Mary Siceloff

Although the general rule (based on 35 USC section 101) is that anything made by humans is patentable, there are exceptions. Laws of nature, physical phenomena, and abstract ideas are not patentable. Inventions that fall in these categories are “patent-ineligible,” that is, directed to subject matter that is not eligible to be patented. After the Supreme Court’s key decisions over the last few years in Bilski v. Kappos, 130 S. Ct. 3218 (2010); Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), and Alice Corp. Pty. Ltd. V. CLS Bank International, 134 S. Ct. 2347 (2014), the courts have increasingly held computerized methods of doing business unpatentable.

The district court for the Eastern District of Texas, where many patent infringement cases are filed, handled such a case in Kroy IP Holdings, LLC v. Safeway, Inc., 2015 U.S. Dist. LEXIS 69363. In Kroy, the court provides a useful review of the state of the law, starting with the three Supreme Court cases.

In Bilski, supra, decided in 2010, the Supreme Court held that claims to a method for commodities traders to minimize the risk of price fluctuations was an unpatentable abstract idea. The idea of hedging against risks is a common practice in our economy. The Court found that an idea cannot be made patentable by limiting it to a particular field, such as commodities. The Court held that the Federal Circuit Court of Appeals’ previous test for claims that appear directed to abstract ideas, the machine-or-transformation test (which requires a claimed method to be linked to a particular machine or to transform an article into something else in order to be patentable) is one test that can be used, but is not the sole test.

In Mayo, supra, decided in 2012, the Supreme Court held that a method of increasing the dosage of drug in a patient if the concentration of the drug in the patient’s blood was below a certain level (and doing the reverse if it was too high) was an unpatentable law of nature. The Court emphasized that applying a law of nature to a particular field does not make it patentable. The Court also clarified that using a machine, such as a computer, to perform an abstract idea does not make the idea patentable. In reaching its decision, the Court set forth a two-part test to determine whether a claimed invention is patent-eligible or falls within the exception. First, a court must decide if the claim is directed to one of the categories of the exception. Second, if that is the case, then the court must decide whether the other elements of the claim transform the idea into an “inventive concept,” something more than an idea.

In Alice, supra, decided in 2014, the Supreme Court held that a computerized method for limiting the settlement risk in two-party financial transactions, using a computer as a third party intermediary, was an unpatentable abstract idea. Like Bilski’s risk hedging method, this method was a fundamental economic practice. Unlike Bilski’s method, however, the claims in Alice Corp. required the use of a computer. The Court held that the use of a generic computer cannot make an abstract idea patentable.

The Texas court also discussed several Federal Circuit cases, including Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (2014), which involved patent for a method of distributing copyrighted materials over the Internet. On remand from the Supreme Court, after Alice was decided, the Federal Circuit held the claims unpatentable. Under the Mayo test, the court found that the claims were directed to an abstract idea and that the other limitations in the claims did not transform the idea into patent-eligible subject matter.

After discussing these and more cases, the district court concluded that most of the time, district courts have invalidated patents directed to computer-implemented business methods. In considering Kroy’s patent, the court reached the same conclusion. The court said that incentive award systems using a computer are “plainly unpatentable.” With respect to Mayo’s first step, like the claims in Bilski and Alice, the court found that Kroy’s claims were directed to an abstract idea. As to Mayo’s second step, the court found no “inventive concept.” The use of computers and a network, like the Internet, did not make the claims patentable. As the Supreme Court explained in Alice, the addition of a generic computer does not make an invention patentable that would not otherwise have been patentable.

In invalidating Kroy’s patent, the court said that the claims were like many other business method patents: broad and not limited to a particular means, performing standard computer operations. Reiterating a point made by the Supreme Court in Mayo, the court said that such patents have “the potential to foreclose future innovation disproportionately” compared to the inventor’s contribution.

Another intellectual property dispute has arisen in the brewing industry. This time, however, the battle took place on Canadian soil. British Columbia based Pacific Western Brewing (“PWB”) sued renowned Mexican brewery Cerveceria del Pacifico (“CDP”), arguing the latter’s name was confusingly similar to PWB’s various brew-related trademarks. For those who do not know, Cerveceria del Pacifico is the brewery responsible for Cerveza Pacifico Clara, better known as Pacifico. Although the claim concerns numerous PWB marks, the lawsuit seems to center on the alleged similarity between their Pacific Pilsner marks and CDP’s Pacifico marks. After analyzing the merits of this case, I cannot understand why PWB felt the need to pursue this lawsuit. Aside from both marks generally using the word “Pacific,” the marks are vastly different.

First, Cerveza Pacifico Clara  is clearly distinct from Pacific Pilsner. Even if you compare the commonly used name Pacifico to Pacific Pilsner, the marks are distinguishable, albeit slightly more similar. Further, the respective design marks are distinct. Pacifico’s mark is generally presented against a bright yellow background with the words appearing in red and a different shade of yellow. The logo also features a lifesaver encompassing a hill with the port city of Mazatlan’s lighthouse hill, known locally as Cerro Del Creston. In contrast, Pacific Pilsner’s mark is generally presented against a white background with the words appearing in red and iridescent blue. Although the PWB designs vary slightly, they consistently include a sailboat. Based on these descriptions, it should be clear that the marks are patently distinguishable.

Justice Luc Martineau, who presided over the case, disagreed with PWB’s assertions. Justice Martineau said the first impression given by CDP’s mark for Pacifico “is of its obviously foreign origin” and that it’s “highly stylized with many distinctive design elements, including strong and contrasting colours [sic] and font in red, gold, blue, green, and yellow.” Justice Martineau also stated that the mark “differs visually, phonetically, and semantically” from all of the marks PWB uses for its Pacific beers. According to Justice Martineau “There is no resemblance in the design or colour [sic] elements. In short, the overall impression created by the mark is that of an imported beer originating from Mexico.”

Martineau also dismissed PWB’s allegation that CDP committed a fraud on the register when it represented that Pacifico was first sold in Canada as early as April 1986. Dismissing this allegation, Justice Martineau noted that PWB failed to challenge an affidavit from CDP that it first introduced its beers to Canada in 1986, at a Mexican restaurant called Ole Cantina.

Later, in December 1989, Pacifico was first listed with the British Columbia Liquor Distribution branch. Then, in August 1990, a registration protecting the mark was issued. This is important because Justice Martineau found that PWB’s delay of almost 25 years to bring its claims weighed heavily against a finding of likelihood of confusion and eventually ruled in favor of CDP. PWB has subsequently filed an appeal of the decision in the Federal Court of Appeal, but based on Justice Martineau’s ruling, as well as the clear distinction between these marks, the trial court is unlikely to be overturned.

This copyright case pitted two big YouTube content brands against each other over issues of fair use. On one side is Equals Three, LLC, a YouTube content studio and channel created and owned by Ray William Johnson, an early YouTube content pioneer. The Equals Three channel has over 10 million subscribers and over 3 billion total views making it one of the most viewed channels on YouTube. Equals Three produces YouTube comedy content. A typical program involves a host who gives an introduction to a particular video clip, shows parts of video clips (which are usually shown in edited form and inset within a decorative graphical frame) and tells humorous or provides humorous commentary about the events and people presented in the clip. Each program is roughly five minutes long and typically features three segments, each of which centers around a different video.

One the other side is Jukin Media, Inc. Jukin is a digital media company that primarily acquires user generated video content and distributes and monetizes such content over multiple online platforms and traditional media outlets, produces and licenses. Jukin acquires the user-generated content by using a research and acquisitions team of eleven people to scour the internet for videos likely to become sensationally popular. Once Jukin acquires the rights to user-generated content, it uploads the video to its YouTube channel and its own websites. Jukin makes money from these videos by ad-supported or subscription-based platforms. Jukin also licenses these videos to other digital, television and cable shows.

Jukin claimed that Equals Three unlawfully used ninteen Jukin owned or controlled clips in one or more Equals Three episode. Jukin instated numerous Content ID claims with YouTube against various Equals Three episodes. These claims prevent Equals Three from monetizing the episodes at issue and allows Jukin to receive all advertising revenue related to such episodes. Equals Three filed a complaint for a declartory judgment that its use of Jukin’s videos was fair use.

In determining whether the use of a work is a fair use, courts consider the following factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

The Purpose and Character of the Use

This factor measures whether a work is “transformative” in nature; whether it “adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.” The more transformative the new work, the less will be the significance of the other factors that may weigh against a finding of fair use.

Equals Three claims that its episodes are transformative because they are parodies of the Jukin videos. Jukin argues that the episodes are not parodies because they do not critique Jukin’s videos. With the exception of one of Jukin clip, the court disagreed with Jukin. The court held that:

the episodes comment upon or criticize Jukin’s videos…[they] directly respond to and highlight humorous aspects of Jukin’s videos. The episodes do so via the host’s reactions to the videos, jokes, narration, costumes and graphics. The host’s narration does not simply recount what is shown in Jukin’s videos; instead the host makes comments about Jukin’s videos that highlight their ridiculousness by creating fictionalized narratives of how the events transpired, using similes, or by directly mocking the depicted events and people.

However, with regard to one clip – a clip of the first person to obtain an iPhone 6 in Perth, Australia promptly dropping the phone upon opening the packaging – the court did not find Equals Three’s use transformative. Equals Three said it used this footage for the purpose of making two points: (1) don’t be the first person to do something new; and (2) the iPhone 6 packaging is absurd. The court finds that these two “general, broad points” are not directly aimed at criticizing or commenting on the video and thus not transformative.

Nature of the Copyrighted Work

This factor looks at what type of work it is (i.e., is it a creative work or something else) and whether this is a type of work that falls closer to the core of copyright’s protection. In dicta, the court questioned whether the “point and shoot” variety of user generated content is a creative work or a factual recitation (which is not as close to the core of copyright’s protection as is a creative work). Ultimately the court concludes that the nature of the Jukin clips is creative, but the clips’ creative nature is “not particularly important where the new work is highly transformative.”

Amount and Substantiality of the Portion Used

The third factor examines the quantitative amount and qualitative value of the original work used. Jukin argued that while Equals Three may have not used all of the clips, it used the most important parts of the clips. Equals Three argued that it used no more of the clips than was necessary to create its parody episode. The court agreed finding that Equals Three did not use more than reasonably necessary to “convey enough of the events to allow the host’s jokes, comments, and criticisms to make sense to the viewer and resonate.”

Market Harm Through Substitution

This factor examines whether the use harms the potential market for or value of the original work because it has created a market substitute. That is, does the new work diminish demand for the original work by acting as a substitute for it. Market harm cannot be established by allowable commentary and criticism. Also, damage to a licensing market caused by fair use is not recognizable under this factor.

While the transformative nature of Equals Three’s videos makes cognizable market harm less likely, the court was unable to say that it is completely implausible that at least some viewers would substitute Jukin’s videos with Equals Three’s videos. The court noted that both videos are meant to be humorous and it could imagine a fine line between the demand for the humorous original and the humorous new work commenting thereon. Nevertheless, the court found that Jukin failed to show actual evidence of any such harm; and where market harm is hypothetical, this factor is neutral.

Conclusion

Based on the “highly transformative” nature of Equals Three episodes and the fact that Equals Three used only what was reasonably necessary to achieve their transformative purpose, the court found Equals Three’s use of Jukins’ clips (with the exception of one clip) to be fair use.

Over the last half century there has been an explosion in the popularity of yoga in the United States, much of it attributable to Bikram Choudhury, the self-proclaimed “Yogi to the Stars.” In 1979, he published a book titled Bikram’s Beginning Yoga Class, which centered on a sequence of 26 yoga poses and two breathing exercises. Two former students of his started a new type of yoga (hot yoga) which resulted in Choudhury suing them for copyright infringement. On October 8, 2015, the Ninth Circuit issued its opinion affirming the trial court’s summary adjudication as to the copyright claim and finding that the Bikram yoga “sequence” was not subject to Copyright protection.

In 1971, Choudhury came to the U.S. and settled in Beverly Hills, California. With his arrival, he helped popularize yoga in the United States and developed a “sequence” of 26 asanas and two breathing exercises; Choudhury opened a yoga studio where he taught the “Sequence” and eventually published his book, Bikram’s Beginning Yoga Class. In 1979, he registered the book with the U.S. Copyright Office. (In 2002, he registered a compilation of exercises contained in the book using a supplementary registration form that referenced the 1979 book.)

In 1994, Choudhury introduced the “Bikram Yoga Teacher Training Course,” which was attended in the early 2000s by Mark Drost and Zefea Samson. Following their completion of the course, Drost and Samson founded Evolation Yoga, LLC, which offered several types of yoga, including “hot yoga” which was similar to Bikram’s basic yoga system. Evolation acknowledged that hot yoga includes 26 poses and two breathing exercises (like Bikram yoga) and is done for 90 minutes in a room heated to approximately 105 degrees Fahrenheit.

In July of 2011, Choudhury and his Bikram’s Yoga College filed suit claiming, among other things, that the hot yoga system of Evolation violated its copyright. Evolation moved for partial summary judgment as to the copyright infringement claim and the court granted the motion, ruling that the “Sequence is a collection of facts and ideas” which were not entitled to copyright protection. The plaintiffs appealed that decision to the Ninth Circuit.

In affirming the trial court’s decision, the Ninth Circuit found that at its most basic essence, “the Sequence is an idea, process or system designed to improve health.” Because copyright law is intended only to protect the expression of an idea, i.e., “the words and pictures used to describe the Sequence,” and not the idea of the Sequence itself, the Sequence was not subject to copyright protection.

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