Intellectual Property Archives - Page 2 of 58

Continuing Forward: Senate Leaders Release an AI Policy Roadmap

The US Senate’s Bipartisan AI Policy Roadmap is a highly anticipated document expected to shape the future of artificial intelligence (AI) in the United States over the next decade. This comprehensive guide, which complements the AI research, investigations, and hearings conducted by Senate committees during the 118th Congress, identifies areas of consensus that could help policymakers establish the ground rules for AI use and development across various sectors.

From intellectual property reforms and substantial funding for AI research to sector-specific rules and transparent model testing, the roadmap addresses a wide range of AI-related issues. Despite the long-awaited arrival of the AI roadmap, Sen. Chuck Schumer (D-NY), the highest-ranking Democrat in the Senate and key architect of the high-level document, is expected to strongly defer to Senate committees to continue drafting individual bills impacting the future of AI policy in the United States.

The Senate’s bipartisan roadmap is the culmination of a series of nine forums held last year by the same group, during which they gathered diverse perspectives and information on AI technology. Topics of the forums included:

Inaugural Forum
Supporting US Innovation in AI
AI and the Workforce
High Impact Uses of AI
Elections and Democracy
Privacy and Liability
Transparency, Explainability, Intellectual Property, and Copyright
Safeguarding
National Security

The wide range of views and concerns expressed by over 150 experts including developers, startups, hardware and software companies, civil rights groups, and academia during these forums helped policymakers develop a thorough and inclusive document that reveals the areas of consensus and disagreement. As the 118th Congress continues, it’s expected that Sen. Schumer will reach out to his counterparts in the US House of Representatives to determine the common areas of interest. Those bipartisan and bicameral conversations will ultimately help Congress establish the foundational rules for AI use and development, potentially shaping not only the future of AI in the United States but also influencing global AI policy.

The final text of this guiding document focuses on several high-level categories. Below, we highlight a handful of notable provisions:

Publicity Rights (Name, Image, and Likeness)

The roadmap encourages senators to consider whether there is a need for legislation that would protect against the unauthorized use of one’s name, image, likeness, and voice, as it relates to AI. While state laws have traditionally recognized the right of individuals to control the commercial use of their so-called “publicity rights,” federal recognition of those rights would mark a major shift in intellectual property law and make it easier for musicians, celebrities, politicians, and other prominent public figures to prevent or discourage the unauthorized use of their publicity rights in the context of AI.

Disclosure and Transparency Requirements

Noting that the “black box” nature of some AI systems can make it difficult to assess compliance with existing consumer protection and civil rights laws, the roadmap encourages lawmakers to ensure that regulators are able to access information directly relevant to enforcing those laws and, if necessary, place appropriate transparency and “explainability” requirements on “high risk” uses of AI. The working group does not offer a definition of “high risk” use cases, but suggests that systems implicating constitutional rights, public safety, or anti-discrimination laws could be forced to disclose information about their training data and factors that influence automated or algorithmic decision making. The roadmap also encourages the development of best practices for when AI users should disclose that their products utilize AI, and whether developers should be required to disclose information to the public about the data sets used to train their AI models.

The document also pushes senators to develop sector-specific rules for AI use in areas such as housing, health care, education, financial services, news and journalism, and content creation.

Increased Funding for AI Innovation

On the heels of the findings included in the National Security Commission on Artificial Intelligence’s (NSCAI) final report, the roadmap encourages Senate appropriators to provide at least $32 billion for AI research funding at federal agencies, including the US Department of Energy, the National Science Foundation, and the National Institute of Standards and Technology. This request for a substantial investment underscores the government’s commitment to advancing AI technology and seeks to position federal agencies as “AI ready.” The roadmap’s innovation agenda includes funding the CHIPS and Science Act, support for semiconductor research and development to create high-end microchips, modernizing the federal government’s information technology infrastructure, and developing in-house supercomputing and AI capacity in the US Department of Defense.

Investments in National Defense

Many members of Congress believe that creating a national framework for AI will also help the United States compete on the global stage with China. Senators who see this as the 21st century space race believe investments in the defense and intelligence community’s AI capabilities are necessary to push back against China’s head start in AI development and deployment. The working group’s national security priorities include leveraging AI’s potential to build a digital armed services workforce, enhancing and accelerating the security clearance application process, blocking large language models from leaking intelligence or reconstructing classified information, and pushing back on perceived “censorship, repression, and surveillance” by Russia and China.

Addressing AI in Political Ads

Looking ahead to the 2024 election cycle, the roadmap’s authors are already paying attention to the threats posed by AI-generated election ads. The working group encourages digital content providers to watermark any political ads made with AI and include disclaimers in any AI-generated election content. These guardrails also align with the provisions of several bipartisan election-related AI bills that passed out of the Senate Rules Committee the same day of the roadmap’s release.

Privacy and Legal Liability for AI Usage

The AI Working Group recommends the passage of a federal data privacy law to protect personal information. The AI Working Group notes that the legislation should address issues related to data minimization, data security, consumer data rights, consent and disclosure, and the role of data brokers. Support for these principles is reflected in numerous state privacy laws enacted since 2018, and in bipartisan, bicameral draft legislation (the American Privacy Rights Act) supported by Rep. McMorris Rogers (D-WA), and Sen. Maria Cantwell (D-WA).

As we await additional legislative activity later this year, it is clear that these guidelines will have far-reaching implications for the AI industry and society at large.

How to Recover Attorneys’ Fees in a Schedule A Trademark Case in the Northern District of Illinois

In recent years, a substantial number of “Schedule A” trademark infringement cases have been filed in the Northern District of Illinois. In such a case, the trademark owner may file a trademark infringement complaint against a number of defendants, with the complaint identifying the defendants as “The Individuals, Corporations, Limited Liability Companies, Partnerships and Unincorporated Associations Identified on Schedule A hereto.” [See, e.g., Opulent Complaint]

The trademark owner may file Schedule A separately from the complaint with a request to the Court that the schedule be placed under seal. Sometimes, trademark owners file the entire complaint under seal. After filing sealed pleadings that shield the defendants’ identities, the trademark owner may then file ex parte motions for temporary restraining orders (“TROs”) against the secretly-named defendants. Because the proceedings are ex parte, the alleged infringer is not given notice of the proceedings or an opportunity to appear. If the Court grants the TRO, the trademark owner may then present the TRO to online marketplaces with a demand that the marketplaces immediately stop selling the allegedly infringing goods. The result may be that an alleged infringer may find all of its activity frozen by the online marketplace, including a freeze on the alleged infringer’s cash held with the online marketplace. This may create cashflow problems for the alleged infringer and prevent the alleged infringer from making future sales. Because its identity is sealed by the court, an alleged infringer may first learn of the TRO after its accounts are frozen.

Schedule A cases appear to be concentrated in the Northern District of Illinois because judges in that district have been receptive to granting ex parte relief. See, A. Anteau, “The Northern District of Illinois v. the Internet: How Chicago Became the Center of Schedule A Trademark Infringement Litigation”; Law.Com, December 19, 2023. At least two judges in that district even provide templates for TROs, preliminary injunctions and default judgments in Schedule A cases. See Northern District of Illinois (uscourts.gov); Northern District of Illinois (uscourts.gov). The justification for the ex parte nature of these proceedings is that it, if notice was required, online counterfeiters (frequently from China) could hide their assets or move their counterfeit products to new sites as soon as an infringement case was filed.

Notwithstanding the foregoing, remedies and relief do exist if an entity is the subject of a wrongfully obtained ex parte TRO. Recently, Ya Ya Creations, a defendant in a Schedule A trademark case, obtained an attorneys’ fees award against a plaintiff that failed to conduct a proper investigation before naming two Ya Ya-affiliated entities as alleged infringers in a case filed in the Northern District of Illinois. [Award of Fees] The dispute began in August 2021, when the plaintiff filed a lawsuit against Ya Ya for trademark infringement and a variety of other causes of action in the Eastern District of Texas. The Texas court transferred the case to the Central District of California in April of 2022. Four months after the transfer, the plaintiff filed a very similar lawsuit against Ya Ya in the Middle District of Florida. On May 26, 2023, the Florida court transferred the case to the Central District of California, and then the CD California consolidated the cases due to the similarity of the facts and claims. On September 26, 2023, the plaintiff filed yet another lawsuit. This time, the plaintiff filed a Schedule A trademark infringement case against a number of defendants in the Northern District of Illinois. In the Schedule A case, the plaintiff named two entities affiliated with Ya Ya as alleged infringers.

Notwithstanding the litigation history between the parties, the plaintiff obtained an ex parte TRO against Ya Ya in the Northern District of Illinois. Ya Ya first learned about the TRO after the court issued it and after an online marketplace froze Ya Ya’s accounts.

Ya Ya’s first step in seeking redress was to file an emergency motion asking the court to dissolve the ex parte TRO. [Ya Ya Motion to Dissolve TRO] Ya Ya argued that, because the parties were actively litigating against each other in California, the plaintiff had no basis to seek ex parte relief against Ya Ya or its affiliated entities without notifying Ya Ya of the proceedings. Ya Ya also argued that the plaintiff’s ex parte TRO was a transparent attempt to gain a litigation advantage in the California cases to either leverage a settlement, force Ya Ya into a position where it could not even pay its lawyers to mount a defense, or force Ya Ya to file for bankruptcy. In response to Ya Ya’s motion to dismiss, the plaintiff agreed to dismiss all of its claims against the Ya Ya-affiliated entities.

Ya Ya’s next step was to file a motion for recovery of the attorneys’ fees it expended in the Northern District of Illinois proceedings. [Ya Ya Request for Reimbursement of Attorneys’ Fees]. In response, the plaintiff argued that it was not obligated to pay Ya Ya’s attorneys’ fees, because it did not know the entities it named in the Northern District of Illinois lawsuit were affiliated with Ya Ya. But the court rejected that argument. The court concluded that, pursuant to Federal Rule of Civil Procedure 11, a court may award attorneys’ fees incurred while defending an ex parte TRO when (1) the TRO caused “needless delay” and unnecessarily “increased the cost of litigation,” or (2) the TRO was obtained by pleadings that were not “well grounded in fact” or made after “reasonable inquiry.” The Court determined that plaintiff could have avoided increasing the costs of litigation if it had conducted a reasonable inquiry to determine if the two entities were affiliated with Ya Ya, but it failed to do so. As a result, the Court awarded Plaintiff to pay Ya-Ya almost $100,000 in attorneys’ fees.

Trademark litigators should be aware that judges in the Northern District of Illinois have been receptive to granting ex parte TROs in trademark cases. If you represent a client that is the subject of an improperly granted ex parte TRO, be prepared to move quickly to dissolve the TRO and consider whether you have a basis to move for an award of attorneys’ fees.

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.

Category: Intellectual Property

Continuing Forward: Senate Leaders Release an AI Policy Roadmap