Tag Archives: intellectual property litigation

DRI IP Litigation Community Opens

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

Tdri-logo-newhe contributors here on the Pit IP Tech Blog are proud to announce the formation of a new DRI Community (IP Litigation) that opened last month. I am co-chair of the community, and I will be splitting my time between this site and the community going forward. The IP Litigation Community is a forum for DRI members to share information and insights into issues involving their practice areas, along with useful resources.

One of my posts is featured on the community pages that deals with the Supreme Court’s decision in Alice Corp. v. CLS Bank International  (No. 13-298) and how Courts and the US Patent and Trademark Office are dealing with that decision. The short answer is that things are looking rough for software inventors who are trying to obtain patents.

Ripple Effect from Alice and Mayo Cases Being Felt in Patent World

shutterstock_26396608By: Henry Sneath, Chair of the Intellectual Property practice at Picadio Sneath Miller & Norton, P.C. in Pittsburgh, Pa.  hsneath@psmn.com or 412-288-4013

Sharing a great post from Dennis Crouch and his tremendous blog: Patently-O

New Section 101 Decisions: Patents Invalid

The Supreme Court’s decisions from Alice and Mayo are beginning to really have their impact. A few examples:

  • Walker Digital v. Google (D. Del. September 2014) (data processing patent invalid under 101 as an abstract idea) (Judge Stark).
  • Genetic Tech v. LabCorp and 23AndMe (D. Del. September 2014) (method of predicting human performance based upon genetic testing invalid under 101 as a law of nature) (report and recommendation from Magistrate Judge to Judge Stark)
  • Ex parte Cote (P.T.A.B. August 2014) (computer method and hardware for ‘phase shifting’ design data invalid under 101)
  • Ex parte Jung (P.T.A.B. August 2014) (diagnostic method associated with epigenetic risk factors invalid under 101).” Patently-O.

To view the entire post – please visit Patently-O at this link: http://tinyurl.com/otj6v6n

Is CafePress a Service Provider and Could Its Stripping of Metadata Cost It Safe Harbor Status Under the DMCA?

by Cara Disheroon, attorney at Picadio Sneath Miller & Norton, P.C. ()

The Southern District of California recently grappled with these issues in Steven M. Gardner v. CafePress Inc., Case No. 3:13-cv-1108-GPC-JMA (S.D. Cal. Feb. 26, 2014). The case centered on a copyright infringement claim against the self-publishing site CafePress and provides an interesting analysis of the safe harbor provision of the Digital Millennium Copyright Act (DMCA) at 17 U.S.C. § 512.

The facts regarding the images were undisputed.  Plaintiff, Gardner alleged copyright infringement of various wildlife images which were distributed for sale on the site by CafePress users. Gardner filed suit and CafePress, on the same day they received the complaint, disabled access to the alleged infringing material.  Subsequently, they discovered a second member’s use of the artist’s work and immediately disabled and terminated the second user’s account. Before the material was disabled however, $6,320 worth of products was sold. CafePress then moved for summary judgment based on the safe harbor provision of § 512.

In analyzing whether CafePress could take advantage of the safe harbor provision, the court began with an analysis of the term “service provider” under § 512(c). Noting that the language “a provider of online services or network access, or the operator of facilities therefor” was a broad definition, they then compared CafePress to other vendors such as Amazon and eBay. Unlike these companies however, CafePress’s service differed as they actually determine the prices for retail products, pay users only a royalty or commission, possess the ability to modify designs and determine which products are sold. The court found CafePress’s activities to be beyond a service that “merely facilitates the exchange of information between internet users” and thus the court was unable to find as a matter of law, that CafePress was a “service provider.”

Moreover, § 512(i) requires that the provider must have “adopted and reasonably implemented” a policy to terminate repeat infringers and not interfere with “standard technical measures” used to protect copyrighted works. Plaintiff contended that CafePress interfered with “standard technical measures” by deleting metadata when images are uploaded to the website. The court agreed stating that the deletion created a dispute of material fact thereby precluding judgment as a matter of law and adding “From a logical perspective, metadata appears to be an easy and economical way to attach copyright information to an image.” At this stage, the discussion is only dicta but it is nevertheless important as the court appears to be placing the burden on CafePress and given the fact that many social media sites routinely strip metadata, a ruling on the merits could potentially affect a whole host of sites which conduct the practice.

CafePress did prevail on its Motion for Partial Judgment as to statutory damages and attorney fees given that Gardner had failed to register his images before the alleged infringement. Concluding that the alleged acts constituted the same “series of acts” that commenced prior to registration of the images, the court granted CafePress’s motion. This means that Gardner is limited to his actual damages of $6,320 and may affect whether the case proceeds to trial.

If the case does proceed however, a ruling by the court on the merits could have a huge impact on numerous self-publishing sites with the potential loss of safe harbor status and the risk of significant statutory damages.

 

Pittsburgh Business Success Story: “Branding Brand. Com” for Mobile Commerce

Branding Brand LogoBy: Henry Sneath, Chair of the Intellectual Property practice at Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

I attended the Pittsburgh Technology Council’s breakfast briefing this morning and heard a great presentation by Jeffrey Hennion, President of Pittsburgh based Branding Brand: http://www.brandingbrand.com/ Founded by 3 CMU students, the company is now an industry leader in Mobile Commerce website and application development. They serve some of the largest retailers and businesses who are now true believers in the power of mobile commerce and mobile wallet apps – shopping from a phone. Costco (See Image below), Dicks Sporting Goods, Sephora, Ralph Lauren and countless more retailers have large percentages of sales now flowing through Branding Brand platforms. Starbucks is currently the leader in mobile commerce sales with its QR code based “mobile wallet”, which allows purchases from a scan of your phone screen.  A next big market for these products is the travel industry. As you ride from the airport to the hotel, you use your phone to check into the hotel, you skip the registration desk, open your room with your phone which has been activated with a mobile key. As Jeff described it – these developments are fascinating, but sometimes a little creepy. The percentage of phone driven ordering, and mobile wallet purchased sales is zooming upward and some companies could face loss of significant market share if they don’t keep up.

Costco_1_large

Busy IP Docket for US Supreme Court Upcoming

Sneath, Henry 2012 headshotBy: Henry Sneath, Chair of the Intellectual Property practice at Picadio Sneath Miller & Norton, P.C.  hsneath@psmn.com or 412-288-4013

The US Supreme Court has a very busy IP docket in the next few months. Close watchers of the court predict a continuing focus on IP cases. Our friends at AIPLA provide a nice summary of the oral argument schedule of IP cases through April. We will follow these cases and post any important decisions. See AIPLA link below: http://www.aipla.org/resources2/reports/2014/Pages/140214AIPLA-Direct.aspx

Supreme Court Holds That Patentee Bears Burden of Persuasion on Infringement When Licensee Seeks a Declaratory Judgment

By: Joe Carnicella, intellectual property attorney with Picadio Sneath Miller & Norton, P.C.

We posted about this case in May 2013, and on January 22, 2014, the Supreme Court decided this matter.

First, the Supreme Court held that the Federal Circuit did not lack subject-matter jurisdiction.  Because federal courts determining declaratory judgment jurisdiction often look to the “character” of the declaratory judgment defendant’s “threatened action,” which in this case, the threatened hypothetical action would constitute the licensor terminating a license and bringing suit for infringement under federal patent laws, the declaratory judgment action would arise under federal patent laws.

Second, the Supreme Court held that when a licensee seeks a declaratory judgment against a patentee that its products do not infringe the licensed patent, the patentee bears the burden of persuasion on the issue of infringement.  The Supreme Court based this ruling on three settled legal propositions: (1) a patentee ordinarily bears the burden of proving infringement; (2) the operation of the Declaratory Judgment Act is only procedural leaving substantive rights unchanged; and (3) the burden of proof is a substantive aspect of a claim.

By way of background, the United States Supreme Court granted cert. to hear argument on whether, in a declaratory judgment action brought by a licensee, the licensee has the burden to prove that its products do not infringe the patent, or whether the patentee must prove infringement.  Medtronic Inc. (licensee) licensed a patent from Mirowski Family Ventures LLC (patentee / licensor) relating to a device used to stop imminent heart failure.  Medtronic subsequently created new products and then filed a declaratory judgment action claiming that its new products do not infringe the patent.  The Federal Circuit Court of Appeals held that Medtronic bears the burden of proving that its products do not infringe Mirowski’s patent.  Medtronic argued that the U.S. Supreme Court should overturn the Federal Circuit’s ruling, which Medtronic argued is inconsistent with the Supreme Court’s decision in MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118 (2007).  In MedImmune, the Supreme Court ruled that a patent licensee that believes that its products do not infringe the patent is “not required . . . to break or terminate its . . . license agreement before seeking a declaratory judgment in federal court that the underlying patent is . . . not infringed.”  According to Medtronic, the Federal Circuit’s opinion undercut the MedImmune decision because it caused a licensee to take on the significant burden and cost of a presumption that its products infringe.  In turn, Mirowski argued that this case is distinguishable from MedImmune because the licensing agreement at issue specifically required Medtronic to file a declaratory judgment action if a dispute arose.  Mirowski submitted that the Federal Circuit correctly decided that, based specifically on the contract terms between the parties, Medtronic should bear the burden of proving that it should be let out of the contract for the new products.

Survey of Proposed Patent Lawsuit Reform Bills in Congress (Part 4)

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Another patent reform bill is quickly working its way through Congress as we speak. The Innovation Act (HR 3309) passed the House by a vote of 325–91 and is pending in the Senate, which has said that it will fast track passage of it. Many of the provisions are similar to those found in the other proposed pieces of legislation that we discussed earlier (see parts 1, 2, and 3), and address some of the concerns I raised in these prior discussions. One of the more significant provisions of the Innovation Act is the fee-shifting provision, which proposes to amend 35 U.S.C. § 285.

US Capitol BuildingUnder current law, patent lawsuits follow the American system in which each side pays its own legal fees. The current § 285 modifies the American rule somewhat, providing that in exceptional cases the court may award attorney fees to the prevailing party. The Innovation Act scraps the American rule altogether and flips current § 285 by providing that the court must award reasonable attorney fees and expenses to the prevailing  in patent cases, “unless the court finds that the position of the non prevailing party or parties was substantially justified or that special circumstances make an award unjust.” (Proposed § 285(a)).

As an initial matter, this provision is supposed to deter parties from filing frivolous lawsuits, but it is not clear that it will accomplish this purpose. To be a prevailing party requires a judgment by the court, likely either on a motion for summary judgment or a trial verdict. Neither of these happen towards the beginning of litigation, so a defendant will have to still incur significant costs to get to the point at which it has a chance to recover its fees. Many defendants will likely not want to incur those costs, especially if the plaintiff appears to lack significant assets or has a plausible basis for its claims (even with the interest party expansion of proposed § 285(b)).

This provision may, in fact, create an incentive for patent trolls, especially in cases where they have a strong patent but the damages are not significant. By defaulting to a loser pays system, there is a greater likelihood that patent trolls will file additional lawsuits and defendants in these kinds of cases will be required to pay the troll’s litigation costs, even when a troll would have been unlikely to prove willful infringement.

Finally, there are real questions about what it means to be prevailing party and what the “substantially justified” standard means. For instance, what happens if a plaintiff prevails on one claim, but the jury find non-infringement on another? Are both parties prevailing parties? Or, if the plaintiff prevails on one patent, but the defendant invalidates the other asserted patent? What happens if a target of a demand letter files a declaratory judgment action and forces a patentee into a lawsuit that it never intended to file?

Also, when, exactly, does a non-prevailing party have to be substantially justified in its position? At that time it first asserts the position? At the end of the litigation? At any time? These are not trivial concerns. A defendant at the initial stages of a lawsuit often will assert non-infringement and invalidity defenses and counterclaims before having much time to analyze the claims or having the benefit of the  court’s claim constructions. Those positions may be only in their initial stages with modest support, but later blossom into very strong positions. Similarly, what appear to be strong positions can turn into weak ones once the court issues its claim construction. In which of these situations are the positions substantially justified?

Courts will undoubtedly struggle with interpreting these standards and deciding who, exactly, “deserves” to pay and who does not. Moreover, while these new rules are clearly targeted towards fighting patent trolls, they apply equally in all patent cases, including the traditional competitor vs. competitor lawsuits. By changing the rules, it will create additional pressures that are more likely to be borne by defendants, who have no control over whether they are sued, than by plaintiffs, who can have significant control over when they sue and which patents/claims they sue on.

The Innovation Act looks likely to pass the Senate and be signed into law by the President. It will be interesting to see if it accomplishes what it purports to set out to do.

Defendant Files RICO Complaint Against Patent Troll

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

A colleague brought to my attention an interesting development in a patent “troll” case in the Southern District of New York that may foreshadow a new approach for companies to defend themselves in these kinds of lawsuits. It is a rather extreme approach, and it will be interesting to see how this case progresses.

MoneyLumen View Technology LLC filed a patent infringement lawsuit against FindTheBest.com, Inc. (Case No. 1:13-cv-03599-DLC). While this case was still pending, FindTheBest filed a separate lawsuit against Lumen View, its principals, and other related entities (Case No. 1:13-cv-06521-DLC), bringing claims under RICO and for extortion, abuse of process, civil conspiracy, and unfair business practices.

Background

According to the two complaints, FindTheBest operates a web site that provides consumers with data-driven comparisons of a wide variety of products and subjects, such as phones, cars, and ski resorts. Lumen View contends that FindTheBest infringes U.S. Patent No. 8,069,073, which relates to a “System and Method for Facilitating Bilateral and Multilateral Decision-Making.”

Lumen View was formed on February 23, 2012 and obtained the patent in suit seven days later. It allegedly conducts no other business aside from filing patent lawsuits and licensing in patents, and has filed more than 20 patent infringement lawsuits relating to the’073 patent in the last 18 months.

On May 30, 2013 (the day after the complaint was filed), FindTheBest claims that it received a letter from Lumen View enclosing the complaint and demanding that FindTheBest pay to settle the lawsuit. Lumen View apparently initially demanded that FindTheBest pay $85,000 for a licensing fee, but dropped that demand to $55,000 the day before FindTheBest’s answer to the complaint was due. FindTheBest rejected Lumen View’s settlement demands and continued with the lawsuit. The parties have submitted a list of claim terms to be construed, and FindTheBest has moved for judgment on the pleadings, arguing that the patent is invalid under 35 U.S.C. § 101.

On September 16, 2013, FindTheBest filed an entirely separate lawsuit in the same court against Lumen View, its principals, and other related entities, bringing claims for violating RICO, extortion, abuse of process, civil conspiracy, and unfair business practices. FindTheBest contends that Lumen View engaged in a criminal enterprise by failing to conduct proper due diligence before filing its lawsuits and knowingly pursuing frivolous cases in order to extort settlement money from its targets. Defendants in this second case have not yet answered the complaint.

What This Case Means

This is an interesting and aggressive approach to fighting back against what FindTheBest apparently believes is a frivolous and improper lawsuit. It is curious that it is bringing this second lawsuit at this time—before the first case is even close to being resolved. One wonders how the Court will respond to this second action. Will it allow it to proceed? Will it stay or dismiss the case pending the resolution of the first lawsuit?

Civil RICO cases are generally disfavored by the courts and notoriously hard to prosecute. In general, such a claim would be extremely difficult for a defendant to bring in a standard patent infringement lawsuit because RICO requires a pattern of racketeering activity and multiple victims. In this case, however, because Lumen View allegedly filed multiple extortionate lawsuits against multiple “victims,” FindTheBest may be able to overcome these pleading hurdles.

Regardless, as long as the second lawsuit exists, it creates immense pressure on the patent holder and the persons and companies associated with it and likely completely changes the settlement dynamic. For one thing, Lumen View likely cannot take the approach that Loadsys did against Kapersky Labs and unilaterally drop the lawsuit if it thinks it will not prevail. Such an action would feed right into FindTheBest’s theory that the lawsuit was a sham and increase the chances that FindTheBest could prevail in its lawsuit.

It will be interesting to follow this case and see how it progresses. If nothing else, it gives all parties something more to think about in lawsuits of this type.

What to Do About Patent Trolls?

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

The problem with patent assertion entities (PAEs), also called patent trolls, continues to be a hot-button issue among practitioners, companies, and the government. Recently, Gene Quinn from IPWatchdog wrote about one proposed solution he and others see to this problem—encouraging companies to fully litigate these lawsuits and not to settle quickly, thereby raising the costs of this kind of litigation to discourage the bringing of weak lawsuits. But, is this really a practical solution to the troll problem for everyone?

TrollQuinn believes that the issues faced by patent troll targets are similar to those faced by the auto insurance industry in the 1980s. Back then, the auto insurance companies frequently chose to settle cases for less than the litigation costs, regardless of the merits. This settlement strategy encouraged litigants to bring even more lawsuits, often of a questionable nature. It wasn’t until the industry decided to fight all of the cases that the more frivolous lawsuits disappeared. As Quinn states, “[t]he lesson was clear: if you don’t fight, and if you make yourself an easy target, people will sue you on both good and bad cases.”

In March 2011, Lodsys approached 55 companies demanding compensation for their alleged infringement of Lodsys patents. 51 of the companies settled out of court, and 3 others settled a few weeks after Lodsys brought suit. Only Kapersky Labs decided to vigorously defend itself. After over two years of litigation and just days before trial, Lodsys unilaterally gave up and dropped its lawsuit against Kapersky Labs. Because Kapersky Labs adopted this approach, Quinn expects that it will no longer be considered an “easy target” and that it will not be sued as often as before.

My feeling is that Quinn is correct that settling weak patent infringement lawsuits only encourages and perpetuates the troll system. The problem that I have with his solution is that it is not a universal solution and is really only effective for a limited number of defendants.

While some trolls are looking for a large payday, many are willing to settle for relatively small amounts in comparison to the litigation costs—in the thousands or tens of thousands range (see, e.g., here and here). Patent litigation is expensive, with pre-trial costs ranging from $350,000 to $1,000,000 for modest size cases and total costs ranging from $700,000 to $2,000,000. Thus, a company is faced with a decision of whether to pay a few thousand dollars now to end the litigation and receive a fully-paid up license or spends hundreds of thousands or millions to hopefully defeat the troll in the courts (which is no guarantee, as any litigator will tell you).

The law potentially allows a prevailing defendant to collect its fees and expenses, but there is no certainty that a defendant can meet the high standard required to get such an award or that it will be able to collect such an award from the troll. Many of these trolls are shell companies with little to no real assets. Even if the company is able to get and collect its fees and expenses, that still would not make it whole. The company will likely have wasted 2+ years in the litigation process, with all the distractions and stresses that it creates.

In addition, for many companies the litigation costs represent a significant portion of its annual profits. It may have to lay off workers, forgo development, or otherwise restrict its operations during the litigation simply to pay its legal bills. That is a lot to ask of a company in order to fulfill some greater societal goal of discouraging patent trolls, especially if it is not a frequent target of patent trolls itself.

Trolls are obviously counting on companies to engage in exactly this type of analysis, which is why they offer certainty at a relative low cost. It encourages companies to pay quickly and avoid both the long-term legal costs and the potential of a large judgment against them. As a purely business decision, it is hard to ignore, even if it is extortionate.

So, what is the solution? Larger companies that are frequent troll targets should seriously consider the approach that Kapersky Labs used (and Quinn encourages) of aggressively litigating these kinds of cases. (Of course, these companies always need to evaluate the merits of the case before deciding whether to litigate.) By raising the costs of doing business and denying the trolls an easy score, trolls will likely begin to avoid suing that company, which is a win for both the company and the legal system.

It is more difficult for smaller companies to adopt this approach, however. These companies likely will need help from the Courts, Congress, and the President to create disincentives to discourage trolls from bringing frivolous lawsuits in the first place. In the end, as long as there is money to be made, the trolls will exist and will find ways around whatever rules are in place.

Some of the approaches being discussed in Congress (see here, here, and here) are a step towards solving this problem, but they are likely not the final answer. Given that the large patent litigation costs are the primary driver that forces companies to settle, mechanisms that reduce these costs or delay them until a patent holder can establish that it has brought a legitimate lawsuit may be part of the answer.

In addition, in the rush to rid the world of trolls, Congress needs to be careful that they don’t tip the balances in traditional, “legitimate” patent infringement lawsuits so as to make it unreasonably difficult for patent owners to enforce their patents against actual infringers. The bottom line is that there do not appear to be any easy answers to this problem.

$1Billion Pittsburgh Verdict Against Marvell Upheld on Post Trial Motions

marvell_chipPosted by Henry M. Sneath, Esq., Chair of the Intellectual Property group at Pittsburgh law firm Picadio Sneath Miller & Norton, P.C.

hsneath@psmn.com or 412-288-4013

Following a December 2012 Patent verdict in favor of CMU against Marvell in the amount of just over $1 Billion, the trial Judge Nora Barry Fischer of the USDC for the Western District of Pa. has denied the post trial motions filed by Marvell. Carnegie Mellon University v. Marvell Technology Group, Ltd., Case No. 09-290 (W.D. Penn. Feb 28, 2013). She has also found that the infringement was willful, but has not determined yet whether to multiply the verdict as an enhanced award.  The lengthy opinion is attached for review. More analysis to come and we will follow what is surely to be an appeal to the CAFC by Marvell. Opinion available only on PACER at the moment but we will search for an independent copy to post.

UPDATE: The full decision of the Court is available here.