The TMCA

Since the Supreme Court’s 2014 decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., district courts have had expanded discretion to award prevailing party attorney’s fees in “exceptional cases” under the Patent Act, pursuant to 35 U.S.C. § 285. Section 35 of the Lanham Act (15 U.S.C. § 1117) also permits attorney’s fees awards in exceptional cases, and so courts have increasingly applied the Octane standard to Lanham Act litigation. This month, the U.S. Court of Appeals for the Tenth Circuit became the latest to follow this approach, in Derma Pen, LLC v. 4EverYoung Limited. The appellate court also described the ongoing role of older judicial tests for finding exceptional cases under the Lanham Act, holding district courts are still permitted to look to those tests, so long as they remain cognizant of their broad discretion under Octane. Courts have used various tests for exceptionality over the years, typically focusing on the merits of the losing party’s claims and that party’s conduct in the litigation. By 2014, the test courts used to define exceptional cases in patent law had (in the U.S. Supreme Court’s view) become “unduly rigid” such that it impermissibly encumbered district courts’ statutory discretion. That year, in Octane, the Court reset the test and held that an exceptional case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Although emphasizing discretion, this test lacks the more specific guidance that earlier, circuit-level cases provided. In Derma Pen, the Tenth Circuit focused its analysis on whether the district court was correct to rely on Octane, instead of King v. PA Consulting Group, Inc., a 2007 Tenth Circuit decision describing the standard for exceptional case attorney’s fees under the Lanham Act. This question—which several circuit courts have faced—has two levels: (1) should the same “exceptional cases” phrase in the Patent Act and Lanham Act be interpreted the same way (all circuit courts to date have said yes), and (2) if so, what becomes of older circuit-level Lanham Act precedents that pre-date Octane? King, for example, held that “[a]lthough no one factor is dispositive, a case may be deemed exceptional because of ‘(1) its lack of any foundation, (2) the plaintiff’s bad faith in bringing the suit, (3) the unusually vexatious and oppressive manner in which it is prosecuted, or (4) perhaps for other reasons as well.’” King summarized this test as looking “to both the objective strength of a plaintiff’s Lanham Act claim and the plaintiff’s subjective motivations.” Is this test reconcilable with Octane? (Spoiler alert—yes it is.) The Tenth Circuit’s decision in Derma Pen is the latest chapter in a long-running dispute. Plaintiff Derma Pen, LLC sold micro needling and skin treatment products. In pure layperson terms, informed only by the author watching an online demo video, Derma Pen’s product seems to repeatedly and quickly jab a rotating array of tiny needles into a patient’s facial skin in connection with dermatological treatments. In 2013, Derma Pen brought trademark infringement and other claims against its one-time business partner 4EverYoung Limited, 4EverYoung’s principal Stene Marshall, and two other business entities he had formed. In May 2017, after multiple law firms withdrew from representing 4EverYoung, citing (you guessed it) 4EverYoung’s failure to pay attorney’s fees, the U.S. District Court for the District of Utah entered a default judgment in favor of Derma Pen. The judgment awarded damages and entered an injunction against 4EverYoung, Stene Marshall, as well as “anyone in active concert or participation with, aiding, assisting or enabling” the named defendants. Among other things, the injunction barred infringement of Derma Pen’s DERMAPEN mark. In November 2017, Derma Pen moved the court to hold Stene Marshall—as well as non-parties Joel and Sasha Marshall and DP Derm, LLC—in contempt for violating the injunction. Joel and Sasha Marshall are Stene Marshall’s brother and sister-in-law, and they own DP Derm. DP Derm told the district court that it sold skin creams, not devices. After eighteen more months of litigation, the district court held Stene Marshall in contempt, but denied Derma Pen’s motion as to Joel and Sasha Marshall and DP Derm. Derma Pen’s case appears to have unraveled during the contempt litigation. The district court observed that Derma Pen had violated its discovery obligations, including by failing to produce a qualified corporate representative for a deposition. The court concluded that Derma Pen had produced no evidence of damages, and that Derma Pen’s evidence “was not clear; it was muddled,” “not convincing,” and “unpersuasive.” After defeating the contempt motion, Joel, Shasha, and DP Derm successfully moved for an award of attorney’s fees. Applying Octane (not King), the district court held that Joel, Shasha, and DP Derm were entitled to exceptional case attorney’s fees. The district court based its decision on the totality of five factors: (1) Derma Pen’s failure to prove damages, (2) evidence showing Derma Pen did not have the right to enforce the injunction because it no longer held rights in the DERMAPEN mark, (3) evidence showing the DERMAPEN mark had been abandoned, (4) Derma Pen’s discovery misconduct, and (5) Derma Pen’s failure to obtain any relief against Joel, Shasha, and DP Derm. The court ordered Derma Pen to pay $190,328 in attorney’s fees to Joel, Shasha, and DP Derm. Derma Pen appealed, asserting the district court abused its discretion. Dashing Derma Pen’s hopes of prevailing on appeal, the Tenth Circuit had no trouble concluding that the district court’s decision satisfied the test under King. The court rejected what it saw as Derma Pen’s “attempt to dissect the factors the district court cited in support of its decision,” given that the district court had made clear it was ruling based on the “totality of the circumstances.” The district court was in the best position to assess those circumstances and make the fee determination after overseeing more than six years of contentious litigation. The Tenth Circuit then turned its analysis to whether Octane or King supplied the correct standard of decision to identify exceptional cases in Lanham Act litigation. Joining every other circuit that has addressed the issue, the Tenth Circuit held that the Octane standard applies to fee-shifting disputes under the Lanham Act. The Tenth Circuit described the decisions in King and Octane as “twin sons of different mothers,” citing the 1978 album of the same name by Dan Fogelberg and Tim Weisberg. (Disclosure: The author listened to the album while writing this post and found the jazz flute a little overpowering, although the court should be commended for avoiding the obvious musical reference in a case involving a party named “4EverYoung.”) Musical tastes aside, the Tenth Circuit is right that King and Octane imbue district courts with the same discretionary authority over identifying exceptional cases warranting awards of attorney’s fees. King, however, is slightly more specific than Octane’s “one that stands out from others” standard. Perhaps for that reason, the Tenth Circuit made clear that it was not overturning its earlier decision in King and that the factors identified in King continue to provide worthwhile considerations in determining when a case is “exceptional” under the Lanham Act. Given that, prevailing parties remain free to rely on totality of the circumstances tests for exceptionality and the various factors courts have used to analyze those circumstances, so long as they avoid “unduly rigid” approaches that place too much weight on any single factor. So how does a trademark litigant avoid being on the losing end of an attorney fee motion? It helps to bear in mind the two areas of focus under King—the strength of a litigant’s case and the way that litigant behaves in litigation. Having at least a fair case and fighting in a fair manner will go a long way towards avoiding losing twice—once on the merits and again by paying the other side’s fees.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. Following the Federal Circuit’s decision, the parties shortly thereafter announced that they had settled the litigation on undisclosed terms. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

Earlier this month, the U.S. Court of Appeals for the Federal Circuit reversed a $66 million dollar judgment against beauty industry giant L’Oréal for patent infringement, trade secret misappropriation, and a related breach of a non-disclosure agreement. While the Court remanded for a trial on patent infringement and damages on the patent infringement claim, it dismissed the trade secret misappropriation and breach of non‑disclosure agreement (“NDA”) claims in full, ruling that no reasonable juror could have found either trade secret misappropriation or breach of contract, and thus that the trial court should have granted L’Oréal’s motion for judgment as a matter of law (“JMOL”). The Federal Circuit’s ruling provides some useful reminders on important tenets of trade secret law. The underlying dispute involved plaintiff Olaplex’s discovery of the protective benefit of maleic acid during hair-bleaching treatments. In May 2015, Olaplex claimed that it met with L’Oréal to discuss a potential acquisition of Olaplex and to provide confidential information and documents pursuant to an NDA, including Olaplex’s then-unpublished patent application of the maleic acid invention. Then, instead of proceeding with the acquisition, Olaplex claimed that L’Oréal opted for “Plan B” of copying Olaplex’s patented method and launching competitor maleic acid products in August 2016. Olaplex filed suit in 2017 alleging claims of patent infringement, trade secret misappropriation, and breach of contract. After a lengthy and embattled litigation, including multiple intervening PTAB proceedings and Federal Circuit appeals, the Court made a determination of patent infringement on summary judgment, and the jury found for plaintiffs on patent-validity issues and the trade secret and breach of contract claims. The trial court then adjusted the damages award to avoid inconsistencies and prevent double recovery, and also award exemplary damages, attorney’s fees, and prejudgment interest, amounting to a total judgment of $66,167,843. On appeal, the Federal Circuit closely scrutinized the four groups of trade secrets asserted by Olaplex, which were generally described as: (1) information in an “unpublished patent” application; (2) “business information”; (3) “testing and know how” and (4) “dead ends and trials and errors” and found that as to each, the jury could not reasonably find sufficient proof of the elements of liability. With respect to the information in the unpublished patent application, Olaplex contended that the trade secret was “using maleic acid during bleaching.” The Federal Circuit found that Olaplex failed to establish that the information in the unpublished patent application was not readily ascertainable through proper means, a requirement that is expressly included in the definition of a trade secret. In so finding, the Court reasoned that L’Oréal put forth numerous prior-art references and expert testimony establishing that the prior-art references disclosed the alleged trade secret before the May 2015 exchange. The Court noted that information in published patents or patent applications is readily ascertainable by proper means, and went on to cite a number of cases establishing the general principle that disclosure of a trade secret in a published patent or patent application extinguishes the trade secret. The Court also noted that Olaplex’s own expert admitted that L’Oréal was using maleic acid in a method of bleaching as a pH adjuster before the alleged May 2015 information exchange, but ultimately decided it was not necessary to get into L’Oréal’s evidence of its own internal consideration of using maleic acid before it received the unpublished patent application to arrive at the Court’s conclusion that the claimed trade secret was not, in fact, a trade secret at the time of misappropriation. With respect to the second category of “business information,” which constituted Olaplex’s “financials,” the Court found that Olaplex failed to prove that the use of that information was without express or implied consent. Olaplex asserted that the business information provided insight into whether it was more cost effective for L’Oréal to acquire Olaplex or launch its own products (i.e. a “Build v. Buy analysis”). However, the Federal Circuit found that the parties’ NDA explicitly gave L’Oréal authorization to use the information in that way, as the very purpose of the agreement was to allow L’Oréal to evaluate a possible acquisition. As a result, L’Oréal’s use of the business information trade secret was not improper since it was consented to by Olaplex. With respect to the third and fourth trade secret categories of “testing and know how” and “dead ends and trials and errors,” the Federal Circuit found that there was an utter lack of proof that L’Oréal misappropriated anything secret within these groups. The Court reasoned that Olaplex described the categories with a high level of generality and never identified with specificity any particular information about testing, know how, dead ends or trial and error processes and evidence showing that L’Oréal made use of that information, let alone evidence of why that use was improper. Indeed, the Court noted that Olaplex addressed this information in a single sentence which indicated that these items yielded a dramatic change in L’Oréal maleic acid research. And, even the evidence relied upon for this assertion did not establish that L’Oréal misappropriated these buckets of “trade secrets” as opposed to the information contained in the unpublished patent application discussed above. The Court also found that, in part due to the absence of particularity provided by Olaplex describing these categories of purported trade secrets, the Court could not say that the evidence allowed a reasonable finding that the information was even a trade secret. The Court examined the expert testimony on these trade secret categories and found that “testing and know how” and “dead ends and trials and errors,” were not identified sufficiently to provide a concrete basis for finding that they were not readily ascertainable by proper means, including through prior literature on the topic. The Court finished its discussion of the third and fourth trade secret categories by articulating the general rule that a person claiming rights in a trade secret bears the burden of defining the information for which protection is sought with sufficient definiteness to permit a court to apply the criteria for protection and determine the fact of appropriation. As the Court explained, the requirement of reasonable particularity matters because a trade secret described in general terms will usually be widely known or readily ascertainable by proper means, and thus not a trade secret. Further, without particularity, there is an inadequate basis for a fair adjudication of what information was actually used by the defendants. And, courts and juries require precision because, especially where a trade secrets claim involves a sophisticated and highly complex system, the trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract. The Court then concluded that Olaplex had failed to provide such particularity as yet another basis why Olaplex’s claim failed. Accordingly, the Federal Circuit concluded that the trial court should have granted L’Oréal’s JMOL motion. The Court also found that, in light of its trade secrets rulings, the breach of contract claim also could not survive because it was based on the same information that was purportedly given to L’Oréal under the NDA. The Federal Circuit’s decision provides a useful reminder of several key principles of trade secret law. First, the Court points to a key tension in determining the method for protecting intellectual property, in that once a published patent application or patent discloses trade secret information, it generally extinguishes the information’s trade secret status. Thus, the decision of how best to protect trade secret information that is potentially patentable should be evaluated carefully. Second, although it seems obvious, misappropriation does not occur when the alleged infringer has express or implied consent to use the information in the manner in which it has used the information that is the subject of alleged infringement. Finally, to be successful in litigation, a trade secret needs to be disclosed with reasonable particularity. In fact, in trade secret litigation in certain jurisdictions, a particularized disclosure of the trade secret is a prerequisite to obtaining discovery of the adversary’s confidential proprietary information pertaining to the alleged infringement.

The rise of Artificial Intelligence (AI) over the past decade is undeniable, and we reap its benefits throughout the day when using our smartphones, managing our bank accounts, listening to a customized playlist, shopping online, etc. What may be less apparent to the casual observer is the use of AI in creative endeavors. Some AI technologies have reached a point where they can now effectively perform creative tasks, such as inventing devices or machines, composing music, or even writing novels. We are only now beginning to see the impact of such uses of AI in the development of intellectual property law. The development of AI creation applications is raising important questions for intellectual property policymakers. Last year, the USPTO sought public comment on IP protection for inventions created using AI. It received nearly 200 responses and launched a page on its website providing information on AI initiatives, public notices and responses, and outside resources. This move left many to wonder whether AI innovations would begin to receive increased IP protection, where, historically, such protection has been thin or nonexistent, when the creative process is known. The USTPO recently responded to such speculation when it issued its decision confirming the refusal for patent protection for an invention generated by “DABUS,” an AI machine. Stephen Thaler filed U.S. Patent application number 16/524,350 with the USPTO last July, with the sole inventor listed as “DABUS, the Creativity machine that has produced the…invention.” The USPTO issued a Notice to File Missing Parts of Nonprovisional Application, requesting identification of each inventor by name, and refused to examine the patent. Thaler petitioned that this notice be vacated, which was denied, and then Thaler petitioned for reconsideration. In denying Thaler’s petition for reconsideration, the USPTO pointed to statutes such as 35 U.S.C. §§ 100(f)–(g) and § 101, which use words such as “individual” and “whoever” in the context of inventorship to conclude that the Patent Act requires a human “natural person.” The USPTO also cited Federal Circuit precedent stating that the mental step of conception of an invention must be performed by a natural person, rather than corporations or sovereigns. It should be noted that the issue of inventorship, while necessary for validity, would likely not have been reached had Thaler named himself as inventor on the patent application, as the determination of the true inventor is still based solely on the supposition of a good faith filing by the patent applicant under current USPTO patent examination procedures. Furthermore, the process by which the invention was created is not something that the USPTO will examine, and so the use of AI in the inventive process is not going to negative an applicant’s claim of inventorship. Non-human creators face similar obstacles in obtaining other types of IP protection as well. Just as AI machines are generating new inventions, AI programs are engaging in the creative process of generating musical compositions. As one example, LifeScore, an AI-augmented adaptive music platform, recently announced that it will be providing a live, adaptive soundtrack for Artificial, an interactive sci-fi and award-winning television series. LifeScore takes recorded musical raw material and processes it, via a proprietary AI platform, to create musical compositions that uniquely adapt to a listener’s environment and inputs without sounding synthetic or repetitive. For Artificial, viewer reaction will influence the music generated by LifeScore. While AI musical compositions have started to create a stir in the music industry and even win awards, the question remains: will these soundtracks ever enjoy copyright protection? Notwithstanding the fact that the word “human” does not appear in the U.S. copyright statutes, currently, the answer to this question is no. As stated in the U.S. Copyright Office’s Compendium of U.S. Copyright Office Practices (Section 306), “Because copyright law is limited to ‘original intellectual conceptions of the author,’ the Office will refuse to register a claim if it determines that a human being did not create the work” (citing Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884)). This concept has also been more recently illustrated in the famous monkey selfie case where copyright protection was denied to a Celebes crested macaque, since the macaque is not a human. The question of copyright protection for computer-generated works is also not a new one; in fact, in 1965, the Copyright Office raised this concern when it stated that the office had previously received an application for a musical composition created by a computer, and it estimated “that both the number of works proximately produced or ‘written’ by computers and the problems of the Copyright Office in this area will increase.” This prediction has come to fruition. Some may argue that the lack of IP rights to encourage investment and innovation to transform inventions and other works into merchantable commodities may disincentive such innovation and creation. At least for now, it seems as if IP law is not yet aligned to afford IP protection to the dramatic developments in AI technologies over the past decade. The USPTO has signaled that it is not ready to knowingly grant patents for innovations created without a human inventor. As companies seek to secure patent protection for more complex inventions, it stands to reason that some may simultaneously seek to obfuscate the inventive process or the involvement of AI machines in their creation. We can expect the USPTO to adapt its procedures over time to account for this, so companies should be prepared for more investigation into inventorship issues in the future. It will also be interesting to see if the Copyright Office is willing to change its tune and allow AI-generated works to enjoy copyright protection, especially when such works are receiving recognition in other forms.

When I was a kid, we anxiously awaited Christmas Eve, with the exception of traditional lutefisk dinner. If you too have ingested lutefisk, you may agree that it is unpalatable. My Dad’s now family-famous quip was “just put more melted butter on it.” That quip went through my head while reading the Federal Circuit’s decision in Columbia Sportswear North America. v. Seirus Innovative Accessories. Just like adding more melted butter, the ability to add a logo to overcome a design patent infringement claim, is not palatable to the design patent bar or to design patent owners. Columbia Sportswear filed suit against Seirus in the Southern District of California, where it received a $3 million summary judgment with respect to the infringement of its patent in the above-featured design. Columbia’s design patent consists of the ornamental design of heat reflective material—a wave pattern featured in its body gear and sleeping bag products. Seirus released a line of gloves and other products with the above-featured wave design. The district court held that “even the most discerning customer would be hard pressed to notice the differences between Seirus’s HeatWave design and Columbia’s patented design,” and further characterized the presence of Seirus’s Logo as a “minor difference.” In its decision, the district court relied upon precedent established in L.A. Gear, Inc. v. Thom McAn Shoe Co., which held that logos should be wholly disregarded in the design infringement analysis. In reversing the district court, the Federal Circuit acknowledged that the premise of L.A. Gear is that “a would-be infringer should not escape liability for design patent infringement if a design is copied but labeled with its name.” But the Federal Circuit narrowed the application of that decision, indicating that “L.A. Gear does not prohibit the fact finder from considering an ornamental logo, its placement, and its appearance as one among other potential differences between a patented design and an accused one.” The court leaned on the Supreme Court’s decision in Gorham Co. v. White, which explained that “if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.” The Federal Circuit reasoned that “a fact finder is tasked with determining whether an ordinary observer would find the ‘effect of the whole design substantially the same,’” and thus it is not proper to ignore elements of the accused design entirely. It then reversed and remanded the district court’s grant of summary judgment. So why do we care? Because from the perspective of the design patent bar and design patent owners, several of whom filed amicus briefs in conjunction with Columbia’s petition for rehearing filed this month, this decision “will likely have far-reaching and unintended consequences for design patent law…it threatens the integrity and reliability of the design patent system and jeopardizes the value of millions of design patents.” From that perspective, if a design is the only focus of a patent, should it not stand that the analysis in an infringement claim should be limited to the design and not additional elements? If not, then “Slapping a Logo on It” creates a path to readily overcome a design patent infringement claim on an otherwise infringing product, undermining the value and protection of design patents. We will provide updates in this case as they develop.

A fog of uncertainty surrounds regulations in the marijuana industry. At the federal level, the plant is still a Schedule 1 substance under the Controlled Substances Act and, therefore, federally illegal to possess, sell, and distribute. However, this has not stopped states from implementing their own laws allowing their citizens to take advantage of the plant’s (and associated products’) potential benefits. With these changes, a new industry has developed providing many opportunities. Savvy business owners understand that patents, trademarks, and copyrights provide protection for their business. Protecting intellectual property can be crucial to a company’s success, especially emerging companies, but doing so is never an easy task. For the marijuana industry, with its explosive growth and unsettling legal landscape, it is even trickier given the federal laws in place. That said, there are still many opportunities for intellectual property protection in the marijuana industry. To help navigate the treacherous landscape, we will be publishing a series of posts directed to intellectual property protection for marijuana related businesses. This first post will introduce the intellectual property issues currently facing marijuana businesses and set the stage for later posts on more specific topics, such as Plant Patents, Marijuana-Related Trademarks, Patenting Paraphernalia, and more. To get us started, here are a few common perceptions we would like to smoke out: Misconception #1 – Cannabis and cannabis-related products can’t be patented or trademarked because they are federally illegal. While it is true that marijuana’s possession, use, and sale is federally regulated, the United States Patent and Trademark Office (“USPTO”) has issued and continues to issue patents directed to the plants and their extracts, as well as related devices and methods, including grow techniques, manufacturing methods, extraction techniques, and consumption devices. Like patents, copyrights in the visual artwork of a logo design can be protected by federal registration (provided the design features sufficient creative authorship). This also applies to books, pamphlets, fliers, videos, and websites. Trademark protection can be trickier. Federal trademark applications require submission of specimens of the mark to be registered, and evidence that it has been “lawfully” used in commerce. In some cases, depending upon the mark and its intended use, this may be impossible. That said, an experienced trademark lawyer, such as the authors of upcoming blog posts, may be able to identify avenues for trademark protection. The bottom line is that protection for your intellectual property, from patents to trademarks, is possible and should not be avoided. Even if you never intend to go to court with your U.S. Patent or Registered Trademark, your business may benefit from protecting those assets, because not doing so may be the same as giving them away. Misconception #2 – I can’t send marijuana related inventions and other IP via U.S. mail, so I can’t apply for protection. Securing protection for your intellectual property, in most cases, does not require providing a Schedule 1 substance to the government. The days of providing a working model or sample of your invention to the U.S. Patent Office are long gone (unless you are trying to patent a perpetual motion machine or a time travel device – but those subjects are the focus of a completely different blog…). With regard to trademark and copyright applications, which do require submission of a specimen or copy of the artistic work, it’s likely that some of your rights can be protected without making reference to the controlled substance. Works of art filed with the Copyright Office do not need to be associated with any particular product and trademark applications can be drafted to cover lawful goods only, such as “t-shirts” or “kitchen grinders.” It’s probably wise to then avoid submitting specimens that obviously show you’ve sold a controlled substance or related paraphernalia in interstate commerce. An experienced attorney can help determine options for safely filing those submissions. Misconception #3 – I can’t enforce my IP rights, even if I can get them. This is where it gets a little more sticky and uncertain. Because it is a relatively new concept to obtain intellectual property protection for marijuana and marijuana-related products, it will take some time until enough litigation has occurred to give a clearer picture of the overall trends. To date, we know of only one pending infringement case related to cannabis. It was filed July 30 in Colorado. We won’t know the outcome for several months – maybe even years. This article was original published on the Dorsey Cannabis Blog.  For more information about Dorsey’s cannabis industry practice, visit www.dorsey.com/services/cannabis.

The Federal Circuit’s ongoing effort to implement TC Heartland—the Supreme Court’s landmark 2017 patent venue decision—took another step forward in May with In re BigCommerce, Inc., which vacated and remanded two decisions out of the Eastern District of Texas after defendants sought mandamus relief following denial of their motions to dismiss and transfer for improper venue. At issue were two narrow and related questions: Does a domestic corporation incorporated in a state having multiple judicial districts “reside” for purposes of the patent-specific venue statute, 28 U.S,C, § 1400(b), in each and every judicial district in that state? And, if not, in which district does a domestic corporation reside? The appellate court left no room for doubt when it invoked the statute’s “language, history, purpose, and precedent” and held that for purposes of determining venue in a state having multiple judicial districts, a corporate defendant shall be considered to “reside” only in the single judicial district within that state where it maintains a principal place of business. Alternatively, if the corporation does not maintain its principal place of business within the state in which it is incorporated, then venue is proper in the judicial district in which its registered office is located. The laser-focus of the Federal Circuit’s decision belies the impact years of contrary interpretation of the patent venue statute have had on U.S. patent litigation. For example, before TC Heartland, the number of patent suits filed in the (very rural) Eastern District of Texas famously outstripped that of any other venue in the U.S., despite being sparsely populated and far from most major technology hubs. According to Lex Machina, in 2015 approximately 45% of new patent cases were filed in the Eastern District of Texas. In fact, the Eastern District’s reputation for being the preferred venue for patent plaintiffs achieved sufficient notoriety to enter popular culture. See e.g., “When Patents Attack!” This American Life, July 22, 2011. The Eastern District’s run as the go-to venue for patent litigants was largely made possible by an expansive and—per TC Heartland—incorrect reading of the patent venue statute, which allowed plaintiffs to claim venue was proper in any district in which defendants were subject to personal jurisdiction. Following TC Heartland, which limited venue to districts in which the defendant resides or has committed an infringing act and has a regular and established place of business, the share of new patent cases in the Eastern District of Texas has dropped to approximately 13%. As a practical matter, In re BigCommerce, Inc. resolves ambiguity as to which district in a multi-district state is proper for patent litigation. More broadly, the decision is yet another measure of TC Heartland’s ground-shifting impact on patent litigation. A harder question is whether In re BigCommerce, Inc. will help spur (pun intended) changes to years of unique local practice in the Eastern District of Texas. On May 29, 2018, Judge Gilstrap followed other recent Federal Circuit precedent to find that the venue statute did not compel transfer. That said, he nonetheless transferred the case based on convenience factors. Although it’s too early to say which way the Eastern District of Texas is heading, this recent opinion from one of its most closely watched patent judges tentatively points in a new direction.

When filing a utility patent that includes design elements, the patentee is often faced with the question “should I also file a design patent?” The patentee may answer with “there is no need to file the design patent since the design elements are covered by the utility patent.” However, a recent case in the United Stated District Court for the Southern District of California, Columbia Sportswear v. Seirus Innovative Accessories, illustrates that filing a design application along with a utility patent can have some very powerful and lucrative benefits. Columbia Sportswear owned three patents directed towards heat reflective lining of outdoor equipment. The three patents are U.S. Patent No. 8,453,270, U.S. Patent No. 8,424,119, and U.S. Design Patent No. D657,093. The reflective lining was used in Columbia Sportswear’s Omni-heat products. In January 2015, Columbia Sportswear sued Seirus Innovative Accessories, alleging that Seirus’ HeatWave gear infringed the three patents. During litigation, Columbia Sportswear filed a summary judgment motion arguing that Seirus infringed the three patents as a matter of law. The court dismissed Columbia Sportswear’s motion regarding Seirus’ infringement of Columbia Sportswear’s two utility patents. However, the court held that Seirus infringed Columbia Sportswear’s design patent. In particular, the court held that the designs of Columbia Sportswear’s design patent and the lining of the HeatWave gear were “strikingly similar” and, as such, met the requirement for infringement of a design patent. This leads to the first reason to file a design patent along with a utility patent: design and utility patents have different standards for infringement. For example, the owner of a design patent needs to demonstrate that an ordinary observer would find the two designs to be substantially the same to prove infringement while the  owner of a utility patent needs to demonstrate literal infringement or infringement under the doctrine of equivalents. The different standards for infringement mean, in some circumstances (as was the case for Columbia Sportswear), it can be easier or more straightforward to demonstrate infringement of a design patent than a utility patent. Before the case went to trial, Columbia Sportswear dropped U.S. Patent No. 8,424,119 from the suit. After trial, a jury found that Columbia Sportswear’s remaining utility patent was obvious in view of the prior art. This leads to the second reason to file a design patent along with utility patent: design patents and utility patents have different standards of obviousness. As such, as was the case with Columbia Sportswear’s patents, a factfinder can find that the utility patent is invalid while the design patent is valid. The jury also found that Columbia Sportswear was entitled to all of Seirus’ total sales for the infringing products, about $3.4 million. This leads to the third reason to file a design patent along with a utility patent: damages for infringing a design patent are different (e.g., can be greater) than a utility patent. Columbia Sportswear v. Seirus is the first court case to determine damages after the U.S. Supreme Court’s decision in Apple v. Samsung. 580 U.S. ___ (2016). However, as shown in this case, damages for infringement of a design patent can result in the patent owner receiving all of the total sales of the infringing product instead of just a reasonable royalty or lost profits as in the case of utility patents. Note that the damage analysis for design patents is fluid and therefore may change. In sum, it can be beneficial to file a design patent along with a utility patent because (1) it can be easier and/or more straightforward to demonstrate infringement of a design patent compared with a utility patent; (2) the design patent can be valid even though the utility patent is invalid; and (3) damages for infringing a design patent can be all of the total sales of the infringing product.

The Supreme Court recently sounded the death knell for patent litigation in the Eastern District of Texas, overruling the Federal Circuit’s interpretation of 28 U.S.C. § 1400(b) and dramatically reducing forum shopping in patent cases.  In TC Heartland LLC v. Kraft Foods Group Brands LLC, the Supreme Court overturned nearly thirty years of Federal Circuit case law that permitted plaintiffs to file patent lawsuits wherever a defendant would be subject to personal jurisdiction. The Court held that under 28 U.S.C. § 1400(b) “a domestic corporation ‘resides’ only in its State of incorporation.” This will significantly reduce the filings in the Eastern District of Texas but may increase the number of filings in jurisdictions such as California or Delaware, where many corporations are incorporated. What does that mean for venue in copyright cases, governed by 28 U.S.C. § 1400(a)?  For several reasons, we don’t expect to see any dramatic shift in venue for copyright cases.  Although similar to the patent venue statute addressed in TC Heartland, § 1400(a) differs in a few noteworthy ways: Copyright Venue – § 1400(a).  Civil actions, suits, or proceedings arising under any Act of Congress relating to copyrights or exclusive rights in mask works or designs may be instituted in the district in which the defendant or his agent resides or may be found. Patent Venue – § 1400(b). Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business. The logic of the Supreme Court’s restrictive interpretation of the term “resides” in §1400(b)  would seem to apply equally to that same term in §1400(a) , although there is room for some argument given the Court’s careful observation that it was simply applying its past precedent and was not asked to reconsider the correctness of that past precedent.   Even if the term “resides” is interpreted narrowly, the other provisions of the copyright statute would prevent any dramatic restriction in copyright venue. The copyright statute is broader in two key ways: In addition to the location where a defendant resides, a copyright action may be initiated in any location where a defendant “may be found.” Some courts have held that, for purposes of § 1400(a), a defendant “may be found” in any jurisdiction in which it is subject to personal jurisdiction.  See, e.g., Time, Inc. v. Manning, 366 F.2d 690, 697-98 (5th Cir. 1966); Isbell v. DM Records, Inc., No. Civ.A.3:02-CV-1408-G, 2004 U.S. Dist. LEXIS 10394, 2004 WL 1243153, at *13 (N.D. Tex. June 4, 2004); CAVU Releasing, LLC v. Fries, 419 F. Supp. 2d 388, 394 (S.D.N.Y. 2005).  If this broad interpretation is applied, then any reduction in the scope of “resides” is counteracted by a broad reading of “may be found.” Unlike the patent statute, the copyright statute examines the location of both the defendant and its agent, which provides an opportunity for broader venue. While TC Heartland signals a dramatic shift in venue for patent cases, it does not portend a similarly dramatic shift for copyright cases.

The Supreme Court ruled yesterday that Lexmark’s decision to sell its patented printer ink cartridge exhausted all of its patent rights in that cartridge, regardless of any contractual restrictions Lexmark attempted to impose on the purchaser’s use and resale of that cartridge and regardless of whether the sale was domestic or international. Lexmark makes and sells toner cartridges for printers and offers buyers two options: One is to buy a cartridge at full price with no strings attached, allowing the buyer to refill the cartridge when depleted. The other is to buy a discounted cartridge through Lexmark’s Return Program under which the buyer agrees not to refill the cartridge nor to give/sell the empty cartridge to anyone other than Lexmark. Lexmark sued Impression Product, Inc., for refurbishing and reselling used Lexmark Return Program ink cartridges. The Supreme Court held that Lexmark pushed the patent law too far. The Court held that Lexmark’s original sale of the printer cartridge extinguished its patent rights for that cartridge under the “exhaustion” principle. This principle (sometimes called the first-sale doctrine) states that once a patented product is sold, purchasers may do what they please with the product. The Supreme Court confirmed that the principle applies to sales made in the US as well as abroad. So, someone who purchases a good from a patentee or its licensee, can no longer be liable to the patentee for patent infringement. In dicta, the Court noted that a patentee could via contract limit a licensee. For example, a patentee could contractually limit a licensee to only sell to non-commercial end users and require the licensee to obtain an agreement from the end users promising not to use the product in business. In such a case, patent exhaustion does not apply to the licensee because the patentee is not selling it a good, but only a portion of a right (i.e., the right to exclude the licensee from making and selling otherwise infringing goods). However, patent exhaustion does apply to the end user because the patentee via the licensee sold the end user a good. Therefore, if the end user violates a contract limitation on commercial use, the patentee’s only remedy is for breach of contract. Other industries attempt to restrict post-sales activities: patented drugs that are sold abroad but may not be imported to the US, bio-engineered seeds which farmers must buy new each year, and companies that limit the “right to repair” their products after they are sold. Companies like Lexmark—which try to maintain control of a product after sale—will have to adjust their business models. Depending upon the industry, using contract law instead of patent law may not be as attractive to patent holders. For example, in some industries it may be impractical to require end users to sign a contract limiting their use of a product and/or impractical to sue all such end users. In the Lexmark case, even assuming Lexmark required its end users to sign a license restricting reuse, it would have no way of knowing which end users had violated the agreement by selling an empty cartridge to a refurbisher and would have no remedy against the refurbisher (who has no contract with Lexmark) in contract or under patent law. It would also be logistically difficult to keep track of all of the end user licenses. Moreover, the remedy for using a product outside the scope of that license after the sale would  now fall under standard contract law remedies. Time will tell how companies react to this narrowing of patent protection for patent holders.

Apparently, quite a bit according to the Supreme Court.  The Supreme Court has dipped its toe into the waters of intellectual property law again and has decided to overturn 150 years or more of common law precedent in its decision in SCA Hygiene last week.  SCA Hygiene held a patent on an adult diaper design and sent notice to defendants in 2003 claiming infringement.  Defendants responded that prior art rendered the patent invalid.  Defendants did not hear from SCA Hygiene again for seven years, at which point they received a complaint for patent infringement.  Defendants raised a defense of laches (among others), arguing that the action should be time barred.  The District Court and the Federal Circuit both granted dismissal on the ground of laches. The Supreme Court reversed.  According to the decision, because the patent statute provides for a statute of limitations, the common law defense of laches has no purchase “within” that six year limitation period.  The actual effect is that there is likely no longer a place for laches as a defense in a patent action, even if grounded on a period outside the six year statutory window for damages, as there was a seven year break in action here. This decision was little surprise to observers who watched the Supreme Court come to the same conclusion in a copyright case two years ago.  In Patrella v. Metro-Goldwyn-Mayer, the court held that laches cannot preclude a claim for damages within the 3-year limitations period provided in the Copyright Act.  In Patrella, an heir to the author of the screenplay for the movie Raging Bull reinstated the copyright rights as provided under the statute, but waited 18 years after first notifying the defendant of the claim to bring suit.  At the time of plaintiff’s original notice, the defendant believed that the plaintiff did not hold the necessary right to bring suit.  The defendant asserted a laches as defense due to the long delay in bringing suit. The Court in SCA Hygiene found little difference between the rationale for its prior denial of a laches defense in copyright cases and its present preclusion of laches in patent cases.  The Court concluded that the provisions for statutes of limitations in the Patent and Copyright Acts supersede and supplant any application of the doctrine of laches. Justice Breyer dissented in both instances. So what are we talking about here?  A statute of limitations is a law that limits the time in which a party can institute an action for a claim, either in tort or contract.  The time limit is usually a number of years from the date on which the action accrued (or on which the harm or breach was discovered).  For example, if you are in a car accident, the cause of action accrued when the accident occurred.  Most states provide that you must file suit to recover damages within 2 or 3 years of the date of the accident.  Otherwise, you are deemed to have forfeited your rights to bring an action to recover damages.  The purpose of a statute of limitations is to provide certainty and closure to parties.  The law prevents lawsuits from being raised long after the claim accrued when memories are fuzzy, evidence is gone, and parties have long presumed that the potential grievance was waived and forgotten. Laches is a common law imposition of a limitation on an action implemented by the courts when a determination is made that a party waited far too long to bring an action such that allowing the action to proceed would be unfair or unjust to the defendant.  Unfairness considerations in a laches analysis are similar to the reasons for limitations statutes, for example, upsetting longstanding expectations and evidentiary prejudice.  The decisions in SCA Hygiene and Patrella dive deep into esoteric discussions about differences between the role of laches in historical cases in “equity” vs. in “law.”  Both the majority and the dissent believe that history supports their decision. What is the takeaway?  If you are a patent or copyright owner, your path to seeking redress has been smoothed, even if you wait what may otherwise be considered an inordinate amount of time to bring an action.  If you are a potential defendant that receives notice from a right holder, do not sit back and wait for a plaintiff to take action.  Seek advice of counsel, including an opinion as to whether your actions infringe the asserted rights.  If you have a strong position that you do not infringe or have other legal defenses, assert them either through negotiation to reach a final settlement of the issue or by filing a declaratory judgment action to resolve the claim.  If it is a patent claim, consider using the administrative options of requesting reexamination or other form of post grant review.  Don’t just ignore the situation and hope it goes away, because going forward it is highly likely that a long forgotten claim will rise again without a defense of laches to stop it.

In February, Waymo LLC, formerly Google’s self-driving car development company, sued Uber Technologies, Inc. and others in federal court in San Francisco for, among other things, violations of  the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 et seq., and patent infringement, and for a preliminary injunction against defendants’ use of the allegedly misappropriated information.  The complaint alleges that three former Waymo employees downloaded over 14,000 files equating to 9.7 GB of data related to Waymo’s highly confidential “LiDAR” technology that is central to implementing its self-driving technology.  Shortly after downloading this data, Waymo alleges that the three Waymo employees defected to defendants Ottomotto LLC and Otto Trucking LLC, which Uber subsequently acquired several months later for $680 million. Waymo alleges that it inadvertently uncovered the alleged misappropriation and infringement when it received an e-mail from one of its LiDAR component vendors, titled “OTTO FILES,” containing a machine drawing of what purported to be an Otto circuit board – but which bore a striking resemblance to Waymo’s circuit boards.  Waymo investigated the departure of the three former employees and their downloading activities, and confirmed that one employee in particular had downloaded each version of each subsequent generation of Waymo’s LiDAR circuit boards.  The complaint alleges that this employee also sought to erase any evidence of his downloading activities in the weeks prior to his departure from Waymo, and that he met with Uber executives prior to his departure. Until its acquisition of the Otto entities, Waymo alleges that Uber did not possess the technology or know-how to engineer its own LiDAR system, and that it was using a system made by a third-party vendor.  “LiDAR” stands for “Light Detection And Ranging” and uses lasers to measure distances between one or more sensors and external objects in order to measure the light that reflects off of objects to identify potential obstacles in the road.  Waymo (under the auspices of Google) began developing its self-driving technology in 2009 and has developed its own LiDAR system tailored from its 2.5 million miles of autonomous driving on public roads and over a billion miles of simulated driving in its labs. The Misappropriation of Trade Secret Claims Waymo alleges claims under both the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 et seq., and the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.  The Defend Trade Secrets Act of 2016 was enacted in May 2016 and federalizes trade secret protection, while preserving state law trade secret protections.  The Act provides a uniform definition of trade secrets, misappropriation, and provides for nationwide service of process and nationwide execution of judgments.  There is a three-year statute of limitation for claims alleged under the Act. Under the Act, the term “trade secret” is defined broadly to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.”  (18 U.S.C. § 1839(3)). The term “misappropriation” has the same definition as it does in the Uniform Trade Secrets Act (and the California trade secrets law) and means:  “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or disclosure or use of a trade secret of another without express or implied consent by a person who—(i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was— (I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that— (I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake” (18 U.S.C. § 1839(5)). Moreover, the term “improper means” is defined to include:  “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and does not include reverse engineering, independent derivation, or any other lawful means of acquisition.” Under both the Federal and California trade secrets laws, Waymo must prove that it took reasonable steps to protect its trade secrets.  Indeed, Waymo alleges that the information obtained by its former employees was encrypted, required passwords, and was accessible only on a “need-to-know” basis.  Waymo further alleges that it required confidentiality agreements with all of its outside vendors and ensured that no single vendor had access to all of its trade secrets, in order to further protect them. Waymo must also identify its trade secrets with reasonable particularity under California law (California Judicial Council of California Civil Jury Instructions (“CACI”) No. 4401).  Waymo has alleged that the misappropriated trade secrets differ from its asserted infringed patents, in that the patents relate to a prior generation of LiDAR designs, which have been subsequently updated to incorporate as-of-yet unpatented designs related to, among other things, measurements for laser beam spacing, elevation, and orientations. If Waymo prevails on its trade secrets claim, it will be able to recover the amount of its actual loss or the amount that defendants were found to have been unjustly enriched in their misappropriation, or both.  (CACI 4409).  Waymo also seeks exemplary damages under Cal. Civ. Code § 3426.3(c) because it alleges that given the circumstances under which defendants obtained their technology, they knew or should have known that the information misappropriated consisted of trade secrets, and their actions were therefore willful, malicious, and fraudulent. Expedited Discovery and Request to Stay Action Pending Arbitration Judge William Alsup, the presiding District Court judge, has since granted the parties the ability to take expedited discovery, including depositions, including with respect to all files allegedly copied by the former Waymo (now Uber/Otto employees) containing the alleged trade secrets.  Waymo’s reply to defendants’ opposition to the motion for preliminary injunction is due on April 21.  The Court will conduct a hearing on the motions on May 4 (Dkt. No. 61). However, on March 29, defendants moved to stay the federal court action and the preliminary injunction motion with respect to the trade secret and unfair competition claims and require Waymo to arbitrate these claims pursuant to the arbitration agreement executed between Waymo and Anthony Levandowski, the first employee to leave Waymo and help form the entities that later became Ottomotto LLC and Otto Trucking LLC (Dkt. No. 125).  Defendants argue that the arbitration provisions require Waymo to arbitrate all disputes “with anyone” that arise out of Levandowski’s employment – including entities not party to the arbitration provisions, such as defendants. Defendants point to the fact that Waymo filed two arbitration demands with JAMs in October 2016 against Mr. Lewandowski in order to bolster their argument.  They argue that Waymo should be equitably estopped from seeking to arbitrate claims with Mr. Levandowski while simultaneously bringing interdependent claims against defendants in federal court.  Defendants argue they will separately initiate arbitration proceedings to seek a declaratory judgment that Waymo’s claims are meritless. However the Court decides defendants’ motion, one thing is certain: with a trillion-dollar industry at stake, the parties will be fastening their seatbelts for what will surely be a rough ride.

The Preparatory Committee charged with the implementation of the Unified Patent Court (“UPC”) announced on 16 January 2017 that it anticipates that the UPC agreement would come into force in December 2017, at which point it is assumed the court will open for business. The announcement coincides with a speech by Theresa May, the British Prime Minister, signaling that the UK will not seek to continue its participation in the European single market after it leaves the EU. The speech has been received as the first clear announcement by the UK Government that it expects negotiations with the EU to result in a “hard” Brexit, even though the Prime Minister also expressed the Government’s desire to enter into a comprehensive free trade deal with the EU that would allow tariff-free access to the single market for British businesses and possible other sector-specific special arrangements. Much debate has taken place since the Brexit referendum in June 2016 on the question of whether the UPC could become reality notwithstanding the UK’s anticipated break from the EU. The UK Government’s official statements over the past few months suggest that participation in the UPC system does not depend on EU membership and the UK announced that it would ratify the UPC agreement later this year. However, it is still difficult to see how Brexit (particularly the hard version now envisaged by the Government) could be reconciled with continued British participation in the UPC system. For one thing, the UPC agreement is based on the supremacy of EU law and the jurisdiction of the Court of Justice of the EU as its final arbitrar. PM May made it clear several times that Brexit means that the UK will no longer be subject to the jurisdiction of the ECJ. It is possible that the Government would be willing to make an exception insofar as European Patents are concerned, although this would seem to be a constitutional fudge. In any event, even if Britain is willing to accept the supremacy of EU law and the jurisdiction of the ECJ in relation to European Patents (and the jurisdiction of an EU court system within its borders presiding, effectively, over all patent matters), the other EU member states that signed up to the UPC agreement still have to agree as well. The UPC agreement will come into force if and when it is ratified by the UK and Germany (it has already been ratified by 11 other EU member states including France which is a required party). Given that the agreement includes the UK hosting the important pharma and life science section of the Court’s Central Division, which is envisaged to be based in London, other member states may see the country’s participation in the UPC as a prize for the UK. Given the UK’s apparent desire to see the system becoming reality, and to continue its participation after Brexit, EU member states may use this issue as a bargaining chip in negotiations with the UK. Germany may decide therefore to delay its ratification of the UPC agreement until a final deal on Brexit (and on the new trading arrangements between the UK and the EU) is struck. A different question might arise if both Germany and the UK ratify the agreement. The UPC agreement was open for participation only by EU member states. It is silent on the question of what happens when a party leaves the EU. If the agreement is indeed ratified before the UK leaves the EU, the question of what happens on the day after will be one more item on the list of issues for Brexit negotiations. Notwithstanding the announcement of the Preparatory Committee, therefore, it remains somewhat premature to assume that the UPC will actually open up for business at the end of this year.

It’s no secret that plaintiffs bringing patent litigation choose the forum carefully.  Though the appellate review of patent litigation is centralized in one appellate court with limited jurisdiction – the Court of Appeals for the Federal Circuit – patent litigations proceed in district courts of general jurisdiction throughout the nation.  There is a remarkable concentration of cases; over half of the patent infringement cases filed in 2015 were filed in two jurisdictions: the Eastern District of Texas (43.6%) and the District of Delaware (9.3%).  The other 47% of cases were spread among the remaining 92 district courts across the nation. One defendant is challenging this practice, and the U.S. Supreme Court has agreed to consider the issue.  TC Heartland LLC was sued in federal court in Delaware for alleged patent infringement.  TC Heartland moved to transfer the venue to Indiana, its state of incorporation, but the request was denied.  The Federal Circuit affirmed the district court’s decision, and TC Heartland petitioned for certiorari. TC Heartland’s argument relies on a distinction between general venue rules – which allow for suit in any jurisdiction in which a corporation operates or can be found – and the specific venue rules for patent cases. In simplified terms, TC Heartland’s argument is as follows: Section 1400(b), the patent venue provision, states that a “civil action for patent infringement” can be brought in one of two places:  (1) the district in which defendant resides, or (2) a place where defendant committed acts of infringement and has a regular and established place of business. Section 1391(c), a general venue provision, has come to mean that a defendant can be sued in any jurisdiction in which personal jurisdiction can be exercised over it. In 1957, the U.S. Supreme Court held that "§ 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c),” which is a general venue provision.  Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957). In 1990, the Federal Circuit was asked to decide a similar issue as in Fourco in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).  Noting that Congress had revised § 1391 in 1988, the Federal Circuit stated that it was faced with a “question of first impression.”  It came to the opposite decision as the Supreme Court.  The Federal Circuit held that the new § 1391 applies to patent infringement cases, and that a corporate defendant “resides” in any jurisdiction in which there would be personal jurisdiction. In 2011, Congress modified § 1391 again, providing that § 1391 governs “all civil actions” “except as otherwise provided by law.” Petitioner TC Heartland argues that the general venue statute does not modify the patent-specific statute, particularly in light of the 2011 amendment.  The respondent, Kraft Foods, argues that the Federal Circuit correctly ruled that § 1391 – after the 1988 amendment – does modify § 1400(b), and that the Federal Circuit’s decision was correct. The Supreme Court granted certiorari on December 14.  This complicated issue of statutory construction is the type of issue the Supreme Court enjoys.  We can expect to see a hotly-contested issue and some heavy-duty briefing with extensive legislative history and analysis, and a substantial number of amicus briefs.  Just at the petition stage, the Court received seven amicus briefs from four industry groups, 56 professors and 33 companies. If Heartland is successful in narrowing the jurisdictions in which a defendant may be sued, the ruling could apply to copyright cases as well, though the limits would not be the same.  Section 1400(b) allows a defendant in a patent infringement suit to be sued in (1) the district in which it resides, or (2) a place where defendant committed acts of infringement and has a regular and established place of business.  In contrast, a copyright case can proceed under § 1400(a) in any jurisdiction “in which the defendant or his agent resides or may be found.” Stay tuned for further developments on this case at The TMCA!