CDA Immunity Protects Internet Service Provider For Erroneously Identifying Bank’s Legitimate Web Site As A Fraudulent Phishing Scam

Case: Associated Bank-Corp. v. Earthlink, Inc. (W.D. Wis. Case No. 05-C-0233-S, 9/14/05)

The One Sentence Summary: The District Court for the Western District of Wisconsin ruled that Section 230(c) of the Communications Decency Act of 1996 which provides "[n]o provider . . . of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider," protected Earthlink from liability to Associated Bank Corp. for mistakenly identifying Associated’s web site as a scam employed by identity thieves.


What They Were Fighting About: Earthlink, an internet service provider, provides more than five million subscribers throughout the United States with access to the internet. It also provides additional software and services designed to block spam, pop-up windows, and to alert customers to fraudulent websites. One of these tools is “ScamBlocker,” a service that aims to protect customers from phisher scams. A phisher scam involves sending fraudulent e-mails purporting to be from a customer’s bank and implying that something is wrong with the customer’s account. The e-mail has a link the customer can click, which directs the customer to what appears to be her bank’s web-site but is actually a site controlled by the scam artist. The fraudulent site encourages the customer to enter her personal account information, which the scam artist then uses for criminal purposes. EarthLink’s “ScamBlocker” service works by redirecting the customer to a Scam Alert page when the user clicks a link to a site listed in the ScamBlocker database as being the address of a fraudulent phishing site. The Scam Alert page tells the user that she may be attempting to visit a fraudulent web site. A user can then choose to either continue and access the potentially fraudulent web site, or can choose to abort the attempt to access the web page. A third-party vendor identifies the fraudulent web-sites listed in the ScamBlocker service’s database. EarthLink direclty inputs the third-party's list of phishing sites into EarthLink's ScamBlocker database without altering the content.

Associated Bank-Corp operates a legitimate online banking web site. During a period of fewer than 48 hours in April of 2005, EarthLink’s ScamBlocker service erroneously identified Associated Bank-Corp’s legitimate web-site as a fraudulent phishing site. Earthlink users attempting to access Associated Bank’s web site would have been directed to a Scam Alert page which informed them that they had attempted to access a web site that might be a fraudulent phishing site. Earthlink corrected the problem the same day Associated Bank-Corp notified Earthlink of the mistake.

Associated Bank-Corp sued Earthlink for tortious interference with business relations, negligence, and fraudulent representation, and sought injunctive relief.

District Court Holdings: The District Court granted EarthLink’s motion for summary judgment. The Court held:

• Section 230(c) of the federal Communications Decency Act of 1996 protected Earthlink from liability. That statute provides in relevant part: “”[n]o provider . . . of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1).
• Earthlink was an “interactive computer service” under Section 230(f)(2) of the Act.
• Section 230 of the Act therefore immunized Earthlink from liability because a reasonable trier of fact could not infer that Earthlink acted as an information content provider, given that the information erroneously identifying Associated’s web site as a fraudulent phishing site came from a third-party vendor and Earthlink did not modify the list of phishing sites when it input the sites into its ScamBlocker database.
  

The District Court’s logic may be flawed. The opinion does not identify whether Earthlink itself created the message users saw on the Scam Alert page, or whether the third-party vendor who provided Associated’s internet address to Earthlink also created the message users saw. If Earthlink itself drafted the erroneous warning on the Scam Alert page, arguably Earthlink was doing more than re-publishing information provided by another information content provider.

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Licensing a Package of Compact Disc Patents Did Not Constitute Patent Misuse

Case: U.S. Philips Corp. v. International Trade Comm'n, No. 04-1361 (Fed Cir. 9/21/05)

The One Sentence Summary: The licensing of a package of compact disc patents without separately offering licenses for the "essential" patents in the package did not constitute patent misuse because there was no effect on any market for alternative technologies and because there were valid, pro-competitive reasons for licensing packages of patents.

What They Were Fighting About: U.S. Philips Corporation licensed a group of patents for making recordable compact discs ("CD-Rs") and rewritable compact discs ("CD-RWs") only as a group of patents. Intervenors Princo, Gigastorage and Linco ceased payments on the licenses, and Philips filed a complaint with the International Trade Commission claiming patent infringement. An administrative law judge and later the Commission found that Philips had engaged in patent misuse by tying non-essential patents to essential patents. The Federal Circuit reversed.

Federal Circuit Holdings:

• Patent misuse is an equitable defense to patent infringement that prevents a patentee from using the patent to impermissibly broaden the scope of the patent grant with anticompetitive effect.
• The safe harbor of 35 U.S.C. § 271(d) which excludes from the definition of patent misuse the conditioning of the license of a patent on the license of another patent did not apply because Philips had market power. The proper time for analyzing market power was the present time rather than the time of the first creation of the package licenses.
• The Commission erred in finding that the tying of a patent to patent was per se illegal conduct. The "block-booking" cases relied upon by the Commission, United States v. Paramount Pictures, Inc., 334 U.S. 131, 156-59 (1948), and United States v. Loew’s, Inc., 371 U.S. 38, 44-51 (1962), were distinguishable because those cases relied upon the tying of a patent to an unpatented product. Unlike the situations in the block-booking cases, Philips did not require licensees to use the non-essential patents, and it did not offer the non-essential patents at a lower price outside of the packages.
• The purchase of a tied product necessarily affects the market for alternatives. In contrast, licensing a tied patent does not require the licensee to use the tied patent rather than an alternative technology.
• Philips' decision to include non-essential patents with essential patents in a package was no different than if Philips had offered the non-essential patents for free.
• There was no basis for the Commission to allocate any value to the non-essential patents.
• The Commission improperly ignored pro-competitive reasons for Philips to license a pool of patents, including the reduction of costs of licensing and increasing certainty of the licensee that it can practice the technology.
• The Commission also erred in finding that the non-essential patents were a separate tied market. There was no evidence that there was a separate market for the technology covered by the non-essential patents because there was no evidence of alternative technologies that Philips' customers wanted to use.
• The advance of technology will often make some patents in a pool become non-essential over time. Finding patent misuse in that situation would encourage litigation by licensees and is not good policy.
• The Commission erred in finding that the patent license pool constituted patent misuse under the rule of reason. There was no evidence that the patent license to the non-essential patents affected any alternative technologies. The Commission also failed to consider the advantages of licensing a pool of patents to an emerging technology.
  
  

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Opposition To A Trademark Registration Was Not Barred By Collateral Estoppel Or Res Judicata Arising From A Prior District Court Infringement Decision

Case: Mayer/Berkshire Corp. v. Berkshire Fashions, Inc., No. 04-1254 (Fed Cir. 9/22/05)

The One Sentence Summary: The PTO’s Trademark Trial and Appeal Board’s (the “Board”) grant of summary judgment based on the principle of res judicata arising from an earlier trademark infringement action was improper, because, among other things, the standards for claiming trademark infringement and opposing trademark registration are not the same.

What They Were Fighting About: In an earlier district court cause, Berkshire Fashions had prevailed in its defense of a trademark infringement action involving the mark “BERKSHIRE,” brought by Mayer/Berkshire, who had registered the mark for class 25 category of goods. Subsequent to prevailing in the trademark action, Berkshire Fashions filed an application for the mark “BERKSHIRE” for class 18 category of goods, which was opposed by Mayer/Berkshire pursuant to Section 13 of the Lanham Trademark Act, 15 USC §1063. The Board held that Mayer/Berkshire’s opposition action was barred by res judicata based on the earlier district court decision, because the jury had found that there was no likelihood of confusion from Berkshire Fashion’s use of the BERKSHIRE mark.

Federal Circuit Holdings:

• The Board erred in holding that the claim was barred by res judicata because the trademark action and the registration opposition action were not based on the same transactional facts.

A second suit is barred by claim preclusion if (1) the parties are the same (2) there was an earlier final judgment on the merits of the claim and (3) the second claim is based on the same transactional facts as the first. Citing Jet, Inc. v. Sewage Aeration Systems, 223 F. 3d 1360 (Fed. Cir. 2000). “[A] trademark infringement action in the district court is not automatically of
preclusive effect in a cancellation proceeding in the PTO, for a claim for trademark infringement may not be based on the same transactional facts as a petition to cancel a registered mark, or the facts relevant to infringement may not be sufficiently applicable to trademark registration to warrant preclusion. In a trademark infringement action, the owner of a registered mark sues for relief from the injury caused by the defendant’s actual sale, offering for sale, or advertising of goods or services bearing the challenged mark, whereas an opposition to registration is based on the content of the registration application. . . . These different causes of action may involve different sets of transactions, different proofs, different burdens, and different public policies. Registration is not at issue in infringement litigation, and although the likelihood of confusion analysis prevents a superficial similarity, differences in transactional facts will generally avoid preclusion.” Citing Jet, Inc., 223 F. 3d 1360 (citations omitted).

• The Board erred in holding that the claim was barred by res judicata because the two actions invoke different standards.

A claim of infringement is “a claim of injury resulting from applicant’s use of its mark in commerce” whereas a claim of priority and likelihood of confusion is “a claim that the opposer believes it would be damaged by the registration of the applicant’s mark.” (emphasis in original) “The issue litigated in the district court action was whether the marketing by Berkshire Fashions . . . was likely cause confusion with Mayer/Berkshire’s registered BERKSHIRE trademarks. In an opposition proceeding the question of likelihood of confusion requires consideration not only of what the applicant has already marketed or has stated the intention to market, but all of the items for which registration is sought.”

• The Board failed to consider evidence of actual confusion which arose from materially changed marketing practices by Berkshire Fashions after the court’s judgment.

The reversal of summary judgment was also appropriate where Mayer/Berkshire’s evidence was sufficient at the summary judgment stage to show that in the five year period between the district court trial and the opposition proceeding Berkshire Fashions’ marketing evolved from the “inconspicuous marking of some goods with labels bearing only the trade name” to “major marketing activity promoting the trademark BERKSHIRE in a manner that . . . caused significant actual confusion.” The court agreed with the court in Litton Industries, Inc. v. Litronix, Inc., 577 F. d 709, 711 (CCPA 1978) which stated, “res judicata and collateral estoppel are not applicable where it is apparent that all the questions of fact and law involved in the second proceeding were not determined in the first proceeding.”

• The Court advised that the PTO should be wary of applying the doctrine of res judicata.

“[T]he purposes of administrative trademark procedures include protecting both the consuming public and the purveyors. Thus the party objecting the registration may raise grounds not only of commercial injury to itself, but of confusion or deception or mistake to the consumer.” Because preclusion can be a “drastic remedy,” it “must be certain to every intent.”

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Assignor Estoppel Prevents an Inventor From Testifying that the Patent He Assigned Was Invalid

Case: Pandrol v. Airboss Railway Prod. , No. 04-1069 (Fed Cir. 9/19/05)

The One Sentence Summary: The district court properly ruled on summary judgment that (1) the patent satisfied the written description requirement of 35 U.S.C. § 112 because the description showed that the inventor possessed the claimed invention at the time of filing; and (2) the inventor was barred by the assignor estoppel doctrine from testifying that the patent he assigned was invalid.


What They Were Fighting About: On this case's third trip to the Federal Circuit, the Federal Circuit panel affirmed the district court's summary judgment of patent validity. The description adequately disclosed the adhering means for a railroad tie abrasion-resistant plate.

Federal Circuit Holdings:

• The district court correctly ruled that the patent satisfied the written description requirement of 35 U.S.C. § 112 because the original specification (before amendment) showed that the inventor possessed the claimed invention. "A patent specification must contain an adequate written description. 35 U.S.C. § 112, ¶ 1 (1994). In 1967, this court’s predecessor inaugurated use of § 112 to prevent the addition of new matter to claims. In re Ruschig, 379 F.2d 990 (CCPA 1967). Thus, in a recent application of the written description doctrine, this court noted: "The purpose of the written description requirement is to prevent an applicant from later asserting that he invented that which he did not; the applicant for a patent is therefore required ‘to recount his invention in such detail that his future claims can be determined to be encompassed within his original creation.’" Amgen Inc. v. Hoechst Marion Roussel Inc., 314 F.3d 1313, 1330 (Fed. Cir. 2003) (citing Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1561 (Fed. Cir. 1991)).
  Compliance with § 112 requires sufficient information in the specification to show that the inventor possessed the invention at the time of that original disclosure. See Vas-Cath, 935 F.2d at 1561 ("Adequate description of the invention guards against the inventor’s overreaching by insisting that he recount his invention in such detail that his future claims can be determined to be encompassed within his original creation."). The possession test requires assessment from the viewpoint of one of skill in the art. Id. at 1563-64 ("[T]he applicant must . . . convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention." (emphasis in original)); Union Oil Co. of Cal. v. Atl. Richfield Co., 208 F.3d 989, 997 (Fed. Cir. 2000) ("The written description requirement does not require the applicant ‘to describe exactly the subject matter claimed, [instead] the description must clearly allow persons of ordinary skill in the art to recognize that [the inventor] invented what is claimed.’" (citation omitted))."
• The district court properly applied the doctrine of assignor estoppel to prevent the inventor from testifying that the patent was invalid: "Assignor estoppel is an equitable doctrine that prevents one who has assigned the rights to a patent (or patent application) from later contending that what was assigned is a nullity." Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988). Thus, an assignor and parties in privity with the assignor are estopped or barred from asserting invalidity defenses. Id. In this case, the district court invoked that doctrine to bar an assignor from testifying against the validity of its own patent. Courts frequently mention four justifications for the doctrine of assignor estoppel: "(1) to prevent unfairness and injustice; (2) to prevent one [from] benefiting from his own wrong; (3) [to adopt the] analogy [of]. . . estoppel by deed in real estate; and (4) [to adopt the] analogy to a landlord-tenant relationship." Id. (quoting Hal Cooper, Estoppel to Challenge Patent Validity: The Case of Private Good Faith vs. Public Policy, 18 Case W. Res. 1122, 1128 (1967))."
• The district court correctly excluded the declaration of Mr. Young, one of the inventors, because he had not submitted an expert report as required by Rule 26(a)(2) of the Federal Rules of Civil Procedure and the declaration included expert opinions.
• The district court properly refused to consider obviousness arguments based upon late-submitted prior art when the proponent had not proposed obviousness jury instructions and had earlier stated that it did not seek a finding of obviousness.
  
  

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Initial-Interest-Confusion Doctrine Does Not Apply to Trademark on Guitar's Shape

Case: Gibson Guitar Corp. v. Paul Reed Smith Guitars, LP, Nos. 04-5836/5837 (6th Cir. 9/12/05)

The One Sentence Summary: The court of appeals reversed the district court's decision granting summary judgment in favor of plaintiff Gibson Guitar and remanded with instructions that summary judgment be entered in favor of defendant Paul Reed Smith Guitars ("PRS") on Gibson's trademark infringement claim because: (1) the district court confused trademark law and trade dress law when it held that Gibson's two-dimensional guitar shape set out in trademark registration papers covered other features of Gibson's Les Paul guitar, and (2) PRS's guitar did not infringe Gibson's trademarked guitar shape since there was no point-of-sale confusion and the initial-interest confusion-doctrine did not apply.


What They Were Fighting About: Gibson's trademark covered the shape of a single-cutaway electric guitar. PRS manufactured a competing single-cutaway electric guitar, which Gibson sought to enjoin as infringing upon its guitar-shape trademark.

Federal Circuit Holdings:

• As to the scope of Gibson's trademark, the court of appeals concluded that the two-dimensional trademark-application drawing of the guitar's body shape did not create a trademark on the entire guitar as depicted in photographs accompanying the application (including the location and style of knobs, switches, and other product features). The district court improperly extended the guitar shape trademark to cover other aspects or design features that would normally qualify as trade dress (which claims the parties had voluntarily dismissed).
• Gibson's claim failed the "evidence of actual confusion" prong of the trademark infringement test for likelihood of confusion among consumers regarding the source of the product. Gibson conceded that there was no point-of-sale confusion because purchasers of the parties' expensive guitars are sophisticated and the guitars are marked with logos and display tags at the point of sale.
• The district court erroneously applied a theory of initial-interest confusion in finding there was trademark infringement. Distinguishing disputes where a misleading Internet domain name can misdirect consumers searching for the trademark owner's web site, the court of appeals found the initial-interest-confusion doctrine to be unsuitable to a trademark on a product's shape.
• The court of appeals rejected Gibson's argument that the shape of PRS's guitar misleads consumers standing on the other side of the room in a guitar store to believe they see Gibson guitars and walk over to examine what are PRS guitars. The Sixth Circuit refused to adopt such a broad reading of the initial-interest-confusion doctrine for product shape trademarks, because competitors would be deterred from making even dissimilar products that might appear from a distance to be similar to a trademarked shape. Applying the initial-interest-confusion doctrine to product shapes might have the undesirable effect of giving trademark protection not just to the trademarked shape but also a "penumbra" of similar shapes not otherwise protectable as trademarks.
  
  

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Patent Law Doctrines Give Special Meanings to the Words "First", "A" and "Adjacent"

Case: Free Motion Fitness, Inc. v. Cybex International, Inc., No. 05-1006 (Fed. Cir. 9/16/05)

The One Sentence Summary: The panel reversed the district court's summary judgment of non-infringement, finding that the court below had erred in: (1) interpreting the word "first" in a spatial sense; (2) construing "a cable" to mean a single cable; (3) interpreting "adjacent" to mean with no intervening pieces; (4) applying prosecution history estoppel.


What They Were Fighting About: Exercise machines with pivot points and cables.

Federal Circuit Holdings:

• The district court erred in construing the claim term "first pivot point" as being spatially related. The terms "first" or "second" in patents typically are used to distinguish between repeated elements in a claim.
• In interpreting the word "adjacent", the panel turned to dictionary definitions because there was no specialized meaning in the art. The court used the specification to choose between two possible meanings rather than automatically choosing the broadest meaning.
• The court refused to construe the term "adjacent" to preserve claim validity because that method is only used when the claim is ambiguous.
• References to "a" cable did not limit the claims to a single cable. Use of the indefinite article "a" or "an" means "one or more" in open ended claims using the word "comprising" unless there is a clear intent to limit the claim. The preferred embodiment that referred to a single cable could not be used to limit the claims. Later references to "the" cable also did not limit the claims to a single cable.
• Claim differentiation applied when later claims referred to a "single cable" - this implied that earlier references to "a cable" had a different scope.
• The district court erred in finding that prosecution history estoppel barred an assertion of equivalents against devices which added an element that was argued during the prosecution history to be an undesirable feature of the prior art. Adding additional elements to an open ended claim does not avoid infringement.
• Judge Prost dissented, arguing that the district court had ruled correctly.
  
  

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Federal Circuit Revisits Claim Construction Ruling in the Wake of Phillips to Limit Term to How It Was Used in Context

Case: Nystrom v. Trex Co. , No. 03-1092 (Fed Cir. 9/14/05)

The One Sentence Summary: The Federal Circuit panel issued a new claim construction ruling in this case after the Phillips v. AWH decision, ruling that the term "board" must be interpreted in light of the context in which it was used to be limited to a board made of wood.


Federal Circuit Holdings:

• The district court properly interpreted a claim for a "board" as referring to a board made from wood because the written description and prosecution history always referred to it in that context.
  
• Plaintiff argued for claim differentiation in that claim 16 referred to a "wood decking board", implying that claim 1 must be interpreted more broadly. However, the presumption of different meaning of these claims was overcome by the use of the term "board" in the written description and prosecution history.


• The district court erred in construing the term "convex top surface" as limited to a particular degree of curvature. The statements from the prosecution history that this limitation arose from were limited to a single claim (16) rather than all claims.


• The district court erred in holding that claim 18 was anticipated by a prior art reference. The drawing of the prior art reference should not have been construed as drawn to scale with exact proportions such that measurement of the drawing could invalidate the proportions claimed in claim 18.


• The district court properly refused to award sanctions against defendant under 18 U.S.C. § 1927 for multiplying proceedings unreasonably and vexatiously. The antitrust counterclaims asserted by Trex were in a single action, and Trex did not act in bad faith in asserting its counterclaims.
  
  

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Weight Watchers Scores "Winning Points" With The Second Circuit in Trademark Dispute

Case: Weight Watchers International, Inc. v. Luigino's, Inc., Case No. 04-4103-cv (September 12, 2005, Second Circuit Court of Appeals).

The One Sentence Summary: Competing frozen food maker could be enjoined from referring to Weight Watchers "Points" in its packaging even if the packaging disclaimed an affiliation with Weight Watchers.


What They Were Fighting About: Weight Watchers has trademarked the terms "Points" and "Winning Points" as indicators of the caloric and fat content of foods pursuant to its diet plan. Defendant frozen food maker marketed a line of products that prominently displayed point values but disclaimed sponsorship by Weight Watchers.

Federal Circuit Holdings:

• Where an infringer attempts to avoid substantial likelihood of consumer confusion by adding a disclaimer, it must establish the disclaimer's effectiveness.
• Having held that the reference to "Points" on the front of defendant's product was likely to confuse consumers about an endorsement by Weight Watchers, the trial court should have assigned the burden of proof to defendant.
• Defendant did not sustain its burden with regard to a disclaimer in small type on the back of the product noting that the number of "Winning Points" had been calculated by defendant and that Weight Watchers did not sponsor or endorse the product.
• Although Weight Watchers may have delayed for a number of weeks, it was still entitled to the presumption that it had suffered irreparable injury from the infringement.
• An order modifying an earlier injunction against a prior line of packaging to include the new version could be appealed.

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Using Software's Output to Copy Chips in Violation of License Agreement Leads to SCPA and Tortious Interference With Contract Verdicts

Case: Altera Corp. v. Clear Logic, Inc. , No. 03-17323, 03-17334 (9th Cir. 9/15/05)

The One Sentence Summary: After a jury trial, the Ninth Circuit panel affirmed an award of damages and an injunction for violation of the Semiconductor Chip Protection Act of 1984, 17 U.S.C. §§ 901-14 ("SCPA"), and inducing breach of contract against a chip manufacturer who copied the groupings of plaintiff's mask works using the output of a computer program in violation of the license for the computer program.


What They Were Fighting About: Plaintiff Altera sued Defendant Clear Logic for copying of Altera's programmable chips using a bitstream output of Altera's software provided by Altera's customers in violation of Altera's license agreement. A jury found against Clear Logic, rejecting Clear Logic's reverse engineering defense. The district court awarded $30.6 million in damages, $5.4 million in prejudgment interest and $394,791.68 in costs, and entered a permanent injunction against Clear Logic. The Ninth Circuit panel affirmed.

Ninth Circuit Holdings:

• The district court properly allowed the jury to consider Altera's claims that Clear Logic had violated the SCPA by copying the groupings of transistors on its mask works without copying of the placement of transistors within groups. The panel held that groupings can be protectable expression separate from unprotectable ideas or function, analogizing to the methods of filtering ideas from protectable expression in analyzing copyright claims involving novels or plays. The jury was properly allowed to consider whether the copying was material and substantial.
• Despite one misstatement, the jury instructions and verdict form on the defense of reverse engineering properly conveyed the law to the jury. Reverse engineering is a common industry practice and a defense under the SCPA provided copying of the circuit is used only for studying it. The jury was adequately instructed on this defense, and there was no error in its finding that Clear Logic had failed to prove the defense.
• The district court properly rejected Clear Logic's argument that the claim of inducing breach of the license agreement was preempted by copyright law. There was an extra element to the breach of contract claim that distinguished it from the elements of copyright.
• The district court properly rejected Clear Logic's copyright misuse defense because this inequitable conduct defense is not applicable to state law claims, particularly when no copyright infringement claim was alleged.
• The contract was properly interpreted in light of the extrinsic evidence to preclude use of the bit stream output of the computer program for purposes of designing a competing product.
• The element of showing the existence of a valid contract for the tortious interference claim was established by showing that the bitstreams could only be produced legally by license agreements that prohibited use other than in programming Altera's software.
• The concurrence by Judge Rymer suggested that for the benefit of an appellate court, the parties videotape the off-the-record technology tutorials such as that presented here to the district court.
  
  

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Federal Circuit Allows Gray Market Goods That Do Not Materially Differ From Trademarked Goods

Case: SKF USA Inc. v. International Trade Commission (ITC), Case No.04-1460 (Fed. Cir. September 14, 2005)

The One Sentence Summary: In order to restrain the sale and importation of gray market goods, a trademark owner must show that all or substantially all of its marked goods are materially different from those goods.


What They Were Fighting About: Plaintiff SKF USA sells ball bearings that were supported by post-sale technical services. Defendant entities import and sell gray market SKF-marked bearings that do not come with such services.

Federal Circuit Holdings:

• Generally, gray market goods are genuine goods manufactured abroad bearing a legally affixed foreign trademark that is the same mark as is registered in the United States. The importation of such goods (produced by the trademark owner or with its consent, but not authorized for sale in the United States) may constitute trademark infringement in appropriate cases.
• The fundamental inquiry in gray market goods cases is whether there are material differences between the foreign and domestic product.
• The answer to the question of first impression of whether material differences can be found in a gray market case based solely on nonphysical differences is yes. Therefore, a material difference could be based on whether the goods are accompanied by different post-sale services.
• A plaintiff in a gray market trademark infringement case must establish that all or substantially all of its sales are accompanied by the characteristic that is alleged to be materially different from the gray market goods.
• SKF USA did not prove that substantially all of its bearings came with the post-sale services. The evidence showed that 12.6% of SKF USA bearings did not.
• SKF USA's bearings did not differ materially from the gray market bearings because SKF USA's bearings are not predictably and consistently accompanied by post-sale technical services.
  
  

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California's Pre-Discovery Trade Secret Identification Statute Applies to Related Claims, But Should Not Be Applied Too Strictly

Case: Advanced Modular Sputtering, Inc. v. Superior Ct. of Santa Barbara (Mishin), No. B181405 (Cal. 2d App. Dist. 9/13/05)

The Two Sentence Summary: Section 2019.210 of the California Code of Civil Procedure, which requires identification of trade secrets with reasonable particularity before commencing discovery, applies to any cause of action alleging misappropriation of trade secrets (not just actions under the Uniform Trade Secrets Act). The statute requires only reasonable (fair, proper, just or rational) identification of the trade secrets with disputes as to identification to be resolved in favor of allowing discovery to proceed.


What They Were Fighting About: 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." Several attempts by the plaintiff to identify its trade secrets were rejected, and ultimately, discovery was barred on the trade secret claims but allowed to proceed on related claims. These discovery rulings were appealed by a writ.

California Appellate Court Holdings:

• Section 2019.2 applies to any cause of action alleging misappropriation of a trade secret, not just actions brought under the Trade Secret Act: "Where, as here, every cause of action is factually dependent on the misappropriation allegation, discovery can commence only after the allegedly misappropriated trade secrets have been identified with reasonable particularity, as required by section 2019.210."
• The trial court's rejection of the trade secret designations offered by plaintiff was too strict - a reasonable identification is all that is required: "'Reasonable particularity' mandated by section 2019.210 does not mean that the party alleging misappropriation has to define every minute detail of its claimed trade secret at the outset of the litigation. Nor does it require a discovery referee or trial court to conduct a miniature trial on the merits of a misappropriation claim before discovery may commence. Rather, it means that the plaintiff must make some showing that is reasonable, i.e., fair, proper, just and rational[,] (See City of Santa Cruz v. Municipal Court (1989) 49 Cal.3d 74, 90), under all of the circumstances to identify its alleged trade secret in a manner that will allow the trial court to control the scope of subsequent discovery, protect all parties' proprietary information, and allow them a fair opportunity to prepare and present their best case or defense at a trial on the merits. (§ 2017.010; Greyhound Corp. v. Superior Court (1961) 56 Cal.2d 355; Calcor Space Facility Inc. v. Superior Court (1997) 53 Cal.App.4th 216, 223-224; Diodes, Inc. v. Franzen, supra, 260 Cal.App.2d at p. 253.)"
• When credible experts disagree as to whether the trade secrets have been adequately identified, discovery should be allowed to proceed: "Where, as here, credible experts declare that they are capable of understanding the designation and of distinguishing the alleged trade secrets from information already known to persons in the field, the designation should, as a general rule, be considered adequate to permit discovery to commence. Our discovery statutes are designed to ascertain the truth, not suppress it. Any doubt about discovery is to be resolved in favor of disclosure."
  
  

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Concentrations of Acid Specified to Avoid Prior Art Precluded Use of Doctrine of Equivalents

Case: Biagro v. Grow More, Inc. , No. 04-1414 (Fed Cir. 9/13/05)

The One Sentence Summary: There was no infringement, either literal or under the doctrine of equivalents, where accused fertilizer did not contain "phosphorous-containing acid" when that limitation was added during reexamination to avoid prior art so that prosecution history estoppel applied.


What They Were Fighting About: Plaintiff Biagro sued Grow More for patent infringement on fertilizer patent claims. The claims included a limitation stating "wherein said phosphorous-containing acid or salt thereof is present in an amount of about 30 to about 40 weight percent." This limitation was added during reexamination to avoid prior art. The district court construed this limitation to require the presence of phosphorous acid in an aggregate amount of 30-40 percent. Grow More's accused product was made from phosphorous acid, but contained no acid in the final product. The district court held on summary judgment that Grow More did not infringe literally or under the doctrine of equivalents. The Federal Circuit panel affirmed.

Federal Circuit Holdings:

• The district court properly construed the term "amount of phosphorous containing acid" as requiring phosphorous acid rather than its chemical equivalent. There was no support in the specification for including the chemical equivalent, and only one reference in the prosecution history where the examiner had referred to an equivalent.
• Extrinsic evidence of the use of chemical equivalent amounts in labeling of fertilizers was not relevant because it was not connected to the patent or the claim language.
• The trial court properly interpreted the term "at least one phosphorous-containing acid or salt thereof . . . wherein said phosphorous-containing acid or salt thereof is present in an amount of about 30 to about 40 weight percent" to require that the aggregate amoount of the acids or salts be 30-40 percent. This interpretation was correct when the prosecution history made clear that it was the total concentration of acids or salts that was important.
• Under the proper claim interpretation, there was no literal infringement.
• By narrowing its claim in reexamination to add the concentration of acid to avoid prior art, the patentee presumptively surrendered the equivalents as to the amount of acid.
• Surrender of equivalents could not be avoided on the grounds that the purpose of the amendment was tangential. Here, the concentration was added as a limitation because of prior art at another concentration - thus, it was not tangential.
• The fact that the top portion of the concentration range added in the limitation was unnecessary to distinguish the prior art did not render the amendment tangential for purposes of avoiding Festo surrender of equivalents through prosecution history estoppel.
  

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Pending Lawsuit May Decide Whether Baseball Players’ Statistics Are Protectable Intellectual Property

A lawsuit currently pending in federal district court in St. Louis, C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, L.P., Case No. 05-CV-00252 (E.D. Mo.), concerns the right of a fantasy sports game provider to utilize baseball players’ names and playing statistics in its fantasy baseball games without licensing that information from Major League Baseball. (Click here for the complaint.) A court decision in this lawsuit could have major business ramifications for sports leagues, fantasy sports game companies, and any web site that charges a fee for a product incorporating athletes’ names and playing statistics.


CBC is a provider of fantasy sports games, including fantasy baseball in which participants “draft” their own teams of ballplayers whose playing statistics in selected categories during that season determine how well the participants’ teams do in their fantasy baseball league. Fantasy sports games is a large and growing industry, particularly on the Internet with popular web sites like Yahoo! offering fantasy sports games. Seeking to expand their businesses on the Internet, sports properties such as Major League Baseball have been aggressively pursuing new revenue opportunities and claiming broad intellectual property rights in products derivative of their on-the-field games. In that regard, Major League Baseball Advanced Media (“MLBAM”) in January 2005 entered into a five-year agreement with the Major League Baseball Players Association (“MLBPA”) totaling more than $50 million for an exclusive license to use and sublicense baseball player group rights for the creation of online games, including fantasy baseball games. CBC had a licensing agreement with MLBPA permitting the use of player names, likenesses, and playing statistics (among other information), which expired at the end of 2004. Apparently unable to reach a new agreement with MLBAM after it acquired the rights from MLBPA, CBC filed a complaint for declaratory relief in February 2005.

CBC’s complaint seeks a declaratory judgment that its use of baseball players’ names and statistics does not infringe on any intellectual property rights controlled by MLBAM, including copyright and the right of publicity. At least in their public comments after the filing of the complaint, MLBAM officials conceded that they do not dispute that player statistics are in the public domain. Instead, MLBAM contends that if another company uses players’ names and statistics in a fantasy game for commercial gain, then a license must be paid for that information.

The copyright claim should be resolved in CBC’s favor because the underlying facts of sporting events are not copyrightable under the Copyright Act. This was made clear by the decision in National Basketball Ass’n v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997). In that case, the NBA sought to prevent real-time game scores and statistics from being transmitted over handheld pagers and on web sites and claimed a copyright in the information. The Second Circuit held that sports games are not copyrightable (as distinct from copyrightable broadcasts of the games) and that factual information from the games is similarly unprotected. Moreover, there does not appear to be a promising argument for MLBAM that the players’ statistics are copyrightable as compilations, because fantasy sports games do not rely upon playing statistics from past seasons. The data is not copied from a pre-existing work of authorship but is ascertained daily as each ballgame is played and a player does something in a statistical category – e.g., hits a home run, earns a run batted-in, steals a base, or strikes out a batter.

The right of publicity claim is likely where the outcome of this lawsuit hinges. The right of publicity, both at common law and under statutes enacted in many states, protects a plaintiff against the commercial appropriation of his or her name or likeness for the defendant’s advantage. MLBAM contends that providing a fantasy baseball game using players’ names and statistics violates the players’ rights of publicity, the group rights to which are exclusively licensed by MLBAM from the MLBPA. A motion by MLBPA to intervene in the lawsuit was granted, and MLBPA is making the same arguments about the players’ rights of publicity in a counterclaim against CBC.

One obstacle to MLBAM defeating CBC’s request for a declaratory judgment that no right of publicity exists is the victory that Major League Baseball achieved in Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400 (2001). In that case, several retired ballplayers alleged that Major League Baseball violated their rights of publicity by publishing their names and statistics in game programs and on its web sites without their consent and without compensation. The California Court of Appeal held that there was no violation of the plaintiffs’ common law or statutory rights of publicity. Balancing the players’ publicity rights against the First Amendment interest in the dissemination of information, the court concluded that the public interest favoring free dissemination of information outweighed any proprietary interests of the players. The court stated: “It is manifest that as news occurs, or as a baseball season unfolds. the First Amendment will protect mere recitations of the players’ accomplishments.” Id. at 410. MLBAM will try to distinguish Gionfriddo on the grounds that CBC is engaging in purely commercial speech in using players’ names and statistics to sell its fantasy games, entitling CBC to less First Amendment protection, whereas Gionfriddo involved recitation of historical facts about baseball by the league in order to promote its own product. Nonetheless, MLBAM will have difficulty overcoming Gionfriddo and prevailing on the right of publicity issue.

According to the court’s docket, a mediation is scheduled for October 24, 2005. If the parties do not reach a settlement and instead proceed with the litigation, intellectual property observers and sports lawyers will be watching this case closely.

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Patentee's Right to a Jury Trial Was Forfeited by Election to Drop Infringement Damages Claim

Case: In Re Technology Licensing Corp. , No. 765 (Fed Cir. 9/12/05)

The One Sentence Summary: A patentee who elected to drop its damages claim and proceed only on claims for an injunction was not entitled to a jury trial on its claim and the alleged infringer's claim for a declaration of invalidity of the patent.


What They Were Fighting About: Gennum filed a declaratory judgment action seeking a declaration that patents held by Technology Licensing Corporation (TLC) and asserted against a customer of Gennum were invalid, unenforceable and not infringed. TLC counterclaimed against Gennum, alleging that TLC was liable for direct and contributory infringement of the patents. After an adverse ruling on damages, TLC dropped its damages counterclaim and sought only injunctive relief. Gennum then dropped its request for a jury trial, but TLC argued that it was entitled to a jury trial on the declaratory relief claims seeking to hold the patent invalid. The district court denied the request for a jury trial, finding that the relief sought was entirely equitable, and that a comparable claim at the time of the adoption of the Seventh Amendment would have been tried to a court rather than a jury. Gennum petitioned for mandamus.

Federal Circuit Holdings:

• The fact that the patentee is the third-party defendant in this particular action does not matter, and the right to a jury trial does not depend upon who initiated the action: "We have made clear that for purposes of the right to a jury trial in patent cases, it is inconsequential whether the parties are aligned in the conventional manner (patentee as plaintiff and accused infringer as defendant and invalidity counterclaimant) or in the manner that results when the accused infringer initiates the action as a declaratory judgment (accused infringer as plaintiff and patentee as defendant and infringement counterclaimant). See Lockwood, 50 F.3d at 974-75."
  
• By electing to drop its damages claim, the patentee TLC forfeited its right to a jury trial on the invalidity claim: "In this case, by contrast, the patentee has voluntarily abandoned its claim for damages and is proceeding only on a request for equitable relief. Thus, the declaratory judgment action in this case is an inverted form of an infringement action in which the patentee has sought only an injunction. In the historically analogous setting of a patent infringement suit with an invalidity defense, the case would therefore have been tried in an equity court, where neither party would be entitled to a jury. For that reason, as the magistrate judge correctly held, Lockwood’s historical analysis dictates that TLC’s decision to seek only an injunction meant that it lost its right to a jury on the related invalidity claims."
• Judge Newman dissented, arguing that the right to a jury trial on patent validity arises from the common law writ of scire facias. The majority disagreed.
  

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Egregious Delay in Prosecution of Lemelson Patents Rendered the Claims Unenforceable

Case: Symbol Tech. v. Lemelson Med. (Fed. Cir. 9/09/05 - No. 04-1451)

The One Sentence Summary: The Federal Circuit panel affirmed the district court's ruling that the Lemelson patents at issue were unenforceable due to prosecution laches when the claims took 18 to 39 years from filing to issuance.

Federal Circuit Holdings:

• The district court did not err in finding that the Lemelson bar code patents at issue were unenforceable due to prosecution laches. The patent claims at issue had issued 18 to 39 years after filing.
• The district court should apply a totality of the circumstances rule, and prosecution laches should be found only in the most egregious of circumstances: "Thus, there are no strict time limitations for determining whether continued refiling of patent applications is a legitimate utilization of statutory provisions or an abuse of those provisions. The matter is to be decided as a matter of equity, subject to the discretion of a district court before which the issue is raised. There are legitimate grounds for refiling a patent application which should not normally be grounds for a holding of laches, and the doctrine should be used sparingly lest statutory provisions be unjustifiably vitiated. The doctrine should be applied only in egregious cases of misuse of the statutory patent system."
  

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Claim for "Download Components" Did Not Encompass Microsoft's Windows Media Player

Case: Network Commerce v. Microsoft , No. 04-1445 (Fed Cir. 9/8/05)

The One Sentence Summary: The Federal Circuit (1) affirmed summary judgment of non-infringement in favor of Microsoft because the accused products, Windows Media Player and its metafiles, were not "download components" within the meaning of the patent claims, and (2) found that the district court did not err in refusing to grant additional discovery.


What They Were Fighting About: Plaintiff Network Commerce sued Microsoft for alleged infringement of a patent for controlling downloads. The accused products were Windows Media Player and metafiles which contained text instructions for locating download files. The claim language included the phrase "download component" which the district court interpreted as being an executable or program because the patent required the download component to independently "coordinate" or "control" the download. Based upon this construction, the district court granted summary judgment for Microsoft because the Windows Media metafile was not a "download component." The district court also found that Windows Media itself was not a "download component" because it was not downloaded to a user computer in response to a request for content. The district court also refused Network Commerce's request for additional discovery to oppose summary judgment.

Federal Circuit Holdings:

• The panel affirmed the district court's construction of the term "download component."
• There was no commonly understood or technical definition of the disputed term.
• The specification supported the district court's construction that the "download component" must include an executable file. The closest term in the specification, download file, was always referred to in the specification as having a boot program.
• The panel rejected conclusory testimony on behalf of Network Commerce's expert as being inconsistent with the intrinsic evidence.
• The district court correctly concluded that Windows Media Player and its metafiles did not infringe under this claim construction.
• The panel rejected the doctrine of equivalents argument because it was not supported by "particularized testimony and linking argument as to the 'insubstantiality of the differences' between the claimed invention and the accused device or process . . . on a limitation-by-limitation basis," citing Tex. Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1567 (Fed. Cir. 1996), and PC Connector Solutions LLC v. Smartdisk Corp., 406 F.3d 1359, 1364 (Fed. Cir. 2005).
• The district court did not abuse its discretion in denying Network Commerce's request under Rule 56 of the Federal Rule of Civil Procedure for additional discovery to oppose summary judgment. Network Commerce had adequate time to conduct discovery, and the district court was under no obligation to construe claims early in the case but could rather construe claims on a rolling basis during the litigation.
  
  

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Dismissal of Trade Secret Claims to Protect Government State Secrets Was Premature

Case: Crater Corp. v. Lucent Tech. , No. 04-1349 (Fed Cir. 9/7/05)

The One Sentence Summary: The district court erred in prematurely dismissing trade secret and breach of contract claims due to potential disclosure of privileged state secrets asserted by the United States government where the facts regarding the nature of the alleged trade secrets and breach of contract had not been developed.

What They Were Fighting About: Plaintiff Crater claimed that defendant Lucent had stolen trade secrets regarding Crater's underwater fiber optic coupler. The United States government intervened, asserting the state secrets privilege and claiming that discovery of Lucent's work for the government would disclosed state secrets. The district court accepted the United States' claim, and dismissed Crater's law suit against Lucent.

Federal Circuit Holdings:

• The government properly invoked the state secrets privilege even though the government department head did not personally review each document at issue, but instead relied on subordinates for that review.
• It was premature for the district court to dismiss Crater's trade secret and breach of contract claims on the grounds that the claims would require access to state secrets. The district court must first determine what the trade secrets were and whether there was a contract to determine if the litigation of those claims would require the disclosure of state secrets.
  
  

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Claims for Expressed Sequence Tags (ESTs) Properly Rejected for Lack of Utility and Enablement

Case: In re: Fisher , No. 04-1465 (Fed Cir. 9/7/05)

The One Sentence Summary: The Federal Circuit affirmed a decision by the Patent Board of Patent Appeals and Interferences affirming the PTO's rejection of claims for expressed sequence tags ("ESTs") as unpatentable for lack of utility under 35 U.S.C. § 101 and lack of enablement under 35 U.S.C. § 112, first paragraph.



Federal Circuit Holdings:

• None of applicant's asserted uses meets the utility requirement of § 101. Section 101 provides: “Whoever invents . . . any new and useful . . . composition of matter . . . may obtain a patent therefor . . . .”
• Specific and substantial utility for an invention must be shown: "the Supreme Court announced a more rigorous test, stating: The basic quid pro quo contemplated by the Constitution and the Congress for granting a patent monopoly is the benefit derived by the public from an invention with substantial utility. Unless and until a process is refined and developed to this point – where specific benefit exists in currently available form – there is insufficient justification for permitting an applicant to engross what may prove to be a broad field. Brenner, 383 U.S. at 534-35 (emphases added). Following Brenner, our predecessor court, the Court of Customs and Patent Appeals, and this court have required a claimed invention to have a specific and substantial utility to satisfy § 101. See, e.g., Fujikawa v. Wattanasin, 93 F.3d 1559, 1563 (Fed. Cir. 1996) (“Consequently, it is well established that a patent may not be granted to an invention unless substantial or practical utility for the invention has been discovered and disclosed.”)."
• The ESTs had no utility in themselves other than as a tool to perform other experiments to understand the maize genome.
• There was no disclosure that the ESTs had actually been used for the asserted uses that applicant claimed.
• The uses asserted for the 5 claimed ESTs were not specific to those ESTs, but would apply to any EST, so they were not specific as required by § 101.
• It was not sufficient to show that the ESTs were useful as intermediates in studying maize. "Just as the claimed compounds in Kirk and Joly were useful only as intermediates in the synthesis of other compounds of unknown use, the claimed ESTs can only be used as research intermediates in the identification of underlying protein-encoding genes of unknown function. The rationale of Kirk and Joly thus applies here. In the words of the Kirk court: 'We do not believe that it was the intention of the statutes to require the Patent Office, the courts, or the public to play the sort of guessing game that might be involved if an applicant could satisfy the requirements of the statutes by indicating the usefulness of a claimed compound in terms of possible use so general as to be meaningless and then, after his research or that of his competitors has definitely ascertained an actual use for the compound, adducing evidence intended to show that a particular specific use would have been obvious to men skilled in the particular art to which this use relates.' 376 F.2d at 942 (emphasis added). "
• The patent statute does not confer a monopoly until research is completed on a useful product. "a patent is not a hunting license. It is not a reward for the search, but compensation for its successful conclusion. "
• The Federal Circuit distinguished cases finding utility when in vivo testing had shown biological activity in treating specific medical conditions.
• The Federal Circuit rejected arguments by amici that granting patents on ESTs would make it difficult to research genes. This was a policy argument that should be directed to Congress.
• The Board properly found that the invention was not enabled because "the enablement requirement of § 112 incorporates the utility requirement of § 101. "
• Judge Rader dissented, arguing that the ESTs have utility as research tools.
  
  

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Antitrust Claims Alleging Bad Faith Settlement Agreement to Exclude Marketing Generic Drug Should Be Allowed to Proceed

Case: Andrx Pharm. Inc. v. Elan Corp. (11th Cir. 8/29/05 - No. 03-13605)

The One Sentence Summary: Antitrust claims arising out of an alleged bad faith settlement agreement that precluded competitors from marketing a generic drug should have been allowed to proceed, but antitrust claims alleging bad faith patent litigation were properly dismissed under Noerr-Pennington doctrine.


What They Were Fighting About: Defendant Elan held a patent on a controlled release from of the drug naproxen. A third party, SkyePharma, filed an abbreviated new drug application ("ANDA") for a generic version, and subsequently entered a settlement with Elan. This settlement agreement triggered the 180 day exclusion period for the first competitor to file an ANDA to market a generic drug, and required SkyePharm to forego marketing the generic drug. Plantiff Andrx also filed an ANDA, and was sued by Elan for patent infringement. Andrx sued Elan alleging violation of federal and state antitrust laws, alleging that the patent was invalid and the patent litigation in bad faith due to the on-sale bar, and that the settlement agreement with SkyePharm was an illegal contract in restraing of trade. The district court granted Elan's motion for judgment on the pleadings, and denied permission to amend. The Eleventh Circuit affirmed in part and reversed in part.

Eleventh Circuit Holdings:

• The Noerr Pennington doctrine protected Elan from claims that its patent claims against Andrx were a violation of the anti-trust laws, and the sham litigation exception did not apply: "The United States Constitution expressly permits the government to grant exclusive monopolies in the form of patents, see U.S. CONST. art. I, § 8, cl. 8, and therefore the Sherman Act cannot be read to impede a litigant from seeking to defend constitutionally-permitted patent rights. See Prof’l Real Estate Investors, 508 U.S. at 56, 113 S. Ct. at 1926 (declining to impute an unconstitutional purpose to Sherman Anti-Trust Act). Moreover, as the Supreme Court has noted, engaging in litigation to seek an anticompetitive outcome from a court is First Amendment activity that is immune from antitrust liability. See Cal. Motor Transp. Co., 404 U.S. at 510, 92 S. Ct. at 611-12. Thus, we conclude Noerr- Pennington immunity was triggered by Elan’s filing suit against Andrx. In addition, we conclude that the sham litigation exception is inapplicable. Andrx’s main contention in its complaint that the patent litigation was a sham hinged on its claim that the on-sale bar found in 35 U.S.C. § 102 was triggered by Elan’s naproxen advertisement in the publication SCRIP World Pharmaceutical News. Two courts have subsequently rejected that argument. See Elan Corp., PLC, 272 F. Supp. 2d at 1340 (rejecting argument that the SCRIP advertisement triggered on-sale bar); Elan Corp., PLC, 366 F.3d at 1342 (rejecting the argument that the on-sale bar was triggered). Thus, while Elan may not have won its infringement lawsuit at this point, it certainly has made a winning argument against Andrx’s contentions of patent invalidity. Cf. Prof’l Real Estate Investors, 508 U.S. at 60 n.5, 113 S. Ct. at 1928 n.5. Thus, it is manifest that Elan’s patent infringement proceedings were not objectively baseless, and therefore not a sham. Accordingly, because the Noerr-Pennington doctrine applies, and the sham litigation exception is inapplicable, the district court properly found that Elan was immunized from antitrust liability for filing infringement proceedings against Andrx."
• The district court erred in dismissing the claims challenging the settlement agreement with SkyePharm as an illegal restraint of trade: "In sum, then, while the allegations regarding Elan’s infringement suits against Andrx were immunized under the Noerr-Pennington doctrine, Andrx did sufficiently state a claim under both §1 and §2 of the Sherman Anti-Trust Act that Elan’s settlement agreement with SkyePharma, coupled with SkyePharma’s putative agreement not to market, violated antitrust law."
  
• The district court did not clearly err in denying leave to amend the complaint when Andrx delayed in seeking amendment and it sought to change its legal theory.
  
  

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Reverse Engineering and Overriding Access Codes of Game Violated License Agreement, Copyright and DMCA

Case: Davidson & Assoc. v. Internet Gateway (8th Cir. 9/01/05 - No. 04-3654).

The One Sentence Summary: Establishing an alternate network for playing a popular Internet multiplayer game through reverse engineering and overriding an access code control system was a violation of the license agreement and a violation of copyright and DMCA provisions.


What They Were Fighting About: Plaintiffs were the owners of Battle.Net, a multi-player game played over the Internet. Battle.net included an End User License Agreement (EULA) on the software and Terms of Use (TOU) on the web site which required that the player agree not to reverse engineer the software. The software also provided an encryption system that verified that each copy of the software was authorized and not already in use before allowing it access to the multiplayer website at battle.net. The defendants reverse engineered Battle.Net to allow it to play on an alternate network, bnet.org, without use of a valid encryption key. Plaintiffs sued defendants on multiple grounds including breach of contract, copyright infringement and violation of the Digital Millenium Copyright Act (DMCA) restrictions on circumvention of anti-copying restrictions. The district court granted summary judgment for plaintiffs. The Eighth Circuit affirmed.


Eighth Circuit Holdings:

• The federal Copyright Act did not preempt plaintiffs' state law breach of contract claims because plaintiffs freely waived their fair use defense by accepting the EULA and TOU: "Appellants contractually accepted restrictions on their ability to reverse engineer by their agreement to the terms of the TOU and EULA. "[P]rivate parties are free to contractually forego the limited ability to reverse engineer a software product under the exemptions of the Copyright Act[,]" Bowers v. Baystate Techs, Inc., 320 F.3d 1317, 1325–26 (Fed. Cir. 2003), and "a state can permit parties to contract away a fair use defense or to agree not to engage in uses of copyrighted material that are permitted by the copyright law if the contract is freely negotiated." Id. at 1337 (Dyk, J., dissenting). See also Nat'l Car Rental Sys., Inc., 991 F.2d at 434 (holding that the Copyright Act does not preempt a breach of contract action based on prohibited use of software contained in a license agreement). While Bowers and Nat'l Car Rental were express preemption cases rather than conflict preemption, their reasoning applies here with equal force. By signing the TOUs and EULAs, Appellants expressly relinquished their rights to reverse engineer."


• By circumventing the "secret handshake" CD Key system, defendants violated the DMCA anti-access provisions of 17 U.S.C. § 1201(3)(A): "Section 1201(a)(1) provides that "[n]o person shall circumvent a technological measure that effectively controls access to a work protected under this title." The term "circumvent a technological measure" "means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner." 17 U.S.C. § 1201(3)(A)."


• Defendants violated 17 U.S.C. § 1201(a)(2) by trafficking in the bnet.org emulator which had only the limited commercial purpose of circumventing access controls to battle.net.


• The interoperability exception to the DMCA did not apply. 17 U.S.C. § 1201(f).
  
  

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Garden Rock Inscribed With A Public Domain Poem Was Eligible for Copyright Protection

Case: Kay Berry, Inc. v. Taylor Gifts, Inc. (3rd Cir. 8/30/05 - No. 04-3809).

The One Sentence Summary: A garden rock inscribed with an inspirational poem from the public domain was eligible for copyright protection and was properly registered by the filing of a catalog showing the rock.


What They Were Fighting About: Kay Berry registered a copyright for a catalog showing various garden stones, including a garden rock with a 5 line poem from the public domain (Sculpture No. 646). Kay Berry sued Taylor Gifts for selling a garden stone with the same poem. The district court granted summary judgment for defendant, holding that the registration was improper, and that the work could not be copyrighted. The Third Circuit reversed.

Third Circuit Holdings:

• The district court erred in finding that the registration was improper. The Third Circuit discussed the different rules for single work registration under 37 C.F.R. § 202.3(b)(3), and group registration under 37 C.F.R. § 202.3(b)(4). Kay Berry did not meet the requirements for a "group registration" because the Copyright Office has not established rules allowing for group registration of sculptural works. However, Kay Berry could have met the requirements for registration as a "single work" because the catalog that was filed with the Registrar showed the garden stone at issue.
• The work was sufficiently creative to be protected by copyright: "[Plaintiff] selected an inspirational poem from the public domain, adapted that poem to make it visually and rhythmically appealing, and then cast it on its own sculptural work. For these reasons, as well as those set forth above, we conclude that this quantum of creativity is sufficient to qualify for copyright protection. See Feist Publ’ns., 499 U.S. at 348; Reader’s Digest Ass’n, 821 F.2d at 806."
• The work was protectible under copyright because it had not merged with the idea.
  
  

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Claims Galore

Here is an interesting post from Dennis Crouch's Patently-O blog regarding a patent application initially filed with more than 13 thousand claims, triggering a filing fee of more than a million dollars. Patently-O: Patent Law Blog: Million Dollar Patent

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