Publications

The patent laws require that the claims of a patent (which define the boundaries of what the patent owner can protect) “particularly point out and distinctly claim the subject matter … of the invention.”  35 U.S.C. §112, ¶2.  This requirement is referred to as “definiteness.”  A patent that fails to satisfy this requirement may be found to be invalid for indefiniteness.

The purpose of the definiteness requirement is to provide the public with notice of what the patent owner owns, and what would be an infringement of the patent.  Thus, the definiteness requirement serves to encourage innovation by providing certainty as to what the patent protects.

This year, the United States Supreme Court vacated a Federal Circuit Court of Appeals decision on the grounds that the Federal Circuit’s test for indefiniteness was not precise enough and would result in confusion in the district courts.  The case is Nautilus, Inc. v. Biosig Instruments, Inc., 189 L.Ed. 2d 37 (June 2, 2014).

In 2004, the patent owner, Biosig, sued Nautilus for infringement of a patent covering a heart-rate monitor used in exercise.  Biosig’s heart monitor was different from existing heart monitors in that it was more accurate because it did not measure both electrical signals from the user’s heart and from the muscles.  The Biosig heart monitor used two pairs of electrodes, one pair for each hand of the user.  Biosig alleged that Nautilus, who owned the StairMaster brand of exercise machine, used the patented heart monitor in StairMaster machines.

In its claim construction decision, the district court for the Southern District of New York construed the phrase “spaced relationship” between the electrodes.  The district court held that this phrase means “a defined relationship,” but did not include any reference to the distance between the two pairs of electrodes.

Nautilus moved for summary judgment on the grounds that the “spaced relationship” was indefinite and rendered the patent invalid.  The district court granted the motion on the grounds that the phrase did not specify the distance between the pairs of electrodes or state how that distance should be calculated.

On appeal, the Federal Circuit reversed and remanded the case.  The court held that the test for indefiniteness is met “‘only when [the claim] is not amenable to construction or insolubly ambiguous.’”  Nautilus, supra, at 46, quoting the Federal Circuit’s decision, 715 F.3d 891, 898 (2013).  The Federal Circuit found that Biosig’s patent claims were not indefinite under this test.

On appeal to the Supreme Court, Biosig argued that a claim is definite enough to satisfy section 112 as long as it “provides reasonable notice of the scope of the claimed invention.”  Id. at 47.  Nautilus contented that a claim is indefinite if it is “ambiguous, such that readers could reasonably interpret the claim’s scope differently.”  Id.

In analyzing the issue, the Court explained that section 112 requires a balance.  There will always be some uncertainty, as “the price of ensuring the appropriate incentives for innovation.”  Id. at 47.  However, a claim must also:

“… be precise enough to afford clear notice of what is claimed, thereby ‘appris[ing] the public of what is still open to them.’  [Citations omitted.]  Otherwise there would be ‘[a] zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement claims.’”

Id. at 48.

According to the Court, at 48, section 112 requires that:

“… a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.”

The Court noted that patent applicants have an incentive to be as vague as possible in drafting claims.  Therefore, the Court found that the incentive must be reversed, and the burden should be on the applicant to draft clear and unambiguous claims.  Id. at 48.

The Court held that the Federal Circuit’s test of “amenable to construction” and “insolubly ambiguous” was too imprecise, and would cause confusion in the lower courts.  The Court stated, at 49:

“It cannot be sufficient that a court can ascribe some meaning to a patent’s claims; the definiteness inquiry trains on the understanding of a skilled artisan at the time of the patent application, not that of a court viewing matters post hoc.  To tolerate imprecision just short of that rendering a claim ‘insolubly ambiguous’ would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging ‘zone of uncertainty,’ against which this Court has warned.”

The Court did not address whether Biosig’s patent satisfied section 112’s definiteness requirement or was indefinite and therefore invalid, remanding the case to the Federal Circuit for that determination.

Gov. Jerry Brown has resurrected an expired law, Cal. Code of Civil Procedure section 128.5. This is a positive development for ethical lawyers and their clients, who find themselves dealing with bad-faith litigation tactics coming from another other party or attorney, but without a meaningful way to combat it. This law restores trial courts’ authority to award sanctions, including attorney’s fees, to a party if the other side engages in bad-faith tactics in litigation.

An almost identical version of Cal. Code of Civil Procedure section 128.5 had been in effect until December 31, 1994, but expired in 1995, leaving only its companion, Cal. Code of Civil Procedure section 128.7, in effect. That “watered down” statute was narrower, allowing sanctions for filing meritless and frivolous complaints, motions, or other pleadings, but not for other bad faith litigation tactics and conduct. Now, lawyers and parties will once again be subject to sanctions for conduct that is “totally and completely without merit” or done “for the sole purpose of harassing an opposing party.” Cal. Code of Civil Procedure section 128.7 will also remain effective.

“Prior to this bill, courts had tools to sanction lawyers who brought frivolous lawsuits but not sanctions if they behaved badly,” said Kim Stone, president of the Civil Justice Association of California. “Now, if the filing is legit, but the lawyer is behaving like a jerk, the court can smack them with the other side’s legal fees.”

The new law is in effect from January 1, 2015 until January 1, 2018, when the California Research Bureau will determine if the law was a demonstrable deterrent on bad-faith litigation conduct.

In the not so distant past, E & J Gallo Winery (“Gallo”) decided that it was not satisfied with only being a player in the wine business.  It decided to expand his horizons and venture into the tequila business, which is currently filled with such players as Patron, Don Julio, Jose Cuervo, and perhaps most importantly, 1800 Tequila (“1800”).  After placing a significant amount of time and effort into the release of its new tequila, Camarena, Gallo was informed that its supplier, Tequila Supremo, had received a cease and desist letter from Agavera Camichines S.A. de C.V. (“Agavera”), the holder of trademark and trade dress rights for the “1800 Tequila” brand.  Accordingly, Gallo brought suit for declaratory relief in the United States District Court in the Eastern District of California.

Agavera and co-defendant, Proximo Spirits Inc. (“Proximo”), counterclaimed that Gallo’s Camarena bottle design infringes Proximo’s registered trade dress and also constitutes false designation of origin under the Lanham Act and unfair competition under common law.  Gallo sought and prevailed on its motion for summary judgment before the Honorable Judge Lawrence J. O’Neill of the Eastern District of California.  Judge O’Neill found that Proximo failed to raise a genuine issue as to whether its trade dress was distinctive.  Furthermore, it was found that there was no likelihood of confusion between 1800 Tequila and Camarena.  Proximo moved for reconsideration on grounds that its trademark registration and related description of the 1800 Tequila bottle and stopper should have constituted sufficient evidence for a trier-of-fact to rely on in deeming the bottle distinctive.  Nonetheless, Judge O’Neill denied the request.  The court also denied Proximo’s motion to dismiss the declaratory judgment action on grounds that the court lacked subject matter jurisdiction.  As a result, Proximo appealed the decision to the Ninth Circuit to challenge the court’s ruling on the motion to dismiss and its grant of summary judgment on the counterclaims.  

The Ninth Circuit affirmed each point and held that under the Declaratory Judgment Act (“DJA”), an actual controversy exists between the parties.  Discovery revealed that Agavera and Proximo are part of a conglomerate known as “Grupo Cuervo.”  The Ninth Circuit stated that, “[I]n light of its findings, which are undisputed and supported by ample record evidence, the court did not err in holding that an actual controversy exists under the “DJA.”  The Ninth Circuit found that Proximo’s argument that Judge O’Neill deprived himself of jurisdiction to enter final judgment when he granted a motion by Gallo to voluntarily dismiss under Federal Rule of Civil Procedure 41(a)(2) was “almost out of hand.”  The Ninth Circuit stated that “[I]n this instance, the Court had already entered judgment on Appellants’ counterclaims and received Appellants’ statement of no opposition when it granted Gallo’s motion to voluntarily dismiss the declaratory action.  The contention that the granting of that unopposed motion somehow disposed of prior rulings on which judgment had already been entered is without merit.”

With regard to the merits of the counterclaim, the Ninth Circuit acknowledged that the disposition of an infringement claim is generally disfavored on summary judgment, and remained “mindful that likelihood of confusion is typically a question for the jury,” but nonetheless found “no factual dispute worthy of a jury.”  The Ninth Circuit stated that, “[A]fter reviewing the bottles and the record de novo, we conclude that the Camarena and 1800 trade dresses are so dissimilar that no reasonable juror could conclude otherwise.”  Thus, the Ninth Circuit affirmed every decision at issue in the appeal and the matter was concluded with Camarena to be distributed without further intellectual property contestations from Proximo.

Misguided Ruling in Cochran v. Schwan’s Home Service, 228 Cal. App. 4th  1137 (August 12, 2014)

There is an old saying – I think it is German – that only a fool confuses loss and gain.  Let me add to that notion by noting that I would be an unhappy human if I thought that everything that was good for you was bad for me.  The world doesn’t work that way. Something good can happen to you without it hurting me in any way.   If you disagree with that notion, stop reading now.

In August 2014, the California Court of Appeal considered an employer’s obligation to reimburse its employees for the business use of their personal cell phones. The case boiled down to one central question:

Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job?

The answer from the Court was that reimbursement is always required.  Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee. Thus, to be in compliance with California Labor Code section 2802, the employer must pay some reasonable percentage of the employee’s personal cell phone bill.

On my to-do list is to write a letter to the California Supreme Court urging that the case be de-published (which means divested of any precedential value).  As a matter of public policy, it is a crazy result – the court analyzed section 2802 to determine benefit to the employer, when previous courts have almost always applied a “cost to the employee” test.  The decision finds that an employee must be reimbursed for a cost, regardless of whether the employee actually incurred one.  In so doing, the Court is policing alleged “windfalls” to employers rather than safeguarding employees.

If a phone company’s subscription charge requires that an employee pay $X dollars for X minutes (or a flat fee for unlimited usage) and that employee’s combined employment and non-employment use of the phone falls below X minutes (or fails to hit even a hypothetical limit), then no additional charge has been incurred by the employee.  The employee would pay the same even if he/she did not work for a company that mandated personal cell phone use.

The Cochran Court’s “benefit to the employer” test results in crazy outcomes:   Suppose I drive myself to work rather than take public transportation, getting me to work earlier than my co-workers, and this benefits my employer. Should my employer pay a portion of my car payment?   Another problem with the Court’s ruling is evidenced in its inability to give employers any specific guidance on how much of the monthly cell phone cost they should pay, or any formula or guide for determining its portion.   I believe that is because it is hard to develop a formula for reimbursing a cost that doesn’t exist or is not charged in increments.

Ok, I will step off my soapbox now.

The Cochran Court’s ruling appears pinned to “mandatory use” of personal cell phones.  The Court expressly stated, “If an employee is required to make work-related calls on a personal cell phone then he/she is incurring an expense for purposes of section 2802.”  The question for employers then, is: “Do we mandate personal cell phone use by employees?”  If the answer is “yes,” then employers should discontinue that mandate or begin to reimburse employees for their “costs.”

If an employer elects to reimburse (rather than discontinue any personal cell phone use mandate), it may consider paying a fixed monthly “phone use” allowance toward the obligation. If an employee’s actual cost incurred exceed that allowance, the employee could submit a request for reimbursement for the greater amount.   Generally, courts and the Labor Commissioner will uphold such fixed “allowance” arrangements if they are reasonably based on costs actually incurred.

As I point out above, however, with many phone plans, that “reasonably based” standard might be hard to meet.  That is so because, if an employee’s work use of his/her telephone falls within the minimum cost of the cell phone subscription, there may be no actual cost; but some rationale could likely be developed based on the ratio between cost of service to the employee and some reasonable estimate of work-related phone use.

Alternatively, employers may choose to issue company-owned phones or give employees the option of using either their own phones or a company-issued device and service. If those policies clearly and unambiguously give the employee the choice of a company-provided phone or use of a personal phone, then the employer can plausibly argue that it does not mandate personal phone use by employees.   Given the Cochran ruling it might be prudent to strengthen any policies (to make clear that personal phone use is not mandated). The use of a written notice and signed election form might also be useful.   Of course, some later court might conclude (as some commentators have) that any employee use of a personal phone for business use obligates the employer to bear some portion of the cost of the employee’s phone.

By: Intellectual Property Group

Victims of trade secret theft often can seek a variety of civil and criminal remedies against those who have absconded with proprietary information.  The Ninth Circuit however recently rejected criminal charges in a situation where the claims could be addressed as a civil matter under California’s trade secret laws.

In United States v. Nosal, David Nosal was sued by his former employer, the Korn/Ferry executive search and placement firm.  After leaving Korn/Ferry, Mr. Nosal contacted several former colleagues who were still working with the company and asked them for assistance with his efforts to set up a competing business.  Mr. Nosal’s former co-workers had access to a significant amount of proprietary information on the Korn/Ferry computer system, and assisted Mr. Nosal by using this access in order to provide names, contact information, and other confidential data from Korn/Ferry’s proprietary database to Mr. Nosal.  Although their access to the database was authorized, the employees provided information to Mr. Nosal in violation of a trade secret and nondisclosure agreement with their employer.

Responding to Korn/Ferry’s complaints, the United States government indicted Mr. Nosal on multiple criminal counts, including mail fraud, theft of trade secrets, conspiracy, and violations of the Computer Fraud and Abuse Act (“CFAA”).  Specifically, the government claimed that Mr. Nosal conspired with his former co-workers in order to “exceed authorized access” to the company’s computers to defraud Korn/Ferry.

Claiming that the CFAA applies only to unauthorized access to computer systems, not abuse of authorized access by misusing or misappropriating the information obtained through that access, Nosal’s attorneys brought a motion to dismiss the government’s CFAA complaint.  The district court granted that request and the Ninth Circuit agreed.  The courts found that the provisions of the CFAA which prohibit users from “exceeding authorized access” do not extend to situations where users violate use restrictions on data that was otherwise acquired through authorized means.  In the appellate court’s opinion, unless a narrow reading is applied, myriad people across the country could potentially be charged for felony violations of the CFAA simply because they had exceeded the permitted use of data which they otherwise had acquired through authorized means.  The court therefore held that misuse of information otherwise lawfully acquired was properly addressed through civil remedies under the Uniform Trade Secrets Act.  Although the Ninth Circuit’s holding in the Nosal case runs counter to holdings in several other federal appellate courts which have allowed such claims to proceed under the CFAA, the holding in Nosal must be considered when analyzing claims and remedies available to victims of trade secret theft and misappropriation.

While Governor Brown hailed the Legislature on August 30, 2014 for its passage of the new Healthy Workplaces, Healthy Families Act” (Assembly Bill 1522) our prior post was incorrect when it stated that he signed the new bill into law on August 30^th.  In fact, the Governor signed the new bill into law on September 10, 2014.  The law becomes effective July 1, 2015.For a full discussion of the new law, see our prior blog post at: Governor Brown Signs Paid Sick Leave Bill Into Law.

Readers of this blog are familiar with our coverage of the various cases involving high tech firms in Silicon Valley such as Google and Adobe involving alleged “no poaching” agreements that they would not solicit each other’s employees for possible employment.  Both the U.S. Government and plaintiff class action attorneys have alleged that such conduct violates anti-trust laws and/or constitutes unfair competition under California law for violating the provisions of Business and Professions Code section 16600 regarding the prohibitions on non-compete agreements.

Earlier this week, a similar class action lawsuit was filed against various entertainment companies, including DreamWorks Animation SKG and the Walt Disney Co., accusing these companies of agreeing not to “poach” each other’s animation and visual effect artists.  The suit also alleges that the defendants agreed to fix wages and salary ranges for these employees.  The plaintiffs in this new action will likely follow the “roadmap” set forth in the Silicon Valley litigation.  It remains to be seen what other industries may be targeted with similar lawsuits in the near future.

For more details concerning this latest lawsuit, please see “DreamWorks Animation, Disney sued over alleged no-poaching scheme,” Los Angeles Times, September 8, 2014.

On August 30, 2014, the Governor signed Assembly Bill 1152 into law and said “tonight, the Legislature took historic action to help hardworking Californians. This bill guarantees that millions of workers — from Eureka to San Diego — won’t lose their jobs or pay just because they get sick.” The new law is called the “Healthy Workplaces, Healthy Families Act.”  Beginning on July 1, 2015, both public and private employers (of any size) will be required to provide eligible employees with paid sick leave “at the rate of not less than one hour per every 30 hours worked.” Eligible employees are those employees who have worked 30 or more days within a year after their date of hire.  Under the new law, exempt employees are deemed to work a 40 hour workweek.  Employees are to be compensated at the same wage as the employee normally earns during regular work hours.  The rate of pay shall be the employee’s hourly wage.  If the employee in the 90 days of employment before taking accrued sick leave had different hourly pay rates, was paid by commission or piece rate, or was a nonexempt salaried employee, then the rate of pay shall be calculated by dividing the employee’s total wages (not including overtime premium pay) by the employee’s total hours worked in the full pay periods of the prior 90 days of employment. There are a few exceptions in which employers are not required to offer the new paid sick leave benefit and they relate mainly to employees who are covered under a collective bargaining agreement, or who work in the construction industry, the home healthcare industry, or the airline industry. Click here to read the full article.

The answer may surprise you.

This dispute over ownership of Facebook ‘likes’ pits the creator of a fan Facebook page for a TV show against the television network that owns the show.  The facts of the dispute are as follows:   From 2008, the CW Network broadcasted the television series “The Game”, a dramatic comedy about the lives of professional football players and their wives and girlfriends.  BET acquired the syndication rights to the series in 2010 and then in 2011 began producing original episodes.

In 2008, when the series was on the CW Network, Stacey Mattocks created a Facebook fan page for the series.  Mattocks did not post any CW or BET owned content and she did not hold the Facebook page out to the public as the “official” series page.  Around October 2010, BET hired Mattocks to perform part-time work managing the series’ Facebook page.  BET then regularly instructed Mattocks to post, or not to post, certain information on the page and provided her with exclusive photos and video clips.  Mattocks posted most of the content on the FB Page, but BET employees also occasionally posted material.  Apparently Mattocks did a good job managing the series’ Facebook page as the number of ‘likes’ grew from around two million to over six million.

In February 2011, BET and Mattocks entered into a written agreement regarding each parties’ rights and privileges regarding the Facebook page. Mattocks granted BET full administrative access to the page, and BET agreed not to exclude Mattocks from the page by changing her administrative rights.  However, it appears that this agreement was silent on which party owned the Facebook page.

After signing the agreement, the parties discussed the possibility of BET employing Mattocks on a full-time basis.  At one time during the course of their negotiations, Mattocks informed BET that she would restrict BET’s administrative access to the page until they concluded their negotiations.  Shortly after Mattocks restricted BET’s administrative rights, BET requested Facebook to migrate the fans of the page to another official series Facebook page created by BET.  Facebook granted BET’s request and migrated the ‘likes’ associated with the previous page to this new BET official page.  That same day BET sent Mattocks a letter declaring her in breach of their written agreement and rescinding all rights previously granted to her concerning any BET intellectual property.  Mattocks promptly sued for, among other causes, conversion of a business interest she held in the Facebook page – namely, the ‘likes’ that the page accumulated while she worked on it.

The court addressed Mattocks’ conversion claim in ruling on BET’s summary judgment motion.  The court noted that under applicable law, a conversion is an unauthorized act which deprives another of his property permanently or for an indefinite time.  To prove a conversion claim, Mattocks would have to introduce facts sufficient to show sufficient ownership of the subject property – the ‘likes’ – and that BET wrongfully asserted dominion over that property.  The court found that Mattocks had not established that she owned a property interest in the ‘likes’ on the Facebook page.  The court reasoned that ‘liking’ a Facebook page simply means that the user is expressing approval of the content.  The user is free to revoke the ‘like’ by clicking an ‘unlike’ button at any time.  The court concluded that if anyone owns ‘likes’ on a Facebook page, it is the users who made them.  Even if Mattocks did have an ownership interest in the ‘likes’, the migration to another BET Facebook page did not amount to conversion because it was not unauthorized; it was done with Facebook’s permission.

The takeaway from this case is not BET’s vindication for migrating the ‘likes’, but rather the court’s position that neither BET nor Mattocks held a proprietary interest in the ‘likes.’  So who owns the ‘likes’ on your Facebook page?  Not  you.