Tag Archives: property rights

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Patent Litigant Targeting Retailers’ Use of Gift Card Activation Prevails in Federal Circuit

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

The U.S. Court of Appeals for the Federal Circuit on May 20 upheld the validity of two claims of a patent for activating gift and pre-paid phone cards, U.S. Patent No. 6,000,608 (“the ’608 patent”), in a divided panel opinion authored by Judge Dyk and joined by Judge Moore (Alexsam, Inc. v. IDT Corporation ). Judge Mayer dissented, writing that patent should be held invalid under 35 U.S.C. § 101. The plaintiff, Alexsam, Inc. (“Alexsam”) has filed suit against a wide array of merchants, seeking damages for infringement whenever a conventional or online retailer uses an existing banking network to process gift and pre-paid cards.

The ’608 patent is directed to a system for activating gift and pre-paid telephone cards at the time that they are purchased. In the past, retailers often installed dedicated “activation terminals” in their stores in order to activate such cards. The inventor on the ’608 patent decided that the activation process could be made more efficient if gift and pre-paid telephone cards could be activated using the point-of-sale terminals that are used for processing credit card transactions. Instead of activating a card by swiping it through a dedicated activation terminal, a store employee could simply swipe it through the terminal used for processing credit card transactions. Continue reading →

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Federal Circuit Affirms ITC’s Determination on Sec. 337 Domestic Industry Litigation Expenses

ItoGuest Commentary

by Emi Ito Ortiz, Adduci, Mastriani & Schaumberg, L.L.P.

On May 13, 2013, in Motiva, LLC v. U.S. Int’l Trade Comm’n, No. 12-1252 (Fed. Cir. May 13, 2013), the Federal Circuit affirmed the International Trade Commission’s determination that a complainant failed to satisfy the domestic industry requirement of Section 337 based on litigation expenses allegedly related to licensing.  The case was an appeal from ITC Investigation No. 337-TA-743, Certain Video Game Systems and Controllers.  Section 337 requires a complainant to prove it has “an industry in the United States, relating to the articles protected by the patent . . .  [that] exists or is in the process of being established.”  19 U.S.C. § 1337(a)(2).  Such an industry can be based, inter alia, on a substantial investment in exploitation of the patent through licensing.  See 19 U.S.C. § 1337(a)(3)(C).  In Motiva, the Federal Circuit agreed with the ITC that litigation expenses can count towards the establishment of a domestic industry only if the litigation encourages the adoption and development of articles that incorporate the asserted patents.

Underlying Investigation.  In the underlying investigation, Motiva accused Nintendo of violating Section 337 by importing, selling for importation, or selling after importation its Wii game system, which allegedly violated two Motiva patents.  Nintendo asserted that Motiva had no domestic industry because it did not have commercialized products incorporating the asserted patents nor activities aimed at creating such products.  Instead, Motiva’s sole activity relating to the patents at issue was litigation against Nintendo, which was insufficient to establish a domestic industry.  The ITC sided with Nintendo, finding no domestic industry. Continue reading →

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Supreme Court Observations: “Blame-the-Bean” Defense Fails in Bowman v. Monsanto

Haas_ThomasGuest Commentary

by Thomas M. Haas, Thompson Hine LLP

In a short, unanimous decision, the U.S. Supreme Court held Monday that the doctrine of patent exhaustion “does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.” (Bowman v. Monsanto) Thus, for the time being, the Supreme Court has maintained the status quo for patent exhaustion.

Farmer Vernon Hugh Bowman purchased patented “Roundup Ready” seeds for his initial crop of soybeans. He subsequently chose to plant cheaper seed for late-season soybean planting. He went to a grain elevator that held soybeans typically sold for feed, milling and other uses to purchase new seed, reasoning that most of those soybeans would be resistant to Roundup, as they initially came from patented Roundup Ready seeds. Bowman was correct; the seeds did in fact contain the genetic material conferring resistance to Roundup.

Bowman argued that Monsanto’s patent rights were exhausted with the sale of the first crop of beans. Bowman also said he should not be liable, in part, because soybeans naturally sprout when planted.

His request found no sympathy. The Court considered Bowman’s argument essentially an argument for an exception to the patent exhaustion doctrine. “Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article,” Justice Kagan wrote for the Court. “Patent exhaustion provides no haven for such conduct.” The Court also failed to accept Bowman’s argument regarding the nature of seeds. “We think the blame-the-bean defense tough to credit,” the Court said.

This ruling is no surprise to those who follow the Supreme Court. In fact, this decision was foreshadowed in the opinion the Court set out in J.E.M. Ag Supply v. Pioneer Hi-Bred Int’l  (2001), in which the Court clearly explained that a patent holder could prohibit a farmer who legally purchases and plants a protected seed from saving harvested seed for replanting. For those in the biotech industry, Monday’s decision merely reaffirmed the law as it has been understood for years – the purchase of a patented product does not confer the right to make copies of the patented product. Mitchell v. Hawley, 16 Wall. 544 (1873).

For other industries, some mystery remains. Though the Court has maintained the status quo for certain types of patented products, it has left the door open for revisiting patent exhaustion in the future. “Our holding today is limited – addressing the situation before us, rather than every one involving a self-replicating product,” the Court said. “We recognize that such inventions are becoming ever more prevalent, complex, and diverse.”

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Want Clarity on Software Patents?: Skip CLS Bank Int’l Opinion and Wait for Supreme Court Review

bethShaw-0580editConvertedProfile-e1360002102239Featured Regular Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

In January, I wrote a WLF Legal Opinion Letter entitled CLS Bank Int’l v. Alice Corp.: Clearer Software Patent Guidance?, which asked if clear software patent guidance would emerge from the U.S. Court of Appeals for the Federal Circuit’s en banc review of CLS Bank (opinion). The answer is an unequivocal “no!”

Seven of the ten members (a majority) of the Federal Circuit court have agreed that the method and computer-readable medium claims in the case fail to recite patent-eligible subject matter. The court was evenly split on the patent eligibility of the system claims. No majority agreed on why, or how, system claims should be analyzed. Further, no majority agreed on the legal rationale as to why the method claims are not patent eligible. Thus, incredibly, despite 135 pages, “nothing said today beyond our judgment has the weight of precedent.”

Judge Newman, concurring in part and dissenting in part, quite accurately summarized the result of the en banc panel:

The ascendance of section 101 as an independent source of litigation, separate from the merits of patentability, is a new uncertainty for inventors. The court, now rehearing this case en banc, hoped to ameliorate this uncertainty by providing objective standards for section 101 patent-eligibility. Instead we have propounded at least three incompatible standards, devoid of consensus, serving simply to add to the unreliability and cost of the system of patents as an incentive for innovation. With today’s judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.

Continue reading →

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Update: Ninth Circuit Ruling a Final End to Copyright “Troll’s” Legal Charade?

copyrightNearly two years ago, in a Legal Pulse post and a WLF Legal Opinion Letter, we discussed the strong judicial response to the copyright litigation scheme pursued by a company called Righthaven LLC. Righthaven was created at the behest of newspaper-owning media company Stephens Media as a vehicle to sue bloggers and other online information outlets which had reprinted articles originally published in Stephens’ newspapers. Thankfully rather than pay the copyright troll’s “toll,” several bloggers refused and Righthaven sued them.

Federal District Judge Philip Pro dismissed Righthaven’s suit for two reasons.  First, because the agreement between Stephens Media and Righthaven assigned only the right to sue potential copyright infringers, Righthaven did not have the exclusive rights needed to possess standing to sue. Second, the bloggers’ reprinting of articles constituted fair use under federal law. Several days after this ruling, Judge Pro ruled that Righthaven had to pay $34,000 in attorneys’ fees. In a separate but related case, a federal judge sanctioned Righthaven $5,000 for failing to disclose its financial ties to Stephens Media.

Apparently not embracing the modified maxim “it’s time to quit while you’re behind,” Righthaven decided to spend more money on legal fees and appealed its loss to the U.S. Court of Appeals for the Ninth Circuit.

In an appropriately terse opinion yesterday, the Ninth Circuit panel unanimously affirmed Judge Pro on the issue of standing. Circuit Judge Clifton initiated his opinion with a reference to an Abraham Lincoln story about a lawyer who tried to “establish that a calf had five legs by calling its leg a tail.” As Lincoln observed, “calling a tail a leg does not make it so.” Similarly, just because Righthaven called itself a copyright owner does not mean it in fact is.

The court essentially went on to restate the very clear legal standards relied upon by District Judge Pro. Regretfully for bloggers and other online information providers, the court vacated the portion of Judge Pro’s ruling that the reprinting activity constituted fair use, since the case could be dismissed on procedural grounds.

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Substantial Patent Licensing with No U.S. Manufacturing Deemed Sufficient to Seek Remedy at US ITC

bethShaw-0580editConvertedProfile-e1360002102239Featured Regular Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

The Federal Circuit reaffirmed that substantial investment in licensing activities—even without manufacturing in the United States—is enough to bring an exclusion action in the U.S. International Trade Commission (ITC), in denying a petition for panel rehearing and rehearing en banc on January 10, 2013. The Federal Circuit denied Nokia Corp.’s petition for rehearing and rehearing en banc of InterDigital Commc’ns, LLC v. Int’l Trade Comm’n (2010-1093) (per curiam). A panel of the Federal Circuit also issued an opinion to address Nokia’s “much more detailed argument . . . on rehearing” regarding Section 337 and InterDigital’s licensing activities. Section 337, the court held, provides protection for industries that were based on the creation and exploitation of intellectual property even if they do not produce the ultimate products that embody that technology.

InterDigital had previously asked the ITC to investigate whether two of its patents, U.S. Patent Nos. 7,190,966 and 7,286,847, were infringed by Nokia. The administrative law judge (ALJ) at the ITC found that Nokia did not infringe the InterDigital patents and the ITC affirmed. On appeal, the Federal Circuit held that the ITC erred in construing certain claim terms and reversed the ITC’s finding of no infringement. The court also dismissed Nokia’s argument that InterDigital’s patent licensing activities did not satisfy the domestic industry requirement of section 337, holding that patent licensing alone may satisfy this requirement, regardless of whether the objects of the licensing activities are actually made in the United States. The court restated that companies can satisfy the domestic industry requirement through substantial domestic investment in licensing activities, and that there is no requirement that the licensed products are actually manufactured in the United States.

To reach its conclusion, the majority (authored by Judge Bryson and joined by Judge Mayer) construed the text of the statute and also examined the legislative history of Section 337. The court noted that proposals were introduced in Congress to expand the coverage of Section 337 so that it would explicitly provide protection for American industries that did not manufacture products but were engaged in engineering, research and development, or licensing of the technology that others used to make products. The statute, the court held, now provides protection for industries that were based on the creation and exploitation of intellectual property even if they did not produce the ultimate products that embodied that technology. Continue reading →

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From the Waning Days of 2012, Five Developments You May Have Missed

dec12Before fully moving forward into 2013, The Legal Pulse offers five late December developments our readers may have missed during the holiday season:

1. Administration’s Regulatory Plan Released.  The federal government waited until late December to release its Spring 2012 Unified Agenda of Regulatory and Deregulatory Actions. This is the list of regulatory plans that the Office of Information and Regulatory Affairs at the Office of Management and Budget requires all federal agencies to submit to it by April of each year. As noted by the House Oversight Committee, the Unified Agenda has traditionally been issued between April and July. We’re in the process of reviewing it, but one item from the EPA’s priorities list jumped off the screen: “Expanding the Conversation on Environmentalism and Working for Environmental Justice.” We’ve consistently raised red flags about environmental justice here at The Legal Pulse, and will keep an even closer eye on that going forward.

2. FTC Issues Report on “Child-Directed” Food Advertising. What a difference a year makes. At the end of 2011, we were still talking about the threat posed to free speech and freedom of choice by the Interagency Working Group’s (IWG)  Nutrition Principles to Guide Industry Self-Regulatory Efforts. As that Legal Pulse post explained, Congress all-but terminated that effort by requiring a cost-benefit analysis. Last March, FTC Chairman Leibowitz told a congressional panel that it was “time to move on” from the IWG “self-regulatory” effort.On December 21, the Commission released what it termed a “follow-up” study on food ads directed at children. FTC’s study credited the food industry for expanding its self-regulatory efforts, but remained critical of the amount of money devoted to advertising foods the FTC deemed less-than-nutritious. The study has one major flaw: it is based on data that is three years old. It’s fair to say that a significant amount of improvement in the nutritional value of foods has occurred in those three years. Continue reading →

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Further Down the Slippery Slope: The EU’s Tobacco Package Property Seizure

EUCross-posted at WLF’s contributor page on Forbes.com

On Wednesday, the European Union’s Health Commission announced revisions to its Tobacco Products Directive. If approved by EU member states and the European Parliament, the Directive would, among other things, seize 75% of the tobacco package for graphic warnings and permit states to seize the entire label through plain packaging.

The Health Commission and public health activists are no doubt busy congratulating themselves and each other. But such policies offer a hollow promise of tobacco use reduction, tread on international laws and treaties, and set the EU on a slippery slope towards further restrictions on consumer information.

Such massive graphic warnings and plain packaging are governments’ “ideas of the moment” for reducing tobacco consumption. A U.S. Food and Drug Administration proposal forces tobacco makers to communicate the government’s disdain for smoking with gory images on 50% of the package. As we’ve noted here previously, two federal circuit courts have issued differing opinions on the constitutionality of this proposal, and the issue is likely headed to the U.S. Supreme Court. Also, at the beginning of this month, Australia’s plain packaging requirement went into effect after the country’s highest court upheld its legality. A just-published WLF Legal Backgrounder details the ruling and views it as merely an opening salvo in a larger legal battle. Continue reading →

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Supreme Court Observations: Takings Ruling a Lump of Coal, Not a Gift, for Landowners

supreme court

Cross-posted by Forbes.com at WLF’s contributor page

Last week, the U.S. Supreme Court ruled unanimously in favor of the property owner in Arkansas Game and Fish Comm’n v. United States, a case that raised issues under the Fifth Amendment’s Takings Clause.  The Court reinstated the owner’s claims, which had been dismissed by the appeals court.  It is difficult to view the Court’s opinion as a victory for property rights, however; it contains disturbing language that does not bode well for future claimants.

The Takings Clause requires governments to provide “just compensation” whenever they “take” private property for a public purpose.  In determining whether government intrusion on property rights constitutes a “taking” of the property, courts generally employ a “balancing” test that considers a wide variety of factors—including the severity of the intrusion, whether the intrusion was intentional, and the owner’s “reasonable investment-backed expectations” regarding the land’s use.  The Supreme Court has also established several per se rules under which certain government actions will always be deemed to constitute compensable takings. Continue reading →

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As “Standards-Essential” Patent Debate Expands, WLF Briefing Offers Some Perspective

PodiumPic1Last month, a Legal Pulse post discussed some important courtroom developments involving disputes over so-called standards-essential patents (“SEPs”). We noted in the post that federal agencies and elected officials were also expressing interest in and concern over SEPs. Since that post there has been a flurry of activity. In just the past week, we have seen:

  • A proposed settlement from the Federal Trade Commission in the context of a merger affecting automobile air conditioning equipment makers where the company being acquired, SPX Services, was a holder of SEPs and had been seeking injunctions against allegedly willing licensees of the patents.
  • Ericsson filing a patent infringement and breach of contract lawsuit against Samsung in the Eastern District of Texas where SEPs and alleged failure to offer a license on RAND terms is involved.
  • The U.S. International Trade Commission announcing it will review a USITC’s judge’s decision that Apple did not infringe Samsung patents. In the announcement, the Commission seeks public comment on several questions related to SEPs.

At a Washington Legal Foundation Media Briefing program yesterday, Standards-Essential Patents: Where Do IP Protections End and Antitrust Concerns Begin?, two academic experts on patents and antitrust, as well as a leading patent pool and standards practitioner, addressed these developments and the larger question of what role government can and should play in SEP controversies.

Speaker Professor Adam Mossoff referenced research on America’s first “patent war”, involving sewing machines, which led to an Arizona Law Review article. Professor Contreras based his presentation on a research paper available here.

Those attending the program in person also received copies of past WLF publications relevant to the topic being discussed.  Links to those papers appear below.