Wednesday, May 23, 2018

Central Valley Profiled as a Great Place for VCs to Invest


The Central Valley is not just the agricultural center of California (and the country), and a great place to live and raise a family.  It is starting to become a center for tech.  It was recently highlighted as a place for VCs to consider investing in “Why You Should Invest in Fresno and the Central Valley” in Venture Beat.  Check it out at https://venturebeat.com/2018/05/19/why-you-should-invest-in-fresno-and-the-central-valley/

Saturday, April 28, 2018

Monkey Makes Monkeys out of PETA at Ninth Circuit

A Crested Macaque named Naruto was just doing his thing on the island of Sulawesi, Indonesia in 2011 when he came across an unattended camera.  Though he was only six or seven years old at the time, he decided to do his best Millenial impression and takes some selfies.

Shortly thereafter, the wildlife photographer who left the camera unattended, David Slater, retrieved his camera.  While reviewing the contents, he found the selfies.  Three years later, he published the selfies in a self-published book printed through the Blurb website.  The book had a copyright notice stating that the copyright was held by Slater and Wildlife Personalities.

People for the Ethical Treatment of Animals ("PETA") and an individual sued on behalf of Naruto.  Through PETA, Naruto claimed that he held the copyright in the images he took, and Slater violated his copyright by selling a book with his selfies in it.

The United States District Court for the Northern District of California, Judge Orrick presiding, held that the Copyright Act does not confer standing upon animals like Naruto, and dismissed the case.  Thankfully, this dismissal avoided raising even more complex questions.  For example, if Naruto was found to own the copyright, did he also have rights under the Equal Protection Clause of the Fourteenth Amendment that were violated by the Copyright Act's scheme that granted protection for 70 years after the death of the author.  As Macaques have an expected lifespan of 20 years, Macaques cannot enjoy the same copyright term as a similarly aged human -- giving rise to a potential Equal Protection violation.

Judge Orrick found that "Naruto is not an 'author' within the meaning of the Copyright Act and dismissed the case. Naruto appealed this dismissal to the Ninth Circuit Court of Appeals.  While the appeal was pending, PETA and Slater settled the case, with Slater agreeing to donate 25 percent of future revenue from the photos to groups that protect crested macaques in Indonesia.  Although PETA and Slater both asked the Court to dismiss the appeal, the Court refused.

On April 23, 2018, the Ninth Circuit handed down its opinion.  The Court held that "the monkey's claim has standing under Article III of the United States Constitution.  Nonetheless, [they] conclude[d] that this monkey -- and all animals, since they are not human -- lacks statutory standing under the Copyright Act."  In other words, if Congress had phrased the Copyright Act as saying "Copyright protection subsists, in accordance with this title, in original works of authorship by any mammal fixed in any tangible medium of expression", Naruto would have been able to proceed to a copyright infringement trial on the merits.

The Ninth Circuit first focused on the concept of "Next Friend" -- a doctrine that allows somebody to run litigation on behalf of somebody not able to manage their own litigation.  PETA initially brought the suit as Naruto's "Next Friend".  PETA realized at the oral argument phase that it would almost certainly lose the case. Rather than take the loss, they agreed to settle for pennies on the dollar. The Ninth Circuit went out of its way to slap down PETA:  "We feel compelled to note that PETA's deficiencies [as Naruto's Next Friend] go far beyond its failure to plead a significant relationship with Naruto.  Indeed, if any such relationship exists, PETA appears to have failed to live up to the title of 'friend.'"  PETA offered to settle the case directly with Slater, leaving Naruto "not a party to the settlement".  

The Ninth Circuit wasn't done yet:  "now, in the wake of PETA's proposed dismissal, Naruto is left without an advocate, his supposed 'friend' having abandoned Naruto's substantive claims in what appears to be an effort to prevent th4 publication off a decision adverse to PETA's institutional interests.  Were he capable of recognizing this abandonment, we wonder whether Naruto might initiate an action for breach of confidential relationship against his (former) next friend, PETA, for its failure to pursue his interests before its own."

It is unclear to the reader whether the Ninth Circuit was actually inviting somebody to sue PETA as Naruto's new "Next Friend", but given the holding that Naruto had standing to sue Slater, it may only be a matter of time before PETA is sued in the manner that the Ninth Circuit described.  Ironically, such a suit would vindicate one of PETA's goals in the original suit:  A ruling where an animal recovers damages from a human or human organization.  The Court did recognize that express statutory permission is required for "Next Friend" standing, and that was not provided in the Copyright Act.  The hurdle to be cleared if Naruto is to bring suit against PETA is whether a suit in federal or state court would allow somebody Next Friend standing (although there is a question about whether PETA could remove a case filed in state court to federal court on the grounds that Naruto is not a resident of the same state as PETA).  Of course, once suit is commenced, Federal Rule of Civil Procedure 17 obligates the court to consider whether he is adequately protected, even where there is no 'next friend' -- so somebody bringing suit against PETA on Naruto's behalf may find themselves kicked out of court as Naruto's next friend while leaving Naruto's claims against PETA to be adjudicated.

The Court then noted a crucial rule about "Next Friend" standing:  "lack of a next friend does not destroy [Naruto's] standing to sue, as having a 'case or controversy' under Article III of the Constitution."  The Court went on to substantively analyze whether Naruto qualifies as an author of a copyrighted work.

The Court makes quick work of this analysis:  "if an Act of Congress plainly states that animals have statutory standing, then animals have statutory standing.  If the statute does not so plainly state, then animals do not have statutory standing.  The Copyright Act does not expressly authorize animals to file copyright infringement suits under the statute."

As a final slap to PETA -- perhaps in response to the footnote about PETA failing to act as Naruto's "friend" -- the Court ordered PETA to pay the photographer's attorneys' fees on appeal.

This case may appear more comedy than precedent (and to be fair, I had fun writing this article), but it does establish an important rule about copyright as well as animal rights.

Until this case, the only works in which copyright can never arise were original United States Government works.  After this case, photographs taken by animals are not enforceable (even if the animal were to hold the copyright).  With the miniaturization of imaging technology, we have seen a significant rise in animal-borne cameras, whether for law enforcement and military use or for fun with a Go-Pro.  While there is a weak argument that the creative decision to mount the camera created some copyright rights in the human, this case seems to indicate that images taken by an animal-mounted camera are likely to fall outside of the realm of enforceable copyrights -- the only difference between the hypothetical case and Naruto's case is that Naruto actuated the shutter.  It seems unlikely that a court would find an automatically actuated shutter on a dog-mounted camera as giving rise to a copyright more enforceable than one where the animal actuates the shutter.

The next logical case to bring after this one is one challenging whether images automatically taken by machines (such as the satellite imagery used in Google Earth or dash-cam video from a car) are subject to copyright protection.  While Congress has set copyright terms to last so long that no work created today will ever reach public domain status in my lifetime, animal-created and AI/machine-created images may help fill some of the void that now exists for free-to-use works.  Of course, the key word is "may".  Don't use any images that "may" be free without direct legal advice saying that they are, in fact, free.



Tuesday, April 24, 2018

Patents Aren't Private Property Anymore

Today the Supreme Court handed down its decision in Oil States Energy Services, Inc. v. Greene's Energy Group, LLC.  The Court determined that patents are "public rights" subject to evisceration by political appointees.

The importance of the decision to innovators is described in the first paragraph of Justice Gorsuch's dissent (joined by Chief Justice Roberts):


As readers of this blog as aware, getting a patent issued is an expensive, ponderous and risky journey.  In the previous worst case scenario, you spend tens of thousands of dollars -- or more -- only to see your patent application published, your trade secrets passed to the public domain, and no patent issues.  The Supreme Court has far more than doubled the risk.

Now the worst case scenario is that you spend tens of thousands of dollars getting the patent issued, you spend hundreds of thousands (or millions) of dollars investing building your now-patented product, and just as you're hitting the market, an infringer (or want-to-be infringer) files an application for "Inter-Parties Review" ("IPR") by the same patent office that you just spent years in front of getting the patent in the first place.  Your patent is essentially unenforceable during this process (most Federal Courts will stay patent litigation while the patent is in IPR).  Defending an IPR typically costs between $250,000 and $500,000 (though some estimates are $1 million including a Federal Circuit appeal).  In the end, the patent office's politically appointed "administrative law judges" on a "PTAB" panel decide the IPR -- and if the USPTO director doesn't like the result, he can just appoint a few additional judges or even join the appeals panel himself to tilt the outcome.  Former Chief Judge of the Federal Circuit Randall Rader called the USPTO's administrative appeals board "death squads killing patent rights" given the likelihood of invalidating patent claims (83% of claims challenged were invalidated, and 95% of claims challenged and reviewed were invalidated at the time of Judge Rader's quote; the statistics have slightly improved since then).

This is an awesome result if you are a patent infringer.  Despite all of the concern about China stealing US intellectual property rights, the Supreme Court just handed Chinese companies all the ammunition they need to produce products that steal US technology without worrying about patent suits.  A quick trip to the PTAB and the patent that protects the technology that company would like to infringe can disappear without any of the due process protections American inventors have come to expect from review by an actual Senate-confirmed Article III judge.  No judge, no jury.  Just a group of political appointees running roughshod over patents.

The Court found solace in the right to appeal a PTAB decision to the Federal Circuit Court of Appeals.  However, the Federal Circuit is already so overwhelmed with such appeals that it has taken to issuing summary affirmances of the PTAB decisions (in fact, Oil States itself was an appeal of a single word decision by the Federal Circuit:  "Affirmed").  So while there is a route for judicial appeal, it comes after the property right has already been stripped by the administrative agency.  A good analogy would be a house.  Imagine that you purchase a house, make the mortgage payments for a few years, and suddenly find that a group of political appointees says you never owned the house in the first place.  This is now the status quo for inventions.

The Supreme Court first found that patent rights are different than other property rights.  Unlike houses, patent rights are now considered to "fall[] squarely within the public-rights doctrine".  Because patents are a matter between the federal government and an individual or company, and not between two individuals or companies, they are considered "public rights" and as such susceptible to revocation by the government.  This decision comes in a context where the Supreme Court is considering whether to decide if state governments can simply seize property they suspect was used to store or transport illegal drugs.  If the Court was looking for a way to allow the government to seize patents but still protect the right of citizens to due process before the seizure of private property, the public/private rights distinction provides a roadmap.  Without that context, it is difficult to imagine how the Court would have required a real court to review seizures of property while allowing political appointees to review seizures of patents.

The Court's holding is ultimately summarized by a pithy quote from the case:

Curiously, the Court also recognizes that "inter parties review involves the same interests as the determination to grant a patent in the first instance" but does not address how repeated IPR challenges can keep a patentee from ever effectively enforcing the patent.  Because Article III courts can, and regularly do, stay litigation over infringement while an IPR request is pending, a sufficiently funded infringer can keep a patent in legal limbo essentially for the life of the patent.*  Presumably this is something that a functioning legislative branch would want to fix, particularly given the concern over Chinese theft of US patent rights.

Perhaps the worst aspect of the decision was a doubling down of the uncertainty involved in patent ownership:  "We do not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum."  In theory, this opens the door for the taking the patent system entirely out of the courts.  While that case was not before the Court, the curious need to mention that limiting infringement actions to administrative proceedings before the patent office might be constitutional is yet another piece removed in the Jenga game that the patent system has become.  At some point, having this level of uncertainty is going to tip companies entirely out of the patent system and into a trade secret system (which now has a federal statute protecting it).

The Court does leave several options open for additional challenges:

The split of judges on the Court is interesting.  Justices Breyer, Ginsburg and Sotomayor (two Clinton appointees and an Obama appointee) go out of their way to clarify, in a concurring opinion, that "the Court's opinion should not be read to say that matters involving private rights may never be adjudicated ... by agencies."  In other words, there are three votes that are open to an argument allowing private property rights such as ownership of real estate to be adjudicated by political appointees and not by a jury.  The Chief Justice and Justice Gorsuch (Bush 43 and Trump appointees respectively) dissented from the decision.  We can conclude there are three justices willing to extend Oil States to additional private property and two justices who back Article III protections for private property (since they backed it for patents).  It would take only half of the four justices who did not opine on Article III applicability to private property rights to agree with Breyer, Ginsburg and Sotomayor, and jury trials for taking certain private property may disappear.  In my opinion, the likelihood of such an outcome is vanishingly small, as it would render the Seventh Amendment toothless.

The rapidity of change in patent law is a good reason (if you needed another one) to use an experienced patent lawyer.  A properly written and prosecuted patent application will weather the rise in uncertainty better than one poorly written and prosecuted.
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* Technically the same party cannot raise the same issue at the PTAB and in court, and parties are not supposed to collude to prevent this "estoppel" from attaching.  As a practical matter, however, it is not uncommon to see a one entity being sued while another entity puts the patent in litigation into IPR.  This can be done through entities (Unified Patents, for example) or by the first company doing favors for other companies by putting patents into IPR in hopes (which usually are realized) that the other company will put patents the first company is being sued for into IPR as a way of returning the favor.  Congress could easily eliminate the risk of such abuse by adopting simple legislation, such as "a patent may not be invalidated in court or administrative proceedings based on issues raised in any previous administrative proceeding."  This would greatly level the playing field, as currently, every patent defendant can raise the identical issue in every court.  Such legislation might be challenged on due process grounds, claiming that there is a constitutional right to defend against infringement suits on the same grounds as another defendant previously raised and lost.  The Oil States court's heavy emphasis on the deference to be granted Congressional rules on review of patents make such a challenge more difficult.

Friday, April 20, 2018

Very Quick Look: Another Reason You Need to Use a Patent Lawyer

There are plenty of "gotchas" that inventors face.  We will list some of these in a future post, but this alone should be enough:  Simply leaving out a line in the patent application wiped out a patent that E*Trade was allegedly infringing.  There will never be a trial on the merits because the lawyers made one mistake that invalidated the patent.

The Federal Circuit opinion quoted the language actually used in the application and that doomed it:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, entitled “SYSTEM AND METHOD FOR DELIVERING REMOTELY STORED APPLICATIONS AND INFORMATION” filed on Nov. 24, 2003 now U.S. Pat. No. 7,502,838, the di[s]closure of which is hereby incorporated by reference in its entirety. CROSS REFERENCE TO RELATED DOCUMENTS Priority is herewith claimed under 35 U.S.C.§ 119(e) from copending Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999, entitled “METHOD AND SYSTEM FOR DELIVERING APPLICATIONS IN CLIENT/SERVER ENVIRONMENT,” by Louis M. Franco et al. The disclosure of this Provisional Patent Application is incorporated by reference herein in its entirety.
Dennis Crouch's Patently-O helpfully gives an example of the language that would have worked:

The present application is a continuation of allowed U.S. patent application Ser. No. 10/720,728, filed on Nov. 24, 2003 which has issued as U.S. Pat. No. 7,502,838, which is a continuation application U.S. application Ser. No. 09/599,382 filed Jun. 22, 2000, which has issued as U.S. Pat. No. 6,687,745 on Feb. 3, 2004, and which claims the benefit of Provisional Patent Application No. 60/153,917, filed Sep. 14, 1999.
Professor Crouch notes that just reading the statute and regulations would lead one to believe that the priority claim should have been valid, but that the courts have interpreted the statute and regulations in a non-obvious way.

If you can't look at the two different priority claims above and know why one works and one doesn't, you need a patent lawyer.

This is far from the first time that companies using lawyers get caught in "gotchas" -- for example, Roche's predecessor left language out of an assignment agreement that cost it a patent worth tens or hundreds of millions of dollars.  However, when an inventor uses a lawyer, there are two outs:  First, pick a good lawyer and the mistakes are far less likely to happen.  Second, part of the legal fee should cover malpractice insurance premiums, so as long as you confirm that your lawyer has appropriate coverage, if they get it wrong you aren't left high and dry (although it is important to note that few malpractice policies are going to cover very high dollar amount patent malpractice claims).

As long as you know what you're doing, there is no reason you can't draft your own specification, draft your own claims, even draft the whole application.  However, whether you know what you're doing or not, there is a reason to have a good patent lawyer take a look at what you've drafted to make sure it threads all of the needles that patent applications need to thread.

Tuesday, April 17, 2018

California Law That Forbade Posting of Actors’ Ages Struck Down by Federal Court

A federal district court judge has struck down California’s AB 1687, a law which forbade a popular film industry website from publishing certain truthful age-related information about actors, finding it in violation of the First Amendment.

In 2016, IMDb.com, Inc. sued the State of California to challenge the constitutionality of the law.  The Screen Actors Guild-American Federation of Television and Radio Artists intervened as a defendant in the suit.  The defendants maintained that the law was necessary to combat rampant age discrimination in the Hollywood film industry.  In its order granting IMDb.com, Inc.’s motion for summary judgment, the court held that while curbing age discrimination is certainly a compelling interest, “regulation of speech must be a last resort.”

One of the defendants’ contentions was that the publication of facts about ages of people in the entertainment industry can be banned because these facts “facilitate” age discrimination.  The court rejected this, noting that such an argument, if successful, “would enable states to forbid publication of virtually any fact.”  Moreover, the United States Supreme Court has said on multiple occasions that the fact that a third party could misuse truthful information is almost never sufficient to justify suppression of that information. 

The court also held that AB 1687 cannot survive strict scrutiny.  While the State certainly has a compelling interest to combat age discrimination, the law was not narrowly tailored to achieve that interest.  For one, the law was uncerinclusive because it bans only one kind of speaker from disseminating age-related information, leaving all other sources of that information untouched.  The law was also overinclusive because it requires IMDb not to publish age-information of all those who request that their information not be published, including those who are not protected by age discrimination laws.

This case serves as a reminder that courts cannot and will not protect Americans from the truth; truthful statements are constitutionally protected.  Furthermore, the court’s ruling implies that the publication of truthful information on a platform that employers can access is not unlawful, even if an employer uses the information to discriminate. 

Authored by Brandon Hamparzoomian

Thursday, April 12, 2018

Trump's USPTO Director Pledges Support for Invention

Many in the patent community held great hope that President Trump, who made millions, perhaps billions, from his understanding of the importance of the work of the United States Patent and Trademark Office ("USPTO") and the Trump® trademark, would be a champion for returning the U.S. patent system to its former status as the world's leading engine for innovation.  There was understandable confusion when he kept Michelle Lee, Google's former patent lawyer, in place for a year as head of the USPTO, making her the highest-ranking Obama administration holdover.  It was with enormous, tough-to-understate interest that inventors waited to see if newly installed USPTO director Andrei Iancu would change direction.

We are left wondering no more.  Mere days after Senate approval, Director Iancu gave a speech to the U.S. Chamber of Commerce that set forth his position, saying in part:
Yet today, our patent system is at a crossroads. For more than just a few years, our system has been pushed and pulled, poked and prodded. The cumulative result is a system in which the patent grant is less reliable today than it should be. This onslaught has come from all directions. There has been major reform legislation, and proposed legislation. There have been massive changes brought about by major court cases. And the USPTO itself has taken a variety of actions in an effort to implement these changes. Plus, importantly, the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system—instead of the incredible benefits the system brings to our nation. We see the result of this years-long onslaught in your own study, the U.S. Chamber’s 6th Annual International IP Index.

I don’t need to tell this audience that the American patent system, which in prior years was deservedly ranked as the number one system in the world, in 2017 fell to number 10. And this year it fell further, tied for number 12. But make no mistake: we are still an elite system, a mere ¼ point away from the systems ranked 2-11.  And the United States remains the leader for overall IP rights.

Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.

So, how do we reverse the trend? The good news is that reclaiming our patent leadership status is within reach.

For today, let me focus on two principal points:

1. Creating a new pro-innovation, pro-IP dialogue, and
2. Increasing the reliability of the patent grant. 
First, we must change the dialogue surrounding patents. Words have meaning. Words impact perception and drive public policy. And for too long, the words surrounding our patent system have been overly-focused on its faults. A successful system cannot be defined by its faults. Rather, a successful system must be defined by its goals, aspirations, and successes. Obviously, errors in the system should be corrected. And no abuse should be tolerated. Errors and abuse should be identified and swiftly eliminated. However, the focus for discussion, and the focus for IP policy, must be on the positive.  We must create a new narrative that defines the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to society. And it is these benefits that must drive our patent policies. 
 Director Iancu concludes with very hopeful dialogue about the importance of our patent system:
President Trump then asked all of us to imagine the wonders our country could know in America’s 250th year. He asked us to think about all the illnesses that could be cured, the distant worlds we could walk on, and the marvels we could achieve, if only we could set free the dreams of Americans. That’s how I think about intellectual property. As I see it, no dream is too big if we unleash the power of innovation, and give our nation’s inventors the protections they need to succeed. That’s why it’s so important that we find the right balance in the IP system. This is something I’m very passionate about, and fully committed to, as I lead the U.S. Patent and Trademark Office.

We have a remarkable patent system, born from our Constitution and steeped in our history. It is a crown jewel; a gold standard. We have a unique opportunity to ensure it meets its full Constitutional mandate to promote innovation and grow our economy.
These are very promising words and show a USPTO Director committed to an innovation economy.  We will see what actions those words and ideas give rise to.

UPDATE:  IP Watchdog has additional coverage of the new policy position.


Wednesday, April 11, 2018

Very quick look: Section 230 Immunity Weakened

A new article titled "'Worst of Both Worlds' FOSTA Signed Into Law, Completing Section 230's Evisceration" was just posted to law professor Eric Goldman's Technology & Marketing Law Blog.

Eric's post is well worth reading in full.  Eric notes that major services, including Google and Microsoft, are taking steps to ban legal content in the aftermath of FOSTA's passage.  Eric summarizes the outcome fairly succinctly:  "So just to make the point obvious: as opponents warned Congress, even before signing, FOSTA suppressed legal Internet content for no apparent benefit to sex trafficking victims. It’s a terrible deal for everyone."

If you operate an internet service that allows user-created content, it is critical that you seek legal advice as to how this dramatic narrowing of Section 230 -- the law that arguably fostered the success of Facebook, Twitter, Google, and most of the services we now take for granted -- will impact your business practices.  Failure to adapt to the new law could easily result in civil liability.