Communications Center

Want Cheaper Patent Litigation? Here's Your Chance.

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Created on Friday, 06 April 2012 13:47

Written by Justin Leonard

One of the biggest defects in our patent system is the high cost that a company must incur to defend itself in court against a charge of patent infringement.   The defense of patent cases routinely costs between $2 million and $5 million, and in high stakes cases can exceed $10 million.  When faced with these high costs of litigation, many defendants charged with patent infringement choose to enter into large settlements that are less than the likely costs of defense, even when the asserted claims lack merit.  This prospect of obtaining a large settlement for even meritless patent claims encourages some patent owners to be overly aggressive in asserting their patents.  Non-practicing patent owners, for example, have been labeled as the notorious “patent trolls” because of their tendency to file frivolous patent lawsuits.

Sensitive to high litigation costs and the abusive assertion of meritless claims, Congress recently overhauled procedures before the Patent Office intended to provide less expensive alternatives to litigation for addressing likely invalid patent claims.  Congress terms these procedures “Post-Grant Review” and “Inter Parties Review.”  A defendant sued for infringing a patent triggers these review procedures by petitioning the Patent Office, rather than the court, to assess the validity of the asserted patent.  If the defendant triggers the review procedures within 9 months of the patent issuing, the defendant may institute Post-Grant Review and challenge the patent’s validity on most any grounds, including not only novelty and obviousness grounds but also indefiniteness and subject matter grounds.  After 9 months from issuance, though, the defendant may only institute Inter Partes Review and challenge the patent’s validity on novelty and obviousness grounds.

Congress generally afforded the patent owner one chance to request that the patent be amended in response to validity challenges.  However, Congress did not itself establish rules governing this amendment process.  Instead, Congress charged the Patent Office with creating these rules, including rules for example that dictate when a patent owner’s motion to amend should be denied.  The Patent Office recently proposed these rules. See here and here.  Under these proposed rules, the Patent Office will deny an owner’s motion to amend only when (i) the amendment does not actually respond to the defendant’s validity challenges; (ii) the amendment seeks to broaden the patent; or (iii) the amendment seeks to introduce new subject matter.

The proposed rules simply fail to implement the review proceedings as a true alternative to litigation for a defendant, as envisioned by Congress.  An asserted patent must stand “as-is” in litigation, meaning that the court must strike down invalid patent claims rather than amending them to make them valid. The Patent Office’s proposed rules fail to enforce that same binding treatment on an asserted patent.  The rules allow a patent owner that has already instituted litigation against the defendant an opportunity to retroactively fix patent validity problems, even though the patent owner would not have had that same opportunity in litigation.  The review proceedings therefore effectively serve as an unintended healing ground for an invalid patent that has already been asserted, rather than as a true alternative to defend against that invalid patent.  The defendant is left with a compelling incentive to incur the high litigation costs required to invalidate the asserted patent.

The Patent Office should adjust the proposed rules governing the review procedures so that the procedures function as a true alternative to litigation for a defendant.  In particular, the rules should deny a patent owner’s motion to amend his or her patent when the owner has already asserted the patent against a defendant who triggered the review proceedings.

Striving to improve the patent system for its clients, Coats + Bennett is submitting proposed modifications to the Patent Office’s rules. If you share our concern for the patent system, we encourage you to echo our proposed modifications by submitting comments to the Patent Office here. Comments must be submitted by April 10 and particularly pertain to modifications of proposed 37 C.F.R. 42.121 (Inter Partes Review) and 37 C.F.R. 42.221 (Post-Grant Review).

THE ANTI-SOCIAL NETWORK: YAHOO v. FACEBOOK

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Created on Tuesday, 20 March 2012 20:54

Written by David Kalish

In quite an anti-social move, Yahoo has sued its former business partner Facebook for patent infringement. This is one of the first patent litigations in the relatively new and evolving field of social networking.

Yahoo claims that Facebook is infringing ten different patents related to a variety of different aspects of social networking. These aspects generally include instant messaging advertising, fraud prevention in a pay-per-click system, privacy protection and controls, news feed and information customization, and network architecture involved with social networking. Specifically, the following patents are involved in the suit:

U.S. Patent No. 6,907,566 (and divisional patents 7,100,111 and 7,373,599) are each directed to methods and systems for placing graphical objects, such as advertisements, on a webpage. The placement of the objects on the webpage is optimized based on performance data. One specific embodiment is placement of an advertisement on a webpage to prioritize the likelihood that a user will click on the advertisement;

U.S. Patent No. 7,668,861 is directed to statistical modeling methods to differentiate valid website interactions from invalid interactions. Examples where this type of modeling is useful includes a website hosting a trivia challenge who wants to make certain a participant only enters the contest a single time, a search engine provider who determines the number of times a certain search term is requested by a search engine’s users, and a pay for placement and performance website operator that leases space on a website by charging them only when the space the advertiser is leasing gets used by the website’s users;

U.S. Patent No. 7,269,590 is directed to processes for managing a customized view of a social network user’s profile information. The processes determine the amount and type of information that is disclosed to the requesting user. The amount and type of information may be determined based on various commonalities between the user and the requesting user, such as whether they share a common activity, category, group, or relationship.

U.S. Patent No. 7,599,935 is related to the ‘590 patent and is directed to enabling a user to preview content as it would be seen by a second user depending upon the commonalities between the users;

U.S. Patent No. 7,454,509 is directed to systems and methods that associate communities of users around specific criteria to focus a data stream to the specific communities. For example, a data stream may be biased towards songs by Barry Manilow that is applicable to a community who indicates a preference for this type of music. One application is to focus the data stream to maintain compliance to constraints imposed by the Digital Millennium Copyright Act;

U.S. Patent No 5,983,227 is directed to a custom page server that uses user preferences that are organized into templates. Live data used to fill the templates is stored local to the page server. The structure of the page server allows for faster custom pages and the ability to handle large quantities of users;

U.S. Patent No. 7,747,648 is directed to information retrieval protocols that use a world model. The model includes inter-related models that correspond to something in the real world, such as a place or a person. The protocols provide a channel through which a user can contact a person responsible for the model; and

U.S. Patent No. 7,406,501 is directed to systems and methods for instant messaging using an email protocol. The systems provide for both conversion of instant messages into e-mail messages, and e-mail messages into instant messages.

Facebook denies that they infringe any of these ten patents and has vowed to fight. Many of these patents appear to be directed to basic concepts that may have been in use prior to Yahoo’s patent filings. Further, the patents issued before much of the current case law involving statutory subject matter (i.e., 35 U.S.C. 101) regarding computer-related information. Issues may arise regarding whether these patents meet the new requirements as now interpreted by the Patent Office and various courts.

Yahoo is bringing this suit at a time when Facebook may be somewhat vulnerable. Facebook is in the process of an initial stock market listing that is expected to provide a valuation of between $75 billion -$100 billion. Facebook may be more willing to settle this dispute prior to the offering to remove any potential issues that could affect the value of the company. Yahoo has used this timing strategy before when they sued Google for patent infringement in 2004. That suit was filed at a time when Google was preparing for their initial public listing.

"It's not personal, Sonny. It's strictly business."

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Created on Wednesday, 22 February 2012 21:01

Written by Emily Haas

It’s not wise to cross Don Corleone. Apparently, it’s also not wise to cross Paramount Pictures, the movie studio that claims rights in the iconic character and the stories featuring the Corleone family (or Family). On February 17, 2012, Paramount brought suit against the estate of Mario Puzo, the author of the original “The Godfather” novel, over sequel novels Paramount claims infringe on its copyright and trademark rights. (The case is currently pending in the United States District Court for the Southern District of New York and the complaint may be viewed here). 

Paramount purchased the rights in “The Godfather” from Mr. Puzo in November 1969. According to Paramount, those rights included all rights to create derivative works (read: sequels) to “The Godfather,” in addition to the movie rights. The studio released the movie adaptation of Mr. Puzo’s novel in 1972.  Since then, “The Godfather” has become one of the most influential and critically acclaimed movies of all time. The movie won three Academy Awards, to include the coveted Best Picture; spawned two sequels (“The Godfather Part II” and “The Godfather Part III”); and was named the third best movie of all time by the American Film Institute. (“The Godfather Part II” also ranks on the list at spot number 32, and AFI has since bumped the original “Godfather” movie to the second place spot, behind “Citizen Kane”). “The Godfather” is arguably also one of the most quoted pieces of pop culture, offering some of the most memorable lines in Hollywood history, to include the infamous “I’m gonna make him an offer he won't refuse.”

Paramount and Mr. Puzo apparently maintained a good relationship during Mr. Puzo’s life and Mr. Puzo worked with Paramount on the “Godfather” motion picture sequels. After Mr. Puzo’s death, his estate and Paramount entered into an agreement to publish a “Godfather” sequel novel, “The Godfather Returns.”  The novel was successful, and the Puzo estate released a second sequel novel, “The Godfather’s Revenge” in 2006. A third sequel, “The Family Corleone,” is set to be released in May 2012.

Paramount, however, takes issue with the latter two sequels, claiming that, unlike the first novelized sequel, these books were not authorized by Paramount and infringe Paramount’s copyright rights, as well as Paramount’s trademark rights to THE GODFATHER. Paramount also accuses the latter novels of being “mediocre” and hurting the value of Paramount’s Godfather-related intellectual property. The Puzo estate disagrees with Paramount’s assertions. According to the estate, the copyright purchase did not include publishing rights for the sequel novels.

Currently, the issue appears to hinge on the interpretation of the language transferring the copyright in the original 1969 contract between Mr. Puzo and Paramount. Regardless of which powerful organization emerges the winner in the Godfather turf war, however, the case serves as an important reminder to those engaging in intellectual property transfers to specifically identify and describe exactly what rights are transferred and retained in their contracts.

GOLAN – GIVE ME BACK MY WORK!

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Created on Friday, 10 February 2012 14:02

Written by David Kalish

GOLAN – GIVE ME BACK MY WORK!

Can Congress take works out of the public domain and give protection to the author? Congress says yes, and now so does the Supreme Court.

The recent Supreme Court decision Golan v Holder holds that the Copyright Clause of the Constitution provides for Congress to give copyright protection to works that were previously in the public domain. The case centered around millions of works by foreign authors, including Prokofiev's Peter and the Wolf, the 1927 film Metropolis, the works of Igor Stravinsky, films by Alfred Hitchcock, paintings by Picasso, drawings by M.C. Escher, and writings by George Orwell and J.R.R. Tolkien. These works were in the public domain for a variety of reasons, including: the U.S. did not protect works from the country or origin at the time of publication; the U.S. did not protect sound recordings fixed before 1972; and failure of the author to comply with U.S. statutory formalities. After the U.S. joined the Berne Convention in 1989 and as part of the Uruguay Round Agreement, Congress granted copyright protection to these works. This part of the Agreement (Section 514) granted protection to the authors that they would have enjoyed had the U.S. maintained copyright relations with the author’s country or had the formalities been removed that were incompatible with the Berne Convention.

The case against Section 514 was brought by Lawrence Golan who is an orchestra conductor at the University of Denver. Golan was concerned that these works will not be affordable to many persons and groups. Orchestras that were previously able to buy a work for a relatively small amount would now be forced to pay for each performance. Golan argued that Congress went against the intent of the Constitution’s copyright clause “to promote the progress of science and useful arts” and also violated First Amendment free speech rights.

In a 6-2 majority opinion, the Court (in an opinion by Justice Ginsburgh and joined by Roberts, Scalia, Kennedy, Thomas, and Sotomayor) held that passage of Section 514 did not exceed the power of Congress under the Copyright Clause of the U.S. Constitution. The Court reasoned that passage of Section 514 directed to works already in existence was in agreement with the purpose of copyright law to promote the progress of science. Finally, the Court held that Section 514 does not violate the First Amendment protection of free speech rights. The Court relied heavily on its previous decision in Eldred v Ashcroft, 537 US 186 (2003)(upholding 20 year extension of copyright term of the Copyright Term Extension Act) as supporting its reasoning for each of these issues.

A dissent written by Justices Breyer and Alito reasoned that granting new powers to foreign authors did not serve the purpose of copyright to encourage the progress of science and the useful arts.

One interesting issue is how this ruling will affect the efforts of various parties to digitize the world’s great libraries. The dissent mentioned this issue in stating that millions of foreign works published abroad now may not be able to be included in the various computer accessible databases. Google and the American Library Association both were actively on the side of Golan.

Another interesting issue is whether this case holds for the more general proposition that Congress has the ability to “re-instate” otherwise abandoned rights. Some have extrapolated this line of reasoning into the patent and trademark realm and believe that Congress now possesses the authority to revive an otherwise abandoned or expired patent or trademark.