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January 15, 2018 Decisions in Brief

Decisions in Brief

By John C. Gatz

©2018. Published in Landslide, Vol. 10, No. 3, Janusry/February 2018, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

COPYRIGHTS

Co-Author Has Right to Create Derivative Works

BMG Rights Mgmt., LLC v. Atl. Recording Corp., 2017 U.S. Dist. LEXIS 136404 (S.D.N.Y 2017). The plaintiffs are co-owners of the copyright in the song “Came to Do,” which was released on the album X by Chris Brown in September 2014. “Came to Do” was composed around June of 2014, and was later recorded by Brown, featuring the musical artist Akon, before being released on Brown’s album. Shortly thereafter Brown, along with the defendants DJ Mustard and Omarion, authored the song “Post to Be,” which was first released as a single song in November 2014, and later appeared on an album. The plaintiffs alleged that “Post to Be” is an unauthorized derivative work of “Came to Do,” and sought an injunction forbidding further acts of copyright infringement, damages, recovery of profits, and a declaratory judgment setting forth the proportion of the publishing royalties due the plaintiffs in the future from the exploitation of “Came to Do.” The defendants sought a motion to dismiss the claims, contending that they cannot be liable for copyright infringement because Brown is a joint author and joint owner of both songs.

The district court found that Brown cannot, as a matter of law, be held liable by another joint owner of “Came to Do” for any derivative works he created, or for any licenses (implied or otherwise) he granted, with respect to “Post to Be.” The district court noted the longstanding principles that a joint author and joint copyright owner has the unrestricted right to use the song as they please, including to distribute, perform, and display the song, or create derivative works. The district court, however, also noted that it had not yet determined whether “Post to Be” is a derivative work of “Came to Do.” If so, the district court indicated that the joint owners of “Post to Be” must account for the profits they derived from the exploitation of “Came to Do.”

Dating Book Copyright Not Infringed

Parker v. PayPal, Inc., 2017 U.S. Dist. LEXIS 130800, 2017 WL 3508759 (E.D. P.A. 2017). Parker wrote and published a dating advice book. This book was later sold as part of a compilation of dating advice articles on a website. Parker sued a number of entities including Amazon for copyright infringement, unfair competition under the Lanham Act, misappropriation of likeness, breach of contract, and unjust enrichment. Amazon moved to be dismissed from the case.

The court granted Amazon’s motion to dismiss. The district court found that Parker failed to state a claim for copyright infringement against Amazon as an internet service provider for hosting the unauthorized copies of his book. The district court cited a Fourth Circuit case that found hosting content is like owning a copying machine that the public may access where the owner does not actually copy the materials. The district court found the passive act of hosting copyrighted material is not direct copyright infringement, contributory or vicarious copyright infringement. Additionally, the district court found that the Copyright Act preempted any state law breach of contract claim against Amazon for hosting an infringing version of Parker’s work on their servers, as that conduct is the same conduct that Parker alleged showed copyright infringement. Therefore, the contract claim is equivalent to an exclusive right granted by the Copyright Act, and is preempted by the Copyright Act.

YouTube Video Critical of Another Video Is Fair Use

Hosseinzadeh v. Klein, Inc., 2017 U.S. Dist. LEXIS 134910, 2017 WL 3668846 (S.D.N.Y. 2017). Matt Hosseinzadeh created several YouTube videos featuring a character he created, “Bold Guy.” In these videos, Bold Guy generally hits on women in a variety of different settings. Ethan and Hila Klein are also YouTube personalities, and they posted a video that was critical of one of Hosseinzadeh’s videos, “Bold Guy vs. Parkour Girl.” In their critique, the Kleins interspersed clips from the Hosseinzadeh video with clips of themselves criticizing and generally making fun of Bold Guy and his attempted wooing of Parkour Girl. Hosseinzadeh submitted a DMCA takedown notification to YouTube, the Kleins submitted a counter-takedown notification, and Hosseinzadeh sued the Kleins for copyright infringement, for misrepresentation in their counter-takedown notice, and for defamation.

The district court sided entirely with the Kleins, finding that their use of the video was fair use and that their video didn’t in any way replace the market for the original video. The criticism and commentary of the Kleins’ video weighed heavily in favor of a finding of fair use. As for the defamation claim, the district court determined that Kleins’ statements were clearly statements of opinion or otherwise non-actionable. The Kleins’ motion for summary judgment was granted in its entirety.

PATENTS

Appealability/Covered Business Method Review/Patentable Subject Matter

Return Mail, Inc. v. U.S. Postal Service, 868 F.3d 1350, 123 U.S.P.Q.2d 1813 (Fed. Cir. 2017). The Federal Circuit found that it had authority to review the PTAB’s determination that the petitioner had standing under AIA in a review of a covered business method (CBM) patent. The Federal Circuit then held that the United States Postal Service had standing within the meaning of AIA §18 because it was sued for infringement in the US Federal Court of Federal Claims. As to the merits, the Federal Circuit held that the claims were directed to the abstract idea of relaying mailing address data.

Appellate Jurisdiction/BPCIA

Amgen Inc. v. Hospira, Inc., 866 F.3d 1355, 123 U.S.P.Q.2d 1697 (Fed. Cir. 2017). The Federal Circuit held that the collateral order doctrine did not provide appellate jurisdiction over the district court’s denial of a motion to compel, and further denied Amgen’s mandamus request on the same. The Biologics Price Competition and Innovation Act (BPCIA) provides details on the information exchange that is to occur and the timing for those exchanges with respect to possible litigation relating to biological products. In the first phase of the exchange, an applicant seeking an abbreviated approval from the FDA of its biosimilar drug is required to provide the patent holder of the already-approved biologic drug (referred to as a “sponsor”) information about the biosimilar and the process used to manufacture it. The sponsor is then required to provide the applicant with a list of patents the sponsor believes the applicant may be infringing; only those identified patents can form the basis of a subsequent lawsuit. The sponsor, Amgen, provided a patent list that did not include any patents relating to the cell-culture medium used to create these types of drugs, arguing that it could not reasonably identify such potentially infringed patents because the applicant failed to provide sufficient disclosure of the processes it used. During litigation, Amgen sought to compel discovery on the Applicant’s cell-culture medium. The district court denied Amgen’s motion, finding that because Amgen did not assert its process patents, the information it sought was not relevant. The Federal Circuit agreed. Accordingly, the Federal Circuit declined to apply the collateral order doctrine. The Federal Circuit also denied mandamus based on its findings that Amgen misinterpreted the BPCIA. Specifically, the Federal Circuit Court found that Amgen could have identified the cell-culture medium patents. Amgen argued that it could not have asserted those patents for fear of sanctions under Rule 11. The Federal Circuit held there would be no sanctions under the facts of this case.

Attorney Fees

AIA Am., Inc. v. Avid Radiopharmaceuticals, 866 F.3d 1369, 123 U.S.P.Q.2d 1703 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s award of attorney fees under 35 U.S.C. § 285 against AIA. The Federal Circuit addressed and dismissed the three reasons presented by AIA as to why the district court’s award of attorney fees—not the amount awarded—was improper. The Federal Circuit disagreed that AIA was entitled to a jury trial under the Seventh Amendment to determine whether attorney fees should be awarded. The district court did not err by making factual findings about AIA’s state of mind, intent, and culpability. AIA also unsuccessfully argued that its due process rights were violated because the district court did not give AIA the opportunity to submit evidence regarding its intent, state of mind, or culpability.

Claim Construction

In re CSB-System Int’l, Inc., 832 F.3d 1335, 123 U.S.P.Q.2d 1684 (Fed. Cir. 2016). The Federal Circuit affirmed the PTAB’s rejection of all the claims as unpatentable over the prior art during an ex parte reexamination. First, the Federal Circuit determined that the PTAB erred by applying the broadest reasonable interpretation (BRI) standard to the claims because, although the patent was alive during the examiner’s review, it had expired before the PTAB considered it. Therefore, the PTAB should have applied the Phillips claim construction standard. The Federal Circuit found that the erroneous applied BRI standard did not produce a different result than what would have been reached under the Phillips standard.

Evidence

Ultratec, Inc. v. CaptionCall, LLC, 123 U.S.P.Q.2d 1793 (Fed. Cir. 2017). The Federal Circuit vacated and remanded the decision of the PTAB finding all claims either anticipated or obvious. The Federal Circuit found that during the inter partes review, the PTAB failed to consider material evidence and failed to explain its decisions to exclude the evidence. The PTAB abused its discretion when it failed to admit and consider expert trial testimony and when it refused to explain its decision. Because the PTAB relied on the expert’s credibility in every IPR, the Federal Circuit vacated every decision, and remanded for the PTAB to admit and consider the expert’s testimony. If the PTAB finds that he gave inconsistent testimony, the Federal Circuit instructed the PTAB to consider the impact on the patents in the trial testimony as well as on the expert’s credibility as a whole.

Federal Appellate Jurisdiction

Alfred E. Mann Found. for Scientific Research v. Cochlear Corp., 841 F.3d 1334, 123 U.S.P.Q.2d 1669 (Fed. Cir. 2016). The Federal Circuit addressed several issues related to patents for cochlear implants. The Federal Circuit affirmed the district court’s finding that Cochlear infringed a claim. The Federal Circuit affirmed an indefiniteness finding for two means-plus-function limitations. The Federal Circuit vacated the district court’s JMOL of no willful infringement based on the Supreme Court’s decision in Halo Electronics Inc. v. Pulse Electronics Inc. The Federal Circuit refused to address Mann’s argument that the district court abused its discretion by granting a new trial on damages. The Federal Circuit indicated that it lacked the jurisdiction because the district court’s damages position lacked finality under both 28 U.S.C. § 1292 and Federal Rule of Civil Procedure Rule 54(b).

Inequitable Conduct

Regeneron Pharm., Inc. v. Merus N.V., 864 F.3d 1343, 123 U.S.P.Q.2d 1469 (Fed. Cir. 2017). The Federal Circuit found that the district court did not abuse its discretion in holding that the patent was unenforceable due to inequitable conduct. The Federal Circuit first affirmed the district court’s finding that four withheld references during prosecution were “but-for material” and not cumulative individually or in combination. The Federal Circuit then affirmed the district court’s decision to draw an adverse interest of specific intent to deceive the PTO based on the patentee’s litigation misconduct, which included discovery abuse. The Federal Circuit reasoned that the patentee’s discovery abuse directly related to the prosecuting attorneys’ mental impressions of the material references during prosecution.

Invalidity

Gold Standard Instruments, LLC v. US Endodontics, LLC, 123 U.S.P.Q.2d 1711 (Fed. Cir. 2017). The Federal Circuit affirmed an invalidity finding by the PTAB in an inter partes review. The only issue substantively addressed by the Federal Circuit was whether a prior art reference taught away. The Federal Circuit found that substantial evidence (expert testimony) existed for the PTAB’s decision.

IPR

Homeland Housewares, LLC v. Whirlpool Corp., 865 F.3d 1372, 123 U.S.P.Q.2d 1584 (Fed. Cir. 2017). The Federal Circuit reversed the PTAB’s decision finding the claims not invalid as anticipated. The Federal Circuit found that the PTAB erred in that it didn’t construe the term “settling speed” despite the parties disagreeing as to the term’s construction. After construing the term, the Federal Circuit found that the PTAB erred in holding the prior art did not anticipate the claims.

Personal Audio, LLC v. Electronic Frontier Found., 867 F.3d 1246, 123 U.S.P.Q.2d 1592 (Fed. Cir. 2017). The Federal Circuit affirmed the PTAB’s decision finding the claims invalid as anticipated and/or obvious.

Soft Gel Techs., Inc. v. Jarrow Formulas, Inc., 864 F.3d 1334, 123 U.S.P.Q.2d 1419 (Fed. Cir. 2017). The Federal Circuit affirmed the PTAB’s decision finding the claims invalid as anticipated and/or obvious. The Federal Circuit agreed with the PTAB’s finding that the d-limonene is the main constituent of lemon oil as it was the main ingredient in 19 different samples (even where it was less than 50% of the sample, the amount was still more than any other ingredient). The prior art reference did not teach away from using lemon oil, but instead differentiated between essential oils and other solvents. Based on these two factors, the Federal Circuit found that one of ordinary skill in the art would be motivated to combine references disclosing using d-limonene with the other prior art.

Obviousness

Honeywell Int’l Inc. v. Mexichem Amanco Holding S.A. de C.V., 865 F.3d 1348, 123 U.S.P.Q.2d 1605 (Fed. Cir. 2017). The Federal Circuit vacated and remanded the PTAB’s affirmation of the examiner’s rejection of claims as obvious over the prior art. The Federal Circuit found the PTAB’s obviousness analysis flawed. The PTAB committed legal error by improperly relying on inherency to find obviousness and in its analysis of motivation to combine references. What is important regarding properties that may be inherent, but known, is whether they are unexpected. The PTAB, in dismissing properties of the claimed invention as merely inherent, without further consideration as to unpredictability and unexpectedness, erred as a matter of law.

In re Stepan Co., 868 F.3d 1342, 123 U.S.P.Q.2d 1838 (Fed. Cir. 2017). The Federal Circuit reversed the PTAB’s decision affirming the examiner’s rejection of the claims as obvious. The Federal Circuit found that the PTAB failed to adequately articulate its reasoning, erroneously rejected relevant evidence of nonobviousness, and improperly shifted the burden to the applicant to prove patentability.

Patent Eligibility Under § 101

Visual Memory, LLC v. NVIDIA Corp., 867 F.3d 1253, 123 U.S.P.Q.2d 1712 (Fed. Cir. 2017). The Federal Circuit reversed the district court’s dismissal of Visual Memory’s patent infringement complaint for failure to state a claim under Rule 12(b)(6). Visual Memory’s patent is directed to a computer memory system having programmable operational characteristics that can be tailored for use with multiple different processors without reducing system performance. The Federal Circuit found that the claimed subject matter was not directed to an abstract idea under step one of the Alice test, but instead to an improvement to computer memory systems. As such, the Federal Circuit found no need to address step two of the Alice test and remanded the case to the district court for further proceedings.

Preamble

Georgetown Rail Equip. Co. v. Holland LP, 867 F.3d 1229, 123 U.S.P.Q.2d 1766 (Fed. Cir. 2017). The Federal Circuit affirmed the finding of infringement, the claim construction, approval of the award of lost profits, and enhanced damages. The district court held that the preamble was not a claim limitation. The Federal Circuit agreed, and found that in the context of the entire patent, it was apparent that the disputed preamble term was meant to describe the principal intended use of the invention, but not to import a structural limitation.

TRADE SECRETS

Art & Cook, Inc. v. Haber, 2017 U.S. Dist. LEXIS 164366, 2017 WL 4443549 (E.D.N.Y. 2017). The plaintiff alleged that its customer’s lists with buyer information for 72 companies was a trade secret. The district court concluded that many of the contacts on the customer list were just prospects and not customers. Further, there was not special information on the lists such as customer preferences that would be difficult to duplicate. The district court concluded that the contact lists were little more than a compilation of publicly available information that could be found with simple Internet searches. The district court concluded that the plaintiff’s customer lists are not trade secrets under the DTSA.

Mickey’s Linen v. Fischer, 2017 U.S. Dist. LEXIS 145513, 2017 WL 3970593 (N.D. Ill. 2017). The plaintiff provided conflicting and unconvincing testimony about his actions and termination of employment in order to join a head-to-head competitor in a managerial position. The district court noted that it is well established in trade secrets law that a plaintiff can rely on circumstantial evidence to prove trade secret misappropriation by drawing inferences from ambiguous circumstantial evidence because direct evidence of theft and use of trade secrets is often not available. The district court concluded that Fischer’s unconvincing explanations for wiping all the data off his company cell phone and his alleged shredding and destruction of confidential information in his possession was not credible. The district court instead inferred from substantial circumstantial evidence that Fischer took at least some trade secret information with him to his new employer.

Opus Fund Servs. United States (USA) LLC v. Theorem Fund Servs., LLC, 2017 U.S. Dist. LEXIS 160649, 2017 WL 4340123 (N.D. Ill. 2017). The defendants moved to dismiss the Opus’s trade secret misappropriation claims because all of the allegations of misappropriation of trade secrets occurred before the enactment of the DTSA on May 11, 2016. The DTSA provides a civil remedy and there can be a partial recovery for misappropriation when some act of misappropriation occurs after May 11, 2016. However, based on the allegations in the plaintiff’s complaint, Opus appears to be proceeding on an acquisition theory rather than a disclosure theory of misappropriation. The allegations are insufficient to put the defendants on notice of disclosure or use of the trade secrets after May 11, 2016.

Stockade Cos. v. Kelly Rest. Group, 2017 U.S. Dist. LEXIS 170944, 2017 WL 4640443 (D. Tex. 2017). Stockade argued, under Texas law, that its “buffet system” consisting of a laundry list of items including recipes, manuals, training materials, trademarks, trade dress, marketing program, purchasing system, point-of-sale system, and gift-card system was collectively a trade secret. The district court denied the plaintiff’s request for an injunction because even assuming that this indeterminate laundry list of elements comprises trade secrets, Stockade must still prove a breach of a confidential relationship or discovery of the claimed trade secrets by improper means. Thus, the injunction was denied.

Yager v. Italia Vignieri, 2017 U.S. Dist. LEXIS 169241, 2017 WL 4574487 (S.D.N.Y. 2017). The plaintiff moved for summary judgment on the DTSA trade secret misappropriation claim. The district court denied the plaintiff’s motion for summary judgment because there was a question of fact on whether any of Yager’s putative trade secrets were improperly acquired or disclosed on or after May 11, 2016, the date of the enactment of the DTSA.

TRADEMARKS

Attorneys’ Fees/Lanham Act

Romag Fasteners, Inc. v. Fossil, Inc., 866 F.3d 1330, 123 U.S.P.Q.2d 1629 (Fed. Cir. 2017). The Federal Circuit vacated the district court’s decision denying the plaintiff’s (Romag Fasteners) request for attorneys’ fees under the Lanham Act. The plaintiff prevailed on claims for patent and trademark infringement and was awarded attorneys’ fees under the Patent Act, but not under the Lanham Act. The district court applied the prevailing Second Circuit precedent under Louis Vuitton Malletier S.A. v. LY USA, Inc. and determined that the case was not exceptional under the Lanham Act in the absence of bad faith, fraud, or willfulness on the part of the defendants. Thus, while the case was exceptional under the Patent Act standard of Octane Fitness, LLC v. ICON Health & Fitness, Inc., the defendant had not acted fraudulently or in bad faith under the Louis Vuitton standard.

The Federal Circuit concluded that the district court erred and that the Octane Fitness standard applied to the Lanham Act. The Federal Circuit noted that since Octane Fitness was decided, the Third, Fourth, Fifth, Sixth, and Ninth Circuits had determined that Octane Fitness defined “exceptional” for fee provisions for the Patent Act as well as the Lanham Act. The Federal Circuit remanded the case to the district court for further proceedings.

Descriptiveness

In re N.C. Lottery, 866 F.3d 1363, 123 U.S.P.Q.2d 1707 (Fed. Cir. 2017). The appellant N.C. Lottery appealed a decision refusing to register its FIRST TUESDAY mark on the ground that the proposed mark is merely descriptive of the appellant’s goods and services. The Federal Circuit affirmed. N.C. Lottery sought to register the mark FIRST TUESDAY for “lottery cards; scratch cards for playing lottery games” and for “lottery services.” N.C. Lottery submitted specimens, including promotional materials, having explanatory text such as “[n]ew scratch-offs the first Tuesday of every month.” The examining attorney refused registration, finding that the mark was merely descriptive. The TTAB affirmed.

The Federal Circuit disagreed with N.C. Lottery’s argument that any explanatory text in specimens cannot supply additional meaning to a mark when the mark itself does not convey that meaning. Explanatory text should be considered on a case-by-case basis. The Federal Circuit found that the commercial context of the FIRST TUESDAY mark demonstrated that a consumer would immediately understand the intended meaning of FIRST TUESDAY, and, as such, the mark was less of a source identifier and more of a descriptive feature of the goods and services. Thus, the Federal Circuit affirmed the TTAB’s refusal to register the FIRST TUESDAY mark.

Likelihood of Confusion

In re i.am.symbolic, LLC, 866 F.3d 1315, 123 U.S.P.Q.2d 1744 (Fed. Cir. 2017). i.am.symbolic (Symbolic) appealed the TTAB’s decision affirming the PTO’s refusal to register the mark I AM on the ground of a likelihood of confusion with registered marks. The Federal Circuit affirmed.

Symbolic’s predecessor-in-interest, William Adams (Adams), filed trademark applications for the mark I AM in classes 3, 9, and 14. The examining attorney refused registration on the ground of likelihood of confusion with previously registered marks. In response, Adams amended the descriptions of goods to include the statement: “associated with William Adams, professionally known as Will.i.am” (the “will.i.am restriction”) at the end of its listing of goods in each class. The examining attorney maintained the rejections, and the TTAB affirmed.

Symbolic argued that the TTAB erred in its likelihood of confusion analysis by holding that the will.i.am restriction was “precatory” and “meaningless,” therefore not properly considering it in certain DuPont factors. The Federal Circuit noted that the cited registrations did not include any express limitations, and such limitations could not be read into unrestricted prior-filed registrations or applications. The Federal Circuit went through the DuPont factors, explaining why the will.i.am restriction did not sufficiently distinguish the mark from registrants’ marks to overcome the likelihood of confusion. The Federal Circuit also found that Symbolic’s limited evidence of third-party uses of I AM for the same or similar goods fell short of ubiquitous or considerable uses of the mark. Thus, the Federal Circuit affirmed the TTAB’s decision to refuse registration.

Primarily Merely a Surname

Earnhardt v. Kerry Earnhardt, Inc., 864 F.3d 1374, 123 U.S.P.Q.2d 1411 (Fed. Cir. 2017). The Federal Circuit vacated the TTAB’s decision dismissing Teresa Earnhardt’s (Earnhardt) opposition to a trademark application filed by Kerry Earnhardt, Inc. (KEI). KEI was cofounded by the son of Dale Earnhardt, the professional race car driver, and filed for the mark EARNHARDT COLLECTION for “furniture” and “custom construction of homes.” Earnhardt (the widow of Dale Earnhardt) asserted a likelihood of confusion with her federal trademark registrations for DALE EARNHARDT in various classes and her common law rights in EARNHARDT and DALE EARNHARDT. Earnhardt also asserted that KEI’s EARNHARDT COLLECTION mark was primarily merely a surname under Section 2(e)(4) of the Lanham Act. The TTAB dismissed the opposition on both counts.

Earnhardt appealed the TTAB’s decision that EARNHARDT COLLECTION was not primarily merely a surname. The Federal Circuit determined it was not clear whether the TTAB’s decision properly applied In re Hutchinson Technology Inc. Under Hutchinson, the EARNHARDT COLLECTION mark must be considered in its entirety rather than considering the mark as two separate terms. In doing so, the relative distinctiveness of the second term, COLLECTION, had to be determined, in particular, whether the term was merely descriptive of KEI’s goods and services. Because the TTAB’s decision was unclear as to the finding as to whether the term, COLLECTION, was merely descriptive, the Federal Circuit determined that the TTAB’s analysis was deficient. Additionally, under Hutchinson, the TTAB also had to determine whether adding the additional term, COLLECTION, to the surname altered the primary significance of the mark as a whole to the purchasing public. The case was vacated and remanded to clarify the TTAB’s findings.

John C. Gatz

John C. Gatz is a member of the firm Nixon Peabody in Chicago, Illinois.

 

Column contributors include the following writers: Copyrights: Zachary J. Smolinski, Smolinski Law PC; Michael N. Spink, Brinks, Hofer, Gilson & Lione; Mark R. Anderson, Akerman LLP. Patents: Cynthia K. Barnett, Johnson & Johnson; R. Trevor Carter, Daniel M. Lechleiter, and Andrew M. McCoy, Faegre Baker Daniels LLP; Robert W. (Bill) Mason, CaptureRx; Peter J. Prommer, Nixon Peabody LLP. Trade Secrets: R. Mark Halligan, FisherBroyles LLP. Trademarks: Janet M. Garetto and Elizabeth W. Baio, Nixon Peabody LLP; Amy L. Sierocki.