USPTO Will Recalculate Patent Term Adjustments, Fee-Free

In our January 2010 newsletter, we reported on the Federal Circuit's recent holding that the USPTO erroneously calculated patent term adjustments (PTAs) under the "overlap" provision of 35 U.S.C. 154(b)(2)(A). See also Wyeth v. Kappos, No. 2009-1120 (Fed. Cir., Jan. 7, 2010).

The USPTO is now allowing patent holders to request a fee-free recalculation of a patent's PTA, if the request meets the following criteria:

1. The request must state that the sole basis for requesting the recalculation is the USPTO's pre-Wyeth interpretation of 35 U.S.C. 154(b)(2)(A).

2. The patent must issue before March 2, 2010, and the request must be submitted no later than 180 days after issue.

Notably, patents issued before August 2009 and after March 2, 2010 are not eligible for fee-free PTA recalculation. The USPTO has not yet provided a fee-free mechanism to request PTA recalculation under Wyeth for patents issued before August 2009. Also, the USPTO indicates that as of March 2, 2010, a new computer program will calculate PTAs in compliance with the Wyeth holding, so that recalculations of pre-Wyeth PTAs will no longer be necessary.

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Geo Domain Names Transferred to Trademark Owner in Controversial Decision

In a recent Domain Name UDRP decision, Complainant, Hayward Industries, Inc. of Elizabeth, New Jersey, was successful in obtaining a transfer of the domain names HAYWARD.COM and WWWHAYWARD.COM from Respondent, domain investor Chad Wright, aka WebQuest.com, Inc. In the controversial decision, the three-member panel from WIPO included commentary that the value paid for one of the domain names was a factor in determining the third element of a UDRP, namely, registration and use in bad faith.

Complainant sells a variety of swimming pool products under HAYWARD trademark, which has been registered in the United States since 1977. Respondent had purchased the domain names in 2006, paying $20,000 for HAYWARD.COM, allegedly for its value as a geographic domain related to the location of Hayward, California. Hayward is a city of approximately 150,000 located in Northern California. Respondent is the owner of a number of other geographic domain names that provide pay-per-click (PPC) search engines related to the locale. The subject domain name resolved to a parking page with PPC links unrelated to the geographic location and containing links to Complainant's competitors.

Three years after receipt of a demand letter from Complainant in 2006, requesting the transfer of the domain names, Respondent offered the domain name HAYWARD.COM for sale via an online auction in 2009, with an opening minimum bid of $100,000. Respondent claimed that he had rights or legitimate interests in the domain names because "Hayward" is a geographic mark, which also has a number of other meanings and uses, and that PPC sites constitute a bona fide offering of services. Respondent further claimed that he never knew of Complainant, and that Complainant needed to show that it had famous rights or reputation in the name as being associated with Complainant's trade name and trademarks. Respondent also claimed that is was not significant that the parking page was not yet developed in relation to the geographic location.

In the decision, there was no dispute regarding the first element of a UDRP, namely, that the domain names were identical or confusingly similar to the HAYWARD trademark.

In the analysis of the "Rights or Legitimate Interests" element of a UDRP, the Panel agreed with Respondent that "Hayward" is the name of a city in California and that PPC websites are not in and of themselves unlawful or illegitimate. It noted, however, that the websites had yet to be developed in accordance with the claim of Respondent's counsel more than three years earlier that the disputed domain names were related to the geographic location. Because the websites contained links to Complainant's competitors, rather than being used for links solely in connection with the geographic locale, the Panel found that Respondent had no rights or legitimate interests.

The most controversial part of the decision is in regards to whether domain names were registered and used in bad faith. Complainant had specifically alleged that bad faith existed because Respondent acquired the domain names primarily for the purpose of disrupting the business of a competitor. The Panel determined that Respondent was not a "competitor" as contemplated by the UDRP policy, since there was no direct competition. The Panel determined that there was bad faith, however, noting that PPC parking pages built around a trademark that contain or lead to pages with links to trademark owner's competitors (as contrasted with PPC pages built around a dictionary word and used only in connection with the generic or merely descriptive meaning of the word) do not constitute a bona fide offering of goods or services, or a legitimate non-commercial or fair use. The Panel also rejected Respondent's claim regarding the fame of Complainant's mark, stating that "Respondent bears complete responsibility for how the disputed domain names were used and could have taken, but failed to take, steps to ensure that they were not used in connection with goods or services competitive with those offered under the HAYWARD trademark."

In its final analysis, the Panel found it informative, though not decisive, that the Respondent had purchased the domain name HAYWARD.COM for $20,000 and was attempting to sell it for at least $100,000. The Panel claimed that these figures would seem to indicate that Respondent saw some value in that domain name beyond its existence as the name of the city of Hayward, California, and for purposes other than as a PPC parking page which typically would not be expected to earn a return to justify the large investment.

This controversial finding would seem to be adding an additional subjective factor of value paid for a domain name into the determination of whether there is registration and use of a domain name in bad faith for UDRP analysis and decisions. It would appear, however, that the UDRP outcome may have been different if Respondent had developed the domain names into sites that contained PPC links related to the geographic location, within the interim three years after registration, rather than allowing the parking-page sites to remain with links to competitors of Complainant.

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Who Owns WHO DAT?

Super Bowl XLIV has come and gone, with the underdog New Orleans Saints snatching a surprise 31 to 17 victory over the Indianapolis Colts. With the Super Bowl over, there is no more NFL football until the next pre-season opener in July. So what is a die-hard fan to do now? Why not analyze one play of the National Football League's trademark defense leading up to the Big Game?

Licensing of professional sports trademarks is a multi-billion-dollar industry. The NFL oversees both the sport of professional football and the business of same, including management of the Intellectual Property of the league and its 32 teams. As clearinghouse for and protector of league trademarks, the NFL has taken the middle linebacker position and been very aggressive over the years, going to significant lengths to protect professional-football-related marks from infringement.

WHO DAT is a cheer New Orleans Saints fans cry at football games. Saints fans refer to themselves as "The Who Dat Nation." WHO DAT itself derives from the chant "Who dat say dey gonna beat dem Saints," which—with its Southern edge and New Orleans flavor—Saints fans have used to cheer on their team since its inception in the 1960s. WHO DAT, as shorthand for the cheer, has appeared on various apparel and other items over the years. With the success the Saints enjoyed during this most recent football season and leading up to the Super Bowl, WHO DAT items saturated the market.

With WHO DAT, the NFL brought a full-on blitz against a number of sellers of merchandise bearing that mark. Because of the association between WHO DAT and the NEW ORLEANS SAINTS trademark, which the NFL owns and licenses, the league asserted trademark rights in the WHO DAT term, claiming that any use, outside an official license, was an infringement. During the week before the Super Bowl, the NFL dispatched numerous cease-and-desist letters to businesses like souvenir and T-shirt shops as well as sporting-goods stores from Bourbon Street to Miami, alleging infringement of the WHO DAT mark.

Though its defense is usually quite successful, some very powerful players read the NFL's blitz and moved swiftly to stop it. WHO DAT is a term rooted in a team cheer which, in turn, has deep roots in Louisiana and New Orleans culture, with references to WHO DAT going back to the early 1900s. As such, according to NFL detractors, the league cannot claim sole ownership of WHO DAT. Response to the NFL came from Louisiana Senator David Vitter and Representative Charlie Melancon. WHO DAT, they asserted, is a piece of New Orleans culture and belongs to the people. Even Louisiana Governor Bobby Jindal instructed the Louisiana Attorney General to investigate potential litigation against the NFL for trying to usurp rights to WHO DAT.

With its attack thwarted, the NFL quickly huddled and only days before the Super Bowl clarified its position on WHO DAT, retracting most of its cease and desist demands. Rather than seeking to stop any use of WHO DAT, the NFL agreed it would only seek to cease use of that term when it appeared in connection with any other unlicensed NFL trademarks. In other words, the NFL would only seek to prevent sales of unlicensed merchandise and only where another NFL mark appeared in connection with WHO DAT.

In the end, New Orleans walked away with two victories in the Super Bowl. The Saints won the Lombardi Trophy and the people of New Orleans stopped a formidable defense. Though this may just have to tide football-trademark fans over until the NFL preseason next summer, pitchers and catchers report to Spring Training in only a few days. The return of baseball will certainly mark a welcome return of sports trademark and licensing activity to follow.

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IpHorgan Attorney Named 2010 "Super Lawyer"

We are proud to announce that our Director of Patents, Michael L. Kenaga, was named an Illinois Super Lawyer for 2010. Super Lawyers magazine names the highest-ranking attorneys in each state, as chosen by their peers and through the independent research of Law & Politics. This is the third year Michael has received this honor.

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IpHorgan Named "Go-To" Firm for Intellectual Property

IpHorgan is pleased to announce that it has once again been named a "Go-To" Firm by Corporate Counsel magazine. The annual survey polls in-house counsel at the top 500 U.S. companies for preferred law firms. This year, IpHorgan has been nominated by two of its top clients as a go-to law firm for Intellectual Property.

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Federal Circuit Court of Appeals Completely Removes "Point of Novelty" from Design Patent Analysis

In 2008, the Federal Circuit's decision in Egyptian Goddess, Inc. v. Swisa, Inc. significantly altered the infringement analysis in design patent cases by determining that the "ordinary observer test" was the sole test that should be applied by the finder of fact. In reaching this decision, the "points of novelty" test, which had previously been applied in conjunction with the "ordinary observer" test, became a thing of the past. The "ordinary observer" test is a plain comparison of the patented design with the accused design. The "points of novelty" test focused on identifying the points of novelty in the patented design and determining if the accused product appropriated those points of novelty. The Egyptian Goddess decision did not mandate a similar change in analysis of "anticipation" issues, i.e., all elements of the applied-for design found in the prior art, during prosecution of design patent applications or challenges to validity of issued design patents. In International Seaway Trading Corp. v. Walgreens Corp. and Touchsport Footwear USA, Inc., the Federal Circuit addressed the issues left open in Egyptian Goddess.

At the heart of the Seaway dispute were the plaintiff's patents covering designs for casual, lightweight footwear, typically referred to as "clogs." During examination of the patents-in-suit, the patent examiner considered prior art consisting of various models of Crocs clogs from the Crocs website and determined the applied-for designs to be patentable over this prior art. In February, 2008, Seaway filed a complaint alleging infringement of its design patents by Walgreens and Touchsport, where Touchsport imported the accused product and Walgreens sold the accused product in its stores. Walgreens and Touchsport filed a motion for summary judgment of invalidity of the patents-in-suit in view of the Crocs prior art, which was granted by the district court upon application of the "ordinary observer" test. In granting the summary judgment motion and finding that the patents-in-suit were "anticipated" by the prior art, the district court compared the exterior portions of the prior art clogs to the exterior of the patented designs, but did not compare the insoles of the prior art clogs and the patented designs. Seaway appealed the district court decision, contending that district court failed to properly apply the "points of novelty" test to the invalidity analysis and failed to properly consider both the interior and exterior design elements of the prior art and patented clog designs.

After addressing the history of application of the "ordinary observer" and "points of novelty" tests, the Seaway court continued its analysis by recognizing the longstanding general rule that the same test be used in both the infringement and anticipation contexts. This general rule is derived from the Supreme Court's 120-year-old proclamation in the context of utility patents "[t]hat which infringes, if later, would anticipate, if earlier." In light of Supreme Court precedent, Federal Circuit precedent holding that the same tests must be applied for infringement and anticipation, and the Egyptian Goddess decision dismissing the "points of novelty" test from infringement consideration, the Seaway court determined that the "ordinary observer" test was the logical, sole test for anticipation analysis. Relying solely on the "ordinary observer" test would prevent inconsistency from developing between infringement and anticipation analyses and continues the established practice of maintaining identical tests for infringement and anticipation.

In supporting its decision, the court noted the problems inherent in the "points of novelty" test in the infringement context were present in the anticipation context. The test was difficult to apply as it encouraged focus on minor differences between the prior art reference and the patented design and created the need to canvass the entire body of prior art to identify points of novelty. Eliminating the "points of novelty" test for anticipation also "has the advantage of avoiding the debate over the extent to which a combination of old design features can serve as a point of novelty under the ‘points of novelty' test."

In Seaway the Federal Circuit finished what it had started in Egyptian Goddess by dismissing the "points of novelty" analysis from all design patent analysis. The case was remanded to the district court for further consideration of the interior design features of the prior art Crocs clogs as they compared with the interiors of the patented designs.

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Big Problem, Small Package: A Summary of the Opel/Autec Decision Regarding Use of an Auto Manufacturer's Trademark on Third-party Toy Cars

On January 14, 2010, the German Federal Supreme Court (Bundesgerichtshof) ruled that Autec's toy cars did not infringe auto manufacturer Adam Opel GmbH's trademark rights, despite the appearance of Opel's trademark on Autec's toy car's grill.

The claimant, Adam Opel GmbH (Opel), a German automobile company which is now a wholly-owned subsidiary of General Motors, was the proprietor of the device mark referred to as the "Opel-Blitz" (pictured below) which covered both motor vehicles and toys.

AUTEC AG (Autec), a German toy-car company, produces and manufactures toy cars under the trademark CARTRONIC. Autec had allegedly produced and distributed miniature toy copies of Opel's Astra V8 Coupé (pictured below) all of which featured the Opel-Blitz mark on the miniature's grill.

Both Opel's automobile and Autec's toy car miniature displayed the Opel-Blitz mark in the same location on the respective car and toy.

Opel objected to Autec's manufacture and distribution of the Opel Astra V8 Coupé miniature, based on its existing trademark rights in the Opel-Blitz mark which covered both motor vehicles and toys, fearing confusion would arise among consumers.

Before ruling on the matter, the court of first instance, the Regional Court Nürnberg-Fürth, requested a preliminary ruling from the European Court of Justice (ECJ) on the matter. In decision C-48/05, the ECJ ruled that "affixing by a third party of a sign identical to a trade mark registered for toys to scale models of vehicles cannot be prohibited under Article (5)(1)(a) of the directive unless it affects or is liable to affect the functions of that trade mark." The ECJ also determined that it was the responsibility of the Regional Court Nürnberg-Fürth to determine how the average consumer of toys in Germany would respond to the issue. Namely, would this average consumer view the logo affixed to the toy model car's grill and assume that the toy was either 1) manufactured by Opel, or 2) that Opel and Autec were linked economically by license or other legal design? The Regional Court Nürnberg-Fürth in its May 2007 decision concluded, "No," holding that the average consumer would believe the logo featured on the toy car was simply part of the model, and thus would not assume that this logo signified a link between the toy car company and the automobile company and car upon which the model was based.

In its January 14, 2010 decision, the Bundesgerichtshof affirmed the Regional Court's ruling denying that the Opel-Blitz trademark had been infringed. Even though Bundesgerichtshof noted that the Defendant had affixed an identical mark, Opel's logo, on identical goods, namely, toys, this particular use did not rise to trademark infringement.

The Bundesgerichtshof reasoned that the use did not affect the main function of the logo, namely, to indicate the "trade origin" of the goods (toy cars). The use also failed to garner a negative consumer reaction, as the German toy consumer would only understand the display of Opel's logo on the toy car as an attempt to mirror the original Astra V8 in miniature version as much as possible. The consumer would not see the logo and assume that the toy car was manufactured by Opel.

Finally, Autec's use of the logo on its model Astra V8 toys did not rise to infringement of a mark with a reputation, as the use did not have detrimental effect on the reputation acquired under Opel's mark for motor vehicles. Thus, the Bundesgerichtshof dismissed the case, denying any trademark infringement relief to Opel.

A comment on the ECJ's initial ruling at the outset of the matter with respect to Article 5(1)(a) of the Trade marks Directive: The ECJ's decision is consistent with earlier case law which notes that infringement exists under Article 5(1)(a) only when the use by a third party harms a function of the trade mark, the guarantee of origin function being the most prominent of functions. The ECJ also appears to have widened this exception, insisting that the public must see a commercial link between plaintiff and defendant. Thus, the ECJ may have introduced, albeit indirectly, a "risk of confusion element" under Article 5(1)(a) of the Directive. Additional discussion on this point may be viewed at http://jiplp.oxfordjournals.org/cgi/content/abstract/3/8/507.

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Come and Get It! Extra PTA Days, Courtesy of the Federal Circuit

Patent holders Wyeth and Elan Pharma successfully challenged the USPTO's method for calculating patent term adjustments (PTAs) this month, adding about 8-9 months each to the terms of 2 patents covering treatments for Alzheimer's disease. Wyeth and Elan Pharma International Limited v. Kappos, No. 2009-1120 (Fed. Cir. 2010).

The Federal Circuit held that USPTO rules applied 35 U.S.C. §154(b) "overlap" provisions too broadly. Under 35 U.S.C. §154(b)(1) and (2), a patent term may be extended by the number of days lost due to (i) USPTO delays during prosecution, or (ii) prosecution occurring more than 3 years after filing. However, where only one day was lost, a patentee cannot recoup two days, even if the lost day falls under ("overlaps") both criteria. The decade-old USPTO rules started the "overlap" clock 3 years too early, said the Federal Circuit, resulting in calculations according fewer PTA days than allowed under 35 U.S.C. §154(b).

We expect that the term of many issued patents will be extended as a result of this ruling. The USPTO has advised that it is changing its method for calculating PTAs and that it will issue guidance for expediting recalculation requests in the near future.

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Undue Pressure or Undue Blame – Foreign Countries React to the Prospects of US-like Copyright Legislation

Reports surfaced this month taking a somewhat accusatory tone against the United States and its alleged tactics for getting other countries to enact copyright legislation similar to its own. Tico Times, a leading weekly paper in Costa Rica reported on January 15, 2010 that the United States is delaying market access to Costa Rican sugar producers until the country's legislators approve the 14th Amendment to the Central America Free Trade Agreement ("CAFTA"), which covers copyright law.

Initially, Costa Rica was the only signatory that did not ratify CAFTA due to strong opposition in the country from various groups, including farmers, students, and trade unions. The legislation was partially pushed through in October 2007, with the section covering several provisions related to intellectual property, Amendment 14, left out and never officially signed into law. Similar to other TRIPS-plus agreements, the provisions go beyond what is required under International agreements. For example, the Agreement requires that member countries develop a uniform domain name dispute resolution policy to assist in settling domain disputes, provide copyright protection for the life of the author plus 70 years, enact provisions on anti-circumvention, under which member countries must prohibit tampering with technology used to protect copyrighted works, and provide for civil and criminal liability.

The country originally faced a December 31, 2009 deadline to approve the controversial portion, but discussions have been delayed, sources cite, due to the Costa Rica's extensive government process and political disagreement. Sources in Costa Rica note that there are currently 121 motions related to the law that need approval. For each motion, there must be a vote in the Commission and up to 45 minutes of debate on the floor of the assembly must be allowed. Moreover, Costa Rica is currently in the middle of a presidential election and Parliament is unlikely to convene before its completion.

Adding to the administrative barriers is the lack of support for the provisions within the region. Costa Rican papers are reporting that the prospect of the copyright provisions being passed is setting off protests by students who are concerned about the effect of proposed changes on their education by way of altering current study and research practices. Health officials in the region are also expressing disdain for the proposed provisions, claiming that they will "bankrupt the public health system" by making it impossible to develop generic low-cost versions of pharmaceuticals without being in contravention of the trademark and patent provisions in the Act.

Currently, a reported 11,880 metric tons of sugar which were ready for export to the United States are on hold, unable to be sold. While this plays well into a powerful-country-threatens-small-lesser-developed-country story, the US Embassy has denied that failure to enact copyright reform is a cause for the delay. Rather, the US indicated that the delay is simply a matter of the fact that the country has already met its allocated sugar export quotas, which were set back in September. The quotas are designed to protect local producers, and to allow countries to export a specified quantity of a product to the US at a low tariff, while subjecting all imports above the pre-determined threshold to a higher tariff.

Costa Rica isn't the only region which the US is accused of bullying into copyright reform. The United States has also received some heat from the Bahamas. According to local reports, the country recently proposed IP enforcement reforms after alleged pressure from the United States Trade Representative, who was reported to have accused the Bahamas of being "lax" in enforcing intellectual property laws. The Chamber of Commerce President has since taken steps to strengthen the country's enforcement regime, but has also placed some of the blame back on the US, arguing that 90-95% of the counterfeit products sold in the Bahamas come from the United States.

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WIPO to Discuss Protection of Pharmaceutical Test Data

On February 8, 2010, the World Intellectual Property Organization is holding a Symposium on test data protection in Geneva.

Under Article 39.3 of the WTO TRIPS Agreement, undisclosed test data submitted to gain marketing approval for a new drug is generally considered to be protected information. The US FDA and other nations' drug regulatory bodies keep such data secret for several years. However, generic pharmaceutical companies would like access to such data as early as possible, to facilitate generic drug entry into the marketplace.

The WIPO Symposium is meant to provide a forum for further discussion of this unique form of intellectual property protection.

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Federal Circuit Clarifies Standards for Using Internet Materials as Specimens of Use

On December 23, 2009, the Federal Circuit Court of Appeals gave trademark applicant Michael Sones an early Christmas gift in reversing a Trademark Trial and Appeal Board decision maintaining a refusal to accept Mr. Sones's specimen of use submitted for his application to register the mark ONE NATION UNDER GOD for "charity bracelets." In the Federal Circuit decision In re Michael Sones, the court held that a picture of goods is not a mandatory requirement for a website-based specimen of use. The proper test for an acceptable website-based specimen is "just as any other specimen, …it must in some way evince that the [applied-for] mark is 'associated' with the goods and services as an indicator of source."

The specimen of use of the applied-for mark submitted with a statement of use consisted of pages from the applicant's website including a product listing consisting of the wording "ONE NATION UNDER GOD™ CHARITY BRACELET for $2.00" and under this listing the wording "ONE NATION UNDER GOD™ CHARITY BRACELET, CHOICE OF BLUE OR RED $2.00 EACH. No photograph of the product was displayed on the submitted website materials. The web page also displayed a "shopping cart" function for online ordering, including a "View Cart" and "Add to Cart" function.

During prosecution, the trademark examiner treated Sones's specimen of use as a 'web catalog' and strictly adhered to a rule from the Trademark Manual of Examining Procedures (TMEP) requiring a picture of the relevant goods as part of an acceptable catalog or similar specimen of use. In following this rule, the trademark examiner noted that the submitted specimen did not show a picture of the goods in close proximity to the mark— which, as described above, is entirely correct. In the Final Office Action, the trademark examiner took a more entrenched position, emphasizing that "a display is acceptable 'only if' it includes 'a picture of the relevant goods.'" (emphasis in original quote) The Board's decision followed the bright line rule applied by the trademark examiner and concluded that Sones failed to satisfy "the criteria …that the specimen (1) include a picture of the relevant goods and (2) show the mark sufficiently near the picture of the goods to associate the mark with the goods." The Board also noted what it believed to be an inadequacy of Sones's description of the goods on the submitted materials.

In reaching its decision, the Federal Circuit reviewed and commented on the origins of the rule applied by the trademark examiner and the Board. This rule originated in a federal district court decision Land's End, Inc. v. Manbeck, addressing a specimen of use from a mail order catalog. While the Land's End decision made reference to the catalog page showing a picture of the goods and corresponding description—thus constituting "a display associated with the goods"— the decision hinged on the catalog page's "point of sale" characteristics through the inclusion of order forms as part of the catalog. The USPTO interpreted and adopted the Land's End decision and created a new section in the TMEP specifically for "catalogs as specimens." Trademark examiners routinely apply this rule to electronic specimens of use, regardless of whether they are catalog pages, and the Board has regularly applied this standard on review.

In the Sones decision, the Federal Circuit clearly states that it does not believe the Land's End decision established a clear rule requiring that specimens of use from the Internet always include a picture of the goods. The Federal Circuit pointed to the Land's End decision's reliance on the "point of sale" nature of the specimen, and less on the fact that the catalog page included a picture. The Federal Circuit also indicated that Internet specimens should be viewed in the same manner as actual goods sold in a brick-and-mortar store. Product labels and product packaging displaying the mark are readily accepted without a picture of the goods. Likewise, product displays such as tradeshow booths, have been found to be acceptable, even though goods were not present or visible at the tradeshow booth. The TMEP recognizes that a website is akin to an electronic retail store and that a web page is a "shelf-talker" or "banner" encouraging consumers to buy a product. The TMEP also recognizes that ordering from a website is the "equivalent" to picking up a box in a store, and boxes as product packaging do not need a photograph of the goods per se to link a trademark to the goods inside. Accordingly, the Federal Circuit questioned the need for a photograph in the context of Internet specimens. The Federal Circuit further pointed out that the TMEP also includes a section concerning specimens of use entitled "Electronic Displays" which makes reference to websites, but does not recite the elements of the test from Land's End.

The Federal Circuit acknowledged that a "visual depiction" of a product is an important consideration in determining the sufficiency of an Internet specimen and the absence of a picture could certainly support a lack of association between a mark with the source of the goods. Nevertheless, a picture is not the only means for establishing an association between a mark and the goods, and a bright-line rule as applied by the trademark examiner and maintained by the Board was not correct. The Federal Circuit identified factors, as examples, to be considered in examining an Internet specimen of use, and possibly offsetting the lack of picture, as the "point of sale" nature of the specimen and whether the actual features or inherent characteristics of the goods are recognizable from the textual description.

The Federal Circuit vacated the decision of the Board and remanded the case for further proceeding consistent with the Federal Circuit's decision.

This decision raises interesting issues that could shape future USPTO analysis of specimens of use and TMEP sections. The Federal Circuit is clearly looking to substance over form in specimens of use. Will this ease review of non-traditional or "new media" specimens of use? The Federal Circuit has made a distinction between a catalog as a specimen of use and an Internet reference as a specimen of use, but did not offer guidance on Internet-based catalogs. Whereas the TMEP section pertaining to catalogs as specimens of use includes factors that do not fully reflect the Land's End decision, might an amendment to this TMEP section be forthcoming? These issues are likely to be addressed as the Board and USPTO digest the Federal Circuit's decision.

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Complications Under the Physician's Immunity Statute: Still Rare, Potentially Costly

Attorneys practicing in the medical-patent field routinely submit method-of-treatment claims for prosecution before the U.S. Patent and Trademark Office, as such are considered patentable subject matter under U.S. law. When drafting and enforcing such claims, however, patent practitioners should be aware of the "physician's immunity" statute in force in the U.S. since 1996, as the statute may prevent the enforcement of remedies for infringement of certain method-of-treatment claims against physicians and hospitals.

Under 35 U.S.C. 287(c), a medical practitioner who infringes a patent by performing a medical or surgical procedure on a human body (the Section also provides immunity for procedures performed on a nonhuman animal used in medical research or instruction directly relating to the treatment of humans) is immune from liability for that infringement, including freedom from injunctions, damages and attorneys fees. The immunity does not apply if the performance included the use of a patented product (machine, manufacture, composition of matter) in violation of patented claims to the product. While nicknamed to indicate physician's immunity, this statute provides immunity to non-physician medical treatment providers as well as health care entities related to the performance (e.g. hospitals). Section 287(c) also provides that immunity does not apply to certain device manufacturers, pharmacy or clinical lab services, or to US patents having effective filing dates prior to September 30, 1996.

U.S. law provides little guidance as to the metes and bounds of 35 U.S.C. 287(c). The legislative history of the statute provides some examples of intended application of the statute, for instance stating that a physician that transplanted a healthy heart into a cardiac patient using a conventional anesthetic would likely enjoy Section 287(c) immunity and not be liable for infringing a method claim covering the transplant procedure. The legislative history also states that if the method claim were directed to the use of a novel and non-obvious anesthetic, immunity under 35 U.S.C. 287(c) may not apply, and patent holders could receive traditional remedies for infringement.

The Supreme Court was given the opportunity to comment on subject matter that might fall under Section 287(c) in Laboratory Corporation of America Holdings v. Metabolite Laboratories, Inc., et al., 548 U.S. 124, 126 S.Ct. 2921 (US S.Ct. 2006). At issue was the validity of claim 13 of U.S. Patent No. 4,940,658, which reads as follows:

A method for detecting a deficiency of cobalamin or folate in warm-blooded animals comprising the steps of:

assaying a body fluid for an elevated level of total homocysteine; and

correlating an elevated level of total homocysteine in said body fluid with a deficiency of cobalamin or folate.

Commentators hoped the Supreme Court would consider whether this diagnostic method claim would be considered protected medical activity under 35 U.S.C. 287(c), and whether physicians and hospitals may enjoy immunity from liability after infringing this claim. However, the Supreme Court dismissed the case on procedural grounds and did not consider 35 U.S.C. 287(c). Dissenting Supreme Court Justices commented that this claim should have been considered by the Court to make the public aware whether such a claim falls under 35 U.S.C. 287(c).

In Emtel, Inc. v. Lipidlabs, Inc., 2008 U.S. Dist. LEXIS 77597 (S. Dist. Tex. 2008), a district court discussed 35 U.S.C. 287(c) in some detail. In Emtel, the holder of U.S. Patent No. 7,129,970 alleged infringement of claims including a method claim self-categorized as a business method, directed in part to delivering medical services by having a physician diagnose medical problems from a distance. The alleged infringer filed a motion for summary judgment, requesting dismissal of the suit in part due to immunity as a provider of health services under 35 U.S.C. 287(c). The district court denied the motion for summary judgment under 35 U.S.C. 287(c), stating that the claims at issue were not infringed and therefore section 287(c) immunity did not apply.

Also, in response to the patent holder's assertion that the physician's immunity statute does not apply because "a Diagnosis is not a 'medical or surgical procedure,'" the Emtel Court noted that a procedure can refer to diagnosis in the medical field, citing medical dictionary definitions and reviewing legislative history records to rebut the patent holder's arguments. The Court also construed the phrase "the performance of a medical or surgical procedure on a body," suggesting that a diagnosing physician need not physically interact with a patient to deliver medical or surgical treatment under 287(c), and that a company providing communication links between physician and patient may qualify for 287(c) immunity.

General Recommendations

When drafting medical method claims for filing in the United States, we recommend considering whether the claims may fall under Section 287(c) (for instance, if they are directed to a medical or surgical method, or even a diagnostic method), and whether a potential infringer might be a physician or a hospital. Where Section 287(c) may be a later issue, we recommend that a claim set include claims having patented products and non-treatment steps where possible. Also, claims should be included in the application that will be geared toward manufacturers and others in the medical industry that do not qualify for 287(c) immunity.

We also recommend that patent litigators seeking immunity under Section 287(c) remember that the immunity likely only applies if infringement has been found. The statute does not prevent patent hol¬ders from alleging infringement or allow alleged infringers to avoid suit altogether. Rather, the statute provides immunity from the enforcement of remedies for infringement against medical practitioners and related health care entities.

Multiple forms of patent protection should be considered, including utility, design and plant patents. It may be that a design patent provides the only means of patenting the product, in contrast to patenting the use of the product during a medical or surgical procedure.

Further, global marketing of a new invention should be considered during the initial claim drafting of the US utility application. In particular, patent protection and enforcement of such claims are treated differently in various countries. For example, most foreign patent offices do not allow method-of-treatment claims, but rather require "use" style claims instead. Therefore, certain claims may be composed in the US application in anticipation of the subsequent examination in specific foreign patent offices.

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U.S. Design Patent— the New Patent King

A case may be made that recent court decisions have made obtaining and enforcing a utility patent more difficult. Conversely, recent court decisions have been largely favorable as to design patents. Although design patents protect ornamental features while utility patents cover functional aspects of an invention, this article suggests that design patent protection deserves greater consideration.

Design patents are on the rise. This is largely due to the fact that the burden on design patent owners to prove infringement has been reduced, courtesy of the Federal Circuit's 2008 decision in Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc), cert. denied 129 S.Ct. 1917 (2009) that changed the test for design patent infringement, by dropping one of two previously required infringement tests. In particular, the Federal Circuit's point-of-novelty test was dropped in favor of the Court's ordinary-observer test. (Although the Federal Circuit also suggests that a test similar to the point-of-novelty test should be taken into consideration during the ordinary-observer test.) The patent in Egyptian Goddess was directed to the ornamental features of a nail buffer. While not a typical product for a design patent, the district court held that the infringer did not demonstrate the patent to be invalid. The Federal Circuit affirmed the finding of non-infringement.

In contrast, ongoing developments in patent law have been less favorable to owners of utility patents. The 2007 U.S. Supreme Court decision in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 127 S. Ct. 1727 (2007) has changed the tests applied by the USPTO when deciding to grant a patent, and by the US courts when deciding whether to invalidate a patent. The ruling has created great consternation within the patent community, raising concerns that it would be very difficult to obtain a patent, and that issued patents en masse could be held invalid. The KSR decision considered a claim directed to a combination of an electronic sensor with an adjustable automobile pedal so that pedal's position can be transmitted to a computer that controls the throttle in the vehicle's engine. The Court held that the claim was invalid as a combination of familiar elements according to known methods which does no more than yield predictable results.

It remains unresolved whether the US Supreme Court intended KSR's patentability analysis to apply to design patents. The Federal Circuit declined to address this issue in its 2009 decision in Titan Tire Corp. v. Case New Holland, Inc., 556 F.3d 1372, 1384 (Fed. Cir. 2009). That case was directed to a design patent covering the ornamental features of a tractor tire. The Federal Circuit indicated that the issue of whether it was necessary to consider the KSR analysis was not relevant. Instead, the issue of obviousness, in the context of a preliminary injunction, was affirmed as to the district court's Durling analysis (Durling v. Spectrum Furniture Co., 101 F.3d 100 (Fed. Cir. 1996)). The Titan Tire Corporation decision suggests that perhaps the analysis of KSR, which was directed to a utility patent, may not be applied to design patents.

Make no mistake. Design patents are a potent tool and should be given serious consideration as a means of intellectual property protection for a vast array of products, provided there is an ornamental aspect of the invention which is not dictated by function.

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Random House Asserts Digital Rights in Its Older Titles

In the mid 1990s, with the dawn of mainstream reliance on the internet and electronic communication, many of the large publishing companies revised their standard publishing contracts with authors to explicitly name rights in digital publication, along with the traditional printing rights. For many publishers, one of the constant areas for profit in a struggling industry remains its authors' backlists, the republication and sale of works long after their initial run. Now, with the swift rise in popularity of e-books in step with the growing use of digital book readers, many publishing companies find themselves scrambling for a way to claim digital rights for works in their backlists whose contracts did not explicitly include such rights, as some of these works had been published before the existence of the digital format.

The battle between authors and publishers over digital rights has now come to head in several inter-related events. On December 11 Random House sent a letter to many literary agents, announcing its position that all digital rights in its backlists vested with Random House. Many of the contracts that do not explicitly name the digital publishing rights still grant the rights to publish books "in book form" or "in any and all editions" according to the comments made in the letter. Shortly thereafter, the Authors Guild revealed its own response to Random House's action on December 15, refuting Random House's claim by pointing to a 2002 New York case also involving Random House and Rosetta Books LLC (Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490, 62 U.S.P.Q.2d (BNA) 1063 (2d Cir. 2002)). In that case, Random House had pointed to the same clause in its contracts granting publishing rights "in book form", that it is currently using to justify its claim to e-book rights in backlist titles. The Southern District of New York refused to grant a preliminary injunction to stop Rosetta from publishing the digital books of a number of authors in Random House's own backlist, finding that Random House did not have the electronic rights to the works of William Styron, Kurt Vonnegut Jr. and Robert Parker. Despite having the rights for the earlier print editions of the books "in book form," the digital rights to works that had been created before the advent of digital publishing were not automatically encompassed within the contracts and therefore vested with the author. The court of appeals subsequently affirmed the refusal to grant the injunctions against Rosetta. However, in late 2002 Random House and Rosetta settled their litigation and avoided trial on the merits. The case was also decided under New York state law, and could conceivably lead to a different approach elsewhere where state courts take a less restrictive approach in interpreting contracts. Indeed the New York appeals court pointed out that Random House did have some appeal to its argument that an e-book is merely "a 'form' of a book, and therefore within the coverage of [those] licenses."

One could argue that Random House's own actions do contradict its claim that the digital rights are inherently included in prior grants, considering it has explicitly contacted authors requesting that the digital rights be released to Random House, and has also amended its standard contracts in 1994 to explicitly include such rights where necessary. While such actions may be seen as a way to just remove all doubt as to who controls the rights rather than as an admission that the digital rights are not included in prior grants, it certainly indicates that the issue and scope of prior contracts are not as clear cut as Random House is claiming.

Random House's announcement may also be a reaction to action by one of its authors, William Styron, author of "Sophie's Choice," and one of the authors involved in the earlier case with Rosetta. Styron recently entered an agreement with a different publishing company to release the e-book version of several of his novels that are in Random House's backlist. Around the same time, Steven Covey, the author of the popular "Seven Habits" series of books, announced that he had reached an independent and exclusive deal with Amazon to publish his books in digital format, presumably for use with the Kindle reading device. In reply, Simon & Schuster, the publisher of Covey's traditionally-published works, announced its intent to still publish its backlists in digital formats.

The issue seems to have not yet come to blows with publishers in Britain, where the e-book readers are less ubiquitous and a more common view is that publishers do not maintain the digital rights in their backlists unless they had been specifically granted. On the flip side, however, there also appears to be more reluctance in Britain for authors to turn to other e-publishing sourced beyond their print publisher. While such a gentlemen's agreement is working for the time being, it may only take one author on the scale of someone like Steven Covey to step towards seeking digital publishing deals elsewhere and challenge this arrangement.

Despite the New York case's prior finding, the fact that the parties did eventually reach a settlement and never went to trial leaves the issue somewhat open-ended, and Random House does maintain that since the matter eventually ended in a settlement, it is not a final ruling on the merits, only on the issue of the injunction. In refusing the injunction, the Rosetta court stated that the digital publishing rights for works created before the existence of digital publishing remained with authors, but this was under a fairly restrictive interpretation of the scope of the contracts. Would the same be true for works that were created after the existence of digital publishing, but before publishing contacts were amended to explicitly name such rights? If a contract granted the general publishing right using the catchall phrase of "in book form" or "in any and all editions," one could reasonably view this as encompassing digital publishing, provided the format was in existence at the time of the contract. While digital formats were certainly not contemplated for many books in a publishing company's backlist that were created before the dawn of digital publishing, there is a window between the start of digital publishing and the time when contracts were amended to specifically address digital rights.

With the stronghold by Amazon's Kindle in the e-publishing industry, followed closely by Barnes and Noble's new Nook and the Sony Reader, and the expected foray of Apple into the market in 2010, this issue is only beginning to develop. Furthermore, as digital versions are often far less costly for publishers to produce, authors are concerned that the royalty percentages provided by old contracts for the print editions may simply be inequitable and view the digital printing rights as a way to re-negotiate a more favorable percentage. Added on this, many large publishing companies intend to delay release of the digital format for many new titles, in an attempt to hold onto any potential profit from the hardback formats. In light of each party's at least partial motivation to increase its own profits, large publishing companies may have been better off approaching author's and agents to rework old agreements, rather than making unilateral announcements claiming all rights under former terms.

Random House's letter may be just one more attempt to revive a struggling industry, and the first shot in what will likely be a long war over the ownership of the increasingly lucrative digital rights.

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Trademark Protection Proposals for New gTLDs Open for Comment

As we have previously reported, the timeline for launch of new gTLDs by ICANN has slowed while there is continuing evaluation of overarching issues, including trademark protection. In its Third Draft Applicant Guidebook, ICANN staff had proposed a number of trademark-protection mechanisms, including provisions for creation of a Trademark Clearinghouse ("TC"), which would make verification of rights easier when a new gTLD is in a sunrise period prior to launch. The Draft also proposed the creation of a Uniform Rapid Suspension System, which is a post-delegation dispute-resolution mechanism intended to more swiftly and less costly address the most obvious cases of trademark infringement or cybersquatting in domain names. Subsequent to the latest Guidebook proposal, a Special Trademarks Issues (STI) review team was created to further analyze the proposed rights-protection mechanisms. The STI team consisted of representatives from the various ICANN constituencies, including business and intellectual-property constituencies. The STI recently issued its recommendations, which are available at www.icann.org and open for comment until January 26, 2010. These recommendations provide greater detail to the processes than previous recommendations did, and in some cases are more limited in scope of protection.

In the Trademark Clearinghouse Proposal, the team consensus was that the Clearinghouse was not a rights-protection mechanism, but was to be used as a beneficial implementation tool for rights-protection mechanisms, such as during a Sunrise or Trademark Claims period of a new gTLD. The Clearinghouse is to be operated by an arms-length contractor, who would validate the trademarks included in the TC and create a centralized trademark database to provide information to the new gTLD registries. The database would include only "text mark" trademarks from all jurisdictions, which were nationally or multinationally registered, including countries where there is no substantive review. However, equal protection would not be required to be provided by registries to marks registered in a country with no substantive review. Common-law rights would be excluded from the database, except for court-validated common-law marks.

The TC database would only be used for validation during pre-launch of a new gTLD, and would not be used post-launch to screen requested domain names for trademark matches. The matches reported to a registry would only include identical matches between the domain name string and validated trademarks. The proposal states that inclusion of a validated mark in the TC database is not proof of any right, nor does it confer any rights on the trademark holder. Conversely, failure to file should not be perceived to be a lack of vigilance by trademark holders.

A minority opinion from the Intellectual Property Constituency objects to the unequal protection of no-substantive-review marks. It notes that this might prejudice marks from a large number countries, including most of Europe, which do not engage in substantive review. It might also prejudice small businesses and not-for-profits whose budgets may not allow for a global registration program beyond their home country.

The Business Constituency and At-Large Advisory Committee also objected to the "identical match" provision. They suggested that a "match" between a validated mark and requested domain name should include the Mark plus significant words from the class description in the Nice Classification system, as was used in the .ASIA Sunrise period. This would further deter cybersquatters and curb registrations of domain names that include a trademark along with common words associated with it.

In the proposed Uniform Rapid Suspension Procedure (URS), the consensus of the STI Review Team is that the procedure would be a beneficial rights-protection mechanism for inclusion in the new gTLD program. Whereas the Draft Guidebook proposal made the URS optional for new registries, the STI team calls for mandatory use of the URS for all new gTLDs. It is intended to be a post-delegation dispute-resolution mechanism to more swiftly and less costly address the most obvious cases of trademark infringement or cybersquatting in domain names. However, some constituencies question its effectiveness, cost and time savings when comparing it to the UDRP procedure.

In a URS, a Complainant would need to satisfy the same elements as in a UDRP, but with a higher burden of proof. Namely, a URS Complainant would need to establish clear and convincing evidence that there is no genuine issue of material fact requiring further consideration. Upon the filing of a complaint, and passing initial examination, an "Initial Freeze" status would be applied to the domain name. The freeze would dictate that the domain name cannot be transferred and the WHOIS record cannot change, but the domain name would still resolve to the original IP address and all features of the domain would still function (e.g. resolving to a website, routing e-mail). However, the effect of a decision in favor of the Complainant is limited. Rather than allowing a transfer of the domain name as in a UDRP, a successful Complaint in a URS would only result in the domain name being placed in "hold" status. As a result, the domain name would still remain in the Registrant's name in WHOIS information during the course of the registration, but would no longer resolve to the original website, pointing instead to an informational web page provided by the URS service provider about the URS process.

While the initial intent was to create a streamlined and swifter version of the UDRP, the timelines of the proposal merely create a shorter timeframe for the examination process, while still allowing 20 days for the registrant to file an answer. Even if a registrant were to default, there is still the possibility of filing an answer within 30 days of a decision, or even later upon the payment of additional fees. Either party would have the right to seek a de novo appeal, along with the option of pursuing a UDRP or court action. Initial URS complaints would be decided by one panelist, while an appeal would be decided by a three-person panel. The URS would also call for penalties against trademark holders that try to abuse the process, along with penalties against Examiners who abused the process. The full URS process would also be subject to a review by ICANN one year after the first date of operation.

Minority positions were voiced again by the Business Constituency and At-Large Advisory Committee, requesting the transfer of the domain name in a URS. Otherwise, it would be necessary to file a UDRP if a cybersquatter registered a domain name that the trademark holder intended to utilize. With similar costs necessary to investigate and prepare a complaint for a URS, the cost savings in filing fees and minimal time savings may not be worth the limited value of placing the domain name on hold, while allowing it to be free for future registration upon expiration.

While the various constituency groups and stakeholders have had their voice in preparing a consensus Trademark Protection Proposal for use with new gTLDs, there is not full consensus on all issues. Trademark holders and other interested parties are encouraged to provide their comments to ICANN during the public comment period. The proposals presented by the STI team, along with public comments, will then be considered by ICANN when it finalizes the proposed model for trademark protection in the new gTLD program.

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Phony Floridians Foiled

Have you ever paid Federated Institute for Patent and Trademark Registry for services rendered in acquiring a patent or mark? Hundreds of companies paid on phony invoices issued by this Florida company, a Florida court recently found, allegedly to the tune of $2.6 million.

The scheme: Companies applying for marks or patents from various government agencies received invoices from Federated Institute for Patent and Trademark Registry, indicating money was "due" for "charges of registration." The companies paid the invoices, believing them to be legitimate charges associated with their intellectual property. According to official reports, Federated Institute did not render a service or pay fees with monies it collected, but rather spirited its booty across the sea into Swiss bank accounts.

The Florida court considered testimony provided by a WIPO PCT expert and held this behavior violated Florida's Deceptive and Unfair Trade Practices Act. Full restitution is being sought for targets of the scheme.

We recommend that all IP holders be aware that hoaxers are looking to the lucrative IP field for potential targets. More information about schemes to mislead or cheat IP holders is available at http://wipo.int/pct/en/warning/pct_warning.htm.

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Supreme Court Hears Oral Arguments In In re Bilski Business Methods Patents Case

On November 9, 2009, the Supreme Court heard oral arguments on behalf of the patent applicants and the U.S. Patent Office in In re Bilski. At the heart of In re Bilski is how a business method may fall within the definition of "process" as it is used in Section 101 of the U.S. Patent Act. Section 101 of the Patent Act broadly defines proper patentable subject matter in the United States as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Due to the breadth of this definition, it is often left to the courts to render decisions concerning how new technologies or advancements fit within this definition and ultimately left to Congress to enact legislation that further restricts or defines the patentability of these new technologies or advancements. While the term "process" has an ordinary meaning that is quite broad, the Supreme Court has previously limited the definition to something narrower than its ordinary meaning by concluding that a patent claim covering a "process" is not patent-eligible if it claims "laws of nature, natural phenomena, [or] abstract ideas."

The Bilski case stems from an application for patent protection filed by Bernard L. Bilski and Rand A. Warsaw in 1997 and covering a method of hedging risk in the field of commodities trading. The U.S. Patent Office refused Bilski's claims as failing to meet the patent eligibility standard of Section 101. The patent examiner supported the refusal of all claims in the application stating 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 applicants appealed the patent examiner's decision to the Board of Patent Appeals and Interferences at the U.S. Patent Office. While the Board rejected the patent examiner's reasoning, it did agree that the claimed method was not proper patentable subject matter. Specifically, the Board concluded that the applicants' claims did not involve any patent-eligible transformation, holding that transformation of "non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants" is not patent-eligible subject matter. The Board also held that Applicants' claims "preempt[] any and every possible way of performing the steps of the [claimed process], by human or by any kind of machine or by any combination thereof," and thus concluded that they only claim an abstract idea ineligible for patent protection. Finally, the Board held that Applicants' process as claimed did not produce a "useful, concrete and tangible result," and for this reason as well was not drawn to patent-eligible subject matter.

The applicants timely appealed the decision of the Board to the Federal Circuit Court of Appeals. The Federal Circuit, sitting en banc, affirmed the Board's decision that the applicants' claims did not meet the patent eligibility standard of Section 101. The Federal Circuit held that a "process" must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (the "machine-or-transformation" test), to be eligible for patenting under Section 101 of the Patent Act. Of particular significance during prosecution of the application, the appeal to the Board and appeal to the Federal Circuit was the admission by the applicants that the claimed "process" was not limited to application on a computer, removing the "machine" portion of the "machine-or-transformation" test from consideration by the Federal Circuit. Because the applicants' claims do not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance, the Federal Circuit concluded that "transformation" portion of the "machine-or-transformation" test was not met.

The applicants appealed the Federal Circuit's decision to the Supreme Court, asking the Supreme Court to consider whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under Section 101 of the Patent Act. The matter was fully briefed on behalf of the applicants and the Patent Office earlier this year. A total of 67 "friends of the court" or amicus curiae briefs have been filed by patent owners, bar associations, interested organizations, academics, and individuals, both supporting and refuting the Federal Circuit's "machine-or-transformation" test. Supportive briefs generally fell in line with the position that the "machine-or-transformation" test would provide meaningful limits to the scope of patent claims as they apply to methods and processes. Briefs refuting the test generally criticize it as being arbitrary, more restrictive than what has been previously applied by the Federal Circuit in similar matters, and in conflict with accepted definitions of statutory terms. Some amicus curiae briefs plead the case of application or non-application of the "machine-or-transformation" test to software patents, clearly requesting the Supreme Court to render a decision beyond the scope of the case at issue.

At oral argument, Justices Sotomayor, Kennedy and Breyer were particularly active, with only slightly lesser participation by Justices Scalia and Ginsburg and Chief Justice Roberts. The Court clearly understood the far reaching implications this decision will have on business methods and methods covering new technologies yet to be developed. During the presentation of the applicants' argument, the Justices peppered applicants' counsel with questions on where to establish a limitation on patentable subject matter, should the "machine-or-transformation" test not be accepted. The Justices all appeared concerned of the consequences of setting no limits and affording patent protection to abstract ideas. The Justices appeared equally concerned that the "machine-or-transformation" test could ultimately turn into something too easily applied on a rigid basis. The Solicitor General answered the Justices' questions by seeking to demonstrate how the "machine-or-transformation" test was a flexible test and a test that would not have changed the result of other seminal cases regarding patentability of processes.

The Supreme Court's decision is expected in the spring of 2010. The business and legal world alike anxiously await this decision. The Supreme Court may decide the issue without much analysis beyond the specific circumstances at hand, leaving open the possibility for more arguments and analysis as new issues arise, or the Supreme Court may decide to render a broad reaching decision that could extend to cover a host of issues concerning methods and processes.

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Sunrise Registration Period Begins for .РФ

Russian registrar RU Center has begun accepting applications for domain names under .РФ, the Cyrillic country-code top-level domain for Russian Federation. Following a four-month sunrise registration period for trademark owners that began on November 25, 2009, registration will open to general public, first through an auction process planned between April and June 2010, and then at a fixed price, beginning July 2010. The domain names will be in the Russian language, using the Cyrillic alphabet. During the sunrise period, instead of granting registrations on a first-come, first-served basis, the registrar will consider applicants' underlying trademark registrations and give priority to holder of the earlier registration. Thus, if there are two identical registrations in different classes, and both owners have applied for the corresponding .РФ domain name, holder of the earlier-issued registration will prevail. The domain is still pending final approval by ICANN and the delegation is not expected until February 2010 at the earliest.

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ACTA's Controversial Internet Provisions

On November 30, 2009, a leaked European Commission document dated October 29, 2009, confirmed suspicions regarding the Anti-Counterfeiting Trade Agreement's controversial Internet chapter. This comes after Round Six of ACTA negotiations that took place November 4-6, 2009, focusing on enforcement in the digital environment, ramped into controversy in light of a different leaked document, a summary dated September 30, 2009, also drafted by the European Commission. The leaked summary discussed the US Trade Representative's oral briefing on the progress of the proposed Internet Chapter, and led many in the technology industry to fear that ACTA would impose DMCA-like regulations worldwide. The October document leaked on November 30th is the European Commission's analysis of the ACTA Internet Chapter proposed by the United States, and it confirms suspicions that the US is pushing for ACTA to contain DMCA-like provisions, third-party liability, and criminal sanctions.

ACTA

ACTA is a proposed agreement between the United States, the European Union, Australia, Canada, Japan, Singapore, Morocco, Mexico, the Republic of Korea, New Zealand and Switzerland to address global counterfeiting and piracy. The idea was launched by the United States and Japan in 2006; thus far, ACTA has been negotiated to cover a broad scope of infringements related to intellectual property and their consequences, including (1) depriving legitimate businesses and their workers of income; (2) discouraging innovation and creativity; (3) threatening consumer health and safety; (4) providing an easy source of revenue for organized crime; and (5) causing a loss of tax revenue. The aim is to enhance international co-operation and to create worldwide standards for enforcing intellectual property rights. Negotiations began in June 2008 and are set to be completed in 2010.

The leaked October document titled "European Union's Comments to the US Proposal" confirms the suspicions generated by the previously leaked September document, in which the EU summarized the USTR's briefing on its progress in drafting the Internet Provisions for ACTA. Taken together, these documents confirm that the US is pushing to model ACTA's Internet Chapter generally on the respective Internet section of the recently completed US-Korea Free Trade Agreement (KORUS), which was based on Section 512 of the Digital Millennium Copyright Act (DMCA).

According to the documents, the US has drafted ACTA's Internet provisions to consist of 7 sections:

Section 1

First section covers general obligations, focusing on "effective enforcement procedures" with language inspired by article 41 TRIPS. Critics have noted, however, that absent from this language is a statement that the procedures shall be fair, equitable, and/or proportionate, contained in the corresponding sections of TRIPS, the WIPO Copyright Treaty, and Europe's Intellectual Property Rights Enforcement Directive.

Section 2

The real controversy begins with Section 2, which would require ACTA members to provide for third-party liability for copyright infringement. Although this is something that copyright owners have long sought after, it is not required by any of the major international IP treaties, including the 1994 Trade Related Aspects of IP agreement (TRIPS), the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty. Opponents are concerned that this section focuses solely on copyright, and that it may incorporate US "contributory copyright infringement" standards, including the "inducement" standard from the Grokster case which would significantly change the law in many countries.

Section 3

Perhaps the most controversial, Section 3 discusses limitations on third-party liability, laying out the conditions under which an ISP could qualify for safe-harbors. The section is reported to require ISPs to adopt and reasonably implement a policy "to address the unauthorized storage or transmission of materials protected by copyright or related rights" and mandate "broad" provisions regarding notice-and-takedown mechanisms.

The concern here is that the requirement that ISPs must develop and implement a certain policy goes beyond the law already in place in the EU by essentially conditioning the application of the liability limitations on an ISP actively policing its content. An example of a reasonable policy is explained in footnote 6 which discusses requiring ISPs to terminate subscriptions. This is highly controversial as the issue of whether such an account can be terminated without court decision is still subject to negotiation between the European Parliament and the Council of Telecoms Ministers.

Further, the leaked September document mentioned the following:

"to benefit from safe-harbours, ISPs need to put in place policies to deter unauthorized storage and transmission of IP infringing content (ex. Clauses in customer's contracts allowing, inter alia, a graduated response)"

Opponents are concerned that the "graduated response" language may imply that negotiators are considering a sort of "three-strikes" policy under which ISPs would be required to terminate a customer upon repeated allegations of copyright infringement, or the ISP could be vulnerable to liability. The Three Strikes/Graduated Response has been sought by the entertainment industry since the European office of the Motion Picture Association began advertising the Three Strikes policy as an ISP "best practice" in 2005. Those in the technology and telecom industries are concerned that requirements of this type will make it too costly to successfully operate online enterprises such as Flickr or YouTube.

Such Three Strikes regime has previously been rejected by the European Parliament and in several ACTA-negotiating countries, and has never been proposed by US legislators. Opponents argue that even the suggestion of such a policy is contrary to the USTR's own statement that ACTA will not change US law. The current safe harbors under the US DMCA require ISPs to adopt and reasonably implement a policy for termination of "repeat infringers" "in appropriate circumstances." ISPs are given the flexibility to determine what constitutes "appropriate circumstances." If a Three Strikes policy were adopted, this would change. ISPs would no longer be able to determine "appropriate circumstances," but instead would be required to automatically terminate a customer.

Further, many are concerned that this section's aim at implementing a notice and take down procedure will be at odds with the current European Commission's E-Commerce Directive (2000/31/EC), under which an ISP may adopt such policies, but they are not a requirement to benefiting from liability exemptions.

Section 4

Section 4 of the US proposal focuses on technical protection measures (TPMs, aka DRM), and includes language inspired by the US-Jordan Free Trade Agreement (article 4.13) and WIPO Internet Treaties (articles 11 WCT and 18 WPPT). This section would cover prohibitions on use, manufacture and trafficking in circumvention of access controls and provide both civil and criminal penalties, separate and apart from "general" copyright infringements.

Sections 5, 6 and 7

Section 5 focuses on Civil and Criminal Enforcement of Anti-Circumvention and requires both civil and criminal provisions. These provisions are also reportedly designed to stop efforts towards establishing interoperability requirements (i.e., ability for consumers to play purchased music on different devices).

Finally, Section 6 focuses on Rights' Management, again inspired by the US-Jordan Free-Trade Agreement and WIPO Internet Treaties and provides for civil and criminal remedies, and Section 7 focuses on the limitations to Rights Management Information protection.

The Good and Bad

The main concern with sections 4, 5, and 6 is that they go beyond current EU law by requiring members to provide for civil and criminal remedies. Under current EU law, member states are merely required to provide "adequate legal protection."

Opponents are concerned that the proposed Internet provisions of ACTA will impede consumer privacy, civil liberties and the free flow of information on the internet. They also fear that many of the provisions may mandate requirements above and beyond, or even in the face of, what is already required under other treaties and/or international law. Because the purpose of ACTA is to create new global standards, many fear that implementation of ACTA by developing countries could become a condition imposed in future free trade agreements and ensure that US' chosen implementation of the WIPO Internet Treaty becomes a global standard, hindering the ability of developing countries (which, opponents argue, are excluded from negotiations) to choose polices best suited for their domestic priorities and economy.

Members of the entertainment and content industries take the position that in light of the substantial technological changes since the drafting of TRIPS nearly 20 years ago and the growth of online theft, new tailored rules are long overdue.

On November 19, the MPAA wrote a letter to Congress expressing its support for a "robust" ACTA and requesting codification of the "best practices" for copyright enforcement (aka "three strikes") in order to protect members of the entertainment and content industry whose livelihood is dependent on intellectual property. In light of the technological changes that have occurred in the last decade, they argue, internet piracy is the fastest growing threat to their industry and copyright protection needs to be strengthened accordingly. They argue that opponents' view that stronger rules are "anti-innovation" disregards that innovation thrives only with adequate incentive. A number of movie studios, labels, and other copyright-holding companies wrote a similar letter in support of ACTA on the same date also requesting codification of "best practices" for copyright and urging for stronger protections.

Conclusion

Since no official draft has been released, it is yet to be seen how far the Internet provisions may go. In any case, negotiating countries are set to meet again in Morocco in July 2010, and the intention is still to conclude negotiations in 2010.

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Cloud Computing: Potential Benefits Come With Legal Risks

Cloud computing has come to the forefront recently as a means for businesses to reduce costs and create efficiencies for IT departments and company employees in utilizing software, infrastructure, and platform as a service. However, the use of cloud computing also comes with potential legal risks and issues of concern. This brief article will touch on some of the issues that should be considered when moving a company's documents and applications to a "cloud."

Cloud computing refers to computing services provided over the internet. Consumers and businesses have been using cloud computing for years, through services such as web-based email from AOL, Yahoo and Gmail, or social-networking and information-sharing sites like Twitter, Facebook and WebMD. Generally, third-party service providers supply various software and/or hardware infrastructures on an as-needed "pay as you go" basis, thereby making cloud computing more scalable and flexible to meet a company's changing needs for software, infrastructure or storage. Frequently, these services include software applications that an end user might access for basic functions like email and word processing. Additional services provided by a third-party vendor would be infrastructure such as networking and storage capabilities, and more advanced software applications, which could include custom applications.

Although cloud computing can reduce costs and provide flexibility, there are risks that must be assessed and accounted for when moving a company's valuable data, including intellectual property, to a cloud hosted by a third-party. Of prime importance is making sure that a company's assets and data are in a safe environment, protected from theft and modification, while also complying with the laws of the location(s) where the company and the cloud may be located. The risks can be minimized by entering into a detailed agreement dictating the terms relating to security, access, performance, location, management and control of a company's assets in the cloud.

The security of a company's data is a primary concern, as the third-party provider has access to the data which is stored on servers and systems over which the company does not have complete control. While the customer legally owns its data in the cloud, it is important that the customer ensures that the provider is contractually obligated to protect the data on a level that complies with the customer's internal policies. Also of concern is protecting the data in a fashion sufficient to meet the regulatory levels of protection required by the locales of the cloud and the customer. This is of particular importance to companies operating in Europe, Canada, or other foreign locations where data protection, security and privacy obligations may be different. It may therefore be necessary to specify particular locations for cloud storage, rather than unknowingly run afoul of the law due to the provider's location or movement of the cloud.

Security issues are also of utmost importance when protecting intellectual property, such as undisclosed patents and trade secrets. Since it is not uncommon for third-party providers to store one company's data at a location where data belonging to other companies (potentially including company's competitors) is also stored, proper protocols should be contractually defined to ensure that there is no commingling of data with that of another company. These terms would include protocols for access rights and encryption standards, thereby preventing data from being improperly accessed or removed by an unauthorized user.

Performing due diligence on the service provider, including stability of the service provider as an on-going entity, continuous availability of data, backup contingencies, and ability to retain and transfer data to another provider are also of utmost importance. If entering into an agreement with a service provider, a company should also secure assurances that the service provider has obtained any necessary intellectual property licenses, while also getting indemnification for any potential infringement by the provider. The negotiated contract must also provide for the safeguarding and transfer of data in the event the provider ceases to exist. Inability to fully control company's data and intellectual property assets on a daily basis, as well as in a force majeure event, including bankruptcy or change of ownership of the third-party provider, can negate potential benefits of using a cloud.

Location of the cloud is important not only in terms of compliance with privacy and security laws. Where the data resides may be a critical factor in determining what law applies to the dispute, and how easy it may be to actually access and control the electronic information. Since data stored in foreign countries may be subject to strict requirements with respect to privacy and security, cross-border litigation can become more complicated. Preservation and record-retention policies, including segregation of privileged, confidential or proprietary information such as intellectual property, must be reviewed in light of compliance with litigation protocols.

While cloud computing can provide financial and scalable benefits to companies and IT departments, potential legal issues and risks that it carries must be carefully assessed, evaluated and contractually provided for in a negotiated agreement before a company's valuable data and intellectual property is moved to the cloud.

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