Keep Your Enemies Closer Part 1

April 18, 2019

The popular press has successfully raised the profile of trade secret misappropriation during the past several years. However, this high profile was primarily directed to: (i) criminal international espionage and the Waymo v. Uber litigation. The prosecution of international theft is ongoing while the Waymo litigation terminated in a 2018 confidential settlement. Beginning in 2016 the federal Defendant Trade Secrets Act [hereinafter “the Act”] provides original subject matter jurisdiction for civil trade secret misappropriation lawsuits between private parties.  Original subject matter exists if a plaintiff’s products and services in interstate or international commerce are related to the disputed trade secrets. Several hundred such lawsuits have already been filed nationally.

The vast majority of lawsuits under the Act arise when former employees wrongfully take their former employer’s trade secrets to (i) their next employer, or (ii) begin a competing business.  The Act explicitly states that threatened misappropriation is actionable although it does not explicitly address inevitable disclosure. Unfortunately, decisions under the Act to date show inconsistency for evidence or allegations necessary to prevent threatened disclosure or inevitable disclosure.  For example, In Primesource Building Products, Inc. v. Huttig Building Products et al., No. 16CV 11468 (N. D. Ill. December 9, 2017) the magistrate judge denied a preliminary injunction to prevent use and disclosure of business information because (i) there was no evidence of wrongful taking, (ii) the defendant employees could perform in new positions without accessing their former employer’s trade secrets and (iii) alleged trade secrets were already stale in a rapidly changing industry.

In Executive Consulting Group LLC v. Baggot, 2018 WL 1942762(D. Colorado April 25, 2018) the court granted a preliminary injunction for actual and threatened misappropriation, because the defendant forwarded confidential information to her personal e-mail account in violation of her employment agreement. In Industrial Packing Supplies, Inc. v. Channell et al., 2018 WL  2560993 (N.D. Ill. June 4, 2018) the court squarely held that an employee would not inevitably misappropriate trade secrets merely because he or she merely moved to a business competitor for similar employment. Instead this court held that there should be evidence to support the former employer’s suspicions.  Recently a Minnesota district court provided criteria for inevitable disclosure, and based in part upon state law these criteria include a subsequent employer’s failure to prevent improper disclosure and use. PrimeTherapeutics LLC v. Beatty et al., 2018 WL 5669270(D. Minn. November 1, 2018).

However, other courts hold that the mere act of accepting employment with an employer’s business competitor is sufficient to trigger liability under the Act. For example, in TFC Partners, Inc. Stratton Amenities, LLC et al., 2019 WL. 369152 (W.D. Texas January 30, 2019), the court granted a temporary restraining order against several defendants, because under Texas state law an employee’s move to a competitor for similar employment establishes a presumption of threatened misappropriation. Similarly,  in Fres-Co Systems USA, Inc. Hawkins et al., 690 Fed. Appx. 72 (3rd Cir. 2017) the court stated that allegations of threatened misappropriation may justify a preliminary injunction if an employee’s previous employment and subsequent employment substantially overlap (i) geographically and (ii) in job description.  The takeaway for practitioners is to review state law for threatened or inevitable misappropriation outcomes, because federal courts often rely at least in part upon state law to interpret the federal Act.

©2019 Adrienne B. Naumann, Esq., all rights reserved. Ms. Naumann does not sponsor or endorse the advertisements and announcements at adriennebnaumann.wordpress.com.


Push Back the Scrimmage Line: Fourth Estate Public Benefit v. Wall Street.com

March 25, 2019

In Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC, 586 U.S. __ (2019) [hereinafter ‘Fourth Estate’ and ‘Wall-Street’] the United States Supreme Court [hereinafter ‘the Court’] held that the United States copyright office [hereinafter ‘copyright office’] must affirmatively grant or deny registration to a work prior to a copyright infringement lawsuit by a claimant.  In so holding the Court resolved a split in the appellate circuits over whether the copyright office’s registration decision was a pre-requisite to commencing a lawsuit. The relevant statutory provision reads in part that a civil suit may commence “after registration has been made” and interpretation of this language was the focus of the litigation. See 1 7 U.S.C. 411(a).

In this case, the district court dismissed Fourth Estate’s copyright infringement lawsuit, because the copyright office had not yet acted upon its registration application for the disputed work. The United States Court of Appeals for the Eleventh Circuit affirmed for the same reasons. Before the Court, Fourth Estate contended that the passive voice of the disputed statutory language evidenced that no action by the copyright office was necessary. Fourth Estate further contended that other provisions of the Copyright Act supported its interpretation because some works do not require registration prior to a lawsuit.  Fourth Estate also asserted that section 411(a) explicitly allows a claimant to commence litigation even if the copyright office refuses registration, and therefore a copyright office decision is unnecessary. In response Wall-Street contended that a copyright office decision granting registration is not the condition precedent; rather the issue is whether the copyright office must either affirmatively either allow or deny registration prior to a lawsuit.  Wall-Street also distinguished Fourth Estates’ examples where registration was not necessary prior to commencing a lawsuit (movies and musical works), by characterizing them as statutory exceptions to section 411(a).

The Court agreed with Wall-Street and affirmed the Eleventh Circuit decision. In particular, the Court stated that the first two sentences of section 411(a) focused upon action by the copyright office.  It also concluded that the last sentence of section 411(a), and by which the copyright office may become a party to the lawsuit, would be unnecessary if a copyright office decision was not required. On this point the Court noted that Congress modified section 411(a) to address instances in which the copyright office refuses registration.  The modification provides notice of the lawsuit to the copyright office and allows a claimant to proceed with a lawsuit after this copyright office refusal.

The court further noted that other provisions of the copyright supported its interpretation of section 411(a). For example, the statutory pre-registration option would be unnecessary if a completed application without more comprised registration. 17 U.S.C. section 408(f).  Finally, the Court dismissed Fourth Estate’s contention that because rights automatically vest in copyrightable works, then these works should be protected in court without copyright office participation.  However, the Court concluded that although by statute ownership may spontaneously arise without the copyright office, protection of these rights requires a registration decision of the copyright office.

©2019 Adrienne B.  Naumann, Esq. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com


Mind The Gap: Helsinn Healthcare v. Teva Pharmaceuticals

March 14, 2019

In Helsinn Healthcare S.A.  v. Teva Pharmaceuticals USA, Inc. et al., 586 U.S. ____ (2019) [hereinafter ‘Helsinn’ and ‘Teva’], the United States Supreme Court [hereinafter ‘the Court’] held that the term “on sale” in 35 U.S.C. 102(a)of the American Invents Act [hereinafter ‘the AIA’] includes both confidential and public commercial sales of an invention. Under this section, together with section 102(b), a sale or offer for sale of an invention triggers a maximum one-year period for submission of a patent application to the United States patent office. After this one year elapses an applicant may no longer submit an application for that particular invention. The pre-AIA statute expressly provided that on sale activities and public use trigger this one-year period.  AIA section 102(a) now expressly reads “public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention [Emphasis added].”  The issue in Helsinn became whether the ‘on sale’ term of the AIA excludes confidential sales because of this additional “or otherwise available to the public” category of activities.

Helsinn originally owned patents for a pharmaceutical that decreases adverse side effects from chemotherapy. Helsinn entered into an agreement with another company to (i) distribute this pharmaceutical at specific doses and (ii) preserve Helsinn’s confidential information received under the agreement. The agreement’s existence was announced in a joint press release, and the actual  agreement was submitted to Securities & Exchange Commission [hereinafter SEC] with the dosages redacted. Nearly two years later Helsinn submitted its first patent application for this pharmaceutical to the U. S. patent office. Thereafter, Helsinn sued Teva for patent infringement when Teva requested government permission to market the pharmaceutical at a dose disclosed in Helsinn’s patents. However, Teva contended that in addition to its three earlier patents, Helsinn’s U.S. Patent No.  8, 598,219 [hereinafter ‘Pat. No. ‘219’] was invalid, because it was submitted after a gap of more than one year after the distribution agreement’s effective date.

Pat. No. ‘219 was the only patent in the litigation governed by AIA 35 U.S.C. 102(a). The district court held that the AIA ‘on sale’ deadline did not apply, because the SEC filing and joint press release did not disclose the claimed dosages. The Court of Appeals for the Federal Circuit reversed, because (i) the existence of the ‘on sale’ event (i.e., the distribution agreement) was publicly disclosed, and (ii) this ‘on sale event’ triggered a one-year application submission deadline even if invention details remained confidential. Because the Federal Circuit held that the sale was public, it did not address whether confidential sales trigger application submission deadlines under section 102(a) of the AIA.

Before the Court, Helsinn contended that under the AIA confidential sales do not trigger a one-year filing deadline, because “or otherwise available to the public” means that only public sales now trigger this deadline.  Nevertheless, the Court held that a commercial sale to a third party who is required to preserve the invention as confidential is also within the scope of the “on sale” AIA deadline.  The Court observed that under pre-AIA precedent a sale or offer of sale does not require that invention details be publicly available to trigger this deadline.   Congress also re-enacted the same ‘on-sale’ language into the AIA, and which is consistent with earlier judicial construction of that phrase.  In sum, the addition of “or otherwise available to the public” is not a sufficient change to conclude that Congress intended to alter the original scope of the term “on sale.”

© 2019 Adrienne B, Naumann, Esq. All rights reserved. Ms. Naumann does not endorse or sponsor advertisements at adriennebnaumann@wordpress.com


Tale of Two Universities

November 25, 2018

In Broad Institute, Inc. et al. v. Regents for the University of California et al., ____ F.3d ___ (Fed. Cir. September 10, 2018) [hereinafter ‘Broad’ and ‘UC’] the United States Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] held that Broad’s bioengineered molecule differed sufficiently from UC’s bioengineered molecule [hereinafter CRISPR-Cas9] to qualify as a separate invention. If this CRISPR-Cas9 could successfully function within animal cells, then the first and sole invention owner would possess enormous commercial potential for medical applications.

UC originally requested the Patent Trial and Appeal Board [hereinafter ‘the Board’] to resolve which entity was first to invent CRISPR-Cas9 that functions within animal cells.   Broad owns patents and patent applications for a method in which CRISPR-Cas9 successfully severs genetic molecules in animal cells. UC also requested patent protection for CRISPR-Cas9 that functions within animal cells. However, UC’s patent application and earlier research publication exclusively disclosed operable isolated CRISPR-Cas9 in environments without any kind of cells.

Before the Board UC maintained that Broad’s animal cell CRISPR-Cas9 was too similar to UC’s CRISPR-Cas9 to qualify as a different invention.  However, Broad observed that soon after publication of UC’s first research paper about CRISPR-Cas9, UC’s own scientists stated that achievement of functional CRISPR-Cas9 in animal cells was uncertain for several technical reasons. Based in large part upon these statements, the Board concluded that UC’s and Broad’s CRISPR-Cas9 sufficiently differed from each other to each be eligible for patents to separate inventions. The Board also relied upon evidence that additional research was required to achieve success in animal cells, and that Broad’s CRISPR-Cas9 implemented this innovation.

Before the Federal Circuit, UC contended in relevant part that the Board had improperly relied upon statements of UC’s inventors and professional witness which were made shortly after its original research publication. However, the Federal Circuit affirmed the Board’s decision because it was supported by credible, reliable and relevant substantial evidence.   In reaching its conclusion the court stated that the Board properly relied upon statements by UC’s inventors and expert which were not prepared for litigation.  The court also looked at UC’s and Broad’s evidence regarding predictable development of other gene editing systems.   On this basis, the court concluded that successful transfer of isolated gene editing systems, such CRISPR-Cas9, to animal cells from other environments remained extremely limited. The court also concluded that such transfers invariably require nonroutine and non-predictable research and development.

After addressing UC’s remaining contentions, the court agreed that there were two distinct inventions, and that there was no reasonable expectation of success for predictably developing Broad’s operable CRISPR-Cas9 in animal cells.  The court further observed that the degree of predictability, and therefore a reasonable expectation of success, is determined on a technology by technology basis.  In this instance, the prior technology offered as evidence by both UC and Broad established that gene editing results, of which CRISPR-Cas9 is one example, were highly unpredictable.

In sum, the judicial result is that UC’s application does not describe the same invention (CRISPR-Cas9) as Broad, there is no sole initial inventor, and so each entity may continue patent prosecution. Whether UC’s application will withstand challenges to patentability during prosecution remains to be seen.

©2018 Adrienne B. Naumann, Esq. Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann.wordpress.com.


If you can’t change your fate change your (IPR) attitude

August 5, 2018

In Oil States Energy Services LLC v. Green’s Energy Group LLC, 584 U.S. ___ (2018) [hereinafter ‘Oil States’ and ‘Green’s Energy’], the United States Supreme Court [hereinafter ‘the Court’] upheld the inter partes review provisions of the America Invents Act [hereinafter IPR] after a challenge based upon the United States Constitution. Briefly stated, to commence an IPR any person may petition the Patent Board of Trials & Appeals [hereinafter ‘the Board’]to review an issued patent for invalidity. The Board may then commence the IPR, but its decision to either do so or to decline the petition is not appealable. However, a party to an IPR which does proceed, and who is dissatisfied with the outcome, may appeal the Board’s decision to the United States Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’].

In this case Oil States challenged the constitutionality of IPR based upon Article III (independent judiciary) and the Seventh Amendment (right to a jury trial). Green’s Energy originally attacked Oil State’s Energy patent in federal district court, and it also petitioned the Board to commence IPR to cancel this same patent. The Board concluded that Oil States’ claims were unpatentable and the Federal Circuit affirmed the Board’s decision. Furthermore, because that Federal Circuit held in a previous decision that IPR did not offend Article III or the Seventh Amendment, it summarily affirmed on that basis as well.

Before the Court, Oil States contended in relevant part that patents are private property to be litigated at common law, but that IPR improperly adjudicates private rights without an Article III judge. Oil States also contended that IPR impermissibly expands the public rights doctrine, because this doctrine requires that the government to enforce agency rules, but IPR resolves disputes between private parties.   Oil States further contended the IPR violates the Seventh Amendment which requires juries for common law disputes. Green’s Energy position was that patents are public rights, because they exclusively originate from a federal statute and regulatory scheme. Green’s Energy also contended that IPR differs from litigation because there is no resolution of ownership, damages or liability.  Therefore, IPR does not offend the Seventh Amendment, because there is no right to a jury in cases involving pubic rights or administrative proceedings.

The Court held that IPR was not unconstitutional, because Congress may properly delegate adjudication of public rights to non-Article III entities. According to the Court, patents clearly qualify as public rights because they remain subject to patent office authority for cancellation through agency procedures such as IPR.  There is also no violation of the Seventh Amendment where Congress properly assigns adjudication to a non-article III agency such as the patent office. However, the Court also stated that its decision was based exclusively upon challenges under Article III and the Seventh Amendment. As a result, this decision did not address or resolve whether patents are personal property for proceedings under the Due Process Clause or Takings Clause of the Constitution.

©2018 Adrienne B. Naumann, Esq. all rights reserved. Ms. Naumann dos not sponsor or endorse the advertisements posted at adriennebnaumann.wordpress.com


When a sale is an authorized sale: Impression Products v. Lexmark International

August 16, 2017

In Impression Products, Inc. v. Lexmark International, Inc., 581 U.S. ___ (2017) [hereinafter ‘Impression Products’ and ‘Lexmark’] the United States Supreme Court [hereinafter ‘the Court’] held that a patent owner’s voluntary transfer of a U.S. patented item for value is the only requirement for an authorized sale of that item. The Court also held that a purchaser’s non-compliance with post sale restrictions does not result in this sale becoming unauthorized. Authorization is critical, because without it the patent owner retains patent rights in the item and a purchaser’s activity may result in patent infringement.  In contrast, with an authorized sale a consumer receives a product of a patented technology free and clear of these patent rights.

Lexmark sold its U.S. patented toner cartridges to Impression Products under a sales agreement which prohibited the purchaser’s reuse and resale. Subsequently, Lexmark filed a U.S. patent infringement suit based upon Impression Products’ sales of toner cartridges initially sold in (i) the United States and (ii) other countries and then imported into the United States. The trial court dismissed the infringement suit for U.S. sales  based upon patent exhaustion, but it did not dismiss the lawsuit based upon foreign sales and patent exhaustion.[1]

The en banc U.S. Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] held that for the patent owner’s sales occurring in the United States, Lexmark’s lawful post-sale restrictions, with adequate notice, prevents patent exhaustion. For Lexmark’s initial international sales, the Federal Circuit held that a U.S. patent owner does not forfeit the right to prevent infringing products from entering the U.S.  The Federal Circuit did not follow Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (2013) [hereinafter ‘Kirtsaeng] which held that that a U.S.  copyright owner does not retain rights to tangible items containing copyright if the owner voluntarily sells these items outside the United States.

The Court reversed the Federal Circuit and held that a U.S. patentee’s voluntary sale of patented items in the United States is authorized and exhausts all U.S. patent rights in those products. It further held that a sale is authorized even if there is non-compliance with contractual post-sale restrictions. The Court relied in part upon Quanta Computers, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) which held that a patentee’s authorized sale through its licensee removed products from patent protection. The Court stated that extending U.S. patent rights beyond the first sale adversely affects business, especially in transactions with used products. However, the Court further stated that a breach of contract lawsuit for non-compliance with post-sale restrictions was a possible remedy.

For international sales, the Court found Kirtsaeng controlling, and so a patentee’s authorized sale of a product item anywhere in the world also exhausts patent rights. In sum, post-sale restrictions and sale location do not result in patent infringement by the purchaser, because the only relevant inquiry is whether the patentee voluntarily transferred an item of patented technology for a one-time financial reward.

© 2017 Adrienne B. Naumann, Esq. All rights reserved.

Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.

[1] Patent exhaustion is defined as the absence of patent rights in a product after a patentee’s voluntary sale of a product, and where that product is a tangible representation of a U.S. patented technology. A licensee in the present context is defined as those rights transferred to another by a patent owner to use, sell or create the patented technology, but without transferring ownership of the patented technology.


It’s NOT complicated Part 2: TC Heartland v. Kraft Food Group Brands

August 15, 2017

In TC Heartland LLC v. Kraft Foods Group Brands, 581 U.S. ___ (2017) the U.S. Supreme Court [hereinafter ‘the Court’] held that U.S. patent infringement litigation takes place only in the state in which a corporation is incorporated. To arrive at this holding the Court concluded that the general federal venue statute at 28 U.S.C. 1391 does not define corporate residence in the patent infringement litigation venue statute.  28 U.S.C. 1400(b).[1]

TC Heartland LLC [hereinafter ‘Heartland’] is a corporation that is organized under Indiana law and headquartered in Indiana. Kraft Foods Group Brands [hereinafter ‘Kraft’] is organized in Delaware with its principle place of business in Illinois. Kraft filed a lawsuit in Delaware based upon Heartland’s alleged infringement of its patents for water enhancer products. Heartland’s position was that the Delaware trial court had no personal jurisdiction over Heartland, or in the alternative that venue should be transferred to Indiana. However, the trial court concluded there was personal jurisdiction over Heartland and denied its motion for a transfer of venue. Before the U.S. Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] Heartland contended that Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957) squarely held that venue for patent infringement litigation, based upon corporate residence, was exclusively in the state in which a corporation is incorporated. Nevertheless, the Federal Circuit agreed with the trial court, because the general federal venue statute explicitly states (i) a corporation is a resident of any judicial district subject to a court’s personal jurisdiction in that district and (ii) this definition applies “for all venue purposes,” including corporate residence in section 1400(b). 28 U.S.C. 1391(c).

The Court reversed the Federal Circuit decision and held that “residence” in the patent infringement venue statute refers exclusively to the state of incorporation for domestic corporations. It observed that amendments to section 1391 after Fourco did not result in Fourcos definition of corporate residence in section 1400(b) becoming obsolete. The Court further observed that Fourco is still good law, neither party has asked the Court to revisit its holding, and that Congress has not amended section 1400(b) since Fourco.   Therefore, the definition of corporate residence in section 1391(c) does not apply, because the section 1391 pre-amble reads “except as otherwise provided by law,” and Fourco qualifies as an exception.

In sum, section 1400(b) does not include the broader definition of corporate residence of the general venue statute.  The Court concluded by remanding the case to the Federal Circuit for further proceedings consistent with its decision.

© 2017 Adrienne B. Naumann. All rights reserved.

Ms. Naumann does not sponsor or endorse the advertisements at adrienneb.naumann.wordpress.com.

[1]Personal jurisdiction is defined as the power of a court over an actual person or entity. Venue is defined as the location where either party in a lawsuit may require the case to proceed. In other words, venue is a subset of locations where there is personal jurisdiction over the parties to the lawsuit.