September 28, 2006 by thomason.

Another coffin nail was driven into the P2P corpus by the summary judgment of copyright infringement granted to the entertainment industry in MGM v. Grokster (StreamCast), 2:01CV8541 (27 Sept. 2006).  While I am open-minded about the result reached, I continue to question a summary judgment based on inferential evidence of intent to induce.  Also, I may be missing it, but there’s no treatment of the countervailing question of the “need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential.”  Grokster, 545 U.S. 913.

The ruling on remand essentially expands upon the summary of proofs in the record considered by the Supreme Court.  In the category of copyright infringers always lose, the District Court concluded that each category of the evidence was standing “alone insufficient to support liability,” but when “viewed in context with other [insufficient] evidence” was enough to sustain an “inference of” intent to induce infringement.  That’s like a ‘smell’ test, and IMO not the Rule 56 threshold set out in Liberty Lobby, especially on a disputed issue of intent.

The District Court honed in on the fact that StreamCast opened their doors to former Napster users, and ‘everyone knew’ that Napster enabled infringing uses.  It highlighted evidence that StreamCast users engaged in infringing sharing of music, which the defendants “must” have known about.  It did not implement filters or measures to limit or prevent infringing uses, and it offered technical support and upgrades.  Again, none of these categories of proof “alone” was sufficient to impose liability.  The Supreme Court noted set those limits in its Grokster ruling.  A “mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability.”  The evidence must go “beyond a product’s characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement.”  The “ordinary acts incident to product distribution, such as offering customers technical support or product updates, [cannot] support liability in themselves.”  Again, the rule of the road is, copyright infringers lose.  Even if no set of proof will support liability, then that support comes from a sum of the inadequacies.

The point given less mention is whether StreamCast is “capable” of significant, non-infringing use.  That capability is proven, not by assessing the actual use.  The Supreme Court described “staple-article rule” from the Sony v. Betamax case as what balances the goals of stopping infringement and permitting innovation.  When I first read that, I presumed that on remand, and if the case went to trial, that StreamCast might have a defense, or be able to rebut the inference of intent.  They would get to ask a California jury whether the inferred intent outweighed the need to promote innovation.  Do you ladies and gentlemen of the jury find that the culpable intent imputed from the evidence is adequate to overcome that “need to keep from trenching on regular commerce or discouraging the development of technologies with lawful and unlawful potential.”

Posted in Copyright, Uncategorized | Comments Off

September 28, 2006 by thomason.

In a well-drafted, but issue driven counterclaim, the owners of LimeWire software threw a battery of antitrust accusations against the major distributors of popular music.  After being sued for copyright infringement, LimeWire countered that the music business is a conspiratorial cartel that acts “with a vengeance,” in Arista Records, et al v. Lime Wire, 06CV5936 (S.D.N.Y.).

The defense of the infringement case suggests that LimeWire developed its software using annotated copies of the Napster and Grokster decisions.  It’s antitrust counterclaim may have been structured around annotations to those and other RIAA cases.

LimeWire avers it lacks the file “directory” resident on its servers, which was a resident evil that snared Napster.  The counterclaim notes a clickwrap agreement by which new users “agree not to use the application to infringe the copyrights of others.”  That hopes to distance LimeWire from the software promoted by Grokster and other P2P systems.  It acknowledges that after clicking, “those persons make use of LimeWire in the manner that they alone choose.”  Sort of like a choice teens make after clicking the ‘I am 18′ on other web sites. 

The LimeWire counterclaim condenses most of the history, and some sound bites from, many prior efforts to ‘take on’ the music industry in court.  Still, it seems short on the details of the antitrust violations.  Usually, a civil antitrust complaint should read like a criminal indictment, identifying the combination, the contract, detailing the conspiracy, the object, the overt acts, etc.  This one indicts more so with criticism of the ‘old business’ model, and with information and belief.  The first problem may be providing an initial disclosure that supports the litany of legal theories - if it gets that far.

The alleged badness - to “attack [new] technology with a vengeance,” “prevent the exploitation of new technology,” “plan to dominate the market for online recorded music distribution,” use “anticompetitive [&] unduly restrictive licensing,” “pool their copyrights,” foment “price-fixing among horizontal competitors,” “concerted refusal to deal,” “boycott,” “collusively employing anti-piracy methods,” - all of these run head-on into the music companies’ exclusive right to distribute, which 17 U.S.C. §106(3) guarantees to all copyright owners.

Copyright cases so often ask who’s copy, what copy, how copied, but so many cases today hinge on the right of distribution.  §106(3) enables all manner of vertical, horizontal, exclusive, non-exclusive, exclusionary, etc., distribution arrangements.  The distribution right goes far, and beyond that point, the law of copyright yields in respect to the law of contracts and licenses. 

While I enjoyed reading the LimeWire counterclaim, and find intellectual interest in its challenge to the music business, I think it faces a tough pull to surmount the copyright owners §106(3) rights.  Copyright law is read textually from the Act, and applied equitably to be fair to the copyright owner.  That leaves little in the scale of justice for a defendant accused of facilitating large-scale copyright infringement.  As I’ve been told, your legal arguments are great, but if it’s you against the whole world, I’d bet that the world wins.

Posted in IP-Antitrust, Uncategorized | Comments Off

September 20, 2006 by thomason.

In this realm of patent trolls, reformers and generics, I find refreshment in a patent infringment suit between Diamond Heads and an infringer “also known as GONZO.”  Added to my refreshment is that the patent is in the art of custom engraved motorcycle engine heads, which were more particularly pointed out and distinctly claimed as a “fin structure” with “one intagliated region comprising at least two concavities of a preselected configuration.”  USP #6,626,134.  More simply, that means if you ‘preselect’ a configuration of two diamonds in the eye-sockets of a skull, then that can be engraved on the heads of your chopper’s engine.

In Briton v. Loggans, a/k/a Gonzo, 04CV177 (M.D. Tenn.), defendant Gonzo wanted to offer his testimony, and others, that he had seen the customized fins in public more than one year before the filing date of the patent, and to offer a page from a 1970 Chopper Magazine.  One witness recalled a “photograph of a motorcycle ..in a magazine in approximately 1963 or 1964 …but he does not recall the name of the magazine.”  The patentee move in limine to exclude what Gonzo would say and show.

What can a patentee do when faced with anecdotal testimony about a prior public use, offered to invalidate under §102(b)?  You can worry a lot, but the Gonzo case offers some guidance on how to deal with it. 

First, I never would want to scare our younger readers, but sometimes a P.I. or a party’s employee will come forward with a witness whose recollection of seeing the claimed combination, in public, somewhere, is totally mistaken, or just made-up.

These witnesses, who often are present or past business associates of party, or who want that association, will tell a tale that is broad enough to cover the point, and as thin as a stain and as hard to wash away.  They will say they were in a shop, or at a show, or that in a photo or a catalog they saw an embodiment of the invention, with each element as claimed and connected.  BUT, they can’t remember exactly where, or whose catalog it was, or such details.  Still, they will swear on the Good Book that they saw it, in public, more than one year before the effective filing date of the patent.  This can present you with the case where you may get to show that you are a cross-examiner as talented as in Rumpole of the Bailey, or Inherit The Wind.  A document can be challenged on its face, but a ‘convenient’ witness only can be challenged face-to-face.  Well, maybe not, a motion may do it.

The Judge in Nashville refused to exclude the evidence, but ruled that the uncorroborated testimony and the “unclear and too vague” Chopper magazine were “insufficient to meet the clear and convincing standard” to invalidate for a prior public use.  He relied on long-standing precedent in The Barbed Wire Case, known fully as Washburn & Moen v. The Beat`Em All Barbed Wire Co., 143 U.S. 275 (1892).  It holds that uncorroborated oral evidence about prior public use either should be precluded, or if admissible, should be insufficient to invalidate a patent.

Many well-stated barbs against uncorroborated testimony, from cases after The Barbed Wire Case,  are collected in Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368 (Fed. Cir. 1998).  It sets out eight factors that “can be described as application of a ‘rule of reason’ to the corroboration requirement” for oral testimony that is offered to invalidate.  Among the nuggets of wisdom from the collected cases are, “With the guidance of precedent, whose cautions stressed the frailty of memory of things long past and the temptation to remember facts favorable to the cause of one’s relative or friend, we conclude that this oral evidence, standing alone, [does] not provide the clear and convincing evidence necessary to invalidate a patent on the ground of prior knowledge and use under §102(a).”

As applied to case circumstances today, the “Supreme Court’s view of human nature as well as human recollection, whether deemed cynical or realistic, retains its cogency.”  In other words, no one has invented anyting new for telling what is the truth. 

“Through all the verbal variances, however, there runs this common core of thought and truth, that one otherwise an infringer who assails the validity of a patent fair upon its face” still has to prove invalidity, rather than just finding someone will to say the right words.  Perhaps Gonzo was correct, but without hard evidence to corroborate the testimony, the proffer was inadequate.  Thus, the patentee obtained a summary judgment of infringement, and could stop worrying that others may earlier have “intagliated” preselected “concavities” on chopper head fins.

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September 14, 2006 by thomason.

The term forum-shopping does pop up when MIT is suing Microsoft, Corel, et al, for patent infringement in the E. D. of Texas.  Why not though, that’s the rocket-docket we’ve all heard tales of.  Some suppose that patent cases get to trial faster, in Texarkana, than for the attorneys and witnesses to travel there.  Let’s measure that myth against the timeline reported in MIT v. Abacus, et al, (Fed. Cir. 9/12/2006).

Suit was filed Dec. 2001, and now, nearly six years later, a stipulated judgment based on a Markman ruling is reversed on appeal.  If that is fast, then it’s not rocket fast.  The case did move from the final amended complaint in April, 2002 to a Markman ruling in July, 2003 - which does show some early speed.

The infringement worm turned when several claim terms were deemed to be means-plus-function limitations, but others were not.  In a show of its mission to promote uniformity, the CAFC panel (over dissent) follows two earlier cases that hold “circuitry” is not a means recitation, but that a “mechanism” is.  These holdings, it appears, are based on dictionary definitions, which rank at the bottom of the Phillips hierarchy.  Still, those with an EE background recognize that the CAFC was complimenting that higher level of ordinary skill for “circuitry” than for ”mechanism” - EE’s implicitly understand all sorts of circuitry, but an ME only may grasp the exact mechanism set out in the spec.

While I am not aware of the specific contentions in the District Court, this ruling suggests that the patentee did not get all that it needed to win on remand.

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September 13, 2006 by thomason.

The gray market (grey?), and the Acts of Lanham and of Sherman all played roles in R.J.R. Tobacco v. Cigarettes Cheaper!, (7^th Cir. 8/24/2006).  A suit begun to stop a seller of reimported cigarettes provoked an antitrust counterclaim.  The Sherman Act count went out on summary judgment, because RJR lacked “market power.”  That was affirmed, although the panel called the lack of power conclusion “both questionable and irrelevant.”  It would be irrelevant if the Robinson-Patman claim of a “horizontal” pricing conspiracy would lie, since that would be per se illegal, which takes out the rule of reason factors.  The predatory pricing claim, though, failed at trial.  Then, a further trial was held on the Lanham Act claim, RJR prevailed, and was awarded $4M.

If you enjoyed more than two semesters of economics, then you’d find Judge Easterbrook’s dissection of the antitrust claims a worthy read.  (You perhaps already know that, for the cig market, the “Herfindahl-Hirschmann Index exceeds 3,000″).  Most opinions on the economic drivers in a market offer the reader some chestnuts about capitalism, and often a literary allusion.  Here, one gleans these.  Capitalism is a “gale of creative destruction,” and “cutthroat competition” is a “term of praise.”  In analyzing the price-cutting evidence, the panel said proof that RJR had “played the role of cat’s paw …would suffice even if ..the[ir] motivation” was hard to understand.  That’s more in the dialect of undergrad classes, than what’s heard in law schools, but it resonates with antitrust wonks.

That gets us to the end of the decision, which affirms the Lanham Act award against the cigarette importer.  In gray market cases, the exception always overcomes the rule.  “The Lanham Act does not block reimportation and sale of genuine articles under their real trademarks …[but this] does not apply if the domestic and foreign products are materially different.”  In every case I’ve seen, the products have some differences, often small, and those always are considered material differences.  With cigarettes, the “loyalty programs,” i.e., coupons on the pack, differ here and abroad; domestically, cigs beyond their shelf life are removed by RJR, but they don’t police remiported cig stores.  While those seem modest differences, the jury accepted them. Sure, the coupons differ - why would a smoker in Italy want a Nascar cap?  No doubt too that RJR is not going to gray market stores to check shelf life labels, but for as long as the reimported cigs were fresh, then they were not materially different from the domestic products.

Sometimes it seems that when no other commercial claim will fit, that a Lanham Act or an antitrust claim can fill in the void.  Here, the fact is that gray market resellers are disfavored, even by jurors who like to get the same thing for a lower price.  If you are defending one of the these cases: invoke your advertising injury coverage, then work hardest to settle with the trademark owner.

Posted in IP-Antitrust | Comments Off

September 11, 2006 by thomason.

After spending $3.1M for “enterprise” software, and hundreds of hours implementing it, a glitch keeps occuring with aspects of an online ordering module.  After a weekend of collaboration between the in-house IT staff, personnel from the vendor and an outside consulting firm, the functionality is restored with a re-written module of equivalent efficiency. 

OK, now that the weekend has been ruined by that task, it’s Monday, and time to get back to the real work of an online enterprise.  Let start the morning slow, with a coffee and thumbing through the mail.  Oh, here’s a cease & desist letter from a small, licensing firm - what, the online ordering system is infringing?

Did that re-write constitute “permissible repair”?  Is that interchangeable module a “component,” in the §271(c) or Eolas sense?  Viewed as such, a bona fide user of enterprise software, who adapts or tweaks the system, may have a “repair” defense to infringement.

The Federal Circuit has applied the repair and reconstruction doctrine recently, in the Jazz Photo decisions.  Their general rule is that “while ownership of a patented article does not include the right to create a substantially new article, it does include the right to preserve the useful life of the original article.”  264 F.3d at 1102.  The “right to replace or modify a part of a patented device does not require that the part be spent or broken …[but] depends on the extent of the change.”  Surfco, 262 F.3d at 1066.  The re-write did “preserve” the life of the online ordering system, and to “replace” the module or to “modify” it did cause that IT dude to exclaim ‘righteous’ when the glitch was defeated.

Perhaps I enjoy the “repair and reconstruction” doctrine because it involves things of interest to me - convertibles, Aro Mfg., surfboards, Surfco, and equity.  These doctrines of permissible repair, impermissible reconstruction, patent exhaustion, first sale and implied license are among the last areas of equity jurisdiction within the CAFC’s domain.

These doctrines extend to components, which the CAFC defined in Eolas to include executable applications.  But then, a beauty of equitable doctrines is malleability and elasticity - just ask Mr. Festo or Mr. Markman.  Should a “permissible repair” defense apply to software, or not?  It can be as simple as predicting how the CAFC might treat software “repair” by applying precedent, such as that for the convertible top in Aro Mfg., or the cotton-bale tie in Simmons, 106 U.S. 89 (1889) or the toilet paper in Albany Perforated, 152 U.S. 425 (1894), or the gelatine band in Heyer, 263 U.S. 100 (1923)….  Again, adapting the defense is all about equity, erudition and elasticity.  So, a user of a software system, which must have had its components modified or repaired, should consider how this defense might be equitably applied.

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September 2, 2006 by thomason.

What better chance to straighten out the shifting plates under the universe of obviousness than a case about orthodontics.  The KSR v. Teleflex case pending in the Supreme Court has been a lightning rod for critcism of the Federal Circuit’s test for obviousness, as well as, criticism of the presumption of validity and of the entire patent system.  Add to the dialogue the CAFC’s decision in Ormco Corp. v. Align Tech., Inc., (05-1426).  KSR and its amici complain that the CAFC’s motivation, suggestion or teaching standard is a litmus test, which leads to factual and credibility disputes that preempt summary judgment.  Counteracting those criticisms is the CAFC panel’s Ormco decision, which reverses a summary judgment of infringement to “hold that all six patents would have been obvious.”

The claims against Ormco had a set of progressive appliances, each with “different …geometries,” which served to incrementally reposition the teeth.

The further elements had some novelty - it was claimed that the progressive orthodonics came in a three-pack, with instructions. Quare: if what’s in the pack is not novel, then does adding the elements of an set of “instructions” and a three-pack make it novel and non-obvious? Seems that if what’s in the package is “obvious to” persons of skill, then why would something so obvious need a set of “instructions.”

In one among many Federal Circuit rulings, the decision rests on where they start and finish reviewing an issue. In essence, the CAFC determined that this invention was obvious - based on their claim interpretation, not the four-part test. The district judge interpreted the claim phrase “different …geometries” to mean structured to “progressively reposition” the teeth, and he took that through the Graham v. Deere test, to sustain the validity of the claims. The CAFC reversed and held that “geometry” is so broad that any differing shaped device would be prior art, and took that interpretation through to “hold” the patents invalid. That seemed an exceptionally broad definition. I recall geometry to be about “lines” and “shapes” with at least one angle or arc. (That was one dictionary definition noted by the panel). Of course, what I recall most in Geometry class is that everytime the young lady next to me moved her lower leg and foot to a “different” angle, that “incrementally” “repositioned” where the hem of her skirt rested on her thigh. Meanwhile, the teacher was setting out a learned lesson on what “geometry” means.

Here, the CAFC defined geometry to encompass “different thicknesses” as well as different shapes or spatial layout. Due to the breadth of that claim interpretation, a lot of what the dental professionals had testified about, then was invalidating prior art.

But even so, did their work also fulfill the ‘litmus test’ of a proven motivation, suggestion or teaching to combine. Not explicitly. Again, maybe there’s an “implicit” suggestion to all persons of skill (within the sound of the CAFC’s voice) to combine a set of instructions, with some obvious dental appliance, in a three-pack.

In my humble view, the truest oddity of this case must have been the oral argument. The panel turns things around with a claim construction that prevents infringement and results in invalidity, and with not even a remand for further proceedings. Did anyone at the oral argument know what the other person was thinking might happen? At least the panelists realized that the “facts are undisputed.” Somethings are a mystery, but - I’ll lays odds that a cite to the Ormco case comes up in one of the briefs yet to be filed in KSR v. Teleflex. 

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