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)