Confusion on Software Patents and Alice v. CLS Bank - Alice in a Computer Wonderland

Posted in Litigation, Patents, Software

ComputerLast term the U.S. Supreme Court handed down Alice Corp. v. CLS Bank International. Alice drew interest for its focus on software and patentability under 35 U.S.C. § 101, the statute that codified eligibility for patent protection. The outcome impacts industries such as software, computer hardware, and telecommunications. Patents dealing with software or computer-implemented inventions may not lead the ten o'clock news...but some of the most successful American companies, such as Apple, Microsoft, and Google, work in this sector, and the Alice decision was of great interest to the whole industry. So the Supreme Court had all of Silicon Valley on the edge of its seat waiting for Alice.

The patents in suit in Alice dealt with software used in financial trading - specifically a computer-based method for intermediated settlement. For example, two parties to a financial trade choose to use a third party intermediary. This intermediary accepts payments from each side and completes the transaction when each party has fulfilled its obligations. A party's failure to pay terminates the trade. This system presents less risk because no money has been exchanged if one party fails its obligations. Alice's patents took this financial practice and implemented it on a computer. CLS Bank challenged the patents' subject matter eligibility under § 101. Section 101 states:

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, subject to the conditions and requirements of this title.

The Supreme Court has previously found implicit exceptions to this statute, namely, laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection.  

The Supreme Court heard the case after the district court invalidated Alice's patents on summary judgment. The judge ruled that a method of intermediated settlement to minimize risk is a "basic business or financial concept." At the Federal Circuit, a panel reversed the district court by a vote of 2-1. CLS Bank petitioned for en banc rehearing, which the court granted. Seven out of ten judges on the en banc panel agreed with the district court and invalidated Alice's patents. But the Federal Circuit created more confusion than certainty. The confusion came from the multiple opinions (seven) and the lack of a discernible standard for applying § 101. The plurality opinion, with five votes, outlined an analysis focusing on the risk of "preemption." Preemption occurs when a patent issues on a fundamental concept or idea. Upholding such a patent preempts the use of the building blocks of invention, therefore stifling innovation.

Alice appealed and the Supreme Court granted cert. A measure of interest in the case: third parties filed over forty amicus curiae briefs. The Supreme Court unanimously invalidated the patents. Justice Thomas, writing for the court, reasoned in part:

We need not labor to delimit the precise contours of the 'abstract ideas' category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of 'abstract ideas' as we have used that term.

Alice Corp. v. CLS Bank International, 134 S. Ct. 2347, 2357 (2014).

Since the decision, practitioners have debated whether Alice changed the law or affirmed it. Over the summer numerous courts invalidated computer-implemented patents on § 101 grounds based on the Alice decision. Examples include:

This wave of decisions suggests that Alice changed the law. On the other hand, the first judge to look at Alice's patents found them invalid. The Supreme Court affirmed, not overruled, the trial court judge.

We will see how the case law develops and how the USPTO implements Alice in its rulemaking. Our experience so far is that the USPTO is taking a tougher stand against software patents. Software is still patentable in certain circumstances but it will take time to discern the exact limits of software patentability post-Alice.  

Tweet Like Email

New Weapon for Combating Online Defamation in Texas

Posted in Defamation, In the News, Litigation

The Texas Supreme Court has held that authors of online content can be ordered to delete defamatory statements they make on their websites.

In Robert Kinney v. Andrew Barnes et al., the president of the BCG Attorney Search legal recruiting firm, Andrew Barnes, posted statements on the websites and that implicated former BCG recruiter Robert Kinney in a kickback scheme during his time at BCG.  Barnes owned and 

Kinney sued Barnes for defamation, and sought an order that would:  (1) require Barnes to delete the alleged defamatory statements from his websites (and request that third-party publishers of the statements do the same) upon a final adjudication that the statements are defamatory; and (2) permanently enjoin Barnes from making similar statements in the future.  Barnes argued that Kinney’s requested relief would constitute prior restraints on his right to free speech under the Texas Constitution.    

The Texas Supreme Court held that ordering the deletion of statements after a final adjudication that those statements are defamatory would not constitute a prior restraint.  Justice Lehrmann wrote for the Court:  “Such an injunction does not prohibit future speech, but instead effectively requires the erasure of past speech that has already been found to be unprotected in the context in which it was made.  As such, it is accurately characterized as a remedy for one’s abuse of the liberty to speak and is not a prior restraint.”

However, the Court held that enjoining the making of similar statements in the future would constitute a prior restraint on speech, which would be permissible only in rare circumstances.  The Court then held that Kinney v. Barnes did not present such a circumstance.  Specifically, the Court held that enjoining future defamatory statements would not effectively remedy defamation without chilling free speech, even if similar statements had already been judged defamatory and ordered deleted.

In so holding, the Court rejected Kinney’s argument that the case for enjoining future online speech was more compelling due to the speed with which online defamatory statements can spread to a vast audience.  Rejecting Kinney’s argument, the Court made clear that online speech shall receive the same protection under the Texas Constitution as speech disseminated through other mediums.

Tweet Like Email

Copyright Protection is Not Monkey Business

Posted in Copyrights, In the News, IP Ownership

Macaca_nigra_self-portrait_(rotated_and_cropped)The U.S. Copyright Office released an updated 1,222-page “Compendium of U.S. Copyright Office Practices, Third Edition” earlier this week clarifying its position that it "will register an original work of authorship, provided that the work was created by a human being."  The report goes on to state that "[t]he Office will not register works produced by nature, animals, or plants.  Likewise, the Office cannot register a work purportedly created by divine or supernatural beings, although the Office may register a work where the application or the deposit copy(ies) state that the work was inspired by a divine spirit."  The report provides examples of works that will not be protected by copyright, and the first example is "A photograph taken by a monkey."

The report was released weeks after wildlife and nature photographer David Slater claimed that Wikimedia was infringing his copyrights in the "selfies" taken by macaque monkeys in Indonesia by allowing thepictures to be posted in Wikimedia Commons, a library of public domain photos.  Wikimedia refused to remove the images because it believed the monkey was the photographer, and, therefore, the "author" of the photo...and, as non-humans can't own copyrights, the photo was in the public domain.  Slater argued that he staged the shot and set up the selfie intentionally, so it's irrelevant that the monkey pressed the shutter (likening the monkey to an assistant).

Although Slater may still file a lawsuit against Wikimedia (as UK or European law may allow Slater to claim ownership if he employed "labour, skill and judgment" in connection with the photographs or they were part of his “intellectual creation”), he is currently offering free canvas prints of the monkey selfie and donating money to the Sulawesi Crested Black Macaques Conservation Programme for each print redeemed.


Tweet Like Email

SCOTUS Preview: Trademark Confusion

Posted in Litigation, Trademarks


In the 2014-2015 term the Supreme Court will decide at least two important trademark cases. (There's still time for them to add more.) Here's a quick preview of one of them:

In B&B Hardware, Inc. v. Hargis Industries, Inc., B&B (a manufacturer of sealing fasteners) owns the registered mark "SEALTIGHT," and Hargis (also a manufacturer of sealing fasteners) sought to register the mark "SEALTITE." The marks are associated with similar products, but the products move in different channels of trade.

This case is about the two ways in which parties, under the Lanham Act, can litigate the issue of whether one mark is "likely to cause confusion" with another -- and how these two proceedings may or may not impact one another. Parties can litigate the "likely to cause confusion" question before the Trademark Trial and Appeal Board (TTAB), in disputes over the registration of new marks. And they can also litigate this same question in court, in lawsuits for trademark infringement.

B&B opposed Hargis's effort to register its mark, claiming "SEALTITE" was likely to cause confusion with B&B's "SEALTIGHT," which was already registered. In fact, Hargis even admitted there had been incidents of actual customer confusion. The TTAB agreed and eventually declined to register Hargis's mark.

While this proceeding before the TTAB was ongoing, B&B also filed suit in federal court for trademark infringement. And after the TTAB concluded that Hargis's mark was likely to cause confusion, B&B sought summary judgment in the district court -- arguing that the TTAB's conclusion precluded the district court from concluding otherwise. But the district court refused to give preclusive effect to the TTAB's decision, and even refused to allow B&B to present the TTAB's decision to the jury, as evidence of the likelihood of confusion. And, in the end, the district court ruled against B&B, finding that there was no likelihood of confusion and no infringement.

The Eighth Circuit Court of Appeals affirmed the district court's decision, and rejected B&B's contention that the TTAB's decision should have had preclusive effect. The court of appeals based its decision on the fact that the TTAB's standard for determining whether a mark was "likely to cause confusion" was different from the Eighth Circuit's standard -- and the court noted that B&B's ability to successfully oppose the registration of Hargis's mark did not necessarily establish an ability to successfully sue for infringement.

But, as B&B points out in its petition for certiorari to the Supreme Court, the circuit courts are divided over this preclusion issue, and the Eighth Circuit's decision to deny preclusive effect to the TTAB's ruling conflicts with decisions in other circuits. The Supreme Court granted certiorari to resolve this disagreement among the lower courts.

Notably, the Supreme Court reversed 73% of the decisions it reviewed last term. The Court reviewed two decisions by the Eighth Circuit, and reversed them both.

Given the facts of this case, given the unsavoriness of having two adjudicating bodies (the TTAB and the district court) reach conflicting conclusions on the same question, and given the Supreme Court's penchant for resolving circuit splits through reversals, my prediction (for what it's worth) is that the Court will reverse the Eighth Circuit, and hold that the TTAB's administrative determination that Hargis's mark was "likely to cause confusion" should have precluded the district court from determining otherwise -- or, at the very least, that the district court should have deferred to the TTAB's determination, unless the court found strong evidence to rebut it.

The case has not yet been set for oral argument.


Tweet Like Email

Who Owns the X-Men?

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

MagnetodebutA potentially important copyright case has made its way through the Second Circuit Court of Appeals and could be on its way to the Supreme Court.

If you’re not a big comic-book fan, you might not have heard of Jack Kirby. But if you’re breathing in America these days, you’ve probably heard of the X-Men, Thor, the Incredible Hulk, Iron Man, and the Fantastic Four. Kirby created (or co-created) these comic-book characters while working as an independent contractor for Marvel Comics, from 1958–1963, and his four kids have been trying to recover the copyrights to these characters for the past five years.

Kirby died in 1994. In 2009 his four children sought to terminate the assignment of Kirby’s copyrights to Marvel, to recover those rights for the extended renewal term under the 1976 Copyright Act. But Marvel filed suit to void this termination, claiming Kirby’s creations belonged to Marvel as “works for hire” under § 26 of the 1909 Copyright Act.

The 1909 Act was in effect during Kirby’s time at Marvel (1958–1963), but the Act’s “work for hire” provision did not apply to independent contractors until the Second Circuit extended it, by judicial decision, in 1972—well after Kirby had left Marvel. Much later, in a 1989 case called Community for Creative Nonviolence v. Reid, the Supreme Court criticized the Second Circuit’s judicial extension of the “work for hire” provision to independent contractors. But the Supreme Court has never squarely decided whether this extension of the “work for hire” provision under the 1909 Act was wrong.

This case, styled as Kirby v. Marvel Characters, Inc., essentially asks the Supreme Court to decide this question. The Second Circuit followed its own precedent to hold that the “work for hire” provision does apply to work created by independent contractors—a decision that voids the Kirbys’ attempt to recover their father’s copyrights under the 1976 Act. But the Kirby kids have taken their case to the Supreme Court—and the Supreme Court has asked Marvel to respond to the Kirbys’ petition, which is a sign that the Court might be interested in reviewing (and perhaps reversing) the Second Circuit’s decision.


Tweet Like Email

U.S. Supreme Court Says Aereo Is Illegal

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

Aereo is a company that provides (or used to provide) a service for streaming TV shows over the internet. Basically, an Aereo subscriber chooses a TV show that is currently broadcasting, and Aereo tunes an antenna to pick up the TV signal and translate it into data for streaming the show to the subscriber.

A group of TV producers, marketers, distributors, and broadcasters—all holders of copyrights to the shows being streamed—sued Aereo for copyright infringement, arguing that Aereo was infringing their right to “perform” their works “publicly.” In response, Aereo argued that it was not “performing” anything, under the meaning of the Copyright Act, but was merely providing equipment that enables viewers to view the performance.

The Supreme Court, in a 6-3 decision written by Justice Breyer, ruled against Aereo, saying that Aereo’s service does “perform” the works, and is therefore illegal. The Court did its best to limit its holding, to avoid discouraging the emergence or use of new or different technologies. But according to the Court’s majority, Aereo is functioning much like the cable-TV providers that the Copyright Act was specifically amended, in 1976, to reach. In other words, Aereo is acting illegally much like those cable-TV providers in the 1970s, who were broadcasting TV shows without permission from the copyright holders.

Justice Scalia filed a dissenting opinion, contending that Aereo does not “perform” anything under the meaning of the Copyright Act. According to Scalia, the majority’s “looks-like-cable-TV” standard is “improvised” and “will sow confusion for years to come,” in copyright law. But Scalia's opinion was joined only by Justices Thomas and Alito.

Tweet Like Email

Best Legal Practices for Brands on Social Media

Posted in Advertising, Copyrights, PRACTICAL IP Tips, Privacy & Data Protection, Trademarks, Websites, Domain Names & Apps

Legally promote your brands and fans on social media with this overview of intellectual property, privacy, advertising and promotions issues and solutions...Best Legal Practices for Brands on Social Media

Tweet Like Email

Facebook, You and the Government: The SEC is Following Your Tweets

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

The United States Securities and Exchange Commission has finally joined the age of social media.  In a watershed report issued last month, the SEC concluded that publicly-traded companies, subject to the still-vague limitations discussed below, may use social media sites to disclose material financial information to the investment community.

The SEC’s report followed an investigation into Netflix, Inc. and Reed Hastings, its Chief Executive Officer, after Hastings posted information about the company’s growing subscriber numbers on his personal Facebook page.  Although the SEC ultimately did not pursue a case against Netflix or Hastings, its investigation resulted in the SEC’s issuance of a report intended to modernize Commission rules regarding how companies share important information with investors.

Historically, these disclosure rules have been defined by the SEC’s Regulation Fair Disclosure, or “Regulation FD,” which generally requires issuers to publish material, nonpublic information to investors simultaneously.  According to the SEC, Regulation FD is “intended to ensure that all investors have the ability to gain access to material information at the same time.”  Regulation FD is, and always has been, about the fair and equal distribution of information to the investing public.

In its April 2, 2013 press release announcing the new rule, which effectively supplements Regulation FD, the SEC stated for the first time that, “companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation FD…”  This new rule, however, while granting companies the newly-issued power to use social media to share their important information, comes with conditions on the use of that authority.  Specifically, the SEC concluded that social media outlets – like the content of a company’s website – can constitute precisely the selective, and unfair, disclosure of material information that Regulation FD was designed to prevent in the first place.

While at first glance the SEC deserves credit for authorizing companies to do what the rest of the world already does, two new problems have resulted.  First, the Commission has yet to provide any real guidance to those companies on how they can use social media to share information with their investors.  Until the SEC provides more guidance on how issuers can use social media to share information with investors, these companies are largely left on their own in navigating – at their own peril – the dos and don’ts of the new rule.

Second, in an age of increasingly sophisticated frauds and identity theft, companies run the risk of having their social media feeds hijacked or spoofed, and false information consequently disseminated to the marketplace.  A fake Twitter or Facebook report on a public company could easily cost investors millions, if not billions, of dollars in the blink of an eye.

Because of the still murky waters surrounding the SEC’s new rule, companies should take a number of steps before using social media to disclose important information to the public:

  • Treat social media information as any other information issued via a traditional press release.  Identify an individual, or individuals, in your organization who will be responsible for approving the content of any social media information issued by the company.  Keep in mind that the SEC’s report notes that “disclosure of material, nonpublic information on the personal social media site of an individual corporate officer, without advance notice…is unlikely to qualify as a method”      complying with this interpretation of Regulation FD.
  • Make sure that no information is transmitted through social media without written approval of a designated individual within your company.  This will not only guard against incorrect or factually unverifiable information reaching the public through social media, but it will also protect the company from prematurely releasing information or accidentally      transmitting confidential or nonpublic information – something that has become increasingly common as social media communication has risen exponentially in the last few years.
  • Establish protocols for alerting investors about the format of social media the  company will use to transmit information.
  • Task individuals in your company with identifying the most effective and reliable social media channels through which to transmit information.
  • Monitor what’s out there in the social media world that potentially could be viewed, by the SEC or the public, as social media content from or sanctioned by your company, knowing that false or incomplete information could have an immediate impact on your company’s share price or result in an unwanted regulatory inquiry.

Please contact one of our attorneys listed below with questions regarding this topic, or to arrange for a more detailed presentation. To read more on this topic, click here.
Contact Information:

Jeff Ansley

Jay Wallace

Greg Kelminson  

Tweet Like Email

Unauthorized Unlocking of Cell Phones Now Illegal

Posted in Copyrights, In the News, Software, Websites, Domain Names & Apps

Pursuant to a ruling by the Librarian of Congress in his triennial review of potential exemptions to the Digital Millennium Copyright Act (DMCA), which prohibits circumventing technological measures that protect copyrighted works, it is now illegal to “unlock” a new mobile phone purchased from a carrier after January 26, 2013, without the approval of the carrier.

In other words, consumers who purchase a new mobile phone from a carrier on or after January 26, 2013, will either have to obtain the carrier’s permission to unlock the device or buy a new phone in order to change service providers.  Additionally, consumers traveling abroad won’t be able to use SIM cards from international carriers on a locked phone without the carrier’s permission.  “Legacy” phones “previously purchased or otherwise acquired by a consumer” prior to January 26, 2013 (whether used or unused) may legally be unlocked because they have been grandfathered in under the ruling.

Consumers who unlock a phone without the carrier’s consent could be fined $200 to $2,500 per act, and willful violators may now face criminal penalties of up to 5 years in prison and/or $500,000 in fines.

Unauthorized unlocking (even of legacy phones) may also violate the terms of the carriers’ contracts, and can result in contact termination fees, penalties, and/or discontinued service.

The unlocking exemption (which was granted in 2006 and 2010) could be reinstated in another three years during the Librarian of Congress’ next DMCA rulemaking proceeding, which will be initiated in late 2014.  There is also a We the People petition that calls for the White House to ask the Librarian to rescind the decision or support legislation that would make unlocking permanently legal.

It’s interesting to note that the same ruling exempts “jailbreaking” of cell phones (but not tablets or game consoles).  “Jailbreaking” occurs when a user removes restrictions on a device in order to download of apps or software not approved by the manufacturer or otherwise makes unauthorized modifications to the operating system. Jailbreaking voids the phone warranty, often violates the terms of phone license agreements, and can cause operating issues with the phone.  Once a consumer jailbreaks a phone, it can be unlocked; however, unlocking a phone through jailbreaking is now illegal and legitimate unlocking by a carrier is no longer an option.

Tweet Like Email

The Importance of Searching and Protecting Brand Names

Posted in IP Ownership, Litigation, Trademarks

The Kardashian sisters’ recent launch of their KHROMA cosmetics and beauty care product line has caused a bit of a stir.

The sisters (through their licensing company, Boldface Licensing + Branding) applied with the U.S. Patent and Trademark Office (“USPTO”) in early June 2012  for registration of the marks KARDASHIAN KHROMA and KHROMA BEAUTY BY KOURTNEY, KIM AND KHLOE, both for personal care products including cosmetics, body and beauty care products based on an intent to use the mark in commerce.  The USPTO issued Office Actions in September 2012 refusing registration of the marks based on likelihood of confusion with an existing registration for the mark KROMA for use in connection with cosmetics owned by Florida-based makeup artist Lee Tillett, who claims to have been using the mark in commerce since March 2004 and whose trademark registration issued on January 3, 2012.

It appears that an attorney was involved with the filing of the Kardashians’ applications, so one would assume that the attorney perform a search to see whether there were any identical or similar marks already registered with the USPTO and/or already in use in the marketplace for the same or related goods or services.  Whether a search was performed or not, the sisters proceeded to file trademark applications and — even after receiving the registration refusal – actually launch their cosmetics line in late 2012, and their products are currently available in CVS, K-Mart, Sears and Ulta stores.

Now, the Kardashians are being sued for trademark infringement by Tillett (who is demanding $10 million in damages), and are also being sued by the owners of Chroma Makeup Studio in Beverly Hills claiming trademark infringement of their common law (aka, unregistered) trademark rights.

There do appear to be a number of mark co-existing on the USPTO Trademark Register that contain the term CHROMA for use with personal care products, so it’s not clear how the courts will come out on either of these lawsuits.  (NOTE: In the trademark world, the terms KHROMA, CHROMA, and KROMA are viewed as identical, because they are pronouced the same, look similar, and are mere misspellings of the same word, which apparently means “color” in Greek.)  It may be that the mark CHROMA, regardless of how it’s spelled, is somewhat dilute or frequently used for personal care products, so the addition of the terms KARDASHIAN or BEAUTY BY KOURTNEY, KIM AND KHLOE to the KHROMA marks is sufficient to distinguish the Kardashians’s KHROMA marks from other CHROMA or KROMA marks in the marketplace for similar products.

However, there are lessons to be learned from both sides of this battle.

For the Kardashians, to avoid getting sued in the future, in addition to performing trademark searches for potential marks before launching a product line, I would recommend that they attempt to come up with a truly unique name to prevent any likelihood of consumer confusion with similar marks that may already be used in the marketplace, registered in one or more Secretary of State offices, and/or registered with the USPTO for use in connection with the same or highly related goods or services.

For U.S. trademark registration owner Lee Tillett, I would recommend that she be vigilant in policing her mark and enforcing her trademark rights against identical or confusingly similar marks used in connection with identical or highly related goods and services.  This is especially true in this instance where the lesser-known Lee Tillett, who is the senior/initial user of the KROMA mark, could become the victim of “reverse confusion.”

Typically, trademark infringement occurs when a second party (or junior user) starts using a mark that is likely to confuse consumers as to some sort of affiliation with the better known senior user of the same or similar mark.  In this instance, the junior user (whether intentionally or not) benefits from the reputation and goodwill of the senior user.  However, “reverse confusion” occurs when a more powerful junior user (say, the Kardashians) uses the same or similar mark of a smaller, less powerful senior user (say, Lee Tillett).  “In a reverse confusion situation, rather than trying to profit from the senior user’s mark, the junior user saturates the market and ‘overwhelms the senior user.’”  3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 23:10 (2006).  In other words, because of the Kardashians’ fame and connections, they are likely to swamp the marketplace with their KHROMA cosmetics to such a widespread extent that consumers would actually mistakenly believe that Tillett’s KROMA cosmetics are somehow associated with the Kardashians.

Finally, with respect to Chroma Makeup Studio in Beverly Hills, I would have recommended that they file trademark applications with the USPTO in order to obtain nationwide rights in their mark instead of attempting to rely on common law trademark rights.  Additionally, if they were planning to create a makeup line using their CHROMA mark, I would have recommended that they file an intent-to-use application with the USPTO to reserve the mark and prevent third parties from registering identical or confusingly similar marks during the time Chroma Makeup Studio was developing its cosmetics line.

Click here for more information about the Kardashian KHROMA disputes.

Tweet Like Email

About This Blog

We know that your time is almost as valuable as your intellectual property, so we’re here to give you quick tips you can immediately apply to your business as well as commentary about current issues in intellectual property that may also apply to you. If you want to know more about a certain topic, we’ll also provide more in-depth information about important issues.
Visit Our Immigration Blog

Stay Connected

Subscribe to this blog by email

Best Legal Practices for Brands on Social Media
8 months ago