Class Action Privacy Lawsuit Against Facebook Gets First Hearing Before European Court

Posted in In the News, Litigation, Privacy & Data Protection, Websites, Domain Names & Apps

Earlier this month, the European regional court in Vienna heard preliminary arguments in a class action lawsuit against Facebook, which challenges the “safe harbor” framework under which US companies transfer personal data from the European Union to their US-located servers while remaining in compliance with the EU’s data protection laws.

The suit against Facebook is spearheaded by an Austrian law student, Maximilian Schrems, who claims that the existing US-EU data protection regime no longer guarantees the privacy of European residents and fails to induce compliance with the EU’s Data Protection Directive, following revelations that Facebook provided the US National Security Agency with access to user data as part of the NSA’s PRISM surveillance program.  The case is brought against Facebook's European headquarters, Facebook Ireland Limited, which registers all Facebook accounts outside the United States and Canada — roughly 80 percent of Facebook’s 1.35 billion users.

According to the Wall Street Journal, spending on digital advertisements in Western Europe is expected to total $34.81 billion in 2015, making the personal information that fuels targeted advertising valuable currency for companies that offer ad-supported services.

The “safe harbor” framework under which US companies can legally transfer that valuable data from the EU was agreed to by the US and EU in 2000.  Essentially, the safe harbor allows US companies to transfer data out of the EU if they self-certify to the US Department of Commerce that they comply with EU data protection standards.

The suit against Facebook is brought by 25,001 users/plaintiffs, and 50,000 more users have registered to join the class according to Europe–v–Facebook, a group started by Schrems. Each plaintiff claims the equivalent of about $532 (€500) in damages.

The recent hearing in Vienna was on Facebook’s preliminary challenges to jurisdiction in Vienna and the plaintiffs’ ability to bring the suit as a class action. No decision has yet been issued, but if the suit goes forward, it could have widespread implications for US companies that move personal data from the EU to their domestic servers. However, talks between the US and EU about revising the safe harbor framework could result in a revised US-EU data protection framework independent of the lawsuit.

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Big Change in Trademark Law

Posted in Litigation, Trademarks

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Last week the U.S. Supreme Court issued it’s decision in B&B Hardware, Inc. v. Hargis Industries, Inc. The case involved a dispute between two manufacturers of sealing fasteners. B&B owned the registered mark “SEALTIGHT” and Hargis wanted to register the new mark “SEALTITE” for a similar product that moves in different channels of trade. The parties had taken their dispute to the Trademark Trial and Appeal Board (TTAB), which declined to register Hargis’s new mark, finding it was “likely to cause confusion.”

While the TTAB proceeding was still ongoing, B&B also filed suit in federal court for trademark infringement. Later, B&B argued that the TTAB’s ruling on the likelihood of confusion should preclude the court from ruling otherwise. But the court disagreed and eventually ruled against B&B (and contrary to the TTAB), finding Hargis’s new mark was not “likely to cause confusion.”

The Eighth Circuit Court of Appeals affirmed the district court’s ruling—including the district court's rejection of B&B’s argument that the TTAB’s ruling should have preclusive effect. So B&B took its case to the Supreme Court.

As predicted, the Supreme Court (7-2) reversed the Eighth Circuit and held that, where the district court is deciding the same issue decided by the TTAB, the TTAB’s decision will have preclusive effect—meaning the TTAB's decision precludes the district court from deciding that issue differently.

The Supreme Court’s decision is narrow, limiting the preclusive effect of TTAB decisions to those situations where the TTAB has considered the same factors that the court is considering. This means there will be many cases in which a prior TTAB decision does not preclude the district court from deciding the question differently. But, of course, this also means many trademark infringement cases will now include an argument over whether prior TTAB rulings have any preclusive effect.

Most reactions to the B&B Hardware decision have been favorable, recognizing that the TTAB has more expertise and experience regarding trademark issues than district courts. But some have expressed concern that B&B Hardware will complicate trademark disputes and put pressure on parties to either invest more in TTAB proceedings or to avoid them altogether—depending on which way the TTAB is likely to decide the matter. For all these reasons, B&B Hardware will likely have a significant impact on trademark litigation.

One interesting question that was not raised or resolved in B&B Hardware is whether the Supreme Court’s preclusion rule violates the Seventh Amendment right to a jury trial. Some believe that the right to a jury trial includes the right to a trial over intellectual property issues, and that this right is infringed when administrative decisions prevent a trial court from deciding the matter. Notably, Justices Thomas and Scalia dissented from the decision in B&B Hardware, on the ground that the preclusion rule trespasses on the primacy of Article III courts.But the Seventh Amendment question is left for another day.

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An Update on Post Grant Proceedings After AIA

Posted in In the News, Litigation, Patents, PRACTICAL IP Tips, Software

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One of the major changes initiated by the America Invents Act was the expansion of post grant proceedings such as Inter Partes Review and Post Grant Review. These procedures before the Patent Trial and Appeal Board (PTAB) give accused infringers and other patent challengers several potentially powerful weapons to challenge patent validity. After several years of use, what is the data showing about these post grant procedures?

The USPTO is attempting to collect and publish data about the various post grant proceedings. The most recent data is current through January 1, 2015. Two factors immediately jump out from the data. One, Inter Partes Reviews (IPRs) are by far the most popular among the four measure procedures: IPRs, Post Grant Reviews (PGRs), Covered Business Methods (CBMs), and Derivation proceedings. IPRs total 2,299 out of the 2,587 total filings. Second, a heavy majority (64% for FY 2015) of challenged patents fall under the electrical and computer arts (TCs 2100, 2400, 2600, 2800). Software patents are often criticized and this data suggests that software will continue to be a contentious battle ground going forward. 

The popularity of IPRs is not surprising. CBMs are limited to business methods and therefore are not available for many patents. And PGRs must be applied for within 9 months of the issuance of the challenged patent. That leaves IPR as the natural recourse for parties engaged in litigation. IPR has an advantage over the old (and still available) Ex Parte Reexaminations because the challenger gets a voice before the PTAB. One drawback of IPRs, however, is the estoppel provision. The challenger is estopped from raising issues in court that were raised or reasonably could have been raised before the PTAB. While on its face this estoppel provision seems daunting, preliminary indications of success rates in IPRs have parties apparently believing that it's worth the risk. IPR filings have continued to increase each year since their inception: 167 IPRs in 2013, 557 in 2014, and 207 so far in 2015.  

It will be interesting to see how the numbers change going forward. It's possible there has been a rush of IPRs filed because of a number suspect patents that were already in litigation. Patentees may include IPR risk in their calculations going forward and assert fewer borderline patents, causing IPR filings to drop. On the other hand, IPRs may become more and more popular if challengers achieve high rates of success. While early indictions look promising for IPR filers, it's still early to judge how successful challengers have been. The preliminary data on final decisions is suggestive but not conclusive. Furthermore, there are substantive and procedural legal issues that still have to be worked out regarding PTAB proceedings. Nevertheless, IPRs' popularity shows that patent challengers are enjoying their new options. If your company faces a patent infringement claim you must at least consider filing an IPR. 

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Frolow v. Wilson and Patent Marking

Posted in IP Ownership, Litigation, Patents, PRACTICAL IP Tips

One overlooked Federal Circuit case from the past few years is Frolow v. Wilson Sporting Goods Co., 710 F.3d 1303 (Fed. Cir. 2013). At the Federal Circuit the case provoked four different opinions - from a three judge panel - so it's worth looking at the legal issues involved. 

The main issue involved was patent marking. Wilson licensed a patent (RE 33,372) from Frolow that covered a tennis racket with certain properties of moment of inertia and center of percussion. Frolow conducted an audit regarding licensing fees and later filed suit and claimed that Wilson was not paying sufficient royalties.

Two sets of rackets in dispute were of particular interest.

  • 14 rackets that were marked but for which Wilson did not pay royalties
  • 299 rackets for which Wilson did pay royalties but that Frolow did not add to the case until later in the proceedings

Frolow appears not to have submitted much evidence that the '372 patent covered the group of 14 or the group of 299 aside from the evidence that: the group of 14 were marked and the group of 299 were explicitly covered by Wilson's royalty payments. In contrast, Wilson submitted evidence including moment of inertia tests and the like from an expert. The trial court essentially ruled that Frolow failed to submit evidence of infringement and granted summary judgment to Wilson. On appeal, Frolow argued that Wilson's marking of the group of 14 presented a fact issue. And furthermore, that Wilson's payments on the group of 299 also presented a fact issue. The Federal Circuit agreed - Wilson's marking and royalty payments created issues of fact that should have gotten Frolow beyond the summary judgment phase. Of course, Frolow could still lose at trial if Wilson had stronger evidence. 

Of note, the Federal Circuit did not adopt a rule of marking estoppel. The Federal Circuit refused to hold that Wilson's marking of the group of 299 prevented Wilson from later arguing that the group of 299 were not covered by the '372 patent. Regarding the group of 14, Wilson's marking of those patents did not prove that they were covered, but the marking could be used as one of many facts regarding infringement. 

One interesting side note (raised in Judge Newman's concurring opinion): should a licensee's marking of a product create a presumption of infringement, such that in a trial the licensee would bear the burden of proving non-infringement? Not long after Frolow the Supreme Court gave us an answer in Medtronic, Inc. v. Mirowski Family Ventures, LLC, 571 U.S. ___ (2014). There, the Supreme Court ruled that the patentee would still have to prove infringement. 

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Patent Reform Update

Posted in IP Ownership, Litigation, Patents

As anticipated, the patent reform bill: the Innovation Act has been reintroduced in the House of Representatives.  Among the included provisions in H.R. 9 are:

Cost Shifting, including Attorney Fees:  The act would require the court to award the prevailing party attorney fees and other expenses unless the judge determines “that the position and conduct of the non-prevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust."  In cases where the losing party cannot pay the award, the law would allow the court to make other interested parties liable for the attorney fee award. This provision is in stark contrast to current practice where the attorney fees are only awarded in exceptional cases.

Stay of End User/Customer Suits:  Courts are required to stay lawsuits against end users when the manufacturer of the accused product is party to the same litigation or another action on the same patent.  The end user/customer must agree to be bound by any issues finally decided as to the manufacturer.

Disclosure of Real Party in Interest: The patent owner must disclose “the ultimate parent entity” of any assignee of the patent. The plaintiff must disclose to the Patent and Trademark Office, the court, and each adverse party the identity of each of: (A) The assignee of the patent or patents at issue; ‘(B) Any entity with a right to sublicense or enforce the patent or patents at issue; (C) Any entity, other than the plaintiff, that the plaintiff knows to have a financial interest in the patent or patents at issue or the plaintiff; (D) The ultimate parent entity of any assignee identified under (A) and any entity identified under (B) or (C). The patentee will have an continuing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. Failure to comply would result in no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.

Heightened Pleading Standards: The pleading requirements for patent infringement would also be raised.  A patent holder filing an infringement lawsuit would need to show how each limitation of each asserted claim is found within each accused product or instrumentality. The patent holder would not be required to complete the analysis if the information required is not reasonably accessible.  The plaintiff must also include a description of the plaintiff's authority to enforce the patent and a description of the principal business of the plaintiff.  The plaintiff must also provide a description of licensing requirements, such as through standard setting bodies.

Discovery Limits:  The bill would limit discovery in litigation prior to a claim construction ruling to information necessary to construe the claims or resolve motions.  The Court could expand discovery limits where delay could affect the rights of a party or as necessary to prevent manifest injustice.

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Patent Applications, Small Entities and Track 1 Prioritized Examination

Posted in Patents, PRACTICAL IP Tips, Software

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If you're a small entity, then you might want to consider filing your patent applications under Track 1 Prioritized Examination. The initial cost is higher...but the patents tend to issue with fewer office actions -- thus saving money in the long run.

Track 1 Prioritized Examination allows patent applicants to get a final disposition (allowance, final rejection, or abandonment) within twelve months. The fees are $4,800 per application, but only $2,400 for small entities. According to the USPTO, the average pendency from grant of a Track 1 request until the first action on the merits is 2.42 months. Average pendency from grant until final disposition is 6.05 months. So, Track 1 is certainly fast.

But Track 1 can make financial sense as well. One study found that, on average, it takes fewer office actions to reach allowance under Track 1 than under a normal patent application. Regular applications have an average pendency of 2.7 office actions until allowance. Assuming an average cost of responding to an office action of $2,600 then prosecuting a regular utility application should cost $7,020 for a small entity. In contrast, Track 1 applications have an average pendency of 1.2 office actions until allowance. Prosecuting a Track 1 application should therefore cost $5,520 for a small entity. That's about $1,500 in savings, all while getting a patent sooner.

There are some possible drawbacks to the study. The costs measured are averages and would therefore be most applicable to an entity filing many patent applications. Small entities may only be pursuing small portfolios and therefore may not see the savings that can aggregate over a large number of applications. Another possibility is that there is selection bias among Track 1 applicants. A follow up study could look at whether companies tend to send high value applications through Track 1. It's possible that the measured average pendency of 1.2 office actions is due to companies using Track 1 for applications they feel confident about.

That being said, even if Track 1 is not cheaper for small entities, it's still similar, or at least not extravagantly more expensive than regular applications. For a small entity, getting a patent issued quickly could provide a great advantage, either for market presence or attracting venture capital or other funding. 

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Commil v. Cisco and Induced Infringement

Posted in Litigation, Patents, PRACTICAL IP Tips

The Supreme Court recently granted cert in Commil USA, LLC v. Cisco Systems, Inc., considering the issue of whether the Federal Circuit erred in holding that a defendant's belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b).

The Supreme Court's decision on this issue could impact potential defendants' approach to litigation.

This case began in the Eastern District of Texas where Commil won a $63 million dollar jury award. The jury instruction said that Cisco could be liable if it "knew or should have known that its actions would induce direct infringement." However, the Supreme Court held in Global-Tech v. SEB that induced infringement "requires knowledge that the induced acts constitute patent infringement." Though Cisco was aware of Commil's patent, it claimed to have a good-faith belief that the patent was invalid. Under Global-Tech, such good faith could appear to be a defense to liability for induced infringement. Cisco felt that the jury instruction in Commil did not give it the ability to properly assert this defense. Essentially, the Commil jury instruction allowed for a finding of liability for mere negligence. Cisco is arguing that more than negligence is required, i.e., actual knowledge. The Federal Circuit agreed and held that "[f]acts sufficient to support a negligence finding are not necessarily sufficient to support a finding of knowledge." 

Critics of the Federal Circuit decision say that a knowledge standard would vitiate induced infringement. If defendants can avoid induced infringement solely by claiming to have a good faith belief that a patent is invalid, then every company will profess that belief. Disproving the belief may prove near impossible as defendants produce reams of self-serving evidence. Supporters of the decision say that the good faith belief is just one piece of evidence to consider. Of possible interest, the Solicitor General sided with Commil, arguing that a good faith belief of a patent's invalidity should not factor in a liability analysis.

This will be a case to watch. If the Supreme Court sides with Cisco then potential defendants will have increased leverage in patent ligation going forward.

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Misleading Invoices for International Trademark Registrations

Posted in In the News, PRACTICAL IP Tips, Trademarks

The World Intellectual Property Organization (WIPO) -- the organization that administers the Madrid Protocol and Madrid Agreement systems of international registration of marks -- has recently issued a warning notice regarding a new kind of misleading invoice being sent to owners of international trademark registrations and their representatives requesting payment of fees.  The organization issuing these invoices is holding itself out as the World Intelligent Property Office and is using a similar name, logo, address and contact information as those of WIPO.

If you receive an invoice related to your trademarks, you should verify its authenticity with Bell Nunnally, your trademark attorney, WIPO or the Intellectual Property Office through which your mark is registered before remitting payment.

WIPO has databases containing samples of misleading invoices and similar announcements issued by various countries.

For information on similar scams in the United States, click here.

 

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How Might a 3D Printing Revolution Impact Intellectual Property Law?

Posted in Copyrights, In the News, IP Ownership, Litigation, Patents

3D printing has drawn increased attention in the past few years. 3D printing involves a computer-guided tool that deposits powdered, liquid, paper or sheet material in successive layers to form an object. The tool automatically fuses the layers together during the depositing process. 3D printing can create a variety of objects such as toys, bicycle parts, furniture, and even guns. 3D printing has even been used in space. The computer that controls a 3D printer uses a set of blueprints to make products, making the procedure quite easy for the layman.

As with any new technology, 3D printing has raised some tough legal questions, and here are a few of the main ways that 3D printing and IP laws will intersect: 

First, case law and statutes regarding inducement of patent infringement will grow in importance. If 3D printing becomes accessible to millions of households, then patentees will be unable to sue each infringer who builds a patented product. However, a patentee could go after the entity who distributed the blueprints used to create a patented product.

Second, there will be an increase in patenting of materials and material science technology. Owners of 3D printers can build their own items, but they need material to do it. 3D printing typically employs various plastics, but there are technologies using powders, metals and other materials. Companies may find increased value in the material sciences. Consumers may need to buy less manufactured product, but they'll need to buy more raw material.

Third, companies may focus on patenting and manufacturing items that can't be 3D printed. Over time, 3D printing may be shown to have limited value for specific items. Maybe certain materials aren't easily adaptable to 3D printing. Or certain items will require a specific manufacturing process to create. Companies may focus on the areas where 3D printing is weakest, although it will take time to determine what these subject areas are.

Fourth, companies will turn to copyright to protect their ideas. Similar to the first point above, if millions of consumers have 3D printers, and it's pointless to sue every infringer, then producers will see less value in patents. But copyrights may grow in importance. A patent is expensive, costing thousands of dollars in application and legal fees. But copyright registrations for blueprints can be obtained for $35-$55. The copyright owner can then sell the blueprints or sue unlicensed distributors. Copyright infringement can result in large statutory damages. There will, of course, be some pirating of material, such as with music and movies. But digital distribution of music and movies is still a big market. Similarly, producers may have to figure out how to make money from the distribution of copyrighted blueprints. Maybe someday consumers will be able to download  3D printing blueprints from iTunes and similar services. 

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Teva and the Foundation of Patent Litigation

Posted in Litigation, Patents

Patent_searchAmazingly, there is only one patent case on the Supreme Court’s docket, so far—though there are at least three more cases up for consideration at the cert-petition stage. (The Supreme Court decided five patent cases last term.) The case that is on the docket, Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., involves a patent dispute between Teva and various generic drug companies, over a drug prescribed for the treatment of multiple sclerosis. But the Teva case raises a question that has little to do with the details of the particular dispute between these drug companies. Instead, the Teva case arguably cuts to the foundation of all patent litigation.

Typically, under the rules of civil litigation, findings of fact are made by the district court and those factual findings “must not be set aside [by the court of appeals] unless clearly erroneous.” In other words, the court of appeals’ job is to focus on legal questions, deferring to the district court when it comes to questions of fact.

The procedure for patent litigation includes an early phase called “claim construction,” where the district court must construe the patent claims that are in dispute, before the trial—and even before summary judgment proceedings—can occur. Arguably claim construction is the foundation of patent litigation, and it involves a lot of scientific evidence from experts on both sides. The district court relies on this evidence (and on its determinations regarding the validity or credibility of the evidence) when it issues its factual findings and its decision regarding claim construction.

But on appeal in a patent case, the Court of Appeals for the Federal Circuit does not defer to the district court’s factual findings. Instead, the Federal Circuit may ignore the district court and make its own determinations regarding claim construction, under what is known as “de novo” review. As Teva puts it, this is contrary to the general rules of civil litigation—and it can make patent litigation “longer, more expensive, and less predictable.”

In Teva, the district court made factual findings pertaining to polypeptide chemistry, which guided the district court’s interpretation of a key term in Teva’s drug patent. But on appeal the Federal Circuit disagreed with those findings and construed Teva's patent in a way that invalidated it.

Now, Teva essentially asks the Supreme Court to put an end to the Federal Circuit’s de novo review of the district court's claim construction—requiring the Federal Circuit to give the same deference to the district court’s factual findings that is usually required in civil litigation.

In other words, the Teva case could have a profound effect on patent litigation going forward. If the Supreme Court does what Teva is asking it to do, claim construction will become much more important in the district court—because parties won't have an open door to challenge the claim construction on appeal.

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