Mediation of Patent Disputes—Part 3 of 3

In the first two parts of this series (Part 1, Part 2), we examined what mediation is and considered reasons why a party might desire to engage in mediation. In our final segment, we discuss how parties may come to mediate a patent dispute and provide an overview of the mediation process.

Getting to Mediation

Parties can arrive at mediation in various ways.

1. Some courts order parties to a patent litigation to participate in compulsory mediation. The old adage “you can lead a horse to water but you can’t make it drink” is applicable to court ordered mediations. While parties may be ordered to participate in mediation, they cannot be ordered to agree to terms of settlement. If the parties are not motivated to resolve the matter, they will only go through the motions. For this reason, court ordered mediations are less likely to be productive of a settlement than those to which parties voluntarily submit. 
2. Courts may inquire whether the parties desire to mediate. Some courts will refer the matter to federal magistrates or a private mediator if the parties are so inclined.
3. Some contracts include a provision that requires a party to engage in mediation prior to the filing of a lawsuit. 
4. Parties to a dispute can privately agree to engage in mediation before or after the initiation of a lawsuit in an effort to find an acceptable resolution of the matter. 

Preparation for Mediation

Frequently, mediators will request that each party submit a written mediation statement that sets forth the party’s view of the case and the relief sought. The purpose of the written statement is to inform the mediator of the subject of the dispute and the posture of the matter.

In preparation for mediation, parties should consider a number of questions that are virtually certain to be front and center during the discussions. Some of these questions are summarized below.

1. What are the objectives you seek to accomplish through mediation and what are the underlying interests that would be furthered if these objectives were achieved?
2. What is understood with respect to the objectives of the other party and what are the underlying interests of the other party that would be furthered if their objectives are achieved?
3. What options exist for resolution of the dispute? This question should be considered with the recognition that it is unlikely that the matter will resolve if all of one party’s interests are met and none of the other party’s interests are met. Accordingly, consider options that would be acceptable to you and may be acceptable to the other party. Such options are not limited to the remedies that would be available through litigation—in mediation they are limited only by the creativity and desires of the parties.
4. What is the best alternative available if the matter does not resolve through mediation, and what are the implications if that alternative is pursued in lieu of a negotiated agreement?
5. What are the implications in terms of cost, time to resolution, market disruption, productivity, sales, etc., if the parties do not resolve the matter through mediation?

Preparation for the mediation increases the likelihood of a satisfactory outcome. A satisfactory outcome may involve a settlement on negotiated terms or the recognition that some alternative course of action would be preferable to a settlement on terms available through the mediation. Having considered the above questions in advance of the mediation, the parties will be well positioned to have a constructive dialogue around possible bases for resolving the dispute through mediation.

The Mediation Process

At the outset of the mediation hearing, mediators typically explain the mediation process to both parties. A representative of each party with authority to settle the matter should be present for mediation to be effective. The mediator will confirm that the persons in attendance have such authority if such has not been confirmed in advance of the hearing. In addition to a representative of each party with decisional authority, counsel for each party may attend to provide advice to their client during the course of the mediation. 

Following an explanation of the mediation process, a mediator may elect to engage in a joint session in which each party explains their position and their objectives. Not all mediators commence the mediation with a joint session. Some mediators are of the view that starting the mediation with a joint session only heightens tensions in an already stressful situation. Mediators of the view that an initial joint session may not be beneficial will proceed to private sessions in which they explore the interests of the respective parties and options for resolution of the matter proposed by the parties. The mediator typically engages in shuttle diplomacy between the parties, sharing information that each party has authorized the mediator to disclose to the other party. In private sessions, the parties typically are more willing to confide in the mediator with respect to underlying motivations for positions they may have and possible solutions, while understanding that the mediator will keep in confidence information that is not to be disclosed to the other party.

If the parties arrive at a resolution in mediation, a memorandum summarizing the terms of their agreement is typically drafted. The memorandum may be reduced to a formal settlement agreement by counsel for the parties.

Mediation is not the answer for every party involved in a patent dispute. Nevertheless, given the advantages afforded by an early settlement, it should always be considered.

Mediation of Patent Disputes—Part 2 of 3

Part 1 of this series discussed the general nature of mediation as a dispute resolution process. There are a number of reasons why parties may find it advantageous to attempt to resolve a patent dispute through mediation rather than litigation. Some of those reasons are considered below.

1. Uncertainty of litigation outcome – After more than 35 years in practice, I have come to understand that the only thing certain about the outcome of litigation is the uncertainty of the outcome. This is particularly true in the arena of patent litigation, which involves complex issues of law and fact. In the United States, most patent cases are tried to juries. The jurors, selected out of the general public, are rarely technically trained and, as a rule, are often ill-equipped to understand the highly technical subject matter involved in many of the cases. Even if a jury or judge understands the technology, it is often difficult to predict in any given case whether infringement will be found or the validity of asserted claims will be upheld, as the outcome frequently involves subjective determinations.
   
2. Years until final judgment – It takes years to resolve a patent dispute in the courts. After a judgment from a federal district court, the losing party may file an appeal, which is likely to take another year or more. By the time a final judgment is rendered, the exigent circumstances that initially motivated the filing of the lawsuit may no longer exist. An accused party may modify their product following the filing of suit so as to avoid infringement and limit the possible damage recovery. An injunction precluding the ongoing sale of an accused product may be of less importance due to changes in the marketplace. For these reasons, a favorable judgment after years of costly litigation may represent only a pyrrhic victory.
   
3. Litigation costs – Over 90% of patent lawsuits are settled before trial. Litigation costs for a patent case through a district court trial routinely exceed $1 million. For those companies that can afford the fight, litigation often presents a major distraction for the business. Many companies are unable to afford the costs associated with a prolonged and vigorously contested patent litigation. In contrast, mediation is a comparatively inexpensive process that typically lasts a day or involves a few sessions spaced over weeks or months. A mediation that results in a settlement of a patent dispute will avoid substantial litigation costs, including costs associated with discovery, motion practice, trial preparation, trial, and any ensuing appeals.
   
4. Flexibility of settlement terms – The parties to a patent infringement action will usually either view the outcome as a win or a loss. A final judgment by a court offers no opportunity for the parties to fashion a creative resolution that may serve the interests of both parties. By contrast, in mediation, the parties determine the terms of settlement and any options may be considered—e.g., phase outs, cross-licenses, other license arrangements, manufacturing agreements, etc.
   
5. Selection of Mediator(s) – Unlike litigation, in which an assigned judge presides over the case, parties to mediation may select the mediator. Judges often have little familiarity with technical matters and some judges have little experience with patent cases. On the other hand, selection of a mediator by the parties allows the parties to obtain the services of someone familiar with patent law or the specific technology. The selection of a mediator with specific knowledge related to the involved subject matter reduces time and effort educating the mediator with the legal and/or technical issues involved.
   Additionally, while many mediations involving patent disputes proceed before a single mediator, the parties may elect to engage two or more mediators should there be a good reason to do so—e.g., one mediator may have particular expertise in the facilitative mediation process, while another may be a technical or patent expert. While the mediator’s role is not to render a decision, should the parties desire that the mediator engage in an evaluation of the case, a mediator with expertise in the relevant field may be desired by the parties.
   
6. Continuing Relationships – The filing of a lawsuit often does little to improve the relationship between the parties to the suit. There may be an ongoing relationship between two parties and/or a desire that the parties continue to work together once their differences are resolved. Mediation provides a process for parties to resolve their differences without the lingering animosity and distrust that often accompanies “civil” litigation. There is no loser in a settlement that is fashioned by and agreeable to both parties.
   
7. Confidentiality of mediation – Although information disclosed to the other party in a patent litigation can be prevented from disclosure to the general public via a protective order, court proceedings are public proceedings. Mediations are not public proceedings. With only a few exceptions, mediators have an obligation to maintain in confidence information obtained from the parties. In most circumstances, mediators cannot be subpoenaed to testify or produce documentation or notes in a subsequent judicial or administrative proceeding. Additionally, parties to mediation can contractually agree that the parties will not disclose or use any information obtained during mediation for any purpose apart from the mediation.
   
8. Prior efforts at settlement have been unsuccessful – If parties to a dispute would prefer to resolve a matter by settlement but have been unsuccessful in their unaided efforts, facilitative mediation may be of assistance to overcome obstacles the parties were unable to address on their own. 

It is often said that mediation provides an opportunity for parties to trade hope for certainty. It is this opportunity for certainty that can make mediation of a patent dispute particularly appealing. A settlement achieved through mediation may be viewed as a victory in its own right due to the avoidance of future costs, business distractions, and the uncertainly associated with a prolonged patent litigation.

In our final segment (Part 3), we will conclude with some discussion on how parties arrive at mediation and discuss the mediation process.

Mediation of Patent Disputes—Part 1 of 3

In recent years, mediation has been used with increasing frequency by parties to patent disputes for good reason. Mediation has the potential to achieve a rapid resolution of the matter upon terms mutually agreeable to the parties.

Mediation is an extra-judicial process that has been described as an assisted negotiation. It is a voluntary process in which parties to a dispute seek to resolve their differences with the aid of a neutral, disinterested third party (a mediator), who facilitates discussions by attempting to focus discussions on the underlying interests of the parties. In the course of the mediation, the parties are encouraged to explore options of their own creation that address their respective interests. The mediator neither advocates on behalf of either party nor seeks to impose a resolution. Moreover, the mediator has no power to render a decision with respect to the matter. The parties are solely responsible for the terms of any settlement reached through mediation. Mediation and arbitration are sometimes confused; however, they are different forms of dispute resolution. In arbitration, a disinterested party (arbitrator) functions like a judge, and the arbitrator, not the parties, determines how the matter is to be resolved.

Mediation is attractive because, if a resolution is reached, the parties avoid prolonged uncertainty of outcome. In a circumstance in which a party is willing to consider mediation of the dispute, a question arises as to when mediation should be pursued. If pursued shortly after the filing of a patent lawsuit, a party may be of the view that there has been insufficient discovery to evaluate the merits of the case. If delayed well into discovery, the parties will have incurred substantial litigation costs. When successful, mediation can produce a resolution in days or months, and at far less cost than a resolution through the courts.

Although mediation has proven to be an effective process for resolving patent disputes, as mediation is a voluntary process, a settlement will be obtained only if the parties find common ground. If a patent owner initially demands that an accused infringer cease the manufacture and sale of an accused product, and the accused infringer refuses to accede to this demand, it would seem that resolution of the matter through mediation would be difficult to achieve. In practice, however, the initial demands are simply viewed as the starting positions, and efforts are made to determine if there is a basis for the parties to bridge what may initially appear as irreconcilable differences.

In this series, we will seek to demystify the mediation process, while addressing some of the unique considerations involved in patent disputes. The next segment will consider reasons why parties to a patent dispute may prefer mediation as a dispute resolution alternative to litigation. In the final segment, we will consider how parties may arrive at mediation and generally discuss the mediation process.

Young Innovators Begin Patent Filing for Robot Invention

The United States Patent and Trademark Office can be a tricky area to navigate if you are not familiar with its proceedings. When a team of young inventors and their mentors approached us at Preti Flaherty to help begin the process for a patent application, we were excited to lend a hand.

Pro Bono Case Helps Team of Students

This unique pro bono case had me meet a team of students ranging from grades four to six. The team and their coaches took a road trip from New Hampshire to our Intellectual Property office in downtown Boston, where they presented their First Lego League project in front of me and my colleagues.

If you are not familiar with First Lego League, it encourages elementary and middle school students around the world to research a real-world problem (ex. food safety, energy, or recycling), and challenges them to come up with a solution by encouraging them to design, build, and program a robot. Not any easy feat to accomplish between homework, family time, and play time. 

The Technical Difficulties!

We are not at liberty to share the details of team The Technical Difficulties!’ inner workings, but I can say they have selflessly chosen to focus on a robot that will help the world of the blind and their faithful seeing-eye dogs. 

I have enjoyed the process of advising and guiding the team through the beginning of their patent filing journey by filing a Provisional Patent Application for the invention. Disclosure: a provisional patent application allows you to file without a formal patent claim, oath or declaration, or any information disclosure statement. After filing the Provisional Patent Application, the team took another trip to Boston so that we could discuss how best to continue their journey.

All of us here at Preti Flaherty look forward to seeing where their IP journey takes them from here.

Patents as a Technology and Marketing Resource

Several types of patent searches are known for identifying patents and published patent applications of potential interest. One type of search, often called a novelty search, is employed to identify prior issued patents and published patent applications relating to a particular concept or idea in an effort to assess patentability of the concept. Another type of search, often known as an infringement or freedom to operate search, is conducted in an effort to identify patents the claims of which may present infringement questions with respect to an intended product.

Patents and published applications are sometimes overlooked as a general technology resource for purposes of product development and market research. The quest for such patents and published applications, sometimes known as a state-of-the-art search, serves the purpose of gaining a general knowledge of the patent landscape in respect to a particular area or field of technology rather than just a specific concept. Such a search can be conducted for the subject matter of interest and also for names of known inventors and owners of relevant technology. Some patents often contain a background section that traces the patent history of prior related technology, which can reveal additional information of potential relevance.

Patents and published applications are readily accessible via the website of the United States Patent and Trademark Office (USPTO) and via the websites of other countries or jurisdictions, such as the European Patent Office (EPO). Patent information is also available via commercial sites, such as Google Patents.

Patents and published applications identified from such searching activity can assist in defining:

• what companies are in the field 
• what technologies may be in use
• the product space of interest
• areas of patent concentration
• competing technologies
• opportunities for product differentiation 
• areas for further market and product investigation
• technologies that present infringement risks

Information collected from such patent investigations can prove to be of value in determining a product and market development path, whether a product concept is distinguishable from what is known and possibly patentable, and what the competitive picture may be. Such investigations may also illuminate the need for more specific patent searching to assess risks of infringement of a particular product implementation.

The scope of this type of patent investigation can vary to suit particular purposes and budget. For example, the investigation may be limited in geographic scope to cover only the United States or other countries of interest, and may vary in technological scope to suit specific circumstances. The investigation may also be conducted in stages depending on results from a prior stage, and may extend to non-patent information such as can be obtained on the web and other sources.

It is therefore useful to remember that product development and market research projects can often benefit from the information and knowledge gained by the identification and review of relevant data.

Your Business May Be Infringing on a Patent. What Should You Do?

What should your company do if it becomes aware of a patent having claims that appear to be relevant to one of its products or receives a cease and desist letter charging infringement?

Enhanced Damage Awards and Awards of Attorney’s Fees in Patent Cases

When a suit for patent infringement is filed, in the event of an adverse judgment, an infringer may be subject to permanent injunction that precludes further infringement and an order to pay the patent owner money damages to compensate for the infringement.

In certain circumstances, the courts have the discretion to increase the amount of the damage award. Under the patent laws “the court may increase the damages up to three times the amount found or assessed.” The damages are enhanced in circumstances where the infringement is said to be “willful.” Additionally, “[t]he court in exceptional cases may award reasonable attorney’s fees to the prevailing party.” A finding that the infringement is willful and that the case is exceptional often go hand in hand. These provisions pose substantial risks in the event a court finds that the accused party infringes the asserted patent(s) and that the infringement was willful or that the case was exceptional since the multiplication of the damages and the patent owner’s attorney fees can involve large sums.

The Evolution of the Law of Willful Infringement

A historical perspective is useful in understanding how the courts have dealt with claims that an infringement was willful.

In 1983, the U.S. Court of Appeals for the Federal Circuit (CAFC) in Underwater Devices v. Morrison-Knudsen Co., held that where “a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. . . . Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of possible infringing activity.” The 1983 decision of the CAFC was in response to “widespread disregard of patent rights” that was perceived to be “undermining the national innovation incentive.”

The Underwater Devices Court stated that where a defendant, in good faith, relied on a competent opinion of counsel that concluded there was no infringement or that the relevant patent claims were invalid, the opinion would serve as a defense to a charge of willful infringement. Thus, as of the 1983 timeframe, in response to a cease and desist letter charging infringement, the accused infringer was well advised to obtain an opinion of counsel that concluded that there was no infringement or that the asserted claims were invalid if counsel could provide such an opinion. To satisfy the requirement that the opinion be viewed as a “competent opinion of counsel” such opinions usually would involve a thorough analysis of the claims, the patent specification, the Patent Office file history and any relevant prior art.

Competent opinions of counsel routinely served as a defense to charges that an infringement was willful and that a case was exceptional so as to justify increased damages and an award of attorney fees.

The CAFC revisited the law of willful infringement in 2007 in In re Seagate Technology, LLC. In the Seagate case, the Court held that “to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” The Seagate Court thus equated “willfulness” to reckless behavior; i.e. a reckless disregard to the patent owner’s rights, and expressly abandoned the duty of due care requirement along with the associated affirmative obligation to obtain an opinion of counsel enunciated in the Underwater Devices case. As a consequence of the Seagate decision, it became more difficult for patent owners to obtain enhanced damage awards and parties charged with infringement were more reluctant to seek opinions of counsel and incur the costs associated therewith. Instead, when charged with infringement, parties often asserted that their conduct was not objectively reckless based on internally generated theories or theories developed during the litigation. With the Seagate decision, the pendulum had swung in favor of parties accused of infringement and enhanced damage awards were more difficult to obtain.

In 2016, the Supreme Court, in Halo Electronics, Inc. v. Pulse Electronics, Inc., considered the requirements for a finding of willful infringement. As a result of this decision, the pendulum once again swung in favor of the patent owner. The Halo Court stated that the Seagate test reflected “a sound recognition that enhanced damages are generally appropriate ... only in egregious cases” but that the Seagate test was unduly rigid and “impermissibly encumbers” the discretion granted to the district courts. The Supreme Court in Halo equated willfulness with egregious conduct without setting forth a more explicit standard and explained that “[a] patent infringer's subjective willfulness, whether intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” The Halo Court also rejected the requirement that willfulness be proved by clear and convincing evidence as had been the standard of proof applied for decades and held that “the statute at issue supplied no basis for imposing a heightened standard.” Thus, post Halo, patent owners may satisfy their burden of proof for a finding of willful infringement by showing egregious behavior by the infringer with proof by a preponderance of the evidence rather than by the heightened clear and convincing evidence standard. Left open for interpretation was what actually constitutes egregious behavior. Given this context, following the Halo decision, opinions of counsel appear once again to take on greater importance as is it less likely that an accused infringer, having sought and obtained a competent opinion of counsel as to non-infringement or invalidity, would be found to have engaged in egregious behavior so as to justify enhanced damages.

Conclusion

As a result of the Halo decision, in response to receipt of an assertion that a product infringes another’s patent rights, or upon recognition that the claims of an issued patent could potentially be relevant to a company’s business, the matter be referred to patent counsel to assess the patent claims with respect to their applicability and/or validity. Patent counsel may then consider whether, given the circumstances, an opinion of counsel can or should be provided. The costs associated with the preparation of such an opinion are typically far less than the additional amount payable to a patent owner should enhanced damages or attorney fees be awarded following an adverse judgment.

Some Foreign Activities Can Result in Liability for Patent Infringement Under US Patent Law

It is generally known that one who manufactures, uses, sells or offers to sell a product in the US or that practices a process in the US that is covered by one or more claims of a US patent is liable for patent infringement under US law.  Less well known is that certain activities involving activities outside of the US can give rise to a cause of action for patent infringement.

(1)       Importing a product manufactured by a patented process

Under US law one who imports into the US or offers to sell, sells or uses within the US, a product made by a process patented in the US is liable for patent infringement even if the process is practiced outside of the US.  35 U.S.C. 271 (g).  Thus, one cannot avoid claims to a patented process simply by making a product in accordance with the patented process overseas.

(2)       Importing unpatented components of a patented invention from a foreign supplier for use is an infringement in the US

A recent court case considered the authority of the US International Trade Commission (USITC) to issue exclusion orders barring importation of goods where the subject goods did not infringe as of the time of importation but were used by the importer to directly infringe a US patent at the inducement of the foreign supplier of the goods.  Section 337 of the Tariff Act of 1930 authorizes the USITC to investigate allegations of unfair trade acts in the importation of articles that infringe a valid United States patent.  19 U.S.C. § 1337(b)(1).  The Court of Appeals for the Federal Circuit (CAFC) recently held that the USITC has the authority under Section 337 of the Tariff Act to issue an exclusion order blocking the importation of products that do not directly infringe at the time of importation into the US where the foreign seller was inducing a direct infringement by the importer. The Court held that this position was reasonable because it was consistent with the mandate of the USITC to “safeguard United States commercial interests at the border” even absent a direct infringement at the border.  Suprema, Inc. et al. v. International Trade Commission et al., 2012-1170 at 26-27 (Fed. Cir. August 10, 2015). 

(3)       Exporting unpatented components of a patented invention for combination outside the US

Under US law Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.   35 USC 271 (f) (1). 

Assume a US manufacturer within the US exports one or more components of an invention that is the subject of a US patent.  If the US manufacturer instructs the customer to combine the one or more components so as to produce a product that would infringe the US patent if the product were made in the US, the US manufacturer is liable for infringement even though the patented invention was never made in the US. 

(4)       Exporting unpatented non-staple articles from the US constitutes an infringement of a US patent if the articles are intended to be combined outside of the US in a manner that would infringe a US patent if the combination occurred in the US

Under US law, Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.  35 271 (f) (2).

Under this statute, a party can be liable for contributory infringement if the party is exporting a non-staple article of commerce that is intended for use in a product covered by a US patent even if the component, per se, is not covered by any claims of a US patent.  The party exporting the unpatented component will be liable  if the unpatented component is specifically adapted for use in a product covered by a US patent. Contributory infringement may be found  even if the combination of the unpatented component with other components to form the patented invention occurs outside of the United States. 

(5)       An offers for sale anywhere in the world may constitute an act of infringement if the product is ultimately to be used in or delivered to the US

An offer to sell a product that would infringe a US patent constitutes an act of patent infringement under US law.  In a recent decision, the Court of Appeals for the Federal Circuit held that, for purposes of infringement, an actionable offer to sell occurs when a company makes an offer outside of the US to sell a product that will ultimately be used in or delivered to the US. The act of offering the product covered by one or more claims of a US patent which was planned to be delivered to the United States was held to constitute the infringing act.

As noted above, there are exceptions to the general rule that the reach of a US patent ends at the US border.  It is therefore important to be aware that certain acts that occur in foreign countries can be actionable under US patent law.  Additionally, certain acts in the US that do not amount to a direct infringement can still be actionable if coupled with overseas activity that would constitute an infringement of a US patent if the activity occurred in the US. When questions arise regarding the applicability of US patents to foreign activities it is generally advisable to consult a specialist that deals with such matters.

Blog authored by Vic Lebovici, a member of Preti Flaherty's IP Practice Group.  

Software Inventions See More Help in Bascom Decision

Since the Supreme Court decided Alice Corp. v. CLS Bank International, patent examiners and the courts have been working to better define patent eligibility. Following closely on the heels of their Enfish, LLC, v. Microsoft Corporation decision, the Federal Circuit provides more guidance on whether software qualified as patentable subject matter with Bascom Global Internet Services, Inc., v. AT&T Mobility LLC. Taken together, Enfish and Bascom indicate the future for software patents is not nearly as bleak as originally predicted when Alice was decided.

Bascom reiterated the two-step test – asking first if the patent is directed to patent- ineligible content and, if so, then asking whether additional elements transform the nature of the claim into a patent-eligible application. The Federal Circuit determined that Bascom was indeed directed to patent-ineligible content. However, on the second step, the court decided that the claims included an inventive concept that can be found in the “non-conventional and non-generic arrangement of known, conventional pieces” transforming the nature of the claims into a patent-eligible application.

The claims in this case were directed to filtering Internet content. The prior art taught two different types of filtering possible at either a local device or on a server. While these types of filtering were known, the system in Bascom enabled the personalized filtering seen on a local device to be performed on a server. By reciting specific details of where the filtering was performed, Bascom was determined to cover a specific, discrete implementation and thus not “preempt all ways of filtering content”. Accordingly, this new arrangement was sufficient for the court to find the claims patent-eligible.

Procedurally, this case was decided on a motion to dismiss during the earliest stages of the case, even before discovery or claim construction. As such, the Federal Circuit construed the facts in favor of Bascom when making their decision to uphold the validity of the patent at this time. In contrast, a recent trend in patent-eligibility decisions has developed where patents are found invalid at the onset of the case. While this trend has been heralded as an efficient means to dispense with dubious claims by ‘patent trolls’ in order to avoid the costs of litigation, it has also been criticized for sidestepping important patent analysis which could help answer the patent-eligibility questions.

The courts are beginning to establish a fuller picture of what qualifies as patent-eligible subject matter in the wake of Alice. Bascom continues with this trend by providing advice with particular relevance for software applications. This helps give inventors and their attorneys the tools they need to draft acceptable claims in order to receive the appropriate examination by the United State Patent and Trademark Office and the proper deference in the courts for the patents that will ultimately issue.

HOPE FOR SOFTWARE PATENTS IN THE POST-ALICE LANDSCAPE

The courts have long been attempting to establish an appropriate framework with which to handle software-based inventions. Even before the Supreme Court decision in Alice Corp. v. CLS Bank International numerous tests have been created to determine whether software qualified as patentable subject matter. Since Alice patent examiners and courts have stumbled over determining what makes a claim an abstract idea ineligible for patenting often at the detriment of software-based inventions. With Enfish, LLC, v. Microsoft Corporation the Federal Circuit has provided guidance to help patent software methods.

Enfish reiterates the Supreme Court’s stance from Alice and acknowledges that some improvements in computer-related technology are “undoubtedly not abstract.” The Federal Circuit then stated that software can make “non-abstract improvements to computer technology just as hardware improvements can.” This highlights Enfish’s focus on improvements to computer functionality regardless to whether the improvement is due to hardware or software. Thus, software-based inventions may be found as patentable even when able to run on a general-purpose computer.

The decision also serves as a caution when determining whether a claim is abstract idea. Warning that too high a level of abstraction can become “untethered from the language of the claims” Enfish concedes that an extreme abstraction can render any invention unpatentable.

Enfish also stresses the importance of the teachings in the patent’s specification. Looking to the disclosure the Federal Circuit found support for the allegations that the claims provided improvements to computer technology. Additionally, the disclosure served to guide the level of abstraction used to decide if the claims qualified as patentable subject matter.

With this decision the Federal Circuit has provided some guidance that inventors can use to ensure their software based-inventions are examined with the proper analysis. Drafting a patent application using the lessons from Enfish will help avoid some of the pitfalls that have threatened to engulf all software-based inventions. As the courts continue to recognize the patentability of software inventors within this technological area can be reassured that their inventions may be granted the appropriate examination by the United State Patent and Trademark Office (at least with regards to technological improvements to computer functionality).

Introducing a New Product? Should a Freedom to Operate Study Be Undertaken?

When developing a new product, companies will frequently engage counsel to perform a “freedom to operate” study in an effort to identify patents that might raise a risk of patent infringement following the introduction of the product. While there is nothing fundamentally wrong with this approach, there are pros and cons associated with the decision to proceed with such a study that are frequently not considered. What should be done if you find a patent or pending application that includes claims that might cover the product? Would the company have been better off had it not engaged counsel to perform the study initially?

The Law of Willful Infringement
As a prelude to this discussion, it is important to understand the laws applicable to willful infringement. If one manufactures uses or sells an infringing product with knowledge of the infringement, they can be liable for willful infringement under the patent laws. A party is liable for willful infringement if the patent owner demonstrates that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. If willful infringement is found, the patent laws provide that the infringer can be liable for up to treble damages and the patentee’s attorney’s fees.

The Pros:
If one or more issued patents are located that would cover the design of the product under development, it may be possible to redesign the product in a manner so as to avoid the infringement. Avoidance of a potential lawsuit for patent infringement is certainly desirable provided that a redesigned product can be manufactured and sold at a competitive price and that a redesigned product can provide the features desired in the marketplace.

If no issued patents are located as a result of a freedom to operate study that disclose or suggest the design of the new product, such may be informative of opportunities to obtain patent protection on the new design and offer guidance as to the scope of protection that may be available should a patent application be filed.

The Cons:

Not all freedom to operate studies have happy endings. What if a patent is located that contains claims that apply to the product under development and a viable product cannot be produced without violating the claims of the patent. If the non-infringing product cannot be designed that provides the desired features, or cannot be produced in a way that is commercially viable for reasons of cost, the company has several options. One option would be to inquire of the patent owner whether a license is available and on what terms. If a license in not available or is not available on reasonable terms, proceeding with a product introduction poses a heightened risk that a suit for infringement will be initiated by the patent owner. A second option would be to abandon the product introduction. This decision may involve substantial losses of investment in the product development, depending on how far along the product development has progressed. A third option would be to proceed with the product introduction and assume the risk that the patent owner may take notice and initiate a suit for patent infringement. If a court determines that a product infringes a patent, that the infringer had knowledge of the patent, and that the infringer’s conduct was “objectively reckless” the court may hold the infringer liable for willful infringement. In such a case, the patent owner could be awarded up to treble damages and its attorney’s fees associated with the pursuit of the litigation.

If a product is introduced and a suit for patent infringement follows, the infringement could be held to be willful as noted above if the conduct of the infringer is determined to be objectively reckless. Although it is not required that an opinion of counsel be obtained to counter a charge of willful infringement, a competent opinion of patent counsel concluding that a product does not infringe or, that any relevant patent claims are invalid, will generally serve as a defense to a charge of willful infringement. When such an opinion is obtained, the continued sale of the accused product during litigation is seldom considered to be objectively reckless. The preparation of a competent opinion of counsel requires study of the patent and its prosecution history and the preparation of such an opinion can involve substantial legal costs.

If a party chooses to sell a product with knowledge of a patent and chooses not to obtain an opinion of counsel, a court will determine whether the sale of the product was objectively reasonable or objectively reckless based on the specific facts in the case. It should be noted that an opinion of counsel does not serve as a defense to a charge of infringement, only a defense to a charge that the infringement was willful.

If a freedom to operate search results in the identification of a published patent application with claims that, if issued, would cover the product under development another issue is raised. The application that was identified in the search may never issue as a patent and, if it does issue, the claims may not resemble those that existed in the published application or in the public records of the U.S. Patent and Trademark Office. Thus, a company developing a product must decide how to proceed in a period of uncertainty regarding claim coverage that may ultimately be obtained.

In such a circumstance does one shut down the development of the product, defer the project or continue the development with the recognition that the product would infringe if the patent issues with existing claims? While one can study the progress of a given patent prosecution if the prosecution is available in the public records of the U.S. Patent and Trademark Office, it would require a crystal ball to determine the scope of protection that would ultimately be granted. Unfortunately, the correct decision to many of the questions raised can only be determined in hindsight and must be based on an educated guess as to what patent coverage may ultimately be achieved.

If a freedom to operate search had not been performed and there was no knowledge of the patent in advance of the introduction of the product to the marketplace and the filing of suit by a patent owner, it is more difficult to sustain a claim for willful infringement. Of course, it this path is followed, following the filing of a suit for patent infringement, the company is faced with a decision of whether to discontinue the product, attempt to settle the dispute or contest the assertion in a litigation.

Conclusion 

There are perfectly good and valid reasons for performing freedom to operate studies. If a study is to be conducted, it is generally advisable that it be undertaken before substantial sums have been invested in product development.

It should be recognized however, that is often unknowable whether a patent owner will become aware of a product that enters the marketplace, whether the patent owner would view the product as constituting an infringement should it become aware of the product, whether the patent would ever be asserted by the patent owner even after becoming aware of the product or, if a license would be available upon reasonable terms. Of course, it is considerably more likely that the introduction of a product will become known to a competitor. The ultimate decision whether to commission a freedom to operate study and what to do if such a study is performed, relates to ones tolerance for risk and an understanding of the ramifications that flow from such a course of action. Before a company engages patent counsel to perform a freedom to operate study, it is therefore worthwhile to discuss with counsel what the company plans to do with the search results since, once the search has been performed, if relevant issued patents are located as a result of the search, the specter of willful infringement is out of the bag.

UPDATE: President Signs Defend Trade Secrets Act of 2016 (DTSA) into Law and Imposes New Employer Whistleblower Immunity Notice Requirements

President Barack Obama signed the federal Defend Trade Secrets Act of 2016 (DTSA) into law on Wednesday, May 11, 2016.

As discussed in a prior blog article, the new federal trade secret law provides a new federal civil cause of action for trade secret misappropriation, and imposes new whistleblower immunity notice requirements on employers. The effective date of the DTSA is the date of enactment. 

Starting May 12, 2016, all employers will be required by federal law to “provide notice of the immunity set forth in [the DTSA] in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The notice requirement applies to “contracts and agreements that are entered into or updated after the date of enactment.” The DTSA broadly defines “employee” to include “any individual performing work as a contractor or consultant for an employer.”

Businesses should review agreements and documents addressing trade secrets and confidentiality with counsel. Employers should consult with counsel to ensure compliance with the new whistleblower immunity notice requirements.

Congress Passes Defend Trade Secrets Act of 2016 (DTSA) and Imposes New Employer Whistleblower Immunity Notice Obligation

Congress has passed a new intellectual property law to protect trade secrets. The law provides a new federal civil cause of action for trade secret misappropriation. The law also imposes a new whistleblower immunity notice requirement on employers.

On April 27, 2016, the U.S. House of Representatives voted 410 to 2 in favor of a bill to enact the Defend Trade Secrets Act of 2016 (DTSA). Congress presented the bill to the White House on April 29, 2016 for signature by President Barack Obama. The President is expected to sign the bill, based on prior support of the bill by his administration.

The DTSA is a bipartisan bill to amend a federal criminal statute known as the Economic Espionage Act of 1996 (EEA) to create the first federal private civil cause of action for theft or misappropriation of trade secrets. Although the EEA made trade secret theft a federal crime, some felt that the federal criminal statute did not go far enough to stem the rising tide of trade secret theft, economic espionage, and online hacking by cybercriminals.

Previously, trade secret misappropriation claims were generally brought under state laws. However, trade secret laws vary from state to state, which has made it difficult for U.S. companies to develop uniform policies. The DTSA is expected to assist U.S. companies by providing a harmonized federal standard for protection of trade secrets. The DTSA does not preempt state trade secret laws, however, so trade secret owners may still pursue remedies under applicable state laws.

The DTSA authorizes trade secret owners to file a civil action in federal court for trade secret misappropriation related to a product or service in interstate or foreign commerce. 

The DTSA provides remedies for theft or misappropriation of trade secrets that may include injunctive relief, damages (for actual loss plus any additional unjust enrichment not covered by an actual loss award, or, alternatively, a reasonable royalty), exemplary damages (for bad faith misappropriation, in an amount up to two times the amount of the damages award), an order for seizure of property, and attorney fees (for willful and malicious misappropriation or for pursuing a claim or opposing an injunction motion in bad faith). 

The statute of limitations for commencing a civil action under the DTSA is 3 years from the date that the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.

Employers should take note that the DTSA imposes a new federal whistleblower immunity notice obligation. The DTSA provides whistleblower immunity against criminal or civil liability for confidential disclosure of a trade secret to the government or in a court filing under seal. The DTSA whistleblower provisions require employers to provide notice of the immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The DTSA broadly defines “employee” to include “any individual performing work as a contractor or consultant for an employer.” An employer who fails to comply with the notice requirement may forfeit exemplary damages or attorney fees in an action against an “employee” to whom the notice was not provided. The notice requirement applies to contracts and agreements that are “entered into or updated” after the date of enactment of the DTSA.

Employers should consult with counsel to ensure compliance with federal whistleblower immunity notice requirements, and may wish to review agreements and documents addressing trade secrets and confidentiality.

Your European Community Trademark Is About to Disappear - BUT DON'T WORRY!

On Wednesday, March 23, 2016, changes are coming to the world of European Community trademarks and Community designs.

The Office for Harmonisation in the Internal Market (OHIM) has to date been the European Union (EU) authority responsible for examining new European Community trademark (CTM) and Community design applications and for maintaining registers of granted CTMs and Community designs.

On March 23, 2016, OHIM will be renamed the European Union Intellectual Property Office (EUIPO), while the CTM will be renamed the European Union trademark (EUTM).  Existing CTMs and CTM applications will automatically become EUTMs and EUTM applications.  Other changes include some small adjustments to filing and renewal fees.

There is one particular change of note with regard to CTMs, though it is unlikely to impact many of our U.S. clients.  In the past, if a CTM applicant listed the respective Nice classification heading in its application, it was interpreted as including all goods or services within the respective class.  This practice was terminated on June 22, 2012.  If an applicant used a Nice class heading after this date, the goods and/or services of the application were defined by the normal meaning of the words used in the class heading.

Thus, at present, the scope of goods and/or services for a CTM depends upon whether it was filed before or after June 22, 2012 and whether it recited the respective Nice class heading.  That is about to change.

During a six month window extending from March 23, 2016 to September 24, 2016, a registrant that: 1) filed its application before June 22, 2012; and 2) used the entire and exact Nice classification heading that was in force as of the application filing date can explicitly add or expand goods and/or services that were merely implied under the old regime.  Importantly, such newly added goods and/or services must have been in use for at least the five preceding years – otherwise, the amended registration may be subject to a cancellation proceeding.

So, if you have a registered CTM, don’t panic.  Instead, it would be prudent to check with your trademark attorney to see if addition or expansion of the recited goods and/or services is available and recommended.

US Copyright Office Reports: WIPO Internet Treaties Require No Copyright Act Amendment to Protect Exclusive “Making Available” Rights

Has the United States lived up to its obligations under the WIPO Internet Treaties to protect the exclusive “making available” right of copyright owners? 

Some would argue no, and that Congress should amend the U.S. Copyright Act.  Others would argue that the exclusive rights provisions in Section 106 of the Copyright Act are adequate.

In Internet copyright infringement litigation, this issue has arisen in the context of a plaintiff’s evidentiary burden of proof and whether the “making available” right requires a plaintiff to prove that an infringing work was simply uploaded to the Internet, or both uploaded and downloaded.  Court cases have been inconsistent.

By way of background, when the Internet was relatively new and growing rapidly in the mid-1990s, the international copyright community wanted to ensure adequate copyright protection in the new medium.  Toward that goal, the World Intellectual Property Organization (WIPO) and its member states (including the United States) entered into the WIPO Internet Treaties, which consist of the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT). 

The treaties required the U.S. and other member states to provide a “making available” right that gives copyright owners the exclusive right to authorize the on-demand transmission of their works and sound recordings to the public (e.g., via the Internet).  The treaties articulate the exclusive “making available” right as follows:

WCT Art. 8	Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorising any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.
WPPT Art. 10	Performers shall enjoy the exclusive right of authorising the making available to the public of their performances fixed in phonograms, by wire or wireless means, in such a way that members of the public may access them from a place and at a time individually chosen by them.
WPPT Art. 14	Producers of phonograms shall enjoy the exclusive right of authorising the making available to the public of their phonograms, by wire or wireless means, in such a way that members of the public may access them from a place and at a time individually chosen by them.

Congress did not amend the Copyright Act to specifically refer to the “making available” right, instead assuming that the exclusive rights provisions in Section 106 of the Copyright Act adequately protect the right.

The Supreme Court in American Broadcasting Cos. v. Aereo, Inc., 573 U.S. __, 134 S.Ct. 2498 (2014), confirmed that the public performance right encompasses the transmission of copyright works to the public through individualized streams.  However, in the context of merely offering access to copyright content, some district courts questioned the existence of the “making available” right under U.S. law, declining to recognize a cause of action where copyright owners are unable to prove that downloads or receipt occurred.  Other courts simply rejected the “making available” right without acknowledging or discussing the international obligations of the United States under the WIPO Internet Treaties.  Appellate courts have not conclusively resolved the issues in cases involving works in digital format, although some appellate decisions have held that distribution does not necessarily require an actual transfer of copies in the context of a library offering physical copies of a work to the public.

In December 2013, Congress asked the U.S. Copyright Office (USCO) to weigh in on the debate.  Congress specifically requested feedback on the following issues: (1) how the existing bundle of exclusive rights under Title 17 covers the “making available” right in the context of digital on-demand transmissions such as peer-to-peer networks, streaming services, and music downloads, as well as more broadly in the digital environment; (2) how foreign laws have interpreted and implemented the relevant provisions of the WIPO Internet Treaties; and (3) the feasibility and necessity of amending U.S. law to strengthen or clarify the law in this area.

In response, the U.S. Copyright Office (USCO) released The Making Available Right in the United States: A Report of the Register of Copyrights on February 23, 2016.  The report concludes that the treaties require no Copyright Act amendment, but recommends that Congress continue to monitor case law and offers suggestions if Congress chooses to amend the law.

The report is available at HERE.

Final Office Actions - Sometimes Final Is Not So Final

Patent prosecution is a back and forth dialogue to get the broadest coverage allowable. In order to keep from bogging down the system, the USPTO can issue a Final Office Action to close off prosecution. There are limited choices to responding to these Final Office Actions. A recent pilot program has created a new option – the After Final Consideration Pilot 2.0 (AFCP 2.0).

The traditional options included filing a Request for Continued Examination (RCE), Appealing and submitting a Response. An RCE reopens prosecution but comes with a sizable fee. As the RCE can be moved to the back of the Examiner’s docket the Examiner may not respond to the RCE for some time. Appealing the Office Action also requires its own related fees. While a submission for a Pre-Appeal Brief Conference can offer a quick response, such review works best only in those rare situations where there is clear error by the Examiner.

Filing a Response to a Final Office Action is a tricky proposition. The Applicant is limited in their ability to change the claims as there is no right to amend. Such a Response works well for situations where claims are canceled, amended to comply with formal requirements or objected to claims are rewritten in independent form. In other situations, the limitations on amendments may be too restrictive and an RCE may be required in order to have the amendments entered.

Timing of a Response to a Final Office Action is also an issue. Unless the Response is filed within two-months from the date of mailing, there is no guarantee that the Examiner will respond. As the Response does not stop the clock on the six-month period for reply, this may leave Applicants waiting impatiently for the Examiner’s response while they enter ever more expensive extension periods. The Advisory Action procedure, which can be invoked by filing the Response within two-months, helps to alleviate some of this concern but the restrictions on amendments are still present.

In an effort to help fill an unmet need left by these traditional options, the USPTO has created the AFCP 2.0. This program is intended to enhance communication between the USPTO and Applicants, and to help reduce the number of RCEs being filed.

Using the AFCP 2.0, an Applicant can submit a request for consideration under the program with a response to a Final Office Action which includes an amendment. If the request is granted, the Examiner considers the amendment and, if the amendment does not place the application in condition for allowance, the Examiner is to reach out to the Applicant in order to hold an interview to discuss the case.

The AFCP 2.0 requires an amendment to at least one independent claim. The amendment can introduce new elements to the claims that have not been considered previously. However, the claim’s scope may not be broadened in any way. Even with this limitation, this process provides more flexibility than previously allowed without an RCE.

Another key requirement is based on the amount of time the Examiner would need to consider the Response. The program gives Examiners an additional two to three hours. If the Examiner determines that this additional time is not sufficient to consider the amendments and arguments they can refuse the request.

No additional fees are required for the program. However, the request for consideration under AFCP 2.0 does not stop the clock on the six-month period for a response and the Applicant may enter extension periods waiting for a response from the Examiner. The USPTO recommends Applicants request a status update if the Examiner has not responded to the request within a month.

The AFCP 2.0 fills a void in the prior USPTO procedures in order to help move applications through prosecution. Given the ability to consider cases which can be handled swiftly Examiners are now able to devote their limited time to promptly address such applications. Additionally, Applicants can avoid costly fees further incentivizing participation in the program.

No Monkey Business Will Be Permitted in the Court

Under the U.S. Copyright laws “Copyright protection subsists … in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.”  Copyright protection includes works of authorship in pictorial form, including photographs.

With this background I’d like to report on a case filed in the U.S. District Court for the Northern District of California in September 2015.  As alleged in the Complaint, sometime in 2011, a photographer by the name of David Slater briefly left his camera unattended and a 6 year old named Naruto, using Mr. Slater’s camera, took a number of selfies without any assistance from Mr. Slater.  Mr. Slater located the selfies that were taken by Naruto on his camera and, he, along with the co-defendant, Blurb, Inc., published and widely distributed the selfies online beginning in 2014, all without the authorization of Naruto.  Naruto filed the complaint against Slater and Blurb, Inc. and alleged that Slater and Blurb, Inc. infringed his rights of copyright by reason of the unauthorized distribution of Naruto’s selfies.
 
On first blush, this sounds like a fairly clearcut case of copyright infringement.  The selfies purportedly were original works of Naruto which were reproduced and widely distributed by Mr. Slater and Blurb, Inc. without Naruto’s permission. So why should these set of facts be of particular interest?  What if Naruto was a crested macaque monkey that snapped the selfies?  This was the novel question that faced the District Court in the action Naruto v. David John Slater and Blurb, Inc. The case was filed through Naruto’s “Next Friends,” People for the Ethical Treatment of Animals, Inc. (PETA) and Dr. Antje Engelhardt, a professor of behavioral ecology and anthropology.

Slater and Blurb, Inc., filed a Motion to Dismiss based on several legal theories.  First, the defendants asserted that Naruto lacked standing to pursue the claim through the courts because Naruto was a monkey.  Though PETA and Dr. Engelhardt, as Naruto’s “Next Friends,” stated that their intent was to use the proceeds from the commercialization of the selfies for habitat preservation and for the benefit of Naruto’s brethren, the defendants asserted that all of these activities would be pursued without Naruto’s consent since Naruto was not capable of providing consent.  Furthermore, the Defendants asserted that the phrase “works of authorship” in the copyright laws, relate to works by humans, not animals.

Sadly for Naruto, on January 6, 2016 the District Court, in a tentative opinion, held that the U.S. Copyright Act extends to humans, not animals, thereby dashing any hopes Naruto and his brethren might have harbored for the betterment of the primate community.  One can only imagine what the deposition of Naruto would have been like had the case continued. The moral of this story should the decision become final – there will be no monkey business in the district courts, at least with respect to claims of copyright infringement.  It remains to be seen whether Naruto will appeal the District Court’s decision.

False Marking Alert: Could International Product Sales, Shipments, Or Manufacturing Land You In Prison?

Do you manufacture, ship, or sell products abroad that contain the ® trademark registration symbol on the products, labels, or packaging?  If so, did you know that you may face criminal liability, imprisonment, fines, seizure of your products, injunctions, unfair competition claims, damages, and other liability if you failed to register your trademark in the foreign countries where you manufacture, ship, or sell the products?

“False marking” occurs when an unregistered trademark is represented as a registered trademark.  Internationally, the ® symbol is generally perceived to denote an existing trademark registration.  In some countries, it is a crime to falsely indicate that a trademark (or portion of a mark) is registered, or that goods or services are protected by a registered trademark or service mark, when they are not.  Examples of countries that impose criminal liability for false marking include, without limitation: Japan, Korea, Germany, India, and Brunei.  False marking under the laws of Japan, for instance, may result in imprisonment for up to three years.

In addition to potential criminal liability exposure, false marking may also result in severe civil penalties.  These penalties may far outweigh any perceived cost savings associated with a foreign manufacturer or cheaper overseas labor.  For example, China may impose a false marking fine of up to 20% of business volume or double the amount of profit earned, even if products are manufactured in China solely for export.  Chinese courts have imposed false marking fines, product seizures, injunctions, and damages against companies that manufacture goods in China for export, even though they were not selling the goods in China.

Before manufacturing, shipping, or selling products abroad, consult with an experienced trademark attorney about international trademark requirements.  Trademark laws and marking requirements vary from country to country.

If you have already manufactured, shipped, or sold products bearing the ® trademark registration symbol in any countries where the trademark is not registered, immediately consult with an experienced trademark attorney to discuss whether you may face criminal and civil liability exposure, and international trademark options and strategy to mitigate future risk.

Protect Your Artwork: Understanding the Visual Artists Rights Act

The Visual Artists Rights Act (VARA) is part of the U.S. Copyright Law and is found at 17 U.S.C. §106(A). This law went into effect in 1990 and grants certain rights to visual artists. It is akin to moral rights laws which have been in existence for many more years in European countries.

 

Works of art meeting applicable requirements provide the artist with certain rights in their works which are in addition to rights available to all authors under the Copyright Law. These rights are personal to the visual artist and exist irrespective of ownership in the work itself and ownership of copyright rights in the work.

 

Under VARA, a visual artist (called an author of visual art in the statute) has the right:

• to claim authorship of the work;
• to prevent use of the author's name on any visual art which the author did not create;
• to prevent any intentional distortion, mutilation or modification of the work which would be prejudicial to the author's honor or reputation.

In addition, an author of a work having a "recognized stature" has the right to prevent intentional or grossly negligent destruction of a work.

 

These artist's rights are subject to Fair Use exceptions and certain exceptions for works incorporated into or made part of a building. In addition, modification of a visual work of art which is a result of the passage of time or the inherent nature of the materials is not a violation of the artist's VARA rights, nor are modifications which are the result of conservation or public presentation, including lighting and placement, unless caused by gross negligence. 

  

The law is applicable to a "work of visual art" as defined in section 101 of the Copyright Law (17 USC§101) which specifies paintings, drawings, prints or sculptures, or still photographic images which exist in a single copy or a limited edition of 200 copies or less signed and consecutively numbered by the author. For sculptures, the limited edition is 200 or less multiple cast, carved or fabricated copies consecutively numbered by the author and bearing the signature or other identifying mark of the author. Aesthetic taste or value are not requirements for protection under the VARA Act.

 

Purchasers of visual works covered by the statute must obtain written waivers from the author if they wish to exercise any of the exclusive artist's rights enumerated under the VARA law. Absent such a waiver, the artist can effectively veto decisions about the work. This has been a contentious issue particularly with respect to public sculptures, site-specific art and commissioned works. Litigation has arisen from assertions of artist's rights violation occasioned by movement of a sculpture from a public park, removal of murals from a building lobby, removal of graffiti from a building wall, and destruction or modification of a public art installation.

 

The VARA rights extend for the lifetime of the author for works created after the effective date of the law (Dec. 1, 1990). For joint authors, the term is for the life of the last surviving author. For works created before the effective date of the law, the rights are coextensive with the usual copyright term.

 

The rights provided under the VARA law do not apply to any reproduction, depiction, portrayal or other use of a work in, upon or in connection with any item that is a work made for hire or any one of the items enumerated in footnote [1].

 

The rights of the author may not be transferred, but those rights may be waived so long as the waiver is in a written instrument signed by the author. If there is a joint work of visual art prepared by two or more authors, a waiver of rights made by one author waives the rights for all the authors.

 

An important aspect of this law is that ownership of the VARA rights is distinct from ownership of any copy of the work or ownership of a copyright or any exclusive right under copyright in that work. Transfer of ownership of any copy of the work of visual art or of a copyright or any exclusive right under a copyright does not constitute a waiver of the VARA rights. A waiver of rights by the author with respect to a work of visual art does not constitute a transfer of ownership of any copy of the work or of ownership of any right of copyright.

 

The Golden Rule with respect to dealing with a work of visual art is to have a written agreement signed by the artist and purchaser which spells out the rights of ownership and copyright acquired by the purchaser, any waivers under VARA and any rights retained by the artist.

--
  
[1] 17 USC§101 A work of visual art does not include -
 A. (i) any poster, map, globe, chart, technical drawing, diagram, model, applied art, motion picture or other audiovisual work, book, magazine, newspaper, periodical, data base, electronic information service, electronic publication, or similar publication;
 (ii) any merchandising item or advertising, promotional, descriptive, covering, or packaging material or container;
 (iii) any portion or part of any item described in clause (i) or (ii).

The Layered Look: Copyrights and Visual Arts

People are generally aware that a painting, photograph, sculpture or other works of art are subject to copyright protection but many are less aware that copyright has many layers of possible protection which can present legal traps for the unwary.

An original work of art which may be a painting, photograph or sculpture, is subject to copyright from the time of creation of the work.  The copyright is owned by the artist or creator unless the work was produced as a work for hire where the creator is an employee acting within the scope of his or her employment duties, or by written agreement between the creator and a party who commissioned or ordered the work.

The exclusive rights of copyright for a visual work include:

• The right to make copies;
• The right to make derivatives;
• The right to distribute copies;
• The right to publicly display the work; and
• The right to reproduce the work on any article or item.

Here are a few examples to ponder in relation to these rights.

A photograph may itself be a separately copyrightable work apart from an original work being photographed.  For example, an old master painting may not itself be the subject of a copyright by reason of its age but a photograph of that master painting can be a copyrightable work of the photographer, or other owner if a work for hire.  The copyright owner of the photograph is entitled to control its copying and public display.

What if you wish to photograph a painting that is copyrighted?  Without permission of the copyright holder such a photograph will be a violation of copyright.

The risks of infringing a copyrighted work are heightened by today's ease of electronic transmission by use of the Internet, social media, cell phones, etc. What if you photograph a copyrighted painting or sculpture and post it on your Facebook page?  That posting can be considered copying and also considered a public display, both of which are violations of the owner's copyright, if done without permission.

Another right of copyright is the right to publicly display a copyrighted work or copies of that work.  Say you purchased an Ansel Adams photograph of a Yosemite landscape, you may display that photograph for your own enjoyment or within you usual social circle but you have no right to publicly display that photograph unless you were granted that right of public display by the copyright owner.

What if you take a copyrighted photograph and Photoshop it into an altered image?  As one of the rights of copyright is to make derivative works, your Photoshopped image would be a non-authorized derivative and also an unauthorized copy of the original work.

Can you put a commercial photo of your favorite band on a tee shirt?  You cannot (absent permission) since the copyright owner has the right to reproduce the photo on any item.

Liability for copyright infringement can be significant.  An owner of a registered copyright can claim damages based on actual provable economic loss or more often statutory damages which can be in the range of $750.00 to $30,000 for each infringement, as a Court may determine.  In cases of willful infringement, a Court can award costs and attorney's fees.  A court may also issue an injunction against ongoing infringement.

In a case of willful infringement under certain circumstances generally relating to commercial piracy of copyrighted works, there can be criminal liability for copyright infringement with penalties including fines and/or imprisonment.  
A defense to an assertion of copyright infringement is the right of fair use of the copyrighted work, which generally allows non-commercial use or copying for purposes of criticism, comment, news, teaching, scholarship and the like.

It would be safe to assume that copyright attaches to most paintings, photographs, sculptures and other visual arts and you should seek permission for any intended commercial activity. Permission may be sought directly from the copyright owner or most conveniently from various licensing organizations which exist for the purpose of providing such permissions.  Usually the permission is for a fee in an amount which depends upon the extent of intended use of the work. Well known licensing organizations for the visual arts include Corbis, Getty Images, Artists Rights Society (ARS), and stock photo companies, among others.

That’s Patentable? The Far-Reaching Definition of an “Invention”

U.S. patent law provides that “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor,” 35 U.S. Code §101. This leaves open a broad range for potential patent protection. The categories of a “machine, manufacture, or composition of matter” provide for many traditional concepts of an invention, such as devices, chemicals or other physical objects. Focusing on these physical items as being invention ignores the “process” category. The process (or method) type of patent has been used to cover a broad range of technologies – from manufacturing techniques to medical procedures. It is this category’s open-endedness which has presented a number of extraordinary patent opportunities as well as a fair share of headaches.

Concerns that method patents may be used to cover broader concepts than is appropriate has caused many to struggle to determine what types of technologies should be allowed to receive patents. The myriad court decisions and United States Patent and Trademark Office rules in the past few decades alone have created a complicated thicket of patent eligibility rules. Despite these issues some interesting ideas and non-traditional concepts have been granted patents. While some might argue that such patents are not appropriate, the Patent Office’s willingness to grant such patents introduces some leeway into determining what might be patentable and that might otherwise be overlooked.

In some cases, patents have been issued for processes used to play card games. One patent that has reached a particular level of notoriety (or infamy) is US 5,662,332. This patent covers a method of playing trading card games where each player constructs a deck of cards. The claims include coverage for “designating the [card] being brought into play by rotating the [card] from an original orientation to a second orientation.” Further claims cover a rotating, or ‘tapping,’ to make players are aware the trading card is in use.

Patent protection has also been awarded to methods involved in the presentation used in computer games. Patent US 6,935,954 was awarded for a sanity system used in a video game where the “character may experience hallucinations as a result of the sanity level.” During game play, the sanity level of the game character is modified based on a character reaction and an amount of character preparation. As the game continues, game play is impacted by varying game effects according to the game character sanity level.

In another patent, US 8,082,499, the graphical interface for an interactive dialog is presented. A dialog choice indicator is shown which has a number of directional choices. Dialog responses corresponding to a particular emotion are then provided in a consistent location/direction.

In 2014, the U.S. Supreme Court decided CLS Bank International v. Alice Corp which invalidated claims that were determined to be drawn to an abstract idea. In response to this case, the USPTO has adjusted their stance regarding patentable subject matter and has rejected many applications held to be too “abstract”. However, this has not prevented the Patent Office from still issuing patents directed to some intriguing methods.

Patent US 8,920,245 is directed to a video game award method. According to the claimed method, the player is awarded a digital gaming object while playing a first game and is then able to use the digital gaming object within a different game.

A language-based video game method is protected by US 8,825,492. In this method, the game display shows an animated portion of a human head related to speech to show a pronunciation of selected text. The text is then transformed into a non-textual form which can be used by the avatar to overcome at least one challenge, for example, a letter of the alphabet may be transformed into a rope which can be used to overcome a rock climbing challenge.

In another post-Alice patent, protection extends beyond graphic displays. US 8,721,415 covers a computer-based solitaire game with stack-based pay table. The player is provided a payout which is calculated based on a per-card payout award and the actual number of cards transferred during the game.

These examples demonstrate that patentable inventions can be made in non-traditional fields. Simply because an invention is not incorporated in a physical object, such as a motor or a chemical composition, or relates to an industrial process, doesn’t mean that patent protection is unavailable. While care must be taken to ensure the claims comply with patentable subject matter restrictions, great opportunities still exist for patenting concepts which might otherwise be overlooked.