IP UPDATE
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Exploring the latest in intellectual property law
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A Tale of Two Authors: Determining Ownership Rights of Novels Adapted for Theatre

by | Sep 30, 2021 |

The US Court of Appeals for the First Circuit vacated the district court’s opinion and order that Roberto Ramos Perea, the playwright who adapted the novels of prominent Puerto Rican author Enrique Laguerre for theatre, was not a proper copyright owner. Perea v. Editorial Cultural Inc., Case Nos. 19-2119, -2129 (1st Cir. Sept. 13, 2021) (Thompson J.) The issue before the Court was whether Editorial, a publishing company, was liable for copyright infringement after it printed and sold 20,000 copies of the theatrical adaptations of two novels (La Llamarada and La Resaca) written by Laguerre and adapted by Ramos.

In 2001, Laguerre contracted with Producciones Teatro Caribeño, authorizing Ramos to create the adaptation of La Resaca and retain the moral rights (protecting the link between Ramos and his work). The parties again contracted in 2003 for the adaptation of La Llamarada. Laguerre and Editorial entered into a contract in 2002 that gave Editorial the right to print “one edition” of the “dramatic adaptation of La Resaca” for seven consecutive years from the first printing date. Editorial received the right to print up to 25,000 copies of La Llamarada (the novel) in exchange for royalties.

During the district court action, both sides moved for partial summary judgment on the infringement claim. Editorial argued that, pursuant to the Laguerre-Caribeño contracts, Laguerre reserved the printing rights to the adaptations to himself exclusively, and Ramos therefore was not entitled to damages for infringement. Ramos argued that he owned the copyrights in the the adaptations and was entitled to recover for infringement because “(1) Laguerre authorized Ramos to create the Adaptations, therefore those creative works belong to him, or, alternatively, (2) La Resaca and La Llamarada were in the public domain when the Adaptations were written (meaning they were available for public use) and as such Laguerre’s authorization was not required.” The district court eliminated the playwright, Ramos, as the copyright owner and, following a jury trial, entered a judgment against Editorial Cultural awarding damages to Laguerre’s heirs. In dismissing Ramos’ claim, the district court exclusively relied on the language of the Laguerre-Caribeño contracts, under which Laguerre retained publishing rights. The issue on appeal involved which party owned the publishing rights to the adaptations when Editorial sold them in 2013.

The district court did not consider whether the novels were in the public domain when Ramos created his adaptations. Under the 1909 Copyright Act, works created before 1978 retained copyright protection for 28 years (plus an additional 28 years if renewed). The novels were written in 1935 (La Llamarada, not renewed) and 1949 (La Resaca, never registered in the Copyright Office). The First Circuit explained it is clear that both novels had passed into the public domain well before the contracts were signed.

Reviewing the summary judgment orders de novo, the First Circuit found that when Ramos adapted the novels into the play scripts in 2001 and 2003, Laguerre had no copyright interest in either of these novels (or any work derived from them) and [...]

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De Minimis Defense Doesn’t Protect Minimal Use of Concededly Infringing Material

by | Sep 23, 2021 |

The US Court of Appeals for the Ninth Circuit reversed a district court’s grant of summary judgment in favor of the defendant in a copyright case based on a “minimal usage” or de minimis use defense. Richard N. Bell v. Wilmott Storage Services, LLC, et al., Case Nos. 19-55882, -56181 (9th Cir. July 26, 2021) (Wardlaw, J.) (Clifton, J., and Choe-Groves, J., concurring).

Richard Bell took a photo of the Indianapolis skyline and published it on various websites. Eleven years later, he registered the photo with the US Copyright Office. Bell later conducted an online reverse image search of his photo to identify potential infringers and subsequently filed more than 100 copyright infringement lawsuits. One of the sites on which Bell found the photo was VisitUSA.com. The image was only available to those who had conducted a reverse image search or knew the precise web address to the photo. Wilmott Storage Services purchased VisitUSA.com in 2012. In 2018, Bell notified Wilmott that it was displaying the photo without his permission. Wilmott removed the photo in response to Bell’s request. In 2019, Wilmott continued to display a copy of the photo, but at a slightly different address than before. Wilmott explained that its webmaster was supposed to remove the photo but instead only changed the file name. Wilmott subsequently removed the photo.

Bell sued Wilmott for copyright infringement in 2018, asserting that Wilmott infringed his right to “display the copyrighted work publicly” by making it accessible to the public on Wilmott’s server. Assuming infringement, Wilmott filed for summary judgment based on the affirmative defenses of de minimis use, fair use and the statute of limitations. The district court granted summary judgment to Wilmott on the de minimis use defense. Although Wilmott conceded that an identical copy of the photo was hosted on its server, the district court found no infringement. Bell appealed.

The Ninth Circuit noted that it had not previously addressed the issue of whether one “publicly displays” a work where it is accessible only to members of the public who either possess the specific pinpoint address or who perform a particular type of online search—here, a reverse image search. Applying Ninth Circuit precedent from Perfect 10, the Court concluded that Wilmott publicly displayed the photo.

The Ninth Circuit also found that there was no place for an inquiry into whether there was de minimis copying because the “degree of copying” was total since the infringing work was an identical copy of the copyrighted photo. The Court explained that it and a majority of other circuits do not view the de minimis doctrine as a defense to infringement but rather as an answer to the inquiry whether an infringing work and copyrighted work are substantially similar so as to make the copying actionable. The Court reiterated that the de minimis defense applies to the amount of copying, not to the extent of the defendant’s use of the infringing work. The Court also explained that the de minimis copying defense is [...]

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IP Ownership Considerations in Multi-jurisdictional Software Development Agreements

by and | Jun 10, 2021 | , , , ,

As a result of the healthcare sector’s growing dependence on software, health IT companies are increasingly taking advantage of globalisation to engage contractors in low wage jurisdictions to develop their user-facing software applications. This can trigger unforeseen legal risks owing to the differing laws across jurisdictions related to the ownership and transfer of intellectual property (IP) rights.

At the most extreme end, best practices in some jurisdictions are unenforceable or even impermissible in others. In view of these issues, it is strongly recommended that a company looking to take advantage of cross-border contracting for critical development eorts should carefully consider the choice of law provisions in their agreements, and engage with local counsel to ensure proper vesting of intellectual property rights.

An inability to demonstrate proper ownership of such rights can be a substantial obstacle for later financings or in corporate activities. Depending on the jurisdictions involved, a contracting company may need to concern itself with at least three types of IP in the software that is developed on its behalf: copyrights, moral or author’s rights, and patents.

Click here to read the full article in our latest edition of International News.



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Not With a Bang but a Whimper

by | May 27, 2021 |

In a non-precedential Order issued by the US Court of Appeals for the Federal Circuit—on remand from the US Supreme Court’s April 2021 decision upholding Google’s fair use defense to Oracle’s copyright infringement claim—the Court recalled its mandate in the case “solely with respect to fair use,” leaving intact the Federal Circuit’s May 2014 judgment favoring Oracle on the question of copyrightability. Oracle America Inc. v. Google LLC, Case Nos. 17-1118; 1202 (Fed. Cir. May 14, 2021)(PER CURIAM). After recalling its mandate, the Federal Circuit issued its order without further briefing by the parties.



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Tax Court Allows Partial Deduction, Requires Partial Capitalization of Generic Drug Approval Legal Expenses

by | May 13, 2021 |

The US Tax Court determined that a pharmaceutical manufacturer’s legal expenses incurred to defend against a patent infringement suit were eligible for an immediate deduction as ordinary and necessary business expenses, while legal expenses incurred as part of an abbreviated new drug application (ANDA) were not eligible for an immediate deduction and thus had to be capitalized and then amortized over 15 years. Mylan, Inc. & Subsidiaries v. Commissioner, 156 T.C. No. 10 (Apr. 27, 2021) (Urda, J.)

The ANDA process allows for faster approval of a generic drug if the manufacturer can show that the generic drug is sufficiently similar to an approved brand name drug. As part of the ANDA process, the generic manufacturer must file statements certifying that the generic drug does not infringe any brand drug patents, or that such patents are invalid. The generic manufacturer also must send a notification to the holder of any patents covered by the certification statements.

Mylan filed several ANDAs for generic versions of brand name drugs, including Celebrex, Lunesta and Nexium, during the tax years at issue in the case. Considerable legal expenses were incurred as part of filing the ANDAs and making the required certifications and notifications. As a result of those certifications and notifications, patent holders brought approximately 120 patent infringement suits against Mylan. Mylan defended itself against the infringement suits, incurring litigation expenses.

In general, taxpayers may take an immediate deduction for ordinary and necessary business expenses. However, taxpayers must capitalize expenditures that create or enhance a distinct asset or otherwise generate benefits for taxpayers beyond a single tax year. Special rules apply to determine whether expenses related to an intangible asset should be capitalized. The income tax regulations provide that a “taxpayer must capitalize amounts paid to a governmental agency to obtain, renew, renegotiate, or upgrade its rights under a trademark, trade name, copyright, license, permit, franchise, or other similar right granted by that governmental agency.” Taxpayers must also capitalize an amount paid to facilitate an acquisition or creation of an intangible.

Litigation expenses for patent suits may be deducted or must be capitalized depending on the nature of the litigation. Defense of title claims are treated as the acquisition or disposition of a capital asset and must be capitalized. In contrast, patent infringement claims arise in tort and can be deducted in the year the expense is incurred.

Applying these rules to Mylan’s legal expenses, the Tax Court held that expenses related to the preparation of the ANDA, including the certifications and notices, were capital expenses to acquire or create an intangible asset and had to be recovered incrementally over 15 years. However, the Tax Court held that the costs of defending against patent infringement suits is an ordinary and necessary business expense for a generic drug manufacturer and permitted Mylan to deduct its litigation expenses in the year the expense was incurred.



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If it’s Not Legit, You Can’t Admit

by | Apr 15, 2021 |

The US Court of Appeals for the Federal Circuit affirmed a district court ruling of non-infringement based on the inadmissibility of unauthenticated printouts of source code as evidence. Wi-LAN Inc. v. Sharp Elecs. Corp., Case No. 20-1041 (Fed. Cir. Apr. 6, 2021) (Dyk, J.)

In 2015, Wi-LAN brought two separate patent infringement suits against Sharp Electronics and Vizio, both of which alleged direct and induced infringement of various claims of two Wi-Lan patents. The cases were managed in parallel by the district court, but consolidated on appeal. In both cases, the district court entered a stipulation of non-infringement with respect to one of the patents, which “relates generally to multimedia encoders and specifically [to] an integrated multimedia stream multiplexer,” based on Wi-LAN’s concession that it could not prove infringement under the district court’s construction of two claim terms. On appeal, the Federal Circuit had little difficulty concluding that the district court’s constructions were correct and affirming its ruling of non-infringement.

With respect to the other patent, the district court granted summary judgment of non-infringement, holding that Wi-LAN lacked sufficient admissible evidence to prove direct infringement. The involved patent is directed to “methods to display interlaced video on [a] noninterlaced monitor,” also known as “deinterlacing.” The deinterlacing functions of Sharp and Vizio’s televisions reside on each of the television’s “system-on-chip.” To establish that the source code underlying these deinterlacing functions practiced the patented methods, Wi-LAN filed (and subsequently dismissed without prejudice) additional lawsuits against third-party chip manufacturers from which it obtained source code printouts—purportedly reflecting the implementation of the deinterlacing process in a specified list of chips used in Sharp and Vizio’s televisions—along with declarations from employees of the manufacturers purporting to authenticate the source code printouts. The district court held that the source code printouts were inadmissible and that Wi-LAN therefore had failed to raise a genuine issue of material fact as to non-infringement. On appeal, Wi-LAN presented three theories as to why the district court erred in finding this evidence inadmissible, all of which the Federal Circuit rejected.

First, Wi-LAN argued that the source code printouts constituted a business record and thus were admissible as an exception to the hearsay rule under Federal Rule of Evidence 803(6). Specifically, Wi-LAN argued that it properly authenticated the printouts through the declarations of the chip manufacturers’ employees. The Federal Circuit acknowledged that declarations are typically used at summary judgment as a proxy for trial testimony, but explained that they cannot be used that way unless the witness would also be available to testify at trial. Because Wi-LAN conceded that it did not think it would be able to force the chip manufacturers’ employees to testify at trial, the Court found that the declarations could not be used as a substitute for trial testimony to authenticate the printouts and that the printouts therefore were not properly authenticated pursuant to Rule 803(6)(D).

Wi-LAN also argued that the declarations themselves constituted a business record. Because they were procured specifically for the purpose of litigation, however, [...]

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Purple Pain: Warhol’s Prince Series Isn’t Fair Use of Photographer’s Image

by | Apr 8, 2021 |

In a case spanning nearly 40 years of art and touching the estates of two of the world’s most well-known artists, the US Court of Appeals for the Second Circuit clarified its position on the application of the fair use doctrine and its protection of transformative works. In doing so, the Second Circuit reversed the district court’s finding of fair use and held that a series of prints and illustrations of the musical artist Prince created by the visual artist Andy Warhol were substantially similar to a 1981 portrait photograph of Prince taken by the photographer Lynn Goldsmith. The Court remanded for further proceedings. The Andy Warhol Foundation for the Visual Arts, Inc. v. Lynn Goldsmith, et al., Case No. 19-2420-cv (2d Cir. Mar. 26, 2021) (Lynch, J.) (Sullivan, J., joined by Jacobs, J., concurring) (Jacobs, J., concurring).

In 1984, Goldsmith’s agency licensed her 1981 photograph of Prince to Vanity Fair for use as an artist reference for creating a rendering of Prince to accompany Vanity Fair‘s profile of the artist. What Goldsmith did not learn until more than 30 years later, shortly after Prince’s untimely death, was that the artist commissioned by Vanity Fair to create the Prince drawing was Andy Warhol, and that Warhol had also used the photograph to create an additional 15 silkscreen prints and illustrations, known as the Prince Series. In 2017, Goldsmith notified The Andy Warhol Foundation for the Visual Arts (AWF), as the successor to Warhol’s copyright in the Prince Series, of her claims of copyright infringement. AWF responded with a lawsuit seeking a declaratory judgment that the Prince Series works were non-infringing or, in the alternative, qualified as fair use of Goldsmith’s photograph. Goldsmith countersued for infringement. Relying on the Second Circuit’s 2013 holding in the copyright case Cariou v. Prince, the district court granted summary judgment to AWF, agreeing with its assertion of fair use and considering the Warhol work to be “transformative” of the original. Goldsmith appealed.

The appeal required the Second Circuit to consider, de novo, the four fair use factors under § 107 of the Copyright Act: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

The Court focused its analysis on the first fair use factor, and specifically the extent to which the Prince Series works were transformative of the original. The transformative nature of a work is determined by whether the new work merely supersedes the “objects of the original creation,” or whether it “instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message.” The Court noted that the assessment of a transformative work is less clear where the [...]

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Thank You to Our Readers

by | Mar 31, 2021 | ,

We greatly appreciate our readers over the past year and are pleased to share that we were recently recognized for our intellectual property thought leadership in the 2021 JD Supra Readers’ Choice Awards, which acknowledge top authors and firms for their thought leadership in key topics during all of last year.

Sarah Bro, a regular contributor to IP Update, was recognized as “Top Author” for trademarks. She focuses her practice on trademark prosecution, enforcement and brand portfolio management, as well as licensing, due diligence, copyright, right of publicity and domain name matters. Through our various blogs and thought leadership pieces, we are dedicated to maintaining our position as a leading firm for intellectual property work and keeping clients abreast of significant and relevant topics in the industry.



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Subscription to RSS Feed Doesn’t Trigger Implied-License Defense

by | Mar 17, 2021 |

The US Court of Appeals for the 11th Circuit affirmed a district court’s grant of judgment as a matter of law against an alleged copyright infringer on its implied-license defense, finding that a blog operator’s publication of entire articles through a really simple syndication (RSS) feed does not give rise to an implied license without substantial evidence showing an intent to grant a license. MidlevelU, Inc. v. ACI Information Group, Case No. 20-10856 (11th Cir. Mar. 3, 2021) (Pryor, J.)

MidlevelU published a free blog designed to attract potential customers in the midlevel healthcare market. MidlevelU made the full text of its blog articles (instead of only headlines and article summaries) available in an RSS feed. ACI is a content aggregator that subscribed to the blog’s RSS feed. ACI copied and published more than 800 entries from MidlevelU’s blog by including those articles in a curated index of abstracts and full-text articles of academic blogs. ACI had no license agreement with MidlevelU.

After discovering the ACI’s activities, MidlevelU registered 50 of its most recent articles for copyright protection with the US Copyright Office. MidlevelU also sent ACI a cease-and-desist letter demanding that its content be removed from ACI’s index. ACI removed the content from the index and coded links to index entries for MidlevelU’s articles so that they would redirect to the MidlevelU’s website. Months later, MidlevelU discovered that, although its content was no longer available on the index website, it still appeared in the website repositories of university libraries. These entries credited ACI as the content’s publisher and directed visitors to view the blog’s full-text content in the “subscribers only” section of the blog aggregator’s website.

MidlevelU sued ACI in federal district court, alleging copyright infringement of the registered articles. ACI asserted an implied-license defense. Relying on the Latimer case, which sets forth the test for implied license in work-for-hire situations, the district court entered judgment as a matter of law in MidlevelU’s favor, finding that there could be no implied license because the ACI could not meet the “creates a work at another person’s request” element of the Latimer test. ACI appealed.

The 11th Circuit found that the district court read Latimer too broadly by applying its holding outside of the work-for-hire context, but the Court nevertheless affirmed the district court’s decision because a jury could not have reasonably inferred from the evidence that the MidlevelU impliedly granted a license to ACI. The Court noted that it had never held that the Latimer test was the only way to prove an implied license. An implied license may arise from circumstances outside of work-for-hire situations: “Creating material at another’s request is not the essence of a license: an owner’s grant of permission to use the material is.”

When an owner clearly manifests consent to use of its copyrighted material, the owner impliedly grants a non-exclusive license. Citing Fields, a district court case in the search-engine web crawler context, ACI argued that an implied license arose because the MidlevelU did [...]

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Ahoy There: If License Terms Not Clearly Intended to Be a Condition Precedent, It’s a Covenant

by | Mar 4, 2021 |

The US Court of Appeals for the Federal Circuit held that the US Court of Federal Claims erred by failing to consider defendant’s non-compliance with the terms of an implied license, vacating the claims court’s finding of non-infringement and remanding the case for a calculation of damages. Bitmanagement Software GmbH v. U.S., Case No. 20-1139 (Fed. Cir. Feb. 25, 2021) (O’Malley, J.) (Newman, J., concurring).

Bitmanagement Software filed suit against the US government for infringement of its copyrighted graphics-rendering software, BS Contact Geo. The claims court found that Bitmanagement had established a prima facie case of copyright infringement based on the US Navy’s copying of the software onto all computers in the Navy Marine Corps Intranet, but found that the Navy was not liable for infringement because Bitmanagement had granted the Navy an implied license to make such copies. Bitmanagement appealed, arguing that:

  • The claims court erred in finding an implied-in-fact license between the parties.
  • An implied-in-fact license was precluded as a matter of law.
  • Even if an implied-in-fact license existed, the claims court erred by failing to consider whether the Navy had complied with the terms of the license.

The Federal Circuit did not disturb the claims court’s findings with respect to the existence of an implied license authorizing the Navy to make copies of Bitmanagement’s software.

The Federal Circuit further declined to apply its preclusion rule as set forth in Seh Ahn Lee, i.e., that “the existence of an express contract precludes the existence of an implied-in-fact contract dealing with the same subject matter,” because the Navy and Bitmanagement never actually entered into an express contract with one another. Rather, both parties entered into express contracts with a third party, Planet 9, through which they intentionally chose to conduct their business. The express contracts “do not capture or reflect the discussions that occurred between the Navy and Bitmanagement directly,” nor do they cover the topic of the implied license between the parties, “i.e., the license to copy BS Contact Geo onto all Navy computers.”

With respect to Bitmanagement’s claim that the Navy failed to comply with the terms of the implied license, the Court considered whether a term requiring the Navy’s use of Flexera, a license-tracking software, was a condition that limited the scope of the license, or merely a covenant. The Court explained that a term of a license is presumed to be a covenant—addressable only in contract—rather than a condition, unless it is clear that the term was intended to be a condition precedent. Accepting the lower court’s factual findings that “Bitmanagement agreed to [the] licensing scheme because Flexera would limit the number of simultaneous users of BS Contact Geo, regardless of how many copies were installed on Navy computers,” the Court found that the required use of Flexera was a condition of the license. The Court found there was no reason Bitmanagement would have entered into an implied license that allowed mass copying of its software without the use of Flexera because, absent [...]

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