Source: https://www.jdsupra.com/legalnews/intellectual-property-bulletin-fall-2017-46508/
Timestamp: 2019-06-18 19:36:00
Document Index: 715325403

Matched Legal Cases: ['§ 1201', '§ 1201', '§ 101', '§ 101', '§ 318', '§ 318', '§ 1201', '§ 1201']

Intellectual Property Bulletin - Fall 2017 | Fenwick & West LLP - JDSupra
Jennifer Bush, Vikram Iyengar, Ph.D., John Kind, Christopher King, Patrick Premo, Matthew Slevin, Mitchell Zimmerman
A Re-Org at the Copyright Office?
In Disney Enterprises, Inc. v. VidAngel, Inc. — a decision that includes a narrow interpretation of the Family Movie Act of 2005 and disturbing dicta on fair use — the U.S. Court of Appeals for the Ninth Circuit brought low an “angelic” video streaming service that filters movies to remove objectionable content.
Movie 'sanitizer' VidAngel purchased multiple authorized copies of movies, decrypted one of the copies, and ripped the decrypted movie to a computer. The company then created numerous intermediate files comprised of segments of the film that could be tagged for filtering many categories of potentially objectionable content.
When a customer wants to watch a movie, he or she “buys” one of VidAngel’s multiple copies. The customer identifies at least one type of objected-to content, and VidAngel streams a filtered version to the user’s device or computer. The “purchased” copy virtually always remains in VidAngel’s possession and is sold back to VidAngel after streaming.
In its lawsuit, Disney alleged that VidAngel violated its exclusive rights to copy and publicly perform Disney's films, and violated the Digital Millennium Copyright Act by circumventing the films’ access controls.
The Family Movie Act allows consumers to watch versions of movies that omit objectionable scenes or language by skipping such matter — so long as the filtering starts from an authorized copy and no fixed copy of the filtered version is created.
VidAngel maintained that the filtered version should be deemed to come from an authorized copy even though the intermediate, server copy was the immediate source of the filtered version. The Ninth Circuit, emphasizing the policy of reading the FMA’s exception to copyright holder rights narrowly, held that the FMA only protected filtering that proceeded directly from an authorized copy. (Curiously, the court ignored the fact that the original source was itself not the copy “purchased” by consumers, but another copy.)
The court’s analysis left open the question of what the FMA is supposed to accomplish if it does not permit making intermediate copies to facilitate filtering. If all the filtering technology does is provide automated instructions for skipping, and no fixed copy is created at the end, the right to copy would not be infringed in any event. Certainly, film owners’ copyrights do not include any right to require consumers to watch the entire work.
On fair use, the court held all four factors tilted against VidAngel. On the key issue of “transformativeness” — which considers whether the challenged work adds “something new, with a further purpose or different character” — the court seemed to treat this criterion rather literally, concluding that omitting content did not “add[] something new.”
The court spurned VidAngel’s “space-shifting” defense without deciding whether it could be fair use, because VidAngel’s use didn’t fit the space-shifting cases: it was neither personal nor non-commercial, and involved altered content. Manifestly skeptical of the defense, the court erroneously stated: “reported decisions unanimously reject the view that space-shifting is [copyright] fair use.” Actually, space-shifting was squarely held to be fair use in Fox Broadcasting Company v. DISH Networks LLC which we previously discussed.
On the DMCA circumvention claim, the court rejected VidAngel’s argument that owners of lawful copies have implied authority to decrypt, since decryption is necessary to access the works. “Rather, lawful purchasers have permission only to view their purchased discs with a DVD or Blu-ray player licensed to decrypt….”
Finally, VidAngel argued that its decryption wasn’t within 17 U.S.C. § 1201(a), which bars circumvention of technical protection measures that control access to a work. Its decryption went only to use of the copyrighted works, VidAngel maintained, governed by § 1201(b) of the DMCA. But that section only bars trafficking in such technologies — something VidAngel did not engage in. The court held that a technological protection measure could fall under both sections, and that VidAngel did circumvent an access control.
Not surprisingly, VidAngel filed for bankruptcy on October 18, 2017.
USPTO Issues New Guidelines for Marks Containing a Surname Combined with Other Wording
Courts Continue to Deny Patent Eligibility to Scientific Discoveries
In the recent case of INO Therapeutics v. Praxair Distribution, a Delaware district court held as patent-ineligible a group of patents for treatment of neonatal (newborn) patients with inhaled nitric oxide (iNO). The court’s reasoning hinged upon the principle that patents are not to be granted to scientific discoveries.
Specifically, the court found that the core of the patent claim was the discovery of a natural human physiological response: an increased risk of adverse reaction to treatment with iNO on the part of neonatal patients with left ventricular dysfunction (LVD). In holding the claim to embody a law of nature, the court stated that “[w]hile man discovered the adverse physiological response that occurs when some patients receive iNO, such a discovery does not amount to innovation.” It further held that the patent claim’s step of excluding neonatal patents with LVD from INO treatment failed to confer patent eligibility, citing judicial pronouncements that “even valuable contributions [to science] can fall short of statutory patentable subject matter” and that “[g]roundbreaking, innovative, or even brilliant discovery does not by itself satisfy the § 101 inquiry.”
The blanket exclusion of scientific discoveries from the possibility of patenting might seem a curious one, given the explicit inclusion of discoveries in the relevant constitutional and statutory language. Article 1, Section 8 of the U.S. Constitution refers to granting exclusive rights to “discoveries.” Similarly, § 101 of the Patent Act states that whoever “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor,” thereby specifically including discoveries as well as inventions within the scope of patent eligibility (emphasis added).
Assuming that the discovery in INO Therapeutics of the connection between LVD and pulmonary edema was indeed useful and novel, why was it deemed ineligible for patent?
One explanation lies in the U.S. Supreme Court’s articulated exceptions to both inventions and discoveries based on constitutional aims. In Le Roy v. Tatham (1852), the Court stated, with reference to sources of power: “the invention is not in discovering them, but in applying them to useful objects.” In Gottschalk v. Benson (1972), the Court used an expanded articulation of the exception when barring a claim to conversions of numeric representations in computers, stating that “[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work” (emphasis added). Thus, the exception was not limited to inherent natural phenomena, but rather expanded to additionally cover specific techniques devised by human inventors. And in Parker v. Flook (1978), the Court further held ineligible a patent application involving use of a formula, even though the claims did not wholly preempt the formula. The Court’s approach may be characterized as pragmatic rather than philosophical, attempting to carry out the Article 1, Section 8 goal of “promot[ing] the progress” of science by denying patents where it feels that patenting would tend more to impede science than to promote it.
Another possible explanation for the exclusion of discoveries from patent eligibility could lie in the Patent Act’s use of the word “new.” A new insight into a phenomenon that had previously been occurring naturally (e.g., a property or consequence of a natural process) might be deemed not to constitute a “new” discovery of a process since the process was already taking place. In contrast, a discovery of a process that does not occur without human action (e.g., the mixture of two manufactured chemicals), even if inadvertent, could be deemed to involve a “new” process. Viewed in this way, the patentee’s invention did not involve a “new” process, since the invention involved an additional insight into the natural, pre-existing reaction to a particular treatment of human bodies having a particular dysfunction, rather than (for example) inducing a new type of reaction.
Unfortunately, the district court's decision in INO v. Praxair, like many others before it addressing the patent eligibility of discoveries, does not include detailed explanation for what particular portion of Section 101 is believed to be unmet by the claimed subject matter. It would be helpful for future courts to be explicit in providing such analysis. Without it, decisions can appear to be arbitrary and even contrary to the statutory provisions.
DOJ Highlights Criminal Enforcement of Trade Secrets Theft
By William Brenc, Vikram Iyengar and Patrick E. Premo
At the Cambridge Cyber Summit in October 2017, Deputy Attorney General Rod Rosenstein discussed ways in which the Department of Justice has increased its vigilance when it comes to protecting American companies from cybercrime, noting that the DOJ's emphasis is on protecting “the ideas that make our nation strong and competitive in the marketplace.” In 2015, leaders from the G20 nations highlighted the need to protect trade secrets, and Rosenstein indicated that the DOJ has honored that commitment by stepping up efforts to criminally indict trade secret thieves.
Although the DOJ has jurisdiction to prosecute trade secret theft, trade secret disputes traditionally have been handled by private parties through civil litigation. The federal Defend Trade Secrets Act of 2016 and an array of state statutes allow victims of trade secret misappropriation to seek injunctions and monetary damages. But, under the Economic Espionage Act, knowingly stealing a trade secret or knowingly receiving a stolen trade secret is a federal crime.
Prosecution of trade secrets misappropriation appears to be on the rise, particularly in the area of financial technology (fintech), which broadly describes the technological backing for financial firms. In April 2017, Joon Kim, Acting U.S. Attorney for the Southern District of New York, announced two charges of theft of financial trade secrets. The DOJ alleged that Zhengquan “Jim” Zhang used his access to the source code of his employer, a financial services firm, and hacked into other portions of the firm’s systems to install a program that would send data to a third-party site. By alerting and cooperating with the FBI, Zhang’s employer was instrumental in uncovering his alleged theft.
In another fintech case, Dmitry Sazonov was charged with attempted theft of trade secrets from his employer, Susquehanna International Group. On the morning of a meeting discussing his future with the firm, Sazonov allegedly attempted to smuggle out the firm’s trading code by camouflaging code within seemingly harmless PDF files, such as tax and immigration documents. Both cases are pending in the Southern District of New York.
These fintech trade secret prosecutions are among a number of criminal trade secret investigations in the technology sector. In one high-profile case, Anthony Levandowski, co-founder of the self-driving truck company Otto, faces potential criminal charges for allegedly bringing trade secrets from Google’s self-driving car project to his startup, which was later acquired by Uber. Although Levandowski has not been charged, the potential indictment has led him to invoke his Fifth Amendment privilege against self-incrimination. As a result, he has been unwilling to cooperate in discovery in the pending civil suit. That suit, of which Levandowski is not a named party, is set to go to trial in early December 2017.
In another matter, on May 23, 2017, federal prosecutors filed a criminal complaint against seven individuals for allegedly stealing military manufacturing trade secrets from a U.S. business for a Chinese firm. Although the case is still in its early stages, the district court granted restraining orders against two defendants.
These pending cases suggest that the DOJ is, in fact, using criminal prosecution of trade secret theft as a tool to protect the valuable intellectual property of American companies. ​​​​​
§ 318. Decision of the Board , 35 U.S.C. § 318
Gottschalk v. Benson , 409 U.S. 63 (1972)
§ 1201. Circumvention of copyright protection systems , 17 U.S.C. § 1201