Streaming providers and the lost trade marks: Napster, Megaupload

Napster: cats are
 the coolest brand

This Kat had read with interest a month ago that one of the first infamous streaming websites for illegal downloading -- Napster -- was going to be revived.  However, much like beloved felines, brands can have several lives. After Napster was brought down in 2001, IP rights over its name, a platform which divided artists, fans and mainstreamed music download, have been owned by parties ranging from Best Buy Co. Inc to Rhapsody Inc. today. This technology revolution forced both the entertainment business and the courts to catch up on what could be considered fair use and contributory infringement and vicarious liability of internet intermediaries (see for example the Grokster case here).

More recently Megaupload, the uber-famous peer-to-peer platform, was shut down in 2012 and the United States Department of Justice commenced criminal actions against its owners. The indictment alleged that DMCA provisions (so-called 'Safe Harbour' as an exemption to liability) were used for the appearance of legitimacy – the actual material was not removed, only some links to it were, take-down agreements were approved based on business growth rather than infringement, and the parties themselves openly discussed their infringing activities. On January 19, 2013, Megaupload was re-launched as Mega under the domain name mega.co.nz. The re-launch date was chosen to coincide with the first anniversary of Megaupload's take-down by the FBI. 

Those events prompted this Kat to wonder what happens to the trade mark when it is no longer used, or in the event that its purpose (or the use of its services) has been declared illegal.  Rights can be assigned or transferred to a licensee who must use it as a trade mark if it does not want to risk being the object of an invalidity action for non-use for an uninterrupted period of five years according to Article 15 of the Community Trade Mark Regulation (CTMR), for example in a EU action. Under the Lanham Act in the U.S., non-use of a trade mark for three consecutive years creates a rebuttable presumption of abandonment of the trade mark (whether registered or at common law). Moreover, Article 7(f) of the CTMR also provides that a trade mark cannot be registered if is against public policy which comprehends offensive trade marks, but does not affect the fact that, in practice, trade marks such as Napster or Megaupload --with the status possibly of a well-known mark but used for illegal activities-- may be annulled. Some countries recognize excusable circumstances deemed to be outside the trade mark owner’s control such as (1) legal restrictions on the continued sale of goods or services or (2) the bankruptcy or insolvency of the mark owner.

Searching for the legal downloading platform

In the Napster case Ryan Lester, the owner of an open-source sharing website, received a C&D letter requesting him to stop using the URL Napster.fm. After failed negotiations, Rhapsody sued for infringement and cybersquatting. Lester in turn applied for Federal trade mark registration and lodged an opposition at the TTAB, counterclaiming in spite of Rhapsody's undeniable prior rights in the field of trade mark services, that it would cause confusion with Napster. Further, U.S. federal courts  are reluctant to block defendants from using marks that are not being actively used by the marks' owners (this is also known as  "residual goodwill"). In most cases involving the abandonment of a still-famous mark--although ill-famed-- the U.S. courts have examined whether a trade mark owner's de minimis use of a mark was sufficient to maintain the owner's exclusive rights Silverman v. CBS Inc., 666 F. Supp. 575 (S.D.N.Y. 1987).

Whether judges will be sympathetic  to the new owners who legitimately acquired a brand with a former bad reputation or to a defendant's "riding on the coat tails of a famous trade mark", only 2014 will tell and this soon-to-be-ex-Kat will monitor this promising development at the intersection of Intellectual property rights.

Headphones for cats
Internet did not kill the Cat video stars

Messaging patent still invalid - Court of Appeal upholds Arnold J

December is a tricky time of the year.  In December 2012, just before Christmas, and just before this Kat rejoined the blogging team, Arnold J handed down the decision Microsoft Corp v Motorola Mobility LLC [2012] EWHC 3677 (Pat) (21 December 2012).  It is an electroniccy case of the variety that makes this Khemical Kat want to run and hide.  But run and hide he can do no more, because, almost exactly a year later, the Court of Appeal has upheld the decision, handed down a couple of weeks ago as Microsoft Corporation v Motorola Mobility LLC [2013] EWCA Civ 1613 (11 December 2013).

Spoiler / executive summary – Arnold J construed the claims broadly on which basis Motorola’s patent (relating to synchronisation of message statuses across multiple messaging devices) was found to be invalid, but would have been infringed by two Microsoft products, EAS (Exchange ActiveSync) and Live Messenger.  On a narrower construction advanced by Motorola but rejected by Arnold J, the patent would still have been invalid but would not have been infringed.  In relation to EAS, Microsoft in any case had a licence, because Microsoft’s licence from Google in 2009 extended to this patent when it was acquired by Google when Google purchased Motorola Mobility Inc. in 2012.  Motorola’s appeal of this decision was rejected by the Court of Appeal.

Before turning to some details of the case, this moggy would like to look at the feline human interest angle.  It is noteworthy that the leading judgment is delivered by none other than the Chancellor of the High Court, Sir Terence Etherton (Jackson LJ and Kitchin LJ concurring).  While Sir Terence is no stranger to IP matters (his most recent foray being noted by this embodiment of the IPKat here; but who can forget his judicial certification as “erudite” reported by fellow Kat here?), it is unusual for the leading judgment in a technical appeal to be given by someone other than the former Patents Court judge, when one is sitting.  If you are not a patent specialist (and even if you are), it is never going to be a bad idea to uphold a decision of Arnold J and sure enough that is what happened.

So the patent was concerned with how synchronise information such as the status of a message (eg "read" once the message has been opened) between multiple devices of a user.  Although the patent was concerned mainly with pagers, the claims were not held to be so limited, and would equally be applicable, for example, to email on mobile devices.

Now we get to the bit where you need to see Claim 1.  So here it is (as in the judgments broken down into integers and with reference numerals omitted).

[A] A method of synchronizing message information among a plurality of transceivers comprising the steps of:
[B] transmitting by a wireless messaging infrastructure a first message having a first status;
[C] in one transceiver of the plurality of transceivers, changing the first status of the first message to a second status responsive to an input to the one transceiver, and
[D] transmitting a second message indicative of the second status;
[E] in the wireless messaging infrastructure, receiving the second message;
and characterised in that the method includes the steps of
[F] in the wireless messaging infrastructure, responsive to receiving the second message, transmitting a third message indicative of the second status; and
[G] in at least one other transceiver of the plurality of transceivers, receiving the third message, and
[H] responsive to receiving the third message, changing the first status of the first message to the second status.

There is a pretty picture showing an embodiment of this method too.

The main issue on appeal was whether, with particular regard to the term "responsive to receiving the second message" in integer [F], the claims were limited to a  "push" system (where the status of the message on the second device is updated from the server as a result of the message being read on the first device, without any request by the second device), as contended by Motorola, or whether the claims included the possibility of synchronization by "polling", as a result of periodic requests for updates from the second device or a result of a specific request for updates, as contended by Microsoft. Although the Figure shows a "push" system, neither Arnold J nor the Court of Appeal saw any reason to construe the claims so narrowly, and so the broader construction put forward by Microsoft was preferred.

It is often assumed that the patentee will always be arguing for a broad construction of the claim, although the cases on claim construction regularly point out that this is not necessarily the case.  This is a good example of a situation where the patentee is actually contending for a narrow construction, because on the broad construction of the claim adopted by Arnold J there was no prospect for Motorola to successfully argue the validity of claim 1.  Once the Court of Appeal had agreed with Arnold's construction of the claim, the appeal was doomed.

The Court of Appeal refused Motorola permission to advance a subsidiary argument that claim 1 should be interpreted as  restricted to non-manual initiated commands for updates.  This was not raised in the Grounds of Appeal, and the distinction between polling by manual command by the user and intermittent polling generated by the device itself was not one that the first instance Judge was invited by Motorola to make at first instance.  Moreover, even if the argument was successful, the result would be to open up new lines of argument against the first instance findings of obviousness, when there "was some evidence before the Judge on that aspect but it was given in the absence of the point of interpretation now sought to be advanced." Therefore Sir Terence concluded:

I am satisfied in those circumstances that it would be wrong to allow this new point of interpretation to be advanced on the appeal since it would be quite wrong to permit Motorola to advance the linked and consequential attack on the Judge's findings of obviousness over PCMAIL and IMAP4.

At first instance, Arnold J had actually found Claim 1 to be obvious over PCMAIL and IMAP4 (non-wireless email protocols) not only on the broad construction that he adopted, but also even on the narrower construction of Motorola.  Also, unusually, he found the claim to be obvious over common general knowledge only (again, under either construction) - this is the polite way of saying what this Kat refers to as "it is just bleeding obvious".

A final point in this case is the role of the parallel proceedings in Germany.  At first instance before Arnold J, both sides claimed that the construction adopted by the Landgericht Mannheim (Mannheim Regional Court) supported their case, although Arnold J considered that the German construction was more consistent with Microsoft's interpretation than with Motorola's.  Things had moved on by the time of the appeal, and a final hearing at the Federal Patent Court took place on 13 November 2013. It made its decision on that day to revoke claim 1 but to accept as valid, pursuant to an auxiliary request, a narrowed down version, namely a version which contains the feature of a delaying transmission of status changes so as to cut down the number of status change transmissions. However, the written decision with reasoning was not yet available. Under these circumstances Sir Terence concluded:

Bearing in mind the respect which is due to decisions of the German courts on issues of patent validity and infringement, it would have been of considerable value to know the detailed reasoning of the German Federal Patent Court in reaching its decision on 13 November 2013. In the present absence of that detailed reasoning, however, I do not consider it is safe for either side or this Court to rely on the German proceedings as to the correct outcome of this appeal. For that reason I shall not refer to them again in this judgment.

[Merpel cannot help but notice that this paragraph dodges the issue of exactly what is the "respect which is due", but she is probably distracted by the impending end of the year.]

Regular readers will recall that this moggy tends to note the rupture factor of decisions.  In these proceedings, while the first instance decision was 163 paragraphs and 38 pages, the appeal decision, by focusing on one determinative issue, managed to dispatch the patent in a mere 50 paragraphs and 15 pages.

This will be this Kat's last post this year, but he hopes to spring back into action very soon in 2014.  In the meantime, a very Happy New Year to all our readers.

Monk fruit, the soft drink industry and the IP challenge

The story (“A sweet Asian fruit tempts the troubled soft drink industry”), as reported by Marina Lopes in the December 22, 2013 edition of reuters.com, here, begins as follows:

“An obscure melon once cultivated by Buddhist monks in China to sweeten tea could give the $8 billion U.S. diet soda industry a shot at winning back consumers concerned about artificial ingredients”.

Within Ms Lopes’ compact story is an engrossing tale of how IP plays out in the broader context of products, markets regulation and legal rights. Forget the IP battles between the hi-tech heavyweights -- Apple, Google, Samsung and the rest. For those Kat readers who simply like a great IP story, this is the one for you.

The Problem-At the beginning of the story are the commercial woes of the low-calorie soft drink industry. Simply put, sales are down and the downward trajectory is only expected to accelerate (a drop of approximately 7% this year with a possible fall of up to 20% by 2020). The decline is attributed to increasing consumer concern over the possible health risks from consuming artificial sweeteners. As a result, consumers are eschewing such soft drinks in favor of juices, teas and the like, anything that does not contain an artificial sweetener. How serious is this trend? In the words of Bonnie Herzog, an analyst from Wells Fargo Securities, “we believe we are seeing a fundamental shift in consumption behavior as diet drinkers leave the category altogether.”

The Paradox--What is particularly interesting is how this apparent change in consumer behaviour runs in the face of regulatory and branding messages to the contrary. Aspartame, here, the ingredient that fueled the diet soda boom, is FDA-approved. Nevertheless, there is relentless dissonance between the regulatory position and the views held by at least some consumers. Cyberspace is replete with commentary challenging the safety of the ingredient. Indeed, within the halls of MBA programs, for a long time the most interesting aspect of the Aspartame story was how G.D. Searle, the owner of the seminal invention, managed to maintain a respectable market share in the product under the NutraSweet mark (the product has since changed owners), even after patent protection expired.

The Solution (?)--To stem this downward trajectory, the soft drink industry continues its multi-decade quest for its own form of “holy grail”, namely “a natural product with great taste and no calories”. A few years ago, great hopes were placed on stevia, here, which is a sweetener made from a Paraguayan plant. Alas, soft drink products containing stevia have enjoyed only modest success, in large part due to consumer complaints that its bitter aftertaste actually changes the flavour of the soda. Enter the Chinese melon known as monk fruit, here. Once raised only in southern China, products based on monk fruit have spread across China in dried form as a natural flavour substitute. Its dietary attractiveness is based on the fact that a single gram of monk fruit is reported to replace eight (!) teaspoons of sugar while at the same time maintaining a sweet taste.

In particular, attention is being drawn to the activities of a California company named Zevia, here, which has launched a soft drink concoction containing both stevia and monk fruit. The result: “Using the two side by side, we were able to get a higher level of sweetness without the bitterness”, said the CEO of Zevia. For the price of approximately $1.00, Kat readers can enjoy a 12-ounce can of this drink, available in nearly 16,000 “high-end grocery stores in the United States.” Among the heavy weight players, Coca Cola is reported to be interested in monk fruit, but Pepsi Cola apparently is not.

The Challenge—Against this backdrop, there have been a number of IP and regulatory measures, some working at apparent cross purposes, that have made monk fruit a particular challenge. Thus, it is reported that no less than Procter & Gamble (“P&G”) obtained a patent back in 1995 for an extraction based on monk fruit as a sugar substitute, but P&G did not seem to develop the product commercially. Instead, it was left for a New Zealand company to obtain US Food and Drug Administration (“FDA”) approval in 2012, which enabled the product to be used for mass consumption purposes. Given P&G’s reputation for innovative product development, its apparent failure (or reluctance) to pursue the patented extraction commercially is particularly interesting. Unfortunately, the article does not delve into the reasons for why P&G did not play an active role in securing FDA approval (it has not yet been approved in Europe).

From the Chinese side, it appears that the fruit is raised only in certain areas in southern China. This is not likely to change, because local Chinese law forbids monk fruit seeds as well as its genetic material from leaving China. This is particularly interesting given the Chinese penchant for buying up huge swathes of land in Africa and elsewhere for agricultural purposes. True, as described by The Economist, Brazil has led the way in developing a world-class domestic bio-agricultural industry, here, but the regulatory restrictions on limiting cultivation of monk fruit to only certain areas seems to be a drag on the current potential for the fruit. Add to this certain cost and production factors that make monk fruit expensive to cultivate, and a giant question mark hovers currently over the ultimate potential for the product.

What about the IP?—For this Kat, what is especially interesting in this tale is the multi-faceted role of IP and related considerations. First, there is the intersection of the traditional knowledge accumulated by the Buddhist monks in the fruit, perhaps augmented by more contemporary know-how developed within the areas in which the fruit is cultivated. Add to this the special factors that define IP knowledge in the seed space (patents, breeder’s rights, breeder’s know-how), a sort of “tangible” form of intangible property, all set against the Chinese regulator and its own views on how to “protect Chinese interests” in this potentially lucrative food-related product.

Second, there is the related patent activity. The article does not discuss whether companies other than P&G have sought to invent products based on the monk fruit. Whatever the current status of patent activity based on monk fruit, what is curious is that P&G did not pursue the invention (perhaps the company did not ascertain any material commercial application for the product, perhaps the invention got lost within the company, it is not clear) and it was left to a company in New Zealand to take the product through FDA approval.

Third, there is the issue of names and branding. Aspartame was marked by Searle as NutraSweet, enabling the company and its successors to continue to derive value from the artificial sweetener product long after the patents had expired. What will happen in the current circumstances, assuming that there are no patents that are or will likely cover the product (either based entirely on monk fruit or a combination of the two)? If differential product branding takes place, what will be the status of monk fruit as the generic source of the product? Could it nevertheless be protected as geographic indication, assuming that the legal requirements are met?

This Kat suspects that the IP headlines in 2014 will once again highlight patent wars and the related activities of the mega-companies. But for those Kat readers who like their IP nuanced and multifaceted, they can do no better than to continue to follow the monk fruit saga.

Authors Guild appeals Google Books decision

Copyright thoughts for Marcel, even
during NYE toast: do the
flowers on his glass ... 

Just a couple of days have passed since this Kat indicated the decision of Judge Denny Chin in the Google Books Library Project case (here and here) as the most important copyright ruling of the year, with the disclaimer that a new chapter of this saga would be written in appeal. 

This is indeed what will happen.

Yesterday, Publishers Weekly announced that, in a filing with the US District Court for the Southern District of New York, the Authors Guild gave notice that it is appealing Judge Denny Chin’s ruling before the US Court of Appeals for the Second Circuit [where incidentally Judge Chin now serves].

... infringe copyright in those on
Perrier Jouet Belle Epoque
champagne?

Still according to Publishers Weekly, the appeal could be complicated by the fact that the Second Circuit is already preparing to rule on a parallel case, the Authors Guild v HathiTrust [on which see here and here]. 

The HathiTrust case was first brought in 2011, a few months after Judge Chin rejected the revised settlement between the Authors Guild and Google.

This case also deals with unauthorised book scanning. The Authors Guild unsuccessfully sued HathiTrust, a collective of Google's library scanning partners, claiming copyright infringement. 

As noted by the Electronic Frontier Foundation (EFF), this was "a puzzling suit to bring -- if anything, the libraries have an even stronger fair use defense than does Google."

We'll see what happens in the coming copyright-rich months ... Stay tuned and have a great New Year's Eve!

Taking the p*** -- or merely retaining it? When trospium chloride can't be overstuck

It's a long time since this Kat has had a chance to contemplate a legal ruling on parallel importation and over-stickering of pharmaceutical products, so he's delighted to bring you this one now. Indeed, Speciality European Pharma Ltd v Doncaster Pharmaceuticals Group Ltd & Madaus GmbH [2013] EWHC 3624 (Ch) is a 20 November decision of Mrs Justice Asplin in the Chancery Division (High Court, England and Wales) which would have been posted here ages ago if the IPKat had fewer interesting cases to write about and more time in which to write about them.

Specialty -- the claimant in these proceedings -- specialised in the distribution and sale of pharmaceutical products, particularly in the fields of urology and urogynaecology [one has to be careful with these medical terms, says this Kat, whose mother was once erroneously sent to see "an urologist" instead of "a neurologist"]. Among the products it sold was a treatment for over-active bladders, trospium chloride, which it sold and distributed in various European countries. Trospium chloride, made by Madaus, was sold as "Céris" in France, as "uriVesc" in Germany and as “Regurin” in the United Kingdom -- where Madaus owned the United Kingdom trade mark REGURIN for pharmaceutical preparations etc in Class 5. This commodity was sold in the United Kingdom in two formats: a 20mg product and a 60mg XL product. In 2009, Madaus appointed Specialty as the exclusive licensee of the REGURIN trade mark in the United Kingdom.

Our attention now turns to Doncaster Pharmaceuticals.  Doncaster had previously imported trospium chloride sold in France as “Céris” into the United Kingdom by overstickering the box with the words "trospium chloride", this being an accurate if unexciting description of the contents of the box. However, in late 2009 when importing “Céris”, Doncaster decided to oversticker it with the trade mark REGURIN instead.  A little later, it started to do the same thing with its imports of the German version, “uriVesc”.

At this point Specialty, as exclusive licensee, decided it was time to act and commenced proceedings against Doncaster Pharmaceuticals for trade mark infringement (Madaus was joined in the proceedings but no claim was made against that company).

In these proceedings Asplin J was required to determine (i) whether Doncaster was entitled under Articles 34 and 36 of the Treaty on the Functioning of the European Union to affix the REGURIN trade mark to the pharmaceutical products made by Madaus and which they imported from other Member States; (ii) whether it was necessary for Doncaster to re-brand the products as REGURIN in order to gain effective market access in the United Kingdom.

Asplin J held for Specialty. In her view:

* In order to decide whether there was effective market access for an imported product, it was first necessary to define the market. In this context, the market in question could not simply be defined by reference to the market for products sold under the REGURIN trade mark -- such a definition was entirely self-fulfilling and failed to satisfy the underlying principles of free trade between Member States.

* The court didn't need to decide whether, for the purposes of re-branding, the test of necessity was to be applied to the market as a whole or to a substantial part of the market. The question was whether, in all the circumstances prevailing at the time of marketing, it was objectively necessary to replace the original trade mark with the trade mark REGURIN in order to gain effective access to the trospium chloride market in the United Kingdom. On the evidence, there was no need to replace the other marks with the REGURIN mark. This was so, whether one took into account the market for trospium chloride as a whole or whether one examined the markets for the 20mg and 60mg XL products separately.

* Taking the products together, Doncaster had immediate and effective access to 90% of prescriptions written for the 20mg version of the product and to 68% of the 60mg XL version. Given the high percentage of the market open to Doncaster, even where it could not use the REGURIN trade mark, the exclusive use of the REGURIN mark by Specialty in the UK did not contribute to the artificial partitioning of the markets between Member States in relation to trospium chloride.

* Even if one took into account the number of prescriptions written generically for trospium chloride which were currently satisfied by the supply of Regurin, the percentage of the market to which Doncaster had effective access was still 60%.

* There was no evidence Doncaster could not compete effectively against the generic producers. Nor was there evidence of the existence of any rules or structures within the UK market which hindered Doncaster from gaining effective access to the market if it would not be permitted to use the REGURIN mark. In fact, National Health Service policy in the UK pointed to the opposite conclusion, being in favour of generically written prescriptions.

* There was no significant resistance on the part of consumers or pharmacists to an over-stickered product.

* Given the percentage of prescriptions written generically, Doncaster was merely seeking a commercial advantage in the sense of seeking a greater margin on its imports than it would otherwise be able to achieve. That company was trying to avoid the need to brand and market the 60mg product for itself, preferring to "piggy back" on Specialty's marketing efforts.

This Kat thinks this decision is quite an important one, but not so much in legal terms.  There was no startling exposition of a new legal doctrine or miserable failure to apply an old one.  Rather, its significance lies in the application of the law to the facts.  Had Asplin J reached the opposite conclusion, and allowed the use of restickered REGURIN labels on these facts, importers of pharma products would be falling over themselves to emulate Doncaster's actions and the prospects of manufacturers of pharma producers such as  Madaus deriving any benefits from their trade marks following the expiry of their patents (as was the case with the patent for trospium chloride, which expired in 2009) would be grim.

Happier days in court for Doncaster Pharmaceuticals here
What is trospium chloride, here
Things you can do with urine here, here and here

Letter from AmeriKat: Disney's Frozen, Google's Rockstar lawsuits & USPTO's Hague Agreement

Unrelated to the Disney
movie, the AmeriKat
is also frozen

The AmeriKat has spent the last week watching Elmo's World, playing cash register, voicing stuffed animals and reading numerous books about Santa Claus (who exists again, in the AmeriKat's current world).  The AmeriKat is looking forward to the day when her niece is old enough to watch some Disney classics - Little Mermaid and Beauty and the Beast were the AmeriKat's favorites - but she is especially looking forward to the new breed of Disney movies where the heroine's main story arch is not all about finding the Prince, Charming or not.

The latest Disney movie with less compliant fairy tale characters is Frozen which is about two sisters trying to break a curse of winter in their kingdom.  The movie is also subject to a new trade mark infringement lawsuit filed by Disney in California against Phase 4 Films who is alleged to have changed the name of one of its films to Frozen Land so as to free-ride off the success of Frozen.  The complaint states that:

"On November 1, 2013, less than three weeks before the Hollywood premiere of FROZEN on November 19, Phase 4 theatrically released an animated picture entitled The Legend of Sarila, which generated minimal box office revenues and received no significant attention."

Disney's Frozen logo

Sarila featured a non-frozen, lush and abundant land of the same name.  So, the complaint continues, Phase 4 redesigned the artwork, logo and other promotional materials for its newly re-titled film to "mimic" that of Frozen.  The logo itself seems more than a mimic to the AmeriKat, with the "jagged, uneven edges on the lettering, dramatic flourishes on the letters and an elongated R and Z that cradle a stylized O that curves into itself and does not close entirely", albeit that the curve is more pronounced in Frozen Land's logo.

Phase 4's revised logo

Disney is requesting an injunction, destruction of all Frozen Land DVDs and damages and lost profits.  According to The Hollywood Reporter, Phase 4 has yet to comment on the lawsuit, but the AmeriKat imagines that for any defendant seeing Disney on the other side of a claim is enough to make their blood cold (or frozen).

On Monday, Google filed a lawsuit in California federal court requesting that the court declare that it does not infringe seven patents owned by the Apple and Microsoft backed consortium dubbed Rockstar. Two months ago, Rockstar commenced seven patent infringement actions against Google's customers and Google in relation to the android operating system developed by Google.   In the first paragraph of the complaint Google states that:

"Rockstar's litigation campaign has placed a cloud on Google's Android platform; threatened Google's business and relationships with its customers and partners, as well as its sales of Nexus-branded Android devices."

According to the complaint, Rockstar Consortium is a limited partnership organized and existing under the laws of Delaware, but based primarily in Canada.  According to its website, the consortium is a "patent licensing business".

The patents at issue in the cases are old Nortel patents which included inventions for wireless, optical, voice, internet and semiconductors.   In June 2011, Apple, Research in Motion and Microsoft joined forces to obtain a portfolio of patents auctioned during the bankruptcy of Nortel Networks.  A company called Rockstar Bidco placed the winning of bid of $4.5 billion.  The complaint records that Apple is a large shareholder in  Rockstar having contributed "approximately $2.6 billion" of the winning bid and maintains a seat on Rockstar's board of directors.

Readers may remember that Google had also placed a bid on the Nortel patents (see posts here and here), but ended up acquiring the Motorola Mobility portfolio.

The complaint continues, recounting several patent infringement suits Rockstar filed against Google and other companies in October:

"Among the myriad companies ensnared in Rockstar's patent dragnet are customers and partners of Google who use the Android platform in their devices, including ASUS, HTC, Huawei, LG, Pantech, Samsung and ZTE."

Last week  Bloomberg reported that unnamed sources were reporting that Rockstar was holding discussions to a sell a portion of the Nortel patents, but such a sale would likely not include the patents at suit.

'Twas the night before Christmas and all through the house not a creature was stirring, except the USPTO Press Release mouse who published the announcement that the USPTO will hold a public forum on 14 January 2014 to discuss the implementation of the Patent Law Treaties Implementation Act of 2012.  The Act implements the Geneva Act of the Hague Agreement which provides for the filing of a single international design to acquire global protection.

The Act and rules call for:

- standardizing formal requirements for international design applications
- establishing the USPTO as an office for filing international design applications
- provide for substantive examination by the Office of the applications that designate the US
-  provide provisional rights for published international design applications that designate the US
-  set the term of protection at 15 years 

Breaking News: Sherlock is (Partly) Free of Copyright in the US

The District Court's Opinion got this
Kat's attention despite being on holiday.

Since this summer, this Kat has been keenly following the lawsuit filed by Los Angeles-based attorney Leslie Klinger seeking a declaratory judgement that all elements of the canon of Sherlock Holmes published before 1923 are free for anyone to use.  Those elements, Mr Klinger claimed, are in the public domain because the Sherlock Holmes books and stories published prior to 1923 (which includes all Sherlock works other than ten stories published in The Case-Book of Sherlock Holmes) are no longer subject to copyright protection under US copyright law. 

Thus, it was with great delight that this Kat received an update yesterday afternoon from Mr Klinger's website Free-Sherlock announcing that the US District Court for the Northern District of Illinois ("District Court") had issued its ruling - just in time for this Kat to write this post before her term as a Guest Kat expires.

The background on this case, including the arguments of each party are described in prior Kat posts here and here. 

The District Court first examined whether the Sherlock Holmes elements published prior to 1923 ("Pre-1923 Elements") are indeed elements that are no longer subject to copyright protection and are now in the public domain.  The District Court quickly dispatched with this question by holding that the Second Circuit Court of Appeal's ruling in  Silverman v. CBS, Inc. is applicable here.  The District Court explained, "[i]t is a bedrock principle of copyright that 'once work enters the public domain, it cannot be appropriated as private (intellectual) property,' and even the most creative of legal theories cannot trump this tenet."  Thus, the public may use the Pre-1923 Elements without obtaining a license from the Conan Doyle Estate. 

The District Court next turned to the question of whether elements of the Sherlock Holmes canon published after 1923 ("Post-1923 Elements"), such as Dr Watson's athletic background and Sherlock Holmes' retirement, are "increments of expression" that are copyrightable, or if the Post-1923 Elements are plot elements, ideas, or events that are not copyrightable.  Mr Klinger argued that these Post-1923 Elements are merely events in the lives of the Sherlock Holmes characters and are not subject to copyright protection.  The District Court examined the Post-1923 works to determine whether they constituted "incremental original expressions" that are readily distinguishable from the prior works.  It concluded that, as storylines, new characters and new character traits, these Post-1923 Elements are indeed increments of expression that are and remain subject to copyright protection, "and as a result neither Klinger nor the public are entitled to use them."

Unfortunately, the District Court stopped short of granting a permanent injunction barring the Conan Doyle Estate from asserting copyright in the elements of the Sherlock Holmes canon, even those elements that the District Court agreed are in the public domain.  The creator of a derivative work or other work that makes use of Pre-1923 Elements thus risks a license fee demand or threat of litigation from the Conan Doyle Estate.  However, based on this District Court ruling, the Conan Doyle Estate would likely be unable to prevail in a legal action against any creators who refuse to pay a license fee.  Will 2014 see the publication of many new (and unlicensed) Sherlock Holmes derivative works that leverage the Pre-1923 Elements?  This Kat will be eager to find out!

District Court Opinion here

A Kat's 2013 Copyright Awards

It's Katawards day!

The end of the year is approaching and, as it always happens when something is just about to end, it is time to think about what has been and also what will be next. Following Ben's post this morning on The 1709 Blog in which he masterfully reviewed the copyright year, this Kat has thought of doing something similar and actually award a few (ideal) prizes to what she thinks have been the most relevant moments in the area of copyright this year. 

So here we go:


Most important copyright decision

This may be a difficult one to choose, as there have been plenty of intriguing, appalling or just plainly important judgments in the past few months. However, copyright enthusiasts may agree that the ruling of the year has been that of Judge Denny Chin in the much-awaited Google Books Library Project case (here and here). Although this epic saga will soon have a new chapter written in appeal, the decision of the US District Court for the Southern District of New York was not just an important victory for Google, but also a further step into the construction of the peculiar - and increasingly attractive - US fair use doctrine. Above all, the decision is likely to be used to orientate copyright reform debates. There the file "How to review systems of exceptions and limitations" is classed as top priority. Should we all embrace fair use? This is a Hamlet dilemma, although (it would seem) not for Aussies: see here. 

Most important piece of legislation

From this point of view, 2013 has been mainly a year of discussion and transition, at least in the EU and US. In the former especially, quite a few policy documents have been released, eg the Lescure Report in France (here), the Modernising Copyright Report in Ireland (here, here, here), and the EU has just launched an ambitious Public Consultation on the review of EU copyright (here and here).

It may be because of the geographic origin of this Kat, but probably the most important piece of legislation is not really a law, but rather a regulation: the Regulation on Online Copyright Enforcement by AGCOM (Italian Communication Authority, on which see here and here, and unofficial English translation here). It is important because for the first time in Italy an administrative authority (as is AGCOM) has vested itself with powers (to grant injunctions) which traditionally have fallen within the competence of courts. Overall, the Italian experiment is not only likely to be looked at with either interest or fear by other Member States, but also inform debate around forthcoming review of the InfoSoc and Enforcement Directives. 
   

Li(c)king for sure,
but also communicating?

Most important (and most-heated) unresolved issue

To this Kat, there is little doubt: it is hyperlinking. More specifically: is a link a communication to the public?

This is a question which has been haunting EU copyright minds for a while, and has elicited a bunch of references to the Court of Justice of the European Union (CJEU) - these being Case C-466/12 Svensson (here), Case C-279/13 C More Entertainment (here), and C-348/13 BestWater (here, but this case has been stayed pending the decision in Svensson) -, independent opinions by the European Copyright Society (on which see here and here), and ALAI (on which see here), and contrasting approaches at the national level (eg here).

In the coming months, the CJEU will deliver its judgment in Svensson, and will do so without asking for the opinion of an Advocate General first. This is becase the CJEU thinks that response to this question is fairly straightforward. Is it? 

Most important policy issue for 2014

Subtitle:
Copyright exceptions
and limitations

It is not a new issue at all, but it is likely that 2014 will be the year of copyright exceptions and limitations. Australia will decide whether to go for fair use, the UK will update its system of exceptions, Irish proposals regarding the possibility (and feasibility) of introducing innovation and fair use exceptions at the national level will be further discussed, the EU will finish consulting on the review of its own copyright system ... It is likely that debate about exceptions and limitations will be a bit everywhere, as will (probably) still be also Miley Cyrus.

What this Kat liked least

Using copyright or related rights to safeguard established (outdated) business models. Although there might be quite a few examples of this tendency, the most serious one appears to be that concerning news content. Earlier this year Germany adopted a piece of legislation known as Leistungsschutzrecht für Presseverlege (LSR) (which this Kat criticised here). This act extended press publishers' copyright by providing them with a related right over news content. France (here) and Belgium (here) considered doing something similar before abandoning (for €€€) this idea. Now Italy appears to like the German way, as is thinking whether to adopt something similar (here). Besides doubts whether these related rights are compatible with EU law (here is an article which responds in the negative), is this the way to go? 

Well, it seems it may be not: following adoption of the LSR, in Germany Google News has become opt-in and apparently some major press publishers have already asked to have their content indexed therein. This is quite telling indeed about the relationship between lobbying, law and the market.

Most important copyright-protected work

While this prize is almost impossible to award (too many options!), this Kat wished to give it to a copyright-protected work that was both enjoyable and had something to say about copyright. 

There is a work - to be more precise: a film - that meets both requirements: Saving Mr Banks, starring Emma Thompson and Tom Hanks. As this Kat wrote more than a year ago on The 1709 Blog, this film tells the story behind 1964 Disney adaptation of PL Travers's Mary Poppins books and Walt Disney's twenty-year courting of the Australian-born writer to secure the rights to her works. 

The film is a MUST-SEE for Mary Poppins's devoted fans and copyright enthusiasts alike, in that it does not just highlight the personal and moral bound between an author and his/her works, but shows very well why copyright matters. Incidentally, it allows you to learn amidst laughs and a tear or two shedding from your eyes. 

Contingent abuse of process? No way says Patents Court

End of year: always a good time to catch up
with those little things that might otherwise
permanently escape a busy Kat's attention ...

The IPKat and Merpel always think the end-of-year break is a great time to catch up on recent cases. One such ruling is Actavis UK Ltd v Eli Lilly & Company [2013] EWHC 3749 (Pat), a decision of Mr Justice Arnold in the Patents Court, England and Wales, on 27 November 2013. It's another of those interesting, but generally expensive and essentially unproductive bits of patent litigation which are not directed at the merits of a patent infringement or validity claim but are merely litigation about litigation itself -- a pastime which appears to be increasingly popular these days.

In short, Eli Lilly held a patent for a cancer-treating drug sold under the brand name Alimta. Actavis wanted to market its own cancer-treating drug on the expiry of Eli Lilly's Alimta supplementary protection certificate (SPC) and sought declarations of non-infringement in advance of that date. Actavis, wanting to determine this same issue with respect to the French, German, Italian and Spanish versions of the same patent in a single trial,  commenced two actions which, the court decided exactly a year earlier, it had jurisdiction to deal with. The court accordingly ordered them to be tried together.

Eli Lilly then served a defence that sought to undermine Actavis's litigation strategy: said Eli Lilly, Actavis had no locus standi to bring the proceedings because it had failed to comply with French and Spanish procedural requirements to give requisite notice in those jurisdictions (three months and one month respectively) before commencing proceedings there. Actavis disputed that French and Spanish law applied, but in any event began two further actions to assist in addressing Eli Lilly's procedural arguments. Eli Lilly then applied to stay the later actions pending the trial in the earlier actions on the basis that they were an abuse of process: after all, Actavis only commenced them in order to circumvent the French and Spanish procedural requirements. Eli Lilly's position was not unattractive: a stay would be appropriate because (i) if the earlier actions were held to be ill-founded, the later actions would be an abuse of process, and (ii) if the earlier actions were held to be well-founded the later actions would be unnecessary.

Arnold J refused the application for a stay. In his view:

* Eli Lilly had not sought to strike out the earlier actions as a abuse of process, but argued that there would be an abuse of process in respect of the later actions if the earlier actions were held to be ill-founded. However, it was not proper for a court to stigmatise a claim as an abuse of process on a contingent basis. The problem arose by virtue of the earlier actions and the consequences in terms of lis pendens that those actions had.

* If Eli Lilly was right to say that the consequences of those actions being pending was to prevent it from raising the procedural objections that it wished to raise in the later actions, that was a natural consequence of the existence of the earlier actions -- not the consequence of bringing the later actions.

* Despite its apparent logic, Eli Lilly's application was logically incoherent. Why was this? Because, even if the later actions were stayed, the court would not have deseized itself of those actions. Accordingly they would have lis pendens priority and would prevent actions being taken in France and Spain. If Eli Lilly was right that the earlier actions were ill-founded, and if it was right as to the consequences, it could raise its abuse of process objections to the later actions at that time.

The IPKat is sure that the good judge is right about there being no such thing as a contingent abuse of process -- and presumably the date on which a process is adjudged abusive must be the date on which it occurs.  It seems to him that the time to challenge a process is when the contingency comes to pass and it would be abusive to continue. Is this in fact the case?

The official motto of the
new European Patent Package

Says Merpel, events like this are just the sort of thing that we all hope to avoid when the new European patent package comes into operation.  But how would this issue be resolved on these facts under the new regime? With a single patent and a single court, what could go wrong? Apart from the fact that Spain has not bought into the unitary patent and that neither Spain nor Italy seem keen on the unified patent court, and bearing in mind that the unitary patent does not extend to the grant of SPCs (the Commission is now said to be taking this seriously, despite the dangers with which this path is fraught: see Alan Johnson's note on Bristows' website here), might there be any other problems? One can hardly imagine ...

Banking on IP? Apparently not, UK Intellectual Property Office study finds

The AmeriKat getting her teeth into some banking

In November the UK Intellectual Property Office (IPO) published a study entitled "Banking on IP? The role of intellectual property and intangible assets in facilitating business finance". The IPKat's sister blog, IP Finance, alerted readers to the publication back in November, but there seems to have been little traction or publicity following the publication.

The study, commissioned by the Department of Business (BIS) and the IPO, reported the findings on how effectively SMEs (which account for 99% of the 4.8 million businesses in the UK) are able to use their IP assets to secure the finance they need for company growth and whether there was more that companies and financiers could do to leverage the IP assets. The context of the report was the findings of the 2012 Breedon Report which estimated that shortage of finance for SMEs was between £84 billion and £191 billion and that, according to recent research published by BIS:

"If the situation is not resolved, output, investment and employment will be lower than would otherwise be the case, with adverse effects on economic performance in the short and longer term."

The study found that IP is an "under-appreciated asset class" and is, in effect, "unbankable". Not a good start. However, the report noted that IP and intangibles are valued highly by equity investors and commercial lenders. A 2006 ACCA report stated that "intangible assets provide the basis of superior profits and enterprise value beyond that determined by competitive market conditions". However, IP was not considered the asset of first choice. Nevertheless, a high proportion of commercial lenders "felt more could be done with them - to improve control, inform appetite, or both".

The study recognized that the main obstacle to leveraging IP as an asset for financing was that IP is "generally regarded as too complex and asset class to finance within the constraints of normal lending margins". This difficulty is attributed to the parties not being able to identify what the IP actually is, how it is connected to cash and how its value can be realized. The report noted that the complexity perception needed to be challenged because it is the IP that accounts for a modern business's primary assets.

So what to do? Well for those who, like the AmeriKat, do not wish to read all 224 pages of the study, the report provides you with their top Ten Recommendations as follows:

1. IP and intangibles must be identified during the financing process - The first steps are to provide a means for companies to identify the assets they own, and to build information on IP and intangibles into the templates companies use when presenting information to prospective funders.

2. The value in IP needs to be taken into account - The obstacle that must be addressed here is to demonstrate, reliably and repeatedly, how an SME’s ‘real’ IP and intangibles may deliver value which bears no relation to anything that may be called an intangible on their balance sheet; this generally only shows a sunk cost

3. Due diligence guidelines can help to control costs - Guidelines will involve providing templates, training and/or access to professional advice at a cost lending margins can support, within a turnaround time that meets business requirements.

4. More effective charges should be part of the lending package - Legal templates and the resource toolkit will help lenders to achieve this at modest cost, firstly by providing appropriate wording for the instruments, and secondly by providing guidance on the procedures which must be followed when recording them to ensure their effectiveness.

5. IP markets and IP financing could be facilitated through infrastructure improvements - This is not a job for government - but solutions will require the co-operation of official registries and the establishment of administrative protocols.

6. On-going management of IP and intangibles should also be supported - The proposed toolkit needs to include measures to inform and encourage SMEs to adopt appropriate IP management practices.

7. Affordable risk mitigation strategies need to be encouraged - More detailed dialogue on the requirements of both lenders and insurers is urgently required, to ensure that commercial sector activity is able to provide workable and affordable solutions.

8. Asset-based finance techniques should be adapted for IP and intangibles - Alongside mainstream lending, where EFG is an obvious area of focus, asset-based and alternative financing methods should be prioritised for IP-backed finance interventions; these are the parts of the industry most accustomed to understanding and assessing individual assets and their value.

9. Steps to stimulate private investment need closer study - This work fell outside the scope of the current IP and finance project, but is clearly desirable as a follow-up stage.

10. IP demands joined-up thinking - The Intellectual Property Office exists “to promote innovation by providing a clear, accessible and widely understood IP system, which enables the economy and society to benefit from knowledge and ideas”. It therefore has an important role to play in scrutinizing Government and finance industry initiatives to boost lending, to ensure that the assets produced by knowledge receive appropriate consideration.

Business Secretary Vince Cable

With headlines last year in the States about US banks wishing to tap into the value of IP holdings of their borrowers so as to cut down on their capital requirements, the value of a business's IP is not lost on the finance sector. But as expressed in the report more can be done. So what's next?

In a speech at the Alliance for Intellectual Property Conference in London in October following the publication of the summary of the report, Business Secretary Vince Cable stated

"...Intellectual property is too important an asset to be undervalued by banks who are the main source of finance. That is why I commissioned a report to explore how we can improve SMEs’ access to capital. We will look carefully at its recommendations in order to better support this countries creators and IP-rich businesses"

The report, although fulsome in setting out the problems facing SMEs, does not propose any substantive guidelines for institutions to follow, a uniform system for assessing and valuing IP across the finance sector or means or a taskforce to implement any system.  The only recommendations are for a "resource toolkit" and "legal templates".

So what will Mr Cable and the IPO do next - will they pull together a taskforce who will start drafting and implementing sector-wide standards or will the report just languish in an uncertain purgatory? Merpel, who is spending the holiday season sharpening her claws thinks that if Government is serious about bridging the finance gap for SMEs, perhaps the time for commissioning reports and looking into recommendations is over, and some actions need to commence in the fast-approaching New Year.

Fix Copyright! group set up to ask you how to review EU copyright

Burt could not wait to open
 his Christmas present

Via a most precious Katfriend comes the news that a new interest group - called Fix Copyright! and composed of a large number of interest groups from across Europe, ranging from rights holders to public interest NGOs to large consumer representatives and everything in between - has just been launched.

Fix Copyright! believes in balanced copyright laws that encourage community participation, facilitate economic growth and spur innovation. It supports:

Joy! It was a Fix Copyright!
membership card

• Flexible copyright exceptions that enable innovation;
• Fair and proportionate liability for copyright infringement;
• Equitable access to information for educators, libraries, cultural institutions and the wider community;
• Fair and proportionate incentives for creators

Fix Copyright! is against:

• Copyright laws that distort the balance between the interests of rights holders and broader public interest in access to knowledge;
• The use of technological or contractual measures to unfairly restrict access to content.

The group was set up following the launch of EU Commission's Public Consultation on the review of EU copyright rules (here), and is seeking YOUR responses to the questions posed therein. You can have your voice heard simply by following this link. 

UPDATE: The website is still under construction, so check it out again in a few days' time!

Thursday thingies

Alice Cooper: with
friends like this ...

Weatherley in Westminster.  The IPKat has learned from a US-based PR agency that British Member of Parliament Mike Weatherley just had an article published in the latest WIPO Magazine that talks about protecting IP rights and gives a little background as to about how the UK has gone about doing so.  It's entitled "Protecting IP: Striking a balance", and you can read it here. According to Mike's Wikipedia entry, he

"has an interest in protecting intellectual property rights and is a member of the All-Party Parliamentary Intellectual Property Group. In 2010, he launched a national music competition, "Rock the House", one of the main objectives of which is to highlight intellectual property rights. The campaign has gained support from musicians such as Alice Cooper".

It's obvious that Mike has friends in high places, so this Kat suggests that we be nice to him ...

Scripted. The fourth and final issue of scripted for 2013 has now been published online.  You can check out the contents of this excellent free publication, now in its 10th year of existence, here. Pride of place in this issue goes to a very clever piece by University of East Anglia PhD student Simone Schroff, "The (Non) Convergence of Copyright Policies – A Quantitative Approach to Convergence in Copyright", in which the author seeks to test the widely-held view that national common-law and civil-law based copyright laws are continuing to converge against the evidence of the law as it is actually enforced, concluding that convergence between UK and US copyright law is limited, at best, and that German law appears to be doing a spot of deconverging diconverging diverging.


Greeks probe competition dimension of EU trade mark law. Case C-535/13 Honda Giken Kogyo Kabushiki Kaisha v Maria Patmanidi SA is a request by the Monomeles Protodikeio Athinon (Greece) to the Court of Justice of the European Union for a preliminary ruling on the following question:

What is the scope of ... Article 7 of Directive 89/104 (now Article 7 of Directive 2008/95) and of Article 13 of Regulation 40/94 (now Article 13 of Regulation 207/2009) in relation to the right of a trade mark proprietor to prohibit parallel imports into the EU and the EEA of its products which were first supplied or put on the market in a country outside the EU and the EEA, especially in the case of products with a large profit margin and price squeezing, as evidenced by large fluctuations in pricing policy, and/or where parallel imports may result in considerable reductions in prices to end consumers, for their benefit and the benefit of competition, as in the case of all types of spare parts for motor vehicles, in light of the effect, in isolation or combination, of: (a) the provisions of Articles 101 and 102 TFEU; (b) the provisions of Articles I, XI.1, ΙΙΙ.4 and XX(d) and GATT 1994 law in general; and (c) Articles I and [Χ]XIV GΑΤΤ 1994, especially as they extend the scope of the provisions of Article 7(1) of Directive 2008/95 and of Article 13(1) of Regulation 207/2009 to products put on the market in contracting parties of the GΑΤΤ 1994 and reciprocity issues arise between them?

Do any readers know anything about the factual background to this reference, or anything about the position taken by the Greek court ahead of its decision to make this very IP-meets-competition reference?

Another step in the Nestec saga.  The IPKat thanks Stephen Garner (Mathys & Squire LLP) for telling him of the publication of the decision of the European Patent Office Board of Appeal to revoke EP patent No. 2 103 236.  Sounds familiar? The UK part of this patent was the subject of the April 2013 ruling of Mr Justice Arnold in Nestec v Dualit (on which see Katposts by the AmeriKat here and by Darren here) to the effect that Nestec's Nespresso coffee machine patent was invalid and that in any event Dualit's compatible capsules didn't infringe it.  The UK case was notable, in part, for the judge's approach to partial priorities, leading to a finding anticipation of the claims by the patent’s own priority application – so-called “poisonous priority”.   Stephen points out that the Board of Appeal did not appear to address the priority/novelty issue.  The reasons for revocation are limited to added subject-matter in respect of granted claim 1 (alternative claims submitted during the hearing by Nestec were not admitted into the proceedings).  Given the vigorous debate that followed the UK ruling, it would have been great to know what the Board of Appeal thought about the issue of poisonous priority.  Nevertheless, in view of the recent divergence of the Boards of Appeal on this point, Stephen wonders whether a referral to the Enlarged Board might still be in order for 2014 [yes of course it would be in order, says Merpel, but that's no guarantee that it will happen ...].