MVS Filewrapper® Blog: Russ Slifer Sworn-In as USPTO Deputy Director and Patent Quality Initiatives

Post by Jill Link

 

USPTO Director Michelle Lee nominated Russ Slifer as Deputy Director of the USPTO. Slifer previously served as the Regional Director for the Denver Satelite Office of the USPTO. He is a patent attorney with over 20 years experience, including 8 years as the Chief Patent Counsel for Micron Technology. Slifer was appointed by Secretary of Commerce for this political appointment, along with Director Lee who was also recently appointed and sworn in earlier this month (March 2015).  With both Director and Deputy Director in place the USPTO is now fully staffed again.

The Director has issued a focus for their remaining terms - Patent Quality Initiatives. For example, Deputy Director's first official day on the job was spent with the Director hosting the USPTO Patent Quality Summit. The Summit follows a Federal Register Notice setting forth various proposals for focus on patent quality. The Federal Register listed the following: 

1. USPTO proposes a mechanism for an applicant to request the Office of Patent Quality Assurance to review an examiner’s Office action during prosecution.

2. USPTO is seeking input on whether to conduct automated pre-examination searches for all applications, and if so, what tools might be used to complete those searches.

3. USPTO is seeking the public’s assistance in identifying ways to enhance the clarity and completeness of the official record during prosecution of an application.

4. USPTO is considering ways to measure and enhance the effectiveness of examiner training, and how best to improve quality metrics.

5. The USPTO is seeking input to help determine whether the current compact prosecution model should be modified.   In particular, is seeking ideas for proactive alternatives to Requests for Continued Examination filings and appeals to the Patent Trial and Appeal Board.

6. The USPTO is considering the viability of enabling applicants to have in-person interviews with examiners, regardless of the examiner’s duty station.

Filewrapper will keep you posted on further updates of these and other patent quality initiatives.

 

 

MVS Filewrapper® Blog: Blurred Lines in Copyright Law Following 'Blurred Lines' Jury Verdict

Post by Paul S. Mazzola

 

Under the Copyright Act of 1909, a work was protected when it was published with the notice of copyright protection.  Although changed by the Copyright Act of 1976, releasing a sound recording of a composition under the 1909 act (i.e., musical notes and lyrics) did not constitute “publication” of a musical work.  Thus, for musical works before the 1976 Act, protection was not typically afforded until the owner deposited a manuscript copy of the music in the copyright office.  For copyright infringement cases involving pre-1976 musical works, this aspect of the law presents an interesting issue.  The recent case involving the song Blurred Lines presents such a case.

 

On March 10, 2015, a jury determined that performers Robin Thicke and Pharrell Williams copied Marvin Gaye's 1977 song Got to Give It Up when the duo created the 2013 hit song Blurred Lines.  The jury found Thicke and Williams liable for copyright infringement and awarded $7.4 million dollar to the children of Gaye.

 

Although most individuals will compare the two audio recordings and/or listen to a "mashup" of the two songs on YouTube before reaching a conclusion, the legal analysis is not so simple.  From an intellectual property law standpoint, this case is particularly interesting.

 

Gaye recorded Got to Give It Up in December 1976.  At that time, the Copyright Act of 1976 had been signed into law two months earlier, but did not go into effect until January 1, 1978.  As a result, aspects related to the copyright(s) of Got to Give It Up were governed by the Copyright Act of 1909.

 

As noted by the judge in a ruling for summary judgment, "in order to claim copyright in a musical work under the 1909 Act, the work had to be reduced to sheet music or other manuscript forum."  The Copyright Act of 1976 broadened the scope of federal copyright protection to include "works of authorship fixed in any tangible medium of expression," thereby encompassing a sound recording of a composition.

 

Due to the timing of Gaye's recording relative to the effective date of the Copyright Act of 1976, his copyrights were limited to the sheet music compositions.  In fact, the federal district judge granted Thicke and Williams a motion in limine to prevent the full, produced audio recording of Got to Give It Up from being played at the trial; a redacted version consistent with the sheet music was played for the jury.

 

To succeed at trial, lawyers for the Gayes were tasked with proving that the lyrics, melody and chords contained in the sheet music were copied when composing Blurred Lines.  The sheet music of Got to Give It Up, however, was reportedly missing several elements commonly associated with the produced audio recording, such as, most notably, the well-known drum beat.

 

The legal test for copyright infringement is a two-part analysis, each of which addresses whether the allegedly infringing work is "substantially similar" to the copyrighted work.  Despite the similar verbiage, the analyses are separate and distinct.  The first inquiry is considered to be a lower threshold and involves: (i) showing the alleged infringer had access to the copyrighted work; and (ii) the two works are substantially similar such that the alleged infringing work was copied from the copyrighted work.  In the case of Thicke and Williams, the popularity and distribution of Got to Give It Up no doubt proves access, and Thicke cited the song as inspiration when composing Blurred Lines.  If the first inquiry is answered in the affirmative, the jury determines whether the alleged infringer copied a substantial amount of protectable expression.  Whether Blurred Lines was substantially similar to the protectable expression captured in the sheet music of Got to Give It Up such that it misappropriates the same is certainly a question reasonable minds differ.

 

The verdict has had some divisive fallout.  Many artists applaud the verdict for advancing strong copyright protection.  Others believe the facts of the case create blurred lines in copyright law, from which the resulting unpredictability may stifle creativity when artists look to features of existing works for inspiration.

MVS Filewrapper® Blog: Lost Profit Damages Require Actual Sales by Patentee

Post by Jonathan Kennedy

 

The award of damages in patent infringement cases is governed by 35 U.S.C. § 284.  The statute provides "[u]pon finding for the [patent owner] the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court."  The statute does not define what "adequate" damages are, but two main theories of damages have been applied in making this assessment—a reasonable royalty, representing the floor for what is adequate, and lost profits.  Lost profits are awarded to make a party whole based on profits that were lost as a result of the infringement.  In contrast, a reasonable royalty is intended to compensate the patentee for the value of what was taken. 

 

In the recent case of Warsaw Orthopedic v. NuVasive, the Federal Circuit affirmed the finding for both patent owners, but reversed the lost profits award to Warsaw—and vacated pre- and post-verdict royalties—on the basis that Warsaw does not practice the patented technologies. 

 

Warsaw owns two patents which it licenses to a third party, Medtronic.  Warsaw and Medtronic sued NuVasive for infringement of the Warsaw patents.  NuVasive counterclaimed for infringement of its own patent.  A jury in the Southern District of California found all patents valid, and awarded damages for infringement to both parties, including lost profits to Warsaw.  Both parties appealed.

 

The Federal Circuit affirmed the district court's findings of validity and infringement, but reversed the lost profits award and vacated the pre- and post-verdict royalties to Warsaw and ordered a new trial on damages, holding that none of Warsaw's activities warranted an award of lost profits. 

 

Warsaw does not practice the patented technologies.  Instead Warsaw licenses the technologies to two related Medtronic entities, which manufacture and sell the patented products to a third related Medtronic entity for a profit.  The two related Medtronic entities that manufacture and sell products pay Warsaw a royalty on those sales.  Warsaw also manufactures fixations, such as surgical rods and screws, used in conjunction with the patented devices during surgery.  The fixations are also sold to the third Medtronic entity.  The third Medtronic entity combines the patented products and fixations, which are sold together in medical kits to hospitals and surgeons.   Warsaw argued that it has three sources of income derived from the patents:  (1) revenue from the sale of fixations to the third Medtronic entity; (2) royalties from the other two Medtronic entities for their manufacture and sale of the patented products; and (3) a payment from the third Medtronic entity resulting from an inter-company transfer pricing agreement ("true-up payment").  At trial Warsaw argued that all three income sources represent potential lost profits.  The jury awarded $101,196,000 in total damages to Warsaw, $101 million of which was for "Lost Profits Damages (with royalty the remainder)."  The verdict form also provided royalty rates for each patent. 

 

In reversing the award of damages to Warsaw, the Federal Circuit held, "a patentee may not claim, as its own damages, the lost profits of a related company."  Further, "[t]o be entitled to lost profits, . . . the post profits must come from the lost sales of a product or service the patentee itself was selling."  Thus, the court found the lost profits based on the royalty payments received from the related Medtronic companies' sales of products, did not qualify for lost profits damages for the plaintiff.

 

Warsaw argued that its lost profits from the sale of fixations to the related Medtronic company qualified as convoy sales.  The Federal Circuit clarified that to qualify as convoy sales, the related products "must be functionally related to the patented product and losses must be reasonably foreseeable."  The Court distinguished this from the mere sale of items together for convenience of some business advantage.  Thus, if the items for the convoy sales have independent use apart from the patented technology, that would indicate that are not functionally related. The Federal Circuit held that the fixations could not qualify as convoy sales because Warsaw failed to prove a functional relationship. Thus, Warsaw was not entitled to lost profits based on the sale of fixations.

 

With respect to the true-up payments, the Court found that Warsaw had failed to establish what percentage of true-up payments received from the related entities was attributable to payments for the patented products to hospitals and surgeons as opposed to unrelated transactions.  The evidence indicated that the true-up payments are valued based on company-by-company basis rather than technology-by-technology or product-by-product basis.  As such, the Federal Circuit held that the true-up payments were also not a recoverable lost profit.

 

The Federal Circuit noted that its holdings denying Warsaw's ability to obtain lost profits does not preclude it from other recovery.  The cjillourt indicated that Warsaw may be entitled to a reasonable royalty and remanded the case for a new trial on damages.

MVS Filewrapper® Blog: Michelle Lee Confirmed as USPTO Director

The Senate on Monday confirmed the White House's nominee for the long-vacant director position at the USPTO.  Director Lee had been serving as Deputy Director and acting Director for over a year, pending the nomination process. 

Director Lee takes over for former-Director Kappos, who left the position in February 2013.  The confirmation has been both long-expected and long-awaited. 

 

Congratulations to Director Lee.   

MVS Filewrapper® Blog: Alternative Patent Reform Legislation Proposed in Senate

Post by Dan Lorentzen

 

Even though the America Invents Act is just over 3 years old, patent reform legislation has arisen on several occasions over the past years.  The most visible legislative efforts have involved the "Innovation Act" proposed by Senator Goodlatte in 2013, and again in 2015.  The version of the Innovation Act introduced in 2013 stalled out in the Senate, but has been re-introduced in the House with a larger number of co-sponsors.   A new, alternative bill has now been proposed in the Senate.

 

Senator Chris Coons (D-Del.), along with co-sponsors Dick Durbin (D-Ill.) and Mazie Hirono (D-Hawaii), has now proposed the "Support Technology & Research for Our Nation’s Growth (STRONG) Patents Act of 2015."  The bill was introduced as S.632 on March 3, 2015 as "[a] bill to strengthen the position of the United States as the world's leading innovator by amending title 35, United States Code, to protect the property rights of the inventors that grow the country's economy." 

 

This new legislation addresses many of the same issues as the Innovation Act in the House, but in some cases does so in markedly different ways.  Included in the provisions are proposed amendments to the Title 35 that would bring claim construction in inter partes review (IPR) and post-grant review (PGR) proceedings at the PTAB in line with litigation in district court.  In particular, the bill would dictate that claim construction in an IPR and PGR proceeding be conducted using the "ordinary and customary meaning" standard instead of the broadest reasonable interpretation (BRI) standard currently applied.  In addition, the bill would require the PTAB in an IPR and PGR proceeding to consider any previous construction of the claims or claim terms at issue performed by a court, provided the patent owner was a party to the prior civil action.  In addition, the bill would import into IRP and PGR proceedings the presumption of validity applied in litigation. 

 

The bill also includes, among other provisions, the elimination of Form 18 for pleading in patent infringement cases in federal court, retention of fees collected by the USPTO, and inclusion of universities and other institutes of higher learning for micro entity status.  In addition, the bill would change the standard for a finding of willful infringement to a preponderance of the evidence.  Finally, the bill would create a cause of action under the Federal Trade Commission Act for sending a demand letter in bad faith.

 

A number of notable organizations have expressed their support for the STRONG Patents Act, including the Association of American Universities, the Association of Public Land Grant Universities, and the Biotechnology Industry Organization (BIO). 

 

The Filewrapper® blog will continue to follow developments for both the STRONG Patents Act and the Innovation Act.  The full text of the STRONG Patents Act is available here.

MVS Filewrapper® Blog: Cancelation of Trademarks due to First Actual Use After Application

Post by Dan Lorentzen

 

Federal registration of a trademark provides a number of benefits to the trademark owner, including protection throughout the entire country, advantageous litigation position—for example presumption of validity and enhanced monetary damages—and enlistment of the U.S. Customs Service to stop importation of counterfeit goods. The federal trademark system provides two separate avenues for protecting a mark: (1) registration of a mark that is already used in commerce, and (2) certification of a bona fide intent to use the mark in commerce (ITU application), followed by a later demonstration of actual use.  However, failure to use the correct registration scheme can result in invalidation of the registration, and loss of the benefits of federal protection.

 

In its recent decision in Couture v. Playdom, the Federal Circuit Court of Appeals held that a trademark that was registered under the standard (i.e. non-ITU) system, but was not actually used in commerce until after the registration, was void.  The mark owner filed a registration including, as a specimen showing use of the mark, a screen capture of the mark owner's website.  At the time of filing, the website was a single page that advertised the mark owner's readiness, willingness and ability to render services.  The mark owner did not, however, provide any services under the mark until after the mark had been registered.  The mark was the subject of a cancelation proceeding, and the Trademark Trial and Appeal Board (TTAB) canceled the registration as void from the time of filing because the owner had not used the mark in commerce as of the date of the application.

 

On appeal, the Federal Circuit affirmed the TTAB's cancelation.  The court held that "use in commerce" for registration requires actual use in conjunction with the services described in the application, and not merely offering services.  The court further noted that, although ITU applications are available, and procedures for substitution of an ITU application for a standard application are available, such substitution is specifically provided for prior to publication and registration.  As a result, once a standard trademark application is published, it can no longer be converted into an ITU application. 

 

This case highlights the need for mark owners to understand when and how they use their marks.  For the incautious, failure to fully consider and communicate these use issues may result in loss of trademark rights. 

 

The full opinion is available here.  

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