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Do the AIA's Changes to Patent Law's Best Mode Requirement Open the Door to "Best Mode Trade Secret" Protection?

To obtain a patent, an inventor must “set forth the best mode contemplated by the inventor of carrying out his invention” in his patent application. 35 U.S.C. § 112, ¶ 1.  Before the Leahy-Smith America Invents Act (“AIA”) a patent applicant’s failure to disclose the best mode was a basis for invalidity in litigation. Though it remains grounds for a patent examiner to reject claims during prosecution, after patent reform a patentee’s failure to disclose best mode is no longer grounds for a court to declare a patent invalid. See AIA, Pub. L. No. 112-29, § 15(a), 125 Stat. 284, 328 (2011) (to be codified at 35 U.S.C. § 282(b)(3)). This decision by Congress is widely regarded to have “effectively eliminated the best mode requirement from patent law.” Lee Petherbridge & Jason Rantanen, In Memoriam Best Mode, 64 Stan. L. Rev. Online 125, 127 (2012).

Professors Brian J. Love and Christopher B. Seaman suggest that this development could give rise to concurrent patent and trade secret protection.  Brian J. Love & Christopher B. Seaman, Best Mode Trade Secrets, 15 Yale J.L. & Tech. (forthcoming 2012), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2056115. Though long considered mutually exclusive forms of protection, Love and Seaman “predict that a significant number of patent owners will attempt to obtain belt-and-suspenders protection for their inventions by relying on patents and trade secrecy.” Id. at 8. Love and Seaman foresee patentees pursing patent protection for the core features of their inventions at the same time they keep as trade secrets the most valuable commercial embodiment. See id. at 12 (providing an illustrative example of dual protection). This means accused infringers could find themselves in the position of having to defend claims of patent infringement and misappropriation of trade secrets arising from the same facts.

What was Congress thinking? Apparently it did not consider this particular issue. Love and Seaman found the legislative history of the AIA “largely silent” on whether patent reform’s changes to best mode “might result in inventors withholding best mode from patent applications and subsequently claiming trade secret protection.” Id. at 7.

Courts might try to use equitable doctrines to mitigate the impact of Congress’ apparent oversight. Love and Seaman suggest that courts could use the equitable doctrine of unclean hands to “dismiss a parallel trade secret claim brought in a case where the asserted trade secret should have been disclosed as the best mode in the inventor’s patent.” Id. at 16. Since patentees still have to disclose best mode even after the AIA, accused infringers might argue “that it is unjust for the courts to allow patentees to violate the best mode requirement and then improperly reap the benefits of their misconduct by turning to trade secrecy.” Id. at 17.

Whether these equitable arguments are persuasive will be an interesting issue to follow as the courts grapple with the AIA. It might take years to get definitive answers, likely from the Federal Circuit, but perhaps even the United States Supreme Court.

A Grey Area?

To say there has been a lot of controversy surrounding E.L. James’s best-selling Fifty Shades of Grey would be putting things mildly. Fifty Shades, which chronicles the BDSM relationship between Anastasia Steele and Christian Grey, has certainly raised more than a few eyebrows, both because of its subject matter and its popularity. While these would be controversy enough, Fifty Shades adds another wrinkle – it originally was a piece of Twilight fan fiction entitled “Master of the Universe.”

From the onset, it is important to understand what this blog is about (the book Fifty Shades of Grey) and what it is not about (the legal issues of fan fiction in general). Nonetheless, to understand the particular issues with regard to “Fifty Shades of Grey,” some “fandom” terms must necessarily be defined – namely “fan fiction” and “alternate universe.” “Fan fiction” (sometimes called “fanfiction” or “fanfic”) refers to unofficial stories written by fans of existing fictional works about the characters, places, and events portrayed in those works. For example, a Harry Potter fan fiction might present what happened to Harry, Ron, and Hermione after Voldemort’s defeat, or a Star Wars fan fiction might chronicle the adventures of Luke, Han, and Leia between A New Hope and The Empire Strikes Back. Sometimes, fan fiction writers draft stories where they change something about the existing work’s universe and address how that change affects the characters from those stories. These “what if” stories are commonly called “alternate universe fics” or “AUs.” Some AUs focus on how minor decisions could have staggering effects on the story as we know it. For example, an AU Star Wars fan fiction might ask “what would have happened if Luke Skywalker didn’t purchase R2-D2 in A New Hope?” and then follow how the results of that different choice affect the “Galaxy Far, Far Away.” Other AUs take established characters and drop them into new worlds that have little in common with those of the original work. One common example of these types of AUs would be “what would happen if the Hobbits from Fellowship of the Ring attended a modern American high school?” Fan fiction in general, and AUs in particular, remain vastly popular with Internet audiences, as evidenced by the large archives hosted by sites like theforce.net or fanfiction.net.  

It is important to note that a significant amount of fan fiction exists, and that many of the authors who created the original works do not take issue with fans “playing in their sandboxes.” Ultimately, however, the decision as to whether to permit fans to create fan fiction and other fan works lies with the copyright holder of the original works upon which the fan works are based. While many professional authors are comfortable with (or even support) fan works based upon their creations, that comfort usually dissipates when unauthorized stories are offered for sale. For example, the famous Eleventh Circuit case of Suntrust Bank v. Houghton Mifflin Co., 268 F.3d 1257 (2001), was brought by Margaret Mitchell’s trustee to prevent the publication and sale of Alice Randall’s The Wind Done Gone, an unauthorized retelling of Gone With The Wind from the point of view of Scarlett O’Hara’s slave half-sister. (This case also added an additional wrinkle regarding parody, which is beyond the scope of this blog).

It is no secret that Fifty Shades originated as an alternative universe Twilight fan fiction featuring Stephanie Meyer’s characters Edward Cullen and Isabella “Bella” Swan. The original Twilight-version of the story was widely circulated and read on the Internet. After achieving popularity in the Twilight fandom, James removed the fan fiction, reworked portions of it to remove references to Meyer’s specific universe of shapeshifters and sparkly vampires, renamed and tweaked the main characters in an effort to reduce the Edward and Bella characteristics, and published the revised story as a trilogy.  It quickly became a best seller.

Upon learning of the origin of Fifty Shades last summer, my interest was piqued. Although Stephanie Meyer, the author of the Twilight series, indicated that she has no interest in bringing suit against James for copyright infringement, as a copyright attorney with an interest in fandom culture, I could not help but ask myself if a colorable issue regarding copyright infringement existed. There was really only one way to answer the question – read the novels. (In the interest of full disclosure, I am not a fan of either work and have serious complaints with the portrayals shown in both, though I disliked Fifty Shades more).

Because copyright infringement is often shown by demonstrating access and substantial similarity, and because there can be no question as to access, this brief analysis focuses on whether there is at least a reasonable question of fact regarding substantial similarity between Twilight and Fifty Shades. When addressing substantial similarity, it is important to remember that copyright protects the expression of ideas, and not the ideas themselves. For example, there is no copyright in the idea of an interplanetary war between an oppressive government and freedom fighters; however, there is a copyright in the specific expression of this idea as found in Star Wars.

            Turning to Twilight and Fifty Shades, much of the similarity appears to be on the level of ideas, not expression. Twilight is a romance between high school student Bella Swan and teenage-appearing “good” vampire Edward Cullen, which is complicated when “bad” vampires decide they would like to kill Bella. Fifty Shades chronicles the coercion of recent college graduate Anastasia Steele into a BDSM relationship with wealthy businessman Christian Grey, which is complicated when Anastasia decides she wants an emotional relationship with Grey (and he’s not willing to provide the same). Although the general plot lines of Twilight and Fifty Shades have different focuses, there are some similarities. For example, both Twilight and Fifty Shades use the idea of the male leads engaging in stalking behavior towards their romantic interests, and both similarly betray this behavior as romantic. Even here, however, the idea is expressed differently. (Christian Grey tracks Anastasia’s movements by her cell phone; Edward Cullen watches Bella sleep).

            With regards to the two main characters, Edward and Bella in Twilight and Anastasia and Grey in Fifty Shades, there are definite similarities. Those similarities, however, appear to have been revised such that they exist primarily at the level of ideas.  For example, although the male love interests both have sociopathic tendencies and the female love interests are presented as clumsy, younger women with self-esteem issues, such similarities are ideas (commonly referred to as character tropes). These sorts of tropes were not created by Twilight, and can be found in a number of other works. Heathcliff of Wuthering Heights could be described as a man with sociopathic and stalker tendencies. Andrew Lloyd Weber’s interpretation of the titular Phantom in Phantom of the Opera is also easily called to mind. Indeed, the plot of Weber’s Phantom interpretation is that the naïve, insecure young woman is [stalked] romanced by the [sociopathic] misunderstood Phantomand falls in love with him. (If there was any question as to this last bit, Weber put it to rest with Love Never Dies, his Phantom sequel, though it appears that Gaston Leroux, the original author of The Phantom of the Opera, intended the Phantom to be a psychopathic murdering villain.) Similarly, a number of romance stories feature insecure, klutzy female leads (for example, Rachel Leigh Cook’s character in She’s All That, not to mention a large number of Harlequin heroines). How those characters play out the tropes - the expressions - are, for the most part, different between the two works.  Some personal details, however, appear in both characters. For example, both Christian Grey and Edward Cullen are highly skilled at the piano and were adopted earlier in their lives by affluent families.

            Ironically, it is the minor characters (i.e., the characters other than the romantic leads) that share the most significant similarities between the two works. Unlike some authors of paranormal romance, Meyer presented a quite interesting cast of minor characters with unique stories and memorable ticks. Most of the Twilight minor characters’ unique quirks and histories are also present in the Fifty Shades versions, making is easy to immediately call to mind the Twilight counterparts for the Fifty Shades names. For example, Bella’s mother and Anastasia’s mother have nearly identical histories and portrayals – both are flighty, impulsive women who have been married several times and are currently married to professional athletes whom they follow around the country, but remain caring towards their daughters. There are also very strong similarities between Bella’s father and Anastasia’s step-father, as well as between Bella’s friend Jacob and Anastasia’s friend Jose to name a few.

            Viewing the totality of the circumstances, there appears to be a legitimate question of fact as to whether substantial similarity could be found. A quick Google search underscores that a question of fact is present, as readers are divided as to whether Fifty Shades and Twilight are substantially similar.

Although this specific question will likely never be answered by a jury, Fifty Shades is not going to be the last fan fiction turned professional fiction we will see. As fandom – to include fan fiction – continues to increase in popularity, it is likely that more and more fan fiction authors will attempt to capitalize on the fame they garner.  How copyright owners (and courts) will respond will likely turn on a case by case analysis. 

The Balancing Act Between Social Networks and Content Providers

A three judge panel from the 7th Circuit, which included the influential Judge Richard Posner, recently handed down a significant decision regarding the copyright implications of video streaming over social networks.

Plaintiff Flava Works produces pornographic movies which are only viewable behind a pay wall. As the court noted, “Flava specializes in the production and distribution of videos of black men engaged in homosexual acts.” The defendant Marques Gunter runs a “social video bookmarking” website called myVidster.com in which users can bookmark and playback videos from across the web. Posted videos are tagged for categorization, and can be viewed by any visitors to the site.

By default, myVidster has a “family” filter turned on, which results in content that is standard YouTube fare. However, if the filter is turned off, the court noted that “your visit will reveal a mixture of pornographic and nonpornographic videos, with the former predominating, and of those the majority are homosexual and many of the actors in the homosexual videos are black.” Thus, it would appear that myVidster was known as a source for such content.

Flava sued Gunter because myVidster users were bookmarking and streaming Flava videos that had been illegally uploaded to third party servers. The district court had previously granted a preliminary injunction to Flava, on the grounds that Flava had demonstrated a likelihood of success on its claim for contributory copyright infringement (a doctrine providing copyright liability for those who may not directly infringe, but nevertheless facilitate infringement by others). The district court emphasized the fact that myVidster users viewed bookmarked videos on the myVidster site, and when viewing videos were not taken to the third party sites that hosted the videos.

On appeal, the 7th Circuit reversed the preliminary injunction, adopting the standard that contributory infringement requires “personal conduct that encourages or assists the infringement.” The appeals court reasoned that the infringers here were those who actually copied Flava’s copyrighted videos by uploading them to third party servers on the Internet, and that there was no evidence that these infringers were users of myVidster, or that myVidster was encouraging these infringers to upload Flava’s content.

The appeals court compared myVidster’s actions to that of a publication providing movie showtimes, as myVidster was providing the addresses to third party locations where videos can be viewed, and letting users stream such videos directly from those locations. The court reasoned that “[s]omeone who uses one of those addresses to bypass Flava's pay wall and watch a copyrighted video for free is no more a copyright infringer than if he had snuck into a movie theater and watched a copyrighted movie without buying a ticket. The facilitator of conduct that doesn't infringe copyright is not a contributory infringer.” Moreover, the appeals court found that a DMCA safe-harbor analysis (often relied upon by ISPs whose networks include copyrighted content) was unnecessary, because “a noninfringer doesn’t need a safe harbor.”

This ruling will surely be welcomed by social networks such as Facebook, where sharing, embedding and playing back videos are indispensable features. Although social networks can already rely on the DMCA safe harbors for protection when their users post copyrighted content without authorization, this holding is nevertheless favorable to both social networks and their users. Cases like this highlight the balancing act that courts must perform as they try to strike a balance between social networks, where content sharing is encouraged, and content providers who seek to protect their assets - especially when technology moves faster than the law.

 

USPTO Presentation

David Kalish
Coats & Bennett, PLLC

          Coats & Bennett, Campbell University Law School, and Business Forward recently hosted a program featuring Dr. Stuart Graham and Janet Gongola from the US Patent and Trademark Office. The program featured presentations from both regarding the patent system and implementation of the America Invents Acts (AIA).

          Dr. Stuart Graham, the Chief Economist of the Patent Office, spoke on innovation being a large driver in the health and growth of the US economy, with as much as 75% of the economic growth since WWII being attributable to innovation. The role of the Patent Office is to provide incentives for innovation to continue the economic growth, and provide jobs in the various innovation-laden technical fields.

          To assist innovators and the innovation system, the Patent Office is implementing changes to the patent system. These changes focus on improving the examination process for filed patent applications through an updated examiner incentive system, better interfacing opportunities between patent applicants and examiners, and reform of the examination criteria. Further changes include a three-track examination system in which patent applicants can choose the timing of their examination (prioritized examination, normal examination, and delayed examination). The Patent Office is also opening regional satellite offices in Detroit, Denver, Dallas, and Silicon Valley to provide better geographic diversity. Multiple other changes have been and are in the process of being implemented as a result of the AIA.

          Janet Gongola is the Patent Reform Coordinator for the Patent Office and responsible for implementing the procedural changes required for enactment of the AIA. Ms. Gongola summarized these changes as providing improvements in three separate aspects of the current system: giving certainty to patent rights sooner; removing/preventing poor quality patents; and building a 21st century patent system.

          Giving certainty to patent rights sooner will be improved by changing from the current first-to-invent system to a first-to-file system. Another major change is the new supplemental examination procedures which strive to immunize an issued patent against allegations of inequitable conduct for the failure to disclose prior art during the examination process.

          Changes to remove/prevent poor quality patents will include the option for third parties to submit to the Patent Office prior art that could affect the patentability of a claimed invention pending in a patent application. This new submission process will give examiners better prior art to provide for a better examination. New changes also include administrative trials that allow for post grant review and inter partes review available for certain time periods after issuance of a patent.

          Efforts to build a long-term patent system include a new fee setting authority that authorizes the Patent Office to set or adjust patent fees. This will accelerate the reduction in the backlog of unexamined patent applications and reduce patent application pendency, realign the fee structure to add processing options during patent application pendency, and put the Patent Office on a path to financial sustainability.

 

The Ninth Circuit Writes the Latest Chapter on How the Federal Food, Drug, and Cosmetic Act Limits False Advertising Claims Under the Lanham Act

What does the Federal Food, Drug, and Cosmetic Act (“FDCA”) have to do with false advertising under the Lanham Act?  The answer provided by the Ninth Circuit Court of Appeals in Pom Wonderful LLC v. Coca-Cola Co., No. 10-55861, slip op. 5245 (9th Cir. May 17, 2012), is instructive for false advertising plaintiffs in industries regulated by the United States Food and Drug Administration (“FDA”).

The Factual and Procedural Background of Pom

The false advertising claim at issue in Pom was directed at Coca-Cola’s Minute Maid Pomegranate Blueberry juicePom, slip op. at 5248.  Coca-Cola’s juice “contains about 99.4% apple and grape juices, 0.3% pomegranate juice, 0.2% blueberry juice, and 0.1% raspberry juice.”  Id.  By contrast, plaintiff Pom’s competing pomegranate blueberry beverage, as indicated on its website, is a blend of only pomegranate and blueberry juice.

Pom’s theory of recovery was straightforward.  Pom alleged that Coca-Cola’s marketing of a beverage consisting mostly of apple and grape juices as a pomegranate blueberry juice materially misled consumers in violation of 15 U.S.C. § 1125(a), the false advertising provision of the Lanham Act, and California state law.  Id. at 5249–50.  Pom asserted it was losing sales of its own authentic pomegranate blueberry beverage to Coca-Cola.  Id. at 5249.

The district court denied Pom’s Lanham Act claims.  See id. at 5251–52.  The court held that FDA regulations governing juice labeling permitted Coca-Cola’s labeling.  Id. at 5251.  As a result, since Coca-Cola’s labeling conformed to FDA standards, “Pom’s claim challenging the name and labeling of [Coca-Cola’s] Pomegranate Blueberry was barred.”  Id.  Pom appealed.  Id. at 5252.

The Ninth Circuit’s Pom Decision

The Ninth Circuit affirmed the district court’s Lanham Act decision.  Id. at 5255.  The court started its analysis by noting that “the Lanham Act and the FDCA can conflict with each other.”  Id. at 5253.  While the court recognized that it is important to construe both the Lanham Act and the FDCA to give both statutes the broadest possible effect, it emphasized “Congress’s decision to entrust to the FDA the task of interpreting and enforcing the FDCA.”  Id.  Thus, “[w]here the FDA has not concluded that particular conduct violates the FDCA, we have held that a Lanham Act claim may not be pursued if the claim would require litigating whether the conduct violates the FDCA.”  Id. at 5253–54 (citing PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 924 (9th Cir. 2010)).

Applying these principles to the facts of Pom, the court held that the FDCA barred Pom’s false advertising claim.  Id. at 5255.  FDA regulations, the court explained, permit juice manufacturers to “name a beverage using the name of a flavoring juice that is not predominant by volume.”  Id. (citing 21 C.F.R. § 102.33(c), (d)).  The same is true for the beverage’s label.  See id. at 5256.  “Congress and the FDA have thus considered and spoken to what content a label must bear . . . so as not to deceive,” the court explained.  Id.  The court continued: “If the FDA believes that more should be done to prevent deception, or that Coca-Cola’s label misleads consumers, it can act.  But, under our precedent, for a court to act when the FDA has not―despite regulating extensively in this area―would risk undercutting the FDA’s expert judgments and authority.”  Id. at 5256–57.

The court did not go as far as to “suggest that mere compliance with the FDCA or with FDA regulations will always (or will even generally) insulate a defendant from Lanham Act liability.”  Id. at 5258.  Instead, it indicated that it was deferring to “Congress’s decision to entrust matters of juice beverage labeling to the FDA.”  Id.  It affirmed the district court’s Lanham Act ruling and remanded Pom’s state law claims to determine, among other things, whether they are preempted by the FDCA.  Id. at 5259.

Implications of Pom for False Advertising Plaintiffs

Pom illustrates the barriers facing false advertising plaintiffs in industries subject to regulation under the FDCA, namely the food, drug, medical device, and cosmetic industries.  By dismissing Pom’s Lanham Act claim, the Pom court told Pom that its remedy was at the FDA and not with the court.  Id. at 5258.  The court’s missive likely gave Pom little comfort.  The reason is that the FDCA has no private right of action.  See 21 U.S.C. § 337(a).  The decision of whether and when to enforce the FDCA is committed to the discretion of the FDA.  See Heckler v. Chaney,470 U.S. 821, 837–38 (1985) (holding that the FDA’s decision not to take action is not reviewable under the Administrative Procedure Act).  This means that even if Pom could show Coca-Cola was violating the FDCA, it would have to wait for the FDA to take action while Pom absorbed the effects of Coca-Cola’s alleged unfair competition.

Pom underscores the importance of carefully studying the FDCA and related FDA regulations prior to bringing a false advertising claim in an industry regulated by the FDA.  At least in the Ninth Circuit, if an allegedly false statement in an advertisement is addressed by the FDCA and FDA regulations then it might be futile to bring a false advertising claim under the Lanham Act.  In other words, litigation may not be the answer.

One alternative to litigation may be to pursue action before the National Advertising Division (“NAD”) of the Better Business Bureau, a private organization that adjudicates false advertising claims.  The NAD’s decisions do not have the force of law, but the NAD does publish the results of its cases.  It may also decide to refer an advertiser that refuses to comply with its decision to the appropriate state and federal regulatory authorities.

Bringing a NAD proceeding may also be more cost effective than litigation.  For companies with less than $400 million in annual revenue, the filing fee is $6,000.  Decisions are rendered within 60 days of filing a complaint.  Compared to the years parties can spend litigating a Lanham Act claim in federal court, pursuing action before the NAD is at the very least something for a potential false advertising plaintiff to consider.

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