Below is a summary of the most important and interesting intellectual property cases decided in 2014, along with a brief outlook for major decisions expected in 2015:
The pendulum has continued to swing away from holders of patents covering business methods or other computer-implemented inventions. In June, the U.S. Supreme Court issued its opinion in Alice Corp. v. CLS Bank, 134 S.Ct. 2347 (2014), which invalidated several financial services patents covering the mitigation of settlement risk. The Court found that the patents covered little more than the abstract idea of an “intermediated settlement” which has been used in the industry for decades and thus were not eligible subject matter under 35 U.S.C. §101. The Court announced a 2-step analysis which should be used to scrutinize computer-implemented inventions, which will result in making these business method patents both harder to obtain as well as enforce.
In its first major decision post-Alice, the Court of Appeals for the Federal Circuit invalidated a patent covering a method of distributing online media to consumers. Ultramercial, LLC v. Hulu, LLC, 772 F.3d 709 (Fed.Cir. 2014). The patent at issue in Ultramercial required a consumer to view an advertisement first before being granted access to additional media, typically a copyright-protected program (i.e., Hulu, YouTube, etc.). The Court held that the patent was invalid in light of Alice Corp. because it was simply an extension of the abstract idea that an advertisement could be used as an exchange or as currency because the advertiser pays for the copyrighted content to be shown to the consumer for free.
The takeaway from these decisions and others issued by district courts on summary judgment (of which there have been several in the second half of 2014) is that business method patents are in danger. Courts have been tightening the requirements to obtain protection and enforce patents in this space for several years and the trend has continued into 2014. Despite these moves, the overall rate of patent litigation, especially cases brought by Non-Practicing Entities (aka “Patent Trolls”) continues essentially unabated. Clients don’t need to be a startup or even in the tech space to have potential exposure to suits by these types of entities, however given the difficulty in winning a lawsuit over a business method patent recently, there is some solace that the overall risk is lessened.
The Supreme Court heard oral arguments this month in order to decide whether a finding by the U.S. Patent and Trademark Office that there is a likelihood of confusion between two marks should be binding precedent in a later-filed district court case over the same marks. In B&B Hardware, Inc. v. Hargis Industries, Inc., on appeal from the Eighth Circuit, the core issue is the difference in analyses used by both the USPTO and district courts in determining whether there is a likelihood of confusion results in the USPTO’s decision having a preclusive effect in later litigation. The Eighth Circuit held that the USPTO’s determination was not preclusive because it was examining the issue as part of the registration process and not in the context of infringement. Given that an opposition or cancellation proceeding before the USPTO is often times a less expensive (and quicker) alternative to filing an infringement lawsuit, the Court’s decision in this case will be of particular importance to small and mid-sized businesses with limited litigation budgets. A decision is expected by June 2015.
A district court in Texas ruled against a restaurant’s claims that the flavor of its Italian food was eligible for trademark protection under the Lanham Act. New York Pizzeria, Inc. v. Syal, 2014 WL 5343523, at *4-6 (S.D. Tex. Oct. 20, 2014). Calling the pizzeria’s claims “half-baked,” the court noted that because flavor is primarily a functional aspect of the food, it is not entitled to trademark protection. The court also rejected a claim that the plating of the restaurant’s food was entitled to any protection under the Lanham Act because, while not functional, this type of “trade dress” claim requires a showing of secondary meaning amongst consumers illustrating the strength of the visual appearance of the dishes as a source identifier. While it is possible to protect certain types of “non-traditional” trademarks, care needs to be taken in establishing their use and illustrating why they are entitled to be protected as courts scrutinize these types of claims very closely.
In one of the last major file-sharing lawsuits brought by the music industry, Florida-based Grooveshark liable for copyright infringement. UMG Recording, Inc. v. Escape Media Group, Inc., (S.D.N.Y. Sept. 29, 2014). The decision rejected Grooveshark’s defense under the DCMA’s safe-harbor provisions that they were simply a repository of third-party materials because evidence showed that Grooveshark’s CEO and employees uploaded their personal copies of songs which were then offered on the site. The Court also sanctioned Grooveshark for spoliation of evidence due to the deletion of source code and file upload logs relating to the infringing file sharing service. Despite the lack of high-profile copyright infringement cases, i.e. Napster, etc., the music industry aggressively enforces its right to control public performances of copyrighted music, especially in restaurants, bars and other gathering spots. Clients who operate these types of establishments should ensure they are in compliance with regard to licensure requirements or are otherwise exempt from needing a license under the Copyright Act.