Loading...

Follow Darren Franklin | Intellectual Property Law Blog on Feedspot

Continue with Google
Continue with Facebook
or

Valid

In a proceeding that included Patent Office Director Andrei Iancu on the panel, the PTAB issued an order this past week denying institution of 3 IPRs filed by Valve. The decision demonstrates that the PTAB continues to tighten its standards for institution of post-grant challenges, including based upon considerations related to what it perceives as fairness to patent owners.

In federal district court, Valve and HTC had been accused of infringing the same patents. The plaintiff dismissed its case against Valve without prejudice. HTC proceeded to file its own IPR challenges for the asserted patents, and the PTAB issued its institution decisions for each of the HTC’s challenges. Recently, the Federal Circuit found that an accused infringer must file an IPR challenge within one year of being served with a complaint, even if the complaint was dismissed without prejudice. In response to that decision, Valve filed its own IPR challenges.

The PTAB denied institution of Valve’s IPR challenges as an exercise of its statutory discretion under 35 U.S.C. 314(a). In reaching the decision, the PTAB considered the factors it created in the General Plastic decision. As part of that analysis, the PTAB found that Valve and HTC were “similarly situated” because both companies were co-defendants in the same case and were accused of infringing the same patents. The PTAB found that instituting Valve’s later-filed IPR challenges would give Valve an unfair advantage over the Patent Owner because Valve could use the Patent Owner’s preliminary responses and the PTAB’s institution decisions for the HTC IPR challenges when preparing Valve’s IPR challenges. The fact that Valve filed its IPR challenges in order to account for the change in law did not prevent the PTAB from denying institution.

This decision is yet another cautionary signal to defendants to not delay filing PTAB challenges, even if they believe there are legitimate reasons for waiting to file. Given the PTAB’s increasing scrutiny of the timing of post-grant challenges beyond just the one-year statute of limitations triggered by the service of a complaint, companies are best served to promptly file any PTAB challenges for patent assertions against their products, including in situations where they are not directly named as a party.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 
Darren Franklin | Intellectual Property .. by Rebecca Edelson, Seong Kim And Youn.. - 2w ago

Several states have passed new laws restricting use of nondisclosure agreements (NDAs), making it timely for companies to review their policies and practices. Below are some general “best practices” related to NDAs.

An NDA Is Still Critically Important.

It is still important to ensure that an appropriate NDA is in place before disclosing your company’s confidential information, whether you are exploring a potential joint development, procuring specialized parts, or even hiring a new employee. Disclosure without an NDA may bar your ability to maintain the trade secret status of your company’s key information, and allow others to freely use them based on your “voluntary” disclosure without an NDA.

Don’t Ignore Future Threats.

In negotiating an NDA, it is important to recognize that the relationship may eventually sour (e.g., the employee is terminated and goes to a competitor; the joint venture transaction does not come to fruition or ends badly; the other party’s representations were a ruse to gain access to your confidential information). Thus, your demands in the NDA negotiations should take into account the possibility that the other party may attempt to steal your trade secrets or accuse you of stealing its trade secrets.

Don’t Inadvertently Enter Into a Relationship Between the Parties Prematurely.

NDAs are often executed when parties are exploring a potential relationship (e.g., a sale of a business or a joint venture). If beneficial for your business, articulate in the NDA that neither party is agreeing to the potential relationship by signing it and, instead, its purpose is only to afford the parties protection against misuse of confidential information exchanged during the exploration of the potential relationship.

Consider the Direction(s) of Information Flow.

Another important consideration is whether confidential information will be exchanged by both parties. If the flow of information will be mutual, keep in mind that the obligations that you attempt to impose on the other party to protect your confidential information likely will be imposed on you by the other party to protect its confidential information. Thus, weigh the costs and benefits before interjecting into the negotiations a provision that imposes obligations to protect confidential information.

Scope of Protected Information Should Not Be Boilerplate.

Beware of provisions that require you to protect the other party’s non-confidential information. Protecting information is burdensome and expensive. Moreover, such provision could expand the potential scope of misappropriation or breach of contract claims that the other party may assert against you in the future. Articulate what is excluded from the scope of the duty to protect information under the NDA. For example, while it may seem obvious, explicitly state that any information that is readily ascertainable or independently developed is not protected under the NDA.

Be Mindful of the “As Required By Law” Carve Out.

Often NDAs will carve out from the obligation not to disclose confidential information “as required by law.” It is important to understand what is being carved under that exception so you know when you may disclose information the other party designates as confidential and when the other party can disclose information you designate as confidential. An obvious exception is when a court orders the disclosure of the information. But you should also be aware of a growing body of “whistleblowing” exceptions, including the following:

  • The federal Defend Trade Secrets Act protects whistleblowers who disclose trade secret information to government officials or private attorneys for purpose of reporting or investigating suspected violations of law.[1]
  • The Securities and Exchange Commission (SEC) considers any limitation on an individual’s ability to communicate directly with the SEC about a possible securities law violation illegal.[2]
  • Other statutory provisions that afford protection for whistleblowers include 5 U.S.C. § 7211 (governing disclosures to Congress) and 5 U.S.C. § 2302(b)(8) (governing disclosures of illegality, waste, fraud, abuse or public health or safety threats).
  • A number of states have restricted an employer’s ability to prohibit certain disclosures by an employee. For example, California’s Government Code § 12964.5 (effective January 1, 2019) makes it unlawful to require an employee “to sign a … document that purports to deny the employee the right to disclose information about unlawful acts in the workplace….”[3]
Pay Attention to Ownership Issues.

Watch out for proposed provisions that may result in a transfer of ownership of proprietary information. For example, a provision that a party disclosing a document will own any and all information in that document may give the counterparty an argument that it owns your information because it disclosed a document containing your information to you. The NDA should address which party will own any intellectual property derived from information disclosed by the parties (assuming the NDA contemplates the creation of intellectual property).

Do Not Ignore Third Party Access Rights and Obligations.

You should determine which third parties, if any, you may need to disclose the other party’s information to and negotiate a provision that meets your needs. For example, you may want to be able to share the other party’s information with your financial and/or legal advisors. On the flip side, the NDA should define clearly how the other party may use the information you disclose – namely, to which third parties, if any, such information may be disclosed and third parties’ obligation to protect the information to which they are given access. You may also want to include a provision requiring the other party to (i) give you notice if it is going to be acquired by a third party and (ii) to return all of your confidential information upon demand. That way, if the acquirer is one of your competitors, you can prevent it from gaining access to your confidential information.

Carefully Weigh Rights to Assign.

Special attention should be given to provisions that allow assignment of NDA rights to third parties or affiliates. Consider requiring the other party to obtain your consent prior to assigning the NDA or disclosing information subject to the NDA to third parties or even the other party’s affiliates since such affiliates may be your competitors. Even if the counterparty has no affiliates that are your competitors now, that may change in the future.

Set an Appropriate Duration for Confidentiality Obligations.

The length of confidentiality obligations should be driven by the nature of the information being disclosed – whether it is expected to remain a trade secret for a long time or will no longer be secret or valuable after a certain period. Confidentiality obligations may continue after the parties terminate their relationship. However, since protecting information can be expensive and burdensome, parties should avoid agreeing to protection period that is unnecessarily long.

Suitable Protection Measures Should Be Imposed.

NDAs often provide that “reasonable efforts” must be taken to protect the other party’s confidential information. But, given the wide latitude in determining “reasonable” efforts, this is sometimes the reason unnecessary litigation arises. For example, what is considered reasonable can vary depending on the scale and sophistication of a particular business. To avoid such dispute, your company should consider whether the NDA should expressly identify what specific protection measures the other party must use to protect your confidential information.

Consider Audit Rights.

The right to inspect the other party’s business records to determine how your confidential information is being used, disclosed, and protected may be important to assuage your concerns, should suspicions of misuse or negligent protection arise. They may be important later to build a case or to obtain an injunction against the other party, and in litigation (especially in jurisdictions where there are limited discovery rights, e.g., in certain non-U.S. countries or under certain arbitral rules).

Don’t Permit an Integration Clause to Backfire.

While it is generally a good practice to include an integration clause – a declaration that the written contract is the complete and final agreement between the parties and supersedes all prior negotiations – in NDAs, be careful not to inadvertently supersede (or worse, nullify) the terms of other agreements between the parties, which is sometimes is the main reason that the parties entered into a relationship in the first place.

Give Special Attention to Choice of Law and Forum Selection Provisions.

Careful consideration should be given to (i) the provision designating which state’s or jurisdiction’s law will apply to interpret the NDA, and (ii) which venue will be chosen to litigate any dispute that may arise, since these provisions may affect enforceability of the NDA, as well as availability of sometimes crucial injunctive relief (and, when foreign jurisdiction is involved, ability to obtain discovery that may be crucial to prove misappropriation). For example, some jurisdictions (e.g., China, Korea) do not provide for discovery similar to that allowed in the United States. Discovery rights also differ based on the arbitral forum chosen. These are essential provisions when it becomes necessary to enforce the NDA.

Educate Your Employees About the NDA and Obtain Their Acknowledgment.

In event that your company may later be required to show its exercise of reasonable efforts to comply with the NDA, it should educate employees who will have access to the other party’s confidential information about their obligations under the NDA, and better yet, obtain their acknowledgment of the training. This goal will also be furthered by maintaining appropriate records, including communications relating to the NDA with the other party, as well as documentation of the information designated as confidential under the NDA (which party designated it as confidential, which employees accessed it, how it was used, and where it is kept within your systems).

Reduce Risk of Misappropriation Claims by the Other Party.

Businesses should control access to the other party’s confidential information, as well as how it is utilized. When a product is being developed that potentially may later be falsely accused of having incorporated the other company’s confidential information, your company should carefully and methodically document the development of such product to be able to demonstrate that it was independently developed without use of the other party’s confidential information. Such documentation may allow your company to avoid (and, if necessary, prevail in) any potential litigation filed by the owner of the confidential information asserting misappropriation.

Stay on Top of Rights and Obligations at Termination of the Relationship.

Once the parties’ relationship is terminated, neither party should use or access the other’s confidential information except to return or destroy documents in compliance with the NDA. Plan in advance so that you can timely return or destroy the other party’s confidential documents and information, and to timely meet such demand by the other party (e.g., keep track from the onset of the location of documents containing such information, and dissemination of the information by the company’s email system, etc.).

[1] 18 U.S.C. § 1833.

[2] Securities Exchange Commission, Rule 21F-17(a), available here..

[3] Other state legislation related to disclosures of sexual harassment and assaults in the work place include:

  • New Jersey – Effective March 18, 2019. P.L. 2019, c.39 precludes any “provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment.”
  • Tennessee – Effective May 15, 2018. Tennessee’s Pub. Ch. 965 prohibits an employer from requiring an employee “to execute or renew a non-disclosure agreement with respect to sexual harassment in the workplace as a condition of employment.”
  • Vermont – Effective July 1, 2018. Act No. 183 prohibits employers from requiring “any employee or prospective employee, as a condition of employment, to sign an agreement or waiver” that restricts the employee from disclosing sexual harassment.
  • Washington State – Effective June 7, 2018. Chapter 117, Laws of 2018 forbids employers from requiring employees to “sign a nondisclosure agreement … that prevents the employee from disclosing sexual harassment or sexual assault occurring in the workplace” as a condition of employment.
Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

On January 11, 2019, the Supreme Court granted a petition for writ of certiorari over an Eighth Circuit decision involving Exemption 4 of the Freedom of Information Act (“FOIA”), which protects from public disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” This marks the first time the Supreme Court has agreed to hear a case involving this important exemption.

The case – Argus Leader Media v. U.S. Department of Agriculture, 889 F.3d 914 (8th Cir. 2018), cert. granted, — S. Ct. —-, 2019 WL 166877 (U.S. Jan. 11, 2019) (No. 18-481) – involves a FOIA request made by Argus Leader Media, a South Dakota newspaper, to the U.S. Department of Agriculture (“USDA”), seeking the yearly Supplemental Nutrition Assistance Program (“SNAP”) sales figures for every grocery store participating in the program. SNAP, formerly known as the Food Stamp Program, is the federal aid program that provides food-purchasing assistance for low- and no-income people living in the United States. The USDA issues SNAP participants a debit-like card that they use to buy food from participating retailers. When a participant buys food using their SNAP card, the USDA receives a record of that transaction, called a SNAP redemption. It was the yearly totals of these redemptions that Argus sought in its FOIA request to the USDA.

The USDA refused to release the SNAP redemption data, citing FOIA Exemption 4. Argus filed suit, resulting in the trial court ruling in its favor. Although the USDA declined to appeal, Food Marketing Institute (“FMI”) – a trade group representing grocery retailers – decided to intervene and file an appeal to the Eighth Circuit. The Circuit Court affirmed the trial court’s ruling, finding the redemption information was not “confidential” information entitled to protection under the exemption. In so ruling, the Circuit Court applied the test first enunciated in the D.C. Circuit case of National Parks & Conservation Assoc. v. Morton, 498 F.2d 765 (D.C. Cir. 1974). Under this test, commercial or financial information is “confidential” for the purposes of FOIA Exemption 4 only if disclosure is likely (1) to impair the Government’s ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained.

Before the trial court, the USDA argued the competitive position prong of the National Parks test applied. On appeal, the Eighth Circuit agreed with the trial court that the SNAP redemption data did not satisfy this prong. Specifically, although the redemption data could be commercially useful, the Circuit Court found that was not enough to show FMI’s members would experience a substantial likelihood of competitive harm. As to FMI’s argument that its members would suffer competitive harm from the stigma associated with SNAP, the Circuit Court found this argument to be speculative and not supported by any other evidence in the record. Finally, in a footnote, the Eighth Circuit addressed FMI’s argument that the National Parks test should be abandoned in favor of a standard that applies the dictionary definition of “confidential” as meaning “secret.” The Circuit Court rejected this argument, stating “[u]nder [this] reading, Exemption 4 would swallow FOIA nearly whole.”

It is this final point that could have the greatest implications on appeal before the Supreme Court. Government contractors – many of whom have no choice but to deliver confidential information to the Government in their proposals and under data rights clauses in their contracts – could gain a significant advantage in having their information more broadly protected from disclosure to their competitors should the Supreme Court reject the National Parks test in favor of a plain meaning definition of “confidential” as “secret.” If a plain meaning test were to prevail, agencies would be required to shield information that contractors keep secret from the public and from companies seeking to use the FOIA request process as a means of to obtain otherwise unavailable competitive information, without the Government having to demonstrate how disclosure would impair the Government’s ability to obtain necessary information in the future or cause “substantial” competitive harm.

The Supreme Court’s adoption of a plain meaning test also would eliminate the many jurisdictional divisions afflicting the application of the National Parks test. Particularly, some courts only apply National Parks when information is “required” to be provided to the Government, as opposed to when information is “voluntarily” submitted. What constitutes a “required” disclosure versus a “voluntary” submission in the Government contracting context is the subject of even further disagreement. The Supreme Court’s adoption of a plain meaning definition of “confidential” as “secret” would do away with these distinctions.

Regardless of how it ultimately rules, the Supreme Court’s decision in FMI is likely to affect the Government’s application of FOIA Exemption 4 for years to come. Consequently, Government contractors should stay tuned and track developments in FMI closely.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The use of blockchain (or distributed ledger) technology for games (a.k.a blockchain games) and token-based digital collectibles is on the rise. The overnight popularity of CryptoKitties was as significant to raising the awareness of digital collectibles as Pokémon Go was to location-based AR games. However, the ecosystem extends well beyond CryptoKitties, and is growing rapidly. The ecosystem includes cross-platform crypto currency and tokens, digital asset marketplaces, digital collectibles, decentralized virtual worlds and more. A significant amount of investment is going into this space. Blockchain gaming startup Forte has announced a deal with Ripple’s Xpring crypto currency platform to invest $100 million in game developers who make games based on blockchain technology. While the opportunities in this space are real, there are a number of legal issues that can arise depending on how a company implements its offerings.

Given its nascent stage, little attention has been paid to the legal issues surrounding blockchain games and collectibles. Some of the advantages of blockchain games (true ownership of digital goods and the ability to take them outside the game and freely buy, sell and trade them) can lead to potential legal issues. For example, depending on how these games work, there are potential gambling issues to consider. The pre-sale of digital goods, in certain circumstances, can raise securities law issues, even if the are not exactly an ICO. FinCEN has issued guidance on the applicability of the Bank Secrecy Act to convertible virtual currency.

Given the technical innovation happening in this space, we are seeing more companies file patents. The patentability of games and blockchain technology in general is very misunderstood. We still hear developers express the belief that games cannot be patented. That is not exactly true. There are thousands of patents on game mechanics, game features, game technology and other aspects of games. Crypto currencies and blockchain technology are rapidly emerging as disruptive technologies. As has happened with many new technologies, particularly disruptive ones, the number of patents being filed is rapidly increasing.

Blockchain games and collectibles hold great promise. As the pioneers who are innovating in this space hit on the right formula to make this work at scale and create great games, copycats will emerge and replicate these successful approaches. Filing patents now can help mitigate this. Many of the advantages of blockchain games and collectibles may have the undesired consequence of complicating certain legal issues. The SEC is still focused on the aftermath of the ICO bubble. It has not been very focused (at least publicly) on this space. Don’t repeat the errors of those who are suffering the consequences of having done illegal ICOs. Obtain an analysis of the legal issues and ensure your legal compliance.

For a more detailed discussion of these issues, Click here for a PDF of our article: Blockchain Games and Collectibles – Patents and Other Legal Issues.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The Federal Circuit weighed in on patent subject matter eligibility again last week, finding certain amino-acid containing dietary supplements, and related methods of use, to be patent eligible. In Natural Alternatives Int’l v. Creative Compounds, LLC, the Federal Circuit vacated the decision of the district court in the Southern District of California, which held that several sets of claims issued to Natural Alternatives International (“Natural”) were not directed to patentable subject matter under 35 USC § 101. The district court found the claims not patent eligible following a motion on the pleadings. Although the claims at issue included methods of treatment, composition, and process claims, this entry looks at the court’s decision with respect to methods.  The decision could put some wind in the sails of developers of supplements and nutraceuticals.

The court’s review of Natural’s method claims hinged on a method claim that read

1. A method of regulating hydronium ion concentrations in a human tissue comprising:
providing an amount of beta-alanine to blood or blood plasma effective to increase beta-alanylhistidine dipeptide synthesis in the human tissue; and
exposing the tissue to the blood or blood plasma, whereby the concentration of beta-alanylhistidine is increased in the human tissue.

See claim 1 of U.S. Patent No. 5,965,596.

The claim above was at risk being seen as a mere application of a natural phenomenon because beta-alanine leads to beta-alanylhistidine dipeptide synthesis in normal processes in the body. The claim’s saving move was use of the term “effective.” The court based its decision on the finding that Natural’s claim was limited to amounts that were effective to bring about certain results in the body. Natural’s claim construction—which was accepted by the court due to the early stage of litigation—proposed that the “effective” amount was that which “elevates beta-alanine above natural levels.” The court clarified that this was enough to remove the claim from the realm of natural phenomena.

The court made hay of the decision in Vanda Pharmaceuticals Inc. v. West-Ward Pharmaceuticals Int’l Ltd., which held that method claims were patent eligible where, in the current panel’s words, the claims “required a doctor to affirmatively administer a drug to alter a patient’s condition from their natural state.” (Indeed, the court cited an expert opinion proffered by Natural stating that one would have had to eat 109 Big Macs to take in the amount of beta-alanine provided by the supplement.) This requirement for affirmative steps distinguished the claims from those found invalid by the Supreme Court in Mayo v. Prometheus. There, claims that merely “indicated a need” to take certain medical treatment actions were found invalid.

However, the majority seemed to be most convinced by various statements of patentee Natural that their invention was only one of a supernatural effect, so to speak. For example, the patentee’s claim constructions suggested that a dietary supplement is not a “natural or conventional food.” Natural brought data that suggested large quantities of beta-alanine might provide enhanced athletic performance; and further that synergistic effects may be realized by the combination of beta-alanine and glycine. The court seemed impressed by Natural’s results, citing several statements in the patents of enhanced athletic ability. These results arising from taking a higher-than natural amount of the amino acids seemed to be key to the decision.

In all, the Natural decision provides a beacon of hope for applicants for patents to naturally derived medicines. However, as is always the case in the patent world, speak softly and carry a big binder.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

This article was originally published on Law360 on March 1, 2019.

The use of open source with cloud-based deployments has become more complicated. Until recently, the OSS license issues with cloud deployments have been fairly straight forward. It is well known that certain OSS licenses have some significant legal implications (detailed below) but that these implications are triggered when software programs that use OSS are distributed. Due to the fact that with most cloud-based deployments the software is not distributed, many developers are lulled into a false sense of security that there are no OSS implications with such deployments. The reality is there are a growing number of OSS licenses that have significant legal implications, even when the OSS is used in a cloud-based deployment. This article will address some of the relevant licenses and their legal implications.

Read the Full article here: Not Every (Open Source) Cloud Has a Silver Lining.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

On March 4, 2019, the United States Supreme Court held unanimously that “a copyright claimant may commence an infringement suit … when the Copyright Office registers a copyright.” Fourth Estate Public Benefit Corp. v. Wallstreet.com, LLC. (Slip. Op. at p. 1 (syllabus)). The Court also held unanimously that, upon registration of the copyright, “a copyright owner can recover for infringement that occurred both before and after registration.” Id. This decision resolves a long-standing circuit split between the application approach, which allowed a copyright owner to sue for infringement upon submission of a copyright application, and the registration approach, which allows an infringement suit to proceed only after the Copyright Office granted the registration.  

The first sentence of section 411(a) of the Copyright Act provides that “no civil action for infringement of the copyright in any United States work shall be instituted until … registration of the copyright claim has been made in accordance with this title.” 17 U.S.C. § 411(a). The second sentence of section 411(a), however, provides an exception: When “’registration has been refused,’ the claimant ‘[may] institute a civil action, if notice thereof … is served on the Register.’” (Slip. Op. at 5 (quoting 17 U.S. C. § 411(a)).   The Court concluded that the words “until … registration … has been made” in the first sentence of section 411(a) mean after the Copyright Office registers the work, rather than after the claimant files the application. (Slip op. at 4). In reaching this conclusion, the Court stated that the exception language of the second sentence of section 411(a) would be superfluous if registration alone sufficed to “ma[k]e” registration. Id.

The Court also noted the Act provides that “[i]n limited circumstances, copyright owners may file an infringement suit before undertaking registration. If a copyright owner is preparing to distribute a work of a type vulnerable to predistribution infringement – notably, a movie or musical composition – the owner may apply for preregistration.” (Slip. Op. at p. 3 (citing 17 U.S.C. §408(f)(2)). Once an application for preregistration has been made, the copyright claimant may sue for infringement. Id. Such a suit, however, may be dismissed unless the claimant applies for registration promptly after the preregistered work is published. (Id. at 4). The Court held that this language also would be superfluous if “registration … has been made” meant after the claimant files its application. Id. at pp. 6-7.

Although not part of its ultimate holding, the Court did note in footnote 6 that the Copyright Office does offer, for an additional $800, an optional “Special Handling” procedure for urgently needed registrations which the Copyright Office undertakes to issue within five business days. Authors’ note: This would seemingly offer a practical means of securing an early registration for filing suit where the legal fees associated with preparing and filing a complaint will almost always exceed $800.

Finally, the Court held that its interpretation of the statute will not deprive copyright owners of their rights during the waiting period between application and registration. The Court stated that “the Copyright Act safeguards copyright owners, irrespective of registration, by vesting them with exclusive rights upon creation of their works and prohibiting infringement from that point forward.” (Slip Op. at p. 10). Accordingly, “[i]f infringement occurs before a copyright owner applies for registration, that owner may eventually recover damages for the past infringement, as well as the infringer’s profits.” (Id. (citing 17 U.S.C. §504)).

Given the relatively short period of time (two months) from oral argument to issued opinion, this unanimous decision may signal the Court’s increasingly strict views on statutory interpretation in which the plain language of the law should be given its ordinary meaning.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Video game patents being asserted in litigation are frequently challenged by defendants at the Patent Trial and Appeals Board by filing a petition requesting inter partes review (IPR), post-grant review (PGR), or (less frequently) covered business method review (CBM). Gaming companies need to be cautious in preparing these petitions as the PTAB continues to increase its scrutiny of petitions and is showing a reluctance to “fill in the dots” for deficient petitions.

In a decision earlier this week, a PGR petition filed by SuperCell against a GREE patent was denied institution. Rather than challenge the asserted patent on prior art grounds, the petition sought invalidity based upon patent eligibility (Section 101), indefiniteness (Section 112), and written description (Section 112) grounds. The challenged patent claims were directed to providing incentives to players for inviting other potential plays to register, as well as provide additional sequential incentives if the second user elects to register for the game.

Notably, the SuperCell did not include an expert declaration that supported its challenge to  the claims of the ‘044 patent, nor did it seek permission to file a reply to the GREE’s preliminary response after the GREE submitted an expert declaration that rebutted the SuperCell’s challenge.

SuperCell also proposed an extremely broad construction for the term “incentive” which the PTAB took issue with. Specifically the PTAB rejected SuperCell’s proposed construction that a claimed incentive could be “anything.”

In terms of 101 arguments, the PTAB quickly moved to the second step of Alice to note that the SuperCell failed to addressed whether the use of sequential incentives, as claimed, was a longstanding, conventional commercial activity.

Takeaways:

  • This decision illustrates the increased scrutiny the PTAB has been applying to post-grant petitions in the past year, and highlights the need to include a declaration by a competent witness to support a petition, including for issues such as patent eligibility.
  • Petitioners must consider uncommon and novel approaches, such as combating a patent owner’s use of a declaration in with its preliminary response by submitting a reply and a rebuttal declaration even if a declaration was not submitted with the petition.
  • The decision also shows that even under the broadest reasonable interpretation standard, the PTAB is unwilling to adopt constructions that appeared to have an unlimited scope.

When challenging the subject matter eligibility of a patent under Section 101 in a PGR or CBM review, a petitioner should strongly consider submitting declaration testimony that addresses Step Two of the Alice analysis, which considers whether the patent claims something was merely conventional and well-known.

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Those familiar with Patent Trial and Appeal Board proceedings are no doubt aware of some basic trends with respect to post-grant challenges: Institution rates have dropped over the past two years to around 60 percent, and the likelihood of at least some challenged claims surviving a PTAB proceeding has correspondingly increased. This article, rather than focusing on statistics, analyzes recent case law developments, rule changes and shifting legal frameworks, and presents five factors that companies facing patent infringement claims should consider when determining how to best leverage the advantages of PTAB proceedings.

SAS Institute Inc. v. Iancu

The U.S. Supreme Court’s SAS decision generated significant debate over whether petitioners or patent owners will benefit more from the decision. Regardless of the overall balance, it is clear that the threat of estoppel with respect to prior art has grown significantly, and petitioners can no longer expect that printed prior art will be available at trial. Petitioners can alleviate estoppel concerns by (1) investigating system art early, because that art is not subject to potential estoppel; (2) conducting more intensive and thorough prior art searching earlier in cases, so that the best art is presented in an inter partes review petition; and (3) preparing high quality IPR challenges shortly after a patent lawsuit has been filed.

In addition to estoppel, SAS requires that the parties address grounds which the PTAB found unlikely to be successful at institution. While this provides a petitioner an additional opportunity to change the panel’s view
on a ground that otherwise would not have gone forward, it will require both petitioners and patent owners to make difficult strategic decisions regarding how much effort and attention to place on such grounds. For example, when preparing a patent owner response and during the deposition of the petitioner’s expert, the patent owner will have to decide whether to spend time attacking grounds that the PTAB has already found unlikely to succeed, which will likely reduce the patent owner’s ability to attack and focus on other grounds.

SAS will also require petitioners to carefully consider whether to include potentially weaker grounds in petitions, as such grounds can still result in estoppel even if the board finds them unlikely to succeed at the institution stage. Previously, the denial of such grounds at institution would not have triggered estoppel.

35 U.S.C. § 314, 325, and the Evolving General Plastic Analysis

SAS changed the estoppel landscape and increased the need to present stronger prior art arguments at the PTAB. Additionally, the board has limited the prior art grounds and arguments available to petitioners with the factors set forth in General Plastic Industrial Co. Ltd. v. Canon Kabushiki Kaisha.[1] These General Plastic factors not only limit the ability of a petitioner to file a second or “follow-on” petition, but also are being used by patent owners to greatly limit the prior art arguments available for IPR challenges. This includes prior art “previously considered” by the U.S. Patent and Trademark Office, which patent owners argue not only includes art used in office actions, but also anything cited on the face of the patent or used in other post-grant challenges of the claims (including those filed by separate parties).

While the decision may be an outlier, the General Plastic test has even been used to deny institution of an IPR by a company that had not previously challenged the claims.
In NetApp,[2] the board decided that NetApp had waited too long to file its own IPR petition while other companies moved forward with IPRs of their own. While the factual history underlying NetApp is unique and complicated, it still leaves open the question of how broadly panels will utilize the General Plastic test.

PTAB Rule Changes (Sur-Replies and the Phillips Standard)

Beyond case law changes, the structure of PTAB proceedings continues to change, resulting in additional challenges that petitioners must be equipped to handle. With a recent rule change, IPR proceedings will now include sur-replies for patent owners, allowing patent owners to have the last word in written briefing before the oral hearing. Petitioners must factor in this change — including its many ramifications on strategy, counter-strategy, and potential new arguments — when preparing a petition, lest they be caught off-guard later in the proceeding, when it is too late to change course.

Last week, the PTAB instituted a rule change to switch from the “broadest reasonable interpretation” standard to the Philips claim construction standard. This switch will create additional implications that defendants must consider and account for when preparing a petition. To date, petitioners have been able to utilize the BRI standard to challenge the claims using the same — often broad — interpretation of claims from the patent owner’s infringement allegations, while at the same time preserving arguments in the district court that such a construction is not proper under the Philips standard. With the PTAB’s switch to the Philips standard, petitioners must carefully consider the strategy implications of, for example, filing an IPR that challenges the claims with a broad construction consistent with the patent owner’s interpretation in district court; filing an IPR under a narrower and proper construction under Philips; or to avoid certain IPR challenges (at least some claims) to preserve arguments for district court. Additionally, the Philips standard for PTAB proceedings will require defendants to determine much earlier in litigation — at higher costs and disruption to its business — whether to prioritize noninfringement or invalidity arguments, and what proposed constructions will be needed when a Markman hearing is likely still at least a year away.

Federal Circuit Decisions: Applications in Internet Time and Click-to-Call 

Two recent Federal Circuit opinions have increased the difficulty for IPR petitioners in ways beyond technical and legal arguments. In Applications in Internet Time LLC v. RPX Corp.,[3] the Federal Circuit raised numerous questions on real-party-in-interest and privity issues but left ambiguity as to the boundaries defining an RPI. Because failure to identify an RPI can result in denial of a petition, companies facing patent infringement allegations will need to take extra care to analyze the positions of co-defendants and other business relationships to avoid an allegation of an undisclosed RPI. Particular care must be paid to these issues when multiple companies join a single petition, as the actions or relationships of a single company could result in the petition being denied for all companies.

With Click-to-Call Technologies LP v. Ingenio Inc.,[4] the Federal Circuit also created uncertainty for companies served with a complaint for patent infringement and subsequently dismissed without prejudice. In such situations, companies must now assess whether to file an IPR before the one-year window runs out, despite no lawsuit existing. This may result in gamesmanship by at least some plaintiffs by filing lawsuits against numerous companies, serving complaints, and then dismissing without prejudice, thereby creating the potential to file suit a year later, after the defendants are precluded from filing IPR petitions.

Hiding Patent Claims 

The success of IPR proceedings has forced patent owners to adopt new tactics, including attempts to make IPR proceedings more difficult and expensive. One tactic (which is growing in popularity) is asserting a larger number of patents and claims in a complaint while attempting to stall the identification of which claims the patent owner realistically plans to pursue in litigation. Particularly with patent litigation becoming more dispersed across different venues after TC Heartland, with varying disclosure requirements in each venue, this tactic can, absent intervention by litigants or judges, allow patent owners to waste time and resources by forcing petitioners to file IPRs on large sets of claims that the patent owners never plan to truly pursue.

Approach Going Forward 

PTAB proceedings remain powerful tools for companies accused of patent infringement, providing the opportunity to challenge asserted claims in front of three technically trained judges. However, recent changes from the Supreme Court and Federal Circuit, and PTAB rule and analysis changes have increased the challenges and hurdles faced by petitioners. Petitioners must understand and account for the impact of these changes when developing their PTAB strategy. Careful consideration must be paid at the early stages of litigation to determine what published and system art is available, push for a narrowing of claims, select prior art grounds that will prevail not only at the PTAB but at the Federal Circuit, and avoid RPI issues. More than ever, these new hurdles will require adept and sophisticated IPR counsel for a petition to be successful.

This post was originally published as an article by Law360 on October 16, 2018.

[1] General Plastic Indus. Co., Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357 (PTAB Nov. 21, 2013)(Paper 19).

[2] NetApp, IPR2017-01196 (PTAB Oct. 13, 2017).

[3] Applications in Internet Time, LLC v. RPX Corp. , 897 F.3d 1336 (Fed. Cir. 2018).

[4] Click-to-Call Techs., LP v. Ingenio, Inc. et al. , 899 F.3d 1321 (Fed. Cir. 2018).

Read Full Article
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

We first wrote on this topic nearly a year ago[1]. Since then, courts have had an opportunity to interpret some of the provisions of the federal Defend Trade Secrets Act (DTSA). Indeed, since it was signed into law, more than 360 DTSA claims have been filed, with more than 343 complaints filed in federal court. California has seen more of these cases than any other state, finding itself host to over 15% of all DTSA claims.

As we addressed in our previous blog, there are some key distinctions between the DTSA and California’s Uniform Trade Secret Act (CUTSA) that may inform companies how to run their businesses and prepare for litigation should it be necessary. Some of these distinctions have come into greater focus as courts have interpreted the DTSA, at times with surprising results.

Inevitable Disclosure. When enacted, the DTSA was generally thought to reject the doctrine of inevitable disclosure like CUTSA. The doctrine of inevitable disclosure enables a plaintiff to “prove a claim of threatened misappropriation by demonstrating that the nature of a former employee’s new employment will ‘inevitably’ lead him to rely on the plaintiff’s trade secret.”[2] The DTSA provides that a court may enjoin “any actual or threatened misappropriation . . . provided the order does not prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.” 18 U.S.C. § 1836(b)(3)(A)(i)(I)).

Nevertheless, some courts have issued inevitable disclosure injunctions under the DTSA. For example, in Mickey’s Linen v. Fischer, the district court for the Northern District of Illinois granted a preliminary injunction, finding that the defendant-former employee would “inevitably use or disclose [the plaintiff’s] trade secrets during his employment with [a competitor].[3] Thus, notwithstanding DTSA’s prohibition on injunctions that preclude employment, there may be jurisdictions where it is possible to obtain an injunction based on inevitable disclosure (although California is unlikely to be one of them).[4] This is somewhat ironic since one of the purposes in enacting DTSA was uniformity across jurisdictions.

Whistleblower Immunity.[5] Unlike CUTSA, the DTSA expressly provides for whistleblower immunity. The thought was that whistleblowers would be more likely to whistleblow if they did not have to worry about the cost and burden of a resulting DTSA lawsuit. But that is not how it has turned out, at least based on Unum Group v. Loftus.[6] There, defendant employee moved to dismiss the plaintiff employer’s trade secret misappropriation claims on whistleblower immunity grounds. He claimed that he had turned over the documents that he took to his attorney in order to report and investigate a violation of law. The court denied the motion, reasoning that such defense cannot be adjudicated at the pleading stage and, instead, a defendant must submit to discovery and present evidence to justify the whistleblower immunity. Although this requirement may burden the putative whistleblower defendant, it may also prevent a defendant from evading litigation based on a mere cry of whistleblowing.

Ex Parte Seizure Order. Unlike CUTSA, the DTSA expressly allows a plaintiff to request – without any notice to the defendant — a court order directing enforcement officials to seize property to prevent further misappropriation. Given the potential power and disruptive nature of such a remedy, there was a lot of talk and concern about this aspect of the DTSA before and after its enactment. But, with the DTSA having over a year under its belt, practice shows that ex parte seizures are rarely sought and courts almost never issue them. The remedy is treated as truly extraordinary. Mission Capital Advisors LLC v. Romaka, [7] is one of the few cases where a DTSA ex parte seizure order was actually granted. The court there reasoned that the requisite extraordinary circumstances were present in light of the forensic evidence and misrepresentations about data deletion. The result in OOO Brunswick Rail Management v. Sultanov [8] – denial of an ex parte seizure order — is more the norm. There, the plaintiff argued that the seizure was necessary to stop data deletion and destruction of the evidence.[9] In denying the seizure requests in that case, the court instead ordered document preservation and delivery of devices to the court at the time of a scheduled preliminary injunction hearing.[10]

Sheppard Mullin attorneys have extensive experience litigating trade secret disputes, as well as navigating clients through the nuances of trade secret law outside of litigation.

[1] The Federal Defend Trade Secrets Act vs. The California Uniform Trade Secrets Act. Ms. Edelson is an editor and contributing author to TRADE SECRET LITIGATION AND PROTECTION IN CALIFORNIA (Defend Trade Secrets Act Supplement (State Bar of California 2017). Mr. Kim is a contributing author. Mr. Salen is a contributor to that Supplement.

[2] Rebecca Edelson and Jesse Salen, Federal DTSA versus California UTSA, California Business Law Practitioner, Vol. 32, No. 2, p. 38 (Spring 2017).

[3] No. 17 C 2154, 2017 WL 3970593, at *12-13 (N.D. Ill. Sept. 8, 2017); see also Molon Motor & Coil Corp. v. Nidec Motor Corp., No. 16 C 03545, 2017 WL 1954531, at *5 (N.D. Ill. May 11, 2017)(denying motion to dismiss because there was “enough to trigger the circumstantial inference that the trade secrets inevitably would be disclosed by [the former employee] to [the defendant-competitor].”); see also Panera, LLC v. Nettles, No. 4:16-cv-1181-JAR, 2016 WL 4124114 (E.D. Mo. Aug. 3, 2016) (finding the doctrine helpful for understanding why an employee’s duties at Papa John’s would almost certainly require him to draw upon and use Panera’s trade secrets).

[4] The DTSA prohibits injunctions that conflict with applicable state law precluding restraints on employment. 18 U.S.C. §1836(b)(3)(A)(i).

[5] A whistleblower is ordinarily thought to be someone who brings to light illegal activity of her company (e.g., by disclosing the matter to the attention of the authorities). Without laws to protect them, whistleblowers may risk reprisal and retaliation. The DTSA’s whistleblower immunity provision is one such law.

[6] No. 16-cv-40154-TSH (D. Mass. December 6, 2016)

[7] No. 1:16-cv-05878-LLS (S.D.N.Y. July 29, 2016)

[8] No. 5:17-cv-00017-EJD, 2017 WL 67119 (N.D. Cal. Jan. 6, 2017); see also Balearia Caribbean Ltd., Corp v. Calvo, No. 16-23300-CIV-WILLIAM, (S.D. Fla. Aug. 5, 2016) (denying a DTSA seizure request for failure to satisfy the “extraordinary circumstances” test and instead issuing a temporary restraining order).

[9] Id. (Plaintiff sought seizure of a laptop, mobile phone, and digital copies of Google and Rackspace email accounts of two former employees which allegedly contained plaintiff’s trade secrets.).

[10] Id.

Read Full Article

Read for later

Articles marked as Favorite are saved for later viewing.
close
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview