• IP BLAWG

    An Oracle’s Prophecy of Infringement

    Beverly A. Berneman
    1/30/18

    You don’t need an Oracle to predict the outcome of working outside the scope of a license. Rimini Street, Inc. was hired by one of Oracle USA, Inc.’s licensees to develop and test updates for the licensee’s customers. But Rimini started using Oracle’s software to develop products for its other clients who didn’t have a license from Oracle. Oracle sued and won a copyright infringement judgment. Rimini appealed and lost at the 9th Circuit Court of Appeals. Rimini had two interesting affirmative defenses that were rejected by the court. First, Rimini said it had an express license. While it had an express license with respect to a single licensee, it didn’t have a blanket express license to use the software for anyone else. Second, Rimini argued that Oracle was misusing the copyright. Copyright misuse is an equitable defense against copyright infringement allowing copyright infringers to avoid infringement liability if the copyright holder has engaged in abusive or improper conduct in exploiting or enforcing the copyright. In other words, Rimini was accusing Oracle of being a copyright bully because Oracle wasn’t allowing Rimini to get a head start with Oracle’s future software licensees. The court rejected this argument. As the owner of the software, Oracle had every right to control the use of its software by potential future licensees.

    WHY YOU SHOULD KNOW THIS. Rimini had an uphill battle. It went beyond the scope of a license. And Rimini’s copyright misuse argument was misguided. Classic copyright misuse involves elements of fraud and extortion. Oracle wasn’t doing that. It was only protecting its software in a specific case. That isn’t copyright misuse.

  • IP BLAWG

    First Sale Can Make You Feel Nauseous

    Beverly A. Berneman
    1/23/18

    If you want a patent, be careful about when you make your first sale. Helsinn Healthcare S.A. applied to patent a formula that would reduce nausea and vomiting resulting from chemotherapy. When it sued Teva Pharmaceuticals USA Inc. for patent infringement, Teva argued that the patent was barred because Helsinn sold the formula more than a year before it applied for the patent. The Patent Act bars the patentability of an “invention [that] was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” An invention is made available to the public when there is a commercial offer or contract to sell a product embodying the invention and that sale is made public. There was no question that Helsinn had entered into a distribution agreement more than a year before the patent application. So the issue was whether the agreement between Helsinn and its distributor was a “sale” which would bar the patent. The Federal Circuit Court of Appeals ruled that the sale to the distributor qualified as a commercial sale that would bar the application.

    WHY YOU SHOULD KNOW THIS. Although this case involves big pharma, every inventor can benefit from Helsinn’s sad experience. There is some discussion among the Patent Bar as to whether making the sale “confidential” would mean the sale wasn’t “commercial”. But it may not be an easy fix. The issue involves an analysis of both commercial law as well as patent law. To be safe, a first sale shouldn’t take place before the patent application is filed. Failing that, advice of counsel is absolutely necessary.

  • IP BLAWG

    *!&% Trademarks

    Beverly A. Berneman
    1/16/18

    The USPTO can no longer ban scandalous and immoral trademarks. Erik Brunetti wanted to register the word “FUCT” for his apparel line. The USPTO refused registration because the word sounded like a swear word. Erik appealed to the Federal Circuit. The appeals court overturned the ruling saying that the government’s rule against registering profane, sexual and otherwise objectionable language violates the First Amendment. Acknowledging that the government didn’t have a substantial interest in policing offensive speech, the Federal Circuit opined that the First Amendment “protects private expression, even private expression which is offensive to a substantial composite of the general public.”

    **WHY YOU SHOULD KNOW THIS. ** With this decision and the decision in the Slants case (“Bleeping Trademarks” Blawg post of 1/12/2016 and 3/29/2016), the courts have drawn the line in the sand regarding trademark choice. The USPTO is being told not to determine registrability of trademarks based upon whether something is offensive to a certain segment of the population. But the impression a trademark makes is very subjective. A trademark should always take the potential consuming audience into account. In this case, Erik’s market is the skateboarding crowd. To them, the jokey and offensive nature of the mark might be a good selling point. However, the same may not be true if Erik’s market was a more a sedate one, like banking for instance.

  • Benefits Bulletin

    Does your Retirement Plan need a 3(16) Fiduciary?

    Andrew S. Williams
    1/11/18

    Your retirement plan may have an outside third party administrator (TPA) to assist with plan administration. However, a TPA typically is not a fiduciary to the plan and does not act as “plan administrator” (that’s usually the employer itself as provided in a typical TPA services agreement). This leaves the employer ultimately responsible for the plan’s compliance with all applicable legal requirements. So, even if your TPA makes a mistake, the employer is likely on the hook for any resulting liability because the TPA’s services agreement usually imposes damage limits and employer indemnities that protect the TPA.

    An independent service provider (maybe your current TPA) can be engaged to act as the “plan administrator” pursuant to Section 3(16) of ERISA. As a 3(16) fiduciary, the service provider assumes fiduciary responsibilities in administering the plan. The 3(16) fiduciary is responsible for all compliance activities, including the following:

    • Determining employee eligibility
    • Retaining plan service providers
    • Preparing and filing annual reports
    • Maintaining fidelity bond coverage for employees who handle plan assets
    • Interpreting and applying plan provisions
    • Distributing summary plan descriptions and supplements on a timely basis
    • Preparing an investment policy statement
    • Administration of participant loans, hardship withdrawals, as well as benefit computations and distributions
    • Distributing participant notes such as summary annual reports and, as applicable, annual qualified default investment alternative (QDIA) notices, safe harbor notices and investment fee disclosures
    • Reviewing and acting on reports of plan investment advisors and any private auditor
    • Reviewing and implementing qualified domestic relations orders (QDROs)

    Are your bases covered on all of the above? If your TPA is not involved in these compliance functions, are they adequately performed by your own employees? If not, your plan may need help from an outside service provider or even a 3(16) fiduciary.

    Takeaway:

    Engaging a competent 3(16) fiduciary should provide any retirement plan the maximum compliance protection available. Just bear in mind that the employer still retains a legal obligation to prudently select the 3(16) fiduciary and to monitor the fiduciary’s ongoing performance of its duties.

  • IP BLAWG

    2017 Crippys - The IP Criminals Hall of Fame

    Beverly A. Berneman
    1/9/18

    Welcome to the Second Annual Crippys. The Crippys are awarded to those who achieved infamy by committing Intellectual Property crimes during the previous year. In other words, an IP Criminals Hall of Fame. The field of candidates was crowded last year. But the award winners rose to the top. The 2017 Crippys go to:

    Second Runner Up Crippy Goes to David Nosel: David was an executive with Korn/Ferry International. After he left, his ex-assistant gave him a password with which he could access his former employer’s computer system. He used the password to hack into the system and steal trade secrets. David’s conviction for violating the Computer Fraud and Abuse Act (“CFAA”) was affirmed by the Ninth Circuit Court of Appeals. The CFAA criminalizes accessing a computer without authorization or exceeding authorization to obtain anything of value from a protected computer. David argued that it wasn’t hacking because he had a valid password. Somehow, David missed the point. David didn’t have authorization to use the password. So his actions fell squarely within the prohibited acts in the CFFA.

    First Runner Up Crippy Goes to Walid Jamil: Walid pled guilty to conspiracy to commit criminal copyright infringement and conspiracy to introduce misbranded food into interstate commerce. A predecessor of Walid’s company, Midwest Wholesale Distributors, was a legitimate exporter of the 5-Hour Energy drink to Mexico. Jamil and his cohorts replaced the Spanish labels with fake English ones so they could sell to the U.S. market. When the stock ran out, Walid switched to fully counterfeit drinks made in a filthy factory. He distributed more than 4 million bottles putting the health of millions of customers into jeopardy. And if that weren’t enough, Walid is also alleged to have been involved in similar schemes involving Equal, Splenda, Truvia, Uncle Ben’s Rice and Pillsbury products. Walid has been sentenced to 7 years in jail plus payment of criminal restitution in the amount of $555,800.00. Walid wins this award for shear audacity and tenacity. He’ll need those skills in prison.

    Grand Prize Crippy Goes to Gregory David Justice: Gregory (whose last name has a good sense of irony), a former employee of a defense contractor, pled guilty to one count of economic espionage and one count of attempting to violate the Arms Export Control Act. He tried to sell information about his (now former) employer’s satellite security systems which included trade secrets. Unfortunately for Gregory, he offered the sale to an undercover agent who was posing as a Russian spy. He told the ersatz Russian spy that he loved spy movies and television shows like “Jason Bourne” and “James Bond” and “The Americans”. He sold the secrets for $3,500.00 telling the undercover agent that he needed it for his wife’s medical expenses. Actually, he sent the money to his on-line girlfriend, an alleged European model named Chay. Actually, the “girlfriend” wasn’t named Chay nor was she a model. She was some woman who lived in Florida with her boyfriend and son. Gregory was sentenced to 60 months in jail. U.S. Attorney Sandra R. Brown said, “This defendant sold out his employer and betrayed his country in exchange for a few thousand dollars. His actions posed an imminent threat to our national security.”

    WHY YOU SHOULD KNOW THIS. Criminal Intellectual Property activity is no laughing matter. Those who criminally interfere with the Intellectual Property of others cause damage, endanger public health and harm national security. They justly face jail time and fines. So no one should strive to be awarded a Crippy for 2018.