Next Tuesday, August 11, the U.S. Court of Appeals for the Federal Circuit will hear oral argument in ClearCorrect Operating, LLC v. International Trade Commission, a case that nominally involves a cease-and-desist order the International Trade Commission (ITC) imposed on a data file that contained a digital model of crooked teeth. As numerous amici in the case assert, however, the court’s ultimate decision could have significance well beyond digital teeth images; it could establish standards for the Commission’s jurisdiction over international trade in digitalized goods.
The case followed a routine path from ITC to the Federal Circuit. Align Technology complained to ITC that ClearCorrect was importing goods into the United States that infringed Align’s patents. Both companies create patient-specific “aligners” to correct crooked teeth. ClearCorrect’s facility in Texas would download data of a model created in Pakistan from a foreign-based server, and then use that data to create the aligner. Align alleged that the data “imported” from the foreign server constituted an “article,” under 19 U.S.C. § 1337, over which ITC had jurisdiction. Continue reading
Featured Expert Contributor – Intellectual Property (Patents)
Jeffri A. Kaminski, Venable LLP
The U.S. Supreme Court recently decided a closely watched case concerning contract rights and patent royalties. In Kimble v. Marvel Entertainment, LLC the Court upheld its long standing precedent and determined that parties cannot agree to patent royalty payments that extend beyond the expiration of the patent.
The case originated when Kimble and Marvel agreed to a patent license for a toy glove that Kimble had patented. The licensing agreement called for a lump sum payment and running royalties for a license to the patent as part of a settlement of ongoing litigation. The agreement did not set an end date for the royalty payments. In making its decision the Court upheld its ruling in Brulotte v. Thys Co., 379 U.S. 29 (1964), holding that licenses requiring payment of patent royalties after patent expiration are “unlawful per se.” Brulotte has been the subject of criticism in the 50 years since it was decided, but the Court determined that was not enough of a reason to overturn its longstanding precedent. Continue reading
by Sara Thornton, a 2015 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.
What do copyright law, a WWE professional wrestler, and ESPN have in common? They were all involved in an appeal before the U.S. Court of Appeals for the Eighth Circuit in Ray v. ESPN, Inc., decided on April 22, 2015. Steve “Wild Thing” Ray sued ESPN under Missouri law for broadcasting WWE rerun matches featuring Ray in the early 1990s.
The specific claims were for (1) invasion of privacy, (2) misappropriation of name, (3) infringement of the right of publicity, and (4) interference with prospective economic advantage. ESPN moved to dismiss the suit, asserting that federal copyright law preempted the state-law claims. The district court construed Ray’s first two claims as being identical under Missouri law, so analyzed them as one. It also assumed that since Ray did not challenge ESPN’s argument that copyright law preempted his first and fourth claims, Ray had waived those claims. The court concluded that the Copyright Act preempted Ray’s remaining misappropriation and right of publicity claims. Continue reading
Federal regulatory agencies routinely act as table-setters for the plaintiffs’ bar. Class-action lawsuits can require targets of federal enforcement actions, even after those actions end in settlement, to defend against the same allegations in court. A federal judge’s April 3, 2015 dismissal of a class action on the ground that the company had already entered into a settlement with the Federal Trade Commission (FTC), therefore, was a commendable outcome. The underlying FTC action that inspired the suit, however—an industry-wide investigation into companies’ in-app purchase procedures—is far less welcome. The Commission’s investigation is yet another example of government’s steady drift away from respecting permissionless innovation and toward “mother-may-I” paternalism.
FTC’s In-App Purchase Inquest. FTC initiated an investigation in 2011 of various companies’ mobile-app sales practices. The Commission had received complaints from parents that their children were making “unauthorized” purchases on mobile app stores. On January 15, 2014, Apple agreed to settle with FTC over charges that its in-app purchase process constituted an unfair business practice under § 5 of the FTC Act. On September 4, 2014, Google entered into a similar settlement. Both app sellers agreed to provide customers with refunds and alter their app sales practices.
In addition to Google and Apple, FTC also accused Amazon of unfair business practices for failing to prevent “unauthorized” in-app purchases. Amazon, however, refused to settle the charges. The Commission filed suit on July 10, 2014 in the U.S. District Court for the Western District of Washington. On December 1, 2014, Judge John C. Coughenour denied Amazon’s motion to dismiss. Continue reading
Featured Expert Contributor – Intellectual Property (Patents)
Jeffri A. Kaminski, Venable LLP
The Supreme Court declined to create a new defense this week for defendants in patent infringement cases, holding that a defendant’s belief regarding patent validity is not a defense to a claim of induced infringement under 35 U.S.C. § 271(b), as a matter of first impression in Commil USA, LLC v. Cisco Systems, Inc. This is welcome news to some patent owners who have felt the legal tide has been turning against them. However, the Court also recognized that so-called “patent trolls” exist and that frivolous patent infringement lawsuits are being brought in federal courts. The Court stressed that district courts have authority under Rule 11 and 35 U.S.C § 285 to levy sanctions and award fees to dissuade frivolous cases from being filed. With its ruling, the Court continued its trend of trying to maintain a balance between patent owners and accused infringers.
The Court began its analysis by clarifying the current state of the law. Direct infringement is a strict liability offense. The state of mind of the infringer is not relevant in determining liability for direct infringement. In contrast to direct infringement, liability for inducing infringement attaches only if the defendant knew of the patent and that “the induced acts constitute patent infringement.” Global-Tech Appliances, Inc. v. SEB S.A. It is not enough if the party charged with induced infringement did not know that the acts it induced would infringe. Continue reading
The California Supreme Court earlier this month issued an opinion that subjects litigants who settle their patent disputes to scrutiny under state antitrust law. The court reasoned that such settlements may create unreasonable restraints on trade. While the decision in In re Cipro Cases I & II to reinstate antitrust claims was not overly surprising—after all, the U.S. Supreme Court had previously held in FTC v. Actavis, Inc. that some patent litigation settlements might violate federal antitrust law—the breadth of the California Supreme Court’s decision could have a particularly negative impact on the free-enterprise system. Indeed, the decision suggests that parties to a patent litigation settlement will have great difficulty ever avoiding California antitrust liability if the settlement entails transferring anything of value from the patent holder to the alleged infringer. Because Cipro’s new state-law antitrust standard is so much more exacting than the standard announced by the U.S. Supreme Court in Actavis, federal antitrust law may well trump California’s standard. Indeed, were Cipro to reach the U.S. Supreme Court, the Court likely would reverse on federal preemption grounds.
“Reverse-Payment” Patent Settlements
When parties to litigation enter into a settlement, one would normally expect that any cash payments would flow from the defendant to the plaintiff. The normal expectations have been reversed in the context of litigation involving prescription-drug patents, however, as a result of financial incentives created by the Hatch-Waxman Act, a federal statute designed to ensure that generic versions of prescription drugs enter the market more quickly. The Act includes a provision that permits generic companies, by declaring to the Food and Drug Administration a belief that the patent held by a brand-name drug company is invalid, to essentially force the patentee to immediately file a patent infringement suit. It also grants huge financial awards to generic companies that successfully challenge drug patents. Continue reading
On April 24, 2013, House Judiciary Committee Chairman Bob Goodlatte announced that the committee would be undertaking “a wide review of our nation’s copyright laws and related enforcement mechanisms.” Five months later, UC Berkeley School of Law Professor Pamela Samuelson formally requested that the American Law Institute (ALI) prepare a restatement of copyright law. It might seem odd that a prestigious institution like ALI would devote time and resources to restating the “law of copyright” when the U.S. House of Representatives is taking steps to possibly amend the federal Copyright Act. But it is going forward with a Restatement of the Law, Copyright project.
ALI is an organization of academics, lawyers, judges, and other legal professionals that studies various areas of law and prepares treatises that “clarify, modernize, and otherwise improve the law.” Courts and legislatures look upon ALI’s best-known treatises, such as the Restatement of Contracts, as authoritative summaries of state common law—i.e. legal principles derived from judicial decisions. A review of its current projects, though, suggests that ALI is drifting away from its traditional approach.
Professor Samuelson’s letter stated that an ALI copyright project “could provide an invaluable and timely analysis and framework for other reform efforts that are currently underway.” Further on in the letter she implies a much larger ambition when decrying the “long and contentious process” of passing laws that makes “comprehensive reform of the statute . . . unlikely to happen any time soon”: Lawyers, academics, and judges at ALI, she seems to suggest, are better positioned to bring clarity to the law of copyright than elected officials in Congress. Continue reading