OHIM Deflation

The Office of Harmonization for the Internal Market (OHIM) has announced that beginning May 1, 2009, official fee for obtaining a Community trademark registration will be reduced to € 900. This is a 40% reduction from the current € 1600 total fee made up of € 750 filing fee and € 850 registration fee for a mark in three classes. Effective May 1, 2009, applicants would pay a single € 900 official fee at the time of filing. Pending CTM applications for which OHIM has not issued the request for payment of the registration fee by May 1, 2009, will be exempt from current registration fee.
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The Importance of Registration—a Copyright Saga in Three Parts

On March 2, 2009, the Supreme Court granted a writ of certiorari in Reed Elsevier Inc., et al. v. Muchnick, et al., No. 08-103, to answer whether 17 USC §411(a)—the requirement of registering a copyright before suing for its infringement—restricts subject matter jurisdiction of the Federal Courts over copyright infringement claims. The class-action case is an offspring of the decision in New York Times Co. v. Tasini, which held that the first publisher of a literary work written by a freelance writer does not, absent an explicit agreement, obtain rights to license the work for use in electronic databases, such as LexisNexis. The Court's answer could have a profound effect on the actual impact of the Tasini ruling.

In Tasini, six authors wrote articles for the New York Times, Newsday, and Time, which had engaged the authors as independent contractors. The publishers thereafter licensed the copy to LexisNexis and two other companies who made the articles available on CD-ROM without obtaining separate permissions from the authors. When the authors sued the print publishers for copyright infringement, publishers argued that no permission was needed because of §201(c) of the Copyright Act, which allows the owner of copyright in a collective work to reproduce and distribute authors' contributions as part of that particular collective work, any revision of that collective work, and any later collective work in the same series. The District Court sided with the print publishers, finding the articles' later inclusion in the electronic databases to be a reproduction "as part of a revision of that collective work" because the databases preserved the print publishers' "selection of articles" by copying all of the articles originally assembled in the periodical's daily or weekly issues. When the case reached the Supreme Court in 2001, however, it was ultimately decided in favor of the freelance authors. The Supreme Court concluded that §201(c) did not assist the print publishers because "the Databases reproduce[d] and distribute[d] [the] articles standing alone" and not "as part of that particular collective work" to which the author contributed; "as part of... any revision" thereof; or "as part of... any later collective work in the same series."

After Tasini was decided, several of the affected authors along with the National Writers Union and American Society of Journalists and Authors filed a consolidated class action suit against a group of forty publishers, including Reed Elsevier Inc. (owner of LexisNexis), The Gale Group Inc., and West Publishing Corporation to recover compensation for the freelance authors. After four years of negotiation the parties reached an industry-wide settlement, and sought its approval in the federal court of the Southern District of New York, filed under In re Literary Works in Electronic Databases Copyright Litigation, MDL No. 1379. The complex settlement divides the claimants into 3 groups: A) those who had obtained copyright registration for their works prior to the alleged infringement; B) those who had obtained copyright registration for their works before December 31, 2002, but after the alleged infringement; and C) those whose works were not registered with the Copyright Office. The settlement was later approved by the District Court.

Present case was filed by Irvin Muchnik, an official of the National Writers Union and affected author, who organized a slate of similarly-situated objectors and appealed the District Court's approval of the settlement on the grounds that it provides grossly-inadequate compensation and is unfair to Class C authors who comprise over 99% of the claimants. The objectors took issue with the schedule for paying out the $18 million (max) settlement.

In the settlement, Class A members were eligible for statutory damages because their works had been registered with the Copyright Office at the time of the infringement. Compensation for members of Classes B and C, on the other hand, was to be dependent on the original sale price of the work. These claimants would receive either a flat fee or a percentage of the original sale price, whichever was greater; the flat fee and percentage set for Class C was much lower than that for Class B. In addition, under the settlement, should the total amount of the claims exceed $11.8 million (the cap amount permitted for awards after deducting attorneys' fees and administrative costs), the C Class award would be reduced first, all the way to zero if necessary, before either Class B or Class A awards are affected. If this were to happen, the objectors argued, it would be equivalent to Class C members granting the publishers an irrevocable, worldwide and continuing license to reproduce, license, and sell their works without any compensation. The objectors argued that allowing the named plaintiffs to grant such a right on behalf of all claimants included in Class C was a denial of due process.

The proponents of the settlement defended that the settlement was fair because members of Class C had no copyright registrations for their works, and thus, pursuant to §411(a), no standing to initiate an infringement action. Section §411(a) reads in relevant part: "...no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title..."

The Court of Appeals for the 2nd Circuit overturned the settlement based largely on this very provision, ruling that the lower court lacked jurisdiction over Class C claims. The Court concluded that §411(a) is a jurisdictional requirement limiting district court's subject matter jurisdiction to claims arising out of registered copyrights only, and that the phrase "the copyright claim" in §411(a) should be interpreted to mean all of the claims in the Class, and not just the claims of the named Plaintiffs.

The Court of Appeals further found that the District Court lacked supplemental jurisdiction pursuant to 28 U.S.C. §1367(a), which reads: "Except as... expressly provided otherwise by federal statute, in any civil case of which the district courts have original jurisdiction, [they] shall also have supplemental jurisdiction over all other claims that are so related... that they form part of the same case or controversy." Here, the Court focused on the phrase "except as... expressly provided otherwise by federal statute", reasoning that because §411(a) of the Copyright Act requires copyright registration for initiating an infringement suit, §1367(a) cannot confer supplemental jurisdiction over the claims involving unregistered copyrights simply because they are asserted together with other, jurisdictionally-proper claims. In other words, the Court found §411(a) to expressly provide otherwise. Thus, the Court of Appeals held, the District Court lacked jurisdiction to certify Class C and approve the settlement.

Of note is a dissent by Judge John Walker who argued that "Congress passed §411(a) to facilitate enforcement of copyrights", and that "... compliance with §411(a) is a mandatory prerequisite to the accrual of a cause of action for damages, but not a prerequisite to the possession of constitutional standing."

In response to the 2nd Circuit decision, a group of publishing companies asked the Supreme Court to review the case, arguing that the decision of the Court of Appeals conflicts with the high court's ruling in Tasini and leaves a vast majority of the affected authors without redress. The publishers also argue that §411(a) is not a source for jurisdictional limitation, noting that copyright registration is not a precondition for copyright protection.

The Supreme Court, on March 2, 2009, granted the writ of certiorari on the following question only, "Does 17 U.S.C. §411(a) restrict the subject matter jurisdiction of the federal courts over copyright infringement actions?" The case is expected to be argued in the fall of 2009, and will present the unusual situation where both sides of the original dispute are arguing to the same end—reinstatement of the settlement. The publishers who petitioned for a writ of certiorari would like to see the settlement reinstated so as to avoid the risk of more claimants coming forward, and having to continue to search and remove millions of articles from their databases. For the objectors, a reinstatement would not only mean that Class C claimants will have a chance to collect, but also that they would be able to appeal the approval of the settlement on its merits and argue for greater compensation.

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See a Trademark. Hear a Trademark... Smell a Trademark? The Singapore Treaty

In this age of competitive advertising, companies continually experiment with new media to impress product recognition on the human mind. In the past, marketers have appealed to our eyes with swoops, golden arches, and fonts. Today, the new frontier of advertising and product recognition will appeal to other senses—sound, taste, and even smell—to trigger consumer recognition, consider the Southwest Airlines "Ding," a grass-scented tennis ball, or an artificial strawberry flavor prevalently used by one pharmaceutical company. As these innovations grow, will formal protection for these source indicators, these non-traditional trademarks, follow suit? Currently, formal protection for non-traditional trademarks is sporadic and random, though the overall attention factor for this area is not. On March 16th, 2009, the World Intellectual Property Organization (WIPO) announced the implementation of the Singapore Treaty, the first International Treaty to specifically address the identity and registrability of non-traditional marks, including, but not limited to sound-, hologram-, motion-, color-, and taste marks.

The Singapore Treaty was adopted in March 2006 by a diplomatic conference of 147 WIPO member states to replace the 1994 Trademark Law Treaty (TLT). In its own implementation in 1994, the TLT sought to harmonize and simplify trademark registration procedures in countries party to the TLT, however, not only did the pre-internet TLT fail to cover all forms of electronic communication (as faxing was still considered "advanced" by 1994 standards), but also failed to consider non-visible marks as potential source indicators.

The Singapore Treaty recognizes that not all trademarks are two-dimensional visible product labels, and attempts to remedy the TLT's silence on the issue by specifically identifying new types of registrable marks such as hologram-, motion-, color-, sound-, and taste marks. Though the Singapore Treaty essentially legitimizes registration for these marks, the Treaty neither provides standardized procedures on how, exactly, one would represent these marks in applications, nor does the Treaty oblige contracting parties to register non-traditional marks. But because the Singapore Treaty has now publicly identified non-traditional marks as registrable, the assembly of the contracting parties will soon be able to define the relevant standards for treatment of non-traditional marks, in an effort to bring these marks into the trademark mainstream.

Though the possibility for non-traditional mark registration is generating buzz throughout the world, the presence of non-traditional registrations in various trademark offices is quite sparse. For example, though the Madrid system boasts more than 450,000 marks on the international registry, only 29 are audio marks. Currently, the Office of Harmonization has only 73 sound marks and one olfactory mark registered. In addition, the United States Trademark Trial and Appeals Board rejected registration for an artificial orange flavor additive in medications in 2006, noting the difficulty in defining how taste can function as a trademark when, generally, consumers only taste goods after purchase (In re N.V. Oregon, TTAB 2006).

Despite the apparent wariness of trademark registries to embrace non-traditional mark registration, the public outcry for acceptance has been recognized and addressed by international trademark publications and authorities. The International Trademark Association (INTA), for example, has filed amicus briefs with the European Court of Justice as well as the United States Supreme Court on three occasions in support of non-traditional mark registration. In addition, the WIPO Standing Committee on the Law of Trademarks, Industrial Designs and Geographical Indications (SCT) has defined a number of areas of convergence where non-traditional marks have already been addressed by WIPO member states to advance the groundwork for non-traditional mark registration as quickly as possible.

Thus, while non-traditional marks continue to grace the public stage, the translation from commerce to trademark registry has yet to be formally established. While the possibilities continue to grow, it may be several years before various flavors of a pet chew toy or an athlete's signature fist pump are as prevalent in registration as fanciful logos and creative taglines.

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Kindle Speaks, But Does It Infringe?

The Authors Guild, representing the interests of authors in the United States, has publicly alleged that Amazon's recently-released e-book reader, Kindle 2, violates an author's right to control creation of derivative works. Kindle 2 has a text-to-speech feature that enables the device to read aloud. Certainly, text-to-speech programs are nothing new to authors, as they are often used by the blind. Why then did the Authors Guild object to Kindle 2 that employs a similar technology?

The concern is that the reading feature will supplant audio book purchases, as an audio book generally costs more than a digital e-book. In the Guild's view, the feature allows e-book purchasers to have the equivalent of both a hard copy and an audio book in one digital file. The Guild's objection appears to be that the text-to-speech function, when utilized, creates a derivative work from the digital version of the written work in violation of the author's bundle of rights.

Whether a derivative work is created depends on whether or not Kindle's text-to-speech function actually creates a work fixed in a tangible medium that can be governed by copyright laws. If it does not, the Authors Guild's argument may not hold water, because the function would be equivalent to another person reading the text aloud (though not as a public performance).

In considering the issue of fixation the case law surrounding copying can be applied. In a recent case, Cartoon Network v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008), the court held that when just over one second of an audiovisual work, a "buffer," is held on a device such as a remote-storage DVR, the copy is only transitory and does not violate copyright holder's rights. It is important to note that Cartoon Network narrowly construed, but was not decided contrary to, the existing doctrine and precedent in MAI Systems Corp. v. Peak Computer, Inc. 991 F.2d 511 (9th Cir. 1993). In both cases the courts considered what constituted unlawful copying and whether there was sufficient fixation to bring a copy within the purview of copyright law. The same consideration would be needed if the Kindle controversy were litigated—is text-to-speech "copy" sufficiently fixed or is it merely transitory?

In MAI, the court considered whether loading a program into RAM makes a copy of the software that can be restricted by copyright. The Ninth Circuit decided that since such copy could be "perceived, reproduced, or otherwise communicated," the loading of software into RAM created a copy that infringed plaintiff's copyright in the software (In 1998, §117 of the Copyright Act was amended to create an exception allowing copies at issue in the case). In distinguishing this decision in Cartoon Network, Second Circuit reasoned that there were two requirements to find the fixation mandated by the statute, not just the single issue of embodiment considered by the Ninth Circuit in MAI.

To be "fixed," as defined in the statute, the work must be embodied in a way that is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated [the embodiment requirement] for a period of more than transitory duration [the duration requirement]" (17 U.S.C §101).

Hence, Second Circuit's recent ruling in Cartoon Network is not inconsistent with the decision in MAI, rather it narrowly construes the prior ruling and distinguishes the facts at issue. The court states that it did not interpret MAI decision to stand for the proposition that "as a matter of law, loading a program into RAM always results in copying." In fact, the Second Circuit notes that the court in MAI did not consider the duration requirement because it had already been established that the copy at issue was embodied in RAM for "at least several minutes" leaving the question of duration not in dispute (536 F.3d at 128). Because in Cartoon Network the transitory nature was in dispute, the court could not be rely on the prior decision in MAI in its entirety.

The decision in Cartoon Network provides some guidance as to what is not long enough to create a new work or an unlawful copy of an existing work, but it does not set a standard for duration that would make a copy more than a transitory fixation. Such question remains open, and if Kindle's text-to-speech function were considered by a court, it would lend further interpretation to MAI and Cartoon Network decisions with regard to duration and fixation. However, if the output of the text-to-speech function is also only "transitory" like a DVR buffer, then, consistent with the rule in Cartoon Network, no new work is created by Kindle's text-to-speech function, meaning it cannot be found to violate author's copyright.

The definition of what constitutes a derivative work is also not settled. The Ninth Circuit found in Mirage Editions v. Albuquerque A.R.T. Co., that a copyright owner could essentially block any use or display of the copyrighted work (in that case, the transfer of a printed work onto tiles), the Seventh Circuit later found otherwise in Lee v. A.R.T. Co. in a highly similar set of facts. See Mirage Editions v. Albuquerque A.R.T. Co., 856 F.2d. 1341 (9th Cit. 1988), Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 1997). While the Seventh Circuit opinion is the more widely accepted result, both precedents have been established.

If Kindle's text-to-speech function does not create a fixed digital recording it may also be relevant to consider whether using the feature to "read aloud" constitutes public performance, which is also controlled by copyright. To be a public performance, the act must to occur in- or be transmitted to a public place, which is anywhere there is a "substantial" number of people beyond one's own family and acquaintances. Hypothetically, Kindle's text-to-speech feature can be easily used for public performance within the meaning of the statute, though the intended purpose of the function is personal convenience—"In the middle of a great book or article but have to jump in the car? Simply turn on Text-to-Speech and listen on the go"—and as we learned from the Sony doctrine and its progeny, the mere fact that new technology has the ability to be used in an infringing manner is not enough to find liability for contributory infringement, provided there is a substantial non-infringing use.

Beyond the assertions of infringement and unlawful creation of a derivative work, one wonders if the Authors Guild's concerns stemmed primarily from the fear of lost audio book sales. Most audio books are read by professional voice-over artists or actors. The performance is a strong part of an audio book experience and allure, one that is not likely to be replaced by the computerized voice of Kindle 2.

In response to the Authors Guild, Amazon has agreed to allow authors to "opt out" of activating the feature on a case-by-case basis, while asserting without equivocation that it firmly believes the text-to-speech function is legal.

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Provisional Patent Applications—Disclosing Danger

Provisional patent applications have been available in some foreign countries, for example, in the UK, for many years. In an effort to harmonize US practice to the general WIPO practice and standards, a 1995 amendment to the US patent laws was implemented and provisional patent applications became available to US applicants. Since June 8, 1995, inventors have had the option of filing a provisional application under 35 U.S.C. §111(b). The purposes for this amendment to the law were two-fold. First, because the US Patent Office does not examine provisional applications, the filing fees are much lower than those of non-provisional applications ($220; $110 for small entities as of October 2008). In addition, provisional applications were meant to provide parity to US applicants, who under the old provisions were unable to "extend" the patent term beyond 20 years from the application's filing date. That is, in 1995, when the US patent laws were changed so the patent term became 20 years from the filing date, non-US applicants were granted an "extra" year in the US patent term as a result of the priority filing in their home country. To provide US applicants a similar benefit, the 12-month pendency for a provisional application is not counted toward the 20-year term of a patent which is granted on a subsequently filed non-provisional application claiming benefit of the filing date of the provisional application.

The trend shows an acceleration in provisional application filings. Over 130,000 applications have been filed in fiscal year 2007 ending on September 1, 2007, the last full year for which final statistics are available. Through the first five months of fiscal 2009 the pace of provisional application filings has been maintained, with conservative estimates being that about 11,000 provisional applications per month have been filed.

Some significant differences in provisional application requirements are that applications can be filed without claims to obtain a filing date and that the provisional applications are not examined and are not reviewed for substantive matters. The filing date of a provisional application is the date on which a written description of the invention, and drawings if necessary, are received by the USPTO. Since a provisional application expires after pending for a year, the applicant must file a non-provisional application to claim the benefit of the earlier provisional application filing date. If the applicant chooses to not file a US national application, but to file instead a PCT international application, the non-provisional, national phase application need not be filed in the USPTO until 2½ years after the PCT application filing date, which is the same due date as for the non-US filings.

The filing requirements for a provisional application are also not as strict as those for a non-provisional application, and this can mislead lay applicants into thinking that any type of documents or drawings can be filed to hold the date of invention. The general, and wrong, impression is that the provisional patent application filing system allows an applicant to obtain a valid priority filing date quickly and cheaply with minimal or no patent attorney involvement. Applicants have utilized the provisional application as a strategy to delay prosecution and avoid the filing fees and the time and application-preparation charges necessary for filing a non-provisional application.

The misunderstanding arises when a provisional application is filed with a bare-bones description that is not prepared in the normal manner, as it would be for a non-provisional application. The tactical advantage obtained in the provisional application filing is in the consideration that it is sufficient for providing protection to the applicant once the non-provisional application is filed. However, unless the disclosure of the provisional application is sufficient to enable the later filing of a non-provisional application, there is some danger that the provisional application priority date will not be granted to the non-provisional application and any intervening prior art may result in an impediment to obtaining a patent. There can be a crucial lapse if the applicant has previously made his invention public by a sale or publication in a research paper, since rights in foreign patents may be given up, and subject matter not disclosed in a provisional application will be treated as new matter in a subsequently filed non-provisional application.

Significantly, the practice of patent applicants who file a simple disclosure to obtain a provisional date—and then wait a year to provide a proper disclosure as part of the regular (non-provisional application) filing—has been found wanting by the courts. In New Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1294 (Fed. Cir. 2002), the Court of Appeals for the Federal Circuit found a patent was not accorded a priority filing date when the provisional application failed to enable the subsequently-filed disclosure.

However, for the non-provisional utility application to be afforded the priority date of the provisional application, the two applications must share at least one common inventor and the written description of the provisional must adequately support the claims of the non-provisional application:

‘An application for patent filed under section 111(a) or section 363 of this title for an invention disclosed in the manner provided by the first paragraph of section 112 of this title in a provisional application filed under section 111(b) of this title, by an inventor or inventors named in the provisional application, shall have the same effect, as to such invention, as though filed on the date of the provisional application filed under section 111(b) of this title, if the [regular non-provisional patent] application... is filed not later than 12 months after the date on which the provisional application was filed and if it contains or is amended to contain a specific reference to the provisional application.' 35 U.S.C. § 119(e)(1).

In other words, the specification of the provisional must ‘contain a written description of the invention and the manner and process of making and using it, in such full, clear, concise, and exact terms,' 35 U.S.C. § 112 ¶ 1, to enable an ordinarily skilled artisan to practice the invention claimed in the non-provisional application.

The practice by inventors of filing a provisional patent application with drawings and documents that may not fully enable the invention or the claims as ultimately issued, thinking that it will "cover" their invention, yields an unnecessary risk of having to defend patent-invalidity assertions based on insufficiency of the underlying provisional application that an accused infringer may raise. Inventors are advised to approach the filing and preparation of claims and drawings for a provisional application with this risk in mind.

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WHAT'S NEW IN PATENT LAW?Update on Recent Supreme Court and Federal Circuit Decisions

The year 2008 saw some significant decisions issued by the Supreme Court and the Federal Circuit Court of Appeals on patent law questions. In this article, we will highlight the key points of some of these decisions.

1. Patent Licensing and the Exhaustion Doctrine.

Under the doctrine of patent exhaustion, a patent owner's patent rights in an article embodying a patent invention end once an authorized sale of the item occurs. In Quanta Computer, Inc. v. LG Electronics, Inc. the Supreme Court considered how this doctrine applies in a licensing situation. Computer manufacturer Quanta purchased Intel chips and installed these chips in computers manufactured for others. LG owns several patents concerning these chips and licensed Intel to manufacture chips with the patented technology. LG did not license Intel's customers to install the chips in machines they were manufacturing for others. When LG sued Quanta for patent infringement, asserting that combination of the Intel chip and non-Intel components infringed LG's patents, Quanta argued that LG's patent rights were exhausted once Intel, as LG's licensee, made an authorized sale of the chips to Quanta. The Supreme Court agreed.

2. Patentability of Business Method Claims.

In In re Bilski the Federal Circuit addressed the question of the standard for review of proposed patent claims covering business methods. Business method claims are often utilized to protect a method of how a business performs an operation or procedure. Prior to Bilski, several different tests for patentability of these types of claims were being utilized by the Patent Office, such as the "machine or transformation" test, the "technological arts" test and the "useful, concrete, and tangible" test. Bilski clarified the issue by deciding that the "machine or transformation" test is the proper test. The "machine or transformation" test requires that a business method claim be tied to a particular machine (e.g., software code to be executed by a computer), or transform a tangible article. Without such ties, the claim is invalid.

3. Test for Infringement of Design Patents.

Prior to the Federal Circuit's decision in Egyptian Goddess v. Swisa, Inc., courts used two tests to determine infringement of a design patent. The first of these tests was the "ordinary observer" test, which requires a comparison between the accused design and the patented design, and then consideration of any applicable prior art designs. The second test was the "points of novelty" test, which focused on the points of novelty of the accused- and patented designs. Analysis under the points of novelty was often complicated if there were multiple points of novelty or if the point of novelty was a combination of design elements. Egyptian Goddess decided that ordinary observer test was the proper test for evaluating design patent infringement claims. This decision arguably increases the value of design patents by making claims of infringement less burdensome to support.

4. Opinion of Patent Counsel in Inducement-of-Infringement Claims.

An allegation of inducement-to-infringe requires that the patentee show that one has enabled another to infringe a patent and requires that the patentee establish that: (1) there has been direct infringement of the patent claims, and (2) the alleged infringer knowingly induced infringement by another and possessed specific intent to encourage such infringement. In Broadcom Corp. v. Qualcomm, Inc., the Federal Circuit addressed the issue of how opinions of counsel factor into inducement to infringe allegations.

Opinions of counsel in patent infringement claims are often obtained to provide a defense to a claim of willful infringement, which if shown could significantly increase monetary damages awarded to the patentee. A 2007 Federal Circuit decision appeared to pull back the importance and necessity of opinions of counsel in such claims, indicating that other evidence could be as probative on the issue. In Broadcom, however, the Federal Circuit held that a jury could consider evidence of whether an alleged infringer obtained an opinion of counsel in determining liability on an inducement-of-infringement claim, thus renewing the importance of these opinion letters in defending such a claim.

Qualcomm had not obtained opinions of counsel on the issue of patent infringement, but was not found liable on the willfulness count. Qualcomm unsuccessfully argued that it couldn't be found to have induced infringement if it wasn't liable for intentionally infringing, since the bar is higher to prove inducement. The Federal Circuit disagreed, instead finding that inducement can be found even without a showing of willfulness. The Court stated that because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer "knew or should have known" that its actions would cause another to directly infringe, such evidence remains relevant to the second prong of the intent analysis in an inducement claim.

5. Direct Infringement of Method Claims.

A "method" claim in a patent includes a list of steps to perform the claimed invention. These types of claims can be written to require that the various steps be performed by different entities, which raises issues regarding proving an allegation for direct infringement of a method claim when there are multiple parties involved. In Muniaction v. Thomson Corp., the Federal Circuit addressed this issue by deciding that unless one of the parties exercises control over entire process, such an allegation could not be supported. The Court found that such control was not evident when the defendant auction company received data and determined the winning bidder, but did not control the actions taken by the bidders in submitting bid information.

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ICANN Releases Revised New gTLDs Applicant Guidebook for Public Comment

The Internet Corporation for Assigned Names and Numbers (ICANN) released a revised Draft Applicant Guidebook relating to its plans for the expansion of gTLDs (generic top-level domains). As previously reported in our October 2008 Newsletter, the guidebook provides a draft proposal for the application process and guidelines that will attach to any public or private organization that wants to register any string of letters as a gTLD. Upon receipt of public comments from many competing constituencies, such as trademark holders, registries, registrars, and domainers, ICANN has revised the policy documents and commenced a second Public Comment period through April 13, 2009. Potential applicants for new gTLDs should review the revised Draft Guidebook at ICANN's website at www.icann.org, but the guidebook is still a work in progress. ICANN has announced that the application process for new gTLDs likely will not occur before December 2009 at the earliest.

In the revisions, ICANN proposed a significant reduction in ongoing "Registry-Level Fees," reducing the original proposed $75,000 per year fee down to $25,000 per year. The revisions also pertained to a variety of issues including: the dispute resolution policy for objections to new gTLDs; the definitions of "Community-Based gTLDs" and "Open gTLDs," which pertain to gTLDs that may be open to the public or limited to a particular company or group; refund schedules for applications that have been withdrawn at various stages of the proceedings; and, changes to string contention procedures.

Of greater importance to trademark holders is what has not been fully addressed in the revisions. Based on the comments submitted by trademark holders and the international business community in the initial commenting period, ICANN has recognized that it needs to further evaluate "overarching issues" relating to trademark protection, security and stability, malicious conduct, demand and economic analysis. As a result, ICANN has not yet updated the policy regarding these issues, and is seeking further consultation, along with recommendations from the global business community, before updating the language in the policy regarding these issues.

Another issue that may greatly affect registrants, and in particular trademark holders, is the potential for tiered pricing, or lack of caps, for registration and renewal fees for domain names. If there are no price caps for the registries for new gTLDs, it is anticipated that the existing registries, such as for .COM, .ORG, .BIZ, etc., may request equal treatment. Tiered pricing would result in more popular or "elite" domains being charged varying prices, without any caps. This development potentially could result in current domain name holders being charged exorbitant renewal fees to maintain the domain names associated with their company name and trademarks. In the current economic climate, the lack of caps could significantly constrain a company's ability to properly budget and implement an effective offensive and defensive domain name strategy.

Although the Department of Justice has requested that ICANN further evaluate the need and public interest for new gTLDs, the proposed program appears to still be moving forward. ICANN is intending to meet with the intellectual property community in the coming weeks to address specific suggestions, along with responding to other competing constituencies, such as registries and registrars. Following the comment period ending on April 13, ICANN will issue a third draft of the Applicant Guidebook, anticipated in third quarter of 2009. However, now is the time for brand owners to take the opportunity to review the revisions to the Guidebook, and continue to provide ICANN with concerns, objections, and/or proposed solutions to the policies that may impact company's valuable trademark rights.

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Meet the New Law, Same as the Old Law

Much is written about how the Internet has changed the face of news reporting, information delivery and traditional print newspapers. There is also much written about new technologies requiring or creating new legal theories particular to them. Sometimes, though, seemingly archaic concepts apply to the fast-paced, need-to-know-now world of the internet.

The Associated Press ("AP") is a world-wide news-gathering and reporting organization. AP works with a global network of reporters who write and file news stories with it. AP in turn edits these items and provides the content to subscribers. Among AP subscribers are traditional print newspapers as well as internet-based and mobile news outlets. Many subscribers ultimately place AP content on their websites. AP subscriptions carry various terms and conditions and every story provided under the subscriptions contains copyright notices identifying AP as author and owner of the copyright.

All Headline News ("AHN") is a company whose employees were paid to scour the web to find breaking news stories from around the world and prepare them for republication under the AHN name. This was done by either re-writing the stories or simply copying them in full. Often, AHN employees simply removed an original author's copyright claim from a story, paraphrased the story and republished it. Sometimes, AHN attributed content to the original author in its reworked stories, but often not. Many of AHN's stories were simply paraphrased AP items. AHN, like AP, would provide its news stories to subscribers who would then publish the items.

AP filed suit alleging, among other things, that a ninety-year-old little-utilized legal theory provided it with a cause of action against AHN for "misappropriation of hot news." This cause of action has its basis in a 1918 U.S. Supreme Court decision also involving AP and at a time when competition among newspapers and reporting organizations was both intensely fierce and fueled by new technology—the telephone and radio wire. In that case, William Randolph Hearst's International News Service ("INS") actually bribed AP reporters and newspapers that subscribed to the AP wire (when it was a wire) to provide AP's breaking news stories to INS before publishing them. Hearst's INS would then rewrite those stories as its own and send them off to its wire subscribers, thus "getting the scoop" on AP.

Copyright law does not necessarily apply to the news itself, since the underlying facts or events giving rise to a news-worthy item cannot be property rights in and of themselves. Only the expression or interpretation of news-worthy events can be protected. This would seem to leave "news" unprotectable. The Supreme Court, however, recognized there is a "quasi-property right" in the reporting of "hot news." Time and expense is involved in newsgathering and reporting and when those efforts yield items of immediate interest—breaking news—the party who put forth the work to develop the news and "break" a story should have the primary right to enjoy the results of same, including profiting from selling its story. INS's practice of seeking diversion of AP news and rewriting it for its own wire was an attempt to "reap what it has not sown." Thus, the Supreme Court held there is a cause of action against a party who misappropriates "hot news."

Though the elements and parameters of this claim were developed almost a century ago, it is little-used and not widely accepted in American jurisprudence. In fact, the only state that allows such a cause of action is New York, which is where AP brought its suit against AHN. AHN tried to dismiss AP's misappropriation of hot news claims, in part by arguing that Florida-, not New York law applied. Nevertheless, just a few weeks ago the U.S. District Court for the Southern District of New York found the ninety-year-old cause of action still available to AP based on the facts alleged in its complaint.

This is not a copyright doctrine, but rather a form of unfair competition. Still, the 1918 decision and cause of action it created was an application of legal concepts to a highly-competitive news industry growing with the use of new technologies. Sometimes, even the latest technologies can be governed by the "old" rules.

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Multiple-Class Registrations and Fraud: New TTAB Precedent

On January 29, 2009, the USPTO Trademark Trial and Appeal Board further clarified the fraud doctrine, holding that fraud committed as to one class in a multiple-class registration requires cancellation only as to that class, and not as to all classes of the registration.

G&W Laboratories, Inc. ("Labs") filed a section 2(d) opposition against G W Pharma Limited's ("Pharma") application for GW PHARMACEUTICALS & Design on the grounds of priority and likelihood of confusion, relying on two registrations, one for G&W in Classes 5 and 35 and the other for G&W & Design in Classes 5 and 35. Pharma thereafter filed counterclaims for cancellation of Labs' registrations in their entireties on the grounds of fraud, alleging that Labs never used either mark in connection with the services in Class 35.

After the counterclaims were filed, Labs proceeded to make its required filings under Section 8 for each registration requesting deletion of the Class 35 services in each registration, and thereafter filed motions to dismiss the counterclaims against Class 35 as moot and the counterclaims against Class 5 for failure to state a claim upon which relief may be granted. Pharma argued, however, that deletion of a class of goods or services procured through fraud during maintenance of the registration does not cure fraud, and that if fraud is proved as to Labs' registrations in Class 35, each registration must be cancelled in its entirety, relying on Medinol Ltd. v. Neuro Vasx Inc., 67 USPQ2d 1205, 1208 (TTAB 2003):

[D]eletion of the goods upon which the mark has not yet been used does not remedy an alleged fraud upon the Office. If fraud can be shown in the procurement of a registration, the entire resulting registration is void.

While Labs admitted that it never used its marks on the Class 35 services, it argued that a claim of fraud directed towards one class of a multiple-class registration cannot render the entire registration void.

The Board denied Labs' motion to dismiss the Class 35 counterclaims, agreeing with Pharma that deletion of services through a Section 8 filing cannot cure fraud. The Board noted that a registrant's request to delete a class subject to a cancellation proceeding in a Section 8 affidavit is governed by Trademark Rule 2.134(a), which provides that a request for such deletion by a respondent in a cancellation proceeding without written consent from every adverse party to the proceeding results in judgment against the respondent. Because no written consent to the deletion of the Class 35 goods was sought or obtained from Pharma, judgment was entered against Labs.

The motions to dismiss the counterclaims as to Class 5, however, were granted. The Board pointed out that all of the cases finding fraud since Medinol involved invalidation of single-class applications or registrations, holding that "fraud as to any goods or services in a single class will lead to a finding that the application or registration is void in the class in which the fraud has been committed", but noted that they had not yet considered fraud in less than all the classes of a multiple-class registration. The Board likened multiple-class applications to a series of single-class applications because they still require a filing fee, date of use, and specimen for each class involved, and because the filer of a multiple-class application is essentially in no different position that if it filed several single-class applications. The Board therefore held that "each class of goods or services in a multiple-class registration must be considered separately when reviewing the issue of fraud, and judgment on the ground of fraud as to one class does not in itself require cancellation of all classes in a registration." The Board reasoned that any other holding would essentially provide an incentive to file single-class versus multiple-class applications.

The decision further clarifies the proper application of the fraud doctrine. While trademark owners must remain diligent in ensuring all information in an application is correct, it is now clear that they do not face a threat of losing trademark rights in an entire multiple-class registration based on errors in a single class.

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Patent Application Filings in the Periods up to 2007 - US and China Show Favorable Trend

It has been stated that the citizens of a country generally will not respect the intellectual property of others unless they themselves have intellectual property that may be misappropriated. No critical mass has been scientifically identified, that is, no specific number or percentage has been determined that would tip the general consensus from an IP-scoffing country to an IP-respecting country. Nevertheless, if mere numbers provide any guidance in the patent area, the number of patent applications being filed on an annualized basis may provide evidence of a trend.

The trend for US patent applications (including utility, plant and design applications) filed over the last twenty years shows a decided increase in US patent application filings by non-US applicants. In calendar year 1987, there were 127,917 applications filed, in 1997 there were 215,257; in 2002: 334,446; and in 2007, the last year for which USPTO statistics are complete, there were 456,154. Simultaneously, patents granted in the same years were in 1987: 82,917; in 1997: 111,984; in 2002: 167,331; and in 2007: 157,283. Of the granted patents, the following were granted to "foreign," that is, non-US, applicants: 1987: 41,587 (50.1%); 1997: 54,107 (48.4%); 2002: 80,360 (48.0%); and 2007: 89,008 (56.7%). Of these, patents granted to residents of China (including Hong Kong) are in 1997: 81; in 2002: 289; and in 2007: 772.

During a similar period, patent applications and grants by SIPO (State Intellectual Property Office of China) increased almost exponentially. Reported applications filed in the SIPO in 2007 are as follows: total applications filed: 694,153 of which 586,734 (72.3%) were filed by Chinese residents and 107,419 (27.7%) by foreign, non-Chinese residents. In 2002 the same numbers are: total 252,631 of which 205,544 (81.4%) were filed by Chinese residents and 47,087 (18.6%) were filed by foreign, non-Chinese residents. Applications filed for the individual years prior to 2002 are not available, but cumulatively for the period 1996-2002 total numbers of applications filed are 1,100,057, of which 890,125 (80.9%) were filed by Chinese residents and 209,932 (19.14%) by foreign, non-Chinese residents. The trend is less pronounced when only "inventions" that is, utility patent applications, are taken into account, but even when so limited, utility applications for the same period are 2007: 27,232 total, of which 19,695 (72.3%) were by Chinese residents and 7,537 (27.7%) by non-Chinese residents; 2002: 80,232 of which 39,806 (49.6%) were by Chinese residents and 40,426 (50.4%) by non-Chinese residents; for the cumulative period 1996-2002: 330,020 total of which 148,696 (45.1%) were by Chinese residents and 181,324 (54.9%) by non-Chinese residents.

In terms of patents granted to Chinese residents in 2007, there are 301,632 (85.7%) out of a total of 351,782 and to foreign patentees 50,150 (14.3%); a sub-category, inventions (utility patents), 31,945 (47%) were granted to Chinese residents and 36,003 (53.0%) to foreign applicants. In 2002, total patents granted were 132,399 of which Chinese residents received 112,103 (84.7%) and non-Chinese residents received 20,296 (15.3%); the corresponding numbers for inventions are 5,868 (27.3% ) for Chinese residents and 15,606 (72.7%) for non-Chinese residents. No corresponding figures for the individual years prior to 2002 are available, but cumulatively for the period 1985-2001 total numbers of granted patents are 770,932, of which 680,249 (88.2%) were granted to Chinese residents and 90,387 (11.8%) to foreign, non-Chinese residents.

The overall trends show that the total number of applications filed in China is rising almost exponentially. In a single year 2007, as many patent applications were filed, as the number of patents were granted during the 16-year period from 1985 to 2001. The numbers of patents granted to Chinese residents, both in the US and in China, also show a rising trend. Significantly, the percentage of inventions (utility patents) both filed and granted in the SIPO is increasing for Chinese residents. The increased interest in US and Chinese patents is a sign that both in the government and in industrial sectors, patents have become a valued property right. Perhaps with increased interest in such IP ownership, the corresponding rights of third parties are more likely to be recognized, since it is very hard for a party to request that its IP rights be respected when it fails respect the rights of others.

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ACPA Sinks Teeth into Taster

In a recent cybersquatting lawsuit in the Northern District of California, Verizon Communications Inc. received a default judgment in the amount of $33.15 million, against an accredited ICANN registrar, OnlineNIC. Pursuant to the Anti-Cybersquatting Protection Act (ACPA), the judge awarded $50,000 for each of the 663 domain names that were in issue. The Judge determined that the domain names were unlawfully registered, and were either identical to or confusingly similar to Verizon's trademarks. The court opined that OnlineNIC's bad-faith registrations of Verizon-related domain names were designed to steer web users away from their attempts to access Verizon's legitimate websites.

In its complaint, Verizon had alleged that OnlineNIC had used a number of shell entities, fictitious business names, or alias personal names, along with privacy protection services that shield the WHOIS information, in an attempt to conceal the true identity of the registrant and OnlineNIC's involvement in the trafficking of domain names. Verizon also alleged that OnlineNIC, through its aliases, was engaged in the practice of "tasting," wherein a domain name is registered and then deleted within five days, in order to avoid paying for the registration fees when the domain name does not generate a sufficient profit from pay-per-click fees. In addition, OnlineNIC was alleged to have practiced "kiting", which is when one repeatedly registers, deletes, and reregisters a domain name within five days to avoid paying the registration fees. This activity was shown to have been repeatedly done by OnlineNIC through its various aliases, against Verizon and other well-known mark owners.

While a Uniform Domain-Name Dispute-Resolution Policy (UDRP) complaint can only achieve the transfer or cancellation of a domain name from a cybersquatter, the ACPA additionally allows for statutory damages ranging from a minimum $1000 to a maximum of $100,000 per domain name, depending on what the court considers just. In this instance, the judge settled on $50,000 per name against OnlineNIC, which did not appear in court to contest the matter.

Typically, a UDRP is a quicker and more cost-effective method of obtaining the transfer of a domain name, than an ACPA litigation in Federal Court. An ACPA action also requires that a trademark owner be able to obtain personal jurisdiction in the U.S. against the defendant, while a UDRP action can be brought against a registrant in any location. If personal jurisdiction does not exist for an ACPA action, or the domain name owner cannot be found, an ‘in rem' action could be brought if the registry, such as that relating to .COM domain names, is located in the United States, although the remedy is then limited to the transfer, forfeiture or cancellation of the domain name, without any monetary damages.

Although OnlineNIC is listed as an accredited Registrar with ICANN for registering domain names, Verizon has been unable to locate the company at OnlineNIC's listed address in California. The alleged aliases list addresses mainly located in China. Whether Verizon is able to collect the monetary award or is merely able to acquire or delete the subject domain names remains to be seen, but trademark owners may breathe easier because the significance of the dollar amount of the judgment will act as a deterrent to other registrars or registrants who engage in cybersquatting.

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Incomplete Bundle Costs a Bundle

Rights conferred by a U.S. Copyright registration are often referred to as a "bundle." Included are the rights to reproduce a copyrighted work; to prepare derivatives based upon the work; to distribute copies of the work; to perform the work; and to display the copyrighted work publicly. These rights are separable and can be sold, licensed or given away one at a time or all at once. The U.S. Copyright Act makes no distinction among the rights conferred and each is separately enforceable by its owner. Thus, if a party wants to acquire copyrights from another, it must make certain that it is acquiring all the rights it needs in order to use the copyrighted material for its intended purposes. Otherwise, a party may be unable to effectively use the copyrighted material.

Take the case of the upcoming film "Watchmen," which promises to be this spring's blockbuster action movie. "Watchmen" was first conceived as a graphic novel by Alan Moore and published by D.C. Comics. In 1986, Twentieth Century Fox (Fox) obtained an option to purchase D.C. Comics' rights in "Watchmen" and ultimately acquired same in 1990. Lawrence Gordon is an influential movie producer who wanted to make a film of "Watchmen." In 1991, Fox granted certain rights in "Watchmen" to one of Mr. Lawrence's production companies, but retained the right to distribute any film ultimately produced. In 1994, Fox and Gordon entered into an agreement called a "Turnaround Notice." This agreement essentially granted Gordon the right to acquire Fox's interest in the "Watchmen" film project for a set price.

Time went by and no film was produced. Gordon, holding the rights to produce a "Watchmen" film, worked on and off with developers, script writers and the like, but there was no broad interest in filming. At no time did Gordon or any of his companies exercise their right under the Turnaround Notice to buy-out Fox's rights in the project. Ultimately, Warner Bros. agreed to produce "Watchmen" with Gordon. The final production budget for the film is approximately $150 million. The film is set for a March 9, 2009 U.S. release distributed through Warner Bros. Ultimately hundreds of millions in box office receipts, DVD sales and merchandising are anticipated.

Fox brought suit against Gordon and Warner Bros., alleging, among other theories, copyright infringement. Fox claimed Gordon's failure to buy out its rights under the Turnaround Notice left Fox with the unfettered right to distribute any "Watchmen" film, and that distribution of the film by Warner Bros. constitutes infringement of Fox's rights. Though there has been no final resolution of the litigation and no formal ruling has issued yet, a U.S. District Court Judge in Los Angeles has issued an advisory opinion indicating he agrees with Fox's argument and unless Fox and Warner Bros. can come to some agreement in the next 90 days, the film's release may be delayed.

Though there are many very technical facts to consider and ultimate resolution of the case determines the interpretation of several complex Hollywood-specific contracts, the import is clear. Since copyrights are in the nature of a bundle of separable rights, when obtaining or selling copyrights, whether in the context of a film production agreement or from a freelance photographer, a party must make certain all relevant rights are obtained and documents relating to same are clear.

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Masters, Synchs and YouTube

On December 20, 2008, Warner Music Group ordered YouTube to remove all videos featuring music by its artists. The move came amidst the breakdown in negotiations to renew the now-expired licensing deal between Warner and Google, YouTube's owner, over Warner's compensation for licensing its music catalog for use on YouTube. Warner is reportedly dissatisfied with the revenue share it received under the prior contract, signed September 2006. The collapse could affect thousands of videos, as Warner is home to over fifteen labels, including Asylum, Atlantic, and Bad Boy, and as the contract also covered its Warner/Chappell division which is the third-largest music publisher in the United States. The specifics of the 2006 deal and the prospects for a renewed contract are largely a reflection of how the rights of copyright holders have been affected by music's transition into the digital era.

As physical album sales decline, copyright owners are demanding a larger share of profits made by media companies streaming their music online – from internet radio companies to video broadcasting companies such as YouTube. Just as other technological advances have in the past, the internet has forced courts to think about how to best protect the "bundle of rights" granted to copyright owners in light of this new setting.

When music is played or distributed online, there are four primary licenses that must be considered in order to avoid infringing the rights of the copyright owner, be it a composer, publisher, or recording artist. First, there is the performance license, which compensates the copyright owner for licensing its right to publicly perform the work, and enables the licensee to broadcast the music to the public. Second, there is the mechanical license which is a statutory payment that compensates a copyright owner, usually the record company that commissioned the song, for allowing another to exploit its exclusive right to manufacture or distribute copies of the song. Third, when a sound recording is used, a negotiable master license must also be paid to compensate the copyright owner of the sound recording, usually a record company. For example, if rather than using "Blue Suede Shoes" written and first recorded by Carl Perkins, a user wishes to use "Blue Suede Shoes" as recorded by Elvis Presley, a master license must be obtained from the owner of that specific recording. Finally, there is a negotiable synchronization or "synch" license which compensates the copyright owner for allowing another to exploit its exclusive right to reproduce a musical composition in connection with a visual image, such as a motion picture, a video, or an advertising commercial.

In a typical scenario where music is used as or in content posted online, it is the individual person posting the content who is responsible for properly obtaining the appropriate rights to use it, be it a performance license, mechanical license, synch license, master license, or all of the above, depending on the use. The Digital Millennium Copyright Act contains a safe harbor which exempts online service providers, such as Google's YouTube, from claims of copyright infringement provided certain conditions are met.

The deal between Warner and Google was intended to relieve the burden of YouTube's users to obtain copyright holder's permission, making it the responsibility of Google instead. Under the deal, Google gained an entire catalog of music which could be used by its users (subject to certain conditions), and Warner was relieved of the difficult task of tracking individual infringers and given exposure for its artists. The contract, however, only concerned the synchronization and master licenses. The mechanical license was not involved because it is a non-negotiable statutory amount which is typically gathered by a mechanical royalty collection group, such as the Harry Fox Agency, which then distributes the earnings to the copyright owners, usually the record company that commissioned the song. Thus, Google's obligation was statutory and out of reach of any contract with Warner. Performance royalties were not subject to the contract either because these royalties are collected by public performance collection agencies, such as BMI, ASCAP, or SEASAC, which issue blanket licenses to use their entire catalogs and likewise thereafter distribute the royalties to the copyright owners. Thus, any money collected by Warner as a result of its contract with YouTube went towards the negotiated payments for licensing master and synch rights to Warner's catalog, compensating Warner, as copyright owner, for giving up its exclusive right to use its sound recordings and synch any of the music it owns with the video content posted on the site.

This December, however, Warner stated that it can no longer accept the terms of the prior contract because they do not fairly compensate recording artists, labels, or publishers for licensing their rights. Under the revenue-sharing deal signed in 2006, Warner became the first music label to agree to license its entire catalog to YouTube. Prior to the internet era, licenses for particular songs were individually negotiated, for the most part, so this deal, which was more akin to the blanket licenses issued by organizations such as ASCAP to license performance rights, was a brand new concept. Under the deal, in exchange for licensing these rights, Warner received a share of the advertising revenue earned by YouTube from streaming Warner's music videos as well as user uploaded videos incorporating audio and audiovisual works belonging to Warner. In addition, Warner received a per-play payment amounting to less than a penny for every video viewed.

To get the 2006 deal off the ground, YouTube had developed a content identification and reporting system offering Warner, and ultimately other labels, tools for identifying copyrighted content on the YouTube's website, including use of a label's music videos and use of its songs in homemade user content. The system provides labels with the opportunity to authorize or restrict certain uses of their works within user-created content, and a system for tracking and recording royalties. Several other labels followed in Warner's footsteps shortly after its 2006 deal was reached, including Universal, Sony BMG Music, and EMI Group Ltd.

The dispute over whether the deal actually provides adequate compensation is likely a direct effect of the fact that companies like YouTube are growing. Labels, such as Warner, likely considered their initial agreement to be an investment. While it may not have been clear whether they would profit in the beginning, it was clear that there was definite potential for growth in the online music industry. Warner argues that it is only fair that its share is increased as profits have increased. YouTube's supporters would defend that the fee for each video watched on YouTube which is paid to labels such as Warner may actually be costing the site money as not all videos are ad-supported, and thus revenue generating. Moreover, they point to the fact that, technically, Google is not legally obligated to pay Warner anything, because the contract has expired and Google is protected by the DMCA safe harbor provisions.

Ultimately, many industry insiders would agree that it is in the best interests of both parties to work out a deal, as both parties benefit. Media companies benefit because the deal pleases its users, who may use copyrighted songs in their videos and leave the complicated copyright issues up to YouTube. For Warner and other recording firms, a contract provides a new way to compensate copyright owners in the face of increased and virtually untrackable use of their works online. Having a contract in place saves these companies the time and money involved in seeking out and dealing with individual (mis)users of their content, and provides great exposure for their artists.

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In re Bilski Decision Redefines Method and Software Patent Scope

The subject matter of what a patent may cover has been on shifting ground since at least as early as the 1972 Supreme Court opinion Gottschalk v. Benson, 409 U.S. 63 (1972), in which a process claim directed to a numerical algorithm was found to comprise unpatentable subject matter because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Since the algorithm was a naturally occurring and preexisting artifact, a finding of patentable subject matter would be tantamount to allowing a patent on an abstract idea, contrary to long held precedent. Unpatentable subject matter was generally identified by the Supreme Court to include "laws of nature, natural phenomena and abstract ideas." Software method patents were found to be patentable if they were somehow associated with a physical machine or a CPU, or if the method could produce a concrete, useful and tangible result.

Additional guidance was found in the decision of Diamond v. Chakrabarty, 447 U.S. 303 (1980), in which a genetically modified living microorganism, an oil spill eating bacterium, was found patentable. Relying on the Committee Reports accompanying the 1952 Patent Act, the Chakrabarty decision noted that Congress intended statutory subject matter to "include anything under the sun that is made by man." The logical conclusion of this holding led to the patenting of a genetically modified mouse (the so-called "Harvard mouse").

The court in State Street Bank & Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), held that any business method may be eligible for protection by a patent if it involves some practical application and "produces a useful, concrete and tangible result."

Long-anticipated decision in In re Bilski recently issued by the Court of Appeals for the Federal Circuit (CAFC) has clarified "the standards applicable in determining whether a claimed method constitutes a statutory 'process' under § 101" and further refined the holding in State Street. The importance of the Bilski decision was underscored by the court's own request (sua sponte without prompting of the parties) that the case be argued before all the judges of the CAFC. In addition, almost forty amicus curiae briefs were filed by attorneys on behalf of "friends of the court" representing the views on the issues of a broad cross-section of industry groups, legal professionals and academics.

The main claim in the Bilski patent application was drawn to a "method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and recited several method steps that were admittedly not limited by use in a calculating machine such as a computer. Rejecting all the claims, the Examiner stated that "the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts." The Examiner's rejection was affirmed by the Board of Patent Appeals and Interferences, and appealed to the CAFC by the Applicant.

In defining the scope of patent coverage for the business method claims in Bilski, the CAFC held that a process claim reciting machine or transformation limitations that "impose meaningful limits on the claim's scope" does not require that such limitations themselves be new or non-obvious. The meaning of "meaningful limits" is not the same as "non-obvious limits," and the subject matter requirement may be satisfied by machine or transformation limitations which may themselves be old or obvious. The threshold issue of §101 patent-eligibility having been met, novelty and non-obviousness of the claim as a whole may be satisfied by a novel and non-obvious algorithm in combination with the structural machine or transformation recitations. Thus, any intimation in the Supreme Court decision in the State Street case that found patentable an algorithm or business method that comprised only steps that could be performed mentally (without reference to any physical or transformative function on a physical manifestation) is no longer literally correct.

The drift of the Bilski decision is to render the Federal Circuit more in line with recent Supreme Court precedent. Although it may be easy to meet the requirement of a patent-eligible invention under Section 101, a claim having method steps may be deemed obvious under other section of the patent law, especially the obviousness provisions of 35 USC 103(a). It has been suggested that the next wave of business-method litigation will focus on defining the kind of computerized, structural and/or transformative steps required to meet the threshold of subject matter patentability requirement.

In dissent by several CAFC judges, the majority decision was asserted to have not gone far enough in restricting business-method patents. Given the wide-ranging interest in the case, a petition to the Supreme Court may be granted during this October term ending in June 2009.

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New Domain to Host Contact Information

Two-month sunrise registration period for .tel, a new top-level domain that comes with a turn-key website for publishing contact information, begins December 3, 2008. .tel domains are of interest because they are optimized for use by small-screen mobile devices so as to permit visitors to contact the owner by e-mail, telephone, VoIP, or any other method specified by the owner.

Unlike conventional top-level domains, .tel does not allow the owner to host a website. Instead, owners are granted acccess to a management console enabling them to store information directly in the DNS. Instead of resolving to a website, .tel would resolve to an interactive listing of owner's contact information, which may include unlimited telephone and fax numbers, physical and e-mail addresses, screen names, links to other websites, and search keywords, allowing visitors to contact the owner with a click of a button.

Given the myriad of top-level domains already in existence, brand owners are drifting away from blanket must-own-every-TLD-in-existence acquisition policies, focusing on the standard set of .com, .net and .org complemented by the country-code top-level domains in the countries they do business. Dismissing .tel as the like of .info, .name or .pro likely to fall into obscurity may be a mistake, however. The new platform offers brand owners a turn-key website optimized for mobile devices, providing yet another way of reaching out to customers.

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CTM Fees Expected to Decrease

OHIM is expected to lower the combined official filing and registration fees for a CTM to 1000 Euro, a reduction of almost 40% compared to the current total of 1600 Euro for a mark in three classes. The reduction is expected to come into effect sometime in 2009.
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ECJ Clarifies Dilution under the Trademark Directive

On November 27, 2008 the European Court of Justice ("ECJ") delivered its judgment in Intel v. CPM, outlining the factors that a national court should consider in deciding whether the owner of a reputable trademark is entitled to the special protection under Article 4(4)(a) of Europe's Trademark Directive, which provides for invalidation of a later trademark based on dilution.

Intel, owner of several UK and Community trademarks for INTEL sought to invalidate CPM's UK registration for INTELMARK covering "marketing and telemarketing services" on the basis of the national provisions implementing Article 4(4)(a) of the Directive. Following dismissals at the UK Trade Mark Registry and the High Court, Intel appealed to the Court of Appeal (England and Wales), where it argued, relying on Adidas-Salomon and Adidas Benelux, that the protection of Article 4(4)(a) is appropriate so long as the earlier reputable mark and later mark are so similar that relevant consumers will establish a "link" (or mental association) between the two marks, and that, where the earlier mark is both unique and highly distinctive, virtually any use of an identical or highly similar mark will be detrimental to it. Court of Appeal found that INTEL is unique and has a huge reputation in the United Kingdom for computers and computer-linked goods, that INTELMARK and INTEL are similar, and that the goods and services covered by respective marks are dissimilar. The Court could not determine whether such factual circumstances warrant protection under Article 4(4)(a) and asked the ECJ to advise.

Article 4(4)(a) protects trademarks with a reputation from later registrations of identical or similar marks in connection with goods and services that are not similar to those covered by the earlier registration. This protection is conditioned on the harm to the earlier mark from the use of the later mark that may consist of taking an unfair advantage of, or being detrimental to, the distinctive character or reputation of the earlier mark.

Detriment to the distinctive character (dilution) is caused when a mark's ability to identify the source of the goods and services for which it is registered is weakened by another merchant's use of an identical or similar mark, dispersing earlier mark's identity and hold upon the public mind.

The ECJ confirmed that the "link" referred to in Adidas Solomon is a prerequisite to establishing unfair advantage or detriment required for Article 4(4)(a) to apply, but noted that the existence of such a link alone is not sufficient to establish the harm necessary to trigger the special protection. The Court further noted that to establish said harm, actual and present injury is not required, and that proof of a serious risk that such injury will occur in future is sufficient.

The ECJ then delineated the standards for defining the "relevant public" to be taken into account in determining whether the prerequisite link and/or harm exist. When evaluating earlier mark's distinctiveness and reputation, or establishing detriment thereto, the relevant public is the average consumer of the goods and services covered by the earlier registration, whereas for claims of unfair advantage, relevant public is the average consumer of the goods or services that the later mark covers.

In explaining the requirements for establishing whether there is a "link," the ECJ stated that as a general rule, all relevant factors must be taken into account, including the degree of similarity between the conflicting marks; goods and services provided by the parties and whether there is overlap in their respective consumers; strength of the earlier mark's reputation; distinctiveness of the earlier mark, whether inherent or acquired through use; and existence of the likelihood of confusion.

In considering similarity between the conflicting marks, the more similar they are, the more likely it is that the later mark will bring the earlier mark with a reputation to the mind of the relevant public. The Court noted that when the two marks are identical, this fact alone is insufficient to establish the link, since it is possible that conflicting marks are registered for goods or services in respect of which the relevant sections of the public do not overlap, and the mark with a reputation (properly assessed in relation to the goods and services covered by this earlier registration) is not known to the public targeted by the later mark. Conversely, the strength of the earlier mark's reputation may go beyond the section of the public targeted by the mark, making it possible that the relevant section of the public as regards the goods and services of the later mark will make a connection between the marks, even though the two sections of the public may be wholly distinct. Likewise, the stronger the distinctive character of the earlier mark, the more likely that confronted with a later identical or similar mark, the relevant public will recall the earlier mark. Trademark's ability to identify the source of goods and services for which it is registered is stronger if that mark is unique, meaning it has not been used by anyone for any goods and services other than by the proprietor of the mark to describe the goods and services it markets. The ECJ noted that existence of a likelihood of confusion is not required for Article 4(4)(a) to apply, though its existence automatically establishes the required link. It is up to the national court to determine whether there is a link based on the facts before it, and presence or absence of one or more of these factors does not guarantee a particular finding (unless there is a likelihood of confusion).

As for establishing the second prong of the test, injury, the Court again stated that the assessment must be made globally, taking into account all factors relevant to the circumstances of the case, including the factors relevant to establishing a link. The Court clarified that the existence of a link does not dispense with the requirement of proving injury (or a serious likelihood that it will occur in the future), but that a stronger link makes the injury more likely.

For the purposes of establishing detriment to the distinctive character of a mark, the heart of the issue in Intel, the Court indicated that the earlier mark does not have to be unique, reasoning that a trademark with a reputation necessarily has distinctive character and use of later identical or similar mark may weaken the distinctive character of that earlier mark. The ECJ further noted that the more "unique" the mark is, the greater the likelihood of dilution; and that a first use of the later mark may be sufficient to establish injury under Article 4(4)(a). The Court stated that proving detriment to the distinctive character (dilution) requires evidence of "a change in the economic behavior" of the average consumer of the goods and services for which the earlier mark was registered consequent on the use of the later mark, or "a serious likelihood" that such a change will occur in the future. Whether or not the owner of the later mark draws real commercial benefit from the distinctive character of the earlier mark is immaterial to showing dilution.

Addressing the factual findings submitted by the national court, the ECJ found that the facts that the earlier mark enjoys a huge reputation, that the respective goods of the two marks are dissimilar, and that the earlier mark is unique with respect to any goods or services, do not necessarily imply that there is a "link." Similarly, the ECJ could not ascertain the existence of harm based on the factual findings presented by the national court.

The decision outlined the factors that national courts should consider in determining whether registration of a later mark may be declared invalid pursuant to Article 4(4)(a) of the Directive, helping brand owners better understand what is involved in mounting a successful dilution claim. While the court asserted that a likelihood of confusion need not be proven for a finding of dilution, the now-required evidence of the later mark's impact on the economic behavior of the relevant public may prove to be a significant hurdle for owners of the earlier marks to overcome when proving dilution.

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Fifth Anniversary of the United States and the Madrid Protocol

Trademark owners were first able to request trademark protection in the United States through the International Bureau on November 2, 2003, although it was another year before the first application passed examination. This 5th year anniversary of the United States' adoption of the Madrid System presents the optimal time for owners of such US registrations to review their rights and ensure that all deadlines to maintain them are properly noted. Apart from renewal, the United States has additional trademark maintenance requirements, notably the Declarations and specimens of use are required on the 6th and the 10th anniversaries of registration, as well as every ten years thereafter. These requirements are governed by the provisions of §8 of the Trademark Act, 15 U.S.C. §1058 for a national registration, and under §71, 15 U.S.C. §1141k for an extension of protection through the International Bureau.

Deadlines are calculated from the date protection is extended specifically to the US, not the date of the international registration. In just over a year, the first extensions will enter the period within which to file the 6th year Declaration of Use, and the International Bureau will begin receiving these declarations filed in compliance with §71. It is vital for owners of the international registrations to be aware that the deadlines for the Declarations and specimens of use due every 10 years are not concurrent with the renewal deadlines for the International Registration that are filed directly through the International Bureau. Incorrect calculations of the deadline could result in a registration inadvertently being cancelled. Trademark owners must also be cautious of the fact that the six-month grace period that applies to filings under §8 for US national registrations does not apply to §71 filings for registrations obtained through International Bureau which only enjoy a three-month grace period.

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Fame in Likelihood of Confusion Claims

United States trademark law is intended to prevent consumer confusion. In infringement actions in the courts or oppositions in the USPTO, a senior trademark user usually contends a junior mark is likely to be confused with the senior mark. Ultimate determination of whether there is a likelihood of confusion requires consideration of a number of different factors, one of which looks at the question of fame of the senior mark. In U.S. practice, famous marks are those that are recognized as source indicators by a "significant portion of the relevant consuming public," relevant consuming public being current and potential consumers of a product or service. Famous marks are entitled to a wide scope of protection from confusion. What then is necessary to establish the fame of a mark?

Fame is about brand awareness. Anything that has bearing on and shows brand awareness is relevant to the question of fame and the greater the awareness, the more likely a mark will be considered famous.

Surveys and consumer study data aimed at aided and unaided brand recognition are relevant to the inquiry if available. Studies such as these can quantify awareness and provide support for a claim of fame, although just what constitutes a "significant portion of the relevant consuming public" is not well defined, and survey data is subject to scrutiny for reliability. Thus, though helpful, survey evidence alone is not a prima facie indicator of fame. Additionally, there is no requirement that surveys must be utilized to show fame and many marks have been found famous without any supporting survey evidence.

Beyond surveys, a number of other factors are relevant to the question of fame. Some of these include the duration of use of a mark—the longer a mark has been in use, the greater the number of consumers who have been exposed to it, and may become aware of it. Also, the extent of advertising and promotion of a mark is a relevant consideration and information about the nature of advertisements and promotions, media saturation and marketing expenditures is helpful. Sales and market share data are also important to the analysis since the greater the sales or market share, the greater consumer exposure and possible awareness. Media exposure, recognition and awards from third-parties are considered as well, as they tend to impart neutral recognition.

No one factor is dispositive and the issue is decided on all the facts and the ultimate awareness among the relevant consumer group. What this means to trademark owners is that anything relative to brand awareness—marketing, customer feedback, surveys, investigations, budgets, sales figures—is important to support a claim of fame. If a trademark owner can establish the fame of its mark, the likelihood of confusion analysis tilts decidedly in its favor. Even the owner of a widely-protected famous mark must demonstrate a likelihood of confusion, however. Fame is but one, though weighty, factor in the analysis.

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Bush Signs Bill Strengthening Anti-Counterfeiting Efforts

On October 13, 2008, President Bush signed into law the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of 2008 (S 3325), which enhances penalties for infringement and counterfeiting and creates a high-level post to oversee and manage the protection of intellectual property.

The Act amends the Copyright Act by nixing copyright registration as a prerequisite to bringing a criminal action for infringement and allowing the owner of a copyright to bring a civil action regardless of whether the registration certificate involved contains any inaccurate information, unless such errors were made knowingly. The Act expands the remedies for copyright infringement to include not only the impoundment of infringing items, but also providing for the forfeiture of any property used to commit or facilitate the commission of a criminal offense involving copyrighted works. Exportation of unauthorized copies of protected works is now codified as infringement, whereas before only importation of such goods was addressed.

Further, the PRO-IP Act amends the Trademark Act by increasing statutory damages in counterfeiting cases from up to $100,000 per counterfeit mark per type of goods sold to up to $200,000, and in the case of willful counterfeiting, up to $2,000,000. In addition, the Trademark Act will now allow for treble profits or damages for intentional counterfeiting.

The PRO-IP Act creates an Intellectual Property Enforcement Coordinator (IPEC) to serve as part of the Executive Branch. The IPEC replaces the National Intellectual Property Law Enforcement Coordination Council, the group formerly responsible for coordinating US and International IP enforcement efforts, which was co-chaired by the USPTO Director. The IPEC would chair a new committee, comprised of other Senate-confirmed officials, for example, from the DOJ and USPTO, responsible for developing a "Joint Strategic Plan" to fight piracy and counterfeiting. In addition, the PRO-IP Act increases the resources available to federal and local law enforcement officials to combat counterfeiting, and adds ten FBI Agents to the Computer Crime and Intellectual Property Division of the Criminal Division of the Department of Justice.

The bill is largely favored by industry and media leaders who cite the economic contribution brought about by increased enforcement efforts as well as the Act's ability to strengthen the incentives for creativity. Supporters also praise it as a message to those seeking to harm consumers through piracy of goods such as pharmaceuticals and auto parts.

Consumer groups, on the other hand, are concerned that the PRO-IP Act uses public resources to protect private interests and interferes with the separation of powers principle by using legislation to alter the composition of the Executive branch. In addition, opponents are concerned that the Act's impound provision will result in unfair treatment of non-infringing third parties, for example, by punishing parents of children who illegally download music by seizing their home computers.

Passage of the PRO-IP Act comes shortly after the European Council, on September 26, 2008, adopted a resolution to establish a European Observatory on Counterfeiting intended to measure and analyze the problem of rising counterfeiting and piracy in Europe.

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