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)

Litigator’s Perspective: Winning Party in Patent Litigation Can Now More Easily Recover Attorneys’ Fees

By Brandon Scruggs. A member of our Litigation Practice Group

 

The Patent Act’s fee-shifting provision allows trial judges to award attorneys’ fees to the prevailing party in patent litigation in “exceptional cases.” Last month, the U.S. Supreme Court issued decisions in two cases on this subject, loosening the meaning of “exceptional” and requiring greater deference to a trial judge’s decision on whether to award attorneys’ fees.

In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court addressed whether the Federal Circuit had set the “exceptional case” standard too high. In Brooks Furniture (2005), the Federal Circuit had held that to qualify as “exceptional,” a patent case needed to either (1) involve “material inappropriate conduct” or (2) be both “objectively baseless” and brought in “subjective bad faith.”

The Supreme Court overruled the Federal Circuit’s standard and held that awarding attorneys’ fees is a matter of district court discretion and should be evaluated on a case-by-case basis. Justice Sotomayor, writing for the court, criticized the Brooks Furniture standard as “mechanical” and “unduly rigid.” Since the statute does not define “exceptional,” the standard should be “inherently flexible.”

The Supreme Court held that an “exceptional” case that could support an award of attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The decision to award attorneys’ fees should be entrusted to the equitable discretion of the trial judge based on the “totality of the circumstances.” After all, who would know if a case is exceptional better than the judge who has observed the litigants’ conduct and positions for two or more years?

The Supreme Court also rejected the Federal Circuit’s requirement that an “exceptional case” must be proved by “clear and convincing evidence.” The Supreme Court noted that the statute imposes no specific burden of proof and seemed to suggest that the lower “preponderance of the evidence” standard (that is, more likely than not) may be proper. (More)

Contrary to Common Belief, Patents Can Survive Validity Challenges at the Patent Office

By John Stickevers. A member of our Patent Practice Group

The America Invents Act, which went into effect September 2012, introduced new proceedings for challenging a patent before the U.S. Patent and Trademark Office. Inter partes review (“IPR”) is one such proceeding. In the short time that IPRs have been available, more than 1000 petitions have been filed, with more than 600 petitions filed thus far in 2014 alone.

IPRs provide a new forum in which persons accused of infringement can contest the validity of patents in view of prior art. IPR proceedings are an administrative form of litigation, taking place before the Patent Trial and Appeal Board (“PTAB”) that includes written arguments, motion practice, expert testimony, depositions and oral arguments.

IPRs are labor-intensive proceedings that require an intimate understanding of patent law, a firm grasp of IPR complexities and procedures and a detailed strategy mapped out in advance. Without a strong foundation at the beginning, arguments may be lost or rendered unavailable to either the petitioner or the patent owner.

IPR proceedings have, to date, proved to be a mighty sword in the hands of defendants in patent litigations. Most of the PTAB decisions have resulted in the cancellation of all of the challenged patent claims. As of May 2014, the PTAB has instituted and decided 28 proceedings, with the petitioners enjoying better than an 80% success rate.

The length of the proceeding from the initiation of the IPR to the final oral arguments is, as mandated by the rules governing the process, a rapid twelve months. Indeed, the speed of disposition is one reason that patent defendants are increasingly likely to file IPR petitions when facing litigation. Another reason, of course, is the high rate of success so far for petitioners in IPRs that go to decision.

If you are a patent owner, all is not lost. For one thing, the PTAB allows the initiation of an IPR only when the board believes there is a reasonable likelihood that the petitioner will prevail on at least one of the challenged claims. The PTAB has reported that in more than 60 petitions the petitioner failed to meet the threshold burden of proof for instituting the IPR, while more than 70 other IPRs have resulted in a settlement favoring the patent owner.

Thus, the success of petitioners must be seen in context. Although they have won 80% of cases that have gone to decision, petitioners have failed to get out of the box in a large percentage of their challenges. The PTAB has taken up a total of 167 petitions and has not instituted 63 of the petitions. In these cases, patent owners prevail without the public fanfare of a written decision.

For example, last month, the PTAB refused to institute an IPR requested by Twitter, Yelp and Facebook for a patent owned by Evolutionary Intelligence LLC. In related decisions, the board ruled that the petitioners failed to establish a reasonable likelihood that they would prevail on at least one of the patent claims challenged. (More)

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. (More)

Patent Practice Tips

Many of the common pitfalls in the defense and enforcement of patent rights can be avoided through careful planning and early consultation with competent patent counsel. Although we assess the needs of each client individually, we find that the following practice pointers are applicable to most companies or individuals who create patentable inventions.

• “File early. File often.” Securing as early a filing date as possible might be critical in getting a patent and in preventing the competition from gaining a patent instead of you. Filing additional applications on variations of and developments on the original conception can result in broader and more robust patent protection.
• Set up a patent committee including heads of marketing, business development, engineering, and in-house legal department to work with patent counsel to develop a patent strategy that is implemented on a company-wide basis to advance your company’s business.
• To protect your investment in research and marketing, consider developing a multi-pronged approach to protecting your intellectual property, incorporating utility patents, design patents, copyrights, trademarks and/or trade secrets. Since there are differences between patents and other types of intellectual property, protecting all of one’s rights in a product line can be very valuable.
• Have written agreements signed by any employee or third party who may be inventing on your behalf. Otherwise, it may not be clear who owns the patent.
• Educate your co-inventors and employees as to why patents are important. Emphasize the importance of early and adequate documentation of developments, which should be considered promptly by a patent attorney or by the patent committee for possible patenting.
• Have searches performed to determine the novelty and the non-obviousness of inventions. In many industries, it is also prudent to learn of patents that may cover your product.
• Consult with a patent attorney early in the development process. A patent application may be filed before a prototype is built, and it is often prudent to file a patent application as quickly as possible.
• Use provisional patent applications to establish an early filing date. (More)