U.S. Supreme Court Discards the “General Rule” in Patent Cases
Paul Devinsky and Bonnie J. Warren
A unanimous U.S. Supreme Court reversed the U.S. Court of Appeals for the Federal Circuit’s long-standing “general rule” that “a permanent injunction will issue once [patent] infringement and validity have been adjudged.” The Supreme Court held that “the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts.” In exercising that discretion, the district courts have been instructed to apply the “traditional principals of equity” that govern the award of injunctive relief. eBay, Inc. v. MercExchange, Case No. 05-130 (Thomas, J.) (concurring opinions by Roberts, C.J. and Kennedy, J.)
MercExchange sued eBay and Half.com (collectively “eBay”) alleging that websites belonging to eBay infringed MercExchange’s business method patent. A jury found that MercExchange’s patent was valid and that eBay infringed the patent. The jury awarded damages for past infringement. Following the jury’s verdict, MercExchange moved for permanent injunctive relief. The district court denied MercExchange’s motion and concluded a “plaintiff’s willingness to license its patents” and “its lack of commercial activity in practicing the patents” would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue. eBay appealed the jury verdict. MercExchange cross-appealed, among other things, the district court’s denial of MercExchange’s motion for a permanent injunction.
On review the Federal Circuit reversed the district court, applying its deep-seated “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.” The Federal Circuit reasoned that “the ‘right to exclude recognized in a patent is but the essence of the concept of property,’” and thus injunctive relief is warranted against the infringer. eBay petitioned the Supreme Court for certiorari, arguing that the Federal Circuit’s “general rule” was inappropriate and counter to the patent law.
The Supreme Court’s Decision
According to the Supreme Court, section 283 of the patent statute “expressly provides that injunctions ‘may’ issue ‘in accordance with the principles of equity,’” which trumps the personal property attribute of patents and the exclusionary right grant. The Court noted the Federal Circuit and the district court erred in failing to apply traditional equitable principles to the permanent injunction motion, albeit from opposite sides of the application of discretion spectrum.
On the one hand, the district court, only looking at the patent owner’s willingness to license and lack of commercial activity, held that patent owners falling into such a category would not be irreparably harmed if no injunction issued. The Supreme Court found such broad classifications were counter to traditional equitable principles and noted that a university researcher or independent inventor might reasonably prefer to license, rather than self-commercialize, an invention and still meet the traditional four-factor test. On the other hand, the Court found error in the “general rule” as articulated by the Federal Circuit, i.e., that injunctions should only be denied “under exceptional circumstances” as an unduly broad categorical grant of such relief.
Rather, the Supreme Court instructed that traditional principles of equity “apply with equal force to disputes arising under the Patent Act and that a major departure from the long tradition of equity practice should not be lightly applied.” In analogizing the right to exclude in a copyright case with a patent case, the Supreme Court stated that it has “consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed.” The Court held that according to “well established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.”
In a concurring opinion, Justice Kennedy took aim at the “industry” that has developed based on use of patents to extract license fees and their use of injunctions “as a bargaining tool to charge exorbitant fees.” He found these practices especially objectionable in cases where “the patented invention is but a small component of the [accused] product.” In such cases, Justice Kennedy opined that “legal damages may well be sufficient to compensate for infringement and an injunction may not serve the public interest.” Justice Kennedy went on to take specific aim at business method patents, noting that the “potential vagueness and suspect validity of these patents may affect the calculus under the four-factor test.”
The dynamic in district court patent cases has changed dramatically. No longer will the 900-pound gorilla of a permanent injunction threat have a permanent seat at the settlement table. Henceforth, in considering whether to award permanent injunctive relief to a prevailing patent owner, district courts are instructed to apply traditional equitable principles on a case-by-case basis with the decision being reviewable on an abuse of discretion standard.
We expect that in the future, many patent owners will consider section 337 actions before the U.S. International Trade Commission, where exclusion orders and cease and desist orders (the functional equivalent of an injunction) are available essentially as a matter of right to a prevailing petitioner.
Scope of Privilege Waiver May Include Non-Communicated Subject Matter
Paul E. Poirot
The U.S. Court of Appeals for the Federal Circuit has further clarified the cost of relying on advice of counsel as a defense to a claim of willfulness. Announcing that the waiver of the attorney work-product privilege extends to work product that discusses a communication between the attorney and the client even if the document itself was not communicated to the client. Also, the accused cannot draw a distinction between advice upon which it relies and upon which it doesn’t rely. In re Echostar Communications Corp., Misc. Dkt. Nos. 803, 805 (Fed. Cir. May 1, 2006) (Gajarsa, J.).
Echostar had asserted the defense of reliance on advice of counsel, relying on a pre-suit investigation performed by its in-house counsel. After the action was filed, Echostar obtained additional legal advice from outside counsel but elected not to rely on it. The district court rejected the distinction between Echostar’s in-house counsel and its law firm and held that Echostar had waived its privilege with both. The district court took an expansive view of the waiver and indicated that it included communication made either before or after the filing of the complaint, whether communicated to Echostar or not.
On appeal the Federal Circuit rejected Echostar’s attempted distinction between its internal investigation and that of its outside counsel. A waiver of the attorney-client privilege applies to all communications relating to the same subject matter.
The Court then identified at least three types of documents that are subject to the privilege: (i) documents that embody a communication between the attorney and client concerning the subject matter of the case, such as a traditional opinion letter; (ii) documents analyzing the law, facts and trial strategy that reflect the attorney’s mental impressions but were not given to the client; and (iii) documents that discuss a communication between the attorney and client concerning the subject matter of the case but that are not themselves communications with the client, such as a communication referring to a phone call with the client. An advice of counsel defense waives the client’s privilege to all of the first category and none of the second category of documents. The Court held that the privilege is also waived with regard to the third category of documents because the documents reference a specific communication with the client. Disclosure of such documents “will aid the parties in determining what communications were made to the client and protect against intentional or unintentional withholding of attorney-client communications from the court.”
Still, the Court curtailed the wholesale disclosure of the documents in the third group, advising that documents that fall into the category should be carefully redacted to remove any legal analysis that was not communicated to the client.
When defending against a claim of willful infringement, there is no distinction between the analysis performed by in-house counsel and outside counsel. A waiver to one is a waiver to both.
“Printed Publication” Does Not Require Much Publication
Toby H. Kusmer
Affirming that a printed publication must be “publicly accessible” to constitute a prior art reference, the U.S. Court of Appeals for the Federal Circuit determined that information canceled from a foreign patent application during prosecution, but nevertheless discoverable upon inspection of the file of the subsequently issued patent, constitutes prior art. The Court announced that the nature of the disclosure and the indexing and classification of the issued foreign patent provided a “roadmap that would have allowed one skilled in the art to locate the application.” Mark Bruckelmyer v. Ground Heaters, Inc. and T.H.E. Machine Company, Case No. 05-1412 (Fed. Cir. Apr. 20, 2006) (Lourie, J.).
A Canadian patented reference described “a portable heating system that places flexible hoses ‘in the proximity to objects of various shapes and configuration which would otherwise be difficult to heat.’” The patent also made reference to the use of the system for applying heat to fresh concrete during extreme cold weather, which was the subject matter of Bruckelmyer’s patent claims. Two drawings showing the system used to thaw frozen ground were canceled during prosecution and, therefore, were not in the issued patented reference. Bruckelmyer stipulated prior to the district court’s entry of judgment that if the application, including the canceled drawings that issued as the Canadian patent, were a “printed publication,” it would render the patents-in-suit invalid on the ground of obviousness. The district court ruled that the Canadian application, including the canceled drawings, was a printed publication.
On appeal the Federal Circuit affirmed and rejected Bruckelmyer’s arguments that to be considered “publicly accessible,” a reference “must either (1) be published to those interested in the art for a sufficient amount of time to allow them to ‘capture[ ], process[ ] and retain[ ] the information conveyed by the reference, or (2) those interested must be able to locate the material in a meaningful way.’” Specifically, Bruckelmyer argued that the first factor was not satisfied because there was no evidence that the contents of the file wrapper were disseminated and the application file was only located in the Canadian Patent Office in Hull, Quebec. The second factor was not satisfied because a person of ordinary skill in the art interested in the subject matter of the patents-in-suit would not have been able to locate the figures because the Canadian Patent Office did not index or catalogue the Canadian application. Bruckelmyer further argued that the Canadian patent itself would not have provided guidance to a person skilled in the art to locate the canceled figures because the figures were canceled from the application during prosecution.
Instead the Court held that determination of what made a reference a “printed publication” under the statute was “whether a person of ordinary skill in the art interested in the subject matter of the patents in suit and exercising reasonable diligence would have been able to locate the [reference].” Relying on In re Wyer, the Court believed that, like published abstracts of applications available for public inspection, the published Canadian patent provided a “roadmap to the application.” The Canadian patent stated the possible use of the system for thawing frozen ground, which was the same use contemplated by the claims of the patents at issue. The “printed publication” provision of section 102(b) “was designed to prevent withdrawal by an inventor…of that which was already in the possession of the public.” The Court therefore concluded that the information canceled during the prosecution of the Canadian patent was within the term “printed publication.”
While it is evident from a published abstract of a patent application that the corresponding patent application will contain more information than the abstract, this case is troubling since it is not evident from an issued patent whether any other information has been canceled during its prosecution. However, cancellation of such subject matter is a relatively rare event.
Bold Declarations in Specification Can Limit Claims
Terry W. Ahearn
In a rare win for Blackberry-maker Research in Motion, the U.S. Court of Appeals for the Federal Circuit, affirming the district court, disavowed the doctrine of claim differentiation in favor of a “very important” claim limitation in the specification. Inpro Licensing, S.A.R.L. v. T-Mobile USA, Inc., Research in Motion Limited and Research in Motion Corporation (collectively “RIM”), Case No. 05-1233 (Fed. Cir. May 11, 2006) (Newman, C.J.).
Inpro accused RIM of infringing its patent for a credit-card-sized personal digital assistant that communicates with a host computer. Inpro appealed the district court’s interpretation of three claim terms, including the term “host interface.” The district court had interpreted “host interface” as “a direct parallel bus interface.” Inpro conceded that if the district court’s interpretation of “host interface” was correct, infringement would not lie.
Inpro argued that under the doctrine of claim differentiation, the limitations of “host interface” in some unasserted claims demonstrate that the broader asserted claims are not limited to a “direct parallel bus interface” but include any interface (serial or parallel, direct or indirect) for communicating with the host. Rejecting application of the doctrine of claim differentiation, the Court stated that describing claims in different words “does not invariably change the scope of the claim.” Citing the recent Phillips case, the Court recognized the boundaries of patented inventions are contained in the claims but construed in light of the specification, prior art and prosecution history.
Turning to the patent, the Court found that Inpro had referred to communication with the host by serial connection as “a big drawback” and “very troublesome” while it referred to communication with the host by “direct parallel bus interface” as a “very important feature” of the invention. The Court also found that the prosecution history of related applications supported the view that “host interface” requires “a direct parallel bus interface.”
Judge Newman wrote the majority opinion and also added a separate concurrence concerning the Court’s failure to review the two remaining terms. Judge Newman argued that the interests of the parties and the public, as well as judicial economy, required disposition of all issues of claim construction raised on appeal. Given the fact the Court had “done most of the judicial work anyway,” Judge Newman argued that all three claim terms should have been reviewed and decided on appeal “lest our silence leave a cloud of uncertainty on the patent, its scope, and its validity.”
Using strong language in a patent application that refers to inferior embodiments as “a big drawback” or “very troublesome,” while referring to the preferred embodiment as “important” or “very important,” may be used to limit asserted claims.
Agreed Upon Claim Construction Breezes Through Federal Circuit
Foregoing de novo review of a claim construction agreed upon by the parties, the U.S. Court of Appeals for the Federal Circuit upheld a district court’s grant of summary judgment of non-infringement. Semitool, Inc. v. Dynamic Micro Sys. Semiconductor Equip GMBH, Case No. 05-1299 (Fed. Cir. Apr. 6, 2006) (Prost, J.).
The patents at issue were directed to a cleaning apparatus for rinsing and drying carriers used to hold and process semiconductor wafers, substrates, flat panel displays and similar articles. In a prior litigation, the parties entered a settlement agreement stipulating to a permanent injunction barring Dynamic from infringing any claims of the patents. The agreement specified that the accused devices, as configured, infringed the apparatus and so would any apparatus “that is no more than a colorable variant” of the accused devices. The parties also agreed that the district court’s final claim construction order would be used in any future enforcement proceedings.
Dynamic later developed a new cleaning system called the Tornado. Semitool went back to court, seeking to enforce the settlement agreement and argued the Tornado system was no more than a colorable variant of the previously accused devices and literally infringed the patents-in-suit. The district court considered the differences between the Tornado system, the patent claims and the previous infringing models and concluded the Tornado system was colorably different from the previously accused products and did not infringe the patents. Thus, the district court granted summary judgment of non-infringement; Semitool appealed.
On appeal the Federal Circuit reviewed the district court’s construction of one term (which the district court had not construed) but did not review the rest of the claim construction. Instead the Court used the parties’ agreed upon construction from the settlement agreement.
On infringement the Court agreed with the district court that, to infringe, a system must supply drying gas to the process chamber. In the accused system the condenser was inside the processing chamber and, as a result, could not introduce gas into the process chamber. During oral arguments, Semitool explicitly acknowledged that the Tornado system’s condenser was inside the processing vessel and, therefore, must be inside the processing chamber.
Appellate Court Considers Claim Construction Despite Pending Counterclaims
Kori Anne Bagrowski
With pending counterclaims of invalidity and unenforceability absent detailed infringement analysis, the U.S. Court of Appeals for the Federal Circuit was placed in an “awkward position” to review claim construction and stipulated judgments of non-infringement. Lava Trading, Inc. v. Sonic Trading Management, LLC, et al., Case Nos. 05-1177, -1192 (Apr. 19, 2006) (Rader, J.; Linn, J.; concurring; Mayer, J.; dissenting). Due to the district court’s flawed claim interpretation, the Federal Circuit vacated the stipulated judgments and remanded the case.
Lava Trading sued Sonic Trading for infringement of its patent for software that aggregates and integrates securities trading and order placement on behalf of various alternative trading systems. In addition to denying infringement, the defendants counterclaimed for declaratory judgment of invalidity and unenforceability. After a Markman hearing, the district court issued a claim construction ruling from the bench. Consequently, the parties stipulated to final judgments of non-infringement.
In its evaluation of the case, the Federal Circuit expressed concern that its review of the claim construction may implicate issues and claims that were beyond the reach of its jurisdiction. The district court failed to provide a meaningful comparison of the accused product to the asserted claims. Absent this analysis, the district court lacked the proper context for an accurate claim construction, and the Federal Circuit could not properly assess the accuracy of the appealed judgment of non-infringement. The Federal Circuit recognized that the appeal was rather problematic without the “vital contextual knowledge of the accused products or process,” and its opinion would be analogous to an advisory opinion on the scope of the patent-in-suit. However, the Court asserted its jurisdiction based on the district court’s rule 54(b) certification of the case.
Before addressing the claims, the Federal Circuit addressed an estoppel/waiver theory raised by Sonic based on Lava’s changed position on claim construction. The Federal Circuit rejected this argument and noted estoppel would not bar a party from departing from a claim construction theory unsuccessfully advocated before the trial court. Second, the Federal Circuit reasoned Lava did not waive its current theory because there was not a practical difference between the two theories. The Federal Circuit determined the district court’s claim construction was flawed and set aside the final judgment orders on non-infringement.
In dissent Judge Mayer stated the Court lacked jurisdiction because there was no final judgment due to the interrelatedness of the infringement claim and unenforceability counterclaim. Judge Mayer noted the majority’s ruling on the presently undeveloped record forced the Court to decide the claim construction again at a later date, and that ruling could differ from its present ruling.
Declaratory Judgment Counterclaims Give Defendants Control
Elaine Heal and Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently affirmed in part and vacated in part a district court’s grant of judgment as a matter of law (JMOL) and remanded for further proceedings on the issues of invalidity. Old Town Canoe Co. v. Confluence Holdings Corp., Case No. 05-1123 (Fed. Cir. May 9, 2006) (Linn, J.; Mayer, J., dissenting).
The Federal Circuit first addressed Old Town’s appeal of the district court’s grant of defendant, Confluence’s motion for JMOL of no infringement. The Federal Circuit upheld the grant of JMOL after affirming the district court did not err in its claim construction and that it properly determined no reasonable juror could have found infringement.
Even though its affirmance of the district court’s JMOL of no infringement resolved Old Town’s claim, the Federal Circuit also addressed the invalidity issues. With respect to obviousness, the Federal Circuit held that a reasonable juror could have found support for the proposition that the patent would be an obvious improvement over the prior art. With respect to enablement, the Federal Circuit concluded that Confluence produced sufficient evidence for a reasonable juror to conclude the experimentation could be unduly laborious. The Federal Circuit also concluded a reasonable juror could find the specification’s failure to disclose information (contained in a document the inventor prepared and presented to his patent attorney prior to the filing date) was a failure to disclose the best mode. Therefore, the Federal Circuit vacated the district court’s grant of JMOL on the issues of obviousness, enablement, and best mode and remanded for further proceedings.
Finally, the Federal Circuit addressed the district court’s finding of no inequitable conduct. Confluence had made two separate arguments with respect to inequitable conduct—one related to the best mode requirement and another related to one of Old Town’s sales. However, Confluence did not meet the threshold level of intent to deceive the U.S. Patent and Trademark Office (USPTO) because it did not point to any evidence of intent to deceive. The Federal Circuit noted that failure to disclose the best mode will not always constitute inequitable conduct if the failure was unintentional, and it consequently affirmed the JMOL of no inequitable conduct.
Judge Mayer dissented solely on the ground that the Federal Circuit no longer had jurisdiction of the declaratory judgment action once it affirmed the district court’s finding of no infringement because there was no longer a reasonable apprehension of suit.
There may be advantages to counterclaiming for a declaratory judgment of invalidity and unenforceability to give the defendant control over ending the case. In this case the Federal Circuit would not have addressed the issues of invalidity and unenforceability had it not been for counterclaims. The result: the case was remanded on the invalidity issues.
Accepting Remitted Award on Damages for Direct Infringement Extinguished Claims for Related Indirect Infringement
Matthew F. Weil
The U.S. Court of Appeals for the Federal Circuit, in a case involving damages and remittitur, has affirmed the denial of the patent owner’s request for a second trial of his infringement claims; the Court determined the damages award from his first trial fully compensated him for all the activities of the proposed second set of defendants. Glenayre Electronics, Inc. v. Phillip Jackson, Case No. 04-1568 (Fed. Cir. Apr. 11, 2006) (Prost, J.).
In Glenayre Electronics, the district court had granted a motion to remit the jury’s $12 million award. Despite the patent owner’s arguments, the district court granted the motion for remittitur, finding the jury’s damages award to be “grossly excessive” and reducing the award to $2.65 million. The patent holder accepted the remittitur amount, reflecting the damages from direct infringement, but then brought a motion to recover further damages for the same accused infringers’ indirect infringement. In this case, the indirect infringement charges were based solely on the accused and adjudged sales of infringing products to customers, which induced those customers to use the same products in an infringing manner.
The district court held that no claims survived the earlier award and remittitur, and the Federal Circuit agreed. After a lengthy review of relevant precedent, the Federal Circuit noted, “It is true, of course, that an award of damages for particular infringing acts, unlike a comprehensive license, does not automatically entitle the infringer or others to continue infringing conduct in the form of additional sales or uses of infringing products throughout the life of the patent. But in this case, the theory of recovery [the patent owner] presented at the first trial was based on a reasonable royalty for past manufacture and sale of infringing products by [the accused infringer] and, importantly, past benefits derived from use of the same products by [that infringer’s] customers.”
On these facts, the Federal Circuit affirmed the holding of the district court.
Depending which side of the settlement table you are on, consideration should be given to the issue of downstream rights and whether to expressly address inclusion (or exclusion) of patent exhaustion and downstream licenses.
Patent Law Terms of Art and Settlement Agreements
Amanda E. Koenig
Addressing the correlation between an offer of judgment pursuant to Federal Rule of Civil Procedure 68 and a reasonable royalty determination under 35 U.S.C. §284, the U.S. Court of Appeals for the Federal Circuit held that an offer of judgment pursuant to Rule 68 did not constitute a “litigation royalty” “expressly determined…in accordance with the law applicable to 35 U.S.C. §284.” Parental Guide of Texas, Inc. v. Thomson, Inc., Case No. 05-1493 (Fed. Cir. Apr. 21, 2006) (Clevenger, J; Rader, J; Dyk, J.).
Patent owner Parental Guide sued a number of parties, including Thomson, for patent infringement. Parental Guide and Thomson had entered into a settlement agreement whereby Thomson would pay a contingent payment based upon a “litigation royalty” if Parental Guide obtained a “favorable termination” of the lawsuit. A litigation royalty was defined as:
the lowest per unit reasonable royalty, if any, as expressly determined in the Lawsuit in accordance with the law applicable to 35 U.S.C. § 284, by the final, irrevocable, and nonappealable order in the Lawsuit.
As the case progressed, more parties settled with Parental Guide. In October of 2002, the last-remaining party, Mitsubishi, filed an offer of judgment pursuant to Rule 68. Parental Guide accepted and eventually filed a “satisfaction of judgment” with the Court, thus rendering the final judgment irrevocable and non-appealable.
Soon after Parental Guide demanded Thomson’s contingent payment described in their settlement agreement. Thomson refused and argued, among other things, that the royalty rate contained in the Rule 68 offer was not a “litigation royalty” as defined in their settlement agreement, and that no contingent payment was owed. On cross-motions for summary judgment, the district court decided in favor of Thompson, “holding that Thomson did not owe any contingent payment because no ‘Litigation Royalty’ and been ‘expressly determined…in accordance with the law applicable to 35 U.S.C. §284’ in the preceding lawsuit.”
On appeal the Federal Circuit upheld the district court’s ruling; by employing a term of art of patent law, i.e., §284, the parties had intended the litigation royalty be defined in accordance with that term. A §284 reasonable royalty calculation is conducted within very specific confines: either a judge or jury performs the calculation in accordance with the Georgia-Pacific factors. In contrast, under Rule 68 the parties themselves agree to the terms of judgment. Neither the jury nor the judge nor the Georgia-Pacific factors need ever come into play. Therefore, the royalties agreed to by Parental Guide and Mitsubishi under Rule 68 did not fall within any of the scenarios contemplated by Parental Guide and Thomson in their settlement agreement.
Patent law terms of art included in settlement agreements are likely to be strictly interpreted in accordance with the case law surrounding those terms.
“Cajun” Statute Found Unconstitutional as Applied to Seafood Importer
John J. Dabney
The U.S. Court of Appeals for the Fifth Circuit ruled that a Louisiana statute that prohibits the use of the word “Cajun” in connection with the sale of food is unconstitutional as applied to an importer of catfish from China. Piazza’s Seafood World, LLC v. Odom, 2006 U.S. App. LEXIS 11188 (5th Cir. May 4, 2006) (McCurn, J.).
Piazza’s Seafood used the names “Cajun Boy” and “Cajun Delight” in connection with sales of catfish imported from China. The distributor then sold the product to wholesalers who added the country of origin (China) to the product label before re-selling it. The Commissioner of Louisiana Agriculture issued a letter to Piazza’s customers demanding that they cease re-selling the catfish under the names “Cajun Boy” and “Cajun Delight” because it violated the Louisiana Cajun Statute. The Louisiana Cajun Statute prohibits use of the word “Cajun” in connection with sale of food made outside of Louisiana. In response, Piazza’s Seafood sued the Commissioner and alleged that the Cajun Statute, as applied, violated the First Amendment. The district court awarded summary judgment to the plaintiff, and the Fifth Circuit affirmed.
In affirming, the Fifth Circuit reasoned that although Louisiana had an interest in protecting its citizens from deceptive uses of trade names, there was no evidence that the use of the names in question (“Cajun Boy” and “Cajun Delight”)was actually deceptive. “[T]he state’s interest in protecting Louisianans from deception [is] is not enhanced by application of the [Cajun] statute to [Plaintiff] because there [is] no deception present to be prevented.” The court found that disclosure of the country of origin on a product’s label eliminated any deception associated with the use of those terms.
Individual Copyrighted Works in an Unauthorized Compilation Warrant Separate Statutory Damages Awards
Rania C. Sarkis
The U.S. Court of Appeals for the Second Circuit held that a compilation that infringed copyrights in its constituent parts is not considered “one work” for purposes of 17 U.S.C. §504(c). Rather, each constituent part that infringes upon a copyright is subject to a separate statutory damages award. WB Music v. RTV Communications Group, Case No 04-3890, 2006 U.S. App. LEXIS 9889 (2d Cir. Apr. 19, 2006) (Walker, C.J.).
WB Music, a group of music publishers, sued RTV for making and distributing copies of seven CDs containing songs that infringed 13 of its copyrights. WWB elected to seek statutory damages under §504(c), which states that the copyright owner may elect to recover statutory damages for any one work where an infringer is individually liable or for which any two or more infringers are liable jointly and severally; all parts of a compilation or derivative work constitute one work. The district court found RTV had infringed the plaintiffs’ 13 copyrights but ruled that the plaintiffs were entitled to only seven statutory damages awards. The court interpreted §504(c)(1) to provide one statutory damage award for each CD that contained one or more infringing songs. Thus, even though RTV infringed 13 copyrights by copying 13 songs on seven CDs, WBB was entitled to only seven statutory damages awards.
The Second Circuit reversed. Relying on Twin Peaks Prods. v. Publications Int’l, Ltd., the Second Circuit concluded that since the defendants infringed 13 copyrights when they copied 13 songs, the plaintiffs were entitled to 13 statutory awards—not seven. The court found no evidence that the seven CDs, some of which contained more than one of the plaintiffs’ copyrighted songs, were each a compilation that constituted one single work for statutory damages purposes.
English Judge Denies Protection to Historical Faction
In a case where two authors sued the publisher of Dan Brown’s bestseller, “The Da Vinci Code” (DVC), and delayed the release of the Hollywood film starring Tom Hanks, the Judge, following established case law, held that the ideas that were copied were too general to be capable of protection. Baigent and Leigh v. Random House Group Limited, Case No. HC04C 03092 (High Court of Justice, Chancery Division Apr. 7, 2006) (P. Smith, J.).
Baigent and Leigh’s book, “The Holy Blood and the Holy Grail” (HBHG), was originally published in 1982. It mixed historical fact with conjecture to give an account of a secret bloodline of Jesus Christ and Mary Magdalene and the church’s campaign over the past two millennia to protect it. A large part of their conjecture had already been available in the public domain, but they also added some new original theories.
Mr. Brown acknowledged the influence of the ideas in HBHG, not least through the celebrated use of an anagram of the Claimants’ names (“Leigh Teabing”) for a character. However, the Claimants’ case turned on how they precisely identified the material alleged to have been taken, resulting in the “Central Theme”: 15 key chronological points.
The Claimants asserted that those 15 points made up substantially the whole of HBHG and represented their Claimants’ opinions, skill and labor involved in collating the various different theories into one book. As the Judge pointed out, by setting out their case in this way, the Claimants had nailed their colors to the mast of the Central Theme: if it was found to be too general, too unstructured or not a substantial part of their work, then their case would fail. Other than the influence of HBHG in the research, Mr. Brown denied the claims.
The Judge gave a detailed analysis of the law on non-textual copyright infringement, noting that copyright protects the original fruits of an author’s labor, skill and knowledge. Copyright protection extends from the actual text used through mere alteration of some words in a text, but broad ideas contained in a work are at the other extreme. Defining where on that spectrum non-textual copying sits requires a careful analysis of the work alleged to have been copied to establish if it can be protected as a literary work.
The Judge concluded that copyright could not subsist in the Central Theme of HBHG. The Central Theme was ultimately an artificial creation for the purposes of the litigation, and it was practically impossible to distil such a theme from HBHG. Further, it did not represent the whole or a substantial part of HBHG because a large amount of the book would remain if the Central Theme was removed. The points comprising the Central Theme were at far too high a level of abstraction to be protected by copyright: they were at the extreme end of the spectrum of broad, unprotectable ideas. There was no structure to the Theme which had been misappropriated; the mere chronological order asserted by the Claimants was too general to be protected.
Although this decision was enough to decide the case, the Judge determined the other issues as well. Although a majority of the 15 individual points of the Central Theme were in both books, it was clear that several research books had been used, so the points in DVC may not have come from HBHG. However, on the evidence, he held that HBHG had been used for DVC.
As a result of this decision, the law on copyright protection in respect of non-textual copying remains largely the same. Authors and publishers of works that are influenced by earlier works need not be unduly concerned about possible legal action. The decision also confirmed that authors have greater freedom to use collections of historical facts without fear of reprisal. On the other hand, the case also highlights the importance for copyright owners and practitioners asserting claims of non-textual copying to carefully and accurately define exactly what forms the heart of what is said to have been taken. The case is also interesting as it gives guidance on the threshold for literary copyright protection of ideas, plots and themes. In addition, the month after judgment was handed down has seen further intrigue in the form of hidden codes and judicial censure.
Proposed Rule Changes on E-filings, Unpublished Decisions and E-discovery
Firasat M. Ali and Arturo E. Sandoval
In June 2005, the Committee on Rules of Practice and Procedure (the committee) reviewed important suggested changes to the Federal Rules of Civil Procedure (FRCP) and the Federal Rules of Appellate Procedure that will affect litigants in federal courts.
First, the Advisory Committee on Civil Rules proposed that FRCP 5 be amended to authorize a court to require electronic case filing via local rule. Civil Rule 5(e) currently authorizes a court to adopt local rules that “permit” a party to file papers by electronic means. The original proposal would have made it mandatory for litigants to file papers with the court electronically. However, during the public comment period, the ABA expressed concern that e-filing would cause hardships for litigants who did not have access to personal computers. Based on these concerns, the proposal was amended to authorize a court to require e-filing by local rule only if reasonable exceptions are allowed. The committee has recommended that the amended rule be adopted.
Second, the Appellate Rules Committee proposed a rule (Rule 32.1) allowing the citation in briefs of unpublished opinions, orders or other judicial dispositions designated as “non-precedential.” The rule would supersede limitations imposed on such citations by circuit rules. In recommending adoption of the new rule, the committee was persuaded by “overwhelming evidence that unpublished opinions can be a valuable source of ‘insight’ and ‘information.’” However, the committee took no position on whether the unpublished decisions should have any precedential value, leaving that issue for the courts to decide.
Finally, the committee proposed amendments to various civil rules regarding discovery of electronically stored information. It also proposed changes to Rules 26, 33 and 34. The proposed amendment to Rule 26(f) would require parties to confer on issues relating to disclosure or discovery of electronically stored information, including the form of producing e-files; retention policies relating to e-files; and assertions of privilege after inadvertent production of e-files. The new Rule 33 would clarify that a party may answer an interrogatory involving review of business records by providing access to e-files if the interrogating party can find the information as readily as the responding party. The proposed amendment to Rule 34 would authorize a requesting party to specify the form of production, such as in paper or electronic form, and for the responding party to object. Additionally, the new rule would help prevent massive “dumps” of unorganized e-files by requiring production of documents as they are ordinarily maintained or labeling them to correspond with the categories in the request.
On April 12, 2006, the United States Supreme Court approved these new rules and amendments to the Federal Rules of Appellate and Civil Procedure. The new rules and amendments have been transmitted to Congress and will take effect on December 1, 2006, unless Congress enacts legislation to reject, modify or defer the amendments.