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Fourth Estate Redux: Dismissal for Lack of Registration Not on the Merits

by | Jun 20, 2024 |

In the latest development of a complicated eight-year court battle regarding a copyright infringement claim, the US Court of Appeals for the First Circuit vacated and remanded the district court’s dismissal on claim preclusion grounds. The Court concluded that dismissal for failure to register the copyright was not “on the merits,” and therefore preclusion did not apply. Foss v. Marvic Inc. et al., Case No. 23-1214 (1st Cir June 10, 2024) (Barron, C.J.; Lipez, Kayatta, JJ.)

In 2006, Cynthia Foss designed a brochure for Marvic, a purveyor of sunrooms, for $3,000. Foss’s grievance with Marvic began in 2016 when she discovered that Marvic had been using a modified version of that brochure without permission. Foss filed a copyright infringement claim in January 2018 demanding $264,000. She inaccurately alleged that she had applied to register the copyright for the brochure. Eight months later, Foss amended her complaint, falsely alleging that she had registered the brochure with the US Copyright Office in February 2018 when in fact she had only applied for registration.

The district court stayed the action pending the Supreme Court’s decision in Fourth Estate v. Wall-Street, which construed 17 U.S.C. § 411(a) to require registration before a copyright claimant may sue for infringement. After Fourth Estate was issued, the district court dismissed Foss’s copyright infringement claim because the Copyright Office had not acted on her application for copyright. Later, the Copyright Office granted Foss a copyright registration in the brochure. Rather than move for reconsideration of the dismissal of her claim in the first action, Foss filed an appeal, which she lost.

After losing the appeal, Foss filed a second copyright infringement complaint against Marvic based on the same facts as the first. Foss also filed an amended complaint naming Charter Communication. She sought a declaratory judgment that Charter was not entitled to assert a safe harbor defense under the Digital Millenium Copyright Act (DMCA). Marvic and Charter filed motions to dismiss. In February 2023, the district court granted the motions, finding that “[b]ecause Foss’s prior copyright infringement claim against Marvic was dismissed with prejudice, [we] agree[d], for substantially the reasons stated in their supporting memorand[a], that her copyright claims . . . are barred by res judicata.” Foss appealed.

On the issue of claim preclusion, the First Circuit concluded that the first dismissal had not been a “final judgment on the merits” because it was based exclusively on the failure to satisfy the precondition of registration. The Court noted that it had ruled on this issue in Foss v. Eastern States Exposition, another copyright infringement action brought by Foss. The Court explained that, as it concluded in the Eastern States Exposition case, dismissal due to lack of prior registration is “too disconnected from the merits of the underlying claim” to be claim preclusive.

Marvic argued that the prior dismissal “with prejudice” constituted a final judgment on the merits and that the dismissal was “a sanction” based on Foss’s “repeatedly ignoring court directives [...]

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PTO Finalizes Rules Promoting Independence in PTAB Decision-Making

by | Jun 20, 2024 |

The US Patent & Trademark Office (PTO) announced a final rule concerning pre-issuance internal circulation and review of decisions within the Patent Trial & Appeal Board. The new rules are designed to bolster the independence of administrative patent judge (APJ) panels when issuing decisions and increase transparency regarding Board processes. 89 Fed. Reg. 49808 (June 12, 2024).

The new rules amend and codify Title 37 of the Code of Federal Regulations (37 C.F.R. §§ 43.1 – 43.6) by adding Section 43 relating to Board proceedings pending under 37 C.F.R. §§ 41 and 42. The final rule was developed in response to a July 2022 request for comments concerning interim processes and standards in place since May 2022, and an October 2023 notice of proposed rulemaking and request for comments. The final rule codifies the interim processes set forth in Standard Operating Procedure 4 (SOP4), which replaced the standards in place since May 2022.

Under the new rules codified in §§ 43.3 and 43.4, prior to issuance of a panel decision, senior PTO management and non-management APJs (as defined in § 43.2) are barred from communicating, directly or through intermediaries, with any panel member (unless they were themselves panel members) regarding panel decisions. Limited communications are permitted for procedural status and generally applicable paneling guidance that doesn’t directly or otherwise influence the paneling or repaneling of any specific proceeding. The rules do not forbid a panel member from requesting input on a decision prior to issuance from non-panel senior APJs, however. The rules further stipulate that it is within the panel’s sole discretion to adopt any edits, suggestions or feedback from non-panel APJs.

The rule is effective July 12, 2024.



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New Arguments Yield Same Unpatentability Outcome

by | Jun 13, 2024 |

On remand from the US Court of Appeals for the Federal Circuit in connection with inter partes review (IPR) proceedings, the Patent Trial & Appeal Board considered the petitioner’s reply arguments and evidence regarding the claim constructions that were first proposed in the patent owner’s response but again found that the claims were not unpatentable. Axonics, Inc. v. Medtronic, Inc., IPR2020-00712; -00680 (May 30, 2024) (Tartal, Jeschke, Dougal, APJ)

Axonics filed IPR petitions challenging two patents owned by Medtronic that are directed to the transcutaneous charging of implanted medical devices. In its petitions, Axonics did not propose any express claim constructions. In its preliminary response, Medtronic agreed that claim construction was not necessary. In its patent owner response, however, Medtronic – for the first time – advanced a new claim construction that differed from the interpretation of the relevant claims implied in Axonics’s claim charts. Axonics defended its own implicit construction but also offered new arguments and evidence that the prior art anticipated the patents even under the alternative construction. The Board adopted Medtronic’s new claim construction but refused to consider Axonics’s new arguments and evidence because they were first presented in the reply. The Board then found that Axonics failed to show by a preponderance of the evidence that the challenged claims were unpatentable. Axonics appealed.

Axonics did not dispute the new claim construction first introduced by Medtronic in its response and adopted by the Board; it argued only that the Board erred in refusing to consider its reply arguments and evidence under the new construction. The Federal Circuit agreed, concluding that in such a situation, “a petitioner must be given the opportunity in its reply to argue and present evidence of anticipation or obviousness under the new construction, at least where it relies on the same embodiments for each invalidity ground as were relied on in the petition.” The Court remanded for the Board to consider Axonics’s new arguments.

On remand, the Board considered Axonics’s new arguments and evidence that the challenged claims were unpatentable over the prior art under the new construction. It also considered Medtronic’s amended sur-reply. The Board again determined that none of the challenged claims were unpatentable. In its analysis, the Board pointed out that some of Axonics’s new arguments and evidence regarding what the prior art disclosed in light of the new claim construction were inconsistent with the arguments and evidence it initially offered in its petition. In particular, the Board observed that the declaration testimony of Axonics’s expert regarding the prior art, on which Axonics relied in its petition, did not support the new claim construction, even considering the expert’s supplemental declaration. The Board also rejected Axonics’s attempts in its post-remand brief to discredit Medtronic’s arguments as “untimely and wrong,” “incorrect” and “contradictory of the positions on infringement it has taken in district court.” Citing the Federal Circuit, the Board pointed out that in an IPR, the burden of persuasion to prove unpatentability by a preponderance of the evidence [...]

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PTO Collaborates With UK Counterpart to Address Standard-Essential Patents

by | Jun 13, 2024 |

On June 3, 2024, Under Secretary of Commerce for Intellectual Property and US Patent & Trademark Office (PTO) Director Kathi Vidal and Chief Executive Officer of the UK Intellectual Property Office (IPO) Adam Williams signed a memorandum of understanding (MOU) designed to tackle various issues related to standard-essential patents (SEPs).

SEPs are patents that have been declared essential to a particular technical standard. Common examples of technical standards with active SEP bases include cellular communication and other wireless standards, such as LTE, 5G and Wi-Fi. Standards are typically adopted by Standard Setting Organizations (SSOs). To have input on standard adoption, many SSOs require participants agree to license any patents that result from discussions with potential licensees on Fair, Reasonable and Non-Discriminatory (FRAND) terms (See e.g., ETSI Intellectual Property Rights Policy).

But what are FRAND terms, and who gets to decide whether they issue? While individual patents are territorial (e.g., a US-issued patent is only enforceable in the United States), patent owners often obtain patent coverage in multiple jurisdictions. This can lead to challenges wherein a court in one jurisdiction may determine FRAND terms for a patent in that jurisdiction, which may then set or significantly influence the FRAND rate for the patent owner’s corresponding patents in other jurisdictions.

While the MOU is not public at this time, the PTO indicated that the MOU sets forth a framework for the following action items:

  • Cooperate on activities to facilitate collaboration and exchange of information on policy matters concerning SEPs to better ensure a balanced standards ecosystem.
  • Explore means to educate small- and medium-sized enterprises seeking to implement or contribute to the development of technical interoperability standards on FRAND terms.
  • Examine ways of improving transparency in the FRAND licensing of technical interoperability standards.
  • Engage in outreach to stakeholders to raise awareness of issues related to SEPs.
  • Discuss means to incorporate additional jurisdictions into the PTO and IPO’s activities concerning SEPs, including exploring a venue for broader discussions.

The agreement remains in place through June 3, 2029. PTO Director Vidal emphasized that “[t]his important collaboration with UKIPO will help us work together toward a fair and balanced international standard essential patent ecosystem that benefits all businesses in our two countries, including small and medium-sized enterprises and new market entrants.”



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The $X Factor: Demystifying Damages Calculations

by | Jun 13, 2024 |

The US Court of Appeals for the Federal Circuit affirmed a district court’s decision to deny a defendant’s motion for a new trial on damages, finding that the plaintiff’s damages expert sufficiently showed that prior license agreements were economically comparable to a hypothetically negotiated agreement between the parties. EcoFactor, Inc. v. Google LLC, Case No. 23-1101 (Fed. Cir. June 3, 2024) (Reyna, Lourie, JJ.) (Prost, J., dissenting).

EcoFactor owns a patent directed to mitigating strain on the electricity grid by adjusting thermostat settings within HVAC systems. The patent describes a system where thermostats collect internal temperature readings and use them alongside external temperatures to estimate internal temperature change rates, including future predictions. EcoFactor sued Google alleging infringement based on Google’s Nest smart thermostat products.

After discovery, Google sought summary judgment, arguing that claims of EcoFactor’s patent were invalid as abstract ideas under 35 U.S.C. § 101. The district court denied this motion as well as Google’s Daubert motion to exclude the testimony of EcoFactor’s damages expert. At trial the jury found that Google infringed EcoFactor’s patent and awarded damages. The district court denied Google’s subsequent motions for judgment as a matter of law on noninfringement and for a new trial on damages. Google appealed.

Google raised three key issues. First, it argued that the district court erred in denying its motion for summary judgment. Second, Google asserted that the district court erred in denying its motion for judgment as a matter of law concerning the noninfringement of EcoFactor’s patent. Third, Google claimed that the district court wrongly denied its motion for a new trial on damages, arguing that EcoFactor’s damages expert opinion was based on unreliable methodology.

The Federal Circuit upheld the district court’s decision to deny summary judgment because there were genuine issues of material fact warranting a trial. The Court also affirmed the jury’s infringement verdict against Google, finding that it was supported by substantial evidence. Despite Google’s argument that its Nest thermostats did not meet the claims of EcoFactor’s patent, the Court concluded that expert testimony and corroborating documentation demonstrated otherwise.

On the damages issue, Google argued that EcoFactor’s expert testimony was unreliable because there was no evidence that the parties to the three license agreements used by the expert actually applied the royalty rate stated in the agreement. While Google acknowledged that each of the license agreements include a specified royalty rate, Google argued that each also included a “whereas” clause indicating that the licensee would pay EcoFactor a lump sum amount “set forth in this Agreement based on what EcoFactor believes is a reasonable royalty calculation of [$X] per-unit for . . . estimated past and [] projected future sales of products accused of infringement in the Litigation.” Google asserted that while the agreements may have included a stated rate, there was no evidence that the agreements actually applied the rate in calculating the lump sum payment.

The Federal Circuit rejected Google’s argument. The Court explained that the proposed royalty rate was derived from three [...]

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PTO Reopens Comment Period for AI Inventorship Guidance

by | Jun 13, 2024 |

The US Patent & Trademark Office (PTO) reopened and extended until June 20, 2024, the period for public comment on the guidance regarding inventorship in applications involving artificial intelligence (AI) assisted inventions. The guidance was published on February 13, 2024, at 89 FR 10043. The PTO will also treat as timely any comments received between May 13, 2024, and the notice’s June 6, 2024, publication date.

Comments on the inventorship guidance must be submitted via the Federal Rulemaking Portal.

For more information, see our previous report on the February 13 PTO notice and related examination guidance.



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Senate Policy Roadmap Steers Generative AI Toward Transparency

by | Jun 6, 2024 |

In May 2024, the Bipartisan Senate AI Working Group released a roadmap to guide artificial intelligence (AI) policy in several sectors of the US economy, including intellectual property (IP). The group, which includes Senate Majority Leader Chuck Schumer (D-NY), Mike Rounds (R-SD), Martin Heinrich (D-NM) and Todd Young (R-IN), acknowledged the competing interests of positioning the United States as a global leader in AI inventions while also protecting against copyright infringement and deepfake replicas. According to the Working Group, a careful balance can be achieved by establishing two requirements for generative AI systems: transparency and explainability.

Under the current regime, AI inventors may hesitate to reveal datasets used to train their models or to explain the software behind their programs. Their reluctance stems from a desire to avoid potential liability for copyright infringement, which may arise when programmers train AI systems with copyrighted content (although courts have yet to determine whether doing so constitutes noninfringing fair use). Such secrecy leaves artists, musicians and authors without credit for their works and inventors without open-source models for improving future AI inventions. The Working Group proposed protecting AI inventors against copyright infringement while simultaneously requiring them to disclose the material on which their generative models are trained. Such transparency would provide much-needed acknowledgment and credit to holders of copyrights on content used to train the generative AI models, according to the Working Group. Although attributing credit does not absolve an alleged infringer of liability under the current legal framework, such a disclosure (even without a legislative safe harbor) may promote a judicial finding of fair use. The Working Group also identified the potential for a compulsory licensing scheme to compensate those whose work is used to improve generative AI models.

The roadmap also recommended a mechanism for protecting against AI-generated deepfakes. Under the Lanham Act, people receive protection against the use of their name, image and likeness for false endorsement or sponsorship of goods and services. But deepfakes often avoid liability through humorous or salacious misrepresentations of individuals without reference to goods or services. The Working Group advised Congress to consider legislation that protects against deepfakes in a manner consistent with the First Amendment. Deepfake categories of particular concern included “non-consensual distribution of intimate images,” fraud and other deepfakes with decidedly “negative” outcomes for the person being mimicked.

If Congress legislates in accordance with the roadmap, the transparency and explanation requirements for generative AI could impact IP law by creating a safe harbor for copyright infringement. Similarly, an individual’s name, image, likeness and voice could emerge as a new form of protectable IP against deepfakes.

Nick DiRoberto, a summer associate in the Washington, DC, office, also contributed to this blog post.



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Interference Analysis Is a Two-Way Street

by | Jun 6, 2024 |

On appeal from an interference proceeding, the US Court of Appeals for the Federal Circuit reversed a Patent Trial & Appeal Board decision that found the claims of the senior party’s patent were not invalid as time-barred under 35 U.S.C. § 135(b)(1). The Federal Circuit concluded that the “two-way test” requires looking to see if either set of pre-critical and post-critical date claims contains a material limitation not found in the other and not just looking to see if the post-critical date claims have additional material limitations. Speck et al. v. Bates et al., Case No. 22-1905 (Fed. Cir. May 23, 2024) (Dyk, Bryson, Stoll, JJ.)

35 U.S.C. § 135(b)(1), pre-AIA, provides that “a claim which is the same as, or for the same or substantially the same subject matter as, a claim of an issued patent may not be made in any application unless such a claim is made prior to one year from the date on which the patent was granted.” This has been described as a statute of repose that places a time limit on a patentee’s exposure to an interference, the deadline for which is referred to as the “critical date.” At issue in this appeal was the “long-standing” exception to § 135(b)(1) for instances where the applicant files its claim after the critical period but has already been claiming substantially the same invention as the patentee during the critical period.

This case involves drug-coated balloon catheter technology. Bates is the senior party that filed a patent application, and Speck is the junior party that owns an issued patent. Speck’s patent issued on September 4, 2012, whereas Bates filed his application on August 29, 2013, six days before the critical date of Speck’s patent (i.e., one year after the filing date). Bates amended the application on August 30, 2013 (still before the critical date), and canceled all of the original claims and replaced them with new claims. Bates later amended the claims after the critical date to add a requirement that the device be “free of a containment material atop the drug layer.” The amendment was made to overcome a rejection from the examiner during prosecution.

Speck filed a motion to terminate the interference on the ground that the claims of Bates’s application were time-barred under § 135(b)(1) because Bates amended the claims more than one year after Speck’s patent issued. Speck also moved the Board to find that the claims of Bates’s application were unpatentable for lack of written description.

The Board denied Speck’s motion to terminate under § 135(b)(1), finding that the later-amended claims did not differ materially from the claims in other patents and patent applications Bates owned that were filed prior to the critical date, because “Speck ha[d] not directed [the Board] to a material limitation of the Bates involved claims that is not present in the earlier Bates claims.” Speck filed a motion for rehearing, which the Board denied. The Board also denied Speck’s motion to find that Bates’s claims lacked [...]

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For Statutory Equivalents, Even One Means May Be Enough

by | Jun 6, 2024 |

A US Patent & Trademark Office (PTO) appeals review panel decided that a means-plus-function (M+F) claim element supported by the disclosure of only a single species is not invalid for indefiniteness or lack of written description, even if the specification lacks other disclosed statutory corresponding equivalents. Ex parte Chamberlain, Appeal No. 22-001944 (App. Review Panel, May 21, 2024) (Vidal, Dir.; Udupa, Boalick, APJs) (per curiam).

The independent claims of the patent application at issue involved methods of treating patients with “anti-C5 antibod[ies]” that include amino acid substitutions devised to increase the in vivo half-life of the antibody. Each claim involved similar preambles: “A method of treating a patient by administering an anti-C5 antibody comprising . . . .” One of the independent claims was in Jepson form, whereas the other included a M+F limitation.

Following rejections by the examiner and the applicant’s appeal to the Patent Trial & Appeal Board, the Board entered new grounds of rejection finding both claims invalid under 35 U.S.C. § 112, ¶1 (written description) and affirmed the examiner’s rejection of the claims for obviousness-type double patenting. The Board also entered a new ground of rejection finding the claim including the M+F claim element indefinite under 35 U.S.C. § 112, ¶2. Following the applicant’s appeal to the Federal Circuit, the PTO took the unusual step of petitioning the Federal Circuit to “administratively remand [the case] to the Office in order to convene an Appeals Review Panel to clarify the Office’s position on the proper analysis of ‘Jepson-format and means-plus-function claims in the field of biotechnology, and particularly in the antibody art’ and ‘to issue a revised decision.’”

On remand, the panel affirmed the Board’s determinations that written description was lacking but overturned the Board’s finding of indefiniteness for the claim including the M+F element. In doing so, the panel offered useful commentary on the invalidity standard for M+F claim elements as well as the implications that a limiting preamble may have on invalidity.

The panel found the “treating a patient” preamble recitation limiting in both claims. For the Jepson claim, the preamble was per se limiting. However, the panel went on to find that, even independent of the Jepson claim format, the “treating a patient” phrase would be limiting. Outside the Jepson context, the panel characterized the inquiry of determining whether a preamble limits the body of the claim as a highly contextual one. According to the panel, the “treating a patient” term did not merely provide “circumstances in which the method may be useful” but instead constituted “the raison d’être of the claimed method itself.” The “treating a patient” language was necessary to “give life, meaning, and vitality” to limitations in the body of the claim involving increasing the in vivo half-life of the antibodies and administering the antibodies.

Having determined that the “treating a patient” recitation was limiting, the panel found that the limitation was overbroad compared to the scope of the patent’s disclosure, and thus the Jepson format claim lacked adequate written description. Read in light of [...]

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Sour Grapes: Winery Minority Ownership Insufficient for Statutory Standing at Trademark Board

by | May 30, 2024 |

The US Court of Appeals for the Federal Circuit affirmed the dismissal of a petition seeking to cancel the registered marks of two wineries, finding the petitioner (a trust owning an interest in a competitor winery) lacked statutory standing under 15 U.S.C. § 1064. Luca McDermott Catena Gift Trust v. Fructuoso-Hobbs SL, Case No. 23-1383 (Fed. Cir. May 23, 2024) (Lourie, Reyna, Chen, JJ.) (en banc). The Court found that while the cancellation petitioner, Luca McDermott, had Article III standing to seek judicial review of the Trademark Trial & Appeal Board’s decision, it did not have statutory standing under the Lanham Act to petition for cancellation of the registrations at issue.

Paul Hobbs is a winemaker and partial owner of California-based Paul Hobbs Winery. The Paul Hobbs Winery owns the registration for the PAUL HOBBS mark in International Class 33 for “Wines.” Luca McDermott and two other related family trusts are each limited partners of the winery, collectively owning more than 21% of the business. Paul Hobbs is also affiliated with two other wineries: Fructuoso-Hobbs, a Spanish winery and owner of the registered mark ALVAREDOS-HOBBS, and New York winery Hillick & Hobbs Estate, owner of the registered mark HILLICK AND HOBBS. Both marks are registered in International Class 33 for “Alcoholic beverages except beers; wines.”

Luca McDermott and the other two family trusts petitioned to cancel both of the registered marks on the grounds of likelihood of confusion, alleging that the use of the ALVAREDOS-HOBBS and HILLICK AND HOBBS marks in connection with wine was likely to cause confusion with the Paul Hobbs Winery’s use of the PAUL HOBBS mark for wine. The trusts also alleged that Fructuoso-Hobbs committed fraud because it caused its lawyer, the same lawyer of record who managed the registration of the Paul Hobbs Winery’s PAUL HOBBS mark, to declare that the marks would not be likely to cause confusion with another mark.

Fructuoso-Hobbs moved to dismiss the petition, arguing that the family trusts were not entitled by statute to bring the cancellation action because they were not the owners of the PAUL HOBBS mark. Fructuoso-Hobbs also argued that the trusts could not show they had the necessary “proprietary interest” to bring the likelihood of confusion claim. The Board granted the motion to dismiss. Luca McDermott, one of the three trusts in the original action, appealed.

Before it could review de novo the Board’s decision regarding the trust’s lack of standing under the Lanham Act, the Federal Circuit addressed whether the trust had Article III standing to seek judicial review of the Board’s decision. The Court had little trouble concluding that the alleged injury (i.e., the diminished value of the trust’s investment in the winery) constituted an individual injury-in-fact, even for a minority partner. Furthermore, the Court found that the causation requirement was satisfied because the constitutional standard did not require proximate causation but only that the injury be “fairly traceable” to the allegedly unlawful registration of the challenged marks. Finally, the Federal Circuit found it [...]

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