The High Cost of Faking It

While many consumers may have few qualms about purchasing a knock-off of their favorite designer handbag from a street vendor, it is questionable whether the same consumers would feel as comfortable at the thought of taking counterfeit pharmaceutical drugs, or trusting fake automotive parts in their cars. Indeed, the common perception of counterfeiting as a victimless crime is far from accurate.

The Organisation for Economic Co-operation and Development (OECD) has embarked on a major project to study the effect that the infringement of intellectual property rights has on economies, governments, right-holders and consumers. The project aims to study the economic effects of infringing activities and to address rising concerns over the health, safety and security threats posed by counterfeit products.

Recently-released Executive Summary of the findings of the project's first phase looks at the economic impact of counterfeiting and piracy. The report delves into the market analysis, notes the magnitude and scope of counterfeiting and piracy, assesses the effects of infringing activity, presents a framework for policy assessment, and suggests ways to improve enforcement and raise awareness.

The report suggests that the market for counterfeit and pirated products can be split into primary and secondary submarkets. In the primary market, consumers purchase fake goods believing the articles are genuine, while consumers in the secondary market are looking for what they believe to be bargains and knowingly purchase counterfeits. The degree to which consumers knowingly buy counterfeits varies depending on the nature of the product and the price difference between the genuine article and its imitation.

Most susceptible to counterfeiting and piracy are products where profit margins are high, taking into account the risks of detection, potential penalties, size of the markets that could be exploited and logistical challenges. The scope of products has broadened from luxury watches and designer apparel to include items that directly affect personal safety and health, including food, pharmaceuticals and automotive replacement parts.

Counterfeit and pirated products are produced and consumed in virtually every country in the world, with Asia emerging as the single largest producing region and China as the single largest producing economy. The lack of comprehensive cross-sector data makes it difficult to measure the magnitude of the problem accurately, but an analysis of international trade data based on the landed customs values of infringing goods suggests that up to $200 billion worth of counterfeit products were traded internationally in 2005. This figure is larger than the combined GDPs of about 150 of the world's economies, but still only represents a fraction of the true total. The report notes that the overall economic value of counterfeiting is likely to be several hundred billion dollars greater when domestic markets and internet sales are taken into account.

The effects of counterfeiting and piracy are wide and varied. These activities stifle economic growth, finance criminal networks, pollute the environment, and adversely affect employment opportunities. Countries where counterfeiting and piracy are widespread may experience further tolls, including lower foreign direct investment and lowered ability to export legitimate products where health and safety concerns could be high.

Rights holders experience lower sales volume, losing market share to pirates and counterfeiters. Brand value and goodwill are damaged when consumers in the primary market who believed they were buying a genuine article become dissatisfied with their purchase, not suspecting the item is a fake. Loss of royalties, diminished incentive to develop new products and processes, and expenditures to fight counterfeiting and piracy are some of the other costs borne by brand owners.

Governments have to bear the cost of anti-counterfeiting measures and forego tax revenues, particularly in sectors such as tobacco and alcohol, where excise duties are high and smuggling of counterfeit products is widespread.

Counterfeiting is also bad news for consumers who can be exposed to health and safety risks by substandard and unregulated products. Infringers have little interest in insuring the quality and safety of their products, particularly when a high return for little investment is a priority. Developing nations are particularly at risk due to lower levels of regulation, enforcement, and consumer awareness. In Central and Southern Africa in particular there exists a high prevalence of counterfeit pharmaceuticals, many of which are completely ineffective versions of drugs used to treat serious illnesses such as HIV/AIDS and malaria. Counterfeiting in the food and drink industry also carries potentially fatal consequences for consumers. Fake baby formula was responsible for the death due to malnutrition of over 50 infants in China in 2004. Counterfeit alcohol is a major problem in Russia, with reports of thousands of deaths in 2006 due to toxic poisoning from the consumption of contaminated spirits. Counterfeit automotive parts and electrical components also carry serious health risks for consumers.

Counterfeiting is a global issue that raises economic- and public-policy concerns. Although there is no one solution to the problem, it is clear that cooperation between governments, brand owners, and consumers is key to achieving results. The OECD report points out that one of the main challenges counterfeiters and pirates face is distribution of their products. Consequently, the importance of raising public awareness, both in helping the public to identify and avoid counterfeit goods, and in deterring consumers from deliberately seeking out "bargains" is self-evident. Effective authentication technologies are needed to assist consumers, retailers, and enforcement agents in identifying genuine goods. Brand owners should work on improving supply chain management by closely overseeing the movement of their products and actively encouraging distributors and retailers to be vigilant when acquiring items.

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By Jovi, that's my name!

Rock star Jon Bon Jovi has asked the makers of the energy drink Mijovi to change its name, finding it too similar to his famous moniker. He has also objected to the marketing slogans "itsmijovi" and "itsmilife," interpreting them as "It's My Jovi" and "It's My Life," the latter phrase being identical to the title of his well-known song. But the drink's creator, Marcos Carrington, says the drink is named after his girlfriend, whose name is Jovita, and not the 45-year-old singer. Carrington has agreed to stop using "itsmilife" on future cans, but plans to continue using the name Mijovi. The drink maker's trademark application for MIJOVI was published for opposition purposes on July 3 by the USPTO and will likely proceed to registration—as no oppositions appear to have been filed.
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Everything you wanted to know about Design Rights but were afraid to ask

When devising intellectual property protection strategy for an industrial product design, it is appropriate to explore trade dress protection, design patent protection, and utility patent protection. While it is well established that these forms of protection can peacefully coexist, statements made to secure one form of protection could in fact adversely affect the ability to secure another form of protection.

Trade dress protects the total image of an industrial product design, including features such as size, shape, color or color combinations, texture and graphics. The elements of the trade dress must act in a manner that identifies the source of the product incorporating the design. Once achieved, trade dress will provide protection to the industrial product design in perpetuity. However, the standard for achieving such protection is high. Consumers must view the primary significance of the trade dress as identifying the source of the product, namely the trade dress has achieved secondary meaning. Once a protectible trade dress is established, to prevail on a claim of trade dress infringement, a plaintiff must show that the similarity of the defendant's trade dress to plaintiff's trade dress is likely to cause confusion among consumers.

A design patent protects a novel, non-obvious and ornamental industrial product design. Design patent protection is limited to the non-functional aspects of the design. To be novel, the new design must be viewed by the average observer as different and not a modification of an already-existing design – a much lower standard than the one for achieving secondary meaning for trade dress. In contrast to trade dress protection, which may last in perpetuity, a design patent is subject to a fourteen (14) year term. The test for infringement of a design patent is determined by the potential for deception of an ordinary observer. If in the eye of the ordinary observer giving such attention as a purchaser usually gives, two designs are substantially the same if the resemblance is such to deceive the ordinary observer. The offending design must also appropriate the points of novelty of the patented design that distinguishes it from the prior art.

A utility patent covers the functional features of an article of manufacture. Accordingly, one could be precluded from claiming that a feature of an industrial design is non-functional or ornamental if it is described as having a function in a utility patent.

A carefully crafted protection strategy may enable the owner of the industrial product design to obtain trade dress and design patent protection on the non-functional features of the design and utility patent protection on the functional features of the product.

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Budejovicky Budvar left crying in its beer by Anheuser-Busch

The latest development in the ongoing Budweiser Trademark saga comes from a recent ruling of the European Court of First Instance (CFI). Czech Brewers Budejovicky Budvar ("Budvar") and American company Anheuser-Busch, Inc. have been engaged in a long-running trademark dispute surrounding the use of the mark BUDWEISER. Despite forming a landmark alliance earlier this year, in an agreement which gives Anheuser-Busch the right to import the Czech beer under the name "Czechvar," the two companies are still engaged in over 40 lawsuits around the world and have agreed that their importation agreement cannot be used to support either side in any trademark cases.

Between 1996 and 1998, Anheuser-Busch filed twelve Community trademark applications for BUDWEISER, BUD, and BUDWEISER Device for various products and services, including stationary, clothing, confectionery, education, and entertainment. Budvar opposed these applications, citing its international registrations BUDWEISER (R 238 203) and BUDWEISER Device (R 342 157), and protected appellations of origin BUDWEISER BIER, BUDWEISER BIER–BUDVAR and BUDWEISER BUDVAR registered with World Intellectual Property Organization (WIPO) in 1964 under the Lisbon Agreement.

The Office for Harmonization in the Internal Market (OHIM) accepted Budvar's opposition to Anheuser-Busch's application for BUDWEISER Device, objecting to the registration of the mark for "beer, ale, porter, malted alcoholic and non-alcoholic beverages," and Anheuser-Busch had since withdrawn the application and dropped its appeal.

OHIM rejected Budvar's other oppositions to Anheuser-Busch's applications because they were for the goods other than beer, and the Lisbon Agreement only offers protection to appellations of origin as against identical or similar products.

Budvar appealed to the CFI, relying heavily on International-, EU-, and French national law providing for the protection of appellations of origin: legislation most notable for safeguarding the Champagne industry in France. The French Code Rural offers greater protection to appellations of origin as it not only covers "similar products" but also offers protection against use of an appellation of origin on "any other product or service if that use is likely to misappropriate or weaken the reputation of the appellation of origin" (Article L. 641-2).

The CFI upheld the decision of OHIM, concluding that Budvar had not provided sufficient evidence to show that it enjoyed a reputation in France, and noting that even if such reputation existed, Budvar failed to demonstrate how the reputation of the appellations of origin would be misappropriated or weakened by Anheuser-Busch's trademarks.

Budvar has two months to lodge an appeal before the Court of Justice of the European Communities against the decision of the CFI. Budvar can also sue in France under the French Code Rural, as a lower standard of proof may apply there. As things stand, though, Budvar has prevented Anheuser-Busch from registering BUDWEISER as a Community trademark for beer, and Anheuser-Busch will have to continue to rely on its BUD mark in the countries where Budvar has secured international registrations for BUDWEISER.

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"That looks familiar," says YouTube

After several high-profile copyright disputes, including a lawsuit by Viacom, Inc. and a subpoena from 20th Century Fox for the unauthorized use of copyrighted material, YouTube will begin testing a new "video fingerprinting tool" that will enable the online video website to identify content that has been uploaded without the copyright owner's consent. This new technology, which has been developed by engineers at Google, Inc., will be tested in partnership with Time Warner Inc. and Walt Disney Co. Copyright owners would first be required to submit copies of their works to be cataloged by the program. The technology examines the video by analyzing it frame-by-frame and establishes a pattern and relationship among the frames that is specific to that video. The result is the "digital fingerprint," which can then be used to search for videos with matching content that have been posted on YouTube by other users. If a match is found, the registered copyright owner is advised and can determine whether the posting is unauthorized.

The technology is expected to recognize the copyrighted material even if it has been "disguised" with other material, because the tool is designed to analyze the whole video and to recognize catalogued content. If proven to work, the technology will allow media companies to identify whether their copyrighted works have been uploaded, letting the registered content owners determine whether or not they wish to have the content removed. If the testing is successful, YouTube plans to launch its new "video fingerprinting tool" later this year.

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US Supreme Court Strengthens Non-Obviousness Test for Patentability

In a long-awaited decision in the patent case KSR v. Teleflex, the U.S. Supreme Court refined the standard for determining whether an invention is "obvious" and therefore not patentable.

In a seminal decision Graham v. John Deere, 383 U.S. 1, 17-18, 148 USPQ 459, 467 (1966), the Supreme Court laid the foundation for an obviousness analysis under U.S. patent law by establishing a tripartite test. The three factual inquiries are (A) determining the scope and content of the prior art, (B) ascertaining the differences between the prior art and the claims at issue, and (C) resolving the level of ordinary skill in the pertinent art. In close cases, secondary considerations, such as long-felt but unsolved needs, or unsuccessful attempts by others to solve the problem, may be used in resolving obviousness.

To make the obviousness standard more objective, the U.S. Court of Appeals for the Federal Circuit (CAFC) had promulgated an additional test: the finding of obviousness must be supported by some "teaching, suggestion, or motivation that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed." ("TSM test") This additional test has now been partially overturned by the U.S. Supreme Court.

The Supreme Court in KSR, did not repudiate the CAFC requirement by completely eliminating the TSM test, since such a ruling would have profoundly and retroactively brought into question several tens, if not hundreds, of thousands of patents issued under the previous CAFC standard. The decision holds that the TSM test is not to be applied as a rigid, inflexible requirement. Although the TSM test may still be utilized in a determination to combine two or more references, a clear written teaching or suggestion in a reference is no longer required, and the general knowledge of a person having ordinary skill may be brought to bear on the obviousness issue.

The Supreme Court decision appears to reflect the view in the non-patent community that patents were being too easily granted by the USPTO. It has been said that USPTO grant of patents for only slight or inconsequential improvements was actually stifling the progress of science and useful arts, rather than promoting it, as mandated by the U.S. Constitution.

The USPTO lost no time in promulgating a Memorandum to the Patent Examining Corps, in which the KSR decision was analyzed. The direct guideline that concluded the memorandum was that "in formulating a rejection under 35 U.S.C. §103(a) [non-obviousness provision] based upon a combination of elements, it remains necessary to identify the reason why a person of ordinary skill in the art would have combined the prior art elements in the manner claimed." The reason need not be articulated or even suggested by a specific reference, and the general knowledge in the industry may be relied upon.

The practical effect of the KSR decision is that the USPTO Office Actions should continue to provide "reasons" for combining references. Arguments that a teaching, suggestion or motivation to combine references is lacking no longer can be counted on to provide a sure basis for overturning a rejection. This may make it harder to obtain allowance of pending claims, supporting the recent USPTO policy to apply more stringent requirements before allowing an application. A decrease in the allowance rate from about 70% to 54% was listed as one of the USPTO accomplishments in its fiscal 2006 report. In patent enforcement or litigation, the KSR decision will provide a stronger defense to accused infringers in an attack on patent validity, and is bound to increase patent litigation costs as the validity of a patent will gain prominence as a contested issue in more cases. These considerations, together with those brought by another Supreme Court decision directed to limitations on the Doctrine of Equivalents, make careful patent prosecution all the more important.

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Microsoft Corp. v. AT&T Corp.

The Supreme Court's recent interest in patent matters continued with its decision in Microsoft Corp. v. AT&T Corp. In a 7-1 decision, the Court held that Section 271(f) of the Patent Act does not extend to cover foreign duplication of software from a master copy supplied from the U.S. Because patent law is territorial—there is no such thing as a world-wide patent—a U.S. patent covers infringing acts occurring within the United States, but generally disregards allegedly-infringing acts occurring elsewhere in the world. The single exception to this principle is Section 271(f) of the Patent Act, which calls for infringement liability for the unauthorized supply of "components" of a patented invention for "combination" abroad.

In the present case, AT&T is the assignee of a patent on a computer to digitally encode and compress recorded speech. In the U.S., a computer installed with Microsoft WINDOWS infringes AT&T's patent—WINDOWS incorporates software code that, when installed, enables a computer to process speech in the manner claimed by the patent. For foreign-made computers sold abroad, Microsoft sends each manufacturer a master version of WINDOWS, either on a disk or via encrypted electronic transmission, which the foreign manufacturer uses to generate copies. The copies are then installed on the individual machines.

The Court framed the issue before it as: Does Microsoft's liability for patent infringement extend to computers made in another country when loaded with WINDOWS software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States? To this, the Court answered "No."

The underlying questions the Court ultimately attempted answer in this decision concern: (1) defining and treatment of "abstract software," and (2) issues with the supply of software copies. Regarding abstract software, the Court stated: "Until it is expressed as a computer-readable "copy," e.g., on a CD-ROM, WINDOWS software, indeed any software, detached from an activating medium remains uncombinable…Abstract software code is an idea without physical embodiment, and as such, it does not match Section 271(f)'s categorization: "components" amenable to "combination." Concerning the supply of copies, the Court stated: "[T]he very components supplied from the United States, and not copies thereof, trigger Section 271(f) liability when combined abroad to form the patented invention at issue. Here, as we have repeatedly noted, the copies of WINDOWS actually installed on the foreign computers were not themselves supplied from the United States." Justice Stevens, in the lone dissenting opinion, stated that: "[I]f a disk with software inscribed on it is a "component," I find it difficult to understand why the most important ingredient of that component is not also a component."

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Bona Fide Intent to Use Requires Hard Facts, Not Merely Subjective State of Mind

In a recent non-precedential but citable decision, the Trademark Trial and Appeal Board (TTAB) sustained an opposition by Intel Corporation, against an intent-to-use (ITU) application for the mark IDEAS INSIDE. In Intel Corp. v. Emeny, Opposition No. 91123312, Applicant, Steven Emeny, filed an ITU application covering a broad listing of goods and services, including computer-related goods, along with more than two hundred items of apparel. Intel's initial opposition included claims of likelihood of confusion and dilution of Intel's INTEL INSIDE mark, but was subsequently limited to the assertion that applicant lacked a bona fide intent to use the mark in commerce at the time the application was filed.

When an applicant lacks a bona fide intent to use the mark in commerce at the time of filing an ITU-based application, the application is invalid. Therefore, such lack of intent is an appropriate ground for an opposition or cancellation proceeding. The TTAB opined that an applicant's intent must be shown by "objective" evidence in the form of "real life facts measured by the actions of the applicant," and not merely by the applicant's arguments about his subjective state of mind. Such objective evidence, which was lacking in this case, can include documentation showing plans to use the mark on the goods or services claimed, marketing plans, business plans, or licensing programs. Although it is difficult for a Trademark Examining Attorney to determine bona fide intent in an ex parte context, this case exemplifies that a trademark applicant should be prepared to objectively demonstrate its good faith, if tested in an inter partes opposition or cancellation proceeding.

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AstraZenica's Process Patent Claims for PRILOSEC® Invalidated on "Inherent Anticipation" Ground

Omeprazole, the generic name for the popular anti-heartburn drug PRILOSEC®, operates in a unique manner by transforming into its active ingredients in the acid-producing cells of the stomach lining and then inhibiting gastric acid production. Because omeprazole degrades in acidic and neutral environments, it must be protected while traveling to the acid-producing cells in the stomach by an enteric layer. AstraZenica's U.S. Patent No. 6,013,281 (the "'281 patent") claims a method for making an omeprazole formulation composed of a core containing the active, acid-inhibiting ingredient, a protective, enteric coating surrounding the core, and a water-soluble separating layer between the core and protective layer. Specifically, the patent recites a process for creating the separating layer by causing an in situ reaction involving the enteric-coating material and the core, producing an omeprazole formulation having three distinct layers.

In 2001, AstraZeneca filed suit for infringement of the '281 patent claims against several pharmaceutical companies seeking permission from the Food and Drug Administration to market generic versions of PRILOSEC®. The district court found that, while the '281 patent claims were infringed, the claims were invalid in view of a prior Korean patent application that recited or anticipated all of AstraZenica's claim limitations, either explicitly or inherently. In a 2-1 decision (Judge Rader filing the majority opinion with Judge Bryson concurring), the Court of Appeals for the Federal Circuit affirmed the district court decision holding that the in situ separation layer was formed when practicing the invention disclosed in the prior art. Therefore it was the natural result of practicing the invention and was inherent to the disclosure even though it was not explicitly disclosed in the Korean patent application.

Judge Rader's majority opinion and Judge Newman's concurring-in-part, dissenting-in-part opinion do differ in what is to be considered "inherent" in a disclosure and in how to evaluate and weigh the proof required to support such a finding. In the present case, questions arose as to whether following the process disclosed in the Korean patent application resulted in the formation of an in situ layer under all conditions or only under limited conditions. While this decision appears to have settled the issues present in this case, it certainly leaves room for further discussion of "inherent anticipation."

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SWEEPSTAKES AND CONTESTSa bonanza of brand awareness or a potential minefield for the unwary

Sweepstakes and contests are two common promotional games that can significantly increase brand awareness and can quickly create a "buzz" around a new product. However, there is a vast array of laws and regulations that pose numerous pitfalls to the unwary game promoter or sponsor. Putting on a sweepstakes or contest involves much more than simply announcing the promotion, collecting entries, and giving away prizes. All sweepstakes and contests will be subject to both federal and state laws which can vary widely in their complexity and the affirmative steps required of the promoter or sponsor prior to conducting the game. For a nationwide game that means compliance with federal laws and the laws of all 50 states.

The most important requirement that promoters and sponsors must keep in mind is that the game cannot be considered an illegal lottery. That is the game must not require "consideration" to play, hence the common buzz words "No purchase necessary." The definition of "consideration" varies by state and may include additional prohibitions on what a potential entrant may or may not be required to do or provide to participate in the game. Other potential pitfalls that game promoters and sponsors must be aware of include: (1) registration and bonding requirements (which may require up to 30 days advance registration of a game); (2) satisfying the "alternative means of entry" requirement; (3) requirements for running an "online" game; (4) the amount and detail of disclosure required in "rules" of the game; (5) eligibility of entrants; (6) advertising of sweepstakes; and (7) fulfillment and post-fulfillment issues, including posting a list or lists of winners or sending the winners list to the required state authority and obtaining the proper releases from the winners.

A successful sweepstake or contest will provide invaluable brand awareness, goodwill, and excitement. A promotional game that does not comply will all federal and state laws, however, can lead to civil liability, civil fines, and criminal penalties.

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The Muddle in Montenegro

Although almost a year has passed since Montenegro declared its independence from Serbia and became the 192nd member state of the United Nations, Montenegro IP Office (MIPO) has yet to be established and is not expected to open until September 2007 at the earliest. With no Trademark Act or similar legislation currently in place, the mechanics of protecting one's IP rights in Montenegro are far from certain. The transitional provisions were supposed to provide that the trademarks filed or registered in Serbia and Montenegro prior to Montenegro's independence (June 3, 2006) would be revalidated in Montenegro by means of a simple deposit procedure. Since MIPO has yet to become functional, however, the transitional rules have not been finalized.

WIPO has added Montenegro (ME) designation to its Madrid system in December 2006.

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Digital Radio on the Ropes

The Copyright Royalty Board (CRB) has announced its decision on Internet radio royalty rates, rejecting all of the arguments made by webcasters and adopting the "per performance" rate proposal put forth by SoundExchange (a group created by the RIAA to handle collection of royalties due to performers) instead. The rates will be enforced retroactively from the beginning of 2006, effectively bankrupting many small independent webcasters. CRB defines "performance" as a streaming of one song to one listener, so an Internet radio station with an average audience of 500 listeners would have to pay a royalty on each of the 500 "performances" for every song it plays. Under prior licensing scheme, the amount of royalty paid to a song's performers was based on a percentage of revenue; the newly-announced rates involve a predetermined per-song, per-listener fee that will increase annually at an average rate of 25% for the next four years.
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Traditional Stations Stiff George and Ringo

One aspect that emerged from the Copyright Royalty Board's decision on Internet royalty rates is the difference in treatment of traditional and digital radio stations. Traditional radio stations only pay royalties to composers of songs by purchasing blanket licenses from ASCAP and BMI. Digital radio stations pay these royalties as well, but must now also pay the performance royalty to SoundExchange that terrestrial stations do not pay. Thus, if a traditional radio station plays "Yellow Submarine," only John Lennon and Paul McCartney—the composers—are compensated; whereas if that same song is played via a webcast, George Harrison, Ringo Starr and Brian Jones would also be paid as performers (under this arrangement Lennon and McCartney would each receive a composer and a performer royalty.) The reasoning for the difference in treatment is two-fold. One is the belief held by performers that airtime translates into sales. Two stems from the Digital Performance Right in Sound Recordings Act of 1995 (DPRA), which removed the exemption from digital broadcasting under the guise that digital radio broadcasts were a perfect digital copy (with no degradation) of the original sound recording. (Even though in practice this is not true because all digital streams use "codecs" to compress the digital audio to lower bitrates. This process degrades the audio, and even though the change may not be perceptible to the ear, the result is certainly not a perfect digital copy of the original.)
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USPTO Proposes Changes for Reconsideration of Final Office Actions

The USPTO has recently proposed a rule change that would reduce the time frame for responding to a Final Office Action in trademark cases. In current practice, a request for reconsideration of an examining attorney's final refusal must be filed within six months of the mailing date of the final action. The proposed change to 37 CFR 2.64 would require that the request for reconsideration be filed within three months of the mailing of the final action. In addition, the request would need to be filed through the Trademark Electronic Application System ("TEAS"). The purpose of this amendment is to facilitate the likely disposition of an applicant's request for reconsideration prior to the six-month deadline for filing an appeal to the Trademark Trial and Appeal Board ("TTAB") or petition to the Director on the same final action. The intent is to obviate the need for some appeals or petitions, and to reduce the need for remands and transfers of applications on appeal. The requirement for using TEAS would expedite the examining attorney's notice of and access to the request. The request for reconsideration, however, would not extend the time for filing an appeal or petitioning the Director on that action. Applicants would also still have the opportunity to submit amendments for the full six-month period from the date of the final action. The USPTO expects that this rule change would relieve some of the burden on the TTAB, promote prompt and more efficient handling of the case, decrease applicant's costs, and reduce the pendancy of the case. Comments to the proposed rule change are being accepted by the Commissioner for Trademarks through April 16, 2007.
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USPTO Issues First Patent under New Accelerated Examination Procedure

The USPTO, to further combat the impression that it is slow in granting patents, has instituted an accelerated examination program (http://www.uspto.gov/web/patents/accelerated/) available to applicants who desire to have their applications examined within 12 months of their filing date. Generally, a Petition to Make Special has been available to accelerate examination in certain circumstances, for example, for an inventor who is over 65 or where the claims of a patent application are considered to be infringed. The new program was instituted in fall 2006. Grant of a Petition to Make Special under the Accelerated Examination Procedure makes USPTO treatment of such applications a priority. The first such patent, US Patent No. 7,188,939, issued to Brother Kogyo Kabushiki Kaisha of Nagoya, Japan, was filed on September 29, 2006 and issued in less than six-months on March 13, 2007. The patent claims improved ink cartridges.

The new procedure differs significantly from the previous Petition to Make Special. Several onerous requirements must be met for filing a Petition under the new procedure. Also, significant rights, available in normal examination, are waived and time deadlines are accelerated. Among the application requirements are electronic filing and prosecution, limitation of the number of claims to 3 independent and 20 total, limitation of claims to a single invention or acknowledgement that a restriction requirement response must include an election without traverse, agreement to an examiner interview, which may be conducted before examination starts, conducting a pre-examination search using both classification and word criteria, and filing of an accelerated examination support document that not only is complete, but also directs the examiner's attention to each disclosure in a cited reference where a claim limitation can be correlated, and a detailed explanation of how the claims are patentable over the prior art, among others. The intent of the procedure requirements is to be "analogous to the analysis an examiner uses when locating a relevant prior art reference" and determining its relevance. In effect, the procedure is calculated to certify that the Examiner's job has already been done and the only remaining step is approval and allowance.

Several drawbacks are immediately apparent to this new procedure. Granting special status to a number of recently filed applications will necessarily delay the examination of other pending applications. The recent experience of the Mexican Industrial Property Office (IMPI) apparently was not taken into account. By law, IMPI must examine new applications within a certain time period, but in complying with this section of the law, older pending applications have languished. Also, the procedures require meeting extensive mandatory steps, and may be subject to inadvertent (or not) discrepancies by the applicant or practitioner. The new procedures necessarily rely on the applicants' good will efforts to aid the examination process. Such reliance may lead to extra complications in later enforcement action by the patent owner, and leave an opening for an accused infringer to raise inadequacy of the search and inequitable conduct charges as possible defenses. Litigators will be pleased.

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Dot Asia Land Rush Expected

In October of 2006, ICANN announced the launch of a new regional ccTLD, .asia, intended to service entities and individuals with a presence in the 73 countries defined as being part of the Asia/Australia/Pacific region and expected to be very attractive to those doing business in the region. Registrations of the .asia domain name will most likely be rolled out on a "Sunrise" basis, somewhat similar to the procedure employed for the .eu domain. A draft of the rules has been released, with the final version expected sometime in March of 2007. The first sunrise period will be reserved for government entities, and the second will give trademark owners priority to register domains using their trademarks. Unlike the .eu registration process that had no "cut-off" date for recent registrations, leading to a flurry of applicants seeking to register their trademarks before sunrise began in order to be eligible for the first wave, the .asia procedure is expected to first allow trademark owners with "established marks"--those filed on or before March 16, 2004--to submit applications, followed by a period in which owners of a registered mark applied on or before December 6, 2006 will be given the opportunity. Rather than a "first come, first served" policy, conflicting successful applications for the same domain will be auctioned to the highest bidder, as it is thought that those applicants willing to pay a higher price will be more likely to actually use the domain.
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IP Australia Pitches In to Help USPTO

In its continuing effort to reduce the growing backlog of pending U.S. patent applications, the U.S. Patent and Trademark Office (USPTO) has extended its pilot project with IP Australia, whereby IP Australia will continue to provide search and examination services on international patent applications filed with the USPTO under provisions of the Patent Cooperation Treaty (PCT). In the next year of the project, starting March 12, 2007, IP Australia will process up to 1,200 PCT applications, covering a range of technologies. The USPTO receives about 50,000 international PCT applications annually.

The USPTO will review the work of IP Australia to ensure that it meets USPTO standards for quality and accuracy. IP Australia's Director General Ian Heath explained some of the benefits IP Australia will receive from the project, including moving closer to the vision of being an office of choice and for enhancing the international reputation of IP Australia.

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Digital Fingerprints on the iTunes

Gracenote digital fingerprint technology has exposed what appears to be a major case of musical plagiarism when it identified a recording of Liszt's 12 "Transcendental Études" attributed to late pianist Joyce Hatto as the work of a different artist. Further investigation confirmed the recordings were identical, and when other Hatto recordings came under scrutiny, many more were found to have been originally recorded by other artists. Some tracks had been tempered with, possibly to disguise their origin. In one instance the tempo was reduced by 15.112% to alter the tone. William Barrington-Coupe who runs Concert Artist label responsible for publishing the infringing works has initially denied any wrongdoing, saying the sound waves prove nothing. Sound engineers disagree, noting that even similar performances by the same artist hold detectable differences--variables such as the timber of the room, the type and placement of microphones and the noise inherent in the recording system make each recording unique. It remains to be seen whether major labels whose copyrights were violated will choose to pursue the matter in court.
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CAFC Holds That Foreign Company Only Needs "Use" in U.S. for 2(d) Opposition

The Court of Appeals for the Federal Circuit (CAFC) has reversed the Trademark Trial and Appeal Board (TTAB) ruling in First Niagara Ins. Brokers, Inc. v. First Niagara Financial Group, Inc. First Niagara Insurance Brokers, Inc. (FN-Canada) had sought to oppose registration of First Niagara Financial Group, Inc.'s (FN-US) intent-to-use trademark applications on the claim of priority under Section 2(d) of the Trademark Act, which requires only prior "use" in the U.S. FN-US had argued that FN-Canada, which has no physical presence or registered trademarks in the United States, did not establish the priority necessary to prevail on a likelihood-of-confusion claim because it had not used its marks "in commerce" in the U.S. In overturning the TTAB's agreement with FN-US, the CAFC ruled that the proper standard of Section 2(d) is that the mark or trade name must have been previously "used in the United States by another." The Court noted that the language of prior use "in commerce" was absent from the statute. It found that the privilege of an opposer claiming priority under Section 2(d) attaches to all opposers, regardless of whether they are foreign or domestic. The TTAB's decision was reversed and remanded for further proceedings, based on FN-Canada's ample use of its marks in the United States to satisfy the use requirements of Section 2(d). The implications of this case may be broad and far-reaching, if it is held that a foreign company has standing to bring a 2(d) opposition based on its "use" in the U.S. merely through its activities on the Internet.
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Medimmune v. Genentech

Until recently, patent licensees have been faced with Hobson's choice when they believed that the licensed patent was invalid or unenforceable or was not infringed by their product. On the one hand, the licensee could terminate or breach the license (creating a "case or controversy" required for federal jurisdiction and satisfying the "actual controversy" requirement of the federal Declaratory Judgment Act) and seek a court declaration regarding the status of the patent. This approach, however, poses the risk of significant monetary exposure-treble damages and licensor's attorney fees-and a potential injunction if the licensor prevails. On the other hand, the licensee could continue to abide by the terms of the license agreement; without a justifiable case or controversy, the courthouse door was closed to the licensee.

In Medimmune, Inc. v. Genentech, Inc., the Supreme Court addressed this dilemma, concluding that a licensee need not "bet the farm" by breaching the agreement in order to challenge the underlying patent. In a footnote, the Court explained how the constitutional case or controversy requirement is met by stating that a licensee who pays royalties either in fear of an injunction or for fear of treble damages is being coerced in a way that creates case or controversy-a clear departure from the existing law. The decision is worded broadly enough to cover all forms of intellectual property, not just patents. Case makes mention of but does not address contractual provisions that could be used to block claims by licensees in good standing.

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