IP Update, Volume 8, No. 5, May 2005
May 2005
- Patents / Claim Construction - Safety Razor Decision Nicks Energizer Holdings
- Patents / Litigation - Party Must Have Meaningful Opportunity to Respond to a Motion to Dismiss
- Patents / USPTO Rule - USPTO Rule Change Imposes Limits on Examination After Final Rejection for “Old” Applications
“Whereby” Clause Can Limit Scope of Method Claim
Contact Paul Devinsky
Applying well-settled principles of claim construction, the U.S. Court of Appeals for the Federal Circuit has held that the “whereby” clause of a claim limits the scope of the claim where the clause “states a condition that is material to patentability.” Hoffer v. Microsoft Corp., Case No. 04-1103 (Fed. Cir. Apr. 22, 2005) (per curiam) (Newman, J. concurring).
Hoffer’s patent describes a method for remote computer users to obtain economic index data. The claim in issue ends with a “whereby” clause that describes how the claimed method enables users to conduct interactive data messaging. Pointing to cases holding that “whereby” clauses in method claims are given no weight when they simply express the intended result of a process step positively recited, Hoffer argued that the district court should not construe the clause as a limitation. The district court disagreed, construed the clause as limiting and granted summary judgment on no infringement. Hoffer appealed.
The Federal Circuit affirmed, explaining that “when the ‘whereby’ clause states a condition that is material to patentability, it cannot be ignored in order to change the substance of the invention.” The Court concluded that the subject “whereby” clause described an interactive data messaging capability which “is more than the intended result of a process step; it is part of the process itself.” The Court noted that both the “Summary of the Invention” section of the specification and portions of the prosecution history of Hoffer’s patent showed the “interactive element” of the claim to be an “integral part of the invention.”
Addressing an unrelated issue, the Federal Circuit reversed the district court’s determination that a dependent claim (which had a wrongly numbered claim dependency as a result of U. S. Patent & Trademark Office renumbering) was invalid for indefiniteness. The district court ruled it was powerless to correct even so obvious an error. The Federal Circuit disagreed, holding that in the absence of prejudice to the defendants or culpability on the part of the patent holder in delaying to seek a correction—and so long as the correction itself is not subject to reasonable debate—courts have the power to correct administrative errors of this sort.
A Cautionary Tale Against Conventional Plain Meaning Wisdom
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A recent opinion by the U.S. Court of Appeals for the Federal Circuit challenges the “conventional” wisdom that a patent owner seeking to establish infringement is usually advantaged by urging a “plain meaning” claim construction. PC Connector Solutions LLC v. SmartDisk Corp., Case No. 04-1180 (Fed. Cir. May 6, 2005) (Lourie, J.).
PC Connector’s patent is directed to the connection of computer peripherals via an adapter inserted into the diskette drive of a computer. The accused devices are diskette-shaped adapters for flash memories and smart cards accessed through a diskette drive. Infringement turned on the meaning of the claim term “conventional computer input/output port,” and, in particular, whether flash memories and smart cards were a computer peripheral device having an input/output port “normally connectible” to a “conventional” computer input/output port.
Construing the claim term “conventional” to refer to technologies existing at the time of the invention, the district court granted SmartDisk’s motion for summary judgment of non-infringement, reasoning that flash memories and smart cards used with the accused device were not peripherals that were “normally connectible” to a “conventional” computer input/output port in existence at the time of filing of the application for patent in 1988.
PC Connector appealed, arguing that the terms “conventional” and “normal” merely clarify the manner of connecting peripherals to a computer—i.e., through dedicated I/O ports typically clustered at the rear of the chassis—without imposing a time-based limitation on the I/O technologies involved.
The Federal Circuit affirmed, finding PC Connector’s argument to be an attempt to redefine the term “conventional” I/O port to “dedicated” I/O port. Finding nothing in the specification or the prosecution history to support the special definition, the Court held that the district court properly gave the term “conventional” its ordinary and customary meaning (that is, what is “conventional” at the time the patent is filed). Accordingly, the Court affirmed the district court’s grant of summary judgment of non-infringement on the grounds that the flash memories and smart cards were not “normally connectible” to a “conventional” computer I/O port in existence at the time of filing in 1988.
Safety Razor Decision Nicks Energizer Holdings
By Bonnie Warren
Over a vigorous dissent, the U.S. Court of Appeals for the Federal Circuit held that the district court erred in construing the scope of the claim at issue. The Gillette Company v. Energizer Holdings, Inc., Case No. 04-1220 (Fed. Cir. Apr. 29, 2005) (Rader, J.; Archer, J. dissenting).
The Gillette Company brought suit against Energizer alleging that Energizer’s QUATTRO®, a four-bladed wet-shave safety razor, infringed certain of its patent claims. The district court denied Gillette’s motion for a preliminary injunction because it concluded that the terms “first,” “second” and “third” in the only independent claim of the Gillette patent, limited the scope of that claim to a razor having three blades. Gillette appealed.
The Federal Circuit reversed, concluding that the “open” claim language “comprising . . . a group of first, second and third blades” may encompass four-bladed safety razors. The Court focused on the intrinsic evidence of record, i.e., the claims, specification and prosecution history, discerning that “claim one uses the ‘open’ claim terms ‘comprising’ and ‘group of,’ in addition to other language, to encompass subject matter beyond a razor with only three blades.” The Court found that the language of certain claims dependent from claim one supports reading “comprising” and “group of” as open terms.
The Court found that the specification supported a conclusion that the invention covered razors with more than three blades, noting that the invention went to progressively varying “the exposure and spacing parameters of the blades to overcome the undesired drag forces produced by razors with multiple blades, not simply limiting the number of blades to three.” The Court further noted that “the specification specifically acknowledges that it is not the three blades themselves which solve the prior art problem of detrimental drag forces but instead the arrangement of three blades in a particular spatial configuration” and that “[t]hese principles . . . could apply equally to four or five blades.” The Court concluded that neither the specification nor the prosecution history provided the “manifest exclusion” or “explicit” disclaimers needed to disavow razors with more than three blades.
In dissent, Judge Archer opined that “a three-bladed razor is not merely a preferred embodiment of the invention; rather, it is the invention.” Judge Archer found that “the transition term ‘comprising’ refers only to the total number of elements in the complete razor, allowing for a razor with additional elements besides the guard, the cap and the three-blade unit.. . . However, it does not permit the expansion of the number of blades in the blade unit itself.” Contrary to the majority, Judge Archer found that the specification did limit the invention to a blade unit having only three blades: “In sum, the patent specification (1) repeatedly and consistently teaches that the safety razor of the invention is one having three blades; (2) teaches preferred embodiments that vary the configuration of the blades but in no way change the number of blades of the invention; and (3) discourages the use of more than two blades in a blade unit except for the three-bladed unit having the claimed geometry.”
Practice Note: Patent prosecutors and litigators alike anxiously await the Federal Circuit’s en banc decision in Phillips v. AWH Corporation with the hope that the Court will clarify inconsistent panel decisions and provide guidance on the proper approach to construing patent claims. As reflected by the Gillette panel, the Court appears to continue to be divided on the proper approach to claim construction.
Without Detailed Claim Construction, District Court Sent Back to the Drawing Board
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Even as it acknowledged that it “rarely remands the issue of claim construction,” U.S. Court of Appeals for the Federal Circuit did just that. Nazomi Communications, Inc. v. ARM Holdings, PLC, Case No. 04-1101 (Fed. Cir. Apr. 11, 2005) (Fogel, J.).
The district court granted partial summary judgment of non-infringement to ARM on Nazomi’s patent for a Java hardware accelerator used to translate source code written in Java bytecodes into native instructions for a CPU. In its opinion, the district court did not actually construe the asserted claims or analyze the infringing product vis-à-vis specific claim limitations. Instead, in what the Federal Circuit termed a “terse seven-page order,” the district court concluded that the accused device practiced the prior art and, therefore, was either invalid or not infringed. Applying the old axiom that patents should be construed to preserve their validity, the district court concluded that “[i]t follows necessarily that the claims of the patent must reach a different type of hardware solution [than the prior art] to be valid, and that the solution of the prior art does not infringe.”
Pointing out the error in “putting the validity cart before the claim construction horse” and cautioning “against the nonviable ‘practicing the prior art’ defense” applied by the district court, the Federal Circuit held the district court’s analysis to be incorrect. It also held that the record created by the district court was “inadequate” to permit the Federal Circuit itself to come up with a proper claim construction or make an independent judgment as to the propriety of summary judgment because the district court did not “supply the basis for its reasoning sufficient for a meaningful review.” The decision was vacated and remanded.
Practice Note: In part because of the different burdens of proof regarding infringement (preponderance) and invalidity (clear and convincing), as well as potential equivalents issues, the Federal Circuit routinely insists that there is no such thing as a “practicing the prior art” defense to literal infringement. Rather, in every case, the district court must construe the claims and then apply that construction in an infringement and/or validity analysis.
Federal Circuit Reaches to Find Loral Patent Not Invalid
By Matthew F. Weil
The U.S. Court of Appeals for the Federal Circuit has reversed a summary judgment of invalidity, holding that the patent at issue contained an adequate written description of the claimed invention. Space Systems/Loral, Inc. v. Lockheed Martin Corporation, Case. No. 04-1501 (Fed. Cir. Apr. 20, 2005) (Newman, J.).
Loral owns a patent on a method to efficiently orient a satellite in space. The method entails the initial firing of thrusters based on information concerning past corrective thruster firings. Only after this initial firing will the remaining error in position be measured and second firing be conducted (if necessary). Positioning by this two-step process reduces the risk the satellite will overshoot its proper position (requiring it to then use more fuel to re-correct).
There was no dispute in the trial court that the first step was described in the patent, but the district court held that the second step (in which the satellite calculates the position after the first firing and performs the second firing of the thrusters) was not adequately described in the specification.
Reviewing the district court’s determination on this question of law de novo, the Federal Circuit reversed, pointing out that experts for both sides had testified that one of the figures in the patent depicted a “summer” and one of ordinary skill would understand that the “summed” matter was historical information and current actual-position information. The Federal Circuit held that this information was sufficient to constitute a written description of the second step in the claimed method.
In an unsuccessful motion for reconsideration to the district court, and again to the Federal Circuit, Loral relied on the deposition of Lockheed’s expert. Lockheed argued such reliance was improper, pointing out that it had objected to the question when asked at the expert’s deposition and that Loral failed to point to the passage in question before its reconsideration motion.
The Federal Circuit blasted through Lockheed’s concerns, holding that the question to the expert was not objectionable because the expert had answered it and that reliance on evidence not pointed out until Loral’s motion for reconsideration was not improper because the district court “specifically allowed Loral to refer to [other parts of] the deposition” in question and “the entire deposition was already before the court.”
Party Must Have Meaningful Opportunity to Respond to a Motion to Dismiss
By Stephanie L. Nagel
Addressing a procedural issue, the U.S. Court of Appeals for the Federal Circuit, applying the law of the regional circuit, vacated the dismissal of a counterclaim to which a party was not given a fair opportunity to respond. The Court further addressed invalidity issues related to the patents-in-suit. ArthroCare Corporation and Ethicon, Inc. v. Smith & Nephew, Inc., Case Nos. 04-1323, 1487 (Fed. Cir. May 10, 2005) (Bryson, J.).
ArthroCare Corporation filed suit against Smith & Nephew, Inc. (S&N) for infringement of certain patents directed to electrical probes and their use during surgery. In response, S&N filed an antitrust counterclaim alleging a conspiracy between ArthroCare and Ethicon, Inc.
Before trial, the district court bifurcated the counterclaim. The issues of infringement, invalidity and inequitable conduct were then tried to a jury that found the patents-in-suit infringed and were not invalid. S&N moved for judgment as a matter of law and a new trial, and ArthroCare moved to dismiss the antitrust counterclaim. Before the due date for S&N’s response to the motion to dismiss, the district court stayed all proceedings on the counterclaim. The court then denied S&N’s motions and entered a permanent injunction. That same day, the district court granted ArthroCare’s motion to dismiss the antitrust counterclaim. S&N’s motion for reconsideration of the dismissal was denied.
On appeal, the Federal Circuit vacated the district court’s dismissal of the antitrust counterclaim and directed that court to permit S&N to respond to the motion to dismiss. The panel based its holding on a categorical Third Circuit rule providing that a party must be given the opportunity to meaningfully respond to a motion to dismiss. Here, the reconsideration process did not satisfy that requirement. The Federal Circuit also vacated the permanent injunction.
Turning to the judgment notwithstanding the verdict (JNOV), after a thorough analysis, the Court found that S&N had proven by clear and convincing evidence that the asserted claims of one of the patents were anticipated by two prior art references, and the Court reversed the district court’s denial of S&N’s motion for JNOV. The Court criticized the district court’s finding that certain claim limitations were not disclosed in a prior art patent, noting that the district court erroneously focused only on the preferred embodiment described in the reference. The Federal Circuit observed that the district court also erroneously thought that an anticipating reference must provide specific examples, contrary to established precedent which requires only that the reference be enabling and describe the claimed invention sufficiently “to have placed it in possession of a person of ordinary skill in the art.
Applying Ninth Circuit Law, Federal Circuit Reverses Dismissal with Prejudice
By Matthew F. Weil
Applying regional circuit law to a procedural question not unique to patent law, the Federal Circuit has held that a district court abused its discretion in sua sponte by dismissing a case with prejudice after the plaintiff failed to serve the complaint or respond to the district court’s show cause order. Bowling v. Hasbro, Inc., Case No. 04-1364 (Fed. Cir. Apr. 11, 2005) (Linn, J.).
In this patent infringement action, after Bowling failed to serve Hasbro within 120 days as required by the Federal Rules of Civil Procedure, the district court issued an order to show cause why Bowling’s lawsuit should not be dismissed. The order to show cause warned of potential dismissal under Rule 4(m)—which allows only for dismissal without prejudice—not under Rule 41(b)—which does allow for dismissal with prejudice. When Bowling failed to respond in the 30 days allowed, however, the district court dismissed the complaint with prejudice.
In exercising their inherent power sua sponte to dismiss a case for lack of prosecution, district courts in the Ninth Circuit must weigh five factors: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice to defendants/respondents; (4) the availability of less drastic alternatives; and (5) the public policy favoring disposition of cases on their merits.” Though this particular fact pattern presented a case of first impression under this five-factor test, the Federal Circuit noted the strong emphasis placed by the Ninth Circuit on warning and consideration of less drastic alternatives.
Because the district court had warned Bowling that he risked only dismissal without prejudice and because the court clearly had available to it a “less drastic alternative” favored under Ninth Circuit law, the Federal Circuit held that the district court abused its discretion by dismissing the complaint with prejudice. Accordingly, the Federal Circuit reversed and remanded.
Actionable False Patent Marking Requires Intent to Deceive
By Krista Vink Venegas, Ph.D.
The U.S. Court of Appeals for the Federal Circuit reversed the district court’s holding that Invitrogen’s RNase H deficient Reverse Transcriptase (RT) polypeptide products (Superscript, “SS,” and Superscript II, “SSII”) had been falsely marked and then affirmed the holding that Invitrogen’s cDNA library products had been falsely marked. Clontech Laboratories, Inc. v. Invitrogen Corp., Case No. 03-1464 (Fed. Cir. May 5, 2005) (Clevenger, J.).
This is only the second case of false marking presented to the Court for review. In the first, Arcadia Mach. & Tool, Inc. v. Sturm, Ruger & Co., the Court essentially adopted the precedent of its predecessor court (the Court of Customs and Patent Appeals) in Norton v. Curtiss, holding that §292 is not a strict liability statute; rather “the fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference of fraudulent intent” and that the intentional falsity must, i.e., show by a preponderance of the evidence.
For Invitrogen’s SS and SSII products, the district court found that Invitrogen knew these products did not meet the claim limitation “substantially no RNase activity” in 2000 when an Invitrogen scientist collected test data showing 5 of 14 product samples contained RNase activity. However, the Court found Clontech failed to meet their preponderance burden of demonstrating that Invitrogen did not reasonably believe its SS and SSII products were properly marked. At trial Invitrogen presented expert testimony stating that in the 2000 test data, 13 of 14 product samples corrected to account for experimental variation showed “no detectable RNase activity.” The Court found that Clontech’s expert testimony “did not address the complete results of the experiments, and there was no indication that Clontech was able to impeach or otherwise discredit [Invitrogen’s expert] Dr. Champoux’s reasoned explanation of the full scope of the tests and results.”
In contrast, for Invitrogen’s cDNA library products, the Court found that Clontech had met its preponderance burden because Invitrogen did not dispute the following: 1) the cDNA library products were not within the scope of any claim of the marked patent numbers, 2) the cDNA library products did not mistakenly or in good faith include the marked patent numbers. Instead, Invitrogen argued only that over-marking does not cause harm since it alerts others to investigate to avoid infringement. The Court found Invitrogen’s policy argument “unconvincing and foreclosed by statute” since §292 calls for liability for marking “unpatented articles,” and prior case law supports the policy that the burden should be upon the manufacturer to determine whether the product falls within the scope of its patent.
In dicta, the Court notes that to the extent a product is made by a patented method, the language: “this product is the subject of” a U.S. patent, is not sufficient patent marking. Rather, proper marking should state: “this product was made by the method” of a U.S. patent.
Commercial Success Is Not Probative of Obviousness Determination
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The U.S. Court of Appeals for the Federal Circuit has denied a patentee’s petition for an en banc rehearing in light of the Court’s three-judge panel decision on January 28 that the patent on its blockbuster Fosamax® osteoporosis drug was obvious. Merck & Co., Inc., v. Teva Pharmaceuticals USA, Inc., Case No. 04-1105 (Fed. Cir. Apr. 21, 2005) (Lourie, J.; Michel, J.; Newman J., dissenting).
Merck has FDA approval to market a once-weekly dose of alendronate monosodium trihydrate, which it does under the trade name Fosamax®. U.S. Patent No. 5,994,329 (the `329 patent) is listed in the FDA’s Orange Book for Merck’s Fosamax® dosages of 35 mg and 70 mg. Teva filed an abbreviated new drug application (ANDA) to market a generic version of Fosamax®. Merck sued, alleging infringement of its `329 patent, which claims a method for treating osteoporosis by administering “about 70 mg” of the compound once weekly and a method for preventing the disease by administering “about 35 mg” of the compound weekly. In the original Markman proceeding, the district court determined that the claim term “about” had been specifically defined by Merck to refer to delivery of “exactly” 35 or 70 mg of sodium alendronate. Teva’s ANDA for 35 and 70 mg dosages infringed.
In its earlier panel decision, the Federal Circuit reversed and vacated the lower court ruling, finding that the claim term “about” had been construed in a manner inconsistent with the specification and that the patentee had failed to clearly redefine the term. Thus, the Federal Circuit concluded that the term “about” should be given its ordinary and accepted meaning of “approximately.” Based on that definition the Federal Circuit concluded that the relevant claims of the`329 patent were rendered obvious in view of the two prior art articles. The majority noted that the commercial success of Fosamax® had minimal probative value on the issue of obviousness because market entry by others was precluded in view of Merck’s ownership of another patent covering the administration of alendronate sodium to treat osteoporosis as well as its exclusive statutory right, in conjunction with FDA marketing approvals, to offer Fosamax at any dosage for the next five years.
In dissenting from denial of an en banc rehearing, Judge Lourie, joined by Chief Judge Michel and Judge Newman, argued that the panel erred in holding that Merck’s commercial success was not an indicator of non-obviousness. They noted the majority’s ruling effectively meant that the commercial success of an improvement patent is irrelevant when an earlier patent dominates the basic invention.
Trademarks / Grey Market Goods
Even for “Grey Market” Goods the Touchstone for Trademark Infringement Is Likelihood of Confusion
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Addressing the issue of infringement by “grey market” goods, the U.S. Court of Appeals for the Ninth Circuit has held that there is no infringement when the goods are genuine and the use of the trademark does not undermine a party’s goodwill or leave consumers in a state of “legal confusion,” and an American trademark holder cannot prevent importation. American Circuit Breaker Corp. v. Oregon Breakers, Inc., Case No. 03-35375 (Ninth Cir. Apr. 25, 2005) (McKeown, J.).
American Circuit Breaker Corp. (ACB) holds the U.S. registration for the trademark STAB-LOK. Schneider Canada holds the Canadian registration for the identical mark. Schneider manufacturers black circuit breakers, which ACB markets in the United States under the STAB-LOK mark. Schneider also manufactures grey circuit breakers, which it markets itself in Canada. The parties stipulate that casing color is the only difference between the two products.
The dispute arose when Oregon Breakers bought grey circuit breakers from Schneider in Canada, imported them and sold them in the United States without ACB’s permission.
ACB argued that the Oregon Breakers product was an unauthorized “grey market” import and should be enjoined. The Ninth Circuit held that labeling the product “grey market” did not change the ultimate issue: “whether there is a likelihood of confusion as to source . . . .” Based on the parties’ stipulation that the goods were genuine and the customers who purchase the grey circuit breakers get exactly what they expect they are purchasing—circuit breakers produced by Schneider—the Ninth Circuit held that there was no confusion in this case and, therefore, no infringement.
Practice Note: The holding in this case may be of limited application in view of the parties’ stipulation that the goods at issue were “genuine.” For example, determined litigants in ACB’s situation may want to look for facts suggesting that consumers view as “genuine” only those goods originally sold by the U.S. mark holder.
Copyright / Standard of Review
Eighth Circuit Adopts Clear Error Standard of Review for “Substantial Similarity”
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Addressing for the first time the standard of review for findings of “substantial similarity” in copyright cases, the U.S. Court of Appeals for the Eighth Circuit followed the majority of circuits in adopting a clearly erroneous standard of review. Taylor Corp. v. Four Seasons Greetings, Case No. 04-1088 (Eighth Cir. Apr. 11, 2005) (Rieley, C.J.)
In the trial court, six greeting cards made by Four Seasons were found to infringe copyrights owned by Taylor. Four Seasons appealed, seeking a de novo review of the district court’s findings citing Second Circuit case law. The Eighth Circuit, however, explicitly rejected the Second Circuit cases adopting a de novo review for determining substantial similarity in copyright cases. The Court held that a district court’s findings of fact should be given deference, under the clearly erroneous standard, even when they are solely based on documentary evidence.
The Court also affirmed the trial court’s grant of permanent injunction. Four Seasons argued error due to Taylor’s decision to forego damages and a jury trial. The Court rejected these arguments, finding that a party can seek a permanent injunction even where no damages are sought and that there is no right to a jury trial where the plaintiff only seeks an injunction, “a purely equitable remedy.” The Court reasoned that under the circumstances, denial of the requested injunctive relief would “amount to a forced license to use the creative work of another.”
Copyright Act Does Not Preempt State Law of Publicity
By Jennifer M. Mikulina
The U.S. Court of Appeals for the Seventh Circuit vacated and remanded the decision of the District Court for the Northern District of Illinois holding that the Copyright Act preempted the Illinois Right of Publicity Act (IRPA). Toney v. L’Oreal USA, Inc., Case No. 03-2184 (Seventh Cir. Apr. 8, 2005) (Kanne, J.).
June Toney is a print model whose likeness appeared on Johnson Products Company’s Ultra Sheen Supreme hair product packaging from November 1995 to November 2000 and in magazine advertisements for these products from November 1995 to November 1996. Toney authorized Johnson Products to use her likeness on this packaging and in these advertisements, but the authorization agreement stated that any additional uses of her likeness would be negotiated separately. Johnson Products sold the Ultra Sheen Supreme line of products to Carson Products, who later sold the line to L’Oreal USA. L’Oreal USA then sold the product line to Wella Products. After these acquisitions, Toney brought suit against Wella, L’Oreal USA and related parties claiming that their use of her likeness in connection with the packaging and promotion of the Ultra Sheen Supreme product beyond the authorized time period violated her right to publicity in her likeness, as protected under the IRPA.
The District Court for the Northern District of Illinois held that Toney’s IRPA claim was preempted by the Copyright Act. Toney appealed.
The Seventh Circuit held that the Illinois Right of Privacy Act is not preempted by copyright law based on a two-part analysis. Under U.S. copyright law, a state law claim is preempted in favor of the rights and remedies available under federal copyright law if “all legal rights are equivalent to any of the exclusive rights within the general scope of copyright as specified in §106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright” (emphasis added). The Court reviewed these criteria and found that preemption did not apply to Toney’s claim.
First, although the Court recognized that it is possible to fix a person’s image in copyrightable form, such as in a photograph, it found that Toney’s right of publicity claim did not include any “work of authorship” because “[a] person’s likeness—her persona—is not authored, and it is not fixed.” Therefore, the Court held that “the rights protected by the IRPA are not ‘equivalent’ to any of the exclusive rights within the general scope of copyright.” According to the Court, “copyright laws do not reach identity claims” because identity “is an amorphous concept that is not protected by copyright law.”
The Court also noted that the IRPA requires a “commercial purpose” and that “the defendants used Toney’s likeness without her consent for their commercial advantage.” Whether the defendants owned the copyright to the photograph containing Toney’s image was irrelevant to Toney’s right of publicity claim because the IRPA claim “relates to whether the plaintiff endorses or appears to endorse the product in question.” Even though Toney originally consented to the use of the photograph, she did not specifically consent to the defendants’ later use of the photograph.
Proof of Rent Is Sufficient to Show a Causal Connection between Infringement of Architectural Plans and Infringer’s Profits
By Sarah Brown
Addressing the requirement to prove a causal link between copyright infringement and an infringer’s profits, the U.S. Court of Appeals for the Fourth Circuit disagreed with the lower court’s contention that proof of rental income from a building based on infringed architectural plans was insufficient to causally link the income to infringement. Nevertheless, the Court upheld denial of a motion for judgment as a matter of law (JMOL) on the plaintiff’s claim for the infringer’s profits. Bonner v. Dawson, 404 F. 3d 290 (Fourth Cir. 2005) (Duncan, J.).
Plaintiff Kenneth Bonner designed a building that was built by Dawson Investments and builder Terry Bishop and leased to Woodmark Corporation. At Woodmark’s request, Dawson and Bishop built another, similar building without paying Bonner for the second use of his building design. Bonner sued for copyright infringement of his plans.
The district court granted summary judgment to Bonner on liability. The issue of damages was tried to a jury, which awarded Bonner lost profits but no infringer’s profits. Bonner moved for a new trial and for JMOL on his claim for infringer’s profits. The judge denied both motions. As to JMOL, the judge held that viewing the evidence in the light most favorable to defendants, a reasonable jury could have found that Bonner had shown no causal connection between infringement and the defendants’ income from the building. Even if the jury found Bonner had made that showing, it could nonetheless have found the defendants proved their revenues did not result from infringement. For example, the defendants offered evidence that Woodmark would have wanted the building regardless of whether it had the features retained from Bonner’s plans.
Bonner appealed only the refusal to grant JMOL. The Fourth Circuit noted that under 17 U.S.C. § 504(b), a successful copyright plaintiff is entitled to an infringer’s profits attributable to infringement. Once a plaintiff establishes the infringer’s gross profits, the burden shifts to the defendant to prove that the profits are from non-infringing sources. The Court acknowledged that under its decision in Bouchat, a plaintiff can’t simply show defendant’s total gross profits from all sources. The plaintiff must show some causal connection between the profits he claims and infringement—only then does the burden shift. However, the Court found that by proving a flow of income from the lease of the building based on his infringed plans, Bonner met this burden.
It was a hollow victory. The Court agreed that a reasonable jury could have found the defendants proved their profits did not flow from infringement. The Court added that had Bonner appealed the denial of his motion for a new trial, it may have found for him based on the lower court’s use of an incorrect standard of proof.
Telecommunications / Consumer Electronics
Court Refuses to Salute FCC’s Broadcast Flag
By Robert S. Schwartz and Jeffrey L. Sheldon
The U.S. Court of Appeals for the D.C. Circuit vacated the Federal Communications Commission’s (FCC) rules requiring digital television (DTV) broadcast receiving and associated equipment to include technology intended to prevent further distribution of digital broadcast programming, such as via the internet. American Library Association, et al., v. FCC, Case No. 04-1037 (May 6, 2005) (Edwards, J.). Motion picture interests said that lack of such protection could limit the HDTV content made available for broadcast, whereas some technology and consumer interests challenged the necessity, effectiveness and collateral consequences of the rule. The Court ruled, however, on the grounds of the FCC’s jurisdiction.
The “broadcast flag” technology regime emerged largely from a private sector technical working group that included representatives of entertainment and technology companies and public interest groups; however, the technology was controversial. Nonetheless, the FCC adopted rules based on this technical regime in 2003. The rules require DTV receivers and associated devices manufactured on or after July 1, 2005 to include technology pertaining to the “screening” of broadcast content for a digital code—a “broadcast flag”—embedded in the data stream. If a “flag” is identified in a program (or if “screening” for the flag is not performed), the program may only be routed to a digital output or a recording device that protects against mass, indiscriminate redistribution of content over the internet. There is no limitation on the transmission of content over “analog” (including analog high definition) outputs and no limitation on consumer home recording—provided that digital recorders have a means to protect against internet redistribution of the recordings they make. The FCC has certified technologies as to both interface and digital recording protection against such redistribution.
Libraries and consumer groups challenged the regulations on the basis that the FCC lacked jurisdiction over TV broadcasting sufficient to govern device design after a signal has left the broadcast reception circuitry as the “flag” rules do. The Court first determined that at least the library petitioners had standing, as the “flag” rules potentially interfere with internet retransmission of broadcast programming for lawful “distance education” purposes. In granting the petitions for review and vacating the FCC regulations, the Court agreed that the FCC’s statutory authority over TV broadcasts does not extend to regulation of consumers’ use of television receiver apparatus after the broadcast has been received.
The Court emphatically rejected the FCC’s argument that it has “ancillary jurisdiction” under Title I of the Communications Act to adopt such regulations in furtherance of its statutory authority to foster broadcasting and promote the transition to DTV. The FCC and the Motion Picture Association of America, which intervened in the appeal, argued that the FCC’s interest and responsibilities in the congressionally mandated transition to digital broadcasting and High Definition Television (HDTV) provided the commission with “ancillary” jurisdiction to impose such regulations on devices. The Court, however, was unwilling to afford Chevron deference to the FCC’s interpretation of its own statutory authority because the Court could not find that the agency was acting pursuant to any authority delegated by Congress. Although the FCC has authority over apparatus used in the transmission and reception of wire or radio communications, this authority does not extend to regulation of consumer electronics products when those devices are not engaged in the process of wire or radio transmission. A DTV receiver is no longer engaged in “communications by wire or radio” once the broadcast has been received.
Thus, to the extent the new rules require DTV equipment to give effect to the broadcast flag after the DTV broadcast has been received, the rules exceed any ancillary jurisdiction, based on its powers over broadcast signals and their reception, that the FCC might have over the design of consumer electronics and information technology products. When it adopted these regulations, the FCC noted that this was the first time it had exercised ancillary jurisdiction over equipment manufacturers in this manner. The Congress, which is slated to consider “DTV transition” legislation that would set a “hard” date for a cutoff of analog broadcasting, is expected also to receive proposals to “ratify” the FCC regulations. Proponents cite Congress’s ratification of the Federal Trade Commission’s “Do Not Call List” regulations after they were vacated by an appeals court on jurisdictional grounds as a direct precedent. Some opponents say that such legislation would turn the FCC into the “Federal Computer Commission.”
Sweeping Changes to U.S. Patent Laws May Be on the Horizon
Contact Paul Devinsky
In an apparent effort to improve patent quality and reduce the overall cost associated with procuring and enforcing patent rights, a committee of the U.S. House of Representatives is considering a draft patent bill which would impose sweeping changes to existing law. After more than 200 years of awarding patents to the first inventor, the U.S. patent laws may soon change to a first-to-file system. In addition, the committee proposed the creation of post-grant opposition procedure, a statutory duty of candor (which, in comparison with the existing case law and rules, heavily favors patentees), and revisions to the law governing the award of damage multipliers and the issuance of injunctions. Some highlights of the proposed changes include:
First to Invent
Currently, the United States is the only major country in the world to award a patent to the first to invent rather than the first to file a patent application. Section three of the draft bill would put an end to that; mandating the award of a patent to the first to file an application. As a consequence, the proposal would end interference proceedings before the Board of Patent Appeals & Interferences and set the stage for future multi-lateral patent law harmonization. As part of the overall statutory reconciliation with a first-to-file regime, the long standing and venerable best mode requirement of 35 U.S.C. § 112 would be eliminated.
Post-Grant Oppositions
A major component of the draft bill, aimed at reducing litigation costs, is the introduction of an extensive post-grant opposition proceeding. Crafted as an additional layer of review over the examination process, under the proposed opposition proceeding anyone has the right to request the U.S. Patent and Trademark Office (USPTO) to reconsider the issuance of the patent within nine months of its issue date. Unlike the existing reexamination proceeding (which is statutorily limited to consideration of patentability over printed publications), the opposer may raise any statutory basis for alleging invalidity. Once an opposition is instituted, the question of invalidity will be decided by a three-judge panel. The panel’s final determination must be issued within one year after the date on which the proceeding is instituted. Because the proposed would be inter partes, the opposer is barred from raising any issue of fact or law actually decided in the proceeding.
Duty of Candor
Section five of the proposed bill would impose a duty of candor on both a patent applicant and parties adverse to a patent or a patent application. Under the proposed codification of the previously existing duty of candor (in USPTO rules and court decisions), applicants for U.S. patents would be required to disclose any material information. Under one of the more significant aspects of the new proposed bill, the USPTO is given jurisdiction to investigate and resolve any alleged violations of the duty. If adopted, the rule will have profound ramifications in patent litigation proceedings and will likely embolden many patent applicants to stretch the “envelope” of permissible advocacy. Courts will not be able to consider allegations of unenforceability absent a finding of invalidity of a claim and absent a finding that, but for the fraud, the patent would not have been issued. Also, the proposed bill provides that if the court finds an issue of misconduct in cases involving validity or infringement of a patent, it “shall” refer the matter to the USPTO. Finally, the proposed bill requires the USPTO to establish a special office dedicated to investigating any violations of the duty of candor with the authority to impose fines of up to $5,000,000.
Revisions to Damages Injunction Rules
The proposed bill would make it more difficult for patentees to obtain injunctions. Under the proposal, a court “shall not grant an injunction … unless it finds that the patentee is likely to suffer irreparable harm that cannot be remedied by the payment of money damages.” This change would eliminate the current presumption of irreparable harm patent owners rely on whenever infringement is found. Such a change will fundamentally alter settlement dynamics as accused infringers will no longer fear what had essentially been the automatic issuance of an injunction in favor of a prevailing patent owner—even one who does not make or sell product under the patent. In many patent “troll” cases, the issuance of an injunction will no longer loom large over settlement discussions.
Another proposed modification to the award of damages relates to the all too frequent award of treble damages for willful infringement. The proposal will codify the rule of Knorr-Bremse v. Dana Corp. as the absence of an opinion of counsel would not create an inference of willful infringement. (IP Update, September 2004). Similarly, increased damages cannot be awarded based “merely upon the knowledge of a patent or its contents by the defendant prior to suit.” As a predicate to invoking an allegation of willfulness, the proposed legislation would require enough notice to the potential infringer to essentially give rise to a declaratory judgment jurisdiction.
Limitation on Enlargement of Claims in Continuation Applications
Under one of the major proposed changes relating to prosecution of patent applications, one would be prohibited from presenting any claims broader than those in a predecessor application in a continuation application. A major “loophole” in this restriction, however, is that under the reissue statute, broader claims would still be available for two years after the first application matured into a patent.
A copy of the legislation proposal can be found at the following link: http://patentlaw.typepad.com/patent/DraftPatentStatuteDDC.pdf
President Signs Family Entertainment and Copyright Act of 2005
Contact Paul Devinsky
On April 27, 2005 President Bush signed the Family Entertainment and Copyright Act of 2005 (Pub.L. 109-9). The Act includes provisions for a federal ban on videotaping in movie theaters, an exemption for technology that allows viewers to edit objectionable material from movies viewed at home, a reauthorization of the National Film Preservation Board and Foundation and an extension of the rights of libraries to copy orphan works.
Title I of the Act, the Artists’ Rights and Theft Prevention Act of 2005 (the ART Act) makes it a felony to use an audiovisual recording device in a movie theater to record copyrighted works. State laws dealing with this subject area generally are not exempted. The ART Act also addresses criminal infringement of works being prepared for commercial distribution. Specifically, it criminalizes willful infringement of a copyrighted work if committed: (1) for commercial advantage or private financial gain; (2) by reproduction or distribution, including by electronic means during a 180-day period works that have a total retail value over $1000; or (3) by making it available on a computer network accessible to the public. The Act also provides for civil remedies.
Title II, the Family Movie Act of 2005, grants an exemption to developers and manufacturers of technology that allows a viewer to skip or filter out limited audio or visual portions of a motion picture during a performance intended for private home viewing only. No fixed copy of the altered version may be created by the technology. This portion of the Act also provides exemptions for both copyright and trademark infringement.
The Act also reauthorizes the National Film Preservation Board and Foundation. Additionally, under the Preservation of Orphan Works Act, the rights of libraries to make copies of “orphan works” are expanded to include musical, pictorial, graphic or sculptural works and motion pictures or other audiovisual works. “Orphan works” are defined as those works in the last 20 years of the applicable copyright term that are no longer commercially exploited and unavailable for purchase at an affordable price.
USPTO Rule Change Imposes Limits on Examination After Final Rejection for “Old” Applications
By Wiliam D. Young, Ph.D.
Under the provisions of 37 CFR § 1.129(a), a utility or plant application that has been pending for at least two years as of June 8, 1995 is entitled to only two submissions after final rejection. Submissions may include an information disclosure statement, an amendment or a new argument in support of patentability. Under prior U.S. Patent & Trademark Office (USPTO) practice, the office action issuing after a submission by the applicant after final rejection was equivalent to the first office action in a continuing application. Since this practice resulted in some applicants filing multiple submissions after final rejection, the USPTO determined that the practice was inconsistent with the goal of expediting prosecution of such long pending applications. Thus, effective as of May 6, 2005, the USPTO will no longer treat the next office action after a submission under § 1.129(a) as the first action in a continuing application. Instead, such office actions will be equivalent to an action following a reply to a non-final office action; i.e., if on the merits it shall be made final except where the examiner introduces a new ground of rejection that is neither necessitated by the applicant’s amendment of the claims nor based on information submitted in an information disclosure statement.
