Any work that is entitled to copyright protection automatically receives protection when it is fixed in a tangible medium of expression. However, in order to benefit from the Copyright Act, the owner must “register” his or her work with the United States Copyright Office. Put another way, in order to protect against copyright infringement, the owner must register the work. So, for purposes of the Copyright Act, what does that mean?

To be clear, there is no right answer. Not yet at least. In fact, the definition of “registered” has been debated for years and the federal circuit courts are split on the definition. The Copyright Act describes the registration process as (1) filing an application and paying a fee; (2) depositing a copy of the copyrightable material with the Copyright Office; (3) an examination of the application by the Register of Copyrights; (4) registration or refusal of registration of the application by the Register; and (5) issuance of a certificate of registration. The circuit courts have split on when the mark should be deemed “registered” for purposes of the Copyright Act.

The two approaches are known as the “application” approach and the “registration” approach. The courts following the “application” approach hold that a work is “registered” and the copyright owner can sue an infringer as soon as the applicant files the application, deposits the copy of the work, and pays the fee. The courts following the “registration” approach hold that a work is not “registered” until the Copyright Office has acted on the application by approving or refusing it, and as such, the owner cannot file suit until the Copyright Office has acted.

For years, the split remained intact, but the Supreme Court of the United States will finally resolve the dispute in an action known as Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC. In that case, Fourth Estate Public Benefit Corporation, a news organization publishing articles online, licensed certain articles to Wall-Street.com. Eventually, Wall-Street.com cancelled its account with Fourth Estate, and under the license agreement, it was required to remove all licensed content from its site. But Wall-Street.com refused to do so, prompting Fourth Estate to file suit for copyright infringement on unregistered works, advocating for the Court to apply the “application” approach. The District Court refused, adopting the “registration” approach and dismissing the action without prejudice.

The Eleventh Circuit affirmed the District Court’s ruling, citing its prior decision in M.G.B. Homes and Kernel Records, where it held, in short, that filing an application does not amount to registration for purposes of the Copyright Act. Registration requires action from both the copyright owner and the Copyright Office. Accordingly, the Eleventh Circuit held that filing for infringement is premature after merely filing the application. Accordingly, Fourth Estate petitioned the Supreme Court for review, which was ultimately granted.

The courts favoring the “application” approach have adopted a more pragmatic and policy-driven position. Those courts have argued that the “application” approach serves justice and judicial economy. After all, if a copyright owner can sue for infringement regardless of the application ultimately being granted or rejected by the Copyright Office, what’s the point of making the party wait to bring suit? It doesn’t seem to make sense. Moreover, these courts point to section 408 of the Copyright Act, which states that registration is not a condition of copyright protection and implies that the only requirement for registration is the delivery of the appropriate documents and fees. Additionally, Section 410 states that the effective date of the registration relates back to the date the Copyright Office receives the filing materials. For these reasons, among a few others, certain circuit courts, including the Fifth and Ninth Circuits, apply the “application” approach.

So, why does the circuit split matter? Generally speaking, the split among the circuit courts results in the courts applying federal law in a dissimilar manner depending upon their location, rather than uniformly throughout the nation. This is problematic because it results in parties bringing, or being prevented from bringing, lawsuits for infringement at different points in the registration process depending on where the action is filed. This can, at times, create statute of limitations problems, and in other instances, permit the infringing party to continue to profit from his or her wrongdoing for a longer period of time. Given that copyright law is exclusively within the jurisdiction of the federal courts, the law should be applied uniformly throughout the nation. Unfortunately, that is not happening, but with the Supreme Court granting certiorari, there will soon be a clear answer regarding what constitutes “registered” for purposes of the Copyright Act.

In recent years, the U.S. Supreme Court has considered a number of intellectual property and related cases, but many issues remain unresolved.  Therefore, it is important to look both at the cases currently before the U.S. Supreme Court as well as those the Court chooses to let stand without further review.  First, consider a few cases the Court has already agreed to hear or is still considering.

  • Apple v. Robert Pepper et al.—In this consumer class action, Apple is accused of violating antitrust law by illegally monopolizing the app market for its phones by forcing developers to sell the apps exclusively through Apple’s app store and collecting a commission from the developers. The Supreme Court will hear this case.
  • Helsinn Healthcare v. Teva Pharmacetuicals et al.—Prior to the America Invents Act (“AIA”), the on-sale bar deemed sales more than a year before a patent filing to be prior art for purposes of invalidating a patent. Helsinn argues the AIA changed this rule such that a sale is not enough to trigger the bar unless the details of the invention are also made public.  Here, the sale took place and was made public more than a year before the patent filing, but the details of the invention were kept confidential.  The Supreme Court will hear this case.
  • RPX Corp. v. ChanBond LLC—The Federal Circuit dismissed an appeal by RPX of a Patent Trial and Appeal Board (“PTAB”) decision upholding a ChanBond patent arguing that an inter partes review petitioner must have suffered a patent-related injury to have standing to appeal an adverse PTAB decision. The Supreme Court has not yet decided whether to hear this case but, to further inform its decision, has asked the federal government for briefing.
  • Amgen Inc. v. Sanofi—The Patent Act requires an inventor to provide a written description in the patent application that enables a skilled artisan to carry out the claimed invention (e.g., make or use the invention). The Federal Circuit treats this as a two-part requirement that imposes a rule that the patent owner 1) must be in possession of the invention at the time the patent application is filed (written description requirement) and 2) show a skilled artisan how to make and use the invention (enablement requirement). This petition asks the Supreme Court to find that the Patent Act merely requires a sufficient description to show a skilled artisan how to carry out the claimed invention without the additional requirement that the patent owner be in possession of the invention at the time the patent application is filed.  The Supreme Court has not yet decided whether to hear this appeal.

Looking at cases the Supreme Court chooses not to review also gives insight into issues that may still need clarifying when a better fact pattern is presented.  These cases should also be considered when formulating arguments in lower courts.  For example, consider several patent cases the Supreme Court chose not to hear this week.

  • Arctic Cat v. Bombardier Recreational Products—Bombardier argued the Federal Circuit misapplied the Halo Electronics v. Pulse Electronics standard for willful infringement by allowing a finding of willful infringement based on negligence. This raises the question as to whether negligence rises to the level of knowing and intentional conduct.  The Supreme Court passed on this opportunity to clarify the Halo
  • B/E Aerospace v. C&D Zodiac—B/E Aerospace argued the PTAB and Federal Circuit use an improper, two-step approach for determining whether a patent claim is obvious. The approach includes an initial determination of obviousness followed by balancing that determination with the weight of the objective evidence of non-obviousness, such as commercial success.  Instead, B/E Aerospace argued for equally weighting objective evidence and other obviousness factors in the same step.
  • Droplets Inc. v. Iancu—Droplets asked the Supreme Court to prohibit the Federal Circuit from affirming PTAB decisions on grounds other than those cited by the PTAB.
  • David Jang v. Boston Scientific—Jang challenged the ensnarement defense that bars patent owners from asserting infringement under a theory of the doctrine of equivalents that “ensnares” the prior art.
  • Nichia Corp. v. Everlight Electronics Co.—The Supreme Court has found the question of patent obviousness to be a question of law for a court not a jury. Nichia argued the Federal Circuit would have reached a different result on obviousness in this case had it independently evaluated the patents rather than improperly deferring to a jury verdict.
  • Presidio Components v. American Technical Ceramics—The Federal Circuit found the patent-at-issue was not indefinite. In its petition, American Technical argued the claimed invention was not clearly described, and was thus indefinite, but the court had improperly allowed Presidio to “backfill” the description with evidence from years of litigation.
  • Regeneron Pharmaceutical v. Merus NV—The Federal Circuit found Regeneron’s patent on a genetically modified mouse was unenforceable because of inequitable conduct. The Federal Circuit found that withholding materials during prosecution was intended to deceive the United States Patent and Trademark Office in part because of Regeneron’s behavior during the infringement litigation.  In the litigation, Regeneron had violated discovery orders and held back documents during discovery.  In its petition, Regeneron argued the doctrine of inequitable conduct is limited to evaluating conduct during prosecution and does not implicate conduct during litigation.
  • Smartflash LLC v. Samsung Electronics America—Smartflash brought two constitutional challenges against AIA review. First, Smartflash argued that PTAB judges must be appointed by the president and confirmed by the Senate rather than appointed by the U.S. secretary of commerce, which is the current process.  Second, Smartflash asked the Supreme Court to bar the PTAB from reviewing patents issued before the AIA was enacted in 2012 arguing that such retroactive application of AIA reviews violates the Constitution’s due process clause.

Keep your eyes on the Supreme Court to monitor these cases and others that are likely to reach the Court this session, such as whether tribal sovereign immunity shields patents from PTAB review (St. Regis Mohawk Tribe v. Mylan Pharmaceuticals).

Recently, a client asked why we included a short form option agreement and a short form assignment agreement as an exhibit to a long form literary option agreement.  I am sure that many a corporate transactional attorney has similarly wondered why a short form copyright assignment agreement is included within the package of numerous M&A transaction documents.  It is true that the short form agreement is used to record the transfer of the copyright interest by filing it with the Copyright office without filing the long form agreement with all of the transaction details.  But that is half the answer to half the question.  The other half of the question is why this type of short form agreement is filed with the Copyright office in the first place.  To answer that question, we look to the statutory language of the Copyright Act.

17 U.S.C. § 205 deals with the recording of transfers of copyright ownership.  The Copyright Act does not require that transfers be recorded.  In order for a transfer of an interest in a copyright to be effective, it is enough that it is in writing and signed by parties.  So if the Copyright Act does not require that transfers of ownership by recorded, what is the benefit to doing it.

Similar to recording an initial copyright interest in a work, transfers are recorded in order to provide constructive notice of the transfer of ownership and to vest the new owner with the right to sue for infringement.  There is one other reason to record the transfer of copyright ownership and other documents pertaining to a copyright; addressing how to deal with conflicting transfers.

Some may assume that once the seller of a copyright interest transfers ownership that seller cannot sell the same interest a second time (or if the unscrupulous seller does so, the second buyer takes nothing).  That’s not always the case.  17 U.S.C. § 205(d) provides:

As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under [17 U.S.C. § 205(c)], within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer.  Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer.

In the scenario where the first buyer (or first exclusive licensee or first optionee) fails to record its interest prior to a second transfer (or grant of exclusive license or grant of option), a second transferee who took without notice, paid valuable consideration and recorded its transaction first, would have a superior interest in the subject work.  If, however, the subsequent transferee had notice (constructive, actual and possibly inquiry notice), then the subsequent transferee would not have a superior interest.  Similarly, the subsequent transferee would not have a superior interest if valuable consideration was not paid, or if the prior transferee recorded its transfer within the statutory grace period of one (or two) months from execution of the prior transfer.

My client was surprised to learn that if it did not record its option (in the form of a short form option), an unscrupulous rights holder could grant the same option to the same material a second time and divest my client of its rights under the option agreement.  While my client would certainly have a claim against the unscrupulous rights holder, the damages my client could potentially collect may be limited to its out of pocket costs and expenses related to the option; no recovery of any potential profits the client could have made from the exploitation of the program based on the literary material that was the subject of the option.

A California appellate court recently dealt a blow to fans of Michael Jackson who brought a class action alleging unfair competition and violations of the Consumers Legal Remedies Act (“CLRA”) in connection with the sale of an album titled simply “Michael” following the singer’s death.  The appellate court found that statements on the album cover and in a promotional video did not amount to pure “commercial speech” and that the Plaintiff’s claims should have been dismissed in connection with an anti-SLAPP motion brought by the Defendants.  (An anti-SLAPP motion is a procedural mechanism by which defendants can seek early disposition of claims against them when: (1) the defendants show that plaintiffs seek to impose liability for some protected activity; and (2) plaintiffs are unable to establish the viability of their claims.)

More than a year after Michael Jackson’s death, an album titled, “Michael” was released by Sony and Michael Jackson’s estate containing 10 songs.  The Serova Plaintiffs alleged that on at least three of the tracks, Michael Jackson was not the singer but rather an unidentified “sound alike” singer had been hired to sing the lyrics.  Even before the album was released several members of the Michael Jackson family disputed whether Michael Jackson was the singer of the three “disputed tracks.”  Sony and the estate, through its attorney, Howard Weitzman, issued public statements confirming their belief that Michael Jackson was the singer of the disputed tracks.  The album cover for “Michael” included a statement that it contained “9 previously unreleased vocal tracks performed by Michael Jackson.”  Shortly before the album was released, a promotional video was distributed that described the album as “a brand new album from the greatest artist of all time.”

Following the issuance of the album and video, a class action lawsuit was filed against Sony and the estate (and others) alleging that because Michael Jackson was not the singer of the three disputed tracks, the album cover and promotional video were misleading and constituted unfair competition and violation of the CLRA.  The complaint alleged that the class members lost money or property as a result of their purchase of the Michael album because of the alleged misrepresentations.

The defendants filed an anti-SLAPP motion against the class action claims, which was granted in part only as to the statements by the attorneys concerning the identity of the lead singer of the disputed tracks as being Michael Jackson.  The trial court declined, however, to dismiss the claims as to the album cover and promotional video finding that these were purely commercial speech and that Plaintiffs could pursue claims as a result thereof.   The defendants immediately appealed this decision to the Second Appellate District for California.

The appellate court began by reviewing the history of the anti-SLAPP procedure.  In essence, the anti-SLAPP laws allow a defendant to file a “special motion to strike” any claim asserted against them “arising from any act of that person in furtherance of the person’s right of petition or free speech under the [U.S.] Constitution or the California Constitution in connection with a public issue” except in those cases where “the Court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.”  While not resolving any conflicts in the evidence, the anti-SLAPP procedure allows the Court to dispose of claims early in the litigation if it determines that the plaintiff cannot make a showing that, if accepted by the trier of fact (i.e., the Court or jury), would not be sufficient to prevail on his or her claims.

In 2003, the California legislature enacted section 425.17 in reaction to what it concluded to be a disturbing abuse of the anti-SLAPP procedures by defendants.  For purposes of the Michael Jackson case, it established an exclusion from the anti-SLAPP procedures for “claims concerning commercial speech,” which it defined as being “representations of fact about that person’s or a business competitor’s business operations goods or services” that is made “to promote commercial transactions” and where the intended audience is an actual or potential customer.

To get around the prohibition on the Court having to make a factual finding as to disputed evidence, the Defendants stipulated that for purposes of the anti-SLAPP motion, Michael Jackson was not the singer of the three disputed tracks.  In their appeal, the defendants disputed the trial court’s finding that the statements in the promotional video and album cover were commercial speech or that the representations in those materials “were likely to deceive a reasonable consumer.”  Given that the appeal concerned the ruling on anti-SLAPP motion, the appellate court was free to look at the evidence in support of and in opposition to the motion “de novo.”

The defendants first argued that the legislature intended to extend broad protection to “the marketing of musical works” when they enacted the 2003 limitations on the anti-SLAPP procedure.  The appellate court rejected this argument finding that it was a misreading of the legislature’s intent.  Arguably, under such a reading, a music publisher could market an album claiming that it contained track x when no such track was on the album.  The court concluded that this misstatement would clearly give rise to claims under the unfair competition and CLRA claim laws.

The court, however, rejected the claim by plaintiffs that the statements as to the identity of the lead singer on the disputed tracks was simply “claims about the contents of a commercial product that appellant’s offered for sale” and therefore, there was no anti-SLAPP protection.  The Court concluded that there was a significant body of law that held that “prominent entertainers and their accomplishments can be the subjects of public interest for purposes of the anti-SLAPP statute.”  Furthermore, the Court recognized that in connection with the promotion of the film, My Big Fat Greek Wedding, it had been held that “facts concerning the creation of works of art in entertainment can also be an issue of public interest for purposes of the anti-SLAPP statute.”

In the case before it, the Court concluded that there was significant interest in the release of the Michael album and whether or not Jackson had in fact snag the lead vocals on the three disputed tracks.  Thus, the Court concluded that the defendants were engaging in protected activity that satisfied the first prong of an anti-SLAPP analysis.

The Court then turned to the issue of whether the plaintiffs could prevail on their unfair competition and CLRA claims.  Because those claims only apply to commercial speech, the appellate court began by recognizing that commercial speech is subject to less First Amendment protection than other types of expression. Furthermore, the California Supreme Court had held that false or misleading commercial speech is not entitled to First Amendment protection and may be prohibited in its entirety.  In determining whether speech is commercial speech that could be limited, the California Supreme Court had ruled that trial courts should consider three elements: (1) the identity of the speaker; (2) the intended audience; and (3) the content of the message.

In the Michael case, the appellate court found that the first two factors clearly indicated that the statements were likely commercial speech in that the defendants were “engaged in commerce” in marketing the Michael album; and the intended audience for the statements were actual or potential buyers of it.  The court concluded, however, that the content of the message did not demonstrate that it was purely commercial speech.

First, the Court concluded that the defendants made the statements on the album cover and promotional video concerning an issue of public interest for which they had no “personal knowledge.”  Rather, given that the defendants were not present when the three disputed tacks were recorded, they did not personally know whether or not Michael Jackson had in fact sung these tracks.  Rather, they were forced to rely on expert opinion that the voice was indeed Michael’s, as well as the fact that the alleged unidentified singer who allegedly sung the tracks denied to them that he had sung them. The court concluded that the defendants’ statements on the album cover and promotional video that Michael Jackson was the singer was one more of opinion rather than fact given their lack of personal knowledge.

The Court found that any other conclusion would likely violate the First Amendment.  For instance, the defendants could have been required to put disclaimers on the album stating that the identity of the singer of the three tracks was disputed or just keep those tracks off the album in its entirety.  The Court found that the second option, the exclusion of the tracks could serve as a chill on defendants’ First Amendment rights and that requiring a disclaimer could be construed as compelled speech concerning an issue that the defendants personally disagreed with.

Finally, the Court reasoned that the music itself on the album was entitled to full protection under the First Amendment.  Given that the challenged statements raised by the plaintiff’s compliant related directly to this piece of art, those statements likely had independent significance under the First Amendment.  For example, the identity of the singer as being Michael Jackson was likely “an important component of understanding the art itself.”  While the Court was careful to caution that not all statements made in connection with the promotion of a work of art such as an album or film were entitled to such broad protection, given that the issue as to the identity of the singer on the three tracks was of significant public interest, the Court concluded that the defendants’ anti-SLAPP motion should have also been granted as to the album cover and promotional video claims.

The Serova case is a reminder to defendants to consider the importance of the anti-SLAPP procedures and whether they can be utilized in connection with the promotion or sale of good and services.  Given that attorney’s fees are also available to a prevailing defendant bringing a successful anti-SLAPP motion, there is significant upside to prevailing on such a motion early in a lawsuit.

 

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. 

In Galderma Laboratories, LP et al v. Amneal Pharmaceuticals LLC et al, 1-16-cv-00207 (DED August 31, 2018, Order) (Stark, USDJ), Judge Stark of the District of Delaware recently found that a plaintiff was collaterally estopped from pursuing claims for patent infringement of two drug patents under a doctrine of equivalents theory based on a finding of no literal infringement in a prior case even though a doctrine of equivalents theory was not asserted in that case.

This case was originally filed in March 2016 by Galderma against Amneal Pharmaceuticals under the HatchWaxman Act, 35 U.S.C. § 271(e).  Amneal sought to bring to market a generic version of Plaintiffs’ Oracea® Capsules, a once-daily 40 milligram (“mg”) administration of doxycycline for the treatment of the papules and pustules of acne rosacea.  Galderma alleged infringement of numerous patents, some of which are generally directed to lowdose doxycycline formulations for the treatment of the papules and pustules of acne rosacea.  In February 2018, the Court held a five-day bench trial, and issued a written order thereafter. 

One of the issues Judge Stark considered in the order is whether Galderma is collaterally estopped from asserting a group of patents referred to as the Ashley I patents.  Each of the asserted claims of the Ashley I patents requires administration of a “subantibacterial amount” of doxycycline or an amount that causes “substantially no antibiotic activity” (the “sub-antibiotic” limitations).   Amneal contended that Galderma was collaterally estopped from asserting the Ashley I patents based on a finding in a prior case (the “Mylan” case) that 40 mg doxycycline administered once-daily does not meet the “sub-antibacterial amount” limitation of the Ashley I patents. Galderma disagreed, arguing that the instant case does not present the “identical” issue as Mylan.  Galderma argued that the issue of doctrine of equivalents infringement was never litigated in Mylan and should be considered separate from literal infringement for purposes of collateral estoppel.

In considering the issue, the Court first noted a party asserting collateral estoppel must prove: (1) the previous determination was necessary to the decision, (2) the identical issue was previously litigated, (3) the issue was actually decided on the merits and the decision was final and valid, and (4) the party being precluded from re-litigating the issue was adequately represented in the previous action.  The Court then reasoned that three of the four elements are not in dispute in this case.  Galderma does not argue that the Court’s previous finding of non-infringement of the Ashley I patents was not necessary to the decision in Mylan, which Galderma concedes was final and valid.  Nor does Galderma argue that it was not adequately represented in Mylan, where it was represented by the same counsel as it is in this case.

Instead, the disagreement was over whether Galderma’s doctrine of equivalents infringement theory presented the “identical issue” that was previously litigated and decided on the merits in Mylan.  Judge Stark concluded that it does.  In Mylan, the Court decided that a 40 mg once-daily administration of doxycycline does significantly inhibit the growth of microorganisms and, therefore, fails to meet the subantibacterial limitation of the Ashley I patents.  Here, Amneal’s ANDA product undisputedly involves once-daily administration of 40 mg doxycycline.  Thus, “in order to prevail against Amneal on its claim for infringement of the Ashley patents, Galderma would have to prevail on the ‘identical issue’ it previously litigated – and lost – in the Mylan Action.”

Galderma’s argument in response was that, for purposes of collateral estoppel, the “issue” of doctrine of equivalents infringement, which Galderma did not raise at trial in Mylan, is a separate “issue” from literal infringement.  The Court disagreed.  Doctrine of equivalents infringement is one theory of infringement, the Court reasoned, not a distinct issue itself.

The Court analogized this reasoning with the view that invalidity, too, is a single issue for purposes of collateral estoppel, regardless of how many different theories are presented as a basis for invalidating a patent.  The Court further reasoned that having decided to pursue only one theory of infringement in Mylan, Galderma is bound by the consequences of that choice.  Namely, that collateral estoppel bars litigants from raising separate arguments in support of the same issue in a later case, where the other prerequisites for application of collateral estoppel are met.

The Court next found that the clarified construction in this case does not provide a basis for Galderma to avoid the estoppel effects of the finding of non-infringement of the Ashley I patents in Mylan.  The Court reasoned that collateral estoppel applies even if Galderma here presented new evidence that was not before the Court in Mylan.  The issue of infringement was decided in Mylan following a trial at which Galderma had a full and fair opportunity to present any evidence of infringement it wished.  Any new evidence Galderma offers now in support of its doctrine of equivalents infringement theory was neither controlling nor otherwise essential to the Court’s finding of noninfringement in Mylan.

The Court did note that it is mindful of Galderma’s warning that considering infringement to be a single issue will inevitably lead to the waste of judicial resources.  The Court’s ruling arguably incentivizes patentees to raise both literal and doctrine of equivalents infringement in all cases, so as to avoid losing on one and later being estopped from pressing the other.  However, the Court reasoned the approach Galderma urges risks incentivizing parties to withhold infringement theories in order to ensure a “second-bite at the infringement apple” in the event of a finding of non-infringement.  Galderma’s approach upends the finality of judgements that collateral estoppel aims to preserve and would require parties to relitigate infringement of the same products covered by the same patents when the issue of infringement has already been decided – a decidedly wasteful use of judicial resources.

Thus, the Court found Galderma is collaterally estopped from asserting infringement of the Ashley I patents, both literally and under the doctrine of equivalents.  This case is a strong reminder to not “withhold” any arguments, theories, or claims during litigation for fear that those arguments may later be considered waived or subject to a collateral estoppel claim.