Intellectual Property Law Blog

California Passes New Electronic Discovery Act Effective Immediately

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 01 Jul 2009 16:13:31 -0800

On June 29, 2009, Governor Schwarzenegger signed into law California's Electronic Discovery Act, which is effective immediately. All discovery propounded or responded to must now comply with the new law. These rules are very similar to the recent revisions to the Federal Rules of Civil Procedure, and bring California in line with the federal e-discovery standards.

]]> Under the new Act, the party requesting production of electronically stored information (ESI) may specify the format in which it should be produced (e.g., native format, or TIFF, with or without certain metadata, etc.). If no format is specified, the responding party must produce the ESI in either the same format as it is ordinarily kept (likely in native format or an archived/compressed format) or in a "reasonably usable" form. The responding party need only produce the ESI in one form. If a requesting party fails to specify the format of production in its request, and the responding party produces the ESI in a "reasonably usable format," the requesting party cannot then compel a different form of production.

A responding party can resist production of ESI on the grounds that it is not “reasonably accessible.” The factors for determining inaccessibility are undue burden and cost. If a responding party claims that ESI is inaccessible, though, it must still identify the types or categories of sources of ESI that it asserts are not reasonably accessible.

A responding party can resist production of ESI that it claims is not reasonably accessible by moving for a protective order or by opposing or objecting to the subpoena or request. The responding party has the burden of proving that the ESI is not reasonably accessible. Once that burden is met, the burden shifts to the requesting party to show good cause for production despite the fact that the ESI is not reasonably accessible.

If good cause is shown, the court may still order production with conditions, including cost-shifting. The factors that the courts may consider in determining good cause are similar to the federal criteria, including: the existence of more accessible sources; duplicative nature of the discovery sought; the cost of accessing the ESI versus the party’s need for the discovery; the importance of the issues involved; the amount in controversy; and the parties’ resources.

Employers Should Carefully Consider Whether To Sue Former Employees For Threatened Trade Secret Misappropriation Based On Recent California Court of Appeal Decision Awarding Over $1.6 Million To Former Employees

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 19 Jun 2009 17:18:19 -0800

A recent decision by a California Court of Appeal should give employers pause before they use California's trade secret laws to try to stifle competition in violation of California law.

In the case of FLIR Systems, Inc. v. Parrish, the Court of Appeal affirmed a decision by the trial court awarding $1,641,216.78 in attorneys’ fees and costs to two former employees who successfully defended a trade secret action brought by their former employer. The Court agreed with the trial court that the action was filed and maintained in bad faith within the meaning of the California Uniform Trade Secrets Act.

]]> In this case, two former employees of Indigo Systems Corporation ("Indigo") left Indigo and decided to start a new company based on a business plan developed by one of them years ago when he was self-employed. The former employees discussed their plans with Indigo. When Indigo's parent company, FLIR Systems, Inc. ("FLIR"), passed on the idea set about to find a new business partner, the former employees entered into negotiations with Raytheon Company ("Raytheon") after assuring Indigo and FLIR that they would not appropriate any of Indigo's trade secrets.

FLIR became concerned that the new company would undermine its market share and sued for injunctive relief and damages on the theory that the former employees would inevitably misappropriate trade secrets, arguing threatened misappropriation. Raytheon pulled out of the deal with the former employees and the former employees then advised FLIR and Indigo that they were not moving forward with the new company.

At the trial for a permanent injunction, the trial court found no misappropriation or threatened misappropriation of trade secrets. The trial court also found that the action was brought in bad faith based on a theory of "inevitable disclosure" – a theory previously rejected by the California Supreme Court because it conflicts with California's strong public policy in favor of employee mobility.

The Court of Appeal agreed with the trial court that FLIR and Indigo brought the action for injunctive relief to stifle competition because they were concerned that the proposed new company would have been a direct competitive threat. FLIR and Indigo had no evidence or even a reasonable suspicion that the former employees had misappropriated trade secrets or had threatened to do so, or that FLIR and Indigo had suffered any damages or were threatened with imminent harm. The Court of Appeal held that "Mere possession of trade secrets by a departing employee is not enough for an injunction."

This case provides employers with an important reminder of California's strong public policy in favor of employee mobility and the right to compete with a former employer. Employers cannot use the California Uniform Trade Secrets Act to do an end-run around California Business and Professions Code section 16600 by, for example, bringing a trade secret action against a former employee to prevent them from forming a competing business or joining a competitor unless there is evidence of threatened or actual misappropriation of trade secrets. Filing a trade secret action simply to preserve a competitive advantage in the marketplace is risky and could result in expensive sanctions. Employers should consult with counsel and carefully consider their motivation for filing any trade secret action and the evidence they have to support such a claim before the action is filed. A former employer's honest assessment of the strength of the case and motivation for litigating should continue throughout the litigation.

Authored By:
Michele Haydel Gehrke
(415) 774-3131
mgehrke@sheppardmullin.com

An Advertising Face-Off: Images and the Right of Publicity

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 19 Jun 2009 12:23:59 -0800

The California Supreme Court heard oral argument on June 3 in an important “right of publicity” case, Christoff v. Nestle USA Inc. Issues included whether the single publication rule applicable to mass communication-based torts applies to right of publicity claims; whether use of another’s likeness on a product label is a “publication” for purposes of the rule; whether its continuing use on product labels and in various product advertisements constitutes a “republication” for each use giving rise to new causes of action; and whether the discovery rule applies to right of publicity claims.

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Authored By:

Guylyn Cummins
(619) 338-6645
gcummins@sheppardmullin.com

Does Edwards v. Arthur Anderson Bar The Use of Employee Confidentiality Agreements?

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 19 Jun 2009 11:36:51 -0800

In Edwards v. Arthur Andersen, the California Supreme Court reaffirmed California's strong public policy against covenants not to compete. The primary issue in Edwards was whether the Ninth Circuit's "narrow restraint" exception was a proper interpretation of California law. Under the narrow restraint exception, employers could enforce noncompetition agreements that did not "entirely preclude" an employee from practicing his or her trade, such as an agreement not to solicit specified customers for a specified period of time after employment. The agreement in Edwards was drafted to fall under this judicially-created exception. The Court rejected the "narrow restraint" exception, expressed a stark disapproval for judicially created exceptions to California Business and Professions Code Section 16600, and held that any time an agreement restricts an employee's "ability to practice his [] profession" in any way not explicitly excepted by the statute, it is void.

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Authored By:

Jennifer G. Redmond
(415) 774-2910
jredmond@sheppardmullin.com

and

Adam Tullman
(415) 774-2976
atullman@sheppardmullin.com

Effective Immediately, Trademark Owners Need To Protect Their Trademarks From Registration As Usernames On Facebook

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 11 Jun 2009 14:53:56 -0800

Social network Web site Facebook announced that, beginning this Saturday, June 13, at 12:01 am U.S. EDT, all Facebook users will be allowed to choose a personalized username for their Facebook profiles. This username will replace the numerical string that appears on the URL for each user's profile page. Facebook users will be able to choose names on a "first-come first-served" basis. All at once, millions of Facebook users will be choosing usernames. If you are a registered trademark owner, or represent such an owner, it's important that you immediately register your trademark(s) with Facebook at this link in order to prevent the trademark from being registered by others as a username on Facebook.

]]> Facebook will shortly be posting a notice on each of their users pages inviting users to provide a new username. Usernames can be five or more letters, numbers or periods. Usernames can be individual names and any word or letter combinations; and although they may be the real names of the user, they may be any non-random characters which are trademarks or the names of others, perhaps famous individuals. The characters selected may be trademarks, including famous trademarks, of companies in the United States and/or around the world.

Trademark owners can attempt to prevent the registration of a username that infringes their trademark by completing the form referenced earlier in this article. Rights holders must provide a registration number for such trademark(s) on this form. Once submitted, Facebook presumably will block the registration of that trademark as a username by any of its members.

Because of the importance of this to trademark owners, and the landrush that will take place as Facebook users flock to register new usernames, a leading trademark organization, the International Trademark Association (INTA), has alerted its members to take the opportunity to fill out the Facebook form.

Companies owning registered trademarks -- and trademark lawyers on behalf of their clients -- should fill out the Facebook form immediately. Presumably, a trademark registration is necessary, as a registration number is required and, if not provided, Facebook will not block the trademark. It is unclear whether the existing registration needs to be in the United States, and/or what, if any, verification will be made or required. It appears that this is on a first-come first-served basis and no verification will be made. No explanation is provided as to why the trademark community was not given more notice of this, or why procedures were not developed ahead of time in conjunction with the trademark community, in order to protect trademarks.

Facebook notes that such usernames will be searchable through Facebook and other search engines, such as Google, so this will provide an additional opportunity for mischief or tarnishment arising from the content nature of Facebook pages, using a registered trademark as a username. Facebook is indicating that new Facebook members will not initially be able to join and apply for usernames at this time, in order to prevent a rush of cybersquatters to now register with Facebook and take advantage of these username opportunities. Facebook has also indicated that, once registered, usernames will not be transferable, although Facebook accounts and contacts certainly have the opportunity to be changed, as the individuals behind them move their Internet addresses or locations.

Authored By:

Neil A. Smith

(415) 774-3239

nsmith@sheppardmullin.com

Limiting Liability in Clinical Trials: Non-Lawyers, Lawyers Beware

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 13 May 2009 10:16:15 -0800

Clinical trials are the lifeblood of biotech. Finding the right service providers (CROs, safety, IVRS, consultants, contract manufacturers and many others), as well as the right clinical investigators and sites, results in a complex web of legal obligations and potential liabilities. Limitation of liability clauses can reduce a party's exposure if a contractual obligation is breached. More often, limitations of liability provisions are used to shift risk to the sponsor of the clinical trial. But, if your contracts are well negotiated and drafted, the risks can be carefully and fairly allocated between the parties in a balanced and reasonable manner. Because of the complexity of the legal relationships and liabilities found in clinical trials, this article is limited to a brief description of limitation of liability clauses, and their general strengths and weaknesses.

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Authored By:

Beni Surpin

(858) 720-8950

bsurpin@sheppardmullin.com

and

Blaine E. Templeman

(212) 332-3854

btempleman@sheppardmullin.com

and

Michael Murphy

(858) 720-7423

mmurphy@sheppardmullin.com

Developing a Foreign Filing Strategy

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 13 May 2009 10:00:51 -0800

The ever-increasing reality of the global marketplace has, for many years, driven U.S. companies to seek intellectual property protection beyond the nation’s borders. Unfortunately, the reality they face is that global patent protection, and even multi-jurisdiction protection, is prohibitively expensive for all but those entities with the deepest of pockets. This, coupled with practicality problems associated with patent enforcement in foreign jurisdictions, has driven companies to develop a more strategic approach to foreign patent filings. There is no one-size-fits-all approach to foreign filing strategies. Each company must consider its business model and channels of commerce for its products, its business goals and objectives, desired utilization for its intellectual property items, and its budgetary constraints in developing a foreign filing strategy that is best suited for its needs while maximizing return on investment. Tough decisions must be made along the way, but with a practical value-minded approach, these decisions can become much easier and can increase the value returned for the foreignrelated expenditures.

]]> Click here to read more.

This excerpt was posted with permission from Thomson Reuters/Aspatore, copyright 2009, www.aspatore.com.

Authored By:

Daniel N. Yannuzzi

(858) 720-8924

dyannuzzi@sheppardmullin.com

Ninth Circuit Report: Raymond Edwards II v. Arthur Andersen LLP

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 13 May 2009 08:45:49 -0800

In Raymond Edwards II vs. Arthur Andersen, the California Supreme Court has broadly interpreted the California Business and Professions Code to further prohibit employee noncompetition agreements which seek to prevent a former employee from working for a competitor, subject to specific statutory exceptions.

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Authored By:

Neil A. Smith

(415) 774-3239

nsmith@sheppardmullin.com

California Court of Appeals Rejects Anti-SLAPP Motion in Trade Secrets/16600 Case

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 13 May 2009 08:26:38 -0800

In World Financial Group, Inc. v. HBW Insurance & Financial Services, Inc. the Court of Appeal for the Second Appellate District rejected an Anti-SLAPP motion to strike in a breach of contract, theft of trade secrets, and unfair competition case. The defendants moved to strike the complaint under the Anti-SLAPP statute, claiming that their activities in soliciting the customers and employees of their previous employer were protected speech involving a "matter of public interest," to whit, their pursuit of employment under the public policies expressed in California Business and Professions Code section 16600 (California's prohibition of covenants in restraint of trade). The court upheld the trial court's denial of the motion, finding that solicitation of customers in a business context was not protected activity for the purposes of anti-SLAPP.

]]> A group of four employees left World Financial Group ("WFG") an insurance, pension, and financial services company for one of its direct competitors, HBW Insurance and Financial Services. During their employment with WFG, each employee signed an "Associate Membership Agreement" that included a provision prohibiting the employee, for a period of two years after termination, from soliciting customers of WFG, or soliciting or hiring employees of WFG. It also prohibited them from disseminating or disclosing any confidential information or trade secrets of WFG in perpetuity. When the employees began soliciting WFG clients for HBW, WFG sued, alleging breach of contract, breach of implied covenant, conversion, theft of trade secrets, unfair competition, intentional and negligent interference with prospective business advantage, and unjust enrichment.

In response, HBW and the employees employed an increasingly popular strategy; they moved to strike under California Code of Civil Procedure section 425.16, the anti-SLAPP statute. They argued that the conduct giving rise to WFG's claims (the use of information in solicitation of customers) was "protected activity" or protected speech for the purpose of anti-SLAPP. They tied this activity to "the pursuit of lawful employment pursuant to Business and Professions Code section 16600" and "workforce mobility and free competition," which are matters of public interest and are protected by public policy.

The court summarily rejected this argument. To begin with, the court stated that "the fact that a broad and amorphous public interest can be connected to a specific dispute is not sufficient to meet the statutory requirements of the anti-SLAPP statute." The court noted that the conduct and speech in question was entirely in a business context and done in the pursuit of private financial gain. The speech in question was "incidental" to the business torts on which the action was premised. The court noted that it was not as though the defendants were speaking about 16600, or informing the public about employee mobility, they were soliciting business for their new employer. In short, the solicitation of customers was not a matter of public interest, despite the fact that it was connected by a "broad generality" to the policies expressed by 16600.

The Second District's complete rejection of an anti-SLAPP motion based on 16600 calls into question the strategy of employing this type of motion in employee raiding, trade secrets, and confidential information cases. In essence, defendants can expect to lose unless they can show that the speech in question directly addressed or informed the public about a matter of public interest. Private speech, or speech in pursuit of business or commercial goals will not suffice, nor will tying the speech to a generalized matter of public interest.

Authored By:

Jennifer G. Redmond

(415) 774-2910

jredmond@sheppardmullin.com

and

Adam Tullman

(415) 774-2976

atullman@sheppardmullin.com

Copyrights: First Amendment Trumps Copyright Restoration

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 16 Apr 2009 12:25:03 -0800

On April 3, 2009, the District Court for Colorado entered a groundbreaking copyright decision, treading on new judicial territory by directly applying the First Amendment to invalidate a provision of the Copyright Act. The case, Golan v. Ashcroft, Civil Case No. 01-cv-01854-LTB, found that, at least as applied to the plaintiffs, the copyright restoration provisions found in Section 104A of the Copyright Act violated rights to material permanently in the public domain by restoring full copyright protection as of January 1, 1996, to such material.

]]> By way of background, when the United States joined the World Trade Organization under the General Agreement on Tariffs and Trade in 1994, it also agreed to abide by the Trade Related Aspects of Intellectual Property Law, otherwise known as TRIPs. One of TRIPs' critical elements was adherence of all WTO members to the Berne Convention, the leading multinational international copyright law treaty. In turn, Article 18 of the Berne Convention requires that member nations provide retroactive protection to the works of authors from other member nations if they are still protected in the source country. This was a substantial issue for the United States. Prior to the Copyright Act of 1976, the works of many foreign authors had fallen into the public domain in this country due to failure to comply with formalities such as registration, renewal and use of a proper copyright notice. Accordingly, to implement this obligation, and as part of the Uruguay Round Agreements Act of 1994 (URAA), Congress restored copyrights to works of foreign authors that had entered the public domain as a result of failure to comply with these formalities.

Judge Babcock, interpreting a mandate from the 10th Circuit reversing his earlier decision in which he affirmed the validity of copyright restoration, held that such restoration provisions of the URAA, as codified in 17 USC § 104A, had altered the traditional contours of U.S. copyright law and, thus, violated the plaintiffs' First Amendment right to continue using speech which had previously entered the public domain. The Court was unimpressed with the Government's concern that TRIPs required copyright restoration in its present form in order to meet the United States' treaty obligations. Instead, the Court applied the traditional First Amendment test for content neutral restrictions on speech and held that the Government could have complied with the copyright restoration mandate of Article 18 of Berne without interfering with plaintiffs' protected speech.

Intriguingly, the Court characterized public domain material as "speech" owned by the plaintiffs, presumably because they are part of the general public. This is an unusual approach, given that no one "owns" works in the public domain, but merely has the right to use such material free from copyright-based restrictions. The Court did not explain how the United States could comply with its treaty obligations, although it suggested that First Amendment concerns would have been satisfied had the URAA permitted prior users of public domain works to permanently continue use of such works without restriction. The Court did not state whether the holding applied only to prior users of specific works or also more generally included persons who had previously made use of any public domain works or even those who merely had a possible future interest in making use of public domain works. If the latter, the decision would seemingly apply to all members of the public.

Normally the courts will give deference to Congress' decision on how best to balance content neutral restrictions with other substantial interests. Accordingly, one key issue was the Government's failure to present any convincing evidence showing other reasonable alternatives had been considered as a means of balancing international treaty obligations, through Section 104A, with the First Amendment. It is not surprising that the legislative process provided no such evidence, because the copyright restoration provisions were included in GATT legislation primarily directed to international trade. The resulting URAA was debated, passed and signed into law on a fast track, thus denying us any meaningful legislative history. Without the typical Congressional record established through the normally thorough process of legislative hearings and analysis, the Government had little of substance on which to rely.

The Golan decision leaves many questions unanswered. Perhaps most importantly, how can the United States now comply with its treaty obligations in a manner acceptable to other WTO members? The failure to do so could potentially subject the U.S. to retaliatory trade restrictions that can be granted as the result of a complaint by another WTO member under the dispute resolution mechanism. Such trade sanctions have, in fact, already been issued in response to WTO complaints dealing with other copyright issues, such as U.S. restrictions on broadcast music performance royalties.

When first enacted on December 8, 1994, effective January 1, 1996, the URAA, with its restored copyright provisions, was described by some as a “zombie copyright act,” with dead works re-emerging from the public domain. If upheld on appeal—an appeal which seems likely—the Golan decision could be the judicial stake in the heart of those zombie copyrights, laying them, once again, to rest.

Authored By:

Edwin Komen

(202) 772-5328

ekomen@sheppardmullin.com

The US Federal Trade Commission considers issues in patent damages awards

updates@antitrustlawblog.com (Sheppard Mullin) — Tue, 14 Apr 2009 09:53:56 -0800

With the median damages award in the millions of dollars, a patent infringement lawsuit in the US can be a boon for a patent owner or a headache for an accused infringer. In support of such awards, patent owners often argue that the value of patents, as measured by damages awards in US courts, bolsters incentives to innovate, to the benefit of consumers. Companies that tend to be on the receiving end of US patent infringement lawsuits often counter that patent owners are systematically overcompensated, leading to excessively high prices for patent licenses and actually hurting innovation.

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Authored By:

Darren Franklin

(213) 617-5498

dfranklin@sheppardmullin.com

For Artists with Original Works, It's Buy Now or Pay Later

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 10 Apr 2009 14:02:20 -0800

The pressure to cut production costs for media works is larger than ever. One expense that should not be slashed, however, is the expense of registering a copyright in the work soon after it is created — whether that work is a written script, motion picture, a television episode, a commercial or a song. Considering that the standard Copyright Office filing fee for registration is between $35 (if filing electronically) and $45 (if filing the old fashion way on paper, which many still do), registration arguably provides a substantial dollar- to-dollar return on investment.

]]> In this economic environment, is it really necessary to spend the time and money to register soon after a work is published? It’s a fair question. The U.S. Copyright Act of 1976 (as amended) does not require express registration to secure a copyright in a work. The simple act of fixing the work in any tangible medium of expression is all that is required. You can even use the “(c)” symbol without formally registering a copyright. But these statutory perks do little to protect the intrinsic value of the work itself.

Click here to read article.

Authored By:

Matthew W. Clanton

(202) 772-5338

mclanton@sheppardmullin.com

Second Circuit Resolves Split Between the Circuits Regarding Sale of Keywords to Trigger Sponsored Links and "Use in Commerce" Under the Lanham Act

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 10 Apr 2009 13:13:45 -0800

On April 3, 2009, the Second Circuit Court of Appeals handed down its decision in the matter of Rescuecom Corp. v. Google, Inc., reversing the United States District Court for the Northern District of New York’s dismissal of Rescuecom’s complaint on the grounds that it failed to state a valid claim for relief. The Court held that Google’s "sale" of Rescuecom’s trademark as a keyword in Google's Adwords and Keyword Suggestion Tool Programs, which sends online search engine users targeted advertisements based on their formulation of search terms, constitutes the "use in commerce” for purposes of the Lanham Act, which governs federal trademark law. Under the Lanham Act, subject matter jurisdiction arises for enforcement of trademark rights against infringement when one party “uses” the trademark of another “in commerce” in a way that “is likely to cause confusion, or to cause mistake, or to deceive," "as to the affiliation, . . . or as to the origin, sponsorship, or approval of . . . goods [or] services.” 15 U.S.C. §§ 1114; 1125(a). By rendering this holding, the Court resolved a significant split between the Second Circuit and federal courts in the Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits over the “use in commerce” issue.

]]> Prior to Rescuecom, the Second Circuit in 1-800-Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), held that the “use in commerce” requirement of the Lanham Act was not satisfied in the context of keyword-triggered search engine popup ads. The Court noted that the WhenU.com opinion involved the construction of "use in commerce" in 15 U.S.C. § 1127. Federal district courts in the Second Circuit applying WhenU.com dismissed claims against Google and other parties alleging trademark infringement as the result of keyword triggered search engine advertising. In Rescuecom, the Second Circuit distinguished and narrowly construed WhenU.com, stating that the holding should be limited to its facts, i.e., keyword triggered pop-up advertising, which did not feature the trademark but the website address, did not give rise to a claim for trademark infringement, and was not intended as an absolute ban on Lanham Act claims based upon the use of keywords to trigger sponsored links.

Central to the Rescuecom decision is the fact that, unlike the software program in WhenU.com, Google's AdWords and Keyword Suggestion Tool Programs actually feature the use of a competitor's trademarks. Google sells advertising through two primary mechanisms, AdWords and Keyword Suggestion Tool. These programs allow an advertiser to select words related to its business and “purchase” those words from Google. Once purchased, whenever a Google user selects that word in a search, the advertiser’s sponsored advertisement and link will appear along with (and sometimes over the top of) what would otherwise be a normal, regular Google search result. The Keyword Suggestion Tool works in concert with AdWords, and features additional words that the advertiser might want to purchase to increase exposure. Frequently, the suggested words are trademarks and trade names of the advertiser’s direct competitors. The Second Circuit noted, in contrast to WhenU.com, that "Google displays, offers, and sells Rescuecom's mark to Google's advertising customers when selling its advertising services."

In Rescuecom, the Second Circuit held that Google's sale of trademarks as part of keyword-triggered search engine advertising constitutes a “use in commerce” under the Lanham Act. As such, trademark owners whose marks have been sold in this way may maintain actions under the Lanham Act in the Second Circuit. The Second Circuit attached to the opinion, as dictum, an Appendix entitled "On the Meaning of "Use in Commerce" in Sections 32 and 43 of the Lanham Act" which traced the history of the phrase "Use in Commerce" in the Lanham Act, including the 1988 Amendment to the Lanham Act. The Rescuecom case has been remanded to the Northern District Court for further consideration and determination of the other elements of infringement, specifically whether Google’s use of Rescuecom’s trademark is likely to cause consumer confusion that rises to the level of infringement.

Authored By:

Theodore C. Max

(212) 332-3602

tmax@sheppardmullin.com

and

Kimberly K. Smith

(212) 332-5024

ksmith@sheppardmullin.com

Gibson's Patent Action Against Activision Hits Wrong Chord With Court In "Guitar Hero" Dispute: Summary Judgment Granted

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 10 Apr 2009 01:36:58 -0800

Activision licensed the Gibson trademark and trade dress in November 2006 in connection with Guitar Hero's "custom guitar controller peripheral." Activision paid a one-time fixed license fee to cover the term of the license and Gibson agreed to help promote the Guitar Hero product.

]]> In January 2008, Gibson sent a letter to Activision requesting that it secure a license under Gibson's U.S. Patent No. 5,990,405 ("the '405 Patent") for "the generation and control of a simulated musical concert experience and participation by a musician in a pre-recorded musical performance using a musical instrument as a control device" or halt sale of any version of the Guitar Hero game software. Activision denied the request on the ground of noninfringement of any valid patent claim and noted "Gibson knew about the Guitar Hero games for nearly three years, but did not raise its patent until it became clear that Activision was not interested in reviewing the License and Marketing Support Agreement." On March 11, 2008, Activision brought an action in the United States District Court for the Central District of California, entitled Activision Publishing, Inc. v. Gibson Guitar Corp., CV 08-1653-MRP, seeking a declaratory judgment that: (1) Guitar Hero does not infringe Gibson's '405 Patent; (2) the '405 Patent is invalid; (3) Gibson is barred from alleging infringement by an implied license and the doctrines of equitable estoppel and laches; and (4) Activision has not breached its agreement with Gibson.

On February 28, 2009, following claims construction and a Markman hearing, the district court granted Activision's Motion for Summary Judgment and denied Gibson's Motion for Reconsideration of the Claim Construction Order, sustaining Activision's Objections to Evidence. As an introduction to its decision, the Court held that "[a]s a general observation, no reasonable person of ordinary skill in the relevant arts would interpret the '405 patent as covering interactive video games." The Court held that Gibson's contention that "the '405 patent covers any system when a user controls something 'musical' with any device" would mean that "actual musical instrument" would cover every conceivable device. The Court observed that the use of the words "musical instrument" has a much more narrower meaning. The Court also held that the Guitar Hero controllers must be considered independent from the console system to which they are attached and the '405 Patent can only read on the Guitar Hero controllers and nothing from the console's input point onward. Further, the Guitar Hero controllers are not "musical instruments" because they do not make musical sounds within the meaning of the '405 Patent or which are "representative of the sounds" the controllers make or are capable of making. The Court further noted that the Guitar Hero controllers are not "musical instruments" in a traditional sense because they do not involve "actual operation of a musical instrument" or use virtual reality-type control devices -- both of which were systems disavowed by Gibson in its '405 Patent. The Court further criticized Gibson by noting that "Gibson's doctrine of equivalents arguments border on the frivolous" and "Gibson's argument about the MIDI protocol actually undermine its position."

This case illustrates how a patent which is narrowly drawn with respect to "a pre-recorded musical performance using a musical instrument as a control devise" does not encompass a virtual reality-type control device, which simulates a musical performance and how a Court can become hostile to an attempt to interpret a patent and claims construction in an expansive and overly broad fashion.

Authored By:

Theodore C. Max

(212) 332-3602

tmax@sheppardmullin.com

The Digital Countdown

updates@antitrustlawblog.com (Sheppard Mullin) — Tue, 10 Mar 2009 12:33:13 -0800

The upcoming conversion to digital television will be one of our most important historic dates. No president will be sworn into office. No one will land on the moon. Instead, television in the United States, as we know it, will simply be turned off. Welcome to the Digital Age.

Click here to read the article.

Author's Note: Shortly after publication, the government-issued digital conversion date changed to June 12, 2009.