Author Archives: Scott M. Flaherty
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Reuters quotes our very own Professor Cotter regarding the novel damages argument being made by Symantec and Trend Micro against Intellectual Ventures (IV). According to the news service, IV seeks more than $300 million from the two companies for infringing a patent purchased for $750,000. Symantec and Trend Micro have told a Delaware Court that such a large licensing fees cannot be reasonable for a patent acquired for so little.
Thomas Cotter, a patent damages expert at the University of Minnesota Law School who is not involved in the case, said he is unaware of any court ruling along the lines being urged by Symantec and Trend Micro. For Intellectual Ventures, which says it has earned about $3 billion to date from licensing its thousands of patents, the stakes could hardly be higher.
“If the royalty is capped at the purchase price, there’s obviously no point in being a patent assertion entity,” Cotter said. Read the rest of this entry
The first-in-the-nation settlement between the Minnesota Attorney General and patent litigant MPHJ Technology Investments has been widely reported, including by the Washington Post, Bloomberg, Law360, and Ars Technica. But none of these outlets have posted a copy of the settlement agreement and the resulting court order.
Although several provisions of the agreement are interesting, perhaps most interesting is a stayed, conditional civil penalty:
MPHJ, including the MPHJ Subsidiaries and affiliates, represents and warrants that it has not received money from any Minnesota resident or entity for a patent license or an alleged infringement of a patent or patent rights. If, contrary to this representation and warranty, the State discovers Minnesota residents or Minnesota entities did pay MPHJ money for a patent license or for an alleged infringement of a patent or patent rights, then as penalty for violation of this Paragraph 4, MPHJ shall pay the State a civil penalty of $50,000 and refund all such money paid by Minnesota residents and entities.
The Assurance thus explains that MPHJ did not make any money from Minnesota residents in response to its demand letters.
Related cases in Vermont and Nebraska continue. Law360 reports that MPHJ removed the Vermont Attorney General’s litigation to federal court, and that the Attorney General is seeking to remand the case to state court. Meanwhile, a federal judge in Nebraska has granted a preliminary injunction for the law firm that represents MPHJ, allowing it to continue litigating patent cases there The Nebraska Attorney General had sent the firm a cease-and-desist letter, demanding that the firm stop its patent-enforcement efforts. Patently O has more details here.
The Minnesota Court of Appeals recently added a decision to the small but growing body of law surrounding state open-records laws and copyright protection.
The case is National Council on Teacher Quality v. Minnesota State Colleges & Universities. Here’s the background. National Council on Teacher Quality sent a request under the Minnesota Government Data Practices Act—Minnesota’s open-records act—for copies of course syllabi maintained by the Minnesota State Colleges and Universities, known as MnSCU (and pronounced min-skew). MnSCU responded, saying (1) its faculty members’ intellectual-property rights might be violated by the National Counsel’s later use of those materials, and (2) MnSCU might be subject to liability under the copyright act.
National Counsel sued and won. The district court concluded that National Counsel’s proposed use was fair use under the copyright act. Because the proposed use was fair use, the copyright act was no defense to MnSCU’s failure to disclose the syllabi.
MnSCU appealed and lost. MnSCU based its appellate argument primarily on its concern that copying the syllabi might expose MnSCU to copyright liability when National Counsel engages in conduct that does not constitute fair use. The court did not consider whether MnSCU’s copying of the documents itself violates the Copyright Act. The court of appeals held that once fair use is established, Minnesota’s open-records law does not allow an agency to withhold information based on a theoretical, future violation of the Copyright Act.
One amicus brief raised an interesting argument, claiming that even allowing National Counsel to view the syllabi—without copying—would violate the Copyright Act. The amicus reasoned that the viewing would constitute a “public display” of the authors works and would therefore violate of the owners’ rights under the Copyright Act. The court noted neither the statute nor cases supported argument that allowing a single party to view a copyrighted work might be a “public display” that would require the copyright holder’s permission.
The court’s case holding is as follows:
A state agency cannot rely on the Federal Copyright Act to refuse to disclose data that is the subject of a request for disclosure under the Minnesota Government Data Practices Act after the district court determines, without dispute, that the requestor intends only “fair use” of the data as defined by the copyright act.
The time to seek review from the Minnesota Supreme Court has not yet run, so this case may not yet be over. Stay tuned.
Magistrate Judge Jeffrey Keyes recently issued a Report and Recommendation granting summary judgment of fair use in a case that involves a copyright infringement claim against a patent-prosecution firm. In the process of prosecuting patents for its clients, the firm copied several of the publishers’ copyrighted scientific journal articles from a USPTO database and other sources, and publishers sued for copyright infringement.
U.S. Magistrate Judge Keyes ruled that the firm’s copying constitutes fair use. This is the result urged by the USPTO, which intervened in the case. The court weighed each of the four fair-use factors, of § 107, (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. As to the first factor, the court concluded that the firm did not use the articles for the same purpose as the publishers. Regarding the second factor, the court reasoned that because the articles were primarily technical rather than creative, they were farther from the “core” of copyright protection. The third factor was the most interesting: even though the firm copied the entirety of each article, the court concluded that this factor still favored a finding of fair use because the copying was consistent with the purpose and character of the firm’s new and different use. As to the fourth factor, the court reasoned that publishers failed to show that the firm’s use of the articles to meet their PTO-disclosure obligations affected the traditional target market for the articles.
The meat of the court’s policy consideration is as follows:
Finally, Schwegman’s copying of the Articles and its use of those copies for the purpose of supporting its clients’ patent applications also “promote[d] the Progress of Science and useful Arts,” U.S. Const., art. I, § 8, cl. 8, which is the very purpose of the Copyright Act. Uses of copyrighted work that fulfill that purpose include “criticism, comment, news reporting, teaching . . ., scholarship, or research.” 17 U.S.C. § 107. Though they borrow from a copyrighted work, criticism, comment, news reporting, teaching, scholarship, and research all have the potential, under certain circumstances, to benefit the public by furthering the understanding of ideas or discoveries highlighted in a copyrighted work. And like each of these listed uses, Schwegman’s use of the Articles in connection with its clients’ patent applications confers a public benefit as well.
This is a case to watch. Because this ruling is a Report and Recommendation, the publishers have the right to seek review of it by filing an objection with the District Court judge. If the ruling stands, the legal community—not just patent-prosecution firms—will be the among the primary beneficiaries. Lawyers of all stripes have ethical duties that require them to duplicate documents that may be subject to copyright. This ruling provides some relief that these practices will not be necessarily be infringement.
This past term the Supreme Court decided McBurney v. Young, a case involving a constitutional challenge to the citizen-only restriction of Virginia’s Freedom of Information Act (FOIA). Virginia law allowed citizens of Virginia to inspect and copy all state public records, but the act did not grant non-citizens the same right. The Court had little trouble unanimously ruling that neither the Privileges and Immunities Clause nor the dormant Commerce Clause barred the citizen-only restriction.
Although McBurney involved the copying of government data, it did not discuss the effects of copyright law on that copying. Copyright law governs reproduction. 17 U.S.C. § 106. State open-records laws, like Virginia’s FOIA, govern access to information—i.e, public availability. Open-records laws involve concerns regarding both access and copying, because state and municipal databases may contain information that is in the public domain and information protected by copyright. Public-domain information is information that is not covered by intellectual property rights (e.g., copyright). Black’s Law Dictionary 1265 (8th ed. 2004) (“When copyright, trademark, patent, or trade-secret rights are lost or expire, the intellectual property they had protected because part of the public domain and can be appropriated by anyone….”).
It is a common misconception that if government data is publicly available then it cannot be copyrighted. Case law, however, confirms the distinction between public-domain information and publicly available information with respect to open-records laws and copyright. In County of Suffolk v. First Am. Real Estate, 261 F.3d 179, 188-90 (2nd Cir. 2001), the appellate court analyzed the interplay between copyright ownership of municipal maps and open-records laws. The court held that open-records laws do not abrogate a copyright holder’s ownership of the publicly available information. Id. at 190; accord Weisberg v. U.S. Dept. of Justice, 631 F.2d 824, 825, 828-30 (D.C. Cir. 1980) (records do not lose copyright protection simply because they become publicly available). Some courts hold that the Copyright Act “is not restricted to private parties and there is no reason to believe that such a restriction should be upheld. In fact, the opposite inference is required when only one specific governmental entity, the United States of America, is excluded from the protection of the Act.” E.g., Nat’l Conference of Bar Examiners v. Multistate Legal Studies, Inc., 495 F. Supp. 34, 35 (N.D. Ill. 1980), aff’d, 692 F.2d 478 (7th Cir. 1982).
Professor Cotter’s post below on FTC v. Actavis, and his related SSRN paper both argue that the Court’s opinion all but in name adopt the presumptive-illegality approach that the decision purported to reject. Interestingly, the dissenting opinion has no mention of the presumption, favorably or unfavorably.
Chief Justice Robert’s dissent—joined by Justices Scalia and Thomas—does, however, argue that the correct approach should “be to ask whether the settlement gives Solvay monopoly power beyond what the patent already gave it….” Whether the dissent is legally correct, though, reverse payments are different than ordinary settlements in at least one respect.
Usually, a settling plaintiff claiming damages is paid by the defendant an amount equal to or less than the damages claimed. But in reverse-payment settlements, the money flows the opposite direction from traditional settlements: the plaintiff who claims its patent was infringed pays the defendant who allegedly infringed the patent. But simply, the alleged trespasser is paid by the property owner. This is odd. The dissent calls it “a distinction without a difference,” but I am not so sure, especially in light of the Hatch-Waxman Act’s provisions, which form the backdrop for these disputes.
Nonetheless, the clear winner is the FTC—not just in this case, but in the future cases it now can bring. Chairwoman Edith Ramirez issued this statement:
We look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law. We also are studying the Court’s decision and assessing how best to protect consumers’ interests in other pay for delay cases. Fighting anticompetitive patent settlements has been a priority for the Commission beginning under the Chairmanships of Robert Pitofsky, through Timothy J. Muris, Deborah Platt Majoras, William E. Kovacic, and culminating under the leadership of Chairman Jon Leibowitz.
Vermont’s Attorney General has sued a patent holding company—MPHJ Technology Investments, LLC—for violation of the state’s consumer fraud statutes. The Vermont complaint alleges “unfair and deceptive trade practices.” The substance of the complaint asserts that one or more in a series of threatening letters was false, deceptive or misleading. Specifically, it says the letters falsely claimed to have received a “positive response,” misrepresented the treatment that most recipients gave the letter, or that the defendant did not make an adequate investigation before sending its letters threatening suit.
The complaint raises a host of interesting issues, including jurisdiction, federalism and the First Amendment. These types of suits may be preempted by 28 U.S.C. § 1338, which gives federal courts exclusive jurisdiction over claims arising under the patent laws. They may be impliedly preempted too. Further, the Petition Clause may limit state’s abilities to restrict the kinds of federal claims threatened or brought by persons. This is a case to watch.
The White House has taken notice of patent holding companies too. Recently it released a report titled “Patent Assertion and U.S. Innovation.” The report, prepared by the President’s Council of Economic Advisers, the National Economic Council, and the Office of Science & Technology Policy discusses “Patent Assertion Entities” (PAEs). The report cites the recent uptick in litigation filed by PAEs:
The White House’s report favorably cites the basis of Vermont’s lawsuit as an example of “abusive practices in litigation by patent assertion entities.” The report makes a few interesting points:
- Not all PAEs are bad.
- PAEs cause more harm than good in the net.
- PAEs can harm large and small companies alike.
- Claim uncertainty, especially in software patents, provides PAEs with an unfair bargaining power.
- 19th Century patent litigation problems involving agricultural equipment and railroad equipment may provide a roadmap to address issues with today’s PAEs.
The report contains general recommendations to promote more straightforward, precise patents, to apply a higher burdens for novelty and non-obviousness, and to reduce patent litigation costs. The positions taken by the White House with respect to issues like Vermont’s are especially interesting because the likelihood that state-level action will be preempted may depend in large part on articulated federal goals and interests.
Circuit judges continue to differ regarding the test for patent subject-matter eligibility under 35 U.S.C. § 101. The en banc decision in CLS Bank v. Alice Corporation produced five, six, or seven opinions, depending on one’s counting. The breakdown of the various opinions authored in connection with the court’s ruling is as follows:
- Per curiam opinion.
- Judge Lourie authored a concurring opinion joined by Judges Dyk, Prost, Reyna, and Wallach.
- Chief Judge Rader concurred and dissented, both in part, joined by Judges Linn, Moore, and O’Malley, except as to part VI, joined only by the Chief Judge and Judge Moore.
- Judge Moore wrote an opinion dissenting in part, joined by the Chief Judge and Judges Linn and O’Malley.
- Judge Newman concurred and dissented, both in part. No judge joined that opinion.
- Judge Linn dissented, and was joined by Judge O’Malley.
- Chief Judge Rader, authored “additional reflections.”
Thus, depending on whether “additional reflections” are considered an opinion, and whether the one-paragraph per curiam opinion is considered an opinion, this case produced five, six, or seven opinions. The per curiam opinions reads as follows:
Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.
The judges sparred not only over the § 101 inquiry, but also regarding the precedential weight that should be afforded to any or all of the signed opinions that accompanied the ruling. Judge Lourie wrote that although
no single opinion issued today commands a majority, seven of the ten members, a majority, of this en banc court have agreed that the method and computer-readable medium claims before us fail to recite patent-eligible subject matter. In addition, eight judges, a majority, have concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the § 101 analysis.
Assuming that Marks applies to circuit courts, there may be rules of law to distill from the various opinions. See Marks v. United States, 430 U.S. 188, 193 (1977). Judge Rader’s opinion, however, suggests otherwise, noting that
[n]o portion of any opinion issued today other than our Per Curiam Judgment garners a majority. The court is evenly split on the patent eligibility of the system claims. Although a majority of the judges on the court agree that the method claims do not recite patent eligible subject matter, no majority of those judges agrees as to the legal rationale for that conclusion. Accordingly, though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.
So, not only is there disagreement regarding the proper test under § 101 (covered nicely at Patently-O here), the various opinions show a meta-disagreement, regarding weather any rule of law emerges from the court’s en banc determination. Stay tuned.
Last week a divided Eighth Circuit panel affirmed a district court’s conclusion that a TTAB decision would not be given preclusive effect in B&B Hardware, Inc. v. Hargis Industries, Inc. The court reasoned that preclusion was inappropriate because the TTAB decided different likelihood-of-confusion issues that those that were before the district court.
The dissenting judge disagreed that the TTAB’s likelihood-of-confusion analysis was truly different from the district court’s analysis, writing that “[m]odest differences in analytical approach to the same ultimate issue, however, do not justify dispensing with collateral estoppel.”
Some commentators have suggested there is now a circuit split regarding the preclusive effect of TTAB decisions. Perhaps there is, but the opinion was careful to avoid holding that TTAB decisions could never be preclusive. Consider these excerpts:
- “The element at issue in this case is the second one—whether the issue sought to be precluded is the same as the issue involved in the prior action. It was not here, and thus the district court properly declined to apply issue preclusion in these circumstances.”
- “[A]pplication of issue preclusion in this case is not appropriate, as the TTAB in denying registration did not decide the same likelihood-of-confusion issues presented to the district court in this infringement action.”
- “Because the Trademark Trial and Appeal Board previously decided the same question about likelihood of confusion that was at issue in the trial of this case, Hargis Industries should not have been permitted to relitigate that point.” (Colloton, J. dissenting)