IP Law Observer

Facebook Allowed to Pursue Copyright Claims Against Service Which "Scraped" Facebook Pages in Violation of Terms of Use

2009-06-12T14:56:00.000-07:00

Case: Facebook v. Power Ventures, Inc., N.D. Calif. Case No. C08-5780 JF (May 11, 2009)

The One Sentence Summary: A complaint alleging copyright infringement and other claims against a service that "scraped" content from Facebook pages was sufficient to survive a motion to dismiss.

What They Were Fighting About: Facebook sued defendants ("Power.com") for operating an internet site that collected user information from Facebook's website. Facebook alleged violation of the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act, 15 U.S.C. § 7701, et seq.; the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030 et seq.; and California Penal Code § 502. Facebook also alleged that Defendants committed direct and indirect copyright infringement when they made copies of Facebook’s website during the process of extracting user, and that the manner in which Power.com accessed the Facebook website constituted a violation of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201, et seq. Facebook also asserted claims for relief based on state and federal trademark law, as well as a claim for relief under California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq. Defendants filed a motion to dismiss the complaint.

District Court Holdings:

The copyright infringement claims were pleaded with adequate detail. Access and copying of just one page in violation of the Terms of Service ("TOS") would be sufficient to commit copyright infringement.
Although Facebook does not have a copyright on user content, copying the Facebook page to get user content may violate Facebook's rights. An arrangement of non-copyrighted data can be protected by copyright.
The complaint stated claims for indirect copyright infringement by alleging that defendants caused users to violate the Terms of Use.
The court refused to dismiss the DMCA claim despite defendant's argument that the users could authorize Power.com to access their Facebook data. Such access was explicitly barred by the Facebook Terms of Use.
The complaint's allegations of trademark infringement were sufficient to withstand the motion to dismiss.
The court ordered that plaintiffs must provide a more definite statement of the basis for their unfair competition law complaint.

Trade Secret Identification Under California Statute Need Not Always Include Differentiation From Skill in the Art

2009-03-30T18:07:00.000-07:00

Case: Brescia v. Angelin, Cal. Ct of Appeal, No. B204003 (3/17/09)

The One Sentence Summary: In a trade secret action against Sylvester Stallone and others, plaintiff's identification of its trade secret formula for body building supplement pudding was sufficient to comply with section 2019.210 of the California Code of Civil Procedure, and plaintiff did not need to include details distinguishing the trade secret from the knowledge of those skilled in the field.

California Court of Appeal Circuit Holdings:

The court summarized its holding as follows:
"Code of Civil Procedure section 2019.210 (hereafter section 2019.210) provides: “In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.” In the published portion of our opinion, we hold that section 2019.210 does not require in every case that a trade secret claimant explain how the alleged trade secret differs from the general knowledge of skilled persons in the field to which the secret relates. Rather, such an explanation is required only when, given the nature of the alleged secret or the technological field in which it arises, the details provided by the claimant to identify the secret are themselves inadequate to permit the defendant to learn the boundaries of the secret and investigate defenses or to permit the court to understand the designation and fashion discovery. Further, the trade secret designation is to be liberally construed, and reasonable doubts regarding its adequacy are to be resolved in favor of allowing discovery to go forward."

Plaintiff could not complain about ad hoc dismissal of its complaint by demurrer where plaintiff had invited error by agreeing to that method of obtaining review of the trial court's discovery ruling regarding the adequacy of plaintiff's section 2019.020 ruling.
The court wrote:
"We conclude that whether a trade secret designation adequately distinguishes the allegedly protected information from the general knowledge of skilled persons in the field is a function of the particularity of the designation – that is, a function of whether the stated details themselves are sufficient, given the nature of the alleged secret and the technology in which it arises, to permit the defendant to ascertain whether and in what way the information is distinguished from matters already known, and to permit the court to fashion appropriate discovery. Absent a showing that the details alone, without further explanation, are inadequate to permit the defendant to discern the boundaries of the trade secret so as to prepare available defenses, or to permit the court to understand the identification so as to craft discovery, the trade secret claimant need not particularize how the alleged secret differs from matters already known to skilled persons in the field. Further, consistent with precedent, the trade secret designation is to be liberally construed, and reasonable doubts regarding its adequacy are to be resolved in favor allowing discovery to go forward."

No Laches Found Where Defendant Had Not Invested in Brand Awareness For Infringing Domain Name During Period of Delay in Bringing Suit

2009-03-17T17:18:00.000-07:00

Case: Internet Specialties West, Inc. v. Milon-Digiorgio Enterprises, Inc., 9th Cir. No. 07-55199 (3/17/09)

The One Sentence Summary: In affirming an injunction prohibiting use of an ISPWEST domain name for internet services, the panel affirmed jury instructions on likelihood of confusion, and affirmed a finding of no laches where the defendant had not invested in brand awareness during a period of delay.

What They Were Fighting About: A jury ruled for plaintiff finding trademark infringement of the domain name IS-WEST for internet services was infringed by defendant's use of its ISPWEST domain.

Ninth Circuit Holdings:

The trial court's jury instruction in a trademark infringement case on likelihood of confusion properly stated the law that in Internet cases, the "Internet troika" of
(i) similarity of plaintiff’s and defendant’s mark; (ii) relatedness of services; and (iii) simultaneous use of the Internet as a marketing channel
are the most important factors in determining likelihood of confusion.
On laches, the panel found that a presumption of laches applied because plaintiff knew of a potential trademark infringement claim starting in 1998 (when defendant first started offering internet services under a similar name), a period longer than the four year statute of limitations.
The panel reviewed the district court's consideration of the factors for laches. The six factors are:
1) the strength and value of trademark rights asserted; 2) plaintiff’s diligence in enforcing mark; 3) harm to senior user if relief denied; 4) good faith ignorance by junior users; 5) competition between senior and junior users; and 6) extent of harm suffered by junior user because of senior user’s delay. E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir. 1983).

The district court erred in determining that plaintiff was diligent when it waited until defendant offered DSL before suing. Natural expansion of defendant's internet services into DSL is not progressive encroachment that allows delay in pursuing a legal claim.
The panel affirmed the district court's exercise of discretion in finding no prejudice to defendant due to delay in bringing the action. Prejudice must arise from investment in building brand awareness, not simple infringing use of the mark, and the trial court did not abuse its discretion in reaching the factual conclusion there was little investment in brand awareness.
The district court's injunction against using the ISWEST trademark or confusingly similar variations was appropriate in scope.

Breach of Confidence and Unfair Competition Claims Were Preempted By California's Trade Secret Act

2009-03-03T18:12:00.000-08:00

Case: K.C. Multimedia v. Bank of America Technology & Operations, Cal. App. 6th Dist. H030494 (3/3/09)

The One Sentence Summary: The appellate panel affirmed court rulings and a jury verdict for defendant in a trade secret misappropriation case, including holding that breach of confidence and unfair competition claims arising from the same nucleus of facts as the trade secret claim were preempted.

What They Were Fighting About: Plaintiff K.C. Multimedia lost at trial on its claim that defendants misappropriated its trade secrets in a Palm application for accessing bank records.

California Court of Appeal Holdings:

The jury's finding that plaintiff did not own trade secrets was supported by substantial evidence of a license that conveyed rights to the defendant.
Plaintiff forfeited its objection to the trial court's use of a motion in limine to resolve preemption, an issue of law, because plaintiff's counsel failed to object to the procedure.
Use of the motion in limine to resolve the preemption issue was not error.
California's implementation of the Uniform Trade Secrets Act (UTSA) has a different preemption provision than the model act. Thus, decisions from states that implemented a different version of the preemption provision will not be persuasive in interpreting California's version of the UTSA.
California's version of the UTSA is broad and intended to "occupy the field."
The UTSA should be read to preempt other civil remedies that are based upon misappropriation of a trade secret. The court agreed with "the federal cases applying California law, which hold that section 3426.7, subdivision (b), preempts common law claims that are 'based on the same nucleus of facts as the misappropriation of trade secrets claim for relief.' Depending on the particular facts pleaded, the statute can operate to preempt the specific common claims asserted here: breach of confidence, interference with contract, and unfair competition."
The causes of action for breach of confidence and statutory unfair competition relied on the same nucleus of facts as the trade secret claim and were therefore preempted.

Patent Claims for Candle Design Which Prevented Scorching Were Invalid Due to Obviousness

2009-02-09T15:37:00.000-08:00

Case: Ball Aerosol & Specialty Container, Inc. v. Limited Brands, Inc., Bath & Body Works, Inc., et al., Fed Cir. No. 2008-1333 (2/9/09)

The One Sentence Summary: Patent claims for a candle which prevented scorching by having feet on the base of the candle holder and having these feet rest on a cover used as a stand were invalid because the invention was obvious.

Federal Circuit Holdings:

The district court properly construed the claim language in determining that the "seating" of the candle on the cover did not require locking or engaging.
The district court should have found that the claimed invention was obvious in light of prior art disclosing a cover used as a stand and feet on the bottom of the candle to minimize scorching.
The district court erred in finding infringement on summary judgment just because the accused object was capable of having the cover used as a stand. Capability to infringe was not enough. The plaintiff failed to show actual infringement by putting the candles in the infringing configuration.

Non-Compete Clause Could Not Be Enforced Outside of Areas Where Comedy Businesses Were Operating

2009-02-05T08:43:00.000-08:00

Case: Comedy Club, Inc. v. Improv West Assocs., 9th Cir. No. 05-55739 (1/29/09)

The One Sentence Summary: After remand from the Supreme Court, the Ninth Circuit panel reaffirmed its earlier decision holding that an arbitrator's award enforcing an in-term non-compete clause over the entire country was in manifest disregard of California's law barring restraints on competition, Business and Professions Code section 16600; the non-compete was only enforceable where a comedy club owned by the licensor was operating.

Ninth Circuit Holdings:

After a remand to consider its earlier decision in light of Hall Street Associates L.L.C. v. Matel, Inc., 128 S. Ct. 1396 (2008), the panel concluded that manifest disregard of the law remains a ground upon which an arbitrator's decision may be reviewed and modified.

Judicial Estoppel Prevents Party From Playing "Fast and Loose" By Taking Inconsistent Litigation Positions

2009-02-04T16:31:00.000-08:00

Case: United Nat'l Ins. Co. v. Spectrum Worldwide, Inc., 9th Cir. No. 07-55833 (2/2/09)

The One Sentence Summary: In a suit by the insurer for recovery of advertising injury insurance proceeds paid to settle a trade dress infringement suit, the district court properly granted summary judgment for the insurer where there was no coverage due to a first publication exclusion and the insured was judicially estopped from arguing that first publication occurred after the policy went into effect.

Ninth Circuit Holdings:

The first publication exclusion of the insurance policy was unambiguous and applied to infringement claims.
Spectrum was judicially estopped from claiming that its first publication of the allegedly infringing material occurred after the insurance policy became effective. The estoppel arose because Spectrum argued successfully in earlier litigation that it had been using the elements of its label since before the policy became effective.

Qualcomm Penalized for Failure to Disclose Patents to Standard Setting Organization and for Litigation Misconduct in Failing to Produce Evidence

2008-12-01T15:08:00.000-08:00

Case: Qualcomm Inc. v. Broadcom Corp., Fed. Cir. No. 07-1545 (12/1/08)

The One Sentence Summary: The panel held that (1) Qualcomm's video patents are unenforceable against products compliant with an industry standard due to Qualcomm's intentional failure to disclose the patents to the standard setting organization; and (2) Qualcomm's failure to disclose the patents and its litigation misconduct of failing to produce evidence of its participation in the standard setting organization were a proper basis for an award of attorneys' fees to Broadcom.

What They Were Fighting About: Qualcomm appealed from the district court's judgment that two of its video patents were unenforceable due to Qualcomm's failure to disclose the patents to the joint video team standard setting organization ("JVT SSO") developing the H.264 video standard. Qualcomm also appealed an award of attorneys' fees based upon its non-disclosure and its litigation misconduct of failing to produce evidence of its participation in the SSO.

Federal Circuit Holdings:

Qualcomm's failure to appeal a non-infringement judgment did not moot the appeal because Qualcomm appealed the district court's judgment of waiver of the patents against the entire world which was an order of larger scope.
The panel affirmed the district court's finding that the JVT SSO participants had an obligation to use best efforts to disclose relevant intellectual property rights, and Qualcomm failed to present evidence that it did so.
As to the scope of the duty to disclose, the panel affirmed the district court's finding that
the language requires JVT participants to disclose patents that "reasonably might be necessary" to practice the H.264 standard. This is an objective standard, which applies when a reasonable competitor would not expect to practice the H.264 standard without a license under the undisclosed claims.
The district court correctly concluded that the Qualcomm patents were required to be disclosed as reasonably necessary despite the jury's finding of non-infringement. Because Qualcomm had claimed infringement of the patents in bringing the suit, it could not now argue that the patents were not reasonably necessary to practice the H.264 standard.
The panel affirmed the district court's findings of implied waiver of Qualcomm's right to assert the patents at issue in light of its intentional failure to disclose the patents to the JVT.
Equitable estoppel was an alternative ground to affirm the district court's judgment. Qualcomm cannot be allowed to argue that equitable estoppel was waived where Qualcomm's discovery misconduct made it more difficult for Broadcom to show estoppel.
The remedy for the waiver and patent misuse here must be tailored to the scope of the harm. The panel therefore narrowed the district court's unenforceability ruling to extend only to products designed to be compliant with the video standard:
the broadest permissible unenforceability remedy in the circumstances of the present case would be to render the ’104 and ’767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against all H.264-compliant products (including the accused products in this case, as well as any other current or future H.264-compliant products).
The panel affirmed the district court's award of attorneys' fees to Broadcom based upon the finding that this was an "exceptional case" under 35 U.S.C. § 285 due to Qualcomm's withholding of information from the JVT and its litigation misconduct of making false statements and withholding documents.

Licensor of "Gone In 60 Seconds" Can Pursue Copyright and Trademark Claims for Retained Rights in the Character "Eleanor" the Car

2008-11-17T15:05:00.000-08:00

Case: Halicki Films v. Sanderson Sales and Marketing, Carroll Shelby Int'l, 9th Cir. Nos. 06-55806, 06-55807 (11/12/08)

The One Sentence Summary: The licensor of remake rights for the movie "Gone in 60 Seconds" retained sufficient rights in the Eleanor car character to pursue trademark and copyright infringement claims on remand.

Ninth Circuit Holdings:

The district court erred in interpreting a license agreement concerning the Eleanor car in a remake of the movie "Gone in Sixty Seconds." The license agreement and the extrinsic evidence supported plaintiff's position that she had retained the rights to market both the original and the remake Eleanor cars.
On remand, the district court should consider whether the character Eleanor was sufficiently developed to qualify for copyright protection.
Plaintiff potentially had standing to sue for trademark infringement (1) as the owner of the unregistered Eleanor mark and as the owner of merchandising rights in Remake Eleanor.
With respect to the Gone in 60 Seconds mark, the district court erred in concluding that plaintiff's registered marks in toy cars were insufficient to create standing for an infringement claim regarding actual cars. "To establish standing under the Lanham Act, a plaintiff need only demonstrate that she is the registered owner of a mark for any class of products, even one that does not compete directly with the defendant’s products. See 15 U.S.C. § 1114." Non-competitive goods may still create confusion about the source or sponsorship of goods, and proximity or relatedness of goods is only one of eight factors in the likelihood of confusion analysis.
Plaintiff had standing to seek cancellation of the "Eleanor" mark because she retained merchandising rights to Remake Eleanor and use of the mark "Eleanor" could create confusion.
Plaintiff waived her challenge to summary judgment on her state law claims by inadequately briefing them in her appeal.
The district court did not err in refusing to award attorneys' fees under 17 U.S.C. § 505 of the Copyright Act or 15 U.SC. § 1117(a) of the Lanham Act.

First Amendment Barred Trademark Claims On Depiction of Strip Club in Video Game

2008-11-09T16:18:00.000-08:00

Case: E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 9th Cir. No. 06-56237 (11/5/08)

The One Sentence Summary: The First Amendment barred trademark infringement claims regarding a fictionalized "Pig Pen" strip club in the game "Grand Theft Auto."

What They Were Fighting About: ESS, the operator of the Play Pen strip club, sued Rock Star games for trademark infringement and state law claims for Rock Star's depiction of a fictionalized "Pig Pen" strip club in the Grand Theft Auto video game. The district court granted summary judgment for defendants.

Ninth Circuit Holdings:

Trade dress claim arising from similarity of trademarks was disposed of with the same analysis as trademark claim.
Nominative fair use defense did not apply where the video game "Pig Pen" mark was not referring or commenting on "Play Pen" mark.
The panel applied the Second Circuit’s approach from Rogers v. Grimaldi, which
“requires courts to construe the Lanham Act ‘to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression.’ ” Walking Mountain, 353 F.3d at 807 (emphasis in original) (quoting Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989)). The specific test contains two prongs. An artistic work’s use of a trademark that otherwise would violate the Lanham Act is not actionable “ ‘unless the [use of the mark] has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless [it] explicitly misleads as to the source or the content of the work.’ ” Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir. 2002) (quoting Rogers, 875 F.2d at 999).
The depiction of the Play Pen club in the video game had some artistic relevance.
The use of the Play Pen club in the video game did not explicitly mislead players of the game.
The trial court properly granted summary judgment for defendants.

Copyright Fair Use Symposium at USF

2008-11-01T15:47:00.000-07:00

Fair Use in the Sky with Diamonds: Examining the Derivative Works Right in the Face of Fair Use, a symposium at the University of San Francisco, explored difficult and interesting questions about copyright fair use.

Highlights included:

Corynne McSherry of the Electronic Frontier Foundation and Jason Schultz of the Samuelson Law, Technology & Public Policy Clinic at Berkeley Law School spoke about fair use cases including the Lenz v. Universal case (the video of a toddler dancing to a Prince song that drew a DMCA takedown notice). This case generated a decision under 17 U.S.C. sec. 512 that sending a takedown notice requires the copyright holder to consider the question of whether the posting is fair use.
Annette Hurst talked about defending the "artsurdist" who created parodies of Barbie and fifties kitchen appliances in the Mattel v. Walking Mountain case.
Jim Marshall, a famous photographer known for his photographs of rock stars, voiced his perspective that "fair use" is often used to justify unfair rip-offs of his work. He spoke about his famous photograph of Johnny Cash flipping the bird. (Search for it on the Internet - the photograph is everywhere).
Steve Vander Ark, the author of the Harry Potter Lexicon, discussed his creation of the Lexicon as a librarian's aid to finding details in the Harry Potter books. He described how writing the Lexicon was not about the money, but rather his love of the stories and the experiences like finding a headstone for James and Lilly Potter. In another panel, attorneys involved in the case discussed the trial and the principles involved.
Another panel with Paul Edward Geller and Ysolde Gendreau explored international copyright and moral rights.

Business Method Patents Are Limited by Federal Circuit in Bilski Decision

2008-10-31T13:32:00.000-07:00

Case: In Re Bilski, Fed. Cir. No. 07-11130 (10/30/08)

The One Sentence Summary: Sitting en banc, the Federal Circuit held that a "process" under 35 U.S.C. § 101 is patentable when it is tied to a particular machine or apparatus or it transforms a particular article into a different state or thing.

Patent Invalidity Due to Anticipation Requires that the Prior Art Include All Elements of the Claim Arranged or Combined as in the Claim

2008-10-22T16:44:00.000-07:00

Case: Net Moneyin Inc. v. Verisign, Inc., Fed. Cir. No. 2007-1565 (10/20/08)

The One Sentence Summary: The panel upheld a finding of invalidity for failure to disclose a computer algorithm as supporting structure for a means-plus-function claim, but reversed the district court in finding anticipation of another claim because an anticipating reference must include all claim limitations arranged or combined as in the claimed invention.

Federal Circuit Holdings:

The district court properly held that a claim including "means for generating an authorization indicia" was invalid for indefiniteness under 35 U.S.C. § 112 ¶ 6. The claim failed to include sufficient structure in the claim to rebut the presumption that it was a means-plus-function claim. Moreover, disclosure of a general purpose computer in the specification without disclosure of the algorithm for generating authorization indicia was not sufficient structure as required by section 112, paragraph 6.
Plaintiff was not allowed to present a new and broader claim construction on appeal than that argued in the district court.
A finding of anticipation under 35 U.S.C. § 102 requires that the single prior art reference disclose all the limitations of the invention "arranged or combined in the same way as in the claim." The reference relied upon by the district court to find anticipation of a claim did not meet this standard because it required picking parts of the protocols disclosed and recombining them to reach the invention.
The district court did not abuse its discretion in denying a motion to amend the complaint to assert a previously-dropped claim of inducement of infringement.

Antitrust Laws Did Not Prevent Reverse Payments to Generic Manufacturers to End Patent Validity Challenges

2008-10-15T16:49:00.000-07:00

Case: In Re Ciprofloxacin Hydrochloride Antitrust Litigation, Fed. Cir. No. 2008-1097 (October 15, 2008)

The One Sentence Summary: Payments by a drug manufacturer to end patent invalidity claims did not violate antitrust laws because the anticompetitive effect was within the exclusionary scope of the patent.

What They Were Fighting About: Bayer had settled patent infringement claims against generic drug manufacturers with "reverse payments." The generic manufacturers had filed ANDA statements of intent to manufacture and challenged the validity of Bayer's patent for Ciprofloxacin (Cipro). The settlement agreements provided that Bayer would pay the generic manufacturers to dismiss their challenges to the patent and would supply Cipro for sale on the generic market. Plaintiffs sued Bayer and the generic defendants for federal and state antitrust violations. The district court ruled against plaintiffs on motions for dismissal and summary judgment, and plaintiffs appealed.

Federal Circuit Holdings:

District court properly declined to find that the agreements were per se unlawful as unreasonable restraints of trade in violation of section 1 of the Sherman Act.
"Any adverse anti-competitive effects within the scope of the ... patent [at issue] could not be redressed by antitrust law ... because a patent by its very nature is anticompetitive."
The district court properly concluded that the settlement agreements were within the exclusionary scope of the patent.
Settlement of patent disputes is to be encouraged despite the anticompetitive effect of ending a challenge to a patent's validity. The settlements did not prevent other generic manufacturers from filing ANDA statements and challenging the validity of the patents.
The panel agreed "with the Second and Eleventh Circuits and with the district court that, in the absence of evidence of fraud before the PTO or sham litigation, the court need not consider the validity of the patent in the antitrust analysis of a settlement agreement involving a reverse payment."
The district court properly concluded that the agreements did not prevent challenges by other manufacturers to the validity of the patent. The Hatch Waxman Act provisions for an Abbreviated New Drug Application provided significant incentives for companies to challenge patents, and the settlement agreements did not prevent other companies from challenging the patents.
The district court properly concluded that there was no manipulation of the 180 day exclusivity period for the first ANDA filer.
Summary judgment for defendants on state law antitrust claims was proper because no fraud occurred.

ITC's Exclusion Order in Cell Phone Chip Investigation Could Not Extend to Parties Not Named in Investigation

2008-10-15T15:48:00.000-07:00

Case: Kyocera Wireless Corp. v. International Trade Commission, Fed. Cir. No. 2007-1493, -1494, -1495, -1496, -1497, -1498, -1499, -1514, -1573; 2008-1004, -1009, -1010, -1012, -1013, -1015, -1018, -1019 (October 14, 2008)

The One Sentence Summary: In reviewing the ITC's exclusion order regarding cell phone chips, the Federal Circuit affirmed claim construction, anticipation, and obviousness rulings, but vacated the remedy due to errors in finding induced infringement and in ordering a limited exclusion order against producers of downstream products who were not named as parties in the ITC investigation.

Federal Circuit Holdings:

The ITC properly construed the claim term "different" in light of the specification.
The GSM specification was properly construed as publicly available prior art, but was not a single anticipating reference because it consisted of many documents created at different times.
The post-hearing decision by the Supreme Court in KSR did not allow Qualcomm to revive an obviousness defense that had not been asserted earlier.
Broadcom failed to show direct infringement.
The ITC's finding of inducement to infringe was vacated because the ITC did not make a finding of specific intent to infringe as required by the decision in DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006), that was issued after the ITC hearing. The matter was remanded for consideration in light of DSU.
The Commission lacked authority under 35 U.S.C. § 1337(d) to issue its limited exclusion order against parties who made downstream products containing the accused devices but which were not named in the investigation.

Patent Cases May Be Leaving the Eastern District of Texas Due to Fifth Circuit Opinion Ordering Transfer of Auto Accident Case

2008-10-14T07:53:00.000-07:00

Case: In re Volkswagen of America, 5th Cir. 07-40058 (October 10, 2008)

The One Sentence Summary: The Fifth Circuit ordered the Eastern District of Texas to transfer a car crash product liability case from the Eastern District of Texas to Dallas, the site of the crash, leading patent attorneys to predict that patent infringement suits brought in the rocket docket in Marshall may now be transferred to other jurisdictions having a greater connection to the dispute.

Fifth Circuit Holdings:

"A writ of mandamus should issue directing the transfer of this case from the Marshall Division of the Eastern District of Texas — which has no connection to the parties, the witnesses, or the facts of this case — to the Dallas Division of the Northern District of Texas — which has extensive connections to the parties, the witnesses, and the facts of this case."

After Ten Years of Litigation and Three Appeals, Claims for Semiconductor Wafer Tracking Are Deemed Obvious

2008-10-10T15:53:00.000-07:00

Case: Asyst Technologies Inc. v. Emtrak Inc., Fed. Cir. No. 07-1554 (10/10/08)

The One Sentence Summary: On the third appeal of a case involving patents for tracking semiconductor wafers through a manufacturing process, the panel affirmed the district court's finding on a judgment as a matter of law that the asserted claims were obvious in light of the test announced in the Supreme Court's KSR decision.

Federal Circuit Holdings:

The substitution of a multiplexer for an electrical bus found in the prior art was obvious because multiplexers and buses were the two common ways for connecting and transmitting signals.
The objective indicia of nonobviousness found by the jury — commercial success, long-felt need, and industry praise - were not linked to the features not disclosed by the prior art. Thus, the commercial success did not indicate that the invention was not obvious.
The district court properly allowed defendant to introduce new invalidity defenses after the claim scope was interpreted by the Federal Circuit in a prior appeal.

Implied Statutory Warranty to Deliver Goods Free from Rightful Claims by Third Parties Can Be Breached by Non-Frivolous Trademark Infringement Claims

2008-10-10T09:37:00.000-07:00

Case: Pacific Sunwear of California, Inc. v. Olaes Enterprises, Inc., No. D051391 Fourth Dist., Div. One. (Oct. 9, 2008)

The One Sentence Summary: Unsuccessful trademark infringement claims asserted against the buyer of "Smile Now, Cry Later" Hot Sauce Monkey shirts supported the buyer's claim that the seller breached the statutory implied warranty of section 2312(3) of the California Uniform Commercial Code to provide goods that were free of "rightful claims."

What They Were Fighting About: Oales sold Hot Sauce Monkey t-shirts to Pacific Sunwear. These shirts depict on the front, a monkey drinking a bottle of hot sauce and, on the back, the same monkey in apparent pain, expelling fire. Centered underneath each of the images is a two-word caption: on the front, the phrase "Smile Now"; on the back, the phrase "Cry Later." SNCL, the holder of a registered trademark for Smile Now, Cry Later, made trademark infringement claims against Pacific Sunwear. In the trademark litigation in Hawaii, the court denied a motion for preliminary injunction, finding there was no likelihood of confusion after which the case settled.

Pacific Sunwear then sued Olaes for breaching the statutory warranty that the Hot Sauce Monkey T-shirts were "free of the rightful claim of any third person by way of infringement or the like." (§ 2312(3).)

The trial court granted summary judgment for Olaes, holding that the underlying claims of infringement were not "rightful claims" in light of the federal court's ruling that there was no likelihood of confusion.

California Uniform Commercial Code section 2312 states as follows:

"(1) Subject to subdivision (2) there is in a contract for sale a warranty by the seller that

"(a) The title conveyed shall be good, and its transfer rightful; and

"(b) The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

"(2) A warranty under subdivision (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.

"(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications."

California Court of Appeal Holdings:

The phrase "free of the rightful claim of any third person by way of infringement or the like" in California Uniform Commercial Code section 2312 should be interpreted by reference to the commentary to section 2-312 of the Uniform Commercial Code in the absence of other evidence of legislative intent as to the meaning of "rightful claim."
The commentary to the Uniform Commercial Code makes it clear that the term "rightful claim" as used in the statute is intended to broadly encompass any nonfrivolous claim of infringement that significantly interferes with the buyer's use of a purchased good.
Other states have interpreted their statutes enacting section 2-312 of the Uniform Commercial Code consistently with the commentary that a rightful claim need not be a meritorious claim.
Public policy reasons also support interpreting section 2312 to extend to nonfrivolous claims. A merchant regularly dealing in goods of the kind has superior knowledge of potential claims and more incentive to resolve them than a buyer. Additionally, the parties can expressly contract to alter the implied warranty under section 2312.
The existence of a reverse warranty from buyer to seller in the case of buyer-supplied specifications under section 2312(3) supports the interpretation of section 2312.
Interpreting section 2312 to extend to nonfrivolous claims provides a clear allocation of risk that provides certainty to parties entering a commercial transaction.
"[T]he warranty against rightful claims applies to all claims of infringement that have any significant and adverse effect on the buyer's ability to make use of the purchased goods, excepting only frivolous claims that are completely devoid of merit."
Summary judgment against the plaintiff's warranty claim was inappropriate due to triable issues of fact as to whether the underlying infringement claim was nonfrivolous.
Triable issues of fact precluding summary judgment also existed as to whether any damages such as Pacific Sun's litigation expenses were proximately caused by Olaes' failure to disclose the potential trademark claims by SNCL. The factual issues include whether Pacific Sun knew of the potential claims.

Reissued Patent Claim Did Not Impermissibly Broaden the Scope of the Original Claim

2008-10-10T08:05:00.000-07:00

Case: Predicate Logic, Inc. v. Distributive Software, Inc., Fed. Cir. No. 2007-1539 (10/9/08)

The One Sentence Summary: The district court erred in finding that claims for software analysis modified during reexamination were broader and different in scope than original claims.

Federal Circuit Holdings:

A claim reissued after reexamination was not invalid due to broadening. The reissued claim was no broader because no hypothetical accused process could be conceived that would violate the reissued claim but not the original claim.
Another reissued claim was not different in scope from the original claim, so activities before reissuance could still be infringing activities.

District Court's Five Year Delay in Issuing Opinion After a Patent Trial Did Not Warrant Reassignment of the Case on Remand

2008-10-08T15:29:00.000-07:00

Case: Cohesive Tech. Inc. v. Waters Corp., Fed. Cir. No. 08-1029 (10/7/08)

The One Sentence Summary: The panel considered several issues in affirming in part rulings by the district court on a dispute about patents for high pressure liquid chromatography, and refused to reassign the case despite a five year delay after trial before the district court issued its opinion.

Federal Circuit Holdings:

Patentee did not expressly disavow claim scope and limit the term "rigid" to exclude polymeric molecules by submitting a declaration distinguishing certain polymeric molecules in a prior art references as non-rigid.
Expert testimony provided sufficient evidence that the accused particles were "rigid" as required by the claim construction.
The district court erred in refusing to allow the jury to consider an "iffy" anticipation argument in light of the obviousness argument. Anticipation and obviousness are separate defenses, and a jury could find anticipation even if it did not find obviousness.
The district court did not err in rejecting an inequitable conduct argument by finding no intent to deceive. The district court accepted witness testimony that the prosecuting attorney felt that the information withheld from the PTO (an expert's disagreement as to whether flow was "turbulent") was not material.
The district court erred in construing the term "greater than about 30 microns" to exclude the accused device. Claims must be construed in light of the claim language, not in light of the accused device.
The district court's construction improperly read out of the claim the "about" language. The phrase "greater than about 30 microns" is broader than "greater than 30 microns." The meaning of "about" in this context must be determined in light of the purpose of the limitation in the invention. In light of the variation in particle sizes cited in the specification, the panel concluded that the proper construction of “greater than about 30 μm” in claim 1 of the ’874 patent is: either (1) greater than 25.434 μm, or (2) both greater than 23.044 μm and of sufficiently large size to assure that the column is capable of attaining turbulence.
The district court's finding of no literal infringement by 25 micrometer particles was in error due to the claim construction and issues of fact as to the diameter of the accused particles.
Although the doctrine of equivalents can be applied to broad claims, the use of the word "about 30 micrometers" necessarily included the scope of claims that would be encompassed by the doctrine of equivalents.
The panel remanded for a determination of whether 20 micrometer columns were an acceptable non-infringing substitute for the damage analysis.
The court affirmed a finding of non-willfulness based upon a close question of whether the claims were limited to non-polymeric materials.
Enhanced damages were not available absent willfulness.
Despite a 5 year delay by the district court in issuing its opinion, the panel would not reassign the case to another judge.

Patent for Controlling Gas Flows Invalidated for Inequitable Conduct Where Witness Could Not Explain the Failure to Disclose References to the PTO

2008-10-08T14:39:00.000-07:00

Case: Praxair, Inc. v. ATMI, Inc., Fed. Cir. No. 2007-1483, 2007-1509, 9/29/08

The One Sentence Summary: The panel affirmed in part, reversed in part and remanded after considering inequitable conduct, indefiniteness, and claim construction challenges.

Federal Circuit Holdings:

The panel affirmed the district court's finding of inequitable conduct and unenforceability of the '115 patent for failing to disclose restricted flow orifices that were similar to the capillaries claimed in a patent to control discharge of high pressure fluids and gases. The RFO prior art was highly material because it was inconsistent with statements made in the prosecution of the patent. There was no credible explanation of the reason why the reference was not submitted to the PTO (general statements of not having an intent to deceive were entitled to no weight, and the witness could not recall specifically why the reference had not been submitted). Thus, the court properly inferred intent to deceive the PTO.
An inequitable conduct finding as to a second patent (the '609 patent) was reversed because there was no basis for a finding of high materiality. The prosecution history statements relied upon in establishing materiality for the '115 patent did not infect the prosecution of the '609 patent.
The panel reversed the district court's conclusion that the '895 patent was unenforceable due to 35 U.S.C. section 112 indefiniteness in the term "port body." The port body was sufficiently described in the specification and figures, it was not exclusively defined by its functionality, and extrinsic evidence of an expert's inability to identify the port body did not affect the legal interpretation of the term.
The district's court's claim construction of the term "flow restrictor" was incorrect in requiring "severe" flow restriction when that was simply a preferred embodiment. However, the panel rejected the broader construction of any flow restriction where the specification made clear that the very character of the invention as described in the specification required that the flow restriction be sufficient to prevent hazardous flows of gases.
The district court properly relied on a dictionary definition for construction of the term "capillary" that was not contradicted by the specification.
Although "uniformity" of capillaries was often mentioned in the specification, it was simply a preferred embodiment, and it was added as a limitation by dependent claims to earlier independent claims, and thus should not be part of the claim construction.

Implied License to Use Custom Created Software Defeats Copyright and Trade Secret Claims

2008-09-11T08:23:00.000-07:00

Case: Asset Marketing v. Gagnon, 9th Cir. No. 07-55217 (9/9/08)

The One Sentence Summary: An implied license to use and modify software arose between a contractor who created customized software for a customer and the customer.

Ninth Circuit Holdings:

Implied, unlimited license arose under copyright law from relationship where plaintiff created customized software for defendant where the contract was silent regarding a license, the contractor was paid on an hourly basis, and software was delivered without indication that there were any limits on use by the defendant.
Trade secrets alleged to be in the software were not misappropriated where defendant had an implied license to use and modify the software.
A non-compete agreement for plaintiff's fomer employees was unenforceable absent any trade secrets due to California Business & Professions Code section 16600.

Watches Manufactured Abroad Bearing US Copyrighted Design Cannot Be Imported Without Copyright Owner's Consent According to Ninth Circuit

2008-09-09T08:23:00.000-07:00

Case: Omega S.A. v. Costco Wholesale, 9th Cir. No. 07-55368 (09/03/08)
The Two Sentence Summary: The Ninth Circuit panel reaffirmed their precedent holding that importation and sale of imported "gray market" watches manufactured overseas bearing a copyrighted design registered in the United States was an infringement of copyright. The panel distinguished the Supreme Court’s decision in Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998), which held that the first sale doctrine allowed resale of gray market products which had been manufactured in the United States.

Breach of Open Source Software License Allows Injunction for Copyright Infringement

2008-08-18T08:07:00.000-07:00

Case: Jacobsen v. Katzer, Fed. Cir. No. 2008-1001 (8/13/08)

The One Sentence Summary: Applying Ninth Circuit law, the Federal Circuit reversed a denial of preliminary injunction, holding that an open source copyright license requiring attribution as a condition of use and distribution of software could be enforced by preliminary injunction and remanded for a determination of whether preliminary injunction standards were met.

Federal Circuit Holdings:

The Federal Circuit had jurisdiction over the appeal because of patent claims in the case, but would apply Ninth Circuit law to the copyright issues on this appeal.
In determining whether to issue a preliminary injunction, the Ninth Circuit requires demonstration of (1) a combination of probability of success on the merits and the possibility of irreparable harm; or (2) serious questions going to the merits where the balance of hardships tips sharply in the moving party's favor.
In copyright cases, the Ninth Circuit has applied a presumption of irreparable harm, but this presumption may need to be reconsidered in light of the Supreme Court's decision in eBay Inc. v. MercExchange, 547 U.S. 388 (2006).
Generally, a copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement, and can sue only for breach of contract. Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121 (9th Cir. 1999); Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998). If, however, a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement. See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir.1989); Nimmer on Copyright, section 1015[A] (1999).
The Artistic License at issue created conditions to use of the software, and was a restriction on the scope of the license. Accordingly, plaintiff could sue for copyright infringement and seek an injunction.

Even Reasonable and Narrow Non-Compete Agreements Are Barred by California Statute

2008-08-07T17:26:00.000-07:00

Employment contracts with non-competition clauses are common outside of California, but a California statute, section 16600 of the California Business and Professions Code, prohibits non-compete contracts outside of a few statutory exceptions. In a decision issued on August 7, 2008, Edwards v. Arthur Anderson, No. S147190, the California Supreme Court held that section 16600 prohibits non-competition contracts even if the non-compete clause is reasonable or imposes only a “narrow restraint.” The Court further held that the employer had engaged in a wrongful act by requiring the employee to sign a release of claims under the non-competition contract.

Background:

Section 16600 provides that

“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

Statutory exceptions to section 16600 allow non-compete contracts in certain circumstances, including in connection with the sale of goodwill of a business (§ 16601) and the dissolution of a partnership (§ 16602) or limited liability corporation (§ 16602.5).

In Edwards, the plaintiff Edwards had signed a non-competition agreement as an employee of Arthur Anderson. The agreement barred Edwards from serving within 18 months any Anderson clients with whom Edwards had worked, and barred solicitation of clients of Anderson’s Los Angeles office. After Anderson became embroiled in the Enron scandal, HSBC sought to hire a group of employees including Edwards. HSBC and Anderson required the moving employees to sign a “Termination of Non-Compete Agreement” which released “any and all” claims against Anderson. Edwards refused to sign the termination agreement because he did not want to release indemnity claims against Anderson, and was therefore not hired by HSBC. Edwards then sued Anderson and HSBC for claims including interference with prospective economic advantage. Edwards lost in the trial court against Anderson but won at the California Court of Appeal (click here for a discussion of the lower court decision). The California Supreme Court then took the case.

California Supreme Court Holdings:

The first question before the California Supreme Court was whether Anderson’s enforcement of the non-competition agreement (by forcing Edwards to sign an agreement terminating it) was a wrongful act. The Court held that enforcing the non-competition agreement was illegal under section 16600 and enforcing it was a wrongful act that could lead to liability for interference with prospective economic advantage. The Court noted that
section 16600 reflects “a settled legislative policy in favor of open competition and employee mobility, . . . [it] ensures that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice [and it] protects the important legal right of persons to engage in businesses and occupations of their choosing.”

In light of the broad statutory language of section 16600 and the limited statutory exceptions, the Court rejected decisions of federal courts which had ruled that section 16600 allowed “reasonable” non-compete contracts that imposed only a “narrow restraint” on competition. The Court stated “Section 16600 is unambiguous, and if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect.”

In a second part of the decision unrelated to the non-competition agreement issue, the Court also held that the release sought by Anderson as the employer for “any and all” claims was not unlawful because it could not be interpreted to release non-waivable employee indemnity rights under California Labor Code section 2802(a).