Intellectual Property

If voters in California  approve Proposition 64 which would legalize the possession and use of marijuana for recreational purposes, it is without question that the sunshine state will see a huge increase in the number of businesses within the cannabis industry. According to a November 7, 2016 Forbes article, the passage of Proposition 64 could add $8.38 billion in annual sales to an already robust medical market worth an estimated $2.83 billion.  Despite what happens at the voting polls on November 8, marijuana is still illegal under federal law and this makes branding marijuana strains,  paraphernalia or services related primarily to marijuana tricky.

One example of this is the recent problems a cannabis entrepreneur faced in seeking to register two trademarks.  JJ206, LLC sought to register the marks POWERED BY JUJU and JUJU JOINTS with the USPTO, for “smokeless cannabis vaporizing apparatus, namely, oral vaporizers for smoking purposes; vaporizing cannabis delivery device, namely, oral vaporizers for smoking purposes.” The Examining Attorney refused registration of the marks based upon lack of lawful use of the mark in commerce.

Under Section 1 of the Lanham Act (15 USC 1051),  the registration of a trademark requires use in commerce.  Section 45 of the Lanham Act (15 USC 1127) defines “commerce” as all commerce which may lawfully be regulated by Congress.  If the goods or services covered by a mark are unlawful, actual lawful use in commerce is not possible, and a refusal under Trademark Act Sections 1 and 45 will be made. But what about the situation where the goods or services are lawful under state law and illegal under federal law.

While vaporizing devices for cannabis may be legal in certain states, they are illegal under the federal Controlled Substances Act (CSA).  The CSA makes it unlawful to sell, offer for sale, or use any facility of interstate commerce to transport drug paraphernalia, defined as “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under [the CSA].”  Where goods or services in a trademark application are identified as primarily intended or designed for use in ingesting, inhaling, or otherwise introducing cannabis or marijuana into the human body, it constitutes unlawful drug paraphernalia under the CSA.

JJ206’s argument that it only intends to do business in states which allow for the sale and distribution of marijuana was not persuasive.  The TTAB noted that whether a product or service is lawful within a state is irrelevant to the question of federal registration when it is unlawful under federal law.  Because “commerce” is defined in the Trademark Act as commerce lawfully regulated by Congress, that which is illegal under federal law cannot be lawful “commerce” under the Trademark Act.  As such, any application to federally register any goods or services that are illegal under federal law will be refused, regardless if it is legal under state law.

So what’s a California cannabis entrepreneur to do?  One could rely on common law trademark rights.  Common law rights arise from actual use of a mark in commerce and no registration is required to establish common law rights.  However, enforcement can present the challenge of establishing proof of the date of first use.  Additionally, common law trademark rights are limited to the actual geographic scope of use established through evidence.

State trademark registration would be an improvement over common law rights.  In California registration is prima facie evidence of ownership of a valid mark and the exclusive right to use the mark for the covered goods or services within California.  Granted seeking registration in California and the other states in which marijuana is legal may not be as convenient or cost effective as a single federal registration and you can’t file based on intent to use, but it is still preferred over relying on common law rights.

Another strategy would be to seek registration for an ancillary product or service that does not violate the CSA.  The application could be filed based on either use in commerce or intent to use. If the mark is registered, the owner would be entitled to argue that the subsequent use by a third party would cause likelihood of confusion and infringe its trademark rights.

The America Invents Act provided several procedures for challenging the validity of patent claims, including inter partes review (“IPR”), post-grant review (“PGR”) and covered business method patent challenges (“CBM”).  An IPR, PGR, or CBM challenge begins with a petition filed by the challenging party that identifies each claim challenged and the grounds for each challenge.   Based on the petition and the patent owner’s optional preliminary response, the Patent Trial and Appeal Board (“PTAB”) determines whether to institute review of one or more of the challenged patent claims.  Under the America Invents Act, this determination whether to institute review is final and nonappealable, but the PTAB’s final decision on patentability of the claims is appealable.  Recently, decisions by the PTAB have raised questions as to where the line is between appealable and nonappealable decisions.

In its decision to institute review, the PTAB can choose to review all or some of the patent claims challenged in a petition and on all or some of the grounds of unpatentability asserted for each claim.  The statute states that those decisions are not appealable.  But, if the PTAB chooses to review claims on grounds not specifically raised in a petition, are those decisions appealable?  The Court of Appeals for the Federal Circuit has determined it lacks jurisdiction to review such cases because they are part of the determination to institute review and thus are not appealable.  Earlier this year, in Cuozzo Speed Technologies, LLC v. Lee, the U.S. Supreme Court also weighed in on this issue holding that the America Invents Act precludes appeal of decisions by the PTAB to institute review of challenged patent claims.  Arguably, however, the Court left the door open for potential exceptions, such as in cases that raise constitutional issues of due process or where the PTAB has exceeded its statutory authority.

In Cuozzo, the patent related to a speedometer that will show a driver when his or her car is exceeding the speed limit.  In 2012, Garmin filed a petition seeking inter partes review of the validity of the Cuozzo patent.  Garmin’s petition included an argument that claim 17 was invalid as obvious in light of three prior art patents, and the PTAB instituted review of claim 17.  While noting that Garmin had not expressly challenged claims 10 and 14 as obvious in light of these references, the PTAB also instituted review of those claims on the same obviousness grounds.  The PTAB explained that because claim 17 depends on claim 14 which depends on claim 10, Garmin had implicitly challenged claims 10 and 14.  Ultimately, the PTAB invalidated all three claims as obvious.

The owner of the Cuozzo patent appealed to the Federal Circuit arguing that the PTAB erred in instituting review of the two claims not expressly identified in the petition because the relevant statute requires that petitions must be pled with particularity.  But the Federal Circuit held that 35 U.S.C. §314(d) rendered the decision to institute inter partes review nonappealable.  The U.S. Supreme Court agreed holding that §314(d) precluded judicial review because it says that the “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable.”  Further, the Court stated that the logical linking of claims 10 and 14 to claim 17 precluded the need for the petition to “repeat the same argument expressly when it is so obviously implied.”  Therefore, the Court found that the “No Appeal” provision’s language must at least forbid an appeal in such circumstances.

The Supreme Court, however, emphasized that its interpretation only  applies to appeals where “the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.”  The Court went on to explain that it was not deciding the precise effect of §314(d) on appeals that “implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach … beyond ‘this section.’”  The Court also noted that it did “not categorically preclude review of a final decision where a petition fails to give ‘sufficient notice’ such that there is a due process problem with the entire proceeding, nor does the interpretation enable the agency to act outside its statutory limits ….”

When does a petition fail to give sufficient notice thus causing a due process problem? What constitutes the PTAB acting outside its statutory limits? Those are the questions SightSound Technologies is asking the U.S. Supreme Court to address and clarify in SightSound’s recently-filed petition for a writ of certiorari.

In 2011, SightSound sued Apple for allegedly infringing three SightSound patents related to the electronic sale and distribution of digital audio and video signals.  Apple challenged claims of two of the patents in petitions for CBM review asserting that the challenged claims were anticipated under 35 U.S.C. §102 by a CompuSonics system.  Apple submitted numerous references and a declaration in support of its §102 argument.  Apple did not challenge the claims as obvious under 35 U.S.C. §103.  The PTAB, however, decided to institute review of the claims under both §102 and §103 explaining that while Apple’s petitions did not assert obviousness explicitly, the petitions nevertheless supported such a ground based on the detailed explanation of the various CompuSonics references.

SightSound objected that the PTAB lacked authority to raise a ground of unpatentability (obviousness) that Apple had never asserted.  The PTAB granted SightSound additional time for argument and authorized it to file sur-replies and new declarations on the issue of obviousness “to ensure that Patent Owner has a full and fair opportunity to be heard on the issue of obviousness.”  Ultimately, the PTAB rejected Apple’s anticipation argument but instead invalidated the challenged claims as obvious under §103.

SightSound appealed to the Federal Circuit, which held that decisions relating to the institution of CBM review are not appealable under 35 USC §324(e), which mirrors the language in §314(d) for inter partes review.  In its petition to the U.S. Supreme Court, citing Cuozzo, SightSound argues that the PTAB’s decision to institute review based on obviousness is appealable because the PTAB exceeded the its statutory authority and deprived SightSound of due process protection.

First, SightSound argues the PTAB lacked statutory authority to conduct an obviousness review because Apple did not challenge the claims as obvious in its petition.  Second, SightSound explains that because a patent is a vested property right, it confers due process protection and patent owners are entitled to “notice and an opportunity to be heard by a disinterested decisionmaker” when the validity of their patent claims is challenged.  SightSound argues that it was not provided this notice because the PTAB did not articulate the specific combinations of the twelve “CompuSonics publications” or the motivation for combining those references until the PTAB’s final written decision.  SightSound alleges this “forced [SightSound] to shoot in the dark” as to which combination of references formed the basis for the PTAB’s obviousness arguments and prejudiced its ability to locate and submit contrary evidence.  Thus, according to SightSound, it was deprived of its due process protection because it was never given sufficient notice of the specific obviousness arguments so that it could fairly defend the validity of its patent claims.

We will have to wait to see whether the Supreme Court weighs in on whether the PTAB has exceeded its authority or deprived a patent owner of due process rights in granting review of patent claims on grounds not raised in a challenger’s petition.  For now, patent owners should assume that the PTAB may take a broad interpretation of a challenger’s petition when determining the scope of review.

To read more Intellectual Property blogs, visit our IP Law Blog at http://www.theiplawblog.com/

The Communications Decency Act (“CDA”) provides broad immunity for “providers of interactive computer services.”  In essence, if an internet service provider falls within certain parameters, it is entitled to immunity against certain claims of liability brought under state law.  Last month, the Ninth Circuit again considered the breadth of such immunity in the case, Kimzey v. Yelp!.

As many readers may know, Yelp is a website that allows customers to “rate” their experience with a particular store, restaurant or service provider.  The reviewing customer can also leave a detailed review in connection with their 1-5 star rating.  Yelp then aggregates all customer reviews into a single rating and this information may be found not only on Yelp’s website, but also on other search engine websites like Google.

The plaintiff, Douglas Kimzey, operated a locksmith shop in the Washington area.  The Ninth Circuit’s opinion relates that he was subject to a one-star review by a purported customer, “Sarah K,”  whose review began, “THIS WAS BY FAR THE WORST EXPERIENCE I HAVE EVER ENCOUNTERED WITH A LOCKSMITH.”  It did not get much better from there.

Rather than suing the customer for posting the offending review, Kimzey sued Yelp instead.  In an attempt to get around the immunity provisions set forth in the CDA, Kimzey alleged two novel theories: (1) that Yelp, by creating its review and star-rating system in effect “created the content” to subject it to liability;  and (2) by allegedly “republishing” the negative review through advertisements and/or search engines, Yelp was liable as the publisher of the negative review.  The District Court granted Yelp’s motion to dismiss on the ground that it was immune from such liability under the CDA.

The Ninth Circuit began by reviewing the immunity provision in the CDA, Section 230(c)(1), which provides protection from liability only to “(1) a provider or user of an interactive computer service; (2) whom a plaintiff seeks to treat under a state law cause of action as a publisher or speaker; (3) of information provided by another information content provider.”  The Ninth Circuit said that it was easy to conclude that Yelp was a provider of “an interactive computer service” given that such term should be interpreted “expansively” under the CDA.  In fact, the Ninth Circuit recognized that in today’s cyberworld, “the most common interactive computer services are websites,” such as Yelp.  The Ninth Circuit continued by finding that it was clear that Kimzey’s claims against Yelp were “premised on Yelp’s publication of Sarah K’s statements and start rating.”

In turning to the gist of Kimzey’s complaint, the Ninth Circuit reasoned that, “a careful reading of the complaint reveals that Kimzey never specifically alleged that Yelp authorized or created the content of the statements posted under the aegis of Sarah K, but rather that Yelp adopted them from another website and transformed them into its own stylized promotions on Yelp and Google.”  The Ninth Circuit found, without any difficulty, that such “threadbare allegations of fabrication of statements are implausible on their face and are insufficient to avoid immunity under the CDA.”  In essence, the Ninth Circuit found that such artful pleading as that engaged in by Kimzey would allow other plaintiffs to avoid the broad immunity protections provided by the CDA.

The Ninth Circuit reasoned that Congress in enabling immunity from liability wanted to protect the purpose of the internet which was to further the “free exchange of information and ideas.” Further, allowing a plaintiff to plead around the immunity statute would eviscerate Congress’ purpose in furthering this purpose.

Turning to the next part of Kimzey’s complaint, the Ninth Circuit noted that Kimzey alleged that Yelp designed and created the signature star-rating system and thereby served as the “author” of the one-star rating given by Sarah K.  He also alleged that Yelp had “republished” the allegedly offending statements on Google by way of advertisements. The Ninth Circuit recognized that there was no immunity under the CDA if the service provider “created” or “developed” the offending materials.  However, the service provider had to make “a material contribution to the creation of development of content” in order to lose immunity under the CDA.

The Ninth Circuit concluded that neither prong was satisfied by Kimzey.  The court ruled that “the rating system does absolutely nothing to enhance the defamatory sting of the message beyond the words offered by the user.”  Further, the Ninth Circuit had previously found in Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9^th Cir. 2003), that the mere collection of responses to a particular question “does not transform [the service provider] into a developer of the underlying misinformation.”  Likewise, a California appellate court had previously rejected a claim based on eBay’s rating system and found that the system was “simply a representation of the amount of such positive information received by other users of eBay’s website.”  Gentry v. eBay, Inc., 121 Cal. Rptr.2d 703 (2002).

The Ninth Circuit, in relying on this precedence, reasoned that it was difficult “to see how Yelp’s rating system, which is based on rating inputs from third parties in which reduces this information into a single aggregate metric, is anything other than user generated data.” Furthermore, the Ninth Circuit rejected Kimzey’s argument that Yelp’s use of the user-generated information in advertisements subjected it to liability as a “republisher.”  The Ninth Circuit concluded that there was “[n]othing in the text of the CDA [that] indicated that immunity turns on how many times an interactive computer service publishes `information provided by another information content provider.’”   The Ninth Circuit ruled that “just as Yelp is immune from liability under the CDA for posting user generated content on its own website, Yelp is not liable for disseminating the same content in essentially the same format to a search engine as this action does not change the origin of the third party content.”  The Ninth Circuit affirmed the lower court’s dismissal of Kimzey’s complaint against Yelp.

The Kimzey case is a reminder of the broad protections provided to interactive computer service providers under the CDA when faced with state law lawsuits regarding the publication of information provided by a user.  Defendants in such cases should explore the possibility of immunity under the CDA in order to cut short such lawsuits by having them dismissed early, often prior to the expense of discovery.

It sounds like a silly question, doesn’t it?  After all, self-driving cars represent innovative progress in technology, and patents are intended “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  U.S. Constitution, Article I, Section 8, Clause 8.

But not so fast — courts have found that many software-based inventions for automating known techniques are patent ineligible under 35 U.S.C. §101 (“§101”).  The reasoning is that these inventions merely represent abstract ideas, which are not patentable.  In fact, even when software was combined with standard hardware, such as computers, displays, cameras, and sensors, many courts have found that the inventions did not involve patent-eligible subject matter.  While this article does not focus on any particular patent, one could argue that certain aspects of self-driving cars are just attempts to automate, largely with the use of software and well-known hardware, what humans have been doing for over 100 years — driving cars while trying to avoid accidents.  Does that mean such patents would be rejected by the United States Patent and Trademark Office (“USPTO”) or invalidated by a court?

To analyze this issue in more detail, first we should consider the technology that many automobile and technology companies, such as Tesla, Volvo, Toyota, and Google, are developing to enable commercially viable, self-driving vehicles.  In fact, some of this technology is already on the road, and numerous patents have already been issued in the field.  The technology is based on the use of various combinations of sensors, cameras, computers, and software.  For example, radar sensors are used to detect the position of nearby vehicles.  Lidar, which uses lasers and sensors, can be used to measure the distance to objects, build a 3D map, and detect hazards, such as the edges of roads and lane markings.  Video cameras are used to detect obstacles such as pedestrians and other vehicles, as well as traffic lights and road signs.  Ultrasonic sensors in the wheels can be used to monitor car movements and detect curbs and other vehicles, such as for use in automatic parking.  But the heart of the system, which most would say is the most complex aspect, is the software that analyzes the data from all of the sensors and controls the car’s systems (e.g., steering, braking, and acceleration) to maneuver it safely.

What have courts said about the patentability of such software-based inventions?  In Alice Corp. v. CLS Bank, the U.S. Supreme Court looked at the patentability of certain claims under §101 by applying the two-step test it had set forth in Mayo v. Prometheus.  In applying the two-step test, first, a court should determine whether the claims are directed to an abstract idea.  If they are, the second step is to determine whether the claims include elements showing an inventive concept that transforms the idea into a patent-eligible invention.  While the Court in Alice stated it was treading carefully in invalidating the claims at issue and warned that applying the decision too broadly could “swallow all of patent law,” numerous patents have been invalidated by district courts in light of the decision in Alice.

At this point, the line between abstract idea and patentable invention has been blurred to the point that it is often difficult to determine whether an invention is patentable.  For example, the court in The Chamberlain Group LLC v. Linear LLC refused to invalidate claims for a monitoring and alarm system related to network communication between a controller and a movable barrier, such as a garage door.   As part of its reasoning, the court noted the claims were “not directed to a method for organizing human activity or computerizing a long-standing commercial practice.”  In contrast, other courts have found the use of computers, memory, transmitters, receivers, and networks not sufficient to save patent claims.  For example, the court in White Knuckle Gaming v. Electronic Arts invalidated claims on an Internet-based method for updating software because it was an abstract idea and performed on a conventional computer, server, and network.  In Visual Memory v. NVIDIA, the court found that categorical data storage was an abstract idea, stating it was a well-known technique performed by humans.  The court in Kinglite Holdings v. MicroStar invalidated a BIOS multitasking patent, stating that it was basically a process for doing two things nearly simultaneously and humans do that all the time.

This means that when asserting your patent in litigation, you will likely face a motion to dismiss on the pleadings or an early summary judgment motion if your patent is vulnerable to a §101 challenge.  In response, it will be necessary to 1) determine whether claim construction is necessary prior to a ruling, 2) argue what distinguishes your patent from an abstract idea, and 3) explain why your patent involves a sufficiently inventive concept that will transform an abstract idea into a patent-eligible invention under step two of the Mayo/Alice test.

In the case of software and sensors for self-driving cars, the system may be performing a task that humans often perform, but it is probably not doing it in the same manner that humans do.  There is a substantial difference between merely writing software to balance a checkbook using substantially the same steps a human would use and designing software that can drive a car.  That is because a human could not write down the steps or analysis techniques that one goes through to safely drive and navigate a car in all situations.  In fact, researchers have long been trying to understand how humans process images and signals received from the environment.  Therefore, one can argue that a self-driving car is not merely an automated implementation of the steps performed by a human.  Instead, a different approach and different algorithms suitable for computer implementation have been developed to accomplish the goal of driving.  We will have to wait to see if that distinction and argument will prevail.

The question has arisen whether courts can resolve the ambiguities and confusion of patentability under §101, or whether it is time for legislative action.  Some argue that the Federal Circuit and Supreme Court should give the district courts the guidance and clarification they need to predictably determine what is patent-eligible under §101.  David Kappos, former director of the USPTO, suggested the solution is to abolish §101.  Others suggest that amendment of §101 would be sufficient.  Until the issue is resolved, additional care must be taken when drafting patents to limit vulnerability to §101 challenges.