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Patents protect inventions.  However, patents protect only certain inventions.  In order to be patentable, an invention must fall within one of four categories of patent-eligible subject matter: articles of manufacture, machines, processes, and compositions of matter. 35 U.S.C. §101.  There are some things that are not patentable (i.e. are patent-ineligible subject matter): laws of nature, natural phenomena, and abstract ideas.

In 2014, in Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208, 216, 219 (2014), the Supreme Court established a two-part test to determine whether an invention is patent-eligible.  In the first step, a determination is made as to whether the claimed invention falls within one of the categories of patent-ineligible subject matter.  If it does, the second step is performed:  a determination of whether the claimed invention has an inventive concept that transforms the patent-ineligible subject matter into something patentable.

Since 2014, the federal courts have invalidated hundreds of patents on the grounds that they are directed to patent-ineligible subject matter under Alice.  In the first five years after the Supreme Court’s decision, the federal courts invalidated 62% of the claims that had been challenged under §101, which amounted to claims from 781 patents.

Recently, in WhitServe LLC v. Dropbox Inc., U.S. App. LEXIS 12285 (April 26, 2021), Dropbox prevailed in a §101 challenge.  In 2018, WhitServ sued Dropbox in the district court for the District of Delaware for infringement of a patent that covered a system for backing up Internet-based data to a client’s computer.  The claims required a central computer, a client computer, a database with Internet-based data, and data processing software that transmits a backup copy.

Dropbox filed a motion to dismiss the complaint under Rule 12(b)(6) on the grounds that the claims were directed to patent-ineligible subject matter under §101.

The district court granted the motion, holding that the claims were directed to the abstract idea of “backing up data records” and that the abstract idea was not transformed into patent-eligible subject matter.  The court found that the claims contained generic computer components which performed routine functions.  The court stated that the claimed system was essentially the same as when “humans secure critical documents, such as wills… in a bank safe deposit box, but keep a copy at home for quick reference when needed.”  The court also held that there were no factual issues, such as claim construction or discovery, that were necessary to address patent eligibility under §101 on a motion to dismiss.

On appeal, the Federal Circuit Court of Appeals affirmed the district court’s decision.  In the first step of the Alice test, the court rejected WhitServe’s contention that the claims were directed to “a practical solution to an Internet-based problem,” holding that the claims were directed to an abstract idea.  The court stated: “the system is for requesting, transmitting, receiving, copying, deleting, and storing data records.  Such transmitting, saving, and storing of client records is a fundamental business practice that ‘existed well before the advent of computers and the Internet’…..”  According to the court, “the computer function of maintaining data records, including storing records at different sites for added protection….is an abstract idea.”

In the second step of the Alice test, the court held that the claims did not contain an inventive concept and thus did not transform an abstract idea into patent-eligible subject matter.  The claim elements “lack[ed] a non-conventional and non-generic arrangement.”  The court explained that the claims covered generic computer components that performed routine conventional functions.  The court noted that in previous cases, it had held that databases and communications media, including the Internet, are generic computer components; and that editing and modifying data, storing data, and sending and receiving information over a network are routine conventional functions.

The court disagreed with WhitServe’s argument that there were factual issues that precluded a determination of patent eligibility.  The court explained that “patent eligibility may be determined on the intrinsic record alone where, as here, the specification provides that the relevant claim elements are well-understood, routine and conventional.”

5-4 Opinion Offers Judicial Workaround by Giving More Oversight to the USPTO Director

In U.S. v. Arthrex, case number 19-1434; Smith & Nephew v. Arthrex, case number 19-1452; and Arthrex v. Smith & Nephew, case number 19-1458, the Supreme Court of the United States recently held that Patent Trial and Appeal Board (PTAB) judges are unconstitutionally appointed.  But, the Court also held that providing the Director of the United States Patent and Trademark Office (USPTO) with more oversight over PTAB rulings will remedy the unconstitutionality of the PTAB judges.

It was a very divided opinion as the Justices split 5-4 on constitutionality, and disagreed on remedy across four different opinions and dissents.  However, Chief Justice Roberts, joined by Justices Alito, Kavanaugh, and Barrett, issued the Opinion of the Court and ultimately concluded that PTAB rulings cannot constitutionally be enforced to the extent that its requirements prevent the USPTO Director from reviewing the final decisions rendered by APJs. However, the Court also held this problem can be solved if the Director can review final PTAB decisions and, upon review, issue decisions himself on behalf of the PTAB.

Per the Court, the key question across the three cases was whether the authority of Administrative Patent Judges (APJs) at the PTAB to issue decisions on behalf of the Executive Branch is consistent with the Appointments Clause of the Constitution. APJs conduct adversarial proceedings for challenging the validity of an existing patent before the PTAB. During such proceedings, the PTAB sits in panels of at least three APJs. The Secretary of Commerce appoints all APJs at the PTAB, except for the Director, who is nominated by the President and confirmed by the Senate.

Thus, the issue is whether these APJs were principal officers who must be appointed by the President with the advice and consent of the Senate, and whether their appointment by the Secretary of Commerce was therefore unconstitutional. The Federal Circuit previously held that the APJs were principal officers whose appointments were unconstitutional because neither the Secretary nor Director can review their decisions or remove them at will. To remedy this constitutional violation, the Federal Circuit invalidated the APJs’ tenure protections, making them removable at will by the Secretary.

The Court concluded that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary of Commerce to an inferior office. The Appointments Clause provides that only the President, with the advice and consent of the Senate, can appoint principal officers.  An inferior officer must be “directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.”

However, the Court found such review by a superior executive officer is absent for the PTAB and APJs. The Court reasoned that while the Director has tools of administrative oversight, neither he nor any other superior executive officer can directly review decisions by APJs. Only the PTAB itself may grant rehearings. This restriction on review relieves the Director of responsibility for the final decisions rendered by APJs under his charge.  And, the possibility of an appeal to the Federal Circuit does not provide the necessary supervision.

Thus, the Court found APJs exercise executive power, and the President must be ultimately responsible for their actions.  However, the Court also found that because of the insulation of PTAB decisions from any executive review, the President can neither oversee the PTAB himself nor attribute the PTAB’s failings to those whom he can oversee.  APJs accordingly exercise power that conflicts with the design of the Appointments Clause.  However, the Court also specifically noted that in reaching this conclusion, it does not attempt to set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes.

The Court then turned to the appropriate way to resolve the issue given the violation of the Appointments Clause.  The Court concluded that the appropriate remedy is a remand to the Director for him to decide whether to rehear the petitions. The Court reasoned that although the APJs’ appointment by the Secretary allowed them to lawfully adjudicate the petition in the first instance, they lacked the power under the Constitution to finally resolve the matter within the Executive Branch. Under these circumstances, a limited remand to the Director provides an adequate opportunity for review by a principal officer.

The Court also noted that the Director need not review every decision of the PTAB. What matters is that the Director has the discretion to review decisions rendered by APJs. In this way, the President remains responsible for the exercise of executive power—and through him, the exercise of executive power remains accountable to the people.

As to the other Justices, Justice Gorsuch partly dissented, agreeing that APJs were unconstitutional, but saying the question of how to fix this appointment problem belonged to Congress and not at the Court.  Justice Thomas wrote a full dissent saying the APJs were properly appointed under the Constitution, and therefore there was no need for any remedy.  And, finally, Justices Breyer, Sotomayor and Kagan partially joined Justice Thomas, agreeing there is no constitutional issue with the appointment of the APJs, but also saying that if there had to be a remedy, the Court’s opinion was sufficient.

I’m experiencing déjà vu. I wrote about a similar topic prior to Allegiant Air becoming the official sponsor of the Las Vegas stadium that the Raiders now call home. In fact, I covered the topic at a time when Allegiant Air claimed that it was not involved in any negotiations for the naming rights of any professional sports facilities despite having filed an application with the United States Patent and Trademark Office for use of Allegiant in connection with stadium or training facilities.

I predicted in my article that Allegiant Air was being covert and was likely involved in such a negotiation, and if I recall correctly, I predicted that they would obtain the naming rights to what is now known as Allegiant Stadium. So why am I going on about this? Because it is happening again. On June 2, 2021, Starbucks filed an application with the U.S Patent and Trademark Office to use its name in connection with “promoting business, sports and entertainment events of others” and “providing stadium and training facilities for sports and entertainment activities.”

Starbucks’s application was filed on an intent-to-use basis, meaning that Starbucks based its application on its good-faith intent to use the mark in commerce in association with the specified services within the statutory period, which can be extended as long as 36 months. As a result, Starbucks will be required to file a statement of use once it has used the mark in connection with the relevant services.

But does Starbucks have any prospective stadiums it would like to sponsor at the moment? They might. But if they do, they aren’t saying. When asked for a comment about the recently filed trademark application, Starbucks declined to comment except to confirm that the application was filed. Unfortunately, that doesn’t give us the necessary insight to do anything more than speculate concerning Starbucks’s intent. I suppose it’s a good thing that speculation is entertaining.

Given that Starbucks is headquartered in Seattle, Seattle would be the most suitable location for it to make a stadium-rights deal. Corporations often enter into deals to name stadiums or arenas where they are headquartered, but that isn’t always the case. So, if we’re speculating, the most obvious location for Starbucks would be Seattle. But Seattle’s facilities are spoken for at the moment. The Seahawks and the Sounders play their games at Lumen Field, which is named after Lumen Technologies, and although the NHL expansion team, the Krakens, will be playing at a brand-new arena next season, Amazon, another Seattle-headquartered corporation, owns the naming rights to that facility. With that said, it seems that Seattle may not be the most obvious location for Starbucks Stadium or Starbucks Arena after all.

Then again, Seattle has been a target city for an NBA expansion team or franchise relocation since the departure of the Seattle SuperSonics to Oklahoma City in 2008. And if that were to happen, I can’t think of a more suitable name than Starbucks Arena. So maybe Starbucks can help make Seattle basketball fans happy again and lure an NBA franchise back to the city.

But as I said before, this is all speculation and conjecture. It’s also possible that the trademark will never be used. While I believe that Starbucks filed the application with the intent to enter into a naming-rights deal, I also believe that they won’t do so unless the right opportunity presents itself. We will monitor the situation as it develops, and if a deal is made, we will publish another article. But remember, it could be three years before the intent-to-use application expires, so be patient.

New York’s post mortem right-of-publicity statute recently came into effect.  Its previous right-of-publicity laws were an extension of its statutory right of privacy which provided that “any person whose name [or likeness] is used within [New York] for advertising [or trade] purposes without . . . written consent” can sue for an injunction and damages.  Because the statute addressed privacy concerns that dissipated at death, such rights did not extend post mortem.  New York courts have held that because the state’s law affords no common law right of publicity – the statutory grant is exclusive.

New York’s new law brings its treatment of post mortem rights closer to that of California which has had postmortem protection for the right of publicity of celebrities and personalities since 1985.  Under the new law in New York, successors in interest of “personalities” and “performers” who pass away after the statute took effect in May 2021, will have a cause of action for certain forms of unauthorized exploitation.

Those “personalities” granted protection under New York’s new law is someone living in New York at the time of death whose name, voice, signature, photograph, or likeness has commercial value at the time of (or because of) their death. The protection against unauthorized use lasts forty years from the date of death. A “performer” granted protection under New York’s law is someone living in New York at the time of their death and had, regularly acted, sung, danced, or played a musical instrument. The postmortem right attached to a “performer” does not expire.  The statute has a specific prohibition against the unauthorized use of a deceased performer’s “digital replica” and also specifically prohibits unauthorized pornographic deep fakes of both performers and personalities.

Previous attempts to pass a law addressing post mortem protection of rights of publicity failed due to concerns over the First Amendment.  In balancing out these concerns, the statute contains specific allowances for the use of a deceased personality’s name, voice, photograph, or likeness in a play, book, magazine, newspaper, musical work, work of visual art, etc.   Likewise, a deceased performer’s digital replica may be used in parodies, satire, commentary, criticism, works of political or newsworthy value, and the like. News, public affairs, and sports programs are also exempt from the statute.

It is relevant to note that this statute is not retroactive which means that it does nothing to protect the post mortem right of publicity of Marilyn Monroe.   Her estate claimed New York as her legal domicile at the time of her death (despite the fact that she lived in California and California recognized post mortem right of publicity at that time).  When the Monroe Estate attempted to control the use of Ms. Monroe’s image by others, the Ninth Circuit Court of Appeals in Milton Green Archives v. Marilyn Monroe LLC subsequently ruled that the Monroe Estate did not have a valid right of publicity claim.  Had New York’s new law been in place at the time of her death, Ms. Monroe’s estate may have been able to claim enforceable post-mortem rights of publicity.  Without these rights, the Monroe Estate has relied on, and continues to rely on, trademark rights to curb misuses of her name and likeness.

Scott Hervey and Josh Escovedo discuss this topic on The Briefing by the IP Law Blog. Watch the episode on the Weintraub YouTube channel here. Listen to the podcast episode here.

We recently wrote about a case in the Southern District of New York against Mashable relating to the embedding of content from social media platforms like Instagram.  In that case, the court held that Instagram’s terms of use (which were accepted by the plaintiff, a photographer, when he created an Instagram account) were insufficiently clear to allow Mashable to escape liability for publishing Instagram content through the process of embedding.  Thereafter, the parties settled out of court.  Legal watchers speculated that the ruling would encourage copyright infringement claims based on the embedding of content.

Embedding is the process of making a photo or other content appear on your website via a link to the content rather than reproducing the content.  For example, Mashable published an article that displayed a photo embedded directly from Instagram.  The photo was not hosted on Mashable’s own servers – it was on Instagram’s servers and accessed anew each time the article was loaded.  Instagram makes it easy for media companies like Mashable and Buzzfeed to generate enormous amounts of content through the use of embedding by providing proprietary software to smooth the embedding process.  In fact, an entire ecosystem of “listicles” has grown up around the blatant embedding of funny tweets and posts rather than generating original content.

Now, a recent class action case filed in the Northern District of California by two photojournalists accuses Instagram of directly profiting from the embedding process via secondary and contributory copyright infringement.  The plaintiffs specifically allege that Instagram allowed media companies to embed their copyrighted photos of the George Floyd protests and the 2016 election without permission.

The plaintiffs claim that “Instagram has been caught red-handed in its scheme to usurp the value from copyrighted works for its own benefit.”  Plaintiffs allege that Instagram encouraged the embedding of photos in order to drive up advertising revenue.  “Instagram misled the public to believe that anyone was free to get on Instagram and embed copyrighted works from any Instagram account, like eating for free at a buffet table of photos, by virtue of simply using the Instagram embedding tool,” they claim.

Instagram and other social media companies, as well as the media companies taking advantage of the embedding tools, will certainly be watching closely to see if they are about to lose a major source of engagement and advertising exposure.

The case is Hunley et al. v. Instagram LLC, Case No. 3:21-cv-03778, U.S. District Court for the Northern District of California.

Hard seltzer first hit the marketplace about five years ago and rapidly grew in popularity with sales exceeding $4.5 billion in 2020.  Wanting to ride the wave of success, many companies have introduced hard seltzers into this now crowded space.  But what is a hard seltzer?  Is it a form of beer or something else?  Based on its popularity, most would say, “Who cares whether hard seltzer is beer, just give me one.”  However, Modelo Grupo (“Modelo”) and Constellation Brands (“Constellation”) would say there is a lot riding on the answer.

Modelo, whose parent is Anheuser-Busch InBev (“AB”), created the Corona brand.  In 2013, Constellation acquired perpetual, irrevocable, and exclusive license rights in the Corona marks, which gave Constellation the right to sell products under the Corona trademark.  Then in 2020, Constellation introduced Corona Hard Seltzer, which is a sugar-based, fermented beverage produced in Coahuila, Mexico.  Corona Hard Seltzer is now the fourth most popular hard seltzer in the United States, competing directly with Bud Light Seltzer and other AB hard seltzers.

Modelo sued Constellation in the U.S. District Court for the Southern District of New York over the use of the Corona trademark for Corona Hard Seltzer and for breach of contract, alleging that Constellation only has the right to sell beer products, not hard seltzer, under the Corona brand.   According to Modelo, hard seltzer is not one of the allowable beer beverages.

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What happens when a junior trademark holder’s business becomes so popular and well known that it threatens to swamp the reputation of a senior mark holder?  The senior mark holder brings a trademark infringement case alleging “reverse confusion” among its potential customers.  This was the scenario the Ninth Circuit faced in its recent decision in: Ironhawk Technologies, Inc. v. Dropbox, Inc. (decided April 20, 2021).

Ironhawk develops computer software that uses compression technology to allow for the efficient transfer of data, especially in “bandwidth-challenged environments.”  It has marketed its software under the name “SmartSync” since 2004 and obtained a trademark for SmartSync in 2007.  It sells its software primarily to the United States Navy but, in 2013, sold its software to at least one major pharmacy chain.

Dropbox (as most lawyers know) produces cloud storage software that millions of users utilize around the world.  One of Dropbox’s software features, “Smart Sync,” allows a user to see and access files in their Dropbox cloud account without using up any of the user’s hard drive storage. Dropbox launched its Smart Sync feature in 2017 and was previously aware of Ironhawk’s SmartSync mark.  Ironhawk sued Dropbox for violations of the Lanham Act, i.e., trademark infringement, and unfair competition claiming that Dropbox’s use of the name “Smart Sync” intentionally infringed upon Ironhawk’s “SmartSync” trademark.

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