Intellectual Property

There are a number of requirements that must be met for an invention to be patentable. The invention must be novel (unique) and nonobvious (i.e., a person skilled in the field of the invention would not have found the invention obvious based on the existing knowledge in the field). In addition, the patent application must meet other requirements, including written description (the application must contain a detailed, clear, and definite written description of the invention) and enablement (the application must describe how to make and use the invention). If the patent application satisfies all of the requirements, a patent is issued.

A third party can challenge an issued patent on several different grounds, either in litigation or in the Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB). If the challenge is successful, some or all of the patent’s claims will be invalidated. If only some of the claims are invalidated, those claims will be cancelled from the patent and the remaining claims will be enforceable.

An inter partes review (IPR) is one of the procedures used to challenge a patent in the PTAB. In an IPR, however, the challenger may only assert two grounds of invalidity: novelty and nonobviousness. In ruling on an IPR, the PTAB cannot invalidate the patent on any other grounds.

This issue was recently addressed by the Federal Circuit Court of Appeals in Samsung Electronics America, Inc. v. Prisua Engineering Corp, 2020 U.S. App. LEXIS 3292 (February 4, 2020). Prisua obtained a patent for editing a video data stream, and sued Samsung for patent infringement. Prisua alleged that Samsung’s cell phones and other devices used Prisua’s patented technology. The jury found that Samsung had willfully infringed Prisua’s patent, and awarded Prisua damages of $4.3 million. The action was then stayed because, in the meantime, Samsung had filed a petition in the PTAB for IPR.

In its petition, Samsung challenged several claims of Prisua’s patent on obviousness grounds. The PTAB invalidated one claim as obvious, but said that it could not review the other claims for obviousness because those claims were indefinite (i.e., not clear). The PTAB said that it could not determine the scope of those claims, and therefore could not determine whether those claims were obvious.

Samsung appealed. On appeal, Samsung argued that the PTAB should have either invalidated the indefinite claims, because definiteness is also a requirement for a patent, or gone ahead and determined whether the claims were obvious even if their scope could not be determined. Prisua argued that the patent statutes do not permit the PTAB to invalidate claims for indefiniteness in an IPR.

The Federal Circuit agreed with Prisua. The court held that in an IPR, the PTAB can only invalidate a patent’s claims on the grounds of novelty and nonobviousness; it cannot invalidate a claim for indefiniteness. The court also held that the PTAB should determine whether a challenged claim is obvious even if it is indefinite.

Thus, the court made it clear that an IPR can only be used to challenge a patent for novelty and nonobviousness. The patent statutes do not authorize the PTAB to decide indefiniteness in an IPR. There are other procedures that a challenger can use for that purpose.

Lil Nas X broke onto the scene in spectacular fashion when he released the viral sensation “Old Town Road,” featuring Billy Ray Cyrus. Old Town Road broke the prior record for most consecutive weeks at No. 1 on the Billboard Hot 100 charts and eventually resulted in Lil Nas X receiving a Grammy award. Unfortunately, fortune and fame comes with its share of problems.

Lil Nas X was sued by producers Don Lee and Glen Keith (the “Producers”) in October 2019 for allegedly infringing their copyrighted material with his track “Rodeo.” According to the Producers, Rodeo bears a substantial similarity to their 2017 song “GwenXdonlee4-142[,]” which was subsequently incorporated into a song called “Broad Day” by PuertoReefa and Sakrite Duexe. Specifically, the lawsuit claims that there are substantial similarities between the chord progression, use of instruments, drumbeats, and other protectable characteristics from “GwenXdonlee4-142” and “Broad Day.” According to the Producers, the song was widely distributed in locations including Lil Nas X’s

Lil Nas X’s legal team responded to the lawsuit last week by filing a motion to dismiss. In the motion, Lil Nas X’s attorneys argue that Rodeo was created independently of Broad Day and without knowledge of the allegedly infringed work. Moreover, Lil Nas X’s team argued, without admitting use of copyrighted material, that the conduct of which the Producers complain was pursuant to an implied or express license.

Given that Lil Nas X’s motion was only filed last week, the Producers have yet to file an opposition. However, Pitchfork, the self-proclaimed most trusted voice in music, reached out to the Producers’ attorneys, who stated, generally, that the filing fails to dispute or rebut the Producers’ claim for copyright infringement, and that the Producers look forward to their day in court. Of course, he wasn’t going to respond that the motion disproves the Producer’s theories of liability and raises issues dispositive to their case. Nonetheless, we will see how the Court feels about the motion and whether it presents a meritorious defense to the case.

Generally, the title to a single motion picture is not entitled to trademark protection.  This is the same for the title to single books, songs and other singular creative works.  Most non-trademark attorneys are surprised when I tell them this.  I am sure you may be scratching your head as well.  The logic behind the legal principle that the title to a single creative work cannot function as a trademark is as follows:  a title to a single creative work such as a book serves to identify only the book and not the source of that book.  Another reason trademark law generally refuses to acknowledge trademark rights in the title to a single creative work, such as a book, results from the interplay between copyright and trademark law. While trademarks endure as long as the mark is used, copyrights eventually expire. When a work falls into the public domain, others would have the right to reproduce the literary work.  However, if the title to the book enjoyed trademark protection, this would compromise the policy of public domain under copyright law because a book with a trademarked title could only be published under a different title.

Read More

In Guardant Health, Inc. v. Foundation Medicine, Inc., 1-17-cv-01616 (DDE 2020-01-07, Order), the Court rejected the Plaintiff’s argument that an inequitable conduct claim must be related only to the prosecution of the patent-at-issue in ruling on plaintiff’s motion to dismiss defendants’ infectious unenforceability counterclaims.  In the case, the Defendants’ theory as to the unenforceability of U.S. Patent No. 9,902,992 (the ’992 patent) was not based on inequitable conduct said to have occurred during the ’992 patent’s prosecution.  Instead, it rested on the relationship between the ’992 patent and the prosecution of other related patents.

As some background, inequitable conduct regarding any single claim in the prosecution of a patent renders the entire patent unenforceable, not just that specific claim. Moreover, a finding of inequitable conduct can affect not just the improperly-prosecuted patent, but can also render unenforceable any other related patents and applications in the same patent family. This concept is what courts have referred to as the doctrine of “infectious unenforceability.”

Pursuant to this infectious unenforceability doctrine, inequitable conduct associated with one patent may render a related patent unenforceable so long as the inequitable conduct at issue bears “an immediate and necessary relation” to the enforcement of the related patent.  And, an “immediate and necessary relation” requires that “the inequitable conduct that occurred earlier in the chain [of issued patents] ‘must be related to the targeted claims of the ultimately-issued patent or patents sought to be enforced.’”

Turning to the specifics of this case, the Plaintiff made three arguments for dismissal of Defendants’ infectious unenforceability counterclaims.  First, the Plaintiff argued that as to the ’992 patent (unlike the allegedly improper patents), the alleged missing inventor is actually listed as an inventor on the face of the ’992 patent.  Therefore, Plaintiff asserted that there can be no inequitable conduct with respect to the ’992 patent based on misnaming of inventors because it is undisputed that the right inventors are named.  Second, Plaintiff argued that there is not a sufficient relationship between the alleged inequitable conduct at issue and the prosecution of the ’992 patent.  Third, Plaintiff argues that differences between the ’992 patent and the allegedly improper patents preclude a finding of infectious unenforceability.

In considering Plaintiff’s first argument-that Defendants’ counterclaim fails because the alleged missing inventor on the other patents is listed as an inventor on the ’992 patent, the Court found this argument unpersuasive.  This is because, as noted above, Defendants’ theory as to the unenforceability of the ‘992 patent was not based on inequitable conduct in the ’992 patent prosecution itself. Instead, the theory relies on the premise that inequitable conduct with regard to other, previously-filed patent applications are sufficiently related to the enforcement of the ‘992 patent, such that the ‘992 patent is also unenforceable.

In other words, the Court reasoned, merely disclosing, in a subsequent patent application, material that was previously withheld with intent to deceive the USPTO does not save the later issued patent from the consequences of the misconduct.  Instead, to adequately cure any inequitable conduct that occurred during earlier prosecution, the applicant would have to: (1) expressly advise the USPTO of the existence of the misrepresentation; (2) advise the USPTO of what the actual facts are and make clear that further examination in light thereof may be required if any USPTO action has been based on the misrepresentation; and (3) establish patentability on the basis of the factually accurate record.  And, Plaintiff did not assert it took these “curing” steps here.

Next, Plaintiff’s second argument was that Defendants fail to sufficiently plead infectious unenforceability because that doctrine requires a relationship between the alleged inequitable conduct and the prosecution of the ’992 patent.  However, the Court also dismissed this argument because the law on infectious unenforceability requires no direct linkage between the inequitable conduct at issue and the prosecution of the ‘992 patent. The Court first reasoned Plaintiffs position is undercut by the Federal Circuit’s description of the doctrine of infectious unenforceability.  Second, requiring an immediate and necessary relation between the inequitable conduct at issue and the prosecution of the allegedly infected patent would render the doctrine of infectious unenforceability superfluous.

The Court also rejected Plaintiff’s third argument that the doctrine of infectious unenforceability is inapplicable because there are too many differences between the allegedly improper patents and the ’992 patent. Instead, the Court concluded that Defendants had pleaded sufficient facts to demonstrate the required “immediate and necessary relation” between the inequitable conduct at issue and the targeted claims of the ‘992 patent.  The Court found there is a close relationship between the content of the respective patents and the inequitable conduct allegations at issue, particularly given the family history and the priority relationship of the respective patents.  Specifically, there are at least sufficient facts pleaded to plausibly allege that the at-issue patents are part of the same family and that they all share the same priority date.

Thus, in sum, the Court found Defendants had pleaded facts demonstrating an extremely close connection between the content of the ‘992 patent and the other patents and, relatedly, between the nature of the inequitable conduct allegations and the content of the ‘992 patent’s claims.  Thus, Defendants had sufficiently alleged that the ‘992 patent is potentially unenforceable pursuant to the doctrine of infectious unenforceability.

This case is a strong reminder that assertions of inequitable conduct can extend to not just the claims at issue, but to all claims in the patent, and even all patents in the family.  Thus, it goes without saying that extreme care must be taken at all times during the prosecution of all patents.

In February 1996, faced with increasing public concern about the availability of pornography on the internet, as well as recent court decisions that seem to deter efforts to filter out such content, Congress enacted the Communications Decency Act (“CDA”).  As part of the CDA, Congress granted immunity to internet service providers from liability for actions they took to help users block online content that a user found to be offensive or objectionable.  Congress further declared its goals in enacting the CDA, and its immunity provision, were “to encourage the development of technologies which maximize user control;” “to empower parents to restrict their children’s access to objectionable or inappropriate online content;” and “to preserve the vibrant and competitive free market that presently exists for the internet and other interactive computer services.”  In 2009, the Ninth Circuit decided the case, Zango, Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169, which held that the immunity provisions of the CDA applied to computer software developers whose programs were intended to help users filter out or block objectionable material.  It is against the backdrop of the history of the CDA and its decision in the Zango case that the Ninth Circuit was called upon to explore the limits of the immunity provided by the CDA in the case, Enigma Software Group USA, LLC v. Malwarebytes, Inc., decided December 31, 2019.  In essence, the Ninth Circuit was called upon to determine whether the immunity provisions of the CDA, specifically section 230(c)(2), immunizes a software company whose blocking and filtering decisions are driven “by anti-competitive animus,” i.e., to deter users from accessing or using a competitor’s software products.

Read More

The Patent and Trademark Office (PTO) may reject a patent application on several different grounds.  One of those grounds is obviousness.  Under 35 U.S.C. § 103, if an invention is obvious to a person of ordinary skill in the art, then it is not patentable.

In determining whether an invention is obvious, the PTO compares the invention to the “prior art” – all similar inventions that are publicly available at the time the application is filed.  If the PTO rejects the invention as obvious, the applicant can respond by narrowing the invention or arguing that the PTO is wrong.  In addition, the applicant can submit evidence of certain factors that the courts have held are relevant, objective indicia of nonobviousness.  These factors are called “secondary considerations.”  They include evidence of: unexpected results, commercial success, long-felt but unsolved needs, failure of others, skepticism of experts, and copying by competitors.

The courts have held that the secondary considerations are often “the most probative and cogent evidence of nonobviousness” and that they help prevent the PTO from relying on hindsight in determining obviousness.  The PTO is required to consider this evidence, if it is presented, in determining the patentability of the patent application.

The Federal Circuit Court of Appeals has addressed these secondary considerations in the context of a competitor’s challenge to an issued patent.  Liqwd, Inc. v. L’Oreal USA, Inc. (941 F.3d 1133) (Fed. Cir. 2019).  There, L’Oreal challenged Liqwd’s hair treatment patent in a post-grant review – a procedure before the Patent Trial and Appeal Board (PTAB) in which an issued patent can be invalidated.  The PTAB agreed with L’Oreal that most of the patent’s claims were obvious and therefore not valid.  Liqwd presented evidence that L’Oreal had copied the invention in Liqwd’s patent.  The PTAB held that the evidence of copying was not persuasive because Liqwd had not shown that L’Oreal had copied a specific product.  Liqwd appealed the PTAB’s decision.

The Federal Circuit vacated and remanded the case.  The court explained that knowledge of an issued patent plus circumstantial evidence of changes by a competitor to its product to make it the same as the patented invention is sufficient to show copying.  (Id. at 1138.)  The court stated that copying of an issued patent requires access to the invention (or the patent) and evidence of copying.  (Id.)  According to the court, the PTAB improperly ignored Liqwd’s evidence of L’Oreal’s copying.  The court remanded the case to the PTAB to consider the evidence of L’Oreal’s copying in determining the obviousness of Liqwd’s patent.

To use a textbook or other reference to challenge the validity of a patent in a petition for inter partes review (“IPR”), the textbook must have been “publicly accessible” prior to the date of the challenged patent to qualify as a printed publication. Is a copyright notice sufficient evidence that a textbook was publicly accessible? The short answer is no in most, if not all, cases.  In Hulu, LLC v. Sound View Innovations, LLC, the PTAB denied Hulu’s IPR petition on the ground that Hulu had not provided sufficient evidence to show that a prior art textbook with copyright and ISBN dates was publicly available as of those dates.  As a result, Hulu requested rehearing of the PTAB decision denying institution of inter partes review of the validity of Sound View’s patent, U.S. Patent No. 5,806,062.  Hulu argued the decision was in conflict with other PTAB decisions “involving the public availability of an asserted ‘printed publication.’”

“Because prior [PTAB] decisions conflicted on requirements for institution involving issues of public accessibility of an asserted ‘printed publication,’” the Precedential Opinion Panel (“POP”) ordered a rehearing to address the question:  “What is required for a petitioner to establish that an asserted reference qualifies as [a] ‘printed publication’ at the institution stage?”  In the POP’s precedential opinion, it reversed the PTAB panel and found that in this instance, “based on the totality of the evidence currently in the record,” there was sufficient evidence “to establish a reasonable likelihood that the [textbook] was publically accessible before the critical date of the challenged patent, and, thus Petitioner has established a reasonable likelihood that the reference qualifies as a printed publication” for the purposes of institution of an IPR.  However, the POP’s opinion makes it clear that under current precedent, relying on a copyright notice is not enough even for a well-known textbook.  The POP, however, declined to indicate what would be per se enough.  Thus, the opinion leaves many unanswered questions as to what is sufficient evidence that a printed publication is publicly accessible for purposes of institution of an IPR.  It is also not clear how, in practice, the requirements for institution now differ from the requirements to prevail in a final written decision by the PTAB even though the standards are different.

In prior institution-stage decisions favoring Hulu’s position, the PTAB previously found that 1) “a copyright notice is prima facie evidence that a publication is prior art”; 2) ”a copyright notice, alone or combined with other minimal corroborating evidence, is sufficient evidence of public accessibility to meet the ‘reasonable likelihood’ threshold for institution”; 3) “a copyright notice by a well-known publisher in the United States is sufficient evidence of public accessibility”; 4) “a copyright notice should be evidence viewed in the light most favorable to a petitioner when resolving disputes regarding public accessibility at the institution stage”; and 5) “where a patent owner merely points out possible inconsistencies in petitioner’s evidence—without submitting its own evidence of a different public availability date—the petition should be instituted, and any determination as to public availability occur during the trial.”  But other PTAB decisions have required significantly more evidence of public accessibility at the institution stage.

Hulu argued “the relevant standard for institution is whether there is a reasonable likelihood that a reference is a printed publication” and that “’conventional markers’ of publication satisfy this standard.”  Hulu further pointed out that the full evidentiary record would be developed during the trial phase to satisfy the preponderance of the evidence standard required to prevail in a final written decision.  The patent owner agreed with the “reasonable likelihood” standard but argued the standard is only met when the “petitioner presents its ‘case in chief’ in the petition, including all evidence that will be used in any instituted review…”  Specifically, the patent owner argued that conventional markers (e.g., copyright notices) are not sufficient to meet the standard for institution.

In its opinion, the POP relies on the applicable statutory language to reach its decision.  Section 311 indicates that an IPR petition “must be based on ‘a ground that could be raised under section 102 [anticipation] or 103 [obviousness] and only on the basis of prior art consisting of patents or printed publications.” 35 U.S.C. § 311(b) (boldface omitted, emphasis added).  Further, Section 312(a) requires that “the petition must identify with particularity … the evidence supporting those grounds, including the prior art patents and printed publications and affidavits or declarations of supporting evidence and opinions.”

As a result, the POP found that “at the institution stage, the petition must identify, with particularity, evidence sufficient to establish a reasonable likelihood that the reference was publicly accessible before the critical date of the challenged patent and therefore that there is a reasonable likelihood that it qualifies a printed publication.”  The POP goes on to state that this is a higher standard than notice pleading but a lower standard than the “’preponderance’ standard required to prevail in a final written decision.”

The POP declined to find that “any particular indicia per se is sufficient at the institution stage,” but instead stated that “indicia on the face of a reference, such as printed dates and stamps, are considered as part of the totality of the evidence.”

Applying the law to the facts in Hulu, the POP determined Hulu had established a reasonable likelihood that the textbook was a printed publication because of the copyright date, the printing date, the ISBN date, and a declaration and supporting material showing the textbook was from an established publisher and was part of a well-known book series.  The POP, however, declined to indicate whether anything less than this evidence would have been sufficient.  Further, the POP declined to opine as to whether this evidence would be sufficient to meet the preponderance of the evidence standard required to prevail in a final written decision.  Therefore, we are left with the question of whether a supporting declaration or equivalent “independent” evidence will be needed at the institution stage when using any textbook, journal paper, or conference paper as a printed publication.  Based on the current precedent, it appears the answer is that we should proceed with caution and always include support, such as that referenced in Hulu, in IPR petitions.

The POP pointed out that while a petitioner must submit the evidence of a reference’s public accessibility in the initial petition, a petitioner will have limited opportunities to submit new evidence, such as in reply to a patent owner’s preliminary response, in reply to a patent owner’s response, or in a motion to file supplemental information.  For example, a petitioner would be allowed to submit a declaration in reply to a patent owner’s challenge of a reference’s status as a printed publication.  But it does not seem worth the risk.  Include the evidence in the petition, if at all possible.

When Disney chose to delay the production and release of merchandise related to The Child—commonly referred to as Baby Yoda—from its hit series, The Mandalorian, it created a significant opportunity for unlicensed fans to create and sell such merchandise. According to statements released by the Walt Disney Company, it intentionally delayed the production of Baby Yoda merchandise to avoid any leaks about the character’s existence until The Mandalorian aired. Because the first episode of The Mandalorian was not released until November 12, 2019, the Walt Disney Company was left with minimal time to release related merchandise. In fact, the Walt Disney Company was only able to roll out limited merchandise in advance of the holiday season, presumably losing a substantial sum of money it would have earned if it had released its full assortment of Baby Yoda gear before the holidays. Of course, as is usually the case with Disney and Star Wars fans, when Disney and LucasFilms fail to deliver, the fans intervene—this is the way.

If you go to Etsy, you’ll find a substantial variety of Baby Yoda merchandise, including without limitation, t-shirts, crochet dolls, coffee mugs, stickers, tumblers, keychains, and bookmarks. Make no mistake, none of it is officially licensed. Every merchant on Etsy that is selling Baby Yoda merchandise is infringing Disney’s copyright in the character. Knowing that, you might be wondering, why doesn’t Disney just put a stop to it by enforcing their copyright? The Digital Millennium Copyright Act includes a mechanism through which a copyright holder can almost immediately have an infringing user’s material taken offline. Similarly, the Copyright Act enables a copyright holder to sue to enforce their intellectual property rights and to obtain injunctive relief precluding the infringing user from using the mark. We all know Disney can afford to take action, and those of us who regularly deal with intellectual property know that Disney aggressively polices its intellectual property. So why hasn’t Disney taken action?

The answer is they have, but there are just too many infringing merchants on Etsy for Disney to deal with. Disney has recently taken action against these infringing users by contacting Etsy, identifying certain users, and requesting that their infringing listings be taken offline. As a result, Etsy has been deactivating the listings identified by Disney and warning merchants they should not re-list the product unless the dispute is worked out with the copyright holder. But as you can see by searching for Baby Yoda on Etsy, there are still nearly 12,000 search results. This is because there are so many merchants selling these counterfeit goods that Disney cannot send out takedown notices and/or cease and desist letters fast enough. In order to do so, Disney would have to regularly review Etsy for infringing goods, examine each of the goods, and send a new takedown notice or cease and desist letter.

Some sites, such as YouTube, provide a more efficient mechanism through which copyright holders can enforce their rights by utilizing an automated tool to identify all infringing content. Unfortunately for Disney, Etsy does not. Instead, Etsy requires copyright holders to review all search results and deal with the infringing merchants on a case-by-case basis. This process is time consuming and requires substantial resources from the copyright holder. But as a result of the Digital Millennium Copyright Act’s safe-harbor provision, which enables Etsy to avoid most liability for infringement perpetrated by its users, Etsy isn’t incentivized to make the process more efficient for copyright holders. In other words, it isn’t really Etsy’s problem, so why should Etsy concern itself?

Nonetheless, Disney could likely dedicate adequate resources to this issue to eradicate the presence of such counterfeit goods on Etsy. However, doing so would be a time-consuming and costly endeavor. Disney will have to decide whether it is worth the time and effort to shut down every merchant on Etsy, or whether it should selectively target the larger, more harmful infringing merchants. The latter would obviously be a more economical approach, but Disney has proven in the past that it is willing to go the extra mile to protect its intellectual property as a matter of principle. While that approach may not make sense for all businesses, it works for companies like Disney that have virtually unlimited resources. Whether Disney will take this approach, however, remains to be seen. One thing is for certain: begun, the Baby Yoda wars have.

In the early 2000’s, an all-girl band called 3LW performed a song called “Playas Gon’ Play,”  which was written by Sean Hall and Nathan Butler.  “Playas Gon’ Play” was initially released in May, 2001 and rose to number 81 on the Billboard’s Hot 100 chart.  The album on which “Playas Gon’ Play” appeared sold over One Million copies and 3LW performed the song numerous times on national television.  The chorus of “Playas Gon’ Play” consists of the following lyrics:

Playas, they gonna play
And haters, they gonna hate
Ballers, they gonna ball
Shot callers, they gonna call
That ain’t got nothin’ to do
With me and you
That’s the way it is
That’s the way it is.

Hall and Butler sued Taylor Swift, her co-authors on “Shake It Off,” as well as various other parties related to “Shake It Off” and the album on which it was included.  Hall and Butler alleged a single claim of copyright infringement premised upon the lyrical similarities between “Playas Gon’ Play” and “Shake It Off.”

On Swift’s motion to dismiss, the sole issue before the court was whether any elements of “Shake It Off” were substantially similar to protectable elements of “Playas Gon’ Play.”  Unlike most music cases, here the court was not called upon to consider the relevant songs’ sound.  Here the court was to focus on similarities between portions of the songs’ lyrics.  The court noted that the only obvious similarities between the two works is that “Playas Gon’ Play” contains the lyrics “Playas, they gonna play / And haters, they gonna hate,” and “Shake It Off” contains the lyrics “Cause the players gonna play, play, play, play, play / And the haters gonna hate, hate, hate, hate, hate.” Before considering whether this satisfied substantial similarity, the court considered whether the allegedly infringed elements of Hall and Butler’s song – the lyrics “Playas, they gonna play / And haters, they gonna hate” are eligible for protection under the Copyright Act.

The Copyright Act protects “original” works of authorship fixed in any tangible medium of expression. The court noted that songs or a portion of a song “must be sufficiently original and creative to warrant copyright protection.”  Originality signifies “that the work originates in the author rather than having been copied from past sources” and creativity signifies “that the work has a spark that goes beyond the banal or trivial.”

The district court found the allegedly infringed phrases to be “too brief, unoriginal and uncreative to warrant protection under the Copyright Act.”  Hall and Butler appealed the dismissal to the Ninth circuit who then reviewed the case de novo.

On appeal, the 9th Circuit took issue with the basis of the district court’s dismissal based on lack of originality. In noting that originality is a question of fact, the court quoted the late Supreme Court justice Oliver Wendell Holmes, Jr. who once wrote, “It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.”  The 9th Circuit held that when the appeals court concluded that, “for such short phrases to be protected under the Copyright Act, they must be more creative than the lyrics at issue here,” the district court constituted itself as the final judge of the worth of an expressive work.  Because the absence of originality is not established either on the face of the complaint or through the judicially noticed matters, the appeals court reversed the district court’s dismissal under Rule 12(b)(6).

In the grand scheme of copyright litigation in the 9th Circuit, this decision will make it much more difficult (if not impossible) for a defendant to put an early end to a frivolous infringement case.  Courts routinely dismiss copyright infringement claims because they fail to show infringement of an original work.  In the 9th Circuit, that’s not going to be possible any longer.  Now, the determination of originality will require costly discovery.

In a unanimous ruling, the U.S. Supreme Court in Peter v. NantKwest, case number 18-801, struck down the U.S. Patent and Trademark Office’s (USPTO) recent and often-criticized effort to recoup its legal fees – even in cases it loses – because it violates the so-called American Rule, which says U.S. litigants must typically pay for their own lawyers.

The Patent Act creates two mutually exclusive pathways to challenge an adverse decision by the USPTO. The first permits judicial review by direct appeal to the United States Court of Appeals for the Federal Circuit. There is “no opportunity for the applicant to offer new evidence” in a §141 proceeding, and the Federal Circuit “must review the PTO’s decision on the same administrative record that was before the [agency].”

The second pathway allows applicants to file a new civil action against the USPTO in federal district court.  Unlike §141, §145 “permits the applicant to present new evidence . . . not presented to the PTO.” The district court “acts as a factfinder when new evidence is introduced in a §145 proceeding” and must make de novo determinations that take into account “both the new evidence and the administrative record before the PTO.”

The parties may appeal the district court’s final decision to the Federal Circuit. Because §145 does not limit an applicant’s ability to introduce new evidence to challenge the denial of a patent, it can result in protracted litigation. As a condition for permitting such extensive review, the Patent Act requires applicants who avail themselves of §145 to pay “[a]ll the expenses of the proceedings.” The question the Court thus had to consider is whether such “expenses” include the salaries of attorney and paralegal employees of the USPTO.

In considering the issue, the Court started with the bedrock principle that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”  This is known as the American Rule, which has “roots in our common law reaching back to at least the 18th century.”  However, the USPTO argued the American Rule did not apply here because it is only applied when a statute awards fees to a “prevailing party,” and this was not a “prevailing party” case since the USPTO was entitled to its expenses regardless of whether it won or lost.

The Court rejected this argument reasoning it has never suggested that any statute is exempt from the presumption against fee shifting or limited its American Rule inquiries to “prevailing party” statutes. Rather, the Court has developed a line of precedents addressing statutory deviations from the American Rule that do not limit attorney’s fees awards to prevailing parties.  The Court further reasoned the presumption against fee shifting is particularly important here because reading §145 to permit an unsuccessful government agency to recover attorney’s fees from a prevailing party “would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.”  Thus, the Court determined the American Rule does apply here and provides the starting point for assessing whether §145 authorizes payment of the USPTO’s legal fees.

Therefore, to determine whether Congress intended to depart from the American Rule presumption, the Court “look[s] to the language of the section” at issue. While “[t]he absence of [a] specific reference to attorney’s fees is not dispositive,” Congress must provide a sufficiently “specific and explicit” indication of its intent to overcome the American Rule’s presumption against fee shifting. In doing so, the Court found Section 145’s plain text does not overcome the American Rule’s presumption against fee shifting because the reference to “expenses” in §145 does not invoke attorney’s fees with the kind of “clarity we have required to deviate from the American Rule.”

Specifically, the Court found the definition of “expenses” in the statute, while capacious enough to include attorney’s fees, does not provide sufficient guidance.  The Court explained the mere failure to foreclose a fee award “neither specifically nor explicitly authorizes courts to shift [fees].” But, the Court reasoned the complete phrase “expenses of the proceeding” would not have been commonly understood to include attorney’s fees at the time §145 was enacted.  Moreover, the modifier “all” does not transform “expenses” to reach an outlay it would not otherwise include.  Instead, in common statutory usage, the term “expenses” alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption. In addition, the appearance of “expenses” and “attorney’s fees” together across various other statutes indicates that Congress understands the terms to be distinct and not inclusive of each other. Therefore, the Court found Section 145’s plain text does not overcome the American Rule’s presumption against fee shifting to permit the USPTO to recoup its legal personnel salaries as “expenses of the proceedings.”

The Court next considered the USPTO’s argument that, on occasion, the Court itself has used the term “expenses” to mean “attorney’s fees.”  However, the Court quickly rejected this argument, reasoning in common statutory usage, the term “expenses” alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption.

The Court also explained the Patent Act’s history reinforces that Congress did not intend to shift attorney’s fees in §145 actions. The Court noted there is no evidence that the original Patent Office ever paid its personnel from sums collected from adverse parties. In addition, the Court noted that the USPTO has not, until this litigation, sought its attorney’s fees under §145. Thus, the history of the Patent Act also reaffirms the Court’s view that the statute does not specifically or explicitly authorize the USPTO to recoup its lawyers’ or paralegals’ pro rata salaries in §145 civil actions.

Thus, in sum, the Court concluded that the USPTO cannot recover the pro rata salaries of its legal personnel under §145 and therefore affirmed the judgment of the Court of Appeals for the Federal Circuit.

##

For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.