Intellectual Property in the New Technological Age

Aspen Publishers, Rev. 4th ed. 2007

Mark Lemley, Peter S. Menell, and Robert P. Merges

Contents

Trade Secret Protection

   1. Subject Matter
   2. Misappropriation of Trade Secrets
   3. Agreements to Keep Secrets
   4. Remedies

Patent Law

   1. Elements of Patentability
   2. Infringement
   3. Defenses
   4. International Patent Law
   5. Remedies
   6. Design and Plant Patents

Copyright Law

   1. Requirements
   2. Copyrightable Subject Matter
   3. Ownership and Duration
   4. Traditional Rights of Copyright Owners
   5. Defenses
   6. Indirect Liability
   7. Digital Copyright Law
   8. International Copyright Law
   9. Enforcement and Remedies

Trademark Law

   1. What Can Be Protected as a Trademark?
   2. Establishment of Trademark Rights
   3. Infringement
   4. Defenses
   5. International Issues in Trademark
   6. Remedies

State Intellectual Property Law and Federal Preemption

   1. State Intellectual Property Law
   2. Federal Preemption

State Intellectual Property Law and Federal Preemption

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

Intellectual Property and Competition Policy

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

Problems and Analysis

   1. Analysis for Problems 3-14


Patent Law

Elements of Patentability

  1. Patentable Subject Matter

    In re Bilski, _ F.3d _, 88 U.S.P.Q.2d 1385 (2008)

    Professors Robert Merges and John Duffy discuss the Bilski decision extensively in this podcast with Professor Doug Lichtman. They argue that, rather than put forward a complete and consistent theory of patentable subject matter, the majority laid down a bright-line rule derived partly from the Supreme Court subject-matter trilogy: Gottschalk v. Benson, Parker v. Flook and Diamond v. Diehr. The opinion repeatedly refers to language from these cases without elaboration, presumably in order to signal that they are taking the Supreme Court precedents seriously.

    Two things seem clear from the decision: the "useful, concrete and tangible result" test from State Street is rejected, but the case-by-case approach to patentable subject matter announced in that decision is reaffirmed: the majority declines to find any broad subject areas unpatentable. Indeed, the court specifically states that the two most controversial subject areas, business methods and software, are not excluded from patentability

    [On Page 142, insert at the end of Note 2]

    For more on recent developments in § 101 patentability, see Chapter XX at pp. 1065 et seq.

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  2. Utility
  3. Describing and Enabling the Invention
  4. Novelty and Statutory Bars
  5. Nonobviousness

    [On Page 237, insert after Note 3]

    4. There are strong indications that KSR is having an immediate impact on workaday § 103 cases. See, e.g., Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1161 (Fed.Cir. 2007) ("Accommodating a prior art ... device ... to modern electronics would have been reasonably obvious to one of ordinary skill in [the art]" because "[a]pplying modern electronics to older ... devices has been commonplace in recent years."). See also USPTO, Examination Guidelines for Determining Obviousness Under 35 U.S.C. 103 in View of the Supreme Court Decision in KSR International Co. v. Teleflex Inc., 72 Fed. Reg. 57526 (Oct. 10, 2007) (examination guidelines instructing examiners on how to apply KSR's approach to specific problems).

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Infringement

  1. Claim Construction
  2. Literal Infringement
  3. Doctrine of Equivalents
  4. "Reverse" Doctrine of Equivalents
  5. Equivalents for Means-Plus-Function Claims
  6. Contributory Infringement
  7. Infringement Involving Foreign Activities

    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.”

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Defenses

  1. The "Experimental Use" Defense
  2. Inequitable Conduct
  3. Patent Misuse

International Patent Law

  1. Procedural Rules
  2. Substantive Harmonization and GATT-TRIPs

Remedies

  1. Injunctions
    eBay Inc. v. MercExchange, L.L.C.

  2. Damages: Reasonable Royalty and Lost Profits
  3. Willful Infringement
    [On Page 364, replace the Knorr-Bremse case with:]

    In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007)

    Might the prospect of treble damages—naturally an appealing prospect to litigators—lead to a lot of rent exhaustion as parties expend resources to capture or avoid the damages? Does the decision in Seagate make this problem worse or better?

    On the other hand, does this decision, combined with eBay's higher bar against injunctions, encourage potential infringers to take a lackadaisical attitude toward patents, secure in the knowledge that the courts will effectively negotiate a license for them if they are found to be infringing?

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Design and Plant Patents

  1. Design Patents
  2. Plant Patents


Copyright Law

Requirements

  1. Original Works of Authorship
  2. Fixation in a Tangible Medium of Expression
  3. Formalities

Subject Matter

  1. Limitations on Copyrightability: Distinguishing Function and Expression
  2. The Domain and Scope of Copyright Protection

Ownership and Duration

  1. Initial Ownership of Copyrights
  2. Duration and Renewal
  3. Division, Transfer, and Reclaiming of Copyrights

Traditional Rights of Copyright Owners

  1. The 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.

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  2. The Right to Prepare Derivative Works
  3. The Distribution Right
  4. Public Performance and Display Rights
  5. Moral Rights
  6. Contributory Infringement

Defenses

  1. Fair Use
  2. Other Defenses

Indirect Liability

Digital Copyright Law

  1. Digital Copyright Legislation
  2. Enforcement
  3. Fair Use in Cyberspace

    [On Page 609, replace Kelly v. Arriba Soft Corp. with:]

    Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701 (9th Cir. 2007)

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International Copyright Law

Enforcement and Remedies


Trademark Law

What Can Be Protected as a Trademark?

  1. Trademarks, Trade Names and Service Marks
  2. Colors, Fragrances, and Sounds
  3. Certification and Collective Marks
  4. Trade Dress and Product Configurations

Establishment of Trademark Rights

  1. Distinctiveness
  2. Priority
  3. Trademark Office Procedures
  4. Incontestability

Infringement

  1. The Requirement of Trademark Use

    [On Page 723, insert before "Comments and Questions"]

    North American Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211 (11th Cir. 2008)

  2. Likelihood of Consumer Confusion

  3. Dilution

    [On Page 740, replace Nabisco, Inc. v. PF Brands, Inc. with:]

    Louis Vuitton Malletier, S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252 (4th Cir. 2007)

  4. Extension by Contract: Franchising and Merchandising
  5. Domain Names and Cybersquatting
  6. Contributory Infringement

    [On Page 778, insert:]

    Tiffany, Inc. v. eBay, Inc., No. 04 Civ. 4607 (RJS), 2008 WL 2755787 (S.D.N.Y. July 14, 2008).

  7. False Advertising

What Can Be Protected as a Trademark?

  1. Functionality
  2. Abandonment
  3. Genericness
  4. Nontrademark ("Nominative") Use
  5. Parody

International Issues in Trademark

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.

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Remedies

  1. Injunctions
  2. Damages


State Intellectual Property Law and Federal Preemption 

State Intellectual Property Law

  1. The Tort of Misappropriation
  2. State "Common Law" Copyright
  3. Idea Submissions
  4. Publicity Right
  5. State Moral Rights

Federal Preemption

  1. Patent Preemption
  2. 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.

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  3. Trademark Preemption


Problems and Analysis

Problems Analysis 3-14

Although Betty is not contesting Big Soya’s claim of infringement, she has raised three affirmative defenses: 1) that the contract she signed with Big Soya is unenforceable; 2) that the PVPA gives statutory protection to saving seeds for planting in the following season; and 3) that Big Soya’s actions here constitute patent misuse.
        
For a contract to be held unenforceable, a court must find unconsionability, duress, undue influence, or another defense to formation.  Here, Betty has claimed only that she did not read the contract (her claim to not have understood it seems quite specious since reading is a prerequisite for understanding).  Absent fraudulent inducement to sign without reading, a party who fails to read a contract but who nonetheless signs it is bound by its terms.  Since there is no evidence here that Big Soya induced Betty to not read the agreement or misled her about the terms of that agreement, Betty is bound by its terms.
         
The PVPA is a complementary form of statutory protection to the Patent Act.  However, the rights and privileges provided for under these statutory schemes are different.  Patent rights are available to plants and seeds that meet the requirements for patentability, independent of the rights granted under the PVPA.  And although the PVPA grants an exception for saving seeds, the Patent Act provides no such carve out.  Therefore, Betty can be safe from liability under the PVPA but still be liable under that Patent Act.
           
Patent misuse is essentially the intersection of antitrust law with patent law.  The Court in Motion Picture refused to find infringement because the films in question were not covered by the patent on the projector; the attempt to bring the films under the umbrella of the patent constituted an illegal tying arrangement.  In this case, Betty may argue that Big Soya is essentially tying current purchases to next year’s purchases by preventing farmers from planting seeds in subsequent growing seasons.  In this case, the tied product would be the future supply of ‘‘WEEDAWAY-PROOF’’ seeds, and the tying product would be the original purchase of the ‘‘WEEDAWAY-PROOF’’ seeds.  However, the essential distinction between these cases is that Motion Picture involved two entirely separate goods while this case involves two purchases of the same good, separated temporally.  Furthermore, Big Soya’s contract with Betty does not require her to purchase more seeds from Big Soya; Betty is never under any obligation to purchase the alleged tied product.  Because there is no obligation to purchase future seeds from Big Soya, there is no tied product, and thus no tying arrangement.
                            
The facts in this problem are very similar to those in Monsanto v McFarling, and Monsanto v Swann.
          
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