IP UPDATE

Senate Judiciary Subcommittee Holds Back Two Key Patent Reform Bills

by Christopher M. Bruno | Nov 21, 2024 | Patents

On November 15, 2024, the US Senate Judiciary Subcommittee on Intellectual Property advanced the Inventor Diversity for Economic Advancement (IDEA) Act, one of three significant bills it considered this year to reform the patent system. The other two bills, the Patent Eligibility Restoration Act (PERA) and the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act, may soon follow, although it is unlikely any will become law before the new Congress begins on January 3, 2025.

The IDEA Act, sponsored by Senator Mazie Hirono (D-HI) and garnering bipartisan support, would require the US Patent & Trademark Office to seek demographic data from patent inventors residing in the United States on a voluntary basis. The bill also includes safeguards to protect the confidentiality of the collected information and ensure it is not used as part of the examination process, with a report to be submitted to Congress biannually.

The substance of PERA and the PREVAIL Act, both sponsored by Senators Christopher Coons (D-DE) and Thom Tillis (R-NC), have been reported on previously here and here, respectively. PERA would revise the standards related to patent eligibility under 35 U.S.C. § 101, which have been broadly criticized as providing insufficient predictability and certainty. PERA would overturn Supreme Court precedent by establishing specific categories of exceptions to broad patent eligibility for inventions or discoveries. The PREVAIL Act would enact substantial changes to post-grant and inter partes review proceedings at the Patent Trial & Appeal Board, including by introducing a standing requirement, aligning standards more closely with district court standards, and strengthening estoppel provisions to prevent re-litigation of validity issues.

At the November 15 hearing, Coons and Tillis explained that they continue to receive feedback on PERA and the PREVAIL Act, both of which have been unsuccessfully introduced in previous years. Coons and Tillis both telegraphed optimism that the bills were moving toward being voted out of the subcommittee.

UPC Court of Appeal Rules on Suspending First Instance Enforcement, Managing Director Liability

by Lisa Nassi | Nov 21, 2024 | EU Update, Patents

The Court of Appeal (CoA) of the Unified Patent Court (UPC) addressed a request for suspensive effect of an appeal and ruled that managing directors of an alleged patent-infringing company cannot be held liable as “intermediaries” under Article 63 of the Agreement on a Unified Patent Court (UPCA). Koninklijke Philips NV v. Belkin GmbH, UPC_CoA_579/2024, ORD_53377/2024 (UPC CoA Oct. 29, 2024) (Rombach, J.)

In contrast to German law (for example), appeals before the UPC generally do not have suspensive effect (See Article 74(1) of the UPCA). Thus, first instance decisions are immediately enforceable under Article 82 of the UPCA and Rule 354 of the UPC Rules of Procedure (RoP), which can have significant economic implications, particularly in the context of injunctions against the affected companies. To mitigate such effects, an application for suspensive effect may be filed under Rule 223.1 of the RoP.

In the present case, Philips initiated an infringement action against the Belkin Group before the Local Division Munich (CFI_390/2024), targeting not only the Belkin Group but also its subsidiaries’ managing directors. In its first instance decision, the Munich court ruled in favor of Philips and granted an injunction against Belkin and its subsidiaries’ managing directors, classifying the latter as “intermediaries” within the meaning of Article 63(1), Section 2 of the UPCA. Belkin appealed and requested suspensive effect under Rule 223.1 of the RoP.

The CoA partially granted this request, ordering suspensive effect with regard to the injunction against the managing directors. The CoA ruled that the suspensive effect of an appeal is an exception that can only be ordered in special circumstances. This involves determining whether the appellant’s interest in maintaining the status quo until the decision of the appeal exceptionally outweighs the respondent’s interest in enforcement. The CoA clarified that such circumstances exist where the decision being appealed is manifestly wrong. Whether this is the case – and whether there is, therefore, an evident violation of the law – is assessed on the basis of the factual findings and legal considerations of the first instance decision. If these findings or legal considerations prove to be untenable on summary examination, suspensive effect must be ordered.

In the present case, the CoA found a manifest error of law in the classification of the managing directors as “intermediaries” within the meaning of Article 63 of the UPCA and Article 11 of Directive 2004/48. It reasoned that managing directors, acting in their official capacity, represent the company itself and are not external to it. Therefore, the appellant company cannot be a “third party” in relation to its CEO. Accordingly, liability under Article 63(1), Section 2 of the UPCA as an intermediary cannot arise solely from the CEO functioning as a managing director.

Consequently, the CoA granted suspensive effect for the injunction against the managing directors but dismissed the application for suspensive effect in all other respects.

Practice Note: Practitioners should carefully consider the rule exception framework when applying for suspensive effect before the UPC. To be successful, a convincing, case-specific justification [...]

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Let’s Not Get It On: Battle of the Greatest Hits

by Kavya Rallabhandi | Nov 14, 2024 | Copyrights

The US Court of Appeals for the Second Circuit affirmed a district court ruling that Ed Sheeran’s 2014 hit “Thinking Out Loud” does not infringe the copyright on Marvin Gaye’s 1973 classic “Let’s Get It On.” Structured Asset Sales, LLC v. Sheeran, Case No. 23-905 (2d Cir. Nov. 1, 2024) (Calabresi, Parker, Park, JJ.)

In 1973, Ed Townsend and Marvin Gaye wrote the Motown hit “Let’s Get It On.” Townsend subsequently registered a copyright for the song’s melody, harmony, rhythm, and lyrics by sending the deposit copy of sheet music to the US Copyright Office. Townsend, Gaye, and Motown Records each held a one-third share in the copyright. Structured Asset Sales (SAS) purchases royalty interests from musical copyright holders, securitizes them, and sells the securities to other investors. SAS owns a one-ninth interest in the royalties from “Let’s Get It On.” Townsend’s remaining two-ninths share in the copyright is split between Kathryn Griffin, Helen McDonald, and the estate of Cherrigale Townsend.

In 2014 Ed Sheeran and Amy Wadge wrote the global chart-topper and Grammy-award-winning song “Thinking Out Loud.” In 2018, SAS brought a copyright infringement suit against Sheeran, Wadge, and various entities that produced, licensed, and distributed “Thinking Out Loud” (collectively, Sheeran). SAS alleged similarities in harmonies, drums, bass lines, tempos, and chord progression combined with anticipation (harmonic rhythm). SAS’s lawsuit followed the Griffin/McDonald/estate of Cherrigale Townsend’s 2017 lawsuit against Sheeran (Griffin lawsuit) alleging materially similar claims.

The district court determined that SAS’s infringement claim was limited to the scope of Townsend’s registration as reflected in the deposit copy (i.e., the sheet music) and excluded the sound recording of “Let’s Get It On.” As evidence that the songs were similar, SAS’s expert witness testified that the “Let’s Get It On” deposit copy included an inferred bass line that matched the bass line in Gaye’s sound recording of “Let’s Get It On” and the bass line in “Thinking Out Loud.” The district court rejected this testimony, concluding that “copyright law protects only that which is literally expressed, not that which might be inferred or possibly derived from what is expressed.”

The district court then denied Sheeran’s two motions for summary judgment without prejudice, determining that whether chord progression and harmonic rhythm in “Let’s Get It On” demonstrated sufficient originality and creativity to warrant copyright protection was a factual question to be determined at trial. Sheeran filed a motion for reconsideration. After the jury in the Griffin lawsuit found that Sheeran did not infringe the “Let’s Get It On” copyright, the district court granted Sheeran’s motion for reconsideration and concluded that “[t]here is no genuine issue of material fact as to whether defendants infringed the protected elements of [‘Let’s Get It On’]. The answer is that they did not.” SAS appealed.

SAS argued that the district court erred in limiting the evidence SAS could present to support its infringement claim and in granting summary judgment in favor of Sheeran. The Second Circuit rejected both arguments.

The Second Circuit explained that excluding the audio recording of “Let’s Get It On” was not error because the 1909 Copyright Act protects [...]

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Moving to Recuse? Too Little, Too Late

by Lois D. Mermelstein | Nov 14, 2024 | Patents

The US Court of Appeals for the Federal Circuit ruled that waiting until well after an adverse summary judgment motion to move for a district court judge’s recusal is untimely and moot, especially where an appeal from the adverse decision is already filed and where the recusal motion is based on public information. Cellspin Soft, Inc. v. Fitbit LLC, et al., Case No. 22-1526 (Fed Cir. Nov. 1, 2024) (Taranto, Prost, Reyna, JJ.) (nonprecedential).

Cellspin filed a complaint for patent infringement against Fitbit and others in October 2017. In February 2021, Fitbit amended its corporate disclosure statement to reflect the completion of its acquisition by Google (an indirect subsidiary of Alphabet). Almost a year later, in January 2022, Fitbit and the other defendants moved for summary judgment of noninfringement in their respective cases, and in June 2022, the district court granted summary judgment.

Months later, in January 2023, after the grant of summary judgment and the filing of notices of appeal from that grant, Cellspin filed a motion to recuse the district court judge based on the judge’s mutual fund investments that were likely to invest in Google. The consulting firm for which the judge’s husband worked also sold Google services, but the judge’s spouse did not do work for Google. The district court denied the motion on the merits as untimely and because the district court lacked authority to vacate the summary judgment that was already on appeal.

Applying Ninth Circuit law and reviewing for abuse of discretion, the Federal Circuit found that Cellspin’s behavior in waiting until well after it had lost on summary judgment, and almost two years after Google’s acquisition of Fitbit became final, “raises obvious concerns of lack of equity and strategic misuse of recusal.” The sources Fitbit cited for the judge’s spouse and the activities of the spouse’s employer were also public well before the summary judgment motion was granted, as were the judge’s financial disclosures.

While there is no specific time limit for seeking recusal, the Federal Circuit (citing its 1989 decision in Polaroid v. Eastman Kodak) noted that “timeliness is a well-established consideration in application of the [recusal] statute. In deciding motions to vacate orders issued by an allegedly disqualified judge, the courts have used ‘untimely’ as a synonym for ‘unfair’ when the circumstances, like those present here, are such that a grant of the motion would produce a result inequitable, unjust, and unfair.”

The Federal Circuit also noted that the risk of injustice to the parties from denying vacatur would also be essentially nonexistent here because the Federal Circuit’s concurrent holding on the summary judgment appeal against other defendants had preclusive effect, resolving Cellspin’s infringement assertions against Fitbit as well.

Practice Note: Any motion for recusal should be promptly filed when grounds for the motion become apparent.

PTO Proposes Additional Audits to Put “Specimen Farms” Out to Pasture

by Taylor MacDonald | Nov 14, 2024 | Trademarks

In response to reports that some registrants use fraudulent specimens to prove continued use in commerce, the US Patent & Trademark Office (PTO) proposed an update to its post-registration audit process. Changes in Post-Registration Audit Selection for Affidavits or Declarations of Use, Continued Use, or Excusable Nonuse in Trademark Cases, 89 Fed. Reg. 85,435 (Oct. 28, 2024).

Since its institution in 2017, the PTO’s post-registration audit process has been essentially random. Pursuant to Section 8 of the Trademark Act, trademark owners are required to file documentation in the form of affidavits of continued use indicating that the marks remain in use in connection with goods or services covered by the registration. In turn, the public relies on the trademark register for notice of marks that may be available for use and registration. The PTO conducts random audits of submitted documentation to ensure its reliability.

Since encountering various filings that revealed “systemic efforts to subvert” a trademark’s use in commerce requirement, the PTO has taken steps to expand its audit program. For example, in 2019, the office amended its examination procedures to highlight “digitally created/altered or mockup specimens” that fraudulently indicate continued use in commerce. In 2021, the PTO became aware of “specimen farms,” which are websites designed to create the illusion of commerce without providing actual sales. To combat deceptive maintenance of obsolete marks, the PTO will no longer perform only randomized audits but will also conduct audits “directed” at items that show tell-tale signs of digital alteration or specimen farm website use.

The objective of the directed audit program is “to promote the accuracy and integrity” of the trademark register. This proposed policy is open for public comments on the Federal eRulemaking Portal until November 27, 2024.