Looking Ahead: Top IP and Technology Trends for 2015

Brooks Kushman P.C.
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2015 promises to be a challenging year for intellectual property law. Here is Brooks Kushman’s list of significant IP and technology law trends that clients should be prepared for in 2015.

  1. Supreme Court Activity in IP Field Expands To Trademarks. In 2015, the U.S. Supreme Court is continuing its unprecedented level of activity in the IP field. The Court will decide at least three patent-related appeals this term. That is a decrease from the October 2013 term, but is still an elevated level of activity by historical standards. In addition, this term the Court expands its IP activity to trademark cases, hearing argument in two trademark cases in the same week. In B&B Hardware, Inc. v. Hargis Industries, Inc., Case No. 13-352, the Court will decide whether a Trademark Trial and Appeal Board finding on likelihood of confusion precludes a court from determining the same issue in a subsequent infringement litigation. In Hana Financial, Inc. v. Hana Bank, Case No. 13-1211, the Court will decide whether trademark “tacking,” which allows a trademark owner to benefit from its previous use of a similar mark under some circumstances, is a jury issue or issue for the court to decide. B&B Hardware and Hana Bank were argued in early December.
  2.  New Federal Civil Trade Secret Legislation. One of the first pieces of IP-related legislation likely to be considered in the new GOP-controlled Congress is an attempt to create a federal civil cause of action for trade secret misappropriation. In the last session, the House of Representatives considered H.R. 5233, known as the “Trade Secrets Protection Act of 2014.” That bill would have created a private civil action for misappropriation of trade secrets, and a civil seizure remedy authorizing a court to enter an ex parte order seizing property necessary to preserve evidence or to prevent the propagation or distribution of a misappropriated trade secret. The bill also would have created expanded remedies, including court orders requiring affirmative steps to protect a trade secret subject to misappropriation and awards of both compensatory and punitive damages. H.R. 5233 was reported to the full House, but did not receive a vote, and a similar bill in the Senate died in committee. Federal trade secret bills will be reintroduced in 2015 and appear to enjoy broad support. If enacted, a federal trade secret cause of action may divert many trade secret disputes arising in the employment context from state courts to federal court.
  3. Patent Owners, USPTO struggle with Alice, Patent Eligibility Guidelines. A major legal development confronting many patent owners in 2014 was patent eligibility under 35 U.S.C. §101. In last year’s landmark case, Alice Corporation Pty. v. CLS Bank Int’l, 573 U.S. ___, 134 S. Ct. 2347 (2014), the Court ruled that claims directed to a computer-implemented process for intermediated settlement of financial transactions was an ineligible abstract idea. The Court also explained that the two-step analysis for evaluating eligibility articulated in Mayo Collaborative Serv. v. Prometheus Labs., Inc., 566 U.S. ___, 133 S. Ct. 1289 (2012), applies to all potential judicial exceptions to statutory eligibility, including laws of nature, natural phenomena, and abstract ideas. In response to Alice, the USPTO reissued its Interim Guidance on Patent Subject Matter Eligibility, incorporating the Alice decision and responding to widespread criticism of its previous proposed guidance. See 79 Fed. Reg. 74618 (Dec. 16, 2014). In the immediate wake of Alice, courts and the USPTO invalidated several patents directed to computer implemented inventions. In December, however, the Federal Circuit upheld eligibility of a software patent. DDR Holdings, LLC v. Hotels.com, LP, No. 2013-1505 (Fed. Cir. Dec. 5, 2014). In that case, a 2-1 decision written by Circuit Judge Chen, the Federal Circuit ruled that an invention directed to merchandising on the internet was patent-eligible. Clients (especially in the computer and bio/pharma fields) will likely face a year of continued uncertainty as the USPTO refines its guidance to examiners and the Federal Circuit and lower courts attempt to reconcile conflicting interpretations of Alice and Mayo.
  4. Europe Prepares for Unitary Patents and Unified Patent Court. Clients with present and expected future patent positions in Europe will need to assess the strategic implications of major changes to the European patent system. In addition to national patents and EU patents, the changes will create a new right called the “European Patent with Unitary Effect.” Unlike current patents resulting from an application filed at the European Patent Office, a Unitary Patent will be granted by the EPO and will be effective across the entire EU region (except Italy and Spain). Cases seeking to enforce the new Unitary Patents will be heard by a Unified Patent Court, with both trial and appeal divisions, that will have jurisdiction over both revocation and infringement proceedings. The new system will raise complex strategic considerations for both patent filing and enforcement, and may in some situations make the Unified Patent Court an attractive alternative venue for enforcing patents.
  5. Will the Popularity of PGR Proceedings Match the Success of IPRs? Perhaps the most surprising result of the 2011 Leahy-Smith America Invents Act has been the popularity of inter partes review (IPR) proceedings commenced under 35 U.S.C. § 311. Through January 1, 2015, challengers had filed a total of 2,299 IPR proceedings. A related administrative procedure, post grant review (PGR), is available for patents issuing from applications with an effective filing date on or after March 16, 2013. To date, only three PGR proceedings have been filed, but as additional eligible patents issue, clients should watch to see whether PGRs prove to be as popular as IPRs. One concern may be the scope of estoppel resulting from PGRs, which implicate a broader swath of potential invalidity defenses than IPR estoppels. However, the relative popularity of Covered Business Method challenges (277 filed through January 1, 2015) suggests that potential estoppel effects may not deter competitors seeking a relatively inexpensive, prompt chance to invalidate a patent.
  6. Patent Damages Become More Difficult To Prove, Leading To New Approaches. In 2014, the Federal Circuit signaled even closer scrutiny of damages presentations in patent infringement actions. In VirnetX, Inc. v. Cisco Systems, Inc., 767 F.3d 1308 (Fed. Cir. 2014), the court rejected a patentee’s damages testimony based on the Nash Bargaining Solution and calculated using a product allegedly representing the “smallest saleable patent containing unit” as a royalty base. VirnetX indicates that the Federal Circuit will continue to scrutinize damage awards involving products containing many features and technologies. Patentees arguing for reasonable royalty damages likely will face increased difficulty in using completed product sales as a royalty base, and should be prepared either to prove that the technology qualifies for the “entire market value rule,” because the invention drives demand for the entire commercial product, or alternatively to apportion value between the patented and unpatented features of the accused product or component. Litigants and their damages experts will be pressed to develop new strategies to support damages, including lump sum royalty measures, survey data, or new analytical strategies such as game theory.
  7. Trademark Clearinghouse May Be Critical to Brand Protection On the Web. As brand owners brace for a tsunami of new generic top level domains (gTLD) released by ICANN in 2015, the Trademark Clearinghouse (TMCH) is likely to prove invaluable in preserving rights and minimizing conflicts. The TMCH was developed by ICANN as a brand protection mechanism. It provides a centralized database of verified registered or protected trademarks, and provides that information to registrars administering the name registration process for each new gTLD. By registering a protected mark in the TMCH prior to or during launch of a new gTLD, a brand owner can potentially block matching attempted domain name registrations. After the submitted trademark information is verified, ICANN provides a unique authentication key that allows owners to access the TMCH, including the ability to participate in “sunrise” registration periods – a pre-launch phase that provides mark owners to register a domain name before registration of a TLD is available to the general public. In addition, participation in the TMCH means that a third party attempting to register the same mark as a domain name will receive notification of the participating trademark and if they proceed, the brand owner will receive notice of the potentially infringing activity for possible enforcement. The TMCH verifies and accepts marks protected by trademark registration, statute or treaty, court validation (e.g. recognition of common law rights in a judicial proceeding), or other evidence of protection on a worldwide basis. However, there are a number of statuses that are not eligible for the TMCH verification, including trademark applications, U.S. state trademark registrations, international trademark applications, and any court-validation of a mark that includes a top level extension, such as .org or .net.
  8. Open Source Continues To Present Opportunities And Avoidable Pitfalls. For several years, commercial software products and tools developed and distributed under open source licensing arrangements have posed both valuable opportunities and serious (but avoidable) pitfalls for software developers and their customers. In 2015, the ubiquity of open source software in mainstream applications software will only increase the stakes. In Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008), the Federal Circuit recognized the validity of open source license agreements, and held that the remedy for “breach” of the obligations set forth in those agreements is a claim for copyright infringement, not a breach of contract. The impact of this holding is playing out today in the pending litigation matters involving Versata and Ximpleware. These lawsuits underscore the potential for liability for breach of an open source license agreement and copyright infringement. Risk of liability can be eliminated, however, with a full understanding of the license terms prior to development, and a plan to comply with them. This permits companies to reap the well-established benefits of open source software, including lower cost and quicker time to market. In 2015, companies will need to assess their risk and adopt strategies to manage open source in their development environments.
  9. Octane Fuels Spike in Attorneys Fee Motions. Last term, the Supreme Court confirmed the ability of district courts to award costs and attorneys fees for “special” cases involving meritless or vexatious patent litigation. Octane Fitness, LLC v. ICON Health & Fitness, Inc., ___ U.S. ___, 134 S. Ct. 1749 (2014); Highmark Inc. v. Allcare Health Mgmt. Sys., ___ U.S. ___, 134 S. Ct. 1744 (2014). The Court rejected the Federal Circuit’s restrictive test for awards under 35 U.S.C. § 285. As a result, trial courts in 2015 will consider an increase in motions for relief under § 285, both from patentees and accused defendants. During 2015, as courts work to establish new standards for determining when fee awards are justified, parties and their attorneys will need to consider the potential impact of § 285 during pre-filing investigations and litigation.
  10. Patent Counsel Use New Tools To Rebut Obviousness Rejections. During 2015, attorneys prosecuting patent applications are certain to encounter obviousness rejections based on KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007). Two recent Federal Circuit decisions may provide effective tools to respond. In In re Klein, 647 F.3d 1343 (Fed. Cir 2011), the Federal Circuit ruled that determining what constitutes analogous art is neither routine nor simplistic and dismissed as non-analogous five references used by the PTO to reject claims. In a second case, Leo Pharm. Prods., Ltd. v. Rea, 726 F.3d 1346 (2013), the Federal Circuit stressed the importance of secondary evidence of nonobviousness, especially long felt need. The court observed that, “consideration of the objective indicia is part of the whole obviousness analysis, not just an after-thought” and was critical to avoiding the trap of hindsight. It ruled that where a problem addressed by the invention is important, the fact that the industry lacked a solution for many years “speaks volumes to non-obviousness.” The Klein and Leo Pharmaceutical decisions may provide applicants with effective arguments to counter obviousness rejections.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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