Apple v. Samsung at the Federal Circuit

Apple, Inc. has some pretty cool stuff. They came up with the Macintosh in 1986. They very intelligently niched out of the World of Microsoft Windows. They now give us music, videos, computers, phones, tablets, watches that we can use as phones and all kinds of tekkie goodies. More specifically, they have this nifty slide-to-unlock mechanism on their touchscreen devices (iPhones, iPads; I don’t know about the watch, since I don’t have one). They have the ever-annoying spell correction, and they have an automated data-structure detection system. And, of course, they have patents on their tekkie goodies. The slide-to-unlock mechanism, the spell correction and the automated data-structure detection system have been the subject of litigation between Apple and Samsung.

The US Court of Appeals for the Federal Circuit (“CAFC”) has just invalidated two of Apple’s iPhone patents based on that litigation; one for the slide-to-unlock mechanism, the other for the spell correction, both on obviousness grounds. This is a big deal for Apple; after a jury trial, the District Court had held these patents infringed and awarded damages to Apple amounting to $119,625,000 in damages and ongoing royalties for infringement of the three patents. Oh well; Apple can bid goodbye to nearly $120M in damages and royalties, unless the Nine (currently eight) Wise Ones who sit on the SCOTUS bench decide to grant certiorari on what will almost certainly be Apple’s appeal to them..

Justice Scalia

Delain Law Office, PLLC joins the country in extending condolences to the family of Associate Supreme Court Justice Antonin Scalia, who died today, 13 February 2016, at age 79.

I am far from the political conservative that Justice Scalia was, so I disagree with many of his opinions. However, I absolutely respect (notice the tense) his eloquence, his persuasiveness and his interpretation of his office. This guy could fight like a tiger for his position yet maintain close personal relationships with those who held the opposite positions against which he fought. The Court, the country, and his family have all lost one of the greats.

American Broadcasting Companies vs. Aereo, Inc.

A couple of weeks ago, overshadowed by the Hobby Lobby decision, SCOTUS handed down a copyright decision that may substantially limit the ability of transmitters to transmit copyrighted broadcasts without a license to do so.

In American Broadcasting Cos. v. Aereo, Inc., 573 US ___ (2014), Aereo is a subscription broadcasting service that sold “…to its subscribers a technologically complex service that allows them to watch television programs over the internet at about the same time as the programs are broadcast over the air.” Slip Op. at 1. The technology is detailed in the case, so I do not reproduce it here; suffice it to say that through a complex series of technological events, each Aereo subscriber ends up having his or her own dedicated antenna through which copyrighted content is streamed to one computer only. The US District Court for the Southern District of New York, affirmed by the US Court of Appeals for the Second Circuit, found that this technology does not infringe the rights of the copyright holders of the shows that Aereo streams to its users because, first, Aereo does not “perform” within the meaning of the Copyright Act and, second, even if it does “perform,” it does not do so “publicly” because there is a dedicated antenna connected to only one computer, making the streaming a private showing, thus falling outside the “public” performance requirement of the Act to qualify as infringement.

SCOTUS disagrees. In a 6-3 decision delivered by Justice Breyer (the dissent comprises Justices Scalia, Thomas and Alito; all others concur in the majority opinion), the Court decreed that the 1976 Copyright Act was put in place, in large part, to overturn their decision in Fortnightly Corp v. United Artists Television, Inc., 392 US 390 (1968), which held that community-antenna television falls outside of the scope of the Copyright Act of 1952. Given the clear intent of Congress to make such activities fall very definitely within the scope of the Copyright Act, and given that Aereo’s activity are not substantially different from those of Fortnightly, the Court felt duty-bound to overturn the Court of Appeals for the Second Circuit’s holding that Aereo’s activities do not infringe copyright. SCOTUS holds for the plaintiff in determining whether (a) Aereo “performs” within the meaning of the Act and (b) Aereo performs “publicly” within the meaning of the Act.

There is language in the case that indicates that this case can be read narrowly, but this case puts rebroadcasters on notice: The act of rebroadcasting is a “transmission” within the meaning of the Act, and the viewer and broadcaster “perform publicly” within the meaning of the Act.

I advise my clients that it’s always easiest, best, cheapest to get a license to use the copyrighted works of others. This case just goes to show that this advice is still good.

The oral arguments on both sides are actually interesting for those of us who like copyright matters.

SCOTUS Got It Right — I Think

Today, the US Supreme Court handed down the long-awaited Hobby Lobby decision (Burwell v. Hobby Lobby Stores, Inc., ___ US ___ (2014). In the decision, they overturned the Obama administration’s insistence that Obamacare overrides the First Amendment.

We all know the facts of this one. Hobby Lobby, Inc., a closely held corporation, is owned by a group of persons who strongly believe on religious grounds that abortion is wrong and don’t want to pay for it through the Affordable Care Act, which covers abortions. The government said no, you don’t qualify for an exclusion, and the fight was on.

42 USC §§ 2000bb-1(A) and (B) says that the government cannot “…substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability.” Today’s decision in Hobby Lobby upholds this law, and, coincidentally the freedom of religion we are all guaranteed under the First Amendment to the Constitution.

Of course, Justice Ginsburg does have a point in her dissent: “Would the exemption…extend to employers with religiously grounded objections to blood transfusions (Jehovah’s Witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews, and Hindus); and vaccinations[?]…Not much help there for the lower courts bound by today’s decision.

As with any decision, the trick is to figure out how to read it. If, as Justice Ginsburg says, the decision is broad enough in application to carry over to these procedures, that will keep SCOTUS in business for many terms to come as the parameters of today’s decision get hammered out. If, though, the case is read narrowly, applying only to religious objection to terminating a pregnancy, Justice Ginsburg’s objection to the decision is defeated. However, I am not the person who will interpret the decision as time goes by; that gets left to those who sit on the judicial benches, and there are likely, until SCOTUS rules again, to be splits on this issue throughout the circuit courts. The import of the decision may well be to cause women to have to pay for contraception, but freedom of religion is guaranteed by the Constitution; freedom of contraception is not.

I don’t always agree with the High Court, but I think they got this one right — and I am by no means a radical pro-life proponent. I think that women should indeed have access to contraception, but this decision does not overturn women’s access to contraception; it merely asks women to pay for that contraception, and the government is likely to come up with a way to provide that contraception for those women who are employed by Hobby Lobby and companies with similar visions. This does not overturn the abortion rights in the United States. Abortion is still reasonably freely available for the employees of any closely held company that objects to providing funding for it on religious grounds. But don’t ask those whose religious convictions hold that the soul enters the human zygote at conception to pay for the woman carrying that zygote to terminate that life.

Feel free to agree or disagree with me in the Comments.

Raging Bull Laches On

The US Supreme Court has issued a decision in the Petrella v. MGM, 572 US ___ (2014).

The equitable doctrine of laches says that if a plaintiff waits too long before bringing a lawsuit, that suit cannot be heard. It’s a common-law version of a statute of limitations. Under a statute of limitations, a case can be forever dismissed because a case was brought too late. Under the equitable doctrine of laches, a case can be forever dismissed because the plaintiff failed to timely bring suit and the defendant was unduly prejudiced by the delay.

In Petrella, the movie Raging Bull (1980) is accused of infringing the copyright in a screenplay written and registered with the US Copyright Office in 1963. Raging Bull is, of course, based on the life of Jake LaMotta. LaMotta had a friend, a writer named Frank Petrella, who co-authored several works on which Raging Bull was based; the copyrights in those works were properly registered in the 1960s and 1970s. While Frank Petrella and his co-author of that screenplay assigned rights and renewal rights to United Artists (now a subsidiary of MGM) in 1979, when Frank died in 1981 (during the first term of the copyright on the Raging Bull screenplay), renewal rights reverted to Frank’s estate under Stewart v. Abend, 495 U.S. 207 (1990), and ultimately to his daughter and heir, Paula Petrella. Paula renewed the copyright in the only one of the three works on which Raging Bull is based in which she could do so, and is now the sole owner of that copyright. In 1998, Ms. Petrella sent notice to MGM that Raging Bull infringes her copyright and threatened suit. In January, 2009, that suit materialized with Ms. Petrella seeking monetary and injunctive relief limited to acts of infringement occurring on or after January 6, 2006 (that is, all acts that occurred within the three-year statute of limitations). MGM promptly answered with the defense of laches, claiming that the delay in filing from 1998 to 2009 was unreasonable and unduly prejudicial. The US District Court for the Central District of California granted the defense and dismissed the case on those grounds. Petrella appealed to the US Court of Appeals for the Ninth Circuit, who affirmed the District Court’s decision. She then appealed to the US Supreme Court, who granted certiorari.

The High Court reversed the decisions below. In a 6-3 decision, the Court decided:

The Ninth Circuit erred, we hold, in failing to recognize that the copyright statute of limitations, §507(b), itself takes account of delay. … [A] successful plaintiff can gain retrospective relief only three years back from the time of suit. No recovery may be hadfor infringement in earlier years. Profits made in those years remain the defendant’s to keep.

Brought to bear here, §507(b) directs that MGM’s returns on its invest­ment in Raging Bull in years outside the three-year win­dow (years before 2006) cannot be reached by Petrella. Only by disregarding that feature of the statute, and the separate-accrual rule attending §507(b), see supra, at 4–5, could the Court of Appeals presume that infringing acts occurring before January 6, 2006 bar all relief, monetary and injunctive, for infringement occurring on and after that date. See 695 F. 3d, at 951; supra, at 9–10.13 Moreover, if infringement within the three-year look-back period is shown, the Act allows the defendant to prove and offset against profits made in that period “deductible expenses” incurred in generating those profits.§504(b). In addition, the defendant may prove and offset “elements of profit attributable to factors other than the copyrighted work.” §504(b). The defendant thus may retain the return on investment shown to be attributable to its own enterprise, as distinct from the value created by the infringed work. See Sheldon v. Metro-Goldwyn Pictures Corp., 309 U. S. 390, 402, 407 (1940) (equitably apportioning profits to account for independent contribu­tions of infringing defendant). See also infra, at 19–22 (delay in commencing suit as a factor in determining contours of relief appropriately awarded).

Last, but hardly least, laches is a defense developed by courts of equity; its principal application was, and re­mains, to claims of an equitable cast for which the Legisla­ture has provided no fixed time limitation. See 1 D. Dobbs, Law of Remedies §2.4(4), p. 104 (2d ed. 1993) (here­inafter Dobbs) (“laches . . . may have originated in equitybecause no statute of limitations applied, . . . suggest[ing] that laches should be limited to cases in which no statute of limitations applies”). Both before and after the merger of law and equity in 1938, this Court has cautioned against invoking laches to bar legal relief. See Holmberg v. Armbrecht, 327 U. S. 392, 395, 396 (1946) (in actions at law, “[i]f Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of thematter,” but “[t]raditionally . . . , statutes of limitation are not controlling measures of equitable relief ”); Merck & Co. v. Reynolds, 559 U. S. 633, 652 (2010) (quoting, for its current relevance, statement in United States v. Mack, 295 U. S. 480, 489 (1935), that “[l]aches within the term of the_statute of limitations is no defense [to an action] at law.”); County of Oneida v. Oneida Indian Nation of N. Y., 470 US 226, 244, n. 16 (1985) (“[A]pplication of the equitable defense of laches in an action at law would be novel indeed.”)

 The holding that laches cannot be used as an equitable defense within the period of the statute of limitations was made by only six of the Justices; the remaining three, who sit at the conservative end of the bench, disagree, stating:

[Laches] applies in those extraordinary cases where the plaintiff “unreasonably delays in filing a suit.” National Railroad Passenger Corporation v. Morgan, 536 US 101, 121 (2002), and, as a result, causes “unjust hardship” to the defendant. Chirco v. Crosswinds Communities, Inc., 474 F.3d 227, 236 (CA6 2007) (emphasis deleted). Its purpose is to avoid “inequity.” Galliher v. Cadwell, 145 US 368, 373 (1892). And, as Learned Hand pointed out, it may well be

“inequitable for the owner of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success.” Haas v. Leo Feist, Inc., 234 F. 105, 108 (SDNY 1916).

Today’s decision disables federal courts from addressing that inequity.

In this case, I actually agree with the majority’s decision. I agree with Learned Hand’s comment that it’s not nice for a copyright holder to let the proposed infringer take the risk then swoop in to reap the rewards, but that is not what happened here. Raging Bull came out in 1980. MGM invested heavily in the film in the late 1970s and early 1980s. While yes, they still market the film today and they market it based on new technologies, the marketing expense has decreased dramatically because of the film’s popularity, awards status, and fame. Really, all MGM has to do is produce the film on a new technology and sales are virtually guaranteed. Also, Petrella does not seek damages for infringement that may or may not have occurred in the 1980s, 1990s or even the early 2000s; her suit seeks damages only within the confines of the statute of limitations, which I think moots the dissent’s quote of Judge Hand.

We certainly do not want to impose an unneeded inequity on any defendant, but I don’t think this decision does that. The inequity of delay is addressed through the statute of limitations. There is a time-certain period outside of which a defendant cannot be successfully sued. That limitation is placed on the plaintiff by statute. Today’s decision does not allow a plaintiff to sue outside of the statute of limitations, which keeps the delay to a minimum.

Wiley v. Kirtsaeng—Changing Copyright Ownership in the USA?

Wiley v. Kirtsaeng, S.Ct. Docket No. 11-697, one of the most important intellectual property matters to come before the Supreme Court in recent years, re-examines the “first sale” doctrine in copyright law. Stare decisis tells us that owners of the individual copies of copyrighted works are free to resell, lend, or give away their legal copies of books, paintings, software, DVDs, CDs, and so on without permission from the copyright holder, no matter where the copyrighted item originated. Now, though, book publishers, software companies, and the movie and music industries, who want to set different prices for different markets, argue that the doctrine should apply only to goods produced in the U.S.

John Wiley and Sons, a major textbook publisher, is doing battle over this very question with one Supap Kirtsaeng, a student from Thailand who studied at Cornell and USC. The case came into being when Kirtsaeng discovered that textbooks almost identical to those in the U.S. market were considerably less expensive in Asia. Being a money-hungry, entrepreneurial student, he had friends and family members send multiple copies of needed books to him, purchased at Asian prices, which he then resold to his fellow students at less than the cost of the US books but more than he paid for them. When Wiley discovered this, they sued Kirtsaeng for infringing their copyrights in the resold books; the Court of Appeals for the Second Circuit ruled in Wiley’s favor.

Kirtsaeng asks the High Court to reverse the Second Circuit’s ruling, arguing that the first sale doctrine prohibits Wiley from enforcing any copyright against the sale of any work that was previously sold.

This notion goes far beyond this one case. If the Nine Wise Ones decide that the First Sale Doctrine does not apply to copyrighted materials that do not originate in the USA, dissemination of copyrighted materials will need a massive overhaul. At this point, museums freely display copyrighted works; they would lose the ability to do that. Salvation Army and Goodwill Industries, who regularly resell copyrighted works at a deep discount, would be required to pay a royalty for resold works, which, necessarily, would raise the prices and have a heavy impact on cash-poor individuals. Ronald McDonald House, which freely lends copyrighted materials regularly to the families of very sick children staying with them, would have to charge a fee. Much of eBay’s business would come crashing down because the free exchange of already-purchased copyrighted works would be stifled. Even your neighborhood library would feel the pinch, and the free lending library would cease to exist.

And all because the publishers want to enforce different prices in different markets.

I don’t think much of this; I like free, community-supported lending libraries. I like being able to view modern art in museums. When I had cause several years ago to use the services of Ronald McDonald House, I very much appreciated the easy availability of DVDs and video tapes (that dates the time). The thought that the free lending and giving systems currently in effect would come to an end is an anathema to me.

The Laws of Nature STILL Cannot Be Patented

Last week, a unanimous US Supreme Court decided Mayo Collaborative Services v. Prometheus Laboratories, interestingly citing the 150-year-old O’Reilly v. Morse which invalidated Samuel Morse’s attempt to get a patent to cover “electro-magnetism, however developed, for marking or printing intelligible characters, signs, letters, at any distance, being a new application of that power of which I claim to be the first inventor or discoverer.”

In Mayo, the patent was for a method to help doctors determine the right drug dose to give different patients, specifically patients with autoimmune disorders, but the Court said this was an innovation based on natural laws, so it can’t be protected by patent.

Although “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent pro­tection,” Diamond v. Diehr, 450 U. S. 175, 187 (1981), “…the steps in the claimed processes (apart from the natural laws them­ selves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field.” slip op. at 4.

The laws of nature still cannot be patented.

Salinger v. Colting Is Making Its Impact

This case is about copyright and the burden of proof to obtain an injunction in the Second Circuit.

Up until this case came down in April 2010, the courts in the Second Circuit held just about automatically that a preliminary injunction should be granted when a copyright holder claimed irreparable damage. This is one of the features of second-circuit case law that made it so very popular with plaintiffs; most circuits hold that the test for a preliminary injunction is that “[a] plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay, Inc. v. MercExchange, LLC, 547 US 388, 391 (2006).

In Salinger, the Second Circuit holds that the law of eBay, a patent infringement case, specifically applies to copyright cases.

So what does this mean for the average copyright holder? It means that, to obtain a preliminary injunction in the Second Circuit, a plaintiff must show that:

(1) it has suffered an irreparable injury; accomplish this by showing that defendant has infringed copyright, thereby depriving plaintiff of benefits other than money that are available to it under the copyright law.

(2) remedies available at law, such as monetary damages, are inadequate to compensate for that injury; accomplish this by showing that the damage done cannot be fixed by throwing money at the problem.

(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; show this by showing that plaintiff suffers more harm through the lack of a preliminary injunction than defendant suffers under a preliminary injunction.

(4) that the public interest would not be disserved by a permanent injunction; show this by showing how the plaintiff’s case advances the public interest in maintaining a bundle of rights exclusive to copyright owners.

This is a much higher standard of proof than previously existed in the Second Circuit for preliminary injunctions in copyright matters. It remains to be seen whether the additional burdens of proof will impact the number and quality of preliminary injunctions issued in the Second Circuit.

Stay tuned….

Taxing the Internet

The US Supreme Court yesterday (25 January 2010) decided Hemi Group, LLC v. City of New York,, ___ US ___ (2010). (The link goes to the slip opinion of the Court, which is a .pdf).

Hemi Group sells cigarettes over the internet. They are based in New Mexico, well outside of the usual jurisdictional reach of New York City and its ordinances.

New York City has a city ordinance putting a surcharge tax of $1.50 per pack on all cigarettes sold within the five boroughs.

New York City likes the $1.50 it gets for every pack of cigarettes sold in the City; that’s a lot of $1.50 payments rolling in, and it produces significant income to the City. They are backed up by federal law: the Jenkins Law 15 U. S. C. §§375-378, requires out-of-state sellers to
submit customer information to the States into which they ship cigarettes, and New York State has agreed to forward that information to the City.

Hemi Group sells its cigarettes over the internet without registering with anybody and they certainly do not disclose their customer list to some City agency. After all, customer lists are commonly acknowledged to be trade secrets, and Hemi’s customers don’t need the City chasing them down to tax them for their packs of cigarettes: why should Hemi divulge just so New York can collect its surcharge?

New York City sued Hemi Group, LLC under RICO to recover the lists to enable them to go after the City residents who bought tax-free cigarettes.

The City’s theory went something like this:

Hemi committed fraud by selling cigarettes to City residents and failing to submit the required customer information to the State. Without the reports from Hemi, the State could not pass on the information to the City. Therefore, some customers who were legally obligated to pay the cigarette tax to the City failed to do so. Because the City did not receive the customer information, it could not determine which customers had failed to pay the tax. Without that information, the City could not pursue those customers for payment. The City thereby was injured in the amount of the portion of back taxes that were never collected.

It turns out that the City chose the wrong statute under which to sue. RICO requires a direct causation link between the deed and the harm. There are just too many layers here, since the Jenkins Act goes through the State. Thus, under RICO, not only must “but-for” causation exist, but also proximate causation must be very proximate, especially when dealing with a case that transcends jurisdictional lines over the internet.

On the surface (and I haven’t had the chance yet to read this case much below the surface), I like this case. RICO is a tough statute that carries some stiff penalties, as well it should: racketeering and corruption are things that, as a society, we’d like to discourage. However, RICO is just a wee bit too much for a firm that simply fails to register with a state before doing business in that state. Heck, if RICO applies every time a business does business across state lines without registering first, many, if not most, small enterprises would be promptly out of business because their owners would be in the federal pen. This is true more than ever with the geographic seamlessness of the internet; people in California can get to the website of a small business here in Schenectady just as easily as can the next door neighbor to the business. Does the internet mean that every small business has to register in every state? This case, on first reading, indicates probably not. Thank goodness.