Intellectual Property

The San Diego Padres recently took control of the Amarillo minor league baseball organization. The organization will serve at the Padres’ Double A affiliate. In the spirit of new beginnings, the organization recently held a public naming contest to determine its new mascot. After the contest had concluded, the Sod Poodles were selected as the new mascot.

Unfortunately, it appears that Panhandle Baseball Club, Inc., the entity that owns and operates the Amarillo Sod Poodles, will not be able to obtain the exclusive right to use Amarillo Sod Poodles or Sod Poodles in commerce without a fight. It turns out that two Amarillo natives, Dusty and Nikki Green, both of whom had been critical of the team’s ownership, filed an intent-to-use (“ITU”) application with the United State Patent and Trademark Office on June 2, 2018, two days after the team name was announced and three days before Panhandle Baseball Club filed its ITU application for Sod Poodles on June 5, 2018, and over five months before Panhandle Baseball Club filed its ITU application for Amarillo Sod Poodles. So as far as filing prior is concerned, the Greens beat Panhandle Baseball Club to the punch.

According to Dusty Green, the team has made three offers to purchase the putative mark, but Green has rejected each of the offers and does not have an intent to sell. Truth be told, although Green seemingly has priority pursuant to his filing date, he does not have a federally registered trademark at this time. Although one must simply have a good faith intent to use the mark in commerce, an opposing party is free to challenge registration of the mark, and in doing so, challenge the initial registrant’s good faith intent to use the mark. Based upon statements issued by the Amarillo general manager Tony Ensor, it seems Panhandle Baseball Club will do exactly that.

“We are aware of this individual and we are following the trademark processes and procedures. We are not at all concerned and will let the process play out,” said Mr. Ensor to MyHighPlains.com. “We could not be more excited and confident about our name, this brand, and our logo! Sod Poodles is our brand and identity. We created it, and our community brought it to life. There is no way we are going to allow an outside individual who has nothing to do with our team try to take advantage of our team and this community.” I could be mistaken, but those sound like fighting words, and as a trademark practitioner, it is my belief that Panhandle Baseball Club will challenge the registration of Greens’ mark on the basis described above.

Practically speaking, it is likely that Panhandle Baseball Club will continue trying to acquire the Greens’ putative rights in the mark in order to avoid protracted and costly litigation. However, if the Greens are set on maintaining ownership of the mark, it seems that Panhandle Baseball Club is prepared for a fight. If I had to guess, I would say that the Greens will eventually sell their putative rights to Panhandle Baseball Club once they realize how expensive this nonsensical proceeding is. But for all I know, the Greens truly intend to utilize the mark in commerce and will stand their ground. Only time will tell, so stay tuned.

The Trademark Trial and Appeals Board’s recent ruling in In re Productos Verde Valle, S.A. de C.V. upholding a trademark examiner’s refusal to register the mark SONIA for “sauces; chili sauce; hot sauce” holds a lesson for those of us that regularly advise clients on the registrability (and usability) of trademarks.  Assuming Verde Valle conducted a trademark search, it’s very likely (if not certain) that the word mark SONIA SONI LIFE IS A RECIPE for “spices, spice blends; spice rubs” would have come up.  If you were representing Verde Valle, would you advise them that this mark will absolutely prevent the registration of their mark?  Or, would you advise that SONIA SONI LIFE IS A RECIPE is likely to be raised by the trademark examiner, but based on the differences in appearance, sound and commercial impression between the two marks, and the difference in the goods covered by the two marks, registration should be possible?  These were the exact same arguments raised by Verde Valle in its appeal to the TTAB.  The Board affirmed the examiner’s refusal to register.

It is understandable that the TTAB found the goods covered by the two marks to be similar.  Both are food flavorings, sold in the same channels of trade (grocery stores) to the same group of consumers.  Plus, the trademark examiner had submitted a number of third-party registrations covering both spices and sauces.  And while Verde Valle argued that its spices were sold as Mexican food while the goods covered by the registered mark were sold as Indian spices, the TTAB pointed out (1) that no such restriction on the scope of the goods, channels of trade or classes of purchasers was included in either the registration or Verde Valle’s application; and (2) certain spices may be used in both Mexican and Indian cuisine.

The interesting part of the decision is the TTAB’s analysis of the two marks.  In support of its argument that the marks are different, Verde Valle relied on standard, well-established holdings:  that marks must be considered in their entireties and not dissected; that the determination of likelihood of confusion cannot be predicated on only part of a mark; that the commercial impression of a trademark is derived from it as a whole, not from its elements separated and considered in detail.   In reliance on these principals, Verde Valle argued the shared term SONI is not sufficient grounds on which to deny registration, and that the two marks are distinct in light of the additional terms.

In considering Verde Valle’s arguments, the TTAB acknowledged its obligation to consider the marks in their entireties but also noted that there is nothing “improper in stating that, for rational reasons, more or less weight has been given to a particular feature of the mark, provided the ultimate conclusion rests on a consideration of the marks in their entireties.”  The TTAB noted that the proper focus of any inquiry into likelihood of confusion “is on the recollection of the average customer, who retains a general rather than specific impression of the marks”  and here, “the average customer includes ordinary consumers seeking food flavorings in the nature of sauces and spices.”

In examining the two marks, the TTAB found the term SONIA to be the most prominent portion of the registered mark.  This should have been no surprise to Verde Valle as the first part of a mark – as long as it is distinctive — is most often (if not always) deemed to be the most prominent part of the mark.  The rationale behind this is that it is often the first part of a mark which is most likely to be impressed upon the mind of a purchaser and remembered.  What likely was a surprise to Verde Valle was the treatment given to the rest of the mark.  In examining its effect on the overall comparison of the marks, the TTAB said that the words LIFE IS A RECIPE “imparts a connotation that simply highlights use of the spices” and contends that consumers would simply ignore them (as well as the other distinctive word, SONI) and believe that Verde Valle’s mark is simply a shortened version of the registered mark, because of “the penchant of consumers to shorten marks.”  (In addressing the TTAB’s treatment of SONI, it stated “likelihood of confusion is not necessarily avoided between otherwise confusingly similar marks merely by adding or deleting other distinctive matter. If an important portion of both marks is the same, then the marks may be confusingly similar notwithstanding some differences.”)

The important lesson here for trademark attorneys who regularly review trademark search reports is to apply an even greater degree of caution when a report reveals a mark that shares an important portion of the searched mark.  In cases where the searched mark and a mark in a report share an exact same word, where this shared word in the first word in each mark, and where the goods are highly similar, it may be wise to caution the client that there is a good chance that registration may not be possible.

The U.S. Court of Appeals for the Federal Circuit was recently tasked with reviewing determinations made by the International Trade Commission (“ITC”) relating to trade infringement claims brought by Converse, Inc. with regard to a number of imported shoes that it alleged infringed on one of its trademarks. Although Converse sneakers have had largely the same appearance since the 1930s, Converse registered a trademark in 2013 relating to the design of its midsole and the toe cap/bumpers on its shoes.  The primary issue before the Federal Circuit was the timing of a second meaning inquiry in connection with the trademark infringement claim in light of the actual trademark registration in 2013.

Section 337 of the Tariff Act of 1930 provides for remedies at the ITC for holders of trademarks against companies and people who import goods that infringe on a valid and enforceable trademark.  Converse brought claims against a number of respondents for trademark violations regarding the importing of various footwear products in 2014.  Although some of the entities defaulted as to the claims, a number contested Converse’s claims to the ITC and received a favorable ruling that they either did not infringe on Converse’s mark, or that the mark was invalid.  Converse appealed that finding to the Federal Circuit which recognized that the primary issue was “whether the mark had acquired secondary meaning” and the timing issues surrounding that determination.

Converse argued that its mark had long ago acquired secondary meaning in that it had been in use since 1932.  The respondents on the other hand contended that Converse did not exclusively use the mark during that time and provided evidence by way of a survey showing that consumers did not necessarily associate the Converse mark with a single source.  The Federal Circuit concluded that the ITC had made several errors in findings against Converse on its trademark infringement claims.

First, the Federal Circuit held that the ITC erred in failing to distinguish those respondents who were alleged to have infringed before Converse obtained its trademark registration in 2013 and those who began afterward.  The Federal Circuit noted that while the Lanham Act does not create trademarks, “it may create some new substantive rights in trademarks unless the trademarks preexist [and] there is nothing to be registered.” Although Converse had secured its trademark registration in September 2013, it claimed that both before registration and after registration acts of infringement violated its rights in the trademark.  The Federal Circuit noted that to establish infringement Converse had to show: “(1) it has a valid and legally protectable mark; (2) it owns the mark; and (3) the defendant’s use of the mark to identify goods or services causes a likelihood of confusion.”  Because Converse was seeking protection for its mark in the form of unregistered product design trade dress, it had to show “that its mark has acquired distinctiveness, i.e., secondary meaning.”  The problem with the ITC’s decision the Federal Circuit found was that it had not determined the relevant date for determining whether secondary meaning existed.  In essence, the ITC was urging an interpretation that the secondary meaning had not attached at any time.  The Federal Circuit disagreed with this approach and found that it needed, “a specific determination of secondary meaning as of the relevant date” so that a court could determine whether or not there had been infringing activity.

The statutory effect of Converse’s registration of its mark in 2013 was to create a “presumption of secondary meaning which would operate only prospectively from the date of registration.”  While Converse argued that this presumption should apply to the use of its mark since its first use in the 1930s, the Federal Circuit rejected this and held that the statute made clear that the presumption only applies to post-registration conduct.  With regard to any possible infringement that predated the registration of the mark, Converse would be required to establish “that its mark had acquired secondary meaning before the first infringing use by each respondent” without any benefit of the statutory presumption.

The Federal Circuit then turned its attention to the standards that the ITC should have applied in determining whether the mark had acquired secondary meaning.  The Federal Circuit then found that the ITC had applied incorrect legal standards in rendering a finding that the mark had not acquired secondary meaning. In clarifying the standard that the ITC should have used in determining whether secondary meaning had been acquired in the mark, the Court held that the following six factors should be considered: “(1) association of the trade dress of the particular source by actual purchasers (typically measured by customer surveys); (2) the length, degree and exclusivity of use; (3) amount and manner of advertising; (4) amount of sales and number of customers; (5) intentionally copying; and (6) unsolicited media coverage of the product embodying the mark.”  The Federal Circuit cautioned that the ITC should consider each of these six factors together in determining the existence of secondary meaning.

The Federal Circuit then turned to the issue of the prior use of the mark by Converse and the alleged infringers.  In reviewing the Lanham Act, the Court found that the most relevant evidence would be the prior use in the five years immediately preceding first use or infringement. Thus, given the importance of looking to a five year period, the Federal Circuit instructed the ITC to “rely principally on uses within the last five years.”  This was because the “critical issue for this factor is whether prior use has impacted the perceptions of the consuming public as of the relevant date.”  The Federal Circuit reasoned that “consumers are more likely to remember and be impacted in their perceptions by third party uses within five years and less likely with respect to older uses.”  Thus, uses that predate the five year period should only be considered if they were likely to have impacted a consumer’s perception of the market as of the relevant date.

The Federal Circuit noted a further error in the ITC’s findings in that in determining prior uses by other third parties, it had considered several instances of shoes that had “at most a passing resemblance to the [Converse] trademark.”  The Court noted that many of these examples were missing at least one of the elements of the trademark and that others had been reproduced in poor resolution that prevented any reasonable comparison. Thus, the Federal Circuit instructed the ITC to limit its analysis only to those uses by Converse and its competitors of the “marks substantially similar to Converse’s registered mark.”  The Federal Circuit noted that there was a similar error by the ITC in applying the similarity in its likelihood of confusion analysis.  The Federal Circuit concluded by vacating the ITC’s findings and remanding it for further proceeding.

The Converse decision reiterates the importance of determining the impact of a mark registration date and whether a presumption of secondary meaning attached when dealing with products that have been in use for years.

Some things are not patentable: laws of nature, natural phenomena, and abstract ideas.  The Supreme Court has long held that inventions falling within these categories are not patentable; they are patent-ineligible subject matter.  In 2014, the Supreme Court relied on this principle in deciding Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347.  In that case, the Court invalidated patent for a computerized system for mitigating risks in financial transactions. The Court also established a test for determining patent-eligible subject matter.  Since then, Alice has been used to invalidate many patents, particularly software patents.  Now it has been used to invalidate a patent for ordering pizza.

Ameranth owned four patents for “an information management system” for transmitting menus from a master database to handheld devices.  In 2011, Ameranth filed suit in the Southern District of California against several defendants, including Pizza Hut, Domino’s Pizza, and others, for infringement of the four patents.  The defendants challenged the validity of three of the patents in the Patent Trial and Appeal Board (PTAB).  The PTAB invalidated many of the claims of the three patents, and, in a subsequent appeal, the Federal Circuit invalidated the remaining claims.  All three patents were held invalid on the grounds that they were directed to patent-ineligible subject matter because the invention was an abstract idea.

The defendants challenged the fourth patent in the PTAB, but the PTAB denied the defendants’ petition, so the infringement litigation proceeded in the district court.

Pizza Hut filed a motion for summary judgement seeking a determination that the patent was invalid as an abstract idea.  However, Pizza Hut then settled the case against it, and Domino’s moved for summary judgement on the same grounds.

On September 27, 2018, the district court granted Domino’s motion and held the patent invalid.  The court applied the two-pronged Alice test.  As set forth in Alice, in the first prong, a court must determine whether the claims of the patent fall within one of the patent-ineligible categories (laws of nature, natural phenomena, and abstract ideas).  The court considers whether the patent’s claims are directed to a specific means or method (which would be patent-eligible) or are directed to a result and use generic processes and machines (which would not be patent-eligible).

If the claims fall within a patent-ineligible category, the court must then proceed to the second prong of the Alice test.  The court must determine whether the elements of the claim transform the claim from patent-ineligible subject matter into patent-eligible subject matter.

In applying the first prong of the Alice test, the court noted that the Federal Circuit had previously held that “collecting, analyzing and displaying information,” without more, and “fundamental economic practices…including longstanding commercial practices and methods of organizing human activity” are abstract ideas.  The court said that the Ameranth claims covered a system that configured the information on large paper menus into a wireless handheld device and allowed the master menu to communicate with the handheld devices in real-time.  The court held that the claims were directed to an abstract idea.

The court then went on to address the second prong of the Alice test.  The court considered the elements of the claims (software, hardware, real-time communications, and configuring information into a wireless device), and found that these elements were based on conventional technology and did not constitute an inventive concept.  The court held that none of these elements transformed the abstract idea of the invention into patent-eligible subject matter.  Therefore, the second prong of the test was met.  The court held the patent invalid as directed to an abstract idea.

Ameranth had filed similar suits against other businesses who use these types of ordering systems, including Papa Johns, Marriott Hotels, Starbucks, Apple and Ticketmaster, and the cases are about to go to trial. Now these cases will be dismissed, thanks to Domino’s. Meanwhile, Ameranth intends to appeal.

In Lexington Luminance LLC v. Service Lighting and Electrical Supplies, Inc. d/b/a 1000bulbs.com, 3-18-cv-01074, the District Court for the Northern District of Texas denied defendant’s motion to dismiss for failure to state a claim, but granted its motion for a more definite statement because of the complexity of the patents-in-suit.

In the case, the Defendant argued that the Plaintiff’s complaint for direct patent infringement should be dismissed because the complaint fails to meet the pleading standards set forth by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009).  Defendant further argued that the complaint only sets forth conclusory statements that the accused devices practice the limitations of the patent claim asserted, that the complaint fails to set forth plausible facts to support those conclusory statements, and that the complaint fails to clearly identify the accused devices.

Under the pleading standards of Twombly and Iqbal, a complaint must at a minimum allege plausible facts that give rise to an entitlement for relief.  Threadbare recitals of the elements of a cause of action supported by conclusory statements are insufficient to meet this pleading standard.  Previously, direct patent infringement causes of action were safe from sufficiency of the pleading motions to dismiss based on the Twombly and Iqbal standard as long as the complaint complied with the pleading example of Form 18 provided in the Federal Rules of Civil Procedure.  However, direct patent infringement causes of action no longer have this protection because Form 18 was abrogated recently, meaning pleadings for direct patent infringement must now conform with the Twombly and Iqbal pleading standards without the benefit of Form 18.

Plaintiff asserted that its complaint complies with the pleading requirements of Twombly and Iqbal as confirmed by the Federal Circuit’s recent opinion in Disc Disease Solutions, Inc. v. VGH Solutions, Inc., 888 F.3d 1256 (Fed. Cir. 2018).  However, in considering Plaintiff’s argument, the District Court noted that in Disc Disease Solutions, the Federal Circuit specifically pointed out that the case involved a simple technology, the complaint specifically accused three products, and photos of the product packaging were attached to the complaint as exhibits.  Thus, the Court reasoned that the holding in Disc Disease Solutions is limited to similar circumstances, where considering the technology at issue, the complexity level of the asserted claims, and the nature of the accused devices, simple pleadings supported by photographs may be sufficient to meet the standards of Twombly and Iqbal.

Therefore, the Court determined that the present case is distinguishable from Disc Disease Solutions.  The patent in suit in this case, U.S. 6,936,851, is titled “Semiconductor Light Emitting Device and Method for Manufacturing the Same.”  The patent discloses a semiconductor light-emitting device having a particular structure and chemical composition.  The asserted claim, claim 1, is directed toward a light emitting device having particular physical and chemical properties including: a textured district comprising “a plurality of etched trenches having a sloped etching profile with a smooth rotation of microfacets without a prescribe angle of inclinations”; a layer that forms a “lattice-mismatched misfit system” with a substrate; a substrate that has at least one particular element or 4 compound; and lower portions of the layer “configured to guide extended lattice defects away from propagating into” an active layer.  Considering the disclosure provided by the ‘851 patent and the limitations of the asserted claim, the Court determined the technology at issue here is not a simple technology.  Instead, the technology at issue is a complicated technology and the claims are directed to an LED light involving a particular structure and chemical composition.

Therefore the Court found a plausible inference that an accused device meets all the limitations of the asserted claims cannot be inferred from the Plaintiff’s bare conclusory allegations.  Additional factual information is required under the standards of Twombly and Iqbal.  However, the Court did note that the additional factual information need not necessarily be as detailed as that disclosed in infringement contentions.  But the Court stated there must at least be some factual support for a plausible inference that the accused devices practice the asserted claim.

Thus, since the complaint failed to set forth factual allegations that meet the pleading requirements of Twombly and Iqbal, the Court found the Plaintiff’s complaint deficient, and ordered the Plaintiff to amend its complaint to add additional factual allegations in compliance with the pleading standards of Twombly and Iqbal.

Defendant also argued that the complaint is deficient in its identification of accused devices. The complaint specifically identifies the “Bulbrite LED T14 Tubular Bulb, model 776511” as an accused device, but Defendant took issue with the remainder of the accused devices which are described as “other similar products, which perform substantially the same function as the devices embodied in one or more claims of the ‘851 Patent in substantially the same way to achieve the same result.”  Defendant asserted that this fails to reasonably inform the Defendant what additional devices are accused devices under this statement.

The Court agreed that the Plaintiff’s identification of additional products was unclear and ambiguous because the statement fails to reasonably inform Defendant as to what additional devices, if any, are accused by this statement.  However, the Court found the Plaintiff did reasonably inform Defendant that the Bulbrite LED T14 Tubular Bulb is an accused device, which is sufficient to survive a challenge to the sufficiency of the pleadings.  Thus, the Court denied this part of Defendant’s motion.

Any work that is entitled to copyright protection automatically receives protection when it is fixed in a tangible medium of expression. However, in order to benefit from the Copyright Act, the owner must “register” his or her work with the United States Copyright Office. Put another way, in order to protect against copyright infringement, the owner must register the work. So, for purposes of the Copyright Act, what does that mean?

To be clear, there is no right answer. Not yet at least. In fact, the definition of “registered” has been debated for years and the federal circuit courts are split on the definition. The Copyright Act describes the registration process as (1) filing an application and paying a fee; (2) depositing a copy of the copyrightable material with the Copyright Office; (3) an examination of the application by the Register of Copyrights; (4) registration or refusal of registration of the application by the Register; and (5) issuance of a certificate of registration. The circuit courts have split on when the mark should be deemed “registered” for purposes of the Copyright Act.

The two approaches are known as the “application” approach and the “registration” approach. The courts following the “application” approach hold that a work is “registered” and the copyright owner can sue an infringer as soon as the applicant files the application, deposits the copy of the work, and pays the fee. The courts following the “registration” approach hold that a work is not “registered” until the Copyright Office has acted on the application by approving or refusing it, and as such, the owner cannot file suit until the Copyright Office has acted.

For years, the split remained intact, but the Supreme Court of the United States will finally resolve the dispute in an action known as Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC. In that case, Fourth Estate Public Benefit Corporation, a news organization publishing articles online, licensed certain articles to Wall-Street.com. Eventually, Wall-Street.com cancelled its account with Fourth Estate, and under the license agreement, it was required to remove all licensed content from its site. But Wall-Street.com refused to do so, prompting Fourth Estate to file suit for copyright infringement on unregistered works, advocating for the Court to apply the “application” approach. The District Court refused, adopting the “registration” approach and dismissing the action without prejudice.

The Eleventh Circuit affirmed the District Court’s ruling, citing its prior decision in M.G.B. Homes and Kernel Records, where it held, in short, that filing an application does not amount to registration for purposes of the Copyright Act. Registration requires action from both the copyright owner and the Copyright Office. Accordingly, the Eleventh Circuit held that filing for infringement is premature after merely filing the application. Accordingly, Fourth Estate petitioned the Supreme Court for review, which was ultimately granted.

The courts favoring the “application” approach have adopted a more pragmatic and policy-driven position. Those courts have argued that the “application” approach serves justice and judicial economy. After all, if a copyright owner can sue for infringement regardless of the application ultimately being granted or rejected by the Copyright Office, what’s the point of making the party wait to bring suit? It doesn’t seem to make sense. Moreover, these courts point to section 408 of the Copyright Act, which states that registration is not a condition of copyright protection and implies that the only requirement for registration is the delivery of the appropriate documents and fees. Additionally, Section 410 states that the effective date of the registration relates back to the date the Copyright Office receives the filing materials. For these reasons, among a few others, certain circuit courts, including the Fifth and Ninth Circuits, apply the “application” approach.

So, why does the circuit split matter? Generally speaking, the split among the circuit courts results in the courts applying federal law in a dissimilar manner depending upon their location, rather than uniformly throughout the nation. This is problematic because it results in parties bringing, or being prevented from bringing, lawsuits for infringement at different points in the registration process depending on where the action is filed. This can, at times, create statute of limitations problems, and in other instances, permit the infringing party to continue to profit from his or her wrongdoing for a longer period of time. Given that copyright law is exclusively within the jurisdiction of the federal courts, the law should be applied uniformly throughout the nation. Unfortunately, that is not happening, but with the Supreme Court granting certiorari, there will soon be a clear answer regarding what constitutes “registered” for purposes of the Copyright Act.

In recent years, the U.S. Supreme Court has considered a number of intellectual property and related cases, but many issues remain unresolved.  Therefore, it is important to look both at the cases currently before the U.S. Supreme Court as well as those the Court chooses to let stand without further review.  First, consider a few cases the Court has already agreed to hear or is still considering.

• Apple v. Robert Pepper et al.—In this consumer class action, Apple is accused of violating antitrust law by illegally monopolizing the app market for its phones by forcing developers to sell the apps exclusively through Apple’s app store and collecting a commission from the developers. The Supreme Court will hear this case.
• Helsinn Healthcare v. Teva Pharmacetuicals et al.—Prior to the America Invents Act (“AIA”), the on-sale bar deemed sales more than a year before a patent filing to be prior art for purposes of invalidating a patent. Helsinn argues the AIA changed this rule such that a sale is not enough to trigger the bar unless the details of the invention are also made public.  Here, the sale took place and was made public more than a year before the patent filing, but the details of the invention were kept confidential.  The Supreme Court will hear this case.
• RPX Corp. v. ChanBond LLC—The Federal Circuit dismissed an appeal by RPX of a Patent Trial and Appeal Board (“PTAB”) decision upholding a ChanBond patent arguing that an inter partes review petitioner must have suffered a patent-related injury to have standing to appeal an adverse PTAB decision. The Supreme Court has not yet decided whether to hear this case but, to further inform its decision, has asked the federal government for briefing.
• Amgen Inc. v. Sanofi—The Patent Act requires an inventor to provide a written description in the patent application that enables a skilled artisan to carry out the claimed invention (e.g., make or use the invention). The Federal Circuit treats this as a two-part requirement that imposes a rule that the patent owner 1) must be in possession of the invention at the time the patent application is filed (written description requirement) and 2) show a skilled artisan how to make and use the invention (enablement requirement). This petition asks the Supreme Court to find that the Patent Act merely requires a sufficient description to show a skilled artisan how to carry out the claimed invention without the additional requirement that the patent owner be in possession of the invention at the time the patent application is filed.  The Supreme Court has not yet decided whether to hear this appeal.

Looking at cases the Supreme Court chooses not to review also gives insight into issues that may still need clarifying when a better fact pattern is presented.  These cases should also be considered when formulating arguments in lower courts.  For example, consider several patent cases the Supreme Court chose not to hear this week.

• Arctic Cat v. Bombardier Recreational Products—Bombardier argued the Federal Circuit misapplied the Halo Electronics v. Pulse Electronics standard for willful infringement by allowing a finding of willful infringement based on negligence. This raises the question as to whether negligence rises to the level of knowing and intentional conduct.  The Supreme Court passed on this opportunity to clarify the Halo
• B/E Aerospace v. C&D Zodiac—B/E Aerospace argued the PTAB and Federal Circuit use an improper, two-step approach for determining whether a patent claim is obvious. The approach includes an initial determination of obviousness followed by balancing that determination with the weight of the objective evidence of non-obviousness, such as commercial success.  Instead, B/E Aerospace argued for equally weighting objective evidence and other obviousness factors in the same step.
• Droplets Inc. v. Iancu—Droplets asked the Supreme Court to prohibit the Federal Circuit from affirming PTAB decisions on grounds other than those cited by the PTAB.
• David Jang v. Boston Scientific—Jang challenged the ensnarement defense that bars patent owners from asserting infringement under a theory of the doctrine of equivalents that “ensnares” the prior art.
• Nichia Corp. v. Everlight Electronics Co.—The Supreme Court has found the question of patent obviousness to be a question of law for a court not a jury. Nichia argued the Federal Circuit would have reached a different result on obviousness in this case had it independently evaluated the patents rather than improperly deferring to a jury verdict.
• Presidio Components v. American Technical Ceramics—The Federal Circuit found the patent-at-issue was not indefinite. In its petition, American Technical argued the claimed invention was not clearly described, and was thus indefinite, but the court had improperly allowed Presidio to “backfill” the description with evidence from years of litigation.
• Regeneron Pharmaceutical v. Merus NV—The Federal Circuit found Regeneron’s patent on a genetically modified mouse was unenforceable because of inequitable conduct. The Federal Circuit found that withholding materials during prosecution was intended to deceive the United States Patent and Trademark Office in part because of Regeneron’s behavior during the infringement litigation.  In the litigation, Regeneron had violated discovery orders and held back documents during discovery.  In its petition, Regeneron argued the doctrine of inequitable conduct is limited to evaluating conduct during prosecution and does not implicate conduct during litigation.
• Smartflash LLC v. Samsung Electronics America—Smartflash brought two constitutional challenges against AIA review. First, Smartflash argued that PTAB judges must be appointed by the president and confirmed by the Senate rather than appointed by the U.S. secretary of commerce, which is the current process.  Second, Smartflash asked the Supreme Court to bar the PTAB from reviewing patents issued before the AIA was enacted in 2012 arguing that such retroactive application of AIA reviews violates the Constitution’s due process clause.

Keep your eyes on the Supreme Court to monitor these cases and others that are likely to reach the Court this session, such as whether tribal sovereign immunity shields patents from PTAB review (St. Regis Mohawk Tribe v. Mylan Pharmaceuticals).

Recently, a client asked why we included a short form option agreement and a short form assignment agreement as an exhibit to a long form literary option agreement.  I am sure that many a corporate transactional attorney has similarly wondered why a short form copyright assignment agreement is included within the package of numerous M&A transaction documents.  It is true that the short form agreement is used to record the transfer of the copyright interest by filing it with the Copyright office without filing the long form agreement with all of the transaction details.  But that is half the answer to half the question.  The other half of the question is why this type of short form agreement is filed with the Copyright office in the first place.  To answer that question, we look to the statutory language of the Copyright Act.

17 U.S.C. § 205 deals with the recording of transfers of copyright ownership.  The Copyright Act does not require that transfers be recorded.  In order for a transfer of an interest in a copyright to be effective, it is enough that it is in writing and signed by parties.  So if the Copyright Act does not require that transfers of ownership by recorded, what is the benefit to doing it.

Similar to recording an initial copyright interest in a work, transfers are recorded in order to provide constructive notice of the transfer of ownership and to vest the new owner with the right to sue for infringement.  There is one other reason to record the transfer of copyright ownership and other documents pertaining to a copyright; addressing how to deal with conflicting transfers.

Some may assume that once the seller of a copyright interest transfers ownership that seller cannot sell the same interest a second time (or if the unscrupulous seller does so, the second buyer takes nothing).  That’s not always the case.  17 U.S.C. § 205(d) provides:

As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under [17 U.S.C. § 205(c)], within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer.  Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer.

In the scenario where the first buyer (or first exclusive licensee or first optionee) fails to record its interest prior to a second transfer (or grant of exclusive license or grant of option), a second transferee who took without notice, paid valuable consideration and recorded its transaction first, would have a superior interest in the subject work.  If, however, the subsequent transferee had notice (constructive, actual and possibly inquiry notice), then the subsequent transferee would not have a superior interest.  Similarly, the subsequent transferee would not have a superior interest if valuable consideration was not paid, or if the prior transferee recorded its transfer within the statutory grace period of one (or two) months from execution of the prior transfer.

My client was surprised to learn that if it did not record its option (in the form of a short form option), an unscrupulous rights holder could grant the same option to the same material a second time and divest my client of its rights under the option agreement.  While my client would certainly have a claim against the unscrupulous rights holder, the damages my client could potentially collect may be limited to its out of pocket costs and expenses related to the option; no recovery of any potential profits the client could have made from the exploitation of the program based on the literary material that was the subject of the option.

A California appellate court recently dealt a blow to fans of Michael Jackson who brought a class action alleging unfair competition and violations of the Consumers Legal Remedies Act (“CLRA”) in connection with the sale of an album titled simply “Michael” following the singer’s death.  The appellate court found that statements on the album cover and in a promotional video did not amount to pure “commercial speech” and that the Plaintiff’s claims should have been dismissed in connection with an anti-SLAPP motion brought by the Defendants.  (An anti-SLAPP motion is a procedural mechanism by which defendants can seek early disposition of claims against them when: (1) the defendants show that plaintiffs seek to impose liability for some protected activity; and (2) plaintiffs are unable to establish the viability of their claims.)

More than a year after Michael Jackson’s death, an album titled, “Michael” was released by Sony and Michael Jackson’s estate containing 10 songs.  The Serova Plaintiffs alleged that on at least three of the tracks, Michael Jackson was not the singer but rather an unidentified “sound alike” singer had been hired to sing the lyrics.  Even before the album was released several members of the Michael Jackson family disputed whether Michael Jackson was the singer of the three “disputed tracks.”  Sony and the estate, through its attorney, Howard Weitzman, issued public statements confirming their belief that Michael Jackson was the singer of the disputed tracks.  The album cover for “Michael” included a statement that it contained “9 previously unreleased vocal tracks performed by Michael Jackson.”  Shortly before the album was released, a promotional video was distributed that described the album as “a brand new album from the greatest artist of all time.”

Following the issuance of the album and video, a class action lawsuit was filed against Sony and the estate (and others) alleging that because Michael Jackson was not the singer of the three disputed tracks, the album cover and promotional video were misleading and constituted unfair competition and violation of the CLRA.  The complaint alleged that the class members lost money or property as a result of their purchase of the Michael album because of the alleged misrepresentations.

The defendants filed an anti-SLAPP motion against the class action claims, which was granted in part only as to the statements by the attorneys concerning the identity of the lead singer of the disputed tracks as being Michael Jackson.  The trial court declined, however, to dismiss the claims as to the album cover and promotional video finding that these were purely commercial speech and that Plaintiffs could pursue claims as a result thereof.   The defendants immediately appealed this decision to the Second Appellate District for California.

The appellate court began by reviewing the history of the anti-SLAPP procedure.  In essence, the anti-SLAPP laws allow a defendant to file a “special motion to strike” any claim asserted against them “arising from any act of that person in furtherance of the person’s right of petition or free speech under the [U.S.] Constitution or the California Constitution in connection with a public issue” except in those cases where “the Court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.”  While not resolving any conflicts in the evidence, the anti-SLAPP procedure allows the Court to dispose of claims early in the litigation if it determines that the plaintiff cannot make a showing that, if accepted by the trier of fact (i.e., the Court or jury), would not be sufficient to prevail on his or her claims.

In 2003, the California legislature enacted section 425.17 in reaction to what it concluded to be a disturbing abuse of the anti-SLAPP procedures by defendants.  For purposes of the Michael Jackson case, it established an exclusion from the anti-SLAPP procedures for “claims concerning commercial speech,” which it defined as being “representations of fact about that person’s or a business competitor’s business operations goods or services” that is made “to promote commercial transactions” and where the intended audience is an actual or potential customer.

To get around the prohibition on the Court having to make a factual finding as to disputed evidence, the Defendants stipulated that for purposes of the anti-SLAPP motion, Michael Jackson was not the singer of the three disputed tracks.  In their appeal, the defendants disputed the trial court’s finding that the statements in the promotional video and album cover were commercial speech or that the representations in those materials “were likely to deceive a reasonable consumer.”  Given that the appeal concerned the ruling on anti-SLAPP motion, the appellate court was free to look at the evidence in support of and in opposition to the motion “de novo.”

The defendants first argued that the legislature intended to extend broad protection to “the marketing of musical works” when they enacted the 2003 limitations on the anti-SLAPP procedure.  The appellate court rejected this argument finding that it was a misreading of the legislature’s intent.  Arguably, under such a reading, a music publisher could market an album claiming that it contained track x when no such track was on the album.  The court concluded that this misstatement would clearly give rise to claims under the unfair competition and CLRA claim laws.

The court, however, rejected the claim by plaintiffs that the statements as to the identity of the lead singer on the disputed tracks was simply “claims about the contents of a commercial product that appellant’s offered for sale” and therefore, there was no anti-SLAPP protection.  The Court concluded that there was a significant body of law that held that “prominent entertainers and their accomplishments can be the subjects of public interest for purposes of the anti-SLAPP statute.”  Furthermore, the Court recognized that in connection with the promotion of the film, My Big Fat Greek Wedding, it had been held that “facts concerning the creation of works of art in entertainment can also be an issue of public interest for purposes of the anti-SLAPP statute.”

In the case before it, the Court concluded that there was significant interest in the release of the Michael album and whether or not Jackson had in fact snag the lead vocals on the three disputed tracks.  Thus, the Court concluded that the defendants were engaging in protected activity that satisfied the first prong of an anti-SLAPP analysis.

The Court then turned to the issue of whether the plaintiffs could prevail on their unfair competition and CLRA claims.  Because those claims only apply to commercial speech, the appellate court began by recognizing that commercial speech is subject to less First Amendment protection than other types of expression. Furthermore, the California Supreme Court had held that false or misleading commercial speech is not entitled to First Amendment protection and may be prohibited in its entirety.  In determining whether speech is commercial speech that could be limited, the California Supreme Court had ruled that trial courts should consider three elements: (1) the identity of the speaker; (2) the intended audience; and (3) the content of the message.

In the Michael case, the appellate court found that the first two factors clearly indicated that the statements were likely commercial speech in that the defendants were “engaged in commerce” in marketing the Michael album; and the intended audience for the statements were actual or potential buyers of it.  The court concluded, however, that the content of the message did not demonstrate that it was purely commercial speech.

First, the Court concluded that the defendants made the statements on the album cover and promotional video concerning an issue of public interest for which they had no “personal knowledge.”  Rather, given that the defendants were not present when the three disputed tacks were recorded, they did not personally know whether or not Michael Jackson had in fact sung these tracks.  Rather, they were forced to rely on expert opinion that the voice was indeed Michael’s, as well as the fact that the alleged unidentified singer who allegedly sung the tracks denied to them that he had sung them. The court concluded that the defendants’ statements on the album cover and promotional video that Michael Jackson was the singer was one more of opinion rather than fact given their lack of personal knowledge.

The Court found that any other conclusion would likely violate the First Amendment.  For instance, the defendants could have been required to put disclaimers on the album stating that the identity of the singer of the three tracks was disputed or just keep those tracks off the album in its entirety.  The Court found that the second option, the exclusion of the tracks could serve as a chill on defendants’ First Amendment rights and that requiring a disclaimer could be construed as compelled speech concerning an issue that the defendants personally disagreed with.

Finally, the Court reasoned that the music itself on the album was entitled to full protection under the First Amendment.  Given that the challenged statements raised by the plaintiff’s compliant related directly to this piece of art, those statements likely had independent significance under the First Amendment.  For example, the identity of the singer as being Michael Jackson was likely “an important component of understanding the art itself.”  While the Court was careful to caution that not all statements made in connection with the promotion of a work of art such as an album or film were entitled to such broad protection, given that the issue as to the identity of the singer on the three tracks was of significant public interest, the Court concluded that the defendants’ anti-SLAPP motion should have also been granted as to the album cover and promotional video claims.

The Serova case is a reminder to defendants to consider the importance of the anti-SLAPP procedures and whether they can be utilized in connection with the promotion or sale of good and services.  Given that attorney’s fees are also available to a prevailing defendant bringing a successful anti-SLAPP motion, there is significant upside to prevailing on such a motion early in a lawsuit.