IN THIS ISSUE
Patents
Obviousness-Type Double Patenting May Exist When There Is Neither Common Ownership nor Common Inventorship
Jackpot! The Federal Circuit Revives Aristocrats Indirect Infringement Claims in View of Akamai
Affidavits Are Not Required to Challenge Prior Art Enablement
Infringement Damages Limited to U.S. Sales and Must Not Be Speculative
No Discovery Permitted in Inter Partes Reexamination Proceedings
To Correct Inventorship of a Patent, Go to the PTO, Not the Federal Courts
Patent Marking: An Extrajudicial Admission that the Product Is Covered by the Patent but Not an Estoppel
New Claim Construction Guts Nearly $600 Million Dollar Infringement Award
No Prior Conception Where Contemporaneous Disclosures Failed to Show Knowledge of Complete and Operative Method of Making Invention
When Can a Design Patent Continuation Applications Claim Priority to a Parent?
USPTO Adopts New Professional Conduct Rules
Fifth Circuit Flushes Away Pro Se Plaintiff’s Claims Against Oil Giants for Intellectual Property Theft and Infringement of a “Giant Plunger”
Trademarks
Fourth Circuit Rejects Post-Trial Preclusion Ruling in Paper Towel “Stuffing” Saga
Copyrights
DMCA Safe Harbor Analysis Now the Same in Both Ninth and Second Circuits
No “Safe Harbor” for BitTorrent Website Operator
Vicarious Copyright Infringement Requires a Showing of Supervision or Control
Patents / Obviousness-Type Double Patenting
Obviousness-Type Double Patenting May Exist When There Is Neither Common Ownership nor Common Inventorship
In re Hubbell
by Kenneth C. Cheney and Sungyong “David” In
Addressing an obviousness-type double patenting rejection, the U.S. Court of Appeals for the Federal Circuit upheld a decision by the U.S. Patent and Trademark Office (PTO) Board of Patent Appeals and Interferences (Board), finding that obviousness-type double patenting can exist even when there is no common ownership. In Re Hubbell, Case No. 11-1547 (Fed. Cir. Mar. 7, 2013) (O’Malley, J.) (Newman, J, dissenting).
This case arose from an appeal from the decision of the Board affirming an examiner’s final rejection of all pending claims of a patent application for obviousness-type double patenting. An obviousness-type double patenting rejection prohibits the issuance of claims in a second patent that are not patentably distinct from claims in a first patent. The rejection works to prevent an unjustified extension of the right to exclude and prevents multiple infringement suits by different assignees asserting essentially the same patented invention.
The rejected application and the patent used as the basis for the rejection were owned by two different institutions, and each resulted from research conducted by certain inventors while employed at each of the respective institutions at various points in time. The rejected application was a continuation of a parent application that was filed before the priority date of the patent used in the double patenting rejection. During prosecution of the rejected application, the examiner found that certain claims of the reference patent were a species of the claimed invention in the rejected application and thus rejected the application claims based on obviousness-type double patenting.
The Board affirmed the examiner’s rejection, finding that the genus claim in the rejected application was anticipated by issued species claims of the reference patent. The Board further determined that common ownership was not required where the rejected application and the reference patent shared common inventors. Jeffrey Hubbell appealed to the Federal Circuit.
On appeal, Hubbell argued that the obviousness-type double patenting rejection was improper because the rejection required common ownership. Alternatively, Hubbell argued that he should be allowed to file a terminal disclaimer, or that a two-way obviousness analysis should have been conducted by which the rejection would have only been appropriate if the claims of the later-filed reference patent were an obvious variation of the claims of the rejected application.
The Federal Circuit disagreed, concluding that when assessing obviousness-type double patenting rejections, a complete identity of inventors or common ownership is not required. The Court also explained that a terminal disclaimer was not available to Hubbell to overcome the rejection because the rejected application and the reference patent were not commonly owned, and there is no Sec. 103 (c)-type joint research agreement between the assignees. Compounding Hubbell’s problems, the Court also explained that a two-way obviousness analysis was not applicable because Hubbell admitted that he was at least partially responsible for the delay. The Court therefore affirmed the Board's decision of unpatentability of the application claims based on obviousness-type double patenting.
Dissenting, Judge Newman strongly argued that the majority decision is a “departure from the principles of the law of double patenting” and that the Court “need not create a new protocol wherein the contributions of distinct entities and separate ownership are rejected for ‘double patenting’ instead of examined under the established rules.”
Practice Note: Practitioners should be aware that when common ownership does not exist, obviousness-type double patenting may still be asserted by the PTO but a terminal disclaimer may not be available to overcome the obviousness-type double patenting rejection.
Patents / Indirect Infringement
Jackpot! The Federal Circuit Revives Aristocrats Indirect Infringement Claims in View of Akamai
Aristocrat Techs. Australia PTY Ltd. v. Int’l Game Tech
by Charles J. Hawkins
Addressing the issue of divided infringement in the wake of the en banc Akamai decision, the U.S. Court of Appeals for the Federal Circuit vacated and remanded the portion of a lower court’s summary judgment ruling involving indirect infringement, concluding that the plaintiff deserved an opportunity to press its indirect infringement theory with the benefit of the Court’s clarification regarding inducement. Aristocrat Techs. Australia PTY Ltd. v. Int’l Game Tech., Case No. 10-1426 (Fed. Cir., Mar. 13, 2013) (O’Malley, J.).
Aristocrat and IGT compete in the casino gaming machine industry. Aristocrat filed a lawsuit against IGT in district court, accusing IGT of infringing two patents directed to gaming machines, such as slot machines, and methods for awarding a progressive prize through a bonus game that may appear in addition to the main game. The lower court granted IGT’s motion for summary judgment of non-infringement as to all of the asserted claims of both patents, finding that the accused products required two separate actors: the casino and the player. Under Muniauction and BMC Resources (IP Update, Vol. 11, No. 7), the lower court found that the lack of single actor precluded a finding of direct infringement as a matter of law. Aristocrat appealed, and while that appeal was pending, the Federal Circuit issued its en banc ruling in Akamai (IP Update, Vol. 15, No. 9).
The Federal Circuit considered the lower court’s summary judgment ruling in the context of direct infringement and indirect infringement. On the issue of direct infringement, the Court confirmed that its Akamai decision did not address the principles of the law of divided infringement as it applied to liability for direct infringement. The law of direct infringement, the Court explained, remained unchanged: for a party to be liable for direct infringement, that party must perform all acts necessary, either personally or vicariously. Recognizing that no single actor performed all the claimed method steps in issue here, Aristocrat argued several vicarious liability theories for direct infringement, each of which were rejected by the Federal Circuit. The Court thus affirmed the lower court’s summary judgment finding of no direct infringement.
Although neither of the parties nor the district court spent any significant time addressing the question of induced infringement, the Federal Circuit saw fit to address the issue in view of its Akamai decision. The Court noted that the district court relied on Muniauction to find no direct infringement. However, based on Akamai, the Federal Circuit vacated and remanded the portion of the district court’s ruling as to indirect infringement, noting that in accordance with Akamai, it is no longer required that the patent owner prove that there has been a direct infringement for purposes of establishing indirect infringement. While the Federal Circuit did not express an opinion on the merits of Aristocrat’s indirect infringement claim, the Court noted stated that it was possible that the evidence could support a finding of induced infringement.
Patents / Enablement
Affidavits Are Not Required to Challenge Prior Art Enablement
In re Morsa
by Babak Akhlaghi
Addressing the issue of whether an anticipatory prior art reference was enabled during prosecution, the U.S. Court of Appeals for the Federal Circuit vacated part of a decision by the U.S. Patent Trademark Office (PTO) Board of Patent Appeals and Interferences (Board) that found that applicant had failed to rebut the presumption that prior art references are enabled, finding that affidavits or declarations are not required to challenge the enablement of the prior art reference. In re Morsa, Case No. 12-1609 (Fed. Cir., Apr. 5, 2013) (O’Malley, J.).
Morsa filed an application directed to the furnishing of benefits information and benefits. The examiner rejected the claims being anticipated over a publication entitled “Peter Martin Associates Press Release” (PMA). PMA related to a new product that allows users to “use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.” Pointing to two paragraphs of PMA, the examiner rejected some of Morsa’s claims as being anticipated. Morsa ultimately appealed the examiner’s rejections to the Board challenging, among other things, whether the PMA reference was enabling. Specifically, Morsa argued that PMA was not enabling on its face and that the PMA lacked specific disclosures of structural elements and their association to enable users to “use the Web to screen themselves for benefits, services, health risks, or anything else an agency wishes to implement via its eligibility library.” After the Board affirmed the examiner, Morsa appealed.
On appeal, PTO citing to the 2012 Federal Circuit decision in In re Antor Media Corp. (IP Update, Vol. 15, No. 8) argued that PMA was presumed enabling and Morsa failed to show any evidence to the contrary such as affidavits and/or expert declarations. The Federal Circuit disagreed that such evidence is necessary to challenge the enablement of a prior art reference. The Court explained that the presumption is simply procedural. As such, it is designed to place the burden or persuasion on the applicant in the first instance and does not mandate that when the applicant makes a non-frivolous argument that the cited reference is not enabling the presumption is rebutted. In this situation, the burden then shifts to the PTO to show that the cited reference is indeed enabling. The Court further explained that a non-frivolous argument does not require affidavits or declarations, although such submissions may be useful to show lack of enablement of prior art. The Court explained that “[w]hen a reference appears to not be enabling on its face, a challenge may be lodged without resort to expert assistance.”
Accordingly, the Federal Circuit vacated the finding of the anticipation since both the examiner and the Board failed to engage in a proper enablement analysis after Morsa provided a substantial rebuttal of the presumption of enablement.
Patents / Damages
Infringement Damages Limited to U.S. Sales and Must Not Be Speculative
Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.
by Joseph Speyer
In a decision addressing several damages-related issues, the U.S. Court of Appeals for the Federal Circuit held that a patentee’s damages award cannot be based on extraterritorial sales, that an expert report can not rely on speculation or unreliable evidence, and that the proper starting point for calculating damages from price erosion is the date of first infringement. Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., Case Nos. 11-1218, -1238 (Fed. Cir., Mar. 26, 2013) (Reyna, J.).
After a jury trial, Power Integrations was initially awarded total damages of $34 million. Fairchild moved for remittitur, judgment as a matter of law (JMOL), or, in the alternative, a new trial on damages. The district court agreed that the damages award was contrary to law and, based on an inducement theory presented at trial, remitted the jury’s original award by 82 percent, resulting in a total award to Power Integrations of a little more than $6 million. Power Integrations appealed.
Power Integrations argued that the original jury award was appropriate because it was foreseeable that Fairchild’s domestic infringement would cause Power Integrations to lose sales in foreign markets. The Federal Circuit rejected this argument, finding that “entirely extraterritorial production, use, or sale of an invention … is an independent, intervening act that, under almost any circumstances, cuts off the chain of causation initiated by an act of domestic infringement.”
At trial, Power Integrations had relied upon expert testimony to support its damages theories. The Federal Circuit found this testimony unreliable for two reasons. First, the expert was unable to clearly identify the source of certain documents he had relied upon in making his calculations. Second, the expert had made two unsupported assumptions. The expert assumed that every mobile phone shipped with a charger. The expert also assumed, contrary to the evidence, that each of those chargers incorporated an infringing Fairchild power circuit.
The Federal Circuit explained that these assumptions were impermissibly speculative: “[I]n the end, we are left with an expert opinion derived from unreliable data and built on speculation” and concluded that the district court abused its discretion when it admitted the Power Integrations expert’s report on damages.
The panel also found the same damages report insufficient to sustain an award under a theory of induced infringement. On this issue, the expert again relied on the assumptions discussed to support his conclusion that 18 percent of Samsung’s worldwide charger sales were U.S. charger sales incorporating Fairchild’s infringing circuits. As the Federal Circuit explained, “[A]lthough direct evidence of infringement is not required, we consistently require that the record demonstrate something more than speculation that infringing activity has occurred.” The Federal Circuit concluded that the district court erred in relying upon the 18 percent figure in calculating its remittitur.
In calculating damages from price erosion, the district court had excluded economic or market data prior to the date Fairchild was notified of its infringement. In so ruling, the court prohibited Power Integrations from introducing evidence that Fairchild’s pre-notice infringing sales had depressed the market price of the patented products. In reversing the district court, the Federal Circuit explained that “price erosion analysis relating to damages arising from post-notice infringement must measure price changes against infringement-free market conditions, and thus the proper starting point of such a price erosion analysis is the date of first infringement.”
Patents / Inter Partes Reexamination
No Discovery Permitted in Inter Partes Reexamination Proceedings
Abbott Labs. v. Cordis Corp.
by Amol Parikh
Addressing for the first time whether 35 U.S.C. §24 empowered a district court to issue a subpoena in an inter partes reexamination proceeding, the U.S. Court of Appeals for the Federal Circuit found that § 24 only empowered a district court to issue a subpoena in proceedings in which regulations specifically authorize the parties to take depositions and went on to conclude that subpoenas were not permitted in inter partes reexamination proceedings. Abbott Labs. v. Cordis Corp., Case No. 12-1244 (Fed. Cir., Mar. 20, 2013) (Dyk, J.).
Cordis sued Abbott and another company alleging infringement of two patents held by Cordis for drug-eluting stents. The two defendants requested inter partes reexaminations of both patents. The U.S. Patent and Trademark Office (PTO) agreed to reexamine both patents and rejected all challenged claims as obvious. In response, Cordis submitted an expert affidavit asserting secondary considerations of non-obviousness, including evidence that Abbott had copied the patents. The defendants submitted competing expert affidavits concluding that the claims would have been obvious. The examiner issued a non-final office action affirming the rejection of the claims of one of the patents, finding that Cordis had failed to present evidence of copying.
Later, Cordis sought from a federal district court subpoenas pursuant to § 24, which mandates that upon application by any party, a district court must issue a subpoena to any witness for testimony in connection with “any contested case in the Patent and Trademark Office.” At the same time, Cordis filed petitions with the director of the PTO asking him to confirm that PTO rules do not require that a party obtain PTO authorization prior to seeking enforcement subpoenas under § 24. In the alternative, Cordis asked the PTO to authorize such subpoenas if authorization was required.
The PTO denied Cordis’s petitions, determining that § 24 subpoenas are not permitted by the inter partes reexamination statute, or by any regulation governing inter partes reexamination proceedings. The PTO reasoned that because initial examination in inter partes proceedings do not provide for discovery practice, inter partes reexaminations are not “contested cases” within the meaning of § 24. Subsequently, the district court granted Abbott’s motion to quash the subpoenas, concluding that the PTO’s decision, while not binding, was persuasive and that inter partes reexamination is not a “contested case” within the meaning of § 24. Cordis appealed.
The Federal Circuit recognized that the appeal turned on the question of whether an inter partes reexamination is a “contested case.” In finding that it was not, the Court analyzed the phrase “contested case” in the context of its relationship with adjacent provisions of title 35, the legislative history of § 24, and the interpretation of that provision by other courts.
The Federal Circuit found that the plain meaning of “contested case” means a proceeding for which testimony may be taken for use before the PTO. The Court then analyzed the relationship between § 24 and the immediately proceeding § 23, which entrusts the PTO with the power to decide by regulation which proceedings require testimony to be taken for use before the PTO. The Federal Circuit noted that as originally drafted in 1861, the language of §§ 23 and 24 were part of a single provision, but starting in 1870 and subsequent years, Congress divided the language of that single provision into separate provisions. However, nothing in the subsequent history reveals an intent on the part of Congress to sever the relationship between §§ 23 and 24. The Federal Circuit found that the “contested cases” of § 24 are those for which the director of the PTO has established rules for taking depositions under § 23.
The Federal Circuit also analyzed the legislative history of § 24. The Federal Circuit found that the history demonstrated that § 24 was intended to help the PTO secure deposition testimony that it needed by compulsory process and not to allow parties to secure evidence that the PTO did not consider necessary.
The Federal Circuit also reviewed decisions from other regional courts of appeal prior to the creation of the Federal Circuit. In particular, the Court reviewed decisions from the U.S. Court of Appeals for the First and Third Circuits which both concluded that § 24 is simply a provision giving teeth, through the court’s subpoena power, to authority conferred upon the Commission of Patents to regulate PTO proceedings.
Turning to the case at hand, the Federal Circuit found that district court properly quashed the subpoenas because PTO regulations do not permit parties to take depositions in inter partes reexamination proceedings, and thus, § 24 subpoenas are not available for such proceedings. The Court noted that the only PTO regulations providing for depositions in patent proceedings apply exclusively to interferences, derivation proceedings, and new Board proceedings created by the new America Invents Act (AIA). The Court further noted that each of these is accompanied by a regulation explicitly allowing parties to seek § 24 subpoenas in the covered proceedings. Because inter partes reexamination fall outside of these covered proceedings, the Court found that §24 subpoenas are not available.
Practice Note: Under the AIA, inter partes reexamination have been replaced by inter partes reviews and post grant reviews. Since the new statute provides for discovery in these proceedings, they will likely be treated as “contested cases” for the purposes of § 24. However, the PTO has instituted regulations that would bar the filing of a subpoena without authorization of the Patent Trial and Appeal Board, as set forth in 37 C.F.R. § 42.52. Moreover, recently in Garmin v. Cuozzo, the Patent Trial and Appeal Board promulgated the following five-factor test that it will use to determine whether to allow additional discovery:
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More than a Possibility and Mere Allegation—The mere possibility of finding something useful and mere allegation that something useful will be found are insufficient to demonstrate that the requested discovery is necessary in the interest of justice. The party requesting discovery should already be in possession of evidence tending to show beyond speculation that in fact something useful will be uncovered.
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Litigation Positions and Underlying Basis—Asking for the other party’s litigation positions and the underlying basis for those positions is not necessary in the interest of justice. The Board has established rules for the presentation of arguments and evidence. There is a proper time and place for each party to make its presentation. A party may not attempt to alter the Board’s trial procedures under the pretext of discovery.
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Ability to Generate Equivalent Information by Other Means—Information a party can reasonably figure out or assemble without a discovery request would not be in the interest of justice to have produced by the other party. In that connection, the Board would want to know the ability of the requesting party to generate the requested information without need of discovery.
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Easily Understandable Instructions—The questions should be easily understandable. For example, 10 pages of complex instructions for answering questions is prima facie unclear. Such instructions are counter-productive and tend to undermine the responder’s ability to answer efficiently, accurately and confidently.
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Requests Not Overly Burdensome to Answer—The requests must not be overly burdensome to answer, given the expedited nature of inter partes review. The burden includes financial burden, burden on human resources and burden on meeting the time schedule of inter partes review. Requests should be sensible and responsibly tailored according to a genuine need.
Patents / Inventorship
To Correct Inventorship of a Patent, Go to the PTO, Not the Federal Courts
Rubin v. Gen. Hosp. Corp.
by Blake Wong
Faced with the question of whether a federal district court should change the inventors listed on the face of a patent, the Federal Circuit found that the decision to change inventors was a question of priority of invention, and thus was properly an issue to be resolved by the U.S. Patent and Trademark Office (PTO) by virtue of an interference proceeding. Rubin v. Gen. Hosp. Corp., Case No. 11-1439 (Fed. Cir., Mar. 28, 2013) (Newman, J.).
Before issuance of the patents-in-suit, two teams of researchers raced to identify the genetic mutations that cause familial dysautonomia, an inherited disease also known as Riley-Day syndrome. The Fordham University researchers believed they identified the two genetic mutations first. They then sent an article reporting their findings to a medical journal, with specific instructions not to allow the competing team, from Massachusetts General Hospital (MGH), to peer-review the article. The journal’s editor sent the article to the MGH team despite these instructions. Eight days later, the MGH team submitted an article identifying the same genetic mutations. The MGH team then received patents based on the mutations.
Convinced they identified the mutations first, the Fordham team filed suit in federal district court requesting correction of the MGH patents’ inventorship under 35 U.S.C. § 256. The Fordham team claimed that the district court should substitute them as inventors, or in the alternative, add them as joint inventors. If not for the inadvertent transmission of their article, the Fordham team argued, the MGH team would not have identified the two genetic mutations. On summary judgment, the district court dismissed the case, holding that there was no joint inventorship because there was no “collaboration.” The district court also held that substituting the Fordham researchers as the inventors under § 256 was inappropriate for a district court and more appropriate for the PTO. The Fordham University inventors appealed.
The Federal Circuit agreed with the district court on both issues. Despite the fact that the MGH team received the Fordham team’s article, the Court reasoned that the independence of the teams and the minimal communication between them was not enough collaboration to qualify as joint invention. The Court also held that the dispute between the parties ultimately boiled down to a question of priority, the primary issue being whether the Fordham team or the MGH team was the first to identify the two genetic mutations. This determination was more appropriate for a PTO interference proceeding, not for a federal district court.
Patent Marking Estoppel
Patent Marking: An Extrajudicial Admission that the Product Is Covered by the Patent but Not an Estoppel
Frolow v. Wilson Sporting Goods Co.
by Sarika Singh, Ph.D.
Addressing for the first time whether marking a product with a patent number creates an estoppel preventing a later assertion that the product is not covered by the patent, the U.S. Court of Appeals for the Federal Circuit refused to adopt the doctrine of “marking estoppel,” but nonetheless reversed a lower court’s summary judgment ruling in favor of the defendant, finding that the lower court had erred in holding that defendant’s marking was irrelevant to whether defendant could now argue that marked products were not covered by the patent. Frolow v. Wilson Sporting Goods Co., Case No. 12-1185 (Fed. Cir., Mar. 15, 2013) (Moore J.) (Newman, J., concurring).
Wilson had an exclusive license to Jack L. Frolow’s patent covering certain tennis rackets. Frolow sued Wilson for breach of license agreement and for patent infringement after finding that Wilson was not paying royalties on all licensed articles. The lower court dismissed the infringement claim for failure to state a claim in view of the license agreement. In the breach of contract case, the lower court made a determination of what constituted licensed articles, i.e., rackets covered by unexpired valid claims of the patent. The court granted summary judgment for Wilson for 37 of the 42 racket models upon Wilson’s showing that the rackets did not meet a specified “moment of inertia” limitation of the claims. The court found that Wilson’s marking of 14 racket models with Frolow’s patent number did not raise an issue of material fact because Wilson’s marking had “no bearing on whether literal or doctrine of equivalents infringement has occurred.” The court also declined to find that Wilson’s marking prevented it from challenging whether the accused racket models were licensed articles under a doctrine of “marking estoppel” recognized in some circuits.
On appeal, the Federal Circuit vacated summary judgment on the 14 marked racket models because the lower court had ignored the circumstantial evidence presented by the patent marking, calling it a form of extrajudicial admission that the product falls within the patent claims, which was sufficient under the facts of the case to create an issue of material fact, precluding summary judgment. The Court, however, refused to create a separate equitable doctrine unique to patent law when Congress had already created a remedy under the False Marking Statute, 35 USC § 292.
Judge Newman wrote a concurring opinion, taking the position that Wilson, not Frolow, should bear the burden of showing that marked products were not licensed articles. She disagreed with the majority that the marking statute was related to providing an appropriate remedy for a breach of patent license. Emphasizing that the dispute arose under a contract, she asserted that a party to a contract may be bound to the course of performance of the agreement, which could be an indicator of a waiver or modification to the terms of the contract. Disagreeing with the majority that patent marking and royalty payments were merely circumstantial evidence or admissions, she suggested that Wilson may have waived its right to dispute that the marked products were not licensed articles in view of Wilson’s repeated markings and its exploitation of the full value of the patent as the exclusive licensee over a long period of time. Judge Newman found it incorrect to place the patent-law burden of proving infringement on Frolow, which would ignore his performance and reliance under the contract. She would have the Court place on Wilson the contract law burden of establishing that a different interpretation of the contract than that established by the course of performance. Disagreeing with Judge Newman, the majority asserted that the plaintiff had the burden of proof in a breach of contract claim and the contract interpretation issues raised by her concurrence were evidentiary issues that the court might consider but which did not, however, create any presumption that would shift the burden of proof.
Patents / Claim Construction—Prosecution Disclaimer, Means-Plus-Function Limitations
New Claim Construction Guts Nearly $600 Million Dollar Infringement Award
Saffran v. Johnson & Johnson et al.
by John C. Low
Presenting divergent opinions about whether a patentee has demonstrated a “clear and unambiguous disavowal” of claim scope through prosecution disclaimer and what constitutes “corresponding structure” in means-plus-function claims, a panel for the U.S. Court of Appeals for the Federal Circuit reversed a nearly $600 million jury award for patent infringement based on alternate constructions of two claim limitations. Saffran v. Johnson & Johnson et al., Case No. 12-1043 (Fed. Cir., Apr.l4, 2013) (Lourie, J.)(Moore, J., concurring-in-part)(O’Malley, J., concurring-in-part). None of the panel members could agree on the construction of the pair of claim limitations in issue. However, each of the concurring judges alternately agreed with one of the district court’s constructions of one of the two limitations. However, affirmance of either of the constructions foreclosed infringement.
Representative claim 1 recited “[A] flexible fixation device for implantation into human or animal tissue…comprising: a layer of flexible material…the layer having material release means for release of an at least one treating material in a directional manner when said layer is placed adjacent to a damaged tissue, the device being flexible.” Representative claim 8 recited “[A] method of treating a damaged tissue to promote repair” using a similar “device” with the same “means for release” included as a limitation. The district court found that “device” was non-limiting preamble language and referred to “a device having the limitations called out by the body of the claim.” Both the Federal Circuit and the district court analyzed the “means for release” term as a means-plus-function limitation under § 112 ¶ 6. The district court held that the function of the claimed “means for release” is “to release a drug preferentially toward the damaged tissue” with the corresponding structure being “chemical bonds and linkages.”
A panel majority found that since the term “device” was found in both the preamble and the body of the claims, the term should properly be construed to mean “continuous sheet,” since the patentee had clearly and unambiguously disavowed a broader claim scope during prosecution by distinguishing prior art on the basis that: “(i) his device is a sheet, and (ii) that his device is not a pre-formed chamber.” Both the plaintiff and Judge O’Malley argued that the patentee had only disclaimed device embodiments with a pre-formed chamber, i.e., the only embodiment disclosed in the prior art. However, the majority found that patentee’s alternative arguments also limited the claims, and that the patentee’s definitive statement that “the device is a sheet” supported prosecution disclaimer. The majority found that the specification’s various embodiments and descriptions of the aim and benefits of the invention supported the “continuous sheet” construction and specifically excluded the defendant’s stent devices having open mesh holes.
A majority also found that that the proper corresponding structure for the claimed “means for release” is “hydrolyzable bonds” because “no non-hydrolyzable bonds are discussed or suggested” in connection with the preferred embodiment of the invention, and the specification distinguished the prior art based on the use of hydrolyzable bonds. The majority explained that “[u]nder § 112, ¶ 6, the question is not what structures a person of ordinary skill in the art would know are capable of performing a given function, but what structures are specifically disclosed and tied to that function in the specification.”
Judge Moore disagreed with the majority that “chemical bonds and linkages” was not a “corresponding structure.” Judge Moore argued that that § 112 ¶ 6 requires only “some link between a generic structural reference and a claimed function.” Judge Moore also criticized the panel majority as “punish[ing] the patentee for providing a detailed description of his preferred embodiment.” Judge Moore also found the panel majority’s construction to be unnecessary due to the resolution of the case based on the “device” construction. On that basis, she characterized the majority’s “means for release” analysis as dicta.
Patents / Conception and Inventorship
No Prior Conception Where Contemporaneous Disclosures Failed to Show Knowledge of Complete and Operative Method of Making Invention
Dawson v. Dawson
by Vinu Raj
Addressing the issue of conception in an interference proceeding, the U.S. Court of Appeals for the Federal Circuit affirmed a decision by the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences (Board), finding that disclosures related to the subject matter at issue were insufficient to prove a prior conception date where the disclosures failed to show that the inventor possessed a definite and permanent idea of the complete and operative invention as it is thereafter to be applied in practice. Dawson v. Dawson, Case Nos. 12-1214, -1215, -1216, -1217 (Fed. Cir., March 25, 2013) (Bryson, J.) (Reyna, J., dissenting).
The two patents at issue covered a process for topically applying an antibiotic to the eye for treating eye infections. The patents issued in 2001 and 2003, respectively, based on a March 1999 application filed jointly by Drs. Chandler Dawson and Lyle Bowman, who assigned their rights to InSite Vision Inc. Prior to joining InSite, Dr. Dawson gave a presentation related to the topical use of the antibiotic azithromycin to treat eye infections at a 1997 conference of the World Health Organization (WHO). At the time, Dr. Dawson was employed by the University of California, San Francisco (UCSF). In 2007, UCSF provoked an interference by filing a patent application that generally copied the specification and claims from the two InSite patents and named Dr. Dawson as the sole inventor.
In the interference proceedings before the Board, UCSF attempted to prove that Dr. Dawson alone had conceived of the claimed inventions and had done so while employed at UCSF. UCSF primarily relied upon contemporaneous disclosures based on Dr. Dawson’s presentation at the 1997 WHO conference and accompanying documents. The Board found that UCSF had failed to prove sole conception by Dr. Dawson and that prior to his collaboration with Dr. Bowman at InSite, Dr. Dawson “did not fully appreciate how [his] idea was to be implemented in actual practice.” UCSF appealed.
The Federal Circuit affirmed the Board’s conclusion that UCSF failed to prove sole conception by Dr. Dawson. The Court reiterated that conception requires the “formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice the definition of conception.” The Court explained that conception is complete only when the idea is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.
The Federal Circuit found that the contemporaneous disclosures of the alleged conception showed only that Dr. Dawson had a general idea for a future research plan for developing a topical azithromycin treatment for eye infections. This finding was supported by a description in the disclosures of Dr. Dawson’s presentation as a “preliminary” statement about a “possibility” or “potential use” of a topical antibiotic eye infection treatment alongside a recommendation for continued work and a request to “report back” at the next meeting.
In response to UCSF’s contention that the Board improperly required a showing of reduction to practice in order to prove conception, the Federal Circuit noted that while conception does not require reduction to practice, the inventor must still possess an operative method for making the invention, emphasizing the difference between conceiving a way to make an idea operative and knowing that a completed invention will work for its intended purpose.
Patents / Design Patents
When Can a Design Patent Continuation Applications Claim Priority to a Parent?
In re Owens
by Roozbeh Gorgin
Addressing the issue of when and under what circumstances a design patent application can receive the benefit of the written description of its parent, the U.S. Court of Appeals for the Federal Circuit denied a bid by a bottle designer to claim priority to a parent application where a continuation attempted to claim only certain portions of the bottle he designed, finding that the introduction of dotted, unclaimed boundaries introduced new matter. In re Owens, Case No. 12-1261 (Fed. Cir., Mar. 26, 2013) (Prost, J.).
Timothy Owens appealed a decision of the United States Patent and Trademark Office Board of Patent Appeals and Interferences (Board), affirming a rejection of his continuation design patent application. The continuation application sought to claim the benefit of priority to a parent design application, which ultimately issued as a U.S. design patent. Owens conceded that without the benefit of priority to the earlier application, the continuation application was barred by prior sales.
The continuation application claimed certain design elements found on the top and side portions of the original mouthwash bottle disclosed and claimed in the parent patent, including an upper portion of the bottle’s front pentagonal center panel. To indicate what portion of the center area was claimed in the continuation application, Owens bisected the top of the front pentagonal panel with a broken line. The examiner rejected the application, reasoning that the addition of the broken line defined an entirely new trapezoidal-shaped surface that constituted new matter. The examiner found no evidence that, in the parent application, Owens indicated processing such a trapezoidal region and rejected the continuation application for lack of written description under § 112, ¶ 1.
After the Board affirmed the examiner, Owens appealed.
On appeal, Owens argued against the notion that his continuation application claimed a trapezoidal-shaped area at all but explained that in order to claim his new design element, he was simply claiming a new boundary. However, as all parties agreed, the newly introduced broken line was “unclaimed.” Accordingly, Owens argued that the Board applied the wrong written description test to his case, one which erroneously treated his unclaimed boundary as though it were claimed.
The Federal Circuit, in affirming the Board, found that by introducing figures with a bottle that was bisected at the top of its pentagonal panel, Owens introduced new subject matter in his design patent application , i.e., the trapezoidal region. The Federal Circuit agreed with the Board that nothing in the parent application’s disclosure suggested anything uniquely patentable about the top portion of the bottle’s front panel, nor was there anything in the parent application indicating that Owens had in his possession a bottle design that was bisected at the top of its pentagonal panel.
In addressing whether, and under what circumstances, a patentee can introduce an unclaimed boundary line in a continuing application and still receive the benefit of the written description of its parent, the Federal Circuit suggested that there are circumstances in which an unclaimed boundary line may not constitute new matter, such as if it only makes explicit a boundary that already existed but that was previously unclaimed in the original disclosure.
Patents / Rules of Professional Conduct
USPTO Adopts New Professional Conduct Rules
by Bernard P. Codd
The U.S. Patent and Trademark Office (USPTO) recently released new rules for professional conduct that take effect on May 3, 2013. See 78 Fed. Reg. 20180 (April 3, 2013). The new rules are largely based on the American Bar Association’s (ABA) Model Rules of Professional Conduct. Noting that 50 U.S. jurisdictions (49 states and Washington, D.C.) have adopted the ABA model rules, the USPTO explained the new rules provide attorneys with consistent professional conduct standards and large bodies of both case law and opinions written by disciplinary authorities that have adopted the rules. While professional conduct and disciplinary opinions from the various state bars may be useful, the USPTO explained they would not be binding precedent, as the USPTO would be its own jurisdiction.
The new rules largely track the numbering of the ABA Model Rules. For example, USPTO Rule 11.101 parallels ABA Model Rule 1.1 and USPTO Rule 11.102 parallels ABA Model Rule 1.2, and so on.
There are several important distinctions between the USPTO Professional Conduct Rules and the ABA Model Rules. The USPTO did not include portions of the ABA Rules that are not relevant to practice before the USPTO, but did include other rules not in the ABA Rules that are specific to USPTO practice. For example, there are no references to criminal law issues in the USPTO Rules. On the other hand, the USPTO retained the requirement that patent practitioners disclose to the USPTO all information necessary to comply with the duty of disclosure rules.
In other rulemaking, the USPTO recently implemented several technical corrections to the America Invents Act (AIA) that were enacted January 14, 2013. In one correction, the USPTO specified that the 14-month period within which the USPTO must issue a notice of rejection or notice of allowance and the three-year application pendency period for determining patent term adjustment (PTA) are to be measured from the same date, i.e., the date of filing the application under 35 U.S.C. § 111 or the commencement of the national stage under 35 U.S.C. § 371. In another correction to the PTA, applicants can extend the period for requesting reconsideration of the PTA determination from two months up to seven months after patent grant via extensions of time in accordance with 37 C.F.R. § 1.136.
Furthermore, the USPTO eliminated the nine-month dead zone for filing inter partes review of first-to-invent patents. As originally enacted, the AIA permitted the filing of a request for inter partes review nine months after issue for all patents (first-to-invent and first-to-file), and post-grant review of first-to-file patents only within the first nine months from date of issue. This created a nine-month dead zone for challenging first-to-invent patents. Under the AIA technical corrections, an inter partes review request can now be filed without waiting nine months in first-to-invent patents. It is still necessary, however, to wait nine-months to file an inter partes review in first-to-file patents.
Patents / Failure to State a Claim
Fifth Circuit Flushes Away Pro Se Plaintiff’s Claims Against Oil Giants for Intellectual Property Theft and Infringement of a “Giant Plunger”
Richards v. BP Exploration
by Donna M. Haynes
Addressing allegations by a pro se plaintiff that oil industry giants stole and infringed her various intellectual property rights related to a “giant plunger” idea submitted to BP by the plaintiff as a means of remedying the Deepwater Horizon oil spill, the U.S. Court of Appeals for the Fifth Circuit affirmed a lower court’s ruling that dismissed plaintiff’s complaint, finding that the complaint failed to recite any facially plausible factual allegations to survive the defendants’ motion to dismiss. Richards v. BP Exploration, Case No. 12-30508 (5th Cir., Apr. 3, 2013) (per curiam).
The plaintiff, Velma Jean Richards, brought a lawsuit pro se in district court against BP; Halliburton Energy Services, Inc.; Cameron International Corporation; and the Gulf Coast Claims Facility (collectively referred to herein as BP), alleging that the defendants stole her copyrighted or patented giant plunger idea and surrendered it into the worldwide oil industry. Richards submitted her giant plunger idea to BP in response to the oil company’s solicitation from the public of Alternative Response Technology (ART) proposals for addressing the oil spill. Richards alleged that she observed media images of her giant plunger idea being used by BP. She further alleged to have filed a provisional patent application presumably covering the giant plunger with the U.S. Patent and Trademark Office.
At the district court, BP filed a motion to dismiss, arguing that Richards only alleged “use” of her plunger idea, which fell outside the scope of copyright infringement, her claim for patent infringement was not actionable because she had not obtained a patent and her theft of intellectual property claim necessarily failed because Richards could not allege any facts establishing that BP used her giant plunger idea in any form. The district court agreed with BP, finding that even if Richards possessed a valid copyright or patent, which the court said was “doubtful,” her bare allegations of theft and use were simply legal conclusions that were not entitled to any presumption of correctness. According to the district court, her claims failed to cross the line from possibility to plausibility. Undetermined, Richards appealed.
In a terse opinion, the Fifth Circuit upheld the district court’s ruling. The Court adopted the district court’s reasoning, finding that Richards failed to state a copyright infringement claim because she did not proffer plausible facts that BP copied any work of original authorship and failed to state a patent infringement claim because she did not allege that defendants made, used, or sold any patented invention owned by her. The Court further found that Richards failed to allege any facts supporting her more general claim of theft of intellectual property under any legal theory. Accordingly, the 5th Circuit affirmed the district court’s judgment of dismissal.
Trademarks
Fourth Circuit Rejects Post-Trial Preclusion Ruling in Paper Towel “Stuffing” Saga
Georgia Pacific Consumer Products, LP v. Von Drehle Corporation
by Rose Whelan
The U.S. Court of Appeals for the Fourth Circuit has now weighed in on the latest turn of events a long-standing dispute between Georgia Pacific Consumer Products and Von Drehle Corp. holding that the district court erred in granting judgment as a matter of law (JMOL) based on Von Drehle’s previously rejected claim preclusion and issue preclusion defenses. Georgia Pacific Consumer Products, LP v. Von Drehle Corporation, Case No. 12-1444 (4th Cir., Mar. 14, 2013) (Keenan, J.).
Plaintiff Georgia Pacific designs and manufacturers paper products and dispensers. In 2002, Georgia Pacific introduced its “enMotion” brand automated touchless paper towel dispenser, designed to use GP’s proprietary, “fabric-like” paper toweling. The dispensers bear marks “enMotion,” “Georgia-Pacific” and a stylized “GP.” Georgia Pacific leases the enMotion dispensers to distributors who sublease them to end users such as hotels and restaurants. The leases and subleases expressly provide that only enMotion brand paper toweling may be used in the dispensers.
In 2004, Van Drehle began selling lower-quality paper towels designed for use in Georgia Pacific’s enMotion dispenser. Georgia Pacific brought several suits for contributory trademark infringement against Van Drehle and Van Drehle’s distributors based on the “stuffing” of the enMotion dispenser. In September 2010, the 4th Circuit vacated the district court’s grant of summary judgment for holding that it was possible that restroom users could confuse inferior paper towels with, Georgia Pacific’s product and remanded the case back to the district court (IP Update, Vol. 13, No. 9). Less than one month later, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court’s holding of non-infringement for Myers Supply, one of Van Drehle’s distributors, after a bench trial (IP Update, Vol. 13, No. 10).
On remand from the 4th Circuit case, for the first time Van Drehle raised the defenses of claim preclusion and issue preclusion in a motion to amend its answer. The district court initially denied Van Drehle’s request to amend its pleadings and its request for reconsideration, finding that the request was untimely and prejudicial to Georgia Pacific. After Van Drehle’s initial request, the U.S. District Court for the Northern District of Ohio found for another distributor, Four-U-Packaging, Inc., based on a preclusion defense arising from the Myers decision. Van Drehle again filed a motion to amend its answer and a motion for summary judgment based on those defenses. Without a ruling from the court on those motions, the case proceeded to trial and the jury found in favor of Georgia Pacific.
After trial, Van Drehle renewed its request for judgment as a matter of law (JMOL) based on its preclusion defenses and filed an additional motion seeking again to supplement its answer. This time, in a reversal of its previous orders, the district court allowed Van Drehle to assert its preclusion defenses and entered JMOL in Van Drehle’s favor. The district court explained its reversal by Van Drehle’s reliance on the subsequent Four-U ruling. Alternatively, the court stated that it would consider the preclusion defenses sua sponte. Georgia Pacific appealed.
The 4th Circuit categorically rejected the district court’s finding, holding that it acted in an arbitrary manner and thus abused its discretion. The Four-U decision, the 4th Circuit reasoned, did not independently address the merits of Georgia Pacific’s claims, but rather was decided on the preclusion defense based on Myers. Therefore, the Four-U decision could not revive Van Drehle’s untimely preclusion defense that was substantively based on Myers. Rather, according to the 4th Circuit, Van Drehle waived its preclusion defense based on Myers by waiting 480 days after the district court decision in that case to raise the defense. Van Drehle’s delay caused Georgia Pacific to spend considerable time and money litigating the case through appeal and remand and by allowing Van Drehle to assert its untimely defense after trial prejudiced Georgia Pacific. The 4th Circuit also rejected the district court’s alternative consideration of the preclusion defenses sua sponte, holding that no special circumstances exist that would justify this issue being raised, sua sponte, after prior rejection of it.
Copyrights / DMCA Safe Harbor
DMCA Safe Harbor Analysis Now the Same in Both Ninth and Second Circuits
UMG Recordings, Inc. v. Veoh Networks, Inc.
by Han (Jason) Yu
The U.S. Court of Appeals for the Ninth Circuit has withdrawn its 2011 opinion applying the “safe harbor” provision of the Digital Millennium Copyright Act (DMCA) to protect a file sharing site (IP Update, Vol. 15, No. 1) and issued a superseding opinion which, while maintaining the same conclusion, modified part of the previous holding to resolve an apparent conflict with the U.S. Court of Appeals for the Second Circuit’s decision in Viacom v. YouTube (IP Update, Vol. 15, No. 5). UMG Recordings, Inc. v. Veoh Networks, Inc., Case No. 09-56777 (9th Cir., Mar. 14, 2013) (Fisher, J.).
Veoh allows users to “upload” videos to its site, which can then be accessed and shared by others via streaming and/or downloading. Like other video-sharing sites, Veoh’s servers automatically break down user-uploaded video files into “chunks” and then convert them into suitable file format for playback by other users. Veoh’s computers also automatically extract metadata from content information users provide to help others locate videos for viewing. Veoh employs various technologies to automatically prevent copyright infringement on its site, but despite its efforts, some users were able to download unauthorized videos containing UMG music. As an affirmative defense against UMG’s infringement claims, Veoh claimed protection under the safe harbor provisions of § 512(c) of the DMCA, which exempt online service providers from monetary damages and most forms of equitable relief for infringement of copyright “by reason of the storage at the direction of a user of material.” To qualify for the safe harbor protection, however, an online service provider must meet the following requirements: no actual or apparent knowledge of the infringement and no financial benefit directly attributable to the infringing activity where the service provider has the right and ability to control such activity.
On appeal, UMG contended that Veoh’s automated processes went beyond just “storage” and, therefore, were outside of the § 512(c) safe harbor provisions. The 9th Circuit confirmed that the statutory language “by reason of the storage” encompasses the access-facilitating processes that automatically occur when a user uploads a video to Veoh.
UMG also contended that Veoh should be denied the § 512(c) safe harbor protection because of its general knowledge that its site could be used to post infringing material. The Court refused to adopt such a general-knowledge standard, noting that it would render the safe harbor a “dead letter.” According to the 9th Circuit, service providers should not suffer the loss of safe harbor protection because they do not locate and remove infringing material of which they do not have specific knowledge.
The third contention by UMG was that Veoh should be deemed to have the right and ability to control infringing activity (it was undisputed that Veoh received a financial benefit therefrom) based on its general ability to “locate infringing material” and “terminate users’ access” (a common law vicarious liability standard employed by the 9th Circuit in A&M Records v. Napster, see IP Update, Vol. 4, No. 3). In declining to follow Napster, the 9th Circuit held that for DMCA purposes, “control” requires something more than just the general ability to locate infringing material and terminate users’ access. Rather, resolving an apparent conflict with the 2nd Circuit, the 9th Circuit adapted the Viacom test, which states that a service provider has the requisite “control” as long as it has “substantial influence” on the activities of users, which influence may be based on high levels of control over user activities or based on purposeful conduct such as intentional inducement. It is in this regard that the 9th Circuit’s revised opinion differs from its original 2011 opinion (in which it held that a service provider must be aware of specific infringing material to have the requisite “control”).
The 9th Circuit also concluded that none of the Veoh’s investors should be held secondarily liable for copyright infringement. According to the 9th Circuit, secondary liability (i.e., contributory liability, vicarious liability, and inducement) cannot be based on the mere fact that the named investors together control a majority of the seats on the board, unless they were on some level working in concert to control and direct Veoh’s activities.
Practice Note: The 9th Circuit’s new opinion in Veoh, together with the 2nd Circuit’s decision in Viacom, provides further clarity on the DMCA safe harbor rules and their application to online service providers that host user-generated content (UGC). Content owners, in particular, should carefully evaluate these decisions and adjust their enforcement and litigation strategies accordingly. Also, see the 9th Circuit’s discussion of vicarious liability in Luvdarts v. AT&T Mobility (IP Update, this issue) as well as the discussion of the DCMA safe harbor provision in Columbia Pictures v. Fung (IP Update, this issue).
Copyrights / Contributory Liability / Digital Millennium Copyright Act
No “Safe Harbor” for BitTorrent Website Operator
Columbia Pictures Industries, Inc., et al. v. Gary Fung, et al.,
by Sarah Bro
The U.S. Court of Appeals for the Ninth Circuit affirmed a summary judgment ruling in favor of seven film studios finding that the defendant induced third parties to download infringing copies of the plaintiffs’ copyrighted works. Columbia Pictures Industries, Inc., et al. v. Gary Fung, et al., Case No. 10-55946 (9th Cir., Mar.21, 2013) (Berzon, J.).
Seven film studios—including Columbia Pictures, Disney and Twentieth Century Fox—sued Gary Fung and his company isoHunt Technologies, claiming that Fung induced third parties to download infringing copies of the studios’ copyrighted works through Fung’s websites, such as torrentbox.com and isohunt.com—websites that help users find copies of videos to download and stream through a type of peer-to-peer file sharing network.
The district court found Fung liable for contributory copyright infringement for inducing others to infringe the studios’ copyrights and also found that Fung was not entitled to protection from damages liability under the safe harbor provisions of the Digital Millennium Copyright Act (DMCA). After a permanent injunction was issued, Fung appealed.
On appeal, Fung challenged the full holding, including the scope of the injunction claiming that it was vague, punitive and an impediment to free speech. The 9th Circuit, citing the Supreme Court decision in Grokster III (which also dealt with peer-to-peer file sharing technology), analyzed the facts of the present case under the four elements of the Grokster III inducement principle: the distribution of a device or product, acts of infringement, an object of promoting its use to infringe copyright and causation.
Inducement Liability Under Grokster III
With respect to the first element of the Grokster III inducement liability standard, Fung argued that he did not develop or distribute products, nor did he develop the BitTorrent protocol used by his websites. The 9th Circuit, however, distinguished copyrights as expression that are not necessarily in the form of products or devices. Thus, the court concluded that a copyright can be infringed through “culpable actions resulting in impermissible reproductions of copyrighted expression,” even if such actions are the provision of services used in accomplishing the infringement.
Fung was not able to rebut the second “acts of infringement” Grokster III factor after the studios presented evidence that Fung’s services were widely used to infringe copyrights by allowing uploading and downloading of copyrighted material. Accordingly, the court found for the studios on the second factor, noting that the “predominant use” of Fung’s services was for copyright infringement.
As to the third Grokster III factor, the court agreed with Fung that mere knowledge of a potential to infringe, or knowledge of actual infringing uses of a product or service, is not enough for liability. Nevertheless, the court found there was more than enough evidence that Fung offered his services with the object to promote their use to infringe copyrighted material. Specifically, the court found that the evidence showed Fung actively encouraged uploading files of specific copyrighted material; he provided links for certain movies and urged users to download those movies; he affirmatively responded to requests for help in locating and playing copyrighted materials; and, he even personally instructed users on how to burn infringing files to DVDs. The court also referenced two points of circumstantial evidence raised by the Grokster III opinion, namely, that Fung took no steps to develop filtering tools to diminish infringing activity and that he generated revenue by selling advertising space on his websites.
Finally, as to causation, the court adopted the studios’ interpretation of causation and held that the acts of infringement by third parties need only be caused by the product distributed or services provided. This was contrary to Fung’s theory of causation (which was also joined by amicus curiae, Google) wherein Fung claimed that the infringement must be directly caused by a defendant’s inducing messages.
The Digital Millennium Copyright Act “Safe Harbor” Provisions
Fung also asserted affirmative defenses under three of the DMCA’s safe harbor provisions, 17 U.S.C. §512(a), (c) and (d). Although the studios argued that there can never be a DMCA safe harbor defense to contributory copyright liability inducement, the 9th Circuit disagreed, noting that the safe harbor provisions do not exclude vicarious or contributory liability from its protections. Even so, the court denied all of Fung’s safe harbor defenses.
In particular, the court concluded that Fung did not qualify for protection under §512(a) for transitory digital network communications because Fung’s torrent file trackers, not the third party users, were responsible for selecting the copyrighted data to be transmitted.
The court also concluded that § 512(c), relating to information residing on networks or systems at the direction of the users, was also not applicable because Fung had actual and “red flag” knowledge of infringing activity on his system due to his own active encouragement of infringement, as well as the fact that Fung did not dispute evidence that he personally used his isohunt.com website to download infringing material.
According to the 9th Circuit, Fung did not qualify for protection under §512(c) or §512(d) (for providers of information location tools) because Fung received a “financial benefit” from his services by selling ad space and because he had the “right and ability to control” the infringing activity, which was shown through evidence that Fung exerted substantial influence on the activities of the users of his websites.
Finding no available defenses under the DMCA safe harbors, the court affirmed summary judgment for the studios on the issue of liability under contributory copyright infringement. However, the court found various terms of the lower court’s permanent injunction to be vague and unduly burdensome and remanded to the district court to modify certain employment prohibitions and to provide more specific language for several terms in the injunction.
Copyrights / Vicarious Infringement Liability
Vicarious Copyright Infringement Requires a Showing of Supervision or Control
Luvdarts, LLC et al. v. AT&T Mobility et al.
by Michael V. Sardina
In an opinion that elaborates on the degree of third-party supervision required in order to attach vicarious copyright infringement liability, the U.S. Court of Appeals for the Ninth Circuit Court upheld a decision that dismissed claims of vicarious copyright infringement against the major wireless networks for content distributed over their networks. The plaintiffs failed to plead a claim of copyright infringement because there was no identification of any system of supervision in place for the wireless carriers to influence, affect, or control what content its users were sharing on multimedia messaging service networks. Luvdarts, LLC et al. v. AT&T Mobility et al., Case No. 11-55497 (9th Cir., Mar. 25, 2013) (O’Scannlain, J.).
The plaintiffs, Luvdarts and Digipie, are in the business of creating, publishing and selling commercial multimedia messaging content for distribution over a wireless network, including content such as greeting cards, advertisements, news, coupons and games. Luvdarts attaches a notice to each piece of content it sells, indicating that each message it sells can only be shared once. Cell phone users ignored the notice, however, and widespread re-sharing of Luvdarts’ content occurred over major wireless carrier networks. Luvdarts’, accordingly, brought a copyright action against AT&T, Verizon Wireless, Sprint and T-Mobile, alleging that these carriers were liable for between $8 billion and $10 billion worth of damages under a theory of vicarious copyright infringement.
After the district court dismissed the complaint for failure to state a claim on which relief can be granted, the plaintiff’s appealed. The 9th Circuit agreed with the district court, concluding that Luvdarts failed to state a claim under a vicarious liability theory by not alleging that the wireless carriers had at least some capacity to supervise the end users’ actions in resharing Luvdarts’ content.
The 9th Circuit elaborated on the doctrine of vicarious liability under A&M Records v. Napster. Vicarious copyright liability only attaches if a party has the “right and ability to supervise the infringing activity” and “‘a direct financial interest’ in the activity.” Here, the wireless carriers had no way of supervising the use of their networks for the resharing of Luvdarts’ content. Luvdarts’ allegations—that the wireless carriers could implement a supervisory system—was insufficient to state a claim of vicarious copyright infringement. In that respect, Luvdarts failed to explain “what that system is, how it would function, or how much implementing such a system would cost.”
The 9th Circuit also summarily dismissed Luvdarts’ assertion of contributory copyright infringement against the wireless carriers, noting that Luvdarts failed to allege that the wireless carriers had the requisite specific knowledge of the resharing of messages. Luvdarts’ complaint also failed to allege that the wireless carriers took active steps to avoid learning that content was being reshared, apparently under a theory of willful blindness.
Ultimately, the 9th Circuit agreed that Luvdarts’ did not properly plead, and could not prevail, on its claims of vicarious or contributory infringement.
Practice Note: A party alleging a claim of vicarious copyright ability must be prepared to specifically identify in its complaint both the exact content that has been infringed and allege that a third party had the requisite level of supervision over the infringement. On the other hand, third parties that provide platforms where infringement may occur should be protected from vicarious liability if they do not affirmatively supervise infringing activities.