THE YEAR IN REVIEW

Greetings all,
We are back, after a few months’ hiatus that found us busy launching our sister firm Tangible IP, specialized in strategic IP conducting and patent sales.  Over 1500 patents sold later that returned tens of millions to their owners and after helping several companies engineer an IP strategy that will enhance their competitive advantage and their valuation, we are taking a short breather to bring you a brief year in review of some important case law that made the headlines in 2011.  While the rest of the world was captivated by the Royal Wedding, Wall Street’s occupation and Osama bin Laden's demise, lamenting Oprah’s retirement and grieving for Elizabeth Taylor and Steve Jobs, a few of us were preoccupied by 2011’s developments in intellectual property law. In this issue of Pointers, we’d like to highlight a few that we find interesting and explain why you should care.

Christian Louboutin V. Yves Saint Laurent:  A US district judge declined to grant a preliminary injunction to fashion designer Christian Louboutin, maker of the famously expensive shoes favored by celebrities and fashionistas, to prevent rival Yves Saint Laurent from selling shoes with similar red soles. Louboutin denied that he was attempting to trademark a color; as he explained to the French newspaper Libération, “it is a red in a specific context. I'm not saying that red usually belongs to me… this is about a precise red, used in a precise location" citing as examples Ferrari red, Hermès orange, and the fact that Cadbury recently prevailed in a lawsuit against Nestlé for using purple packaging.
 

• Bottom line: Innovators should understand that colors and other design elements are often not afforded trademark protection because of the blurry line between “aesthetic” and “functional”. But in certain jurisdictions like the US and Canada, they can –especially in combination with other elements- receive some protection as “trade dress” if they have inherent or acquired distinctiveness

Ultramercial v. Hulu:  A Federal Court of Appeals reversed a District Court decision invalidating a business method patent wherein an advertiser pays a content provider who provides copyrighted content to the end user. Under the traditional “machine-or-transformation test” such a process would not be patentable since it need not be implemented with a specific machine, and it doesn’t transform a physical object to a new state.
 

• Mental note: Innovators should know that a business method may be patent-eligible, however, applicants will need to demonstrate that the business method is a more than just an abstract mental process.

Uniloc USA Inc. v. Microsoft Corp:  A US Court of Appeals dispensed of the traditional 25% rule of thumb for calculating damages for patent infringement, calling the guideline “a fundamentally flawed tool.”
 

• Thumbnail:  As a lawyer for Microsoft stated after the proceeding, “This is an important and helpful opinion with respect to the law of damages, and it may signal the end of unreasonable and outsized damages awards based on faulty methodology.”

Microsoft Corp. v. i4i Ltd. Partnership:  The Supreme Court affirmed an almost $300 million judgment to patent holder i4i, rejecting Microsoft’s argument that the burden of proof required for invalidating a patent should be lowered from “clear and convincing” to “a preponderance of the evidence” where the Patent and Trademark Office fails to do its due diligence with respect to searching for and considering “prior art” information that could disqualify a patent application.
 

• Two cents:  Although this important decision is controversial (as are most), it is consistent with the overall effort to control ambiguity about asserting patent invalidity as a defense to patent infringement. 

Therasense, Inc. v. Becton:  A US Court of Appeals made it more difficult for alleged patent infringers to defend on the basis of “inequitable conduct” – where the infringer claims the patent holder invalidated his own patent by failing to disclose information or “prior art” to the US Patent and Trademark Office.
 

• Moral:  After Therasense, the patent infringer bears the burden of proof to show evidence that the failure to disclose was intentional and that the undisclosed information was directly and materially relevant to the patent application.

Domain Names Expansion: The Internet Corp. for Assigned Names and Numbers (ICANN) converged in Singapore and elected to lift the restriction on generic top-level domains (“gTLDs”) from a familiar, limited list (.com, .net, .gov, .edu, .org, etc.) so that entities can choose their own gTLD (i.e., .google, or simply Google). Although proponents view the expansion as an exciting opportunity for increased creativity with respect to branding and internet presence in general, opponents predict confused consumers, brand devaluation, less effective searching and a windfall benefit to Goliath companies who can afford the hefty price tag.
 

• Net/net:  Companies will need to weigh the $185,000 front-end cost and $25,000 annual fee against the branding value and opportunity for innovation afforded by a custom gTLD, and they need to do so by April 12^th if they wish to get in on the first round.

Stop Online Piracy Act:  “SOPA” is a controversial US bill introduced in October that, if signed, would reduce the limitations currently imposed upon US law enforcement with respect to intellectual property rights and expand such criminalization to include unauthorized streaming of copyrighted works and trafficking of counterfeit goods.
 

• What’s the big deal? The proposed bill was met with vehement and vocal opposition by internet companies such as Google, Facebook and Wikipedia, who warned that such heightened policing authority would result in innovation-stifling censorship. Following encouragement by Wikipedia and other internet companies, over 10 million constituents contacted their legislative representatives to protest the bill; SOPA has been indefinitely shelved.

In our next issue of Pointers, we will highlight some of the major aspects of the new America Invents Act which President Obama signed into law last September and which will have profound implications long term on some of the way inventors are filing, prosecuting and protecting their inventions.