Intellectual Property Archives - The National Law Forum

Fourth Circuit Reverses $1 Billion Award for Vicarious Liability Claim for More than 10,000 Works

On January 12, 2021, the U.S. District Court for the Eastern District of Virginia awarded a group of music recording companies (the plaintiffs) a $1 billion verdict against Cox Communications (Cox). The Virginia court’s ruling found that Cox, an internet service provider (ISP), was contributorily and vicariously liable for copyright infringement committed by certain subscribers on its networks. The plaintiffs alleged that the ISP allowed the unauthorized downloading and distribution of more than 10,000 copyrighted works by Cox subscribers who had already received three or more notices of infringement. The district court in Virginia established that the “takedown” notices sent by the plaintiffs provided Cox with the requisite knowledge of its subscribers’ repeated infringement to substantiate their claim that Cox was contributorily liable, suggesting that Cox had sufficient specific knowledge of infringement to have done something about it.

The plaintiffs’ notice to Cox identified the IP address of the subscriber, as well as the time of infringement and the identification of the infringed work, which the plaintiffs argued was sufficiently specific knowledge for Cox to be able to identify the subscriber and to exercise its policy by suspending or terminating the infringing subscriber. This case proceeded to trial on two theories of secondary liability – vicarious and contributory copyright infringement. The plaintiffs argued that Cox failed to act on these known repeat infringers, and the jury found Cox liable for willful contributory infringement and vicarious infringement, ordering Cox to pay more than $99,000 for each of the infringed-upon works. Cox appealed the jury verdict.

On appeal, before the U.S. Court of Appeals for the Fourth Circuit, Cox raised several questions of law concerning the secondary liability for copyright infringement, as well as what constitutes a derivative work in the Internet Age.

Vicarious Infringement
The Fourth Circuit’s analysis first considered whether the district court erred in denying plaintiffs’ vicarious infringement claim. “A defendant may be held vicariously liable for a third party’s copyright infringement [if the defendant] (1) profits directly from the infringement and (2) has a right and ability to supervise the direct infringer.” See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005) (internal citations omitted). The Fourth Circuit found that the plaintiffs failed to establish the first element as a matter of law and thus found that the plaintiffs failed to establish that Cox was vicariously liable.

In reaching this decision, the Fourth Circuit turned to the landmark decision in Shapiro, Bernstein & Co., 316 F.2d 304 (2d Cir. 1963), a case on vicarious liability for infringing copyrighted music recordings. In Shapiro, a department store was sued for the selling of “bootleg” records by a concessionaire operating in its stores. The store had the right to supervise the concessionaire and employees, demonstrating its control over the infringement. There, the store received a certain percentage of every record sale, “whether ‘bootleg’ or legitimate,” giving it “a more definite financial interest” in the infringing sales.” Thus, the Shapiro court found that the financial gains were clearly spelled out from the bootleg sales and acts of infringement in Shapiro.

Next, the Fourth Circuit recognized that courts have found that a defendant may possess a financial interest in a third party’s infringement of copyrighted music, even absent a strict correlation between each act of infringement and an added penny of profits. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996). In Fonovisa, the operator of a swap meet allowed vendors to sell infringing goods, and the operator collected “admission fees, concession stand sales, and parking fees” but no sales commission “from customers who want[ed] to buy the counterfeit recordings at bargain-basement prices.” The Fonovisa court found that the plaintiffs adequately showed a financial benefit from the swap meet owner and the sales of pirated recordings at the swap meet, which was a draw for customers. Thus, the infringing sales “enhance[d] the attractiveness of the venue of the potential customers, finding the swap meet operator had a financial interest in the infringement sufficient to state a claim for vicarious liability.”

The Fourth Circuit established that Shapiro and Fonovisa provided the steppingstones of the principles of copyright infringement to the internet and cyberspace and that Congress agreed that “receiving a one-time setup fee and flat periodic payment for service” from infringing and non-infringing users alike ordinarily “would not constitute a financial benefit directly attributable to the infringing activity.” Ellison v. Robertson, 357 F. 3d 1072, 1079 (9th Cir. 2004) (internal citations omitted). The Court also reviewed other court precedents, including A&M Records v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001), to show that increased pirated music drew in users as a direct financial interest for vicarious liability., but also notes that courts have found no evidence of a direct financial benefit between subscribers of American Online (AOL) and the availability of infringing content.’’ Ellison, 357 F.3d at 1079.

Against this backdrop, the Fourth Circuit held that to prove Cox was vicariously liable, the plaintiffs had to demonstrate that Cox profited from its subscribers’ infringing download and distribution of the plaintiffs’ copyrighted songs, which – given the evidence at trial – it did not. While the district court found it was enough that Cox repeatedly declined to cancel an ISP subscriber’s monthly subscription fee, the Fourth Circuit found this evidence to be insufficient. Instead, the Fourth Circuit found that the continued monthly payment fees for internet service, even by repeat infringers, was not a financial benefit flowing directly from the copyright infringement. Cox established that subscribers paid a flat fee even if all of its subscribers stopped infringing. Recognizing that an internet provider would necessarily lose money if it canceled subscriptions only demonstrates that service providers have a direct financial interest in providing subscribers with access to the internet only. Thus, the Fourth Circuit held that vicarious liability demands proof that the defendant profits directly from the acts of infringement for which it is being held accountable.

To rebut this, the plaintiffs claimed that the jury could infer that subscribers paid monthly membership fees based on the high volume of infringing content. The Fourth Circuit rejected this argument and found that the evidence was insufficient to prove that customers were drawn to Cox’s internet service or that they continued the service because they were specifically drawn to the opportunity to infringe the plaintiffs’ copyrights. The plaintiffs further asserted that subscribers were willing to pay more for the opportunity to infringe based on Cox’s tiered structure for internet access – but the plaintiffs fell short in proving this claim because no reasonable inference could be drawn that Cox subscribers paid more for faster internet to infringe on the copyrighted works. Ultimately, the Court found that the plaintiffs could not establish a causal connection between subscribers’ copyright infringement and Cox’s revenue for monthly subscriptions. Thus, the Fourth Circuit held that Cox was not liable for its subscribers’ copyright infringement and reversed the district court’s ruling on this theory. The court vacated the $1 billion damages award and remanded the case for a new trial on damages, holding that the jury’s finding of vicarious liability could have influenced its assessment of statutory damages.

Contributory Infringement
The Fourth Circuit then examined the remaining issue of contributory infringement. Under this theory, “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another is liable for the infringement, too.” Cox argued that the district court erred by taking away the factual determination from the jury that notices of past infringement established Cox’s knowledge that subscribers were substantially certain to infringe in the future. Cox had contracted with a third party to provide copyright violation notices to users and asserted that it used these notices as their safe harbor under the Digital Millennium Copyright Act to alert violators and to terminate access to users who were repeat infringers. Despite this, the Fourth Circuit ultimately agreed with the jury’s finding that Cox materially contributed to copyright infringement occurring on its network and that its conduct was culpable.

Therefore, a three-judge panel found that Cox was liable for willful copyright infringement but reversed the vicarious liability verdict and remanded a new trial on damages. The Fourth Circuit held that because Cox did not profit from its subscribers’ acts of infringement, a legal prerequisite for vicarious liability, Cox was not liable for damages under the vicarious liability theory.

The Impact
The Fourth Circuit’s decision recognizes a new dawn breaking in copyright law, one that requires a causal connection between profit and/or financial gain and a defendant’s acts of infringement to prove vicarious liability in a copyright infringement claim under the Copyright Act. The plaintiffs attempted to bridge the financial gap between acknowledging access to infringing content through a monthly internet subscription and high-volume infringing acts. However, the Fourth Circuit found that this leap in logic was a step too far and reversed the award for vicarious liability for lack of evidence to find this missing connection between Cox subscribers and infringing plaintiffs’ content.

While this may be one route the courts may consider to reduce music piracy damages, it remains to be seen whether other courts will take this approach to determining that profit is the key element supporting other vicarious liability claims in cyberspace.

PTO to Patent Examiners: Make Interpretation of Means-Plus-Function Claims Clear in the Record

On March 18, 2024, the US Patent & Trademark Office (PTO) issued a memorandum to patent examiners addressing means-plus-function and step-plus-function claim limitations and how to clearly articulate, in the prosecution record, the PTO’s interpretation of such claim limitations. The goal of the memorandum is to ensure consistency in connection with the examination of such limitations, provide both the applicant and the public with notice regarding the claim interpretation used by the patent examiner, and provide the applicant an opportunity to advance a different claim interpretation early in the prosecution.

As stated in 35 U.S.C. §112(f), “[a]n element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.” The memorandum does not suggest any changes in interpretation of the statute.

One aspect of the memorandum is to remind examiners of the resources and guidance available when examining means-plus-function and step-plus-function claim limitations, specifically MPEP §§ 2181-2187 and refresh training. In accordance with the guidance, the primary steps when examining such claim elements include:

Determining whether a claim limitation invokes § 112(f)
Ensuring the record is clear with respect to invoking § 112(f)
Evaluating the description necessary to support a § 112(f) claim limitation under §§ 112(a) and (b).

To determine whether a claim limitation invokes §112(f), the guidance instructs examiners to employ the three-prong analysis set forth in MPEP § 2181, subsection I. Using this analysis, recitation of the terms “means” or “step” in association with functional language, rather than structure, material or acts for performing that function, should be interpreted as claim limitations invoking § 112(f). However, where these terms are accompanied by structure, materials or acts for performing the function, § 112(f) is not invoked. On the other hand, a limitation reciting functional language along with a generic placeholder term instead of “means,” which fails to recite sufficiently definite structure for performing the function, would nonetheless invoke § 112(f), according to a proper analysis. Examples of such generic placeholders include “mechanism for,” “module for,” “device for,” “unit for,” “component for,” “element for,” “member for,” “apparatus for,” “machine for” and “system for.”

An important caveat in the memorandum states that “[e]stablishing the interpretation of § 112(f) limitations in writing during prosecution is critical in supporting the agency goal of establishing a clear prosecution record.” The guidance advises examiners that form paragraphs are available in support of meeting this objective, which serve to inform “the applicant, the public, and the courts . . . as to the claim construction the examiner used during prosecution. This further informs the applicant, the public, and the courts (and the PTO for any post-grant review procedures) as to how the examiner searched and applied prior art based on the examiner’s interpretation of the claim.”

The memorandum further emphasizes the need to evaluate whether claims under §112(f) meet the written description and enablement requirements of § 112(a) and the definiteness requirement of § 112(b). Regarding the latter, the specification must clearly disclose a structure that is clearly linked to or associated with the function, which would be understood by one skilled in the art to perform the entire recited function. Further, “[f]or computer-implemented § 112(f) claim limitations, the specification must disclose an algorithm for performing the claimed specific computer function . . . [and] sufficiency of the disclosure of the algorithm must be determined in light of the level of ordinary skill in the art.”

The memorandum further states that an indefinite § 112(f) claim limitation “based on failure of the specification to disclose corresponding structure that performs the entire claimed function will also lack adequate written description and may not be sufficiently enabled to support the full scope of the claim under § 112(a).” Thus, in any § 112(f) analysis, an examiner must determine whether the specification establishes possession of the claimed invention and whether sufficient information is provided to enable one skilled in the pertinent art to make and use the claimed invention.

For further details, see the memorandum here and the Federal Register notice here.

Regeneron v Novartis and Vetter: Walker Process Client Update

In an appeal that attracted a dozen amici, including the Department of Justice, the Federal Trade Commission, five states, and the District of Columbia, the Second Circuit gave the Walker Process antitrust doctrine a shot in the arm in a patent dispute related to pre-filled syringes (“PFSs”) used for injection of anti-VEGF biologic medicines into patients’ eyeballs (i.e., intravitreal injections).¹ Under Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965), patentees who obtain patents through fraudulent behavior or inequitable conduct can be liable under the Sherman Antitrust Act. In a complaint filed in the Northern District of New York, Regeneron alleged Novartis and Vetter committed a Walker Process violation by obtaining and asserting patents for PFSs. The Second Circuit held that the district court made a mistake by dismissing Regeneron’s suit because it focused on the functional similarities in the markets for anti-VEGF medicines in PFSs and vials. In reversing, the Second Circuit held that the correct approach must focus on an economic market analysis rather than a functional market analysis, and that Regeneron’s complaint plausibly alleged that anti-VEGF PFSs constituted their own economic product market. As the amicus interest signals, the decision may have significant implications, both for the blockbuster market for anti-VEGF medicines and, more broadly, for defining the markets for different pharmaceutical methods of administration.

In its complaint, Regeneron alleges that in 2005, it had contracted with Vetter, a company providing pharmaceutical filling services, to collaborate on a PFS for its blockbuster anti-VEGF product, EYLEA.² It alleges that its agreement with Vetter granted Regeneron ownership in any patent related to EYLEA PFSs. Id. Notwithstanding its agreement with Regeneron, Vetter later entered into a confidential agreement with Novartis to develop a PFS for anti-VEGF biologics, which are used to treat macular degeneration and other retinal conditions. Id. Indeed, both parties agree on the benefits of PFSs for patients and providers of anti-VEGF medicines—ease in administration, improved safety, and greater efficiency—compared to vials, which must be used to fill a separate syringe.³ Novartis has an anti-VEGF biologic, LUCENTIS, which Genentech markets in the United States.

Regeneron alleges that Vetter contributed to Novartis’s invention of U.S. Patent No. 9,220,631 (the “’631 Patent”) and that Novartis concealed Vetter’s contribution to inventorship from the PTO to avoid alerting Regeneron to its contractual violations. Id. Concealing inventorship from the PTO can constitute inequitable conduct and form the basis for a Walker Process claim. (Regeneron also alleges Novartis improperly withheld key prior art references from the PTO during prosecution.) Novartis’s resulting ’631 Patent specifically claims EYLEA’s active ingredient as a treatment for use in Novartis’s patented syringe.⁴ Regeneron contends that the defendants’ pattern of conduct delayed its entry into the PFS market, resulting in significant damages.⁵ Regeneron also alleges that, after the ’631 Patent issued, Vetter leaned on it in contract negotiations to enter a long-term deal and to agree not to challenge the validity of the ’631 Patent.⁶ Novartis sued Regeneron on the ’631 Patent in the ITC and the Northern District of New York in 2020, and there is a pending Federal Circuit appeal regarding the validity of the patent.⁷

The Second Circuit held that “the district court improperly concluded that Regeneron failed to plead adequately the existence of a distinct anti-VEGF PFS market because it… placed improper weight on the functional, rather than economic, similarities between anti-VEGF PFSs and vials.”⁸ Rather than look to the functional similarities in the markets for PFSs and vials (i.e., same drug, same medical condition), the Second Circuit held that the proper analysis was economic. That is, whether products are “reasonably interchangeable by consumers for the same purposes,” as assessed by examining “sufficient cross-elasticity of demand.”⁹ Regeneron’s complaint alleges that physicians transferred 80% of patients from vials to PFSs when they were offered for LUCENTIS. The Second Circuit found Regeneron’s allegation adequately pled a hypothetical monopoly market by pleading that the physicians’ switching behavior showed that a “small, but significant, price increase in the PFS version would not cause physicians to substitute the vial version for PFS.”¹⁰

Second, the Second Circuit held that the district court was wrong to decide that an antitrust market cannot be coextensive with a patent’s scope. Instead, “once an antitrust plaintiff has demonstrated that [1] a patent was obtained through fraud, it must [2] separately explain how the fraudulently obtained patent enabled the defendants to achieve market power within the relevant market.”¹¹ Regeneron’s allegations regarding inventorship and improperly withheld prior art satisfied the “fraudulently obtained” prong of the test.¹² Next, the Second Circuit found that Regeneron’s complaint adequately pled the “market power” prong, crediting Regenoron’s allegation that Novartis and Vetter attempted to use the ’631 patent to coerce Regeneron into a long-term exclusive PFS filling relationship and demanding other modifications to Regeneron and Vetter’s 2005 agreement.¹³

Why the Decision Matters

The Second Circuit’s decision stands out for two reasons. First, anti-VEGF biologics are a big business for innovator companies, biosimilar makers, and government payers. EYLEA’s total revenue for 2023 was nearly $5.9 billion.¹⁴ Roche, which through its subsidiary Genentech commercializes LUCENTIS in the US, reported $460 million CHF in 2023 revenue, down from approximately $1 billion CHF in 2022 after entry from two biosimilars, with more pending.¹⁵ Biosimilars referencing EYLEA are also pending FDA approval or in clinical trials.¹⁶ Government payers are naturally interested in age-related macular degeneration (AMD) medications: among Americans over 65, the CDC estimates that approximately 1.3 million have vision-threatening AMD, with another 10.9 million having milder AMD.¹⁷ Indeed, the state amici’s brief supporting Regeneron noted the states’ interest in the markets for AMD drugs.¹⁸

Second, and more broadly, a product’s presentation or method of administration—pill vs. liquid; standard vs. extended release; IV vs. subcutaneous injection—has major implications for patients, providers, and product lifecycle. Different methods of administration may expand a product’s commercial reach and, as this case shows, provide additional patent protection (and possibly market exclusivity). Antitrust scrutiny directed to narrowly defined markets for methods of administration—here PFSs—is noteworthy. The amicus brief from the DoJ and FTC makes clear that it is supporting neither side and “take[s] no position as to whether the complaint adequately pleads a relevant antitrust market or states an antitrust claim.”¹⁹ However, the Federal government’s amicus brief also stated that the district court erred in its decision, and the brief’s analysis of the proper market definition parallels the reasoning ultimately adopted by the Second Circuit^.20

This decision relates to a motion to dismiss under Rule 12(b)(6), where the court only looks for a plausible, well-pled complaint. Novartis will have its day in court at the summary judgment and trial stages, where Regeneron will owe a higher burden of proof. However, antitrust claims are powerful tools because they carry the monetary risk of treble damages as well as the possibility of scrutiny from regulators. These risks must be weighed, not just by outside counsel and CLOs, but by CEOs and boards of directors.

Footnotes

[1] See Regeneron Pharm., Inc. v. Novartis Pharma AG et al., No. 22-427, slip op. at 1 (March 18, 2024). As the Second Circuit explains, “[t]he products in question are prescription medications used to treat the overproduction of vascular endothelial growth factor (‘VEGF’), a naturally occurring protein that, if overproduced, can lead to various eye disorders and, in some cases, to permanent blindness.”

[2] Slip op. at 9

[3] Id. at 8-9

[4] See ’631 Patent at Claim 12

[5] See slip op. at 10-11.

[6] Id. at 13-14.

[7] Id. at 15-16.

[8] Id. at 19.

[9] Id. at 20-21 (citing Brown Shoe Co. v. United States, 370 U.S. 294 (1962) and United States v. Am. Express. Co., 838 F.3d 179 (2d Cir. 2016)).

[10] Slip op. at 26; see, e.g., Am. Express, 838 F.3d at 199 (small but significant non-transitory increase in price (“SSNIP”) may demonstrate that the proposed market is relevant market).

[11] Slip op. at 30(citing Walker Process, 382 U.S. at 177).

[12] Id. at 30-31.

[13] Id. at 31-32. In addition to reversing the district court’s decision on the antitrust claim, the Second Circuit reversed the court’s dismissal of Regeneron’s claim for tortious interference with contract as time barred, crediting Regeneron’s equitable estoppel arguments.

[14] “Regeneron Reports Fourth Quarter and Full Year 2023 Financial and Operating Results,” Feb. 2, 2024, https://investor.regeneron.com/news-releases/news-release-details/regeneron-reports-fourth-quarter-and-full-year-2023-financial (last visited March 20, 2024).

[15] “Roche Finance Report 2023,” at 16, https://assets.roche.com/f/176343/x/3b1fb647e2/fb23e.pdf (last visited March 20, 2024).

[16] See, e.g., “New and Upcoming biosimilar launches,” at 6 https://www.cardinalhealth.com/content/dam/corp/web/documents/Report/cardinal-health-biosimilar-launches.pdf (last visited March 20, 2024).

[17] See “Prevalence of Age-Related Macular Degeneration (AMD), at Table 1, https://www.cdc.gov/visionhealth/vehss/estimates/amd-prevalence.html (last visited March 20, 2024).

[18] See Brief of Amici Curiae Nevada, District of Columbia, Illinois, Louisiana, Minnesota, and New Mexico as Amicus Curiae in Support of Plaintiff-Appellant, Regeneron Pharmaceuticals, Inc., Case 22-427, Dkt. 106 at 2.

[19] See Brief for the United States and the Federal Trade Commission as Amici Curiae in Support of Neither Party, Case 22-427, Dkt. 90 at 1.

[20] Id. at 12.

New USPTO Obviousness Guidelines Seek to Refine Examiner Evaluations Likely Making Path to Patent Grant More Difficult and Potentially Opening Door to More Patent Challenges

On February 27, the United States Patent and Trademark Office (USPTO) released new guidance aimed at enhancing the methodology used to assess the obviousness of patent applications. The updated USPTO guidance emphasizes the need for a clear articulation of a reasoned analysis, grounded in relevant facts, in determining whether a claimed invention meets the criteria of being obvious. The USPTO asserts that this initiative is in line with the directives of the U.S. Supreme Court’s landmark decision in KSR Int’l Co. v. Teleflex Inc., advocating for a flexible approach toward obviousness evaluations.

The USPTO suggests that this newly issued guidance will act as a practical manual for USPTO examiners, applicable to all utility patent applications under review or contestation. It allegedly aims to ensure a standardized application of the law of obviousness across various cases.

A brief synopsis provided from the USPTO’s updated guidance and garnered since the KSR decision of the Federal Circuit include:

In KSR, the Supreme Court instructed the Federal Circuit that persons having ordinary skill in the art also may glean suggestions from the prior art that go beyond the primary purpose for which that prior art was produced. “Thus, the Supreme Court taught that a proper understanding of the prior art extends to all that the art reasonably suggests and is not limited to its articulated teachings regarding how to solve the particular technological problem with which the art was primarily concerned.”
Since KSR, the Federal Circuit has confirmed that “the flexible approach to obviousness encompasses not only how to understand the scope of prior art, but also how to provide a reasoned explanation to support a conclusion that claims would have been obvious.”
However, a flexible approach to obviousness does not negate the need for articulated reasoning and evidentiary support, the USPTO said.
Obviousness decision-makers must examine all the evidence before them.
The USPTO states that, “there is no one-size-fits-all approach to crafting an obviousness rejection.”

Kathi Vidal, Director of the USPTO, expressed the agency’s commitment to issuing reliable patent rights while ensuring clarity and consistency across the board. “Our initiative aims at bolstering transparency and uniformity within our processes and across the innovation landscape,” Vidal remarked.

The implications of this USPTO guidance extend to design patents as well, with the USPTO keenly awaiting the Federal Circuit’s verdict in LKQ Corp. v. GM Global Technology Operations LLC.

Additionally, the USPTO makes notes that it is gearing up to explore the influence of artificial intelligence on the landscape of prior art and the competence of someone skilled in the art, particularly how these factors interplay with patentability assessments including obviousness determinations. The USPTO plans to invite public commentary on these topics soon.

The updated USPTO guidelines initially appear to increase the burden on the patent applicant or the patentee to show that a claimed invention is not obvious by allowing the obviousness decision-makers (e.g., USPTO examiners and judges of the Patent Trial and Appellate Board (PTAB)) more flexibility in rejecting claims and to go outside of the boundaries of patent documents used to reject claims as long as reasoning is articulated and evidentiary support is provided. To counter an obviousness rejection made by an obviousness decision-maker, patent applicants or patentees should review obviousness rejections for a clearly articulated obviousness reasoning, including evidentiary support (e.g., not purely the examiner or judge’s argument) that is sound (e.g., actually supports the examiners or judges’ positions). Patent applicants and patentees also may need to rely on more expert declarations or affidavits to help overcome obviousness rejections.

by: Samuel A. Savanich , Jeffrey S. Whittle of Womble Bond Dickinson (US) LLP

For more news on Patent Law Guidance, visit the NLR Intellectual Property Law section.

Design Patent vs. Trade Dress: Strategic Considerations for Protecting Product Designs

Product designs often serve as the cornerstone of a brand’s identity, evoking instant recognition and loyalty among consumers. From the iconic silhouette of Coca-Cola’s glass bottle to the distinctive shape of Gibson guitars, the visual appeal of product designs can be a critical asset in the competitive marketplace. However, protecting a product design requires careful consideration and strategic planning. Two forms of IP protection are the most common – design patents and trade dress.

1. Design Patents

Design patents offer a streamlined and cost-effective means of protecting the ornamental appearance of product designs. The allowance rate is extremely high – over 95% – and is usually complete within 18 months. The result is that a design patent is significantly easier and less expensive to obtain as compared to conventional utility patents. This might explain the growing popularity of design patents for protecting product designs across various industries.

Design Patents Filed by Industry¹

Enforcing design patents can sometimes be more streamlined as compared to utility patents. For example, a design patent can be quickly enforced on the Amazon Brand Registry and other e-commerce platforms against copycat products sold on the platform. While Amazon does offer a procedure for utility patent enforcement, it tends to be more expensive and unpredictable.

However, design patents are not always an option. For example, a design patent can protect a functional article, but the protection only applies to the ornamental appearance of that article. So, a design patent on Crocs footwear does not protect the overall idea of a ventilated shoe. Instead, the protection only extends to the overall ornamental appearance of the shoe. And this protection only lasts for 15 years after the patent issues.

A design patent risks being overly narrow if its drawings contain too many solid lines. To counter this, a common practice involves converting unnecessary solid lines into dashed lines to broaden the patent’s scope and enhance its exclusionary effect. An example is below – the dashed lines do not narrow the design and are only provided to show the environment in which the design exists.

Is the End of Crocs Really Upon Us? Not So Fast. - The Fashion Law

Figure from Crocs Design Patent – U.S. Design Patent No. D517,789

2. Trade Dress

Trade dress is a form of trademark that protects the commercial look and feel of a product. Like all trademarks, trade dress indicates or identifies the source of the product and protects against consumer confusion in the marketplace. A classic example is the Coca-Cola bottle and how its shape and design immediately connect a consumer to the Coca-Cola brand:

A black and white drawing of a bottle Description automatically generated

Coca-Cola Bottle Trade Dress – U.S. Registration No. 696,147

Trade dress protection offers several advantages. It can sometimes be considered broader than a design patent because it attaches to any confusingly similar design. Additionally, trade dress protection is not limited to a 15-year term, like a design patent, and can continue for as long as the trade dress is used commercially in the marketplace.

So why not protect every product design as trade dress? First, product trade dress is not protectable unless it has “acquired distinctiveness” in the minds of consumers.
The Coca-Cola bottle serves as an example; its distinctive shape immediately invokes consumer association with the brand, demonstrating its acquired distinctiveness. However, proving acquired distinctiveness can be difficult and usually requires consumer survey evidence or other more costly endeavors. As a result, trade dress protection is less common than design patent protection for product designs.

Second, trade dress protection does not extend to any functional aspect of the product. The functionality requirement of trade dress protection is stricter than that of design patents – anything that is “essential to the use or purpose of the product or [that] affects the cost or quality of the product”² cannot be protected as trade dress. Many product designs include functions that cannot be separated from their branded “look and feel” and this disqualifies the design from trade dress protection.

Determining the optimal form of protection for a product design hinges on the specific attributes of the design and its commercial significance to the company. Navigating the path to protection demands meticulous attention to crafting intellectual property rights that are expansive yet defensible.

Footnotes

[1] This chart reflects the top ten owners of design patents over the past five years.

[2] Inwood Laboratories, Inc. v. Ives Laboratories, Inc.,456 U.S. 844 (1982).

For more news on product design protections, visit the NLR Intellectual Property section.

Huawei U.S. Patent Grants Drop 24% in 2023; BOE Drops Out of the Top 10

Accordingly to analysis by Harrity Patent Analytics, Huawei ranked 10^th for US patent grants in 2023, down 3 spots from 2022 with a 24% drop in patent grants. BOE Technology Group Co., Ltd. dropped even further to 19^th down from 8^th in 2022. BOE had a 38% drop in granted US patents. Tencent was 54^th this year with an 11% drop in patent grants. Oppo was down 32%. Baidu was up only 1%. Xiaomi was down 7% and didn’t make the top 100 in 2023. Alibaba was down 49%. In contrast, US companies advanced with Qualcomm patent grants up 46%, Alphabet (Google) up 23% and Apple up 11%.

The drop in Chinese patent grants reverse the trend of growing US patent grants for Chinese companies. Huawei’s patents grants in 2022 were up 3%, BOE up 27%, Baidu up 43% and Xiaomi up 33%.

Possible reasons for the drop in grants to Chinese entities may include a poorly performing Chinese economy, the reduction and elimination of government subsidies for foreign patent grants, the impact of COVID-19 on patent application filings the past few years; and geopolitical tensions.

Top 10 Chinese Grantees of U.S. Patents in 2023

Rank	Company	2023 Patents	% Change from 2022
10	HUAWEI TECHNOLOGIES CO., LTD.	2290	-24%
19	BOE TECHNOLOGY GROUP CO., LTD	1695	-38%
54	TENCENT HOLDINGS LTD	702	-11%
67	BAIDU, INC.	626	+1%
77	LENOVO GROUP LIMITED	530	-16%
84	OPPO MOBILE TELECOMMUNICATIONS CORPORATION	516	-32%
101	XIAOMI INC.	461	-7%
115	TSINGHUA HOLDINGS	372	-3%
121	ZTE CORPORATION	351	-14%
122	BYTEDANCE LTD.	350	+119%

Source: https://harrityllp.com/patent300/

Year in Review: The Most Popular IP Posts of 2023

As 2024 begins and intellectual property (IP) strategies are being developed for the new year, it is a good time to reflect on what IP issues were prominent in 2023. According to many readers, hot IP topics included patent litigation strategies, artificial intelligence (AI), and pharmaceutical-related patent applications.

An Overview of Shotgun Pleadings in the Federal Courts– This article explores types of shotgun pleadings identified by courts and outlines potential responses to a shotgun pleading.
Lensa: Are AI Art Generators Copyright Infringers?– The ability of an AI tool, such as Lensa, to create near-replicas of other artists’ works leads to the question of whether AI-generated art can be considered derivative of other artworks. This article explores the answer to this question.
Supreme Court Unanimously Affirms Amgen Repatha® Antibody Patents Invalid for Lack of Enablement– In their May 2023 decision in Amgen v. Sanofi, the U.S. Supreme Court held claims of patents, directed to a genus of potentially millions of antibodies, to be invalid because the patents failed to sufficiently enable one skilled in the art to make and use the full scope of the claimed inventions as required by 35 U.S.C. §112(a). This article explains the decision and its possible effect going forward.
Why Pharma Companies Should File Patents Later In The R&D Process – This article discusses clinical trial related patent applications and best practices for maximizing patent term while minimizing risk of invalidation by public use.
Federal Circuit Resolves District Court Split, Holds Foreign Defendant Cannot Defeat Rule 4(k)(2) Personal Jurisdiction by Unilateral Post-suit Consent to Jurisdiction in Alternative Forum – This article provides provide additional context regarding the Federal Circuit’s January 2023 decision in In re Stingray IP Solutions, LLC.

5 Trends to Watch: 2024 Artificial Intelligence

Banner Year for Artificial Intelligence (AI) in Health – With AI-designed drugs entering clinical trials, growing adoption of generative AI tools in medical practices, increasing FDA approvals for AI-enabled devices, and new FDA guidance on AI usage, 2023 was a banner year for advancements in AI for medtech, healthtech, and techbio—even with the industry-wide layoffs that also hit digital and AI teams. The coming year should see continued innovation and investment in AI in areas from drug design to new devices to clinical decision support to documentation and revenue cycle management (RCM) to surgical augmented reality (AR) and more, together with the arrival of more new U.S. government guidance on and best practices for use of this fast-evolving technology.
Congress and AI Regulation – Congress continues to grapple with the proper regulatory structure for AI. At a minimum, expect Congress in 2024 to continue funding AI research and the development of standards required under the Biden Administration’s October 2023 Executive Order. Congress will also debate legislation relating to the use of AI in elections, intelligence operations, military weapons systems, surveillance and reconnaissance, logistics, cybersecurity, health care, and education.
New State and City Laws Governing AI’s Use in HR Decisions – Look for additional state and city laws to be enacted governing an employer’s use of AI in hiring and performance software, similar to New York City’s Local Law 144, known as the Automated Employment Decisions Tools law. More than 200 AI-related laws have been introduced in state legislatures across the country, as states move forward with their own regulation while debate over federal law continues. GT expects 2024 to bring continued guidance from the EEOC and other federal agencies, mandating notice to employees regarding the use of AI in HR-function software as well as restricting its use absent human oversight.
Data Privacy Rules Collide with Use of AI – Application of existing laws to AI, both within the United States and internationally, will be a key issue as companies apply transparency, consent, automated decision making, and risk assessment requirements in existing privacy laws to AI personal information processing. U.S. states will continue to propose new privacy legislation in 2024, with new implementing regulations for previously passed laws also expected. Additionally, there’s a growing trend towards the adoption of “privacy by design” principles in AI development, ensuring privacy considerations are integrated into algorithms and platforms from the ground up. These evolving legal landscapes are not only shaping AI development but also compelling organizations to reevaluate their data strategies, balancing innovation with the imperative to protect individual privacy rights, all while trying to “future proof” AI personal information processing from privacy regulatory changes.
Continued Rise in AI-Related Copyright & Patent Filings, Litigation – Expect the Patent and Copyright Offices to develop and publish guidance on issues at the intersection of AI and IP, including patent eligibility and inventorship for AI-related innovations, the scope of protection for works produced using AI, and the treatment of copyrighted works in AI training, as mandated in the Biden Administration Executive Order. IP holders are likely to become more sophisticated in how they integrate AI into their innovation and authorship workflows. And expect to see a surge in litigation around AI-generated IP, particularly given the ongoing denial of IP protection for AI-generated content and the lack of precedent in this space in general.

Parody of Iconic Sneaker Isn’t Entitled to Heightened First Amendment Protection

The US Court of Appeals for the Second Circuit upheld a temporary restraining order and preliminary injunction enjoining use of a trademark and trade dress associated with an iconic sneaker design over a First Amendment artistic expression defense. Vans, Inc. v. MSCHF Product Studio, Inc., Case No. 22-1006 (2d Cir. Dec. 5, 2023) (per curiam). This case is the first time a federal appeals court has applied the Supreme Court of the United States’ recent decision in Jack Daniel’s v. VIP Products, which clarified when heightened First Amendment protections apply to expressive uses of another’s trademark and trade dress.

MSCHF Product Studio is a Brooklyn-based art collective known for provocative works that critique consumer culture. It sells its works in limited releases during prescribed sales periods called “drops.” It promoted and sold a shoe called the “Wavy Baby,” which is a distorted, corrugated version of the iconic black-and-white Vans Old Skool sneaker. MSCHF claimed that the product was a commentary on consumerism in sneakerhead culture and that the Wavy Baby shoes were not meant to be worn but were instead “collectible work[s] of art.”

MSCHF promoted the shoes using the musician Tyga. Vans sent MSCHF a cease-and-desist letter and a week later filed a six-count complaint in federal court, including a claim for trademark infringement under the Lanham Act. The following day, Vans filed a motion for a temporary restraining order, seeking to have the court enjoin the sale of the Wavy Baby shoes. Nevertheless, MSCHF proceeded with its pre-planned drop of the Wavy Baby sneakers and sold 4,306 pairs of the Wavy Baby in one hour.

About a week later, after oral argument on the temporary restraining order (TRO) motion, the district court granted Vans’s motion. The district court concluded that Vans would likely prevail in showing a likelihood of consumer confusion and rejected MSCHF’s contention that the Wavy Baby was entitled to special First Amendment protections because it was an artistic parody. MSCHF appealed.

The Second Circuit held the appeal in abeyance pending the Supreme Court’s Jack Daniel’s decision. In that case, Jack Daniel’s sued the maker of a squeaky dog toy that resembled the iconic whiskey bottle and used puns involving dog excrement in place of the actual language of the Jack Daniel’s label. In a unanimous decision, the Court clarified that special First Amendment protections (as used in the Rogers test for expressive works that incorporate another’s trademark) do not apply when a trademark is used as a source indicator—that is, “as a mark.”

The Second Circuit concluded that the Jack Daniel’s case “forecloses MSCHF’s argument that Wavy Baby’s parodic message merits higher First Amendment scrutiny” because, even though the product is a parody, the Rogers test does not apply if the mark is also used as a source identifier. The Second Circuit drew a direct parallel between Wavy Baby and the punning dog toy in the Jack Daniel’s case, noting that in both cases the infringing product evoked the protected trademark and trade dress of the target to benefit from the “good will” developed by the source brand. Hence, the Court held that the district court did not err in applying the traditional likelihood-of-confusion analysis rather than the speech-protective Rogers test.

Practice Note: An alleged infringer of a trademark may claim that its product is artistic expression to trigger the heightened First Amendment protections offered by filters such as the Rogers test. However, after Jack Daniel’s, courts are more likely to regard such defenses with skepticism unless the allegedly infringing work falls into a more canonical category of artistic expression such as a film, television show, song or video game.

This article was authored by Karen Gover.

China’s Supreme People’s Court Releases Typical Cases on Film Intellectual Property Protection

On November 3, 2023, China’s Supreme People’s Court (SPC) released the Typical Cases of Film Intellectual Property Protection by the People’s Courts (人民法院电影知识产权保护典型案例). The SPC stated, “In order to strengthen the publicity of the rule of law in the film field, further stimulate the innovation and creativity of the film industry, and promote the prosperity of socialist culture, the Supreme People’s Court issued typical cases on the protection of film intellectual property rights. Typical cases include both criminal cases and civil cases, involving pirated recordings and dissemination of theatrical movies, protection of the integrity rights of works, adaptation rights, information network dissemination rights, reasonable use of copyrights, protection of trade secrets, etc., which are important for promoting the rule of law. It is of positive significance to speed up the construction of a powerful film country.”

8 Typical Cases as explained by the SPC follow:

1. Copyright infringement cases involving Ma XX, Ma YY and others [Criminal Judgment of Yangzhou Intermediate People’s Court of Jiangsu Province （2020）苏10刑初11号]

[Basic case facts] From June 2016 to February 2019, the defendants Ma XX, Ma YY, Wen Jie, and Lu collaborated with others for the purpose of profit, colluded with theater staff to illegally obtain movie masters and keys, and then copied hundreds of movies such as “The Wandering Earth” and “Crazy Alien” with high-definition equipment, and sold the pirated and copied movies to “movie bar” operators to gain illegal profits.

[Judgment Result] The Intermediate People’s Court of Yangzhou City, Jiangsu Province held that the defendants Ma XX, Ma YY, Wen Jie, and Lu copied and distributed other people’s film works without the permission of the copyright owner for the purpose of profit, and jointly implemented the production The act of selling pirated films, with huge illegal gains and other particularly serious circumstances, constitutes a crime of copyright infringement. The four defendants were sentenced to fixed-term imprisonment of four to six years, and fined from RMB 600,000 to RMB 5.5 million, and their illegal gains were recovered. After the verdict was announced, the parties did not appeal or protest, and the first-instance judgment has become legally effective.

[Typical Significance] This case is a typical case in which the act of stealing and distributing theater movies constitutes a crime of copyright infringement. The people’s courts perform their intellectual property trial duties in accordance with the law and severely crack down on illegal and criminal acts of infringement and piracy in the film field, which is of great significance to strengthening the copyright protection of theatrical films and promoting the healthy development of the film and television industry.

2. Liang XX’s copyright infringement case [Criminal Judgement of the Shanghai No. 3 Intermediate People’s Court (2021）沪03刑初101号]

[Basic Case Facts] Since 2018, the defendant Liang XX has instructed Wang YY and others to develop and operate the “Renren Film and Television Subtitle Group” website and Android, IOS, Windows, MacOSX, TV and other clients, and instructed Xie ZZ and others to download unauthorized film and television works from overseas websites, translate, produce and upload them to relevant servers, and provide users with online viewing and downloading through the “Renren Film and Television Subtitle Group” website and related clients operated by them. There are 32,824 unauthorized film and television works on the “Renren Film and Television Subtitle Group” website and related clients, with a total of about 6.83 million members and an illegal business amount of more than 12 million RMB.

[Judgment Result] The Shanghai No. 3 Intermediate People’s Court held after trial that the defendant Liang XX copied and distributed other people’s works without the permission of the copyright owner for the purpose of profit, and there were other particularly serious circumstances, which constituted the crime of copyright infringement. Liang was sentenced to three years and six months in prison and fined RMB 1.5 million, and his illegal gains were recovered. After the verdict was announced, the parties did not appeal or protest, and the first-instance judgment has become legally effective.

[Typical Significance] There are many film and television works in this case and the rights holders are dispersed. The judgment clarified the legal application issues such as the crime of copyright infringement and the determination of the number of infringing film and television works. The criminal liability of the organizers and main participants shall be investigated in accordance with the law, and severe crackdowns shall be carried out for serious infringement of film copyright.

3. Copyright infringement dispute case between Shanghai Art Film Studio Co., Ltd. and Chongqing Yun Media Information Technology Co., Ltd. [Chongqing Fifth Intermediate People’s Court （2019）渝05民初3828号Civil Judgment]

[Basic facts of the case] Shanghai Art Film Studio Co., Ltd. owns the copyrights to the film works of the cartoons “Calabash Brothers” and “Calabash Little King Kong,” as well as the copyright to the character modeling art works of “Calabash Brothers” and “Calabash Little King Kong.” Chongqing Yun Media Information Technology Co., Ltd. (hereinafter referred to as Yun Media Technology Company) and others based on the story clips of the characters such as Seven Calabash Babies and Calabash King Kong in the cartoon, replaced the Mandarin carried by the audio data of the characters in the original work with Sichuan and Chongqing dialects, changed the dialogue content of the characters in the original work, produced multiple short videos of “Calabash Dialect Version,” and uploaded them to websites and public accounts for dissemination. Shanghai Animation Film Studio Co., Ltd. filed a lawsuit in court on the grounds that the above-mentioned actions carried out by Yun Media Technology Company and others constituted copyright infringement.

[Judgment Result] The Fifth Intermediate People’s Court of Chongqing held after trial that Yun Media Technology Company and others jointly produced the short video involved in the case, deliberately exaggerated the use of vulgar, negative, dark and uncivilized terms in dialects, changed the dialogue content of the characters in the original work, and vilified the original work. The character image in the work was uploaded to the Internet platform for wide dissemination, which conflicts with the core socialist values, damages the legitimate rights and interests of the copyright owner, and constitutes copyright infringement. It was ruled that Yun Media Technology Company and others should immediately stop the infringement, jointly publish a statement to eliminate the impact, and jointly compensate for economic losses. After the first-instance judgment, none of the parties appealed.

[Typical Significance] The judgment of this case emphasizes that the derivative use of other people’s film works must not deface the characters in the film works, and must not include cultural dross. It must vigorously promote the core socialist values, which plays a positive guiding role in establishing healthy and civilized rule of law in the film industry.

4. Copyright ownership and infringement dispute case between Yu Mouzhu and Zhejiang Dongyang Meila Media Co., Ltd. [Chengdu Intermediate People’s Court of Sichuan Province （2018）川01民初1122号 Civil Judgment]

[Basic facts of the case] Yu Mouzhu published his novel “Wild Lily in Bloom” (盛开的野百合) on the website under the pseudonym Yu Mou, and adapted the novel into a script of the same name and sent it to Emei Film Group Co., Ltd. Since then, Zhejiang Dongyang Meila Media Co., Ltd. commissioned others to write the “Youth” movie script, and the film of the same name jointly produced with Huayi Brothers Film Co., Ltd. and others was released. Yu Mouzhu believes that the plot setting, character relationships, lines, and song and dance combinations of the “Youth” movie are highly overlapped with its novel and script, constituting substantial similarities, exceeding the boundaries of reasonable reference, and constituting an infringement of its rights to adapt and film and believes Zhejiang Dongyang Meila Media Co., Ltd., as the producer of the film “Youth” and other parties, jointly committed infringement.

[Judgment Result] The Intermediate People’s Court of Chengdu City, Sichuan Province held that there are obvious differences in the specific subject matter, story line, and theme between the “Youth” movie and Yu Mouzhu’s works. As far as the plot of the work is concerned, the multiple similar plots claimed by Yu Mouzhu are objective facts and limited expressions were not original and should not be protected. The plot of the disputed book and the character relationships advocated by Yu are obviously different from the movie “Youth.” Readers and audiences will not believe them to be similar and they do not have substantial similarities. Therefore, the all claims are dismissed. Yu Mouzhu was dissatisfied and appealed. The second-instance judgment of the Sichuan Provincial Higher People’s Court rejected the appeal and upheld the original judgment.

[Typical Significance] The judgment in this case clarified that objective facts and limited expressions are not original and are not protected by copyright law, and should be filtered when comparing infringements. The judgment also clarifies the correct comparison content and comparison method when determining whether a film work is infringing, protects the legitimate rights and interests of film copyright owners in accordance with the law, maintains a fair market competition order, and has positive significance for the prosperity of film creation.

5. Dispute case between Beijing iQiyi Technology Co., Ltd. and Shanghai Qiaojiaren Culture Media Co., Ltd. for infringement of the right to disseminate work information online [Beijing Intellectual Property Court (2021）京73民终2496号 Civil Judgment]

[Basic facts of the case] Beijing iQiyi Technology Co., Ltd. was authorized to obtain the exclusive information network dissemination rights and rights protection rights for the movie “I am not Madame Bovary.” The APP operated by Shanghai Qiaojiaren Culture Media Co., Ltd. (hereinafter referred to as Qiaojiaren Company) provides online playback of the complete content of the film involved and added corresponding dubbing, sign language translation, and source subtitles on the basis of the pictures and sound effects of the video involved in this case, but no identification/prevention mechanism to limit viewership to those with dyslexia was used. Beijing iQiyi Technology Co., Ltd. believes that the APP provides online playback services for the accessible version of the movie “I Am Not Madame Bovary” to unspecified members of the public, infringing on its right to information network dissemination, and filed a lawsuit in court, requesting an order against Qiaojiaren Company to stop the infringement and compensate for economic losses and reasonable expenses.

[Judgment Result] The Beijing Intellectual Property Court held that the “accessible means that can be perceived by people with dyslexia” stipulated in the Copyright Law should include special restrictions on this “accessible means”, that is, it should be limited to meeting the requirements of and exclusive use of people with dyslexia. The alleged infringement of Qiaojiaren Company is open to the unspecified public and does not meet the above conditions. It does not belong to statutory fair use and constitutes infringement. Considering that the original intention of Qiaojiaren Company was to make films accessible to people with disabilities and that the video involved had few clicks, the Court awarded economic losses of 10,000 RMB.

[Typical Significance] This case is the country’s first dispute involving an accessible version of a movie that infringes on the right to disseminate work information online. The judgment clarified that “providing published works to people with dyslexia in an accessible manner that they can perceive” is limited to the exclusive use of people with dyslexia. As a “fair use,” an effective verification mechanism for “people with dyslexia” should be adopted and exclude those who do not meet the criteria. The judgment in this case is conducive to the accurate implementation of the relevant international treaties that our country has joined (the “Marrakesh Treaty”), to the comprehensive protection of the rights of copyright owners, and to the regulation of the production and distribution of accessible versions of movies.

6. Zhejiang Shenghe Network Technology Co., Ltd. and Legend IP Co., Ltd. Confirmation of Non-infringement of Copyright Dispute Case [Hangzhou Internet Court（2021）浙0192民初10369号 Civil Judgment]

[Basic Case Facts] The Korean game “Legend of Mir 2” was launched in China in 2001. The rights holder, Legend IP Co., Ltd. (hereinafter referred to as “Legend IP”), after learning that the movie “Blue Moon” was about to be broadcast exclusively on the platform, believed that the movie infringed on the game’s copyright and sent a letter to the platform requesting to stop distributing the movie. The film producer sent a letter of reminder to Legend IP to enforce their IP, but Legend IP neither withdrew the warning nor sued. After the movie was released, Zhejiang Shenghe Network Technology Co., Ltd., as the copyright owner of the movie, sued for a declaratory judgement that the movie did not infringe the above-mentioned game copyright.

[Judgment Result] The Hangzhou Internet Court held that the overall picture of the game involved in the case is completely different from that of the movie in terms of picture composition, picture smoothness, lens experience, and audio-visual effects, and that the specific creative elements in the selection and arrangement of the audio-visual pictures are very different. There is a substantial difference, and the judgment confirms that there is no infringement. Legend IP was dissatisfied and filed an appeal. The second-instance judgment of the Intermediate People’s Court of Hangzhou City, Zhejiang Province rejected the appeal and upheld the original judgment.

[Typical Significance] The judgment of this case clarifies the thoughts of comparing whether the overall picture of the game and the film works are infringing, and points out that a work created later does not constitute infringement if it only refers to the theme or conception of the prior work, but specifically expresses that it has been separated from or differs from the prior work. The judgment of this case is conducive to guiding the development and prosperity of multi-style cultural innovation and promoting the high quality integrated development of the cultural industry.

7. Dispute over trade secret infringement between Xinli Media Group Co., Ltd. and Beijing Paihua Culture Media Co., Ltd. [Beijing Chaoyang District People’s Court(2017）京0105民初68514号 Civil Judgment]

[Basic facts of the case] Xinli Media Group Co., Ltd. (hereinafter referred to as Xinli Company) is the copyright holder of the movie “The Legend of Wukong.” It entrusted Beijing Paihua Culture Media Co., Ltd. (hereinafter referred to as Paihua Company) with the audio post-production of the film. Both parties signed a contract and agreed on a confidentiality clause. During the performance of the contract, Paihua Company violated the confidentiality agreement by outsourcing some of the work to outsiders for actual completion, and transmitted the film materials to the outsiders under the title “WKZ” (the first letters of the transliteration of the film title) through Baidu Cloud. While the film material was being stored on Baidu Cloud, it was hacked by criminals, causing the film involved to be leaked through the Internet before it was released. Xinli Company sued, requesting Paihua Company to stop the unfair competition behavior of disclosing the trade secrets of the film involved, make a public statement to eliminate the impact, and compensate for economic losses.

[Judgment Result] The Beijing Chaoyang District People’s Court held after trial that Paihua Company violated the confidentiality agreement by disclosing the film material involved to a party outside the case, and uploaded the material to Baidu Cloud, which ultimately caused the material to be leaked on the Internet. Both of these acts constituted Infringement of trade secrets. It was ruled that Paihua Company should compensate Xinli Company for economic losses of 3 million RMB and rights protection expenses of more than 300,000 RMB, and make a public statement to eliminate the impact. After the first-instance judgment, none of the parties appealed.

[Typical Significance] This case is a typical case of protecting materials as trade secrets during the film production process. Film materials are trade secrets, and there are many subjects involved in the film production process. All parties involved in film production have strict confidentiality obligations in all aspects of film production. Any violation of confidentiality obligations shall bear corresponding legal liability. The judgment in this case is conducive to promoting the standardization and legalization of the film production process, is conducive to protecting the rights of relevant rights holders involved in film production, and is conducive to promoting the prosperity and development of the film industry.

8. Unfair competition dispute case between Xinghui Overseas Co., Ltd. and Guangzhou Zhengkai Cultural Communication Co., Ltd. [Guangzhou Intellectual Property Court（2020）粤73民终2289号 Civil Judgment]

[Basic Case Facts] The Hong Kong movie “The King of Comedy” has a high reputation and the relevant public attention is high. Guangzhou Zhengkai Culture Communication Co., Ltd. (hereinafter referred to as Zhengkai Company) and Li XX promoted the accused infringing TV series “The King of Comedy 2018” on Weibo and WeChat official accounts in 2018 as the “series #King of Comedy” , and claimed in media promotions that it was adapted from “The King of Comedy” and so on. Hong Kong film copyright owner Xinghui Overseas Co., Ltd. filed a lawsuit in court, claiming that Zhengkai Company and Li XX were unfair competing.

[Judgment Result] After a hearing, the Guangzhou Intellectual Property Court held that by taking into account the box office receipts of the movie involved during the theatrical release in Hong Kong, the publicity efforts conducted before and during theatrical release, the number of films played on authorized video websites, the degree of continuous media coverage of the movie, and the involvement of the relevant public in the evaluation of the movie, among other factors, it could be fully proved that the titles of the movie involved had a certain degree of influence. The acts of Zhengkai Company and Li XX constituted the act of imitating and confusing the film name and false publicity with a certain degree of influence, and Zhengkai Company and Li XX shall bear the legal liabilities for unfair competition according to law.

[Typical Significance] In this case, the Anti-Unfair Competition Law is applied to protect the names of movies screened in Hong Kong in accordance with the law, and in light of the dissemination characteristics of film works, the essential requirements and considerations for determining the names of audiovisual works “having a certain impact” as prescribed in Article 6 of the Anti-Unfair Competition Law are clarified, which are of positive significance in strengthening the protection of film works, and are conducive to creating a sound market environment for the development and prosperity of the film industry.

The original announcement is available here (Chinese only).

Category: Intellectual Property

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