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Change in Law Leading to Case Dismissal Doesn’t Preclude Attorneys’ Fees

by Eleanor B. Atkins | Aug 24, 2023 | Copyrights

Addressing the symmetrical fee-shifting provision of the Copyright Act and whether a prevailing defendant was entitled to fees even when the plaintiff moved to dismiss the case in response to a change in law, the US Court of Appeals for the Seventh Circuit reversed the district court’s denial of attorneys’ fees and remanded the case for reconsideration. Live Face on Web, LLC v. Cremation Society of Illinois, Inc., et al., Case No. 22-1641 (7th Cir. Aug. 11, 2023) (Scudder, Kirsch, Jackson-Akiwumi, JJ.)

The Cremation Society of Illinois and its co-defendants (collectively, CSI) licensed software from Live Face on Web. Live Face on Web then sued CSI for copyright infringement, seeking damages of more than 1,000 times the initial license fee. Five years later, while summary judgment was pending, Live Face on Web moved to dismiss the case, arguing that the Supreme Court’s 2021 decision in Google LLC v. Oracle America, Inc. “made the defendants’ fair-use defense insurmountable.” The district court granted the motion to dismiss, and CSI filed a motion to recover fees. The court denied the motion for fees, in part because “awarding fees would neither encourage nor discourage other defendants from maintaining valid defenses against copyright claims.” CSI appealed.

The Copyright Act allows prevailing parties to recover costs and fees. The Seventh Circuit examined the nonexclusive factors that guide this analysis:

The frivolousness of the lawsuit
The losing party’s motivation for bringing or defending the lawsuit
The objective unreasonableness of the losing party’s claims
The need to advance considerations of compensation and deterrence.

The Seventh Circuit noted that the last factor relates to the purpose of the fee-shifting provision: “[b]y encouraging parties to stand on their rights, the Act’s symmetrical fee-shifting provision advances its core purposes.” A successful copyright infringement litigant “encourages others to use the copyright system, fostering further innovation,” whereas a defendant “who successfully protects his rights to use things in the public domain necessarily gives others a license to do the same.” The Court stated that prevailing defendants in particular benefit from a strong presumption that they are entitled to recover attorneys’ fees: “Without an award of attorney’s fees, a defendant faces pressure to abandon his meritorious defenses and throw in the towel because the cost of vindicating his rights (his attorney’s fees) will exceed the private benefit he receives from succeeding (a nonexcludable right to continue doing what he was already doing).”

In this case, the district court reasoned that CSI’s success was due to the change in the law rather than meritorious defenses and, therefore, awarding fees to CSI would not advance or deter any conduct. The Seventh Circuit disagreed, stressing that Live Face on Web did not demonstrate that it would have prevailed but for the Supreme Court’s decision in Google. Moreover, the Court noted that CSI had raised multiple other defenses that were not impacted by Google. In any event, the Court reasoned, “[i]n litigation, both sides accept that as the case evolves, the law might, [...]

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Standard Computer Equipment Can Support Inventive Concept under Alice Step 2

by McDermott Will & Emery | Oct 6, 2022 | Patents

The US Court of Appeals for the Federal Circuit overturned a district court dismissal of a patent case for errors in analyzing the claims’ patent eligibility under Alice. The Court found that regardless of whether the claimed invention was abstract under step 1, the invention claimed specific improvements rendering it patent eligible under step 2. Cooperative Entertainment, Inc. v. Kollective Technology, Inc., Case No. 21-2167 (Fed. Cir. Sept. 28, 2022) (Moore, C.J.; Lourie, Stark, JJ.)

Cooperative Entertainment sued Kollective Technology for infringement of several claims of Cooperative’s patent directed to structuring a peer-to-peer (P2P) dynamic network for distributing large files. After Kollective filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) arguing that all of the patent claims were ineligible under 35 U.S.C. § 101, Cooperative filed an amended complaint. Kollective refiled its motion to dismiss, and the district court granted the motion, holding the challenged claims ineligible under § 101. Cooperative appealed.

The patent relates to systems and methods of structuring a P2P dynamic network for distributing large files, specifically videos and video games. The patent specification explains that in prior art systems, video streaming was controlled by content distribution networks (CDNs), with content “distributed directly from the CDN server originating the content.” In contrast, the challenged claims recite methods and systems for a network in which content distribution occurs “outside controlled networks and/or [CDNs]” (emphasis added), and therefore outside a “static network of controlled systems.” Dynamic P2P networks comprising “peer nodes,” which consume the same content contemporaneously, transmit content directly to each other instead of receiving content from the CDN. The claimed P2P networks use “content segmentation” to segment a video file into smaller clips and distribute it piecemeal. Viewers can obtain individual segments as needed, preferably from other viewers. The disclosed segmentation techniques include “CDN address resolution, trace route to CDN and the P2P server manager, dynamic feedback from peers reporting traffic rates between individual peer and its neighbors, round-robin, other server side scheduling/resource allocation techniques, and combinations thereof” (emphasis in original).

The Federal Circuit applied the two-step Alice framework: (1) determining whether the claim is “directed to” a “patent-ineligible concept,” such as an abstract idea, and if it is, (2) examining “the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” Step 2 examines whether the claim elements, individually and as an ordered combination, contain an inventive concept that more than merely implements an abstract idea using “well-understood, routine, [and] conventional activities previously known to the industry.”

Under Alice step 1, the district court had held that the “focus of the [] patent” is the abstract idea of “the preparation and transmission of content to peers through a computer network.” The Federal Circuit disagreed, concluding that regardless of whether the invention could be reduced to an abstract concept, under step 2 the claims contained several alleged inventive concepts that the specification touted as specific improvements in the distribution of data [...]

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Ex Parte Reexamination Not Allowed After Failed IPR Challenge

by Paul Devinsky | Oct 14, 2021 | Patents

The US Court of Appeals for the Federal Circuit found that ex parte reexamination was unavailable to a challenger who repeatedly tried and failed to raise the same arguments for the same patent in a prior inter partes review (IPR) proceeding. In re: Vivint, Inc., Case No. 20-1992 (Fed. Cir. Sept. 29, 2021) (Moore, C.J.)

Vivint sued Alarm.com in 2015 for infringement of several patents. In response, Alarm requested that the Patent Trial & Appeal Board (PTAB) institute “a litany of post-issuance review proceedings,” including three separate IPR petitions directed to one of the patents. The PTAB refused to institute two of the petitions because Alarm failed show to a reasonable likelihood that it would prevail on at least one challenged claim and also refused to institute the third petition because it represented an example of “undesirable, incremental petitioning.” According to the PTAB, Alarm had “used prior Board decisions as a roadmap to correct past deficiencies” and allowing such “similar, serial challenges to the same patent” by the same challenger risked, not only harassment of patent owners, but also frustration of congressional intent behind the America Invents Act (AIA).

More than a year later, Alarm filed a request for ex parte reexamination of the patent—a request that used repackaged versions of arguments from its unsuccessful IPR petition. Despite the striking similarity between Alarm’s prior and current arguments, including two out of the four original IPR patentability questions being copied verbatim from the failed petition into the ex parte reexamination request, the PTAB found the petition raised substantial new questions of patentability and ordered reexamination. Vivint responded by seeking dismissal of the ex parte reexamination under 37 C.F.R. § 1.181, arguing that the PTAB has the authority under 35 U.S.C § 325(d) to deny the ex parte reexamination request because that statute applies to ex parte reexaminations and IPRs with “equal force.” The PTAB rejected Vivint’s request, stating that any § 1.181 petition raising a § 325(d) challenge must be filed before reexamination is ordered.

Vivint filed a second § 1.181 petition seeking reconsideration of the § 325(d) issue, arguing that it would have been impossible for Vivint to file the § 1.181 petition before ex parte reexamination was ordered. Vivint also argued that even if the PTAB lacked general authority to terminate the reexamination, it could exercise such authority under the Administrative Procedure Act (APA). Vivint also asserted that the PTAB “acted arbitrarily and capriciously by applying the same law to the same facts and reaching a different conclusion.” The PTAB rejected Vivint’s arguments and denied its second petition, finding that Vivint could have sought a waiver of the rules having to do with the required prior-to-ex parte timing of a § 1.181 petition vis-à-vis institution of ex parte reexamination. The PTAB also noted that ex parte reexamination was not inconsistent with denying the initial IPR. Ultimately, after an examiner issued a final rejection for all claims of the patent, Vivint appealed to the PTAB. The PTAB affirmed and Vivint [...]

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Second Circuit: Supreme Court Google Precedent Doesn’t Alter Copyright Law’s Fair Use Analysis

by Sarah Bro | Sep 2, 2021 | Copyrights

Addressing fair use as an affirmative defense to copyright infringement, the US Court of Appeals for the Second Circuit amended its recent opinion, reversing a district court’s summary judgment in favor of fair use. The Court did not change its original judgment but took the opportunity to address the recent Supreme Court of the United States precedent in Google v. Oracle. The Andy Warhol Foundation for the Visual Arts, Inc. v. Lynn Goldsmith, Lynn Goldsmith, Ltd., Docket No. 19-2420-cv (2d Cir., Aug. 24, 2021) (Lynch, J.) (Jacobs, J., concurring).

Lynn Goldsmith and Lynn Goldsmith, Ltd. (collectively, LGL) appealed from a district court judgment that granted summary judgment to The Andy Warhol Foundation for the Visual Arts, Inc. (AWF) on its complaint for a declaratory judgment of fair use and dismissing defendants-appellants’ counterclaim for copyright infringement. The Second Circuit reversed and remanded for further proceedings.

In 1984, LGL’s agency licensed her 1981 photograph of Prince to Vanity Fair for use as an artist reference for creating a rendering of Prince to accompany Vanity Fair‘s profile of the artist. What LGL did not learn until more than 30 years later, shortly after Prince’s untimely death, was that the artist commissioned by Vanity Fair to create the Prince drawing was Andy Warhol and that Warhol had used the photograph to create an additional 15 silkscreen prints and illustrations, known as the Prince Series. In 2017, LGL notified AWF, as the successor to Warhol’s copyright in the Prince Series, of her claims of copyright infringement. AWF responded with a lawsuit seeking a declaratory judgment that the Prince Series works were non-infringing, or, in the alternative, qualified as fair use of LGL’s photograph. LGL countersued for infringement. Relying on the Second Circuit’s 2013 holding in the copyright case Cariou v. Prince, the district court granted summary judgment to AWF, agreeing with its assertion of fair use and considering the Warhol work to be “transformative” of the original.

LGL’s appeal required the Second Circuit to consider the four fair use factors under §107 of the Copyright Act:

The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes
The nature of the copyrighted work
The amount and substantiality of the portion used in relation to the copyrighted work as a whole
The effect of the use upon the potential market for, or value of, the copyrighted work.

In its March 2021 opinion, the Second Circuit rejected AWF’s fair use defense, concluding that the Prince Series was not transformative and substantially similar to LGL’s original photograph.

After the Second Circuit’s initial disposition of the appeal, the Supreme Court issued its decision in Google LLC v. Oracle America, Inc., which discussed the four fair use factors as applied to a computer programming language and found that Google’s copying of certain Oracle application programming interfaces (APIs) “to create new products . . . [and] expand the use [...]

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Transfer Motions Must Take Top Priority

by Amol Parikh | Nov 19, 2020 | Patents

The US Court of Appeals for the Federal Circuit granted an accused infringer’s mandamus petition to transfer a case from the Western District of Texas to the Northern District of California, concluding that the district court “barreled ahead” on the merits before addressing the transfer motion and clearly abused its discretion in denying transfer. In re. Apple, Inc., Case No. 20-135 (Fed. Cir. Nov. 9, 2020) (Prost, C.J.) (Moore, J., dissenting). In re. Apple, Inc

In September 2019, Uniloc sued Apple in the Western District of Texas alleging that several Apple products infringed one of Uniloc’s patents. In November 2019, Apple moved to transfer the case to the Northern District of California on the basis that it would be clearly more convenient to litigate the case in that district. In January 2020, Apple moved to stay all activity in the case unrelated to its transfer motion pending a decision on that motion. The district court denied the stay motion without explanation. In May 2020, the district court held a hearing on Apple’s transfer motion during which the court stated that it would deny the motion and issue a written order as soon as possible. After the hearing, but before issuing a written order, the court held a Markman hearing, issued its claim construction order, held a discovery hearing and issued a corresponding discovery order. In response to these advances in the case, in June 2020 Apple filed a petition for writ of mandamus requesting that the Federal Circuit transfer the case to the Northern District of California. One week after Apple filed its petition, the district court issued its written order denying transfer.

The Federal Circuit granted Apple’s mandamus petition and directed the district court to transfer the case to the Northern District of California. The Federal Circuit explained that the US Court of Appeals for the Fifth Circuit assesses transfer requests using private and public interest factors. The private interest factors are: “(1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive.” The public interest factors are: “(1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws [or in] the application of foreign law.” The parties agreed that the third and fourth public interest factors were neutral, but disputed whether the remaining factors weighed for or against transfer.

The Federal Circuit found numerous errors in the district court’s analysis. As to the first private factor (access to sources of proof), the Court found that the district court erred in determining that the location of witnesses weighed in favor of transfer. The Court explained that the “access to proof” factor [...]

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Buzz-sawed: Give Copyright Credit or Face Statutory Damages, Fees, Costs

by Jodi Benassi | Aug 26, 2020 | Copyrights

The US Court of Appeals for the Second Circuit affirmed a district court’s award of statutory damages where the defendant knowingly distributed a photograph without first getting permission to use the photograph. Gregory Mango v. BuzzFeed, Inc., Case No.19-446 (2nd Cir. Aug.13, 2020) (Park, J.).

Gregory Mango, a freelance photographer, sued BuzzFeed, an online media company, under the Digital Millennium Copyright Act (DMCA), for using one of his photographs in a news article without first obtaining his permission and crediting him. Mango asserted copyright infringement, alleging that BuzzFeed removed or altered the copyright management information (CMI), a violation under the DMCA. Mango sought statutory damages of $30,000 for his copyright infringement claim, $5,000 for his DMCA claim, and attorney’s fees. BuzzFeed argued that it could not be held liable under the DMCA because there was no evidence that it knew its conduct would lead to future, third-party infringement of Mango’s copyright.

The photo at issue was of Raymond Parker, who was the lead figure in a discrimination lawsuit filed by federal prosecutors in New York. The New York Post licensed the photo and published it, including Mango’s name in an attribution known as “gutter credit.” A few months later, BuzzFeed published an article about Parker and used Mango’s photo. The BuzzFeed journalist did not ask for permission to use the photo; instead, he listed the name of Parker’s attorneys’ law firm in the gutter credit. The journalist, a six-year veteran at BuzzFeed, had written more than 1,000 articles for the company, all of which included a photograph, and it was his custom to give credit to the photographers by “name or by photo outlet.” However, in this case, he asked the law firm for a photo of Parker but ultimately downloaded the photo from the New York Post website himself and attributed the photo to the law firm.

Prior to a bench trial, BuzzFeed stipulated to liability on the copyright infringement claim. The district court noted that under “Section 1202(b)(3) of the DMCA, plaintiffs must prove (1) actual knowledge … that CMI was removed and/or altered without permission and (2) constructive knowledge … that such distribution will induce, enable, facilitate or conceal an infringement.” The court found that Mango’s gutter credit constituted CMI and that BuzzFeed knew that the CMI had been removed and altered without permission, rejecting the journalist’s claims that he had believed he obtained permission and that BuzzFeed had reasonable grounds to know that such removal and distribution was infringement. The court found BuzzFeed liable on both claims and awarded Mango $8,750 in statutory damages and $65,132 in attorney’s fees. BuzzFeed appealed.

The Second Circuit determined that the district court correctly applied the DMCA in the case, finding that the journalist had distributed Mango’s photo knowing that his gutter credit had been removed or altered without Mango’s permission and distributed it with a gutter credit of the law firm, knowing that doing so would conceal that he did not have permission to use the photo.

BuzzFeed argued [...]

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Third Parties Not Responsible for Defective Motion to Seal

by Paul Devinsky | Jul 22, 2020 | Patents

The US Court of Appeals for the Federal Circuit held that a district court did not abuse its discretion in denying reconsideration of a previous order denying a litigant’s defective motion to seal with regard to the litigant’s own information, but vacated and remanded for further consideration with regard to third-party information. Uniloc 2017 LLC v. Apple, Inc., Case Nos. 19-1922, -1923, -1925, ‑1926 (Fed. Cir. July 9, 2020) (Mayer, J.).

Uniloc sued Apple for patent infringement in the Northern District of California. Apple moved to dismiss. The briefing on the motion included material that Uniloc had designated as highly confidential. Both parties filed motions to seal. Uniloc’s motions to seal covered quotations from published opinions and matters of public record, among other things. Uniloc’s supporting declarations included only boilerplate assertions of harm from disclosure. Non-party Electronic Frontier Foundation asked Uniloc to narrow its redactions, and when Uniloc declined, Electronic Frontier moved to intervene for the purpose of opposing Uniloc’s sealing motions. The district court denied the motions to seal as overbroad under the local rules, which require such motions to be narrowly tailored.

Uniloc sought an extension of time and ultimately filed a motion for leave to seek reconsideration. In that motion, it agreed to make public more than 90% of the material it had originally sought to seal. It also filed a new motion to seal the remainder. In support, it attached a much more specific declaration supporting sealing the more limited set of materials, as well as several declarations of third-party licensees, who stated that disclosure of their confidential information would be harmful to them. The court denied the motion seeking leave as not meeting the local rules’ requirements for reconsideration. The court also denied the narrower motion to seal, reasoning that Uniloc should have filed a proper motion to seal in the first instance. Uniloc appealed.

Uniloc argued that the district court had abused its discretion in denying the narrower motion to seal. In considering Uniloc’s argument, the Federal Circuit distinguished between Uniloc’s information and third-party information. Applying Ninth Circuit law, the Court held that the district court had not abused its discretion by strictly enforcing its local rules with regard to Uniloc’s information. Uniloc had violated the local rules in its motion to seal and subsequent motion for reconsideration. Moreover, the Court explained that notwithstanding the submission of a narrowly tailored motion, the burden is always on the moving party to provide compelling reasons for sealing, which Uniloc had failed to do.

Next, the Federal Circuit explained that third-party information “calls for an analysis not dependent on the overbreadth rationale” because third parties should not be harmed by a litigant’s failure to follow the local rules. Because the district court’s analysis had been based on overbreadth, the Court found that the district court “failed to make findings sufficient to allow us to adequately assess whether it properly balanced the public’s right of access against the interests of the third parties in shielding their . . [...]

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Improper Use of Voluntarily Communicated Trade Secrets Sufficient to Maintain Action for Misappropriation in Texas

by Paul Devinsky | Jul 1, 2020 | Trade Secrets

The US Court of Appeals for the Fifth Circuit held that, under Texas law, a plaintiff can sustain an action for trade secret misappropriation even if the plaintiff voluntarily communicated the alleged trade secrets to the defendant. Hoover Panel Systems, Inc. v. HAT Contract, Inc., Case No. 19-10650 (5th Cir. June 17, 2020) (per curiam). (more…)

When It’s All In the Family: Reverse Confusion Not a Basis for Broad Trademark Remedies

by Mary Hallerman | Jan 8, 2020 | Trademarks

Addressing reverse confusion and scope of available remedies, the US Court of Appeals for the Seventh Circuit upheld a district court’s refusal to award infringing profits and a broad permanent injunction after a jury found infringement. Fabick, Inc. v. JFTCO, Inc., Case Nos. 19-1760; -0072 (7th Cir. Dec. 9, 2019) (Flaum, J.)

This trademark dispute originates with a family feud. John Fabick, founder of the John Fabick Tractor Company, purchased two Caterpillar equipment dealerships intending for his son, Joe, to operate the dealerships. At the time, the John Fabick Tractor Company had used the mark FABICK in connection with its business. Joe later founded FABCO, which sold Caterpillar equipment and related goods. Eventually, one of Joe’s sons, Jeré, took over FABCO.

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