The Federalist Society recently hosted a panel “Is the Patent System Working or Broken?” at George Mason University School of Law featuring retired Federal Circuit Judges Paul Michel and Arthur Gajarsa and Seventh Circuit Judge Richard Posner, with D.C. Circuit Judge Douglas Ginsburg moderating the panel. Although the America Invents Act (“AIA”) was intended to provide sweeping reforms to the patent system in the United States, it is clear there is still much to be desired. Judge Posner was critical of current patent laws, pointing to the high number of patents granted for minor software innovations, arguing that these innovations would occur even without a patent because there are little upfront costs or investment that need to be recouped. He believes the amount of frivolous patent litigation would be curbed if fewer patents were granted for a shorter period of time and there was no presumption of validity. Judges Michel and Gajarsa agreed further reforms were needed, but rejected Judge Posner’s idea that patents should only be granted for the purpose of recouping investment costs and pointed out that the 20-year patent term was required under international treaties. Judge Gajarsa further argued that the new post-grant review procedures under the AIA should help resolve the issue of the USPTO granting patents that should never have been issued in the first instance. The debate over patent reform will certainly continue as the AIA is tested over this year.
Perspectives on Intellectual Property Issues
Last Friday, the Associated Press learned that the U.S. Justice Department had secretly seized telephone records in April and May of 2012 for more than 20 separate lines assigned to the AP and its journalists. (The AP story is available here.) While the Justice Department gave no explanation for the secret subpoenas, the seizure may be related to an ongoing criminal investigation into who provided information to the AP for a May 7, 2012, story about the CIA’s operation in Yemen to stop an airplane-related terror plot.
The ACLU, American Society of News Editors, and federal lawmakers have expressed concern that the secret seizure may inhibit or intimidate the press. This week, Sen. Charles Schumer, Rep. John Conyers, Jr., and Rep. Ted Poe announced separate plans to push for a federal reporter shield law to protect reporters from compelled disclosure of information. (Additional details are available here.) In light of the AP seizure, the Obama Administration has asked Senator Schumer to reintroduce the Free Flow of Information Act, last introduced in the Senate in 2009. Representative Poe plans to introduce his own version of the Free Flow of Information Act, while Representative Conyers has said he will reintroduce a reporter shield law that passed the House in 2009.
We will continue to monitor the investigation of the seizure of AP telephone records and the Free Flow of Information Act.
A few months ago we wrote about the Monsanto appeal that was pending before the U.S. Supreme Court. The Federal Circuit previously affirmed that Bowman (a farmer) had infringed Monsanto’s patent rights when he purchased patented and non-patented seeds, culled all of the non-patented seeds, and replanted only the patented seeds. The Supreme Court took the case to look at whether Monsanto’s patent rights covered later generations of self-replicating seeds as well as the initial seeds sold by Monsanto. For more background, see How Exhausting Is Self-Replication?
The Supreme Court issued a unanimous decision on May 13, 2013, in favor of Monsanto that Bowman did infringe Monsanto’s patent rights. The court focused heavily on Bowman’s actions and the fact that he “controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.” The Supreme Court clearly felt that farmers cannot intentionally plant patented seeds without obtaining them from the patent holder (whether first or subsequent generation seeds) and escape patent laws.
What I find interesting is that the Court specifically left open at least two issues: (1) whether the outcome would be the same if Bowman had not intentionally culled the non-patented seeds; and (2) whether the outcome would be the same if self-replication was necessary for the ordinary use of the product (here, the evidence was that farmers did not typically buy seeds from a grain elevator for planting, but instead for consumption).
Another area that this ruling leaves open is the impact of patent exhaustion with respect to technologies where the product replicates so quickly that purchaser is really buying the subsequent generations (i.e., cell lines, viruses, and bacteria).
Two other interesting elements of the case were: (1) it was unanimous and (2) Justice Kagan called for further review of the patent exhaustion issue, either by the court or by the legislature.
The opinion is available here.
Just when we thought the issue of patentability of software could not get any more confusing, the Federal Circuit issued its opinion in CSL Bank International v. Alice Corp. Pty. Ltd. on Friday, May 10, 2013. That case was over a computerized system and method for reducing risk using escrow-based transactions. The Federal Circuit (sitting en banc) split across several opinions with no clear majority. From the opinions, we know that Alice’s claims are not patentable, but we don’t know exactly why. The general issues the court pointed out were lack of specificity in the patent and a general lack of “inventiveness” because Alice simply took an existing idea (using escrows in financial transactions) and implemented the idea with a computer program.
The district court’s judgment of invalidity as to Alice’s patents was affirmed by the Federal Circuit, so it seems likely that Alice will appeal.
The opinion can be found here.
In this day and age where an innocuous home video or the latest news story can explode into an internet phenomenon, game developers looking to cash in on the popularity of the latest memes need to carefully consider the potential copyright ramifications of using protected images without permission.
Warner Bros. Interactive Entertainment and 5th Cell, developers of the popular Nintendo DS gaming franchise Scribblenauts, recently found themselves the target of a lawsuit filed by the creators of two popular internet memes, namely Keyboard Cat and Nyan Cat.
The creators, Charles Schmidt and Christopher Torres, respectively, filed suit because the Keyboard Cat and Nyan Cat both appear as Easter Eggs in Scribblenauts, an adventure game in which players summon objects to help solve puzzles. The lawsuit claims that the Cats are “valuable for commercial uses” based on their status as foundational internet memes with tens of millions of views on YouTube. The creators seek unspecified damages and an injunction on Scribblenauts-related products.
Google, Blackberry, Earthlink and Red Hat recently filed with the Federal Trade Commission their analysis of the anticompetitive effects of patent trolls (a/k/a non-practicing entities) on competition. (Their analysis may be found here.) What is particularly intriguing is their argument that licensing patents to a non-practicing entity stifles competition because the non-practicing entity is not vulnerable to a countersuit in the same way that a practicing entity is. They assert that a non-practicing entity is not as vulnerable as a practicing entity because it is designed to enforce patents and does not need to allocate other resources to defend its rights. Further, because it does not practice the patent, a non-practicing entity is less likely to settle a dispute through a cross-license. They assert that these reduced vulnerabilities found with non-practicing entities may raise market-wide prices, are detrimental to competition, and encourage companies to transfer patent rights to non-practicing entities for enforcement. Accordingly, they have asserted that the Federal Trade Commission should investigate non-practicing entities, how practicing entities transfer patents to non-practicing entities, and the ways that those arrangements may harm competition.
An article by Robb Harvey, Kim Looney, and Andy Norwood entitled “Medical Devices and Malware: The Latest Hospital-Acquired ‘Infection’” was published by Healthcare Informatics on March 21, 2013. The article may be accessed here.
The U.S. Supreme Court recently heard oral arguments in a case expected to have a major impact on the global agricultural industry, individual farmers, and research and development efforts directed to genetically modified crops. To decide the case, the Supreme Court must ultimately elucidate the scope of patent exhaustion in the context of self-reproducing goods and the extent to which license agreements for such technology apply to subsequent purchasers who have not signed an agreement.
The specific technology at issue is Monsanto’s Roundup Ready® soybeans, which contain a chimeric gene that confers glyphosate resistance. This way, a farmer can apply Monsanto’s herbicide Roundup® to weeds and soybean plants at the same time, killing only the weeds. Because soybean plants are self-pollinating, seed harvested from each successive generation of progeny plants will necessarily contain the gene. Monsanto sells its Roundup Ready® soybean seeds directly to farmers and licenses the technology to seed producers. Both are required to sign a licensing agreement which limits the use of the seeds to a single planting. The agreement also prohibits farmers and seed producers from selling the seeds to a third party or replanting seeds harvested from plants grown from the original seeds (i.e., second generation seeds). Interestingly, the agreement contains a loophole that allows seed producers to sell second generation seeds without restriction to grain elevators, who commonly resell the seed as a commodity for animal feed or replanting.
In the case, Bowman v. Monsanto, an Indiana farmer named Vernon Bowman was sued for infringing Monsanto’s patents by replanting second-generation seeds he purchased from a local grain elevator, admittedly in the hopes that they were glyphosate resistant. Monsanto alleged that Bowman planted the second-generation seeds and applied herbicide to the plants that sprouted, thereby selecting for only those plants having herbicide resistance. He then harvested the seeds of plants showing herbicide resistance and replanted them. Bowman repeated this process with subsequent generations from 2000 through 2007.
Monsanto argued to the Court that Bowman is subject to the license agreement despite the fact that he did not sign it. Monsanto also argued that Bowman’s seed purchase did not constitute an “authorized sale” triggering patent exhaustion. Under this theory, Monsanto would retain the right to prevent Bowman from making the patented invention by growing subsequent generations of seeds. Bowman argued that he was free to do as he wished with the seeds once he purchased them and that he is not subject to an agreement he never signed.
One the one hand, a holding for Bowman that exhaustion applies would effectively eliminate Monsanto’s patent rights and much of the value in the technology since anyone could then produce Roundup Ready® seed by simply replanting and harvesting seed containing the patented technology. Permitting replication of the patented technology via traditional replanting techniques could also drastically reduce research efforts by deincentivizing investment in this expensive technology.
On the other hand, a holding for Monsanto that Bowman’s generation of seeds is infringement could expose conventional and organic farmers to liability not only if they proceed as Bowman did, but also if their crops become inadvertently contaminated with the patented technology, for example, via natural cross pollination.
A decision is expected in June.
A federal judge has dismissed claims that online services that provided access to legal briefs filed in federal court were infringing the copyright in those briefs.
Earlier this month, in one of the most highly watched copyright cases of the last few years, Judge Rakoff of the Southern District of New York issued a ruling dismissing the case brought against Westlaw and LexisNexis by a pair of copyright attorneys. Westlaw and LexisNexis both provide access to legal briefs filed in federal cases, for a fee. The attorneys claimed that through this practice, Westlaw and LexisNexis unlawfully profited from their copyrighted works.
Judge Rakoff’s summary ruling was not supported by an extensive order including his reasoning, but he did promise a future order discussing his rationale for dismissing the case. Although the judge’s reasoning is currently unknown, Westlaw and LexisNexis argued that they were entitled to use the documents under the fair use doctrine. The electronic services also noted that the briefs were readily available through PACER, the federal court system’s electronic filing service.
It will be interesting to see whether the Judge agreed with Westlaw and LexisNexis that their actions were protected by fair use, or whether he relies on a different (and perhaps new) exception to copyright protection. Either way, an appeal is a distinct possibility.