Rocket Docket IP Blog

Can a would-be trademark-infringer evade the trademark laws by superimposing facsimiles of two different trademarks of the same company into a single combined image, and maintaining that the combined image is legally distinguishable from the true ones?  The answer, thankfully, is no.

 

In United States v. Lam, No. 11-4056 (4th Cir. Apr. 16, 2012), the Fourth Circuit upheld the criminal convictions of two owners, Lam and Chan, of multiple New York companies that imported massive numbers of both legitimate and counterfeit luxury handbags and wallets.  In three seizures of containers in Norfolk, Virginia, in 2005, U.S. Customs and Border Protection agents found bags bearing what appeared to be marks registered to Burberry and other luxury designers secreted behind layers of legitimate goods.

 

Three corporations - Burberry Limited, Louis Vuitton North America, and VSE Corporation - entered appearances in the case, tried before Chief Judge James R. Spencer in the Eastern District of Virginia, Richmond Division.  The first trial resulted in a hung jury.  In the second trial, the defendants were acquitted of counterfeiting Gucci trademarks, and a co-defendant was acquitted on all counts.  But the jury convicted Lam and Chan of smuggling, conspiracy, and trafficking in counterfeit Burberry goods.

 

At the center of the case were two registered trademarks:  the Burberry Check mark (depicting Burberry's signature plaid pattern), and the Burberry Equestrian mark, an equestrian knight symbol.  The evidence showed that Burberry had successfully sued one of the defendants' companies, Marco, when Marco had attempted to copyright an image (the so-called "Marco mark") that appeared to be the Burberry Check mark with a superimposed equestrian knight somewhat similar (but not identical) to the Burberry Equestrian mark.  The wallets and handbags seized in Norfolk displayed the Marco mark, and the convictions rested on the jury's finding that the plaid design found on the seized items was a counterfeit of the Burberry Check mark.

 

In a pretrial motion, the defendants unsuccessfully attacked the federal counterfeit goods statute, 18 U.S.C. section 2320, as being unconstitutionally vague, on the ground that the phrase "substantially indistinguishable" could not be understood by an average person.  The statute criminalizes trafficking in goods or services and using a "counterfeit mark" on or in connection with the goods and services.  A "counterfeit mark," in turn, is defined as a "spurious mark" that is identical with, or "substantially indistinguishable" from, a mark in use and registered with the U.S. Patent and Trademark Office, and that is likely to deceive or cause confusion or mistake.  The defendants argued that the incomprehensibility of the statutory language encouraged arbitrary enforcement of the law.

 

On appeal, the Fourth Circuit joined three other courts of appeals in holding that section 2320 was not impermissibly vague and comported with due process.  The Court concluded that the statute "makes clear that a mark punishable as a counterfeit is one that suggests an erroneous origin and is, to a considerable degree, impossible to distinguish from a legitimate mark."

 

The court also held that the government's evidence sufficiently established the Marco mark's counterfeit nature.  The key to the defense was that the allegedly counterfeit Marco mark featured a plaid background with an equestrian knight overlay, whereas the true Burberry Check mark did not include an equestrian knight.  But the Fourth Circuit rejected the defense, pointing out that Burberry often sells goods displaying the Check mark and the Equestrian mark together.  The court observed that an item displaying an allegedly counterfeit trademark must possess "pronounced differences" from a legitimate trademarked good before a conviction can be overturned.  In the case before it, because the plaid Marco mark differed only slightly from the Burberry Check mark - and because the superimposed equestrian mark invoked a second mark trademarked by Burberry - the jury was entitled to conclude that the bogus mark was "substantially indistinguishable" from the real one.

 

Corporate victims of trademark infringement should be aware of and participate actively in criminal prosecutions involving their marks.  Organizational victims must be specifically identified in court pleadings under Federal Rule of Criminal Procedure 12.4, and hold the full panoply of rights accorded all victims in federal criminal cases, including the right to “full and timely” restitution (generally based on total lost sales).  The statute invites trademark holders and “producers and sellers of legitimate goods or services affected by conduct involved in the offense” to submit a victim impact statement to the sentencing court that identifies the “estimated economic impact” on the company.

In a widely anticipated decision announced on April 9, 2012, a panel of the United States Court of Appeals for the Fourth Circuit upended the final judgment in Rosetta Stone v. Google. The published opinion can be found here. Chief Judge William Traxler wrote the opinion, in which Judge Keenan and Senior Judge Hamilton concurred. The court affirmed the decision by Judge Gerald Lee (of the "Rocket Docket" Eastern District of Virginia) granting summary judgment on claims of vicarious liability and unjust enrichment. However, the Court reversed Judge Lee's summary judgment of noninfringement on theories of direct and contributory infringement. Rosetta Stone's evidence of actual consumer confusion and its survey evidence were of some significance to the Fourth Circuit. However, the Court also discussed Google studies that showed Google anticipated increases of advertising revenues when it decided to loosen its trademark adword policies in 2009. Assuming that the decision stands, the case will soon return to Judge Lee for a jury trial in Alexandria.

See our previous post on the case here. 

In Dunn v. Brown, No. 11-2291 (1st Cir. 3-22-2012), the U. S. Court of Appeals for the First Circuit affirmed summary judgment in favor of author Dan Brown and his publisher, Simon & Schuster, to dismiss a rival author’s claim that Brown’s best-seller, Angels & Demons, infringed the plaintiff’s copyright in his book, The Vatican Boys.

Dunn, the author of seven books, and Brown, the author of five novels including the best-seller The DaVinci Code, have fought before. In an earlier suit (“Dunn I”), Dunn alleged that Brown’s The DaVinci Code infringed Dunn’s copyright in his 1997 book, The Vatican Boys. That case ended in 2007 with summary judgment for Brown. The Dunn I court held that while both books were thrillers involving artifacts from the Catholic Church, the characters, plot devices, settings, pacing, tone and theme of the two books were entirely different.

Filing the current suit (“Dunn II”) in 2010, Dunn again alleged that Brown infringed The Vatican Boys when writing Angels & Demons. He asserted that Brown and his publisher were liable for extensive and direct copying of Dunn’s text, character, settings, themes and plot elements, rendering Brown’s book substantially similar to the copyrighted expression in Dunn’s.

Dunn II was referred to Magistrate Judge Neiman, who examined several representative examples of the passages in the two books which Dunn contended were evidence of Brown’s direct copying. The Magistrate Judge found no basis to hold that an ordinary reasonable person would see a substantial similarity between the books. While both books were thrillers with religious elements, they had many differences. For example, Brown’s book was a murder mystery in which the male protagonist, Langdon, a Harvard professor, traveled to various historical sites in Rome. Dunn’s book was a crime novel in which the female protagonist, Turrell, was a recovering drug-addict who searched for stolen money. Brown’s book was set primarily in Rome and occurred in a single day. By contrast, Dunn’s novel was set primarily in New England and took place over three decades. Weighing these and other points, the Magistrate Judge concluded that the alleged similarities in the books were de minimis, the plots were quite different, the respective protagonists were not similar, and whatever similarities the books might have resulted from the use of stock scenes or elements necessarily flowing from common ideas. He therefore decided that the defendants had not infringed any of the copyright-protected expression in Dunn’s book. The district court adopted the Magistrate Judge’s report and granted summary judgment for the defendants.

Conducting its own review of the record, the First Circuit followed essentially the same reasoning of the lower federal court. In a summary decision with little elaboration, the First Circuit held that no reasonable juror could find substantial similarity of copyrighted expression sufficient to support an infringement claim, nor was there probative evidence of actual copying of Dunn’s book. The First Circuit also found that to the extent there were similarities between the books, “many of them relate to stock scenes à faire naturally stemming from both works’ subject matter, which are not subject to copyright protection.” The court found the remaining similarities only coincidental and de minimis.

Chief Judge Rader of the Federal Circuit caused quite a stir among both the patent and eDiscovery bars when he unveiled a new Model Order intended to curb perceived abuses of eDiscovery in patent cases. Chief Judge Rader unveiled the Model Order during his September 27, 2011 remarks at the Eastern District of Texas Judicial Conference. His speech highlighted six ways to improve patent litigation, and at the top of the list was controlling the cost and efficiency of electronic discovery. To that end, he explained how the Advisory Council of the Federal Circuit had created a special subcommittee to draft a model rule for eDiscovery guidance. The Model Order subsequently drafted by the subcommittee was unanimously adopted by the Advisory Council.

According to Chief Judge Rader, the goal of the Model Order “is to streamline e-Discovery, particularly email production, and require litigants to focus on the proper purpose of discovery – the gathering of material information – rather than on unlimited fishing expeditions.” The Model Order’s Introduction echoes this sentiment, citing the “disproportionately high discovery expenses” of patent cases, the “exponential growth of and reliance on electronic documents and communication,” and the frequency with which “routine discovery requests result in mass productions of marginally relevant and cumulative documents.” The Introduction further states that the Model Order is intended to serve as “a helpful starting point for district courts to use in requiring the responsible, targeted use of e-discovery in patent cases.”

The more significant provisions of the Model Order are summarized below:

• Email Must Be Separately Requested: General production requests for electronically stored information (“ESI”) shall not include email or other forms of electronic correspondence. Parties must propound specific email production requests to obtain email.
  
  
• “General” Requests for Email Not Permitted: Email production requests shall be propounded only for specific issues, rather than for general discovery of a product or business.
  
  
• Email Requests Limited to Five Custodians and Five Search Terms: Email production requests shall identify the custodian, search terms, and time frame. Each requesting party shall limit its email production requests to a total of five custodians per producing party for all requests. Each requesting party shall limit its email production requests to a total of five search terms per custodian. The search terms shall be narrowly tailored to particular issues. Indiscriminate terms, such as the producing company’s name or its product name, are inappropriate unless combined with narrowing search criteria that sufficiently reduce the risk of overproduction.
  
  
• Limits May Be Modified By Agreement Or For Cause: The parties may jointly agree to modify the limits on the number of search terms and/or custodians. The Court also may consider contested requests for up to five additional custodians and/or five additional search terms per custodian, upon showing a distinct need based on the size, complexity, and issues of the specific case.
  
  
• The Requesting Party May Obtain Additional Email Discovery At Their Own Expense: If a party serves email production requests for additional custodians or search terms beyond the limits agreed to by the parties or permitted by the Court, the requesting party shall bear all reasonable costs caused by such additional discovery.
  
  

Practitioners did not have to wait long to see the impact of the Model Order on discovery in patent cases. In Effectively Illuminated Pathways v. Aston Martin, Case No. 6:11cv00034 (E.D. Tex., Oct. 20, 2011), Judge Love included the following provision in the case’s discovery order:

No party shall be obligated to search for or produce e–mail in this case as part of its initial production pursuant to Paragraph 2 of the Discovery Order. After the initial production a party may request that the e–mail of up to five custodians for each party be searched and produced, with the searching to be done in the most efficient way possible with the fewest and most relevant search terms. The requesting party and the producing party shall meet and confer to determine the most efficient method for searching each custodian’s e-mail. If an agreement cannot be reached, the requesting party may seek relief from the Court.

In terms of reducing the costs of discovery and guarding against “fishing expeditions,” there is much about the Model Order and those that follow it that the patent bar will celebrate. What remains to be seen, however, is whether the Model Order’s reliance on search terms and custodians when discovering email will help practitioners achieve the stated goal of gathering material information while streamlining costs.The eDiscovery bar has been questioning the efficacy of using search terms in the discovery process for some time.¹ The gravamen of these arguments is that search terms can be both over- and under-inclusive, regardless of the tool being used to conduct the search. As technology improves, many practitioners are finding that the words used in an email are becoming less meaningful to the search process, while the parties to an email, the timing of an email, and/or the location of an email in a particular folder or on a particular drive, are becoming more pertinent. In light of these developments, it is concerning that the Model Order requires parties always to use search terms when requesting email and limits the requesting party to a specific number of terms per custodian, especially as there is no guidance as to how parties could craft, sample, and test those terms to ensure that material information is being returned.

Likewise, the Model Order limits parties to five custodians but is silent as to how those custodians should be determined. It also does not address email accounts that have no “set” custodian, e.g., group accounts, or accounts assigned to a particular position or department as opposed to an individual custodian, e.g., customer service. While the Model Order no doubt will be commended for trying to restrict the discovery of email to an entity’s “key” individuals, and in many instances may effectively accomplish that goal, the determination of those five people may prove challenging when large, unorganized entities are involved.

Members of both the patent and eDiscovery bars will be watching the Federal Circuit closely to see whether the Model Order is effectively able to meet the stated goals of streamlining costs while focusing on gathering material information. As with other attempts to rein in the excesses that can surround the discovery of ESI, the Model Order is to be commended for its encouragement of cooperation, reasonableness and proportionality.

________________________________________

¹ See Maura R. Grossman & Gordon V. Cormack, Technology-Assisted Review in E-Discovery Can Be More Effective and More Efficient Than Exhaustive Manual Review, XVII RICH. J.L. & TECH. 11 (2011), http://jolt.richmond.edu/v17i3/article11.pdf; see also Bennett B. Borden, et al., “Why Document Review is Broken”, http://www.williamsmullen.com/why-document-review-is-broken-05-16-2011/).

For more information about this topic, please contact the author or any member of the Williams Mullen eDiscovery and Information Governance Team or Intellectual Property Team.

The U. S. District Court for the Northern District of California granted partial summary judgment, on February 1, 2012, to rule that the “first sale defense” was inapplicable as a defense to the plaintiff’s copyright infringement claim in Adobe Systems Incorporated v. Hoops Enterprise LLC, No. C 10-2769 (N. D. Cal. 02/01/2012). The crucial fact was that Adobe Systems Incorporated (“Adobe”) licensed the software in question, and had not sold it.

  

The “first sale defense” is an affirmative defense available under the Copyright Act, 17 U. S. Code 109(a), which limits the exclusive statutory rights of copyright owners and allows those who have purchased copies of copyrighted works to resell those works without infringing the owners’ copyright. The Ninth Circuit has held that this “first sale” defense is limited to copies made domestically in the United States, not manufactured abroad.

  

The Adobe products in this case were copies of OEM software distributed by Adobe in a bundle with approved hardware components, subject to restrictive licensing agreements that did not transfer title to the software. The bundles were product-specific and not licensed to be un-bundled and sold separately or re-bundled with any products that Adobe had not previously approved.

  

Hoops Enterprises LLC and the other Defendant sold OEM copies of Adobe’s software on the auction site eBay and another web site. The copies sold by Defendants had been unbundled from the hardware with which they were originally packaged and then sold separately. Adobe had not licensed the Defendants to make or distribute copies of its software. However, the Defendants contended that Adobe’s license agreements with the OEM manufacturers did not create significant restrictions on the transfer of the OEM copies or impose notable use restrictions on those copies.

  

The court did not buy those arguments. It held that the undisputed evidence showed that Adobe only transferred a license in the software, not a title of ownership. Adobe’s license agreements specified they were only granting a license and did impose significant restrictions to prevent re-sellers from selling the software separately from the bundled hardware. Because the transfer of the OEM software was subject to a license and did not constitute a sale, the “first sale defense” could not protect the Defendants. The court ruled further that the “first sale defense” could not apply, under Ninth Circuit precedent, to the Adobe OEM software manufactured abroad.

On January 30, 2012, the Federal Circuit issued an opinion in HTC Corp. v. IPCom GmbH that reversed the district court’s award of summary judgment of invalidity of claims 1 and 18 of U.S. Patent No. 6,879,830.  The district court concluded that those claims were indefinite because they claimed both an apparatus and method steps.  The Federal Circuit reversed, holding that the claims at issue covered only an apparatus.

  

The ‘830 patent is directed to a “handover” in a cellular telephone network.  A handover occurs when a mobile station switches from one base station to another.  Handovers occur, for example, when a person using a cellular telephone travels in a car between coverage areas.  The invention of the ‘830 patent is intended to reduce the chance of interrupted service during a handover.

 

Representative claim 1 is recited below (including the annotations and emphases added by the court to facilitate its analysis):

 

[1] A mobile station for use with a network including a first base station and a second base station that achieves a handover from the first base station to the second base station by:

  

[2] storing link data for a link in a first base station,

 

[3] holding in reserve for the link resources of the first base station, and

 

[4] when the link is to be handed over to the second base station:

 

[5] initially maintaining a storage of the link data in the first base station,

 

[6] initially causing the resources of the first base station to remain held in reserve, and

 

[7] at a later timeout determined by a fixed period of time predefined at a beginning of the handover, deleting the link data from the first dbase station and freeing up the resources of the first base station, the mobile station comprising:

 

[8] an arrangement for reactivating the link with the first base station if the handover is unsuccessful.

 

The parties’ disagreement centered on whether the mobile station or the network, both recited in paragraph 1, implemented the six functions enumerated in paragraphs 2-7.  As the court noted, if the network performed the functions, the claims would not be indefinite because the recited steps would merely describe the network environment in which the mobile station must be used.  On the other hand, if it were the claimed mobile station that implemented the functions, the claims would be indefinite because they would recite both an apparatus—the mobile station—and method steps—the functions enumerated in paragraphs 2-7.  Such “hybrid claims” as they are sometimes called are indefinite pursuant to the Federal Circuit’s earlier decision in IPXL Holdings, LLC v. Amazon.com, Inc. (Fed. Cir. 2006).  Citing Strunk and White’s Elements of Style for the proposition that “modifiers should be placed next to the words they modify,” the court reasoned that “[a] reader, therefore, may assume that the phrase beginning with ‘including’ and the clause beginning with ‘that achieves’ modify ‘network.’”  The court held that this assumption was supported by the claims’ reintroduction of the mobile station in paragraph 7 and by the patent’s specification.  Accordingly, the court concluded that the claims were not indefinite.  Instead, “[t]he claims merely establish [the functions in paragraphs 2-7] as the underlying network environment in which the mobile station operates.”

 

It is worth noting that this dispute could have been avoided by clearer claim drafting.  Patent drafters should take care to ensure that it is unambiguous which claim term a modifier refers to.  For example, in this case, it would have been possible to rewrite paragraph 1 as follows: “A mobile station for use with a network including a first base station and a second base station, the network being configured to achieve a handover…”

US Magistrate Judge F. Bradford Stillman has announced that he will retire from his position on September 30, 2012.  Judge Stillman will have served 12 years on the federal bench in the Norfolk Division of the Eastern District of Virginia.  The US District Judges for the EDVA will select Judge Stillman's replacement from a list of candidates recommended by a committee of attorneys and nonattorneys.  The Virginian-Pilot published this story on Judge Stillman's announcement.

In a December 22, 2011 opinion, the Federal Circuit denied patent-holding company ICHL LLC’s attempt to keep its patent suit against Sony Electronics, Inc. and Lenovo, Inc. alive.  The asserted patent, U.S. Patent No. 4,884,631, covers a heat sink assembly for cooling electronic components such as microprocessors.  The central dispute on appeal was whether the “top plate” and “fin structures,” recited in the asserted claims as separate elements, were necessarily structurally distinct, or whether they could be met by an integrally formed structure.  The Federal Circuit affirmed the district court’s construction which required that the elements be structurally distinct.  The parties had stipulated to noninfringement under such a construction.  The court’s decision rested on three grounds.  First, the district court’s construction was supported by the claims’ plain language.  The claims recited the “top plate” and “fin structure” as separate elements, in which the top plate contains a surface “for receiving fin structures,” and in which the fin structures are “bonded to” the second surface of the top plate.  In the court’s view: “[w]hen one structure is bonded to a second structure, those structures are plainly separate to begin with and are not integrally [formed].” Second, the specification disclosed that the patented heat sink assembly contains fin structures that are bonded to, affixed to, or mounted on a surface of the top plate.  Finally, the specification disparaged prior art extruded heat sinks as being unable to achieve optimal parameters. 

 

The problem that ICHL faced in this case can often be avoided by careful drafting when the integral / separate distinction is not a critical aspect of the invention.  In such cases, patent drafters may want to note in the specification that structures disclosed as being separately formed can, in other embodiments, be integrally formed and vice versa.  Similarly, when drafting claims, it may be desirable to avoid language (such as references to “bonding”) that implies that two claim elements are necessarily structurally distinct.  The doctrine of claim differentiation can also be used to help prevent unintentional narrowing of claim scope, e.g., adding a dependent claim which recites that two elements are “integrally formed.”

 

On January 13, 2012, the Supreme Court of Virginia issued an opinion in Anthony Collelo v. Geographic Services, Inc., affirming in part, reversing in part, and remanding the case for a new trial on claims under the Virginia Uniform Trade Secrets Act (“Trade Secrets Act”). The opinion, authored by Justice Lemons, emphasized that one may be liable under the Trade Secrets Act for misappropriating the trade secrets of another, even if the two parties are not marketplace competitors.

The appeal related to several claims brought by Geographic Services, Inc. (“GSI”), which provides its customers with large databases containing detailed information about specific features on maps, called “geonames.” GSI accused its customer, Boeing Company, and a former employee of misappropriating GSI’s geonames trade secrets. According to the court, GSI originally hired and trained the employee to perform geonames work, and provided him with access to GSI’s confidential information, geonames technology, and other trade secrets during his employment. After leaving GSI, he was hired by Boeing, where he also performed geonames work and developed geonames technology similar to that of GSI.

GSI appealed the trial court’s decision granting the defendants’ motion to strike GSI’s entire case. Overturning the trial court’s ruling on the Trade Secrets Act claims, the Supreme Court of Virginia disagreed with the “underlying premise of the trial court’s ruling,” which was the following:

‘[T]he reason for the [Trade Secrets Act is] to avoid a person benefiting by doing the type of work which this trade secret enables to the detriment of the creator of the trade secret,’ and... there had been no ‘evidence whatsoever,’ that Boeing is ‘competing with GSI,’ or ‘that Boeing is even doing the same work as GSI.’

Contrary to the trial court’s interpretation of the statute, the Supreme Court of Virginia held that “the Trade Secrets Act does not require that one who is accused of misappropriating a trade secret use the allegedly misappropriated trade secret to compete with the holder of the trade secret.”

The ruling is a reminder that Trade Secrets Act claims are not limited to marketplace competitors alone. Instead, the court emphasized that, to prove liability, a party must only show that (1) trade secrets were acquired by another, (2) the acquiring party knew or had reason to know that the trade secrets were acquired by improper means, and (3) the owner of the trade secrets suffered compensable damages or is otherwise entitled to relief.

The opinion can be found here.
The text of the Virginia Uniform Trade Secrets Act can be found here.

On Friday, January 20, 2012, the Federal Circuit issued an order indicating that it will rehear the case of Marine Polymer v. Hemcon, No. 2010-1548, en banc.  The earlier appellate decision deals with intervening rights, and held that a narrowing of claim terms through arguments made by the patentee during reexamination does give rise to intervening rights, even if the claim terms are not actually amended.  Intervening rights are provided for in 35 USC §§ 252 (reissue) and 307(b) (reexamination).  The doctrine provides protection for an accused infringer who has engaged in activity that falls within the scope of the new or amended claim, but did so prior to the grant of the new or amended claim by reissue or reexamination.  The accused infringer can thus continue to practice the invention after the reissue or reexamination without committing infringement.

 

The question in Marine Polymer was whether the narrowing of a claim term by patentee argument only, without any actual amendment to the claim term or issuance of a new claim, has the same effect.  In its earlier decision, the Federal Circuit agreed that it did, in an opinion authored by Judge Dyk and joined by Senior Judge Gajarsa.  Judge Lourie dissented, relying on the language in the statute that intervening rights apply to “amended or new claims.” 

 

With the rise in popularity over the past few years of accused infringers initiating reexamination proceedings when faced with allegations of infringement, intervening rights have become increasingly important.  Most claims that emerge from a reexamination are amended in some way, and intervening rights can provide a successful defense when the reexam does not result in cancellation. 

 

 

Interestingly, the court did not adopt its usual practice of issuing a set of particular questions for the parties to address, or inviting briefs amicus curiae; rather, the court indicated that the case will be decided on the basis of the briefs previously submitted.

 

 

Notable non-practicing entity Intellectual Ventures filed an amicus brief in support of rehearing en banc. 

 

 

Dennis Crouch at Patently-O has a good discussion of the earlier decision here. 

In March 2010, Plaintiff and non-practicing entity Parallel Networks, LLC originally brought four separate lawsuits for patent infringement in the Eastern District of Texas against over 100 defendants, alleging infringement of US Patent No. 6,446,111.  One year later, in March 2011, the court held a status conference to discuss the most efficient way to proceed in these cases.  At the request of the defendants, who indicated that three claim terms would be dispositive for nearly all of them, Judge Davis adopted an innovative and unusual early claim construction/“Mini-Markman” and summary judgment procedure, rather than proceeding with full discovery. 

 

The court conducted a hearing in June and issued its Markman opinion on August 12, 2011, construing the three claim terms.  Based on those constructions, the court granted summary judgment to 99 of 112 defendants.  Judge Davis concluded his opinion as follows:

As of the filing of Defendants’ claim construction brief and summary judgment motion, 112 Defendants remained in the case. The summary judgment motion on the “dynamically generated” issue has resolved this case as to 99 of the 112 Defendants. The Court notes that in many patent cases before it involving multiple defendants, it is frequently faced with motions for severance and transfer to many different districts. Had the Court taken that approach in this case, Parallel and Defendants would be litigating this patent all over the country in many districts at great additional expense to all parties and the judiciary. 

 

The Court commends the parties in this case for working together to identify issues common to nearly all Defendants and moving the case to resolution of these important issues in a timely and economic manner. By doing so, this case was resolved in a manner of months—as opposed to years—for the vast majority of Defendants. By all Defendants remaining in one case in one District, the Court was able to resolve the controversy in the most judicially economic manner sparing many other courts from repetitive work, and at the same time saving the parties very significant sums of money in attorneys fees.

 

At the request of the plaintiff, on January 12, 2012, the Court entered an order severing the defendants who received summary judgment into a separate case, dismissing those defendants’ counterclaims without prejudice, and entering final judgment, so that Parallel Networks can appeal the Court’s decisions.  In addition, the Court decided to stay the case against the remaining defendants until the outcome of the appeal. 

 

 

Other folks, including Law.com, EDeTexweblog.com, and the Southeastern Texas Record have reported on Judge Davis’ revised and innovative approach to patent infringement cases involving large numbers of defendants.  While ultimately this may be of less import now that section 299 of the America Invents Act has been implemented, there are still numerous multi-defendant patent cases pending around the country that were filed prior to its enactment.

 

 

 

On January 13, 2012, the EDVA issued an order in Automated Tracking Solutions v. Awarepoint Corp. et al., dismissing all but the first-named defendant without prejudice for improper joinder.  Before passage of the America Invents Act, 35 U.S.C. § 299, which now prohibits the filing of a single lawsuit against multiple unrelated defendants in a patent case, ATS filed suit in the EDVA for patent infringement against Awarepoint, RadarFind, Impinj, SimplyRFiD, TeleTracking, and Bode.  TeleTracking, RadarFind, Impinj, and SimplyRFiD moved to dismiss the case against them for improper joinder pursuant to Rules 20 and 21.  They argued that the claims asserted against the defendants did not arise from the same transaction or occurrence, because the defendants were unrelated and were accused of infringing different claims by way of different products and systems, and asserted that mere accusations of infringement of the same patent, without more, were insufficient to join the defendants in a single suit.  Judge Smith agreed. 

 

 

In the Order, the Court relied on Colt Def. v. Heckler & Koch, No. 2:04-cv-258, 2004 U.S. Dist. LEXIS 28690 (E.D. Va. Oct. 22, 2004), and Bear Creek Techs. V. RCN Communications, No. 11-cv-103, 2011 WL 3626787 (E.D. Va. Aug. 17, 2011), and noted that, although the plaintiff purportedly relied on judicial economy to oppose the dismissal, the Court need not rely on judicial economy when there is not enough commonality among the defendants.  In particularly strong language, the Court stated:

 

[H]ow can judicial economy be served by attempting to try five or six different infringement actions at one time?  This type of joinder in the case at bar represents judicial ineconomy and serves no purpose but to thwart the rules of proper procedure for filing separate lawsuits….  Judicial economy does not exist when six separate cases of infringement are to be presented.  Asking a jury to keep all of this evidence properly sorted against this many defendants in an infringement case creates confusion that could lead to an inability to decide the case.

 

 

The Court thus granted the motion to dismiss, including sua sponte as to the two nonmoving defendants, Awarepoint and Bode, and dismissed without prejudice all but Awarepoint, the first-named defendant.  Despite section 299, there nonetheless have been instances of plaintiffs in patent cases filing suit against multiple defendants, as discussed here by Alison Frankel at her ON THE CASE blog.  This decision by the EDVA indicates they likely will not be successful doing so in this Court.

The Internet Corporation for Assigned Names and Numbers (ICANN) plans to accept new applications from January 12, 2012 to April 12, 2012 for hundreds of new generic top-level domains (gTLDs, e.g., .com, .net, .org), unless the Department of Commerce convinces ICANN to delay the rollout or limit the number of applications that it will approve.  When the application period opens Jan. 12, entities that meet ICANN’s background and technical operations requirements (along with the $185,000 evaluation fee) may apply to run their own registry.  For example, applicants may apply for new top-level domains containing a brand name or a generic term.

 

 

Brand owners and nonprofit organizations have opposed the program, complaining that it could exponentially increase their burdens associated with challenging cybersquatting and trademark infringement.  Persuaded by recent discussions in Congress, the National Telecommunications and Information Administration (NTIA) urged ICANN to reevaluate its plan, stating in a Jan. 3, 2012 letter:  “I urge you to consider implementing measures: (i) to minimize the perceived need for defensive registrations; (ii) to implement promptly ICANN’s existing commitments for law enforcement and consumer protection; and (iii) to ensure better education of stakeholders.” 

 

 

Throughout the new gTLD approval process, NTIA has stood behind ICANN’s multi-stakeholder approach to policymaking, which encourages broad collaboration and creative problem solving, in contrast to other countries’ heavy-handed Internet regulation.  Nevertheless, NTIA recognized through discussions with stakeholders that many trademark owners believe they need to file defensive applications at the top-level even though they may have no interest in operating a registry.  NTIA suggests that ICANN take measures to alleviate this possibility and immediately educate stakeholders on the purpose and scope of the program.  

 

 

Also, NTIA noted deficiencies and inaccuracies in the WHOIS policies, including the need to authenticate WHOIS entries, and it expects ICANN to address these issues in its June 2012 board meeting.  NTIA further suggested that ICANN take steps to centralize and automate the complaint process so that it would be more transparent by the third quarter 2012.

 

 

If the new gTLDs proceed as planned, trademark owners should be aware of some new protection mechanisms established by ICANN, in addition to the traditional remedies under the Uniform Domain Name Resolution Policy (UDRP) and other trademark laws, including the following:

 

 

1.         Trademark Clearinghouse.  ICANN intends to contract with a neutral third party to establish a Trademark Clearinghouse for registered marks and other marks protected by court order or statute.  New gTLD registry operators (“Operators”) will be required to provide trademark claims services and sunrise services to owners of marks in the clearinghouse.   To review final guidelines, as of September, 2011, for the Trademark Clearinghouse, click here.

 

 

2.         Sunrise Services.  Operators of generic industry extensions, such as .hotel, must offer sunrise services to owners of marks in the clearinghouse.  This differs from previous sunrise registration periods, where registry operators have been required to offer sunrise periods to registered trademark owners.  Operators will not be required to offer a domain name under a new gTLD unless the trademark owner: (a) applies for entry in the Trademark Clearinghouse prior to publication of the new gTLD; and (b) registers the subject marks prior to execution of the registry agreement between ICANN and the Operator. 

 

 

3.         Trademark Claims Services.  Within 60 days of the launch of a new gTLD, Operators must provide prospective domain name registrants under the new gTLD with notice of marks in the Trademark Clearinghouse.  Operators must require the prospective registrant to confirm that he/she has read and understood the notice and that the prospective domain name does not infringe on any rights in the notice.  Operators must also notify owners of the marks in the Trademark Clearinghouse if a domain name containing an identical mark ultimately registers under the new gTLD.  Notifications will not include misspellings or variations of the mark as registered with the clearinghouse. 

 

 

4.         Uniform Rapid Suspension (URS).   ICANN will offer URS as a cheaper and faster dispute resolution remedy for domain name registrations under the new gTLDs.  URS complaints are only recommended for clear-cut cases of trademark abuse, and will be limited to 500 words with a proposed $300 filing fee.  Trademark owners must support complaints with both proof of use of the mark and an allegation of bad faith supported by reasonable evidence.  If a trademark owner is successful under URS, Operators must freeze the domain name, but they will not be required to transfer the domain name to the trademark owner.

 

 

The new gTLDs could dramatically change the scope of the Internet in the very near future.  Although, the expansion may become irrelevant due to search-based web navigation, trademark owners should be wary of some potential short term implications and take steps to protect against cybersquatting and trademark abuse.

On November 29, 2011, in Hanover Architectural Service, P.A. v. Christian Testimony-Morris, N.P., No. 10-cv-05455 (D.N.J., 11-29-2011), the U. S. District Court for the District of New Jersey ruled against a copyright infringement defendant’s motion to dismiss for failure to state a claim, in a case providing a useful reminder on the limits of implied licenses to use copyrighted architectural plans. 

 

The plaintiff, Hanover Architectural Service, P.A. (“Hanover”), is an architectural firm that was initially engaged by the defendant church, Christian Testimony-Morris, N.P. (“the Church”), to evaluate whether a warehouse in Boonton, New Jersey, could be reconstructed into a church, including sanctuaries, offices and other spaces. The defendant Chang, as president of the Church and chair of its building committee, first contacted Hanover in early 2005, and multiple discussions followed. These talks led to a series of agreements between the Church and Hanover for specific services.

 

The first agreement engaged Hanover to review the existing warehouse and provide an architectural design for the purpose of obtaining a variance from the Boonton township authorities. The second agreement engaged Hanover to provide the project building, electrical and other designs needed to comply with local building code requirements during the permit application process. During the negotiation of this second agreement, the Church allegedly told Hanover that the Church intended to retain Hanover to administer the building of the church conversion. Hanover alleged that its pricing for the second agreement was below fair market value, because it expected to recoup its invested hours during the project administration. In 2006, Hanover and the Church executed a third agreement for the second phase of the project design process, whereby Hanover would provide additional building and other designs needed for the permit process. Hanover delivered the variance work and submitted the needed designs to the township to support the building permit application.

 

After the designs were delivered to the township in June 2007, the Church informed Hanover that it would not retain Hanover to administer the project. Hanover notified the Church in two letters that Hanover’s designs were copyright protected, and Hanover registered its designs as copyrighted architectural works. Hanover continued to revise the project plans as the township requested, and delivered copies of those changes to the Church. However, the Church did not use Hanover for the conversion project, and its attorney notified Hanover that the agreements with Hanover were terminated. Failing to resolve its issues with the Church, Hanover filed suit on several grounds.

 

Moving to dismiss the copyright claim, the Church and other defendants asserted that, among other grounds, the Church held an implied license to use the Hanover designs for the project. No such license had been expressly given by Hanover, but copyright law does not require an implied nonexclusive license to be written. Such an implied license can be oral or implied from the circumstances, and can occur when a person requests the creation of a work, the creator of the work makes that particular work and delivers it to the requesting party, and the creator of the work intends that the requesting party copy and distribute the work. The defendants argued that all of those factors applied here.

 

The federal court rejected the defendants’ argument. Hanover’s complaint alleged facts that defeated the crucial factor of intent to license the Church’s use of the designs for carrying out the building conversion. In two letters delivered in September 2007, Hanover reminded the Church that the designs were copyright protected and could not be used or modified without Hanover’s permission. The fact that these letters were sent after the Church notified Hanover of the Church’s decision not to use Hanover for the project, did not negate Hanover’s intention to protect its copyrights and not to grant an implied license in the project designs.

 

Hanover Architectural Service P.A. is a useful reminder that parties requesting the creation of copyrighted architectural works do not automatically acquire rights to use the completed works for all purposes.  The defendants in this case might have avoided this dispute if they had assured that the agreements with Hanover provided for such subsequent use of the designs beyond the permitting phase of the project.  Such a provision might have entailed higher pricing for the designs, or Hanover might have refused, but in either circumstance the parties could have avoided the confrontation depicted in this court opinion.

On Wednesday, October 26, 2011, the Thomas Jefferson Intellectual Property Inn of Court was formally launched on the campus of the T.C. Williams School of Law at the University Richmond. The Thomas Jefferson IP Inn of Court covers Richmond, Hampton Roads, and Central and Southwest Virginia.

 

The Inns of Court are a fraternal legal organization comprised of Judges, Attorneys and law students. These Inns are located across the country, under the general leadership of the American Inns of Court and its current President, Justice Lemons of the Virginia Supreme Court.

 

In the past decade, there has been a growth of IP-specific Inns of Court under the guidance of Judge Richard Linn of the US Court of Appeals for the Federal Circuit. The Thomas Jefferson IP Inn of Court is the sixteenth Inn under the Linn Inn alliance and focuses on all aspects of Intellectual Property law, including litigation, licensing and prosecution of intellectual property assets.

 

Any IP practitioner located in Richmond, Hampton Roads, Central or Southwest Virginia is welcome to contact Timothy J. Bechen regarding membership opportunities. Any IP practitioner located in Northern Virginia may contact the Pauline Newman IP Inn of Court. IP practitioners located outside Virginia are invited to visit the Inns of Court website to find your nearest Inn of Court.

In GoPets, Ltd. v. Hise, Nos. 08-56110, 08-56112 and 08-56114 (9^th Cir. September 22, 2011), the Ninth Circuit clarified a key part of the Anticybersquatting Consumer Protection Act (“ACPA”) and its prohibition of “cybersquatting” registration of internet domain names identical or confusingly similar to registered trademarks and service marks. In doing so, the Ninth Circuit held that the accused cybersquatters did not violate the ACPA when a currently registered domain name was re-registered, but affirmed a judgment against them for registering more than a dozen additional domain names. The timing of the registrations was a crucial element.

 

The background of GoPets involves the collision of two developing companies which, for different reasons, developed an interest in the gopets name. The domain name gopets.com was first registered by defendant Edward Hise in 1999, during his development of a business plan for gopets.com as part of a marketing class he was taking. The plan called for development of the website into a pet owner resource covering pet health, safety and other pet-related issues. Hise and his brother also own defendant Digital Overture, a corporation that performs internet-related services for its clients, including registering and maintaining domain names; more than 1300 domain names have been registered by these defendants in the past decade.

 

In 2004, Erik Bethke founded GoPets, Ltd., which created a game featuring virtual pets that move between the computers of registered users. GoPets, Ltd. submitted an application in September 2004 to register its service mark, “GoPets” in the United States; its first use in commerce was shown to be August 20, 2004. The federal registration issued in November 2006.

 

In 2004 Bethke contacted Hise and began a series of unsuccessful attempts to buy the gopets.com domain name. In response to the initial contact, Hise offered to consider selling the domain name. Bethke later tendered an offer of $750, but Hise did not accept it. Failing to reach an agreement to purchase the domain name, in May 2006 GoPets, Ltd. filed a complaint against Hise with the World Intellectual Property Organization (“WIPO”) under ICANN’s binding arbitration procedures, to pursue transfer of the gopets.com domain name.

 

In July 2006, the WIPO arbitrator found that the domain name was confusingly similar to GoPet’s service mark, and was “unconvinced” that Hise ever had a serious plan to develop a website at gopets.com. He nonetheless held that the initial gopets.com registration was not made in bad faith – being registered five years before GoPets was founded. He therefore ruled for Hise.

 

Bethke and GoPets made further offers to Hise in October and November 2006, to buy gopets.com for $5,000, then $40,000. No deal was reached. In December 2006, while the parties communicated their positions, Hise transferred the gopets.com registration to Digital Overture. Until September 2004, the gopets.com site had no content, and no more content appeared until November 2006. Hise and Digital Overture added further content over the following months.

 

In November 2006, Hise and his brother also began registering more than a dozen additional domain names similar to gopets.com, such as gopetssite.com, gopet.biz, gopet.org, and the like. In March 2007, Hise offered to sell gopets.com for $5 million. GoPets, Ltd. then filed a federal complaint, alleging violating of the ACPA, the Lanham Act, and state law claims.

 

On appeal, the Ninth Circuit ruled that Hise’s initial registration of gopets.com did not violate the ACPA. Because GoPets, Ltd. did not exist at the time of the original registration in 1999, there could be no “bad faith” intent on Hise’s part to violate GoPets, Ltd.’s rights in the name at that time. The court ruled further that the right of Hise in the domain name was not lost when he transferred the domain name to a new owner, Digital Overture. Consequently, Digital Overture’s re-registration and continued ownership of the original domain name did not fall within the prohibitions of the ACPA.

 

However, the Ninth Circuit reached the opposite conclusion with regard to the numerous additional names Hise and his brother began registering in 2006, all of which were registered long after the GoPets trademark had become distinctive in 2004. The court found evidence in the record that Hise and his brother had registered these additional names in bad faith, with the intent “to divert customers from [GoPets’] online location to a site accessible under [these] domain name[s] . . . by creating a likelihood of confusion.” The court rejected the defendants’ argument that they had registered the additional names with reasonable grounds to believe they were making a fair use or otherwise lawful use of these domain names. The court found that Hise’s July 2006 victory in the WIPO dispute only gave him grounds to believe his use of gopets.com was proper; it provided no reason to believe that he had a right to register additional domain names identical or confusingly similar to GoPets after that mark was established in 2004.

 

GoPets is, in one respect, an interpretation of one technical provision of the ACPA, in particular what does and does not constitute a "registration" that violates that statute.  More broadly, it is a reminder that the timing and surrounding circumstances of a disputed domain name registration can be crucial to the outcome of a dispute under the ACPA.

On September 2, 2011, in Edgenet, Inc. v. The Home Depot USA, Inc., et al, No. 10-1335 (7^th Cir, September 2, 2011), the U. S. Court of Appeals for the Seventh Circuit affirmed a district court decision and held that The Home Depot USA, Inc. (“Home Depot”) was entitled, under its contracts with Edgenet, Inc. (“Edgenet”), to buy a perpetual license in the “taxonomy” Edgenet created to organize Home Depot’s computer database for Home Depot’s national product inventory. In doing so, the Seventh Circuit provided useful guidance for companies that contract for copyrightable works and those vendors that create them.

 

Home Depot’s need for Edgenet’s software arose from Home Depot’s national system of more than 2,000 retail stores and its complex inventory of goods in many broad categories, such as hand tools and appliances. Home Depot needed to organize the products database for use by its own stores, and enable its customers to access the inventory for on-line purchases at Home Depot’s web site. The general classifications of products, such as hand tools, had many sub-classifications, for example, hammers, which were further subdivided into many types by product attributes (by length, material, and so forth). The manufacturers who sold these items to Home Depot furnished electronic records detailing their products’ attributes, but Home Depot needed to organize the data into a comprehensive database system.

 

Home Depot therefore contracted with Edgenet in 2004, to develop what the parties called a “taxonomy”, a classification system that would organize Home Depot’s products database. The companies agreed that Edgenet would own the intellectual property rights in the taxonomy and would license Home Depot’s use of it, while the product manufacturers would own the intellectual property rights in their respective products’ attributes data.

 

In 2006 Edgenet and Home Depot entered into a supplemental agreement that gave Home Depot a no-extra-cost license to use “the product collection taxonomy” Edgenet created, as long as Edgenet remained Home Depot’s data-pool vendor and Home Depot continued paying for services. The 2006 agreement provided that the license would terminate with the contract, at which time Home Depot must immediately stop using the taxonomy unless it exercised an option to purchase a perpetual license for $100,000.

 

By 2008 Home Depot was developing an in-house database system, incorporating the Edgenet taxonomy. Edgenet learned of this and registered a copyright in what it termed the “Big Hammer Master Collection Taxonomy and Attributes 2008”. In February 2009 Home Depot sent Edgenet a letter saying that their business relationship would end soon, and enclosing a check for $100,000 to exercise Home Depot’s option to buy a perpetual license in the taxonomy.  Edgenet did not accept this transition, returned the check to Home Depot, and filed this lawsuit. The federal district court dismissed the case, and Edgenet appealed.

 

On appeal, Home Depot conceded that it used Edgenet’s taxonomy to create Home Depot’s own classification system, called HomeDepotLink, which was thus a derivative of Edgenet’s copyrighted work. However, Home Depot contended that it had exercised its right to pay $100,000 for a perpetual license to use “the product collection taxonomy’, and had not violated either Edgenet’s copyright in developing its own system.

 

In affirming the district court’s dismissal of Edgenet’s claims, the Seventh Circuit agreed with Home Depot’s position. The following points of the court’s decision provide practical guidance to parties contracting for such software services.

 

The court found that both the 2004 contract and the 2006 supplemental contract between the parties did not refer to “the “Big Hammer Master Collection Taxonomy and Attributes 2008” registered by Edgenet. Instead, the contracts licensed “the product collection taxonomy”, which was the current version of the taxonomy developed by Edgenet, as long as the contracts were in force. The taxonomy was, the court said, “a work in progress”, and as Home Depot added or dropped products, the taxonomy changed. Home Depot was not buying the right only to use an older version of the taxonomy; if its right to buy a perpetual license had applied only to the older versions, then Edgenet would have been offering Home Depot “nothing that Home Depot would want to buy”. The court rejected this reading of the contracts.

 

Neither of the contracts limited the way in which Home Depot could use the taxonomy, and thus the unrestricted license allowed Home Depot to prepare a derivative work incorporating the taxonomy as it pleased. Any limits on what Home Depot could do with the taxonomy was dependent on the terms of the contracts, and Edgenet failed to impose such contractual limits.

 

The court also found that when Home Depot stopped using Edgenet’s services, Home Depot lost the right to a no-extra-cost license, but, while the contracts were in force, Home Depot had the option to pay $100,000 to obtain the perpetual license to use Edgenet’s taxonomy. Home Depot exercised this option while the license was still in force. Thus, Home Depot’s use of the taxonomy in HomeDepotLink was no infringement of Edgenet’s copyright.

 

Edgenet is a timely reminder that parties who contract for the creation and licensing of copyrightable works must consider how their relationships will develop over time. The case is also a stern reminder that the courts will enforce the words the contracting parties have chosen – and will not rewrite such contracts to include limitations that the parties themselves failed to add.

In Cybersource v. Retail Decisions, the Federal Circuit once again addressed the question of patentable subject matter. The patent at issue involved a method for detecting online credit card fraud by determining if “Internet address” information (e.g. IP addresses) for a particular transaction is consistent with other Internet address information for prior transactions using the same credit card. Two claims were at issue. The first reads in its entirety:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:

a) obtaining the information about other transactions that have utilized an Internet address that is identified with the credit card transaction;

b) constructing a map of the credit card numbers based on the other transactions and;

c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

The district court granted summary judgment of invalidity of Claim 3 under 35 U.S.C. § 101 for failure to recite patent-eligible subject matter. The Federal Circuit affirmed, holding that the claim was directed to an unpatentable mental process (“a subcategory of unpatentable abstract ideas”) because all of the claims’ steps could be performed in the human mind.

The Federal Circuit also affirmed the invalidity of Claim 2 which recited a so-called “Beauregard claim.” A Beauregard claim is a claim to a computer readable medium (e.g., a disk, hard drive, or other data storage device) containing program instructions for a computer to perform a particular process. Beyond its use of the Beauregard format, Claim 2 was substantially identical in scope to Claim 3. The Federal Circuit held that simply reciting the use of a computer to execute an algorithm that can be performed entirely within the human mind does not render the claim’s subject matter patentable. The Federal Circuit relied upon its prior decision in Bilski which held that in order to impart patent-eligibility to an otherwise unpatentable process by linking the process to a machine, the use of the machine “must impose meaningful limits on the claim’s scope;” in other words, the machine “must play a significant part in permitting the claimed method to be performed.” The Federal Circuit thus distinguished Claim 2 from “other cases where as a practical matter the use of a computer is required to perform the claimed method.”

 

On August 15, 2011, the U. S. Court of Appeals for the Second Circuit decided a case of first impression for that Circuit, holding that the Copyright Act’s “first sale doctrine” does not apply to books manufactured outside of the United States. The decision could have far-reaching consequences for copyright law in the United States.

 

The “first sale doctrine” is codified in the Copyright Act, 17 U. S. Code § 109(a), and provides that a person who buys a copyrighted work “lawfully made in the United States”, may sell or otherwise dispose of that copy of the work as the person sees fit, without limitations imposed by the copyright holder. This doctrine, which dates back to 1908, applies to a broad spectrum of everyday situations in the United States, from the ordinary re-sale of books and other copyrighted works at a neighborhood yard sale, to the commercial re-sale of numerous types of copyrighted works in larger retail markets.

 

In John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896-cv (2d. Cir. August 15, 2011), the Second Circuit affirmed a district court decision and held that the first sale doctrine does not apply to copyrighted works produced outside of the United States – in this instance, lawfully manufactured textbooks – that are subsequently imported and resold in the United States.

 

The plaintiff, John Wiley & Sons, Inc. (“Wiley”), is an American publisher of academic, scientific and educational journals and books, including textbooks, for sale in domestic and international markets. Wiley relies upon a wholly-owned subsidiary (“Wiley Asia”) to manufacture books for sale in foreign countries. The written content of books for the domestic and international markets may be similar or even identical, but the books intended for foreign markets differ from the domestic versions in design, supplemental content (such as accompanying CD-ROM’s) and the type and quality of the materials used to print the books. The foreign editions also carry a legend stating that they are to be sold only in a particular country or region.

 

Defendant Kirtsaeng is an individual who moved to the U. S. in 1997, to pursue a degree in mathematics and then a doctoral degree. To help pay for his education, Kirtsaeng’s friends and family shipped him foreign edition textbooks printed abroad by Wiley Asia. He, in turn, sold those books on commercial websites such as eBay.com. From the sales revenue, he reimbursed his friends and family for their costs, and kept any remaining profits for himself.

 

Wiley filed suit against Kirtsaeng in 2008, alleging, among other things, that he had infringed Wiley’s copyrights in the textbooks in question. Wiley relied in part upon 17 U. S. Code § 602(a)(1), that makes unlawful the importation into the U.S., without the authority of the copyright owner, of any copies of a work that have been acquired outside the United States.

 

Following a trial in 2009, Kirtsaeng was found liable for willful infringement of eight Wiley copyrighted works and for damages of $75,000 for each of the eight works. He appealed, arguing that the district court erred in finding that the “first sale doctrine” was not an available defense.

 

The Second Circuit rejected Kirtsaeng’s argument, holding that Section 602(a)(1)’s ban on infringing imports applied to his importation of the Wiley books. The court also distinguished Kirtsaeng’s case from the United States Supreme Court’s decision in Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U. S. 135 (1998), which held that the “first sale doctrine” codified in section 109(a) limited the scope of section 602(a). As the Second Circuit noted, all of the copyrighted items in Quality King had been manufactured in the U.S., then distributed and sold in overseas markets, where the defendant had repurchased them and imported them into the U.S. for domestic re-sales. The Supreme Court did not address the question of cases where the allegedly infringing imports were manufactured in foreign countries.

 

The Second Circuit therefore analyzed the language of Section 109(a) and held that the statutory provision’s application of the first sale doctrine to copies of works “lawfully made under this title,” meant “lawfully made in the United States.”  Acknowledging that the language of section 109(a) was ambiguous, the Second Circuit drew guidance from the Supreme Court’s holding in Quality King and concluded that Quality King’s dicta suggested section 602(a)’s importation ban was broad enough to encompass books manufactured abroad and then purchased and imported by Kirtsaeng.

 

The majority opinion in John Wiley & Sons triggered a strong dissent, and the court’s opinion acknowledged that the case presented “a particularly difficult question of statutory construction in light of the ambiguous language of section 109(a).” Other federal courts will undoubtedly be called upon to determine whether they agree or differ with the Second Circuit’s analysis. Nonetheless, the Second Circuit’s decision applies a brighter line to the question than copyright litigants have seen heretofore, and copyright owners may be expected to rely upon that decision to contest the importation of copies of copyrighted works introduced into the United States without the owner’s authorization.

In a 100+ page opinion which can be found here, the EDVA upholds Pfizer's '012 patent on sildenafil, the active ingredient in Viagra, as valid and enforceable. 

Some highlights from the Court's opinion, including its discussion and application of the Federal Circuit's en banc decision in Therasense follow:

• The Court presents a thorough discussion of the law of standing to sue for patent infringement at pp. 20-24, and ultimately concludes that Pfizer, Inc. is the legal owner of the '012 patent.  Op. at 25.  See our previous discussion of Teva's motion to dismiss for lack of standing here. 
• The Court further expands upon the definition of a "beneficial owner" under English law, as provided for in the Patent Filing Agreement, at pp. 28-29.
• The Court has a detailed discussion of whether Pfizer Ireland qualifies as an "exclusive licensee," based on the rights it received, and ultimately concludes that it is a nonexclusive licensee at least in part because the rights it received were "ephemeral," and Pfizer Ltd. had the right to revoke them at any time, in addition to the right to control the litigation.  Op. at 30-33.
• The Court addresses the Federal Circuit's Therasense decision and concludes that it "significantly heightened the requirements for a showing of inequitable conduct on the merits," op. at 43, but also concludes that Exergen, not Therasense, continues to set forth the pleading requirements for inequitable conduct.  Op. at 44.
• The Court finds that Teva did not meet its burden to demonstrate that the claims of the '012 patent were obvious under 35 USC § 103.  Op. at 55-81.
• Applying Therasense, the Court denies Teva's claim of inequitable conduct.  Specifically, the Court states

Instead, the court sees this claim of inequitable conduct for what it is: an attempt to induce the court to believe that if enough smoke is created, there must be a fire. The court sees through this smokescreen and finds that Teva has failed to bring any evidence to the court's attention which shows that Mr. 0'Rourke acted with the specific intent to deceive the PTO.  Op. at 108.

In sum, this court finds that this case is the archetype of the action the Federal Circuit was aiming to curtail with the tightening of the standards in Therasense. Pfizer's initial behavior of disclosing all substantive documents from every foreign patent prosecution and litigation is understandable, particularly now in hindsight, given the unfounded, costly, and time-consuming accusations, which have resulted from not turning over one completely non-material document after the time for disclosures had passed, except in the most extreme of cases, with this not being one.  The court refuses to read Therasense in any way other than how the Federal Circuit intended, as a bulwark against the waste of resources by both the judiciary and litigants, as has occurred in this case.  Op. at 108-110.

Recently, social media game developers have been filing copyright infringement suits faster than a round of crops can grow on FarmVille.  Although the “look and feel” of a user interface is typically not eligible for copyright, particularly within the Internet environment, this seems to be at the center of recent filings.

 

In June, social gaming giant Zynga filed suit against Brazilian developer Vostu for “blatant copyright infringement.”  Zynga claims that Vostu has appropriated the copyright-protected aspects of Zynga’s games as well as almost every other aspect of Zynga’s business.  Vostu is accused of infringing Zynga’s copyrights in FarmVille, Zynga Poker, PetVille, Café World and CityVille, with Mini Fazenda (Mini Farm), Vostu Poker, Pet Mania, Café Mania and MegaCity respectively.  Zynga alleges that its evidence shows a series of similarities between the concepts, graphics, layout, menus and more for each game, although the complaint never specifies what the copyrights actually cover.  The complaint includes a side-by-side comparison of a number of the games Vostu allegedly infringed.  In addition, the filing points to bugs in the Zynga source code that Vostu allegedly copied inadvertently.

 

Zynga’s suit was quickly followed by another copyright infringement allegation filed on June 17, 2011.  A complaint filed by SocialApps, a California-based developer, claims that Zynga stole the source code from myFarm for use in Zynga’s farming game, FarmVille.  The Facebook game myFarm was released in November 2008, six months before Zynga released FarmVille.  The suit claims Zynga had engaged in discussions to buy SocialApps in May 2009.  Allegedly, Zynga was able to access the source code for myFarm during those negotiations.  The complaint further claims that shortly after receiving a copy of the myFarm source code, Zynga called off negotiations and released Farmville only a few weeks later. 

 

Zynga is not a stranger to copyright lawsuits.  David Maestri, the creator of another popular Facebook game Mob Wars, sued Zynga in 2009.  Maestri claimed that Zynga’s Mafia Wars was a knockoff.  The suit was settled the same year for an undisclosed amount.  Recently, Zynga agreed to change the name of its upcoming expansion to FrontierVille from The Oregon Trail to Pioneer Trail after being approached by The Learning Company with a lawsuit.

 

Most recently, Vostu filed a countersuit against Zynga on July 20, 2011.  Vostu claims that Zynga cannot claim copyright over the design of everyday objects and places, including barns, farms and chairs, and that Zynga has in the past copied designs from other companies.  Vostu does not deny similarities between its games and the Zynga games, but claims that Zynga did not create the elements it now bringing suit over.  Vostu provides a number of exhibits as part of its filing with its own side-by side comparisons between Zynga games and similar, earlier games by other companies.  For example, Vostu compares Playdom’s Social City to Zynga’s CityVille, and Slashkey’s FarmTown to Zynga’s FarmVille.  The suit, filed in the United States District Court for the Northern District of California, also alleges that Zynga entered discussions with Vostu last year under the pretense of forming a partnership which never actually materialized. 

 

To prevail on a copyright infringement claim, a plaintiff must prove: (1) ownership of a valid copyright; and (2) copying of constituent elements of the work that are original.  The second element can be further dissected into two prongs: (a) actually copying by the defendant of the plaintiff’s work; and (b) a substantial similarity between the defendant’s work and the protectable elements of the plaintiff’s work.  There is no agreed-upon test for substantial similarity, but it has been established that to show infringement, the plaintiff must show “a substantial similarity of protectable expression, not just an overall similarity between the works.” 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.03[F] (2008).  By presenting the court with numerous examples of preexisting works similar to both the defendant’s and the plaintiff’s works, the defendant puts the plaintiff in the unenviable position of trying to show how his or her work is dissimilar to those examples, but still substantially similar to the defendant’s. 

 

Vostu seems to have taken this approach – showing that the constituent elements of Zynga’s games lack originality – in its countersuit against Zynga.  According to Vostu spokesman, Davidson Goldin, “Zynga has been accused of copying so many games that they’ve sadly lost the ability to recognize games like ours that are chock full of original content and have been independently created.”  It will be interesting to see how the courts respond to this unsettled area of copyright law. 

The Federal Circuit Bar Association has this tribute to Circuit Judge Archer, who passed away on July 27, 2011:

 

The fabric of our justice institutions is strong, reflecting the leadership, professional skills, good humor, and integrity of our judges. Judge Archer’s career blended public and private representation, creating a broad perspective on our system and the importance of all stakeholders. The Association offers its sympathies to Judge Archer’s family and shares their pride and appreciation for his contribution to the Nation and to every individual whose life he touched.

 

The Federal Circuit website provides this brief biography:

 

GLENN L. ARCHER, JR. was nominated by President Ronald Reagan and assumed duties as Circuit Judge on December 23, 1985. He became Chief Judge on March 18, 1994, and served in that capacity until December 24, 1997. He assumed senior status on December 25, 1997. Judge Archer served as Assistant Attorney General, Tax Division, United States Department of Justice from 1982 to 1984. Prior to that appointment, he was an associate in the Washington, DC law firm of Hamel, Park, McCabe and Saunders from 1956 to1960 and a partner from 1960 to 1981. Judge Archer served as First Lieutenant in the Judge Advocate General's Office, United States Air Force from 1954 to 1956. He received a B.A. from Yale University in 1951 and a J.D., with honors, from George Washington University Law School in 1954.

Acknowledging this discussion on the WHDA Blog, Patently O has this post on a recent decision by Judge Sparks of the Western District of Texas.  While granting a stay of litigation in a two-page Order, pending the outcome of reexamination proceedings of the patents-in-suit, the Court gave the PTO an ultimatum:

 

The United States Patent and Trademark Office is ordered to expedite the reexamination of U.S. Patent Nos. 6,393,158, 7,467,218, and 7,890,648 and to advise the Court and the parties in these cases of its results prior to October 24, 2011. . .

[The USPTO] shall provide the results of its reexamination to the parties and the Court before the above date.

 

Stay tuned...

On July 1, 2011, the District of Delaware issued a ruling in Stored Value Solutions v. Card Activation Technologies (CAT), that CAT's '859 patent is invalid as anticipated, as obvious, and for lack of written description.  The '859 patent also recently suffered an adverse ruling during reexaminations proceedings ongoing at the PTO.

According to its website, CAT "owns proprietary patented transaction technology which covers Gift Cards, Phone Cards and Debit Cards used by thousands of retailers. The management’s mission is to pursue license agreements for its patented technology from the thousands of retailers and if necessary enforce our rights through the court system."  CAT has filed suit against as many as fifty major retailers for infringement of US Patent No. 6,032,859 ("'859 patent").  Many suits are still pending.  In this case, Stored Value Solutions filed a declaratory judgment of invalidity of the '859 patent.

Judge Jordan, a Third Circuit Judge sitting by designation, issued his ruling on July 1, which can be found here.  The Court concludes that the '859 patent is invalid for a number reasons:

• Claims 1-3, 5-7, 9-14, and 16-19 are anticipated under section 102(a) by a systems reference manual distributed by MicroTrax along with its software that permitted retailers in a point-of-sale system to accept the use of ATM cards to purchase and return goods; and
• Claims 20, 22-28, 29, 30-31, and 33-38 are invalid pursuant to section 112, paragraph 1, for failure to meet the written description requirement.

CAT had this to say about the ruling here:  

We believe the Delaware Court's Order contains numerous additional errors. However, we anticipate that the PTO will likewise make a final determination that the '859 Patent is invalid. Consequently, we will be required to appeal in both the Delaware Action and the PTO reexamination proceeding.

The realities of Card's financial status surely impact our ability to appeal these decisions. The costs of appeal, as well as the cost of maintaining an ongoing entity, are estimated to reach $750,000.00 over the next two years.  It is also important to understand that success on appeal means the action will be returned to the Delaware District Court for further proceedings regarding the validity of the patent. It is also common for the Federal Circuit Court of Appeals to affirm a trial court's ruling without written explanation. 

 

Although we strongly disagree with the Court's Order and what we presume will be the findings of the PTO, we are mindful of the economic realities facing the company at this juncture. A telephone conference has been scheduled for August 2, 2011 at 9:00 AM PST, dial in # 800-895-0198 Conference ID: CASUPDATE, in which President Bob Kite will answer questions concerning these important issues. Please bear in mind that we know, and expect, our adversaries to be listening on this call. Consequently, the company will not be inclined or able to fully disclose all of its strategies. 

SVS issued this statement on its website:

 

On July 1, 2011, Judge Kent A. Jordan, sitting by designation in the United States District Court for the District of Delaware, ruled that 33 of the 36 claims of Card Activation Technologies, Inc.'s U.S. Patent No. 6,032,859 are invalid. And on July 7, 2011, Card Activation Technologies, Inc. stipulated that the remaining three claims are also invalid. SVS filed this lawsuit seeking to invalidate all of the claims of U.S. Patent No. 6,032,859 because Card Activation Technologies, Inc. had previously sued a number of SVS's customers asserting that SVS's card products infringed the patent.

"We initiated this litigation to protect our customers from being sued over a patent that should have never been issued," said Ralph Rolen, SVS Executive Vice President and General Manager, "I am delighted that our view has been confirmed by the court process." Rolen added, "We are pleased with the outcome. We will continue to defend with vigor baseless patent threats against our business and business processes."

Retailers should continue to monitor the situation for developments both at the PTO and the Federal Circuit on appeal.

717 Madison Place has an interesting post on Fuzzysharp Tech v. 3D Labs, which was recently argued at the Federal Circuit.  The case puts the issue of the patentability of business methods and computer software under 35 USC § 101 squarely before the Court.  A link to the oral argument transcript is included. 

Pfizer and Teva concluded their presentation of evidence on the 11th day of the bench trial in front of Judge Smith, in the Norfolk Division of the EDVA.  Closing arguments were set for July 13.  As we previously noted in our coverage of the case here, much of this trial was about Pfizer's standing to enforce the patent-in-suit, and Teva's allegations of inequitable conduct by Pfizer during prosecution of the patent-in-suit, as Teva has already stipulated to indirect infringement.

On Tuesday, July 12, ActiveVideo and Verizon began day one of a jury trial before Judge Jackson in the EDVA, Norfolk Division, on claims of patent infringement by both parties.  A dispute has arisen from the start, over the admissibility of inventor Leo Hoarty's inventor notebooks.  On Wednesday, ActiveVideo filed this bench memorandum, arguing that the inventor notebooks (1) are admissible under the "rule of reason" test, (2) do not need corroboration to be admitted, (3) are not hearsay, and (4) even if they are hearsay, fall under the exceptions for state of mind, ancient documents, business records, and the catchall residual exception. 

 

Earlier in the case, in this opinion, the Court granted in part ActiveVideo's motion for summary judgment on invalidity of patents asserted by Verizon, ruling that claims 1 and 28 of US Patent No. 5,682,325 are invaild as anticipated, and that claims 13 and 20 of US Patent No. 6,381,748 are invalid as anticipated.  The Court subsequently denied Verizon's motion for partial reconsideration of this order regarding the validity of the '748 patent.

 

The Virginian-Pilot covered day one of the trial here. 

 

See our previous coverage of the case on this blog here. 

Circuit Judge Daniel M. Friedman passed away last week at the age of 95.  The Federal Circuit posted this on its website, noting that Judge Friedman was the last of the original members of the Federal Circuit, and that he was instrumental in the Court's creation: 

The Honorable Daniel M. Friedman died at his home on Wednesday July 6, 2011.  Chief Judge Rader, in a message to the court announcing Judge Friedman’s death to the court, said: “ Yesterday we lost one of the grandest and best judges to ever grace this court – the last of the original members of the United States Court of Appeals for the Federal Circuit.  Indeed he was instrumental in the creation of our court.  Dan was also the last Chief Judge of the oldest Circuit Court in United States history, the United States Court of Claims.  Dan left us on the day before we open the renovated courtroom that preserves the Court of Claims legacy. Our flag will fly at half mast for three days to honor Dan Friedman. I mourn with you all.”

Judge Friedman was appointed Chief Judge of the Court of Claims by President Jimmy Carter in 1978.  When the Court of Claims merged with the Court of Customs and Patent Appeals to form the U. S. Court of Appeals for the Federal Circuit on October 1, 1982, Judge Friedman was elevated to the newly-established court on which he was deemed the first in seniority just below the Chief Judge.  Judge Friedman assumed the status of senior judge on November 1, 1989, and continued to actively serve on the Federal Circuit and also to sit by designation with other Circuits. Judge Friedman authored over 470 opinions for the Federal Circuit, over seventy opinions for the Court of Claims, and over 160 opinions when sitting by designation with other U. S. circuit courts of appeals.  

Judge Friedman's legal career spanned almost seven decades, virtually all of it in public service. He began with a position at the Securities and Exchange Commission in the early 1940's. From 1942 to 1946, he served in the U. S. Army in Europe.  Returning to the SEC at the conclusion of World War II, he worked there for five more years before joining the Antitrust Division of the Department of Justice, working there from 1951 to 1959. In 1959, he joined the Office of the Solicitor General, serving as an Assistant Solicitor and First Deputy Solicitor from 1959 to 1978, where he served twice as Acting Solicitor General and argued eighty cases at the Supreme Court.

717 Madison Place has links to comments by Judges Rader and Linn before oral argument at the Court on July 7. 

Lanier Parking has filed its reply brief in support of its motion for a stay, pending the outcome of the ongoing reexamination proceedings of the patent-in-suit.  Lanier argues that a stay is justified here because the reexamination proceedings are already well advanced, unlike in the cases cited by Juxtacomm.  Moreover, Lanier points out that its case has just begun, and argues that Juxtacomm will suffer no prejudice.  Lanier takes specific umbrage with Juxtacomm's argument that its licensing program would suffer if a stay were implemented:  "[P]otential harm to a licensing program is by no means justification to proceed with litigation. Implicit Networks, Inc. v. Adv. Micro Devices, Inc., No. C 08-184 JLR, 2009 WL 357902 at *3 (W.D. Wash. Feb. 9, 2009) (granting a stay of litigation and finding insufficient patentee’s argument that a stay would “significantly and irreparably” harm its licensing campaign)."

 

See our previous post on Lanier's motion for a stay here. 

On the 11th day of a bench trial before Judge Smith, Teva has filed a motion to dismiss Pfizer's claims of infringement of US Patent No. 6,469,012 for lack of standing.  In its motion, Teva contends that Pfizer has failed to demonstrate that any of the entities listed as plaintiffs in the suit has sufficient rights in the '012 patent to confer standing on Pfizer to sue for infringement.  The argument highlights a rather complicated web of ownership of the '012 patent on the basis of numerous agreements among the Pfizer entities and the inventors. 

The agreements between Pfizer Inc. and Pfizer Limited are as follows (putting aside arguments regarding subsequent transfers of the '012 patent to other Pfizer entities):

• On August 9, 1993, Pfizer Inc. and Pfizer Limited entered into an agreement that provides that Pfizer Limited’s U.S. patent applications will be filed by Pfizer Inc. and that “Pfizer [Inc.] will act as agent for Limited, so that such applications and any patents issued thereon shall be held by Pfizer [Inc.] in trust for Limited, as the beneficial owner thereof."  The Agreement further provides that “[i]n consideration of Pfizer [Inc.] undertaking the obligations referred to in clause 2 hereof with respect to Limited Property patent applications, Pfizer [Inc.] shall be entitled to obtain a non-exclusive license from Limited with respect to any such Limited Property in the USA ….”
• On October 10, 1995, the two named inventors of the '012 patent assigned their "entire right, title, and interest" in the patent application that later issued as the '012 patent, and the inventions disclosed in that patent, to Pfizer Inc.
• Also on October 10, 1995, Pfizer Limited executed a Consent Of Pfizer Limited, which states that “by virtue of the terms of employment with Pfizer Limited … Pfizer Limited is entitled to an assignment of the entire right, title and interest in and to all inventions, whether joint or sole, made by [Dr.] Ellis and [Dr.] Terrett and whereas Pfizer Limited desires that Pfizer Inc. receive the full benefits of the foregoing assignment by its aforesaid employee(s), Pfizer Limited … hereby consents to the foregoing assignment by its aforesaid employee(s)."
• On March 4, 1996, Pfizer Inc. filed U.S. Application Ser. No. 08/549,792, from which the ‘012 patent issued on October 22, 2002. Ex. 6 (DX-2001). Pfizer Inc. is identified on the face of the ’012 patent as the assignee.

With respect to Pfizer Limited, Pfizer contends that Pfizer Limited “is the owner of a beneficial interest in the ‘012 patent” by operation of the August 9, 1993 Patent Filing Agreement entered into by Pfizer Inc. and Pfizer Limited and therefore has standing to enforce that patent.  Teva argues that Pfizer, however, failed to establish that the Patent Filing Agreement has effect with respect to the ‘012 patent, and that even if that Agreement has effect, Pfizer failed to identify the meaning of “beneficial owner” under that Agreement and accordingly failed to establish that a beneficial owner of the ‘012 patent has rights that are sufficient to confer standing to enforce the patent.

With respect to Pfizer Inc., Pfizer contends that “Drs. Ellis and Terrett duly and legally assigned the ‘012 patent to Pfizer Inc.”  Pfizer Inc. received an October 10, 1995 Assignment from the inventors of all of their rights to the application that issued as the ‘012 patent accompanied by a Consent to that Assignment executed by Pfizer Limited on the same day.  Teva asserts that Pfizer, however, failed to establish that Pfizer Inc. has rights in the ‘012 patent that are sufficient to convey standing because Pfizer separately contends that the August 9, 1993 Patent Filing Agreement conveys “beneficial ownership” rights to the ‘012 patent on Pfizer Limited.  That “beneficial ownership,” according to Pfizer, includes the right to grant an exclusive license to the ‘012 patent.  But according to Teva, If Pfizer Limited has the right to convey an exclusive license under the ‘012 patent by virtue of being a “beneficial owner” by operation of the Patent Filing Agreement, then Pfizer Inc. cannot be the owner of such a right – and cannot own rights to the ‘012 patent that are sufficient to confer standing.  Furthermore, states Teva, the Patent Filing Agreement, which Pfizer contends has effect with respect to the ‘012 patent, further provides that “[i]n consideration of Pfizer [Inc.] undertaking to file and prosecute Pfizer Limited’s U.S. patent applications, Pfizer [Inc.] shall be entitled to obtain a non-exclusive license from Limited with respect to any such” applications.  From Teva's perspective, that provision in the Patent Filing Agreement strongly implies that Pfizer Inc. does not own rights to the ‘012 patent that are greater than the non-exclusive right to which the Agreement expressly states that Pfizer Inc. is entitled.  Teva points out that a non-exclusive patent license is not sufficient to confer standing on the licensee or sufficient even to allow the licensee to be joined in a suit to enforce the patent. Thus, claims Teva, Pfizer has failed to establish that Pfizer Inc. has an ownership interest in the ‘012 patent that is sufficient to confer standing on Pfizer Inc. to enforce the ‘012 patent.

Pfizer has encountered other roadblocks with respect to its efforts to enforce the '012 patent, which has been under reexamination by the PTO since 2003.  In February 2010, the Board of Patent Appeals and Interferences determined that claim 24 of the '012 was unpatentable for obviousness-type double patenting.  The next month, in March 2010, Pfizer then dropped its pending suit against Eli Lilly over rival drug Cialis, because claim 24 was the only claim at issue in that suit, which had been stayed pending the outcome of the reexamination proceedings.  Most recently, last month, Pfizer filed suit against Wilson Pharmaceuticals over its abbrieviated new drug application for a generic version of Viagra. 

We previously blogged on Teva's stipulation to indirect infringement here. 

Check out this recent docket entry from Magistrate Judge Crocker of the Western District of Wisconsin, in response to the plaintiff's failure to serve its complaint just over three months after filing:

** TEXT ONLY ORDER ** On March 30, plaintiff, a Georgia company, filed a declaratory patent invalidity lawsuit in this court against defendant, a Missouri company. Defendant countered in April by filing a patent infringement lawsuit against plaintiff in Missouri. Since then, the parties have been negotiating a global settlement. Apparently, neither party has served its lawsuit on its opponent believing that this would "chill settlement negotiations." See dkt. 10. Plaintiff has shared this back story to this court in advance of the July 7, 2011 telephonic status conference, at which the court had intended to ask why this lawsuit is slumped inert on the court's docket. Now we know; but as local counsel likely already has predicted, the court is perplexed and unmoved in equal measure: why would a patent litigant seek out this notoriously fast court and then start its case with a stalling maneuver? This court does not grant stays to accommodate settlement negotiations. Because defendant hasn't even appeared yet, the July 7 hearing is pointless, so it is canceled. On July 29, 2011, this lawsuit will be dismissed without prejudice pursuant to F.R. Civ. Pro. 4(m). Further, if this case ever requires a schedule, the calendaring template for patent cases starts running this week, leading to a firm trial date in early October, 2012. This would be true even in the face of dismissal for failure to serve.. Signed by Magistrate Judge Stephen L. Crocker on 7/5/2011. (voc) (Entered: 07/05/2011)

The case is Simmons Bedding Company et al v. Leggett & Platt, Inc et al, No. 3:11-cv-232 (W.D. Wisconsin).

Under what circumstances can a defendant get a stay of litigation in the EDVA pending the outcome of reexamination proceedings of the patent-in-suit? 

 

Juxtacomm filed suit against Lanier Parking Systems of Virginia, and others, for infringement of US Patent No. 6,195,662, titled "System for Transforming and Exchanging Data between Distributed Heterogenous Computer Systems."  Defendant Lanier Parking Systems immediately responded with a Motion for Stay pending the ongoing ex parte reexamination of the '662 patent, in addition to filing its Answer.    Lanier explained that on May 12, 2011, the PTO issued a final office action rejecting claims of the '662 patent, including claim 1, the only claim specifically identified in the complaint.  Noting the three factors the EDVA has considered in deciding whether to stay litigation pending a reexamination:  (i) whether discovery was complete and a trial date was scheduled, (ii) whether a stay would have simplified the matters at issue, and (iii) whether a stay would have unduly prejudiced or clearly disadvantaged the non-moving party; Lanier contends that because the case is in its infancy, because the rejected claims may be dispositive, and because Juxtacomm is a non-practicing entity, each of these factors weighs in favor of a stay.  Lanier relies on the following EDVA cases in which the Court granted a stay pending reexamination of the patent(s)-in-suit:

• NTP, Inc. v. T-Mobile USA, Inc., Nos. 3:07-CV-548, 549, 550, 551, 2007 WL 3254796 (E.D. Va. Nov. 2, 2007) (Spencer, J.) 
• NTP, Inc. v. Palm, Inc., No. 3:06-CV-836, (E.D.Va. Mar. 22, 2007) (Spencer, J.)

In its opposition, Juxtaxcomm cites recent caselaw in the EDVA denying motions for stay pending reexamination:

• NTP, Inc. v. Research in Motion, Ltd., 397 F. Supp. 2d 785 (E.D. Va. 2005) (Spencer, J.)
• Sunbeam Products, Inc. v. Hamilton Beach Brands, Inc., No. 3:09-cv-791, 2010 WL 1946262 (E.D. Va. May 10, 2010) (Payne, J.) 
• ePlus, Inc. v. Lawson Software, No. 3:09-cv-620, 2010 WL 1279092 (E.D. Va. Mar. 31, 2010) (Payne, J.) 
• Osmose, Inc. v. Arch Chemicals, Inc., No. 2:10-cv-00108 (E.D. Va. Jan. 28, 2011) (Friedman, J.)  
• 01 Communique Lab. v. Logmein, Inc., No. 01:10-cv-1007, 2010 WL 4736204 (E.D. Va. Nov. 12, 2010) (Hilton, J.)

Juxtacomm's opposition explains that since the final office action issued, the examiner has withdrawn her rejection of the claims based on obviousness, although she has continued rejections based on anticipation by a reference titled DBMS Copy Plus.  In addition, Juxtacomm notes that the Eastern District of Texas denied a similar motion to stay by defendants in a case on the same '662 patent just recently on May 24, 2011, and the parties in that case are proceeding to discovery (although Lanier points out in its motion that the ED Texas case was much farther along:  a Markman hearing had already been held, and the parties had produced over 6 million pages of documents, served over 100 discovery requests, taken 14 depositions, and spent more than 40 days reviewing source code).  Juxtacomm argues that (1) it will suffer severe prejudice by a stay because the reexamination could take years; (2) a stay will not simplify the case because the PTO's decision may be overturned; (3) the fact that the case is in its infancy, standing alone, does not justify a stay; and (4) neither party will suffer hardship by proceeding with the litigation. 

 

The case is assigned to Judge Spencer in the Richmond Division. 

 

On Thursday, June 30, 2011, Judge Turk of the Western District of Virginia issued an order staying the false marking case filed by Ponani Sukumar and Southern California Stroke Rehabilitation Associates against Natilus, Inc.  The case had previously been transferred into the W.D. Va. from the Central District of California.  In the Complaint, Plaintiffs assert that Nautilus violated 35 U.S.C. § 292 by placing stickers on its exercise machines that identify patent numbers which have expired, or which do not apply to the machine to which they are affixed.  

 

After the case was transferred to the W.D. Va., Roanoke Division, Nautilus moved to stay the case for two reasons.  First, the Federal Circuit is currently considering the constitutionality of section 292 on appeal from Unique Product Solutions, LTD. v. Hy-Grade Valve Inc., Case No. 5:10-CV-1912 (U.S. Dist. N. Ohio), where the district judge ruled that section 292 was unconstitutional because it violated Article II of the US Constitution and the "Take Care" clause.  In addition, in FLFMC LLC v. WHAM-O (Fed. Cir. Case No. 2011-1067), which is an appeal from an order granting a motion to dismiss in the W.D. Pa., one of the questions certified to the Federal Circuit is the constitutionality of section 292.  Because briefing has begun in both of these cases, and oral arguments in Wham-O are currently set for July 7, Nautilus argued that concerns of judicial efficiency warrant a stay pending the Federal Circuit's decisions in one or both of these cases.  Second, Nautilus cited the pending patent reform legislation, in which the Senate version at least would eliminate qui tam actions and require the plaintiff to make a showing of competitive injury to file suit. 

 

Plaintiffs opposed the motion, arguing that the factors to be considered did not warrant a stay, and that Plaintiffs would be irreparably harmed by the delay, and citing other cases in which courts denied a stay under similar circumstances. 

 

In reply, Nautilus noted that during briefing, the House had passed its own version of the patent reform bill, which eliminates the qui tam provision, and provides that a private plaintiff who files suit must demonstrate a competitive injury and prove actual damages.  In addition, Nautilus referred to another district court decision that had issued, which found section 292 unconstitutional:  Rogers v. Tristar Products, Inc., No. 5:11-cv-01111 (E.D. Pa. June 2, 2011). And Nautilus disputed that Plaintiffs would suffer any prejudice.

 

The Court agreed with Nautilus and entered a Stay of the Proceedings, finding that (1) Plaintiffs would not be prejudiced by a stay, (2) a stay would promote less costly and more efficient litigation for the parties, and (3) a stay would promote judicial economy.  The Court thus entered a stay until the earlier of (a) 180 days passes, or (b) section 292 is amended or the constitutionality of that statute is considered by the Federal Circuit.

 

For coverage of the Wham-O case, links to the briefs, and coverage of the Federal Circuit's decision to allow the US Government and the US Chamber of Commerce to participate in oral arguments, see this article by Lawrence Higgins at Patently-O.   For coverage of Hy-Grade and Tristar, see here and here.  For coverage of the recent ND Texas decision upholding the constitutionality of section 292, see here. 

In an update to a post that we wrote on November 12, 2010, on Monday, June 27, 2011, the United States Supreme Court released its much-anticipated opinion in Brown v. Entertainment Merchants Association.  In Brown, the Court affirmed by a 7-2 vote the ruling of the Ninth Circuit, striking down a California law restricting the sale or rental of “violent” video games to minors.

Justice Scalia, writing for the majority, found that the California law, which was transparently modeled after a law upheld in a 1968 Supreme Court case, Ginsburg v. New York, “impose[d] a restriction on the content of protected speech,” and failed to pass the test of strict scrutiny applied to such content-based restrictions.  The law at issue in Brown attempted to regulate video game violence which, as Scalia noted, “is not part of the obscenity that the Constitution permits to be regulated.”  The law was therefore invalid, Scalia wrote, unless “justified by a compelling government interest” and “narrowly drawn to that interest.”

Applying strict scrutiny, the majority found the California law to be both underinclusive and overinclusive, and therefore not narrowly tailored.  Specifically, the law failed to address any “serious social problem” because it sought to restrict only violence as depicted in video games, and even then permitted relatives of minors to purchase or rent violent games on the minors’ behalf.  At the same time, the law failed to truly “aid….parental authority” because, in imposing content-based restrictions, it simply assumed that parents of all affected children desire such restrictions.  In addition, the majority discounted evidence presented by the State in support of the view that violent video games beget violence in minors, noting that the studies offered in support of the law had “been rejected by every court to consider them” and that, at best, they demonstrated correlation, not causation.

Justice Alito, concurring only in the decision, wrote separately in an opinion joined by the Chief Justice and found the California law to be unconstitutional on the narrow ground that its definition of “violent video games” lacked requisite specificity.  Further, Alito disagreed with what he characterized as the majority’s “too quick” dismissal of “the possibility that the experience of playing video games” may differ substantially from other experiences in its “effects on minors,” and appeared reluctant to foreclose the prospect of future regulation.

Justices Thomas and Breyer each penned a dissent.  Justice Thomas argued that the California law abridged only speech “that bypasses a minor’s parent or guardian,” which he claimed “does not fall within the ‘freedom of speech’ as originally understood.”  Justice Breyer found that the law “imposes no more than a modest restriction on expression,” and that, in any event, the law furthers a compelling interest of the State, given the scientific evidence presented.

The ruling has been hailed as a victory by the video game industry.  Despite the two-vote concurrence in Brown on narrower grounds, the strength of the five Justice majority appears to have erected a significant barrier to any future attempts to restrict violence in video games.

ICANN OPENS UP HUNDREDS OF INTERNET DOMAIN NAME ENDINGS WHICH WILL GREATLY EXPAND WEBSITE POSSIBILITIES FOR BOTH BRAND OWNERS AND POTENTIAL INFRINGERS.

The Board of Internet Corporation for Assigned Names and Numbers (ICANN) has just approved a plan to significantly increase the number of Internet domain name endings, or generic top-level domains (gTLDs), from the current 22 (which includes domains such as .com, .org and .net). Applications for the new gTLDs will be accepted from January 12, 2012 to April 12, 2012. The first batch of applications is limited to 500, and subsequent batches to 400, to account for Internet capacity limitations, as well as a maximum limit of 1000 new gTLDs per year.

The decision to proceed with the gTLD program follows many years of discussion, debate and deliberation with the Internet community, business groups and governments. ICANN’s Applicant Guidebook, which explains how to apply for a new gTLD, went through seven revisions to incorporate more than 1,000 comments from the public, including those addressing the security, stability and resiliency of the Internet.

Under the Applicant Guidebook, any established public or private organization anywhere in the world can apply to create and operate a new gTLD Registry, if it can demonstrate the operational, technical and financial capability to run a registry and comply with additional specific requirements. Although there is no sunrise period for trademark owners to submit new gTLD applications, all trademark owners may apply during the general application period. However, there is no requirement for an applicant to hold a trademark in order to apply for a new gTLD.

Candidates may apply for new gTLDs via an online application system called TAS – TLD Application System. The evaluation process could take as little as 9 months or up to 20 months to complete. Applicants may apply for more than one gTLD, but each gTLD string requires its own application, and ICANN has specific technical rules that apply to all such strings. For example, strings composed entirely of numbers and some reserved gTLD names are unavailable for general use and will be rejected. gTLDs comprising a geographic name must meet additional requirements as set forth in the Applicant Guidebook.

There is a US$5,000 deposit fee per application request, which will be credited against an evaluation fee estimated at US$185,000. Other fees may apply depending on the specific application path or, in certain cases, where specialized process steps are applicable.

Once an application has successfully passed all the evaluation steps, the applicant will be required to sign a New gTLD Agreement with ICANN (a “Registry Agreement”), requiring two additional fees: (a) a fixed fee of US$6,250 per calendar quarter; and (b) a transaction fee of US$0.25 per domain name, which does not apply until and unless more than 50,000 domain names are registered in the gTLD.

The applicant is responsible for setting the business model and policy for how it will use the new gTLD, but the policy must comply with the terms of its Registry Agreement. For example, an applicant can register a gTLD solely to promote its own brand and undertake its own marketing plans, and can refuse applications for second level domains from competitors or individuals who appear to be cybersquatters or scammers.

After the application period for the first round of gTLD purchases closes, ICANN will verify all of the applications for completeness and will then release on its website the list of strings, applicant names, and other application data.

After the list of all gTLD applications has been published on ICANN's website, third-parties may file formal objections, based on gTLD string confusion, existing legal rights, community objections, or limited public interest objections, using Dispute Resolution Procedures (DRP). Objections will be managed by specialized Dispute Resolution Service Providers (DRSPs), such as the International Chamber of Commerce (ICC), based in Paris, France, the Arbitration and Mediation Center of the World Intellectual Property Organization (WIPO) in Geneva, Switzerland and the International Centre for Dispute Resolution (ICDR), based in New York.

At the time an objection is filed, the objector is required to pay a filing fee in the amount set and published by the relevant DRSP, or the objection may be dismissed. After a hearing has taken place and the panel makes its determination, the DRSP will refund the advance payment of costs to the prevailing party. If a legal rights objection is successful, the respective application will not proceed.

The introduction of the new domain name endings will significantly expand the possibilities for brand owners, but could also create more opportunity for cybersquatting and other domain name uses that could impede brand owners’ rights. It will be important for all brand owners to actively monitor the new applications and to consider whether to apply for their own extensions to effectively maintain and enforce their trademark rights.

Fred Hutchinson sued Biopet for infringement of a patent relating to a kit for dog breed identification services.  The EDVA previously entered both a temporary restraining order and a preliminary injunction, enjoining the defendants from further sales of the accused products during the pendency of the litigation.  On Monday, Judge Jackson issued another decision on the plaintiff's motion to dismiss and strike Biopet's counterclaims and affirmative defenses asserting inequitable conduct, granting the motion in full based on Exergen and Therasense. 

Although concluding that Biopet had identified with sufficient particularity the "who" prong of Exergen, the Court concluded that "BioPet's cursury [sic] allegations that the inventors were aware of the material aspects of the alleged prior art based on citations to those works in unrelated publications fails to meet the standards for establishing the "what," "where" and "how" of the material omission."  Specifically, the Court stated that:

In order to satisfy this standard, the pleading must set forth "which claims, and which limitations in those claims, the withheld references are relevant to, and where in those references the material information is found" as well as "the particular claim limitations, or combination of claim limitations, that are supposedly absent from the information of record." Exergen, 575 F.3d at 1329.

What is more, the Court concluded that Biopet's allegations failed to allege that the individuals knew of the reference, knew that it was material, and made a deliberate decision to withhold it, as required by Therasense; rather, the allegations merely "invite speculation" about specific intent but do not plead any facts to support knowledge of the materiality of the references along with a deliberate decision to withhold them.  That would have been sufficient, but the court went on: 

BioPet has not identified how the alleged prior art materially relates to any specific claim in the patent. It has not shown where in the alleged prior art such material references occur, nor has it provided an explanation of how such information would have been useful to the patent examiner.

This decision certainly sets the bar for what is required to plead inequitable conduct under Exergen, Therasense, and Rule 9(b).

On June 23, 2011, The U.S. House passed the America Invents Act, H.R. 1249, by a bipartisan majority of 304 to 117, supported by 168 Republicans and 136 Democrats. In March, the Senate passed a similar bill by a wide margin of 95 to 5. Both patent reform bills would move the United States from a first-to-invent to a first-to-file patent system. Before final passage, however, the House and Senate bills must be reconciled and then approved by both chambers before heading to President Obama’s desk.

By adopting a manager’s amendment offered by House Judiciary Committee Chairman Lamar Smith (R-TX), the House proposed a compromise to the debate over whether the U.S. Patent and Trademark Office (“PTO”) should be able to set its own application fees and retain the revenue from those fees. Currently, fees collected by the PTO are sent to the U.S. Department of the Treasury and the PTO must later request the return of those funds from Congress. Both the Senate version of the bill and the House version approved by the House Judiciary Committee contained provisions that would allow the PTO to set, collect, and retain those fees. In a press release praising the amendment’s passage, Representative Smith stated that

Since 1992, nearly $1 billion has been diverted from the PTO. The average wait time for patent approval is three years. The Manager’s Amendment ends fee diversion by creating a fund for fees collected by the PTO. The money in the fund will be reserved for and used by the PTO and only the PTO. This maintains congressional oversight, while making sure that fees collected by the PTO can no longer be diverted.

This compromise was developed in part due to recent demands from Representatives Paul Ryan (R-WI), Chairman of the House Budget Committee, and Harold Rogers (R-KY), Chairman of the House Appropriations Committee. In a June 6 letter to Representative Smith, they wrote that

Oversight of the PTO belongs with the Congress, and should not be abdicated to the Executive Branch of government…. It would be both irresponsible and unwise to allow the PTO to operate solely under the authority of bureaucrats and White House political appointees – without being held accountable to the American public through their elected Representatives in Congress.

Senator Tom Coburn (R-OK), the sponsor of the Senate amendment to end PTO fee diversion, urged the House to reject the compromise version of the bill, stating that “The House, unfortunately, decided to water down this language and allow the Appropriations Committee to control this account. Unfortunately, the Appropriations Committee has a poor record of managing such accounts responsibly and honestly in this area and others.” Despite this objection, Senator Patrick Leahy (D-VT), sponsor of the Senate patent reform bill, S. 23, was optimistic that the differences between the House and Senate versions were small enough to overcome:

The House-passed bill differs slightly from what the Senate approved overwhelmingly in March, but the core reforms are consistent. Just as the Senate did when it passed the America Invents Act in a significant 95-5 vote, we should come together and approve this bill once again, and send it to the President’s desk to be signed into law.

One of the significant “core reforms” in both bills is the move to a first-to-file patent system. This first-to-file system would grant priority of invention to the first inventor who files a patent application with the PTO. While most countries have adopted the first-to-file system, the United States is an exception in that it currently uses a first-to-invent system.

In contrast to the proposed reform, the current U.S. system grants priority to an inventor who first conceives of the invention, instead of an inventor who first files a patent application. This priority is contingent, however, on the first inventor’s reasonable diligence in reducing the invention to practice. Supporters of the first-to-file system argue that it would reduce the number of priority disputes that frequently arise between parties, while those who oppose the reform argue that it would disadvantage small businesses and individuals.

More information on both the House and Senate bills can be found in our previous posts on the subject: Patent Reform.

Pfizer and Teva started a bench trial on Wednesday over Pfizer's patents on sildenafil (Viagra), before Judge Smith in the Norfolk Division of the EDVA.  Pfizer has two patents on Viagra, one which expires in 2012, and a subsequent patent that extends to 2019.  Pfizer sued Teva for infringement, alleging that Teva's generic version of sildenafil, which it intends to market on March 27, 2012, upon expiration of the earlier patent, would infringe Pfizer's later patent.  Teva has asserted that the subsequent patent is invalid.  On the first day of trial, the parties presented this Joint Stipulation to the Court, where the parties stipulate to the facts that, of the two asserted claims, Teva's generic version does not directly infringe those claims, but does induce infringement of and contributorily infringe those claims, under the Court's claim construction.  The parties then proceeded to Teva's invalidity case.  With sales of Viagra at approximately $1 billion annually (potentially as high as $1.9 billion in 2009), needless to say the case is extremely important to both parties.

 Coverage of the case can be found at the WSJ, Fierce Pharma, and the Virginian Pilot. 

This week, Judge Payne of the Eastern District of Virginia, Richmond Division, dismissed a patent complaint, and counterclaims, sua sponte, for both parties' failure to meet the requirements of Twombly and Iqbal.  Pro se Plaintiffs Saied and Bijan Tadayon filed suit against Execubus, Inc., asserting infringement of US Patent No. 7,031,657.  The complaint identifies the following accused products:  "systems that come within the scope of multiple claims, including (but not limited to) claims 1, 2, 3, 4, 9, 11, 16, 17, 19, 24, and 25 of the '657 Patent," and "Upon information and belief, such systems include, but may not be limited to, the Vamoose's Wi-Fi services/systems which provide Wi-Fi (wireless zone) within its buses, while providing data transmission."  The counterclaims state (1) for noninfringement simply that Exeubus has not infringed, and (2) for invalidity that "[t]he '657 Patent fails to meet the requirements for patentability set forth in 35 U.S.C. § 101, 102, 103, and 112." 

After the counterclaims were filed, but without any motion to dismiss from either party, the Court sua sponte dismissed both the complaint and the counterclaims, with leave to refile a "proper Complaint and a proper Counterclaim that satisfy the pleading requirements set forth in Twombly and Iqbal" as follows:

[T]he Amended Complaint shall set forth, without using terms such as "including (but not limited to)" or "include, but may not be limited to," all aspects of each claim that is alleged to be infringed, claim by claim, and identifying the infringing product (by product by product [sic], by claim) and describe how the infringing product is alleged to offend; and shall not use conclusory language.

If a counterclaim is filed, it shall not use conclusory language and shall comply with the requirements of Twombly and Iqbal with respect to its assertions.

The decision, albeit without much in the way of detailed analysis, is noteworthy for at least three reasons.  First, it was issued without a motion to dismiss by either party.  Second, it prevents the plaintiff from using catchall language such as "including but not limited to" in its identification of the accused products.  And third, and perhaps most importantly, it requires the plaintiff to provide a fair amount of detail in its amended complaint.  I am unaware of any prior decision in this district requiring in the Complaint an identification of each claim asserted, all aspects of each claim alleged to be infringed, and a description of how the infringing product is alleged to infringe, by product, for each claim. 

Over the last several months, patent holder Melvino Technologies Limited, and its Luxembourg-based licensee, ArrivalStar S.A., (together “ArrivalStar”) have filed scores of patent infringement lawsuits targeting a variety of software, retail and transportation companies. In these suits, ArrivalStar asserts a portfolio of patents, broadly covering a number of systems and methods related to vehicle tracking and notification.

For instance, ArrivalStar’s U.S. Patent No. 6,714,859, entitled “User Definable Communications Methods and Systems,” describes a system for tracking the progress of a vehicle in transit through a GPS or other positioning system, storing collected information on a device, and sending notifications to an individual from the device to signal the status – such as the impending arrival – of the vehicle, be it a package-delivering courier, a bus, or aircraft. ArrivalStar’s other patents describe similar systems and methods, some providing for configurable notification, or for additional detail about the vehicle, potentially allowing an individual to reroute a shipment or otherwise request changes to the vehicle’s route in real time.

Such technology and systems have, in some form or another, become commonplace and indispensable within retail and other industries. It is no surprise then that ArrivalStar’s lawsuits have named not only software producers and transportation and shipping companies, but many of the largest retailers in the United States, including Best Buy, Home Depot, Abercrombie and Fitch Stores, Barnes & Noble, Macy’s, Toys “R” Us, and Kohl’s.

Through its demand letters, ArrivalStar claims to have licensed its patents to “over 170 companies in the transportation, transportation logistics, cargo shipment, package delivery and related industries.” Several of the targets of such letters have responded to ArrivalStar’s offer to license its patents with declaratory judgment actions, filing suit against ArrivalStar and seeking declarations that the patents are invalid and/or that there was no infringement of the asserted claims.

With a dozen lawsuits filed between April and June 2011 alone, ArrivalStar continues to pursue companies who have developed or use vehicle tracking and notification systems. Software, transportation and retail companies should monitor the ArrivalStar lawsuits, form defense groups to more efficiently and effectively deflect and defeat these patents suits, and consider declaratory judgment actions to control the timing and venue of any action.

On June 1, 2011, House Judiciary Committee Chairman Lamar Smith (R-TX) submitted the committee’s report on H.R. 1249, the America Invents Act, to the full House.  The committee recently voted 32 to 3 in favor of sending the patent reform bill to the House floor for consideration.  Included in the report was a letter from the Secretary of Commerce, Gary Locke, expressing the Administration’s approval of the bill.  In part, Secretary Locke stated that

we supported passage of the Senate’s recent patent reform legislation, S. 23, and welcome the House Judiciary Committee’s timely consideration and approval of an amended version of H.R. 1249.  These two bills are identical in many respects, and we are confident that the variations between the two can be resolved and that enactment of a bipartisan consensus is within reach.

There are many similarities between the House and Senate bills, the most significant being the adoption of a first-to-file patent system.  See our previous posts on the subject here and here.  Among the differences is the treatment of the “prior user defense.”  Under current law, the prior user defense may be raised only by a party accused of infringing a business method patent.  Generally, if the defendant is able to show a reduction to practice at least one year before the patent filing date and commercial use before that date, the defendant “prior user” is not liable for infringing the patent.

Whereas the Senate bill only requires a study and report of the issue, the House bill would actually expand the prior user defense to all patents, with exceptions only for certain federally funded organizations.  In his letter, Secretary Locke indicated that the Administration supports the House’s attempt to expand the prior user defense, stating that “[a]s a matter of fairness, we believe that innovators who independently create and commercialize technology should not be penalized for, or deprived of, their investment.  As a result, we believe that the availability of a prior user defense is, on balance, good policy.”

Also included in the report were dissenting views from Rep. John Conyers, Jr. (D-MI) and additional views from Reps. Howard Berman (D-CA), Melvin Watt (D-NC), and Zoe Lofgren (D-CA).  Those representatives who submitted additional views stated objections to certain provisions of the proposed post-grant review process.  Among other issues with the House bill, Rep. Conyers voiced his disagreement with a section that proposes a retroactive post-grant review of financially-related business method patents:

[I]t is unfair and inappropriate to force specific patent holders that have been through reexamination, or that have survived years of legal challenge, to defend their patents under an entirely new set of rules at the USPTO.  It is also contrary to patent law norms and establishes a bad precedent for our trade partners to force a small subset of patent holders—those who have invented financially-related business methods and associated apparatus—to defend themselves in a new, retroactive procedure that does not apply to other patent holders.

In support of this provision, Secretary Locke stated that it would “enable the USPTO, upon petition, to review the validity of a limited range of business method patents to address particular challenges faced in this technology area as a result of case law developments.”

Of particular interest to practitioners in the Eastern District of Virginia is a provision in both the House and Senate bills that would change the venue for challenging certain USPTO decisions from the District of Columbia to the Eastern District of Virginia.  The report states that this is an effort to correct an inadvertent inconsistency in prior legislation: “Because the USPTO no longer resides in the District of Columbia, the sections that authorize venue for litigation against the USPTO are consistently changed to reflect the venue where the USPTO currently resides.”

While the America Invents Act continues on its path toward becoming law, there are still opportunities for significant amendments.  Although a date to consider the House bill has not been set, it has been placed on the House Union Calendar. Moving forward, not only will the full House have a chance to amend or reject the bill, but even if approved, the House and Senate bills must then be reconciled and approved by both chambers before finally heading to President Obama’s desk.

As the bill moves through this process, the present status can be found on the Library of Congress’s legislative information website, THOMAS.  The full text of the House bill in its current form is available here.

Over the last few months, Walker Digital, a patent holding company formed by Priceline.com founder Jay Walker, has filed infringement suits against over 100 companies, particularly targeting the video game industry. Given the number of suits, the breadth of the asserted claims and Walker Digital’s purported resources, these lawsuits are likely to entangle others in the gaming industry.

 

In January, 2011, Walker Digital filed its first suit in federal court in Delaware against Activision and Blizzard (Call of Duty, DJ Hero 2, World of Warcraft) and Zynga (Farmville), alleging infringement of U.S. Patent No. 6,425,828 (“the ‘828 Patent”), regarding a method for conducting a networked electronic tournament for multiple players and storing player information. While games developed by these companies require individual player accounts, they are not traditional “tournament” games.

 

A few months later, Walker Digital filed another lawsuit in Delaware asserting the ‘828 Patent, as well as a related patent, U.S. Patent No. 6,224,486 (“the ‘486 Patent”), targeting a number of other gaming developers and publishers, including Electronic Arts (Madden, Medal of Honor), Microsoft (Halo, Gears of War), Rockstar (Red Dead Redemption), and Ubisoft (Assassin’s Creed).

 

In these complaints, Walker Digital alleges that the defendants have used the patented technology for tournament games to “exchange information with a central computer to influence game play, and also store certain information that is available for use in subsequent tournament play.” The patents’ specifications reveal that they are broadly directed at methods and devices for conducting multiple tournaments wherein player information is collected and stored from one tournament to the next. Ostensibly, this would seem to reach many games played online.

 

In May 2011, Walker Digital filed yet another lawsuit in Delaware, this time alleging that a number of gaming companies, including Cryptic (Star Trek Online), Electronic Arts, and Zynga, had infringed its U.S. Patent No. 6,527,638 (“the ‘638 Patent”), directed at a “Secure Improved Remote Gaming System.” According to the May complaint, the ‘638 Patent describes a means whereby users obtain gaming credits, such as from prepaid cards, rather than from some form of direct payment. The complaint specifically alleges infringement of, at least, claim 11 of the ‘638 Patent, which recites a method for a device to receive credit by means of an “encoded credit value code” provided by the player and decoded by a gaming device, thereby enabling the player to play a game. The asserted claims of this patent are also broad, and could read on any of a number of games incorporating prepaid credit.

 

In an April press release, Walker Digital’s CEO indicated that the lawsuits were filed in response to the defendant companies’ unwillingness to take licenses under the asserted patents. Whether the defendants’ games in fact “depend on” the patents, as Walker Digital believes, is uncertain.

 

Further, there are early indications of prior art that could be used to challenge the validity and scope of these patents.

 

Nevertheless, Walker Digital appears resolute as it continues to target the gaming industry. Gaming companies should take note, monitor the status of the Walker Digital suits, and consider proactive measures such as Declaratory Judgment actions, to preempt the next wave of lawsuits.

United States Patent and Trademark Office (USPTO) Director David J. Kappos sent an April 21 e-mail message to agency employees announcing spending cuts as a result of Congress’s decision not to give the USPTO access to all the fees it collects this year (FY 2011). The most recent federal budget compromise (H.R. 1473, the Full-Year Continuing Appropriations Act, 2011) will force the USPTO to cut approximately $100 million from USPTO collected fees and divert that money to other federal programs.

 

Thus, effective immediately, and likely beyond the end of FY 2011 (September 30, 2011), Director Kappos announced the following cost cutting measures have been implemented:

• The Track I prioritized patent examination program, scheduled to go into effect on May 4, 2011, is indefinitely postponed;
• All overtime is suspended until further notice;
• Hiring – both for new positions and for backfills – is frozen for the rest of the year unless an exemption is given by the Office of the Under Secretary;
• Funding for employee training is limited to mandatory training for the remainder of the year;
• Funding for Patent Cooperation Treaty (PCT) outsourcing is significantly reduced;
• The opening of the planned Nationwide Workforce satellite office in Detroit and any consideration of other satellite locations are postponed until further notice;
• Limited funding is available only for mission-critical IT infrastructure investments;
• Business units are required to reduce all other non-compensation related expenses, including travel, conferences and contracts.

These cuts will have a negative impact on the patent examination process. The USPTO is already faced with a backlog of pending patent applications. Each cut, particularly eliminating overtime for patent examiners as well as the hiring freeze, will likely set back the agency’s progress in reducing the patent application backlog. Furthermore, the Track I prioritized patent examination program has been indefinitely postponed, thus patent applicants no longer have a means to expedite the examination process. Members of the patent community have voiced strong objections to these cuts.

The United States Patent and Trademark Office (PTO) announced on April 4, 2011 that it will begin accepting requests on May 4, 2011 for prioritized examination of patent applications – allowing inventors and businesses to get their patent applications processed within twelve months. Under this program, eligible applications will be accorded special status and placed on the examiner’s special docket throughout prosecution until final disposition. At this time, the PTO is limiting such requests to a maximum of 10,000 applications during fiscal year 2011, which ends September 30th.

The most significant aspect of this program, known as Track I, is the twelve month turnaround from application to final disposition. It is important to note that a twelve month turnaround is defined as a goal “in the aggregate,” for all the prioritized applications handled, and not for any one application. Therefore, an applicant would not be guaranteed a final disposition within twelve months. However, in comparison to the current three year average to process a patent, prioritized applications will certainly proceed faster than the current process.

Also, “final disposition” is not simply allowance or rejection, but could also occur upon one of three actions by the applicant: (i) filing a notice of appeal; (ii) filing a request for continued examination; or (iii) abandonment of the application. The PTO will not refund the prioritized examination fee under any of these circumstances, and the prioritization status does not extend to RCE applications or to actions taken up by the Board of Patent Appeals and Interferences (BPAI). Moreover, extension of time requests and requests for Suspension of Action will also terminate the prioritized examination proceedings.

Track I prioritized examination will become available for any original, continuation, or divisional utility or plant application filed on or after May 4, 2011. Track I is not available for international applications (including PCT applications that have entered the US stage), design applications, reissue applications, provisional applications or reexamination applications.

Eligible applications, except for plant patent applications, must be electronically filed with no missing parts, with all requisite fees, and with a request for prioritized examination. Applications may contain no more than four independent claims and no more than thirty total claims. The application may not contain any multiple dependent claims. Amendments resulting in claims not in compliance with program limits will terminate the prioritized examination proceedings.

Filing a request for prioritized examination through Track I will require a fee under 37 CFR § 1.102(e) of $4,000, in addition to filing fees for the application. At this time, there is no discount for small entities. Adding the standard processing fees, which are discountable for small entities, a corporate applicant choosing prioritized examination will pay $5,090, with the small-entity applicant paying $4,545, assuming the application conforms to the standard three independent claim and twenty total claims limit. However, the patent reform bills in Congress, S. 23 and H.R. 1249, would specifically allow the 50 percent discount for small entities filing an application under the Track I program. Should the 50 percent small-entity discount become available, the prioritized examination fee is expected to change to $4,800 for a corporate applicant, and hence $2,400 for small-entity applicants. The PTO explained that this large fee for prioritized examination would include the cost of hiring and training additional examiners in an attempt to prevent non-prioritized applications from being delayed as a result of diverting resources to process the prioritized applications.

The final rule is available on the PTO website.

On April 14, 2011, the America Invents Act continued to move forward as the House Judiciary Committee voted 32 to 3 in favor of sending the patent reform bill to the House floor for consideration. In March, the Senate approved a similar bill by a wide margin of 95 to 5. Both bills would change the United States from a first-to-invent to a first-to-file patent system. More information on the Senate bill and different filing systems can be found in our previous posts on the subject.

Urging support among his colleagues, the bill’s primary sponsor, House Judiciary Committee Chairman Smith (R-TX), stated that “[t]he current patent system is outdated and dragged down by frivolous lawsuits and uncertainty regarding patent ownership. Unwarranted lawsuits that typically cost $5 million to defend prevent legitimate inventors and industrious companies from creating products and generating jobs.”

However, Rep. Sensenbrenner (R-WI), one of the members who voted against the bill, questioned the constitutionality of the move to a first-to-file system, arguing that “our courts from the earliest days of the republic have recognized that the right that is contained in the Constitution accrues from the time of the invention rather than the time the invention is patented.” Also voting against the bill were Rep. Conyers (D- MI) and Rep. King (R-IA).

While the America Invents Act continues its march toward becoming law, there are still opportunities for significant amendments. Not only will the full House have a chance to amend or reject the bill, but even if approved, the House and Senate bills must then be reconciled and approved by both chambers before finally heading to President Obama’s desk.

As the bill moves through this process, the summary and present status can be found on the Library of Congress’s legislative information website, THOMAS. The House Judiciary Committee has also established a website with full details of its markup of the bill.

On Wednesday, March 30, 2011, a U.S. House subcommittee will consider the patent reform bill titled the “America Invents Act.” The Senate passed a bill by the same name on March 8, 2011, by a vote of 95-5. While the House version of the bill has not yet been made public, Practicing Law Institute reports that the draft being circulated does contain language that would change the U.S. to a “first-to-file” patent system, which would parallel the Senate bill. The hearing is scheduled for 1:30 p.m. in the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet.

Both the Chairman of the House Subcommittee, Rep. Bob Goodlatte (R-VA6), and the Vice-Chairman, Rep. Howard Coble (R-NC6), have had some experience with patent reform in the past, as they co-sponsored the ultimately unsuccessful Patent Reform Act of 2005, according to Dennis Crouch of the Patently-O blog. The 2005 bill contained a provision that would have changed the U.S. to a “first-to-file” patent system as well. Rep. Lamar Smith (R-TX21), the sponsor of the 2005 bill, is the Chairman of the House Judiciary Committee.

More information regarding the subcommittee’s hearing on the America Invents Act can be found here. For an explanation of the “first-to-file” versus the “first-to-invent” system, see our previous posts. The summary, full text, and present status, of the Senate bill can be found on the Library of Congress’s legislative information website, THOMAS.

On February 23, 2011, the U.S. District Court for the Northern District of Ohio found the statutory basis for false patent marking lawsuits, 35 U.S.C. § 292, unconstitutional under the Take Care Clause of Article II, United States Constitution.

Under Section 292, one who falsely marks products as being covered by invalid or expired products may be fined up to $500 "per offense." Although the statute was long-interpreted to prescribe such a fine for each decision to falsely mark, the Federal Circuit held in December 2009 that Section 292 "clearly requires a per article fine." This pronouncement has encouraged the bringing of lawsuits under Section 292, a qui tam statute under which any private citizen, whether harmed by the false marking or not, may sue and split any award with the government.

Pending legislation in the House of Representatives proposes to remove standing under Section 292 from non-competitors, or to modify Section 292 to provide a fine for each decision to falsely mark, rather than for each falsely marked article. Such legislation, if passed, is likely to reduce drastically the numbers of false marking lawsuits.

In the meantime, false patent marking battles continue to be fought in the courtroom. While settlement figures in false patent marking cases have been "modest," and while many cases have been resolved in favor of defendants for lack of intent to deceive, the Northern District of Ohio, in Unique Product Solutions Ltd. v. Hy-Grade Valve Inc., is the first court to declare Section 292 unconstitutional.

In Unique Product Solutions, defendant Hy-Grade, accused by plaintiff of falsely marking "a series of industrial valve products" as being covered by an expired patent, argued that Section 292 was unconstitutional under the Take Care Clause of Article II, which provides that the President "shall take Care that the Laws be faithfully executed." The Northern District of Ohio agreed with Hy-Grade, and pointed to the 1988 Supreme Court decision in Morrison v. Olson in holding that Section 292 "lacks any of the statutory controls necessary to pass Article II muster."

In Morrison, the court explained, the Supreme Court had held that the qui tam provisions of the False Claims Act were constitutional because such provisions were "crafted with particular care to maintain the primacy of the Executive Branch in prosecuting false-claims actions." By contrast, Section 292, according to the Ohio court, "essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice." In so characterizing Section 292, the court noted that, under the statute, a private citizen may bring an action without seeking approval from, or even notifying, the government, and that the government may not exercise control over, intervene in, or dismiss the action – despite the fact that such action is brought on its behalf. For various policy reasons, the court concluded that it is "essential that the government have control over when [false marking] cases are brought, and …. how they are settled." Because Section 292 does not provide the government with sufficient control, the court held, it is unconstitutional.

While an appeal to the Federal Circuit could be the next step for the plaintiff in Unique Product Solutions, the very same issue is  already before the Federal Circuit in another case, FLFMC LLC v. Wham-O, Inc.

The America Invents Act, formerly the Patent Reform Act of 2011, cleared an important legislative hurdle on March 8, 2011, when the U.S. Senate passed the bill with a bipartisan vote of 95 to 5. Although certain provisions were amended before passage, the Senate retained a key provision that would move the United States to a first-to-file patent system. The bill now heads to the House for consideration.

This first-to-file system would grant priority of invention to the first inventor who files a patent application with the U.S. Patent and Trademark Office. While most countries have already adopted the first-to-file system, the United States is an exception in that it currently uses the first-to-invent system.

In contrast to the proposed reform, the current U.S. system grants priority to an inventor who first conceives of the invention, instead of an inventor who first files the patent application. This priority is contingent, however, on the first inventor’s reasonable diligence in reducing the invention to practice. Under the current system, priority disputes arise between parties regarding alleged dates of conception and adherence to the diligence rule.

Supporters of the bill argue that U.S. innovation is falling behind other countries in part because of the first-to-invent system. Urging reform, Senator Patrick Leahy (D-VT) stated that a dispute to resolve priority of invention "typically costs at least $400,000 in legal fees and even more if the case is appealed. By comparison, establishing a filing date through provisional application to establish priority of invention costs just $110."

While the bill received strong bipartisan support, not everyone is on board with reforming the patent-filing system. Senator Dianne Feinstein (D-CA), for example, proposed an amendment to strip the bill of the first-to-file reform. In support of the amendment, Senator Reid (D-NV) argued that the current system "comports with the reality of small entity financing through friends, family, possible patent licensees, and venture capitalists. The [current system] allows small inventors to have conversations about their invention and to line up funding before going to the considerable expense of filing a patent application." The Feinstein amendment failed by a vote of 87 to 13, and the patent-filing reform remains a part of the bill that the House will consider.

The summary, full text, and present status, of the bill can be found on the Library of Congress’s legislative information website, THOMAS.

 

Judge Norman K. Moon recently issued an opinion regarding a motion to change venue in Greenberry’s Franchising Corp. v. Alice Y. Park et al.  Plaintiff Greenberry’s Franchising Corporation (“Greenberry’s”) brought an action against Defendants Alice Y. Park, Brian T. Park, GNT Enterprises, Inc. (“GNT”), Anthony D. Han, and Han Holding, Inc. (“Han Holding”) (collectively “Defendants”) for trademark infringement in violation of the Lanham Act, 15 U.S.C. §§ 1051 et seq. and various Virginia state law and common law claims.  Greenberry’s filed suit in the United States District Court for the Western District of Virginia, Charlottesville Division, on August 12, 2010.  The matter before the Court was the Motion of Defendants Alice Y. Park, Brian T. Park and GNT to Change Venue, the Motion of Defendants Anthony D. Han and Han Holding, Inc. to Adopt and Conform, and the Motion of Defendant Han Holding, Inc. to Dismiss All Claims Against Han Holding, Inc. for Failure to State a Claim Upon Which Relief May be Granted.  Judge Moon granted the motion to change venue and the motion to adopt and conform, but did not decide the motion to dismiss because the matter will be transferred to the United States District Court for the Eastern District of Virginia, Alexandria Division.

 

 

Greenberry’s first entered into a franchise agreement to operate a Greenberry’s coffee shop in Leesburg, Virginia with MHG Leesburg, LLC (“MHG”), which is not a party to this action.  MHG transferred the Leesburg Franchise to Alice Park with Greenberry’s consent.  Pursuant to that transfer, Greenberry’s, Alice Park and MHG entered into a Transfer and Release Agreement (“Transfer Agreement”), thereby transferring all right, title and interest of MHG in the franchise to Alice Park.  The Transfer Agreement also contained a forum selection clause that selected “a court of competent jurisdiction within the City of Charlottesville or County of Albemarle, Virginia.”  Greenberry’s and Alice Park also executed a new Franchise Agreement which did not contain a forum selection clause.

 

 

Greenberry’s alleged that, without authorization from Greenberry’s, Alice Park transferred her Leesburg Franchise to either or both of Han and Han Holding, giving it or them access to and use of the Greenberry’s proprietary system relating to the establishment, development, and operation of a coffee shop and café.  The complaint stated ten counts, all arising from Alice Park’s transfer of the Leesburg Franchise.  Defendants moved to transfer the venue to the Eastern District of Virginia, Alexandria Division, pursuant to 28 U.S.C. § 1391(b) or 28 U.S.C. § 1404.

 

 

Venue in a civil action wherein jurisdiction is not founded solely on diversity of citizenship is governed by 28 U.S.C. § 1391(b), which provides in pertinent part that venue is proper only “in a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred….”  When venue is challenged, the burden is on the plaintiff to prove that venue is proper in the chosen forum for each defendant.  Furthermore, even where venue is proper, “a district court may transfer any civil action to any other district or division where it might have been brought” if such transfer is for the convenience of the parties and witnesses and in the interests of justice.  28 U.S.C. § 1404(a).

 

 

The Court held that, with one exception, Greenberry’s failed to show that the Western District of Virginia is the proper venue to bring these claims.  The Leesburg Franchise, which is at the center of the controversy, was located in the Eastern District of Virginia.  As a result, the allegations of wrongful conduct (i.e., the alleged breach of contract, the allegedly tortious interference with contract and business relations and expectancy, the alleged conspiracy, the alleged conversion of assets, the alleged computer fraud or trespass, and the alleged infringement on the trademarks) occurred, if at all, in the Eastern District of Virginia.  Greenberry’s maintained that Alice Park committed numerous contract breaches within the Western District of Virginia.  But the Court held that each of those alleged breaches related to the manner in which Alice Park operated the Leesburg Franchise in the Eastern District of Virginia and only had a tangential nexus to Greenberry’s place of business in the Western District, despite the fact that the Franchise Agreement and the Transfer Agreement were negotiated and executed at least in part in the Western District.  Greenberry’s did not meet the burden of alleging that a substantial part of the events giving rise to the breach of contract claim occurred in the Western District.  Furthermore, the fact that the proprietary system, confidential information, and trademarks that allegedly were misappropriated in the Eastern District were “created and developed” in the Western District at some point in the past for general use in franchising the Greenberry’s system was held to be too remote an event to render venue proper.

 

 

Although the Court found that venue was not proper in the Western District of Virginia for counts two through ten, count one stated a cause of action for breach of the Franchise Agreement and the Transfer Agreement.  The Transfer Agreement contained the forum selection clause indicated above.  As a result, the Eastern District of Virginia was not an appropriate venue for the breach of the Transfer Agreement complaint against Alice Park because it was not a court selected in the forum selection clause.  However, the Court found that, in the interests of convenience, efficiency, and justice, the breach of the Transfer Agreement claim should nevertheless be heard with the other claims in the Eastern District and, therefore, transferred it to the Eastern District pursuant to 28 U.S.C. § 1404(a).  Having transferred the entire case to the Eastern District of Virginia, Judge Moon did not rule on the motion to dismiss.

This Monday, February 28th, the U.S. Senate will have an opportunity to consider its first overhaul of United States patent law in almost 60 years. On February 3rd, a unanimous and bipartisan group of Senators, led by the bill’s authors Patrick Leahy (D-VT), Orrin Hatch (R-UT), and Chuck Grassley (R-IA), ushered the Patent Reform Act of 2011 through the Judiciary Committee and recommended the bill to the Senate floor. The Senate has since agreed to bring the bill to the floor this Monday.

 

Among other reforms, the Patent Reform Act of 2011 would bring a first-to-file patent system to the United States. This first-to-file system would grant priority of invention to the first inventor who files a patent application with the U.S. Patent and Trademark Office. While most countries have already adopted the first-to-file system, the United States is an exception in that it currently uses the first-to-invent system.

 

In contrast to the proposed reform, the current U.S. system grants priority in an inventor who first conceives of the invention, instead of an inventor who first files the patent application. This priority is contingent, however, on the first inventor’s reasonable diligence in reducing the invention to practice. Often under the current system, priority disputes arise between parties regarding alleged dates of conception and adherence to the diligence rule.

 

In addition to adopting the first-to-file system, the bill also contains provisions that would change certain aspects of patent practice for parties working with the U.S. Patent and Trademark Office, as well as parties involved in patent litigation. The Congressional Research Service (“CRS”) has produced a summary of the bill as it is currently written. In part, the CRS states that the bill also:

--Sets forth a damages determination procedure that requires the court or jury to consider only court-identified methodologies and factors.

--Authorizes the court to increase damages up to three times (treble damages) the amount found or assessed (inapplicable to specified royalties for provisional rights to inventions claimed in published applications).

--Allows any party to request that the trier of fact decide infringement and validity questions before the issues of damages and willful infringement are tried (commonly referred to as sequencing or bifurcation).

--Revises specified defenses and evidentiary requirements, including a bar on using an accused infringer's failure to obtain the advice of counsel to prove that any infringement was willful or induced.

--Allows a person who is not the patent owner to request to cancel as unpatentable one or more claims of patent by filing a petition with the USPTO to institute: (1) post-grant review on any ground that could be raised under specified provisions relating to invalidity of the patent or any claim, and (2) inter partes review (replaces inter partes reexamination procedures) on specified novelty and nonobvious subject matter grounds based on prior art consisting of patents and printed publications.

--Limits the filing of petitions for post-grant review to the nine-month period beginning after the grant of patent or issuance of a reissue patent.

--Requires any petition for inter partes review to be filed after the later of: (1) nine months after the grant or reissue, or (2) the date of termination of a post-grant review.

The summary, full text, and present status, of the bill can be found on the Library of Congress’s legislative information website, THOMAS.

 

While bringing the Patent Reform Act before the full Senate is a milestone for the bill, it does not guarantee that it will pass without significant amendments or that it will become law at all. There are still several steps even if it passes in the Senate. First, the House would also have to consider the bill, make its amendments, and approve it. Following passage in the House, a conference committee consisting of members from the Senate and the House would meet, negotiate changes, and agree to send the bill back for approval by both chambers. It would then only become law after both chambers pass the negotiated bill and the President signs it. In short, there are still many opportunities for significant changes to the Patent Reform Act of 2011, including the possibility that Congress does not pass it at all.

 

If Congress does pass the bill with the key provisions intact, however, it would mean significant changes in patent practice for individual inventors, businesses, patent attorneys, and other stakeholders as well.

The amicus briefs poured in last week as a host of high-tech companies and other firms weighed in on an upcoming patent fight at the Supreme Court. The case is Microsoft v. i4i Limited Partnership. On November 29, 2010 the Supreme Court granted Microsoft’s petition for certiorari to hear whether the court of appeals erred in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence.

Specifically, the Supreme Court will consider the appropriate standard to use when reviewing the validity of a patent. The Patent Act provides that “[a] patent shall be presumed valid” and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C. § 282. The statute does not, however, specify the standard for overcoming this presumption. Federal courts traditionally have required that a party challenging the validity of a patent prove that it is invalid by clear and convincing evidence. Indeed, the Federal Circuit held below that Microsoft was required to prove its defense of invalidity under 35 U.S.C. § 102(b) by “clear and convincing evidence,” despite the invalidity defense resting on prior art not considered by the U.S. Patent and Trademark Office (PTO) prior to the issuance of the asserted patent.

Microsoft argues that this heightened standard is inappropriate in this situation. Because the challenge to the validity of the patent includes evidence that the PTO did not consider at the time it issued the i4i patent, Microsoft argues that the standard should be a lower, “preponderance of the evidence,” standard. Microsoft and companies supporting the petition want changes that would ease standards of review so that allegedly “poor quality” software patents might be overturned. In effect, Microsoft argues that the clear and convincing standard prevents invalidation of patents that should never have been granted.

Microsoft acknowledges that the Federal Circuit applies a heightened standard of review even when the invalidity defense is based on prior art evidence that was never presented to or considered by the PTO in issuing the patent. Nonetheless, Microsoft argues that in KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007), the Supreme Court “th[ought] it appropriate to note that the rationale underlying the presumption – that the PTO, in its expertise, has approved the claim – seems much diminished” where an invalidity defense rests on evidence that the PTO never had an opportunity to consider. Id. at 426. Despite this language in KSR, the Federal Circuit has repeatedly applied a heightened evidentiary standard. Accordingly, Microsoft and other supporters of the petition urge the Supreme Court to codify KSR’s invitation to reconsider the heightened evidentiary standard, particularly when the invalidity defense rests on new evidence the PTO did not consider in issuing the patent.

In contrast, i4i argues that any such change to existing burdens of proof should be dictated by Congress, not by the courts. Along with i4i, numerous parties urge the Court to reject the Microsoft petition, setting forth the historical development of the presumption of validity and the corresponding heightened standard of proof required to support an invalidity defense. The i4i brief cites long-standing precedent invoking the heightened standard of proof, noting in particular that nothing in these cases indicates that the PTO had previously considered the evidence for invalidity or that the burden of proof would be lower when considering new evidence. i4i also argues that when the 1952 Patent Act codified the common law presumption of validity, it did not alter the heightened standard of proof for facts supporting invalidity.

Furthermore, the opposition argues that this heightened standard of proof for invalidity arose not only out of deference to the administrative decisions of the PTO, but also as a means to encourage inventors to enter into the underlying bargain of the American patent system: detailed disclosure of an invention to the public in exchange for exclusive rights to the invention for a limited time. In effect, lowering the standard of proof would permit the invalidation of patents based on unreliable evidence, thus removing the protection the heightened standard of proof provides inventors from the inevitable vulnerability brought about by the public disclosure of their inventions.

In short, the outcome of this case may have significant ramifications for individuals and companies who hold patents. If the Supreme Court holds that a lesser evidentiary standard is appropriate in situations where the PTO did not consider all the evidence, patent holders may have a more difficult time upholding their patents. On the other hand, parties challenging the validity of a patent will have a smaller hurdle to overcome. What is more, the outcome of this case may impact the likelihood of settlements in future patent litigation. By lowering the standard of proof required to invalidate a patent, parties accused of infringement might feel less inclined to settle because there will be a greater chance of invalidating the patent in question. The Supreme Court will hear oral arguments for Microsoft v. i4i Limited Partnership on Monday, April 18, 2011. The Court is expected to render a decision by June 2011.

On January 12, 2011, the United States District Court for the Western District of Washington denied a motion to dismiss, among other claims, a claim of contributory cybersquatting asserted by plaintiff Microsoft in Microsoft v. Shah, et al., case No. 2:10-cv-00653-RSM.

 

In Shah, Microsoft alleges that a pair of individuals, Amish P. Shah and Jose A. Rivera, and a pair of companies, Digispace Solutions LLC and yMultimedia LLC, committed acts of trademark infringement and unfair competition, as well as violated the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) ("ACPA").  Specifically, Microsoft asserts that the defendants not only registered and operated domain names that incorporated Microsoft trademarks, or misspellings thereof, in order to drive traffic to their emoticon e-business, but also induced, or attempted to induce, third parties to do the same.  Defendants' websites both "provided instructions" to third parties "for how to misleadingly use Microsoft marks" and supplied software to enable such misuse.  These actions, Microsoft argue, give rise to a claim for contributory cybersquatting.

 

The court was not persuaded by defendants’ motion to dismiss the claim, which was based on defendants' assertion that "[n]o court has recognized a cause of action for induced violations of the ACPA" and that prior courts addressing such a claim had concluded that it "would apply, 'if at all, in only exceptional circumstances.'"  The court cited to Ford Motor Co. v. Greatdomains.com, in which the Eastern District of Michigan, although it ultimately dismissed a similar claim on motion, had "noted that [its analysis of contributory liability], while traditionally applied to trademark infringement, could potentially be applied to allegations of cybersquatting."

 

One wrinkle, the Shah court noted, in applying contributory liability to cybersquatting is that the ACPA "requires a showing of 'bad faith intent,' which is not a requisite element under traditional trademark infringement, unfair competition, or dilution causes of action."  The Ford court had been forced to dismiss the claim for contributory cybersquatting because the plaintiff could not show bad faith on the part of the alleged contributory infringer, who in that case had "simply provide[d] a marketplace where a trade in domain names [could] take place."  By contrast in Shah, the defendants "allegedly developed and marketed a method, the sole purpose of which was to allow purchasers to profit from the illicit use of Microsoft marks" and therefore "should have known that [any such] purchasers … could not have had a legitimate reason for purchasing the method."

 

The Shah court thus concluded that Microsoft's pleading had met the heightened standard required by the ACPA, and accordingly dismissed the defendants' motion to dismiss this claim.  The court further concluded that a cause of action for contributory cybersquatting is squarely within the ambit of the ACPA, as the "practice of instructing others on how to engage in cybersquatting runs counter to the purpose" of the statute.  To decline to recognize such a cause of action, the court reasoned, would be to "unduly constrain the protections [the ACPA] is meant to afford against cybersquatters."

PWC recently released its 2010 Patent Litigation Study (available here), and the results may be somewhat surprising.  On the one hand, it should surprise no one that juries continue to hand down higher patent damages awards than judges, and the disparity between the two is growing larger.  In the 1990s, the median award was $5.5 million for jury trials and $3.4 million for bench trials.  In the 2000s, the median award for jury trials increased dramatically to $10.7 million, while the median award for bench trials dropped precipitously to just $0.7 million. 

What may be surprising, however, is the success that Non Practicing Entities (NPEs) are having in persuading juries to award substantial damages awards.  During the 14-year period of the study, both NPEs and practicing entities have an approximate two-third success rate at trial.  However, the tables have turned as to who now gets higher damages awards.  From 1995-2001, NPEs were awarded a median of $5.2 milliion in damages, compared with $6.3 million for practicing entities.  From 2002-2009, by contrast, those roles were reversed, with NPEs receiving a median damages award of $12.9 million, compared with $3.9 million for practicing entities. 

And not surprisingly, the PWC study concludes that the venue still matters very much to the outcome of any patent litigation.  The District of Delaware, and the Eastern Districts of Texas and Virginia, continue to favor patentholders, who enjoy faster times to trial, higher success rates, and higher median damages awards there than in other districts.  In fact, the Eastern District of Virginia issued the highest median damages award from 1995-2009 at $30.3 million (Delaware came in second at $21.6 million, and the ED Texas third at $19.7 million). 

In light of recent damages rulings by the Federal Circuit, including the January 4 decision in Uniloc v. Microsoft, however, it remains to be seen whether these numbers will continue to remain at these levels.

On September 27, 2010, the Department of Defense (“DOD”) published a proposed rule that would significantly revise the Defense Federal Acquisition Regulation Supplement (“DFARS”) Part 227, “Patents, Data, and Copyrights.” 75 Fed. Reg. 59,412 (Sept. 27, 2010).

The Proposed rule includes many significant changes but those that specifically relate to commercial data entitle the DOD to the following:

1. Obtain unlimited rights in certain commercial technical data, including form, fit, and function data, and data necessary for “operation, maintenance, installation, or training.”  Proposed DFARS § 252.227-7015(b)(2);

2. “[A]ccess, use, modify, reproduce, release, perform, display, or disclose” commercial technical data, which includes computer software documentation, within the government if such an action is necessary for “emergency repair or overhaul,” or to foreign governments for evaluation or informational purposes.  Proposed DFARS§ 252.227-7015(b)(3);

3. Require contractors to identify and mark all commercial data provided to DOD with restrictions on use, release, disclosures, etc.  Proposed DFARS § 252.227-7015(d);

4. Unilaterally determine if the software is improperly marked, and in “urgent and compelling circumstances access, use, modify, reproduce, release, perform, display or disclose computer software or technical data as necessary to address said urgent and compelling circumstances....”  Proposed DFARS § 252.227-7037(f)(3)(ii); and

5. Order certain commercial data on a deferred basis for up to three years.  Proposed DFARS § 252.227-7027. 

Clearly, these proposed changes are an expansion of DOD rights in commercial computer software and technical data.  Currently, the DOD is required to purchase commercial data on the same terms that the software or data is licensed to the public.  DFARS §227.7202-1(a).  And while the Proposed DFARS purports to require the DOD to purchase commercial data using the commercial license, it also prohibits any commercial license terms that are “inconsistent with Federal procurement law.”  Proposed DFARS § 252.227-7015(b)(1).  In an attempt to alleviate any ambiguity from the prohibition on inconsistent terms, the proposed clause incorporates “severability” language, which explicitly strikes such terms from the license.  Further, the clause envisions the parties negotiating “any issues raised by the elimination of license terms or conditions,” which, presumably, may occur during performance of the contract.

An additional striking change to the traditional practice of most commercial vendors is the requirement in Proposed DFARS § 252.227-7015(d), which will require all commercial software and technical data to be marked, regardless of whether it is purchased pursuant to a commercial license.  Not only must a prime contractor adjust its practices accordingly, but also such requirements must flow down to any subcontractors providing commercial software and technical data.  Proposed DFARS § 252.227-7015(f).

Moreover, the revisions include a Proposed DFARS Deferred Ordering ,clause whose applicability to commercial items does not appear entirely clear.  Specifically, the government’s right to order technical data or computer software on a deferred basis for up to three years appears to be limited to “any technical data or computer software created or developed in the performance of this contract or any subcontract hereunder.”  Proposed § 252.227-7027(a). However, the clause goes on to state that the government’s rights in such data will be subject to the appropriate data rights clause, including DFARS § 252.227–7015, Rights in Technical Data and Computer Software—Commercial.  Proposed § 252.227-7027(d)(3).  Application of the deferred ordering clause to commercial software and technical data delivered to the government from both a prime contractor and its subcontractors creates a novel requirement for commercial vendors that may be at odds with standard business practice.  Further, this requirement has the potential to undercut a contractor’s ability to protect commercial data, developed at private expense.  Currently, the best way for a contractor to protect its data is to keep it trade secret.  That means not delivering the source code to the government.

In sum, the Proposed DFARS provide an expansion of the rights that DOD receives when it acquires commercial computer software by effectively subjecting commercial software to DOD’s current clause governing the acquisition of commercial “technical data.”  Proposed DFARS § 252.227-7015.  Further, the government’s ability to explicitly strike terms “inconsistent with Federal procurement law” may result in a contraction of data protection for commercial vendors of software or technical data to DOD.

Ultimately, the real implications of these proposed changes to the DFARS can only be surmised until government agencies and contracting officers begin to incorporate and implement them in the performance of contracts.  However, the potential risk associated with dwindling protection for commercial software and technical data must be assessed as commercial contractors determine whether and how they intend to go about doing business with the federal government.

The time for submitting comments to the DOD on the proposed rule has recently been extended until December 27, 2010.

It is somewhat ironic that Arnold Schwarzenegger, the icon of 1980s science fiction violence, is the plaintiff in an action seeking to restrict the sale of violent video games in California, a dispute that was argued last week in the U.S. Supreme Court (Scotusblog has all of the cert. and merits briefs collected here, in addition to coverage of the case).  California’s statute was stricken by a unanimous panel of the United States Court of Appeals for the Ninth Circuit as an unconstitutional violation of First Amendment rights.  The Supreme Court granted cert. and debated sex, violence and free speech to determine whether the California law could be upheld in response to the facial challenge presented. 

 

At oral argument (audio of the argument can be found here), the majority of justices attacked the vagueness of the law and questioned how it could be fairly applied.  In response to pointed questioning, California’s Deputy State Attorney General struggled to explain which video games would be prohibited, why the law would be applied equally to 8 year olds and 17 year olds, and generally how to define violence.  Justice Scalia expressed the difficulty video game producers would have in understanding and complying with the law.  For example, the state’s law restricts games where a player can participate virtually in “killing, maiming, dismembering, or sexually assaulting the image of a human being.”  In response to a question from Justice Sotomayor, California’s counsel admitted that the law would not apply to such violence if perpetrated on a Vulcan (from Star Trek).  Six of the nine justices appeared to agree that the law is an unconstitutional abridgement of the First Amendment.

 

The gaming industry’s attorney faired better in the argument, but was not immune from attack.  Chief Justice Roberts along with Justices Breyer and Alito explored more feasible way for states to keep younger children away from truly violent video games, even while seemingly convinced that California has not found the right answer.  The Justices did appear to feel that there is a social problem with children committing violence from their computers.  The Chief Justice elicited a concession from EMA’s attorney, from which he tried to backtrack, that perhaps a law narrower than California’s could survive constitutional scrutiny.

 

While a majority of justices appear ready to affirm the Ninth Circuit and strike the California Statute, the Supreme Court’s decision to hear the case in the absence of disagreements in the lower courts and the oral argument itself suggests that the justices might be prepared to rethink how the First Amendment applies to certain depictions of violence, at least when they are sold to children.  The case and its aftermath could have major implications for gaming and entertainment companies, and for states seeking to enforce such restrictions. 

We previously posted here on the dispute between Activevideo and Verizon over the terms of the protective order governing the parties' disclosure of documents. The Court took Verizon's side and ruled that each of the four in-house counsel from Verizon should be permitted access to Highly Confidential, Attorney Eyes Only documents. Explaining that the "leading case on point" is Volvo v. Brunswick, 187 F.R.D. 240 (E.D. Va. 1999), the Court instructs that the question of acess to confidential information must be resolved on a counsel-by-counsel basis, regardless of whether counsel is in-house or retained. The primary determinant is whether the counsel is involved in "competitive decisionmaking" with its client. The Court recognized that in Volvo, the EDVA noted that some decisions by other courts considered additional factors, such as the nature of the litigation, whether it presnets complex issues, and the possibility of alternative discovery measures. However, the Court also recognized that none of the Federal Circuit decisions had addressed those factors, but instead had focused solely on competitive decisionmaking; accordingly, the Court here did so as well.

On the merits, the Court credits each of the declarations submitted by Verizon's in-house counsel, in concluding that none of them is engaged in competitive decisionmaking, such that they should be denied access to Highly Confidential documents. In its analysis, the Court declines to adopt a per se bar against access by any counsel engaged in patent prosecution or patent licensing, or engaged in litigation settlement negotiations.

On Tuesday, November 9, 2010, oral arguments were heard en banc by the Federal Circuit in Therasense Inc. v. Becton, Dickenson & Co.  Audio is available here.

In Therasense, plaintiff Therasense Inc. (now Abbott Laboratories) alleged infringement of its patents by defendants Becton, Dickenson & Co. and Bayer Healthcare LLC.  Becton and Bayer defended on grounds of noninfringement and invalidity, alleging inequitable conduct during the prosecution of the patents-in-suit.

The district court agreed with the defendants, holding one of the patents-in-suit invalid for inequitable conduct and finding no infringement with respect to two other asserted patents.  The Federal Circuit affirmed, but subsequently agreed to hear the case en banc, in part to reconsider the current standard for evaluating inequitable conduct, including whether and when a court may infer deceptive intent based on the materiality of information withheld from, or misstated to, the Patent and Trademark Office during patent prosecution.

Dennis Crouch (of Patently-O) and Bruce Wexler (of PaulHastings) have also reported on the oral arguments.

At 10am on November 8, 2010, the U.S. Supreme Court heard oral arguments in Costco v. Omega.

Costco arrived at the Supreme Court on appeal from the Ninth Circuit, which in 2008 held that Petitioner Costco had unlawfully imported watches that were subject to Respondent Omega's copyrights.  Specifically, the Ninth Circuit held that the watches, which featured a tiny copyrighted "globe" logo, had not been subject to valid domestic sales, though they had been sold overseas.  As a result, the copyright "first sale" doctrine did not apply, and Omega retained its Title 17, Section 106 rights in the watches, in spite of the foreign sales.

The Wall Street Journal reports that "the court seemed unsure of how to approach the case" and that "some justices suggested that neither side's arguments were completely supported by the text of federal copyright law."  Law360.com similarly reports that "the justices were skeptical that either side could support their positions based on the text of the Copyright Act."  SCOTUSblog has also reported on oral arguments here.

At least one blogger-attendee, however, believes that, based on various comments from the justices, the Court would appear likely to affirm the Ninth Circuit's holding for Omega.

A transcript of oral arguments is available here.

Not to be outdone by the dispute over the patent prosecution bar in Tecsec v. IBM, the parties in Activevideo Networks v. Verizon are having their own dispute over whether Verizon's in-house attorneys should be permitted access to Highly Confidential information.  Activevideo has sued Verizon for patent infringement based on Verizon's FIOS tv system, and Verizon has counterclaimed for infringement based on Activevideo's interactive tv system. 

 

In response to Activevideo's proposal that the protective order prevents in-house counsel from viewing Highly Confidential documents, Verizon moved for entry of its protective order that does permit in-house counsel with access to such documents, relying on Volvo Penta of the Americas, Inc. v. Brunswick Corp., 187 F.R.D. 240 (E.D. Va. 1999) (permitting in-house counsel access to confidential information where in-house counsel was not involved in competitive decisionmaking); and Wi-LAN, Inc. v. Acer, Inc., Nos. 2:07-CV-473 et al., 2009 WL 1766143, at *5 (E.D. Tex. June 23, 2009) (rejecting exclusion of in-house attorneys from protective order because plaintiff failed to meet its burden to “identif[y] defendants’ particular in-house counsel that pose a risk of disclosure” and to “demonstrate[] how defendants’ in-house counsel could be considered ‘competitive decision makers’ ”).  Verizon contends that its in-house attorneys need access to such information in order to fully participate in the case, especially because these particular in-house counsel have a history of active involvement in Verizon's patent litigation, and that they are not competitive decisionmakers.  Verizon notes that in a similar dispute in TiVo Inc. v. Verizon Communications Inc., Verizon Services Corp., and Verizon Corporate Resources Group LLC, 2:09-cv-257-DF (E.D. Tex., Marshall Division), the Eastern District of Texas ultimately permitted three of the same four counsel to view highly confidential information (although the court required Verizon to choose only two).   

 

In its opposition, Activevideo responds that its highly confidential information includes source code, technical documents, business plans, and other competitive documents that Verizon could use to its business advantage if its in-house counsel were permitted access to this information.  In response to Verizon's assertion that it relies heavily on in-house counsel in patent litigation, Activevideo cites to the currently pending action In re Certain Digital Set-Top Boxes and Components Thereof, Inv. No. 337-TA-712 (the “ITC action”), in which the protective order does not permit Verizon’s in-house lawyers access to materials designated as “confidential business information.”  In fact, as part of the ITC action, Verizon issued a subpoena to Activevideo, who provided highly confidential documents in response, including source code, documents, and a deposition--Activevideo thus contends that Verizon should not be permitted to make an "end-run around the protections provided by the Administrative Law Judge’s protective order in the ITC action."  Because the parties are competitors, Activevideo argues that the risk of harm from disclosure to in-house counsel is greater.  Activevideo cites to cases holding that there is no prejudice when a party has outside counsel who has been fully involved in the case from the outset (such as Norbrook Labs. Ltd. v. G.C. Hanford Mfg. Co., 2003 U.S. Dist. LEXIS 6851, 2003 WL 1956214 *5 (N.D.N.Y. 2003) (citing A. Hirsh Inc. v. United States, 657 F. Supp. 1297, 1305, 11 Ct. Int’l Trade 208 (CIT 1987)), and contends that the Verizon in-house counsel are in fact competitive decisionmakers who are involved in strategic initiatives at Verizon. 

 

Verizon's reply brief can be found here. 

 

Judge Stillman held a hearing on the motion yesterday, on October 26, 2010, but has not yet ruled. 

Judge Doumar recently issued a reminder to litigants that the EDVA's Rocket Docket is not available to just anyone, absent some connection to the forum.  The defendant Graphic Packaging (GP) is a Delaware corporation headquartered in Marietta, Georgia, which formerly had a folding carton facility in Richmond.  The plaintiff Eaglewood Consulting (Eaglewood) is a New York limited liability company, who filed suit as a qui tam relator under 35 USC § 282, for alleged false marking violations by GP.  GP moved to dismiss, stay, or transfer, based on its lack of connections to the EDVA. 

 

Eaglewood opposed GP's motion, in part because of the speed of the EDVA's docket, which it contended would proceed to trial in one-third of the time it would take in the N.D. Ga.  In response to this argument, the Court explained:

Aware of an expeditious docket's magnetism, courts within the Eastern District of Virginia routinely transfer actions having no discernible connection to this district. See, e.g., Cognitronics Imaging Svs.. Inc. v. Recognition Research. Inc., 83 F. Supp. 2d 689, 699 (E.D. Va. 2000) ("'The "rocket docket" certainly attracts plaintiffs, but the Court must ensure that this attraction does not dull the ability of the Court to continue to act in an expeditious manner.'" (quoting Schlegel U.K. Holdings Ltd. v. Cooper Tire & Rubber Co., No. 970522-A, slip op. at 18 (E.D. Va. June 10, 1997)); GTE Wireless. Inc. v. Qualcomm. Inc., 71 F. Supp. 2d 517, 520 (E.D.Va. 1999) ("Docket conditions, although relevant, are a minor consideration when all other reasonable and logical factors would result in a transfer of venue."). Aside from docket considerations, the Court struggles to find any other factor which counsels in favor of retaining this action. 

Eaglewood Consulting, LLC v. Graphic Packaging Int'l, Inc., No. 2:10-cv-00125, Slip Op. at 5-6 (E.D. Va. Oct. 25, 2010).  After analyzing the remaining interests of justice factors under section 1404(a), the Court transferred the case to the Northern District of Georgia.

 

At the AIPLA 2010 Annual Meeting on Thursday, Chief Judge Rader and Judge Michel served on a panel discussing the role of amicus briefs at the Federal Circuit.  They were joined by Paul Clement, Seth Waxman, and Patrick Coyne, outgoing Chair of the AIPLA Amicus Committee, along with Jay Thomas from Georgetown.  As expected, it was a spirited discussion, covering everything from what the Judges find persuasive in amicus briefs, to the value to the court of filing amicus briefs at the petition for rehearing en banc stage in addition to on the merits, to the role of amicus like the AIPLA and others in affecting the development of the law. 

 

The Judges noted that in some instances, when the Supreme Court has granted certiorari and asked for the views of the Solicitor General's office, the court discovers that the office disagrees with the Federal Circuit's decision.  Judge Rader noted that it would be helpful to the court to know this at the time the case is pending before the Federal Circuit, and queried whether and how to get the views of the Solicitor General when the government is not actually a party to most cases before the Federal Circuit.  The panelists agreed that merely summarizing the parties' arguments on the merits did not make for an effective amicus brief; rather, it was more important to provide the organization's perspective on various consequences each party's arguments may have, or to develop arguments the parties did not address in their briefs.  Judges Rader and Michel both agreed that an amicus brief that does not advocate one side or the other can nevertheless be very effective at giving the court the amicus' perspective on the law and the case.  Interestingly, the Judges supported the submission of amicus briefs at the petition for rehearing stage, because that is a very important stage at which the court considers the state of the law and the merits of the case, and amici's perspective can be very helpful then. 

 

Patrick Coyne explained the process for the AIPLA agreeing to file an amicus brief on a given topic, which takes at least six weeks in most cases if not more.  He urged the audience to seek the AIPLA's input early on in a case to give ample time for AIPLA to make its decision and draft its brief.  He also explained that AIPLA will not discuss the position that it intends to take with a party before filing, nor will it give access to drafts of the brief. 

The Supreme Court has set oral argument in Costco v. Omega for November 8.  Scotusblog has all the relevant documents for this case here, including merits briefs, amicus briefs, certiorari-stage documents, and the Ninth Circuit's opinion.  See our alert on the case previously published here. 

On October 14, the Federal Circuit affirmed without opinion the EDVA's refusal to award attorney fees in Juniper v. Graphon.  In the district court, Graphon filed its motion for fees one day past the fourteen-day deadline set forth in Rule 54(d)(2)(B)(i), and the EDVA denied the motion as late.  See our previous posts about the case here. 

Williams Mullen's own Jimmie V. Reyna has been nominated by President Obama to the US Court of Appeals for the Federal Circuit (WM press release).  Mr. Reyna joins recent nominees Judge Kathleen O'Malley and Edward C. DuMont.  The Court currently has nine active judges, and six who have taken senior status. 

A quorum of the Senate Judiciary Committee recently approved Judge O'Malley's nomination by a unanimous vote.  Her nomination will now move to the full Senate.  The Senate Judiciary Committee has not yet held a hearing on Mr. DuMont.  If all three nominees are confirmed, the Court will have its full complement of twelve. 

Recent coverage of Mr. Reyna's nomination:

White House Press Release

PatentlyO

ITC 337 Law Blog

TAGLaw

HispanicBusiness.com

In this rather contentious litigation (click here for previous discussion of this case), IBM recently made an emergency motion (reply brief is here) asking the Court to enforce a patent prosecution bar set forth in the Protective Order to which the parties had previously agreed.  Ordinarily, a patent prosecution bar in a protective order provides that any outside counsel who review highly confidential information from the other side may not, for a period of time, prosecute patents that involve the technology at issue.  See, e.g., In re Deutsche Bank Trust Co., 605 F.3d 1373, 1378-81 (Fed. Cir. 2010).  A patent prosecution bar is intended to protect a producing party from "the risk of inadvertent disclosure or competitive use" of its highly confidential information by counsel for the receiving party.  Id.

The issue in this case involved a patent prosecution bar on outside counsel who received access to IBM's source code for the accused software products.  The protective order provided for a two-year bar on prosecution of any patent application involving "the particular technology or information disclosed" in the highly confidential information.  Tecsec interpreted that provision to mean "technology involving use of access control with encryption, technology related to encryption of XML documents, generating of split keys and parallel processing of encrypted data."  IBM disagreed, asserting that the bar is defined by the "particular technology or information," and is not, as Tecsec contends, defined by the narrower scope of the asserted claims of the patents-in-suit. 

Relying on In re Deutsche Bank (in which the Federal Circuit held that Federal Circuit law governs this issue because it is unique to patent law), Tecsec asserted that the Federal Circuit required that the party seeking to enforce the bar show that any prosecution bar is narrowly tailored to reflect the risk presented by the disclosures of proprietary competitive information, and that in considering the scope, the court may make sure that any bar exempts activities that do not involve competitive decisionmaking related to the subject matter of the litigation.  Accordingly, Tecsec argued that it was proper to limit the bar to the "same or substantially related subject matter as the patents-in-suit." 

The Court granted-in-part and denied-in-part IBM's motion, ultimately adopting the following compromise offered by Tecsec:  "TecSec and IBM attorneys shall be, for the period of two years after conclusion of this litigation, precluded from participating in any competitive decisionmaking patent application work for any patent application that has its patent claims directed to features identified from the Accused Products (defined in TecSec’s discovery requests in this case)...."  Tecsec's discovery requests defined the features by which Tecsec sought to specifically limit the prosecution bar.  But in this compromise, rather than limiting the bar only to the patents-in-suit and the technology disclosed therein, the Court tied the prosecution bar to the IBM accused products, which according to Tecsec, IBM itself had defined as the outer bounds of relevance for the case. 

The parties do not reference the recently decided case of Xerox v. Google, C. A. No. 10-136-JJF-MPT (D. Del. Sept. 8, 2010) (memorandum order).  In that case, the court concluded that trial counsel could advise a plaintiff patentee on amending its claims, which were subject to patent reexamination before the USPTO, even when trial counsel had access to defendants’ confidential information disclosed during litigation.   Following In re Deutsche Bank, the court concluded that the potential harm in denying plaintiff advice from its trial counsel outweighed the risk of the plaintiff's competitive use of the defendants' confidential information.  For a more in-depth discussion of Xerox, see this post at the Reexamination Center Blog, and this post at the Delaware IP Law Blog.

The PTO has released its latest Strategic Plan 2010-2015, which is available here.  The document sets forth the PTO's goals as follows:

"The USPTO’s mission focused goals will be accomplished when:

• Patent pendency time is optimized, allowing a final action on the merits within one year of filing for any applicant who requests it, with overall patent pendency time reduced to 10 months for a first office action and 20 months total pendency.
• The number of patent applications awaiting examiner action is reduced by almost 50 percent, to slightly less than 10 months of inventory.
• Issued patents are of higher quality, and the stakeholder community has a clear understanding of the meaning of a “quality” patent.
• The world’s IP offices enjoy increased efficiency as a result of collaboration in areas including automation, global patent classification, search results and work sharing.
• USPTO staffing is stabilized by lower attrition levels and a workforce that can be recruited from and stationed across the United States.
• Trademark pendency times remain between 2.5 and 3.5 months, on average, to first office action, and 13 months to final disposition.
• Trademark quality is enhanced via input from stakeholders and new metrics are focused on excellence for the entire office action.

*****

The USPTO’s management focused goal will be accomplished when:

• Accelerated processing time and increased efficiency occurs via electronic, end‐to‐end processing for patent applications.
• A sustainable funding model allows the USPTO, in conjunction with stakeholders, to set its fees to reflect the cost of providing the services and products requested by businesses and innovators.
• The public has greater insight into – and confidence in – the operations and progress of the USPTO due to more transparent and meaningful performance metrics."

This plan presents an ambitious strategy going forward that, if successful, will greatly improve the operation of the Office.

Cvent, Inc., a Virginia-based software company that licenses web-hosted software for large-scale event planning, recently filed an action and motion for preliminary injunction against competitor, Eventbrite, Inc. in Cvent, Inc. v. Eventbrite, Inc., No. 1:10cv481 (E.D.Va. May 10, 2010) (link to the opinion below).  Cvent alleged that defendants used a technique, known as “webscraping” to access Cvent’s website and copy thousands of its website pages, including various venue descriptions and a destination guide distributed to Cvent customers. 

After expedited discovery, Eventbrite moved to dismiss some of Cvent’s claims that were based on the Virginia Computer Crimes Act (VCCA), the Lanham Act, unjust enrichment, the Computer Fraud and Abuse Act (CFAA), Breach of Contract, Business Conspiracy, and common law. 

Judge Brinkema reviewed each of these claims, and ruled that only the Lanham Act and unjust enrichment claims could survive dismissal, along with the copyright claim that was not at issue.  First, the court looked at whether Eventbrite had “exceeded authorized access” to Cvent’s electronic data under the CFAA, finding that the data that Eventbrite allegedly stripped from plaintiff’s website was publicly available on the Internet, with no login, password or other individualized grant of access.  Although Cvent argued that its Terms of Use (TOU) prohibited competitors to access its site or information, the court found that the TOU were not displayed on its website in any way that a reasonable user could be expected to notice them.  Thus, the mere allegation that defendant used such publicly available information in an inappropriate way did not state a claim for relief under the CFAA.

In reviewing the VCCA claim, the court looked at whether the defendant had used a computer or computer network without authority to obtain property or services by false pretenses, or by embezzling, commiting larceny, or converting plaintiff’s property.  The Court found that the cause of action was preempted by copyright law to the extent it was based on reproduction of the copyrighted computer program.  Because Cvent had not alleged any facts with respect to false pretenses apart from its copyright claim, the VCCA claim was dismissed.

With respect to the Lanham Act and unjust enrichment claims, the court reviewed the Supreme Court case of Dastar v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), which limited the scope of reverse passing off claims based on copyrighted works created by another to “tangible goods offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.”  Following Dastar, many courts have rejected reverse passing off claims based on copying the intellectual property of another.  However, the Court found that plaintiff’s claims under the Lanham Act and unjust enrichment claims were based on the assertion that Eventbrite had re-branded and re-packaged Cvent’s product (the venue database) as its own, and that Eventbrite was deriving a commercial benefit from unauthorized scraping and repackaging of such products.  Thus, the court denied the motion to dismiss the Lanham Act and unjust enrichment claims, because they were based on reverse passing off of goods or products, rather than ideas.

Turning to the breach of contract claim, the court again reviewed Cvent’s website TOU to determine whether there was any contract between the parties.  Placing the TOU into a “browsewrap agreement” category, the court asked whether the defendant had actual or constructive knowledge of the site’s terms and conditions and manifested assent to them under common law.  The Court found that Cvent had not pled sufficient facts to plausibly establish such assent.  Although plaintiff argued that it stated a claim under the Uniform Computer Information Transactions Act (UCITA), the court found that the defendants did not have a reasonable opportunity to review the TOU under that act, because the terms were not “available in a manner that ought to call it to the attention of a reasonable person.”  Nor did the website “disclose the availability of the standard terms in a prominent place on the site” and not “take affirmative acts to prevent printing or storage of the standard terms for archival or review purposes” under UCITA.

Finally, the court granted Eventbrite’s motion to strike certain relief requested for attorney’s fees and statutory damages, based on unlawful acts of infringement that allegedly took place prior to Cvent’s copyright registration.

The Court’s decision in this case could have an impact on how software and other e-commerce companies post their terms of use on their websites, as other courts discussing “browsewrap” agreements have not generally analyzed whether such conspicuous posting is necessary to manifest a party’s assent to the terms.

Click here for the opinion.

This weekend marks the 22nd Annual Virginia State Bar Intellectual Property Weekend Seminar, beginning Friday, October 1, in Williamsburg Virginia at the Williamsburg Lodge.  Speakers include:

Erika H. Arner, Partner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

Sharon R. Barner, Deputy Under Secretary of Commercefor Intellectual Property and Deputy Director for the USPTO

The Honorable Judge Waugh Crigler, Magistrate Judge, United States District Court for the Western District of Virginia

Meryl Hershkowitz, Acting Deputy Commissioner for Trademark Operations

Professor David Hrcik, Mercer University School of Law

Michael Jacobs, Partner, Crowell & Moring, LLP

Aaron M. Panner, Partner, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C.

Professor Matthew Sag, DePaul University School of Law

A full schedule of events and registration procedures can be found here. 

A number of retailers and technology giants – including Amazon.com, Facebook, and Microsoft – have filed amicus briefs with the Federal Circuit in support of Netflix, Inc.’s petition for rehearing en banc in Media Queue, LLC v. Netflix, Inc. et al. Netflix successfully parried Media Queue’s patent infringement charges in California district court, but was denied attorneys’ fees under 35 U.S.C. § 256, because the court concluded that the case failed to qualify as "exceptional" under the statute. Netflix has requested en banc consideration of the Federal Circuit’s standard, which Amici claim is to blame for "an unchecked epidemic of overreaching patent assertions." Absent a requirement that patentees demonstrate "an objectively reasonable basis" for bringing infringement suits, the Amici assert, many arguably frivolous suits will continue to be brought.

Previously, prevailing plaintiffs and defendants played on a level field when seeking fees. As the Federal Circuit Court held in Eltech Sys. Corp. v. PPG Indus., Inc., "there is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation" when determining attorneys' fee motions.  903 F.2d 805,811 (Fed. Cir. 1990). This party-neutral application of section 285 looked to the objective unreasonableness of a party's position - whether a defendant's denial of liability or a patentee's assertion of infringement. Evidence that a party proceeded in reckless disregard of the objective unreasonableness of its position sufficed to establish bad faith and an exceptional case under Section 285. Under the current standard applied in the Federal Circuit, however, a case is "exceptional" for defendants when the conduct related to the litigation is materially inappropriate, such as "willful infringement, fraud or inequitable conduct in procuring the patent, unjustified litigation, or a violation of Federal Rule of Civil Procedure 11." Thus, if there is no misconduct, a case is exceptional only if the litigation is brought in subjective bad faith and the litigation is objectively baseless. See, e.g., Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Further, even if the case is found to be exceptional, the court has discretion to deny fees. Netflix and the Amici argue that this gives plaintiffs a "free pass," permitting them to make bad faith allegations of infringement and unreasonable demands for injunctions or damages based on patents directed to trivial features.

Netflix has taken the position that the previous standard for awarding attorneys’ fees to prevailing defendants is proper and consistent with the standards for awarding fees in other intellectual property cases. Netflix cites the Supreme Court case of Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), where the Court applied a party-neutral reading to copyright claims, stating "the federal fee-shifting statutes in the patent and trademark fields support a party-neutral approach." Netflix has argued that the Federal Circuit’s higher standard for prevailing defendants in patent cases runs counter to the Fogerty decision and is inconsistent with the interpretation of similar statutes such as the trademark fee-shifting statute, 15 U.S.C. § 117, which is interpreted much more broadly than the current standard used for patents.

The Amici are interested in a clarification of the standard as to what constitutes an "exceptional case," and focus their briefing on the "epidemic" of unreasonable patentee litigation, and the financial and administrative burdens placed on companies by "non-practicing entities." The Federal Circuit's decision will have far-reaching effects on patent cases and the ability of defendants to recover when they successfully argue that plaintiff’s cases were without merit.

The federal courts are split on a fundamental aspect of copyright law -- whether copyright holders are required, under 17 U.S.C. § 411, to have registrations granted or just applications filed, before they can bring suit. This has a significant impact on copyright holders waiting for the Copyright Office to act before they can enforce their rights. In March, 2010 in Reed Elsevier, Inc. v. Muchnick, the U.S. Supreme Court clarified one aspect of this issue, but did not resolve the real dispute. In Reed Elsevier, the Supreme Court held that § 411(a) does not restrict a federal court’s subject-matter jurisdiction over infringement claims involving unregistered works. The Court stressed, however, that its decision did not address whether § 411(a)’s registration requirement is "a mandatory precondition to suit."

Thus, the Court left to the Circuit Courts to decide whether the registration requirement of §411(a) is satisfied by filing an application, or whether the Copyright Office must either grant or reject the application before a claim for infringement may be brought. Not surprisingly Circuit Courts are divided on this issue. For example, the Fifth Circuit held in Positive Black Talk v. Cash Money Records that simply filing an application is adequate, as long as all required elements are deposited with the Copyright Office. This view has been called the "Application Approach." Conversely, the Tenth Circuit in La Resolana Architects, PA v. Clay Realtors Angel Fire held that simply filing all the required elements of an application is not enough to satisfy § 411(a), and that either a rejection or an acceptance must be received by the applicant for a party to bring an infringement claim. This has been called the "Registration Approach." While the Second Circuit has yet to address the issue, three recent district court cases in the Southern District of New York have applied the Registration Approach.

To date, neither the Fourth Circuit nor the Virginia federal district courts have addressed this issue since the Reed Elsevier decision.

In American Medical Systems, Inc. v. Biolitec, Inc. (Fed. Cir. 2010) at least one judge in the Federal Circuit agrees that the time has come for the court to address en banc the issue of preambles serving as substantive claim limitations.

 

This infringement case involves patent No. 6,986,764, (the '764 patent) which relates to a technology for vaporizing tissue using laser radiation.  The dispute on appeal turned on whether the preamble constituted a limitation.  Claim 31 is representative:

 

A method for photoselective vaporization of tissue, comprising:

 

delivering laser radiation to a treatment area on the tissue, the laser radiation having a wavelength and having irradiance in the treatment area sufficient to cause vaporization of a substantially greater volume of tissue than a volume of residual coagulated tissue caused by the laser radiation, wherein the delivered laser radiation has an average irradiance in the treatment area greater than 10 kiloWatts/cm2 in a spot size at least 0.05 mm2.

 

In general, a preamble limits the invention if it recites essential structure or steps, or if it is necessary to give life, meaning, and vitality to the claim.  Conversely, a preamble is not limiting where a patentee defines a structurally complete invention in the claim body and uses the preamble only to state a purpose or intended use for the invention.  Catalina Mktg. Int'l, Inc. v. Coolsavings.com, Inc., 289 F.3d 801, 808 (Fed. Cir. 2002) (internal citation and quotations omitted).

 

During claim construction of the '764 patent, the district court determined that the preamble phrase “photoselective vaporization” was a “fundamental characteristic” of the invention, and construed the term to mean “using a wavelength that is highly absorptive in the tissue, while being absorbed only to a negligible degree by water or other irrigant.”  Based on this construction, the court granted summary judgment in favor of the accused infringer.

 

On appeal, the majority of the Federal Circuit disagreed, concluding that the preamble phrase “photoselective vaporization of tissue” does not limit the claims of the '764 patent.  The court explained that if the patent owner wanted to claim the “photoselective vaporization of tissue,” it should have been placed as a limitation in the body of the claim.  Judge Dyk dissented, and argued for a blanket rule that the preamble always acts as a claim limitation:

It seems to me that a rule recognizing that all preambles are limiting would make better sense and would better serve the interests of all concerned. There is, after all, little to be said in favor of allowing an applicant, in the claim drafting process, to include material in the claims that is not binding. If patentees are allowed to include material in the claim definitions that is not binding, patentees can suggest or imply one position before the U.S. Patent & Trademark Office ("PTO") to secure allowance of the patent on the theory that the preamble is limiting and another, inconsistent position in infringe-ment litigation on the theory that it is not limiting.  Principles of fairness thus dictate that the patentee should be required to clearly define the claimed invention's scope.  By creating a uniform rule that all preambles are limiting, we would ensure the patentee has the burden of drafting a patent that avoids confusion as to the scope of the claims.

 

The Fourth Circuit affirms the district court's decision in a six-year battle in Universal Furniture International, Incorporated("Universal") v. Collezione Europa USA, Incorporated ("Collezione"), Nos. 07-2180, 09-1437 (4th Cir. 2010).  The case involved violations of copyright, trademark and unfair trade practices and was initiated by Universal after Collezione allegedly imitated two of Universal’s decorative furniture lines. The district court initially denied Universal’s motion for an injunction, based on limited evidence that the furniture designs were copyrightable.  After a full hearing on the merits, the district court was persuaded that Collezione infringed the protectable, copyrighted elements on the furniture, and the court awarded $11 million in a subsequent damages proceeding.

On appeal, the Fourth Circuit reviewed the district court opinion for issues of ownership, originality and copyrightability of the designs, substantial similarity, and infringement of Universal’s designs, and the award of damages. The appellate court first found clear chain of title in the designs.  Collezione had argued that the designs were not properly transferred to Universal from their individual designers or from Universal’s predecessor, but the court concluded that service agreements clearly assigned all designs and associated copyright rights to the predecessor company, which subsequently transferred the designs to Universal by merger and asset agreement.

Next, the Fourth Circuit reviewed the standard for copyright validity in design compilations, such as Universal’s, noting that, to be protected, Universal must show that the designs were original and conceptually separable from the utilitarian aspects of the furniture, and that "the principal focus should be on whether the selection, coordination, and arrangement are sufficiently original to merit protection." Id. at 12-13 (citing Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 358 (1991)). The district court had found that Universal’s designer had done more than simply take two-dimensional designs from the public domain, but had modified and arranged the decorative elements in unique ways, in a manner more than sufficient to satisfy the originality requirement. The Fourth Circuit agreed, finding that the decorative elements on the furniture, including three-dimensional shells, acanthus leaves, columns, finials, rosettes, and other carvings were "superfluous nonfunctional adornments for which the shape of the furniture (which is not copyrightable) serves as a vehicle." Such features were entitled to protection because they were "‘artistic and aesthetic features’ that can be conceived of as having been added to, or superimposed upon, an otherwise utilitarian article." Id. at 20.

Next, in determining whether there was infringement, the Fourth Circuit reviewed whether the works were:  "(1) extrinsically similar because they contain substantially similar ideas that are subject to copyright protection" and (2) "intrinsically similar in the sense that they express those ideas in a substantially similar manner from the perspective of the intended audience of the work." Id. at 23 (citing Lyons P’ship v. Morris Costumes, Inc., 243 F.3d 789, 801 (4th Cir. 2001)). Although Collezione argued that the district court had focused on the overall designs rather than the copyrightable elements, the Fourth Circuit disagreed.  The appeals court found that the trial court had properly focused on the copyrightable ornamentation and observed that the furniture pieces shared a "highly decorative appearance with a traditional feel" and "very ornamental designs combined with basic styles that resemble pieces from England in the 18th and 19th centuries." Id. at 24. Because the lines of furniture were substantially similar, there was no clear error in the court’s determination of infringement.

The Fourth Circuit also upheld the district court’s determination that Collezione had violated trademark and unfair competition laws by falsely passing itself off as the source of origin of the furniture pieces, particularly because Collezione had displayed actual pieces from Universal’s furniture lines.

Finally, the Fourth Circuit upheld the damages award, finding that it reflected Collezione’s profits based on the infringement, and that Collezione had failed to prove any deductible expenses.

Do you or your clients sell goods from a retail location in Virginia?  Do you collect and sell the information you collect about your purchasers?  Do your purchasers know? 

 

A recent, newsworthy First Amendment case in the 4^th Circuit provides an opportunity to visit these questions.  Incidentally, the case involved a privacy activist who was concerned about being charged under the Virginia Personal Information Privacy Act, VA CODE §§ 59.1-442 - 444 for putting up a website that highlighted public documents bearing social security numbers, including those of certain government officials.  The court found First Amendment protections in that case, as may be seen in the above links. 

 

But the scope of the Personal Information Privacy Act is not limited to social security numbers.

 

Some common marketing practices of average retailers may have a bit more difficulty under the Personal Information Privacy Act.  This statute requires merchants to give notice to its purchasers when it sells information about its purchasers:

 

No merchant, without giving notice to the purchaser, shall sell to any third person information which concerns the purchaser and which is gathered in connection with the sale, rental or exchange of tangible personal property to the purchaser at the merchant's place of business.

 

Id. § 59.1-442.  Online or ecommerce merchants - who often transact business in multiple jurisdictions - generally expect to face such a requirement, and are well advised to include such notice within their website privacy policies.  However, this statute defines a merchant as “any person or entity engaged in the sale of goods from a fixed retail location in Virginia.”  Id.  A suggested approach for compliance is the posting of a sign (or any other reasonable method of giving notice).  The image inspired is that of a brick and mortar business posting a busy sign detailing a fine print privacy policy.  Of course, financial and certain other regulated institutions may already provide something similar in seeking to comply with the financial privacy notice requirements (e.g., Gramm Leach Bliley Act). 

 

Under the Virginia Personal Information Privacy Act., an aggrieved person may be entitled to $100 per violation, reasonable attorney’s fees, and court costs.  Id. § 59.1-442.  Violations are also considered a prohibited practice under the Virginia Consumer Protection Act, which offers additional remedies.

 On August 3, Judge Gerald Bruce Lee of the Eastern District of Virginia issued his much-anticipated memorandum opinion in Rosetta Stone v. Google, revealing the reasoning behind his award of summary judgment to defendant Google on counts of, inter alia, direct, contributory, and vicarious trademark infringement.

 

As discussed in previous blog entries, plaintiff Rosetta Stone had alleged that Google’s sale of Rosetta Stone’s trademarks as keywords, triggering advertisements by third parties promoting counterfeit Rosetta Stone products, both directly and indirectly infringed such trademarks under Virginia law and the Lanham Act.

 

In finding for Google with respect to direct infringement, the court held that “no reasonable trier of fact” could find that such a practice “creates a likelihood of confusion as to source or origin.”

 

Specifically, the court held (a) that there was no intent on the part of Google, either to confuse its users or to pass its own goods off as those of Rosetta Stone; (b) that “Rosetta Stone’s evidence of actual confusion – testimonies of five individuals out of more than 100,000 impressions over six years – [was] de minimis”; (c) that none of the interviewed witnesses “who allegedly purchased counterfeit Rosetta Stone products after conducting a search … were confused about the source of their purchase,” even if they were confused about the authenticity of the products purchased; and (d) that "consumers who are willing to spend hundreds of dollars on language-learning software" are likely to be knowledegable and sophisticated.  And, in any event, the court held that functionality doctrine precludes a finding of infringement, as Google’s use of Rosetta Stone’s marks “to identify relevant sponsored links” is “no different than the use of a Google search query to trigger organic search results relevant to the user’s search.”

 

Judge Lee also disagreed with Rosetta Stone’s claim that Google “intentionally induces or knowingly continues to permit” known counterfeiters to purchase Rosetta Stone marks as keywords.  Although Google’s Query Suggestion Tool, which generates a filtered list of keyword ideas, was developed to simplify use of its AdWords program and attract additional advertisers, such an economic incentive does not, by itself, “indicate intent to induce infringement.”  The court then considered the Second Circuit’s reasoning in Tiffany, Inc. v. eBay, Inc. (2010) in holding that Google did not have the sort of “specific contemporary knowledge” of infringing activity necessary to find liability.  In Tiffany, the Second Circuit failed to find liability despite the fact that eBay had received "thousands of Notice of Claimed Infringement Forms." By contrast, Google had been notified of "200 instances of Sponsored Links advertising counterfeit Rosetta Stone products" over a six-month period.

 

The court further declined to impose vicarious liability on Google.  To prevail on this claim, Rosetta Stone needed to show that Google “[had] joint ownership or [controlled] the alleged infringing advertisements.”  The court, however, refused to find such control based on the “mere fact that Google [had] a financial relationship with the alleged infringers.”

 

Nor did the court agree with Rosetta Stone that Google’s sale of its trademarks as keywords impaired the distinctiveness or reputation of the trademarks.  Rosetta Stone’s brand awareness had, in fact, “only increased since Google revised its trademark policy in 2004.”  Moreover, the court found no evidence suggesting that “those who purchased the allegedly counterfeit software had a reduced opinion” thereafter of the Rosetta Stone marks and brand.

 

As stated in prior blog entries, Rosetta Stone may consider an appeal to the Fourth Circuit upon review of the Memorandum Opinion.

 

Other discussions of the case can be found at Eric Goldman's blog here, at MediaPost here, and at WebProNews here.

In mid-July, 2010, an Eastern District of Virginia jury returned a $26 million verdict in favor of Florida underground mining tire designer and distributor Tire Engineering & Distribution, LLC (d.b.a. Alpha Tire Systems) and its owner, Jordan Fishman, in a trade secret case against China-based tire manufacturer Shandong Linglong Rubber Co., Ltd. and United Arab Emirates-based distributor Al Dobowi Tyre Co., LLC.

 

The plaintiffs had alleged that, in 2005, former Tire Engineering sales and marketing manager Sam Vance disclosed trade secrets to the defendants, that the parties had conspired to steal these secrets, and that that the defendants had infringed the plaintiffs’ copyrights and trademarks.  Reportedly, Vance had provided defendants with plaintiffs’ “design blueprints, customer lists, and pricing information,” and defendants had used these to develop a competing enterprise.

 

On July 20, subsequent to the jury verdict, the defendants filed a renewed motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure.  The memorandum in support of its motion argues in part that the plaintiffs had staked jurisdictional claims on allegations that “a conspiracy was commenced at a meeting in Virginia” in 2005 between several of the defendants and their representatives.  The defendants deny that such a conspiracy was commenced, as well as that the defendants engaged in any conspiracy through email, and on these and other bases argue that the EDVA lacks jurisdiction.  The defendants further dispute that any valid secrets have been stolen, that any valid IP has been infringed, and that the award is reasonable.

 

The EDVA jury’s award comes on the heels of a default judgment and $59 million award for Tire Engineering in a related case in Florida state court that was subsequently and recently reversed on appeal for want of jurisdiction over defendant Vance.  The default judgment had been entered after Vance failed to appear in court.  Tire Engineering’s counsel has been granted leave to amend the complaint, and reportedly plans to refile.

 

Virginia Lawyers Weekly reported on the EDVA case here.

Virginia Lawyers Weekly reports here that the EDVA is in fact still the fastest docket in the country.  According to the article, which cites to the Judicial Business 2009 Report from the US Courts website, cases in the EDVA had a median time from filing to trial of 10.2 months, and the EDVA had a total of 38 jury trials for the twelve months from September 30, 2008, to September 30, 2009. 

Although nearly three months have passed since Judge Lee granted Google’s motion for summary judgment and dismissed Rosetta Stone’s trademark infringement suit against the search engine, the parties still await Judge Lee’s accompanying Memorandum Order.

 

Rosetta Stone had argued that Google’s use of its trademarks to trigger sponsored ads by known counterfeiters of Rosetta Stone products, despite Rosetta Stone’s repeated notices to Google of such counterfeit products, was infringing.  Google had countered that, in short, it had no particular responsibility to independently determine the authenticity of the products advertised through AdWords.

 

Rosetta Stone indicated at the time of Judge Lee’s decision that it would consider an appeal to the Fourth Circuit upon reading Judge Lee’s Memorandum.  In June, its general counsel intimated that an appeal is still planned.

 

In the interim, there have been a couple of developments.

 

On May 5, Rosetta Stone filed objections in response to Magistrate Judge Buchanan’s denial of its motion for sanctions against Google for having failed to timely produce one thousand responsive documents pursuant to a February 4, 2010 order.  Rosetta Stone claims that Judge Buchanan’s denial was “based on her ... belief that Rosetta Stone would have an opportunity to utilize the late-produced documents [at trial] to demonstrate Google’s liability,” and that there would be no prejudice to Rosetta Stone.  As Rosetta Stone maintains in its filed objection, however, it was precluded from using the documents by Judge Lee’s dismissal of the case on summary judgment.

 

We previously blogged about the Rosetta Stone v. Google case here.

The Digital Millennium Copyright Act (“DMCA”) wins again as the United States District Court for the Southern District of New York Judge Louis Stanton rules that the Internet service providers (“ISPs”) were protected from copyright liability through their “notice and takedown” procedures.  Viacom Internat’l Inc. v. YouTube, Inc., 02 Civ. 3582 (S.D.N.Y. June 23, 2010).

The DMCA provides safe harbor to ISPs against copyright claims if they provide proper notice and takedown procedures for removing infringing content.  17 U.S.C. § 512(c).  Viacom sued YouTube, now owned by Google, for multiple counts of copyright infringement in 2007, based on claims that tens of thousands of videos were uploaded to YouTube’s site without Viacom’s authorization, and that defendants had actual knowledge of this infringing activity.  However, YouTube had designated an agent to remove the content in response to DMCA takedown notices and acted quickly to remove close to 100,000 videos within a business day.

Viacom argued that YouTube was not protected by the DMCA because it had actual knowledge and was aware of facts and circumstances from which infringing activity was apparent; that it received a financial benefit directly attributable to that infringing activity; and that such infringement did not result solely from providing storage at the direction of a user.  However, the court found that YouTube had nothing more than a generalized knowledge that infringement was occurring on its sites, and that an ISP did not have a duty to actively investigate, monitor, or search its service for infringements. 

The court reviewed precedent and legislative history regarding the DMCA to support the proposition that “actual knowledge” required a showing that the sites contained blatant infringing activity or “red flags,” namely obvious infringements that would have been apparent to a reasonable person operating under the same or similar circumstances.  For example, the copyright owner could prove that infringing activity was apparent if it were a “pirate” site of the type where sound recordings, software, movies, or books were available for illegal downloading.

The court distinguished recent file-sharing cases, such as Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Arista Records LLC v. Lime Group LLC, No. 06 Civ. 5936, 2010 WL 2291485 (S.D.N.Y. May 25, 2010), stating that “peer-to-peer file-sharing networks … are not covered by the safe harbor provisions of DMCA §512(c)” and that the DMCA defense in Arista was denied on undisputed evidence of “purposeful, culpable expression and conduct aimed at promoting infringing uses of the websites.”   Grokster was distinguishable because defendants in that case distributed software products with the express intent “of succeeding to the business of the notoriously infringing Napster”  whereas YouTube is "a service provider who furnishes a platform on which its users post and access all sorts of materials as they wish, while the provider is unaware of its content.”

Copyright holders have long complained that the DMCA puts the onus on them to send the notices and police the ISPs.  Viacom has promised to appeal the decision, so the future of the law remains uncertain.

To see the memorandum opinion for this case, click here: Viacom v YouTube.pdf

As we have blogged about here, Tecsec and IBM are engaged in a large patent dispute in the Alexandria Division. The parties disagreed as to what kind of order should be entered by the Court governing the search for and production of electronic information. Ultimately, the Court entered IBM's proposed Order. This is one of the most detailed ediscovery orders that I have seen. The Order finds that "the review of emails in this case will be unduly burdensome unless a search protocol is implemented to narrow the universe of email…." The Order then establishes the following procedure for the search and production of email:  The parties will exchange topics for searching; once the Court approves or the parties agree, the producing party will then provide a list of custodians and search terms.  The parties will meet and confer, and then run the search.  Notably, the Order states that the producing party "may at its option, but need not, review the search results for responsiveness" before producing, and if it elects not to, it can simply designate all documents HIGHLY CONFIDENTIAL and produce them, relying on the clawback provision in the protective order if it needs to. The Order then contemplates an additional meet and confer among the parties to refine the results, but after that, and upon production of the data, the Order states: "A Producing Party's obligation to conduct a reasonable search for email and attachments in response to a Requesting Party's discovery requests shall be deemed to be satisfied by producing non-privileged email and attachments identified by utilizing the search protocol described herein, absent a post-search review."

ActiveVideo Networks sued Verizon in the EDVA for patent infringement of five patents relating to cable television technology, including interactive cable.  In the Complaint, ActiveVideo identified the following accused products:  "interactive television systems, devices, and/or services, including the FIOS system...."  Verizon responded with a motion to dismiss based on Ashcroft v. Iqbal, for ActiveVideo's failure to allege which Verizon products are accused of infringement.  The motion has been fully briefed (motion, opposition, and reply), before Judge Jackson in the Norfolk Division.  The Court's ruling may well be instructive as to how Judges in the Rocket Docket approach the application of Iqbal to patent infringement cases.

Inequitable conduct is asserted as a defense in the vast majority of patent infringement suits and generally involves an allegation that the patentee failed to disclose material information (i.e., prior art) to or intentionally misled the Examiner during the prosecution of the patent application.

Therasense v. Becton Dickinson addresses inequitable conduct during patent prosecution.  In Therasense, the patentee was accused of making conflicting statements concerning certain prior art to the United States Patent & Trademark Office (PTO) and the European Patent Office (EPO).  The patentee told the PTO that a certain element was required but had told the EPO that the same element was optional.  The district court ruled that the conflicting statements were material and found that there was intent to deceive the PTO in not disclosing the prior statement made to the EPO.  The Court of Appeals for the Federal Circuit agreed, finding no clear errors in the district court’s ruling regarding materiality and intent.  Therasense then petitioned for an en banc rehearing, which was granted by the Federal Circuit.

The last time the Federal Circuit addressed inequitable conduct en banc was in Kingsdown v. Hollister, 863 F.2d 867 (Fed. Cir. 1988).  The court there held that inequitable conduct requires that materiality and deceptive intent be separately proven under a clear and convincing standard.  Over the last twenty plus years district courts and the Federal Circuit have been criticized for inconsistent application of Kingsdown, leading to what has been characterized as a "plague" of inequitable conduct allegations in almost all patent infringement suits.  Burlington Industries, Inc. v. Dayco Corporation, 849 F.29 1418, 1422 (Fed. Cir. 1988).

Most agree that a clear, firm rule that can be applied consistently should replace the current standard.  To that end, the parties in Therasense and amici curiae have been asked by the court in the Order granting a rehearing en banc to brief the following issues:

• Should the materiality/intent test be modified or replaced?
• If so, should the test be tied more directly to fraud or unclean hands?
• What is the proper standard for materiality – must alleged misconduct negate one or more claims – and, what role should PTO rules have in defining materiality?
• Can intent be inferred from materiality?
• Should the materiality/intent test be abandoned?
• Can inequitable conduct materiality/intent standards in other federal agency contexts be applied in the patent context?

Many contend that confusion arises when intent is inferred from materiality.  Indeed, Judge Linn penned a vigorous dissent in the vacated panel opinion in Therasense in which he argued that the majority erred by failing to recognize that intent to deceive is a subjective standard rather than an objective standard.

Another major question that is yet to be settled is whether the alleged misconduct actually affects the validity of the patent.  In other words, is the alleged misconduct only material if it would have changed the outcome of the PTO’s decision to grant the patent?  Inequitable conduct is grounded in equity.  Perhaps not all inequitable conduct, even if proven, should render a patent unenforceable.

Many would also like to see enhanced provisions for attorney fees when inequitable conduct claims are unsuccessful, especially because a charge of inequitable conduct carries an implication of wrongdoing.

The case is scheduled to be heard later this summer.

Discussion of the case can be found at PatentlyO and PatentDocs (with a link to the briefing schedule).

At long last, the Supreme Court has issued its decision in the closely watched Bilski case. While shattering the record for longest time from argument to decision in a Supreme Court patent case (over 200 days!), the Bilski decision reads like a middle episode of a movie series or television program, staying internally consistent with prior episodes while not providing significant closure to the central issues (i.e., business method and software patentability).  In the near term, business methods are not categorically excluded from patent protection.  Further, there is now no hard line rule that a claimed inventive process must meet the "machine or transformation" test laid down by the Court of Appeals for the Federal Circuit in order to qualify for patent protection.  These takeaway points will keep the flow of new software and business method patent applications coming into the PTO (which has already issued an "interim guidance" memorandum to the examining corps) and issued patents litigated in the courts, and we can expect the battle lines to be drawn between unpatentable abstract ideas and mathematical algorithms on the one hand, and potentially patentable "applications of laws of nature and algorithms" on the other.  It's Benson and Flook versus Diehr for the time being.

In his concurring opinion, Justice Stevens notes that the Court essentially reaches the conclusion that the Bilski claims pertain to an abstract idea and are therefore not patentable, while never really providing a satisfactory account of what actually constitutes an unpatentable abstract idea.  Perhaps the Court is saying it did not need to, because the caselaw guidance is already there.  Judge Rader apparently had it right in his dissent in the Federal Circuit's opinion, where he summarizes what the Federal Circuit could have said in 2008 with the single sentence, "[b]ecause Bilski claims merely an abstract idea, this court affirms the Board's rejection."  Indeed, that is more or less all we get from the Supreme Court here.

What we have then is a "middle episode" in the form of Bilski that accurately recaptures prior decisions and leaves the courts, practitioners, and the PTO to interpret.  We also have the KSR obviousness decision and a much larger body of patent and non-patent prior art that may help defuse the "business method" patentability fears on the basis that many are simply not novel or non-obvious.

We will stay tuned...

Not necessarily, although the Court has considered prior claim construction decisions in arriving at its own conclusion.  In a recent claim construction ruling by Judge Payne in ePlus, Inc. v. Lawson Software, Case No. 3:09cv620 (E.D. Va. 2010), the Court dealt with the issue of construing claims of patents that had been construed in two previous cases in the District.  Judge Brinkema construed certain terms in the context of summary judgment motions in ePlus, Inc. v. Ariba, Inc., Civil No. 1:04cv612 (E.D. Va. 2005).  In addition, Judge Spencer construed some of the claim terms at issue in ePlus, Inc. v. SAP America, Inc., Civil No. 3:05cv281 (E.D. Va. 2006), but that claim construction opinion was later vacated. 

 

For some of the claim terms construed, the Court noted that the newly adopted construction was consistent with the construction in the prior lawsuits.  The Court also noted that ten of the eleven means-plus-function terms at issue were construed in the 2005 decision, and because they were “based on sound logic and are linked to the specification,” the Court adopted them.  However, the Court also stated in a footnote that while the claim constructions from the 2006 decision were helpful, it was preferable not to rely on them because that claim construction decision was vacated after the case was settled. 

The Court of Appeals for the Federal Circuit found no violation by defendant Solo Cup for falsely marking 21 billion cup lids as being covered by expired patents, affirming the Eastern District of Virginia’s prior determination as to liability and stating that Solo Cup lacked “the requisite intent to falsely mark its products.”

 

As we have previously blogged here, here, here, and here, Pequignot v. Solo Cup was one of many qui tam actions pending in the wake of the Federal Circuit’s December decision in The Forest Group v. Bon Tool, 590 F.3d 1295 (Fed. Cir. 2009).  In Forest Group, the CAFC interpreted 35 U.S.C. § 292 to impose a fine for each falsely marked product, as opposed to the singular decision to falsely mark all products.  

 

In Solo Cup, plaintiff Matthew A. Pequignot had charged that the cup lids were “unpatented articles” and that Solo Cup had “falsely marked [them] … for the purpose of deceiving the public[,]” as required under § 292(a) to trigger the fines prescribed by the statute.  The CAFC agreed with Pequignot that the cup lids were indeed “unpatented articles,” but disagreed that Solo Cup had intended to deceive the public.

 

Solo Cup had argued that the legislative history of § 292 revealed Congress’ rejection of “a proposed amendment to change the word ‘unpatented’ to ‘not at the time secured by a patent’” and that this evidenced Congress’ intent to exclude any previously patented articles from its definition of “unpatented articles.”  The Federal Circuit was unmoved by this argument, agreeing with the EDVA that “an article that is no longer protected by a patent is not ‘patented,’ and is more aptly described as ‘unpatented’” and that the cup lids were, at the time of suit, unpatented within the meaning of § 292.

 

With respect to Solo Cup’s alleged intent to deceive, Pequignot had argued that the existence of the falsely marked cup lids, combined with Solo Cup’s statement on its packaging that the lids “may be covered” by one or more patents, created a rebuttable presumption of an intent to deceive.  The Federal Circuit agreed with Pequignot on this point, but held that Solo Cup had “successfully rebutted the presumption” by proffering evidence that (a) it had developed a policy whereby it would gradually replace the mold cavities containing the expired patent numbers, (b) it had obtained a favorable opinion of counsel as to the permissibility of such policy, and (c) it had been advised by counsel to include the “may be covered” language on its packaging.

 

Solo Cup’s good faith reliance on the advice of counsel in this case, the Federal Circuit concluded, amounted to more than mere “blind assertions of good faith” given its plan to replace the molds, albeit gradually so "to reduce costs."  Rather, such evidence confirmed that Solo Cup’s “purpose was not to deceive the public.”

 

Finally, the Federal Circuit addressed the meaning of the term “offense” as it is used in § 292(a).  Depending on the interpretation of the term, Pequignot had argued, Solo Cup may have been liable for multiple offenses based on its awareness of the falsely marked articles, its persistence in spite of such awareness, and its inclusion of the “may be covered” language on its packaging.  The Federal Circuit held that, in light of its finding of no violation in this case, this question was moot.

 

Dennis Crouch has also blogged about the Solo Cup decision here.

On Friday, the Court issued its order resolving the motions made by Defendants to sever the claims against each Defendant and stay those cases, pending resolution of the case against IBM.  The Court granted the Defendants' motion and referred the motions regarding a Case Management Order to Magistrate Judge Buchanan.  Accordingly, the case will now proceed only against IBM (and eBay, who did not join the motion to sever but instead filed a motion to dismiss based on Tecsec's alleged failure to identify any allegedly infringing activing in which eBay participated), with the claims against all other Defendants being stayed. 

CompX received a jury verdict of infringement on two of its patents, with the jury awarding over $19 million in damages.  (See our previous posts about the case here.)  CompX subsequently asked the Court for a permanent injunction against Humanscale's future infringement.  The Court denied CompX's request in a memorandum order.

The Court analyzed the four eBay factors as follows.

(1) irreparable injury:  the Court concluded that "CompX has presented insufficient evidence that the direct competition between the parties and its practice of not licensing its patents result in irreparable harm to its sales and goodwill," relying on i4i v. Microsoft, 589 F.3d 831 (Fed. Cir. 2010).  "To accept the argument that any claim of direct competition should result in a finding of irreparable harm would essentially create a presumption in favor of irreparable harm, contrary to the Supreme Court’s directive in eBay."  Thus, despite the presence of competition, which the Court noted usually constitutes irreparable harm in a two-competitors market, and even if CompX had demonstrated loss of market share, the Court still found that CompX had not proven irreparable harm, in part because the patents expire in six weeks.

(2) inadequate remedies:  the Court relied on its analysis under the first factor, and concluded that CompX had not demonstrated that the 6% royalty awarded by the jury would be inadequate compensation.

The Court thus denied the injunction based on its analysis of the first two factors, and then noted that the balance of hardships (factor 3) favors Humanscale because of the short life left on the paetnts, and because the injunction would prevent Humanscale from selling its entire keyboard system even though only one component was found to infringe.  The court found the public interest (factor 4) to be neutral.

NB:  the Court also did not enter judgment on the jury's verdict of infringement and award of damages, but instead took that under advisement.  The Court also has not yet ruled on CompX's request for its attorney fees.

UPDATE:  Yesterday on June 1, Oracle filed its own opposition to Tecsec's request for a case management order, joining in the defendants' request to proceed only against IBM, but in the alternative requesting that the Court order Tecsec to limit both the number of claims asserted and the number of accused products. 

See our previous posts on this case here and here. 

Cvent, Inc., a Virginia-based software company which licenses web-hosted software for large-scale event planning, recently filed an action and motion for preliminary injunction against competitor Eventbrite, Inc. in Cvent, Inc. v. Eventbrite, Inc., No. 1:10cv481 (E.D. Va. May 10, 2010).  Cvent alleges that defendants used a technique known as “webscraping” to access Cvent’s website and copy thousands of its website pages, including various venue descriptions and a destination guide distributed to Cvent customers. 

Cvent alleges that to attract customers to its website, it created a database of about 100,000 hotels, conference centers, and special meeting venues around the world called the Cvent Supplier Network (“CSN”), which included detailed information about venues, such as images, descriptions, the availability and capacity of meeting rooms, venue amenities and services, and other information.  Cvent also alleges that, as part of the CSN, it created a “Destination Guide,” a resource of city-specific profiles designed for meeting and event planners.   

Cvent alleges that Eventbrite’s website contains content identical to content on Cvent’s website.  Upon initiating a forensic review of how such content was collected, Cvent discovered that John Doe defendants appeared to be using an automated website data retrieval (or web crawling) program, affiliated with so-called “bot” or “robot” programs, which allow automatic, systematic download, and copying of websites.  Cvent alleges that defendants used these programs to copy Cvent’s CSN and Destination Guide content on Eventbrite’s own venue profile pages.

Cvent has made claims of copyright infringement under 17 U.S.C. § 101 et seq.; violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Virginia Computer Crimes Act, Va. Code Ann. § 18.2-152.3 et seq.; reverse passing off under the Lanham Act, 15 U.S.C. § 1125(a); and various state and common law claims, including breach of Cvent’s terms of use on its website. 

Enclosed are links to the complaint, Cvent's motion for preliminary injunction, and the parties stipulation regarding expedited discovery of the identity of John Does 1-10, and other stipulations going forward.

In Solo Inc. v. Chapin Mfg., Inc., the plaintiff Solo, a manufacturer of backpack sprayers used for applying chemicals to lawn and gardens, sued Chapin, a competitor, in the EDVA for false advertising in violation of the Lanham Act.  The complaint alleged that Chapin made false or misleading statements of fact when comparing the functions of its sprayers to the models manufactured by Solo.  Some of the statements Solo accused of being false were that certain features of Chapin's backpack sprayers were exclusive to its brand, that Solo's sprayers leaked, and that Solo's sprayers lacked a reserve tank, among others.  Chapin brought a Rule 12(b)(6) motion to dismiss, claiming the statements made were not sufficient to support a false advertising claim because they were ambiguous and therefore could not, as a matter of law, be false.  Prior to this case, the Fourth Circuit had not expressly held that the determination of ambiguity in a false advertising case involved a question of fact.

 

Analyzing numerous lines of caselaw, and recognizing a trend in the Fourth Circuit toward this view, the Court held that the issue of whether an advertising statement is ambiguous must involve a determination as to its meaning, and that determining the meaning of a statement is a question left for the finder of fact.  The fact finder must balance the plausible meanings of an advertising claim to determine if the literal falsity element was satisfied.  Here, the Court concluded that all but one of Solo's claims were sufficiently pled to withstand the Rule 12(b)(6) motion to dismiss. 

On March 9, 2010, in Richardson v. Stanley Works, Inc., the Federal Circuit affirmed that the district court properly “factored out” functional aspects of a design patent when determining infringement.  Here, Richardson received a design patent on a multi-purpose carpentry tool.  Stanley Works manufactured a similar looking tool that performed the same functions.  Ordinarily, because a design patent limits protection to the ornamental design, if a design is primarily functional, the patent is invalid.  Analyzing infringement, the court compared the two designs and factored out functional elements common to both.  The court then determined that the only similarities between the two tools were unprotectable functional elements.

 

Richardson has petitioned for an en banc rehearing claiming that factoring out functionality is determinative of patentability, but misapplied as to infringement.  He argues the appropriate test for infringement is the “ordinary observer” test, first applied in Gorham Co. v. White, 81 U.S. 511, 528 (1871).  This test had been the sole standard for design patent infringement for over 100 years, until Litton Systems, Inc. v. Whirlpool Corp., 728 F.2d 1423 (Fed Cir. 1984), created the “point of novelty” test.  Recently, Egyptian Goddess Inc. v. Swisa, Inc., 543 F.3d 665 (Fed Cir. 2008), limited the point of novelty test in favor of the standard of the “ordinary observer.”  Richardson argues that an en banc rehearing is necessary to reaffirm that the Gorham ordinary observer test is the sole test for determining design patent infringement.  Apple Computer has filed an amicus brief, and the American Intellectual Property Law Association has too, both in support of the rehearing. 

 

Richardson's carpentry tool

            

Stanley Works' carpentry tool

At the status conference in this case (the transcript is here), the Court expressed serious reservations about the manageability of this case with numerous claims and defendants, and indicated that it was considering "creative restructuring" of the case.  The Court even limited Tecsec to its preliminary infringement contentions, and held that Tecsec could only amend them by narrowing them.  Ultimately, while taking no action at that time, the Court expressly indicated that it would not have one trial against 13 defendants, but would break the case apart at that time if it had not done so already.

In the wake of the Court's comments, the parties continue to weigh in on how Tecsec v. IBM should proceed.  Noting that Tecsec's claim chart identified over 200 claims asserted against 61 products by thirteen defendants, the defendants have moved to sever and stay the claims against all defendants save IBM, with only the allegations against IBM going forward now.  The defendants have also opposed Tecsec's proposed Case Management Order, as IBM has done separately, recognizing that the majority of the allegations and allegedly infringing products are against IBM, and IBM has proposed its own discovery plan. 

For its part, Tecsec has submitted a proposed discovery plan, which it asserts is consistent with its proposed Case Management Order.

eBay has filed a motion to dismiss or in the alternative for judgment on the pleadings, contending that Tecsec has not identified any infringing activity conducted by eBay.

It thus remains to be seen how the Court will decide to proceed with this litigation.

See press coverage about the case here and here. 

Tecsec has sued 13 defendants, including IBM, Oracle, and others, for alleged infringement of 11 patents related to encryption techniques.  The case is pending in the Alexandria Division, before Judge Brinkema.  Once all of the defendants filed their Answers, the Court issued a typical scheduling order for the Alexandria Division, with a final pretrial scheduled for just under four months from the Rule 16(b) Scheduling Conference.  Concerned with the possibility of completing discovery on 11 patents asserted against 13 defendants in less than four months, especially when the parties contemplated as many as 800 hours of fact-witness depositions, the defendants moved for a two-month extension of the discovery schedule.  In response to the motion, the Court issued an Order which contemplated permitting the litigation to proceed against only one defendant, and staying all other claims pending the outcome.  Tecsec opposed the Court’s suggestion.  Ultimately, the Court entered the extension to the schedule, and did not indicate that it would proceed against only one defendant.  In response to the Court’s request at the hearing to provide means to streamline the case, Tecsec then filed a motion for a case management order, which includes a number of means by which Tecsec has agreed to narrow the case, including by limiting the number of claims asserted and the number of claim terms for construction. 

 

See here and here for discussions of the case and the relevant technology. 

In late April, U.S. District Judge Gerald Bruce Lee of the Eastern District of Virginia, Alexandria Division, announced that he was granting Google’s motion for summary judgment in the trademark infringement “Adwords” litigation brought by Rosetta Stone. [Our previous post about the case is here.]  Judge Lee announced his decision in a short order, which stated that the Court would later issue a memorandum opinion and final judgment.  While Judge Lee has not yet issued his opinion, this week the Court made available the transcript of the April 23 hearing on Google’s motion.  The transcript is not available on line, but we read the transcript in the courthouse clerk’s office.  While Judge Lee did not announce his decision during the hearing, he did make certain comments in his discussion of the case with counsel that likely anticipate the grounds for his holding.  “What I’m focused on,” Judge Lee stated, “is confusion as a source or origin of goods where the search engine itself does not sell products.”  At another point, he stated “[Google] is not selling [products] – they’re selling placement on a page.”   

The EDVA’s holding in Level 3 Communications, LLC v. Limelight Networks, Inc. was affirmed in a brief opinion issued by the Federal Circuit on May 5, 2010.  Level 3 initially filed suit in the EDVA accusing Limelight of infringing three patents, U.S. Patent Nos. 7,054,935, 6,654,807; and 6,473,405.  The patents-in-suit relate to content delivery network technology, which is a system that supports delivery of information, such as video, music, games, and software, to computer users or computers on behalf of its subscribers (e.g. content providers).  Limelight countered by asserting defenses of non-infringement and invalidity. 

 

Level 3 initially attempted to dispose of the case on summary judgment.  However, Level 3’s motion for summary judgment was denied, as previously reported here. 

 

While the EDVA rejected Limelight’s assertion of invalidity of the patents-in-suit, Limelight ultimately prevailed at the jury trial on grounds of non-infringement. 

As Dennis Crouch reports on Patently-O, Professor Mark Lemley has unveiled a draft of his study, “Where to File Your Patent Case.”

 

According to Crouch, Professor Lemley examined 25 potential patent forums with respect to three criteria: “(1) likelihood of winning; (2) likelihood of getting to trial; and (3) speed of getting to trial.”

 

The Eastern District of Virginia, Crouch notes, was among the “best districts” with respect to two of the three criteria – speed and likelihood of getting to trial.

On Wednesday, April 28, the Eastern District of Virginia granted defendant Google’s motion for summary judgment and dismissed Rosetta Stone’s trademark infringement suit against Google, for “reasons to be stated in [his] forthcoming Memorandum Order.”

 

In a memorandum in support of a Motion for Partial Summary Judgment as to Liability, Rosetta Stone had alleged, inter alia, that the use of Rosetta Stone’s trademarks on sponsored advertisements positioned alongside its “organic” search results both actually and likely confused customers as to the source and authenticity of the products advertised.  Rosetta Stone further charged that Google had knowledge that these sponsored ads were purchased by known counterfeiters based on Rosetta Stone’s repeated notifications of such to Google over a period of seven months.  In addition, Rosetta Stone had alleged that Google's use of its trademarks to trigger such sponsored ads was an infringing use.

 

Google, in a memorandum in support of a Motion for Summary Judgment, countered that its "policy prohibits the sale or promotion of counterfeit goods,” and that it had promptly dealt with all known instances of counterfeiting in this case.  Moreover, Google claimed, the uses of Rosetta Stone’s trademarks by its AdWords program were not actionable because they constituted either lawful references by legitimate resellers to genuine Rosetta Stone products, or references by alleged counterfeiters, who themselves determined the content of their ads, to supposed Rosetta Stone products, the sources of which were known to consumers and the authenticity of which Google had no responsibility to independently determine.  Finally, Google asserted that its use of Rosetta Stone's trademarks and other searched terms to generate ads was a functional and otherwise lawful use that failed to confuse customers.

 

The case had been scheduled to go to trial on May 5, 2010.  As reported by Law360.com, Rosetta Stone will consider an appeal to the Fourth Circuit after it has had an opportunity to read Judge Lee’s opinion.

 

We previously blogged about the case here.

Judge Payne recently denied defendants’ motion to stay a patent infringement suit pending reexamination of the patents-in-suit in ePlus, Inc. v. Lawson Software, Inc., No. 3:09cv620 (E.D.Va. March 31, 2010).  Plaintiff ePlus filed the complaint in May, 2009, against defendants, Perfect Commerce, Inc., Sciquest, Inc., Lawson Software, Inc., and Verian Technologies, Inc. alleging patent infringement claims relating to electronic sourcing systems, which allow prospective buyers to locate items to purchase from multiple electronic catalogs and build a requisition for the items. 

The patents at issue were the subject of a previous lawsuit in 2006 against SAP America, Inc. and SAP AG.  However, after the trial for that case ended in a hung jury, SAP filed for an ex parte reexamination of one of the patents-in-suit.  The PTO granted reexamination and rejected 20 claims of the patent as being anticipated by four independent items of prior art.  ePlus’ appeal of the rejection is still pending.  Lawson also filed an inter partes reexamination request regarding several claims of other patents-in-suit in the current ePlus case.

In ruling on the motion, the Court considered the standard set down by Landis v. N. Am. Co., 299 U.S. 248 (1936), and the factors set out in other patent cases relying on Landis, to determine: (1) whether discovery was complete and a trial date was scheduled; (2) whether a stay would simplify the matters at issue; and (3) whether a stay would unduly prejudice couror clearly disadvantage the non-moving party.

The Court found that because the parties had completed a substantial amount of discovery and trial was already set for September, 2010, the first factor weighed against a stay.  With respect to the second factor, the Court noted that completion of the reexamination would undoubtedly simplify some of the matters at issue, particularly if there were an effective invalidation of a patent requiring dismissal of the suit or encouraging settlement.  Although it would certainly not dispose of all the issues, such as subject matter, indefiniteness, improper inventorship, or inequitable conduct defenses raised in the case, the Court found this factor weighed slightly in favor of a stay.

Finally, the Court found that ePlus made a strong showing of prejudice, because of the time it would have to wait to litigate its claims, and the possibility it could lose its right to injunctive relief, because the patents could expire prior to completion of reexamination.  Although Lawson argued it would be prejudiced at trial because the patents would be presumed valid without a decision on the reexaminations, the Court found that the advanced stage of the case and Markman proceedings undercut Lawson’s arguments.  Moreover, the lengthy process of reexamination outweighed the interest of the parties and efficient administration of justice in moving forward with the action.

To see the opinion for the decision above, click here:

http://www.williamsmullen.com/files/upload/ePlus-V-Lawson.pdf

On April 13, the Federal Circuit reversed a 2008 Eastern District of Texas jury ruling in favor of plaintiff Anascape, LTD, wiping out a $21 million judgment against defendant Nintendo of America, Inc.  Anascape had accused Nintendo of infringing 12 patents covering video game controllers.  Among the alleged infringing products were Nintendo’s Wii Remote, Nunchuk, and Classic controllers, as well as two of its Gamecube controllers.

 

In 2008, an Eastern District of Texas jury found no infringement with respect to the Wii Remote and Wii Nunchuk, but held that the Wii Classic controller (pictured) and the two Gamecube controllers had indeed infringed claims of Anascape’s U.S. Patent No. 6,906,700 (“the ’700 patent”), a continuation-in-part of its U.S. Patent No. 6,222,525 (“the ‘525 patent”).  Anascape was awarded a $21 million judgment, and Nintendo was enjoined from selling its infringing controllers.

 

 

CC license courtesy of Tsukihito on Wikimedia.

 

On appeal, the Federal Circuit held that Anascape could not claim the benefit of the ‘525 patent’s earlier filing date, as that patent was limited to “a single input member that operates in six degrees of freedom,” whereas the broader specification of the ‘700 patent included “controllers having multiple input members that together operated in six degrees of freedom.”  Anascape argued that the ‘700 patent did not include new matter, but the Federal Circuit disagreed, stating that

 

[T]he changes [in the ‘700 patent] are extensive and substantive.  A description can be broadened by removing limitations.  The limitation to a single input member capable of movement in six degrees of freedom was removed, in filing the ‘700 application, and new claims were provided of commensurately broadened scope.  This is classical new matter.

 

In other words, the ‘525 patent disclosure on its own could not support the claims of the ‘700 patent disclosure. 

 

Because the ‘700 patent therefore was not entitled to the ‘525 patent’s earlier filing date, and because Anascape conceded that defendant Nintendo had presented intervening prior art, in the form of two Sony controllers, that anticipated the ‘700 claims in question, the Federal Circuit held that the judgment against Nintendo must be reversed.

 

The full CAFC opinion is available here.

 

Gamasutra has reported on Nintendo’s victory here.

 

Patent Hawk has also blogged about the decision.

The April 6, 2010 oral argument before the Federal Circuit on Pequignot’s appeal from the district court, ruling against it on summary judgment that there “was not a scintilla of evidence” to support the claim that Solo Cup acted with intent to deceive the public when it continued to mark cups with the numbers of patents that had expired, signaled strong consideration of making the burden of proof  “beyond a reasonable doubt” for a plaintiff asserting §292(b) claim.  The judges noted repeatedly that the legislative history of the section referenced Title 18, indicating Congress’ intent that the statute be considered a criminal statute.  Pequignot’s argument was that under Clontech Labs, Inv. v. Invitrogen Corp., 406 F.3d 1347 (Fed. Cir. 2005), cited as authority in Bon Tool, a party asserting false marking must show by a preponderance of the evidence that the accused party did not have a reasonable belief that the products were properly marked.  In colloquy with counsel, one of the judges suggested that this portion of the opinion in Bon Tool was dicta.  References were also made to decisions of sister circuits which had adopted a higher standard than that of preponderance of the evidence.

           

The facts of the case present the question of whether continuing to mark products with patent numbers of expired patents constitutes “false marking.”  The evidence is undisputed that Solo Cup was aware that certain patent numbers marked on its cup lids, while correct at the time the cup molds were made, had expired by 2000.  Solo argued that patent law was silent as to when such markings had to be removed, and that its reliance on the advice of counsel that it could remove the markings for expired patents at its convenience was appropriate.  At appellate argument, Solo was asked if there was a point in time when continued marking of products with expired patents moved toward deceiving the public.  Its response was that there was no such point in time because marking products with truthful patent numbers, even if expired, benefits the public.  The numbers, which are easily searchable, benefit the public because it is easy to determine that the invention is at that point available for public use.    

           

It is possible that the court could affirm the decision of the district court awarding summary judgment without addressing the issue of the standard of proof by adopting the trial court’s finding that “not a scintilla of evidence” supported a finding of intent to deceive under either the preponderance standard or the more rigorous standard Peguignot argues that the district court applied. 

Erin Coe of Law360.com reports that 114 false patent marking claims have been filed in federal court since the Federal Circuit’s December decision in The Forest Group Inc. v. Bon Tool, 590 F.3d 1295 (Fed. Cir. 2009).

In Forest Group, the Federal Circuit held that liability for false patent marking under 35 U.S.C. § 292 applies to each instance of false marking, and not generally to the decision to falsely mark.  In other words, each article falsely marked as being covered by a patent that has expired or is otherwise inapplicable to the article “constitutes an offense” under the statute, and is subject to a fine of up to $500.

Though the per article fine is still a matter of discretion within the district courts, the potential for significant fines in the aggregate has incentivized the filing of claims under the statute.  Previously, there was little such incentive, as § 292 had been interpreted in London v. Everett H. Dunbar Corporation, 179 F. 506 (1st Cir. 1910), to impose a fine not for each instance of false marking, but for the singular decision to falsely mark.  London effectively created a $500 ceiling on recovery, even in cases where millions of falsely marked products had been distributed.  In Forest Group, however, the Federal Circuit cited policy and the plain language of the statute in declaring that § 292 “clearly requires a per article fine.”

As Coe reports, it is possible that courts will establish fractional penny fines in cases where falsely marked products have been mass-produced and distributed.  Even where fines are of the fractional penny magnitude, however, recovery could be substantial.  For instance, in Pequignot v. Solo Cup, 640 F.Supp.2d 714 (E.D. Va. 2009), originally filed in the Eastern District of Virginia, defendant Solo Cup admitted to having falsely marked and distributed 21 billion cup lids, though it denied having done so with an intent to deceive the public.  The EDVA granted summary judgment in favor of defendant Solo Cup, and plaintiff Matthew A. Pequignot appealed.  If the Federal Circuit determines on appeal that Solo Cup is indeed subject to fines under § 292 and Forest Group, recovery would be a product of the 21 billion lids.

We previously blogged about the Solo Cup case in June 2009 and July 2009, prior to Forest Group.

The currently pending Patent Reform Act purports to eliminate standing under § 292 where a party has not suffered a “competitive injury.” Such a change would apply both prospectively as well as to any pending cases, and could have a chilling effect on the numbers of § 292 claims filed thereafter.

Dennis Crouch recently posted a snippet from a press release by the Public Patent Foundation, citing the benefits of § 292 qui tam suits to both citizens and government, and cautioning that the Patent Reform Act’s amendment “would eliminate an important method of protecting the public from false and deceitful statements.”

 

Having recently successfully opposed proposed limits on patent continuation applications, requests for continued examination, and claims-per-patent, inventor Triantafyllos Tafas now seeks remuneration for what he alleges was an unnecessarily protracted battle with the USPTO.

 

Tafas filed a motion (and a memo in support) on March 15th in the Eastern District of Virginia seeking recovery of attorneys’ fees and other expenses related to the earlier case.  Tafas’ claim is grounded in the Equal Access to Justice Act, which permits recovery of such fees where a party has unreasonably, and in bad faith, delayed the outcome of litigation.  In his motion, Tafas characterizes the USPTO’s rules package as “transparently ultra vires” and asserts that its defense of the package was “not substantially justified” under the Act.

 

Specifically, Tafas suggests that the USPTO “knew or reasonably should have known by no later than January 2008” that it lacked the necessary approval from the Office of Management and Budget to move forward with the proposed rule changes.  The agency nonetheless “vigorously litigated” the case, prolonging its resolution and causing Tafas to incur substantial legal fees.

 

Tafas further asserts that he is entitled to compensation at common law under the “common benefit” doctrine, as the outcome of his prior suit conferred a benefit on other inventors who otherwise would have been subject to the proposed limits.

 

Tafas claims that even the USPTO benefited from the prior suit insofar as it was spared the expense of “proceeding to implement the Final Rules only to have them subject to future challenge and invalidation.”

 

A motion hearing has been set for March 26, 2010 before District Judge James C. Cacheris.

 

Ryan Davis of Law360 reported on Tafas’ motion here.

Berkeley HeartLab, Inc. (BHL) has filed suit in the Eastern District of Virginia against Health Diagnostic Laboratory, Inc. (HDL) and several former BHL employees for theft of trade secrets, breach of contract, and several other causes of action.  The breach of contract claims refer to a Proprietary Information and Invention Agreement between BHL and the former employees, who allegedly left BHL en masse to work for Richmond based HDL.  The Complaint also includes a claim under the Computer Fraud and Abuse Act, 18 USC 1030 (CFAA). 

 

The CFAA protects against unauthorized access or hacking into to certain computers or information.  For example, the knowing access of a computer without authorization (or exceeding authorized access) for obtaining certain types of information and willfully providing it to someone who is not authorized to receive it is a crime.  Much of the buzz over the CFAA has been with the sensational criminal case United States v. Drew, over cyber-bullying. 

 

However, the CFAA also provides a civil claim for some types of prohibited conduct:

 

 (g) Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. A civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in clause (i), (ii), (iii), (iv), or (v) of subsection (a)(5)(B). Damages for a violation involving only conduct described in subsection (a)(5)(B)(i) are limited to economic damages. No action may be brought under this subsection unless such action is begun within 2 years of the date of the act complained of or the date of the discovery of the damage. No action may be brought under this subsection for the negligent design or manufacture of computer hardware, computer software, or firmware.

18 U.S.C. § 1030(g).  Some employers have brought CFAA civil claims against employees that have misappropriated information; the CFAA offers a federal remedy that does not involve the burden of proving that the information stolen was a trade secret. 

 

For example, the BHL Complaint characterizes BHL computers as “protected computers” used in interstate commerce (citing 18 U.S.C. § 1030(e)(2)(B)), and that the former employees “accessed BHL’s computers without authorization and, as a result of such access, made unauthorized copies of computer data.”  Complaint, ¶ 174.   The Complaint spells out a number of factors that BHL might use to argue that it defined and controlled authorized access for

its employees, such as using “key-coded access,” “password protecting patient and sales information,” and controlling sensitive information.  Complaint, ¶¶ 23 - 27.

 

A brewing conflict in civil CFAA litigation dwells specifically on the meaning of the statutory words: “authorization” and “access.”  There is a split between the seventh and ninth circuits on proving these terms.  A background of the cases defining the split may be found at the blog for the Journal of Intellectual Property Law & Practice.  Without repeating the background provided there, in short, the Seventh Circuit reasons that authorization for access to an employer’s computer terminates at the time an employee breaches the duty of loyalty to the employer.  The Ninth Circuit requires a more specific showing of how the employer defined authorized access for the employee, including its safeguards for sensitive information. 

 

BHL’s suit now brings the question to Virginia, and may reveal if the Eastern District of Virginia will choose to follow one of the existing standards, or decide to go its own way.  

UPDATE:  This case was settled, and dismissed per order of the Court on April 22, 2010.

The Eastern District of Virginia “Rocket Docket” remains in the top ten for patent infringement filings in the United States in 2009, as reported by LegalMetric, a data analysis company.  The top ten districts for 2009 were:

 

1. Central District of California

2. Eastern District of Texas

3. District of Delaware

4. Northern District of California

5. District of New Jersey

6. Northern District of Illinois

7. Southern District of New York

8. Southern District of California

9. District of Massachusetts

10. Eastern District of Virginia

Record companies pursue restaurant owners for failing to get ASCAP licenses for the public performance of several songs in three recent cases filed in the Eastern District of Virginia.  See The Twin Towers Co. v. Knuckleheads, Inc., No. 2:10cv 50 (E.D. Va. 2010); WB Music Corp. v. Blcj, Inc., No. 1:10cv104 (E.D. Va 2010); 6 Deep Pub’ng v. Tropical Soul, Inc., No. 3:10cv062 (E.D. Va 2010).

Public performance is one of the bundle of rights protected under the Copyright Act, 17 U.S.C. § 101 et seq.  Music publishers and songwriters have protected this right through affiliation with performing rights organizations, such as ASCAP, BMI and SESAC, which in turn license the performance right for a statutory royalty to restaurants, movie or television producers, or other business that desire to perform the music.  Through ASCAP, for example, businesses can obtain the right to perform millions of songs created or owned by more than 500,000 songwriters, composers, lyricists and publishers.

Failure to get the licenses to perform can result in statutory damages under the Copyright Act, of between $750 - $30,000 for each work infringed, as well as costs and attorneys fees spent in enforcing the right.  Restaurant owners in cases brought by the music companies over the last few years in the Eastern District of Virginia have felt that burden, largely through settlement or default judgment.  In the most recent cases, the record companies allege that each of the restaurant owners has allowed the unauthorized public performance of three to six different songs within the last couple of years.  If the highest statutory amount is ordered by the court with respect to six songs, this could result in up to $180,000 in damages.

Businesses need permission to play music even if they are only playing CDs, records, or tapes.  On the other hand, businesses do not need permission for radio and television transmissions if the performance is through TV or radio transmission, as long as the  establishment uses a limited number of speakers or TVs, the reception is not further transmitted (for example, from one room to another), and there is no admission charge.

To find out more information about obtaining the proper licenses, businesses can go to http://www.ascap.com/licensing/licensingfaq.html.

 

Judge Anthony J. Trenga shared his perspectives on the Preliminary Injunction standards following the Fourth Circuit’s adoption of Winter v. NRDC, 129 S.Ct. 365 (2008) in Real Truth about Obama, Inc. v. FEC, 575 F.3d 342 (4th Cir. 2009) in a "View from the Bench" CLE hosted by the Northern Virginia Chapter of the Federal Bar Association. The need to clearly establish the likelihood of success on the merits was paramount. The former "flexible interplay" of (a) irreparable harm; (b) balance of the equities; (c) likelihood of success on the merits; and (d) public interest has been replaced with the requirement that an independent demonstration by the moving party as to each factor must be demonstrated. Despite the routine practice of supporting motions for preliminary injunction with affidavits or verified complaints, Judge Trenga noted that one holdover from the Blackwelder case was that testimony could still be permitted to assist a "perplexed judge." Recent opinions reflect a greater scrutiny of the injunction factors. In FBR Capital Markets & Co. v. Short, 2009 U.S. Dist LEXIS 94558 (E.D.Va Oct. 9, 2009) (J. O’Grady), plaintiff’s motion for a preliminary injunction in a theft of trade secrets case was denied upon a determination that although plaintiff showed a risk of loss, it had not demonstrated any actual loss of customers; further, any demonstrated loss of income could be compensated, undermining the "irreparable harm" factor. In a franchisee/franchisor dispute with covenants not to compete and trademark claims, the court again denied injunctive relief upon determining that inconsistencies in the facts precluded a finding that the plaintiff was likely to succeed on the merits. Allegra Network LLC v. Reeder, 2009 U.S. Dist LEXIS 103688 (E.D.Va. Nov. 4 2009) (J. O’Grady). In a building construction matter, plaintiff’s motion for an injunction was denied upon defendants’ demonstration that not only could plaintiff not establish any of the necessary factors, he had waited for a year to bring the matter to court. Glassman v. Arlington County, Va et al, 1:09cv01249 (Jan.22, 2010).

On Thursday, February 25, the jury returned its verdict in Humanscale v. CompX, on CompX's claims for infringement of its '054 and '767 patents relating to keyboard trays.  The results:

• All asserted claims of both patents infringed
• All asserted claims of both patents not invalid
• Humanscale's laches defense rejected
• Reasonable royalty damages up to the date the counterclaims were filed:  $17,220,000
• Reasonable royalty damages from then until December 31, 2009:  $2,152,200
• Reasonable royalty percentage going forward:  6%

The Court had previously granted Humanscale's motion for a directed verdict on willfulness, so these damages will likely not be enhanced.  See CompX's press release on the jury verdict here. 

The Court had also previously stayed Humanscale's claims for infringement of its '097 patent, pending an ITC determination regarding the same allegations.  On Tuesday, Judge Paul Luckern at the ITC issued a final determination that CompX had infringed two claims of Humanscale's '097 patent (although he also determined that one of those claims was obvious), and stated that he would recommend a limited exclusion order barring entry of CompX's keyboard trays and a cease and desist order against CompX.

See our previous posts on these cases here. 

 

On Friday, February 19, the Eastern District of Virginia vacated its earlier order granting judgment in favor of Apple, and dismissed the case, pursuant to the parties' joint stipulated order.  The order finally resolves the case between the parties, including Monec's pending appeal to the Federal Circuit.  In its memorandum supporting the request for vacatur, Monec explained that the parties resolved the case using the Federal Circuit's mediation process.  Monec contended that the parties' resolution rendered the Court's judgment moot, and that there were open questions as to whether Monec had a full and fair opportunity to litigate its claims, and whether the Court applied proper procedural standards in issuing judgment in favor of Apple so early in the case, before any discovery or claim construction process.  See our previous posts on the case here. 

Patent infringers must have notice of a patent before they can be liable for patent infringement damages.  Notice can come in many forms, including by lawsuit, cease-and-desist letters, or proper patent marking. 35 U.S.C. Section 287(a) permits recovery of damages based on the constructive notice provided by proper patent marking, even where no actual or direct notice to the alleged infringer has been given.

OceanTomo LLC, the Chicago-based company that brokers deals for IP portfolios and hosts live patent auctions, has recently launched a web site dedicated to virtual patent marking.  See www.patentmarking.com.  Its purpose is to provide free public information linking products and services to their associated patents.  According to the website, information can be posted in three forms: (1) from the actual product manufacturers or service providers themselves; (2) from observations of registered users; and (3) from validated information provided by Ocean Tomo and/or a trusted affiliate organization.

OceanTomo espouses virtual marking as a way to avoid the hassles associated with actual product marking, while also helping to prevent false marking charges.  If patent reform measures were to pass that included a provision permitting virtual marking, OceanTomo states, product manufacturers could replace the specific number on the product itself with a pointer to a website that has the patent information for that product.

Will this be the wave of the future for patent marking?  Tough to say.  Within the field of patent law, patent marking is a fairly black-and-white principle in a sea of gray.  Your product is either properly marked or it isn't.  While one can see the benefits to OceanTomo as an information aggregator (are we still saying "eyeballs" in 2010?) and service provider (minimum annual subscription is apparently $5,000), the benefits to the potential patent enforcer may be less apparent.  If OceanTomo is calling for a switch from marking your product with a patent number to marking it with a website pointer, then doesn't the product still need to be marked somehow?  Not sure where that hassle is eliminated, although I suspect it could make things easier when a product is covered by many patents and the product owner has an electronic means to update the patent list.  Still, what if the site goes down for a couple of hours?  Will an alleged infringer have infringement windows of opportunity as a result?  Until the kinks are worked out and any legislation is fully developed, it may be tough to get virtual marking permitted under Section 287.

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In ResQNet.com, Inc. v. Lansa, Inc., decided February 5th, the Federal Circuit affirmed a district court finding of patent infringement, but reversed and remanded as to damages, holding in a per curiam opinion that plaintiff ResQNet’s expert had improperly relied on extraneous past license evidence in calculating a royalty rate.  Building on its September, 2009 decision in Lucent Technologies, Inc. v. Gateway, Inc., the court in ResQNet reaffirmed that “[a]ny evidence unrelated to the claimed invention does not support compensation for infringement but punishes beyond the reach of the statute.”

One approach to determining a “reasonable royalty” for patent infringement, introduced in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), is to estimate the rate a hypothetical license would have featured had the parties willingly negotiated prior to the infringement.  In calculating such a rate, a party may rely on any substantial evidence, including royalty rates paid in connection with other, actual licenses for the use of the infringed patent or any other sufficiently similar patents.

Such past license evidence, however, must be “sufficiently comparable to the hypothetical license” at issue.  In Lucent, the Federal Circuit had held that four of the eight license agreements used to calculate a royalty rate “differ[ed] substantially from the hypothetical negotiation” and therefore failed to adequately support the damages calculation.  The court ruled similarly in ResQNet, holding that five of the seven licenses relied on by ResQNet’s expert not only granted rights in the patent, but also included “services such as training, maintenance, marketing, and upgrades” that were “unrelated” to the claimed invention.

The ResQNet court suggested that these “inapposite” licenses were purposefully included in the expert’s calculations to inflate the royalty rate, and that no actual link existed between them and the patented technology.

In dissent, Judge Newman suggested that the ResQNet majority’s opinion misapplied its own precedent, claiming that Lucent does not call for disqualification of all past license evidence that does not wholly relate to the claimed technology.  Rather, if it is at least fractionally relevant, such evidence should be included in rate calculations, though valued proportionally.

Dennis Crouch (Patently-O) and Peter Zura (The 271 Patent Blog) have also blogged about the ResQNet decision.

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On Friday, February 19, Humanscale and CompX completed the first week of a jury trial in the Richmond Division of the EDVA, before Judge Spencer.  See our previous post on the case here.  At issue are CompX's claims of infringement of the '054 and '767 patents, and Humanscale's counterclaims of noninfringement and invalidity.  CompX rested on the third day, and the Court denied all of the Humanscale's motions for judgment as a matter of law, save one.  The Court granted Humanscale's motion on willfulness.  Humanscale started presenting evidence on Friday, and the trial resumes on Monday, February 22. 

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The trademark infringement lawsuit filed by the Virginia-based language learning software company Rosetta Stone against Google is now scheduled to go to trial on May 3, 2010, before a jury in Alexandria, Virginia.  Google's previous motion to dismiss the lawsuit was denied.  This lawsuit is one of several trademark infringement lawsuits filed against Google in federal courts since Google reportedly adopted a new policy allowing advertisers to use trademark terms in their ad text, but it is the only such action pending in the EDVA. Because of the jurisdiction’s well-known speedy docket, it is likely that this case will be the first of the new Adword cases to reach judgment.

Google’s current policy is posted here.

Eric Goldman has a post discussing the cases against Google here on his Technology & Marketing Law Blog.

Dennis Crouch has an interesting post from yesterday at PatentlyO on conflicting statutory provisions providing for appeals of rejections by the BPAI in ex parte reexamination proceedings, namely whether the patentee can appeal to the District of DC, or whether the Federal Circuit has exclusive jurisdiction over such appeals.   Addressing this issue in Sigram Schindler v. Kappos, 2009 WL 4981473 (E.D. Va. Dec. 18, 2009), the Eastern District of Virginia agreed with the PTO's interpretation (found in 37 C.F.R. § 1.303 and in MPEP § 2279) that section 141 controls, and that appeals lie only at the Federal Circuit. 

The Reexamination Center also has a good discussion of this issue here. 

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In the wake of the Federal Circuit’s decision in Wyeth v. Kappos, the USPTO recently announced an interim procedure for patentees to request patent term adjustment recalculations.  In Wyeth, the Federal Circuit affirmed Wyeth and Elan Pharma International Ltd.’s request to extend patent term adjustments under 35 U.S.C. 154(b), due to the USPTO’s delay in prosecuting their patent applications.   Commissioner for Patents Robert Stoll stated that “the USPTO is working to modify its computer program to comply with the Federal Circuit’s decision as soon as possible. Until then, this interim procedure will enable patentees to request a recalculation quickly and at no charge.”   The USPTO expects that the software modification needed to comply with the Wyeth decision will be completed by March 2, 2010.  In the interim, the USPTO is providing patentees with the ability to request a recalculation of their patent term adjustment without a fee or petition as is normally required pending completion of necessary modifications to the USPTO’s computer program.

 

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In recent years, PwC has analyzed trends in patent litigation and issued a report focusing on a particular "hot topic" in the arena.  For 2009, that topic was Non-Practicing Entities, and their effect on patent litigation.  The 2009 report draws a number of interesting conclusions about NPEs, including the statistic that since 2002, NPEs have consistently won larger damage awards that operating companies.  Not surprisingly, the Eastern District of Virginia was identified as the fastest docket in the country with an average time-to-trial in patent cases of .88 years.  The study also concludes that the Rocket Docket is a pro-patentee jurisdiction, largely because of its speedy docket, higher success rates for patentees (ranked third with a success rate of 48.6% for patentholders), and larger median damage awards.  

The 271 blog has a discussion of the report here, as does the Prior Art blog here.  

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Everyone is anxiously awaiting the Supreme Court's decision in In re Bilski, but until then, AwakenIP has collected here an extremely comprehensive collection of resources on the Bilski case.  It has everything from commentary, to blog posts, to transcripts and briefs, including amicus briefs at the Federal Circuit.  Definitely a website to visit for anyone interested in the Bilski case.

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On November 24, the Court dismissed Juniper's claims of infringement, and GraphOn's counterclaims, with prejudice, based on a covenant not to sue that Juniper had given to GraphOn, which the Court concluded eliminated the existence of a case or controversy under Article III of the Constitution.  Fifteen days later, GraphOn filed its motion for attorney fees.  Unfortunately for GraphOn, the motion was a day late; under Rule 54(d)(2)(B)(i), motions for attorney fees are due within fourteen days of the entry of judgment.  The Court denied the motion, finding that GraphOn's excuse that it miscalculated the due date was insufficient to constitute excusable neglect under Rule 6.  GraphOn has appealed both the dismissal and the denial of its motion for fees to the Federal Circuit.  GraphOn's brief is due March 8. 

PATracer also has a discussion of this case here.  See our previous discussion of this case here. 

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On February 13, 2009, Humanscale sued CompX International and CompX Waterloo in the EDVA for infringement of US Patent No. 5,292,097.   Humanscale designs and manufactures keyboard support products, such as the keyboard tray in the '097 patent.  In response, Defendants filed the usual counterclaims for invalidity, noninfringement, and unenforceability, and also asserted infringement by Humanscale of US Patent Nos. 5,037,054 and 5,257,767. Early in the case, the Court stayed the claims on the '097 patent, based on a concurrent ITC investigation, and let the claims on the '054 and '767 patents go forward.  Almost exactly a year later, it looks like parties are headed to trial by jury before Judge Spencer in Richmond.  On February 5, 2010, the Court heard oral argument on Humanscale's motion for summary judgment of invalidity and laches (the only summary judgment motion that appears to have been filed), and denied it from the bench.  According to the current scheduling order, the parties are scheduled to begin trial on February 16.   

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Patent cases are notoriously expensive to litigate.  As a result, more and more parties are turning to Rule 12(c) in an attempt to narrow down issues in the case, or to dismiss the case entirely.  In Monec v. Apple (which this blog has previously covered here), the Eastern District of Virginia dismissed the case in its entirety, finding that the plaintiff could not recover based on the claims of the patent as written.   And more recently in the Norfolk Division, defendant Walden University filed a Rule 12(c) motion asserting that certain claims of the patent at issue in its case against Digital-Vending Services International are indefinite, in part because they claim both an apparatus and a method.  In addition to arguing that Walden's motion is premature, because the claims have not yet been construed, DVSI has opposed Walden's motion on its merits.  The Court has neither set a date for the hearing nor ruled on the motion. 

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The IP Section of the Virginia State Bar has announced its 2010 writing competition, for articles relating to intellectual property law, or the practice of intellectual property law.  According to the VSB's website, the contest is open to students at Virginia law schools, or Virginia residents attending law school outside the Commonwealth of Virginia.  The prize is $4,000 and publication of the article on the VSB IP Section website.  Articles are due by May 29, 2010.  More details can be found here.

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PRE Holding, Inc. v. Monaghan Medical Corporation was dismissed without prejudice pursuant to a Stipulated Order entered on January 27, 2010, in the Richmond Division of the Eastern District of Virginia.  The lawsuit had been pending in the EDVA since July 21, 2009, when PRE Holding asserted that the Defendants infringed U.S. Patent No. 7,562,656, which is directed toward an aerosol medication inhalation system to aid in the delivery of aerosolized medicaments to patients.  Monaghan subsequently requested an Inter Partes Reexamination of the ’656 patent, and the USPTO granted the request on January 20, 2010, and entered a First Office Action rejecting all of the asserted claims as unpatentable. 

 

Defendant Trudell Medical International agreed to be bound by the USPTO’s disposition of the Reexamination Proceeding to the same extent that Monaghan is bound.  Defendants also agree to discontinue selling the accused products in the United States before the presently scheduled trial date of July 12, 2010.

 

The Court also ordered that the six year statute of limitations for obtaining damages in the case was tolled from the date the suit was filed through the date on which a final ruling is entered in the Reexamination Proceeding, and that damages would not be limited during that tolling period.

In Nemet Chevrolet v. Consumeraffairs.com, Inc., No. 08-2097 (4th Cir. 2009), the Fourth Circuit majority, Judges King and Agee, recently upheld the district court’s Rule 12(b)(6) dismissal of Nemet's defamation claims against Consumeraffairs.com, based on website posts relating to Nemet’s automobile services. The majority found defendant immune as an information service provider under section 230 of the Communications Decency Act (“CDA”). Nemet argued that its claims were sufficient to withstand the motion to dismiss and that Consumeraffairs.com was not entitled to immunity because it was an “information content provider” under section 230(f)(3).

Section 230 of the CDA prohibits a “provider or user of an interactive computer service” from being held responsible “as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1).  However, the scope of the immunity depends on whether a person’s actions also make it an “information content provider” or “responsible … for the creation or development of information provided through the Internet,” in which case the person is not entitled to immunity.  Id. at § 230(f)(3).

Nemet first argued that its general allegations that defendant participated in the preparation of the posts: (1) through the structure and design of its website, or (2) by soliciting its customers’ complaints, steering them into specific categories designed to attract consumer class action lawyers, contacting customers to ask questions about their complaints, and helping them draft or revise their complaints, were sufficient to show that Consumeraffairs.com was responsible, in part, for the creation or development of the information in the posts. Nemet’s argument was based on Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008), in which the Ninth Circuit held a website operator liable as an information content provider for the discriminatory postings created by third parties because it had designed the website to develop unlawful content as a condition precedent of use.

However, the Fourth Circuit disagreed with Nemet, finding Roommates.com distinguishable because the website there required users to input illegal content, whereas Nemet merely alleged that Consumeraffairs.com structured its website and business operations to develop purely lawful information related to class-action lawsuits. Also, because Nemet failed to make any cognizable argument as to how a website operater who contacted a user “developed” or “created” the website content, the court found the allegations both threadbare and conclusory.

Nemet also argued that Consumeraffairs.com had fabricated eight of the posts because it could not confirm that the posts were created by a Nemet customer, based on the date, model of car, and first name. However, the majority found that the sole basis for these claims was that Nemet could not find the customer in its records based on the information in the post. Thus, viewed in their best light, Nemet’s allegations allowed inference of no more than “the mere possibility” that defendant was responsible for the creation of the posts, and it was entitled to immunity under the CDA.

Judge Jones concurred with respect to the insufficiency of the allegations based on the website structure and design, but dissented with regard to the eight fabricated posts, because Nemet had alleged that each of those posts gave the name and hometown of the putative customer as well as the make and model of the vehicle sold by Nemet.  Thus, Judge Jones believed Nemet’s allegations, along with other factual allegations concerning Consumeraffairs.com’s derogatory statements about Nemet in connection with the posts, were sufficient to create a reasonable inference that Consumeraffairs.com wrote the eight posts to attract additional complaints, and should withstand the motion to dismiss.

Click here for this Fourth Circuit opinion.

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On May 19, ePlus, Inc. filed suit in the Rocket Docket against a number of defendants for infringement of patents covering aspects of electronic sourcing and procurement systems.  ePlus, Inc. v. Lawson Software, Inc., Civ. Action No. 2:09-cv-00232 (E.D. Va.).  No stranger to the Rocket Docket, ePlus has attempted to enforce these patents twice before in this Court.  In a case filed in 2004, ePlus received a favorable jury verdict against Ariba in the Alexandria Division before Judge Brinkema, and subsequently, in a case against SAP where the same 79 claims asserted against Lawson were at issue, ePlus was left with a hung jury in the Richmond Division before Judge Spencer.  Both cases settled after the jury returned.  In this case, as with the other two, ePlus filed its complaint in the Alexandria Division, but as with the case against SAP, this case against Lawson was transferred to the Norfolk Division pursuant to the Court's patent rotation procedure.  In Norfolk, the Defendants made a joint motion to transfer the case to Judge Spencer in Richmond, and the Court obliged.

Analyzing the traditional factors under 28 U.S.C. section 1404(a), the Court concluded that the "interests of justice" factor was dispositive in this case.  While giving short shrift to the Defendants' concerns over inconsistent results, the Court was persuaded that the judicial economy concern under this factor should carry the day, relying heavily on the Court's decision in Mullins v. Equifax Info. Servs., LLC., 2006 WL 1214024 (E.D. Va. 2006).  Specifically, because Judge Spencer was already familiar with the patents, had already construed the claims of many of them (despite the fact that his claim construction order was withdrawn at the parties' request after they settled the SAP case), and had presided over a multi-week jury trial on these patents, he was so much more familiar with them so as to enable him to preside over this case at much less cost, in terms of judicial resources.

Since receiving the case, Judge Spencer has reassigned the case to Judge Payne in the Richmond Division, and consistent with the Rocket Docket's typical speed, the case has been set for a jury trial to begin on June 14, 2010.

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The Eastern District of Virginia recently denied a preliminary injunction to PRE Holding, Inc., a patent infringement plaintiff seeking to enjoin the sale of certain allegedly infringing devices sold by Defendants, which included a “valved holding chamber” that aids in the delivery of aerosolized medication to patients through inhalation.  PRE Holding, Inc. v. Monaghan Med. Corp., Civ. Action No. 3:09-cv-00458 (E.D. Va. Nov. 17, 2009).  In doing so, the Court invoked the Supreme Court’s recent decision in Winter v. Nat’l Res. Defense Council, Inc., 129 S. Ct. 365 (2008).  Explaining that Winter “restated and clarified” the well settled four-factor standard for preliminary injunctive relief, the Court noted that the Chief Justice, speaking for the Court, “emphasized that ‘injunctive relief [is] an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.”  Turning to the merits of PRE’s motion, the Court reiterated this “clear showing” requirement with respect to the likelihood of success on the merits factor, and cited to Real Truth About Obama v. Fed. Election Comm’n, 575 F.3d 342 (4th Cir. 2009) as further support.  Ultimately, the Court concluded that PRE failed to make the requisite clear showing of a likelihood of success on the merits.

 

The Federal Circuit, though, whose law governs preliminary injunction motions in patent cases, has not invoked this dictum from Winter, and has stated both before and since that a patentee need only make a showing of a “reasonable” likelihood of success on the merits.  See Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1375-76 (Fed. Cir. 2009) (quoting Winter, 129 S. Ct. at 374).  Indeed, the Federal Circuit has held that at the preliminary injunction phase, the movant “need not present sufficient evidence to be entitled to summary judgment,” New England Braiding Co. Inc. v. A.W. Chesterton Co., 970 F.2d 878, 882-83 n.4 (Fed. Cir. 1992), and that a patentee need not make a “strong,” or “clear” showing of likelihood of success on the merits to prevail, Roper Corp. v. Litton Sys., Inc., 757 F.2d 1266, 1271 n.5 (Fed. Cir. 1985).  Arguably then, the Court’s decision in PRE Holding raises the bar for patentees seeking preliminary injunctions in the Rocket Docket.

 

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The clock is ticking for U.S. Patent Application No. 10/962,357, which is currently pending before the USPTO.  The patent application is generally directed toward a pharmaceutical composition comprising arsenite for the treatment of malignancy, and will go abandoned as of December 3, 2009, absent intervention of the Eastern District of Virginia. 

 

Komipharm International Co., Ltd. claims ownership and has attempted to pursue the prosecution of this patent application; however, the USPTO has denied its attempts to do so.  The USPTO has determined that Komipharm does not own all rights in the patent application because one of the named inventors, Dr. Sang Bong Lee, retained his rights.  This is significant because it means that Dr. Lee’s consent is needed to continue prosecution of the patent application.  In an effort to circumvent the USPTO’s decision, Komipharm filed a complaint on November 30, 2009, in the Eastern District of Virginia against David Kappos, Director of the USPTO.  Komipharm seeks a ruling that the USPTO’s decision that Komipharm is not the owner of a pending patent application, despite U.S. assignments of the pending patent application to Komipharm, is arbitrary, capricious and contrary to law.  Komipharm also seeks a preliminary injunction to suspend all prosecution of the pending patent application until ownership of the patent application is determined by the EDVA, or in the alternative, requests that the USPTO withdraw the pending Office Action so as to preserve the status quo while the matter is pending.

 

The dispute has arisen over various documents recorded at the USPTO.  The USPTO determined that one of the named inventors, Dr. Lee, had not assigned all of his rights in the patent application to Komipharm.  As a result of the decision, Komipharm has alleged that it cannot prosecute the patent application, as Dr. Lee has refused to file a joint response to the outstanding Office Action.  The patent application currently stands to go abandoned on December 3, 2009, if no action is taken, and Komipharm alleges that it would be irreparably harmed if it was allowed to go abandoned.

 

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In a surprising decision in Tafas v. Kappos on November 13, 2009, the Federal Circuit granted the parties' joint motion to dismiss the appeal as moot, but denied the parties' joint motion to vacate the judgment of the Eastern District of Virginia.  The court reasoned that dismissal of the appeal was proper as moot because the USPTO had rescinded the rules that formed the basis for the litigation.  However, the court also reasoned that vacatur of the Eastern District of Virginia's judgment was not proper because the mootness arose due to a unilateral act of the USPTO in rescinding the rules.  In contrast, vacatur of the EDVA's decision would have been proper if the mootness had arisen from an external cause over which the parties had no control - that was not the case.  Accordingly, the EDVA's decision stands.

The Tafas v. Doll decision has been previously reported on the blog here. 

 

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The blog Inventive Step has this post on the recent Virginia State Bar Intellectual Property Section 21st Annual Fall Weekend.  The new director of the PTO David Kappos was one of the speakers, and he addressed a number of his proposals for change at the PTO.  He quipped that when previously asked whether he planned to hit the ground running in his new position, he had responded no.  Instead, he planned to “drop out of a chopper shooting” to begin work before he hit the ground. 

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The USPTO Director David Kappos signed a new final rule rescinding the 2007 Patent Regulations Package previously proposed by the Bush Administration.  The USPTO also announced that it would be filing a motion to dismiss the currently pending Tafas v. Doll lawsuit, which was initially brought in the Eastern District of Virginia by inventor Triantafyllos Tafas and GlaxoSmithKline to prevent the rules from taking effect. In justifying the reasons for withdrawing the highly unpopular regulations, Kappos stated that “the USPTO should incentivize innovation, develop rules that are responsive to its applicants’ needs and help bring their products and services to market.”  Kappos further noted that “this course of action represents the most efficient way to formally and permanently move on from these regulations and work with the IP community on new ways to take on the challenges these regulations were originally designed to address.”

 

The Tafas v. Doll decision has been previously reported on the blog here. 

 

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After a hearing on August 21 on Apple's request for fees, and Monec's request for reconsideration, the Court denied both motions in a one-line order.  Monec has already filed its notice of appeal to the Federal Circuit. 

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Pentium Fund, Ltd. (“PFL”), a Swiss hedge fund and financial services company, claims it is the rightful owner of the domain names pentiumfund.com, pentiumfund.net, and pentiumfund.org, in a declaratory judgment action filed in the Eastern District of Virginia, No. 1:09cv532, against Intel Corporation (“Intel”).  PFL filed the complaint in response to a decision by the World Intellectual Property Office Arbitration and Mediation Center (“WIPO”) ordering that the domain names be transferred to Intel Corporation.  The complaint also alleges that Intel’s attempt to take over these domain names is unlawful under the reverse domain name hijacking provisions of the Anticybersquatting Consumer Protection Act (“ACPA”).

PFL filed a First Amended Complaint in July, 2009.  In February, Intel filed a case with WIPO requesting transfer of the three domain names, claiming that they were confusingly similar to Intel’s famous PENTIUM trademark, registered in the U.S. in 1994, and that the addition of the non-distinctive word “fund” to PFL’s domain names was not sufficient to avoid such confusion.  Although PFL argued that its financial services are not likely to be confused with Intel’s computer chips, the WIPO Panel agreed with Intel, holding that “[t]he use to which the site is put has no bearing on the issue whether the domain name is confusingly similar to the trademark, because by the time the Internet users arrive at the Website, they have already been confused by the similarity between the domain name and the Complainant’s mark into thinking they are on their way to the Complainant’s Website.”

The WIPO Panel also found that when an Internet user entered one of the three PFL domain names, he or she was directed to a “parking” webpage showing primarily sponsored links, which do not constitute a bona fide offering of goods or services within the meaning of the Uniform Domain Name Dispute Resolution Policy (the “Policy” or “UDRP”).  Finally, the Panel found it more likely than not that PFL registered the challenged domain names in bad faith, intending to attract, for commercial gain, Internet users to its website by creating a likelihood of confusion as to source or sponsorship with Intel and its trademarks.

In order to avoid immediate transfer of the domain names pursuant to the WIPO decision, PFL filed the present action, asserting that the domain names are not similar to the PENTIUM trademark because of the inclusion of the word “Fund,” signaling to consumers that the domain names relate to a financial services business, which are vastly different from the goods and services offered by Intel.  PFL also claims it had no bad faith intent when registering the domain names, which were chosen because PFL’s owner was the fifth child in his family and the Pentium Fund was also the fifth fund started by PFL. 

Finally, PFL alleges that Intel’s opposition to PFL’s application for registration of the PENTIUM FUND trademark in the European Union’s Office for Harmonization of the Internal Market (“OHIM”), was rejected because OHIM found that PFL’s services were not similar to the computer-related goods and services offered by Intel under the PENTIUM trademark and that PFL’s use of the PENTIUM FUND trademark in connection with the allowed services did not “imply a risk of taking unfair advantage of the repute of [Intel’s] PENTIUM [trademark].”   PFL awaits an answer from Intel to its First Amended Complaint.

A link to the First Amended Complaint is available at: http://www.williamsmullen.com/files/upload/PentiumFund-v-Intel.pdf

TeleCommunications Systems (TCS) has sued Sybase 365 (formerly Mobile 365) twice more for patent infringement in the Eastern District of Virginia.  In a prior case before Judge Spencer, TCS won a jury verdict on March 21, 2009 against Sybase for infringement of a single patent (6,985,748), and a damages award of $12 million.  On July 30, TCS filed a second lawsuit.pdf against Sybase in the Richmond Division, for infringement of a related patent which had just recently issued.  The case has been assigned to Judge Spencer as well. 

On the same day, TCS filed this Complaint.pdf against Sybase in the Alexandria Division, asserting infringement of two separate patents "permitting the two-way communication of short messages between either a short message service center or a wireless handset, and an HTTP device or an Universal Resource Locator."  Although filed in Alexandria, this case has been assigned to Judge Doumar in Norfolk pursuant to the EDVA's patent rotation procedure.

Because of the identity of the parties and similarities in the technology, look for the consolidation of these cases at some point.

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The EDVA recently granted Funai Corporation's motion to transfer (previously reported in our blog here) and kicked Vizio, Inc.'s patent infringement case to the Central District of California in its August 7, 2009, Order.  In weighing the interests of justice, the Court determined that the mere fact of one percent of sales of the offending product in Virginia was not enough to keep the case pending in the Rocket Docket, especially in light of the substantial connections of both plaintiff and defendant's third-party manufacturers to California.  While Vizio countered by arguing that despite the lack of connection to Virginia, the fact that the EDVA is a Rocket Docket should weigh against transferring the case, the Court recognized that while the docket conditions of the transferor and transferee courts may be considered, it would not give it commanding weight.  The Court reasoned that if it allowed docket considerations to control, then all cases filed in the EDVA would be immune from transfer.  

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IPO reports here that Judge Schall of the Federal Circuit has announced his intention to take Senior Status as of October.  This will be the first vacancy on the Court since Judge Kimberly Moore was appointed in 2006.  Judge Schall was appointed in August 1992 by President George H.W. Bush.  Just prior to his appointment, he was an Assistant to the Attorney General of the United States, under Attorneys General Dick Thornburgh and William P. Barr.   

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PatentlyO links to the briefs filed with the US Supreme Court in In Re Bilski in this post.  Amicus briefing is extensive, with over 35 briefs filed so far supporting either Bilski or neither party.  The government's opposition is due September 25, and amicus briefs in support of the opposition are due within seven days of the government's filing. 

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Gene Quinn at IP Watchdog has a great post here on his rating of the Top 50 Patent Blogs, with Patently O taking the top award.  As he explains, patent law blogs rank very high in popularity, in comparison with other blogs and websites generally.  For example, five of the top rated patent blogs were in the top 2% of all websites according to Alexa traffic data, which has approximately 16 million websites indexed.  (IPWatchdog, Promote the Progress, Invent Blog, PatentlyO, Spicy IP)

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Last month, the Eastern District of Virginia posted a notice seeking applicants for a federal Magistrate Judge position in the Norfolk Division.  Public Notice  Applications are due by September 1, 2009.  The Notice states how the selection will be made:

"A merit selection panel composed of attorneys and other members of the community will review all applicants. Due consideration will be given to all qualified applicants. The merit selection panel will then recommend to the district judges in confidence the five persons it considers best qualified. The court will make the appointment following an FBI full-field investigation and an IRS tax check of the applicant selected by the court for appointment."

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Hot on the heels of its early victory, Apple has filed a motion for sanctions against Monec under Rule 11, and a request for its attorney fees.  Fees.pdf  Apple contends that the allegations of infringement by the iPhone were objectively unreasonable, because of the limitation in the patent that the invention permit one page of a book to be displayed at a "normal size."  According to Apple, and Judge Brinkema in the order granting judgment of noninfringement, the iPhone does not meet this limitation.  Monec has filed a motion for reconsideration, arguing that the Court's claim construction includes errors of law, and that the Court's order denies Monec due process.  Monec.pdf  Specifically, Monec argues that the Court improperly took judicial notice that a librarian constituted a person having ordinary skill in the art without complying with Federal Rule of Evidence 201, and that the Court should not have granted judgment without the benefit of discovery, a Markman hearing, etc.  A hearing on both motions is set for August 21.

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There have been 48 trademark cases filed in the Eastern District of Virginia in 2009.  If this pace continues, the total number may approach twice the number filed in 2008, which totaled 51 for the entire year.  Of the 2009 cases:

• Of those 48, at least 14 are Anticybersquatting cases under the ACPA.
• The vast majority, 38, have been filed in the Alexandria Division, with the assignments as follows:  Trenga (9); Hilton (7); O'Grady (6); Lee (5); Cacheris (4); Ellis (4); and Brinkema (3).
• In the Richmond Division, Judge Payne has been assigned 3 cases, Judge Spencer 1, Judge Hudson 1, and Judge Williams 1.
• In the Norfolk Division, Judge Jackson has been assigned 3 cases, and Judge Friedman 1. 

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The Federal Circuit has granted the parties’ joint motion to stay the proceedings in Tafas v. Doll.   The case docket is available on PACER (see page 1, Entry 222).  Under the parties’ motion, the Appellants’ opening brief to the en banc court, if still necessary, would be due sixty days after the confirmation of the new Director of the USPTO. 

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On Friday, the U.S. Patent and Trademark Office (USPTO) and the appellees in the Tafas case asked the Federal Circuit to stay the proceedings until sixty days after the new PTO Director is confirmed by the U.S. Senate. Joint Consent Motion for a Stay of En Banc Proceedings.  If granted, the joint motion would postpone for several months the due date for the parties’ en banc briefs, which are currently scheduled for submission in August and early September.  The parties contend that a stay is justified because the new Director may revise the USPTO’s position in the case and thereby change or moot the issues that are presently before the Federal Circuit.  See our previous posts about this case here and here.

At issue in Tafas are several new rules the USPTO is proposing to implement. The rules would limit prosecution practices concerning continued examination (continuation applications and requests for continued examination) and would require an examination support document for applications exceeding certain numbers of independent claims or total claims.  After the Eastern District of Virginia struck down the rules on summary judgment in 2008, that decision was reversed in part in March 2009, but the Federal Circuit has since taken the case en banc.

In June, President Obama nominated David Kappos as Under Secretary of Commerce for Intellectual Property and Director of the USPTO. The confirmation hearing for Mr. Kappos before the Senate Judiciary Committee is scheduled for this Wednesday, July 29, 2009.  The parties in Tafas argue that the proposed stay period will give the new Director “an opportunity to examine the rules at issue…and determine what course the USPTO should take in the future with respect to those rules, including whether to rescind the rules.” Under the parties’ proposal, the Appellants’ opening en banc brief, if still necessary, would be due thirty days after the expiration of the stay. The Appellees’ responsive brief would be due twenty days after the opening brief was filed and be followed by the Appellants’ reply brief within seven days thereafter.

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In a victory that surely does not happen often, Apple recently won summary judgment on the pleadings in a patent infringement case in Alexandria filed by Monec over Apple's iPhone.  See our previous posts about Apple's motion for judgment on the pleadings in the case here, and on Monec's asserted claims in the complaint here.  Last week, Judge Brinkema granted Apple's Motion and dismissed the case with a summary one page order.  Apple Order.pdf.  With this early and decisive victory, Apple was able to avoid what could likely have been an expensive discovery process, in addition to the cost and uncertainty of trial. 

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On June 23, the EDVA denied Level 3's Motion for Judgment as a Matter of Law and for a new trial (Order.pdf), and on July 21, Level 3 filed its Notice of Appeal to the Federal Circuit.  Level 3's arguments focus on Defendant's use of the Court's claim construction at trial.  See our previous post here covering the Court's summary judgment order and the jury trial in Norfolk. 

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Juniper Networks, Inc.'s ostensible litigation strategy to take advantage of the Rocket Docket as a plaintiff, but transfer claims that it must defend to a slower paced jurisdiction, appears to have been successful.  As previously reported, the Eastern District of Virginia, Alexandria Division, recently entertained Juniper Networks, Inc.'s Motion to sever GraphOn Corporation's Counterclaim and transfer it to the Eastern District of Texas.  The Court issued GraphOn's marching orders on June 24, 2009, where the counterclaim will be transferred.  For a discussion of Juniper's approach, see this article in Am Law Litigation Daily.

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A complaint recently filed in the Eastern District of Virginia concerns a story “of burning professional jealousy, fueled by the glory of seeing one’s name in the lime lights of the big screen, in combination with greed.”  The complaint was filed in the Richmond division (Case Number 3:08cv386), by Raman K. Singh (“Singh”), an English professor retired from Mary Washington University, against Gary Haas aka Gary Hollywood, (“Haas”) an individual who lives on the same small Greek island as Singh.   Singh seeks a declaratory judgment that his story The Jesus Manuscript, about a theory that Jesus visited India before his death, created in 2006, does not infringe The Ikon, a story about art forgery, written by Haas and Singh in 2007.

 

Singh alleges that he wrote a script called The Sand Relic, about an archaeologist seeking a relic/manuscript written by the Greek hero Odysseus, set in the Sahara Desert.  However, when he didn’t receive a production offer for his script, Singh changed the manuscript to one written by Jesus and guarded by a hostile tribe in India, and changed the title from The Sand Relic to The Quest.  Blockbuster Scripts, which offered to buy an option to produce The Quest, suggested Singh change the name to The Jesus Manuscript.

 

Meanwhile, according to Singh, Haas also wrote a novel and screenplay called The Ikon, about a priceless painting, called The Ikon, that would be replaced with a forgery, set on a Greek island.  Singh alleges in the Complaint that because Haas was unable to sell the screenplay, he asked Singh to rewrite it, which Singh agreed to and completed in March, 2007.  Nevertheless, Haas and Singh were unsuccessful in selling the new version of The Ikon.

 

Having been unable to sell The Ikon, and hearing that Singh had sold his option to The Jesus Manuscript to Blockbuster, Haas allegedly wrote a letter to some of the collaborative producers of The Jesus Manuscript, claiming that it infringed The Ikon.  However, Singh alleges that Haas had not read one word of The Jesus Manuscript, and the stories and characters are completely different.  Upon receipt of the letter, production of The Jesus Manuscript immediately ceased. 

 

Singh brings various claims for a declaratory judgment action that his work does not infringe The Ikon, that Haas tortiously interfered with his contractual relationship with Blockbuster and other producers, libel and injunctive relief.

 

For a copy of the complaint, please click here.

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On July 10, 2009, Rosetta Stone sued Google in the Alexandria Division of the Eastern District of Virginia, for trademark infringement based on Google’s AdWords® program.  Through AdWords, Google sells keyword search terms, so that when an Internet user types a search term into Google that has been purchased, a link to the purchaser’s website appears at the top or on the right column of the search results page as a “Sponsored Link.”  In its Complaint, Rosetta Stone alleges that Rosetta Stone’s competitors (and companies selling counterfeit Rosetta Stone products) have purchased Rosetta Stone’s registered trademarks through AdWords; thus, when one of Rosetta Stone’s registered marks is entered into Google as a search term, links to these third parties websites appear as Sponsored Links on the search results page.  Rosetta Stone thus alleges that Google is liable for trademark infringement based on its sale of Rosetta Stone’s registered marks. 

Eric Goldman, author of the Technology & Marketing Law Blog who has been following these types of cases for years, has collected each of the pending cases against Google which make the same allegations here, and includes intelligence on Rosetta Stone's lawyers, and their previous experience with these cases.

The cases have been around for years, although the majority involve the mark holder suing the purchase of the keyword search term.  The courts are split over whether purchase of a registered mark through AdWords constitutes a “use in commerce” under the Lanham Act.  Courts in the First, Third, Fourth, Eighth, and Ninth Circuits have concluded in various scenarios that such purchases of trademarked keywords do constitute a use in commerce under the Lanham Act.  Most recently, the Second Circuit joined this group on April 3, 2009, concluding that allegations similar to Rosetta Stone’s do state a cause of action under the Lanham Act.  Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009).

The United States Court of Appeals for the Fourth Circuit reined in the award of attorney fees and costs which Quantum System Ingtegrators, Inc.'s received in its copyright suit against Sprint Nextel Corporation in the Eastern District of Virginia.  The copyright infringement lawsuit involved network monitoring software and concluded with Quantum collecting actual damages, attorneys' fees and costs based on Sprint's copyright infringement.  Despite Quantum's award, the Fourth Circuit noted in its ruling on July 7, 2009, that Quantum's success was only "minimal" in this lawsuit, which did not justify an award of fees and costs more than five times the actual damages in the case.

Last week, in a case it described as one of “practically first impression,” the Eastern District of Virginia granted summary judgment in favor of Solo Cup Co. that it was not liable for improper patent marking under                              35 U.S.C. § 292(a). Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va. July 2, 2009). The Court agreed with Solo that the advice of counsel it received to replace patent-marking molds with non-marking molds in a gradual fashion was reasonable. Solo’s overall conduct was held to evidence a lack of intent to deceive the public. The Court also held that an “offense” under the statute is the overall decision to mark improperly, thereby rejecting Pequignot’s argument that Solo should be penalized for each and every lid it marked.

The Court ruled from the bench on July 2 during a hearing on the parties’ cross motions for summary judgment. Judge Brinkema remarked early on that the Court would be addressing “several issues of first impression or nearly first impression” and that the case had drawn interest from the IP community. The Court observed that it may “structure a lot of law in this area of false marking and damages.”

On the merits, the Court focused on Solo’s behavior after it discovered that its products were being marked with an expired patent number. Solo approached its outside counsel and requested advice on how to address the situation. The company followed counsel’s advice and replaced the patent-marking molds, as they became worn, with non-marking molds. The Court viewed that course of action as “extremely clear evidence of no intent to in any way mislead or defraud the competitors or the public.”

Plaintiff Pequignot unsuccessfully argued that there was a factual dispute about whether the legal advice was actually received and acted upon by Solo. The Court disagreed, stating that “[t]here are interpretations that are in dispute but not material issues of fact that are in dispute.”

Solo also prevailed on summary judgment with respect to its fallback position, namely, that even if there were intent to deceive the public, the offenses punishable under the statute are the decisions to mark improperly, not each and every marking of a product. Thus, in an alternative holding, the Court decided that the maximum amount of damages for which Solo could be liable is $1500.

The United States Court of Appeals for the Federal Circuit has agreed to rehear en banc the highly anticipated appeal in Tafas v. Doll.  The case initiated in the Eastern District of Virginia, in which the Court enjoined the implementation of new rules relating to patent application continuations and claims.  The Court's March 20, 2009, opinion was expressly vacated and the appeal was reinstated in the Court's July 6, 2009, Order. 

Some observations from the patent case filings in the Eastern District for the first half of the year:

• The pace of filings during this calendar year (30) is roughly on track with the number of last year’s filings (58 for the year ending September 2008). During 2008, patent filings as a percentage of the district’s total caseload (2.25%) were more than double the national average (1.1%).
• Cases are fairly evenly spread across the district, even without a substantial number of intra-district transfers. There were 12 filings in Alexandria, 1 of which was transferred under the special patent case transfer procedure to the Norfolk division. 10 patent cases were filed in Norfolk, and 8 in Richmond.
• Cases are more or less evenly distributed among the judges. Each of the four non-senior judges in Alexandria has at least one pending case. Three of the four non-senior judges in the Norfolk division have at least one case also. In Richmond, the cases have been distributed evenly between Judge Spencer and Judge Payne, but as of yet, Judge Hudson has not drawn a patent case assignment in 2009.

We previously posted about the suit filed in Alexandria by Monec Holding AG, a Swiss wireless communications company, against Apple Inc., for patent infringement.  Monec v. Apple  Notably, Apple stated its counterclaim for noninfringement in great detail, asserting that the iPhone® does not satisfy the limitation of a “display” that “has dimensions such that one page of a book can be displayed at normal size.”  Simply put, the claims do not cover a device as small as the iPhone.  Apple even went so far as to discuss the prosecution history and statements made by the applicant about prior art cited by the PTO.  Now, despite the fact that discovery does not close until October 9, Apple has moved for “judgment on the pleadings or summary judgment, or in the alternative, to transfer” to the Northern District of California. Apple Motion.pdf  Importantly, Local Rule 56(C) provides that each side only gets one motion for summary judgment, without leave of Court.  To the extent that the Court construes Apple's motion as one for summary judgment, it may not get another chance. 

                                                                        

The basis for Apple’s motion is, as it set forth in its counterclaim for noninfringement, that the 2 inch x 3 inch iPhone lacks a “display ha[ving] dimensions such that one page of a book can be displayed at a normal size,” which Apple contends is present in every claim of the ’678 patent.  In the alternative, Apple moves to transfer the case to the Northern District of California, where its Cupertino headquarters are located, because as a Swiss corporation, Monec has no ties to Virginia, and because all the convenience factors of 1404(a), including the location of parties, witnesses, and documents, weigh in favor of California.  A hearing is set on Apple’s motion for July 17, 2009.

 

Juniper Network Inc.'s strategic plan to take advantage of the Rocket Docket as a plaintiff in its patent infringement claims against GraphOn Corp., while transferring GraphOn's patent infringement claims to a slower jurisdiction, appears to be coming to fruition.  The dispute between Juniper and GraphOn initially began in 2007 in the Eastern District of Texas, where GraphOn sued Juniper for patent infringement for network security products.  Juniper retaliated by suing GraphOn in the Eastern District of Virginia for patent infringement for data transmission.  Not to be outdone, GraphOn attempted to take advantage of the Rocket Docket by filing in the Virginia case a counterclaim for infringement based on the Juniper products it accused of infringement in the Texas case.  However, GraphOn's attempt to bring its claims to Virginia were not successful.

 

In an opinion by Judge Lee, the Eastern District of Virginia recently granted Juniper’s motion to sever and transfer GraphOn’s patent infringement counterclaim to the Texas case.  Juniper moved to transfer only GraphOn's counterclaim for patent infringement -- not Juniper’s affirmative claim for patent infringement.  Juniper successfully argued that that patent infringement counterclaims were better suited to be adjudicated in the Texas court because they targeted all but one of the same products which were already at issue there.  Juniper further justified the transfer by showing that the counterclaims had no relation to the patent infringement suit that Juniper was asserting against GraphOn in the Virginia case.  Juniper therefore kept its claims for patent infringement against GraphOn in the Rocket Docket, while transferring GraphOn's claims for infringement to a slower jurisdiction in Texas.

 

Meanwhile, the saga continues as the Texas court is currently entertaining Juniper’s motion to transfer the Texas suit to the Northern District of California.  GraphOn pointed out this fact to Judge Lee in its opposition to Jupiter’s motion, alleging that Jupiter’s actions were simply an attempt to exploit the federal court system.  However, the Court was not persuaded by GraphOn’s arguments. 

 

Juniper Networks Inc. v. GraphOn Corp., Case. No. 1:09-cv-00287 (E.D. Va., Alexandria Division).

 

GraphOn Corp. v. Juniper Networks Inc., Case No. C. A. No. 2:07-CV-373-CE (E.D. Tex., Marshall Division)

With discovery complete, both Solo Cup Co. and Matthew A. Pequignot have asked the Eastern District of Virginia to resolve major issues in the patent marking case Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB (E.D. Va.). Solo contends that it cannot be liable for improper marking because it has acted in accordance with advice from counsel while implementing a plan to reduce and eventually eliminate the marking of products with expired patent numbers. Pequignot counters that Solo knowingly marked its products improperly and should be penalized for each article so marked.

In moving for summary judgment, Solo argues that no trial is necessary because Pequignot cannot prove that Solo marked its products “for the purpose of deceiving the public,” as required by 35 U.S.C. § 292(a). This is the case, says Solo, because its attorneys advised it that phasing out the manufacturing components that applied the patent numbers to the products would be legally permissible. Solo contends that a wholesale replacement of all the components at once, which Solo alleges would have been very expensive, was not necessary to comply with § 292.

Pequignot takes a contrary position, stating that the controlling facts regarding the deception element of § 292 are that Solo knew its products were no longer patented and yet marked them anyway. Pequignot argues that the advice of counsel Solo received is legally irrelevant because it was not directed to the question of whether the marked products were actually patented.

Solo’s motion also includes the alternative position that even if the Court were to find a deceptive purpose to Solo’s conduct, the applicable “offense” was Solo’s decision to mark the products, not each and every marking of a product. Under Solo’s view, it would thus be guilty of, at most, three such offenses, which limits its liability under a law that calls for a fine of “not more than $500 for every such offense.” 35 U.S.C. § 292(a). Pequignot counters that the plain language of the statute shows that each instance of intentional improper marking is a separate offense, and notes that if Solo’s position were adopted, a party could flood a market with as many wrongly marked products as it wished and pay no more than a $500 penalty. The Court has set July 2 as the hearing date for both motions.

On June 16, 2009, Vizio, Inc. opposed Funai Electric Co., Ltd.’s Motion to transfer the pending patent infringement lawsuit from the Eastern District of Virginia, Norfolk Division, to the Southern District of California. The case involves multiple patents relating to digital televisions and is currently pending before the Honorable Robert G. Doumar. Funai’s justification for its Motion to Transfer is based on Declaratory Judgments which were filed by Funai and Sony Inc. (“Sony”), not a party to the Virginia case, against Vizio in California regarding the same patents at issue in the Virginia lawsuit.  In its Opposition, Vizio disputed transfer of the suit on the basis that the California case with Sony involved different parties and products.  Vizio also opposed transfer on the grounds that Funai’s own Declaratory Judgment was filed after it was served with Vizio’s complaint in Virginia, and that neither Vizio nor Funai have operations in the District.

 

The Virginia case involves multiple patents relating to digital televisions.  This lawsuit appears to be the latest skirmish in a long war between multiple companies for television patents, including disputes in front of the U.S. International Trade Commission, the Central District of California, and the Western District of Wisconsin.

The PTO is appealing a decision by the Eastern District of Virginia overturning the PTO’s denial of patent-term extension for a pharmaceutical patent. PhotoCure ASA v. Dudas, No 1:08cv718-LO-JFA, 2009 U.S. Dist. LEXIS 27543 (E.D. Va. Mar. 31, 2009), appeal docketed, No. 2009-1393 (Fed. Cir. June 11, 2009). In its ruling, the Eastern District of Virginia determined that a 1990 decision from the Federal Circuit interpreting the patent-term extension statute conflicted with a later panel decision. The Court held that the earlier decision is controlling and compels extension of the patent’s term.

Plaintiff PhotoCure ASA (“PhotoCure”) filed an application with the PTO to extend the term of a patent it holds on its drug product Metvixia™. PhotoCure based its application for additional patent term on the loss of marketing opportunities due to the regulatory-approval process for the drug. PhotoCure did not obtain approval until more than four years after the issuance of its patent, and believed it was entitled to a term extension under 35 U.S.C. § 156.

The PTO denied the application, however, because it determined that Metvixia was not the “first permitted commercial marketing or use of the product,” 35 U.S.C. § 156(a)(5)(A), covered by the patent. This determination was reached this because an earlier drug, Levulan™, has a key ingredient having the same “active moiety” as that of Metvixia’s key ingredient.

Key Ingredient in Metvixia	Key Ingredient in Levulan	Common Active Moiety

The PTO relied on 35 U.S.C. § 156(f)(1)(A), which defines “product” to be a “drug product,” defined by 35 U.S.C. § 156(f)(2) to mean “the active ingredient of a new drug...including any salt or ester of the active ingredient.” Taking the position that the active moiety is the “active ingredient” of both Metvixia and Levulan, the PTO decided that extending the term of PhotoCure’s patent would be improper. Photocure challenged the PTO’s decision by suing in the Eastern District of Virginia and moved for summary judgment.

In deciding the motion, the Court compared Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392 (Fed. Cir. 1990), and Pfizer, Inc. v. Dr. Reddy’s Laboratories, Ltd., 359 F.3d 1361 (Fed. Cir. 2004). The Court determined that the Pfizer panel had adopted an “active moiety approach” that the Glaxo panel had previously determined was not consistent with the plain language of the statute. Finding Pfizer and Glaxo to be “clearly in conflict,” the Court applied Newell Cos. v. Kenney Mfg. Co., 864 F.2d 757, 765 (Fed. Cir. 1988), to follow Glaxo and grant summary judgment in favor of PhotoCure. The PTO’s appeal will give the Federal Circuit an opportunity to analyze Pfizer and Glaxo and determine whether they are indeed in conflict and, if so, how that conflict should be resolved.

    Major record companies continue their pursuit of individuals who illegally download music.    Five lawsuits have recently been filed in the Eastern District of Virginia against individuals who were identified based on their Internet Protocol (“IP”) addresses.  UMG Recordings, Inc. v. Snipe, 3:09cv298, filed May 06, 2009; Sony Music Entm’t v. Albarzinji, Case No. 1:09cv495, filed May 14, 2009; Zomba Recording LLC v. Havert, Case No. 1:09cv560, filed May 19, 2009; Arista Records LLC v. Jackson, 2:09cv229, filed May 19, 2009; and Warner Bros. Records Inc. v. Weiner, Case No. 1:09cv559, filed May 19, 2009.

 

    In each case, plaintiffs allege that the defendants unlawfully distributed plaintiffs’ copyrighted sound recordings over the Internet through peer-to-peer (“P2P”) file copying networks or online media distribution systems.  Plaintiffs allege in Weiner, for example, that defendant downloaded and distributed approximately 177 audio files using LimeWire on the P2P network Gnutella, in violation of plaintiffs' exclusive rights under federal copyright laws. 

 

    Users of P2P networks can be identified by their IP addresses because each computer or network device that connects to a P2P network must have a unique IP address to deliver files from one computer to another, and two computers cannot effectively function if they are connected to the Internet with the same IP address at the same time.

 

    Record companies have aggressively pursued individuals for illegal sharing of music files on the Internet based on the outcome of cases such as MGM Studios, Inc. v. Grokster, 545 U.S. 913 (2005) (holding software distributors liable for contributory copyright infringement when they distributed a device that allowed customers to freely download copyrighted files).

 

    Last fall, record companies filed preliminary lawsuits against anonymous individuals in the Eastern District of Virginia, so that they could issue subpoenas to determine their identity based on their IP addresses.  In Capital Records, Inc. v. Does 1-13, Case No. 2:08-cv-00090 (E.D.Va. 2008) and Interscope Records v. Does 1-7, Case No. 4:07-cv-00052, Judge Kelley initially denied motions for expedited discovery to issue such subpoenas, but the record companies were ultimately victorious after they cited more than 200 cases across the country in which similar subpoenas were allowed.

All four magistrate judges from the Alexandria Division of the Eastern District of Virginia participated in a bench-bar dialogue organized last month by the Federal Bar Association’s Northern Virginia Chapter.  The event took place on May 13 at the Albert V. Bryan Courthouse in Alexandria.  The panel of magistrate judges engaged with members of the bar on the subject of federal civil motions practice, and provided the Court’s perspective on several issues important to patent cases and federal litigation generally.

Magistrate Judges T. Rawles Jones, Jr., Theresa C. Buchanan, John F. Anderson, and Ivan D. Davis constituted the panel for the event.  Several members of the bar gave presentations covering topics such as magistrate-judge jurisdiction, general rules of motion practice, and the principles governing particular motions, e.g., motions to compel and motions to amend pleadings or join new parties.  After each presentation, the magistrate judges responded to particular questions and provided insights on strategies attorneys can use in certain areas of motions practice.

Patent-specific issues were also raised by both the bench and the bar.  Regarding the topic of privilege logs, the event moderator noted that collections of patent-prosecution files, which often have high numbers of privileged documents, are ideal candidates for “catalog” entries on the log.  One of the magistrate judges noted that in patent cases (and other similarly complex cases), the meet-and-confer process often gets bogged down because the attorneys involved are either too combative or lack authority from the client to make compromises.  This same judge noted that one technique the Court sometimes uses to solve this problem is requiring the parties (1) to identify a particular person responsible for representation during a meet and confer and (2) to provide that person with sufficient negotiating authority to reach binding agreements.

Other topics were also addressed.  By way of example, on the topic of reply briefs, one of the magistrate judges observed that brevity is particularly important, with the most effective briefs focusing strictly on the opposition (rather than rehashing opening arguments) and being as short as one or two pages in length.  Another magistrate judge commented that the reply brief, when done effectively, will “crystallize” the issues.  For motions to amend pleadings that involve complex edits (as opposed to those simply adding or deleting a count entirely), the judges recommended including a redline version showing changes made to the original, which aids the Court in its analysis.

In response to Monec’s allegations that Apple’s well-known iPhone® infringes U.S. Patent No. 6,335,678 (“’678 patent”), Apple reciprocated by filing an Answer and Counterclaim of non-infringement and invalidity on May 11, 2009, in the Eastern District of Virginia, Alexandria Division.  (Monec Holding AG v. Apple Inc., No. 1:09-CV-312 (filed on March 23, 2009)).

 

Apple alleges that the iPhone® does not infringe the claims of the ‘678 patent since the iPhone® does not have a “display” that “has dimension such that one page of a book can be displayed at normal size,” a limitation which is found in all of the claims of the ‘678 patent.    In support of its argument, Apple cited to the specification of the '678 patent and various representations made by the patentee during prosecution of the ‘678 patent regarding the size of the “display.”

 

Specifically, Apple alleges that the “display” term should be defined based on the patentee’s failure to dispute the Examiner’s assertions that the cited prior art disclosed a “display” and the submission of brochures to the Examiner showing an example of an electronic device depicting technical features and advantages of the claimed invention.

 

Apple also responded to Monec’s allegations of “unfair trade practices, monopolization and tortious interference with prospective business advantage” by stating that "Monec appears to have copied these claims mistakenly from a prior complaint against Hewlett-Packard Co. in this District” as none of the facts alleged in Monec’s Complaint supported or mentioned those claims.

 

Apple also generally alleges that the claims of the ‘678 patent are invalid.  The case has been assigned to Judge Leonie M. Brinkema and Magistrate Judge John F. Anderson.

The Fourth Circuit affirmed the Eastern District of Virginia's decision that an online plagiarism detection service does not infringe students’ copyright ownership in papers submitted through the system. A.V. v. iParadigms, LLC, Case No. 1:07-cv-00293-CMH-BRP (E.D.Va., 2008), aff’d Case Nos. 08-1424, 08-1480, 2009 U.S. App. LEXIS 7892 (4th Cir. April 16, 2009).  Plaintiffs argued that iParadigms’ plagiarism detection service, which was designed to evaluate the originality of written works and prevent plagiarism, infringed their copyright ownership in the essays and other papers that they submitted for high school classes. 

Plaintiffs alleged that the system could allow their unpublished manuscripts to be displayed or distributed throughout the world without their permission, in violation of their rights to copy, publish and distribute their own works under the Copyright Act, 17 U.S.C. § 101 et seq. However, the Court opined that plaintiffs’ copyright rights were limited by the doctrine of fair use, which allows for uses of a copyrighted work for purposes such as criticism, comment, news reporting, teaching, scholarship and research. 17 U.S.C. § 107.

The court analyzed the four “fair use” factors under the Copyright Act, namely the (1) purpose and character of the use, (2) the nature of the copyrighted work, (3) the amount and substantiality of the portion used in relation to the whole, and (4) the effect of the use upon the potential market for the work.  17 U.S.C. § 107.

First, the court said defendant’s use was transformative because, although the students’ works were not modified or altered by defendant, the purpose of the system was to prevent plagiarism by archiving the works in digital code to compare against other works, rather than to express or exploit the original work.  Second, although fair use is more limited for unpublished works because the authors have the right to control the work’s first publication, defendant’s use of the works did not have the intended purpose or incidental effect of supplanting plaintiffs’ rights to first publication.

The Court also concluded that the third factor did not weigh in favor of either party, because, even though defendant used the entire work, the use was limited in purpose and scope to electronic comparison.  Finally, the Court found that no market substitute was created by archiving student works, where the only alleged marketplace for the papers was to other students, which would encourage plagiarism and cheating.  The Court glossed over the argument that the papers may be marketable to college journals or other magazines.

The case raises the issue of whether archiving unpublished works in a database to which any client of the system can gain access constitutes a publication such that a copyright owner’s right to control the work’s first publication is eviscerated by the use...maybe an interesting question for the U.S. Supreme Court.

A group of local patent litigation practitioners has begun crafting a set of "local rules" for patent cases in the Eastern District of Virginia. At least one prominent judge in the district has indicated his willingness to support local patent rules, as long as they maintain the ability of each individual judge to exercise his or her discretion in modifying and adapting default rules and procedures. The first draft of the group’s work -- which essentially compiles certain of the practices and procedures some of the judges in the district currently use in patent litigation cases -- is attached here at /files/Uploads/Documents/draft edva local patent rules.pdf. The group is currently soliciting the opinion of various judges and local IP bar associations, and plans to present its proposed set of local patent rules to the judges on the Local Rules Committee at the end of May or the beginning of June.

The Eastern District of Virginia has held that a private party has standing to bring an action based on the false marking statute, 35 U.S.C. § 292, even in the absence of direct injury.  Pequignot v. Solo Cup Co., No 1:07cv897-LMB/TCB, 2009 U.S. Dist. LEXIS 26020 (E.D. Va. Mar. 27, 2009).  In denying a motion to dismiss for lack of subject matter jurisdiction, the Court interpreted section 292 as a qui tam statute conferring Article III standing to the plaintiff as a relator and partial assignee of the U.S. government’s claims for false-marking violations.  The Court also rejected the defendant’s argument that the qui tam framework violates the separation-of-powers aspects of the U.S. Constitution.

The plaintiff in the case, Matthew A. Pequignot, is a patent attorney who alleges that the defendant Solo Cup Company (“Solo”) has improperly marked products with the numbers of expired patents.  Section 292 is violated when a person “marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word ‘patent’ or any word or number importing that the same is patented for the purpose of deceiving the public.”  35 U.S.C. § 292(a).  The law calls for a fine of “not more than $500 for every such offense.”  Id. The statute states that “[a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.”  Id. § 292(b).

Solo moved to dismiss the case against it for lack of subject matter jurisdiction on the basis that the plaintiff lacks standing to bring the action and, alternatively, that permitting him to sue Solo under section 292 would be contrary to the separation-of-powers provisions of the U.S. Constitution.  At the invitation of the Court, the United States intervened to defend the constitutionality of section 292(b).

Solo initially argued that the Court should narrowly construe section 292(b) as limited to competitors of the party that did the marking, in order to avoid the constitutional questions.  The Court found the argument unpersuasive, however, given the breadth of the phrase “[a]ny person” in the statute.

Moving to the question of standing, the Court acknowledged that the lack of actual injury to the plaintiff prevented him from having standing as a traditional plaintiff, which led the Court to an analysis of section 292 and an evaluation of whether it is a qui tam statute.  The phrase “qui tam” is short for “‘qui tam pro domino rege quam pro se ipso in hac parte sequitur,’ meaning ‘who pursues this action on our Lord the King’s behalf as well as his own.’”  The Court reviewed the history of qui tam statutes in the English and American legal systems, including the trends away from them in modern times.  But some qui tam statutes are still in effect in the United States, and the Court observed that the Supreme Court and several other courts have indicated that section 292 is one of them and confers on plaintiffs standing to sue for improper marking.

That left the separation-of-powers issue as the only remaining basis for Solo’s motion to dismiss.  Solo contended that permitting private parties to enforce section 292 would run afoul of the Article II provision requiring the President to “take Care that the Laws be faithfully executed.”  In particular, because section 292 does not authorize the government to exercise a sufficient level of control over the relator’s action, Solo argued that such private suits would undermine the Executive Branch.

The Court disagreed.  Although the Supreme Court majority declined to address the Article II question in Vermont Agency, two Justices in that case did view qui tam statutes as being consistent with Article II.  The Court also noted that several federal appellate courts have rejected Article II challenges to another qui tam statute, the FCA, and found the Fifth Circuit’s views on the matter persuasive.  “[L]ike Justices Souter and Stevens and the Fifth Circuit, the Court finds the long history of qui tam statutes, including many passed by the First Congress soon after the signing of the Constitution, see, e.g., 1 Stat. 131, 133, highly persuasive as to their constitutionality.” 

Solo’s emphasis on the lack of government control did not gain traction.  The Court viewed that factor as being more relevant to statutes concerning criminal proceedings.  The Court also determined that “enforcement of the substantive provisions of § 292 is not the type of executive function whose delegation to an authority not controlled by the Executive Branch would presumptively raise serious Article II questions.”  The Court therefore concluded that the plaintiff’s case should be permitted to continue and that Solo’s motion to dismiss should be denied.

The Fourth Circuit ruled that “OBX” is a generic or geographically descriptive designation for “Outer Banks” in OBX-Stock, Inc. v. Bicast, Inc., Case No. 2:04-cv-000450BO (E.D.N.C.), aff’d Case Nos. 06-1769, 06-1887 (4th Cir. 2009).  On appeal from the Eastern District of North Carolina's decision against enforcement of the OBX marks by OBX-Stock, Inc., the panel consisted of Judges Niemeyer, Agee, and O'Grady (US District Judge for the Eastern District of Virginia, sitting by designation).  OBX-Stock, whose founder claims to have invented “OBX” as an abbreviation for “Outer Banks,” filed suit for trademark infringement against Bicast, Inc. based on its sale of stickers with the text “OB Xtreme.” 

Prompted by similar abbreviations on automobile stickers in Europe, OBX-Stock originally developed the OBX mark, intending that it become a popular designation for the Outer Banks. However, fame is a double-edged sword. OBX quickly came to be used by many businesses and residents of the Outer Banks to refer to the geographical area, with local headlines reading “An OBX Institution Says Goodbye” and “Contest winner fell under OBX spell.”  By 2005, thousands of website domain names incorporated OBX into their name, from obxnews.com to obxnightclubs.com.

The Court found it pure fortune that OBX-Stock had obtained federal registrations for its OBX marks, because the Patent & Trademark Office (“PTO”) had repeatedly rejected OBX-Stock’s applications until North Carolina’s congressional delegation got involved to get four of the OBX-Stock marks registered with the PTO for various entertainment and merchandise related goods and services.

In finding that OBX was a geographically descriptive or generic term for Outer Banks, the district court had relied on the lack of evidence showing that “any consumer associates OBX with Plaintiff’s products or Plaintiff itself.” The Fourth Circuit agreed, finding that the lack of any secondary meaning associated with the OBX marks, the fact that OBX-Stock actually intended that OBX would suggest the Outer Banks, and the overwhelming evidence that OBX had actually become an everyday abbreviation for the Outer Banks would prevent OBX-Stock from claiming any exclusive interest in the geographically descriptive or generic designation.

On March 20, 2009, the Federal Circuit issued its decision in Tafas v. Doll, an appeal by the PTO from the Eastern District of Virginia's decision to enjoin the PTO from implementing the Claims and Continuation Final Rules.  The opinion can be found here:  Tafas v Doll.pdf.  The Claims and Continuation Final Rules limit the number of requests for continued examination (Final Rule 114), require submission of a new "examination support document" when filing a certain number of claims (Final Rules 75 and 265), and limit the number of continuation applications that can be filed (Final Rule 78).  With Judge Prost writing for the majority, the Court upheld Final Rules 75, 114 and 265, finding them to be procedural rather than substantive, and therefore within the rulemaking authority of the PTO.  The Court struck down Rule 78, however, as inconsistent with 35 USC § 120, which states that any continuation or continuation-in-part application "shall" be granted priority to the patent application upon satisfaction of certain requirements. 

Judge Bryson wrote a concurrence in striking down Rule 78, which left open the possibility that it could be redrafted in a way that would save it, and Judge Rader dissented with respect to Final Rules 75, 114, and 265, concluding that all of them were substantive and therefore beyond the PTO's rulemaking authority.  The Court ultimately remanded the case to the Eastern District of Virginia to address: "whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious; whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion; whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. § 553; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive."

Earlier this month a Suffolk, Virginia corporation sued Minneapolis-based Target Corporation for alleged infringement of a design patent.  Spring & Assocs., LLC v. Target Corp., No. 1:09cv00149-LO/JFA (filed Feb. 11, 2009).  In the suit, Spring & Associates (“Spring”) accuses Target of infringing U.S. Design Patent No. 581,628 (“’628 Patent”), which covers an ornamental design for underwear.

According to the complaint, Target has knowingly and intentionally sold infringing underwear “as simulations of Spring’s patented underwear.”  (Compl. ¶ 9.)  Spring also contends that Target’s infringement “has been and continues to be intentional and willful.”  (Id. ¶ 11.)  The complaint requests a trial by jury and indicates that Spring is seeking an injunction, treble damages, and attorneys’ fees.  (Id. ¶¶ B-D.)

Research in Motion, Ltd. (“RIM”) is facing another yet another suit in the Eastern District of Virginia charging some of its popular BlackBerry® products with patent infringement.  Virginia-based WiAV Solutions LLC (“WiAV”) has asserted ten patents against BlackBerry devices in a complaint filed last month.  WiAV Solutions LLC v. Research in Motion, Ltd., No. 3:09cv00047-REP (filed Jan. 26, 2009).  WiAV brings its action less than three years after RIM agreed to a $612.5 million settlement to resolve a case filed by NTP, Inc. in the same court.

WiAV alleges in its complaint that it is the owner of two of the patents and the exclusive licensee with rights of enforcement in a specified field of use under the other eight patents.  (Compl. ¶¶ 5, 8.)  The ten patents are said to be “directed to various aspects of encoding and decoding of signals and signal transmission.”  (Id. ¶ 14.)  WiAV has accused numerous BlackBerry products, including several Curve, Pearl, and other models, naming over two dozen particular BlackBerries.  (Id. ¶ 9.)

The twenty-count complaint charges infringement and willful infringement of each of the ten patents by RIM and codefendant Research in Motion Corp.  (Id. ¶¶ 28-97.)  WiAV seeks a permanent injunction, treble damages, attorneys’ fees, and other relief.  (Id. ¶¶ B-H.)  The case has been assigned to Judge Robert E. Payne, in the court’s Richmond Division.

RIM’s settlement with NTP was finalized in March 2006.  That agreement ended a patent litigation filed by NTP in 2001.  See generally NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005).  The case had been assigned to Chief Judge James R. Spencer, also in the Richmond Division.

In a battle between manufacturers of generic pharmaceuticals, the Eastern District of Virginia has dismissed counts for declaratory judgment of patent noninfringement, invalidity, and unenforceability.  Zydus Pharms., Inc., USA v. Teva Pharm. Indus. Ltd., No. 1:08cv1071 (E.D. Va. Jan. 23, 2009) (order granting in part and denying in part defendants’ motion to dismiss).  A covenant not to sue that Teva provided to Zydus was deemed sufficient to resolve the Article III controversy between the parties regarding the patent counts, thereby eliminating subject matter jurisdiction over them.  The court, however, permitted Zydus’s state and federal antitrust claims and its claim for tortuous interference with prospective economic advantage to proceed.

Zydus’s declaratory-judgment counts target two Teva patents concerning the preparation of risperidone, an active ingredient in pharmaceutical formulations used to treat mental illnesses such as bipolar disorder.  The Zydus complaint, filed on October 14, 2008, includes six such counts, which seek declaratory judgments that Zydus’s risperidone product does not infringe either of the Teva patents and that the patents are both invalid and unenforceable.  Zydus alleges that it filed its complaint in response to a demand letter from Teva threatening legal action if Zydus did not provide a sample of its product to Teva for analysis for possible patent infringement.

The Zydus complaint also includes two antitrust counts and a count for tortious interference with prospective economic advantage.  The first antitrust count is a state-law claim based on the Virginia Antitrust Act.  The second is a federal claim based on the Sherman Act.  Both antitrust counts allege that the Teva patents were wrongfully obtained and are being improperly asserted in a manner that interferes with Zydus’s present and future business interests.  The tort claim alleges that Teva's legal threats were made in bad faith and wrongly prevent Zydus from supplying generic risperidone to customers.

On October 17, three days after the complaint was filed, Teva responded by offering Zydus a covenant not to sue it or its customers for infringement of the two patents.  Rather than responding to Teva’s offer, Zydus served Teva with its complaint on October 22.  Teva then executed its covenant on October 23 and provided it to Zydus the next day.  The covenant stated that Teva would not assert a patent-infringement claim against Zydus “or any of Zydus’s customers, suppliers, importers, manufacturers, or distributors.” 

Teva then moved to dismiss Zydus’s complaint.  Teva argued that the covenant removed subject matter jurisdiction over the patent counts, necessitating dismissal under Rule 12(b)(1).  The antitrust and tort claims were alleged to be deficient for failure to state a claim upon which relief could be granted.  Zydus opposed the motion, arguing that Teva’s covenant failed to protect end users of the product, i.e., patients, and that its antitrust and tort claims were adequately pled.

The Court conducted a hearing on Teva’s motion on January 23, and concluded that Teva had provided a “broad covenant not to sue” and that there was “no question” that Zydus’s customers were covered by it.  The Court further decided that “the covenant...not to sue is sufficiently broad that it does take the patent claims out of this case.”  The antitrust claims, however, were considered sufficiently pled for the court “to deny the motion to dismiss and let them go forward.”  The court observed that its decision effectively kept patent issues in the case because they are relevant to the substance of the antitrust claims.

The Eastern District of Virginia grants default judgment and damages to a plaintiff in a copyright case after plaintiff alleges copyright infringement of architectural blueprints. The complaint was filed in the Richmond district (Case Number 3:08cv723), by Donald A. Gardner Architects, Inc. (“Gardner”), a South Carolina architectural firm, against Bradley K. Price and NetCad Drafting Inc., (“NetCad”) a company located in Petersburg, Virginia. Gardner alleged that NetCad copied, published and distributed fourteen designs for single family homes, namely the Caroline, Beaufort, Thornberry II, Hawthorne, Irwin, Herndon, Baldwin, McBride, Carrington, Brighton, Keenan, Anniston, Southerland, and Edgewater, which were created and authored by Gardner.

NetCad’s failure to respond to the complaint convinced the Court to enter an order enjoining NetCad from publishing or selling houses built from any of Gardner’s residential designs. Judge Payne also awarded Gardner statutory damages in the amount of $56,360.00 along with attorney’s fees and costs in the amount of $7,537.09. This statutory amount was the amount that Gardner argued it would have obtained from NetCad’s license fees, doubled as a result of NetCad’s refusal to stop using the designs or answer the claims.

In a case assigned to Judge Mark S. Davis, the newest federal judge in the Norfolk Division of the Eastern District of Virginia, the Court denied summary judgment on December 29 and presided over a patent trial in January in the matter of Level 3 Communications, LLC v. Limelight Networks, Inc., No. 2:07cv589. The dispute is over alleged infringement by Limelight Networks, Inc. (“Limelight”) of two patents owned by Level 3 Communications, LLC (“Level 3”) relating to Internet content delivery networks (CDNs). In the denial of summary judgment, the Court concluded that genuine issues of material fact regarding noninfringement and invalidity defenses raised by Limelight required resolution by trial. That trial was completed on January 23, with the jury siding with Limelight on the issue of infringement and the court entering judgment based on the jury’s verdict.

The Level 3 patents at issue are U.S. Patent Nos. 6,654,807 and 6,473,405. The ’807 patent “provides a way for servers in a computer network to off-load their processing of requests for selected resources by determining a different server (a ‘repeater’) to process those requests.” (Col.2 ll.59-62.) The ’405 patent “provides an on-demand method and system for discovering optimized paths for the transmission of data between source and destination points on a heterogeneous, computer-based communications network.” (Col. 2 ll.26-29.) (A third patent was dropped from the case prior to the order denying summary judgment.)

Limelight moved for summary judgment of noninfringement of the ’807 Patent on multiple grounds. It argued that (1) it does not own or control any “origin servers” as allegedly required by the asserted claims and (2) it is not a “subscriber” to its own CDN and does not control the actions of actual subscribers. Distinguishing two recent decisions by the Federal Circuit on joint infringement, the Court ruled that the two features are not limiting elements of the claims and, even if they were, Level 3 had raised genuine issues of material fact about their presence. Slip op. at 5-12.

The Court also disagreed with Limelight’s arguments that the ’807 patent excludes the use of domain name servers (DNS) for repeater selection or reflection, determining that the patent’s relative silence on the issue did not mandate entry of summary judgment.  Nor was the Court persuaded by Limelight’s contention that the court’s construction of the term “handled” prevented coverage of its DNS-based system; Limelight’s view of that construction was overly narrow.

Regarding noninfringement of the ’405 patent, the Court rejected Limelight’s two arguments. The first argument, that infringement could not be present without Limelight controlling “all of the nodes on the paths between its CDN and clients’ computers,” was dismissed as “fly[ing] in the face of patent’s specification and claims and, indeed, the very nature of the Internet itself,” and “creative . . . yet nonsensical.”  The other argument, that the claims require a data packet to be routed through both default and alternative paths, was considered even less persuasive and “clearly contradicted by the plain language of the claims and specification.”

Limelight fared no better on the invalidity front. Basing its arguments on the written description requirement of 35 U.S.C. § 112, ¶ 1, Limelight’s arguments were considered by the Court to largely parallel the noninfringement arguments.  The Court found them similarly unconvincing.

But Limelight prevailed at trial, which began the following week.  The jury found that the asserted patent claims were neither infringed nor proven invalid, and the court entered judgment based on the jury verdict. 

In cases across the country, the major record companies have pursued individuals for illegal sharing of music files on the Internet based on the outcome of cases such as MGM Studios, Inc. v. Grokster, 545 U.S. 913 (2005) (holding software distributors that distributed a device to promote copyright infringement by allowing customers to freely download copyrighted files liable for contributory copyright infringement). However, in two cases in the Eastern District of Virginia, the record companies were briefly stalled by Judge Walter D. Kelley, Jr.’s denial of motions for leave to take expedited discovery and issue subpoenas to the College of William & Mary for the identity of William & Mary students who were allegedly sharing copyrighted music files. Capital Records, Inc. v. Does 1-13, Case No. 2:08-cv-00090 (E.D.Va. 2008); and Interscope Records v. Does 1-7, Case No. 4:07-cv-00052. Judge Kelley denied the motions on the basis that only the Digital Millennium Copyright Act (“DMCA”) expressly provides subpoena authority for internet related copyright infringement cases and the DMCA did not extend to William & Mary.

The record companies filed motions for reconsideration claiming that the DMCA only applied in the pre-litigation context and that Federal Rule of Civil Procedure 45 allowed for the issuance of subpoenas in the post-litigation context where good cause was shown, attaching an exhibit of more than 200 cases across the country where the subpoenas to obtain the identity of John Does had issued. An amicus brief was also filed by similarly situated defendants in North Carolina, asking the court to deny the motion for reconsideration, in part because the record companies had failed to state a claim for copyright infringement. The cases were transferred to Judge Henry Coke Morgan, Jr., and the motion for reconsideration was heard by Magistrate Judge F. Bradford Stillman, who granted the record companies’ motions, denied the motion for leave to file the amicus brief as too late under the local rules, and consolidated the two cases under Case No. 2:08-cv-00090.

These cases raise interesting issues about whether the DMCA rather than Rule 45 applies in post-litigation context: Judge Kelley thought that it did but Judge Stillman agreed with the record companies that it did not. Also, whether the record companies stated a claim of copyright infringement, allowing them to obtain the identity of John Does simply by alleging that they are downloading or distributing sound recordings to the public was never addressed: a majority of other district courts appear to allow such cases to proceed merely by claiming that individuals are distributing copyrighted music files over the Internet. The Eastern District of Virginia and the Fourth Circuit have not yet addressed these issues, nor will they be able to this time around -- since the record companies dismissed both cases without prejudice in September, 2008.  Does that mean file sharers can remain anonymous awhile longer?