And the Winner is Music Licensing Reform
On May 15, 2018, singers and songwriters, among others, urged the Senate Judiciary Committee to support sweeping bipartisan legislation, the Music Modernization Act (MMA), that will overhaul federal law on music licensing. Senators speaking at the hearing joined in the creative spirit, incorporating lyrics from favorite songs into their comments. By the time you read this article, I expect this bill will be enacted into law. Although not perfect, the MMA is a big step forward in improving incentives for creators of musical works while at the same time fostering dissemination of their creations.
The MMA packages together several music licensing reform bills. House Judiciary Committee Chairman Bob Goodlatte (R-VA), Ranking Member Jerry Nadler (D-NY), and 28 original cosponsors introduced this legislation (H.R.5447) in the House following a comprehensive review of copyright law in the Committee during Rep. Goodlatte’s chairmanship. H.R. 5447 incorporates aspects of the Music Modernization Act originally introduced by Reps. Doug Collins (R-GA) and Hakeem Jeffries (D-NY), the CLASSICS Act, introduced by Reps. Darrell Issa (R-CA) and Jerrold Nadler (D-NY), and the AMP Act, introduced by Reps. Joseph Crowley (D-NY) and Tom Rooney (R-FLA). On April 11, 2018, the House Judiciary Committee voted unanimously (32-0) to approve the legislation and on April 25, 2018 the full House voted unanimously (415-0) to pass the legislation. Reps. Collins and Jeffries, among others, reached across the aisle to help bring the various bills under one umbrella and thus facilitate passage of H.R. 5447 in the House with strong support.
The Senate responded quickly. On May 10, 2018, Senator Orrin Hatch (R-UT) and Senate Judiciary Committee Chairman Chuck Grassley (R-IA) introduced the Senate version of the Music Modernization Act (S. 2823). The Senate Judiciary Committee hearing followed less than a week later.
What the MMA Does
The MMA makes many important changes to music licensing laws, including:
closing the pre-1972 loophole by establishing federal copyright protection that will guarantee compensation for artists who recorded music before February 15, 1972;
establishing a “willing buyer, willing seller” rate standard requiring all digital platforms to pay fair market value for music;
codifying SoundExchange’s longtime practice of honoring “Letters of Direction” from artists who want to share royalties with studio producers and other creative participants who work with them; and
creating a new process that will allow eligible participants in recordings made before the digital performance right was enacted in 1995 to share in digital royalties for those recordings.
The bill creates a single licensing entity to administer mechanical rights for musical works. It calls for the digital services to fund a Mechanical Licensing Collective (MLC) and receive blanket mechanical licenses for interactive streaming or digital downloads of musical works. The MLC would be governed by publishers and self-published songwriters. The MLC would diminish the challenges digital services face today when attempting to match songwriters and publishers with recordings. The bill would also create business efficiencies for the digital services by providing a transparent and publicly accessible database housing song ownership information. The database would publicly identify songs that have not been matched to songwriters and/or publishers, thus enabling more songwriters and publishers to claim the rights to and get paid for their songs.
Why the MMA Matters
The business of music is a tangle of copyright, licensing, distribution, and royalty rules that govern how artists get paid when a user streams a song. Money in the music business moves through a patchwork of vehicles. Payment collection is complex and can involve dozens of parties exchanging details for even the shortest recorded track. The MMA remodels music licensing to better fit the digital streaming age.
Why is this remodeling necessary? As noted recently by economist Marcel Boyer, the markets for music delivery have changed rapidly in the digital streaming age. See M. Boyer, The Competitive Market Value of Copyright in Music: A Digital Gordian Knot, Working Paper No. 17-844, at 2 (Toulouse School of Economics) (August 31, 2017). New technologies used to sell and distribute digitized music have increased competition in the recorded music market due to the lower costs of entry of creators (songwriters, composers, performers) on a world-wide and time-wide scale. Id. For example, Boyer reports that Americans streamed 135 billion tracks in the first half of 2015, an increase of more than 90% from the first half of 2014. However, only 9% of them expected or were likely to subscribe or pay for streaming music in the ensuing 6 months. Id. at 3 (citing http://www.nielsen.com/us/en/insights/reports/2015/music-360-2015-
The music recording industry has experienced a staggering revenue loss over the years as digital streaming has emerged. A recent Phoenix Center Report shows that between 1999, when the Digital Millennium Copyright Act was enacted, and 2015, a 16-year period when Internet use mushroomed, revenues for the recording industry in the United States declined by 65% in real terms. Id. (citing T. Randolph Beard, George S. Ford, and Michael Stern (2017), Safe Harbors and the Evolution of Music Retailing, Phoenix Center Policy Bulletin No. 41, March. http://www.phoenixcenter.org/PolicyBulletin/PCPB41Final.pdf). Boyer further notes that in 2016 the recording industry saw revenues from sales of digital tracks and albums decline faster than in any previous year. Id. at 4 (citing Joshua P. Friedlander, News and Notes on 2016 RIAA Shipment and Revenue Statistics, RIAA).
The MMA isn’t perfect. Among other problems, it contains little to benefit DIY musicians and songwriters who operate outside the entity-focused music licensing system. Yet, it’s heartening that Congress has finally acted. For some time now, music creators have been asking for copyright reform that takes into account the realities of today’s music marketplace. The modernization of music licensing in the MMA is both long overdue and very welcome.
In This Issue:
NYIPLA President's Corner
An Interview with Judge Sue L. Robinson, NYIPLA's Outstanding Public Service Award Recipient
Harnessing Innovation in Canada
The Supreme Court Navigates Trouble in Foreign Waters
Safe Harbors for Internet Service Providers after BMG Rights Management (US) LLC, et al. v. Cox Communications, Inc. et al.
Avoiding Patent Exhaustion: Structuring Agreements in View of the Latest Jurisprudence
Dealer’s Choice: First Circuit Allows Licensor to Reject Trademark License in Bankruptcy
Comments on the Spanish Trademark Draft Bill Implementing European Union Trademark Directive 2015/2436
On the Cusp of Music Copyright Reform: The Music Modernization Act
Notable Trademark Decisions
96th Annual Dinner in Honor of the Federal Judiciary
NYIPLA Event Programming
Moving Up and Moving On
Welcome New Members
Participate in one of NYIPLA's 24 open committees! We encourage you to actively partake in the myriad of activities the Association has to offer.
If you are interested in joining a committee this year please visit www.nyipla.org/volunteerfor
If you were in a committee last year, and would like to continue to stay on a committee, please submit your preferences again for this year.
One-Day Patent CLE Seminar
The Princeton Club
Mediating Patent Infringement Disputes: Current Trends and Future Considerations
JAMS NY Resolution Center
Hot Topics in IP Law
The Princeton Club
VOLUNTEER FOR A COMMITTEE!
5th Annual Second Circuit Moot Court Argument CLE
Thurgood Marshall US Courthouse
An Interview with Judge Sue L. Robinson, NYIPLA's 2018 Outstanding Public Service Award Recipient
By: publications Committee
2018 outstandinG public service award
The Publications Committee had the opportunity to interview this year’s Outstanding Public Service Award Recipient, Judge Sue L. Robinson. Judge Robinson has had a distinguished career in public service and served as a member of the District of Delaware court for more than 25 years. During her tenure on the bench, Judge Robinson presided over a number of complex cases, including patent disputes, numerous trademark infringement disputes, and antitrust disputes. Following her retirement from the bench in July 2017, Judge Robinson has joined the firm Farnan LLP in Wilmington, Delaware. Judge Robinson’s notable experience and her character truly demonstrate her commitment to public service and her impact on the District of Delaware during her tenure.
Q: How did you start your career in public service?
A: I went from private practice, where I was an associate for about five years, and was invited to join the United States Attorney’s Office (USAO) in Delaware. My leap from the private sector to the public sector began as a federal prosecutor for the USAO.
Q: What was your journey to the bench?
A: Because the USAO was a small office and I was the civil division at the time, I also had the chance to do criminal trials, and this is where I got jury experience. I was in court basically every day, which is of course difficult for an associate at a big law firm to have that kind of experience. The judges got to know me, and five years after I joined the USAO, the magistrate judge for the District of Delaware resigned, and I was selected for that position by a vote of the district court judges. I served as the sole magistrate judge for three years, and then got the nod from our senators to be a district court judge in 1991. It was an interesting and fulsome path in terms of learning different aspects of the craft.
Q: Did your experience as an Assistant United States Attorney prepare you for the bench? If so, in what ways?
A: When I was in the private firm, the skills I learned was more research and writing, and I didn’t get into court even though I was called a litigator. It wasn’t until I joined the USAO that I had my own caseload and saw cases from start to finish. I was able to understand at that point how all the motions and pleadings fit in, and I was more comfortable in the courtroom and could appreciate what made for a good trial and for a not so good trial; good decisions and bad decisions; and working with a jury and understanding how important a jury is to the system. It is important to get into court and to find your style so that you appear genuine to both the judge and the jury.
Q: During your time on the bench in the District of Delaware, what were some noteworthy changes that occurred in the practice of the court?
A: While I was serving as Chief Judge, the district court transitioned to electronic filing, which was a rather dramatic change in how we managed our cases and lawyers. This change was probably the most noteworthy because we now had electronic documents and had that as a resource available to us. Another noteworthy moment during my tenure was in 2013 when the district may have peaked in how many patent cases the court had—at the time, the District of Delaware had more patent cases per judge than any other district and certainly that kind of caseload changed the way I managed my caseload just to keep up. Those two catalysts changed my practice and how I managed my caseload.
Q: What were cases from your tenure that you found to be particularly memorable or educational?
A: Well, there were certainly lots of those, and I had a number of cases with interesting technology, however, I had a series of stent cases when they first got on the market, which was in the late 1990s until the last one settled and spanned over the course of ten years. Observing the new iterations of products going from bare metal stents to drug eluting stents was an interesting journey, and seeing the same experts, lawyers, and companies with the same initially underlying patent owned by Cordis was unlike many other experiences I had during my tenure. It is rare that you have an invention that changes how something is done, and that first stent was truly one of those innovations.
Q: What did you find to be some of the most rewarding experiences while serving on the bench?
A: Having a series of law clerks come in as young lawyers and seeing the professional development of my clerks into partners and professors over the course of twenty-five years is something rewarding to every judge.
Something that was one of the hardest skills and responsibility I had was in my criminal cases and the sentencing aspects of these cases. Periodically, I would receive feedback that someone you sentenced took it to heart and changed their ways and began on a different path. This was rare but certainly was rewarding when it happened.
In terms of patent litigation, you don’t really get feedback on those types of cases, and the only feedback may be if the case is affirmed or reversed. However, having the satisfaction of getting a case through whatever stage it got through with a degree of efficiency and reasonableness on a level playing field in a timely fashion was something I found particularly rewarding. Getting a complicated case through to resolution, regardless of whether it is affirmed or not, means as a trial judge you have done your job, and your job is to see the case through to resolution so the powers that be can review it—you have to take satisfaction in that.
Q: Were there any particular challenges you faced during your tenure, particularly during your time as Chief Judge?
A: While as Chief Judge, one challenge was moving the court towards an electronic docket and all that entailed.
I don’t recall any other particular challenges as Chief Judge, but because the court was a small district, the Chief Judge did not receive any additional resources for the extra administrative responsibilities at a time when our patent docket was increasing. Generally, from 2010 onward, there was such a heavy patent docket with a relentless stream of motions that it was really a challenge to keep up and be able to prioritize so as to give every motion its due consideration. At some point in the last five years, it was my impression that litigation had gotten more aggressive—for every line I drew as a judge, in most cases, you would have one side trying to push and would have to keep reinforcing the same ruling, and the parties couldn’t agree on anything. This would swallow up resources when you don’t have lawyers trying to resolve the case but, rather, prolonging the case.
Q: Following the Supreme Court’s decision in TC Heartland, have there been changes to the docket and how the Court manages patent suits?
A: I retired from the Court too soon to have personal experience with it. Certainly there is a steady stream of patent cases being filed in Delaware. It has been a burden because there are two vacancies on the court, and the court has a number of visiting judges to assist with the case load. Cases have come to the District of Delaware as a result of TC Heartland, and I don’t think it has been a tidal wave of them as this point, but this remains to be seen until the district fills the two vacancies and has a steady contingent of four judges.
Q: Do you have any predictions on how TC Heartland may affect how the Court handles patent suits?
A: We have had such a heavy case load all along that I don’t foresee any major changes on how the Court handles patent cases. I think it is more interesting to think about how the two new judges will changes the dynamic on how the court handles patent cases.
Q: How has your transition to private practice gone thus far?
A: It has been an interesting transition—I was telling a colleague recently that I think I would be a better judge now because I have seen what actually goes on from a litigator’s perspective. If I could carry that experience back to the bench, I think I would be better able to handle certain things—I would suggest a sabbatical for sitting judges to sit in the real world for six months, and then go back to the bench and see how you do. It has been truly interesting to see how lawyers really litigate cases and how little of that gets shown to the judges making the decisions.
Q: What advice would you provide to intellectual property law practitioners from experience in the private sector and serving on the bench?
A: There are two things that are important to me and that I would offer as advice to practitioners. First, keep it simple—this is difficult to do, but there were times when my law clerks and I would be reading through a brief and the record, and the brief citations didn’t match the record. You would get to the point where you think the lawyer must be hiding something because it is so hard to find their argument, or support for the argument. If you want to convince the judge, it is important to send a clear message of what your position is and support for that position.
Secondly, although the judge may not always be aware of what is happening behind the scenes, now that I am off the bench, I see lawyers whose word cannot always be trusted from time to time. I would like to think that young lawyers are mentored that their integrity is everything. If you “fudge” to opposing counsel on even simple things, that kind of reputation will have its consequences, even if those lawyers get away with it from time to time. It really is important for lawyers to take their position as officers of the court seriously.
Q: What does winning the Outstanding Public Service Award mean to you?
A: I am humbled by it—to be a in a room full of intellectual property lawyers, and I know I am not the smartest person in the room. I presume that the reason I was recognized was because I worked hard and cared about a fair process. I am very grateful if that kind of service was recognized.
Harnessing Innovation in Canada
By: nicholas bertram
This summer will mark the third anniversary of a program launched by the government of the province of Quebec to encourage patent protection. Quebec’s First Patent Program is the first of its kind in Canada. The Program offers businesses a 50% reimbursement on the first $50,000 spent on obtaining patent protection. The Program covers government fees and professional fees. Costs associated with obtaining a patent in Canada, the United States and abroad are eligible for reimbursement. Moreover, freedom-to-operate opinions and patentability opinions may equally be reimbursed under the Program.
Since its adoption in August 2015, over one hundred businesses operating in Quebec have benefitted from the Program, receiving more than 2.25 million dollars in financial support. In 2017, the Quebec Government announced that an additional five million dollars will be allocated to the Program.
A business is eligible for the Program if:
- it is incorporated;
- it has operated in Quebec for at least one year;
- it has conducted research and development leading to the technology that will be covered by the patent application; and
- it has not filed any prior patent applications. A business that has filed a U.S. provisional patent application or a PCT patent application is still eligible.
Applying to the Program:
When applying, the business is to provide its most recent financial statements and a service proposal prepared by the Quebec intellectual property firm that will be assisting the business in securing patent protection.
Admissibility under the Program does not depend on the nature of the technology, to the extent that the above-mentioned conditions are met.
Once approved, the business signs an agreement with the Government and can begin receiving financial assistance.
Any patent costs incurred by the business after it has applied to the First Patent Program are eligible for reimbursement.
What is to Come:
The existence of the First Patent Program is encouraging for IP-conscious businesses and intellectual property professionals alike. Businesses that could not afford to obtain a patent are now seeking patent protection. The Quebec Government has stated its interest in keeping the Program active, indicative of its understanding of the importance of intellectual property protection. Although the Federal Government of Canada expressed in 2016 an interest in adopting a similar program, such a program has not yet been implemented. Nevertheless, the author remains hopeful that a pan-Canadian program will see the light of day in the near future.
Nicholas Bertram is a Canadian intellectual property lawyer, his practice focusing on patent procurement and enforcement. He is admitted to the Bars of New York and Quebec. He is a member of the Canadian intellectual property firm Anglehart et al., located in Montreal, Quebec. If you have any questions, he invites you to contact him at: email@example.com.
 Économie, science et innovation Québec, https://www.economie.gouv.qc.ca/bibliotheques/
premier-brevet/ (accessed on May 11, 2018).
 Recommendation 47: “That the Government of Canada create a first patent program, with a design that is similar to that launched by the Government of Quebec. This program should subsidize the expenses incurred by small and medium-sized businesses obtaining a first patent.” Canada’s House of Commons Standing Committee on Finance, Report 11 - Creating the Conditions for Economic Growth: Tools for People, Businesses and Communities, http://www.ourcommons.ca/DocumentViewer/
en/42-1/FINA/report-11/ (December 7, 2016).
The Supreme Court Navigates Trouble in Foreign Waters
By: katherine daniel
On April 16, 2018, the Supreme Court heard oral argument in WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, to decide whether damages for domestic patent infringement should include foreign lost profits. The Supreme Court’s decision in this matter has the potential to considerably alter the damages calculation in patent cases and result in higher awards for injured patentees.
Petitioner WesternGeco LLC (“WesternGeco”) owns four patents with claims directed at technologies used to search for oil and gas beneath the ocean floor. Ships tow a series of streamers equipped with sensors to search for the oil and gas. The sensors generate a map of the subsurface of the seabed, and this map is used by companies to identify drilling locations for natural resources. The patents at issue relate to: (1) preventing the streamers from tangling and (2) using the sensors to generate maps that ascertain changes in the seabed over time. The commercial embodiment of the patents is manufactured domestically, and then WesternGeco performs surveys abroad on behalf of oil companies. Respondent ION Geophysical Corporation (“ION”) manufactures the alleging infringing technology in the United States and then ships these systems overseas to its customers. These customers, in competition with WesternGeco, then use this technology to conduct the offshore surveys outside the United States for oil companies.
On June 12, 2009, WesternGeco filed suit for infringement against ION in the United States District Court for the Southern District of Texas under 35 U.S.C. § 271(f), alleging that ION’s systems infringe four of its patents and also identified multiple surveys that WesternGeco believes it lost contracts for as a result of ION’s alleged infringing activity. Section 271(f) imposes infringement liability on persons who supply “all or a substantial portion of the components of a patented invention” from the United States abroad, where combining those components outside the United States would infringe a patent if that combination occurred in the United States. The district court entered a judgment of infringement in favor of WesternGeco, and the company was awarded $93.4 million in lost profits and $12.5 million in reasonable royalties. In its appeal to the Federal Circuit, ION argued, in part, that the jury should not have been allowed to award lost profits.
Following the Federal Circuit's reversal of the inclusion of lost profits for activities occurring outside of the United States, the Supreme Court granted certiorari.
II. Argument at the Supreme Court
During oral argument at the Supreme Court, the Justices alternated voicing concerns about the international repercussions of permitting foreign lost profits with the need to fully compensate injured patentees through the inclusion of lost profits in damages. Justice Gorsuch began the hour by discussing the territorial limits of patent law and expressed his fear that applying lost profits arising from a third party’s foreign use would grant the patentee improper patent protection beyond the boundaries of the United States. Justice Breyer quickly followed that sentiment, hypothesizing that other nations could follow the United States and enact similar laws to allow for the collection of lost foreign profits. He proposed,
And suddenly a foreign patent holder, in, say, Switzerland, has -- takes this American company and obtains enormous profits on the basis of the sales in the United States, where those sales do not violate American law. I mean suppose 10 countries do this. I try to think about that and I see chaos or confusion. And at that point, I think part of comity is, what happens if everybody does it?
It is possible the influx of confusion could throw the patent system into a tailspin, but Mr. Paul Clement, arguing on behalf of WesternGeco, tried to ameliorate the Justices’ concerns by offering that this has been the rule of the land for one hundred years and the patent system has not collapsed yet.
Despite his concerns, Justice Breyer acknowledged that WesternGeco has an “excellent case” and was quick to offer a possible solution to remedy his own uneasiness. Along with Justices Ginsburg and Sotomayor, Justice Breyer discussed the possibility of using proximate cause to limit the use of foreign lost profits. To this point, attorneys for WesternGeco and the Solicitor General, who was invited to file a brief expressing the views of the government and also appeared at the oral argument, agreed that proximate cause could provide sufficient protection from unforeseeable damages. Furthermore, the government took the position that the Court should reject the categorical rule that a patentee can never be awarded damages for lost foreign profits in any instance of infringement. Allowing for lost foreign profits would provide patentees with full compensation for their injuries. This type of compensation would not be novel in the legal realm, and is already the standard in the tort, contract, and copyright. Notably, in all of these fields lost foreign profits have not given rise to significant discord in international relations.
In response to WesternGeco and the Solicitor General, ION offered that allowing for the account of foreign lost profits could lead to “converting a single act of supply from the United States into a springboard for what would effectively be worldwide damages.” ION countered that the patentee was “attempting to convert an American court . . . into a one-stop shop for worldwide damages.” Specifically, ION noted that WesternGeco was not without a remedy and could have gone to the foreign countries and litigated its patents in those countries in an effort to recover damages. ION expressed concern that if the American courts become a “one-stop shop” for worldwide damages, then patentees may use American courts to avoid foreign patent laws. This could potentially lead to enlarged damages because American juries tend to award larger amounts compared to their foreign counterparts.
III. Proximate Cause as the Gateway to Lost Profits
Statements from Justice Breyer to the petitioner such as “you have an excellent case” and “maybe this is an easy case” may have revealed the tilt of the Supreme Court on this issue, but it was evident from oral argument that if the district court’s award of foreign lost profits is upheld, then it must have limits. The solution proposed at oral argument for limiting awards was the doctrine of proximate cause. By using proximate cause as the gatekeeper to foreign lost profits, the question would become what degree of connectivity must exist between the domestic infringement and foreign lost profits before the lost profits may be calculated into the plaintiff’s damages. This would be a fact-intensive analysis, but courts are not newcomers to these types of factually challenging questions. And under this theory, patentees would still need to provide sufficient evidence of actual causation and demonstrate the specific amount of lost profits. The principles of proximate cause may mitigate some of the risks associated with runaway damages from American juries, but this is a problem that plagues damages in patent law already, with or without foreign lost profits.
Potential infringers should be aware that if the Supreme Court decides to expand the scope of damages to encompass foreign lost profits, then awards for damages could increase tremendously. For example, the jury in this case awarded $94 million in lost foreign profits as compared to only $12.5 million in reasonable royalties, but again an inquiry under similar circumstances would be fact specific. The increase in damages could result in companies changing their business models to limit their potential liability or cause tension in international relationships. Businesses may decide to develop, manufacture, and assemble products entirely outside the United States, or foreign countries may even enact similar laws to extend damages to the United States. Despite these concerns, its seems that the Supreme Court is likely to decide that an injured party should be made whole for their damages and allow for the award of foreign lost profits, if relevant and supported by the evidence. How businesses and other countries will react to this likely intrusion into foreign space remains uncertain.
 WesternGeco L.L.C. v. ION Geophysical Corp., 791 F.3d 1340, 1343 (Fed. Cir. 2015). cert. granted, vacated, and remanded, 136 S. Ct. 2486 (2016), reinstated in pertinent part, 837 F.3d 1358 (Fed. Cir. 2016), cert. granted, 138S. Ct. 734 (U.S. Jan. 12, 2018) (No. 16-1011).
 Id. at 1343, 1349.
 Id. at 1343.
 Id. at 1349.
 Id. at 1342.
 Id. at 1349.
 WesternGeco L.L.C. v. ION Geophysical Corp., 138 S. Ct. 734 (U.S. Jan. 12, 2018) (No. 16-1011).
 Transcript of Oral Argument at 11, WesternGeco L.L.C. v. ION Geophysical Corp., No. 16-1011 (U.S. Apr. 16, 2018).
 Id. at 46.
 Id. at 48.
 Id. at 11.
 Id. at 22.
 See generally William F. Lee & Douglas A. Melamed, Breaking the Vicious Cycle of Patent Damages, 101 Cornell L. Rev. 385 (2016) (explaining that the current patent system perpetuates a vicious cycle of excessive damages).
Safe Harbors for Internet Service Providers After BMG Rights Management (US) LLC v. Cox Communications, Inc.
By: keelan diana
In BMG Rights Management (US) LLC v. Cox Communications, Inc., 881 F.3d 293 (4th Cir. 2018), the United States Court of Appeals for the Fourth Circuit issued an opinion with the potential to alter the legal landscape for online service providers, broadband subscribers, copyright owners, and, broadly, anyone needing access to the internet by holding an internet service provider (“ISP”) liable for allegedly infringing content shared by its subscribers.
BMG Rights Management (US) LLC (“BMG”), an international music publishing house “that administers copyright for 2.5 million songs,” sued Cox Communications, Inc. and CoxCom, LLC (collectively, “Cox”), which provide high-speed internet access for roughly 4.5 million subscribers, for contributory and vicarious copyright infringement. BMG argued that Cox failed to institute a policy entitling it to the shelter offered by the safe harbor provisions of the Digital Millennium Copyright Act (“DMCA”). To sustain protection under the safe harbor provisions, an ISP like Cox must have “adopted and reasonably implemented . . . a policy that provides for the termination in appropriate circumstances of subscribers . . . who are repeat infringers.” By affirming in part the Eastern District of Virginia’s holding that Cox should be liable for actions allegedly undertaken by its subscribers—actions that amounted to unproven, unadjudicated accusations of copyright infringement—the Fourth Circuit simultaneously strengthened the position of copyright owners whose work is frequently subject to file-sharing and eroded the application of one of the central legal protections upon which ISPs have relied to provide their subscribers with access to the internet.
II. The DMCA and Safe Harbors for Internet Service Providers
On October 28, 1998, President William Jefferson Clinton signed the DMCA into law, implementing two 1996 World Intellectual Property Organization (“WIPO”) treaties and criminalizing the production, use, and dissemination of devices that control access to copyrighted works, among other things. In the DMCA, Congress aimed to craft a bulwark against the burgeoning threat of digital piracy, leaving copyright owners free to share “the movies, music, software, and literary works that are the fruit of American creative genius.” The DMCA amended Title 17 of the United States Code to include Section 1201, dictating that “[n]o person shall circumvent a technological measure” designed to control access to a copyrighted work. By limiting penalties to persons who would circumvent a technological measure to access (rather than simply to copy) these works, Congress attempted to draw a balance between the right of the public to make fair use of copyrighted materials and the proprietary interests of copyright owners.
Because the heightened protections provided by the DMCA created a risk that online and internet service providers would be exposed to claims of copyright infringement based on the actions of their subscribers, the DMCA included four safe harbor provisions to shield ISPs from incurring vicarious liability through no fault of their own. The safe harbor provision relevant to BMG v. Cox specifies that ISPs will be eligible for protection if they: (i) have “adopted and reasonably implemented, and inform[ed] subscribers and account holders of . . . a policy that provides for the termination in appropriate circumstances of subscribers and account holders . . . who are repeat infringers” and (ii) “accommodate and do not interfere with standard technical measures.”
The DMCA fails to define the terms “repeat infringers” and “appropriate circumstances.” In the absence of statutory guidance, courts have concluded “that Congress intended for [internet] providers to have broad discretion over the substance and implementation of their section 512(i) policies.” The case law has “never been clear,” however, about “whether a provider may legitimately take the position that the only customers who should be treated as repeat infringers under the DMCA are those who have been adjudicated and found liable for infringement.” This silence has made space for ISPs like Cox to argue that they should not be held liable for the actions of their subscribers, particularly where those actions have not been found to amount to infringement.
III. BMG v. Cox and the Difficulty of Crafting Adequate Policies to Curb Subscriber Infringement
In BMG v. Cox, BMG sought to hold Cox contributorily liable for alleged infringement of BMG’s copyrights by subscribers to Cox’s internet service—particularly those using BitTorrent, a protocol that enables peer-to-peer sharing of copyrighted materials like audio and video files by allowing computers to transfer these files to each other directly. Rightscorp, Inc. (“Rightscorp”), an organization that has been referred to as a copyright troll, which “monitors BitTorrent activity to determine when infringers share its clients’ copyrighted works,” was a party-in-interest to the case.
Rightscorp’s business model involves contracting with copyright owners like BMG and policing channels on which internet users share BitTorrent files to locate instances of alleged infringement, and then sending “takedown notices” to the ISPs hosting these files. Rightscorp intends that the ISPs who receive these notices (which it characterizes as “settlement offers”) forward them to the alleged infringers and either suspend their service or force them to pay the requested “settlement” amount. The DMCA does not require ISPs to take these steps. Rightscorp’s takedown notices include “the name of the copyright owner . . ., the title of the copyrighted work, the alleged infringer’s IP address, a time stamp, and a statement under penalty of perjury that Rightscorp is an authorized agent and the notice is accurate.” The amount that Rightscorp requests from alleged infringers amounts to “twenty or thirty dollars for a release from liability.”
In 2011, when Rightscorp began sending these takedown notices to Cox, Cox responded by notifying Rightscorp that it would forward the notices to its subscribers “only if Rightscorp removed the settlement language.” Rightscorp refused to remove this language, and “[i]n the fall of 2011,” after receiving thousands of takedown notices from Rightscorp, Cox decided to “blacklist” Rightscorp—meaning that Cox automatically deleted the notices it received “without acting on them or even viewing them.” BMG became a client of Rightscorp after Cox made the decision to blacklist Rightscorp.
According to the court, Cox stood one step removed from the allegedly infringing actions of its subscribers: “[a]s a conduit ISP, Cox only provides Internet access to its subscribers. Cox does not create or sell software that operates using the BitTorrent protocol, store copyright-infringing material on its own computer servers, or control what its subscribers store on their personal computers.” Cox also conditioned the use of its services on an agreement “reserv[ing] the right to suspend or terminate subscribers who use [its] service ‘to post, copy, transmit, or disseminate any content that infringes the patents, copyrights . . . or proprietary rights of any party.’”
To shield itself from liability for vicarious infringement, Cox implemented an automated system that processed “notifications of alleged infringement” such as Rightscorp’s. This system relied on a so-called “thirteen-strike policy,” under which Cox responded to subscribers about whom Cox had received takedown notices in a manner prescribed by the number of notices that subscriber had received. The first takedown notice “produce[d] no action from Cox”; the second through seventh notices “result[ed] in warning emails from Cox to the subscriber.” After the eighth and ninth notices, Cox limited the alleged infringer’s access to the internet “to a single webpage . . . contain[ing] a warning, but the subscriber c[ould] reactivate complete internet access service by clicking an acknowledgement.” After the tenth and eleventh notices, Cox suspended service—but the subscriber was able to reactivate it by placing a telephone call to a technician and agreeing to remove the offending content. The twelfth notice resulted in essentially the same action as the tenth and eleventh notices. After the thirteenth notice, Cox suspended the subscriber once again “and, for the first time, considered [him or her] for termination.”
IV. The Court Denies Cox the Protections of the Safe Harbor Provision
Despite (or rather, precisely because of) Cox’s labyrinthine suspension and termination policies, the court deemed Cox’s automated monitoring system inadequate to curb the allegedly infringing activities of its subscribers, and used Cox’s thirteen-strike policy (along with a handful of starkly incriminating email messages) to justify denying Cox the protections of the DMCA safe harbor.
To fall within the safe harbor, the court reasoned, “Cox must show that it meets the threshold requirement, common to all § 512 safe harbors, that it has adopted and reasonably implemented . . . a policy that provides for the termination in appropriate circumstances of subscribers . . . who are repeat infringers.” Despite the DMCA’s silence on the topic, the court rejected Cox’s argument that “repeat infringers” must mean adjudicated repeat infringers, or “people who have been held liable by a court for multiple instances of copyright infringement,” and deduced from both the Congressional record and the varying uses of the word throughout the DMCA that “the term ‘infringer’ in § 512(i) is not limited to adjudicated infringers” and can include those merely accused of infringement.
In its opinion, the Fourth Circuit cited Sony Corp. of America v. Universal City Studios Inc., 464 U.S. 417 (1987), one of the seminal cases addressing the rights of a corporation that provides the public with a service or product embedded with the potential for abuse. In Sony, the Court held that “the mere sale of a product that has both lawful and unlawful uses does not in and of itself establish an intent to infringe.” The product at issue in Sony was the video cassette recorder (“VCR”), which could be (and often was) used to duplicate copyrighted programs illegally. The Court held that the distributor of a product like the VCR cannot be held secondarily liable for the infringement of its users when that product has “commercially significant noninfringing uses.” The Fourth Circuit distinguished Sony from Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 545 U.S. 913 (2005), a decision holding that while a peer-to-peer file sharing network did offer substantial noninfringing uses, it could nevertheless be secondarily liable when it encouraged its users to engage in infringing activities. The Fourth Circuit cited Grokster’s explanation of this distinction:
[U]nder Sony, intent to infringe will not be presumed from the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, even when the seller has the understanding that some of [his or her] products will be misused. . . . But the fact that a product is capable of substantial lawful use does not mean the producer can never be held contributorily liable.
Cox’s argument that access to the internet—the service it provided to its customers—had substantial noninfringing uses, and that it never intentionally encouraged direct copyright infringement, was unavailing. The Fourth Circuit read the requisite intent into Cox’s thirteen-strike policy and often intentional delay in terminating the service of subscribers who had received numerous takedown notices, finding that if someone “knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result.”
V. Looking Forward: The Potential Impact of BMG v. Cox
After BMG v. Cox, ISPs are likely querying the extent to which they can rely on the safe harbor provisions of the DMCA. If they have policies in place to bring them into compliance with section 512(i), and they enforce these policies more assiduously than Cox did, they may remain unaffected. But one of the most significant findings of BMG v. Cox—that an ISP can be held liable for actions of its subscribers when a copyright troll or other bad actor merely suggests that these actions constitute infringement—is startling in its implications for internet subscribers and users. BMG v. Cox may “encourage ISPs to act on dubious infringement complaints” and even to terminate internet access of subscribers “based on unverified accusations” that they have posted or shared copyrighted materials.
How important is access to the internet? Does it constitute a legally cognizable right for everyone, or merely for people who pay ISPs like Cox a monthly subscription fee? What kinds of prejudice could subscribers face if their access to the internet is summarily terminated, especially when they are not at fault? By allowing Rightscorp and BMG to prevail over an ISP like Cox and denying Cox the protection of the DMCA safe harbor, BMG v. Cox leaves these questions unanswered—for now.
 Oliver Brown, BMG v. Cox: Court of Appeals Denies DMCA Safe Harbor in Landmark Copyright Case, Harv. R. L. & Tech. – JOLT Digest+ (Feb. 21, 2018), available at https://jolt.law.harvard.edu/digest/bmg-v-cox-
 BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 298 (4th Cir. 2018).
 17 U.S.C. § 512(a).
 The Digital Millennium Copyright Act of 1998, Pub. L. No. 105-304, 112 Stat. 2860 (Oct. 28, 1998).
 17 U.S.C. § 512(i)(1)(A).
 The Digital Millennium Copyright Act of 1998, Pub. L. No. 105-304, 112 Stat. 2860 (Oct. 28, 1998).
 Sen. Rep. No. 105-190 at 8.
 17 U.S.C. § 1201(b)(2)(A) clarifies that the phrase “‘circumvent protection afforded by a technological measure’ means avoiding, bypassing, removing, deactivating, or otherwise impairing a technological measure,” and that “a technological measure ‘effectively protects a right of a copyright owner under this title’ if the measure, in the ordinary course of its operation, prevents, restricts, or otherwise limits the exercise of a right of a copyright owner under this title.”
 Id. § 1201(a)(1)(A).
 See id. § 1201(c)(1).
 Id. § 512(i)(1)(A)-(B).
 Annemarie Bridy, BMG v. Cox: The High Cost of Losing Safe Harbor, Center for Internet and Society (December 5, 2015), available at http://cyberlaw.stanford.edu/blog/2015/12/
 See id.
 BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 298 (4th Cir. 2018).
 Rightscorp “turn[s] a profit for shareholders by demanding money from users whose computer IP addresses were associated with copyright infringement.” Mitch Stoltz, BMG v. Cox: ISPs Can Make Their Own Repeat-Infringer Policies, But the Fourth Circuit Wants A Higher “Body Count,” Feb. 5, 2018, Electronic Frontier Foundation, https://www.eff.org/deeplinks/2018/02/bmg-v-cox
 BMG, 881 F.3d at 299, 294.
 See Stoltz, supra note 16; see also BMG, 881 F.3d at 299.
 “Rightscorp began sending infringement notices to ISPs, coupled with demands for payment, and insisting that ISPs forward those notices to their customers. In other words, Rightscorp and its clients, including BMG, sought to enlist ISPs to help coerce payments from Internet users, threatening the ISPs themselves with an infringement suit if they don’t join in.” See Stoltz, supra note 16; see also BMG, 881 F.3d at 299.
 BMG, 881 F.3d at 299.
 Id. at 300.
 Id. at 299.
 See id. (“The effectiveness of Cox’s thirteen-strike policy as a deterrent to copyright infringement has several additional limitations. Cox restricts the number of notices it will process from any copyright holder or agent in one day; any notice received after this limit has been met does not count in Cox’s graduated response escalation. Cox also counts only one notice per subscriber per day. And Cox resets a subscriber’s thirteen-strike counter every six months.”).
 These emails revealed, among other things, Cox employees acknowledging that implementation of their thirteen-strike policy harmed Cox revenues, and thus tended to be either half-heartedly enforced or outright ignored. See, e.g., id. at 303.
 Id. at 301 (internal citation and quotation marks omitted).
 See id. at 301-02.
 Id. at 306.
 Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442 (1984).
 BMG, 881 F.3d at 306.
 Id. (internal citations and quotation marks omitted).
 Id. at 307.
 Stoltz, supra note 16.
What do principles of patent exhaustion have to do with convenience of disposable consumer products—such as individual coffee/tea/beverage pods, disposable diagnostic test strips, refillable ink cartridges, and the like? Although transparent to consumers, these principles are very important to innovative companies creating these products and protecting them through IP rights. How a company controls its proprietary rights to make and/or market these components can have profound consequences on maintaining its competitive edge in the marketplace.
A patent owner has a right to parse out and license its bundle of make/use/sell/etc. rights as it sees fit. But, an unqualified sale of a patented device can effect a complete transfer of the entire bundle of ownership rights. Under the principles of patent exhaustion, a patent owner cannot later sue a customer who purchased a patented product without qualification. Whether a patentee can restrict a sale in some manner to retain some of its rights in the sold item remains an issue that can be highly fact-sensitive. Here, we it is explored whether the sale of a larger appliance—coffee-maker, printer, etc.—exhausts patent rights to disposable components or refills sold for use with the appliance. Several recent cases illustrate the circumstances in which patent exhaustion may apply, and suggest ways of possibly avoiding exhaustion through careful approaches in crafting patent claims, thoughtful patent portfolio strategies and use of carefully tailored patent license agreements.
Impression Products, Inc. v. Lexmark International Inc.
In the recent U.S. Supreme Court decision Impression Products, Inc. v. Lexmark International Inc., the patentee designed ink toner cartridges for use in laser printers, and owned patents covering both the cartridges and their use in printers. Lexmark sold these cartridges worldwide. Because the cartridges were refillable, Lexmark had difficulty maintaining control of the cartridges after their sale. In an attempt to prevent unauthorized re-filling of spent cartridges, Lexmark required its customers to sign a contract prohibiting them from returning empty cartridges to anyone other than Lexmark. Despite this provision, remanufacturers acquired empty cartridges that they refilled and resold.
Lexmark sued the remanufacturers alleging patent infringement of the cartridge patents. The U.S. Supreme Court held that any Lexmark patent rights in the cartridge were exhausted when Lexmark sold it to the first purchaser (Lexmark’s customer). Applied was the established principle that when a patentee sells an item under an express, otherwise lawful restriction, the patentee does not retain patent rights in that product. The Court explained that Patent Laws promote innovation by allowing patentees to “ ‘secure the financial rewards’ for their inventions.” However, once the patentee sells a patented product it has secured, its reward and the Patent Laws provide no further basis for restraining that product’s use and enjoyment. Accordingly, Lexmark could not maintain an action in patent infringement against the remanufacturers who were selling the same (but refilled) cartridges previously sold by Lexmark. Whether the sale occurred within the United States or abroad made no difference. Rather, “what matters is the patentee’s decision to make a sale” without regard to the sale’s location. As for the express contractual provisions between Lexmark and its cartridge customers, although lawful, those provisions did nothing to avoid exhaustion of the patent. Once sold, “whatever rights Lexmark retained are a matter of the contracts with its purchasers, not the patent law.”
Patent exhaustion put Lexmark in a tough position. On the one hand, it did not want to sue its customers for breach of the contract provision restricting its action with the empty cartridges. On the other hand, it could not sue remanufacturers for contract violations because the remanufacturers were not a party to that contract, and, as it turns out, patent infringement was also not an available cause of action.
While Lexmark’s application of patent exhaustion involved a refillable cartridge fully covered by a patent claim, other U.S. Supreme Court and Federal Circuit decisions have applied the doctrine of patent exhaustion to patent claims where the commercial product read on only part of the patent claims. In other words, the product is covered by some, but not all, of the elements in the patent claim.
Quanta Computer, Inc. v. LG Electronics, Inc.
Before Lexmark, the U.S. Supreme Court in Quanta Computer, Inc. v. LG Electronics, Inc., articulated a standard for determining the potential applicability of patent exhaustion: “[t]he authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights”, even when not fully infringed by the sold item, where the product sold “had no reasonable noninfringing use and included all the inventive aspects” of the patented claim. In Quanta, the licensed products accused of infringement (i.e., computer chips) read onto a portion of each of the asserted patent claims and had no use other than to be coupled to the system claimed in the remaining claim elements (i.e., the computer) because without the other components the licensed product would not work. Although some of the patents included method claims, it did not change the exhaustion analysis because methods may be “‘embodied’ in a product, the sale of which exhausts patent rights.”
With this test, patentees were on notice that sale of a component used in a larger patented system —despite not embodying the entire patent claim —could nevertheless potentially exhaust any potential patent right the patentee might hope to assert to protect against follow-on sales of the larger system. This created a dilemma for companies who sell two (or more) items as part of a system where the patent claims are directed to the system, but not individual components within the system.
LifeScan Scotland, Ltd. v. Shasta Technologies, LLC
The Federal Circuit case, LifeScan Scotland, Ltd. v. Shasta Technologies, LLC provides a post-Quanta example of patent exhaustion involving a disposable component used in a larger device. LifeScan Scotland (“LifeScan”) sold a glucose metering system having a meter device and disposable test strips. LifeScan obtained patent protection covering the system of using the strips with the meters to determine blood glucose levels but not on the disposable strips alone. Of the seven elements in the asserted claim, three were directed to the meter while four were directed to the strips. Defendant Shasta sold only disposable test strips, and not meters. LifeScan sued Shasta alleging its manufacture and distribution of competing disposable test strips indirectly infringed LifeScan’s patents.
Using the analysis set forth in Quanta, the Federal Circuit held that LifeScan’s sale of its glucose meters exhausted the rights to the asserted patent claims. In applying the Quanta test, the Federal Circuit considered whether the strips themselves were inventive. But because LifeScan had originally tried and failed to obtain patent protection for the test strips alone, the court held the meter device embodied the essential inventive elements of the claims. Given that the claimed inventive concept was based on the meters and not the test strips, the Federal Circuit found that the sale of the LifeScan meter exhausted LifeScan’s patent rights and it could not obtain any recovery for Shasta’s sale of test strips under the principles of Quanta.
Keurig, Inc. v. Sturm Foods, Inc.
Another example of exhaustion in the context of disposable components occurred in Keurig, Inc. v. Sturm Foods, Inc. Patentee Keurig separately sold coffee brewers and disposable coffee pods for use with these brewers. Sturm Foods (“Sturm”) sold disposable coffee pods for use with Keurig’s brewers. Keurig sued Sturm for infringing patent claims directed to Keurig’s brewer and methods of using the brewer.
However, here Keurig admitted that their brewer fully embodied the asserted apparatus claims. This fatal admission resulted in a finding that the sale of the Keurig brewer exhausted the product and method claims because both required the brewer device.
Biotechnology And Exceptions to Patent Exhaustion
In contrast, biotechnology is one area where the U.S. Supreme Court has provided an exception to the rule of patent exhaustion. As with any other product, products utilizing patented biotechnology (e.g., genetically modified seed) also exhaust all patent rights upon sale of the product. However, unlike products in other technological fields, biotechnology products may, in some cases, self-replicate after purchase. For example, when farmers purchase patent-protected genetically modified seed, they grow the seed and then harvest the newly-produced seeds from the resulting plant. This new seed will have the same genetically modified traits as the originally-purchased seed, but is not the same item.
In the U.S. Supreme Court case Bowman v. Monsanto Company, the Court ruled that the doctrine of patent exhaustion only applies to the “‘particular article’ sold [but] leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item.” To the extent that a product is able to self-replicate, copies made from the purchased product are not bound by patent exhaustion, thereby providing at least one exception to this rule.
A recently-filed case between Apple Inc. and Qualcomm Inc. in the Southern District of California will take another look at the patent exhaustion doctrine. Apple is defending against allegations of patent infringement by arguing Qualcomm’s patent rights are exhausted by sale of its chips and that Qualcomm’s separate license and requirement for royalty fees are not enforceable under Lexmark and Quanta. However, because Qualcomm uses two separate corporate entities—one to sell its chips and another to license its technology—a new question of whether patent exhaustion occurs will need to be considered. It will be interesting to see how the court addresses this new situation.
Practitioners should consider these recent patent exhaustion decisions when advising clients regarding their licensing and sales strategies. First, one must consider whether the patentee wishes to relinquish all patent rights or only some: is the contemplated transaction a sale or a license? If the transaction is a license, consider what rights will be granted and what corporate entity is transferring those rights. Second, because sales of a product made outside the U.S. also exhaust domestic U.S. patent rights, a company should consider the economics of selling the patented item abroad. It may be useful to negotiate particular sales prices or royalty rates to adjust for a potential imbalance in return between country-specific prices.
Another lesson from these cases relates to obtaining sufficient patent protection for the different components of a system. The LifeScan and Keurig models are well-known to many companies manufacturing consumer products, e.g.,., the principal appliance and the disposable refills. In such systems, it will be highly significant to obtain patent protection for each component that could potentially be sold separately. In Keurig, as with LifeScan, the way in which the patent attorneys decided to claim the device affected the outcome of the ruling. Perhaps if a patent claiming the coffee pod itself had been asserted, Keurig would have had recourse against Sturm. With separate patents in hand, a patentee may more clearly define the line between rights transferred and rights retained to avoid a situation where sale of one component exhausts the rights to a second, different component.
 Impression Prods., Inc. v. Lexmark Int’l, Inc., 137 S. Ct. 1523 (2017).
 Id. at 1529 (third parties named “remanufacturers” obtained used cartridges from Lexmark customers).
 Id. at 1529-30.
 Id. at 1532-33.
 Id. at 1532 (citation omitted).
 Id. at 1531-32.
 Id. at 1535.
 Id. at 1538.
 Id. at 1537 (“[T]he Patent Act does not guarantee a particular price, much less the price from selling to American consumers. Instead, the right to exclude just ensures that the patentee receives one reward[.]”); see also id. at 1532 (“[O]nce a patentee sells an item, it has ‘enjoyed all the rights secured[.]’”) (citation omitted).
 Id. at 1533; see also id. at 1535 (“Once a patentee decides to sell . . . that sale exhausts its patent rights, regardless of any post-sale restrictions the patentee purports to impose”; and “[t]he purchasers might not comply with the restriction, but the only recourse for the licensee is through contract law[.]”).
 Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008).
 Id. at 638.
 Id. at 633 (e.g., “[T]he incomplete article substantially embodies the patent because the only step necessary to practice the patent is the application of common processes or the addition of standard parts.”).
 Id. at 628.
 LifeScan Scotland, Ltd. v. Shasta Techs., LLC, 734 F.3d 1361 (Fed. Cir. 2013).
 Id. at 1364-65.
 Id. at 1365.
 Id. at 1377.
 Id. at 1370-71 (patent office rejected claims).
 Id. at 1377.
 Keurig, Inc. v. Sturm Foods, Inc., 732 F.3d 1370 (Fed. Cir. 2013).
 Id. at 1373-74 (“Keurig . . . does not dispute that its rights in its brewers were exhausted with respect to the apparatus claims of the asserted patents.”).
 Id. at 1374 (“‘Where a person has purchased a patented machine of the patentee or his assignee, this purchase carries with it the right to the use of the machine so long as it is capable of use.’”) (quoting Quanta, 553 U.S. at 625).
 See Bowman v. Monsanto Co., 569 U.S. 278, 284 (2013).
 Id. at 282.
 Id. at 284 (emphasis added, citation omitted).
 See Apple Inc. v. Qualcomm Inc., No. 3:17-cv-108-GPC-MDD (S.D. Cal. June 20, 2017), ECF No. 83 (First Am. Compl.) ¶¶ 91-93, 582-83.
Avoiding Patent Exhaustion:
Structuring Agreements in View of the Latest Jurisprudence
By: dorothy auth and howard wizenfeld
One of the purposes of the Bankruptcy Code is to allow companies an opportunity to get back on their feet. The U.S. Court of Appeals for the First Circuit recently furthered that purpose by providing debtors with the opportunity to walk away from trademark licensing agreements they signed before entering bankruptcy.
When a company seeks protection from its creditors under Chapter 11 of the Bankruptcy Code, the bankruptcy trustee, or the company itself as a debtor-in-possession, typically will ask the bankruptcy court for permission to “reject” burdensome contracts under 11 U.S.C. § 365(a) (“Section 365(a)”). The ability to reject burdensome contracts is a powerful tool for a company seeking to reorganize under Chapter 11. It frees the company from any obligations to perform under the rejected contract and generally leaves the other contracting party with only a claim for damages instead of a claim to enforce the terms of the contract.
For some time, many have questioned whether Section 365(a) protects trademark licensees if a trademark license is rejected. In January, the First Circuit removed all doubt on the issue: In Mission Product Holdings, Inc. v. Tempnology, LLC (In re Tempnology, LLC), the First Circuit held that trademark licenses are “unprotected from court-approved rejection.” That is, the First Circuit has confirmed that licensors undergoing Chapter 11 reorganization can reject trademark licenses under Section 365(a).
Businesses operating in Chapter 11 certainly will welcome the ruling as it allows them to regain control over their trademarks. Trademark licensees, however, likely will view the decision with alarm because of the practical consequences. Indeed, under the First Circuit’s decision, the investment trademark licensees make in the licensed trademarks will be lost if those licenses are ultimately rejected in bankruptcy.
Of course, the First Circuit’s decision in Tempnology may not be the last word. A Supreme Court decision or even congressional action ultimately could change the landscape. But for now, Tempnology stands as one of the clearest decisions yet on the ability of a trademark license to be rejected in bankruptcy.
Section 365(a) provides that a debtor, “subject to the court’s approval,” may “assume or reject any executory contract or unexpired lease of the debtor.”Although not expressly defined in the Bankruptcy Code (11 U.S.C. et. seq.), executory contracts are considered to be contracts “on which performance is due to some extent on both sides.”
Section 365(a) permits a debtor to assume beneficial contracts and to reject contracts that may hinder its financial recovery. It provides an “elixir for use in nursing a business back to good health” by allowing a trustee or debtor-in-possession to “prescribe it as an emetic to purge the bankruptcy estate of obligations that promise to hinder a reorganization.”
More than three decades ago, the U.S. Court of Appeals for the Fourth Circuit was asked to apply this legal framework to an intellectual property license granted by a debtor. In Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., the Fourth Circuit held that the term “executory contract” in Section 365(a) encompassed intellectual property licenses and that under Section 365(g), the rejection of such a license required termination of that license. 
Three years later, in 1988, Congress softened the blow to intellectual property licensees by enacting a new section of the Bankruptcy Code: Section 365(n). That Section provides that a licensee of intellectual property has the right to: (1) treat the license as terminated and assert a claim for pre-petition damages (a remedy the licensee already held under Section 365(g)); or (2) retain its intellectual property rights under the license. In doing so, Congress amended the definition of “intellectual property” to mean:
(A) trade secret;
(B) invention, process, design, or plant protected under title 35;
(C) patent application;
(D) plant variety;
(E) work of authorship protected under title 17; or
(F) mask work protected under chapter 9 of title 17;
to the extent protected by applicable nonbankruptcy law.
“Trademarks” are noticeably absent from that definition. And in Tempnology, the First Circuit faced the issue of whether trademarks should be included in that definition.
The Factual Background
On November 21, 2012, Tempnology, LLC entered into a Co-Marketing and Distribution Agreement with Mission Product Holdings, Inc. That agreement, among other things, granted Mission a non-exclusive license to use Tempnology’s trademarks and logo in its distribution of Temponology’s specialized products such as towels, socks, headbands, and other accessories. That agreement also contained a separate provision granting Mission a non-exclusive license to Tempnology’s intellectual property other than trademarks.
After accruing multi-million dollar net operating losses in 2013 and 2014, on September 1, 2015, Tempnology filed a voluntary petition for relief under Chapter 11. The following day, it moved to reject 17 of its contracts, including its license agreement with Mission. To that end, Tempnology informed the bankruptcy court that it sought to reject its license agreement with Mission because it hindered its ability to derive revenue from other marketing and distribution opportunities. Tempnology alleged that the agreement “suffocated” its ability “to market and distribute its products.”
Mission objected, arguing that Section 365(n) allowed Mission to retain its intellectual property license, including its non-exclusive license to Tempnology’s trademarks. The bankruptcy court disagreed with Mission, concluding that Congress’ decision to omit “trademark” in the definition of “intellectual property” allowed debtors to reject trademark license agreements.
Upon Mission’s appeal, the Bankruptcy Appellate Panel for the First Circuit (“BAP”) agreed with the bankruptcy court that Tempnology could reject the agreement as a whole, but disagreed as to the effect of the rejection, particularly as it related to the trademark license. Relying on the Seventh Circuit’s decision in Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC, the BAP held that the rejection of a trademark license did not necessarily eliminate a licensee’s right to use the licensed trademarks. The BAP reasoned that a contract rejected in bankruptcy is tantamount to a breach of contract and a licensor’s breach of a trademark license would not prohibit a licensee from using a trademark. Thus, the BAP reversed the bankruptcy court’s conclusion that Mission no longer had protectable rights in Tempnology’s trademarks.
The First Circuit’s Tempnology Decision
On appeal, the First Circuit held that that Mission’s right to use Tempnology’s trademarks did not survive Tempnology’s rejection of the license agreement. In its decision, the First Circuit pointed out that, in defining the “intellectual property” eligible for the protection of Section 365(n), Congress expressly listed six kinds of intellectual property but omitted trademarks—“hardly something one would forget about.”
The First Circuit also rejected the Seventh Circuit’s reasoning in Sunbeam, observing that Sunbeam rested on the “unstated premise” that it was possible “to free a debtor from any continuing performance obligations under a trademark license even while preserving the licensee’s right to use the trademark.” The First Circuit explained that “the effective licensing of a trademark” required that the trademark owner be able to “monitor and exercise control over the quality of the goods sold to the public under cover of the trademark.” 
In the First Circuit’s opinion, the Seventh Circuit’s approach would allow Mission to retain the use of Tempnology’s trademarks in a manner that would force Tempnology to choose between performing executory obligations arising from the continuance of the license and risking the permanent loss of its trademarks. That kind of restriction on Tempnology’s ability to free itself from its executory obligations, even if limited to trademark licenses alone, would depart from the manner in which Section 365(a) otherwise applies and would defeat the benefits of rejection, to wit, releasing a Chapter 11 debtor from burdensome agreements.
Accordingly, the First Circuit declared that it favored the “categorical approach of leaving trademark licenses unprotected from court-approved rejection unless and until Congress should decide otherwise,” thereby endorsing a bright-line rule omitting trademarks from the protections of Section 365(n).
* Stuart I. Gordon represents financial institutions, insurance companies, real estate owners and developers, retailers, manufacturers, distributors, restaurants, physicians and medical practices, non-profits, unions, and health and welfare funds in insolvency cases throughout the United States. Michael C. Cannata and Frank M. Misiti litigate complex, intellectual property, insurance coverage, and other commercial disputes in federal and state courts throughout the country. The authors, all partners at Rivkin Radler LLP, can be reached at firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org, respectively.
 11 U.S.C. § 365(a).
 Mission Product Holdings, Inc. v. Tempnology, LLC (In re Tempnology, LLC, 879 F.3d 389 (1st Cir. 2018).
 NLRB v. Bildisco & Bildisco, 465 U.S. 513, 522 n.6 (1984).
 See, e.g.Mason v. Official Comm. of Unsecured Creditors, for FBI Distrib. Corp. & FBC Distrib. Corp. (In re FBI Distrib. Corp.), 330 F.3d 36, 41 (1st Cir. 2003).
 Thinking Machs. Corp. v. Mellon Fin. Servs. Corp. (In re Thinking Machs. Corp.), 67 F.3d 1021, 1024 (1st Cir. 1995).
 Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043, 1045 (4th Cir. 1985).
 Id. at 1048.
 11 U.S.C. § 365(n).
 11 U.S.C. § 101(35A)
 Tempnology, 879 F.3d at 392-393.
 Id. at 394.
 Id. at 395.
 Id. at 395; see also Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC, 686 F.3d 372 (7th Cir. 2012).
 Tempnology, 879 F.3d at 395.
 Id. at 401.
 Id. at 402.
 Id. at 403.
Dealer's Choice: First Circuit Allows Licensor to Reject Trademark License in Bankruptcy
By: stuart gordon, michael cannata, frank misiti
Comments on the Spanish Trademark Draft Bill Implementing The European Union Trademark Directive 2015/2436
By: Eleonora Carrillo
The European Trademark (EUTM) Reform, which is intended to harmonize European Union Member States’ trademark laws, requires European Union Member States to implement portions of the 2015 directive, (EU) 2015/2436 (the “Directive”), and sets respective deadlines of January 14, 2019 and January 14, 2023 for such implementation.
Spain recently moved forward in the process of revising its current Trademark Act, No. 17/2001, (“Trademark Act”) to be in line with the Directive. The Spanish Ministry of Industry, Energy and Tourism and the Spanish Patent and Trademark Office (SPTO) issued a Draft Bill (“Anteproyecto de Ley de Modificación Parcial de la Ley 17/2001 de 7 de Diciembre de Marcas”), which partially amends the Trademark Act to implement the Directive in Spain.
Various changes are imposed by the European harmonization process, from both a substantive and procedural point of view. Below are some of the most relevant amendments included in the Draft Bill:
Article 8 of the Trademark Act regulating Reputed Trade Marks (and Trade Names), is subject to a noteworthy revision.
The traditional distinction existing in Spain between “notorious trademarks” (“marcas notorias”), which are well-known marks in connection with the goods/services covered by the registration, and “famous trademarks” (“marcas renombradas”), which are marks well-known to the public in general, regardless of the pertinent sector of the covered goods/services, is addressed
Pursuant to the Draft Bill, the two different types of marks, defined by the current Trademark Act as notoriety (“notoriedad”) and fame (“renombre”), according to a lower or higher level of repute enjoyed by the trademark, are combined in one single concept of “reputed trademarks.”
From an enforcement perspective, the new treatment of such marks will void the varying legal presumptions attributed to these two types of trademarks in contentious proceedings. Currently, the protection of notorious trademarks is available only for the relevant market sector relating to the goods/services covered by the registration and related goods/services, and the protection of famous trademarks is considered extended to all market sectors, regardless of the relatedness to the goods/services of the registration.
This amendment may impact Spanish contentious practice significantly if the criteria applied to the assessment of reputation is too stringent, and only trademarks enjoying “fame” under the current standard will qualify under revised SPTO requirements. Accordingly, “notorious” trademarks will be excluded.
Further, the new language of the Draft Bill no longer contains – as the current Trademark Act currently does – any reference to the pertinent market sector in the definition of “reputation,” but merely refers to a generalized kind of trademark having a reputation in Spain (if it is a Spanish registration) or in the European Union (if it is a EUTM). This may be detrimental to trademark owners if, as a matter of fact, the enhanced protection of reputed trademarks is restricted only to cases wherein the highest level of “fame” is acknowledged. Enforcing such protection for “notorious” trademarks may be more difficult or even no longer possible.
Additionally, the new definition provided by the Draft Bill refers not only to reputation of a trademark in Spain – as per the current language of Article 8 of the Trademark Act – but also in the European Union. Currently, proof of notoriety or fame is only required in Spain; however, the revised text may create legal uncertainty with respect to the territorial extension of the evidence to be filed in the event of enforcement of a EUTM in Spanish contentious proceedings. Particularly, in relation to the European Union, new criteria should be established to determine if evidence is necessary for the entire European Union or only select Member States. While the European Union Intellectual Property Office (“EUIPO”) case law could be of guidance, it should be noted that the SPTO generally operates according to its own practice and local rules, which may differ from the EUIPO practice. Notably, SPTO practice guidelines are not included in the Draft Bill.
It is important to note that the current distinction between notoriety and fame is sometimes debatable, particularly when the differences associated to these definitions are not clearly applied by the SPTO or Spanish courts. In this regard, the consolidation is welcome as, in addition to being in line with the Directive and new EUTM Regulation, it should be helpful to avoid ambiguity when enforced. Specifically, it may limit trademark owners in Spain from claiming notoriety or fame improperly, which is common practice in Spain.
Article 21 of the Trademark Act, concerning provisional refusals of trademark applications based on oppositions, is integrated by new paragraphs 3, 4, 5 and 6 of the Draft Bill and finally introduces the right of applicants to require proof of use in connection with opposing trademarks registered for five years or more.
This is noteworthy in Spain due to the fact that opponents have never before had their registrations subject to use requirements during opposition proceedings. It will dramatically decrease the chances for registrants to prevail in oppositions based on trademarks registered for five years or more, which have previously been indiscriminately used to prevent others from registering new applications, irrespective of whether the earlier trademarks were used or not.
The new requirement, similar to use requirements in other countries, is introduced in an effort to facilitate trademark registration by means of eliminating artificial obstacles constituted by registered trademarks no longer or never used by registrants. It could also lead to abandonment of non-used registrations due for renewal which, if expired, would also further the removal of registrations without use from the trademark register.
As a consequence, we should expect opposition proceedings in Spain to become more complex and drawn out as an additional examination process relating evidence of use will need to be implemented.
The implementation of this change may be a step toward the process of reducing value of trademark registrations not supported by use in Spain. In instances where owners have not established use, a registration by itself will be of less value, both for enforcement and as an asset to the company. The current Spanish trademark system is based on a registration, regardless of use being the fundamental basis for protection.
Article 37 is the Trademark Act provision that lists the exceptional limitations imposed by the law, namely, those specific instances in which trademark owners will not be able to enforce their registered rights against use by third parties.
Such exceptional limitations which trademark registrations are subject to refer to: use of another individual’s name or address (Art. 37 paragraph 1-a); use of generic or descriptive terms (Art. 37 paragraph 1-b); and use of the trademark registration when necessary to describe the purposes of a third party’s goods or services, particularly if these are accessories or spare parts thereof (Art. 37 paragraph 1-c).
The Draft Bill introduces a final paragraph into this provision establishing one further limitation to rights holders that consolidates a very important case law development, specifically, judgment 520/2014 of October 14, 2014 of the Spanish Supreme Court.
This decision changed the conventional doctrine on trademark rights conferred to the owner or registrant of a Spanish trademark, redefining the relationship between the right of using (ius utendi) and the right of preventing others from using the trademark (ius prohibendi) attributed to trademark registrations in Spain. Historically, Spanish case law dictated that a trademark registration conferred a right to use the trademark, which is not affected by the right of a prior registrant.
Pursuant to the new principles now clarified by this judgment, in the event of two conflicting Spanish trademark registrations, the proprietor of the later trademark will no longer be protected by the “shell” of its registration against the right of the owner of a prior registration to prohibit such use. This is a departure from past case law, as the owner of the prior registration can now claim trademark infringement against the use by the proprietor of a later trademark registration, without the need to first file an action to cancel the trademark based upon prior rights.
The new limitation contained in Art. 37 paragraph 3 is in line with the above provision and is aimed at preventing a claim of trademark infringement by a registrant that obtained a registration after the true owner of the mark. Specifically, the new paragraph provides that a trademark registration cannot be invoked by the registrant in the event that the alleged infringement predates the registrant’s filing date. Therefore, it is now acknowledged by the Spanish trademark law – and supported by recent case law – that trademark proprietors do not need to pursue a nullity action prior to a claim for infringement when their rights predate that of the later registrant.
In the Spanish practice, this change is welcome and particularly helpful for taking action against “squatters” and unauthorized entities that have secured trademark registrations as a tool for protecting their infringing activities. Given the significant costs of contentious proceedings, removing the need for first nullifying a trademark registration in order to file a trademark infringement action will simplify this process in terms of time and costs.
Last, but not least, amendments in the Draft Bill to Articles 51 to 61 regulating Trademark Nullity and Revocation Actions will also have a big impact in the Spanish practice, since said actions, aimed at cancelling a trademark registration, will now be filed with the SPTO rather than with the courts.
The possibility of bringing a cancellation action with the SPTO will provide trademark owners a more expeditious and cost-effective procedure than current judicial proceedings in Spain, which are presently quite complex, long and costly. The current complexities and cost in the case of judicial proceedings are often a deterrent for proprietors with good cause to file cancelation actions against third-party trademark registrations due to non-use. The current situations lends to unfair situations wherein only large entities are generally able to invest the necessary time and economic efforts into court proceedings.
The new administrative nullity and revocation proceedings with the SPTO will be more simple and agile than the present court proceedings. Additionally, the Spanish courts will continue to have jurisdiction to hear trademark nullity and revocation claims when these actions are submitted via cross-claims to an infringement action. Such partial jurisdiction still assigned to judges will certainly help to avoid potential interference between the courts and SPTO proceedings (such as lis pendens, res judicata effects, etc.).
It should be noted that this amendment will not enter into force until January 14, 2023, so there is still room for discussion of the impact and possible advantages/disadvantages relating to this future amendment.
Eleonora Carrillo is the Managing Partner of Jacobacci & Partners in Madrid, Spain. Eleonora has extensive experience in all trademark and design matters, including availability searches and pre-filing assessment, application filing and prosecution of Spanish, European Union and international trademarks/designs, as well as domain name dispute resolutions. She has valuable experience in handling oppositions before the Spanish Patent and Trademark Office (SPTO), oppositions and cancellation actions before the European Union Intellectual Property Office (EUIPO), and negotiations for successful out-of-court settlements. Eleonora also coordinates the enforcement of her client’s IP rights in foreign countries, cooperating closely with local attorneys, and has acquired a broad knowledge of legal and practical issues relating to trademark prosecution and enforcement abroad. Eleonora can be contacted at email@example.com.
 Directive 2015/2436, of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks (L 336/1).
 See Law No. 17/2001 of December 7, 2001 on Trademarks (Consolidated text including the Amendments made by Law No. 20/2003 of July 7, 2003), on Legal Protection of Industrial Designs), available at http://www.wipo.int/wipolex/en/text.jsp?file_id=126736 (English translation).
 Anteproyecto de Ley de Modificación Parcial de la Ley 17/2001 de 7 de Diciembre de Marcas, available at https://www.oepm.es/export/sites/oepm/comun/documentos_
Marcas.pdf (“Draft Bill”).
 T.S., Oct. 14, 2014 (No. 520/2014) (Spain), available at https://supremo.vlex.es/vid/551912710
In March 2013, Maria Pallante, former Register of Copyrights, proposed “The Next Great Copyright Act,” imploring Congress to conduct a comprehensive review of U.S. copyright law for the first time since the 1976 Act. Following Ms. Pallante’s testimony, the U.S. House Judiciary Committee announced it would undertake an extensive review to determine whether the Copyright Act of 1976 still adequately meets the challenges posed by the digital age. Five years later, after twenty hearings with testimony from hundreds of witnesses, legislation has emerged from the Committee’s extensive review that finally has real momentum in Congress. Although modest compared to the reforms envisioned in 2013, the Music Modernization Act (“MMA”) stands to have a significant impact on one area of copyright law: music licensing.
Over the years, changes in technology have wrought fundamental shifts in the economics of music distribution and consumption; the law has endeavored to keep pace. Following the Supreme Court’s 1908 decision in White-Smith Music Publishing Company v. Apollo Company, which held that piano rolls were not “copies” of the musical works, Congress included the right to make and distribute mechanical reproductions in the Copyright Act of 1909. In 1971, Congress struck back against unauthorized duplication of physical records and tapes by granting an exclusive right to reproduce and distribute sound recordings. More recently, in 1995, Congress enacted the Digital Performance Right in Sound Recordings Act (“DPRA”), which created the exclusive right to perform a sound recording publicly by means of digital audio transmission in order to compensate the owners and artists for digital radio and streaming services.
The way music is distributed and consumed has once again shifted, exposing gaps in the existing music licensing framework. As the Copyright Office concluded in its 2015 report, COPYRIGHT AND THE MUSIC MARKETPLACE, the current system is often unfair to creators, inefficient, and lacking in transparency. To address these issues, the Office offered a number of recommendations that were intended to “overhaul” the music licensing system. Since then, many of these recommendations were adopted and adapted into bills by members of the House Judiciary Committee.
Harmonizing the medley of bills, the current omnibus MMA was introduced by Chairman Bob Goodlatte and Ranking Member Jerrold Nadler on April 10, 2018. The MMA consists of three titles (outlined below), and combines provisions from four previously introduced music bills, namely, the Music Modernization Act of 2017; the Fair Play, Fair Pay Act; the CLASSICS Act; and the Allocation for Music Producers (“AMP”) Act.
Title I: Musical Works Modernization Act
In July 2011, Spotify launched its service in the United States. By April 2018, the company had listed its stock on the New York Stock Exchange. Over those seven years, the U.S. marketplace for interactive streaming services has grown to include Google Play, Apple Music, Tidal, and Amazon Prime Music—all competing for the ears and subscriptions of listeners. As physical sales of music have declined steeply, Title I of the MMA responds to the emergence of streaming as a dominant source of music distribution in the current marketplace. Title I, the Musical Works Modernization Act, is comprised of an updated version of the Music Modernization Act of 2017, previously introduced by Representatives Doug Collins and Hakeem Jeffries, as well as selected provisions of the Fair Play, Fair Pay Act, which was previously introduced by Ranking Member Jerrold Nadler and Representative Marsha Blackburn.
Title I amends Section 115 of the Copyright Act to reform the compulsory licensing system for mechanical royalties that are paid for private use of musical compositions. Title I creates a blanket license for digital distribution of nondramatic musical works for private use, including “interactive streams.” In exchange for obtaining a blanket license, licensees would not be liable for reproducing or distributing musical works nor subject to liability for claims commenced after January 1, 2018.
To reform the rate-setting procedure for both musical compositions and sound recordings, Title I amends Sections 114 and 115 of the Copyright Act. The reforms require Copyright Royalty Judges (“CRJs”) to set rates by applying a “willing buyer / willing seller” market-based standard, and eliminate discounts for “pre-existing services.” Section 114(i), which prohibited CRJs from considering the rates paid for sound recordings when setting compulsory license rates for underlying musical works, is repealed by the bill. On a related note, the bill modifies the rate-setting procedure for licenses to publicly perform musical works that are offered by performing rights organizations (“PROs”). Currently, two PROs, the American Society of Composers, Authors & Publishers (ASCAP) and Broadcast Music Inc. (BMI), are bound by consent decrees with the Department of Justice, which are intended to curb antitrust abuses by the PROs dating back to the 1940s. One federal rate court judge is assigned to review and set rates under ASCAP’s consent decree; another judge does the same for BMI. This bill modifies this oversight arrangement by randomizing the selection of the presiding judge and restricting the two current assigned rate court judges from further hearings on these matters.
Further, Title I establishes a Mechanical Licensing Collective (“MLC”) to administer the blanket licenses, collect and distribute royalties, develop a database of musical works, and provide documentation in rate-setting proceedings before the CRJs. The MLC’s board of directors will be comprised of representatives of eight music publishers and two individual songwriters with voting privileges, as well as three non-voting representatives of trade associations and digital licensees. To fund the operations of the MLC, blanket licensees would pay an administrative assessment determined by CRJs. The House Report on the legislation stresses the importance of transparency in establishing and operating the MLC in order to “avoid unnecessary litigation as well as to gain the trust of the entire music community.”
To represent licensee interests, a Digital Licensee Coordinator (“DLC”) may be designated by the Register of Copyrights with the endorsement and support of licensees. The DLC would participate in proceedings before the CRJs to set the administrative assessment and be tasked with enforcing this assessment for the MLC. A DLC representative also would serve as one of the three non-voting board members of the MLC.
As noted earlier, one of the most ambitious, and desperately-needed, components of Title I would be the creation of a new musical works database. Indeed, much of the criticism of the current system involves the absence of reliable identifying data on musical works, which has led to challenges in paying royalties and litigation arising from failures to do so. Still, some concern persists about the MLC succeeding where other efforts to establish a database have failed. Other commentators are wary of the proposal for how unmatched compositions will be redistributed. Nonetheless, a single database that matches sound recordings to underlying musical works, while improving the quality of identifying data, is critical to achieving the goals of the legislation. Beyond that, a freely-accessible database of registered musical works stands to be a tremendous resource to the U.S. Copyright Office and the public.
In sum, Title I addresses a gap in copyright law as to whether interactive streaming requires a payment of a mechanical royalty for use of musical works by creating a blanket license for digital copying of musical works. The current system has been criticized for undercompensating rights holders while not shielding digital service providers from liability. The MLC would arguably create a more efficient entity to administer the collection and distribution of fair mechanical royalties. Further, the availability of a blanket license would allow current and prospective digital service providers freedom from managing royalty payments to instead focus on improving and innovating digital delivery of music. Finally, additional reforms to the rate-setting processes for sound recordings and public performance rights should improve the broader music licensing marketplace.
Title II: Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act
When sound recordings were first granted federal copyright protection in 1971, no public performance rights were granted, and recordings before February 14, 1972 were excluded from protection. While Congress eventually granted public performance rights in digital transmissions for post-1972 sound recordings by enacting the Digital Performance Right in Sound Recordings Act of 1995, it declined to establish public performance royalties for terrestrial radio transmissions of sound recordings or address the absence of federal protection for pre-1972 sound recordings. Even prior to the current House Judiciary Committee copyright review in 2009, Congress recognized the public performance purgatory for pre-1972 sound recordings by directing the Copyright Office to study the issue. In 2011, the Copyright Office concluded its report on the study by recommending pre-1972 sound recordings be federalized. In this atmosphere of legal uncertainty, and with royalties from physical sales of sound recordings in continued decline, owners of pre-1972 sound recordings sought relief under state law, subjecting digital distribution services to the specter of multijurisdictional litigation. Title II of the MMA corrects some of these historical compromises and oversights by creating royalties for pre-1972 sound recordings using the same rates and distribution system for post-1972 works.
Title II serves as an updated version of the CLASSICS Act, which was introduced by Representative Darrell Issa and Ranking Member Nadler. The CLASSICS Act extends the statutory royalty scheme established under Section 114(f) for digital audio transmissions to include pre-1972 sound recordings. The bill would create a new Chapter of Title 17: “CHAPTER 14—UNAUTHORIZED DIGITAL PERFORMANCE OF PRE-1972 SOUND RECORDINGS.” Copyright owners of pre-1972 sound recordings could pursue injunctions and damages under Sections 502 and 504 for “unauthorized” digital public performances. Non-exempt digital transmissions would be required to either pay statutory royalties or license the sound recordings directly from the owners. Limitations on remedies and defenses include fair use, library and archival reproduction, and safe harbor provisions from other sections of Title 17.
The CLASSICS Act benefits older artists in particular who may be no longer able to generate income from touring due to its physical demands. Of benefit to licensees, the CLASSICS Act expressly pre-empts state laws, affording certainty to licensees that are currently are potentially liable for infringements of state law public performance rights.
Terrestrial radio transmissions remain exempt from paying royalties under the CLASSICS Act. Although expanding public performance royalties for sound recordings to terrestrial radio was considered by the Committee, this issue was a non-starter for the National Association of Broadcasters, as it would have had considerable impact on its membership. Arguably, the added expense of paying royalties for sound recordings could result in a reduction in the amount of radio music programming, an increase in the amount of over-the-air advertising necessary to sustain stations, and possibly threaten the continued viability of terrestrial radio altogether, at least as a medium for music.
Although the MMA as a whole has enjoyed broad support, one specific criticism has been levied against the CLASSICS concerning the “term” of the right. After the bill was introduced in the Senate, forty-two IP professors signed onto a letter to the Senate Judiciary Committee in which they expressed concern that granting public performance rights to pre-1972 sound recordings would effectively operate as a “term extension” by protecting these older works through 2067, long past when the original terms of many of these works would have ended.  For example, in the case of a 1923 sound recording, the “term” ending in 2067 would protect the work 144 years after first publication. Critics view this as a disservice to the purpose of copyright law because it would provide rewards for creating works that are untethered from the original incentive to create, and also remove works from the public domain. However, Terry Hart of the Copyright Alliance considers this interpretation misguided because the MMA does not in fact “extend” the copyright term. Rather, supposing that sound recordings are protected under state law—an open question in a number of states—the CLASSICS Act merely shifts protection from the state to the federal level. On the other hand, assuming sound recordings are not protected under state law, the Act at most provides a prospective term of 48 years, from 2019 to 2067, for works that previously received no protection whatsoever.
Title III: Allocation for Music Producers (AMP) Act
Producers, mixers, and sound engineers—creative collaborators essential to the creation of sound recordings—were not provided for in the enactment of the DPRA in 1995. In the absence of a statutory obligation, SoundExchange, the collective that collects and distributes public performance royalties for digital transmissions, enacted a policy in 2004 to honor “letters of direction” from copyright owners to distribute a portion of royalties collected to pay these creators. Title III would rectify this long-standing inequity by providing for distribution of sound recording royalties to important creatives involved in their production. Title III is an updated version of the AMP Act, which was introduced by Representatives Joseph Crowley and Tom Rooney.
Title III amends Section 114 of the Copyright Act to formalize in statute SoundExchange’s current “letters of direction” framework with respect to works fixed on or after November 1, 1995—the date the DPRA was enacted. For works fixed prior to this date, the AMP Act establishes a more detailed framework whereby two percent of total royalties may be set aside for producers, mixers, or sound engineers, while requiring featured artists be notified and provided an opportunity to object to any proposed distributions. Where a letter of direction is honored, the two percent reallocated to producers, mixers, or sound engineers reduces the featured artist’s royalty share from forty-five to forty-three percent. In a hopeful note, the House Judiciary Committee recognized SoundExchange as a model organization in terms of its transparency and efficiency—qualities the MLC established under Title I should aspire to replicate.
Current Status of the Legislation: What Does the Future Hold?
While the House Judiciary Committee held no hearings on the current version of the MMA, it previously held a field hearing at Fordham University School of Law on January 26, 2018. This hearing focused on the issues in the final bill and provided a forum from which emerged support for combining some of the proposed music bills into omnibus legislation. In addition, the Committee held two earlier hearings on music copyright in June 2014. On April 11, 2018, the bill was voted out of committee by a vote of 32-0. On April 25, the bill was unanimously passed by the House by a vote of 415-0. The bill was received in the Senate on April 26. The Senate Judiciary Committee held a hearing on its version of the CLASSICS Act (S. 2393) on May 15.
It is a rare and propitious moment for any piece of legislation to enjoy overwhelming support in Congress, and the Music Modernization Act is exceptional in that regard. After the original version of the bill was introduced in 2017, more than twenty prominent music organizations along with Digital Media Association (“DiMA”), which represents digital service providers, announced their support for the legislation. Despite the current momentum behind the bill, politics can be contentious and fickle, and could yet impede the bill from passage. Although Chairman Goodlatte has made copyright reform a priority, his term as Chairman ends in December 2018, and he has announced he will not seek reelection to Congress. Should Congress fail to pass copyright legislation during this session, legislative priorities may change with the incoming chairperson. Consequently, it could be another decade or more before copyright reform is revisited.
Even if enacted, key questions and concerns regarding the proposed legislation remain, including: a) who will ultimately bear the cost of the proposed reforms—digital service providers or consumers; b) whether the proposed reforms will truly provide effective solutions or will the MLC meet the same fate of past efforts to construct a foundation in a quagmire; and c) whether the proposed amendments are flexible enough to anticipate future technological developments or risk becoming outdated or obsolete. Nonetheless, the Music Modernization Act presents a once-in-a-generation opportunity to reform the music licensing landscape, one which could achieve more efficient market for musical works, while providing all of their creators—the songwriters, performers, producers, mixers, and sound engineers—more fair and equitable remuneration for their music.
Nicholas Bartlet is the Distinguished Senior Fellow at the Fordham IP Institute where his work focuses on researching IP law and policy, with an emphasis on copyright. In this role, he is primarily responsible for substantive legal projects including research and editorial work on amicus briefs, academic publications, and developing the IP Institute’s programming in other media. His most recent article “Ninth Circuit’s ‘minor logical extension’ of Rogers Test permits an ‘Empire’ of expressive uses” was published in the Journal of Intellectual Property Law & Practice and GRUR Int.
In addition to his work at the Fordham IP Institute, Nick counsels individual creatives and small businesses in transactional and disputed copyright and trademark matters. He serves as counsel in music copyright matters to the firm of Alter, Kendrick & Baron LLP. Nick is a JD graduate of Fordham Law; and he holds a BA from Roosevelt University where he was a Presidential Scholar.
Thanks to Lauren Beth Emerson, Leason Ellis LLP, for her collaboration in preparing a White Paper for the NYIPLA Copyright Law & Practice and Legislative Action Committees that formed the basis for this article.
 See The Register’s Call for Updates to U.S. Copyright Law: Hearing Before the Subcomm. on Courts, Intellectual Prop. & the Internet of the H. Comm. on the Judiciary, 113th Cong. (2013) (statement of Maria A. Pallante, Register of Copyrights), https://judiciary.house.gov/wp-content/uploads/
2016/02/Pallante-Testimony.pdf; Maria A. Pallante, The Next Great Copyright Act, Twenty-Sixth Horace A. Manges Lecture (Mar. 4, 2013), https://judiciary.house.gov/wp-content/uploads/
 See Press Release, H. Comm. on the Judiciary, Chairman Goodlatte Announces Comprehensive Review of Copyright Law (Apr. 24, 2013), https://judiciary.house.gov/press-release/
 Music Modernization Act, H.R. 5447, 115th Cong. (2018) [hereinafter “MMA”].
 209 U.S. 1 (1908).
 Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391 (1971) (amended by Pub. L. No. 93-573, 88 Stat. 1873 (1974)).
 Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1996). For an additional example of Congressional efforts to respond to technological changes, see the Audio Home Recording Act of 1992, Pub. L. No. 102-563, 106 Stat. 4237 (amending Title 17 of the United States Code by adding a new chapter 10), enacted October 28, 1992 (addressing concerns arising from digital recording devices by establishing restrictions and imposing royalties on the sale of devices and media).
 U.S. COPYRIGHT OFFICE, COPYRIGHT AND THE MUSIC MARKETPLACE (Feb. 2015), https://www.copyright.gov/policy/musiclicensing
study/copyright-and-the-music-marketplace.pdf. The Copyright Office’s study revealed broad consensus among study participants on four key principles: “Music creators should be fairly compensated for their contributions. The licensing process should be more efficient. Market participants should have access to authoritative data to identify and license sound recordings and musical works. Usage and payment information should be transparent and accessible to rightsowners.” Id. at 1. The Copyright Office offered the additional guidelines for music licensing reform: “Government licensing processes should aspire to treat like uses of music alike. Government supervision should enable voluntary transactions while still supporting collective solutions. Ratesetting and enforcement of antitrust laws should be separately managed and addressed. A single, market-oriented ratesetting standard should apply to all music uses under statutory licenses.” Id. at 2.
 Id. at 2-11.
 See, e.g., Music Modernization Act of 2017, H.R. 4706, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
house-bill/4706; Transparency in Music Licensing and Ownership Act, H.R. 3350, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
house-bill/3350; Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act, H.R. 3301, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
house-bill/3301; Performance Royalty Owners of Music Opportunity To Earn Act of 2017 (PROMOTE) Act of 2017, H.R. 1914, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
house-bill/1914; Fair Play Fair Pay Act of 2017, H.R. 1836, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
house-bill/1836; Allocation for Music Producers (AMP) Act, H.R. 881, 115th Cong. (2017), https://www.congress.gov/bill/115th-congress/
 MMA §§ 101–104.
 See Mark Millan, Spotify music-streaming service launches in the U.S., CNN (July 15, 2011), http://edition.cnn.com/2011/TECH/web/07/13/
 See Daniel Ek, Spotify Lists on NYSE as SPOT, SPOTIFY (Apr. 2, 2018), https://newsroom.spotify.com/2018-04-02
 See IFPI Global Report 2018 (Apr. 24, 2018), available at http://www.ifpi.org/news/IFPI-GLOBAL-MUSIC-
REPORT-2018 (observing the continuing decline of physical sales and “[s]treaming remains the main driver of recovering revenues and, for the first time, has become the single largest revenue source . . . .”).
 H.R. 4706, https://www.congress.gov/bill/115th-congress/
house-bill/4706. The overall legislation now carries the name of the original bill; Title I is now referred to as the “Musical Works Modernization Act.”
 H.R. 1836, https://www.congress.gov/bill/115th-congress/
 MMA § 102.
 Id. § 102.
 Id. § 102.
 Id. §§ 102, 103.
 H.R. Rep. No. 115-651, at 13-14 (2018), https://www.congress.gov/115/crpt/hrpt651/
CRPT-115hrpt651.pdf. For a brief discussion of the Digital Millennium Copyright Act and pre-existing services, see BRIAN T. YEH, CONG. RESEARCH SERV., COPYRIGHT LICENSING IN MUSIC DISTRIBUTION, REPRODUCTION, AND PUBLIC PREFORMANCE 13 (2015), available at https://fas.org/sgp/crs/misc/RL33631.pdf.
 MMA § 103.
 See United States v. ASCAP, Civ. Action No. 41-1395, 2001 U.S. Dist. LEXIS 23707 (S.D.N.Y. June 11, 2001); United States v. Broadcast Music, Inc., 64 Civ. 3787, 1994 U.S. Dist. LEXIS 21476 (S.D.N.Y. Nov. 18, 1994).
 MMA § 104.
 Id. § 102.
 Id. § 102(d)(3)(D)(i).
 Id. § 102(d)(3)(c)(i).
 H.R. Rep. 115-651, at 5.
 MMA § 102(d)(5).
 Id. § 102(d)(5)(c).
 Id. § 102(d)(3)(D)(i)(IV).
 See H.R. Rep. No. 115-651, at 7-9. As the House Report states, “the Committee believes that [the failure to create a database of musical works] must end so that all artists are paid for their creations and that so-called ‘black box’ revenue is not a drain on the success of the entire industry.” Id. at 6.
 See Bill Rosenblatt, Improving the Music Modernization Act, COPYRIGHT & TECH. (Feb. 7, 2018 5:02 PM), https://copyrightandtechnology.com/2018/02/07/
improving-the-music-modernization-act/ (noting issues with the “accuracy of recording-composition matching and rights holder identification” may persist if the MLC is not sufficiently accountable); see also Section 115 Reform Act of 2006, H.R. 5553, 109th Cong. (2006).
 See Henry Gradstein, How the Music Modernization Act Takes Royalties from DIY Songwriters and Gives Them to the Major Publishers, BILLBOARD (Mar. 2, 2018), https://www.billboard.com/articles/business/
songwriters-henry-gradstein; Wallace E.J. Collins, III, The Music Modernization Act (H.R. 4706) Sets the Stage for a Songwriter Publisher Tug Of War, ENT. INDUSTRY L. ISSUES (Feb. 1, 2018 10:25 AM), https://wallacecollinsentertainmentlawblog.
 Indeed, part of the impetus for reforming the current system comes from the fact that the Copyright Office is currently tasked with managing the voluminous Notices of Intention filed by licensees seeking a compulsory licensor, but who were unable to locate a matching registration. See Rep. Doug Collins, The Music Modernization Act will Provide a Needed Update to Copyright Laws, THE HILL (Jan. 10, 2018 6:30 PM), http://thehill.com/blogs/congress-blog/technology/
 H.R. Rep. No. 115-651, at 8-9.
 Spotify was sued by owners of musical works or music publishers three times in 2017 alone for underpaying royalties, often due to unsatisfactory administration by third parties. See Eriq Gardner, Spotify Hit With Two Lawsuits Claiming "Staggering" Copyright Infringement, HOLLYWOOD REP. (July 18, 2017 2:20 PM PT), https://www.hollywoodreporter.com/thr-esq/
copyright-infringement-1021771; Eriq Gardner, Spotify Hit With $1.6B Copyright Lawsuit Over Tom Petty, Weezer, Neil Young Songs, HOLLYWOOD REP. (Jan. 2, 2018 10:57 AM PT), https://www.hollywoodreporter.com/thr-esq/
 MMA §§ 201-03.
 Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391 (1971) (amended by Pub. L. No. 93-573, 88 Stat. 1873 (1974)).
 Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995).
 See U.S. COPYRIGHT OFFICE, FEDERAL COPYRIGHT PROTECTION FOR PRE-1972 SOUND RECORDINGS 113–15 (Dec. 2011).
 See 155 CONG. REC. H2397 (daily ed. Feb. 23, 2009) (statement of Rep. Obey, Chairman, H. Comm. on Appropriations, regarding H.R. 1105, Omnibus Appropriations Act of 2009).
 See U.S. COPYRIGHT OFFICE, FEDERAL COPYRIGHT PROTECTION FOR PRE-1972 SOUND RECORDINGS 175-78.
 For additional background on the legal plight of pre-1972 sound recordings, see Nick Bartelt, What About Us? Pre-1972 Sound Recordings, Music Licensing, and Recording Artists’ Public Performance Rights in the Wake of Flo & Eddie v. Sirius XM, N.Y. INTELL. PROP. L. ASS'N REP., Aug.-Sept. 2015, available at https://stage.nyipla.org/images/nyipla/Documents/
 H.R. 3301, 115TH Cong. (2017).
 MMA § 202.
 See H.R. Rep. No. 115-651, at 15.
 See MMA § 202; H.R. Rep. No. 115-651, at 15-16.
 MMA § 202.
 See H.R. 1836 115th Cong. (2017); Fair Play, Fair Pay Act of 2015, H.R. 1733, 114th Cong. (2015), Free Market Royalty Act, H.R. 3219, 113th Cong. (2013).
 See Press Release, Nat’l Ass’n of Broadcasters, NAB Statement on Introduction of Performance Royalty Legislation (Mar. 30, 2017), http://www.nab.org/documents/newsroom/
 See infra, note 71.
 See Letter of 42 IP Scholars to the Senate Judiciary Committee (May 14, 2018), available at https://www.publicknowledge.org/documents/
 See Lawrence Lessig, Poking the IP Bear, MEDIUM (May 20, 2018), https://medium.com/@lessig/poking-the-ip-bear-
efd48c08a7e8; Lawrence Lessig, Congress’ Latest Move to Extend Copyright Protection Is Misguided, WIRED (May 18, 2018 8:00 AM), https://www.wired.com/story/congress-latest-
 Terry Hart, No, the CLASSICS Act Is Not a “Term Extension,” COPYHYPE (May 7, 2018), http://www.copyhype.com/2018/05/no-the-
 MMA §§ 301-03.
 See H.R. Rep. No. 115-651, at 16–17.
 H.R. 881 115th Cong. (2017).
 See MMA § 302; H.R Rep. No. 115-651, at 16–17.
 MMA § 302.
 See H.R. Rep. No. 115-651, at 17–18.
 See H.R. Rep. No. 115-651, at 16.
 Music Policy Issues: A Perspective from Those Who Make It: Hearing Before the H. Comm. On the Judiciary, 115th Cong. (Jan. 26, 2018), available at https://judiciary.house.gov/hearing/music-policy
 See H.R. Rep. No. 115-651, at 18. Testimony was received from Mr. Aloe Blacc, Musician, Singer, Songwriter; Mr. Mike Clink, Record Producer; Mr. Booker Jones, Songwriter, Record Producer, Artist, and Arranger; Mr. Tom Douglas, Songwriter; Mr. Neil Portnow, President, The Recording Academy; and, Ms. Dionne Warwick, Recording Artist. Id.
 See H.R. Rep. No. 115-651, at 18. Testimony at these hearings was received from Mr. David Israelite, National Music Publishers Association; Mr. Neil Portnow, The Recording Academy; Mr. Michael O’Neill, BMI; Mr. Will Hoyt, TV Music License Committee; Mr. Lee Knife, Digital Media Association; Mr. Jim Griffin, OneHouse LLC; Mr. Lee Miller, Nashville Songwriters Association International; Mr. Michael Huppe, SoundExchange Inc.; Mr. Ed Christian, Radio Music License Committee Inc. (RMLC); Mr. Charles Warfield Jr., On Behalf of the National Association of Broadcasters (NAB); Mr. Chris Harrison, Pandora Media Inc.; Ms. Roseanne Cash, On Behalf of the Americana Music Association (AMA); Mr. Cary Sherman, Recording Industry of America (RIAA); Mr. David Frear, Sirius XM Holdings Inc.; Mr. Paul Williams, American Society of Composers, Authors and Publishers (ASCAP); and, Mr. Darius Van Arman, On Behalf of the American Association of Independent Music (A2IM). Id.
 See H.R. Rep. No. 115-651, at 18–19.
 See 164 CONG. REC. H3560 (daily ed. Apr. 25, 2018).
 Protecting and Promoting Music Creation for the 21st Century: Hearing Before the Sen. Comm. on the Judiciary, 115th Cong. (May 15, 2018), https://www.judiciary.senate.gov/meetings/
 See, e.g., Paula Parisi, RIAA, NMPA, Recording Academy and More Announce Support for Music Modernization Act, Other Legislation, VARIETY (Jan. 8, 2018 11:00 AM), https://variety.com/2018/biz/news/riaa-nmpa-
 Cristina Marcos, House Judiciary Chairman Announces Retirement, THE HILL (Nov. 9, 2017 10:58 AM), http://thehill.com/homenews/house/359596-house
-judiciary-chairman-announces-retirement. Senator Orrin Hatch, Chairman of the Senate Judiciary Committee, will also retire after this term, further imperiling the future of any copyright legislation not passed during this session of Congress. See Ellie Mertens, Music Modernization Act Gathers Momentum in Senate, MANAGING INTELL. PROP. (May 16, 2018), http://www.managingip.com/Article/3807457/
 Indeed, this concern has animated the proponents of another piece of proposed copyright legislation, the Copyright Alternative in Small-Claims Enforcement (CASE) Act, H.R. 3945. See Intellectual Property 101: How Small Business Owners Can Utilize Intellectual Property Protections in Their Businesses: Hearing Before the Comm. on Small Business, 115th Cong. (2018) (statement of Keith Kupferschmid, Chief Executive Office, Copyright Alliance), https://copyrightalliance.org/wp-content/uploads/
On the Cusp of Music Copyright Reform: The Music Modernization Act
By: Nicholas Bartelt
How many times might you imagine the noun "right" appears in the Constitution? If you imagine "once", you'd be exactly right. The context is, of course, the grant of power to Congress in favor of "securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries" as recited in Article 1, Section 8, Clause 8. A clear implication of the word "securing" is that the right being secured is a pre-existing, inherent right.
How can we know that this implication is correct? Consider, for example, phraseology in the Declaration of Independence, namely "all men . . . are endowed by their Creator with certain unalienable rights" and "that, to secure these rights, Governments are instituted among Men . . . ." Further, the preamble of the Constitution itself states that one of its purposes is to "secure the Blessings of Liberty" for the benefit of the people of our nation. Had the Founding Fathers believed that Congress had the ability to grant a new right, as opposed to securing a pre-existing right, doubtless they would have stated "granting" rather than "securing."
Because the Constitution embraces both "Writings" and "Discoveries" within the framework of the single use of the noun "right," clearly the Founding Fathers intended author's and inventor's rights to be preeminently recognized vis-a-vis other, unspecified rights. The Copyright Act of 1976 recognizes that copyright vests at the moment of creation of an author's work. That copyright act comprehends both a positive right of the author to copy their own works, and a negative right precluding others from such copying. Nonetheless, as a prelude to enforcing the negative right via the judicial process, copyright registration must be obtained.
So too, inventors are privy to both a positive and a negative right. The positive right entitles the inventor to make, use and sell physical embodiments of their invention. The Founding Fathers recognized this positive right as flowing from the natural law expounded upon in the 1600s by John Locke. The positive right also flows from the common law, as we shall see. On the other hand, the negative right, namely the right to exclude others from practicing the invention, requires patent issuance as a prelude to enforcement.
NYIPLA Past President Giles S. Rich [1950-51] was a chief architect of the Patent Act of 1952. He was an expert in inventor's rights and would make sure that his knowledge would be incorporated into the language of that patent act. The words embodying the negative right, namely the "right to exclude," found their way into Section 154(a) of the Patent Act. Phraseology to the effect that patents have "attributes of personal property" was incorporated into Section 261 - seemingly anticipating and potentially resolving the question posed in the Oil States case as to whether patents are private or public rights. The words "attributes of personal property" appear to comprehend the positive right of possession and the negative right of excluding others from possession.
If you subscribe to the notion, as Judge Rich did, that a patent embodies only a negative right to exclude others from actualizing the invention, then you may call into question SCOTUS’ logic in its eBay v. MercExchange opinion. To disembody the right to exclude from the only possible remedy, (namely the remedy of injunctive relief), by requiring proof of irreparable harm when there clearly is no adequate remedy at law for violation of the patent denies the unique nature of the right referred to in the Constitution that is owing to inventors.
You may wonder where Judge Rich derived his ideas regarding the absolute nature of the right associated with a patent. One of his former law clerks, Philip C. Swain, suggests that it might be attributable to a Gladney treatise in an article titled "Judge Rich's Favorite Book on Patent Law" appearing in the Journal of the Federal Circuit Historical Society, Vol. 3, pp 181-83 (2009). The full title of the treatise is "Restraints of Trade in Patented Articles" by Frank Y. Gladney (1910). Early in Judge Rich's career, he got to meet Mr. Gladney.
A central theme of the Gladney treatise is that the inventor or their assignee has two separate rights: (I) a common law right to make, use and sell, and (II) a patent law right, to exclude others from making, using and selling. In explaining the common law right, Mr. Gladney states at page 68 of his treatise that "[w]hen we deal with the right of the owner of a patent to use his invention we are dealing with a right that is far older, far more durable, far more precious than any thing contained in the patent law."
During the last decade, SCOTUS seems to have lost its way regarding the nature of the patent right. We can only hope that Congress will rectify the situation "down the road" by supplanting the ill-fated America Invents Act and re-establishing the nature of rights to the first, true inventor, rights that have been abrogated after 200 years by a combination of SCOTUS and the AIA. With the onset of spring, hope springs eternal!
By : Dale carlson
AS TIME GOES BY - Right Makes Might?
Notable Trademark Decisions
By: Scott Greenberg and Michael kraich
TTAB AFFIRMS REFUSAL BASED ON LIKELIHOOD OF CONFUSION NOTWITHSTANDING DISTRICT COURT'S HOLDING OF NO LIKELIHOOD OF CONFUSION
FCA US LLC (“FCA,” formerly named Chrysler Group LLC) filed an intent-to-use application to register the mark MOAB for “[m]otor vehicles, namely, passenger automobiles, their structural parts, trim and badges” in Class 12. The USPTO Examining Attorney refused registration under Section 2(d) on the ground of likelihood of confusion with the prior registered mark MOAB INDUSTRIES in connection with “[a]utomotive conversion services, namely, installing specialty automotive equipment” in Class 37, owned by Moab Industries LLC (“Moab Industries”). FCA petitioned to cancel Moab Industries’ registration. Moab Industries then brought suit in the U.S. District Court for the District of Arizona against FCA, in which Moab Industries claimed trademark infringement and unfair competition, and the USPTO proceedings were suspended pending the outcome of the civil action. After the District Court concluded there was no likelihood of confusion and dismissed Moab Industries’ claims, the parties stipulated to dismissal of both Moab Industries’ appeal in the civil action and FCA’s cancellation proceeding. FCA then proceeded with the subject appeal to the TTAB from the refusal of registration, arguing that the Board should adopt the District Court’s adjudication of no likelihood of confusion. The Board disagreed and affirmed the refusal of registration, relying on the differences in both the issues and parties in the two proceedings. In re FCA US LLC, 126 U.S.P.Q.2d 1214 (T.T.A.B. Apr. 10, 2018).
The Board explained that FCA, relying on the Supreme Court decision in B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 113 U.S.P.Q.2d 2045 (2015), “seeks to charge the USPTO with issue preclusion in the present proceeding,” 126 U.S.P.Q.2d at 1218. However, the Board found that the present ex parte registration case did not involve the same parties or the same issues as in the District Court proceeding, and that the B&B Hardware decision holds that preclusive effect should only be given where these “ordinary elements of issue preclusion” are met. Id. at 1218 (quoting B&B Hardware, 113 U.S.P.Q.2d at 2048).
As to the parties, the Board held that it would not charge the USPTO with issue preclusion within the present appeal from a refusal of registration because “the agency was not a party to the prior action” and did not have a full and fair opportunity to litigate its claims in the prior action. Id. at 1219 citing In re Trans Texas Holding Corp., 498 F.3d 1290 (Fed. Cir. 2007).
As to the issues, the Board first stated that, in the registration context of the present appeal, the Examining Attorney and the Board must determine the issue of likelihood of confusion based on the marks and the goods and services as disclosed in the application and the cited registration and cannot consider any evidence of actual marketplace usages that may limit or alter the foregoing. By contrast, in an infringement action, the District Court determines the issue of likelihood of confusion based on “specific alleged marketplace activities.” Id. at 1217. The Board determined that, in the present case, this difference in the required focus between the two types of proceedings resulted in material differences when considering the likelihood-of-confusion factors, including the following:
The parties’ marks: The mark in FCA’s application was MOAB, which the Board compared to the prior registered mark MOAB INDUSTRIES. By contrast, the Board noted that the District Court had considered the mark that FCA had actually been using in the marketplace, i.e. “JEEP WRANGLER MOAB Special Edition.” Id. at 1218.
The parties’ goods: As described above, the goods in FCA’s application included the unrestricted phrase “passenger automobiles” and also “structural parts”of passenger automobiles. By comparison, the services in Moab Industries’ cited registration of installing “specialty automotive equipment” was considered to include all kinds of equipment, not just equipment to enhance off-road capability, and such specialty automotive equipment was broad enough to encompass “structural parts” for all types of “passenger automobiles” as identified in FCA’s application. By contrast, the District Court had not considered automobiles in general, or structural parts. It had only considered FCA’s actual vehicles, which the Court had found to be “expensive” “highway-legal, off-road enhanced performance vehicles,” as were the modified vehicles provided by Moab Industries. Id. at 1218–19.
Trade channels: Because there were no limitations in the subject application and registration, the Board presumed that the parties’ goods and services moved in all channels of trade that are normal for such goods and services. In this regard, the Board held that Moab Industries’ identified installation service was itself a trade channel for FCA’s identified structural parts. By contrast, the Board noted that the District Court had specifically contrasted the trade channels for FCA’s finished automobiles, which are sold “off the assembly line” through FCA’s authorized dealers, with Moab Industries’trade channels for its upfitted automobiles, which are sold through auction and at Moab Industries’ resale dealers. Id. at 1221–22.
Absence of actual confusion: The Board noted that the lack of evidence of actual confusion carries little weight in an ex parte registration proceeding.Additionally, the Board held that FCA’s survey demonstrating an absence of any significant confusion, which FCA had also submitted in the civil action, was not probative in the registration proceeding due to the above-referenced differences in the relevant marks and goods and services in each proceeding. In particular, the survey universe was limited to customers for off-road capable vehicles, not all automobiles and structural parts, and the survey tested the public’s reaction to “MOAB” in conjunction with “JEEP” as used by FCA, not “MOAB” by itself as FCA was seeking to register. Id. at 1225–26.
In view of the above differences, and considering all relevant factors, the Board concluded that there was a likelihood of confusion between MOAB for “motor vehicles, namely, passenger automobiles, their structural parts, trim and badges” and MOAB INDUSTRIES in connection with “automotive conversion services, namely, installing specialty automotive equipment.”
In re FCA US LLC, 126 U.S.P.Q.2d 1214 (T.T.A.B. Apr. 10, 2018) [precedential].
TTAB FINDS LIKELIHOOD OF CONFUSION BETWEEN “CHATEAU LAROQUE” STANDARD CHARACTER MARK AND “LAROQUE AND DESIGN” COMPOSITE MARK FOR DIFFERENT WINE PRODUCTS
Aquitaine Wine USA, LLC (“Aquitaine”) applied to register the following mark in connection with “wine of French origin protected by the appellation of the origin Cité de Carcassonne”:
(“Cité de Carcassonne” disclaimed). Registration was refused under Section 2(d) based on a prior registration for the standard character mark “CHATEAU LAROQUE” (“Chateau” disclaimed) for “wines having the controlled appellation Saint-Emilion Grand Cru.” On appeal, the TTAB affirmed the refusal, finding that the marks are confusingly similar notwithstanding their specific differences, and the goods are related types of French wine with overlapping customers and trade channels. In re Aquitaine Wine USA, LLC, 126 U.S.P.Q.2d 1181 (T.T.A.B. Apr. 2, 2018).
The Board considered what variations in the depiction of the mark are deemed to be encompassed by a mark that is registered in standard characters, such as the registered mark “CHATEAU LAROQUE” in the present case, especially when it is being compared to another party’s mark, such as Aquitaine’s mark, that includes a design element that is separate from and in addition to the display of a verbal element. The Board noted that the Federal Circuit had expressly left “for future cases to determine the appropriate method” of making such a comparison. Id. at 1187 (quoting In re Viterra, 671 F.3d 1358, 101 U.S.P.Q.2d 1905, 1910 (Fed. Cir. 2012)). The Board held that, when making such a comparison, the Board “will consider variations of the depiction of the standard character mark only with regard to ‘font style, size, or color’ of the ‘words, letters, numbers, or any combination thereof.’” 126 U.S.P.Q.2d at 1187 (emphasis in original; citations omitted).
The Board, however, added that a pictorial representation that is included in the other mark under comparison will be taken into account in determining the marks’ overall connotation and commercial impression. Id.
Applying this approach to the present case, the Board held that, even if the design of a house as in Aquitaine’s mark is not envisioned as potentially included in the registered standard character mark, that design element nevertheless heightens the likelihood of confusion because it could be interpreted as a large estate home, or “chateau,” thus corresponding to the word “CHATEAU” in the registered mark.
Overall, the Board found the two marks to be confusingly similar. In addition to the above-mentioned similarity, the Board held that the predominant impression made by both marks would be the word “LAROQUE,” given its prominent size and positioning in Aquitaine’s mark, and the descriptive and commonly used nature of the other word in the cited mark, “CHATEAU,” in connection with wine. Id. at 1185. The Board also noted that Aquitaine did not introduce any evidence regarding the meaning of “LAROQUE,” such as potential evidence from which the Board might have concluded that the term is weak with respect to wine and only entitled to a narrow scope of protection. Id. at 1184.
As to the respective goods, and their customers and trade channels, the Board held that, even if Aquitaine had presented evidence that consumers were aware that Aquitaine’s and the registrant’s wines come from two different regions of France, those consumers “are still likely to assume that the wines share a common source or affiliation, particularly where, as here, the marks share a dominant, fanciful term.” Id. at 1188. The Board credited the Examining Attorney’s evidence showing that the same wine retailers offer wine from both the Saint-Emilion and Cité de Carcassonne regions. Id. at 1189–94. The Board also observed that Aquitaine presented no evidence that any applicable laws would prevent a single company from producing wines in both regions. The Board therefore found that customers encountering wines from different regions under similar marks may mistakenly believe they emanate from the same ultimate source. Id. at 1194.
Finally, the Board rejected Aquitaine’s contention that the relevant purchasers were necessarily sophisticated, holding that: (a) wine purchasers are not necessarily sophisticated or careful in making their purchasing decisions; (b) the evidence showed that wines from both regions at issue could include at least moderately priced wine; and (c) neither identification of goods excluded wine at any price-points.
Weighing the relevant factors, the Board concluded that there is a likelihood of confusion and affirmed the refusal. In a concurring opinion, TTAB Judge Ritchie stated that, although she agreed with the majority’s result, she would find that the cited registrant’s right to display of the standard-character-registered mark CHATEAU LAROQUE in any “font style, size, or color” includes designs that would make the mark similar to Aquitaine’s mark.
In re Aquitaine Wine USA, LLC, 126 U.S.P.Q.2d 1181 (T.T.A.B. Apr. 2, 2018) [precedential].
TTAB FINDS LIGHT-ARRAY PATTERN FOR REAR TRUCK LIGHTS LACKS ACQUIRED DISTINCTIVENESS
Truck-Lite Co., LLC (“Truck-Lite”) obtained a trademark registration in 2008, pursuant to Section 2(f) of the Lanham Act, for the following mark in connection with “lighting products for vehicles, namely, a combined stop-turn-tail lamp”:
The registered mark is essentially described as the configuration of a rear truck light featuring six lenses that are situated above corresponding LED lights and that are arrayed in a pentagonal pattern, with the sixth lens in the center (known as the “Penta-Star Pattern”). Truck-Lite also applied to register the following mark in connection with “electric lighting fixtures, namely, lights for vehicles”:
This applied-for mark, which was published for opposition in 2010, is essentially described as the configuration of the LED lights within the same rear truck light, arrayed in the same pattern as the lenses in the registration.
Grote Industries, Inc. (“Grote”), a competitor of Truck-Lite, opposed the application in 2010 and petitioned to cancel the registration in 2011, asserting in both cases the same grounds –of functionality, lack of acquired distinctiveness, and fraud. The proceedings were consolidated and, after trial, the Board granted cancellation based on lack of acquired distinctiveness under Section 2(f), dismissed the functionality claim, and declined to address the fraud claim as unnecessary for the disposition of the case. Grote Indus., Inc. v. Truck-Lite Co., LLC, 126 U.S.P.Q.2d 1197 (T.T.A.B. Mar. 30, 2017).
Regarding Grote’s claim of functionality, the Board stated the general rule that registration of a product design feature as a mark will be refused as functional under Section 2(e)(5) if it is “essential to the purpose of the article or if it affects the cost or quality of the article.” Id. at 1202 (quoting TrafFix Devices Inc. v. Mktg. Displays Inc., 532 U.S. 23, 58 U.S.P.Q.2d 1001, 1006 (2001)). The Board concluded that neither of Truck-Lite’s configurations is functional under this standard, making the following findings:
Although Truck-Lite owns a U.S. utility patent pertaining to LED lighting within vehicle lights, the patent claims “at least one” LED, but not necessarily six. The patent includes drawings showing multiple possible embodiments of the invention, including the configuration used in the product along with others having different numbers and placements of the LEDs. Also, although the patent includes reference to the array in question as a preferred embodiment of the invention, the Board held that the patent does not disclose any utilitarian aspect of the specific placement of optical elements in the configuration of the subject mark, and also credited Truck-Lite’s testimony that this particular array was chosen for the product because it was the most aesthetically pleasing. Therefore, the Board agreed with Truck-Lite that the Penta-Star lighting pattern at issue is only incidentally disclosed in the patent, and the patent is therefore not probative of whether this lighting pattern is essential to the use or purpose of the product. Id. at 1203–06.
Regarding Truck-Lite’s advertising, the Board held that, although it touts the heat-dissipating utilitarian advantage provided by a particular source of LED arrays that are used within the product, it does not directly attribute any such advantage to the Penta-Star pattern specifically. Id. at 1206–07.
Truck-Lite presented evidence of numerous truck light products having other light array patterns that are offered for sale by competitors and meet the applicable federal safety standards. Id. at 1207–08.
Grote did not submit evidence comparing the cost or ease of use of the Penta-Star Pattern with other LED arrays, and Truck-Lite’s witnesses testified that the Penta-Star pattern added to the cost of manufacture relative to other possible arrays, because it required manual installation. Id. at 1208–09.
Regarding Grote’s additional claim of aesthetic functionality, the Board found that Grote did not establish a competitive need to use the Penta-Star Pattern based on consumers’ aesthetic preferences or for any other aesthetic purpose independent of a source-identifying function. Therefore, based on the totality of the evidence, the Board found the subject design to be non-functional.
However, the Board concluded that Grote had established that Truck-Lite’s evidence of acquired source-identifying distinctiveness, submitted pursuant to Section 2(f) in its ex parte prosecutions and at trial, was inadequate to meet the requirement for the registration of any alleged product configuration mark.
The Board held that, although Truck-Lite had introduced evidence of millions of product units sold and $192 million in sales revenues, sales revenue alone is not probative of purchaser recognition “of a configuration” as a source-indicator. Id. at 1212. Truck-Lite also sought to rely on product advertisements that included an illustration of the Penta-Star lighting pattern. However, the Board did not find these ads to be probative because they did not mention the configuration of the six LEDs, “much less inform consumers to ‘look for’ the pattern to identify a Truck-Lite product.” The Board also noted that most of Truck-Lite’s testimony and declarations on this issue were its own conclusory statements without supporting evidence. Id. at 1211–12. Therefore, the Board held that there was insufficient evidence in the record to show that “the design by itself indicates source, or that consumers recognize it as such.” Id. at 1214.
Grote Indus., Inc. v. Truck-Lite Co., LLC, 126 U.S.P.Q.2d 1197 (T.T.A.B. Mar. 30, 2017) [precedential].
“MECHANICALLY FLOOR-MALTED” DENIED REGISTRATION UNDER
SECTION 2(E)(1) AND SECTIONS 23 AND 45 OF THE TRADEMARK ACT
Mecca Grade Growers, LLC (“Applicant”) filed an application to register the standard-character mark “MECHANICALLY FLOOR-MALTED,” (“the mark”) on the Principal Register for malt brewing and distilling in International Class 31 and processing of agricultural grain in International Class 40 (App. No. 86/358,219). The Examining Attorney refused registration under Section 2(e)(1) of the Trademark Act stating that the mark is merely descriptive of the identified goods and services, and later refused registration on the Supplemental Register, finding the mark generic under Sections 23 and 45 of the Trademark Act. The Applicant did not substantively address the Examining Attorney’s descriptiveness refusal, and the Board chose to consider Applicant’s arguments made during prosecution in this regard, ultimately upholding the Examining Attorney’s refusals. In re Mecca Grade Growers, LLC, Serial No. 86358219, 125 U.S.P.Q.2d 1950 (T.T.A.B. Mar. 12, 2018).
Reviewing the Examining Attorney’s refusal to register the mark on the Principal Register, the Board stated, “[i]n the absence of a showing of acquired distinctiveness, Section 2(e)(1) of the Trademark Act precludes registration of a mark on the Principal Register that, when used in connection with the goods or services of the [A]pplicant, is merely descriptive of them.” Id. at 1952 (citation omitted). When reviewing the applicable evidence, the Board found that the mark “immediately conveys to prospective consumers characteristics of both the goods and the services.” Id. at 1953. Particularly, the Board noted that “the adverb ‘mechanically’ is derived from the adjective ‘mechanical,’ which is defined as ‘of or relating to machinery,’” and that “‘floor malting’ refers to ‘the practice of germinating (malting) steeped barley on the floor of the malt house,’ which can be performed manually or with machinery.” Id. (citations omitted). In response to Applicant’s arguments, suggesting that the terms “mechanically” and “floor-malted” were incongruous, the Board disagreed, stating that “no imagination or thought is required by prospective consumers to discern the nature of Applicant’s goods and services.” Id.
Similarly, considering the Examining Attorney’s refusal to register the mark on the Supplemental Register, the Board stated that “[i]n order to qualify for registration on the Supplemental Register, a proposed mark must be capable of distinguishing the [A]pplicant’s goods or services.” Id. at 1956 (internal quotation marks and citations omitted). The Board found the evidence of record  and “Applicant’s suggestion in its brief that a possible genus for the goods is ‘floor-malted malts’ constitute an outright admission that ‘floor-malted’ identifies a type of malt.” Id. at 1958. As such, the Board maintained the Examining Attorney’s refusal to register the mark on both the Principal Register and Supplemental Register.
In re Mecca Grade Growers, LLC, Serial No. 86358219, 125 U.S.P.Q.2d 1950 (T.T.A.B. Mar. 12, 2018) [precedential].
“SERIAL” as a Word and Design Mark
Serial Podcasts, LLC (“Applicant”) filed applications – App. Nos. 86/454,424 and 86/464,485 – to register the marks “SERIAL” (App. No. 86/454, 420) and stylized versions of the word (reproduced below) (hereinafter “the marks”) on the Principal Register for “entertainment in the nature of an ongoing audio program featuring investigative reporting, interviews, and documentary storytelling,” in International Class 41.
In re Serial Podcast, LLC, Serial No. 86454420, 126 U.S.P.Q.2d 1061 (T.T.A.B. Mar. 26, 2018). The Examining Attorney refused registration of all three marks, stating that each was “generic for the identified services,” or alternatively that the marks were merely descriptive. Id. at 1063. The Board affirmed refusal based on genericness with regard to the standard character mark, reversed with regard to genericness on the stylized marks, and affirmed refusal on the grounds that the marks were merely descriptive, noting that the refusal would be set aside for the stylized marks should Applicant disclaim the word “serial.”
Determining that the word mark “SERIAL” was generic, the Board stated that “[t]he critical issue in genericness cases is whether members of the relevant public primarily use or understand the term sought to be protected to refer to the genus of goods or services in question.” Id. (internal quotation marks and citation omitted). In rejecting Applicant’s arguments that use of the noun “serial” is antiquated and archaic, the Board noted that the definition and third-party uses of the term (both as a noun and an adjective) “refer categorically to ongoing audio programs [–] programs that may emanate from multiple sources, not just a single source.” Id. at 1069. The Board went further, finding that media stories referred to by Applicant stylized the term “serial” in print, using capitalization, italics, quotation marks, and/or contextual marks to “indicate that the ‘[s]erial’ to which they refer is one particular serial.” Id. at 1070. The Board stated that this supported a finding that the term, when used in the generic sense, means “a work that is published or produced in installments.” Id.
Regarding the refusal to register the marks as merely descriptive without acquired distinctiveness, the Board stated that “Applicant’s unequivocal claim of acquired distinctiveness under Section 2(f) tacitly concedes that the applied-for marks are not inherently distinctive, and must acquire distinctiveness to be registrable.” Id. at 1071. Based on Applicant’s third-party evidence of the word “serial,” the Board maintained that there was an insufficient showing to prove that “serial,” taken alone, had acquired distinctiveness under Section 2(f). However, in a detailed analysis of the components forming the above-reproduced composite marks, the Board found that, taken as a whole, those marks had acquired distinctiveness and as such, pending Applicant’s disclaimer of the word “serial,” the stylized marks would be registerable. Id. at 1065-67.
In re Serial Podcast, LLC, Serial No. 86454420, 126 U.S.P.Q.2d 1061 (T.T.A.B. Mar. 26, 2018) [precedential].
Website (Internet) Printouts Only Admissible for What They Show On Their Face
Weapon X Motorsports, Inc. (“Applicant”) filed an application on October 29, 2013, to register the standard-character mark “WEAPON X MOTORSPORTS,” (disclaiming the word “motorsports”) for automotive engine and motor parts in International Class 7, automotive body kits in International Class 12, and automotive body kit installation services in International Class 37. WeaponX Performance Products Ltd. (“Opposer”) brought the present opposition, stating the mark was likely to lead to confusion under Section 2(d) of the Trademark Act, that Applicant was not the owner of the mark as of the filing date, and that Applicant abandoned its mark. WeaponX Performance Products, Ltd. v. Weapon X Motorsports, Inc., Opposition No. 91221553, 126 U.S.P.Q.2d 1034 (T.T.A.B. Mar. 14, 2018). The Board found that the Opposer failed to timely raise arguments regarding Applicant’s ownership interest in the subject application, and as such that claim was waived. Id.
After establishing the evidence of record as well as standing, the Board analyzed Opposer’s claim that a likelihood of confusion exists between Applicant’s mark as of the filing date and Opposer’s unregistered mark. Observing that Opposer was relying on hearsay consisting primarily of Internet evidence, the Board held that such evidence was “insufficient evidence to conclude that [Opposer’s] pleaded mark is being used in commerce by Opposer, or, for the purpose of establishing priority, that [Opposer’s mark] was in use prior to October 29, 2013.” Id. at 1041. In addition, for completeness, the Board found that “Opposer [had] not presented any evidence that it  sold any of its pleaded goods or rendered any of the pleaded services in its notice of opposition under its pleaded WEAPONX mark.” Id. at 1042. Having failed to present evidence necessary for an analysis of the du Pont factors, the Board dismissed Opposer’s likelihood of confusion claim.
Regarding Opposer’s abandonment claim, Section 45 of the Trademark Act requires a showing of both nonuse and intent not to resume use of a mark to support a finding of abandonment. Id. Opposer argued that Applicant had abandoned the mark by failing to introduce information or documentation demonstrating use from 2001 to 2012. The Board disagreed, finding that “Applicant need only rely on its application filing date, i.e., October 29, 2013, as its constructive use date in this proceeding.” Id. As such, since Opposer did not establish rights in a mark prior to Applicant’s established priority date, Opposer “failed to prove by a preponderance of the evidence that Applicant  abandoned its involved WEAPON X MOTORSPORTS mark.” Id. Accordingly, the Board dismissed Opposer’s abandonment claim.
WeaponX Performance Products, Ltd. v. Weapon X Motorsports, Inc., Opposition No. 91221553, 126 U.S.P.Q.2d 1034 (T.T.A.B. Mar. 14, 2018) [precedential].
 “[T]he record consists of dictionary and industry specific evidence demonstrating the use of the words, ‘mechanical,’ ‘mechanically,’ ‘malt,’ ‘malting,’ ‘malter,’ ‘malted,’ ‘floor-malting,’ ‘floor-malted,’ [ ] ‘floor-malter,’ and demonstrat[ions of] how these words may be used together. These examples clearly show the meanings that relevant consumers attribute to those words when they are used separately and when they are used together. The purchasers in this case are not members of the general public who might not be familiar with the processing of grain for brewing or distilling. Here, the customers are those in the brewing and distilling business who are likely to know exactly what MECHANICALLY FLOOR-MALTED malt is and the process for producing this type of malt, regardless of the grammatical form of the word ‘mechanical’ or whether ‘floor-malted’ is spelled with a hyphen.” 126 U.S.P.Q.2d at 1958.
Standing: Heather Schneider, Hon. Leonard Stark, Peter Thurlow, Hon. Dora Irizarry, Hon. Jose Linares, Kathleen McCarthy, Hon. Barbara Lynn, Robert Rando
Sitting: Hon. Janet Hall, Matthew McFarlane, Hon. Sharon Prost, Hon. Sue Robinson, Annemarie Hassett,
Bob Woodward, Hon. Joy Flowers Conti, Hon. Ruben Castillo
Annual Dinner in Honor of the Federal Judiciary
he New York Intellectual Property Law Association held its 96th Annual Dinner in Honor of the Federal Judiciary on March 23, 2018 at the New York Hilton Midtown Hotel. President Annemarie Hassett welcomed the honored guests, members of the NYIPLA, and their guests. Joseph Bartning, Malena Dayen, and Emily Eagen opened the evening with a magnificent rendition of the National Anthem. The Association’s Sixteenth Annual Outstanding Public Service Award was presented to the Honorable Sue L. Robinson, District Judge for the United States District Court for the District of Delaware. The Keynote address was given by Bob Woodward, award-winning journalist, best-selling author and Associate Editor of the Pulitzer Prize-Winning Washington Post.
Happy Hour Hosted By the Women in IP Law & Young Lawyers Committee
Steven bernstein, scott forman, AND lindsay korotkin, Co-Chairs of the young lawyers committee
Hot Topics and Issues in the Biosimilars Space: Part Two
Jessica copeland AND abigail langsam, Co-Chairs of the woman in ip law committee
2018 Trademark Update: A Discussion with a USPTO Policy Maker and a TTAB Decision Maker
dyan finguerra-ducharme and michael cannata, co-chairs of the trademark law & practice committee
On the evening of February 1, 2018, the Patent Litigation and Women in IP Law Committees presented a panel discussion entitled, “Hot Topics and Issues in the Biosimilars Space: Part Two.” Hosted at Axinn, Veltrop & Harkrider LLP, this program provided an update on legal and policy developments in the biosimilar drug products space. Chad Landmon (Axinn, Veltrop & Harkrider LLP) addressed the current legal landscape surrounding the BPCIA “patent dance” and considerations for biosimilar sponsors going forward. Brian Murphy (Haug Partners LLP) discussed the use of inter partes review challenges before the PTAB against patents involved in parallel BPCIA litigations. Christine Simmon (The Biosimilars Council, Association for Accessible Medicines) discussed the challenges and opportunities for advocacy in fostering a robust U.S. biosimilar market, including regulatory and antitrust issues. Michael Johnson (Willkie Farr & Gallagher LLP) moderated the panel.
The event drew a large and diverse audience of practitioners and other professionals. The Patent Litigation and Women in IP Law Committees wish to thank the panelists, Axinn, Veltrop & Harkrider LLP, Lisa Lu, and Feikje van Rein for making the program a resounding success.
On Thursday, March 1, 2018, the Women in IP Law and Young Lawyers Committees joined forces for a happy hour and networking event in midtown at the Stagecoach Tavern. Approximately 30 lawyers attended. Conversations ranged from work-life balance to career transitions to navigating difficult situations. A good time was had by all.
On March 6, 2018, Pryor Cashman hosted a NYIPLA Trademark Law & Practice Committee program called 2018 Trademark Update: A Discussion with a USPTO Policy Maker and a TTAB Decision Maker. Committee Co-Chair Dyan Finguerra-DuCharme moderated the discussion with Colleen Kearney, Attorney Advisor, Office of the Deputy Commissioner for Trademark Examination Policy, United States Patent and Trademark Office, and David Mermelstein Administrative Trademark Judge, Trademark Trial and Appeal Board, United States Patent and Trademark Office. The panel covered a wide variety of topics including letters of protest, doctored specimens and reliance on third party evidence. Over 60 practitioners attended, and the panel reserved significant time for questions, which were thought-provoking, challenging and insightful. This is the second year in a row that the Committee has organized this program and, given its marked success, the Committee has decided to make it an annual event.
""Day of the Dinner"" Luncheon CLE: Developments in the
Courts and Congress and the Implications for Patent
Policy and Innovation
lynn russo, programs committee
On March 23, 2018, the NYIPLA presented a luncheon and panel discussion, “Developments in the Courts and Congress and the Implications for Patent Policy and Innovation” at the New York Hilton Midtown. This event reviewed current issues and trends in patent policy and litigation and presented views from the courts, as well as the USPTO on directions for change.
The keynote speaker, Judge Kathleen M. O'Malley of the U.S. Court of Appeals for the Federal Circuit, delivered a historical overview of the U.S. patent system from its inception to the present.
After Judge O’Malley’s address, Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director of the USPTO, provided remarks that touched on the patent system’s historical significance and ways to protect American invention by providing a reliable and predictable patent system.
A panel discussion followed Director Iancu’s remarks. The panel members included Chief Judge Leonard P. Stark (U.S. District Court for the District of Delaware), Chief Judge Jose L. Linares (U.S. District Court for the District of New Jersey), and Joseph Matal (Former Under Secretary of Commerce for Intellectual Property and Former Director of the USPTO). The discussion was moderated by Walter E. Hanley, Jr., NYIPLA Past President.
The panel first discussed the upswing in patent invalidity cases under Section 101, particularly the recent focus on the factual issue of what constitutes “routine and conventional” in analyzing the second step of the two-part test for determining patent-eligible subject matter. The panel then discussed venue considerations arising after the Supreme Court’s TC Heartland decision, including the difficulties in assessing venue for Hatch-Waxman cases and cases involving multiple defendants.
In all, the talks provided an overview of hot issues in patent law, and prompted discussion of how to address current problems moving forward.
In combination with the New Jersey Intellectual Property Association (NJIPLA), the New York Intellectual Property Intellectual Association’s (NYIPLA) Trade Secrets Committee coordinated a half day program entitled: “Trade Secrets / Cybersecurity: Protecting Your Corporate Clients’ Information.” The program covered a variety topics that were directed to practice of intellectual property by those in-house and in private practice.
After a welcome by NJIPLA President Lisa Wang and NYIPLA First Vice-President Peter Thurlow, and opening remarks by NYIPLA Trade Secrets Committee Co-Chair Mark Schildkraut, the substantive program commenced. The program involved:
A Trade Secrets Overview – in the format of a top 10 – was provided by David Almeling, Partner at O’Melveny & Myers, who has years of experience handling trade secrets litigation and counseling. David has also authored two books on trade secrets. A few takeaways from this overview included:
Defense of Trade Secrets Act (DTSA) preliminary injunction rates and temporary restraining order rates, after the first year the DTSA was in effect, are each 58%.
The top venues for DTSA filings are: Northern District of Illinois, Northern District of California, Central District of California, Southern District of New York, Eastern District of Pennsylvania, and Southern District of Florida.
Over the past two years since the enactment of DTSA, 21 motions for ex parte seizure were sought and 5 were granted.
A Cybersecurity Overview presentation by Deirdre Wheatley-Liss, partner at Porzio, Bromberg & Newman, who counsels business owners regarding cybersecurity practices and corporate governance. Deirdre provided an overview on cybersecurity and how businesses can plan and avoid infiltration of unwanted software and exfiltration of sensitive material like intellectual property and privacy data. The presentation covered the interweaving of federal, state, industry and regulatory requirements and guiding best practices.
An interactive session on Late-Breaking Trade Secrets and Cybersecurity Cases and Issues by Dan Levy, partner at Epstein, Becker and Green who specializes in employment, trade secrets and non-compete matters. The program ran through a series of fact patterns and addressed best practices for resolving matters without litigation as well as with litigation – through civil remedies and criminal referral.
A View from the Trenches, which involved a dynamic discussion by two trade secret litigators: Meredith Dearborn, partner at Boies Schiller & Flexner, and attorney for Uber in Waymo v. Uber, and John Gray, partner at Perkins Coie and attorney for Zillow in Move Inc. (aka Realtors.com) v. Zillow Inc. The two litigators interviewed one another and had a lively discourse, discussing litigation strategies for defending complex trade secrets litigation, including:
What should be considered a “trade secret”;
Whether the lessons and skills an engineer learns on the job should be included; and
Insights on preparatory measures and litigation strategies for asserting or defending a trade secrets case.
A panel on Protecting the Corporate Client, by Mark Schildkraut, Associate General Counsel-IP/Cybersecurity at Becton, Dickinson and Company, and Ken Corsello, IP Law Counsel at IBM. These two seasoned in-house attorneys provided practical guidance on a wide variety of topics that included:
Proactive measures (policies, training, inventories) for identifying and protecting a company’s most valuable information;
Key internal stakeholders (R&D, business leaders, Board of Directors, Chief Information Security Officer) and processes to afford effective trade secret protection; and
Responding to trade secret misappropriation and cybersecurity breaches.
A dynamic talk on Cybercrime and IP Crime: Working with the Government and Ethical Considerations, presented by U.S. Department of Justice Senior Counsel (Computer Crimes and Intellectual Property Section) Brian Levine. Brian was one of the lead prosecutors in the first U.S. criminal trial of a Chinese entity for theft of trade secrets, Sinovel Wind Group Co. Ltd. After an eleven-day jury trial, the company was convicted of a trade secret theft that nearly destroyed an American company. The presentation included:
The current threat environment;
The role of the Department of Justice in cybercrime and IP;
Developing a relationship with law enforcement before an incident;
The importance of involving law enforcement as soon as an incident occurs; and
Common concerns regarding involvement of law enforcement with an emphasis on the ethical considerations.
The program concluded with closing remarks by NYIPLA Trade Secrets Co-Chair John Moehringer.
For more information about the program, feel free to reach out to Mark Schildkraut or John Moehringer.
Trade Secrets / Cybersecurity: Protecting Your Corporate Clients' Information
Mark Schildkraut, co-chair trade secrets committee
NYIPLA Presidents' Forum
Patent Venue After TC Heartland: Application and Policy Considerations
mitchell epner, programs committee
On Tuesday, April 24, 2018, the subject of the Annual President’s Forum at the Thurgood Marshall Courthouse of the Southern District of New York was “Patent Venue After TC Heartland.” This invitation-only event was moderated by NYIPLA’s immediate Past President Walter E. Hanley and featured three point-counterpoint discussions. First, Brian Ledahl (Russ August & Kabat) and Tim Wilson (SAS Institute Inc.) led a discussion of how Section 1400(b) was being applied and should be applied in the “clicks-and-bricks” business world that has come to pass in the 30 years since the last operative test for patent venue. Second, Henry Haddad (Bristol-Myers Squibb Co.) and Colman Regan (Teva Pharmaceutical Industries Ltd.) led a discussion on the application of Section 1400(b) in the context of ANDA litigation under the Hatch-Waxman Act.
Finally, Charles Macedo (Amster Rothstein & Ebenstein LLP) and Robert Isackson (Leason Ellis LLP) discussed whether the holding in Brunette Machine Works, Inc. v. Kockum Industries, Inc., 406 U.S. 706 (1972), that, as a general rule, foreign defendants do not have venue rights applied in patent litigation, remains (or should remain) good law after TC Heartland. Spirited questioning and conversation was guided by Senior Judge Loretta A. Preska.
Formerly of Hoffmann & Baron LLP, has joined Lucas & Mercanti LLP as Of Counsel.
Formerly of Hogan Lovells, has joined Arnold & Porter as a Partner.
Formerly of Greenberg Traurig LLP, has joined Cole Schotz P.C. as Special Counsel.
MOVING UP & MOVING ON
Formerly of Sharma & DeYoung LLP, has joined Lucas & Mercanti LLP as a Partner.
Formerly of Wilson Sonsini Goodrich & Rosati PC, has joined Wachtell Lipton Rosen & Katz as Of Counsel.
Formerly of Kirkland & Ellis LLP, has joined Crowell & Moring LLP as a Partner.
Formerly of Baker Botts LLP, has joined Leason Ellis LLP as Counsel.
Formerly of Merchant & Gould PC, has joined Fox Rothschild LLP as a Partner.
dianna el hioum
Formerly of Arent Fox LLP, has joined Orrick Herrington & Sutcliffe LLP as a Partner.
Formerly of Polsinelli PC, has joined Goldberg Segalla as a Partner.
gina reif ilardi
Formerly of Locke Lord LLP, has joined Lucas & Mercanti LLP as a Partner.
Formerly of Andrews Kurth Kenyon LLP, has joined Pepper Hamilton LLP as a Partner.
Paul richter jr.
Formerly of Venable LLP, has joined Leason Ellis LLP as a Partner. He is also a Member of the Board of Directors of the NYIPLA.
Formerly of Blank Rome LLP, has joined Leason Ellis LLP as a Partner.
Formerly of McGuireWoods, has joined Leason Ellis LLP as a Partner.
Formerly of Stroock & Stroock & Lavan LLP, has joined BakerHostetler LLP as a Partner.
Formerly of Andrews Kurth Kenyon LLP, has joined Pepper Hamilton LLP as a Partner.
Formerly of Jenner & Block LLP, has joined DLA Piper as a Partner.
Formerly of Holland & Knight LLP, has joined Kilpatrick Townsend & Stockton LLP as a Partner.
Formerly of Andrews Kurth Kenyon LLP, has joined Haug Partners LLP as a Partner.
Formerly of Greenberg Traurig LLP, has joined Cole Schotz PC as a Member.
Last First Membership Firm/Company/law school State
Adickman Cary Active 3+ Quinn Emanuel Urquhart & Sullivan New York
Baldinger Jacob Active 3+ Weiss & Arons New York
Barkaus Keith Active 3+ Amster, Rothstein & Ebenstein New York
Bowen Heather Student Northwestern University School of Law New York
Cole David Associate Paul, Weiss, Rifkind, Wharton & Garrison District of Columbia
Colt Angela Active 3+ Orrick New York
Conlon Nicole Active 3- Patterson, Belknap, Webb & Tyler New York
Dellaporte Christina Student Brooklyn Law School New York
DeLucia Adri Active 3+ Solo Practitioner Connecticut
DeVries Katherine Active 3- Cadwalader, Wickersham & Taft New York
Fede Alexis Active 3- Cooper & Dunham New York
Foit Linda Active 3+ Fox Rothschild New York
Gergely Peter Active 3+ Merchant & Gould New York
Halajian Dina Active 3- Cadwalader, Wickersham & Taft New York
Herring Doug Student Fordham Intellectual Property Institute New York
Hersh Ryan Active 3+ Axinn, Veltrop & Harkrider New York
Hung Howah Corporate Memorial Sloan Kettering Cancer Center New York
Internoscia Brittany Active 3- Cooper & Dunham New York
Jones Kat Student Fordham Intellectual Property Institute New York
Kennedy Dwight Active 3+ Carrieri & Carrieti New York
Leavy Tanya Active 3+ Troutman Sanders New York
Leclerc Alain Associate Goudreau Gage Dubuc Quebec
Lehman Christine Associate Finnegan District of Columbia
LoGiudice Lisamarie Active 3+ Jones Day New York
Melson Terra Student Fordham University School of Law New York
Moss Alexandra Active 3+ Sullivan & Cromwell New York
Rabin Gregory Active 3+ Schwegman Lundberg Woessner Minnesota
Sahachartsiri Bobby Active 3- Cooper & Dunham New York
Strino Paolo Active 3+ Gibbons New York
Stroud Jonathan Associate Unified Patents Inc. District of Columbia
Wang Yuan Yuan Student Fordham Intellectual Property Institute New York
Weiss Zachary Student Benjamin N. Cardozo School of Law New York
Wheeler Margaret Active 3+ Orrick New York
Wilk Matthew Active 3- Cooper & Dunham New York
Wilson Damias Active 3+ Cullen and Dykman New York
Xie Rong Active 3+ Law Offices of Albert Wai-Kit Chan New York
WELCOME NEW MEMBERS
NYIPLA Publications Committee Editorial Team
TaeRa Franklin, Liz Murphy, and Jessica Sblendorio
NYIPLA Executive Office
2125 Center Avenue
Fort Lee, NJ 07024