The Defend Trade Secrets Act - What it Means for Your Company

Posted in Employee Issues, Litigation, PRACTICAL IP Tips, Privacy & Data Protection, Trade Secrets

On May 11, 2016, President Obama signed the Defend Trade Secrets Act ("DTSA"), which went into effect immediately. The DTSA will have a major impact on intellectual property law and also has implications related to employees and independent contractors. Although the DTSA contains elements similar to the Uniform Trade Secret Act adopted in some form by every state except for New York and Massachusetts, there are notable differences. For example, the DTSA creates a federal private/civil cause of action for trade secret misappropriation. Previously, federal law only provided for criminal actions brought by the government. Available remedies include injunctive relief, exemplary damages in addition to actual damages, and attorneys' fees. The DTSA also allows for civil seizure of an opponent's property in extraordinary circumstances. These remedies could provide powerful tools for trade secret protection.

The DTSA provision of most immediate concern is the required employee notice of civil and criminal immunity for whistleblowers who disclose trade secrets to government officials for the purpose of reporting a suspected violation of law. The immunity also protects disclosures to attorneys or in sealed court filings. In order to comply with the DTSA, all agreements with employees, independent contractors or consultants covering trade secrets or confidential information must include notice of the DTSA's whistleblower safe harbors and immunity. Although the DTSA requires that an employer provide notice of the whistleblower immunity in any agreement with an employee that governs the use of a trade secret or other confidential information, the act defines "employee" to include any individual performing work as a contractor or consultant. Compliance can be achieved by including specific language in the agreement or providing a cross reference to an existing whistleblower policy document, such as an employee handbook. Failure to include the required notice in employment agreements results in the employer losing the right to recover attorneys' fees or exemplary damages from the employee.

Employers should take the following steps to comply with the DTSA:

  • All agreements concerning trade secrets or confidential information should be revised. This likely includes employment agreements, non-disclosure and confidentiality agreements, contractor agreements, severance or separation agreements, and more. The DTSA notice provision applies to agreements entered into or updated after May 11, 2016.
  • Employers may want to consider changing forum selection clauses in any contract affected by the DTSA. Having federal and state court options could be beneficial in a trade secret or other employment dispute. 
  • Contractor or consulting agreements should be amended so that the service provider is required to notify its employees of the DTSA's whistleblower protections

Additional compliance issues may arise as case law develops and companies adjust to the DTSA's requirements. 

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Lenz v. Universal and Fair Use under the Digital Millennium Copyright Act

Posted in Copyrights, In the News, Litigation, PRACTICAL IP Tips

On September 14, 2015, the 9th Circuit issued an opinion that requires copyright holders to take an extra step before sending a Digital Millennium Copyright Act (17 U.S.C. § 512(a) et seq.) takedown notification.  According to the 9th Circuit’s opinion in Stephanie Lenz v. Universal Music Corp. et al., copyright holders must now consider the application of the fair use doctrine before sending the notification.

The events giving rise to Lenz began in February 2007, when Stephanie Lenz uploaded a 29-second video to YouTube, showing her toddler dancing to Prince’s Let’s Go Crazy.  Prince’s publisher at the time, Universal, sent a takedown notification to YouTube, resulting in and the video’s removal.  The notification included a statement that Universal had a “good faith belief” that the use of Let’s Go Crazy was “not authorized” by the law, as required by 17 U.S.C. § 512(c)(3)(A)(v).

Lenz submitted a counter-notification requesting that the video be restored, and the video was restored in July of 2007.  Lenz then sued Universal, claiming there was a misrepresentation in Universal’s takedown notification.  Specifically, Lenz alleged that Universal did not have a good faith belief that her use of Let’s Go Crazy was “not authorized” by the law.  Such misrepresentations violate 17 U.S.C. § 512(f), which creates civil liability for the party requesting the takedown.

The case turned on the question of whether the fair use doctrine affirmatively “authorizes” the use of copyrighted material as contemplated by the DMCA.  If fair use equaled authorization, copyright holders would have to check for fair use before sending takedown notifications.  If fair use merely excused copyright infringement that would otherwise be unlawful, copyright holders would not need to consider fair use before sending takedown notifications.

Noting that the question had never before been taken up by a federal circuit court, the 9th Circuit held that “[f]air use is not just excused by the law, it is wholly authorized by the law,” and that fair use must be considered before sending a takedown notification.  The Court added that the fair use review need not be "searching or intensive," but a copyright holder must do more than “pay lip service” to fair use in a takedown notification. 

Lenz will now proceed to trial in the Northern District of California, where Stephanie Lenz may show that Universal did not consider fair use before sending the takedown notification. 

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In re Cuozzo and Inter Partes Review

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

The recent Federal Circuit decision in In re Cuozzo Speed Technologies, LLC (In re Cuozzo I) may impact how you want to defend against a patent infringement lawsuit. 

In re Cuozzo dealt with several interesting issues. But one highlight is the standard for claim interpretation during inter partes reviews (IPRs) before the PTO. IPRs are a way to challenge the validity of a patent. Commonly, a defendant in a patent litigation in a United States District Court will file an IPR on an asserted patent. The IPR process gives both the patentee and the challenger the opportunity to make arguments before the PTO regarding the validity of the challenged patent. A district court defendant may feel that an IPR is a better venue for challenging validity, or may feel that instituting the IPR helps bring leverage in settlement negotiations.

But an interesting question regarding IPRs has been: What standard is used for claim construction? The PTO had previously said that the broadest reasonable interpretation (BRI) would be used. This standard is more favorable to a challenger, as interpreting claims broadly allows more prior art to be considered anticipatory. The PTO applied this standard in finding the patent at issue in In re Cuozzo to be invalid, and the patentee appealed to the Federal Circuit. 

In its decision the Federal Circuit upheld the use of BRI, a looser standard than is used in the district courts. This should make IPRs even more popular. Challengers seem to like the knowledgeable venue provided by the PTO. Furthermore, IPR challenges may save money over complicated district court cases with high discovery burdens. Now, the In re Cuozzo decision gives challengers even more motive to avail themselves of IPR. 

Every case is different, but if you're hit with a patent infringement lawsuit, and you don't trust the district court to get invalidity or claim construction correct, you must at least consider inter partes review. 

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Why Should I Register My Trademarks?

Posted in IP Ownership, Trademarks

In the United States, trademark rights are based on (1) priority (who used the mark first), (2) territory (the geographic area(s) where the mark has been used), and (3) use (whether products or services are actually provided under the mark).Trademark

Generally, the first to either use a mark in commerce or file an intent-to-use application with the United States Patent and Trademark Office (USPTO) has the ultimate right to use and registration of the mark.

Common law rights arise when products or services are offered for sale in connection with the mark.  However, common law rights are limited to the trade area in which you actually use the mark and those rights may be limited or even prohibited by prior senior uses of the same or confusingly similar marks.

A trademark owner may also register a mark in one or more individual states through Secretary of State Offices.

Although registering your mark with the USPTO is not required to establish rights in a trademark, there are many important benefits of federal trademark registration with the USPTO.  For example, upon registration of a federal trademark, the registrant obtains rights to the mark throughout the United States retroactive to the date of filing of the application. The registrant also obtains the right to stop junior users from adopting confusingly similar marks in overlapping trade areas or anywhere the registrant has acquired goodwill in such mark.

Here are some of the benefits of registration:

  • Registration provides constructive notice nationwide of the mark owner’s claim in the mark and evidence of ownership of the mark.
  • The mark owner has the exclusive right to use the mark on or in connection with the goods or services set forth in the registration.
  • The mark owner may bring lawsuits for infringement in federal court.
  • The mark owner may be entitled to recover profits, damages and costs of infringement, attorneys’ fees and treble damages.
  • Registration can be used as a basis for obtaining registration in foreign countries.
  • The mark can obtain incontestable status after continuous use for 5 years after the date of registration on the Principal Register (which limits third parties’ rights to contest your mark).
  • Registration may be filed with U.S. Customs Service to prevent importation of infringing foreign goods.

An application for trademark registration requires: (1) a completed application form, (2) a nonrefundable filing fee ranging from $225-$375 per class of goods/services, and, for marks already being used in commerce, (3) specimens of the mark showing use of the mark in connection with the applicable goods/services.

Click here for more information about how to select and protect a trademark.

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Spider-Man Patents & Superpowered Stare Decisis

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

Web shooterIn 1964 the U.S. Supreme Court issued its decision in Brulotte v. Thys Co., interpreting the Patent Act in a way that made "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent" unlawful. In other words, under Brulotte you cannot continue to collect royalties after your patent expires. This has been the law for 50 years.

But in 2013, a case called Kimble v. Marvel Entertainment made its way to the Supreme Court, asking the Court to reconsider its decision in Brulotte. In short, Marvel had entered into an agreement with Stephen Kimble, who had patented a design that Marvel used to create Spider-Man toys that enabled kids to shoot foam string from their wrists -- like Spider-Man, of course. But the contract included an agreement to pay royalties indefinitely. So, when the parties fell into a dispute, Marvel took the position that, under Brulotte, the royalty agreement was no longer enforceable, because Kimble's patent had expired. And in response -- perhaps because he didn't have a lot of options -- Kimble took the position that Brulotte was wrongly decided and should be overruled.

The Ninth Circuit Court of Appeals was bound by Brulotte and had to rule in Marvel's favor -- but it made sure to note how "reluctant" it was to do so, citing the criticism that Brulotte had suffered since 1964. In other words, Kimble was trying to enforce his agreement with Marvel, and the Ninth Circuit wanted to help him, but Brulotte was standing in the way. Or, more precisely, a legal doctrine called "stare decisis" was standing in the way.

Stare decisis is legalese for the concept of "precedent" -- that is, it's the legal doctrine that says previous decisions are authoritative and binding on future cases that involve similar issues. The Latin term "stare decisis" is short for the maxim "stare decisis et non quieta movere" -- "to stand by decisions and not disturb the undisturbed."

In other words, by asking the Supreme Court to overrule Brulotte, Kimble was asking the Court to ignore stare decisis. And the Court doesn't do that very often.

Nevertheless, when the Supreme Court granted Kimble's cert petition, many thought it was to give Kimble what he was asking for by overruling Brulotte. After all, if the Court wanted to leave Brulotte in place, it could just deny Kimble's cert petition and let the Ninth Circuit's decision stand. Granting the cert petition seemed to suggest that Brulotte's days were numbered. Thus, it came as a surprise to many when, earlier this week, the Court issued a 6-3 decision reaffirming Brulotte as good law.  

What does this mean? It means Kimble v. Marvel Entertainment is not a very important case for patent law, because it doesn't say anything new: it just says the law under Brulotte hasn't changed. You still can't collect royalties after your patent expires.

But Kimble is a fascinating case -- and potentially a very important one -- for its discussion and affirmation of stare decisis. (Starting in section III of the majority opinion.) Justice Kagan wrote for a 6-justice majority, talking about the "enhanced force" of stare decisis when it comes to decisions that interpret statutes, because those decisions "become part of the statutory scheme" that businesses and individuals rely upon in their decisionmaking. This "superpowered form" of stare decisis cannot be easily set aside, writes Kagan. Not without without "superspecial justification."

This playful elevation of past decisions to superhero status is sure to be cited in all kinds of future cases, where challenges are brought against other statutes and the prior cases that interpret them. Thus, the impact of Kimble -- as a precedent for the power of precedent -- could be wide-ranging. Indeed, in a weird twist, Kimble could turn out to be the most important IP case from the 2014 Term, even while it is simultaneously the least important IP case for IP law.

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Supreme Court Patent Review -- Third Time's a Charm?

Posted in Litigation, Patents, Software

SupremecourtIn case you missed it, the Ultramercial patent case is back at the U.S. Supreme Court for a third time. For those who haven’t been following the long and winding road that this case has been on, here it is in summary:

In 2009 Ultramercial sued Hulu, YouTube, and WildTangent for patent infringement. But the district court dismissed the case under Rule 12(b)(6), without formally construing the claims, ruling that Ultramercial’s patent did not claim patent-eligible subject matter under 35 U.S.C. § 101. On appeal, the Federal Circuit disagreed with the district court’s ruling on patent eligibility at the dismissal stage, and reversed and remanded, saying Ultramercial’s patent did claim patent-eligible subject matter.

WildTangent petitioned the Supreme Court for review and the Supreme Court, instead of taking up the case on its merits, vacated the Federal Circuit’s decision, sending the case back to the Federal Circuit for reconsideration in light of the Supreme Court’s decision in Mayo Collaborative Services v. Prometheus Labs, Inc. But the Federal Circuit held its course, and again reversed the district court—still finding the Ultramercial patent claimed patent-eligible subject matter.

So WildTangent petitioned the Supreme Court a second time. And the Supreme Court again declined to take up the case on its merits, vacating the Federal Circuit’s decision and sending the case back for reconsideration—this time in light of the Supreme Court’s decision in Alice Corp. v. CLS Bank.

In round three at the Federal Circuit, the Federal Circuit changed its mind. This time, after applying the Alice test, the Federal Circuit agreed with the district court that the Ultramercial patent did not claim patent-eligible subject matter, and affirmed the district court’s dismissal of the case on these grounds, under Rule 12(b)(6).

So, now it’s Ultramercial who is petitioning for review—putting the case before the Supreme Court for a third time. In its petition, Ultramercial argues that the Federal Circuit misapplied the Alice test, and that clarification is needed from the Supreme Court or confusion will abound.

Given the disagreement and confusion that have surrounded this case in particular—and the Alice test in general—there’s a reasonable chance the Supreme Court will finally take up this case for review on the merits.

But in the meantime, the Federal Circuit’s decision is law. And practitioners should pay special attention to Judge Mayer’s concurring opinion, which addresses some key points on the issue of patent-eligible subject matter.

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Good Faith Belief of Invalidity. A Defence to a Claim of Inducement?

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

On Tuesday the Supreme Court decided a case that eliminated a line of defense in cases involving claims of inducing infringement.  In Commil v. Cisco, Cisco had raised the defense that it had a good-faith belief that Commil’s patent was invalid, but the District Court found Cisco’s supporting evidence inadmissible. The Federal Circuit held that the trial court erred in excluding Cisco’s evidence of its good-faith belief that Com­mil’s patent was invalid.

 Subsection (b) of 35 U.S.C. § 271 governs induced infringement: “Whoever actively induces infringement of a patent shall be liable as an infringer.”  In contrast to direct infringement, which is a strict liability offense, liability for inducing infringement involves the mental state of the defendant and attaches only if the defendant knew of the patent and that the induced acts would constitute patent in­fringement.  Cisco's argument was that a good faith belief of invalidity concerning the patent would prevent a defendant from knowing that the induced acts would constitute infringement.

 The Supreme Court disagreed finding:

 "The scienter element for induced infringement concerns infringement; that is a different issue than validity. Section 271(b) requires that the defendant “actively induce[d] infringe­ment.” That language requires intent to “bring about the desired result,” which is infringement. Id., at ___ (slip op., at 4). And because infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b)."

 While the court had been encouraged to uphold the defense as a way to prevent abusive patent assertion, the court found that there were existing tools to prevent the problem of frivolous suits and determined that it was necessary to maintain a separation between the issues of infringement and of invalidity.

 Although the court removed a potential defense for patent defendants, it did confirm the high standard of knowledge on the part of the defendant that a plaintiff must prove to establish a claim of inducement.

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Louisana and AstraZeneca

Posted in In the News, Litigation, Patents

A recent lawsuit by the State of Louisiana raises interesting patent issues, with a side of antitrust thrown in. 

The case revolves around patents on a beta-blocker called Toprol-XL. Three patents contain claims directed to the active compound in Toprol-XL. Louisiana alleges that the two later-filed patents were the result of inequitable conduct on behalf of AstraZeneca: they were obvious over the earlier-filed patent and AstraZeneca was improperly trying to extend the life of its patent rights. On the basis of the later-filed patents, AstraZeneca was able to preclude generic manufacturers from the market for an extended period of time. Louisiana claims that its citizens were hurt by these actions.


The lawsuit raises various issues and statutes: patent misuse, the Hatch-Waxman Act, the Orange Book, Abbreviated New Drug Applications (ANDAs), and state court versus federal court jurisdiction of patent issues. 

The two main issues to focus on are the patent and antitrust ramifications. 

Regarding antitrust, this case could have lasting effects on how pharmaceutical and other medical companies pursue protection of their products and market share. 

Regarding patents, this case will test what legal issues can be litigated in state court versus federal court. Federal courts have exclusive jurisdiction on patents, but Louisiana has not alleged a federal cause of action. AstraZeneca is already trying to remove the case to federal court, arguing that the issues raised will have substantial federal impact. 

If you're in the pharmaceuticals business this is definitely a case to keep an eye on. 

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Protecting Your Marks Outside of the United States: Foreign Trademark Priority Filings

Posted in IP Ownership, PRACTICAL IP Tips, Trademarks

Trademark protection is geographic in scope...meaning that a trademark is only protected in the geographic area(s) (state/region/country) in which the mark is used or registered.

earth globeA United States trademark application or registration with the United States Patent and Trademark Office (“USPTO”) does not protect a trademark in any foreign country.  However, U.S. trademark applications and registrations can be used to obtain trademark protection in other countries and vice versa.

Six-Month Priority Foreign Filings

If the foreign trademark application is filed within six months of the U.S. application, the foreign application can claim “convention priority.”  This means that the foreign application will be treated as if it was filed on the same day as the U.S. application.  Nearly all countries are members of the Paris Convention, which put this rule in place.

“Claiming priority” in this six month window can prove to be a major advantage by providing you with the earliest possible filing date for your mark.  If other applicants file similar marks after that priority date, they will be rejected or suspended. In other words, your application will receive priority over applications filed after not only your actual filing date, but also over applications filed between your actual filing date and your priority date.

Taking advantage of priority foreign filings also allows you the opportunity to spread out the costs associated with trademark filings over a six-month period and gives you time to assess your international brand protection strategy without sacrificing any protection...which can be significant, especially for a new venture or brand.

Foreign trademark applications filed after this six-month “priority” date take the actual dates on which they are filed.

Other Cost-Saving Measures and Strategies

In many cases, there are mechanisms available that provide efficient and cost-effective ways of obtaining protection for your brand simultaneously in multiple countries.  For example, the Madrid Protocol allows a trademark owner to seek protection in any of the almost 100 member countries by filing one application and designating as many member countries as it chooses.  It is also possible to file a single Community Trade Mark ("CTM") application for a trademark covering all of the countries in the European Union.  You can designate the EU/CTM in your Madrid Protocol application.

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Wild Thing Thrown Out of the Ring

Posted in Copyrights, In the News, Litigation, Right of Publicity

WildThingLast week the U.S. Court of Appeals for the Eighth Circuit threw former pro-wrestler, Steve "Wild Thing" Ray, out of the ring. That is, the Court threw Ray's lawsuit out of court, holding Ray's state-law claims were preempted by federal law.

Ray wrestled professionally for the UWF in the early '90s. At some point, ESPN obtained films of some of Ray's wrestling matches and was rebroadcasting them in Europe and North America -- without Ray's consent. Ray sued in Missouri state court, bringing state-law claims for (1) invasion of privacy & misappropriation of name, (2) infringement of the right of publicity, and (3) interference with prospective economic advantage. ESPN removed the case to federal court and then moved to dismiss, arguing Ray's state-law claims were preempted by the federal Copyright Act.

The district court agreed and dismissed the case. Ray appealed. And the Eighth Circuit affirmed the dismissal.

In simple terms, under the "federal preemption doctrine," a plaintiff cannot bring a claim under state law if essentially the same claim can be brought under federal law. The basic rationale underlying the doctrine is that defendants should not have to defend against the state-law version of a claim -- and thus have to possibly defend against 50 different state-law versions of that claim -- if there is a single federal-law version of the same claim. If there's a federal-law version of the claim, it preempts all the possible state-law versions of the same claim.

According to the Eighth Circuit, the federal Copyright Act preempts a state-law claim if (1) the claim is based on a work that falls within the subject matter of copyright, as defined under the Act, and (2) the right being asserted under state law is equivalent to the rights that are protected by the Act.

In Ray's case, the Court noted that his claims were based on the films of his wrestling matches -- and films (like books and music) are works that clearly fall within the subject matter of the Copyright Act. The Court then noted that Ray was not complaining that ESPN was using his image to, for example, promote a product without his permission; instead, he was complaining merely that the films were being rebroadcast without his permission. And because the right to rebroadcast (or to reproduce) is equivalent to a right protected by the Copyright Act, Ray's state-law claims were essentially the same as claims that might be brought under the Copyright Act, and were therefore preempted by the federal statute.

In short, Ray can't do anything about ESPN's rebroadcasting of his wrestling matches, unless he can show that the rebroadcasting violates federal copyright law -- or unless he can show that ESPN was doing more than merely rebroadcasting the films, such as using Ray's image to promote a product without his permission.

If you have questions about whether state-law claims may or may not be preempted by federal law, contact an attorney. And for information about recent trends in the Supreme Court regarding the federal preemption doctrine, see this article.

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