Judgment Day: Supreme Court Grants Petitions on Constitutionality of Administrative Patent Judges in Arthrex, Inc. v. Smith & Nephew, Inc.

by Matt Digan

On October 13, 2020, the Supreme Court granted three petitions for writs of certiorari related to a Federal Circuit decision in the 2019 case Arthrex, Inc. v. Smith & Nephew, Inc.[1] On the surface, the case involves questions of administrative and constitutional law, but the outcome of the case could have significant impact on the world of patents.

The Supreme Court’s grant was for two specific issues:

(1) whether, for purposes of the Constitution’s appointments clause, administrative patent judges (APJs) of the U.S. Patent and Trademark Office (USPTO) and Patent Trial and Appeal Board (PTAB) are principal officers who must be appointed by the President with the Senate’s advice and consent, or inferior officers whose appointment Congress has permissibly vested in a department head; and

(2) whether, if APJs are principal officers, the court of appeals properly cured any appointments clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. § 7513(s) to those judges.[2]

The controversial 2019 decision by the Federal Circuit concluded that APJs are principal officers who must be appointed by the President, with the advice and consent of the Senate, under the Appointments Clause of the Constitution.[3] In analyzing the question of whether APJs were principal or inferior officers, the Federal Circuit ultimately assessed three factors: how the work of APJs was reviewed, how APJs were otherwise supervised, and how APJs could be removed from office.[4] Generally speaking, the more control, review, and direction over the work and role of a given officer that can be demonstrated, the more likely that officer will be found to be an inferior officer. The Federal Circuit determined that the first and third factors weighed in favor of categorizing APJs as principal officers, whereas the second factor pointed towards categorizing them as inferior officers. Thus, on balance, the Federal Circuit concluded APJs were principal officers and that the then-current statutory scheme of the Secretary of Commerce appointing APJs to the PTAB was unconstitutional.[5]

As a remedy for the finding, the Federal Circuit vacated the PTAB’s underlying Arthrex decision, remanded for a new hearing, directed designation of a new panel of APJs to hear the PTAB proceeding, and severed the portion of the Leahy-Smith America Invents Act (AIA) that provided removal protections to APJs.[6] By severing that portion, the Federal Circuit held that APJs were now inferior officers and could continue performing their role without violating the Appointments Clause.[7] In addition to the underlying Arthrex decision, the Federal Circuit vacated more than 100 other PTAB decisions that predated the Arthrex decision and in which the Appointments Clause challenge was properly preserved.[8]

Both parties in Arthrex petitioned for an en banc rehearing by the Federal Circuit, but the petition was denied on March 23, 2020.[9] In response, the chief APJ issued an order on May 1, 2020 holding all impacted cases to be held in administrative abeyance until the Supreme Court either granted or denied certiorari on Arthrex.[10]

The Supreme Court could ultimately decide that the statutory framework for appointing APJs prior to the Federal Circuit’s Arthrex decision was constitutional or that the Federal Circuit’s remedy for an unconstitutional framework is sufficient, either of which would result in a narrow decision. However, the Supreme Court could find that APJs are not constitutionally appointed and that the Federal Circuit’s solution is insufficient to cure the problem(s), resulting in a far wider-reaching decision that could potentially reap chaos on the patent world. Though the full extent of such a possibility is not well defined given the amount of uncertainty that pervades, short of Congressional intervention in that scenario, such a decision could open a “floodgate of challenges” to the constitutionality of any of thedecisions by the PTAB dating back to its creation.[11] A date has not been set for oral arguments before the Court, but this case stands to be an important one to watch for patent owners, patent challengers, and the broader world of patents.


[1] Amy Howe, Supreme Court will consider constitutional status of administrative patent judges, SCOTUS Blog (Oct. 13, 2020), https://www.scotusblog.com/2020/10/supreme-court-will-consider-constitutional-status-of-administrative-patent-judges/.

[2] Arthrex Inc. v. Smith & Nephew Inc., SCOTUS Blog (last visited Oct. 20, 2020), https://www.scotusblog.com/case-files/cases/arthrex-inc-v-smith-nephew-inc-2/.

[3] Daniel N. Yannuzzi, Supreme Court Deciding Constitutionality of PTAB Judge Appointments, The National Law Review (Oct. 14, 2020), https://www.natlawreview.com/article/supreme-court-deciding-constitutionality-ptab-judge-appointments.

[4] Dion Bregman, Maria Doukas, & Vishal Parikh, Supreme Court Will Review Arthrex Cases Regarding Whether PTAB Judges Are Constitutional, JD Supra (Oct. 19, 2020), https://www.jdsupra.com/legalnews/supreme-court-will-review-arthrex-cases-21001/.

[5] Yannuzzi, Supreme Court Deciding Constitutionality of PTAB Judge Appointments, https://www.natlawreview.com/article/supreme-court-deciding-constitutionality-ptab-judge-appointments.

[6] Id.

[7] Dion Bregman et al., Supreme Court Will Review Arthrex Cases Regarding Whether PTAB Judges Are Constitutional, https://www.jdsupra.com/legalnews/supreme-court-will-review-arthrex-cases-21001/.

[8] Id.

[9] Id.

[10] Id.

[11] Yannuzzi, Supreme Court Deciding Constitutionality of PTAB Judge Appointments, https://www.natlawreview.com/article/supreme-court-deciding-constitutionality-ptab-judge-appointments.

The Copyright Showdown Between Google and Oracle Finally Reaches the Supreme Court

by Matt Digan

On October 7, 2020, Google and Oracle finally had their day at the Supreme Court after a decade-long legal battle between the two tech giants. The issues before the eight-justice Supreme Court were:

(1) whether copyright protection extended to a software interface; and

(2) whether, as a jury found, the petitioner’s (Google) use of a software interface in the context of creating a new computer program constituted fair use.[1]

To understand how the companies found themselves arguing before the highest court in the land, it is useful to review the history of these legal proceedings.

How We Got Here

Oracle’s copyright infringement allegations stem from Google’s decision in the mid-2000s to re-implement the Java programming language for use in its then-upcoming Android platform rather than create a new programming language from scratch.[2]The decision was practical; Java was already widely known and used, so re-implementing it would allow “thousands of existing Java programmers to become Android developers without having to learn a new language.”[3]However, the re-implementation used the same names, organization, and functionality as some of Java’s application programming interfaces (APIs). An API is a collection of well-defined interactions in software programming that allow programmers to “build without having to reinvent the wheel.”[4]

In a lawsuit filed in 2010 in the Northern District of California, Oracle alleged copyright infringement against Google for copying 37 Java APIs, or about 11,500 lines of code out of Android’s estimated 12 million lines of code.[5] Two separate legal points were at issue: (1), whether the APIs were copyrightable; and (2), whether Google’s use was a fair use. The judge in the case ruled as a matter of law that APIs were not covered by copyright. He noted that, “when there is only one way to write something, the merger doctrine bars anyone from claiming exclusive copyright ownership of that expression. Therefore, there can be no copyright violation in using the identical declarations.”[6]The jury hung on the question of fair use.

Oracle then appealed the decision to the Federal Circuit, which in 2014 reversed the district court’s finding and held that Java APIs were copyrightable, but left open the possibility of a fair use defense for Google.[7] The case then returned to the district court for a trial on Google’s fair use defense, and in 2016 a jury unanimously agreed that Google’s use of the Java APIs was fair use. Oracle then filed another appeal, and in 2018 the Federal Circuit rejected the jury’s verdict and ruled that Google’s use was not fair use as a matter of law.[8] In January 2019, Google filed another petition asking the Supreme Court to review both of the Federal Circuit decisions, and in November 2019 the Court granted Google’s petition.[9]

Oral Arguments

One of Google’s primary goals in oral arguments was to demonstrate to the justices that there was something different about APIs as opposed to other computer code and that that difference was of legal significance. However, court observers noted that at least four justices—Alito, Gorsuch, Kavanaugh, and Thomas—expressed skepticism at Google’s position that APIs could not be copyrighted.[10] Those justices seemed far more amenable to Oracle’s position that APIs are no different than any other computer code, and therefore subject to copyright.

It is important to note here that for decades, it had been assumed in the industry that APIs were not subject to copyright.[11] It was taken for granted that competing companies could make use of each other’s software in order to enable products to work with each other and to propel the industry forward. For example, Oracle’s MySQL language was created as an iteration of IBM’s SQL and Oracle re-implemented Amazon’s S3 API for cloud services so customers who built software for Amazon’s cloud platform could easily switch to Oracle’s rival cloud platform.[12] A finding for Oracle could upend this foundational assumption that has existed at the core of the industry and supported its growth and development.

Justice Sotomayor noted that prevailing belief within the industry and that it did not seem sensible to upend it now. Oracle disputed the justice’s statement, noting that there has never been a case that has explicitly stated a difference between code that is copyrightable and code that is not.[13]

There was also the issue of whether or not Google’s use of the API was fair use. This issue could end up being resolved on procedural grounds, rather than an adjudication of whether Google’s use actually constituted fair use. Traditionally, factual questions are supposed to be decided by juries, not judges. Google argued that an evaluation of fair use is sufficiently fact-intensive and that the Federal Circuit should not have overturned the jury’s verdict. Several justices seemed open to this line of argument.[14]

Additionally, over 50 amici briefs have been filed in the case. Such industry giants as Microsoft, IBM, and Mozilla support Google, while Oracle has the amici support of the U.S. government, several former industry executives, and a broad range of copyright owner associations and professors of law, among others.[15]

What to Expect

If all four of those justices who expressed skepticism at Google’s argument that APIs were not copyrightable voted for Oracle, the best Google could hope for is a tie. A tie would still technically be a loss for Google as it would leave in place Oracle’s win at the appellate level, but it would not set a national precedent that APIs are copyrightable. If five or more justices side with Oracle on the issue of API copyrightability, then the country has a new precedent that could cause seismic shifts in how the industry operates.

Another possible outcome could be a narrow procedural win for Google on the issue of the Federal Circuit throwing out the jury’s finding of fair use. Such a ruling would permit the Court to skirt around the issue of API copyrightability entirely, kicking the case back down for further litigation. It remains to be seen whether the Court will rule on both issues or just one, for Oracle or for Google, but the software industry and copyright scholars alike await the Court’s decision with bated breath.


[1]Google LLC v. Oracle America Inc., SCOTUSblog (last visited Oct. 16, 2020), https://www.scotusblog.com/case-files/cases/google-llc-v-oracle-america-inc/.

[2] Timothy B. Lee, Google’s Supreme Court faceoff with Oracle was a disaster for Google, Ars Technica (Oct. 8, 2020), https://arstechnica.com/tech-policy/2020/10/googles-supreme-court-faceoff-with-oracle-was-a-disaster-for-google/.

[3] Id.

[4] Sarah Jeong, The Supreme Court is taking on Google and Oracle one last time, The Verge (Oct. 6, 2020), https://www.theverge.com/2020/10/6/21504715/google-v-oracle-supreme-court-hearings-android-java.

[5] Id.

[6] Oracle America, Inc. v. Google Inc., 872 F.Supp.2d 974, 998 (N.D. Cal. 2012).

[7] Oracle v. Google, Electronic Frontier Foundation (last visited Oct. 16, 2020), https://www.eff.org/cases/oracle-v-google.

[8] Id.

[9] Id.

[10] Lee, Google’s Supreme Court faceoff with Oracle was a disaster for Google, https://arstechnica.com/tech-policy/2020/10/googles-supreme-court-faceoff-with-oracle-was-a-disaster-for-google/.

[11] Jeong, The Supreme Court is taking on Google and Oracle one last time, https://www.theverge.com/2020/10/6/21504715/google-v-oracle-supreme-court-hearings-android-java.

[12] Id.; Charles Duan, Oracle copied Amazon’s API—was that copyright infringement?, Ars Technica (Jan. 1, 2020), https://arstechnica.com/tech-policy/2020/01/oracle-copied-amazons-api-was-that-copyright-infringement/.

[13] Lee, Google’s Supreme Court faceoff with Oracle was a disaster for Google, https://arstechnica.com/tech-policy/2020/10/googles-supreme-court-faceoff-with-oracle-was-a-disaster-for-google/.

[14] Id.

[15] Jacob Baldinger, What’s at stake in the copyright dispute between Google and Oracle?, Subscript Law (Mar. 26, 2020), https://www.subscriptlaw.com/blog/amicus-positions-google-v-oracle.

U.S. Supreme Court to Review Robocalls

David Ward

You get a call from a number you don’t recognize. We all know the feeling: “should I even answer this? It’s probably just a robocall.” It may come as a surprise to many that, despite the number of robocalls we get, the 1991 Telephone Consumer Protection Act (TCPA) actually prohibits the use of “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers.”1 Devices that meet this definition are called Automatic Telephone Dialing Systems (ATDS). Not surprisingly, the language of this has become trickier to navigate in recent years as our technology and devices evolve, resulting in circuit splits.

Circuit Splits

In 2018, the D.C. Circuit set aside a 2015 Federal Communications Commission (FCC) ruling that defined “capacity” as any device that could be transformed into an ATDS by downloading an application.2 Had the ruling been allowed to stand, it could have technically subjected ordinary smartphone users to a violation of federal law when inviting someone to a party after getting their number from a friend. Since then, courts have been split on what constitutes an ADTS.

The Ninth3 and Second4 Circuits have adopted a broad definition of an ADTS, finding any device that can store numbers to be called and then dial them automatically suffices. In other words, this broad definition includes devices that can either store numbers and automatically dial them or produce numbers from a random or sequential number generator.

Conversely, the Eleventh5, Seventh6, and Third Circuits7 have all adopted a narrow definition. The narrow definition states that a device must have the capacity to store numbers and dial them using a random or sequential generator, as well as be capable of producing numbers to be called using a random or sequential number generator.

Resolving the Split

In 2014, Noah Duguid, who is not a Facebook user, began getting sporadic text messages from Facebook claiming that his account was accessed at various times. After replying “off” to turn off messaging, and receiving a text saying he would no longer receive messages, he continued to receive the messages.8 After emailing to resolve the issue, and only receiving automated responses, Duguid sued Facebook for violating the TCPA. He alleged that the text messages were sent using an ATDS, because Facebook created a security feature that stored phone numbers and automatically sent texts when the associated account number was accessed.9

The 9th Circuit, using its broad definition of an ADTS, reversed and remanded the lower court’s dismissal of the complaint, and Facebook petitioned the U.S. Supreme Court for a writ of certiorari.10 On July 9, 2020, the U.S. Supreme Court granted a writ of certiorari to review the question of “[w]hether the definition of ATDS in the TCPA encompasses any device that can ‘store’ and ‘automatically dial’ telephone numbers, even if the device does not ‘us[e] a random or sequential number generator.’”11 The resulting decision will resolve the current stark contrast in the Circuit.

While We Wait

While we will have to wait for the October 2020 Supreme Court term to have the split resolved, the 6th Circuit is set to chime in on the matter soon.12 The 6th Circuit has previously encountered a case involving an ADTS, but merely affirmed the Eastern District of Michigan’s granting of summary judgment using a narrow definition without substantive analysis.13 Given the narrow, albeit brief, 6th Circuit interpretation requiring a random or sequential generator14, it seems likely that the 6th Circuit will join the Eleventh, Seventh, and Third Circuits in adopting a narrow interpretation of an ADTS. However, any interpretation that the 6th Circuit may or may not adopt could be short lived once the Supreme Court finally resolves the Circuit split in its upcoming October 2020 term.


[1] 47 U.S.C. § 227(a)(1).
[2] ACA Int’l v. Fed. Commc’ns Comm’n, 885 F.3d 687, 696-98 (D.C. Cir. 2018).
[3] See Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1052-53 (9th Cir. 2018).
[4] See Duran v. La Boom Disco, Inc., 955 F.3d 279, 283-84 (2d Cir. 2020).
[5] See Glasser v. Hilton Grand Vacations Co., LLC, 948 F.3d 1301, 1310 (11th Cir. 2020).
[6] See Gadelhak v. AT&T Servs., Inc., 950 F.3d 458, 464, 469 (7th Cir. 2020).
[7] See Dominguez v. Yahoo, Inc., 894 F.3d 116, 119-21 (3d Cir. 2018).
[8] Id. at 1150.
[10] See id. at 1157; Facebook, Inc. v. Duguid, 2019 WL 5390116 (U.S.).
[11] Facebook, Inc. v. Duguid, 2019 WL 5390116 (U.S.), ii; see Facebook, Inc. v. Duguid, No. 19-511, 2020 WL 3865252 (U.S. July 9, 2020).
[12] See Allan v. Pennsylvania Higher Educ. Assistance Agency, 398 F. Supp. 3d 240 (W.D. Mich. 2019).
[13] See Gary v. TrueBlue, Inc., 786 F. App’x 555 (6th Cir. 2019).
[14] See id. at 557.

Star Athletica v. Varsity Brands – Supreme Court Ruling’s Impact

By Michael Small

 

In a recent Supreme Court case regarding the compatibility between clothes and copyright, Star Athletica v. Varsity Brands, the justices ruled in favor of Varsity Brands in a 6-2 decision, holding that the Defendant’s cheerleading uniform designs are protectable under copyright because they were deemed conceptually separable[1] from the uniform.  This decision answered the question brought to them by Star Athletica’s petition,[2] to which they state the following regarding the compatibility of copyright on clothes using the conceptual separability test:

A feature incorporated into the design of a useful article is eligible for copyright protection only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article, and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.[3]

When placed into the context of the cheerleading uniforms, the justices noted that the surface decoration of the cheerleading uniforms are separable and when alone, allows them to appear as a pictorial, graphic, or sculptural work.  When the separated decorations are applied to any other medium, they would be considered a two-dimensional work of art.  Therefore, Varsity’s designs on their cheerleader uniform are protectable under copyright.

The initial case began in 2015 when Varsity Brands sued Star Athletica under copyright infringement of their cheerleader uniform designs, which are registered in the Copyright Office from the drawings and photographs taken of the outfits.  The district court ruled in favor of Star Athletica, agreeing with their argument that copyright could not be applied to the utilitarian nature of the uniform, regardless of how unique the patterns are on the uniform.  Varsity Brands successfully filed for appeal in the Sixth Circuit and the lower court’s decision was reversed.  The Sixth Circuit ruled in favor of Varsity Brands, holding that the design patterns are copyrightable as the photography made the designs into “pictorial, graphic, or sculptural works,”[4] which is protectable under the Copyright Act.  Star filed for a writ of certiorari in 2016, arguing that the Sixth Circuit’s decision “allows roundabout copyrighting of garment designs masquerading as separable decorative features, preventing competition and inviting new copyright claims for all manner of garments … based solely on the arrangement of stripes and color blocks.”[5]  Ultimately Star Athletica’s argument aimed to dismiss Varsity Brand’s copyright hold on their outfits.  The writ was approved and the case ascended to the U.S. Supreme Court.  The final decision was made in March 2017, in which the U.S. Supreme Court ruled in favor of Varsity Brands, thus concluding the issue.

Prior to the U.S. Supreme Court’s ruling, clothing design is not protectable by copyright law because clothes serve a utilitarian purpose and are identified as useful articles;[6] they keep the customer warm, covered, and protected from the elements.  The functionality of clothing outweighed the creative intent of any design added to the garment, and are therefore not applicable for copyright.  This is the same reason why most clothes cannot be protected by utility patents, although design patents and trademarks may apply on a case-by-case basis (e.g., purses and shoes, large logo T-shirts).  This lack of intellectual property (IP) protection meant that new, creative designs for clothes released in businesses such as the fashion industry, are prone to receiving knockoff versions being sold afterwards, often flooding the market with multiple copies of similar, but lower quality goods.  These knockoffs enter the market after or even before the original design is ready for sale, stealing profits from the original designer.

The U.S. Supreme Court’s ruling on this case will likely have a major impact on the fashion industry.  Fashion designers have been given a tool supported by the U.S. Supreme Court that can be used to argue that the conceptual nature of a design in their product can be protected under copyright by using the conceptual separability test.  This logic can give fashion designers an incentive to clamp down on the copycat/knockoff industry that manifested in the fashion industry due to being a copyright-free environment.  This would make it more difficult for copycat/knockoff designers to make and sell products in a market where copyright is enforced, thus returning profits to the original designers.  Although there is no bill that guarantees protection of clothing design, the conceptual separability test approved by the U.S. Supreme Court could be used to help grant designers the copyright protection they want for their works.  If the design concept can be separated from the clothing design and appear as a two-dimensional work, a copyright can be applied to a clothing design.

While the ruling may provide copyright benefits for the fashion industry, not all are in support of the potential impact.  Up until this ruling, the fashion industry maintained itself somewhat efficiently without the protection required from copyright.  In fact, there are arguments that support the lack thereof for copyright, stating that such an implementation would damage innovation for designers.  Previous attempts to make fashion design copyrightable through legislative bills such as the Innovative Design Protection Act (2012) and the Design Piracy Prohibition Act (2007) have been met with opposition from independent fashion designers and businesses alike, making them fail to pass in Congress.  Some argue that it would be impossible to make an original design from scratch because designers learn and become influenced from other creations.  Therefore, copying is essential in fashion design to promote innovation and new takes on fashion under Raustiala and Sprigman’s Piracy Paradox argument.[7]  Others are more concerned that designers would focus more on the risk of copyright litigation rather than making interesting designs, reducing innovation and creativity in the fashion design industry.  In addition, legal costs for fashion designers can rise should they consult with a lawyer regarding fashion design and copyright, which could indirectly lead to a rise in prices of clothes and designs for the consumer overall.  Finally, enforcement of copyright protection may not be a viable option due to the fast-paced nature of fashion design, where the ‘next big thing’ is only from months to less than a year away, as opposed to the length and complexity of filing a copyright litigation and going to court.  With an industry that has adapted to having limited IP protection since the Copyright Act’s implementation, arguments against copyright in the fashion industry center around the problem that its incorporation could severely damage the industry’s economic and creative value now and in the future.

Despite the opposition against implementing copyright into the fashion industry, the U.S. government has shown interest in the past to make such an introduction.  It could be argued that the Star Athletica v. Varsity Brands U.S. Supreme Court ruling is a representation of this interest, giving designers a tool to use should they feel that their design is being infringed.  The effort to include fashion design for copyright protection would also strengthen the U.S.’s global market to attract foreign direct investment, as several countries in Europe have their own copyright laws for fashion design, such as France and Germany.  This is further reinforced by the presence of the European Union (EU), which grants 25 years of design copyright protection for all its 28 member states.  The protection granted by the EU makes it viable for fashion design companies concerned about copycat/knockoff designs to doing business overseas in the EU’s member states than in the U.S.  The outcome of Star Athletica v. Varsity Brands could garner interest from politicians and businesses to try and compile another bill to include fashion as copyrightable, allowing the U.S. to garner interest in some fashion designers that were wary of the previous copyright-free area of clothing design.  At the same time, however, companies that relied on the copyright free environment for designing outfits, such as certain sports teams or other artists, would have to put resources into redesigning the product so that their goods do not infringe on the original copyright.  An introduction of a bill that would enforce an immediate change without a smooth transition could have a drastic effect on the fashion design industry, for better or worse.  The impact of the Star Athletica v. Varsity Brands ruling has yet to be fully measured as the decision was just made and there are not many cases that have tested the U.S. Supreme Court’s conceptual separability test.   It is very likely that a rise of copyright litigations will occur that will test the extent of the copyright protection granted to clothes by the conceptual separability test from both individual fashion designers and businesses.  Once its protection range has been analyzed, it will become easier to analyze the aftermath of the Star Athletica v. Varsity Brands ruling.

[1] “In its statutory form, the separability inquiry asks whether the aesthetic features of a useful article can be identified separately from, and can exist independently.”  See Barton Keyes, Alive and Well: The (Still) Ongoing Debate Surrounding Conceptual Separability in American Copyright Law, Ohio State Law Journal, 69 (109), (2012), http://moritzlaw.osu.edu/students/groups/oslj/files/2012/04/69.1.keyes_.pdf.

[2] “What is the appropriate test to determine when a feature of the design of a useful article is protectable under § 101 of the Copyright Act?”  See Star Athletica, L.L.C., v. Varsity Brands, Inc., Varsity Spirit Corporation, and Varsity Spirit Fashions & Supplies, Inc., On Petition for a Writ of Certiorari to the United States Court of Appeals for the Sixth Circuit, (2016).

[3] See Star Athletica, L.L.C. v. Varsity Brands, Inc., et al., 580 (U. S. Supreme Court, 2017), https://www.supremecourt.gov/opinions/16pdf/15-866_0971.pdf.

[4] See Varsity Brands, Inc. v. Star Athletica, LLC, 799 F.3d 468, 471 (6th Cir. 2015).

[5] See Petition for a Writ of Certiorari at 31, Star Athletica, LLC v. Varsity Brands, Inc. (Jan. 5, 2016) (No. 15-866), http://www.scotusblog.com/wp-content/uploads/2016/05/SACP.pdf.

[6] “A ‘useful article’ is an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information. An article that is normally a part of a useful article is considered a ‘useful article’.”  See 17 U.S.C. § 101.

[7] The Piracy Paradox argument revolves around the idea that the nonstop changing trends of fashion in the fashion industry is made aware of by the consumer, such as not wearing what everyone else is wearing, or the constant demand for new products even after acquiring new products.  This awareness makes copying a viable option that helps drive faster innovation in design, sales, and competition more than enforcing copyright or other forms of IP protection. See Kal Raustiala and Christopher Sprigman, The Piracy Paradox: Innovation and Intellectual Property in Fashion Design., Virginia Law Review, 92, (Nov. 13 2006), p. 1687-1777.

Summary on the Supreme Court’s Recent Kirtsaeng Decision

By Samantha Leiner

The Supreme Court released its decision regarding the case Kirtsaeng v. John Wiley & Sons, Inc., 579 U. S. ____ (2016, in June.  This case deals with what factors a district court is supposed to look at when awarding or rejecting attorneys’ fee under the Copyright Act Section 505. 17 U.S.C. § 505.  The original infringement issue was decided by the Supreme Court in 2013.  See Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. ___ (2013).

 

Kirtsaeng, a citizen of Thailand, came to the US to go to school at Cornell University.  He realized the same textbooks required for his class in the US were sold for a significantly cheaper amount back home in Thailand.  Kirtsaeng had family and friends buy the textbooks in Thailand and then sent the books to him in the U.S., where he sold them for a nice profit.  Wiley & Sons, the publishing company for the textbooks, sued Kirtsaeng for copyright infringement, claiming his activities violated the exclusive right to distribute under the Copyright Act.  Kirtsaeng’s defense was the “first-sale doctrine,” which allows for the lawful owner of a copyrighted book to resell “or otherwise dispose of” the product as he wishes.  Wiley’s counter to Kirtsaeng’s defense is the “first-sale doctrine” does not apply when the book was manufactured abroad.   While this case was taking place, multiple courts were in conflict as to whether the “first-sale doctrine” applied to products manufactured abroad.  Even the Supreme Court in a previous decision was undecided on this issue in a 4-to-4 split of the Court. See Costco Wholesale Corp. v. Omega, S. A., 562 U. S. 40 (2010) (per curiam). Here, the district court sided with Wiley, as did a divided Second Circuit court.  However, the Supreme Court reversed in a 6-to-3 decision and determined the first-sale doctrine allows the resale of foreign-made books, just like domestic books.   Being victorious, Kirtsaeng went back to the district court to seek more than $2 million in attorneys’ fees from Wiley.  The district court denied the motion based on the reasoning that Wiley’s infringement claim was objectively reasonable, which the district court argued was in line with the Copyright Act’s purpose.  The Second Circuit affirmed the district court’s holding that attorneys’ fees would not be awarded due to the objective reasonableness of Wiley’s position in bringing the infringement suit.

 

The major issue presented to the Supreme Court was whether a court, in exercising its authority to award or deny attorney’s fees to the winning party, should give substantial weight to the objective reasonableness of the losing party’s position.

 

The Supreme Court found that a court, specifically a district court, should give substantial weight to the objective reasonableness of the losing party’s position.  However, the Court also held that district courts, when determining whether attorneys’ fees should be awarded, should also give weight to all other factors relevant in granting the motion for attorney’s fees, such as a party’s litigation misconduct or if the infringer has repeated offenses of infringement.  The Supreme Court further held that it is in a court’s discretion to order or deny attorneys’ fees based on these relevant factors.  Therefore, the Supreme Court vacated the decision and remanded back to the district court because the Justices were not sure whether the district court understood the full scope the discretion it holds.

 

The Supreme Court started its analysis by citing to Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), a Supreme Court case where it decided two restrictions or limitations for courts to follow when determining whether attorneys’ fees should be awarded under the Copyright Act § 505.   The two restrictions/limitations on district courts are: (1) when a district court is determining whether to award attorney’s fees it may not “award [] attorney’s fees as a matter of court,” but on a case-by-case, more particularized basis, Fogerty, 510 U.S. at 533; and (2) the district court shall treat prevailing plaintiffs and prevailing defendants equally when determining a motion for attorneys’ fees, Id. at 527.   The Supreme Court in Fogerty noted with approval “several nonexclusive factors” to help a district court in deciding whether to award attorneys’ fees, while leaving open the possibility of additional guidance in determining attorneys’ fees: “frivolousness, motivation, objective unreasonableness[,] and the need in particular circumstances to advance considerations of compensation and deterrence.”  Id. at 534, n. 19.    Here, Kirtsaeng and Wiley disagree as to “what else [the Court] should say to district courts” about what to consider when awarding attorneys’ fees.  Kirtsaeng, 579 U.S. at 4.  Both Kirtsaeng and Wiley argue that the Supreme Court should hold that the district court should put “substantial weight” on certain factors in determining whether attorneys’ fees should be awarded, but Kirtsaeng and Wiley differ on what factors should be given substantial weight.  Wiley argues that the district court, in deciding whether to award the prevailing party attorneys’ fees, should put substantial weight on the objective reasonableness of a losing party’s position in bringing or defending the infringement case.  In contrast, Kirtsaeng’s position was that the court should give “special consideration to whether a lawsuit resolved an important and close legal issue and thus ‘meaningfully clarifie[d]’ copyright law.” Kirtsaeng, 579 U.S. at 5 (quoting Brief for Petitioner 36).

 

The Supreme Court agrees that there is a need for additional guidance surrounding an application of § 505.  The Court states that, even when a fee-shifting law does not state any explicit limits or conditions, the Supreme Court has “found limits” in the laws in order to give individuals a predictor as to how a fee-shifting decision will result.  Kirtsaeng, 579 U.S. at 6.

 

The Court explains that to find the right guidance for a determination of attorneys’ fees under § 505, it must look at whether Wiley’s position above or Kirtsaeng’s position above advances the Copyright Act’s goals.  The Supreme Court in Fogerty explained, “copyright law ultimately serves the purpose of enriching the general public through access to creative works.”  510 U.S. at 527.  Section 505 achieves that purpose “by striking a balance between wo subsidiary aims: encouraging and rewarding authors’ creation while also enabling other to build on that work.”  Kirtsaeng, 579 U.S. at 6 (citing Forgery, 510 U.S. at 526.  Therefore, attorneys’ fees should “encourage the types of lawsuits that promote the purposes of the Copyright Act.” Id.

 

The Supreme Court sided with Wiley because Wiley’s argument falls within the purpose of the Copyright Act, while Kirtsaeng’s argument does not “produce any sure benefits.” Kirtsaeng, 579 U. S. at 7.   The Supreme Court’s reasoning on rejecting Kirtsaeng’s argument is even if the case advances public interest, fee shifting does not always encourage possible litigation, but will most likely have a chilling effect on people bringing suits, especially those of public interest, based on the punishment of attorney’s fees.  Further accepting Wiley’s argument, the Supreme Court found putting substantial weight on reasonableness discourages a copyright holder from bringing a suit with no reasonable infringement claim or an infringer from bringing a defense with no reasonableness.  Discouraging infringement claims or defenses with no merit saves the courts and the parties time and money.  Additionally, Wiley’s argument supports Forgery because it does not discriminate between plaintiffs and defendants.

 

However, the Supreme Court decided reasonableness is only a “substantial factor” in determining whether attorney’s fees shall be awarded, not a controlling one.  The Court found other factors may be considered by the district court to determine whether attorneys’ fees should be awarded, such as a party’s litigation misconduct, “to deter repeated instances of copyright infringement,” or “overaggressive assertions of copyright claims.”  A party’s litigation misconduct can mean unduly delaying the case through discovery, filing unneeded motions, failing to produce important documents, etc. This means the victor may be awarded attorney’s fees even if the losing party’s position was reasonable.

 

Conclusion:

 

The Supreme Court found that a court, specifically a district court, should give substantial weight to the objective reasonableness of the losing party’s position.  However, the Court also held that district courts, when determining whether attorneys’ fees should be awarded, should also give weight to all other factors relevant in granting the motion for attorney’s fees, such as a party’s litigation misconduct or the repeated offenses by the infringer.  The Court further held that it is in a court’s discretion to order or deny attorneys’ fees based on these relevant factors.  Therefore, the Court vacated the decision and remanded back to the district court because the Justices were not sure whether the district court understood the full scope the discretion it holds.