IP UPDATE

Criminal counterfeiters beware: Second Circuit affirms prison sentence, restitution for counterfeit trafficking

by Taylor MacDonald | Nov 12, 2026 | Trademarks

The US Court of Appeals for the Second Circuit affirmed a 24-month prison sentence and more than $111,000 in restitution for trafficking in counterfeit luxury goods, finding that the defendant’s supervisory role and the value of the counterfeit goods supported sentencing enhancements. The Court also concluded that harm to intangible trademark rights can support restitution under the Mandatory Victims Restitution Act (MVRA), including expenses incurred investigating the counterfeiting. United States v. Sow, Case No. 25-2621-cr (2d Cir. Nov. 3, 2026) (Leval, Wesley, Bianco, JJ.)

Adama Sow pleaded guilty to trafficking counterfeit goods after law enforcement seized more than 80,000 items bearing counterfeit luxury trademarks from storage units she rented at a Manhattan facility. At a sentencing hearing, the district court heard testimony from two storage facility employees concerning Sow’s role in the operation and from an expert retained by the affected luxury brands concerning the value of the counterfeit goods.

The district court applied a two-level sentencing enhancement based on Sow’s supervisory role and a 20-level enhancement based on the value of the counterfeit goods, which it determined exceeded $9.5 million but did not exceed $25 million. These enhancements resulted in an advisory sentencing guidelines range of 70 to 87 months’ imprisonment. The district court nevertheless imposed a substantially reduced sentence of 24 months’ imprisonment and ordered Sow to pay $111,419.32 in restitution to the luxury brands for expenses associated with the expert’s investigation and testimony. Sow appealed.

Sow argued that 28 U.S.C. § 994(j) favored a noncustodial sentence because she was a first-time offender convicted of a nonviolent crime. The Second Circuit rejected that argument, explaining that § 994(j) directs the Sentencing Commission to recognize the general appropriateness of noncustodial sentences for certain first-time offenders but does not require courts to impose such sentences. The Second Circuit found that the district court properly considered the relevant sentencing factors, including the seriousness and duration of Sow’s counterfeiting operation, and exercised its discretion by imposing a sentence substantially below the advisory guidelines range.

The Second Circuit also affirmed both enhancements. The storage facility employees testified that Sow directed at least one assistant who regularly handled merchandise and performed tasks on her behalf. Although Sow challenged the testimony as unreliable and based partly on hearsay, the Court explained that sentencing courts may consider hearsay evidence bearing sufficient indicia of reliability. The employees’ firsthand observations and the district court’s credibility findings supported the supervisory role enhancement.

The Second Circuit likewise upheld the district court’s valuation enhancement. The district court credited expert testimony estimating the street value of the seized counterfeit goods and reduced that estimate by 10% to account for sales in locations such as Canal Street rather than traditional retail stores. The valuation was supported by evidence linking the seized goods to Sow and financial records reflecting millions of dollars flowing through her bank accounts. The Second Circuit found that the district court’s methodology provided a reasonable estimate of the counterfeit goods’ value.

Sow argued that the luxury brands had not established [...]

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The whey forward: Losing product-of-nature defense doesn’t make case exceptional

by Keval Amin | Nov 12, 2026 | Patents

The US Court of Appeals for the Federal Circuit reversed an attorneys’ fee award, finding that the district court erred in treating Supreme Court precedent on the patent eligibility of isolated natural products as dispositive of a dispute where additional issues regarding the claimed compositions’ characteristics and utility were involved. The Federal Circuit concluded that the patentee’s unsuccessful eligibility arguments were not exceptionally meritless under 35 U.S.C. § 285. ChromaDex, Inc. v. Elysium Health, Inc., Case No. 25-1227 (Fed. Cir. Oct. 30, 2026) (Prost, Chen, Stoll, JJ.) (nonprecedential).

ChromaDex and the Trustees of Dartmouth College (collectively, ChromaDex) owned patents directed to dietary supplement compositions containing isolated nicotinamide riboside (NR), a form of vitamin B3, formulated for oral administration to increase nicotinamide adenine dinucleotide (NAD+) biosynthesis. NR occurs naturally in cow’s milk, but only in trace amounts bound to a whey protein that prevents its bioavailability. Milk nevertheless increases NAD+ biosynthesis through another compound, tryptophan.

ChromaDex sued Elysium Health for patent infringement. The district court granted summary judgment that the asserted claims were ineligible under § 101 because they were directed to a product of nature, and the Federal Circuit affirmed (ChromaDex I).

Elysium subsequently sought attorneys’ fees under § 285, arguing that ChromaDex had pursued its infringement claims without meaningfully addressing the Supreme Court’s 2013 decision in Association for Molecular Pathology v. Myriad Genetics, which held that merely isolating naturally occurring DNA does not render it patent eligible. The district court agreed, characterizing Myriad as dispositive and faulting ChromaDex for citing the decision only once in its summary judgment opposition. The district court awarded Elysium more than $9.1 million in attorneys’ fees, including $3.9 million incurred before the claim construction hearing. ChromaDex appealed.

The Federal Circuit concluded that the district court erred by treating Myriad as resolving the entire eligibility dispute. Although Myriad established that isolating NR from milk was insufficient, standing alone, to confer patent eligibility, ChromaDex had advanced a broader argument. Relying on the Supreme Court’s 1980 decision in Diamond v. Chakrabarty and the Federal Circuit’s 2019 decision in Natural Alternatives International v. Creative Compounds, ChromaDex argued that isolating NR made it bioavailable, giving the claimed compositions markedly different characteristics and significant utility compared with naturally occurring milk. ChromaDex also supported its position with expert testimony.

The Federal Circuit explained that rejecting ChromaDex’s eligibility arguments in ChromaDex I required analysis beyond Myriad. In particular, the Court considered whether the claims required a particular quantity of isolated NR, whether they attributed increased NAD+ biosynthesis to the isolated NR, and whether the district court’s construction of “isolated” necessarily required bioavailability. The Court also considered that milk itself increases NAD+ biosynthesis through tryptophan. None of these issues was resolved by Myriad alone.

Regarding the attorneys’ fee award, the Federal Circuit emphasized that an unsuccessful legal position does not necessarily make a case exceptional under § 285. The relevant inquiry is the substantive strength of the party’s position, not whether it ultimately prevailed. Because ChromaDex’s eligibility arguments required substantive analysis and [...]

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Forum contacts must be linked to alleged trade secret misappropriation to establish personal jurisdiction

by Amol Parikh | Nov 12, 2026 | Trade Secrets

The US Court of Appeals for the Tenth Circuit affirmed the dismissal of federal and state trade secret misappropriation claims against three out-of-state defendants for lack of personal jurisdiction, finding that although the defendants purposefully directed activities toward Colorado, the plaintiffs failed to establish that their alleged injuries arose out of or related to those contacts. Flux Drive Inc. v. Rong, Case Nos. 25-1308; 26-1013; -1292 (10th Cir. Oct. 30, 2026) (Matheson, McHugh, Federico, JJ.)

Flux Drive alleged that a former senior design engineer, Michael Sparks, conspired with John Qiang Rong, Rong’s wife Leigh Wang, and Zyrcon Global Strategies to misappropriate proprietary technology related to industrial drive equipment and transfer it to PRD Technologies, a Chinese manufacturer. According to Flux, Rong facilitated the alleged scheme by serving as a technical liaison between Sparks and PRD, transmitting a master services agreement under which Sparks performed engineering work for PRD, and helping provide financing to Sparks.

Rong and Wang, both Illinois residents, maintained that Rong merely assisted with communications between Sparks and PRD, and that the $23,000 transferred to Sparks’ Colorado bank account was a short-term bridge loan that was repaid within a month.

Flux sued in the District of Colorado, asserting claims under the Defend Trade Secrets Act (DTSA), the Colorado Uniform Trade Secrets Act, and several common law theories. Rong, Wang, and Zyrcon moved to dismiss for lack of personal jurisdiction. The district court granted the motion and subsequently awarded the defendants attorneys’ fees under Colorado Revised Statutes § 13-17-201, which mandates reasonable attorneys’ fees when certain tort actions are dismissed on a pretrial motion under Rule 12(b). Flux appealed both the dismissal and the fee awards.

The Tenth Circuit first addressed whether the defendants had sufficient contacts with Colorado to support specific personal jurisdiction. The Court explained that the DTSA does not independently authorize nationwide service of process and that Flux therefore had to establish personal jurisdiction under Colorado law and constitutional due process principles.

The Tenth Circuit concluded that Flux had made a prima facie showing that the defendants purposefully directed activities toward Colorado. Rong repeatedly communicated with Sparks, knowing that Sparks resided in Colorado; Sparks testified that Rong was someone to whom he was expected to report; and the defendants transferred $23,000 to Sparks’ Colorado bank account. Those contacts were sufficient to satisfy the purposeful-direction requirement at the preliminary stage.

Flux nevertheless failed to establish that its claims arose out of or were related to those contacts. Although Rong allegedly transmitted the master services agreement, Flux did not explain how that agreement facilitated the theft of its trade secrets. Similarly, Flux offered no evidence that the $23,000 loan was used to purchase equipment employed in the alleged misappropriation, or that the defendants knew or controlled how the funds would be used. The Tenth Circuit emphasized that allegations of a supervisory relationship or participation in a broader scheme, without a factual connection between the forum contacts and the claimed injuries, were insufficient to establish specific jurisdiction. It therefore [...]

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Ownership of compilation doesn’t mean ownership of individual copyrights

by Jolie B. Schenerman | Nov 5, 2026 | Copyrights

The US Court of Appeals for the Seventh Circuit affirmed summary judgment of noninfringement, finding that ownership of a copyright in a compilation does not confer rights in its individual components and that a subsequent copyright assignment remains subject to a previously granted irrevocable oral license. Center for Gestalt Development, Inc. v. Bowman, Case No. 25-3336 (7th Cir. Oct. 26, 2026) (Scudder, Pryor, Maldanado, JJ.)

Dr. Frederick Perls, a pioneer of gestalt therapy, authored an unpublished article titled “Psychopathology of Awareness.” In 1991, his widow’s estate granted the Center for Gestalt Development exclusive rights to publish a collection of Perls’ unpublished manuscripts, including the “Psychopathology” article. The Center did not publish the collection until 2021. Meanwhile, Charles Bowman and Jean-Marie Robine published the article in a 2019 book accompanied by commentary from other gestalt therapists. In 2019 or 2020, Perls’ children, who had inherited the copyright in the article, orally authorized Bowman and Robine to use the article in exchange for royalties. In 2021, the children settled a separate lawsuit with the Center by assigning their rights in the article to the Center for the duration of the litigation. The Center sued Bowman and Robine for copyright infringement. The district court granted summary judgment in favor of Bowman and Robine, finding that the Center’s original rights extended only to the collection and that its subsequent acquisition of the article’s copyright was subject to the earlier oral license. The Center appealed.

The Seventh Circuit affirmed, explaining that the Copyright Act distinguishes between ownership of a compilation and ownership of the individual works the compilation contains. Under § 103(b), a compilation copyright protects only the original material contributed by the compiler, such as the selection, coordination, or arrangement of the underlying works. Section 201(c) further provides that copyright in an individual contribution is distinct from copyright in the collective work as a whole. Relying on the US Supreme Court’s decisions in Feist Publications, Inc. v. Rural Telephone Service Co. (1991) and New York Times Co. v. Tasini (2001), the Seventh Circuit explained that the Center’s 1991 agreement conveyed rights in the collection’s “selective curation,” not in the article standing alone. Because Bowman and Robine reproduced only the article, rather than the collection, their use did not infringe the Center’s compilation copyright.

The Seventh Circuit next addressed the Center’s acquisition of the article’s copyright in 2021. By that time, Perls’ children had already granted Bowman and Robine a nonexclusive oral license to publish the article. The Court explained that although § 204(a) of the Copyright Act, sometimes called the Statute of Frauds, requires transfers of copyright ownership to be in writing, nonexclusive licenses are exempt from that requirement under § 101. The license was also irrevocable because Bowman and Robine had paid royalties in exchange for permission to use the article. Accordingly, the Center acquired the article’s copyright subject to the existing license and could not revoke Bowman and Robine’s authorization to continue publishing it.

The Seventh Circuit also rejected the Center’s argument [...]

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Computer metadata corroborates conception

by Dexter Hamilton | Oct 29, 2026 | Patents

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board decision finding that Google failed to establish unpatentability of challenged claims because the patent owner successfully antedated the asserted prior art reference using inventor testimony corroborated by metadata. Google LLC v. Valtrus Innovations Ltd., Case No. 2024-1945 (Fed Cir. Oct. 19, 2026) (Hughes, Cunningham, Burroughs, JJ.)

Valtrus owns a patent directed to methods for merging search results from multiple search engines. Google petitioned for inter partes review (IPR) of the patent, asserting four grounds for obviousness. Each ground relied on the same primary prior art reference, Bushee. Although Bushee was filed about five weeks before the application for Valtrus’ patent, the patent was governed by pre-America Invents Act (AIA) law. Pre-AIA 35 U.S.C. § 102(e) permitted Valtrus to antedate Bushee by establishing conception before Bushee’s filing date and reasonably continuous diligence from just before that date until Valtrus filed its patent application.

Valtrus submitted an inventor declaration, original invention disclosure documents, and associated Microsoft Word metadata to establish conception before Bushee’s filing date. The Board found that the disclosure documents and metadata corroborated the inventor’s testimony, and that Valtrus had demonstrated reasonably continuous diligence through the filing of its patent application. The Board determined that Bushee was not prior art under pre-AIA § 102(e) and that Google had failed to establish the unpatentability of any challenged claim. Google appealed.

Reviewing the Board’s legal conclusions de novo and its factual findings for substantial evidence, the Federal Circuit affirmed. Google argued that the invention disclosure documents and accompanying metadata could not independently corroborate the inventor’s testimony because both were entirely within the inventor’s control. The Federal Circuit disagreed, relying on its 2025 decision in Global Health Solutions v. Selner, which recognized that automatically generated metadata is independent of an inventor’s own statements and documents. Assuming without deciding the metadata’s authenticity, the Court explained that the Microsoft Word metadata was not authored by the inventor and contained authorship and timestamp information consistent with his asserted conception date. The Court distinguished such metadata from unwitnessed inventor-created documents, which cannot independently corroborate conception testimony, and noted Google’s acknowledgment at oral argument that corroboration need not come from a human source. Applying the rule of reason, the Court concluded that substantial evidence supported the Board’s finding that the disclosure documents and metadata corroborated the inventor’s testimony.

Google also challenged the Board’s finding that the inventor exercised reasonably continuous diligence in reducing the invention to practice. The Federal Circuit explained that although reasonable diligence must be established throughout the critical period, it need not be perfectly continuous, and evidence of activity on each day of the diligence period is unnecessary if the record provides a satisfactory explanation for any gaps. Google disputed only the approximately 11 business days between August 8 and August 27, 2001, when the patent application was filed. The Court found substantial evidence supporting diligence during that period, including the time required to mail the last inventor’s signed [...]

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