Intellectual Property

In a 7-2 opinion, the U.S. Supreme Court ruled in OIL STATES ENERGY SERVICES, LLC v. GREENE’S ENERGY GROUP, LLC that inter partes review does not violate Article III or the Seventh Amendment of the Constitution. Thus, the Supreme Court rejected an argument that only federal courts, and not executive branch tribunals or administrative courts like the Patent Trial and Appeal Board (“PTAB”), can invalidate patent claims once issued by the US Patent and Trademark Office (“USPTO”). In so doing, the Supreme Court left intact a system created by Congress in 2011 that has been used by potential patent infringers to challenge and invalidate thousands of patents.

Inter partes review allows private parties to challenge previously issued patent claims in an adversarial process before the PTAB, which is the trial arm of the USPTO. A party that wishes to challenge one or more issued patent claims must file a petition to institute review that identifies the challenged claims and the grounds for challenge with particularity. The patent owner, in turn, may file a response. If the USPTO determines “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition” a review is instituted in front of the PTAB. At the end of the review process, which operates similarly to a litigation proceeding in a court, the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

In the underlying proceedings in this matter, a PTAB inter partes review and a District Court litigation were running in parallel. The PTAB issued a final written decision concluding that the challenged claims were unpatentable even after the District Court had issued a claim-construction ruling that construed the challenged claims in a way that foreclosed some of the arguments about the prior art. The PTAB acknowledged the District Court’s contrary decision, but nonetheless concluded that the claims were anticipated by the prior art. On appeal, the patent owner challenged the constitutionality of inter partes review. Specifically, it argued that actions to revoke a patent must be tried in an Article III court before a jury. After the Federal Circuit summarily affirmed the PTAB’s decision, the Supreme Court granted certiorari to determine whether inter partes review violates Article III or the Seventh Amendment.

First, the Supreme Court reasoned that inter partes review falls squarely within the public rights doctrine. The Court continued that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the USPTO’s authority to conduct that reconsideration. Thus, the USPTO can do so without violating Article III. Additionally, granting patents is one of “the constitutional functions” that can be carried out by “the executive or legislative departments” without “judicial determination.” Accordingly, the determination to grant a patent is a “matte[r] involving public rights.” It need not be adjudicated in Article III court.

The Court further reasoned that inter partes review involves the same basic matter as the grant of a patent. So it, too, falls on the public-rights side of the line. The primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued. But, the Court held, that distinction does not make a difference. Patent claims are granted subject to the qualification that the USPTO has “the authority to reexamine—and perhaps cancel—a patent claim” in an inter partes review. Patents thus remain subject to the USPTO’s authority to cancel outside of an Article III court.

Next, the Court considered the patent owner’s argument that prior holdings recognize patent rights as the “private property of the patentee.” In rejecting this argument, the Court reasoned that patents convey only a specific form of property right—a public franchise. And patents are “entitled to protection as any other property, consisting of a franchise.” As a public franchise, a patent can confer only the rights that “the statute prescribes.” Thus, the patentee’s rights are “derived altogether” from statutes, and “are to be regulated and measured by these laws, and cannot go beyond them.” One such regulation, the Court held, is inter partes review. The Court also distinguished decisions from the 1800’s that held the patent office has no authority to revoke patents, reasoning this was before Congress enacted inter partes review. It further pointed out that the Patent Clause in our Constitution “was written against the backdrop” of the English system. Therefore, based on the practice of the Privy Council in existence at that time, it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council.

The patent owner also argued that inter partes review violates Article III because it shares “every salient characteristic associated with the exercise of the judicial power.” But the Court quickly rejected that argument, holding it has never adopted a “looks like” test to determine if adjudication has improperly occurred outside of an Article III court. The fact that an agency uses court-like procedures does not necessarily mean it is exercising the judicial power.

Lastly, the Court quickly rejected the challenge to inter partes review under the Seventh Amendment. The Seventh Amendment preserves the “right of trial by jury” in “suits at common law, where the value in controversy shall exceed twenty dollars.” However, the Courted noted its precedent establishes that, when Congress properly assigns a matter to adjudication in a non-Article III tribunal, “the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.” Thus, the Court held, because inter partes review is a matter that Congress can properly assign to the USPTO, a jury is not necessary in these proceedings.

In conclusion, the Court emphasized that its holding is limited to the constitutional challenges raised in the case. In fact, the Court held in a separate opinion issued on the same day that the PTAB must decide the validity of every challenged patent claim when it agrees to institute an AIA review. Previously, the PTAB could review some challenged claims and deny review of others. However, the Court found that PTAB should not be able to select a subset of challenged claims to rule on; the PTAB’s final decisions must address all of the claims in a petition. The Court reasoned “everything in the statute before us confirms that SAS is entitled to a final written decision addressing all of the claims it has challenged and nothing suggests we lack the power to say so,….whatever its virtues or vices, Congress’s prescribed policy here is clear: the petitioner in an inter partes review is entitled to a decision on all the claims it has challenged.”
In short, although AIA reviews are here to stay for the time being as the US Supreme Court has upheld their constitutionality, their exact nature is still in flux.

The Ninth Circuit recently revisited the issue of the applicability of the safe harbor provision of the Digital Millenium Copyright Act (“DMCA”) in the case Ventura Content, Ltd., v. Motherless, Inc., et al. (decided March 14, 2018). The issue before the Court was whether the defendants had presented undisputed evidence that they fell within the protections of the DMCA’s safe harbor provision to allow for summary judgment in their favor.

Motherless is a website that allows users to upload photos and videos of a mainly pornographic nature. It has over 12.6 million pictures and video clips and in 2011, had approximately 750,000 active users. No one pays Motherless to view the content, but a “premium subscription” is available for users who want to avoid advertisements on the site. Motherless does not pay for content nor does it license any of the content that appears on its site. Approximately 85% of its revenue is derived from advertising.

In its early years, users who updated a large amount of content were awarded with “credits” that could be used to purchase items such as coffee mugs or t-shirts. Later, the credits could be exchanged for money of nominal value. The most prolific user who had uploaded over 300,000 videos received approximately $200 in exchange for his credits.

When users uploaded content to the site, they received a notice warning them against uploading illegal images or videos, as well as copyright infringing material. In addition to posting a procedure for receiving the DMCA take down notices, Motherless also made available to copyright owners, software that would allow them to directly remove their copyrighted content from the site. The owner of Motherless testified that he personally reviewed all uploaded content before allowing it to appear on the site, although he used an independent contractor to assist in this work. They were to delete any material that they found to be illegal or which apparently violated copyrights. After material is removed pursuant to a takedown notice, Motherless employs software to prevent users from reposting the offending material. Over the last decade, Motherless deleted more than 4.5 million pictures and videos for violating its terms of use of which approximately 4-6% of the deleted files were for copyright infringement.

Although Motherless warns users that repeat infringers will have their access terminated, Motherless did not employ a written policy for determining when and how repeat infringers were to lose their access. The owner of Motherless testified, however, that he was solely responsible for determining whether to terminate a repeat infringer’s access and considered a number of factors in doing so. Between 2008 and 2011, he testified that he had terminated more than 33,000 user accounts of which approximately 1,300-2,000 were for repeat copyright infringement.

Ventura Content creates and distributes pornographic movies and alleged that 33 video clips on Motherless contained its copyrighted materials. None of the offending clips identified Ventura Content as the owner of the material although a few had watermarks referring to other aggregator websites.

Ventura Content did not provide a takedown notice to Motherless regarding the 33 clips nor did it avail itself of the software provided by Motherless to directly remove these video clips. Rather, the first notice it gave to Motherless of the offending materials was when it served it with its complaint for copyright infringement.

After being served with the complaint, the owner of Motherless requested that Ventura provide him with the URLs of the offending clips so that he could remove them. After his first request was ignored, he made a second request and then immediately took down the video clips after receiving the identifying URLs from Ventura.

Because Motherless had removed the offending clips, it rendered Ventura’s claim for an injunction moot. Nevertheless, Ventura continued to seek damages based on its claim of copyright infringement. Motherless (and its owner) moved for summary judgment arguing that the evidence demonstrated that they were covered by the DMCA’s safe harbor provision and thus, Ventura’s copyright infringement claim failed as a matter of law. The trial court agreed and granted summary judgment to Motherless. Ventura appealed to the Ninth Circuit.

The Ninth Circuit began its analysis by examining the DMCA’s safe harbor provisions. It recognized that the DMCA places the burden on the copyright owner of policing its copyrights. Essentially, to take advantage of the DMCA’s safe harbor provision, a service provider must (1) establish that it did not know of the infringement nor was the infringement apparent; (2) it must also take down or prevent access to infringing material as soon as it is put on notice; and (3) it cannot financially benefit directly from the infringing activity. Finally, the DMCA also requires that service providers had a policy to terminate users who repeatedly engaged in copyright infringement.

Before turning to these factors, the Ninth Circuit examined Ventura’s claim that Motherless (and not its users) had uploaded the offending clips and therefore was not able to take advantage of the safe harbor provision. Ventura argued that Motherless’s owner had initially uploaded 700,000 files from an old site and that the site’s website categorizes clips into the “most popular” and “most viewed” for its users.

The Ninth Circuit rejected these arguments finding that although the owner had done an initial upload, none of these files contained Ventura’s copyright material. The Ninth Circuit turned to its prior decision in UMG Recordings, Inc. v. Shelter Capital Partners, LLC (2013) to hold that the mere fact that Motherless performed some access facilitating processes to enhance the site for its users, this did not amount to having some control over what was uploaded. Rather, Motherless’s stated policy was “Anything legal stays.” Given that the users decided what to upload and not Motherless, the Court concluded that Motherless was still eligible for the DMCA’s safe harbor provision. The Ninth Circuit also noticed that this conclusion was consistent with similar rulings out of the Second, Fourth and Tenth Circuit Courts of Appeal.

Turning to the knowledge factor, Ventura argued that Motherless knew or should have known that its video clips were copyrighted and that the posting of them on Motherless constituted infringement. The Court rejected this argument by recognizing that only 4 of 33 clips had watermarks and that none of these identified Ventura as the copyright owner. Furthermore, the fact that these video clips may have been of a “high quality” would not necessarily have put Motherless on notice since many amateur content providers also produced “high quality” content.

The Ninth Circuit then turned to the issue of whether Motherless engaged in an expeditious take down of the offending materials. The Court found it significant that Ventura had not marked its material as having been copyrighted nor did it take advantage of the DMCA’s take down notice procedure. Rather, it chose to file a lawsuit and that upon the second request by Motherless, provided it with the URLs containing the offending materials. The Court found it also significant that once Motherless received the URL information, it took down the offending clips that same day. The Court found that this evidence demonstrated that Motherless had “respond[ed] expeditiously to remove” the offending material.

Ventura also argued that Motherless had the right and ability to control the materials because it received a direct financial benefit from the posting of this material. While the Court noted that theoretically Motherless had some right of control in that it could have taken down all of its content and shut down the website, this factor of the DMCA requires something more, i.e., “a service provider must be able to exert `substantial influence’ on its users activities.” The Ninth Circuit found it significant that Motherless did not tell its users what type of content to upload nor did it curate the uploaded content in any meaningful way. Further, it offered users that had the most popular or most viewed material credits of a nominal value, which would not incentivize the uploading of any copyright protected information. The Court also noted that Motherless did not advertise itself as a place to get pirated content and thus concluded that it did not financially benefit from its users infringing activity.

Finally, Ventura argued that Motherless was not entitled to safe harbor protection because it did not have a written policy detailing how it would identify and terminate the accounts of repeat infringers. The Ninth Circuit rejected this argument, finding that given its size, i.e., the owner and a part-time independent contractor, there was no need for more formal policies. Thus, the Ninth Circuit concluded that Motherless had established that it could avail itself of the safe harbor provision and affirmed summary judgment in its favor.

Circuit Judge Rawlinson disagreed with the majority and would have reversed the granting of summary judgment to Motherless. She found it significant that Motherless did not have a formal written policy as to how to identify and terminate the accounts of repeat infringers and thought that Ventura should have been allowed to proceed on its theory.

The Ventura/Motherless case is a reminder to those service providers that allow users to upload photographs and/or video clips to take affirmative steps and institute appropriate policies to police against infringing material. Otherwise, they may not be able to take advantage of the DMCA’s safe harbor provision when sued for copyright infringement.

Patent law is a complicated area of law governed by a confusing set of statutes and regulations that are interpreted by the United States Patent and Trademark Office (PTO) and the federal courts. Patents themselves are sometimes almost unintelligible and, if intelligible, may require many hours of reading to understand. It is no wonder that there are a lot of misconceptions about patents.

This is the first of two columns in which I will discuss a few of the most common aspects of patent law that are misunderstood.

1. Ideas Are Not Patentable.
Clients often want to patent an idea. Ideas are not patentable – inventions are patentable.
To be patentable, an invention must fall within one of four categories, referred to as statutory subject matter. Those categories are: processes (also referred to as methods), machines, articles of manufacture, and compositions of matter.
Process patents include patents for methods of doing just about anything, including some computer software and some methods of doing business (although business method patents are now under increasing scrutiny both in the PTO and in the courts). Machine or apparatus patents include traditional types of machines as well as computer systems. Articles of manufacture are devices such as tools or just about any non-machine. Compositions of matter include chemical compositions, genes, and genetically engineered (non-natural) living organisms, including bacteria, plants, and animals.
The above four categories are the categories of inventions for which a utility patent can be obtained. There are two additional types of patents: design patents and plant patents.
Design patents protect ornamental designs for articles of manufacture, such as chairs, dishes, and glassware. A design patent protects only the appearance of the article, not any aspect of its functionality. An article may be the subject of both a design patent and a utility patent, however, if it has both ornamental design and function.
Plant patents protect distinct, new varieties of asexually reproducible plants (i.e., plants that can be reproduced without seeds, such as by budding or grafting). They include such plants as certain types of roses, nuts, flowering plants, and fruit trees.
There are several things that are specifically not patentable. They are: abstract ideas and mental processes, laws of nature, natural phenomena, and mathematical algorithms.
Even if a client’s idea fits within one of the four categories of statutory subject matter, it still is not patentable if it is in its infancy. The idea must be an invention. The inventor need not have actually made the invention (reduced it to practice), but must have a complete and operative understanding of the invention. The patent application must contain a detailed written description of the invention and must describe how to make and use the invention without undue experimentation. Thus, an idea that is not fully fleshed out, even if it is patentable subject matter, is not ready to patent. The inventor must be able to describe what the invention actually is.
2. The Inventor Cannot Withhold Details of the Invention to Prevent the Public from Copying.
In addition to a detailed description of how to make and use the invention, a patent application must also include the “best mode” of carrying out the invention. The best mode is the best way of using the invention known to the inventor at the time the application is filed.
This requirement prevents the inventor from keeping the best way of using the invention a secret. A patent is a trade-off: in exchange for the Government giving the inventor the rights to exclude others from making, using, selling, or offering to sell the invention, the inventor must fully disclose the invention to the public in the patent. This is so that the public may practice the invention after the patent expires.
If an invention is easy to reverse-engineer, trade secret protection is essentially useless and patent protection is the better choice. This is because patents, unlike a trade secret, protect against reverse engineering. On the other hand, if an invention is difficult to reverse-engineer, trade secret protection may be preferable to obtaining a patent because, unlike a patent, a trade secret does not expire.
3. You Cannot Tell What a Patent Protects by Looking Only at the Text or the Drawings.
A utility patent contains several parts: a specification or disclosure, a drawing if necessary, and at least one claim. The specification is a detailed description of the invention that tells a person of ordinary skill in the art how to make and use the invention and describes the best mode of carrying out the invention. The drawings (which may include flow charts) must illustrate all essential elements of the invention. Drawings are typically necessary for inventions that fall within the subject matter categories of machines, articles of manufacture, and processes; drawings are usually not necessary for compositions of matter.
The specification and drawings describe the different versions (embodiments) of the invention or examples of the invention. They do not define what the patent owner may enforce with the patent. This is determined by the claims.
The claims must contain the patentable elements of the invention. It is the claims that are used to determine whether there is infringement. The claims must be read in light of the specification and the drawings, but the claims define what the patent protects. Sometimes the claims are broader than what is described in the specification and the drawings, so one must read and interpret the claims to know what the patent protects.
4. A Provisional Patent Application is Not a Quicker, Cheaper Way of Getting a Patent.
A provisional patent application cannot become a patent. Despite its name, a provisional patent application is not really a patent application at all because it cannot mature into a patent. Rather, a provisional patent application acts as a placeholder for a utility application – it is a mechanism for allowing an inventor to obtain an earlier filing date for a utility application.
A provisional patent application requires a specification and a drawing if necessary, and should contain at least one claim. It must satisfy the same requirements as a utility application (written description, enablement, and best mode). A provisional application is not ever examined by the PTO and no patent ever issues directly from it. An inventor has one year from the filing date of the provisional application in which to file a non-provisional utility patent application for the same invention, claiming the benefit of the filing date of the provisional application. Because a provisional application requires the same level of detail as a utility application, it is typically not much quicker or less costly than a utility application.
If a client has limited time or funds, however, filing a provisional application may be better than filing no patent application. For example, a provisional application may be advantageous if the inventor needs to disclose the invention on short notice and does not have enough time to have a utility application prepared. In that situation, the provisional application may provide the inventor with an earlier filing date than might otherwise be obtained, as long as what is later claimed in the utility application was disclosed in the provisional application.

A business’s intellectual property may be its most valuable asset. Whether it is biotechnology, trade names, business methods, or computer software, intellectual property should be protected to the greatest extent possible in order to maximize the value of the business. This article summarizes the types of intellectual property protection that are available
What Is Intellectual Property Protection?
There are four types of intellectual property protection: patent, copyright, trademark, and trade secrets.
Patents protect inventions. A patent is a grant by the United States Government to the inventor of the rights to exclude others from making, using, or selling the invention in the United States, or importing the invention into the United States. There are three kinds of patents: utility, design, and plant. A utility patent protects five classes of inventions: a process or method, a machine, an article of manufacture, a composition of matter (including chemical compositions, genes, and genetically engineered bacteria, plants, and animals), and an improvement of an invention in one of the other four classes. Subject matter that is not patentable includes pure mathematical algorithms that do not have steps, printed matter, natural compounds, and scientific principles. In order to be patentable, the invention must be useful, new (novel), and nonobvious.
A design patent protects new, original, ornamental designs for articles of manufacture. The patent protects only the appearance of the article, not any aspect of functionality.
Plant patents protect distinct, new varieties of a asexually reproducing plants (i.e. plants that can be reproduced without seeds, such as by budding or grafting), including certain types of roses, nuts, and fruit trees.
Copyrights protect original works of authorship fixed in a tangible medium. Original works of authorship include books, musical compositions, multimedia works, dramatic productions, motion pictures, and computer programs and databases. Functional works such as ideas, procedures, processes, and methods are not protectable by copyright. A copyright entitles its owner to the exclusive rights to reproduce the work, prepare derivative works, distribute copies of the work, and perform and display the work publicly.
Trademarks and service marks protect words, symbols, phrases, and logos used to indicate the source of goods or services. The strongest marks are those that are coined (made up words) or arbitrary (words that do not have any connection to the product or service). Suggestive marks, which suggest a characteristic of the product or service, are less strong than coined or arbitrary marks. Descriptive marks, which describe the product or service, are not protectable unless they have achieved secondary meaning (a strong association with the source of the product or service). Generic marks are not protectable at all because they are simply words that have become used to identify the product itself.
Trade dress protection is similar to trademark protection and protects the overall look of a product, as long as it is inherently distinctive and nonfunctional.
Trade secret law protects information such as formulas, compilations, programs, devices, or methods, which derives independent economic value from not being generally known to others and is the subject of reasonable efforts to maintain its secrecy.

Which Type of Protection Is Best?
A business may obtain all four types of intellectual property protection. For example, the product itself may be patentable, the name or brand may be a trademark, the literature or other written materials may be copyrightable, and the details of the manufacturing process for the product may be maintained as a trade secret.
In some cases, however, a decision must be made between the types of protection that will be used. One cannot obtain both patent and trade secret protection for the same thing. In order to obtain a patent, the invention must be disclosed to the public, while trade secret protection can be obtained only if the invention is kept secret. Patent and trade secret law offer different kinds of protection. A patent protects against the independent creation or reverse engineering of the device, while trade secret law does not protect against these acts. Patent and trade secret law have different requirements. An invention must be useful, novel, and nonobvious to be patentable, while there are no such requirements for trade secret protection.
In general, if both patent and trade secret protection are available, one should seek a patent if the invention is easily reverse-engineered or if it is disclosed when it is used (e.g. Amazon.com’s 1-Click method of accepting purchase orders over the Internet). If the invention is not easily reverse-engineered and not disclosed when it is used (e.g. the formula for Coca-Cola™), trade secret protection may be the better choice.
How Long Does the Protection Last?
A utility patent is valid for 20 years from the filing date of the patent application. A copyright lasts for the life of its author plus either 70 or 95 years, depending on the date of creation, unless it is a work-for-hire, which lasts for the shorter of either 95 years from the first publication or 120 years from creation. A trademark does not expire, as long as it is used. Trade secret protection lasts as long as the information is maintained as secret.
How Does One Obtain Protection?
A patent is obtained by filing, with the United States Patent and Trademark Office (“PTO”), a patent application containing claims (which set forth the scope and limits of the invention). The PTO conducts a search of the prior art, including U. S. and foreign patents and other publications, and issues a written opinion on whether the invention is patentable. The claims may be allowed or rejected. The applicant then has the opportunity to respond to the PTO and to explain why the claims should be allowed. After this process, called patent prosecution, the PTO either issues a patent or rejects the application. The process usually takes two to three years or so, depending on the type of invention and amount of prior art.
A copyright is obtained by filing an application with the United States Copyright Office. There is no examination process; it is simply a registration process.
A federal trademark is obtained by filing an application with the PTO. The PTO conducts an examination of other marks in use and determines whether there are similar marks and whether a likelihood of confusion could occur. If the PTO approves the mark, it is then registered. There is also protection for trademarks available under state law.
Trade secrets are governed by state law, in particular the Uniform Trade Secrets Act, which most states, including California, have adopted. There is no registration or examination procedure; a trade secret exists if the requirements set forth above are met.

What Advice Should a Client Be Given?
Clients should be advised to identify their intellectual property. This can be done through a formal audit by an intellectual property lawyer or informally by the company’s management. Once the intellectual property has been identified, the client should verify that it owns the intellectual property and, if not, take steps to secure ownership from employees or independent contractors. Then, an analysis should be made of the value of the intellectual property and a determination made of which items need to be protected and how they should be protected. If it is not economically feasible to protect all of the company’s intellectual property, management should prioritize the intellectual property and begin the effort necessary to obtain protection.

According to a complaint filed in the United States District Court for the Northern District of California by California law firm LegalForce RAPC Worldwide, LegalZoom engages in the unauthorized practice of law when its non-attorneys instruct customers on how to register trademarks. The lawsuit names various other defendants, including the Patent and Trademark Office and several bar associations, as alleged conspirators in LegalZoom’s attempt to restrain trade.

According to the Complaint, LegalZoom has helped filed over 250,000 trademark applications for its customers. Accordingly, LegalForce took it upon itself to register two trademarks through LegalZoom’s website. During the process, LegalZoom’s “trademark document specialists” assisted LegalForce in preparing the application, including selecting the international classification and preparing the goods and services description. According to the Complaint, LegalZoom also advised LegalForce about how potentially conflicting marks could reduce the chances of obtaining federal registration, which, according to LegalForce, constituted legal advice provided by non-attorneys.

Compounding the problem, the advice given by the trademark specialists was allegedly incorrect. Specifically, the specialists allegedly advised LegalForce that only similar marks in the same international class could prevent registration despite the fact that marks outside of the same international class can, in fact, prevent registration.

In addition to alleging that LegalZoom engages in the unauthorized practice of law, LegalForce alleges that LegalZoom is unfairly competing because it is not required to run conflict checks, maintain malpractice insurance, or employ U.S. licensed attorneys “to review and sign off on trademark matters filed before the USPTO like similarly situated law firms are required to do. Accordingly, LegalZoom has allegedly gained an unfair competitive advantage because it does not have to pay to follow federal and state laws regarding the practice of law. And although “LegalZoom represents on its website that it does not practice law, this representation is false and/or misleading,” according to the complaint.

LegalForce also claims that LegalZoom is using Google and related search engines to compete with law firms, and spends more than $100,000 each month to do so. According to LegalForce, LegalZoom is outspending its competitors for certain keywords used by consumers, such as “trademark lawyer,” further exacerbating the unfair competition. Perhaps more concerning, LegalForce alleges that LegalZoom has used search terms such as LegalForce and Trademarkia to misdirect customers to its own ads, despite those terms being directly related to LegalForce.

According to LegalForce, LegalZoom’s conduct demonstrates an “intentional, willful and malicious intent to deceive consumers and unfairly compete with plaintiffs.” It will be interesting to see the outcome of this litigation. On the one hand, competition is competition, but on the other hand, unlicensed individuals cannot be permitted to practice law, and therefore should not be allowed to compete.

“Cause the players gonna play, play, play, play, play

And the haters gonna hate, hate, hate, hate, hate
Baby I’m just gonna shake, shake, shake, shake, shake

Shake it off / Shake it off

Heartbreakers gonna break, break, break, break, break

And the fakers gonna fake, fake, fake, fake, fake

Baby I’m just gonna shake, shake, shake, shake, shake

Shake it off / Shake it off.”

-Taylor Swift

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 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 are substantially similar to protectable elements of Playas Gon’ Play. All federal courts falling under the 9th Circuit employ the extrinsic vs intrinsic test in determining likelihood of confusion. The “extrinsic test” is an objective comparison of specific expressive elements. The “intrinsic test” is a subjective comparison that focuses on whether the ordinary, reasonable audience would find the works substantially similar in the total concept and feel of the works. The 9th Circuit has not established a set of factors to consider when analyzing musical compositions under the extrinsic test. So long as the plaintiff can demonstrate that one or more musical elements such as the rhythm, pitch, cadence, melody, tempo, harmony or lyrics are similar to protected elements of the copyrighted work and that such similarity was “substantial”, the extrinsic test is satisfied.

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.”

Swift and the other defendants argued that the phrase “Playas, they gonna play/And haters, they gonna hate” is not entitled to copyright protection because it is merely a short phrase and short phrases are not afforded protection under the Copyright Act. However, on occasion courts have recognized that there may be exceptions to the general rule that short phrases are not protectable where a short phrase is sufficiently creative. For example, in the 1979 Federal district case, Brilliant v. W.B. Productions, Inc., in finding the two phrases, “I may not be totally perfect, but parts of me are excellent” and “I have abandoned my search for truth and am now looking for a good fantasy” protectable under copyright, the court noted these phrases were concise, clever and culturally relevant, thereby satisfying the “creative” component of originality. Hall and Butler argued that their short phrase – “Playas, they gonna play/And haters, they gonna hate” – is sufficiently creative to warrant protection.

In an effort to show that the phrase in question was not sufficiently creative to warrant protection under the Copyright Act, Swift introduced evidence showing the use of the words “Player” and “Hater” in numerous songs and other creative works. This evidence, the court said, established that in 2001, American culture “was heavily steeped in the concept of players, haters and player haters.” As for Hall and Butler’s argument that they “originated the linguistic combination of [players playing and haters hating]” the court said that the concept of people behaving in accordance with their essential nature is not at all creative.
The court found the allegedly infringed phrases to be “too brief, unoriginal and uncreative to warrant protection under the Copyright Act” and provided Hall and Butler leave to amend their complaint “just in case there ar

The U.S. Supreme Court’s May 22, 2017 ruling in TC Heartland v. Kraft Foods held that personal jurisdiction alone does not convey venue for patent cases under the patent venue statute. Previously, the Court of Appeals for the Federal Circuit and the United States district courts had interpreted the patent venue statute, 28 U.S.C. §1400(b), to allow plaintiffs to bring a patent infringement case against a domestic corporation in any district court where there is personal jurisdiction over that corporate defendant. Specifically, the patent venue statute provides that “[a]ny civil action for patent infringement may be brought in either 1) the judicial district where the defendant resides” or 2) “where the defendant has committed acts of infringement and has a regular and established place of business.” But, TC Heartland, held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute, and not just anywhere it is subject to personal jurisdiction as had previously been the case.

However, TC Heartland did not address the second prong of § 1400(b), which makes venue proper in any judicial district where: (1) the defendant has a regular and established place of business, and (2) has committed acts of infringement. Post TC Heartland, a number of district courts and the Federal Circuit have weighed in on what constitutes a regular and established place of business under the second prong of § 1400(b). But, few courts have considered what is required to satisfy the second requirement, namely committing acts of infringement sufficient to establish venue.

Thus, it is notable that the U.S. District Court for the Eastern District of Texas, in Snyders Heart Valve LLC v. St. Jude Medical SC, Inc. et al, 4-16-cv-00812 (TXED March 7, 2018, Order), recently had to determine whether, under the second prong of § 1400(b), sufficient infringement occurred in the District to establish venue. The specific issue in the case turned on whether all sales of the accused products in the District were subject to the safe harbor provided in 35 USC § 271(e)(1). The safe harbor provided by § 271(e)(1) extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the Federal Food, Drug, and Cosmetic Act of 1938. In other words, if all of Defendants’ challenged activities in the District are covered by the safe harbor, there can be no acts of infringement in the District, and venue is thus improper.

The Plaintiff argued that the safe harbor under § 271(e)(1) is irrelevant for purposes of determining whether venue is proper, and that its allegations of infringing activity in the District—as required under §1400(b)—are sufficient. Plaintiff also argued that because the clinical trial safe harbor is all or nothing, Defendants’ commercial activity outside this District effectively revokes the safe harbor protection for activities inside the District.

The District Court first considered Plaintiff’s argument that the safe harbor defense is irrelevant to venue under § 1400(b). Plaintiff argued its mere allegation of infringing acts in the District make venue proper under § 1400(b). The Court rejected this argument, reasoning both the venue statute and the safe harbor statute speak of “acts of infringement,” not acts of “alleged” infringement. The Court continued, “if Plaintiff were right, any venue limitation could be overcome by simply making infringement accusations in the forum of the plaintiff’s choice, regardless of the defendant’s actual activities in that particular forum. This is contrary to law. Once the defendant comes forward with evidence that venue is improper, the plaintiff cannot rely on mere venue allegations in its complaint to maintain its chosen venue.” The Court then found the Plaintiff has not alleged any facts showing activities in this District other than those statutorily exempted from infringement by safe harbor under § 271(e)(1).

Next, the Plaintiff argued the safe harbor defense is “all or nothing” and to the extent Defendants make and sell accused products elsewhere in the United States for commercial purposes, such uses are not “solely for uses reasonably related” to seeking FDA approval and Defendants are not entitled to any exemption at all under § 271(e)(1). The Court also rejected this argument, reasoning the Federal Circuit has made clear that for purposes of the safe harbor, each accused activity must be analyzed separately. The Court noted a two-part test under the safe-harbor analysis: “(1) whether the activity at issue is a potentially infringing one; and (2) whether the exemption applies to that activity.” Therefore, some of the accused products could fall within the safe harbor, while some of could not, even though the accused products were all of the same group. Thus, the Court found all acts of infringement in the Eastern District of Texas are solely clinical, and therefore, the § 271(e)(1) safe harbor applies despite purported nonexempt activity in Minnesota. The Court concluded that since there are no material factual questions on challenged activities remaining, summary judgment on the safe harbor issue is proper, and this renders venue in the District deficient.

Although this case concerned a specific statutory exemption to infringement, namely the safe harbor under § 271(e)(1), its reasoning could have broader implications in the on-going evolution of venue in patent litigation cases post TC Heartland. In addition to challenging whether it has a regular and established place of business in the District, defendants may also begin challenging a plaintiff’s bare-bones allegations that the defendant has committed acts of infringement in the District. And, District Courts may begin to require plaintiffs to show actual acts of infringement in the District by Defendant in order to maintain venue.

There is some confusion about what constitutes an “on-sale bar” in patent law. The on-sale bar, set forth in 35 U.S.C §102, prohibits a patent if the invention sought to be patented was offered for sale or sold more than one year before the patent application was filed. In other words, there is a one-year grace period after an offer for sale or sale in which a patent application may be filed. The earliest date of an offer of sale or sale is the critical date, often referred to as the “statutory bar date.” The reason for the on-sale bar is that once an invention is offered for sale, it is in the public domain, and no one should be able to patent something in the public domain.

If a patent issues and it is later found that there was an offer for sale or sale of the invention more than one year before the patent application was filed, the patent can be invalidated. The on-sale bar can be raised as a defense in patent infringement litigation to challenge the validity of the patent and it can be raised in a separate challenge to a patent’s validity.

Both the 2013 America Invents ACT (AIA) and the pre-AIA law include the on-sale bar in §102. Under pre-AIA §102(b), a patent is barred if the invention was on sale in the United States more than one year before the filing date of the patent application. The statutory bar applies regardless of whether the sale was public or secret. Under AIA §102(a)(1), the language of the statutory bar is different; a patent is barred if the invention was on-sale “or otherwise available to the public…” more than one year before the filing date of the patent application. Thus, the AIA broadened the scope of the on-sale bar to cover offers for sale and sales anywhere in the world, rather than just in the United States. However, the phrase “or otherwise available to the public…” created an ambiguity by implying that the on-sale bar only applies to public sales.

In Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. (Fed. Cir. 2017), the Federal Circuit Court of Appeals considered the on-sale bar, but did not resolve the ambiguity. Helsinn owned four patents covering a drug used to prevent nausea in patients undergoing chemotherapy. In 2001, Helsinn entered into a supply and purchase agreement with a pharmaceutical company, MGI. The parties announced the agreement in a press release and MGI filed a redacted copy of the agreement (excluding the price and the dosage terms) with the SEC. At the time the agreement was entered into, the drug was undergoing clinical trials and had not yet been approved by the FDA. In 2003, Helsinn filed a provisional patent application for the drug. In 2005 and 2006, Helsinn filed three utility applications claiming priority to the provisional, and, in 2013 filed one utility application claiming priority to the provisional. In 2011, Teva, a competitor of Helsinn, filed a new drug application in the FDA seeking approval of a generic version of Helsinn’s drug.

Helsinn sued Teva for patent infringement. Teva argued that all four patents were invalid based on the on-sale bar because Helsinn had entered into the supply and purchase agreement with MGI in 2001, over one year before the provisional application’s filing date in 2003. The trail court ruled in favor of Helsinn, holding that the on-sale bar did not apply. Teva appealed to the Federal Circuit.

The Federal Circuit explained that there is a two-part test for whether the on-sale bar applies. First, there must be a commercial offer for sale or a sale of the invention sought to be patented. Second, the invention must be “ready for patenting.” Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998).

The court analyzed whether the Pfaff on-sale bar test was met. Three of the patents were governed by pre-AIA §102(b); one patent was governed by AIA §102(a)(1).

The court addressed whether the first part of the Pfaff test was met: whether there was a commercial offer for sale or sale more than one year before the patent application was filed. As for the three patents governed by pre-AIA §102(b), the court found that there was an offer for sale to MGI and that Helsinn had also marketed its drug to others. The court rejected Helsinn’s argument that there was no sale because FDA approval was a condition precedent to the actual sale, and there was no FDA approval at the time of the agreement with MGI. The court held that the need for regulatory approval or the existence of other conditions precedent do not mean that there is no contract for sale.

As to the one patent governed by the AIA, the court acknowledged that in enacting AIA §102(a)(1), members of Congress stated that the new §102 on-sale bar would apply only to sales in which the invention was made public, not to confidential sales as does pre-AIA §102. However, the court found that MGI’s filing of the supply and purchase agreement with the SEC was a public sale. The court held that it was irrelevant that certain specific terms of the agreement were not publicly disclosed.

The court did not address the key question of whether a confidential offer for sale or sale is an on-sale bar. Because most of the terms of Helsinn’s supply and purchase agreement were publicly disclosed, the court did not have to reach that question.

Next, the court addressed the second requirement of the Pfaff test: whether the invention was ready for patenting more than one year before the patent application was filed. This requirement is met if the invention has been reduced to practice (i.e., actually made and shown to work for its intended purpose) or if the invention has been described in writing in such detail that a person skilled in the art could make the invention.

Helsinn argued that its drug was not reduced to practice more than one year before it filed its patent application because it had not yet obtained FDA approval. The court stated the standard to obtain FDA approval is higher than the standard to show that a drug works for its intended purpose under patent law. The fact that more testing is required for an invention does not mean that the invention has not been reduced to practice. The court held that Helsinn knew that its drug worked for its intended purpose and therefore had reduced its invention to practice more than one year before it filed its patent application.

Because the Pfaff test was met for all four patents, the court held that the four patents were invalid based on the on-sale bar, reversing the district court.

After this decision, Helsinn filed a petition with the Federal Circuit seeking an en banc rehearing of the case. The Federal Circuit denied Helsinn’s petition. Helsinn has just filed a petition to the United States Supreme Court for writ of certiorari, asking the Court to answer the question of whether confidential sales fall within the on-sale bar. If the Court grants the petition, it will then have to decide whether Congressional intent was clear enough to change the approach of longstanding patent law.

In Exmark Manufacturing Company v. Briggs & Stratton Power Products, 2018 U.S. App. LEXIS 783 (Fed. Cir. 2018), the Federal Court of Appeals addressed patent infringement damages based on a reasonable royalty. Exmark Manufacturing Company owned a patent for a lawn mower with an improved flow control baffle (the part that controls the flow of air and cut grass underneath the mower). Exmark sued Briggs & Stratton Power Products for patent infringement. The jury returned a verdict of infringement against Briggs and found the infringement willful. The jury awarded Exmark $24 million in damages. The district court doubled the amount of damages for willfulness.

Briggs appealled to the Federal Circuit on multiple grounds, including the district court’s denial of Briggs’ motion for a new trial on damages.

Damages for patent infringement can be determined in several ways. At a minimum, a successful plaintiff is entitled to a reasonable royalty for the defendant’s sale of the invention. The royalty is calculated by multiplying a royalty rate by the royalty base (the defendant’s sales of the infringing invention). However, if the patent only covers a component of the product that the defendant has sold, the plaintiff must apportion damages between the patented component and the whole product. The plaintiff is only entitled to a reasonable royalty on the patented component, not on the whole product.

On appeal, Briggs contended that Exmark’s expert should have determined damages by apportioning the royalty base, not the royalty rate. The appellate court rejected Briggs’ argument and held that damages can be apportioned by apportioning the royalty rate, apportioning the royalty base, or a combination of the two.
The court stated, at *29:

“So long as Exmark adequately and reliably apportions between the improved in conventional features of the accused mower, using the accused mower as a royalty base and apportioning through the royalty rate is an acceptable methodology….The essential requirement is that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.”

The court explained that apportioning damages using the sales revenue from the lawn mower was proper for two reasons. First, Exmark’s patent included claims to the mower as a whole, not just the component baffle. Second, parties who negotiate licenses often use sales revenue for the whole product as the royalty base for a patented component. Id. at *29-31.

Briggs also argued on appeal that Exmark’s damage number was not admissible because its expert did not connect the royalty rate to the facts of the case. The Federal Circuit agreed with Briggs and held the district court’s denial of Briggs’ motion for a new trial on damages was an abuse of discretion. Id. at *31.

The court found that Exmark’s expert’s use of 5% as the royalty rate was not connected to the evidence in the case. Under Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), several specific factors may be considered in determining damages for patent infringement based on a reasonable royalty. These factors are referred to as the “Georgia-Pacific factors.” Exmark’s expert had analyzed certain of the Georgia-Pacific factors (including the advantages of the patented baffle to customers) and had determined that, in a hypothetical licensing negotiation, the parties would have agreed to a 5% royalty rate on the sales of the lawn mower. The expert did not tie the Georgia-Pacific factors to the 5% rate. Because the court held that Exmark’s expert had not connected the 5% rate to the Georgia-Pacific factors or the facts of the case, the expert’s opinion was inadmissible. The court remanded the case for a new trial on damages.

Some commentators believe that the Exmark court’s decision may increase plaintiffs’ ability to argue that a reasonable royalty should be based on the sales revenue from the whole product, not just the patented component. The court clearly held that apportioning damages between the whole product and the patented component can be accomplished by using the sales revenue for the whole product and apportioning the royalty rate. However, because the court rejected Exmark’s 5% royalty rate as not connected to the facts of the case, the court’s decision is also a warning that if a plaintiff chooses to use the sales revenue from the whole product and apportion with the royalty rate, they must clearly tie the royalty rate to the facts of the case.

Given this decision, it is likely that in the future, plaintiffs will use the sales revenue from the whole product, as it will be a larger amount than the sales revenue from the patented component, and apportion with the royalty rate.

The Court of Appeals for the Federal Circuit just highlighted another approach plaintiffs can use to overcome early challenges to the validity of patent claims under 35 U.S.C. §101.   What is that approach?  It is a classic one:  show there is a genuine issue of fact.  That approach saved a subset of claims from summary judgment in Berkheimer v. HP.

Berkheimer sued HP for infringement of its patent “relat[ing] to digitally processing and archiving files in a digital asset management system.”  The system parses files into objects and “tags objects to create relationships between them.”  “The objects are analyzed and compared … to archived objects” to find variations.  “The system then eliminates redundant storage of common text and graphical elements” improving efficiency and reducing storage costs.

In an Alice challenge, HP moved for summary judgment that certain claims are not patentable under 35 U.S.C. §101.  In Alice v. CLS Bank, the Supreme Court recognized that “laws of nature, natural phenomena, and abstract ideas” are not patent-eligible subject matter under §101. To determine whether claims are patent eligible the Supreme Court set forth a two-part test in Mayo v. Prometheus as further explained in Alice.  This test consists of the following steps:

Step 1:  The court determines whether the claims are directed to an abstract idea.

Step 2:  If the claims are directed to an abstract idea, then the court determines whether the claims include elements showing an inventive concept that transforms the idea into a patent-eligible invention.  Step 2 is satisfied when the claim limitations “involve more than performance of ‘well-understood, routine, [and] conventional activities previously known to the industry.’”

“[W[hether a claim recites patent eligible subject matter is a question of law which may contain underlying facts.”  Any fact, however, “that is pertinent to the invalidity conclusion must be proven by clear and convincing evidence.”

The district court granted summary judgment that a number of claims of Berkheimer’s patent were invalid under §101.  On appeal, the Federal Court found the patent is directed to an abstract idea (Step 1) and then focused on Step 2 of the two-part test.  While the patent-at-issue relates to a technique for archiving files, Berkheimer argued that “portions of the specification referring to reducing redundancy and enabling one-to-many editing contradict the district court’s finding that the claims describe well-understood, routine, and conventional activities.” Berkheimer thus argued there was a fact question to which HP had offered no evidence.  The Federal Circuit agreed the validity of some of the claims turned on whether they cover “well-understood, routine and conventional” technology.  “Whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination.” Therefore, the Court found there was a genuine issue of fact as to whether the disclosed system archives files in an inventive manner that transforms the abstract idea into a patent-eligible invention.

Given the genuine issue of material fact, the Federal Circuit found that it was inappropriate to invalidate the claims at the summary judgment stage.  Note the Federal Circuit did not find the claims are directed to patent-eligible subject matter, but rather the district court judge should not have granted summary judgment given to the factual issue.

Therefore, a plaintiff’s patent can survive an Alice challenge in a motion to dismiss or motion for  summary judgment if the plaintiff can show a genuine issue of fact as to whether the invention is well-understood, routine, and conventional to a skilled artisan at the time of the patent.  Importantly, the Federal Circuit indicated not all cases involving Alice implicate questions of fact stating “not every §101 determination contains genuine disputes over the underlying facts…”  Thus “[p]atent eligibility has in many cases been resolved on motions to dismiss or summary judgment.”

In light of Berkheimer, it will be interesting to see whether district courts are now more hesitant to invalidate claims as patent-ineligible in early stages of litigation.