Ninth Circuit Applies Fourth Amendment to Text Messages at Work
By Anna Volftsun — Edited by Evie Breithaupt

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.

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Federal Circuit Affirms Award of Attorney Fees for Inequitable Conduct and Litigation Misconduct
By Christina Hayes — Edited by Stephanie Weiner

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.

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Ninth Circuit Assesses Copyright Damage Awards
By Debbie Rosenbaum — Edited by Stephanie Weiner 

Derek Andrew, Inc. v. Poof Apparel Corp.
9th Circuit, June 11, 2007
Slip Opinion 

The Ninth Circuit reversed and remanded in part the decision of the District Court for the Western District of Washington, which had awarded statutory damages under the Copyright Act for a copyright infringement, as well as attorney’s fees. 

Under § 504(a) and (c) of the Copyright Act, a copyright owner can elect to recover statutory damages for an infringement instead of actual damages and any additional profits.  This is limited, however, by § 412(2), which bars recovery of statutory damages for “any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.”  17 U.S.C. § 412(2).  The Ninth Circuit held here that § 412 precludes recovery of statutory damages for post-registration infringements where the first infringement in a series occurred before registration.  This was the first time the Ninth Circuit had addressed the provision in the context of post-registration infringement.  In so holding, the court joined several other circuits in rejecting a reading of the Copyright Act that would allow an end run around § 412.

An overview of the case is available at The Patry Copyright Blog and by Michael Atkins of the Seattle Trademark Lawyer Blog
Filewrapper features commentary, including pictures of the trademark in question  

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Supreme Court Reinvigorates Patent Exhaustion
By Andrew Ungberg — Edited by Joshua Gruenspecht

Quanta Computers, Inc. v. LG Electronics, Inc.
Supreme Court of the United States, June 9, 2008, No. 2006-937
Slip Opinion

The Supreme Court reversed the Federal Circuit, which had held that patent holders could seek infringement damages from subsequent purchasers further “downstream” provided that the initial transfer had imposed some type of restriction on the initial purchaser. The Federal Circuit’s ruling, had it been upheld, would have effectively extinguished the doctrine of patent exhaustion and allowed patent holders the ability to control the use of their patents far beyond traditional limits.

Justice Thomas delivered the unanimous decision, holding that the 155-year-old doctrine of patent exhaustion limits the patentee’s power to dictate the terms of use through the first level of sales only. In an opinion steeped in tradition, the Court held that the reasoning of United States v. Univis Lens Co. 316 U.S. 241 (1942) controlled the case. The Univis Court held that a patentee’s rights were extinguished because the finished product (cut eyeglass lenses) embodied essential features of the patented product (unfinished eyeglass lens blanks). While this has long been the standard for process patents, the Court for the first time here extended that same logic to method patents. The Court also stated that a use “substantially embodying” the patent, rather than fully practicing it, was sufficient to exhaust the patent-holder’s rights.

Overviews of the case are available at Patently-O, the SCOTUS Blog and Law.com.

The full transcript of the oral argument is available here.

Professor Mark R. Patterson of Fordham University authored an article last November advocating a broad overruling of the Federal Circuit decision on Patently-O, which outlined the negative implications of allowing the lower court’s decision to stand.

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Federal Circuit Clarifies Recovery for Lost Profits, Non-Exclusive Licensees: Parent Company Denied Recovery for Lost Profits of Subsidiary
By Jeff Gritton — Edited by Joshua Gruenspecht

Mars, Inc. v. Coin Acceptors, Inc.
Federal Circuit, June 2, 2008, No. 2007-1409
Slip Opinion

The Federal Circuit affirmed in part and vacated in part the District Court of New Jersey and remanded for recalculation of damages in a patent infringement suit.

The court affirmed the district court’s holding precluding Mars Inc. (“Mars”) from recovering damages on a lost profits theory, holding that Mars could not recover for its wholly owned subsidiary’s lost profits. The court stopped short of answering the question of whether a parent company could ever recover for its subsidiary’s lost profits, limiting its holding to the facts of the case at issue.

The court also affirmed the district court’s judgment denying Mars’s motion to amend its complaint to add its subsidiary Mars Electronics International (“MEI”) as a co-plaintiff in its action against Coin Acceptors, Inc. (“CoinCo”) for infringements occurring before 1996, agreeing with the lower court that MEI lacked constitutional standing as a non-exclusive licensee.

The Federal Circuit vacated the lower court’s conclusion that Mars had standing to recover damages for the period between 1996 and 2003. Because Mars had assign its title to the patent to MEI in 1996, it lacked standing for that period of time.

Finally, the court affirmed the district court’s assessment of a reasonable royalty rate for the calculation of damages related to the infringement. Because Mars’s lack of standing for the period from 1996 to 2003 changed the royalty base, the court remanded for recalculation of damages for the period prior to 1996.

The Patent Hawk provides a “sassy” take.

Dennis Crouch of Patently-O and Barry Barnett of Blawgletter also provide coverage of the opinion.

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