non-family members sharing the passwords has been a little more vague.

Hulu Plus

Hulu has not taken the vocal stance on account sharing that Netflix has.  Though it is apparent that Hulu has at least contemplated password sharing to some degree.  In section 5 of its terms of use, Hulu acknowledges that people within the same household are likely to use the account, and holds the primary account holder accountable  for their activities:  “You are responsible for all use of your account, including use of your account by other members of your household. By allowing others to access your account, you agree to be responsible for ensuring that they comply with these Terms and you agree to be responsible for their activity using the Services.”[6]  However unlike Netflix, Hulu Plus accounts are limited to streaming on one device at a time, which minimizes the advantage of sharing.

HBO Go

Like Netflix, HBO Go specifically contemplates the idea of multiple users within the same household.  HBO has two tiers of accounts.  The first is a “Registered Account” which consists of account holders who meet certain eligibility criteria, namely, they subscribe to HBO and HBO On Demand or Cinemax and Cinemax on Demand.[7]  These Registered Account holders can create “Household Member Accounts” for members of their household.  The Register Account serves as the master account for the Household Member Accounts and can control what content the junior accounts have access to.  However, despite the ability to create Household Member Accounts, HBO Go appears to take an antagonistic view of sharing the master account password itself.  HBO Go’s terms of service specifically state that “You are responsible for all activity occurring under your Registered Account and any Subaccount authorized by you, including maintaining the confidentiality of each Username and Password, and you agree that any household member account users authorized by you will not permit the disclosure of any Username and Password to any person.”   Contrast the above statements to Hulu’s request to “Please keep your password confidential,” and it is apparent that one is an order, and the other a request.

But statements by HBO’s CEO bely the strict terms of their agreement. In an interview with Buzzfeed, HBO’s CEO stated:  “It’s not that we’re ignoring it, and we’re looking at different ways to affect password sharing. I’m simply telling you: it’s not a fundamental problem, and the externality of it is that it presents the brand to more and more people, and gives them an opportunity hopefully to become addicted to it. What we’re in the business of doing is building addicts, of building video addicts. The way we do that is by exposing our product, our brand, our shows, to more and more people.”[8]

So HBO intends on building a legion of addicts, and with shows like Game of Thrones, they are well on their way to being the Pablo Escobar of digital content.  But like any drug dealer, the first sample is free, but the second is going to cost you.  No one knows for sure when HBO will start demanding money for that next “hit.”

It is apparent that these three streaming services all authorize sharing of an account among members of a household. A reasonable argument could be made that this extends to college age children who are away from the home during the school year, but whose primary residence is still their family home.

But what about sharing the account with third parties?  What liability might an individual incur if they use a friend’s account with the friend’s permission?  Arguably such activity goes beyond the terms of service of a user’s account, and presents some interesting questions of both state and federal law.

Trouble in Tennessee

In 2011, Tennessee, the home of Nashville and the birthplace of country music, became one of the first states to formally criminalize user account sharing.  HB1783, effective July 1, 2011, modifies Tennessee Code Annotated Section 39-11-106 subdivision 35 by adding “entertainment subscription service” to the list of services protected by its theft of services offence.[9]   Section 39-14-104 defines theft of services as any person who: “(1) intentionally obtains services by deception, fraud, coercion, false pretense or any other means to avoid payment for the service; (2) having control over the disposition of services to others, knowingly diverts those services to the person’s own benefit or to the benefit of another not entitled thereto.”  The punishment for violation of this provision ranges from a misdemeanor to a felony depending on the value of the services rendered.

The first provision of 39-14-104 targets the friend who is using the primary account holder’s password without permission from the streaming service.  The person has “obtain[ed] services by . . . any other means to avoid payment for the service.”  The second provision targets the account holder who has shared his password with a friend.  That person has control of a subscription service and diverts it to his friend, who is not entitled to the service.

California is Not the Golden State For Sharing

It is unsurprising that California would not take kindly to people sharing the fruits of its most visible industry.  California Penal Code Section 502 is an “anti-hacking” statute that covers a broad variety of activities.  To the extent that sharing a primary accountholder’s password with people outside of the household is beyond the scope of the terms of use of the streaming service, there are several provisions of Section 502 that would criminalize such activity (along with giving a private cause of action), including subsections: (1) “knowingly accesses and without permission  . . . otherwise uses any data in order to . . . wrongfully control or obtain . . . data;” (3) “knowingly and without permission uses or causes to be used computer services;” (6) “knowingly and without permission provides or assists in providing a means of accessing a computer, computer system, or computer network in violation of this section;”  and (7) “knowingly and without permission accesses or causes to be accessed any computer, computer system or computer network.”  Violation of these sections can range from a misdemeanor to a felony.

Like the Tennessee law, sections 1, 3 and 7 apply to the friend who is using the account without permission of the streaming service.  Section 6 applies to the account holder who is sharing the account with a friend without the permission of the streaming service.

It Might Be A Federal Offense

The Computer Fraud and Abuse Act offers broad protection against unauthorized access to computers.  It has been amended a half dozen times in its nearly 20 year history, and likely covers password sharing that is beyond the scope of the terms of service of a streaming account.

18 U.S.C. § 1030(a)(2) makes it a crime to “intentionally access a computer without authorization or exceeds authorized access, and thereby obtains . . . (c) information from any protected computer.”  A “protected computer” is defined by 18 U.S.C. § 1030(e)(2) as any computer “which is used in or affecting interstate or foreign commerce or communication.”  A streaming service’s streaming servers undoubtedly qualify as a protected computer under the Act as they stream their stored media all across the country.

Using a third party’s password to access a streaming service clearly “exceeds authorized access” as it is beyond the scope of the access defined in Netflix, Hulu Plus, or HBO Go’s terms of use.  The user of the password is “obtaining information”―the streamed media―from the protected computer.

An interesting wrinkle is that the Act arguably has a jurisdictional requirement of $5,000 in damages over the course of one year.  18 U.S.C. § 1030(c)(4).   This would probably be hard for a streaming site to demonstrate, especially against an individual who is making use of a friend’s password.  However, it would be easier to meet the limit for the primary account holder who decided to share the account with a group of friends.  All it takes is sharing a $20 dollar a month account with 21 people to meet the $5,000 threshold.

So what does all of this mean?  Sharing an account with members of a household is just fine under Netflix, Hulu Plus, and HBO Go’s terms of use.  Arguably this extends to children of the account holder who are away at school but whose primary residence is still the family home.

But sharing the password with people outside of the household or using someone else’s account opens up the potential for liability.  Not only does sharing a password expose the primary account holder to the possibility of a claim of breach of contract, it also gives rise to various causes of action under both state and federal law for everyone involved.

At the moment none of the sharing services seem to care all that much, and it would be easy for them to mitigate their exposure to shared accounts by simply limiting the number of devices that the account can be used on simultaneously.  Some seem to view account sharing as a marketing tool.  But all that may change without notice.  Sharer beware.

Article By Drew Wilson of Proskauer Rose LLP

© 2016 Proskauer Rose LLP.

[1] Todd Spangler, Cord-Cutting Gets Ugly: U.S. Pay-TV Sector Drops 566,000 Customers in Q2, Variety (August 8, 2015).

[2] Is it Okay to Share Log-Ins for Amazon Prime, HBO Go, Hulu Plus, or Netflix?, Consumerreports.org (Jan. 28, 2015).

[3] Netflix User Profiles, Netflix (Jan 14, 2016) https://help.netflix.com/en/node/10421.

[4] Terms of Use, Netflix (Jan 14, 2016) https://help.netflix.com/legal/termsofuse.

[5] Sarah Perez, Netflix CEO Says Account Sharing is OK, TechCrunch (Jan 11, 2016),

[6] Terms of Use, Hulu (Jan 14, 2016), http://www.hulu.com/terms

[7] Terms of Use, HBO Go (Jan. 14, 2016), http://www.hbogo.com/#terms/

[8] Greg Kumparak, HBO Doesnt Care if You Share Your HBO Go Acccount . . . For Now, TechCrunch (Jan 20, 2014),

[9] http://www.capitol.tn.gov/Bills/107/Bill/HB1783.pdf

Top Patent Law Stories In 2015

There was a lot of IP action in 2015 – much involving the Fed. Cir. and Supreme Court’s resolution of cases in progress in 2014. In no particular order, I pick:

top patent stories of 20151.  Ariosa v Sequenom. This Fed. Cir. decision that a method for isolating “cffDNA” from maternal blood is no more than a natural phenomenon was a big step backwards for the development of patent law in the area of “precision medicine” and clouds the future patent-eligibility of both natural products and methods of diagnosis and treatment. It is a pick to click with the Supreme Court. (There was also a PTO “July 2015 Update” of the December 2014 s. 101 Guidelines that really did not clarify anything.)

2.  Biosimilars Hit the Shelves. In April, the FDA finalized its biosimilars guidance and Sandoz soon launched the first biosimilar, a generic version of Neuprogen.

3.  Nautilus v Biosig. The Supreme Court redefined the “indefiniteness standard” of s. 112(2) so that a claim term must be reasonably certain to the POSA, not simply amenable to construction. In Dow v. Nova, this new standard compelled invalidation of the claims-in-suit.

4.  The Rise of the PTAB. While it seems clear that the Fed. Cir. does not want to review every decision made by the PTAB in IPR, it released important decisions relating to its authority. In re Cuozzo, the court preserved the application of the PTO’s broadest reasonable claim construction rule in IPRs. In Merck v. Gnossis, the court affirmed that it would review PTAB decisions under the deferential “substantial evidence” standard, and not review PTAB decisions for proper application of the preponderance of the evidence standard.

5.  Obviousness Post-KSR. With the Supreme Court’s rejection of the teaching-suggestion-motivation by the art requirement, the Fed. Cir. has been developing the legal standards around obviousness questions derived from decisions that the Supreme Court left intact. These include a greater reliance on evaluating whether or not the art “teaches away” from the claimed invention, and evidence tending to show that hindsight was employed by the lower court or the Board. Closer evaluations of secondary considerations such as commercial success, failure of others, long-felt need, etc. are appearing in recent decisions. For example, see Judge Newman’s dissent in Merck v. Gnossis, Appeal no. 2014-1779 (Fed. Cir. 2015); see also Shire v. Anneal.

6.  Teva v. Sandoz Reverses Cybor. Fed. Cir. can still review questions of law de novo, but must give deference to the lower court’s findings of fact.

7.  Kimbel v. Marvel. In this “Spiderman” decision, the S. Ct. upheld the viability of Brulotte v. Thys: “No royalties for you” patentee/licensee, after the patents have expired. Impact: not huge, since patentees have been designing work-arounds for years.

8.  The Gradual but Steady Demise of Invalidations Based on Inequitable Conduct. Even though the decisions on appeals post-Therasense affirmed findings of IC about half the time, there were no important decisions involving IC in 2015. Either it is being pled less or being dismissed earlier in the proceedings. The Fed. Cir. earlier had upheld the invalidation of an Apotex patent, and Apotex has petitioned for cert., calling the Therasense decision just one more rigid Fed. Cir. rule, but I don’t think the Supreme Court will bite.

9.  The Gaggle of Decisions on Divided Infringement. This includes Akami v. Limelight (direct infringement can involve multiple actors if one “mastermind” controls their actions), Commil v. Cisco (belief in invalidity does not negate intent to induce infringement), Life Techs. Corp. v. Promega (self-active inducement under 271(f)(1)) and others that never quite captured my interest.

10.  The Trans-Pacific Partnership. According to Republicans, one more thing that President Obama got wrong.

So Happy New Year to All! 2016 Promises to be equally interesting – as in the old Chinese curse – “May You Live in Interesting Times.”

Article By Warren Woessner of Schwegman, Lundberg & Woessner, P.A.
patents4Life blog

© 2015 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.