Category: Intellectual Property

Top Ten Intellectual Property Stories from 2013

Schwegman Lundberg Woessner

 

I admit it, I like lists, even completely subjective ones like this one, that is tilted toward patent law and prep/pros. So in no particular order, except for number one, here we go:

top 10 2013 intellectual property patent

  1.  Myriad [Add your pun title here!]. No story can top a unanimous Supreme Court opinion (Thomas writing even!) holding that a discrete chemical molecule is really a data storage device made for us all by Mother Nature, and so is a “natural product”. More troubling, I fear, are Judge Lourie’s two opinions below, holding that the broadly-claimed diagnostic methods were patent-ineligible as “abstract ideas.” Combine this with Mayo and PerkinElmer v. Intema and you get caught in a perfect storm that can sink almost any claim to a diagnostic method.
  2. CLS Bank v. Alice. A big story indeed, as commentators tried, with little success, to unravel the threads in multiple opinions issued by the Fed. Cir. judges. Now the Supreme Court will try to define an abstract idea. Is C =pi(D) carved into a brick concrete enough for you?
  3. Inequitable Conduct goes into IP hospice. While we still have a duty of candor and good faith in dealing with the PTO, Rule 1.56(b) is gone. A simple failure to submit even “material” information will seldom, if ever, lead to an IC holding. In 1st Media v Electronic Arts, Sony, a defendant in the suit, petitioned for cert., playing the “rigid test” card, but the Supreme Court stood pat and denied the petition. In Network Signatures v. State Farm, Judge Newman suggested that facially false petitions would not amount to “egregious misconduct” unless they involved statutory standards of patentability, as opposed to formal PTO filings. However, the Supreme Court also denied cert.  in Apotex v. Cephalon, in which the Cephalon attorney and scientist obtained a patent on an invention made by their supplier – both the D.C. and the Fed. Cir found IC. And where are the final PTO rules?
  4. The rise of the Written Description Requirement as a patent-killer. I predicted this trend post-Ariad and the Fed. Cir. has ruled accordingly. It is much easier to invalidate a claim by finding that the specification does not demonstrate enough “possession” of the claimed invention that it is to have to sort through all those messy Wands factors for enablement. Even with a lot of structural data, Novozymes’ patent on its improved enzyme sank like a stone. And the Fed. Cir. has pretty much ignored patentee’s attempts to argue that a thin disclosure can be supplemented by information available to the art. See Wyeth v. Abbott Labs. Even “Gentry Gallery” –based decisions seem to be in vogue again (no support in specification for later claim amendment) – see Synthes v. Spinal Kinetics. However, possession did “rule” in Sanofi-Aventis v. Pfizer, so perhaps it is possible to turn this ocean liner around.
  5. Section 112(b) Indefiniteness. Supreme Court may grant cert to resolve the question: “Does the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations—so long as the ambiguity is not ‘insoluble’ by a court—defeat the statutory requirement of particular and distinct patent claiming.” Nautilus v Biosig Instruments. This is one of the few lines of Fed. Cir. decisions that favor patentees.
  6. Who induced infringement, or did they? In Limelight Networks v. Akami Techs., the Supreme Court may well grant cert. to decide the question: “Whether the Fed. Cir. erred in holding that a defendant may be held liable for inducing patent infringement under [271(b)] even though no one has committed direct infringement under [271(a)]?” This somewhat muddled question could be clearer if “no one” was defined more completely, but the Solicitor General has recommended that the Court take this one up, so watch out.
  7. The Rise of Secondary Considerations. In the wake of KSR’s termination of the teaching-suggestion-motivation test, the Fed. Cir. and the Board are increasingly looking for, and giving weight to, the oft neglected bag of secondary considerations. The court has noted that unexpected results are a secondary consideration (I don’t think that John Deere said that), and has put increased emphasis on long-felt need, failure of others, commercial success and the like. This does not mean that applicants or patentees will always “win”, but it significantly increases the number of patentability “chips” they have to play. For example, see Galderma v Tolmar, Appeal No. 2013-1034 ( Fed. Cir., December 11, 2013)in which a split panel of the Fed. Cir. found Galderma’s add-on patent for adapalene obvious, but spent a lot of space evaluating unexpected results and defining “teaching away.”
  8. Has Cybor’s Time Finally Come? The Fed. Cir. en banc will soon decide whether or not Fed. Cir. panels should overrule its practice of reviewing claim construction de novo, as a matter of law. Cybor has been much reviled in recent years, but there are voices that feel Cybor comports with the mission of the Fed. Cir. to bring uniformity to patent law. If the court takes this step, some commentators think that the Supreme Court will be the final arbiter.
  9. Stem Cell Research to Continue. The suit seeking to ban Federal funding for embryonic stem cell research was finally dismissed.
  10. The Battle Against “Patent Trolls” continues. And continues to threaten a system that has worked to advance innovation for over 200 years. The biggest threat posed by attempts to limit suits by NPE’s against – mostly – high tech communications companies is that they tar patent holders as a group, particularly universities and individual inventors and start-ups, by making it more difficult/costly for them to enforce their patent rights against deep pocket infringers. H.R. 3309 is just one of the latest shotgun blasts fired at the patent system. Now the Office may have a new “Director” who believes that the patent system is broken and needs to be fixed. I don’t like legislative and administrative bodies cooperating to fix a problem that almost no one has clearly defined. The last time this happened, there was a bill passed to reduce the backlog by severely limiting application filing and prosecution in general.

Merry holidays (or year-end rushes) to us all and many happy allowances!

Article by:

Warren Woessner

Of:

Schwegman, Lundberg & Woessner, P.A.

The Top Ten Things You Should Know About The Innovation Act of 2013 (For Now)

Andrews Kurth

 

Companies that find themselves either defending against patent infringement lawsuits or enforcing their own patent infringement claims should pay close attention to the Innovation Act of 2013 (H.R. 2639). The Innovation Act (“the Act”), which was introduced by Representative Bob Goodlatte (R-VA), made it out of committee and has now been passed by the House, is aimed squarely at non-practicing entities (“NPEs”), i.e., companies that own patents but that do not sell any products or provide any services themselves. While NPEs may be the primary target, the Innovation Act, if passed, will impact all patent litigation, not just NPE efforts. Likewise, while primarily having a potentially negative impact on plaintiffs, the Act will also have potentially negative impacts on defendants. With bipartisan support and the backing of the White House, the Innovation Act may be the first such legislation to pass.

The Innovation Act makes numerous amendments to Title 35, the section of U.S. Code embodying U.S. patent law. These changes include introducing a discovery delay and other discovery changes, fee shifting, customer suit staying and party-of-interest transparency, heightening pleading requirements and expanding post-grant review. If nothing else, NPEs and their targets should know the following about these changes and the Innovation Act:

Discovery: Perhaps the most expensive and intrusive aspect of any U.S. patent litigation is the discovery process. Indeed, the expense and process of discovery is often the most effective tool used by plaintiffs to bring defendants to settlement, as the process can begin early in the case before any substantial determinations regarding the merits are decided. As a result, defendants are often forced to spend up to hundreds of thousands of dollars going through the discovery process before having any idea whether infringement is a substantial risk or not. The Innovation Act significantly neuters this tool and makes other significant changes to discovery in patent cases:

1. The Act limits discovery to only matters relevant to interpreting the claims until such time as the claims are actually interpreted. Claim interpretation is often dispositive of the merits of the case. Consequently, defendants would be able to dispose of frivolous cases before the expensive discovery process or make settlement decisions more fully informed of the risks; and

2. The Act seeks to better balance discovery costs between the parties, ordering the Judiciary Conference to address the presumably unfair burden placed on defendants and place a higher burden of costs on plaintiffs.

Fee Shifting: Another area in which U.S. patent litigation, indeed U.S. litigation as a whole, differs from foreign litigation is that, except in extreme cases, each party bears its own litigation costs. Currently, NPEs often file suit against multiple defendants. Each defendant is often offered a settlement for an amount much less than that defendant’s anticipated litigation costs. As defendants settle, the settlement price typically is increased for other defendants, further encouraging early settlement. Consequently, many defendants that otherwise believe they have a strong non-infringement case will settle because the cost of achieving victory is substantially higher than settling. This strategy would not work in most foreign countries since, in those countries, the losing party pays the winning party’s fees and costs. The Innovation Act would align U.S. patent litigation with this practice and eliminate the strategy of leveraging high litigation costs for early settlement.

3. In other words, under the Act the Court can force the losing party to pay the winning party’s attorney fees and costs. If passed, this would have a dramatic effect on patent litigation defendants’ decision making process and the typical enforcement strategy of many NPEs. By allowing Courts to shift the litigation costs to the losing side, defendants may be significantly motivated to litigate when they have a strong case even if the price of settlement is relatively low. Combined with the discovery delay described above, defendants will have considerable incentive to remain in the case at least through claim interpretation and to fight infringement claims if the claim interpretation is favorable…

4. …but, by allowing Courts to shift litigation costs to the losing side, defendants’ potential exposure may also be much higher. If the defendant ultimately loses a case, the Court presumably could order them to pay the plaintiff’s litigation costs, particularly if it was apparent that they should have settled. Consequently, the Act’s changes will necessitate defendants making smart decisions about their risk exposure. Fortunately, the discovery delay will enable defendants to economically make more effective decisions by delaying significant discovery costs until after claim interpretation.

5. The Act’s fee-shifting provisions also allows for the limited joinder of parties (such as those covered by transparency provisions described below) to satisfy the award of litigation costs. In principle, this provision could be used against defendants as well as plaintiffs.

The other changes mentioned above may also cast a chill on the NPE business and other patent plaintiffs.

Customer Suit Staying

6. The Innovation Act requires the staying of patent lawsuits against a defendant’s customer. Plaintiffs often sue a defendant’s customers in order to pressure the defendant into settling, often on terms less favorable than the defendant’s actual liability would dictate. Under the Act, an action against a customer may be stayed if the customer agrees to be bound by the results of a suit against the manufacturer. Consequently, customer suit staying takes away another pressure point for plaintiffs.

Post-Grant Review Expansion

7. The Innovation Act expands the post-grant review available against covered business methods (“CBMs”), making CBM review a more effective tool to fight back against patent lawsuits. Specifically, the Act makes the CBM review program permanent and codifies the broad interpretation of what is a CBM.

Heightened Pleading Requirements

8. Currently, many plaintiffs merely name the patents infringed and, in some cases, the products or services infringing. Heightened pleading requirements require more detailed initial pleading by plaintiffs, including greater details describing how a defendant’s products or services infringe the asserted patent claims.

Party-of-Interest Transparency

9. The actual parties of interest are often not discernible from patent complaints. Many NPEs are shell companies that serve the purpose of hiding the actual party asserting the patent. The Innovation Act requires detailed descriptions of the plaintiff’s business and identification of the real party or parties-of-interest behind the asserting plaintiff. Such transparency makes next to impossible for plaintiff’s to hide their true identity and may impact litigation strategies currently used by NPEs and other plaintiffs.

10. Additionally, the party-of-interest transparency provisions of the Act also permit possible joinder of the real party or parties-of-interest behind the asserting plaintiff. This provision gives real teeth to the Fee Shifting provisions of the Act as it may prevent a real party-of-interest from hiding behind a shell company with limited or no resources and avoiding the consequences of the Fee Shifting provisions.

Keep in mind that the Innovation Act will not just affect the Act’s main target, NPEs. Indeed, the Innovation Act has the potential to affect others. Defendants that choose to fight a patent lawsuit rather than settle could find themselves on the losing end of the fee-shifting provisions. Also, the Act may encourage a delay in sharing sales numbers until after claim interpretation, with the result that defendants that may have previously settled for reasonable amounts may find themselves paying much higher amounts if the claim interpretation goes poorly. On a different front, the amounts NPEs and others are willing to pay for patents may be reduced because of the greater risks and costs involved in enforcement. This could reduce the market for patents that provide additional sources of revenue for many patent owners. This in turn could reduce the overall value of patents, the amount companies are willing to spend on patenting and result in an overall chilling effect on research and development and ultimately innovation. As the Innovation Act evolves through the legislative process, some or all of the points above may vary, but the clear direction of the Act, the limitation of patent litigation by NPEs, will remain.

Article by:

Sean S. Wooden

Of:

Andrews Kurth LLP

Supreme Court to Consider Case on Patent Eligibility of Computer-Implemented Inventions

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On December 6, 2013, the Supreme Court agreed to consider Alice Corp. v. CLS Bank International, a case concerning the patent eligibility of computer-implemented inventions. The Court will review a split decision issued by the en banc Federal Circuit in May 2013. In that decision, seven of 10 judges concluded Alice Corporation’s claims to computer-based methods for minimizing settlement risk in financial transactions, as well as claims to computer-readable media containing program code for performing such methods, constituted patent-ineligible subject matter under § 101. The judges split evenly, however, regarding the patent eligibility of Alice’s remaining claims to computerized systems for performing such transactions. Given the stark differences of opinion expressed by members of the Federal Circuit, it was widely predicted that the Supreme Court would step in to settle the dispute. The Court’s decision could have significant implications for the computer hardware and software industries, as well as for patent eligibility standards in general.

The Supreme Court is expected to hear arguments in early 2014, and a decision is expected by the end of the term in June 2014. The case number is 13-298.

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Of:

Michael Best & Friedrich LLP

 

Federal Court Narrows Claims Surrounding “HAPPY BIRTHDAY TO YOU” Copyright Suit

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Following up on a previous post regarding the lawsuit winding its way through federal court seeking clarity on whether the music publisher Warner Chappell owns or has the exclusive right to license the copyright in the ubiquitous “Happy Birthday to You” song, U.S. District Judge George H. King (Central District of California) has ordered that certain tangential claims be stayed until further notice, while the case will move forward on the central claim, essentially whether Warner’s copyright in the song is valid and enforceable or not.

Judge King’s order confirms the parties’ agreement at an October 7th hearing to bifurcate (separate) the central claim from the remaining claims (seeking an injunction against Warner, and a variety of related claims such as unfair competition, false advertising, and breach of contract) at least through the summary judgment phase of the central claim.  The central claim alone will proceed for the time being allowing the parties and the Court to focus on what is truly the dominating question in this case.

In his order Judge King also declined to apply a four-year statute of limitations to the central claim instead of the traditional copyright infringement three-year period.  Plaintiffs claimed that unlike a traditional copyright infringement action where a plaintiff alleges a defendant infringed its copyright, this is a “declaratory judgment” action involving a copyright, that is to say one where plaintiffs are preemptively bringing suit so the Court can decide whether Warner even has rights it can assert.  Basically instead of asserting its purported rights, Warner is being forced into a suit to defend its rights.  Despite the procedural change however, the analysis and issues are very similar to a traditional copyright infringement action.  The question Judge King has to resolve was, since the Declaratory Judgment Act (which permits this type of suit) does not contain its own statute of limitations, plaintiffs argued that the Court should instead use the four-year period applicable to California’s unfair competition claims (one of those ancillary claims Judge King stayed in this same order).  Judge King declined, holding that because the Declaratory Judgment Act is merely a procedural vehicle and the substantive rights being challenged are copyright-based under the Copyright Act, the best statute of limitations period is not California’s four-year period, but rather the Copyright Act’s three-year period.  He therefore dismissed two plaintiffs whose claims were time-barred by the new shorter period and gave them three weeks to re-file if they can/chose to.

Judge King’s order is clearly going to focus the parties and the court on the central issue, whether Warner has a valid enforceable copyright in the “Happy Birthday to You” song.  We will continue to closely watch this one as it proceeds.

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To Track or Not to Track Re: Digital Advertising

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Digital advertising based on tracking users’ interests and related privacy concerns have been the subject of many recent news articles.  What does this mean for businesses?  Evolving industry practices and new legislation relating to online privacy and user tracking likely require changes to online privacy practices and policies.

Online privacy and user tracking are in the news almost daily.  Consider these highlights from the past few weeks about online tracking of California minors, big data brokers, California legislation addressing “do not track,” new mobile and online interest-based advertising technology, and a warning to all website operators from the Better Business Bureau:

New Privacy Rights for California Minors

On September 23, 2013, Governor Brown signed into law new Sections 22580 through 22582 of the California Business and Professions Code titled “Privacy Rights for California Minors in the Digital World.”  The new law, which goes into effect January 1, 2015, requires an operator of a website (including online services and applications, such as a social media site) or mobile application that is “directed to minors” to allow minors (defined as anyone younger than 18 years old residing in California) who are registered users the opportunity to un-post or remove (or request removal of) their posted online content.  The operator also must provide minors with notice and “clear instructions” about how to remove their posted content.  The operator is not, however, required to remove posted content in certain specific circumstances, such as when the content was posted by a third party.

This new law also prohibits website and mobile app operators from advertising to California minors certain products and services that minors cannot legally purchase, such as alcoholic beverages, firearms, ammunition, spray paint, tobacco products, fireworks, tanning services, lottery tickets, tattoos, drug paraphernalia, electronic cigarettes, “obscene matter” and lethal weapons.  Operators also are prohibited from using, disclosing or compiling certain personal information about the minor for the purpose of marketing these products or services.

Senator Rockefeller Expands Investigation of Data Brokers

On September 25, 2013, Governor Rockefeller (W.VA) announced that he sent letters to 12 operators of popular family-, health- and personal-finance-related consumer websites requesting details about whether and what information collected from consumers is shared with data brokers.  In his letter to the operator of self.com, for example, Rockefeller noted that “[w]hile some consumers may not object to having their information categorized and used for marketing purposes, before they share personal information it is important that they know it may be used for purposes beyond those for which they originally provided it.”

California Adds Do-Not-Track Disclosure Requirements Effective January 1, 2014

On September 27, 2013, California Governor Brown signed into law amendments to the California Online Privacy Protection Act (CalOPPA), a 2004 law requiring all commercial websites and online service providers collecting personally identifiable information about California residents to “conspicuously” post a “privacy policy.”  The amendments to CalOPPA, which take effect on January 1, 2014, add two new disclosure requirements for privacy policies required by CalOPPA:

  • The privacy policy must explain how the website “responds to ‘Do Not Track’ signals from web browsers or other mechanisms that provide California residents the ability to exercise choice” about collection of their personally identifiable information (Cal Bus and Prof Code §22575(b)(5)).
  • The privacy policy must disclose whether third parties use or may use the website to track (i.e., collect personally identifiable information about) individual California residents “over time and across third-party websites” (Cal Bus and Prof Code §22575(b)(6)).

The “Bill Analysis” history indicates that CalOPPA amendments are not intended to “prohibit third-party or any other form of online tracking” but rather to “implement a uniform protocol for informing Internet users about tracking . . . and any options they may have to exercise choice . . .” (6/17/13 – Senate Judiciary).

A website operator may meet the “do not track” disclosure requirement by including a link in the privacy policy to “an online location containing a description, including the effects, of any program or protocol the operator follows that offers the consumer that choice” (Cal Bus and Prof Code §22575(b)(7)).

The reference in §22575(b)(7) to “an online location” suggests that businesses already complying with the “enhanced notice link” requirements of the Self-Regulatory Program for Online Behavioral Advertising of the Digital Advertising Alliance (DAA) will comply with amended CalOPPA.  Among other requirements, the DAA’s self-regulatory program requires website owners/operators (called “First Parties”) to provide “clear, meaningful and prominent” disclosure about data collection and use for advertising purposes, and to offer consumers a way to opt out of tracking, such as through the DAA’s consumer choice page.  As noted in the Bill Analyses, while the DAA’s consumer choice mechanism enables consumers to opt out of receiving advertising based on online tracking data, it only works for companies that participate in the DAA’s program and “does not allow consumers not to be tracked.”

User Credentials Subject to California Breach Laws Effective January 1, 2014

Governor Brown also signed into law amendments to California’s breach notification laws on September 27, 2013.  As amended, the definition of “personal information” that triggers breach notification requirements includes consumers’ online credentials: “user name or email address, in combination with a password or security question and answer that would permit access to an online account.”

Mobile Advertising: Mobile Telephone as Tracking Device

In the October 6, 2013, edition of the New York Times, an article titled “Selling Secrets of Phone Users to Advertisers” describes sophisticated profiling techniques for mobile phone users that feed on data collected through partnerships with other various online service providers.  These companies are developing alternatives for cookies, which do not work on mobile devices and, as the new California law illustrates, are increasingly irrelevant as an online tracking technique because users can block or delete them.

New Tracking Technology from Microsoft and Google

On October 9, 2013, AdAge reported that Microsoft is developing a new kind of tracking technology to replace cookies.  The new technology would function as a “device identifier,” allowing user tracking across devices that use Microsoft Windows, Xbox, Internet Explorer, Bing and other Microsoft services.  Similarly, USA Today reported that Google is developing its own digital tracking mechanism known as “AdID.”  While both of these new trackers will be used to collect and aggregate date for advertising and marketing purposes, they purportedly will offer users more control over how and what online activity is tracked and who has access to their personal data.

Better Business Bureau Issues Compliance Warning to Website Operators

On October 14, 2013, the Better Business Bureau issued a Compliance Warning noting that a “significant minority of website operators” are omitting the “enhanced notice link” (as required by the DAA’s Self-Regulatory Program for Online Behavioral Advertising) when ad networks and other third parties collect data for interest-based advertising purposes but cannot provide their own notice on the website on which the data collection occurs.  The Better Business Bureau operates the Online Interest-Based Advertising Accountability Program, through which it monitors businesses’ advertising practices and enforces the DAA’s self-regulatory program, even for companies that are not participating in it.

All of this news has created consumer confusion.  While consumers are increasingly aware of being tracked, they don’t know what exactly it means or which websites are doing it—and they are not happy about it.  A study from data privacy company TRUSTe found that 80 percent of consumers are aware of being tracked and 52 percent don’t like it.

What to Do?

A check-up for the privacy policy (or “privacy statement,” which is the increasingly popular industry term) posted on your company’s website is a good way to start evaluating your company’s digital advertising and privacy practices.  The online privacy statement is the primary means by which website operators (also known as “publishers”) communicate their privacy practices to users.

These Four steps can help you successfully evaluate your company’s privacy statement:

First, find out if your company’s marketing strategy includes advertising based on consumer information collected through cookies or other tracking technology.  Even if this type of advertising is not part of current plans, your company’s website still may have third-party tracking activities occurring on it, and these activities must be disclosed in the privacy statement as of January 1, 2014.

Second, review the privacy statement displayed on your company’s website(s) and/or mobile application(s) and make sure it accurately, clearly and completely discloses the information collected from users, how it is collected (e.g., by your company or by third parties), how your company uses the information, and whether and how the information is disclosed to third parties.  If you use information that you collected from consumers for targeted advertising, make sure the privacy statement says so.  A federal judge in the Northern District of California recently reviewed a company’s online privacy policy to evaluate whether users reading the privacy policy would understand that they were agreeing to allow user profiles and targeted advertising based on the contents of their e-mails.  The court found that the lack of specificity in the company’s privacy policy about e-mail interception meant that users could not and did not consent to the practices described in the online privacy policy.

Third, find out when and how the privacy statement is or was presented to users who provide personal information through the company website(s) and/or mobile application(s).  Is the privacy statement presented as a persistent link in the footer of each webpage?  Are users required to agree to the privacy statement?  If not, consider implementing a mechanism that requires users to do so before providing their personal information.

Finally, if your privacy statement needs to be updated, make sure you notify all consumers in advance and ensure that the changes you propose are reasonable.  Unreasonable and overbroad changes made after the fact can cause reputational harm.  Instagram learned this at the end of 2012 when it tried to change its terms of service so that users’ photos could be used “in connection with paid or sponsored content or promotions, without any compensation to [the user].”  After a hail of consumer complaints, Instagram withdrew the revised terms and publicized new, more reasonable ones.

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Another Software Patent Horror Story Unmasked and Debunked: This One You Won’t Believe

Schwegman Lundberg Woessner

I have noticed lately that the anti-software patent PR machine is trying pretty hard to find examples of start-ups “crushed” by software patents.

Ok, so here is the latest laugher example they came up with:  FindTheBest.com, a company that is nearing its fifth birthday and handling 20 million visitors a month, is supposedly a “start-up” being unfairly targeted by a patent troll  (see http://www.latimes.com/business/la-fi-hiltzik-20131011,0,704586.column).

Jack-o'-lantern and pumpkins

As far as I can tell from their web site, FindTheBest is doing a land-office business, and probably has a valuation better than 95% of all software companies.  For starters, in my opinion, pretty much every software entrepreneur on the planet would gladly endure a challenge from a troll if they could get 20 million visitors a month in web traffic.  But that is just the beginning of the irony of this anti-patent sob story.   The leader of this particular start-up at present, Kevin O’Connor, sold a previous start-up he co-founded, Doubleclick, to Google for $3.1 billion in 2008.  Doubleclick, and indeed O’Connor himself, named as an inventor on at least four software patents acquired by Google (http://www.patentbuddy.com/Inventor/O%27Connor-Kevin-Joseph/5640460#More), had aggressively filed patents to protect its innovations (http://www.seobythesea.com/2007/04/doubleclick-google-looking-at-some-of…).   Those patents weighed heavily in the valuation of Doubleclick when it was sold to Google.  So, is it not a little ironic that FindTheBest.com would be outraged about software patents impeding their progress, after one of their founders profited mightily from the patent filings of his own prior company?  Well, I sure think many would think so.  This is not to say I don’t have nothing but the utmost admiration for Mr. O’Connor’s entrepreneurial talents.  And, its not to say that he may very well be legitimately frustrated to have to deal with a patent infringement issue.  But, these are the problems that go with the kind of success few entrepreneurs are ever lucky enough to achieve, not the problems of the vast majority of true start-ups still trying to find enough customers to survive another round of financing.

Here is another injustice of this story: Eileen C. Shapiro, the inventor of the so-called troll patent in question, is no slacker. She has an undergraduate degree from Brown University and an MBA from Harvard University.  According to her LinkedIn profile, she holds 14 patents and has been actively involved in many start-ups.  Is this really an example of some undeserving “troll” inventor with no right to exclusive rights in her inventions?  Is it so improbable that someone that likely has a genius level IQ would be awarded a valuable patent for her ideas, which mind you appear to have come to her a good while ago before the site FindTheBest.com was even a notion in its founder’s imagination.

So, is this really an example of a “start-up” getting drummed out of business by underserving troll?  The Electronic Frontier Foundation would like you to believe that — “Trolls do a really good job of targeting start-ups at their most vulnerable moments,” says Julie Samuels, a staff attorney at the Electronic Frontier Foundation and holder of its Mark Cuban Chair to Eliminate Stupid Patents.”  (LA Times, October 13, 2013).   Or, is this an example of a large, successful, well established and fast growing company nearing its fifth birthday, that some time ago left “start-up” mode behind?  Wouldn’t most five year old companies be embarrassed to say they were still “starting up”?  This is a label only those desperately in need of contriving the facts to suit their hypothesis would dare to come up.

Moreover, is this not a great example of how Mr. O’Conner’s patents helped him get a fair return for the sale of Doubleclick to Google, so he could reinvest some of his gains in FindTheBest.com, rather than an example of how Ms. Shapiro’s innovations are a poster child for patents underserving of a reward.

If this is the best software patent horror story the anti-patent forces can come up with this Halloween, they should give it a rest for a while.

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Federal Court Rules That Patent Infringement Can Violate Antitrust Laws

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Patent infringement can be considered anticompetitive conduct under federal antitrust law, according to a recent ruling issued by the U.S. District Court for the Eastern District of Texas.

This ruling arose out of a dispute between Retractable Technologies, Inc. (Retractable) and Becton, Dickinson and Company (BD),1 in which Retractable alleges, among other claims, that BD’s infringement of Retractable’s patents foreclosed competition and maintained BD’s monopoly power in the hypodermic syringe market, thereby violating Section 2 of the Sherman Act.2

Retractable manufactures patented safety syringes and IV catheters, which protect against needlestick injuries by automatically retracting the needle after injection.  According to Retractable’s complaint, BD is the leading U.S. manufacturer of hypodermic syringes and holds a very large share of the relevant market.  Retractable claims that BD took steps to protect its dominant position after Retractable’s entry into the market, including by introducing an inferior line of safety syringes that infringe on Retractable’s patents.  Retractable contends that these actions, together with other exclusionary conduct including unlawful bundling and loyalty discounts, impeded the adoption of new and novel safety syringes, including those of smaller rivals such as Retractable, substantially lessening competition and maintaining BD’s dominance.  Retractable also alleges false advertising and other unfair competition claims.

To prove a violation of Section 2 of the Sherman Act, a plaintiff must demonstrate that the defendant (1) possesses monopoly power, and (2) acquired, enhanced, or maintained that power by exclusionary or anticompetitive conduct.3 In one of several motions to dismiss, BD asked the court to find that, as a matter of law, patent infringement can never be considered “exclusionary or anticompetitive conduct,” and therefore cannot be the basis of a Section 2 monopolization claim.  BD argued that no court has ever found patent infringement to be an “anticompetitive” act under Section 2 and that Retractable’s claim makes no economic sense, because patent infringement actually increases competition by making more products available to consumers.

On September 9, 2013, U.S. District Court Judge Leonard Davis adopted the recommendations of U.S. Magistrate Judge Roy S. Payne’s August 5 Report and Recommendation and issued an order denying BD’s motion.  Judge Davis agreed with Judge Payne that the only binding precedent offered by BD in support of its arguments held that patent infringement is not an injury recognized under the Sherman Act,4 but this has nothing to do with patent infringement as anticompetitive conduct.  Both judges noted the U.S. Supreme Court’s statement in U.S. v. American Tobacco Co. that the Sherman Act covers “every conceivable act which could possibly come within the spirit or purpose of the prohibitions of the law, without regard to the garb in which such acts were clothed.”5 Judge Payne further explained in his Report that while patent infringement often increases competition and benefits the end consumer despite harming a specific competitor, in this case Retractable alleges that the effect of BD’s patent infringement was to decrease competition by keeping BD’s inferior products on the market and preventing the sale of other, better quality safety syringes.

The complex interactions between intellectual property rights and the antitrust laws have received significant attention recently in various contexts, such as pay-for-delay settlements in pharmaceutical patent cases and abusive enforcement of standard essential patents.  The decision in this case adds an arrow to the quiver of companies with patented technology that are trying to compete in a market with a large and established player.  Companies with high market shares should take note that this ruling may expose them to additional antitrust risks, and should carefully consider whether any of their business practices would support a Section 2 monopolization claim against them.

1 Retractable Technologies, Inc., et al. v. Becton, Dickinson and Co., Case No. 2:08-CV-00016 (E.D. Tex.).

2 15 U.S.C. § 2.

3 United States v. Grinnell Corp., 384 U.S. 563 (1966).

4 A plaintiff must prove antitrust injury in order to recover damages.

5 221 U.S. 106, 181 (1911).

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It’s the Words, Not the Ideas, that Are Copyrightable

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The U.S. Court of Appeals for the Seventh Circuit dismissed a lawsuit claiming that Elton John and his songwriter partner Bernie Taupin had plagiarized their hit song “Nikita” from a song called “Natasha,” explaining that copyright law does not cover general ideas, but only the specific expression of an idea.  Guy Hobbs v. Elton John, Case No. 12-3652 (7th Cir., July 17, 2013) (Manion, J.).

Guy Hobbs composed “Natasha,” a song about a love story between a British man and a Ukrainian woman.  In 1983, Hobbs registered his copyright in the song and then sent the song to several music publishers, one of them being Elton John’s publisher, Big Pig.  However, the song was never published.  John released the Nikita song in 1985, wherein the singer from the west describes his love for a girl named Nikita, who he saw through the wall and who was on the other side of the line.  The copyright in Elton John song was registered with the U.S. Copyright Office by Big Pig.

Hobbs claimed that he first learned of the Nikita song in 2001.  He alleged that the lyrics infringed his copyright of Natasha and sought compensation from John and Taupin.  Hobbs later sued John, Taupin, and Big Pig for copyright infringement.  Hobbs claimed that his work was entitled to copyright protection because his selection and combination of the elements in Natasha constituted a “unique combination.”  Hobbs argued that the number of similar elements between the two works supported a claim for copyright infringement.

The district court held that the elements identified by Hobbs were not entitled to copyright protection when considered alone.  Hobbs had not established a “substantial similarity” between Natasha, a song about a British man and a Ukrainian woman who did meet, and John’s Nikita song describing an East German woman peering through the Berlin wall at a man she never met.  The district court also rejected Hobbs claim that the elements in the song created a unique combination that was copyrightable.  The district court held that although the theme of the two songs had some similar elements in common, the elements identified were not protectable under the Copyright Act.  Hobbs appealed.

The 7th Circuit agreed, concluding that “Natasha and Nikita simply tell different stories, and are separated by much more than small cosmetic differences.”  The 7th Circuit stated that the Copyright Act does not protect general ideas, but only the particular expression of an idea.  In addition, the Copyright Act does not protect “incidents, characters or settings which are as a practical matter indispensable, or at least standard, in the treatment of a given topic.”  The 7th Circuit concluded that “as a matter of law Natasha and Nikita are not substantially similar because they do not share enough unique features to give rise to a breach of the duty not to copy another’s work.”

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WildTangent Files its Supreme Court Certiorari Petition in Patent Infringement Case – Part 1

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In September of 2009, Ultramercial, Inc. sued WildTangent, Inc., Hulu and YouTube in the Central District of California for alleged patent infringement of U.S. 7,346,545 (the ’545 patent).  The ’545 patent claims trading advertisement viewing for access to content over the Internet.  The Abstract of the ’545 patent reads:

The present invention is directed to a method and system for distributing or obtaining products covered by intellectual property over a telecommunications network whereby a consumer may, rather paying for the products, choose to receive such products after viewing and/or interacting with an interposed sponsor’s or advertiser’s message, wherein the interposed sponsor or advertiser may pay the owner or assignee of the underlying intellectual property associated with the product through an intermediary such as a facilitator.

Claim 1 of the ’545 patent is more detailed:

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual-property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;

a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

As you can see, there are 11 method steps recited in Claim 1, so it is a very detailed claim and it cannot be summarized in a sentence or two.

The history of the case is not easy to summarize either.  In short, the District Court found that the subject matter of the patent was not patent eligible and dismissed the district court action before interpreting the claims.  In 2011, the Federal Circuit reversed the District Court decision, but the Supreme Court vacated the Federal Circuit’s decision in 2012 based on its recent opinion in Mayo v. Prometheus.  And in June of 2013 the Federal Circuit again reversed the District Court decision, leading to WildTangent’s Petition for Writ of Certiorari filed last week.

WildTangent’s cert petition is attached.  I will be discussing the petition and the ongoing patent eligibility battle in more detail in future posts.

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Google, Yahoo, and Ad Networks Agrees to Set of Best Practices to Combat Online Piracy

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The United States Intellectual Property Enforcement Coordinator Victoria Espinel recently blogged about a new effort to combat online piracy of intellectual property.  The broad-based effort attempts to leverage the participation of several large internet/publishing companies (Google, Yahoo, Microsoft, AOL and Condé Nast), advertising networks (24/7 Media, Adtegrity) and the Interactive Advertising Bureau.  The parties have agreed to voluntarily adopt a set of best practices to remove advertising from websites that are primarily engaged in copyright piracy (movies, video games, music, books, etc.) or selling counterfeit goods.

In addition to efforts by companies to combat a similar problem using the Copyright Alert System, which we have previously covered, the current agreement takes aim at shutting down the profitability (and it is hoped, the major incentive) of these piracy websites to attenuate their proliferation.

The parties have agreed to implement these procedures and establish a system whereby a rights holder will send an initial informal complaint to one of the participating ad networks alleging that the website at issue is “principally dedicated to” engaging in copyright piracy and/or counterfeiting goods.  Further, the website must have no “substantially non-infringing uses.”  Upon receipt of a complaint, the ad networks will investigate and determine whether to take action, which can range from requesting the website cease from engaging in the alleged activity, to an embargo on advertisements placed by that ad network on the website until such time as the alleged violations are removed, or ultimately, removing the website from the ad network altogether.  While not required to, the ad network may also consider any evidence provided by the website owner that it is either not principally dedicated to counterfeiting or copyright piracy, or has substantial non-infringing uses.  Any such “counter notice” should include the content prescribed in the Digital Millennium Copyright Act (17 U.S.C. §512(g)(3)).  In addition, the participating ad networks will be certified by the Interactive Advertising Bureau’s Networks and Exchanges Quality Assurance Guidelines.

It is important to note that the burden to initiate the process is squarely on the rights holder, the guidelines explicitly noting that (i) there is no burden on the ad networks to police or actively monitor the websites on which their ads are placed; and (ii) by participating in this program, the ad networks do not prejudice their ability to maintain any “safe harbor” status they may otherwise be entitled to.

These best practices certainly have the critical mass to succeed.  The critical question, however, will be the quality of the analysis by the ad networks in response to allegations of piracy or counterfeiting, and the efficacy of this avenue of redress as perceived by the rights holders.  Regardless, this agreement, which may be refined going forward, is another step towards alleviating some of the pressure search engines have been under recently to take more proactive steps toward protecting intellectual property.

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