Pooled Patent Licenses, Patent Misuse and Price Fixing

Recently, the Federal Circuit agreed to hear the Princo v. Phillips case en banc to decide whether or not Sony, Phillips, Taiyo Yuden and Ricoh’s agreement to pool patents and jointly license technology relating to the “Orange Book” standard for making CD-Rs and CD-RWs was a form of Patent Misuse and price fixing amounting to an Antitrust violation?  Phillips provided the joint licenses to this technology to Princo, but Princo stopped paying the fees for the license and claimed Patent Misuse.  

Patent Misuse is not a new defense, but an old equitable defense.  The idea behind Patent Misuse is to prevent business practices that do not violate any law, but drew anticompetitive strength from the patent right and thus were deemed contrary to public policy.  Phillips I, 424 F.3d at 1134 (quoting Maillinckrodt, Inc., v. Medipart Inc., 976 F.2d 700, 704 (Fed. Cir. 1992).   Typically, in a Misuse analysis, courts will focus on determining whether or not the patentee has imposed conditions or restraints that derive their force from the patent, and increase the scope of the patent with anticompetitive effect.   Phillips I, 424 F.3d at 1134 (quoting C.R. Bard Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998).  

 In Princo v. Phillips, the court recently held that there was Patent Misuse, because the Lagadec Patent was a non-essential patent that was pooled into the licensing agreement.  In other words, the court held that the pooling of a patent that was not essential to the “Orange Book” standard was an expansion of the scope of the other patents.  The Court also emphasized and seemed to find that there was an agreement by Sony and Phillips to combine and pool their individual (digital and analog) solutions to the wobble signal that is used to control the recording speed in creating CD-Rs/RWs. 

The court focused on the fact that only one of these two solutions is needed and found that the Lagadec Patent (digital) solution was non-essential.  The court stated that since Sony and Phillips ultimately chose to define the Orange Book standard with the analog solution, the Lagadec Patent was non-essential.  The Federal Circuit has agreed to hear a motion for a rehearing en banc, and may make some important changes to the patent licensing, misuse and antitrust standards. 

For a review of the Petition for Rehearing from the ITC, please see attached:  Princo-Petition for Rehearing en banc – ITC

Investigating and responding to Employment Retaliation Claims!

Investigating and responding to allegations of retaliation by employees or former employees often makes managers, supervisors and officers angry, frustrated or upset.  However, these natural and human feelings about a potentially false retaliation claim can be used against employers in a retaliation lawsuit. 

A manager’s hurt feelings, anger, upset demeanor, unhappiness or defensiveness can be used as evidence of retaliatory animus.  See. Woods v. Washtenaw Hills Manor Inc., Case No. 07-cv-15420, 2009 U.S. Dist. Lexis 22358, *47 (E.D. Mich. 2009); Anderson v. Royal Crest Dairy Inc., 281 F. Supp. 2d 1242, 1250 (D. Colo. 2003); Kinzel v. Discovery Drilling, Inc., 93 P.3d 427, 436 (Ak. 2004); Miller v. National Life Insurance Co., Case No. 00364, 2009 U.S. Dist. Lexis 10626, *27 (D. Conn. 2009). 

Making sure that officers, managers, supervisors, and employees are trained and properly investigating claims of retaliation is crucial in avoiding liability for employers.  At the same time, mechanical or uncompassionate reactions often make the employer less credible during EEOC or IDHR investigations, or a lawsuit. 

Understanding the tightrope that employers have to walk in this regard can be the difference between winning or losing a dispositive motion or a trial.  If you have any concerns or questions about implementing a proper training procedure or defending against retaliation claims, then feel free to contact us. 

Single Source, Related Companies and Section 2 (d) rejections for Trademarks!

The USPTO will typically issue a section 2 (d) rejection for any mark that is confusingly similar to the mark described in your trademark (“TM”) application. Often times, through a merger, sale, acquisition or reorganizations companies have different names and structures, but maintain a unity of interest in their intellectual property (such as a TM). 

However, unless a proper assignment or transfer is recorded with the USPTO, a derivative version of a mark owned by a prior company will be the basis of section 2(d) rejection.  Fortunately, the Federal Circuit has stated that if the applicant and the prior company are related companies that qualify as a single source of a good or service, then there is no likelihood of confusing the consumer.  In re Wella A.G., 787 F.2d 1549 (Fed. Cir. 1986). 

An examiners section 2(d) rejection may be overcome by filing an affidavit from the appropriate owner(s) asserting that the prior company and the applicant are related and share unity of control over their trademarks.  Unless there is contradictory evidence, the Examiner will usually accept the affidavit and withdraw the USPTO’s objection to registration of your mark under section 2(d).

Understanding how to properly apply for intellectual property (trademark) rights in the face of a merger, acquisition, sale or reorganization is often crucial to the continued growth of a business enterprise.

Motions to Dismiss and the new Plausibility Standard under Rule 8!

The Supreme Court extended and changed the requirements for pleading a cause of action under Rule 8.  In Twombly, the Court first applied the plausibility standard to a claim for antitrust violations by telecommunications providers.  The Court, stated merely reciting that the telecommunications providers had entered into a contract, combination or conspiracy to prevent competition was insufficient to make the Plaintiffs’ claim plausible. 

In Ashcroft, the Court applied the plausibility standard to a Plaintiff’s complaint of discriminatory treatment of detainees by the Immigration and Naturalization Officers.  The Court stated that merely asserting conclusory allegations that Ashcroft was the principal architect of invidious discrimination and that Mueller was instrumental in adopting the policy was insufficient to meet the plausibility standard.

The Court went to on to reiterate that we must still accept all well plead allegations as true, but essentially, stated that we are not required to accept legal conclusory allegations, unless there are facts that turn the conceivable into the plausible.  However you interpret Twombly or Ashcroft, it is clear that a Defendant’s motion to dismiss in Federal court has greater teeth and district court judges are now empowered to dispose of claims they find incredible. 

It also seems that the plausibility standard is not limited to Antitrust complaints. 

See.  Ashcroft

The Antitrust side of IP Litigation

Antitrust counterclaims are once again viable options for defendants involved in Intellectual Property (IP) litigation.  Often a Plaintiff is utilizing a patent infringement suit as a method of interfering with the business relationship of a competitor. 

However, if the patent was obtained by knowing and willful fraud or the lawsuit is a sham for interfering with competitors’ business relationships, then the patent may be invalid and subject the Plaintiff to an antitrust violation.  Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177 (1975);  In re Independent Service Organizations Antitrust Litigation, 203 F.3d 1322, 1326 (Fed. Cir. 2000); and Hazelquist v. Guchi Moochie Tackle Co., 2004 U.S. Dist. Lexis 13991 (W.D. Wash. May 12, 2004). 

The risk of an antitrust violation and counterclaim is not limited to sham patent litigation.   Plaintiffs attempting to utilize trademark infringement suits to maintain a monopoly (price control) or restrict competition face a similar risk of an antitrust violation.  In Marketing Displays, Inc. v. TrafFix Devices, Inc., 200 F.3d 929, (6th Cir. 1999), the court permitted an antitrust counterclaim against a plaintiff asserting trade dress infringement after the expiration of patent. 

If the litigation is objectively baseless in the sense that no reasonable litigant could expect success on the merits, then it may be the basis for a antitrust violation.  Professional Real Estate Investments, Inc. , v. Columbia Pictures Industries, Inc. , 508 U.S. 49, 60 (1993).  However, this does not mean that a product’s different qualities cannot be protected simultaneously, or successively by more than one statutory means for protection of intellectual property.  Kohler Co. v. Moen, Inc. , 12 F.2d 632, 638-39, (7th Cir. 1993). 

Understanding the nuances of the scope of intellectual property protection that can be obtained for a product is crucial to your ability to protect your market and your investments.

Tricky Settlement Agreements in Seventh Circuit…

If you are a litigator in Illinois, the Seventh Circuit decisions in Lynch, Shapo, and Blue Cross have just made your job a lot more difficult.  Especially, if your practice involves business, employment or intellectual property matters, where settlement agreements often contain a payment plan for royalties, profits, backpay or future earnings. 

It used to be that based on Kokkonen you could simply enter a dismissal order with prejudice that allowed the court to retain jurisdiction to enforce the settlement agreement.  However, based on the 7th Circuit’s recent rulings in Lynch, Shapo, and Blue Cross entering such an order will deprive the court of jurisdiction to enforce the settlement agreement. 

In which case, your client may be standing outside the courtroom trying to find a way back in by filing a new lawsuit for a breach of contract.  The other common alternative is to enter a dismissal order without prejudice to allow the court to retain jurisdiction to enforce the settlement agreement. 

Unfortunately, entering such an order may deprive your client of the res judicata effect of a dismissal order that is with prejudice.  In this scenario, your client will be back in the courtroom defending against claims that it believed were resolved, and may have helped fund its opponent’s lawsuit. 

Understanding how the drafting of settlement agreements has changed in light of the US Supreme Court’s decision in Kokkonen and the Seventh Circuit’s decisions in Lynch, Shapo, and Blue Cross is crucial to properly representing your client’s interests. 

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Amendments to Trademark Rules of Practice

The USPTO has adopted some new rules of practice that will impact the way attorneys can register your business name or logo for trademark or servicemark registration.  The following is a summary of some of the new Amendments: 

1) an application under section 1 or section 44 must be in English to receive a filing date;

2) if more than one good or item is specified within a particular class of goods or services in section 1 (a) application, then only 1 date of use is required (as long as the corresponding good or item is provided); and

3) the filing of an amendment to allege use does not extend the deadline to respond to an Office Action, an appeal to the Trademark Trial and Appeals Board (“TTAB”) or a Petition to the Director.    

These and other Amendments will have both a substantive and procedural impact on the registration of a trade or service mark.  For the exact language and additional amendments, please see attached: Amendments to Trademark Practice with USPTO

If you have any additional questions or concerns, then please feel free to contact me.

Collaborators, Joint Authors and Copyright Infringement!

Generally, joint authors own an undivided interest despite any differences in the authors contributions.  Erickson v. Trinity Theatre Inc., 13 F.3d 1061, 1071 (7th Cir. 1994).   A movie, song, book, computer program, picture will qualify as a joint work if two or more authors collaborated and/or contributed interdependent parts with the intention to a create a unitary whole.  17 USC 101. 

Traditionally, this requires the following: 1) the intent to create a joint work; and 2) contribution of independently copyrightable work.  Erickson, at 1068.  The intent requirement only requires that the parties wanted to work together to create a single product, nothing more.  Janky v. Lake County Convention and Visitors Bureau, 07-2350 (7th Cir. 2008) (see attached).  In performing this analysis the court must look to the parties intent at the time that the work was created. Id.

Moreover, crediting another person as a co-author is strong evidence of the intent to create a joint work. Id.  The second element requires that the contribution is something that is more than general ideas or suggestions, but concrete expressions meriting copyright protection.  Id.  The Seventh Circuit’s refinement and restatement of the joint author analysis heightens the need for collaborators to clearly define their roles and rights to intellectual property ownership. 

Whether you are working with an other individual, consultant, company, independent contractor or a employee, if you fail to clearly define the roles and rights between the collaborators, then you take the risk of allowing another to own your intellectual property. 

See:  Janky v. Lake County

Employment Related Torts-Assault, Battery, IIED, and False Imprisonment!

Often times, employers and employees do not realize that there are common law torts associated with many forms of sexual harassment.  If sexual harassment involved some form of touching or locking up of an employee in an employer facility, then the employer may be liable for common law torts, as well as, sexual harassment. 

It used to be that the Illinois Human Rights Act (“IHRA”) pre-empted many of these common law torts; however, due to recent changes in the law these common law claims are now permitted.   However, the common law torts must not be inextricably linked to the sexual harassment claim.  A common law tort claim that is inextricably linked is still pre-empted by the IHRA.  Johnson v. Chicago Board of Ed., 2002 WL 1769976 *5-7, (N.D. Ill.) and Quantock v. Shared Marketing Services Inc., 312 F.3d 899, 904-06 (7th Cir. 2002). 

In addition, these common law tort claims are still subject to traditional common law defenses, such as the following: laches, statutes of limitations, consent, etc.  In fact, voluntarily entering a room with the harasser can be the basis of a strong consent defense for an employer.  Hanna v. Marshall Field & Co., 279 Ill. App.3d 784 (1st Dist. 1996) (affirming a trial courts dismissal of a false imprisonment claim based on the consent defense pursuant to the employer’s summary judgment motion). 

Of course, this can vary based on the gravity of the sexual harassment from touching hair or genitalia, use of threats, weapons and/or physical violence.  Understanding these employment related torts requires a careful review of current court opinions on these matters.  If you have any concerns or questions relating to these matters, then please feel free to contact us. 

See: Quantock_IIED_Preemption

Twelve Month Anniversary (Approximately) Thank you!

I wanted to take a second to thank all of our readers and visitors for their comments and interests.  Over the last twelve months our monthly visit count has been in the range of 122-269, with an average of 175 visits per month. 

I am pleased to note that our reader base is growing and appreciate the favorable comments from our visitors.  If you have any comments or suggestions regarding content or additional ways to make this a more useful blog, then please feel free to contact me. 

Again THANK YOU for your continuing visits and helping us grow our audience. 

Sincerely,

Vihar R. Patel

(08/11/09).