Intellectual Property Directions

Crank up the music! Turn on the camcorder! And turn your kids loose on the dance floor! YouTube is safe again for you to post those simply adorable videos of your child stumbling his or her way through Purple Rain. Yes, Universal Music, the same company that made you afraid to go in the water with “Jaws” and set out to make YouTube a scary place too, has been given a second dope slap by the Electronic Freedom Foundation and District Court Judge Jeremy Fogel.

The case started a couple of years ago when Universal, trolling the internet, uncovered a significant violation of their copyright in a 29 second video of Stephanie Lenz’s baby “dancing” to a Prince song. Swinging into action immediately to fight this threat, Universal relied on the Digital Millennium Copyright Act to sent a take down order to YouTube.

Luckily the EFF took up Ms Lenz’s case. According to Zusha Elinson on Law.com,

The Electronic Frontier Foundation sued Universal on behalf of Lenz in 2008, arguing that the music company’s lawyers should have taken a moment to consider whether Lenz had a fair-use right to post the clip before firing off a takedown notice to YouTube. YouTube removed the video, but restored it six weeks later when Lenz filed a counternotice.

In the most recent action, Judge Fogel ruled that Ms Lenz can recover some level of damages. Quite reasonably, the EFF asked for damages to make real a deterrent for copyright holders who abuse the takedown process of the DMCA. Universal, of course, argued that Ms Lenz should only be allowed to recover financial damages caused by their overzealous application of copyright (which of course are essentially zero) rather than to receive compensation for the violation of her right to post the video. The judge agreed, writing;

Requiring a plaintiff who can make such a showing to demonstrate in addition not only that she suffered damages but also that those damages were economic and substantial would vitiate the deterrent effect of the statute.

Now we wait to see what damages are assessed. But in the meantime, it’s safe to go back in the water.

UPDATE 02-Mar-10: As has been pointed out (see comment), the blog belongs to BRAD Feld, not Michael.

A recent post on Michael Feld’s blog, http://www.feld.com/wp/archives/2010/02/sawyer-weighs-in-on-intellectual-ventures.html, prompted me to post the following comments:

“Sawyer’s” comments on IV, as useful as they may be in making him feel self-righteous (or is he spending all that time in Texas pro bono) are, for the most part, avoiding the real issues of the failure of the patent system, world wide, to keep up with technology and business realities. He is attacking someone who plays a bad game better than he instead attacking the bad game itself.

The three hundred year old perception that it was a fair trade to give an inventor some period of exclusivity to profit from his invention in exchange for teaching society the invention’s details never envisioned a world in which product/technology lifecycles might be measured in months or in which patent litigation costs start at 7 figures. Nor did they envision technologies where a patent examiner would need an advanced degree to understand a patent application. Or inventions that were totally intangible, like software or business methods.

Furthermore, I doubt the founding fathers envisioned the growth of the patent law practice, where one set of attorneys bill out at well over 50 times the minimum wage to nitpick through the legal maze created and interpreted by another set of lawyers.

My point is not that attorneys charge too much - it is just that the constitutional basis for the patent laws (that society benefits when innovation is encouraged and that that goal is achieved when inventors are encouraged to share the details of their invention with society by having an opportunity to profit without competition) is no longer served by the laws and processes that form our patent system.

The key sentence in this article is

“Medical imaging company Hologic Inc. has settled patent disputes with a subsidiary of Johnson & Johnson Co. in a deal that will see Bedford-based Hologic pay out $12.5 million for one product [and pay ongoing royalties] and get ongoing royalties coming in from another.”

That is, Hologic reached into its patent portfolio [a year and a half] after it was sued by J&J in order to find a bargaining chip. Would J&J have let Hologic keep selling the product in suit if it did not have its own product in patent problems?

Hologic settles J&J subsidiary patent dispute - Mass High Tech Business News

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Since Valentine’s day is behind us, is it okay to speak of a relationship gone bad? A “divorce” that has ended up in patent court some 12 years after the patent issued? Can you really enforce a patent 12 years after the supposed infringement started or is this just a “lovers’ quarrel” taken too far?

Hassan Kunbargi started investigating the chemistry of cement at a graduate student in 1984. Edward Rice, owner of CTS Cement Manufacturing, became aware of Kunbargi’s work and sought an adjunct faculty position at UCLA so that he could serve as Kunbargi’s advisor. Rice hired Kunbargi to work at CTS in 1985. After that, both men worked for another company, Fibermesh.

In 1989, after demonstrating the invention disclosed in a patent application to Rice, something in the relationship apparentlyy turned sour and Kunbargi ceased working for Rice. In September 1990 the patent was allowed and Kunbargi received the ’556 patent, entitled “Very Early Setting High Strength Early Cement.”

Fast forward to 2002. Upon the issuance of his third patent, Kunargi sued Rice for, among other things, patent infringement and theft of trade secrets. This case bounced around the courts with motions on both sides being considered at one time or another. [including Kunbargi's motion to disqualify Rice's counsel, who had been listed on a power of attorney as entitled to prosecute a patent application on an invention by Rice and Kunbargi when they had both worked for Fibermesh!].

Among other defenses, Rice turned to the doctrine of laches - that is, the idea that if you fail to act within a reasonable period of time you lose your rights under the law. The concept, like most aspects of patent law, is an attempt to enforce fairness. If you believe someone is infringing your patent, it is considered unfair for you to wait until the other party has invested in the technology and built up a large business before enforcing your patent. The District Court agreed with Rice that 12 years was too long and declared the patent unenforcable against Rice in a summary judgement [viz., without a trial].

According to the court, Kunbargi should have known of his infringement claim because of his history of working on cement mixtures with, and then having a falling out with, Rice, and because of his prior affiliation with CTS. The court found that, because Kunbargi had demonstrated his invention to Rice before the ’556 patent issued, Kunbargi was on “inquiry notice” at the time the patent issued.

The appeals court (the CAFC) disagreed. It said:

CTS does not dispute that [Kunbargi] could not have tested CTS’s product for the presence of soluble anhydrite. Without access to CTS’s internal procedures, Kunbargi could not have investigated CTS’s methods to determine infringement. Even Kunbargi’s hiring of a private investigator led to no conclusive result that CTS’s products infringed the ’556 patent. An infringer does not escape liability merely by infringing in secret. [Kunbargi] could only have asserted infringement of the ’556 patent upon a reasonable belief that CTS infringed all of the limitations of the claims, including the limitation requiring soluble anhydrite.

The CAFC therefore reversed the summary judgement and sent the question of laches back for trial. The CAFC pointed out that, for laches to apply, the only time that counts is the time after the patent holder should have had a reasonable basis to believe infringement is taking place.

Keeping a low profile while you infringe, even if you are successful for many years, will not get you off the hook for infringement. And knowingly allowing someone to infringe in order to build up your settlement (or get revenge in a relationship gone bad) may leave you holding an empty purse.