Monthly Archives: February 2014

Congress Considers New Trade Secret Bills

The US Congress has recently passed two bills to protect trade secrets and is working on more.

The Theft of Trade Secrets Clarification Act was passed in 2012 in response to a court decision overturning the trade theft conviction of former Goldman Sachs programmer Sergey  Aleynikov.

As previously reported, Goldman has been ordered to pay about $1.7 million (so far) for Aleynikov’s legal fees.

Another act passed in 2012, the Foreign and Economic Espionage Penalty Enhancement Act of 2012, increased penalties for trade secret theft.

Reports that the Chinese military had hacked into the computers of US businesses to steal trade secrets have led to even more trade secret protection bills.

Representative Zoe Lofgren (D-CA) has introduced the Private Right of Action Against Theft of Trade Secrets Act of 2013 (H.R. 2466).  This act would give individuals and companies a right of action under the federal Economic Espionage Act of 1996 (EEA) to sue those who misappropriate trade secrets.  The EEA now only allows federal prosecutors to file criminal trade secret cases.

 

Senator Jeff Flake (R-AZ) introduced the Future of American Innovation and Research Act (S. 1770), which would create a private right of action for trade secret theft by foreign entities.  The act would give US federal courts jurisdiction over thefts by foreign entities that injure a US citizen or cause an injury within the United States.

Representative Mike Rogers (R-MI) introduced the Cyber Economic Espionage Accountability Act (H.R. 2281) and Senator Carol Levin (D-MI) introduced the Deter Cyber Theft Act (S. 884).

The Cyber Economic Espionage Accountability Act would allow federal agencies to penalize foreign officials that committed or aided cyber-espionage and trade secret theft.  Penalties would include freezing assets, banning travel to the US, and other measures.

The Deter Cyber Theft Act would create a “watch list” of counties that engage in “economic or industrial espionage in cyberspace with respect to United States trade secrets or proprietary information.”

In order for information to be protected as a trade secret under either state or federal law, a company that owns the so-called secrets must take adequate steps to maintain the confidentiality of the information.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

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Dow Jones Sues over Use of Wall Street Journal Headlines

Dow Jones & Co., which owns the Wall Street Journal, has sued an audio news service known as a “squawker” for $5 million.

Dow Jones alleges that RANsquawk, based in the United Kingdom, is hurting Dow Jones’s business by reading Wall Street Journal “hot news” headlines and other content to subscribers seconds after the material is published by Dow Jones.

RANsquawk claims that “8/10 of the world’s largest banks” use its service.

Dow Jones operates its own newswire service providing “real time” news to its subscribers.  Its customers include investors and others involved in industries where breaking news moves markets and drives business decisions.

Dow Jones’s premier product is called Dow Jones Dominant (DJX), which provides scrolling headlines.

According to the Dow Jones complaint against Real-Time Analysis & News Ltd., which runs RANsquawk,

By nearly instantaneously cutting, pasting and broadcasting via their own channels the reports of news events that others have uncovered and verified at significant investment and expense, these free-riders offer a pirated product at a cheaper price.

RANsquawk does not credit Dow Jones as the source of the news it reports.  A copyright law firm representing RANsquawk previously denied that its client used material directly from DJX.  The law firm claimed that its client obtained material from instant messages, Twitter, and other sources.

US copyright law protects “original works of authorship fixed in a tangible medium of expression.”  Although the particular words used to report a news story may constitute a “work of authorship,” the facts are not protected by copyright law and may be reported by others in different ways.

 

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Arbitrator Orders Hasbro to Pay $72.9 Million for Nerf Guns

An arbitrator has ordered Hasbro to pay a licensor $72.9 million in royalties in a dispute involving Nerf guns.

The licensor, Johnson Research & Development Co. of Atlanta, also has a separate breach of contract case pending in federal court that involves Hasbro’s Super Soaker water guns.

In the breach of contract suit, Johnson has accused Hasbro of violating a 1996 agreement under which Hasbro was to pay Johnson royalties of 2% for “three-dimensional products” based on the appearance of the Super Soaker toy gun and 1% for “two-dimensional visual representations.”

The lawsuit claims that Hasbro sold toy guns that were “visually similar and based upon the appearance of Super Soaker water guns that incorporate Johnson’s technology.”

Johnson is also seeking an audit of Hasbro’s records to determine the volume of sales of Super Soaker products between 2006 and 2012.

The water guns were invented by Lonnie G. Johnson, the company founder, 25 years ago.

Johnson, a nuclear engineer, holds a PhD from TuskegeeUniversity.  After graduation, he joined the Air Force and worked at the Air Force’s Sandia Weapons Lab in New Mexico.  Later he worked for NASA’s Jet Propulsion Laboratory on the Mars Observer project and the Galileo Jupiter mission.

Johnson first licensed the Super Soaker in 1989.  Within two years, it has generated more than $200 million in retail sales.  Sales have now reached almost $1 billion.

The inventor holds more than 80 patents, with an additional 20 patent applications pending.  Johnson’s Thermo-Electrochemical Converter System was named one of the top 10 inventions of 2009 by Popular Mechanics.

Hasbro has asked a federal court in Rhode Island to void the arbitration award, saying that the Hasbro products at issue did not actually use any Johnson Research technology.  Hasbro claims the arbitrator erred in awarding royalties based on the entire line of Nerf guns even if only a single gun used Johnson’s air compression technology.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Trademark Owners Must Show Irreparable Harm for Injunctions in Ninth Circuit

The Ninth Circuit Court of Appeals has eliminated the presumption of irreparable harm when trademark owners seek preliminary or permanent injunctions against alleged infringers.

This means that trademark owners must now show that they would suffer actual irreparable harm in order to obtain injunctions.

The case of Herb Reed Enterprises, LLC v. Fla. Ent. Mgmt. Inc. involved the musical group “The Platters,” founded in the 1950s and known for hits like “Smoke Gets in Your Eyes” and “Only You.”

Herb Reed was one of the founders of the group.  After it broke up in the 1960s, its members continued to perform using different versions of the name “The Platters.”

Employment contracts signed in 1956 between the original members of the group and their manager’s company assigned rights in the name “The Platters” to the company in exchange for company stock.

Litigation over the validity of these contracts and ownership rights in the group’s name has dragged on for more than 40 years.

In this most recent case, defendant Florida Entertainment Management challenged a district court’s order enjoining the defendant from using “The Platters” in conjunction with any vocal group.

The US Supreme Court in eBay v. MercExchange effectively eliminated the presumption of irreparable harm for plaintiffs seeking preliminary injunctions in patent cases.  Other courts have also eliminated the presumption for copyright cases, but the circuits have been divided on whether the presumption applies in trademark cases.

Before the latest Herb Reed decision, the law on this issue for the Ninth Circuit (which includes California) was likewise unsettled.

In order to establish irreparable harm, a trademark owner must show that “remedies available at law, such as monetary damages, are inadequate to compensate” for the injury arising from infringement.

Although the Ninth Circuit found that the district court had applied the correct legal principle in the Herb Reed case, it concluded that the record did not support a finding of the likelihood of irreparable harm.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Spider-Man Toy Inventor Seeks to Extend Royalties in Patent Case

The inventor of a Spider-Man web-shooter toy has asked the US Supreme Court to overturn its own precedent and allow him to collect royalties from Marvel Enterprises even after his patent expired.

Stephen Kimble claims that in 1990 he invented a toy that could shoot foam string from a wristband.  He says that he had a verbal agreement with Marvel that the company would compensate him if it used his idea.

Marvel later created a “Web Blaster” toy but did not compensate Kimble.  He sued Marvel in 1997 for patent infringement and breach of contract.

The parties settled the dispute in 2001.  Marvel agreed to pay Kimble $500,000 and a royalty of 3% on Web Blaster sales.  Kimble eventually earned $6 million in royalties.

In 2006, Marvel granted Hasbro the right to produce the Web Blaster and other toys.  Marvel and Kimble disagreed about the royalties due from this arrangement.  One issue was the calculation of royalties for Web Blasters packaged with other role-playing toys like Spider-Man masks.

Kimble filed another breach of contract suit against Marvel in 2008.

Kimble’s US Patent No. 5,072,856 expired in 2010.  Under the Supreme Court’s 1964 decision in Brulotte v. Thys Co., an inventor may not enter into a royalty agreement that allows the inventor to collect payments after a licensed patent has expired.
The Ninth Circuit noted that the rule of Brulotte is “counterintuitive, and its rationale is arguably unconvincing” but still ruled in favor of Marvel in July of 2013.

The Ninth Circuit joined other courts which have held that so-called “hybrid” patent licensing agreements are unenforceable after the underlying patents expire, unless certain conditions apply to prevent patent owners from “leveraging” a patent beyond its legal life.

Kimble had argued that his settlement with Marvel distinguished between patent and non-patent rights and thus that Brulotte did not apply.

The Ninth Circuit disagreed.  Judge Consuelo Callahan wrote:

We cannot agree because the agreement plainly involved one royalty rate for both patent and Web Blaster rights, with no discount or other clear indication that the Web Blaster royalties were not subject to patent leverage.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson

SAP Asks US Supreme Court to Review $391 Million Patent Award

SAP America, the US arm of a German multinational enterprise software company, has asked the US Supreme Court to review a decision by the Federal Circuit that upheld a jury verdict making SAP liable for $391 million in patent infringement damages.

SAP argued that it has already invalidated the claims of the patent at issue, which is owned by Versata Software Inc.

Versata sued SAP for patent infringement in 2007.  In the first trial, a jury concluded that SAP had infringed both patents, but the judge found no infringement as a matter of law for one of the patents and ordered a new trial to determine damages.

At a second trial, the jury awarded Versata $260 million for lost profits and an additional $85 million for patent royalties.  Prejudgment interest brought the total award to $391 million.

In May of 2013, the Federal Circuit agreed with the district court jury that SAP had infringed the Versata patent.  The Federal Circuit rejected SAP’s arguments that the lower court had miscalculated Versata’s damages.

However, six weeks after the Federal Circuit upheld the infringement verdict, the US Patent and Trademark Office (USPTO) declared that Versata’s patent was invalid.  The USPTO decision was the first issued in a challenge filed under the new America Invents Act (AIA).

In September, the USPTO denied a request by Versata to reconsider the invalidity ruling.

According to SAP’s petition to the Supreme Court,

In the first review proceeding, the [U.S.] Patent and Trademark Office’s Patent Trial and Appeal Board declared invalid as mere abstract ideas the patent claims that are the basis of respondents’ nearly $400 million judgment against SAP. SAP now faces the prospect of having to pay a $391 million judgment despite having successfully invalided the patent claims at issue — whereas SAP’s competitors who might have ‘infringed’ the same patent will avoid any similar liability.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

European Patent Office Translation Service Covers 32 languages

A year ahead of schedule, the European Patent Office (EPO) added eight more languages to its free machine translation service for patents, bringing the total to 32.

The service now covers the 28 official languages of the EU’s member states, as well as Russian and several Asian languages.

According to the EPO’s website:

Patent Translate is now complete and covers translations between English and 31 other languages, namely Albanian, Bulgarian, Chinese, Croatian, Czech, Danish, Dutch, Estonian, Finnish, French, German, Greek, Hungarian, Icelandic, Italian, Japanese, Korean, Latvian, Lithuanian, Macedonian, Norwegian, Polish, Portuguese, Romanian, Russian, Serbian, Slovak, Slovenian, Spanish, Swedish and Turkish. Translation from and into French and German is also available for 17 of these languages.

The translation service is designed to aid patent offices, inventors, and businesses by providing access to information about patented technologies.

The translation service was launched in 2012 as a joint project between the EPO, Google, the patent offices of the EU member states, and other major patent offices.

The service receives about 12,000 patent translation requests per day.  Espacenet, the EPO’s patent database, contains more than 88 million patent documents from all over the world.

The EU is in the process of trying to implement a unified patent court system.  The EU’s Council of Ministers has backed the reforms and members of the European Parliament are expected to vote on them in March of 2014.

The new European patent law system would allow inventors to obtain a unitary patent that covers multiple European country jurisdictions by making a single application with the EPO.  This is expected to reduce costs for patent applications and increase innovation in Europe.

Under the current system, EU-wide patent protection is only available for patent holders who validate their patents in each EU member state.  The patent must first be translated into each state’s language – hence the need for the online translation service.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.