Author Archives: Michael Lafeber

THE 3D REVOLUTION: IP ISSUES ARISING FROM THE PROLIFERATION OF 3D PRINTING

A.What is 3D printing and why is it a big deal?

Traditional methods of manufacturing require expensive machinery and molds or casts. The high cost associated with such equipment acts as a barrier to entrance into the market. It also restricts variation and customization. 3D printing (known as “additive manufacturing”) creates or “prints” a desired object “layer by layer” using a variety of raw materials including plastics, metals, clays and even chocolate (Hershey and 3D Systems recently unveiled their new Chocolate 3D printer capable of creating elaborate shapes in dark, milk, or white chocolate.)

3D printers utilize a blueprint in the form of a Computer Aided Design (“CAD”) file. The CAD file can be created manually or via sophisticated 3D scanners capable of “scanning” three dimensional objects.

3D printing has already been widely utilized in major industries such as automotive (auto design and parts); aerospace (NASA sends 3D printers into space for emergency replacement parts and tools); healthcare (custom implants and orthotics); and military (3D printers provide on demand replacement parts in the field). Small business and consumer use is expected to increase dramatically as 3D printers become more affordable. (A steep increase in 2015 has been predicted due to the recent expiration of several key patents.) For those who think 3D printers are too big, clumsy and cost prohibitive for widespread consumer use – recall the early stages of the computer revolution. (“I think there is a world market for maybe five computers.” Thomas Watson, President of IBM, 1943).

Because 3D printers copy and create replicas of existing 3D objects, they raise a host of intellectual property concerns. Many fear the erosion of non-legal deterrents to infringement (i.e. high capital costs) will result in widespread infringement rendering traditional legal enforcement useless and devaluing intellectual property.

The music industry is frequently cited for comparison. Leading commentators argue 3D printing will effect change in the manufacturing industry in much the same way digitization altered the music industry:

3D printing will unleash the power of digitized things on manufacturers. The PC and the Internet put digitization into consumers’ hands, slashed copying and distribution costs, and weakened entry barriers to economic sectors that provided certain nonrivalrous goods. Nonrivalrous goods are like an idea; once created, their capacity is infinite as “there is no additional marginal cost in allowing others to use [them].”. . . Once digitization hit the copyright industry, it felt the full force of nonrivalry. . . [A]nyone could make and distribute copyrighted goods. To date, companies relying on patent to protect nonrivalrous goods have not had to face potential broad-based copying. 3D printing will challenge those companies. Lower costs, the ability to make specialized and just-in-time parts, and a return to local manufacturing are all positive developments that should be embraced. Yet these advances will threaten, if not destroy, many firms and jobs that live off rents from intellectual property.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014). As with digital music, the coming years will see a host of intellectual property cases, issues and legislative activity involving 3D Printing.

 B. Forms of Intellectual Property Protection

1. Copyright
a. “Pictorial, Graphic and Sculptural Works”

U.S. copyright law protects original “pictorial, graphic, and sculptural works.” 17 U.S.C. §102(a)(5). This includes three-dimensional works of art. Examples of such works include artificial flowers and plants, dolls, toys, jewelry designs, models, sculptures and figurines. Traditional copyright laws will afford protection to copyright protected work duplicated by a 3D printer. Several variations merit discussion.

b. “Useful Articles”

Copyright protection is generally not available to articles which have a utilitarian function. Copyright protection for such “useful articles” extends only to “features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” “Useful articles” are defined as those goods “having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.” 17 U.S.C. §101.

Determining the scope of copyright protection for useful articles is fact intensive and indefinite at best. However, the exclusion of “useful articles” leaves open the ability of 3D printers to supply objects used in our everyday lives without necessarily implicating copyright law.

c. Computer Software

Computer programs are protected as “literary works” under the Copyright Act. 17 U.S.C. §102(a)(1). Both source code and object code are considered “literary works” because they are original works of authorship “expressed in words, numbers, or other verbal or numerical symbols or indicia.” 17 U.S.C. §101.

The underlying CAD files which facilitate 3D printing constitute computer software eligible for copyright protection. Accordingly, U.S. copyright law will prohibit the unauthorized distribution of copyright protected CAD files for use with 3D printers.

(1) Originality Requirement for CAD Files

In order to be eligible for copyright protection, the subject CAD file must meet the requisite “originality” requirement. The U.S. Supreme Court set a low bar for meeting the originality requirement in Feist Publications, Inc. v. Rural Telephone Service, 499 U.S. 340 (1991). In order to qualify, a work must: 1) be independently created by the author (as opposed to copied from other works); and 2) possess at least some minimal degree of creativity.

Leading commentators argue scans of 3D objects in the public domain will not pass the originality test:

There is a solid argument that no originality is involved in [scanned] design[s] at all. A 3D scan that is not modified cannot be compared to a photograph, which is an original (and copyrightable) work that combines reality with the expression of the photographer. A person who uses a scanner to get an exact copy of an object, by contrast, contributes nothing to the result.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

In support of their contention, Desai and Magliocca cite to Meshwerks, Inc. v. Toyota Motor Sales U.S.A., Inc., 528 F.3d 1258 (10th Cir. 2008). In Meshwerks, the 10th Circuit held that a 3D scan using older technology was not sufficiently original to be entitled to copyright protection. Id. The Court explained Meshwerks process as follows:

Meshwerks took copious measurements of Toyota’s vehicles by covering each car, truck, and van with a grid of tape and running an articulated arm tethered to a computer over the vehicle to measure all points of intersection in the grid. Based on these measurements, modeling software then generated a digital image resembling a wire-frame model. In other words, the vehicles’ data points (measurements) were mapped onto a computerized grid and the modeling software connected the dots to create a “wire frame” of each vehicle.

Id. Despite Meshwerks’ painstaking efforts, the Court determined the resulting files were not original and therefore not amenable to copyright protection. According to the court the files were “not so much independent creations as (very good) copies of Toyota’s vehicles” and “depict[ed] nothing more than unadorned Toyota vehicles–the car as car.” Based on this reasoning, a scanned 3D CAD file would presumably likewise not merit copyright protection.

d. Merger Doctrine

The copyright merger doctrine provides that if an idea and the expression of such idea are so tied together such that there is a very limited number of ways to express or embody the idea in a work, the expression of the idea is uncopyrightable.   This is akin to the “scenes a faire” doctrine which provides that certain well established story lines, fables, folklore, scenes of nature, and other common visual and cultural references are not copyrightable. Such “scenes a faire” are part of the public domain.

Desai and Magliocca theorize that 3D printing will foster a new debate and potential expansion of the merger doctrine. They reason:

A CAD file may give the merger doctrine more relevance than it has had to date. Consider software that is written to make a statue that looks like one of the giant heads (or moais) from Easter Island. The idea and the expression there could be described as identical–a statue that looks like a giant Easter Island head. The software can only do one thing. Most other software, by contrast, can do multiple things or be described as an expression of some idea (for example, a spreadsheet). The moai program does not present a merger problem if the CAD file is classified at a higher level of generality (making art from indigenous cultures), but it is not clear why the software should be viewed in that way. The design file could also be seen as the specific iteration of a specific trail.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

e. Derivative Works

A derivative work is a work based on or derived from one or more already existing works. 17 U.S.C. § 101. The right to create derivative works is one of the exclusive rights of a copyright holder. 17 U.S.C. § 106(2). At least one commentator has suggested CAD files created using copyrighted protected 3D objects constitute derivative works. Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771 (“A CAD file distributor could thus be. . .infringing the copyright in the article itself by having made, copied, and distributed a derivative work of the article.”)

f. DMCA Take-Down Notices

The Digital Millennium Copyright Act (“DMCA”) notice and takedown provisions provide a vehicle for copyright owners to force online service providers to discontinue infringing activity by third parties. Upon proper notification by the copyright holder, online service providers can insulate themselves from liability by removing infringing files. The DMCA’s “safe harbor” provisions may provide an effective tool for copyright owners to combat the online sale or distribution of infringing CAD files and/or 3D printed articles.

2. Patents

a. Direct Infringement

Direct infringement is the unauthorized making, using, selling, offering for sale, or importing of the patented invention. 35 U.S.C. §271. Accordingly, the printing (“making”), sale, or use of patented products will constitute direct infringement.

While traditional direct infringement claims will be effective against large commercial 3D printers and sellers of patented products, this is not the anticipated business model.   Rather, the head of the distribution chain will generally sell or distribute CAD files for end use by small businesses and consumers. This poses obstacles to relying on direct infringement theories.

(1) Do CAD Files Constitute the “Patented Invention” Under § 271(a)?

Are sellers of CAD files offering for sale and selling the patented invention under §271(a)? If so, they would be directly liable for patent infringement. At least one commentator makes a compelling argument CAD files are not the equivalent of the underlying infringing product:

The requirement under § 271(a) that the sale be of “any patented invention” implicates the particular claims of the patent, since “[I]t is a bedrock principle of patent law that the claims of a patent define the invention to which the patentee is entitled the right to exclude.” If a patent claims a physical product, that physical product is what must be sold or offered for sale in order to satisfy § 271(a).

Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771

If the sale of CAD files does not constitute direct infringement, patent holders are left with a high volume of small value direct infringement claims against end user consumers. The music industry taught us that pursuing such claims is not practical or feasible. Accordingly, patent holders will likely be forced to rely heavily on theories of indirect infringement to attack the head of the distribution chain.

b. Indirect Infringement

(1) Active Inducement

Section 271(b) makes it unlawful to “actively induce infringement of a patent.”  Active inducement occurs when one encourages another to engage in infringing activity with “knowledge that the induced acts constitute patent infringement.” Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011). The requisite knowledge standard is one of “willful blindness” requiring: 1) subjective belief that there is a high probability infringement exists; and 2) deliberate actions to avoid confirming such infringement. Id. Despite the heightened knowledge standard, active inducement claims are a viable tool for pursuing flagrant sellers of CAD files having as their sole purpose the production of infringing products.

(2) Contributory Infringement

Contributory infringement is defined as the sale, or offer to sell, within the United States or the importation into the United States of “a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use.” 35 U.S.C. §271(c).

In order to establish contributory infringement, a patent owner must show: 1) that there is direct infringement; 2) that the accused infringer knew that the combination for which its components were being made was both patented and infringing; 3) that the component has no substantial noninfringing uses; and 4) that the component is a material part of the invention. Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321 (Fed. Cir. 2010)

Commentators question whether a CAD file will be found to constitute a “component” for purposes of contributory infringement.   Their concern derives from the narrow interpretation of “component” adopted in Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007). In Microsoft, the Court construed the meaning of “component” in the context of § 271(f). Section 271(f) makes it an infringement to export unassembled components of a patented invention to induce assembly of the invention outside the United States in a manner that would infringe the patent if such combination occurred within the United States.

AT&T holds a patent on an apparatus for digitally encoding and compressing recorded speech. Microsoft’s Windows software, when installed, rendered the subject computer infringing. Microsoft sent a master version of its Windows software abroad, either on disk or via electronic transmission. Copies of the master were made abroad and installed on computers. Microsoft denied liability for such foreign activities on the grounds the master version of its software did not constitute a “component” within the meaning of § 271(f).

The Court adopted a narrow interpretation of “component” in the software context. According to the Court, software constitutes mere information and detailed instructions akin to “a blueprint. . .schematic, template, or prototype.” Accordingly, software cannot constitute a “component” until such time as it is expressed on a computer readable medium. Commentators opine that CAD files for use with 3D printers are likely to be viewed in the same restrictive fashion under Section 271(c). Daniel Harris Brean, Asserting Patents to Combat Infringement Via 3D Printing: It’s no “Use” 23 Fordham Intell. Prop. Media & Ent. L.J. 771

C. Licensing Models – “If You Can’t Beat ‘Em Join ‘Em”

The inherent difficulties of relying on traditional legal theories when combating infringement in the digital age has caused certain manufacturers to borrow from the iTunes playbook. Observers believe a licensing model can succeed in the 3D printing arena despite the availability of free alternatives:

Although the entertainment industry makes a credible complaint that “it is impossible to compete with free,” there have actually been several documented cases of artists who have successfully competed with those who offered their work for free in violation of copyright law. Of course, individual examples are insufficient to declare a trend. Yet there are studies showing that the availability of content for purchase can decrease file sharing, and the unavailability of legal content for purchase can result in increased peer-to-peer sharing, in violation of copyright law. If given the opportunity, rational consumers will purchase digital content that is appropriately priced, free of viruses, and of high quality. With physical products, consumers will consider printable designs that they know will work and are virus free, if those designs are priced appropriately.

Devan Desai and Garard Magliocca, Patents Meet Napster: 3D Printing and Digitization of Things, 102 Geo. L.J. 1691 (2014).

Consistent with this theory, Hasbro has partnered with 3D printing pioneer Shapeways to make its popular “My Little Pony” brand available to fans online via 3D printing. Nike utilizes 3D printing technology to produce high performance sport cleats. Such cleats will inevitably soon be available for home production — swoosh and all — via licensed CAD files.

Are predictions of the demise of IP due to 3D printing greatly exaggerated? (See VCR and Napster). Or, will 3D printing be the next “internet” and spawn a new industrial revolution with evolving forms of intellectual property? Time will tell.

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“The 3D Revolution” — 3D Printing and Intellectual Property

Gartner, Inc. touts itself as “the world’s leading information technology research and advisory company.” Accordingly, intellectual property lawyers may want to pay attention to Gartner’s claims that the “escalation of 3D printing capabilities will change retail models and threaten intellectual property.” Gartner’s January 2014 report contains the following predictions:

–           3D printing will result in the loss of more than $100 billion per year in global IP revenue by 2018.

–           At least seven of the world’s top 10 multichannel retailers will be using 3D printing technology to generate custom stock orders by 2018.

–           The rapid advancement of 3D printing for the production of living tissue and organs (“bioprinting”) will foster major ethical debates.

–           There will be an explosion in demand for 3D technology to meet medical needs in underserved emerging markets (i.e. 3D printed prosthetic limbs.)

Several companies have already adopted an “if you can’t beat ‘em join ‘em” mentality. For example, Hasbro partnered with 3D printing pioneer Shapeways to make its popular “My Little Pony” brand available to fans online via 3D printing. Chocolate giant Hershey is developing a licensed 3D printer concept for confections. Nike utilizes 3D printing technology to produce high performance sport cleats. It seems inevitable such cleats will soon be available for home production — swoosh and all — via licensed “blueprints.”

Are predictions of the demise of IP due to 3D printing greatly exaggerated? (See VCR and Napster). Or, will 3D printing be the next “internet” – spawning innovation and whole new industries? Stay tuned.

Third Annual University of Minnesota Law School Patent Symposium

On Wednesday, May 21, Briggs and Morgan’s Intellectual Property group and the University of Minnesota Law School co-presented the Third Annual University of Minnesota Law School Patent Symposium, Non-Practicing Entities: Abusive “Patent Trolls” or Free Enterprise Drivers of Innovation? The symposium covered the following topics:

  • Do Patent Assertion Entities Help or Hinder Innovation?
  • Issues and Trends in State Actions Against NPEs
  • Litigation When Sued by a Patent Assertion Entity
  • Litigating Against NPEs – In‐House Strategies
  • Pending Legislation Aimed at NPEs

Briggs and Morgan’s top-rated intellectual property attorneys can help you maximize the value of your IP and avoid risk. Briggs’ IP lawyers have been recognized by their peers as “Top 40 Intellectual Property” lawyers, Intellectual Property “Super Lawyers,” and Minnesota Attorneys of the Year. As a result, they possess the knowledge and breadth of experience to understand your business and help you achieve your objectives.

Please click here if you were not able to make the symposium but would like to view a copy of the materials.

“The Innovation Act of 2013” – Representative Goodlatte Introduces New Bill Seeking to Curb Perceived Patent Litigation Abuses

On October 23, 2013, House Judiciary Committee Chairman Robert Goodlatte introduced “The Innovation Act of 2013.” (H.R. 3309) The bill is in response to perceived abuse of the patent litigation system by Non-Practicing Entities (referred to derogatorily as “Patent Trolls.”) The bill is being distinguished from other recent reform proposals on the basis that it “target[s] abusive behavior rather than specific entities.”  The bill’s authors have been careful to note that it does not attempt to eliminate valid patent litigation.  Rather, the stated goal is “preventing individuals from taking advantage of gaps in the system to engage in ‘litigation extortion.’”

Some of the key highlights of the bill are:

1.         Heightened pleading requirements.  Without limitation, the bill would require Plaintiffs to provide: i) an identification of each patent and each claim allegedly infringed; ii) an explanation as to where each element of each claim is found in each “accused instrumentality”; iii) whether each element is infringed literally or under the doctrine of equivalents; iv)  how the terms of each claim correspond to the functionality of the accused instrument; v) for any indirect infringement, a description of the direct infringement and any acts allegedly inducing or contributing thereto; vi) allege indirect infringement; vii) a description of the “right” of the party to assert infringement, viii) a description of the principal business of the party alleging infringement; and ix) a list of all infringement complaints involving the same patent(s).

2.         Joinder.  The bill would allow joinder of an “interested party” where a defendant shows the plaintiff has no substantial interest in the patent other than asserting it in litigation.  “Interested Party” is defined to include: i) assignees of the patent; ii) persons with a right to enforce or sublicense the patent; iii) persons with a direct financial interest in the patent, including attorneys and law firms representing the plaintiff;

3.         Attorneys Fees to the Prevailing Party. The bill provides that the court “shall” award reasonable fees and other expenses to the prevailing party unless the position of the non-prevailing party was “substantially justified” or “special circumstances make an award unjust.”  Of note – the bill expressly allows prevailing defendants to collect fee awards from non-plaintiffs having a substantial interest in the patent-at-issue.

4.         Limitations on Discovery.  The bill would allow only limited discovery until after claim construction.

The bill also contains substantive changes to the AIA’s new IPR and PGR proceedings.  First, the bill seeks to limit PGR estoppel. Under the AIA, PGR creates estoppel for “any ground that the petitioner raised or reasonably could have raised. . .” 35 U.S.C. § 325(e) (italics added.)  The bill would narrow such estoppel solely to grounds actually raised.  The authors of the bill presumably want to promote use of PGR by limiting estoppel concerns.

Second, the bill seeks to change the PTO’s longstanding practice of applying the broadest possible claim construction in review proceedings.  The proposed bill would require the PTO to “constru[e] each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” To the extent the authors of the bill are seeking to curtail NPE litigation, one wonders why they would propose a narrower claim construction, thereby making it easier for the NPEs’ patents – many of which are perceived to be obvious and overbroad — to survive review.

To see why former USPTO Director Kappos supported and favored continuing application of the broadest possible claim interpretation see http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and.

http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and

ONE YEAR LATER – IPR WIDELY ACCEPTED AND GAINING MOMENTUM

The new AIA Inter Partes Review proceedings (“IPR”) became effective September 16, 2012.  USPTO statistics reveal IPR has been widely accepted with IPR filings steadily increasing.  In October 2012, the first full month the new IPR procedures were in effect, approximately 25 IPRs were filed. Less than a year later in July 2013, approximately 75 IPRs were filed – a 200% increase.  A total of 459 IPRs were filed through August 30, 2013. The rate of IPR filings now greatly exceeds the average filing rates for the old Inter Partes Reexamination proceedings.

Interpartes review data

inter partes reexam data

Inter Partes Reexamination

A variety of factors are responsible for the widespread acceptance and utilization of IPR, including: 1) the expedited nature of IPR (decision required within 12 months of filing); 2) the availability of limited “litigation” style discovery; 3) the express ability of the parties to enter into a settlement prior to a final decision (“put the genie back in the bottle”); and 4) filing deadlines (a defendant in a patent litigation may only request IPR for up to one year after being served with the complaint).

In addition to the new benefits afforded by IPR, the traditional benefits of administrative review verses a district court challenge remain, including: 1) significantly lower average attorneys fees; 2) lower “preponderance of the evidence” standard (compared to heightened “clear and convincing evidence” applied in district court); 3) no presumption of validity; and 4) application of broadest claim interpretation (compared to district court canon that claims be construed to preserve their validity).

IPR has continued to gain momentum despite the AIA’s adoption of a heightened standard for commencement/initiation of the review proceeding.  The old “substantial new question of patentability” standard resulted in roughly 95% of Inter Partes Reexamination proceedings being allowed to proceed.  The “SNQ” standard has been replaced by what was intended to be a heightened standard.  Specifically, an IPR requestor must now establish a “reasonable likelihood that the requestor will prevail with respect to at least one of the claims challenged.”  The initial data indicates a slight decrease in the initiation rate under the new standard.  Through August 2013, 87% of IPR petitions filed have been allowed to proceed.

Based on one year of data, it appears the USPTO will increasingly become the forum of choice for patent validity challenges.

Fresenius USA, Inc. v. Baxter Intern., Inc. – Federal Circuit Decision Further Promotes Administrative Review of Patents

The Federal Circuit has ruled that a patent infringement judgment in excess of fourteen million dollars ($14,000,000.00) was rendered void and moot by a PTO decision invalidating the subject patent despite a prior Federal Circuit decision in the case affirming the validity of the patent.  Fresenius USA, Inc. v. Baxter Intern., Inc.— F.3d —-, 2013 WL 3305736 (C.A.Fed., July 2, 2013 (Cal.)) Coupled with the new broader scope and expedited administrative review provided for in the America Invents Act, the decision continues a trend of favoring or promoting administrative review of patents over district court litigation.

The decision will allow defendants to consider administrative challenges to the validity of a patent much further into the district court litigation process.  Prior to this ruling, prevailing wisdom was that a re-examination proceeding needed to be completed prior to the conclusion of district court proceedings to be useful.  A defendant who uncovers relevant prior art late in a proceeding may now be more likely to commence a re-examination proceeding as long as it can be completed prior to any appeals.

The decision raises interesting issues concerning separation of powers and the finality of judgments.  In a strongly worded and well-reasoned dissenting opinion, Judge Pauline Newman argued the decision improperly allows an administrative agency to void a final Federal Circuit Court of Appeals judgment.  Judge Newman wrote:

The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.

The majority justified its decision on the grounds that the there was no “final” judgment. According to the majority, the prior decision affirming the validity of the patent was not final because the matter had been remanded solely to address post-judgment damage issues.  According to Judge Newman this position is inconsistent with well-established principals of finality:

The panel majority argues that the rules of finality do not apply here because the Federal Circuit, with its final judgment, included a remand to the district court to assess post-judgment damages. The courts of the nation have dealt with a variety of circumstances in which a final judgment included a remand to the district court. Here, all of the issues on appeal were finally adjudicated by the Federal Circuit; the remand authorized the district court to determine only post-judgment royalties. The remand had no relation to any issue in reexamination; validity had been finally resolved in the courts.

. . .The majority proposes that the final adjudication of patent validity can be redecided by the courts and thus by the PTO, because of the remand to assess post-judgment damages. This theory is contrary to the precedent of every circuit. All circuits impose finality and preclusion as to issues that were finally decided in full and fair litigation. . .

The America Invents Act contains certain procedural mechanisms which should prevent this from becoming a recurring concern.  Specifically, under the AIA: 1) Post Grant Review and Inter Partes Review will be prohibited if a civil action challenging the validity of the patent has been previously filed; and 2) a civil action challenging validity filed after the filing of either a Post Grant Review or Inter Partes Review petition will automatically be stayed (With the exception of “Covered Business Method Patents” these provisions are applicable only to patents issued from applications filed after March 16, 2013 (patents granted under the new “First Inventor to File” Rules).

ICANN Launches Trademark Clearinghouse

The Internet Corporation for Assigned Names and Numbers (“ICANN”) has launched its Trademark Clearinghouse (“TMCH”) effective March 26, 2013.  ICANN touts the TMCH as an effective tool for combating infringement and other feared abuses relating to ICANN’s new generic top level domain program (“gTLD”).  For an annual fee between $95 and $150 per trademark, brand owners can file their trademarks with the TMCH centralized database before and during the launch of the new gTLDs.  Registration will afford the brand owner two purported benefits: 1) priority registration for gTLDs matching their trademark during the ”sunrise” period (the period before the names are available to the general public); and 2) notification if anyone registers a gTLD matching their trademark.

ICANN’s gTLD program provides companies the opportunity to forego standard domain extensions such as “.com” and “.org” and register domain extensions incorporating their trademark such as “.pepsi” or “.google.”  The program has received heavy criticism, including claims the program is primarily intended to increase revenues (the application fee for a gTLD is $185,000 with an ongoing annual fee of $25,000.)  Others are concerned gTLDs will have an anticompetitive effect by allowing large players such as Google to monopolize descriptive domain extensions such as “.blog.”  The founding chairperson of ICANN, Esther Dyson, is on record as claiming the gTLD system will create jobs for lawyers, marketers, search-engine optimization experts, registries, and registrars but add little actual value or benefit to brand owners or internet users.

The TMCH has received similar criticism.  According to some commentators, the TMCH is less effective than readily available commercial watch services routinely utilized by brand owners.  Such critics note that the TMCH will apparently only screen for exact matches – failing to flag minor variations from the subject mark.  For example, an application for the gTLD “.googled” would apparently not get flagged for the registered trademark “google.”  For an equivalent cost, most commercial watch services catch all minor variations of the subject mark.  Additional information and details concerning ICANN’s TMCH can be found at http://trademark-clearinghouse.com

CLS Bank v. Alice Corp. – “Abstract” Computer Patents Under Attack

The Electronic Frontier Foundation (“EFF”) has filed an amicus brief in CLS Bank v. Alice Corp., wherein the Federal Circuit will be holding an en banc hearing to address the issue of when a computer implemented patent should be invalidated under 35 U.S.C. § 101 for claiming an abstract idea.  Section 101 provides that”[w]hoever invents or discovers anynew and useful process, machine, manufacture, or composition of matter, or anynew and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  Despite Section 101’s broad and sweeping language, the Supreme Court has routinely recognized that there are limits to what can be patented, and that “laws of nature, physical phenomena, and abstract ideas” fall outside the scope of § 101.  Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010).

The patents in question in CLS Bank v. Alice Corp.[1] cover a computerized trading platform for exchanging obligations so as to eliminate “settlement risk.”(such a platform can be used for stock and foreign currency trades).  The District Court invalidated the patent under Section 101 as covering an “abstract idea” ineligible for patent protection.  The Federal Circuit initially overturned the lower court and upheld the validity of the patent.  According to the majority opinion, “[W]hen — after taking all of the claim recitations into consideration — it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.”  The Court went on to determine that the claims in question passed its newly formulated test because they “appear to cover the practical application of a business concept in a specific way. . .”  The Court’s opinion highlighted specific elements such as creating electronically maintained shadow credit and shadow debit records, requiring such shadow credit and debit records to be held independently of the exchange institution by a supervisory institution, etc.

Some commentators believe the Federal Circuit’s decision ignored and/or was inconsistent with recent precedent seeking to rein in the scope of patent eligible subject matter.  According to EFF’s attorney Julie Samuels, patents like the one involved in CLS Bank v. Alice Corp. “lead to harmful monopolies on simple ideas like ways of running a business or cooking a meal.”  Recognizing the inherent difficulties of defining what constitutes an improper “abstract idea”, the EFF is advocating for a more vigorous application of Section 112(f) to combat the perceived problem of overbroad computer implemented patents.  Section 112(f) requires disclosure of structure corresponding to the acts covered by the patent.  According to the EFF, software patents that do not contain an algorithm should automatically be found invalid.  “Giving Section 112(f) the teeth Congress intended would simplify the Section 101 inquiry by limiting the scope of the question and eliminating from contention many patents that this court has already found to be impermissibly abstract,” the group argues.

The Federal Circuit’s en banc order has formulated the questions presented as follows:

a.         What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

b.              In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

Oral argument has not yet been scheduled for the en banc hearing.  Stay tuned.


[1] U.S. Patent Nos. 5,970,479; 6,912,510; 7,149,720; and 7,725,375.

Color Trademarks Prevail Over Aesthetic Functionality

The Second Circuit has determined that fashion designer Christian Louboutin’s use of a distinctive red sole can serve as a trademark as long as it contrasts with the other colors of the shoe.  In doing so, the Second Circuit reversed the lower court’s ruling that color can never be a valid trademark for fashion items. (See Christian Louboutin S.A. v. Yves St. Laurent America Holding, Inc.)

By way of background, Louboutin is the owner of a U.S. federal trademark registration for the use of “lacquered red sole[s] on footwear.”  Further, there is no dispute Louboutin’s red soles are widely recognized and have acquired secondary meaning.

Despite these facts, the lower court relied on the doctrine of aesthetic functionality to invalidate and cancel Louboutin’s Registration.   The District Court argued that “[t]here is something unique about the fashion world that militates against extending trademark protection to a single color.”

The Second Circuit began its analysis by citing to multiple examples where color has been upheld as a valid trademark.  As one example, the Court cited to the Owens-Corning decision wherein the Federal Circuit explained, “[Owens-Corning’s] use of the color ‘pink’ performs no non-trademark function, and is consistent with the commercial and public purposes of trademarks” and therefore “serves the classical trademark function of indicating the origin of the goods, and thereby protects the public.”

Following the Federal Circuit’s lead, the Second Circuit rejected the district court’s per se ban on colors acting as trademarks in the fashion industry and reinstated Louboutin’s federal registration.  The Court explained, “Louboutin’s marketing efforts have created a “brand with worldwide recognition,” and “[b]y placing the color red in a context that seems unusual, and deliberately tying that color to his product, Louboutin has created an identifying mark firmly associated with his brand. . .”

While the Court recognized the validity of Louboutin’s red sole mark, it restricted its scope solely to contrasting red soles.  According to the Court, Louboutinfailed to establish the requisite distinctiveness and/or secondary meaning when the red sole does not contrast with the upper part of the shoe (For example, a monochromatic red shoe.)

Despite rejecting the lower court’s per se ban based on the aesthetic functionality doctrine, the Second Circuit clarified that the aesthetic functionality doctrine remains a viable defense.  According to the Court, the aesthetic functionality doctrine is applicable “where protection of the mark significantly undermines competitors’ ability to compete in the relevant market.”

However, the Court avoided having to conduct an aesthetic functionality analysis because Yves St. Laurent’s accused shoes were monochromatic (non-contrasting) and therefore outside the restrictions placed on Louboutin’s trademark by the Court.

While the scope and boundaries of the aesthetic functionality defense remain to be explored, the Second Circuit’s decision is a victory for fashion designers seeking to use color as a brand identifier.

American Institute of Physics and John Wiley & Sons v. Schwegman Ludberg – First Battle Won by Copyright Owners

with co-author Kimberly Overholser, Student, St. Thomas Law School

In a copyright infringement case of significant importance, the first battle has been won by  publishers American Institute of Physics and John Wiley & Sons, Inc.  In February, the American Institute of Physics and John Wiley & Sons, Inc. filed suit against two law firms, including Minnesota patent prosecution firm Schwegman Lundberg & Woessner,  alleging copyright infringement. The publishers claim that the law firms infringed their copyrights by improperly copying journal articles for submission to the United States Patent and Trademark Office (USPTO) and for their own internal use.

The patent application process requires applicants to disclose prior art through information disclosure statements, inevitably leading to submission of journal articles.  Accordingly, the case has significant relevance to the patent bar.  Earlier this year the USPTO’s General Counsel released a memo stating the USPTO’s position that submission of copies of copyrighted materials to the USPTO as part of the patent application process is fair use under 17 U.S.C. 107.  Requiring a license from each journal would substantially hinder the patent process.  Although the office took no position on whether additional copies (i.e. for the law firm’s future reference) qualify as fair use. Plaintiff’s attorney Bill Dunnegan was quoted saying “The crux of what our case deals with is the internal copying by the law firms after they have one copy in their hand.”

The case has potential impact on the legal community as a whole, not just the patent bar.  If copying a journal article for submission to the USPTO constitutes infringement, wouldn’t copying the same article for submission to the court in support of a summary judgment constitute infringement?

Schwegman moved to dismiss the case, arguing that Plaintiffs had not sufficiently pleaded their claims. To avoid dismissal, a complaint must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007). Predicating their motion on Twombly and Iqbal, Schwegman argued that the publishers had not pleaded sufficient facts to establish either element of copyright infringement: (1) ownership of a valid copyright and (2) copying of original elements of the copyrighted work.  The motion was denied.  The Court stated, “a plaintiff does not need to expressly plead facts to support the elements of a claim in the complaint, rather a plaintiff may rely upon plausible inferences from the well-pleaded facts to state a claim for relief.”

The publishers satisfied their pleading obligations by simply pleading ownership of the copyright, providing registration certificates for the journals, and by alleging Schwegman copied their protected works pursuant to Federal Rule of Civil Procedure 8(a)(2).

This is merely a warm-up for the real battle which lies ahead concerning the scope of the fair use defense.  The case continues under several watchful eyes.

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