Risky Business

OpenRisk, LLC v. MicroStrategy Services Corp., 2017 WL 5711021, 2017 U.S. App. LEXIS 22736 (4th Cir. 2017). The plaintiff OpenRisk contracted with defendant MicroStrategy to create a cloud environment that would host OpenRisk’s data and programming. When OpenRisk faced insolvency, three of its principal officers resigned and formed a new company. MicroStrategy copied and transferred data from the OpenRisk cloud environment to a new environment established for the new company, and then purportedly deleted the data from OpenRisk’s environment without the notice of termination required by the parties’ contract. OpenRisk sued MicroStrategy for computer fraud under Virginia’s Computer Crimes Act and for other state-law violations. The district court granted summary judgment almost entirely in MicroStrategy’s favor, holding that the federal Copyright Act preempts OpenRisk’s computer fraud claims because they were all premised on underlying conduct that falls within the scope of copyright protection—the unauthorized copying of data.

The Fourth Circuit upheld the decision. The Fourth Circuit reviewed the two-pronged inquiry under 17 U.S.C. § 301(a), namely whether: (a) the data and software were within the scope of the subject-matter of copyright, and (b) the rights granted under state law were equivalent to those protected by federal copyright. There was no dispute under the first prong, and under the second, the Fourth Circuit agreed that the state claims turned on the allegations that MicroStrategy made unauthorized copies of the data on the OpenRisk cloud environment and then transferred that data. The Fourth Circuit found those claims equivalent to copyright law’s prohibition of unauthorized reproduction and dissemination.

Failure to Comply with Expert Testimony Rules Sinks DMCA Claim

Dynamic Concepts, Inc. v. Tri-State Surgical Supply & Equip., Ltd., 2017 WL 5176230, 2017 U.S. App. LEXIS 22348 (2d Cir. 2017).  Dynamic Concepts licensed to Tri-State two software programs under limited concurrent-user licenses. The software had security measures that policed the license usage. Tri-State modified the security measures so that the programs could not enforce the license restrictions. Dynamic Concepts sued, bringing a claim under the DMCA. A dispute centered around declarations submitted by Dynamic Concepts in support of their assertion that their software was copyrightable. The district court found that the declarations contained expert testimony rather than solely lay testimony or lay opinion. Preclusion was found to be appropriate because Dynamic Concepts had not complied with expert discovery disclosure rules, a decision that was affirmed by the Second Circuit. The Second Circuit also vacated the district court’s decision on the abandonment by the plaintiffs of a user fees damages claim.

Patents

Arbitration

Waymo LLC v. Uber Techs., Inc., 870 F.3d 1342, 124 U.S.P.Q.2d 1547 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s decision denying the defendant’s motion to compel arbitration. The defendant argued that arbitration should be compelled because of an arbitration agreement between the plaintiff and an intervenor, Levandowski. The Federal Circuit applied the law of California and the Ninth Circuit. The defendant argued the plaintiff should be compelled to arbitrate because the claims relate to the employment agreement with the intervenor. However, the complaint neither alleges breach of the employment agreement nor cites to any provision of the employment agreement. Because the plaintiffs do not need to rely on the employment agreement to prove its claims, arbitration is not required.

Attorneys’ Fees

NantKwest, Inc. v. Matal, 869 F.3d 1327, 124 U.S.P.Q.2d 1068 (Fed. Cir. 2017). The Federal Circuit, sitting en banc, issued an order vacating the prior decision of a three-judge panel of the Federal Circuit and ordered the parties to file new briefs addressing whether attorney fees are included in the “all expenses” provision of U.S.C. § 145.

Claim Construction

Cisco Sys., Inc. v. Int’l Trade Comm’n, 873 F.3d 1354, 124 U.S.P.Q.2d 1482 (Fed. Cir. 2017). The Federal Circuit affirmed the ITC’s decision of infringement and the scope of the limited exclusion order. Arista challenged the Commission’s claim construction on two grounds. First, Arista argued that the construction failed due to grammar, but the Federal Circuit did not find this argument persuasive. Second, Arista relied on prosecution history as a basis of disavowal of claim scope. The Federal Circuit found the language Arista was relying on was ambiguous and could not form such a basis.

In re Smith Int’l, Inc., 871 F.3d 1375, 124 U.S.P.Q.2d 1210 (Fed. Cir. 2017). The Federal Circuit reversed the PTAB’s construction of the term “body” in an ex parte reexamination. The PTAB interpreted “body,” which appeared in a claim directed to a drilling tool, as a broad term that could encompass other drill components such as a mandrel and cam sleeve. The Federal Circuit disagreed, finding that the specification consistently described the body as separate and distinct from other drill components.

Damages

Mentor Graphics Corp. v. EVE-USA, Inc., 870 F.3d 1298, 124 U.S.P.Q.2d 1010 (Fed. Cir. 2017). The Federal Circuit denied a petition for panel rehearing and a petition for rehearing en banc filed by EVE-USA (EVE) and others in a case related to lost profit damages. The Federal Circuit found that apportionment was not necessary in the district court’s lost profits calculation based on two undisputed jury findings: (1) customers would not have purchased the infringing system without the two patented features; and (2) there were no other alternatives available. Thus, the Federal Circuit found the decision to be consistent with longstanding patent law damages principles that recognize that apportionment is unnecessary if the entire market value rule is satisfied.

Discovery

Waymo LLC v. Uber Techs., Inc., 870 F.3d 1350, 124 U.S.P.Q.2d 1222 (Fed. Cir. 2017). The Federal Circuit dismissed the appeal and denied the petitions for writ of mandamus. Plaintiffs sued defendants for patent infringement and violations of state and federal trade secret laws. Prior to the lawsuit, two of the defendants had a third party investigate certain employees and create a report with their findings. The plaintiffs tried to obtain the report during discovery, and the defendants refused, arguing attorney-client privilege and attorney work product. The district court compelled discovery and one of the defendants appealed, asking for a writ of mandamus. The Federal Circuit found the disclosure of the items did not meet the requirements for entering a writ of mandamus. Specifically, the Federal Circuit found the defendant did not prove he did not have any other adequate means for obtaining relief.

Evidence

Amgen Inc. v. Sanofi, Aventisub LLC, 872 F.3d 1367, 124 U.S.P.Q.2d 1354 (Fed. Cir. 2017). The Federal Circuit reversed-in-part, affirmed-in-part, vacated-in-part, and remanded the district court’s judgement of validity of the patent and grant of permanent injunction. A court should not consider evidence discussing the state of the art subsequent to the priority date when determining whether a patent meets the written description requirement. However, the use of post-priority-date evidence may be used to show a patent does not disclose a representative number of species of a claimed genus.

Infringement

Intellectual Ventures I LLC v. Motorola Mobility LLC, 870 F.3d 1320, 124 U.S.P.Q.2d 1129 (Fed. Cir. 2017). The Federal Circuit upheld the validity of two patents, but held that substantial evidence did not support direct infringement. A patentee needs to show that the accused infringer must (1) control directly or indirectly and (2) benefit from each claimed component of a system to prove infringing use of the system. Because there was no evidence that Motorola or its customers ever used one of the claimed components, the Federal Circuit found no infringement.

IPR

Aqua Prods., Inc. v. Matal, 872 F.3d 1290, 124 U.S.P.Q.2d 1257 (Fed. Cir. 2017). After engaging in a detailed statutory interpretation of 35 U.S.C. § 316(e), the Federal Circuit, sitting en banc, held that an IPR petitioner has the burden to prove the unpatentability of proposed claim amendments. The Federal Circuit concluded that § 316(e) unambiguously requires the petitioner to prove all questions of unpatentability, and that the PTO’s interpretation placing the burden on the patent owner was not entitled to any deference under the Chevron doctrine. The Federal Circuit reasoned that proposed claim amendments must be narrower in scope and cannot add new matter, so the only remaining question is whether they are unpatentable in light of the prior art cited in the IPR. The Federal Circuit further concluded that the PTAB must consider the entirety of the record in the IPR in assessing the patentability of amended claims.

Organik Kimya as v. Rohm & Haas Co., 873 F.3d 887, 124 U.S.P.Q.2d 1383 (Fed. Cir. 2017). The Federal Circuit affirmed the PTAB’s finding of validity of the patents. The Federal Circuit found the PTAB correctly construed the term “swelling agent” as an agent that permeated the shell and produces swelling by hydration of the hydrophilic core. The prior art references did not disclose the construed swelling agent.

Southwire Co. v. Cerro Wire LLC, 870 F.3d 1306, 124 U.S.P.Q.2d 1317 (Fed. Cir. 2017). The Federal Circuit affirmed the PTAB’s decision that the claims were invalid. While the Federal Circuit found the PTAB’s reliance on inherency to be in error, it also found the error harmless because all the underlying factual findings supported obviousness.

JMOL

Jang v. Bos. Scientific Corp., 872 F.3d 1275, 124 U.S.P.Q.2d 1365 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s denial of Dr. Jang’s motion for JMOL, the vacatur of the jury verdict of non-infringement, and its entry of judgment of no infringement. The Federal Circuit found that substantial evidence supporting the jury’s finding of no literal infringement. In terms of doctrine of equivalents, Dr. Jang failed to demonstrate through a proper hypothetical claim analysis that his doctrine of equivalents theory did not ensnare the prior art and, therefore, affirmed the district court’s findings.

Obviousness

Idemitsu Kosan Co. v. SFC Co., 870 F.3d 1376, 124 U.S.P.Q.2d 1179 (Fed. Cir. 2017). The Federal Circuit upheld the PTAB’s final decision in an IPR finding several claims obvious over a single reference.

Merck Sharp & Dohme Corp. v. Hospira, Inc,, 874 F.3d 724, 124 U.S.P.Q.2d 1489 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s holding that the claims were obvious. The Federal Circuit found that substantial evidence supported this decision. The district court found commercial success that was sufficiently linked to the claims, but the evidence was weakened by the prior art. The Federal Circuit stated that commercial success is a fact-specific inquiry that may be relevant to an inference of nonobviousness, but agreed that here it could not overcome the prior art.

Owens Corning v. Fast Felt Corporation, 873 F.3d 896, 124 U.S.P.Q.2d 1404 (Fed. Cir. 2017). The Federal Circuit reversed the PTAB’s conclusion that Owens Corning had failed to show obviousness of any of the claims. The Federal Circuit agreed with Owens Corning that the PTAB implicitly adopted an erroneous claim construction that was legally incorrect under the broadest-reasonable-interpretation standard applicable in the IPR. Using the appropriate legal standard, the Federal Circuit concluded that a skilled artisan would have been motivated to combine the prior art references in a way that rendered the claims obvious.

Obviousness/Inequitable Conduct

Intercontinental Great Brands LLC v. Kellogg N. Am. Co., 869 F.3d 1336, 124 U.S.P.Q.2d 1081 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s findings that the claims were obvious and the patent was not unenforceable due to inequitable conduct. Because this prima facie case of obviousness was so strong, the Federal Circuit also agreed with the district court that substantial evidence of commercial success, industry praise, and copying could not save the validity of the claims. The Federal Circuit held that it is proper to first conduct the prima facie analysis before considering secondary considerations evidence, as long as the secondary considerations evidence is ultimately considered. Regarding inequitable conduct, the Federal Circuit affirmed, finding that there was no evidence that the patent owner intentionally deceived the PTO.

Patentability

Secured Mail Sols., LLC v. Universal Wilde, Inc., 873 F.3d 905, 124 U.S.P.Q.2d 1502 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s grant of a motion to dismiss on grounds that claims of the patents are directed to ineligible subject matter under § 101. The Federal Circuit determined that the claims were not limited by rules or steps that established how the focus of the methods is achieved. Instead, the claims embraced the abstract idea of using a marking affixed to the outside of a mail object to communicate information about the mail object. In the second step of the Alice inquiry, the Federal Circuit found no inventive concept that transformed the nature of the claims into a patent-eligible application of the abstract idea.

Smart Sys. Innovations, LLC v. Chi. Transit Auth., 873 F.3d 1364, 124 U.S.P.Q.2d 1441 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s holding that the claims are directed to an abstract idea and are patent ineligible under § 101. The Federal Circuit determined that claims directed to the collection, storage and recognition of data are abstract ideas. Moreover, the Federal Circuit agreed with the district court that the claims recite an abstract idea of collecting financial data using generic computer components. Therefore, the claims offered no inventive concept that transformed them into patent-eligible subject matter.

Two-Way Media Ltd. v. Comcast Cable Commc’ns, LLC, 874 F.3d 1329, 124 U.S.P.Q.2d 1521 (Fed. Cir. 2017). The Federal Circuit affirmed the district court’s finding that the claims are directed to ineligible subject matter under § 101. Under step one of Alice, the Federal Circuit determined that the claims were directed to an abstract idea of using generic computer components to carry out the abstract method for routing information. In Alice step two, the Federal Circuit further saw no inventive concept in the ordered combination of the limitations.

Pleading Infringement

Lifetime Indus., Inc. v. Trim-Lok, Inc., 869 F.3d 1372, 124 U.S.P.Q.2d 1061 (Fed. Cir. 2017). The Federal Circuit reversed the district court’s grant of Trim-Lok’s motion to dismiss Lifetime’s patent infringement complaint for failing to adequately allege that Trim-Lok either directly or indirectly infringed the patent claims. With respect to direct infringement, even though the claims required the combination of a seal with an RV, and Trim-Lok only manufactured seals and not recreational vehicles (RVs), the Federal Circuit found that Lifetime’s allegations that an agent of Trim-Lok installed its seals onto an RV constituted sufficient “making” of the claimed invention for purposes of alleging direct infringement. With respect to indirect infringement, the Federal Circuit found that Lifetime adequately pleaded that Trim-Lok had knowledge of the patent through two former Lifetime employees before the allegedly infringing act and that Trim-Lok had the intent to infringe. Moreover, Lifetime alleged that, in light of that knowledge, Trim-Lok installed onto an RV the same type of seal as described in the patent despite Trim-Lok never having made or sold those particular seals prior to gaining that knowledge. The Federal Circuit found these allegations sufficient to state claims for both contributory and induced infringement.

Reduction to Practice

NFC Tech., LLC v. Matal, 871 F.3d 1367, 124 U.S.P.Q.2d 1169 (Fed. Cir. 2017). The PTAB erred in concluding that a patent owner failed to submit sufficient evidence of reduction to practice to antedate a reference in an IPR. The patent owner argued that the inventor conceived the invention and designed a prototype, which was built by a third party, that embodied the invention. Applying a “rule of reason analysis,” the Federal Circuit found that the evidence corroborated the inventor’s account of conception, but remanded to determine whether the prototype embodied the invention and whether the third party’s construction of the prototype inured to the patent owner.

Reexamination

Vicor Co. v. SynQor, Inc., 869 F.3d 1309, 124 U.S.P.Q.2d 1048 (Fed. Cir. 2017). The Federal Circuit affirmed-in-part, vacated-in-part, and remanded two inter partes reexamination decisions from the PTAB requested by Vicor relating to anticipation and obviousness.

Subject Matter Jurisdiction

Allied Mineral Prods., Inc. v. OSMI, Inc., 870 F.3d 1337, 124 U.S.P.Q.2d 1142 (Fed. Cir. 2017). The Federal Circuit upheld the district court’s dismissal of a declaratory judgment action for lack of subject matter jurisdiction because the defendant’s actions did not create a case or controversy. Because the defendant Stellar did not directly communicate with or threaten Allied, or otherwise allude that there was infringement in the US, there was no case or controversy.

Venue

In re Cray Inc., 871 F.3d 1355, 124 U.S.P.Q.2d 1001 (Fed. Cir. 2017). The Federal Circuit granted a writ of mandamus regarding a venue issue and directed transfer of the case pursuant to 28 U.S.C. § 1406 to an appropriate venue. Following TC Heartland, Judge Gilstrap set forth a new test for determining “regular and established place of business” under 28 U.S.C. § 1406. Using that test, Cray had a regular and established place of business in the Eastern District of Texas. The Federal Circuit rejected Judge Gilstrap’s test and found that venue was not proper. The Federal Circuit stated three general requirements for determining “regular and established place of business” under 28 U.S.C. § 1406: “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant. If any statutory requirement is not satisfied, venue is improper under § 1400(b).”

Trade Secrets

Blue Star Land Servs., LLC v. Coleman, 2017 WL 6210901, 2017 U.S. Dist. LEXIS 202396 (W.D. Okla. 2017). To prove misappropriation of a trade secret in Oklahoma, the plaintiff must show: (1) the existence of a trade secret, (2) misappropriation of the trade secret by the defendants, and (3) use of the trade secret to the plaintiff’s detriment. The first two requirements are nearly identical in the DTSA and the UTSA, but the Oklahoma UTSA imposes the additional requirement that the plaintiff show use and detriment.

Broker Genius, Inc. v. Zalta, 2017 WL 5991831, 2017 U.S. Dist. LEXIS 198951 (S.D.N.Y. 2017). The evidence showed that Broker Genius disclosed the information that it alleged to be its trade secrets to each of its licensees as a matter of course and it did not show that it required those licensees to maintain the confidentiality of the software. Therefore, the plaintiff did not establish a likelihood of success on the merits and had serious questions going to the merits of its trade secret misappropriation claims. Thus, the plaintiff’s motion for a preliminary injunction was denied.

Manitowoc Cranes LLC v. Sany Am. Inc., 2017 WL 6327551, 2017 U.S. Dist. LEXIS 202860 (E.D. Wis. 2017). Sany asserted that the ITC applied a legal standard different from the one applied here under Wisconsin law because the ITC used the Restatement of Agency to find Sany partially liable under a theory of vicarious liability. While no Wisconsin court has addressed the doctrine of respondeat superior in connection with trade secret misappropriation, other jurisdictions have applied the doctrine under the UTSA. In an effort to maintain uniformity in the application and construction of the law, the doctrine of respondeat superior applies to the facts under the Wisconsin Uniform Trade Secrets Act.

Oakwood Labs., LLC v. Bagavathikanun Thanoo, 2017 WL 5762393, 2017 U.S. Dist. LEXIS 194935 (D.N.J. 2017). A party who asserts the trade secret bears the burden of proving that the information is a secret and not a matter of general knowledge in the industry. A plaintiff is not required to set forth a claim in heightened specificity, but it must still provide sufficient information to put defendants on notice of the nature of the claim and to support the claim itself. After reviewing the complaint, the district court found that the list of actions allegedly constituting trade secrets was not sufficiently specific. The plaintiff never identified or pointed to a specific action, process, or formula that is the subject of this action. Thus, the plaintiff failed to meet the elements to bring a claim for misappropriation.

PrimeSource Bldg. Prods. v. Huttig Bldg. Prods., 2017 U.S. Dist. LEXIS 202748 (N.D. Ill. 2017). The evidence showed that the identity of PrimeSource’s suppliers is publicly available through customs reports and industry resources known as Panjiva and Import Genius. Those resources allow subscribers not just to identify PrimeSource’s suppliers, but also provides shipping details and generic descriptions of the products sourced from the vendor. There was testimony establishing that customers regularly identify suppliers to middleman distributors, and that the suppliers themselves freely share information about whom they are supplying as a way to market themselves. Even PrimeSource’s CEO admitted that the identity of PrimeSource’s suppliers is not even confidential, let alone a trade secret.

Trademarks

Color Trademarks

In re General Mills IP Holdings II, LLC, 2017 WL 4082590, 124 U.S.P.Q.2d 1016 (T.T.A.B. 2017). General Mills IP appealed the refusal of its application for a mark consisting of the color yellow appearing as the predominant background color on product packaging for “toroidal-shaped, oatbased breakfast cereal.” The TTAB maintained the refusal. The applicant requested registration under Section 2(f), alleging that consumers had come to identify the color yellow, when used in connection with the goods, as coming from a single source (Cheerios brand). The examining attorney refused registration on the ground that a single color mark is not inherently distinctive and, because the applicant failed to demonstrate acquired distinctiveness, the applied-for trademark failed to function as a mark. The examining attorney argued that the purchasers would perceive the color yellow as merely a decorative feature.

The TTAB found that the number and nature of third-party cereal products in yellow packaging in the marketplace was such that consumers did not perceive the color yellow as having a source-indicating significance for the goods. The TTAB held that the applicant did not demonstrate that its yellow background had acquired distinctiveness within Section 2(f) and, accordingly, that the applicant had not shown that its proposed mark functioned as a trademark.

Genericness

Frito-Lay North America, Inc. v. Princeton Vanguard, LLC, 2017 WL 3948367, 124 U.S.P.Q.2d 1184 (T.T.A.B. 2017). Princeton owned a registration for PRETZEL CRISPS on the Supplemental Register for “pretzel crackers” and a pending application for the same mark and the same goods on the Principal Register. Frito-Lay filed corresponding opposition and cancellation proceedings against Princeton’s PRETZEL CRISP mark on the ground that the mark was generic. In a prior proceeding, the TTAB granted the cancellation and sustained the opposition to Princeton’s PRETZEL CRISP mark. The Federal Circuit determined that the TTAB had used an incorrect legal standard and remanded the decision for further proceeding. The Federal Circuit directed, among other things, that the TTAB appropriately consider the proffered survey evidence of record.

Applying the two-part test for genericness, the TTAB first determined that the category of goods was adequately defined as “pretzel crackers” and that the relevant consuming public were ordinary consumers who purchase and eat pretzel crackers. The TTAB determined that Frito-Lay had proven by a preponderance of the evidence that Princeton’s PRETZEL CRISP mark was generic for “pretzel crackers.” The TTAB noted that the survey evidence, which had been offered by both parties to show how customers perceive the term “pretzel crisp,” was found to have methodological flaws and thus was of limited probative value. The TTAB also found that the evidence was inadequate to show that the mark had acquired distinctiveness and thus the opposition and cancellation of the PRETZEL CRISP mark were sustained.

Functional Marks

Poly-America, L.P v. Illinois Tool Works Inc., 2017 WL 4687981, 124 U.S.P.Q.2d 1508 (T.T.A.B. 2017). Poly-America sought cancellation of three registrations owned by ITW for a “colored line mark” in connection with “plastic bags,” a “zipper flange mark” in connection with flexible plastic recloseable fastener strips, and a “rollstock mark” in connection with recloseable film tubing and plastic film sheeting, not for wrapping. Poly-America asserted that the three marks comprised matter that, as a whole, was functional under Section 2(e)(5) of the Trademark Act.

The TTAB first determined that Poly-America had shown sufficient proof to support standing. In particular, the TTAB found that Poly-America had established a direct commercial interest in the goods identified in the registrations, that Poly-America had an expectation of harm from its inability to enter the reclosable food storage bag market, and that Poly-America had an interest in using colored closures on food storage bags. On the issue of functionality of ITW’s marks, the TTAB noted that the Federal Circuit had identified several categories of evidence for determining whether a design is functional, including whether a utility patent discloses the utilitarian advantages of the design. Here, ITW owned a utility patent directed to a fastener for a bag or pouch. Upon reviewing the utility patent, the TTAB found that the utility patent, and its prosecution history, established that the design features were functional. As a result of the utility patent, Poly-America’s petition for cancellation was granted. Consequently, the TTAB declined to consider Poly-American’s other claim that ITW had abandoned the “color line mark” through its licensing practices.