Source: https://www.mwe.com/insights/2017-04-ip-update/
Timestamp: 2019-09-17 22:58:57
Document Index: 145986521

Matched Legal Cases: ['§ 101', '§ 286', '§ 286', '§ 286', '§ 286', '§ 282', '§ 282', '§ 282', '§ 101', '§ 101', '§ 101', '§ 512', '§ 512', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§ 101', '§ 111', '§ 111', '§ 111', '§ 111', '§ 111', '§ 2510']

IP Update, Vol. 20, No. 4 – McDermott Will & Emery
Finding of Anticipation Must Be Fully Supported by Evid...
To Teach Away, Prior Art Must Criticize, Discredit or D...
Exceptional Case Rulings Establish Deference to Distric...
Willfulness Can Be Predicated on Brief Between Declarat...
Prejudgment Interest Can Recover for Acts Prior to Pate...
Settlement Agreement May Be Used as Evidence of Damages...
Heads Up! That’s Patentable Subject Matter
Intellectual Ventures Loses Claims Based on § 101, Col...
District Court Excludes Reference to Presumption of Val...
Bar for CBM Review Inching Higher
Give Me an E: Cheerleading Uniform Designs Eligible for...
Without Volitional Conduct, Establishing Direct Copyrig...
No Compulsory License for Internet Retransmissions of B...
Foreign-State-Sponsored Espionage Not Actionable Under ...
Intellectual Property Copyright Counseling and Litigation Patent Litigation Food, Beverage & Agribusiness Intellectual Property Patent Portfolio Strategy and Counseling Litigation & Dispute Resolution Cross-Border Data Protection Privacy Litigation & Governmental Investigations Technology Intellectual Property Telecommunications, Media & Technology
PATENTS / LACHES DEFENSE
In a 7–1 decision, the Supreme Court of the United States held that the equitable defense of laches is no longer a valid defense to patent damages claims brought within the six-year damages limitation period of 35 USC § 286. SCA Hygiene Prods. Aktiebolag, et al. v. First Quality Baby Prods., LLC, et al., Case No. 15-927 (Supr. Ct., Mar. 21, 2017) (Alito, Justice) (Breyer, Justice, dissenting)
The Supreme Court’s decision emphasizes the Court’s copyright law precedent in Petrella v. Metro-Goldwyn-Mayer, in which the Court held that “in the face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief” (IP Update, Vol. 17, No. 5). In SCA Hygiene, the Supreme Court found that “[t]he question in this case is whether Petrella’s reasoning applies to a similar provision of the Patent Act, 35 U.S.C. § 286 . . . We hold that it does.”
SCA Hygiene makes and sells adult incontinence products. In late 2003, SCA sent a warning letter to First Quality alleging that First Quality was infringing an SCA patent. First Quality responded that one of its own patents rendered the SCA patent invalid. SCA never responded to this allegation, and First Quality proceeded to develop, manufacture and sell its products. Without informing First Quality, however, SCA filed a re-examination proceeding at the US Patent and Trademark Office to determine whether its patent was valid over the First Quality patent. The re-examination ended in 2007 with the issuance of a certificate confirming the validity of the SCA patent. SCA did not inform First Quality of this event but instead waited until 2010 to file suit against First Quality. First Quality moved for summary judgment based on laches and equitable estoppel.
The district court granted First Quality’s summary judgment motion on both grounds. The US Court of Appeals for the Federal Circuit affirmed the district court’s decision on laches based on its 1992 decision in A.C. Aukerman v. R.L. Chaides Constr. However, the Federal Circuit reheard the case en banc to reconsider Aukerman in view of the Supreme Court’s decision in Petrella. In its 6–5 en banc decision, the Federal Circuit held that laches could apply as a defense in patent cases, even during the six-year damages limitation period of § 286, and that nothing in Petrella precluded that result (IP Update, Vol. 18, No. 10).
The en banc Federal Circuit explained that notwithstanding the provisions of § 286, US Congress codified laches as a defense in § 282 when it included an unenforceability defense in that statute. Thus, the Federal Circuit found that laches could bar a damages claim even for acts occurring within the six-year statutory period. The Federal Circuit also concluded, however, that the Supreme Court’s 2006 decision in eBay Inc. v. MercExchange required a change in the Aukerman rule that only pre-suit damages may be barred by laches. The Court explained that the availability of injunctive relief or ongoing royalties now depends on an analysis of the circumstances of the delay under eBay.
In its petition for certiorari, SCA argued that the Federal Circuit’s en banc decision conflicted with the Supreme Court’s decision in Petrella that under the Copyright Act laches cannot bar damages claims brought within a statutory limitations period, even though the initial violation may have occurred years earlier. SCA also argued that the Federal Circuit decision used a presumption in favor of laches that was inconsistent with Supreme Court precedent.
The Supreme Court reversed the Federal Circuit and based its holding in large part on Petrella. The Supreme Court explained that its reasoning in Petrella, a copyright case, applies equally to patent law. Most of the remainder of the Supreme Court’s opinion was spent on dismissing three of First Quality’s and/or the Federal Circuit’s positions that the Supreme Court found unpersuasive:
The Patent Act’s limitation period differs from the Copyright Act because the Patent Act does not contain a statute of limitations.
The Patent Act codified laches as a defense in § 282.
Settled practice prior to the 1952 Patent Act allowed the defense of laches, and the 1952 Act did not change this.
The Supreme Court stated that Petrella’s elimination of laches in copyright cases relied on two principles: the difference between law and equity, and the separation of powers. The Court found that laches was designed to shield defendants in equity from stale claims, the same purpose that statutes of limitations served in law. The merger of law and equity brought the two principles into conflict. To resolve that conflict, the Supreme Court held that statutes of limitations reflect a legislative judgment about the time to bring suit, which courts cannot overrule based on the equitable doctrine of laches. The Supreme Court applied that reasoning to patent law, holding that the Patent Act’s six-year damages limitation is a similar legislative judgment. Therefore, laches cannot bar a claim for damages within six years of filing suit.
The Supreme Court then reviewed three potential distinctions between patent law and copyright law and held that these were irrelevant. First, the Court reviewed the argument that the Patent Act’s damages-limitation period was not a true statute of limitations. The Court disagreed because each new copyright infringement was judged on its own statute of limitations, allowing a party to recover the past three years of damages in the same way that the Patent Act’s damages limitations period does. Second, the Supreme Court addressed the Federal Circuit’s holding that the Patent Act codified laches, while the Copyright Act did not. The Supreme Court was not convinced by this argument because the Federal Circuit failed to point to clear language in the Patent Act preserving laches. Finally, the Supreme Court reviewed historical cases on which the Federal Circuit relied to show a patent-specific practice of invoking laches within a statute of limitations. The Supreme Court found that the general historical rule barred the defense of laches within the damages limitations period and that there was no established practice to the contrary in patent law.
Justice Breyer, in dissent, agreed with the Federal Circuit and found that the equitable doctrine of laches should remain as a defense to patent infringement. Justice Breyer disputed the majority regarding the historical application of the laches defense in patent cases, citing numerous cases that recognized laches as a defense. Justice Breyer also recognized practical implications that may result from eliminating the laches defense in patent cases.
Justice Breyer reviewed 150 years of case law and found an almost uniform practice of applying laches to patent claims despite a damages limitation period. He suggested that the 1952 Patent Act was designed to codify that practice based on the inclusion of “unenforceability” as a defense to patent infringement, and that Congress intended to codify the law in enacting the Patent Act in 1952.
With respect to practical concerns, Justice Breyer pointed to the “lock-in” problem, which arises if the damages look-back period is patent law’s only limitations period. An unreasonable patentee could lie in wait, watching an infringer build its business and sell an infringing product for many years, only to suddenly file suit and collect damages over the preceding six years of infringement. This puts the infringer in the difficult position of having made significant business investments in the product, making it difficult to settle and difficult to stop selling should it lose the lawsuit.
Practice Note: The SCA Hygiene decision opens the door for plaintiffs to wait for essentially the entire life of a patent to file a complaint, even if the plaintiff became aware of its claim at the beginning of the patent’s life, while an industry or technology is developed.
The Supreme Court seemed to suggest that Congress will need to amend the patent statute to specify “laches” in the list of defenses in § 282 to avoid potentially unintended results of this decision. Going forward, courts will be tasked with determining what equitable considerations may prevent a patent from being enforced or raised as a defense to liability for infringement. Currently, courts will still be able to consider equitable estoppel.
After issuing its decision in SCA Hygiene, the Supreme Court granted certiorari and remanded to the Federal Circuit three patent cases in which the defense of laches was a dispositive issue: Medinol v. Cordis Corp., Case No. 15-998; Endotach v. Cook Medical, Case No. 16-127; and Romag Fasteners v. Fossil, Case No. 16-202.
PATENTS / AIA / ANTICIPATION / EVIDENCE
In Nidec Motor, the patent at issue related to a system for controlling the torque of an electromagnetic motor. Broad Ocean petitioned for inter partes review (IPR) of the patent. After institution, the PTAB construed the claim term “IQdr demand” to mean “a current demand that includes Q-axis and d-axis current demands.” The patent owner argued that the prior art failed to anticipate because it taught the currents in a stationary frame of reference rather than a rotating frame of reference, as required by the construction of the term “IQdr demand.” The PTAB acknowledged the difference but nevertheless found the claim to be anticipated, citing the Federal Circuit’s 2015 decision in Kennametal v. Ingersoll Cutting Tool (IP Update, Vol. 18, No. 4) for the proposition that anticipation can be found even when a prior art reference fails to disclose a claim element, as long as a skilled artisan reading the reference would “at once envisage” the claimed arrangement. Nidec appealed to the Federal Circuit.
The Federal Circuit agreed with the PTAB’s construction of the term “IQdr demand.” However, the Court disagreed that the claim at issue was anticipated even if the prior art only disclosed currents in the stationary, rather than rotating, frame of reference. As the Court explained, Kennametal does not permit the PTAB to fill in missing limitations simply because a skilled artisan would immediately envision them. Rather, Kennametal addresses whether the disclosure of a limited number of combination possibilities discloses one of the possible combinations. Because the prior art did not disclose currents in the rotating frame of reference, the Court concluded that the PTAB’s findings of anticipation were unsupported by substantial evidence.
In re Chudik is an appeal of the PTAB’s decision to uphold an examiner’s anticipation rejections in the context of original prosecution. Specifically, the PTAB upheld the examiner’s findings that multiple claims related to minimally invasive shoulder replacement surgery were anticipated by two prior art references (Rambert and Bouttens). The PTAB’s conclusion of anticipation was based on the fact that the claims did not require the recited surfaces to actually “engage” the glenoid region, but instead only required that the surfaces be “arranged for such engagement.” Chudik appealed.
The Federal Circuit reversed with respect to Rambert, concluding that the PTAB’s finding of anticipation was not supported by substantial evidence. According to the Court, although the “arranged to engage” claim language implies that the protruding surface does not always need to actually engage the glenoid surface, it must be at least capable of doing so. In this case, neither the examiner nor the PTAB explained how the protruding surface of the Rambert reference is “capable of engaging” the glenoid surface without modifying the reference to remove an element (i.e., “tearing the invention apart”). As the Federal Circuit explained, “[p]rior art that ‘must be distorted from its obvious design’ does not anticipate a new invention.
Applying similar reasoning, the Federal Circuit reversed with respect to the Bouttens reference, concluding that both the examiner and the PTAB failed to describe how a user could rotate Bouttens’s protruding surface for “engagement” with the glenoid region without significant and impermissible modification. For these reasons, the PTAB’s findings with respect to both prior art references were not supported by substantial evidence.
PATENTS / AIA / OBVIOUSNESS (TEACHING AWAY)
Google petitioned for inter partes review of Meiresonne’s claims directed to “a supplier identification and locator system and method,” asserting that the challenged claims were obvious over two prior art references. The PTAB agreed with Google and found that a person of ordinary skill in the art would not have read the references to teach away from the solution of Meiresonne’s claims. Meiresonne appealed.
On appeal, Meiresonne argued that the references taught away from the combination of descriptive text having a rollover viewing area because both prior art references disparaged and criticized the use of descriptive text. Meiresonne argued that the reference’s solution to “cursory, if not cryptic” descriptive text was abandoning it and replacing textual descriptions with graphical previews. Meiresonne further argued that the prior art reference described abstract text as “gibberish” and advocated “visiting the actual site” instead of reading an unreliable abstract text.
The Federal Circuit disagreed, explaining that a reference that “merely expresses a general preference for an alternative invention but does not criticize, discredit, or otherwise discourage investigation into” the claimed invention does not teach away. The Court reasoned that the prior art’s description of descriptive text as “cursory, if not cryptic” did not convert the reference to one that teaches away from the claimed combination because the prior art reference did not state or imply that the text descriptions were “unreliable,” “misleading,” “wrong” or “inaccurate.” The Court explained that the word “cursory” implied that the information was accurate but could use supplementation, and did not demand replacement. Similarly, the Court reasoned that the description of website abstracts as “sometimes . . . as informative as a paragraph of gibberish” did not amount to promoting abandonment of text description, but instead merely encouraged supplementing the text.
The Federal Circuit further distinguished this case from its 2009 decision in DePuy Spine, in which the Court affirmed the lower tribunal findings that prior art references taught away from the invention based on the reasoning that the prior art references rendered the device inoperative for its intended purpose (IP Update, Vol. 9, No. 12). The prior reference in this case did not express concerns that the text descriptions would hinder the goal of communicating information about website links to a person browsing the internet or detract in any way from the goal of using a rollover viewing area to peruse data “much faster” than previous methods. Instead, the prior art encouraged the addition of the graphical previews to make the internet even more advantageous than before, and helped a user to determine whether a link is relevant to their information.
Addressing the issue of whether a particular case was “exceptional” because plaintiff’s inventorship challenge failed in part because of admissions from plaintiff’s witness, the US Court of Appeals for the Federal Circuit upheld the district court’s decision that the case was not exceptional. University of Utah v. Max-Planck-Gesellschaft, Case No. 16-1336 (Fed. Cir., Mar. 23, 2017) (Reyna, J). In contrast, just six days earlier, the Federal Circuit affirmed a district court’s finding of an exceptional case where the plaintiff’s infringement suit failed in large part because of plaintiff’s own witnesses and evidence. Bayer Cropscience AG v. Dow Agrosciences LLC, Case No. 2015-1954 (Fed. Cir., Mar. 17, 2017) (Stoll, J).
In Max-Planck, the Federal Circuit summarized the standard for finding a case “exceptional” under Octane Fitness (IP Update, Vol. 17, No. 5): “[a]n exceptional case ‘is simply one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.’” Pertinent factors may include “subjective bad faith or exceptionally meritless claims . . . frivolousness, motivation, objective unreasonableness of a case’s factual or legal components, and the need in particular circumstances to advance considerations of compensation and deterrence.” In general, the case must “set itself apart from mine-run cases” such that a fee award is warranted. The district court must “make exceptional case determinations on a case-by-case basis, considering the totality of the circumstances.”
The University of Utah sued to correct inventorship of a series of patents dealing with RNA interference. Utah argued that one of its scientists, Dr. Bass, should be named as an inventor. During deposition, Dr. Bass made a series of admissions that seriously undercut Utah’s inventorship arguments. The district court granted summary judgment in favor of Max-Planck.
Max-Planck sought attorneys’ fees, but the district court denied the motion, finding that the case was not exceptional. The district court concluded that “[a]lthough Utah may have been asking for pie in the sky, that does not differentiate this case from most patent cases.” Max-Planck appealed. The Federal Circuit affirmed the district court’s decision because, while “the district court agreed that Utah’s case was weak and based on insufficient evidentiary support, it provided a detailed explanation as to why it disagreed that Utah’s case was objectively unreasonable.”
In contrast, in Bayer the Federal Circuit affirmed the district court’s finding that the case was exceptional. Bayer sued Dow for infringement of patents covering genetically modified soybeans, but Dow responded that it had obtained a sublicense to the asserted patents from Bayer’s licensee. The case turned on whether the licensee could sublicense the patents for commercial use. The district court agreed with Dow and granted summary judgment.
The district court found the case exceptional because of “Bayer’s weak positions on the merits and litigation conduct.” Bayer appealed. The Federal Circuit affirmed, finding that the “district court’s opinion thoroughly demonstrated the totality-of-the-circumstances approach, detailing the reasons why Bayer’s positions on the merits and litigation tactics coalesced in making this case, in its judgment, exceptional.” The Federal Circuit also emphasized the district court’s explanation that “in its view, this case stood out from others because ‘[t]he positions Bayer took to support their contract interpretation arguments were directly contradicted by the record evidence Bayer had obtained through early discovery and Bayer should have made every effort to discover before filing suit.’”
Practice Note: Both Max-Planck and Bayer present somewhat similar facts in that both involve plaintiff losing on summary judgment where plaintiff’s evidence undercut its positions. In affirming the contrary conclusions reached by the district courts, the Federal Circuit emphasized the importance of a district court’s finding a case truly “exceptional”—in other words, that the case stood apart from the rest by such a wide margin as to warrant a fee award. This test is necessarily highly subjective and as such appears to give district courts a wide leeway in deciding whether a particular case is exceptional.
As both Max-Planck and Bayer demonstrate, the Federal Circuit will extend considerable deference to district courts when evaluating whether a case is exceptional. Accordingly, success at the district court level is crucial, because an adverse decision is unlikely to be overturned.
PATENT DAMAGES / ASSIGNOR ESTOPPEL / CLAIM PRECLUSION
PATENTS / INFRINGEMENT / DAMAGES
In addressing the first step of the Supreme Court of the United States’ § 101 framework in Alice (IP Update, Vol. 17, No. 7) evaluating whether the claimed subject matter is an abstract idea, the US Court of Appeals for the Federal Circuit reversed a decision invalidating claims directed to a heads-up display patent as being patent ineligible under 35 USC § 101. Thales Visionix Inc. v. U.S., Case No. 15-5150 (Fed. Cir., Mar. 8, 2017) (Moore, J).
The Federal Circuit reversed, concluding that the asserted claims are not directed to an abstract idea since they specify a particular configuration of inertial sensors and a particular method of using the raw data from the sensors. The Court emphasized that “it is not enough merely to identify a patent-ineligible concept underlying the claim; we must determine whether that patent-ineligible concept is what the claims is ‘directed to.’”
To reach the conclusion that the asserted claims are not abstract, the Federal Circuit traced recent precedent, such as Enfish LLC (IP Update, Vol. 19, No. 6), as well as the Supreme Court’s pre-Alice rationale in Diamond v. Diehr, finding the claims at issue “nearly indistinguishable from the claims at issue in Diehr.” Although the claims utilize mathematical equations to determine the orientation of the helmet, the equations serve only to tabulate position while being dictated by the placement of the inertial sensors and application of laws of physics. Requiring a mathematical equation to complete the claimed methods and system “does not doom the claims to abstraction.” Because the patentee did not claim the equations themselves and the claims were not directed to an abstract idea, the inquiry should therefore end with Alice step one.
Practice Note: Although this decision did not reach the question of whether the claims disclosed an “inventive concept,” the Federal Circuit commented on the multiple advantages of the claimed methods and systems over the prior art. In other words, the Court’s “abstract idea” analysis went to an evaluation of whether the subject matter is non-conventional or an improvement upon previously disclosed technologies. This decision suggests that drafting a specification and claims indicating a non-conventional use may provide some level of protection against a contention that the claimed subject matter is abstract.
PATENTS / § 101 / STANDING
PATENTS / INFRINGEMENT / EVIDENCE
Addressing the standard for initiating a covered business method (CBM) review, the Patent Trial and Appeal Board (PTAB) declined to institute CBM review given the generic, broad nature of the claims and specification. Ford Motor Company v. Versata Development Group, Inc., Case No. CBM2016-00100 (PTAB, Mar. 20, 2017) (Medley, APJ) (Turner, APJ, concurring) (Arpin, APJ, concurring).
Ford filed a petition challenging Versata’s patent directed to the processing of configuration queries to determine valid configuration answers, where the answers are prioritized by predetermined attributes. In its preliminary response, Versata forfeited certain claims by statutory disclaimer. Subsequent to the patent owner’s preliminary response, the PTAB authorized the petitioner to file a reply addressing the impact of the Unwired Planet decision (IP Update, Vol. 19, No. 12) and whether the disclaimed claims should be considered for determining the patent’s eligibility. After considering the issues, the PTAB, citing US Court of Appeals for the Federal Circuit precedent, explained that disclaimed claims should be treated as if they never existed.
The PTAB also declined to institute CBM review, finding that the patent did not include any claim that satisfied the financial prong of the CBM patent eligibility test. The PTAB was not persuaded by petitioner’s argument that the claims, when read in light of the specification, recited terms attributable to price, or were at least “incidental to” or “complementary to” a financial activity. The PTAB cited the Federal Circuit’s rejection of the “incidental to” or “complementary to” language in the Unwired Planet decision. The PTAB explained that the CBM patent eligibility test is focused on the claim language, not simply on embodiments in the specification. Here, the PTAB agreed with the patent owner that the claims are “agnostic to the specific data with the attribute,” finding that the claims lacked any language related to pricing, financial products or services, and that the claims did not specify that price is an “attribute.” Although the PTAB acknowledged that price is described as an “attribute” in the specification and that the invention has application to financial services, it also noted that the specification described examples of non-financial attributes and applications beyond financial services.
In concurrence, Administrative Patent Judge (APJ) Turner opined that the current state of the law for CBM review has become troubling for accused infringers that cannot avail themselves of CBM review proceedings given recent Federal Circuit precedent. Turner acknowledged that, as a matter of patent law, claims that do not recite explicitly anything directed to selling products or services cannot be supplemented by statements in the written description. He argued, however, that a broad patent claim intended to be directed to a financial product can escape review while a narrower patent claim directed to the same financial product would be forced into CBM review under the existing precedent. In a second concurrence, APJ Arpin explained that the statutory disclaimer of certain claims narrowed the scope of the challenged claims by clearly and unambiguously disclaiming “financial products” from the scope of the term “product.”
Practice Note: This decision continues the pattern of limiting eligibility for CBM review that stems from the Federal Circuit’s landmark decision in Unwired Planet and more recent decision in Secure Axxess (IP Update, Vol. 20, No. 3), where the Federal Circuit has taken a more strict reading of the statutory definition of a CBM patent.
COPYRIGHTS / USEFUL ARTICLES / AESTHETIC FEATURES
The US Court of Appeals for the Fifth Circuit affirmed the district court’s grant of summary judgment, holding that “volitional conduct” is required to establish a claim for direct copyright infringement under the safe harbor provision of the Digital Millennium Copyright Act (DMCA). BWP Media USA, Incorporated, et al. v. T & S Software Associates, Inc., Case No. 16-10510 (5th Cir., Mar. 27, 2017) (Southwick, J).
T & S Software, an internet service provider (ISP), hosted an internet forum called HairTalk on which third-party users posted various images, shared comments, asked questions and posted other content on topics that include hair, beauty and celebrities. BWP Media sued T & S claiming that a third-party HairTalk user posted images that infringed BWP’s copyrights. BWP argued that during the relevant time period, T & S did not have an agent designated to receive notices of content that should be removed, as required to qualify for the DMCA statutory safe harbor.
The DMCA protects ISPs from liability when users upload copyrighted content while requiring such ISPs to remove the material if they receive notice or otherwise become aware of the infringement. To qualify for the safe harbor protection, an ISP must have “designated an agent to receive notifications of claimed infringement.” 17 USC § 512.
After the district court granted summary judgment in favor of T & S as to both direct and secondary infringement, BWP appealed the direct infringement liability ruling.
The Fifth Circuit affirmed the district court’s grant of summary judgment, determining that volitional conduct is required to prove a claim of direct infringement. The Court explained that although T & S hosted the forum on which infringing content was posted, T & S’s “connection to the infringement ends there.” The users of the HairTalk forum posted the infringing content, and T & S did not provide them access to the infringing content. T & S “and the infringing content are not linked by volitional conduct.” The Court further noted that it couldn’t be said that T & S’s “conduct caused in some meaningful way an infringement.”
BWP also argued that the DMCA safe harbor rules created an exclusive method of protecting an arguably innocent ISP. The Fifth Circuit disagreed, explaining that “even though the DMCA was designed to provide ISPs with a safe harbor from copyright liability, nothing in the language of § 512 indicates that the limitation on liability described therein is exclusive.” The Court concluded that it is difficult to argue “that the statute in fact precludes ISPs from relying on an entire strain of case law holding that direct infringement must involve conduct having a volitional or causal aspect.”
COPYRIGHTS / COMPULSORY RETRANSMISSIONS LICENSE (INTERNET STREAMING)
Reversing the district court’s partial grant of summary judgment in favor of an internet streaming service, the US Court of Appeals for the Ninth Circuit relied on the US Copyright Office’s interpretation of § 111 of the Copyright Act in finding that an internet streaming service does not qualify as a “cable system” under the statute and therefore is not eligible for a compulsory license to stream copyrighted content from broadcast television signals. Fox Television Stations, Inc. v. AereoKiller, LLC, Case No. 15-56420 (9th Cir., Mar. 21, 2017) (O’Scannlain, J).
FilmOn uses antennas to provide over-the-air broadcast programming to subscription customers via internet streaming. After the Supreme Court of the United States’ 2014 decision in American Broad. Cos. v. Aereo (IP Update, Vol. 17, No. 7) held that use of antenna technology to rebroadcast TV to the internet was a “public performance” in violation of US copyright law, FilmOn made an attempt to legally navigate its business within the Copyright Act and applied to the US Copyright Office for a compulsory license to stream its broadcast television content under § 111 of the Act.
Section 111 provides that cable systems are eligible for a compulsory license to retransmit content originally broadcast by someone else. The statute defines a “cable system” as a “facility . . . that receives signals transmitted or programs broadcast by one or more television broadcast stations . . . and makes secondary transmission of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members . . . .”
The US Copyright Office denied FilmOn’s § 111 application on the ground that internet-based retransmission services are not cable systems and thus are not covered under the statute. In the meantime, FilmOn was sued by a significant number of broadcast stations and copyright owners, including the Fox networks, NBC, ABC and Disney, among others (collectively, Fox) for copyright infringement.
Finding that FilmOn did qualify as a “cable system” and may be entitled to a compulsory license for retransmitted broadcast content, the district court granted partial summary judgment to FilmOn. In its decision, however, the district court also authorized the immediate appeal on this “controlling question of law,” noting a difference of opinion among the courts on the issue of whether internet-based retransmission services count as “cable systems” under § 111. In fact, the district court in this dispute was the only court to conclude that internet retransmissions services so qualify.
On appeal, the Ninth Circuit rejected the arguments put forth by both parties with regard to their respective interpretations of the “plain meaning” of § 111 and whether internet streaming services qualify as “cable systems.”
Fox focused on the word “facility” in the § 111 language and argued that FilmOn is not a cable system because it does not control the full retransmission process, since the internet transmission path is outside of FilmOn’s control, or otherwise beyond its “facility.” The Ninth Circuit disagreed, finding that nothing in the statute compels the conclusion that “cable systems” must have control over the full process or retransmission medium.
Relying on the Supreme Court’s decision in Aereo, FilmOn argued that § 111 “should be interpreted in a technology agnostic manner,” making compulsory licenses available to any facility that retransmits broadcast signals or programming, regardless of the medium. However, the Ninth Circuit was quick to explain that Aereo did not deal with § 111, but instead examined the Copyright Act’s Transmit Clause under § 101 to determine the types of retransmissions that qualify as public performances of copyrighted content.
FilmOn also argued that internet retransmissions should count as one of the “other communications channels” covered by the definition of “cable system” under § 111. On this point, the Court examined particular language of the statute coupled with the legislative history of § 111, which was intended to provide broadcasts to “geographically distant and isolated communities,” and determined that internet services have no similar geographic boundaries. Further, the Court opined that internet-based retransmissions actually lend themselves to piracy and pose a “more serious threat to the value and integrity of copyrighted works.”
Given the ambiguity of the statute with regard to the specific question at issue, the Ninth Circuit turned to the Copyright Office’s long-held interpretation of § 111, unequivocally stating that internet streaming services may not use the same statutory compulsory copyright license granted to cable companies. In reversing the district court, the Ninth Circuit found that the Copyright Office’s consistent position on § 111 strikes a balance between the public’s interest in “improved access to broadcast television and the property rights of copyright holders,” and is based on the statute’s text, structure and legislative history. The court further noted that Congress has “effectively acquiesced” to the Copyright Office’s position, since Congress has repeatedly amended the statute in other respects, but has left this interpretation of § 111 intact.
Practice Note: FilmOn has petitioned for en banc review by the Ninth Circuit. Citing a separation of powers concern and arguing that the court erroneously deferred to the position of the US Copyright Office on the issue of internet streaming services as cable systems, FilmOn argues that the current decision threatens internet-based broadcast television retransmissions as an “important emerging technology.”
In concluding that the Foreign Sovereign Immunities Act (FISA) exception for non-commercial torts does not abrogate sovereign immunity where the claimed espionage did not occur entirely in the United States, the US Court of Appeals for the District of Columbia Circuit affirmed the dismissal of a US citizen’s Wiretap Act and state-law claims against Ethiopia’s alleged digital espionage. John Doe aka Kidane v. Ethiopia, Case No. 16-7081 (DC Cir., Mar. 14, 2017) (Henderson, J).
Plaintiff John Doe—proceeding pseudonymously as “Kidane”—obtained asylum from Ethiopia in the early 1990s. He is now a US citizen living in Maryland and has remained active in the Ethiopian community to raise awareness of corruption and human rights issues in Ethiopia. In late 2012 or early 2013, Kidane received an email originally sent by or on behalf of Ethiopia from an individual allegedly located in London. The email included an attachment that, once opened, allegedly infected Kidane’s computer with a “clandestine . . . program[] known as FinSpy.” According to the complaint, FinSpy is “a system for monitoring and gathering information from electronic devices, including computers and mobile phones, without the knowledge of the device’s user” and is “sold exclusively to government agencies.” FinSpy “began . . . recording some, if not all, of the activities undertaken by users of the computer,” whether by Kidane or his family members, then allegedly communicated with a server in Ethiopia.
Kidane filed suit under the Wiretap Act, 18 USC §§ 2510 et seq., which prohibits “any person [from] intentionally intercept[ing] . . . any wire, oral, or electronic communication[,]” as well as under Maryland’s common law tort of intrusion upon seclusion. The district court dismissed the lawsuit, concluding that the Wiretap Act could not be enforced via private lawsuit against a foreign government, and that there was no subject matter jurisdiction for the state-law claim. Kidane appealed.
FISA’s non-commercial tort exception abrogates immunity from actions involving “personal injury or death, or damage to or loss of property, occurring in the United States and caused by the tortious act or omission of [a] foreign state or of any official or employee of that foreign state while acting within the scope of his office or employment[.]” According to DC Circuit precedent (Jerez), the “entire tort—including not only the injury but also the act precipitating that injury—must occur in the United States.”
Practice Note: The DC Circuit’s strict assessment of FISA and its exceptions may leave citizens without recourse against foreign state-sponsored digital espionage in certain situations. Indeed, the Court seems to suggest that as long as the foreign government formed its tortious intent abroad, it may be immune from suit even though the wiretap occurred in the United States against a US citizen.