Copyright Owner Needs to Prove Use Limitations to Avoid First Sale Defense

Adobe Sys. Inc. v. Christenson, 809 F.3d 1071, 117 U.S.P.Q.2d 1257 (9th Cir. 2015). Christenson owns a software company that resells software products purchased from third-party distributors, including Adobe. Adobe sued Christenson for copyright infringement and trademark infringement, alleging that Christenson was not authorized to sell this software. Adobe argued that it only licenses its software, so Christenson could not make use of the first sale defense to copyright infringement. Christenson argued that the first sale defense was applicable, since he had purchased the software from third parties. Both Christenson and Adobe moved for summary judgment and the district court granted summary judgment in Christenson’s favor, ruling that Adobe had not produced any admissible evidence that it only licenses software. Adobe appealed.

The Ninth Circuit affirmed. The ruling was based on the court’s interpretation of the evidence standards required to satisfy 17 U.S.C. § 109(a), the first sale defense to copyright infringement. The Ninth Circuit ruled that Christenson had satisfied the initial burden of establishing that he had lawfully purchased the software he subsequently sold. This caused the burden to shift to Adobe to prove that the software was not actually sold, but merely licensed with restrictions on resale, so the first sale doctrine would not apply. The Ninth Circuit found this burden shifting to be reasonable, as Adobe was in a much better position to show what restrictions were placed on the software when Adobe placed the software into the marketplace. Adobe failed to produce any licensing agreements covering the copies of software Christenson sold during discovery. Therefore, the court found that the first sale defense was available to Christenson.

Why is in Left Field

TCA Television Corp. v. McCollum, 117 U.S.P.Q.2d 1452 (S.D.N.Y. 2015). Plaintiffs TCA and others are owned by the heirs of the comedy duo Abbott and Costello. The defendants are related to the Broadway play “Hand to God,” in which a character performs a portion of the “Who’s on First?” routine made famous by Abbott and Costello. In the play, a teenage boy (Jason) from the Bible Belt performs the routine with a sock puppet (Tyrone) that represents his alter ego. The defendants moved for dismissal based on lack of copyright ownership and fair use.

The district court found that defendant’s use of the comedy routine was highly transformative, and thus entitled to protection under the fair use doctrine. The factors favoring the plaintiffs, namely the nature of the work and the amount of the work used, were outweighed by the factors of the effect on the market, and the purpose and character of the use. The district court noted that it was unlikely that the play would usurp the market for the original Abbott and Costello performance. Further, the play only has one actor performing the routine to illustrate the contrast between Jason’s seemingly soft-spoken personality and the actual outrageousness of his inner nature, and represents a darkly comedic critique of the social norms governing a small town in the Bible Belt. Accordingly, the district court found the defendants’ use was fair, and not an attempt to usurp the plaintiff’s material to avoid the drudgery in working up something fresh.

PATENTS

Anticipation

In re DiStefano, 808 F.3d 845, 117 U.S.P.Q.2d 1265 (Fed. Cir. 2015). The Federal Circuit vacated the PTAB’s rejection that was based partially on giving no weight to certain claim limitations deemed to fall under the printed matter doctrine. Although the web asset features from the claims likely do communicate some information, the content was not claimed.

Case Or Controversy

Tesco Corp. v. Nat’l Oilwell Varco, LP, 804 F.3d 1367, 116 U.S.P.Q.2d 1789 (Fed. Cir. 2015). The Federal Circuit dismissed the appeal of the district court’s sua sponte dismissal with prejudice under the district court’s inherent power to sanction. Because all parties and all counsel signed mutual releases and settled the underlying dispute, the Federal Circuit found that there was no remaining case or controversy to adjudicate.

Certificate of Correction/Written Description/Obviousness

Cubist Pharm., Inc. v. Hospira, Inc., 805 F.3d 1112, 117 U.S.P.Q.2d 1054 (Fed. Cir. 2015). The Federal Circuit affirmed the district court’s findings that the asserted claims in four of Cubist’s five asserted patents to dosage regimens and purification methods for daptomycin were invalid as obvious. A single prior art reference described the claimed dosage regimens and inherently disclosed the benefit of those dosage regimens. Regarding Cubist’s purification patents, which relied on a two-step filtration process, the Federal Circuit held that the two-step filtration technique was invalid as obvious. The Federal Circuit also affirmed the district court’s findings that Cubist’s fifth asserted patent, the ‘071 patent, was valid and infringed. The Federal Circuit rejected Hospira’s arguments that the PTO incorrectly allowed a certificate of correction to correct the chemical structure diagram in the ‘071 patent. Because the patent clearly described daptomycin and a process for isolating daptomycin (which necessarily results in the correct stereoisomer), the Federal Circuit held that the PTO did not err in issuing the certificate of correction. The Federal Circuit held that persons skilled in the art would have understood that the inventors had possession of the correct chemical structure so there was not a written description problem.

Claim Construction

Advanced Steel Recovery, LLC v. X-Body Equip., Inc., 808 F.3d 1313, 116 U.S.P.Q.2d 1981 (Fed. Cir. 2015). The Federal Circuit affirmed the district court’s finding of non-infringement. The Federal Circuit upheld the district court’s construction of “proximal end” as being the extreme or last part lengthwise, which was supported by the specification. Based on this claim construction, there was no literal infringement or infringement under the doctrine of equivalents.

Akamai Techs., Inc. v. Limelight Networks, Inc., 805 F.3d 1368, 117 U.S.P.Q.2d 1101 (Fed. Cir. 2015).The Federal Circuit affirmed the judgment of noninfringement with respect to two patents and remanded with instructions to reinstate the jury verdict and damages with respect to another patent. After a lengthy case history, the case returned to the Federal Circuit to resolve all residual issues in the appeal and cross-appeal. The Federal Circuit found no error in the district court’s claim constructions and jury instructions.

Atlas IP, LLC v. Medtronic, Inc., 809 F.3d 599, 116 U.S.P.Q.2d 1803 (Fed. Cir. 2015). The Federal Circuit affirmed the summary judgment of noninfringement, reversed the summary judgment rejecting the validity challenge, and remanded for further proceedings on invalidity. The district court concluded that, as long as the information must be sent before the remotes transmitted, as the Federal Circuit concluded it must, Medtronic’s devices did not infringe. Atlas did not argue otherwise, and for that reason the Federal Circuit affirmed the summary judgment of non-infringement. The Federal Circuit rejected the claim construction and therefore reversed the summary judgment of no anticipation or obviousness, which rested on the district court’s incorrect claim construction.

Atlas IP, LLC v. St. Jude Med., Inc., 804 F.3d 1185, 116 U.S.P.Q.2d 1811 (Fed. Cir. 2015). The Federal Circuit vacated the summary judgment of noninfringement and remanded. The Federal Circuit found that the district court erred in construing the claim limitation, and because there was no other ruling about infringement at the district court under any other claim construction, the Federal Circuit therefore vacated the summary judgment.

Imaginal Systematic, LLC v. Leggett & Platt, Inc., 805 F.3d 1102, 116 U.S.P.Q.2d 1998 (Fed. Cir. 2015). The Federal Circuit affirmed the district court’s finding of non-infringement. The district court construed the term “vision guidance system” in accordance with the specification and the plain meaning of the terms. The district court’s construction did not limit the construction to a preferred embodiment.

Openwave Sys., Inc. v. Apple Inc., 808 F.3d 509, 117 U.S.P.Q.2d 1189 (Fed. Cir. 2015). The Federal Circuit affirmed the district court’s claim construction that a “mobile device” is “a portable wireless two-way communication device that does not contain a computer module” and that this construction does not read out embodiments including microcontrollers. The Federal Circuit’s decision was based on the number of disparaging remarks made in the specification regarding two-way communication devices that included computer modules. While stating that there is a high bar to finding disavowal of claim scope through disparagement, the Federal Circuit nonetheless found that in the present case, it is difficult to envisage how, in light of the repeated disparagement of mobile devices with computer modules discussed above, one could read the claims to cover such devices.

Straight Path IP Group, Inc. v. Sipnet EU S.R.O., 806 F.3d 1356, 117 U.S.P.Q.2d 1223 (Fed. Cir. 2015). The Federal Circuit reversed the PTAB’s claim construction and remanded for further proceedings under the correct construction. The Federal Circuit found the claim terms to have a very clear meaning and that the specification does not provide a basis for reasonably adopting a construction that contradicts the plain meaning of the claim language.

Consent Order

DeLorme Publ. Co. v. ITC, 805 F.3d 1328, 117 U.S.P.Q.2d 1141 (Fed. Cir. 2015). The Federal Circuit affirmed the ITC’s finding that DeLorme violated a consent order and the ITC’s imposing of a civil penalty. The Federal Circuit agreed that the consent order precluded DeLorme from importing, selling for importation, or selling or offering for sale after importation products that infringed the claims. DeLorme was also precluded from selling infringing devices containing imported components with instructions to infringe. Moreover, the Federal Circuit found that the ITC did not abuse its discretion in imposing the civil penalty, which was substantially less than the statutory ceiling.

Enablement

In re Morsa, 803 F.3d 1374, 116 U.S.P.Q.2d 1863 (Fed. Cir. 2015). The Federal Circuit affirmed the PTAB’s finding that the anticipated reference was enabling. Morsa admitted in his specification that the described system could be implemented by any programmer of ordinary skill in the art. The prior art reference discloses each claim limitation of Morsa’s patent application. Taken together, the Federal Circuit affirmed the judgment of the PTAB finding the reference enabling.

Enhanced Damages

Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., 805 F.3d 1382, 117 U.S.P.Q.2d 1099 (Fed. Cir. 2015). The Federal Circuit denied a petition for rehearing en banc, except for an issue regarding enhancement of damages. The Federal Circuit held that portion of the en banc petition in abeyance in view of the pending Supreme Court decisions in Halo Electronics and Stryker.

Infringement

Momenta Pharms., Inc. v. Teva Pharms. USA Inc., 809 F.3d 610, 116 U.S.P.Q.2d 1961 (Fed. Cir. 2015). The Federal Circuit affirmed the grant of summary judgment of non-infringement after determining that a product is not “made by” a patented process under 35 U.S.C. § 271(g) if it is used merely to determine whether the intended product of a separate process has already been manufactured. The case, however, was remanded for further proceedings based on the erroneous determination that one of the defendants’ activities fell within the 35 U.S.C. § 271(e)(1) safe harbor provision.

Invalidity

Ariosa Diagnostics, Inc. v. Sequenom, Inc., 809 F.3d 1282, 117 U.S.P.Q.2d 1153 (Fed. Cir. 2015). The Federal Circuit denied the petition for rehearing en banc following the Federal Circuit panel’s affirmation of summary judgment of invalidity and noninfringement.

ITC Jurisdiction

ClearCorrect Operating, LLC v. ITC, 810 F.3d 1283, 116 U.S.P.Q.2d 1883 (Fed. Cir. 2015). The Federal Circuit found that the ITC does not have jurisdiction over electronic transmissions of digital data. More specifically, the term “articles” in 19 U.S.C. § 1337(a) does not include electronic transmissions of digital data. This majority decision reversed an ITC decision finding that “articles” can include electronic transmission of digital data.

Jurisdiction

MCM Portfolio LLC v. Hewlett-Packard Co., 117 U.S.P.Q.2d 1284 (Fed. Cir. 2015). The Federal Circuit affirmed that it lacked jurisdiction to review the PTAB’s decision that institution of inter partes review was not time barred under 35 U.S.C. § 315(b). However, the Federal Circuit also concluded it can review the question of whether the final decision by the PTAB violates Article III and the Seventh Amendment, which the Federal Circuit held it does not. Finally, the Federal Circuit held that the PTAB’s factual finding in determining the claims obvious was supported by substantial evidence.

Obviousness

Ariosa Diagnostics v. Verinata Health, Inc., 805 F.3d 1359, 117 U.S.P.Q.2d 1068 (Fed. Cir. 2015). Ariosa petitioned the PTAB to review the validity of Verinata’s patent. The PTAB concluded that Ariosa failed to meet its burden that the claims were invalid as obvious, but the Federal Circuit vacated the PTAB’s decision and remanded for further consideration. In its inter partes review petition, Ariosa argued that the patent was obvious in view of three prior art references. Although the PTAB instituted Ariosa’s petitions, it ultimately held that Ariosa failed to sufficiently explain why a person of ordinary skill in the art would have combined the disparate teachings. The Federal Circuit, however, concluded that the PTAB incorrectly limited its consideration of an exhibit that Ariosa used to explain a person of skill in the art’s knowledge and understanding of the state of the art and, therefore, remanded.

Prometheus Labs., Inc. v. Roxane Labs., Inc., 805 F.3d 1092, 116 U.S.P.Q.2d 1942 (Fed. Cir. 2015). The Federal Circuit affirmed the district court’s finding that Prometheus’s patent was obvious over the prior art and, thus, invalid. In particular, all elements of the asserted claims were present in the prior art, and the differences between the asserted claims and the prior art were insubstantial. The district court found no unexpected results due to the claimed methods. No secondary considerations supported the nonobviousness of the asserted claims.

Obviousness/IPR

Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 116 U.S.P.Q.2d 1869 (Fed. Cir. 2015). The Federal Circuit affirmed the PTAB’s obviousness rejection in an inter partes review (IPR) proceeding of four of six challenged claims in Belden’s patent, reversed the PTAB’s decision on the remaining two challenged claims, and affirmed the PTAB’s denial of Belden’s motion to exclude an expert declaration.

On-Sale Bar

The Meds. Co. v. Hospira, Inc., 805 F.3d 1357, 116 U.S.P.Q.2d 2017 (Fed. Cir. 2015). The Federal Circuit granted a petition for rehearing en banc to address the issue of what constitutes a commercial sale with respect to suppliers under the on-sale bar.

Validity/Burden of Proof

Prolitec, Inc. v. ScentAir Techs., Inc., 807 F.3d 1353, 117 U.S.P.Q.2d 1269 (Fed. Cir. 2015). The Federal Circuit affirmed the PTAB’s decision that the asserted claims lacked novelty and were obvious. Prolitec attempted to argue certain claim terms should have been construed more narrowly, but the Federal Circuit upheld the broader construction based on the specification. The Federal Circuit also upheld the PTAB’s denial of a motion to amend because Prolitiec did not demonstrate that the proposed claim is patentable over prior art that was part of the prosecution history.

Written Description

Inphi Corp. v. Netlist, Inc., 805 F.3d 1350, 116 U.S.P.Q.2d 2006 (Fed. Cir. 2015). The Federal Circuit affirmed the PTAB’s decision that the negative claim limitation met the written description requirement. The Federal Circuit found that properly describing alternative features—without articulating advantages or disadvantages of each feature—can constitute a “reason to exclude” under the standard articulated in its prior decisions. Here, the Federal Circuit found substantial evidence supporting the PTAB’s finding that the specification properly distinguished several different signal types.

TRADE SECRETS

Baxter Healthcare Corp. v. HQ Specialty Pharma Corp., 2016 WL 344888, 2016 U.S. Dist. LEXIS 9201 (D.N.J. 2016). The defendant HQ knew or had reason to know that Mr. Owoo obtained certain information through improper means. Baxter’s claimed that HQ “stuck its head in the sand.” The district court agreed. If HQ was willfully blind to the circumstances indicating Mr. Owoo’s improper use of Baxter’s trade secrets, HQ may be liable for trade secret misappropriation.

Blue Ocean Labs., Inc. v. Tempur Sealy Int’l, Inc., 2015 WL 9592523, 2015 U.S. Dist. LEXIS 173487 (M.D.N.C. 2015). While the case presents a close question and the factual allegations of the complaint may be consistent with innocent explanations as well as misconduct, they nevertheless are sufficient to state plausible claims for breach of contract and misappropriation of trade secrets. At this stage, the plausibility standard applicable to motions to dismiss is not akin to a ‘‘probability” requirement.

Emerald City Mgmt., LLC v. Kahn, 2016 WL 98751, 2016 U.S. Dist. LEXIS 2143 (E.D. Tex. 2016). It is well established that customer lists can constitute trade secrets under Texas law. Items such as customer lists, pricing information, customer preferences, and buyer contacts can be trade secrets. However, passwords do not qualify as trade secrets under the Texas Uniform Trade Secrets Act because passwords have no independent economic value.

NVR, Inc. v. Davern, 2015 WL 9450831, 2015 U.S. Dist. LEXIS 171428 (D.N.J. 2015). The district court found NVR is likely to succeed on its misappropriation claim because NVR discovered that Davern sent Horton a list of 40 land deals and obtained substantial confidential information including documents related to pricing strategy and the design of land purchase agreements. The district court distinguished information Davern learned from his many years of employment with NVR in the homebuilding industry and the information he took from NVR in anticipation of his resignation. The district court did not enjoin Davern from using the generalized industry knowledge and even company specific information he obtained through his years of employment.

Title Trading Servs. USA v. Kundu, 2016 WL 608193, 2016 U.S. Dist. LEXIS 1768 (W.D.N.C. 2016). When a misappropriated trade secret is used in direct competition against the owner of the trade secret, and the profits or losses of the owner are concretely measurable, courts typically calculate damages based on either the plaintiff/owner’s lost profits or the defendant/user’s illicit gains. When, however, the misappropriated secrets are used to save research and development costs or when a plaintiff cannot prove specific gains or losses, courts measure the value of the secret by other means. Here, the damages were the amount of the defendant’s savings in research costs.

TRADEMARKS

Non-Registrable Subject Matter

In re Tam, 808 F.3d 1321, 117 U.S.P.Q.2d 1001 (Fed. Cir. 2015). The Federal Circuit vacated and remanded the TTAB’s holding that the mark “The Slants” was disparaging and, therefore, unregistrable. The Federal Circuit found that the government cannot refuse to register disparaging marks because it disapproves of the expressive message of the marks. Applying strict scrutiny review appropriate for government regulation of message or viewpoint, the Federal Circuit concluded that the disparagement proscription of 15 U.S.C. § 1052(a) is unconstitutional.

Mr. Tam was the “front man” for the Asian-American band The Slants. He filed the instant application to register the mark The Slants for “entertainment in the nature of live performances by a musical band.” The Examiner found that the mark likely referred to people of Asian descent in a disparaging way and that a substantial composite of persons of Asian descent would find the term offensive, thereby denying registration. The TTAB affirmed. Mr. Tam appealed, arguing that the TTAB erred in finding the mark disparaging and that § 2(a) is unconstitutional. The Federal Circuit sua sponte ordered a rehearing en banc.

The Federal Circuit found that §2(a) denied important legal rights to private speech based on disapproval of the message conveyed and, as such, was subject to and could not survive strict scrutiny. The Federal Circuit noted that the government could not escape strict scrutiny by arguing that § 2(a) regulates commercial speech. The Federal Circuit also found that, although § 2(a) did not ban speech, it was still subject to strict scrutiny because it “significantly chills private speech on discriminatory grounds,” noting that § 2(a)’s bar on registration creates a strong disincentive to choose a “disparaging” mark and that it was, at best, unclear whether a user of an unregistrable disparaging mark had any enforceable common law rights.

The Federal Circuit rejected the position that trademark registration constitutes government speech or that § 2(a) is a government subsidy, thereby insulating § 2(a) from First Amendment review. The Federal Circuit noted that § 2(a) was unconstitutional even under the Central Hudson test for commercial speech because the disparaging trademark was not illegal or misleading and a substantial government interest did not justify the regulation.

Thus, the Federal Circuit held that the disparaging provision of §2(a) was unconstitutional because it violated the First Amendment.

Trademark Infringement/Vicarious Liability

Grubbs v. Sheakley Group, Inc., 807 F.3d 785, 117 U.S.P.Q.2d 1209 (6th Cir. 2015). Linda Grubbs, Tri-Serv Ltd., and other companies owned by Grubbs (Tri-Serv) sued the defendants for trademark infringement, false designation of origin, false advertising, and various state claims. The district court dismissed the federal claims for failure to state a claim on which relief may be granted and the pendant state claims. The district court found that the defendants’ use of Tri-Serv’s name, in emails and a flyer, was not used in a “trademark way.” The Sixth Circuit disagreed with the district court and reversed its findings as to whether the defendants’ use constituted use as a trademark. The Sixth Circuit found that an email from the defendants to existing Tri-Serv clients, which provided a new address for Tri-Serv c/o Sheakley, designated the geographic source of Tri-Serv’s PEO (professional employment organization) services, and implied that those services would be originating from both Tri-Serv and the defendants.

The Sixth Circuit also determined that where the email explicitly referred to the relationship between Tri-Serv and the defendants as a partnership, and the intent was to create an apparent partnership in the eyes of Tri-Serv’s customers, the defendants could be held vicariously liable for trademark infringement under the Lanham Act.

After examining the factors to determine whether the defendants’ use of the Tri-Serv name created a likelihood of confusion, the Sixth Circuit found that (1) the Tri-Serv name was a suggestive mark, (2) the relatedness of the PEO business services weighed in favor of potential consumer confusion, (3) the defendants had taken Grubbs’s actual trademark, (4) evidence of actual confusion occurred where Tri-Serv’s clients expressed dissatisfaction that their information had been transferred to the defendants, (5) the potential customer base was the same, (6) Tri-Serv’s and the defendant’s customers should be held to the standard of a “typical buyer exercising ordinary caution,” and (7) the email was calculated to mislead Tri-Serv clients. These factors weighed strongly in favor of potential consumer confusion.

Thus, the Sixth Circuit found that Tri-Serv had stated a claim for improper use of its tradename, as well as false designation of origin, for which the defendants may be held vicariously liable. The Sixth Circuit further found that Tri-Serv had stated a claim for false advertising, but had not met the standard for RICO liability.