Top IP Developments of 2016By: William R. Schmidt, II
April 3, 2017
While you may have been distracted by a tumultuous 2016, at Morse we have been monitoring developments in IP. We are happy to present, in no particular order, our list of the top IP developments of 2016, plus an Honorable Mention for 2017.
Patent Infringement Plaintiffs get a “Halo”
More patent infringement cases eligible for enhanced damages
35 U.S.C. § 284 provides for enhanced damages in patent infringement cases. For almost 10 years, courts have used the “Seagate test” and awarded enhanced damages only if there was clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted an infringement of a valid patent. However, in June 2016, the Supreme Court issued a joint decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc., (“Halo”), overturning the Seagate test as being too rigid. The Supreme Court noted that 35 U.S.C. § 284 contains “no explicit limit or condition” and allows discretion in awarding enhanced damages. The Supreme Court held that District Courts should be guided by “sound legal principles” developed over many years of application and interpretation of the Patent Act in which enhanced damages are awarded only in “egregious cases of misconduct beyond typical infringement.”
A Light at the End of the Tunnel for Software Patents?
Software patent claims to a self-referential database found patent-eligible under 35 U.S.C. § 101
In Enfish v. Microsoft Corp., the Federal Circuit overruled a District Court decision and found that claims directed to a “self-referential database” were subject matter eligible under 35 U.S.C. § 101 as an improvement providing “faster searching of data than with the relational model,” “more efficient storage” of certain types of data, and “more flexibility in configuring the database.” The Court noted that a “self-referential table” claim element is a “specific type of data structure designed to improve the way a computer stores and retrieves data in memory.” The Court’s characterization of the invention for purposes of subject matter eligibility was influenced by the specification’s disparagement of conventional data structures and by language describing the “present invention” as including self-referential table elements. The Court found that the claims are directed to a specific implementation of a solution to a problem in the software arts, and thus are not directed to an abstract idea, possibly providing a light at the end of the tunnel guiding applicants towards patentable subject matter in the software arts.
High Octane Fee Shifting
Ninth Circuit relaxes standard for awarding Attorneys’ fees in Trademark cases
In 2014, in Octane Fitness, LLC v. Icon Health & Fitness, Inc., the Supreme Court relaxed the standard for awarding attorneys’ fees in patent cases. The Court held that an “exceptional” case qualifying for attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Subsequently, this definition of an “exceptional case” has been applied to trademark cases brought under the Lantham Act in Federal Circuit Courts in the Third, Fourth, Fifth and Sixth Circuits, and in District Courts in the Eighth, Tenth and Eleventh Circuits. In October 2016, the Ninth Circuit Court joined the party and also applied the Octane standard for awarding attorneys’ fees in trademark cases.
Limits on “Common Sense”
Common sense cannot be used to create patent claim limitations in many instances
In August 2016, the Federal Circuit in Arendi S.A.R.L. v. Apple reversed an IPR decision finding invalidity for obviousness wherein the PTAB used “common sense” to provide a claim limitation not found in prior art. The Circuit Court explained that “there are at least three caveats to note in applying ‘common sense’ in an obviousness analysis” including: (1) common sense may be used to provide a known motivation to combine missing claim limitations; (2) common sense may be used to provide a missing claim limitation when “the limitation in question was unusually simple and the technology particularly straightforward”; and (3) common sense “cannot be used as a wholesale substitute for reasoned analysis and evidentiary support, especially when dealing with a limitation missing from the prior art references specified.”
Shhh… It’s a Secret
Trade secrets obtain federal protection
In May 2016, the Defend Trade Secrets Act of 2016 (DTSA) was signed into law. The DTSA creates, for the first time, a federal civil cause of action for misappropriation of trade secrets. The DTSA supplements state trade secret laws and provides a direct route to federal court, which was formerly only available if a party could satisfy federal diversity jurisdiction. The DTSA allows parties to request a court order seizing property to prevent the disclosure of trade secrets and protects whistleblowers from legal liability for disclosing trade secrets to governmental entities and in court filings. Significantly, the DTSA requires that employers provide notice of whistleblower immunity in some employment agreements entered into after the enactment of the DTSA.
Designs, Damages, and Dinner Plates
Design patent damages for infringement of multi-component products may be limited
In December 2016, the Supreme Court reversed and remanded a $399 million damage award to Apple in Apple Inc. v. Samsung Electronics Co. In this long-running dispute, Apple was awarded damages based on Samsung’s entire profit for smartphones found to infringe Apple’s design patents. The relevant statute specified that damages can be awarded on the entire profit for an “article of manufacture.” However, the Supreme Court found that, unlike a dinner plate, “identifying the ‘article of manufacture’ to which the design has been applied is a more difficult task” for a multi-component product. Thus, the Supreme Court rejected the Federal Circuit’s finding that the entire Samsung smartphone was the only permissible article of manufacture and remanded the case.
Personal Information Expressway
EU and US agree on a framework for transfers of personal data between EU and US businesses
In July 2016, the EU-US Privacy Shield Framework (to replace the US-EU Safe Harbor) went into effect. The Framework was designed by the U.S. Department of Commerce and the European Commission to provide companies with a mechanism to comply with data protection requirements when transferring personal data between the European Union and the United States. The Framework specifies what data can be shared and how that data can be used. It is designed so data protection laws can be upheld between EU member states and the US. A similar framework between the US and Switzerland was agreed upon in early 2017.
In Defense of Abbott and Costello
Second Circuit tightens application of fair use doctrine in copyright case
In October 2016, the Second Circuit held in TCA Television Corp. v. McCollum that use of an approximately one minute portion of Abbott and Costello’s “Who’s on First” comedy routine in a Broadway play was not fair use. The Federal Circuit found for the defendant on other grounds. In what is seen by some commentators as a tightening of the Second Circuit’s application of the fair use doctrine, the Circuit found that “the critical inquiry is whether the new work uses the copyrighted material itself for a purpose, or imbues it with a character, different from that for which it was created.” The Second Circuit also found that the play’s use of “Who’s on First” specifically was not necessary for the play's stated purpose of critiquing small-town social norms and that the character of the comedy routine itself was not transformed.
Thanks, But No Thanks
The United Kingdom votes to exit from the European Union
As you are undoubtedly aware, the UK voted to exit the European Union (Brexit) on June 23, 2016. The process of withdrawal is schedule to begin in 2019 and will likely last for several years. It is not currently clear how IP rights will be affected by Brexit, although it is likely that registered and unregistered community designs and EU trademarks will no longer have effect in the UK. However, the UK is still likely to join the European Union’s Unitary Patent system which provides that a patent granted by the EPO is valid in all participating states. Morse continues to monitor the changing legal landscape occurring due to Brexit. See Brexit trademark update.
CRISPR/Cas9 Interference Terminated at PTAB
CRISPR/Cas9 is a technology that greatly advances the ability of scientists to introduce specific DNA changes into cells and is being commercialized by numerous companies. In February 2017, the PTAB held in that patents and a patent application by The Broad Institute to CRISPR/Cas9 technology in a class of cells are not drawn to the same invention as a patent application by the University of California (UC) broadly drawn to CRISPR/Cas9 technology (Patent Interference No. 106,048). The PTAB held that there would not be a reasonable expectation that the invention of the UC patent application would work in the class of cells specified by the Broad Institute. It is unknown at this time if the University of California will file an appeal.
For more information on intellectual property matters, please contact a member of our IP team.