Don’t Do It Unless You Mean It — Voluntary Surrender of a Trademark Registration is Irreversible

By Steven Abreu. A member of our Trademark Practice Group

Think twice before filing a voluntary surrender of a US trademark registration or expressly abandoning an application, because, like the decision to burn a bridge, the choice is irreversible. Registrant International Expeditions Inc. found this out the hard way as chronicled in the recent precedential Trademark Trial and Appeal Board (TTAB) decision, Christiane E LLC v International Expeditions Inc. (Cancellation No 92055645, May 24, 2013).

A cancellation petition was filed by Christiane E LLC against International Expedition’s registration for the mark INTRAV on May 22, 2012. Rather than file an answer, the registrant voluntarily surrendered its registration for cancellation on June 29, 2012. Nearly four months later, but before the TTAB had taken action on the surrender, new counsel made an appearance on the registrant’s behalf and filed motions for leave to file a late answer and to withdraw the voluntary surrender.
 

Whether or not to allow a party in an inter partes proceeding to withdraw a voluntary surrender of its registration prior to official action on the surrender was an issue of first impression at the TTAB. However, the TTAB took some guidance from the In re Glaxo Group Ltd decision from 1993 which held that only in an “extraordinary situation” could a withdrawal of an express abandonment of an application be allowed in an ex parte proceeding (In re Glaxo Group Ltd (33 USPQ2d 1535 (CCPA 1993))).

Three reasons were given for the decision in Glaxo:

1. third parties have a vested interest in relying on an express abandonment in planning their own prosecution strategy;
2. administrative requirements of the Trademark Office are implicated by withdrawing an abandonment; and
3. trademark examiners must be able to rely on the express abandonment or voluntary surrender of potentially blocking pending applications and registrations.

Continuing the logic in Glaxo, the TTAB agreed that once a party has expressly and voluntarily relinquished an interest, members of the public and employees of the Trademark Office may have relied on the filing to their detriment. Further, the TTAB felt that such reliance should be protected absent an extraordinary situation.

In the current case, the registrant’s two cited reasons for withdrawing their voluntary surrender were at the time of the surrender it did not know that the petitioner, Christiane E LLC, was formed by a founder of one of the registrant’s predecessors, and that the petitioner had hired away one of the registrant’s employees. The TTAB found this anecdotal evidence irrelevant and unpersuasive.

It remains to be seen what would qualify as an extraordinary situation. Perhaps the filing of the voluntary surrender by mistake – due to typographical errors in the withdrawal – would suffice.

Clients can and do change their minds. As the withdrawal of one’s registration (and in this case the entry of judgment against the registrant with prejudice) is an important and final action, it should not be done lightly. Thus, it is incumbent on trademark counsel to advise clients that voluntary surrender of one’s registration or an express abandonment of an application cannot be undone, and the decision to do so should only be taken after a thorough contemplation of the reasons and frank discussion of the irreversible consequences.

This article first appeared on WTR Daily, part of World Trademark Review, in June 2013. For further information, please go to www.worldtrademarkreview.com.

Patent Reexamination Produces Extra-Innings Win in Seesaw Infringement Battle

By Meredith Ainbinder. A member of our Litigation Practice Group

This past July, the Federal Circuit delivered a ruling that has defendants in patent infringement lawsuits, business executives and attorneys exploring new ways to wield patent reexaminations as a weapon in hotly contested patent fights.

 

Baxter and Fresenius have been engaged in years of tough competition and a long, tortuous litigation concerning hemodialysis machines. Their lawsuit came to a surprising close when the Federal Circuit determined that a late-in-the-game invalidation of Baxter’s patent claims in the PTO stripped Baxter of a string of wins in the litigation.

While reexamination itself has long been an arrow in the quiver of a company accused of patent infringement in district court, it was previously thought that a reexamination proceeding would affect an ongoing lawsuit only if the trial judge stayed the matter pending the PTO’s determination or if the reexamination was completed before rulings issued on infringement and validity.

In Fresenius v. Baxter, both the district court and the Federal Circuit had already ruled that Fresenius infringed Baxter’s valid patent, but the question of a proper damages award was still the subject of ongoing appeals. For that reason, the Federal Circuit held that the matter had not been finally decided. It thus took into consideration the PTO’s belated invalidation of the patent claims and dismissed the lawsuit.

For Baxter and Fresenius, the devil was in the details. The lawsuit was filed in 2003. In 2007, the district court determined that certain Baxter patents were valid and infringed by Fresenius. The case went up on appeal. In 2009, the Federal Circuit affirmed the district court’s ruling on validity of one patent, but reversed on two others. The Federal Circuit then remanded the case to the district court to reconsider remedies in light of the changed ruling on the patents actually infringed. (more)

Fresh Guidance for Owners of Standard-Essential Patents: Reasonable Royalties Can Be Expected; So Can Penalties if You Overreach

By Thomas Carey. Chair of our Business Practice Group

 

Until recently, thousands of companies had agreed to license their standards-essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms in the course of participating in standard-setting organizations (SSOs), even though they were uncertain as to how or whether those commitments could be enforced or interpreted. A recent flurry of activity has brought the meaning and enforceability of FRAND commitments into sharp focus.

The Cellphone Wars
The most exceptional event was the August 3, 2013 decision by the US Trade Representative to overturn an exclusion order issued by the US International Trade Commission (ITC), the first such reversal of the ITC in over 25 years^[1]. The ITC order would have prevented Apple from bringing certain of its products into the United States because they infringed a Samsung patent essential to the 3G wireless communications standard.

Samsung had participated in the development of that standard. In doing so, it had committed to make its SEPs available on FRAND terms. The Apple products in question adhered to the applicable standard and, according to the ITC, used the Samsung technology. Although Samsung had offered a license to Apple over the course of prolonged negotiations, Samsung was persistent in asking for a license back of certain Apple patents that were not SEPs and not subject to FRAND commitments.

Before the ITC rendered its decision, the Department of Justice and the US Patent and Trademark Office issued a joint statement supporting a theory that we have reported as gaining traction worldwide: that injunctive relief should not be available to remedy infringement of patents that are the subject of FRAND commitments. This theory is based on the doctrine that injunctive relief is available only where monetary damages is not an adequate remedy; by agreeing to license on FRAND terms, the patent holder has conceded that it would be adequately compensated for a license if a reasonable royalty were paid.

An ITC exclusion order is comparable to an injunction in that it prevents the importation, and thus the sale, of the infringing product. Many observers felt that the ITC should have denied Samsung its requested relief on this basis.

The ITC rejected this argument. Furthermore, it complained that the parties had not adequately briefed the question in the initial ITC proceedings before the administrative law judge, and therefore it was not in a good position to rule on whether the Samsung patent really was essential to the 3G standard, how important it was to the standard, and what precisely the FRAND obligations were.

One of the ITC’s commissioners argued in dissent that Samsung had violated its FRAND obligations by consistently tying its license offers to Apple to a cross-license of non-SEP patents. While the dissenter did not accept the notion that the ITC could never exclude the importation of products on the basis of infringement of FRAND-burdened SEPs, he felt that no exclusion order should be granted because of Samsung’s failure to offer FRAND terms and the relative unimportance of its patent to the 3G standard.

On August 3, 2013, the US Trade Representative, with the backing of the White House, reversed this ITC’s exclusion order. The Trade Representative’s decision gave the ITC two succinct instructions in handling similar cases in the future. It directed the ITC:

1. To consider whether exclusion orders of products infringing FRAND-burdened patents is an appropriate remedy at the outset of the proceeding, rather than at the end; and
2. To require the parties to develop the factual record relating to the FRAND issue in the initial ITC administrative proceeding.

(More)

New Obstacles Are Raised to Protecting Computer-Related Inventions

By Bruce Sunstein. A member of our Patent Practice Group

 

Recent court decisions make it more challenging to protect computer-related inventions with patents. On September 5, in the case of Accenture v. Guidewire,^[1] the Federal Circuit issued a split decision holding that a computer-related invention was not eligible to be patented.

At issue in Accenture was the validity of an already issued patent having claims directed to a system, and to a method, for generating tasks to be performed in an insurance organization. The system claims required an “insurance transaction database,” a “task library database,” a “client component,” and a “server component.” These items, which have sub-items that also appear in the claim, cooperate with each other to generate the tasks to be performed.

The patent also included a method claim that recited steps in a computer environment involving an event processor that interacts with an insurance transaction database, a task assistant, and a storing step.

In the past, this kind of structural detail in a computer-implemented system claim and a computer-implemented method claim would be sufficient to support a determination that the subject matter would be eligible for a patent, and, indeed, a patent with such claims was issued by the Patent and Trademark Office. Illustrating the structural detail in the system claim, the last subparagraph of the claim reads this way:

. . . wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

 

Accenture put considerable additional detail into its patent, which has 15 figures, and occupies 110 columns of print. The patent is loaded with examples, including numerous excerpts of actual programming code, showing how Object Oriented Programming structures implement the invention.

Yet the Federal Circuit held that the subject matter defined by the system claims is not patent-eligible, relying on the court’s own non-precedential opinion in CLS Bank Int’l v. Alice Corp., decided in May 2013 .^[2] The plurality opinion in Alice Corp. in turn relied principally on the Supreme Court’s 2012 decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc.^[3]

Determining that subject matter defined by a patent claim is eligible for a patent does not mean that the owner of such a patent claim deserves a patent, because the patent law also requires that the subject matter must be new and must not have been obvious to a person of ordinary skill in the field of the invention. These last two requirements correspond to sections 102 and 103 of the patent law.^{[4]
(More...)}

^[1]Accenture v. Guidewire, No. 2011-1486 (Fed. Cir. 9/5/13)(slip opinion).

^[2] Accenture v. Guidewire, slip opinion, page 8 et seq., citing CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc). Accenture had not appealed invalidation of the method claims.

^[3] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2013), cited in CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 at 1279.

^[4] 35 U.S.C. §§ 102 and 103.

Trademark Selection Guidelines

Choosing a Trademark. The choice of a trademark can be critical to the ability to protect one’s rights in a mark. A weak mark may not serve as a good identifier of source. A strong mark, which becomes identified in the mind of the consumer with a particular product or service—e.g., LEXUS® for luxury cars or AT&T® for long distance telephone services—makes possible more effective protection of rights. Thus, it is easier for the owner of a strong mark to preclude third parties from adopting similar marks than it is for those with weak marks. By helping our clients identify and select strong marks, we assist them in developing trademark portfolios that become valuable business assets.

It is natural for the owner of a trademark to want to choose a mark that tells consumers something about its products. Unfortunately, this understandable tendency can sometimes come into conflict with certain principles of trademark law. In the United States, as well as in most other jurisdictions, only “distinctive” terms may be protected as trademarks. Terms that are considered “merely descriptive” or generic are generally not able to function as trademarks and will not be protected.

The line between an imaginative mark that cleverly suggests the nature of the products for which it is used and a mark that is “merely descriptive” of those products can be quite fine. Case law in the United States describes a spectrum of types of marks: fanciful, arbitrary, suggestive, descriptive and generic.

The “Strength” of a Mark. The strongest marks are those that are considered fanciful. A fanciful mark is one that has been made up or invented by its owner. Fanciful marks are either previously unknown words, or archaic or obsolete terms that are no longer commonly known. Non-word marks (letters, numbers, designs and pictures) may also be considered fanciful. Examples of fanciful marks are EXXON®, KODAK®, and XEROX®.

Arbitrary marks are the next on the spectrum of trademark strength. An arbitrary mark is one that may have a commonly known meaning, but the meaning is unrelated to the products for which the mark is used. Examples of arbitrary marks are APPLE® (for computers), DELPHI™ (for computer software), and RADIUS™ (for a restaurant). (More)

Licensing and Strategic Partnering

Companies have different strengths. The company with creative, technically trained executives may turn out marvelous products that they have little idea how to market, while other companies may be marketing whizzes with little product flow. Out of this may be born licensing or strategic partnering transactions.

Licensing
Licensing may involve patents, trademarks, copyrights (including copyrights in software), or trade secrets and know-how. Different legal doctrines and issues will arise in each of these types of transactions. The primary business issues that need to be resolved may include:

1. Is the license exclusive or non-exclusive?
2. What is the royalty rate? Are there any lump-sum license fees? Are they to be credited against future royalties?
3. What is the duration of the license?
4. For what field of use is the license being granted?
5. What territory is covered?
6. Who is responsible for warranty coverage and customer support?
7. Who is responsible for enforcing any intellectual property rights that may be involved?
8. Are there any performance targets, such as sales volumes, that the licensee must achieve to keep its license rights alive?

Strategic Partnering
Strategic partnering refers to special business relationships that, while close, are in fact something less than a true partnership. They typically involve one company assisting another in making sales to the first company’s customers. These relationships often involve the payment of sales commissions, and require particular attention to issues of quality control and customer support and maintenance. Since both companies will be selling to the same customers as a team, each company has an interest in how well the other satisfies the customer. (More)

Copyright Flowchart

We have prepared a flowchart setting forth some general guidelines regarding the duration of United States federal statutory copyright. There are a number of exceptions to these guidelines. In most cases, these exceptions may involve expiration prior to the theoretical date indicated. However, in some cases, copyright protection may continue past the indicated date. In addition, some remnants of state common law copyright protection continue to exist, and may provide protection even when federal copyright does not. See, e.g., Capitol Records, Inc. v. Naxos of Am., Inc., 4 N.Y.3d 540 (2005) (holding that New York state common law copyright protects sound recordings made before 1972 until February 15, 2067).

View the flowchart.

Comparison of Types of Intellectual Property

What are the types of intellectual property, and what are the differences among them? We try to answer these questions succinctly, based on current U.S. law. The classic IP types are copyrights, patents, trademarks, and trade secrets.

Copyrights

Copyright law protects original works of authorship, such as books, films, music, but many other things as well. Copyright law protects only the original expression set forth in those works, however, and not the underlying ideas, procedures, processes, systems, methods of operation, concepts, principles, and discoveries themselves. In other words, copyright protects how something is expressed, not what is expressed.

In the United States, federal copyright law protects a wide range of works, including literary works; musical works and lyrics; dramatic works; pantomimes and choreographic works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works, and computer programs. Federal copyright law is set forth in Title 17 of the U.S. Code.

Under current U.S. law, a copyright begins on the date that a work is created and lasts until 70 years after its author’s death. If the author is anonymous or pseudonymous, or if the work is made for hire, the copyright term is 95 years from the date of publication or 120 years from the date of creation, whichever expires first.

The copyright in a work is separate from the work itself and, in the absence of an agreement to the contrary, the copyright is not transferred when the work itself is sold or given away. Thus, an artist who creates a painting and sells it to a collector has not given up the copyright in the work and may prevent the collector from making and selling posters or postcards of the painting. Although the collector does not own the copyright in the work, he or she does have the right to display and sell the work itself. (More)

Patent Litigation 101

A patent owner who finds that another party is making, using or selling its patented invention may bring suit for patent infringement. Federal courts have exclusive jurisdiction over patent infringement claims. Hence the litigation must be brought in a federal district court having jurisdiction over the parties. A party accused of infringement by letter or otherwise may bring a suit against a patent owner for declaratory judgment of patent invalidity or noninfringement. Either party in a patent infringement action may demand a jury, or the case can be tried to the judge if both parties waive their jury rights.

As a general rule, patent litigation presents unusually complex issues and a case will typically take at least 18 months or more to get to trial. During the initial discovery phase, each side will make demands on the other for responses to written questions and for the production of documents relevant to the issues in the case, followed by depositions of key witnesses, including the inventor, design and engineering personnel, and financial and accounting personnel. Next, in the expert witness phase, expert witness reports are exchanged, followed by depositions of the experts. Thereafter, either side may file a motion for summary judgment with supporting briefs and documentation, seeking a ruling from the court without the need for a full-scale trial. Following resolution of such motions, the case is ready for trial.

At some point in this process, it is necessary for the court to conduct a Markman hearing to determine proper construction of the claims. Even in a jury case, it is the job of the judge to determine the meaning of the claims as a matter of law. The terms in a claim are given their ordinary and accustomed meaning unless it appears the terms were used differently by the inventor. Claim language is construed by reference to the claims, the specification of the patent, the prosecution history of the patent and the prior art. Expert witness testimony is also often considered. The timing of the Markman hearing is currently a subject of considerable controversy. Some judges have even permitted the case to be tried to the jury before resolving disputes about claim construction. In other cases the Markman hearing has been held at a preliminary stage well before trial. In many cases, the judge’s decision on the meaning of the claims may be determinative of the question of infringement. (More)

America Invents Act Delivers: Quick Administrative Decision On Patent Challenge Brings Hope to Accused Infringers

By Kerry Timbers. Co-Chair of our Litigation Practice Group

When the America Invents Act (AIA) was enacted last year to overhaul the patent laws, one of its goals was to provide cheaper and faster ways to attack patents, relative to the multimillion-dollar patent lawsuits that seem to take forever to resolve.

One of these new procedures, the Covered Business Method (CMB) review procedure, provides a relatively quick way to attack method patents in the financial and banking areas. This month, the first party to pursue the challenge was rewarded with a ruling from the Patent Trial and Appeal Board (PTAB) invalidating the patent asserted against it in a pending district court lawsuit.

SAP America has been in a multi-year infringement battle with patent owner Versata Development Group over a software-based patent for determining pricing based on which customer, from which geographic region, is buying which product. Versata claimed great success with its software until the much larger SAP introduced a competing product which, according to Versata, destroyed Versata’s customer base.

Versata sued for patent infringement and in late 2011 won a jury verdict of over $330 million. While this case was being appealed, CBM reviews became available under the AIA on September 16, 2012, and SAP took advantage of it on the very day the law took effect.

CBM reviews are available only to parties being sued or threatened on a patent involving a financial product or service. Unlike prior post-issuance reviews of patents, CBMs allow attacks on a patent not only on the basis of prior art, but also on the basis of lack of written description, lack of enablement, and indefiniteness, as well as whether the patent’s subject matter is even eligible for patenting. (More)

Patent Trolls in the Crosshairs: Vermont’s Aggressive Stance and the Emerging Federal Response

By Thomas Carey. Chair of our Business Practice Group, and Robert Williams, New England Law School summer fellow

 

Vermont Takes Charge
Vermont has begun a two-fronted battle against what it deems bad-faith patent-assertion entities (PAEs)[i], which some commentators, including some in the Obama administration, have disparaged as “trolls.”

On May 22, Vermont Governor Peter Shumlin signed into law H. 299, with the aim of ending “bad faith assertions of patent infringement” in the state by giving Vermont companies and the state attorney general the ability to sue for such litigation abuses.

Instead of defining the offending conduct, H. 299 lists factors meant to help judges spot bad faith, including sending a demand letter that lacks basic information about the infringement claim, demanding payment or a response within an unreasonably short period of time, failing to conduct an analysis of the target’s business or products or to compare them to the patent claims, and continuing to assert a patent that a court has found to be invalid. The target of such a demand can sue the PAE and seek damages, costs and fees.

On the same day, Vermont’s attorney general filed a civil complaint against MPHJ Technology Investments LLC under the Vermont Consumer Protection Act. The state’s complaint accused MPHJ of unfair and deceptive commercial practices by sending a series of letters to many small businesses and non-profit organizations in Vermont that falsely stated that “many” businesses had taken licenses to the MPHJ patents, falsely stated that MPHJ would sue those businesses that did not pay for licenses, and made these threats without undertaking any investigation of the actual business practices of the target companies.

The MPHJ patents included claims directed to the use of a scanner to send an image of a document by e-mail to someone on a corporate network. The complaint alleges that MPHJ operated in Vermont through a web of 40 special-purpose entities, presumably as a means of shielding itself from liability that might arise in individual lawsuits.

The lawsuit is not asserted under the new Vermont legislation, but under the Vermont consumer protection statute, which prohibits “unfair and deceptive” trade practices, language that has found its way into the laws of most states and originated with the Federal Trade Commission Act in 1914.

Is Vermont’s Initiative Stillborn Because of Federal Preemption?

Both the lawsuit and the new legislation are groundbreaking. But because patent rights are primarily governed by federal law, both will inevitably face preemption challenges. These challenges may arise when a state attempts to govern or regulate a subject that is exclusively a matter of federal law. Indeed, MPHJ has asked to transfer the lawsuit to federal court, arguing that the state law claim against it is preempted by federal patent law.

The Federal Circuit held in 1999 that federal patent law does not preempt allegations of state-law unfair competition that require a showing of bad faith. In a 2004 decision, it elaborated on this subject by saying that, to survive federal preemption, the allegedly bad-faith patent assertion “must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized.” This standard is referred to as “objective baselessness.” (More)

YourTrademark.Anything – Trademark Protection in the Age of the Limitless Internet

By Steven Abreu. A member of our Trademark Practice Group

Get ready for the next great land rush, because the Internet is about to expand. Top-level domains, now restricted to 22 variations like .com, .edu, .net and .gov will soon be limitless. Companies have already petitioned ICANN (the Internet Corporation for Assigned Names and Numbers) for the right to be the official registry of new top-level domains, which may now take the form of whole words like .health and .books.[i] These new domains are called “generic top-level domains.”[ii]

As trademark owners can attest, the Internet is already a difficult place to police unauthorized uses of intellectual property. Cyber-squatters register domain names that contain the legitimate trademarks of others (or commonly misspelled variants), hoping to trick unsuspecting visitors into viewing their webpages. With the availability of thousands of new domains, cyber-squatters will have thousands of new playgrounds. The coming expansion of domain names to a theoretically limitless number is cause for concern for the trademark owner.[iii]

The trademark rights-protection community is worried that a new generation of cyber-squatters is crouching at the door. However, trademark owners have gained certain protections within the new generic top-level domain regime through negotiations with ICANN. Some of these protections are already in place, and some are still being worked out. As the launch of several top-level domains is only months away, now is a good time to plan for the protection of one’s trademark rights.[iv]

The situation remains fluid, but we know enough now to advise trademark owners about a protection regime called the Trademark Clearinghouse. This is a system which will give owners of registered marks two important safeguards – also known as rights-protection mechanisms (RPMs).

• The Trademarks Clearinghouse has been established to protect trademark owners

The Trademarks Clearinghouse is essentially a verified list of registered marks eligible to receive the benefit of rights-protection mechanisms. RPMs were built into agreements between ICANN and the administrators of the new domains, known as registries. There are two mandatory RPMs and some optional RPMs. The availability of optional RPMs varies depending on the owner of the registry.

The two mandatory RPMs across all domains are: access to a sunrise period, in which a trademark owner can purchase a domain name before the general public; and notice of a potentially adverse third party domain name registration. (More)


[i] Some companies have applied to be appointed the official registry for a top-level domain so that they can levy registration charges on companies who wish to register individual domain names on that top-level domain. Other companies have applied so that they can own and administer an entire top-level domain for their own marketing purposes.

[ii] It is important to understand what a generic top level domain is and how the landscape of the internet may change in the coming years. Until now, in addition to the country-specific domain names like .ca (for Canada), there have been 22 top-level domains. The best-known of these is .com, but also among the 22 are .edu, .net, .tv, .biz, .info, .mobi and .xxx. Several of these top level domains are widely used, but many are not.

[iii] Whether or not web traffic will actually funnel to any of these new top-level domains is anyone’s guess. One might expect that people seeking information about healthcare or medicine may prefer to receive that information from websites parked at .health or .drug. If key players inside an industry begin to host information on industry-specific websites, it could spur a trend where search results are tailored to top-level domains related to an industry. (Google is the second-largest applicant for top-level domains and thus has a vested interested in the vibrancy of these new domains.)

[iv] Industry insiders expect the process of launching top-level domains to take off by late summer or early fall.

 

Reverse Payments by Drug Companies: The Supreme Court Declines to Adopt a Bright-Line Test

 

By Thomas Carey and Nancy Wilker, Ph.D. Mr. Carey is Chair of our Business Practice Group and Dr. Wilker is a member of our Life Sciences Group

The Federal Trade Commission has long opposed “reverse payments,” the practice by which a pioneer drug company selling a brand-name drug pays a generic drug company to not enter the market. These payments arise in connection with the settlement of litigation of an Abbreviated New Drug Application (ANDA) filed with the Food and Drug Administration. These ANDA litigations typically challenge the validity of the pioneer drug company’s relevant patents.

While the FTC has challenged such settlements on several occasions, it has usually lost. In several instances, federal appeals courts have held such settlements to be a valid exercise of the patent rights of the proprietary drug company.

The FTC had one recent victory before the Third Circuit Court of Appeals, which agreed that such payments were presumptively illegal. At about the same time, however, the Eleventh Circuit Court of Appeals dismissed a case brought by the FTC involving Androgel, a patent-protected drug sold by Solvay Pharmaceuticals. The FTC appealed the Androgel ruling to the Supreme Court, which agreed to resolve the split of authority among the circuit courts.

On June 17, a bare majority of the Supreme Court ruled in FTC v. Actavis, Inc. that neither side was right. It refused to apply the presumption of illegality that the FTC urged, but also refused to rule that any exercise of patent power is immune from antitrust scrutiny, as several lower courts had held. Instead, the court reverted to the “rule of reason,” an antitrust standard by which the trial court is asked to weigh the pro- and anti-competitive aspects of a business practice.

The court relied on two 1948 price-fixing cases that invalidated cross-licensing by multiple patent holders and involved agreements to charge minimum prices and, in one case, involved agreements that restricted trade in unpatented items. Applying these precedents to the Androgel settlement, the court held that reverse payments may be unlawful even though they appear to be an exercise of patent rights. The court reversed the dismissal of the FTC’s complaint and remanded the case for a trial on the merits. (more)

Myriad Genetics: The Supreme Court Rules That Isolated DNA Is Not Patent Eligible

 

 

By Kathleen Williams, Ph.D. and Amy DeCloux, Ph.D.  Members of our Life Sciences Practice Group

 

“The very first official thing I did in my administration – and it was on the very first day of it, too – was to start a patent office; for I knew that a country without a patent office and good patent laws is just a crab, and couldn’t travel any way but sideways or backways.”

Mark Twain, A Connecticut Yankee in King Arthur’s Court
 

The Patent Act of 1793, authored by Thomas Jefferson and clearly a favorite of Mark Twain’s, defined patent-eligible subject matter as “any new and useful art, machine, manufacture, or composition of matter, or any new useful improvement [thereof].” The Act embodied Jefferson’s philosophy that “ingenuity should receive a liberal encouragement.”
 

It is upon Jefferson’s carefully crafted definition of patent-eligible subject matter (codified in §101 of the Patent Act) that the U.S. Supreme Court rested its considerable weight in its ongoing effort to define patent-eligible subject matter.

The court’s long-anticipated decision in Association of Molecular Pathology. v. Myriad Genetics Inc., published on June 13, unanimously supported the premise that a gene in its isolated form cannot be the subject of a U.S. patent:

“We merely hold that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.” (emphasis added).
 

The word “merely” is a key to understanding the overall effect—and narrowness–of the decision.
The Myriad litigation was begun by a group of plaintiffs, including the American Civil Liberties Union, who challenged Myriad’s patents by asserting isolated DNA to be a product of nature and thus not patent-eligible subject matter. The plaintiffs sought to invalidate all existing gene patents, to prevent the future issuance of patents claiming human genes, and thereby to eliminate barriers to competition for genetic tests.

While the ACLU achieved its nominal objectives, the Myriad decision should not significantly impede patent protection of genetic tests or commercialization of discoveries in human diagnostics and personalized medicine.

The science of predicting or diagnosing human disease has moved towards identifying mutation in many genes, no one of which on its own is predictive or dispositive. Thus, new diagnostics have moved beyond the isolation of individual genes and incorporate inventions that involve combinations of gene segments, where each gene segment has a naturally occurring sequence but the combination of sequences does not occur in nature. (More)

 

Gimme Shelter: When Does a Content-Sharing Website Incur Copyright Liability?

By Thomas Carey. Chair of our Business Practice Group

 The Digital Millennium Copyright Act (DMCA) insulates on-line service providers from copyright infringement claims if they:

1. Have a robust take-down policy,
2. Do not tolerate infringement of which they have actual or constructive knowledge, and
3. Do not receive a financial benefit directly attributable to infringing activity that they have the right and ability to control.

This “safe harbor” from liability is the focus of two recent cases involving YouTube and isoHunt.com, a BitTorrent site. The business of YouTube is to enable the uploading and streaming of video content provided by users.

BitTorrent sites, in turn, help users identify files available for copying on third-party computers using peer-to-peer technology (think “Grokster” on steroids, but constructed to better distance the website from the infringing activity).

The ever-thorny problem is that a tremendous number of the videos and files that are available on or through these websites infringe the rights of copyright holders.

Both YouTube and isoHunt derive their revenue largely from advertisers, not from subscription fees. YouTube’s servers actually contain the infringing material; isoHunt merely directs users to peer-to-peer networks where it can be found.

YouTube’s internal studies estimate that 75% – 80% of all YouTube streams contain copyrighted material. IsoHunt has no such internal documents. Yet YouTube has so far escaped liability based upon the DMCA safe harbor, while isoHunt has not. What accounts for this different result?

These cases involve an active dialogue between two courts of appeals that cite each other in their opinions: the Second Circuit, which took up the YouTube appeal; and the Ninth Circuit, which heard the isoHunt appeal.

The two courts agreed on two key aspects of the DMCA safe harbor: The question of constructive knowledge of infringement (which they call “Red Flag Knowledge”) requires actual knowledge of facts and circumstances that would lead a reasonable person to conclude that infringing activity was taking place; and the element of control referred to in the third qualification for safe-harbor protection listed above must involve something more than the ability to locate infringing material and terminate users’ access to it. (More)

Litigator’s Perspective: I’ve a Hunch You’re Stealing My Invention

By Joel Leeman. A member of our Litigation Practice Group

 

The Federal Circuit, the appeals court for all patent litigations, has given its blessing to the no-frills complaint that has become standard in infringement lawsuits. The court bucks recent judicial trends of mandating more detailed pleadings in support of claims for relief.

Patent litigation, for all its knotty complexities and notoriously high cost, is typically launched with a complaint of surprising spareness. The patent owner need only say he owns a specific patent and that the defendant is infringing it by making, selling and/or using a device or method that practices the patent.

Indeed, an appendix to the rules of civil procedure includes a sampler of complaints for a dozen different situations, all intended, in the words of Rule 84, to “illustrate the simplicity and brevity that these rules contemplate.” Form 18 is a complaint for patent infringement laid out in a mere four paragraphs.

Sometimes, parties on the receiving end of an infringement complaint feel frustration when the lack of detail leaves them wondering how precisely they are thought to be infringing. Two such defendants, Time Warner and DirecTV, persuaded a federal judge in Los Angeles to dismiss an infringement complaint from K-Tech Telecommunications for failure to state a claim.

It’s not enough, said the judge, that K-Tech thinks the defendants “must” be infringing. Even though the complaint met the bare-bones criteria of Form 18, the judge faulted K-Tech for not explaining why it believed the two defendants were practicing K-Tech’s patented method rather than some alternative method that did not infringe.

In K-Tech Telecommunications v. Time Warner Cable, the Federal Circuit stood up for traditional modes of pleading, holding that the law does not require a patent owner to identify the devices or methods that are believed to be infringing. It follows that a plaintiff need not exclude the possibility that the defendant is using a noninfringing alternative. (More)

To the Chagrin of Copyright Holders, Consumers Win the Right to Resell Imported Books

By Sharona Sternberg. A member of our Litigation Practice Group

 

Just over a century ago, when buying a book for a dollar still seemed expensive, the Supreme Court first recognized the “first sale doctrine,” a basic exception to a copyright owner’s distribution rights. Once a consumer buys a copyrighted product, like a book, the copyright holder—whether it be the author or a publisher—has exhausted all rights to control the product’s downstream distribution.

As long as the legitimate buyer does not make any copies, he is free to give away, lend, or discard his book as he pleases. Most significantly, the buyer can resell the book at any price, potentially undercutting the demand for new books sold at prices set by the original copyright owner or publisher.

Following the 1908 Bobbs-Merrill decision and subsequent cases, the first sale doctrine was codified as § 109(a) of the Copyright Act. In 1998, the U.S. Supreme Court in Quality King revisited the right of resale, holding that a copyrighted item manufactured in the United States but sold abroad could be legally imported and resold in the U.S. The court held that the copyright owner’s importation right [§ 602(a)(1)] is subject to the general distribution right, which is expressly limited by the first sale doctrine. Goods can thus make the round-trip to Malta and back without the permission of the copyright holder.

The Quality King court, however, did not resolve the more common scenario in which a copyrighted product is manufactured abroad and sold abroad (often at a price lower than for the same product in the United States), and is later resold in the U.S. at a discount.

Without committing itself, the court implied that the sale into the United States of these “gray market” goods would not be protected by the first sale doctrine. In a 2010 case, Costco v. Omega, the court addressed this exact quandary. However, because of Justice Kagan’s recusal due to her participation in the case as Solicitor General, the court was deadlocked at 4-4 and the debate continued. (More...)

Patent Owners Gain Revitalized Right of Enforcement Against Equivalents

By Robert Asher. Co-Chair of our Patent Practice Group

Recent decisions by the Federal Circuit Court of Appeals have breathed life into the doctrine of equivalents. This doctrine is judge-made law that allows patent owners to establish infringement when an accused product or method has skirted the literal wording of the patent claims but is only insubstantially different from the claimed invention.

The claims of a patent typically define the legal scope of the invention. The broader the claims, the more expansive the patent protection and the more difficult it is to get the claims allowed in the U.S. Patent and Trademark Office.

Due to the vagaries of language and invention and the unforeseeability of all variations on an inventive concept, any word or phrase in a patent claim offers aggressive competitors an opportunity to design around the words, while still benefiting from the inventive teachings. The doctrine of equivalents was developed to protect the invention when the claim language turns out to be too limiting.

The patent litigated in Deere & Co. v. Bush Hog, LLC (2012) was directed to a rotary cutter deck that houses one or more powered mower blades. The upper deck slopes downwardly “into engagement with, and being secured to” the lower deck. Rather than directly engaging the upper deck with the lower deck, the accused products included an intermediate structure connecting the upper deck to the lower deck.

The district court judge found no infringement because the upper deck of the accused product did not directly contact the lower deck. The Federal Circuit reversed, stating “into engagement with” did not require direct contact. Indirect contact could suffice. (More)

Biotechnology Industry Reaps a Harvest of Patent Protection from Supreme Court Ruling

 

By Wei Campbell and Kathleen Williams. Members of our Life Sciences Practice Group

May 2013 IP Update
 

At the height of this spring season, the Supreme Court planted a seed of hope for the biotechnology and other industries that offer self-replicating technologies. In Bowman v. Monsanto Co., the court unanimously ruled that farmer Vernon Bowman infringed upon Monsanto’s patents on soybean seeds when he replanted these genetically modified seeds to create more crops without paying Monsanto a fee.

The question before the court was “whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission.” Monsanto holds patents on genetically modified soybean seeds, Roundup Ready, which are resistant to glyphosate, the active ingredient in many herbicides. (More)