An interesting copyright question continues to percolate in the Circuit Courts over what “registration” means as a prerequisite for filing a copyright claim in federal court. The Second Circuit, in The A Star Group, Inc. v. Manitoba Hydro, (No. 14-2738) noted the Circuit split on the issue but declined again to weigh in.
Under 17 U.S.C. § 411(a), a copyright holder must register its work before it can initiate a lawsuit against an infringer:
no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.
The question is what is sufficient to satisfy the “registration” requirement–is the filing of the application sufficient, or does the application need to be accepted and granted by the Copyright Office?
Currently, the Circuit Courts on split on the issue. The Fifth and Ninth Circuits require only that the copyright holder file the application. See, e.g., Apple Barrel Prods., Inc. v. Beard, 730 F.2d 384, 386-87 (5th Cir. 1984); Cosmetic Ideas Inc. v. IAC/InteractiveCorp, 606 F. 3d 612, (9th Cir. 2010). While the Tenth and Eleventh Circuits require that the Copyright Office grant the application. See, e.g., M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486, 1488-89 (11th Cir. 1990) ; La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195, 1202-05 (10th Cir. 2005). The Seventh Circuit appears to have taken conflicting views on this matter. Compare Chicago Bd. of Educ. v. Substance Inc., 354 F.3d 624, 631 (7th Cir. 2003) with Gaiman v. McFarlane,360 F.3d 644, 655 (7th Cir. 2004).
The Second Circuit chose not to wade into this issue and was able to decide the case without having to choose a side. At some point, however, the U.S. Supreme Court will likely need to resolve this dispute as the Circuit split continues. As it stands now, a copyright holder can face very different results depending on where the case is filed, which is not a helpful situation when a national right, such as a copyright, is involved.
This week the United States Supreme Court determined that a jury should decide the issue of whether “tacking” can be used by a trademark holder to assert a priority position.
In Hana Financial, Inc. v. Hana Bank, No. 13-1211 (decided January 21, 2015), Hana Financial sued Hana Bank for trademark infringement. Hana Bank asserted the doctrine of tacking as a defense, claiming that its mark came first. This argument is relevant because under trademark law, rights in a trademark are determined by the date of the mark’s first use in commerce. In other words, the party who uses a mark in commerce first is given priority over other users. The doctrine of tacking arose from courts’ recognition that trademark users ought to be able to modify their marks over time without losing priority (for instance, think of the Aunt Jemima mark: The mark dates to 1893 but Aunt Jemima has changed her appearance over the years. Thanks to the tacking doctrine, the owner of the mark, currently Quaker Oats Company, keeps that 1893 priority date. Fun Fact: The Aunt Jemima mark actually changed trademark law in the United States. (See this article for details.) A trademark holder may use “tacking” when the original and revised trademarks are “legal equivalents” in that they create the same, continuing commercial impression. In short, tacking applies when a consumer considers both marks to be the same despite a modification.
The Supreme Court, in an opinion delivered by Justice Sotomayor, concluded that because the tacking inquiry operates from the perspective of an ordinary purchaser or consumer, a jury should make the determination of whether the modified mark creates the same, continuing commercial impression. Prior to this ruling, there had been a split in the federal circuit courts as to whether tacking was a question for the jury or the court. The Supreme Court has now decided the issue. Note, that the Supreme Court did acknowledge that the issue of tacking could still be decided by a judge on a motion for judgment as a matter of law or on a motion summary judgment under the right set of facts.
So which bank won? Hana Bank. Hana Bank convinced a jury that the doctrine of tacking applied to its mark such that it had priority over Hana Financial. Based on the Supreme Court’s ruling, the jury verdict will stand.
On September 4, 2014, the Third Circuit held that the revised, or “slightly altered standard” for awarding attorneys’ fees to a prevailing party in a patent case, as set forth in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), also applies to cases brought under the Lanham Act. Fair Wind Sailing, Inc. v. Dempster, Nos. 13-3305 & 14-1572, 2014 U.S. App. LEXIS 17118 (Sept. 4, 2014). In Octane Fitness, the Court held that “an ‘exceptional’ case [which merits attorneys’ fees] is simply one that stands out from others with respect to the substantive strength of a party’s litigation position (considering both the governing law and the facts of the case) or the unreasonable manner in which it was litigated.” Consequently, the previous standard in the Third Circuit, which required a finding of culpable behavior before awarding fees, is no longer a prerequisite.
Like § 285 of the Patent Act, Section 35(a) of the Lanham Act (15 U.S.C. § 1117(a)) permits the recovery of reasonable attorneys’ fees only “in exceptional cases.” In fact, the Octane Fitness Court noted that the Lanham Act fee provision is “identical” to § 285 of the Patent Act. The Third Circuit interpreted this as a clear message from the U.S. Supreme Court that it “was defining ‘exceptional’ not just for the fee provision in the Patent Act, but for the fee provision in the Lanham Act as well.”
Based on Octane Fitness and Fair Wind Sailing, a prevailing party under the Lanham Act (either plaintiff or a defendant) in the Third Circuit, must show the following to be awarded attorneys’ fees: (a) an unusual discrepancy in the merits of the positions taken by the parties; or (b) the losing party has litigated the case in an “unreasonable manner.” Whether litigation positions or litigation tactics are “exceptional” enough to warrant attorneys’ fees is to be determined on a case-by-case basis by the district courts based on the totality of the circumstances.
By removing a threshold finding of culpable behavior, the Courts are making it easier to award attorneys’ fees if there is a finding that the litigation was brought or conducted in an abusive manner. Time will tell if Octane Fitness and Fair Wind Sailing have this impact.
In Elf-Man LLC v. Cariveau, No. C13-0507RSL, 2014 U.S. Dist. LEXIS (W.D. Wash., Jan.17, 2014), the U.S. District Court for the Western District of Washington found that a production company’s complaint alleging copyright infringement for the internet downloading of its film, “Elf-Man,” did not state a “plausible” ground for relief when the company’s only evidence of infringement was the use of defendants’ IP addresses.
The production company initially filed an action against 152 Doe defendants for allegedly downloading the film using the BitTorrent application, which identified defendants through their IP address. Following a dismissal of the Doe defendants in the original complaint, plaintiff filed a First Amended Complaint naming eighteen individual defendants. Four of these defendants filed a motion to dismiss arguing that the complaint failed to state a claim that was “plausible” under the Federal Rules.
The court agreed stating that plaintiff provided no factual allegations that supported claims that defendants directly or indirectly stole copyrighted material. Noting that plaintiff alleged only that the defendants purchased internet access and failed to ensure that others did not use that access to download copyrighted material, the Court addressed the claims of direct, contributory, and indirect infringement in turn. Regarding the direct and indirect infringement allegations, the court reasoned that the mere identification of defendants’ IP address “tells us very little about who actually downloaded Elf-Man using that IP address.” Citing various other possibilities, including another family member, guest, or freeloader who could have engaged in the infringing activity, the Court found that plaintiff alleged facts that were merely possible. In the eyes of the court, it was also possible that defendants simply failed to secure their connection against third-party interlopers. The conclusory allegations of the complaint therefore failed to give rise to a plausible inference.
Regarding the indirect infringement claim, the Court again found that plaintiff’s complaint was conclusory and failed to provide facts that would support a finding that defendants intentionally encouraged or promoted the infringement. Plaintiff argued that defendants should be held liable for contributory infringement “because they failed to take affirmative steps to prevent unauthorized use of their internet access….” The Court, while agreeing with plaintiff that courts continue to analyze contributory liability claims and that not all issues had been litigated, held that courts have fixed the requirement that defendant’s contribution to the infringement be intentional. Absent this essential element of the claim, defendants’ motion to dismiss was granted.
The decision arguably adds to the already difficult burden of copyright holders to protect their works from online infringement but also demonstrates the balancing act of courts which require proof that a particular individual behind the IP address actually pirated the copyrighted work.
In an opinion issued yesterday, the Ninth Circuit confirmed, in Inhale, Inc. v. Starbuzz Tobacco, Inc. (Case No. 12-56331), that when a useful article has distinctive, artist features, those features are not copyrightable if they are not separable from the utilitarian aspects of the article.
Inhale registered with the Copyright Office its design for a uniquely shaped hookah (a device used for smoking tobacco). Starbuzz sold identically shaped hookahs (shown in the picture to the right and as alleged in the complaint). Inhale then sued Starbuzz for copyright infringement. The District Court granted summary judgment in favor of Starbuzz, holding that the shape of a hookah is not copyrightable.
The Ninth Circuit Affirms
Designs of a useful article are copyrightable “only if, and only to the extent that, [it] incorporates . . . sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the” article. 17 U.S.C. § 101. The parties agreed that the hookahs were useful articles, so the question was whether the design was physically or conceptually separable from its utilitarian aspect. Inhale argued conceptual separability.
The Ninth Circuit first considered whether separability was a question of law or fact. It concluded under its precedent that it was a mixed question, and, therefore, it could decide the issue de novo.
Inhale argued that the distinctiveness of the shape of the hookah made its conceptually separable from its utilitarian aspects. The Ninth Circuit acknowledged that the law is muddled with respect to how courts should determine the separability of the artistic and utilitarian aspects of a useful article, so it deferred to the Copyright Office’s interpretations of the relevant standards.
The Copyright Office has determined that the distinctiveness of an article’s shape does not affect its separability. The Ninth Circuit found its reasoning persuasive and adopted it—“[t]he shape of a container is not independent of the container’s utilitarian function—to hold the contents within its shape—because the shape accomplishes the function.”
Therefore, the Ninth Circuit affirmed the District Court’s grant of summary judgment because it correctly concluded that the shape was not copyrightable.
Do you work in an office that receives a single copy of a trade publication, which is passed around the office for multiple people to read? Be careful because such use may constitute copyright infringement—at least that is what one publisher argues.
In Energy Intelligence Group, Inc. v. The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC (“USW”), Civ. Action. No. 11-00428, 2013 U.S. Dist. LEXIS 123080 (W.D. Pa. Aug. 29, 2013) (Judge Conti), Energy Intelligence Group, Inc. and Energy Intelligence Group (UK) Limited (collectively “EIG”) filed suit to seek damages from Defendant USW for sharing its single subscription to the “Oil Daily” with multiple USW employees. USW, located in Pittsburgh, Pennsylvania, is a labor organization, which provides collective bargaining services to its union members. USW subscribed to the Oil Daily, beginning in 1992. From 1992 to 1999, the Oil Daily was sent in paper copy. Starting in 1999, EIG began sending the Oil Daily in electronic form. USW subscribed to the Oil Daily through a subscription agent, EBSCO Information Services (“EBSCO”).
EIG’s suit involves 2,880 issues of the Oil Daily, which were published from December 1999 to March 2011. EIG owns valid U.S. copyright registrations for each of these publications and provides copyright notices on its website, articles, emails and publications, including on the Oil Daily itself. In February 2006, EIG sent a letter to all subscribers informing them that single-user subscriptions were not to be shared by multiple readers. This letter was not sent directly to USW but was sent to EBSCO. However, the court determined that EBSCO was USW’s agent and this constituted notice to USW, as well as EBSCO.
Mary Dimoff, USW’s librarian, was the sole subscriber to the Oil Daily. When she received the Oil Daily in hard copy, she maintained a list of USW recipients to receive the Oil Daily, and she routed the paper to these individuals over the course of three to four days. When Ms. Dimoff started receiving the Oil Daily in electronic form, she forwarded it to the recipients via email. Through various communications with EIG and EBSCO, Ms. Dimoff revealed to EIG that she was sharing her subscription, and EIG filed suit.
USW conceded that it copied and distributed the 2,880 issues of the Oil Daily. However, USW asserted that it was permitted to do so based upon several different defenses including, implied license, equitable estoppel, fair use, and laches. USW also argued that damages should be limited to the three-year period prior to the filing of the complaint. The parties filed cross motions for summary judgment on the defenses and the damages issues.
The court held that factual issues precluded the entry of summary judgment on all but one issue which was the equitable estoppel defense. The court concluded that it would be impossible for USW to prove that the equitable estoppel defense applied because it could not prove all four factors necessary to establish such a defense: (1) the plaintiff had actual or constructive knowledge of the defendant’s infringing conduct; (2) the plaintiff intended or expected that defendants would act on the plaintiff’s misrepresentations or concealments; (3) the defendant was ignorant of the true facts; and (4) the defendant relied on the plaintiff’s conduct to its injury.
The court found that USW had sufficient evidence to prove that EIG had at least constructive knowledge of the infringing conduct for approximately three years before filing suit and thus, met the first factor. However, USW could not prove the last three factors. As for the second factor, the court determined that EIG did not misrepresent or conceal its intent to assert its copyrights because it affixed its copyright notice on every edition of the Oil Daily. With respect to the third factor, the court rejected USW’s argument that it acted innocently because it had the notice of the copyright on the Oil Daily and because USW never followed up with EBSCO or with EIG to confirm if its actions were permissible. Finally, the court held that USW could not show that it relied on EIG’s conduct to its detriment because EIG provided the copyright notice directly on the Oil Daily and sent its terms and conditions to EBSCO. Therefore, EIG made no misrepresentations and did not conceal its copyrights.
The Energy Intelligence Group case is an interesting copyright case. For more details on the other defenses and the factual issues raised, you can read the entire case here.
Magistrate Judge Jeffrey J. Keyes from the U.S. District Court for the District of Minnesota issued an important report and recommendation affirming the ability of patent attorneys to use copyrighted articles during patent prosecution (e.g., to submit them to the USPTO to fulfill disclosure requirements) as fair use.
In American Institute of Physics, et al. v. Schwegman Lundberg & Woessner, P.A. (No. 12-cv-00528), various publishers sued a law firm that had copied their copyrighted scientific articles in order to assess whether the articles were prior art and, if they were, sent copies to the USPTO to fulfill its obligation to disclose prior art. The publishers originally argued that any use by the law firm of these articles without payment constituted copyright infringement. However, they dropped their claims as to the firm’s (1) making copies to be sent to the USPTO, (2) sending copies to the USPTO, and (3) retaining one copy for its files. They continued their infringement claims as to the downloading of the articles, making other copies that existed in the firm’s files, and distributing the copies to its clients or others in the firm. The law firm argued that none of these actions infringed because of the fair use exception.
THE COURT’S DECISION
In assessing the applicability of the fair use defense, a court must consider (1) the purpose and character of the accused infringer’s use, (2) the nature of the copyrighted work, (3) the amount of used, and (4) the effect of the copying on the relevant market.
The Court determined that the nature and purpose of the firm’s use was different from that of the publishers. The publishers publish the works for the betterment of science and to allow other scientists to test and validate the authors’ findings. In contrast, the firm used the articles to satisfy a legal requirement of disclosure to assist the USPTO in determining whether an invention was new and novel. The Court further found that the intended audience for the two parties was different and did not overlap. The publishers’ audience was scientists, students, libraries, etc., whereas the firm’s audience was the USPTO and lawyers in the firm.
The Court also considered the nature of the articles to slightly favor the law firm. Because the articles were primarily factual and informational in nature, they fell a bit further from the creative types of expression more strongly protected by copyright law.
The Court looked at the amount of use and also concluded that, despite the copying of the entire article, this factor also favored the law firm. In order to satisfy its obligation of disclosure, the firm had to use the entire article. Thus, its entire use was consistent with its allowed purpose.
Finally, the Court looked to whether there were any other factors that might favor either party. It concluded that the law firm’s use was consistent with the overriding Constitutional basis for both the patent and copyright laws, which is to promote the progress of the science and useful arts. Such copying ultimately furthered this objective and the public good by assisting the USPTO in weeding out improper patents.
Ultimately, in weighing all of the factors, the Court concluded that the law firm’s use of the copyrighted articles was fair use and not copyright infringement.
On March 15, 2013, the Federal Circuit issued an order in Lighting Ballast Control LLC v. Philips Electronics North America Corp, Case No. 2012-1014, -1015, stating that an en banc panel of the Court will consider whether and to what extent it should afford any deference to a district court’s patent claim construction. The Federal Circuit is determining whether it will overrule its prior decision in Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998).
The Supreme Court, in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), determined that claim construction is a matter of law exclusively for the courts, and is not a factual matter for juries (although it did recognize that claim construction is somewhat of a “mongrel,” having aspects that are both legal and factual). In Cybor, the Federal Circuit considered what the implication of that finding would be on how it, as an appellate court, would review a trial court’s construction of the claims in a patent. It concluded that because claim construction is a matter of law, it would review a district court’s construction of the terms in a patent de novo, meaning without any deference to the lower court’s conclusion. This has been the state of the law for some time now.
The implications of the Cybor decision are significant to patent holders and those accused of infringement. As a practical matter, parties to a lawsuit have come to view a district court’s claim construction as a somewhat intermediate position. After all, if the Federal Circuit will give no deference to the district court’s conclusions, there is a significant possibility that those conclusions could be reversed on appeal. Fair or not, the perception of the Federal Circuit among some practitioners is that a trial court’s claim construction only has a 50/50 chance of being affirmed on appeal. (For some interesting studies of Federal Circuit reversal rates, seehere, here, and here). Many have complained that this uncertainty discourages settlement, because the “losing” side on the claim construction issue often feels that it will be “vindicated” on appeal.
On the other hand, by having the Federal Circuit have the “final say” on claim construction, it promotes more consistency and, hopefully, better results, as the Federal Circuit is often far more familiar with claim construction issues than many district courts and they (and their clerks) are often better versed in the technologies described in these patents.
Patent holders are also fearful that if claim construction is not reviewed de novo, an unfavorable claim construction by a district court may be very difficult to overcome and could affect how a particular term is construed in other patents held by the patentee. If the Federal Circuit has the final say, a patentee has more options. For instance, it can appeal to the Federal Circuit a get a fresh look at the issue, or it can settle the case with a realistic hope that the Federal Circuit in a later case would not be particularly beholden to how a district court in a previous case construed a claim term.
Thus, this case will be particularly important for parties in patent litigation. It will be very interesting to listen to the oral argument in the Lighting Ballast case and see what the Federal Circuit ultimately decides. This may, in the end, be another issue that the Supreme Court will decide to weigh in on.
Today – The US Supreme Court in Gunn v. Minton decided that a patent legal malpractice case is properly brought in state court. The court held that even though the “case within a case” standard would require interpretation of a patent and other typically Federal Issues, that “case within a case” is a hypothetical case, that does not need to be in Federal Court. Further the court wrote:
“Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical “case with a case,” it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.
Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law. … Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit. … In resolving the non-hypothetical patent questions those cases present, the federal courts are of course not bound by state court case-within-a-case patent rulings. … In any event, the state court case-within-a-case inquiry asks what would have happened in the prior federal proceeding if a particular argument had been made. In answering that question, state courts can be expected to hew closely to the pertinent federal precedents. It is those precedents, after all, that would have applied had the argument been made.”
We previously reported on this case and will follow for any interesting cases which actually try one of these malpractice cases in state court. Here is the opinion delivered by Chief Justice Roberts: http://tinyurl.com/a474okm
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