The IP Law Blog

Focusing on legal trends in data security, cloud computing, data privacy, and anything E

THE ESSENTIAL PURPOSE OF THE SHORT FORM COPYRIGHT ASSIGNMENT

Posted in Copyright Law, IP, IP Law Blog Lawyers In The News

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.

Michael Jackson, Commercial Speech and Anti-SLAPP Motions

Posted in IP, IP Law Blog Lawyers In The News

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

Court Finds Prior Finding of No Literal Infringement Bars Later Claim for Infringement Under the Doctrine of Equivalents

Posted in IP, IP Law Blog Lawyers In The News, Patent Law

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.

Accused Patent Infringers – Don’t Wait to File an Inter Partes Review!

Posted in IP, IP Law Blog Lawyers In The News, Patent Law

An inter partes review (IPR) is one of the ways a party can challenge a patent in the Patent and Trademark Office. This procedure was added by the America Invents Act, which established a panel of judges called the Patent Trial and Appeal Board (PTAB) to decide IPRs and conduct other procedures used to challenge patents.  An IPR is quicker and less costly than patent litigation. It also allows an accused infringer to attack the plaintiff’s patent without having to defend against a patent infringement claim at the same time.

There is a time limit for filing an IPR.  Pursuant to 35 U.S.C. §315(b), the PTAB cannot grant a petition requesting an IPR if the petition is “filed more than one year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  While this language seems clear enough, patent infringement defendants sometimes don’t even realize they have missed the deadline and end up trying to argue that the time bar is not so clear. 

The Federal Circuit Court of Appeals, however, has made it even clearer: §315(b) is a strict one-year time bar that begins to run when a party, real party interest, or its privy is served with a patent infringement complaint alleging infringement of the patent sought to be challenged. Click-To-Call Technologies, LP v. Ingenio, Inc., 2018 U.S. App. LEXIS 22839 (Fed. Cir. August 16, 2018).

The Click-To-Call litigation history is complicated by the existence of numerous parties who were merged or acquired by other parties, and a patent that was acquired by one party from another party.   The first patent infringement lawsuit involving the patent in question was filed in 2001.  Ingenio, the defendant in that case, then acquired the plaintiff, and the lawsuit was voluntarily dismissed without prejudice by a stipulation of the parties.  The patent was later acquired by another party, Click-To-Call. In 2012, Click-To-Call sued the original defendant, Ingenio, and several other defendants for patent infringement.

In 2013, the defendants jointly filed a petition for an IPR challenging the patent.  Click-To-Call filed a response claiming that the defendants were time-barred under §315(b) from seeking an IPR because Ingenio had been sued for infringement of the patent in 2001, more than one year before the petition for an IPR was filed.

The PTAB ruled that the IPR was not time-barred because the 2001 patent infringement lawsuit had been dismissed voluntarily without prejudice.  The PTAB’s rationale was that, under Federal Rules of Civil Procedure Rule 41(a), a dismissal nullifies the complaint and leaves the parties as if the complaint had never been filed.

Click-To-Call requested a rehearing before the PTAB, which was denied. The PTAB then issued a decision invaliding a number of the patent’s claims.

Click-To-Call appealed to the Federal Circuit.  After two dismissals by the Federal Circuit and one trip to the Supreme Court, the case was finally heard by the Federal Circuit.

The question before the court was whether a voluntary dismissal of a patent infringement complaint triggers §315(b)’s one-year time bar for filing an IPR.  The court held that it does, vacating the PTAB’s decision in the IPR and ordering the IPR dismissed.

The Federal Circuit held that the language of §315(b) was plain and unambiguous. Id. at *14.  There are no exceptions to the one-year bar; in particular, there are no exceptions for cases that are dismissed voluntarily after the complaint has been served. The court explained, at *15:

“Simply put, §315(b)’s time bar is implicated once a party receives notice through official delivery of a complaint in a civil action, irrespective of subsequent events…it is wholly irrelevant to the §315(b) inquiry whether the civil action in which the complaint was filed is later voluntarily dismissed without prejudice.”

Thus, “subsequent events” in the original patent infringement case do not “nullify service of the complaint for the purpose of §315(b)’s time bar.” Id. at *17.

The Click-To-Call decision may have several ramifications. Defendants in patent litigation may be more reluctant to enter into settlements requiring a dismissal without prejudice.  In addition, defendants will be more likely to file IPRs earlier in order to ensure that they don’t miss the deadline.  Parties to pending IPRs filed more than one year after a complaint was filed may end up in a fight over whether this case should apply to their IPR, potentially leading to its dismissal.

Procter & Gamble Seeks to Register Text Message Lingo Such as LOL and WTF

Posted in IP, IP Law Blog Lawyers In The News, Trademark Law

Procter & Gamble, the international consumer packaged goods conglomerate, recently filed a slew of trademark applications with the United States Patent and Trademark Office, seeking to register WTF, LOL, FML, and NBD for use in conjunction with certain consumer goods. Now, I suspect most of you are familiar with these acronyms, but if you aren’t, LOL stands for “laughing out loud” and NBD stands for “no big deal.” As for WTF and FML, if you’re unfamiliar with these acronyms, I welcome you to conduct a quick Google search, as I will not be discussing their meanings in this article.

In any event, Procter & Gamble’s attempt to register these trademarks with the USPTO has caused a bit of a stir among casual readers who lack familiarity with United States trademark law. Such readers may, however unreasonably, believe that if Procter & Gamble obtain trademark rights regarding these acronyms, many everyday users will no longer be able to utilize the phrases. But that belief demonstrates a fundamental misunderstanding of the rights conferred by United States trademark law. The truth is, Procter & Gamble doesn’t care if individuals continue to use these acronyms as part of their everyday vocabulary. In fact, Procter & Gamble probably prefers that these phrases stay in use and maintain relevance. After all, that’s the name of the game: finding a word or phrase people are familiar with and associating it with your product. Of course, this assumes that no one else owns the right to use that word or phrase in conjunction with that particular product or other related products. To summarize, trademark law does not give the owner of the mark a monopoly over the name or phrase. Instead, it gives the owner the exclusive right to use that name or phrase in conjunction with specified products.

So, moving on to the next question: will Procter & Gamble be able to register these marks with the USPTO? In short, I don’t see why not. In fact, the USPTO just issued notice of its intent to publish each of the marks for opposition. In plain English, what this means is that the USPTO’s examining attorney, who serves as the gatekeeper for registrable trademarks, has reviewed each of the applications and determined that the marks are entitled to registration and that no confusingly similar marks exist. Now, the marks will each be published in the Trademark Official Gazette, where others will have the opportunity to see, and, if they should choose, oppose the registration of any of the marks on the ground that it is confusingly similar to the opposing party’s mark. If no one opposes the mark’s registration, the USPTO usually issues a registration certificate within 12 weeks and the process concludes with the applicant becoming the owner of a federally registered trademark. It’s unclear if anyone will challenge Procter & Gamble’s putative trademarks, but if the marks made it by the USPTO’s examining attorney without the issuance of an office action, it seems reasonably likely they will sail on to registration without opposition.

Now that it’s clear that Procter & Gamble’s potential registration of WTF, LOL, FML, and NBD will be NBD, and therefore have no bearing on your everyday use of those acronyms, you really have to wonder, what kind of consumer goods will be sold in conjunction with the acronyms WTF or FML? If you’re familiar with the acronyms or Googled them as I suggested above, it’s really an interesting question.

NAVIGATING USERNAME JACKING

Posted in IP, IP Law Blog Lawyers In The News

Have you ever had the experience of attempting to register a social media account in the name of your business only to find that your preferred name is taken?  Often, it’s just the case of another business with the same name having registered that account first.  Other times, it’s evidence of what’s come to be known as “Username Jacking”.  Big brands and public figures are highly susceptible to incidents of username jacking.  If you have not yet had to deal with a fake social media account, it’s likely only a matter of time.  Unlike the case with domain names, brand owners or public figures do not have a clear path to a relatively quick resolution.  There is no UDRP corollary for social media usernames.  So what can a brand or public figure do when it has been username jacked?

The first step would be to review the social media platform’s terms of use and utilize whatever internal dispute resolution process it has in place.  Most (if not all) the terms of use provide, at a minimum, a way to lodge a complaint about a false account.  Twitter has clear rules regarding parody or commentary accounts.  For example, Twitter requires that the bio clearly indicate that the user is not affiliated with the subject of the account and incorporate a word such as “parody,” “fake,” “fan,” or “commentary,” and be done so in a way that would be understood by the intended audience.  Additionally, Twitter requires that the account name not be the exact name as the subject of the account.  Other platforms, such as Facebook and Instagram, do not have such clear-cut rules.

If the violation is clear cut – such as in the case where a rogue account is an attempt to impersonate a celebrity or public figure – the platform will promptly shut down the account and likely transfer the user name to the aggrieved party. It gets a bit more complicated where the fake account could be seen as a “gripe” account – an account dedicated to the criticism of certain persons.  (BP Oil had to deal with a gripe Twitter account created in response to the damage caused by the 2010 Gulf of Mexico oil spill.  This rogue Twitter account featured BP’s logo, soiled with oil dripping down its side and tweeted comments such as “Please write your representatives and tell them you’ve forgotten about the Gulf of Mexico.” )

So what is a brand or public figure to do when facing a jacked username on a platform that doesn’t have clear guidelines for parody or commentary accounts, the account owner has been nonresponsive to your correspondence, and,  although it’s not clear that the account is dedicated to criticism, the platform refuses to take action?  Unfortunately, the legal options available at this point all involve filing a lawsuit.

Going directly after the social platform is not the best course of action.  Section 230 of the Communications Decency Act generally provides immunity to social media platforms from lawsuits that seek to treat them as publishers or speakers of content published by its users.  Since going directly after the user can also be challenging if the jacked social media account provides no clues as to the true identity of the user, the first step is usually figuring out the true identity of the rogue account owner.  No legitimate social media platform is going to hand over user account information (even in the face of a threatening legal letter).  In order to obtain that information, you are going to have to serve the platform with a subpoena.

In order to subpoena user information from a social media platform, one must file a John Doe lawsuit alleging relevant causes or action against a “John Doe”.  After the complaint is filed and a case number is assigned, a deposition subpoena would be served on the platform, requesting the username and profile URL, and other identifying information related to the account.

There is always a chance that the social media platform (or the “John Doe” defendant) will file a motion to quash the subpoena and dismiss the case.  If the platform or the Doe defendant establishes that the plaintiff does not have a meritorious basis to its complaint, the court will not require compliance with the subpoena and will also dismiss the complaint.  Thus, making certain the complaint alleges relatively strong causes of action is important.

One potential judicial claim available to a brand victim of a Username Jacking is a trademark infringement claim.  The factors necessary to support a trademark claim of this nature are: (1) was the mark used in a manner likely to confuse consumers, and (2) whether the mark was used “in commerce” (defined as use “in connection with the sale, offering for sale, distribution, or advertising of any goods or services”).  In cases where the account username is exactly the same as the brand, establishing the first factor would be relatively simple.  However, showing commercial use of the allegedly infringed mark by this account may be challenging.  Further, the brand owner could run into a potential issue if the court finds that the account is a “gripe” account.  Courts have also held that use of a trademark for criticism is noncommercial, even if the defendant makes money from the use.

Other Username Jacking victims have sought relief under the Federal Anti Cybersquatting Consumer Protection Act (“ACPA”).  Various law review articles have pontificated that Username-jacking victims would be unlikely to succeed in a cybersquatting claim because (1) the Anticybersquatting Consumer Protection Act (ACPA) only protects domain names, not usernames, and (2) the social platform account holder does not act with bad faith intent to profit in username-jacking situations.

Assuming one could successfully navigate any argument that the ACPA is inapplicable, cases under the ACPA recognize that the establishment of a “gripe” site does not establish the requisite bad faith.  Some federal circuits have different standards for legitimate gripe or parody sites.  For example, in the Tenth Circuit it must be immediately apparent to anyone visiting a parodic website that it was not the trademark owner’s website, while in the Fourth Circuit, the domain name at issue must convey two simultaneous, yet contradictory, messages: that it is the original and that it is not the original and is instead a parody.

If the jacked user account includes content whose copyright is owned by the brand or public figure, one should consider including a copyright infringement claim.  Obviously, such a claim would have to withstand a fair use challenge or claim that the use is for the purpose of criticism, commentary, news reporting, teaching, scholarship or research.

To many, this situation feels very similar to the early days of cybersquating before the availability of the UDRP.  Not having a clear pathway to resolving disputes is not productive for all concerned.  While a UDRP type proceeding for usernames could prove to be a suitable dispute resolution tool, guidelines on what is and is not acceptable as a gripe or commentary account would be a great place to start.

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

Posted in IP, IP Law Blog Lawyers In The News

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

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

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

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

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

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

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

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

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

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

Posted in IP, IP Law Blog Lawyers In The News, Trademark Law

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

Federal Circuit Limits Patent Infringement Damages

Posted in IP, IP Law Blog Lawyers In The News, Patent Law

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

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

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

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

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

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

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

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

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

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

Posted in IP Law Blog Lawyers In The News

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

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

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

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

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

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

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

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