Publications / McDermott Newsletters / IP Update, Volume 3, No. 11, November 2000

IP Update, Volume 3, No. 11, November 2000

November 2000

IN THIS ISSUE

Patents/E-Commerce/Claim Construction

E-Commerce Patent Broadly Construed by Federal Circuit
By Paul Devinsky

In one of the first e-commerce patent disputes to be decided by the Federal Circuit, the Court reversed a lower court decision, finding the claims of U.S. Pat. No. 4,528,643 (the '643 patent) to be entitled to a generally broader claim
construction than the district court. Interactive Gift Express, Inc. v. Compuserve Inc., et al., Case No. 99-1324 (Fed. Cir., Nov. 3, 2000).

The list of defendants in this case, including Compuserve, Broderbund, Intuit, Walden-Books, Ziff-Davis and others, amply represents the world of e-commerce. The appeal was preceded by an unusual procedural history. While no Markman hearing was held, the district court limited initial discovery to claim construction matters and ordered Interactive Gift Express (IGE), the owner of the '643 patent, to file a "binding claim construction report." After receiving the report and each party’s brief, the lower court construed the '643 patent claims to be sufficiently narrow that IGE stipulated under the district court’s construction, the defendant’s did not infringe. The appeal followed.

The '643 patent is directed to a system for reproducing information in material objects (books, tapes, etc.) at point-of-sale locations, thereby providing a system for the distributed manufacture and sale of the material objects at multiple locations by simply making a copy of the material object on demand. This permits the seller to satisfy consumer demand for the material object without relying on manufacturing estimates or bearing costs associated with overproduction, inventory control, shipping or warehousing.

Prior to embarking on specific claim construction issues, the Federal Circuit panel emphasized that, as it held in Vitronics, all intrinsic claim construction evidence "is not equal." Rather, intrinsic evidence must be considered according to a specific hierarchy; the claim language and the specification being the most important. Deviations from the clear language of a claim is only permitted where "a patentee [has chosen] to be his own lexicographer and uses terms in a manner other than their ordinary meaning" or has "relinquished [a] potential claim construction in an amendment to the claim or to overcome, or to distinguish a reference."

Where claim language is not clear on its face "consideration of the rest of the intrinsic evidence is directed to resolving, if possible, the lack of clarity." Only,
if after considering the totality of the intrinsic evidence, a claim limitation is
still not clear, a court may "look to extrinsic evidence to help resolve the lack
of clarity."

Applying these claim construction rules, the Federal Circuit found the lower court erred in construing each of the five claim limitations, impermissibly reading limitations from the specification into the claim and improperly resorting to extrinsic evidence where the intrinsic evidence unambiguously described the meaning of claim term. In this particular case, the Court found that the claimed "point of sale" encompassed online transactions at a consumer’s home but that the term "material objects" did not include the consumer’s computer or hard disk. The case was remanded.

Patents/Infringement

Authorization to Manufacture Abroad Is Irrelevant to Infringement Under § 271(g)
By Paul Devinsky and Debra A. Gaw

The Federal Circuit has recently determined that the statutory language regarding importation "without authority" under 35 U.S.C. §271(g) only applies to unauthorized actions within the United States. Actions outside the United States, whether authorized or not, are irrelevant in determining infringement under §271(g). Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co., Inc., 2000 WL1505533 (Fed. Cir. Oct. 3, 2000).

This case involved products that were made abroad by a process covered by a U.S. patent and then imported into the United States. The manufacturer had permission to practice the process extraterritorially but no authority to do so in the United States.

Ajinomoto is the owner of United States Patent No. 4,278,765 (the '765 patent), which is directed to modification of bacterial strains to produce amino acids, threonine in particular. Ajinomoto acquired the U.S. patent rights from Genetic Engineering and Industrial Microbiology (Genetika) in the former Soviet Union.

In 1993, Archer-Daniels-Midland (ADM) commenced production of threonine using a bacterial strain that was made in Sweden by another Genetika licensee, ABP International. ABP’s license from Genetika provided limited rights in several European countries. The United States was specifically excluded from the license. Ajinomoto sued ADM under §271(g).

Section 271(g) defines an infringer as one who "without authority … imports into the United States or offers to sell, sells, or uses within the United States a product which is made by process patented in the United States." Ajinomoto alleged that the bacteria ADM imported into and used in the United States infringed the '765 patent, and that ADM lacked authority to import it. The district court held for Ajinomoto and ADM appealed.

ADM argued that the language "without authority" includes consideration of whether use of the patented process was authorized abroad and, therefore, since the goods were produced abroad under license, the subsequent importation and use of threonine made in accordance with the patented process were authorized under §271(g).

Ajinomoto argued that §271(g) only concerns the importation into the United States of products produced abroad that would infringe a U.S. patent if made in the United States and, therefore, ADM was not authorized to import the product since ABP’s license specifically excluded the United States.

The Federal Circuit, affirming the lower court decision, held that §271(g) only applies to unauthorized actions within the United States. According to the terms of the statute, infringement liability only arises upon importation of the threonine and sale and use of it in the United States. The grant of authority abroad is irrelevant in determining infringement in the United States. Thus, while ADM may be able to practice the invention under the ABP license abroad, importation into and use of the product in the United States without authority from Ajinomoto rendered ADM liable for infringement of the '765 patent.

E-Commerce/Domain Names

ICANN Approves New Top Level Domain Names
By Carrie A. Shufflebarger

On November 16, 2000 the Internet Corporation for Assigned Names and Numbers (ICANN), the international regulatory body responsible for managing the Internet, approved seven new top-level domains (TLDs) to add to the already-existing list of unrestricted domains, .com, .net and .org.

Beginning in the spring of 2001, Internet users can register domain names using .info, .biz, .name, .pro, .coop, .museum and .aero as TLDs. Some of these TLDs, such as .info, will be for general use and globally available. Others, however, will be restricted to certain classes of registrants. For example, .pro will be reserved for "professionals" such as lawyers, doctors and accountants, and individuals will have to prove their professional status to the registrar before the domain name can be registered. Several other restricted TLDs, such as .gov, .edu and .mil, are already in use.

Unlike the now-existing TLDs, which can be registered through a host of accredited domain name registrars, these new TLDs will only be available through select registrars. For example, domain name registrar Register.com will be the exclusive provider of .pro domain names. A consortium of 19 current registrars, including Networks Solutions, Inc. (NSI), will be responsible for registration of domain names ending in .info.

Patents/Obviousness

Finding of Prima Facie Obviousness Not "Smoked" by a Showing of Commercial Success
By James E. Griffith and Joy Serauskas

The Federal Circuit recently affirmed a lower court decision finding that a reissue patent was invalid for obviousness despite the commercial success enjoyed by patentee’s product that incorporated the invention. Brown & Williamson Tobacco Corp. v. Phillip Morris Inc., Inc., 2000 U.S. App. LEXIS 25913 (Fed. Cir. 2000).

An invention is unpatentable due to "obviousness" if the differences between it and the prior art "are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art." "Obviousness" is a legal conclusion based on the totality of the evidence, including (1) the scope and content of the prior art; (2) the level of ordinary skill in the prior art; (3) the differences between the claimed invention and the prior art and (4) objective evidence of nonobviousness. Among the objective evidence that courts will consider is evidence of "secondary indications" of nonobviousness including (1) commercial success, (2) long-felt but unsolved needs and (3) failure of others.

In Brown & Williamson, the Federal Circuit affirmed the district court’s determination that claims of Re. Pat. No. 32,615 (the '615 patent) were invalid for obviousness over the prior art. The patent claims included limitations directed to the reduced circumference of a cigarette (10 mm to 19 mm versus about 25 mm for conventional cigarettes), a narrower cut tobacco filler range and the number of puffs the cigarette would provide (in excess of about eight).

After discussing several secondary indications of nonobviousness, namely commercial success of the plaintiff’s product, competitors’ skepticism regarding the invention and their subsequent incorporation of the claims in their own products, the Court held that the commercial success of the plaintiff’s product incorporating the claims did not have a sufficient nexus with the claimed features of the '615 patent to warrant a finding of nonobviousness. Rather, the Court noted that the modest commercial success enjoyed by the plaintiff’s product was more likely due to successful promotions, especially in light of the failure of the defendant’s competing product. The evidence relating to competitor skepticism and copying were not significant enough to overcome the strong evidence of obviousness based on prior cigarette designs and reported cigarette design.

Practice Note: While the commercial success of a product can be a secondary factor in proving the nonobviousness of a patent claim, it will not be sufficient to overcome a strong case of prima facie obviousness based upon prior art, especially absent a compelling showing of a nexus between the commercial success and the claimed invention.

Copyrights/Infringement

Fourth Circuit Adopts "Strikingly Similar" Doctrine Permitting Inference of Access by an Alleged Infringer
By Jeffrey J. Miller

The Court of Appeals for the Fourth Circuit has now held that a plaintiff need not prove that an alleged infringer actually accessed a work in question, but only that the infringer (or his intermediary) had the mere opportunity to see the work and that the subsequent material produced is "strikingly similar" to the work in question. Bouchat v. Baltimore Ravens Inc., et al., Case No. 99-1617, October 3, 2000 (4th Cir.).

When news of an NFL team for Baltimore, Maryland spread in 1995, Bouchat, an amateur artist, created a helmet design and affixed his creation to a miniature football helmet. Bouchat gave the design and helmet to Eugene Conti, a state official. Conti later arranged a meeting between Bouchat and John Moag, chairman of the Maryland Stadium Authority (MSA) at Moag’s law office on March 28, 1996. The Ravens and David Modell (the team’s owner) were temporarily sharing Moag’s office suite at the time. On April 1 or 2, 1996, Bouchat faxed his drawings to the MSA, one of which was a shield drawing.

Beginning on April 2, 1996, Modell commenced communications with the NFL design team concerning the logo project. When the Ravens unveiled their new logo in June of 1996, it was a Raven holding a shield. Bouchat filed a lawsuit against the Ravens alleging copyright infringement. The jury returned a verdict in favor of the Bouchat.

Defendants filed a motion for judgment as a matter of law, based on Bouchat’s failure to prove access to the work. The motion was denied.

The Fourth Circuit affirmed, finding that Bouchat’s proof of a reasonable possibility of access was legally sufficient. Nevertheless, the court went on to adopt the "strikingly similar" doctrine. Gaste v. Kaiserman, 863 F.2d 1061 (2d Cir. 1988). The strikingly similar doctrine permits inference of access in cases where the two works in question are so similar as to create a high probability of copying and negate the reasonable possibility of independent creation. At least four regional circuit courts (the 2nd, 4th, 5th and 7th) have now adopted the "strikingly similar" doctrine.

Legislative

Legislative Update–November 2000

Copyright "Work Made for Hire" Bill Is Signed into Law, Public Law No. 106-379, H.R. 5107.
By Wendy L. Toman

In 1999, Congress enacted the Intellectual Property and Communications Omnibus Reform Act (IPCORA) that included, among other things, a change in the definition of "work made for hire" to contain "sound recordings." On October 27, 2000, President Clinton signed into law legislation to undo the 1999 Amendment to the Copyright Act that added "sound recordings" to the list of nine categories of "specifically ordered or commissioned" works that qualify for "work made for hire" treatment under U.S. copyright law. Recording artists lobbied for this reversion, based on a fear that they would be unable to terminate unfavorable contracts with recording companies.

The 1999 revisions will be subject to scrutiny in UMG Recording, Inc. v. MP3.com, Inc. (SDNY, No. 00-472 (JSR), 10/23/00 and 10/27/00 briefs filed). MP3.com provides an Internet service that allows subscribers to access, store, customize and listen to sound recordings contained on the subscriber’s CDs from any location where the subscriber has Internet access. In May 2000, MP3.com was found liable for copyright infringement, and, subsequently, ordered to pay $25,000 for each CD that UMG owned. UMG then filed for summary judgment that UMG is the "work-for-hire" owner of all of the sound recordings for which it holds copyright registrations. MP3.com opposed the motion arguing, among other things, that Congress "foreclosed the treatment of any sound recording as a work for hire prior to November 29, 1999," when it retroactively repealed "sound recordings" as one of the nine specific categories of "works made for hire." A decision remains outstanding.

In a related MP3.com development, on September 25, 2000, Congressman Rick Boucher (D-Va) introduced the "Music Owners Listening Rights Act" that would allow Internet-based companies to legally transmit consumer-owned copies of music, thereby allowing users to access their music anywhere they could establish an Internet connection. If enacted, this bill would legalize MP3.com’s website along with other websites offering similar services. This bill proposed to add a new Section 123 to the Copyright Act to establish "Personal Interactive Performances" as an exception to the copyright owner’s exclusive rights. The bill defines "Personal Interactive Performances" as "the performance of a sound recording and the nondramatic musical works embodied therein by means of a digital transmission … provided that the transmission is received only by a recipient who has provided to the transmitting organization proof that the recipient lawfully possesses a phonorecord of such sound recording … and conveyed a specific request to receive the transmission." Boucher argues that this change would act to "update" the law and would not effect the artists since proof of an initial purchase would be required.

Technology Transfer Commercialization Act Is Signed into Law, Public Law No. 106-404, H.R. 209.

On November 1, 2000, President Clinton signed this bill into law stating that this new law will "… help ensure that the benefits of Federal research translate into new products and opportunities for the American public." The purpose of this law is to promote the transfer and commercialization of technology created in federal laboratories and will improve the ability of federal agencies to license government-owned inventions. This new law eases the requirements for obtaining a non-exclusive license in order to allow as many individuals as possible to gain access to the information. The law also clarifies the ability of the government to terminate a license and allows the federal agencies to consolidate intellectual property developed in collaboration with a private entity to be "packaged" and licensed to third parties. In addition, the law broadens the criteria for licensing government-owned inventions.

Trademarks/E-Commerce

Unauthorized Use of Trademarks in Website Metatags Is Found Not to be Actionable Under ACPA
By Carrie A. Shufflebarger

The U.S. District Court for the Southern District of New York recently held that the Anticybersquatting Consumer Protection Act (ACPA) does not apply to use of a trademark in website metatags. The Court also declined to issue a preliminary injunction barring use of trademarks in metatags pursuant to Section 43(a) of the Lanham Act because the trademark fairly and accurately described the content of the websites. Bihari v. Gross, 00 Civ. 1664, 2000 U.S. Dist. LEXIS 14180 (S.D.N.Y. September 28, 2000).

Metatags are HTML coded, invisible to the Internet user, and allows website owners to describe their websites. Metatags are often used by Internet search engines to locate, categorize and prioritize websites in search engine results.

Defendants Craig Gross and Yolanda Truglio (collectively, "Gross") were dissatisfied customers of Plaintiff Marianne Bihari’s interior design business, Bihari Interiors, Inc. (collectively, "Bihari"). Gross established and maintained websites that criticized Bihari’s business and provided a forum for others to post these criticisms about Bihari’s business. Gross also used Bihari’s trademarks in metatags for his websites.

The Court first rejected Bihari’s claim that use of trademarks in metatags is actionable under ACPA, holding that ACPA only applies to the registration, trafficking or use of a domain name. The Court relied on both the plain language of the statute and the statute’s legislative history in reaching this conclusion, both of which expressly stated that ACPA applies to domain names.

The Court also rejected Bihari’s request for a preliminary injunction under 43(a) of the Lanham Act, finding that Gross use of Bihari’s trademarks in metatags is not likely to cause confusion and is protected by fair use.

First, the Court found that Gross' use was commercial because the Gross websites effectively acted as a conduit, steering potential customers away from Bihari and toward competitors. However, the Court determined that there was no likelihood of confusion because no reasonable web user would believe that Bihari endorsed the disparaging comments on the first page of the website. The Court also declined to apply the concept of initial interest confusion because, according to the Court, the site is not diverting people that are looking for information about Bihari, but rather it is giving information about Bihari. Gross was not diverting web traffic because Bihari does not have a website. Finally, the Court found Gross’ use of metatags to be "fair use" because it was not a bad faith attempt to trick users into visiting Gross sites, but rather it was a means of cataloging and fairly identifying the actual content of the sites.

Litigation/ITC

A Limited Venue License Provision Prevents a Patentee from Bringing a Section 337 Action in the ITC
By D. Sean Trainor

The Federal Circuit Court recently held that, under the federal patent and California state law, the term "litigation," as used in a patent license, was not limited to federal district court actions but also encompassed actions at the U.S. International Trade Commission (ITC). As a result, a governing law clause in a patent license that required any "litigation" between the parties to occur in California prevented the patentee from filing a 337 action in the ITC. Texas Instruments Inc. v. Tessera, Inc., Case No. 00-1381 (Fed. Cir. Nov. 7, 2000).

Tessera, Inc. (Tessera) had licensed several patents to Texas Instruments (TI). The license contained a California choice of law provision and a dispute clause, which provided that "[i]f [any] disputes, controversies, claims or differences cannot be settled between the parties, any litigation between the parties relating to this Agreement shall take place in California."

After a dispute arose between the parties, Tessera terminated TI’s license and, in response, TI filed suit in district court in California. Shortly thereafter, Tessera filed a section 337 complaint in the ITC naming TI as one of the respondents, whereupon TI applied for a Temporary Restraining Order (TRO) and expedited preliminary injunction (PI) to prevent Tessera from pursuing its claim in the ITC. The ITC intervened in the district court TRO/PI action and argued against granting TI’s application. The district court denied TI’s request, holding that TI was unlikely to succeed on the merits because under California law "litigation" did not limit "the parties’ federal right to administrative redress." The Courts drew its definition of "litigation" from Cal. Code of Civ. Proc. section 391(a) (entitled "Vexatious Litigants"), which defined "litigation" as "any civil action or proceeding, commenced, maintained or pending in any state or federal court."

The Federal Circuit reversed and remanded the case to the district court for further factual findings on the irreparable harm and public interest factors, which, along with likelihood of success on the merits and the balance of the hardships, are used to analyze whether a TRO/PI should issue. Applying Federal Circuit procedural law to the denial of the preliminary injunction and California state law to the substantive contract issues, the Federal Circuit noted that under California law the court must consider the mutual intent of the parties at the time the contract was executed and must interpret the contract such that terms are given their ordinary and accustomed meaning.

Using these tenets, the Federal Circuit concluded that both parties were sophisticated corporations with extensive experience in patents and patent licensing. As a result, the Federal Circuit concluded that at the time the license agreement was executed both parties were aware of available patent infringement forums, including the district courts and the ITC.

The Court then examined the parties’ intent in using the word "litigation" in the license and rejected the district court’s reliance on the Cal. Code of Civ. Proc. 391(a). The court found the field of patent law to be more relevant and held that ITC actions constitute "litigation." In doing so, the Court noted that ITC proceedings are, among other things, inter partes proceedings initiated by the filing of a complaint and include all the trappings of litigation such as discovery, briefs, motions, depositions and a trial. The Federal Circuit also observed that the ITC itself, patent practitioners and commentators, all generally refer to Section 337 actions as "litigation."

In light of the foregoing, the Federal Circuit held that "litigation" as used in the license and as interpreted both according to the intent of the parties and the plain meaning of the term "litigation," includes the ITC. Because the ITC is not in California, the Federal Circuit found that the ITC action was barred by the limited venue license provision.

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