*This line is the title of a song written by Peter Allen and Carole Bayer Sager that was performed in Bob Fosse’s movie “All that Jazz.”  The song was a hit, and the phrase has a lot of relevance to everyday life, but the Federal Circuit isn’t buying it.Audrey-Millemann-03_web

In RecogniCorp, LLC v. Nintendo Co. (Fed. Cir. 2017) 2017 U.S. App. LEXIS 7528, the Federal Circuit struck down a patent on the grounds that the invention was not new – it had been done before – way before– in 1775 by Paul Revere.

RecogniCorp’s patent covered a method and apparatus for encoding and decoding image data.  The invention was intended to solve problems that arise in the digital transmission of images, including decreased image quality as the images are compressed and transmitted.

RecogniCorp sued Nintendo for patent infringement.  The case was transferred to the Western District of Washington and stayed pending reexamination by the Patent and Trademark Office.  After the reexamination concluded, the district court lifted the stay.  Nintendo then moved for judgment on the pleadings, arguing that the patent’s claims were directed to ineligible subject matter under 35 U.S.C. §101.  Under that statute and case law, just about every type of invention can be patented, except for those that relate to laws of nature, natural phenomena, and abstract ideas.  Nintendo argued that RecogniCorp’s invention was an abstract idea, and therefore unpatentable.

The district court granted Nintendo’s motion, finding the claims to be directed to ineligible subject matter as an abstract idea.

On appeal, the Federal Circuit affirmed the district court’s decision.  The court applied the Supreme Court’s two-part test set forth in Alice Corp. v. CLS Bank International, 134 S.Ct. 2347 (2014) for determining whether a claimed invention is patent-eligible.  In applying the first step of the Alice test, the court determined that RecogniCorp’s claims were directed to an abstract idea.  The method of encoding and decoding images was a standard method, which the Court said had been used before, in Morse code, in ordering fast food at restaurants using a number system, and in Paul Revere’s famous phase “one if by sea, two if by land.”  The methods of RecogniCorp’s invention rely on encoding something at one end and decoding it at the other end, which is a concept or idea that has been used in many different situations.

Next, the Court applied Alice’s second step to decide whether there was an inventive concept that transformed the claim into a patent-eligible application.  The court said that nothing in RecogniCorp’s claims transformed the abstract idea into subject matter that was patent-eligible.  Because the claims failed both prongs of the Alice test, the court held that the claims were not patentable subject matter.

As most people know, Paul Revere was a Patriot during the American Revolution who is best known for warning the colonial militias that the British were getting ready to attack, before the battles at Lexington and Concord.  He helped create an intelligence and watch operation by the colonists over the British.  On April 18, 1775, Paul Revere was told that the British were leaving Boston for Cambridge by boat, heading on to Lexington and Concord, to seize the Patriots’ weapons at Concord and to capture their leaders Samuel Adams and John Hancock.  Revere had previously told the church’s sexton to alert the colonists to the British by signal using the lanterns in the church’s steeple:  “one if by land, two if by sea.”  On that night, Revere told the sexton to light two lanterns in the steeple.  Revere then quietly rowed a boat past a British warship to get to Charleston, and then rode by horseback into Lexington, spreading the warning as he went.  More riders joined him in the night, riding out through the countryside in a system the colonists called “alarm and muster.”  Revere was captured by the British (but later released, although they kept his horse).

Paul Revere helped stop the British in 1775, and, 242 years later, helped stop RecogniCorp’s patent.

For more information about Audrey, her practice, or the firm, please visit our website here: http://www.weintraub.com.

In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., the United States Court of Appeals for the Federal Circuit recently ruled that the America Invents Act’s (“AIA”) did not change the meaning of the on-sale bar provision in 35 U.S.C. § 102.   The on-sale bar provision holds that sales of an invention one year prior to the patent filing are prior art even if the sale is made by the patent owner and does not publically disclose the invention.  Under Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998), application of the on-sale bar requires satisfaction of a two-prong test that: (1) “the product must be the subject of a commercial offer for sale” and (2) “the invention must be ready for patenting.”eric_caliguiri_web

In the case, Helsinn Healthcare S.A. (“Helsinn”) brought suit against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries, Ltd. (collectively, “Teva”) alleging that the filing of Teva’s Abbreviated New Drug Application (“ANDA”) constituted an infringement of various claims of four patents directed to reducing the likelihood of CINV. CINV is a serious side effect of chemotherapy treatment.  In defense, Teva argued the asserted claims were invalid under the on-sale bar provision of 35 U.S.C. § 102.

In addressing the on-sale issue, the district court applied the two-step framework of Pfaff and found that the patents-in-suit were valid.  With respect to three of the patents, all subject to pre-AIA § 102, the district court concluded that there was a commercial offer for sale before the critical date, but that the invention was not yet ready for patenting.  With respect to the fourth patent, which is governed by the AIA version of § 102, the district court concluded that there was no commercial offer for sale because the AIA changed the relevant on-sale bar standard, and the invention was not ready for patenting.

In coming to the conclusion that the AIA changed the on-sale bar standard, the district court reasoned that before the AIA, the on-sale bar provision of § 102 stated that a person was entitled to a patent unless the invention was patented or “in public use or on sale in this country, more than one year prior to the date of application.”  Thus, courts held that even confidential sales could potentially trigger the on-sale bar under that provision.  Congress amended the on-sale bar in the AIA, which applies to patents filed after March 2013.  The new § 102 states patents are allowed unless the claimed invention was patented or “in public use, on sale, or otherwise available to the public” before a patent is filed.

The district court thus reasoned that the “otherwise available to the public” phrase means that only public sales trigger the AIA’s version of the on-sale bar, unlike prior to the AIA when private sales could satisfy the on-sale bar. Thus, in effect, the district court held that the AIA changed the meaning of the on-sale bar and § 102 now “requires a public sale or offer for sale of the claimed invention.”  The district court concluded that, to be “public” under the AIA, a sale must publicly disclose the details of the invention.

The Federal Circuit reversed the district court and held the asserted claims of the patents-in-suit were subject to an invalidating contract for sale prior to the critical date, and the AIA did not change the statutory meaning of “on sale” in the circumstances involved. The Federal Circuit also found the asserted claims were ready for patenting prior to the critical date.

In first addressing the on-sale bar and whether the AIA requires that the details of the claimed invention to be publicly disclosed before the on-sale bar is triggered, the Federal Circuit held “requiring such disclosure as a condition of the on-sale bar would work a foundational change in the theory of the statutory on-sale bar.”  The Federal Circuit reasoned a primary rationale of the on-sale bar is that publicly offering a product for sale that embodies the claimed invention places it in the public domain, regardless of when or whether actual delivery occurs.  The patented product need not be on-hand or even delivered prior to the critical date to trigger the on-sale bar.

The Federal Circuit further explained that “prior cases have applied the on-sale bar when there is no delivery, when delivery is set after the critical date, or, even when, upon delivery, members of the public could not ascertain the claimed invention.”  The Federal Circuit found no indication Congress intended to overrule these cases. Instead, the Federal Circuit reasoned Congress, in stating that the invention must be available to the public, “meant that the public sale itself would put the patented product in the hands of the public.”  Thus, the Federal Circuit concluded that, after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed in the terms of sale.

The Federal Circuit also addressed whether the invention was ready for patenting as of the critical date.  Under Pfaff, there are at least two ways in which an invention can be shown to be ready for patenting: “by proof of reduction to practice before the critical date; or by proof that prior to the critical date the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention.”   The Federal Circuit found the patented invention was ready for patenting because it was reduced to practice before the critical date.  Thus, the Federal Circuit also reversed the district court on this point, and invalidated the asserted claims of all four patents.

Whenever there is a report of a YouTube creator being sued for copyright infringement, the response from the creator and the community seems to be one of shock and surprise.  The truth is, successful YouTube content creators should not be surprised when they get sued for copyright infringement.  Any person or company that creates content professionally, whether that’s a television network, a motion picture studio or a YouTuber, is a likely target for a copyright lawsuit.  When I began representing Anthony Padilla and Ian Hecox of Smosh over 10 years ago, only a few people were making digital video content, even fewer understood what YouTube was, and the amount and types of revenue opportunities was nowhere near what it is today.  But today, there are so very many successful YouTube content creators with millions and millions of subscribers and the amount of money flowing through the digital first content genera is significant.   Like it or not, popular YouTube creators are just as much a target for infringement claims as a television network or movie studio.  If a creator is surprised or caught off guard when they receive a claim of infringement, it means they were not adequately advised and prepared for this eventuality.

The truth is that, for the most part, anyone can sue anyone.  As one of my first year law school professors explained, one of the basic elements of the American system of jurisprudence is the concept of the “American Rule” in which each party pays their own attorneys’ fees as opposed to the “English Rule” whereby the loser pays the winner’s attorneys’ fees.  While the American rule does enable the bringing of questionable claims, the founders of our judicial system believed that this risk was outweighed by making the courts available to all without the fear of financial ruin.Scott-Hervey-10-web

Another truth about the American civil judicial system is that lawyers are expensive.  While there are vastly different rates that certain lawyers may charge, good lawyers are expensive.  And since most lawyers charge by the hour, this makes lawsuits a costly endeavor.

So with the reality that content creators are a likely target for lawsuits, that it’s relatively easy to bring a lawsuit and that lawyers (and thus lawsuits) are expensive, what is a content creator to do?  Doing nothing to prepare for the eventual lawsuit is not it.  Content creators should take the risk of lawsuits into account when doing business and take steps to hedge against that potentiality.   Like all other media businesses, creators should consider making the following part of their general business practices.  The following isn’t exclusive, but it’s a good place to start.

The first step any content creator should take is to “clear” the rights to any other person appearing on camera and any third-party music, pictures, videos or other content.  This sounds more complicated that it is.  Clearing rights is accomplished by using a written agreement to secure whatever rights are necessary that will allow you to feature that person, music or clip in your video.  If you have people other than yourself appearing in your video, they should sign what’s known as an appearance release.  Similarly, if you use third-party music or other content, there are specific documents that are appropriate for those situations as well.

Granted there are certain times when a content creator can’t obtain permission to include third‑party content in a video.  In those situations, a creator may still be able to use the content if the use satisfies the judicial test established for fair use.  I strongly suggest that all creators have a working knowledge of fair use.  (A good place to start is the fair use presentation Rian Bosak and I give each year at VidCon.)  However, unless a creator is absolutely certain that what he/she is doing qualifies as fair use, it may be best to consult an expert.  When I was the attorney for YouTube Nation, fair use review took up a fair amount of my time.  Fair use is a complicated legal theory that is constantly in flux; even our federal courts sometimes can’t agree on what is and what is not fair use.

Any content creator that includes third-party music, third-party pictures or videos or third-party brands in their video or that reviews products or services should consider the benefits of a media liability insurance policy.  This is a type of Errors and Omissions (E&O) insurance policy and generally covers against copyright and trademark infringement claims, privacy claims, defamation claims and others.  The coverage provided by such a policy not only includes the damage award resulting from a covered claim, but also includes the cost to defend against such a claim.  And while it is true that a media liability policy may be expensive, the cost to pay lawyers to defend against a claim is way more expensive.

In addition, YouTubers should consider adopting some of the methods television networks and film studios use in their production of content.  I am not necessarily saying that creators would need to employ a full-blown production team, but implementing some of their practices could lessen the risks inherent with the production and distribution of content.  Making use of some standard production forms and having a relationship with a lawyer who is extremely familiar with copyright, fair use and production issues will go a long way towards preventing claims.

The high odds of being on the receiving end of a cease and desist letter or a complaint (which are much worse than a strike or a takedown) is the cost of success as a creator.  The smart bet is to prepare in advance so you are not caught off guard and doesn’t put your financial wellbeing in jeopardy.

*Scott Hervey represents top content creators, studios and production companies in a wide variety of matters including financing, acquisitions, production, clearance and general business matters. Scott’s clients include STX, DreamWorks/YouTube Nation, Pharrell Williams’ I am Other channel, Smosh, Sawyer Hartman and Nerdwriter. Scott previously served as the acting business affairs director for the publicly traded digital content company, Digital Music Group, Inc. (now The Orchard). Scott was featured in Variety’s Legal Impact Report and is a Super Lawyer®. Scott is a professor of entertainment law at King Hall law school, U.C, Davis and he serves on the board of directors of the Hollywood Radio and Television Society (HRTS).

When a winery wants to tell consumers the geographic source of its wine, it includes on the label the wine’s “appellation of origin.”  An appellation of origin tells the consumer where the wine grapes were grown.  Appellations are either the name of a county or state, or a federally-recognized growing region called American Viticultural Areas (AVAs).  California has 138 AVAs.  The value of an AVA designation is significant; it increases the amount a winemaker can charge for the wine.  Consumers will pay much more for a Napa Valley Cabernet than a California Cabernet.Scott Hervey 10 final

The drafters of The Adult Use of Marijuana Act (the “Act”) borrowed this concept from the wine industry playbook.  The Act added California Business and Professions Code section 26063 which states:

(a) The Bureau [of Marijuana Control] shall establish standards for recognition of a particular appellation of origin applicable to marijuana grown or cultivated in a certain geographical area in California.

(b) Marijuana shall not be marketed, labeled, or sold as grown in a California county when the marijuana was not grown in that county.

(c) The name of a California county shall not be used in the labeling, marketing, or packaging of marijuana products unless the marijuana contained in the product was grown in that county.

On April 5, 2017 Governor Jerry Brown issued a number of proposed changes to the Act including proposing that the California Department of Food and Agriculture take responsibility for establishing marijuana appellations of origin by January 2020.

It is reasonable to presume that the Department of Food and Agriculture will enact regulations that mimic the Federal wine labeling regulations established by the Alcohol Tobacco and Tax Trade Bureau and the regulatory scheme currently in place for California’s wine industry.  If this were to be the case, it would be safe to assume that California law will require that marijuana or any marijuana product listing an appellation of origin must be 100% from California, and that 85% must be from the county in California or other appellation listed.  It is also safe to assume that the Department of Food and Agriculture will begin working with growers and growing groups to establish the growing regions similar to AVAs.

Certain growers have already recognized the value of establishing unique appellations.  For example, the Mendocino Appellations Project is seeking to establish ten appellations within Mendocino County:  Spyrock-Bell Springs, Covelo-Dos Rios, Long Valley-Branscomb-Leggett, Willits, Comptche, Ukiah Valley, North Mendocino Coast, South Mendocino Coast-Greenwood Ridge, Anderson Valley-South Mendocino, and Potter Valley.  Justin Calvino from the Mendocino Appellations Project believes that Mendocino could become the Napa of cannabis.  What area will be the Sonoma of cannabis?

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The Patent Trial and Appeal Board (“PTAB”) has rarely allowed patent owners to replace or modify claims during inter partes review (“IPR”), covered business method review, or post-grant review.  In fact, in April 2016 the PTAB’s Motion to Amend Study reported that only 6 of 118, or about 5%, of such motions to amend claims had been granted.  We have not seen a substantial change since that report, but will that statistic be changing in light of recent events?  In particular, the PTAB just granted Shire’s motion to amend, and the Federal Circuit is considering en banc whether to shift the burden of proving patentability away from the patent owner, which could make it easier to amend claims.

In Amerigen Pharmaceuticals Ltd. v. Shire LLC, the PTAB instituted review of claims 18-21, 23 and 25 of Shire’s patent for the attention deficit and hyperactivity disorder medication known as Adderall XR.  In lieu of responding to the invalidity arguments, Shire filed a motion to amend that consisted of a request to cancel all of the claims under review and substitute a single, “new” claim in their place.  The PTAB granted Shire’s motion.

Does the Shire decision open the door for other patent owners hoping to amend claims during IPRs?  To answer that question, we need to look more closely at the facts in Shire.  Specifically, Shire requested cancellation of instituted claims 18-21 and 23, as well as non-instituted claims 22 and 24.  Shire also requested substitution of new claim 26 for instituted claim 25, which is a multiple dependent claim that recites:

  1. The pharmaceutical composition of any one of claims 2, 13 or 18 to 20 wherein the pharmaceutically active amphetamine salt in (a) and (b) comprises mixed amphetamine salts.

Proposed new claim 26 recites:

  1. The pharmaceutical composition of any one of claims 2 or 13 wherein the pharmaceutically active amphetamine salt in (a) and (b) comprises mixed amphetamine salts.

The PTAB’s ultimate decision relied on the fact that for these purposes a multiple dependent claim is treated in the same manner as if it were written as separate dependent claims.  In the case of claim 25, it is treated as if it had been written as five separate dependent claims with a separate claim depending from each of claims 2, 13, 18, 19, and 20.  Similarly, claim 26 is treated as two separate dependent claims with one depending from claim 2 and one from claim 13.   Effectively, claim 26 deletes three “claims” from claim 25, those that depended from claims 18-20, which were all claims under review by the PTAB.  Given that claims 2 and 13 were not under review, new claim 26 would not involve any claim under review.  Thus, Shire’s motion to replace claim 25 with claim 26 and cancel the other claims would leave no instituted claim under review by the PTAB.

Petitioner Amerigen opposed Shire’s motion to amend arguing that according to Idle Free Sys. v. Berstrom, Inc., a patent owner seeking to amend a claim has the burden “to show a patentable distinction over the prior art of record and also prior art known to the patent owner.”  The PTAB, however, explained that in Shire’s request “[e]ffectively, no claim is being amended, and claims are only being cancelled, because claims 18-24 are being removed, and proposed claim 26 removes three multiple dependent claims (claim 25 as it depends from claims 18-20)” and “[n]o other changes to the claims are being made.”  Therefore, the PTAB “agree[d] with Patent owner that ‘[t]here is no requirement for Shire to prove, after the Institution Decision, that original non-amended claims are patentable over all potential prior art, especially non-instituted claims.’”

While motions to substitute amended claims are rarely granted, motions to cancel claims are routinely granted.  Therefore, once the PTAB decided that Shire’s motion was merely canceling claims, the outcome was very predictable.  In other words, nothing really changed as a result of the Shire decision.

But, in In re Aqua, will the Federal Circuit turn the tide for amending claims?  Currently, a patent owner is allowed to file one motion to amend to (A) “cancel any challenged patent claim” and (B) “propose a reasonable number of substitute claims” that do not “enlarge the scope of the claims of the patent or introduce new matter.”  The patent owner has the burden of showing that the amended claims are patentable over the known prior art.  Then the petitioner may oppose the motion to amend and raise new arguments of unpatentability, cite new prior art against the proposed new claims, and file new expert declarations.  But in In re Aqua the Federal Circuit is currently considering en banc whether it is proper for the PTAB to put the burden on the patent owner to prove that the proposed substitute claims are patentable or whether the burden to show unpatentability should be shifted to the petitioner.

Under the current requirements, a patent owner must distinguish the proposed substitute claims over the material art in the prosecution history, the material art in the current proceeding, any material art in any other proceeding before the USPTO involving the patent, and any material art not of record but known to the patent owner.  In Shinn Fu v. The Tire Hanger, the PTAB found that, in instances where art is duplicative, a patent owner is not required to address each piece of art individually.  Instead, as long as the patent owner groups prior art references according to claim features and examines a representative reference from each group, the patent owner can satisfy its burden for purposes of a motion to amend.

As evidenced by the difficulty of succeeding on a motion to amend, the patent owner has a heavy burden.  Further, placing this burden on the patent owner differs from the traditional approach used during initial prosecution of a patent.  During prosecution, a patentee merely needs to respond to unpatentability positions offered by the examiner rather than affirmatively distinguishing the proposed claims from all known prior art.  If the Federal Circuit adopts a prosecution-like approach in In re Aqua, then the patent owner would likely still need to show the proposed new claims respond to a ground of patentability involved in the PTAB trial, do not broaden claim scope, and have written description support and do not introduce new matter.  The patent owner will also need to provide claim constructions for any new claim terms and show that the number of proposed substitute claims is reasonable. The petitioner, however, would then bear the burden of showing unpatentability.  In response, the patent owner would be given the opportunity to rebut the petitioner’s unpatentability arguments.

Shifting the burden to petitioners to show unpatentability could have a number of consequences.  For example, it may be easier to amend claims because it likely will be easier for a patent owner to rebut a petitioner’s specific unpatentability arguments for the substitute claims than to affirmatively show patentability.  Thus patent owners may be more likely to file motions to amend.  Further, if patent owners are more likely to succeed in amending claims, some petitioners may opt against an IPR petition and instead challenge validity in district court where amendment is not possible.

Even if amendments become easier to obtain, the patent owner will still need to consider the impact of amending claims on litigation strategy, particularly in ongoing litigation.  Amended claims give rise to intervening rights, which may relieve infringers of cancelled claims from liability during the period before the amended claims issue.  Further, amendments and arguments made to the PTAB may impact infringement and validity arguments in the district court proceeding.  Therefore, a successful claim amendment may dramatically impact infringement, validity, and damages arguments in co-pending district court litigation.

The Federal Circuit heard oral argument in In re Aqua on Friday, December 9, 2016.   Therefore, we will know soon whether there will be a shift that may favor patent owner amendments or whether amendments are destined to remain a rarity, at least for now.