February 2015

Daniel M. Cislo Named Super Lawyer 2015

Cislo & Thomas LLP is pleased to announce that Managing Partner, Daniel M. Cislo, has been recognized as a 2015 California Super Lawyer for Intellectual Property. This year marks the third straight Super Lawyers recognition for Mr. Cislo as he was first named a Super Lawyer in 2013.

Super Lawyers selects attorneys using a patented multiphase selection process, which combines peer nominations and evaluations with third party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis. Their objective is to create a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource for those searching for legal counsel. The final published Super Lawyers list represents no more than five percent of the lawyers in the state.

Congratulations again to our Managing Partner, Daniel M. Cislo!

Firm Attorneys Published in Santa Clara Law’s High Tech Law Journal

Cislo &Thomas LLP is proud to announce that our Managing Partner, Daniel M. Cislo, Esq., jointly-authored with Dr. Michael Anderson Ph.D., was recently published in The Santa Clara High Tech Law Journal of Santa Clara Law titled The California Central District Court: The New Hot Spot for International Intellectual Property Disputes. In 2013, Washington and Lee University placed The Santa Clara High Tech Journal within the top five Intellectual Property Law Journals in the country based on a combined score considering impact factor, journal citations, and currency factor (Outpacing the Stanford and Boston Technology Law Review Journals). The article is now available at http://htlj.org/2015/01/644/.

Cislo & Thomas Sponsors 2014 Tech Forum

Cislo & Thomas LLP was again a proud sponsor of this year’s UCLA Tech Forum.  The theme of this year’s forum was Robotics and Technologies of the Future. The forum began with a keynote presentation by Dr. Marc Raibert, founder of Boston Dynamics, the world leader in robotic locomotion, which was recently acquired by Google.  In the afternoon, participants broke into parallel sessions concerning robotics, energy and the environment, technology in medicine, big data and cybersecurity.

Cislo & Thomas is thrilled to be a part of this innovative tradition.

Cislo & Thomas Collaborating with CrowdPatent

Cislo & Thomas LLP is excited to announce that the firm’s highly successful Patentfiler website, an innovative platform that allows for simple and effective provisional patent filing and searching, is collaborating with CrowdPatent, a platform for crowdsourcing the funds for patenting inventions. Together, PatentFiler and CrowdPatent aim to be in the forefront for providing inventors with the funds and means to obtain the legal protection necessary to go forward in bringing their innovative inventions to the market. Please visit patentfiler.com and crowdpatent.com for more information.

Tony Horton and Daniel M. Cislo, Esq. Award Scholarships to 20 UCLA Undergraduates

Managing Partner and Chapter Advisor Daniel M. Cislo, Esq. was privileged to award with fitness guru Tony Horton the annual Tony Horton Phi Kappa Psi $2500 scholarship to twenty deserving UCLA undergraduate men for their service to the community. Tony Horton and his P90X workout program has been an international sensation and has been responsible for selling over a billion dollars in fitness products over the last ten years.

Mr. Daniel M. Cislo (left) with Tony Horton (right) and Horton’s fiancée, Shawna Brannon (center)

Summary of Preliminary Patent Eligibility Examination in view of Alice Corp 

In Alice Corp. Pty. Ltd. V. CLS Bank International et al, 134 S.Ct. 2347 (2014), the Supreme Court delineated and clarified the standard for the two-part process in determining if a patent was subject matter eligible.  Below is a summary of the queries as further explained in a preliminary examination instruction written by the United States Patent and Trademark Office in light of the Alice decision.

Step 1 is to determine if the claim is a process, machine, manufacture or composition of matter.

  • If the answer is NO then the claim is not patent eligible subject matter.
  • If the answer is YES, we move on to step 2, which comes in two parts: step 2A and step 2B.

Step 2A is to determine if the claim is directed to a law of nature, a natural phenomenon, or an abstract idea (collectively, judicial exceptions).

  • If the answer is YES to step 2A we move on to step 2B
  • If the answer is NO, the claim as a whole is patent eligible subject matter.
  • A claim is directed to a judicial exception when a law of nature, natural phenomenon, or an abstract idea is recited, set forth, or described in (but not when it only involves an abstract concept) the claims. Some example of judicial exceptions include: mathematical formulas, nature-based products that do not exhibit markedly different characteristics from its naturally occurring counterparts in their natural state, an isolated DNA, fundamental economic practices, and certain methods of organizing human activities.

Step 2B is to determine whether there is an “inventive concept,” meaning if there is any element, or combination of elements, in the claim sufficient to ensure that the claim amounts to significantly more than the judicial exception.

  • If the answer is YES to step 2B, the claim is eligible.
  • If the answer is NO, the claim should be rejected under 35 U.S.C. 101.
  • A claim amounts to significantly more than the judicial exception when the claim includes, but is not limited to, improvements to another technology; improvements to the functioning of the computer itself; applying the judicial exception with, or by use of a particular machine; effecting a transformation or reduction of a particular article to a different state or thing; and adding a specific limitation other than what is routine and conventional in the field. Limitations that were not found to be “significantly more” include, but are limited to, simply appending well-understood routine and conventional activities previously known to the industry to the judicial exception, such as using a generic computer to perform generic computer functions to implement an abstract idea.

For the complete summary, click here.

Federal Circuit Holding Regarding Barring of IPR Appeals and IPR’s Broadest Reasonable Interpretation Standard 

The Federal Circuit held on February 4, 2015 that the Inter Parties Review (“IPR”) proceedings instituted by the Patent Trial and Appeal Board  (“PTAB”) of the United State Patent and Trademark Office (“USPTO”)  is not only nonappealable as an interim ruling, but also nonappealable as part of a final decision. In re Cuozzo Speed Technologies, LLC, Fed. Cir., No. 2014-1301, 2/4/2015. The Federal Circuit also held that in an IPR proceeding, patent claims are to be construed under the “broadest reasonable interpretation” standard rather than a narrower standard as applied in district courts, because a party in an IPR is able to amend claims.

To read the complete decision, click here.

Teva v. Sandoz: Federal Circuit Reviews for Clear Error on Evidence Extrinsic to Patents

The Supreme Court held in Teva Parmaceuticals USA, Inc. v. Sandoz, Inc., No. 13-854, 1/20/2015 that the Federal Circuit erred by applying a de novo standard of review, considering the question for the first time and disregarding the decisions below, rather than applying the “clear error” standard to the district court’s factual findings, giving district courts more deference.  Rule 52(a) of the Federal Rule of Civil Procedure requires deferential “clear error” review over any findings of fact, but the Federal Circuit has consistently reviewed claim construction as conclusions of law that are allowed for de novo review.

In Teva, the claims at issue relate to methods for manufacturing copolymer-1, the active ingredient in Copaxone®, owned by Teva and used to treat multiple sclerosis. Teva sued Sandoz for patent infringement, wherein Sandoz’s primary defense was that the claim term “average molecular weight” had multiple possible meanings to a person of ordinary skill in the art and that the claim should be invalid for indefiniteness. The district court rejected the defense and held that there was enough in the specification for a person of ordinary skill in the art to understand that the term was referring particularly to the peak average molecular weight (Mp).

On appeal, the Federal Circuit reversed and reviewed the issue of indefiniteness de novo. The court found that “plain language does not indicate which average molecular weight measure is intended” and “neither the specification nor the prosecution history resolved this ambiguity.” Teva Pharms. USA, v. Sandoz, 723 F.3d 1363, 1369 (Fed. Cir. 2013).

On January 20, 2015, the Supreme Court vacated and remanded the Federal Circuit’s decision by a 7-2 vote. The Court explained that in its earlier decision Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), “the ultimate question of claim construction is for the judge,” however, “the appellate review of actual matters” still follows an ordinary rule for clear error. Therefore, when it comes to claim constructions based only on evidence intrinsic to the patent such as the claims, specifications and prosecution history, the Federal Circuit may review de novo. However, extrinsic evidence, such as “background science or meaning of a term in the relevant art during the relevant time period,” must be reviewed for clear error on appeal.  Since the Federal Circuit failed to accept the district court’s finding of Teva’s expert’s explanation about “how a skilled artisan would understand the way in which a curve created from a chromatogram data reflect molecular weights” without any determination of clear error, the Federal Circuit opinion was vacated and remanded for further proceedings.

Here, the Supreme Court was able to clarify the boundaries of each standard of review especially for cases that involve claim construction that reach the Federal Circuit.  However, in terms of whether Teva’s claims will be invalidated on remand under the clarified Supreme Court ruling is not as clear.

To read the complete opinion, click here.

Omega v. Costco: First Sale Doctrine Exception Under Copyright Applies for Foreign-Made Goods 

In 2010, the Supreme Court granted certiorari for a case between Omega and Costco concerning whether or not Costco, a discount retailer, in selling luxury Omega watches with an “Omega Globe” logo engraving without authorization from the Swiss watchmaker was infringing the importation right under the Copyright Act. The district court granted summary judgment in favor of Costco based on the first sale doctrine exception but the Ninth Circuit reversed this decision based on the rationale that the first sale doctrine only applied to copies “lawfully made under this title” and since the Omega watches were made in Switzerland, its exception did not apply. The Supreme Court reached a 4-4 tie with Justice Kagan recusing herself, meaning that the Ninth Circuit decision was affirmed but only within the Ninth Circuit.

On remand, the district court once again granted summary judgment in favor of Costco but under a different theory, copyright misuse. The court found that Omega misused its copyright in the logo by trying to expand a limited monopoly of non-copyrightable watches. Omega appealed to the Ninth Circuit and in its decision, the court applied a recent 2013 Supreme Court case, Kirtsaeng v. Wiley, which held that the phrase “lawfully made under this title” applied to products made abroad that were brought into the United States. Under Kirtsaeng, the Ninth Circuit reapplied the first sale doctrine as a valid defense and reaffirmed that “copyright owners cannot use their rights to fix resale prices in the downstream market.”

However, in a strong concurring opinion, Judge Kim McLane Wardlaw agreed with the outcome but argued that the Ninth Circuit should have affirmed the copyright misuse finding because “Omega impermissibly used the defensive shield of copyright as an offensive sword.” Judge Wardlaw’s opinion fairly warns against using copyright as a means to fight otherwise legal gray market goods.

To read the full opnion, click here.

Hana Financial v. Hana Bank: Tacking for Trademark Priority Determination Is Question for the Jury

In a unanimous decision, the Supreme Court held in Hana Financial v. Hana Bank that the issue of whether two trademarks are “legal equivalents” as to “create a single, continuing commercial impression” and may be tacked together for determining priority of the marks as a whole is a question of fact and should be decided by a jury.

Respondent Hana Bank (“Bank”)—a Korean entity originally used the name of “Korean Investment Finance Corporation”—established Hana Overseas Korean Club (“Club”) to provide financial services to Koreans expatriates in the United States. In 1994, Petitioner Hana Financial Inc. (“Financial”) was incorporated in California and then obtained a federal service mark registration for the mark “Hana Financial” in 1996. In 2001, in part because of Financial’s registration, Bank was unable to register “Hana Bank” as a trademark but continued to use its mark, starting operations in New York in 2002. Financial sued Bank for trademark infringement and Bank denied infringement and counterclaimed seeking cancellation of the “Hana Financial” mark.

During trial, the issues narrowed to that of infringement for which Bank relied on the doctrine of “trademark tacking,” which allows owners of two marks that are “legal equivalents” to view them as one for the purposes of establishing priority. Bank offered evidence that the use of the name “Hana Bank” was a part of the logo associated with Club’s offering of financial services and thus sufficient to become the senior user of the mark. Financial argued that the marks are not similar enough for tacking to be appropriate.

The District Court presented the issue of tacking to a jury, which found for Bank and decided the marks are legally the same. The Ninth Circuit also affirmed, although the court noted that there was a split among the circuits. On June 23, 2014, the Supreme Court granted certiorari to resolve the circuit split and decide whether a judge or jury should decide on the issue of tacking.

The Supreme Court held that when a test relies on what an ordinary consumer understands to be the impression that a mark conveys, the test “falls comfortably within the [perview] of the jury.” The Supreme Court clarified that judges may still make a tacking determination on a motion for summary judgment if the parties have chosen to try their case before a judge; otherwise, the tacking issue is property reserved for the jury.

To read the full opinion, click here.

Number of Patent Litigation Cases Dropping for the First Time in Six Years

The Supreme Court, in Alice Corp. Pty. Ltd. V. CLS Bank International et al, 134 S.Ct. 2347 (2014) encouraged the Court of Appeals for the Federal Circuit and district courts to strike down overly broad claims tied to software and computer-implemented business methods. Along with other landmark cases involving IP as well as the growing popularity of petitions to review patent validity at the United States Patent Office (“USPTO”), the area of IP law has been rapidly changing, swaying patent holders from filing suits.

From 2009 to 2013, the number of filings increased every year but in 2014, there was a drop of 17%, with the number of filings dropping below 5,000, as compared to 2013. However, in 2014 the Patent Trial and Appeal Board, a panel of judges at the USPTO, received 1,679 petitions to review patents.

Further, the court in VirnetX Inc. v. Cisco Systems Inc., 13-1489 (Fed. Cir. 2014) raised the standards and thus made it more expensive to litigate a case for damages. 2014 has been an unpredictable year for IP law and the data showing the drop in filings is proof that the effects have rippled past just how much the legal standards have changed.

9th Circuit Rejects Dismissal of Case Involving Using NFL Players in Video Games Without Permission

On January 6, 2015, the 9th Circuit held for former pro football players and agreed with the U.S. District Judge, Richard Seeborg of San Francisco, that the class action should go forth to litigation and that free speech principles should not be used to shield liability from depicting the players without paying them. David v. Electronic Arts Inc., 2015 DJDAR 229. Although Electronic Arts (“EA”) do pay millions of dollars in licensing fees to current players that they depict, their bestselling Madden NFL series, there are about 6,000 unpaid retired players who appear, unnamed but identifiably by position, years in the NFL, height, weight, skin tone and skill level, in a “historic teams” series.

EA argued before the 9th Circuit panel that under the First Amendment, there is a strong constitutional protection that guarantees free expression by creators of games, books, movies and other artworks. However, the panel appeared skeptical and stated that hundreds of thousands of data points does not amount to expressive work but are just “a bunch of data.” The EA also failed the transformative use test, which tests if the players’ look was sufficiently different as to be able to claim an altered image, along with other tests including the public interest defense, the Rogers test regarding trademark confusion, the incidental use test, and an anti-SLAPP defense, which cites a California law designed to eliminate meritless suits that seek to chill protected speech.

EA settled another suit against former college players in NCAA football related video games for $20 million and another by the then current NCAA players for $40 million. In re NCAA Student Athlete Name & Likeness Licensing Litigation, 724 F.3rd 1268 (9th Cir. 2013).  History may repeat itself, however any settlement or damage reward pales in comparison to EA’s multi-billion dollar viability.

Seahawks v. Texas A&M: 12th Man Trademark Explained

It is common knowledge among football fans that Texas A&M (“TAMU”) owns the “12th Man” trademark, which embodies the concept that a certain football team’s fans are loyal. Since there are 11 players on the field, the 12th player points to the fans in the stands, representing that they are just as involved.

Historically, the term came from a particular TAMU game in 1922 when the team was so injury-ridden that if it were to lose one more player to injury, they would not have had enough players. The coach recruited a young man from the stands and told him to suit up in case he was needed. Although he never had to go on the field, the team ended up winning with the 12th player on the sidelines. Since then, TAMU fans have called themselves the “12th Man,” and the term caught on in both collegiate and professional football.

It wasn’t until the 1980s and 1990s when TAMU applied for and received a series of federal registrations for the “12thMan” trademarks and started enforcing the mark when conflicts arose. In particular, TAMU requested that the Seahawks stop using “12th Man,” and eventually the issue landed in court and ultimately resulted in a settlement wherein the two parties agreed on a licensing arrangement for the trademark “12th Man.”

The settlement terms stated that the Seahawks could use the number 12 and any rendition thereof so long as it is sufficiently distinguished from “12th Man.” They may however use “12thMan” for advertising and promotional items with proper notice but not on merchandise. Interestingly, the licensing agreement is set to expire in 2016 and likely, the renewal negotiations are to start soon, if they have not already started. It seems likely that TAMU will ask for more money given that the Seahawks is currently one of the best teams in the nation, but TAMU also has the right to no longer permit the Seahawks from ever using “12th Man.” Currently, Football Northwest (the company who owns the Seahawks’ IP) has applied for trademark protection for: “12’s”, “We are 12,” “The 12s” and the like. It could be a strategic plan to avoid having to relicense the “12thman” trademark altogether.

With the Seahawks’ loss in the Super Bowl, it may be interesting to see how the trademark battle will have an impact on the advertising and promotional items as well as the merchandise sales for the Seahawk franchise.

Supreme Court May Overrule Its Own 1967 Patent Royalties Decision

The Supreme Court is expected to hear oral arguments in the spring for a case regarding whether a royalty obligation to the inventors ceases once the licensed patent expires. In a 1964 ruling in Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court held that royalty provisions in patent licensing agreements are not enforceable beyond a patent’s expiration.  The Supreme Court’s willingness to take on this present case involving the same issue means that the Court may overrule its previous holding under the principle of stare decisis.

The present case involves a patent for a device that shoots foam “from the palm of a hand to give the impression that a spider web is being formed.” Marvel Enterprises (now owned by Walt Disney Co.) bought the patent from Mr. Stephen Kimble, the inventor after he sued the company in 1997. The settlement also agreed to pay a running royalty of 3% on product sales and he received more than $6 million during the term of the patent.

After the patent expired, Mr. Kimble sued in 2008 for breach of settlement when the parties disagreed on the royalty calculations. After the lower courts ruled for Marvel, Mr. Kimble asked the Supreme Court to overrule its earlier decision. Such a request is rarely considered but the Court must have found the issue worth revisiting. Mr. Kimble’s lawyer said that Brulotte’s automatic prohibition on post-expiration patent royalties has been widely criticized and is economically unsound. Marvel, joined by U.S. Solicitor General Donald Verrilli, states that the old ruling did not prohibit “the vast majority” of licensing practices that allow parties to spread to costs over time and should not be overruled.

The decision is set to be rendered by the end of June.

Abstract Idea Hypothetical Examples of Patent Eligible Claims in view of Alice Corp.

Recently, the United States Patent and Trademark Office (“USPTO”) provided eight scenarios, four of which demonstrate patent eligible subject matter (Step 2A: NO or Step 2A: YES + Step 2B: YES, see previous article:  Summary of Preliminary Examination Instructions in view of Alice Corp) and four of which demonstrate patent ineligible subject matter (Step 2A: YES + Step 2B: NO).

First, the USPTO wanted to inform applicants and examiners that it is possible to draft a claim that covered a software innovation and was NOT directed to an abstract idea (software innovation + Step 2A: NO). For example, in Hypothetical 1, the UPSTO identified software that isolates and removes malicious code from electronic messages wherein the claim is directed to “performing isolation and eradication of computer viruses, worms, and other malicious code, a concept inextricably tied to computer technology” was not directed to an abstract idea.

Hypothetical 2, based on DDR Holdings, LLC v. Hotels.com, L.P., Appeal No. 2013-1505 (Fed. Cir. Dec. 5, 2014), was considered to be NOT directed to a judicial exception but was one that addressed “a business challenge (retaining website visitors) that is particular to the Internet” such that the solution was “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”

Hypothetical 3, based on Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010), was considered directed to an abstract idea but amounted to significantly more than the abstract idea which addresses a mathematical operation of generating a blue noise mask, which allows a computer to use less memory than required for prior masks. This example shows that software that can improve the functioning of a computer itself is enough to be considered “significantly more” for a YES for Step 2B.

Hypothetical 4, based on SiRF Technology, Inc. v. International Trade Commission, 601 F.3d. 1319 (Fed. Cir. 2010), was considered directed to an abstract idea but also amounted to significantly more than an abstract idea because of the additional features and “meaningful limitations placed upon the application of the claimed mathematical operations.” The claim was limited to a mobile device comprising a GPS receiver, microprocessors, wireless communication transceiver and a display; the combination of the elements with the mathematical operations “are applied to improve an existing technology (global positioning) by improving the signal-acquisition sensitivity of the receiver.” Thus, when viewed in combination, the UPSTO deemed that it amounted to significantly more than the judicial exception.

The next set of four hypotheticals exemplified claims that were not patent eligible. Hypothetical 5, based on Digitech v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014), was considered directed to an abstract idea of “gathering and combining data by reciting steps of organizing information through mathematical relationships” involved in digital image processing devices for capturing both spatial and color properties. However, the claims failed to amount to significantly more because it did not include any additional elements beyond the idea.

Hypothetical 6, based on Planet Bingo, LLC v. VKGS LLC, _ Fed. Appx._ (Fed. Cir. 2014) (nonprecedential), considered directed to a series of steps for managing a game of Bingo, which could be performed mentally or by a computer and thus considered a subset of “organizing human activity.” Because the claims’ additional limitations were only a computer with a central processing unit (CPU), memory, a printer, an input and output terminal, and a program, the generic computer components were not enough to be significantly more than the abstract idea of the series of steps.

Hypothetical 7, based on buySafe, Inc. v. Google, Inc., 765 F.3d 1350, 112 USPQ2d 1093 (Fed. Cir. 2014), was considered directed to methods of creating a contractual relationship and offering performance guaranty, which is a fundamental economic practice found by courts to be an abstract idea.  The claim limitation, in addition to the abstract idea, only included a computer application running on a computer and the computer network. Thus, such generic recitations of a computer and a computer network performing their basic function did not amount to being significantly morethan the abstract idea.

Hypothetical 8, based on Ultramercial, LLC v. Hulu, LLC and WildTangent, 772 F.3d 709, 112 USPQ2d 1750 (Fed. Cir. 2014), was considered directed to a series of steps for distributing media and advertisements over the Internet, which is similar to the concepts involving human activity relating to commercial practices.  The claims’ additional limitations only represented insignificant pre-solution activities, and thus, the claims simply instruct a practitioner to implement a “conventional activity specified at a high level of generality in a particular technological environment” the claims did not add significantly more to the abstract idea of using advertising as an exchange or currency.

These examples, based primarily on past case law, should be helpful for all parties involved in patent prosecution, including the prosecuting attorneys, the inventors and the examiners.  As more patents are being submitted for review under the guidance of Alice Corp. and the instructions by the USPTO, we will have a better idea how broad or narrow these examples will be as guidelines.

For the full examples, click here.