Intellectual Property Seminar

1. Intellectual Property Seminar October 27, 2010

2. Recent Developments in Patent Case Law:Bilski v. Kappos and False MarkingFred Rusche314.480.1933 Fred.Rusche@huschblackwell.com

3. Bilski v. Kappos • Business Method Patentability Before Bilski • State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) • The Federal Circuit expressly affirmed the validity of “business method” patents • The court created the useful, concrete, and tangible result test for patent eligibility of processes • Since State Street Bank, the number of patent applications classified as “business methods” went from just over 2,600 filed in 1999 to almost 14,000 filed in 2008

4. Bilski v. Kappos • Bilski Background • Application included method claims directed to hedging risk in energy markets • The Examiner rejected the claims under §101 on the basis that they were “not implemented on a specific apparatus” and merely manipulated an “abstract idea”

5. Bilski v. Kappos • The BPAI affirmed the Examiner’s rejection of the claims under §101 • Claims did not define a statutory process under §101 using the “transformation” test • Claimed steps preempted “any and every possible way of performing the steps” of the method • Claimed method did not produce a useful, concrete, and tangible result

6. Bilski v. Kappos • Federal Circuit’s Bilski Opinion • The court identified the “machine-or-transformation” test as the sole unifying test consistent with applicable precedent • The machine-or-transformation test: Is the claimed process • tied to a particular machine or apparatus; or • does it transform a particular article into a different state or thing. • The court repudiated the useful, concrete, and tangible result test • The court refused to categorically exclude business methods as patent eligible subject matter

7. Bilski v. Kappos • The Supreme Court Responds • Majority Opinion (Justice Kennedy) • The machine-or-transformation test is NOT the exclusive test for patent eligibility under §101 • There is no requirement under the Patent Act that the terms process, art or method be tied to a machine or to transform an article • There is no categorical exclusion of business methods as patentable subject matter • The Bilski claims were not patentable because they attempted to patent abstract ideas

8. Bilski v. Kappos • Supreme Court Majority Opinion • The Court declined to provide any further definition as to what constitutes a patentable process • Instead, the Court merely pointed to Supreme Court precedent: • Gottschalk v. Benson, 409 U.S. 63 (1972) • Preemption • Parker v. Flook, 437 U.S. 584 (1978) • Environmental and insignificant post solution activity • Diamond v. Diehr, 450 U.S. 175 (1981) • Application of law of nature • The majority opinion left the door open for the development of further limiting criteria for process patent eligibility

9. Bilski v. Kappos • The Impact of Bilski • Even if the machine-or-transformation test is not satisfied, the applicant can now still present arguments for patent eligibility. • At the same time, can the machine-or-transformation test be met yet claims still be found to be directed to an upatentable abstract idea? • No other clear guidance: The Court appears content (for now) to wait to see how the Federal Circuit reacts.

10. Bilski v. Kappos • The USPTO’s Response to Bilski: Guidelines for Examiners • Factors Weighing Toward Eligibility • Recitation of a machine or transformation (either express or inherent) • The claim is directed toward applying a law of nature • The claim is more than a mere statement of a concept • The claim is directed toward applying a law of nature • The claim is more than a mere statement of a concept

11. Bilski v. Kappos • The USPTO’s Response to Bilski: Guidelines for Examiners • Factors Weighing Against Eligibility • No recitation of a machine or transformation (either express or inherent). • Insufficient recitation of a machine or transformation. • The claim is not directed to an application of a law of nature. • The claim is a mere statement of a general concept.

12. Bilski v. Kappos • The USPTO’s Response to Bilski: Guidelines for Examiners • For the foreseeable future, the machine-or-transformation test will continue to dominate §101 inquiries for process patent applications • “in some rare cases, factors beyond those relevant to machine-or-transformation may weigh for or against a finding that a claim is directed to an abstract idea”

13. False Marking: Increased Risk for Patent Owners • Why Mark Your Product in the First Place? • Assists public in identifying whether an item is patented • Avoids unintentional infringement • Provides potential to collect greater damages for infringement • May provide competitive advantage

14. False Marking: Increased Risk for Patent Owners • So What’s the Problem? • What if your product really isn’t covered? • 35 U.S.C. 292(a) • “… whoever marks upon … any unpatented article … any word or number importing the same is patented, for the purpose of deceiving the public … shall be fined not more than $500 for every such offense • $500?? Is that all? Again, what’s the problem?

15. False Marking: Increased Risk for Patent Owners • Up to $500 per falsely marked article • The Forest Group, Inc. v. Bon Tool Company, 590 F.3d 1295(Fed. Cir. 2009) • A “per article” penalty approach allows potential damages to add up quickly • In Pequignot v. Solo Cup Company: 22 billion articles (disposable cup lids) were at issue with a potential payment to the plaintiff of $5.4 trillion

16. False Marking: Increased Risk for Patent Owners • Who can raise a false marking claim? • 35 U.S.C. §292(b): “Any person may sue for the penalty …” • Federal Circuit: “Any person” in fact means any private party can file a false marking suit • Stauffer v. Brooks Brothers, Inc., --- F.3d ----, 2010 WL 3397419 (Fed. Cir. 2010) • There is (currently) no requirement for the plaintiff to show that they were harmed by the alleged false marking in any way

17. False Marking: Increased Risk for Patent Owners • What is the impact of these recent cases? • From 1999 – 2009: there were a total of 40 false marking cases filed • 0 cases filed in Q3 2009 • Since Forest Group (December 2009), over 350 false marking cases have been filed • 175 new cases filed in Q3 2010 alone • The liability for defendants is uncertain but potential sizable • Statute allows for a range from fractions of a penny up to $500 per article • Very little guidance (or restrictions) on how courts are to apply this range

18. False Marking: Increased Risk for Patent Owners • Defenses to False Marking Claims • Intent • Plaintiff must show that the false marking was conducted “for the purpose of deceiving the public” • A false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public, BUT • Defendant can rebut the presumption with evidence that it did not consciously desire that the public be deceived • Pequignot v. Solo Cup Company, 608 F.3d 1356 (Fed. Cir. 2010) • Reliance on advice of counsel • Cost and business disruption caused by removing markings

19. False Marking: Increased Risk for Patent Owners • Defenses to False Marking Claims • Failure to Meet Pleading Requirements under FRCP 9(b) • False marking claims appear to be subject to the heightened pleading requirements of Rule 9(b) • See e.g.Juniper Networks v. Shipley, 2009 WL 1381873 (N.D. Cal. 5/14/2009) • Rule 9(b) requires the claimant to “state with particularity the circumstances constituting fraud.” • However, the manner in which district courts have applied Rule 9(b) to false marking cases has been inconsistent • Case to watch: Simonian v. BP Lubricants USA, Inc. • Pending writ of mandamus before the Federal Circuit

20. False Marking: Increased Risk for Patent Owners • What is the future of false marking claims? • These claims will remain a threat for the immediate future • Pending legislation • Would require plaintiffs to show a “competitive injury” arising from the false marking • May limit aggregate liability to $500 • Retroactive effect • But … , passage is uncertain

21. False Marking: Increased Risk for Patent Owners • Addressing the current risk • Conduct annual review of patent markings • Document decision to list each patent or to not remove expired patents • Have a clearly defined policy for marking • When in doubt, seek advice of counsel … and follow it • Don’t mark

22. New Developments in Advertising and Marketing Gary A. Pierson314.345.6236 Gary.Pierson@huschblackwell.com

23. Advertising law concepts: • False and deceptive advertising • Testimonials and endorsements • Contests, promotions, sweepstakes • Developing issues . . . .

24. Video

25. What is false and deceptive advertising? • Consider both express and implied claims • Must have a reasonable basis for the claim when it is made - prior substantiation • Implied claims often require consumer perception evidence.

26. What can you do about false and deceptive advertising? • Lanham Act Claims: • AT&T v. Verizon: “There’s a map for that.”

27. What can you do about false and deceptive advertising? • State Consumer Protection Statute Claims • Dannon “Activia” yogurt: Bifidus Regularis • Claimed to be “clinically proven” to strengthen immune system function • Class action suit settled for up to $45 million

28. What can you do about false and deceptive advertising? • National Advertising Division Challenge • Voluntary, self-regulatory process • Submit written challenge and supporting evidence for review by NAD staff attorneys • Creative challenges can alter competitive landscape

29. Testimonials and Endorsements: New Rules • “Clear and conspicuous” disclosure of compensation for testimonials and endorsements • Specifically include blogs and web sites • The end of “Results not typical.” • Must now provide the typical results if they differ from the statements in the testimonial

30. Avoiding lottery status: “consideration” “chance” “prize” Beware of registration and bonding requirements Contests, promotions and sweepstakes

31. Social media context Facebook Fan pages Twitter follower contests User-generated content Be aware of terms and conditions of the host service Contests, promotions and sweepstakes

32. Developing issues: • “Green” and environmental claims: New FTC Guides • Gift Cards: New Federal Reserve Rules • Privacy and data collection • “Advertainment”

33. Entertainment, New Media & Privacy Michael Lewis 816.983.8178 Michael.Lewis@huschblackwell.com

34. Objectives • Briefly explore trends in the entertainment and media industry over the next five years. • Discuss what legal issues may result from those trends and how to address them.

35. Five Year Trends of E&M Segment* • 5% global CAGR • Fastest growing segments are Internet advertising (9%), Internet access (8%) and TV subscriptions and licenses • By 2014, $1 of every $3 will be spent on the Internet • Newspaper publishing and recorded music are the only two segments that experience decline in the U.S. • US and global markets are driven by increased Internet penetration and mobile services

36. Five Year Trends of E&M Segment* (cont.) • Digital drives growth; traditional drives revenue • Internet advertising continues to increase and represent greater portion of advertising market • Revenue driven by improved customer experiences and hyperlocal • New business models (e.g., freemium) are tested *Courtesy of PricewaterhouseCoopers, Entertainment & Media Outlook 2014

37. What Do These Market Trends Mean for My Client’s Legal Issues? Businesses get closer to their customers and their customers’ personal data Advertising continues to increase in digital and viral channels Clients in all sectors continue to go digital

38. Social & Digital Media • Internal social media policies • Astroturfing • Advertainment and other viral initiatives implicate multiple privacy policies • Behavioral targeting

39. Overview of Key U.S. Privacy & Data Security Laws No general federal comprehensive privacy law Sector specific approach, e.g., laws related to: Financial information Health care data Children’s online protection Cable privacy Credit reporting

40. Overview of Key U.S. Privacy & Data Security Laws (cont.) • Driver’s privacy protection • Electronic communications/wiretapping • Customer Proprietary Network Information (CPNI) • Marketing channels • E-mail marketing • Telemarketing • Text messaging • Fax marketing

41. Key Privacy Regulations to Know

42. Too many breaches, too little time

43. Privacy Audits Collection of consumer data Storage of consumer data (including security and encryption practices and policies) Customer-facing privacy statements Internal privacy policies and practices Internal privacy training for employees

44. Privacy Audits (cont.) • Contractual obligations for third parties (vendors, service providers, etc.) accessing data • Cross-border transfer issues for international operations • International database registration requirements • Threat detection and escalation procedures • Technical implementation requirements for suggested changes

45. BREAK 10:15-10:30

46. Domestic & International Patent Issues Amy Hammer 312.526.1618 Amy.Hammer@huschblackwell.com Sam Digirolamo 314.345.6225 Samuel.Digirolamo@huschblackwell.com

47. Domestic Patent Issues 1. Backlog of Patent Applications • Bump and Dump Program • Patent Prosecution Highway • KSR Obviousness Guidelines • Green Technology Program • PTO Quality Control Metrics

48. Backlog of Patent Applications • Over 1 million applications in System • Current backlog = 720,000 • Optimal handling of applications = 325,000/yr • Optimal inventory = 50 to 70 applications/Examiner • Goal 1st Office Action – 10 months • Final determination – 20 months • Reality – 1st Office Action – 26 months • Final determination – 36 months • Hire 1000 Examiners/Year

49. Bump-And-Dump Program • Program extended to end of year • Abandon one application; accelerate another application • Eligibility Requirements • Non-provisional application to accelerate filed before Oct. 1, 2009 • Letter of abandonment and statement agreeing not to file new application for same invention • Obtain refund of search fee and excess claims fee paid for abandoned application • Each entity limited to 15 applications

50. Patent Prosecution Highway • Applicant receiving allowed claims in Office of First Filing (OFF) may request that Office of Second Filing (OSF) fast track the examination of corresponding claims filed in OSF • Working Sharing Program – • Participating offices: US, JP, KR, UK, CH, EPO, AU, CA, DE, RU, SG, DK, FI, HU, ES, AT • 80% of all applications – US, JP, CH, KR, EPO