Patents

Canada Rejects Problem-Solution Approach for Computer Implemented Patent

The Canadian Federal Court has rejected the problem-solution approach as adopted by the Canadian Intellectual Property Office (CIPO) for assessing patentable subject matter in favor of the purposive constructive approach as set out in the Whirlpool and Free World Trust cases. In Choueifaty v. Canada, representative independent claim 1 reads as follows: “A computer-implemented method for providing an anti-benchmark portfolio, the method comprising: acquiring, using a computer system, data regarding a first group of securities in a first portfolio, wherein the computer system comprises a computer processor and memory coupled to said processor, identifying, using a computer system, a second group of securities to be included in a second portfolio based on said data and on risk characteristics of said second group of securities, and providing, using a computer system, the individual weightings for each of the securities in said second portfolio according to one or more portfolio optimization procedures that maximizes the anti-benchmark ratio for the second portfolio wherein the anti-benchmark ratio is represented by the quotient of: a numerator comprising an inner product of a row vector of holdings in said second portfolio and a column vector of a risk characteristic of return associated with said holdings in said second portfolio; and a denominator comprising the square root of a scalar formed by an inner product of said row vector of said holdings in said second portfolio and a product of a covariance matrix and a column vector of said holdings of said second portfolio.” Under Section 2 of the Patent Act, only those elements in a claim identified as essential may be considered in determining whether the subject matter of that claim qualifies as an “invention.” Under the problem-solution approach, only those claim elements that solve an identified problem may be defined as “essential.” Using this approach, it was determined that the representative claim’s “essential” elements were “directed to a scheme or rules involving mere calculations” for weighing securities. It was further determined that these “essential” elements reflected an “optimization procedure” and not a “computer implementation.” As such, the claim was found to be non-statutory. Under the purposive constructive approach, a claim element is “essential” if (1) modifying or substituting that element changes the way the invention works and (2) the intention of the inventor, considering the express language of the claim, or inferred from it, is that the element is “essential.” Accordingly, unlike the problem-solution approach, the purposive constructive approach does not require that “essential” elements of a claim solve an identified problem. While Choueifaty may be appealed, it may provide some clarity for patent applications in Canada that claim a computer implemented method.

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Patents

The Intersection of Trade Secrets and Patents

A federal court in New Orleans has allowed a trade secret claim to proceed to trial, even though the alleged trade secrets were disclosed in a patent application. Cajun Servs. Unlimited, LLC v. Benton Energy Serv. Co., No. 17-0491 (R. Doc. 241). The lawsuit concerns Cajun’s patented elevator roller insert system (ERIS), which is a technology used in drilling for oil. Before filing its patent application, Cajun agreed to rent ERIS to Benton Energy. While renting ERIS, Benton Energy hired a third party to reverse engineer ERIS, using drawings and prototypes supplied with the rented system. Cajun eventually filed its patent application for ERIS while still renting the system to Denton Energy. Cajun initially brought claims for trade secret theft and unfair trade practices. Once a patent was granted for ERIS, Cajun added a patent infringement claim against Benton Energy. In response, Benton Energy filed a summary judgment motion on Cajun’s trade secret claims. Benton Energy attempted to argue that trade secret claims failed as a matter of law because Cajun publicly disclosed the ERIS technology in its patent application. That is, the information could not be a trade secret because it was no longer a “secret” since it was disclosed in the patent application. The court disagreed. It noted that “publication of the ‘862 Patent application does not deprive Plaintiffs of a cause of action for misappropriation of trade secrets before the patent application was published.” In other words, the subsequent patent application did not absolve Benton Energy from liability for any misappropriation that occurred before the patent publication. A non-provisional patent application in the U.S. is normally published eighteen months after its earliest priority date. A non-publication request may be made to prevent publication of the non-provisional application. This holding confirms that before publication, the information disclosed in a patent application may still be afforded trade secret protection.

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Patents

Protecting Individual Replacement Parts

In Automotive Body Parts Ass’n v. Ford Global Techs. (Fed. Cir. 2019), Ford accused the Automotive Body Parts Association (ABPA) of infringing Ford’s design patents that cover individual parts of Ford’s F-150 truck. The ABPA argued that the patented designs are functional. ABPA further argued the application of doctrines of exhaustion and repair to these patented designs. The design patent D489,299, titled “Exterior of Vehicle Hood,” claims “[t]he ornamental design for exterior of vehicle hood,” as shown in Figure 1 below. The design patent D501,685, titled “Vehicle Head Lamp,” claims “[t]he ornamental design for a vehicle headlamp, as shown below in Figures 1 and 2. A design patent must be directed to an “ornamental design for an article of manufacture” and not one “dictated by function.” High Point Design LLC v. Buyers Direct, Inc., 730 F.3d 1301, 1315 (Fed. Cir. 2013) (interpreting 35 U.S.C. § 171(a)). Although the article of manufacture itself is typically functional, the protected design elements themselves may not be “primarily functional.” As to functionality, ABPA states that consumers seeking replacement parts prefer hoods and headlamps that restore the original appearance of their vehicles. As such, ABPA concludes that there is a functional benefit to designs that are aesthetically compatible with those vehicles. Specifically, ABPA argues that Ford’s protected hood and headlamp designs are functional because they aesthetically match the F-150 truck. The Court disagreed with the ABPA’s functionality arguments. Specifically, the Court held that even in the context of a consumer’s preference for a particular design to match other parts of a whole, the aesthetic appeal of a design to consumers is inadequate to render that design functional. As to exhaustion, ABPA asserts that the sale of an F-150 truck exhausts any design patents embodied in the truck and permits use of Ford’s designs on replacement parts so long as those parts are intended for use with Ford’s trucks. The Court declined to apply exhaustion to the protected hood and headlamp designs sold by a third party as replacement parts, the Court noting that exhaustion attaches only to items embodying the protected designs sold by, or with the authorization of, the patentee. As to the right or repair, ABPA argues that purchasers of Ford’s F-150 trucks are licensed to repair those trucks using replacement parts that embody Ford’s hood and headlamp design patents. The Court also rejected ABPA repair argument noting that the right of repair does not permit a complete reconstruction of a patented device or component. As such, a purchaser may replace “individual unpatented component” of the patented article but does not permit the purchaser to infringe other patents by manufacturing separate patented components of the purchased article. Accordingly, the new hoods and headlamps in question are subject to Ford’s design patents, and manufacturing new copies of those designs constitutes infringement. This decision reinforces the use of design patents to protect the manufacturer of individual replacement parts to be used in a purchased article.

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U.S. Licensed Attorney Requirement for Foreign Trademark Applicants and Registrants

The USPTO has amended the Rules of Practice in Trademark Cases to require applicants, registrants, or parties to a trademark proceeding whose domicile is not located in the United States or its territories to be represented by an attorney who is in an active member in good standing of the bar of a state in the United States. A stated purpose of the rule change is to instill greater confidence in the public that U.S. trademark registrations that issue to foreign applicants are not subject to invalidation for reasons such as improper signatures and use claims. Another stated purpose is to enable the USPTO to more effectively use available mechanisms to enforce foreign applicant compliance with statutory and regulatory requirements in trademark matters. The rule change is effective on August 3, 2019.

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Trademarks

Supreme Court Finds Bar on Scandalous and Immoral Trademarks Unconstitutional

The Supreme Court has upheld the Federal Circuit’s decision in In re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017) holding that the provision of the Lanham Act that bars the registration of “immoral or scandalous” trademarks violates the First Amendment. Iancu v. Brunetti, No. 18-302, 6/24/2019. The trademark at issue is the mark “F U C T” which Brunetti uses for a clothing line. The Patent and Trademark Office (“PTO”) barred registration of this mark as being “immoral or scandalous” as required by the Lanham Act, categorizing “F U C T” as “a total vulgar,” “extremely offensive” and “therefore unregistrable” mark. Brunetti appealed the rejection. In Matal v Tam (2017), a parallel provision of the Lanham Act that bars registration of disparaging marks was found unconstitutional as being viewpoint based. Similarly, the key question here is whether the “immoral or scandalous” provision is viewpoint neutral or viewpoint based. The Court found the “immoral or scandalous” provision viewpoint based. Specifically, the Court noted that the Lanham Act “permits registration of marks that champion society’s sense of rectitude and morality, but not marks that denigrate those concepts” and that it “allows registration of marks when their messages accord with, but not when their messages defy, society’s sense of decency or propriety.” As such, the Court held that “put the pair of overlapping terms together and the statute, on its face, distinguishes between two opposed sets of ideas: those aligned with conventional moral standards and those hostile to them; those inducing societal nods of approval and those provoking offense and condemnation.” As such, the Court ruled that the Lanham Act’s ban on federal registration of “immoral or scandalous” trademarks is unconstitutional under the First Amendment. In a concurring opinion, Justice Alito noted that the Court’s “decision does not prevent Congress from adopting a more carefully focused statute that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas.”

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Patents

Predictability and Criticality as Factors in the Evaluation of a Patent Specification

The Court of Appeals vacated the decision of the Patent Trial and Appeal Board in In Re Global IP Holdings (Fed. Cir. 2019), instructing the Board to include predictability and criticality as factors to consider in determining whether Global IP’s written description satisfies the proper legal standard. Global IP filed a reissue application in U.S. Patent No. 8,690,233 to replace the term “thermoplastic” with “plastic” in three independent claims. In the reissue application, the inventor filed a declaration that, at the time of the invention, he was aware of the use of plastics other than thermoplastics for the formation of a sandwich-type composite panel with a cellular core. The Examiner rejected Global’s reissue claims finding that “the specification only supports thermoplastics“ and that Global “cannot claim the full range of plastics, which would include thermosetting as well as thermoplastics” thereby introducing new matter. The Board affirmed the Examiner’s rejection explaining that “regardless of the predictability of results of substituting alternatives, or the actual criticality of thermoplastics in the overall invention, [Globla’s] Specification, as a whole, indicates to one skilled in the art that the inventors have possession only of the skins and core comprising specifically thermoplastics.” The Court held that the Board was mistaken in its legal analysis of whether Global’s specification complies with the written description requirement. The Court stated that “the level of detail required to satisfy the written description requirement varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology.” The Court further stated that, in addition to predictability, the criticality or importance of an unclaimed limitation to the invention can be relevant to the written description inquiry. Accordingly, a variation that is predictable to a person of ordinary skill in the art is more likely to be covered by a specification. Moreover, variations of a non-critical component of the invention are more likely to be covered by the specification.

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Trademarks

Bankruptcy and Trademark License Agreements

In Mission Product Holdings, Inc. v Tempnology, LLC (Supreme Court 2019), the Supreme Court addressed whether a rejection by a licensor in a bankruptcy proceeding “terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.” The Supreme Court answered no to this question, holding that a rejection breaches a contract but does not rescind it. Tempnology entered into an agreement with Mission that granted Mission a non-exclusive license to use Tempnology’s Coolcore trademarks. Before the expiration of this agreement, Tempnology filed for Chapter 11 bankruptcy and asked the Bankruptcy Court to allow it to reject this agreement. The Bankruptcy Court approved the rejection, which meant that Tempnology could stop performing under the agreement and that Mission could assert a claim for damages resulting from Tempnology’s nonperformance. The Bankruptcy Court also agreed with Tempnology’s assertion that under a traditional view of Section 365 of the Bankruptcy Code, this rejection also terminated the rights it had granted Mission to use the Coolcore trademarks. The Bankruptcy Appellate Panel reversed this holding based on a prior decision by the Court of Appeals for the Seventh Circuit that held that rejection of a contract “constitutes a breach” of that contract. The Appellate Panel explained that outside of bankruptcy, the breach of an agreement does not eliminate those rights that the agreement had already conferred on the non-breaching party. The Court of Appeals for the First Circuit rejected the Appellate Panel’s decision and reinstated the Bankruptcy Court’s decision terminating Mission’s trademark license. The Court of Appeals reasoned that special features of trademark law required that the trademark license be terminated. Specifically, the majority reasoned that if a licensee can keep using a mark after an agreement’s rejection, the licensor will need to carry on its monitoring activities which would frustrate the principal aim of a rejection — namely, to release the debtor’s estate from burdensome obligations. The Supreme Court rejected the Court of Appeals reasoning holding that a rejection breaches a contract but does not rescind it. The Supreme Court noted that according to the plain language of Section 365, a rejection “constitutes a breach of a contract,” deemed to have occurred “immediately before the date of the filing of the petition.” The Supreme Court further noted that Section 365 reflects a general bankruptcy rule that the estate cannot possess anything more than the debtor itself did outside bankruptcy. This rule prevents a debtor in bankruptcy from recapturing interests it had given up, namely the rights to the trademark license. Tempnology’s main argument rested on the negative inference drawn from the fact that Section 365(n) provides that licensees of some intellectual property rights retain contractual rights after rejection. The specific intellectual property rights including patents but do not trademarks. In response, the Supreme Court noted that in enacting Section 365(n), Congress did nothing to alter the natural reading of Section 365 that rejection and breach have the same result. Tempnology also argued that a trademark licensor’s duty to monitor and “exercise quality control over the goods and services sold” required that rejection of the agreement also revoke the trademark license. The Supreme Court noted that in allowing rejection of an agreement, Section 365 does not grant the debtor an exemption from all the burdens that generally applicable law, including contracts and trademarks, imposes on property owners. This ruling changes the traditional view of bankruptcy and emphasizes the need to clearly define in the trademark license agreement what happens to trademark license rights under various circumstances, including bankruptcy.

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Patents

Amazon Program for Patent Infringement Complaints

Amazon is testing a new program to handle infringement complaints brought by patent owners against third-party retailers. The program is called the “Utility Patent Neutral Evaluation.” The patent owner must provide a $4,000 deposit with a patent infringement complaint. The third-party retailer must provide another $4,000 deposit if they wish to respond to the complaint. Once the third-party retailer has responded, the patent owner can respond one last time. A third-party attorney holds both deposits and performs a neutral review of the infringement complaint based on the submitted complaint and responses. Each submission cannot exceed fifteen (15) pages. The third-party response cannot include invalidity arguments unless the USPTO or a court has already addressed this argument. A decision is issued within a few months. If the patent owner wins, the infringing listing is removed, and the patent owner gets their deposit back. If the third-party retailer wins, the listing is maintained, and the third-party retailer gets their deposit back. If the third-party retailer decides not to participate, the listing is removed. One limitation is that the program cannot be used for products made and offered by Amazon. Rather, the program is limited to allegations against third-party retailers selling their products through Amazon.

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Trademarks

USPTO Issues Examination Guidance for Cannabis and Cannabis-Related Marks

The 2018 Farm Bill amended the Agricultural Marketing Act of 1946 (AMA) to remove “hemp” from the Controlled Substances Act’s (CSA) definition of marijuana. “Hemp” itself is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.” The newly issued Examination Guidance clarifies that the United States Patent and Trademark Office (USPTO) will refuse to register marks with goods that show a clear violation of federal law, regardless of the legality of those same goods under state law. For applications filed on or after December 20, 2018, the Farm Bill removes the CSA as a ground for refusing registration if the associated goods are derived from “hemp” and the identification of goods specifies that they contain less than 0.3% THC. For applications filed before December 20, 2018, the application may be amended to change the filing date to December 20, 2018, and to establish a valid filing basis. Specifically, if the original filing basis was use based, the application may be amended to change the filing basis to intent-to-use. Also, the original identification of the goods must be amended to specify that any identified CBD or cannabis products contain less than 0.3% THC. Instead of amending the original application, the applicant may abandon the application or submit evidence and arguments against a pending refusal. For applications that recite services involving the cultivation or production of cannabis that is “hemp,” the examining attorney will also issue inquiries concerning the applicant’s authorization to produce hemp.

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Patents

In re Morinville: Computer Generated Business Organization Not Patentable

In the case of In re Morinville, the Court of Appeals for the Federal Circuit (“Court”) affirmed on appeal the decision of the Patent Trial and Appeal Board (“PTAB”) to reject all the claims of U.S. Patent Application No. 11/003,557 (“Application”). As shown below, independent claim 1 of the Application recites a method of reorganizing a business hierarchy into a more centralized functional hierarchy. A method implemented in a computer for dynamically generating a hierarchal functional structure from a hierarchal operational structure, comprising the steps:providing a hierarchal operational structure of unique positions within an organization;associating one of a plurality of roles with each of the positions, wherein each of the roles has a corresponding major function, and wherein at least a subset of the roles is non-unique;identifying a first one of the positions;identifying positions in the hierarchal operational structure that are subordinate to the first one of the positions and that have roles which have at least one functional level in common with the role of the first one of the positions; andgenerating a hierarchal functional structure of the identified positions; andcontrolling user access to business processes based on the hierarchal functional structure;wherein each of the steps is automatically implemented in the computer. Under the first step of the Alice framework, the Court affirmed that claim 1 is directed to an abstract idea. Specifically, the abstract idea of creating a functional organizational structure from a hierarchal operational structure and controlling access to business processes based on the created functional structure. Concerning the use of a computer to implement the rules that define the implementation of the abstract idea, the Court noted that computer-based efficiency does not save an otherwise abstract idea. Moreover, concerning the defined rules themselves, the Court noted that rules implemented on a computer that were previously available to be implemented without the assistance of a computer also could not save an otherwise abstract idea. Under the second step of the Alice framework, the Court affirmed that the recitation of the generic computer does not provide the requisite inventive concept and, as such, is insufficient to transform the method recited in claim 1 into a patent-eligible invention. Concerning the inventive concept, the Court noted that such features must be more than “well-understood, routine, conventional activity.” Comments: While software can be patent eligible in the U.S., the recited steps of the claimed software method must be defined with specificity and not as a black box. In drafting these specific software steps, the recited functionality should not describe functions that can be reasonably performed by a human without the assistance of a computer. Moreover, the claimed software steps should not describe only functionality that is regularly provided by an operating system implemented on the computer.

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