On July 21, the Federal Circuit affirmed the United States District Court for the Southern District of New York’s ruling in favor of plaintiff Eisai Co., holding that the patent-in-suit, U.S. Patent No. 5,045,552, was non-obvious and was not obtained through inequitable conduct.

This case illustrates the Federal Circuit’s current test for chemical obviousness since the Supreme Court rejected the Federal Circuit’s application of the “teaching, suggestion, or motivation test” for obviousness in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007) as too rigid, mandating a more flexible approach that takes ordinary creativity and skill into account. A brief background on KSR can be found at Patent Docs.

Kevin E. Noonan at Patent Docs welcomes the decision.

The Patent Hawk characterizes the court’s opinion as positing a “problem-reasoning-predictability” test for chemical obviousness.

Aaron F. Barkoff at Seeking Alpha makes the observation that patents on chemical compounds are holding up well even after KSR.

The district court granted summary judgment to Eisai on the issue of obviousness and, after a bench trial, found that Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, “Dr. Reddy’s”) and Teva Pharmaceuticals USA, Inc. (“Teva”) had failed to prove the remaining allegations of inequitable conduct. In an opinion by Judge Rader, joined by Judges Linn and Prost, the Court of Appeals affirmed that the ’552 patent was non-obvious over the proffered prior art and that Eisai’s alleged acts during prosecution did not rise to the level of inequitable conduct.

The patent at issue claimed rabeprazole and its salts, one of which is the active ingredient in Aciphex, a commercially successful pharmaceutical approved for the treatment of ulcers, heartburn, and associated disorders. Dr. Reddy’s and Teva each filed Abbreviated New Drug Applications (“ANDA”s) under the Hatch-Waxman Act, 21 U.S.C. § 355 and 35 U.S.C. § 271(e), seeking to manufacture a generic version of Aciphex before the expiration of the ’552 patent. Because filing an ANDA is “an artificial, but legally cognizable, act of patent infringement,” Eisai filed suit.

Teva asserted that the ’552 patent was invalid for obviousness, and both defendants asserted that it was unenforceable for inequitable conduct.

The Federal Circuit reviewed the district court’s legal conclusion of obviousness de novo, based on four underlying factual determinations, as set out in Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966): 1) the scope and content of the prior art; 2) the level of ordinary skill in the art; 3) the differences between the claimed invention and the prior art; and 4) evidence of secondary factors, also known as objective indicia of non-obviousness. In the case of a chemical compound, the court noted that the third factor would depend largely on structural similarity.

The court reasoned that even post-KSR, “a prima facie case for obviousness for a chemical compound still, in general, begins with the reasoned identification of a lead compound” (a previously known compound). Obviousness based on structural similarity “can be proved by identification of some motivation that would have led one of ordinary skill in the art to select and then modify [the lead compound] in a particular way to achieve the claimed compound,” although that motivation need not be explicit in the art.

Teva’s obviousness argument employed lansoprazole, a compound nearly identical to rabeprazole with one structural difference, as the lead compound for rabeprazole. The Federal Circuit concluded that Teva could not create a genuine issue of material fact on obviousness through an unsupported assertion that compounds other than lansoprazole might have served as lead compounds, and combined with the court’s finding that the record contained no reason a skilled artisan would have considered modifying lansoprazole in the way that Teva did as “an identifiable, predictable solution,” the record could not support a case of obviousness as a matter of law.

On the inequitable conduct question, the court reviewed the district court’s findings on intent and materiality for clear error, and its ultimate conclusion for abuse of discretion. To find inequitable conduct in a patent prosecution, there must be an affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information, coupled with an intent to deceive. The court found the record devoid of any real suggestion of intent to deceive, much less the clear and convincing evidence required to support a finding of inequitable conduct, which it described as a “high bar.”

MDY Industries, LLC v. Blizzard Entertainment, Inc. et al.
District Court of Arizona, July 14, 2008, No. CV-06-2555-PHX-DGC
Order (via Justia)

The District Court of Arizona entered a summary judgment motion finding that MDY Industries, LLC (“MDY”), creators of a software program called WoW Glider (“Glider”), were liable for contributory and vicarious copyright infringement because their program loaded a copy of a copyrighted Blizzard Entertainment, Inc. and Vivendi Games, Inc. (collectively, “Blizzard”) game into computer memory on the game-owners’ machines against the terms of the game’s End User License Agreement (“EULA”). As part of this decision, the Court also found that over-the-counter buyers of the computer game were licensees rather than owners and were thus bound by the terms in the EULA.

Judge David Campbell ruled that the EULA created a limited license rather than a sale because the title explicitly uses the word “limited” and because several of the provisions contain explicit restrictions on the use of the game which, when read together, prohibit the use of Glider. As licensees rather than owners of the game, users were only allowed to copy it under circumstances dictated by the EULA and were thus guilty of direct infringement when they used Glider because it loaded the game into the user’s RAM. A line of Ninth Circuit cases had previously held this to be “copying,” an exclusive right of the copyright holder under Section 106 of the Copyright Act. MDY was found to be liable for contributory and vicarious copyright infringement because it materially contributed to users’ direct infringement, profited from it, and declined to exercise its ability to stop Glider users from activities infringing the license.

The motions of both parties can be found here.

Public Knowledge argued that because 17 U.S.C §117 reserves to the computer user the right to make RAM copies to run the program, this construction of the EULA will allow Blizzard to retain rights it has never owned. Their amicus brief can be found here, and and Blizzard’s reply can be found here.

The Patry Copyright Blog notes the dismissal of the DMCA claim with approval but finds the copyright ruling to be wrongly decided and to also be a “chilling extension of control” by copyright holders over their products.

Corynee McSherry of the Electronic Freedom Foundation Blog also disagrees with the copyright ruling and notes other recent district court cases under Ninth Circuit jurisdiction which have come out differently, speculating that there will be an appellate decision on this matter soon.

A Note by Christina Hayes published at 22 Harv. J.L. & Tech. touched on whether Blizzard’s EULA could be enforced to limit users’ copyright fair use rights.

World of Warcraft (“WoW”) is a multiplayer online role-playing game whose copyright is owned by Blizzard. Many copies, though not all, are sold over the counter. To play the game a user must load a copy of the software and then access the online server using an online account for which the user pays a monthly fee. Glider automates some of the tedious game activities so that players progress through the game faster. In the process of carrying out this function Glider loads WoW onto the computer’s RAM.

The Court also ruled that MDY did not violate 17 U.S.C. § 1201(a)(2)(part of the Digital Millennium Copyright Act), which forbids tools that circumvent technological measures that a copyright holder has implemented to control access to its copyrighted work. Since the user does not have to pass through Blizzard’s security devices to gain access to the code, the Court found that Glider’s circumvention of these devices is not a § 1201(a)(2) violation. The Court denied summary judgment and wanted further fact-finding on the question of whether MDY violated this section with respect to “non-literal elements” of the game. Similarly, it denied summary judgment on potential MDY violations of § 1201(b)(1), which focuses on whether a technological measure protects copyright rather than whether it controls access.

The Court also granted summary judgment to Blizzard on a claim of tortious interference, to MDY on Blizzard’s claim of unfair competition, and denied summary judgment to MDY on an unjust enrichment claim.

Tiffany, Inc. v. eBay, Inc.
S.D.N.Y., July 14, 2008, No. 04 Civ. 4607
First Circuit, June 18th, 2008, Nos. 07-2078, 07-2246
Slip Opinion

On July 14, the Southern District of New York denied Tiffany’s claims of direct and contributory trademark infringement against eBay. The court agreed with eBay that, as a legitimate seller of Tiffany goods, the online auctioneer had the right to use the Tiffany marks under the nominative fair use doctrine. It also rejected Tiffany’s demand that eBay be held jointly and severally liable for sales made on eBay.com by third parties.

Tiffany instigated this suit against eBay after its research showed that the majority of claimed Tiffany products for sale on eBay were counterfeit. While eBay provided reporting services for both users and trademark holders to notify its fraud division of counterfeit items, Tiffany had requested a more proactive solution: removal of all sellers placing five or more Tiffany items up for sale and suspension of the use of the Tiffany mark on the eBay site and in eBay advertising.

Brad Stone at the New York Times notes that courts in two prior international cases brought by luxury brands (Rolex in Germany and Louis Vuitton in France) had ruled against eBay. The divergent opinions may pose a challenge to eBay’s operation of a single global marketplace.

Professor Eric Goldman also provides a detailed analysis of the case.

Looking first at direct infringement, Judge Richard J. Sullivan ruled that eBay’s many sales of genuine Tiffany products gave it the right under the nominative fair use doctrine to point out on its site that such items were available. In addition, he ruled that eBay’s nominative fair use rights extended to the use of the Tiffany name in advertising as long as legitimate sales of Tiffany items on its site were taking place.

Turning to contributory infringement, Judge Sullivan analogized eBay to a flea market and not an online classified ad service, and therefore found that eBay was in enough control of its users’ actions to apply the contributory infringement test in Inwood Labs v. Ives Labs, 546 U.S. 844 (1982). However, he also found that eBay’s termination of listings of counterfeit items immediately upon notification showed that eBay did not “know or have reason to know” of infringement under the Inwood test. He rejected Tiffany’s theory that eBay’s “general knowledge” that infringers were using its service should have made it liable under Inwood. Tiffany had unsuccessfully argued that eBay should have “reasonably anticipated” infringement.

The court also rejected Tiffany’s claims of unfair competition, false advertising, and direct and contributory trademark dilution.

H.R. 6304 — FISA Amendments Act of 2008
Full Text of Enrolled Bill
Senate Vote Summary
GovTrack.us Summary

On July 9, the Senate passed H.R. 6034, the FISA Amendments Act of 2008, and President George W. Bush signed it into law the following day. The new law modifies the Foreign Intelligence Surveillance Act of 1978 (“FISA”) to expand (subject to certain new checks) the federal government’s surveillance powers and retroactively immunize telecommunication companies that cooperated with the warrantless wiretapping program brought to light in 2005.

The New York Times summarizes the politics surrounding the FISA issue, in which presumptive Democratic nominee for president Barack Obama’s “yea” vote attracted scorn from some Democrats.

The Electronic Frontier Foundation (PDF), a longtime opponent of President’s surveillance program, calls Section 202 an immunity “compromise” in name only.

Orin Kerr, writing at The Volokh Conspiracy, criticizes as “misleading” media coverage that ignores the law’s new procedural safeguards (as compared to last year’s less restrictive Protect America Act (“PAA”)).

On the issue of immunity, Charlie Reina (writing at the Huffington Post), regrets that the public will never know who was monitored or which companies cooperated with the original warrantless wiretapping requests.

The bill’s history illustrates the controversy that surrounded the issue. In February, the Senate passed a bill similar to 6304, which included retroactive immunity provisions. In March, the House passed an alternative bill that did not include immunity for telecommunications companies and would have instituted additional checks on the executive’s ability to eavesdrop. However, under the threat of veto, the House on June 20 passed H.R. 6304, sponsored by Rep. Silvestre Reyes (D-TX), which provided for a “compromise” immunity procedure. Under it, the federal courts must dismiss any suit in which the Attorney General certifies that the defendant telecom acted upon a written notice indicating that the request was “authorized by the President and determined to be lawful.” Following a filibuster, the Senate passed H.R. 6304 this week, 69-28.

Apart from the debate over retroactive immunity, there are substantial questions about what kind of wiretapping regime the FISA Amendments Act has created. Relative to the Protect America Act of 2007, passed as a six-month stopgap, the text of the new law includes more procedural checks and an increased opportunity for judicial review.

Significantly, it requires a court order to eavesdrop on US persons abroad, and it instructs Foreign Intelligence Surveillance Courts to review statutory compliance de novo (See Orin Kerr’s analysis).

On the other hand, Marty Lederman notes that the new Act (like the PAA, but in contrast to the original FISA) permits intercepting foreign communications received in the US without a warrant — the very gravamen of the warrantless wiretapping program that first spurred Congress to reconsider the issue of surveillance. Additionally, Timothy B. Lee faults the law for what it doesn’t contain: a functional mechanism to prevent the abuse of unreviewable executive “authorizations,” nor one that will prevent the executive from stalling the review process while continuing to listen in.

In sum, privacy activists worry that the new law has unduly and unaccountably expanded domestic spying powers, and some legally-minded observers see the FISA Amendments Act as a naked attempt to aggrandize the executive branch. President Bush, on the other hand, has called it “vital” to protect American lives. The new law’s validity may soon be tested in court, as the American Civil Liberties Union, The Nation, and a host of other groups have filed a complaint in the Southern District of New York, seeking to have it declared contrary to the First and Fourth Amendments.

Related JOLT articles: Amitai Etzioni, Implications of Select New Technologies for Individual Rights and Public Safety, 15 Harv. J.L. & Tech. 257 (2002) (applying the national security vs. civil liberties debate to several new technologies and describing several forms of accountability); Christopher Woo and Miranda So, The Case for Magic Lantern, 15 Harv. J.L. & Tech. 521 (2002) (arguing for a limited use of keylogging software within the FISA framework of the time).

Viacom International, Inc. v. YouTube, Inc.
S.D.N.Y., July 1st, 2008, No. 07 Civ. 2103
Order (Provided by Justia)

The District Court for the Southern District of New York partially granted a discovery motion made by Viacom in its copyright suit against YouTube and YouTube’s parent company Google. The order compels Google to produce the contents of YouTube’s logging database, including the login IDs, IP addresses, and viewing information of YouTube users. The court denied Viacom’s motion to compel production of the protected source code for the Google search engine.

Viacom’s complaint alleges that YouTube is directly or vicariously liable for duplication of copyrighted material on youtube.com, and seeks damages of over $1 billion and injunctions against further infringing conduct.

Wendy Seltzer at the Citizen Media Law Project summarizes the bifurcated outcome of the case: “trade secret wins; privacy loses.” Kurt Opsahl of the Electronic Frontier Foundation calls this a “setback to privacy rights,” and argues that some of the login names and IP address information, which the court states are anonymous, can in fact be used to identify individual users.

The most contentious portion of the 25-page opinion from Judge Louis Stanton concerns YouTube’s logging database. Each time a video is watched on youtube.com, this database records the YouTube account name of the viewer (if he or she has one), the IP address of the viewer’s computer, an identifier for the video, and the time.

Judge Stanton granted Viacom’s request for the entire contents of the logging database, which Viacom claims will reveal whether copyrighted materials are more heavily watched than amateur content. Judge Stanton discounted Google’s argument that disclosure of this information violates users’ privacy, citing Google’s own Public Policy Blog, which has stated that IP addresses cannot be used to identify individual users without more information. He also rejected YouTube’s argument that the information was protected by the 1988 Video Privacy Protection Act (18 U.S.C. § 2710).

Viacom was also successful in its request for copies of all videos that have ever been removed from youtube.com for any reason. Judge Stanton ruled that this discovery is necessary for Viacom to identify infringing videos among the removed material, and that the logistical difficulties in transferring this enormous quantity of data are not prohibitive.

Yet the ruling stated that the Electronic Communications Privacy Act (“ECPA”) 18 U.S.C. § 2510 et seq., does prevent YouTube from disclosing any videos users had labeled “private.” The court protected the videos themselves but granted the motion to compel disclosure of non-content information, such as usage history. Viacom hopes to use this information to test its argument that videos designated as “private” are nevertheless shared with numerous members of the public. Such videos would lose their protected status under Viacom’s interpretation of the ECPA.

The court accepted Google’s argument that the release of its source code, which is a valuable commercial secret, would be devastating to Google’s business. It held that Viacom would need to make a “plausible showing” to demonstrate that Google’s search code was intentionally designed to facilitate the viewing of infringing content. Stanton similarly denied discovery of the source code for of YouTube’s new “Video ID” program, with which copyright owners can search for infringing materials on youtube.com by providing sample clips for reference.

Viacom has stated that it does not intend to use the logging database information to sue individual users for copyright infringement and has issued a statement that it will allow YouTube to strip personally identifiable information from its records before disclosure.

Ellen Nakashima at the Washington Post points out that even if Viacom has promised not to use the data to pursue lawsuits against individuals, the ruling may still pave the way for others to do so.

Groklaw accuses the judge of “lack of tech cluefulness,” but also suggests that users may have contributed to the problem by being brazen about their violations of copyright law.

Greenberg v. National Geographic Society
11th Circuit, June 30, 2008, No. 05-16964
Slip Opinion

On June 30, the Eleventh Circuit issued a divided en banc opinion, affirming by a 7-5 vote the panel decision in Greenberg II, which had vacated Greenberg I.

Writing for the majority, Judge Barkett held that National Geographic was privileged to reproduce its print issues. Section 201(c) of the Copyright Act distinguishes between the copyright of each individual work within a collective work — here Greenberg’s photographs — and copyright of the collective work in its entirety, here National Geographic’s “Complete National Geographic” (“CNG”), a CD-ROM collection of all the back issues of the National Geographic magazine. Citing New York Times v. Tasini, Judge Barkett wrote that § 201(c) granted the publisher privilege to reproduce an article contributed by a freelancer when it was part of (1) the collective work to which the author originally contributed; (2) any revision of that work; or (3) any later collective work in the same series. Emphasizing the importance of the context in which the works were presented, Judge Barkett found that the CNG CD-ROM collection qualified as a “revision” under § 201(c) and Tasini’s interpretation of the term.

William Patry comments favorably on the majority opinion on his blog, and notes that a grant of certiorari is unlikely as there is no split in the circuits, and the issues decided are close to Tasini. He previously criticized Judge Birch’s approach as at odds with copyright’s constitutional goal of promoting the progress of science. Law.com provides a summary of the decision and the procedural history of the case.

In Greenberg I, the district court had held that National Geographic’s reproduction of its print magazine issues in the CNG was a “revision” under 17 U.S.C. § 201(c) of the Copyright Act, and thus did not constitute infringement of the copyrights of a freelance photographer whose photographs were included in several of the print issues. The Eleventh Circuit reversed the district court’s grant of summary judgment in favor of National Geographic, however, and remanded for determination of damages. Shortly thereafter, the Supreme Court issued its decision in New York Times v. Tasini, which provided further guidance as to the proper scope and interpretation of § 201(c).

Addressing National Geographic’s post-Tasini appeal, the Eleventh Circuit held in Greenberg II that under Tasini’s reasoning, National Geographic could reproduce its print magazine in digital form under § 201(c) without infringing individual photographers’ copyrights. The court then granted hearing en banc to determine whether National Geographic’s use of the photographs was privileged.

In the instant majority opinion, the court reasoned that although CNG reproduced the original print issues in an electronic format, it reproduced them in the exact same context as they originally appeared, merely digital reproductions of the original printed pages. It relied on this to distinguish the instant case from Tasini, as there, the individual articles appeared independent from the context of their original publication, and without the original publication’s formatting features. The court noted that CNG’s inclusion of a computer search program, which allows users to navigate through the collection, did not alter this conclusion as the search results still present full pages and issues, rather than isolated articles and photographs devoid of the original print context.

The court acknowledged that truly “new” collective works would not qualify for § 201(c) protection. It found, however, that the minimal new features incorporated into the CNG, including an index, search and zoom functions, and a brief introductory sequence montage, did not divest National Geographic of the § 201(c) privilege. The court concluded by recognizing the consequences of the rapid development of new information storage media. The court emphasized that courts must analyze whether the addition of new materials to a new-medium reproduction creates a new collective work so as to place it outside of § 201(c) protections, and not simply presume that the use of a new medium itself creates a new work by default.

Judge Birch, who had authored the majority opinion in Greenberg I, filed a lengthy dissent. He would have found that (1) the CNG is a new work that does not qualify for the § 201(c) privilege; (2) National Geographic could not have transferred its reproduction privilege to Mindscape, a third party developer who worked with National Geographic to create CNG; and (3) projecting the photographs in question onto a computer screen was not privileged under § 201(c). Judge Birch reasoned that by combining some 1,200 pre-existing magazines (each, he argued, a separate collective work) into a single digital collection, together with independent computer software that helps users to search for and view particular articles and photographs, National Geographic created a new work outside of the § 201(c) privilege. He further criticized the majority’s analogy of the CNG to microfilm, arguing that without the search engine and the image-compression software that CNG utilizes - two features that microfilm does not have - the digital collection would not be commercially marketable, as it would likely take up several hundred CD-ROMs and would not be easily navigable.

Judge Anderson joined the part of Judge Birch’s dissent that argued that CNG was a new work outside of the § 201(c) privilege and submitted a separate, brief dissent. He argued that the “context” analysis set forth in Tasini did not resolve the instant case, because, in his view, that case did not answer whether satisfaction of contextual analysis always meant that the new publication received the § 201(c) privilege. He expressed doubt that the § 201(c) grant of privilege of reproduction of individual collective works extended to compilations, reasoning that compilations were not “revisions” of any of the individual constituent works. Although recognizing that conversion from print to digital media and addition of new functionality does not necessarily result in creation of a new collective work, Judge Anderson thought that National Geographic’s creation of a massive digital collection of 1,200 print issues, accompanied by new features and new uses, exceeded its § 201(c) reproduction privilege.

June 26, 2008
ICANN press release

The Internet Corporation for Assigned Names and Numbers (“ICANN”), the international organization in charge of allocating resources and establishing protocols on the Internet, last week removed the existing limits on internet generic top-level domains (“gTLD”s) and announced plans to accept applications from operators for new namespaces. Initially, the earliest domain names fell into a few select functionally classified categories, such as .com and .net; subsequent rounds of expansion added new categories such as .biz and .post. Now, however, ICANN will permit private operators to create and vend top-level domains of their own design.

According to ICANN’s Final Report on Introduction of New Top-Level Generic Domains, new gTLDs will continue to be approved by ICANN itself. It is as yet unclear whether registrars who are approved to distribute domain names using new gTLDs will not be required to follow the same Unified Domain Name Dispute Resolution Procedure (“UDRP”) that registrars who handle .com, .net, .org, .biz, .info, and .name are currently required to follow. ICANN itself, however, will follow an entirely new set of procedures. Approval of a new gTLD will take into consideration the string’s similarities to existing gTLDs, how closely it resembles existing trademarks, and whether it fits within existing international standards of “morality and public order,” among several other tests.

Names @ Work is already touting this as the next big trademark challenge for corporations concerned about maintaining their brand online, while Cyber Law Online is dismissing it as a minor shift with few real-world implications. Pangloss predicts that this will ultimately result in legitimate users dispersing across the newly broadened namespace, making it easier to identify determined trademark-infringing cybersquatters, although others are less optimistic.

Last year, IP Justice looked at the draft standard and worried that the censorship policies of nations whose concept of public order is more restrictive would eventually make the availability of new gTLDs subject to a least-common-denominator test of international acceptability.

Among technologists, the Slashdot community offers its own reaction here. Various international technology publications offer mostly cautious optimism about the success of the expansion, tempered by either concern that the average internet user may become confused or pleasure at what they assert is long-overdue modernization in the system combined with cynicism about the legal windfall for trademark attorneys.

This change signals a reconsolidation of regulatory power over Internet names in the hands of ICANN. For years, Network Solutions, Inc. had an exclusive contract to register Internet domain names with InterNIC, the original Internet governing body chartered by the US government. When InterNIC handed off authority to ICANN, they initially moved toward a freer market, opening up the distribution of domain names to multiple registrars. However, this new initiative places the power to approve or disapprove of any string in the hands of ICANN. To the extent that it can convince companies, private actors, and organizations to move from original TLDs such as http://www.walmart.com to new ones like http://walmart, ICANN will become the arbiter of acceptable naming on the Internet.

Some international interests may well be better served by this regime. For example, ICANN expects this expansion to lay the groundwork for URLs in languages which do not use Roman characters. However, given the number of ways in which trademarked terms can be truncated, transliterated, or otherwise altered within this newly broadened namespace, legal practitioners concerned about costly domain name dispute resolution should be wary of the power that ICANN has arrogated to itself.

Background on domain name dispute resolution, available at Legal Cyber Law.

Volume 21 of the Harvard Journal of Law & Technology features an article by Jacqueline Lipton on an alternative approach to international trademark conflict resolution.

Boston Duck Tours v. Super Duck Tours
First Circuit, June 18th, 2008, Nos. 07-2078, 07-2246
Slip Opinion

On June 18, the First Circuit lifted a preliminary injunction granted by the District Court of Massachusetts, which had enjoined Super Duck Tours, LLC (“Super Duck”) from using the phrase “duck tours” in its trade name and the cartoon of a duck in its logo. On July 2, 2007, Boston Duck Tours, LP (“Boston Duck”) filed a complaint in the district court alleging federal trademark infringement and unfair competition and seeking a preliminary injunction against Super Duck. The district court granted the injunction and Super Duck appealed.

The First Circuit held that the lower court clearly erred in concluding that Boston Duck was likely to succeed on the merits of its trademark infringement, by over-estimating the likelihood that use of the phrase and image would cause consumer confusion.

The court of appeals did not address the district court’s ruling regarding Super Duck’s purchase of the key word phrase “Boston duck tours” on Google. “Sponsored linking” or “keyword advertising” allows the purchaser of a keyword to link his or her website to the search engine’s results page with a highlighted link at the top of the page.

The district court found that Super Duck’s sponsored linking did not violate the injunction. It found that sponsored linking, however, does constitute “use” under the Lanham Act, which states that “a mark shall be deemed to be in use in commerce. . . (2) on services when it is used or displayed in the sale or advertising of services.” 15 U. S. C. §1127. The district court reasoned that the plain language of the statute and the majority of courts have considered sponsored linking “use.”

Unlike traditional advertising, sponsored linking makes use of allegedly infringing terms without actually displaying the marks to consumers, making it unclear whether such activity fulfills the “use in advertising” requirement. A split has developed in the circuit courts over interpretation of the act and the First Circuit has yet to rule on the matter. The Second Circuit has distinguished sponsored linking from more overt use of trademarks in advertising online, holding that sponsored linking does not constitute “use.” By contrast the Ninth and Tenth Circuit Courts of Appeals have held that similar internal uses do constitute “use” under the Lanham Act.

In this case, the First Circuit lifted the injunction on the basis of traditional trademark infringement analysis. The court held that the lower court clearly erred in concluding that Boston Duck was likely to succeed on the merits of its trademark infringement. To win its trademark infringement case, Boston Duck had to prove that its mark was entitled to trademark protection and that Super Duck’s use of the mark was likely to confuse consumers. The First Circuit determined that the phrase “duck tours” was generic, and that consumers were unlikely to be confused by the similarity between the names “Boston Duck Tours” and “Super Duck Tours.” The two companies’ similar cartoon duck logos, the court further held, were dissimilar enough to prevent confusion.

Law.com discusses the sponsored linking issue here.

FileWrapper analyzes the case here (with photos).

Press Coverage is also available from Business Week and Boston Magazine.

Quon v. Arch Wireless Operating Company, Inc.
Ninth Circuit, June 18, 2008, No. 07-55282
Slip Opinion

On June 18, 2008, the Ninth Circuit held that the City of Ontario, California violated the Fourth Amendment when Ontario Police Department officials viewed text messages sent by a department employee. The court also held that Arch Wireless, the city’s service provider, had violated the Stored Communications Act (“SCA”), 18 U.S.C. § 2701-2711, when it disclosed messages to individuals who were not the addressees or intended recipients.

In late 2001, Sergeant Jeff Quon received a pager from his employer, the Ontario Police Department. The pagers’ wireless text-messaging service provider, Arch Wireless, had stipulated that the city was required to pay overage charges for text messages exceeding a set character limit. Quon paid the overage fee several times without further inquiry into the content of the messages until August 2002, when the Ontario police Chief Scharf moved to obtain transcripts of Quon’s text messages from a support specialist at Arch Wireless.

At least three department employees, including Quon’s immediate supervisor, reviewed the transcripts and read many of Quon’s personal messages, some of which were sexually explicit. Quon and several recipients of the messages brought suit in the District Court of Central California. They appealed the district court’s holding, arguing that Arch Wireless had violated the SCA. Quon also argued that the city violated his Fourth Amendment right to be free from unreasonable search and seizure, as well as his rights under the California Constitution.

Fourth Amendment Violation

The Fourth Amendment protects individuals and entities from unreasonable searches. The Supreme Court has previously held that the Fourth Amendment extends to public employees, although their reasonable expectation of privacy could be curtailed by official or unofficial workplace practices.

Judge Wardlaw, writing for the Ninth Circuit, stated that the reasonable expectation of privacy for text message users is very fact-specific. He noted that the official in charge of the pagers had an informal policy that the messages would not be audited if the employee paid the overage charges. Based on Quon’s prior experiences paying for overage charges, the court found that Quon had a reasonable expectation of privacy in his text messages. The Court also found that the California Public Records Act (“CPRA”), which provides that public records are open to inspection at all times, did not diminish an employee’s reasonable expectation of privacy.

Judge Wardlaw acknowledged the finding of the jury in the lower court that that the search was reasonable “at its inception” because it had a legitimate work related purpose — to ensure that officers were not being required to pay for work-related expenses. However, the Ninth Circuit found that the scope of the search was unreasonable because there were less invasive ways to verify the efficacy of the 25,000 character limit without violating Quon’s Fourth Amendment right to privacy, including warning Quon of its intent to review the content of future messages or asking Quon to redact personal messages before reviewing the transcripts.

Judge Wardlaw limited discussion of the right to privacy to the Fourth Amendment, noting that the California Constitution offers no broader privacy protection.

The Stored Communications Act

The SCA prevents providers of communication services from disclosing private communications. Under the SCA, an “electronic communication service” (“ECS”) is allowed to divulge the contents of a communication only to the sender and recipient, while a “remote computing service” (“RCS”) is also allowed to release it to a “subscriber.” An ECS is a service which provides its users with the ability to send or receive wire or electronics communications, and an RCS is a computer storage or processing service provided to the public by means of an electronic communications system. Judge Wardlaw held that Arch Wireless’ service was properly categorized as an ECS because it enabled users to send and receive messages. The Court noted that the temporary storage incidental to the communication was insufficient to make the service an RCS.

Full Text of the Secured Communications Act of 1986 at the US Government Printing Office.

Orin Kerr of the Volokh Conspiracy approves of the holding and considers it broad enough to extend to emails as well as text messages.

An article in E-Commerce Times provides statements on the case from practitioners, with Charles Baker noting that this is the first case in which the Fourth Amendment has been applied to electronic communications in a work setting. Barry Werbin believes that this will set off a series of similar suits, while Evans C. Anyanwu expresses his view that the decision is a “warning to employers to not say one thing and then do another.” He suggests that Appellees could avoid this problem in the future by appending a statement to the city’s contract declaring it an “addressee” of all messages.

Nilssen v. Osram Sylvania, Inc.
Federal Circuit, June 17, 2008, No. 2007-1198
Slip Opinion

The Federal Circuit affirmed the judgment of the U.S. District Court for the Northern District of Illinois granting a motion for attorney fees to Osram Sylvania, Inc. and Osram Sylvania Products, Inc. (collectively, “Osram”) due to the inequitable conduct and litigation misconduct of the appellants pursuant to 35 U.S.C. § 285. Section 285 of the Patent Act authorizes the award of attorney fees to the prevailing party in “exceptional cases.”

The Federal Circuit held that the district court did not clearly err in finding that the case was “exceptional” and that it was within its discretion to award attorney fees to Osram. Appellants argued that Nilssen’s inequitable conduct was “benign” and their litigation misconduct amounted to instances of “harmless oversight” and “permissibly rough litigation tactics.” The Federal Circuit refused to distinguish the inherent contradictory notion of benign inequitable conduct and further noted that the argument ultimately “amount[ed] to little more than an impermissible attempt to reargue the merits of [the district court's] holding.” With respect to the litigation misconduct, the court noted that “it ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court,” concluding that the district court had sufficient evidence to have concluded that trial misconduct occurred.

Appellants further argued that a finding of inequitable conduct was insufficient to constitute an exceptional case. The court agreed that while there was no per se rule of exceptionality in cases involving inequitable conduct, its precedent provided wide discretion to district courts to award fees in inequitable conduct cases.

Dennis Crouch of Patently-O points out that there was no “individual smoking gun” here and agrees with the appellants’ argument that their actions were reasonable given that Osram was represented by Kirkland & Ellis, “well known for its relentless bull dog litigation style.”
The Patent Hawk also provides an overview of the case.
Filewrapper features an overview as well, complete with a timeline of the case.

The Federal Circuit additionally affirmed the district court’s denial of appellants’ motion for expert fees under Fed. R. Civ. P. 26(b)(4)(C). The court found that the district court had not abused its discretion in refusing appellants’ request for fees, and agreed that such a reward would result in “manifest injustice.”

Judge Newman dissented. In her opinion, the majority “promotes unexceptional trial procedures and non-culpable prosecution errors into an ‘exceptional case’ of such severity as to warrant the award of attorney fees” as uncontemplated by statute, precedent, or policy. She argued that the type and manner of the inequitable conduct was critical to determining an award of attorney fees and that the clearly erroneous standard requires appellate attention to the facts. Judge Newman concluded that the majority had misapplied the law and departed from precedent by refusing to consider the nature of the conduct and limiting the attorney fee award to major infractions, warning that “[a]ny patent prosecution, and indeed any litigation, is vulnerable in its detail.”

In response to the dissent’s concern that each instance of inequitable conduct could not individually justify the exceptional label, the Federal Circuit further noted that the multiplicity of these occurrences, in conjunction with the litigation misconduct, could justify the district court’s ruling. The court concluded its analysis with the note that “the key to the affirmance of the district court in this case is the standard of review.”