IP Update, Vol. 13, No. 2, February 2010
February 2010
Patents / Patent Eligible Subject Matter (§ 101) - Claiming Computer Readable Media
Copyrights / VARA / Unfinished Works - VARA Deals with Unfinished Business
Copyright - Google Held Liable for Copyright Infringement for Bulk Scanning of Books
DSU Notwithstanding, Federal Circuit Finds Inducement May Be Based on Actions Taken in “Deliberate Disregard” of U.S. Patent
Brock F. Wilson
Upholding a district court’s jury instruction, the U.S. Court of Appeals for the Federal Circuit found that sales of products delivered free on board (f.o.b.) to a destination outside the United States could be infringing sales under 35 U.S.C. §271(a) and that the “knowledge of the patent” requirement for inducing infringement under §271(b) and DSU Medical can include deliberately ignoring the risk that a protective patent exists. SEB S.A. and T-Fal Corp. v. Montgomery Ward & Co. et al., Case No. 09-1099 (Fed. Cir., Feb. 5, 2010) (Rader, J.).
SEB, a French company that specializes in home-cooking appliances, brought a patent infringement action against Pentalpha Enterprises, Montgomery Ward & Co. and Global-Tech Appliances, for selling accused deep fryers in the United States. Pentalpha is a Hong Kong corporation that sold the accused deep fryers to, inter alia, Montgomery Ward f.o.b. Hong Kong or mainland China. According to the Court, “‘f.o.b’ is a ‘method of shipment whereby goods are delivered at a designated location, usually a transportation depot, at which legal title and thus the risk of loss passes from seller to buyer.’” At trial, the district court instruction and jury from arguably would permit the jury to assess damages based either on inducement or direct infringement alone.
On appeal, Pentalpha challenged the jury instructions and form, arguing it was “hopelessly ambiguous” as to whether the jury based its damages award on direct or indirect infringement and that the court erred in finding liability for inducement as SEB had not proven knowledge by defendants of the patents-in-suit. The Court, however, upheld the jury instruction, finding that an infringement verdict was proper on either ground.
Regarding direct infringement, Pentalpha argued that the district court (the U.S. District Court for the Southern District of New York) should have charged the jury that an offer in the United Stated to sell goods outside of the United States does not violate the “offer to sell” provision of the 35 U.S.C. §271(a). Pentalpha also argued that the district court erred by instructing the jury that, in determining if a sale occurred within the United States, it could consider “where the products were shipped from and where the products were shipped to.”
The Federal Circuit noted that Pentalpha failed to raise an objection to these portions of the jury instructions on the record, and stated that the applicable circuit (Second Circuit) law limits review in such a case to fundamental errors, rather than the lower bar of plain error. Upon such a standard, the Court found that neither of the alleged problems constituted fundamental error.
The Federal Circuit insisted that it has “rejected the notion that simply because goods were shipped f.o.b., the location of the ‘sale’ for purposes of §271(a) must be the location from which the goods were shipped,” citing it prior decision in Lightcubes. Moreover, the Court found that the record supported a finding that Pentalpha intended to sell its deep fryers directly to the United States because it labeled them with its customers’ United State’s trademarks, manufactured them with North American electrical fittings and because customer invoices showed delivery to U.S. destinations. With such evidence, the Court concluded there was no fundamental error in the jury instruction regarding direct infringement.
With regard to inducement, Pentalpha argued that it did not induce infringement because it did not have knowledge of the asserted patent and, therefore, did not have the specific intent to encourage another’s infringement. The Federal Circuit ruled that the “specific intent” requirement of its en banc decision in DSU Medical is “not so narrow at to allow the accused wrongdoer to actively disregard a known risk that an element of the offense exists.” Rather, citing to Supreme Court and sister circuit cases involving child pornography, prison inmate safety and age discrimination, the Court sua sponte created a “deliberate indifference” exception to the DSU rule, noting substantial evidence that Pentalpha “deliberately disregarded” a known risk that SEB had a protective patent. The Court explained that a “claim for inducement is viable even where a patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.” In this case, while SEB did not produce direct evidence that Pentalpha knew of the asserted patent, the evidence did show that Pentalpha purchased a SEB deep fryer, reverse engineered it, copied it and sold it as its own; Pentalpha commissioned a “right to use” study but did not inform the commissioned attorney that the deep fryer was copied; Pentalpha’s president was “well versed” in U.S. patent law and was a named inventor on 29 U.S. patents; and Pentalpha and SEB had an earlier business relationship. Moreover, Pentalpha did not provide evidence that it actually believed no SEB protective patent existed. Thus, the Court did not find a fundamental error in the jury instruction regarding indirect infringement.
Finding that an infringement verdict was proper under either theory, the Court upheld the district court’s jury instruction as the ambiguity was non-consequential because the jury’s damages award could have been properly based either on a finding of direct or indirect infringement, or both.
Only Licenses Involving the Patents-In-Suit Can Be Considered When Determining A Reasonable Royalty for Patent Infringement
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently reversed the reasonable royalty determination because the royalty rate was based on licenses unrelated to or that did not specifically mention the patents at issue. ResQNet.com, Inc. v. Lansa, Inc., Case Nos. 08-1365, -1366, 09-1030 (Fed. Cir., Feb. 5, 2010) (Per Curium) ( Newman, J., dissenting).
After a trial on ResQNet’s claim against Lansa for patent infringement, the district court found that Lansa infringed the patent and awarded ResQNet damages of over $500,000 for past infringement based on a hypothetical royalty of 12.5 percent and imposed a license at a royalty of 12.5 percent for future activity. The district court reached its decision after hearing testimony from ResQNet’s expert on how he determined a reasonable royalty rate of 12.5 percent, why he relied upon seven ResQNet licenses, how the seven ResQNet licenses relate to the patents and technology at issue, as well as analysis of the Georgia-Pacific factors. The district court additionally issued Rule 11 sanctions against ResQNet and its attorneys for litigating other related patents that were eventually found not to be infringed. ResQNet appealed.
On appeal, the Federal Circuit agreed that Lansa infringed the patent, but citing to its recent Lucent Techs v. Gateway decision, held that the district court’s reliance on five re-branding or re-bundling licenses (hereinafter, the re-bundling licenses), was “problematical”. The five licenses were for software products and source code, training, maintenance, marketing and upgrades to other software companies in exchange for ongoing revenue-based royalties far exceeding 20percent, (the specific numbers are under protective order). The Federal Circuit explained that the district court’s reliance on the re-bundling licenses was improper because these licenses did not specifically mention the patents in suit or evidence a “discernible link to the claimed technology.” The Federal Circuit noted that the district court “made no effort to link [these licenses] to the infringed patent” and moreover the expert’s opinion that the licensed products are “based on the technology described in the patents in suit” does not provide sufficient grounds to consider the re-bundling licenses in a reasonable royalty determination because such statement does not equate to a determination that ResQNet’s products are coextensive with the claimed invention or provide the necessary link between the re-bundling licenses and the patents in issue. Not to beat a dead horse, the Federal Circuit went on to note that the “re-bundling licenses simply have no place in this case” and that the “inescapable conclusion is that the [ResQNet’s damages] expert used unrelated licenses on marketing and other services—licenses that had a rate nearly eight times greater than the straight license on the claimed technology in some cases—to push the royalty up into the double figures.”
In reversing and remanding the reasonable royalty calculation, the Court cautioned that “the most reliable licenses in this record arose out of litigation” and continued that since a reasonable royalty arises out of a hypothetical negotiation that “occurs before litigation” the district court should be careful about evidence (such as a settlement agreement) that might “skew the results of the hypothetical negotiation.”
Ultimately the Federal Circuit determined that the only licenses that can be considered in determining a reasonable royalty for purpose of patent infringement damages are those that specifically name the patent(s) in suit or show a discernible link to the claimed technology.
The Federal Circuit also reversed the district court’s issuance of sanction (under Rule 11) against ResQNet and its attorneys. In reaching its conclusion, the Federal Circuit noted the “abuse of discretion” standard of review but nevertheless reversed, determing that ResQNet initially represented in pre-discovery correspondence between counsel that that it “did not appear” that Lansa’s product did not infringe two of the products and that it would dismiss these claims unless it discovers evidence to the contrary; ResQNet dismissed its claim for patent infringement with respect to one of its patent two years before Lansa moved for Rule 11 sanctions; and a motion for summary judgment of non-infringement with respect to the other patent was denied by the district court. Under the circumstances, the Federal Circuit determined that there was no act of bad faith sufficient to warrant Rule 11 sanctions against ResQNet.
In Judge Newman’s view, the majority’s dismissal of the testimony of ResQNet’s economic expert, who was subject to examination and cross-examination, is improper; “… the district court provided a full and reasoned analysis of the evidence. No flow in this reasoning has been assigned [by the panel majority] who, instead, create a new rule whereby no licenses involving the patented technology [but that include additional subject matter] can be considered …”
Practice Note: Prior licenses may only be considered in connection with a reasonable royalty determination where the patents in suit are the subject of the license or where licenses go to essentially the same subject matter as the patents found to be infringed.
Patents / Inequitable Conduct / Obviousness / Anticipation
Failure to Disclose Contradictory Statements Made in Another Forum Supports Inequitable Conduct Finding
Mary Boyle, Ph.D.
Holding that the prosecuting attorneys had violated their duty of disclosure by failing to disclose to the U.S. Patent and Trademark Office (USPTO) contradictory statements made to the European Patent Office (EPO) regarding the European counterpart of another patent family, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s finding of inequitable conduct in parallel cases. Therasense, Inc. v. Becton, Dickinson & Co., Case No. 08-1511 (Fed. Cir., Jan. 25, 2010) (Dyk, J.; Linn, J., concurring-in-part and dissenting-in-part); Therasense, Inc. v. Becton, Dickinson & Co., Case No. 09-1008 (Fed. Cir., Jan. 25, 2010) (Linn, J.).
Over the last few years, the Federal Circuit has toughened the standard for proving inequitable conduct. In Star Scientific, the Federal Circuit explained that the clear and convincing standard is not met, as a matter of law, unless the inference of intent to deceive is the single most reasonable inference. Here, in the first case (Case No. 08-1511), the Federal Circuit held that this is a “rare” situation in which a finding of inequitable conduct is appropriate and found that the district court was “clearly correct.”
The technology-in-suit is for disposable test strips used by diabetic patients. The test strips contain an electrode and reactant system that measures blood sugar. Measurements can be made either from whole blood samples or from other types of samples. The electrode system may have a membrane on top of it.
The inequitable conduct issue turned on the failure to disclose to the USPTO that inconsistent representations had been made by the patent owner in another forum, the EPO, about another patent with a U.S. counterpart that was now prior art in the litigation. In the EPO, the patent owner argued that “optionally, but preferably” meant that a membrane was not required for whole blood testing. In the USPTO, the patent owner argued that the same language would be read by a person of ordinary skill to mean that a membrane was required. The Federal Circuit found these two positions flatly inconsistent. Judge Linn dissented and suggested a reading of the language in context that harmonized the positions taken in the EPO and PTO and thus would support a conclusion of no intent to deceive the USPTO. The Court distinguished precedent involving mere attorney argument to the USPTO about prior art, in which no inequitable conduct was found. None of those cases involved inconsistent statements made in another forum and not disclosed to the USPTO. The Court also emphasized that this case involved a sworn affidavit submitted to the USPTO, which triggers a higher standard.
A Combination of Non-Conclusory Factual Allegations Satisfies Twombly for a Sherman Act §1 Claim and Can Proceed to Trial
Stefan Meisner and Carrie Amezcua
The U.S. Court of Appeals for the Second Circuit recently reversed a district court decision dismissing a complaint alleging the defendants conspired to fix prices of digital music in violation of the Sherman Act §1. Starr v. Sony BMG Music Entertainment, Case No. 08-5637 (2nd Cir., Jan. 13, 2010) (Katzmann, J.).
The plaintiffs purport to represent a nationwide class of digital music purchasers. They alleged that the defendants, which include four of the nation’s major music labels, conspired to fix the prices and impose digital rights management restrictions on digital music available through the internet to make it “less attractive to consumers, thereby buoying the prices” of compact discs. The defendants created two joint ventures to sell music over the internet. The plaintiffs allege that the defendants used these joint ventures to illegally exchange price information and set a wholesale price floor for digital music. The plaintiffs also allege that the defendants used the joint ventures to enforce “most favored nation” clauses with their licensees, such that all the defendants benefited from receiving the same licensing terms as every other defendant or licensor. The most favored nation clauses also allegedly helped the defendants maintain their agreed upon wholesale price floor.
The District Court for the Southern District of New York dismissed the complaint, holding that the Supreme Court’s decision in Bell Atlantic v. Twombly required the plaintiffs to plead more facts tending to show a conspiracy in order to survive a motion to dismiss. Because joint ventures are generally not prohibited, the district court refused to draw a negative inference of collusion simply because the defendants entered into two of them. The court stated that the defendants’ seemingly collusive actions in setting prices could just as likely have been parallel pricing, which is not illegal. Similarly, the defendants’ enforcement of digital rights management restrictions—for example, preventing one purchaser of a digital song from sharing it with others who have not purchased the song themselves or from transferring the song from the purchaser’s computer to an iPod—could have been legal parallel use restrictions. The district court held that the facts the plaintiffs alleged in their complaint were just as consistent with independent action as with conspiracy and therefore the claim had to be dismissed.
Moreover, the district court stated that the plaintiffs’ conclusion that the price and use restrictions were against the defendants’ self-interest could not support an inference of an agreement. The district court noted that pirating music, that is, acquiring a digital song without purchasing it, is widespread and has been detrimental to music distributors and music artists. Thus, even though digital rights management restrictions are unpopular, it is in the companies’ best interest to enforce them. Starr appealed.
The Second Circuit reversed, holding that the complaint contained enough factual matter, taken as true, to suggest an illegal agreement. The Second Circuit criticized the district court’s reference to Matsushita Elec. v. Zenith Radio as the basis for finding the plaintiffs needed to plead “plus factors” that tended to rule out the possibility that the defendants were acting independently. The Court explained that Matsushita is a summary judgment standard, not a pleading standard. While Twombly requires more than a bare assertion of conspiracy, it does not require the level of factual information that a summary judgment standard requires. Thus, here, the Second Circuit found that the non-conclusory factual allegations of parallel conduct were enough to plausibly state a claim for relief.
The Second Circuit first focused on the joint ventures among the defendants that allegedly charged such unreasonably high prices such that “nobody in their right mind” would purchase music from them. In addition, there was evidence that the defendants formed the joint ventures to “stop the continuing devaluation of music.” The court also took exception to the most favored nation clauses, which guaranteed that the defendant licensors received terms no less favorable than the terms offered to other licensors. These clauses also allegedly facilitated the defendants in setting a wholesale price floor. Even more compelling to the court was the fact that the defendants tried to hide these most favored nation clauses.
The Second Circuit pointed to other factors supporting the claim, including: not reducing prices for internet music despite dramatic cost reductions, the substantial price difference between the defendants’ wholesale price and the second most popular music retailer’s price, all the defendants raising their wholesale prices around the same time and past criminal investigations for price fixing.
Taking all these factual allegations to be true, the Second Circuit held that the plaintiffs had “alleged behavior that would plausibly contravene each defendants’ self-interest in the absence of similar behavior by rivals” under Twombly. The court remanded the case back to the district court for further proceedings.
Practice Note: When structuring joint ventures with competitors, parties need to be careful that they do not violate antitrust laws. Setting minimum prices, exchanging price information or distributing the revenue from the joint venture equally instead of by market share will raise red flags. Using the joint venture to enforce non-price restrictions, such as the most-favored-nation clauses in this case, will also invite antitrust scrutiny.
Construction of Claim Term “Personal Action” in Elevator Patent Goes Down
Megan Heller
The U.S. Court of Appeals for the Federal Circuit recently reversed a grant of summary judgment of non-infringement, concluding that a district court had too narrowly construed the terms “information transmitter” and “recognition device” to exclude any personal action by an elevator user other than walking into the monitored area. Schindler Elevator Corp. v. Otis Elevator Co., Case No. 09-1146 (Fed. Cir. January 25, 2010) (Linn, J.) (Dyk, J., concurring in result and dissenting in part).
Schindler’s asserted patent concerns an elevator system that recognizes a user when he or she enters an entry location of a building, then dispatches an elevator to bring the user to a destination floor based on stored user-specific data. The embodiment in question encompasses recognition taking place via an “information transmitter” brought within range of a mounted “recognition device.” Once the system recognizes the user, it accesses the user’s information and an elevator is dispatched to take the user to a pre-designated floor. Schindler alleges that Otis infringed the “information transmitter” embodiment of the patent through its system at 7 World Trade Center, which requires users to swipe a card within approximately 3.5 inches over card readers in building turnstiles. The reader uses the card information to dispatch an elevator.
The point of contention arose as a result of specification language in the Schindler patent stating that the information transmitter and recognition device communicate “without any personal action being required by the passenger.” Otis alleged that the action of bringing a card within the necessary proximity of the sensor qualified as “personal action,” and the district court agreed. The district court read the specification as excluding any personal action by an elevator user other than “walking into the monitored area.” Accordingly, the district court granted summary judgment of non-infringement to Otis.
The Federal Circuit reversed, finding the district court construction to be too narrow. The Court determined that the statements in the specification and prosecution history on which the district court relied were “directed to elevator operations that occur only after the information transmitter is already within range of the recognition device, not to the initial act of bringing the information transmitter within range of the recognition device.” The Court noted specification examples in which a user would need to do more than just walk to bring the transmitter into range; for example, the “key” specification of claim 7 requires the user to unlock a door and open it to dispatch the elevator. Ultimately, the Federal Circuit modified the district court construction of the terms at issue by striking the phrase “without requiring any sort of personal action by the passenger” from each construction. The Court then vacated the grant of summary judgment and remanded.
Concurring with the result but dissenting in part, Judge Dyk expressed concern that the court broadened the construction of the patent so far as to render its disclaimer meaningless.
Patents/ Obviousness Type Double Patenting
Retroactive Terminal Disclaimer Not Allowed and Safe Harbor Applies to Divisional of Divisional
Leigh J. Martinson
The U.S. Court of Appeals for the Federal Circuit determined that a terminal disclaimer cannot be effective if it is filed after the expiration of the earlier patent. The Court determined that the safe harbor provisions of 35 U.S.C. § 121 apply to a divisional of a divisional. Boehringer Ingelheim International GMBH and Boehringer Ingelheim Pharmaceuticals, Inc. v. Barr Laboratories, Inc. and Barr Pharmaceuticals, Inc. and Mylan Pharmaceuticals, Inc. , Case No. 09-1032 (Fed. Cir., Jan. 25, 2010) (Linn, J.; Dyk, J., dissenting-in-part).
Boehringer sued Mylan for patent infringement after being notified by Mylan of an Abbreviated New Drug Application (ANDA) for generic pramipexole. The Mylan case was consolidated with an earlier action against Barr Laboratories. Mylan argued that the asserted claims of the patent in suit, the third in a chain of related patents, were invalid for obviousness-type patenting in view of an earlier issued patent. The district court agreed and held the patent in suit invalid for obviousness-type patenting. During the litigation, Boehringer filed a terminal disclaimer in the patent in suit over the earlier issued patent, which had already expired before the terminal disclaimer was filed. The district court deemed this “retroactive” terminal disclaimer inoperative. The district court also rejected Boehringer’s safe harbor theory of removing another earlier patent as an invalidating reference. Boehringer appealed both points.
In addressing Boehringer’s arguments with respect to the terminal disclaimer, the Federal Circuit noted that the “fundamental reason for the rule [of obviousness-type double patenting] is to prevent unjustified timewise extension of the right to exclude.” Here, Boehringer did not file its terminal disclaimer until long after the earlier patent had expired. The Court reasoned that “[b]y failing to terminally disclaim a later patent prior to the expiration of an earlier related patent, a patentee enjoys an unjustified advantage—a purported time extension of the right to exclude from the date of the expiration of the earlier patent. The patentee cannot undo this unjustified timewise extension by retroactively disclaiming the term of the later patent because it has already enjoyed rights that it seeks to disclaim.”
The Court, however, did overturn the district courts denial of the safe harbor provisions of 35 U.S.C. § 121. The arguments presented centered around the “as a result of” statutory language. The claims of Boehringer’s original application faced a multi-way restriction requirement. The patent in suit was technically a “divisional of a divisional.” The Court reasoned that the safe harbor provision applied because there was “consonance with the restriction requirement” as originally issued, even though the patent in suit included more than one group of the originally -restricted claims. Thus, because the patent in suit honored the lines of demarcation drawn by the examiner in the restriction requirement, the Court concluded that the safe harbor provision applied.
Practice Note: All terminal disclaimers should be filed during the pendency of the parent patent.
Patents / Law Firm Disqualification
Federal Circuit Disqualifies Law Firm for Attorney Ethics Violation
Please contact Paul Devinsky
In a non-precedential decision, the U.S. Court of Appeals for the Federal Circuit disqualified the law firm King & Spalding from representing defendant in an appeal where one of its attorneys testified in the trial below as an expert for the other party. Outside the Box Innovations, LLC v. Travel Caddy, Case Nos. 09-1171, -1558 (Fed. Cir., Feb. 1, 2010 ) (Dyk, J.).
The conduct that gave rise to charges of inequitable conduct began when Anthony B. Askew, a partner at King & Spalding, submitted a declaration as an expert witness in support of a motion for attorneys’ fees filed by Outside the Box (doing business as Union Rich USA). K&S opined that Union Rich’s requested attorneys’ fees were reasonable, based on his experience. Travel Caddy opposed the motion, challenging the strength of Askew’s assertion. The district court ruled against Union Rich, denying the request for attorneys’ fees and finding that the parties should be held responsible for their own fees.
After the district court proceedings concluded, Travel Caddy selected three attorneys from K&S to represent it in the appeal. Union Rich objected, arguing that Travel Caddy and Union Rich’s interests were “materially diverse” and that K&S attorneys should be disqualified under the principle of “implied disqualification” for “switching sides” without knowledge and consent of the parties.
Union Rich’s motion for disqualification brought before the Federal Circuit the issue of whether a law firm is disqualified from accepting representation of a client on appeal because one of the firm’s attorneys was an expert witness in the same matter on behalf of a party having an adverse interest. Judge Dyk, focusing on Georgia Rule of Professional Conduct (GRPC) 1.7, which states that “a lawyer shall not represent a client if there is significant risk that the lawyer’s own interests or duties to another client or a former client will materially and adversely affect the representation of the client,” noted that under this rule, an attorney may represent a client, notwithstanding these potential material and adverse affects, only if the client consents.
Judge Dyk agreed with Union Rich that K&S would find itself in precisely the predicament barred by GRCP 1.7 if it continued to represent Travel Caddy since in the course of that representation the new K&S lawyers would have to challenge the sufficiency of Askew’s expert testimony. If they did not challenge his opinion, it would be tantamount to inadequate representation. The Court noted that no proof existed that Travel Caddy had waived the conflict, thus removing the only potential grounds for the K&S to avoid disqualification.
Practice Note: This ruling serves as a reminder of the ethical rules that govern attorney conduct and the ramifications of failing to ensure that one client’s interests are not materially adverse to another.
Patents / Patent Eligible Subject Matter (§ 101)
Claiming Computer Readable Media
Eric M. Shelton
Refining its previous guidance regarding patent eligible subject matter, the U.S. Patent and Trademark Office (USPTO) issued a formal suggestion to applicants pursuing applications directed to computer readable media. The notice is available online at http://www.uspto.gov/patents/law/notices/101_crm_20100127.pdf.
In August 2009, the USPTO issued revised guidelines for examination of patent claims under Section 101 (see IP Update, Volume 12, No. 9). The revised guidelines continued to recognize Beauregard claims, for media bearing computer instructions, as a patent-eligible article of manufacture. However, in view of the Nuijten decision (see IP Update, Vol. 10, No. 10), which held that per se “signals” are ineligible for patenting under § 101, the USPTO indicated the phrase computer readable medium alone is too broad for § 101 eligibility. Instead, the guidelines indicated such claims must be directed to a non-transitory, tangible computer readable storage medium. The recent notice reiterates these points, explaining that the phrase computer readable medium, when broadly construed, covers both non-transitory tangible media and transitory propagating signals per se.
The notice specifically suggests that applicants add the limitation “non-transitory” to computer readable media claims in order to narrow such claims to exclude transitory embodiments that may be deemed ineligible in view of the Nuijten decision. The notice indicates that this amendment should be acceptable in the majority of applications. However, the notice cautions that in some applications, where the only disclosed embodiment is a signal per se, the specification may not support such an amendment.
Patents / Patent Term Adjustment Calculations
Update: USPTO Announces Interim Procedure for Requesting Recalculation of Patent Term Adjustment Under Wyeth v. Kappos
Contact Paul Devinsky
On January 7, 2010, the U.S. Court of Appeals for the Federal Circuit held that patentees, Wyeth and Elan Pharma International Ltd., were entitled to extended patent term adjustments (PTA) because the U.S. Patent and Trademark Office misinterpreted the statute 35 U.S.C. § 154(b), which provides for patent term adjustment (PTA) for certain USPTO delays. Wyeth v. Kappos, (see IP Update, Vol. 13, No. 1). Soon after, the USPTO announced it would not seek further review of the Federal Circuit decision but would instead change “the manner in which [it would] calculate patent term adjustments” under § 154. The revised program will calculate overlapping days consistent with Wyeth and is expected to be completed by March 2, 2010. For now, the USPTO is providing patentees of patents issuing prior to March 2, 2010 the opportunity to request recalculation of PTA and will waive the fee and petition required by 37 C.F.R. § 1.705(d).
To take advantage of this optional interim procedure, a patentee must meet the following criteria: the patent must be issued prior to March 2, 2010; the sole basis for requesting reconsideration of PTA must be the USPTO’s pre-Wyeth interpretation of 35 U.S.C. § 154(b)(2)(A); a Request for Recalculation of Patent Term Adjustment in View of Wyeth form (PTO/SB/131) must be submitted within 180 days of the day the patent was issued. The form is available on the USPTO website at http://www.uspto.gov/forms/index.jsp.
The interim procedure does not apply to patents issued on or after March 2, 2010, to requests that the USPTO recalculate the PTA for alleged errors other than those identified in Wyeth or to any request for reconsideration of PTA that is filed later than 180 days after the patent was granted. Additionally, the interim procedure is not a basis for requesting a refund of the required fee in 37 C.F.R. § 1.18(e) for any previously filed request under 37 C.F.R. § 1.705, including requests that were based on the USPTO’s pre-Wyeth interpretation of 35 U.S.C. § 154(b)(2)(A). Furthermore, should a patentee wish to preserve its right to review of the USPTO’s patent term adjustment determination in the U.S. District Court for the District of Columbia, it must also take the steps required under 35 U.S.C. § 154(b)(3) and (b)(4) (i.e., within 180 days after grant of the patent) and 37 C.F.R. § 1.705 (i.e., within two months of issuance of the patent).
For patents issuing on or after March 2, 2010, a patentee may file under 37 C.F.R. § 1.705(d) a request for reconsideration of PTA.
Practice Note: To avoid a potential loss of a right to a civil action seeking reviewing of the USPTO’s determination of PTA, patentees who file a request using the optional interim procedure should docket a reminder of the deadline under 35 U.S.C. § 154(b)(3) and (b)(4) (i.e., within 180 days after grant of the patent) in the event that the USPTO’s PTA decision arrives after the 180 day time period.
Trademarks / Likelihood of Confusion
Go Team! University of Southern California’s “SC” Mark Dominates University of South Carolina
Lynne Boisineau
The U.S. Court of Appeals for Federal Circuit affirmed a Trademark Trial and Appeal Board (TTAB) decision refusing registration of the University of South Carolina’s (South Carolina) “SC” design mark and granting summary judgment in favor of the University of Southern California (Southern Cal), while denying a counterclaim cancellation action filed by South Carolina attempting to cancel Southern Cal’s registration for its standard character “SC” mark. The
The TTAB refused registration of
The Court found that the goods covered by Southern Cal’s block letter registration in Classes 6, 18 and 24 (key rings, tote bags, blankets, etc.) were sold through “University authorized” trade channels and, as such, Southern Cal’s and South Carolina’s marks would likely appear on similar goods in similar channels of trade. It held that confusion was likely.
The Court also found no substantial evidence to support the fact that goods would be purchased by less sophisticated consumers such as “new or casual fans,” but determined this to be harmless error. The Court noted that the marks being legally identical and appearing on the same classes of goods in the same trade channels were factors which, on their own, would support a finding of likelihood of confusion.
Additionally, the Court agreed with the TTAB that without evidence showing the marks commingled within retailers for a significant length of time, the fact that there was no evidence of actual confusion weighed only slightly in favor of
Cancellation Based on False Association
While the TTAB denied South Carolina’s cancellation counterclaim finding the university was not an agent of the state and had no standing to assert the § 2(a) claim, the Court held that the TTAB took an unreasonably limited view of standing and found that the university did have a direct commercial interest in the cancellation proceeding. However, the Court still affirmed the grant of summary judgment, finding that
Practice Note: While the Court technically only affirmed Southern Cal’s prior rights in the standard character “SC” mark in connection with its various enumerated goods and services, this decision appears to provide Southern Cal with grounds for future trademark infringement actions and/or dilution claims against any parties using the letters “SC,” simply by being the first to file an application for same. In light of the 16 other colleges and universities using the “SC” reference (as well as other non-academic entities potentially using same), this decision appears to have granted
Copyrights / VARA / Unfinished Works
VARA Deals with Unfinished Business
Hasan M. Rashid
Deciding “important and unsettled legal issues under the Visual Artists Rights Act” (VARA), the U.S. Court of Appeals for the First Circuit held that unfinished works are protected under VARA. VARA was enacted to protect “moral rights” in certain types of works, encompassing the artist’s right to attribute his name to a work and his right to protect the work’s integrity from deformation or mutilation. Massachusetts
For a few years, the
The United States District Court for the District of Massachusetts granted the Museum declaratory relief, permitting it to continue displaying the unfinished installation. The court held that VARA, absent any agreement otherwise, does not protect an artist who abandons a collaborative project in which he remotely directed the construction of the work on someone else’s property with someone else’s resources and staff. Accordingly, Büchel could not use VARA to dictate the rights and actions of the Museum with respect to the abandoned, incomplete work, so long as it was not labeled as Büchel’s work. Büchel appealed.
After highlighting the lower court’s skepticism that an unfinished work is even covered under VARA, the First Circuit held that VARA protects unfinished works that are “works of art” under the Copyright Act. Although unfinished installations are not explicitly included or excluded in VARA, VARA is a part of the Copyright Act, which provides that a work is protectable when it is fixed. Generally, fixation occurs when a work has been formed by or under an artist’s authority into a permanent or stable form. For works prepared over a period of time, whatever is fixed at any particular time constitutes a protectable work, albeit incomplete. Because the Copyright Act protects unfinished works, so too does VARA. For this and other reasons, summary judgment for the Museum was inappropriate.
Practice Note: In any collaboration, always memorialize the agreement and explicitly and clearly address intellectual property rights—uncertainty in these rights may lead to costly litigation in the unfortunate event that the relationship between the parties sours.
Google Held Liable for Copyright Infringement for Bulk Scanning of Books
Désirée Fields
The Paris Court of First Instance’s third chamber has ruled that Google Inc.’s bulk scanning of books for its Google Book Search website, done without permission from copyright holders, infringed the copyrights on hundreds of French books. Editions du Seuil v. Google Inc., T.G.I. Paris, 79 PTCJ 226, 1/1/10 (Tribunal de Grande Instance de Paris 3ème Chamber, Dec 18, 2009).
The case raised the issue as to whether Google’s digitization of copyrighted works of French origin and making extracts of them available in response to searches without the permission of authors infringed copyright. The works in question were scanned in the
The French court also rejected Google’s arguments that its then-pending settlement of U.S. class-action lawsuits filed by the U.S. Authors Guild, several authors and publishers should be enforceable in France and that book extracts on Google Livres should be considered informative, brief quotations and consequently legal.
The court addressed the issue whether Google should be held liable for making infringing copies under French copyright law. Google argued that it had never made full copies of any of the works and should benefit from an exception to French copyright law that allowed reproduction of short quotations from copyrighted works for informative purposes. However, under French law, the exception of short quotations requires some intellectual work and aim at illustrating the subject matter of the work in which it is incorporated. Accordingly, the court rejected the argument on the basis that Google had posted books’ entire cover pages, chose book extracts at random and harmed authors’ moral rights with some of the short quotations.
The court ordered Google to pay €300,000 in damages and interest to French publisher Seuil, Delachaux & Niestle and to American publisher Harry N. Abrams, both subsidiaries of the French group La Martinière. It also ordered Google to pay a nominal one euro to national publishers’ and authors’ association, Syndicat national de l’édition et à la Société des gens de lettres. In addition, Google was ordered to immediately take down posted excerpts of the publisher’s works and cease scanning and posting further excerpts on penalty of a further €10,000 for each day it delayed to remove the content from its site.
Practice Note: Given that in the French legal system an appeal leads to a new trial during which the appeals court would completely re-evaluate factual and legal issues, it is possible that the decision will be reversed. While the ruling may inspire publishers throughout Europe to file further lawsuits against Google in an attempt to obtain damages for copyright infringement, copyright laws in
Trade Secret/ Forum Non Conveniens
Even if Neither Party Resides in the District, Trade Secret Suit Venue Is OK
Elisabeth (Bess) Malis
The U.S. Court of Appeals for the Ninth Circuit reversed and remanded a district court dismissal of a trade secrets suit based on forum non conveniens, holding that the district court abused its discretion in balancing the public and private interest factors relevant to such determination. Neuralstem, Inc., v. ReNeuron, Ltd., Case No. 08-56546 (9th Cir., Feb. 9, 2010) (per curiam).
Neuralstem, a Maryland corporation, sued ReNeuron, an English corporation, in the central district of California for misappropriation of Neuralstem’s stem cell technology and breach of a joint venture agreement between the parties. The district court dismissed the action for forum non conveniens, concluding that England would be a more convenient forum for the action because most of ReNeuron’s former employees and many of the documents relevant to the action are located in England, neither of the parties resides in California and English law governed the joint venture agreement. Neuralstem appealed.
The Ninth Circuit reversed. To dismiss an action for forum non conveniens, an adequate alternative forum must exist and a balance of private and public interest factors must support dismissal. The Ninth Circuit stated that while the district court properly found England to be an adequate alternative forum, the district court abused its discretion in weighing the private and public interest factors.
The Ninth Circuit found that the district court failed to properly regard private interest factors such as Neuralstem’s U. S. residency and choice of forum. The court also stated that the district court diminished the fact that Neuralstem’s claims rely on third-party witnesses and documentary evidence located in California and other U.S. locations and failed to require ReNeuron to meet its burden of proof that the evidence and witnesses located in England were of sufficient “materiality and importance.” Moreover, the court indicated that the district court failed to consider that the majority of documentary evidence located in England is within ReNeuron’s control and could be easily transported to any forum.
The Ninth Circuit also found fault with the district court’s analysis of public interest factors. The court stated that the central issue to the case was ReNeuron’s alleged breach of the contractual agreement; the purportedly breaching conduct occurred virtually exclusively in California and elsewhere in the United States. The court reasoned that even if the “principal locus” of the case did not occur in California, the court need only find an “identifiable interest” in the controversy. California has an “identifiable interest” in preventing illegal conduct within its borders.
Accordingly, the Ninth Circuit reversed the district court’s holding that England was a more convenient forum for the action and remanded the case for further proceedings.
