Month: February 2014

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.


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.

Anti-Patent-Troll Bill Passes US House of Representatives

A bill known as the Innovation Act has passed the House of Representatives and is headed to the Senate.  The bill, sponsored by Congressman Bob Goodlatte, is designed to prevent “abusive patent litigation.”

Some companies known as “patent assertion entities,” “non-practicing entities,” or (less politely) “patent trolls” have been criticized for actions such as sending large numbers of demand letters to small businesses, claiming patent royalties without first determining whether the recipients were actually infringing any patents.

For example, one such entity threatened to sue about 8,000 hotels, coffee shops, and retail stores, claiming that they infringed its patents by setting up Wi-Fi networks for their patrons.

Congressman Goodlatte said that his bill was designed to discourage lawsuits that “target a settlement just under what it would cost for litigation, knowing that these businesses will want to avoid costly litigation and probably pay up.”

Among other things, the Innovation Act requires disclosure of the identity of the ultimate entity that owns the patents asserted in litigation, to prevent patent owners from hiding behind shell companies and sending multiple demand letters to the same targets.

The Act could affect a wide range of patent holders, and not just so-called patent trolls.

The bill would require patent holders to plead patent infringement more specifically, with reference to infringing products by name and model number.  The patent holder would also have to identify which claims of a patent are being infringed on an element-by-element basis with reference to the purportedly infringing products.

The Innovation Act would also create a version of the “loser pays” system that applies in many other countries.  The Act states that “a court shall award, to a prevailing party, reasonable fees and other expenses incurred by that party.”

However, the Act also gives a court the discretion to decline to award fees if “the position and conduct of the non-prevailing party or parties were reasonably justified in law and fact” or if “special circumstances” would “make an award unjust.”

The Act prevents patent holders from using an alleged infringer’s failure to settle in response to a demand letter as evidence of willful infringement, unless the letter set out with particularity the identity of the patent owner, which patents had allegedly been infringed, and the manner in which the patents had allegedly been infringed.

Opponents of the bill argue that it will discourage legitimate inventors with meritorious claims and favor wealthy parties which can afford to risk being liable for other parties’ costs.  They say that the bill does not fix real “patent troll” problems.


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

Supreme Court to Consider Software Patent Case

The US Supreme Court has agreed to hear an appeal of a decision by the US Court of Appeals for the Federal Circuit that an abstract idea does not become patentable simply because it is connected to a computer system.

The Court of Appeals for the Federal Circuit has primary responsibility for interpreting US patent law.  It has struggled over the years to define the standards that judges should use to evaluate the validity of software patents.

The Federal Circuit’s May ruling in the case of CLS Bank v. Alice could lead to the “death” of software and business method patents, according to dissenting Judge Kimberly Moore.

Alice, an electronic marketplace company, holds four patents related to a computerized trading platform for currencies.

After being sued for patent infringement, defendant CLS Bank International contended that Alice’s so-called inventions were too abstract to be patentable.  A district court agreed.

The Federal Circuit decided en banc that Alice’s patent claims were invalid.  But the decision included seven separate opinions that failed to clarify the patent-eligibility of software claims.

The Federal Circuit’s decision was widely criticized and left software patent owners guessing about whether their inventions were really eligible for patents.  Technology groups including the Electronic Frontier Foundation, a digital civil liberties group, urged the Supreme Court to review the case.

In its appeal, Alice has asked the Supreme Court to decide:

Whether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Mark Lemley, a StanfordLawSchool professor and patent expert, wrote in a brief on behalf of Facebook and other companies that the Federal Circuit’s decision had left the law “hopelessly confused.”  He later wrote that he expects the Supreme Court to find that Alice’s inventions are not patent-eligible.

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

Palin Claims Facebook Post of 9/11 Flag Photo Was Fair Use under Copyright Law

Former Alaska Governor and Republican Vice Presidential candidate Sarah Palin has claimed that her posting of a photo of firefighters raising an American flag at the WorldTradeCenter site was “fair use” under US copyright law.

Palin was sued for copyright infringement in September by the operators of the New Jersey newspaper that owns the rights to the image.

Palin had posted a cropped version of the image on her Facebook page and PAC website.

The North Jersey Media Group’s suit alleges that Palin and her political action group (SarahPAC) violated its copyright in the photo and that Palin never sought permission to use the image for fundraising purposes.

Palin countered that the posting of a historic and patriotic image to commemorate the tragedy of 9/11 was fair use under copyright law.

In their response to the suit, Palin’s copyright attorneys cited the recent ruling in favor of Google with respect to the millions of books scanned and made available online in the Google Books project.  They said that Palin’s use was even more a matter of fair use since, unlike Google, Palin and her PAC are not for-profit entities.

Palin’s response to the suit also addressed other prongs of the fair use test, claiming that the cropped and altered version of the photo Palin used did not affect the market for the original photo.

The photo at issue, known as “Raising the Flag at Ground Zero” appeared on the cover of The Record (of New Jersey) and other newspapers.  The photo has been compared to another iconic image, “Raising the Flag on Iwo Jima.”

The Iwo Jima photo was the basis for the Marine Corps War Memorial in Washington, DC, depicted above.

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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.

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.

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.

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