Discovery Conferences Now Required by the TTAB

The Trademark Trial and Appeal Board, or TTAB for short, is the quasi-judicial branch at the U.S. Trademark Office that oversees, amongst other matters, all trademark opposition-, trademark cancellation-, and concurrent use proceedings. Recently, the TTAB has adopted amendments to its rules of practice that mirror the Federal Rules of Civil Procedure, particularly with respect to discovery issues. The changes come into effect on November 1, 2007.

Of significance, the TTAB rules will now require that the plaintiff and defendant in a TTAB proceeding partake in a discovery conference to map out a discovery plan, including the guidelines for taking discovery and timing of discovery activities for the proceeding, and engage in the exchange of mandatory initial disclosures, including an initial production of relevant documents and things, and identification of potential witnesses. These new provisions correlate directly to the Federal Rules. In adopting these changes, the TTAB reasoned that the earlier the parties sit down to discuss the dispute and the earlier they begin to exchange discovery, the earlier the parties will discuss settlement.

The new rules also provide that the TTAB's standard protective order is applicable for all cases before the TTAB. Accordingly, in the absence of a mutual agreement upon protective order, the standard protective order applies. This provision became effective on August 31, 2007.

Another amendment that addressed a subject of much commentary involves the former requirement that a trademark application or registration owner provide a certified copy of the application or registration showing current title and ownership. The USPTO's website makes all of this information available electronically, which begged the question, why make litigants provide a certified copy when the TTAB could take judicial notice of the information provided on the USPTO's website. The amended rule establishes that ownership and title information obtained from the USPTO's website may be submitted in lieu of a certified copy of an application or registration. This provision also came into effect on August 31, 2007.

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Design Patents Not Just Ornamental

In a recent decision, the International Trade Commission (ITC) ruled that the owner of a design patent could rely on it through Customs to block the importation of infringing products into the United States. In In re Certain Automotive Parts, Investigation No. 337-TA-557, 2007 WL 2021234 (ITS 2007), the ITC found that certain spare parts for Ford trucks being manufactured overseas without authorization infringed certain design patents owned by Ford. Pending the outcome of the appeal to the Court of Appeals for the Federal Circuit (CAFC), Ford vs. ITC, Docket No. 07-1357, Ford can take the ITC determination to the U.S. Customs Service, which must hold for inspection at the port of entry any spare parts that are covered by Ford's design patents. If the parts are considered to be infringing, they must be barred from entry into the U.S.

Design patents protect the ornamental appearance of a novel and non-obvious design. There is a non-statutory exception, the repair doctrine, which permits the lawful purchaser of a product to effect a repair. The accused importers in this case argued that the parts fell within this exception because they were to be used for repair purposes. The ITC disagreed, finding that the accused were importing complete replacement parts, which were themselves the subject matter of Ford's design patents.

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National Arbitration Forum to Permit Combining of Respondent Aliases

In a letter to ICANN, the National Arbitration Forum—one of two main forums for UDRP proceedings—has proposed updated Supplemental Rules for the UDRP, with an intended effective date of November 1, 2007. The proposed change with likely the greatest impact is one relating to allegations of Respondent aliases. In instances where a Complainant believes that a number of domain names are registered to a single entity or person, but under multiple aliases, the Complainant will be allowed to make arguments and present evidence in the UDRP Complaint, linking the alleged aliases. The determination of whether presented evidence is sufficient to link the alleged aliases will be made by the Panel, rather than by the service provider. Large-scale domain name registrants in the "pay-per-click" business often use multiple aliases to avoid being detected and perceived as "cybersquatters." This proposed rule change is also relevant in the context of domain names whose WHOIS information is shielded by the same privacy protection service.

Although there will be an increase in filing fees dependent on the number of domain names involved in the dispute, the proposed change will likely yield monetary savings for Complainants by allowing them to proceed under a single filing instead of having to pursue each of Respondent's multiple aliases separately. It should be noted, however, that if the Panel determines that Complainant's evidence is insufficient to link the alleged aliases, the domain names held by the unrelated registrants will not be subject to further consideration and no portion of the filing fee will be refunded.

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UK–Good-bye to Citations/Hello Oppositions

On October 1, 2007, the United Kingdom will reform its practices in the area of relative examination so that they are more closely aligned with the Community Trademark examination procedure. In particular, while Examiners will continue to cross-search new applications against earlier United Kingdom and Community trademarks, the results will be provided to the applicant on an informational basis and will not of themselves be a basis for refusing registration. It will fall to the owner of a prior right to lodge an Opposition if it wishes to block a later mark.

The change is being made in large part because it was considered unduly burdensome on applicants for United Kingdom marks to have their marks refused on the basis of earlier national and Community rights which themselves often overlapped due to the absence of relative examination at the Community level. This resulted in applicants for United Kingdom rights being at a substantially higher risk of encountering an objection than an applicant for a broader Community right.

Whether this change will devalue the perceived value of a United Kingdom national registration remains to be seen. Under the new practice, the owners of prior United Kingdom national rights will be notified of later-filed applications that may conflict with those rights while owners of Community and International rights extended to the United Kingdom can also opt-in for a fee so that they are notified of possibly conflicting United Kingdom national applications.

The change will mean that there will be a greater burden on the owners of United Kingdom national rights to police their marks and affirmatively assert these rights against later applicants by means of Oppositions and other enforcement measures.

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No Area Geographically Obscure to Wine Fans

OHIM's Cancellation Division has cancelled Community Trademark 2020832 TUPUNGATO that covered "alcoholic beverages (excluding beer)," on the basis that it is or may become descriptive of the geographical origin of the goods and on grounds of bad faith.

The evidence indicated that Tupungato was longstanding, although small wine growing region in Argentina, accounting for less than 1% of the country's wine output. Article 7(1)(c) CTMR provides for refusal of protection to marks that "consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service." The Board noted that the provision is not limited to marks that are currently associated with the category of goods in question, but also extends to marks that are capable of designating the geographical origin of the goods in the minds of the relevant consumers. Noting that a part of the wine-purchasing public is composed of "wine fans," who have a superior knowledge in the field, and that in wine shops, the customer is often assisted by an expert vendor, the Board found that it was "reasonable to assume that TUPUNGATO is a geographical name which is liable to be used in future by wine traders and producers as an indication of the geographical origin of their goods and is, in the mind of the targeted public, capable of designating the geographical origin of the category of goods in question."

The Board also found that the registrant has acted in bad faith because "even though the knowledge of the name TUPUNGATO as a wine producing area on behalf of the proprietor (had) not been proved by positive evidence…it seems extremely unlikely that the proprietor could have ignored the existing link between the name TUPUNGATO and the wine producing area having the same name and that it could consequently ignore that the sought monopoly over the name TUPUNGATO for alcoholic beverages, which include wines, would have been prejudicial to the interests of competitors producing and/or dealing with the import-export of wines from that area."

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The United States May Have Designs on Fashion

Much to the chagrin of most fashion designers, the United States is lacking a statutory scheme for protecting apparel designs, comparable to protection offered in Europe. Copyright law only offers protection for fabric patterns, trademark law protects logos on the apparel item, and prosecution time for a design patent ordinarily exceeds the lucrative first few months of a fashion design's lifespan. With advent of the Internet, photographs of new designs from fashion shows immediately make their way to overseas manufacturers who can produce a full line of knock-offs before the originals hit the market.

A bill is now circulating in the Senate that would amend U.S. copyright law to specifically provide protection to the overall appearance and ornamentation of apparel articles. Under this bill, entitled the Design Piracy Prohibition Act, "apparel" would be defined broadly to include: an article of men's, women's, or children's clothing, including undergarments, outer-wear, gloves, footwear, and headgear; handbags, purses and tote bags; belts; and eyeglass frames. Registrations on apparel designs would have a three-year registration term and infringement of the registration would be assessed under the same standard existing under current copyright laws, namely substantial similarity in overall appearance. Statutory damages awards for infringement of a registered original design would increase to the greater of an amount not exceeding $250,000 or $5 per infringing article.

The proposed legislation requires that the application for registration of the design is made no later than three months after the date on which the design was first made public.

As with most new bills, this one will likely go through many iterations and drafts as it proceeds through Congress on its way to becoming law.

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US Patent Office Drastically Revises Rules of Practice to Reduce Number of Claims and Continuations for One Invention

New rules of Practice before the US Patent Office, promulgated by the USPTO on August 22, 2007, will reduce the number of claims available to an applicant in any one patent application and eliminate the unfettered ability to file an unlimited number of continuations and requests for continued prosecution. New rules would allow the USPTO to object on formal grounds and refuse to examine any applications that have over 5 independent or 25 total claims. The USPTO was required to include provisions to enable examination of applications with a larger number of claims, so that the rule does not limit rights that are not so limited by the US patent laws, but the requirements that must be met in order to make use of these provisions are so onerous as to make them practically unavailable to all but the wealthiest of applicants. Two continuation applications, permitting an additional 25 claims each, will also be available, for a total of 75 claims (15 independent) for each invention. The original parent application and each of the continuation applications will be entitled to only one request for Continued Examination. The rule changes are set to become effective on November 1, 2007, but the continuation and claim provisions become effective for all applications filed after August 21, 2007. These rules have already been challenged in a federal district court—the plaintiffs are asserting that the rules are beyond the scope of USPTO regulatory authority and are contrary to the patent laws passed by the Congress.
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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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