Intellectual Property

On July 31, 2012, the Ninth Circuit issued its ruling protecting the right of privacy held by collegiate athletes against the use of their likeness in connection with video games. (Keller v. Electronic Arts, Inc. (2013) 9th Circuit Court of Appeals 10-15387. This decision joins the Third Circuit’s decision in Ryan Hart v. Electronic Arts, Inc., U.S. App. LEXIS 10171 (3d Cir. 2013), finding that the collegiate athletes’ right to publicity outweighs Electronic Arts’ First Amendment rights.

Sam Keller was a starting quarterback for Arizona State in 2005, before joining Nebraska in 2007. Electronic Arts (“EA”) is the producer of a series of video games known as NCAA Football, in which EA seeks to replicate a school’s entire team as closely as possible. NCAA Football is an interactive game that allows the video gamer a wide range of playing options including modification of a player’s size and abilities as well as for which team he plays. Keller sued EA and the NCAA in a putative class action. EA filed a SLAPP motion (“Strategic Lawsuit Against Public Participation”), claiming that this conduct was protected by the First Amendment. The District Court denied the SLAPP motion, and EA appealed.

The Ninth Circuit recognized that video games, like books, plays, and movies, are entitled to the full protections of the First Amendment. (Brown v. Entm’t Merchs. Ass’n, 131 S.Ct. 2729, 2733 (2011). However, the First Amendment rights are not absolute, and states may recognize the right of publicity to a degree consistent with the First Amendment. (Zacchini v. Scripps-Howard Broad Co., 433 U.S. 562, 574-75 (1977).)

California’s right of publicity is codified in Civil Code section 3344 as well as common law. Civil Code section 3344 prevents the use of another’s likeness “in any manner on or in products, merchandise, or goods, or for purposes of advertising or selling . . . without the person’s prior consent.” EA raised four First Amendment privileges as defenses. The first, and most viable, potential defense is the “transformative use defense” as formulated by the California Supreme Court in Comedy III Productions, Inc. v. Gary Sandrup, Inc., 25 Cal.4th 387 (2001). The transformative use defense is “a balancing test between the First Amendment and the right of publicity based on whether the work in question adds significant creative elements so as to be transformed into something more than a mere celebrity likeness or imitation.” (Id.) The protected economic interest in a celebrity’s right of publicity diminishes when the work contains substantial transformative elements.

The court in Comedy III set forth five factors to consider in determining whether a work is sufficiently transformative. First, if the celebrity likeness is just one of many elements from which the work is developed as compared to whether the likeness is the “very sum and substance of the work in question.” Second, the work is protected if it is primarily the defendant’s own expression so long as that expression is something other than the likeness of the celebrity. This element has been described to examine whether the consumer is purchasing the work primarily because it is a replicate of the likeness of the celebrity or is purchasing the work because of the creative elements added by the defendant. Third, each of the five factors is to be applied more quantitatively than qualitatively in order to avoid debates over artistic expression. In other words, do the creative elements predominate over the likeness of the celebrity? Fourth, the court is to consider whether the economic value of the work is primarily due to the likeness or fame of the celebrity. Lastly, there is no transformative work if the overall goal is to create a traditional likeness or portrait of the celebrity so as to exploit his or her fame.

In addition to Comedy III, the Ninth Circuit examined three other California decisions applying the transformative use defense: Winter v. DC Comics, 30 Cal.4th 881 (2003); Kirby v. Sega of America, Inc., 144 Cal.App.4th 47 (2d Dist. 2006); and No Doubt v. Activision Publishing, Inc., 192 Cal.App.4th 1018 (2d Dist. 2011). Applying the five factors, the Ninth Circuit found that EA’s depiction of Sam Keller was not protected by the transformative use defense. Although all players, including Mr. Keller, could be modified by the video gamer, such control did not outweigh Mr. Keller’s right of publicity. The Court found that, just as in the No Doubt v. Activision Publishing, Inc., the characters in the EA NCAA Football video series were literal recreations of the collegiate players engaging in the same activities, and in the same settings, in which they gained their fame. The transformative elements of the overall video game that allowed the video gamer to manipulate certain elements of the characters, settings, and plays did not overcome the literal recreation of the collegiate players.

Judge Sidney R. Thomas issued a dissent, finding that a “holistic” examination of the video game established that the “transformative and creative elements” of the work “predominate over commercially based literal or imitative depictions.” Judge Thomas criticized the majority decision, focusing on a single athlete’s likeness rather than examining the video game as a whole.

The majority, and dissenting Judge Thomas, gave little weight to the other three First Amendment defenses argued by EA.

The Ninth Circuit was now joined by the Third Circuit in finding that the transformative use defense did not protect EA against claims for violation of the collegiate players’ right of publicity. The Third Circuit denied EA’s petition for a hearing en banc. One can only assume EA will make the same request for the Ninth Circuit. Unless overturned by the United States Supreme Court, these two decisions affirm substantial rights for collegiate athletes to protect the use of their likeness for commercial purposes without their consent. The economic consequence to EA and the NCAA will undoubtedly be substantial.

In April, we published an article about Fox Broadcasting Co. v. Dish Networks, LLC, where Fox Broadcasting was requesting a preliminary injunction against Dish Network, claiming that were engaged in copyright infringement by offering their Auto Hop on Dish Networks’ DVRs. As of that date, a judge declined to issue a preliminary injunction and Fox had appealed to the Ninth Circuit Court of Appeals. On July, 24, 2013, the Ninth Circuit rejected Fox’s appeal, and affirmed the district court’s refusal to enjoin Dish Network’s features. It affirmed the lower court’s reasoning that the consumer is the party causing a copy to be made, and not Dish Network. So if you subscribe to Dish Network and have the Auto Hop and “PrimeTime Anytime” features, no need to panic and switch cable/satellite providers, you can still watch your favorite television shows, commercial-free, without even touching the fast-forward button.

The Ninth Circuit confirmed that DVR recording is protected fair use, and since Fox did not have any copyright interest in the advertisements (the only content that was being skipped), it could not show that it was irreparably harmed by the features. However, it may be a bit premature for Dish Network to break out the champagne, despite Dish’s executive vice-president’s statement that, “This decision is a victory for American consumers.” That is because this decision was made using the very high legal standard required to justify a preliminary injunction, and the deferential standard of review applied to denials of preliminary injunctions.

A preliminary injunction is a remedy that requires a defendant to take, or refrain from taking, a specific action, prior to a trial on the merits, but based on an underlying lawsuit. It is often referred to as an “extraordinary remedy” because you are essentially granting relief to a party pre-litigation, without giving the enjoined party the chance to conduct discovery, put forth their side of the case, etc . . As a result, a party seeking a preliminary injunction has a pretty high bar to meet.

Before an injunction can be granted, a plaintiff must prove a few things, including (1) there is no adequate remedy at law (meaning that money compensation is not sufficient), (2) there is a serious risk of immediate irreparable harm absent injunctive relief, (3) a likelihood that he or she will prevail on the merits of the underlying controversy, and (4) the plaintiff is more likely to be harmed if an injunction is not issued, than defendant would be if the injunction is granted (the so-called “balance of hardships”). The plaintiff essentially has to try a mini-version of the case in front of the judge and courts often apply all these factors on a “sliding scale.” In other words, if the plaintiff can prove that the likelihood of success is very high, their showing of irreparable harm does not need to be as strong. Likewise, if the injunction’s burden on the defendant is low, but the plaintiff would be greatly harmed without the injunction, the plaintiff would only need to show a fair ground for litigation.

It is not easy to get an injunction and logically this makes sense because sometimes an injunction gives the plaintiffs the exact remedy they wanted (if they’re not interested in money). Accordingly, the law sets a high bar for granting “extraordinary” equitable remedy and typically a bond is required so that if the injunction is wrongfully granted, the defendant has some kind of redress.

Given the above factors, it’s not surprising that the judge denied Fox’s appeal for a preliminary injunction. The questions of law are by no means a “slam dunk” for Fox, complicated copyright questions rarely are, especially when they involve a new technology like this one. In addition, the harm to Dish Network and its subscribers would be great as the injunction could force Dish Network to disable the AutoHop and “PrimeTime Anytime” features and affect millions of its customers and lose millions of dollars. So for now, Dish Network and its subscribers can continue “hopping” their way through prime time.

Currently pending before the United States District Court for the Northern District of Illinois is a case that will determine whether the Estate of Sir Arthur Conan Doyle has any remaining copyright interest in the iconic character of Sherlock Holmes, and his friend and companion in sleuthing, Dr. John Watson.

The fictional detective and his sidekick first made their appearances in “A Study in Scarlet,” published in 1887. By 1923, Doyle had written and published some fifty-six short stories and four novels wherein Holmes and Watson solved numerous cases through Holmes’ unique analytic and deductive methods, all the while interacting with various supporting characters, including Scotland Yard’s Detective Lestrade, their landlady Mrs. Hudson, Holmes’ brother Mycroft, and his arch-nemesis Professor Moriarty. Each of those pre-1923 works is now in the public domain in the United States. Approximately ten Sherlock Holmes stories, published after 1923, remain protected by copyright.

Malibu lawyer, and Sherlock Holmes aficionado, Les Klinger, is the author of numerous books and articles regarding the Sherlock Holmes canon. In 2011, he published, as co-editor, a collection of new short stories by contemporary writers featuring Sherlock Holmes and some of his supporting characters, titled “A Study in Sherlock.” In connection with that publication, the Doyle Estate demanded, and Klinger’s then-publisher paid under protest, a license fee for the use of Holmes and the other characters in the story collection.

Klinger recently compiled and edited, and is ready to publish, a second collection of new Sherlock Holmes stories by contemporary writers, tentatively titled “In the Company of Sherlock Holmes.” The Doyle Estate has once again demanded a license fee, but Klinger’s new publisher would not agree to pay it. Neither would it publish the new story collection while the Doyle Estate’s claim of copyright ownership remained unresolved.

Accordingly, Klinger has filed a single cause of action complaint against the Estate, seeking a declaration that the Sherlock Holmes character, as well as the other characters that first appeared in the pre-1923 works, are in the public domain, and can freely be used by Klinger or anyone else in new literary or audio visual works without infringing on any of the Estate’s copyrights.

Klinger’s position is that Holmes and Watson (as well as the other supporting characters) were fully delineated characters, with all of their respective well-known characteristics, by 1923, and accordingly the characters fell into the public domain along with the works in which they first appeared. The Estate’s position, as expressed by its attorney to the New York Times shortly after the filing of the lawsuit, is that “Holmes is a unified literary character that wasn’t completely developed until the author laid down his pen.” Since Doyle included the Sherlock Holmes character in ten stories published after 1923 – that are still within the term of copyright protection – the Estate apparently is arguing that the copyright in the character will remain with the Estate until the last of those post-1923 works falls into the public domain.

This case highlights an interesting issue – that of the copyrightability of a character as separate and distinct from the work in which that character appears. It was first addressed in 1930 by Judge Learned Hand in Nichols v. Universal Pictures, and Judge Hand’s description of the issue remains to this day the touchstone for determining when a character becomes copyrightable:

“If Twelfth Night were copyrighted, it is quite possible that a second comer might so closely imitate Sir Toby Belch or Malvolio as to infringe, but it would not be enough that for one of his characters he cast a riotous knight who kept wassail to the discomfort of the household, or a vain and foppish steward who became amorous of his mistress. . . . It follows that the less developed the characters, the less they can be copyrighted; that is the penalty an author must bear for marking them too indistinctly.” 45 F.2d 119, 121 (2d Cir. 1930).

In 1954, in a case involving Dashiell Hammet’s Maltese Falcon, the Ninth Circuit applied a rigorous test for granting copyright protection to a character – namely, whether the character “constitutes the story being told.” If so, then he is protected by copyright. If, on the other hand, “the character is only the chessman in the game of telling the story he is not within the protection afforded by copyright.” Warner Bros. Pictures, Inc. v. Columbia Broadcasting System, Inc., 216 F.2d 945 (9th Cir. 1954).

The factual circumstances of that case – which no doubt influenced the court’s conclusions – were unusual: Warner Bros. had been assigned the copyright in the Maltese Falcon in order to produce a motion picture based on the novel. When Hammett then assigned the Sam Spade character to CBS for use in different stories, Warner sued for copyright infringement. The Court found that Hammett – the original author – had the right to put his characters in other works and assign them to other parties, notwithstanding the fact that Warner had the rights to the original story, because the character was not itself copyrightable:

“We conclude that even if the Owners assigned their complete rights in the copyright to [Maltese Falcon], such assignment did not prevent the author from using the characters used therein, in other stories. The characters were vehicles for the story told, and the vehicles did not go with the sale of the story.” Id.

Cases from other Circuits, and later Ninth Circuit cases, have applied a less stringent test, requiring only that character in question be sufficiently distinctly delineated, with consistent, identifiable traits, in order to warrant copyright protection independent of the story in which he appeared. See Walker v. Time Life Films, Inc., 784 F.2d 44, 50 (2nd Cir. 1986); Rice v. Fox Broadcasting Co., 330 F.3d 1170, 1175 (9th Cir. 2003).

Under any analysis, however, it would appear that at least the great Sherlock Holmes was, within the first handful of stories, highly delineated, perhaps even to the point of constituting “the story being told.” As noted by another court, “[i]ndeed, audiences do not watch Tarzan, Superman, Sherlock Holmes, or James Bond for the story, they watch these films to see their heroes at work.” Metro-Goldwyn-Mayer, Inc. v. American Honda Motor Co., Inc., 900 F.Supp. 1287, 1296 (C.D. Cal. 1995).

If the Sherlock Holmes and Dr. Watson characters in fact reached copyrightable status in the earlier works, then it should follow that when those works fell into the public domain, so did the character. Accordingly, it will be interesting to see how the Estate defends the action, and what the ultimate ruling of the Northern District of Illinois will be. Given the significant number of Sherlock Holmes works currently being produced and distributed, it is undoubtedly a matter of substantial financial import to the Estate.

In Association For Molecular Pathology v. Myriad Genetics, Inc., decided on June 13, 2013, the United States Supreme Court held that isolated natural genes (DNA) are not patentable. Thus, genes that exist in a living organism, such as the human breast cancer genes BRCA1 and BRCA2 at issue in this case, are not made patentable because the inventor isolates them from the other genomic DNA. The Court was careful to explain that other inventions related to genes, however, are patentable. In particular, the Court held that the synthetic copy of a gene known as “complimentary DNA” (cDNA) is patentable, as well as methods of isolating genes and methods of using cDNA.

The decision was not surprising. The law has long been that naturally occurring biological compositions are not patentable subject matter. The Court applied that rule logically to find that a gene as it exists in a living organism is not patentable just because someone discovers it. In contrast to natural DNA, cDNA is not found in the living organism. The Court found that cDNA is a copy of the natural gene, synthesized in the lab; it is different from the natural gene in that it does not include the non-coding portions of the DNA that are present in the natural gene. The Court concluded that the cDNA is therefore patentable as a man-made composition.

BRCA1 and BRCA2 genes are associated with an increased risk of breast and ovarian cancer. A woman with specific mutations in these genes has a 50% to 80% chance of having breast cancer, compared with 12% to 13% risk for women without these mutations, and a 20% to 50% chance of having ovarian cancer. Myriad discovered the location of these genes and sequenced the most common mutations. They used this information to develop a screening test to determine if a woman has a high risk of cancer due to the presence of the BRCA1 and BRCA2 gene mutations.

Myriadobtained patents on the natural genes and on the cDNA. Other companies developed genetic tests to determine the presence of the BRCA1 and BRCA2 mutations, and offered genetic services to the public. Myriad then threatened its competitors with patent infringement suits. In response, all of the other test providers ceased offering their tests, and Myriad became the sole provider of BRCA genetic testing.

After several years, a group of cancer patients, physicians, and patient advocacy groups sued Myriad for a declaratory judgment of invalidity under 35 USC § 101 on the grounds that the patents on the genes covered products of nature. The district court granted summary judgment for the plaintiffs, finding that the claims were not valid. On appeal, the Federal Circuit Court of Appeals reversed the district court. The Supreme Court granted the plaintiffs’ petition for certiorari, vacated the judgment, and remanded the case back to the Federal Circuit. The Federal Circuit then decided that both natural DNA and cDNA were patentable. Plaintiffs again appealed to the Supreme Court. In this decision, the Court affirmed in part and reversed in part.

The Court described Myriad’s discovery as follows:

“The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. “

Myriad argued that the Supreme Court’s decision in Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) was controlling. Chakrabarty was the Court’s leading case holding that phenomena of nature and products of nature are not patentable, but that a man-made bacterium was patentable. The Court correctly pointed out that the invention in Chakrabarty was man-made, as it was not a naturally occurring bacterium, while the genes that Myriad had patented were not man-made and exist in nature. The Court acknowledged the importance of Myriad’s discovery, stating that “groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the section 101 inquiry.” The Court held that the genes that Myriad had discovered are clearly products of nature, and therefore not patentable.

The Court reached the opposite conclusion with respect to Myriad’s claims directed to the cDNA it had synthesized. Because the cDNA is not naturally occurring, the Court held that it is patentable.

The Court emphasized the limitations of its holding, pointing out that it was not ruling on the patentability of methods of making genes, method of applying the discovered knowledge, or natural DNA whose sequences had been altered by the inventor.

Even though the Court’s decision was well reasoned, the reaction in the biotechnology community has been mixed. Some experts are concerned that biotechnology companies have lost significant value because their gene patents can and will be invalidated. Others believe that most biotechnology companies will not really be affected because they have also patented their cDNA compositions and methods of using those genes. What is certain is that the Court has made a clear rule, even if narrow: if you want to patent a gene, it had better not be the naturally occurring DNA.

The reaction of the public has been favorable. Many scientists view the decision positively because it confirms that genes (as they exist in nature) do not belong to anyone, but are in the public domain, giving them the freedom to conduct basic genetic research. Patients and doctors are happy because the BRCA genetic test should now be less costly and more accessible to patients.

The landscape of patent law has been rapidly changing over the last several years. President Obama recently signed into law the America Invents Act (the “AIA”) which offered the first identifiable attempt by the United States government to stem the tide of claims asserted by non-practicing entities, also known pejoratively as “patent trolls.” Among the many changes included in the AIA is the requirement for non-practicing entities to file individual lawsuits against accused infringers rather than multiple defendants, thereby creating a potentially significant increase in the cost of litigation. This provision of the AIA, and other proposals directed at non-practicing entities, are often premised on the assumption that every lawsuit filed by these so-called “trolls” is frivolous.

While it’s true that a significant number of lawsuits filed by non-practicing entities have no merit, and are settled by the accused parties merely to avoid the costs associated with defending a patent infringement lawsuit, it is inaccurate and potentially counterproductive to assume that all patent litigation initiated by a non-practicing entity is meritless. Yet, recent comments by President Obama grouped all non-practicing entities together and cast them all as a significant drain on U.S. businesses and an overall drag on technology companies. The White House stated that “stopping this drain on the American economy will require swift legislative action.”

Obviously there are a significant number of non-practicing entities who are appropriately categorized as “trolls.” However, we also must consider the notion that the non-practicing entity business model can serve the underlying function of the United States patent system—to promote the sciences and advance innovation. While the changes implemented by the AIA tend to undermine this goal by disadvantaging small inventors in their ability to acquire patent grants, the non-practicing entity business model can function to restore some strength to these disadvantaged inventors. Currently, when small companies or individual inventors acquire patent grants, those patent holders then face enormous costs in connection with patent litigation if they wish to enforce the patent. This often renders them unable to vindicate the rights granted to them under their patent. Obviously a patent that cannot be enforced through litigation is practically worthless.

The emergence of a non-practicing entity model addresses this problem. Non-practicing entities are not limited to the patent trolls who assert rights in worthless patents in order to shakedown businesses. Companies such as Intellectual Ventures and Eolas Technologies are non-practicing entities who partner with smaller companies and individuals, which generally could not afford to assert their patent rights against larger entities, to provide resources enabling these small entities and individuals to vindicate their interests. As a result, some non-practicing entities actually revive the incentive for smaller entities and individuals to create patentable inventions. Since the underlying purpose of the patent system is to promote invention, these legitimate non-practicing entities may actually benefit the patent system.

Obviously the existence of unscrupulous patent trolls can be a tremendous burden on companies specializing in high tech goods. A significant number of claims are filed each year based on patents which arguably should not have been issued by the United States Patent and Trademark Office. Yet, we must be cautious in the promulgation of new legislation directed at non-practicing entities so that we do not inadvertently create additional barriers making it more difficult for small entities to obtain patents on legitimate inventions.