They're Alive! Breathing Life Back Into Our Patent System?

I wrote an article last year in The Tampa Tribune entitled "The Death of American Innovation?" discussing the impact of the America Invents Act (passed in 2011) on the validity and enforceability of patents in our country.   One of the tools put in place through that Act is the ability to challenge (and eventually kill) patents that are purportedly directed to "Covered Business Methods."

The Act defined "Covered Business Methods" as methods "for performing data processing or other operations used in the practice, administration, or management of a financial product or service."  As I mentioned in the article, to challenge a patent using this system, a challenger must pay the Patent Office a significant filing fee (currently $30,000).

When asked to review a patent under this "Covered Business Method" review system, the Patent Trial and Appeal Board (PTAB) was first tasked with determining whether or not a patent was directed to a "Covered Business Method."  Instead of relying just on the language above, the PTAB instead focused on whether the claimed invention was directed to activities "that are financial in nature, incidental to a financial activity, or complementary to a financial activity."  Such a standard is significantly broader, and obviously swallowed up significantly more patents than just those directed only to data processing or the like in the practice, administration, or management of a financial product itself.

Yesterday, the Federal Circuit (hopefully) put an end to this overreaching by the PTAB.  Using an example I've used myself, the Federal Circuit explained the fallacy of such overbreadth:

The patent for a novel lightbulb that is found to work particularly well in bank vault does not become a CBM patent because of its incidental or complementary use in banks.  Likewise, it cannot be the case that a patent covering a method and corresponding apparatuses becomes a CBM patent because its practice could involve a potential sale of a good or service.  All patents, at some level, relate to potential sale of a good or service.  Take, for example, a patent for an apparatus for digging ditches.  Does the sale of the dirt that results from use of the ditch digger render the patent a CBM patent?  No, because the claims of the ditch-digging method or apparatus are not directed to "performing data processing or other operations" or "used in the practice, administration, or management of a financial product or service," as required b y the statute.

The PTAB's reliance on its "incidental to" or "complementary to" a financial activity standard was not proper under the law, and is no more.  This is certainly a victory to those patent owners facing CBM Petitions and appealing recent adverse rulings from the PTAB.

Unwired Planet, LLC v. Google, Inc., Case No 2015-1812, (Fed. Cir. Nov. 21, 2016)

Florida's Patent Troll Act

Last year, Florida (like a few other states) passed a "Patent Troll Prevention Act."  Fla. Stat. 501.991 et seq.  The act sought to discourage "bad faith" assertion of patent rights in Florida.  The Legislature described its goal:

Patents encourage research, development, and innovation. Patent holders have a legitimate right to enforce their patents. The Legislature does not wish to interfere with good faith patent litigation or the good faith enforcement of patents. However, the Legislature recognizes a growing issue: the frivolous filing of bad faith patent claims that have led to technical, complex, and especially expensive litigation.

Fla. Stat. 501.991(2) (2015).  The law created a number of tools patent infringement defendants (and other recipients of demand letters) could use to ward off expensive patent litigation.  These tools included requiring the patent owner to post a bond of up to $250,000 to proceed with the case as well as punitive damages.  But the law did not clearly define what a "bad faith assertion of patent infringement" was.  This uncertainty made it difficult to enforce patent rights in Florida as the patent owner was likely subjected to the damages and bond provisions of the act.

I currently serve as Chair of the Florida Bar Business Law Section's Intellectual Property Committee.  One of our legislative priorities this year was to work on fixes to this law to more properly strike a balance between legitimate enforcement of patent rights and the behavior sought to be discouraged by the law.  To that end, I testified in front of a number of Florida legislative committees to help with passage of fixes to the law.  I am happy to report that House Bill 1181 was passed (unanimously by both Houses of Florida's Legislature) and signed into law last week by the Governor.  This amended law took effect immediately and includes a number of improvements.

First, there is no longer a bond component, meaning a patent owner will not be subjected to litigating whether or not it should post a bond of up to $250,000 simply to ask a court to resolve its patent infringement claim.

Second, the act specifically defines what a patent owner can do to make sure its demand is not a "bad faith" assertion of patent rights.  For a demand letter (which includes an email) to be a "bad faith assertion of patent infringement" it must:

1. Include a claim that the target (i.e. the recipient of the letter) has infringed a patent and is liable for the infringement; and
2. Meet one or more of the following criteria:
1. It falsely claims that a lawsuit has been filed; or
2. It asserts an "objectively baseless" claim because:
1. The sender doesn't have a right to assert the patent;
2. The patent has been held invalid in a final judgment or administrative order; or
3. The alleged infringement took place after the patent expired.
3. It is likely to materially mislead because it does not contain enough information to determine:
1. The identity of the person asserting the patent;
2. Which patent is alleged to be infringed; and
3. At least one allegedly infringing product or service.

Fla. Stat. 501.993 (2016).

Third, the act makes clear that it does not interfere with a party's ability to license its patents, by specifically indicating that the act does not prohibit:

1. Notifying other parties of a person's ownership or rights under a patent
2. Offering the patent to others for license or sale
3. Notifying someone that they infringe the patent; or
4. Seeking compensation for infringement of the patent

Fla. Stat. 501.991(4) (2016).

Fourth, the act revises the criteria for punitive damages in an effort to focus the act on the nefarious behavior sought to be discouraged.  Now, to pursue punitive damages, the violator must be a repeated violator of the law.  Thus, a small entity that only asserts a single claim should be free from the law's restrictions.

It will be interesting to see how this law continues to develop in Florida and throughout the country.

Fla. Chapter 2016-101.

Uber in Gainesville? Not So Fast...

This will be my first post on a case from outside the Middle District of Florida, but instead comes from the Northern District.  I'll let the Judge provide the intro:

You live in Gainesville and need to book a party bus, or perhaps a non-party bus or a limo to take a number of people to an event. You run a Google search for “Gainesville party bus” and, not satisfied with any of the offerings on page one of the results, turn to page two. There is a listing there for “Uber Promotions.” Thinking that perhaps this is somehow affiliated with Uber, a nationally known taxi-like service that has recently come to town, you click on the link. You are taken to a webpage with a bright green and purple “über PROMOTIONS” logo. The crux of this trademark infringement case is (roughly speaking) whether you could reasonably conclude that Uber Promotions and Uber the taxi- like service are in some way connected. 

This case pits a Gainesville, Florida company (Uber Promotions, Inc.) ("Promotions") against the nationally known Uber Technologies, Inc. ("Tech"), an on-demand car service.   Tech began in a few cities, but has exponentially expanded over the last few years.  Tech's first foray into Florida was in Tampa [ed - thus the Middle District of Florida connection!] during the Republican National Convention in 2012.  

Promotions has been operating in Gainesville since 2006. Concerned that the junior user (Tech) was encroaching into its space in Gainesville, Promotions filed suit seeking a preliminary injunction to prevent Tech from operating in Gainesville.  This is an interesting case for showing a senior user relying on common law rights in a particular geographic area to fend off or stop a junior user relying on federal trademark rights (and the respective zones of natural expansion of the two rights holders).  The Court described the respective sizes of the companies in colorful language:

Elephants don't look out for gerbils when they plow through the bush.

Apparently Tech has unveiled a new service, called UberEVENTS, that allows you to purchase a ride for others that can be used at a particular time in the future.   It was this new service that the Court decided was preventable (at least pending trial), as a broader injunction seeking to stop Uber altogether in Gainesville was too broad.  Again, the Court used useful prose:

Arming Squirrels with Bazookas

The Court addressed the preliminary injunction factors and ultimately concluded that a narrow  injunction was proper to requiring Tech to:

• stop using the UBER mark (or any variant thereof) in connection with the UberEVENTS service in the Gainesville market (Alachua County) until further notice
• not advertise the UberEVENTS service in Alachua County or cause it to be advertised in Alachua County until further notice.  A posting promoting UberEVENTS placed on the Facebook wall or page of an entity with its principal place of business in Alachua County is an advertisement.  A posting promoting UberEVENTS placed on the Facebook wall or page of a real person whose usual place of abode or residence is in Alachua County is an advertisement.
• ensure that if a person attempts to book an event in Alachua County through the UberEVENTS webpage, that booking is not allowed to be completed.
• set up a 352-area-code phone number to handle phone calls
• make sure that internet searches for the phrase "Uber Gainesville phone" or "Uber Gainesville phone number" returns Defendant's 352-area-code number along with words clearly indicating that the results are clearly Defendants

(The injunction further required Tech to buy Google AdWords (or similar products) if necessarily to accomplish the injunction search result obligations.)  

I'm certain this case is far from done.  Stay tuned...

Uber Promotions, Inc. v. Uber Technologies, Inc., Case No. 1:15-CV-206 (N.D. Fla. Feb. 16, 2016) (J. Walker)

Is The Relative Emphasis in Marketing Materials of the Accused Technology a Reliable Basis for Apportioning Damages?

No.

Omega Patents has sued CalAmp for infringement of a number of patents relating to vehicle control systems.  CalAmp offered expert opinion explaining the amount of certain damages that should be at risk.  Specifically, CalAmp's expert began his damages calculation by first determining profits for sales of the accused devices.  But the accused devices included a number of features, only some of which are alleged to infringe the patents.  So the expert attempted to allocate the amount of this profit that was attributable to the patented features.  The Court described this allocation methodology:

Here, Dr. McDuff analyzed two of CalAmp's marketing brochures to conduct a word count of certain key words and phrases.  He describes the methodology as follows:  "Next, I apportion to the contribution of the accused functionality as alleged to be commercialized within [the accused products].  I utilize the relative marketing emphasis of various phrases relating to the contributions of the accused data bus and vehicle tracker functionalities."  Explained more simply, Dr. McDuff counted the total words in certain sections of the marketing brochures and then selected certain words which related to the accused patents.  He then counted the number of chosen words and calculated the proportion of these words to all words to assign a value to solely the patented features in the Accused Devices.

Needless to say, Omega objected to this novel approach. And the Court did not allow it:

Neither Dr. McDuff nor CalAmp has been able to point the Court to this type of methodology being accepted by or even utilized by other courts or experts in this field.  Dr. McDuff himself acknowledged that there was no way to calculate an error rate using this methodology.  

The Court went on to exclude this testimony as unreliable.

The decision also provides interesting analysis on attempts to use expert reports and testimony to alter or adjust claim construction positions after Markman determinations.  For example, CalAmp's invalidity opinion analyzed fifteen references as supporting its invalidity positions.  But the report also included the following:

In addition to the references discussed above, I also considered a number of additional prior art references that also disclosed the elements claimed by Omega's patents.  For reasons of brevity, they were not included in the detailed discussion which follows.  However, it is my opinion that these references also disclose all of the elements of each asserted claim of the Omega patents, and could be used alone, in combination with themselves, or in combination with references disclosed above to show additional reasons why the asserted Omega patents are not valid in view of the prior art.

Omega asked to exclude these additional opinions.  The Court obliged:

The Court finds the violation of Rule 26, as it pertains to the ten prior art references identified in Mr. Andrews' report, to have resulted in substantial prejudice to Omega such that the only proper remedy at this late date is the exclusion of Exhibits 24 through 33 along with the testimony relating to how the prior art references relate to Mr. Andrews' opinions.

Motion to Exclude Expert Testimony, Granted in Part and Denied in Part.  Motion to Exclude Damages Testimony, Granted.

Omega Patents, LLC v. Calamp Corp., Case No. 6:13-CV-1950 (M.D. Fla. Dec. 23, 2015) (J. Byron)

Does a Patent Plaintiff's Unsuccessful Belief That It Can Enforce A Patent Render A Case Exception?

No.

Sweepstakes Patent Company ("SPC") acquired a license to use U.S. Patent 5,569,082 in certain fields.  SPC later sued a number of defendants for infringement.  But the license agreement provided:

[Patent Owner - not SPC the licensee] shall, in its absolute discretion, instittute or not institute proceedings or defend or not defend proceedings ... as [it] shall deem fit, provided, however, where [Patent Owner] decides not to institute or defend any proceedings, it shall advise [SPC] of same and in such circumstance, [SPC] shall have the right at its own cost and expense, to institute or defend such proceeding. ...

* * * 

Subject to the foregoing, neither the Licensee nor any sublicensee shall under any circumstances whatsoever, institute or respond to ay claim or legal proceeding of any third party relating to the Inventions or any of the Patents without first obtaining the prior written consent of the [Patent Owner] 

SPC did not receive Patent Owner's written permission to file the lawsuit, and thus did not have standing to assert a patent infringement claim.  The Court dismissed the claim on that ground.  Defendants also pursued a motion to sanction SPC on this theory.  That sanction motion was denied, as the Court found that SPC made "colorable arguments" on the issue.

Defendants (after appellate confirmation of the dismissal) attempted to recover their fees by asking the Court to find the case exceptional pursuant to 35 U.S.C. § 285.  The Court presented the law:

A district court may award attorney’s fees pursuant to § 285 of the Patent Act. 35 U.S.C. § 285; Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct 1749, 1753 (2014). According to that provision, “[t]he court in exceptional cases may award reasonable attorney’s fees to the prevailing party.” Id. The Supreme Court’s holding in Octane Fitness makes clear that § 285 imposes only one restriction on the imposition of attorney’s fees: “that the power is reserved for exceptional cases.” Octane Fitness, 134 S.Ct at 1756. The Supreme Court clarified that “exceptional” is defined according to its ordinary meaning, as one that “stands out from others with respect to the substantive strength of a party’s litigating position . . . , or the unreasonable manner in which the case was litigated.” Id. The court may, in the exercise of its discretion, consider the totality of the circumstances and make a case-by-case determination. Id. District courts may look to a “nonexclusive” set of factors, including “frivolousness, motivation, objective unreasonableness . . . or the unreasonable manner in which the case was litigated. NXP B.V. v. Blackberry, Ltd., 58 F. Supp. 3d 1313, 1317 (M.D. Fla. 2014). The party moving for an award of attorney’s fees must demonstrate by a preponderance of the evidence that the case is “exceptional.” Id. A case is not exceptional merely because a party has a good faith belief that there is standing to sue but is ultimately incorrect. Clouding IP, LLC v. EMC Corp., No. 13-1355-LPS, 2015 WL 5766872, at *2 (D. Del. Sept. 30, 2015). The focus is the “substantive strength of the party’s litigating position . . . , not the correctness or eventual success of that position.” See SFA Sys., LLC v. Newegg, Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015). 

The Court then analyzed (and rejected) Defendants' arguments that SPC's claims were so weak as to warrant an exceptional case finding:

The undersigned Judge agrees with the Magistrate Judge that Clouding IP stands for the proposition that an ultimately unsuccessful belief as to standing that is brought in good faith does not render a case exceptional.  In the present case, the Court has not found that SPC had any improper motivations other than a good faith, but ultimately incorrect, argument that it had standing based on its interpretation of the License Agreement.

Renewed Motion for Attorneys' Fees, denied.

Sweepstakes Patent Co. v. Chase Burns, Case No. 6:14-cv-151 (M.D. Fla. Feb. 2, 2016) (J. Conway)

Must A Copyright Holder Attach The Deposit Copy To Its Complaint?

No.  Rule 8 (i.e. notice pleading) is alive and well in the copyright context.

PK Studios, Inc. provided architectural drawings for homes to Stock Development, LLC in connection with development in two communities.  PK provided a release to Stock allowing it to use the architectural drawings for the two communities and for any other projects developed solely by Stock.

Ten years later (in 2014), PK discovered another community being developed by other parties which PK claims are "exact duplicates" of the drawings it had provided to Stock a decade earlier.  PK notified the developers of this new community, who responded that they received a license from Stock.  But PK states that Stock was not authorized to provide such a license.  So PK sued all sets of developers.

The developers of the new community sought dismissal on the pleadings, arguing that PK did not sufficiently identify the work because it did not attach the copy of the drawings it had submitted to the Copyright Office.  According to the defendants, this did not provide sufficient notice to them in order to frame a response.  The Court did not agree:

While the Court agrees with Defendants that PK Studios cannot ultimately prevail on this count without providing the specific materials alleged to have been copied so that they can be compared to the Eagles Landing designs, PK Studios was under no obligation to do so at the pleading stage, In re Southeast Banking Corp., 69 F.3d 1539, 1551 (11th Cir.1995) (Rule 8 does not “impose upon plaintiffs the burden to plead with the greatest specificity they can”), and Defendants will be able to obtain this information during discovery

Motion to dismiss (or for a more definite statement), denied.

PK Studios, Inc. v. R.L.R. Investments, LLC, Case No. 2:15-cv-389 (M.D. Fla. Jan. 4, 2016) (J. Steele)

Is Making a Song Available Via the Internet An Act of Copyright Infringement?

No, not really.  But it can survive the pleadings.

A number of Record Companies asserted their rights against a number of Accused Infringers.  The rights at issue relate to a number of sound recordings, 25 of which were recorded before 1972, and 600 or so recorded afterwards.  In late 2012 the Record Companies notified the Accused Infringers that "there were hundreds of links to Internet videos posted" by the Accused Infringers which allegedly contained material protected by the Record Companies' copyrights.

The attempts to resolve the disputes prior to litigation did not work, so the Accused Infringers sued the Record Companies.  The Record Companies asserted counterclaims for copyright infringement.  The Accused Infringers sought dismissal on a number of grounds:

Public Performance
The Accused Infringers argued that there could not be any violation of a right to "public performance" because the "public performance" limitation only applied to musical works, not the audiovisual works that were at issue.  The Court was not persuaded:

Initially, the Court is not persuaded that the definition of “digital audio transmission” definition set forth in § 114(j) (5) is applicable to an infringement analysis under § 106(6) because the Act cautions that the terms the § 114(j) definitions are only for use in § 114.  See 17 U.S.C. § 114(j) ("As used in this section, the following terms have the following meanings....”); see also, Creative Non-Violence v. Reid, 490 U.S. 730, 748 n. 14 (1989) (noting that courts must strictly adhere to the language and structure of the Copyright Act); Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 432 (1984) (requiring circumspection when construing the Copyright Act and adherence to the Act's concern for the general public good).

Further, applying the § 114(j)(5) definition in the manner urged by Amway is contrary to the admonition in § 103(a) that “copyright protection in preexisting material is not affected by use of such material in a “work that is based upon one or more preexisting work” such as a sound recording. See id. § 101 (defining “derivative works”). Indeed, copyrights in a preexisting work are “completely independent of” an audiovisual work that incorporates the preexisting work.” See Traicoff v. Digital Media, Inc., 439 F. Supp. 2d 872, 883 (S.D. Ind. 2006) (noting that “the copyright of an independent and preexisting sound recording” cannot be invalidated by “incorporating” the sound recording “into an audiovisual work”). 

Here, the Registered Recordings are “preexisting material” that must be distinguished from any audiovisual works in which they are incorporated—including the Accused Videos.  Stewart, 495 U.S. at 216–17 (rejecting argument that Court should “read into the Copyright Act a limitation on the statutorily created rights of the owner of an underlying work”). Accordingly, the Court rejects Amways' argument that—based on § 114(j)(5)—the Record Companies' “public performance” claim under § 106(6) fails as a matter of law.

Making the Work Available
Is "making the work available" a violation under the Copyright Act?  Technically, no.  But the Court did not need to dismiss this portion of the claim on pleading grounds, as there is still liability under the vicarious liability theories:

Although the Court agrees that the Act does not confer a “making available” copyright under § 106, the Court does not agree that relief is warranted under Rule 12(b)(6). Notably, the act of making a copyrighted work available for the use of a direct infringer is relevant to the Record Companies' indirect infringement claims against Amway. See Atlantic Recording Corp. v. Howell, 554 F.Supp.2d 976, 983 (D. Az. 2008); Capitol Records, Inc. v. Thomas, 579 F. Supp. 2d 1210, 1225 (D. Minn. 2008) (stating that although dissemination needs to be proven to meet the distribution standard in the act, the proof need not be direct and can come from circumstantial evidence). Thus, the Motion is due to be denied with respect to Amway's “making available” argument. See Warner Bros. Records, Inc. v. Payne, 2006 WL 2844415, *2 (W.D. Tx. 2006) (declining, at the pleading stage, to reject “making available” theory a possible ground for imposing liability).

Public Performance Under Florida Common Law
Like the "making available" issue above, the Court noted that Florida common law did not recognize a cause of action for public performance right with respect to a sound recording, but determined it was not necessary to dismiss such claim on the pleadings.

Unidentified Parties - Does 1-20
The Accused Infringers last sought dismissal of the 20 parties identified only as Does 1-20.  The Court did not find this necessary:

In a footnote, the Amway Interests argue that the Court should dismiss Does 1 through 20 because fictitious party pleading is disallowed in federal courts. (See Doc. 113, p. 1 n.1.) Federal Rule of Civil Procedure 10(a) requires that the title of a complaint include the names of “all the parties,” and the U.S. Court of Appeals for the Eleventh Circuit discourages fictitious party pleading as a practice that is contrary to the public's right in open judicial proceedings. See Roe v. Aware Woman Center for Choice, Inc., 253 F.3d 678, 684–85 (11th Cir. 2001). Nonetheless, reference to a fictitious party may be permitted if it is mere “surplusage” (see Richardson v. Johnson, 598 F.3d 734, 738 (11th Cir. 2010)), or the fictitious party will be identified through discovery (see Tracfone Wireless, Inc. v. Access Telecom, Inc., 642 F. Supp. 2d 1354 (S.D. Fla. 2009)). 

Here, the Does 1 through 20 are effectively identified for pleading purposes based on the Record Companies' identification in Tables 1 through 4 of specific creators and uploaders of the Accused Videos. Identification of the Doe Defendants is further discerned based on the IBOs named as Defendants in the 2045, 1511, and 776 Actions. Thus, under the unique circumstances presented here, the Court does not find it necessary to strike Does 1 through 20 under Rule 12(f) or to dismiss any claims based on Rule 10(a). See Weiland v. Palm Beach County Sheriff's Office, 792 F.3d 1313, 1318, n.4 (11th Cir. 2015) (noting that the court had simply ignored the improperly named fictitious parties).

Motion to dismiss counterclaims, denied.
Alticor, Inc. v. UMG Recordings, Inc., Case No. 6:14-CV-542 (M.D. Fla. Dec. 11, 2015) (J. Dalton)