Alleged Copyright Infringement by Patent Prosecutors

By Dennis Crouch

American Institute of Physics and John Wiley & Sons v. Schwegman Ludberg (D.Minn)

Publishers John Wiley & Sons and American Institute of Physics have asked the Minnesota District Court for leave to amend and narrow their complaint against the Schwegman law firm. The amendment would drop any allegation that submitting copies of copyright works to the USPTO constitute copyright infringement. The plaintiffs write that the amended complaint

does not allege that this unauthorized copying includes (i) making such copies of a copyrighted work for submission to the PTO as may be required by the rules and regulations of the PTO, (ii) transmitting such copies to the PTO, or (iii) making an archival copy of that work transmitted to the PTO for Defendants’ internal file to document what has been transmitted.

To be clear, however, the plaintiffs have not dropped their case, but continue to allege that other copies and transmission do constitute copyright infringement. Further, because Wiley does not have any proof of those other activities, it argues that the now unchallenged submission to the PTO serves as “evidence of broader use and circulation” sufficient to permit the complaint to move forward.

The newly amended complaint thus recites no factual basis other than the fact that Schwegman is a law firm that prosecutes patents and that, because Schwegman submitted copies of certain articles to the USPTO that it must have also made unauthorized copies. The complaint:

14. Upon information and belief, Defendants have engaged in Unauthorized Copying with respect to the copyrighted articles from Plaintiffs’ journals, including but limited to the articles identified on Schedule A.

15. Plaintiffs cannot know the full extent of Defendants’ Unauthorized Copying without discovery.

The amended complaint also adds a further list of obscure scientific articles that were submitted to the PTO by Schwegman and were allegedly copied internally in an unauthorized manner. The plaintiffs have not yet filed any proposed amendments in the MBHB case.

The USPTO intervened in these cases supporting the law firms. It appears that this amendment is meant to appease the USPTO so that it will fall out of the case – making the defendants look much less sympathetic.

Notes:

Sometimes a Pig is Just a Pig

PatentLawImage067Moody v. Morris, PBS, et al. (Fed. Cir. 2010)

In 1993 and 1994 Kyle Morris and William Kirksley filed several patent applications all directed toward animated captioning “coordinated with oral-word utterances.”  The idea was to actually see the words coming from the mouth of the speaker in a movie or television program. The patents were assigned to their new company ReadSpeak.   Morris brought-in Don Moody to help develop a new children's television show. However, after a falling-out, Moody left and started the successful Word World show that was broadcast on PBS beginning in 2007.  Word World does not use captions streaming from the mouths of actors. Rather, objects and characters in the television show are made-up of word-objects.  As the district court explained “in the Word World universe, a 'bee' consists of the word 'bee' shaped like the object that it names; the character 'CAT' is made up of the letters 'C-A-T.'”  The image below shows an ear of corn, a pie, a pot, and a pig.

PatentLawImage068

In the lawsuit, Morris alleged both patent and copyright infringement. The district court rejected both allegations on a 12(b)(6) motion-to-dismiss. 

On patents, the court held that the word-objects found in Word World could not satisfy “word utterance” limitation of the patent claims.

On copyright, Morris argued that he owned a copyright on the phrase “where words come alive” that Word World uses as its slogan as well as a copyright in the “teaching methodology” that he had developed. The district court rejected both of these arguments: first holding that the phrase “where words come alive” could not be protected by copyright because it is merely a short phrase or slogan; then holding that the “teaching methodology” could not be protected by copyright because copyright does not “extend to any idea, procedure, process, system, [or] method of operation . . . regardless of the form in which it is described, explained, illustrated, or embodied . . . “ 17 U.S.C. § 102(b).

On appeal, the Federal Circuit affirmed without opinion. 

The most interesting aspect of the appeal was lead-in by Judge Gajarsa where he warned the lawyers to remain civil:

The court has a few words to say on civility in the courtroom.  I think that it is very very important for attorneys who happen to be officers of the court to conduct themselves in such a manner that at least the record would reflect that they accept each other in the courtroom and outside of the courtroom. A confrontational basis should not exist and should not be part of the record. And, if we read this record, there are a number of issues that could be confrontational and very much out of order with respect to the treatment of the attorneys with each other. You can represent your clients to the best of your abilities . . . . but you don't have to have difficulties among yourselves. I think that it is very very important to maintain civility in our practices.  Especially since lawyers are officers of the court.

Documents:

Supreme Court Does not Decide Costco v. Omega Int’l Exhaustion Case

Costco v. Omega (Supreme Court 2010)

In Costco, the Supreme Court was asked to apply the first sale doctrine of copyright law in the context of international sales. Costco had purchased legitimate Omega watches abroad and then imported them into the US.  The watches included a small copyrighted design on the back surface and Omega argued that the importation and further distribution of the watches constituted copyright infringement.  Ordinarily, the purchaser of a legitimate copy of a work can lawfully resell the copy based on the first sale doctrine (also known as copyright exhaustion). The trick, however, is that copyright is territorial in nature and the first sale abroad arguably did not “exhaust” the US copyright. The 9th  Circuit had sided with Omega — holding that the first sale doctrine did not apply to foreign manufactured copies that were purchased abroad.

Without opinion, and in a 4–4 split, the Supreme Court has affirmed the 9th  Circuit decision. However, because of the 4–4 split, the case will not be seen as precedent-setting. Thus, as Ryan Vacca wrote in an e-mail this morning: “Our unanswered questions . . . remain unanswered.”

 

Design Patents and the Fashion Industry

The chart above shows a histogram of design patent application pendency based on patents issued April-November 2010. The majority of design patents issue within one year of the application filing. When there is a delay in prosecution, it is typically due to informalities in the application submitted. In an earlier study, I found that a very low percentage of design patent applications were ever challenged on novelty or obviousness grounds. For a large entity, a design application and issue fees total to $1,320 (half that for a small-entity).

Fashion Industry: In property law, I teach the case of Cheney Bros. v. Doris Silk Corp. (2nd Cir. 1930). In that 80-year-old case, a silk designer filed suit to stop a free-riding copycat. The appellate court rejected the plea based on the general rule that mere product imitation is not actionable at common law. Rather, a successful plaintiff must have some statutory right to protection – such as a patent or copyright – before copying can be pejorized as counterfeiting. At the time, copyright was not available for fabric designs (it is now) and patents were arguably impractical because of the prosecution cost and invention requirement. For the past eighty-years, the fashion industry has been asking for additional protections. During that time, the potential for copyright and trademark protections have been greatly expanded and enforcement of criminal counterfeiting has increased. However, there are still calls for expanded protection for fashion.

Fashion & Design Patent Rights: Some fashion industry markets have found design patents as valuable. These include eyewear, shoes, handbags, and jewelry. Despite widespread and growing use, fashion industry leaders have continued to push additional forms of protection that are easier to obtain.

The Innovative Design Protection and Piracy Prevention Act (S.3728) was recently passed through the Senate Judiciary Committee. That bill would provide protection for new fashion designs that are unique, distinguishable, non-trivial, and non-utilitarian variation over the prior art. No registration of rights would be required. Rather, protection is automatic for newly publicized clothing, footware, bags, and eyeglass frames. At trial, plaintiff would have the burden of proving rights and infringement. Under the proposed system, rights would persist for three years from the date of publication or first distribution.

Final Draft of ACTA Released

By Jason Rantanen

Yesterday, the negotiating parties (which include the United States) released the final draft of the Anti-Counterfeiting Trade Agreement (ACTA), a document that purports to combat the proliferation of pirated and counterfeit goods.  The development of this Agreement has been subject to considerable controversy, in large part due to the secretive nature of its negotiation, which took place outside conventional International IP bodies such as TRIPS and WIPO.  The Electronic Frontier Foundation, for example, has written extensively about the subject, as has Michael Geist

In its final state, ACTA relates primarily to copyright and trademark infringement, and expressly disclaims application to patent law in several sections.  Nevertheless, everyone interested in intellectual property law issues should give it a read (and at only 24 pages long it's a surprisingly concise document), as within the area of trademark and copyright infringement the scope of ACTA is very broad: despite its characterization as a "Trade Agreement," it covers the enforcement of IP rights in the domestic civil, criminal, and digital spheres in addition to providing for border control measures, 

Although ACTA generally tracks existing U.S. law on copyright and trademark infringement, the Agreement has a clear pro-rights holder slant.  For instance, provisions on discovery discuss only the rights of the party asserting the infringement claim, and do not require similar rights on the part of the alleged infringer.  Readers may also want to pay particular attention to the criminal provisions – which seem on their surface to make any commercial willful trademark or copyright infringement subject to criminal penalties.

Given that this document likely will be scrutinized by scholars and practitioners concerned about the implications of strong copyright and digital property rights, I'll identify just a few specific drafting issues that leaped out at me.

  • "Trademark counterfeiting" and "copyright piracy" are broadly defined, and seem to include any form of trademark or copyright infringement.  In other words, these terms could be readily replaced with "trademark infringement" and "copyright infringement" wherever they appear in the document.  That said, the trademark counterfeiting language is somewhat ambiguous, and could plausibly be read to only apply to instances where the mark "cannot be distinguished in its essential aspects" from the registered trademark.
  • Another issue is the sudden appearance of "copyright or related right," which is first used in Chapter Two, Article 2.2(1).  Perhaps this is an artifact from earlier drafts, but I didn't see any definition of these "related rights."
  • The procedures for civil enforcement of IP rights largely appear to parallel U.S. law.  However, the damages provisions strongly favor rights holders, perhaps more so than current domestic copyright and trademark law. 
  • Similarly, to the extent the sections on litigation discovery procedures expand parties' rights and obligations, they may create a disjunction with current law.
  • In the context of border measures, the terms "goods of a commercial nature" and "goods of a non-commercial nature" are left undefined.  On the surface, it seems like nearly every good hs a commercial nature, but perhaps I'm just picking at nits with this one.
  • Likewise, the term "acts carried out on a commercial scale," used in the context of the section on criminal penalties, seems equally broad, especially given that it includes "at least those carried out as commercial activities for direct or indirect economic or commercial advantage."
  • The pro-rights holder forum and education campaign requirements seem quite one-sided, especially for such a sensitive subject.  Chapter Three, Articles 3.1(4) and 3.4 are particularly strong in their requirement that governments present a pro-IP rights holder message.

The full text of the proposed version of ACTA is available here:  Download Finalized ACTA text.  In addition to substantive issues, some organizations have raised concerns about the potential approval of ACTA via Executive Agreement, as opposed to ratification by the Senate.  If the former approach is indeed used, it will likely have profound legal implications that courts, practitioners and scholars will need to address.

Update: As one commenter pointed out, Terry Hart's blog Copyhype has a detailed point-by-point comparison of many ACTA provisions to the relevant U.S. law.  Mr. Hart also responds to some of the negotiation transparency criticisms that various organizations have raised. 

Guest Post: Copyrights, Patents, and International Exhaustion

By Professor Ryan Vacca

Last week, the Supreme Court heard oral arguments in Costco Wholesale Corporation v. Omega, S.A., to determine whether copyrighted works first sold in Switzerland and then imported into the U.S. infringed the copyright owner's right of distribution or whether the first sale doctrine (aka the exhaustion doctrine) applied to make the importation non-infringing.

The facts are fairly straightforward.  Omega is a watch company that manufactures watches in Switzerland.  Omega owns a copyright in a small visual image that is laser-engraved onto each Swiss-manufactured watch.  Costco, a U.S. warehouse retailer, acquired genuine Omega watches from a third party, who had purchased them from an authorized Omega distributor abroad.  Costco subsequently sold these watches in the United States.  Omega alleged that Costco's sale of these watches infringed its exclusive right to distribute copies of its copyrighted work under § 106(3) of the Copyright Act because § 602(a)(1) provides that:

Importation into the United States, without the authority of the owner of the copyright under this title, of copies … of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies … under section 106.

Costco argued that its sales in the U.S. were non-infringing under the exhaustion doctrine codified in § 109, which provides:

Notwithstanding the provisions of section 106(3), the owner of a particular copy … lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.

As I blogged earlier and others have discussed here and here, the Court is wrestling with what the phrase "lawfully made under this title" means in § 109 of the Copyright Act.

Costco argues that goods manufactured abroad can still fall within this phrase whereas Omega argues that goods manufactured abroad are not "made under this title" unless the goods are made or sold with permission from the copyright owner to import the goods into the United States. At oral argument, the Justices quickly pointed out the difficulties in these two interpretations on both a textual and policy level.

In contrast to the formidable task before the Court in the copyright context, patent law takes a relatively easier approach to the international exhaustion issue. The seminal Supreme Court case on international exhaustion under patent law is Boesch v. Graff, 133 U.S. 697 (1890). In Boesch, the plaintiffs held a U.S. patent and German patent for an improvement to lamp burners. The defendants purchased burners in Germany from Mr. Hecht, who was authorized to make these burners in Germany because of Germany's prior user defense (Hecht was not authorized by the patentees). When the defendants imported these burners into the U.S., the patentees sued for infringement. The defendants argued that their legal purchase in Germany from Mr. Hecht permitted them to import and sell them in the United States. The Court disagreed and held that although Mr. Hecht had a right to make and sell the burners in Germany under German patent law, this had no effect on the U.S. patentee's ability to enforce its U.S. patent in the United States.

Over a century later, the issue of international patent exhaustion arose again in Jazz Photo v. ITC, 264 F.3d 1094 (Fed. Cir. 2001) and Fuji Photo Film v. Jazz Photo, 394 F.3d 1368 (2005), where the Federal Circuit reaffirmed the Supreme Court's holding in Boesch and clarified that the exhaustion doctrine would not apply even if the U.S. patentee or its licensees authorized the first sale abroad. In other words, even if the U.S. patentee permitted the first sale in a foreign country, a subsequent attempt to import such an item into the U.S. would still constitute infringement. In support of its holding, the Federal Circuit noted that the U.S. patentee's "foreign sales can never occur under a United States patent because the United States patent system does not provide for extraterritorial effect."

Based on the dialogue between the Justices and the attorneys in Costco, it appears that the Court may be uncomfortable limiting the exhaustion doctrine in the copyright context solely to situations where the first sale took place within the United States. They seem to be struggling to articulate a standard that allows some foreign sales to take advantage of the exhaustion doctrine while giving the phrase "lawfully made under this title" some meaning.

If, in the end, the rule announced by the Court in Costco differs from the holdings in Boesch and Jazz Photo, then what effect may this have on the future of patent law's exhaustion doctrine? Of course, the Court could maintain a dual approach, where copyright exhaustion and patent exhaustion are treated differently. However, if presented with an international patent exhaustion case, the Court could rely on its Costco holding and try to align the copyright and patent rules. We have seen the Court take this approach recently in MGM Studios v. Grokster, 545 U.S. 913 (2005), when it created a new theory of secondary liability in copyright law (the inducement theory) by relying, in large part, on patent law's recognition of this theory via statute in § 271(a) of the Patent Act.

Another possibility for harmonization of copyright and patent law is that the Court takes its cue from patent law and hold that exhaustion in the copyright context only applies when the copyrighted works were first sold or otherwise distributed in the United States. If this disrupts the policy concerns underlying the exhaustion doctrine, then Congress can always step in to resolve this issue.

Guest Post: Open Season on Copyright Infringement Claims? All Hail, or Hate, the “Troll”?

By Robert W. Zelnick, McDermott Will & Emery LLP

Is it me, or has there been a noticeable uptick in publicity about copyright infringement claims in 2010? There is the prolific new so-called "copyright troll," Righthaven LLC, which has sued more than 120 parties on behalf of its sole newspaper client, the Las Vegas Journal-Review (including against some high-profile defendants, such as politician Sharron Angle). The Fox network has been defending against claims that it violated a plaintiff's copyright when it ran footage of Bernard Madoff, and now the Fox network (in an unrelated claim) is suing politician Robin Carnahan for alleged unauthorized use of Fox clip in a political ad. Some blame the poor economy, some blame the lawyers, some blame a heated election season. Maybe it is all of those reasons, or none of those. But at the end of the day, it doesn't appear that anything has really changed in the substantive copyright law.

Although the nuances of copyright law can be sometimes challenging to understand and interpret, at its heart copyright law stands for a relatively simple proposition – don't copy. The copyright laws are not an act of "judicial activism" to codify a common-sense grammar school lesson. Instead, these laws find their basis in the U.S. Constitution: Article I authorizes Congress to "Promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Some of the comments in the blogosphere – including some rather nasty and ad hominem attacks against the "copyright troll of 2010" Righthaven LLC – seem to overlook that the easiest way to avoid copyright infringement claims is to avoid copying.

So, why all the angst related to enforcement of IP laws, now particularly centering on the concept of a copyright troll? In part, there are some of the same criticisms that have long been aimed at so-called "patent trolls": opportunistic lawyers, recoveries that are disproportionate to the "sweat of the brow" of the actual inventor/author, a drag on corporate profitability, etc. However, there are significant differences between a so-called patent troll and a so-called copyright troll.

First, the stakes and business model so far for the copyright cases seem to be quite different from the patent model. Righthaven's model, at least so far, has seemed to be a high-volume of cases that often individually settle in the range of a few thousand dollars.

Second, the policy issues are different. Revenue problems have cause newspapers to disappear at an alarming rate, and copyright revenue gives troubled businesses a new revenue stream from an existing asset. On the other hand, even those bloggers who infringe a copyright are usually creating knowledge, and there may be other counterconsiderations.

Third, some forms of clearinghouse model for copyright licensing/enforcement have existed for decades. For example, ASCAP, BMI, Copyright Clearance Center and others have generated revenue for themselves and for copyright owners by pursuing users of copyrighted works.

Fourth, it seems that courts may have a significant role in influencing policy when it comes to so-called "copyright trolls." For example, the courts have latitude in setting statutory damages in copyright cases within a wide range spanning $200 to $300,000; the exercise of that discretion can directly affect whether a so-called troll's business model will be profitable.

Most of all, though, parties being sued by Righthaven seem to feel a sort of "gotcha" moment. Sure, these defendants saw the copyright notices on the newspapers and websites whose content they allegedly copied, and they knew at some level that copying often has some element of "wrong" to it. But perhaps they figured that there was a safe harbor in doing what everyone else seemed to be doing. Compare the rumored – and often very dangerous – "rules of thumb" about things like the percent of content that can "safely" be copied, the supposed "free pass" that comes from a direct link to the original (copyrighted) article, the breadth of applicability of the fair use defense, and so on.

Perhaps the one aspect of the Righthaven model that many defendants feel most indignant about is that they were sued before receiving a cease-and-desist demand. As another example of the many disconnects between expectations and reality in IP enforcement, a demand letter is not a prerequisite to a complaint. There is no guaranteed "free bite at the apple" when it comes to infringement, and for good reason. Indeed, what would be the value of opinion counsel in the IP arena if the ultimate outcome were that liability only starts to accrue after a party elects to continue infringement after being actually warned of potential claims? Cease-and-desist demands have a place in certain infringement scenarios; however, they are sometimes a waste of time and money, and there is a strong deterrent to infringement when a defendant cannot escape liability for past acts simply by ceasing accused conduct when directly asked by the IP owner. Righthaven has apparently decided that such warning letters do not fit into its business model, which seems to be its prerogative.

The other major factor that contributes to the sense of "gotcha" is undeniably the role of the internet, email and related technologies. In short, acts of infringement can be publicized to the world at the speed of light, via a few keystrokes. Infringement over the internet is also much easier to identify, via increasingly-sophisticated searching and tracking technologies. It comes as no surprise that Righthaven reportedly uses a proprietary technology to identify suspected infringements before offering to buy the underlying copyrights from the copyright owner.

It will be interesting to see whether the Righthaven model, or some other models of so-called "copyright troll," will be sustainable. So far, to my knowledge, none of the 120+ Righthaven defendants has litigated what appear in some cases to be potentially valid "fair use" theories. Indeed, so far, Righthaven reportedly has been willing to settle individual cases for a few thousand dollars, which is far less than it would typically cost a defendant to secure copyright counsel and answer a federal complaint (both without any guarantee of success). I have heard rumblings that some defendants are pursuing discussions to form a defense coalition of sorts, to share costs and to combine expertise and effort. I will be curious to see how Righthaven handles serious defenses to the complaints, and whether pursuing active litigation fits Righthaven's business model.

In the meantime, the publicity surrounding this so-called "copyright troll" and the other high-profile copyright infringement claims of 2010 have served a useful purpose in reminding the public (and even non-copyright lawyers) about best practices regarding copyright law. Said differently, this is a very good time for clients to revisit their copyright practices. Maybe the economy and the election cycle have motivated more parties to enforce their copyrights, and maybe there could be a sustainable entrepreneurial enforcement model for a new kind of "troll," but the copyright law – as always – still prevents copying.