Intellectual Property Exclusive Q&A

With Ryan Baker, Partner at Baker Marquart LLP

Posted: 3rd July 2014 09:24

Are you witnessing any prominent trends or strategies?
               
Above many trends in intellectual property law is the cloud.  Cloud computing and its inherent decentralization has raised new issues in almost every area of intellectual property law.  In the copyright context, ABC, Inc. v. Aereo, Inc. (Sup. Ct. Case No. 13-461) deals with storage of copyrighted broadcast content on remote servers, located in the “cloud.”  Patent law has also grappled with cloud computing issues.  In Limelight Networks Inc. v. Akamai Technologies Inc., the U.S. Supreme Court found that Limelight Networks Inc. could not be liable for induced infringement because neither it nor its consumers performed all the steps of Akamai Technologies Inc.’s patent, although Limelight and its customers each performed certain steps.  Some have argued that case creates a huge loophole for infringers.
 
Related to cloud computing and decentralization, another important ongoing trends in intellectual property law is its increasing internationalization.  As patented inventions and other intellectual property are increasingly developed on a global scale, the legal architecture protecting intellectual property is still, to a large extent, dominated by the parochial interests of individual nations.  The development of Chinese intellectual property law and its accompanying enforcement mechanisms will be interesting to observe.  As China increasingly develops specialized intellectual property such as like the intellectual property tribunals of the Shanghai People’s Court, intellectual property holders may abandon their traditional reticence to litigate claims in China.
 
Who will be the biggest winners and losers of the new Top Level Domains (“TLDs”)?
 
The biggest winners from TLDS will be TLD registry providers – although TLDs seem ultimately to be a speculative bubble, TLD registries are poised to profit spectacularly from this bubble.  Unfortunately, we believe that some of the biggest losers at the end of the day will be businesses and brands who will be charged enormous sums at unfair terms to essentially defend their names from predatory third parties.  As we do not expect established businesses and brands to lie down in the face of this extortion, we anticipate that IP litigators and alternative dispute resolution providers to see an uptick in business.
 
In your opinion, what are the biggest and most interesting cases to follow in 2014?
 
ABC, Inc. v. Aereo, Inc., Sup. Ct. Case No. No. 13-461, relates to copyright holders’ public performance rights.  Aereo has a technology that enables users to access over-the-air broadcast network content via the user’s computer and internet service by remotely housing antennas and DVRs.  The major networks claim this technology makes pubic performances and infringes their exclusive rights granted to them under copyright law.  Aereo claims the transmissions of the content to users is individualized, one-to-one, so it is not a public performance and it is just acting as a service that rents equipment to users.  This case could potentially have a huge impact on the cloud computing industry.  It was argued on April 22, 2014, and a decision is expected to be out sometime this month.
 
Alice v. CLS Bank, Sup. Ct. Case No. No. 13-298, argued March 31, 2014, relates to the legal standard for determining patentability of computer implemented inventions.  The case addresses whether a computer-implemented, electronic escrow service concerns abstract ideas ineligible for patent protection.  The Supreme Court’s decision could have an enormous impact on countless method patents. The decision is expected to be out sometime this month.
 
Petrella v. Metro-Goldwyn-Mayer Inc., 134 S.Ct. 1962 (2014), addresses the affirmative defense of laches in the context of copyright infringement claims.  The daughter of a screenwriter brought infringement claims against MGM, related to the movie Raging Bull, based on a screenplay copyrighted in 1963.  Metro-Goldwyn-Mayer Inc. arguedher claims, which were alleged to be outside the 3 year statute of limitations applicable to copyright infringement claims, were barred by laches.  Largely due to the fact the damages had continued to accrue throughout that time period between her notice of her belief Metro-Goldwyn-Mayer Inc. was infringing and her instituting the action, the Supreme Court concluded that laches cannot be invoked to bar copyright infringement claims for damages accrued within the statutory period.  This case has been remanded to the district court for further proceedings. 
 
In Nautilus v. Biosig Instruments, Inc., Sup. Ct. Case No. No. 13-369, the Supreme Court considered one measure of patent validity, definiteness.  The Court overturned the Federal Circuit’s “insolubly ambiguous or amendable to construction” standard and held that the standard for determining invalidity for indefiniteness should be whether a person skilled in the art, in light of the specification and prosecution history, with a “reasonable certainty” ascertain the scope of the invention.
 
To what extent do non-practicing entities (“patent trolls”) stifle innovation in the current intellectual property landscape?
 
Patent trolls rely on the high cost of litigation to extract settlement from defendants.  Patent trolls stifle innovation by requiring companies, which would be spending money on research and design, to instead spend that money on patent litigation and “acquisition.”  Studies show patent trolls could cost the economy in a sum close to $30 billion a year.  See, e.g.,2012 study by Boston University Law School professors Michael J. Meurer and James Bessen, available at http://www.bu.edu/law/news/BessenMeurer_patenttrolls.shtml.   Further, the trolls do not just go after the large, successful innovators, but frequently target small and mid-size businesses.  The study by Muerer and Bessen revealed that small and mid-size companies pay more than one third of that almost $30 billion a year. 
 
Can you outline the significance and repercussions of the pharmaceutical “patent cliff” in the current landscape?
 
Pharmaceutical companies are losing drug patents in high rates (the patent protections are expiring), which threatens billions of dollars in revenue for the big pharmaceutical companies.  Once the drug is no longer patent protected, other companies are free to replicate it, and create “generics.”  Those generics are generally much cheaper than the name branded, previously patent protected drug, so sales of the generics undercut the revenues the companies receive for the name brand drug.  The major potential repercussion is that once companies no longer have the large, protected revenue stream generated by the patent protections of the drugs, the companies’ money available to reinvest in research and development will decrease, thus decreasing new, effective drugs entering the market. According to Bloomberg Businessweek, “drugs going off-patent in 2014 contribute just under $50 billion in pharmaceutical industry revenue.” Companies facing the patent cliff must find ways to expand or enhance the product line.
 
What are the difficulties in representing international companies in cross-national IP, copyright or patent cases?
 
Coordination is important when representing an international company in cross-national IP matters. Each locale might have different requirements and some might be conflicting.  These requirements include applicable law, as well as custom and practice in a particular industry.  Discovery, a critical element to any intellectual property case, is complicated in cross-national disputes.  This is particularly true when the dispute involves countries with blocking statutes or other protectionist measures.  A strategic plan should be developed to coordinate and guide to all cross-national activities.
 
What are the potential legal complications arising from crowdsourcing intellectual property?
 
The primary legal complication arising from crowdsourcing of intellectual property relates to ownership of the final technology and at what point that ownership takes effect.  If a company employee produced the IP solution to the proposed problem, in most instances, the property would belong to the company.  This is true for independent contractors, as well.  However, currently, crowdsourced solutions are the property of the developer until formally transferred to the company.   Special measures must be taken by any authors of works offered through crowdsourcing to ensure those authors are properly compensated for any intellectual property they transfer.
 
How important is it to have solid net neutrality rules in order to promote innovation?
 
It is absolutely essential.  Net neutrality has been a clear driver of economic innovation on the web.  The neutral playing field that those rules ensure allow all parties a chance at success.  In their absence, the highest bidders (likely well established) will have no reason to continue to get better and improve consumer choice if they know they will be able to dominate internet traffic.  The marketplace and not network operators should determine winners and losers.  It is difficult to see how that will happen if already entrenched interests become more entrenched.  The barriers to entry will simply be too large for the vast majority of innovators to overcome.  In the absence of net neutrality rules, large telecommunications companies and entrenched businesses able to pay for increased speed will benefit, everyone else will not. 
 
Can you outline the best practices in portfolio management?
 
Management of an IP portfolio, especially with the speed of technology advancements today, requires diligence, attention and tools that enable acquisition, analysis and organization and protection.  First, identify the company’s current core technological areas. The areas that are vital to the company’s business should be given priority.  A solid portfolio will spread the risk among many patents, as this decreases the dependency on individual patents.  The portfolio should still be one of quality though, and not just a collection of patents for every idea that has come along.   Establish an IP portfolio strategy that is aligned with the company’s business objectives.  A company should have a continuous, organized strategy that looks at innovation, the scope, and the quality of patents, as well as the portfolio itself.  A portfolio should be strong and properly scaled, as it can act as a defensive and offensive weapon in litigation.  Having multiple patents in a given subject matter in the portfolio allows for potential counter-claims, while also discourages others from entering the field.  As with investment portfolios, diversity and balance are also important.  Diversity hedges risks.  Balance of the portfolio requires a monitoring of the life span of technologies and patents.  Patents should be renewed, defended or abandoned based on the markets demands.  Of the utmost importance is just attention to the portfolio and periodic review and re-balancing.  Ensure adequate protection of company’s core technology and supplement with continuation applications and continuation-in-part applications, where necessary.

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