District Court Affirmed in Rejection of Jury's Advisory Findings of Inequitable Conduct

Case: Kemin Foods, L.C. v. Pigmentos Vegetales del Centro S.A. de C.V., No. 05-1479, 05-1480 (Fed Cir. September 25, 2006)

The Two Sentence Summary: Despite an advisory jury finding of intent to deceive the patent office by withholding material information, the Federal Circuit affirmed a district court's decision to believe the patentee's witness in his testimony that the prior art was not material and not intentionally withheld. The panel also overturned a decision preventing plaintiffs from asserting infringement of a process claim where plaintiffs asserted the claim as soon as possible after compelling defendants to produce the evidence.


What They Were Fighting About: Plaintiffs sued for infringement on two patents (the '714 and '564 patents) for a composition and processes to produce pure lutein for dietary supplements. At a jury trial, the jury found that the asserted claims of the patents were not invalid but held that the claims of the ‘714 patent were not infringed and that claim 1 of the ‘564 patent was infringed under the doctrine of equivalents. The district court rejected defenses that both patents were unenforceable because of inequitable conduct.

Federal Circuit Holdings:

• An argument regarding obviousness that was omitted from the post-trial motion for judgment as a matter of law was waived and would not be considered on appeal.
• There was sufficient evidence for the jury to conclude that Claim 1 of the ‘714 patent was not obvious. The article that was relied on as the basis of an obviousness argument discussed the difficulty of removing impurities and therefore the jury could have concluded that creating the purified crystal claimed by the patent would not have been obvious.
• The panel affirmed the district court’s refusal to invalidate the ‘714 patent for inequitable conduct. The district court was within its discretion in determining that information withheld from the patent office was not highly material and that there was little evidence of intent to deceive. In reaching this conclusion, the district court relied on testimony from a scientist who said that he believed that the article withheld from the patent office was not material because it left impurities in the resulting protein and therefore made it unsuitable for human consumption, the goal of the patent.
• The district court was also affirmed in its decision to reject claims of invalidity due to inequitable conduct regarding earlier experiments that had produced lutein from propylene glycol. The district court found that there was no intent to deceive where it accepted testimony that the individuals who had performed these processes had not understood that lutein was formed as a result of these processes.
• The panel rejected a challenge to the district court's decision to award costs to plaintiff as the prevailing party. The district court had broad discretion in awarding costs and was not required to apportion costs between the parties even though not all claims of infringement were successful and the jury had accepted some of the defenses offered by defendant. The award of costs was not grossly disproportionate to the success so it was in the court’s discretion.
• The panel affirmed the jury’s finding of non-infringement with respect to a claim for a composition “substantially free” from other carotenoids. Non-infringement was a question of fact for the jury and was supported by the evidence. In an earlier ruling, the panel had construed the limitation “substantially free” to mean that it had less than 10% of other carotenoids. The evidence of the compositions of the defendant’s products presented to the jury supported a jury finding that this limitation was not met in defendant’s products. The jury also properly found that the accused products did not meet the claim limitations because they contained traces of toxic chemicals. The panel affirmed the district court’s conclusion that the phrase “traces of toxic chemicals” could not be construed to require the chemicals be present in amounts sufficient to be toxic. Rather, any trace of toxic chemicals such that in defendant’s products removed the product from infringement.
• The district court erred in accepting a recommendation by the magistrate judge to strike a supplemental expert report that supported plaintiff’s claim that defendant infringed a process claim in the ‘714 patent. Plaintiff was not late in presenting detailed evidence as to this claim because it had difficulty in getting information as to the process used by the defendant from defendant in discovery. Plaintiff only received the evidence after successfully compelling defendant to produce it. The panel remanded the case to the district court for the district court to allow plaintiff to present evidence of infringement of claim 5 of the patent.
• The panel affirmed the district court’s refusal to allow defendant to amend its counter claim to present unfair competition and false marking counter claims. After the district court indicated it intended to rule against these counter claims due to futility, the defendant had the burden of producing additional evidence on these counter claims but it failed to do so. Therefore, dismissal of these counter claims was proper.
  
  

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Is ICANN's Definition of the Whois Directory Too Narrow?

Subject: ICANN's domain name policy making organization, the Generic Names Supporting Organization ("GNSO") recently defined the purpose of ICANN's Whois directory in a technical fashion over the US Government's Objection, but is the Government changing its stance?



April 2006: ICANN's GNSO Adopted A New Definition of the Purpose of the Whois Directory Over the US Government's Objection:

The Whois directory contains identifying information for all domain name registrants. According to an ICANN Watch blog entry titled In Historic Vote on WHOIS Purpose, Reformers Win by 2/3 Majority, prior to the adoption of the new defintion, ICANN's procedures allowed registrars to collect private information about domain name registrants and publish same for general use. In March 2006, in response to privacy concerns raised by noncommercial users and other privacy proponents, the GNSO Council adopted a technical definition of the Whois directory's purpose:

"The purpose of the gTLD Whois service is to provide information sufficient to contact a responsible party for a particular gTLD domain name who can resolve, or reliably pass on data to a party who can resolve, issues related to the configuration of the records associated with the domain name within a DNS nameserver."

The US government joined the business community in objecting to this definiton on the ground that it will increase costs for enforcement of intellectual property rights and protection from libel by requiring subpoenaes to obtain information that was previously publicly available. Nonetheless, the new definition was adopted by a 2/3 majority.

By July 18, 2006, The US Government's Position Might Be Changing with the FTC Possibly Taking a More Nuanced Approach:

Since the adoption of the new definition, it appears that there are now fissures in the US Government's seemingly unified position. On July 18, 2006, the House of Representatives Subcommittee on Financial Institutions and Consumer Credit, held a hearing entitled "ICANN and the Whois Database: Providing Access to Protect Consumers from Phishing."

John M. R. Kneuer, Acting Assistant Secretary for Communications and Information, reiterated the traditional US Government stance opposing the technical definition of the Whois purpose: “The Department of Commerce strongly supports continued, timely access to accurate and publicly available WHOIS data contained in the databases of information identifying registrants of domain names.”

The Federal Trade Commission appears to be taking a more nuanced stance. Eileen Harrington, Deputy Director of the Bureau of Consumer Protection, said: “The FTC, as the primary enforcement agency for U.S. consumer privacy and data security laws, is very concerned about protecting consumers’ privacy. Thus, the Commission has always recognized that registrants engaged in non-commercial activity may require some privacy protection from public access to their contact information, without compromising appropriate real-time access by law enforcement agencies.” See, the ICANN Watch blog entry titled A Good Day for Privacy in Washington for a pro-privacy perspective on the July 18, 2006 hearing.

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Copyright Claims Against Lexis for Legal Forms Program Are Dismissed

Case: Ross, Brovins & Oehmke, P.C. v. Lexis Nexis Group, No. 05-1513 (6th Cir. 9/15/06)

The One Sentence Summary: Copyright claims asserted by a law firm that had previously supplied Michigan legal forms to Lexis were dismissed because the copyrighted selection of forms was not substantially similar to the Lexis forms, and the selection and placement of fields was not sufficiently original to merit copyright protection.


What They Were Fighting About: Plaintiff had previously supplied Michigan law forms to Lexis under a contract. Lexis then created its own forms service, and was sued for copyright infringement and breach of contract.

Sixth Circuit Holdings:

• Plaintiff's selection of form templates was a compilation protected by copyright. The selection of 576 forms out of a universe of over 700 Michigan forms was suffiiciently creative to merit protection, but Lexis did not copy any protected elements. The percentage of plaintiff's selection used by defendant (61%) was the more relevant number rather than the percentage of defendant's selection that came from plaintiff. The number 61% did not indicate substantial similarity.
• The classification system used by Lexis was not substantially similar to that used by plaintiff. Lexis did not use the creative parts of plaintiff's classification, and the only overlap was when both Lexis and plaintiff used parts of the public domain system used by the Michigan forms.
• The appearance of the data entry boxes was not sufficiently original to allow protection when it was the default setting of the Hot Docs software used to create plaintiff's forms.
• The interrelationship of variables was dictated by the nature of the forms, and was not protectable.
• The breach of contract claim was remanded because Lexis had never presented evidence rebutting the allegations of the complaint.
  
  

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Expert Testimony Can Support Finding of Motivation to Combine, And Warrant Finding Patent Invalid for Obviousness

Case: Alza Corp. v. Mylan Laboratories (9/6/2006n -- No. 06-1019)

The One Sentence Summary: The Federal Circuit affirmed a grant of summary judgment finding Alza's patent invalid based on a finding of obviousness, and further finding no infringement because Alza's proof, consisting of indirect evidence of drug release rates, did not link to the claimed feature of the drug.

What They Were Fighting About: Mylan had filed two Abbreviated New Drug Applications for a generic version of an Alza incontinence drug, which was taken once daily. The patent had specified rates at which the drug would be "delivered" during the 24 hours. The decision focused on two issues: (1) The validity of Alza's patent, which Mylan challenged on the basis of obviousness, and (2) A gap in Alza's proof of the rate at which Mylan's generic drug was "delivered" in the body.

Federal Circuit Holdings:

• Alza claimed an extended-release form of oxybutynin that would continue to be released after passing through the gastrointestinal ("GI") tract into the colon. Alza claimed this drug was not obvious because one of ordinary skill in the art would not have believed it could continue to be absorbed in the colon. However, one prior patent had disclosed a sustained-release pharmaceutical composition that would be released over a period for 10 to 24 hours or greater (longer than the time required to pass through the GI tract to the colon); another claimed a 24 hour extended release oxybutynin formulation; a third disclosed 24 hour extended release forms of several drug categories of which oxybutynin is a member. Given this prior art, the court focused on whether there was “motivation to combine” in the prior art that would have led to combining references, and a “reasonable expectation of success” in doing so.
• The Federal Circuit agreed that there would have been a reasonable expectation of success, because prior patents taught rate adjustable extended release dosing technology, and release rates falling within the claimed parameters. The remaining issue would be whether one of ordinary skill in the art would have been motivated to adapt these prior technologies to oxybutynin in the first place.
• Alza claimed there would have been no expectation of a therapeutic benefit from doing so, that is, no expectation that it would continue to be absorbed after reaching the colon. Alza claimed no prior evidence supported that finding. In reviewing the district court’s finding of obviousness, the Federal Circuit agreed that a suggestion to combine does not have to be found in the prior art, because it might also be found in the general knowledge of one of ordinary skill in the art. For example, here Mylan provided expert testimony on the issue. Rejecting Alza’s argument that two prior art references undercut that expert’s opinion, the Federal Circuit affirmed the district court’s finding of obviousness.
• Having affirmed on obviousness grounds, the Federal Circuit did not review the district court's finding of anticipation.
• Notwithstanding its finding that the patent was invalid, the Federal Circuit went on to affirm the district court’s finding that there was no infringement. At trial, Alza had relied on indirect evidence to prove how quickly Mylan’s product dissolved. The Federal Circuit held that the critical deficiency in this evidence was not that it was indirect, but rather that it did not link to the rate of in vivo dissolution in the GI tract. Alza failed to show that releases in the blood (one of the indirect measures it had used) are the same as appearance in the GI tract. Having failed to present such evidence, Alza did not prove infringement.
  
  

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Contract Allowing Duplication of Design Prevents Copyright Claim

Case: Automation by Design, Inc. v. Raybestos Prods. Co. (7th Cir. No. 05-1172, 9/15/06)

The One Sentence Summary: A contract providing that the recipient of a machine designed by plaintiff could duplicate the design was affirmed as the basis of a summary judgment for defendants on copyright claims.


What They Were Fighting About: Plaintiff Automation By Design ("ABD") had built an automated clutch plate assembly machine for defendant Raybestos. The contract included a provision allowing Raybestos to duplicate any and all design copyrighted by ABD. The contract further provided that this provision was for Raybestos alone and was non-transferable. When Raybestos went to manufacture another machine, ABD could not match the lowest price that Raybestos was able to find from another supplier. Therefore, Raybestos had another supplier manufacture the machine using the designs from ABD for the first machine. ABD sued for copyright infringement. The District Court granted summary judgment in favor of defendants, holding that the contract allowed Raybestos to use the ABD design.

7th Circuit Holdings:

• The question of the interpretation of the contract and the rights to the copyrighted design was a question that would be interpreted under Indiana contract law.


• The rights in a copyright can be subdivided and transferred by contract. This contract was unambiguous in giving Raybestos the right to duplicate the design for the equipment. Accordingly, summary judgment for Raybestos was proper.
• The panel rejected plaintiff's argument that Raybestos could not hire a third-party company to manufacture the machine for it because that was a prohibited transfer. Rather, the company that manufactured the duplicated machine for Raybestos was properly acting as the agent of Raybestos and there was no transfer of copyright by allowing that company to make the machine per the design.
• Plaintiff could not unilaterally terminate the copyright license even though Indiana law provides for unilateral termination of a contract of unlimited period. This contract had language providing for how it would be terminated and was therefore not terminable at will. Moreover, the nature of the parties' relationship was that this was not an ongoing unlimited relationship but was rather a contract for the design and manufacture of one machine with provisions allowing for future manufacture of other machines. Accordingly, it made economic sense that the plaintiff could not unilaterally terminate the rights as to the design of the second machine.
  
  

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Failure To Describe Details Of Trade Secret On Appeal Dooms Trade Secret Claim

Case: BondPro Corp. v. Siemens Power Generation, Inc. No. 05-3077 (7th Cir. 9/12/06)

The One Sentence Summary: The panel affirmed judgment as a matter of law for a trade secret defendant where there was no evidence of the value of the trade secret, and an injunction was improper because there was no detail as to the specifics of the trade secret that would have allowed determination of the proper period for a trade secret injunction.


What They Were Fighting About: Plaintiff had asserted trade secret claims in a diversity action under Wisconsin's version of the Uniform Trade Secret Act against defendant Siemens. The claim was that plaintiff had disclosed its secret process for manufacturing an insulation component for generators to Siemens under a confidentiality agreement with the prospect that Siemens would license the manufacturing technique. Siemens did not enter into a license for the technique, but a Siemens engineer filed a patent application for a technique that plaintiff claimed was the same and disclosed its trade secret. The patent application was not allowed by the patent office and was ultimately published. At a jury trial, the plaintiff won a verdict on liability but before determining damages, the district court judge granted a motion for judgment as a matter of law for the defendant.

7th Circuit Holdings:

• Publication of the alleged trade secrets in the published patent application destroyed the trade secret and allowed anyone to perform the allegedly secret process. However, defendant could have liability for disclosing the alleged secret and destroying it.
• Damages were not available to plaintiff because there was no reasonable basis for the jury to estimate damages. Neither the plaintiff nor the defendant had ever actually used that process for manufacturing so this led to an inference that the process did not have commercial value. Moreover, the district court properly rejected a "palpably inadequate" expert's report on damages. This left no basis other than "wild conjecture" to determine the value of the trade secret.
• Plaintiff had taken reasonable measures to maintain the secrecy of its trade secrets by negotiating confidentiality agreements with its employees and potential licensors such as defendant.
• Plaintiff was not entitled to an injunction against the defendant because there was no showing of any detailed trade secret. The confidentiality agreement with defendant provided that there would be no trade secret protection for materials that were already known to defendant at the time of the demonstration by plaintiff of its process. Plaintiff's brief was inadequate in describing the details of its trade secret, preventing the court from determining any differences between the alleged trade secret and very general statements about process that could not be accorded trade secret protection. Accordingly, plaintiff had not demonstrated that it had a trade secret and therefore was not entitled to an injunction.
  

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Patent Reform Gaining Momentum Once Again

An article by Joe Crea in today's San Francisco Recorder reports that patent reform is gaining momentum in the Senate. Coalition Pushes for Patent Reform (subscription required). The article attributes the interest in reform in part to the the attention that lawmakers paid to the Research in Motion Blackberrry case.
Among the changes proposed in the legislation are a first to file system, and new factors for determing damages. A redline copy of the code changes can be found here.

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Court Holds That Right Of Publicity Does Not Preclude Unlicensed Use Of Players' Names And Statistics In Fantasy Sports Games

Case: C.B.C. Distribution and Marketing, Inc. v. Major League Baseball Advanced Media, L.P., Case No. 05-CV-00252 (E.D. Mo. Aug. 8, 2006)

The One Sentence Summary: A federal court held on summary judgment that the right of publicity does not require a fantasy sports game provider to pay for a license in order to use players' names and statistics in its fantasy games.


What They Were Fighting About: As predicted in this blog a year ago, this lawsuit focused on the right of publicity rather than on the copyright claim that was also included in the complaint for declaratory judgment, which online fantasy sports provider C.B.C. Distribution and Marketing ("CBC") filed against Major League Baseball Advanced Media ("MLBAM") in February 2005. CBC sought a declaratory judgment that its unlicensed use of baseball players' names and statistics in its online fantasy games did not violate any of the players' intellectual property rights. MLBAM and intervenor Major League Baseball Players Association ("MLBPA") responded that CBC's use of players' names in conjunction with their playing statistics violated the players' right of publicity. The parties filed summary judgment motions on the right of publicity issue, and the trial court issued its opinion on August 8, 2006 (by U.S. Magistrate Judge Mary Ann L. Medler), granting summary judgment to CBC. MLBAM and MLBPA filed notices of appeal in September 2006 to bring the case before the Eighth Circuit.

Holdings:

• In order to prove a violation of the right of publicity, it must be established that the defendant commercially exploited the plaintiff's identity without consent to obtain a commercial advantage.
• The court found that the commercial advantage element could not be established because CBC's fantasy games did not suggest that any baseball player endorsed or sponsored the games in any way. In addition, CBC's use of players' names and statistics is not intended to attract customers away from any other fantasy game provider because all fantasy games use players' names and statistics.
• The element of exploitation of the players' identity also could not be established, according to the court. CBC was not using players' names as a symbol of their identity but rather in conjunction with historical facts about their playing records.
• In analyzing the public policy considerations behind the right of publicity, the court concluded that CBC's use of players' names and statistics did not go to the heart of their ability to make a living from playing baseball and endorsing products. "[T]hey do not earn a living by the publication of their playing records," the court wrote.
• Even if the players could establish a violation of the right of publicity, the court held that CBC's First Amendment right to freedom of expression would prevail in the required balancing test and permit unlicensed use of the players' names and statistics. The court wrote: "CBC's use of the names and playing records of Major League baseball players in its fantasy baseball games informs and entertains about the history of baseball. The public's interest in this suggests that the interests should be balanced in favor of the First Amendment rather than in favor of the right of publicity."
  
  

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The Term "Circuitry" Identifies Sufficient Structure to Avoid Means Plus Function Analysis

Case: Massachusetts Institute of Technology v. Abacus Software, No. 05-1142, 05-1161, 05-1162, 05-1163 (Fed. Cir. 9/13/06)

The One Sentence Summary: District Court erred in construing the term "aesthetic correction circuitry" as a means plus function claim because the term included sufficient structure by using the term "circuitry."


What They Were Fighting About: Plaintiffs' MIT and EFI held a patent for color correction of a scanned original and color mixing using three inks to match the original. They sued many defendants, including Microsoft. After claim construction rulings by the District Court, the patentees dismissed the suit under a stipulated judgment and appealed the claim construction rulings and the District Court's refusal to allow plaintiffs to add Microsoft's Windows as an accused instrumentality.

Federal Circuit Holdings:

• The court will not consider issues that did not effect the final stipulated judgment on the appeal. Thus, claims construction rulings that were favorable to the patentee were not reviewed in determining the propriety of judgment for the accused infringer.
• It is preferable to have evidence regarding the accused device or instrumentality in reviewing claims construction rulings so that the court can determine what aspect of the claim should be construed.
• In light of the usage in the specification and dictionary definitions, the District Court properly construed the term "scanner" to be limited to devices that had moving elements relative to the original. A television camera was not included within this construction despite plaintiffs' argument.
• The District Court properly ruled that a "scanner" also required close proximity to the original to the scanning device. This was not disclosed in the specification or the dictionary, but was derived from the meaning of the term at the time that the patent application was filed.
• The term "colorant selection mechanism" was properly construed by the District Court as a means plus function clause subject to 35 U.S.C. § 112 ¶ 6 even though it did not include the term "means". The term did not connote sufficient structure to a person of ordinary skill in the art to avoid treatment as means plus function language.
• The District Court incorrectly construed the claim "aesthetic correction circuitry" as means plus function language. The panel held that the term connotes sufficient structure to avoid 35 U.S.C. § 112 ¶ 6 treatment. Unlike the term "mechanism," the term "circuitry" defines structure. It is unusual for a claim that does not include the word "means" to be construed as a means plus function claim.
• The term "circuitry" should be interpreted in this patent to refer only to hardware and not to software because of repeated uses in this sense in the specification and because dictionary definitions in 1982 when the application was filed did not include software.
• The panel refused to consider other claims of error in the claim construction raised by the defendants because they did not effect the judgment below.
• The district court erred in refusing to allow plaintiff to add Microsoft's Windows as an accused instrumentality because Plaintiff was not provided sufficient notice that amendment of its infringement contentions would not be allowed without good cause.
• The panel refused to consider arguments regarding a summary judgment ruling on the marking statutes because a favorable ruling would not broaden the scope of the judgment.
• Chief Judge Michel dissented from the ruling, arguing that the term "aesthetic correction circuitry" was correctly construed as a means plus function claim and that it was not an abuse of discretion to refuse plaintiffs' late request to add Windows as an accused instrumentality.
  
  

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Agreement Not to Solicit the Customers and Employees of the Buyer of a Business Was Invalid Under California Law

Case: Strategix, Ltd. v. Infocrossing West, Inc., No G036177 (Cal. 4th App. Dist. September 11, 2006)

The One Sentence Summary: Nonsolicitation clauses in contracts for the purchase of a business were unenforceable under California Business & Professions Code § 16600 as a prohibited restraint on trade where the clauses prohibited the seller from soliciting the employees and customers of buyer rather than of the business that was sold.


California Court of Appeal Holdings:

• California Bus. & Prof. Code § 16600 prohibits restraints on competition, but Bus. & Prof. Code § 16601 has an exception for the sale of a business so that the seller can agree not to to compete with the business it is selling.
• The exception of Bus. & Prof. Code § 16600 was not applicable to this contract, however, because the agreement prohibited competition with the buyer's business, not the business that was sold.
• The court would not "blue-pencil" the contract and limit its effect to the customers and employees of the sold business.
  
  

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California State Court Disagrees with Ninth Circuit, Holding that Even "Narrow Restraint" on Competition Violates State Non-Compete Prohibition

Case: Edwards v. Arthur Andersen LLP, No B178246 (Cal. 2d App. Dist. August 30, 2006)

The One Sentence Summary: A non-compete contract prohibiting a former employee from soliciting the customers of his former employer was an invalid restraint on competition under section 16600 of the California Business and Professions Code even though it was narrowly tailored, and forcing the employee to sign an agreement releasing him from the non-compete as a condition of new employment formed the basis of a claim for intentional interference with prospective economic advantage.


What They Were Fighting About: Plaintiff Edwards had signed a non-compete and non-solicitation contract with his former employer, Arthur Andersen LLP. When Andersen folded after its conviction in the Enron case, many of the Los Angeles employees of Andersen went to HSBC. As a condition of employment with HSBC, HSBC and Andersen required that the employees sign agreements with Andersen waiving claims against Andersen, releasing the employees from their non-compete obligations, and promising not to disparage Andersen. Edwards refused to sign, and sued Andersen and HSBC for intentional interference with prospective economic advantage and violation of the Cartwright Act. The trial court ruled for Andersen without hearing evidence.

California Appellate Court Holdings:

• The noncompetition agreement was invalid under Bus. & Prof. Code § 16600 as a restraint from engaging in a lawful possession or trade.
• Bus. & Prof. Code § 16600 allows covenants not to compete in limited instances, such as for the protection of trade secrets, but none of these exceptions were implicated.
• The non-compete agreement prohibited performing professional services for clients serviced while at Andersen and soliciting these clients. Both provisions were invalid under Bus. & Prof. Code § 16600.
• The "narrow restraint" exception created under federal court interpretations of Bus. & Prof. Code § 16600 was a misapplication of California law. The plain language of the statute does not include this exception, and the presence of other express exceptions to the law implies that other exceptions were not intended by the legislature. Moreover, allowing "narrow restraints" was bad policy in that it encourages employers to push the boundaries and imposes unfair burdens and risks on employees.
• Requiring execution of the new agreement as consideration for release of the non-compete violated public policy and constituted an independent wrongful act for the intentional interference claim.
• The termination of non-compete agreement was also wrongful in that it provided for a release of the employee's statutory right to indemnity.
  
  

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Trademarks That Incorporated Functional Aspects of Expired Patents Were Properly Cancelled as Unprotectable

Case: Fuji Kogyo Co., Ltd. v. Pac. Bay Int'l, Inc. (08/23/06 - No. 05-5854)

The One Sentence Summary: Registered trademarks for fishing pole line guides that incorporated functional features of expired patents were cancelled as unprotectable.



What They Were Fighting About: After a trial, the district court had cancelled three of plaintiff's trademark registrations for fishing line guides, finding that they were functional and unprotectable. The line guides were the subject of expired patents, and also of design patents.

Sixth Circuit Holdings:

• The monopoly right granted by a patent is given only for a limited term, and after that term, the public is free to copy and practice the invention. The defendant was entitled to build the fishing line guides that had been described in the expired patents, and trademark could not interfere with the public's right to practice the invention.
• The evidentiary presumptions that the trademark and design patents were properly issued and covered non-functional aspects of the design were in conflict with the presumption that aspects shown in the patents were functional. The trial court properly resolved these factual disputes as to functionality of the design at trial.
• Copying a competitor's design is not always discouraged or disfavored, and can keep downward pressure on prices and encourage innovation. Copying the functional aspects of the expired patents was allowed.
• The patent was proper evidence of functionality of the designs, and the district court did not need to do claim construction on the patents to determine the issue of the trademarks' validity.
  
  

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Sewing Pattern Memory Cards Not Registered as Computer Programs Cannot Support Infringement Claim Under Computer Software Rental Amendments Act

Case: Action Tapes, Inc. v. Mattson (08/30/06 - No. 05-3309, 05-3520)


The One Sentence Summary: Rental of memory cards that drive computerized sewing machines to stitch designs did not violate Computer Software Rental Amendments Act of 1990 when the plaintiff had not registered the contents of the cards as a computer program with the Copyright Office.


Eighth Circuit Holdings:

• The purchaser of a computer program is usually allowed to sell the computer program later without permission of the copyright holder due to the first sale doctrine. The Computer Software Rental Amendments Act of 1990 provided an exception to the first sale doctrine by requiring that rental of a computer program be done only with permission of the copyright owner.
• Plaintiff had failed to show that its memory cards contained a “computer program” because it had failed to register the memory cards as computer programs. The registration requirements include deposit of source code, and plaintiff had not done so.
• Plaintiff’s visual arts registrations for the designs did not allow application of the Computer Software Rental Amendments Act of 1990.
• The district court did not err in denying attorneys’ fees to plaintiff because the case raised important and novel questions.

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Screenplay for "The Funk Parlor" Was Not Substantially Similar To "Six Feet Under"

Case: Funky Films v. Time Warner Entertainment, Case No. CV-03-00964-CJC (9th Cir. 8/30/06)

The One Sentence Summary: Although there were certain plot similarities between a copyrighted screenplay and the show "Six Feet Under," an actual reading of the two works revealed greater, more significant differences in their plots, characters, themes, moods, pacing, dialogue and sequences of events.


What They Were Fighting About: Creators of a screenplay appealed district court's summary judgment that the series "Six Feet Under" did not infringe their copyright.

Ninth Circuit Holdings:

• Affirms summary judgment, holding that no jury could reasonably find the works substantially similar.
• As plaintiffs' ownership in the copyright was undisputed, plaintiffs only had to demonstrate a triable issue of fact whether the defendants copied anything "original" to their work. Absent evidence of direct copying, proving infringement involves showing that defendant had access to plaintiffs' work and that the works are substantially similar.
• The substantial similarity test contains objective extrinsic and subjective intrinsic components. At summary judgment, courts apply only the extrinsic test, which depends on articulable similarities between the plot, themes, dialogue, mood, setting, pace, characters and sequence of events in the two works.
• Courts must consider only whether the protectable elements of a work, standing alone, are substantially similar. Protectable expression includes specific details of an author's rendering, not scenes a faire which flow naturally from generic plot-lines.
• The works at issue appear to contain similarities in plot because they both involve a small family-run funeral home, the death of the father, two sons who share the business, and a rival funeral home run by a woman.
• However, the differences between the works are greater and more significant. Specifically, the screenplay was more of a murder mystery while "Six Feet Under" did not revolve around any plot-line in particular. The complexity and number of characters in the latter were greater; the themes of death, relationships and sex were explored differently; there were no similarities in the setting, mood or pace; the dialogue of the former was pedestrian while that in the latter was complex and subtle; and while the sequence of events in the former was straight, linear trajectory, the latter used repetition, dreams and flashbacks.
• Because the works were not substantially similar, no amount of proof of defendants' access to plaintiffs' work could prove illegal copying.
  
  

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Seventh Circuit Rejects "Monopoly Leveraging" Claim

Case: Schor v. Abbott Labs., Case No. 05-3344 (7th Cir. 7/26/06)

The One Sentence Summary: Rejects "monopoly leveraging" claim because one who has a monopoly in one component of a product does not increase his profits by obtaining a monopoly in another component of the product.


What They Were Fighting About: Defendant patentholder charges less for a combination of its drugs than the cost of combining one of defendant's drugs (allegedly sold at a high stand-alone price) with a drug from another supplier. Plaintiff alleged that the disparity between the high price of the drug alone and the low price of the drug in combination was designed to give defendant an illegal monopoly.

Federal Circuit Holdings:

• Defendant holds a patent on Norvir, a drug that acts as a protease inhibitor and slows the progress of HIV-AIDS. As a stand-alone, the drug causes serious side effects. However, it works effectively in combination with other protease inhibiting drugs. Defendant offers such a combination under the brand name Kaletra.
• Plaintiff contends that by charging an unduly high price for Norvir and a low price for Kaletra, defendant is trying to use its patent to obtain a monopoly for all protease inhibitors by inducing the purchase of Kaletra, leading competitors who combine Norvir with other protease inhibitors to drop out of the market. Such a monopoly would allow defendant to then jack up the price of Kaletra.
• Affirms the dismissal of the complaint because it does not state a claim on which relief may be granted. A claim of "monopoly leveraging," such as this one, does not violate antitrust laws unless it takes a particular form, such as a tie-in sale or refusal to deal.
• The price of the stand-alone drug cannot violate the Sherman Antitrust Act because a patent holder is entitled to charge what the market will bear.
• Distinguishes the price-squeeze claim in United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945) because that defendant sold processed aluminum for less than raw aluminum while Kaletra sells for more than Norvir alone.
• This is not an instance of predatory pricing because the price of Kaletra is above the average variable cost of its manufacture. Thus, defendant's rivals can continue to profit from their competing products and will not be knocked out of the market.
• The low price of Kaletra is an unalloyed benefit for consumers. It would be inappropriate to use the Sherman Act to oblige defendant to raise its price for Kaletra.
• A "monopoly leveraging" claim requires first that the defendant have a monopoly, which seems unlikely. Defendant's patent did not necessarily create market power and there are many drugs that act as protease inhibitors and are substitutes for defendant's drugs.
• The problem with "monopoly leveraging" as a theory is that the practice cannot increase a monopolist's profits. A defendant that monopolizes one component of a treatment can extract a monopoly profit for that component. However, if the monopolist gets control of another component as well and tries to jack up the price of that item, the effect is the same as setting an excessive price for the monopolized component and does not add to its profits. Rejects the contrary opinion of Image Technical Serv., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997).
  
  

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