Protecting your interests

2011 Notable Intellectual Property Changes

December 28th, 2011 by Jacob

2011 was an interesting year for intellectual property law. Major revisions to patent law were passed by Congress, the Supreme Court addressed both copyright and trademark law, and Congress is debating several sweeping changes to intellectual property law as it applies to the internet. This first part will discuss some prominent developments for 2011. The second part will discuss pending legislation for 2012.

2011 Patent Reform Act

America Invents Act: Congress passed the Patent reform in the form of the America Invents Act supported by President Obama who spun it as a jobs bill, but everyone else mostly yawned and it quickly faded from the news. Politico coverage

The America Invents Act did make one major change to U.S. patent law. It changed U.S. patent law to a ‘first to file’ system from the ‘first to invent’ system. This is a major change. Indeed most intellectual property law contains the concept that a registration/filing is encouraged by granting certain benefits, but the right is conveyed by the first person to create the intellectual property. However, the U.S. is the exception in a world where almost all other countries follow ‘first to file’ rules. The America Invents Act now brings U.S. patent law in line with the rest of the world. Certainly this will make many patent disputes much clearer because so much patent litigation centers on resolving the ‘first to invent’ issue. However, the ‘first to invent’ system really was meant to serve the small inventor who did not have the resources to file patent applications. If small business create so many new jobs how does this law get pushed as a job creating law. On the other hand the law does create a new ‘micro-entity’ status for small-scale inventors (less than five previous patent applications). Greatly reduced filing fees will apply to such qualified applicants.

There are many other smaller changes to the patent law such as procedures for challenging patent, patent litigation procedures, and tax issues. However, most of the criticism revolves around the many issues not addressed by the law. The problems of patent trolls and forum shopping were not even touched by the law. For those interested in the details of the new patent law here are some suggested resources.

2011 Patent Reform Act Further Reading:
Just What You Need to Know (PCWorld)

Patent Reform Legislation Set to Become Law, but Will Make Few Meaningful Changes
Patent Reform and You by YourPatentGuy

2011 Copyright Developments

Supreme Court Decides Golan V. Holder: This was an important case for the Supreme Court to address but has yet to issue an opinion. The case arose from a conflict between U.S. copyright law and copyright law in foreign countries because under the Berne Convention, which the U.S. is a signatory member, each country must honor the intellectual property laws of each other. In 1994 Congress passed a law establishing copyrights for certain foreign works for authors who never had U.S. copyright protection. This was required to comply with the Uruguay Round Agreements to the Berne Convention. However this removed many works from the public domain in the United States and, of course, angered someone enough for them to sue. It should be noted that the 1994 law, under section 514, had several provisions to minimize the impact of the change. The Court will put the Berne convention into serious disarray if the court strikes down the law.

Copyright/trademarks- first sale doctrine and imports

Supreme Court splits 4-4 in Costco v. Omega, with Justice Kagan sitting it out, effectively affirming the lower court decision denying a first-sale defense under copyright law for unauthorized imports. I previously discussed this case which was decided December 2010 and the related subsequent Court of Appeals case John Wiley & Sons v. Kirtsaeng. The case is interesting because it really uses copyright law to do something for which trademark law was intended.

Costco imported Omega watches made with the consent of the copyright holder but were imported without the copyright holder’s consent for resale in Costco stores. The case hinged on the first sale doctrine of copyright law which provides that once a work is sold the purchaser may sell the work without permission from or compensation to the copyright holder. Also, among the ‘basket of rights’ granted to copyright holders is the exclusive right of importation thereby making unauthorized importation infringement. However, the lower courts had held that the first sale doctrine only applies within the U.S.

The Kirstaeng case clarified that this was the case under a different set of facts. Kirstaeng involved textbooks which are traditionally protected by copyright law unlike the Costco case where Omega included a copyright protected image on the watches specifically to control imports. The decision will give manufactures more power to limit stop grey market imports.

Copyright/Internet

United States (Yahoo/RealNetworks) v. ASCAP affirmed that music file downloads do not constitute a public performance of the work. The court rejected all ASCAP legal theories for declaring downloads as a public performance by reading the statute itself.

In answering the question of whether a download is a public performance, we turn to Section 101 of the Copyright Act, which states that “[t]o ‘perform’ a work means to recite, render, play, dance, or act it, either directly or by means of any device or process.” A download plainly is neither a “dance” nor an “act.” Thus, we must determine whether a download of a musical work falls within the meaning of the terms “recite,” “render,” or “play.”

This case could have dramatically shifted the balance of power between the music industry and websites. As the music industry sees that it cannot suppress internet distribution it is becoming more comfortable sites such as Spotify. The days of the 19.99 CD are gone forever. The future is the likes of Spotify and Bandcamp.

2011 Trademarks
No doubt the most notable trademark case for 2011 was Christian Louboutin v. Yves Saint Laurent America. In a slightly entertaining decision, the New York District Court decision denied Louboutin trademark claim for the color red used on the bottom sole of certain shoes. This was a strong blow against the fashion industry’s efforts to promote new ‘fashion rights’ in intellectual property.

Louboutin used a lacquered red coating on the outer soles of some of its shoes which distinguished them in the market although, as the court clearly noted, Louboutin was not the first one to do so. In fact, in 2008, the PTO granted trademark registration for the Louboutin soles described in the trademark application as “The mark consists of a lacquered red sole on footwear…” (Registration 3361597, approved 2008-1-1) Louboutin sued YSL after YSL release red soled shoes in its 2011 collection although YSL had used red soles in the past.

The court acknowledged that color may qualify as a trademark but only when it attains ‘secondary meaning’ as an identification of the manufacturer. This is logical because this is the function of a trademark- to identify the manufacture in the marketplace. A prime example is the pink for Owens-Corning Fiberglass (cited by the court (Owens-Corning decision) and a mark that was initially refused by the Patent and Trademark Office) and Tiffany Blue for Tiffany & Co jewelry box. Furthermore, color has often been a component of trademark consisting of other design elements, e.g. Burberry check pattern. The court concluded that here the color is not serving to identify the manufacture but is an ornamental and functional element in the marketplace. The red creates an image and commands higher prices that if granted trademark protection would hinder commerce by granting a monopoly on functional elements of the product. Louboutin has appealed the decision. It will be an interesting case to watch that already has the fashion world abuzz. And, of course, Louboutin has appealed the decision.

2011 Trade Secrets

International Business Machines Corp. v. Visentin

On November 2011 the 2nd Circuit Court of Appeals affirmed a lower court decision refusing to enforce a non-competition agreement between IBM and its former manager Mr. Visentin. The agreement provided that Mr. Visentin would not work for a competitor for on year after termination of employment at IBM. Mr. Visentin left IBM directly for HP and IBM sued. The case hinged on the inevitable disclosure doctrine. Under New York law,

“Only that confidential information or those trade secrets that the employee misappropriates or will inevitably disclose is protectable.”

The inevitable disclosure doctrine has three elements: 1- employers are direct competitors; 2- employees position is nearly identical to old position; and 3- trade secrets in question are highly valuable to both employers. The court held that although IBM and HP were direct competitors the new position was very different and his knowledge was not critical to HP such that HP would require him to disclose any trade secrets. The case is fairly unique because the lower court had an exhaustive 4 days of hearings on the facts. This made it clear to the court that IBM would not likely succeed and therefore refused to grant a preliminary injunction against Mr. Visentin.