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A recent decision from the US District Court for the Western District of Texas suggests that district courts are taking a more expansive view of what constitutes a “regular and established place of business” for purposes of establishing venue in patent infringement cases.  Board of Regents, The Univ. of Texas Sys. v. Medtronic PLC, Case No. 17-942 (W.D. Tex.)

In November 2017, the Board of Regents of the University of Texas System (the “Board’) sued Medtronic, Inc. for patent infringement in the US District Court for the Western District of Texas (the “Western District”).  Medtronic responded to the Complaint by challenging venue as improper.

Proper venue in a patent infringement case is first determined by “the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”  28 USC § 1400(b).  In light of the Supreme Court’s TC Heartland decision, which held a corporation “resides” only in its state of incorporation, the parties agreed that Medtronic, which is not incorporated in Texas, did not “reside” in the district.  The parties instead focused on the second method for establishing venue: whether Medtronic, Inc. “has a regular and established place of business” in the Western District.  Establishing such a presence has three requirements: (1) there must be a physical place in the district, (2) it must be a regular and established place of business, and (3) it must be the place of the defendant.  In re Cray, 871 F.3d 1355, 1360 (Fed. Cir. 2017).

According to Plaintiffs, Medtronic, Inc. satisfies the Cray test because it maintains a regular and established place of business in San Antonio, Texas—a 431,000 square feet manufacturing and research facility.  Medtronic, Inc. countered that the facility is not sufficient to establish proper venue because it does not own or lease the facility; rather, a Medtronic, Inc. subsidiary leases and uses the facility, and the presence in the district of a non-party subsidiary cannot be imputed to Medtronic, Inc.

The district court disagreed with Medtronic, Inc. and found venue proper.  Regardless of the lease arrangement for the facility, the district court concluded that Medtronic, Inc. had “ratified” the San Antonio facility as its place of business because: (1) Medtronic, Inc. announced its move to San Antonio in 2009, (2) the facility had a large “Medtronic” logo on the façade, and (3) Medtronic, Inc. lists the San Antonio facility on its website and in telephone and web-based directories.

While the Federal Circuit articulated the factors to consider when determining whether a defendant has “a regular and established place of business” in a district, litigants and the district courts continue to wrestle with the question.  (See our prior post predicting an increase in litigation over this question, here.)  Decisions like that in Board of Regents may signal a trend in which district courts are willing to peek behind formal legal structures and consider whether, under the totality of circumstances, a defendant has ratified a subsidiary’s presence as its own.

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In China, to succeed in an intellectual property (IP) infringement lawsuit, it is beneficial to have the case heard in a court that specializes in IP disputes (e.g., the IP courts in Beijing, Shanghai and Guangzhou). Securing a court that is away from the domicile of the infringer may also be beneficial, as it will reduce the risk of the court being influenced by local factors, and and the unknown legal environment will force the defendant to increase its defensive efforts.

In China, IP infringement generally gives rise to tort-like claims. The jurisdiction for such suits is either the domicile of the defendant or where the wrongdoing, or purchase, took place. Therefore, through a process of forum shopping (i.e., acquiring a sample of the infringing product in the desired jurisdiction), the plaintiff can determine where the IP litigation takes place.  Filing a suit where the infringing product was purchased, rather than where it was manufactured, requires the plaintiff to find a third-party trader that sells the infringing product in the desired jurisdiction and involve them in a purchase trap tied to the manufacturer.

However, what happens if there is no third-party trader selling the infringing product and the only way to purchase the “evidence” is by placing an order online? Where is the place of the wrongdoing? Is there any other rule that may apply to determine whether there is an alternative to the domicile of the defendant? What if there is more than one defendant?

In the past, Chinese case law has provided little guidance. Courts adopted different standards and, with there being no binding precedents aside from the decisions of the Supreme People’s Court, judges have adopted rather inconsistent positions. However, in the recent case Guangdong Martinel Clothing Co., Ltd., Zhou Lelun v. New Balance Trade (China) Co., Ltd. & Nanjing Dongfang Shopping Mall Co., Ltd., 2016 Supreme People’s Court judgment No. 107 (Min Xia Zhong No. 107), the Supreme People’s Court finally provided a clear answer to the above questions. In particular, the Supreme People’s Court concluded that in a case in which the evidence of a trademark infringement was purchased directly from the infringer/defendant through an online transaction, the deriving civil lawsuit shall be alternatively subjected to (i) the jurisdiction of the People’s Court where the infringing act was committed (including the place where the damages were suffered), (ii) the jurisdiction of the People’s Court where the infringing commodities were stored, sealed and detained, or (iii) where the defendant has its domicile.

The Martinel Case

In the Martinel case, New Balance Inc. sued two Chinese entities and one individual before the Nanjing Intermediate Court, after having acquired evidence of their trademark infringements online from the city of Nanjing. Two of the defendants, which were domiciled in Guangzhou, objected to the court jurisdiction. The Nanjing court rejected the objection, espousing the line of arguments advanced by the plaintiff, New Balance. In particular, New Balance had based its forum shopping on the provision of article 20 of the 2015 Supreme People’s Court Interpretation on China Civil Procedure Law. This norm allows the buyer in a contractual dispute concerning the purchase of goods to sue the seller at the place of domicile of the buyer, if the subject matter of the contract is delivered via the information network (place where the contract is performed). New Balance argued that it had concluded contracts with the defendants and both had delivered the goods via the internet to New Balance in Nanjing. Therefore, it was entitled to sue the defendants in that city. By using the above provision, New Balance not only founded the jurisdiction of the court on its Chinese domicile, but also unified two originally separate infringements in one sole legal action. The defendants appealed the court decision to reject their objection to jurisdiction with the Supreme People’s Court.

The Supreme People’s Court overruled the decision of the court of first instance, stating that Article 20 of the Supreme People’s Court Interpretation on China Civil Procedure Law is not applicable to a claim of trademark infringement because the main evidence of infringement was purchased via the internet. The court concluded that trademark infringement claims are tort claims and as such are only subject to the rule on jurisdiction provided by Article 6 of the 2002 Supreme People’s Court Interpretation Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks. This norm simply reflects the general principle of jurisdiction that is applicable to all tort cases: sue at the forum of the domicile of the defendant or that of the locus commissi delicti

Conclusion

The decision of the Supreme People’s Court is binding on all People’s Courts and will put an end to disputes over the purchase of evidence of infringement online and forum shopping. It will surely make it more difficult for rights holders to build evidence acquisition strategies. In practice, when evidence of infringement is purchased online from the infringer directly, it will be difficult to move the forum away from the domicile of the defendant. The decision also held that in the case of separate infringements by independent defendants, the plaintiff will have to file separate lawsuits against each defendant unless a competent court unifies the different cases upon the consent of all involved parties.

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The U.S. International Trade Commission issued an important opinion on Friday concerning Section 337’s “domestic industry” requirement, holding that investments in non-manufacturing activities, such as engineering and research and development, can be used to satisfy the required “significant investment in U.S. plant and equipment” or “significant employment of U.S. labor or capital.”

The Commission’s opinion (in Certain Solid State Storage Drives, Stacked Electronics Components, and Products Containing Same, Inv. No. 337-TA-1097) is noteworthy because it directly addresses, for the first time, a difference of opinion among the Commission’s administrative law judges (ALJs) concerning the proper treatment of engineering and research and development investment under the statutory scheme.  The issue arises because the statute provides three, seemingly distinct, options for satisfying the domestic industry requirement in cases involving alleged infringement of statutory intellectual property rights:

. . .an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, [registered U.S.] trademark, mask work, or design concerned—

(A) significant investment in plant and equipment;

(B) significant employment of labor or capital; or

(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. § 1337(a)(3).  As the Commission opinion notes, this provision was added to the statute in 1988; prior to 1988 there was “no definition in the statute as to what constitutes a domestic industry.”  Quoting the legislative history, the Commission explains that the first two factors (subsection A and B) were relied on in Commission precedent up to that point, but the third factor (subsection C) went “beyond” the ITC’s then-existing precedent on the domestic industry issue.

In the instant case, the complainant sought summary determination that it met the statutory investment requirements, “rel[ying] at least in part on the domestic engineering, and research and development activities of its licensee . . . to demonstrate the existence of a domestic industry under subsections 337(a)(3)(A) and (B).”  These “domestic engineering activities included ‘customer integration and sustaining engineering activities,’ ‘customer service engineering activities,’ ‘warranty and repair work,’ ‘testing of replacement parts,’ and ‘preparation of responses to statement of work (“SOW”) requests.’”  The presiding ALJ (Judge Lord), however, “concluded that investments in ‘non-manufacturing activities,’ including engineering, and research and development activities related to the domestic industry products, cannot support a finding of domestic industry under subsections (A) and (B).”  According to Judge Lord, the legislative history suggests that Congress “understood that subsections (A) and (B) covered only manufacturing.”

The Commission, in a unanimous opinion, disagreed.  Following several pages of analysis, the Commission concludes that

the text of the statute, the legislative history, and Commission precedent do not support narrowing subsections (A) and (B) to exclude non-manufacturing activities, such as investments in engineering and research and development.

As a result, the Commission vacated the ALJ’s analysis and conclusion that subsections A and B cover only manufacturing activities.  Relatedly, it also vacated the ALJ’s conclusion that all three subsections require connecting the U.S. investments to exploitation of the patent; rather, only subsection C requires such proof.  Nonetheless, the Commission did not disturb the ALJ’s ultimate conclusion that the domestic industry investment requirement (the so-called “economic prong”) was satisfied with respect to three of the four patents, but based its determination on different reasoning from that of the ALJ.

Takeaway:  Section 337’s unique, “domestic industry” requirement is often referred to as a “gatekeeper” provision for proceedings under the statute.  The Commission’s interpretation of the enumerated domestic industry factors arguably loosens the requirements for establishing a domestic industry in two ways.  First, it expands the types of investments that can be used to satisfy the “plant and equipment,” “labor,” or “capital” investment requirements of subsections A and B.  Second, it clarifies that the Commission’s jurisprudence regarding engineering and research investments under subsection C—which requires a Section 337 complainant to show a “nexus between the investments and the asserted patent(s)”—is inapplicable to subsection A or B.  Although the Commission’s opinion appears to have no practical impact on the outcome in this case, it seems likely to affect how the domestic industry issue will be litigated in future investigations.

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Does a forum selection clause in a pre-existing agreement between opposing parties in a Section 337 investigation provide grounds for terminating the investigation?  A recent decision of Administrative Law Judge Cheney in Certain Color Intraoral Scanners and Related Hardware and Software, Inv. No. 337-TA-1091, Order No. 23 (May 18, 2018) concludes that the answer is no.

The forum selection clause at issue was included in a three-year development agreement designed “to enable” the respondent’s technology “to become acceptable to [complainant].”  The clause provided that the parties “irrevocably submit[] to the exclusive jurisdiction of the courts in Denmark to settle any dispute arising out of or in connection with this Agreement (including any non-contractual disputes or claims.)”  Respondent moved for termination of the Section 337 investigation based on the Commission’s discretionary authority to terminate investigations “on the basis of an agreement between the private parties.”  19 U.S.C. § 1337(c).

Although the complainant argued that the Commission had “repeatedly denied” requests to terminate based on forum-selection clauses, the ALJ found that the Commission’s cases did not stand for any such “bright line rule.”  Looking to federal court practice, the ALJ determined that the threshold question that must be answered is whether the forum selection clause is enforceable in the forum in which it is asserted.  The ALJ determined that enforcing the clause would contravene the public policy behind Section 337 of “protect[ing] U.S. domestic interests in connection with unfair commercial activity involving foreign imports” and that the respondent had not shown that “any other court, and specifically a court in Denmark, can satisfy this congressionally-mandated policy[.]”  According to the ALJ, the federal courts “have refused to enforce forum selection clauses based on similar public policy reasons.”

Takeaway:  Although noteworthy as a case of first impression, the precedential impact of the ALJ’s decision beyond forum selection clauses is uncertain.  For example, the ALJ distinguished arbitration clauses, which Congress in the Federal Arbitration Act deemed “enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”  Indeed, arbitration clauses were added by a 1994 amendment to Section 337(c) as an example of the types of private party agreements justifying termination, reversing a contrary conclusion by the Federal Circuit.  The ALJ also noted that his decision did not leave the respondent without recourse because the respondent could still request a district court to enjoin the complainant from breaching the forum selection clause and to order the complainant to withdraw its Section 337 complaint.

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The United States Supreme Court ruled on Friday that a patent owner can, at least in some situations, recover lost profits for the unauthorized use of its patented technology abroad.  The 7-2 decision in WesternGeco LLC v. ION Geophysical Corp. overturned the Federal Circuit’s opinion, which relied on the presumption against extraterritorial application of U.S. law to vacate a jury’s award of $93.4 million in profits that the patent owner would have earned on overseas contracts.

In the opinion, the Supreme Court soundly rejected the Federal Circuit’s view that profits lost outside the United States are categorically unavailable as a matter of United States patent law.   But the Court declined to go as far as the patent owner requested and find that the “presumption against extraterritoriality should never apply to statutes, like 35 USC § 284 [the patent damages statute], that merely provide a general damages remedy for conduct Congress has declared unlawful.”  (For more details on the Federal Circuit decision and briefing, see our prior posts here and here.)   The Court instead focused on the narrower question of “whether the case involves a domestic application of the statute.”

According to the Court, even if “other conduct occurred abroad,” a case involves a “permissible domestic application” if “the conduct relevant to the statute’s focus occurred in the United States.” Based upon the statutory focus, the Court determined that “the conduct relevant to the statutory focus in this case is domestic” and so damages based on foreign lost profits were not prohibited.

In reaching this conclusion, the Court reconciled the parties’ views as to whether the case presented a question of infringement under 35 U.S.C. § 271 or one of damages under 35 U.S.C. § 284.  The Court noted that where a statutory provision at issue “works in tandem with other provisions, it must be assessed in concert with those other provisions” when determining the “focus” of the statute.  Turning first to 35 USC § 284, the Court found that the focus of this statute, which provides a general damages remedy for various types of patent infringement, is “the infringement”—not damages.  And because 35 USC § 271 identifies various ways in which a United States patent can be infringed, determining the focus of Section 284 in a given case requires the Court to look at the type of infringement that occurred under Section 271.

Here, 35 USC § 271(f)(2) was the basis of the patent owner’s infringement claim and the lost profits damages that it received.  Section 271(f)(2) provides that a defendant is “liable as an infringer” if it:

supplies in or from the United States all or a substantial portion of the components of a patented invention . . . as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.

Given that the conduct regulated by Section 271(f)(2) is domestic—i.e., “suppl[ying] in or from the United States”—the Court found that the focus of Section 284 was domestic infringement through the act of exporting components from the United States.  The Court concluded, on this basis, that damages based upon contracts to be performed outside of U.S. territory were permitted.

WesternGeco thus opens the door to patent owners recovering lost profits they would have earned overseas—at least in some situations.  The Court was careful to limit the scope of its decision to infringement under Section 271(f)(2) and expressly refused to declare that Section 284 is not subject to the presumption against extraterritorial application of United States law.  Accordingly, the Federal Circuit’s decision in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. continues to bar the recovery of damages from foreign sales for infringement under 35 USC § 271(a).

In light of this decision, litigators should be sure to assert infringement under Section 271(f) if there is any conceivable “combination” of exported parts so as to preserve the opportunity to obtain damages from infringing foreign sales and use.  Patent prosecutors may also wish to include claims for products that are likely to be assembled outside of the U.S., and that include inventive components manufactured within the U.S.

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The Federal Circuit recently issued a precedential decision in Stone Basket Innovations, LLC v. Cook Medical LLC, No. 2017-2330 that has important ramifications for litigants seeking attorneys’ fees under Section 285 of the Patent Act.

Section 285 authorizes a court to award reasonable attorneys’ fees to the prevailing party in “exceptional cases.”  In Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), the Supreme Court defined an “exceptional case” as one that “stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”  Under Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014), district courts are to apply a “totality of the circumstances” test to determine whether a case is exceptional.

Stone Basket’s case started life as a run-of-the-mill patent infringement suit filed in the US District Court for the Eastern District of Texas in April 2015.  Defendant Cook Medical served its invalidity contentions in October 2015 and subsequently deposed the inventor in January 2016. The inventor testified that he “realize[d] there [wa]s nothing novel about” the “sheath movement element” added to the claim to overcome an examiner rejection.  Cook Medical then petitioned the US Patent and Trademark Office for inter partes review in March 2016.  Shortly thereafter, the court transferred the case to the US District Court for the Southern District of Indiana.  The parties filed a joint motion to stay the proceedings in April 2016, which the district court granted.

The PTO instituted an IPR on all claims of the asserted patent in September 2016, which prompted one of Stone Basket’s managing members to offer Cook Medical a license in exchange for $150,000.  Negotiations broke down and in December 2016, Stone Basket filed a motion requesting adverse judgment in the IPR proceeding.  The PTO granted the adverse judgment and cancelled all claims.

Following cancellation, the district court granted Stone Basket’s motion to dismiss the infringement suit with prejudice.  Cook Medical subsequently sought attorneys’ fees.  The district court denied the fee application because it determined the case was not “exceptional” under 35 USC § 285.

Addressing the issue of the substantive strength of Stone Basket’s non-prevailing litigation position, the Federal Circuit found that the district court did not abuse its discretion in finding that the evidence Cook Medical submitted—invalidity contentions and inventor testimony—did not, taken alone or in combination, warrant a finding of exceptionality.

Describing Cook Medical’s invalidity contentions as “inconsistent and unilluminating,” the Federal Circuit observed that the invalidity contentions failed to provide “clear notice” of invalidity.  While Cook Medical focused on the obviousness of the asserted patent over a prior art reference (the “Leslie reference”), the Federal Circuit explained that the contentions fell short of notifying Stone Basket how the Leslie reference renders the asserted patent obvious or even that Stone Basket should conduct a focused investigation on whether the Leslie reference, in particular, renders the asserted patent obvious.  The Leslie reference Stone Basket championed, moreover, was listed on the face of the patent and Stone Basket failed to overcome the presumption that the examiner considered the reference.  As such, the Federal Circuit explained that Stone Basket, having been issued a valid patent, was entitled to a presumption of good faith in asserting its patent rights against Cook Medical.

The Federal Circuit found equally unavailing Cook Medical’s reliance on the inventor testimony concerning the novelty of a particular claim element.  Citing its precedent, the Federal Circuit reiterated that a post-issuance statement regarding a single element of a claimed invention does not establish invalidity because the court must consider the subject matter sought to be patented taken as a whole.  Again noting that a duly issued patent is presumed valid, the Federal Circuit explained that it was not “necessarily unreasonable” for Stone Basket to continue relying on the presumptive validity despite the inventor’s testimony.

Cook Medical further faulted the district court for considering its litigation conduct when declining to find the case exceptional, arguing that the district court cited no authority for the proposition that the tactical decisions made by the prevailing party are relevant to assessing the substantive strength of the non-prevailing party’s litigation positions.  The Federal Circuit rejected the argument, noting post-Octane precedent that the conduct of all parties—including the movant—is a relevant factor for district courts to consider under Octane’s totality of the circumstances inquiry.  Accordingly, the Federal Circuit concluded it was appropriate for the district court to consider Cook Medical’s failure to send any communication to Stone Basket that highlighted and set out with precision the specific invalidity argument that rendered the lawsuit frivolous or unfounded.

Ultimately, Cook Medical’s failure to provide “early, focused, and supported notice [to Stone Basket] of its belief that it was being subjected to exceptional litigation behavior” proved dispositive to the Federal Circuit’s opinion that the district court had not abused its discretion.  Reviewing the chronology, the Federal Circuit noted that Cook Medical waited nearly a year after service of its invalidity contentions and nine months after the inventor’s deposition before informing Stone Basket that Cook Medical intended to seek fees if Stone Basket refused to drop its case.  According to the Federal Circuit, a “party cannot simply hide under a rock, quietly documenting all the ways it’s been wronged, so that it can march out its ‘parade of horribles’ after all is said and done.”

The key takeaway: Although Section 285 does not expressly require notice, providing interim notice during the litigation of exceptionally weak arguments or bad behavior is an important factor in the determination of an exceptional case.  Like Rule 11, such a notice serves the salutary role of avoiding undue expenses by providing the noticed party with the opportunity to correct its approach and by providing the court the ability to take corrective action at an early stage.

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The UK Trade Secrets Regulations which came into effect earlier this month for the first time provide a statutory definition of a “trade secret.”  The definition is narrower than the existing standard and focuses more on whether the information has been kept secret rather than its inherently secret nature.  This new requirement puts the onus on businesses to take reasonable steps to secure their trade secrets. Our paper prepared by Carlton Daniel highlights a few steps UK businesses may take to limit their exposure under this new legislation.

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Having just addressed several, important patent venue issues on mandamus in a trilogy of cases (see our prior posts here, here, and here), the Federal Circuit recently issued a terse opinion denying mandamus on yet another venue-related petition, stating that mandamus was unwarranted.

The case, In re Hantover, Inc., No. 2018-138, involved a patent infringement suit resolved by a 2007 settlement agreement that provided for continuing jurisdiction over the agreement before a Northern District of Ohio judge.  In 2014, the plaintiff filed suit alleging breach of the agreement and infringement of the same patents that it had asserted in the original suit.  The case proceeded through claim construction.  Two and one half months after the Supreme Court’s landmark decision on patent venue in TC Heartland, LLC v. Kraft Foods Grp. Brands, LLC, 137 S.Ct. 1517 (2017), the defendant moved to dismiss or transfer the case for improper venue, “arguing that it did not reside in the Northern District of Ohio within the meaning of 28 U.S.C. § 1400(b) as interpreted by TC Heartland or have a regular and established place of business in the district to warrant venue.”  The district court denied the motion based on the “advanced stage” of the case and the waiver of venue “by virtue of [defendant’s] assent” to the settlement agreement.  Without opining on the district court’s reasoning, the Federal Circuit concluded that the defendant did not satisfy the mandamus requirement that there be no adequate alternative to mandamus for obtaining relief:  defendant “fails to sufficiently explain why raising its arguments on appeal from final judgment would be inadequate here.”  In other words, venue could be appealed as part of the final judgment and, if found improper, would nullify the judgment, thus providing “adequate” relief.

Takeaway:  Not all mandamus petitions are created equal.  In one of its recent mandamus cases on patent venue—In re HTC Corp., No. 2018-130—the Federal Circuit seemed to be signaling that future mandamus petitioners challenging venue decisions would face a higher bar when it indicated that mandamus would not be granted merely “to avoid the inconvenience of litigation by having this [venue] issue decided at the outset of the case.”  In re Hantover suggests that, at least for the time being, the usefulness of mandamus petitions as means for challenging venue under the patent venue statute may have reached its practical limit. 

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As part of larger institutional reorganization schemes, the Chinese government has recently issued a draft statute for the reform of the State Intellectual Property Office (SIPO). SIPO, until now an agency subordinated to the executive branch (i.e. the State Council), will be organized under a newly created super agency in charge of IP and product quality and safety. Among the goals of the reform are administrative simplification and increased efficiency in handling IP related matters, as well as the improved protection of the intellectual property rights of foreign entities and individuals in China.

Under the reform, SIPO, currently the administration in charge of patents, will be reorganized under the State Administration for Market Regulation (SAMR), a new government body formed by the incorporation of several and currently separated administrative bodies. Among them are the State Administration of Industry and Commerce (SAIC) today in charge of trademarks and trade names, the State Food and Drugs Administration (SFDA), in charge of the registration and administration of food, cosmetics, medicines and medical devices and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the product quality and product recall watchdog.

As a result of the reform, SIPO will extend its current responsibilities in the administration of patents to the administration of trademarks (currently charged upon SAIC) and geographical indications (currently with SFDA).  Therefore, the reorganized SIPO will be responsible for the registration of patents, trademarks, integrated circuit layout, and geographical indications as well as issuing the corresponding administrative decisions.  It will also provide guidance/direction for the enforcement of patents and trademarks at administrative level. In practice, the current structure of the administrative enforcement of trademarks under the territorially competent AIC may be drastically reformed.

It is also worth noting that the IP protection administration under SIPO will be put under the same umbrella of product quality supervision and administration. In this way China seems to create a Super authority that will be watching over the market and “Products” from their major angles, including IP, safety registrations and quality/consumer protection.

Since the reorganization of SIPO is part of a major institutional reform, it may take months or even years to complete. However, the hope is that these changes will significantly improve protection of foreign IP rights in China.

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Recent jurisprudence rendered by Spanish Courts establishes that in the case of copyright infringement over the internet, it is not necessary to sue the infringer, but rather the IT intermediaries that host the website.

The Court of Appeal in Barcelona has now dismissed an appeal filed by several IT companies against the first instance Judgment that established the above-mentioned doctrine.  The claimant had sued several IT companies requesting that the defendants must prevent access to a website that was allegedly infringing certain copyrights.  The petition was made based on the Spanish Copyright Act, which establishes the ability to request such action against the intermediaries, not only as an injunction but also as a petition on the merits.

The availability of this action, however, presents a potentially problematic situation that was argued by the IT intermediaries as an objection against the claim. The problem is that if the infringer is not sued, there would be no previous declaration of infringement and, consequently, the intermediaries could not be requested to prevent access. Here, the claimant previously requested the Spanish regulator to order the infringer to stop infringing the claimant’s copyright.  Although initially the infringer stopped the infringement, it eventually restarted it. The claimant also produced an expert report that showed that the infringer facilitated links that allow free downloading of music.  The Court of Appeal decided that it is possible to sue the intermediaries without the need to sue the infringer and without the need to obtain a previous declaration of infringement, so long as evidence of the infringement is provided.

Finally, another problematic issue is that this action might determine that non-infringing content could also be prohibited. However, if the main use of the website infringes the copyright, the decision to prevent access is not disproportionate.

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