rescuecom v. google/media/files/insights/publications/2009/0… · i hope to see you there....
TRANSCRIPT
Perspectives • Analysis • Visionary Ideas
INTELLECTUAL PROPERTY AND TECHNOLOGY NEWS
Issue 3, Q3 2009 | www.dlapiper.com/ip_global Attorney Advertising
ReexAmInAtIon: A Cost-EffECtivE AltErnAtivE
PAtent tRolls need not APPly: Why thE itC should BAr thE doors to PAtEnt trolls
ChAnge Is heRe: finding frAud At thE ttAB
WIll less ContRol oVeR lICensIng meAn moRe lItIgAtIon?
rEsCuECoM v. googlE: ChAnging thE futurE of KEyWord AdvErtising?
There are still significantly fewer women than men in the area of IP Law. Every now and again, I must stop and ask why…and more importantly, what can we do to change that?
Odds are, you are already championing diversity in your legal department or law firm. I would like to start a conversation to help find a broader solution. What more can be done to attract, retain and advance women in IP law? If you have some thoughts on the subject, I would welcome your email. Perhaps by thinking together we can make more of an impact.
As this issue goes to press, DLA Piper is making final preparations for our third annual Women in IP Law CLE Luncheon, to be held at the Four Seasons Hotel Silicon Valley on September 16, 2009.
Our distinguished outside panelists include Judge Fern M. Smith (Ret.) (ADR Neutral with JAMS); Mary E. Doyle (Senior Vice President and General Counsel, Palm Inc.); and Susan Marsch (Senior Vice President, General Counsel and Ethics Officer, UTStarcom, Inc.). Panelists from DLA Piper include IP and Technology partners Elizabeth Day and Karen Dow, and Dr. Julia Schönbohm from Germany.
DLA Piper hosts this event to foster relationships among women in the IP field and to promote the status of women in IP law and business. We think that the annual event makes a significant difference in the IP community in many ways, including showcasing women as leaders in the IP legal field, creating programs for education and professional development, and providing venues for professional networking and mentoring opportunities. Open to men and women, every year the event attracts talented in-house and outside counsel, business people, students and leaders from Silicon Valley and beyond.
This year’s program, entitled “Navigating a Changing IP Landscape,” focuses on two topics of discussion: “Winning IP Strategies in a Struggling Global Economy” and “The New Patent Licensing World and Its Impact on Litigation.” For more information regarding this event, please visit http://www.dlapiper.com/ip_women_luncheon/.
I hope to see you there.
Randy KayPartner, Patent litigation
you are receiving this communication because you are a valued client, former client or friend of dlA Piper. the information contained in this newsletter is for informational purposes only and should not be construed as legal advice on any matter. to unsubscribe from this mailing list, send an email to [email protected] or send your written request to: dlA Piper, Attention: Marketing department, 401 B street, suite 1700, san diego, California 92101-4297, usA. Copyright © 2009 dlA Piper llp (us), dlA Piper uk llp and other affiliated entities. for questions, comments and suggestions, email us at [email protected] or contact diane vislisel, senior Practice and industry Marketing Manager, t +1 619 699 3541, [email protected].
us Chair – intellectual Property and technology, John Allcock: t +1 619 699 2828, [email protected] in Chief, randy Kay: t +1 619 699 2800, [email protected] Piper llp (us), 401 B street, suite 1700, san diego, California 92101-4297, usA.
“What more can be done to attract, retain and advance women in iP law?”
this newsletter is also available as a digital PdF at http://www.dlapiper.com/IPt_newsletter3. In support of our global sustainability Initiative, this publication is printed on 100% recycled paper. Please recycle this newsletter or share it with others.
EDITOR’S COLUMNFOSTERING RELATIONSHIPS AMONG WOMEN IN IP
PROvIDING PRO BONO ADvICE IN IP MATTERS
By valuing people, clients and community, dlA Piper is committed to making the world a better place. Community involvement is an essential part of who we are, part of our roots and a growing part of our impact. our iPt lawyers reach out to the communities where we live and work in many ways. here are just a few examples.
Almost five years ago Thomas L. Friedman wrote The World Is Flat, illuminating the forces operating at light speed to globalize the world economy. He discussed 10 forces driving a global “triple convergence—of new players, on a new playing field, developing new processes and habits for horizontal collaboration.” Although there has not been uniform agreement about Friedman’s views, few would dispute that globalization is occurring at a rapid pace, and it means big changes for most of us.
What about IP? I have spent considerable time working with DLA Piper’s global IPT group over the last year, along with my co-chair Simon Levine. From Tokyo to Prague, and with considerable time in London, I have been working with the country heads of our practice, including folks from Russia (and the other CEE countries), Spain, Italy, Germany, the UK, Hong Kong and China, Belgium, the Netherlands and most of the 48 cities in 22 countries where DLA Piper has IP capability. So, what about IP in this flatter world?
The forces identified by Friedman are at work in what is becoming an ever more global IP world. Established companies in the US, which have historically relied on IP protection to maintain their profit margins, are expanding into many other nations, and not just India and China. After all, customers are everywhere now, not just in the US and Europe. And work previously performed solely in the US is being done worldwide. The ease with which that work can be done globally, in smaller workplaces connected by the magical power of the Internet, has increased dramatically. Thus, smaller companies can compete more effectively on a global basis with established players. This naturally leads to more friction on a global basis.
Another force is at work. Recognizing globalization, many countries are strengthening their legal protection of IP. In the last two editions of this newsletter, we have detailed how the UK and Germany have implemented changes to strengthen their IP systems. Importantly, many other countries are doing the same.
So what does that mean for the future? In terms of enforcement, while previously an IP owner could afford to turn a blind eye to knockoff products in certain low-volume regions, now it is becoming far more important to enforce IP rights in those places too. Venues like Germany and the UK are becoming even more important, particularly in the patent area, as greater volumes of product are introduced there, and the laws are becoming more favorable to enforce IP rights in those venues. In summary, the same forces that Friedman detailed in his book—new players, new playing field and new processes—are all operating to increase the importance of protecting IP rights on a global basis.
HOW FLAT IS THE IP WORLD?
FIGHTING FOR LIvESTRONG
the lance Armstrong Foundation’s lIVestRong and yellow Band brands are recognized around the world as symbols of strength, hope and advocacy in the global fight against cancer. Under the brands, lAF has raised more than $150 million for cancer survivorship programs. heather dunn, an IPt lawyer in dlA Piper’s san Francisco office, handles high-profile brand protection strategy and enforcement work for lAF on a partial pro bono basis. Beginning in 2005, heather has led the charge in a large-scale, worldwide anti-counterfeiting campaign. she has coordinated numerous actions, including a civil action in India against 18 counterfeiters, cases brought in China against manufacturers of fakes and dozens of efforts worldwide to resolve cases of infringement.
Committed to supporting the arts and her community, heather also contributes pro bono work to California lawyers for the Arts, ArtsFest and the mexican heritage Corporation.
PROTECTING MUSICIANS AND ARTISTS
darius gambino, a partner in our Philadelphia office, has a history of pro bono work with local musicians and artists. darius currently represents 1960s musician Brooks o’dell in a royalty dispute that began when UK record label Ace Records released I’m Your Man: The Anthology 1963-1972, a Cd featuring mr. o’dell’s previously unreleased music. mr. o’dell had never authorized the master recordings for release, and Ace never compensated him. darius and other dlA Piper lawyers have been working to discover the sources of the master recordings and to ensure mr. o’dell receives proper compensation.
darius also recently settled a dispute between a major record label and a photographer and graphic artist who designed the cover artwork for more than a dozen of the label’s Cds and dVds. the record label agreed to pay the artist shortly after receiving a letter alleging copyright infringement.
PRO BONO IN THE US CAPITAL
For several years, some of the IPt lawyers in our Washington, dC office have actively provided pro bono IP services to numerous organizations, among them the Capital Area Food Bank, greater dC Cares and the greenbelt movement. We work with the Washington Area lawyers for the Arts (WAlA), frequently holding intake screening sessions and providing additional legal assistance to qualifying attendees. Ryan Compton, an IPt lawyer in dC, has become closely involved with a growing nonprofit, Critical exposure, which uses photography and educational programs to help local public school students document conditions at their schools that are inhibiting their ability to learn and succeed. Ryan says he has been privileged to assist Critical exposure, Capital Area Food Bank and many other organizations in their IP and other legal needs.
dlA Piper believes it is part of every lawyer’s professional responsibility to provide free legal services for the benefit of the community. In the Intellectual Property and technology practice, we are always looking for ways to deepen our commitment. We especially enjoy partnering with our clients on pro bono matters, so please let us know if you are interested in partnering together to benefit our communities. to learn more about dlA Piper’s commitment to Pro Bono work, please visit www.dlapiperprobono.com.
heather dunn, based in san Francisco, concentrates her practice on trademark prosecution and counseling, anti-counterfeit programs, advertising and promotions and art law. you may reach her at [email protected]. darius gambino’s practice encompasses many areas within both domestic and international intellectual property law. Based in Philadelphia, he may be reached at [email protected]. Ryan Compton, based in dC, practices in trademark, copyright and trade secret law, including domain name and Internet matters. Reach him at [email protected].
John AllcockPartner global Co-Chair and Us Chair, Intellectual Property and technology
Patents are frequently described as bundles of rights that can be divided in many ways. The ability to divide patent rights facilitates license agreements. It gives the parties more options for finding a middle ground in a negotiation. The larger the menu of licensing options, the more likely it is that the parties will find something they can agree upon.
Recent court decisions, however, have shortened the menu by limiting the ability to divide patent rights. These developments generally favor existing licensees and are bad news for patentees. But they could also be bad news for prospective licensees. Fewer middle-ground options may make it more difficult to avoid or exit litigation. Parties may end up litigating simply because the courts have taken off the menu an agreement they otherwise would have reached.
CARvING UP LICENSE RIGHTS CAN FACILITATE AGREEMENTS
Patent licensing is a multi-level game. The licensee’s primary objective is typically to protect itself from future litigation. But often there is more at stake. The licensee also wants to protect its customers and suppliers from
patent litigation relating to its products. A common refrain at the negotiating table is: “This license will be worthless to me if you can simply turn around and sue my customers and suppliers.”
The patentee’s perspective, unsurprisingly, tends to differ. The patentee usually wants to limit the flow of patent rights upstream and downstream. This way, the patentee can maximize the potential revenue that may flow from licensing deals or litigation with others.
The parties frequently meet in the middle by carving up license rights differently at each level of a distribution chain. A common approach has been to give the licensee relatively broad protection from lawsuits while giving customers and suppliers narrower protection. For example, a licensee might be allowed to sell a product for any purpose, but its customers might be limited in how they can use or resell that product.
COURTS ARE LIMITING THE ABILITY TO DIvIDE RIGHTS
Recent court decisions have limited parties’ options in crafting licenses. First came the United States Supreme Court’s decision in Quanta Computer, Inc. v. LG Electronics, Inc., 128
S. Ct. 2109 (2008). This decision restricted a patentee’s ability to contract around the doctrine of patent exhaustion. The patent exhaustion doctrine prevents a patentee from suing downstream parties based on products that were the subject of a licensed sale. Quanta tied the rights that a downstream party gets through patent exhaustion more closely to the rights initially granted to the licensee. This took some choices off the menu in negotiating licenses.
In the wake of Quanta, some parties began to rely more heavily on another technique for limiting downstream rights: the patentee would give the other party a covenant not to sue instead of a license. This approach rested on the premise that a covenant not to sue did not result in any patent exhaustion. For example, a patentee might grant a broad covenant not to sue and a narrower license so that only the narrower rights would flow to the licensee’s customers.
But the Federal Circuit recently took this option off the menu in TransCore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009). The court held that a covenant not to sue has the same effect as a license for purposes of patent exhaustion. This decision makes it even more difficult to carve up patent rights differently at each level of a distribution chain.
Courts are also limiting the ability to divide patent rights in other ways. For example, the Federal Circuit in TransCore also ruled that the patentee had impliedly licensed a related patent that was not named in the agreement. The court made this ruling because the related patent was necessary to practice the patents named in the agreement, even though the parties expressly agreed that no other patents were covered by the agreement. And in CoreBrace LLC v. Star Seismic LLC, 566 F.3d 1069 (Fed. Cir. 2009), the Federal Circuit held that, unless
WILL LESS CONTROL OvER LICENSING MEAN MORE LITIGATION?
By stan Panikowski
www.dlapiper.com/ip_global | 05
Chambers hails the work of 20 of our IPT lawyers in the US and nearly 80 IPT lawyers throughout 17 countries. The rankings demonstrate DLA Piper’s vast global reach and extensive knowledge across a wide range of sectors. Chambers gave particular acclaim to such important IPT regions in the US as California, Texas and Illinois, and to our Media and Sport practices around the world.
DLA Piper lawyers in the US named in Chambers IP categories include John Allcock, Mark Feldman, Ann Ford, John Guaragna, Dale Lazar, Christina Martini, Allyn Taylor, and Andrew Valentine. DLA Piper’s US lawyers named in technology categories include Thomas Boyd, Steven de Groot, James Halpert, Paul Hurdlow, Victoria Lee, Mark Radcliffe, Ellen Ray, Philip Russell, William Russell, Vincent Sanchez, James Vickery and Sam Zabaneh.
Similarly, this year’s Legal 500 cited more than 50 DLA Piper IP and Technology lawyers in 17 countries. The Patent Litigation practice from the US was recognized particularly for its experience in high-tech electronics and information technology and for its practice in the International Trade Commission. Legal 500 highly praised DLA Piper’s technology practice for work in data protection and privacy as well as in technology transactions.
John Allcock san diego
mark Feldman Chicago
Ann Ford Washington, dC
John guaragna Austin
INTELLECTUAL PROPERTY
dale lazar n. Virginia
Christina martini Chicago
Allyn taylor silicon Valley
Andrew Valentine silicon Valley
thomas Boyd Washington, dC
steven de groot Atlanta
James halpert Washington, dC
Paul hurdlow Austin
TECHNOLOGY
Victoria lee silicon Valley
mark Radcliffe silicon Valley
ellen Ray Atlanta
Philip Russell Austin
William Russell new york
Vincent sanchez Chicago
James Vickery Austin, silicon Valley
sam Zabaneh Austin
DLA PIPER INTELLECTUAL PROPERTY AND TECHNOLOGY PRACTICE RECOGNIzED GLOBALLY
two prestigious legal media companies, Chambers & Partners, publisher of leading lawyer compendiums Chambers USA and Chambers Global, and legalease, publisher of The Legal 500, have recognized the achievements of dlA Piper’s Intellectual Property and technology group.
expressly excluded, the right to have a product made by someone else is inherently included in the grant of a license to “make, use, and sell” a product.
GOOD NEWS FOR LICENSEES
These developments are good news for existing licensees, their customers and their suppliers. The above decisions may give these parties more protection from lawsuits than anyone thought they were bargaining for at the time of the agreement. And this additional protection, of course, is at the expense of patentees. Some patentees may have unknowingly granted rights that they thought they were withholding when the agreement was signed. All parties should inventory their existing license agreements to measure the effect of these decisions on their rights.
BAD NEWS FOR THOSE TRYING TO CONTROL LITIGATION COSTS?
Today’s windfall for existing licensees may be tomorrow’s burden for prospective licensees. For example, it is now much harder to separate the rights granted to a licensee from the rights that the licensee’s customers receive when they purchase the licensee’s products. As a result, a patentee may be more reluctant to grant those rights to a prospective licensee in the first place. Deals that would have been struck before these court decisions may no longer be possible. As a result, patentees and accused infringers alike may find themselves litigating in situations where they previously would have reached an agreement. The limitations that the courts are placing on licensing thus may drive up litigation costs for everyone.
stan Panikowski, based in san diego, is a partner in dlA Piper’s Patent litigation practice. you may reach him at [email protected].
Courts have not answered this question predictably. On April 3, 2009, in a long-awaited decision, the Second Circuit Court of Appeals rejected the district court’s dismissal of a trademark infringement action brought against a search engine by a national computer service franchising company. Rescuecom v. Google, 562 F.3d 123 (2d Cir. 2009). In Rescuecom v. Google, the Second Circuit has in effect reversed its prior position on the keyword issue by rejecting the lower court’s findings and holding that Google’s recommendation and sale of the RESCUECOM trademark as a keyword to plaintiff’s competitors constitutes use of the trademark “in commerce.” There is still a split in the circuits on this issue, but the Second Circuit now follows the majority view. The case is currently remanded to the district court. If ultimately decided on the merits, Rescuecom v. Google will likely have a profound impact on search engines and the keyword advertising industry.
BACKGROUND AND THE DISTRICT COURT
Rescuecom conducts a large amount of its business over the Internet, and many of its competitors advertise on the Internet using
tools offered by various search engines, including Google’s AdWords program. Google, through its Keyword Suggestion Tool, recommends the RESCUECOM trademark and, through its AdWords program, offers this keyword for sale to Rescuecom’s competitors. When a Google user searches the term “Rescuecom,” links to competitive websites appear on the user’s screen.
Rescuecom brought claims against Google alleging trademark infringement, false designation of origin and trademark dilution. In its complaint, Rescuecom alleged that Google’s sale of the RESCUECOM trademark as a keyword causes confusion by diverting Internet users to competitors’ websites.
The United States District Court for the Northern District of New York granted Google’s motion to dismiss on the basis that its use of the RESCUECOM trademark is not a “use in commerce,” and therefore does not constitute trademark infringement. Rescuecom v. Google, 456 F. Supp. 2d 393 (N.D.N.Y. 2006). Relying on the Second Circuit’s decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., the court held that
the sponsored links triggered by Google’s keyword tool did not actually reference the RESCUECOM trademark. See 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005). Thus, the court concluded that Google’s use of the RESCUECOM mark was not a “use in commerce” under 1-800 Contacts, which held a company’s private internalization of a trademark in its ad-triggering software is not a “use in commerce.” Rescuecom appealed the decision.
SECOND CIRCUIT OPINION
The Second Circuit reversed the dismissal, held Rescuecom’s complaint properly alleged a claim for relief and noted two significant distinctions from 1-800 Contacts. Specifically, in 1-800 Contacts, plaintiff’s website address, not its trademark, triggered the pop-up advertisement at issue. In fact, the case’s dictum suggests that use of plaintiff’s trademark to trigger the pop-up advertisement may have been actionable. Moreover, the advertisers in 1-800 Contacts could not purchase trademarks as keywords. By contrast, in Rescuecom, Google encouraged the purchase of the plaintiff’s trademark through its Keyword Suggestion Tool, displayed, offered and sold the mark
By Christina l. martini
06 | intellectual Property and technology news
For the past several years, keyword advertising has been a highly lucrative, multibillion-dollar industry—one that, not surprisingly, has triggered a significant amount of controversy. does the use, purchase and sale of trademarks as keywords constitute trademark infringement?
through its AdWords program, and controlled advertisement placement through the keyword itself.
The Second Circuit also rejected Google’s contention that including a trademark in an internal computer directory in its ad-triggering software does not constitute trademark use. It found that Google’s recommendation and sale of the RESCUECOM trademark to its advertising customers was not an internal use and, even if it was, such a finding would not preclude a “use in commerce.” The court concluded that Rescuecom’s complaint properly alleged a claim for relief and remanded the case to the district court to decide the merits of the trademark infringement and related claims.
POTENTIAL IMPACT OF THE Rescuecom DECISION
Prior to Rescuecom, several district courts in the Second Circuit followed 1-800 Contacts and held that neither the internal use of a trademark to trigger sponsored links, nor the purchase of a trademark as a keyword,
constitute “use in commerce.” Rescuecom is essentially a reversal of the Second Circuit’s decision in 1-800-Contacts. A majority of the other circuits have already adopted the Rescuecom position on the “use in commerce” issue, but a few remain which take the opposite view. Since the district court in Rescuecom is now considering the merits of plaintiff’s trademark infringement and related claims, it will hopefully provide more clarity and uniformity regarding the liability associated with keyword advertising.
Because many search engines generate much of their revenue through keyword advertising, Rescuecom’s outcome is potentially significant. Before this case, the Second Circuit was one of the few jurisdictions in which search engines were essentially immunized from liability if their use of the trademark was “internal” to their ad-triggering software and not visible to users. Now, under Rescuecom, such trademark infringement claims are much more likely to be evaluated on the merits. Thus, defendants are less likely to engage in forum shopping tactics such as filing preemptive declaratory judgment actions in the Second Circuit, and plaintiffs are more likely to file suit there.
Given the high stakes, search engines will likely make significant investments in defending such cases. They also have incentive to explore new technologies that promise to reduce legal risks. Companies may also be more reluctant to promote their businesses through keyword advertising,
meaning decreased revenues for both advertisers and search engines.
Rescuecom is particularly helpful to trademark owners who seek relief against the unauthorized use of their trademarks in keyword advertising. Although it is unclear whether the district court will ultimately find Google liable for trademark infringement, Rescuecom has brought the Second Circuit in line with other courts throughout the country which have given plaintiffs the opportunity to have their day in court. This will likely shape the legal landscape for keyword advertising in a more straightforward, predictable way for all interested parties.
Christina l. Martini, a partner based in dlA Piper’s Chicago office, concentrates her practice in trademark, copyright, domain name, internet, advertising and unfair competition law. she may be reached at [email protected]. Ms. Martini wishes to thank Amish shah, a 2009 summer associate based in the Chicago office, for his invaluable contributions to this article.
www.dlapiper.com/ip_global | 07
“When a google user searches the term ‘rescuecom,’ links to competitive websites appear on the user’s screen.”
“Because many search engines generate much of their revenue through keyword advertising, Rescuecom’s outcome is potentially significant.”
08 | intellectual Property and technology news
With the rising cost of litigation, defendants faced with a patent infringement lawsuit should seriously consider requesting reexamination of patents-in-suit at the United States Patent and Trademark Office. Under the proper circumstances, reexamination offers a cost-effective alternative to litigation, which may result in a stay of the district court litigation, significant amendments to the asserted claims or even cancellation of all asserted claims.
ex PaRte vS. InteR PaRtes REExAMINATION
Reexaminations provide a means for any member of the public, including the patentee, to request that the USPTO reexamine a patent claim in light of a “substantial new question of patentability” based on prior art printed publications or patents. Reexaminations come in two forms: ex parte and inter partes.
Ex parte reexaminations can be requested by a patent owner or any third party. If an ex parte reexamination is requested by a third party, the patent owner is entitled to file a statement if the USPTO finds a new question of patentability, at which time the patentee may amend the originally issued claims or add new claims. The third-party requester may respond to the patent owner’s statement, but the participation of the third party in the reexamination process ends there.
Inter partes reexaminations can be requested by any party other than the patentee and are only available for patents that issued from an original application filed in the United States on or after November 29, 1999. Because a third party has the right to participate throughout an inter partes reexamination,
the third party maintains greater control over the process than with an ex parte proceeding. Inter partes reexaminations do, however, impose some risks. Specifically, a defendant in a district court action is “estopped” from challenging the patent on any ground that was or could have been
raised in a prior inter partes reexamination.
PROCEDURE AND PENDENCY
In 2005, the USPTO announced that it had implemented a new process for handling reexamination proceedings, targeting all future reexaminations for completion within two years. Additionally, all reexaminations are now assigned to a Central Reexamination Unit (CRU) dedicated solely to reexaminations. The CRU conducts a panel review at various stages in the proceedings to ensure all matters are addressed appropriately.
Despite this policy, March 2009 data from the USPTO website (www.uspto.gov/web/patents/cru.html) indicates that the average pendency of inter partes reexaminations is 33.7 months. Presumably, involvement of the third party in inter partes reexaminations accounts for the additional time. Ex parte reexaminations have an average pendency of 24.8 months – closer to the USPTO’s 2005 stated goal.
ADvANTAGES
According to USPTO statistics, the majority of patents put through reexamination result in some change to their claims. As of March 31, 2009, statistics from the USPTO website indicate that:
■ 73 percent of ex parte reexaminations initiated by a third party resulted in some or all of the claims being canceled or amended.
■ 93 percent of inter partes reexaminations resulted in some or all of the claims being canceled or amended.
These statistics indicate that a defendant embroiled in a district court action may enjoy several advantages by filing a request for reexamination, such as:
■ a stay of the district court action, pending conclusion of the reexamination process;
■ avoiding liability for past damages if claims are substantively amended during reexamination;
■ assistance with narrowing claims during the claim construction process.
TIME IS OF THE ESSENCE
In deciding whether to stay a litigation pending a reexamination, district courts consider whether the patentee will be unduly burdened or prejudiced by the stay, whether a stay will simplify the issues for trial and whether discovery has been completed and a trial date set. Therefore, the sooner a request for reexamination is submitted, the better. In fact, most courts will not consider staying the litigation until at least a first office action rejection is issued, thereby placing greater weight on the timeliness of filing a request. To reap the potential benefits of the reexamination process in a district court litigation, file requests for reexamination as soon as possible after the lawsuit is filed.
DISADvANTAGES
One of the main disadvantages of reexamination is that it could result in a stronger patent. Indeed, a patent holder may change the claims of the patent in such a way as to remedy invalidity concerns or read directly on a defendant’s products (though a patentee cannot broaden its claims during reexamination).
Another disadvantage is that reexamination is limited to prior art printed publications or patents. Other invalidity defenses, such as on-sale bar or public use, are not available in a reexamination proceeding.
Additionally, as noted above, involvement in an inter partes reexamination may estop a defendant from later asserting in district court that a claim is invalid based on grounds that were “raised or could have been raised” during the reexamination.
A vALUABLE TOOL
In sum, while reexamination of patents-in-suit may have certain disadvantages, defendants faced with a patent infringement lawsuit should nevertheless weigh its potential for canceling or amending claims against them. It is a valuable tool in the arsenal of IP protection.
Christine K. Corbett is a partner in dlA Piper’s Patent litigation group, based in silicon valley. you may reach her at [email protected]. Also based in silicon valley, ronald l. yin is a partner with more than 30 years of experience in the field of patent law. reach him at [email protected].
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For several years, the Trademark Trial and Appeal Board (TTAB) has been grappling with how to treat false statements made to the United States Patent and Trademark Office (USPTO) in trademark applications and registrations. Now, a recent decision from the Court of Appeals for the Federal Circuit (CAFC) has made the answer to that question much clearer. See In re Bose Corp., No. 2008-1448, 2009 U.S. App. LEXIS 19658 (Fed. Cir. Aug. 31, 2009).
The traditional approach to fraud requires proof of an intent to deceive. In 2003, however, the TTAB deviated from this standard, in effect imposing a negligence standard by presuming fraud when an applicant or registrant makes a false, material representation of fact in its application or registration and knew or should have known the information was false. Medinol Ltd. v. Neuro Vasx Inc., 67 U.S.P.Q. 2d 1205 (T.T.A.B. 2003). In Medinol, the TTAB drew a clear, yet severe, line when it canceled a trademark registration because the registrant had incorrectly declared a mark was in use. The TTAB refused to allow the registrant to amend the registration to exclude the goods at issue, choosing instead to void the entire registration as fraudulent. Noticeably absent from the Medinol doctrine is any requirement of an intent to deceive. Since Medinol, the TTAB frequently applied this negligence standard to cancel registrations for fraud.
CHANGE IS HERE
The CAFC has now reinvigorated the intent requirement and voided Medinol to the extent the TTAB had “equat[ed] ‘should have known’ of the falsity with a subjective intent.” In re Bose Corp., 2009 U.S. App. LEXIS 19658, at *8-9. The TTAB had found fraud in a renewal for audio tape recorders and players where the products were being serviced but no longer manufactured, reasoning that this form of use did not qualify as use in commerce. Bose Corp. v. Hexawave, Inc., 88 U.S.P.Q. 2d 1332 (T.T.A.B. 2007). On appeal, Bose argued that its repair of audio tape recorders constituted use in commerce and that Hexawave had offered no evidence of fraud.
The CAFC heard oral arguments in May and handed down its decision on August 31, 2009, reversing and remanding the TTAB. In its opinion, the Court found that Bose did not commit fraud in renewing its mark and that the TTAB had erred in cancelling the mark in its entirety. The Court held that “a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly
makes a false, material representation with the intent to deceive the PTO.” In re Bose Corp., 2009 U.S. App. LEXIS 19658, at *10. Fraud must be proven “to the hilt” by clear and convincing evidence of intent. To rectify the registration, the Court suggests striking the offending goods from the registration.
Prior to In re Bose Corp., recent cases at the TTAB had signaled change was coming for the Medinol doctrine. Although the TTAB refused to allow amendment to the registration in Medinol, in Grand Canyon West Ranch LLC v. Hualapai Tribe, 78 U.S.P.Q. 2d 1696 (T.T.A.B. 2006), denying reconsideration of fraud claim, 88 U.S.P.Q. 2d 1501 (T.T.A.B. 2008), the TTAB held that where fraud has not been alleged, an incorrect allegation of use about some, but not all, of the goods identified in an application will not cause an entire application to be canceled. Instead, the TTAB ruled that an applicant will be permitted to amend its application to delete the goods on which the mark has not been used. Absent a fraud claim, the TTAB held that an application is not void in its entirety so long as the mark was used on some of the goods or services as of the filing date. This decision is now on appeal at the CAFC.
In January of this year, the TTAB addressed for the first time the issue of fraud in a multi-class registration in G&W Labs., Inc. v. G W Pharma Ltd., 89 U.S.P.Q. 2d 1571 (T.T.A.B. 2009). In doing so, it significantly narrowed the applicability of the Medinol doctrine. In G&W Labs, the TTAB held that a finding of fraud relative to one class in a multi-class application does not require cancellation of the registration in its entirety. Instead, the proper remedy is to strike the affected class or classes.
Then, in May, in response to public requests for more guidance on the issue of fraud, the TTAB reclassified a non-precedential opinion, Zanella Ltd. v. Nordstrom, Inc., 90 U.S.P.Q. 2d 1758 (T.T.A.B. 2008), as precedential. There, the TTAB ruled that a registrant’s pro-active corrective action, taken before issues of fraud have been alleged, creates a rebuttable presumption that the registrant did not intend to deceive the USPTO. If a registrant voluntarily restricts a registration only to those goods on which the mark is actually in use, this raises a genuine issue of material fact regarding whether a registrant intends to commit fraud. Although Zanella does not explicitly hold that subsequent amendments may cure alleged fraud, the decision indicates a loosening of the Medinol standard.
While Medinol took a strict approach to fraud, these recent decisions somewhat blunt the risk to trademark owners who exercise timely diligence in assessing the accuracy of their applications or registrations. Medinol is no longer the standard for fraud. Instead, as noted in In re Bose Corp., “[u]nless the challenger can point to evidence to support an inference of deceptive intent, it has failed to satisfy the clear and convincing evidence standard required to establish a fraud claim.” 2009 U.S. App. LEXIS 19658, at *16. Indeed, “[a] party seeking cancellation of a trademark registration for fraudulent procurement bears a heavy burden of proof.” Id. at *5 (citation omitted).
ACT PRE-EMPTIvELY
What do these developments mean for trademark owners? Despite this notable shift, potential fraud claims and counterclaims remain a potent means of attack in trademark conflicts. It is imperative that trademark owners verify all dates of use and specific goods and services in their applications and registrations—especially when filing a new application, declaration of use or renewal. Moreover, trademark owners must maintain proper records substantiating these facts to defend against any challenges.
Going forward, trademark owners should consider “fraudits,” audits of potential fraud in trademark portfolios, to identify potential vulnerabilities. Based on current case law, the key times for making an amendment to an application or registration are pre-publication for applications and prior to any conflict arising for both applications and registrations. In other words, before bringing an Opposition or Cancellation Proceeding before the TTAB or any infringement claim, the trademark owner should be certain that its own application or registration is in order. A trademark owner who fails to take these steps risks jeopardizing its mark’s validity. Ultimately, trademark owners should review their applications and registrations to ensure the accuracy of all facts, and then act to remedy any inaccuracies before a conflict arises.
Ann K. ford, based in Washington, dC, chairs dlA Piper’s us trademarks, Copyrights and Media practice. she focuses on us and international trademark and copyright law, including the emerging law governing iP on the internet. you may reach her at [email protected]. John nading, also in Washington, dC, is an associate focusing on trademarks, copyrights and media. he may be reached at [email protected].
By Ann Ford and John nading
ChAnge Is heRe: FIndIng FRAUd At the ttAB
IN THE ITC
10 | intellectual Property and technology news
It is counterintuitive, but it is happening. The so-called patent trolls have found another forum in which to bring patent cases—the International Trade Commission, of all places. Patent trolls have gained a foothold in the ITC despite authority suggesting the forum was never meant for them.
The pejorative term “patent troll” is said to have been coined in 2001 to describe a company that earns revenue from patents not by making patented products or services but through licensing or litigation settlements.
On the other side of the coin, the ITC is an administrative agency created by the Tariff Act of 1930, which forbids “unfair trade practices” including the importation of products that infringe a United States patent. The goal of the ITC is to protect domestic industries and jobs by protecting patent owners who make and sell patented “articles” in the US.1 Only parties able to demonstrate such a domestic industry are permitted to bring complaints in the ITC.
Despite the domestic industry requirement, recent years have seen several ITC filings by patent trolls, which raises a basic question: Is the ITC an appropriate forum for companies that do not significantly contribute to the domestic economy? This question is particularly important at a time when major US employers are named in scores of patent suits each year. We propose that the ITC should closely scrutinize those who seek access to its broad, powerful remedies and consider sharply limiting access by non-practicing entities whose only goal is to extract licensing revenues from operating companies.
THE RISE OF PATENT TROLLS IN THE ITC
As the ITC has long held, “a domestic industry does not exist if the complainant, or its licensees, is not exploiting the asserted patent.”2 Proof of exploitation can come from research and development expenses or from a company’s expenditures on plant, labor and capital in the US related to the asserted patents. However, proof of exploitation can also come solely from licensing activities related to the asserted patents. This is where the trolls come in.
To satisfy the domestic industry requirement, patent trolls in the ITC typically argue that their licensing activities permit other companies to make products that practice the asserted patents. Several have pointed to
the 1988 amendments to Section 337, which removed the “injury” requirement from the statute. Before 1988, a complainant had to prove injury to an “industry, efficiently and economically operated, in the United States.”3
In removing the injury requirement, however, Congress’ intent was not to make the ITC available to all patent owners, but rather to clarify that the ITC was available to companies that practiced their own patents or licensed them to others for commercial use to make products. Indeed, Congress stated that the domestic industry requirement “was maintained in order to preclude holders of US intellectual property rights who have no contact with the United States other than owning such intellectual property rights” from invoking Section 337.4 Congress drew a distinction between patent owners who licensed their patents for commercial use to others before asserting them in litigation versus entities engaged solely in litigation-based licensing. Therefore, in the eyes of Congress, mere ownership of patents, without some significant US commercial activity, does not qualify one for the protections afforded by the ITC.
Despite this distinction made by Congress, trolls may be gaining ground in the ITC. On June 10, 2009, Chief Administrative Law Judge Paul Luckern issued an Initial Determination in Certain Short-Wavelength Light Emitting Diodes, Laser Diodes and Products Containing Same (Inv. No. 337-TA-640), which granted Professor Gertrude Rothschild’s motion for summary determination that she satisfied the domestic industry requirement. ALJ Luckern found that “a complainant may satisfy the domestic industry requirement solely by relying on licensing activities … even if the complainant (or a licensee of the complainant) does not manufacture patented products in the United States.” ALJ Luckern found it persuasive that Professor Rothschild had consummated four licenses before filing suit in the ITC, and that five former respondents in the investigation had entered into licenses. The next day, the Commission issued a notice that it would review Judge Luckern’s decision. We have not heard the last word on this issue.
BEST PRACTICES IN DEFENDING AGAINST TROLLS IN THE ITC
Patent trolls will no doubt continue to file complaints in the ITC—at least until the Commission clarifies whether trolls qualify—
Patent trolls need not aPPly:
By Sean Cunningham, Elizabeth Day and Brian Fogarty
WHY THE ITC SHOULD BAR THE DOORS TO PATENT TROLLS
www.dlapiper.com/ip_global | 11
looking for “the next generation of leaders” in Chicago’s law firms, Chicago Lawyer identified dlA Piper IPt partner Christina (“tina”) martini as one of only six Chicago lawyers who are “representatives of the coming generation of leadership.” tina has been with dlA Piper for 15 years—her entire legal career—and explained to Chicago Lawyer that her leadership roles have had a profound, positive impact on her career and life. tina serves in many firm leadership positions, including as vice chair of the Chicago IPt practice group, co-hiring partner for the Chicago office, dlA Piper’s diversity and inclusion ombudsperson, on the firmwide policy committee, the national diversity steering committee, the Chicago office diversity committee, the board of advisors for the marbury Institute (our professional education arm) and as dlA Piper liaison for the Chicago chapter of the Association of Corporate Counsel. she is also a published author on various legal topics. Please read tina’s article on the implications of the Rescuecom decision on page 6. you may reach her at [email protected].
you have probably already observed that Randy Kay, an IPt partner in our san diego office, is the editor of this newsletter. he is also garnering recognition in the legal community for his private practice. the San Diego Daily Transcript recently named him a top Attorney in Intellectual Property litigation. Randy focuses his practice on patent and trade secret disputes. this summer he testified as an expert witness on trade secret litigation in a jury trial in los Angeles. he also recently served on the winning team in a two-week jury trial of a patent case in the southern district of new york. In addition, this year the state Bar of California published the second edition of the treatise that Randy co-edited and co-authored, Trade Secret Litigation and Protection in California. you may reach Randy at [email protected].
San Diego Metropolitan magazine chose stan Panikowski, an IPt partner in our san diego office, as one of its “40 Under 40” honorees, recognizing him as “one of the brightest and most enterprising young people in san diego County.” A former Rhodes scholar, stan served as a law clerk to both the honorable sandra day o’Connor of the United states supreme Court and the honorable J. harvie Wilkinson III of the United states Court of Appeals for the Fourth Circuit. stan represents clients at the trial level in high-stakes antitrust and intellectual property cases. he has argued and won appeals on behalf of some of the world’s leading technology companies. stan is actively involved in pro bono work and community service, holding leadership positions in a number of local and national nonprofit and law-related organizations. you may read his article on the ability to divide patent rights on page 4. Reach stan at [email protected].
Christina martiniChicago
Randy Kaysan diego
stan Panikowskisan diego
because, in the post-eBay world, the ITC offers trolls a clearer path to an injunction than does a district court. Companies that are sued by trolls in the ITC should consider the following strategies to ensure a meaningful attack on the complainant’s domestic industry:
Do not give ground: Respondents should not stipulate to or concede anything on domestic industry, but rather make the complainant prove every element of its case. The more challenges respondents make to domestic industry, the more likely law will develop that favors keeping trolls out of the ITC.
Stress the statutory intent: A plain reading of Section 337 and its legislative history supports the conclusion that patent trolls should not be allowed in the ITC. Respondents should therefore stress this policy and statutory intent whenever possible.
Develop the record: Respondents should thoroughly investigate the basis for any licenses signed before or during an ITC investigation to develop theories about why certain licenses cannot support the complainant’s domestic industry.
Because trolls do not contribute meaningfully to the domestic economy, they are not entities that Section 337 was designed to protect. The ITC should take the opportunity to reaffirm its statutory mandate by sharply limiting the right of non-practicing entities to bring suit in the ITC.
1. 19 u.s.C. § 1337, et seq.; see also s. rep. no. 100-71, at 129 (1987).
2. Certain Integrated Circuit Telecommunication Chips and Products, inv. no. 337-tA-337, 1993 Wl 13033517, at *83 n.87 (initial determination Apr. 23, 1993).
3. 19 u.s.C. § 1337(a) (1985, amended 1988).
4. s. rep. no. 100-71, at 129 (1987).
sean Cunningham, a partner based in dlA Piper’s san diego office, has extensive experience handling patent cases through trial in district courts and in the itC. you may reach him at [email protected].
Partner Elizabeth day, based in silicon valley, concentrates her practice on the litigation of patent infringement and other iP-related lawsuits and has represented clients in numerous patent infringement matters throughout us district courts and in the itC. named among the top female litigators in California, she may be reached at [email protected].
Brian fogarty, a partner based in dlA Piper’s san diego office, is a trial lawyer focusing on patent litigation, especially involving multiple parties, patents and jurisdictions. he has extensive experience handling patent cases through trial in the itC and district courts. he may be reached at [email protected].
LOCAL COMMUNITIES RECOGNIzE THREE DLA PIPER PARTNERS
three dlA Piper IPt partners recently received recognition by their communities for their professional accomplishments.
dlA Piper llp (us)
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