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A new federal law on trade secrets has recently been enacted that should require a change in non-disclosure and employment agreements that address confidential information.
The Defend Trade Secrets Act was signed into law in May of this year. This new law provides for trade secret misappropriation to be brought in federal court according to the provisions of the new law. Trade secret misappropriation was previously a state law issue covered by the laws of the particular state where the misappropriation occurred.
The new law defines three requirements for information to be considered as a trade secret: the information must be secret; the owner of the information must have taken reasonable measures to keep the information secret; and the information has value to the owner when it is kept as a secret. The new law provides for the owner to recover damages and an injunction if the information is stolen. For egregious situations, the owner may also obtain enhanced damages up to two times the awarded amount as well as to collect their attorney fees.
The new law provides immunity for an employee who discloses the information when reporting a possible trade secret misappropriation. This whistleblower immunity provides for the employee to disclose the information to a government official or an attorney during the course of reporting the possible misappropriation. If an employee is not made aware of this immunity and later takes or discloses a trade secret, the employer is not eligible to collect enhanced damages or their attorney fees. Therefore, confidentiality and employment agreements should include a clause explaining the immunity to the employee.
The new law also includes other provisions, including the possibility of seizures, the relationship with existing state trade secret laws, the definition of an employee, employees that change jobs and misappropriation that occurs outside of the United States.
Please contact us if you would like more information on this new law.
The Federal Circuit recently decided GPNE Corp. v. Apple Inc. in favor of Apple, affirming the decision of the district court that certain Apple products did not infringe GPNE's patent US 7,570,954. GPNE, page 2. The claims of the '954 patent are generally directed to a "node" for sending and receiving messages. Id. GPNE appealed the decision of the district court, alleging that the district court's construction of the term "node" as a "pager with two-way data communications capability that transmits wireless data communications on a paging system that operates independently from a telephone network" was improperly narrow. Page 6.
Absent further facts, one might be initially disturbed that the district court would take it upon themselves to construe the term "node" so narrowly. In particular, one might have the view that if GPNE had intended to specifically claim such a pager, they could have explicitly written the term "pager" into their claims. Indeed, other patents of the same family did just that, thereby implying that something other than a mere pager was intended to be claimed by the '954 patent. Page 7. While GPNE's specification only used the term "node" in the Abstract, Title, and Claims (and instead uses the term "pager" over 200 times throughout the specification), claims are supposed to be construed according to how one of ordinary skill in the art would understand them in view of the specification. Pages 7-8. It stands to reason that one of ordinary skill in the art understands the difference between the more general concept of a network-based node and the more specific pager embodiment used by the Court. This is likely true even if the specification discusses pager-based embodiments at length and only sparingly refers to a node as a more general embodiment of the overall invention. Simply using one type of device as a representative embodiment for explaining the more general invention would not likely justify the Court's construction of a "node" this narrowly.
Instead, it is a single line in the specification of GPNE's patent that makes the Court's narrow construction of a "node" unsurprising. Towards the end of GPNE's specification, the '954 patent apparently summarizes the overall specification, stating "[t]hus, the invention provides a two-way paging system which operates independently from a telephone system for wireless data communication bewteen users." Col. 14 lines 14-16 (emphasis added). In my view, this sentence is the critical fact in this case. The patent does not say that particular embodiments of the invention provide such a system. Rather, GPNE clearly states that "the invention" GPNE has applied for provides a two-way paging system and operates independently from a telephone system. Therefore, it logically follows that if the allegedly infringing device does not provide a two-way paging system which operates independently from a telephone system, the allegedly infringing device is not operating according to GPNE's invention. Consistent with this logic, the Federal Circuit affirmed the district court's narrow construction of the term "node" as requiring these paging-specific features. GPNE pages 8-9.
This case underscores the importance of carefully drafting the specification. Yes, an ordinarily-skilled engineer would likely understand that other forms of computing devices would be just as suitable for implementing various embodiments of GPNE's invention. However, a Court can, and often does, take blanket statements about "the invention" as a disclaimer of all other embodiments (i.e., a disclaimer of embodiments that are outside such blanket statements). Unfortunately, the potential for such statements to narrow the scope of otherwise seemingly broad claims is not always easily discerned from a quick reading of a patent. Indeed, a single sentence buried at the end of the specification can decimate the value of your patent, in some cases.
Will Pagán is an award-winning patent attorney and engineer, nationally-recognized tech-industry veteran, and former IBM Master Inventor. At Coats + Bennett, he primarily practices patent law with a substantial technical focus on software, computing devices, and telecommunications. He also assists clients with their trademark, copyright, licensing, and infringement issues. His bio can be found here.
Software patents consistently sacrificed in the war to determine what is patent-eligible subject matter after Alice, may have received a champion in the form Enfish. On May 12, 2016, the Federal Circuit decided Enfish LLC v. Microsoft Corporation, Fiserv, Inc. upholding a software patent and boldly stating: “Software can make non‑abstract improvements to computer technology.” Id. at 11. Improvement can be defined by reference to “logical structures and processes” rather than “ ‘physical’ components[, and this] does not doom the claims.” Id. at p. 17-18. The business community rejoiced at the win for software. The patent community rejoiced at finally having a case that decided a claim was non-abstract under the first prong of section 101, rather than having to go to the second prong where the claim is abstract but recites “significantly more.”
However, the win may come at a cost the business and patent community cannot bear. On May 19, 2016, the Patent Office issued a memorandum in response. The Patent Office selected its own champion in the form of TLI. The Federal Circuit in TLI Communications LLC v. AV Automotive, LLC upheld the invalidation of software claims on May 17, 2016. This case adopted the court’s approach in Enfish in which the first step to deciding whether a claim is directed to patent ineligible subject matter is to ask “whether the focus of the claims is on the specific asserted improvement in computer capabilities.” Enfish at 11. In Enfish, the Court answered that question by looking at the disclosure or the specification. In TLI the Court also looked to the specification and found that the problem faced in TLI was how to archive large numbers of digital images, and the solution in the invention was described as “archiving of digital images simply, fast and in such a way that the information therefore may be easily tracked.” TLI, p. 4 (citing to the patent). In the Patent Office’s memo they weaponized this approach to allow examiners to use the specification to invalidate a claim if “the character [of the specification] as a whole is directed to a patent ineligible concept.”
A company that heralds the strengths of its invention in the patent disclosure with the language they use to sell their products to customers (“better, faster, stronger” in the words of Kanye West) may obscure the improvements to technology. Alternatively, the disclosure may be silent as to the improvement to technology. No patent attorney can save these flawed disclosures through claim drafting.
There is hope for the software community going forward for drafting applications directed to patent-eligible subject matter. In particular, the Patent Office in its memo reaffirmed its examples of patent-eligible subject matter. Example 1 of the 2014 examples is likely to still be helpful for drafting and defending claims to patent-eligible subject matter. Enfish and its progeny, however, may require honing the skills of the draftsman to craft a description of the current state of the technology and the improvement over that technology.
In October 2014, the Supreme Court asked the Solicitor General to provide the federal government’s view on whether the Court should review a case that raises questions about the interplay between state unfair competition law and the Federal Food, Drug, and Cosmetic Act (“FDCA”).
Athena Cosmetics, Inc. v. Allergan, Inc. involves a claim for unfair competition under California’s Unfair Competition Law (“UCL”). In the suit, Allergan asserts that Athena markets RevitaLash as a cosmetic when it is really an illegally marketed drug that has never been approved by the Food and Drug Administration (“FDA”) or the State of California. According to Allergan, those acts violate the UCL. Allergan won on its claim at the district court and the Federal Circuit. Athena appealed to the Supreme Court, arguing Allergan’s suit is an impermissible attempt to enforce the FDCA which has no private cause of action, see 21 U.S.C. § 337. (The procedural history of the case is discussed in further detail here.) Last Tuesday the Solicitor General recommended the Court deny Athena’s petition for discretionary review.
The government rejected Athena’s position that Allergan’s claim is pre-empted by the FDCA. The government found “[n]o conflict” between Allergan’s claim and “federal law or with any of decision of FDA.” According to the government, Allergan’s state law action falls within the scope of the role “the FDCA preserves . . . for the States where, as here, there is no conflict with federal law.”
As part of its petition, Athena argued that suits like Allergan’s would undermine national uniformity and the FDA’s role in policing the market. The government—FDA included—rejected this argument. Citing the Supreme Court’s decision in Wyeth v. Levine, 555 U.S. 555 (2009), the government noted its limited “capacity to police the vast marketplace of consumers products [(like Athena’s)] that have never been submitted to FDA for pre-market review.” The implication is that suits like Allergan’s are a useful supplement to FDA's regulatory scrutiny. The Supreme Court raised a similar point in its decision in POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014), noting how private litigation creates “synergies among multiple methods of regulation.” Id. at 2239. The government did not cite this passage in its brief.
The Court will likely decide the fate of Athena’s petition later this month.
A domain name is often a valuable business asset that allows customers to find your website. Often times the business trademark is used as the domain name. For example, coatsandbennett.com is used by persons looking for information about our law firm. Unfortunately, nefarious third parties recognize the value to a business in obtaining the domain names corresponding to their trademarks. These third parties are referred to as cybersquatters that register the domain names of trademarks in an attempt to profit from this action. These cybersquatters have no intention of using the domain names for their own legitimate purpose, but rather hold the domain name hostage in attempt to be paid a ransom from the trademark owner.
A business has two options for pursuing a cybersquatter who is using their trademark as a domain name: (1) institute an ICANN proceeding; or (2) bring a trademark infringement suit in federal court.
ICANN (the Internet Corporation for Assigned Names and Numbers) is responsible for the Internet’s global Domain Name System including the determination of domain name registrations. ICANN has established a Uniform Domain Name Dispute Resolution Policy (UDRP) that decides disputes and determines whether there is an infringement or violation of one’s rights. The UDRP proceeding is a non-judicial arbitration type system in which the challenging party submits a brief establishing why the existing domain name should be transferred and/or cancelled. The domain name registrant then responds with their own brief stating why they are entitled to use the domain name. A panel of one or more judges then decides the rightful domain name owner.
In order to be successful in this type of proceeding, the challenging party is required to prove the following:
1. The challenged domain name is identical or confusingly similar to complainant’s trademark;
2. The domain name holder has no rights or legitimate interest in respect to the domain name; and
3. The domain name was registered in bad faith and is being used in bad faith.
A fundamental requirement for a challenger is to prove that they possess the rights to the name. This can be proven through on-going use of the mark or a federal trademark registration.
An issue that often arises in ICANN proceedings is whether the domain name is currently being used in bad faith. Cybersquatters will often try to include on the website basic information in an attempt to demonstrate good faith use. ICANN has established four circumstances that demonstrate bad faith in registering and using the domain name:
1. The domain name was acquired primarily for the purpose of selling, renting, or otherwise transferring the domain name registration for an excessive amount; or
2. The domain name was registered to prevent registration by the trademark owner; or
3. The domain name was registered primarily for the purpose of disrupting the business of the trademark owner; or
4. The domain name was registered to intentionally create a likelihood of confusion to attract consumers for commercial gain.
The ultimate resolution of cybersquatting cases are highly fact dependent and need to be carefully analyzed prior to deciding to move forward with a proceeding. The challenging party must be able to demonstrate each of the three elements necessary to prevail. In the event that this is not possible or one or more of the elements is speculative, the party may need to pursue other actions to obtain the domain name.
A challenger may also bring a federal trademark suit against the domain name registrant. The Anti-Cybersquatting Consumer Protection Act (Lanham Act §43(d) (15 USC 1125(d))) establishes a cause of action against such a domain name holder. The Act defines cybersquatting as receiving a domain name that is confusingly similar to a trademark with the bad faith intent to profit. A challenger must prove the following elements:
1. The defendant registers, traffics, or uses a domain name;
2. The name is identical to or confusingly similar to a mark owned by the plaintiff;
3. The mark was distinctive at the time of the defendant’s registration of the domain name; and
4. The defendant committed acts in bad faith with the intent to profit from the plaintiff’s mark.
The Act specifically spells out nine factors when determining bad faith (15 U.S.C. 1125(d)(1)(B)(i)). These include factors such as the current registrant’s prior use of the domain name in offering goods or services, the intent to divert consumers from the mark owner’s online location, and the any offer to transfer the domain name to the mark owner for financial gain. The Act further provides a safe harbor provision (15 U.S.C. 1125(d)(1)(B)(ii)) that excludes a finding of bad faith when it is determined that the current registrant believed and had reasonable grounds to believe that the use of the domain name was fair use or otherwise lawful.
As with an ICANN proceeding, the outcome of a federal court proceeding is highly fact dependent. Therefore, it is necessary to carefully review the facts of the case prior to instituting any action. The analysis of the facts should establish the strengths and weaknesses of your case and provide options for regaining your domain name.