House Rules: Remote Gambling Activity Claims Go Bust

The US Court of Appeals for the Federal Circuit applied the Alice/Mayo framework to assess whether claims directed to remote gambling were patent eligible under 35 U.S.C. § 101 and determined that the claims were directed to a patent-ineligible abstract idea and did not otherwise recite an inventive concept. Beteiro, LLC v. DraftKings Inc., Case Nos. 22-2275; -2277; -2278; -2279; -2281; -2283 (Fed. Cir. June 21, 2024) (Dyk, Prost, Stark, JJ.)

Beteiro owned several patents related to facilitating live gaming and/or gambling activity at a gaming venue remote from the user’s physical location so that a user can participate via a communication device away from the gaming venue location. In 2021 and 2022, Beteiro filed at least six patent infringement cases against the defendants. The district court granted the defendants’ motions to dismiss the claims on the grounds that the asserted claims were patent ineligible under § 101. Beteiro appealed.

The Federal Circuit agreed with the district court’s assessment of the claims under the first step of the Alice/Mayo framework and found that the claims “exhibit several features that are well-settled indicators of abstractness”:

  • The claims “broadly recited generic steps of a kind” frequently held to be abstract, such as “detecting information, generating and transmitting a notification based on the information, receiving a message (bet request), determining (whether the bet is allowed based on location data), and processing information (allowing or disallowing the bet).”
  • Claims like these, e., drafted with largely “result-focused functional language” without specifying how the purported invention achieves those results, are “almost always found to be ineligible.”
  • Citing earlier decisions, the Court found broadly analogous claims were abstract as involving methods of providing particularized information to individuals based on their locations. The Court also noted in a footnote that several district courts have found remote-gaming patents analogous to Beteiro’s patents ineligible.
  • The claimed methods were similar to “fundamental practices long prevalent,” an indicia that they are abstract and unpatentable. For example, the Federal Circuit referred to the district court’s analogy to real-world activities, including one step in the claims where “those accepting bets have always had to confirm that the bettor with whom they were dealing was located in a place where gambling was allowed.”

The Federal Circuit also agreed with the district court’s analysis of the second step of the Alice/Mayo framework and its conclusion that the claims failed to provide an inventive concept and “simply describe[d] a conventional business practice executed by generic computer components.” The Court disagreed with Beteiro’s argument that there was genuine dispute as to whether using geolocation and global positing as an “integral data point” in processing mobile wagers was conventional technology at the time of the earliest claimed priority date, 2002. Beteiro only briefly referred to conventional use of GPS in connection with several types of conventional computers but failed to describe differences between equipping GPS on a mobile phone versus any other described conventional computers. The asserted patents did not describe any advanced GPS mobile device technology [...]

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It’s an Old Tune: Third-Party-Use Evidence From Long Ago Can Support Genericness

The US Court of Appeals for the Fifth Circuit found that the district court abused its discretion in wholesale exclusion of evidence on the issue of genericness. The evidence was offered to show prior use of a trade dress from more than five years prior to an alleged infringer’s first use of a mark. Gibson Inc. v. Armadillo Distribution Enterprises, Inc., Case No. 22-40587 (5th Cir. July 8, 2024) (Stewart, Clement, Ho, JJ.)

Gibson filed trademark infringement and counterfeiting claims against Armadillo Distribution Enterprises in 2019, alleging that Armadillo infringed four of Gibson’s trademarked guitar body shapes, one guitar headstock shape and two word marks. Just before trial, the district court made several evidentiary rulings on the parties’ motions in limine, including one in which Gibson sought to exclude all arguments and evidence related to advertisements or sales of third-party guitars before 1992, arguing they had limited probative value and were unduly prejudicial. Gibson argued that any third-party-use evidence should be restricted to a five-year period from 1992 to 1997. In its first exclusion order, the district court found that evidence of third-party use was relevant to determining whether a mark was generic or unprotectable but concluded that the probative value of the evidence from before the 1990s was low and found that the five-year cutoff date was reasonable. Armadillo objected to that ruling, leading to oral argument and a second exclusion order upholding the first order. The district court relied on Federal Rule of Evidence (FRE) 403 and the 2018 Federal Circuit ruling in Converse v. International Trade Commission to support this wholesale exclusion of evidence prior to 1992.

The parties proceeded to trial in mid-2022. A jury found that Armadillo infringed all of the trademarks other than one word mark and found that Armadillo marketed counterfeits. Armadillo appealed based on the district court’s exclusion of decades of third-party-use evidence. Armadillo asserted that this evidence was central to Armadillo’s counterclaim seeking cancellation of the marks and its main defense of genericness.

The Fifth Circuit first considered the district court’s reliance on Converse and determined that the district court abused its discretion in excluding the third-party evidence predating 1992. Armadillo argued that reliance on Converse was error because that case concerned secondary meaning and not genericness. Gibson countered that genericness and secondary meaning are closely related issues and that the five-year period predating infringement is the most logical measuring line. Alternatively, Gibson argued that 15 U.S.C. § 1064 would bar evidence predating 1992 because it provides that a petition to cancel a mark’s registration must be filed within five years from the date of registration of the mark.

The Fifth Circuit found that Converse did not rule that third-party-use evidence from more than five years prior to the alleged infringer’s first use was irrelevant to the issue of genericness and did not compel a strict five-year limitation of third-party-use evidence. The Court further reasoned that under Converse, evidence of prior use is relevant if such use was likely to have [...]

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Message Received: Trade Secret Law Damages Available for Sales Outside US

The US Court of Appeals for the Seventh Circuit affirmed, in a matter of first impression, a district court’s decision to apply trade secret law extraterritorially and award trade secret damages for foreign sales while also finding that the copyright damages award needed to be reduced to eliminate foreign sales. Motorola Solutions, Inc. v. Hytera Communications Ltd., Case Nos. 22-2370; -2413 (7th Cir. July 2, 2024) (Hamilton, Brennan, St. Eve., JJ.)

Motorola Solutions and Hytera compete globally in the market for two-way radio systems. Motorola spent years and tens of millions of dollars developing trade secrets embodied in its line of high-end digital mobile radio (DMR) products. Hytera struggled to overcome technical challenges to develop its own competing DMR products. After failing for years, Hytera hatched a plan to “leap-frog Motorola” by stealing its trade secrets. Hytera, headquartered in China, hired three engineers from Motorola in Malaysia, offering them high-paying jobs in exchange for Motorola’s proprietary information. Before the engineers left Motorola, acting at Hytera’s direction, they downloaded thousands of documents and computer files containing Motorola’s trade secrets and copyrighted source code. Hytera relied on the stolen material to develop and launch a line of DMR radios that were functionally indistinguishable from Motorola’s DMR radios. Hytera sold these DMR radios in the United States and abroad.

Motorola sued Hytera for copyright infringement and trade secret misappropriation. The jury found that Hytera had violated both the Defend Trade Secrets Act of 2016 (DTSA) and the Copyright Act. The jury awarded compensatory damages under the Copyright Act and both compensatory and punitive damages under the DTSA for a total award of $765 million. The district court later reduced the award to $544 million, which included $136 million in copyright damages and $408 million in trade secrets damages. Hytera appealed.

Hytera conceded liability and instead challenged the damages award under both the Copyright Act and the DTSA. Among other things, Hytera argued that copyright and trade secret damages should not have been awarded for its sales outside the US. With respect to the copyright award, the Seventh Circuit agreed that Motorola failed to show a domestic violation of the Copyright Act and therefore was not entitled to recover damages for any of Hytera’s foreign sales of infringing products as unjust enrichment. Specifically, to show a domestic violation of the Copyright Act, Motorola had asserted that its code was copied from servers based in Chicago. While the district court accepted Motorola’s argument, the Seventh Circuit found that this factual finding lacked adequate support in the record, citing Motorola’s expert’s admission that there was no evidence of downloads from the Chicago servers. The Court instead found that given the location of the employees in Malaysia, it was likelier that the code was downloaded from Motorola’s Malaysia server. The Court therefore reversed the $136 million copyright award and remanded with instructions to limit the copyright award to Hytera’s domestic sales of infringing products.

The Seventh Circuit affirmed with respect to the trade secret award. Like the [...]

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PTO Asks Whether Legislative Action for Experimental Use Exception Is Warranted

The US Patent & Trademark Office (PTO) issued a request for comments concerning the public’s views on the common law experimental use exception and whether Congress should enact a statutory experimental use exception. 89 Fed. Reg. 53963 (June 28, 2024).

The experimental use defense for alleged patent infringement has been part of US jurisprudence for more than 200 years. The current state of experimental use exception jurisprudence in the United States is set forth in Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002). In that case, the Federal Circuit proffered a “very narrow and strictly limited experimental use defense” prohibiting an alleged infringer from invoking such a defense for “use that is in any way commercial in nature” or “any conduct that is in keeping with the alleged infringer’s legitimate business, regardless of commercial implications.”

The Madey decision has been met with a mix of opinions, some arguing that the Federal Circuit’s construction encourages innovation and others arguing that it impedes innovation. Limited exemptions have been carved out in the US. For example, 35 U.S.C. § 271(e)(1) established a safe harbor (the Bolar exemption) allowing for the experimental use of a patented invention by parties to collect regulatory approval data for medical devices or drugs. The Plant Variety Protection Act also provides for exemptions allowing the use of protected plant varieties for research and breeding of new varieties.

While many European and Asian nations have statutory experimental use exceptions in place, legislative efforts for codifying a statutory experimental use exception in the US have thus far failed. With the intent to promote fair competition and innovation, the PTO seeks to revisit this issue by collecting the public’s views on the impact of the experimental use exception in all technology areas. Of particular interest, the PTO seeks comments on one or more topics, including:

  • How current US experimental use exception jurisprudence impacts investment and/or research and development in any field of technology.
  • Whether certain technologies are negatively affected by the current experimental use exception jurisprudence.
  • The impact that a statutory experimental use exception would have on the innovation and commercialization of new technologies with respect to research and development, ability to obtain funding, investment strategy, licensing of patents and patent applications, product development, sales (including downstream and upstream sales), competition, and patent enforcement and litigation.
  • The impact of current experimental use exception jurisprudence on decisions made with respect to filing, purchasing, licensing, selling or maintaining patent applications and patents in the US.
  • Reasons for adopting a statutory experimental use exception or maintaining the status quo.
  • How a statutory experimental use exception should be defined to ensure that patent rights are preserved.
  • Recommendations for enhancing and facilitating experimental research on patent inventions in the US.

When responding to the questions, commenters are further asked to identify whether they represent, for example:

  • An inventor, patent owner or investor.
  • A licensee or user of patented technology.
  • An entity representing inventors or patent owners (g., law firms).
  • A recipient of [...]

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European UPC Issues Its First Decisions on the Merits

Franz Kaldewei GmbH & Co. KG v. Bette GmbH & Co. KG

The Unified Patent Court (UPC) issued its first decision on the merits, granting the first-ever permanent injunction covering seven UPC member states. Franz Kaldewei GmbH & Co. KG v. Bette GmbH & Co. KG (Düsseldorf Local Division, July 3, 2024).

The UPC found that the asserted patent was invalid in its granted form due to obviousness but upheld as valid an auxiliary request on which the injunction is based. Among other things, the Düsseldorf Local Division discussed procedural lapses around a missed deadline (denying the defendant a submission of certain documents one day prior to the oral hearing), jointly hearing the infringement case, and a counterclaim for revocation and inventive step. In this regard, the Court proceeded pragmatically and flexibly, as the UPC Court of Appeal (CoA) did in 10x Genomics, but unlike the European Patent Office (EPO) with its focus on the closest prior art and building a problem-solution approach thereon.

The decision further dealt with claims for information on the scope of infringement, claims for recall or removal from the channels of commerce, and considerations against requiring security for enforcement of a judgment on the merits in the given case.

Regarding so-called contributory infringement (i.e., indirect use of the invention), the UPC held that there is a double territorial requirement: the offer and/or delivery of the essential element must take place within UPC territory, and the invention must also be used within UPC territory. The Court left open the question of whether it is sufficient that the offering/delivery exists in a member state and the invention is intended for direct use in another, different member state. Further case law will have to clarify this point. Regarding the prior use defense, it follows from the decision that there is no “UPC/European” prior use. The existence of a right of prior use must be asserted for each member state according to its national law, and the respective defendant must provide the relevant information for each country individually.

Practice Notes:

  • The UPC has shown that it is capable of dealing efficiently with both infringement and invalidity questions within the short timeframe it has set itself. The UPC delivered on its promise to issue a decision on the merits in just over a year and only a few weeks after the oral hearing.
  • Regarding claim interpretation, the Düsseldorf Local Division referred to the CoA’s decisions on February 26, 2024, and May 13, 2024, stating that the principles of Article 69 EPC apply to both validity and infringement proceedings.

DexCom, Inc. v. Abbott et al.

The day after the UPC’s decision on the merits in Franz Kaldewei granting a permanent injunction, the Paris Local Division delivered its first decision on the merits and declared the patent in suit invalid in 17 UPC member states. DexCom, Inc. v. Abbott et al. (Paris Local Division, July 4, 2024).

The Paris Local Division also ruled on both infringement and validity questions and [...]

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