IP Law Daily, WORTH NOTING—Other IP law developments, (Jul 13, 2018)

A periodic roundup of other items of interest to the Intellectual Property community:

COPYRIGHT—9th Cir.: The U.S. Court of Appeals in San Francisco has issued an amended version of its opinion affirming a district court’s judgment, after a jury trial, that "Blurred Lines" songwriters and pop stars Robin Thicke and Pharrell Williams were liable for approximately $5.3 million in damages to the heirs of the late Marvin Gaye for infringing Gaye’s copyright in the 1977 hit "Got to Give It Up." The split panel did not alter the substantive holdings made in the original opinion, which was issued March 21, 2018, and in which the court held that "Got to Give It Up" was entitled to a broad scope of copyright protection and that the jury’s infringement verdict was supported by evidence and was not the result of erroneous jury instructions. The court removed passages from the original opinion that discussed the controversial "inverse ratio" rule, a Ninth Circuit doctrine providing that the stronger the showing of access to a copyrighted work, the lesser the showing of substantial similarity that is required to find infringement. Circuit Judge Jacqueline H. Nguyen revised her dissenting opinion first issued in March, again opining that that "Blurred Lines" and "Got to Give It Up" were not objectively similar and that the defendants were entitled to judgment of noninfringement as a matter of law, and changing her dissent only to remove a passage criticizing the majority’s invocation of the "inverse ratio" rule. The panel also voted 2-1 (with Judge Nguyen in the minority) to deny a petition to rehear the case en banc (Williams v. Gaye, July 11, 2018, Smith, M.).

COPYRIGHT—11th Cir.: An individual who accused Apple Inc. of engaging in copyright infringement by copying a drawing of an "electronic reading device" that he had invented in 1992 was not entitled to leave to amend his pro se complaint, the U.S. Court of Appeals in Atlanta has decided. There was nothing to indicate that the individual owned a copyright on any element of the drawing that Apple allegedly copied. The idea for the device was not subject to copyright protection, in the court’s view. Each element of the drawing was purely functional and inseparable from the idea of a handheld electronic reading device. None of those elements could be conceived as a work of art separate from the device itself, but rather were necessary parts of it, the court said. Even if the individual were successful in identifying copyrightable elements of his drawing, he did not plead any facts to establish that Apple copied them. He also made no arguments in support of direct copying or access in his appeal. The drawing was not so similar to Apple’s devices as to indicate "striking similarity" (Ross v. Apple, Inc., July 12, 2018, per curiam).

COPYRIGHT—2nd Cir.: The federal district court in Manhattan correctly ruled that use of the characters, plot, and setting of the Dr. Seuss book, How the Grinch Stole Christmas! ("Grinch") in a comedic play, titled Who’s Holiday!, constituted a noninfringing fair use, the U.S. Court of Appeals in New York City has held. Declaratory judgment of noninfringement on the pleadings was appropriate because it was apparent that all four factors listed in Section 107 of the Copyright Act favored a finding of fair use. The play was a parody, imitating the style of the Grinch for comedic effect and to mock the naive, happy world of the Whos. Dr. Seuss Enterprise’s trademark counterclaims also were properly dismissed under the balancing test set forth in Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989), because the public’s interest in free speech outweighed Dr. Seuss’s interest in protecting its trademarks (Lombardo v. Dr. Seuss Enterprises L.P., July 6, 2018, Hellerstein, A.).

COPYRIGHT—N.D. Cal.: The federal district court in San Francisco has determined that Lucasfilm Ltd. and Lucasfilm Entertainment (collectively, "Lucasfilm") established as a matter of law that software developer Ren Ventures infringed copyrights in the Star Wars franchise (the "Works") by using protected elements of the movies in a mobile app game called "Sabacc—The High Stakes Card Game," which allowed users to play an online card game that mimicked the appearance and rules of the fictional Sabacc game featured in the Star Wars franchise universe. However, disputed questions of fact precluded deciding on summary judgment whether Ren Ventures’ infringement was willful. Lucasfilm established ownership by showing that the elements of the Works at issue here—the images and dialogue used by the defendants—were part of the registered works by specifying the precise time stamps where they appear on the DVDs submitted to the Copyright Office. The defendants failed to establish entitlement to the affirmative defenses of equitable estoppel, de mimimis use, and fair use. The defendants’ argument that they did not expect to be sued for copyright infringement because they were first sued only for trademark infringement and because others had infringed the works were unpersuasive. The defendants’ game used GIF images consisting of seconds-long Star Wars video clips paired with short captions. The defendants’ use was not, as a matter of law, de minimis because no reasonable jury could find defendants’ use was "so meager and fragmentary that the average audience would not recognize the appropriation." The defendants’ use of the allegedly infringing content to promote their mobile game app strongly disfavored a fair use finding under the important first and fourth factors—purpose and character of the use and the effect of the use upon the copyrighted work’s potential market or value. While defendants may be correct that "no one is going to watch a Star Wars GIF instead of the original movie," the GIF images can nonetheless have an adverse effect on the derivative market, the court said (Lucasfilm Ltd. LLC v. Ren Ventures Ltd., June 29, 2018, Seeborg, R.).

PATENT—Fed. Cir.: In light of the Supreme Court’s recent decision in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), the U.S. Court of Appeals for the Federal Circuit had granted Adidas AG’s motion to remand to the Patent Trial and Appeal Board two inter partes review proceedings (involving claims 1–13 of Nike’s U.S. Patent No. 7,814,598 and claims 1–9, 11–19 of U.S. Patent No. 218,266,749) for consideration in the first instance an additional ground Adidas had asserted in its petitions for review, which was not addressed by the Board. The Board instituted review of all challenged claims, but only on one of the two grounds for obviousness raised by Adidas. Adidas argued that the Patent Office recently issued public guidance indicating that, in light of SAS, the Board will institute review on all challenges raised in the petitions. The court expressly rejected Nike’s argument that SAS was "irrelevant to the present appeal" because SAS required only institution as to all claims, and that Adidas had waived any "all grounds" argument by failing to present it to the Board (Adidas AG v. Nike, Inc., July 2, 2018, Moore, K.).

PATENT—Fed. Cir.: The U.S. Court of Appeals for the Federal Circuit has remanded for a second time three decisions issued Patent Trial and Appeal Board following inter partes review of patents related to coaxial cable connectors owned by PPC Broadband ("PPC"). On February 22, 2106, the Federal Circuit held that the Board erred in determining that claims 8, 16, and 31 of U.S. Patent No. 8,287,320, claims 1-9 of U.S. Patent No. 8,323,060, and claims 7–27 of U.S. Patent No. 8,313,353 were invalid for obviousness. In particular, the Board (1) failed to make sufficient factual findings to support its conclusion that the combination of two prior art references would have made the limitations of the claims obvious; (2) improperly concluded that PPC did not establish that its "SignalTight" connectors met all of the elements of the challenged claims for the purpose of giving rise to a presumption of commercial success; and (3) failed to give due weight to PPC’s unrebutted evidence of copying and failure of others.The Board repeated these same errors on remand, the court said. The case was remanded for the Board to reconsider the evidence in light of the court’s reiterated instructions, including making factual findings to support that the combination of two prior art references teach the "maintain electrical continuity" limitations and considering PPC’s objective indicia evidence of non-obviousness anew (PPC Broadband, Inc. v. Iancu, July 3, 2018, O'Malley, K.).

PATENT—Fed. Cir.: The federal district court in Minneapolis properly granted summary judgment of noninfringement to medical device manufacture Wright Medical Technology as to two claims of a patent for an expandable surgical reamer owned by competitor Spineology, the U.S. Court of Appeals for the Federal Circuit has held. The district court correctly construed the term "body" and found that claims 33 and 34 of U.S. Patent No. RE42,757 (the ’757 patent) were invalid and, therefore, not infringed by Wright Medical’s accused products. However, the district court erred in finding that claims 15, 21–23, and 35 were indefinite under the court’s construction. Moreover, because each of these claims also contained the same "body" limitation, they were not infringed by Wright Medical. The judgment of invalidity was vacated and the case was remanded with instructions to enter judgment of noninfringement as to the remaining claims (Spineology, Inc. v. Wright Medical Technology, Inc., July 6, 2018, Dyk, T.).

PATENT—Fed. Cir.: The U.S. Court of Appeals for the Federal Circuit has withdrawn a previous precedential opinion, issued May 1, 2018, affirming a district court’s judgment, following a jury trial, of liability for trade secret misappropriation of technology relating to the photodiode array structure of ambient light sensors for electronic devices. The court replaced its May 1 decision with a modified precedential opinion. According to the order granting TAOS’s petition for panel rehearing, only section "III.A" of the original opinion regarding sales abroad was modified. The revisions had no substantive effect on the court’s earlier decision (Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc., July 9, 2018, per curiam).

PATENT—D. Mass.: Pharmaceuticals makers Shire LLC and Shire US Inc. (collectively, "Shire") have been granted $1.5 million in attorney fees and costs incurred as a result of litigation misconduct by Abhai, LLC, during Shire’s successful patent infringement suit over Abhai’s generic version of the drug Adderall. In a decision issued March 22, the federal district court in Boston determined that Abhai’s proposed generic product met each limitation of patents covering Shire’s Adderall products. Also, the court sanctioned Abhai $30,000 for litigation misconduct for failure to correct inaccurate stability and dissolution testing data that Abhai had disclosed to Shire during discovery. The additional fee and costs award covered: (1) expenses incurred as a result of the time Shire wasted with Abhai’s inaccurate data; (2) costs associated with discovering the litigation misconduct, including deposition costs; and (3) fees and costs incurred in connection with revisions of Shire’s expert reports using the corrected data. With respect to the first category, Shire was only entitled to the costs it incurred in reviewing the incorrect data and could not recover costs associated with its experts’ independent analyses or for work done on correct stability data prior to the discovery of the misconduct (Shire LLC v. Abhai, LLC, July 11, 2018, Young, W.).

TRADEMARK—TTAB: In a proceeding seeking cancellation of Pinnacle Entertainment, Inc.’s registered mark PINNACLE ENTERTAINMENT, the Trademark Trial and Appeal Board in a precedential decision has ruled as a matter of law that petitioner Freki Corporation was barred under the doctrine of claim preclusion from asserting cancellation based on abandonment due to naked licensing because the claim was a compulsory counterclaim in prior cancellation proceeding between the parties. Under Trademark Rule 2.114(b)(3)(i), a defense attacking the validity of a registration pleaded in a cancellation action is a compulsory counterclaim if grounds for the counterclaim existed at the time when the answer is filed or are learned during the course of the cancellation action. Freki’s assertion of its naked licensing claim as an affirmative defense in the prior proceeding demonstrated that Freki was aware of the claim and its underlying facts when it filed its answer in that case. While Freki was not barred by claim preclusion from asserting claims for cancellation based on nonuse, abandonment for nonuse, and fraud because those claims were not before the Board in the prior proceeding, Freki’s nonuse and fraud claims were insufficiently pleaded and were dismissed without prejudice (Freki Corp. N.V. v. Pinnacle Entertainment, Inc., June 6, 2018, by the Board).

TRADEMARK—TTAB: The Trademark Trial and Appeal Board has decided, in a precedential ruling, that the federal district court in Newark, New Jersey, lacked the statutory authority to order the Commissioner of Trademarks to transfer an application to register KEYBOARD WELLNESS.COM to opposer Piano Wellness, LLC. Section 37 of the Trademark Act permits the USAPT Director to take action in accordance with district court orders and decrees that "determine the right to registration, order the cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action." Section 37 is limited to registrations, not pending applications. When a district court determines that ownership of a pending application should be transferred, the source of its authority to order the transfer is not Section 37, but rather its plenary power to order the parties to take the steps required to effectuate such transfer, such as requiring an applicant to assign the application to an opposer and record that assignment with the USPTO. Alternatively, under Section 18 of the Trademark Act, the Board could, upon motion of either party, amend the ownership of an application pursuant to the Board's authority to "register the mark or marks for the person or persons entitled thereto." A third option would be a motion to sustain the opposition, thereby effing an abandonment of the application, in view of the court’s permanent injunction against the applicant. The opposer was given 30 days to seek further relief from the district court or file a motion to amend the pending application or sustain the opposition (Piano Wellness, LLC v. Williams, June 29, 2018, by the Board).

TRADE SECRETS—2nd Cir.: The U.S. Court of Appeals in New York City has vacated a jury’s award of a $3.9 million in damages to a security seals manufacturer, and remanded the case for further proceedings to consider damages in view of direction provided by the New York Court of Appeals. The jury’s award was based on total costs a competitor avoided as a result of its unauthorized use of the plaintiff’s automated processes. In June 2017, the Second Circuit asked the New York Court of Appeals whether a plaintiff asserting claims of misappropriation of a trade secret, unfair competition, and unjust enrichment under New York common law may recover damages based on the defendant’s avoided costs. On May 3, 2018, New York’s high court, in a split-decision, held that "avoided costs" is not a proper measure of damages under common law because it focused on the defendant’s gain rather than on the plaintiff’s loss. The court clarified that damages in trade secret actions must be measured by the losses incurred by the plaintiff, and that damages may not be based on the infringer's avoided development costs (E.J. Brooks Co. v. Cambridge Security Seals, July 3, 2018, Preska, L.).

COPYRIGHT NEWS: The Copyright Office is proposing to create a regulation regarding its procedures for closing out royalty payments accounts under 17 U.S.C. §1005, and updating its regulations governing online payment procedures for cable, satellite, and digital audio recording technology (DART) statements of account to no longer require that payments be made in a single lump sum, according to a notice in the Federal Register. The Office said that the amendments are intended to improve the efficiency of the Office’s Licensing Division operations. The Office is accepting written comments through August 10 (83 Federal Register 32068, July 11, 2018).

PATENT NEWS: Mobile apps developers face difficulties dealing with the U.S. Patent and Trademark Office’s patent procedures, Morgan Reed, president of ACT, which represents apps developers, said in prepared testimony on June 11 at a House Small Business Committee hearing on the use of intellectual property by small businesses. "Though patents have great importance to our members, many have encountered difficulty navigating the USPTO’s patent application process," Reed said. "Delays in prior art reviews are frustrating, and our members often recount the difficult decision-making process when trying to determine whether to protect novel inventions by patenting them. The costs are great, particularly for software patents."

PUBLICITY RIGHTS NEWS: The California Supreme Court has turned down a request by actress Olivia de Havilland to review an intermediate appellate court’s decision that de Havilland’s claims for violation of the California statutory publicity rights statutory right of publicity and various common-law privacy torts against the creators and producers of the television miniseries "Feud: Bette and Joan" were barred by California’s anti-SLAPP law. The appellate court held that the First Amendment protected the use of de Havilland’s name and likeness by the program’s creators. The petition for review was denied July 11 (de Havilland v. FX Networks, No. S248614).

TRADEMARK NEWS: A revised version of the Trademark Trial and Appeal Board Manual of Procedure (TBMP). The June 2017 revision is a minor update of the January 2017 edition. Primarily, it incorporates relevant case law issued between September 30, 2016 and March 3, 2017.

Attorneys: Kathleen M. Sullivan (Quinn Emanuel Urquhart & Sullivan LLP) and Howard E. King (King, Holmes, Paterno & Soriano, LLP) for Pharrell Williams, Clifford Harris Jr., Robin Thicke, and More Water from Nazareth Publishing Inc. Mark E. Haddad (Sidley Austin LLP) for Star Trak Entertainment, Interscope Records, UMG Recordings Inc., and Universal Music Distribution. Lisa Blatt (Arnold & Porter LLP), Paul H. Duvall (King & Ballow), Mark L. Block (Wargo & French LLP), and Paul N. Philips (Law Offices of Paul N. Philips APLC) for Frankie Christian Gaye, Marvin Gaye III, and Nona Marvisa Gaye. Catherine Emily Stetson (Hogan Lovells US LLP) for Apple, Inc. Juan Chardiet (Juan Chardiet, Attorney At Law) for Freki Corp. N.V. d/b/a Pinnacle Sports Worldwide. Erin E. Lewis (Brownstein Hyatt Farber Schreck LLP) for Pinnacle Entertainment, Inc. Elliott J. Stein (Stevens & Lee PC) for Piano Wellness, LLC. Charlotte K. Williams (GoDaddy, LLC) for Charlotte K. Williams. Suzelle M. Smith (Howarth & Smith) for Olivia de Havilland. Glenn D. Pomerantz (Munger, Tolles & Olson LLP) Glenn D. Pomerantz (Munger, Tolles & Olson LLP) for FX Networks, LLC, and Pacific 2.1 Entertainment Group, Inc. Jordan Greenberger (J. Greenberger, PLLC) for Matthew Lombardo and Who's Holiday Ltd. Liability Co. Andrew Lawrence Deutsch (DLA Piper LLP [US]) for Dr. Seuss Enterprises, L.P. Fabien Manohar Thayamballi (Shapiro Arato LLP) for Lucasfilm Ltd. LLC and Lucasfilm Entertainment Co. Ltd. LLC. James E. Rosini (Hunton Andrews Kurth LLP) for Ren Ventures Ltd. and Sabacc Creative Industries Ltd. Michael A. Bittner (Winston & Strawn LLP) for Equistar Chemicals, LP and MSI Technology LLC. Daryl Joseffer (King & Spalding LLP) for Westlake Chemical Corp. Randall Thomas Skaar (Skaar Ulbrich Macari, PA) for Spineology, Inc. Anthony James Fitzpatrick (Duane Morris LLP) for Wright Medical Technology, Inc.

Companies: More Water from Nazareth Publishing Inc.; Star Trak Entertainment; Interscope Records; UMG Recordings Inc.; Universal Music Distribution; Apple, Inc.; Shire LLC; Shire US Inc.; Abhai, LLC; Freki Corp. N.V. d/b/a Pinnacle Sports Worldwide; Pinnacle Entertainment, Inc.; Piano Wellness, LLC; FX Networks, LLC; Pacific 2.1 Entertainment Group, Inc.; Who's Holiday Ltd. Liability Co.; Dr. Seuss Enterprises, L.P.; Lucasfilm Ltd. LLC; Lucasfilm Entertainment Co. Ltd. LLC; Ren Ventures Ltd.; Sabacc Creative Industries Ltd.; Equistar Chemicals, LP; MSI Technology LLC; Westlake Chemical Corp.; Spineology, Inc.; Wright Medical Technology, Inc.; PPC Broadband, Inc.

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