The Communications Decency Act (“CDA”) provides broad immunity for “providers of interactive computer services.” In essence, if an internet service provider falls within certain parameters, it is entitled to immunity against certain claims of liability brought under state law. Last month, the Ninth Circuit again considered the breadth of such immunity in the case, Kimzey v. Yelp!.

As many readers may know, Yelp is a website that allows customers to “rate” their experience with a particular store, restaurant or service provider. The reviewing customer can also leave a detailed review in connection with their 1-5 star rating. Yelp then aggregates all customer reviews into a single rating and this information may be found not only on Yelp’s website, but also on other James Kachmar 08_websearch engine websites like Google.

The plaintiff, Douglas Kimzey, operated a locksmith shop in the Washington area. The Ninth Circuit’s opinion relates that he was subject to a one-star review by a purported customer, “Sarah K,” whose review began, “THIS WAS BY FAR THE WORST EXPERIENCE I HAVE EVER ENCOUNTERED WITH A LOCKSMITH.” It did not get much better from there.

Rather than suing the customer for posting the offending review, Kimzey sued Yelp instead. In an attempt to get around the immunity provisions set forth in the CDA, Kimzey alleged two novel theories: (1) that Yelp, by creating its review and star-rating system in effect “created the content” to subject it to liability; and (2) by allegedly “republishing” the negative review through advertisements and/or search engines, Yelp was liable as the publisher of the negative review. The District Court granted Yelp’s motion to dismiss on the ground that it was immune from such liability under the CDA.

The Ninth Circuit began by reviewing the immunity provision in the CDA, Section 230(c)(1), which provides protection from liability only to “(1) a provider or user of an interactive computer service; (2) whom a plaintiff seeks to treat under a state law cause of action as a publisher or speaker; (3) of information provided by another information content provider.” The Ninth Circuit said that it was easy to conclude that Yelp was a provider of “an interactive computer service” given that such term should be interpreted “expansively” under the CDA. In fact, the Ninth Circuit recognized that in today’s cyberworld, “the most common interactive computer services are websites,” such as Yelp. The Ninth Circuit continued by finding that it was clear that Kimzey’s claims against Yelp were “premised on Yelp’s publication of Sarah K’s statements and start rating.”

In turning to the gist of Kimzey’s complaint, the Ninth Circuit reasoned that, “a careful reading of the complaint reveals that Kimzey never specifically alleged that Yelp authorized or created the content of the statements posted under the aegis of Sarah K, but rather that Yelp adopted them from another website and transformed them into its own stylized promotions on Yelp and Google.” The Ninth Circuit found, without any difficulty, that such “threadbare allegations of fabrication of statements are implausible on their face and are insufficient to avoid immunity under the CDA.” In essence, the Ninth Circuit found that such artful pleading as that engaged in by Kimzey would allow other plaintiffs to avoid the broad immunity protections provided by the CDA.

The Ninth Circuit reasoned that Congress in enabling immunity from liability wanted to protect the purpose of the internet which was to further the “free exchange of information and ideas.” Further, allowing a plaintiff to plead around the immunity statute would eviscerate Congress’ purpose in furthering this purpose.

Turning to the next part of Kimzey’s complaint, the Ninth Circuit noted that Kimzey alleged that Yelp designed and created the signature star-rating system and thereby served as the “author” of the one-star rating given by Sarah K. He also alleged that Yelp had “republished” the allegedly offending statements on Google by way of advertisements. The Ninth Circuit recognized that there was no immunity under the CDA if the service provider “created” or “developed” the offending materials. However, the service provider had to make “a material contribution to the creation of development of content” in order to lose immunity under the CDA.

The Ninth Circuit concluded that neither prong was satisfied by Kimzey. The court ruled that “the rating system does absolutely nothing to enhance the defamatory sting of the message beyond the words offered by the user.” Further, the Ninth Circuit had previously found in Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9th Cir. 2003), that the mere collection of responses to a particular question “does not transform [the service provider] into a developer of the underlying misinformation.” Likewise, a California appellate court had previously rejected a claim based on eBay’s rating system and found that the system was “simply a representation of the amount of such positive information received by other users of eBay’s website.” Gentry v. eBay, Inc., 121 Cal. Rptr.2d 703 (2002).

The Ninth Circuit, in relying on this precedence, reasoned that it was difficult “to see how Yelp’s rating system, which is based on rating inputs from third parties in which reduces this information into a single aggregate metric, is anything other than user generated data.” Furthermore, the Ninth Circuit rejected Kimzey’s argument that Yelp’s use of the user-generated information in advertisements subjected it to liability as a “republisher.” The Ninth Circuit concluded that there was “[n]othing in the text of the CDA [that] indicated that immunity turns on how many times an interactive computer service publishes `information provided by another information content provider.’” The Ninth Circuit ruled that “just as Yelp is immune from liability under the CDA for posting user generated content on its own website, Yelp is not liable for disseminating the same content in essentially the same format to a search engine as this action does not change the origin of the third party content.” The Ninth Circuit affirmed the lower court’s dismissal of Kimzey’s complaint against Yelp.

The Kimzey case is a reminder of the broad protections provided to interactive computer service providers under the CDA when faced with state law lawsuits regarding the publication of information provided by a user. Defendants in such cases should explore the possibility of immunity under the CDA in order to cut short such lawsuits by having them dismissed early, often prior to the expense of discovery.

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 information about James and his practice, visit his attorney bio at http://www.weintraub.com/attorneys/james-kachmar

Can the owner of renowned tequila brand Patrón prevent a former marketing and PR firm from listing it as a client on its website and discussing the services it provided?  Patrón believes it can and has sued its former marketing firm, The Reindeer Group, for trademark infringement in Federal court in Texas.

In 2009 Patrón engaged Reindeer to provide advertising agency services.  Patrón claims that under the terms of Reindeer’s engagement, Reindeer agreed that it would not display any work regarding the Patrón brands, nor display the Patrón marks, without Patrón’s prior written approval.  Reindeer’s engagement ended in December, 2011.

Patrón claims that despite the termination of its services, Reindeer was using the Patrón marks on its website and was claiming that Patrón was a current client.Scott Hervey Article

Patrón claims that Reindeer failed to respond to letters from its counsel requesting that it cease the unauthorized use of the Patrón marks, thus necessitating the filing of a complaint.

In reading the complaint, it appears that this dispute is more about Reindeer’s billings than its use of the Patrón marks.  That said, Patrón makes a claim which, if upheld by the court, could impact how advertising agencies and other service professionals reference work performed for clients for marketing purposes.  Most advertising agencies get advance permission – usually within a written service agreement – to display the work as part of the firm’s portfolio.  Some firms, however, do not seek a client’s approval.  The outcome of Patrón’s claim could bring an end to that practice.

In its complaint for trademark infringement, Patrón claims that Reindeer’s listing of it on the Reindeer website and using the Patrón marks to refer to the work performed for Patrón as having

……harmed and continues to harm Patrón.  Such use deprives Patrón of the right to control its intellectual property, and to exclude unauthorized users — the core right of such property.  Moreover, Reindeer’s use of Patrón’s marks falsely suggests a connection between the two brands, which allows Reindeer to reap the benefits of the highly valuable Patrón name and all of the associated goodwill, but without Patrón’s permission.  This unauthorized use of Patrón’s marks diminishes the exclusivity of the marks, and threatens the marks’ source-identifying significance, and this damage is exceedingly difficult to quantify in monetary terms.

The Lanham Act provides that the holder of a registered trademark can file a trademark infringement claim against any person who, without the registered trademark holder’s consent, uses any reproduction, counterfeit, copy, or colorable imitation of a registered mark, in commerce, in connection with the sale, offering for sale, distribution, or advertising of any goods or services, where such use is likely to cause confusion, or to cause mistake, or to deceive.  Pursuant to 15 U.S.C. § 1125(a), “Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . .  is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

Patrón claims that Reindeer’s conduct  “has caused and is likely to continue to cause purchasers or others to mistakenly believe that Reindeer is legitimately connected, affiliated or associated with Patrón, or that Patrón approves Reindeer’s services, which is not the case.  Consumers who encounter Reindeer’s website are likely to incorrectly believe that Reindeer currently is the exclusive provider of advertising services for Patrón.” So seemingly, Patrón has a strong claim against Reindeer…but maybe not.

Trademark law recognizes a defense where the mark is used only “to describe the goods or services of [a] party, or their geographic origin.” Courts have found that nominative trademark fair use exists where the defendant used the plaintiff’s mark simply to describe the plaintiff’s own product.  In the case of nominative trademark fair use, the original producer is deemed as a matter of law not to sponsor or endorse the third-party product or service that uses its mark in a descriptive manner.  The test for nominative trademark fair use requires the court to ask whether (1) the product was “readily identifiable” without use of the mark; (2) defendant used more of the mark than necessary; or (3) defendant falsely suggested he was sponsored or endorsed by the trademark holder.

In Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir., 1969), the Ninth Circuit applied nominative trademark fair use and found that in “advertising [the repair of Volkswagens, it] would be difficult, if not impossible, for [Church] to avoid altogether the use of the word ‘Volkswagen’ or its abbreviation ‘VW,’ which are the normal terms which, to the public at large, signify appellant’s cars.”   Church did not suggest to customers that he was part of the Volkswagen organization or that his repair shop was sponsored or authorized by VW; he merely used the words “Volkswagen” and “VW” to convey information about the types of cars he repaired.  Therefore, his use of the Volkswagen trademark was not an infringing use.

In applying nominative trademark fair use to Reindeer’s use of the Patrón marks, a court would ask whether (1) Reindeer could describe the work it performed for Patrón without using the Patrón marks; (2) in describing the past work it performed for Patrón, did Reindeer use more of the Patrón marks than necessary to convey the information; or (3) whether Reindeer’s use of the Patrón marks in describing the services it provided for Patrón falsely suggested it was sponsored or endorsed by Patrón.  In a general sense, it would be difficult, if not impossible for Reindeer, or any other service provider who provides services to Patrón, to describe the services without using the Patrón marks.  Assuming Reindeer can get past the claim that it was contractually prohibited from using the Patrón marks without Patrón’s approval, Reindeer might have a good shot at putting Patrón’s trademark claim back in the bottle.

On September 26, 2016, the U.S. Court of Appeals for the Federal Circuit declined to review in a unanimous en banc decision a panel Federal Circuit decision affirming that the Patent Trial and Appeal Board (the “Board”) at the Patent and Trademark Office (“USPTO”) could hear new evidence during a trial, evidence that was not cited by the Board in its decision to institute review under the America Invents Act (“AIA”).  In so doing, the Federal Circuit reasoned “[t]he introduction of new evidence in the course of the trial is to be expected in inter partes review trial proceedings and, as long as the opposing party is given notice of the evidence and an opportunity to respond to it, the introduction of such evidence is perfectly permissible.”01-Caliguri-Er-15EX-web

The patents at issue in the case are U.S. Patent Nos. 7,351,410 (“the ’410 patent”) and 7,655,226 (“the ’226 patent”), both entitled “Treatment of Pompe’s Disease,” and are directed to treating Pompe’s disease with injections of human acid α-glucosidase.  Pompe’s disease is a genetic disease caused by a complete or partial lack of the lysosomal enzyme acid α-glucosidase (“GAA”).  In a healthy individual, GAA breaks down glycogen, a larger molecule, into glucose.  A person with Pompe’s disease has reduced levels of GAA, or no GAA at all, and is unable to break down glycogen into glucose.  This inability results in glycogen accumulating in the muscles of affected patients in excessive amounts.  There are two forms of Pompe’s disease: early-onset and late onset.  Early onset occurs in infants shortly after birth and is usually fatal before one year because excess glycogen accumulates in the muscles and causes cardiac or respiratory failure.  Those with late onset develop the disease after infancy and have progressive muscle weakness and respiratory issues caused by the glycogen buildup in the muscles, but do not typically develop the severe cardiac symptoms associated with early onset.

In 2013, Biomarin, the petitioner, filed petitions requesting inter partes review of the ’410 and ’226 patents.  The Board granted review on two different obviousness grounds for each challenged claim in each patent.  In its final written decisions, the Board found by a preponderance of the evidence that the challenged claims of the ’410 and ’226 patents would have been obvious.  In so doing, he Board cited references in its final written decisions that were not specifically included in the combinations of prior art on which the Board instituted review.

On appeal, Genzyme, the patent owner, argued that the Board violated the requirements of notice and an opportunity to respond found in the Administrative Procedure Act (“APA”).  Genzyme argued that in finding that the claims at issue were unpatentable, the Board relied on “facts and legal arguments” that were not set forth in the institution decisions.  Therefore, according to Genzyme, it was denied notice “of the issues to be considered by the Board and an opportunity to address the facts and legal arguments on which the Board’s patentability determination [would] rest.”

The Federal Circuit rejected this argument because the Board’s decision to institute review does not need to refer to every bit of evidence that is relied on by the Board in its final written decision.  The Federal Circuit reasoned “there is no requirement, either in the Board’s regulations, in the APA, or as a matter of due process, for the institution decision to anticipate and set forth every legal or factual issue that might arise in the course of the trial.”

Moreover, the Federal Circuit found “Genzyme has not shown that the Board’s decisions rested on any factual or legal issues as to which Genzyme was denied notice or an opportunity to be heard at a meaningful point in the proceedings.”  Indeed, the Federal Circuit noted that Genzyme itself referred to the disputed prior art in its patent owner responses to the petitions.  Therefore, the Federal Circuit found “Genzyme had ample notice that the references were in play as potentially relevant evidence and that the Board might well address the parties’ arguments regarding those references in its final written decisions.”  The Federal Circuit also noted that despite having notice of the prior art, Genzyme failed to take advantage of its procedural options to seek to exclude that evidence or further respond before the Board.

Finally, the Federal Circuit also noted the relatively limited use to which the Board put the disputed references.  Specifically, the Board used the references merely to describe the state of the art; and they were not among the prior art references that the Board relied upon to establish any claim limitations.  Thus, the Federal Circuit reasoned it has previously “made clear that the Board may consider a prior art reference to show the state of the art at the time of the invention, regardless of whether that reference was cited in the Board’s institution decision.”

This case serves as a warning to both petitioners and patent owners alike when faced with patent review under the AIA.  For patent owners, do not expect to able to exclude evidence or arguments raised at trial after the fact simply because the exact contours of the evidence or arguments were not raised in the petitions or the Board decision to institute review.  Instead, take advantage of all pro-active measures along the way, such as motions to exclude, motions seeking additional briefing, and so on.  For petitioners, be careful relying too heavily on evidence or arguments not raised in the petitions or cited in the Board’s decision to institute review.  Although successful here, one could argue the results may be different if patent owner had no notice of the references, did not have any opportunity to previously object, or the references had a significant substantive role in the Board’s decision, such as to establish claim limitations.

transparentIt is no secret; the Disney Corporation is a marketing and merchandising powerhouse. It has achieved that reputation by capitalizing on almost every marketing and merchandising opportunity that comes its way. If you have kids, the odds are you have been subjected to the Disney Corporation’s influence on more than one occasion. In fact, even if you do not have children, I’m willing to bet, at some point, you have been influenced by Disney’s masterful marketing.

Now, many of you already know that the Disney Corporation owns Pixar Animation Studios; the studio that has brought us family classics like Finding Nemo, Toy Story, The Incredibles, WALL-E, Monsters, Inc., and Cars.  And if you’re familiar with these movies, then you know that there is no shortage of related merchandise. But have you ever wondered why you never see merchandise related to Pixar’s most iconic character and beloved mascot, Luxo Jr.? You may not know Luxo Jr. by name, but he is the desk lamp character that appears on the production logo of every Pixar Film where he hops on the screen bouncing on the letter “I” in Pixar. With such a prominent role in one of Disney’s largest subsidiary companies, it was baffling to me that Disney had not capitalized on this merchandising opportunity. After some brief research, I learned that Disney tried to exploit this opportunity in 2009, but was immediately met with a lawsuit.

It turns out that Luxo Jr. is actually based on the award-winning lamps produced by the Norwegian company Luxo. Since Pixar’s creation of Luxo Jr.’s in 1986, Pixar has maintained a mostly positive relationship with Luxo, and Luxo was seemingly happy to allow Pixar to utilize its lamp’s likeness. But all of that changed in 2009 when Pixar had the idea to package its Up Blu-rays with its own Luxo Jr. merchandise that was not manufactured by Luxo. This obviously didn’t sit well with Luxo because they immediately filed a lawsuit for trademark infringement because the Pixar lamps bore the LUXO mark. In the complaint, Luxo contended that Pixar and Disney had not used the Luxo name on the products until this point, and that the sale of these Pixar lamps would cause “devastating damage to Luxo and dilute the goodwill which Luxo has built up.” This claim resulted from the fact that although the lamps were not made by Luxo, they bore their likeness, and gave the impression that they were a Luxo lamp. These claims, if proven, constitute the epitome of trademark infringement. Frankly, if the Disney Corporation and Pixar acted without Luxo’s permission when they moved forward with this merchandising idea, it is highly likely that the Court would have found in Luxo’s favor through summary judgment if the litigation had reached that stage.

However, the case never made it that far. Luxo and Disney quickly reached a settlement agreement where Disney and Pixar agreed that they would no longer sell Luxo Jr. lamps as long as Pixar was allowed to continue utilizing Luxo Jr. as its corporate mascot. Moreover, although Disney has never offered an official explanation, the six-foot tall animatronic Luxo Jr. that once stood in Walt Disney World near the Toy Story Midway Mania attraction was removed in 2010. Several people believe that this removal was related to the Luxo Jr. litigation, but because of the confidential nature of the settlement, no one knows for certain.

Jo-Dale-Carothers-015_webIt sounds like a silly question, doesn’t it?  After all, self-driving cars represent innovative progress in technology, and patents are intended “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  U.S. Constitution, Article I, Section 8, Clause 8.

But not so fast — courts have found that many software-based inventions for automating known techniques are patent ineligible under 35 U.S.C. §101 (“§101”).  The reasoning is that these inventions merely represent abstract ideas, which are not patentable.  In fact, even when software was combined with standard hardware, such as computers, displays, cameras, and sensors, many courts have found that the inventions did not involve patent-eligible subject matter.  While this article does not focus on any particular patent, one could argue that certain aspects of self-driving cars are just attempts to automate, largely with the use of software and well-known hardware, what humans have been doing for over 100 years — driving cars while trying to avoid accidents.  Does that mean such patents would be rejected by the United States Patent and Trademark Office (“USPTO”) or invalidated by a court?

To analyze this issue in more detail, first we should consider the technology that many automobile and technology companies, such as Tesla, Volvo, Toyota, and Google, are developing to enable commercially viable, self-driving vehicles.  In fact, some of this technology is already on the road, and numerous patents have already been issued in the field.  The technology is based on the use of various combinations of sensors, cameras, computers, and software.  For example, radar sensors are used to detect the position of nearby vehicles.  Lidar, which uses lasers and sensors, can be used to measure the distance to objects, build a 3D map, and detect hazards, such as the edges of roads and lane markings.  Video cameras are used to detect obstacles such as pedestrians and other vehicles, as well as traffic lights and road signs.  Ultrasonic sensors in the wheels can be used to monitor car movements and detect curbs and other vehicles, such as for use in automatic parking.  But the heart of the system, which most would say is the most complex aspect, is the software that analyzes the data from all of the sensors and controls the car’s systems (e.g., steering, braking, and acceleration) to maneuver it safely.

What have courts said about the patentability of such software-based inventions?  In Alice Corp. v. CLS Bank, the U.S. Supreme Court looked at the patentability of certain claims under §101 by applying the two-step test it had set forth in Mayo v. Prometheus.  In applying the two-step test, first, a court should determine whether the claims are directed to an abstract idea.  If they are, the second step is to determine whether the claims include elements showing an inventive concept that transforms the idea into a patent-eligible invention.  While the Court in Alice stated it was treading carefully in invalidating the claims at issue and warned that applying the decision too broadly could “swallow all of patent law,” numerous patents have been invalidated by district courts in light of the decision in Alice.

At this point, the line between abstract idea and patentable invention has been blurred to the point that it is often difficult to determine whether an invention is patentable.  For example, the court in The Chamberlain Group LLC v. Linear LLC refused to invalidate claims for a monitoring and alarm system related to network communication between a controller and a movable barrier, such as a garage door.   As part of its reasoning, the court noted the claims were “not directed to a method for organizing human activity or computerizing a long-standing commercial practice.”  In contrast, other courts have found the use of computers, memory, transmitters, receivers, and networks not sufficient to save patent claims.  For example, the court in White Knuckle Gaming v. Electronic Arts invalidated claims on an Internet-based method for updating software because it was an abstract idea and performed on a conventional computer, server, and network.  In Visual Memory v. NVIDIA, the court found that categorical data storage was an abstract idea, stating it was a well-known technique performed by humans.  The court in Kinglite Holdings v. MicroStar invalidated a BIOS multitasking patent, stating that it was basically a process for doing two things nearly simultaneously and humans do that all the time.

This means that when asserting your patent in litigation, you will likely face a motion to dismiss on the pleadings or an early summary judgment motion if your patent is vulnerable to a §101 challenge.  In response, it will be necessary to 1) determine whether claim construction is necessary prior to a ruling, 2) argue what distinguishes your patent from an abstract idea, and 3) explain why your patent involves a sufficiently inventive concept that will transform an abstract idea into a patent-eligible invention under step two of the Mayo/Alice test.

In the case of software and sensors for self-driving cars, the system may be performing a task that humans often perform, but it is probably not doing it in the same manner that humans do.  There is a substantial difference between merely writing software to balance a checkbook using substantially the same steps a human would use and designing software that can drive a car.  That is because a human could not write down the steps or analysis techniques that one goes through to safely drive and navigate a car in all situations.  In fact, researchers have long been trying to understand how humans process images and signals received from the environment.  Therefore, one can argue that a self-driving car is not merely an automated implementation of the steps performed by a human.  Instead, a different approach and different algorithms suitable for computer implementation have been developed to accomplish the goal of driving.  We will have to wait to see if that distinction and argument will prevail.

The question has arisen whether courts can resolve the ambiguities and confusion of patentability under §101, or whether it is time for legislative action.  Some argue that the Federal Circuit and Supreme Court should give the district courts the guidance and clarification they need to predictably determine what is patent-eligible under §101.  David Kappos, former director of the USPTO, suggested the solution is to abolish §101.  Others suggest that amendment of §101 would be sufficient.  Until the issue is resolved, additional care must be taken when drafting patents to limit vulnerability to §101 challenges.