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Patent Litigation Venues: Is a Computer Server Room Really a Place of Business?

By Jo Dale Carothers on Posted in IP, IP Law Blog Lawyers In The News

The U.S. Supreme Court’s in TC Heartland v. Kraft Food,  and subsequently the Court of Appeals for the Federal Circuit in In re Cray Inc., addressed where patent litigation can be filed under the patent venue statute, 28 U.S.C. §1400(b).  Specifically, the patent venue statute provides that “[a]ny civil action for patent infringement may be brought in either 1) “the judicial district where the defendant resides” or 2) “where the defendant has committed acts of infringement and has a regular and established place of business.”

In TC Heartland, the Supreme Court limited venue under the first prong explaining a corporation only resides in its state of incorporation.  For plaintiffs wishing to sue corporations in judicial districts outside the defendant’s state of incorporation, the TC Heartland ruling shifted the focus to the second prong of the patent venue statute.  The second prong states a domestic corporation can be sued for patent infringement “where the defendant has committed acts of infringement and has a regular and established place of business.” 

Following TC Heartland, corporations have routinely argued they have been improperly sued in venues where they have no “regular and established place of business.”  For example, in Seven Networks v. Google, Google recently argued it does not have a  “regular and established place of business” in the eastern district of Texas.  Judge Gilstrap, however, disagreed in a 43-page opinion.  Judge Gilstrap found Google’s server and the computer rack where it is housed by a third-party internet service provider (“ISP”) to be Google’s “regular and established place of business” in that judicial district.

But one could easily ask, how is that a “place of business”?  In In re Cray Inc., the Federal Circuit explained that its “analysis of the case law and statute reveal three general requirements” for whether a corporation has a “regular and established place of business” in a judicial district.  These requirements include:  “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.

The Federal Circuit further explained that while the “‘place’ need not be a ‘fixed physical presence in the sense of a formal office or store,” “there must still be a physical, geographical location in the district from which the business of the defendant is carried out.”  The Federal Circuit further explained a “place” is defined as “a building or a part of a building set apart from any purpose or quarters of any kind from which business is conducted.”  The mere fact that a defendant has advertised it has a place of business in the judicial district is not sufficient.  “[T]he defendant must actually engage in business from that location.”  Further, the statute “cannot be read to refer merely to a virtual space or to electronic communications from one person to another.”  A test that encompasses virtual spaces or electronic communications would improperly expand the venue statute.

In Seven Networks, Judge Gilstrap found Google has a physical server occupying a physical space in the judicial district and that Google exercises exclusive control over not only the digital aspects of the server but also “the physical server and the physical space within which the server is located and maintained.”   As a result, Judge Gilstrap found the “server itself and the place of the [] server, both independently, and together, meet the statutory requirement of a ‘physical place.’”

Google argued the servers were not places of business much less a regular and established places of business of Google.  The Court disagreed.  The Court reiterated its prior conclusion stating “The only relevant difference between a warehouse that stores a company’s tangible products and Google’s [] servers is the nature of the products being stored—physical merchandise versus digital content.  Regardless of what the products may be, if the physical structure that stores them is ‘a physical, geographical location in the district from which the business of the defendant is carried out,’ that structure is a place of business under §1400(b).”  “Here, the []servers are best characterized as local data warehouses, storing information in local districts to provide Google’s users with quick access to the cached data, avoiding the delays associated with distant data retrieval from Google Data Centers.”

Some courts, however, have found §1400(b) “requires some employee or agent of the defendant to be conducting business at the location in question” for the location to be a place of business.  See, for example, Peerless Network, Inc. v. Blitz Telecom Consulting, LLC.  Judge Gilstrap disagreed with that reasoning because he found no basis in the language of the statute for such a requirement.  Therefore, he found venue proper in the eastern district of Texas in Seven Networks irrespective of whether Google had an employee or agent conducting business at the server’s location.

Given the difference of opinion on the minimum requirements for a place of business under the patent venue statute, we can expect this issue to be raised again at the Federal Circuit.

“Honey Badger Don’t Care”: The Rogers test and Trademark Infringement

By James Kachmar on Posted in IP, IP Law Blog Lawyers In The News, Trademark Law

Christopher Gordon is a comedian who created a viral video about the honey badger with the notable catch phrase, “Honey Badger Don’t Care,” among others.  He later trademarked that phrase and sued greeting card companies for trademark infringement for using that phrase, or a variation thereof, without his permission.  As a result, the Ninth Circuit was recently asked to revisit the test set forth in Rogers v. Gramaldi, 875 F.2d 994 (2d Cir. 1989), to determine whether the greeting card companies could use Gordon’s catch phrase without infringing on his trademark.

Gordon originally created his Honey Badger video and posted it to YouTube in 2011.  It quickly generated millions of views on YouTube and he began selling goods with the Honey Badger catch phrases.  In June 2011, Gordon copyrighted his video and shortly thereafter registered the “Honey Badger Don’t Care” mark with the Patent and Trademark Office, including for goods such as greeting cards.  Gordon’s Honey Badger brand received a boost when notable celebrities used it and in late 2011, the “Honey Badger” brand was identified as one of ‘America’s hottest brands” by Advertising Age.

In early 2012, Gordon hired a licensing agent to begin licensing Honey Badger themed products, including greeting cards.  That agent met with representatives of American Greetings but no licensing agreement was ever entered into.  Gordon was successful, however, in entering into licensing agreements with various other greeting card companies.  In mid-2012, American Greetings and Papyrus Recycled Greetings began marketing seven different greeting cards using small variations on the “Honey Badger” catch phrases.  The president of one of the defendant greeting card companies testified that he created all of the greeting cards in question and while he did not recall what had inspired their designs, he claimed never to have heard of Gordon’s “Honey Badger” video.

Gordon filed a lawsuit against the two greeting card companies for trademark infringement in June 2015.  However, the district court granted summary judgment to the defendants and found that the “Rogers” test applied to bar all of Gordon’s infringement claims.  Gordon then appealed to the Ninth Circuit.

The Ninth Circuit began by recognizing that the purpose of the Lanham Act is to ensure that “(1) `owners of trademarks can benefit from the goodwill associated with their marks,’ and (2) `consumers can distinguish among competing producers.’”  To establish a trademark infringement claim, a plaintiff normally has to show that it: (1) “has a valid protectable trademark;” and (2) “the defendant’s use of the mark is likely to cause confusion.”   In this case it was undisputed that Gordon had a viable registered trademark so this first prong was satisfied.  The Ninth Circuit cautioned; however, that the likelihood of confusion test is meant to strike “a comfortable balance” between the Lanham Act and the First Amendment.

Thus, in order to protect the public’s interest and free expression, the Ninth Circuit had adopted the Rogers test from the Second Circuit to ensure that these competing interests are appropriately balanced.  In essence, the Ninth Circuit adopted the Rogers test so that it would limit the Lanham Act “to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest and free expression.”  Thus, under the Rogers test, a defendant accused of trademark infringement must “come forward and make a threshold legal showing that its allegedly infringing use is part of an expressive work protected by the First Amendment.”  If a defendant can make that showing, “then the plaintiff claiming trademark infringement bears a heightened burden … the plaintiff must satisfy not only the likelihood of confusion test but also at least one of Rogers’ two prongs.”  That is, the plaintiff must then show that his or her mark is “either not artistically relevant to the underlying work or explicitly misleads consumers as to the source or content of the work.”

The Ninth Circuit then began by reviewing the Rogers case and several Ninth Circuit decisions that subsequently applied it.  In Rogers, at issue was an Italian movie about two fictional Italian cabaret performers who imitated Ginger Rogers and Fred Astaire in a film titled, “Ginger and Fred.”  Ginger Rogers sued the film’s producers for trademark infringement alleging that the title gave the false impression to filmgoers that the movie was either about her or sponsored by her.  The Second Circuit rejected her claim and found that the names Ginger and Fred were “not arbitrarily chosen just to exploit the publicity value of their real life counterparts” but rather, because they had “genuine relevance to the film’s story.”  Following the Rogers decision, the Ninth Circuit applied it to dispose of trademark infringement claims involving Barbie dolls (Matel, Inc. v. MCA Records, Inc.), a hip hop record label (20th Century Fox Television v. Empire Distribution, Inc.), and the videogame Grand Theft Auto (ESS Entertainment 2000, Inc. v. Rockstar Videos, Inc.).

The Ninth Circuit found, however, that the instant Honey Badger case showed the limits of the Rogers decision. It reasoned that although the Defendant’s greeting cards “are expressive works to which Rogers applies in,” there remained the factual issue as to whether their use of the “Honey Badger” catch phrase was artistically relevant.

The Ninth Circuit recognized that the Defendants had met their initial burden of showing that the greeting cards are “expressive works protected under the First Amendment” since a greeting card is intended to “convey a particularized message.”  However, as to the artistic relevance inquiry, the question is not only whether the mark is relevant to the rest of the work, but rather, “whether the mark is relevant to the Defendants’ own artistry.” That is, whether the Defendant uses it for artistic reasons.  On the other the hand, the Ninth Circuit reasoned that “the use of a mark is not artistically relevant if the defendant uses it merely to appropriate the goodwill inhering in the mark or for no reason at all.”

The Court concluded that a jury could look at the facts and determine that Defendants had used the “Honey Badger” catch phrase merely to use the goodwill that Gordon had established in his mark “without adding any creativity of their own.”  The Ninth Circuit concluded that the jury should decide “whether Defendants added their own artistic expression as opposed to just copying Gordon’s artistic expression.”

The Ninth Circuit found it significant that Plaintiff had presented evidence that he had sold various products bearing his mark, had discussed a licensing deal with representatives of at least Defendants’ parent corporation, and that Defendants started developing their product lines only after that meeting had occurred.  In sum, the Ninth Circuit concluded that there was evidence “that Defendants simply used Gordon’s mark in the same way that Gordon was using it.  To make humorous greeting cards in which the bottom line is `Honey Badger Don’t Care.’”  Thus, the Court ordered that the summary judgment in Defendants’ favor be reversed.

Defendants in trademark infringement cases should explore whether the Rogers test can provide them some immunity from a trademark infringement claim. However, to do so, they should be prepared to establish that they did more than merely use the Plaintiff’s mark in an identical or similar manner to the plaintiff.

 

James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section.  He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes.  For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com. 

 

Federal Circuit Limits Patent Infringement Damages

By Audrey A Millemann on Posted in IP, IP Law Blog Lawyers In The News, Patent Law

The Federal Circuit Court of Appeals has taken aim at sky-high patent infringement damages. In Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., 2018 U.S. App. LEXIS 18177 (July 3, 2018), the court limited the use of the rule that allowed patent owners to recover damages based on the total sales of the infringing product, even if the patent covered only a part of the product.

Power Integrations owned two patents covering switching regulators in power supply controller chips. Power Integrations sued Fairchild for patent infringement in the Northern District of California. At trail in 2014, the jury found for Power Integrations and awarded it damages of $105 million for a reasonable royalty. Fairchild moved for judgement as a matter of law or for a new trial. The district court denied the motions.

After the Federal Circuit, decided another case involving damages for a product that contained both patented and unpatented features, the district court ordered a second trial on damages. After that trail, the jury awarded Power Integrations $140 million in damages as a reasonable royalty, based on the entire market value rule. Under that rule, a patent owner can recover damages for the sales of the entire infringing product, even though the product has unpatented features in addition to patented features.

Again, Fairchild moved for judgement as a matter of law or a new trail, and the district court denied the motions. On appeal, the Federal Circuit vacated the damages award and remanded the case. The court held, at *22:

“A patentee is only entitled to a reasonable royalty attributable to the infringing features. The patentee ‘must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features.”

The reasonable royalty must be based on the “value of what was taken,” which is only the value of the patented features, not the value of the whole product. Id. at *23.

The court explained that the determination of a reasonable royalty must start with a royalty base. The royalty base “should not be larger than the smallest salable unit embodying the patented invention.”  Id.

The court cautioned against the application of the entire market value rule, finding that its application could result in an improper damage award because it is likely to overstate the amount that is attributable to the patented features of an infringing product. Id. at *24. The court said that the entire market value rule is only appropriate when the patented feature is the basis for the defendant’s sales. Id. at *25.

The court found that Fairchild’s products contained unpatented features of significance, as well as the patented features. Because Power Integrations has not met its burden of proof to show that the patented features were the “sole driver of customer demand,” the application of the entire market value rule was improper and the damages award had to be vacated. Id. at *28.     

Federal Circuit Affirms Tribal Immunity Does Not Apply in Inter Partes Review Proceedings Before the USPTO

By Eric Caligiuri on Posted in IP Law Blog Lawyers In The News

In Saint Regis Mohawk Tribe et al. v. Mylan Pharmaceuticals Inc. et al., the U.S. Court of Appeals for the Federal Circuit held that Native American tribal sovereign immunity does not apply in Inter Partes Review (“IPR”) proceedings at the Patent Trial and Appeal Board (“PTAB”) arm of the USPTO.  In do so, the Federal Circuit affirmed the PTAB’s ruling that it has the authority to decide the validity of patents transferred to the St. Regis Mohawk tribe, and rejected an attempt from Allergan to shield its patents covering dry-eye medication Restasis by transferring the patents to a Native American tribe.

In 2015, Allergan sued various generic drug manufactures in the Eastern District of Texas alleging infringement of its Restasis patents.  Mylan, one of the generic manufactures sued by Allergan, petitioned the PTAB for IPRs of the Restasis patents.  The PTAB instituted the IPRs, which were later joined by other defendants.  However, before the IPR hearings, Allergan and the tribe entered into an agreement to transfer ownership of the Restasis patents to the tribe, and license them back to Allergan.  The tribe moved to terminate the IPRs, arguing it is entitled to assert tribal sovereign immunity, and Allergan moved to withdraw.  The PTAB denied the motions, which Allergan and the tribe now appeal.

In considering the issue of tribal immunity in an IPR proceeding before the PTAB, the Federal Circuit first noted that as “domestic dependent nations,” Indian tribes possess “inherent sovereign immunity,” and suits against them are generally barred “absent a clear waiver by the tribe or congressional abrogation.”  However, that immunity generally does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action.  But, there is not a blanket rule that immunity does not apply in federal agency proceedings.

Ultimately, four factors convinced the Federal Circuit that an IPR is more like an agency enforcement action than a civil suit brought by a private party, and that tribal immunity is not implicated.  First, the Federal Circuit reasoned the PTAB possesses broad discretion in deciding whether to institute review.  If the PTAB decides to institute, review occurs. If the PTAB decides not to institute, for whatever reason, there is no review. In making this decision, the PTAB has complete discretion to decide whether or not to institute review.  Therefore, if IPRs proceed on patents owned by a tribe, it is because a politically accountable, federal official has authorized the institution of that proceeding.  In this way, an IPR is more like cases in which an agency chooses whether to institute a proceeding on information supplied by a private party.

Second, the role of the parties in an IPR suggests immunity does not apply in these proceedings.  Once IPR has been initiated, the PTAB may choose to continue review even if the petitioner chooses not to participate.  The PTAB has construed its rules to allow it to continue review even in the absence of patent owner participation, and to participate in appeals “even if the private challengers drop out.”  This reinforces the view that IPR is an act by the agency in reconsidering its own grant of a public franchise.

Third, the USPTO procedures in an IPR do not mirror the Federal Rules of Civil Procedure.  Although there are certain similarities, the differences are substantial.  The Federal Circuit noted the differences and breadth of discovery in civil litigation, ability to amend pleadings in civil litigation, ability to amend patent claims during an IPR, and the length and scope of a civil court trial versus an IPR hearing.  In short, in an IPR, the agency proceedings are both functionally and procedurally different from district court litigation.

Finally, while the USPTO has the authority to conduct reexamination proceedings that are more inquisitorial and less adjudicatory than IPR, this does not mean that an IPR is thus necessarily a proceeding in which Congress contemplated tribal immunity to apply.  The tribe acknowledged that sovereign immunity would not apply in ex parte reexamination proceedings because of their inquisitorial nature.  The mere existence of more inquisitorial proceedings in which immunity does not apply does not mean that immunity applies in a different type of proceeding before the same agency.  While IPR presents a closer case for the application of tribal immunity than ex parte reexamination, the Federal Circuit nonetheless concluded that tribal immunity does not extend to these administrative agency reconsideration decisions.

Thus, the Federal Circuit held that tribal sovereign immunity cannot be asserted in IPR, and affirmed the underlying decision of the PTAB.  However, the Federal Circuit was careful to note that it was not deciding the issue of state sovereign immunity.  The Federal Circuit specifically pointed out it was only deciding whether tribal immunity applies in IPR.  It left for another day the question of whether there is any reason to treat state sovereign immunity differently.

Conor McGregor Returns to Combat in the Intellectual Property Arena

By Josh H. Escovedo on Posted in IP, IP Law Blog Lawyers In The News

Conor McGregor doesn’t back down to anyone. He knocked out the once unbeatable Jose Aldo in 13 seconds. He was the first UFC fighter to simultaneously hold titles in two different weight divisions. He crossed over to boxing to fight the greatest boxer of all time, Floyd “Money” Mayweather. You get the point: Conor McGregor takes on all competitors—anywhere, anytime.

Although McGregor’s fights usually occur inside the octagon, or most recently, the boxing ring, McGregor will now be forced to take on new opponents in a new arena: the intellectual property arena. Specifically, as a result of McGregor’s attempt to register the mark THE CHAMP CHAMP through a European Union trademark application, McGregor will have to take on sporting apparel giant, Champion, which has filed an opposition to McGregor’s application. The opposition covers McGregor’s word marks and his design marks.

Although I am not familiar with this process as it relates to European Union registrations, my research indicates that the process can last approximately one year, which is not all that different from opposition proceedings in the United States. In the interim, McGregor may choose to forego use of the mark in commerce as it could open him up to damages for trademark infringement if Champion succeeds in its opposition proceedings. However, if McGregor’s actions outside of the business and intellectual property arenas are any indication of his actions inside those arenas, he may choose to move forward with use of the mark in commerce, in the absence of a preliminary injunction, just assuming he will prevail in the opposition proceeding.

In addition to this dispute with Champion, McGregor is also entangled in opposition proceedings relating to applications to register MYSTIC MAC and I AM BOXING. The MYSTIC MAC mark was opposed by cosmetic giant, Make Up Cosmetics, commonly known as MAC, as well as Mac Jeans. I AM BOXING was opposed by Switzerland’s largest retail company Migros. Although the merit of these oppositions remain in dispute, one thing is clear: McGregor’s presence in the business world is just as polarizing as his presence in the sports and entertainment world.

Recovery of Lost Foreign Profits for Infringement of a U.S. Patent

By Jo Dale Carothers on Posted in IP, IP Law Blog Lawyers In The News, Patent Law

While a U.S. patent provides the patent owner with a monopoly to prevent others from “making, using, offering for sale, or selling the invention throughout the United States,” there are significant limits to the extraterritorial application of U.S. Patent law.  The U.S. Supreme Court, however, just found that damages for one form of patent infringement extend not only to lost U.S. profits, but also to lost foreign profits.  In what is seen as a big win for patent owners, the Court, in a 7-2 decision in WesternGeco v. Ion Geophysical, ruled patent owners may recover lost foreign profits for patent infringement under 35 U.S.C. §271(f)(2).

Section 271(f) addresses U.S. patent infringement resulting from exporting components of an invention for assembly abroad.   The subsection at issue in WesternGeco, 35 U.S.C. §271(f)(2), specifically “addresses the act of exporting components that are specially adapted for an invention,” stating “[w]hoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

When patent infringement is proven, 35 U.S.C. §284 provides for damages “adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer.”   The question in WesternGeco was whether those damages for infringement of a U.S. patent (not a foreign patent) extend to lost foreign profits arising from assembled foreign products that are used abroad when the infringement claim arises merely from exporting specially-adapted components of the invention.  Even though the foreign uses of the invention cannot infringe a U.S. patent, the Supreme Court found that lost foreign profits are recoverable for infringement under §271(f)(2).

In reaching its decision, the Court looked to whether extraterritorial application of the relevant statutes is permissible.  While there is a presumption against extraterritorial application of U.S. statutes, there is a two-step framework for deciding whether extraterritorial application is permissible.  “The first step asks ‘whether the presumption against extraterritoriality has been rebutted,’” which requires a “clear indication of an extraterritorial application.”  The second step asks “whether the case involves a domestic application of the statute,” which requires courts to identify the statute’s focus and whether “the conduct relevant to that focus occurred in the United States territory.”  Further, when “the statutory provision works in tandem with other provisions, it must be assessed in concert with those other provisions.  Otherwise, it would be impossible to accurately determine whether the application of the statue in the case is a ‘domestic application.’”

The court exercised its discretion to begin with step two of this framework, and in this case, that required assessment of both 35 U.S.C. §284 and §271(f)(2) because they work in tandem.  The Court found the focus of the damages statute, 35 U.S.C. §284, is “the infringement” and the “overriding purpose” of the statute is to “affor[d] patent owners complete compensation for infringements.”  The Court then turned to §271(f)(2) and found it “focuses on domestic conduct”—“the domestic act of ‘suppl[ying] in or from the United States.”  Therefore, the Court determined the relevant conduct in this case was domestic, and  that awarding lost foreign profits as damages was a permissible domestic application of §284.

In dissent, Justice Gorsuch, joined by Justice Breyer, raised the point that the majority “does not explain why ‘damages adequate to compensate for the infringement should include damages for harm from noninfringing [foreign] uses.’”  Justice Gorsuch also warns that by permitting damages of this sort, it effectively allows U.S. patent owners to extend their monopolies to foreign markets, which “in turn, would invite other countries to use their own patent laws and courts to assert control over our economy.” Finally, he pointed out that WesternGeco was seeking lost profits for uses of its invention beyond the U.S. borders, which rather than just completely compensating for infringement “puts the patent owner in a better position than it was before by allowing it to demand monopoly rents outside the United States as well as within.”

While the Court indicated it was limiting its holding to damages under 35 U.S.C. §271(f)(2), it remains to be seen how far it will ultimately reach.  In a footnote, the Court did note it was not addressing “the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.”

Right of Publicity Risks For Producers Still Uncertain

By Scott Hervey on Posted in Entertainment Law, IP, IP Law Blog Lawyers In The News

Often writers base characters on complete fiction, drawing from their imagination to build a character’s various facets.  However, on certain occasions a writer may base a character on a living person.  Sometimes such a portrayal is factual and other times it may be a combination of fact and fiction.  Such was the case, claimed legendary actress Olivia de Havilland, in her lawsuit against FX Networks over her portrayal in the FX docudrama Feud: Bette and Joan.

Feud told the tale of the infamous silver screen ongoing battle between Bette Davis and Joan Crawford.  De Havilland claimed that Catherine Zeta-Jones’s portrayal of her in the show (which lasted all of 17 minutes) violated her right of publicity because she did not give the creators of Feud permission to use her name or identity.  Additionally, de Havilland also claimed that FX portrayed her in a false light by taking certain creative liberties with the story (namely, the inclusion of a fictitious interview and the de Havilland character’s reference to her sister as a “bitch” when in fact the term she actually used was “dragon lady”).

At the trial court, FX filed a motion to strike the complaint based on California’s anti-SLAPP statute.  The trial court denied FX’s motion.  The trial court’s ruling presented a Catch-22 for those choosing to portray real persons in creative works.  If the portrayal is done accurately and realistically (and without permission) this is grounds for a right of publicity lawsuit; if the portrayal is more creative or entirely fictitious, this could be grounds for a false light claim if the person portrayed doesn’t like the portrayal.

FX appealed to the California Court of Appeals.  In a lengthy opinion, the court reverses the trial court’s decision and dismissed de Havilland’s case.  By all means, the opinion is a clear endorsement of the First Amendment rights of television producers (and other creatives).

The First Amendment Trumps de Havilland’s Right of Publicity.

The court doesn’t answer the question whether a docudrama is a product or merchandise within the meaning of Civil Code section 3344.  Rather, the court assumes “for argument’s sake that a television program is a ‘product, merchandise, or good’ and that Zeta-Jones’s portrayal of de Havilland constitutes a ‘use’ of de Havilland’s name or likeness within the scope of both the right of publicity statute and the misappropriation tort.”  Feud, the court notes, “is speech that is fully protected by the First Amendment, which safeguards the storytellers and artists who take the raw materials of life — including the stories of real individuals, ordinary or extraordinary — and transform them into art, be it articles, books, movies, or plays.”  The fact that FX did not purchase or otherwise procure de Havilland’s “rights” to her name or likeness did not change the court’s analysis.  The court stated that film and television producers may enter into rights agreements with individuals for a variety of reasons, however, “the First Amendment simply does not require such acquisition agreements.”

De Havilland Did Not Show That She Would Likely Prevail on Her False Light Claim.

A false light claim is a type of invasion of privacy, based on publicity that places a person in the public eye in a false light that would be highly offensive to a reasonable person, and where the defendant knew or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the aggrieved person would be placed.  A false light claim is equivalent to a libel claim, and its requirements are the same as a libel claim, including proof of malice.  In order to prevail on her claim, de Havilland had to demonstrate that FX broadcast statements that were (1) assertions of fact, (2) actually false or create a false impression about her, (3) highly offensive to a reasonable person or defamatory, and (4) made with actual malice.

First, the court questioned whether a reasonable viewer would interpret Feud as entirely factual. The court noted that “[v]iewers are generally familiar with dramatized, fact-based movies and miniseries in which scenes, conversations, and even characters are fictionalized and imagined.”  Next, the court concluded that Feud’s depiction of de Havilland is not defamatory nor would it highly offend a reasonable person.  Granting an interview at the Academy Awards, the court noted, is not conduct that would cause offense to reasonable persons.  Further, the court found the producer’s substitution of the word “bitch” for “dragon lady” in a statement actually made by de Havilland was an un-actionable substantial truth – a statement that would not have a different effect on the mind of the reader from that which the truth would have produced.

Lastly, because de Havilland is a public figure, she had to show that the statements made by FX were made with actual malice.  This means more than showing that the statements were not true.  Fiction is by definition untrue and “[p]ublishing a fictitious work about a real person cannot mean the author, by virtue of writing fiction, has acted with actual malice.”  Rather, the court said, “de Havilland must demonstrate that FX either deliberately cast her statements in an equivocal fashion in the hope of insinuating a defamatory import to the [viewer], or that [FX] knew or acted in reckless disregard of whether its words would be interpreted by the average [viewer] as defamatory statements of fact.”  The court concluded that de Havilland would be unable to meet this burden.

In dismissing de Havilland’s case, the Appeals court acknowledged the Catch-22 the trial court’s decision created for producers and other creatives and found it inconsistent with the First Amendment.  The right of publicity does not give celebrities the “right to control the [their] image by censoring disagreeable portrayals.”

But the show isn’t over yet.  De Havilland filed a petition with the California Supreme Court to reverse the decision by the Appeals Court and allow her case to proceed to trial.  De Havilland claimed that the Court of Appeals misapplied the balancing test between the First Amendment and the right of publicity formulated by the Supreme Court in the 2001 case of Comedy III Prods., Inc. v. Gary Saderup, Inc.  While it’s uncertain whether the Supreme Court will agree to hear the matter, if it does, a ruling in de Havilland’s favor could be very disruptive for producers who wish to create a work of fiction based on true events and portraying real persons.

Ninth Circuit Rejects “General Possibility” of Infringement Theory

By James Kachmar on Posted in Copyright Law, IP Law Blog Lawyers In The News

Today’s real estate industry relies heavily on the use of websites displaying photographs of properties for sale to entice buyers.  Many of the photographs on these sites are taken by professional photographers who license the use of their photos and retain the copyrights to them.  In Stevens v. CoreLogic, Inc. (decided June 20, 2018), the Ninth Circuit was faced with the question of whether these photographers can maintain an action for copyright infringement against a company whose software apparently “scrubbed” metadata identifying the copyright holders of photographs on various real estate websites.

The plaintiffs in the CoreLogic case were photographers who were hired by various real estate agents to take digital photos of homes for sale.  These photos would then be shown on the real estate agent’s websites and other sites to attract potential buyers for these properties.  The digital photographs would contain metadata, which although invisible to the average user, contained information that could help identify the author of the photograph as well as potential copyright ownership information.  Copyright law, specifically 17 U.S.C. § 1202(b) ,restricts “the removal or alteration of copyright management information (“CMI”) – information,” such as the title, the author, the copyright owner and other identifying information, from a copyrighted work.

CoreLogic develops and provides software to the real estate industry, primarily multiple listing services also known as MLSs.  Because digital photos can entail large file sizes, CoreLogic’s software programs would “downsize” photos, which would include removing metadata from particular images.  In May 2014, the Plaintiffs sued CoreLogic claiming that its software, by removing this metadata, constituted copyright infringement.  (It appears that shortly after the lawsuit was filed, CoreLogic modified its software to allow at least one form of metadata to remain attached to images displayed on the MLS websites.)

After discovery was nearly complete, CoreLogic moved for summary judgment arguing that there was no evidence that it intended to allow infringement of Plaintiffs’ copyrights.  The trial court agreed with CoreLogic and granted judgment in its favor, which judgment the photographers appealed to the Ninth Circuit.  (This article does not address other issues raised on appeal by the Plaintiff photographers.)

In essence, the Ninth Circuit considered whether Plaintiffs could state prevail on a claim against CoreLogic that its software unlawfully removed CMI metadata in violation of 17 USC §  1202(b)(1) and that CoreLogic violated 17 U.S.C. § 1202(b)(3) by distributing images knowing that CMI had been removed.  After reviewing the text of both of these statutes, the Ninth Circuit recognized that “[b]oth provisions … require the defendant to possess the mental state of knowing, or having a reasonable basis to know, that his actions `will induce, enable, facilitate or conceal’ infringement.”  The Ninth Circuit agreed with the trial court that the Plaintiff- Photographers had not produced admissible evidence to satisfy this required mental state.

The Plaintiff-Photographers’ main argument was that by removing metadata, CoreLogic was impairing the ability of copyright owners to detect whether someone might be using their photographs in violation of their copyrights.  The Ninth Circuit reasoned that this argument was not based on any affirmative evidence, but rather, “it simply identifies a general possibility that exists whenever CMI is removed.”  The Ninth Circuit held that this “general possibility” was not sufficient to establish copyright infringement.

First, in reviewing the statutory language, the Ninth Circuit found it important to “give effect, if possible, to every clause and word of a statute.”  Thus, in order not to make sure that the mental state requirement set forth in these provisions was not a “superfluity,” there must be a more specific application “than the universal possibility of encouraging infringement.”  While the Plaintiff-Photographers were not required to show that any specific infringement had already occurred, the Ninth Circuit held that a plaintiff “must make an affirmative showing, such as by demonstrating a past `pattern of conduct’ or `modus operandi,’ that the defendant was aware of the probable future impact of its actions.”  The Ninth Circuit continued by recognizing that the statutory intent is further evidenced by the fact that it was enacted in response to similar concerns addressed in the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty. In sum, the Ninth Circuit concluded that in order to satisfy the knowledge requirement of section 1202(b), “a plaintiff … must offer more than a bare assertion that `when CMI metadata is removed, copyright infringement plaintiffs … lose an important method of identifying a photo as infringing.’”

The Ninth Circuit then concluded that the Plaintiff-Photographers had failed to offer any specific evidence that the removal of the CMI metadata impaired their ability of policing possible infringement.  First, the Plaintiff-Photographers had not produced any evidence that they ever relied on the use of CMI metadata to prevent or detect copyright infringement of their works.  In fact, at least one of the plaintiffs apparently testified that he had never looked at metadata information on any MLS system.  Furthermore, on two occasions when one of the plaintiffs became aware that his photographs were being infringement upon, this discovery came through a notice provided by the real estate agent who had commissioned the photos later discovering them on another website.

Furthermore, the Plaintiff-Photographers had not offered any evidence that CoreLogic’s distribution of real estate photographs to other sites had ever resulted in an infringing use of photographs by third parties.  Importantly, the Ninth Circuit recognized that if a third party was intent on infringing the copyrights of one of the photographers, that party could always remove any CMI metadata, which would also preclude the detection of infringement through the search of metadata.  The Ninth Circuit concluded that “because the photographers have not put forward any evidence that CoreLogic knew its software carried even a substantial risk of inducing, enabling, facilitating or concealing infringement, let alone a pattern or probability of such a connection to an infringement, CoreLogic is not liable for violating 17 U.S.C. §  1202(b).”

The CoreLogic decision is a reminder to copyright infringement plaintiffs that in order to prevail on a copyright infringement claim, they must come forward with admissible evidence to meet each of their burdens of proof to establish their claim.  The Ninth Circuit has made clear that relying on a “general possibility” of infringement theory will not suffice to meet this burden and risk dismissal of such claims.

James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section.  He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes.  For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com. 

Ninth Circuit Denies Copyright Protection to Monkeys

By Audrey A Millemann on Posted in IP Law Blog Lawyers In The News

Does anyone think that a monkey has standing to bring a copyright infringement lawsuit? In Naruto v. Slater, 888 F.3d 418 (9th Cir. 2018), the Ninth Circuit Court of Appeals said no, but not without carefully considering the issue.

Animals have many legal rights based on federal and state laws. Most of those rights are enforceable by humans or legal entities suing under the statutes on behalf of the animals. However, should animals have the right to sue under their own names in court?

The Ninth Circuit Court of Appeals has addressed this question in The Cetacean Community v. George W. Bush and Donald H. Rumsfeld, 386 F.3d 1169 (9th Cir. 2004). In that case, the court had to decide whether cetaceans (whales, porpoises, and dolphins) had standing to sue in their own names under several federal statues, including the Endangered Species Act and the Marine Mammal Protection Act. The world’s cetaceans, identified as The Cetacean Community, represented by an attorney in Hawaii, sued the United States Government to stop the Navy’s use of a type of sonar that causes injury to cetaceans. This sonar emits low frequency pings that are heard underwater over hundreds of miles.  The pings cause the cetaceans tissue damage and hearing loss, and disrupt their feeding and mating behavior by masking the sounds of other cetaceans and the environment. The damage caused by this type of sonar was undisputed. The use of the sonar during peacetime had been successfully challenged in a separate case filed by the Natural Resource Defense Council. In this case, the cetaceans sued to cause the President and the Secretary of Defense to conduct a regulatory review and to prepare an environmental impact report on the use of this sonar during threat situations and wartime.

The district court for Hawaii granted the defendants’ motion to dismiss the case on the grounds that the cetaceans did not have standing under the federal statutes to bring suit.

The Ninth Circuit affirmed. The court explained that standing to sue under federal statues requires both Article III standing and specific standing under the statute. Article III standing exists if there is a “case or controversy,” meaning that the plaintiff must have suffered an injury traceable to the defendant for which a court can provide a remedy.

According to the court, nothing in Article III prohibits animals from having a “case or controversy.” Cetacean Community, 386 F.3d 1175. Congress can grant animals the right to sue in their own names by statute, just as Congress has enacted statutes that provide for suits in the names of entities such as corporations or trusts, cities, ships, and incompetent persons such as infants or mentally incapacitated individuals. Id. at 1176.

The court then analyzed whether The Environmental Protection Act, The Marine Mammal Protection Act, and the other statutes under which the cetaceans sued provided standing to the cetaceans. The court held that these statutes did not provide standing to any animals, but rather provided standing to persons or entities to sue to protect the animals. Id. at 1179.

In Naruto v. Slater, supra, 888 F.3d 418, the Ninth Circuit was faced with a copyright infringement claim brought by an animal. The animal was a Crested Macaque, a type of monkey, named Naruto. Naruto lived in a wildlife reserve in Indonesia. In 2011, Naruto found a camera that had been left in the reserve by a photographer, defendant David Slater. Naruto took photos of himself. In 2014, presumably after finding the camera with Naruto’s selfies, Slater and the other defendants published a book containing the selfies. The defendants listed themselves as the copyright owner of the selfies, although they admitted that Naruto had taken the pictures.

In 2005, People for the Ethical Treatment of Animals (PETA) and a scientist who had studied Naruto sued the defendants for copyright infringement, as “Next Friends” on behalf of Naruto. The defendants moved to dismiss. The district court for the Northern District of California granted the motion on the grounds that the Copyright Act did not provide statutory standing to animals.

The Ninth Circuit affirmed. The court held that it was bound by the holding of Cetacean Community, supra, that animals could show Article III standing. Naruto, supra, 888 F.3d at 421. The court found that PETA was not a proper Next Friend to sue on behalf of Naruto, but held that this was not determinative because a Next Friend was not necessary to establish Article III standing. The court held that because the “case or controversy” requirement was met, Naruto had Article III standing. Id. at 424. However, the court held that the Copyright Act did not provide statutory standing to animals other than humans.

So, at least for now, animals who take pictures don’t own the copyrights to those pictures. You can leave your camera somewhere and claim ownership of any photos taken by an animal without the risk of liability for copyright infringement! In the future, however, it’s possible that the animals just might win.

SAS Institute, Inc. v. Iancu Has Affected Cases in Federal Courts in Addition to Those at the PTAB

By Eric Caligiuri on Posted in IP Law Blog Lawyers In The News, Patent Law

On April 24, 2018, the Supreme Court issued its ruling in SAS Institute, Inc. v. Iancu, which held that the Patent Trial and Appeal Board (“PTAB”) arm of the United States Patent and Trademark Office (“USPTO”) must issue a final written decision addressing each and every patent claim challenged in an Inter Partes Review (“IPR”) petition if review is granted.  In other words, if the PTAB is going to institute a review, it must address all the claims that are being challenged by the petition.  In the six weeks or so since the SAS Institute decision, the ruling has had repercussions not only for the PTAB, but also for federal courts.

For example, in Wi-LAN, Inc. et al v. LG Electronics, Inc. et al, the Southern District of California recently decided to issue a stay in a patent infringement case brought by WiLan, Inc. against LG Electronics, Inc. pending a decision on whether to institute an IPR proceeding against the at-issue patents.  While not dispositive, the Court did consider the SAS Insitute ruling in making its decision, reasoning “[w]hile review is not guaranteed … in light of the Supreme Court’s mandate to review all contested claims upon grant of [an IPR] and the complexity of this case, the court finds [the simplification of issues] weighs in favor of a limited stay of proceedings until the [PTAB] issues its decisions on whether to institute IPR.”

Next, in DermaFocus LLC v. Ulthera, Inc., the District of Delaware had to decide whether to lift an already issued stay when some but not all challenged claims had already been ruled on by the PTAB.  The Delaware District Court decided not to lift the stay because the circumstances warranting the entry of a stay in the first instance still persisted in light of SAS Institute.  Specifically, the Court reasoned that the “parties stipulated to stay the litigation ‘pending resolution by the PTAB of the patentability of all challenged claims in the pending IPR.’”  Although the PTAB denied institution of IPR proceedings with respect to some claims, and issued a final written decision on all remaining claims, the Supreme Court recently ruled that the PTAB must issue a final written decision “with respect to the patentability of any patent claim challenged,” and “in this context, as in so many others, ‘any’ means ‘every.’”  For this reason, the Federal Circuit remanded Ulthera’s appeal to the PTAB for issuance of a final decision regarding the patentability of all claims.  Consequently, the PTAB has yet to resolve the patentability of all challenged claims in the pending IPR proceeding, and the terms of the parties’ stipulation have not been satisfied.

Finally, in PGS Geophysical AS v. Iancu, the Federal Circuit held that it has jurisdiction to address appeals without first requiring the PTAB address the claims and grounds included in petitions for review but not previously included in final written decisions, i.e. the “non-instituted” claims and grounds.  In other words, the Federal Circuit held “that the existence of non-instituted claims and grounds does not deprive [it] of jurisdiction to decide appeals from final written decisions.”  The Federal Circuit reasoned that while the PTAB having only partially instituted review is now improper under SAS Institute, the PTAB’s final decisions on the validity of individual claims are nonetheless still final because the PTAB made a patentability determination.

Although there are still numerous issues and questions the PTAB and federal courts need to decide in implementing the SAS Institute ruling, the answers to some of these issues and questions are slowly taking shape.  However, there are many more that will require resolution in both the short and long term.