IP UPDATE
Exploring the Latest in Intellectual Property Law
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Coons and Tillis Introduce Two Bills Intended to Change Patent Landscape

by | Jul 13, 2023 |

In late June 2023, Senators Chris Coons (D-DE) and Thom Tillis (R-NC) introduced two bills in Congress that, if enacted, would change the patent adjudication landscape:

The PREVAIL Act is essentially a reintroduction of the previously unsuccessful STRONGER Patents Act of 2019 bill and would change fundamental aspects of how the Board operates. Under current practice, the Board judges who rules on institution and also decides the outcome of an instituted proceeding. Under the PREVAIL Act, institution decisions would be made by a separate set of judges from those that render a decision on a petition’s merits. Through proposed changes to the initiation and estoppel provisions, a patent challenger could bring its attack on patent validity in either the district court or the Board, but not both. And as part of the harmonization of district court and Board proceedings, the PREVAIL Act would adopt the “clear and convincing” standard for Board review and codify existing Board practice of applying the same claim construction standard as district courts apply.

The PREVAIL Act would also change who can bring issues to the Board by imposing standing and revised real-party-in-interest requirements. An IPR petitioner would have to establish standing equivalent to that required for a district court declaratory judgment action. Moreover, anyone who financially contributes to an IPR would be deemed a real party in interest to avoid multiple petitions backed by the same entity. To reduce the multiplicity of proceedings, the PREVAIL Act would establish a presumption against a joinder for time-barred petitions. The PREVAIL Act also includes several provisions directed to the independence and transparency of the Board’s decision-making, including establishing a code of conduct and requiring recordation of the Director’s actions that affect Board proceedings.

Turning to subject matter eligibility, the Patent Eligibility Restoration Act would overrule Supreme Court decisions importing a judicial exception to Section 101 and would codify many of the existing categories of ineligible subject matter, including mathematical formulae; substantially economic, financial, social, cultural and artistic practices (in other words, fundamental human activity); natural processes and products made independent of human activity; and mental processes. The Patent Eligibility Restoration Act specifically would authorize early resolution and limited discovery on Section 101 ineligibility.

Practice Note: Although both acts have been introduced before without much success, Congress’s present focus on technology (such as artificial intelligence) may serve to propel one or both bills forward. Of course, it remains to be seen whether Congress has an appetite for modifying patent law, particularly in the lead-up to an election year.



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Amending a Range? Better Enable It

by | Jul 13, 2023 |

In a post-grant review appeal, the US Court of Appeals for the Federal Circuit explained that patent claims reciting a range must enable the full scope of that range and, under the Administrative Procedure Act (APA), the Patent Trial & Appeal Board is not bound to decisions rendered in a Preliminary Guidance. Medytox, Inc. v. Galderma S.A., Case No. 22-1165 (Fed. Cir. June 27, 2023) (Dyk, Reyna, Stark, JJ.)

Medytox owns a patent directed to the use of animal-protein-free botulinum toxins with long-lasting effects. Galderma challenged the validity of Medytox’s patent in a post-grant review. In response to the challenge, Medytox filed a motion to amend the patent under the Board’s Pilot Program, which allows a petitioner to amend the patent claims and receive a preliminary decision as to whether the amendment would preserve the patent’s validity (Preliminary Guidance). Medytox proposed modifying the claims so that they only encompassed treatment methods that possessed a patient response rate of “50% or greater.” Galderma opposed the motion, arguing that claiming a 50% to 100% response rate constituted new matter, meaning the claim language improperly claimed an invention that was not described in the patent application as filed.

The Board issued a Preliminary Guidance construing the new claim language and explaining that it did not believe that Medytox’s amended claims represented new matter. According to the Board, the new limitation did not “necessarily” claim a range of 50% to 100% and instead could just be claiming 50% or greater. The Board explained that since the patent contained the concept of a greater than 50% response rate, claiming that rate was not new matter. As a consequence of the Board’s positive reception, Medytox amended all the claims to include the new language. Galderma once again opposed the motion and further argued that the amended claims were not enabled. The Board held an oral hearing and questioned the parties on the proper construction of the “50% or greater” claim language.

In its final written decision, the Board decided that the limitation was a range of 50% to 100%, contrary to its statement in the Preliminary Guidance. Because the claimed limitation was a range, the Board—citing the Supreme Court’s 2023 decision in Amgen v. Sanofi and the Federal Circuit’s 2012 decision in Magsil v. Hitachi Global Storage—explained that the entire range must be enabled. The patent, however, only described a response rate of up to 62%, so the Board found that the claimed range was not enabled. Medytox appealed.

Medytox alleged three errors. First, Medytox argued that the Board’s new construction was wrong. Second, Medytox argued that the claims were enabled. Finally, Medytox argued that the Board violated the APA by capriciously departing from its Preliminary Guidance. The Federal Circuit rejected Medytox’s arguments and affirmed the Board’s decision.

First, the Federal Circuit determined that there was no meaningful difference between the two possible constructions—claiming a response rate greater than 50% was essentially the same as claiming a response rate of [...]

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If at First You DuPont Succeed, Try a Different Factor

by | Jul 13, 2023 |

The US Court of Appeals for the Federal Circuit remanded a Trademark Trial & Appeal Board decision, finding that the Board incorrectly analyzed several DuPont factors, improperly disregarded the DuPont factor regarding third-party registration on similar goods, permitted the opposer to succeed without a showing of identical marks for identical goods used in the marketplace and predicated its comparative analysis on the incorrect mark. Spireon, Inc. v. Flex Ltd., Case No. 22-1578 (Fed. Cir. June 26, 2023) (Mayer, Reyna, Dyk, JJ.)

Spireon filed a trademark application for the mark FL FLEX for use in connection with “[e]lectronic devices for tracking the locations of mobile assets in the nature of trailers, cargo containers, and transportation equipment using global positioning systems and cellular communication networks.” After the Examining Attorney approved the application, Flex opposed registration on grounds of priority and likelihood of confusion with Flex’s previously registered marks: FLEX, FLEX (stylized) and FLEX PULSE.

The Board sustained Flex’s opposition based on its analysis of the DuPont factors for evaluating likelihood of confusion. There are a total of 13 factors that together form the underlying factual findings upon which the legal conclusion of likelihood of confusion is made. Not all factors are relevant in every case.

In its consideration of the first DuPont factor (the similarity of the marks), the Board addressed the strength of Flex’s marks, including the marks’ conceptual and commercial strength. The Board weighed five marks—FLEX (in three relevant commercial contexts), LOAD FLEX VALUE FLEX—and concluded that the third-party evidence did not show that Flex’s marks were either conceptually weak or inherently distinctive. The Board then considered the similarity of the marks, analyzing Spireon’s FL FLEX against FLEX, FLEX (stylized) and FLEX PLUS (rather than the actual mark FLEX PULSE). The Board found the marks highly similar and concluded that the first DuPont factor supported a finding of likelihood of confusion. The Board also addressed three other DuPont factors that it considered relevant, but no others. Spireon appealed.

The Federal Circuit reversed. The Court found that the Board erred in not considering the sixth DuPont factor, “[t]he number and nature of similar marks in use on similar goods.” This factor requires an evaluation of conceptual strength and commercial strength. Conceptual strength focuses on the degree to which a mark is descriptive in that it “directly and immediately convey[s] some knowledge of the characteristics of products.” Commercial strength focuses on the “marketplace recognition value of the mark.”

The Federal Circuit explained the relevance of third-party registrations and their bearing on a mark’s conceptual strength, noting that the Board erred in assigning a low probative value to 15 composite marks of record. The Court explained that composite third-party marks are relevant to resolving the question of whether the “shared segment—in this case, ‘flex’—has a commonly understood” meaning in the pertinent field and to the crowded nature of the field in which the flex root is used. As the Court explained, proof of use or non-use is material because the sixth DuPont factor only considers [...]

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Personal Jurisdiction? Selling Products via Interactive Website Will Do It

by | Jul 13, 2023 |

The US Court of Appeals for the Ninth Circuit reversed and remanded a district court’s dismissal for lack of personal jurisdiction, deciding that the sale of a product via an interactive website provides sufficient “minimum contacts” to support jurisdiction over a nonresident defendant in a state where the defendant causes the product to be delivered. Herbal Brands, Inc. v. Photoplaza, Inc., Case No. 21-17001 (9th Cir. July 5, 2023) (Graber, Clifton, Christen, JJ.)

Herbal Brands sells health, wellness, fitness and nutrition products directly to consumers and through authorized third-party retailers in Arizona. Photoplaza sold Herbal Brands products through two e-commerce storefronts without Herbal Brands’ permission. Herbal Brands sent three cease-and-desist letters, stating that Photoplaza’s sales harmed Herbal Brands in Arizona. Herbal Brands accused Photoplaza of trademark infringement and unfair competition under the Lanham Act, false advertising under the Lanham Act and tortious interference with contracts and business relationships under Arizona law. The district court granted Photoplaza’s motion to dismiss for lack of personal jurisdiction. Herbal Brands appealed.

The Ninth Circuit noted that Photoplaza failed to submit any evidence to contradict the jurisdictional allegations in the complaint. The Court found that under its three-part test, Photoplaza had sufficient minimum contacts with Arizona to warrant personal jurisdiction:

  1. Photoplaza purposefully directed its activities at the forum.
  2. Herbal Brands’ harm arose out of Photoplaza’s contacts with Arizona.
  3. Exercise of jurisdiction over Photoplaza would be reasonable.

The second and third prongs of the Ninth Circuit’s test were easily resolved. Herbal Brands’ claimed harm rose out of and related to Photoplaza’s conduct of selling the products to Arizona residents. The Court referred to its 2004 holding in Schwarzenegger regarding a plaintiff’s burden to establish jurisdiction, whereupon the burden shifts to the defendants under the seven-factor balancing test of Freestream Aircraft (2018). The Court found that Photoplaza did not meet its burden to present a compelling case that exercising jurisdiction would be unreasonable.

The bulk of the Ninth Circuit’s decision focused on the first prong (purposeful availment), which applies when “a case sounds in tort,” such as claims of trademark infringement, false advertising and tortious interference with business relationships, each of which requires an intentional tortious or “tort-like” act. Referring to the effects test from the 1984 Supreme Court decision in Calder v. Jones, the Ninth Circuit explained that Photoplaza purposefully directed its activities toward the forum if it (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that Photoplaza knew was likely to be suffered in the forum state. Related to the Calder test’s first and third prongs, Photoplaza’s product sales to Arizona residents were intentional acts, and the cease-and-desist letters informed Photoplaza that its actions caused harm in Arizona.

Regarding the “express aiming” prong, the Ninth Circuit explained that when a website itself is the only jurisdictional contact, the analysis turns on whether the site had a forum-specific focus or whether the defendant exhibited an intent to cultivate an audience in the forum. The Court explained that [...]

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Not on the Merits: Claim Preclusion Doesn’t Bar Inducement Claims After Direct Infringement Case

by | Jul 13, 2023 |

Applying Seventh Circuit law to determine whether the dismissal of patent infringement claims should be upheld on the basis of claim preclusion, the US Court of Appeals for the Federal Circuit reversed a district court ruling that the claims were precluded by res judicata. Inguran, LLC v. ABS Global, Inc., Case No. 22-1385 (Fed. Cir. July 5, 2023) (Lourie, Bryson, Reyna, JJ.)

At the district court, ABS argued that a previous infringement suit brought by Inguran precluded it from bringing the instant suit. At issue was whether the previous suit asserting direct infringement of Inguran’s “GSS technology” used to create “single-sexed semen straws” barred the current suit, which alleged that ABS induced third parties to infringe upon the same technology by entering into licensing agreements with these third parties. The district court agreed with ABS. Inguran appealed.

To successfully assert claim preclusion under Seventh Circuit law, a party must meet the following three-factor test:

  1. An identity of the parties or their privies in the first and second lawsuits
  2. An identity of the cause of action
  3. A final judgment on the merits in the first suit.

The Federal Circuit’s analysis focused on the second requirement. In determining whether there was an identity of the cause of action, the Court examined whether the second claim was based on the same set of transactional facts as the earlier litigation between the parties. In patent infringement cases, the general rule is that res judicata does not bar the assertion of new rights acquired during the previous action, which could have been litigated but were not (i.e., claims that arose while the litigation was ongoing but after the original complaint was filed).

The Federal Circuit determined that the transactional facts between the present case and the previous litigation were different because the cases respectively centered around theories of induced infringement by third parties and direct infringement. As the Court noted, “The evidence needed to support these two claims (induced infringement vs direct infringement) is different.” To allege and prove induced infringement, Inguran needed to establish additional facts beyond what it asserted in the previous case to show direct infringement. As the Court noted, an “induced infringement claim rests on evidence and elements beyond those required by direct infringement.” Although minimal evidence regarding the activities of the third parties was part of the record in the previous litigation, the parties ultimately stipulated that direct infringement occurred. The issue of induced infringement, however, was never presented to the jury.

The Federal Circuit held that although both cases implicated similar facts, including extensive discussions of the “GSS technology,” the direct infringement allegations could not reasonably serve to bar later allegations regarding the actions of third-party licensees. The Court accepted Inguran’s argument that any induced patent infringement claim it might have brought at the time of the earlier case would have been based on speculation: “[w]e agree with ST that it could not have asserted an inducement claim during ABS I.” The Court therefore rejected the district [...]

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CEO Punches Ticket and Avoids Sanctions Based on Receiving Confidential Documents

by | Jun 29, 2023 |

Addressing protective order violations, the US Court of Appeals for the Fifth Circuit largely vacated a district court’s sanctions order. The Court explained that sanctions must comply with due process, barring parties from future litigation should be treated as a “death-penalty” sanction and damages calculations require specific factfinding. CEATS, Inc. v. TicketNetwork, Inc., Case No. 21-40705 (5th Cir. June 19, 2023) (Elrod, Haynes, Willett, JJ.)

To settle a long-running dispute, TicketNetwork licensed several patents from CEATS, a non-practicing patent assertion entity. Several years into the license, all of the licensed patents were invalidated in an unrelated litigation. TicketNetwork promptly stopped paying royalties and filed suit seeking a declaration that the license agreement was unenforceable. CEATS counterclaimed for breach of contract.

During discovery, CEATS requested TicketNetwork’s list of affiliates, which TicketNetwork refused to produce, citing its highly confidential nature. After two discovery hearings, the district court ordered TicketNetwork to produce the affiliate list but specifically prohibited CEATS from using the list for any purpose other than use in the present litigation.

At trial, a jury found that TicketNetwork breached the license, and the district court awarded attorneys’ fees and costs to CEATS. After the jury verdict, CEATS CEO Milford Skane asked his litigation consultants for a “non-confidential” list of TicketNetwork’s affiliates. The consultants gave Skane the confidential list, which was promptly used in settlement negotiations with TicketNetwork. TicketNetwork filed for sanctions, requesting damages from CEATS and an injunction preventing CEATS from suing or seeking licenses from the listed affiliates.

The district court ordered an investigation and, after two years of inquiry and an all-day evidentiary hearing, found that Skane, the consultants and CEATS all violated the protective order and were jointly and severally liable to TicketNetwork. As sanctions, the district court awarded $500,000 in attorneys’ fees (using a billing rate nearly double the one it used when calculating CEATS’s fees) and barred Skane, the consultants and CEATS from suing or seeking licenses from any of TicketNetwork’s affiliates.

The sanctioned parties appealed and argued:

  • The district court violated due process by finding Skane and the consultants personally liable without giving them notice or opportunity to respond.
  • The district court erred by barring the parties without a finding of bad faith.
  • The district court’s damages calculation was unsupported.

The Fifth Circuit began by addressing the sanctions against Skane and the litigation consultants. The Court explained that sanctions require due process, which includes both fair notice and the opportunity to defend against the claim. The Court observed that the first time Skane and the consultants were made aware that they could be sanctioned was in the sanctions order itself—and their only opportunity to defend themselves took place after that order. Given the lack of any advance notice, the Fifth Circuit concluded that due process had not been satisfied and vacated the monetary sanctions against Skane and the consultants.

The Fifth Circuit also vacated the bar preventing Skane, the consultants and CEATS from suing or seeking licenses from any of the affiliates. Core [...]

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Double Jeopardy Doesn’t Attach to Venue and Vicinage Clause Violations

by | Jun 29, 2023 |

The Supreme Court of the United States concluded that the Constitution’s Double Jeopardy Clause does not preclude retrial of a criminal defendant who was prosecuted in an improper venue and before a jury drawn from the wrong district. Smith v. United States, Case No. 21-1576 (Sup. Ct. June 15, 2023) (Alito, Justice.)

Timothy Smith was indicted in the Northern District of Florida for stealing trade secrets from StrikeLines, a company that uses sonar equipment to identify private artificial reefs that individuals construct to attract fish. In particular, Smith was accused of “surreptitiously” obtaining portions of coordinates and data from StrikeLines’ website.

At trial, the district court denied Smith’s motions to dismiss the indictment and for judgment of acquittal due to improper venue. Smith unsuccessfully argued that “he had accessed the data from Mobile, Alabama (in the Southern District of Alabama) and [that] the servers storing StrikeLines’ coordinates were located in Orlando, Florida (Middle District of Florida).” On appeal, the US Court of Appeals for the Eleventh Circuit reversed but concluded that “the ‘remedy for improper venue is vacatur of the conviction, not acquittal or dismissal with prejudice,’ and that the ‘Double Jeopardy Clause is not implicated by a retrial in a proper venue.’” Smith appealed to the Supreme Court.

On writ of certiorari, the issue before the Supreme Court was “whether the Constitution permits the retrial of a defendant following a trial in an improper venue and before a jury drawn from the wrong district,” or if retrial is barred by the Double Jeopardy Clause.

Citing precedent and the text of the Venue and Vicinage Clauses, Smith advanced the theory that the purpose of the Clauses bars retrial and requires acquittal. However, as the Supreme Court explained, neither purpose nor precedent demanded that the Venue or Vicinage Clauses be excepted from the general rule that, unless prohibited by the Double Jeopardy Clause, “a defendant [who] obtains a reversal of a prior, unsatisfied conviction . . . may be retried in the normal course of events.” The Court rejected Smith’s argument that the Venue Clause is meant to prevent the hardship of undergoing trial in a distant forum because the clause is “keyed to the location of the alleged ‘Crimes’” and not the district in which the defendant resides. The Court similarly rejected Smith’s arguments related to the purpose of the Vicinage Clause, noting that the Court has “repeatedly acknowledged that retrials are the appropriate remedy for violations of other [Sixth Amendment] jury-trial rights.”

Next, Smith appealed to the historical background of the Venue and Vicinage Clauses. The Supreme Court examined the relevant historical background and explained that the remedy at common law for a trial in an improper venue and before a jury drawn from the wrong vicinage did not preclude retrial. Moreover, the Court noted that it previously “embraced the retrial rule for a venue error” and that other federal and state courts have similarly ordered retrials for venue violations.

Finally, Smith argued that the Venue and Vicinage Clauses [...]

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Mootness Requires Covenant Not to Sue to Be Unconditional and Irrevocable

by | Jun 29, 2023 |

Addressing a district court decision finding no trade secret misappropriation, the US Court of Appeals for the Fourth Circuit agreed that the alleged trade secret holder had failed to moot the case because its covenant not to sue was both conditional and revocable. Synopsys, Inc. v. Risk Based Security, Inc., Case No. 22-1812 (4th Cir. June 15, 2023) (Agee, Rushing, Dawson, JJ.)

In early 2021, Risk Based Security (RBS) sent a cease-and-desist letter to Synopsys, its competitor in the software security industry, alleging intellectual property misappropriation, including use of RBS’s private database of source code vulnerabilities. Synopsys responded by filing a declaratory judgment action asserting that it had not engaged in trade secret misappropriation. RBS later issued a covenant not to sue in express reliance on certain pretrial representations made by Synopsys, including that Synopsys was not planning to use RBS’s database. RBS moved to dismiss the case as moot based on its covenant, but the district court denied the motion. The district court then ruled on summary judgment that RBS had failed to establish that its alleged trade secrets satisfied the requirements that they have an independent economic value derived from their secrecy and were subject to reasonable efforts to maintain their secrecy. RBS appealed.

The Fourth Circuit first affirmed the rejection of RBS’s covenant not to sue. The Court noted that the covenant was not unconditional and irrevocable because it was expressly premised on Synopsys’s planned future performance, which RBS could later claim was not being met. The Court also relied on the fact that the covenant was limited to the use of RBS’s private database and was thus narrower than the original cease-and-desist letter, which was explicitly not limited to that use. Finally, the Court concluded that there was a continuing live controversy, demonstrated by the fact that, after issuing the covenant, RBS added Synopsys to a pending trade secret case it had filed against Synopsys’s subsidiary. Accordingly, the Fourth Circuit affirmed the district court’s denial of RBS’s motion to dismiss.

On the merits, the Fourth Circuit agreed with the district court that RBS had failed to show that its alleged trade secrets met the independent value or reasonable secrecy elements required by statute. In particular, the Court agreed that RBS’s evidence regarding its value as a company and the revenue it derived from licensing its database could not show independent value for the specific alleged trade secrets contained in the database.



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‘Show Me The Money’ Isn’t Enough: Disproportionate $1.7M Attorneys’ Fees Rejected

by | Jun 22, 2023 |

The US Court of Appeals for the Ninth Circuit reversed and remanded a $1.7 million award of attorneys’ fees, finding the amount unreasonable compared to the benefit the plaintiffs received. Lowery v. Rhapsody International, Inc., Case No. 22-15162 (9th Cir. June 7, 2023) (Smith, Collins, Lee, JJ.)

Streaming music providers such as Apple Music, Spotify and Napster (formally Rhapsody International) have fundamentally changed the way we enjoy music. Gone are the days of the mixtape. But to bring these services, providers must license the copyrighted music and pay royalties to the owners. At the time this case was filed, the two main licensing paths available to streaming music providers required either direct negotiations with the owners or compulsory licensing by serving a notice of intent to each owner. These paths were unworkable and antiquated given the millions of songs that the providers were playing.

David Lowery and others sued Rhapsody in 2016 on behalf of a putative class of copyright owners. They claimed Rhapsody had infringed their copyrights by reproducing and distributing their musical compositions through its platform without a license. The parties eventually reached a settlement. Rhapsody agreed to pay a maximum of $20 million to the class members, but because an earlier argument effectively decimated the putative class, the actual payout to the class was just over $50,000.

Despite the low amount paid to the class, the plaintiffs’ counsel requested $6 million in attorneys’ fees. The request was based on a “lodestar” calculation, where the number of hours reasonably spent on the case is multiplied by a reasonable hourly rate, then adjusted up or down as called for by the peculiarities of the case. The plaintiffs’ counsel estimated its fees to be around $2.1 million, with a proposed 2.87 multiplier due to the “exceptional” results in a “complex” case.

The magistrate judge disagreed and recommended reducing the lodestar to $1.7 million because one-fifth of the hours spent were either unreasonable or improperly blocked billed. The judge also recommended further reducing the lodestar value with a negative multiplier in light of the limited benefit actually paid out. The district court took issue with the magistrate judge’s cross-checking of the lodestar value against the amount paid. The court noted that there was “no bright-line rule” to cross-check a lodestar value either against the claimed amount ($50,000 in this case) or the possible recovery ($20 million). However, the district court agreed with the magistrate judge’s lodestar calculation and awarded $1.7 million in attorneys’ fees. Rhapsody appealed.

The Ninth Circuit rejected the award, concluding that the $1.7 million award was unreasonable given the small benefit to the class members. The Court explained that the actual benefit to the class must be considered when assessing the value of a class action settlement. Here, the Court pointed out that the district court should have cross-checked any lodestar calculations to ensure that there was a reasonably proportional benefit to the class members. The district court also should have disregarded the $20 million settlement cap when [...]

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A Single Picture Database Is Worth a Thousand Statutory Damages Awards

by | Jun 22, 2023 |

In the latest appeal of a copyright infringement dispute, the US Court of Appeals for the Ninth Circuit upheld the lower court’s finding that the copyright owner’s photographs were not part of a single compilation for purposes of awarding statutory damages. VHT, Inc. v. Zillow Grp., Inc., Case Nos. 22-35147; -35200 (9th Cir. June 7, 2023) (McKeown, Fletcher, Gould, JJ.)

VHT is a professional real estate photography studio that real estate brokerages and listing services hire to photograph properties. VHT retouches the photographs, saves them in its photo database and licenses them to its clients for marketing purposes. In 2015, VHT sued Zillow for copyright infringement based on Zillow’s display of VHT photographs on its real estate listing website and on its Digs home design website. The district court found that Zillow was not liable for displaying VHT photographs on its real estate listing website or for displaying untagged, unsearchable VHT photographs on its Digs home design website. However, the district court found that Zillow’s display of tagged, searchable VHT photographs on Digs constituted infringement and that the searchability functionality was not fair use.

The parties cross-appealed, and the Ninth Circuit considered the issue of infringement in a 2019 decision (Zillow I). In this prior appeal, the Ninth Circuit agreed that Zillow’s display of VHT photographs on its real estate listing website was not copyright infringement, while Zillow’s display of searchable VHT photographs on its Digs home design website constituted infringement and was not fair use. The Ninth Circuit also reversed the jury’s finding that Zillow had willfully infringed 2,700 searchable VHT photographs displayed on Digs and remanded for consideration of whether the searchable photographs were a compilation for purposes of awarding statutory damages. On remand, the district court found that the photographs were not a compilation and awarded statutory damages of $200 for each innocently infringed photograph and $800 for each remaining photograph.

The district court also considered the impact of the Copyright Act’s preregistration requirement and Fourth Estate v. Wall-Street (Supreme Court, 2019) on VHT’s ability to sue. In accordance with Ninth Circuit precedent holding that registration is made when the Copyright Office receives a completed registration application, VHT had sued Zillow for copyright infringement after applying for copyright registration. However, the works were not registered until after the suit was filed. Just 11 days before Zillow I was decided, in Fourth Estate, the Supreme Court held that registration is made when the Copyright Office has registered a copyright after examination—not when the application is filed. Zillow argued that VHT’s claims should be dismissed because VHT did not satisfy the preregistration requirement. The district court excused the exhaustion requirement because dismissal would result in a massive waste of resources. The parties again cross-appealed.

Preregistration and Fourth Estate

Addressing the preregistration issue, the Ninth Circuit agreed that dismissal was not required. The decision to excuse compliance with a non-jurisdictional exhaustion requirement is based on whether the claim is wholly collateral to the substantive [...]

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