Monthly Archives: March 2014

California “Green Chemistry” Law May Force Companies to Re-Think Trade Secret Strategy

Under California’s “Green Chemistry Initiative” (GCI) the state has listed 1,200 chemicals as “chemicals of concern.”  Makers of consumer products that contain these chemicals will have to disclose these components if the products are made or sold in California.

Companies that use the chemicals are required to submit detailed regulatory filings, which will be posted online for public review and comment.  The information would also be available to a company’s competitors.

The state may eventually limit or ban the listed chemicals.

The California Department of Toxic Substances Control (DTSC) approved the GCI’s regulations in July of 2013 and the regulations took effect in October.

However, one important aspect of the final regulations has not yet been resolved.  In August, the California Office of Administrative Law disapproved two provisions of the regulations that were intended to protect trade secrets.

The Office disapproved Section 69509.1(c) due to impermissible vagueness in the “substantive criteria” that the DTSC would apply to determine whether submitted materials should be designated as trade secrets.

The Office also disapproved Section 69509.1(a) due to uncertainty over when the trade secret designation would be made, and whether DTSC could decline to designate something a trade secret.

With trade secret protection for chemical formulas regulated by the GCI thus in limbo, the time is ripe for companies to re-evaluate their strategies for protecting proprietary information.

The two primary ways for a company to protect proprietary information (such as a chemical formula) are via patent law and trade secret law.

For patent applications filed on or after June 8, 1995, US patent law protects an invention for 20 years from the filing date of the earliest US patent application.

Information can theoretically be protected as a trade secret “forever” as long as it is not disclosed.  For example, the formula for Coca Cola has been a trade secret since the drink was invented in 1886.  (“The Vault of the Secret Formula” is an exhibit at the World of Coca-Cola museum in Atlanta.)

If disclosure is mandated under the GCI, and adequate trade secret protections do not apply, companies may wish to seek patent protection for their chemical formulas.

However, under the “on-sale bar” doctrine, an inventor may not acquire a patent if

the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of application for patent in the United States.

Under a recent decision by the Federal Circuit, this “offer to sale” includes an offer by an authorized supplier to make the product at issue and sell it to the inventor – even if the product is not yet offered for sale to the general public.

Thus, patent protection won’t be a viable option to protect trade secrets associated with products that have been for sale for years.

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


Lions Gate Files Copyright and Trademark Counterclaims over Twilight Spoof

Lions Gate Entertainment Corp. has filed copyright and trademark counterclaims against the producers of a Twilight parody film.

The Twilight movie series, based on the hyper-popular novels by Stephanie Meyer, was produced by Lions Gate subsidiary Summit Entertainment and has earned over $3.3 billion worldwide.

Between the Lines Productions LLC, producers of the spoof film Twiharder, had previously sued Lions Gate for antitrust violations.  The 219-page complaint charged that Lions Gate and Summit engaged in “ridiculous-to-insane overreaches of intellectual property law.”

The Lions Gate counterclaim alleges that the Between the Lines “use of the ‘Twilight’ motion pictures … in the absence of a valid license agreement …. would constitute copyright infringement.”  It also includes state and federal causes of action for trademark infringement, false designation of origin, unfair competition, and trademark dilution.

Between the Lines has claimed that several major distributors had expressed interest in distributing Twiharder, but that they immediately lost interest after Between the Lines received a “cease and desist” letter from Lions Gate.  The film’s budget is estimated at $3 million.

The antitrust complaint alleges that Lions Gate tried to “monopolize the conversation” about Twilight via “oppressive” IP enforcement using “sham” cease-and-desist notices.

Lions Gate and its subsidiary Summit Entertainment have sought to have the antitrust case dismissed.

According to the Urban Dictionary, “Twihards” are “Stupid obsessive people (mostly teenage girls) who are ‘in love’ with fictional characters and wouldn’t know a good book if it punched them in the face.”

The dispute will likely turn on the issue of whether Twiharder constitutes a “parody,” which is considered “fair use” under US copyright law and thus not copyright infringement.

Courts distinguish between parodies (which poke fun at the work being parodied) and satires (which use elements of a copyrighted work to poke fun at something else).  Parodies are more likely than satires to be considered fair use.

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

Bill Would Allow Civil Suits against Foreign Entities for Trade Secret Theft

Senator Jeff Flake (R-Ariz.) has sponsored a bill which would allow civil suits against any foreign person who “misappropriates, threatens to misappropriate, or conspires to misappropriate” a US trade secret.

Senate Bill 1770 is entitled the “Future of American Innovation and Research Act of 2013.”

The bill would extend the jurisdiction of US District Courts to entities “located outside the territorial jurisdiction of the United States” or acting “on behalf of, or for the benefit of” an entity located outside the United States.

The bill defines trade secrets to mean:

any information, including a formula, pattern, compilation, program, device, method, technique, or process, that—

(A) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public or other persons who can obtain economic value from the disclosure or use of the information; and

(B) is the subject of efforts that are reasonable under the circumstances to maintain the secrecy of the information.

The bill deals with trade secrets discovered by “improper means,” defined to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, and espionage through electronic or other means.”

“Improper means” do not include reverse engineering or independent derivation alone.

Remedies for violations of the Act would include injunctions, reasonable royalties, and damages.

Trade secret owners can already bring complaints before the International Trade Commission (ITC) concerning misappropriation of trade secrets by foreign entities.  A 2011 case, TianRui Group Co. Ltd. v. U.S. Int’l Trade Comm’n, held that Section 337 of the Tariff Act of 1930 applied to trade secret misappropriation even where the act occurred outside the US.


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

Trade Secrets Gain Protection Worldwide

The European Commission has introduced proposals that would make it easier for trade secret owners to sue when their proprietary information, including algorithms, recipes, manufacturing processes, and client lists, is misappropriated by competitors.

According to the Commission, 20% of European companies have been victimized by trade secret theft or attempted theft during the past 10 years.  Half of the businesses surveyed reported that the risk of trade secret theft has increased.

Trade secrets are not now expressly protected by EU-wide intellectual property laws.  This makes it harder for European companies to sue when their secrets are stolen.  Trade secret disputes are primarily governed by the divergent laws of EU member states.

The proposed EU directive would harmonize trade secret laws and enforcement throughout the EU and create a shared definition of protected know-how.

China, which recently beefed up its trademark law, amended its Civil Procedure Law in 2012 to make it easier for parties to seek preliminary injunctions.  A recent ruling by a Shanghai court established that the new law also applies to cases involving the theft of trade secrets, enjoining the defendant from distributing alleged trade secrets downloaded from the plaintiff’s website.

In the US, trade secret law was for many years left up to the states.  The 1996 Economic Espionage Act (“EEA”) made theft of trade secrets a federal offense and imposed criminal penalties (including imprisonment) for trade secret theft.

In 2012, Congress passed the Theft of Trade Secrets Clarification Act to clarify the scope of the EEA, amending it to include things like software used within a company as well as products “produced for or placed in interstate or foreign commerce.”

Even more recently, the Economic Espionage Penalty Enhancement Act of 2012 increased the maximum federal criminal penalties for foreign economic espionage and theft of trade secrets.

Proposed US legislation would further strengthen the EEA by, among other things, covering foreign-government-sponsored hacking and the theft of negotiating positions or strategies.

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

Photojournalist Awarded $1.2 Million for Use of Twitter Pictures

A freelance photojournalist has been awarded $1.2 million after a US federal court jury found that two major media companies had infringed his copyrights.

Daniel Morel was in Haiti on January 12, 2010, when an earthquake struck and killed 250,000 people. He took photos of the resulting devastation and distributed them to media outlets all over the world, including via his Twitter feed.

The photos were retweeted and picked up by Agence France-Presse (AFP) and then by Getty Images.

AFP obtained eight of Morel’s photos from the TwitPic account of a person who had posted them on his own Twitter feed without giving Morel credit or noting any restrictions on the use of the photos.

The photos were eventually distributed by media organizations, including ABC, CBS, CNN, and the Washington Post, without Morel’s permission.

Morel settled with the other media outlets but ended up in court with AFP and Getty.  AFP sued Morel, claiming that images that appear on Twitter are free for others to use for commercial purposes.  In January, a judge disagreed, finding that images on Twitter may only be retweeted but not used on a stand-alone basis without the creator’s permission.

Morel also countersued AFP for copyright infringement.  The purpose of the trial was to determine whether the defendants had “willfully” infringed Morel’s copyrights.

AFP’s copyright attorney contended that his client’s infringement was not willful and said that the company had tried to buy the photos from Morel once it learned that he owned them.  AFP also sent out a caption correction identifying Morel as the photographer.

When the defendants were advised by the Corbis photo agency that it had the exclusive right to Morel’s photos, they removed the photos from their databases and issued a “mandatory kill” notice telling clients not to use the photos.

Despite these steps, the jury concluded that the defendants’ infringement was in fact willful.

The jury also found that the defendants had violated the Digital Millennium Copyright Act (DMCA).  For this, they awarded Morel an additional $20,000.

Many individuals and businesses routinely use photos found on the internet without concern for copyright ownership.  This is a potentially dangerous practice that can lead to liability for copyright infringement.

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

Mitsubishi, GE, Settle Green Tech Patent Cases

Mitsubishi and General Electric have settled a patent infringement dispute involving wind turbine technology by agreeing to cross-license their patents.

GE, the largest US manufacturer of wind turbines, first filed a complaint with the US International Trade Commission (ITC) in 2008, alleging that Mitsubishi’s 2.4 megawatt turbines infringed GE patents.

GE then filed a civil suit in federal district court in Texas in 2009, and another suit in 2010.  Mitsubishi countersued GE in federal courts in Arkansas and Florida.  All of these actions have been dropped as a result of the settlement.

In 2012, in the case filed in the Northern District of Texas, a jury found that Mitsubishi had infringed a GE patent and the Japanese company was ordered to pay GE $170 million in patent infringement damages.

In May of 2013, a federal judge rejected Mitsubishi’s claim that GE’s turbine patent was invalid due to GE’s allegedly inequitable conduct.  The judge held that Mitsubishi had failed to prove that GE intentionally withheld information about prior art when it applied for its US Patent Number 7,629,705, for technology which helps turbines stay online during disturbances in the power grid.

The judge also said that if the US Patent and Trademark office (USPTO) had known of the alleged prior art it might not have granted the GE patent.  He said that there was some evidence GE knew of, but failed to disclose, its competitors’ patents but no “smoking gun” to show that GE had deliberately deceived the USPTO.

Mitsubishi appealed that decision to the Federal Circuit, contending that the district court had applied the wrong legal standard for inequitable conduct in patent cases.

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

Federal Circuit Revives $80 Million Boat Patent Case

The Federal Circuit has overturned a finding by a lower court that Malibu Boats LLC did not infringe a design patent owned by Pacific Coast Marine Windshields Ltd.

The Federal Circuit found that the lower court had erred in holding that the plaintiff was barred from alleging infringement of its design patent for a boat windshield.

PlaintiffPacificCoast had sought $80 million in damages for the alleged infringement.

PacificCoast’s owner originally applied for a design patent for a boat windshield with a varying number of vent holes, from none to five.  The patent examiner required him to limit his application to a single design, and he picked one with four holes, which became the patent in the case.  He later obtained a design patent for a no-hole design.

PacificCoast sued Malibu, alleging that Malibu’s three-hole windshield design infringed the PacificCoast patent.


A US district judge granted Malibu summary judgment on the basis that PacificCoast had “surrendered” the three-hole design.

On appeal, Malibu argued that PacificCoast had abandoned all of its designs from one hole to three holes.

The Federal Circuit disagreed, finding that the fact that PacificCoast had claimed designs with zero and four holes didn’t mean it had surrendered any claim to designs with an in-between number of holes.

Since the Federal Circuit concluded that the history of the prosecution of the patent didn’t prevent Malibu from claiming a wider range of related designs, it sent the case back to the lower court for further proceedings.

A design patent covers the external design of a functional item – anything from a boat windshield to a liquor bottle to the rounded corners on an iPhone.

Although design patents sometimes cover aspects of a product that may seem “superficial,” they can provide a powerful competitive – and legal – advantage.  In one Apple versus Samsung case, about $980 million of the over $1 billion awarded to Apple for Samsung’s alleged patent infringement was due to Apple’s design patents.

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