Oldies and Broadcasters: No Longer Happy Together?

By Thomas Carey. Chair of the Business Practice Group

Copyright law is full of nooks and crannies, some of which aren’t explored for years or even decades. Recent decisions from courts in California and New York cast a bright light on a seldom considered subject: state law copyright protection.

The Turtles, a California rock group that performed from 1965 – 1970, had their first hit with a 1965 cover of Bob Dylan’s “It Ain’t Me Babe”. Their most successful song, “Happy Together,” reached number one on the charts in 1967. A handful of their other songs made the top ten. Their music lives on, broadcast over the air by Sirius XM and others, and over the internet by Sirius XM, Pandora and others.

Two of the founding members incorporated and own Flo & Eddie Inc., which owns the rights to the master recordings of the Turtles’ music. Federal protection of copyright is based upon the copyright clause of the United States Constitution.

Federal copyright statutes, which generally preempt state law, have protected musical compositions since 1831. But that protection benefited only composers (and their assignees) until February 15, 1972. On that date, an amendment to the Copyright Act, designed to curtail piracy of phonograph records, became effective. This amendment did not give copyright holders the right to prevent others from playing the records for public entertainment (over the air, for example), but prohibited only the unauthorized manufacture of copies of the records.

While this amendment preempted all state law protection for sound recordings to which it applied, it specifically preserved (until 2067) state law protection for sound recordings made before February 15, 1972 (we will call them “Oldies” here). In 1995, the Copyright Act was further revised to provide copyright holders with a right to royalties for playing recorded performances over the air, but only for transmissions in digital form. This right does not apply to Oldies, which are not eligible for federal copyright protection.^[1] Traditional analog radio stations have thus been spared the obligation to pay performance royalties when they broadcast recorded music, but as always they must pay royalties that benefit the composers of that music.

As a result, no federal law benefits the Turtles when their performance of “It Ain’t Me Babe” is played on the radio. They did not compose the song and their performance was recorded before February 15, 1972. In fact, commercial radio stations and digital distributors of music such as Sirius XM and Pandora have never paid “performance royalties” for playing Oldies.

It had been accepted wisdom in the music industry that Oldies had no performance-based copyrights under any law, state or federal. For example, the Chairman and CEO of the Recording Industry of America (RIAA) testified before Congress in 1995 that “Under existing law, record companies and performers … have no rights to authorize or be compensated for the broadcast or other public performance of their works.”

That may all be about to change.

In 2013, Flo & Eddie brought suit against Sirius XM in California, New York and Florida, alleging infringement of rights under the copyright law of those three states for the unauthorized broadcast of Oldies. Not to be outdone, major record labels including Sony, UMG and Warner brought suit against Sirius XM in California state court on the same theory.

Sirius resisted the claims by arguing that the relevant state courts had never ruled that state copyright law protected performances of recordings and thus no such protection exists; that well-established customs in the recording and broadcast industries should be respected; and that the founders of the Turtles (and Flo & Eddie), themselves long-time subscribers to Sirus XM radio, had done nothing to assert their rights for decades and should not be permitted to do so after having been silent for so long. Sirius XM also argued that state regulation of national broadcasts would violate the Commerce Clause of the Constitution.

As Sirius XM pointed out, the broadcast and recording industries had for decades operated on the assumption that no law required broadcasters to pay performance royalties for broadcasting Oldies. Were they wrong? Three courts – two in California and one in New York – have recently ruled that they were. (More)

^[1]Section 301(c) of the Copyright Act provides: “[N]o sound recording fixed before February 15, 1972 shall be subject to copyright under this title . . .”

 

By Elizabeth Spar, Ph.D. A member of our Patent Practice Group

 

On May 8, 2014, the Federal Circuit released its opinion in In re Roslin Institute, addressing whether Dolly, the cloned sheep, was patentable. The Court held that in the absence of claim elements encompassing “markedly different characteristics from the donor animals of which they are copies” cloned animals are not patent eligible under 35 U.S.C. §101.

Background

On July 5, 1996, Keith Henry Stockman Campbell and Ian Wilmut successfully produced the first mammal ever cloned from an adult somatic cell: Dolly the sheep. The cloning method used by Campbell and Wilmut, known as somatic cell nuclear transfer, involves creating a clone embryo by removing the nucleus of a somatic cell of a donor and fusing that nucleus with an enucleated (non-nucleated) ooctye (egg cell), from which an embryo develops. The embryo is implanted into a surrogate mammal and develops into a baby animal. Dolly was cloned from the fusion of a nucleus of an adult, somatic mammary cell with an enucleated oocyte. According to the court, “[t]he resulting cloned animal is an exact genetic replica of the adult mammal from which the somatic cell nucleus was taken.”

Campbell and Wilmut applied for patent protection for the somatic method of cloning mammals, as well as the clones themselves. They received a patent on their innovative method of cloning mammals in 2009 (U.S. 7,514,258). They also applied for a patent to the actual cloned animals —U.S. Patent Application No. 09/225,233 (the ’233 application). Claims of the ’233 application were directed towards the live-born clones of “cattle, sheep, pigs, and goats,” including these claims:

• A live-born clone of a pre-existing, non-embryonic, donor mammal wherein the mammal is selected from cattle, sheep, pigs, and goats.
• The clone of any one of claims 155-159, wherein the donor mammal is non-foetal.

In 2008, the U.S. Patent and Trademark Office rejected the claims of the ‘233 application as directed to non-statutory subject matter under 35 U.S.C. 101 and as anticipated and rendered obvious under §102 and §103. The applicants appealed these rejections to the Patent Trial and Appeal Board (PTAB).

Is Dolly Patent Eligible Subject Matter?

Section 101 of the Patent Act allows an inventor to obtain a patent for any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. However, over the years the courts have ruled that laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection even if they appear to fall within the scope of Section 101.

The examiner of the’233 patent application rejected all of the application’s claims, as directed to patent ineligible subject matter. The PTAB upheld the examiner’s rejection on February 7, 2013. Following that ruling, the Roslin Institute appealed to the Federal Circuit.

In arguing that Dolly was a patentable invention, Roslin said that “Copies (clones) are eligible for protection because they are ‘the product of human ingenuity’ and not nature’s handiwork, but [their] own”. Roslin also argued that the claimed clones are distinct from the donor mammals from which they are created. In support of that argument, Roslin pointed out that:

• “environmental factors lead to phenotypic differences [observable characteristics such as shape, size, color and behavior] between its clones and their donor mammals that render their claimed subject matter patentable”; and
• “its clones are distinguishable from their original donor mammals because of differences in mitochondrial DNA, which originates from the donor oocyte rather than the donor nucleus.” (Mitochondria are organelles present in multiple copies inside a cell that convert chemical energy from food into a form that can be used by cells.)

In considering whether the composition claims of the ‘233 patent constituted patent eligible subject matter, the Federal Circuit discussed Supreme Court decisions holding that naturally occurring organisms are not patentable. The court then said: “Dolly herself is an exact genetic replica of another sheep and does not possess ‘markedly different characteristics from any [farm animals] found in nature…Dolly’s genetic identity to her donor parent renders her unpatentable.”

The court responded to Roslin’s arguments about the differences between the clone animals and the original donor animals by noting that neither of the “phenotypic differences” or any “difference in mitochondrial DNA between the donor and claimed mammals” were claimed in the patent application.

Roslin also argued that “its clones are patent eligible because they are time-delayed versions of their donor mammals, and therefore distinct from their original mammals” to which the court responded, “[t]he difficulty with the time-delayed characteristic is that it is true of any copy of an original.”

Having rejected all of Rosin’s arguments, the court affirmed the finding of the PTAB that Roslin’s clones are unpatentable subject matter under §101. (More)

Don’t Overlook Utility Model Protection

By Steven Saunders. Vice-Chair of the Patent Practice Group

 

US companies often struggle with the costly decision of whether they should file patent applications in foreign countries. Rather than taking a scorched-earth approach of filing in too many countries—depleting even the most well-endowed budgets—or, conversely, skipping foreign filing altogether because of the daunting cost, companies should consider the frequently overlooked option of filing a so-called “utility model.” While its scope of protection can be limited and uneven, a utility model can provide quick, patent-like protection for a new innovation.

A utility model is an intellectual property right that is similar to a patent but, as is explained in greater detail below, it is generally subject to less demanding examination prior to issuance, requires less creativity than a patent, has a shorter duration and may in some jurisdictions be easier to challenge.

A utility model can act as an adjunct to, or possibly as a substitute for, a direct national phase filing. In fact, companies can pursue a tiered strategy overseas by filing utility models in countries of secondary importance, and normal patent applications in countries of primary importance. To enhance protection for a critical technology, some companies go so far as filing both utility models and regular patent applications in the same countries.

Although details vary from country to country, utility models generally have a number of common attributes, such as:

• Protection is of shorter duration than normal patents–often between 5-10 years.
• Examination typically is less rigorous than that for normal patents. Some countries merely require novelty. Often, the utility model application is not substantively examined at all. Instead, it simply is registered as filed. Moreover, utility model applications usually issue much faster than normal applications (e.g., within 3-5 months in Germany) and are less expensive. Unlike some other countries, Germany requires utility models to have an inventive step (like non-obviousness in the US), but they do not examine for that requirement.
• The holder of a utility model often can receive monetary damages for infringement and a permanent injunction (e.g., Germany). In some countries, such as Germany, preliminary injunctions are unavailable.
• Since they are typically not subjected to rigorous examination, the claims are usually less likely to survive a patentability challenge in court.
• Many countries (e.g., Germany) do not provide utility model protection on methods–only on devices.
• Utility models often can begin as original filings, or branch off other filings, such as a filing under the Patent Cooperation Treaty or a local, already filed regular patent application. In fact, both the regular patent application and utility model typically can be prosecuted at the same time. In some jurisdictions, an applicant who faces significant resistance during examination of a regular application can convert that application to a utility model, which should be much easier to get allowed. (More)

Surviving the Judicial War on Patents: Strategies after Alice and Ultramercial

By Bruce Sunstein. A member of our Patent Practice Group

On November 14, the Federal Circuit Court of Appeals rendered an unsettling decision in Ultramercial Inc. v. Hulu, Inc. The patent claims were directed to a method of distributing copyrighted media products over the Internet free to consumers. The consumer would be presented with an advertisement as well as the desired content and the advertiser would pay for the ad placement, thereby underwriting the consumer’s enjoyment of the copyrighted content.

The opinion was written by Judge Lourie, who is something of an expert on patent eligibility, since his opinion in the Federal Circuit’s decision in CLS Bank v. Alice Corp. formed the basis for the Supreme Court’s decision in Alice Corp. v. CLS Bank.

Alice is one of three recent cases in which the Supreme Court has run amok seeking to rein in the patent system. This unholy triad includes Mayo v. Prometheus, about which we wrote here and Ass’n for Molecular Pathology v. Myriad (our article here), as well as Alice Corp. v. CLS Bank (our article here). These cases make it possible to challenge any patent on the theory that what it covers is not, in fact, eligible to be protected by a patent. It does not matter that the patent has been approved and issued by the Patent and Trademark Office. Nor does the presumption of validity, which normally applies to patents, help much to protect a patent from assault based on ineligible subject matter.

Although these Supreme Court decisions relate to patents in the fields of diagnostics (Mayo), biotechnology (Myriad), and computer-related inventions (Alice), their logic can be used to invalidate any patent, as Ultramercial shows. Furthermore, this invalidation can be achieved without a trial and without the formal exercise of determining what the claims in the patent actually mean.

According to these cases, even though the subject matter claimed appears to fit within a category of items that the Patent Act says can be patented (in this case a process carried out by a computer), the claims are not eligible for patent protection if they are directed to laws of nature, natural phenomena, or abstract ideas. (More)

Patent FAQ's, Part VI

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.

 

What post-issuance procedures are important?

 

Reexamination, Post-Grant Review, Inter Partes Review, Reissues, and Other Proceedings
Once a patent is issued, the patentee may request review again by the U.S. Patent and Trademark Office by means of a reissue or an ex parte reexamination. A third party can institute an ex parte reexamination, post-grant review, an inter partes review, or a derivation proceeding.

Because of the limited involvement of requesters in ex parte reexamination proceedings, Sunstein always recommends that the pros and cons of a reexamination request be carefully weighed before choosing reexamination as an inexpensive alternative to patent litigation. On the other hand, reexamination can be an excellent tool for opening up a market that one would like to enter but for the patent infringement risk. The relatively low cost of requesting reexamination or these other post-grant procedures makes them attractive to clients with a limited budget.

Post grant review (PGR) and inter partes review (IPR) give third parties more involvement in the proceedings. Third parties further benefit from rules limiting the ability of the patent owner to amend or add claims. Moreover, a final decision will issue from the Patent Trial and Appeal Board (“PTAB”) within one year of institution of the review. The final decision will be controlling over any litigation in court. On the other hand, third parties need to be aware that in order to keep these proceedings streamlined the PTAB will often limit the arguments that can be raised and the claims that can be challenged. There is also uncertainty as to which arguments, if any, challenging the patent can later be raised in court on the basis of prior art patents or publications (and in the case of PGR, other grounds), should the patent survive the proceeding.

A reissue proceeding can be initiated by a patentee if there was some mistake on the part of the applicants that caused them to obtain more or less coverage than that to which they were entitled. Accordingly, a reissue can broaden or narrow the claims. A broadening reissue must be filed within two years of the patent’s issue date.

Marking the Invention
Once a patent is issued, the patentee should mark all products incorporating the invention (including those sold by licensees) with the patent number. The AIA introduced a new concept of “virtual patent marking,” allowing a patent owner to affix the word “patent” or the abbreviation “pat.” along with a freely accessible website which associates the article with the appropriate patent number. The legislation also included a provision calling for review and analysis of this change to take place 3 years after the enactment. A failure to mark may harm a patentee’s ability to get damages in litigation by cutting off damages arising before the accused infringer received actual notice of infringement.

Thus, it is important for patentees to make sure that all of their products and all of their licensees’ products are properly marked. False marking on the other hand, refers to the practice, with intent to deceive the public, of marking a product not covered by the patent listed or indicating that a patent has been applied for when no application is pending. A party can be sued for false marking by a person who has suffered a competitive injury, who can recover damages “adequate to compensate for the injury” or by the United States government, which could recover fines of up to “$500 for every such offense” pursuant to 35 U.S.C. sec. 292. False marking law changed dramatically with the AIA. Previously, any person could sue on behalf of the U.S. government, even without any harm. The AIA also excluded from conduct in violation of sec. 292 the act of including an expired but formerly applicable patent on an article.

Clearance Opinions
One should take care to avoid willfully infringing a patent owned by another, as a finding of willful infringement can result in the trebling of damages and the award of attorney fees. In order to avoid such a finding, a client should consult a patent attorney to evaluate whether a patent of concern is infringed by what the client intends to sell. Sometimes a design-around will be necessary. Once the client’s plans have cleared, the client should consult with the patent attorney about having a formal, comprehensive written opinion prepared by patent counsel that the product in question does not infringe the patent, or that the patent is invalid or otherwise unenforceable. This opinion should be sought as soon as it is realized that a given patent may pose a problem. Sunstein regularly prepares such clearance opinions for its clients. Since clearance opinions are often introduced as evidence at trial, we believe that a properly prepared clearance opinion can have an impact beyond limiting the risk of enhanced damages.

As of November 29, 2000, patent applications can raise the specter of patent infringement as to patent applications that have been published but not yet issued. Anyone receiving a Notice of Published Application of a patent application should seek counsel from a patent attorney. The attorney will be able to follow the prosecution of the application in the patent office. The attorney will further be able to evaluate the risks of infringement, develop strategies for designing around the patent claims, search for prior art, and at an appropriate stage, prepare a written clearance opinion. (More)

Patent FAQ's, Part V

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.

 

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.

 

What is the significance of a patent being published?
As of November 29, 2000, the United States Patent and Trademark Office began publishing patent applications. Typically, publication of an application will take place 18 months from the earliest priority date for the application. If secrecy of the invention is important, an applicant can avoid publication by submitting a request upon filing the application and certifying that the invention has not and will not be the subject of an application in another country. If the applicant later decides to file in a foreign country or internationally under the Patent Cooperation Treaty, the applicant must notify the U.S. Patent and Trademark Office within 45 days.

The publication of an application provides the patent applicant, for the first time, with the ability to go after damages corresponding to a reasonable royalty for patent infringement occurring prior to patent issuance. These are called provisional rights. Provisional rights are only available once the application issues as a patent. A further limitation on obtaining such pre-issuance damages is that actual notice of the published application must have been provided to the infringer and the infringed patent claims must be in the issued patent and be substantially identical to claims in the published application. Anyone receiving a notice of a published application should contact a patent attorney who can evaluate the matter of infringement, follow the continued prosecution of the application in the Patent Office and determine the advisability of a clearance opinion. A patent applicant interested in securing provisional rights may want to request early publication of the application to start the damages period sooner.

The publication of applications should make the examination of applications more comprehensive. The patent examiners will have easier access to a much larger database of recent prior art. A published application will be prior art as of its earliest filing date in the Patent Office. (More)

Patent FAQ's, Part IV

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.

 

What goes into a patent application?
The patent laws require a disclosure of the invention. In most cases, drawings are required. In all utility cases (but not design cases), a written specification is required. This specification has two main parts: (i) the disclosure of the invention that will teach the public about the invention (as part of the exchange referred to above between the inventor, who has made an advance in the field, and the government, which grants a monopoly in the invention); and (ii) the claims. A United States patent application must also include an oath and filing fee. A provisional application does not require all these parts. The different components of a patent application are discussed below.

The Disclosure
The requirements for the written disclosure to be made in a patent application are set forth in the first paragraph of 35 U.S.C. sec. 112, which reads as follows:
“The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out the invention.”

The statute requires that the “best mode” be disclosed. Congress does not want inventors withholding important information about the invention so that after the patent expires, others cannot practice the invention with the same benefits or efficiency as the inventor. For this reason, patents are sometimes incompatible with trade secrets. If the trade secret is important to know for “the best mode . . . of carrying out [the] invention,” then the failure to disclose the secret in the application may invalidate any patent that may issue from that application. While the best mode requirement is important in prosecution, the AIA has eliminated it as a way to challenge the validity of a patent in litigation.

Although the claims are clearly the most critical part of the patent, we at Sunstein draft the disclosure with the view that a well-drafted disclosure will make it easier to obtain broad coverage during the prosecution of the patent application and will strengthen the patent owner’s case during patent litigation.

The Claims
The second paragraph of 35 U.S.C. sec. 112 reads: “The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.”

The claims, which are usually written in a very arcane style, are the most critical part of the patent. The claims are meant to define what is covered by the patent. If an accused product or process falls within the scope of a valid claim, it infringes the patent. A product or process may infringe a claim literally or under the Doctrine of Equivalents, which allows in some cases a finding of infringement if the accused product or process does not include each of the elements of the claim but does include at least an equivalent of any element that is literally absent. Yet the Doctrine of Equivalents cannot be so broadly applied to cover anything that would have been obvious in light of the prior art.

For any invention that is valuable, the drafting of the claims should be done by a patent attorney. It has been the experience of Sunstein, that many inventors do not appreciate the scope of their invention. Without the assistance of an experienced patent attorney, claims often are drafted too narrowly. (More)

Patent FAQ's, Part III

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.

 

What are the different types of patents?

There are three types of patents that an inventor can obtain in the United States: a utility patent, a design patent and a plant patent. The type of patent with which most people are familiar is a utility patent, which is a patent for a new and useful invention. The subject matter for each of the three types of patents is discussed further below.

Utility Patents
In order to obtain a utility patent, the invention must be for a “new and useful process, machine, manufacture, or composition of matter . . . .” This requirement is fairly straightforward and is usually not a problem, except in certain areas.

A series of very vague, indefinite and often misleading maxims have arisen over time to address what may and may not be patented. For example, “mathematical algorithms,” “mental steps,” “laws of nature,” “products of nature,” “methods of doing business,” and “printed matter” have, in the past, been held to be not patentable. Patents are regularly issued that defy these maxims. For instance, purified products of nature are generally patentable, assuming that the other requirements of patentability are satisfied. In addition, computers and the Internet have now transformed methods of doing business and mathematical algorithms into protectable machines and processes.

Decisions by the Federal Circuit Court of Appeals favorable to patent applicants have caused the U.S. Patent and Trademark Office to rewrite and loosen its guidelines for examining patent applications for software inventions.

Medical procedures are patentable in the United States; however, the patentee’s ability to sue all infringers of a patent directed to a medical procedure has been curtailed by recent legislation. This legislation makes it even more important to consider likely defendants when drafting a patent claim. For instance, it is usually easier to sue the manufacturer of an infringing product than the consumers, so the patent should be drafted to cover the product as it leaves the factory—as opposed to how it may be used by the consumer—so as to avoid having to show the additional elements of contributory infringement. Many foreign countries limit the patentability of medical procedures.


Design Patents
Design patents have different subject matter requirements from utility patents, as set forth in 35 U.S.C. sec. 171, which reads as follows: “Whoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor, subject to the conditions and requirements of this title. The provisions of this title relating to patents for inventions shall apply to patents for designs, except as otherwise provided.”

One difference between utility patents and design patents is the length of their terms. Utility patents generally have a term of twenty years from the earliest effective filing date—or seventeen years from issuance, depending on when they were filed. Design patents have a term of fourteen years from issuance.

The aspects of the design claimed in a design patent must be ornamental, as opposed to functional. This can sometimes be a very fine distinction. Design patents can be very useful (especially as a surrogate for or in conjunction with trade dress and other trademark protection), but are not considered to be as valuable as utility patents, since they are not supposed to protect the underlying concept that makes a product function the way that it does, and since it is usually very easy to design around an ornamental design. Design patents, on the other hand, are generally easier and less expensive to obtain than utility patents.

Plant Patents
It is possible to get a patent on living plants, including hybrids, mutants, and newly found seedlings, provided that the plants are asexually reproduced and are of a distinct and new variety. Plants can also be protected by utility patents in certain circumstances. The requirements for obtaining plant patents are set forth in 35 U.S.C. sec. 161.

 

What is patentable?
Pursuant to Article 1, section 8, clause 8 of the U.S. Constitution, the U.S. Congress has the power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Congress has exercised this power by creating statutory schemes for copyrights and patents. The rules for what is and is not patentable, as promulgated by Congress, are set forth below. Congress has also set up the United States Patent and Trademark Office (the USPTO), whose primary responsibility is to review patent applications and issue a patent if the application meets the statutory requirements. (More)

Patent FAQ's, Part II

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.
 

What are some of the differences between patents and other types of intellectual property?
The different types of intellectual property—patents, copyrights, trade secrets and trademarks—have different purposes, different strengths and different weaknesses. In many cases, a proper strategy for protecting a new product line will involve several different types of intellectual property. Sunstein is well suited to consider and implement such a strategy, since our attorneys are familiar with all these areas.

A patent is generally considered to be the strongest way to protect an invention—assuming that a patent with broad coverage can be obtained for the invention. A patent is frequently the only way to protect an invention adequately. In many cases, trade secret protection is impossible or impractical, because of the nature of the invention (e.g., the invention is mass marketed and can be reverse engineered), or because of other circumstances (e.g., the engineers move freely among competitors in the industry). A copyright is not supposed to protect an idea, only the expression of the idea. Trademark and trade dress protection is meant to prevent consumers from being misled about the origin of a product and is not intended to prevent competition in the underlying product.

Patents have other advantages over other types of intellectual property protection. In particular, in order to prove infringement of a patent, one does not have to show that the accused party copied the invention from the patent owner, nor does one have to show that the accused party breached an agreement with the patent owner. Indeed, the infringer may be liable even if the infringer was unaware of the patent or of the patent owner.

In other words, someone who has independently developed their own product can innocently infringe a patent and still be liable. Unlike in patent litigation, to prove copyright infringement in copyright litigation, one has to show—by one means or another—copying of the copyrighted work. To prove misappropriation of a trade secret, one must show that the trade secret was improperly appropriated.

Issued patents are entitled to a statutory presumption of validity pursuant to 35 U.S.C. sec. 282. In addition, since the institution in the early 1980′s of the Federal Circuit Court of Appeals, which hears the appeals of all patent infringement cases, patents have become much more valuable. Whereas about two-thirds of patents in litigation had been invalidated, now about two-thirds are upheld.
There are some disadvantages to patents over other types of protection. Patents have a short, limited life compared to copyrights, trade secrets and trademarks. Utility patent applications filed on or after June 8, 1995 have a term of twenty years from the earliest effective filing date. Design patents have a term of fourteen years from the patent’s date of issuance. By contrast, trade secret protection and trademarks can last indefinitely if properly handled.

A patent can be enforced only after it has been issued by the U.S. Patent and Trademark Office. Patent prosecution takes significantly longer than the copyright registration process—typically measured in years (although, if examination is accelerated or if the application is for a design patent, the examination can take less than a year). Trade secrets do not require any government approval. (More)

Patent FAQ's, Part I

by Bruce D. Sunstein, Timothy M. Murphy and Robert M. Asher

 

With all of the changes to the patent system arising from the decisions of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, it’s helpful to go back to basics and to contemplate the fundamentals of patent law in view of these decisions.
 

Below, we answer some frequently asked questions about patents. This summary is provided for informational purposes only, and does not constitute legal advice. Any specific question about patent law should be directed to an attorney in our Patent Practice Group.
 

What is a patent?
A patent can be a very valuable asset for a business selling a novel product or using a novel process. A patent is a right, granted by the government, to exclude others from making, using or selling within the government’s jurisdiction the invention as claimed.
Patents are intended to promote innovation and the exchange of ideas. The granting of a patent is traditionally considered an exchange between the applicant and the government: the applicant permits the invention to be disclosed to the public (and pays a variety of fees) and in return the government grants the applicant a monopoly to practice the invention as claimed in the patent document. But of course it’s not that simple, as the invention and the patent application must meet all of the government’s requirements.
Having the right to exclude others from making and using or selling your invention can be a very powerful tool for the success of your business. At Sunstein, our goal is to allow the client to maximize the leverage afforded by patents and other intellectual property.

 

What does a patent look like?
A patent is a document that describes the invention protected by the patent and sets forth in the claims the scope of the invention. To view a typical patent, click here (PDF: 183KB). This patent was prosecuted by Sunstein. It, and other patents, can be found on the website of the United States Patent and Trademark Office.

 

Why are patents important?
If someone else has or obtains a patent that covers your product or process, you (i) may be enjoined from making, using and selling the product or process; and (ii) may be subject to significant monetary damages—even if you did no copying and even if you did not know about the patent. In certain cases, the damages may be doubled or trebled and attorney fees granted.

One of the services provided by Sunstein is to conduct searches of issued patents to determine the degree of risk our clients undertake in introducing new products or in continuing to sell a product accused of infringement. Often, we will suggest design modifications for a product to minimize the risk of a successful patent infringement suit against our clients. Sunstein prepares clearance opinions to address such issues, and we pay particular attention to how such opinions may be used by a defendant in patent litigation to advance its case, as well as to reduce the likelihood of multiple damages and the award of attorney fees.

If you can obtain a patent, you may be able to (i) prevent others from practicing the invention (including even those who independently develop their own product, as well as copycats); (ii) obtain license fees from others who wish to practice the invention; and (iii) use it as a marketing tool. At Sunstein, we view the obtaining of a patent not as an end, but as a means to achieving our clients’ goals, whether it is giving our clients a business advantage over competitors or producing an additional income stream for our clients.

Filing for a patent early (and keeping good records of the invention’s development) puts you in a better position vis-à-vis other inventors. Thus, it is almost always preferable for the patent attorneys to consult with the inventors early on in the development process, rather than waiting for the development of the product to be completed.

The fact that a person obtains a patent for an invention does NOT necessarily mean that the invention can be practiced without infringing someone else’s patent. The Patent and Trademark Office determines whether an invention is new enough to be entitled to a patent, but not whether a device, such as that described in a patent application, infringes anyone else’s patent. A typical example is when someone obtains a patent for an improvement on someone else’s patent: Until the earlier patent expires, a license may be required to practice the later invention. The earlier patent is therefore called a blocking patent. Like any other patent, a blocking patent may be invalidated if sufficient proof of unpatentability is shown during litigation. In some cases, however, the fact that a person obtains a patent for an invention is evidence that the product incorporating that later invention does not infringe an earlier patent cited during the prosecution of the later patent in the U.S. Patent and Trademark Office.

Having a patent portfolio may permit you to enter into cross-licensing arrangements with other companies that have patents on valuable related technology.

Building a patent portfolio can also increase the value of your company in the eyes of potential investors or buyers. A patent is an important piece of property, and may enable a company to obtain capital when it would otherwise be insolvent. Investors, of course, would like to invest in a company that has a product that is in demand, but has no competition. Investors also do not want to invest in a company that has made or will make significant expenditures in research, only to have the product “knocked off” by a low-cost producer that was able to avoid the research costs simply by copying.

On the other hand, if you are a potential investor or licensee, the value of a patent must not be overestimated. Simply because a company has a patent does not mean that the company is valuable—the patent may be narrow (thereby allowing plenty of competition), there may be no demand for the product covered by the patent, or the company’s product might be of poor quality. Patents by themselves do not necessarily result in royalty streams. The invention or the products incorporating the invention still have to be marketed—to customers, licensees or assignees—in order to make money. Frequently, for individual inventors, obtaining the patent is the easy part; it’s the money-making part that’s difficult. Also, a patent is NOT a seal of approval from the U.S. government. If one looks through the weekly Official Gazette published by the U.S. Patent and Trademark Office, one will find plenty of inventions that are not practical and that will not make any money.

These issues should be addressed whenever one is considering a technology transfer. At Sunstein, we feel it is critical to discuss fully such practical aspects of an invention with our clients and to appreciate the business and technical context of an invention, in order to advise our clients on a technology transfer issue. (More)

 

 

 

Why Are Patents Important?

by Timothy M. Murphy and Robert M. Asher, Co-Chairs, Sunstein Patent Group


If someone else has or obtains a patent that covers your product or process, you (i) may be enjoined from making, using and selling the product or process; and (ii) may be subject to significant monetary damages—even if you did no copying and even if you did not know about the patent. In certain cases, the damages may be doubled or trebled and attorney fees granted.

One of the services provided by Sunstein is to conduct searches of issued patents to determine the degree of risk our clients undertake in introducing new products or in continuing to sell a product accused of infringement. Often, we will suggest design modifications for a product to minimize the risk of a successful patent infringement suit against our clients. Sunstein prepares clearance opinions to address such issues, and we pay particular attention to how such opinions may be used by a defendant in patent litigation to advance its case, as well as to reduce the likelihood of multiple damages and the award of attorney fees.

If you can obtain a patent, you may be able to (i) prevent others from practicing the invention (including even those who independently develop their own product, as well as copycats); (ii) obtain license fees from others who wish to practice the invention; and (iii) use it as a marketing tool. At Sunstein, we view the obtaining of a patent not as an end, but as a means to achieving our clients’ goals, whether it is giving our clients a business advantage over competitors or producing an additional income stream for our clients.

Filing for a patent early (and keeping good records of the invention’s development) puts you in a better position vis-à-vis other inventors. Thus, it is almost always preferable for the patent attorneys to consult with the inventors early on in the development process, rather than waiting for the development of the product to be completed.

The fact that a person obtains a patent for an invention does NOT necessarily mean that the invention can be practiced without infringing someone else’s patent. The Patent and Trademark Office determines whether an invention is new enough to be entitled to a patent, but not whether a device, such as that described in a patent application, infringes anyone else’s patent. A typical example is when someone obtains a patent for an improvement on someone else’s patent: Until the earlier patent expires, a license may be required to practice the later invention. The earlier patent is therefore called a blocking patent. Like any other patent, a blocking patent may be invalidated if sufficient proof of unpatentability is shown during litigation. In some cases, however, the fact that a person obtains a patent for an invention is evidence that the product incorporating that later invention does not infringe an earlier patent cited during the prosecution of the later patent in the U.S. Patent and Trademark Office.

Having a patent portfolio may permit you to enter into cross-licensing arrangements with other companies that have patents on valuable related technology.

Building a patent portfolio can also increase the value of your company in the eyes of potential investors or buyers. A patent is an important piece of property, and may enable a company to obtain capital when it would otherwise be insolvent. Investors, of course, would like to invest in a company that has a product that is in demand, but has no competition. Investors also do not want to invest in a company that has made or will make significant expenditures in research, only to have the product “knocked off” by a low-cost producer that was able to avoid the research costs simply by copying.

On the other hand, if you are a potential investor or licensee, the value of a patent must not be overestimated. Simply because a company has a patent does not mean that the company is valuable—the patent may be narrow (thereby allowing plenty of competition), there may be no demand for the product covered by the patent, or the company’s product might be of poor quality. Patents by themselves do not necessarily result in royalty streams. The invention or the products incorporating the invention still have to be marketed—to customers, licensees or assignees—in order to make money. Frequently, for individual inventors, obtaining the patent is the easy part; it’s the money-making part that’s difficult. Also, a patent is NOT a seal of approval from the U.S. government. If one looks through the weekly Official Gazette published by the U.S. Patent and Trademark Office, one will find plenty of inventions that are not practical and that will not make any money.

These issues should be addressed whenever one is considering a technology transfer. At Sunstein, we feel it is critical to discuss fully such practical aspects of an invention with our clients and to appreciate the business and technical context of an invention, in order to advise our clients on a technology transfer issue. (Click here for Frequently Asked Questions About Patents)

FTC Rule Targeting Pharma Licenses Is Upheld by Federal Judge

By Jordana Goodman. Summer Associate

 

Last November, the Federal Trade Commission (“FTC”) announced a rule requiring advance notice of proposed exclusive patent license agreements in the pharmaceutical industry that exceed $75.9 million in value. Upon receipt of such a notice, the FTC or the Justice Department may then oppose the transaction on antitrust grounds.

This was the first industry-specific rule that the FTC had issued under the Hart-Scott-Rodino Antitrust Improvements Act (the “HSR Act”). Sure enough, the Pharmaceutical Research and Manufacturers of America (“PhRMA”) filed suit, arguing that, although the HSR Act allows the FTC to exempt certain industries from the Act’s filing requirements, it does now allow the FTC to create a rule which specifically targets an industry.

PhRMA reasoned that an earlier version of the HSR Act included a provision allowing the FTC to “impose reporting burdens on certain classes or categories of persons” but this was removed from the final version of the Act. Congress’s removal of this language constituted a refusal to grant the FTC the power to target a specific industry, PhRMA contended.

On May 30, 2014, the judge presiding over PhRMA v. FTC granted the FTC’s motion for summary judgment and upheld both the FTC’s power to target a single industry and the new rule (the “Final Rule”) itself. The court turned PhRMA’s argument regarding the legislative history on its head: If the FTC can exempt industries under the HSR Act, it can exempt all industries except for the pharmaceutical industry. Rather than make the FTC pursue this roundabout path to the same result, the court upheld the FTC’s more direct route.

As of this publication, PhRMA has not appealed the court’s decision or announced on its website any intention to do so.

Now that the Final Rule has survived a court challenge, let’s review its scope: The rule requires prior notification to the FTC of exclusive patent licenses in the pharmaceutical industry. The FTC and the Justice Department then have 30 days to decide whether to object to the transaction on antitrust grounds.(More)

Supreme Court Sinks Nautilus, Reformulates the “Definiteness” Requirement for Patents

By Thomas Tuytschaevers. A member of our Patent Practice Group

 

In yet another rejection of prevailing norms for determining patent validity, the U.S. Supreme Court refined the standard by which courts assess the clarity of patent claims. Until now, a patent claim was deemed insufficiently clear, and therefore invalid for indefiniteness, only if a court found the claim language to be “insolubly ambiguous.”

In its June 2 decision in Nautilus, Inc. v. Biosig Instruments, Inc., the Court held that a patent is invalid for indefiniteness if its claims fail to define the scope of the invention with “reasonable certainty.” This lower standard will make patent claims easier to invalidate and portends a surge of indefiniteness defenses in patent litigation.

A patent is a property right that allows the owner to exclude others from using an invention and, “like any property right, its boundaries should be clear.” To that end, U.S. patent law requires that a patent include “claims particularly pointing out and distinctly claiming the subject matter” that the inventor regards as the invention. A claim that does not meet these criteria fails to meet the law’s “public-notice function” because it fails to define the scope of the patent owner’s right to exclude, and is therefore invalid for being indefinite.

However, the courts have recognized that written language is an imperfect tool. The limits of written language are sometimes evident in patent claims that, by definition, describe a new invention, something that has never previously been described. Fittingly, courts have acknowledged that absolute precision in patent claims is unattainable. The issue in Nautilus focused on “just how much imprecision [the law] tolerates.”

Biosig patented a monitor useful for measuring a person’s heart rate while exercising, for example, on a treadmill. Such measurements are challenging because it is difficult to distinguish the electrical signal produced by the heart (an “ECG” signal) from electrical signals produced by other hard-working muscles (“EMG” signals).

Biosig realized that a user’s heart signal appears differently at the user’s left hand than at the user’s right hand, while muscle signals appear the same way at both hands. Biosig capitalized on this discovery by developing a circuit that measures the heart and muscle signals at both hands using two pairs of electrodes – one pair for each of the user’s hands. The patented Biosig circuit subtracts one of the measurements from the other to cancel out the muscle signals and leaves only the heart signal. (More)

Supreme Court Rejects Inducement Liability Where There’s No Direct Infringer

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

 

The issue of “divided infringement” — where multiple parties “share” infringement by performing different steps of a method claim — has vexed the courts of late, with the Federal Circuit see-sawing between two very different interpretations of the patent law. The Supreme Court has recently entered the fray, unanimously delivering the blunt criticism that the Federal Circuit, which handles all patent infringement appeals, “fundamentally misunderstands what it means to infringe a method patent.”

The bottom line from the Supreme Court, in Limelight Networks v. Akamai Technologies, is that there is no infringement, direct or by inducement, unless one party performs every step of the method, either itself or through control of another, such as by contract.

The patent asserted in Limelight claims a method for delivering electronic data using a content delivery network (CDN). The patent calls for, among other things, certain components of a website, like music or video files, to be “tagged” for storage on certain servers within the CDN. This increases the speed of accessing files.

The alleged infringer, Limelight, operated a CDN and performed all but one step of the patented method. It left to its customers, however, the task of tagging the files they wanted placed on Limelight’s servers. The claimed method was performed in its entirety, but no one actor performed all the steps.

There is good precedent for rejecting the idea that Limelight could be charged with direct infringement. The Federal Circuit held in 2007 and 2008, in BMC Resources. v. Paymentech and Muniauction v. Thomason, that there is no direct infringer unless a single actor performs all the method steps himself, or all the steps are performed on his behalf by another who is controlled by the alleged infringer.

The question in Limelight was whether Limelight might be guilty of inducing infringement, even in the absence of a direct infringer, because it encouraged or instructed the customer to perform the missing step, thereby ensuring every method step would be performed, albeit not by a single actor. Both BMC Resources and Muniauction answered no — to have inducement, you must first have a direct infringer.

In 2011, as we reported when Akamai’s case against Limelight first came before the Federal Circuit, a three-judge panel of that court further tightened the standard, making clear that mere directions or instructions to another entity — absent a legal obligation of that entity to perform the steps — is insufficient to establish direct infringement, and without that, there could be no inducement. (More)

The Supreme Court Bans Aereo’s Service: An Odd Decision With an Odd Rationale

By Timothy Murphy. Co-chair of our Patent Practice Group

 

Last week the Supreme Court decided, in American Broadcasting Companies, Inc. v. Aereo, Inc., that Aereo was infringing the copyrights of the television broadcasters. This decision was not a surprise in light of the comments of the justices during the April oral argument, which I discussed in “How Will the Supreme Court Decide the Aereo Case?” The court voted 6-3 with Roberts, Kennedy, Ginsburg, Sotomayor and Kagan joining Breyer’s decision in favor of the broadcasters, and Thomas and Alito joining Scalia’s dissent.

Aereo used arrays of small antennas to pick up over-the-air television shows and make them available to Aereo customers. Each customer was assigned a separate antenna. Aereo also allowed its customers to record television shows and save them in a cloud storage dedicated to that customer. For this service, Aereo charged $8 a month. Prior appellate court cases had ruled that cable companies providing such individualized remote storage and playback systems did not infringe the copyright of the content owners. Aereo undoubtedly hoped that this line of thinking would apply to its individualized antennae. ABC and other over-the-air content providers hoped otherwise and sued to enjoin Aereo’s service.

The majority recognized that Aereo and the cable companies distributed content in different ways. However, the majority took the position that—whatever the technical differences may be—Aereo still seemed like and acted enough like a cable company so that, if its technology had existed when Congress passed the Copyright Act of 1976, Congress would have treated Aereo like a cable company, requiring it to pay for the privilege of rebroadcasting over-the-air content. The majority also concluded that Aereo was publicly performing the plaintiffs’ television shows.

An individual is clearly entitled under the law to set up an antenna and record onto a DVR a copyrighted show that was broadcast over the air. But the Aereo majority rejected the view that Aereo was merely a service provider that rented an antenna and a virtual, cloud-based DVR to each of its customers. By providing antennas and a virtual, cloud-based DVR to thousands of subscribers, Aereo crossed a line between what an individual is entitled to do on his or her own and what a company is not allowed to do on a large scale, even if it is merely helping people exercise their legal rights.

Ironically, the more liberal Justices sided with the vested interests—the television broadcasters and cable companies—against the individual who wants an easy, efficient way to enjoy the free over-the-air television transmissions, while the dissenting Justices, who favored allowing individuals to take advantage of the new technology, were from the conservative end of the bench. (More)

Yet Again, the Supreme Court Narrows Patent Eligibility, This Time Targeting Computer-Related Inventions

By Bruce Sunstein. A member of our Patent Practice Group

 

In the wake of its decisions denying eligibility for patent protection to diagnostic procedures (Mayo Collaborative Services v. Prometheus Laboratories, 2012), and isolated genomic DNA (Association for Molecular Pathology v. Myriad Genetics, 2013), the Supreme Court has denied patent eligibility to a computer-implemented invention on the grounds that it is directed merely to an “abstract idea,” in Alice Corporation Pty. Ltd. v. CLS Bank International, decided June 19, 2014.

In what might be a silver lining (or maybe an aluminum foil lining) to this cloud, the Court did not hold all computer-related inventions to be ineligible for patent protection, but only those that are deemed directed to an abstract idea.

Motivating the Court’s decision is a concern that patents impede innovation when they are directed to subject matter that the Court regards as an abstract idea. Abstract ideas are one of three exceptions the Court wrote into section 101 of the patent law, which defines what subject matter is eligible to be considered for patenting.^[1] (Only if subject matter claimed in a patent application is eligible for patenting will the patent application be examined for the additional requirements under patent law that the subject matter must be new^[2], non-obvious^[3], and clearly described^[4] and claimed^[5] in the application.)

The Court explains its rationale for these exceptions by quoting from its Myriad decision: “Laws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work.”^[6] To elaborate on why inventions otherwise eligible to be patented should not be eligible if one of these Court-made exceptions is present, the Court cites its Prometheus decision: “Monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws.”^[7] Further relying on Prometheus, the Court admonishes, “We have repeatedly emphasized this concern that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.”^[8]

So how does the Court determine whether patent claims are directed to an abstract idea—or, for that matter, to a law of nature or natural phenomenon? It specifies a two-step process drawn from Prometheus: “First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts.”^[9] Second, if they are, then there is “a search for an ‘inventive concept’—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept  itself.”^[10]  (More)

^[1] Specifically, the wording of 35 U.S.C. § 101 is as follows; “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

^[2] 35 U.S.C. § 102.

^[3] 35 U.S.C. § 103.

^[4] 35 U.S.C. § 112.

^[5] 35 U.S.C. § 112.

^[6] Slip opinion, p. 6. For ease of reading, quotations from the opinion may omit interior quotation marks, capitalizations, brackets and ellipses found in the original.

^[7] Id.

^[8] Id.

^[9] Slip opinion, p. 7.

^[10] Id.

 

Can a Foreign Bankruptcy Upset the License Of a U.S. Patent? A Court of Appeals Says “No”

By Thomas Carey. Chair of the Business Practice Group

Since 1988, section 365(n) of the U.S. Bankruptcy Code has protected licensees of intellectual property from having their licenses rejected by an insolvent licensor. While this statute addresses certain contingencies and exceptions, the basic rule is that an insolvent licensor is not free to terminate (or ‘reject’) an intellectual property license the way it is free to shed itself of other contracts.

But what if the licensor is based overseas and licenses U.S. patents? In Jaffe v. Samsung Electronics Company, the Fourth Circuit Court of Appeals recently addressed that first-of-its-kind question.

Chapter 15 of the Bankruptcy Code includes a procedure, based upon a model law promulgated by the UN, by which the administrator of a foreign bankrupt company can ask a U.S. bankruptcy court for permission to control the bankrupt company’s U.S. assets and for an array of other privileges, including the right to prevent creditors from taking actions that would frustrate the foreign proceeding and the right to examine witnesses and seek the production of documents. In weighing such a request, a U.S. bankruptcy court is authorized to consider the interests of the insolvent, its creditors, and others affected by the request.

In 2009, Qimonda AG, a large German semiconductor manufacturer, filed for bankruptcy in Germany. Its principal asset was a portfolio of about 10,000 patents, roughly 4,000 of which were U.S. patents. These patents were subject to cross-license agreements with other industry players. Dr. Michael Jaffe was appointed as the German bankruptcy administrator for Qimonda.

Dr. Jaffe applied to the U.S. bankruptcy court for recognition under Chapter 15 of the Bankruptcy Code and for powers within the U.S. that a bankruptcy trustee in a U.S. proceeding would ordinarily have. The court granted the request, but made it conditional on compliance with section 365.

With Qimonda basically out of business, it had nothing to gain from the incoming license rights that it had obtained in the cross-licenses. Dr. Jaffe undertook to monetize the patent portfolio by notifying all parties to the cross-license agreements that the licenses were being terminated under the German bankruptcy proceeding. Dr. Jaffe’s plan was to re-license these patents for the benefit of Qimonda’s creditors, replacing the in-kind cross-licenses with royalty-bearing licenses.(More)

Trademark Falsely Suggesting Connection to a Native American People is Denied Registration

By Steven Abreu. A member of the Trademark Practice Group

 

A word that primarily refers to a group of people may not be registrable as a trademark in the United States if the word falsely suggests to consumers an association between the applicant and the identified group.

This principle explains the Trademark Trial and Appeal Board’s affirmance of a refusal to register an application for the mark LAKOTA, applied for in connection with herbal remedies in Class 5. In re Kent Pederson, Serial No. 85328868 (TTAB Dec. 30, 2013).

In an opinion stretching 43 pages, the Board set out the reasons why registration of LAKOTA was impermissible under section 2(a) of the Lanham Act. That statute prohibits registration of a mark that may falsely suggest a connection with persons, institutions, beliefs or national symbols. The trademark office has the burden to show that a mark falsely suggests such a connection through the application of a four-part test:

1. Is the mark the same as or a close approximation of a name previously used by another person or institution?
2. Would the mark be recognized as such, because it points unmistakably to that person or institution?
3. Is the applicant not connected with the person or institution named by the mark?
4. Is the fame or reputation of the person or institution such that when the mark is used with the applicant’s goods or services, a connection with the person or institution is presumed?

On the first two points, the Board agreed with the examining attorney that Lakota referred to the Native American people who are part of the Sioux Indian tribe. The dictionary definition and evidence, showing countless uses of Lakota to refer to the western part of the Sioux tribe, easily carried the day over the applicant’s argument that Lakota also referred to the name of the language spoken by the Lakota people and so could not unmistakably refer only to the people.

As to the third prong of the test, the applicant, Kent Pederson, offered evidence that his organization, through a licensee, is philanthropically connected to the Lakota people. However, the Board considered this philanthropy not sufficiently connected to commercial interests between Pederson and the Lakota people, especially regarding the applied-for goods. An actual commercial connection between the applicant and the identified person or institution is necessary to show that a connection made in the mind of a consumer is not “false;” mere philanthropy in favor of the identified person is not sufficient. (More)

How Will the Supreme Court Decide the Aereo Case?

By Timothy Murphy. Co-Chair of the Patent Practice Group

 

During oral argument last month for American Broadcasting Companies, Inc., et al. v. Aereo, Inc., Justice Scalia asked the attorney representing Aereo, “I mean, you could take HBO, right?” One had to wonder whether the Supreme Court has the time or the inclination to understand enough of the technology at issue to provide a well-reasoned opinion on whether Aereo is complying with copyright law.

The answer to Justice Scalia’s question is indisputably “no.” HBO is a cable channel and is not broadcast over the airwaves, as local television and radio stations are. Aereo’s business is a service that provides its customers with over-the-air broadcasts. Aereo uses arrays of small antennas, and each of its customers is assigned a separate antenna.

The television shows picked up by the customer’s antenna are made available by Aereo to the customer over the internet. Thus, the customer can watch a television show with a web browser, an iPad, or a similar device having an internet connection. Aereo also allows the customer to record television shows and saves the customer’s recorded shows in cloud storage dedicated to that customer. For this service, Aereo currently charges $8 a month, plus tax.

In short, Aereo is like a service provider that rents to each of its customers an antenna and a virtual, cloud-based DVR. Indeed, Aereo presents itself as a mere service provider when defending against the accusation of copyright infringement. If an individual set up an antenna and recorded onto a DVR a copyrighted show that was broadcast over the air, and that individual later watched the recorded show, it is well settled that that individual is engaged in a fair use of the copyrighted show and thus does not infringe the copyright in the television show.

In Sony Corp. of America v. Universal City Studios, Inc. (1984), the Supreme Court ruled that recording television shows for the purpose of “time shifting,” that is, watching the show at a later time, is fair use. Although the recording medium in the Betamax case was a video cassette, the logic is widely accepted as completely applicable to the more advanced technology of the DVR.

Aereo’s position is that—by providing individual customers with a separate antenna and separate cloud-based storage for their recorded television programs—it is simply helping the customers do what they are perfectly entitled to do on their own.

More than a dozen television and other media companies disagreed with Aereo’s characterization of its business and brought a copyright infringement action against Aereo in the Southern District of New York. They alleged that Aereo was “publicly performing” their television shows and thus must pay for a license from the plaintiff content providers, just as cable companies do.

The district court found in favor of Aereo, and that decision was upheld by the Second Circuit Court of Appeals.

An important precedent for these lower court decisions was Cartoon Network LP, LLLP v. CSC Holdings, Inc. (2d Cir. 2008). In the Cablevision case, as it is known, the cable company—which had already paid for a license to transmit the Cartoon Network’s television shows to its customers—provided to its customers a remote storage digital video recording service (“RS-DVR”). The Second Circuit in the Cablevision case found that this RS-DVR service was not “public performing” and thus did not infringe the Cartoon Network’s copyright.

This RS-DVR service is similar to the cloud-based storage provided by Aereo, so the Second Circuit relied on its earlier precedent in finding in favor of Aereo.

The questions from the Supreme Court justices during the oral argument in the Aereo case showed that they are trying to determine whether Aereo’s characterization of its business—that it merely helps its customers do what they are entitled to do on their own—was accurate, or whether Aereo was more like a cable company and thus required to pay a license fee to the television stations being picked up by the Aereo antennas. (More)

Greater Than the Sum of Its Parts: Patent Protection is Available for Combinations

By William Childs, Ph.D., J.D.. A member of our Patent Practice Group

 

Someone walks into your office and asks: Is it possible to patent a combination of known compounds based on an unexpected synergy between them? The answer remains ‘yes,’ and you should consider citing Sanofi-Aventis v. Glenmark in support.

In Sanofi, decided last month by the Federal Circuit, the patentee discovered that a combination of two active ingredients in a single dosage provided longer-lasting control than previously known treatments. When generic drug makers submitted an Abbreviated New Drug Application seeking permission to market this combination before the expiration of the patent, the owner and licensees of the patent sued for infringement.

The accused infringers argued that the patent was invalid on grounds of obviousness: Each ingredient, they said, was known to be effective for treating hypertension such that the combination of these ingredients would have been “obvious to try.”

The defendants further contended that any advantages from the obvious combination were merely unknown benefits that were not recognized at the time of filing.

The Federal Circuit reasoned that “it would not be ‘obvious to try’ when ‘the prior art gave either no indication of which parameters were critical or no direction as to which of many possible choices is likely to be successful.’”

Regarding unexpected results, the Federal Circuit reiterated the principle that “patentability may consider all of the characteristics possessed by the invention, whenever those characteristics become manifest.” This means that unexpected results discovered after the filing date or even issue date of a patent can weigh against a finding of obviousness. (More)

Court’s Reading of Statute Opens the Door For Extended Patent Terms for Many Applicants

By Alexandra Cavazos, Ph. D.. A member of our Patent Practice Group

 

Thanks to the Federal Circuit, longer patent terms are available for thousands of patents that have undergone prolonged examinations.

An extended term is of particular value in the pharmaceutical and biotechnology industries. Because of the high regulatory hurdles that new therapeutic molecules have to overcome, and because of the time that it takes to gain market acceptance for some new drugs, patents in these fields tend to be most valuable towards the end of their effective terms. Even a few extra days of patent term can translate into millions of dollars in sales for a blockbuster drug.

Novartis AG v. Lee centers on the interpretation of 35 U.S.C. § 154, the federal statute that awards patent applicants a day-for-day adjustment to their patent term for several kinds of USPTO-caused delays in the prosecution of their patent application. In particular, the statute guarantees applicants “no more than 3-year application pendency” but excludes “any time consumed by continued examination of the application requested by the applicant,” through a request for continued examination (RCE) (emphasis added).

The purpose of an RCE is to re-open and continue prosecution before the USPTO without having to file a new patent application. This may happen when all of an applicant’s claims have been rejected by the USPTO in a Final Office Action and the applicant wants another opportunity to amend its claims or offer evidence of their patentability. It may also happen when the applicant wishes to submit new prior art that pertains to the invention.

Prior to the Federal Circuit’s recent Novartis decision, the USPTO’s policy dictated that an RCE filing at any point during the pendency of a patent application would stop the USPTO’s three-year clock from running.

When this policy was applied to Novartis in 2010, it argued that once a Notice of Allowance was mailed to it, prosecution of the case was closed and thus the subsequent time up until the issue date of the patent was not time consumed by the RCE, but was instead time consumed by the USPTO.

In January 2014, the Federal Circuit agreed with Novartis on this point: “We reject the PTO’s view that the time after allowance, until issuance, is ‘time consumed by continued examination’ and so is excluded from adjustments given to the patentee. Such time from allowance to issuance undisputedly would count towards the PTO’s three-year allotment in a case not involving continued examination. This is no basis for distinguishing a continued examination case.”  (MORE)