What Should You do if an Inventor Refuses to Sign a Declaration for Your Patent Application?

Takeaway: Make sure to document your attempts to have inventors sign their oath and declaration in writing.

For applications filed on or after September 16, 2012 assignees may have the option of filing what is called a substitute statement instead of an oath or declaration by the inventor.  This issue may arise in a number of ways; sometimes an inventor may go missing, they may pass away, or they may refuse to cooperate because they have quit their job. The solution to this problem may be to file a substitute statement on the inventor’s behalf so you may continue with the prosecution of the application without abandoning your patent rights.

According to 37 CFR 1.64(a)(iii) an applicant who is the assignee or party to whom the inventor is under an obligation to assign, where the inventor is deceased, legally incapacitated, refuses to execute the oath or declaration, or cannot be found or reached after diligent effort may sign a substitute statement on behalf of an inventor.

To file a substitute statement you must show evidence to the United States Patent and Trademark Office (“USPTO”) that you are the true party of interest.  This means that you have the right to prosecute the application because you have ownership rights over the invention.  Additionally, you must provide the USPTO with evidence of why the inventor is unavailable and the efforts you have made to contact them.

Because you are required to provide evidence of unavailability and your own diligent efforts to contact the inventor, it is important as an assignee to document your attempts to have the inventor sign an oath or declaration.  

If you have any questions or comments about patent prosecution feel free to call Cislo & Thomas LLP to set up an initial consultation today.

PTAB Rules That Provisional Applications Must Support the Patent Claims of Later Issued Patents to Qualify as Prior Art

Takeaway: Provisional applications may only become effective as prior art if the claims of subsequently-filed issued patent are supported by the provisional application.   Prosecuting attorneys faced with 35 USC §102(e) rejections should always evaluate whether it is possible to rebut a rejection by arguing that the claims of the published application or issued patent being applied do not include any claims supported by the provisional application under 35 USC §112. In brief, the Federal Circuit in Dynamic Drinkware held that Circuit held that an IPR petitioner did not adequately demonstrate that an invalidating reference under 35 U.S.C. § 102(e)(2) was entitled to its provisional filing date because it failed to compare the provisional application to the claims of the reference patent.  Furthermore, Dynamic Drinkware argued that the provisional patent was substantially different from the subsequently-file non-provisional such that the provisional’s effectiveness as a prior art reference fatally suffered. The Court agreed, finding that the claims of the issued patent could not be supported by the provisional application, and that by extension, as a general rule, provisional applications used as prior art references may be disqualified as prior art if it can be demonstrated that a provisional application lacks support for the issued claims. In other words, a patent used as a prior art reference that claims priority to a provisional does not instantaneously benefit from the priority filing date of the provisional patent application.  Rather, the referenced patent only receives its provisional date where at least one claim of the patent is support by the provisional patent application. The recent PTAB decisions in Ariosa Diagnostics and Benitec both upheld the validity of challenged patents on similar grounds, by holding the petitioner failed to prove any claim of the prior art published patent application was supported by the provisional application. The PTAB is increasingly relying on Dynamic Drinkware, LLC v. Nat'l Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015) [“Dynamic Drinkware”] to dispose of Inter Partes Review (IPR) decisions.  These two decisions,  Ariosa Diagnostics, Inc. v. Illumina, Inc.  IPR2014-01093, Paper 69 (PTAB Jan. 7, 2016) and Benitec Biopharma Ltd. V. Cold Spring Harbor Lab., IPR201600014, Paper 7 (PTAB Mar. 23, 2016), reinforce the importance of the Dynamic Drinkware decision.  

Electronic Frontier Foundation (“EFF”) Sues the U.S. Government for “Unconstitutional” Use of the Digital Millennium Copyright Act (“DMCA”)

One of the most highly anticipated lawsuits, filed by EFF against the U.S. Government, on July 21, 2016 will, if successful, strike down one of United States’ most controversial technology laws which the U.S. has been pressuring the rest of the world to adopt. The rule at issue is section 1201 of the DMCA of 1998, the “anti-circumvention” rule, which makes it illegal to break an “access control,” namely a “digital rights management” (“DRM”) or simply a digital lock, for copyrighted works. This act was lobbied by the entertainment industry along with larger tech companies. The act allows users to lobby for “exceptions” but EFF claims “the rulemaking itself is an unconstitutional speak-licensing regime.”  For example, the Library of Congress allowed hackers to revive defunct games by circumventing copyright protection, unless the games involved a central server and unlocking cell phone was made legal in 2006, and then illegal in 2012 before Congress legalized it. And most recently, the Library of Congress denied petitions requesting permission to copy portions of movies for educational K-12 students for noncommercial filmmaking. "As a result, it may be unlawful to circumvent an order to create a running critical commentary on a large portion of a political debate, sporting event, or movie, when where such activity would be a noninfringing fair use," states EFF. EFF will be met with strong contentions but won’t back down without a fight.  The government cannot broadly ban protected speech and then grant a government official excessive discretion to pick what speech will be permitted, particularly when the rulemaking process is so onerous,” said EFF Staff Attorney Kit Walsh. “If future generations are going to be able to understand and control their own machines, and to participate fully in making rather than simply consuming culture, Section 1201 has to go,” he added.

Data Scraping Rules Clarified in the 9th Circuit

Takeaway: Web scraping after receiving a cease and desist letter is held by the 9th Circuit to be in violation of the Computer Fraud and Abuse Act (“CFAA”). Recently, the 9th Circuit Court of Appeals clarified the web scraping debate in Facebook v. Power Ventures, 2016 DJDAR 7051 (July 12, 2016).  The 9th Circuit held that for a publically accessible website, although the legality of scraping has not been clarified, a cease and desist letter withdrawing authorization for an entity to access a website triggers liability for scraping from that point forward, under the CFAA. Other circuits have held similarly.  North District of Texas held in Southwest Airlines Co. v. Farechase Inc., 318 F. Supp. 2d 435 (N.D. Tex. 2004) that even if a plaintiff’s browsewrap terms prohibiting scraping were insufficient to show that defendant accessed without authorization, their repeated warnings and requests to stop were enough.  Most recently in the Northern District of Indiana, a plaintiff sued defendants for automated and manual scraping and the court denied motion to dismiss the cause of action under the CFAA. Couponcabin LLC v. Savings.com Inc., 14-39 (N.D. Ind. June 8, 2016). The cases leave the question open as to whether scraping created liability under the CFAA even before receiving cease and desist letters and for the most part, most courts focused more on whether or not there was enough notice that its scraping activities were without authorization. QVC Inc. v. Resultly LLC, 99 F. Supp.3d 525 (E.D. Pa. 2015). All in all, at least to once put on notice by cease and desist letter, further scraping of a website may be deemed by the 9th Circuit to violate the CFAA.

Santa Monica Bar Association and Cislo & Thomas Sponsor  “Startup Seminar  2016”

Join us in an inspirational and enlightening evening on the 3rd floor of the Santa Monica Promenade Mall on Thursday, August 11, 2016 from 5:30 PM to 9:00 PM! Our curated panel of experts will share their stories and experiences along with priceless advice for any aspiring entrepreneurs. Our experts range in their expertise but have one thing in common—their undeniable hustle.  Come meet our experts, get inspired, and network with Silicon Beach's entrepreneurs, investors, attorneys, and our panelists! This is an event you will not want to miss! Open bar and refreshments are complimentary with your ticket.

Get your tickets at: https://www.eventbrite.com/e/startup-seminar-2016-tickets-22809885983 and tell your colleagues, friends, and family about the event through Facebook:https://www.facebook.com/events/484031415137337/

For more information and to purchase tickets, please contact Joanna Chen, Esq., IP Committee Chair of Santa Monica Bar Association [email protected].

Fee-Shifting for Copyright Cases Places “Significant Weight” on “Objective Unreasonableness of a Losing Party’s Position”

Takeaway: For fee-shifting in copyright cases, courts must place “significant weight” on the “objective unreasonableness of a losing party’s position,” which will affect attorneys fee awards in copyright cases. On June 16, 2016, the Supreme Court unanimously held that the district courts must place “substantial weight” on objective reasonableness or lack thereof of a losing party’s position when considering whether or not to award discretionary attorney fees. Kirtsaeng v. John Wiley & Sons, Inc., 579 U.S. __ (2016). The primary guideline that the Supreme Court set was in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), wherein the Court held that for copyright law, under Section 505 of the Copyright Act,  a district court’s broad discretion regarding awarding attorneys’ fees was based on four nonexclusive factors that were to be applied evenhandedly: (1) frivolousness of a claim or defense, (2) motivation in bringing the lawsuit, (3) objective reasonableness of their legal position, and (4) the need surrounding a particular circumstances to advance considerations of compensation and deterrence. In light of Fogerty, district courts applied various weight to the factors delineated by the Supreme Court.  The 2nd U.S. Circuit Court of Appeals agreed with the district court that placed “significant weight” on the reasonableness of a defendant’s losing position. The Court reiterated the ultimate goal which should be to further “the purpose of the Copyright Act” and generally encourage litigation of meritorious claims and discourage frivolous claims.  Therefore, the Court held that the proper test was to focus on the objective unreasonableness of the losing party’s position rather than whether or not the case revolves around a close issue.  By taking the focus away from how close or important an issue is, more risk-averse parties would not be discouraged from pursuing their reasonable legal positions. The Court, however, clarified that “objective reasonableness” is not a dispositive or controlling factor, but carries “significant weight.”  For example, fee-shifting may be ordered due to litigation misconduct or in order to deter repeated infringement as well.

Supreme Court Overturns Seagate and Returns More Discretion to District Court Regarding Awarding Enhanced Damages

Takeaway: Supreme Court’s stance on enhanced damages for patent infringement is a win for patent holders, such that their burden of proof to show egregious behavior is lowered and the rigid Seagate test that required a showing of “objective recklessness” was overturned. Enhanced damages up to 3 times actual damages may become more common.

On June 13, 2016, the Supreme Court unanimously overturned the Federal Circuit’s holding in In re Seagate Technology, LLC, 497 F. 3d 1360, which required the district courts to consider enhanced damages only if there was “objective recklessness,” and returned some discretion back to the district court.  Halo Electronics, Inc. v. Pulse Electronics, Inc., U.S., No. 14-1513, 6/13/2016; Stryker Corp. v. Zimmer, U.S., No. 14-1520, 6/13/2016.

Further, the Supreme Court held that the burden of proving that an egregious circumstance warranting enhanced damages is at a lower standard of a “preponderance of the evidence,” which is standard generally applied to infringement, rather than “clear and convincing evidence,” and that the standard for appellate review for such awards is abuse of discretion. However, in a concurring opinion (joined by Justices Kennedy and Alito), Justice Breyer pointed out the potential danger to innovation if too many enhanced damages were rewarded.

In 2007, the Federal Circuit held in In re Seagate Technology, LLC, that the standard for awarding enhanced damages under 35 U.S.C. §284 follows a two-part test.  The first is an objective prong wherein the patent owner must show that the infringer acted despite an objectively high likelihood that its actions would constitute infringement and the second is a subjective prong wherein the patent owner must show that the infringer either knew or should have known of the risk of infringement.

The Supreme Court found the Seagate test to be “unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.”  Id. at 8-9.  Chief Justice Roberts pointed out that the use of the word “may” in 35 U.S.C. §284 was evidence that the district court was to be given discretion to increase damages.

“The Seagate test aggravates the problem by making dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense at the infringement trial.  The existence of such a defense insulates the infringer from enhanced damages, even if he did not act on the basis of the defense or was even aware of it.  Under that standard, someone who plunders a patent–infringing it without any reason to suppose his conduct is arguably defensible–can nevertheless escape any comeuppance under §284 solely on the strength of his attorney’s ingenuity.”

The Court further analyzed that using the higher “clear and convincing evidence” to prove enhanced damages was inconsistent with 35 U.S.C. §284 because it imposed no specific evidentiary burden and therefore should not default to a higher standard.

The Court also warned the lower courts that awarding enhanced damages more commonly because of this holding would result in catastrophic and far-reaching results.  Now, under Halo and Styker, undoubtedly, the state of mind of infringers will be examined under the microscope.

Federal Circuit Compares Mark in Their Entireties for Likelihood of Confusion Analysis

Takeaway: When making a likelihood of confusion analysis, for similarity of the marks, the court is to compare the marks without dissecting the letters, but as a single unitary expression. The Federal Circuit, in Oakville Hills Cellar, Inc. v. Georgallis Holdings, LLC, [2016-1103], agreed with the TTAB and held that there is no likelihood of confusion between Oakville’s registered mark MAYA and Georgallis’s applied-for mark MAYARI. While Oakville argued that the Board MAYA dominated both marks and the suffix –RI is minor, and therefore causes confusion, Georgallis responded that the Board correctly analyzed that both MAYA and RI are elements without their own meaning and therefore MAYARI should be perceived as a unitary whole. Further, Georgallis agreed with the Board for considering the marks in their entireties and finding that MAYA is familiar to U.S. consumers as a reference to the Mayan culture and as a popular female given name, whereas MAYARI is unfamiliar to U.S. consumers. The Federal Circuit held that the determination of similarity or dissimilarity of the marks must be done in their entireties.  The Federal Circuit stated that there was no evidence that a customer would view the mark logically as MAYA plus RI, rather than as a single unitary expression., and therefore no reason to break the term into MAYA-RI than MAY-ARI or MA-YARI. The Federal Circuit further emphasized that a single DuPont factor, such as the dissimilarity of the mark in the case, may be dispositive in a likelihood of confusion analysis.

What does Brexit Mean for EU IP Law?

Takeaway: With the United Kingdom leaving the European Union, the new Unified Patent Court (“UPC”) and Unitary Patent may be delayed in becoming operative and applying for EU trademarks in the UK will likely change. With respect to the United Kingdom’s (“UK”) vote to leave the European Union (“EU”), known as “Brexit,” it is important to understand the vote’s possible impact on intellectual property (“IP”) rights that may have been secured in the EU under the mindset that IP rights in the EU would cover the UK. Initially, it should be kept in mind that until the UK actually leaves the EU, and negotiates the terms thereof over the next two (2) years or so, the current procedures and operations are believed to remain in effect. With respect to European patents, the European patent system is governed by the European Patent Convention, which operates independently of the EU.  The UK is a member of the European Patent Convention, and there is no indication that it will not continue to be a member.  Therefore, the UK can continue to be designated in a European patent application.  There is, however, a new Unified Patent Court in Europe available to handle patent disputes, which was set to come online in 2017.  The exit of the UK from the EU may delay the start date for the United Patent Court. With respect to EU Trademarks and Designs (also known as Community Trade Marks and Registered Community Designs, respectively) applying in the UK, this is likely to change upon the formal exit of the UK from the EU, and will depend on the negotiated terms of the exit.  It could be that existing EU Trademarks and Designs will need to be “validated” in the UK in order to have effect in the UK.  The exit negotiations may provide for a “validation” procedure that will secure rights in the UK to existing EU rights owners without a loss in priority, filing dates, grant dates, etc.  Another approach that clients may take is to simply register their rights in the UK, which could be tricky for designs if any bar dates apply, or trademarks if there are intervening users. Ultimately, while there is time to prepare for the transition of the UK out of the EU in terms of IP rights and corresponding licensing or other IP agreements, we recommend that owners of IP rights in the EU audit their IP rights to determine next steps in making sure that they will be covered in the UK once the UK leaves the EU. Disclaimer – we are not European IP attorneys and base the foregoing on what we have read and studied.  For clients or companies seeking advice in this area, we would, of course, provide such advice in conjunction with our European associates.

How to Create a Multiplier Effect with Patents

Takeaway: Patents add to a start-up's strategic advantages. Beyond serving as a tool for start-ups to get investments and protect their products or services, a patent can serve a startup company in many other ways that can achieve a multiplier effect. A startup may not be the best fit in certain markets that its patent can be used in and therefore, by having licensing agreements that may be specified by markets, a startup may lease out the technology beyond their own business models to create extra revenue. A startup may consider franchising their business in a way that includes use of the patent and wherein the franchisor still has control as to branding and the overall business model but can quickly operate in different markets. If the products protected under the patent can address secondary problems, the startup may consider eventually spinning off that can be completely separate entities or as subsidiaries. A startup short on investments may form a business deal with a vendor for manufacturing a product and negotiating a limited license agreement with the vendor.

Improving the USPTO'S System for Processing Patent Applications

Takeaway: The USPTO needs to improve patent examining by applying a different examination criteria. The USPTO's idealized system for processing patent applications has yet to be achieved because patent examiners, desiring to dispose of patent applications quickly, tend to give unreasonably broad interpretations to the claim terms in order to allow them to quickly find a reference that can serve as a basis for a rejection. Although examiners are instructed to give claims their broadest reasonable interpretation pursuant to MPEP section 2111, from our experience, it appears that the examiners may be ignoring the specification and using the broadest possible interpretation of claim language so as to encompass more prior art. Furthermore, patent examiners do not appear to adhere to MPEP 904.03, which states that “[i]t is normally not enough that references be selected to meet only the terms of the claims alone . . . but the search should, insofar as possible, also cover all subject matter which the examiner reasonably anticipates might be incorporated into applicant’s amendment.” (Emphasis added.) To truly implement a proper system, the patent examiner should be incentivized to uncover the best prior art reference(s) available in the First Action on the Merits (FAOM) so that a second search would not be necessary based on any amendments. Therefore, if the invention is unpatentable, then the FAOM should demonstrate as much, not the second or any subsequent office action. One way to implement a better system would be to change the count system. The current count system does not incentivize examiners to conduct the best search in advance of the FAOM. Under the current model, the examiner can receive a maximum of 2 counts on an original case. This is accomplished by issuing a FAOM (1.25 counts), issuing a final office action (Final) (0.25 count), then issuing an allowance or an abandonment (0.5 count). Under this system, it appears the examiners are incentivized to issue a Final prior to an allowance. In fact, an examiner may conduct an inadequate search, knowing that after a response to the FAOM, a second search can be done, and a Final issued, so that the examiner receives the extra 0.25 count. We have advocated this approach to the USPTO in a recent article in the Berkeley Technology Law Journal.

Patent Eligibility of Natural Products Under New USPTO Guidance

Takeaway: The USPTO has offered new guidance as to what "natural products" might be patentable.

There are two new examples added in the USPTO patent eligibility examples for “natural products” based inventions. The new examples add Examples 28-33 to the USPTO’s body of patent eligibility examples, of which Examples 28 and 30 relate to natural products. One example relates to vaccines and the other relates to nature-based sweetener compositions.

For vaccines, the following are the USPTO examples of what satisfies and what does not satisfy patent subject matter eligibility.

[S]tructurally-altered variants of natural products satisfy § 101; no “significantly more” analysis is required.

[C]ompositions comprising a natural product (or a fragment of a natural product, such as a peptide antigen) and other components that are structurally-altered as compared to their naturally-occurring counterparts (e.g., a cream, emulsion, gel, liposome, nanoparticle, or ointment carrier) satisfy § 101; no “significantly more” analysis is required, but it could be important that the other components impact properties of the composition as a whole in a relevant way.

[C]ompositions comprising a natural product (or a fragment of a natural product) and another component that impacts the function of the natural product (e.g., an effective amount of an adjuvant) satisfy § 101; no “significantly more” analysis is required.

[C]ompositions comprising a natural product (or a fragment of a natural product”) and other components (e.g., a pharmaceutically acceptable carrier) do not satisfy § 101 if the components do not impart a different structure or function to each other, unless the claims can survive a “significantly more” analysis.

[D]evices (e.g., microneedles) comprising a natural product (or a fragment of a natural product”) do not satisfy § 101 unless the use of the device with the natural product was not well-understood, routine or conventional (e.g., unless the claims can survive a “significantly more” analysis).

For nature-based sweeteners, the following are the USPTO examples of what satisfies and what does not satisfy patent subject matter eligibility.

[C]ompositions comprising specified amounts (or ranges of amounts) of a natural product (e.g., a small molecule) and a carrier (e.g., water) do not satisfy § 101 where it was well-understood, routine and conventional to use that type of carrier with that type of product and to vary the relative amounts of each (e.g., where the claims do not survive a “significantly more” analysis).

[C]ompositions comprising a natural product and other naturally-occurring components satisfy § 101 if the combination as a whole has properties that are different in a way that is “relevant to the nature of the invention” (e.g., organoleptic properties or flavor profile); no “significantly more” analysis is required.

[C]ompositions comprising a natural product having specific physical characteristics (e.g., a specific particle size distribution) satisfy § 101 if the physical characteristic is associated with a different property that is “relevant to the nature of the invention”; no “significantly more” analysis is required.

[C]ompositions comprising a natural product in a controlled release formulation satisfy § 101 if the controlled release is “relevant to the nature of the invention”; no “significantly more” analysis is required.

The examples indicate the additional component(s) at issue must not be “well-understood, routine or conventional” in the field of the invention in order to satisfy § 101 and be patentable subject matter.

Provisional Patent Applications Are Prior Art Upon Their Filing Date Except Where No Non-Provisional Patent Claims Issue or Are Not Supported by the Provisional Patent’s Original Disclosure

Takeaway: With the explosive growth of patent filings and online publications, it is critical to file your patent application promptly. Even after operating for half a decade under the Leahy Smith America Invents Act (“AIA”), patent practitioners often find it difficult to anticipate the evolution of case law pertaining to the conditions under which a patent may qualify as prior art as of its provisional application filing date.  This is true both with respect to post-AIA and pre-AIA statutory interpretation.    In Dynamic Drinkware, LLC v. Nat'l Graphics, Inc., 800 F.3d 1375 (Fed. Cir. 2015) [“Dynamic Drinkware”], we encounter an example of this strange world of prior art. In Dynamic Drinkware, the court interpreted the pre-AIA version of [35 USC] § 102, and astoundingly denied the patent-defeating effect to a disclosure of a provisional application filing date despite the fact that the relevant disclosure was found in the provisional patent application.   By way of background, an IPR-appeal was initiated for the purpose of reviewing National’s Patent No. 6,635,196 which was applied for on November 22, 2000 but claimed priority to a provisional application filed in June of 2000. Dynamic Drinkware argued that the challenged patent was invalid as being anticipated in view of the provisional application (U.S. Patent 7,153,555, “Raymond”) that was filed in May 2000 but claimed priority back to a February 2000 provisional application filing.   Dynamic Drinkware argued that the provisional patent was substantially different from the subsequently-file non-provisional such that the provisional’s effectiveness as a prior art reference fatally suffered.  The Court agreed, finding that the claims of the issued patent could not be supported by the provisional application, and that by extension, as a general rule, provisional applications used as prior art references may be disqualified as prior art if it can be demonstrated that a provisional application lacks support for the issued claims. In other words, a patent used as a prior art reference that claims priority to a provisional does not instantaneously benefit from the priority filing date of the provisional patent application.  Rather, the referenced patent only receives its provisional date where at least one claim of the patent is support by the provisional patent application. As patent commentator Dennis Crouch stated, “Anyone who works with prior art knows that this setup is an oddball way to address the situation.  A patent’s disclosure for prior art purposes should not depend upon what was claimed or not, but instead should focus on what was disclosed.  My belief is that, once publicly available, all provisional applications should be considered prior art as of their filing dates.”  Crouch, Federal Circuit Backtracks (A bit) on Prior Art Status of Provisional Applications, Patently O (September 8, 2015). With this criticism in mind, and in light of the potential for future evolution of the underlying case law, what are the best practices for practitioners and inventors to keep in mind moving forward? As a general rule, a pending provisional patent application or an abandoned provisional patent does not qualify as “prior art” under 25 USC 102.  A provisional patent application may mature into a prior art document only if it provides thorough written descriptive supportive of at least one claim of the issued patent.   What a crazy way to consider whether a provisional patent is prior art!

The Federal Circuit Confirms That Software Is Not Inherently Abstract and Still Patentable

Takeaway: The Federal Circuit finally confirms that there are types of software that are not inherently abstract, especially if the claims at issue were directed to specific features that improves the way a computer operates. In Enfish, LLC v. Microsoft Corp (Fed. Cir. 2016), the Federal Circuit reversed, for the first time, a district court’s summary judgment that the patents-at-suit were invalid as ineligible under 35 U.S.C § 101 since the Supreme Court’s 2014 Alice decision. The patents-at-suit were U.S. Patents No. 6,151,604 and No. 6,163,775, both of which related to a logical model for a computer database.  More specifically, the patents describe a table wherein the rows correspond to records and columns correspond to attributes of the record, such that this table-based model is “self-referential” because all data entries are maintained in a single table. The California district court found that the patents-at-suit were directed to an abstract idea of “organizing information using tabular formats” or more specifically, “storing, organizing, and retrieving memory in a logical table.”  The Federal Circuit held that the district court improperly “oversimplified the self-referential component of the claims,” and that “the claims are not directed to just any form of storing tabular data, but to the specific ‘self-referential’ features of the database model claimed in the patents” that were “a specific improvement to the way computers operate, embodied in the self-referential table.” The Federal Circuit further found that the claims at issue were directed to “a specific implementation of a solution to a problem in the software arts.” Thus, the court ended the analysis at the first part of the two-part Alice test, because it concluded that the patents were not directed to an abstract idea without providing an inventive concept sufficient to transform the claims into a patent-eligible invention. The court further commented that the second step is for less clear cases wherein “an analysis of whether there are arguably concrete improvements in the recited computer technology could take place” to show that the patents are more than an abstract idea.

Famous Mark Case Dismissed at Seventh Circuit

Takeaway: In the Seventh Circuit, to bring a trademark infringement lawsuit, including by dilution or reverse confusion, the litigant must present evidence of harm or likelihood of harm. In Hugunin, et al. v. Land O’ Lakes, Inc., Case No. 15-2815 (7th Cir., Mar. 1, 2016) (Posner, J), the court addressed the issue of whether a famous mark can be diluted by the identical mark of a much smaller company and agreed with the district court for dismissing the trademark infringement claims and cross-claims because neither party had been, or was likely to be, harmed by the other. Plaintiff Land O’ Lake makes and sells fishing bait and tackle in Wisconsin and currently sells to retailers in several states. In 2000, the USPTO registered its trademark LAND O LAKES for fishing tackle. The defendant and counterclaimant Land O’ Lakes, Inc. is located in Minnesota and sells butter and other dairy products throughout the United States since 1920, when the company was founded. After learning that the plaintiff had registered LAND O LAKES as a trademark for fishing tackle, the defendant wrote to the plaintiff and told him that Land O’ Lakes’ trademark was “famous” and had been in use much longer.  The plaintiff’s original registration had lapsed and when applying again, the defendants opposed at the Trademark Trial and Appeal Board (TTAB) and the application was suspended pending the outcome of litigation. The Seventh Circuit found the parties’ concern over their marks perplexing because “[i]t would be strange indeed for a dairy company to manufacture a product so remote from milk, butter, and cream [as fishing tackle], and there is no sign that the dairy company intends to take the plunge.” Similarly, the Court found no facts that suggested that Land O’ Lakes intended to make or sell fishing tackle. Thus, the court emphasized that there was no evidence of any confusion, and on this basis, the infringement claims were dismissed. As for the defendant’s counterclaims claiming that the plaintiff’s use of the LAND O LAKES trademark diluted the value of their identical trademark, the district court found that the dilution claim was barred by laches and would not have fit either form of dilution, blurring, or tarnishment. The Court concluded that “in this unusual case two firms sued each other though neither had been, is, or is likely to be harmed in the slightest by the other. The suit was rightly dismissed.”

The New Trade Secrets Act (“DTSA”) Is Signed Into Law

Takeaway: Trade secrets that were once protected only at the state level are now under federalized trade secrets protection as well. One of the key immediate impact for employers is DTSA’s new requirement for employment and contractor agreements affecting confidential information. The Defend Trade Secrets Act (“DTSA”) models the Uniform Trade Secrets Act and duplicates the definitions of “trade secret,” “misappropriation,” and “improper means.” The DTSA offers immunity for whistleblowers and requires that employment contracts provide employees with notice of their immunity.  The DTSA provides civil and criminal immunity for employees and contractors who (1) disclose trade secrets in confidence to the government or their lawyers solely for the purpose of reporting or investigating a suspected violation of law, (2) disclose the trade secrets to their personal attorneys in connection with a lawsuit alleging retaliation for reporting a suspected violation of law, or (3) disclose or use the trade secret in any complaint or other document filed in a lawsuit, as long as they file the trade secret information under seal.   Consequently, the DTSA requires employers to provide notice of the foregoing immunity in any contract or agreement with an employee or contractor that governs the use of a trade secret or other confidential information.  Alternatively, the employer may provide a cross-reference to a policy document provided to the employee or contractor that sets forth the employer's policy for a suspected violation of law. Employers will not be able to recover the full extent of remedies available under the DTSA if they fail to comply with the immunity notice provision, specifically exemplary damages (of up to two times actual damages) and attorneys' fees for willful or malicious violations.  Therefore, it is important for employers to incorporate the immunity notice into their relevant employment agreements and policies as soon as practicable. Further, the DTSA will also allow employers to file civil lawsuits in federal court for trade secrets misappropriation by departing employees.  For complex trade secret cases that may be cross-state or international cases, the federal courts may serve as a superior forum since there are more resources at the federal level to hear trade secret disputes and with more sophisticated review.

The Billion-Dollar Verdict – Trade Secret Edition

Takeaway: Trade secret misappropriation may lead to extremely serious legal consequences, especially in terms of punitive damages.

In Epic Systems v. Tata Consultancy Services, a Western District of Wisconsin jury awarded Epic Systems close to $1 billion ($240 million for compensatory damages and $700 million in punitive damages) on state-law trade-secret misappropriation, breach-of-contract claims, unfair competition, and computer-fraud.  

In 2011, Kaiser Permanente contracted with Tata Consultancy Services “TCS” to test a beta Epic Systems software.  Once the testing was complete, a TCS employee was able to reactivate his account which was listed as "expired” rather than deactivated, and use it in 2013 and 2014.

"This is basically every CIO and CISO’s nightmare – unauthorized access to sensitive data and information by offshore contractors that are a direct or indirect part of their supply chain," said Avivah Litan, vice president and distinguished analyst at Gartner Inc. in an email sent to the Wall Street Journal.

Tata employee Rajesh Gajaram had access to Epic's UserWeb portal, according to court documents, and he testified that he shared his login credentials with three other Tata employees. At least one of the three employees testified that he downloaded documents form UserWeb and made them available to other team members. Over 6,000 documents and more than 1,600 files were downloaded between June 2012 to June 2014.

One of the main risks in cybersecurity is rooted in human error and, thus, humans remain to be the weakest link in cybersecurity.