Federal Circuit to Decide Joint Liability Issue En Banc

The Federal Circuit has agreed to decide en banc the issue of joint liability of method claims.  In three cases, the court had discussed the issue of when a method claim is directly infringed by the combined actions of multiple parties.  For direct infringement, at least, the court had taken a very narrow view of infringement in these cases:

BMC Resources, Inc. v. Paymentech, LP, 498 F.3d 1373 (Fed. Cir. 2007)
Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008)
Akamai Techs., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417 (Fed. Cir. Dec. 20, 2010)

In Muniauction, for example, the court held:

Accordingly, where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises "control or direction" over the entire process such that every step is attributable to the controlling party, i.e., the "mastermind."

In the Akamai case from last December, the court went further and stated:

In assessing infringement based on the actions of joint parties, it is not enough to determine for whose benefit the actions serve, for in any relationship there may be benefits that inure in some respects to both parties. This court therefore holds as a matter of Federal Circuit law that there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps. Neither is present here.

The court has now decided to rehear Akamai en banc.  Per today's order, the question presented is:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

UPDATES:
(1) Here's Patently-O's post on this order.  That post references a relevant 2004 article by Mark Lemley and others on divided infringement.

(2) I did some more thinking and analysis of what's going on here.  It turns out there are two other cases applying the BMC/Muniauction reasoning:
Golden Hour Data Systems, Inc. v. emsCharts, Inc., 614 F. 3d 1367 (Fed. Cir. 2010)
McKesson Technologies Inc. v. Epic Sys. Corp., No. 2010-1291 (Fed. Cir. April 12, 2011)

Judge Newman dissented briefly in Golden Hour,  and at length in the recent McKesson Technologies case.  Her dissent in McKesson probably acted as an incentive for the court to order a rehearing en banc in Akamai.  Something else that probably helped was Judge Bryson's concurring opinion in McKesson, joining the majority opinion in view of BMC, Muniauction, and Akamai, but suggesting en banc review.  (The mandate has not yet issued in McKesson, so the outcome of Akamai will probably apply to McKesson eventually.)

What's interesting is looking at the lineup of the judges in the 5 cases decided so far (the judge authoring the opinion is listed first; Chief Judge Rader is just referred to as "Judge" for convenience):

BMC:  Judges Rader, Gajarsa, Prost
Muniauction: Judges Gajarsa, Plager, Prost
Akamai:  Judges Linn, Rader, Prost
Golden Hour:  Judges Dyk, Friedman; Judge Newman dissenting
McKesson:  Judge Linn; Judge Bryson concurring; Judge Newman dissenting

Adding up the scorecard suggests that Judges Rader, Linn, Gajarsa and Prost seem to like the BMC/Muniauction rule, having agreed to it in two cases each.  Judges Dyk, Friedman and Plager are also willing to follow it, in one case each.  Judge Bryson might or might not follow it, especially now that he is free to vote to repeal the rule in an en banc setting.  Judge Newman will obviously vote to overturn the rule.  However, since Judges Friedman and Plager are senior Judges, they won't participate in the en banc panel.  Although enough active Judges voted to rehear the case en banc, based on the previous cases it seems that to overrule BMC and Muniauction, Judge Newman (and perhaps Judge Bryson) will have to pick up the votes of nearly all of the remaining judges who have yet to decide this issue.

Sign of the Day

"This Is Not a Good Sign."  If not, what is?

En Banc Federal Circuit Clarifies Law of Contempt

Today the Federal Circuit released an en banc opinion in Tivo v. Echostar.  This case deals with the standards for contempt proceedings after trial and entry of a permanent injunction.  As such, the issue doesn't come up very often, but the Federal Circuit took the case en banc to clarify -- and overrule -- some of its earlier precedent.  Rejecting the application of the previous "colorably different" test, the court held:

 

Thus, the party seeking to enforce the injunction must prove both that the newly accused product is not more than colorably different from the product found to infringe and that the newly accused product actually infringes.

 

We have stated the test for colorable differences as one that requires determining whether “substantial open issues with respect to infringement to be tried” exist. KSM, 776 F.2d at 1532. In some cases, that has misled district courts to focus solely on infringement by the newly accused devices in deciding contempt. That is the case here. Today, we reject that infringement-based understanding of the colorably different test. Instead of focusing solely on infringement, the contempt analysis must focus initially on the differences between the features relied upon to establish infringement and the modified features of the newly accused products.

 

The primary question on contempt should be whether the newly accused product is so different from the product previously found to infringe that it raises “a fair ground of doubt as to the wrongfulness of the defendant’s conduct.” Cal. Artificial Stone Paving Co., 113 U.S. at 618. The analysis must focus not on differences between randomly chosen features of the product found to infringe in the earlier infringement trial and the newly accused product, Additive Controls, 154 F.3d at 1350, but on those aspects of the accused product that were previously alleged to be, and were a basis for, the prior finding of infringement, and the modified features of the newly accused product. Specifically, one should focus on those elements of the adjudged infringing products that the patentee previously contended, and proved, satisfy specific limitations of the asserted claims. Where one or more of those elements previously found to infringe has been modified, or removed, the court must make an inquiry into whether that modification is significant. If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one, and the inquiry into whether the newly accused product actually infringes is irrelevant. Contempt is then inappropriate. Arbek Mfg., Inc. v. Moazzam, 55 F.3d 1567, 1570 (Fed. Cir. 1995) (“[T]he modifying party generally deserves the opportunity to litigate the infringement questions at a new trial.”).

There is more going on in this opinion, including a separate section on a provision requiring Echostar to disable certain products already sold, but the above holding is of greatest interest.

Oral Argument in Microsoft v. i4i

Today the Supreme Court heard oral argument in Microsoft v. i4i.  The transcript is available here.  As I explained in previous posts on the subject, this cases involves the standard of proof for the difficulty of invalidating a patent.  Microsoft is asking the Court to lower the standard of proof from clear and convincing evidence to a preponderance of the evidence -- at least when the prior art was not considered by the Patent Office (PTO).  In particular, see my most recent post containing some thoughts about the oral argument.  i4i has a case page linking to all of the briefs except for Microsoft's reply brief, which is here.  In addition to counsel for Microsoft and i4i, a deputy Solicitor General argued in support of i4i.

The oral argument did not clearly favor either side.  (This is in contrast, for example, to the oral argument in KSR v. Teleflex, which seemed to predict, correctly, that the Court would overrule the Federal Circuit's standard for proving obviousness.)  Some thoughts:

• The Justices asked all three counsel about the wording of the statute and its construction, which has two separate sentences about proving invalidity, but which does not specify that the standard of proof is clear and convincing evidence.
• Several Justices seemed at least somewhat sympathetic to i4i's argument that the RCA case established a clear and convincing rule in all circumstances.
• The Justices did not ask either i4i's counsel or the deputy SG about either the Grogan or Huddleston cases.  My most recent post observed that if the Justices did ask about those cases, it would have been a good sign for Microsoft.
• There was a fair amount of discussion about an alternative to lowering the standard of proof: a jury instruction saying that the defendant could more easily meet the clear and convincing standard using evidence that was not before the Patent Office.  i4i's counsel described the instruction as follows:

 But you could -- certainly could say that the defendant contends that the patent is invalid because the law presumes that a patent issued by the PTO is valid, the defendant bears the burden of proving invalidity by clear and convincing evidence, and in deciding whether the defendant has met that burden, you may find it more easily met with evidence that you conclude the Patent Office did not consider in evaluating patentability.

         i4i probably likes that idea because Microsoft didn't ask for such an instruction in this case.  Microsoft's counsel pointed out that Microsoft did ask for such an instruction in an earlier case, and that the Federal Circuit rejected the instruction as potentially confusing.  Some Justices commented that even such an instruction would require the jury to decide what prior art had or not been considered byt the PTO.

• Only Justice Breyer expressed concerned about the harm in erroneously granting invalid patents:

JUSTICE BREYER: All those first principles are along the lines of how important patents are and what a disaster is it is to the person once they're invalidated. Okay. I think the other side will say: In today's world, where nobody really understands this technology very well, a worse disaster for the country is to have protection given to things that don't deserve it because they act as a block on trade, they act as monopolies, and they will tie the country up in individual monopolies that will raise prices to consumers, et cetera. You can imagine my spelling out this argument.

A decision is expected by June.  UPDATE:  Here are discussions by SCOTUSblog and Patently-O.

YouTube Copyright School

YouTube has a new video:  "YouTube Copyright School."  I think this is serious, but I'll label it under both "Copyright" and "Humor" to be sure.
(Note to the creator of this video, if you need it:  my DMCA contact information is available in the lower right.)

UPDATE:  Here are comments by EFF, Joe Mullin and Techdirt.  And here's a post by The Onion, thus validating my initial decision to label this under both "Copyright" and "Humor."

FURTHER UPDATE:  Public Knowledge has started a contest to create a better video than YouTube's.   The winner gets a $1,000 prize. 

Facebook Wins Winklevoss Appeal

Today, Facebook won an appeal against the Winklevoss brothers.  The film "The Social Network" featured the lawsuit the Winklevosses filed against Facebook and Mark Zuckerberg, claiming that they and not Zuckerberg invented the concept for Facebook.  The parties settled the case for a reported $65 million in cash and stock.  However, the Winklevosses claimed the settlement was invalid.  Facebook asked the courts to confirm the settlement, which a trial court did awhile ago and which the Ninth Circuit Court of Appeals did today.  Here's the opinion.  Of course, the stock is worth even more now, so don't feel too sorry for the Winklevosses.

Go Celebrate!

It's International "Louie Louie" Day!

Appellee Round Briefs in Viacom v. YouTube and Premier League v. YouTube Appeals

The Appellee round briefs (sometimes called "bottom side" briefs) have been filed in the Viacom v. YouTube and Premier League v. YouTube appeals.  My post about the opening round briefs described the case, which is about the "safe harbor" provisions of the Digital Millennium Copyright Act, 17 U.S.C. §512.  Briefly, the plaintiffs in two related cases in the Southern District of New York -- Viacom et al. in one case, the Premier League et al. in the other -- sued YouTube and Google for copyright infringement.  The plaintiffs claimed that YouTube was responsible when its users uploaded copyrighted videos and music to YouTube.  YouTube claimed it was entitled to the DMCA's "safe harbor" since it took down any copyrighted material promptly upon receipt of a notice that complied with the statute.  The district court agreed with YouTube and granted summary judgment in YouTube's favor in June 2010.  The case is now before the Second Circuit Court of Appeals.

YouTube filed its opening brief on March 31, 2011; its corrected brief is here.  Techdirt has a detailed analysis of YouTube's brief, which is worth reading (and which saves me the trouble of writing my own detailed summary).  Three things I liked about YouTube's brief included: (1) it clearly explained the statutory requirements and why the statute should be interpreted as YouTube claims; (2) it pointed out how the Appellants distorted the record, to try to paint YouTube as a "pirate" site (see pages 11-15 of YouTube's brief); and (3) YouTube cleverly used the plaintiffs' posting of their own videos on YouTube for marketing purposes to support YouTube's legal arguments, such as YouTube's lack of knowledge of what was allegedly infringing (see, for example, pages 44-53).

Thirteen amicus briefs were filed in support of YouTube (not counting the AIPLA brief filed during the opening round of briefs, which mostly favors YouTube).  I co-authored an amicus brief by the Consumer Electronics Association.  The 13 amicus briefs are as follows:

1. Anaheim Ballet, Michael Moore, Khan Academy Inc., Adam Bahner, Michael Bassik, Dane Boedigheimer, Mathew Brown, Michael Buckley, Shay Butler, Charles Como, Iman Crosson, Philip De Villis, Rawn Erickson, Hank Green, John Green, Kassem Gharaibeh, William Louis Hyde, Kevin Nalty, Allison Speed, Charles Todd, Charles Trippy and Barnett Zitron
2. Computer & Communications Industry Ass'n (CCIA) and NetCoalition
3. Consumer Electronics Association
4. eBay Inc., Facebook, Inc., IAC/InterActiveCorp, and Yahoo!
5. Electronic Frontier Foundation, Center for Democracy and Technology, International Federation of Library Associations and Institutions, American Library Association, Association of College and Research Libraries, and Association of Research Libraries
6. Human Rights Watch, Freedom House, Reporters Without Borders, and Access
7. Intellectual Property and Internet Law Professors
8. MP3tunes, Inc.
9. National Alliance for Media Art & Culture and The Alliance for Community Media
10. National Consumers League, Consumers Union of United States, Inc., Consumer Action and the United States Student Association
11. National Venture Capital Association
12. Professor Michael Carrier
13. Public Knowledge

EFF and Public Knowledge have published posts about their briefs.

UPDATE:  Eric Goldman has a lengthy post about YouTube's brief and the amicus briefs.   I'll try not to repeat what Eric says, but here's some of my thoughts about the amicus briefs, organized by topic:

• Stealth Marketing:  The MP3Tunes brief discusses the efforts by Viacom and many other media companies to use YouTube and similar UGC sites for "stealth marketing" purposes.  In so doing, this brief offers perhaps the best practical examples of why Viacom's "generalized knowledge" scheme simply won't work.  Briefly, content companies use YouTube and similar sites to market their content, by uploading their own content using fake or dummy accounts to make the content look like it isn't associated with the content owner.  It's impossible for UGC sites like YouTube to figure this out and properly take down what's authorized and what isn't.  As the brief says, "Internet marketing practices have created a climate of uncertainty wherein service providers cannot differentiate between authorized and unauthorized content on user-generated websites."  Read this entire brief to appreciate it fully.  The brief concludes by showing that after the marketing departments of Viacom or other media companies secretly posted their own content, the same companies' legal departments then sent takedown notices, to which the marketing departments then had to send counter-notices, to re-post the authorized content.  As the brief says, "If media titans with enormous resources like Viacom and EMI cannot monitor their own copyrighted works and keep track of whether the posting of a work is authorized or not, it is absurd to expect service providers, which are not privy to even a fraction of such information, to make these distinctions."

• User Groups:  One of the best amicus briefs at the district court level was by the "Sideshow Coalition," a collection of YouTube users who were able to distribute their own content using YouTube, which traditional media distribution channels didn't easily accommodate.  (The term "Sideshow Coalition" reflected Viacom's dismissal of individual users using YouTube to their benefit as a "sideshow," an expression Viacom left out of its appeal brief.)  While the "Sideshow Coalition" didn't make it to the Second Circuit, there are two briefs of similar user groups, the Anaheim Ballet et al. brief, and the National Alliance and Media Art and Culture et al. brief.  A related brief is by the National Consumers League et al., which discusses the value of consumer reviews.

• "Least Cost Avoidance":  An amicus brief supporting Viacom by Stuart Brotman et al. argued that under the tort law principle of "least cost avoidance," UGC sites should bear the entire cost and liability for monitoring infringements.  The brief by Professor Michael Carrier shows why this principle isn't applicable here.  (After all, this case doesn't involve an oil spill, asbestos, or a defective product.)  It's not clear that YouTube is in fact the least cost provider -- after all, only copyright owners know if content is authorized (see the MP3Tunes brief, for example), and copyright owners are best able to decide issues such as fair use.  Prof. Carrier asks what would have happened if, for example, all photocopier machines were required to automatically refuse to copy any paper that had a copyright notice on it.  The brief by the IP and Internet Law Professors also discusses this issue.

• Free Speech and Political Advocacy:  The briefs by the Human Rights Watch et al. and the Electronic Frontier Foundation et al. discuss the importance of YouTube and other UGC sites, such as Facebook and Twitter, to free speech and human rights, including recent events in places like Egypt, Tunisia, Iran, and elsewhere.

• Rebutting the Content Industries' Claim that UGC Sites Are Causing Enormous Harm:  Two briefs respond to the claims by many of the opening round briefs by Viacom and its amici that "the sky is falling" because of YouTube and other UGC sites.  In sum, the content industries have been making such claims for over 100 years, and have uniformly been wrong.  See my brief on behalf of the Consumer Electronics Association, and Prof. Carrier's brief.

• Filtering:  Two briefs supporting Viacom, by Audible Magic and Vobile, asserted that those companies' filtering technologies could detect allegedly infringing content.  A brief by Public Knowledge rebuts these assertions.  Among other things, filtering technologies can identify content (with both false positives and false negatives, see also my CEA brief); but filtering can't identify infringements.   In other words, a content filter isn't the same thing as an infringement filter.  Content filters can't identify any of the following:  stealth marketing; other authorized content; fair use of content; or de minimus use of content.

• Inducement Liability:  The CCIA brief contains a detailed discussion of the issue of inducement liability.  (I don't necessarily agree with all of the analysis in this brief, but it nicely rebuts arguments that Viacom makes in this case.)

• Statutory Analysis and Discussion of Case Precedent:  As Eric's post notes, several briefs discuss the statutory language and case precedent relevant to these appeals.  These include briefs by the IP and Internet Law Professors, eBay, EFF, and the National Venture Capital Association.  As to precedent, the NVCA brief interestingly notes how its VC members funded many of the defendants in previous cases, including Veoh, LoopNet, eBay, Amazon, and Photobucket.
  

Final updates:  When this post was first filed, I included links to the amicus briefs as they existed at that time.  Since then, several amicus briefs have been re-filed to comply with the Second Circuit's arcane formatting rules.  (The rules actually make a lot of sense, but they are difficult to follow.)  I have since updated the above links to the re-filed briefs; this includes the briefs by Prof. Carrier, the National Consumers' League, eBay, and the NVCA.

Techdirt has a detailed discussion of Professor Carrier's brief.

Google's Testimony Before the House Subcommittee on Intellectual Property, Competition and the Internet

On April 6, 2011, Kent Walker, Google's Senior VP and General Counsel, testified before the Google's Testimony Before the House Subcommittee on Intellectual Property, Competition and the Internet.  This was at a hearing on “Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part II.”  (Any chance that the use of the word "Parasites" in the title of the hearing showed some bias?)  Anyway, Mr. Walker's written testimony can be found here.  Techdirt has an article about the hearing here. 

A few highlights of the written testimony:

Internet technologies are used every day in amazing and perfectly legal ways. Without question, the information technology industry is the fastest growing business sector in the world, regularly experiencing double-digit growth and accounting for nearly one-fourth of our nation’s real GDP growth. The Internet adds an estimated $2 trillion to annual GDP. Interactive advertising alone is responsible for $300 billion of economic activity in the U.S., employing 3.1 million Americans.

The Internet has been a boon to businesses of every kind and size across the country. The efficiencies of the web reduce transaction costs for suppliers and consumers in every sector, while creating entirely new markets. Thanks to the Internet, it’s never been easier to start a business and reach a wide audience. More than a million small and large advertisers use Google as a platform to find customers in an increasingly global marketplace—from Twiddy, a vacation rental business in North Carolina that attributes recent growth and job creation to Google’s advertising tools, to two brothers in Austin Texas who use Google to grow loyalty and demand for premium YETI Coolers, certified to withstand smashing by hungry grizzly bears.

The innovations brought about by the Internet economy have also delivered enormous benefits to content creators. Google empowers traditional artists and an emerging generation of new creators to promote their work to a global audience. Google drives traffic to creators’ websites, sending, for example, four billion clicks a month to news sites. Every minute, users upload 35 hours of video content to our YouTube site.YouTube has allowed performers to rocket from oblivion to fame; has given politicians, pundits, andprotesters a powerful new way to communicate; has facilitated citizen journalism; and has inspired laughter atthe antics of dancing babies.

The Computer and Communications Industry Association has found that industries that rely on fair use and other limitations generate $4.7 trillion in revenue, represent one sixth of total U.S. GDP, and support 17 million jobs. While online piracy remains a serious enforcement problem, we should not lose sight of the overall balance of our nation’s copyright laws, which continues to spur a broad array of American-bred creativity and innovation.

There is much more in Mr. Walker's written comments, which are worth reading.

The Exodus, 2011 Version

Want to see how much easier the Exodus would have been in 2011? Watch this video. Hit the "pause" button frequently to catch all the subtle humor.  (Here's a YouTube link.)

Some Thoughts About the Upcoming Oral Argument in Microsoft v. i4i

On April 18, the Supreme Court will hear oral argument in Microsoft v. i4i.  As I explained in previous posts on the subject, this cases involves the standard of proof for the difficulty of invalidating a patent.  Microsoft is asking the Court to lower the standard of proof from clear and convincing evidence to a preponderance of the evidence -- at least when the prior art was not considered by the Patent Office (PTO).

i4i filed its opposition brief on March 11, and a number of amicus briefs supporting i4i were filed the following week.  i4i has helpfully prepared a web page linking to all the briefs -- thanks, i4i!

The amicus briefs supporting i4i -- and the higher standard of proof -- can be grouped into several categories:

• As expected, several large biotechnology companies or organizations supported i4i, such as Genentech and Bayer.
• Certain "non-practicing entities," such as Intellectual Ventures.
• Several bar associations, such as the San Diego IPLA.
• The United States, represented by the Solictor General's office, filed a brief that argued that the higher standard was justified as a way of showing deference to the PTO, a governmental agency.  (Discussions about the USA's brief are here and here.)
• A mix of several other organizations, individuals, and companies, such as a group of former PTO Commissioners.

Now that the briefs are all in, here are some points to watch out for during the oral argument.  (A transcript of the oral argument will be available within a day or two after April 18.)

1.  The patent statute in question, 35 U.S.C. §282, says that the party challenging validity (usually the defendant) has the burden of proving invalidity.  However, specifying which side has to prove an issue isn’t the same thing as quantifying the quantum of proof (standard of proof) on the issue.  Normally in a civil case, the plaintiff has to prove all the elements of its claims.  So but for §282, a patent plaintiff would otherwise have to prove ownership of the patent, validity, infringement, and damages.

Because Congress felt that the PTO’s issuance of a patent is entitled to at least some degree of deference, §282 reverses the ordinary allocation of proof and requires the defendant to prove invalidity.   But that allocation alone (1) shows deference to the PTO, and (2) doesn’t by its wording mean that the deference has to be by clear and convincing evidence.  A presumption that a patent is valid doesn’t necessarily require that the proof to invalidate the patent must be clear and convincing.  In this case, §282 is silent on the standard of proof.

The Internet Retailers’ brief contained a 40-page appendix of federal statutes that explicitly require “clear and convincing” proof.  Since §282 doesn’t contain such a standard, the plain inference is that Congress didn’t intend §282 to require clear and convincing evidence.  i4i counters with its own list of statutes that specify a preponderance standard, see i4i Brief at 1a-7a.  At most, that means we should look to ordinary rules of statutory interpretation to figure out §282’s standard of proof.

2.  The ordinary rules for deciding standards of proof are set out in two Supreme Court non-patent cases called Grogan and Huddleston. (In past situations where the Court has reviewed a patent case, it has applied its ordinary rules of law, something the Federal Circuit hasn't always done.)  If you hear some of the Justices asking about Grogan and Huddleston, that means they are interested in applying that law in this case.  Interestingly, although briefs of Microsoft and its amici discussed those cases at length, i4i's brief hardly did at all.  Only one of i4i's amici, the Pharma Research brief, did so in detail. 

There is probably a good reason why Microsft and its amici discussed Grogan and Huddleston, and i4i and its amici probably didn't:  the cases strongly favor Microsoft.  The cases say that the usual rule is that the burden of proof in a civil case is preponderance of the evidence, and the clear-and-convincing standard only applies where "particularly important" interests are involved. These are usually things like proceedings to terminate parental rights or involuntary commitments.  This wouldn't seem to apply to patent cases.

i4i did argue that promoting innovation is "particularly important," so patents should enjoy a strong presumption of validity.  The problem with this argument is that promoting innovation isn't the end of the story with the grant of patents.  The patent system reflects a balance between promoting innovation and avoiding monopolies that stifle innovation.  Improperly granted patents that are invalid can harm innovation by removing existing knowledge from the public's use.  i4i relied on part of a Supreme Court case called Bonito Boats for the proposition that patents promote innovation -- but i4i ignores Bonito Boats’ point about balancing innovation against the harm to competition caused by improperly-granted monopolies.  Bonito Boats has language about a “carefully crafted bargain” in the patent system that i4i partially quotes in its brief -- but after i4i quotes the part it likes, Bonito Boats then goes on to explain what that “bargain” means:

“The attractiveness of such a bargain, and its effectiveness in inducing creative effort and disclosure of the results of that effort, depend almost entirely on a backdrop of free competition in the exploitation of unpatented designs and innovations.  The novelty and nonobviousness requirements of patentability embody a congressional understanding, implicit in the Patent Clause itself, that free exploitation of ideas will be the rule, to which the protection of a federal patent is the exception.”  489 U.S. at 151 (italics added).

If you hear the Justices asking about Grogan, Huddleston and Bonito Boats at the oral argument, that's a good sign for Microsoft, and a bad sign for i4i.

3.  i4i and its amici are left to argue that court precedent has always set a "uniform" rule of clear-and-convincing proof, so all §282 did was codify that uniform rule.  i4i relies on a case called RCA, or Radio Corp., that supposedly established clear-and-convincing proof as the standard in all cases.  There is a big debate in the briefs over whether RCA really established an absolute rule in all circumstances.  (See, for example, EFF's brief at 30-31.)  If the Justices discuss RCA, listen carefully to what they think it means.

4.  In any event, it's doubtful that RCA either established a "uniform" rule, or even a clear rule that the Courts of Appeals understood to be uniform.  Both before and after the 1952 Patent Act, and before the Federal Circuit was created in 1982, many other Courts of Appeals didn't hold that the standard of proof was always clear-and-convincing.  Rather, many such courts held that if the prior art asserted in the lawsuit hadn't been considered by the PTO, the presumption of validity was weakened, or lowered to just a preponderance of the evidence. 

Click here for a list of such cases. 

5.  i4i and its amici argue that the existing standard of proof should be kept because of "settled expectations" by the public.  Given the large number of pre-Federal Circuit courts that didn't rely on the clear and convincing standard -- at least where the PTO had not considered the prior art -- it's not clear how "settled" those expectations should have been.  In any event, that same argument was made and rejected in the 2007 case of KSR v. Teleflex, where the Supreme Court made it easier to find a patent obvious, overturning two decades of Federal Circuit precedent in the process.

I'll post a link to the transcript of oral argument as soon as it is available.

Blogging Hiatus is Over

Blogging has been light the past few weeks since I've been busy working on an amicus brief in the Viacom v. YouTube and Premier League v. YouTube appeals.  This time, the brief is on behalf of the Consumer Electronics Association.  I should have more time to blog going forward.

Some Tips for April 1

Tomorrow is April Fool's Day.  So you might want to put THIS next to the office photocopying machine, or do THESE in a grocery store.

Patent of the Day

Good news (or not):  Google Doodles is now patented!
(For a PDF with the cool drawings, go to this website and type in: 7,912,915.) 

Happy Purim!

Sung to the tune of P!nk's "Raise Your Glass."

Comparing Apples to Oranges

Finally, the mystery has been solved.

In Other Supreme Court News

The Onion reports: "Struggling Supreme Court Loses Eighth Consecutive Case."

Supreme Court to Decide Whether Foreign Works Can Be Taken Out of the Public Domain

Today the Supreme Court granted cert in Golan v. Holder.  The case involves a constitutional challenge to part of the Uruguay Round Agreements Act (URAA).  Section 514 of the URAA restored the copyright for certain foreign works that had fallen into the public domain.  The effect of the statute was to take out of the public domain many works that previously were not protected by copyright in the United States.  Examples include literature by C.S. Lewis, H.G. Wells, Gorky, Nabokov, and Solzhenitsyn; music by Prokofiev, Shostakovich, and  Stravinsky; films by Fellini and Hitchcock; and artwork by M.C. Escher and Picasso, including Picasso’s masterpiece "Guernica."
 
Petitioner Golan claimed that Section 514 violated both the Progress Clause of the Constitution (Article 1, §8, clause 8) and the First Amendment.  The Tenth Circuit Court of Appeals rejected Golan's challenge, but the Supreme Court has agreed to review the case.  I had worked on an amicus brief on behalf of the Internet Archive supporting the cert petition.   

Golan is significantly different than the earlier Supreme Court case of Eldred v. Ashcroft, 537 U.S. 186 (2003).  In Eldred, the Court upheld the constitutionality of the Copyright Term Extension Act of 1998 (CTEA), which extended the term for existing (non-expired) copyrights for 20 years. The CTEA did not remove anything from the public domain, since it only applied to works currently under copyright protection.  In contrast, Section 514 does remove works from the public domain. An earlier Tenth Circuit panel decision, Golan v. Gonzales, 501 F.3d 1179, 1193 (10th Cir. 2007), discussed this (citing Eldred, 537 U.S. at 221):

Section 514 has interfered with [plaintiff] Blackburn's right by making the cost of performance or creation of new derivative works based on Shostakovich's Symphony No. 5 prohibitive.  Moreover, as the example of Mr. Blackburn's composition suggests, plaintiffs’ First Amendment interests in public domain works are greater than the interests of the Eldred plaintiffs.  The Eldred plaintiffs did not—nor had they ever— possessed unfettered access to any of the works at issue there. As the Eldred Court observed, the most the Eldred plaintiffs could show was a weak interest in “making other people's speeches.” By contrast, the speech at issue here belonged to plaintiffs when it entered the public domain.  In reliance on their rights to these works, plaintiffs have already performed or planned future performances and used these publicly available works to create their own artistic productions.

The case will be briefed over the next several months and argued this fall.

The SCOTUSblog case page is here.  Patently-O's writeup is here.  UPDATE: Techdirt's discussion is here.

O’Melveny & Myers' Trade Secret Litigation Studies

The O'Melveny & Myers firm has published two detailed analyses of trade secret litigation.  The Federal Court analysis is here.  The State Court analysis is here.

Some of the key findings of the State Court analysis, which was published second, include:

• In the vast majority of trade secret cases, the alleged misappropriator was someone the trade secret owner knew. Specifically, the alleged misappropriator was an employee or a business partner 93% of the time in this state study.  That figure was comparable to that of the federal study, which showed the alleged misappropriator to be an employee or a business partner in 90% of cases.  One key difference between state and federal courts is that while 78% of state cases involved alleged employee misappropriators, only 53% of federal cases did.
• About half of all state appellate cases are heard in only five states: California (16%), Texas (11%), Ohio (10%), New York (6%), and Georgia (6%).
• State appellate courts affirmed trade secret decisions 68% of the time and reversed them 30%.
• Alleged misappropriators won more often than trade secret owners on appeal, winning 57% of the time and losing 41%.  Alleged misappropriators also have an advantage on appeal in terms of affirmance/reversal rates. Appellate courts reverse lower court decisions in favor of trade secret owners more often (58%) than they reverse lower court decisions in favor of alleged misappropriators (42%).

Best. Facebook. Link. Ever.

To Celebrate Revolution, Egyptian Names Baby 'Facebook.'

Federal Circuit Opinion on Limiting the Number of Asserted Patent Claims

Today the Federal Circuit issued an opinion approving a method for limiting the number of asserted patent claims.  In re Katz Interactive Call Processing Litigation.  To my knowledge, this is the first published CAFC case approving such a procedure.

Katz is a well-known non-practicing entity.  He filed 25 actions in which he "asserted a total of 1,975 claims from 31 patents against 165 defendants in 50 groups of related corporate entities (“defendant groups”)."  It is obviously not practical for a trial court to decide whether 1,975 patent claims are each valid and infringed, and if so, what are the appropriate damages. 

The district court adopted the following procedure for dealing with this morass:

Choosing a middle ground between the two proposals, the district court ordered Katz initially to select no more than 40 claims per defendant group, and after discovery to narrow the number of selected claims to 16 per defendant group. The court further directed that the total number of claims to be asserted against all defendants could not exceed 64 (eight claims for each unique specification including four specifications not at issue in this appeal). However, the court added a proviso that the limitations on the numbers of claims were not immutable. The proviso permitted Katz to add new claims if they “raise[d] issues of infringement/validity that [were] not duplicative” of previously selected claims. Katz added new claims to exceed a total of 64 across all the actions, but the number of claims did not exceed 16 per defendant group.

Instead of selecting additional claims and seeking to show that those claims raised non-duplicative issues of infringement or validity, Katz moved the court to sever and stay the non-selected claims. Katz contended that the court’s requirement that it select particular claims violated its due process rights because the court’s order could result in decisions having a preclusive effect on non-selected claims regardless of whether those claims pre-sented distinct issues of invalidity or infringement. The court denied Katz’s motion. The court held that Katz’s rights under the unselected claims were protected by the proviso that Katz could add new claims if it could show that the new claims raised non-duplicative issues of validity or infringement.

The Federal Circuit rejected Katz's appeal on the due process argument and affirmed the district court's procedure:

In approving the district court’s procedure, we do not suggest that a district court’s claim selection decisions in a complex case such as this one are unreviewable. Katz could have sought to demonstrate that some of its unselected claims presented unique issues as to liability or damages. If, notwithstanding such a showing, the district court had refused to permit Katz to add those specified claims, that decision would be subject to review and reversal. As noted, however, the problem with Katz’s position is that Katz made no effort to make such a showing with respect to any of the unselected claims. Instead, Katz chose to make the "all or nothing" argument that the entire claim selection process was flawed from the start and that it is impermissible to give the judgments effect as to the unselected claims regardless of Katz’s failure to make any showing as to the uniqueness of any of those claims. That sort of global claim of impropriety is unpersuasive. In complex cases, and particularly in multidistrict litigation cases, the district court "needs to have broad discretion to administer the proceeding." In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1232 (9th Cir. 2006). Given the district court’s need to manage the cases before it and the "strong public interest in the finality of judgments in patent litigation," Cardinal Chem. Co. v. Morton Int’l, Inc. 508 U.S. 83, 100 (1993), we cannot adopt Katz’s broad proposition. And, not having made a record reflecting that the court erred in its disposition of particular claims, Katz cannot point to specific errors by the court in the administration of the claim selection scheme that the court adopted.

This will be useful in dealing with non-practicing entities that practice abusive litigation tactics.  In the particular case, most of the claims were invalidated or not infringed; the CAFC remanded the case to the district court on some of the issues.

Mark Lemley's New Article: "Is the Sky Falling on the Content Industries?"

Mark Lemley has published a new article, "Is the Sky Falling on the Content Industries?"  The article discusses how content industries have had a "Chicken Little" problem over new technologies:  For over a century, when new technologies come out, content industries claim that massive copyright infringement will occur, and the new technologies must be stopped.  Examples given are John Philip Sousa and the gramophone, the radio, the photocopier, the VCR, MP3 players, and others.  Only problem is, once these new technologies come out, they lead to more sales of copyrighted content, not less.

The article is published in the Journal of Telecommunications and High Technology Law, 9 J. on Telecomm. and High Tech. L. 125 (2011).

"8 Ways to Prepare Your Pets for War"

The title says it all.  Cats, dogs, hamsters, bunnies and parakeets.

For You Apple Fans!

A new Apple, Inc. product:  Water.

For You Non-Football Fans Today

How about going to a concert?

Opening Round Briefs in Microsoft v. i4i

In two previous posts (here and here), I discussed the Microsoft v. i4i case presently pending before the U.S. Supreme Court.  I'm not going to repeat those lengthy posts, but in summary, Microsoft is asking the Court to make it easier to invalidate U.S. patents.  Microsoft seeks to lower the standard of proving invalidity from "clear and convincing evidence" to "preponderance of the evidence."  The case will be argued in April 2011, and likely decided by June 2011.

The opening round briefs have now been filed.  Microsoft filed its brief, along with 20 amicus briefs supporting Microsoft and an additional 5 briefs "supporting neither party."  Microsoft's brief discusses all the issues and gives a detailed explanation of the case.  The amicus briefs tend to focus on different points -- here's what a few of them say:

• I co-authored the EFF brief (joined by Public Knowledge and the Apache Software Foundation).  This brief discusses how the existing clear and convincing standard harms open source software developers and small software innovators.  It explains how the existing standard results in an unfair playing field in software patent litigation.
• The CTIA brief has an interesting discussion of the empirical effects of the clear and convincing standard.  It discusses how the existing standard results in excessive deference to the Patent and Trademark Office (PTO) and how the standard affects licensing negotiations.
• The CCIA brief discusses a number of the deficiencies in the patent examination process.  Because the PTO is far from perfect, this means that there is no justification for excessive deference to the PTO's decision to grant a patent by making the standard of proving invalidity one of clear and convincing evidence.
• The brief by 37 law and economics professors also discusses constraints on the PTO's decision making process.
• A brief by Internet Retailers contained an interesting 40-page appendix of federal statutes that explicitly require "clear and convincing" proof.  Since the section of the Patent Act in question -- 35 U.S.C. §282 -- doesn't contain such a standard, the plain inference is that Congress didn't intend §282 to require clear and convincing evidence.

(I might add to this list after I read more of the briefs.)

Here are links to all of the briefs:

Microsoft's Opening Brief (backup location)

Briefs supporting Microsoft:
1. Apotex, Inc. by Roy Englert,  Mark Stancil, and Daniel Lerman at Robbins Russell
2. Apple Inc. and Intel Corporation by Deanne Maynard, Seth Galanter, and Marc Hearron at Morrison Foerster
3. Business Software Alliance by Andrew Pinchus and Paul Hughes at Mayer Brown
4. Cisco Systems,  Ebay Inc., Netflix, Inc., Office Depot, Inc., Toyota Motor Corporation,  and Trimble Navigation Limited by John Vandenberg and Joseph Jakubek at Klarquist Sparkman
5. Computer & Communications Industry Association (CCIA) by Jonathan Band of Jonathan Band PLLC
6. CTIA -- The Wireless Association by Michael Kellogg and Greg Rapawy of Kellogg Huber
7. Electronic Frontier Foundation, Public Knowledge and the Apache Software Foundation by Michael Barclay, Julie Samuels, Corynne McSherry and James Tyre of EFF (backup location)
8. EMC Corporation by Paul Dacier of EMC Corporation
9. Google Inc., Verizon Communications Inc., Consumer Electronics Association, Comcast Corp., Dell Computer Corp., Hewlett-Packard Co., HTC Corp., Intuit Inc., L-3 Communications Corp., Linkedin Corp., Lockheed Martin Corp., Mastercard Worldwide, The New York Times Company, Rackspace Hosting Inc., Red Hat,  Inc., Shutterfly,  Inc., Software & Information Industry Association, Time Warner Inc., Wal-Mart Stores, Inc., and Zynga Inc by Paul Clement,  Daryl Joseffer,  and Adam Conradat of King & Spalding
10. Hercules Open Source Project by Joshua Rosenkrantz and Mark Davies at Orrick
11. Internet Retailers by Peter Brann, David Swetnam-Burland,  and Stacy Stitham at Brann & Isaacson
12. 37 Law, Business, and Economics Professors by Mark A. Lemley at Stanford.
13. Professor Lee A. Hollaar by David Bennion at Parsons Behle
14. SAP America,  Inc., Acushnet Company, Facebook, Inc., General Motors LLC, Pregis Corporation,  Symantec Corporation, Terex Corporation,  and Yahoo! Inc by James Dabney and John Duffy at Fried Frank
15. Securities Industry and Financial Markets Association and The Clearing House Association by John Squires at Chadbourne & Parke
16. Synerx Pharma, LLC by Christopher Ohly and Douglass Hochstetler at Schiff Hardin
17. Teva Pharmaceuticals USA Inc. by Henry Dinger and Elaine Herrmann Blais at Goodwin Procter
18. The Public Patent Foundation by Daniel Ravicher at PubPat Cardozo School of Law
19. Timex Group USA, Inc., Macdermid, Inc., Gem Manufacturing, Inc., Perfect 10 Antenna Company,  Inc.,  Carson Optical, Inc. by John Horvack and Fatima Lahnin at Carmody & Torrance
20. William Mitchell College of Law IP Institute by Carl Moy and Jay Erstling of William Mitchell

Briefs supporting neither party:
AIPLA
DC Bar Association
IBM
FICPI
Professor Roberta Morris
     Of these briefs, the AIPLA and IBM briefs argue for affirmance and the existing clear and convincing standard -- it's not clear why these briefs were filed now, instead of in March when the amicus briefs supporting i4i are due.

The EFF post on the amicus brief filing is here.  Patently-O's discussion is here.

Sarah Palin Applies for Trademark Protection on . . . "Sarah Palin"

Yep, Sarah Palin has filed a federal trademark application for "Sarah Palin."  (And Bristol Palin has applied for "Bristol Palin.")  The Sarah Palin application is here.

I'm not sure whether to label this under "Trademarks" or "Humor" . . . so I'll do BOTH!

Guys: Bored When Your Wife Takes You Shopping?

Try doing some of THESE.

I Am So Happy I Retired

"Top Ten Law Firm Interview Questions"

No Matter What State You Live In

You're the best at SOMETHING.

High Score!

Notice the last entry on the list.

Feeling Old Yet?

A 12-year old explains the information age's facts of life to her mother.

If You Ever Want to Go Back to Costco

Do not try THIS while waiting in line.

Today's a Great Day for Humor

Too many humor links today to put in separate posts.  So here they are:

Sign of the day.

Scroll ahead to the 0:30 mark for . . . FLYING PENGUINS!

Fractals explained.

Global warming tips.

Wikileaks:  U.S. Assisted Voldemort.

Because I Had to Post Something on 1-11-11

Want to go camping?

Facebook Post of the Day

I sure hope this isn't real.

From the Ninth Circuit: Giving CDs Away for Free Is a "Sale," But Selling Software for Money Isn't a "Sale"

While the title of this post perhaps gives away the answer, I thought I'd start the post with this quiz.  Which of the following is a "sale" of the goods involved?

A.  A record company gives promotional CDs away for free, with no right to get the CDs back once the recipient is done with them. 
B.  A software company sells software for money, with no right to get the software back once the buyer is done with the software. 

If you thought that "B" was a sale and "A" was not a sale, you're not alone (based on the unscientific home survey I did last night).  But based on two cases from the Ninth Circuit, you have it completely backwards.

The first case, decided in September 2010, was Vernor v. Autodesk.  The case involved Autodesk's sale of computer software; the Ninth Circuit opinion was the inspiration for my starting this blog.  My post on Autodesk was entitled, "The Ninth Circuit on first sale: "'If it looks like a duck, and quacks like a duck, and flies like a duck . . . it's a CHICKEN!'" Read that post for the background of the "first sale" doctrine, which in summary says that once a copyright owner sells a physical copy of a work, the buyer can resell the physical copy without implicating the copyright laws.  In Autodesk, the Ninth Circuit held that certain restrictions in Autodesk's end user agreements meant that even though its customers bought copies of the software for a one time fee and got permanent possession of the software (that is, Autodesk had no right to regain possession of the copies), the transaction was a license, not a sale, and the "first sale" doctrine didn't apply.  I commented that putting a "license" label on the transaction, which Autodesk did, didn't make the economic realities of the transaction a license instead of a sale, any more than calling a duck a "chicken" makes it a chicken.

Two other cases were argued before the Ninth Circuit the same day as Autodesk.  One of them, MDY v. Blizzard, was decided in December and only peripherally involves the first sale doctrine.  The other one, UMG v. Augusto, was decided yesterday.

Augusto involved UMG's distribution of promotional CD's.  UMG would give the CD's to disc jockeys and the like for marketing purposes.  UMG did not charge money for the CD's and gave them away unsolicited.  UMG marked the discs either "Promotional Use Only--Not for Sale" or with a promotional statement saying that the transaction was a license.  Augusto obtained copies of the CD's and tried to sell them on eBay; the lawsuit ensued.

Well, if the transaction in Autodesk wasn't a sale because Autodesk sold its software under a "license" agreement, then surely UMG's giving CD's away for free under a license agreement can't be a "sale" either, right?  In other words, the UMG CD's are even more of a "chicken" than the Autodesk software.

Not according to the Ninth Circuit, which ruled in favor of Augusto under the first sale doctrine (and also a Postal Act statute on unordered merchandise).  The Court stated:

We conclude that, under all the circumstances of the CDs’ distribution, the recipients were entitled to use or dispose of them in any manner they saw fit, and UMG did not enter a license agreement for the CDs with the recipients. Accordingly, UMG transferred title to the articular copies of its promotional CDs and cannot maintain an infringement action against Augusto for his subsequent sale of those copies.
. . .
It is one thing to say, as the [promotional] statement does, that “acceptance” of the CD constitutes an agreement to a license and its restrictions, but it is quite another to maintain that “acceptance” may be assumed when the recipient makes no response at all. This record reflects no responses. Even when the evidence is viewed in the light most favorable to UMG, it does not show that any recipients agreed to enter into a license agreement with UMG when they received the CDs.  Because the record here is devoid of any indication that the recipients agreed to a license, there is no evidence to support a conclusion that licenses were established under the terms of the promotional statement.

It's hard to disagree with any of this.  Except, of course, that most of the above applies equally to the software sales in Autodesk.  About the only difference is that buyers of mass-marketed software find when they open a shrink-wrapped package that there is a "license" agreement inside.  But otherwise, software buyers can dispose of the software as they see fit, and don't make a "response" to a shrink-wrapped license.

The Ninth Circuit says that software is different, though, to explain the different result in the two cases.  Its Augusto opinion says that its Autodesk "formulation, however, applies in terms to software users," and not to UMG's customers.  At least one problem with this is that the first sale statute itself makes no distinction between software and other works of authorship. 

Perhaps the Ninth Circuit will rehear Autodesk en banc, or perhaps the Supreme Court will review one of these cases.  In the meantime, it's hard to tell the ducks apart from the chickens in that Circuit.

Here is additional commentary by the EFF, Eric Goldman, and Techdirt.

Spies.

They are EVERYWHERE.

A Tale of Two Experts

Yesterday the Federal Circuit decided Uniloc USA, Inc. v. Microsoft Corp.  The case is very interesting because of the holding on patent damages, but is personally interesting because it involved two experts I worked with at various times while in private practice.  The technical expert was vindicated in this opinion, while the damages expert -- who wasn't even involved in the case -- saw the Court disapprove a widely-adopted damages theory he had used for many years.

The Technical Expert

I worked with Uniloc's technical expert, David Klausner, in a number of cases starting in the late 1990's.  I liked David and enjoyed working with him.  In April 2009, David told me about a patent case where his side, plaintiff Uniloc, won a big patent verdict against Microsoft.  David provided testimony about how Microsoft's products infringed Uniloc's patent, and the jury agreed with him.  I congratulated David on this good result.  However, several months later, the trial judge threw out the verdict and entered judgment for Microsoft.  The judge's opinion was quite critical of David's testimony.

The case went up on appeal, and in yesterday's opinion, the Federal Circuit sided with Uniloc and David on infringement.  The Court found that David's testimony provided "substantial evidence" to justify the jury's verdict.  In particular, the Court addressed the trial court's criticism of David: "the district court improperly rejected Klausner’s testimony as 'incomplete, oversimplified and frankly inappropriate.'"  Rather, the Federal Circuit stated that "Klausner’s testimony was certainly a simplification of the functioning of MD5, but neither the district court nor Microsoft demonstrate why it was 'oversimplified,' Uniloc II, 640 F. Supp. 2d at 171 n.21, or even why it was inaccurate."

So good news for David Klausner and his client on the infringement issue.

The Damages Expert

Not such good news for a damages expert I once worked with, who didn't even testify in the case.  By way of background, in the late 1980's and 1990's I worked with Robert Goldscheider,  Bob was an impressive and knowledgeable licensing expert.  When I first met him, he told me about a theory of his that could be used to determine a reasonably royalty in patent case, which is now known as the "25 percent rule."  Bob's theory was that a reasonable patent royalty would be 25% of the licensee's expected profits for the product that uses the patent.  The theory is that the licensee gets to keep 75% of the profit (it builds the product, after all), and the patent owner gets the other 25%.  The Federal Circuit describes Bob as the "leading proponent" of the 25% rule, and discusses it at length (see pages 35-38 of the opinion).

Since the time Bob first told me about his theory, it had gained wide acceptance as at least a starting point in calculating a reasonable royalty.  Many other licensing or damages experts considered it.  The Federal Circuit's opinion lists quite a few cases using the 25% rule (see pages 39-41 of the opinion).  Uniloc's damages expert, Mr. Gemini, had used the rule to calculate his royalty rate, which the jury's damage award reflected (perhaps with a reduction).

In its decision, for the first time the Federal Circuit disapproved the 25% rule:

This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation.  Evidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue.

. . .

. . . there must be a basis in fact to associate the royalty rates used in prior licenses to the particular hypothetical negotiation at issue in the case. The 25 percent rule of thumb as an abstract and largely theoretical construct fails to satisfy this fundamental requirement. The rule does not say any-thing about a particular hypothetical negotiation or reasonable royalty involving any particular technology, industry, or party.

Thus, although Bob didn't even get a chance to defend his theory in the Uniloc case, it has now been disapproved after decades of use.

In another part of the damages discussion, the Court disapproved the use of the "entire market value" rule by  Uniloc's expert.  The accused product was a software registration system for Microsoft's other products (such as Office and Windows), but Uniloc's expert also calculated damages as a percent of the sales of those larger products -- not just the registration system.  The Court disapproved this use of the "entire market value" analysis:

This case provides a good example of the danger of admitting consideration of the entire market value of the accused where the patented component does not create the basis for customer demand. As the district court aptly noted, “[t]he $19 billion cat was never put back into the bag even by Microsoft’s cross-examination of Mr. Gemini and re-direct of Mr. Napper, and in spite of a final instruction that the jury may not award damages based on Microsoft’s entire revenue from all the accused products in the case.” Uniloc II, 640 F. Supp. 2d at 185. This is unsurprising. The disclosure that a company has made $19 billion dollars in revenue from an infringing product cannot help but skew the damages horizon for the jury, regardless of the contribution of the patented component to this revenue.

Microsoft therefore got a new trial on damages.

This decision might yet be reviewed further by the entire Federal Circuit, or by the Supreme Court.  If the opinion stands, it operates as a substantial limitation on patent damages in future cases.
 
Here is further analysis by Patently-O.  UPDATE:  Here is an article by Joe Mullin.

Oh Darn, I Named This Blog Incorrectly

I called this blog "IPDuck" with the "IP" short for "Intellectual Property."  Well, "Intellectual Property" is really just a shorthand for patents, copyrights, trademarks, and trade secrets (and maybe other things).  It's cumbersome to list all four of those things when you can abbreviate them to "Intellectual Property" or even shorter, "IP."

Only problem is the use of the word "property."  "Property" usually means things like your house (real property) or valuable possessions, like jewelry (personal property).  But patents, copyrights, trademarks, and trade secrets aren't really like that, for a bunch of reasons.  For example, patents, copyrights, trademarks, and trade secrets are legal rights only to exclude others from doing things -- patents in particular don't give you the right to practice your own invention.  (Imagine owning a house where you didn't have the legal right to live in it yourself, but only had the right to exclude other people from staying there.  Not much of a house, eh?)

In a blog post last week, Mike Masnick's blog points out that the term "Intellectual Property" is misleading in its use of the term "property."  See "Exposing the False Sanctity of Intellectual Property."   In a post later that same day, Masnick further points out that the term "Intellectual Property" is a relatively recent term.  Masnick's solution?  Call it "Intellectual Pooperty."

So maybe I misnamed this blog.  At least, keep in mind that I'm using a shorthand for convenience, and not asserting that there are any "property" rights in "IP."

Dave Barry's 2010 Year In Review

Has arrived.

"Possibly the Most Comprehensive Array of Legal Humor Ever Assembled"

Postings like THIS could put at least half of my blog out of business.  Unless I simply re-post them, of course.

Venn Diagram of the Day

Click HERE to see who gets paid to touch your junk.

UPDATE:  It turns out that the original Venn diagram is all messed up.  As explained HERE.

A Special Christmas Dinner Message

A message of thanks. From one group who appreciates another one.

Unclear Sign of the Day

If you understand THIS sign -- that's what comments are for.

And Now A Word From Our Sponsor

Duck Poster of the day.

Federal Circuit Holds that eBay Doesn't Apply to ITC Injunctions

Today the Federal Circuit decided Spansion v. U.S.I.T.C.

You have to read to the very end of this long opinion, but in the case, the Federal Circuit ruled that eBay doesn't apply to ITC injunctions.  Specifically, while there is still a "public welfare" component to an ITC injunction, the "irreparable harm" element seems to be absent.

UPDATE: (a brief explanation of what this means for people who don't know just by reading it):
A patent owner who wants to enforce its patent can file a lawsuit in Federal District Court.  If the patent owner wins the case, it might or might not get an injunction forcing the losing infringer to stop its infringing activities, based on the case of eBay v. MercExchange. Under that case, to get an injunction the patent owner must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.  What this means in practice is that if the patent owner has a competing product -- it is in the market -- it usually can get an injunction.  If the patent owner does not practice its patent, it usually can't get an injunction, and only gets money damages (royalties).

Alternatively, some patent owners can file a proceeding in the U.S. International Trade Commission (ITC).  There are a number of differences between an ITC proceeding and a district court proceeding; some of them are discussed here and here.  For the purposes of today's case, the Federal Circuit ruled that eBay's four part test, above, doesn't apply to ITC injunctions -- specifically, the patent owner doesn't have to prove irreparable harm to get an ITC injunction.  This has been an open question after the eBay decision.

"The Woman Language Translator"

The perfect gift for that not-so-perfect guy in your life.

Google Search of the Day

I have tried this and it really works.

Sign of the Day.

Actually, this could be the most practical "sign of the day" I've seen.

Post-Bilski Case From the Federal Circuit: Claims Still Patentable

Today the Federal Circuit released an opinion in Prometheus v. Mayo.  This case was on remand from the Supreme Court after the Bilski decision in June 2010.  The claims in question are directed to certain medical diagnostic treatments.  The Federal Circuit had originally found the claims patentable under 35 U.S.C. §101 in view of its strict "machine or transformation" test in its Bilski decision.  After the Supreme Court's Bilski case had modified the Federal Circuit's test to something less strict (the Supreme Court test is less than a model of clarity, but it's less strict than the Federal Circuit's test), the Supreme Court granted cert in Prometheus, vacated the Federal Circuit opinion, and remanded the case so the Federal Circuit could reconsider the issue.

I thought it odd that after its Bilski decision, the Supreme Court granted cert and remanded the case to the Federal Circuit.  If the Federal Circuit found the claims patentable under its stricter Bilski test, surely it would do the same under the Supreme Court's less strict test?  Today's answer to that question is "yes."

The Best of #Wookieleaks!

THIS might be enough for me finally to get a Twitter account.

Opening Briefs in Viacom v. YouTube and Premier League v. YouTube

Viacom v. YouTube is an important copyright case on appeal to the Second Circuit Court of Appeals (Appeal No. 10-3270).  A related case is a class action brought by The Football Association Premier League and others against YouTube, which is also on appeal (Appeal No. 10-3342).  For the purposes of this post, I'll just discuss the Viacom case; the claims in the Premier League case are similar, although there are some differences.

As summarized on EFF's case page, in 2007 Viacom sued YouTube, claiming that YouTube should be liable for its users' posting of Viacom's copyrighted videos on YouTube.  Although YouTube acts promptly to take down infringing videos once a copyright owner gives YouTube notice of infringements -- you doubtless have tried to look at a video on YouTube and have seen a message that the video was removed due to a copyright claim -- Viacom asserts that YouTube is liable for postings of infringing works anyway.  The potential damages are a billion dollars or more.

At issue is Section 512 of the Copyright Act, which is part of the Digital Millennium Copyright Act.  Subsection (c) of that statute gives an Internet service provider such as YouTube a defense to copyright claims, provided that it satisfies certain conditions.  One condition is that the ISP registers an agent for service of notifications of claimed infringements, and then acts promptly to remove infringements upon receipt of such notices.  There's no dispute that YouTube did that in the Viacom case; Viacom sent YouTube more than 100,000 takedown notices, which YouTube promptly complied with.  Section 512(c) is sometimes called the "DMCA safe harbor."

Viacom claims that YouTube isn't entitled to the "safe harbor" for three reasons that can be briefly summarized as follows: (1) YouTube's general knowledge that infringements occur on its website defeats the safe harbor under § 512(c)(1)(A); (2) YouTube receives "a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity," disqualifying YouTube's safe harbor under § 512(c)(1)(B); and (3) that "storage" in § 512 is limited to uploading of stored files only, not downloading of them by another user.  While all issues are being contested in the case, the most important issue is probably the first one.  Does an ISP lose its immunity under § 512 because it has "general" knowledge of infringements on its website (as Viacom and the Premier League argue), or is the safe harbor lost only if the ISP has specific knowledge of infringements that the website doesn't then remove (as YouTube argues)?  This is a very important distinction that affects all user-generated content on the Internet in general.  Most UGC sites are "generally" aware that some users post infringing material, so if "general" awareness subjected UGC sites to suit, they would probably have to stop operating.

On June 23, 2010, the district judge agreed with YouTube and granted YouTube summary judgment against Viacom and the Premier League.  The district court agreed that generalized knowledge isn't enough to defeat the safe harbor.  Discussions of that decision are here, here, here, here, and here.

Viacom and the Premier League have now filed their opening briefs in the Second Circuit.  Fifteen amicus briefs have also been filed (at least ones that I have found).  Techdirt has this discussion of the Viacom opening brief.  While under normal court procedure only the amicus briefs favoring Viacom and the Premier League were filed at this time, at least one of the amicus briefs filed so far favors affirmance of the summary judgment rulings, by the American Intellectual Property Law Association.  Techdirt discusses that brief here.

YouTube's opposition brief will likely be due on March 31, 2011, with amicus briefs supporting YouTube due a week later.  I was one of the co-authors of an EFF amicus brief supporting YouTube at the district court level, and expect that the EFF will file an amicus brief supporting YouTube on appeal.

UPDATE:  Here is Eric Goldman's analysis of the briefs. EFF's discussion is here.

Here are links to the briefs filed so far:

Plaintiffs' Opening Briefs:
Viacom's opening brief
Premier League's opening brief 


Amicus Briefs:
Brief of America Intellectual Property Law Association
Brief of Advance Publications et al
Brief of American Federation of Musicians et al
Brief of Audible Magic
Brief of BMI-ASCAP et al
Brief of BSA
Brief of CBS
Brief of Intellectual Property Law Professors
Brief of International Intellectual Property Institute
Brief of Matthew Spitzer et al
Brief of Microsoft-EA
Brief of MPAA
Brief of Stuart Brotman et al
Brief of Vobile
Brief of Washington Legal Foundation

Terrorism vs. Normal Behavior

Having difficulty telling the difference between terrorism and normal behavior?  Here's a handy guide.

Times Are Tough.

So keep calm and carry on.

Intellectual Ventures Files Its First-Ever Patent Lawsuits

Intellectual Ventures is an invention development and patent holding company.  It was originally founded in 2000 by Nathan Myhrvold and Edward Jung of Microsoft.  The Wikipedia article about the company is here.  The company's website is here.

Despite its impressive patent portfolio, up until today Intellectual Ventures never filed a lawsuit on its patents, preferring to license its patents.  In some cases, it sold patents to other companies (some of whom filed lawsuits).  However, today Intellectual Ventures filed three patent lawsuits, for the first time.  An article about the lawsuits is here.

The lawsuits are Case Nos. 1:10cv1065, 1:10cv1066, and 1:10cv1067 in the U.S. District Court for the District of Delaware.

Quiz: What Starts With F and Ends with K?

Totally suitable for work.  At least the answers.

Recipe of the Day!

During the holiday season, everyone needs THIS recipe.

Dave Barry Has Published His Annual Holiday Gift Guide!

There's something for everyone on this list.

Happy Hanukkah!

But you might not want to eat one of THESE.

Multitasking FAIL

Some people just get way too busy at work.