The United States International Trade Commission (“ITC”) is a Federal agency that deals with matters involving trade.  Among its many responsibilities, the ITC investigates a variety of issues related to trade including investigating and adjudicating cases involving imported products that allegedly infringe intellectual property rights.  These infringement investigations, called Section 337 investigations, may include allegations that imported goods infringe patents or trademarks.  For example, the ITC may investigate allegations by a complainant (plaintiff) that certain imported goods infringe utility or design patents or infringe registered or common law trademarks.  “Other forms of unfair competition involving imported products, such as infringement of registered copyrights, mask works or boat hull designs, misappropriation of trade secrets or trade dress, passing off, and false advertising, may also be asserted.” See https://www.usitc.gov/intellectual_property.htm for more details.

The ITC offers certain advantages over Federal district courts for patent owners seeking to enforce their patents against alleged infringers.  For example, some would say the ITC is the ultimate rocket docket.  Most investigations are completed within 12 to 15 months of institution whereas district courts may take several years.  Scheduled to take effect for investigations instituted after June 7, 2018, new rules announced by the ITC are intended to further “increase the efficiency of its section 337 investigations and reduce the burdens and costs on the parties and the agency.”  These new rules are part of a process that began in 2015 with the proposal of amendments to the Commission’s Rules of Practice and Procedure.

The new rules will allow the ITC to institute multiple investigations based on one complaint and will allow Administrative Law Judges (“ALJs”) to use their discretion to sever an investigation into two or more investigations within 30 days of institution.  Severing large investigations will ensure they proceed to completion according the Section 337 timelines and help ALJs better manage their dockets.  ALJs may be more likely to sever cases with multiple parties and/or multiple patents.  For example, where one party is only involved in a subset of the issues, the ALJ may server the investigation for efficiency.

The new ITC rules also formalize procedures of a previous, rarely-used pilot program for resolution of potentially dispositive issues within the first 100 days of an investigation.  The following rules apply to such 100-day proceedings:

  • an ALJ may hold expedited hearings on designated issues;
  • an ALJ may stay discovery on the remaining issues pending resolution of the 100-day proceeding;
  • within 100 days of institution of the investigation, an ALJ’s initial determination in a 100-day proceeding is due;
  • absent review, the initial determination on these issues becomes final within 30 days; and
  • a petition to review an initial determination in a 100-day proceeding is due within five business days after service of the initial determination, and the time for filing a response to a petition for review is five business days.

Additional rule changes will impact other aspect of Section 337 investigations. Specifically, a party may now serve objections to a subpoena or move to quash, which is more consistent with the Federal Rules of Civil Procedure.  Drafts of expert reports will be privileged.  More documents will be able to be filed online and electronically served.  Further, the ITC’s notice of investigation “will define the scope of the investigation in plain language so as to make explicit” the products that are at issue.  In general, these new rules are likely to ensure the ITC continues to provide a forum for quickly resolving patent infringement disputes involving imported goods.

In addition to the advantages already discussed, the ITC offers patent owners several other benefits over district courts when enforcing patent rights.  For example, the ITC does not stay proceedings pending inter partes review (“IPR”) of the validity of an asserted patent at the United States Patent and Trademark Office whereas district courts often stay cases while IPRs are pending.  Stays further lengthen district court cases relative to ITC investigations.  In addition, the Supreme Court in TC Heartland v. Kraft Foods greatly limited the proper venues for patent cases, but there are no venue restrictions in Section 337 investigations.  Further, the remedy in a Section 337 investigation is an exclusion order that prevents the importation of infringing products into the United States.  In contrast, the Supreme Court’s decision in eBay v. MercExchange has made it difficult to get an injunction, which some would consider a similar remedy to an ITC exclusion order.  If these advantages were not enough, patent owners should also know that ITC success rates for patent owners have been steadily increasing over the last few years for cases decided on the merits.  In fact, some have reported the success rate for patent owners was just short of 90% in 2017.

Given the advantages of adjudicating patent infringement matters at the ITC, why not always use that forum instead of district courts?  The answer, in part, is that for an investigation to be launched at the ITC, the complainant must be able to allege more than just patent infringement.  The complainant must be able to allege a domestic industry exists or is being established and be able to allege infringement by the importation, sale for importation, or sale after importation of the accused products.  In district court, a plaintiff need not make these additional allegations.  Further, due to the speed at which ITC investigations proceed, the cost of litigation must be absorbed over a shorter time period and can be higher.

In sum, patent owners should consider whether the ITC is the appropriate forum for litigating their patent infringement claims given that 1) the new ITC rules for patent cases are likely to further boost the speed and efficiency of this rocket docket; 2) the remedy of prohibiting importation of infringing products can lead to early, favorable settlements; and 3) patent owners have an enviable record of success in cases decided on the merits at the ITC.

Currently, the standard for claim construction is different in AIA reviews before the United States Patent and Trademark Office’s (“USPTO”) Patent Trial and Appeal Board (“PTAB) than in proceedings in federal district courts and the International Trade Commission (“ITC”).  The USPTO construes claims to have their broadest reasonable interpretation (“BRI”) while district courts and the ITC apply the Phillips standard.

Under the BRI standard, a claim term is given its broadest reasonable construction “in light of the specification as it would be interpreted by one of ordinary skill in the art.”  Under the Phillips standard, a claim term is given the “ordinary and customary meaning” it would have to “a person of ordinary skill in the art … at the time of the invention.”  The Federal Circuit has explained that the “broadest reasonable interpretation of a claim term may be the same as or broader than the construction of a term under the Phillips standard.  But it cannot be narrower.”  Thus the Phillips standard is generally considered narrower than the BRI standard.

Currently, the USPTO applies the BRI standard during prosecution of patents, in ex parte reexaminations, and in AIA reviews including inter partes reviews (“IPR”), post grant reviews (“PGR”), or covered business method (“CBM”) proceedings before the PTAB involving unexpired patents.  The PTAB applies the Phillips standard when interpreting expired patent claims.  Further, either side in an AIA review may request application of the Phillips standard for patents that will expire within 18 months of the petition’s filing date.  In contrast, district courts and the ITC always apply the Phillips standard for claim construction.

Many patent owners feel that alleged infringers have an unfair advantage under the current system that applies different claim construction standards for the different forums.  An alleged infringer can argue for a narrow claim construction under Phillips in district court to avoid a finding of infringement and simultaneously argue for a broad construction under the BRI standard before the PTAB in an attempt to invalidate the asserted patent claims.  Therefore, patent owners have repeatedly argued the PTAB should use the same claim construction standard as district courts.

On May 9, 2018, the USPTO issued a notice of proposed rulemaking in which it proposed to adopt the narrower Phillips standard for construing unexpired patent claims and proposed amended patent claims in PTAB trials under the AIA.  The proposal also would amend the rules to add that the PTAB will consider prior claim constructions in civil actions and ITC proceedings that are made of record in a timely manner in IPRs, PGRs, or CBMs.

The USPTO stated “[t]he goal is to implement a fair and balanced approach, providing greater predictability and certainty in the patent system” and increased judicial efficiency.  The USPTO acknowledged that one of the primary concerns of patent owners is that under the PTAB’s current BRI standard, a patent claim could theoretically be found invalid in an IPR, PGR, or CBM review based on a claim interpretation that the patent owner would not be able to apply in asserting infringement in a district court case.  Therefore, the proposed rule change will also alleviate this concern by harmonizing the standards across forums.

Most patent owners will see this proposed rule change as a sign more patent claims will be upheld by the PTAB in AIA reviews conducted under the narrower claim construction standard.  In most cases, however, those patent owners will likely be disappointed.  While the difference in claim construction standards has critically impacted a few decisions, in most instances, the BRI standard and the Phillips standard lead to the same result.  There may also be a downside for patent owners who are anxious for patent infringement litigation to quickly move forward against alleged infringers.  Given the Supreme Court’s recent ruling in SAS Institute v. Iancu requiring the PTAB to review all claims challenged in a petition if review is instituted and the proposed harmonization of the claim construction standard between district courts and the PTAB, district courts will be even more likely to grant stays of infringement cases pending IPRs, PGRs, and CBMs.  In sum, while patent owners were hoping the change in claim construction standards would make it harder to invalidate patent claims, that may not be the result and instead district courts are likely to decide it is judicially more efficient to let the PTAB conclude its AIA reviews before proceeding with infringement actions.

If the USPTO’s proposed rule change is implemented, there will also be a stronger basis for reliance on claim construction rulings across the forums.  But will PTAB claim construction rulings be binding on district courts?  It has been noted that in B&B Hardware v. Hargis Industries, the Supreme Court held that decisions of the Trademark Trial and Appeal Board can be considered binding in subsequent matters before federal courts considering the same questions.  One could argue that claim construction rulings by the PTAB could be similarly binding in subsequent district court infringement cases.

The USPTO has indicated that, if adopted, the proposed rule changes will apply to all IPR, PGR, and CBM proceedings, including those pending at the time the rule change takes effect.  This proposed change will not apply to claims during prosecution at the USPTO.  Further, it does not appear the change will apply to ex parte reexaminations, which could make that option more intriguing for those instances where the BRI standard is more likely to lead to invalidating claims than the narrower Phillips standard.

The USPTO is accepting comments on the proposed rule change for 60 days from its date of publication.  Therefore, the proposed change could go into effect as early as summer of 2018.

The Ninth Circuit was recently faced with a novel issue: Does a crested macaque, or generally speaking, a monkey, have the right to sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement? Unless you’re familiar with this case, you’re probably wondering what occurred to give rise to Naruto, the monkey, bringing suit for copyright infringement. In fact, you probably have several other questions, such as how did Naruto obtain a copyright? Who infringed Naruto’s copyright? Who brought suit on Naruto’s behalf? And last, but not least, can Naruto sue someone for copyright infringement? Well, if you’re interested in at least one of these questions, you’re in the right place.

In 2011, a wildlife photographer named David Slater was visiting a reserve on the island of Sulawesi, Indonesia, where Naruto lived, and may still live. While visiting the site, Mr. Slater left his camera sitting unattended and Naruto simply could not help himself. Naruto ventured over to the camera and began taking various photographs, including multiple selfies, which have now become known as the “Monkey Selfies.” Slater and Wildlife Personalities, Ltd. subsequently published the Monkey Selfies in a book that Slater created through Blurb, Inc.’s website in December 2014. The book identifies Slater and Wildlife Personalities as the copyright owners, but admits several times throughout the text that Naruto took the photographs himself.

In response to the publication, in 2015, People for the Ethical Treatment of Animals (“PETA”) and Dr. Antje Engelhardt, an individual who studied the crested macaques in Sulawesi, Indonesia for over a decade, and who has been familiar with Naruto since his birth, brought suit on Naruto’s behalf. Specifically, the complaint alleged that because Naruto took the photographs, he is the owner of the photographs and the relevant copyrights, rendering the use by Slater and Wildlife Personalities infringement.

In response to the complaint, Slater, Wildlife, and Blurb moved to dismiss the lawsuit for lack of standing and for failure to state a claim. The district court granted the motions to dismiss, finding that the complaint did not state facts sufficient to establish statutory standing under the Copyright Act. In response, PETA and Dr. Engelhardt appealed on Naruto’s behalf.

On appeal, the Ninth Circuit first addressed whether PETA had standing to bring the claim on Naruto’s behalf as his “next friend.” In short, the Ninth Circuit found that PETA could not bring the claim on Naruto’s behalf for two reasons: (1) because PETA failed to allege facts to establish the required significant relationship between the “next friend” and the real party in interest and (2) because an animal cannot be represented, under U.S. law, by a “next friend.” Although Dr. Engelhardt had a significant relationship with Naruto, he withdrew from the case shortly after the appeal was filed. As for PETA, there were no allegations supporting a significant relationship, and in fact, the Court discussed at length how PETA had failed to live up to the title of “friend” as it abandoned the appeal before the hearing after it reached a settlement, which did not include Naruto as a party, that resulted in a payment to PETA, which led Judge Bea to contemplate if Naruto would have sued PETA for breach of a confidential relationship if he could recognize the abandonment.

In any event, the Court found that even if PETA had a significant relationship with Naruto, “next friend” standing has a narrow scope, which is no broader than what is permitted by statute. Unfortunately for animals, the statutes do not expressly authorize “next friend” standing on their behalf. Accordingly, the Ninth Circuit found that absent express authorization from Congress, there is no right of “next friends” to bring suit on behalf of animals.

But rather than ending its analysis there, the Court found that it must address the merits of Naruto’s case because lack of a “next friend” does not destroy his standing to sue, as having a “case or controversy” under Article III of the Constitution. Federal Rule of Civil Procedure 17 obligates the court to “consider whether [incompetent parties] are adequately protected,” even where they have no “next friend” or “guardian.” Accordingly, a “next friend” or a guardian is not necessary for an incompetent person to be protected. A court may find that the person’s interests would be adequately protected by the appointment of a lawyer. In fact, a prior action was brought by the “Cetacean Community,” through a self-appointed lawyer, against the United States Navy for its use of sonar systems without any purported “next friend.”

Addressing the Article III standing issue, the Court found that because the complaint alleges that Naruto is the author and owner of the Monkey Selfies, and that he suffered concrete and particularized economic harms as a result of the infringing conduct by the Appellees, Naruto had Article III standing to bring his claim.

Next, the Court addressed whether Naruto has statutory standing under the Copyright Act to sue for infringement. Following the Cetacean Court, the Court held that the rule is simple: “if an Act of Congress plainly states that animals have statutory standing, then animals have statutory standing. If the statute does not so plainly state, then animals do not have statutory standing.” Accordingly, because the Copyright Act does not expressly authorize animals to file copyright infringement suits, the Court held Naruto lacks statutory standing to sue under the Copyright Act. As a result, the Ninth Circuit affirmed the decision of the district court.

Unless you have been living under a rock (and not a rock on Tatooine), then you have heard of a little film called Star Wars, things called lightsabers, the Millennium Falcon, and even droids. But do you know how to play Sabbac?

 

For those of you who are not Star Wars aficionados, Sabacc is a card game rooted in unexplored mythology of Star Wars.   Sabacc was first referenced in a draft screenplay for the 1980 motion picture Star Wars V: The Empire Strikes Back, and later in a volume from the trilogy of novels about Lando Calrissian, published in 1983.  This 1983 reference explained the rules of Sabacc, a betting game, in which the goal is to finish with a hand as close as possible to positive or negative 23 without going over. 

 

What else is Sabacc?  It’s the axis of a lawsuit between Lucasfilm and UK gamemaker, Ren Ventures. Why?  It may have something to do with Han Solo.  See,  he won the Millennium Falcon from Lando Calrissian in a game of Sabacc and Lucasfilm will soon be releasing the next film in the Star Wars anthology called Solo which is about a young Han Solo.

 

Ren Ventures – The Phantom Menace or Opportunistic Gamemaker?

 

In 2015, Ren Ventures created a mobile game titled “Sabacc – The High Stakes Card Game”.  The game follows the rules as described in the 1983 Lando Calrissian novel and, during game play,  makes a handful of Star Wars references, including: (a) “From a Cantina far, far away to your mobile device, welcome to the world’s largest Sabacc site.”; (b) “[B]ecome a Cloud City legend!”; (c) “Go bust? Don’t worry, we won’t take your ship!”  The game also includes elements of various space figures that, one could argue, are stylistically similar to certain characters appearing in one or more Star Wars properties.

 

On August 23, 2016,  Ren Ventures secured a federal registration for the mark SABACC covering, primarily, on line computer games.  Its application claimed a November 20, 2015 priority date.  In May, 2017 Lucasfilm filed a petition with the Trademark Trial and Appeals Board to cancel the SABACC registration.  Ren Ventures answered the petition and then filed a motion for summary judgment.  Less than 20 days later, Lucasfilm suspended the cancellation at the TTAB and sued Ren Ventures for copyright and trademark infringement.

 

In its complaint, Lucasfilm argued that it used  SABACC as the name of an element of Star Wars entertainment products and that “dozens of Star Wars products created or licensed by [Lucasfilm] have used [SABACC]” including “card games, mobile games, video games, magazines, comic books, novels, television episodes, a live theme park experience, and a major motion picture.”  Lucasfilm argued that the timing of Ren Ventures’ use of SABACC reflects its intent to infringe.  Prior to Ren Ventures claimed first use, Lucasfilm had publicly announced the development of a motion picture focused on Han Solo as a young man and that any Star Wars fan would expect Solo’s acquisition of the Millennium Falcon from Lando Calrissian to be part of this picture.

 

In February, Ren Ventures filed a motion to dismiss Lucasfilm’s trademark infringement claim.  Ren Ventures argued that Lucasfilm had no protectable common law trademark rights in SABACC because Lucasfilm failed to use SABACC in a trademark manner.  Ren Ventures argued that; Lucasfilm can not claim trademark rights to goods or services that are only featured in a work of fiction.  Ren Ventures argued that it has superior trademark rights due to its use and registration of SABACC.

 

Since Lucasfilm had not registered SABACC as a trademark, the question before the district court on Ren Ventures’ motion to dismiss was whether Lucasfilm had common law trademark rights in SABACC.  While Ren Ventures argued that it didn’t because Lucasfilm failed to use SABACC in a trademark manner – use on or in connection with goods or services.  Lucasfilm argued that Sabacc’s role as an element of the star Wars universe is sufficient to establish trademark rights with regard to the Star Wars franchise itself.   Does its use of SABACC as a fictional card game in movies and books create protectable trademark rights? To be certain, Lucasfilm appears to have distributed a Sabacc card game in 1989, but that game appears to have been short lived (like the planet Alderaan).

 

In the end, Ren Ventures’ claim that the lack of traditional trademark use by Lucasfilm means it has no trademark rights was not enough to escape the complaint’s forcefield.  In ruling on the motion to dismiss, the court noted that fictional elements of expressive works (like a movie) can function as trademarks because those elements can symbolize the creator of the expressive work (i.e., the movie maker) or its products to the general public.  The court noted that  trademark protection had been extended to the “General Lee” car from the TV series, “The Dukes of Hazzard,” to the fictional restaurant “The Krusty Krab” from the SpongBob SquarePants animated series, to the fictional element “Kryptionite” from the Superman comics, and to the physical appearance of the E.T. character from the movie of the same name.

 

The Southern District of New York, in granting trademark protection to Kryptonite, summed up the policy reason why trademark protection may be granted to a fictional element fo an entertainment property, not yet used in a traditional trademark manner:

 

[W]here the  the product sold by plaintiff is “entertainment” in one form or another, then not only the advertising of the product but also an ingredient of the product itself can amount to a trademark protectable under § 43(a) because the ingredient can come to symbolize the plaintiff or its product in the public mind

 

DC Comics, Inc. v. Filmation Assocs., 486 F. Supp. 1273, 1277 (S.D.N.Y. 1980).

 

Although the Court elected to allow Lucasfilm’s trademark claims to go forward, it will be interesting to see how the court will rule at the summary judgment phase (if this case gets that far) when it is able to consider evidence.  Without question, SABACC is not is not as well known as the General Lee or Kryptonite and, who knows if consumers encountering Ren Venture’s online video game would believe that Lucasfilm is the source of or the sponsor or endorser said game.  All that may change after Solo premiers at the Cannes Film Festival on May 15, 2018.

In a 7-2 opinion, the U.S. Supreme Court ruled in OIL STATES ENERGY SERVICES, LLC v. GREENE’S ENERGY GROUP, LLC that inter partes review does not violate Article III or the Seventh Amendment of the Constitution.  Thus, the Supreme Court rejected an argument that only federal courts, and not executive branch tribunals or administrative courts like the Patent Trial and Appeal Board (“PTAB”), can invalidate patent claims once issued by the US Patent and Trademark Office (“USPTO”).  In so doing, the Supreme Court left intact a system created by Congress in 2011 that has been used by potential patent infringers to challenge and invalidate thousands of patents.

Inter partes review allows private parties to challenge previously issued patent claims in an adversarial process before the PTAB, which is the trial arm of the USPTO.  A party that wishes to challenge one or more issued patent claims must file a petition to institute review that identifies the challenged claims and the grounds for challenge with particularity.  The patent owner, in turn, may file a response.  If the USPTO determines “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition” a review is instituted in front of the PTAB.  At the end of the review process, which operates similarly to a litigation proceeding in a court, the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

In the underlying proceedings in this matter, a PTAB inter partes review and a District Court litigation were running in parallel.  The PTAB issued a final written decision concluding that the challenged claims were unpatentable even after the District Court had issued a claim-construction ruling that construed the challenged claims in a way that foreclosed some of the arguments about the prior art.  The PTAB acknowledged the District Court’s contrary decision, but nonetheless concluded that the claims were anticipated by the prior art.  On appeal, the patent owner challenged the constitutionality of inter partes review.  Specifically, it argued that actions to revoke a patent must be tried in an Article III court before a jury.  After the Federal Circuit summarily affirmed the PTAB’s decision, the Supreme Court granted certiorari to determine whether inter partes review violates Article III or the Seventh Amendment.

First, the Supreme Court reasoned that inter partes review falls squarely within the public rights doctrine.  The Court continued that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise.  Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the USPTO’s authority to conduct that reconsideration.  Thus, the USPTO can do so without violating Article III.  Additionally, granting patents is one of “the constitutional functions” that can be carried out by “the executive or legislative departments” without “judicial determination.”  Accordingly, the determination to grant a patent is a “matte[r] involving public rights.”  It need not be adjudicated in Article III court.

The Court further reasoned that inter partes review involves the same basic matter as the grant of a patent.  So it, too, falls on the public-rights side of the line.  The primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued.  But, the Court held, that distinction does not make a difference. Patent claims are granted subject to the qualification that the USPTO has “the authority to reexamine—and perhaps cancel—a patent claim” in an inter partes review.  Patents thus remain subject to the USPTO’s authority to cancel outside of an Article III court.

Next, the Court considered the patent owner’s argument that prior holdings recognize patent rights as the “private property of the patentee.”  In rejecting this argument, the Court reasoned that patents convey only a specific form of property right—a public franchise.  And patents are “entitled to protection as any other property, consisting of a franchise.”  As a public franchise, a patent can confer only the rights that “the statute prescribes.”  Thus, the patentee’s rights are “derived altogether” from statutes, and “are to be regulated and measured by these laws, and cannot go beyond them.”  One such regulation, the Court held, is inter partes review.  The Court also distinguished decisions from the 1800’s that held the patent office has no authority to revoke patents, reasoning this was before Congress enacted inter partes review.  It further pointed out that the Patent Clause in our Constitution “was written against the backdrop” of the English system. Therefore, based on the practice of the Privy Council in existence at that time, it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council.

The patent owner also argued that inter partes review violates Article III because it shares “every salient characteristic associated with the exercise of the judicial power.”  But the Court quickly rejected that argument, holding it has never adopted a “looks like” test to determine if adjudication has improperly occurred outside of an Article III court.  The fact that an agency uses court-like procedures does not necessarily mean it is exercising the judicial power.

Lastly, the Court quickly rejected the challenge to inter partes review under the Seventh Amendment.  The Seventh Amendment preserves the “right of trial by jury” in “suits at common law, where the value in controversy shall exceed twenty dollars.”  However, the Courted noted its precedent establishes that, when Congress properly assigns a matter to adjudication in a non-Article III tribunal, “the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.” Thus, the Court held, because inter partes review is a matter that Congress can properly assign to the USPTO, a jury is not necessary in these proceedings.

In conclusion, the Court emphasized that its holding is limited to the constitutional challenges raised in the case.  In fact, the Court held in a separate opinion issued on the same day that the PTAB must decide the validity of every challenged patent claim when it agrees to institute an AIA review.  Previously, the PTAB could review some challenged claims and deny review of others.  However, the Court found that PTAB should not be able to select a subset of challenged claims to rule on; the PTAB’s final decisions must address all of the claims in a petition.  The Court reasoned “everything in the statute before us confirms that SAS is entitled to a final written decision addressing all of the claims it has challenged and nothing suggests we lack the power to say so,….whatever its virtues or vices, Congress’s prescribed policy here is clear: the petitioner in an inter partes review is entitled to a decision on all the claims it has challenged.”

In short, although AIA reviews are here to stay for the time being as the US Supreme Court has upheld their constitutionality, their exact nature is still in flux.