MVS Filewrapper® Blog: The Ongoing Battle of Copyright Protection and Pre-1972 Sound Recordings

Federal Copyright Law generally protects works that are fixed in a tangible medium from unauthorized use, including copying, performance, exhibition, and broadcasting.  However, sound recordings from before 1972 are treated uniquely under the law—a situation that has resulted in real legal problems.

 

When enacted, the Federal Copyright Law preempted any state rights relating to copyright protection.  However, because the Copyright Act of 1909 failed to provide protection for sound recordings, and protection for sound recordings was not incorporated into the Federal Copyright Law until 1972, protection for sound recordings prior to 1972 is governed by various state law doctrines. 

 

In particular, the Federal Copyright Law retains several "safe harbors" concerning certain acts relating solely to sound recordings, such as broadcasting pre-1972 sound recordings over the radio. § 114 of the current Copyright Act allows for broadcast transmission of a protected sound recording.  However, some copyright holders are attempting to hold broadcasting companies liable for "unauthorized broadcast transmission" of pre-1972 sound recordings under various state misappropriation laws. A class action suit filed in September, 2013 in the Central District of California alleges that SiriusXM refuses to obtain licenses for transmission of pre-1972 recordings in violation of common law and California law, seeking payment for the use of thousands of songs.  Two additional class action suits have been filed in the Southern District of New York and the Southern District of Florida, alleging violation of New York and Florida law, respectively.  A fourth suit has also been filed in California state court by Capitol Records, Sony Music, UMG Recordings, Warner Music, and ABKCO Music. 


Currently, the federal courts are split on whether a state's misappropriation law establishes a cause of action to a copyright holder with a pre-1972 sound recording.  The outcome of these cases may help to clarify what protection is afforded to pre-1972 sound recordings, and under what law.

MVS Filewrapper® Blog: New and Useful - July 10, 2013

·         In Convolve v. Compaq Computer the Federal Circuit affirmed in part the United States District Court for the Southern District of New York ruling that Compaq Computer Corp., Seagate Technology, LLC., and Seagate Technology, Inc. did not misappropriate 11 of 15 alleged trade secrets from Convolve, Inc.  In addition, the Federal Circuit affirmed the district court’s judgment that 8 claims of U.S. Patent No. 4,916,635 (“the ’635 patent”) are invalid.  However, the Federal Circuit vacated the district court’s ruling that Compaq did not infringe several claims of U.S. Patent No. 6,314,473 (“the ’473 patent”), and remanded the case for further proceedings relating to that patent. 

Convolve and Massachusetts Institute of Technology (“MIT”) sued Compaq and Seagate for both trade secret misappropriation and patent infringement, all related to technology developed by Dr. Neil Singer while a graduate student at MIT.  The technology involves seeks in computer hard drives, and minimizing the vibrations created by those seeks—the ’635 patent discloses a method “for generating an input to a system to minimize unwanted dynamics in the system response and to reduce energy consumed by the system during moves,” and an apparatus for shaping commands to a system “to reduce endpoint vibration.” The ’473 patent covers the same type of technology, but relating specifically to data storage devices such as computer disk drives.  The ’473 patent is owned by Convolve, a company owned by Dr. Singer, and the ’635 patent is owned by MIT.  Convolve is the exclusive licensee of MIT software motion control technology called Input Shaping, which Convolve alleges is covered by the trade secrets and patents involved in the case. 

Convolve entered into licensing discussions with Compaq, which included a non-disclosure agreement (NDA) signed by both parties and covering confidential information disclosed between August 13, 1998 and October 15, 2000, but explicitly excluding any information that: (1) the recipient possessed prior to disclosure; (2) was a matter of public knowledge; (3) was received from a third party without a duty of confidentiality attached; (4) was independently developed by the recipient; (5) was disclosed under operation of law; or (6) was disclosed by the recipient with the discloser’s prior written approval.  The NDA further stated that any confidential material or presentations must be particularly identified as confidential.  Compaq sought to include Seagate as the potential designer and manufacturer of hard disk drives incorporating Convolve’s technology to include in Compaq’s computers.  Convolve then disclosed its technology to Compaq and Seagate, but Convolve and Compaq/Seagate never entered into a licensing agreement.

Convolve filed suit alleging breach of contract, misappropriation of trade secrets, patent infringement of the ’473 patent, ’635 patent and breach of good faith and fair dealing.  The district court granted Compaq and Seagate’s motions for summary judgment, dismissing Convolve’s claims of breach of contract, infringement of the asserted claims of the ’473 and ’635 patents, and misappropriation of a subset of the trade secrets asserted against Compaq and Seagate; and granting Seagate’s motion for summary judgment for invalidity of the ’635 patent.  

Regarding the alleged trade secrets, the Federal Circuit upheld the district courts findings and judgment that Compaq and Seagate had not misappropriated 7 of the asserted trade secrets because Convolve disclosed the information in the absence of a written confidentiality follow-up memorandum mandated by the NDA.  The Federal Circuit also affirmed the district court’s ruling that 6 of the asserted trade secrets were either generally known before any disclosure by Convolve or were not used by Seagate following any disclosure by Convolve.  Further, the court rejected Convolves argument that Seagate’s actions constituted trade secret misappropriation under the California Uniform Trade Secret Act notwithstanding the NDA, concluding that where the parties have contracted the limits of their confidential relationship regarding a particular subject matter, one party should not be able to circumvent its contractual obligations or impose new ones over the other via some implied duty of confidentiality.

The Federal Circuit vacated the district court’s grant of summary judgment to Seagate and Compaq for non-infringement of the asserted claims of the ’473 patent, concluding that there were material issues of fact that precluded a grant of summary judgment  as to direct or indirect infringement.  The court also concluded that there was sufficient evidence to preclude summary judgment for induced infringement on the basis of the court’s recent holding in Toshiba Corp. v. Imation Corp. that when an alleged infringer instructs users to use a product in an infringing way, there is sufficient evidence for a jury to find direct infringement.

·         The Federal Circuit in Wyeth v. Abbott Laboratories upheld the U.S. District Court for the District of New Jersey's grant of summary judgment that claims 1 and 2 of U.S. Patent No. 5,516,781 and claim 1 of U.S. Patent No. 5,563,146 are invalid for nonenablement.  The patents relate to the use of rapamycin for the treatment of restenosis.  The patents disclosed use of the rapamycin species sirolimus to reduce thickening of arterial walls.  Wyeth sued the defendants for patent infringement for their products that elute everolimus and zotarolimus.  These compounds fall under the umbrella of rapamycin, but are not mentioned in the specification of the Wyeth patents.

The main issue on appeal was whether practicing the full scope of the claims requires excessive experimentation.  The specification describes assays used to determine whether a potential rapamycin compound exhibits the desired characteristics of immunosuppressive and antirestenotic effects.  Wyeth argued that even though millions of compounds would meet these criteria, one of skill in the art would know that an effective compound had to be small enough to permeate cell membranes.  However, that still leaves tens of thousands of compounds to test and the specification gave no indication of which types of rapamycin compounds would be preferable over others, leaving scientists to synthesize and screen each and every compound. 

While synthesizing and screening compounds is considered routine experimentation, the Court noted in Cephalon, Inc. v. Watson Pharm., Inc. that routine experimentation is "not without bounds."  One indication of excessive experimentation is length of time that would be spent to do the experiments.  Wyeth's expert admitted that it would take technicians weeks to complete each of the assays. 

A final indicator that the invention is not enabled is the unpredictability of the field.  Simply offering a starting point for further research in field like organic chemistry does not properly enable an invention.  Due to the uncertainty, there needs to be more concrete guidance given in the specification in order to avoid undue experimentation.

Ultimately, the Federal Circuit determined that synthesizing and screening tens of thousands of candidate compounds constituted undue experimentation.  While they did not draw a definitive line between routine experimentation and undue experimentation, the Court did provide some guidance on what could be considered excessive experimentation in organic chemistry.

·         In Commil USA v. Cisco Systems, Cisco Systems appealed a district court final judgment in favor of Commil, asserting that the district court gave erroneous jury instructions, improperly precluded Cisco from presenting evidence of good-faith belief of invalidity, and abused its discretion by granting a new partial trial.  On appeal, the Federal Circuit found that the district court gave erroneous instructions to the jury with respect to indirect infringement and that evidence of a good-faith belief of invalidity may negate the intent required to show induced infringement.  The Court determined that the district court did not err in granting the partial new trial.

In regard to the issue of indirect or induced infringement, the jury had been instructed in part that to show induced infringement, "Cisco knew or should have known that its actions would induce actual infringement."  In light of the Supreme Court's decision in Global-Tech Applicances, Inc. v. SEB S.A., which held that induced infringement "requires knowledge that the induced acts constitute patent infringement," a finding of induced infringement may no longer be based on recklessness or negligence.  As such, the Federal Circuit concluded that the jury instructions were erroneous as a matter of law.  The Court found that this erroneous instruction could have changed the result of the trial.  Due to the prejudicial effect of the jury instruction, the Court vacated the verdict of induced infringement and remanded for a new trial. 

With respect to invalidity, Cisco had provided evidence to support its good-faith belief that the patent at issue was invalid.  However, the district court granted Commil's motion in limine to exclude that evidence.  Federal Circuit case law has shown that evidence of a good-faith belief of non-infringement tends to show that an accused inducer of infringement lacked the requisite intent.  Similarly, the Court in this case found that a good-faith belief of invalidity serves the same purpose as a good-faith belief of non-infringement as far as specific intent is concerned.  The Court noted that "one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid.  Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement."  The Federal Circuit ultimately held that a good-faith belief of invalidity can negate the specific intent required for induced infringement.

Judge Newman dissented with regard to this portion of the ruling, finding that the Court had changed the law of induced infringement.  She stated that a good-faith belief in invalidity does not avoid liability for infringement because infringement in fact does not depend on the belief of the accused infringer.  Judge Newman relied on tort theory to support her position that "A mistake of law, even if made in good faith, does not absolve a tortfeasor."

With respect to the decision to grant a partial new trial on the issues of indirect infringement and damages, the Federal Circuit determined that it did not violate the Seventh Amendment because the issues were distinct and separable.  The jury in the partial trial was asked to determine whether Cisco possessed a good-faith belief of invalidity, but not whether the patent was in fact invalid.  Cisco argued that these issues are intertwined, but the Court determined that they could be separate issues. 

Judge O'Malley disagreed with this part of the decision, believing that Cisco was deprived of its right to a jury trial under the Seventh Amendment.  She noted that because statements by Cisco's counsel were prejudicial towards the Jewish inventors of Commil, the entire trial was affected.  As a result, Commil was entitled to an entire retrial of all of the issues instead of a partial new trial.

Tenth Circuit: No trademark infringement, unfair competition, or cybersquatting by parody sites

In a decision last week, the Tenth Circuit affirmed a district court's grant of summary judgment finding no trademark infringement, no unfair competition, and no cybersquatting. 

The district court held, and the Tenth Circuit affirmed, that none of the three elements of a trademark infringement action was proven, namely that the mark was not protectable, the defendant's use was not in connection with goods or serivces, and that the successful parody showed there was no likely confusion.  On the cybersquatting claim, the district court held, and the Tenth Circuit also affirmed, that the mark was not shown to be protectable (as with the trademark claim), and there was no bad faith.  As a result, the district court's summary judgment was affirmed in all respects.

More detail on Utah Lighthouse Ministry v. Found. for Apologetic Info. & Research after the jump.

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Quality of investigation irrelevant to whether claims objectively baseless

In a Wednesday decision, the Federal Circuit affirmed a district court decision that a patent holder's communications with a competitor's customers that the competitor's products were infringing were not objectively baseless, and therefore could not support state law tort claims of unfair competition, intentional interference with contractual relations, interference with prospective economic advantage, and trade libel.  The court noted that the patent holder had successfully defeated a motion for summary judgment of non-infringement before the ITC and an ALJ had found infringement of one of the patentee's patents.  Thus, it could not logically follow that the patentee's pre-litigation communications alleging patent infringement were objectively baseless.

The court also reaffirmed that in order for such communications to support state tort claims such as those asserted in this case, the assertions of infringement must be both objectively and subjectively baseless.  Here, the plaintiff attacked that patentee's opinion of counsel that infringement was occurring as incompetent, but the court noted that this was only relevant to whether the claims were subjectively baseless.  Because the claims were not such that "no reasonable litigant could reasonably expect success on the merits," the plaintiff could not show objective baselessness, and the court therefore did not even consider whether the claims were subjectively baseless.  All in all, the case confirms that it is extremely difficult for plaintiffs to prevail on these types of claims.

More concerning Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH after the jump,

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Eleventh Circuit: Insufficient evidence of likely confusion dooms 43(a) claim

In a decision last week, the Eleventh Circuit affirmed a district court's decision granting summary judgment of no trademark infringement and no unfair competition.  The plaintiff and defendant had entered into a contract for the plaintiff to design a water meter reading system.  After the plaintiff allegedly breached the contract, the defendant engaged different companies to complete the project.  The replacement companies used some of the parts the plaintiff had used when it was performing the initial work, and some of the circuit boards used retained the plaintiff's trade name.

The court held that this was insufficient to create a likelihood of consumer confusion.  The circuit boards were housed in an opaque plastic unit and placed as high as possible in attics and on the exterior of buildings in order to minimize interference.  The court therefore noted that confusion was highly unlikely for purchasers of the products, namely owners and managers of apartment complexes.  There was also insufficient evidence of likely confusion in the context of repair technicians, who may actually view the circuit boards in question.  As a result, there could be no likely confusion.  The failure of the trademark infringement claim also doomed the plaintiff's unfair competition claim, and the district court's decision was affirmed.

More detail of Custom Mfg. & Eng'g, Inc. v. Midway Servs., Inc. after the jump.

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Two patents held obvious, "no question" that motivation to combine references existed

Optivus Technology sued Ion Beam Applications (IBA) for infringing its patents relating to the use of proton beams in cancer therapy, and specifically to proton beam therapy facilities with multiple treatment rooms using the same proton source. In addition to patent infringement, Optivus also claimed violations of California and Florida unfair competition laws and a Lanham Act "false statement" claim. The district court granted summary judgment of invalidity of the asserted patents as obvious and no unfair competition or Lanham Act violation. Both parties appealed. Ultimately, the Federal Circuit affirmed that both patents were invalid.

More details of the case after the jump.

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