Intellectual Property 2014 Year in Review

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The year 2014 saw some important developments in the area of intellectual property law. A number of intellectual property-related issues even made national headlines.

Who can forget the public debate over the rightful owner of a series of "selfies" taken by a macaque monkey? (The U.S. Copyright Office confirmed in December thatworks created by non-humans are not subject to copyright protection.)

With 2015 already shaping up as another significant year for intellectual property owners and practitioners, we take a look back at some of last year’s most significant cases.

ADVERTISING LAW

The Supreme Court Decides a "Juicy" Case

In June, the U.S. Supreme Court issued an opinion in POM Wonderful LLC v. Coca-Cola Co., a case with broad implications for the food and beverage industry.

POM Wonderful sued Coca-Cola under the Lanham Act, claiming that one of its juice blend labels was misleading. The Lanham Act is a federal statute that prohibits trademark infringement and false advertising. The juice blend at issue was prominently labeled "Pomegranate Blueberry," followed in smaller type by a more detailed description of the product, which included the phrase "Flavored Blend of 5 Juices." The product contained less than one percent pomegranate and blueberry juice.

Coca-Cola countered that its label complied with the Food, Drug, and Cosmetic Act, enforced by the U.S. Food and Drug Administration. Thus, Coca-Cola argued, it could not be sued for a product name that already met federal labeling guidelines. The Court found that the Lanham Act and the FDCA merely complemented each other because they served distinct purposes. Accordingly, the Court held that competing companies can bring Lanham Act claims to challenge labels regulated by the FDCA.

Going forward, food and beverage companies should review their product names and labels to ensure compliance with all relevant laws, including the FDCA and the Lanham Act.

Standing Under the Lanham Act Clarified

In another Supreme Court decision interpreting the Lanham Act, the Court established that one business can sue another business under the Lanham Act even if they are not direct competitors.

In Lexmark International v. Static Control Components, Inc., Lexmark developed a microchip that prevented its laser printer toner cartridges from being re-used. Static Control developed a similar microchip, which enabled remanufactured cartridges to be used in Lexmark’s printers. Lexmark filed a copyright infringement action against Static Control, and Static Control countersued for false advertising, claiming that Lexmark had stated it was illegal to sell cartridges containing Static Control’s microchip.

The Supreme Court confirmed that a plaintiff may bring a false advertising claim under the Lanham Act if it is able to show (1) it suffered an injury to a commercial interest or to its business reputation; and (2) the injury was "proximately caused" by the defendant’s false statements. Because Static Control could show both these factors, it was given the opportunity to prove its case.

For a more detailed analysis of this decision, take a look at our April client alert here: http://www.mwn.com/pubs/xprPubDetail.aspx?xpST=PubDetail&pub=414.

Using Presumptions in False Advertising Cases

Merck and Gnosis were the only two companies that sold a particular nutritional supplement. Merck’s product was naturally occurring, whereas Gnosis’ product was synthetically produced. Gnosis used marketing materials that, without specifically mentioning Merck, made it appear that its supplement was a pure isomer product like Merck’s supplement. Merck succeeded on a false advertising action against Gnosis.

Where two companies are the only players in a given market, one may harm the other even where it does not mention the other by name. As long as the defendant company deliberately intended to deceive consumers through its advertising, a plaintiff company may not even have to produce evidence of consumer confusion or injury. Because showing such evidence can be difficult to secure, especially during the early stages of a case, the Second Circuit’s decision in Merck Eprova AG v. Gnosis S.p.A. could make it easier for a plaintiff under certain circumstances to bring a misleading marketing claim against a competitor.

TRADEMARK LAW

Offensive Trademarks

The decades-long dispute between a group of Native Americans and the Washington Redskins picked up steam when the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (the "TTAB") issued a decision cancelling six of the NFL team’s trademark registrations containing the term "redskin."

The TTAB based its order on a section of the Lanham Act which prohibits the registration of marks that may disparage individuals. The TTAB found that at the time the registrations were issued, a certain portion of the Native American population considered the term "redskin" disparaging.

The Washington Redskins quickly appealed the decision. Just last month, the U.S. Justice Department announced that it would defend the constitutionality of the relevant section of the Lanham Act.

Although the TTAB’s decision would not prevent the Washington Redskins from using its name, it would reduce the team’s protection against infringing and counterfeiting activity. The outcome of this case could affect the ability of certain groups to bring claims against offensive trademarks in the future.

Marking Their Day in Court

The U.S. Supreme Court heard arguments in two trademark cases at the end of 2014. Before hearing these cases, it had been about ten years since the Court decided a substantive trademark case.

One of these cases involved the "likelihood of confusion" test, which is used to determine whether one party has unfairly adopted a trademark that infringes the rights of another. If consumers are likely to be confused by the existence of both marks, then the junior user must stop using its mark.

In B&B Hardware, Inc. v. Hargis Industries, Inc., B&B registered the trademark SEALTIGHT, for use with fasteners in the aerospace industry. Hargis later applied to register the mark SEALTITE, for use with screws it sells in the construction industry. The TTAB found confusion likely as to these marks.

The Supreme Court is determining whether Hargis can appeal and re-litigate the same likelihood of confusion issue in federal court. The Court also will decide whether a federal court should defer to the TTAB’s earlier decision in such a case. The Court’s decision is anticipated prior to June 2015.

This decision could be important for budget-conscious businesses, as proceedings before the TTAB typically are less expensive than federal court actions.

COPYRIGHT LAW

We Now Return to Your Regularly Scheduled Programming

Last year we saw the demise of the tech startup Aereo, which streamed live and time-shifted broadcast television programs to computers and mobile devices. Since its launch in 2012, major broadcast networks have challenged the startup’s business model, claiming that Aereo committed copyright infringement by streaming the networks’ programming without getting their permission and paying required fees.

The Supreme Court agreed with the networks. A majority of the justices considered Aereo’s technology similar to that of cable providers. Limiting its decision to Aereo’s technology, specifically, the Court held Aereo subject to the same part of copyright law that requires cable providers to pay a fee when they retransmit copyrighted content.

After its defeat at the high court, Aereo advanced one more unsuccessful argument at the district court level before ultimately declaring bankruptcy.

Facing the Music

The music industry had a few significant victories in 2014. In September, a federal judge ruled that Sirius XM was liable for copyright infringement by failing to pay royalties for playing songs that the 1960s band The Turtles recorded before 1972.

Sound recordings made before 1972 are not protected under federal copyright law. As a result, only the owner of the musical work contained in a pre-1972 sound recording receives royalties when the song is played. The record label and the artist do not receive royalties. Although not protected under federal law, sound recordings made before 1972 may be protected by a patchwork of state laws and common law.

In this case, The Turtles pursued Sirius XM based on their rights in their songs under California state law. On appeal in California, as well as in a separate lawsuit in New York, courts have ruled in The Turtles’ favor.

Additionally, a district court found that the online music service Grooveshark was infringing on thousands of copyrights. Grooveshark has argued that its music-sharing services are legal under the Digital Millennium Copyright Act. The DMCA protects websites that host third-party materials as long as the websites comply with certain requirements, including taking down content after receiving notice from copyright owners. That defense didn’t work in this case, where evidence showed that Grooveshark’s employees uploaded thousands of songs from their personal collections without a license to do so.

Claiming a Copyright Interest in an Actor’s Performance

In a controversial decision, a three-judge panel of the Ninth Circuit held that an actor may own a copyright in his or her performance. The case was reheard by the full Ninth Circuit in mid-December.

In Garcia v. Google, Inc., actress Cindy Garcia was filmed for what she believed was a minor role in an action movie. She later learned that her performance was used in an anti-Islamic YouTube video, called Innocence of Muslims. After she began receiving death threats, Garcia filed a copyright infringement claim against Google for refusing to remove the film from the internet.

The three-judge panel found that Garcia showed she likely had a protectable interest in her performance and ordered Google to take down the video. The decision was met with strong opposition due to concerns about censorship, the liability of ISPs, and the Court’s expansive view of copyright protection.

PATENTS

2014 also produced numerous patent decisions of note, including no less than four decisions issued by the Supreme Court across a variety of topics.

In its first intellectual property ruling of 2014, the Supreme Court unanimously held a patentee always bears the burden of proving infringement, regardless of how the parties are aligned. In an ordinary patent infringement action, the patentee bears the burden of proving infringement and the same was ordinarily true in declaratory judgment actions, even though the patentee is technically the defendant. However, an exception had emerged for declaratory judgment cases, reversing the burden of proof when the plaintiff was also a licensee in good standing. The Supreme Court eliminated this exception, opting instead for a bright line rule in all cases, which it reasoned created more uniformity and certainty.

Then, in June, the Supreme Court followed with three of 2014’s most noteworthy patent decisions in a span of two weeks. Limelight Networks v. Akamai Technologies dealt with induced infringement, which permits a claim against a party who, although not itself infringing, actively encourages someone else to infringe a patent. The question was whether there could ever be liability for inducement if there was no direct infringer. While all steps of a patent method might be performed, under current law there is no direct infringer unless all of those steps are performed by one party or, if not, under one party’s direction or control. The Supreme Court unanimously held that inducement must be predicated on direct infringement, which means the existence of a direct infringer even if the patented method is otherwise still being performed.

Clarity of patent claim terms was at issue in Nautilus v. Biosig Instruments. One requirement of a patent is that its claims must be clear enough to permit others to understand what the patentee is trying to protect, a concept referred to as "definiteness." While noting the inherent limitations of language, the Court asserted a patent must be sufficiently precise to afford clear notice of what is claimed, in order to inform the public of what is still permitted. It found the prior standard – "insolubly ambiguous" – so broad as to encourage patentees to be vague rather than precise. The Supreme Court instead held the inquiry should focus on what the inventor actually intended to protect with the patent, starting with the concepts that 1) definiteness is to be evaluated from the perspective of someone skilled in the art at the time the application was filed and 2) in assessing definiteness, claims are to be read in light of the patent’s specification and prosecution history, but without reading limitations from the specification into the claims.

Finally, Alice Corporation v. CLS Bank International set forth a new test to determine whether computer implemented methods (generally software and business methods) qualify as patentable subject matter. The Alice decision placed further limitations on the already eroding applicability of patent protection to these inventions by requiring that the invention either 1) improves the functioning of the computer itself (by doing more than instructing an abstract idea be carried out using an unspecified generic computer) or 2) effects an improvementin another technology or field.

That is, courts must look at the substance of the claims without deference to the form of claim drafting and give no patentable weight to specific hardware recited in the claim (e.g., data processing system, communications controller, or data storage unit) unless that hardware offers meaningful limitations beyond general linking of a method being carried out by a computer. The second half of 2014 saw many lower courts increasingly applying the Alice standard to invalidate patent claims directed to commercial activity implemented in a software environment. While the recitation of generic computer components had been standard practice ever since a 1998 lower court initially recognized such patents, many post-Alice decisions found nothing "additional" or "meaningful" after stripping away the generic components, but only that the limitations were directed to purely commercial activity or methods of conducting business and thus unpatentable.

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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