Copying Complex APIs is Not Fair Use: The Federal Circuit Turns the Software World on its Ear

By Thomas Carey. Chair of our Business Practice Group

The Federal Circuit has issued a copyright opinion that stands to radically alter both copyright law and the software industry.  The case involves the first-ever reversal of a jury on the question of fair use, and the first time that APIs (described below) and their organization have been protected by copyright despite a fair use defense.

At the center of the controversy in Oracle America v. Google are application programming interfaces (APIs): instructions that invoke (or call up) entire programs, provide those programs with bits of data, and receive back the results of processing using that data.

To illustrate a simple API, imagine an instruction that reads: SQRT 4, where the command “SQRT” invokes a program that calculates the square root of the number that follows the command.  The hard work is done by an implementing program.  The command “SQRT 4”, called the “declaring code”, is a simple command that seems to involve little or no imagination or expression.  Instead, it seems purely functional, exactly the sort of development that is denied copyright protection and that can be protected, if at all, only by patent law.

The Development and Cloning of Java.  In the 1990s, Sun Microsystem developed the Java platform, which was designed to allow programmers to write code that, once written, could run on any popular computer hardware.  While Sun presented Java as open source software, and thus made it freely available to all, it kept tight reins on its evolution as a product that would carry the “Java” trademark.  It also kept some key components proprietary and demanded license fees for the complete Java package.

Sun was successful in developing a community of programmers who wrote code and contributed it to the Java platform.  In time, there would be 30,000 such programs (called “methods,” in Java parlance) and several million programmers writing applications in Java.

Google decided to aggressively pursue the smartphone market in 2005 when it acquired Android Inc.   It gave its technical team a tight timetable for developing Android into a complete smartphone operating system.  The team quickly decided that incorporating Java into its system was key to meeting its deadline.

Google tried to negotiate a license with Sun, but talks broke down over Sun’s insistence on maintaining control over the Java platform so that its motto of “write once, run anywhere” would continue to be true.  Sun feared, correctly as it turned out, that Google might create a version of Java that would be incompatible with its own version, and result in Java-like programs that would run on Android but not elsewhere.

When negotiations cratered, Google panicked.  The Android team had been working on substitutes for the Java platform, but, as a top Android engineer lamented, Google’s versions were “half-ass at best. We need another half of an ass.”  A Google engineer was tasked to investigate what options besides Java were available.  He summarized Google’s predicament as follows:

What we’ve actually been asked to do (by [Google’s co-founders]) is to investigate what technical alternatives exist to Java for Android and Chrome. We’ve been over a bunch of these, and think they all suck. We conclude that we need to negotiate a license for Java under the terms we need.

Android’s chief gave Google’s founders two options: “1) Abandon our work or 2) Do Java anyway and defend our decision, perhaps making enemies along the way.”

Google chose option 2. Google copied verbatim the declaring code of 37 Java API packages, 11,500 lines of Oracle’s copyrighted code, and the elaborately organized taxonomy known as the “structure, sequence, and organization” (“SSO”) of the Java API packages.

The Litigation.  Sun originally expressed enthusiasm for the release of Android and its reliance on the Java platform, but attitudes changed soon after Oracle acquired Sun.  It sued Google in 2010 for patent and copyright infringement.  The case went to trial, where the jury found that Google did not infringe the Oracle patent in question.  The jury found, however, that Google had infringed Oracle’s copyright, but was unable to agree on whether it was protected as fair use.

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Justice Delayed? Here’s Why Inter Partes Reexamination has been Replaced by Inter Partes Review

By Robert Asher. Chair of our Patent Office Litigation Group

Almost a decade ago, Sunstein partner Steven Saunders uncovered the Halteren international patent publication describing a flexible transducer assembly. This technology was the subject of Knowles Electronics’ US Patent No. 6,781,231(“the ’231 patent”) which was being asserted against our client in federal district court and the International Trade Commission (ITC).

Steve recognized the value of the Halteren reference as prior art that could invalidate the significant patent claims of the ’231 patent. Steve and I prepared a request for inter partes reexamination against the ’231 patent in October 2009. In less than two months, the U.S. Patent and Trademark Office (PTO) rejected the significant claims 1-4 over Halteren, thereby initiating the reexamination.

Knowles responded to the rejection by adding additional claims and arguing against the pending rejections. In our comments, we pointed out that Halteren anticipated these newly added claims as well.

Meanwhile, Knowles was asserting the ’231 patent against many competitors. The war engendered by this patent was proliferating. Two more competitors followed our lead and piled on with their own requests for inter partes reexamination. In December 2010, the PTO merged all three reexaminations and issued another comprehensive office action with rejections of the pertinent patent claims and the new claims.

After gathering comments from the patent owner and the requesters, the PTO issued another non-final rejection of the claims 1-4 and the added claims 23-27 in October 2011.

In January 2012, we filed a response, pointing out that a claim construction ruling in the co-pending ITC proceeding was not binding on the PTO, citing In re Trans Texas Holdings Corp., 498 F. 3d 1290 (Fed. Cir. 2007). We addressed Knowles’s revised attempt at further narrowing its claim through a claim construction of “package.”  After receiving all comments, the PTO issued yet another non-final rejection of the claims.

Responding to our attacks on new claims 23-27, Knowles amended the claims further to include a solder reflow capability on the solder pads of the package. We filed our comments on Knowles’s newly amended claims. We objected to the use of “solder reflow process” and “rigid” substrate in the claims as unsupported in the original patent. We reinforced the examiner’s view toward the rejection of the claims on the basis of Halteren and other prior art.

While waiting for the examiner to take action, in early 2013, the heavily litigated dispute between Knowles and our client was settled. Although over three years had elapsed since we filed the reexamination, we still did not have a final ruling.

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Cox Communications Makes Its Mark as the First Major Cable Provider To Lose its DMCA Immunity from Copyright Infringement

By Thomas Carey. Chair of our Business Practice Group

The Digital Millennium Copyright Act (DMCA) provides internet service providers (ISPs) with immunity from copyright infringement for the infringing activity of their customers.  That immunity, found at 17 USC § 512(a), comes at a modest price:  To qualify, the ISP must have “adopted and reasonably implemented. . . a policy that provides for the termination in appropriate circumstances of subscribers. . . who are repeat infringers.”

BMG Rights Management is the fourth-largest music publisher in the world, with over 2.5 million compositions and recordings in its library.  BMG hired Rightscorp, Inc. to police its copyrights over the internet.  When Rightscorp detected Cox Communications customers “sharing” BMG’s music, it emailed an infringement notice to Cox.  Rightscorp began sending these notices in the spring of 2011.

Each notice identified BMG as the copyright owner, and provided the title of the copyrighted work, the infringer’s IP address, a time-stamp identifying the time and date of the infringement, and a settlement offer asking the infringer to pay $20 or $30 in exchange for a release. RIghtscorp asked Cox to forward each notice to the infringer, but Cox refused to do so because it objected to forwarding a settlement offer.  Rightscorp refused to remove the settlement offer, and Cox never considered removing it on its own initiative.

In the fall of 2011, Cox decided to “blacklist” Rightscorp, meaning that Cox would delete incoming emails from Rightscorp without reading them.  After the blacklisting, millions of notices from Rightscorp were ignored in this fashion.

Cox, it turns out, had a “13 strikes” policy to deal with repeat infringers.  Going through the chain of up to 13 infringing activities, subscribers might be suspended temporarily, but never terminated. After the 13th infringing activity, the result was substantially the same–termination followed by reactivation.  In fact, Cox had never terminated a subscriber for infringing activity without reactivating it.

The trial court granted BMG’s motion to disallow Cox’s attempt to raise the DMCA defense available to ISPs, holding that no reasonable jury could find that Cox implemented a policy that entitled it to the safe harbor that the DMCA provides to ISPs.

After a jury trial, BMG was awarded $25 million in damages for willful contributory infringement.  Cox was ordered to pay an additional $8 million in attorneys’ fees.

On appeal, in BMG Rights Management v. Round Hill Music, the Fourth Circuit Court of Appeals upheld the trial court’s view of the DMCA safe harbor.  It picked apart Cox’s argument that the obligation to terminate repeat infringers would apply only if an ISP had been presented with repeated adjudications of infringement.   The Court of Appeals waded patiently through the history and text of the DMCA to discount this argument.  It noted that Cox personnel had interviewed some of the infringers, who had admitted to infringing activity.

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The First Circuit Allows a Chapter 11 Debtor to Terminate A Trademark License

By Dorothy Wu Chiang. A member of our Patent Practice Group

By filing for chapter 11 bankruptcy, a financially distressed company may take advantage of special ways to turn itself around and reorganize instead of liquidating its assets and going out of business. The chapter 11 debtor may, for example, petition a bankruptcy court for relief from those contracts that it deems undesirable  (known as “rejecting” a contract).

In theory, freeing a company from unwanted commitments allows the debtor to devote its time to more profitable pursuits that will enable it to regroup quickly. However, bankruptcy law does not completely shortchange the debtor’s business partners; they may still sue for breach of contract and recover monetary damages, although recovery is often limited to a small residue of assets.

However, when a debtor seeks to reject a license of “intellectual property,” as that term is defined in the bankruptcy code[i], the licensee may opt to retain the granted rights.

Trademarks are absent from the bankruptcy code’s definition of intellectual property.  The legislative history of the statute is unclear as to whether Congress intended to leave trademark licenses vulnerable to rejection.  As a result, the effect of a chapter 11 debtor’s attempt to reject a trademark license remains uncertain, with different courts reaching different conclusions.

The First Circuit Court of Appeals recently held that chapter 11 debtors may reject trademark licenses. In re Tempnology concerns an insolvent company that made products (e.g., towels, socks, headbands) that remained at low temperatures when used during exercise.  Tempnology had granted Mission Products, a marketing and distribution company, exclusive marketing and distribution rights to a group of its products and an accompanying license to use Tempnology’s trademark and logo.

The trademark agreement, in typical fashion, explicitly forbade Mission Products from using Tempnology’s trademarks inaccurately or disparagingly, and Tempnology retained the right to review and approve all of Mission Products’ use of its trademarks.

When Tempnology’s business faltered, the company filed for chapter 11 protection in bankruptcy court in Massachusetts. Attributing its dim financial outlook to Mission Products’ poor marketing efforts, Tempnology asked for court permission to reject its agreements with Mission Products.

Mission Products responded that the bankruptcy code protected both its distribution agreement and its trademark license as intellectual property licenses, leaving both in force. The bankruptcy court dismissed this characterization, concluding the distribution rights were not protectable as intellectual property rights; and that because the bankruptcy code’s definition of “intellectual property” does not include trademarks, the Tempnology trademark license was not shielded from rejection.

[i]  The term “intellectual property” means—

(A) trade secret;

(B) invention, process, design, or plant ..,

(C) patent application;

(D) plant variety;

(E) work of authorship …; or

(F) mask work …
to the extent protected by applicable nonbankruptcy law.

11 USC § 35A

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For Want of an Immediate Assignment of Patent Interests, Enforcement Rights Were Lost

By Christopher Lacenere, Ph.D.. A member of our Patent Practice Group

Employers, look over the language of your employment agreements.  It can be critical in determining who owns an employee’s inventions. “I hereby assign all inventions” may provide an employer with immediate ownership, but “I will assign all inventions” may fail the employer if the inventor does not execute a later assignment.

This fate befell the supposed patent owner in a recent case before the Federal Circuit, Advanced Video Technologies LLC v. HTC Corporation. Advanced Video Technologies’ (AVT’s) patent infringement suit was dismissed for lack of standing because a co-owner of U.S. Patent No. 5,781,788 was not a party to the suit.  To have standing in a patent infringement suit, either all of the inventors must be party to the suit or the plaintiff must be the assignee of each inventor’s rights.  Here, one of the inventor’s interests in the ’788 patent had not been assigned to AVT.

The controversy dates back to 1995 when the parent application to the ’788 patent was filed and two of the three inventors assigned their interests to AVC Technology Inc. (“AVC”), while the third, Vivian Hsiun, refused.  AVC believed it had acquired ownership of the parent application through a series of transfers that ultimately began with an invention made at company called Infochips.

In 2015, AVT acquired any patent rights held by AVC and filed three patent infringement lawsuits against HTC Corporation and others.  AVT argued that three provisions of Ms. Hsiun’s employment agreement entitled it to her interests: a “will assign” provision, a trust provision, and a quitclaim provision. These terms read as follows (emphases added):

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company.

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