Ever since the Supreme Court handed down its decision in Bliski v. Kappos, 130 U.S. 3218 (2010), practitioners have grappled with the line between eligible and ineligible patent processes. Two recent cases, one eligible and one not will undoubtedly be cited to describe the divide as it relates to a business process.

In August, the United States Court of Appeals for the Federal Circuit Court decided that a method of verifying the validity of credit card transactions over the Internet was patent ineligible. Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011). The claims were very broad and were capable of implementation through a purely mental process. Further, use of a computer to perform the method, by itself was insufficient to render the process patentable.

In September the Federal Circuit decided that a method, that provided for a triangular business transaction was patent eligible. Under scrutiny was a method of providing copyrighted materials to one party, in exchange for royalties from a third party advertiser. In this transaction, the advertiser paid the royalty to the intellectual property owner, and in return secured an individual to view their advertisement. Ultramercial, LLC v. Hulu, LLC, 2011 WL 4090761 (Fed. Cir. 2011). The viewer received entertainment value of the copyrighted material for the cost of viewing the advertisement. Although the Court concluded that “the mere idea that advertising can be used as a form of currency is abstract,” it noted that the patent “disclosed a practical application of this idea.” Id. at 5. Such is fully consistent with accepting patentability of the Arrhenius equation when narrowly and practically applied to the manufacturer of rubber. Diamond v. Diehr, 450 U.S. 175, 187 (1981).

But why is one patent eligible and the other not? Although the Court disavows level of complexity as a factor, one is left to consider.

The Court rejected the credit verification card method as all the steps could be “performed in the human mind or by a human using a pen and paper.” Practice of the patent would require no more than construction of a list and comparing future transaction to that list; furthermore, no particular algorithms were disclosed. Cybersource at 1372. In contrast, the process to implement the “controlled interaction with a consumer via an Internet website” was “far removed from purely mental steps.” Ultramercial at 6.

Both the eligible and ineligible methods included the use of computers. The Court reiterates that “use of a computer to execute an algorithm that can be performed in the mind” does not make the method patentable, nor does “mere manipulation or reorganization of data.” Cybersource at 1375. In contrast, the triangular business method “required intricate and complex computer programming” and “specific application to the Internet.” Ultramercial at 5

In conclusion, the rumor that patentable business methods are dead is premature at best. The Federal Circuit may allow the patentability of a business method; however, implementation must require more than a purely mental process. Although future decisions will define the degree of required non-mental process, the Federal Circuit has present some hints; computer programming must be more involved than data management and must truly relate to implementation of the method, application of specific algorithms in a narrow fashion is desirable and finally, complex methods requiring complex computer programming are more likely patentable than simple system.
 

Today, the ICM Registry launched the new sponsored top-level domain – .XXX. The .XXX domain is being launched specifically for the adult entertainment industry; however, the .XXX launch is also important for individuals, businesses, and organizations owning trademark rights. Trademark owners will have a short, fifty-two (52) day period (“Sunrise B period”) to protect their trademarks from .XXX registry ahead of wider availability on the .XXX domain. The Sunrise B period will run from September 7, 2011 to October 28, 2011.

The .XXX Registry is allowing trademark owners to block their marks in the .XXX domain (e.g., yourmark.xxx). The owner of a registered mark desiring to opt-out of the .XXX domain may submit an application to the .XXX Registry, with a one-time fee of $225 per domain name. This application, if granted, will remove that domain name from the pool of domain names available for future registration. Essentially, a successful application will prevent any potential person or entity from registering a trademark as an .XXX domain name for at least ten (10) years. Any blocked domain will resolve to a standard informational page stating that the domain name is not available for registration.

If a trademark owner does not block its trademark from .XXX registry during the Sunrise B period, all members of the adult entertainment industry will have the ability to register that mark as an .XXX domain name. Although post-registration protection measures, such as the ICM Registry’s Uniform Dispute Resolution Policy (“UDRP”) and the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (“ACPA”), are available to trademark owners who fail to block their mark from .XXX registry during the Sunrise B period, participation in the .XXX Registry’s Sunrise B opt-out process may be a more cost-effective and pro-active approach for trademark owners.

Trademark owners desiring to protect their marks from .XXX registry should act fast as the Sunrise B period only lasts from September 7, 2011 to October 28, 2011.
 

In Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc, 617 F.3d 1296 (Fed. Cir. 2010), the Federal Circuit reversed a district court’s summary judgment decision that no patent infringement occurred when a US company made an offer to sell to another US company when the sale negotiations occurred outside of the US.

Transocean filed suit for infringement of patents related to an improved apparatus for conducting offshore drilling. In order to drill for oil and other offshore resources, drilling rigs must lower several components to the seabed including the drill bit, casings, BOB’s, and the drill string. A conventional offshore drilling rig utilizes a derrick with a single top drive and drawworks that can only lower one element at a time in a time consuming process. Transocean patented a specialized derrick to improve the efficiency of lowering the above components. The specialized derrick included “two stations – a main advancing station and an auxiliary advancing station that can each assemble drill strings and lower components to the seabed.” Id. at 1301. This duel-activity rig could significantly decrease the time required to complete a borehole. Id at 1302. Transocean sued Maersk rig for infringement of the specialized derrick patent.
 

Thus, one of the questions before the Federal Circuit was whether an offer to sell, made in Norway by a U.S. Company to another U.S. company, to sell a product within the U.S. for delivery and use within the U.S. constituted an offer to sell “within the U.S.” under the definition of Section 271(a). Ultimately, the Federal Circuit determined that the focus should not be the location of the offer; rather, the focus must be on the location of the future sale that would occur pursuant to the offer. There was no question that the patent infringing rig was to be delivered to the US and utilized in the Gulf of Mexico. As such, the Federal Circuit vacated the district courts summary judgment of non-infringment noting the real harm that would be created by such a decision because U.S. companies could simply travel and contract abroad to avoid patent infringement. Id at 1309-10.

On remand, a jury found on April 21, 2011 that Maersk infringed Transocean’s valid patent and awarded Transocean $15 million. 2011 WL 2604769 (S.D. Tex 2011). Transocean’s victory was short-lived as on June 30, 2011, Judge Hoyt found pursuant to Fed. R. Civ. P. 50(b) that Maersk did not infringe the patents because the evidence did not support the jury’s findings.

Also of interest is a potential conflict between the prior decisions of the Federal Circuit and Judge Hoyt. The Maersk contract contained a provision allowing for the design to change if needed to avoid patent infringement. The Federal Circuit stated that schematics attached to the contract could support a finding of an infringed sale and that subsequent alterations were irrelevant. 617 F.3d at 1311. Judge Hoyt found that the contract anticipated alteration and therefore “no rig was offered for sale, or sold in violation of 35 U.S.C § 271(a).” 2011 WL 2604769 at 5. Further, Judge Hoyt found that under such circumstance, awarding a reasonable royalty would be unconscionable if the delivered drilling rig was altered to avoid infringement as Transocean would suffer no harm.
 

In the United States, patent owners or licensees are required to inform alleged infringers of their possibly infringing behavior prior to being able to recover damages for the infringement of a valid U.S. patent. (1)  Marking a product with the applicable patent number provides the requisite notice. (2)  However, failure to monitor products marked with a patent number can have dire consequences.

35 U.S.C § 292 prohibits the marking of an unpatented article as being “patented.” § 292 states that “[w]hoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word “patent” or any word or number importing that the same is patented for the purpose of deceiving the public… [s]hall be fined not more than $500 for every such offense.” (3)

Currently, any person may bring a lawsuit for a violation of 35 U.S.C. § 292 and get half of any fines levied against the entity responsible for the false marking. (4)  The other half of the fine goes to the United States government. (5)

While § 292 only provides for a civil monetary fine, the fine is up to $500 per offense. The Court of Appeals for the Federal Circuit, the court which hears appeals in all patent cases, held that an “offense” under the statute is each separate item that bears the false patent label. (6)  Accordingly, the damages could easily climb into the millions of dollars.

However, to be fined under § 292, there must be a showing that there was an “intent to deceive the public.” (7)  The Court of Appeals for the Federal Circuit held that there is no intent to deceive the public when there was a “reasonable belief that the articles were properly marked.” (8) 

Recently, the United States District Court for the Northern District of Ohio found that 35 U.S.C. §292 was unconstitutional. (9)  However, the Court of Appeals for the Federal Circuit has yet to determine the constitutionality issue. Additionally, the America Invents Act passed by the Senate would limit a cause of action under 35 U.S.C. §292 to the United States government or to an entity suffering a competitive injury as a result of the alleged false marking. (10)  The America Invents Act merely narrows the potential pool of plaintiffs and does not alter the amount of damages available.

Therefore, under the Court of Appeals for the Federal Circuit’s interpretation of the statute, it is important to have a plan in place to monitor patent marking and to ensure that the plan is actually implemented.  Additionally, the Court of Appeals for the Federal Circuit has held that obtaining the opinion of outside counsel with regards to the formation of a monitoring plan and to ensure that the items marked are covered by the applicable patents are facts which may tend to show that a business did not intend to deceive the public. (11)

To reduce the risk of violating the false marking patent law, businesses which own or license patents should consider obtaining the opinion of a competent patent attorney to assist in developing a plan to monitor patent marking and to determine if products and processes which are currently being marked with patent numbers are indeed covered under the listed patents.

(1)  35 U.S.C. § 287(a).
(2)  Id.
(3)  35 U.S.C. § 292(a).
(4)  35 U.S.C. § 292(b).
(5)  35 U.S.C. § 292(b).
(6)  Forest Group v. Bon Tool, 590 F.3d 1295, 1304 (Fed.Cir.2009).
(7)  Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed.Cir.2005).
(8)  Id., at 1353.
(9)  See Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc., 2011 WL 924341 (N.D.Ohio 2011).
(10)  S. 23, 112th Cong. (as passed by Senate, March 8, 2011).
(11) Pequignot v. Solo Cup, 608 F.3d 1356, 1364 (Fed.Cir. 2010)

In one of its last acts before its summer 2010 recess, the United States Supreme Court issued its opinion in the long-awaited case of Bilski v. Kappos (S.Ct. 2010 80-964). In the Bilski case, the inventor was seeking to obtain a patent on a method of hedging risk. The Supreme Court found that the method was not patentable because it was merely an abstract idea. In earlier jurisprudence from the Court of Appeals for the Federal Circuit (CAFC), the CAFC had used a “machine-or-transformation test” to determine whether business methods were patentable. In Bilski, the Supreme Court refused to say that the machine or transformation test was the sole test for determining patentability, and the Court did not reject the machine or transformation test. Instead, the Bilski court stated that the machine or transformation test is a useful tool, but not the only tool, for evaluating whether an invention is proper subject matter for patent protection.

While the result of the Bilski case was not the clarification that many in the business and patent legal communities had been awaiting, the case is significant in that it did not pronounce a death sentence for so-called business method patents. Going forward, it appears that pure software-based methods will not be patentable. However, an invention may still be patentable subject matter even if it fails the machine or transformation test, so long as it is not an abstract idea. Proving a negative is always difficult. Therefore, patenting a business method will be possible, but will be an uphill climb.

It will become more important for inventors to evaluate their claiming strategy for inventions which involve business methods. If there is enough substance to the invention or the implementation of the method so as to avoid being classified as an abstract idea, then it is possible that the invention will be deemed proper subject matter. It will also be important to see what the CAFC does in applying the Bilski case going forward.
 

The Fifth Circuit Court of Appeals recently addressed the standard for a declaratory judgment action in the context of trademark rights. In Vantage Trailers, Inc. v. Beall Corporation, 567 F.3d 745 (5th Cir. 2009), Vantage filed civil action seeking declaratory judgment finding that its designed for a new aluminum bottom dump trailer would not infringe on any valid trademark rights of Beall Corporation.  Beall manufacturers and sells an aluminum bottom dump trailer which is protected by a registered trademark.  In early 2006, Vantage began designing its own aluminum bottom dump trailer.  In July 2006, Beall’s vice president sent a letter to Vantage stating that if your company places any trailers into service that violate any of Beall’s trademarks we will pursue legal action to stop the infringement. In response to the letter, Vantage filed a civil action seeking a declaratory judgment that Beall’s trademark is invalid and that the design of Vantage’s trailer did not infringe on any intellectual property rights of Beall’s.

Vantage argued that its activities related to the design and attempted sale of an aluminum bottom dump trailer demonstrated the immediacy and reality of the controversy between itself and Beall.  Vantage had worked with an engineer on private development and began construction of a new manufacturing facility, purchased specialized equipment, built a sub-frame and offered to sell its new model trailers.  Although it was undisputed that Vantage had begun to manufacture a type of trailer, Vantage’s design was not substantially fixed and definite when it filed the action.  Even during the litigation, Vantage had made modifications to the external configuration or appearance of the trailers it was working to build.  Thus, the court could not compare the potentially infringing characteristics of Vantage’s trailer against those of the Beall trailers.

This ruling highlights that although a threatening letter had been sent, this threat alone cannot create an actual controversy under the Declaratory Judgment Act.  In order for a case to exist, a person must use a trademark or service mark.  A word, slogan, design or product configuration can only function as a trademark or service mark if used in commerce to identify and distinguish certain goods/services from those of others.  A mark is used in commerce when it is affixed to a good or service which is sold or transported in commerce. In this instance, the potentially infringing elements, i.e., the appearance of the trailers, were not substantially fixed, so as to constitute a distinctive shape that functioned to identify a source.  Therefore, no true controversy existed. Vantage was not yet using a mark in commerce so as to give rise to a controversy.  The ruling shows that the “cart must be before the horse” – a controversy must in fact exist as a matter of law before one can seek a declaration as to rights and obligations involving such controversy, regardless of the “warning shot” letter.
 

Social networks like Facebook, YouTube and Twitter are transforming the way companies communicate with consumers.  Facebook, YouTube and Twitter can be powerful business tools, but you must be mindful of certain legal limitations and guidelines.

The words “Facebook,” “YouTube,” and “Twitter” are proprietary to the companies that own them.   “Facebook,” “YouTube,” and “Twitter” are all registered with the U.S. Patent & Trademark Office.  A trademark is distinctive word, logo or phrase that is used by an individual or business to identify a unique source of products or services.
 

Both Facebook and Google authorize the use of the Facebook and YouTube trademarks in specified ways. These guidelines are set forth in full on each of their websites. Twitter does not yet have specific guidelines, although I anticipate similar guidelines will be listed on the Twitter website very soon. Until then, Twitter users should be wary of using the Twitter trademark to promote their businesses in advertising without receiving specific permission.

Google only allows use of the YouTube trademark in a specific way to give attribution to a You Tube video that may appear on a website or blog. If a YouTube link or video is incorporated into a business’s website or blog, then the business owner must use what YouTube refers to as its "Powered by YouTube Badge." This badge is available for free download & use.

Additionally, it is important to note that the YouTube license appears to only extend to use of the YouTube Badge to give attribution to a YouTube video on a website, blog, or other such means of electronic communication.  The license does not specifically address print advertisements, such as billboards.  When the YouTube badge is used on a website, it must be “clickable” so that it links back to http://www.youtube.com.  YouTube strictly prohibits changing the YouTube mark in any way, such as "YouTubers," "Tubing," You-Tube," or "YouTubed," etc.

Facebook actually recommends promoting one’s Facebook page outside of Facebook.  Facebook likewise provides guidelines for appropriate use of its trademark.  For example, Facebook allows its users to use its trademark to alerts consumers to: "Find us on Facebook to discover more about..." or "Check Out ABC Company on Facebook."  Facebook, however, prohibits use of its trademark as follows: "Check out the ABC Company Facebook Page" or "ABC Company partners with Facebook in social advertising campaign."  More examples of acceptable and unacceptable uses of the Facebook trademark are provided here.   Facebook also gives users permission to use its Facebook Page Badge, which can also be accessed from the website.  There are additional guidelines for use of the Facebook badge.

Facebook may be used in print advertisements, only if a registered trademark symbol ® is included each time the Facebook Brand is mentioned.  Where possible, Facebook recommends including its legal copy on all print promotional materials: “Facebook is a registered trademark of Facebook, Inc.”

Before delving into the world of social networking advertising, take the time to read the permissions and guidelines of whatever social networking site you may be using.  These guidelines are typically located on the social network’s website.  If there are no guidelines, the default rule is that specific permission should be sought to use the social network’s trademark to promote your business by incorporating a social network’s trademark in commercial advertisements.
 

Recent court decisions show that patent infringement opinions are still important for any person or entity that becomes aware of a United States patent that is similar to their products, methods or processes.

Under federal patent law, anyone who either makes, uses, offers to sell, or sells any patented invention in the United States or actively induces another to do so is liable for patent infringement.  In addition to regular damages, courts may award up to three times the damages for willful infringement.  Under the 1983 Underwater Devices Inc. v. Morrison-Knudsen Co. opinion, if a party had actual notice of another person’s patent rights, then that party had an affirmative duty to exercise due care to determine whether that party was infringing those patent rights.  This affirmative duty included the duty to obtain patent infringement opinions prior to engaging in any potentially infringing activities.
 

However, in 2008, the Federal Circuit found that patent infringement opinions can be used as evidence of intent, or the lack thereof, for claims of inducing patent infringement.  To be liable for inducing patent infringement, the patent holder must show that the alleged infringer knew or should have known that their actions would induce direct patent infringement.  The fact that the alleged infringer fails to produce or obtain a patent infringement opinion may be used as evidence that the alleged infringer knew or should have known that their actions would induce direct patent infringement.

To reduce the risk of an adverse judgment awarding a patent owner triple damages, any party that is aware of a patent that is similar to a product, method, or process which they utilize should consider obtaining a patent infringement opinion.

Facebook is taking certain steps to prevent infringement of intellectual property through “name-squatting.” In connection with this, Facebook is allowing Federally registered trademark holders to prevent the registration of usernames that would infringe their intellectual property rights.

There is a link to the form on Facebook’s Web site if you want to complete the form yourself. You will need the trademark registration number and the exact wording of the trademark as registered.

For more information, or to protect your trademark, please contact Pamela Baxter at pamela.baxter@keanmiller.com (225.389.3761) or Russel Primeaux at russel.primeaux@keanmiller.com (225.382.3454).

As we continue our shift to a more knowledge-based economy, frequently the greatest assets of a company reside in the creativity of its employees. This is especially true for service companies in which the services can be repeated for multiple customers (example: software). Whether or not a company owns something that has been created by one of its employees will depend to a great extent on the category of intellectual property into which the creation is classified. Generally, the creations or discoveries of employees will fall into the intellectual property categories of copyright, patent, or trade secret.

The legal standard used in determining whether a company owns a patentable invention is narrower than the “scope of employment” standard used in copyright law. For patentable inventions, the courts look to whether the employee had a “duty to invent.” We return to the above example of Mr. Jones, the dispatcher. Suppose the creation by the dispatcher was capable of patent protection. Because Mr. Jones was a dispatcher, who did not have a specific duty to invent, it is likely the company would not own any patent that might be issued to cover the invention.

For trade secrets, the law is less clear than the law for copyright and patent. Generally, trade secret law states that a trade secret will exist if the underlying information has value by not being generally known and is the subject of reasonable measures to keep it secret. Trade secrets are normally the property of the company, and not the individual employees. However, as a practical matter trade secrets are harder to control than patents or copyrights. If an employee maintains a list of customer contacts on her personal cell phone, and the employer does not have a specific policy stating that customer contacts are the property of the employer; it will be difficult for the employer to assert that the contact information is a company trade secret when that employee leaves the company.

Companies should use their information technology management practices to bolster the company’s trade secret practices. For example, if the sales person above had been provided a company Blackberry, and if the system ensured that all contact information was stored on company servers; the company would have a stronger basis for arguing that the customer contact information is a trade secret. The company would be in an even stronger position if it had a written policy regarding the company’s trade secret practices. Additionally, trade secret obligations should be included in employment agreements as well.

Employment agreements can also be used to clarify the company’s ownership of copyrights and patents. The company can make clear that the “scope of employment” for copyrights is considered very broad. Also, the company could impose a duty to invent on all employees. Additionally, the employee agreement can clearly state, under a simple contractual basis, that all inventions or works of authorship created by employees are owned by the company.

A company can properly protect and claim ownership over the creations of its employees. Doing so requires a knowledge of the different areas of the law that apply and appropriate company practices. Those practices should take advantage of the applicable law and should fill in the gaps where the law does not adequately address the situation.
 

“Someone is using my photos and website design on the internet without permission. What can I do?” These questions arise more and more with the increased use of the internet in business. The technical answer is that you have a potential claim for copyright infringement. Filing a federal lawsuit under the Copyright Act, however, is not a realistic option for many businesses, particularly when monetary damages may not be at issue. The goods news is that with the enactment of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C 512, victims of internet copyright infringement now have a more practical option for achieving the desired result – removing the infringing material from the internet – without filing a lawsuit. 

Once the ISP receives a written notice containing 1) identification of the work claimed to have been infringed, 2) identification and location of the infringing material, 3) contact information for the copyright owner, and 4) statements that that claimant has a good faith belief that the use is unauthorized and the notice is accurate and submitted by a person with authority to pursue the copyright owners rights, the DMCA requires that the ISP act expeditiously to remove or disable able access to the infringing material in order to maintain its limited liability. See 17 U.S.C. 512(c).

However, as with any claim, a DMCA claim should be thoroughly investigated before a notice of infringement is issued. “Any person who knowingly materially represents [that material or activity is infringing] shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer . . . or by a service provider, who is injured by such misrepresentation. . . .” 17 U.S.C. 512(f). 

The DMCA provides a more practical option for businesses to stop internet copyright infringement without having to incur the expense of filing suit. Moreover, results can oftentimes be achieved in a matter of weeks, as opposed to months or years. 

A jury in California issued a $6 million verdict against SLB Toys USA, Inc. (also known as ToyQuest) in favor of Wham-O, Inc., the manufacturer of the famous backyard yard toy, the Slip ‘N Slide. Wham-O owns two registrations for design marks for water slides which include the color yellow as part of the registration. Wham-O claimed that its famous yellow water slide has become an instantly recognizable iconic symbol of summer fun, and is famous among both children and adults.

On April 23, 2006, Twentieth Century Fox Film Corporation aired an episode of “Family Guy” entitled “Peterotica.” In this episode, Peter Griffin, who was an Archie Bunker-like character, enters a porn shop with his friends and comments that the porn shop is cleaner than he expected. One of Peter’s friends explains that Carol Burnett works part-time as a janitor. At this point, an animated character resembling the “Charwoman” from the Carol Burnett Show appears mopping the floor near several blow-up dolls and a rack of “XXX” movies. At this point, a slightly modified version of Carol Burnett’s theme song is playing in the background. One of Peter’s friends remarks, “You know, when she tugged her ear at the end of the show, she was really saying good night to her mom.” Another friend responded, “I wonder what she tugged to say good night to her dad?”

In responding to the action, defendants contended that even if the plaintiff possesses a valid copyright, the claim is barred by the doctrine of fair use. The court analyzed the fair use factors, including (a) the purpose and character of the work, (b) the nature of the copyrighted work, (c) the amount and substantiality of the amount used, and (d) the effect on the potential market. The fair use doctrine calls for a case-by-case analysis. See Campbell v. Acuff Rose Music, Inc., 510 U.S. 569 (1994). 

In addressing the first factor, the court considered to what extent the new work is transformative. Parody is a form of transitive use and is defined as a “literary artistic work that imitates the characteristic style of an author or a work for comic effort or ridicule, or is a composition in prose or verse in which the characteristic turns of thought and phrase or classes of authors are imitated in such a way to make them appear ridiculous.” After considering the arguments, the court concluded that the 18-second clip of the animated figure resembling the “Char woman,” mopping the floor next to the blow-up dolls, a rack of “XXX” movies, and video booths in a porn shop is clearly designed to imitate the style of an author or work for comic effort or ridicule. Family Guy put a cartoon version of Carol Burnett/Charwoman in an awkward, ridiculous, crude and absurd situation in order to lampoon and parody her as a public figure. In further analyzing fair use, the Court stated the Family Guy took just enough of the imaginary and accompanying theme music to make the crude depiction of the “Charwoman” character recognizable to the viewers. It noted that the market demand for the non-parodic use of the Charwoman would not be fulfilled by use that has the character in front of a blow up doll and XXX movies. Finally, the Court concluded that there was likelihood of confusion by the defendant’s use of the Char woman character and, thus, there was no basis for confusion or dilution.

The Court noted that Carol Burnett is an icon in American culture, as is her character the Charwoman. She is well respected and loved by a large sub-segment of American public based upon her persona and her outstandingly successful entertainment career. The Court stated, “Although debasing the Charwoman and making Ms. Burnett’s parents participants in a crude joke is disheartening, it does not mean she has a cause of action.” The Court dismissed the action concluding the law, as it must in an open society, provides broad protection for the defendant’s parodic segment.

The purpose of due diligence in the acquisition of licensing of intellectual property assets (namely patents and copyrights) is to give a buyer an opportunity to investigate and evaluate the asset concerned in some detail. More particularly, due diligence involving patens and copyrights can present ownership issues if the author/inventor is or was married and resides in a community property state. Whatever level of diligence is required for the particular transaction, the buyer should consider inquiring as to the current and past marital status of the inventor/author of the intellectual property if the inventor/author is either the seller; a direct owner of the seller; or in some cases, even a past owner of the intellectual property.

In the case of patents, federal case law states that the ownership of a patent vests initially with the inventor or inventors. On the other hand, in community property states like Louisiana, Texas, and California, a patent that is developed during the marriage is presumed to be co-owned by both spouses even though the other spouse is not a named inventor. In fact, it is not uncommon for courts to vest partial ownership rights in patents and copyrights to the non-contributing spouse in a binding marital property settlement. Thus far, courts have upheld these types of settlement by holding that federal law does not preempt state law when vesting ownership in the non-contributing spouse.

If the author/inventor of the intellectual property is married at the time of the transaction, it would be advisable to have the author/inventor’s spouse sign as a witness or as party to the assignment or license. Generally, one spouse has the power to transfer community personal property provided the transfer does not defraud the other spouse; however, gaining the non-contributing spouse’s consent would solidify the transaction. If the author/inventor has been divorced, the Buyer will need to determine if the intellectual property was created during the marriage so as to determine the non-contributing spouse’s possible ownership interest.

In the case of a patent, for example, ownership by the non-inventing spouse could be determined by inquiring as to when the invention was conceived; when the patent was filed; and when the patent issued. If either of these events occurred during the marriage, the non-inventing spouse may have a valid claim to an ownership interest in the patent and further diligence will be required by the buyer. At the very lease, any final divorce settlements should be reviewed to determine how the intellectual property was allocated between the two former spouses regardless of what state law controls. Unfortunately, it is common for attorneys to overlook the intellectual property assets when drafting a divorce settlement which may require further research into the controlling state law to determine if the non-contributing spouse has a valid ownership interest. Of course, it is always advisable to insert certain provisions into the contract wherein the seller represents and warrants that the seller is the sole owner of the intellectual property, but these provisions will not be effective against a third-party spouse’s claims of ownership.

In summary, it is always recommended to retain an experienced intellectual property attorney when acquiring or licensing intellectual property assets to deal with the pitfalls that can be involved with these types of transactions.

The Fifth Circuit recently addressed the issue of copyright ownership in its unreported decision in Pritchett v. Pound, civil action 05-41445 (5^th Cir. 2005). In 1981 Ronald Pound was hired by Pritchett, L.P., a business consulting firm founded by E. Price Pritchett. The employment contract provided that he was responsible for “completing regular written assignments and development of new products and procedures.”   It also stated that, “[s]hould the Employee produce any written materials in the course of his work with the Employer, then such shall be done for and on behalf of Employer and all work produced shall be the exclusive property of the Employer.” 

Ronald Pound died in1995.   Thereafter, in 2002, Nancy Pound sued Pritchet alleging co-ownership of the books. That action was subsequently dismissed. Thereafter, Pritchett filed this suit in the Eastern District of Texas seeking a declaratory judgment that it is the sole owner of the copyright in the two books. The Fifth Circuit affirmed the district court’s ruling that Pritchett is the sole owner of the books. The employment agreement specifically provided that written materials are the exclusive property of the employer. The books were therefore “made for hire” because Pritchett and Pound did not expressly agree otherwise by written instrument. See 17 U.S.C. §201(b).

Additionally, the Court held that the registration form is not a written agreement changing the employment relationship between the parties. The fact there was an error by the administrator in filling out the registration application does not change the nature of the employment relationship or ownership of the copyright. Although the certificate of registration can be prima facia evidence of ownership, this can be rebutted and was in this case. The Court also held that the errors in the certificate did not effectuate some type of transfer of the copyright. 17 U.S.C. § 204 states that a transfer of ownership is not valid unless an instrument of conveyance or a note or memorandum of transfer is in writing signed by the owner of the rights conveyed. The registration certificate did not satisfy this requirement as it did not reference a transfer or any intent to convey ownership.

The Fifth Circuit also affirmed the district court’s ruling finding Ms. Pound liable for attorney’s fees. 17 U.S.C. 505 provides that the court may allow the recovery of costs and award attorney’s fees to the prevailing party as part of costs. The district disagreed with Ms. Pound and concluded that this section is not limited to infringement claims since a determination as to ownership is a “civil action under this title”. The Fifth Circuit stated that in view of this often vexatious litigation over a long and tortured procedural history, with charges of fraud being made, the district court had discretion to award reasonable fees to Pritchett. The court did not question the reasonableness of the amount awarded.

The Dilution Statute was enacted as part of the Lanham Act in 1996. The Dilution Statute provides in 15 U.S.C. §1125(c) that the owner of a famous mark shall be entitled to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use causes dilution of the distinctive quality of the mark and to obtain such other relief as provided in this subsection. The courts have been wrestling with the meaning of the terms in the Statute since that time.

On October 6, 2006, President Bush signed the Trademark Dilution Act of 2006 into law to further refine the applicability of the Statute and clarify many of the legal issues. Many of the provisions of the Act are important to note.

First, the Act retitles the cause of action to be for Dilution by Blurring and Dilution by Tarnishment. Presumably, this eliminates the possibility of another basis for claiming dilution. Blurring is defined as an association arising from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark. Tarnishment is defined as an association that harms the famous mark’s reputation.

The Act provides factors for considering whether there is a likelihood of blurring including the degree of similarity, degree of inherent or acquired distinctiveness of the famous mark, extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark, degree of recognition of the famous mark, whether the user of the mark intended to create an association with the famous mark, and any actual association between the mark and famous mark.

The term famous mark is now clarified by the Act. In order to have a cause of action, the mark must be famous. The Act clarifies that it is "widely recognized by the general consuming public of the United States." This means the mark must be famous beyond some simple narrow sub-community or niche market, but instead must be in the general consuming public.

Damages are now available as a remedy under the Act if the mark was first used in commerce after the date of enactment of the Act and the defendant intended to trade on the recognition of the famous mark or to harm the reputation of the famous mark. It is unclear how the court will assess damages.

The Act includes a fair use defense by persons other than as a designation of source for the person’s own goods and services in connection with comparative advertising, parody, criticism and comment.

We will see how the courts interpret the new provisions supplied by the Act.

eBay is in litigation with a small company that claims that its patents cover the online auction method used by eBay. Blackberry users were a judge’s pen stroke away from an injunction that would have stopped all Blackberry use in the U.S. In that case, the patent owner, again a small company, claimed that the famous Star Trek type devices infringed the company’s patent. These patents might have been detected during a patent search, if eBay or Blackberry undertook such searches. This article will discuss each type of patent search, the cost, and the purpose.

Patentability Searches

Suppose your company develops a new product that appears to be innovative. You would like to obtain a patent if it is feasible. Before spending the money for a patent application (the initial filing cost could range from $8000 to $20,000), it may be wise to conduct a patentability search. The purpose of this search is to look through the issued patents and published patent applications at the U.S. Patent & Trademark Office (PTO) to find those patents which are relevant to the invention. Once you know of the existing patents, known as the prior art, you can make a better determination of your chances at obtaining a commercially viable patent. A patentability search and report can range from $500 to $2500, depending on (1) the complexity of the technology and (2) whether the results are reported in a formal opinion or are merely discussed in a meeting.

Your company may be concerned that a competitor has a patent on the product you are introducing. A clearance search is conducted to learn whether there are patents that could block you from selling your products. The search is broader than a patentability search. Because the scope of the search can be virtually limitless, it is hard to give a general cost estimate for these searches. The usual practice is to give the searcher a limit at which he or she will stop the search and share the results. However, it is doubtful that a clearance search can be done for less than $2000 and the cost can be much higher. Generally the cost of the product investment will drive the clearance budget. If you are building a half million dollar production line, it would be foolish to pinch pennies on the clearance study. You could finish your expensive production line and be enjoined from using it if a blocking patent existed. On the other hand, if your initial cost to get the first products to market is only $10,000; it would not make any sense to spend $5000 on a clearance search. 

Invalidity Searches

If your company has been sued for infringement, or if your company has received a cease and desist letter that threatens a suit for patent infringement; an invalidity search might be in order. In this search, the goal is to discover patents or other publications that should have been but were not considered during the PTO’s initial examination of the patent. If the invalidity search yields a piece of so-called “killer” or “knock-out” prior art, a couple of options are available. This killer prior art can be used as leverage in licensing negotiations. Alternatively, it can be used as evidence to invalidate the patent through PTO re-examination proceedings or a lawsuit.

These searches, like many facets of intellectual property, are tools that provide you with the proper information for making decisions. Armed with the results of a competent search, your company can exercise sound business judgment on the filing of applications, the introduction of products, or the response to a lawsuit.

Subsequent to registration, the Patent and Trademark Office ("PTO") requires that periodic forms be filed to keep the mark "alive". It is suggested that the mark owner create a calendar system to track the various filing deadlines for the marks. While many law firms will track the deadlines, due to the long time periods that are involved it is always prudent to have the owner of the marks keep track of the dates.

The owner of the trademark should monitor the use of their marks to make sure they are actually used in association with the products or services for which the federal registration was filed. This becomes particularly important if a number of marks are owned in a portfolio of trademarks. Without use of a mark, you may loose all rights in a mark. There is a presumption under federal law that if you do not use a mark for a three-year period, you are deemed to have abandoned the mark. While this presumption is reputtable, it is not something you want to try to rebut at an infringement trial. Best practice is to ensure that each mark in a trademark portfolio is used in commerce each year.

If a trademark is registered for a product, the mark must be used in association with the sale of the product "in commerce". This means the mark must be attached to the product itself (for instance a label sewed to a piece of clothing) or affixed to packaging. If the mark is registered for a service, advertising of the services offered using the mark will be sufficient.

Also, as part of maintenance of your marks, you should make sure you always use a "™" symbol in association with your registered marks (and only your registered marks), and a "TM" next to your unregistered marks, for example: Coke™, or WidgetTM.

Third, you should monitor the use of your marks by competitors and third parties. It is important to take action against all infringers as soon as possible. If you turn a blind-eye to one infringer, or you let someone infringe a mark for too long, the legal doctrine of estoppels and latches may prevent you from enjoining that party from use of the mark, and may destroy your rights in the mark as to the world.

Diligence in the protection and maintenance of your trademarks can save money in the long-run and may help you avoid future costly litigation, as well as protect the name by which your customers have come to know your products and services.

For more information, contact Bill Caughman at 225.389.3724 or bill.caughman@keanmiller.com

The second key definition is misappropriation. This term is defined as the acquisition of a trade secret of another person who knows or has reason to know that it was acquired by improper means or disclosure or use of a trade secret of another without express or implied consent by a person who used improper means to acquire knowledge of the trade secret, or at the time of disclosure knew or had reason to know that his knowledge was derived from a person who had utilized improper means to acquire it. In any action, a plaintiff will have to prove that the party receiving the information wrongfully breached a duty of trust or confidence by disclosing or using the information to the injury of the plaintiff.

Thus, how any supposed trade secret is handled is very important. Evidence regarding use of confidentiality agreements, where the secret information is retained, the process whereby the supposed defendant acquired it, will all be subject to scrutiny by any Court in determining whether a claim is actionable. Businesses should consider whether their efforts to maintain secrecy are reasonable before any supposed misappropriation occurs so as to be covered by this Act.

For more information, contact Sonny Chastain at 225.389.3706 or sonny.chastain@keanmiller.com

Someone once observed that most car accidents occur within 10 blocks of the driver's home. We see a analogous trend in Intellectual Property "crimes" - i.e. infringement of patents, trademarks, or copyrights; or misappropriation of a trade secret. Intellectual Property (IP) disputes between two parties that are strangers to one another are the exception, not the rule.

The licenses can be for trademarks, trade secrets, or patents. In a trademark license, the licensor (the trademark owner who is granting the license) should ensure that the agreement covers good will generated by the licensee. The license agreement should clearly state that good will generated by the licensee in the trademark inures to the benefit of the licensor, not the licensee. Additionally, the agreement should state that any registrations that the licensee seeks to obtain in its name either (1) will be deemed to be obtained for the benefit of the licensor or (2) can be voided by the licensor. Licensees who elect to part ways with the licensor should be careful not to infringe the licensor's trademarks going forward. Former licensees should discard or return to the licensor (check the agreement) all old parts lists, brochures, and marketing materials and start fresh with new materials.

In patent licenses, as well in joint ventures (JVs), the most common dispute is over improvements to technology. The license or venture agreement should spell out exactly what happens in the various scenarios of inventorship. The three possibilities are: (1) the licensor (or JV partner #1) creates the new technology; (2) the licensee (or JV partner #2) creates the new technology; or (3) the invention is truly jointly created by the licensor and licensee (or both JV partners). The license or JV agreement should state how the parties will handle inventions arising under each of these three categories. An important provision is that each party should be under a duty to report all inventions to the other party, even if the reporting party believes it is the sole owner of the invention. Such an obligation ensures that the parties are fully disclosing their activities, and provides an additional legal claim (breach of contract) in addition to the IP infringement claims which might be available.

When dealers or distributors sever their relationship with a manufacturer; it is often because the dealer has decided to make its own products. The dealer must be careful to fully assess the manufacturer's IP rights. The dealer should consult with IP counsel to steer around those IP rights and avoid any infringement claims. From the manufacturer's perspective, the manufacturer should be careful to follow the procedures outlined in the dealer agreement. A court will not look favorably upon a manufacturer who failed to follow the procedures outlined in the dealer agreement; especially if the agreement is a form agreement drafted by the manufacturer.

A final consideration in disputes with former partners is that these disputes are often very emotional situations, and the scenario tends to be driven by personalities. It is important to remember that the dispute is simply another part of one's business and should be treated with sound business judgment. When possible to do so, the person making decisions about the dispute should be a person who was not directly involved in the earlier relationship. When cooler heads prevail, the terms of the "divorce" can be settled in a manner that allows everyone to get back to business.