IP Intelligence

IP Intelligence

Insight on Intellectual Property

The Supreme Court Again Rejects Post-Expiration Patent Royalties

Patent147631712Authored by: Samuel McMahon, 2015 Summer Associate

In Kimble v. Marvel Entertainment, LLC, No. 13-720 (U.S. June 22, 2015), the Supreme Court, in a 6-3 decision with Justice Kagan writing for the majority, upheld its 1964 decision in Brulotte v. Thys, 379 U.S. 29, reaffirming that a patent owner cannot charge royalties for use of the patent after the patent term expires.

Stephen Kimble patented a device that allows the user to shoot pressurized foam string from the palm of the hand, like Spider-Man shooting web. He pitched his idea to Marvel, and the company’s representatives apparently liked it but nonetheless declined to engage Kimble in a licensing agreement. Kimble sued for patent infringement when Marvel began manufacturing and selling its own “Web Blaster” toy. Pursuant to a settlement agreement, Marvel purchased the patent for a lump sum and agreed to pay Kimble a 3 percent royalty on future sales. The parties did not negotiate an end date for the royalty payments, but before the patent term expired, Marvel asked for and received from federal district court in Arizona a declaratory judgment that it could avoid the royalty payments upon expiration of the patent. Relying on Brulotte, the district court held that the agreement to pay royalties was unenforceable after expiration of the patent term. The Ninth Circuit affirmed, and Kimble appealed. Continue Reading

BakerHostetler’s Oren Warshavsky, a Law360’s Voices of the Bar for Intellectual Property, comments on “With High Court Mum On Java Copyrights, Is Innovation Safe?”

WARSHAVSKY_Oren_CAM_1_2007On July 1, 2015, Law360 queried the Supreme Court decision not to review Google Inc. v. Oracle America Inc. in their Voices on the Bar column.  Oren Warshavsky, head of BakerHostetler’s national Copyright, Content, and Platforms team and one of Law360’s Voices on the Bar commented:

 “In a vacuum, the Federal Circuit’s holding could well disrupt interoperability. APIs are the specifications permitting programs to communicate and operate together across a single or multiple platforms, and thus are critical to, among other things, local networks, mobile computing, cloud computing and the Internet of Things. APIs are openly used throughout the computer industry; developers write programs for one platform and then use APIs to make the application operable across other platforms. The industry trend has been toward universal applications that are “platform agnostic” — the same application is written for a desktop computer, iPhone, Android phone, etc. If all APIs are protected copyrights, and enforced by the copyright owners, the Federal Circuit’s ruling would require developers to rewrite applications for each platform and interoperability certainly would be chilled.

But the Federal Circuit was interpreting Ninth Circuit law, and many predict the Ninth Circuit — and other circuits — will decline to follow this ruling. Moreover, the decision can be limited because it focuses on the creative choices when these APIs were created; other APIs are created differently and many result from an iterative, purely utilitarian (and therefore not creative) process. Finally, the ruling specifically notes that interoperability will be considered in the fair use analysis in this case — which convinced the solicitor general that the Supreme Court should refrain from taking the case. The Federal Circuit’s decision clearly deals a blow to certainty — for now there is no longer a bright line copyrightability test — but its impact on interoperability and innovation may not be felt as significantly as some fear.”

Read full article on Law360.com (subscription required).

Pre-1972 Recording Rulings – Not as Happy Together or as a Settlement

TurtleshappytogetherThis week, after a string of wins, two members of the classic rock group the Turtles suffered a setback in their lawsuit against satellite radio provider, SiriusXM (Flo & Eddie Inc. v. Sirius XM Radio Inc.).

Background: The dispute has been well explained by others, including here and here. But generally speaking, the dispute concerns the rights of artists and record labels to control how recordings made before 1972 get used. Federal copyright law was extended to protect sound recordings made after February 1972. That means that state laws decided what rights and compensation the recording’s owner is entitled to—if any—for pre-1972 recordings. Continue Reading

In re Tam – Federal Circuit Orders En Banc Review of Trademark Act’s Ban Against Registration of Disparaging Marks

Trademark_Puzzle_99898612The Slants is a Portland-based band composed of musicians of Asian-American descent who characterize their genre as “Chinatown Dance Rock.” The band’s bassist, Simon Tam, filed a trademark application for THE SLANTS for “Entertainment, namely, live performances by a musical band.” The examining attorney refused registration on the basis that the mark THE SLANTS is disparaging to Asian-Americans, pursuant to 15 U.S.C. §1052(a) (“Section 2(a)” of the Trademark Act). Looking both to dictionary definitions and to evidence of the band’s own use of the mark, including the applicant’s contention that the band’s adoption of the name The Slants was “a way to reclaim a racial slur and to assert Asian pride,” the examiner found that “the evidence is overwhelming that applicant chose the mark fully aware of the connection to the racial slur.” The Trademark Trial and Appeal Board affirmed the refusal in April 2013.

On appeal to the U.S. Court of Appeals for the Federal Circuit, Tam contended that the Board erred in finding the mark THE SLANTS disparaging, and also challenged the constitutionality of Section 2(a). Continue Reading

Ninth Circuit Draws Fine Line Around Fine Art Resale Royalties

copyright ThinkstockPhotos-493835891In a partial victory for artists such as Chuck Close and the Sam Francis Foundation—and for other visual artists who sold early works for rent money before establishing their name and value—the Ninth Circuit Court of Appeals last week resurrected part of a California law that enables fine artists to share in the profits from resale of their works.  Whether the state law interferes with federal copyright laws remains to be seen.

The 1976 Resale Royalty Act required California art sellers or their agents to locate artists after selling their work and to pay them 5 percent of the purchase price.  The well-intentioned law ran afoul of the so-called dormant Commerce Clause by purporting to regulate not only sales in California, but also all sales on behalf of California domiciles, even if the sale itself occurred wholly outside of California.  The Commerce Clause, contained in Article I, Section 8, of the U.S. Constitution, permits Congress to regulate interstate commerce, and by implication the dormant Commerce Clause prohibits states from regulating commerce taking place outside of their own boundaries.  See, e.g., Healy v. Beer Instit., 491 U.S. 324 (1989).  The Resale Royalty Act was therefore struck down in its entirety by the Central District of California.  On appeal, however, the Ninth Circuit severed the offending “California domicile” portion, leaving intact the remainder of the law regulating resale taking place in California. Continue Reading

Take Care in Using Consumer Data to Drive Dynamic Pricing of E-Commerce

Data_483120645Co-authored by: Hannah Bloink

Dynamic pricing is the practice of offering different prices to consumers based on various factors designed to maximize sales and profits, which may include the retailer’s perception of the willingness of a particular consumer to pay at a given price point, often in connection with other factors such as a given point in time. Airlines use dynamic pricing based on complex data analyses involving a myriad of factors including time of day and week, fare class and availability. The ride share service Uber’s surge pricing dynamically bases fares on supply and demand at a given moment. Making projections of whether consumers will pay more or less under different circumstances is an evolving art that can be aided by data analytics, including, now that the data is increasingly available, consumer profiling based on historical consumer behavior and even A/B testing – the practice of testing for different reactions by the same subject based on variables. This can be the basis for personalized pricing, also known as first-degree or primary price differentiation, the “holy grail” of which is to develop a methodology for “perfect price discrimination” that maximizes the amount each individual consumer is willing to pay. Perfect price discrimination is only theoretically possible since the seller must know each buyer’s reservation price (the maximum they will pay) and individualize an offer to them at that price, thus not leaving any potential revenues uncaptured. Beyond the difficulty in ascertain that information, the market prevents perfect price discrimination through competition and data enables real time competitive offering. However, since less price conscious consumers may be less inclined to shop the competition and more cost conscious consumers are more inclined to look for lower equivalent offers, retailers have an incentive to try to identify which consumers are which when they are in front of them and offer them personalized pricing based on their price sensitivity. Read More >>

Jury Sees a Clear Line – Pharrell, Thicke Crossed It

Pharrell Williams, famous for singing about how “Happy” he is, might be changing his tune these days. On March 10, a federal jury found him and fellow pop star Robin Thicke liable for copying Marvin Gaye’s popular song “Got to Give it Up,” resulting in one of the biggest music-infringement verdicts ever – $7.3 million.

Pharrell, known for composing an impressive list of pop hits, scored his biggest hit when he and Robin Thicke teamed up to compose and record “Blurred Lines,” which topped the music charts for months in 2013. Thicke repeatedly said that Gaye’s “Got to Give It Up” was an “inspiration” when they were composing the 2013 hit. While “Blurred Lines” enjoyed immense success, Marvin Gaye’s family members, who own the copyright to “Got to Give It Up,” complained that the two songs were a bit too similar. As a result, Pharrell, Thicke, and other “Blurred Lines” rights holders filed a declaratory action in the Central District of California asking the court to rule that their hit did not infringe, as we previously discussed here and here. The Gaye family counterclaimed for infringement.music crowd Continue Reading

Coming Soon…the New .sucks gTLD: How Will It Affect You?

To All Brand Owners: The arrival of a new generic top-level domain (gTLD) will require you to once again evaluate your brand strategies and trademark portfolios, particularly as they relate to the Internet. The Internet Corporation for Assigned Names and Numbers (ICANN) has approved several hundred new gTLDs, but the one that may be of most concern to brand owners is the new .sucks gTLD, which is set to launch this year.

The .sucks gTLD, operated by Vox Populi Registry, Ltd. (Vox Populi), is positioning the new gTLD as a platform for conversation. Indeed, its website declares that the .sucks domain is “designed to help consumers find their voices and allow companies to find the value in criticism.” However, critics of the new domain are concerned that the domain has little or no public interest value and is simply a predatory shakedown scheme aimed at getting businesses to spend a lot of money on defensive registrations.

Whatever your view, the time to make a decision about whether you want to protect your valuable brands from winding up on the left side of the .sucks domain, potentially under someone else’s control, is NOW. Continue Reading

The Innovation Act of 2015: Congress Targets Patent ‘Trolls’ Again

On February 5, 2015, the House Judiciary Chairman, Rep. Bob Goodlatte (R-VA), flanked by a bipartisan group of his peers, reintroduced his “Innovation Act” (H.R. 9). The bill is the second time in as many years that the Republican-controlled House has introduced legislation aimed at curtailing the excesses of patent protection litigation. In mid-2014, the first incarnation of the “Innovation Act” (H.R. 3309) passed the House but died in the Democratic-controlled Senate. This time, however, the Republican majority extends into the Senate.

In his statement, Rep. Goodlatte pitched the bill as “commonsense reform” aimed at “curb[ing] abusive patent litigation.”[1] The Act’s major provisions include significantly heightened pleading and demand letter requirements, an attorney’s fee shift to the non-prevailing party, discovery limits, plaintiff patent ownership transparency, and stays of litigation against end users. These reforms are aimed ostensibly at protecting emerging and innovative market enterprises. Rep. Darrell Issa (R-CA), another of the bill’s supporters, explained that “increasingly, Americans find innovation obstructed, with attempts to enter the marketplace frequently shut down by well-funded patent trolls who exploit loopholes in the patent system.”[2] But if this is really the Act’s intent, something may have gone awry. The companies lining up in support of the Innovation Act include Apple, Google, and Broadcom – not exactly average garage start-ups. Meanwhile, those who should be cheering legislation aimed at making it easier for start-ups to enter the marketplace are urging caution. Continue Reading

USPTO Urged to Revise Interim §101 Guidance to Require Examiners to Present a Proper Prima Facie Case Supported by Factual Evidence

As previously reported, on December 15, 2014, the U.S. Patent and Trademark Office (USPTO) published a document titled “2014 Interim Guidance on Patent Subject Matter Eligibility” (Interim Guidance). This Interim Guidance was published as a notice for comments with the possibility of being revised, depending on public feedback.

On March 16, 2015, two of the largest and most influential IP bar organizations, the Intellectual Property Owners Association (IPO) and the American Intellectual Property Law Association (AIPLA), submitted comment letters.[1] A key argument (among others) made by both organizations was the importance of requiring examiners to present a well-reasoned prima facie case of ineligibility, i.e., one supported by factual evidence. I believe this is an excellent suggestion. If adopted, it could go a long way toward easing applicants’ burdens in dealing with the recent onslaught of rejections under §101. Continue Reading