In March of 2012, British Petroleum sought court enforcement of a subpoena for “any conversation or discussion” made by researchers from the Woods Hole Oceanographic Institution (“WHOI”) regarding their studies on the Deepwater Horizon oil spill. WHOI and its researchers were neither parties nor witnesses in the ongoing lawsuits related to the Deepwater spill, but they had contributed data to a government report on the spill, and results of their studies had been cited in the lawsuits. WHOI argued that they had already provided all the information needed to test the study’s veracity, but BP asserted that additional materials, including records of internal deliberations made by the researchers before they published the studies, were necessary for them to challenge the studies’ results. The court applied a balancing test that weighed BP’s need for the requested information against the burden placed on WHOI, and required the WHOI researchers disclose internal pre-publication materials relating to the studies cited in the government report.[i]

Last fall, Science published an editorial by several WHOI researchers whose materials were among those requested by the subpoena. The WHOI researchers argued that BP’s subpoena request amounted to an attack on the independence of scientific inquiry, and advocated for federal legislation to protect researchers from legal harassment when their results contradict entrenched interests. While legislation is the most straightforward method by which the government can protect scientific independence, common law already provides some protection for researchers who may find themselves in a situation similar to that of WHOI.

Discovery of evidence from third parties is nothing new, and many courts hold that the right to obtain evidence from non-parties is sometimes necessary to ensure a fair trial. While the Supreme Court has not directly addressed scientific privilege, lower federal courts have applied a balancing test that weighs the requesting party’s need for the information against the burden that would be placed on the receiving party.[ii] When determining what information must be disclosed, courts have considered several factors, including the completeness of the information, confidentiality of sources, and chilling effects on research.[iii]

Federal courts generally favor disclosure under the assumption that litigants have a right to review relevant evidence when resolving disputes.[iv] However, courts have made exceptions where there are public policy reasons for excluding evidence.[v] For example, courts have denied subpoena requests for materials that solely reveal researchers’ pre-publication deliberations unless there is a strongly compelling need by the requesting party.[vi] The outcome of the analysis often depends on the type of information being requested. The balancing test is a useful method to adjudicate the competing interests of each side when deciding whether to enforce a subpoena. However, the factors that affect the probative value of preliminary or deliberative scientific materials, and the burden placed on the researchers who produce them, are unique, and not all are thoroughly considered in the balancing test as applied by courts.

Several courts hold that data from studies expected to be relied on during trial is highly probative.[vii] Indeed, this is in line with courts’ use of scientific findings as evidence in judicial proceedings. However, unpublished working materials are generally considered insufficiently probative to justify the burden of discovery on researchers. Unpublished working materials can be broadly divided into two categories: preliminary data and preliminary analyses, the latter referring to materials created as part of the deliberative process of interpreting the data and generating conclusions.

In Deitchman v. E.R. Squibb & Sons, Inc., the Seventh Circuit states, “No discovery should be allowed of any material reflecting development of [the researcher’s] ideas or stating his or others’ conclusions not yet published.” 740 F.2d at 565. In United States v. Allen, the court found that the requested data was too preliminary and thus insufficiently probative to justify enforcing a subpoena for its disclosure.[viii] In Allen, the researchers had recently begun a study to measure the long-term toxicity of low doses of 2,3,7,8-tetrachlorodibenzo-p-dioxin (“TCDD”), a component of an herbicide that was the subject of an EPA hearing. The researchers protested the subpoena because the animal subjects had not yet received the full series of TCDD doses. The court held that the preliminary data available from the studies had very little probative value. 494 F. Supp. at 113. In Deitchman, a leading researcher had established and was maintaining a database recording adenocarcinoma cases that were thought to be linked to using the drug diethylstilbestrol (“DES”). Squibb obtained a subpoena that essentially requested every document in the database. The researcher challenged the subpoena, in part because it would force him to prematurely disclose his study results prior to peer review. The Deitchman court agreed with the researcher and limited discovery to factual materials from which Squib could perform its own analyses. 740 F.2d at 565.  In In re Bextra, the District Court of Massachusetts also held that peer review comments had only limited probative value. 249 F.R.D. at 12. These decisions together suggest that unpublished working materials should generally be considered non-probative.

In limited circumstances, unpublished working materials may be considered sufficiently probative to justify discovery, particularly when the researchers’ behavior is at issue. If the party requesting the subpoena has a legitimate claim of potential fraud in the requested research, preliminary analyses may have higher probative value because they may reflect unethical or illegal behavior by the researchers. For example, fraud may prejudice a study’s results in a way not easily determinable from the study’s factual information. In Deitchman, the court notes that Squibb did not allege any impropriety in the research, suggesting that a colorable claim of fraud could affect a court’s determination of probity, even where the researcher is not party to the original suit. 740 F.2d at 563. There are public policy arguments in favor of broader disclosure where research fraud is suspected. Not all researchers behave ethically, and judicial investigation of allegations of scientific fraud would reduce the negative impact of false studies on the litigants and the public, whose taxes fund much of the research and whose safety may be affected. As just one example, a Massachusetts anesthesiologist published papers on research he never performed regarding commonly used painkillers.[ix] Discovery may also be appropriate in cases where a corporation, such as a drug manufacturer, is accused of hiding negative data from safety studies. However, general, unsupported allegations of fraud should not be used to justify abusive discovery to harass researchers who study politically sensitive subjects.[x]

Balanced opposite the probative value is the burden placed on the subpoenaed. The burden on researchers when disclosing study-related materials is extremely high, especially when the studies are unpublished. Some courts have alleviated the financial burden on subpoenaed researchers by ordering the requesting party to pay for the cost of production, but less monetizable burdens remain.[xi] Some of these non-monetary burdens, such as the burden of disclosing proprietary knowledge, can be alleviated by protective orders against public disclosure, but courts have recognized that protective orders cannot adequately address all such burdens. The Allen court acknowledges that forcing the disclosure of preliminary information “is likely to jeopardize the study by exposing it to the criticism of those whose interests it may ultimately adversely affect, before there has been an opportunity for the researchers themselves to make sure the study is the result of their best efforts. This is not the kind of burden which can be lightened by a protective order.” 494 F.Supp. at 113. Similarly, other courts and commentators emphasize the reputational consequences that could result from disclosure of inaccurate preliminary data or conclusions, especially to a non-neutral party whose litigation goals directly oppose the researchers’ results. 672 F.2d at 1276. This is of special concern when the researchers are not parties or witnesses to the lawsuit, because they then have no opportunity to refute any impeachment arguments made against their work. Courts have also recognized the general chilling effects that forced disclosure produces on free academic research. Id. In the non-precedential WHOI order, the court excluded from discovery documents associated with academic studies published after the government report, agreeing that disclosure of those materials to BP could “hamper future research efforts.”[xii] Discovery of research materials is thus only warranted where the probative value is sufficiently large to justify imposing court-recognized burdens on the researchers.

However, the burden of disclosure on researchers is greater than that described by the courts. Courts have focused on the harms to the researcher from potentially disclosing inaccurate data, but even disclosure of accurate, unpublished working materials is harmful because it damages researchers’ chances to publish. Researchers, especially academic researchers, exist in a “publish or perish” environment, and the success of their careers depends in large part on the number of papers they publish in high-profile journals. Disclosure of working materials burdens researchers’ ability to publish in two ways.

First, academic journals value previously unknown findings. Early disclosure of a study destroys the novelty of a later-submitted manuscript, and thereby drastically reduces the researchers’ chance of having their manuscript accepted. Courts could address this problem by issuing protective orders that place study-related information under seal prior to publication — although leaks are still possible.

Second, and perhaps more importantly, is that researchers must spend time gathering the information. Regardless of how broad or narrow the subpoena request, researchers will have to comb through lab notebooks, databases, email records, and other materials. Given the specialized nature of research, it would be difficult if not impossible for a researcher to hire an outsider to gather the information, because no one else could identify the materials relevant to a particular study. Thus, the researcher (or his graduate students) will be forced to gather the information themselves. All this time is time not spent on the researchers’ work. In highly competitive fields, several labs may be competing to complete and publish the same discovery. Even a few days lost at a critical time can severely damage a researcher’s progress and result in a competitor “scooping” their research. Such reputational burdens cannot be alleviated by protective orders or financial compensation.

These reputational burdens affect academic researchers more strongly than corporate researchers. Success in industry research depends on successful product development, not on publication. Though publishing peer-reviewed articles does play a role in companies’ marketing strategies, corporations often decline to seek publication of their studies, which suggests that the pressure to publish is not as severe. There is still some burden on corporations and corporate researchers, especially with regard to the competitive disadvantage that results from being required to spend time on disclosure. However, while first-mover and first-to-file patent advantages are important to corporations, these factors are less immediately dependent on research progress than publication is, so the burden on disclosure is similarly smaller. Thus, a court can generally weigh the publication burden more heavily for academic compared to corporate research. One concern with this distinction is that there is an increasing trend of corporate sponsorship of research at academic institutions, which sometimes blurs the line between academic and corporate research. A court may be able to resolve such situations by considering whether the researchers’ publication records strongly affect their career advancement or ability to obtain research funding.

In some cases, such as where the requesting party has alleged scientific fraud, researchers’ work product should be discoverable. Only in such a narrow set of circumstances does the probative value of such materials outweigh the burden to the researcher. In most situations, working materials are not strongly probative, and the burden of disclosure is unjustifiably high. Therefore, courts that apply the balancing test to subpoenas of non-party researchers should generally limit discovery of unpublished working materials.

Viacom Int’l Inc. v. YouTube, Inc., 07 Civ. 2103 (S.D.N.Y. April 18, 2013)
Slip opinion

On April 18, 2013 the U.S. District Court for the Southern District of New York once again granted summary judgment for YouTube in Viacom Int’l Inc. v. YouTube, Inc., on remand from the Second Circuit Court of Appeals. Judge Louis L. Stanton held that YouTube did not have any actual knowledge of any specific infringements of the Viacom content in suit, nor was it willfully blind to any such specific infringements. He also held that YouTube did not have the “right and ability to control” infringing activity for the purposes of 17 USC §512(c)(1)(B), and that YouTube’s transcoding of clips for viewing on mobile devices is protected by the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”), 17 USC §512(c).

Reuters has further coverage of the decision, which is hailed by the Electronic Frontier Foundation and Eric Goldman. JOLT Digest previously covered the District Court’s prior grant of summary judgment in favor of YouTube, and the Second Circuit’s decision to vacate part of that prior order and remand for further proceedings.

In its landmark decision reviewing the prior grant of summary judgment in this case, the Second Circuit affirmed the District Court’s ruling that YouTube qualified for the DMCA’s safe harbor provisions, but remanded for more extensive consideration of four narrower issues: a) whether YouTube had actual knowledge of specific infringements of the content in suit, b) whether it was willfully blind to any such specific infringements, c) whether YouTube had the “right and ability to control” infringing activity under the exception to the safe harbor created by §512(c)(1)(B), and d) whether any potential syndication of these clips to third parties was protected by the DMCA’s safe harbor. Slip op. at 1–2. Considering these issues in light of the Second Circuit’s guidance on remand, the District Court once again found for YouTube on every issue.

On the issue of actual knowledge of specific infringements, Viacom was done in by its admission that it had “failed to come forward with evidence establishing YouTube’s knowledge of specific clips-in-suit.” Id. at 3. Viacom had attempted to argue that the burden should be on YouTube to prove lack of such knowledge, but the District Court dismissed this argument as rooted in “an anachronistic, pre-Digital Millennium Copyright Act… concept” of the law, id. at 4, explaining that “Congress has determined that  the burden of identifying what must be taken down is to be on  the copyright owner, a determination which has proven practicable in practice.” id. at 6. Similarly, in dismissing the willful blindness claim the District Court pointed to Viacom’s inability to identify information in YouTube’s possession indicating specific infringements, as opposed to “information that infringements were occurring with particular works, and occasional indications of promising areas to locate and remove them.” Id. at 9. On the issue of syndication, the court found that YouTube’s transcoding of videos for playback on devices from Apple, TiVo, and other device makers merely amounted to “steps by a service provider taken to make user-stored videos more readily accessible (without manual intervention) from its system to those using contemporary hardware,” and thus were protected by the DMCA’s safe harbors. Id. at 23.

The District Court gave more extensive consideration of the issue of whether YouTube had the “right and ability to control” infringing activity, thereby bringing it outside the safe harbor. The Court started with the “governing principle” that “knowledge of the prevalence of the infringing activity, and welcoming it, does not itself forfeit the safe harbor.” Id. at 13. Quoting the Second Circuit, the Court wrote that “something more” is needed, citing as examples of “something more” prior cases in which service providers had been found to prescreen, edit, and dictate content or in which they had encouraged and aided specific infringements. Id. at 12-13. In contrast to such cases, the court found that here YouTube was perfectly entitled under the safe harbor to attach conditions to access to proprietary “digital fingerprinting” technology to identify infringement, and YouTube’s other activities went “no further than the normal function of any service provider, and shows neither participation in, nor coercion of, user infringement activity.” Id. at 18.

This decision marks a significant victory for YouTube and other hosting providers, filling out the standards for “willful blindness” and the “right and ability to control” in favorable ways. But it is not the end of Viacom v YouTube, as Viacom has already promised to appeal once again to the Second Circuit.

Pio Szamel is a 1L at Harvard Law School.

Bayer Healthcare Pharm., Inc. v. Watson Pharm., Inc., No. 12-1397 (Fed. Cir. Apr. 16, 2013)
Slip opinion

Photo By: Nate Grigg – CC BY 2.0

The Court of Appeals for the Federal Circuit reversed the judgment of the Nevada District Court, which ruled that claims 13 and 15 of Bayer Healthcare Pharmaceuticals, Inc. and Bayer Schering Pharma AG (“Bayer”) U.S. Patent RE37,564 were not invalid for obviousness. The patent claimed a combination of synthetic hormones and dosing regimens used by Bayer in the Yaz birth control pill. Three generic manufacturers—Watson Pharmaceuticals, Inc., Sandoz, Inc., and Lupin Ltd.—filed Abbreviated New Drug Applications (“ANDAs”) with the FDA, including Paragraph IV certifications, 21 U.S.C. 355(j)(2)(A)(vii)(IV), asserting that the patent was invalid.

The Federal Circuit held, first, that the patented combinations were obvious in view of prior art:  two foreign patent applications and four scholarly articles. Bayer Healthcare Pharm., Inc. at 11. A person of ordinary skill in the art would have been motivated by the knowledge disclosed in the prior art to craft Bayer’s combination and would have had a reasonable expectation of success. Id. at 11–12. Second, the court rejected Bayer’s arguments on secondary indicia of non-obviousness relating to unexpected results, expert skepticism, industry praise, and copying. Id. at 10, 15.

Reuters and Bloomberg put this ruling into context by describing Bayer’s continuing legal troubles with Yasmin, the precursor to Yaz; the company faces thousands of legal claims that Yasmin increases the risk of blood clots.

Most birth control pills come in packs of twenty-eight, of which twenty-one contain active ingredients and seven are placebos. The medical reasoning is that, after a round of twenty-one pills containing synthetic hormones, a seven-day break is necessary to reduce the risk of side effects (a “21/7 schedule”). Prior art  suggested that the risk of side effects could be reduced by a lower per-pill synthetic hormone dosage; however, with a lower dosage, the risk of pregnancy for a patient who forgetfully skipped a day would be much higher than it would be under the traditional dosage scheme. The solution, according to prior art and Bayer’s patent claims, would be to decrease the placebo period from seven days to four or five. A lower hormone dose in combination with a shorter placebo period would lower the risk of side effects without greatly increasing the chance of unintentional pregnancy.

Bayer contended that the traditional 21/7 schedule taught away from an altered dosing regimen, particularly in light of perceived risks of increasing hormone administration. Bayer also argued that the prior art  was directed at hormone replacement therapy for pre-menopausal women, and it was not obvious that the proposed combination would have applications as an oral contraceptive. The court disagreed, noting that the prior art acknowledged the problem and expressly proposed the claimed solution, “plainly disclos[ing] preparations with hormone replacement and contraceptive applications.” Id. at 13–14 (emphasis original).

Moreover, Bayer’s secondary evidence of non-obviousness was insufficient. Id. at 15. The clinical data demonstrating the efficacy of the new combination was not unexpected, but “common sense,” and the FDA’s request for clinical safety and efficacy data did not alone demonstrate skepticism about the new drug combination. Id. Alleged wide praise merely referred to results, and at least one source was authored by an inventor, falling short of true industry praise. Id. at 16. Finally, copying of Yaz by generic manufactures did not rebut non-obviousness because generic manufacturers must prove bioequivalence to receive FDA approval under the ANDA system. Id.

As pointed out on Bloomberg and Reuters, this loss is just one more blow to the profitability of the Yaz/Yasmin line of birth control pills. Bayer spent 1.19 billion euros on settlements and legal expenses associated with the drugs last year alone, and worldwide sales are falling due to potential side effects and competition from cheaper generic versions. Bayer’s loss before the Federal Circuit will do nothing to slow generic competition and blocks Bayer from seeking compensation for their lost sales.

Erica Larson is a 1L at Harvard Law School.

Ass’n for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398 (U.S. Apr. 15, 2013)
Transcript of Oral Argument

Photo By: brett jordan – CC BY 2.0

On Monday, April 15, the Supreme Court heard oral arguments to determine the validity of a patent encompassing the use of the BRCA1 and BRCA2 genes. Mutations in these genes correlate strongly with the development of breast and ovarian cancers. As the patent owner, Myriad Genetics, Inc. (“Myriad”) possesses and exercises the exclusive right to sell diagnostic testing kits based on these genes.

The ACLU first challenged the constitutionality of the Myriad patent in the District Court of the Southern District of New York (“SDNY”), claiming that the patent violated the First Amendment. The SDNY invalidated the patent on other grounds, holding that the genes were “products of nature” and thus not patentable subject matter. On appeal, the Court of Appeals for the Federal Circuit (“CAFC”) affirmed that “comparing” gene sequences was unpatentable as an “abstract mental step” but reversed the SDNY by holding that Myriad’s “screening” claims were patentable. After deciding Mayo Collaborative Servs. v. Prometheus Labs., Inc., the Supreme Court vacated the CAFC’s earlier decision and remanded the case to be decided in light of Mayo. The CAFC reaffirmed that isolated genes were patentable as “markedly different” from genes in the human body and reaffirmed its earlier position on the various method patents. The ACLU appealed to the Supreme Court.

SCOTUSblog comments on the Supreme Court’s skepticism regarding the validity of the Myriad patents. The New York Times offers a summary of the oral argument and background on the case. Nature newsblog and Patently-O predict how the Supreme Court may narrow the scope of its holding to a particular class of genetic material. JOLT Digest previously commented on the implications of a ban on gene patents.

The Myriad patents in question contain claims covering both isolated gene molecules (“composition patents”), and  methods for diagnosing breast cancer, in which the genetic material of a patient’s tumor is compared to the genetic material of the same patient’s healthy tissue.

The isolated gene molecules are known as complementary DNA, or cDNA which consist of isolated BRCA1/2 genes. Through a series of steps, scientists reverse engineer cDNA from other genetic material. The cDNA lacks “introns”—regions of DNA that do not encode genetic information—that exist in DNA in the body.

The method claims are divided into comparing/analyzing claims and screening claims; the Federal Circuit deemed the first category to be unpatentable subject matter in light of Prometheus and the latter patentable because it involves significant human intervention. Myriad currently sells diagnostic kits based on its patents to hospitals for around $3,000 each.

The oral argument focused on the composition claims covering cDNA. The Supreme Court attempted to determine whether Myriad’s patents claimed unpatentable “products of nature” or patent eligible human inventions. The justices and the litigants traded extensively in analogies.

Christopher Hansen, representing the ACLU, argued that although Myriad deserved recognition for having discovered the BRCA genes’ correlation to breast cancer, it did not deserve a patent over them. Transcript of Oral Argument at 3, Ass’n for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398 (U.S. Apr. 15, 2013). He compared the BRCA genes to gold. Id. at 4­­–5. According to Hansen, although one could get a patent on a new use of gold, such as earrings, one could not get a patent on gold itself as a “product of nature.” Likewise, the argument went, Myriad could get a patent on a new use of the BRCA genes, but not on the genes themselves.

In contrast, Gregory Castanias, representing Myriad, contested that the BRCA genes as used in the method claimed did not constitute products of nature. According to Castanias, isolated BRCA genes are not found in the human body. Scientists must cut the BRCA genes at specific locations from a much longer strand of DNA to perform the claimed method, and Myriad deserves a patent for its investment in finding where to make those cuts. Castanias likened it to awarding a patent over the first baseball bat, which was cut away from an unpatentable tree. Id. at 37.

The Supreme Court took issue with both metaphors. Justice Sotomayor compared the BRCA genes in a person to the “flour” used in baking “chocolate chip cookie[s],” and questioned “why gene sequences are not those basic products that you can’t patent.” Id. at 35. Chief Justice Roberts and Justice Kagan puzzled over why “snipping” a part of the body makes it patentable, speculating whether one could get a patent on piece of human liver by “snipping” it off. Id. at 54–55. Justice Alito pressed the parties to distinguish why a medicinal leaf plucked from a plant in the Amazon was unpatentable whereas a concentrated form of the compound in the leaf is patentable. He further asked where the BRCA gene plucked from human DNA fits in between the two. Id. at 7–8.

Amid the imagery, the justices and parties remained aware of broad doctrinal and policy implications of the Court’s eventual holding. Justice Breyer highlighted the “uneasy compromises” in patent law: “on the one hand, we do want people to invent; on the other hand, we’re very worried about them tying up . . . a thing that itself could be used for further advance.” Id. at 49. On the issue of what economic incentives would drive companies to invest in gene discovery if genes were deemed unpatentable, Justice Scalia criticized Hansen’s response that “curiosity,” “recognition,” and “taxpayers” would spur and fund innovation. Id. at 13–15. At the same time, Justice Kennedy cautioned that in “patent [law] . . . we have a uniform rule . . . that avoids giving special industries special subsidies.” Id. at 58. Castanias also suggested cabining or abolishing the “products of nature” doctrine, id. at 54–55, and requested that the court defer to the longstanding and expert decision by the USPTO that genes are patentable subject matter. Id. at 51.

Solicitor General Donald Verrilli, representing the United States as amicus but supporting neither party, offered a solution that would attempt to preserve “a necessary balance in the patent system between encouraging individual inventors and keeping the basic building blocks of innovation free for all to use.” Id. at 24. According to Verrilli, although “simply native DNA extracted from the body” would be patent ineligible, cDNA should be patent eligible as “an artificial creation in the laboratory.” Id. at 24–25. Verrilli supported the eligibility of the Myriad patent, but abstained from commenting on its obviousness. Id. at 26–28.

A decision is expected by the end of June.

Alex Shank is a 1L at Harvard Law School.

Digital Public Library of America Goes Live, Sans Fanfare

The Digital Public Library of America (“DPLA”) website went live late last week; however, the celebration was postponed in the wake of the Boston Marathon bombing, reports the Harvard Crimson. After more than two years of planning, the DPLA became the first national digital library in the world—with about two million books, pictures, manuscripts, and other materials. The staff is working to overcome copyright obstacles to add more works. A ceremony was to take place on April 18 and 19 at the Boston Public Library, the first public library in the country. But given its proximity to the site of the bombings, organizers decided to reschedule the event for the fall.

ITC Rules Apple iPhone did not Violate Motorola Patents

The International Trade Commission (“ITC”) terminated its investigation into Apple’s alleged infringement of Motorola U.S. Patent No. 6,246,862 (“the ‘862 patent”), “Sensor controlled user interface for portable communication device,” finding no violation of section 337, reports Ars Technica. The ‘862 patent was the last patent remaining of the six included in the original complaint filed by Motorola in 2010. In a notice issued April 22, the ITC found that the ‘862 patent is obvious in view of U.S. Patent Nos. 6,052,464 and 5,894,298. The case is one piece of a larger patent battle between Apple and Motorola, being waged in courts worldwide.

Parties Race to Register “Boston Strong” Trademark with USPTO

Less than a week after the Boston Marathon bombing, two Massachusetts parties have applied to trademark the phrase “Boston Strong” with the U.S. Patent and Trademark Office (“USPTO”), reports the Huffington Post. The first application, filed by Born Into It, Inc., is a standard character mark for “clothing and accessories.” The second application, filed by an individual, is also a standard character mark for “[i]mprinting messages on T-shirts.” The hashtag #BostonStrong has garnered a strong following on Twitter over the last week. The Huffington Post notes that similar applications following the Sept. 11, 2001 attacks were denied by the USPTO.

House Passes CISPA

Last week, the U.S. House of Representatives passed the Cyber Intelligence Sharing and Protection Act, reports Ars Technica. The proposed bill aims to facilitate the sharing of data between Internet companies and the government for cybersecurity purposes. The bill faces an uphill battle in the Senate, as a previous version of the bill died there last year, notes NBC News. President Obama has threatened to veto the bill, under fears that the bill does not do enough for user privacy, according to the New York Times.

Federal Circuit Renews K-Tech Communications Lawsuit Against DirecTV

The U.S. Court of Appeals for the Federal Circuit renewed a lawsuit filed by K-Tech Communications against DirecTV for alleged patent infringement, Bloomberg reports. The court ruled that a complaint for patent infringement does not have to identify the infringing device to satisfy the requirements of Form 18 (the sample complaint for patent infringement in the Appendix of Forms to the Federal Rules of Civil Procedure). K-Tech Telecommunications Inc. v. Time Warner Cable Inc., No. 12-1425, slip op. at 17 (Fed. Cir. Apr. 18, 2013). Interestingly, the court also stated that, should there be a conflict between Form 18 and the plausibility standard for pleading requirements set forth in Iqbal and Twombly, Form 18 would control. Id. at 11.

Government Squashes Dozens of Patents a Year for National Security Reasons

Government “secrecy orders” have prevented more than 5,000 inventions from being patented, reports Wired. If the Department of Defense believes that an invention could be a national security threat, it can issue a secrecy order to prevent the inventor from discussing the technology with anyone. Patent applicants can appeal a secrecy order, but that process can often take years. The applicable law is based on a vague standard of “detrimental to national security,” according to Wired.

Capitol Records, LLC v. ReDigi Inc., No. 12 Civ. 95 (RJS) (S.D.N.Y. Mar. 30, 2013)
Slip Opinion

Internet startup ReDigi—“the world’s first and only online marketplace for digital used music”—recently suffered a setback in the rollout of its digital music resale platform. Capitol Records, LLC v. ReDigi Inc., No. 12 Civ. 95 (RJS), slip op. at 1 (S.D.N.Y. Mar. 30, 2013). Judge Sullivan for the District Court for the Southern District of New York granted plaintiff Capitol Records’ motion for partial summary judgment on its claims for defendant ReDigi’s direct, contributory, and vicarious infringement of its exclusive distribution and reproduction rights under the 1976 Copyright Act. The court held, in a case of first impression, that the first sale doctrine,17 U.S.C. § 109(a), does not permit the resale of a digital music file, and that uploading to and downloading from the cloud “incident to a sale” falls outside the scope of the fair use defense, 17 U.S.C. § 107.

The New York Times provides a summary of the case and places it in the context of a broader debate over digital secondary markets, including books and movies. The Electronic Frontier Foundation expresses frustration over the court’s decision not to “bring the first sale doctrine into the 21st century.” Billboard notes that unlike iTunes sales, record labels do not get any proceeds from ReDigi sales of “perfect digital copies of ‘pre-owned’ music.”

To sell music on ReDigi’s online platform, a user must download the “Media Manager” application to her computer. The user can upload any eligible file—purchased on iTunes or from another ReDigi user—to ReDigi’s “Cloud Locker.” Media Manager then deletes any additional copies of the file on the user’s computer and continually monitors the computer to ensure no local copies remain. The user has the option of storing and streaming the file for person use or offering it for sale in ReDigi’s marketplace. If a user sells her digital music file, her access to the file is terminated and transferred to the new owner, who can continue to store it in the Cloud Locker, stream it, sell it, or download it to her computer. ReDigi’s website prices digital music files at 59 to 79 cents each, retaining 60% of the proceeds itself and allocating the remainder to the seller (20%) and an escrow fund for the artist (20%).

Capitol Records owns copyrights in a number of the recordings sold on ReDigi’s website and brought suit alleging direct copyright infringement, inducement of copyright infringement, contributory and vicarious copyright infringement, and common law copyright infringement. Both parties moved for summary judgment.

Judge Sullivan held first that the digital music files on ReDigi’s website are reproduced and distributed in violation of Capitol’s exclusive rights under 17 U.S.C. §§ 106(1), 106(3). ReDigi did not contest that distribution occurs on its websites, only that such distribution is protected by the fair use and first sale doctrines. Examining the statutory text and the legislative history, the court distinguished between “sound recordings” (the music) and “phonorecords” (the physical objects in which sounds are fixed). The court reasoned that when a user downloads a music file to her hard disk the copyrighted work is reproduced on a new phonorecord (the user’s hard disk) within the meaning of § 106(1). Judge Sullivan acknowledged the parties analogies during oral argument (transcript) to “the Star Trek transporter—‘Beam me up, Scotty’—and Willy Wonka’s teleportation device, Wonkavision.” Id. at 2 n.2.However, the court held that it is beside the point that the original phonorecord no longer exists.

The court next addressed ReDigi’s fair use defense, holding that each of the four statutory factors in § 107 weighed against it. Capitol did not allege and the court did not decide whether uploading to and downloading from the Cloud Locker for storage and personal use only are protected fair use. However, the court held that such activity “incident to a sale fall[s] outside the ambit of fair use.” Id. at 10 (emphasis in original). Addressing the first of the factors, Judge Sullivan reasoned that the upload, sale, and download of digital music files does nothing to “transform” the copyrighted work and that ReDigi’s use is undoubtedly commercial. The second factor also weighed against fair use, because sound recordings are “close to the core of the intended copyright protection.” Id. at 10. The third factor likewise hurt ReDigi, because it transmits the works in their entirety. Finally, under the fourth factor, the court held that the products sold through ReDigi not only harm the potential market for the copyrighted works but also those sold on the legitimate primary market.

Judge Sullivan then addressed the “novel question presented in this action . . . whether a digital music file, lawfully made and purchased, may be resold by its owner . . . under the first sale doctrine.” Id. at 4. He held that “[t]he first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.” Id. at 12. As a preliminary matter, the court noted that for the first sale doctrine—as codified at 17 U.S.C. § 109(a)—to apply, the copy of the work must be “lawfully made under this title.” Because the court had already held ReDigi’s copies to be in violation of § 106(1), the first sale doctrine was inapplicable. In addition, the court noted that the statute protects distribution “of a particular copy or phonorecord … of that copy or phonorecord.” Id. at 12 (quoting 17 U.S.C. § 109(a)) (emphasis in original). Because it is impossible for the user to sell her “particular” phonorecord on ReDigi, the first sale doctrine cannot apply. However, the court noted that § 109(a) does not prohibit an owner of a particular phonorecord—for example, a computer hard disk, iPod, or other memory device onto which the file was originally downloaded—from reselling it.

Finally, the court held ReDigi both directly and secondarily liable for copyright infringement. As to direct infringement, the court reasoned that while the sales process itself is automated, absolving ReDigi of direct liability on that ground alone “would be a distinction without a difference.” Id. at 14. The court distinguished a similar situation in Cartoon Network, LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (“Cablevision” previously covered by the Digest), by noting that the Second Circuit left room for liability where a party’s “contribution to the creation of an infringing copy [is] so great that it warrants holding that party directly liable for the infringement, even though another party has actually made the copy.” Id. at 14 (quoting Cablevision, 536 F.3d at 133). The court further found ReDigi contributorily liable, holding that its service is not “capable of substantial noninfringing uses” under the Supreme Court decision in Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442 (1984). As a result, ReDigi’s entire business model—trading only in copyright-protected iTunes files—is built on the erroneous notion that the first sale defense permits the resale of digital music. Because the first sale defense does not apply, ReDigi’s resale platform is capable of no noninfringing uses by definition. Finally, the court held that ReDigi vicariously infringed Captiol’s copyrights by virtue of its transaction fee and control over the website’s content and user access.

The court did not address Capitol’s performance and display rights, or common law copyrights on summary judgment.

This case is another example from a line of similar disputes in the Second Circuit—for example, WNET v. Aereo and YouTube v. Viacom—testing the legal boundaries between a copyright system developed in an analog era and new digital business models. Several policy issues lay at the forefront of these disputes, but as Judge Sullivan admonished, “this is a court of law and not a congressional subcommittee or technology blog.” Id. at 1. Whether future legislative action is pursued by rightsholders remains to be seen. ReDigi, perhaps mindful of an adverse decision, has already developed a potential workaround in the interim: ReDigi 2.0, which directs users’ new iTunes purchases to upload from iTunes directly to the Cloud Locker. Thus, the digital files are never moved from their initial locations. The new system was launched at the close of discovery in the instant case but may become a target for future litigation.

Charlie Stiernberg is a 3L at Harvard Law School.

Timelines, Inc. v. Facebook, Inc., No. 11-cv-6867 (N.D. Ill. Apr. 1, 2013)
Memorandum Opinion and Order (hosted by Justia.com)

Photo By: Robert Scoble – CC BY 2.0

Facebook, Inc. (“Facebook”) lost its bid for a quick end to a trademark infringement suit filed by Timelines, Inc. (“Timelines”) over the social networking giant’s use of the term “timeline.” The U.S. District Court for the Northern District of Illinois denied Facebook’s motion for summary judgment on each of Timelines’ claims and its own counterclaims. The court held that Facebook failed to show as a matter of law that Timelines’ trademark for “timeline” was generic or merely descriptive or , if the trademark were valid, that Facebook’s use of the term constituted fair use. A jury trial will commence on April 22.

PCWorld and Bloomberg provide overviews of the case.

Timelines launched its Timelines.com website, which allows users to collaboratively create online representations of personal events or history, in 2009. Timelines, Inc. v. Facebook, Inc., No. 11-cv-6867 (N.D. Ill. Apr. 1, 2013) at 3. The company owns federally registered trademarks for “Timelines,” “Timelines.com,” and its “Timelines” design mark. Id. at 5. In September 2011, Timelines sued Facebook, alleging, inter alia, trademark infringement under federal law.

The court held that since Timelines has a registered trademark for the term “timelines,” its mark was “entitled to a presumption of validity.” Id. at 16. Facebook could rebut this by showing that the term was generic or merely descriptive, but to prevail at the summary judgment stage, it would have to show that the evidence was so obvious as to remove any doubt. Id. at 17.

Facebook asserted that other companies had used “timeline” generically in the past; the court, however, found those different from Timelines’ usage: they were for static, paid-for, local software-based products, while Timelines’ service was dynamic, free, and web-based. Id. at 8–9. The term “timeline” had been used generically in common speech and even on the U.S. Patent and Trademark Office’s own website, but this simply indicated that the Office understood the difference between generic and non-generic uses of “timeline” and had found Timelines’ use of the term to be non-generic. Id. at 18.

Facebook presented survey results showing that nearly seventy percent of respondents believed that “timeline” and “timelines” were generic, while only twenty-four percent believed that the terms were brand names. Id. at 13. Timelines, however, disputed the study’s methodology: A phone survey could not mirror a customer’s thought process as he/she encountered the term online. Id. at 19. Further, the court held that the survey data were not compelling enough to eviscerate doubt as to the genericness of “timeline.” Id.

Facebook argued next that Timelines’ mark was merely descriptive—that it had not acquired a secondary meaning uniquely associating it with the company. The court rejected this: given Timelines’ base of over one thousand active users, “it is not unreasonable to conclude that as to this group of users, ‘timeline(s)’ has acquired a specific meaning associated with [Timelines, Inc.].” Id. at 21. Further, Timelines asserted that beyond being merely descriptive with secondary meaning, its use of “timeline” was “suggestive” because it stood “for an idea which requires some operation of imagination to connect it with the goods.” Id.

Facebook also tried to assert that even if “timeline” were protected, its use of the term fell within fair use and thus was non-infringing. Id. To establish fair use, Facebook had to show that (1) it did not use “timeline” as a trademark; (2) its use was merely descriptive of its offering; and (3) it used the mark fairly and in good faith. Id. Facebook founder and CEO Mark Zuckerberg had, however, referred to “Timeline” as Facebook’s “most important brand,” intended to replace its trademarked “Wall.” Id. at 22. A jury could, the court held, reasonably find this and Facebook’s marketing of its “Timeline” “product” to constitute trademark use. Id. Further, Facebook’s good-faith usage was not beyond doubt: Facebook was aware of Timelines’ registered trademark and Zuckerberg was quoted as hostile to Facebook’s competitors.  Id.

The case is set to proceed to a jury trial on April 22. Facebook’s own name, ironically, derives from a generic term for college yearbooks, id. at 9, and the company has actively opposed others’ attempts to register or use terms, such as “Teachbook” or “Sharewall,” that Facebook believed were to close to  its own registered marks. Id. at 10.

Ashish Bakshi is a 1L  in Harvard Law School and Harvard Business School’s joint JD/MBA program.

Phishing Attack Used to Steal Bitcoins

Ars Technica reported April 11 that at least one Bitcoin trader was robbed of Bitcoins by a phishing attack in a Bitcoin-trading forum hosted by Bitcoin exchange MT.Gox. The attacker posted an announcement that MT.Gox would start handling exchanges of another online currency, Litecoins, and included a link to a supposed live chat on the topic. People who clicked through were prompted to download a forged Adobe updater that contained a remote administration tool and keylogger, allowing the attacker to collect victims’ MT.Gox credentials and access their Bitcoin accounts.

Court Documents Reveal FBI Cellphone Surveillance Tool and Verizon’s Involvement

The FBI prompted Verizon to reprogram a tax fraud suspect’s air card so that the FBI could track him, according to documents released in the case against Daniel David Rigmaiden, who is accused of leading a $4 million tax fraud operation. Wired reported April 9 that Rigmaiden accused Verizon of remotely reconfiguring his air card so the FBI could silently call it and receive pings of his location to a fake cell site, or stingray, that it was using. Air cards, which are plugged into computers to connect them to wireless internet provided by cellular providers, cannot normally receive calls. Rigmaiden also asserts that Verizon altered the air card so that it would accept the FBI’s stingray and prioritize it over other cell sites. In the past, the government has argued that it does not need probable cause warrants to use stingrays because they don’t collect phone or text communications.

Google Introduced New Tool for Managing Digital Afterlife

Google announced on April 12 a new tool that will allow users to specify what they want to happen to the contents of their Google accounts after they die. Users can either order their accounts deleted or grant access to a beneficiary. The tool will activate once accounts are inactive for a designated amount of time and the user fails to respond to a text and email. The New York Times Bits blog notes that Google introduced the “digital will” feature at a time when states have begun to pass laws on the fate of online accounts belonging to the dead.

Lithuania Monitors Suspected Tax Fraud with Google Maps Street View

Lithuanian tax authorities have started to use Google Maps Street View to investigate possible tax fraud, the AP reported April 11. The free Internet service only premiered in Lithuania earlier this year, but tax inspectors seized the opportunity to inexpensively tour the streets of major cities like Vilnius in search of signs of tax dodging. Through this method, the Lithuanian government identified one hundred homeowners and thirty companies that it suspects of cheating on taxes, based on suspicious activity like construction that has not been reported. After inspectors found signs of tax fraud through Google Maps, they would follow up with an actual visit to inspect the premises.

G.C. v. Owensboro Public Schools, No. 11-6476, (6th Cir. Mar. 28, 2013)
Slip Opinion

Photo By: Debs (ò‿ó)♪ – CC BY 2.0

In a 2-1 decision, the Sixth Circuit reversed the U.S. District Court for the Western District of Kentucky. The lower court had granted summary judgment for Owensboro, holding that the school’s search of a student’s cell phone did not violate the Fourth Amendment.

The Sixth Circuit held that the school’s search of G.C.’s cell phone was an unreasonable search and seizure. In so holding, the court stated that despite the school’s knowledge of G.C.’s prior behavioral problems, school officials had no specific reason at the time of the search to believe that he was engaging in an unlawful activity. Although using a cell phone in class contravened the school’s policy, “using a cell phone on school grounds [did] not automatically trigger an essentially unlimited right enabling a school official to search any content stored on the phone.” G.C.,slip op. at 13.

EducationWeek provides a thorough analysis of the Fourth Amendment issue. The New York Times editorial board lauded the decision, writing that the Sixth Circuit “correctly ruled” and “wisely interpreted” the scope of a reasonable search as applied to students.

After numerous other disciplinary incidents, including ones where G.C. admitted drug use and suicidal thoughts to school administrators, G.C. was caught texting in class. As this was a direct violation of school policy, G.C.’s teacher confiscated the cell phone and brought it to the assistant principal. The assistant principal, who was aware of G.C.’s previous admission of drug use and depression, read four text messages on the phone to see whether he was in danger of harming himself.

The court held that the assistant principal’s search of G.C.’s phone failed to satisfy the first prong of the two-part test laid out by the Supreme Court in New Jersey v. T.L.O, 469 U.S. 325 (1985). In holding as it did, the court reasoned that, first, a student search must be justified at its inception, and second, the search must be conducted within the scope of the reasons that prompted the search in the first place. The court rejected Owensboro’s argument that the decision to search G.C.’s cell phone could be based on knowledge of his prior behavior. The court declared that general background knowledge of a student’s tendencies did not “enable a school official to search a student’s cell phone when a search would otherwise be unwarranted.” G.C.,slip op. at 14.

Judge Norris dissented. The dissent would have held that the assistant principal’s search of the cell phone was not a violation of the Fourth Amendment. The dissent reasoned that under all the circumstances—including the assistant principal’s knowledge of G.C.’s disciplinary record—the search was reasonable.

The Sixth Circuit’s decision is novel in that it looks at a student’s right against unreasonable search and seizure to cell phones. The decision significantly narrows the scope of circumstances in which a school official can legally conduct a search of a student’s cell phone. As JDSupra points out, this means that schools must “tread carefully when searching a student’s mobile device.”

Michelle Sohn is a 1L at Harvard Law School.