Federal Circuit Penalizes ICU Medical, Inc. and Counsel Paul Hastings for Frivolous Patent Infringement Suit
By Jamie Wicks – Edited by Joshua Gruenspecht

ICU Medical, Inc. v. Alaris Medical Systems, Inc.
Federal Circuit, March 13, 2009, No. 2008-1077
Opinion

On March 13^th, the Federal Circuit unanimously affirmed the United States District Court for the Central District of California, which had granted summary judgment in favor of Alaris in a suit in which ICU claimed infringement of its patents for spiked medical valves used in intravenous (IV) fluid transmission. Judge Kimberly A. Moore, writing for the Federal Circuit, granted summary judgment of non-infringement against claims by ICU that the Alaris devices were “spiked” according to the terms of the patents, granted summary judgment of invalidity against claims by ICU that its patents covered spikeless and tubed devices, and awarded $4.6 million in attorney fees to Alaris and Rule 11 sanctions against ICU.

The Patent Prospector summarizes the Federal Circuit’s opinion. Dewipat details the section of the opinion regarding the spiked medical valve claims. Law.com highlights the Rule 11 sanctions, quoting patent attorney Neil Smith, who says that sanctions are “really unusual” in patent cases.

With regards to the spiked valve claims, the Federal Circuit held that the district court properly interpreted the word “spike” to mean “an elongated structure having a pointed tip for piercing the seal, which may be sharp or slightly rounded” as Alaris argued, and not to mean “an upward projection” as ICU argued. Rejecting ICU’s broader definition, the Federal Circuit held that the district court properly granted summary judgment of non-infringement. The Federal Circuit reasoned that a person having ordinary skill in the art would interpret “spike” in the narrower respect after reading the complete patent. Importantly, it reasoned that the patent’s specification strongly supported this definition, and held that patent specifications should generally carry significant weight in claim construction.

With regards to the spikeless and tube valve claims, the Federal Circuit held that the claims are invalid because they lack written descriptions in the specification, which is required by U.S.C. § 112, ¶ 1. The court reasoned that a person having ordinary skill in the art would not know ICU invented spikeless or tube valves after reading the specification, since the specification only detailed spiked valves.

The case is particularly notable for the Federal Circuit’s agreement with the district court that the claims as constructed were frivolous enough to merit sanctions and payment of court costs. Judge Moore held that the district court appropriately awarded attorney fees in favor of Alaris under the Federal Circuit’s legal standard for awarding such fees, articulated in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005): Attorney fee awards are justified “if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” The district court reasoned that ICU’s broad construction of the term “spike” was “objectively baseless and brought in bad faith.” ICU’s inventor and internal personnel each indicated that they believed Alaris’s valve technology did not include spikes. In addition, the district court detailed numerous misrepresentations made by ICU. Overall, the Federal Circuit determined that the district court made no clear error, utilized the correct legal standard and adequately explained its basis for awarding attorney fees.

For similar reasons, the Federal Circuit held that the district court appropriately sanctioned ICU and its counsel Paul Hastings under Rule 11 of the Federal Rules of Civil Procedure. The district court found that ICU and counsel were well aware of the dubiousness of their definition of the term “spike” and frivolously amended the complaint to include the spiked claims, an action which merited sanctions. ICU argued that the district court utilized the same justification for imposing attorney fees and sanctions, and thus stated that its arguments for both issues “applie[d] equally.” The Federal Circuit reasoned that since it did not accept ICU’s arguments regarding the attorney fees issue, it would not accept its argument regarding the sanctions issue. The court also accepted the lower court’s choice to award no Rule 11 monetary sanctions given the sizeable penalty paid in attorney’s fees.

Bourne Co. v. Twentieth Century Fox Film Corporation
S.D.N.Y, March 16, 2009, 07 Civ. 8580
Opinion (hosted by Exclusive Rights)

On March 16, 2009, Judge Batts of the Southern District of New York granted summary judgment for the defendants in a copyright infringement suit against the creators, producers and broadcasters of the television series Family Guy. Plaintiff Bourne Co. is the sole owner of the copyright to the popular song “When You Wish Upon a Star.” The plaintiff claimed that defendants had copied “When You Wish Upon a Star” in a “thinly veiled” manner in their song “I Need a Jew,” which appeared in an episode entitled “When You Wish Upon a Weinstein.”

Judge Batts first determined that “I Need a Jew” was parody, not satire, with a correspondingly greater need to borrow from source material. The court then established that the song satisfied the four-prong test for fair use forth set forth by the 1976 Copyright Act, 17 U.S.C. § 107, which, as developed by case law, places emphasis on the purpose and character of the use and the effect of the use on the potential market for the copyrighted content. The court therefore held that the importation of the melody was protected fair use. 

Reuters provides the basic facts. Exclusive Rights offers an overview of the opinion, examining the court’s treatment of the parody versus satire distinction and providing a brief video excerpt of “I Need a Jew.”
Legal Geekery also covers the opinion, characterizing it as a victory for fair use, and comments upon society’s willingness to depend on fair use as a shield against aggressive copyright enforcement. 
The animated film site suite101 hosts an article providing background on the Family Guy spoof from an industry perspective. 

Both parties in this case agreed that the defendants’ use of “When You Wish Upon a Star” would be copyright infringement but for a finding of fair use.  Notably, defendants initially approached Bourne Co. and asked for permission to use the song, but were denied.

Judge Batts opened her discussion of fair use by citing the Supreme Court’s seminal discussion of parody in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), which cautioned against the “rigid application” of the copyright statute when it would “stifle creativity.” She then determined that “I Need a Jew” was a parody rather than a satire under Campbell because its intent was at least in part to comment on its source material.  The defendants justified their song as a parody on two fronts: (1) as a contrast to the “saccharine sweet” worldview of the original and (2) as a pointed comment on Walt Disney’s reputation as an anti-Semite. Judge Batts pointed to evidence produced by defendants that awareness of both the sweetness of the song and Disney’s reputation were widespread, and noted that a parody does not have to be successful in order to be protected by fair use.

After looking at the four factors of the fair use test – (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; (4) the effect of the use on the market for or value of the copyrighted work – Judge Batts found that the Family Guy parody was sufficiently “transformative” to satisfy the first prong.  Following Campbell, she gave little weight to the second prong. She found that the third prong weighed in the defendants’ favor since they had intentionally used enough of “When You Wish Upon a Star” to conjure up the original. She also resolved the fourth prong in the defendants’ favor in spite of plaintiff’s claim that this use would compete with licensed uses and that the anti-Semitic lyrics would harm the value of the song. She stated that the plaintiffs’ interpretation of the fourth prong would “swallow the prong completely” and that “I Need a Jew” is so different from “When You Wish Upon a Star” that it cannot be a market substitute for the original.

Text of H.R. 1427
Summary

Last week, Rep. Henry Waxman and several other representatives unveiled the latest version of a bill designed to lower the price of drugs by encouraging generic competition in biological products (”biologics”). Biologics are products derived from living processes and used to prevent, treat, or cure human illness. Most drugs, in contrast, are synthesized using chemical reactions.  Biologics include products such as vaccines, blood-derived products, antibodies, and recombinant proteins (e.g. proteins that modulate the immune system, or proteins that induce the proliferation of red blood cells). Over the past 30 years, a revolution in recombinant DNA technology has propelled the sub-field of biologics from the periphery into prominence in the biopharmaceutical industry. Three of the top 10 best-selling drugs in the U.S. in 2007 were biologics (Enbrel, Aransep, and Epogen), and biological products now represent some of the most expensive drugs on the market; annual per-patient treatment costs for one expensive drug topped $300,000 last year.

The new bill, H.R. 1427, dubbed the “Promoting Innovation and Access to Life-Saving Medicines Act,” is intended to introduce price competition in biologics by granting the FDA clear authority to approve generic, or “follow-on” biologics, which are comparable in safety and efficacy to biologics already on the market. The new legislation is modeled on the Hatch-Waxman Act of 1984, which allowed generic manufacturers to gain market approval by showing that their products were interchangeable, or bio-equivalent, with previously approved products, without the need to preform additional clinical trials. Until now, the FDA has been reluctant to allow for this type of abbreviated approval for biologics, which have historically been regulated under a different legal regime from other drugs. Although, as described in this testimony by an FDA official, the story is more complicated. Some proteins that were initially purified from human and animal tissues, such as insulin and human growth hormone, were categorized as drugs when they first obtained FDA market approval. Today these substances remain regulated as drugs, even though they are now synthesized using recombinant DNA technology, like many biologics.

Previous attempts to create an abbreviated approval pathway for generic, or “follow-on” biologics, have stalled based on concerns that the new pathway will fail to ensure patient safety and protect the profits of innovator firms. A major sticking-point has been the inclusion, in some versions of the legislation, of a “data-exclusivity” provision that would prevent generic firms from gaining approval based on comparisons to an innovator product for 12-14 years after the innovator gains approval. The data exclusivity term would run concurrent with the term of any patents covering the innovator product. Data exclusivity would protect innovator firms whose patents have expired or been interpreted too narrowly to effectively block competition. The new H.R. 1427 attempts to compromise with innovators by offering shorter, 3- and 5- year periods of data exclusivity, similar to the periods currently available to other drugs under the 1984 Hatch-Waxman regime (a model suggested by Boston University Scholar Laurence Kotlikoff).

While the debate rages on over how best to protect investment by innovators under the new regime, few have raised the question of whether or not the new legislation will actually be successful in promoting generic competition. Lawmakers and lobbyists pushing for the extended period of data exclusivity appear to assume that once the pathway is open, it will be a simple matter for generic firms to reverse engineer the originator product. The success of the Hatch-Waxman regime has relied on the fact that most drugs are easy to reverse engineer — the process of characterizing and reproducing a simple chemical entity can cost as little as $100 million and take as few as 6 months. Once Hatch-Waxman removed the barrier of submitting independent clinical data, generic competition was immediate and dramatic: the share of prescriptions filled by generic drugs rose from 19% to 40% in the first decade following the act (as described in this FTC Comment).

By contrast, the process of reverse-engineering a biologic is much more complicated. As the FDA notes, biologics tend to be more complex, heterogenous, and harder to characterize than their chemical counterparts.  Unlike most chemical drugs, the particulars of the production process for biologics can have major effects on the structure of the end product.  Use of different cell-lines or small changes to the manufacturing process can lead to dangerous variations in the product that can be difficult to detect without additional clinical studies. The importance of the manufacturing process and use of particular cell lines means that a product may remain difficult to reproduce, even where elements have been disclosed in a patent application. The innovator biologics industry has argued that it would be impossible — at least in some cases — to design a follow-on products that could be safely exchanged with the innovator product. This assertion has prompted criticism that many biologics patents are actually invalid because they fail to disclose enough information to enable a person skilled in the art to make and use the invention. See 35 U.S.C. § 112

Such barriers to reverse-engineering biologics will cut into the effectiveness of the new legislation by making it difficult for generic firms to prove that their drugs are similar enough to the innovator product to gain regulatory approval without preforming additional clinical trials. Even Henry Grabowski, a Duke University economist who has argued for a 12-16 year data exclusivity period to protect innovation, admits that the new legislation will not work as well as Hatch-Waxman at promoting competition for biologics. In a 2006 paper published in Health Affairs, Grabowski estimated that even with an abbreviated approval process in place, technological and manufacturing barriers to copying would result in fewer follow-on biologics. Less generic competition means that prices are not likely to drop as dramatically for biologics as they had for simpler drugs following Hatch-Waxman.

The troubling implication is that some biologics will be able to maintain their monopolies — and resulting high prices — even after the new legislation takes effect. Even more troubling is the fact that no attempt has been made to generate new solutions to the new challenges presented by biologics. Instead, the debates have focused on which elements of the Hatch-Waxman regime, such as data exclusivity, will be incorporated into the new legislation.

Solutions do exist. One potentially simple fix to the problem could be to borrow from patent law and require the innovator firm to meet an additional disclosure requirement in return for the allotted period of data exclusivity. If innovator firms insist on an 12-14 year period of monopoly protection, it is reasonable and fair to ensure that when the period expires, generic firms will be allowed to compete. A disclosure requirement could ensure competition by giving generic firms the information and materials necessary to replicate the innovator product with a minimum of additional expense. This would mean, in many cases, requiring the innovator firm to share cell lines and disclose manufacturing processes that would otherwise be protected by trade secrets. Such a requirement would also assist with public safety by ensuring that generic biologics were as similar as possible to the innovator — reducing the danger of unexpected side-effects. Publication of the disclosure could be timed to coincide with the expiration of patent and data exclusivity terms, as a way to prevent generics firms from manipulating the system by seeking early entry.

The paradigm for generic entry developed for chemical drugs fails to address existing barriers to production of follow-on biologics.  If lawmakers do not recognize these problems and incorporate new solutions to overcome them, the new legislation will not be effective at lowering the price of biologics.

*For further discussion of biologics and data exclusivity, see the forthcoming Fall 2009 edition of the Journal of Law & Technology, featuring “A Longer Monopoly for Biologics?: Implications of Data Exclusivity as a Tool For Innovation,” a student Note by Sarah Sorscher.

Eli Lilly & Co. v. Teva Pharma
Federal Circuit, February 24, 2009, No. 2009-1071
Opinion

On February 24^th, the Federal Circuit affirmed two to one an order by the United States District Court for the Southern District of Indiana extending the 30-month statutory stay on FDA approval of Teva Pharmaceuticals‘ generic version of Eli Lilly’s postmenopausal osteoporosis drug, Evista®. The stay was extended until March 9, 2009, when trial was set to begin for Lilly’s suit against Teva, in which Lilly alleged that Teva infringed four method patents.  Teva filed for and received an expedited appeal.  Judge Rader, writing for the two-judge majority with Chief Judge Michel, found that Teva “fail[ed] to ‘reasonably cooperate’” in expediting the lawsuit by altering its product last minute and because of multiple delays in producing critical discovery. Controversially, the court based its decision also on allowing Eli Lilly the time to prepare, rather then solely on the factors mandated by the statute.

Patent Docs offers a description of the case’s history, and Patently-O provides a summary of the case.

Patent Baristas notes the importance of even a short stay: Evista accounted for $1.075 billion in sales in 2008, meaning that a two-week extension could mean revenues of $41 million.

Patent Hawk’s Patent Prospector notes surprise at Judge Prost’s dissent, stating that “[f]or a court that regularly takes liberties interpreting the law, Prost strikes a pose as a religious constructionist to statute.”

The dispute began after Teva filed an Abbreviated New Drug Application (ANDA) with the FDA in 2006 to get approval for the manufacture of a generic version Eli Lilly’s raloxifene hydrochloride formulation, marketed as Evista®. Under the Hatch-Waxman bill, Eli Lilly’s resulting patent infringement suit in July 2006 automatically triggered a 30-month stay on FDA approval of Teva’s ANDA, which was set to expire in November 2008.  However, Teva altered its particle size manufacturing specification, a key issue under one of Eli Lilly’s patent claims, delivering samples and 27,000 pages of documentation to Eli Lilly well past the court’s August 18th 2008 discovery deadline.  As a result, the district court granted a 4-month extension to the original 30-month stay, preventing FDA approval and manufacture by Teva until the scheduled trial date in March.

The 4-month extension was authorized by 21 U.S.C. § 355(j)(5)(B)(iii) of the Waxman Hatch Act, which allows a court leeway to extend or shorten the standard 30-month stay on FDA approval of an ANDA when “either party to the action failed to reasonably cooperate in expediting the action.” The Federal Circuit majority found that the lower court did not abuse its discretion and that the record contained sufficient evidence to support the extension based on the violation of discovery deadlines.  Teva has announced that it plans begin production of the generic alternative as soon as the stay expires.

Judge Prost dissented, claiming that the trial court appeared to base their decision on allowing Eli Lilly more time to prepare a response rather than a proven “failure to cooperate,” and thereby went outside the analysis required by the statute.

This is not the first time that Teva and Eli Lilly have sparred in patent infringement cases over high-dollar drugs.  Eli Lilly won a case early in 2005 preventing Teva from manufacturing a generic version of Zyprexa®, the world’s top-selling schizophrenia medication.  Later that same year, Eli Lilly won another case preventing Teva from using fluoxetine to treat severe forms of PMS.

This case provides an example of one of the controversial ways that pharmaceutical companies can “buy time” on their patents.  This relates to the debate on the pharmaceutical company practice of “evergreening,” or using related patents and statutory loopholes to extend patent protection and prevent generic alternatives.  When a generic manufacturer files an application claiming either that the generic does not violate any of the patents the brand has listed in the FDA’s Orange Book of approved drugs or that the patents are invalid, brand drug manufacturers may file suit against this move. By doing so, under the Hatch-Waxman Act the brand drug manufacturer receives an automatic thirty-month stay, as Lilly did here. As each additional week that drug companies can extend patents can result in millions of dollars of added revenue-an estimated $41 million over two weeks in this case, as mentioned above-this statutory allowance may have significant results. 

File-Sharing Cases in Courts Around the World
In February, the four men behind the popular file-sharing site The Pirate Bay went to trial in Stockholm, Sweden.  They stand accused of helping millions of Internet users illegally download protected movies, music, and computer games. The defendants – Fredrik Neij, Gottfrid Svartholm Warg, Peter Sunde Kolmisoppi, and Carl Lundström – face up to two years in prison and a fine of 1.2 million kronor (US $143,529) if convicted of being accessories and conspiracy to break Swedish copyright law.  The case has made headlines not only because of the substantive legal issues, but also because Defendant Peter Sunde, co-founder of The Pirate Bay, has called for the court’s proceedings to be as open as possible. The Swedish court granted Sunde’s motion to allow coverage of the proceedings without much resistance, and SVT, a public broadcaster in Sweden, has provided streaming audio webcasts webcasts of trial.

A similar situation is unfolding in the United States in a high-profile case involving issues very similar to those of The Pirate Bay case, although here there has been significant resistance for the defendant’s calls to open the proceedings to the public.  Joel Tenenbaum is one of the tens of thousands of defendants being sued by the RIAA for allegedly violating their members’ copyrights by distributing files through P2P file sharing software. However, unlike the vast majority of the defendants in these cases, he chose to litigate rather than settle his case rather than settle, with the help of Harvard Law School Professor Charles Nesson and a team of his students. With Professor Nesson’s assistance, Tenenebaum filed a motion similar to Sunde’s, requesting his trial be broadcast live via the Internet. Tenenbaum’s motion asked the Court to exercise its discretion under the Court’s local rules to allow Internet access to the courtroom by authorizing the Courtroom View Network (”CVN“) to provide audio visual coverage of the proceedings in this case over the Internet.

Tenenbaum’s Arguments for Internet Access
In the motion, Tenenbaum argues that Internet access to the litigation will allow lawyers, professors, students, and reporters to keep abreast of the most recent legal developments in the case.  Moreover, he argues a live stream over the Internet would provide an interested – and increasingly tech-savvy – public with access that will assist in educating the public about the issues involved in the RIAA’s unprecedented litigation campaign.  This is arguably in line with the RIAA’s litigation strategy, which was at least partially designed to educate the public about the legality of file sharing. Finally, Tenenbaum argues that granting access over the Internet is valid under Local Civil Rule 83.3, which permits proceedings to be recorded, photographed and broadcast “by order” of the Court. See D. Mass. Local Rule 83.3.

The only argument the RIAA provides in opposition is that Massachusetts U.S. District Court Judge Nancy Gertner has no authority under Local Civil Rule 83.3 to permit such an order.

Ultimately, Judge Gertner allowed web casting of a legal hearing in the Tenenbaum case.  In her ruling, she emphasized the unique relation of the Tenenbaum case to the Internet:

“In many ways, this case is about the so-called Internet Generation – the generation that has grown up with computer technology in general, and the internet in particular, as commonplace. It is reportedly a generation that does not read newspapers or watch the evening news, but gets its information largely, if not almost exclusively, over the internet.”

The RIAA immediately appealed the order. In its response, the RIAA reiterated what it had argued in its original opposition: that the proposed reading and broadcasting of the district court proceedings was barred by Rule 83.3 of the Local Rules of the United States District Court for the District of Massachusetts.  The RIAA  also argued that the ban established by Local Rule 83.3 specifically tracked the Policy Statement adopted by the Judicial Conference of the United States regarding the recording and broadcasting of proceedings in the district courts.

The First Circuit has agreed to hear oral arguments on April 7^th, 2009.

The Broader Debate over Electronic Access to Courtroom Proceedings
The question of whether to allow live-broadcasts of publicly available legal proceedings via the web is just the newest question in a long-running debate within the legal community on how to provide public access to the courts.  The traditional view of open public proceedings would limit access to those members of the public that can physically attend the court proceedings.  The debate has centered on whether this view should yield to the modern media’s attempts to provide broader public access via new technologies.  The issue is hardly new, as for many years the issue of cameras in the courtroom has challenged long-standing norms of the judicial process.

Although courts vary widely – even within the same jurisdiction – in their tolerance of electronic recording and distribution of their proceedings, the trend is generally towards providing greater access.  For instance, New York courts have issued conflicting opinions on the issue, ruling that camera coverage of a criminal trial without a defendant’s consent does not automatically warrant reversing the defendant’s conviction, despite precedent requiring that cameras must be banned throughout a trial.  However, the law is clearer in other states.  For example, courts in Delaware, Ohio and New Jersey are already regularly webcasting their proceedings.  Moreover, the trend towards greater access seems to be accelerating.  In February 2009, the Minnesota Supreme Court ordered a pilot program be established to give electronic media access to court proceedings with a judge’s approval.

Still, traditionalists remain resistant to changing the way in which court proceedings are reported, and this resistance may temper the adoption of broad electronic access to the judicial system.  The infamous O.J. Simpson murder trial gave critics an example of the potential downsides of televised trials, as critics argued that the cameras cheapened the proceedings and promoted posturing by lawyers.

Additionally, the United States Supreme Court notably prohibits televised coverage of its oral arguments. Recently Supreme Court Justice Scalia was asked why cameras are not allowed in the Supreme Court even though the court hearings are open, transcripts are available, and the Court’s justices are open enough to discuss proceedings while ‘out on book tours.’  Justice Scalia said he originally favored televising Supreme Court proceedings when President Reagan appointed him in 1986.  Yet he said that over time, he has come to believe that “most people will only see 30-second takeouts” that would fail to give an accurate picture of the proceeding. Justice Scalia asked “why should I be a party to the miseducation of the American people?”

There is good reason to question Justice Scalia’s argument. The release of audio-taped oral arguments from the Supreme Court, which started only a few years ago, has not caused any well-documented detrimental effect on our judicial system.  In fact, the audio recordings have helped Americans better comprehend the law, and provide a glimpse of legal practice on the nation’s highest level.  As Ben Sheffner points out, if it’s so dangerous to allow “30-second takeouts” to be shown, why allow newspaper reporters in the courtroom? After all, reporters do not reprint entire oral arguments verbatim; rather, they pick and choose snippets for their articles that we call “quotations” — which are the print version of “takeouts.” No doubt quotations or “takeouts” can “miseducate.” As one of Scalia’s predecessors once observed: “If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the process of education, the remedy to be applied is more speech, not enforced silence.” Whitney v. California, 274 U.S. 357, 377 (1927) (Brandeis, J., concurring).

Public Trials for the Twenty-First Century
In spite of the substantive legal distinctions between the Tenenbaum and The Pirate Bay cases, both involve an issue of great interest to a very large number people – the legality of file-sharing over the Internet.  The public’s profound interest in this issue is obvious, primarily due to the vast numbers of Internet users that have used file-sharing services and the high-profile litigation over the last decade against both file-sharing services and individual users.  This high level of interest is reflected by the hundreds of news stories and blogs pieces written lawyers, scholars, and others about the Tenenbaum case.  Moreover, the issue of Internet access to the Tenenbaum proceedings has garnered support even from those who otherwise oppose Tenenbaum’s alleged behavior.

The RIAA’s opposition to webcasting the trial is particularly odd, since the organization has stated its goal with the litigation campaign is to educate the public and deter against further piracy. It seems the best way to broadcast this message to the appropriate audience (Internet users) would be allowing access to the case over the Internet.  If the RIAA is serious in wanting to spread awareness about the business and legal issues facing the music industry – and copyright in general – it should welcome any increased attention that Internet access might bring to the Tenenbaum case.

The First Circuit should follow the lead of the Swedish court in The Pirate Bay case and uphold Judge Gertner’s decision allowing Internet access in the Tenenbaum case.  The fundamental right to a public trial should be brought into the digital age by making court proceedings available via the Internet.  Providing such access in the Tenenbaum case is critically important precisely because the legal issues involved are substantively about Internet use.  It is time to make “public” trials truly public by opening them up to the masses via the Internet.

*Ms. Rosenbaum is one of the students assisting Professor Charles Nesson on Joel Tenenbaum’s Defense Team.

Video Software Dealers Assoc. v. Schwarzenegger
February 20, 2009, Case No. 07-16620
Opinion

The United States Court of Appeals for the Ninth Circuit affirmed the order of the United States District Court for the Northern District of California, enjoining the enforcement of an Act that imposed a mandatory labeling requirement for all “violent” video games and prohibited the sale of such games to minors. 

The Ninth Circuit held that the Act posed a presumptively invalid content-based restriction on speech in violation of the First Amendment of the United States Constitution. The Ninth Circuit also held that the Act’s labeling requirement constituted unconstitutionally compelled speech because it did not require disclosure of purely factual information, but required the carrying of the State’s opinion as to the nature of the video game.  In so holding, the Court noted that “minors are entitled to a significant measure of First Amendment protection, and only in relatively narrow and well-defined circumstances may government bar public dissemination of protected materials to them.”

Briefs are available here. 

The Wall Street Journal highlights that the state, in defending the law, argued that violence and sex should be governed by analogous prohibitions: the government can prohibit the sale of explicit pornography to minors, and so it should also be able to limit the sale of ultra-violent video games.

Ars Technica notes that should this case reach the Supreme Court, it is unlikely that the Court will discover anything that the court of appeals failed to notice. 

California Civil Code §§ 1746-1746.5 (the “Act”) restricts the sale of violent video games to minors, and imposes a labeling requirement on such games. Video Software Dealers Association and Entertainment Software Association filed for declaratory relief seeking to invalidate the Act on the grounds that it violated rights guaranteed under the First Amendment. The District Court granted summary judgment for the plaintiffs.

In upholding the District Court’s order and striking down the Act, the Ninth Circuit declined to “boldly go where no court has gone before” by extending the “variable obscenity” (”obscenity as to minors”) standard set forth in Ginsberg v. New York 390 U.S. 629 (1968), which upheld the prohibition of sale of sexually-explicit material to minors that was defined by statute as obscene because of its appeal to minors. In doing so, the Court restricted Ginsberg’s application to sex-based expression, not expression containing only violent content. After declining to expand Ginsberg, the Court reviewed the Act in accordance with the presumption of invalidity applied to content-based restrictions, and finally determined that the State’s asserted interest in “preventing psychological or neurological harm to minors” was insufficient to pass strict scrutiny.

According to the Court, the government’s interest is compelling only when “the recited harms are real, not merely conjectural and [ ] the regulation will in fact alleviate these harms in a direct and material way.” The Court found the research proffered by the State to support its assertion of harm insufficient because the research suggested only correlation between actual psychological harm and violent video games and not causation. Furthermore, the Court found that even if there was a direct causal relationship between the asserted harms and violent video games, the State failed to demonstrate that the Act was narrowly tailored to achieve the State interest.

Turning to the question of labeling, the Ninth Circuit noted that although commercial speech is accorded less protection than other speech, the Court has only upheld compelled commercial speech where the State required inclusion of “purely factual and uncontroversial information.” The label required by the Act did not provide factual information but rather compelled speech concerning the government’s opinion about the content of the video game. This type of compelled speech is cannot pass constitutional scrutiny. 

Arista Records LLC v. Does 1-16
N.D.N.Y., February 18, 2009, No. 1:08-CV-765
Order

On February 18, 2009, United States Magistrate Judge Randolph F. Treece of the Northern District of New York denied a motion to quash a subpoena that would force the State University of New York at Albany (SUNYA) to reveal the identities of 16 students (“Doe Defendants”) alleged to have illegally shared music files.

The defendants raised four claims: “(1) the Subpoena is an infringement of their First Amendment Rights, (2) the Court lacks personal jurisdiction over them, (3) the Complaint fails to state a cause of action; and, (4) the joinder of all Doe Defendants into this single action is improper.” The court ruled against the students on all four of these arguments. The court dismissed the students’ First Amendment claim to the right to privacy by declaring that the “modest First Amendment right to remain anonymous when there is an allegation of copyright infringement” must be balanced against a “copyright owner’s right to disclosure of the identity of a possible trespasser of its intellectual property interest,” and found that in this case the balance weighed on the side of disclosure. The court found the students’ personal jurisdiction and joinder challenges unpersuasive, as their merits cannot be properly determined while identities of the defendants had not yet been disclosed. It similarly denied the claim that the complaint failed to state a cause of action, holding that this claim is essentially a 12(b)(6) motion. Such a motion, the court reasoned, is procedurally improper at this point, as no complaint has been officially served on the Doe Defendants.

The students also argued that MediaSentry, a company retained by the Recording Industry Association of America to assist the plaintiffs with their investigation, illegally obtained evidence, and therefore this evidence cannot be used in a civil suit against them. MediaSentry gathered the IP addresses of 16 students who allegedly committed copyright infringement and believes that SUNYA, as the students’ ISP, can determine their identities based on the IP addresses. Although the court remains uncertain whether MediaSentry violated New York’s General Business Law § 70 by not obtaining a license to act as a private investigator, it nonetheless stated that the students ”are hardly in a position to claim trespass, force, or fraud by MediaSentry” and that any disputes about the admissibility of evidence should be saved for trial. Moreover, the court noted the lack of any authority for the proposition that illegally obtained evidence must be excluded from a civil trial.

Ben Sheffner, in a commentary posted on his Copyrights & Campaigns blog, agrees with the court’s ruling that the evidence gathered by MediaSentry should be admissible, saying that arguments to the contrary have always been “red herrings.” Sheffner argues that MediaSentry “simply accesses open peer-to-peer networks, where users have no reasonable expectation of privacy.”

Ars Technica’s Nate Anderson has reported on universities placed in similar situations to that of SUNYA that have refused to turn over the identities of students. According to Anderson, while the universities want to respect the rights of copyright holders, they reject the music industry’s premise that IP addresses can be reliably linked to the individuals that allegedly infringed on their copyright. The common sharing of computers in school environments and the prevalence of wireless networks on campuses are cited as common reasons why the owner of an IP address many not be responsible for copyright infringement committed using that IP address.

Interscope Records v. Leadbetter, February 6, 2009,  No. 07-3582
Court of Appeals Ruling
District Court Ruling

On February 6, 2009, the Ninth Circuit Court of Appeals affirmed the decision of a W.D. Washington District Court denying defendant Dawnell Leadbetter’s motion for attorney’s fees and costs. In December of 2006 a group of recording companies voluntarily dismissed their claims against Leadbetter in an online file-sharing copyright infringement suit. Leadbetter subsequently sought attorney’s fees, which the court denied on the grounds that Leadbetter was not a “prevailing party.”

The Copyright Act, 17 U.S.C. § 505, provides that a prevailing party may be entitled to reasonable attorney’s fees in a copyright action. However, because the claims against Leadbetter were voluntarily dismissed without prejudice, the Court of Appeals found that she was not entitled to attorney’s fees. The district court and appellate court both looked to the standard established in Buckhannon Board & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001), that a “prevailing party” is one who has received judgment on the merits or “settlement agreements enforced through a consent decree.” The district court reasoned that because the record companies claims were dismissed without prejudice, Leadbetter could not be considered a “prevailing party.”

The EFF filed an amicus curiae brief in support of Leadbetter’s motion for attorney’s fees. In their brief, they argued that these record labels, which are all members of the RIAA, are participants to a larger campaign that has “entangled innocent internet users in its litigation dragnet.” By awarding attorney’s fees in this case, the EEF stated the court would help “balance the overall equities in the RIAA’s nationwide campaign.”  The EEF contends that if individuals like Dawnell Leadbetter have to pay out of pocket for her fees, future innocent litigants will not stand up to the recording industry.  Instead, the EEF believes the public will “suffer under the misperception that such misguided theories are, in fact, the law.”

Though triggering a flurry of postings by anti-RIAA bloggers, this case is in fact non-precedential and unpublished. It is unclear if this decision will play any role of actual significance in future online copyright infringement actions. Even so, according to Ben Schaffer of Copyright and Campaigns, this case gave a “significant procedural victory to the recording industry,” sending a “message to defendants in such p2p cases that they should be forthcoming with information about infringing activity on their ISP accounts early in litigation.”
According to Schaffer, the suit arose when the  record labels discovered a KaZaA username “dawnlead@KaZaA” with 788 music files in its sharing folder. Believing the user to be Dawnell Leadbetter, the record companies filed suit.  However, after discovery, the labels decided it was actually Leadbetter’s fiancé and son who were the likely infringers. They therefore filed a motion of voluntary dismissal against Dawnell, which the district court granted without prejudice.

For the district court, the lack of prejudice was dispositive, distinguishing the case from Capitol Records, Inc. v. Foster, 2007 WL 1028532 (W.D. Okla. Feb. 6, 2007), a copyright action where attorney’s fees were awarded when the case was dismissed with prejudice. The court also distinguished the present case from Corcoran v. Columbia Broadcasting System, Inc., 121 F.2d 575 (9th Cir. 1941), where the defendant prevailed on a motion requiring clarification of the plaintiff’s complaint.

Vicsbingo.com v. Commonwealth of Kentucky, No 08-CI-01409
Court of Appeals Ruling (Hosted by EFF)
Commonwealth of Kentucky v. 141 Internet Domain Names (original ruling) 

On January 20, 2009, the Kentucky Court of Appeals overturned a lower court’s order to seize 141 Internet domain names that could potentially be used as illegal “gambling devices” within the state. The appeals court granted a stay back in November, but Tuesday’s decision makes it look increasingly unlikely that the state can seize domains in this fashion. According to John Pappas of the Poker Players Alliance, this decision is “a tremendous victory for Internet freedom.” 

On January 21, 2009, a day after this decision was entered, the Commonwealth of Kentucky filed a notice of appeal to the Kentucky Supreme Court.

The three judge panel of the Court of Appeals did not provide a majority opinion, but in a 2-1 decision, Judges Keller and Taylor granted a Writ of Prohibition against the Franklin Circuit Court and successfully blocked the domain name seizure. In his opinion, Judge Keller concluded that domain names did not fall within the statutory definition of “gambling devices” and consequently that the lower court lacked jurisdiction over them. 

The appeals court focused its decision on the language of Kentucky’s gambling statutes, declining to address many of the jurisdictional and constitutional issues posed by the state’s attempt to seize out-of-state interests. Judge Taylor agreed, but in a concurring opinion said that even if the domain names had qualified as “gambling devices,” the statute still did not authorize civil in rem forfeitures and that absent criminal charges, the domain names could not be seized.

Jeremiah Johnston of the Internet Commerce Association told the Associated Press that he approved of the Court of Appeals decision to return the 141 websites but noted that the court had not resolved the important question of whether or not Kentucky has the authority to seize the domain names of overseas companies.

The Court of Appeals emphasized that the Kentucky legislature could redraft the gambling law and provide courts with the authority to seize Internet domain names. However, the Electronic Frontier Foundation points out that even if the Kentucky legislature amended its gambling laws in accordance with the court’s decision, several constitutional problems would still be likely render any attempt at seizure unenforceable. The Amicus Curiae brief filed by the EFF, the Center for Democracy and Technology, and the ACLU of Kentucky, addresses many of these problems.

Ars Technia provides a short summary of several of these constitutional problems, including the fact that allowing Kentucky to seize foreign domain names could affect interests internationally and would likely be in violation of the Commerce Clause. Additionally, permitting these kinds of seizures could potentially threaten other types of speech as well, since a domain name seizure could conceivably be authorized whenever content was in violation of a local law. At the time of the original order, these issues gave rise to widespread criticism. 

John Levine, for example, called the dispute “a phenomenally bogus case,” although he speculated that the decision may provide some interesting case law regarding courts’ jurisdiction over domain names.   Slashdot ran a similarly negative response. Some groups even suggested that it might be advisable for domain owners to move their domains to registrars that are located outside the U.S.  DomainNews.com reported that the ruling even led groups to call for a Kentucky Gambling Boycott.

Kentucky Governor Steve Beshear and the Justice and Public Safety Cabinet initially brought the action as part of an effort to protect Kentucky’s legitimate, taxable gambling interests. Kentuckians spend an estimated $170 million annually on gambling, much of which flows out of the state, an effect Beshear has sought to counteract with new gambling laws.  Jacqui Cheng noted that online gambling poses serious threats to Kentucky’s horse-racing industry as well.   The Kentucky Supreme Court has the option of affirming the appellate court’s decision, but it will be interesting to see if they choose to engage the jurisdictional and constitutional issues when they hear the state’s appeal.

On Monday, January 5, 2009, Chief Judge Vaughn* Walker of the United States District Court for the Northern District of California denied the U.S. government’s third motion to dismiss the Al-Haramain v. Bush litigation, in which the Al-Haramain Islamic Foundation sued the Bush administration for illegal surveillance of the organization.  The original suit was based on an inadvertently revealed, top-secret government call log which indicated Al-Haramain had been the subject of wiretapping.  However, the case was nearly dismissed after the court found the log to be a state secret, and thus would not be admissible due to national security concerns.  Al-Haramain claimed the document showed the organization was subject to surveillance outside of the scope of the Foreign Intelligence Surveillance Act (FISA).

Ed Brayton of Scienceblogs states that this case may finally end use of the secrets privilege as a means of avoiding all judicial scrutiny of the NSA’s wiretapping program.

Julian Sanchez of Ars Technica points out that the suit is unique in that the Electronic Frontier Foundation, whose attorneys represent the Foundation’s directors, does not normally represent clients who they know were targeted by the NSA for warrantless surveillance. Sanchez also notes that in the opinion, Chief Judge Walker pointed out that in writing the FISA, Congress would not have provided for in camera review of classified documents if it meant to allow the government to use the state secrets provision in each case.
The Al-Haramain Islamic Foundation of Oregon is a Saudi Arabian charity that is currently listed as a terrorist organization by the U.S. government, and whose assets were frozen in 2004 when the organization was classified as a “Specially Designated Global Terrorist” organization.  Last summer the Ninth Circuit determined that the sealed document was a state secret, but remanded to the District Court for the Northern District of California to determine whether, because FISA can preempt the state secrets privilege, the case could nonetheless progress. The District Court found while FISA preempts the state secrets privilege, FISA would only provide plaintiffs a viable remedy if they can show that they are “aggrieved persons” within the meaning of the Act. To determine this, the District Court allowed Al-Haramain and its lawyers to amend their complaint.

According to the District Court, Al-Haramain’s directors were able to successfully show that they were “aggrieved persons” under FISA’s definition through evidence other than the secret document, and the suit may continue The Court also set up a process whereby the litigation could proceed without revealing sensitive information; it ordered the government to provide security clearances for Al-Haramain’s attorneys, to provide for Chief Judge Walker to view the secret document in camera, and to review the classified documents so as to determine which can safely be declassified.

*Correction – This article incorrectly reported Chief Judge Vaughn Walker’s first name as John.  Judge John Walker sits on the Second Circuit and took no part in the Al-Haramain decision.