Tuesday, May 31, 2011

Knowledge That Induces Patent Infringement -- Outsourcers Cannot Hide Under The Rug Of Foreign Law

The Supreme Court announced today its decision in the case of Global-Tech Appliances, Inc. v. SEB S.A., an opinion that speaks to the scienter standard for inducement of patent infringement.

In this case, SEB obtained a U.S. patent on its deep fryer. Sunbean had an interest in marketing a competing fryer and contacted Global-Tech's Hong Kong subsidiary to manufacture a fryer containing Sunbeam's specifications. The Hong Kong firm purchased an SEB fryer made for the foreign market that did not contain any patent marking. It copied the substantive elements of the SEB fryer except for certain cosmetic features. It further retained an attorney to conduct a patent right-to-use analysis, but did not disclose to the attorney that it had copied the SEB product. The attorney did not discover the SEB patent and concluded that the Hong Kong product did not infringe the patents that were discovered. The Hong Kong firm then manufactured and supplied its fryers to Sunbean and other firms (under their own brands) for sale in the U.S.

SEB sued Sunbeam for patent infringement, and Sunbeam notified the Hong Kong firm of the lawsuit. The Hong Kong firm continued to distribute its fryers to other brand owners for sale to the U.S. market. SEB settled with Sunbeam and sued Global-Tech for infringement by inducement under 35 USC §271(b). The issue before the Supreme Court centered on the knowledge standard on the part of Global-Tech for purposes of liability under an inducement theory.

The Federal Circuit held that liability for patent inducement under §271(b) occurs when the purported infringer knew or should have known that its actions would induce actual infringements. The Federal Circuit held that Global-Tech was liable on this basis since it deliberately disregarded a known risk that SEB's fryer was protected by a U.S. patent. As such, the Federal Circuit concluded that "deliberate disregard" is the same as "actual knowledge."

The Supreme Court rejected the Federal Circuit's deliberate disregard standard for knowledge and confirmed that actual knowledge that the induced acts constitute patent infringement remains the standard for infringement by inducement under §271(b). The Supreme Court makes clear that "deliberate indifference" to a known risk does not satisfy the knowledge standard. However, the Supreme Court agreed that the knowledge requirement can be satisfied by proof of "willful blindness." To satisfy the test for willful blindness, two elements must exist: (1) the purported infringer must subjectively believe that there is a high probability that a patent is infringed by its act, and (2) the purported infringer must take deliberate steps to avoid learning of this fact.

The Supreme Court held that, in this case, the following facts satisfy the test for willful blindness: (1) the defendant copied all of the features of SEB's fryer except for certain cosmetic traits, believing that these copied features were valuable, (2) the defendant copied an oversea's model of SEB's fryer aware that it did not contain a patent marking, and (3) the defendant failed to disclose to its attorney that the product under consideration was a knock-off of SEB's product.

Taken together, the Supreme Court affirms that this evidence satisfies the willful blindness test to establish knowing inducement, and the judgment against Global-Tech was affirmed.

This decision should be considered carefully by any U.S. manufacturer who outsources its manufacturing to overseas suppliers. It must also be considered by overseas manufacturers who look solely to their local law and fail to consider the merits of liability under U.S. law. Blindly failing to consider the requirements of U.S. patent law may constitute an element of "willful blindness."

As an aside, it will be interesting to learn whether the "willful blindness" synonym for "knowledge" will be of use to establish liability in the various patent marking claims that are pending around the U.S.

Monday, May 30, 2011

More of The Hangover

By all accounts, The Hangover: Part II flick appears to be a big financial hit, at least this weekend. Focusing on the facial tattoo that is prominently featured in the film, and further to my blog post of this past Thursday, I continue to be troubled by the prospect of copyright protection for a tattoo.

It is clear enough that Mike Tyson's facial tattoo is a work of graphic design and is included within the subject matter of copyright. It is also certain that the permanent tattoo is, well, permanent and fixed in a tangible medium. So, why should there be a question of copyrightability?

There are many items that adorn a human body that are not copyrightable for one reason or another. A hair stylist may be quite creative in designing a new coiffure, but the constant growth of hair -- and the resulting change in shape of the cut -- means that the hair design may not be sufficiently permanent and is, in any case, functional (hair must be cut periodically). The same can be said of a cosmetic artist who creates a highly stylized facial rainbow, and a cuticle stylist who adorns finger tips with creative designs. While this work of body adornment is high fashion, it is also functional (makeup and finger nail polish protect the skin and, secondarily, provide a bodily presentation that creates sexual attraction that leads eventually to procreation, etc.). Plus the need to wash the face and cut the cuticle means that the work is not sufficiently permanent. Add the aroma of pungent perfume to this mix of non-permanent, functional bodily accouterments.

The above examples pertain to work that is so intimately applied to the body that it becomes one with the body. They are not protectable in copyright either from lack of permanency or inherent functionality. Apparel is another item of bodily adornment. It is not copyrightable because of historical views of function that clothing provides to the body. Though apparel is of another class than the very intimate works of tattoo, cosmetics, nail paint and perfume that are applied directly to the body, the lack of copyrightability in the very things that humans wear to warm themselves, protect themselves and to become noticed supports the view that there are some things that simply are too closely associated with the body to merit copyright protection.

A tattoo seems to me to be so personal that, notwithstanding its permanency, it serves a very functional purpose of becoming the human body. Pulling skin into a tuck to hide its lack of elasticity, coloring hair to hide its natural lack of attractive color, reconfiguring a nose or acid washing the skin to correct perceived flaws, all may be creative but they are too personal to a human. The result of the work becomes the human. A tattoo is of this sort. Mike Tyson is now a tattoo-bearing human. His face has been altered by the ink just as his face would be altered by plastic surgery. Notwithstanding how creative the plastic surgery, the resulting transformation involves a surgical alteration of the body that, itself, becomes the body. And while the holder of the tattoo needle may be as skilled in his or her field as the plastic surgeon, the result is the same: an alteration of the human body that becomes the body. As the body, the result of the work is purely functional.

My thinking.

Thursday, May 26, 2011

More BitTorrent Lawsuits

My May 4th post discussed a pending lawsuit brought by Liberty Media Holding against cable firms and ISPs in order to identify the owners of the internet protocol addresses that participated in claimed infringing downloads of copyright-protected film. This Liberty Media case is not the only case, of course, involving BitTorrent downloads. Of note, PC World recently reported on a new case brought by U.S. Copyright Group seeking the names of owners of IP addresses that downloaded "The Expendables" movie. The court has authorized USCG to obtain these names from the cable firms and ISPs. PC World has published the IP addresses and dates of download. The owners of these IP addresses may soon be receiving infringement claims from USCG.

Hangover: Part II -- The Case of the Mimic Tattoo

The movie Hangover II has opened and may enjoy a good box office this Memorial Day weekend. In the first Hangover, three friends give their buddy a wild bachelor party in Las Vegas, thereby encountering a multitude of problems. One critical issue concerns the misplacement of their buddy. The friends spend most of the film trying to locate him prior to the impending nuptials. During the friends' misdirected quest, they encounter Mike Tyson's tiger sleeping in their hotel bathroom. This is actually a good thing since the tiger is the cause of the friends' meeting with Mike Tyson, who was prominently brandishing a large facial tattoo.

Part II continues with the friends' pursuit of further intoxicating high jinx. The new film also prominently features a tattoo on actor Ed Helms' face. The tattoo appears very similar in design, location and size as the Tyson tattoo, although there are some apparent differences. Wherein lies the problem, according to the tattoo artist S. Victor Whitmill, who claims that the Helms' tattoo is an infringement of the tattoo he designed and affixed to Big Mike's face.

So, this being America, where a federal lawsuit can be filed for a court fee of $350, Mr. Whitmill filed a copyright infringement action against Warner Bros. in federal court in St. Louis. He sought to enjoin the release of Part II to preserve his copyright interest in the Tyson tattoo from claimed irreparable harm.

The court declined to enjoin the release of the new film, but news reports suggest that the court did not think much of the Warner Bros. defense. This will all be sorted out in time. This case raises several interesting issues in copyright, just as Part II raises interesting issues in filmatic humor, I'm sure.

One question present in the case tests whether copyright protection can -- or should -- extend to an image indelibly and permanently affixed to the human body. After all, Big Mike walks around town, perhaps with his tiger, meeting people while emblazoned with the permanent and public face art. If someone takes his photo, can this be infringement? If Big Mike appears in a motion picture, can this appearance (and the resulting display and distribution of the tattoo) be infringement? Indeed, Mike appeared in the first Hangover film and no lawsuit was filed by Mr. Whitmill. Is affixing to the human body sufficient for purposes of satisfying the fixation requirement of copyright? And if it is, should it be so? Should there be a human body fixation exception? Does copyright in a permanent aspect of a human body travel too close to the law of right of publicity? Are the exclusive rights of copyright too strict, notwithstanding fair use principles, to allow for first amendment protection when the human body becomes the walking canvas? These are but a few, I'm sure, of many more interesting copyright questions relating to human fixation.

A second question concerns the role of David Nimmer. He is both the present author of Nimmer on Copyright (written initially by his father Mel), a law teacher at UCLA and a practicing attorney with the firm of Irell and Manella. Mr. -- Professor -- Author Nimmer gave a declaration in behalf of Warner Bros. and in opposition to the preliminary injunction. In the declaration, he explains that he once believed that work can be affixed to the human body to satisfy the fixation requirement, but that he changed his mind years ago. Fair enough, he has the right to change his mind. But it appears that the current version of Nimmer on Copyright continues to posit that a work can be protected by copyright if affixed to the human body. See, §1.01[B][1], fn 392 (“For a tattoo may presumably qualify as a work of graphic art, regardless of the medium in which it is designed to be affixed (in this instance, human flesh)”).

So, Nimmer takes one position as an authority in his treatise, but takes a contrary position in his declaration as an advocate for Warner Bros. in this case. At least, that is the appearance. Is Nimmer's true role that of a scholar or advocate, and how can anyone tell? Should his legal position on this issue be consistent notwithstanding the several hats he wears? Indeed, is there now a hint of suggestion that the perceived independence and authority of the Nimmer treatise is called into question?

Sunday, May 22, 2011

Was President Lincoln the First IP President?

Among President Lincoln's notable "firsts", and there were several (the first president to preside over a civil war, the first president to proclaim the release of slaves in Washington, DC, the first president to seize the family homestead of a rival military leader -- the Robert E. Lee family home in Arlington -- and others), he was the first president to obtain an issued patent. On this date, May 22, in 1849, the U.S. Patent Office issued a patent to Abraham Lincoln for his invention of affixing bellows to the undersides of a ship so that, upon inflating the bellows with air, the ship achieves greater buoyancy, thereby enhancing safe passage over sand bars and shoals.

Lincoln whittled the wooden specimen of his invention, and this carving now resides at the Smithsonian's National Museum of American History.

That Lincoln recognized the value of invention, and the importance of protecting invention, cannot be denied.

"The patent system . . . secured to the inventor, for a limited time, the exclusive use of his invention; and thereby added the fuel of interest to the fire of genius, in the discovery and production of new and useful things." A. Lincoln, Feb. 11, 1859.

Presently, the U.S. patent system is bowed under serious strain. Congress has appropriated PTO user fees for other government purposes. The PTO's expedited patent review program has been suspended due to these budget cuts. The PTO's program to open satellite offices around the country (beginning with Detroit) has been likewise suspended. The PTO's need to upgrade its computer system and examination processes are stifled under this budget stress.

For a country that many believe continues to lead the world in creative invention and innovation, the government's budgetary burden on the patent system fails to head the admonition of Lincoln to preserve the patent system, thereby causing the diminution of "the fuel of interest to the fires of genius."

Tuesday, May 10, 2011

Financial Assistance Available for New Inventions

Some of you public TV fans may be familiar with the show Everyday Edisons, an Emmy winning TV show on PBS now in its third season. The show, produced by Edison Nation, seeks to match investors to inventors of newly conceived inventions. The CEO of Edison Nation, Louis Foreman, an innovator who attempts to inspire others toward innovation, has spearheaded the formation of a $25 million new-invention fund managed by the Edison Nation Innovation Fund. For a fee of $25, an inventor can submit an idea to the Fund to potentially qualify for an investment up to $250,000 to assist in the commercialization of the invention. Foreman expects that the Fund will select about 100 ideas for investment. More information about the Fund and the investment program are available from Edison Nation and from this Reuters news report.

This blog does not recommend or encourage any inventor's participation in the Edison Nation Innovation Fund, or in any other invention development/funding programs, but offers the foregoing for informational purposes only.

Thursday, May 5, 2011

Have You Seen Me? -- India's 44,000 Missing Trademark Files

For those of us wondering why it takes so long to obtain a trademark registration in India, we now have a bit of an answer. A public notice dated April 25, 2011 has been posted on the India Trade Mark Office website, explaining that 44,404 trademark files have gone missing.

The public notice, written by the India Comptroller of Patent, Designs and Trademarks, reads:
This Public Notice is issued in pursuance of the directions issued by the Hon'ble Delhi High Courtin Civil Writ Petition No.12505 of 2009 dated 6.4.2011. All the public and in particular the registered proprietors are hereby informed that a total of 44,404 files relating to registered trade marks are missing from different branches of the Trade Marks Registry. Branchwise missing list is attached to this notice. The Trade Marks Registry is having critical information in digital format in respect of all these missing files such as the trade mark applied for, the name of the applicant, the address for correspondence, agent on record as available in the Trade Marks Journal and details of renewal and subsequent changes available in the electronic history records of the concerned mark. However, in order to update the trade mark office records it has now become necessary to reconstitute these files with inputs from the registered proprietors. It would also be in the interest of the registered proprietors to have the files reconstituted for better protection and maintenance of their marks. All the registered proprietors/agents of registered trade marks attached to this notice are requested to furnish self attested copies of the available documents such as trade mark application in form TM-1, additional representation , Examination report, Acceptance order, registration certificate, all documents relating to assignment/ transmission, change in name and address of applicant, any court order on the matter and all other relevant documents if any before 31st July, 2011 at the appropriate Registry. The documents so furnished will be digitised and uploaded in the electronic server of the Registry so as to maintain electronic records as well. The Trade Marks Registry will follow the procedure for reconstitution issued by separate Office Circular. 

Controller General of Patents, Designs and Trade Marks
What is interesting is that these missing files came to light not as a result of normal file maintenance practice but rather from the India Trade Mark Office's efforts to modernize its files. It is not clear what the risk may be, going forward, for further loses of files once the moderization process is completed. Further, no word yet as to how many patent files are unaccounted for. That patent modernization process may not have commenced yet, although this is also unclear.
And finally, no word on how any of this has impacted the commercial competitiveness of India businesses. Years ago, during the process of moving from one house to another, my family and I came to live out of boxes for an extended period of time. In fact, most of our non-essential possessions remained in boxes and in storage while we traversed from on house to another over an extended period. Once we finally arrived at our new home, it became clear to all of us that the items in the boxes, the access to which was denied to us for quite a while, were not as critical to our needs or happiness as we had once thought.
Wondering if the same can be said for the owners of the 44,404 lost Indian trademark files. If these trademark owners can go about their business without a trademark registration, and if no one was apparently aware -- until recently -- that the files were lost, then perhaps the need for an India trademark registration may not be all that important, after all. Something to ponder, I suppose.

Wednesday, May 4, 2011

BitTorrent Users: Liberty Media Holding is Looking for You!

The decision last week by the federal court in Los Angeles highlights the potential liability for BitTorrent users who download copyrighted material. BitTorrent is a peer-to-peer file sharing protocol that allows the private transfer of files between private parties. Using BitTorrent, users can join a network “swarm” to simultaneously upload or download content with one another.

If the shared material is protected by copyright, trademark or other laws, then the copyright owner has a challenging problem in learning the identity of the BitTorrent swarm participants. Rights owners, taking a cue from the music industry infringement litigation, are seeking court orders requiring the production of names and contact information of customers of cable operators and Internet service providers who participate in these BitTorrent file sharing swarms.

In the Los Angeles case, Liberty Media Holdings (U.S. District Court for the Southern Dist. of Cal., Case No. 11cv619, order entered April 4, 2011) filed a lawsuit against unknown “Does” claiming that Liberty’s copyrighted motion picture, “Corbin Fisher Amateur College Men Down on the Farm,” (!), was the subject of infringing file sharing via a BitTorrent swarm. Liberty had the IP addresses of users actually participating in the claimed infringing conduct, but did not have the names and addresses of the owners of the IP addresses. After filing its lawsuit, Liberty requested that the court order various cable companies and ISPs, including Charter Communications, Comcast Cable, Cox Communications, Qwest Communications, Time Warner, Verizon, and numerous others, to provide to Liberty the identifying information of the owners of the IP addresses. Liberty was interested in obtaining this information for one important, and obvious, reason: it wanted to add these names to the lawsuit.

The court allowed Liberty to obtain this identifying information from the cable companies and ISPs. In doing so, the court observed that the Cable Privacy Act generally prohibits cable operators from disclosing personal identifying information about its customers absent a court order. The court concluded that it has authority to enter the order compelling the disclosure of customer identifying information when: (a) the plaintiff presents the unique IP addresses, the dates and times of the connection, and the names of the ISPs and cable operators that provide Internet access for these IP addresses, (b) the plaintiff had no other ability to identify the owners of the IP addresses, and (c) the plaintiff establishes its prima facie claim.

The court’s decision will now allow Liberty to obtain the identity of the claimed BitTorrent swarm infringers from the cable operators and ISPs. And once the identities are obtained, these BitTorrent users will likely receive notices of infringement and other claims from Liberty, perhaps in conjunction with an opportunity to pay a substantial sum of money in settlement!

This case should be a warning to all BitTorrent file sharers. Do not download or upload video and audio files that are protected by copyright, trademark or other laws. If you are uncertain whether the files are protected, look for a copyright notice, a trademark notice or other relevant information that may appear on the material. Importantly, be cautious in uploading or downloading material created by others. This material may very well be protected by IP laws and other laws.

Monday, May 2, 2011

The Ninth Circuit Gets Tough With Violations of Computer Use Restrictions

The Ninth Circuit has expanded criminal liability under the Computer Fraud and Abuse Act for violation of specific use restrictions.

The Computer Fraud and Abuse Act (CFAA) creates civil and criminal liability in certain instances for conduct relating to the unauthorized access to a computer, or exceeding the authorized access to a computer. A person is criminaly liable under the CFAA if he or she:

Knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period[.]
18 U.S.C. §1030(a)(4).

On April 28, 2011, in the case of USA v. Nosal, the Ninth Circuit expanded the use of CFAA into the criminal arena. The court made clear the following basic tenets under CFAA §1030(a)(4):

1. If the business owner of the computer does not restrict a user’s access to and use of computer data, then a user’s access to computer data and the use of the data for purposes contrary to the interest of the computer owner does not constitute a crime under CFAA.

2. If the business owner of the computer restricts access to computer data, then there is criminal liability under CFAA §1030(a)(4) when:

a. The person who accesses the computer does so in violation of the computer owner’s specific restrictions on computer access;

b. The person accesses the computer data with the intent to defraud the owner of the computer data; and

c. By accessing the computer data in violation of the restrictions, the person “furthers the intended fraud and obtains anything of value.”

3. If a person without access to the computer induces another person who has access to obtain and pass along restricted data, then under criminal conspiracy theories both the person without access who receives the restricted data and the person with access who passes along the restricted data may be criminally liable.

The Nosal case deals with a former employee of a business who engaged with several existing employees of the business to obtain proprietary information from the business’ computer system. The former employee intended to use this information to establish a competing business. The existing employees had access to the computer data, but their access and use were restricted by the employer’s specific written business rules. The employer’s use restrictions were “clear and conspicuous.” The employer required its employees to sign employment agreements that specifically prohibited “use and disclosure of all such information, except for legitimate * * * business * * *.” Further, the employer’s computer system displayed a cautionary message whenever a user logged on, stating:

This computer system and information it stores and processes are the property of * * *. You need specific authority to access any * * * system or information and to do so without the relevant authority can lead to disciplinary action or criminal prosecution * * *.
The criminal case was brought when the existing employees used their restricted access to obtain proprietary data and pass the data to the former employee for purposes of developing a competing business. This conduct occurred in direct violation of the employer’s specifically defined use restrictions. Nosal represents the first criminal use of the CFAA in this manner by the Ninth Circuit.

The Ninth Circuit’s Nosal opinion goes to some length to explain that the foregoing criminalization of computer access is not designed to impose liability on an employee who uses an employer’s computer system for unauthorized use that is merely personal and non-fraudulent, “for example, to access their personal email accounts or to check the latest college basketball scores.”

While the Nosal opinion involves an employment context, the teaching of Nosal is not so limited. Other examples in which a person can intentionally access and use computer data in violation of specific restrictions and for a fraudulent purpose include:

 downloading data with a “borrowed” access code when the owner of the database specifically requires that each user obtain his or her own access code, or

 accessing and using a computer database to redistribute downloaded data in violation of a personal use agreement, or

 downloading data for commercial purposes when the use agreement restricts usage to personal or household purposes.

While the CFAA is not limited to the traditional concept of hacking, the Ninth Circuit will allow criminal application only when the owner of the computer clearly and conspicuously establishes access and use restrictions.