Business Leaders Rank Cyber Risk #2 on List of Main Concerns

Travelers Business Risk Image

Posted By Henry M. Sneath, Chair of the Cybersecurity and Data Breach Prevention and Response Team at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

Travelers Indemnity and Insurance released its annual Business Risk Index, which is a survey of the concerns of business leaders and decision makers. Not surprisingly, for 2015, Cyber Risk moved up to the number 2 concern on that list, right behind rising healthcare costs. In some industry sectors it is the number 1 concern. The Banking and Financial Services, Professional Services, and Technology sectors each ranked cyber risks as the main driver of sleepless nights.  The chart on page 3 of the survey is very instructional as to the different concerns between small, medium and large businesses. Small businesses have less concern about data breach than larger businesses, but perhaps small businesses are overlooking their vulnerability and attractiveness as targets. If they care less, they will likely protect less, and become easy targets for hackers. It should be a huge concern for all businesses in all industries as no one appears immune. If you data store or deal in Personal Identifiable Information (PII) or Personal Health Information (PHI) as part of your business, then you are a valuable target. If you have financial or credit information, or trade secrets to protect, then perhaps your competitors, foreign governments and political hackers want to look inside your data. Many insurers are now offering Cyber Risk Insurance to provide defense and indemnity against these risks. Every business should have a data breach prevention and response team of employees and outside consultants and lawyers to audit the company’s vulnerability and to set the plan for a response when a breach occurs.  See the complete Travelers Business Risk Index at: https://www.travelers.com/prepare-prevent/risk-index/business/index.aspx

 

Updated Resources and Link Section

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

PSMN LogoWe’ve updated our Resources and Links page with more links to helpful intellectual property resources and references for practitioners, inventors, and artists.  If you haven’t looked at this section recently, you should see what we’ve added.

USPTO and US Copyright Office Offer New Tools for Practitioners

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

ComputerThe US Patent and Trademark Office and the US Copyright Office recently announced that some new tools are available to practitioners and interested individuals and companies to help individuals be better aware of recent patent applications and to help explain the fair use doctrine.

The USPTO, in partnership with Reed Technology and Information Services, created an alert system (the Patent Application Alert Service) that allows individuals to receive email alerts whenever a patent application publishes that contains certain keywords. After signing up for the service, a user can set “alerts” based on keywords found in the title, abstract, description, drawings, claims, CPC classification, applicant, inventor, or assignee fields (or combination of these fields). The system then sends out weekly emails whenever an alert criteria has been satisfied.

This system will enable individuals and companies to be better aware of what their competitors are attempting to patent, as well as to keep abreast of changes in the field. The USPTO also hopes that this service will lead to better patents being issued because interested individuals in the relevant fields can monitor patent applications and help identify prior art for pre-issuance submission to the USPTO.

The US Copyright Office has also been busy, creating a Fair Use Index, which is a searchable database of court opinions indexed by category and type of use. The Index currently has decisions reaching back to 1841 and provides a link to the opinion, the relevant court information, the type of medium (photograph, text, etc.), and the outcome. The US Copyright Office created the Index to help the public understand the contours of the fair use doctrine as applied to copyright law. While useful for the public, the Index will also be a useful resource for practitioners.

Parties’ Settlement Can’t Stop Inter Partes Reexamination

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

USPTOThe Federal Circuit issued an interesting decision in Automated Merchandising Systems, Inc. v. Lee, (No. 2014-1728), regarding the USPTO’s decision not to stop an inter partes reexamination proceeding after the parties settled a parallel patent infringement action in federal court. The Court concluded that the USPTO’s decision to continue was not a final action by the agency, so the Court did not have the authority to overrule the USPTO.

Background

The case involved a dispute between Automated Merchandising Systems, Inc. (AMS) and Crane Co. AMS sued Crane for allegedly infringing four of AMS’s patents. During the court proceedings in the Northern District of West Virginia, Crane instituted an inter partes reexamination of the patent at the USPTO, which the USPTO granted. As often occurs, AMS and Crane settled the dispute and requested that the district court enter and order dismissing the case. In that order, which the court entered, the parties stipulated that the four patents were valid, the case was being dismissed with prejudice, and the judgment was final.

After the court entered the order, AMS asked the USPTO to stop the reexamination proceedings under 35 U.S.C. § 317(b), arguing that there was a final judicial decision that the patents were valid. The USPTO disagreed, finding that there had been no actual decision on the merits and that it had an obligation to continue reviewing the patents once it had determined that there was a substantial question of patentability.

AMS filed suit against USPTO in district court in the Eastern District of Virginia, seeking to have the court overturn the USPTO’s decision under the Administrative Procedure Act (APA), the Declaratory Judgment Act, and the court’s inherent mandamus power. The court entered summary judgment against AMS because it also found that there had been no final decision on the merits. AMS then appealed to the Federal Circuit.

Holding

The APA places limits on what courts can review:

[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action.

5 U.S.C. § 704.

So, the Federal Circuit first considered whether it the USPTO’s decision was a final agency action, sufficient to invoke the APA. The Federal Circuit concluded that it was not. Final agency actions are those that mark the end of the agency’s decision-making process and are such that rights, obligations, or legal consequences flow from the decision.

Here, neither of those elements were found to exist. The USPTO’s decision did not mark the end of its involvement. To the contrary, the USPTO determined that the reexamination should continue. In addition, the USPTO had not made any final determinations on the merits of the reexamination, so no legal consequences flowed from its decision, other than to continue the reexamination. The Court found that the continuation of legal process was not the type of consequence required under the APA, especially because additional appellate remedies existed if the USPTO reached a decision unfavorable to AMS.

Having determined that the APA did not give grounds for the Court to reverse the USPTO’s decision, the Court also concluded, for basically the same reasons, that the Declaratory Judgment Act and the court’s inherent mandamus powers did not provide relief for AMS. The Federal Circuit, therefore, affirmed the district court’s grant of summary judgment against AMS.

Conclusion

This decision highlights a concern that patent owners need to be aware of that once a reexamination has been filed, it can be very difficult for a patent owner to unilaterally end the process. Unlike the court system, the USPTO has a separate obligation to verify the appropriateness of patents it issues when there has been a legitimate challenge to the validity of the patent. Just because the parties wanted to end the dispute does not mean that the USPTO has the same interest. Litigants will need to keep this in mind when determining whether and how to settle a patent infringement lawsuit that also has an ongoing inter partes reexamination.

Supreme Court Holds That Issue Preclusion Applies to Some TTAB Decisions

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1The Supreme Court handed down a decision today in B&B Hardware, Inc. v. Hargis Industries, Inc. (No. 13-352), in which it reversed an Eighth Circuit ruling regarding whether a decision by the Trademark Trial and Appeal Board (TTAB) during an opposition proceeding that there was a likelihood of confusion between two marks could have a preclusive effect in a subsequent trademark infringement lawsuit in a district court. In a 7-2 decision, authored by Justice Alito, the Supreme Court held that in certain circumstances, final decisions by the TTAB can preclude re-litigation of those issues in later forums. Justices Thomas and Scalia dissented, stating that they did not think that TTAB decisions should have preclusive effects.

Background

B&B Hardware registered its trademark “SEALTIGHT” with the USPTO in 1993, which was used with threaded and unthreaded metal fasteners and other related hardware. In 1996, Hargis sought to register its own mark, “SEALTITE” for self-piercing and self-drilling metal screws. B&B Hardware opposed the registration, contending that the marks were confusingly similar.

Although not described in detail, the Court noted that the parties had been involved in disputes before the USPTO and courts in the Eighth Circuit for the last twenty years, including three trips to the Eighth Circuit and two jury verdicts in infringement actions.

Relevant to this case, the parties were before the TTAB on an opposition proceeding brought by B&B Hardware. B&B Hardware successfully argued to the TTAB that the USPTO should not register the SEALTITE mark because it was confusingly similar to its SEALTIGHT mark. While the Lanham Act provides that a decision of the TTAB can be appealed to either a district court or the Federal Circuit, Hargis declined to seek any judicial review, and the decision of the TTAB to not allow registration of the SEALTITE mark became final.

While the opposition proceeding was occurring, B&B Hardware brought a trademark infringement action against Hargis in district court. Once the TTAB decision became final, B&B Hardware argued before the district court that Hargis could no longer contest the issue of likelihood of confusion based on the doctrine of issue preclusion. The district court disagreed, and a jury ultimately concluded that there was no likelihood of confusion. The Eighth Circuit affirmed.

The Supreme Court ultimately reversed both the Eighth Circuit and the district court.

The Supreme Court’s Decision

Issue preclusion is a doctrine that prohibits the redetermination of issues in a later action that have been finally decided in a prior action. In general, it applies “[w]hen an issue of law or fact is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”

In deciding whether issue preclusion could apply to a TTAB decision, the Court first concluded that issue preclusion is not limited to proceedings involving two courts. It is possible that agency decisions (such as a TTAB decision) can be given preclusive effects unless Congress clearly indicates otherwise. In this case, the Court found that Congress did not indicate in the Lanham Act that TTAB decisions should not be given preclusive effect, so it concluded that issue preclusion is potentially available.

Next, the Court considered whether the TTAB and the district court were, in fact, deciding the same issue in order for issue preclusion to be available. It reviewed the standards applied by both tribunals and concluded that the same likelihood-of-confusion standard applies to both the registration of marks and the question of infringement.

Hargis argued that issue preclusion should not apply because the TTAB considers whether the marks “resemble” each other, while the district court considers how the marks are used in commerce, and that these are different tests. The Court rejected that argument, stating that while the two tribunals may not consider the same usage of the marks, that did not mean that they applied different standards to the usage. It is at this point that the Court noted some important limitations on whether a TTAB decision could be given preclusive effect:

If a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation. By contrast, if a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue. Thus, if the TTAB does not consider the marketplace usage of the parties’ marks, the TTAB’s decision should “have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue.” 6 McCarthy §32:101, at 32–246.

In addition, the Court reiterated that if the TTAB considers a different mark than is at issue in the litigation or has decided a different issue than is before the district court, there can be no issue preclusion.

Because Hargis decided not to appeal the TTAB decision, it was a final judgment. And, because the likelihood of confusion issue was the same in both tribunals, the Court concluded that issue preclusion applied. Thus, the Court reversed the Eighth Circuit and remanded the case.

Issues not decided by the Supreme court

There were a couple of issues that the Court touched on, but did not rule because either the parties had not preserved the issues or they had not been adequately presented. In both instances, the majority noted that the constitutional issues were not before it, but it seems unlikely from what was said that they would have been successful even if they had been.

For instance, the Court noted that it has never had the occasion to determine whether issue preclusion from an agency decision violates the separation of powers in Article II and III of Constitution. In addition, the Court indicated that Hargis failed to preserve a Seventh Amendment challenge that giving preclusive effect to an non-jury, agency decision denied it a right to a jury.

It will be interesting to see if those challenges are raised with more care in future cases before the Court.

Conclusion

As seems to be typical in intellectual property cases before the Supreme Court, the Court did not set down a bright-line rule. The Court held that in some appropriate circumstances, decisions by the TTAB can be given preclusive effect in subsequent litigation in Article III courts. The Court caveated its determination, though, so litigants in the TTAB will need to carefully consider what the risks might be if they do not seek judicial review of a TTAB decision in either a district court or before the Federal Circuit. This uncertainty will likely give rise to more challenges to TTAB decisions, especially where there is a risk that those decisions have aspects that are similar to issues being raised in court (such as likelihood of confusion).

For further discussion of this case, the Likelihood of Confusion blog has some good coverage.

 

Target Agrees to Settle Class Claims Over 2013 Data Breach for $10M

Posted By Henry M. Sneath, Chair of the Cybersecurity and Data Breach Prevention and Response Team at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

Data Breach broken_security_lock photo Target Corp. agrees to settle the 2013 data breach class claims prior to argument on class certification. Lead plaintiff’s counsel admitted the uphill battle he faced to obtain class certification due primarily to the difficulty in these consumer data breach cases of proving commonality of claims. This settlement, which still needs court approval for its proposed $10M payout, will not settle claims by commercial entities, but only individual consumer claims. Here is a good article with more detail from the National Law Journal. We will continue to follow this settlement and the handling of the commercial claims as this blog increases our focus on Cybersecurity and Data Breach Prevention and Response issues.

See this link to the NLJ for more info:  http://tinyurl.com/kxwjrb9

 

 

Cybersecurity (CISA) Bill Moves out of Congressional Committee

j0402514Posted By Henry M. Sneath, Chair of the Cybersecurity and Data Breach Response team at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

Privacy concerns continue to dog the CISA (formerly CISPA) bill, but it easily passed out of the  Senate Intelligence Committee yesterday.  Pundits claim that the bill pits “big government – NSA, Homeland Security et al allegedly aided by Big Tech Companies” against privacy advocates who want less regulation of data and the internet. I’m not sure if it lines up that neatly however. See this short article with a summary of the committee process from Wired.Com.

Here is an advocacy website piece which supports defeat of he bill.

We will continue to monitor the path of the bill to see if it makes it to the Senate Floor for a vote. For the complete text of the bill, view it at this link.

Sneath Headshot

Henry M. Sneath on Google+ or see his PSMN ® bio.

Jury Returns $7.4 Million Verdict for Marvin Gaye’s Family in “Blurred Lines” Copyright Infringement Suit

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

Law and MoneyOn Tuesday, a jury in Los Angeles reached a verdict in favor of Marvin Gaye, Jr.’s family against Pharrell Williams and Robin Thicke, finding that Williams and Thicke’s song “Blurred Lines” infringed Marvin Gaye’s copyright in his song “Got to Give It Up.” The jury awarded approximately $7.4 million in damages.

Background

In 1976, Marvin Gaye, Jr. composed the song “Got to Give It Up,” which went on to become a musical hit and reached number one on Billboard’s Hot 100 chart in the United States. Marvin Gaye registered the musical composition “Got to Give It Up (Part 1 and 2)” with the United States Copyright Office in 1977 (Reg. No. EP 366-530), and the registration was subsequently renewed in 2005 (RE 910-939). Marvin Gaye was a Grammy winning performing and is a member of the Rock-and-Roll Hall of Fame. He passed away in 1984.

In 2013, artists Pharrell Williams, Robin Thicke, and Clifford Harris, Jr. composed the hit song “Blurred Lines,” which also went on to become a huge success, selling over six million copies and being viewed over 250 million times on the internet. In various interviews, Robin Thicke indicated that he had been influenced by Marvin Gaye’s work and wanted to make something like that. He further indicated that “Got to Give It Up” was one of his favorite songs of all time.

Shortly after the song was released in March 2013, the Marvin Gaye’s family began to assert that “Blurred Lines” infringed the copyright on “Got to Give It Up” and threatened to bring a lawsuit against Williams and Thicke. In response, Williams and Thicke filed a pre-emptory lawsuit in Los Angeles on August 15, 2013, seeking a declaratory judgment that they did not infringe any of Marvin Gaye’s copyrights (Williams v. Bridgeport Music, Inc.No. 2:13-cv-06004, US. District Court for the Central District of California). Gaye’s family filed a counterclaim for infringement in response.

After discovery, the Williams and Thicke filed a motion for summary judgment, arguing that the case need not go before a jury. (The parties’ summary judgment arguments can be found here–Williams/Thicke and Gaye.) The Judge denied their motion (his opinion is here), and the case proceeded before a jury. After nine days of testimony and presentations, the jury returned its verdict, finding that Pharrell Williams and Robin Thicke infringed the copyright on “Got to Give It Up” and awared approximately $7.4 million in damages to Marvin Gaye’s family. The jury concluded, however, that the infringement was not willful.

Williams and Thicke have subsequently filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit.

Take Aways

Copyright infringement cases are never a sure things, especially when they go to a jury. Williams and Thicke chose to file suit seeking a declaratory judgment that they did not infringe, which was a risky maneuver. While there are no guarantees that Gaye’s family would not have filed a lawsuit anyway, the decision may have escalated the conflict. Individuals who have been accused of infringement need to consider carefully whether a declaratory judgment action is the prudent thing to do. In some cases it will be, because it gives the accused infringer an opportunity to control the forum in which the case is heard and when the lawsuit begins, among other things. It may be worthwhile in some cases to accelerate a decision, even if that means risking getting an unfavorable outcome. This is just one of the many decisions that litigants need to consider carefully before lawsuits are filed and threats are made. There is likely no one right answer that applies to all cases. Instead, litigants and their attorneys need to carefully think through the various risks and benefits before they proceed.

3rd Circuit Hears Argument on Cybersecurity Issue Regarding Data Breaches of Consumer Information

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

ComputerOn March 3, 2015, the Third Circuit heard oral argument in FTC v. Wyndham Worldwide Corp. (No. 14-3514) on the novel issue of whether or not the Federal Trade Commission can sue a company for failing to properly secure consumer data. The case arose when the FTC sued Wyndham Worldwide Corporation, after Russian hackers broke into the Wyndham’s computer network and stole the credit card information for thousands of customers. The FTC filed the suit based on its authority under federal law to patrol unfair business practices. The Wyndham Hotel contends that its cybersecurity system is outside the realm of the FTC’s authority and that the FTC had not given notice about what the law would require with regard to corporate data security practices. The case reached the Third Circuit after the District for New Jersey denied the Wyndham’s motion to dismiss, and the Wyndham filed an interlocutory appeal. The panel’s, consisting of Judge Thomas Ambro and Senior Judges Anthony Scirica and Jane Roth, interest in the novel issue was apparent from the fact that oral argument lasted twice as long as the allotted time and the Court requested supplemental briefing.

See this article for additional information (subscription required). A recording of the oral argument can be found here at the 3rd Circuit’s website.

“Use in Commerce” Requires Actual, Not Intended, Use

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

Playdom LogoWhen applying to register a trademark or service mark, one of the key requirements is that the applicant has used or intends to use the mark in commerce. The Federal Circuit recently considered what is sufficient “use in commerce” for purposes of obtaining a service mark in Couture v. Playdom, Inc., No. 2014-1480 (March 2, 2015).

Background

Playdom filed an application to register the service mark PLAYDOM on May 30, 2008 and submitted a specimen that purported to demonstrate that the mark had actually been used in commerce. Specifically, Playdom submitted a screen shot of the only page on its website (www.playdominc.com), which stated “[w]elcome to PlaydomInc.com. We are proud to offer writing and production services for motion picture film, television, and new media. Please feel free to contact us if you are interested.” The webpage also indicated that it was still under construction. The USPTO registered the mark on January 13, 2009. However, Playdom did not actually provide any services under the mark until 2010.

On February 9, 2009, Couture filed his own application to register the identical mark—PLAYDOM. Not surprisingly, the examining attorney rejected Couture’s mark based on Playdom’s mark. In response, Couture filed a petition to cancel Playdom’s mark, arguing that Playdom had not actually used the mark in commerce when it said it did.

The Board granted the petition, finding that Playdom had not provided services as of the filing date of the application because it had only indicated that it was willing to provide services then, not that it actually had provided services.

The Federal Circuit affirmed the cancellation on the same grounds.

Analysis

Under the Lanham Act, a service mark is used in commerce when it (1) is used or displayed in the sale or advertising of services and (2) the services are rendered in commerce. 15 U.S.C. § 1051(a)(1). And, when claiming that the mark has been used in commerce, it must have actually been used in commerce as of the application’s filing date.

In analyzing this provision, the Federal Circuit noted that “used in commerce” means actual use, and not preparations. If an applicant submits advertising relating to the services as proof of use, the advertising must relate to existing services that have already been offered to the public, and not services that the applicant intends to perform in the future.

Because there was no evidence in the record that Playdom actually rendered any services before 2010, the Board correctly cancelled Playdom’s 2008 registration.

Conclusion

Small things can make a difference when applying to register trademarks and service marks. Counsel and applicants need to be aware of these requirements and accurately complete the applications. In circumstances like these, applicants can indicate on the application that they have a bona fide intent to use the mark in the future, which allows for the application to proceed.