by Dennis Crouch

Morality judgments have been a core governmental activity for millennia.  However, when it comes to limiting speech – morality is unlikely to be a sufficient justification to overcome today’s expansive Free Speech principles.

The Lanham Act requires the USPTO to bar registration for marks that are either “immoral” or “scandalous.”  15 U.S.C. 1052(a).  A separate portion of the provision prohibits registration of marks that “may disparage . . . persons” — but the Supreme Court found that portion uncontitutional in Matal v. Tam, 582 U.S. ___ (2017). In Brunetti, the Federal Circuit expanded Tam by holding that the prohibition on registering “immoral” or “scandalous” marks is also an unconstitutional.  The court suggested that the government could draw some lines – such as barring obscene marks — but those dilenations are the province of Congress.

In Brunetti’s particular case, his admittedly vulgar mark FUCT was originally refused registration on scandalous grounds. On appeal, however, the Federal Circuit reversed.

Now, the US Government has petitioned the Supreme Court for Writ of Certiorari — arguing that:

Under the proper analysis, the First Amendment does not prohibit Congress from making vulgar terms and graphic sexual images ineligible for federal trademark registration.

[Read the petition: Brunetti (Pet)]. The petition asks one straightforward question:

Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is facially invalid under the Free Speech Clause of the First Amendment.

In some ways, the case here looks to be open-and-shut — since the Supreme Court just held in 2017 that disparaging limit is unconstitutional. However, a disparaging mark is – by definition – directed toward a particular viewpoint and therefore more suspect than a mark that is simply vulgar.   In addition, one problem with Tam is that there was no majority opinion explaining the court’s reasoning. On this second point, the petition explains:

Although this court recently concluded in Matal v. Tam, 137 S.Ct. 1744 (2017), that a different provision of Section 1052(a) was facially unconstitutional, no rationale garnered the assent of a majority of the Court, and neither the of the lead opinions in Tam endorsed the approach that the court of appeals adopted here.

The petition here was a joint submission by the US Solicitor General and the USPTO, including acting solicitor Joseph Matal who was acting director at the time of the Tam decision.

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Notes: Prior to Brunetti, courts have largely enforced the “immoral” and “scandalous” limitations — treating the two as a single category of prohibition.  My favorite case is In re Fox, 702 F.3d 633 (Fed. Cir. 2012) (finding the mark for a rooster-shaped lollipop scandalous since it was intended to refer to a “cock sucker”).  Scandalous marks, include those “shocking to the sense of propriety, offensive to the conscience or moral feelings or calling out for condemnation.” McGinley. 

by Dennis Crouch

Worlds Inc. v. Bungie, Inc. (Fed. Cir. 2018)

The appeal here stems from three Inter Partes Review (IPR) proceedings — each cancelling the claims of aseparate Worlds’ patent. U.S. Patent Nos. 7,945,856; 8,082,501; and 8,145,998. The Worlds’ patents involve methods and systems for displaying avatars within a virtual environment and claim priority back to a 1995 provisional patent application.

The appeal here does not focus on the merits of the case but rather whether the IPR proceedings were time barred.  I.e., whether the patentee’s still-pending lawsuit against Bungie’s contracting partner Activision will block Bungie from pursuing its IPR. 

35 U.S.C. § 315(b) is fairly clear — “an inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

Here, the petitioner Bungie was never sued for infringing the patents.  However, game distributor Activision was sued for infringement 2012 for its World of
Warcraft games.  Bungie develops virtual-world games such as Halo — and distributes those games through a deal with Activision. Back in 2014, Worlds notified Activision that it planned to add the Bungie products to the lawsuits.  Within six months, Bungie filed the IPRs at issue here. The Activision lawsuit is ongoing – though it was conveniently stayed pending outcome of the Bungie IPR.

In the IPR, the patentee Worlds requested discovery on the connection between Bungie and Activision in order to determine whether Activision could be considered a “real party in interest” or “privy.” However, that request was summarily denied and the PTAB concluded that the patentee “has not demonstrated that Activision is an unnamed real party in interest in this proceeding.”

On appeal, the Federal Circuit has vacated and remanded — holding that the PTAB should have investigated the relationship between the IPR petitioner (Bungie) and the prior litigant (Activision) and that the PTAB should have explained its reasoning.

Absent from the Board’s analysis of the real-party-in interest issue is any clear statement of what, if any, burden framework the Board used to analyze the evidence presented in these IPRs, including an identification of which party the Board viewed as bearing the burden of persuasion.

In its decision, the court made several important findings:

• An “IPR petitioner bears the ultimate burden of persuasion to show that its petitions are not time-barred under § 315(b).” However, an IPR petitioner’s identification of the real parties in interest in the petition papers will ordinarily serve as prima facie evidence meeting this burden.  At that point, the patentee must produce some evidence to support its contention otherwise.
• Note here, that the initial statement by the patentee does not create a “presumption” but only serves as an initial starting point for the analysis. The court explains: “[i]nstead of viewing this as a presumption, we simply view this as practical. In short, we see no reason for the Board to question an IPR petitioner’s identification of the real parties in interest unless and until a patent owner has chosen to raise the issue.”
• In order to properly “raise the issue”, a patentee will need to provide “some evidence” showing that a particularly third-party should be named as a real-party-in-interest. The court expressly refused to state the “quantum” of evidence required — but suggested that it might follow the PTAB’s prior ruling that evidence should “reasonably brings into question the accuracy of a petitioner’s identification of the real parties in interest.”  Note — this requirement is clearly less than a preponderance of the evidence.

Here, the court found that the patent owner “presented more than enough evidence to sufficiently put this issue into dispute.”  The evidence here was:

1. Worlds pointed to a particular party it saw as a real-party-in-interest — Activision.
2. Worlds provided evidence of a development-distribution agreement between petitioner Bungie and Activision. This agreement placed an obligation on Bungie to clear-rights for its products distributed by Activision and also provided Activision with ability to review and approve the clearance;
3. Worlds provided evidence that it had provided notice to Activision regarding its intent to add Bungie products to the Activision litigation; and
4. The patents challenged by Bungie are the exact same patents that are the subject matter of the pending litigation with Activision.

The Federal Circuit saw this evidence as sufficient to force the Board’s hand and no longer simply rely upon the petition’s statement in a conclusory judgment.  Rather, at that point the Board should have considered the evidence and expressly made “the factual determinations necessary to evaluate whether Bungie had satisfied its burden to demonstrate that its petition was not time-barred based on the complaints served upon Activision, the alleged real party in interest.”

On remand, the Board will reconsider its the real-party-in-interest decision — placing the ultimate burden of persuasion on the IPR petitioner.

Vacated and Remanded.

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Claim 1 of the ‘856 patents is listed below:

1. A method for enabling a first user to interact with second users in a virtual space, wherein the first user is associated with at first avatar and a first client process, the first client process being configured for communication with a server process, and each second user is associated with a different second avatar and a second client process configured for communication with the server process, at least one second client process per second user, the method comprising:

(a) receiving by the first client process from the server process received positions of selected second avatars; and

(b) determining, from the received positions, a set of the second avatars that are to be displayed to the first user;

wherein the first client process receives positions of fewer than all of the second avatars.

Bhagat v. Iancu is a newly filed petition for writ of certiorari now pending before the United States Supreme Court. (Case No. 18-277).   Bhagat is the founder and CEO of Asha Nutrition and is seeking to patent a lipid-formulation – that contains a mixture of omega-6 and omega-3 faty acids at a ratio of 4:1 or greater.

The USPTO refused to issue the patent finding the claims barred both by on eligibility (101) and anticipation (102) grounds.  On appeal, the Federal Circuit affirmed.   The 101 denial is most interesting.  The PTAB found that that claimed fatty-acid mixtures already occur naturally in walnut oil and olive oil.  And, although the claims require (via disclaimer) that the mixture of oils come from different sources, the Board found them to be directed to a natural phenomenon.  On appeal, the Federal Circuit agreed — finding that the original ingredients of walnut oil and olive oil are natural products and the mixtures were not shown to be a “transformation of the natural products, or that the claimed mixtures have properties not possessed by these products in nature.”  [Query – are the the oils themselves product of nature?]

This opinion follows Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948).  In that case, the Supreme Court explained that

The [claimed] combination of species produces no new bacteria, no change in the six species of bacteria, and no enlargement of the range of their utility. . . . They serve the ends nature originally provided and act quite independently of any effort of the patentee. . . .

The qualities of these bacteria, like the heat of the sun, electricity, or the qualities of metals, are part of the storehouse of knowledge of all men. They are manifestations of laws of nature, free to all men and reserved exclusively to none. He who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end.

The new petition raises three questions:

1. a. Whether the Federal Circuit erred in finding petitioner’s patent application claims unpatentable under 35 U.S.C. § 101 because the court failed to apply the correct patent eligibility standard under this Court’s conflicting holdings in Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948) and Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013).

1. b. Whether the Federal Circuit erred in finding petitioner’s patent application claims unpatentable under 35 U.S.C. § 101 because the court did not apply the patent-eligibility standard set forth in Myriad.

2. Whether the Federal Circuit erred in affirming the USPTO’s decisions under 35 U.S.C. §§ 101 and 102(b) because it failed to apply “meaningful review” to that decision, as required by the Administrative Procedure Act.

2018 Read the Petition

The broadest claim in contention reads as follows:

65. A lipid-containing formulation, comprising a dosage of omega-6 and omega-3 fatty acids at an omega-6 to omega-3 ratio of 4: 1 or greater, contained in one or more complementing casings providing controlled delivery of the formulation to a subject, wherein at least one casing comprises an intermixture of lipids from different sources, and wherein (1) omega-6 fatty acids are 4-75% by weight of total lipids and omega-3 fatty acids are 0.1-30% by weight of total lipids; or (2) omega-6 fatty acids are not more than 40 grams.

by Dennis Crouch

TS Patents v. Yahoo! Inc. (Fed. Cir. 2018)

In this case, TS patents (inventor Sheng Tai Tsao) has asserted four patents against Yahoo!: U.S. Patent Nos. 9,280,547 (“the ’547 patent”); 8,799,473 (“the ’473 patent”); 8,713,442 (“the ’442 patent”); and 8,396,891 (“the ʼ891 patent”).  All four patents are related to remote hosting.  When a user logs-in, the system creates a per-user-session hierarchical folder list that is sent to the user’s local device.  When a user logs-out, the hierarchical list is deleted from memory.  (2002 priority dates).

The district court found all the asserted claims invalid under 35 U.S.C. § 101 following the Alice/Mayo test as applied to abstract ideas.  In Alice Step-Two, the district court concluded that the claimed elements and arrangements were all “conventional” and “generic.”  In particular, the district court dismissed the case on the pleadings — ruling that the patent is so clearly invalid that the complaint failed to state a plausible claim (Fed.R.Civ.Pro. 12(b)(6)).  At that stage, the district court did not consider any evidence or expressly draw factual conclusions.  On appeal, the Federal Circuit affirmed without opinion (R.36).

In its new en banc petition, TS Patent has asked the Federal Circuit to reconsider in light of its recent decisions in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) and Aatrix Software, Inc. v. Green Shades Software, Inc., 890 F.3d 1354 (Fed. Cir
2018).  Leading attorney Matthew Dowd writes:

When a U.S. patent—in particular, a patent issued after Alice Corp. Pty Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014)—states that the claimed computer-based invention yields technical improvements over existing systems, can a district court make factual findings contrary to the patent’s specification at the pleading stage and dismiss a complaint for patent infringement under Rule 12(b)(6)?

TSPatentEnBanc.  The Federal Circuit is struggling internally with this issue, but I do not expect TS to get a majority of the judges — especially since Judges Newman and Linn were on the original R.36 panel.

What is the right answer here: Our system needs a relatively quick and cheap way to cancel patents that are clearly invalid and should not have issued.  Without a better solution, the Supreme Court functionally blessed this approach — although effective it has some major defects.  Barring major revisions of eligibility analysis, the better approach here is to open the window for post-grant review proceedings.

I am happy to announce that Damian Porcari has been sworn-in as the new USPTO Midwest Regional Office director in Detroit. Porcari has been a longtime fixture in the Michigan intellectual property circles — and “retired” from his position as Director of Licensing and Enforcement for Ford in 2017 after 28 years with the company.  Congratulations!

Guest Post by Professor Paul M. Janicke, University of Houston Law Center.   In 2017, Prof. Janicke was awarded the Tom Arnold Lifetime Achievement Award by the State Bar of Texas. – DC

I have now been a registered patent attorney for 50 years, spending 21 of them in private patent litigation practice before joining the law faculty at the University of Houston. Looking back on it all, and on the posture of patent litigation in the past few years, I feel it is time to consider some major surgery on the patent statute, re-envisioning what we are trying to accomplish. Lawyers presently active in the field have told me enforcing a United States patent is nigh unto impossible today. You usually have to fight off multiple IPRs in the Patent & Trademark Office, during which time any infringement suits you have filed are likely stayed. If your client’s patents survive the PTO proceedings, you then have to battle against the much wider field of prior art established by the America Invents Act. For example, foreign patents used to be effective as prior art as of their grant or publication dates; now they are secret prior art as of their foreign filing dates. Time bars of public use and on sale, formerly limited to U.S. activities, are now expanded to world-wide events. And some kinds of prior art were removable by showing an earlier invention date, but that option is now gone. Meanwhile the remedies section, §271, has not changed in any meaningful way. No wonder patent infringement suits filings have dropped 30% as of June 30 of this year, compared to two years earlier.

I do not contend that fewer patent suit filings are necessarily a bad thing. A plausible argument can be made that any well-functioning law system should generate a smaller number of court fights. In the patent law world, that could signify better quality patents with everyone respecting them, resolving any minor disagreements by ADR, and filing zero infringement cases. However, the present situation suggests something else is afoot. A new look at what we are trying to accomplish by way of promoting progress in the useful arts may be in order. Many of the provisions in the current law are borrowed from the patent statutes of more than a century ago. Some may have been well-intentioned in their time and may even have some measure of residual benefit today, but experience shows that many of them are causing more trouble than they are worth. Maybe it is time to jettison these provisions. In these pages over the coming weeks I will present my proposals for streamlining the patent system in that way. I will try to balance them between those favoring accused infringers and those helping patent owners. To readers steeped in patent property philosophy, all of them will likely be labeled heretical.

The proposals are intended to be compromises, some favoring patent owners and some favoring infringers, whom we will no longer consider criminals. The two most central items are these:

(1) Continue to allow prosecution of as many claims as desired, but after allowance require the applicant to choose no more than three for issuance. During the first three years from grant, attacks on these claims can be made in the PTO or the courts, to the same extent as now. After three years from the issue date, validity of the claims becomes incontestable.

(2)  In exchange for (1), the remedy of permanent injunction disappears, except in ANDA cases. It will be replaced by a revised financial remedy: equitable sharing in the infringer’s revenues from the infringing activity, as set by the judge.

Proposal (1) is admittedly borrowed from the trademark law of incontestability, and may strike some as unfair to late entrants into a market. Those companies will find the validity questions foreclosed. However, my sense is that we need to cut down on the seemingly endless attacks on patent validity, and a fair sharing system seems to me a sensible way of going about it. (I do not expect hurrahs! from the patent litigation bar.)

I recognize that prong (2) can be said to make a patent no longer intellectual “property,” since there will usually be no explicit power to exclude others. This may be a heresy, but for progress of the useful arts maybe this is better. To start with, in real life patent cases we seldom see permanent injunctions going into effect any more. Government contractors are immune from them, and after the Supreme Court’s eBay decision, when they are granted by a court they are usually bought out by a financial payment arrangement instead. So maybe an equitable sharing remedy will work better for practically promoting the progress of the useful arts. The originator gets rewarded, and the benefits of the invention flow more widely and sooner. (I do not expect hurrahs! from the patent licensing bar.)

I have several other heresies in mind, which I intend to present a few at a time in the coming weeks.

Recent Headlines in the IP World:

• Helen Partz: Bank of America Applies for Blockchain-Based Encrypted Crypto Storage System Patent (Source: Coin Telegraph)
• Anton Shilov: AMD Wins Patent Infringement Case Against Vizio & Others; Vizio Ordered To Cease Some TV Imports (Source: AnandTech)
• Becky Edwards: McCarthy Institute Moves to Golden Gate University (Source: Business Wire)
• Christian de Looper: Apple Patent Hints at Smarter Charging for a Potential Wireless Pad (Source: Digital Trends)
• Sebastian Blanco: Tesla Wants Cars To Automatically Activate Their Turn Signals (Source: Forbes)
• Ben Miller: Coffee-Delivering Drones in the Office? IBM Inventors Say Yes (Source: New York Business Journal)

Source: USPTO

Commentary and Journal Articles:

• Matt Novak: The Story of the American Inventor Denied a Patent Because He Was a Slave (Source: Gizmodo)
• Prof. Brian L. Frye: Invention of a Slave (Source: Syracuse Law Review)
• Atty. Russell Slifer: Congress and Trump are Out of Step on Intellectual Property (Source: The Hill)
• Prof. David O. Taylor: Patent Reform, Then and Now (Source: SSRN)

New Job Postings on Patently-O:

• The Juelsgaard Intellectual Property and Innovation Clinic of Stanford Law School
• UNH School of Law
• Daly, Crowley, Mofford & Durkee, LLP
• Practical Law US
• Armstrong Teasdale LLP
• Kennedy Lenart Spraggins LLP
• Harrity & Harrity

by Dennis Crouch

A new petition for writ of certiorari focuses attention again on patent eligibility and the law-fact interplay. Real Estate Alliance Ltd. v. Move, Inc., SCT Docket No. 18-252.

The original focus of patent law is to “promote the Progress of . . . useful Arts.”  In that vein, patents have long been awarded for inventions with concrete and practical uses — and barred to invention claims that are merely abstract ideas.

In Mayo and Alice, the Supreme Court defined a two-step process for determining when a claimed invention is patent eligible:

Step 1: Ask whether the patent claims are directed to a patent ineligible concept, such as a law of nature, natural phenomenon, or abstract idea.

Step 2: If so, ask whether the claimed invention includes an “inventive concept” sufficient to transform the ineligible concept into a patent eligible invention.

In Step 2, the Supreme Court also suggested an inquiry into whether the claims present “something more” beyond a combination of “well understood, routine, and conventional” elements.

In this case, Real Estate Alliance Ltd. focuses on this second part of the Alice test and the “proper role of fact-finding.”  The question presented is:

Is whether an ordered combination of elements in a patent claim is “well-understood, routine and conventional” to a skilled artisan in the relevant field under Alice step two a question of fact?

In this particular case, the courts have seen this issue as a question of law and have not really considered any hard evidence.  The patent at issue is directed to a user interface that shows the geographic location of for-sale properties — using a zoomable interface.  Although this idea might seem well understood today — the application claims priority back to 1986 — graphics were not so easy back then. (See Conan – my favorite game back then). U.S. Patent No. 5,032,989.

The difficulty for the patentee – I expect – is that the patent claims just seem so obvious. Consider representative claim 1 below:

1. A method using a computer for locating available real estate properties comprising the steps of:

a) creating a database of the available real estate properties;

b) displaying a map of a desired geographic area;

c) selecting a first area having boundaries within the geographic area;

d) zooming in on the first area of the displayed map to about the boundaries of the first area to display a higher level of detail than the displayed map;

e) displaying the zoomed first area;

f) selecting a second area having boundaries within the zoomed first area;

g) displaying the second area and a plurality of points within the second area, each point representing the appropriate geographic location of an available real estate property; and

h) identifying available real estate properties within the database which are located within the second area.

20180824182113024_PetitionofWrit

Mark Banner was one of the best IP lawyers in the nation.  At his untimely death in 2007, I wrote that he had been generous and helpful to me in my first few years of practice in Chicago — and that he had been an occasional Patently-O contributor.

The ABA IP Section has established an annual award in Banner’s honor:

This award in honor of the late Mark T. Banner will be presented to an individual or group that has made an impact on intellectual property law and/or practice. Candidates will have expressed a clear passion and enthusiasm for, and advanced the practice, profession, and/ or substance of, IP law through extraordinary contributions to, among other things, teaching, scholarship, innovation, legislation, advocacy, bar or other association activities, or the judiciary. The award is open to the widest range of individuals and there is no requirement to be a lawyer or ABA member. Self nominations are welcome.

Nominations for the 2019 Award are now Open

by Dennis Crouch

The chart below shows the number of design patents granted each calendar year (orange) going back to 1993.  The figures for 2018 are current through the end of August 2018. 2018 figures have also been extrapolated to the end of the calendar year — predicting an all-time-high of 31,000+ design patents issued in 2018.  In the shadow-grey background the chart also shows the number of design patent applications filed each year as reported by the PTO (These applications are ordinarily kept secret unless the application results in a patent).

Take away: More design patents than ever, but I don’t know if we are progressing?

Cobbler Nevada, LLC v. Gonzales (9th Cir. 2018)

This copyright lawsuit involves cute Adam Sandler movie titled The Cobbler.  In the movie, Sandler’s character free-rides off of the experiences of others by using a magical shoe-cobbling machine.  The movie copyright holders did not reciprocate that freedom when American Pirates began downloading and distributing the movie through BitTorrent.

Cobbler-Nevada was able to trace the Internet Protocol (IP) address associated with the infringing activity and then filed suit in a John Doe lawsuit.  Comcast responded to a subpoena in the case with information that the IP address was assigned to its customer Thomas Gonzales.   The Copyright holder then amended its complaint to name Gonzales — accusing him of copyright infringement as well as contributory copyright infringement (for failing to secure his internet connection).  Note here that Gonzales operates an adult care home and that the internet service was open to residents and visitors.

The appeal here focuses on the pleadings and whether the complaint states a claim.  In Iqbal, the Supreme Court explained that a complaint must be plausible — allegation of plausible facts that create a plausible “entitlement to relief.”  Reviewing the allegations here, the 9th Circuit found that the facts alleged against Gonzalez here are “not enough to raise a right to relief above a speculative level.” (quoting Twombly).

[S]imply establishing an [internet] account does not mean the subscriber is even accessing the internet, and multiple devices can access the internet under the same IP address. Identifying an infringer becomes even more difficult in instances like this one, where numerous people live in and visit a facility that uses the same internet service. While we recognize this obstacle to naming the correct defendant, this complication does not change the plaintiff’s burden to plead factual allegations that create a reasonable inference that the defendant is the infringer.

The only connection between Gonzales and the infringement was that he was the registered internet subscriber and that he was sent infringement notices. To establish a claim of copyright infringement, Cobbler Nevada “must show that [it] owns the copyright and that the defendant himself violated one or more of the plaintiff’s exclusive rights under the Copyright Act.” Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004). Cobbler Nevada has not done so.

Regarding contributory infringement, the copyright holder here pursued a contributory infringement claim based upon a failure-to-police theory. The appellate court confirmed that theory is lacking:

Cobbler Nevada’s contributory infringement claim is premised on a bare allegation that Gonzales failed to police his internet service. This perfunctory allegation, without more, does not sufficiently link Gonzales to the alleged infringement.

Here, in particular, the complaint lacked allegations of any specific acts of active-infringement-encouragement.  As the Supreme Court explained in Grokster, contributory infringement must be based upon more than merely “failure to take affirmative steps to prevent infringement.”

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The appellate court also affirmed the award of attorney fees to Gonzales.