Category: Intellectual Property

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012

The National Law Review is pleased to bring you information about an upcoming conference:

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012 in Washington, DC

The marcus evans 5th Product and Pipeline Enhancement for Generics Conference will host industry leaders within the Generic Pharmaceutical, Branded Pharmaceutical and API industries operating globally as they share best practices, strategies and tools on portfolio management and business strategy, as well as legal, intellectual property and patent issues.

Featuring case studies from leading generics experts, including:

  • Richard Dicicco, Chairman at Harvest Moon Pharmaceutical
  • Dr. Vijay Soni, Executive Vice President, IP, BD and Product Portfolio at Glenmark Pharmceuticals
  • Candis Edwards, Senior Vice President, Regulatory Affairs & Compliance at Amneal Pharmaceuticals
  • Gregory Fernengel, Senior Intellectual Property Counsel at Ben Venue Laboratories, Inc.
  • Markus H. Meier, Assistant Director, Health Care Division, Bureau of Compensation at Federal Trade Commission
  • Vishal K. Gupta, Chief Scientific Officer, Vice President, Research & Development at CorePharmaLLC
  • Sherri Leonard, VP, Business Development and Portfolio Management at OrchidPharma, Inc.

Attendees will leave this conference with a better understanding of:
1. Current and upcoming FDA proposals and regulations to ensure compliance
2. Innovation in the drug pipeline
3. Portfolio management and business development
4. How to protect the company’s patents’ and intellectual property
5. Expanding the commercial reach through biosimilars
6. Market changes and future industry developments

Testimonials:

“Great in-depth coverage of hot topics in an intimate setting that lent itself to excellent discussions.” – Novartis

”Terrific chance to connect with other industry traders to exchange ideas and explore solutions to the challenges we all face.” – OrchidPharma

When the Sky’s the Limit, Don’t Forget the Basics: Social Media, the Internet and Your Business

The National Law Review recently published an article by Charles H. Gardner of Much Shelist, P.C. regarding Social Media and Businesses:

In today’s diverse marketplace, social media sites, as opposed to a company’s own branded website, are poised to become a primary and potentially first point of contact with current and future generations of consumers. Techrevel.com recently reported that 56% of consumers who use Facebook, as an example, say that they are more likely to recommend a brand after becoming a “fan.” With the number of Facebook users approaching one billion, a strong social media presence has become a de facto mandate for businesses.

In response, start up and established businesses are growing more reliant on the Internet, and social media in particular, for marketing and sales. According to a recent Forrester Research study cited on Statistica.com, social media marketing expenditure is expected to grow to $5 billion in 2016, up from approximately $1.6 billion in 2011.

In this context, you may be exploring the possibility of making your company website more interactive. From a business perspective, creating a user experience on your branded website that is simpatico with social media reanimates the end user’s experience and revitalizes your brand. From a legal perspective, however, you may wonder how to enter (or expand your presence in) this pioneer media. How do you balance the advantages of interactivity with the added burdens of creating, maintaining and updating essential privacy, data security and other policies?

You can start by asking―and answering―the following questions:

Does your website have a privacy policy that is compliant with all federal, state and territorial laws?

Federal law (and several state laws) mandates that companies inform their users about the personally identifiable information (PII) they collect, how the company uses it, with whom the company may share it, and how users may “opt-out” of having their PII collected and shared. PII includes information such as name, social security number, biometric records, etc., that alone or when combined with other information such as date and place of birth, mother’s maiden name, etc., can be used to trace an individual’s identity. Because many states have regulations that are more restrictive than federal regulations, you should seek to comply with the laws of the most restrictive states. These laws may apply not only to information that you collect from your own company website, but also from your company social media pages.

Every company with a presence on the internet should have a privacy policy that is compliant, proactive and forward thinking. If you have a strong international presence, it should address issues of global compliance as well.

If your company website is interactive or likely to become interactive, are you following proper procedures to shield the company from liability?

Consumers are likely to continue their use of third-party social media sites, including Facebook, as an interactive first point of contact with a company. However, as branded company sites begin to mirror the functionality of traditional social media sites, company sites are including interactive features from blogs and community chat rooms to video sharing  and personalized profile pages that allow the posting of user-generated content (UGC). If your website includes these or similar features, then you are, in fact, also an interactive website.

There are two important legal protections for operators of interactive computer services. The Communications Decency Act (CDA) provides safe harbor (immunity from liability) for Internet Service Providers (ISPs). This shields an ISP from liability arising out of civil causes of action such as defamation, invasion of privacy, trade libel, etc. As a very general rule, as long as the provider is not a publisher of the content (importantly, they merely provide a place to post the content; they do NOT contribute to or edit it), they will not be held liable for the original posting of the offending UGC. While the term ISP is traditionally applied to services such as Yahoo!, Google, and AOL, recent case law suggests that if you operate an interactive computer service, you should, for the practical purpose of maintaining safe harbor protection, consider yourself a sort of ISP.

The Digital Millennium Copyright Act (DMCA) also contains important safe harbor provisions. Under the DMCA, “an operator of interactive computer services” is immune from liability for intellectual property (primarily copyright) infringement by a third party using the service provided that the provider follows certain registration, compliance and procedural guidelines.

Do you post and require users to agree to your company website’s terms of use?

One of the most valuable policies for a website owner is a terms of use policy (sometimes called “house rules” or a “user agreement”). Your terms of use tell your users what they can reasonably expect when using your site. For example, you may prohibit certain activities, such as hate speech, personal attacks, posting materials to which the user does not have the requisite legal rights, etc. By setting the ground rules of what you will allow on your site, you can monitor UGC for violations of the policy and remove or refuse to post such material objectively based upon your site’s posted terms and preserve your safe harbor protection. Remember, if an ISP edits or modifies content, it is treated as a publisher of content and can lose safe harbor protection. However, if an ISP removes content in its entirety for violating a documented policy, the ISP is not considered a publisher and is protected under the CDA for example.

A well-crafted terms of use policy, if correctly written and agreed to, also forms a “contract” between the end user and the website operator. For example, arbitration clauses can minimize the likelihood of class action lawsuits and the potentially negative publicity of high-profile trials. A transparent policy can also set reasonable expectations, engender goodwill and protect the company website owner.

Do you have internal procedures and policies in place to address data security, data breaches and personnel practices?

As soon as reasonably possible, before or after your site goes live, you should discuss data security with your attorney and a qualified information technology (IT) representative. Like privacy policies, data security policies should comply with federal law and regulations, as well as the laws of the most restrictive U.S. state or territory. It is wise to have written procedures for data protection and breaches, which should be provided to any personnel who will be dealing with the company’s electronically stored information (ESI), particularly to the extent that the ESI contains end users’ PII.

You should also have a separate personnel policy that educates your employees and contractors about the use of company technology, social media and the Internet, and that protects your company without unreasonably or illegally restricting your employees’ activities.

As a practical matter, social media is no longer merely an optional business tool. It is a primary source of communication, information and advertising. Developing sound social media and technology policies as early as possible can reduce your liability and exposure and allow your company room to grow in this new online world.

© 2012 Much Shelist, P.C.

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012

The National Law Review is pleased to bring you information about an upcoming conference:

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012 in Washington, DC

The marcus evans 5th Product and Pipeline Enhancement for Generics Conference will host industry leaders within the Generic Pharmaceutical, Branded Pharmaceutical and API industries operating globally as they share best practices, strategies and tools on portfolio management and business strategy, as well as legal, intellectual property and patent issues.

Featuring case studies from leading generics experts, including:

  • Richard Dicicco, Chairman at Harvest Moon Pharmaceutical
  • Dr. Vijay Soni, Executive Vice President, IP, BD and Product Portfolio at Glenmark Pharmceuticals
  • Candis Edwards, Senior Vice President, Regulatory Affairs & Compliance at Amneal Pharmaceuticals
  • Gregory Fernengel, Senior Intellectual Property Counsel at Ben Venue Laboratories, Inc.
  • Markus H. Meier, Assistant Director, Health Care Division, Bureau of Compensation at Federal Trade Commission
  • Vishal K. Gupta, Chief Scientific Officer, Vice President, Research & Development at CorePharmaLLC
  • Sherri Leonard, VP, Business Development and Portfolio Management at OrchidPharma, Inc.

Attendees will leave this conference with a better understanding of:
1. Current and upcoming FDA proposals and regulations to ensure compliance
2. Innovation in the drug pipeline
3. Portfolio management and business development
4. How to protect the company’s patents’ and intellectual property
5. Expanding the commercial reach through biosimilars
6. Market changes and future industry developments

Testimonials:

“Great in-depth coverage of hot topics in an intimate setting that lent itself to excellent discussions.” – Novartis

”Terrific chance to connect with other industry traders to exchange ideas and explore solutions to the challenges we all face.” – OrchidPharma

Otsuka v. Sandoz – Motivation Trumps Structure

An article by Warren Woessner of Schwegman, Lundberg & Woessner, P.A. about Otsuka v. Sandoz recently appeared in The National Law Review:

The recent decision of the Fed. Cir. in Otsuka v. Sandoz, App. No. 2011-1126, -1127 (Fed. Cir. May 7, 2012) continues the courts admirable work in defining obviousness post-KSR. This case revisits the standards involved in making out a prima-facie case of structural obviousness. What is particularly interesting in this decision is the weight – or lack thereof – that the court gave to evidence of therapeutic utility of the closest prior art compound. In fact, the court applied the fairly obscure maxim of patent law articulated forty years ago In re Steminski, 444 F.2d 581 (CCPA 1971). John L. White, in Chemical Patent Practice, summarized the holding of Steminski as part of his discussion of the “Hass-Henze Doctrine”:

“The [CCPA] concluded that because the characteristics normally possessed by members of a homologous series [e.g., differing by only one methylene group] are principally the same, varying gradually from member to member [e.g., methyl, ethyl, propyl, butyl, etc], chemists knowing the properties of one member of a series would in general know what to expect in adjacent members so that a mere difference in degree is not the marked superiority which will ordinarily remove the unpatentability of adjacent homologs of old substances. Contra, where no use for the prior art compound is known [citing Steminski].”

Sandoz was trying to invalidate an anti-schizophrenic drug, aripiprazole, marketed by Otsuka as Abilify. The court abbreviated its structure by referring to it as a 2,3-dichlorophenylbutoxy compound. Sandoz et al. were trying to invalidate the claim to this compound in US Pat No. 5,006,528 over an earlier patent that disclosed the 2,3-dicholorphenylpropoxy analog of Abilify (a butoxy compound). Not only is the prior art compound  a homolog of Abilify, but the prior art patent disclosed a laundry list of utilities, including “antischizophrenia agents”. Many other structurally more remote analogs were disclosed, and three others were discussed in detail in the opinion, but the appellant/defendants must have felt pretty confident, even though the district court ruled that the patent was unobvious.

No such luck! The Fed. Cir. discussed the “lead compound concept” at length and stated that: “Absent a reason or motivation based on such prior art evidence [of pertinent properties], mere structural similarity between a prior art  compound and the claimed compound does not inform the lead compound selection….See KSR [citation omitted] (‘A fact finder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning.’)” Slip op. at 18-19. In other words, structural similarity, taken alone is not sufficient to establish obviousness.

But wasn’t there data beyond the “naked” structure of the 2.3-dichlorophenyl propoxy prior art homolog? Citing Takeda, 492 F.3d at 1357 and Pfizer, 480 F.3d at 1361, the court fell back on the rule that the art worker must be motivated to use the teachings of the reference to achieve the claimed invention and had a reasonable expectation of success. The court focused on the generality of the prior art disclosure of utility and the primitive nature of this area of pharmacology prior to Otsuka’s invention of Abilify: “At the relevant time, there were no carbostyril compounds that were marketed as antipsychotics or were publicly known to have potent antipsychotic activity with minimal side effects.”So reasonable expectation of success probably carried the day (or the lack thereof), and the ‘528 patent remains valid. Apart from the revival of Steminski, I was heartened by the number of times that the court criticized defendants’ use of what the court(s) considered to be hindsight. For instance, defendants tried to argue that Otsuka’s advance involved “a short timeline”. The Fed. Cir. replied:

“The inventor’s own path itself never leads to a conclusion of obviousness; that is hindsight. What matters is the path the [POSA] would have followed, as evidenced by the pertinent prior art…the district court’s careful analysis exposed the Defendants’ obviousness case for what it was—a poster child for impermissible hindsight reasoning.”

Not just pretty words, beautiful ones!

© 2012 Schwegman, Lundberg & Woessner, P.A.

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012

The National Law Review is pleased to bring you information about an upcoming conference:

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012 in Washington, DC

The marcus evans 5th Product and Pipeline Enhancement for Generics Conference will host industry leaders within the Generic Pharmaceutical, Branded Pharmaceutical and API industries operating globally as they share best practices, strategies and tools on portfolio management and business strategy, as well as legal, intellectual property and patent issues.

Featuring case studies from leading generics experts, including:

  • Richard Dicicco, Chairman at Harvest Moon Pharmaceutical
  • Dr. Vijay Soni, Executive Vice President, IP, BD and Product Portfolio at Glenmark Pharmceuticals
  • Candis Edwards, Senior Vice President, Regulatory Affairs & Compliance at Amneal Pharmaceuticals
  • Gregory Fernengel, Senior Intellectual Property Counsel at Ben Venue Laboratories, Inc.
  • Markus H. Meier, Assistant Director, Health Care Division, Bureau of Compensation at Federal Trade Commission
  • Vishal K. Gupta, Chief Scientific Officer, Vice President, Research & Development at CorePharmaLLC
  • Sherri Leonard, VP, Business Development and Portfolio Management at OrchidPharma, Inc.

Attendees will leave this conference with a better understanding of:
1. Current and upcoming FDA proposals and regulations to ensure compliance
2. Innovation in the drug pipeline
3. Portfolio management and business development
4. How to protect the company’s patents’ and intellectual property
5. Expanding the commercial reach through biosimilars
6. Market changes and future industry developments

Testimonials:

“Great in-depth coverage of hot topics in an intimate setting that lent itself to excellent discussions.” – Novartis

”Terrific chance to connect with other industry traders to exchange ideas and explore solutions to the challenges we all face.” – OrchidPharma

Keep a Close Eye on Your Competition- Intellectual Property Law

Do you know of a competitor trying to imitate your product? Rip-It Sporting Goods developed an in-fielder’s mask for baseball and softball. The mask, which is marketed at trade shows, on the internet and nationally through distributors, was allegedly copied by competitor Champro Sports who attempted to sell two versions of a competing mask at a lower price. Champro displayed their masks at trade shows and on its website. Champro also sold and took orders for their masks.

Luckily, Rip-It held a design patent on its mask. On April 19, 2012, the United States District Court for the Middle District of Florida executed a Consented to Permanent Injunction Order prohibiting Champro Sports from making, using, selling or offering for sale the accused mask designs.

Lessons learned:

  • Protect your assets – whether your products, your name, your brand identity, even your customer lists.
  • Keep an eye on your competition.
  • Contact an attorney before the competition tries to copy you, to find out how to protect your assets.

© Lowndes, Drosdick, Doster, Kantor & Reed, PA

Nothing Revealed on “Reveal Day”: New gTLD Application System Remains Suspended

Recently an article by Geri L. Haight of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding The NEw gTLDs was published in The National Law Review:

The much anticipated “Reveal Day” — so dubbed by ICANN itself — has now come and gone without fanfare.  May 1st was to be the day when ICANN was scheduled to publish the list of all applied-for new generic top level domains (gTLDs) as part of the roll-out of the new Internet era.  Instead, all that was revealed today was that ICANN remains mired in technical glitches.

ICANN announced last Friday that, though it had hoped to re-open the online application system on April 27th, the system would remain shut down.  ICANN now plans to notify all applicants within the next seven business days (by May 8th) as to whether their applications were affected by the “technical glitch” in the TLD application system.  The “technical glitch” at issue is that ICANN’s application system allowed a limited number of users to view some other users’ file names and user names.  For the past two and a half weeks, ICANN has been (and continues to be) reviewing its internal system logs and full packet-level capture of all traffic to and from the application system from when it opened the application system on January 12th until it was shut down on April 12th.  After it notifies all applicants, ICANN will announce a new schedule for reopening the system and allowing applicants to confirm the completeness of their applications.  At the time the application system was shut down, the number of registrants in the system was 1,268. According to ICANN, this number could change (for example, for applicants that might withdraw or were in the process of submitting their $5000 deposit when the system was taken offline). Many business (and their trademark counsel) are anxious to review the list of which .BRANDS and .GENERICS have been applied-for.

But, alas, it seems that nothing will be revealed anytime soon.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Rosetta Stone v. Google: No Easy Exit for Google from AdWords Trademark Suits

An article about Rosetta Stone v. Google written by J. Roger Williams, Jr. of Andrews Kurth LLP recently appeared in The National Law Review:

Rosetta Stone, Inc., which provides technology-based language learning products and services, sued Google in the U.S. District Court for the Eastern District of Virginia for direct and indirect trademark infringement and trademark dilution arising out of Google’s sale of Rosetta Stone’s trademarks as keywords in Google’s AdWords program. Google triumphed in the trial court, with the District Court granting summary judgment in favor of Google on all claims. Earlier this month, however, in Rosetta Stone, Inc. v. Google, Inc.,[1] the U.S. Court of Appeals for the Fourth Circuit reversed the ruling and remanded the case for further proceedings on all trademark claims. For Google, the ruling means that it has no easy way to exit any trademark case arising out of its AdWords program. For brand owners, the ruling provides a road map for how to hold e-commerce web sites (Google, eBay) responsible for counterfeiters who advertise on the web site.

The primary issue in Rosetta Stone’s claim of direct trademark infringement was whether the Sponsored Links generated by Google’s AdWords Program create a likelihood of confusion. The District Court held that the only meaningful “digits of confusion” were Google’s intent in auctioning the keywords, the evidence of actual confusion, and the sophistication of the consuming public; and on each of these elements Rosetta Stone had failed to provide sufficient evidence to defeat summary judgment. The Fourth Circuit, after intense scrutiny of the evidence, disagreed with the trial court and held that there was sufficient evidence on each of these factors to force a trial.

The court’s analysis on the “intent” issue is remarkable. The record contained evidence of internal business studies done by Google that suggested that there would be “significant source confusion among Internet searchers when trademarks were included in the title or body of the advertisements.”  Although the Rosetta Stone marks were not involved in these studies, the Fourth Circuit nevertheless held that these studies provided sufficient evidence “that Google intended to cause confusion in that it acted with the knowledge that confusion was very likely to result from its use of the marks.” Because Google’s studies were not specific to the Rosetta Stone marks, the reasoning of this holding appears applicable to every brand owner that asserts a trademark infringement claim against Google over its use of AdWords. In other words, the opinion indicates that any trademark plaintiff may be able to defeat summary judgment for Google on the “likelihood of confusion” issue by showing that Google was provided with evidence that confusion was “very likely.”

Google also gave up its win on the “functionality” doctrine, which holds that a functional product feature cannot be trademarked or the subject of a trademark infringement suit. Finding that the trademarks used as keyword triggers are functional because they are essential to the functioning of Google’s search service, the District Court had granted summary judgment for Google on this defense. The Fourth Circuit reversed, reasoning that the functionality doctrine affords no protection to Google because Rosetta Stone, the mark owner, did not use the marks as a functional product feature.

Also reversed was Google’s summary judgment on Rosetta Stone’s claim of contributory infringement, i.e., Rosetta Stone’s claim that Google is liable for trademark infringement by the advertisers who directly infringe Rosetta Stone’s marks in the Sponsored Links. The central issue was the evidence that Rosetta Stone had notified Google of approximately 200 instances of specific Sponsored Links advertising counterfeit Rosetta Stone products and that Google nevertheless continued to allow the very same advertisers to purchase Rosetta Stone marks to trigger Sponsored Links for other web sites owned by the advertisers. The trial court was “unpersuaded” that this evidence met the legal standard for contributory infringement set by the Second Circuit in its Tiffany v. eBay decision.[2]  In theTiffany case, the Second Circuit held that eBay was not contributorily liable for trademark infringement despite its general knowledge that sellers were selling counterfeit Tiffany products on eBay. The major difference between the facts in the two cases is that Tiffany’s demand letters, in Tiffany v. eBay, did not identify particular sellers who Tiffany thought were then offering or would offer counterfeit goods, whereas Rosetta Stone’s notification to Google, in Rosetta Stone v. Google, apparently did identify particular sellers who were offering or were likely to offer counterfeit products. This evidence, according to the court of appeals, sufficed to force a trial on the issue of whether Google contributed to trademark infringement by continuing to supply its services to known infringers.

In any event, the Fourth Circuit’s reasoning has clear practical implications for brand owners who are fighting counterfeiters: Diligently provide notice to the e-commerce site of the identity and web site of each counterfeiter who is or might be selling counterfeit products.

Not all the news was bad for Google. The holding that Google was not vicariously liable for infringement by counterfeiters was affirmed; and although Rosetta Stone is going to get its day in court, nothing in the Court of Appeals’ holding suggests that Rosetta Stone will be able to prevail at trial. Even so, this ruling was a significant setback for Google. Google, understandably, has been searching for a “safe harbor” to avoid entanglement in trademark disputes between online advertisers and brand owners over the advertiser’s use of the brand owner’s mark in Sponsored Links.  One potential safe harbor for Google has already been eliminated by the Second Circuit in its 2010 holding in Rescuecom v. Google that Google’s sale of keywords constituted a trademark “use in commerce.”[3]  It appeared that the District Court’s ruling in Rosetta Stone had given Google several additional “safe harbors” under the theories that Google’s mere sale of keywords did not create a likelihood of confusion, that Google did not contribute to infringement by supplying its services to known infringers, that Google’s keywords were merely functional, and that Google’s sale of keywords fell within the “fair use” exception to dilution; but now the Fourth Circuit has rejected the notion that any of these defenses shields Google as a matter of law from trademark liability for its AdWords program. For the foreseeable future, Google has no easy exit from any trademark suit based on its AdWords program.

1. Rosetta Stone, Inc. v. Google, Inc., __ F.3d. __, 2012 WL 1155143 (4th Cir. April 9 2012).

2. Tiffany Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010).

3. Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009).

© 2012 Andrews Kurth LLP

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012

The National Law Review is pleased to bring you information about an upcoming conference:

5th Product and Pipeline Enhancement for Generics Conference, July 17-19, 2012 in Washington, DC

The marcus evans 5th Product and Pipeline Enhancement for Generics Conference will host industry leaders within the Generic Pharmaceutical, Branded Pharmaceutical and API industries operating globally as they share best practices, strategies and tools on portfolio management and business strategy, as well as legal, intellectual property and patent issues.

Featuring case studies from leading generics experts, including:

  • Richard Dicicco, Chairman at Harvest Moon Pharmaceutical
  • Dr. Vijay Soni, Executive Vice President, IP, BD and Product Portfolio at Glenmark Pharmceuticals
  • Candis Edwards, Senior Vice President, Regulatory Affairs & Compliance at Amneal Pharmaceuticals
  • Gregory Fernengel, Senior Intellectual Property Counsel at Ben Venue Laboratories, Inc.
  • Markus H. Meier, Assistant Director, Health Care Division, Bureau of Compensation at Federal Trade Commission
  • Vishal K. Gupta, Chief Scientific Officer, Vice President, Research & Development at CorePharmaLLC
  • Sherri Leonard, VP, Business Development and Portfolio Management at OrchidPharma, Inc.

Attendees will leave this conference with a better understanding of:
1. Current and upcoming FDA proposals and regulations to ensure compliance
2. Innovation in the drug pipeline
3. Portfolio management and business development
4. How to protect the company’s patents’ and intellectual property
5. Expanding the commercial reach through biosimilars
6. Market changes and future industry developments

Testimonials:

“Great in-depth coverage of hot topics in an intimate setting that lent itself to excellent discussions.” – Novartis

”Terrific chance to connect with other industry traders to exchange ideas and explore solutions to the challenges we all face.” – OrchidPharma

Supreme Court to Decide if First Sale Doctrine Permits Importation of Foreign-Made Copyrighted Works Without Authorization

Recently an article by Paul Devinsky and Rita Weeks of McDermott Will & Emery regarding First Sale Doctrine was published in The National Law Review:

The “first sale doctrine” in copyright law permits the owner of a lawfully made copy of a copyrighted work to sell or dispose of that copy as it sees fit.  The Supreme Court of the United States has agreed to hear a case that will decide whether the first sale doctrine permits the importation of foreign-made goods containing copyrighted materials into the United States without the copyright owner’s permission.

The Supreme Court of the United States has agreed to hear Kirtsaeng v. John Wiley & Sons, Inc., a case involving “gray market” resale of copyrighted works and the defense of the “first sale doctrine.”  In copyright law, the “first sale doctrine” permits the owner of a lawfully made copy of a copyrighted work to resell or otherwise dispose of that copy without limitations imposed by the copyright holder.  The Supreme Court’s decision will resolve whether the first sale doctrine applies to works manufactured outside of the United States that are imported and resold in the United States, and therefore is of particular importance to importers, distributors and retailers of copyrighted goods produced abroad.

U.S. textbook publisher John Wiley & Sons brought a copyright infringement suit in the Southern District of New York against Kirtsaeng, a University of Southern California graduate student from Thailand.  Kirtsaeng’s friends and family shipped him foreign editions of Wiley textbooks printed abroad by Wiley’s affiliate Wiley Asia, which Kirtsaeng then sold on commercial websites such as eBay for allegedly substantial profits.  Wiley alleged Kirtsaeng violated Wiley’s copyrights by unauthorized importation of textbooks only intended for a foreign market.  Kirtsaeng attempted to proffer the defense of the “first sale doctrine,” but the district court prohibited him from raising the defense and rejected the applicability of the defense to foreign editions of textbooks.  A jury found Kirtsaeng liable for willful copyright infringement and awarded Wiley $600,000 in statutory damages.

Kirtsaeng appealed, arguing the district court erred in holding that the first sale doctrine was not an available defense.  Last year the U.S. Court of Appeals for the Second Circuit affirmed the district court.  (IP Update, Vol. 14, No. 9).  Reviewing §109(a) of the Copyright Act, which codifies the first sale doctrine, the Second Circuit noted that the language instructing that the defense applies to works “lawfully made under this title” was ambiguous such that §109 itself did not compel or foreclose the application of the first sale doctrine to works manufactured abroad.  Therefore, the Second Circuit looked to §602(a)(1) of the Copyright Act, which prohibits the importation of a work acquired abroad without the copyright owner’s authorization, and the Supreme Court’s guidance in Quality King Distributors, Inc. v. L’anza Research International, Inc.  Quality King involved copyrighted works manufactured in the United States that were exported to foreign distributors, who then re-imported the works back into the United States for resale without the copyright owner’s permission.  In that context, the Supreme Court unanimously held that the first sale doctrine limited the scope of §602(a) and thus the foreign distributor who re-imported the works could assert the first sale doctrine as a defense.  The Supreme Court did not rule on whether the first sale doctrine would apply to works manufactured outside of the United States, however.  Relying on Quality King, the Second Circuit in Kirtsaeng held that the first sale doctrine only applies to products physically manufactured in the United States.  To find otherwise, the Second Circuit reasoned, would nullify the protections of §602(a)(1) in the vast majority of cases.

Among other reasons, the grant of certiorari is significant because the Supreme Court issued a rare 4-4 decision in a similar case in 2010, Costco Wholesale Corp. v. Omega, S.A. (see Supreme Court Deadlocks on Applying First Sale Doctrine to Foreign-Made Copyrighted Items for more information).  In that case Costco legitimately acquired Omega-brand watches through a New York company that bought and imported the watches from overseas at much lower prices than Costco would have paid.  While copyright owner Omega had authorized the initial foreign sale of the watches, it did not authorize their importation into the United States or their resale by Costco.  The U.S. Court of Appeals for Ninth Circuit held that the first sale doctrine did not apply to purchases made outside of the United States, and the Supreme Court agreed in a split decision.  Due to the split, caused by the recusal of Justice Elena Kagan who filed an amicus brief in the case in her previous position as Solicitor General, the ruling is only binding on the Ninth Circuit.  Therefore, the Supreme Court’s decision in Kirtsaeng should resolve the outstanding question of how the first sale doctrine and §602 apply to copies of copyrighted works made and legally acquired abroad, then imported into the United States.

In granting cert, the Supreme Court order indicated it will consider whether such a foreign-made product (1) can never be resold within the United States without the copyright owner’s permission; (2) can sometimes be resold within the United States without permission, but only after the owner approves an earlier sale in this country; or (3) can always be resold without permission within the United States, so long as the copyright owner authorized the first sale abroad.  Oral arguments will be heard in the fall (2012).

© 2012 McDermott Will & Emery