0. General

1. Appendix B -- Introduction to Computer Technology (PDF file).

I. Trade Secret Protection

1. Subject Matter
2. Misappropriation
3. Agreements
4. Remedies

1. Elements of Patentability
2. Infringement
3. Defenses
4. Patent and Trademark Reauthorization Act of 2002
5. International Patent Law
6. Remedies
7. Design & Plant Patents

1. Requirements
2. Subject Matter
3. Ownership & Duration
4. Rights of Copyright Owners
5. Defenses
6. International Issues
7. Remedies

1. Scope of Protection
2. Establishment & Extension of Rights
3. Infringement
4. Defenses
5. Remedies

1. State IP Law
2. Federal Preemption

1. Trade Secret Protection
2. Copyright Law
3. Patent Protection
4. Trademark / Trade Dress
5. Sui Generis Protection of Computer Technology

1. Monopolization
2. Agreements to Restrain Trade
3. Mergers & Acquisitions

VIII. Alternative Course Outlines

1. Prof. George W. Conk, Seton Hall Law School

Trade Secret Protection

Subject Matter

Defining Trade Secrets

Reasonable Efforts to Maintain Secrecy

Disclosure of Trade Secrets

Misappropriation

Improper Means

Confidential Relationship

Reverse Engineering

Departing Employees

Agreements to Keep Secrets

Remedies

Damages for Misappropriation

Injunctions

Criminal Trade Secrets Statutes

Patent Law

Elements of Patentability

Patentable Subject Matter

Utility y CKR]

Novelty & Statutory Bars

Nonobviousness

Written Description / Enablement [blurb by EL]

Infringement

Claim Construction

• In Texas Digital Systems, Inc. v. Telegenix, Inc., 308 F.3d 1193 (Fed. Cir. Oct. 16, 2002), the Federal Circuit remanded for a new trial the District Court's decision for the patent-holder (2000 WL 1801849). The case arose from TDS' 1997 patents for controlling LED pixel colors. TDS filed suit, alleging that Telegenix' Colorgraphix devices infringed its patents. A jury found for TDS, and the district court entered judgment of literal infringement on several of the claims, found willful infringement, awarded damages and interest of more than $9 million, and enjoined Telegenix from producing its Colorgraphix displays.

  The Federal Circuit first found that "[d]ictionaries, encyclopedias and treatises ... may be the most meaningful sources of information" in helping judges understand technology. The court found that such works are not "extrinsic evidence," but where there are multiple dictionary definitions, the intrinsic record must also always be consulted to identify which of the dictionary definitions is most consistent with the inventor's use of the words. If more than one dictionary definition is consistent, the claim terms may be construed to encompass all such consistent meanings. The intrinsic record must also be examined to determine whether the presumption of ordinary and customary meaning is rebutted. "The presumption in favor of a dictionary definition will be overcome where the patentee, acting as his or her own lexicographer, has clearly set forth and explicit definition of the term different from its ordinary meaning." "Consulting prosecution history before dictionary definitions may import unnecessary limitations into the claims.

  The Federal Circuit applied dictionary definitions to several terms, narrowing the district court's reading of the claims involving "activation," "controlling the duration," and the distinctions between the background area and the display area. The Federal Circuit also found error in the district court's means-plus-function claim analyses. substantially narrowed the claims. Having found substantial prejudicial error in the trial court's jury instructions, the court remanded for a new trial on both liability and damages. The court found no abuse of discretion in the district court's various admissions and exclusions of expert testimony. The court found that the district court had correctly applied the rule in Wine Railway Appliance Co. v. Enterprise Railway Equipment Co., 297 U.S. 387 (1936), in sustaining the jury's award of damages for acts of infringement prior to notice of infringement. blurb by LQ

Literal Infringement

Doctrine of Equivalentsby CKR]

• On remand from the Supreme Court on the issue of whether Festo can rebut the presumption of having surrendered all subject matter between the original claim limitations and the amended claim limitations by filing narrowing amendments for the two patents in suit, the federal circuit in Festo Corp. v. Shokestsu Kinzoku Kogyo Kabushiki Co., 344 F.3d 1359 (Fed. Cir. 2003), concluded that Festo had failed to demonstrate two of the three rebuttal criteria, namely that the rationale underlying the narrowing “magnetizable” and “sealing ring” amendments “bore no more than a tangential relation to the equivalent in question,” and that the amendments were made for “some other reason such that the patentee could not reasonably have been expected to have described the alleged equivalent.” The federal circuit, however, remanded to the district court the remaining rebuttal criterion of whether “the alleged equivalent would have been foreseeable at the time of the narrowing amendment.” The court also concluded that the rebuttal of presumption of surrender was a question of law to be determined by the court, not a jury, since prosecution history estoppel is a matter of law and questions relating to the application and scope of prosecution history estoppel should therefore also be determined by the court.

In applying the three rebuttal criteria to the patents in suit, the federal circuit refused to provide a list of factors encompassed by each of the rebuttal criterion, stating instead that the factors should be addressed as they arise on a case-by-case basis. The federal circuit nevertheless provided some general guidance. The federal circuit stated that a court must, in general, limit its determination of the rebuttal criteria to the prosecution history record. A court may, however, consider extrinsic evidence, including expert testimony, in addressing the first rebuttal criterion--foreseeability of the alleged equivalent-- and may hear expert testimony interpreting the record in order to evaluate the second criterion-- tangential relatedness to the equivalent. Emphasizing that the third criterion of “some other reason” must be interpreted narrowly and its determination, when possible, should be limited to the record, the federal circuit nonetheless chose not to decide what extrinsic evidence may be considered in evaluating the third rebuttal criterion.

Applying these guidelines to the patents in suit, the federal circuit remanded the first rebuttal criterion to the district court noting that factual issues existed as to whether a person of ordinary skill in the art would have considered an aluminum sleeve to be an unforeseeable equivalent to a “magnetizable” sleeve or a two-way sealing rings to be an unforeseeable equivalent of the accused pair of sealing rings. As to the second criterion, the federal circuit concluded that by not providing a reason for the amendment Festo had failed to show that “magnetizable” amendment was only tangentially related to aluminum sleeve. The federal circuit also determined that Festo could not establish the tangential relatedness of the “sealing ring” amendments to the accused pair of sealing rings since it made the “sealing ring” amendments to distinguish prior art. Regarding the third criterion, the federal circuit determined that there was no linguistic or “other” limitation to describing an aluminum sleeve or a pair of sealing rings. According to the federal circuit, aluminum could have been described as “aluminum” or even “metal” and a pair of sealing rings would be encompassed by a description of “at least one sealing ring.” Concurring with the majority decision, Judge Rader nevertheless cautioned that bringing more certainty to the doctrine of equivalents may cause more uncertainty in the form of unintended consequences, particularly given the rapidity of doctrinal changes. Judge Rader, nonetheless, strongly endorsed the foreseeability principle stating that such a principle is likely to ease the “pace and uncertainties inherent in transition to new rules.”


Dissenting Judges Newman and Mayer questioned the majority’s adjudication of the second and third rebuttal criterion as questions of law, stating that all three rebuttal criteria raise factual questions and as matters of first impression require “full and fair exploration of issues with the benefit of the procedures of trial.” [blurb by BKS]

"Reverse" Doctrine of Equivalents

Equivalents for Means-Plus-Function Claims

Contributory Infringement

Importation

In Bayer AG v. Housey Pharmaceuticals, Inc., 2003 U.S. App. Lexis 17453 (Fed. Cir. Aug. 22, 2003), the federal circuit affirmed a lower court’s holding that infringement under 35 U.S.C. § 271(g) is limited to physical goods manufactured by a patented process, and does not extend to information derived by such a patented process. Housey is the assignee of U.S. method patents which disclose a process for identifying whether a particular agent can activate or inhibit a target protein. Housey alleged that Bayer would infringe Housey’s patents on two theories: 1) by importing into the United States information derived from using its patented method; and 2) by selling in the United States a drug containing an activator or inhibitor of a target protein identified using Housey’s method patents.

In support of its first theory, Housey contended that information generated by using Housey’s patents was itself a product made by a patented process and therefore fell within the rubric of § 271(g). Bayer, however, argued that the word “made” in the statute means “manufactured” and since information is not a manufactured product, the statute is limited to physical goods. Finding the statutory meaning of the term “made” ambiguous, the court began its analysis by examining the other provisions of the Act which added § 271(g). The court determined that while the other sections of the Act indicate that “made” means “manufactured,” the use of the term “manufacture” in § 101 does not mean that Congress specifies “manufacture” when it so desires. Turning next to legislative history, the court concluded that nothing in the legislative history suggested an expansive interpretation to include intangible information. The court noted that § 271(g) was added to provide new remedies available under 19 U.S.C. § 1331 and § 1331 consistently refers to “articles” and that every reference to the provision that became § 271(g) described the provision as directed to manufacturing. Finally, the court commented that under Housey’s interpretation, a person could infringe a process patent by merely entering the United States with information derived from the process—a result that is both illogical and difficult to enforce.

As for Housey’s second theory that a product made through the use of a patented process qualifies as a product made by the patented process, the court summarily rejected it stating, “the process must be used directly in the manufacture of the product, and not merely as a predicate process to identify the product to be manufactured.” [blurb by BKS]

Defenses

Experimental Use

Inequitable Conduct

Patent Misuse

Prosecution Laches

Hatch-Waxman Act

In Integra Lifesciences I, Ltd. v. Merck KGaA, 331 F.3d 860 (Fed. Cir. June 6, 2003), the federal circuit affirmed the lower court’s claim construction and holding that Merck’s infringing activity in conducting experiments using cyclic RGD peptides did not fall within the safe harbor of § 271(e)(1). The federal circuit, however, reversed the jury award of reasonable royalty and remanded for further considerations. Integra owns patents to RGD (Arg(R)-Gly(G)-Asp(D)) peptides. Since the patent specification disclosed both linear and cyclic forms of RGD peptides, the federal circuit affirmed the lower court’s construction of Integra’s patent claims as inclusive of both cyclic and linear peptides.

A cyclic form of the RGD peptides was found by Dr. Cheresh, a scientist at Scripps, to block angiogenesis. Merck entered into an agreement with Dr. Cheresh and Scripps to fund cyclic RGD peptides experiments necessary to satisfy FDA requirements. Integra sued for patent infringement. Merck contended that its work with Scripps fell within the § 271(e)(1) exemption. Ruling otherwise, Judge Radar began his analysis by looking to the legislative intent behind the enactment of the provision. According to Judge Radar, while clinical trials and demonstrations of medical devices are permitted, “the § 271(e)(1) safe harbor [does not] reach back down the chain of experimentation to embrace development and identification of new drugs that will, in turn, be subject to FDA approval.” In construing the statutory language, Judge Radar noted that while the term “reasonably” permits some activities that do not themselves produce FDA information, the word “solely” restricts the scope of permissible experimentation. Characterizing Merck’s activities as “general biomedical research to identify new pharmaceutical compounds,” Judge Radar concluded that Merck’s activities do not fall within the purview of § 271(e)(1) since the “FDA has no interest in the hunt for drugs that may or may not later undergo clinical testing for FDA approval.” Buttressing his analysis in the context of the 1984 Act, which was enacted to facilitate expedited approval of generic drugs and permits only a de minimis encroachment on the rights of the patentee, Judge Radar determined that § 271(e)(1) does not extend to new drug developments since such an extension would “vitiate” the rights of owners of patent tools.

Dissenting, Judge Newman characterized the majority opinion as eliminating the common law research exemption, although that issue was not litigated in the appeals court. Declaring that research subject to prohibition by the patentee would stop the advancement of technology, Judge Newman opined that Merck’s discovery-based research is subject to either the common law research exemption or the § 271(e)(1) exemption. Judge Newman also distinguished between research on matter disclosed in patents and the use in research of research tools, characterizing the Integra patents as not research tools and thereby subject to the experimental use exemption.

Regarding the jury award of reasonable royalty, Judge Radar found that the award was not supported by substantial evidence. According to Judge Radar, the date of the hypothetical negotiation was unclear; the Merck-ImClone license agreement could not set the value of pre-clinical RGD research project; factors that would reduce the value of the license were not considered; and factors such as stacking royalty and value of RGD peptides as research tools could be relevant. Disagreeing, Judge Newman stated that the majority had gone too far in dictating how damages were to be calculated and that she would affirm a damages verdict if construed differently. [blurb by BKS]

Patent & Trademark Reauthorization Act of 2002

• On November 4, 2002, the president signed the Patent and Trademark Reauthorization Act of 2002 (H.R. 2215, Part B, Title III; Pub. L. 107-273; 116 Stat. 1758 (2002)), which contained, inter alia, several separate intellectual property bills.

  The "Patent and Trademark Authorization Act of 2002" (Subtitle A) significantly amends the reexamination process. H.R. 2215 broadens the scope of prior art to be considered in the reexamination process, allowing previously cited ("old") prior art to be considered. Previously, prior art which was cited, but ignored or misread by the PTO, could not be considered in reexamination; only "new" prior art, not previously cited, could be considered. "The existence of a substantial new question of patentability is not precluded by the fact that a patent or printed publication was previously cited by or to the Office or considered by the Office." [Sec. 13105.]

  H.R. 2215 also significantly expands the ability of third parties to appeal patent reexaminations. Previously, third-party requesters' appeals were limited to Board of Patent Appeals and Interferences, an administrative agency. H.R. 2215 allows third party requesters to appeal to the Federal Circuit. [Sec. 13106.] Subtitle A additionally requires the PTO to develop and implement a comprehensive electronic filing and processing system, already well under way. The "Intellectual Property and High Technology Technical Amendments Act of 2002" (Subtitle B) clarifies the Office's policy on prior art rejections stemming from international applications and publications. More information on Subtitle B is available from the US PTO website. blurb by LQ

International Patent Law

Procedural Rules

Substantive Harmonization and GATT-TRIPS

Remedies

eBay Inc. v. Merc Exchange, L.L.C. (pdf summary)

In re Seagate Technologies (pdf)

Design & Plant Patents

Design Patents

Plant Patents CVC]

Copyright Law

Requirements

Original Works of Authorship

Fixation

Formalities

Subject Matter

Function vs. Expression

Domain and Scope of Copyright Protection blurb by CKR]


Ownership & Duration

Initial Ownership y MSV]

Duration & Renewal

• In Eldred v. Ashcroft, 123 S.Ct.769 (2003), the Supreme Court held that the 1998 Sonny Bono Copyright Term Extension Act was constitutional. Plaintiffs, people who used public domain works, had challenged to the 1998 act, alleging that the 20-year term extension applied retroactively to existing works violated the Copyright Clause, and that the entire CTEA violated the First Amendment. The District Court and the Circuit Court had both upheld the constitutionality of the statute. A 7-2 majority affirmed, holding the CTEA constitutional in an opinion written by Ginsburg, with separate strong dissents from Justices Breyer and Stevens.
  
  On the Copyright Clause question, the majority held that applying a new twenty-year extension retroactively to works already copyrighted and published was within Congress' power. Eldred had claimed, first, that Congress' extension violated the "limited times" provision by tacking copyright extensions in an unlimited fashion. As to this question, the majority held that the CTEA term of life plus 70 years, or 95 years, did not violate the "limited times" provision. Congress had not intended to act unconstitutionally, and the number of years did not cross any Constitutionally significant thresholds. The Court further held that Congress had acted rationally in extending the copyright term, justifying its decision on several grounds: the Court's substantial deference to Congress on copyright matters; the interest in treating all copyright-holders the same, whether their copyrights were granted prior to the extension or after; the interest in international harmonization; demographic, economic and technological changes; and projections that longer terms would encourage greater investments. The Court also engaged in a lengthy comparison of copyright to patent, concluding that since Congress can extend patents retroactively, Congress may also extend the less sweeping copyright retroactively.
  
  Eldred had posed a second Copyright Clause claim, that the CTEA violated the quid pro quo embodied within the Copyright Clause by conferring a windfall upon creators and providing no equivalent benefit to the public. The CTEA did not promote new works, did not "promote the Progress of Science," and merely prevented public access to works. Because the retroactive extension could not inspire the creation of new works by the original authors, there was no new consideration and the CTEA violated the quid pro quo bargain with the public interest that underlies the Copyright Clause. On this question, the Court weighed strongly Congress' tradition of retroactive extensions, and the lack of prior challenges to those extensions. Moreover, the Court held that Congress may have rationally considered that the bargain was met in several ways. First, Congress may meet the public interest merely by creating a "system" of copyright which overall promotes the progress of science. An author, for instance, may consider her side of the bargain to be not the term granted when she writes her work, but that term plus any term extensions granted while the work is still under copyright. Second, the court found that public interest and private profit may be considered to be substantially equivalent in the realm of copyright. Third, the Court again compared copyrights to patents, concluding that Congress' power to extend the copyright was not diminished by the different bargains struck in the granting of patents and copyrights. Fourth, the Court analyzed the claim that extending existing copyrights is per se illegal as a sort of Due Process "congruence and proportionality" review. The Court declined to apply such a review outside the context of the Fourteenth Amendment.
  
  Regarding the First Amendment claim, the court held that the copyright scheme had its own built-in speech safeguards--the idea expression dichotomy, and the fair use exception. The CTEA, moreover, built upon these protections with additional exceptions, such as the CTEA library exemption which allows copying by libraries under certain circumstances.
  
  Both Stevens and Breyer issued separate forceful dissents. Stevens' dissent exhaustively examined the history of Congressional grants of patent and copyright, concluding that the majority opinion's analysis and comparison of copyright to patent was misplaced, and that "[t]he fact that the Court ha[d] not previously passed on the constitutionality of retroactive copyright extensions does not insulate the present extension from constitutional challenge." Stevens also challenged the majority's crediting of the argument that the extension would enable greater use of old copyrighted materials including films. Stevens also argued that the majority dismissed the public interest in free access to copyrighted works as entirely worthless, in comparison with a windfall to authors which the majority treated as only fair. Finally, Stevens pointed out that the majority's reasoning would allow Congress to extend copyrights ad infinitum.
  
  Justice Breyer's dissent likewise evaluated the CTEA in light of the Copyright Clause's history and text, and its impact on expression. Breyer suggested a test that would find the statute to lack the "constitutionally necessary rational support" if (1) its significant benefit was private not public; (2) it seriously threatens to undermine the expressive values that the Copyright Clause embodies; and (3) it cannot find justification in any significant Clause-related objective. Breyer noted that an extension in copyright term exacted a cost from the public, not just in the loss of access to information, but in the additional royalties charged to the public. Breyer detailed objections to the majority's arguments, finding them implausible. The CTEA did not actually create international harmony in copyright terms, for example. Most importantly, Breyer found the majority's opinion to be economically implausible. He found it ridiculous to assume that any additional creativity would result from the windfall awarded to the copyright industries, noting that the term already provided almost all the value of a perpetual term. [blurb by LQ, 1/2003]
  
  

Division & Transfer

Rights of Copyright Owners

Right to Make Copies

In Assessment Technologies of WI, LLC v. WIREdata Inc., 350 F.3d 640(7th Cir. 2003), the seventh circuit reversed the lower court’s grant of permanent injunction holding that Assessment Technologies (“AT”) had no copyright claim where WIREdata only wanted data that is in public domain, although the data was now compiled in a program, Market Drive, copyrighted by AT and may not be extracted without running Market Drive.

Judge Posner, writing for the court, emphasized that the data requested by WIREdata, property information collected to assess the value of the properties for property-tax purposes, was in public domain; it was collected by municipalities, not AT, and was subject to Wisconsin’s “open records” law. As such, Judge Posner concluded that the data was not copyrightable and as long as the Market Drive program was not copied, there was no direct or contributory infringement. Judge Posner proposed two ways for extracting the data without copying the program. First, use the tools in the Market Drive program to extract the data and place it in a separate file. Second, use Microsoft’s Access, a compatible database program, to extract the data. Noting that the two proposals may not be feasible under the municipalities’ license agreements with AT or Microsoft, Judge Posner nevertheless dismissed AT’s contract argument as irrelevant because WIREdata is not a party to the contract. As for the possibility that the data may not be extractable without copying the Market Drive program, Judge Posner reasoned that even in that scenario AT does not have a copyright claim. Citing Sega Enterprises Ltd. v. Accolade, Judge Posner observed that since the only purpose of copying the program is to extract the uncopyrighted material and not to compete with AT in selling the Market Drive program, such “intermediate copying” would be a fair use. As for AT’s argument that extracting the data would create a derivative work, Judge Posner rejected it stating that a derivative work cannot be created from an unoriginal work and must itself contain some originality—a factor that the public domain data does not have. Lastly, Judge Posner cautioned that preventing the municipalities from extracting the data by asserting contract or other rights might constitute copyright misuse.[blurb by BKS]


 

Right to Prepare Derivative Works

The Distribution Right

Public Performance & Display Rights by CVC]

Moral Rights

Contributory Infringement

• In .Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003), the district court granted summary judgment for Defendants internet software distributors holding that Defendants were not liable for contributory or vicarious copyright infringement since there was no showing that Defendants were materially contributed to the user’s conduct or had any right or ability to supervise the users’ conduct. Plaintiffs Motion Picture Studios and Record Companies sued Defendants Grokster, Ltd. and StreamCast Networks, Inc. for liability stemming from copyright infringement committed by users of Defendants’ software. Grokster and Streamcast distribute software, Grokster and Morpheus respectively, which users can download for free from servers operated by Defendants. The software connects the user to a peer-to-peer network (FastTrack in Grokster’s case and Gnutella in Morpheus’s case) and thereby allows the user to access “shared files” of other users currently connected to the same peer-to-peer network.

The court first examined whether users of Defendants’ software had in fact engaged in direct copyright infringement. To establish copyright infringement, the plaintiffs must show that: 1) they owned the copyright to the allegedly infringing material; and 2) the users had violated at least one exclusive right of copyright holders. The court found that the plaintiffs had met both prongs of copyright infringement. The Record Company and Motion Picture Studio plaintiffs stipulated to their copyright ownership and the court assumed that the Music Publisher plaintiffs could show copyright ownership. The second requirement was met by undisputed showing that at least some of the individuals had used Defendants’ software in order to download copyrighted material and had thereby violated the plaintiffs' rights of reproduction and distribution.

Having found that the users of Defendants’ software had directly infringed the plaintiff’s copyright, the court then examined whether Defendant’s conduct gave rise to liability for contributory infringement. To be liable for contributory infringement, a defendant must have actual knowledge of infringement and should have materially contributed to the infringing conduct of a user. Constructive knowledge of infringement based on the mere retail of products is insufficient because some products, such as Defendant’s software, are capable of both infringing and “substantial non-infringing” uses. Regarding the knowledge prong, the court determined that although Defendants knew that many of their users downloaded their software to subsequently infringe copyrighted works, the critical question was whether Defendants had actual knowledge of specific infringement "at a time when a defendant materially contributes to the alleged infringement, and can therefore do something about it.”

Turning to the material contribution prong of contributory infringement, the court concluded that Defendants had no control over the users and therefore did not materially contribute to the users' infringement. Distinguishing Grokster and StreamCast from Napster, the court stated that unlike Napster, neither Grokster nor StreamCast operated a centralized file-sharing network, a factor critical in retaining control over users. Grokster distributes free software that is powered by FastTrack networking technology, a technology not owned by Grokster and which Grokster therefore cannot alter, while StreamCast’s software, Morpheus, employs the open-source Gnutella technology, which is controlled by no one. Napster, by contrast, “served as the axis of the file-sharing network’s wheel.” Grokster’s de-centralized file-sharing network consists of “nodes” (typically a user’s computer) and “supernodes” (a node that accumulates “information from numerous other nodes”). The nodes and supernodes are not fixed--a user's computer may be a node one day and supernode another day. When a user starts the Grokster software, the user’s computer self-selects a supernode and thereby accesses the network. As such, the court stated, Grokster has no control over the process of locating and connecting to a supernode. Unlike Grokster, StreamCast's software, Morpheus, does not even use supernodes. Instead, a user connects to the Gnutella network by contacting another user through one of the many publicly available directories of those currently connected to the Gnutella network. Since StreamCast neither operates the directories nor pays those who operate the directories, the court concluded that StreamCast also has no control over its users' access to the network. Napster, by contrast, owned and operated a supernode. In addition, the court found that Grokster and StreamCast did not control their users' search for or transfer of files either. In the Grokster system, the users’ queries and results are relayed among supernodes “without any information being transmitted to or through any computers owned by Grokster.” In the StreamCast system, search requests are passed from user to user and file transfer occurs between two users. By contrast, Napster's central servers indexed files from users and passed search queries and results among all Napster users. Thus, the court stated, neither Grokster nor StreamCast facilitated the exchange of files between users. Rather, “[i]f either Defendant closed their doors and deactivated all computers within their control, users of their products could continue sharing files with little or no interruption.” The court also dismissed the plaintiff’s contention that technical assistance and other incidental services provided by Defendants materially contributed to the infringement. The court stated that the technical assistance was “routine and non-specific,” was provided after the alleged infringement and in most cases dealt with other companies’ software. As for Defendant’s ability to communicate with users regarding software update, the court stated that such an ability was irrelevant to Defendant’s facilitation of copyright infringement.

The court then addressed the issue of Defendant’s liability for vicarious infringement. To demonstrate vicarious infringement, the plaintiffs must show Defendant’s: 1) financial benefit, and; 2) right and ability to supervise the infringing conduct. Financial benefit exists where the infringing activity “enhances the attractiveness of the venue to potential customers” or “acts as a ‘draw’ for customers.” The court found that Defendants derived financial benefit in the form of a large user base of tens of millions, who were drawn to the software by its ability to access copyrighted material and through substantial advertising revenues. The court, however, concluded that Defendants did not have the ability to supervise and control the user’s infringing activities since all of the infringing activities occurred after the copyrighted material had passed to the end-users. As to the plaintiff’s argument that Defendants could have policed the network by altering the software to prevent users from swapping copyrighted material, the court rejected it stating that Defendants’ obligation to “police” the network also did not arise since Defendants did not have the “right and ability” to supervise the infringing conduct.[[blurb by BKS]


Defenses

Fair Use

 

Other Defenses

International Issues

Remedies

Trademarks & Trade Dress lurb by CKR]

Scope of Protection

Trademarks, Trade Names & Service Marks CVC]

Color, Fragrance & Sounds

Certification & Collective Marks

Trade Dress & Product Configurations

Establishment & Extension of Rights

Priority

Distinctiveness

Trademark Office Procedures

Incontestability

Extension Overseas: International Trademark Practice

• On November 4, 2002, the president signed the "Madrid Protocol Implementation Act" ( H.R. 2215, Part B, Title III, Subtitle D; Pub. L. 107-273; 116 Stat. 1758 (2002)), which streamlines international recognition of trademarks. The bill amends the Trademark Act of 1946 (15 USC 1051 et seq) by adding Title XII, The Madrid Protocol. This title implements the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, commonly known as the Madrid Protocol. The United States joins more than 50 other jurisdictions in the Madrid System of the International Registration of Trademarks.

  Once the PTO fully implements the system, the owner of a trademark registration or pending application will be able to simultaneously file an international application with the US PTO. [Sec. 61 of the Act.] Registration in any given jurisdiction is not guaranteed; each jurisdiction will individually examine the application under its own standards. The Act also allows other jurisdictions' registrants to receive protections in the United States under the Madrid Protocol. [Sec. 65.] blurb by LQ

Extension by Contract: Licensing & Franchising

Infringement

Likelihood of Consumer Confusion

Reverse Passing off

• Ruling unanimously that Section 43(a) of the Lanham Act does not prevent unaccredited copying of a public domain material, the Supreme Court of the United States, in Dastar Corp. v. Twentieth Century Fox Film Corporation, 123 S. Ct. 2041 (2003), reversed the judgment of the Ninth Circuit affirming liability for Dastar Corporation under the Lanham Act. Dastar marketed a video set entitled World War II Campaigns in Europe, which was based on Fox television series called “Crusade in Europe.” Although Fox had originally held the copyright to the television series, the series was now in public domain because of Fox’s failure to renew its copyright. Respondents Fox and others brought suit claiming that Dastar’s sale of Campaigns without proper credit to Fox’s television series constituted “reverse passing off” in violation of the Lanham Act. The district court found for Fox and the Court of Appeals affirmed stating that Dastar had “bodily appropriate[ed]” Fox’s series by copying substantially the entire television series and labeling the resulting product as its own without duly crediting the television series.

Writing for the Court, Justice Scalia noted that Fox’s claim would be undoubtedly sustained if Dastar had merely repackaged the television series. Instead, by modifying the series and producing its own version, Dastar had produced the physical goods—the videotapes. Accordingly, the Court reasoned, whether Fox has a valid claim under the Lanham Act depends on the definition of the term “origin of goods”—does it refer to the producer of the goods or does it also include the creator of the underlying work.

The Court concluded that the term “origin of goods” refers to the producer of tangible of goods and not to the creator of the underlying work on the ground that extending the Lanham Act to include the creator “would not only stretch the text, but it would be out of accord with the history and purpose of the Lanham Act and inconsistent with precedent.” According to the Court, the Lanham Act, unlike the copyright and patent laws, is “not designed to protect originality or creativity.” Permitting a cause of action under the Lanham Act “would create a species of mutant copyright law” which would restrict the public’s right to use and copy materials in the public domain and would render superfluous statutes, such as the Visual Artists Rights Act, which specifically allows an artist to claim a particular piece of work. The Court also noted that there were practical difficulties with interpreting “origin” to include the creator. The first difficulty lies in determining who the creator is. For instance, although Fox has a claim to the television series at issue, Time Inc. was the principle creator with the footage provided by different groups including the United States Army, Navy and Coast Guard and unidentified “Newsreel Pool Cameramen.” As such, the Court said, “[w]e do not think the Lanham Act requires this search for the source of the Nile and all its tributaries.” The other difficulty, the Court noted, was that it would put parties, such as Dastar, in an untenable position. They could face liability irrespective of whether they fail to credit or credit the creator (by implying that the creator had approved of the copy). Finally, the Court stated, such a reading would be inconsistent with precedent. Citing to three cases involving rejection of liability for adopting a non-distinctive children’s dress, an unpatented boat hull or flexible road signs, the Court noted that under Fox’s interpretation of “origin,” liability would have attached for the acts in these cases. [blurb by BKS]

Dilution

Contributory Infringement

False Advertising

Defenses

Functionality

Abandonment

Genericness

Nontrademark ("Nominative") Use

Parody

Remedies

Injunctions

Damages

State IP Law / Federal Preemption

State IP Law

The Tort of Misappropriation

State "Common Law" Copyright

Idea Submissions

Publicity Right

• In Winter v. DC Comics, 30 Cal. 4th 881 (2003), the California Supreme Court reversed a lower court’s denial of summary adjudication on misappropriation of likeness and held that comic books are protected by the First Amendment. Plaintiffs, Johnny and Edgar Winter, two well-known artists brought suit alleging that defendants DC comics had misappropriated their names and likeness as the characters Johnny and Edgar Autumn in defendant’s comic books. The characters had similar names (Johnny and Edgar) and features (long white hair and albino features) as the plaintiffs and like Johnny Winter, the character Johnny Autumn wore a tall black top hat. The trial court granted summary judgment in defendant’s favor and the Court of Appeals affirmed. After granting review, the California Supreme Court remanded the case for reconsideration in light of a then recent California Supreme Court decision. The Court of Appeals denied summary judgment concluding that triable issues of fact existed as to whether comic books are protected by the First Amendment and the California Supreme Court granted review.

This case juxtaposes the celebrities’ statutory right of publicity against the First Amendment. While the right of publicity allows celebrities to prohibit others from using their likeness, the First Amendment entitles one to express “alternative versions of celebrity images.” The First Amendment right may nevertheless trump the right of publicity when the work at issue “adds significant creative elements so as to be transformed into something more than a mere celebrity likeness or imitation.” As such, an artistic expression which literally depicts or imitates a celebrity for commercial gain does not trump the celebrity’s right of publicity while an expression that so transforms the celebrity’s likeness as to be the artist’s own expression is protected by the First Amendment. Applying this standard, the California Supreme Court concluded that the defendant’s comic books contained transformative “creative elements” and were therefore entitled to First Amendment protection. Distinguishing comic books from lithographs and T-Shirts bearing a likeness of The Three Stooges, the Court found that the defendant’s comic books did not merely depict the plaintiffs; rather the characters were “part of the raw materials from which the comic books were synthesized.” Moreover, the Court reasoned, the characters were a distorted version of the plaintiffs and quite expressive as half-human and half-worm creature. As for the plaintiff’s argument that the comic books were not a parody of the plaintiffs and therefore not entitled to First Amendment protection, the Court rejected it stating that the form of expression, whether parody or satire or something else, was irrelevant to a determination of the work’s transformative quality. The Court also dismissed the plaintiff’s contention that the defendants had utilized the plaintiff’s reputation and likeness in drumming up interest and sales of the comic books pointing out that the manner of marketing was irrelevant to the question of the work’s transformative quality. [lurb by BKS]

State Moral Rights

Federal Preemption

Patent Preemption

Copyright Preemption

• In Bowers v. Baystate, 203 F.3d 1316 (Fed. Cir. 2003), the Federal Circuit enforced a shrinkwrap license prohibiting reverese engineering. The court found that under First Circuit caselaw, Bowers' shrinkwrap license, which prohibited reverse engineering, was not preempted by federal copyright law, which permits reverse engineering as fair use.

  The Federal Circuit held that "under First Circuit law, the Copyright Act does not preempt or narrow the scope of Mr. Bowers' contract claim." While recognizing that federal regulation may preempt private contract, the court found that "[t]he First Circuit does not interpret [the Copyright Act] to require preemption as long as a state cause of action requires an extra element, beyond mere copying, preparation of derivative works, performance, distribution or display." The court relied in part upon Data General v. Grumann, 36 F.3d 1147 (1st Cir. 1994), which held that the Copyright Act did not preempt state trade secret claims. The court also relied upon other Circuit cases, including ProCD v. Zeidenburg, 86 F.3d 1447 (7th Cir. 1996) which resolved shrink-wrap licenses and questions of Copyright Act preemption of "contractual constraints on copyrighted articles."

  The court briefly mentioned two reverse engineering cases, with very little discussion. The court merely noted that Atari Games v. Nintendo, 975 F.2d 832, 24 USPQ 1015 (Fed. Cir. 1992), which held that reverse engineering is a fair use defense to copyright infringement, did not conflict with the current holding. The court also noted that Vault v. Quaid, 847 F.2d 1488 (5th Cir. 1988), which expressly found that the Copyright Act preempted a state law prohibiting copying of computer programs, did not affect "private contractual agreements supported by mutual assent and consideration." The court added that the First Circuit allows contractual parties to waive their affirmative defenses.

  The court did not reach the merits of Bowers' copyright infringement claim, since it found that the contract infringement claim was valid, and it was reasonable for the judge to award only once where the underlying behavior was the same. Finally, the court held that the patent claims were invalid. [blurb by LQ, 2/13/2002]

Trademark Preemption

Protection of Computer Software

Trade Secret Protection

Copyright Law

Scope of Software Copyright

Exclusive Rights in Computer Programs

Fair Use blurb by MSV and CVC]

Patent Protection

Subject Matter Issues

Examination & Validity of Software Patents

Infringement

Trademark / Trade Dress

Protecting Programs Through Trademark

Compatibility & Standardization

Trademarks and the Internet

• Reversing the Trademark Trial and Appeal Board’s (“Board”) decision to cancel trademark registrations involving the professional football team, the Washington Redskins, the district court in Pro-Football, Inc. v. Harjo, 284 F. Supp. 2d 96 (D.D.C. 2003) granted Pro-Football’s summary judgment motion. The court held that the Board’s finding that the trademarks “may disparage” Native Americans was not supported by substantial evidence and that the laches defense precluded the cancellation of the trademarks. The court, however, emphasized that its conclusion was based on the review of evidence presented to the Board and did not reflect the court’s view on whether the term Washington Redskins may be disparaging to Native Americans.
  

The court began its analysis by reviewing the Board’s two findings of fact--the linguists’ testimony and the survey evidence—under the substantial evidence standard. Regarding the linguists’ testimony, the court found that the Board had simply summarized undisputed testimony rather than weighing conflicting evidence. As for the survey evidence, the court determined that the survey merely represented current attitudes at the time the survey was conducted and could not be extrapolated to a representation of the views of the Native American population as a whole. Moreover, the survey did not provide information about the relevant period and was therefore irrelevant.


Next, the court examined the Board’s application of the legal principles to its findings of facts. Although the court acknowledged that substantial evidence supported the finding that “redskins” refers to the football team and also alludes to Native Americans, the court nevertheless concluded that the Board’s finding of disparagement was not supported by substantial evidence. According to the court, there was no direct evidence that the trademarks “may disparage” Native Americans when used in the context of the football club. Second, the Board’s conclusion of disparagement was based on assumptions not available on the record. The court pointed out three assumptions made by the Board: a) ascribing the views of the general public to the Native Americans, rather than presenting evidence of views of a “substantial composite” of Native Americans; b) finding the word “redskins” derogatory based on usage labels in half of the dictionaries, drop in the use of the word in the last half-century and survey evidence that did not include the relevant time period—none of which, according to the court, indicates that the word is derogatory in the relevant period and context; and c) extending the derogatory connotation of the word “redskins” to its use in the context of the football club because the media and fans use the trademark in a negative manner. Pointing out the flaw in the last assumption, the court stated that the views of the general public is irrelevant in determining whether the word “may disparage” a “substantial composite” of Native Americans.


Turning to the football club’s laches defense, the court first noted that the defense was available. Dismissing the Defendant’s contention that laches defense is unavailable where a public interest is involved the court declared that such a reading is an improper interpretation of a prior caselaw. The court also made a policy argument stating that in the absence of a laches defense a party could theoretically delay filing suit indefinitely, thereby engendering inequitable results. The court then examined the three elements of laches defense—substantial delay, notice and prejudice. Observing that the defendants had waited from over twenty-five years to two years since trademark registration (the two-year old trademark had been in public use for thirty years) and had twelve separate occasions of constructive notice when the trademarks were published and registered and actual notice resulting from public use of the trademarks, the court reasoned that the substantial delay and notice requirements of the laches defense were satisfied. The court found that the prejudice requirement was also met because of a presumption of economic prejudice when there is a long delay; further, there was undisputed evidence that Pro-Football had invested heavily in the marketing and distribution of its trademarks during the delay period.[blurb by BKS]


Sui Generis Protection of Computer Technology

Intellectual Property and Competition Policy

Monopolization

Defining the Market

IP & Anticompetitive Conduct lurb by CVC]

Agreements to Restrain Trade

Vertical Restraints

Horizontal Restraints

• In In re Cardizem CD antitrust litigation, 332 F.3d 896 (6th Cir. 2003), the Sixth Circuit affirmed a lower court’s finding that generic drug manufacturer, Andrx Pharmaceuticals’s agreement to delay production of cheaper generic drugs in exchange for payments by brand name drug manufacturer, Hoechst Marion Roussel, Inc., per se violated the Sherman Act and that the plaintiffs had satisfied the standard for stating antitrust claim. Plaintiffs, purchasers of heart medication diltiazem hydrochloride, the active ingredient in Cardizem CD, sued Andrx and Hoechst under section 1 of the Sherman Act alleging that but for the Agreement, Andrx would have marketed its generic drug at a lower price than Cardizem CD once it received FDA approval. The defendants moved to dismiss the complaint for failure to allege an antitrust injury. After denying the defendant’s motion to dismiss and granting summary adjudication that the defendant has per se violated the antitrust law, the lower court certified two questions for interlocutory appeal: 1) whether plaintiffs’ antitrust claims must be dismissed only if it is apparent from the pleadings that the plaintiffs would have suffered injury even if there had been no antitrust violation; and 2) whether the Agreement was a per se illegal restraint of trade. Answering yes to both questions, the Sixth Circuit began its analysis with the second question.

The Sixth Circuit held that the Agreement was a horizontal market restraint since the agreement was between competitors at the same level of the market structure and had allocated prices so as to reduce competition. The Agreement had delayed the entry of Andrx and other generic competitors for the price of $10 million per quarter paid by Hoechst to Andrx. As such, the court held, the Agreement was per se violation of the Sherman Act. As to the defendant’s argument that the per se rule was inapplicable because the Agreement has allegedly procompetitive justifications, the Sixth Circuit dismissed it as a misunderstanding of the per se rule, stating that horizontal price fixing are so inherently anticompetitive that they are per se illegal even if precompetitive justifications are present.

The Sixth Circuit also determined that the plaintiffs had alleged antitrust injury. The court found that the plaintiffs, by having to purchase a more expensive drug rather than the cheaper generic drug, had suffered an injury of the type antitrust laws were intended to prevent and the injury had “flowed” from the anticompetitive effects of the Agreement. As for the defendant’s argument that Andrx would not have entered the market irrespective of the Agreement because of its concerns about damages in the patent infringement suit, the Sixth Circuit dismissed it stating that such an argument merely creates a disputed issue of fact and therefore cannot be appropriately resolved in a motion to dismiss.

Turning to the first certified question, the Sixth Circuit rejected the defendant’s contention that the "necessary predicate" test requires a plaintiff to plead that the defendants could injure plaintiffs only by engaging in antitrust violation. Stating that the defendant’s argument mixes up the court’s prior decision in Hodges, the Sixth Circuit pointed out that Hodges required a plaintiff to allege either that the plaintiff’s injury can result only from defendant’s antitrust violation or that the antitrust violation was “a necessary predicate” to their injury. Finding no support for the defendant's interpretation of the "necessary predicate" test in previous decisions, the court stated that the complaints in those cases were dismissed because the defendant’s actual and legal acts would have caused the plaintiff’s injury, even if there had been no antitrust violation. In this case, by contrast, the defendants had failed to show any legal right which if they had exercised could have caused the plaintiff’s injury. As such, the court concluded, the Agreement may be construed as the necessary predicate for Andrx’s decision not to enter the generic market. [blurb by BKS]

Mergers & Acquisitions

Please send questions, comments or updates to dgrady@law.berkeley.edu .

Initial site design and content by Chris K. Ridder and Matthew S. Voss (2000-01), with revisions and updates by Colleen V. Chien and Ryan R. Owens (2001-02), Laura Quilter (2002-03), and Bhanu K. Sadasivan (2003-04) as research assistants to Mark Lemley. This page last revised on 08-24-2004, by David M. Grady.