New Year, New Website
Cislo & Thomas LLP is proud to announce the launch of our newly updated website! Please visit www.cislo.com and check it out.
Dan and Lisa Cislo Work at the Light In Africa Orphanage for Handicapped and AIDS Infected Children
Recently, Lisa Cislo with husband Dan Cislo lead a medical mission trip to Tanzania not far from Mount Kilimanjaro. Ten days were spent at the Light In Africa orphanage, a sister school to Malibu Presbyterian Nursery School in Malibu, where Dan and Lisa are on the Board of Directors. The days were filled with medical outreach to the community, art classes for the kids, and a multimedia training course for the middle school. Lisa claims that working with the director of the orphanage “Mama Lynn” was one of the highlights of her life. Cislo & Thomas LLP donated funds to help the orphanage build a new building for disabled training.
See Mama Lynn’s amazing story on YouTube here.
New Year’s Resolutions for IP Matters
It’s a new year, which hopefully breeds a new and refreshed mindset for protecting your IP.
Here are a couple of New Year’s resolutions to keep in mind, relating to your intellectual property matters, whether for a start-up or an established business:
1. Treat trademarks as identifying adjectives rather than using them as replacement terms of the products or service you are offering for sale in order to avoid genericizing the mark.
Once a trademark is used generically, a trademark owner may have to take aggressive measures to regain the strength of the mark, such as when Xerox corporation used extensive public relations campaigns, advising consumers to “photocopy” instead of “xerox” documents.
2. Evaluate your company’s current direction for your product(s)/service(s) and how they impact the company’s fiscal health so that you can adjust your IP protection by changing strategies involving licensing, enforcement, and/or marketing.
For example, if you are receiving cease-and-desist letters regarding a certain product or service, conduct a cost-benefit analysis and communicate it to your legal counsel before deciding whether or not to invest the fees contesting the allegations or to just change the mark.
3. File patent, copyright, and trademark applications only after performing initial steps in assuring that the IP protection sought is not already under someone else’s protection. It is better to spend the up-front cost to be sure that the IP protection sought will not infringe upon another’s rights and will most likely be granted than to be surprised by a potential lawsuit down the line and spend even more money on resolving the problem.
However, obtaining IP protection does have its costs as well, so seek effective and efficient means, such as filing a lower cost provisional patent application, while determining the marketability of the innovation.
4. Do not forget that your IP attorney is your advocate and needs to know all the facts in order to provide you with the best advice. Many times, clients tend to reserve the facts that may not be in their favor, hoping that the attorney will give the green light not realizing that big problems may later arise.
5. Remember that your IP portfolio is not only insurance, but also “property.” Intellectual property functions similarly to real property, and like some real property, over time the value may increase and you may want to sell it or license it in the future.
Be proactive in asking your attorney what strategies you can implement to mine the untapped value of your IP!
Supreme Court Agrees to Take Two IP Cases in 2016
On January 15, the U.S. Supreme Court granted certiorari in an administrative patent review case of Cuozzo Speed Technologies, LLC v. Lee, U.S. No. 15-446 (cert. granted January 15, 2016), pertaining to claim construction standards and a case addressing the appropriate standard in awarding attorneys’ fees to a prevailing party under Section 505 of the Copyright Act, John Wiley & Sons Inc. v. Kirtsaeng, No. 15-375 (cert. granted January 15, 2016). Both cases are discussed below:
Cuozzo Speed Technologies, LLC v. Lee
The questions to be addressed are: (1) whether or not the Court of Appeals erred in holding that in inter partes review (IPR) proceedings the Patent Trial and Appeal Board (PTAB) may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning; and (2) even if the Board exceeds its statutory authority in instituting an IPR proceeding, is the Board’s decision to institute an IPR proceeding judicially unreviewable.
In Cuozzo, the Federal Circuit panel decision held that 35 U.S.C. 314(d) bars it from reviewing a PTAB decision to institute an IPR, even if the issue is raised in an appeal of a PTAB final decision, meaning that institutional decision is insulated from judicial review.
The 2-1 decision (Judge Dyk for the Court, joined by Judge Clevenger, Judge Newman dissenting) also approved of the PTAB’s use of the “broadest reasonable interpretation” (BRI) standard for claim construction, and agreed that the three claims in suit were invalid for obviousness, meaning that the standard for claim construction is different at the PTAB Level from that of a federal district court. The courts use the “ordinary meaning” of the claim terms.
John Wiley & Sons Inc. v. Kirtsaeng
Challenging a decision on awarding attorneys fees in a copyright case,, Petitioner Kirtsaeng urged the Supreme Court to determine which of the four different standards currently employed by district courts should be the prevailing standard for awarding attorneys’ fees: (1) whether the prevailing party’s successful claim or defense advanced the purposes of the Copyright Act (9th and 11th Circuits); (2) a presumption in favor of attorneys’ fees for a prevailing party (5th and 7th Circuits); (3) the four “non-exclusive factors” listed in Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994) (3rd, 4th, and 6th Circuits); and (4) the 2nd Circuit’s placement of “substantial weight” on the objective reasonableness of the losing party’s claim.
The case at hand involved a college student’s appeal seeking to win attorneys’ fees after defeating claims he imported and illegally sold foreign edition textbooks online via the auction site eBay. In 2013, the case reached the Supreme Court and was a case which clarified that under the Copyright Act’s first-sale doctrine, which states that once a copy is sold the first time it is out of the copyright owner’s control, applies to goods made anywhere.
As a result of the ruling, Kirtsaeng avoided paying $600,000 in damages to Wiley that a federal jury previously said he had to pay for willfully infringing the company’s copyrights. Kirtsaeng, however, subsequently lost his bid to obtain attorneys’ fees from Wiley, leading up this this case.
How 3-D Printing May Threaten The Patent System
Just like Napster was to copyright law, the growing prevalence of 3D printing in addition to the easy sharing of computer-aided design (CAD) files is becoming a hot debate topic in the patent law realm.
With a 3D printer, anyone can download a CAD file that would instruct the 3D printer to make the physical, three-dimensional object, which may comprise patented elements.
The problem is that it is much more difficult to determine who is printing patented inventions because 3D printers are becoming widely dispersed and do not leave a digital footprint to be traced.
Alternatively, patent owners could go after the facilitators of the infringement, such as potential inducers of patent infringement: those who provided the CAD files of the patented device and/or instructions.
However, the biggest hurdle is that inducement of patent infringement requires actual knowledge of the relevant patent, whereas for music, it is presumed that everyone knows songs are copyrighted.
Another difference between 3D printing and music copyright is that for copyright, the digital files themselves infringe, but for patent law, only the physical 3D printed object infringes. It seems likely that courts and/or Congress will eventually have to address these issues, ironically rooted from an ingenious patented device.
Sony’s Attempts to Trademark “Let’s Play” Draws Adversaries
Earlier this month, Sony Computer Entertainment of America (SCEA) tried to trademark “Let’s Play” to cover the “electronic transmission and streaming of video games via global and local computer networks; streaming of audio, visual, and audiovisual material via global and local computer networks.”
Although the term has been around for decades, that was not why it was rejected at the United States Patent and Trademark Office (“USPTO”), but was rejected based on a similar mark, “Letz Play.”
A law firm which specializes in gaming law, decided to jump in to try and have the court instead declare that “Let’s Play” is now a generic term by offering up fifty examples of how “Let’s Play” has become a generic term in a letter to the USPTO.
Sony most likely will respond to the USPTO’s rejection based on “Letz Play,” which some scholars have noted is not too hard to overcome because the mark has been abandoned. However, now the USPTO also has evidence from a third-party showing why Sony should not be handed ownership of the term “Let’s Play.”
The Conundrum of Software Patentability
What do you tell a client who comes to you and wants to patent a new software platform or app functionality? The response would likely contain elements of what follows.
The water is muddier than ever when it comes to software patentability. There are those who, for many years up to the present believe that software should not be patentable at all. There are others (as evidenced by the tremendous number of software patent applications filed over the past 20 years or so) who believe that software is eminently patentable.
The 800-pound gorilla in the room in terms of software patentability is the Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank. The opinion did not say that software was per se unpatentable. Rather, the decision has been applied in a way that has made most software-based patent applications fall prey to rejections in the Patent Office, or invalidation in litigation (or the Patent Trial and Appeal Board) as “abstract ideas” under Title 35 United States Code Section 101. Has the pendulum of invalidity swung too far?
One recent example of the pendulum swinging back towards the middle is Central District of California Judge S. James Otero’s opinion in Timeplay, Inc. v. Audience Entertainment, LLC.
Thus, for clients coming in the door today to discuss patenting software, their applications, if filed, will not be examined until the pendulum potentially swings back to a place where software is more readily patentable, or so the thought process of some goes.
This middle ground area seems to be the most reasonable approach. A patent system that is hostile to what presently represents a very substantial portion of the economy (software and app development) is a problem.
Having an environment more hospitable to software patenting is important for protecting innovation, securing capital raises, and allowing new technologies and ventures to develop and flourish. The current environment is likely hindering economic growth.
Take home message: Keep filing patent applications on software inventions, but do so in a prudent and measured manner (i.e., with sufficient detail and definiteness), and wait in hope for the pendulum to swing back towards the middle.
Google Files Patent To Replace Social Media Marketers
Google was just issued a patent, “Encouraging Conversation in a Social Network,” that claims a system that will assess trends that will help users, companies, and brands tailor their social media posts to drive engagement across social media shares.
The proposed system is built on email communication and advances on a similar idea—a link is shared from one user to another. When the link is clicked, Google will utilize a pop-up system that will suggest how to share the link on social media. Essentially, the system recommends social activity data and social conversation to a user and is able to determine knowledge data describing topics related to the message.
The patent suggests that Google will be utilizing and analyzing the content within the email to propose different topics that a user might want to post. For example, in the image above, three potential suggestions pointing to their “favorite author,” “new book,” or “I’ve been a reader of…” were generated, which amplifies the conversation beyond the email and into the social media realm.
This patent may give Google a strategic edge in the social media marketing game, and perhaps a step towards automating certain roles currently fulfilled by social media marketers.
Car Designer Requests Supreme Court Review Copyright Protection of Batmobile
Mark Towle, a car designer, was unsuccessful in his dispute against DC Comics after the U.S. Court of Appeals for the Ninth Circuit ruled that his Batmobile designs had infringed the comic book company’s copyright.
Towle built replicas of the Batmobile vehicles that featured in the 1966 Batman television series and the 1989 film directed by Tim Burton. The 1966 design was produced by George Barris and the 1989 design by Anton Furst, and both designers obtained design patents for their work, but they have since expired.
DC sued Towle for copyright infringement and was successful at both the U.S. District Court for the Central District of California and U.S. Court of Appeals for the Ninth Circuit in asserting its claim.
A three-judge panel on the Ninth Circuit said that the Batmobile displayed “consistent character traits” and also had a “unique and highly recognizable name” and therefore qualified for copyright protection and Towle’s work was considered infringing.
In a writ of certiorari filed on January 22, Towle said that Congress had specifically excluded “useful items” from copyright protection.
“It is improper for the courts to arbitrarily create an exception to such a clear mandate by Congress,” Towle argued, adding that the Batmobile cannot be considered a literary character because DC “created over 100 Batmobiles, with very different characteristics, and no consistent, widely-identifiable traits.”
In the petition, Towle asks the justices to consider three questions:
Whether a court may judicially create a subject of copyright that was specifically and expressly excluded by Congress as such when Congress enacted The Copyright Act, thus circumventing the clear mandate of Congress and the U.S. Copyright Office;
Whether an automobile that does not display any personality traits or any consistent and widely-identifiable physical attributes can be separately protected by copyright as a “character”; and
Whether a determination of substantial similarity of protected expression must be made in a copyright case, independent of proof of copying.
The odds that the Supreme Court will pick up this case are slim, however, it may result in some interesting briefs submitted by professors and other IP scholars.
YouTube Can Delete Videos Without Repercussions
The Court Of Appeal of the State Of California, Sixth Appellate District, in an unpublished opinion by Justice Nathan Mihara, upheld the dismissal of a suit by Jan Lewis, who claimed that Youtube deprived her of “the acclaim that her channel received from fellow YouTube users” when it temporarily deleted the channel for what it said was a violation of its terms of service.
Justice Mihara cited a clause in the terms of service stating the company would bear no liability “whatsoever” for damages resulting from, among other things, “errors or omissions in any content or for any loss or damage of any kind incurred as a result of your use of and content posted, emailed, transmitted, or otherwise made available via the services, whether based on warranty, contract, tort, or any other legal theory.”
The court ruled that YouTube’s standard contract’s clause, limiting its potential liability to users who upload videos, is valid and enforceable. That clause, Mihara said, “encompassed Lewis’s claim that YouTube wrongfully failed to include her videos, the number of views of these videos, and the comments on the videos by other YouTube visitors on its Web site.”
Justice Mihara further held that Lewis failed to state a claim for specific performance in the form of an order requiring defendant to “restor[e] her channel to its condition prior to” the alleged breach.
Because her account has been reinstated, Justice Mihara said, Lewis is free to re-upload her videos. As for the other deleted material—the view counts and comments associated with the videos prior to their deletion—there is nothing in the terms of service that requires YouTube to display them.
Maybe the PTAB Is Not a Threat to Patents
In 2012, intellectual property specialists were worried that the Patent Trial and Appeal Board (“PTAB”), created the by U.S. Patent and Trademark Office (“USPTO”), would turn out to be a patent-eating monster.
In the beginning, out of the first 20 challenges that made it to a final decision, 17 resulted in losses for the patent holder and those concerns seemed to manifest into a potential nightmare.
However, according to a recent report by legal analytics firm Lex Machina, which looks at all 2,700 decisions from the Board’s first three years in existence, the finding showed that patents are surviving the process 66% of the time.
Formed in 2012 as part of the America Invents Act, the PTAB was set up, in part, as a way to fight back against patent trolls, focusing on being a more effective forum than federal courts for hearing challenges to existing patents.
According to Brian Howard, a legal data scientist with Lex Machina, “a lot of press says that PTAB is basically munching its way through patents, but what the data shows are that it’s not like an ATM, where you just submit a petition and you get an invalidation of a patent back.”
“When they started invalidating patents for first time, there was a lot of press on it,” said Ted Behm, a partner in the IP department at Barnes & Thornburg. “But our own experience, and these numbers bear it out, is that it’s not truly a death knell when someone files a petition.”
The Potential for Large Monetary Rewards Continues to Attract Patent Litigation by Non-practicing Entities
“Non-practicing entities”(NPEs) are generally defined as patent holders that do not create products themselves, but rather secure or purchase patent rights for the purpose of monetizing those rights through licensing agreements or lawsuits. A statistical analysis of patent litigation case filing trends over the past half-decade suggests that NPE-initiated patent litigations are on the rise, representing a significant financial burden on litigants across the country.
In 2011, for example, NPE lawsuits named over 5,000 defendant firms, at a collective cost of over $29 billion out-of-pocket, according to James Bessen of the Washington Post. In addition, the 2013 GAO congressional committee report concluded that, of 500 lawsuits surveyed from 2007 to 2011, the number of lawsuits initiated by NPEs numbered just over 100. A recent survey by Unified Patents suggests that NPE litigation expanded beyond this figure by 2015, with NPE lawsuits representing 66.9% of all patent litigations initiated in 2015 (a 61 percent increase over 2014).
The potential for immense damages awards is undoubtedly a driving force behind the recent surge in NPE patent litigation. Unfortunately, in the most extreme cases, this extortion-like behavior is reinforced if left unchecked by external forces.
The fact that that software-related patent disputes between 2007 and 2011 accounted for nearly 90 percent of the increase in patent litigation defendants, according to the same GAO report, can be traced, in part, to allure of large monetary awards and an imperfect institutional approach to damages calculations.
Until 2010, the pervading rule used to value IP assets was the so called “25 Percent Rule”- wherein a royalty rate equivalent to 25% of the expected profits is assessed against an alleged infringer. The stringent application of this rule often amplified damages awards in NPE cases, resulting in a windfall for firms such as Intellectual Ventures advancing these practicing, as explained by Law Professor Jason Rantanen in a 2011 PatentlyO review of Uniloc v. Microsoft.
In the wake of enormous damages awards in 2010, the CAFC finally responded. In Uniloc v. Microsoft, the CAFC held that the 25 Percent Rule, “is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation,” thus precluding its use for damages. Although the rule was thereafter eliminated, many rights holders and practitioners continue to report a need for improvement in damages calculations.
Notably, while many are alarmed by the upward trend in nationwide patent litigation, some patent scholars argue that under-assertion rather than over-assertion of patent rights held by small entities and individuals represents a greater burden on the patent system than the actions of non-market participant patent owners.
In any event, the above-cited statistics clearly evidence an upward trend in NPE litigation, a pattern that may reasonably be linked to the continued allure of large monetary awards and the evolving modes of royalty rate calculation in federal court.