Often in patent cases, courts are faced with the issue of whether the assignee of a patent possesses “all substantial rights” to the patent such that the assignee has standing to sue potential infringers. Generally, for a patent assignee to have standing to sue, the patentee must have conveyed “all substantial rights under the patent” to the transferee. Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1189 (Fed. Cir. 2007). Furthermore, “[t]o be an exclusive licensee for standing purposes, a party must have received, not only the right to practice the invention within a given territory, but also the patentee’s express or implied promise that others shall be excluded from practicing the invention within the territory as well.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1317 (Fed. Cir. 2010).

Recently, in Porto Technology, Co., et. al. v. Cellco Parnership d/b/a Verizon Wireless, a Richmond U.S. District Court was asked to determine whether Plaintiffs Porto Technology, Co. and Porto Technology, LLC (collectively, “Porto”), the assignees of the patent in issue, had standing to sue the alleged infringers under the specific terms of the assignment. The district court concluded that although the license agreement at issue was styled “Exclusive Patent License Agreement,” it did not confer sufficient rights to Porto to confer standing. Specifically, the court noted that: 1) the license agreement at issue gave the patent owner the right to veto any transfer of a sublicensing agreement entered into by Porto, 2) the license agreement gave the patent owner the right to dictate non-exclusive licensing of the patent to third parties – without Porto’s consent, 3) the license agreement did not specifically convey to Porto the exclusive right to bring suit to enforce the patent, and 4) the license agreement was silent as to Porto’s right to practice the invention. Thus, the Richmond District Court ultimately concluded that “even setting aside the absence of a specific right to practice or enforce the patent, the restriction on Porto’s right to sublicense, coupled with the patent owner’s retained right to independently license the patent, defeat constitutional, precedential and statutory standing.” Porto Tech., Co. v. Cellco P’ship, 2013 U.S. Dist. LEXIS 38748, *9-10 (Hudson) (E.D. Va. Mar. 19, 2013).

This case should serve as a reminder that a demonstration of standing will often be the first hurdle for a patent assignee seeking to sue for infringement. A patent assignee should assess whether the patent assignment at issue conveyed “all substantial rights” to the patent such that: 1) the assignee has the right to make use, or sell the service under the patent and 2) has the exclusive right to sue for infringement.  –Lauren Tallent Rogers

We have on more than one occasion used this blog to warn about uninvited solicitations for services relating to U.S. federal trademark registrations. The ability of the folks generating these things to do so arises from the fact that once an application for trademark registration is filed with the U.S. Patent and Trademark Office (PTO), information about the application (as well as any resulting registration) is publicly available at the PTO’s website. This information, unfortunately, includes the name and contact information for the applicant or registrant.

The most deceptive aspect of these solicitations – and the most offensive – has always been that many of them seem to be designed to create the impression that they are official communications from the PTO. In fact, the PTO saw fit long ago to post a warning about this on their website, including a list of some of the more deceptive solicitations. Nonetheless, the solicitations have continued apace.

One of them that seems particularly active lately is being sent under the name Trademark Safeguard to recent applicants for federal trademark registrations. It is a pitch for $375 per year subscriptions to a trademark monitoring service to watch for and advise of potential trademark conflicts. Even though this solicitation has been made to look less like an official PTO communication than it previously did (yes, this company was one of those noted in the PTO warning about these kinds of solicitations), like all of these solicitations it is still something that can safely be ignored.

To the extent a trademark applicant or registrant feels they need to be on the lookout for conflicting uses of their mark, our view is that they will be better served by a self-help approach (by using an email alert service such as Google Alerts), or by engaging one of the larger and more reputable national companies that is also in the business of providing corporate administrative services.  –Robert E. Smartschan

This post, the post that preceded it,  and the ones that will follow it, will outline the due diligence that we recommend for prospective franchisees.  For the prior blog post on this topic, click here. 

A prospective franchise should conduct due diligence on the internet regarding the chosen franchisor.  The franchisee should conduct a Google search on the franchisor entity, and should examine multiple pages of Google search results to attempt to get past sites promoting the sale of the franchise to any independent and objective articles, or possibly complaints about the franchisor.  The prospective franchisee should also do a specific Google search with the franchisor’s name and (separately, for each of the following items) “lawsuit,” “judgments,” “earnings,” “financial” and “competitors.”

In addition, the prospective franchisee should conduct a Google search on all of the individuals identified in Item 2 of the Franchise Disclosure Document, to see if any additional information is available on any of their backgrounds.

Issues worthy of further inquiry include litigation brought against the franchisor (Item 3) and bankruptcy by the franchisor or any of its principals (Item 4) and, in particular, undisclosed (in the Franchise Disclosure Document) litigation, undisclosed orders from state franchise regulators, or undisclosed bankruptcies.

Finally, the prospective franchisee should visit sites aggregating complaints about franchisors.  Two sites I regularly visit are  www.bluemaumau.org and www.unhappyfranchisee.com.

For further information regarding this topic, please contact Stephen E. Story at 757/624-3257 or sestory@kaufcan.com.  –Stephen E. Story

In a rare unanimous decision, the United States Supreme Court held that the patent exhaustion doctrine, while viable, does not allow a famer to use genetically modified soybeans to “make” new seeds to reuse in later planting seasons.  The decision, issued on May 13, 2013, in Bowman v. Monsanto, 569 U.S.____, No. 11-796, 2013 U.S. LEXIS 3519 (U.S. May 13, 2013) [add link to case], while specifically limited to the facts of the case, is significant in that it illustrates the Supreme Court’s willingness to extend patent protection to later generations of self-reproducing biological inventions in the biotechnology industry. 

In Bowman, Monsanto marketed patent protected soybean seeds that had been genetically altered to resist certain herbicides.  Bowman purchased, planted and harvested these seeds, keeping and replanting some of the beans’ seeds for a later crop.  Bowman argued that because he purchased the seeds, the patent exhaustion doctrine allowed him to reuse the additional seeds from the original plants to grow new ones which still exhibited their genetically altered condition.  Monsanto claimed that Bowman was “making” infringing seeds in violation of the company’s patent. While the Court expressly recognized the patent exhaustion doctrine, it refused to apply it to the facts of the case concluding: “the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article.  Such a sale, however, does not allow the purchaser to make new copies of the patented invention.”  In reaching this holding, the Court also expressly rejected the “blame the bean” defense; Bowman had argued that he did not make the copies, the plants did—an argument the Court made short shrift of pointing out that it was Bowman that purchased the seeds, planted them, harvested them and then replanted them.

Significantly, in delivering the opinion, Justice Kagan left the door open for a different application of the patent exhaustion doctrine for different technology.  She expressly noted that in a case with different facts, the self-replication of the article could be outside of the purchaser’s control or may be a necessary but incidental step in using the item for another purpose.  Only time will tell if the Court’s caveat will amount to more than “a hill of beans” and extend the patent exhaustion doctrine to other biotech areas and related technologies. 

Stephen E. Noona is the head of Kaufman & Canoles’ Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group.  He has been counsel in over ninety (90) patent cases in the Eastern District, is Fellow in the American College of Trial Lawyers and has appeared before the judges in all four Divisions of the Eastern District on patent and intellectual property matters. — Stephen E. Noona

Do you use a clickwrap agreement to notify users of your terms of use, or do you simply rely on the users continued use as a manifestation of their intent to be bound by your terms of use?  A clickwrap agreement displays the terms of use and then requires the user to click an “I Agree” or “Accept” button to affirmatively manifest their intent to be bound by the terms.  On the other hand, a browsewrap agreement is typically accessible through a hyperlink at the bottom of a web page and no affirmative acceptance is required by the user.  The theory is that with continued use of the website, the user agrees to be bound by the terms of use.

If the terms of use of accepted by clickwrap agreement, the E-SIGN Act generally provides that such agreement cannot be denied legal effect solely because the agreement is in electronic form.  If the terms of use are passive and you are relying on a browsewrap agreement, the law is unclear and certain terms may not be enforceable.  To ensure enforceability of your terms of use, you should consider using a clickwrap agreement rather than a browsewrap agreement.
–Nicole J. Harrell

In a 6-3 decision issued on March 19, 2013, the Supreme Court of the United States reversed and remanded a decision by the Court of Appeals for the Second Circuit, holding that the first sale doctrine applies to copies of a copyrighted work lawfully made abroad. The case involves a lawsuit filed by John Wiley & Sons, Inc. (“Wiley”) against Supap Kirtsaeng (“Kirtsaeng”) regarding foreign textbooks for which Wiley is the copyright owner. While studying in the United States, Kirtsaeng asked his friends and family in Thailand to purchase copies of inexpensive foreign edition English language textbooks and mail them to him in the United States where he sold them for a profit. Wiley filed a federal lawsuit against Kirtsaeng for copyright infringement, claiming that the unlawful import and resale of these books constituted infringement. In response to the claims, Kirtsaeng argued that the books were “lawfully made” and that the first sale doctrine permitted him to resell or dispose of them without further permission from the copyright owner.

The Supreme Court determined that Section 109(a) of the Copyright Act says nothing about geography and permits the first sale doctrine to apply to copies manufactured abroad with the copyright owner’s permission. The Supreme Court held that a nongeographical reading of Section 109(a) was in keeping with (a) the historical and contemporary statutory context, (b) the canon of statutory interpretation that “when a statute covers an issue previously governed by the common law,” it is presumed that “Congress intended to retain the substance of the common law”; and (c) basic constitutional copyright objectives. A lawful owner of a copy of a copyrighted work manufactured abroad can bring that copy into the United States and sell it without obtaining permission from the copyright owner. –Kristan B. Burch

When a patent infringement litigant is choosing a forum – the court in which the lawsuit will be filed – it is important to remember that in analyzing the propriety of venue, district courts will look principally to four factors: (1) the plaintiff’s initial choice of venue; (2) witness convenience and access; (3) the convenience of the parties; and (4) the interests of justice.  JTH Tax, Inc. v. Lee, 482 F. Supp. 2d 731, 736 (E.D. Va. 2007). Although all four factors are important, the first factor, a plaintiff’s choice of forum, is typically given substantial weight.  However, the weight a court ultimately chooses to give this choice may vary depending on “the significance of the contacts between the venue chosen by plaintiff and the underlying cause of action.”  Pragmatus AV, LLC v. Facebook, Inc., 769 F. Supp. 2d 991, 994-95 (E.D. Va. 2011). 

Specifically, in patent infringement cases, the weight given to a plaintiff’s choice of forum may diminish if plaintiff is a “non-practicing entity” and its sole activity in the forum is the enforcement of its intellectual property rights.  The Eastern District of Virginia has defined a “non-practicing entity” as an entity that “does not research and develop new technology, but rather acquires patents, licenses the technology, and sues alleged infringers.”  Id. at 995. The narrow reach of this “non-practicing entity” definition can be seen in a recent opinion issued by a Norfolk district court.  The district court held that even where an entity had only one employee, no formal office location (outside of the employee’s residence), and did not engage in any manufacturing activities in the forum, substantial weight should still be given to plaintiff’s choice of forum since the entity’s sole employee was “actively engaged in . . . research and development operations [within the forum] on a full-time basis.” Virginia Innovation Sciences Inc. v. Samsung Electronics Co. Ltd., No. 2:12cv548, 2013 U.S. Dist. LEXIS 31626  (Davis) (E.D. Va. March 6, 2013).  Therefore, before choosing to file in the Eastern District of Virginia, a plaintiff should consider whether its chosen forum has significant contacts with the underlying action – while keeping in mind that these contacts need not be as extensive as a formal manufacturing operation but must include something more than the mere enforcement of intellectual property rights.  
–Lauren Tallent Rogers

This post, and the series of posts that will follow it, will outline the due diligence that we recommend for prospective franchisees.

First, assuming the prospective franchise will have a place of business in Virginia, the prospective franchisee should ensure that its chosen franchisor is properly registered to offer franchises within Virginia.  This information is available on-line at the Virginia State Corporation Commission Retail Franchise Division website. 

A franchisor that is not properly registered to offer franchises for sale within the Commonwealth of Virginia presents a major red flag.  Not only will the sale of the franchise be illegal, and therefore potentially voidable by the prospective franchisee, but, more importantly, failure to register reveals either franchisor ignorance of pertinent franchise laws, or its conscious disregard of those laws.  (While the franchisor could be in the process of registering its franchise offering with the Commonwealth of Virginia, a prospective franchisee should confirm this with both the franchisor and with the State Corporation Commission Retail Franchise Division.  Moreover, the franchisor should not provide a prospective Virginia franchisee with a Franchise Disclosure Document before it has been properly registered with the Commonwealth of Virginia).

For further information regarding this topic, or to discuss potential actions to take upon learning your chosen franchisor is not properly registered in Virginia, please contact Stephen E. Story at (757) 624-3257 or sestory@kaufcan.com. — Stephen E. Story

An unfortunate scenario we see repeated too often is the one in which someone pays someone else to create copyrightable material for them, and later learns that they did not end up owning everything they thought they paid for.  This problem can manifest itself in the context of advertising materials, logo designs, website text and graphics, software programming and anything else that is subject to copyright protection. 

The problem is that the copyright in any creative work is owned by the person who does the creating, unless their copyright is effectively transferred to the party who paid them to do it.  Even though the agreed price for the work is paid to the creator, unless the copyright in the work is effectively transferred to the buyer, the right to reproduce the work for later use and benefit will remain with the creator.  With employees this is not a problem, because copyright law provides for ownership by their employers of the copyrights in works created by them in the course of employment.  But the problem exists for all works created by freelancers and other independent contractors.

While there may be some cases in which the party who paid to have something created for them by someone else can prove from surrounding circumstances that they own the copyright because the thing created was a “work made for hire,” the only truly safe course of action is to obtain a written agreement that the work is a work made for hire, and/or an explicit assignment of the creator’s copyright in the work.  Because not all creative materials fit within the finite definition of things that can be works made for hire under the Copyright Act, it is prudent in every case to include appropriate transfer language in the agreement covering the engagement to create the work.  A very short agreement can be used to tend to this concern, and it is one of those cases where an ounce of prevention is truly worth a pound of cure.   –Robert E. Smartschan

Will patents extend to DNA, the basic building blocks of life?  Attempting to unravel this helix-laden, complex conundrum, the Supreme Court of the United States recently heard argument in the case of Association for Molecular Pathology v. Myriad Genetics Inc., U.S., No. 12-398 (argued 4/15/13).  At stake in Molecular Pathology is the scope and reach of the controversial section of Patent Law, 35 U.S.C. § 101, the section of that law that determines what qualifies for patent protection. That section excepts from patent protection “laws of nature, natural phenomena, and abstract ideas,” and, according to Diamond v. Chakrabarty, 447 U.S. 303, 206 (1980), a “product of nature” as well.  The petitioners  primary argument throughout the case has been that all patent claims on DNA as a composition of matter fall under that exception, and should not be patentable.

The case has a long and tortuous history of repeated decisions and remands.  To simplify things, the U.S. Patent and Trademark Office has been awarding patents on human genes for almost 30 years, but opponents of Myriad Genetics Inc.’s patents on two genes linked to increased risk of breast and ovarian cancer say patent protection should not be given to something that can be found inside the human body. The lead lawyer argued:

Finding a new use for a product of nature, if you don’t change the product of nature, is not patentable. If I find a new way of taking gold and making earrings out of it, that doesn’t entitle me to a patent on gold. If I find a new way of using lead, it doesn’t entitle me to a patent on lead…Allowing companies like Myriad to patent human genes or parts of human genes will slow down or cripple lifesaving medical research like in the battle against breast cancer…

But Myraid argued that without the ability to recoup their investment through the profits that patents bring, breakthrough scientific discoveries needed to combat all kinds of medical problems will not happen; simply put, without patent protection, these companies will not invest the vast resources needed to unlock the secrets of genes and DNA.  Myriad has used its patents to develop its BRCA analysis test that looks for mutations on the breast cancer predisposition gene, or BRCA. Those mutations are associated with much greater risks of breast and ovarian cancer and Myriad sells the only BRCA gene test.

The Federal Circuit, the appeals court that has exclusive jurisdiction over patents, twice ruled that the genes can be patented.  The Court held that since the isolated DNA has a “markedly different chemical structure” from DNA within the body, it is patentable.  The Supreme Court was clearly troubled by tension created in patenting things that exist in nature and denying patents to companies that invest vast amounts of time, resources and research in isolating such DNA.  The Court is expected to rule later this summer.  Stay Tuned.

Stephen E. Noona is the head of Kaufman & Canoles’ Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group.  He has been counsel in hundreds of intellectual property cases in federal courts across the nation, including over ninety (95) patent cases in the Eastern District and is Fellow in the American College of Trial Lawyers. He regularly appears before the judges in all four Divisions of the Eastern District on intellectual property matters of all kinds. –Stephen E. Noona