Filewrapper Filewrapper http://www.ipmvs.com/ Tue, 03 May 2016 14:19:25 GMT http://backend.userland.com/rss RSS.NET: http://www.rssdotnet.com/ Supreme Court Revisits Standard for Awarding Attorneys’ Fees in Copyright Cases

Earlier this week the Supreme Court heard oral arguments addressing the relevant standard for awarding attorneys’ fees in cases involving copyright law. The Court’s ruling, expected later this spring, will likely have a significant impact on copyright litigation cases.

Section 505 of the Copyright Act provides that a district court “may” award a reasonable attorney’s fee to a “prevailing party”. Due to the vague wording of the statute, the district courts have differed in the standards used to determine whether or not the prevailing party should be awarded attorneys’ fees in copyright cases. The Ninth and Eleventh Circuits consider whether the prevailing party’s successful claim or defense advanced the purposes of the Copyright Act. The Fifth and Seventh circuits employ a presumption in favor of attorneys’ fees for a prevailing party that the losing party must overcome. The Second Circuit places “substantial weight” on whether the losing party’s claim or defense was “objectively unreasonable”. Additionally, other court of appeals have adopted several non-exclusive factors that the Supreme Court noted in a footnote ofFogerty v. Fantasy, Inc., 510 U.S. 517 534 n.19 (1994) that include frivolousness, motivation, objective unreasonableness and considerations of compensation and deterrence.

The case before the Court, Kirtsaeng v. John Wiley & Sons, is a dispute over copyrighted textbooks produced overseas but imported to the United States and resold by Kirtsaeng without the publisher’s permission. Mr. Kirtsaeng argued that the “First Sale” doctrine applied but lost in the district court and the Second Circuit Court of Appeals.  The Supreme Court reversed, concluding that the “First Sale” doctrine applied and that Kirtsaeng could not be help liable for copyright infringement.

On remand, Kirtsaeng, attempted to recover his attorney’s fees as the prevailing party. He again lost in both the district court and Second Circuit after a finding that Wiley’s suit was not unreasonable. Kirtsaeng successfully petitioned the Supreme Court to hear his case for a second time.

Kirtsaeng argues that that the Second Circuit’s standard creates a presumption against awarding fees because it only considers the reasonableness of the claims of a copyright holder, not of those by an accused copyright infringer. Kirtsaeng further argues that the proper standard is that followed by the Ninth and Eleventh Circuits because it advances the aims of the Copyright Act set forth inFogerty. Additionally, Kirtsaeng believes the ultimate determination should be based on the “totality of the circumstances” and should take into account any equitable factors that are relevant and “faithful to the purpose of the Copyright Act.”

Wiley contends that the Second Circuit’s “objective reasonableness” standard does take into account theFogerty factors and treats both plaintiffs and defendants evenhandedly. Both parties contend there are significant public policy considerations at stake as well, especially in cases involving extreme differences in the financial resources available to potential litigants. The Court’s decision will likely have a significant impact on both plaintiffs and defendants as they navigate the rising costs and increasing frequency of copyright litigation cases.

 

Brandon W. Clark is the Chair of the Copyright And Entertainment Law Practice Group at McKee, Voorhees & Sease, PLC. For additional information please visitwww.ipmvs.com or contact Brandon directly via email atbrandon.clark@ipmvs.com.

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UPDATE: Will the U.S. Enact a Federal Trade Secret Law?

The Filewrapper® series relating to all things trade secrets has previously updated the status of proposed federal trade secret legislation (available here). As previously reported there appears to be sufficient legislative support to enact legislation to establish a single, national standard for trade secret misappropriation with transparent procedural rules.

The Senate has taken the next step for approval of the legislation. On April 4th, the Senate unanimously passed a floor vote for the Defend Trade Secrets Act of 2016 (DTSA).  For additional Senate insight into the bipartisan support for this legislation the January 27th op-ed written by the sponsors of the legislation, Senators Hatch (R-Utah) and Coons (D-Delaware), in The Hill (available here) sets forth their rationale for having a federal cause of action for trade secret misappropriation. In part, the Senators use the exemplary case of trade secret theft experienced by DuPont – the chemical company who invented Kevlar body armor – to demonstrate the harm caused to companies by trade secret theft.

President Obama’s administration has clearly indicated its support for the DTSA, including issuing a statement on Monday (available here). The next step will be for the U.S. House of Representatives to move forward with their trade secrets bill. In the House the bill is sponsored by Reps. Collins (R-Georgia) and Nadler (D- New York) with a staggering 128 co-sponsors.

In case you missed the last Filewrapper® post earlier this week, the fifth posting on trade secrets answered the question “Do I have a trade secret, confidential information or patentable subject matter?” (available here).

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USPTO Issues Rule Amendments for Trials Before PTAB

The United States Patent and Trademark Office issued finalized amendments to the rules for trials before the Patent Trial and Appeal Board. The updated rules were issued in a Federal Register Notice on April 1, 2016, which may be found here. The rules put into final form most of the amendments proposed on August 20, 2015, which pertain to inter partes review (IPR), covered business method review (CBM), and post-grant review (PGR) under the America Invents Act (AIA). The new rules go into effect May 2, 2016.

The major changes to the rules include the following:

  • allowing new testimony in a patent owner preliminary response
  • adding an option for a Phillips-type claim construction for expiring patents
  • implementing word counts instead of page limits for certain filings
  • adding a Rule 11-type certification for papers filed in a proceeding
  • more time for exchange of demonstrative exhibits

Patent Owner's Preliminary Response

Currently, a patent owner is precluded from submitting testimonial evidence, in response the filing of a petition, to support its position not to institute a PTAB trial; the evidence is restricted to that which is already in the record. With the new rule change, a patent owner may file a preliminary response with new testimonial evidence, without any limit on scope.

If the testimonial evidence should cause a genuine issue of material fact to arise, this issue is to be resolved in favor of the petitioner, but only for the purposes of determining whether to institute a trial.

Claim Construction Standard

The PTAB (like the rest of the USPTO) uses a "broadest reasonable interpretation" (BRI) standard for construing claims. Under the new rules, however, a Phillips-type claim construction was deemed to be appropriate in proceedings involving claims of a patent which will expire prior to issuance of a final written decision. However, for such a claim construction to apply, one of the parties must request the adoption of the Phillips claim construction and certify that the patent at issue will expire within 18 month period permitted for these PTAB proceedings. In the absence of such a request, the Board will continue to apply the broadest reasonable interpretation standard in AIA proceedings.

Word Counts

For certain filings, the Office has replaced page limits with word limits. The following changes will apply beginning May 2:

  • Instead of 60 pages, all IPR and derivation petitions, patent owner preliminary responses, and patent owner responses to petition are limited to 14,000 words.
  • Instead of 80 pages, all PGR and CBM petitions are limited to 18,700 words.
  • Instead of 25 pages, replies to patent owner responses to petitions are limited to 5,600 words.

All remaining filings continue to have existing page limits.

Rule 11-type Certification

As a part of the duty of candor owed to the Office, a certification will be required for all papers filed with the Office, which establishes that the paper is submitted in good faith, similar to the requirements of Rule 11 of the Federal Rules of Civil Procedure. The new rules also provide a procedure for sanctions that did not exist previously.

Exhibits for Oral Hearing

The Office has amended the rules to require that parties exchange exhibits seven business days before oral argument, extending the time from five days.

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PTAB's Interpretation of 35 USC 315(b) Continues to Stand: Dismissal Without Prejudice Effectively Nullifies the One Year Bar to Bring an IPR

The USPTO's Patent Trial and Appeal Board's holding that the voluntary dismissal of a lawsuit, without prejudice, effectively nullifies the service of the complaint for purposes of triggering the one year bar in 35 U.S.C. § 315(b) to petition for the institution of an inter partes review (IPR) stands in Shaw Indus. Grp. v. Automated Creel Sys. after the Federal Circuit maintains that it does not have jurisdiction to review the PTAB's decision to institute an IPR.

Automated Creel sued Shaw Industries in February 2012 for patent infringement and subsequently dismissed the suit voluntarily without prejudice. Within one year of service of the complaint Shaw Industries filed a petition of an IPR seeking invalidation of all claims in the patent. The PTAB instituted an IPR one all of the claims except claim 4. Shaw then filed another petition for an IPR directed at claim 4. This petition was filed later than one year after service of the complaint in the now-dismissed patent infringement lawsuit. The PTAB decided to institute the IPR on claim 4.

Both IPRs proceeded separately. Ultimately, the PTAB consolidated them and issued one final written decision invalidating a number of the claims including claim 4. Automated Creel appealed the PTAB's interpretation of § 315(b) that resulted in the decision to institute the IPR invalidating claim 4. Specifically, Automated Creel argued that the IPR should have been barred by § 315(b) as it was brought later than one year after service of the complaint. § 315(b) states, "An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner . . . is served with a complaint alleging infringement of the patent."

The PTAB had justified instituting the IPR on claim 4 stating, "consistently [we] ha[ve] interpreted the effect of dismissals without prejudice as leaving the parties as though the action had never been brought." Thus, the PTAB concluded that the voluntary dismissal without prejudice "nullifie[d] the effect of the service of the complaint." The Federal Circuit reiterated that it "lack[s] jurisdiction to review this aspect of the Board's decision." Thus, the PTAB's interpretation stands for the time being. The Federal Circuit did note that this issue may be affecting by the second question before the Supreme Court inCuozzo Speed Techs., LLC v. Lee. The second question before the Supreme Court is "Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially unreviewable."

The Federal Circuit’s opinion is available here.

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"Unavailable" Joint Inventor after the America Invents Act

All applications for United States patent must include an oath or declaration signed by each inventor. The oath or declaration must be furnished to the United States Patent and Trademark Office no later than the date on which the issue fee is paid, but preferably on the same day as the non-provisional application is filed to avoid payment of a surcharge. Provisional applications do not require submission of an oath or declaration.

For any number of reasons, including death or legal incapacity, a joint inventor may be unavailable to sign the oath or declaration. Perhaps the most common scenario involves a joint inventor that cannot be located, and/or he or she refuses to join in an application. One can imagine a scorned ex-employee who refuses to assist a previous employer with obtaining a patent.

Regulations addressing unavailability of an inventor changed with the America Invents Act (AIA), and while the procedural requirements have been eased, the substantive law largely remains the same. It remains incumbent on applicants to satisfy the substantive requirements despite the ease with which the issue can be disposed.

Prior to the AIA, if a joint inventor refused to join in an application for patent or could not be found or reached “after diligent effort,” the other joint inventor(s) could make the application for patent on behalf of themselves and the omitted inventor. Doing so required accompanying the oath or declaration (signed by the other joint inventor(s)) with a petition including proof of the pertinent facts and the last known address of the nonsigning inventor. See pre-AIA 37 CFR § 1.47. The pertinent facts most often include the efforts taken to locate the nonsigning inventor or the circumstances surrounding why he or she refuses to file an oath or declaration. Further, thebona fide attempt must be made to comply with the provisions of pre-AIA 37 CFR § 1.47 at the time the oath or declaration is first submitted.

For applications filed on or after September 16, 2012, the substantive law remains the same –i.e., a joint inventor refuses to join in an application for patent or cannot be found or reached “after diligent effort.” However, 37 CFR § 1.64 provides for an applicant to execute a substitute statement in lieu of the oath or declaration for the nonsigning inventor. Furthermore, the USPTO has conveniently provided fillable Form PTO/AIA/02 to comply with the regulations. No petition or proof of pertinent facts need be provided. Yet USPTO Guidance cautions, "An applicant [does] not need to file a petition or provide proof of the pertinent facts in order to be named as the applicant or execute a substitute statement. Though proof is not required to be submitted to the Office, proof of attempt to secure the inventor’s signature should be kept in applicant’s file. There is no change to what is considered a good faith attempt to contact an inventor and what constitutes a refusal to sign."

Thus, while the administrative burden is eased, one should be careful not to hastily file the substitute statement without making diligent effort to locate the joint inventor. With a substitute statement as part of the prosecution history, a challenger to the later issued patent will leave no stone unturned in litigation and will demand the patent owner establish proof and sufficiency of the pertinent facts present prior to the filing of the substitute statement. While there appears to be no case on point, not making diligent efforts prior to the filing of the substitute statement could result in a court finding the patent unenforceable as a matter of law.

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