On Monday, June 13, 2016, the Patent Trial and Appeal Board issued its first ever post-grant review decision under the America Invents Act.  The Board invalidated two patents challenged by Husch Blackwell client American Simmental Association, a national cattle breed association representing the interests of Simmental cattle breeders in the United States. The ASA successfully argued that two previously issued patents which sought to protect a method of determining the relative market value of feeder cattle based upon genetic merit and physical traits of the animals constituted non-patentable subject matter. The Board agreed and stated that the challenged patents’ methodology were “fundamental concepts” that were “long prevalent in our system of commerce” and that some of the patents’ claims would have been obvious to a person familiar with the relevant technology based on previous inventions.

More information on the first-of-its-kind ruling, Husch Blackwell’s involvement and a link to the Law360 article can be found on our website.

Sky with a yellow street sign "

Over the past few years, we have been reporting on the full frontal assault against patent assertion entities (PAEs), pejoratively referred to as patent trolls in blog posts in May 2014, July 2014 and December 2014.   Actions to curb these perceived pariahs of the US economy have come from nearly every angle of attack including the White House, Congress, the Federal Trade Commission and all the way down to various state houses.   Although much has happened on many of the fronts we have previously reported, much has stayed the same.  We thought now would be a good time to reflect over the last year’s activities to see if the strategy of patent litigation as a business is truly nearing its demise.

To catch those of you up who are unfamiliar with the term, “patent troll” generally refers to an individual or entity that focuses its efforts solely on enforcing patent rights against purported infringers without itself intending to manufacture the patented product or supply the patented service. Patent trolls are often accused of a sort of “21st century shakedown,” often holding vaguely worded patents and, rather than using the protected technology themselves, demanding “licensing fee” payments from alleged infringers in hopes that their targets will settle rather than defend themselves in court.   Patent trolls are most often thought of as asserting computer implemented inventions claimed in so-called business method patents.  The bread and butter tactics of a troll usually begin with sending demand letters to accused infringers, inviting a quick settlement before prolonged litigation likely to cost the accused infringer several multiples of what the troll will take to resolve the issue.

To be sure, patent trolling is big business in the U.S.  A number of studies conducted on the subject have found that patent trolling cost the U.S. economy close to $30 billion each year, with many small businesses paying significant sums to defend themselves or settle claims raised by patent trolls.

Federal Legislation to Reform the Patent Act

Since our first post on the subject back in May 2014, there have been several attempts at reforming the US Patent Act in order, at least in part, to rope in patent trolls. In July 2015, the Innovations Act (H.R. 9) was reintroduced in Congress and was designed principally to put a legislative lid on patent trolls.  A key, and controversial, element of the bill is a revision to the Patent Act to provide a presumption that the winner of any infringement suit will have its attorney’s fees paid by the loser.

Despite its early wide-spread bipartisan support, the Innovations Act has lost its momentum and appears to be dead – at least for the time being.  As it turns out, there are several critics to the bill’s concepts, including universities and other research and development-based businesses that do not generally practice the inventions they create. Undaunted, Representative Bob Goodlatte (R-Va) vows to keep up the fight. Continue Reading What is Up with Patent Reform, and What About Those Darn Trolls?

For the last several years, there have been rumblings about the possibility of a truly unified set of laws for the protection of trade secrets. Well, that day may be right around the corner. Recently, the Senate Judiciary Committee approved the Defend Trade Secrets Act (“DTSA”), which will, if signed into law, amend the Economic Espionage Act of 1996 to create a federal right of action for trade secret theft. The DTSA is the culmination of several years of work by a number of Senators striving for uniformity in US law on the subject of trade secrets and their enforcement.

“Trade secrets” can be found in nearly every segment of the US economy, including the agriculture and animal science industries. A bevy of commercially sensitive information can qualify as trade secrets including scientific, technical, and engineering data and knowhow. Currently, “trade secret” rights are determined on a state-by-state basis, and disputes relating to trade secrets are principally within the domain of state courts. Under our current patchwork of laws, each state has its own requirements for initiating, maintaining and ultimately prevailing on claims relating to the alleged theft or misappropriation of a company’s trade secrets. This has at times lead to inconsistent treatment of determining whether something can qualify as a trade secret and, if so, the provisions of meaningful relief for misappropriation of those assets — particularly when the information crosses state lines or is removed from the United States. 

Some recent issues touching limitations on patent protections have further brought to light the value of trade secret protections. The America Invents Act and developments in limiting patent eligibility for diagnostics and biological inventions have caused ag technology companies to reevaluate how to go about protecting their innovations to better ensure company value and competitiveness.  

If enacted, the DTSA would represent the most significant trade secret reform in decades. The key aspects of this legislation are that it provides a uniform law on the subject matter of trade secrets and gives federal courts jurisdiction over disputes brought under the Act. Remedies would no longer be limited to state law and would give litigants nationwide scope to injunctions issued under the Act.  It also gives litigants the opportunity to recover stolen assets on an ex parte basis. Another key element of the DTSA is a provision that provides for awarding attorneys’ fees to the prevailing party when a claim of misappropriation is brought in bad faith. The current bill also contains provisions to protect whistleblowers who disclose trade secrets to the government or use the information in the context of a retaliation lawsuit. The bill now moves to the full Senate for consideration.

We will of course continue to monitor developments and keep you up to date with the progress of the DTSA.

Congratulations to Michael Annis, Sam DiGirolamo and Dan Cohn on a precedent setting decision for Husch Blackwell in intellectual property. This is for the American Simmental Association, which is attempting to invalidate a set of patents directed to utilizing genetic information to value feed animals.

These petitions for post-grant review, filed in January and February of 2015, respectively, concern patents related to systems and methods for determining the relative market value of a sale group and for generating a genetic merit scorecard. These patents were also at issue in Case No. 1:14-cv-01040-RBJ in the District of Colorado, since dismissed. Leachman Cattle filed a preliminary response on March 23, 2015. However, the Patent Trial and Appeal Board (PTAB) sided with the American Simmental Association, determining that it was more likely than not to prevail in a Post Grant Review trial, based on its Petitions. The PTAB therefore instituted trial on June 19. These petitions resulted in the first instance of a trial in a Post Grant Review proceeding.

Earlier this year, we reported on the full-frontal legal assault on so-called patent trolls (here) and (here).  Now at the end of the year, we thought a look back on what has happened in the conflict since our last posts and a look forward into what may be in store for 2015 would be of interest to those who have or may be impacted by allegations of infringement by non-practicing entities.

The Federal Trade Commission dipped its toes into the troll infested waters in early 2014 when it initiated a study of patent assertion entities (PAE) and their impact on American commerce.  Shortly thereafter, the FTC, for the first time, initiated its consumer-protection authority against a PAE.  Specifically, the FTC issued an administrative complaint against MPHJ Technology Investments, LLC (a PAE ); its officer, Jay Mac Rust; and its outside legal counsel, Farney Daniels, P.C., for deceptive sales practices in violation of the FTC Act by conducting a campaign to promote and sell licenses for the company’s computer scanning and networking patents.  Most of the 8,000 plus demand letters sent by MPHJ (or its sister licensing companies) were sent to small business across the country, including several animal heath related entities.   In early November, the FTC announced a proposed settlement where, without admitting or denying the allegations, the respondents agreed to cease making certain misleading or unsubstantiated representations in patent assertion communications.  The FTC’s continued interest in monitoring and evaluating demand letters from PAEs will no doubt be something to watch in 2015. Continue Reading The Battle Against Patent Trolls – Part Three

As we advised in a previous post, there seems to be an all-out war against so-called patent trolls. A patent troll is, in general, a pejorative term associated with entities that do not practice their own patents but nonetheless assert those patents against others. Also known as “patent assertion entities,” patent trolls often “assert” their patents by way of mass mailing letters to accused infringers demanding that the accused immediately take a license in the subject patent or face oppressive litigation. The battle against patent trolls continues to wage on several fronts, from the White House, to the FTC, to numerous state houses attempting to curb the practice of sending vexatious patent license demand letters.

Last week, Missouri Governor Jay Nixon signed into law legislation aimed at repelling patent trolls, at least for Missouri residents. A copy of the bill is attached here. Missouri law now provides a private right of action to recipients of bad faith patent licensing demand letters, allowing for damages of up to $10,000 per occurrence, as well as attorneys’ fees expended in the effort. The law also authorizes the Missouri Attorney General to pursue entities perceived to be trolling in Missouri for greenmail-type settlements.

Missouri’s actions to protect its citizens from patent trolls may ultimately prove to be for naught. Late last week, the U.S. House of Representatives Subcommittee on Commerce, Manufacturing, and Trade passed out a bill known as the Targeting Rogue and Opaque Letters Act, or TROL Act. As currently drafted, the bill would make the act of sending a patent demand letter “in bad faith” punishable as an “unfair or deceptive act” under the Federal Trade Commission (FTC) Act. Sending a letter would only be a crime if the letter met certain conditions, such as attempting to assert an invalid patent. However, the TROL Act expressly preempts state laws regarding demand letters (this means the federal law replaces the state laws and renders them a nullity).

Congress has focused much attention over the last few years on the types of patent trolls that send out thousands of demand letters. Senator Claire McCaskill (Dem.-MO) has introduced similar legislation in the Senate. Senator McCaskill has been a vocal opponents of patent trolls, at times referred to them as “bottom feeders and “pond scum” and also referring to their demand letters as “scams.” The House bill will now go for a vote before the full Energy and Commerce Committee. We will continue to monitor the situation and report to you the potential impacts to your business.

Last Thursday (June 19), the U.S. Supreme Court unanimously decided that the federal Food, Drug and Cosmetic Act (“FDCA”) does not preclude POM Wonderful’s deceptive labeling claims under the Lanham Act against Coca-Cola.  POM Wonderful LLC v. Coca-Cola Co., No. 12-761, slip op. at 2 (June 12, 2014).  POM sued Coca-Cola under the Lanham Act for false advertising, arguing that Coca-Cola’s product label was misleading since the beverage contained less than one percent pomegranate juice.  Coca-Cola responded that the Food & Drug Administration’s (“FDA”) authority under the FDCA preempted POM’s Lanham Act claim.  From Coca-Cola’s perspective, the false advertising claims were barred, because the company was complying with the FDCA. 

The Ninth Circuit agreed in part with Coca-Cola, holding that the FDCA precluded Lanham Act claims based on any aspect of a food label regulated by the FDA.  POM Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170 (9th Cir. 2012).  The court reasoned that by acting when the FDA has not, despite regulating extensively in this area, a court risks undercutting the expert judgments and authority of the FDA.    

Reversing the Ninth Circuit’s decision, the Supreme Court stated that a case involving two federal statutes should be decided based on traditional rules of statutory interpretation, not principles of pre-emption.  Reviewing the text of the FDCA and Lanham Act, the Court concluded that neither statute prohibited or limited Lanham Act claims involving food labels that are regulated under the FDCA, as both statutes have coexisted since the Lanham Act was passed nearly 70 years ago.  The Court further noted that the FDCA’s state law pre-emption provision indicated that Congress did not intend for the FDCA to preclude application of other federal laws to food labels. 

Moreover, the Supreme Court observed that private causes of action under the Lanham Act and governmental enforcement actions under the FDCA serve complementary purposes—the Lanham Act allows competitors to bring civil lawsuits to protect their commercial interests from unfair competition, whereas the FDCA protects public health and safety.  For these reasons, the Court determined that the FDCA does not preclude a Lanham Act claim based on an allegedly deceptive food or beverage label.  The Court then remanded the case to the Ninth Circuit for further proceedings.

As a result of the Supreme Court’s decision, food and beverage manufacturers attempting to differentiate their products with specialized or targeted labeling should closely re-examine their product labels.  Despite the considerable uncertainty created for the food and beverage industry, it is now clear that ensuring food and beverage labels comply with FDA labeling regulations is not enough to avoid deceptive labeling lawsuits. The likely result is a proliferation of Lanham Act claims amongst competitors in the food industry.

The Canadian Government recently introduced Bill C-31, the Economic Action Plan Act 2014, No.1.  This omnibus bill includes changes to a wide variety of laws in Canada.  The potential amendments to Canada’s Trade-marks Act will have a significant impact on brand owners, as well as intellectual property practitioners worldwide.  The bill is intended to ensure that Canada meets its international trademark obligations outlined in the Singapore Treaty on the Law of Trade-marks, the Nice Agreement, and the Madrid ProtocolAlthough the bill is still moving through the legislative process, the essence of the changes that will impact brand owners will likely remain unchanged and become law in Canada.  It will be important to monitor the legislation because, once implemented, the changes will be far-reaching.

Notably, C-31 radically changes trademark use requirements.  Presently, Canada, like the U.S., is a use-based jurisdiction, meaning a party can only register a trademark if it has been used in Canada, or if it has been both used and registered outside of Canada.  Bill C-31 eliminates this requirement.  Brand owners doing business internationally are likely quite familiar with the potential issues that arise when a country does not require use of a mark prior to registration.  A party may register your mark—even a famous mark—and try to keep you from doing business in that country, claiming infringement, absent what often may be a high payment to purchase the registration and  to use the mark.  The Apple iPad situation in China is a classic example.  Apple had to pay $60 million to resolve the dispute concerning use of its mark in China because another party had obtained a registration for that mark in China.  Continue Reading Brand Owners Beware: Important Changes in Canadian Trademark Law are on the Horizon

Over the past several years, there has been a growing cry from the business sector about a menacing plague rising in the form of patent litigation originated by non-practicing entities, more commonly referred to as “patent trolls.” Big business, academicians, practitioners and politicians alike are demanding that our patent system be reformed to address this parasite to American capitalism.  Lately, it appears that there has been an all-out attack on this professed scourge of the business world, from the White House, to the halls of Congress, to the United States Supreme Court, and even to various State Houses and Attorneys General across the country.  Now we have to ask: Has the patent troll seen its time come and go?

Since passage of the America Invents Act, there have been no less than 12 bills presented in Congress directed at curbing perceived abuses of the U.S. patent system, particularly in enforcement of patent rights. Several changes to the Patent Act, including discovery reform, heightened pleading requirements and amending the Patent Act’s fee shifting provisions to a loser-pays system, are all on the table. Even a cursory view of the proposed amendments show they are principally directed at curbing perceived abuses by patent trolls.

In addition, at least nine states including Vermont, Oregon, Wisconsin, Georgia, Virginia and Missouri, have either passed or are considering legislation directed at curbing the rise in mass mailing demands from trolls for patent license payments.  Generally, these legislative enactments make it a crime to send patent licensing demands that contain false or misleading information.  Wisconsin, for example now requires any notification seeking enforcement of a patent to include comprehensive patent information including detailed facts forming the basis for the infringement allegations and an identification of any pending court or administrative proceeding related to each asserted patent.  In addition, states are empowering their attorneys general to enforce the provisions of their anti-troll laws with both civil and criminal action. Continue Reading Are We Witnessing the Beginning of the End of the Patent Troll?

In arguments before the Supreme Court earlier this week, Coca-Cola asserted that its label for Minute Maid “Pomegranate Blueberry” juice, which contained a “flavored blend of 5 juices” complies with FDA rules and therefore, Coca-Cola could not be sued by a competitor for using an allegedly “misleading” label under the Lanham Act.  Years ago, the juice market was dominated by apple and orange juices – until POM Wonderful introduced pomegranate based drinks trumpeting the health benefits of pomegranate juice.  POM Wonderful fairly aggressively challenges drink makers that offer beverages with small amounts of pomegranate, while still boasting of the health benefits associated with the juice.

Pom Wonderful sued Coca-Cola under the Lanham Act on the ground that Coca-Cola’s product misleads consumers because purchasers would have no way of telling that the total amount of pomegranate and blueberry in the juice amounts to “a teaspoon in a half gallon.”  Coca-Cola’s defense rested on the ground that the FDA’s right to regulate and approve labels preempts POM Wonderful’s false advertising claims.

During oral arguments, Chief Justice John Roberts seemingly disagreed with Coca-Cola’s defense:  “I don’t know why it’s impossible to have a label that fully complies with the FDA regulations and also happens to be misleading on the entirely different question of commercial competition, consumer confusion that has nothing to do with health.”  Similarly, Justice Anthony Kennedy seemed skeptical of Coca-Cola’s assertion that consumers are sophisticated enough to know that other juices would be in the bottle because the food label contained the word “flavored”.  Justice Kennedy wryly stated:  “Don’t make me feel bad because I thought that was pomegranate juice.”  Justice Ruth Bader Ginsburg also seemed nonplussed by Coca-Cola’s argument, stating “But maybe the two acts are serving different purposes.”

A favorable decision on behalf of POM Wonderful could give rise to an increase in consumer and competitor suits over labelling and advertising claims.  A decision in the case is expected in June.