Patent Reform Series: Part 3 of 3 “The PATENT Act”

July 22nd, 2015

By Dennis Collins

This is the third and final installation in the three part series on patent reform. On June 4th, 2014, the Senate Judiciary Committee voted and approved the PATENT Act. Senator Charles Grassley (R-Iowa), introduced the Protecting American Talent and Entrepreneurship Act of 2015 (PATENT), S. 1137, and it is expected to move forward in the Senate with bipartisan support. This Act is the Senate’s specific response to the Innovation Act that was introduced into the House by Congressman Bob Goodlatte. While many institutions are happy to see some changes made to the patent environment, many detractors believe that it is best to move forward cautiously. The Act does not go as far as the Innovation Act with some of its provisions, but it is a solid move in the direction for patent reform.

The PATENT Act includes a provision for demand letters sent to parties and their required specificity before they can be delivered to the alleged infringing party. The current patent environment has allowed essentially vague and anonymous letters to be delivered to parties for alleged patent infringement, and leaving those parties oblivious. This has caused uproar among parties receiving the demand letters. Unlike in the past, demand letters will need more information that clarifies what exactly is being sought. The demand letters will require:

  • The identification of the patent being infringed;
  • The claim for alleged infringement;
  • Each product or process believed to be infringing; AND
  • An explanation of that infringement.

Failing to meet any of the requirements, gives the letter recipient an extension of 30 more days to respond to the complaint.

The party sending the demand letter must also provide notice to the party with the potential right to seek a stay, and the letter must identify each person with the right to enforce that patent. A stay is when the judge issues an order that stops all judicial proceeding. This is used to protect the targeting of end users of a product that has a patent. An end user could be a small business, like a coffee shop that has purchased a Wi-Fi router from an electronics store, and is now faced with the threat of federal court litigation. The stay can be sought by that coffee shop if the manufacturer of the router is also involved in federal court litigation over the same patent.

Patent trolls have been blamed for demand letters that were sent in bad faith. These letters include those sent out threatening litigation when there is a track record of false threats to file suit by those sending the letters. The letters are sent out as a calculation to extract settlements from the recipients to avoid the expense of litigation with no reasonable expectation of having meritorious cases. Any letters sent that lack an objectively reasonable can be found to be abusive. A letter sent that may mislead the recipient because they fail to identify the person seeking to enforce the patent, identify the patent, or identify the product or process that they violate are abusive.

Patent trolls, the crux for the call for patent reform, have in the past sent out abusive demand letters to alleged patent infringers. These parties were not aware which patents are being infringed, even after receiving the demand letters, forcing them to devote resources and hire an attorney, etc. This creates a problem within the system, because not answering the complaint can be held to be evidence of willful infringement by that party. Demand letters that are abusive, such as an overwhelming amount of letters, or ones that are deceptive in nature can lead to a significant fine by the Federal Trade Commission (FTC).

The PATENT Act does not have the normal default rule of “loser-pays,” otherwise known as “fee shifting,” when the patent is determined either valid or invalid. Other patent reform acts introduced in Congress have the prevailing party automatically receiving an award of fees. However, under the PATENT Act, the party that prevails bears the burden to demonstrate that it is entitled to attorneys’ fees from the opposing party. The Act requires the shifting of attorney’s fees if the prevailing party can show the losing party’s position during litigation was objectively unreasonable. The Act seeks to balance the rights of the patent holder and to deter any abuses in patent litigation following closely with the Supreme Court’s decision in the Octane Fitness, LLC v. Icon Health & Fitness, Inc. 134 S. Ct. 1749 (2014). The rule also extends to those parties seeking to unilaterally withdraw from a case on the eve of the trial. The Act does not allow the joining of any parties later in a suit in order to help fund the awarded attorneys’ fees.

The Act requires that the patent holders disclose to the court and the adverse parties, any and all interested parties within 14 days of the suit being filed. The interested parties can include parent entities, sublicensed entities, and those with a financial interest in the patent itself. The financial interest of a party is defined by if they received earnings or have more than 20% control in the patent. In order to better track for patent trolls, the disclosure requires a listing of all complaints made by the patentee and its affiliates from the three years since before the suit was filed.

Bob Krause, a candidate in Iowa for the US Senate race in 2016, has recently come out against the PATENT Act and warns of its unintended consequences. Krause, in a possible political move, has argued that the Act itself will destroy small businesses, startup companies, and patent owners who try to fight to protect their patents. Krause is not the only naysayer against the PATENT Act however. Contingencies on both sides of the aisle, have argued against not only the PATENT Act, but the Innovation Act and STRONG Act as well.

As a result of the misunderstanding of the complexity of the patent environment, and the glut of both accurate and inaccurate information available, there have been some speed bumps in Congress. Most recently, the well-received Innovation Act has received push back and a coalition of Congressmen known as the “Anti-Innovation Coalition” has been able push the consensus vote from the House floor for the summer. The earliest the bill will be considered is September of this year. Congressman Thomas Massie (R-KY) has led the charge in the Anti-Innovation Coalition. Massie, a patent holder himself, he has had personal experience with patent trolls. Wary to enact any laws which could potentially damage patent holders, the coalition believes that all the provisions in the Innovation Act that seek to target patent trolls will also hurt genuine inventors.

The ultimate goal is to make the life of patent holders easier and to avoid unnecessary litigation. However, there is no clear path to the correct answer for improvement. The general wide spread feeling, nonetheless, is that reform should be brought in to sweep out certain NPE’s who are taking advantage of the system. The only problem is determining which of the three Acts or some other legislation going through Congress will have the greatest impact without undermining the current patent system.

Patent Reform Series: Part 2 of 3 “The STRONG Patent Act”

July 17th, 2015

By Dennis Collins

Continuing into part two of this series on patent reform, another attempt hit the floor of the Senate March 3rd of 2015. The Support Technology and Research for Our Nation’s Growth (STRONG) Patents Act, (S. 632) was introduced and is still pending before the Senate Judiciary Committee. Presented by Senator Christopher Coons (D-DE), this act, according to certain critics, is much weaker than the House bill known as the Innovation Act (H.R. 9) and some critics feel it will not create as substantial of a change, in other words, it does not go far enough. These critics claim the Act fails to address the “patent troll problem” which is the ultimate goal of most seeking patent reform. The STRONG Act itself proposes to deal exclusively with “patent trolls,” but beyond that, there are no provisions to tackle directly a lot of the hot button issues that are dealt with by some some of the other patent reform bills, such as the Innovation Act discussed in Part 1 of this series.

The most powerful provision of the STRONG Act is the empowerment given to the Federal Trade Commission (FTC). The FTC’s expanded power would target firms that abuse startup companies with incessant demand letters claiming patent infringement. These companies claim the rights to patents and send letters to businesses, including small ones, demanding payment for licenses or threaten to file suit for the infringement of their patents. The provision attempts to tackle rogue and opaque letters that have been sent in bad faith. Bad faith is when the company sends the demand letters knowing that they are intentionally fraudulent or just for nuisance purposes to induce a quick settlement. These targeted firms of the Act, who unlawfully send misleading demand letters to startups claiming that their patents were being used without permission and demand payment for the patents or threaten litigation. These parties are commonly known as “patent trolls.” The FTC will be able to target those patent trolls found acting in bad faith are punishable with up to $5 million in fines. The court has the discretion to treble any of the damages if it has any evidence of a party willfully infringing in bad faith.

One of the more significant provisions included in the STRONG Patent Act is the reform of the proceedings before the Patent Trial and Appeal Board (PTAB). The act addresses inter partes review and post-grant review. Post-grant review is used by parties to challenge the validity of a patent that has recently been approved by the USPTO. Inter partes review is a procedure used by the PTAB that allows a party to challenge another party for the legitimacy of their patent until a period of 9 months has passed since the USPTO registration. Both types of review are available for challenges to patent validity instead of going through Federal District Courts which may be drawn out and more expensive, and to reduce the number of issues being litigated by the Courts. Any patents being challenged will be presumed to already be valid.

In order to reform these two types of reviews, the PTAB would be required to increase the standard of evidence when proving if a patent is valid or not. The PTAB currently applies a standard known as the “broadest reasonable interpretation” that sets a lower bar for the reviewing examiner in determining the validity of the patent. The new standard is a higher one of “clear and convincing evidence” which is currently applied by the Federal Court. The higher standard level requires that the evidence presented by the challenging party to be highly and substantially more probable than not that the patent claims are not lawful. All ex parte reexaminations by a party in the case must be filed within one year after the requester is served with the original complaint alleging infringement. This will be beneficial to both parties, because the chance of a review of the decision by the court is both helpful and decisive.

One of the more positively received provisions is the push for an expansion in micro-entity status. Having a micro-entity status lowers the fees for inventors and small companies. In order to qualify for micro-entity status the applicant needs to have:

  • Filed four or less US patent applications;
  • An income for the past year of less than $150,000, or less than three times the current gross median income; OR
  • The rights in the application are licensed to only that micro-entity.

The expanded micro-entity status would be given to certified universities as well as their related tax exempt patent commercialization entities. Those micro-entities would receive a 75% reduction in USPTO fees.

Another provision of the STRONG Act enforces the blocking of any anonymous demand letters. The parent entity filing the demand letters must identify itself before an official suit can be filed. This is due to the large amount of demand letters from shell companies served on businesses. The purpose of a shell company is to hide the identity and possibly the assets of the company/entity and its directors that is/are ultimately seeking the lawsuit. By hiding behind the veneer of the corporation seeking to extract money from small fledgling companies, the larger corporations can keep their public appearance in a positive spotlight. If the plaintiff can prove that its suit is founded on good faith or can prove a track record of good faith, the suit will be determined to not be deceitful, and therefore will allow for trial proceedings to continue. Nonetheless, if there is any proof of abusive demand letters done in bad faith by the plaintiff, the District Courts are free to award increased damages to the prevailing party.

The STRONG Act will also give the USPTO the ability to access and spend fees it collects without regard to any fiscal year budgets or limitations. This, allegedly, will give the USPTO more flexibility and enforcement against duplicitous patent claims, because of the increased budget. All patent and trademark fees would be credited to the revolving fund in the Treasury, known as the USPTO Innovation Promotion Fund. The Director of the USPTO can use these fees collected from the current year and past years until they are ultimately depleted.

In conclusion, the STRONG Patent Act could have a large and sweeping effect, but doesn’t go far enough according to critics who seek more robust patent reform. Many believe that due to the political atmosphere of the current Senate, this bill has little chance of being enacted when compared to its counterpart of the PATENT Act because of how narrowly the bill is tailored. The concern over the perceived abuses of the US Patent System is a major driving force behind the push for reform in the system. Any attempt at actual patent reform should make patent owners wary about the potential effects of any enacted law on the current patent environment. Next up: the PATENT Act, the 3rd and final part of this series.

New Pilot Program for Ex Parte Appeals for Appellants with Multiple Concurrently Pending Ex Parte Appeals Announced by USPTO on July 14, 2015

July 15th, 2015

By Michael Stein

As people in the patent field know, patent appeals from an examiner’s final decision can take a significant amount of time, even years, with there being a large backlog of patent applications on appeal before the PTAB. In a just issued notice, the USPTO has recently launched a new pilot program that will permit appellants with multiple ex parte appeals pending before the Patent Trial and Appeal Board (PTAB) to expedite review of one appeal in return for withdrawing another appeal. This pilot program offers a number of advantages, at least from the USPTO’s vantage point, while being simple to use.

The advantages set forth by the USPTO are:
1. the Expedited Patent Appeal Pilot allows appellants having multiple ex parte appeals currently pending to have greater control over the priority with which their appeals are decided;
2. reducing the backlog of appeals pending before the PTAB; and
3. permit an appellant having multiple appeals pending to accelerate the PTAB’s decision on an appeal involving an invention of greater importance to the appellant.

According to the current normal procedures appeals to the PTAB are taken up for decision in the order in which they are docketed. The current average pendency of an ex parte appeal at the PTAB is approximately 30 months. An appeal that is accorded special status under the Expedited Patent Appeal Pilot Program will be advanced out of turn for a decision on the appeal. The goal of the pilot is to render a decision on the appeal accorded special status no later than six months from the date of filing of the petition. Thus, participation in the pilot could save up to 2 years in wait time for a decision on an appeal.

Appellants wishing to participate in the pilot program need only make a certification and file a petition to the Chief Judge. The petition fee will be waived and there is the USPTO is providing a form-fillable PDF (Form PTO/SB/438) for use in filing the certification and petition. Although an application having no allowed claims becomes abandoned upon withdrawal of an appeal, applicants are permitted under the pilot program to file a Request for Continued Examination (RCE) in the application of the appeal sought to be withdrawn to continue prosecution and avoid abandonment of that application.
However, there are limitations and drawbacks to participation in the this pilot program, such as:
1. as part of the petition process, an appellant must certify that docketing notices were issued for the appeal to be made special and the appeal to be withdrawn before June 19, 2015, and that both applications underlying the identified appeals are owned by the same party as of June 19, 2015, or name at least one inventor in common. Thus, it is not possible to file an Appeal now solely for the purpose of getting an earlier filed appeal to be eligible for expedited consideration since we are already past the June 19, 2015 date;
2. the appellant must agree to waive any requested oral hearing in the appeal to be made special and acknowledge that any oral hearing fees paid in connection with the appeal to be made special and any appeal fees, including oral hearing fees, paid in connection with the appeal to be withdrawn will not be refunded.
The following is a link to the Expedited Patent Appeal Process on the USPTO website
http://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/expedited-patent-appeal-pilot
and the fillable form PTO/SB/438
http://www.uspto.gov/sites/default/files/documents/sb0438%20Rev%202015-05-01.pdf.

In addition to the Expedited Patent Appeal Pilot, the USPTO is working on other initiatives to reduce the ex parte appeal backlog, which the agency will release soon. The PTAB continues to hire administrative patent judges, patent attorneys, and paralegals. In addition, the PTAB is starting a law clerk fellowship pilot program and is identifying further ways to provide more support to administrative patent judges to increase efficiency.

Patent Reform Series: Part 1 of 3 “The Innovation Act”

By Dennis W. Collins

This is the first installment of a three part series on the patent reform bills that are currently being debated in Congress. One of the most discussed bills that is being pushed through the House of Representatives is the Innovation Act. The Act was originally introduced by Representative Bob Goodlatte (R-VA) in the 2013 Congress, where it passed through the House, but failed to pass in the Senate. The Act was reintroduced into the current 2015 Congress by Goodlatte (R-VA) and passed by the House earlier this month with little controversy. This Act is being used to change the patent litigation environment in order to limit the prevalence of Non-Practicing Entity’s (NPE) or more popularly known, “patent trolls.” These NPE’s are companies that do not use their patents for anything other than to demand licensing fees for the patents, or threaten lawsuits.

Several major corporations, like Apple and Google, who are strongly advocating for the Innovation Act, hope that it will significantly change the current patent situation. The Act has received several cosponsors and the added support of President Barack Obama. The introduction of the Innovation Act is to address the increasing patent litigation taking place despite the signing of the Leahy-Smith America Invents Act (AIA) in 2011.

The Innovation Act introduces several provisions to protect against NPE’s. The Act raises the pleading requirements for a complaint in patent infringement cases. Historically, complaints have been notoriously vague when they are sent to the defendant. This leaves the defendant wondering what exactly she was being sued for and why. The provision for patent complaints requires the parties to supply a much more specific pleading under the Innovation Act. The party to file the complaint needs to disclose up front the entity they are representing. NPE’s have been infamous for hiding behind shell companies when filing law suits to protect the identity of their parent company. Under the Act, new patent complaints must include a claim chart that describes a theory of infringement for each asserted claim against each specifically referenced product. This could be both time consuming and costly for NPE’s, universities, and many smaller companies trying to assert their rights to a patent. The Innovation Act also could drag out the amount of discovery and time spent available to the parties in litigation, making it onerous and more costly for both parties.

The Act includes a cost and fee shifting provision, which raises the most concerns amongst innovators. This fee shifting requires a US District Court judge to award reasonable attorneys’ fees and expenses to the winning party. However, the court may take the position that the conduct of the losing party was reasonably justified by law and fact, or falls under special circumstances, and award no fees to the prevailing party. The Act also imposes a large increase in post judgment awards fees. Severe economic hardship to the inventor is an example of what falls under “special circumstances,” and the awarding of the attorneys’ fees must be unjust against the losing party to avoid the fees. The result is a shift of the burden of proof to the losing party showing they would be unjustly encumbered by attorneys’ fees.

Another important provision of the Act allows “interested parties” to be joined. According to the Act, the term “interested parties” is defined by a party that: is an assignee patent; has a right to enforce or sublicense the patent; has a direct financial interest in the patent, including the right to awards of damages or licensing revenue. Any parties involved will be personally liable to satisfy any awards of attorneys’ fees and expenses if the party who claims the patent prevails. Many patent owners believe this will decrease the value of their patents. The fee shifting will reduce the practicable ability of patent owners to pursue certain infringement cases, because of the possible risk of paying exorbitant attorneys’ fees and expenses if they fail. Proponents of the Act point to this provision being helpful for discouraging meritless or superfluous claims.

The final provision which raises many eyebrows is in what venue the suit can be brought. There are a few districts around the country where claims are dealt with much more leniently by judges. The Eastern District of Texas, well known for its leniency towards patent holders no matter how ridiculous the suit, was the most popular District Court in the nation for the claims to be brought, although the US District Court of Delaware is also very popular. The new provision forces the action to be brought only in a certain judicial district, according to certain qualifications. This district must include: (1) where the defendant has its principle place of business or is incorporated; (2) the infringement must have occurred in this district; (3) where the invention was created; (4) where significant research was done on the invention; (5) and where a physical facility has been established. The desired result is to stop frivolous suits brought by patent trolls who abuse the current system.

Unsurprisingly, there is no shortage of tangentially involved parties objecting to the passage of the Act. Qualcomm, Merck, Monsanto, and many large universities have criticized the Act for intruding too much on the current patent system. Their argument is that the bar is being lowered too much for patent rights. Higher education associations, such as universities, criticize the Act for discouraging the private sector from turning university research discoveries into inventions. With the increased risks in litigation with the shifting of fees, the universities lack the deep pockets that are necessary to enforce their patents. They argue that strong patent protection is necessary to insure that the rewards and benefits of the work the universities do is not at risk of being taken away from them. Many universities rely on the revenue from their licensed patents to supplement continued research and funding.

There are many parties interested in the fate of the Act. One side believes it is necessary in order to control for NPE’s; whereas the other side believes that the AIA of 2011 has already achieved the desired result of stopping patent trolls. The fee shifting provision was recently addressed in the Supreme Court decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). The Supreme Court lowered the bar to prove what is an “exceptional case” when referring to how the fees for the attorneys are shifted to the winning side. The court found that an exceptional case is one that is litigated in an “unreasonable manner” or is based on the “substantive strength” of the party’s position.

In another recent case, the Supreme Court has made it easier to seek attorneys’ fees in patent cases for the prevailing party. In Highmark, Inc. v Allcare Management Systems, Inc. 134 S. Ct. 1749 (2014), the Court held that appellate courts should give deference to district courts when deciding if the shifting of attorneys’ fees is “objectively unreasonable.” This asserts that the approval of an award of attorneys’ fees is a “matter of discretion” and to be reviewed only for an abuse of that discretion in the Federal Circuit. The result of this decision makes it much more difficult for the losing party to show that the awarding of fees was a mistake by the district court.

Silicon Valley and other select parts of the United States are deeply affected by the patent environment. Many venture capitalists and private investments rely heavily on technology based companies that use these patents to protect their ideas as money is invested to help companies grow. It is believed that by increasing the cost of patent enforcement, the patents will be devalued, thus reducing the amount of investment into technology companies made by venture capitalists.

The consequences of this Act could have a very sweeping effect on the current patent environment. Many patent holders and startup companies are very interested to see what the result will be, and if the Act will actually be signed into law. The best outcome of this national spotlight is that the patent troll problem is being noticed by the general public, and the acknowledgment that a much needed reform to the patent system is finally being addressed. Next up in the three part series is the discussion of the STRONG Act, the Senate’s response to the Innovation Act.

Disney Draws Distinction

Written by Dennis Collins

On March 2, 2015, the Federal Circuit ruled that when using a service trademark, the “mere intent to use” was not “actual use in commerce”. In the case Couture v Playdom, Inc. 778 F.3d 1379, the court held that merely offering to provide a service does not support the “actual use” basis when filing during the application process.

In 2008, the Plaintiff, David Couture, applied to register the mark “Playdom” for as he described, “educational and entertainment services”. He filed his application under the Lanham Act, 15 U.S.C. 1051 Section 1 (a), which requires that the applicant establish the mark is being “used in commerce” in order to receive approval from the United States Patent and Trademark Office (USPTO). Use in commerce includes any tangible evidence of the mark having been a part of any transaction. By contrast, intent to use, as defined by the Federal Circuit, is having the plan of immediate use after receiving approval of the mark from the USPTO. Couture received approval from the USPTO and registered the mark. Immediate is not defined by the court, but it is expected that the trademark recipient should begin practice with the mark within a reasonable amount of time.

Couture maintained the mark on a website page which simply stated:

Welcome to PlaydomInc.com. We are proud to offer writing and production services for motion picture, film, and new media. Please feel free to contact us if you are interested.

This site indicated that it offered the services; however, there was no indication of the services actually being rendered.

In 2009, a company named Playdom attempted to register its name as a trademark, but was denied due to David Couture’s reservation of the mark. Walt Disney Company, which purchased the company Playdom in 2010, challenged the use of the mark and petitioned to cancel the mark held by Couture on the grounds of insufficient evidence of commercial use. The Trademark Trial and Appeal Board (TTAB) sided with Walt Disney Company based on the lack of evidence. The TTAB found in 2014 that Couture had still not used the mark in any commercial transaction and was only advertising a service. The advertisement of this service was moot, because the website was under construction and any potential interested customers didn’t have the ability to contact Mr. Couture.

The holding from the Federal Circuit, ultimately, hinged on the application and registration process for securing a trademark, and which was the correct section to complete. Under the Lanham Act, the applicant seeks to register a mark which they are currently using or intend to use in the future in order to reserve that mark. The distinction lies in Section 1 (a), “use in commerce” or in Section 1 (b), “bona fide intention . . . to use a trademark in commerce.” Robert Couture applied his trademark under Section 1 (a) despite having no evidence of any prior commercial transactions. There were no sales reflective to the purchase of the services selected in the registration, and in fact, there was not ever any ability to request the services. While these are not the only two options when applying for a trademark, they are the two options when seeking to file for a domestic trademark in the United States.

Implications

            If an applicant is filing for a mark under the “use in commerce” section of the Lanham Act, the mark must actually be in use. In the case of David Couture, his mark was invalidated due to the lack of the service actually being rendered. Those seeking to file for a service mark with the purpose of future use should file under the intent-to-use application. The Federal Circuit has drawn a distinction and now requires more “use in commerce” than just an advertisement for those services such as actual sales of the services (or goods) cited in the registration. David Couture’s case is currently being appealed to the Supreme Court to determine what the term “use” means in the internet age.

Anti-troll strikes back

Written by Dr. Sinai Yarus

On April 10, 2014 the Patent Trial and Appeal Board (PTAB) of the USPTO decided the Electronic Frontier Foundation v Personal Audio LLC inter partes review case.

Personal Audio LLC is an offshoot of Personal Audio, Inc. which developed an audio player that could download, store and manipulate audio files. The Personal Audio patents issued starting in 1998. Personal Audio, LLC asserts the patents. The International Trade Commisssion has ruled (in an unrelated case) that significant licensing efforts in the US constitute a “domestic industry” worthy of protection.

The Electronic Frontier Foundation (EFF) is a nonprofit organization which describes itself as “defending civil liberties in the digital world”. EFF says that it engages in impact litigation, policy analysis, grassroots activism, and technology development. EFF favors open source software.

Both Personal Audio and EFF are virtually immune from counter-suits because neither one of them sells a product. Personal Audio is a classic non practicing entity (NPE; pejoratively referred to as a “troll”). EFF represents a new type of NPE which is interested in curbing the licensing activity of others (as opposed to engaging in its own licensing activity). In the title of this post I’ve referred to EFF as an “Anti-troll” to indicate their relationship to classic NPEs. This terminology is consistent with the way that EFF describes itself.

The dispute between EFF and Personal Audio is longstanding and well publicized. The dispute has often been referred to as the “podcasting case” and co-exists with numerous lawsuits filed by Personal Audio based uponUS 8112504 to Logan et. al (assigned to Personal Audio):

(i) Personal Audio, LLC v. CBS Corp., No. 2:13-cv-270 (E.D. Tex. Apr. 11, 2013);

(ii) Personal Audio, LLC v. NBC UniversalMedia, LLC, No. 2:13-cv-271 (E.D. Tex. Apr. 11, 2013);

(iii) Personal Audio, LLC v. Ace Broadcasting Network, LLC, No. 2:13-cv-14 (E.D. Tex. Jan. 7, 2013);

(iv) Personal Audio, LLC v. Howstuffworks.com, No. 2:13-cv-15 (E.D. Tex. Apr. 10, 2013);

(v) Personal Audio, LLC v. Togi Entertainment, Inc., No. 2:13-cv-13 (E.D. Tex. Jan. 7, 2013);

(vi) Fox Networks Group, Inc. v. Personal Audio, LLC, No. 1:13-cv-11794 (D. Mass. July 26, 2013); and

(vii) Personal Audio, LLC v. Fox Broadcasting Co., No. 2:13-cv-577 (E.D. Tex. Aug. 6, 2013).

The purpose of this post is to provide a short summary of how EFF successfully used inter partes review to successfully invalidate claims 31 to 35 of the Logan patent.

The Logan patent:

US 8112504 entitled “System for disseminating media content representing episodes in a serialized sequence” was filed March 4, 2009 and granted February 7, 2012.

US 8112504 is a Division of U.S. patent application Ser. No. 09/782,546 filed on Feb. 13, 2001.

Application Ser. No. 09/782,546 is a Division of U.S. patent application Ser. No. 08/724,813 filed on Oct. 2, 1996.

The earliest priority date is therefore October 2, 1996.

The focus of the inter partes review was Independent claim 31 which is directed towards (terms at issue inbold):

Apparatus for disseminating a series of episodes represented by media files via the Internet as said episodes become available, said apparatus comprising:

one or more data storage servers,

one or more communication interfaces connected to the Internet for receiving requests received from remotely located client devices, and for responding to each given one of said requests by downloading a data file identified by a URL specified by said given one of said requests to the requesting client device,

one or more processors coupled to said one or more data storage servers and to said one or more communications interfaces for:

storing one or more media files representing each episode as said one or more media files become available,

each of said one or more media files being stored at a storage location specified by a unique episode URL;

from time to time, as new episodes represented in said series of episodes become available, storing anupdated version of a compilation file in one of said one or more data storage servers at a storage location identified by a predetermined URL,

said updated version of said compilation file containing attribute data describing currently availableepisodes in said series of episodes,

said attribute data for each given one of said currently available episodes including displayable text describing said given one of said currently available episodes and one or more episode URLs specifying the storage locations of one or more corresponding media files representing said given one of saidepisodes; and

employing one of said one or more communication interfaces to:

(a) receive a request from a requesting client device for the updated version of said compilation filelocated at said predetermined URL;

(b) download said updated version of said compilation file to said requesting client device; and

(c) thereafter receive and respond to a request from said requesting client device for one or more media files identified by one or more corresponding episode URLs included in the attribute data contained in said updated version of said compilation files.

US 8112504 also contains claims directed towards A media player for acquiring and reproducing media program files which represent episodes in a series of episodes as said episodes become available (claims 1-12) and Apparatus for acquiring and reproducing media files representing episodes in a series of episodes as said episodes become available (claims 13-22) and An audio program player for acquiring and reproducing audio recording files which represent episodes in a group of episodes (claims 23-30). None of these claims were at issue in the inter partes review.

Issues under review:

The PTAB considered two issues

(1) Are 31–35 of the ’504 patent anticipated under 35 U.S.C § 102(a) by Andrew S. Patrick, et al, CBC Radio on the Internet: An Experiment in Convergence, 21 CANADIAN J. OF COMM’N 1, 125-140 (1996)?; and

(2) Are claims 31–35 obvious under 35 U.S.C. § 103(a) over Charles L. Compton, Internet CNN NEWSROOM: The Design of a Digital Video News Magazine, Massachusetts Institute of Technology (Aug. 10,1995)?

There was no consideration of § 101 issues which are excluded from inter partes review.

Outcome:

The PTAB held that claims 31 to 35 of US 8112504 were both anticipated by Patrick et al. (1996) and obvious in view of Compton/CNN (1995). Discussion focused on the highlighted terms in claim 31 which were all deemed to be present in, or obvious in view of, the cited references. Personal Audio can appeal to the Federal Circuit.

Impact:

It seems likely that the numerous infringement suits in which US 8112504 is asserted will be quickly resolved. Although claims 1 to 30 in the patent remain in force, these claims are all directed towards client side devices. Since the alleged infringers are content providers, assertion of these claims would have to rely on an “induced infringement” rationale. In addition, since the server side claims were deemed obvious and/or anticipated, claims directed towards client side hardware using similar language to perform complementary functions could easily turn out to be anticipated and/or obvious.

We can only hope this PTAB decision will help establish that the existing patent system is not “broken” and that well intentioned legislation to “reform” the patent system may be superfluous.

Personal Audio has engaged in extensive licensing activity and filed infringement suits to protect that activity. It is not yet clear how the current decision will impact licensing activity of the remainder of the Personal Audio portfolio.

EFF’s success in this case may give rise to IP vigilantism in which not for profit organizations are formed to pursue an agenda which hampers licensing activity in a specific technology sector. Like the original trolls, the anti-trolls will be able to operate with impunity because they are virtually immune from counter-suits. EFF has demonstrated that relatively inexpensive procedures within the USPTO can be an effective substitute for litigation.

One of the complaints leveled against traditional NPEs is that it can be hard to identify the real party in Interest. Ironically, determining who is behind an Anti-troll may prove to be just as difficult.

Preclusive Effect of TTAB Likelihood of Confusion Rulings to be Determined by The Supreme Court

Written by Daniel DeLuca

B&B Hardware, Inc. v. Hargis Industries, Inc.

Case Summary:

The trademark dispute between B&B Hardware, Inc. (“B&B”) and Hargis Industries, Inc. (“Hargis”) has been ongoing for over a decade. Plaintiff B&B registered their SEALTIGHT mark with the PTO in 1993. B&B had produced fasteners for various uses within the aerospace industry under this mark for a few years before registration. Hargis produces self-drilling screws for which they tried to register the mark SEALTITE in 1996. Hargis was ultimately unsuccessful in its attempt to have the B&B mark canceled.

The USPTO published the SEALTITE mark for opposition in 2002. Shortly thereafter, B&B instituted an opposition claiming that there was likely to be confusion between the proposed Hargis mark and their own SEALTIGHT mark. By the end of the process, the TTAB found that the marks were confusingly similar and ultimately sustained B&B’s opposition and denied the Hargis mark registration. Shortly before this result, B&B had initiated a suit against Hargis in federal district court, alleging trademark infringement. When the district court began the jury trial, the TTAB had already made its finding that there was a likelihood of confusion between the two marks. B&B tried to argue that the TTAB finding of likelihood of confusion should preclude the court from reexamining the issue, or at least result in the court showing some deference by admitting the TTAB holding to evidence for the jury’s consideration. The district court rejected both arguments, and a jury verdict was returned in favor of Hargis, finding that there was no likelihood of confusion between the marks. B&B then appealed the case to the Eighth Circuit.

On appeal, the Eighth Circuit sought to address three issues. First whether the TTAB finding of likelihood of confusion was entitled to a preclusive effect. Second, whether the same decision should at least be entitled to deference. And lastly, whether the trial court erred in keeping the TTAB decision from the jury.

The Eighth Circuit began by noting that there is precedent recognizing that administrative agency decisions that are judicial in nature may be entitled to preclusive effects. Univ. of Tenn. v. Elliott, 478 U.S. 788 (1986). However, to support a finding that issue preclusion is appropriate for a given case, the Eighth Circuit noted that the five-factor test set forth in Robinette should be considered. The Robinette factor most relevant to the facts of the B&B case was that the issues sought to be precluded must be the same issues involved in the original lawsuit. Robinette v. Jones, 476 F.3d 585, 589 (8th Cir. 2007).

The Eighth Circuit found that the likelihood of confusion test used by the TTAB, while similar to the test used by the District Court was ultimately a different test because one was for determination of registration status, and the other was for determination of infringement. Despite significant overlap in the substance of the factors used in each analysis, the Eighth Circuit was able to distinguish the analysis of the TTAB from the District Court. One factor that the Eighth Circuit emphasized was the consideration of the marketplace context and channels of trade. In the court’s view, the Eighth Circuit did not give enough weight to market context, noting that the channels of trade for each mark did not overlap significantly, a factor that would cut in favor of Hargis. Because the tests were different, the Eighth Circuit found that the TTAB finding of likelihood of confusion was not entitled to preclusive effect. In addition, the court found that there was no need to give deference to the TTAB decision, as infringement is a separate issue from registration. Lastly, the court found that it was not an error for the district court to keep the TTAB decision from the jury, as it would be likely to confuse the jury, and had minimal probative value. It should be noted that despite this ruling, Judge Colloton wrote a dissent, arguing that the tests are too similar for a finding of no preclusive effects.

Other Circuit Results:

As with many cases that make their way to the Supreme Court, the issue of whether a TTAB likelihood of confusion ruling should have a preclusive effect has become the subject of a circuit split. While the Eighth Circuit considers the TTAB decision to be unworthy of both preclusive effect and deference due to the lack of emphasis on the factor of marketplace context, other circuits disagree.

The Fifth and Eleventh for example, have decided to give the TTAB the benefit of the doubt, as they are in theory experts on such matters, and will only overturn them if there is a high amount of evidence present that cuts in favor of a contrary finding. Freedom Sav. & Loan Ass’n v. Way, 757 F.2d 1176, 1181 (11th Cir. 1985); American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 10 (5th Cir. 1974).

The Third and Seventh Circuits give preclusive effect to TTAB findings of likelihood of confusion even in trademark infringement cases, because in their view the issue of likelihood of confusion should not be litigated twice. Jean Alexander Cosmetics, Inc. v L’Oreal USA, Inc., 458 F.3d 244, 254 (3d Cir. 2006); EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375 (7th Cir. 1984).

Lastly, the Second Circuit, like the Eight Circuit, found that the TTAB is susceptible to undervaluing the importance of market context, and therefore requires a finding that the TTAB must have taken the marketplace context into account in a meaningful way in order to support preclusion of the issue. Levy v. Kosher Overseers Assn of Am., Inc., 104 F.3d 38, 42 (2d Cir. 1997).

Implications of B&B Hardware, Inc. v. Hargis Industries, Inc.:

 

In its current state, the law at issue in this case is unclear and therefore leads to unpredictable results. No matter what the Supreme Court decides, the result will make the law more uniform and predictable. Until the Supreme Court makes its decision, it should be noted that whether a TTAB finding of likelihood of confusion will have a preclusive effect is highly dependent on which circuit the case is in. Practitioners seeking to promote holdings of preclusive effects should emphasize the weight given to marketplace context.