Monday, November 12, 2018

Ninth Circuit Holds Laches Defense Applies to Trademark Cancellation Actions


Pinkette Clothing v. Cosmetic Warriors

                In Pinkette Clothing, Inc. v. Cosmetic Warriors Limited, dba Lush Handmade Cosmetics (“CWL”), CWL filed a trademark infringement suit against Pinkette, seeking cancellation of its trademark registration because of the likelihood of confusion as to the use of the label “LUSH” on clothing.  The U.S. Ninth Circuit Court of Appeal affirmed the district court’s judgment in favor of Pinkette, and found that CWL waited too long to bring its case and that the unreasonable delay prejudiced its opponent.

                To understand the court’s holding, a brief procedural summary is essential.  Pinkette filed a trademark registration for the use of the “LUSH” mark on clothing (sold in major department stores and smaller fashion boutiques) in 2009.  CWL, who operates over 900 “LUSH Fresh Handmade Cosmetics” retail stores throughout the world, asserted that Pinkette’s use of “LUSH” was confusingly similar to that of CWL’s use of the “LUSH” mark (which has been used since 1995).  CWL claimed it was not aware of Pinkette’s LUSH mark until years after Pinkette’s mark was registered (while it did not oppose Pinkette’s registration of the LUSH mark in 2010, because Pinkette’s LUSH mark was registered, CWL was on constructive notice of Pinkette’s claim to ownership).  CWL claims to have no actual knowledge of Pinkette’s use of the LUSH mark until late 2014 and, shortly thereafter, it filed a petition to cancel Pinkette’s registration with the Trademark Trial and Appeal Board.  Pinkette also filed an action in federal court seeking declaratory judgment (regarding not infringing on CWL’s trademark rights or, alternatively, that laches bars CWL from asserting rights against Pinkette). 

                In affirming the district court’s ruling, the Ninth Circuit Court of Appeal found that the district court did not abuse its discretion in applying laches to bar CWL cancellation and infringement claims against Pinkette because CWL waited too long to bring its case after it “should have known about its claims.”  The Lanham Act contains no statute of limitations, and thus, courts apply a presumption in favor of the defense of laches if the plaintiff’s delay is longer than the most analogous state statute of limitations.   In trademark cases, even if the defense is asserted within the most analogous state limitations period, the laches defense may still apply - this is unlike with patents and copyrights which have a federal statute of limitations.  In this case, California’s analogous four-year statute of limitations for trademark infringement was the most analogous statute of limitations, and the court found that because the delay was beyond four years, a “strong presumption in favor of laches” applied.  The court further concluded that due to the laches defense, CWL can neither enforce its trademark rights against Pinkette’s use of LUSH on clothing nor cancel Pinkette’s registration for use of the mark on clothing.

                 This case sheds light on the often forgotten equitable defense of laches and reminds all that it still applies in trademark cases even though the Supreme Court has eliminated it in the last few years in copyright and patent cases.

Authored by Jennifer T. Poochigian

Monday, October 8, 2018

IS A VALID COPYRIGHT REGISTRATION REQUIRED BEFORE AN INFRINGEMENT SUIT? SCOTUS WILL DECIDE THIS TERM

U.S. Courts of Appeal are split as to whether copyright registration occurs once the copyright holder delivers the required application, deposit and fee to the Copyright Office, or whether registration occurs after the Copyright Office acts on an application by either registering or denying a copyright. As such, the Supreme Court will consider this issue in its current term through Fourth Estate Public Benefit Corp. v. Wall-Street.com, an eleventh Circuit case decided in May, 2017.

In Fourth Estate, the Eleventh Circuit Court affirmed the district court’s ruling which dismissed the lawsuit on grounds that the Copyright Act requires the Register of Copyrights to actually register (or deny) the copyright claim before the infringement suit could proceed. This "registration approach," which is also adopted by the Tenth Circuit, follows the plain language reading of the Copyright Act, which requires a valid copyright registration to be issued before the filing of an infringement suit. On the other hand, the Fifth and Ninth Circuit Courts have adopted the "application approach," which allows for an infringement suit to be maintained after an application is completed and filed. These courts reason that the application process is a mere formality, since every application results in a registration or rejection, and either will allow a plaintiff to proceed with an infringement action. Obtaining a copyright registration can take months unless the applicant pays a nonrefundable $800 fee for expedited handling when there is compelling need, such as prospective litigation. Forgoing the extra fees will make infringement actions more economically feasible, particularly for smaller companies or individual owners.

Once this split is resolved, copyright owners will know what is required prior to bringing an infringement suit. The decision will also end forum shopping and provide clarity and consistency in copyright litigation moving forward.

This post will be updated when the Supreme Court renders its decision.


Wednesday, July 18, 2018

Making America's Patent System Great Again


The Restoring American Leadership in Innovation Act of 2018 was recently introduced by a bipartisan group of members of the House. 

The Act reverses a lot of the damage that has been done to the US patent system in recent years as a result of restrictions on the value, scope, and enforceability of patents put in place nearly simultaneously on a judicial, legislative, and executive level.

The Act would:

(1) Undo the Supreme Court's decision in Oil States, a case that determined that patents are not private property (despite literally centuries of jurisprudence treating them as private property and a statutory provision stating that "patents shall have the attributes of private property."). 

(2) Restore the United States patent system to a "First to Invent" system.  With passage of the America Invents Act, the United States changed its patent system from one where the first person to invent something got the patent to one where the first person to file for a patent got the patent, regardless of whether they were the first person to invent.  The Act would reverse this change.

(3) Restore a one year grace period that lets an inventor test and improve their invention in full public view for a year before the clock runs out on filing for a patent.  This grace period allows inventors to improve the invention through experience, to gauge whether a market exists for the invention, and to find investors.

(4) Abolishes the post-grant review ("PGR") and inter-parties review ("IPR") processes.  The IPR system has been called a patent death squad by the former chief judge of the Federal Circuit Court of Appeals, and it is very likely that this change alone restores predictability and fairness to the US Patent system, again rendering it the preeminent IP system in the world.

(5) Without the PGR and IPR workload, the need for a Patent Trial and Appeal Board ("PTAB") goes away, and the bill would replace the PTAB by restoring the Board of Patent Appeals and Interferences (this is really a technical fix).

(6) Critically, the bill would eliminate fee diversion.  This issue seems like a nerdy, "inside baseball" kind of issue, but is actually crucial.  Currently, the USPTO is self-funded.  That means that users are charged hefty fees for almost every interaction with the USPTO, and those fees are used to pay for the USPTO.  In theory, the USPTO sets fees in order to minimize the cost of protection invention while making sure that the office is funded in a way that allows for timely, complete, and accurate review of patent applications.  In reality, every year Congress takes the opportunity to raid the USPTO's coffers, diverting to other government departments the USPTO user fees intended to pay for additional patent examiners.  Ending fee diversion will dramatically improve patent quality and the speed of patent issuance (or rejection).

(7) Clarifies that when Congress said "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," it actually meant it.  Supreme Court decisions in recent years have carved out so many judicial exceptions that even federal judges and the head of the patent office are no longer sure what is patentable.  The statute lays out patentability in a very clear way by replacing wandering, inconsistent jurisprudence with a simple statement that an invention is ineligible only if it exists in nature independently of and prior to any human activity, or exists solely in the human mind.  I have long taken the position as an inventor that a clear rule -- even a bad clear rule -- would substantially improve on the existing state of confusion.  By abrogating the various Supreme Court decisions that created a confusing maze of eligibility issues, inventors will finally know whether to keep something a trade secret (because it isn't patentable) or to file for a patent.

(8) The standards for a patent rejection on the grounds that the invention isn't novel are clarified.

(9) Clarifies that patents may only be invalidated by a judicial proceeding unless the patent owner consents to an administrative procedure.

(10) Reverses the rule that (absent an express request for non-publication) patent applications are automatically published 18 months after the priority date.  The concern here is apparently that (1) publication rules can prevent an inventor from filing for an improvement on their own invention that didn't issue as a patent because the prior invention was published before the improvements were filed for after the publication of the earlier patent application, and (2) Publication at 18 months and a delay in patent issuance that can last years after publication allow foreign competitors to steal inventions.

(11) Restores the rule that patents are presumed to be valid.

(12) Prevents infringers from effectively running out the patent term by filing multiple validity challenges that effectively prevent the patent from being enforced before it expires.  This is accomplished by "tolling", or pausing, the running of a patent term during the pendency of a validity challenge.

(13) Reverses the Supreme Court's holding that patent owners are almost never able to obtain an injunction against infringers.

(14) Restores the "Best Mode" requirement -- a requirement that an inventor discloses the best mode to implement an invention.  This avoids the shady practice of describing hundreds of ways to do a thing in order to keep competitors from figuring out the best way to do it (presumably after the patent term ends).

The bill would likely restore the status of the United States patent system as the envy of the world.  As of now, the United States patent system may well be the most confusing and expensive in the world.

Unfortunately, the infringer lobby is likely to derail or massively amend the bill. If the bill makes it into law largely unscathed, however, it will keep the Trump Administration's promise to Make America Great Again -- at least with regard to a patent system that has suffered mightily over the past decade.


Tuesday, July 17, 2018

Contingency Planning and Patents


It was 2006.  RIM/Blackberry just settled a patent infringement case for $612.5 million.  US patent law had been largely stable for decades. The Chinese government was not all in on IP. The US government ran the world's best patent system, and "Designed in California, Manufactured in China" was the tagline on almost every Apple device. The RIM settlement was the canary in the coal mine: Infringers did not like the idea of having to pay this kind of money just to use somebody else's innovations.  They piled money and support into Obama's campaign, and soon enough Google's head of patents was promoted to head the US Patent and Trademark Office (causation v. correlation -- your call). The Supreme Court got involved an bought into the "patents are broken" line that the infringer lobby pushed -- and in response severely limited patents and patent rights. Congress got involved and created a system of post-grant review that has been called a "patent death squad".

Fast forward to 2018.  The U.S. Patent System dropped to 12th place in the U.S. Chamber of Commerce's global IP index, ranking below the new patent rights champion, Singapore, as well as France, Germany, Ireland, Japan, the Netherlands, South Korea, Spain, Switzerland, the UK, and Italy -- marking quite a fall for the previously top-ranked patent system.  China is rapidly moving to reinvent its own patent system that improves on the Western patent systemThe European Patent Office appears likely to survive Brexit, but the same forces that brought Brexit to electoral success -- and the US Administration's hostility to international trade agreements -- raise questions about whether the Patent Cooperation Treaty remains stable (for now, it is) and whether the EPO will continue to function (for now, it will).

Finally, the IP markets have entirely seized up for small businesses and independent inventors.  While big companies continue to wage billion-dollar court battles and reach 10 figure settlements, the introduction of the post-grant review ("PGR") regime and the inter-parties review ("IPR") category of PGR have raised the cost of asserting a patent by hundreds of thousands of dollars for each IPR filed (and some patents have seen double-digit numbers of IPR filings). 

Because of the uncertainty about what the US Supreme Court will do next and whether there will be a legislative fix for what the US Supreme Court did with the Alice and related decisions about patent eligibility, potential patent buyers are faced with a situation analogous to ... well, there really isn't a solid analogy. One that gets close is an owner of a house trying to sell it. Playing the role of IPR in this analogy is a prohibition on fire insurance and legalization of arson.  Sure, you can buy the house, but if a big enough company decides it wants to destroy the house, it can.  At will.  It becomes an impossible task to sell a house -- or a patent -- under those circumstances.

As a lawyer and a named inventor on over 200 issued patents, I have had plenty of opportunities to analyze the patent marketplace and consider how an independent inventor or small business should respond to these changes.  Of course, the best strategy for me may not work for a particular invention or business, so you should seek legal advice tailored to your situation.

As a general case, my recommended filing strategy is as follows:

(1) File a provisional patent application in the United States.  This preserves the filing date but does not start the clock running on the 20 year patent term (which runs from the date the first non-provisional application is filed).
(2) Before expiration of the provisional, file a Patent Cooperation Treaty application.  This is a place-holder (just like a provisional) but it allows you to file years later in almost every country in the world.
(3) Hope that the US patent system stabilizes before it is time to file a national phase application in the United States.
(4) Before the expiration of the PCT deadlines, file national phase in:
  (a) Germany (the EU's biggest economy).
  (b) China (the government is strongly backing growth in their patent system and -- if trends continue unchanged -- may well have a stronger patent system than the United States within a decade.
  (c) USA (the world's biggest economy).
  (d) Review the technology at issue and determine which other countries are good candidates.
(5) With regard to the US filing, one strategy is to buy time for the US patent system to stabilize by filing an application that has claims that should be allowable and putting the patent application into the appeals process if it is denied.  This will buy half a decade or more, much of which is ultimately tacked onto the patent term in the form of a patent term adjustment.
(6) File for foreign patents via a non-US entity.  This is a weird one, but there is increasing pressure on Canada and certain other former US trade allies to respond to the Trump Administration's trade policies by expropriating patents owned by US entities.  By having a non-US entity own your foreign patents, you have a better chance of avoiding seeing your patents fall victim to a trade war.

While the US system was still the preeminent patent system in the world, and while China's IP policy was at best neglected, the strategy was much simpler:  File for a utility patent in the United States and perhaps file abroad if you can make the business case for it.  Now the strategy is complex, but with a simple organizing principle:  IP law is in flux, and filing strategy needs to preserve the maximum amount of flexibility to respond to changes.

One example of the flux we're waiting out?  The United States is about to find out whether a patent is void (as a result of the on-sale bar) if the inventor shows the patent to a third party under a non-disclosure agreement.  Last year's flux?  Determining whether extraterritorial sales of patented items exhaust US patent rights. Before that? The legality of the IPR system. Before that? Subject matter eligibility.  The United States has made changes to the patent system such that baseline, critical questions remain unanswered -- and the answers are coming out at a snail's pace.

Tuesday, June 5, 2018

Even the Federal Circuit Court of Appeals Judges, USPTO head Can't Figure Out Patent Eligibility Rules


President Trump's new head of the United States Patent and Trademark Office, Andrei Iancu, recently noted that uncertainty about what kinds of innovation are patent-eligible is weakening investment, growth, and jobs in high tech industries:
 I do worry that the current state of Section 101 in patentable subject matter weakens the robustness of our IP system in the affected areas.  And if industry cannot predict in a relatively reliable way whether their investments will be protected from an intellectual property point of view I think that will result in less investment, less growth, fewer jobs created in the affected industries.  So I do think it is critically important for our economy.  And again whatever industry we’re talking about and whatever industry we want to grow it’s critically important to have a strong reliable and predictable intellectual property system.
Yesterday, two well respected and long-serving judges on the Federal Circuit Court of Appeals (the court designated to handle all patent appeals), Judges Lourie and Newman (with 66 years of experience hearing patent appeals on the Federal Circuit between them), echoed Director Iancu's concerns.  In a concurring opinion, they wrote separately to say that Congress needs to clarify the kinds of inventions that are patentable:
I concur in the court’s declining to rehear this case en
banc. There is plausibility to the panel holding that there
are fact issues potentially involved in this case concerning
the abstract idea exception to patent eligibility. And the
panel, and the court, are bound to follow the script that
the Supreme Court has written for us in § 101 cases.
However, I believe the law needs clarification by
higher authority, perhaps by Congress, to work its way
out of what so many in the innovation field consider are
§ 101 problems. Individual cases, whether heard by this
court or the Supreme Court, are imperfect vehicles for
enunciating broad principles because they are limited to
the facts presented. Section 101 issues certainly require
attention beyond the power of this court.
Director Iancu further indicated that the Trump Administration is interested in strengthening the patent system:
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.
Well respected commentators have been even more explicit in laying the blame for the weakened United States patent system at the feet of the Supreme Court

As an inventor, I have frequently spoken on the subject of innovation.  One point I have repeatedly made is that it would be far better to have bad rules than to be unsure of what the rules are.  Given the current state of confusion about which inventions are patent-eligible, it would be hard for even the most dysfunctional Congress to worsen the situation. The alarming uncertainty in the U.S. patent system seems to finally be getting the attention it badly needs.

While we await Congressional action that may or may not come, it is all the more critical that inventors turn to experienced patent lawyers capable of laying out the pros, cons, and unknowns about inventions.

Wednesday, May 30, 2018

US Patent Number 10,000,000 is set to issue in June, 2018


Inventors keep filing for patents, despite a fairly hostile judicial atmosphere for patents (such as declaring patents are no longer private property, adding new limitations on where patentees can bring suit against infringers, weakening the standard for invalidating patents in administrative proceedings, and of course the various decisions adding restrictions to what is patentable, most recently a decision holding that the magnitude, level of inventiveness and importance of an invention are irrelevant to whether it is patentable).

I've commented before on the staggering rate of invention, and it comes as no surprise that since that article, I've personally been granted 53 patents, for a total of 203 issued US patents.  It does come as a bit of a surprise that my first issued patent was number 6,756,879 -- meaning that approximately one-third of all issued US patents issued in the 14 years between my first issued patent (6,756,879 issued June 29, 2004) and today.

There are some strong indications that this rate of innovation is slowing under the weight of legislative and judicial changes substantially weakening patent protection in the United States.  Fewer lawsuits are being filed claiming infringement (though the way to count litigation "campaigns" -- where a single patent is asserted against many defendants -- can be manipulated to make the numbers go up or down).  International patent filings are slowing (the United States is such a huge market that a weakening system in the United States may well change the economics of getting patent protection as compared to keeping things as a trade secret).  US patent filings are slowing significantly more than international filings (compare the previous link with page 12 of the USPTO's filing here).

Perhaps most salient is that the U.S. patent system fell to the 12th ranked system in the world this year.  The United States was ranked #1 every year until 2017 when it dropped to #10.  This year, it is behind Singapore, France, Germany, Ireland, Japan, the Netherlands, South Korea, Spain, Sweden, Switzerland, and the United Kingdom (and tied with Italy).  This raises serious questions about whether the United States will continue to be viewed as a viable place to file for patent protection.

I can speak to my own experience filing for patents.  With each new Supreme Court decision, and with each year passing without a change to the post-grant review procedures, I have filed fewer patent applications. The economics of them have simply become harder to justify. However, I have adopted a new procedure that does support continued filing, so I expect my filings to return to their previous levels.  The procedure is:

(1) File a provisional application in the United States Patent and Trademark Office.  This costs very little and gives me a year to develop the invention.
(2) Before the year expires, file a "Patent Cooperation Treaty" ("PCT") application.  Like a provisional, a PCT filing will never issue as an enforceable patent -- it just keeps the door open to filing internationally.
(3) At or near the deadline for entering the national phase of various countries, examine their patent system and determine the cost/benefit of filing in that country.  China's system has strengthened and is positioned to become a premier forum for IP protection in the 21st Century.  India is diligently working on their system. Germany, Canada, Australia, and the UK all represent large markets and have mature patent systems.  So even if US patent law is too unpredictable or hostile to a given invention, it may still be worth pursuing in nations that are more innovation-friendly.

Patent 10,000,000 is indeed something to celebrate.  It is a testament to the millions of inventors who have made the United States the world's foundry for good ideas. The future of the patent system in the United States is uncertain, but we should all take pride in the system, decisions, and innovations that brought us to where we are.

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.

Tuesday, April 10, 2018

After 200 Issued Patents, I Have Some Tips

My 200th United States patent issued today, titled Device Power and Resource Management.  According to data that I analyzed in the blog post I made when I received my 100th issued patent, there are well under 1,000 people in the world with that many issued patents.  I know the patent system from a unique vantage point as a Harvard-trained attorney, prolific inventor, and innovation consultant.  Here are some of the lessons I've drawn from my years as an inventor.

If you don't have a good patent lawyer, here is how to find one I have previously written about how to improve your business by improving how you work with your patent lawyer, and after working 200 inventions through the system from idea to issued patent, I stand by that advice.  In terms of finding the right lawyer, it is important to understand that the right lawyer for you, this year, for a particular invention, may not be the right lawyer for your friend, for you in the future, or for a different invention.  It is possible to find the right lawyer for you across a range of patent applications and over a long period of time, but first, it is important to try an application or two with a candidate.

I've long said that a good patent lawyer-client relationship can be understood through the analogy of marriage.  The best spouse for me may well be a terrible fit for you.  I may change over time, or my spouse may, and the day may come when the match no longer works as it should.  This stems from the odd nature of patent work.  Your patent lawyer needs to eventually be able to act as if she is reading your mind. When you say "it would be cool if the invention was also mobile", the lawyer should immediately start envisioning what you probably mean -- and get it right.  If you are thinking of vehicles and drones and your lawyer is thinking you mean making it small enough to fit in your pocket, that is a red flag. Your lawyer should know what you are good at (I'm good at writing specifications for example) and what you are bad at.  The lawyer should anticipate providing a lot of help where you are weak, and a lot of encouragement where you are strong.

The best thing you can do when looking for a lawyer is to recast it as looking for the right lawyer at this time, for this job. This is the dating theory of finding a lawyer. The "first date" is a brief (hopefully free) meet-and-greet with the lawyer, allowing each of you to see if there is good chemistry and an ease of communication.  The "second date" is sending an invention disclosure to the lawyer and working together to write up a strong patent application.  After a few dates, evaluate whether this is the person for you, and if so, you've found the patent lawyer for the majority of your own.  You will still need other patent lawyers (for example, if your lawyer knows nothing about the subject area of your invention or if your lawyer has a conflict of interest).

Like any relationship, people and needs change.  As difficult as it may be to terminate your relationship with a lawyer who has been in your corner for years, it is a business decision and sticking with a lawyer out of sentimentality is an easy way to spend a lot of money in fees for bad outcomes.

Your guess about the value of an invention is probably wrong:  Inventors fall in love with their inventions, and that can lead to disaster.  Review the invention with a friend.  Ask your patent lawyer their opinion on valuation and chance of issuance. Most importantly, look at your invention as objectively as possible, asking "will people buy this invention?"  You'll get it wrong sometimes.  I once invented a device that would use three colored lasers to project an image directly onto a user's retina.  Because of the complexity of biotech inventions and patents, the cost of patent prosecution was going to be very high.  On balance, I thought that the chance people would be ok with lasers shooting directly onto their retinas was small.  Because I thought a market for such an invention would not exist in any financially meaningful way, I never filed for patent protection.  It seems I was quite wrong about the commercial viability of such an invention.

You will file for patents that turn out to have no commercial value.  You will pass on patents that turn out to have commercial value.  Don't let it discourage you.  It is simply the nature of patents.

Post-issuance monetization is hard:  This is a relatively new problem.  From the founding of the republic, the United States held inventions in high esteem -- a function so important to the success of the nation that the power to grant patents was specifically granted to the government in the Constitution.  Until passage of the America Invents Act, an issued patent was a strong piece of property, with a presumption of validity.  The America Invents Act created a range of "post-grant review" processes that allow an administrative agency to strip this property right from the inventor without any intervention from an Article III court (i.e. a Federal District Court, a Federal Circuit Court, or the U.S. Supreme Court).

The America Invents Act has so weakened the value and reliability of patents that the market for patent sales and licenses has collapsed and copy-cats and foreign-produced infringing devices are regularly imported to the US on the theory that US patents are sufficiently weak that a simple post-grant review filing will compel an inventor to either give up or grant a license for pennies on the dollar. 

Luckily, even if the US has broken its patent system (it fell out of the U.S. Chamber of Commerce's top ten nations for patent protection for the first time ever in 2018), there are plenty of other countries to file in.  China is actively pursuing patent filings from overseas inventors.  Europe's patent system remains strong, as does Japan's, South Korea's, and Singapore's.  India is paying far better attention to improving its patent system.  In short, as the United States patent system weakens, foreign patent systems strengthen.  As a matter of public policy, this presents an enormous risk to U.S. Competitiveness over the long term.  As a business matter for inventors, this argues strongly in favor of filing outside of the United States.

When I first started inventing, the typical pattern was to file a United States provisional application (which is basically a placeholder that preserves your filing date for a year), then file a United States utility application together with, sometimes, a Patent Cooperation Treaty (PCT) filing and subsequent foreign filings. After the U.S. system's fall from grace, my typical pattern is now to file provisionally in the United States, file a PCT application claiming priority to the U.S. Provisional, and then file in China and Europe, delaying a U.S. filing until the last second as U.S. patent law is in such a state of flux that filing the U.S. utility application any earlier than necessary runs the risk that U.S. law changes in a way that renders the U.S. filing weaker or valueless.  I'm not trying to be a doom-and-gloom voice on the U.S. patent system.  This is the weakest it has been in my lifetime, but it is important to understand that U.S. patents have gone through many up and down cycles and may be on the way to recovering.

You're going to be called a patent troll no matter what you do:  The term "patent troll" was likely coined by Peter Detkin while he worked as counsel for Intel.  Of course, Mr. Detkin moved to Intellectual Ventures shortly after coining the term, and I would be surprised if he did not regret creating it. While patent troll was initially aimed at entities that purchased patents from the inventor and then enforced them against operating entities, it has experienced "definition creep", and is not infrequently used to describe an operating entity that invented something, patented it, and then asserted the patent against a competitor trying to steal the invention. 

Taking a step back, we can see why the term actually makes some sense.  The "troll" terminology used references the children's stories about a troll hiding under a bridge and making everybody who wants to pass pay a toll.  Once we are using a bridge as the analogy, we can describe it far more accurately than the simple one word pejorative does.  Jane builds a bridge, spending money and years getting everything right.  It is Jane's bridge.  Jane decides to sell the bridge in order to get the cash to launch her next venture.  The bridge purchaser then charges people to cross the bridge.  Patents and bridges are both property, and to say that there is something pernicious about selling your own property should have no place in a capitalist democracy such as the United States.

Regardless of whether the term "troll" is part of a propaganda campaign to weaken patent rights (as I would argue) or a legitimate description of patentees (a position advanced by several large tech companies), it is important to be prepared for the name calling.

Nobody knows what is patentable in the United States anymore:  While there are certain things that are clearly patentable, there is a huge swath of intellectual property that sits in a grey area that the Supreme Court created in the Alice case.  Get your lawyer to advise you as to his or her opinion about patentability, but understand that even if your lawyer is right today, it does not mean that he or she will still be right by the time the patent is examined or enforced.  The law is in flux, and high value inventions that fall near the grey area may be worth pursuing even if they are unlikely to be considered patentable subject matter under the rules in force at the moment.  If it is possible to treat an invention in the grey area as a trade secret, it may make sense to hold it as a trade secret rather than risk public disclosure through a patent system that goes on to reject the patentability of the invention.

Inventing is still fun:  I probably should have led with this one.  Inventing is awesome.  Sitting down with your kids and helping them invent is awesome.  I love working with start ups and others to further develop inventions or show them how to invent in a patentable way.  Once in a while, it is important to look up from your computer and just think about how cool it is that you get to make money by just coming up with ideas.

Thursday, April 5, 2018

California Court of Appeal Knocks Out Right of Publicity Claim by Olivia de Havilland

Olivia de Havilland will celebrate her 102nd birthday on July 1.  She was famous as an actor, starring in such films as Gone With the Wind and winning two Academy Awards (losing a third one to her sister, Joan Fontaine). 

Among lawyers, though, she was perhaps most famous for her role as the plaintiff in de Havilland v. Warner Bros.  That case held that performers may not be bound to a contract for a period longer than the statutory limit of seven years, even if the performer was "suspended" under the contract for failure to perform for some of that time.

After a long and very successful career, and after winning crucial rights for California performers in court, Ms. de Havilland's luck (at least in court) seems to have run out.

In 2017, FX aired an eight-part docudrama titled "Feud: Bette and Joan", focusing on Joan Crawford and Bette Davis.  Catherine Zeta-Jones portrayed de Havilland, appearing in only 17 minutes (4.3%) of the 392-minute miniseries.  Three months after the release of the docudrama, Ms. de Havilland sued FX.  Her claims were technically for "misappropriation", a violation of California's statutory right of publicity, false light invasion of privacy, and "unjust enrichment". However denominated, the claims really boil down to a desire to get paid for the use of her image and the fictionalization of details of her life.  She also sought to permanently enjoin the broadcast and distribution of the film.  Because of her advanced age, the court expedited the case.

The case came on appeal of denial of an anti-SLAPP motion.  An anti-SLAPP motion is designed to generate a quick resolution of a lawsuit intended to chill speech and is described in Section 425.16 of California's Code of Civil Procedure

It is important to note (as we have previously in this blog) that one way to identify important cases is to look at the people and entities who file friend of the court briefs.  In this case, content producers from Netflix to the MPAA, a group of intellectual property law professors, Wikimedia, and the International Documentary Association, among others, sided with FX.  By contrast, only the Screen Actors Guilt/American Federation of Television and Radio Artists filed a brief siding with de Havilland.  The interest in interpreting the First Amendment to protect documentaries and semi-documentaries had far more support than did the interest in prohibiting documentaries and semi-documentaries where at least one of the subjects has not been paid for her participation.

In a March 26, 2018 decision, the California Court of Appeals issued what can only be characterized as a firm slapdown of this attempt to diminish the First Amendment.  The case opens with a passage that could have constituted the entire opinion:
Authors write books. Filmmakers make films. Playwrights craft plays. And television writers, directors, and producers create television shows and put them on the air -- or, in these modern times, online. The First Amendment protects these expressive works and the free speech rights of their creators. Some of these works are fiction. Some are factual. And some are a combination of fact and fiction. That these creative works generate income for their creators does not diminish their constitutional protection. The First Amendment does not require authors, filmmakers, playwrights, and television producers to provide their creations to the public at no charge.
Books, films, plays, and television shows often portray real people. Some are famous and some are just ordinary folks. Whether a person portrayed in one of these expressive works is a world-renowned film star -- “a living legend” -- or a person no one knows, she or he does not own history. Nor does she or he have the legal right to control, dictate, approve, disapprove, or veto the creator’s portrayal of actual people.
The Court goes on slap down the trial court, pointing out that a key point in the trial court's decision in favor of de Havilland was that FX "tried to portray de Havilland as realistically as possible," making the program not sufficiently transformative to merit First Amendment protection. The Court finds this precisely inapposite to what the First Amendment requires.  It finds dead wrong the lower court's holding that "the more realistic the portrayal [of the plaintiff in the show], the more actionable the expressive work would be."

Adding intrigue (or uncertainty, as lawyers will bemoan) to the Right of Publicity law, the Court states that "We question whether a docudrama is a product or merchandise within the meaning of CivilCode section 3344 [the right of publicity]."  The opinion clearly leans in favor of finding that it is not (although at least some video games, which are capable of being interactive dramas, seem to be covered by the Right of Publicity under Davis v. Electronic Arts).

The Court went on to find that the First Amendment defense is not impaired merely because the docudrama was intended as a commercial product.  In the key (financial) passage, the Court went on to hold that the First Amendment does not require payment in order to tell a story about somebody:
That Feud’s creators did not purchase or otherwise procure de Havilland’s “rights” to her name or likeness does not change this analysis. Producers of films and television programs may enter into agreements with individuals portrayed in those works for a variety of reasons, including access to the person’s recollections or “story” the producers would not otherwise have, or a desire to avoid litigation for a reasonable fee. But the First Amendment simply does not require such acquisition agreements. 
Perhaps the most fascinating part of the decision is that the Court of Appeals states several times that, in essence, they need go no further because de Havilland based on the analysis to that point.  Despite those statements, the Court continues, finding even more such "you lose but we'll go on anyhow" points.  Trying to get inside of a judge's head is a fool's errand, but the Court's animated (and breakneck speed) decision speaks to the importance of this case, and this holding, to the Court.

It is unknown at this time whether de Havilland will appeal to the California Supreme Court.

Things To Consider When Entering Into a Cross Border Agreement

Typically, the two most concerning provisions of cross border agreements is the arbitration and termination provisions. Often times, these agreements are not well thought out and disputes as to their content and enforceability are disputed.

With regard to arbitration provisions, parties should consider whether arbitration is preferred rather than resolving disputes in court. When permitting arbitration, parties should consider whether it is perceived by all parties as being faster and cheaper than litigation. Parties should also consider the most effective location, the scope of discovery rights and confidentiality. While arbitration in international disputes is generally preferable because proceedings are private, speedy and often confidential, the downside includes limited remedies (such as injunctive relief, etc.) and great expense.

Parties should spend time considering the scope and language of termination provisions. For example, will the agreement expire on a specific date, are there scenarios where early termination would be beneficial? Can or should the agreement be renewed? What would be grounds for immediate termination (e.g. failure to comply with certain provisions, bankruptcy, etc.) or is termination without cause desirable?

In sum, these types of agreements are typically negotiated when the parities are cooperating and have a positive relationship. Prior to entering into an international agreement, it is strongly advisable to consider your ultimate goal and to think about what provisions can be included or strategically drafted that can directly address these goals. Also, ask yourself if you are more likely to be a defendant or plaintiff if the deal falls apart. The answer to this will likely affect the contents of the agreement.

Tuesday, March 27, 2018

Oracle v. Google: A billion dollar case rises from the dead

This morning, the Federal Circuit Court of Appeals revived the long-running case of Oracle America, Inc. v. Google LLC. in a 56-page ruling.  The ruling is particularly important to programmers, as it holds that Google's copying of the declaring code and structure, sequence, and organization ("SSO")* of an Oracle-owned Application Programming Interface, or "API", is not fair use as a matter of law.  The Court went on to suggest that this liability could have been avoided had Google developed its own APIs -- APIs that would mimic those of Oracle in function, concluding that:
allowing Google to commercially exploit Oracle’s work will not advance the purposes of copyright in this case. Although Google could have furthered copyright’s goals of promoting creative expression and innovation by developing its own APIs, or by licensing Oracle’s APIs for use in developing a new platform, it chose to copy Oracle’s creative efforts instead. There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.
In important cases, entities not involved in the litigation often file "amicus curiae", or "friend of the court" briefs.  Four full pages -- over 7 % -- of this decision is simply a list of amici. Reviewing the Amici list shows just how important this decision is for the future of interoperability and software. These include such entities as the Motion Picture Association of America, the Screen Actors Guild, the American Federation of Television and Radio Artists, the Recording Industry Association of America, associations of press and other photographers, and Business Software Alliance, the Computer & Communications Industry Association, the Electronic Frontier Foundation, Mozilla, Microsoft, Red Hat, HP, Linus Torvalds (creator of Linux), Vinton Cerf (one of the creators of the internet), Steve Wozniak (Apple Co-Founder) and GitHub.

Given the importance of the case to one of the engines of the American economy, the chance of the Supreme Court granting review is a good deal higher than the average case.  At the same time, given the dollar amount of damages sought in this case (potentially measured in the billions, with a "b"), there is a compelling reason to believe that Google will seek to settle after this decision.  Copyright lawyers hoping for new guidance on the "fair use" copyright defense are likely hoping for a Supreme Court review and published opinion.

Understanding the case involves examining something that even lawyers find overly technical:  The procedural history.  A copyright verdict requires three determinations by the Court: (a) copyright violation; (b) no fair use defense; and (c) what the financial damages are. After a jury trial in the United States District Court for the Northern District of California (the federal trial court in the Bay Area), the jury found that Google infringed Oracle's copyrights in the Java Standard Edition platform, but was unable to reach a verdict on the "fair use" defense.**  The trial court overturned the jury's verdict, finding that the API packages were not copyrightable as a matter of law.  In a 2014 case, the Federal Circuit Court of Appeals reversed, holding that the declaring code and the SSO of the Java API packages are entitled to copyright protection.  The jury verdict of copyright infringement was reinstated, and the case was "remanded", or sent back, to the trial court for a trial on Google's fair use defense.  Google attempted to appeal that decision to the Supreme Court, but the Supreme Court refused to hear the appeal.  On remand, the jury found that Google's use fell under the "fair use" exemption to copyright law.  Today's case reversed that finding and remanded to the trial court.  If the Supreme Court does not overturn today's ruling, the case will go back for a third verdict, this time on damages, making it one of the few cases to have each of the three copyright determinations made by a different jury, at least two of which were reviewed in separate appeals.

Today's decision was not concerned with whether copyright infringement took place -- that was determined in the prior appeal.  It was also unconcerned with damages -- that will be determined on remand.  Rather, today's decision addressed only the "fair use" defense.

The most fun way to understand fair use is to watch the EFF's video of Disney® characters explaining it.  The United States Copyright Office has a quick summary of the elements comprising fair use.  As there is no copyright in original United States government works, we are able to copy this summary here:

Fair use is a legal doctrine that promotes freedom of expression by permitting the unlicensed use of copyright-protected works in certain circumstances. Section 107 of the Copyright Act provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use.  Section 107 calls for consideration of the following four factors in evaluating a question of fair use:
  • Purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit educational purposes:  Courts look at how the party claiming fair use is using the copyrighted work, and are more likely to find that nonprofit educational and noncommercial uses are fair.  This does not mean, however, that all nonprofit education and noncommercial uses are fair and all commercial uses are not fair; instead, courts will balance the purpose and character of the use against the other factors below.  Additionally, “transformative” uses are more likely to be considered fair.  Transformative uses are those that add something new, with a further purpose or different character, and do not substitute for the original use of the work.
  • Nature of the copyrighted work:  This factor analyzes the degree to which the work that was used relates to copyright’s purpose of encouraging creative expression. Thus, using a more creative or imaginative work (such as a novel, movie, or song) is less likely to support a claim of a fair use than using a factual work (such as a technical article or news item). In addition, use of an unpublished work is less likely to be considered fair.
  • Amount and substantiality of the portion used in relation to the copyrighted work as a whole:  Under this factor, courts look at both the quantity and quality of the copyrighted material that was used. If the use includes a large portion of the copyrighted work, fair use is less likely to be found; if the use employs only a small amount of copyrighted material, fair use is more likely. That said, some courts have found use of an entire work to be fair under certain circumstances. And in other contexts, using even a small amount of a copyrighted work was determined not to be fair because the selection was an important part—or the “heart”—of the work.
  • Effect of the use upon the potential market for or value of the copyrighted work:  Here, courts review whether, and to what extent, the unlicensed use harms the existing or future market for the copyright owner’s original work. In assessing this factor, courts consider whether the use is hurting the current market for the original work (for example, by displacing sales of the original) and/or whether the use could cause substantial harm if it were to become widespread.
In addition to the above, other factors may also be considered by a court in weighing a fair use question, depending upon the circumstances. Courts evaluate fair use claims on a case-by-case basis, and the outcome of any given case depends on a fact-specific inquiry. This means that there is no formula to ensure that a predetermined percentage or amount of a work—or specific number of words, lines, pages, copies—may be used without permission.  

Before applying these factors, it is important to understand what copying is at issue.  The Java APIs "allow programmers to use the prewritten code to build certain functions into their own programs rather than write their own code to perform those functions from scratch.  They are shortcuts. ... The prewritten programs are organized into packages, classes, and methods.  Specifically, an API package is a collection of classes and each class contains methods and other elements.  Each method performs a specific function, sparing a programmer the need to write Java code from scratch to perform that function."  Slip opinion page 8 (internal quotation marks omitted).

The basic infringement alleged stems from Google's desire to make programming for its Android operating system easier by importing API structures and functions.  This avoids programmers having to do much, if any, work to port a Java program written for another Java platform to the Android platform.  Google had difficulty writing its own APIs providing the same function and rules of use as the Oracle APIs, failed to reach an agreement with Oracle on a license fee to use the APIs, and elected to simply copy 11,500 lines of code from Oracle and the SSO of the Java API packages.  In what can best be described as a risky strategy, Google appears to have intentionally copied the materials in hopes that a fair use defense would prevail in an infringement suit.  Unless the Supreme Court grants review, Google's strategy appears to have failed.
BLOG EXTRA;  This is a good spot to discuss the relationship patents, copyrights, and trademarks.  Patents protect function while copyrights protect the actual way a thing has been expressed.  One may infringe a copyright without infringing a patent (which seems to have happened in today's case).  Because the function of the code is not protected, Google could presumably have written its own APIs and avoided copyright liability.  The opposite is also possible:  Google could have copied far less code, enabling a fair use defense, but if the code it copied was responsible for performing a patented function, Google would have avoided copyright liability while creating patent liability.  At this point, we can bring in a trademark issue -- had Google copied neither the code nor infringed a patent, but displayed on the Android boot screen "Oracle's Java", it could face a trademark suit.
The fair use defense is found in Section 107 of the Copyright Act, and requires a case-by-case determination as to whether a particular use is fair.  Of interest is that "in balancing the four statutory factors [set out in Section 107 as factors in determining fair use], courts consider 'whether the copyright law's goal of 'promot[ing] the Progress of Science and useful Arts' ... would be better served by allowing the use than by preventing it." Slip. Opinion 18.  This is a reflection of the fact that the founding fathers believed intellectual property so important that they included it in the text of the constitution.  As a result, changes to the statute and judicial interpretations of the statute are measured against the constitutional goals and limitations.

The Court goes on to explain that fair use is an "affirmative defense", which means that the burden of proving fair use falls to the alleged infringer.

In analyzing the fair use factors, the Court first addressed the purpose and charater of the use, finding that (a) the character of the use was commercial, weighing against a finding of fair use; (b) moving the code to the new context of Android on mobile, or a mere change in format, in a context where the copyright was verbatim, for an identical function and purpose and without changes to the expressive content or message, did not rise to the level of transformative use; and (c) The purpose and character prong in this case must conform to a Ninth Circuit holding that "one who acts in bad faith should be barred from invoking the equitable defense of fair use."  Today's case went on to hold that "while bad faith may weigh against fair use, a copyist's good faith cannot weigh in favor of fair use."  The Court determined that even if Google did not operate in bad faith, "the highly commercial and non-transformative nature" of the use weigh against a finding of fair use."***

The second factor, the nature of the copyrighted work, "turns on whether the work is informational or creative," as factual works are more likely to fall under fair use.  The Court goes on to hold that the Copyright Act, as amended in 1980, "unambiguously extended copyright protection to computer programs."****

The third factor, the amount and substantiality of the portion used in the context of the copyrighted work, seemed to turn on Google's decision to copy 11,330 more lines of code than the 170 lines minimally required to write in Java.  Even though there were millions of lines of code that were not copied, the court found that "no reasonable jury could conclude that what was copied was qualitatively insignificant, particularly when the material copied was important to the creation of the Android platform."  The Court found the third factor was either neutral or weighed against fair use.

The fourth factor, the effect on the potential market, was identified as "undoubtedly the single most important element of fair use" (Slip. Cp. 48, quoting the US Supreme Court).  The Court also applied the Ninth Circuit holding that likely market harm can be presumed where a use is commercial and not transformative.***  The Court held that the fourth factor weighs heavily against fair use.

Balancing the four factors, the Court found that there was no fair use as a matter of law, substituting its determination for that of the jury.

Perhaps in recognition of the widespread chilling effect this holding will have on development of interoperable computer systems and code, the Court adds that they "do not conclude a fair use defense could never be sustained in an action involving the copyright of computer code." (Slip Op. 54).

It is hard to overstate the importance of APIs to computer programming.  It is likely that some form of legislative fix or judicial clarification will be forthcoming.  Given the money available to the litigants, it is also very likely that a spirited effort will be made to get the matter before the U.S. Supreme Court.  While we await the next developments in this case and on the subject of APIs, however, it is more critical than ever to clear API copying with counsel before copying them.

It is also possible -- perhaps likely, given GitHub's participation as Amici -- that the various open source licenses will be modified to directly address copying APIs in light of this case.  When seeking legal advice, it is important that your lawyer be very familiar with copyright law and open source licensing.


* The court's decision will be confusing to many programmers who understand an SSO to mean "single sign-on" -- by far the more common use of the initials "SSO".  The Court defines "SSO" as instead meaning "structure, sequence, and organization".  The single sign-on process is generally something companies complete to provide the back end for, as it makes it far more difficult to stop using the service that provides the back end.  It is likely for this reason that Facebook®, Google®, Amazon®, and others often provide free or largely low-cost access to single sign-on.   It is important to note that while we think it unlikely that we will see a copyright case involving simply using single sign-on, readers of this article should retain a lawyer to review their use of single sign-on to ensure the absence of copyright and patent issues.
** As one might expect in a case between two tech giants, patent claims were also raised.  However, the jury found no patent infringement, and that finding was not reviewed in today's case.  Copyright cases are normally heard in the regional Circuit Court where the trial court is located.  However, because there were patent claims brought in the case -- even though the appeal concerned copyright claims only -- the Federal Circuit had exclusive jurisdiction.  Without the patent claims, the case would have been heard by the Ninth Circuit Court of Appeals.
*** Much as the Supreme Court has done with patent eligibility and obviousness, the Federal Circuit has incorporated one of the prongs of the fair use test into another of the prongs.  In this case, it uses the second prong -- whether a work is transformative -- to determine the third prong, the purpose and character of use.  So too does it collapse the first factor into the fourth factor, effect on the potential market.
**** The original "bargain" of copyright and patent law was that a time-limited exclusive monopoly would be granted to the inventor or author in exchange for teaching others how to practice the invention or for making the work available to the public at the end of the copyright period.  Today's case hinted at the overlap between patents and copyrights, holding that "reasonable jurors could have concluded that functional considerations were both substantial and important [and based] on that assumed factual finding ... factor two favors a finding of fair use."  Of course, intellectual property protection for function is available via the patent system, not the copyright system.  At the same time, copyright can extend to compiled, computer-readable object code that performs functions.  The IP ecosystem may thus protect a specific implementation of function via copyright and patent.