- Trade Secret Protection
- Subject Matter
- Defining Trade Secrets
- Reasonable Efforts to Maintain Secrecy
- Disclosure of Trade Secrets
- Misappropriation
- Improper Means
- Confidential Relationship
- Reverse Engineering
- Departing Employees
- Agreements to Keep Secrets
- Remedies
- Damages for Misappropriation
- Injunctions
- Criminal Trade Secrets Statutes
- Patent Law
- Elements of Patentability
- Patentable Subject Matter
- Utility
- In Juicy
Whip, Inc. v. Orange Bang, Inc., 1999 U.S. App. LEXIS
18342, 51 U.S.P.Q.2D (BNA) 1700, (No. 98-1379) (Fed. Cir.
Aug. 6, 1999), the court reversed a District Court decision
holding Juicy Whip's patent invalid for lack of utility.
The patent covered a 'post-mix' beverage dispenser, a machine
that mixes the beverage at the time it's dispensed, while
spinning a fake liquid in a sealed display bowl. The invention
thus creates the impression that the beverage is dispensed
from the bowl, while reducing the potential for bacterial
growth in the beverage and the hassle of cleaning. The District
Court reasoned that the machine's only use was to increase
beverage sales through deception.
The Federal Circuit held that this was sufficient utility
to satisfy the requirements of 35 U.S.C. Section 101,
stating, "the principle that inventions are invalid
if they are principally designed to serve immoral or illegal
purposes has not been applied broadly in recent years."
Deceptive trade practices may be regulated by Federal
Trade Commission and Congress may preclude patentability
on such a basis, said the court - but given that there
is no such rule here, the patent is valid.
In its decision, the court explicitly declined to follow
Rickard v. Du Bon, 103 F. 868 (2d Cir. 1900) (invalidating
a patent on making low-quality tobacco leaves appear to
be of higher quality), and Scott & Williams, Inc.
v. Aristo Hosiery Co., 7 F.2d 1003 (2d Cir. 1925) (invalidating
a patent on making stockings appear to be of higher quality),
stating that they did not accurately reflect the concept
of utility since the Patent Act of 1952, and that "[t]he
fact that one product can be altered to make it look like
another is in itself a specific benefit sufficient to
satisfy the statutory requirement of utility." In
this regard, the court pointed to cubic zirconia and imitation
leather as additional examples. [blurb
by CKR]
- Novelty & Statutory Bars
- Nonobviousness
- In Amazon.com,
Inc. v barnesandnobel.com, Inc., (No 00-1109) (Fed.
Cir., Feb. 14, 2001), the Federal Circuit Court of Appeals
vacated a district court's preliminary injunction barring
defendant Barnesandnoble.com (BN) from use of its single
action online ordering system, "Express Lane."
The lower court had held that BN's Express Lane would likely
be found to have infringed Amazon's "one-click" patent.
In an opinion by Judge Clevenger, the Federal Circuit concluded
that BN had "mounted a substantial challenge to the validity
of the [Amazon] patent." The court was careful to point
out, however, that it only held "that BN cast enough doubt
on the validity of the '411 patent to avoid a preliminary
injunction, and that the validity issue should be resolved
finally at trial."
Both BN and Amazon are major online retailers. Amazon's
patent is directed to a method and system for "single
action" ordering of items in a client/server environment
such as the Internet (the '411 patent). Amazon developed
the patent to overcome limitations with the "shopping
cart model," which requires customers to select items
and then proceed to a virtual "checkout" where they must
input shipping and billing information to complete the
transaction. Amazon's system employs a unique identifier
or "cookie" stored on each users computer and transmitted
to Amazon when a user connects to the Amazon web site.
The identifier enables Amazon to reference previously
stored customer data such as shipping and billing information.
Once an item is displayed, a user can complete an order
for that item with a single action, and without having
to enter billing and shipping information.
BN developed its own ordering system, dubbed "Express
Lane," which also allowed users to complete purchases
with a single action, once an item is displayed. Amazon
brought suit against BN claiming Express Lane infringed
its '411 patent. The district court found that Amazon
would likely prevail in its infringement action, and immediately
before the holiday shopping season entered a preliminary
injunction barring BN from using Express Lane ordering
system.
On appeal, the Federal Circuit found no error with the
lower court's finding that Amazon would likely succeed
in proving BN's Express Lane feature infringed the '411
patent. On the issue of invalidity, however, the court
found that the district court had committed clear error
by misreading the factual content of the prior art references
cited by BN and by failing to recognize that BN had raised
a substantial question of invalidity of the asserted claims
in view of the prior art references. The court emphasized
that at the preliminary injunction stage of an infringement
suit, a defendant need only raise a "substantial question"
as to the validity of the asserted patent, which "requires
less proof than the clear and convincing showing necessary
to establish invalidity itself."
Turning to specific prior art references, the court first
discussed the "CompuServe Tend System," which allows subscribers
of the pre-world-wide-web network to purchase stock charts
for a surcharge of 50 cents per chart, with a single action.
While noting that BN had not provided sufficient evidence
for to establish anticipation, or obviousness, for purposes
of a preliminary injunction, the reference raised a substantial
question of invalidity. The court next turned to the "Web-Basket"
system, developed by a Dr. Lockwood in August 1996, and
employing a "cookie" specification to retrieve user billing
and shipping information. BN argued that the system rendered
Amazon's '411 patent obvious to one skilled in the art.
The lower court cited the testimony of Dr. Lockwood that
it never occurred to him to develop a single action version
of Web Basket as evidence that it was not obvious. The
circuit court held such reliance wrong as a matter of
law; "[t]he relevant inquiry is what a hypothetical ordinarily
skilled artisan would have gleaned from the cited references,"
not what Dr. Lockwood's would have personally gleaned.
The court also found the lower court had erred by failing
to recognize that a reasonable jury might have found that
a passage in a 1996 book and a quote from a 1996 web site,
when combined with the other cited references, provided
sufficient motivation to "modify the shopping cart model
to skip unnecessary steps." Again, these raised a substantial
question as to validity. Finally, the court cited a patent
('780 patent), predating the '411 patent, and describing
a system for single request access to "controlled content"
on a web sever. The court held that the district court
had erred in failing to recognize that a reasonable jury
could have found that such "controlled pages" fall within
the scope of the '411 patent, and that delivery based
on a single request constituted a "single action," and
thus anticipating the '411 patent. Finding substantial
questions as to validity had been raised by BN, the court
vacated the preliminary injunction, and remanded for further
proceedings. [blurb by MSV]
- Written Description / Enablement
- In Purdue
Pharma v. Faulding Inc., 2000 U.S. App. LEXIS 26797, 56
U.S.P.Q.2D (BNA) 1481, (No. 99-1416, 99-1433) (Fed. Cir. Oct.
25, 2000) the Federal Circuit affirmed the District Court's
decision holding Purdue's claim invalid because the patent's
written description lacked sufficient details which could direct
a skilled artisan to the claimed medication ratio. The patent
covered a single, daily dose, sustained-release oral morphine
formulation. This once-a-day formulation differed from previous
attempts at single dosage delivery techniques in that instead
of attempting to maintain an unchanging concentration of opioid
throughout the system for the whole day the maximum concentration
of opioid occurs within 2 to 8 hours of administration. Such
a spike in the drug dosage allows for effective treatment of
pain by a single dose of an opioid. The District Court found
that the patent was insufficient in its description that the
final concentration of opioid be less than half of the maximal
concentration of the opioid.
The Federal Circuit agreed that one skilled in the art could
not immediately realize that a final opioid concentration
of less than half the maximum concentration was described
in the Purdue patent. Purdue's argument was based on a statement
in their patent regarding a "substantially flat serum
concentration curve" which Purdue claimed was equivalent
to a fluctuation of 100% or less. While some experts agreed
with this interpretation, one acknowledged that changes over
100% could be considered flat. An additional problem was that
the examples used in the patent cover ranges of fluctuation
outside of this claimed critical range of fluctuation. Also,
those examples that were within the critical range of fluctuation
were not in any way emphasized.
The Federal Circuit described Purdue's patent as lacking
any "blaze marks" directing the skilled artisan
to the relevant range in opioid fluctuation. The Federal Circuit
further characterized Purdue's action as having described
a forest and then attempting to pick out an individual tree
it wanted to protect. Purdue's additional arguments, that
the District Court made an error of law, were also denied.
The Federal Circuit declared the first two such issues to
be based on misinterpretations the lower court's opinion.
The final issue was that the lower court should have initially
deferred to the examiner. The Federal Circuit found that the
lower court was correct in not yielding since the lower court
found the examiner's statement insufficient and unpersuasive.
The Federal Circuit did not address the issue of infringement
after finding the claim invalid. [blurb
by EL]
- Infringement
- Literal Infringement
- Doctrine of Equivalents
- In Vehicular
Technologies Corp. v. Titan Wheel Int'l, Inc., No. 96-1557,
141 F.3d 1084 (Fed. Cir. 1998), the court vacated the district
court's preliminary injunction order regarding allegedly
infringing automotive locking differentials, concluding
that the district court erred in finding a likelihood of
success on the merits. A normal differential applies equal
torque to each wheel, which can cause problem when one wheel
loses traction. The locking differential solves this problem
by shifting drive power to the wheel that has traction,
by using springs to push toothed drive plates against toothed
driven plates. The prior art spring-disk-pin solution was
very difficult to install. Plaintiff's invention solved
this with (1) window openings in the drive plates; (2) spring
assemblies that used concentric springs and a pin, instead
of the spring-disk-pin configuration; and (3) spring passageways
with oblong cross sections. Plaintiff Powertrax introduced
the new product two years before the patent issued, and
defendant Trachtech promptly reverse-engineered the device.
When the Powertrax patent issued, Trachtech redesigned its
differential by eliminating holes around the edges of the
drive plates, and by replacing the inner spring of the two
spring assembly with a single spring and a plug. The district
court found that the new Trachtech assembly was equivalent
to the Powertech two spring assembly.
The Federal Circuit focused on the following limitation
in the Powertrax patent: "biasing means interposed
between said driving surface faces comprising at least
a pin in alignment with a spring assembly consisting of
two concentric springs bearing against one end of said
pin," and held that the district court erred in finding
the claimed design equivalent to the Trachtech spring/plug
assembly. In so holding, the court essentially based its
decision on an estoppel theory related to the written
description, which "repeatedly emphasized" the
importance of the second spring as performing a backup
function. Although this backup function was not claimed,
the court found that it was nevertheless "key."
A vigorous dissent by Judge Newman characterized this
as an improper importation of a limitation from the specification,
in a case where the claims were clear on their face. The
dissent further characterized the holding as a "new
rule" creating a new bar to equivalency based on
unclaimed advantages. The dissent also noted that the
backup feature was not viewed by the patentee or the accused
infringer as necessary to the device's function, and that
the accused device was just as durable as the patented
device. [blurb by CKR]
- In Festo
Corporation v. Shoketsu Kinzoki Kogyo Kabushiki Co., Ltd.,
2000 U.S. App. LEXIS 29979, 56 U.S.P.Q.2D (BNA) 1865, (No.
95-1066) (Fed. Cir. Nov. 29, 2000) (rehearing en banc) the
Federal Circuit reversed the District Court's judgment of
patent infringement because the amendments to the patents
gave rise to prosecution history estoppel, the plaintiff
failed to establish that the amendments were unrelated to
patentability, and the amended claim elements were not entitled
to a range of equivalents. The Stoll and Caroll patents,
assigned to Festo, each disclosed a hollow cylinder with
an inner piston magnetically coupled to an outer sleeve,
wherein the piston drives the sleeve in order to convey
articles. Additionally, the two patents each disclose a
pair of sealing rings at the axial ends of the cylinder.
The SMC patent differed from the Stoll and Caroll patents
in that it disclosed only a single resilient two-way sealing
ring at one end of the piston, rather than a pair of sealing
rings at both piston ends. The District Court jury found
that the SMC patents infringed the Stoll patent under the
doctrine of equivalents since the single sealing ring performed
substantially the same function in substantially the same
way to obtain substantially the same result as the pair
of sealing rings.
The Federal Circuit, in answer to its en banc questions,
held that any amendment, either voluntary or required
by the examiner, that narrows the scope of a claim for
a reason related to the statutory requirements for patentability
will give rise to prosecution history estoppel; and that
no range of equivalents is available for unexplained amendments
or an amended claim element that gives rise to prosecution
history estoppel. In other words, any claim amendment
that narrows the scope of a claim for a reason related
to patentability creates a complete bar to the doctrine
of equivalents. The Federal Circuit acknowledged that
it was overruling its prior acceptance of a flexible bar
approach, stating that it was an "unworkable" approach.
Under the complete bar approach, the court held that
the SMC patents did not infringe the Stoll patent. During
patent prosecution, Stoll amended claims in response to
a rejection under 35 U.S.C. § 112, P 1, which stated that
it was unclear whether the claimed device was a motor
or a clutch. The amendment recited "first sealing rings
located axially outside said guide rings," and cancelled,
"sealing rings." Since Stoll narrowed the claims regarding
sealing rings, the Federal Circuit held that prosecution
history estoppel existed and there was no available range
of equivalents for the pair of sealing rings.
The dissent disagreed with the majority's opinion that
no range of equivalents should be available, stating that
the majority's new complete bar rule was inequitable and
contradicted Supreme Court precedent established in Warner-Jenkinson
Co., v. Hilton Davis Chemical Co. The dissent warned that
the complete bar rule would invite technology theft-anyone
who wanted to steal a patent need only review a patent's
prosecution history to identify patentability related
amendments, then make a trivial modification in order
to avoid infringement. The dissent also objected to the
majority's upset of the balance struck by the Supreme
Court between the competing needs for meaningful patent
protection and adequate public notice. The Supreme Court,
as recently as Warner-Jenkinson, stated that the all-elements
rule, as supplemented by prosecution history estoppel,
sufficiently balanced competing needs, so that a complete
bar would not be necessary to serve the public with adequate
public notice.[blurb by CW]
- "Reverse" Doctrine of Equivalents
- Equivalents for Means-Plus-Function Claims
- Contributory Infringement
- Defenses
- Experimental Use
- Inequitable Conduct
- Patent Misuse
- American Inventors Protection Act
- Title IV of the Intellectual Property and Communications Omnibus
Reform Act of 1999, Pub. L. No. 106-113, the American
Inventors Protection Act of 1999 (*pdf download*), includes
significant changes to U.S. patent law:
1. The Inventor's Rights Act of 1999 regulates the invention
promotion industry, providing statutory damages of up to $5,000
for failure to comply with the new law, fraudulent statements
and omissions of material facts. The law also requires a written
contract between the inventor and promoter, and detailed disclosures
by the promoter.
2. The Patent and Trademark Fee Fairness Act of 1999 lowers
filing fees for patent and reissue applications, U.S. filing
of foreign patents, and the first patent maintenance fee.
It also creates an Undersecretary of Commerce for Intellectual
Property and vests this position with power to further adjust
these fees. It also requires a study of alternative fee structures.
3. The First Inventor Defense Act of 1999 applies to infringement
actions filed after November 29, 1999. It creates an affirmative
defense for prior users of business methods who, in good faith,
reduce a method to practice at least one year before the filing
date of the patent, AND commercially use it before the filing
date. It must be proven by clear and convincing evidence.
Filing date is the earliest date patentee can assert, including
reliance on earlier-filed foreign applications. Use is commercial
if it's an internal commercial use, the sale of a useful end
result or premarketing regulatory review. There are also limited
protections for certain nonprofit entities like universities
and hospitals. The defense also protects third parties who
purchased a useful end product from a prior user. This defense
only applies to business methods, and is limited to the specific
subject matter of the qualifying patent (e.g., no license
to practice all claims of the patent). The defense does not
apply if there is derivation or abandonment. Finally, the
defense generally may not be conveyed unless the entire enterprise
is transferred, in which case it may only be asserted where
the method was in use before the effective filing date of
the patent, or the transfer, whichever is later (e.g., original
inventor may expand, but transferee may not expand uses after
patent application is filed.
4. The Patent Term Guarantee Act of 1999 applies to patents
issued on or after August 29, 1999. The continued examination
provisions apply to nonprovisional and international applications
filed after June 7, 1995. In general, patents that do not
issue within three years of the filing date will get an extra
day in the patent term for each additional day the PTO delays
in issuing the patent. Whereas the old law provided for a
maximum of five years of extension, the new law removes the
limit and expands the circumstances which can give rise to
an extension.
The Act guarantees that the PTO will either issue an allowance
or rejection of an application within 14 months of filing;
that the PTO must respond within four months to a reply, appeal
or interference/court decision, and mandates issuance of a
patent within four months after payment of the issue fee.
Each day of delay will result in an additional day of patent
term.
If total patent prosecution takes longer than three years,
the term will be extended unless the delay is due to an interference,
secrecy order, successful appellate review, delay requested
by the applicant. It also does not apply to continued examinations.
Further, in case of interference, secrecy order or appellate
review where an adverse determination is reversed, the term
must be extended for each day of delay.
Overlaps in extensions are limited to the actual number of
days of delay, and extensions may not be granted beyond the
limit of a terminal disclaimer. Further, extensions will be
reduced by the number of days the applicant didn't exercise
reasonable efforts to conclude prosecution, presumptively
any response to an office action taking longer than three
months. Applicants are automatically notified of any extensions
in the notice of allowance, and may request reconsideration
or appellate review. Although an applicant may object to a
term extension prior to issuance, third parties must wait
until the patent issues before making an objection.
5. Domestic Publication of Foreign Filed Patents. Effective
November 29, 2000, all patent applications filed abroad (either
before or after a U.S. filing), must be published within 18
months from the earliest filing. This does not apply to design
patents, applications no longer pending, or pending applications
subject to a secrecy order. Patents that are not foreign filed
may remain unpublished upon the applicant's request. Only
the portions of the application published abroad need be published
in the U.S. To avoid publication, an applicant must certify
that it does not intend to file abroad. If the applicant changes
its mind, notice to the PTO within 45 days (failure results
in abandonment of the U.S. application) is required, and the
application will be published.
For those who publish their U.S. applications, a reasonable
royalty applies after publication and before the patent issues,
and will accrue against any infringers during this term, to
the extent these infringers have actual notice of the publication.
This provisional benefit vests only after issuance of the
patent, and the granted claim must be "substantially
identical" to the claim in the published application.
Patentee must bring an action within six years to collect
the provisional reasonable royalty. Published applications
become part of the prior art as of their filing date, as may
published international applications if they are published
in English. With regard to interferences, an interfering claim
may be made prior to one year after the date on which the
application was published. U.S. publication does not give
rise to opposition or reissue proceedings unless the applicant
consents.
6. The Optional Inter Partes Reexamination Procedure Act
of 1999 applies to any patent that issues from an application
filed on or after November 29, 1999. This provision gives
parties requesting reexamination a choice of the old system
(reexamination can be requested but the third party may not
participate), and the new system. Under the new system, third
parties may submit a written response to each response filed
by the patentee (although they may not participate in any
discussions or between examiner and patentee).
The new system has significant disadvantages. Third parties
may not appeal an adverse decision, may not participate in
an appeal by the patentee, and the third party is estopped
from later asserting the invalidity of any claim determined
to be valid. The third party is also estopped from raising
any issues in subsequent proceedings that it could have raised
in the reexamination, as well as from challenging any facts
determined during the reexamination proceeding. Only facts
proven erroneous in light of new information and newly discovered
prior art may be asserted in subsequent proceedings. Because
of these substantial limitations, it is generally thought
that the new system will rarely be used.
7. The Patent and Trademark Efficiency Act of 1999 places
the PTO under the Department of Commerce and provides for
appointment of an Undersecretary of Commerce for Intellectual
Property and Director, appointed by the President. The Secretary
of Commerce appoints a Director, Deputy Director, a Commissioner
of Patents and Commissioner of Trademarks. Also included are
two 9-member Public Advisory Committees (Patents and Trademarks),
which review policies and procedures.
8. Miscellaneous provisions include (a) elimination of the
copendency requirement for provisional and nonprovisional
applications to obtain the provisional filing date; (b) permitting
the PTO to require certain documents to be filed electronically;
(c) requiring a study of the risks of transfer of biological
materials on deposit; (d) limiting a showing of prior foreign
invention in an interference proceeding to Section 104 acts,
and that such an invention must not have been abandoned, suppressed
or concealed; and (e) 102(e) prior art no longer precludes
patentability if it was commonly owned with the claimed subject
matter at the time the invention was made (applies to applications
filed after November 28, 1999). [blurb
by CKR]
- International Patent Law
- Procedural Rules
- Substantive Harmonization and GATT-TRIPS
- Remedies
- Injunctions
- Damages
- Design & Plant Patents
- Design Patents
- Plant Patents
- Copyright Law
- Requirements
- Original Works of Authorship
- Fixation
- Formalities
- Subject Matter
- Function vs. Expression
- Domain and Scope of Copyright Protection
- In SmithKline
Beecham Consumer Healthcare LP v. Watson Pharmaceuticals
Inc., 2d Cir., No. 99-9501, 4/4/00), the court held
that the Hatch-Waxman amendments to the Federal Food, Drug,
and Cosmetic Act ("FFDCA") trumped copyright law
with regard to brochures and audiotapes explaining the proper
use of generic versions of Nicorette gum, a smoking cessation
aid. The amendments, designed to simplify the process for
generic drug approval, require that such drugs use the "same
labeling" as the original pioneer drug. Getting approval
on such labeling can be a very time-consuming process -
in this case, for example, 70 changes over three years were
required prior to approval. Based on the rule that, where
two statutes conflict the court should attempt to preserve
the primary purposes of each, the court reasoned that the
"same labeling" requirement could not be served
if the user guide and audiotape had to be changed, since
this would require significant FDA approval. With regard
to the copyright law, the court reasoned that, although
the materials were clearly copyrighted material, the purpose
of copyright law is to create incentives for the production
of creative works. The drug materials were primarily created
for an administrative purpose, and were ancillary to obtaining
FDA approval. Further, the court reasoned that allowing
copyright infringement in such cases would not reduce the
incentive to create effective drug labeling. [blurb
by CKR]
- Ownership & Duration
- Initial Ownership
- In Tasini
et al. v. New York Times Co., Inc. et al., 1999 U.S.
App LEXIS 36241, 206 F.3d 161 (Nos. 97-9181, 97-9650) (2nd
Cir. Sept. 24, 1999, as amended Feb. 25, 2000), Certiori
granted, 2000 U.S. LEXIS 7321, the Second Circuit Court
of Appeals reversed a District Court decision granting defendant
Publishers summary judgment against Authors' claim that
Publishers infringed their copyright rights by including
Authors' copyrighted works in online databases. The court
ruled that online databases containing individual articles
from multiple publications cannot be construed as "revisions"
of collective works under 17 U.S.C. Section 201(c). Authors
of collective works (such as dated editions of newspapers,
magazines, and encyclopedias) containing individually copyrighted
contributions own copyright only to the original material
they create, including the "selection, coordination,
and arrangement of the preexisting materials." Only
the individual copyright holders, the court held, may authorize
republication or redistribution of their individual contributions
by licensing to databases.
The court's decision turned on the interpretation of
section 201(c) of the 1976 Copyright Act, which limits
the default rights collective-works authors acquire over
individually copyrighted contributions to the collective
work. Following the plain language of section 201(c) in
conjunction with sections 103(b) (denying collective-work
authors "any exclusive right in the preexisting material"),
and 201(d) (permitting separate ownership of individual
copyright rights and their subdivisions), the court found
that defendant Publishers had infringed Author's exclusive
rights. Section 201(c) grants a limited privilege to collective-work
authors to reproduce and distribute individually copyrighted
contributions "as part of that particular collective
work, any revision of that collective work, and any later
collective work in the same series." The District
Court erred, the court held, in accepting Publishers'
claim that online databases constitute "revisions"
of the editions of newspapers or magazines in which the
stories were first published.
In reaching its decision, the Appellate Court relied
on statutory construction and legislative history. The
court found that the statute's distinction between three
kinds of publication could not be reconciled with the
broad definition of "revisions" proposed by
Publishers. The court noted that the first clause "sets
the floor . . . of the presumptive privilege: the collective-work
author is permitted to reproduce and distribute individual
contributions as part of 'that particular collective work.'[and]
in this context,. . . 'that collective work' means a specific
edition or issue of a periodical. . . ." The second
clause, according to the court, "[permits] the reproduction
or distribution of . . . a revision of a particular edition
of a specific periodical." Finally, the third clause
"sets the outer limit or ceiling on what the Publisher
may do; it permits the reproduction and distribution of
the individual contribution as part of a 'later collective
work in the same series,' such as a new edition of a dictionary
or encyclopedia." According to the court, "[t]he
most natural reading of the 'revision' of 'that collective
work' clause is that section 201(c) protects only later
editions of a particular issue of a periodical, . . ."
The court found support for this reading in the House
Report on the 1976 Copyright Act stating that the "revision"
clause "was not intended to permit the inclusion
of previously published freelance contributions 'in a
new anthology or an entirely different magazine or other
collective work.'" H.R. Rep. No. 94-1476, at 122-23
(1976).
The court invoked a second rule of statutory construction
(exceptions to general rules should be narrowly construed)
in analyzing Section 201(c) as an "exception to the
general rule that copyright vests initially in the author
of the individual contribution" and concluding that
Publishers' theory posits an exception so broad that "it
is not clear that the rights retained by the Authors could
be considered 'exclusive' in any meaningful sense."[blurb
by MKW]
- In late 1999, Congress passed the Satellite
Home Viewer Improvement Act of 1999, enacted as part
of Pub. L. No. 106-113, 113 Stat. 1501 (1999), which, in
a short provision added in a last minute closed door meeting,
modified the definition of "work made for hire" in section
101 of the Copyright Act by adding "sound recordings" to
the list of works that may be considered "works made for
hire." The new language was apparently added at the request
of record companies, which insisted that the change was
a mere "technical" correction meant to "clarify" existing
law. Recoding artists quickly mobilized to seek a repeal,
and ultimately prevailed when congress passed the (
Work Made For Hire and Copyright Corrections Act of 2000
(H.R. 5107, Pub. Law 106-379).
According to recording artists and their supporters,
the 1999 amendment was far more than a mere technical
clarification, but may have converted many existing copyrights
in sound recordings to "works made for hire." If correct,
the change may have effected a substantial reworking of
future copyright ownership rights. There is crucial difference
between a work created by an author and transferred by
copyright, and a "work made for hire." When
artists transfer copyright by contract, the termination
provision of the 1976 Copyright Act gives the artist the
right to recapture the work 35 years after the transfer
is made. This allows artists to capitalize on a work that
has grown far beyond its perceived value at the time of
the initial transfer. If, however, the work is deemed
a "work made for hire," the "employer" or here, the
recording company, is deemed the putative "author,"
thus, the artist has no termination right.
Generally, material contributed by an independent contractor
may be considered a "work made for hire" only
under the very specific circumstances defined in the second
paragraph of the section 101 definition of a "work
made for hire." Prior to the 1999 amendments, the
nine categories of works listed in section 101 as potential
works made for hire did not include "sound recordings"
(although some of those categories listed, such as "audio
visual works" might include a sound recording specifically
made for inclusion in such a work).
Most recording artists transfer their copyrights in their
sound recordings to a recording company in exchange for
upfront payments, promotion, and royalties. Most recording
contracts contain provisions stating that the sound recording
is "a work made for hire." However, such contract language,
by itself, is not thought to be dispositive of whether
a given work meets the legal definition of a "work made
for hire" under the 1976 Copyright Act (allowing contract
language to override the termination right would make
the termination and recapture right, meant to re-balance
author's unequal bargaining position, essentially meaningless).
The U.S. Supreme Court, in Community for Creative Non-Violence
v. Reid, 490 U.S. 730 (1989), held that in situations
where an entity exercises a high degree of control over
an artist's activities in making a particular work, application
of a multi-factor test derived from the common law of
agency might yield the conclusion that the artist was
an "employee" working within the scope of his or her employment,
with the result being that the work created would be a
"work made for hire" and the putative "author" would be
the employer. Thus, it is possible that certain sound
recordings, prior to the 1999 amendments, could qualify
as works made for hire. Prior to the 1999 change, however,
several courts had ruled out treating typical recording
artists' contributions to typical sound recordings as
"works made for hire" on the basis of the then
existing second paragraph of the Sec. 101 definition,
because a "sound recording does not fit into any
of the nine categories of 'specially ordered or commissioned'
works...." Staggers v. Real Authentic Sound, 77 F.Supp.
2d 57, 64 (D.D.C. 1999); see also Ballas v. Tedesco, 41
F.Supp. 2d 531, 541 (D.N.J. 1999). Thus, with the 1999
amendment specifically adding "sound recordings" to the
list of works eligible for treatment as "works made for
hire" under section 101, courts could no longer rely on
the lack of such language to find that a typical sound
recording could not be a work made for hire.
In congressional hearings on the Work Made for Hire bill
introduced to repeal the 1999 change, Hilary Rosen, president
of the Recording Industry Association of America (RIAA
- the chief lobbying arm of the recording industry), insisted
that the new provision was simply a clarification of existing
law: namely that sound recordings could be (but didn't
necessarily have to be) "works made for hire." Despite
this insistence, Rosen also argued that sound recordings
should generally be considered works made for hire because
otherwise, any person who made any contribution to the
sound recording, no matter how minor (e.g. producers,
co-authors, sound engineers, etc.), might have a claim
to the status of "author" upon statutory termination and
recapture, and the resulting uncertainty of ownership
rights would lead to substantial under exploitation of
the full value of the work. Work for hire status, on the
other hand, ensures single ownership, and thereby promotes
full exploitation of the work.
Artists, the Register of Copyrights, Marybeth Peters,
and numerous copyright law scholars argued, however, that
the change was far more than a mere technical correction,
but was rather a significant substantive change in copyright
law (See Register's
Statement) They also argued that typical sound recordings
should not be deemed works for hire as this would upset
the purpose of the termination and recapture right of
section 203 to "safeguard[] authors against unremunerative
transfers. A provision of this sort is needed because
of the unequal bargaining position of authors, resulting
in part from the impossibility of determining a work's
value until it has been exploited." H.R. Rep. No. 94-1476,
at 124 (1976). As to the potential problem of many potential
claimant authors, it could be readily solved by limiting
the termination right to only major or "key contributors."
Ultimately, the artists prevailed when congress passed
the Work Made For Hire and Copyright Corrections Act of
2000, which essentially put the law back where it was
prior to the 1999 amendment. Concerned that courts not
interpret the subsequent deletion as an intent to exclude
sound recordings from ever being works made for hire,
the law also included specific language stating that no
interpretive weight be given to either the 1999 addition
or the 2000 removal of language in section 101.[blurb
by MSV]
- Duration & Renewal
- In Eldred
v. Reno, 2001 U.S. App. LEXIS 2335 (No. 99-5430) (D.C.
Cir., Feb. 16, 2001), the United States Court of Appeals
for the District of Columbia affirmed a district court ruling
dismissing plaintiffs' claims that the Copyright Term Extension
Act of 1998 (CTEA) was unconstitutional. The majority opinion
by Judge Ginsburg, and joined by Judge Henderson, reviewed
de novo and rejected plaintiffs' arguments that the CTEA,
which amended various sections of the Copyright Act to extend
the terms of existing and future copyrighted works by twenty
years, was unconstitutional as violating both the First
Amendment and the Copyright Clause. Circuit Judge Sentelle,
dissenting in part, agreed with much of the majority's conclusions,
but found that the Copyright Clause, Art. I, § 8, cl. 8,
limits Congress' power to extend copyright protection for
existing works, and found unconstitutional the CTEA's twenty
year extension of copyright protection for existing works.
In 1998, Congress enacted the CTEA, which amended various
sections of the Copyright Act of 1976 to extend the terms
of all copyrights, existing and new, by twenty years.
According to the Senate report, a primary purpose of the
Act was to better align the terms of United States copyrights
with those of the European Union. However, the CTEA was
only the latest in a series of congressional extensions
of copyright. Between 1962 and 1974, Congress passed a
series of laws that incrementally extended the terms of
existing copyrights. Plaintiffs, which include various
organizations and individuals that have an interest in
utilizing, preserving, and making available public domain
works, brought suit to obtain a declaration that the CTEA
was unconstitutional. Plaintiffs raised three primary
arguments: (1) granting a copyright to a work that would
otherwise be in the public domain violates the First Amendment;
(2) extending an extant copyright violates the originality
requirement of the Copyright Clause because the copyrighted
work already exits, and thus cannot be original; and (3)
extending copyright terms violates the "for limited times"
language of the Copyright Clause.
Addressing plaintiffs' First Amendment argument, the
court cited Harper & Row Publishers, Inc., v. Nation
Enterprises, 471 U.S. 539 (1985), and its own decision
in United Video v. FCC, 890 F.2d 1173 (D.C. Cir. 1989),
as "insuperable bars to plaintiffs' first amendment theory."
According to the majority, "copyrights are categorically
immune form challenges under the First Amendment." "The
works to which the CTEA applies, and in which plaintiffs
claim a first amendment interest, are by definition under
copyright; that puts the works on the latter half of the
"idea/expression dichotomy" and makes them subject
to fair use. This obviates further inquiry under the First
Amendment."
The court next rejected plaintiffs' argument that the
CETA unconstitutionally extends protection to works that
lack originality because they would otherwise be in the
public domain, and public domain works by definition lack
originality. The court simply disagreed. "A work with
a subsisting copyright has already satisfied the requirement
of originality and need not do so anew for its copyright
to persist." The court noted that if Congress could not
extend a subsisting copyright, it could not provide for
a renewal right either. Nevertheless, even if there were
something special about extending a copyright beyond the
combined initial and renewal terms, the court refused
to characterize an existing copyright as in the public
domain. The court appeared willing to accept the argument
that Supreme Court precedents in patent cases denying
Congress the power to grant patents "whose effects are
to remove existent knowledge from the public domain" may
also apply to copyright. But the court found such an analogy
irrelevant here because the works to which the CETA applies
are not (yet) in the public domain.
The court quickly disposed of plaintiffs' argument that
the "for limited times" language of the Copyright Clause,
read in conjunction with the "to promote the arts and
sciences" introductory passage, acts as a limit on Congress'
power to extend the term of copyright protection. Essentially,
plaintiffs' argued that if 50 years were sufficient to
"promote ... Progress," then a grant of 70 years
would be unconstitutional. But court held that the plaintiffs
ran squarely up against its holding in Schnapper v. Foley,
215 U.S. App. D.C. 59, 667 F.2d 102, 112 (1981), in which
it rejected the argument "that the introductory language
of the Copyright Clause constitutes a limit on congressional
power." While Amicus argued, and the dissenting opinion
agreed, that Schnapper should be read more narrowly, the
court refused to even consider the argument because, as
a procedural matter, plaintiffs had rejected it. Nevertheless,
the court held that even if it were to determine that
Schnapper was wrong (and the preamble was limiting) it
would still find the CETA constitutional. Applying a "necessary
and proper" analysis, the court noted that it might well
have held that the term extension for subsisting copyrights
was "plainly adapted" and "appropriate" to "promoting
progress." The court cited a congressional finding that
extending copyright term would provide an incentive to
preserve existing works as evidence that the CETA "promotes
progress." Finally, the court cites the first Copyright
Act, which extended the terms of many copyrights then
protected by state law, as insurmountable proof that extending
the term for subsisting copyrights is within the power
of Congress.
The dissent by Judge Sentelle, agreed with many of the
majority's conclusions, but read Schnapper more narrowly,
and found that the "for limited times" language of the
Copyright Clause denied congress the power to extend the
term for subsisting copyrights; thus, in so far as the
CETA extended terms on such existing works, it was unconstitutional.
The dissent argued that the same "outer limits" analysis
the Supreme Court applied to the Commerce Clause in United
States v. Lopez, 514 U.S. 549 (1995), should be applied
to the Copyright Clause. Applying that analysis, the dissent
found that Copyright Clause was not an "open grant of
power to secure exclusive rights," but rather "a grant
of power to promote progress" by "a securing for limited
times." The dissent found that the government had "offered
no tenable theory as to how retrospective extension can
promote the useful arts." Citing United States v. Lopez,
the dissent noted that just because "Congress concluded
a given piece of legislation serves a constitutional purpose
'does not necessarily make it so.'" The court also rejected
the majority's argument that the first copyright act made
it clear Congress had the power to extend the copyright
on subsisting works. Terming works pre-existing under
state acts as sui generis, the court noted that something
had to be done. As to the argument that Congress was obligated
to conform to international copyright terms, the dissent
noted that unlike other nations, Congress is bound by
the Constitution.[blurb by MSV]
- Division & Transfer
- Rights of Copyright Owners
- Right to Make Copies
- Right to Prepare Derivative Works
- The Distribution Right
- Public Performance & Display Rights
- Moral Rights
- Contributory Infringement
- Defenses
- Fair Use
- In Worldwide
Church of God v. Philadelphia Church of God, (No. 99-56489)
(9th Cir. Sept. 18, 2000), the Ninth Circuit, reversing the
court below, found copyright infringement by defendant's use
of a religious text authored by the plaintiff's late spiritual
leader.
Herbert Armstrong, founder of the Worldwide Church of God
(WCG), published a religious text in 1985, shortly before
his death. Although over 9 million copies of the text had
been distributed free-of-charge worldwide, in 1987, WCG rejected
the views of it's recently deceased leader as outdated, insensitive
and racist. WCG destroyed all remaining copies of the text
save those used for archival and research purposes. In 1989,
two former ministers of WCG formed a splinter church, Philadelphia
Church of God (PCG) based on the teachings of Armstrong. PCG
made unauthorized copies of his text, which every PCG member
was required to read, and ignored WCG's demand that it discontinue
distribution of the work.
The Ninth Circuit rejected PCG's challenge to WCG's copyright
ownership and its fair use defense. In assessing the four
statutory factors, the court found that three (nature of use,
nature of the copyrighted work, substantiality of portion
used) clearly weighed in WCG's favor, with the fourth factor
(effect on potential market) was, at worst, neutral. The court
rejected as untimely WCG's claim that Armstrong granted an
implied to distribute, but nonetheless noted that the claim
was without merit.
The court also rejected PCG's use-justification based on
the Religious Freedom Restoration Act (RFRA) because PCG failed
to satisfy the court that the copyright laws subjected it
to a substantial burden in its exercise of religion. The court
assumed, without deciding, that while RFRA has been held invalid
with respect to state and local laws, it remains constitutional
as applied to federal law.
In a fairly strong dissent, Circuit Judge Brunetti considers
WCG's infringement claim a disguised effort to suppress religious
ideas which ran counter to WCG, and would hold fair use by
PCG under the totality of circumstances.[blurb
by NR]
- Other Defenses
- International Issues
- In its Report
of the WTO Panel concerning Section 110(5) of the U.S. Copyright
Act, WT/DS160/R, No. 00-2284 (WTO, June 15, 2000) (see also
appendices),
the Panel ruled that the Fairness in Music Licensing Act of
1998 violates the TRIPS Agreement. The Act amended Section 110(5)
of the Copyright Act of 1976 to expand exceptions to the exclusive
rights granted copyright holders under Section 106. Section
110(5)(A), the "homestyle exemption," is similar to
a prior exemption flowing from a U.S. Supreme Court case, Twentieth
Century Music v. Aiken (sole proprietor of small restaurant
could play radio through four small loudspeakers). It exempts
"communication of a transmission embodying a performance
or display of a work by the public reception of the transmission
on a single receiving apparatus of a kind commonly used in private
homes," unless a fee is charged for the music, or it is
retransmitted to the public. Significantly, the 1998 Act limited
this exemption to dramatic works (e.g., plays, sketches, operas,
musicals).
Section 110(5)(B), the "business exemption," is
newly introduced in the 1998 Act. It applies to nondramatic
works (e.g., all other musical works, including a single song
taken from a musical and played on the radio). It exempts
transmission of such works by radio, television, cable or
satellite carriers from consent of the rights holder, provided
the business is under a certain size limit. Size limits differ
based on whether the business is a retail establishment or
a food service/drinking establishment. If above these size
limitations, the provision restricts the type of equipment
used, although it does not distinguish between analog and
digital transmissions.
Provisions of the TRIPS Agreement incorporate portions of
the Berne Convention that provide exclusive rights to copyright
holders, including the exclusive rights to broadcast or publicly
perform the works. Article 13 of the TRIPS Agreement contains
a "minor exception" provision, which provides that
"[m]embers shall confine limitations or exceptions to
exclusive rights to (1) certain special cases (2) which do
not conflict with a normal exploitation of the work and (3)
do not unreasonably prejudice the legitimate interests of
the right holder." (numbering added). The Panel held
that each is a separate requirement that must be satisfied
for an exception to be valid under TRIPS. It further interpreted
the doctrine to apply to "de minimis" uses, although
not confined to the specific examples set forth in connection
with the Berne convention (religious, military and educational
uses), nor confined to noncommercial uses.
As to category 1, the Panel concluded that any exception
must be narrowly limited in application. With regard to 110(5)(B),
the Panel concluded that the application was not narrow, where
a study concluded that at least 70% of eating and drinking
establishments, and 45% of retail establishments were exempt,
without equipment limitations, from obtaining consent of rights
holders for playing music from radio and TV on their business
premises. With regard to 110(5)(A), the "homestyle"
exemption, the Panel concluded that equipment of the type
"commonly used in homes" has been expanding since
the Aiken decision, and now includes a wide range of devices
ranging from CD players to Internet-connected computers. Despite
the EC's argument that this "moving target," as
well as judicial decisions tending to broaden the scope of
the exemption, have expanded the scope beyond "certain
special circumstances," the Panel held that given the
small percentage of exempt locations (around 15%), and subsection
A's limitation to only dramatic works, this limitation was
permissible.
As to category 2, the Panel held that the business exemption
did conflict with normal exploitation of the work, because
the large number of businesses exempted under the provision
constituted a significant potential source of royalties. Although
some businesses had not obtained licenses for playing music,
others had, bringing such uses within the "normal"
language of Article 13. The Panel held that the homestyle
exemption, because of its limitation to dramatic works and
homestyle equipment, and because there was little or no direct
licensing of such works in normal use, was permissible.
With regard to category 3, both parties agreed that the rights
holders' interests were legitimate. The Panel therefore focused
on prejudice, holding that this should be assessed "on
the basis of the economic effects in the country applying
the exception." The Panel further held that potential
for "unreasonable" prejudice, not a finding of actual
losses, was sufficient to satisfy this criterion. The U.S.
and EC submitted very different estimates of actual losses
($500,000 vs. $56 million respectively). Finding that both
calculations depended on widely varying assumptions, the Panel
held that the U.S. failed to carry its burden in showing that
its figures were more correct, or that even this small amount
would not unreasonably prejudice rights holders with regard
to the business exemption. As to the homestyle exemption,
the Panel held that it did not unreasonably prejudice rights
holders because it is limited to dramatic works, and the types
of establishments it applies to represent a very small segment
of the potential licensing market. [blurb
by CKR]
- Remedies
- Trademarks & Trade Dress
- Scope of Protection
- Trademarks, Trade Names & Service Marks
- Color, Fragrance & Sounds
- Certification & Collective Marks
- Trade Dress & Product Configurations
- In Wal-Mart
Stores, Inc. v. Samara Brothers, Inc., ---U.S.--- (March
22, 2000) (No. 99-150), the Court unanimously held that
in an action for trade dress infringement, a product's design
is distinctive only upon a showing of secondary meaning.
The ruling reversed a Second Circuit affirmation of a district
court ruling that the trade dress at issue, Samara's line
of children's clothing featuring styled appliques, was inherently
distinctive and infringed.
The Court distinguished between product design, where
consumers are not predisposed to equate the source of
a product with its design, and product packaging, which
may immediately identify a source to customers. Design
is exemplified by cases such as Qualitex v. Jacobsen Products,
where the Court held that secondary meaning was required
to protect color as trade dress (green-gold on dry cleaning
press pads). The Court thus limited its holding in Two
Pesos v. Taco Cabana (that trade dress could be protected
based on inherent distinctiveness) to a narrower subset
of trade dress, under the rationale that with product
design, as with color, "even the most unusual of
product designs is intended not to identify the source,
but to render the product itself more useful or appealing."
Because product design is inherently bound up with functional
aspects of the product, the Court held that consumers
should not be denied the benefits of competition without
an additional showing - especially when it's unlikely
that any product design would be inherently distinctive.
Perhaps as consolation, the Court noted that owners of
distinctive product designs may obtain design patent or
copyright protection for trade dress that has not yet
acquired secondary meaning.
The Court acknowledged that distinguishing product design
and packaging may be difficult. However, it noted that
such difficulty would be no greater than determining whether
a product was inherently distinctive. In a close case,
the Court suggested that courts should err on the side
of caution, classifying ambiguous trade dress as product
design. [blurb by CKR]
- In TrafFix
Devices, Inc. v. Marketing Displays, Inc., No. 99-1571,
2001 U.S. LEXIS 2457 (Mar. 20, 2001), a unanimous United
States Supreme Court reversed the Sixth Circuit, and held
that respondent's "dual-spring" road sign design, the subject
of an expired utility patent, was not eligible for trade
dress protection under the Lanham Act because the design
was a functional feature. In so doing, the Court resolved
a split among the Circuits on the issue of how much weigh
an expired utility patent should be given in determining
the functionality of a claimed trade dress in a product's
design.
Marketing Displays, Inc. (MDI), holds expired utility
patents for a "dual-spring design" used to keep
temporary road signs upright in wind conditions. MDI claimed
that its sign stands were recognizable to buyers and users
because the patented design was visible near the sign
stand's base. After the patents expired and Defendant
TrafFix Devices, (TrafFix) began marketing sign stands
with a dual-spring mechanism copied from MDI's design,
and MDI brought suit for trade dress infringement. The
District Court granted TrafFix's motion for summary judgment,
holding that that MDI had not established secondary meaning
in its alleged trade dress, and that there could be no
trade dress protection for the design because it was functional.
The Sixth Circuit reversed. Relying on Qualitex Co. v.
Jacobson Products Co., 514 U.S. 159, 165, (1995) the Sixth
Circuit held that exclusive use of a feature must put
competitors at a significant non-reputation-related disadvantage
before trade dress protection is denied on functionality
grounds.
Justice Kennedy, writing for the Court, held that the
Sixth Circuit had given insufficient weight to the expired
utility patent in determining functionality. Noting that
"trade dress protection may not be claimed for product
features that are functional," the Court explained that
"[a] utility patent is strong evidence that the features
therein claimed are functional," which "adds great weight
to the statutory presumption that features are deemed
functional until proved otherwise." "[O]ne who seeks to
establish trade dress protection must carry the heavy
burden of showing that the feature is not functional,
for instance by showing that it is merely an ornamental,
incidental, or arbitrary aspect of the device."
Applying this standard, the Court held that MDI had not,
and could not "carry the burden of overcoming the strong
evidentiary inference of functionality based on the .
. . claims of the expired patents." As the Court explained,
"the central advance claimed in the expired utility patents
... is the dual-spring design; and the dual-spring design
is the essential feature of the trade dress MDI now seeks
to establish and to protect." The Court rejected the argument
that dual-spring design at issue, because it was different
in appearance, was not covered by the disclose in the
expired patent. MDI's success in establishing in previous
patent litigation that the scope of the expired patent
claims included the present design under the doctrine
of equivalents precluded such an argument.
The Court held that the Sixth Circuit misapplied Qualitex
in formulating its functionality test, requiring that
a functional feature must "put competitors at a significant
non-reputation-related disadvantage."(quoting Qualitex).
This was improper as a comprehensive definition of functionality,
where "a feature is also functional when it is essential
to the use or purpose of the device or when it affects
the cost or quality of the device." The Court explained
that the "non-reputation-related" language in Qualitex
was an elaboration on the traditional rule appropriate
for use in determining "aesthetic functionality," the
question involved in Qualitex. But "[w]here the design
is functional under the Inwood formulation there is no
need to proceed further to consider if there is a competitive
necessity for the feature."
In reaching its decision, the Court emphasized the different
goals of trademark and patent law. "The Lanham Act does
not exist to reward manufacturers for their innovation
in creating a particular device; that is the purpose of
the patent law and its period of exclusivity. The Lanham
Act, furthermore, does not protect trade dress in a functional
design simply because an investment has been made to encourage
the public to associate a particular functional feature
with a single manufacturer or seller."
Resolving the issue on functionality grounds, the Court
left open the question of whether the Patent Clause of
the Constitution, Art. I, § 8, cl. 8, "prohibits the holder
of an expired utility patent from claiming trade dress
protection." [blurb by MSV]
- Establishment & Extension of Rights
- Priority
- Distinctiveness
- Trademark Office Procedures
- Incontestability
- Extension Overseas: International Trademark Practice
- Extension by Contract: Licensing & Franchising
- Infringement
- Likelihood of Consumer Confusion
- Dilution
- In Times
Mirror Magazines, Inc. v. Las Vegas Sports News, ---
F.3d ----, 54 U.S.P.Q.2d 1577 (No. 99-1299) (3rd Cir., Apr
2000), the court affirmed the district court's issuance
of a preliminary injunction on dilution grounds, under the
Federal Trademark Dilution Act (FTDA). In its opinion, the
Third Circuit held that famousness within a niche market
is sufficient to constitute fame under the act, and upheld
a finding based on rather scant evidence that Times Mirror's
"Sporting News" was famous within the sports publications
market.
In dissent, Judge Barry detailed serious reservations
about the majority's famousness holding, noting that the
evidence for fame was "woefully inadequate,"
and that the Act was meant only to apply to truly famous
marks like Kodak or Buick. Judge Barry reviews the legislative
history and scholarly criticism of the Act and relevant
case law in some detail. She concludes that a finding
of famousness in this context presents a grave risk that
the FTDA (which protects business investment) will be
applied well beyond its intended scope, perhaps to the
point of eclipsing traditional infringement analysis (which
focuses on harm to consumers). The dissent goes through
the eight factors, with particular emphasis on (f), the
degree of recognition in the relevant trading areas, concluding
that the factors generally weigh in favor of LVSN. In
light of the legislative history and public policy concerns,
the dissent states that a finding of famousness in this
context is "beyond the pale." [blurb
by CKR]
- Contributory Infringement
- False Advertising
- Defenses
- Functionality
- Abandonment
- Genericness
- Nontrademark ("Nominative") Use
- In a case that explores the tension between the Lanham
Act and the First Amendment, the Fifth Circuit Court of
Appeals, in Westchester
Media v. PRL USA Holdings, Inc., 214 F.3d 658 (5th Cir.
2000) (No. 99-20754), upheld a lower court's finding of
trademark infringement for plaintiff's "POLO" mark where
defendant Westchester's use of "Polo" in its magazine title
was likely to cause confusion, but held that the lower court
may have erred in permanently enjoining defendant from using
"Polo", and remanded for reconsideration. The
circuit court criticized the lower court for too abruptly
dismissing First Amendment concerns in granting the permanent
injunction, and for failing to consider the possibility
of using a disclaimer or other limited injunctive relief
as a remedy, rather than completely restraining defendant
Westchester's right of choosing the title for its literary
work.
The circuit court noted that in a run of the mill Lanham
Act case, the presence of a likelihood of confusion disposes
of the issue of infringement. But in this case, plaintiff
PRL was attempting to do more than merely enjoin a purely
commercial use of the "Polo" mark; it was trying
to prevent Westchester from using "Polo" as
a title for a magazine. As such, the court held that,
PRL's infringement claim implicates the First Amendment
right to choose a title for literary works. The court
held that a permanent injunction would only be appropriate
in such a case if the likelihood of confusion could not
be solved by means of a disclaimer or other limited injunctive
relief.
Here, the court found a permanent injunction may be inappropriate
because it: (a) could extend beyond the title of Westchester's
magazine, posing special First Amendment concerns, (b)
would allow PRL to arrogate the very name of a sport from
the players' publication; (c) did not take into account
that there was no evidence of actual confusion after the
preliminary injunction of using a disclaimer was granted
by the district court, and (d) did not take into account
that the buyers for both PRL's products and Westchester's
magazine are relatively sophisticated, being able to differentiate
the trademarks by means of a disclaimer or other injunctive
relief.[blurb by BR]
- Parody
- Remedies
- Injunctions
- Damages
- State IP Law / Federal Preemption
- State IP Law
- The Tort of Misappropriation
- State "Common Law" Copyright
- Idea Submissions
- Publicity Rights
- State Moral Rights
- Federal Preemption
- Patent Preemption
- Copyright Preemption
- Trademark Preemption
- Protection of Computer Software
- Trade Secret Protection
- Copyright Law
- Scope of Software Copyright
- Exclusive Rights in Computer Programs
- Fair Use
- In Sony
Computer Entertainment, Inc. v. Connectix Corp., ---
F.3d ----, 2000 WL 144399, 53 U.S.P.Q.2d 1705 (9th Cir.(Cal.),
Feb 10, 2000) (NO. 99-15852), the court dissolved a preliminary
injunction against the sale of Connextix' Virtual Gamestation.
In doing so, the court held that intermediate copies of
copyrighted software created during the reverse engineering
products are protected by fair use, and that Sony was unlikely
to prevail on its claim that sale of the Connectix product
would tarnish its Playstation mark.
Connectix had repeatedly copied the entirety of Sony's
BIOS, the Playstation's operating system, in the course
of reverse engineering. The resulting product, however,
was created entirely by Connectix. Although the reasoning
in this case is strongly based on that put forth in Sega
v. Accolade, it's worth noting that here Connectix was
seeking to produce directly competing, as opposed to downstream
code. "Intermediate" copying, the process of
loading copyrighted software into RAM, constitutes copyright
infringement under Sega. In this case, such copying was
permitted under the fair use doctrine for the purpose
of gaining access to the functional aspects of the code.
The court also clarified its Sega decision in light of
the district court's finging that Connectix not only studied
the Sony BIOS, but that they also used it in developing
their competing code. The Sony court explicitly reject
any distinction between studying and use, and also held
that the amount of times intermediate copying occurs is
not a relevant factor in the analysis.
The nature of the copyrighted work was key to the court's
holding. Because the BIOS contained unprotected functional
code, and because there was no way to reverse engineer
it without copying, the court afforded it a "lower
measure of protection." As to the amount and substantiality
of the portion used, the court reiterated the concept
from Sega that, in cases of intermediate copying, this
factor is to be afforded very little weight because, although
the entire work is copied briefly, none of it ever ends
up in the final infringing product. As to the purpose
and character of the use, the court found Connectix product
"modestly transformative", noting the value
inherent in interoperability and the fact that the Connectix
product was entirely original expression. The court ruled
that the commercial nature was "indirect or derivative",
and thus did not weigh heavily against fair use. Although
recognizing that the Connectix product could harm Sony's
console sales, the court held that because it was transformative,
it was a legitimate competitor in the market for platforms
capable of playing Playstation games. [blurb
by CKR]
- In Universal
City Studios, Inc. v. Reimerdes, 111 F. 2d 294 (S.D.N.Y.
2000) (PDF Document), the District Court for the Southern
District of New York the court held that DeCSS, a software
tool for circumventing the DVD encryption scheme, was prohibited
by the DMCA's anticircumvention provisions. DeCSS was created
by a 15 year old Norwegian, ostensibly for the purpose of
playing DVDs on Linux machines, for which DVD player software
was not available. Defendants, who did not create DeCSS
but rather posted copies (prior to the PI) and links to
copies of it on their web sites, argued that it was an important
tool enabling DVD users to effectuate their fair use rights
(e.g., making backup copies, extracting portions of movies
for commentary, playing DVDs on platforms for which no authorized
decryption software existed, etc.). The court found that
Congress had debated this issue extensively, struck a balance
between the needs of rights holders and the needs of DVD
users, and promulgated a statute that clearly prohibited
the posting of DeCSS. Although the court recognized that
computer code is speech, it held that computer code's "expressive
element no more immunizes its functional aspect from regulation
that the expressive motives of an assassin immunize the
assassin's action."
The court found that, using DeCSS and other compression
software available on the Internet, the potential for
widespread dissemination of pirated movies was significant.
It further found that compromising the DVD encryption
scheme was very expensive for the motion picture industry,
requiring either a new protection scheme (possibly making
all existing players obsolete), or forcing it to tolerate
steadily increasing piracy as bandwidth increases.
The DMCA, Section 1201(a)(2) provides that no one shall
"offer to the public, provide, or otherwise traffic
in" technology "primarily" designed to
circumvent a technical protection measure such as the
DVD encryption scheme. It found that DeCSS was a prohibited
circumvention technology, and was not persuaded by defendants'
argument that the encryption was weak (40 bit), given
the statute's broad language. Nor was the court persuaded
by the creator's purpose in creating the software, because
even if designed to allow DVDs to operate under Linux,
it was still designed to circumvent encryption without
the rights holders' consent. Motive, the court held, is
irrelevant in this context.
In response to defendants' argument that DeCSS came under
the reverse engineering exception, Section 1201(f) (allowing
circumvention to achieve interoperability), the court
noted that the exception only permits those who perform
the reverse engineering to make information acquired by
such means available - not the tool itself. Further, the
exemption is limited to circumvention measures whose "sole
purpose" is interoperability. The DeCSS program runs
under Windows and has wide-ranging applications beyond
a Linux DVD player. The court similarly held that the
encryption research exemption did not apply (DeCSS was
posted for the world, no information provided to the rights
holders on how it was made); and that the security testing
exemption did not apply (not for testing).
With regard to defendants' assertion that the anticircumvention
provisions made the exercise of fair use rights illegal
in this context, the court responded that although perhaps
true, Congress deliberately intended the fair use defense
to be inapplicable in this context. It reasoned that Congress
had authority to do this because it struck an appropriate
balance in exempting persons who had already obtained
an authorized copy of a protected work, in delaying implementation
of the DMCA pending a study, and in certain other exemptions.
The court also enjoined defendants not only from publishing,
but also linking to copies of the DeCSS software. It justified
this in part on defendants' "electronic civil disobedience,"
whereby they linked to copies after entry of the PI, which
prohibited them from posting actual copies, and actively
encouraged others to mirror the software. It found a justification
for such an injunction in the "or otherwise traffic"
language in the DMCA, and held that defendants' linking
was the "functional equivalent" of actual posting.
It further held that, even where sites linked to offered
content in addition to the software, linking could still
be enjoined because defendants' main purpose was to provide
the software to their sites' visitors.
The court also shot down First Amendment arguments that
(a) computer code is protected speech, and (b) that the
DMCA is overbroad in effectively gutting the fair use
right. As to the first, the court merely held that although
computer code is speech, it may still be regulated. It
further held that nonspeech (i.e., functional) elements
of the DeCSS code were regulated in this case, and that
the DMCA was content neutral, subject to intermediate
scrutiny. It also analogized functional vs. nonfunctional
aspects of software to speech vs. conduct in First Amendment
jurisprudence. Because the antitrafficking provision furthered
an important state interest, and because the speech considerations
were minimal, the court held, the provision was permissible.
As to the argument that the DMCA was overbroad, in that
it eviscerated fair use rights of ordinary citizens without
the means to design DVD cracks on their own, the court
found that fair use rights are "probably affected"
by the DMCA, but not to a great degree. For example, the
court suggested, someone wishing to quote from a movie
could watch the DVD and copy the relevant lines by hand.
It also suggested that defendants lacked standing to fully
litigate the argument, because defendants were not attempting
to use the technology to effectuate fair use rights.
As to the First Amendment implications of the linking
prohibition in the injunction, the court again relied
on a functionality rationale. Although it recognized that
exposing people to such liability under the DMCA could
have a chilling effect, it noted that the law of defamation
has a similar effect and suggested the solution lay in
a high standard of culpability. In this regard, it held
that an essential element of "trafficking" is
"a desire to bring about the dissemination,"
that the relevant standard requires proof of intent, and
knowledge that the link is to a circumvention device,
by clear and convincing evidence.
See also the statement
by Emmanuel Goldstein in response to the ruling. [blurb
by CKR]
- On February 12, 2001, the Ninth Circuit Court of Appeals,
in A&M
Records, Inc. v. Napster, Inc., (Nos. 00-16401, 0016403)
(9th Cir., Feb. 12, 2001), affirmed in-part a District
Court ruling by Judge Marilyn Patel finding that Napster,
the phenomenally popular Internet based "peer-to-peer" digital
music file-sharing service, would likely be found liable
for contributory and vicarious copyright infringement and
entering a preliminary injunction effectively shutting the
company down. The appeals court agreed with the lower court
that plaintiffs' exclusive rights under the Copyright Act
were violated and that Napster's users were not engaged
in "fair use." However, the court reversed-in-part
and remanded for a more narrow injunction, noting that the
mere existence of Napster's "peer-to-peer" file sharing
system, absent actual notice and Napster's established failure
to remove offending material, was insufficient to impose
contributory liability.
The court began by describing the way in which Napster's
"peer-to-peer" file sharing system works, noting that
Napster doesn't actually store, transfer or copy MP3s,
but rather, maintains a centralized, searchable, real-time
index of its users' MP3 files, and facilitates connections
between users seeking to transfer MP3 files.
Turning first to direct infringement, the court agreed
that plaintiffs had made out a prima facia case of direct
infringement by Napster's users of plaintiffs' exclusive
rights of reproduction and distribution. The court then
addressed Napster's affirmative defense that its users
are engaged in fair use, first addressing the factors
generally, and then turning to specific fair uses alleged
by Napster.
Applying the first factor, the purpose and character
of the use, the court noted that a use is generally not
deemed fair where an original is merely "retransmitted
in a different medium," and concluded "downloading MP3
files does not transform the copyrighted work." The court
also found users' use under this factor to be "commercial."
Stating that direct economic benefit is not required,
the court held that "[i]n the record before us, commercial
use is demonstrated by a showing that repeated and exploitative
unauthorized copies of copyrighted works were made to
save the expense of purchasing authorized copies."
The court found the second factor, the nature of the
use, and the third factor, the portion used, both weighed
against fair use as the sound recordings copied were creative,
and the entire works were copied. Applying the fourth
fair use factor, the effect of use on the market, the
court found no reason to disturb the lower court's findings
that copying by Napster users harms plaintiffs' market
for CD sales to college students, and has a "deleterious
effect on the present and future digital download market."
Further, the court noted, "lack of harm to an established
market cannot deprive the copyright holder of the right
to develop alternative markets."
The court next addressed specific uses. Napster argued
the lower court erred in finding that "sampling," or temporary
downloading of songs for preview purposes, was commercial
in nature and would harm the market for plaintiffs' works.
The court questioned whether the downloading and storage
of MP3s could be considered "sampling" as it permitted
permanent, rather than only temporary storage. Nevertheless,
citing plaintiffs' practice of licensing "sampling" and
collecting fees, the court agreed with the lower court
that "even authorized temporary downloading of individual
songs for sampling purposes is commercial in nature."
As to market effect, the court noted "even if the type
of sampling supposedly done on Napster were a non-commercial
use, plaintiffs' have demonstrated substantial likelihood
that it would adversely affect the potential market for
their copyrighted works if it became widespread." (quoting
district court). The court refused to credit Napster's
argument that sampling may increase sales, noting that
"increased sales of copyrighted material attributable
to unauthorized use should not deprive the copyright holder
of the right to license the material. Nor does positive
impact in one market . deprive the copyright holder of
the right to develop alternative markets, here the digital
download market."
The court next addressed Napster's argument that "space-shifting"
is fair use. Napster argued that its users engaged in
space shifting when they download music they already own
on CD, citing RIAA v. Diamond Multimedia (1999), where
the Ninth Circuit, extending the Supreme Court's holding
in Sony(time-shifting), held that a portable MP3 player
"merely makes copies in order to render portable, or space-shift,
those files that already reside on a user's hard drive..
Such copying is paradigmatic noncommercial fair use."
The court held these cases inapposite, as users in Sony
and Diamond did not make their copies "available to millions
of other users" as do Napster users.
The court next reviewed the lower court's determination
that Napster would likely be found liable for contributory
and vicarious copyright infringement. Considering first
contributory infringement, the court analyzed the knowledge
requirement, and in an apparently novel application, cited
the Supreme Court's refusal in Sony to impute the requisite
level of knowledge where a device was capable of both
infringing and substantial noninfringing uses for its
refusal to impute the requisite knowledge to Napster "merely
because peer-to-peer file sharing technology may be used
to infringe plaintiff's copyrights." The court departed
from the district court's reasoning, finding it had placed
"undue weight on the proportion of current infringing
use as compared to current and future noninfringing use."
Nevertheless, the court concluded that for purposes of
preliminary injunction, sufficient evidence existed to
establish Napster had actual knowledge that specific infringing
material is available using its system, that it could
block access to suppliers of such material, and that it
refused to do so. Under the "material contribution" factor,
the court agreed that "Napster provides the site and facilities
for direct infringement." Thus, the court found no error
with the lower court's finding the Napster would likely
be found liable for contributory infringement.
Reviewing vicarious infringement, the court held that
vicarious copyright liability extends where a defendant
has both the right and ability to supervise the infringing
activity, and receives a direct financial interest in
such activities. In evaluating the financial benefit prong,
however, the court seemed to depart from earlier cases
requiring a more "direct" benefit when it held "[f]inancial
benefit exists where the availability of infringing material
acts as a draw for customers." The court found that "[a]mple
evidence supports the . finding that Napster's future
revenue is directly dependant upon "increases in userbase."
Turning to the "supervision" prong, the court found that
while the lower court had correctly determined that Napster
had the right and ability to police the system, and failed
to exercise that right to prevent the exchange of copyrighted
material, it had "failed to recognize that the boundaries
of the premises that Napster 'controls and patrols' are
limited." Nevertheless, the court found that Napster had
the ability to police the "file name indices" and had
failed to do so.
The court quickly disposed of Napster's argument that
the Audio Home Recording Act shielded it from liability,
stating that the Act "does not cover the downloading of
MP3 files to computer hard drives." "[C]omputers do not
make 'digital music recordings' as defined by the [Act]."
The court did not, however, so quickly dismiss Napster's
claim to fall within the safe harbor provisions of the
DMCA, 17 U.S.C. section 512. While declining to accept
the lower courts "blanket conclusion that [the DMCA] will
never protect secondary infringers," the court did note
that serious questions had been raised as to Napster's
ability to qualify as an "ISP" under those provisions,
and that the balance of hardships weighed in favor of
a preliminary injunction.
The court quickly disposed of the remaining arguments
by Napster of waiver, implied license, and copyright misuse.
As to misuse, Napster argued that plaintiffs' colluded
to "use their copyrights to extend their control to online
distribution." But the court found no evidence that plaintiffs'
seek to control areas outside their grant of copyright,
and the fact "that copyrighted works are transmitted in
another medium - MP3 format rather than audio CD - has
no bearing on our analysis."
Finally, the court concluded that while a preliminary
was warranted, the scope of the district court's injunction
was overbroad. Specifically, the court reiterated its
differing view of contributory liability, holding that
liability may only be imposed to the extent that Napster
"(1) receives reasonable knowledge of specific infringing
files containing copyrighted [material], (2) knows or
should know such files are available on the system, and
(3) fails to act to prevent viral distribution of the
works." The court emphasized that "the mere existence
of the Napster system, absent actual notice, and Napster's
demonstrated failure to remove the offending material,
is insufficient to impose contributory liability." The
injunction was overbroad because it places on Napster
the entire burden of ensuring that no copying occurs,
and fails to place any burden, as required, on the plaintiffs'
to provide notice. As to policing file names under vicarious
liability, the court noted that because users name the
files, it is not an exact science, and the district court
must weigh this in crafting the injunction on remand.
While there is no shortage of media coverage for this
closely watched case, readers may find the following links
of interest: http://www.gseis.ucla.edu/iclp/napster.htm
(providing case summary and additional links) http://www.nytimes.com/2001/02/12/technology/13NAPSTER-REUTERS.html
(NY Times Story discussing how Napster's demise is good
news for Napster clones) http://www.msnbc.com/modules/DigitalMusic/(digital
music timeline) [blurb by MSV]
- Patent Protection
- Subject Matter Issues
- Examination & Validity of Software Patents
- Infringement
- Trademark / Trade Dress
- Protecting Programs Through Trademark
- Compatibility & Standardization
- Trademarks and the Internet
- The ICANN
Dispute resolution system is producing domain name decisions
at a furious pace. For far less than the cost of litigating
in federal court, and in far less time (60 days), complainants
can have a domain name transfer ordered. For example, check
out Harrods
Limited v Robert Boyd, Case No. D2000-0060, ordering
the transfer of dodialfayed.com. See also the complete list
of proceedings. As of April 1, several hundred ICANN
proceedings had been filed, and over 100 had been resolved.
Trademark owners prevailed in about 78% of these cases.
[blurb by CKR]
- Congress recently passed the Anticybersquatting
Consumer Protection Act, P.L. 106-113, 113 Stat. 150,
prohibiting registration or use of an Internet domain name
that is (a) confusingly similar to a distinctive trademark;
(b) confusingly similar to, or dilutive of, a famous mark;
or (c) a trademark already registered by another entity.
[blurb by CKR]
- In Sporty's
Farm L.L.C. v. Sportsman's Market, Inc., --- F.3d ----,
2000 WL 124389, 53 U.S.P.Q.2d 1570 (2nd Cir.(Conn.), Feb
02, 2000) (NO. 98-7452 L, 98-7538 XAP), the first case interpreting
the Anticybersquatting Consumer Protection Act, the Second
Circuit found a domain name holder acted in bad faith with
regard to a distinctive mark. The court, affirming the lower
court's decision, found that injunctive relief was proper
and that plaintiff was not entitled to damages under the
dilution act or state law. In applying the new law, the
court dismissed defendant's contention that it was impermissibly
retroactive on the grounds that the remedy corrected a continuing
harm, and thus implicated only prospective relief. [blurb
by CKR]
- Sui Generis Protection of Computer Technology
- Intellectual Property and Competition Policy
- Monopolization
- Defining the Market
- IP & Anticompetitive Conduct
- In In
re Independent Service Organizations Antitrust Litigation,
203 F.3d 1322, 53 U.S.P.Q.2d 1852 (Fed.Cir.(Kan.), Feb 17,
2000), (No. 99-1323), the Federal Circuit affirmed the district
court's finding of summary judgment in favor of Xerox, which
had been sued by a number of independent service organizations
(ISOs) for refusing to license patents and copyrights essential
to maintain its copiers. Although Xerox settled with a number
of ISOs, Plaintiffs in this case opted out of that settlement,
and claimed that Xerox violated the Sherman Act by charging
ISOs a higher rate for its patented parts than it did to
end users, eliminating ISOs from the copier repair market.
Xerox counterclaimed for patent and copyright infringement.
The district court held that a unilateral refusal to sell
or license a patented invention or copyright does not violate
antitrust laws, even if it impacts more than one market.
In affirming the holding below, the Federal Circuit noted
that, although intellectual property protection is not
a shield from antitrust laws, the nature of the IP grant
does confer a legitimate monopoly on the grantee. As to
the patent claims the court held that there is a strong
showing required before an antitrust finding may be imposed:
"In the absence of any indication of illegal tying,
fraud in the Patent and Trademark Office, or sham litigation,
the patent holder may enforce the statutory right to exclude
others from making, using, or selling the claimed invention
free from liability under the antitrust laws." The
court further noted that the infringement defendant bears
the burden of proving such exceptional circumstances.
As to the copyright claims, there is an unresolved split
in the circuits concerning the Sherman Act implications
of refusal to sell or license copyrighted expressions.
Relying heavily on the First Circuit's Data General v.
Grumman decision, the court held that such refusal is
a presumptively valid business justification, and may
only be overcome by evidence that their monopoly was acquired
in an unlawful manner. The court criticised the 9th Circuit's
extension of this doctrine in Kodak v. Image Technical
Services to include the rights owner's subjective motivation,
under the rationale that it would undermine the exclusive
rights granted by the Copyright Act.
[blurb by CKR]
Update: The United States Supreme Court has denied cert.,
69 USLW 3087, 2001 WL 137633, 2001 U.S. LEXIS 1102 (U.S.
Feb. 20, 2001). The Solicitor
General's amicus brief supported the denial of cert.
- In United
States v. Microsoft, D.D.C. (No. 98-1232) (April 3,
2000) (see also pdf
version), the court concluded that Microsoft violated
sections 1 and 2 of the Sherman Act, giving current and
potential plaintiffs against the company a prima facie case
that Microsoft is an illegal monopolist. The next phase
of the Microsoft antitrust trial will focus on remedies.
The court found that Microsoft illegally maintained its
Windows OS monopoly, and that it illegally attempted to
monopolize the browser market, both violations of Section
2. The court also found that Microsoft violated Section
1 of the Clayton Act by tying its browser to the Windows
operating ystem. However, the court did not find that Microsoft's
agreements with companies regarding browser distribution
constituted exclusive dealing. In its opinion, the Court
took issue with the D.C. Circuit's opinion in United States
v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998) ("Microsoft
II"), which in dictum stated that software design decisions
shouldn't be second-guessed by judges if there is a plausible
claim of consumer benefit. The court stated that that the
D.C. Circuit dicta was not intended to apply to cases like
this one, and that following its rationale would effectively
insulate software design from antitrust scrutiny and is
inconsistent with Supreme Court precedent.
[blurb by CKR]
- Agreements to Restrain Trade
- Vertical Restraints
- Horizontal Restraints
- Mergers & Acquisitions
|