Publications

Whether you like him or not, Conor McGregor’s business savvy cannot be disputed. The UFC superstar, in just over year, has become a household name known to people who may not even watch the sport. His quick rise to superstardom is no coincidence. He knows how to market himself and he knows how to sell the events he’s involved in.

In my opinion, McGregor single handedly crippled the UFC’s landmark UFC 200 event when he was removed from the fight card as the result of a contract dispute. Since that time, he’s made amends with the UFC and become the promotion’s first two-weight world champion. So, having risen to such a level of superstardom, I got to wondering what McGregor was doing to protect his intellectual property rights, which undoubtedly have substantial goodwill and value at this point. As such, at the end 2016, I did a search on the USPTO website, but to my surprise, McGregor had not applied to protect his name, or his nickname, the Notorious, in the United States. He already had applications filed abroad, but not in the United States, where he arguably has the bulk of his fans. Having always considered McGregor a business savvy athlete, I was shocked.

But it seems that McGregor recently remedied this problem by filing two trademark with the USPTO through his entity McGregor Sports and Entertainment, Ltd. On January 9, 2017, McGregor filed for registration of THE NOTORIOUS and CONOR MCGREGOR. The marks seek registration for several goods and services, including DVDs, aftershave, books, clothing, footwear, games, health club services, restaurants, and barbershops. It’s a pretty interesting array of goods and services. I would not have expected McGregor to go into the barbershop or aftershave business anytime soon, but then again, with his debonair style and reputation for being a sartorial man, maybe it wouldn’t be such a bad idea.

Before McGregor’s now historic fight at UFC 205 where he became the promotion’s first two-division world champion, there were several articles in legitimate publications comparing McGregor’s level of superstardom to the late Muhammad Ali. Now, it is quite early to start comparing McGregor’s notoriety to one of the most renowned athletes of all time, but the point is, McGregor is already huge star and he should be taking these measures to protect his intellectual property.

Paramount and Star Trek Fan Film Producers Settle

The copyright infringement lawsuit between Star Trek fan film producer, Axanar Productions, and Paramount Pictures came to an end less than two weeks before trial.  The settlement was undoubtedly triggered by the court’s early January ruling that the fan fiction film, Prelude to Axanar, is not protected by fair use.

Prelude to Axanar is a documentary style short that tells the story of Garth of Izar, a Starfleet captain and Captain Kirk’s hero, who fought in the Battle of Axanar between the Federation and the Klingons, which took place 21 years before the events of the first episode of the original Star Trek television show.  As a result of it success, Prelude’s producer, Alec Peters, raised over $1 million through Kickstarter and Indegogo in order to produce a full-length, studio quality motion picture about the Garth of Izar and the battle of Axanar.  In addition to releasing Prelude on YouTube, Peters released on YouTube a short clip entitled “Vulcan Scene” (which features Ambassador Soval, a minor character from “Star Trek: Enterprise” and a new Vulcan character) and drafts of the script for the full-length movie.

Paramount sued Axanar Productions and its founder Alec Peters for copyright infringement.  According to the Complaint, Peters and his production company infringed Star Trek’s copyright by utilizing various Star Trek elements, including the concept of the Battle of Axanar, the Klingons, the Starfleet and characters, costumes and props that are unique to Star Trek.  According to Paramount, Prelude and the other Axanar works are substantially similar to Star Trek precisely because they copied characters, settings, plot points, dialogue, themes, pace, mood, races, species, ships, and weapons in order to create an unlicensed, independent Star Trek film.

Peters, on the other hand, argued that Prelude and the other Axanar works were transformative and therefore protected under fair use.

A work is transformative when it adds something new to the work allegedly infringed, with a further purpose or different character, altering the original work with new expression, meaning, or message.  As the Supreme Court noted in Campbell v. Acuff-Rose Music, Inc., “the more transformative the new work, the less will be the significance of other factors, … that may weigh against a finding of fair use.”

Although Prelude features Federation officers, Klingons and Starfleet ships, Peters claimed that the work is transformative because of the way in which it features these elements; in a first-person narrative style, never before used by Paramount, featuring new characters and other elements, with its subject matter being a storyline that was only a footnote in the first episode of the original Star Trek television series.  This, Peters contends, makes Prelude and the other Axanar works transformative.

To the contrary, Paramount argued that Prelude and the other works are not transformative as they “were created to function as another Star Trek work, with a slightly different plot.”  Paramount argues that using copyrighted characters and elements and then placing those elements into a new story or timeline does not create a transformative work but rather an infringing derivative work.

In determining whether Prelude and the other Axanar works are protected by fair use, the court reviewed its four factors: (i) the purpose and character of the infringing use; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the work used; and (iv) the effect upon the market for the original work.

The first factor explores whether and to what extent the new work is transformative.  Here the court agreed with Paramount, finding Prelude and the other works not transformative.  The court noted that Peters “set out to create a… prequel to The Original [Star Trek] Series” and that they “intentionally use or reference many elements similar to those in [Star Trek] to stay true to Star Trek cannon down to excruciating details.”  The court found that Prelude and the other works do not have a further purpose or different character, and do not alter Star Trek with new expression, meaning or message.  Instead, the court stated, the defendants intended to supplant Star Trek with Prelude and their full-length motion picture.

The court determined that the second factor, the nature of the work, also weighed in favor of Paramount as creative works – such as Star Trek – are given broad copyright protections.

The third factor examines the quantity, quality and importance of the materials used in relation to the copyrighted work in its entirety.  The court did not accept Peters’ argument that, from a quantitative and qualitative standpoint, the elements he used from Star Trek were not significant.  The court remarked that the elements used by Peters “are an indispensable part of what makes Star Trek ‘Star Trek’” and give Prelude the “Star Trek feel.”

The fourth factor examines the effect the infringing work would have on the market and also whether unrestricted and widespread similar conduct would have an adverse impact on the market for derivative works.  In considering the market harm presented by a full-length, professional quality motion picture about the battle of Axanar, the court stated that such a motion picture is the kind of derivative project Paramount would develop.  The court also focused on Peters’ statement that he wanted to create “a whole new way that fans can get the content they want, by funding it themselves.”  If left unrestricted, widespread fan-funded, professional quality motion pictures telling Star Trek stories would have an adverse impact on Paramount’s ability to develop derivative Star Trek properties.

With all four factors weighing in favor of Paramount, the court rejected Peters’ fair use defense, leaving for the jury the determination of whether Prelude is substantially similar to Star Trek and whether Paramount’s copyright in Star Trek was willfully infringed.

However, the key cause for the settlement was undoubtedly the court’s finding that Peters would be personally liable for contributory and vicarious infringement if the jury found substantial similarity between Prelude and the other Axanar works and Star Trek.  The terms of the settlement are unknown with the exception of the fact that “substantial changes” would be made to the Axanar feature film and that any future Star Trek films produced by Peters or his company would follow the Guidelines for Fan Films distributed by CBS and Paramount in June, 2016.

Although arguably foreshadowed, some may be surprised to learn that a party with the right to challenge the validity of a patent at the United States Patent and Trademark Office (“USPTO”) may not have the right to appeal an unfavorable decision.  In Phigenix v. ImmunoGen, the Federal Circuit clarified that while there is no standing requirement to challenge a patent at the USPTO via an inter partes review (“IPR”), standing is required to appeal the Patent Trial and Appeal Board’s (“PTAB”) final decision to the Federal Circuit.

In 2014 in Consumer Watchdog v. Wis. Alumni Research Fund, the Federal Circuit ruled that there was no standing to appeal the PTAB’s final decision in a re-examination proceeding.  But is standing required to appeal decisions in IPRs and post-grant reviews, which are procedures created by the America Invents Act (“AIA”)?  After all as a result of the AIA, 35 U.S.C. §141(c) states “[a] party to an inter partes review or a post-grant review who is dissatisfied with the final written decision of the Patent Trial and Appeal Board [] may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.”  In Cuozzo Speed Techs., LLC v. Lee, the U.S. Supreme Court noted that a party initiating an IPR “need not have a concrete stake in the outcome,” but it may lack standing to sue in federal court.  Now, erasing any remaining doubt as to whether the standing requirement applies to appeals of PTAB decisions in IPRs, the Federal Circuit in Phigenix found that 35 U.S.C. §141(c)  does not confer standing on IPR petitioners nor does it remove the requirement for standing to appeal final written decisions of the PTAB.

While not manufacturing any of its own products, Phigenix purportedly “has developed, and is developing, an extensive intellectual property portfolio” that it claims includes a patent that covers Genentech’s activities relating to the breast cancer drug Kadcyla.  While refusing to license Phigenix’s patent, Genentech licensed a patent from ImmunoGen, Inc., for use in making Kadcyla.  Phigenix sought redress in various forums.  As part of its strategy, Phigenix challenged the validity of ImmunoGen’s patent in an IPR proceeding.  Apparently, Phigenix felt that invalidating ImmunoGen’s patent would “further [Phigenix’s] commercialization efforts with respect to its patent portfolio” by capturing at least some of the licensing revenue Genentech is paying to ImmunoGen.  However, this challenge failed when the PTAB ruled the Immunogen patent claims were not obvious in light of the prior art.

Phigenix then appealed the PTAB’s decision to the Federal Circuit, but ImmunoGen moved to dismiss the appeal for lack of standing.  The Federal Circuit heard the issue of standing along with the substantive issues of the appeal.

The requirement of standing to sue comes from Article III of the U.S. Constitution, which “confines the judicial power of federal courts to deciding actual ‘Cases’ or Controversies.’” The minimum requirement for standing consists of three elements.  “An appellant ‘must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [appellee], and (3) that is likely to be redressed by a favorable judicial decision.’”  The party seeking judicial review, Phigenix, “bears the burden of establishing that it has standing.”

Interestingly, however, in the nearly thirty-five years since the inception of the Federal Circuit, the Court had “not established the legal standard for demonstrating standing in an appeal from a final agency action,” such as a final written decision of the PTAB.  Such a “standard must identify the burden of production; the evidence an appellant must produce to meet that burden; and when an appellant must produce that evidence.”  Setting the standard in Phigenix, the Federal circuit determined that the summary judgment burden of production applies.  If standing is not self-evident, this means identifying any record evidence that was before the agency, and relying on evidence, such as affidavits and declarations, typically produced at the summary judgment stage.  The Federal Circuit further explained that an appellant must identify the relevant evidence demonstrating its standing at the earliest possible opportunity.

In its attempt to show standing, Phigenix did not contend that it faced the risk of infringing the patent at issue, that it was an actual or prospective licensee of the patent, or that it otherwise planned to take any action related to the patent.  Rather, first Phigenix argued that it suffered economic injury because of the competition between ImmunoGen’s patent and Phigenix’s similar cancer drug patent.  Phigenix asserted that the mere existence of ImmunoGen’s patent hindered Phigenix’s licensing program “while ImmunoGen receives millions of dollars in licensing revenue,” a portion of which Phigenix contended would inure to it if ImmunoGen’s patent were invalidated.  Phigenix, however, did not substantiate its arguments but instead relied on a conclusory declaration and an attorney letter that the Court found insufficient to demonstrate injury in fact.  The Court noted that if had Phigenix licensed its patents to the same parties to which ImmunoGen had licensed the challenged patent, then invalidation of the ImmunoGen patent could have increased Phigenix’s revenues.  But Phigenix produced no evidence that it had ever licensed its patent to anyone must less to the Immunogen licensees.  Thus, the Federal Circuit found that Phigenix did not establish an injury in fact that could confer standing.

Second, Phigenix argued it suffered an injury in fact because 35 U.S.C. §141(c) “provides a statutory basis for appeal.”  The Federal Circuit, however, found that Phigenix could not “base its injury in fact upon a violation of §141(c) because [Phigenix] has been permitted to file its appeal, and the exercise of its right to appeal does not necessarily establish that it possesses Article III standing.”

Finally, Phigenix asserted injury in fact based on the estoppel effect of the PTAB’s final decision, which means Phigenix “may not request or maintain a proceeding before” the USPTO, the U.S. International Trade Commission, or a federal district court with respect to any ground raised or that reasonably could have been raised during the IPR.  But, as in Consumer Watchdog, the Federal Circuit explained that estoppel “do[es] not constitute an injury in fact” when, as here, the appellant “is not engaged in any activity that would give rise to a possible infringement suit.”  Failing to establish standing, Phigenix’s appeal was dismissed.

Standing issues will not arise in the majority of appeals from IPRs because, as previously reported, around 80% of IPRs are brought by parties involved in underlying patent infringement controversies. But the petitioners in the remainder of IPRs face the real likelihood they may have no ability to appeal unfavorable PTAB decisions.  As a result, public interest groups, hedge funds, patent holding companies, and others looking to invalidate patents owned by other entities may be precluded from challenging an unsuccessful IPR in federal court because they will not be able to show that there is an actual case or controversy that would confer standing.

Therefore, before petitioning for review of a patent at the USPTO, a petitioner should consider whether he or she will have standing to appeal an unfavorable decision.  Of course, if the IPR is successful, there is no need for the appeal.

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

The Federal Circuit Court of Appeals has reminded the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office in no uncertain terms that covered business method review has limits.  In Unwired Planet, LLC v. Google Inc., 841 F.3d 1376, 2016 U.S. App. LEXIS 20764 (November 21, 2016), the court held that the PTAB had improperly instituted covered business method (“CBM”) review of Unwired’s patent.  CBM review is a procedure enacted in the America Invents Act by which a business method patent can be challenged in the PTAB.

Unwired owned U.S. patent no. 7,203,752 for a system and method to limit access to the location information of wireless devices.  The system allows a cell phone user to set their phones privacy preferences to restrict access to the phone’s location information to specific permitted requesters.

In October 2013, Google filed a petition in the PTAB for CBM review of certain claims of Unwired’s patent.  In April 2014, the PTAB instituted CBM review.  The PTAB determined that the ‘752 patent was a CBM patent, applying the following test: “whether the patent claims activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.”  Unwired, supra, at *4.  The PTAB’s rationale was that the ‘752 patent’s specification stated that the requesters of the location information could include business like hotels and restaurants who could send targeted advertising to nearby cell phone users.  Id.  The PTAB found that this discussion in the ‘752 patent satisfied the requirement that the claims be “incidental or complementary to a financial activity.”  Id.

The PTAB instituted CBM review of the ’752 patent on several grounds, including invalidity for unpatentable subject matter under 35 U.S.C. §101, obviousness under 35 U.S.C. §103, and written description under 35 U.S.C. §112.  In April 2015, the PTAB issued its decision invalidating all of the challenged claims under §101.

Unwired appealed to the Federal Circuit, arguing that the PTAB had erroneously applied its own improper test (“claims incidental or complementary to a financial activity”), rather than the test set forth in the America Invents Act, for whether the ‘752 patent was a CBM patent.  Google responded that, because the PTAB’s interpretation was based on comments made during the rulemaking process when the AIA was enacted, the PTAB had correctly interpreted the statutory definition of a CBM patent.  Google also argued that the PTAB properly relied on the ‘752 patent’s discussion of potential advertising uses for the invention.

The Federal Circuit gave a straightforward answer to a straightforward question.  The court disagreed with the PTAB and Google.  The court held that the PTAB must apply the statutory definition of a CBM patent set forth in the AIA and cannot use commentary from the rulemaking process to create a broader definition.  Id. at *7.

Under the AIA, §18(d)(1), a CBM patent is one that “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service . . .”.  The court noted that the PTO had adopted this definition without change.  Id. at *7.  However, the PTAB had applied a different definition (“incidental or complimentary to a financial activity”) to the ‘752 patent, one which is broader than the statutory definition.  The court explained that the PTAB relied on a comment made by Senator Schumer during the Senate’s discussion of the AIA, but the comment, like many of the comments made during the Senate hearings, was not included in the statutory definition.  Id. at *8-9.  The comments made by various legislators are irrelevant; the statute is the “operative legal standard” — the PTAB cannot “expand its authority beyond that granted by Congress.”  Id. at *12-13.

The court emphasized its point, at *13:

“The patent for a novel lightbulb that is found to work particularly well in bank vaults does become a CBM patent because of its incidental or complementary use in banks.  Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service.  All patents, at some level, relate to potential sale of a good or service. . . . It is not enough that a sale has occurred or may occur, or even that the specification speculates such a potential sale might occur.”

The court did not reach the question of the patentability of the claims of the ‘752 patent under §101.  The court vacated the PTAB’s decision and remanded the case to the PTAB.

This case clearly establishes that there are limits what a CBM patent is.  The statutory definition is not so broad as to encompass any patent that relates to a financial activity.  CBM review can only be used to challenge patents that cover operations used in the practice, administration, or management of a financial product or service.  Any attempt to broaden the application of CBM review is not supported by law.