Denton True Young

There, on this day in 1890, well before the so-called Modern Era of baseball, stood Denton True (Cy) Young, pitching for the Cleveland Stingers in his first professional game. Cy pitched in Cleveland, St. Louis and Boston before his amazing 22-year career was complete, amassing 511 wins.

Cy was elected to the Hall of Fame in 1937. The Cy Young Award, given to the best pitcher in each league, was instituted in 1956.

"Let others hunt, or fish, or sail

Afar o'er ocean's foam;

Give me the game that's played among

The sweet green fields of home.

Bases pitch on a level spot,

Beneath a smiling sky,

No sport for pleasure or for health,

With Base Ball then can vie..."


The Base Ball Song, by W.J. Bullock, 1874

New Protection For Film And Video Actors?

WIPO appears to be moving toward the revival of talks to develop a treaty to protect the performance rights of actors in audiovisual works. The potential issues in this treaty would not only extend moral rights to actors over their performance, but would extend control to actors over the ownership of their performance and the transfer or license of their performance to AV producers.

WIPO has been pressing since 1996 for some sort of performance rights protection but has not seen much movement. Its historical white paper appears here. WIPO now is exhibiting renewed energy in developing a consensus of members at this time.

The U.S. does not recognize moral rights in the same way as exists in other legal systems, although there is a limited right of attribution and integrity to authors of works of visual arts (Section 106A). Further, the U.S. has in place a "work for hire" rule in which the commissioning party in AV works receives a copyright interest without an assignment or transfer from the actors.

Any adherence by the U.S. to WIPO's proposed treaty would certainly require a re-work of both Section 106A's limited moral rights and the work-for-hire rule. It would perhaps also require new consideration of an actor's performance as a stand-alone work, separate from the AV material, together with re-thinking the early termination right.

Javier Bardem testified at a recent WIPO hearing concerning the proposed treaty, and his statement is set out here.

The Big 5 - 0 For The Big 4 - 4

Happy Birthday, Mr. President.

More On India's Missing Trademark Files

My post of last May 5th commented on the large number of trademark files that the government of India ... lost. It is now confirmed by India that some of these files have been found, but many still remain ... lost. Last week's announcement from India's Office of Controller General explains that, as of last April, some 37,046 trademark files could not be accounted for. The good news is that some 12,683 files have now been found. As for the rest, the government has been able to reconstruct some files with the aid of the registrants, the government has ignored some files since the marks had not been renewed (the files are still lost, but who cares?) and some 8,183 files continue to be ... lost.

Two comments. First, if one of the purposes of a trademark registration is to allow registrants to protect the commercial value of their marks, how does the Indian government's failure to manage its trademark files allow for commercial growth and confidence in India, and how does all of this impact U.S. business partners of Indian firms? Very scary. And second, it goes without saying that the annual fee "diversion" from the PTO raises the specter of similar burdensome administrative problems with the PTO. Another very scary concern for commercial business that relies on IP.

Bad Faith Patent Litigation is Sanctioned

The Federal Circuit provides an important review of the expected legal and professional standards for non-practicing patent plaintiffs in the pursuit of their infringement claims. The new case is Eon-Net v. Flagstar Bancorp. The opinion describes the plaintiff, Eon-Net, as being in the lawsuit business. It, or its related entities, filed over 100 lawsuits and, in almost all cases, sought to settle quickly at a small fraction of the defendant’s anticipated litigation costs. In this instance, Flagstar Bancorp refused to settle and fought hard.

Eon-Net’s patent relates to a system of extracting information originating from a hard copy document and placed into computer memory. After extensive and expensive discovery, Flagstar filed its motion for summary judgment, confirming that it did not extract customer information from a hard copy document but rather from its website. The district court granted the motion and determined that the case was exceptional and merited an award of fees. The district court further allowed defendant’s Rule 11 motion for sanctions. Significant attorneys’ fees and sanctions were awarded against Eon-Net and its counsel.

The Federal Circuit reviewed the patent and confirmed that the claims and written description “repeatedly and consistently” defined the invention as a process that derives information from hard copy documents. “[T]he term ‘hard copy document’ appears over 100 times in the common disclosure of the [three] patents.” Flagstar’s customer information came from its website and not from hard copy documents. The case was not “a close call.” “[T]he specification unequivocally compels the construction adopted by the district court.”

The Federal Circuit confirmed that an exceptional case finding to support an award of awarding attorney fees must be based on clear and convincing evidence. The Federal Circuit will not overturn a district court’s determination except upon a finding of clear error. The Federal Circuit determined that the district court’s exceptional finding was not clear error because:

Plaintiff engaged in litigation misconduct:

• It destroyed relevant documents prior to litigation.
• It intentionally did not implement a document retention plan. Indeed, plaintiff’s principal testified that “I don’t save anything so I don’t have to look.”
• It engaged in abusive litigation tactics in that it failed to engage the claim construction process in good faith, it failed to offer a construction for any disputed claim terms, it lodged incomplete and misleading extrinsic evidence and it submitted declarations that contradicted earlier deposition testimony.
• It showed lack of regard for the judicial system by testimonial statements from its principal (“I am so sick of this stuff, especially this haggling over stupidities and trivialities which is the name of the game in litigation.”

Plaintiff brought baseless infringement litigation in bad faith and for an improper purpose: 

• The plaintiff’s patent “clearly refutes Eon-Net’s claim construction.”
• The infringement claim had an “indicia of extortion” because “it was part of Eon-Net’s history of filing nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation.” “[T]hose low settlement offers – less than ten percent of the cost that Flagstar expended to defend suit – effectively ensured that Eon-Net’s baseless infringement allegations remains unexposed, allowing Eon-Net to continue to collect additional nuisance value settlements.”
• As a non-practicing patent plaintiff, Eon-Net had little to lose in the litigation. “In addition to its ability to impose high costs to defend against its meritless claims, Eon-Net placed little at risk when filing suit. As a non-practicing entity, * * * Eon-Net did not face any business risk resulting from the loss of patent protection over a product or process.  Its patents protected only settlement receipts, not its own products.”

The Federal Circuit took particular point to explain the obligation of plaintiff’s attorney. While plaintiff’s attorney stated at oral argument that his client was “difficult to control,” the opinion points out the obvious; “an attorney, in addition to his obligations to his client, has an obligation to the court and should not blindly follow the client’s interests if not supported by law and facts.”

On the issue of Rule 11 sanctions, the Federal Circuit upheld the district court’s determination and observed that plaintiff’s attorney “failed to perform a reasonable pre-suit investigation.” The court confirmed that “A reasonable pre-suit investigation, however, also requires counsel to perform an objective evaluation of the claim terms when reading those terms on the accused device.”

An award of attorneys’ fees and costs of $489,150.48 was upheld, as was the Rule 11 sanction of $141,984.70.  Grand total: $631,135.18.

Sobering.

The Federal Court Show: Take This Court Opinion -- Please

Who needs David Letterman, Jay Leno, Jon Stewart, Stephen Colbert or SNL, when we have the Seventh Circuit Court of Appeals? For good times and good humor, nothing beats the Seventh. I’m not certain if the Seventh’s high rise building in downtown Chicago allows the car fumes to wisp upwards or if it is just too dog gone hot in Chicago during this time of year, but the Seventh Circuit cuts some funny opinions.

Why, take today’s opinion – please. The case of Georgia-Pacific v. Kimberly-Clark is chuckles-filled. As Judge Evans points out, time and time and time again, this case deals with toilet paper. And to underscore the focal (oops, I almost wrote fecal) point of the case, the court observes “Are there many other things most people use every day but think very little about? We doubt it.” As funny as this is (repeat: toilet paper, toilet paper, one more time, toilet paper), there’s more. The opinion next targets “top-rate intellectual property lawyers” who breathe the “rarified air” of unfair competition and trademark infringement under the Lanham Act. Now that’s funny. Judge, you had me with toilet paper!

But wait, there’s more. Judge Evans soon lapses into song, “‘I wish I was in the land of cotton, old times there are not forgotten.’” And quickly, lest we forget, the opinion reminds us “But again, this case is about toilet paper, and who really pays attention to the design on a roll of toilet paper?” Apparently, the paper companies.

Indeed, the case is not about toilet paper but about trademark infringement relating to the lattice designs embedded into the sanitary product and its packaging. Toilet paper and its packaging happen to be the medium on which the trademarks appear.

After several pages of chuckles, the opinion settles down a bit and begins an analysis of common trademark concepts of incontestability, trademark functionality, a Supreme Court case, and trade dress. But, candidly, by the time the opinion talks about law, I lost interest. I want to hear more of toilet paper and Dixie! In fact, the legal portion of the opinion relates to the lighthearted quips in the same way that Stiller & Meara related to the audience during The Beetles first appearance on The Ed Sullivan Show – not well. The only thing the opinion does not do is to criticize the hyphen used by each party in their corporate names. Perhaps the court was holding back?

Two days ago, the Seventh gave us another slammer: White Pearl Inversiones S.A. v. Cemusa. Judge Easterbrook did not provide in White Pearl the same level of comic flair as Judge Evans – perhaps this is why he is the chief judge – but the White Pearl opinion possesses sufficient in-your-face sarcasm to rank up with the best of them. In the midst of important analysis concerning jurisdiction and choice of law relating to a contract dispute between foreign entities, the opinion attacks the lawyers. Judge Easterbrook makes certain that we understand that “White Pearl’s lawyers have scoured the legal phrase-book.” He tells us that “White Pearl is represented by the Chicago office of Wilson, Elser, Moskowitz, Edelman & Dicker; Cemus is represented by the Miami office of Hunton & Williams plus the Chicago office of K & L Gates.” Then to underscore the significance, he explains that “All three are substantial law firms with expertise in business law and international trade – as one would expect when a Uruguayan firm based in Rio de Janeiro sues the U.S. component of a multinational enterprise based in Madrid.” Now we know. Of course, none of this has anything to do with the merits, but who cares? It’s fun to attack lawyers and it’s fun to read about an attack on lawyers.

These opinions are not the first time that the Seventh has reached down to vaudeville. But there’s no point dragging up old cases, and old jokes. You get the idea. Courts that treat litigation, litigants and their counsel lightheartedly should not expect too much respect in return. Is this too harsh to state? No one views David Letterman as anything other than a jester. He may be a brilliant man. He may be extremely learned in many subjects. But who cares. He’s F U N N Y. Is this how the Seventh wants to be viewed; irreverent, frivolous, sarcastic, impudent, belligerent? I’m running out of adjectives, someone help me – please.

I wish I was in the land of cotton …

What is Intellectual Property?

I read an excellent article today that speaks to the practical meaning of Intellectual Property. The article, written by attorney Michael Mann, is located here. Mann explains that he used to refer to himself as a practitioner of patent, trademark, copyright and trade secret law. But he aptly points out that these words do not define IP, but refer instead to areas of law that are applied to IP. He explains that IP, in fact, is something else: it is know-how, message, innovation and reputation. Mann's thoughts provide an intriguing way of thinking about what IP lawyers really do. Importantly, his thoughts provide an excellent way of explaining this to clients.

Foreign Authors: Beware of U.S. Copyright Registration Obligations

The Internet’s ability to distribute content, including new print, music and film/video works, to every corner of the world is amazing. But the universal reach of the Internet suggests caution when print, music and film/video creators seek to expand distribution of their content through the inexpensive and universal distribution tool of the Internet.

Prior to the Internet, a book publisher could publish and distribute a title in a designated geographic area where copyright protection was secured. If a print book was published in the United States only, the publisher could apply for copyright registration in the U.S. and not worry about copyright registration in other countries.

The advent of Internet distribution compels publishers and rights owners to consider copyright protection throughout the reaches of the Internet. Since the posting on line of a new work allows downloading throughout the world, the publisher and rights owner of a posted work are faced with a burdensome rights protection problem.

A recent federal district court case highlights the copyright problem regarding a new work published directly to the Internet. The case of Kernal Records Oy v. Mosley (2011 WL 2223422, S.D. Fla., June 7, 2011), deals with the registration requirement of the U.S. Copyright Law for works created outside of the U.S. but first published on the Internet. In the Mosley case, a sound recording was created in Australia and first published by posting on the Internet for downloading. The rights owner did not register the copyright in the U.S. Ordinarily, this would not be a problem for enforcement in the U.S. since Section 411 of the Copyright Act requires registration of a “United States work” in order to bring an infringement claim. The copyright in a work that is not a United States work need not register in the U.S., ordinarily, in order to commence litigation in the U.S. for infringement.

But the definition of a United States work is broad enough to encompass a work created outside of the U.S. by authors who do not reside in the U.S. The Copyright Act defines a United States work as a work first published:

             (A) in the United States;

             (B) simultaneously in the United States and another treaty party or parties, whose law grants a term of copyright protection that is the same as or longer than the term provided in the United States;

             (C) simultaneously in the United States and a foreign nation that is not a treaty party; or

             (D) in a foreign nation that is not a treaty party, and all of the authors of the work are nationals, domiciliaries, or habitual residents of, or in the case of an audiovisual work legal entities with headquarters in, the United States

The Mosley court held that the first publication on the Internet of the Australian sound recording constituted a simultaneous first publication in Australia and the U.S. and, as such, caused the sound recording to be deemed a United States work for purposes of the registration requirement of Section 411. The Florida federal court dismissed the infringement claim brought by the plaintiff rights owner because of failure to obtain registration prior to commencement of the litigation.

The publication on the Internet constitutes a simultaneous global publication leading to the prospect of global infringement. Accordingly, publishers who seek to benefit from the low cost and ease of world-wide distribution afforded by the Internet must not lose sight of the enhanced protection burdens that result. To be sure, the Mosley decision represents the first trial court decision in the U.S. on the need to obtain U.S. registration of a foreign created work first published on the Internet. Mosley places foreign authors and publishers on notice and represents a sobering application of U.S. copyright law to foreign authors of work created outside of the U.S.

The Georgia Peach

Last week, we witnessed the great shortstop for the New York Yankees, Derek Jeter, obtain his 3000th big league hit. Jeter became the first Yankee to reach this milestone, and he did so in grand style with a home run. Jeter has been the Yankee shortstop since 1996, and it took him 15 years to reach 3000 hits.

 By contrast, today marks the anniversary of Ty Cobb’s 4000th hit in 1927. When he retired in 1928, after 23 years in the big league, Cobb held the Major League record of 4191 hits, a mark that lasted until surpassed by Pete Rose in 1985.

Who Knew?

Trademark

Who knew that law practice group names have been trademark registered? I wonder how many law firms have an employment law group that is marketed as their "Employment Law Group"? I'm guessing a lot. It is interesting to note, however, that the PTO has issued a trademark registration for "The Employment Law Group" in Class 42 for legal services (Reg. No. 3436135). There is also a pending application for "Intellectual Property Law" (Ser. No. 85205240) for legal services, a registration for the "Litigation Media Group" (Reg. No. 3051750) for legal services, for "Intellectual Property" (stylized design) (Reg. No. 1690628) for legal services, and "The Construction Law Group" (Reg. No. 2129634) for legal services. These are but a few of numerous trademark filings related to very common legal service offerings of the type provided by, I imagine, thousands of lawyers and law firms. Who knew that these common legal service descriptions could be registered?

Copyright

Who knew that there is no copyright protection for the idea of a crime fighting hair dresser? We should all be cautiously optimistic that the issue of copyright infringement relating to crime fighting hair stylists has been, apparently, resolved. In Cabell v. Sony Pictures Entertainment, the Second Circuit affirmed in last week's unpublished decision that the plaintiff's idea of a crimefightinghairdresser brandishing a hair dryer in stock fighting poses is not protectable in copyright. Here is the plaintiff's artwork:

Here is Sony's movie art for You Don't Mess With The Zohan:

DMCA

Who knew? Notwithstanding the warnings from Lenz v. Universal Music Group, new cases continue to be filed over liability for claimed wrongful takedown notices. Under the Digital Millennium Copyright Act, a copyright claimant can employ the takedown notice procedure in order to remove claimed infringing postings from the Internet. But wrongful takedown notices create the potential for liability for a wrongful takedown. Lenz posted a 29 second video on the Internet of her infant daughter dancing in the kitchen to the music of Prince's "Let's Go Crazy." Universal sent a takedown notice to the ISP claiming that the video infringed the copyright interest in the song and performance. Lenz sued for the wrongful takedown, arguing that the takedown was wrongful because her posting was protected by fair use of the Prince song. The court agreed. The court in Lenz made clear that liability attaches when the claimant who sends the takedown notice does not have a viable copyright claim in light of the poster's fair use. Now comes word that a similar DMCA case is pending in federal court in Ohio. In Smith v. Summit Entertainment, N.D. Ohio, 3:11cv348, Summit sent a takedown notice claiming to own a copyright interest in Smith's musical work posted on line. The music was taken down. Subsequently, Summit acknowledged that it did not have a copyright interest in Smith's music. Smith sued under several theories, including wrongful takedown under the DMCA, plus defamation and other theories. The court allowed several of Smith's claims to proceed forward in ruling on Summit's motion to dismiss, stating in part: "While defendant post hoc and promptly acknowledged that it has no copyright interest in plaintiff's song, that does not matter. Plaintiff alleges that defendant made an unquestionably false assertion in take down notices and the song was taken down." Lawsuits for wrongful takedowns are tracking up out there! Who knew?

July 4th

The Fourth of July is around the corner. Be careful out there!

Washington State Has A New IP Law: Stolen Or Misappropriated Information Technology

Washington State's new law that takes effect on July 22, 2011 creates state-based liability for use of so-called stolen or misappropriated information technology. In particular, the new act creates liability for the use without authorization, as a component in an "article or product," of stolen or misappropriated hardware or software that was available for retail purchase on a stand-alone basis. Before liability is imposed, the law requires advance notice from the claimant and an opportunity to cure. Liability only applies when the product containing the stolen or misappropriated information technology causes "a material competitive injury as a result of the stolen or misappropriated information technology."

The Washington Attorney General is authorized to bring a claim under this new law, as are private claimants. But the law does not identify who can bring a private claim. Certainly, it appears that the owner of the stolen IP can sue, but the new act does not appear to limit claims to parties who themselves have experienced a material competitive injury. At any rate, the law allows for several remedies, including an injunction, plus damages consisting of "actual direct damages" or "statutory damages of no more than the retail price of the stolen or misappropriated information technology." If the misuse is found to be willful, the court can treble the damage award and assess costs and reasonable attorneys' fees.

The foregoing is but a brief and incomplete description of the new Washington law. Interested persons should review the session law and make an independent determination as to its meaning, application and merit. But from my perspective, this law appears to have a very high burden to overcome -- preemption. That is, the very definition of stolen or misappropriated information technology, and the use thereof, appears to fall squarely within the four corners of a patent infringement claim or a copyright infringement claim. Indeed, even though the so-called "information technology" is not the subject of an issued patent or copyright does not take the potential claim out from under the foot of preemption jurisprudence.

In any event, this may all be sorted out in the future. The fun begins on July 22, 2011!

Death on the Plains

This weekend marks the anniversary of Custer's Last Stand. Fought in southeastern Montana in the area of rolling hills and prairie dogs around the Little Bighorn River, some 600 members of the U.S. Seventh Cavalry were outmanned by Sitting Bull's combined force of some 20,000 Sioux and Cheyenne.

On June 25, 1876, Custer's army came upon the Indian village, peacefully camping along the Little Bighorn, and elected to attack. Custer did not believe the information from his scouts as to the true size of the Indian position. Custer separated the army into several columns; he lead one, General Reno another and General Benteen a third. A fourth column stayed in the rear to protect the army's horses. Custer's column was completely and swiftly annihilated while Reno lost about a third of his column.

Reno ordered a retreat that became chaotic, and for the next day fought off the attacking Indians in a holding action from his entrenched positions. The Indians withdrew at noon on June 26th.



Reno was severely criticized for his actions in not coming to Custer's aid. While he was exonerated following an 1879 formal inquiry, Reno's career and legacy were seriously harmed.

A Question Of Infringement: Digital Course Packets Used In University Instruction

A current copyright infringement lawsuit, pending in the federal court in Georgia, concerns the practice by instructors at Georgia State University of posting electronic versions of copyrighted material on the GSU computer system for use by course students. Importantly, from the point of view of the plaintiffs (Cambridge University Press, Oxford University Press and Sage Publications), GSU fails to obtain permission and pay for the electronic posting of the copyrighted course materials. Although GSU does apparently obtain permission and pay rights fees for traditional paper course packets, it takes the position that the electronic course packets are fair use. As such, the three publishers are seeking an injunction to prevent further postings of electronic course packets at Georgia State without permission.

Both parties are fighting hard. A bench trial was held several weeks ago and the parties are presently participating in post-trial briefing. A decision should be forthcoming from Judge Orinda D. Evans sometime this summer, hopefully prior to the start of fall classes.

The mechanism employed at GSU to electronically post course materials is interesting. The university has two systems in place for this purpose. In one system, the instructor fills out a fair use check list form, makes an initial determination whether fair use does or does not exist by, apparently, adding up the pro and con check marks, and then submits the form to the library for review. If the checks add up to fair use, then the library will digitally copy the copyrighted material and electronically post the digital file on the university's computer system for access by course students. In the second system, a similar fair use check-off system is employed by the instructor but the instructor uploads the copyrighted material directly to the university's computer system. In either case, the instructor will assign the digital course packets to class students as part of the class requirements.

The publishers argue that there is no practical difference in terms of copyright harm between distributing the course packet in paper form or in digital form. [The case of Princeton University Press v. Michigan Document Services, Inc. is one of the leading cases finding that the production of paper course packets by a commercial printing service does not constitute fair use.]

The fair use check-off form is of interest. A copy of the form is reproduced below. It takes the various fair use elements from the Copyright Act and case law and creates two columns, for and against fair use. Here is the form:

The problem with this form, as I see it, is not that the form omits any of the key elements of a fair use analysis, but rather that the form compels the application of equal weight to all of the factors across the board. In counting up the check marks, it certainly appears that the result will constitute fair use in all circumstances. If the fair use exemption were this broad, then no educational institution would be liable for copyright misuse since in virtually all instances of educational use the check marks will tally toward fair use. Logically, this cannot be. Indeed, if greater weight were applied to certain of the factors, and less or no weight to others, then the exemption calculus might produce different results than merely adding up the equally-weighted check marks.

Georgia State is not the only educational institution to employ an equally-weighted fair use check-off form. Columbia University, as an additional example, provides a similar form to its instructors.

It will be interesting to learn Judge Evans' view on all of this once the trial opinion is entered. Stay tuned.

There Is No i In Apple

For some reason, Apple is in love with the letter i -- using it on its products (iPad, etc.) and services (iTunes, etc.). For some other reason, Apple does not pay enough attention to the need for trademark clearance searches. Last week, Apple was sued by iCloud Communications of Phoenix for trademark infringement of the mark iCloud. Now comes word that a small New York publisher, J.T. Colby, is suing Apple (S.D.N.Y., 11-cv-4060-DAB) for use of the trademark ibooks for Apple's electronic library service. Colby claims to own the common law trademarks "ibooks" and "ipicturebooks," asserting that it acquired priority rights to ibooks going back to 1999 from a predecessor user. Note to Apple, it costs a lot less to obtain and analyze a good trademark clearance report than to litigate trademark claims after a product launch.

It's Not Just .com Anymore!

It's official. This morning in Singapore the Internet Corporation for Assigned Names and Numbers (ICANN) voted to open up the filing of generic top level domains (gTLDs). The new world of .xxx, .disney, .coke, .(your tradename here) is now upon us.

The Hangover: Part II -- Case Settled?

Reuters is carrying a report this morning that the copyright infringement claim relating to a face tattoo has been settled. There is no present report as to how much money, if any, was paid in settlement and there is no filing in the case records relating to the settlement as of this morning. My prior blogs on the topic of the copyrightability of facial tattoos were published on May 26 and May 30.

Investment Firms Lose Their News To News Aggregators

News aggregators won a big victory today in the Second Circuit Court of Appeals in the case of Barclays Capital v. theflyonthewall.com. The Second Circuit held that it is not a violation of the Copyright Act for a news distributor to report the fact that a stock analyst makes an investment recommendation. Nor is it a violation of the "hot news" misappropration tort when the news distributor accurately reports that the investment recommendation originates from its true source.

In the early hours prior to the opening of the stock exchange, Barclays and other investment firms provide investment analysis and recommendations to their subscribers and clients. The sales staff of the investment firms then contact their customers in an effort to procure investment transactions based on the recommendations. theflyonthewall is a news gatherer, or aggregator, that claims to be the "fastest news feed on the web." theflyonthewall somehow obtains the recommendations from the investment firms early in the day, often before the markets open, and distributes the recommendations to its subscribers. In doing so, the investment firms claim that theflyonthewall undercuts their research service and ability to trade on the hot news of their recommendations.

The Second Circuit held that there is no hot news claim if all that is done by theflyonthewall is to truthfully report that an investment firm makes a certain investment recommendation. The fact that an investment firm makes a recommendation is, itself, news. theflyonthewall is merely distributing this news without improperly "free riding." The Second Circuit observed that if theflyonthewall copies the recommendation report of the investment firms so as to induce a customer into believing that the recommendation originates with theflyonthewall, then this would be impermissible free riding and violation of the hot news tort. But theflyonthewall accurately reports a recommendation and the origin of the recommendation from the particular investment firm. In this circumstance, the hot news tort is preempted by the Copyright Act since the recommendations come within the subject matter of copyright and the scope of copyright protection. And because the Copyright Act does not extend protection to facts, the fact that an investment firm makes an in investment recommendation is not protected in copyright, either.

So, in the end, the investment firms who invest significantly in investment research are not able to control their own investment recommendations to their customers. Their recommendations are not protectable by copyright as non-protectable news or fact. Their recommendations are not protectable under the hot news misappropriation theory. This is the case even in relation to a fast acting news distributor who can distribute the recommendation quicker, at potentially less expense, and then seek to direct the customer to make a transaction from a discount trader. It appears that the news distribution problems impacting the newspaper industry now squarely have reached the stock analysts desks on Wall Street.

Stanford Lost A Fortune: Faulty Drafting Of An Inventorship Agreement

The wrong word choices can lead to devastating results -- just ask Stanford University!

Last week’s Supreme Court decision underscores the necessity of careful drafting in employment and inventorship agreements. Stanford University lost out on the ownership of valuable patent rights because of poor word choices. The problem? Stanford's assignment form used the future tense (I agree to assign) rather than the present tense (I hereby assign).

The factual circumstance was not all that unusual. Stanford hired a research fellow, Dr. Mark Holodniy, to work on HIV research. At the time of the hire, Dr. Holodniy signed Stanford’s Copyright and Patent Agreement, by which he “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at the University. Thereafter, Stanford loaned Holodniy to a small California research firm, Cetus, to collaborate on HIV research. Cetus required Holodniy to sign its Visitor’s Confidentiality Agreement that provided Holodniy “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus.

Holodniy worked at Cetus for a period of time on HIV testing processes before returning to Stanford. As a result of further research conducted at Stanford by Holodniy and others, Stanford was awarded several patents relating to HIV measurement techniques. Cetus was eventually acquired by Roche Molecular Systems, by which Roche specifically acquired all rights that Cetus owned in its Visitor’s Confidentiality Agreement. Thereafter, Roche commercialized the HIV quantification methods developed by Holodniy at Cetus, and now sells its HIV test kits to hospitals and HIV clinics world-wide.

Stanford sued Roche for patent infringement, claiming that Roche’s HIV test kits infringed Stanford’s HIV measurement patents. Roche argued that it had an ownership interest in the HIV inventions by virtue of its acquisition of Holodniy’s Visitor’s Confidentiality Agreement. Stanford disputed Roche's ownership interest, pointing out that Holodniy had no rights to assign to Cetus since he had earlier signed Stanford’s Copyright and Patent Agreement.

The district found that Cetus’ Visitor’s Confidentiality Agreement transferred Holodniy’s inventorship rights to Cetus. However, the district court also held that, because the development of the HIV measurement technique was funded by federal money, the Bayh-Dole Act superseded the assignment to Cetus and placed ownership of Holodniy’s invention with the recipient of the federal funds, Stanford.

The Federal Circuit disagreed with the district court. It held that the choice of words in Stanford’s Copyright and Patent Agreement did not transfer to Stanford a present interest in Holodniy’s inventorship in HIV measurement research. The Federal Circuit determined that Stanford’s Copyright and Patent Agreement constituted only an agreement to assign in the future. On the other hand, there was an actual, present transfer of Holodniy’s inventorship rights by virtue of the present assignment provided for in Cetus’ Visitor’s Confidentiality Agreement. The Federal Circuit also held that the Bayh-Dole Act does not change normal invention ownership rules, even when the invention is developed with federal funds.

The Supreme Court granted certiorari on the issue whether the Bayh-Dole Act supersedes normal contract language pertaining to assignment of an inventorship interest when funding is provided by the federal government. The Supreme Court made clear that, since the initial patent act of 1790, an invention is owned in the first instance by the inventor, and there must be an actual present assignment of the rights in the invention in order to cause a transfer from the inventor. The Supreme Court further confirmed that the Bayh-Dole Act does not usurp this established law.

The problem with Stanford’s choice of words was that “agree to assign * * * right, title and interest in” only created a promise to assign in the future, not a present assignment. A further problem was that Stanford’s language related only to inventions, and did not seek to transfer broader rights for ideas, improvements and issued patents.

On the other hand, Cetus' agreement specifically provided that Holodniy “will assign and do[es] hereby assign.” The language assigned the inventor’s “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus. Not only does the Cetus language constitute a present-day assignment of Holodniy’s present and future inventions, but it provides an expansive assignment of ideas, inventions and improvements.

While the Supreme Court holds that the Bayh-Dole Act does not change, but supports, traditional law of patent ownership and transfer notwithstanding the use of federal funds in the development of the invention, Stanford lost exclusive patent rights from poor choice of language in its employment agreement with Holodniy. Critically:

1. The inventor is the initial owner of an invention, even if the invention is developed during the course of the inventor’s employment.
2. The inventor’s employer must obtain a present-day assignment in writing from the employee-inventor in order to obtain an interest in the invention. A promise to assign rights in the future is not good enough to create a present assignment.
3. An assignment of rights in an invention is too narrow. The employer should make certain that the assignment covers the ideas, improvements and issued patents, as well.
4. Funding of invention development by the federal government does not, without more, change these rules.

Liberty

On this date 126 years ago in 1885, a nice round number to be sure, the Statue of Liberty arrived at its permanent place of repose in New York Harbor. The 151 foot high statute was a gift from the people of France to commemorate the 100th anniversary of American independence.

Jack Boucher, photographer, 1984

The Supreme Court Tells Microsoft To Reboot

It must be tough being Microsoft. This huge multi-zillion dollar company just can't seem to catch a break. It gets no respect. Apple is floating in the clouds with its ultra-innovative efforts. Wasn't Microsoft claiming to be the great innovator at one point in time? Paul Allen is brow-beating his former Microsoft friends, telling the world who the real Idea Man truly is. In your face, Bill! And now, the Supreme Court is kicking sand at Microsoft.

In one corner, you have Microsoft, the Redmond behometh that outsources legal tasks overseas and tries to talk the Supreme Court into seeing things its way. In the other corner, you have nine Supreme Court justices who could care less about Word.

In Microsoft v. i4i, the Supreme Court today tells Microsoft that, while it is very sorry that Microsoft lost a huge jury award for willfuly infringing i4i's patent in some of Microsoft Word's products, too bad. Microsoft argued that its defense of patent invalidity should not be based on a clear and convincing standard but the less arduous preponderance of the evidence standard. Microsoft particularly argued that this should be the case when the Patent Office issues a patent without examining relevant prior art. Microsoft claimed that i4i's patented software contained elements of i4i's earlier software and therefore, because the earlier software failed to satisfy the on-sale bar, the Patent Office's issuance of i4i's current patent was faulty. Of note, the code for i4i's earlier software had been destroyed years prior to commencement of the litigation. i4i relied on the testimony of the inventors of the earlier software to explain verbally why the earlier destroyed software was not present in the patented software. [ I can only hope that the inventors did not use shadow puppets during their software testimony! ] In any event, Microsoft lost big time at trial even though i4i did not introduce into evidence its former code that was the subject of the on-sale bar! Brutal!

The Supreme Court explained that §282 of the Patent Act very clearly provides that an issued patent is presumed valid. The meaning of the term "presumed valid" is well settled in common law. Indeed, the Supreme Court cites to Justice Cardozo, and his analysis of over a century of case authority, confirming the clear and convincing burden of proof needed to overcome a presumption of validity.

Let's be clear. Whenever any court, including the Supreme Court, cites to Benjamin Cardozo, the appellant is going to lose. I am not aware of any court overturning Cardozo. Indeed, it should not have been necessary for Microsoft's counsel to read to the end of the Supreme Court opinion, where the court writes Affirmed, to know that Microsoft lost. This should be clear once Cardozo's name is mentioned early in the opinion. Hopefully, Microsoft will not be billed for any time reading past the name Cardozo.

Benjamin N. Cardozo (1870 - 1938):

So, bottom line, the proof of invalidity requires a clear and convincing showing, just as has been the case for decades. Further, a jury is willing to believe a software inventor's testimony concerning software code that is destroyed and not introduced into evidence. Microsoft just can't catch a break.