IP Update, Vol. 22, No. 3

Still Open for Discussion: Venue Based on Presence of Servers

The US Court of Appeals for the Federal Circuit elected not to decide en banc whether servers or similar equipment in third-party facilities constitute a regular and established place of business under the patent venue statute. In re: Google, Case No. 18-152 (Fed. Cir. Feb. 5, 2019) (per curiam) (Reyna, J, dissenting).

After being sued by Seven Networks in the Eastern District of Texas, Google filed a motion to dismiss for lack of venue, arguing that the presence of its servers in a data center operated by a third party did not establish a regular and established place of business. The district court denied the motion, and Google petitioned the Federal Circuit for a writ of mandamus directing the district court to dismiss or transfer the case for improper venue. In an unpublished opinion, the Federal Circuit denied the petition, finding mandamus inappropriate because it was “not known if the district court’s ruling involves the kind of broad and fundamental questions relevant to § 1400(b) and it would be appropriate to allow the issue to percolate in the district courts so as to more clearly define the importance, scope, and nature of the issues.” Google filed a petition for panel rehearing and a petition for rehearing en banc, which the Federal Circuit denied.

Judge Reyna issued a dissenting opinion, arguing that the majority ignored the purpose of mandamus relief and left unanswered critical issues that increasingly affect venue in legal actions involving e-commerce. Judge Reyna argued that mandamus review is part of the Federal Circuit’s supervisory and instructional duty, and given the nature of its exclusive jurisdiction over federal questions involving patent law, the Court has a duty to ensure uniformity and predictability. He noted that the Federal Circuit has taken up several cases since TC Heartland (IP Update, Vol. 20, No. 5) to ensure that § 1400(b) is not given expansive construction, and pointed to growing uncertainty among district courts regarding the requirements of § 1400(b) when a company conducts business virtually through servers or similar equipment in the district. He argued that the issues in the present case are relevant to every technology company that conducts business over the internet, and that the denial of Google’s petition was a signal to file cases against Google in the Eastern District of Texas. In support, he noted that since October 29, 2018, when the original panel decision issued, 34 new cases have been filed against Google in the Eastern District.

Judge Reyna also noted that in justifying its mandamus denial, the Federal Circuit found that the district court focused on specific details of Google’s contracts with internet service providers, including Google’s “strong control” of servers. While Judge Reyna agreed that while possession and control over a place are important factors in a venue analysis, he argued that the Court should have considered these factors en banc because the district court’s holding could be interpreted to stand for the proposition that owning and controlling computer hardware involved in some aspect of the company is sufficient to establish venue. He found that the current case would have allowed the Court to decide to what extent a defendant must be “present” in the district to have a regular and established place of business, and he saw no principled reason to wait for this question to “percolate” further among district courts.

Practice Note: By the time the Federal Circuit decides the question of venue based on location, possession and control of servers, it is possible that dozens of cases will have proceeded through motion practice, discovery, claim construction or trial before being potentially thrown out by a reversal of a ruling on a motion to dismiss for improper venue.

Sovereign Plaintiff Not Immune from Infringement Defenses

Affirming dismissal of a patent infringement lawsuit on § 101 eligibility grounds, the US Court of Appeals for the Federal Circuit found that a patent holder bringing an infringement action waives sovereign immunity against all defenses, including subject-matter eligibility. University of Florida Research Foundation, Inc. v. General Electric Co., Case No. 18-1284 (Fed. Cir. Feb. 26, 2019) (Moore, J).

The University of Florida Research Foundation (UFRF) sued several General Electric (GE) entities for infringement of a patent claiming a method and system for “integrat[ing] physiologic data from at least one bedside machine.” The representative claim recited the steps of (1) receiving data, (2) converting the data from one format to another, (3) “performing at least one programmatic action” on the converted data, and (4) “presenting results . . . upon a graphical user interface.” GE moved to dismiss, arguing that the patent claimed ineligible subject matter under 35 USC § 101. After the district court granted GE’s motion, UFRF appealed.

On appeal, UFRF argued that the district court did not have subject matter jurisdiction to hear GE’s eligibility challenge and that the ineligibility determination was incorrect on the merits.

Addressing the jurisdictional challenge, the Federal Circuit explained that UFRF’s filing of the infringement suit waived sovereign immunity against any defenses to infringement, including subject-matter eligibility. Turning to the merits, the Court found that at Alice step one, the claim was directed to the abstract idea of “collecting, analyzing, manipulating, and displaying data.” At Alice step two, the Court concluded that the claim did no “more than simply instruct the practitioner to implement the abstract idea . . . on a generic computer.” Accordingly, the Court affirmed that the claims were patent ineligible.

Practice Note: Sovereign patent holders must accept the risk of patent invalidation on any ground that comes with filing an infringement suit.

Absent Clear Disavowal, Preferred Embodiment Does Not Limit Claim Construction

In a case that hinged on the construction of a disputed claim term, the US Court of Appeals for the Federal Circuit explained that the district court erred in limiting the disputed claim based on the preferred embodiment and other intrinsic evidence. Cont’l Circuits LLC v. Intel Corp., Case No. 18-1076 (Fed. Cir. Feb. 8, 2019) (Lourie, J).

Continental Circuits sued Intel Corp and Intel’s supplier, alleging infringement of four related patents directed to a multilayer electrical device having a tooth structure and methods for making the same. The parties disputed the proper construction of the terms “surface,” “removal” and “etching” of “a dielectric material” or “epoxy.” A determination of whether the accused devices infringed depended on resolving whether these disputed claim terms should be limited to a “double desmear process.”

The district court construed the disputed terms to require that “surface,” “removal” or “etching” of the dielectric material be “produced by a repeated desmear process.” The district court found that Intel “met the exacting standard required” to read a limitation into the claims, and that the prosecution history, in which Continental submitted an expert declaration to overcome indefiniteness and written description rejections, corroborated the court’s construction. The district court found that the declaration’s explanation that the specification-disclosed “etching” process uses “two separate swell and etch steps” as “a technique which forms the teeth” “clearly describe[d] the patented method as involving two etching processes.” The district court also found that extrinsic documents produced by the inventors stating the use of a “two pass desmear cycle” and “a double pass desmear to achieve the tooth structure” provided “helpful corroboration,” although they were “not reliable enough to be dipositive.” Based on the district court’s construction, the parties stipulated noninfringement, and the court entered judgment. Continental appealed.

On appeal, Continental argued that the plain language of the claims did not include a repeated desmear process and the specification did not clearly and unmistakably limit the claims to require a repeated desmear process. Continental argued that even if the preferred process discussed a repeated process, it was improper to limit the claims to the preferred embodiment since the expert declaration did not include a clear and unmistakable disavowal for prosecution disclaimer purposes and the inventor documents merely reflected the inventors practicing the preferred embodiment. Intel argued that the patentees repeatedly disparaged and expressly disavowed the single desmear process and expressly defined “the present invention” as requiring a repeated desmear process. Intel also argued that the expert declaration reiterated that “the claimed invention is directed to surface roughening performed by ‘two separate’ passes of a desmear process” and that the inventor documents demonstrated an inability to obtain the desired levels of roughening using a single-pass desmear process.

The Federal Circuit concluded that the district court erred in limiting the claims. The Court began with the observation that none of the asserted claims recited a “repeated desmear process” and thus were not so limited based on the plain language. The Court also concluded that none of the specification statements relied upon by the district court rose to the level of “a clear and unmistakable disclaimer” or “expressions of manifest exclusion or restriction, representing a clear disavowal of claim scope,” citing to phrases such as “[o]ne technique,” “can be carried out,” “for example” and “a way of.” Given that one goal of the specification is to provide a best mode, and Federal Circuit case law  that holds that even when the specification describes only a single embodiment, the claims will not be read restrictively absent a clear intention to limit claim scope, the Court viewed these phrases from the specification as simply one method to make the invention. Similarly, arguments distinguishing double desmear as “contrary to” or “in stark contrast” to single desmear were not considered clear and unmistakable limiting statements, since “[m]ere criticism of a particular embodiment” is not clear disavowal of claim scope.

The Federal Circuit further found that “[a] novel product that meets the criteria of patentability is not limited to the process by which it was made.” The Court found that to read a process limitation into a product claim, the patentee must have “made clear that the process steps are an essential part of the claimed invention.” The Court found that the repeated desmear process was not “an essential part” of the claimed electric device having a tooth structure, but instead expressed a preference or comparison with prior art techniques. Thus, concluding that the specification and statements revealed preferred, non-limiting embodiments, the Court vacated the district court’s construction and remanded for further proceedings.

Merely Contemplating Alternative Embodiment May Satisfy Written Description

Addressing a decision granting summary judgment of invalidity due to lack of sufficient written description and noninfringement, the US Court of Appeals for the Federal Circuit explained that a patent holder’s contentions were sufficient to at least raise a genuine issue of material fact and thereby avoid a summary determination. CenTrak, Inc. v. Sonitor Techs. Inc., Case No. 17-2510 (Fed. Cir. Feb. 14, 2019) (Chen, J).

CenTrak sued Sonitor for infringement of a patent directed to locating portable devices using ultrasonic signals. Sonitor responded by asserting invalidity based on lack of written description for claims directed to using ultrasonic signals. All of the embodiments described in the patent involve infrared signals rather than ultrasonic, but the specification included two sentences stating that the inventors also contemplated using ultrasonic signals. Sonitor also asserted noninfringement because Sonitor did not sell pre-existing networking elements that were used in final assembly of the accused system.

Sonitor moved for summary judgment on both grounds, which the district court granted. Regarding invalidity, the district court held that mere contemplation of using ultrasonic signals was not sufficient written description support in view of the technological differences from the infrared signals used in the detailed embodiments. As for noninfringement, the district court held that Sonitor’s contribution of a portion was insufficient to qualify as making the infringing system. CenTrak appealed.

The Federal Circuit reversed both the invalidity and noninfringement decisions. As for written description, the Court distinguished the patent’s explicit contemplation of ultrasonic signals from previous cases where written description was found to be lacking because there was no mention or reference whatsoever to the alternative approach. The Court found that the mention of ultrasonic signals was enough to avoid summary judgment, and explained that the ultimate resolution would depend on a factual determination about the complexity and predictability of the particular technology at issue.

As for noninfringement, the Federal Circuit explained that completing a system can in fact constitute an act of infringement. The Court distinguished previous cases where a party that contributed a portion of a complete infringement was held not to be an infringer, but pointed out that in each case, someone else who completed the assembly was identified as the potential infringer.

Circuits Play Jurisdictional Hot Potato with Walker Process Claim

A game of “hot potato” between the US Courts of Appeals for the Federal and Fifth Circuits has been resolved, ending a disagreement over the scope of the Federal Circuit’s jurisdiction. After a patent infringement defendant appealed the dismissal of its Walker Process claim against the patent owner to the Federal Circuit, the Court concluded that it lacked jurisdiction and transferred the appeal to the Fifth Circuit. Xitronix Corp. v. KLA-Tencor Corp., 882 F.3d 1075 (Fed. Cir. 2018) (Moore, J). The Fifth Circuit then transferred the case back. Xitronix Corp. v. KLA-Tencor Corp., Case No. 18-50114 (5th Cir. Feb. 15, 2019) (Higginson, J). Finally, the Federal Circuit accepted jurisdiction of Xitronix’s appeal. Case No. 16-2746 (Fed. Cir. Mar. 14, 2019).

Xitronix and KLA both make optical inspection devices used for quality control in the production of semiconductor wafers and have been engaged in multiple rounds of litigation over the past decade. In 2008, Xitronix sought a declaratory judgment that a KLA patent was invalid, and a jury entered a verdict in Xitronix’s favor. The present case began in December 2014, with Xitronix bringing a single Walker Process monopolization claim against KLA. Xitronix alleged that KLA obtained the challenged patent, a successor to the invalidated  patent, through fraud on the US Patent and Trademark Office (PTO). Specifically, Xitronix alleged that KLA made material misrepresentations to the PTO regarding the 2008 litigation. A federal district court disagreed and granted KLA summary judgment. Xitronix then appealed to the Federal Circuit.

Despite the parties’ arguments to the contrary, the Federal Circuit ruled that it lacked jurisdiction, rejected a petition for en banc rehearing and transferred Xitronix’s appeal to the Fifth Circuit. In past cases, the Federal Circuit has exercised jurisdiction over Walker Process claims like Xitronix’s. However, as the Court explained, the 2013 Supreme Court of the United States decision Gunn v. Minton changed the scope of its jurisdiction. Gunn did not directly address the allocation of patent-related cases between the Federal Circuit and regional circuits, but clarified when patent-related claims must be brought in federal district court rather than state court. Nevertheless, because the district court and the Federal Circuit patent jurisdiction statutes use the same language, the Federal Circuit concluded that these two statutes must be read in parallel. Thus, the Court applied the four-factor test identified in Gunn to determine its own jurisdiction over Xitronix’s Walker Process claim. The Court concluded that one of the Gunn factors—that the claim must raise a “substantial” federal patent issue—was not met because, among other things, the case would not invalidate or revive any patent claims.

The Fifth Circuit disagreed with the Federal Circuit’s jurisdictional analysis and transferred the appeal back. First, the Fifth Circuit disagreed with the Federal Circuit’s conclusion that Xitronix’s claim did not raise a substantial patent issue. The Court noted that a finding that KLA deceived the PTO would effectively render its challenged patent unenforceable in future cases because any potential infringer would have a “readymade” inequitable conduct defense. In addition, the Fifth Circuit questioned whether Gunn actually changed the scope of the Federal Circuit’s jurisdiction. In the Fifth Circuit’s view, the Gunn Court gave no indication that it meant to alter the allocation of cases among the circuit courts.

After receiving this “hot potato” back from the Fifth Circuit, the Federal Circuit decided to accept jurisdiction. Although the Court did not agree with all of the Fifth Circuit’s legal analysis, it determined that the Fifth Circuit’s ultimate conclusion was “plausible.” The Federal Circuit rejected the notion that Gunn did not change the scope of its own jurisdiction, but found plausible the Fifth Circuit’s conclusion that Xitronix’s claim raised a substantial patent issue.

Practice Note: Going forward, the scope of the Federal Circuit’s jurisdiction over Walker Process and other patent-related claims is not entirely clear. The Federal Circuit’s initial decision to transfer Xitronix’s claim suggests that it may decline to hear similar Walker Process claims. However, the Federal Circuit did find the Fifth Circuit’s reading of Gunn plausible and may be open to similar arguments regarding the scope of its jurisdiction.

Representation of Opposing Party’s Corporate Subsidiary Can Cause Disqualification

The US Court of Appeals for the Federal Circuit concluded that a firm’s ongoing representation of the opposing parties’ indirect subsidiary and affiliate in three patent infringement appeals created a concurrent conflict of interest, and therefore granted the opposing parties’ motion to disqualify. Dr. Falk Pharma GmbH v. Generico, LLC, Case Nos. 17-2312, -2636, 18-1320, -2097 (Fed. Cir. Feb. 8, 2019) (O’Malley, J).

Valeant Pharmaceuticals International and Salix Pharmaceuticals moved to disqualify Katten Muchin Rosenman as counsel for Mylan in several patent infringement appeals. The motions to disqualify stemmed from Katten’s ongoing representation of Bausch & Lomb (an indirect subsidiary of Valeant and an affiliate of Salix) in trademark litigation, and from Katten’s concurrent representation of Mylan, which was adverse to Valeant and Salix in the patent infringement matters.

To support its motion for disqualification, Valeant argued that it was a longstanding Katten client, both directly and through its subsidiaries. As part of its representation of Bausch & Lomb, Katten signed an engagement letter that generally governed the overall representation between Katten and Valeant—the ultimate parent of Bausch & Lomb. The engagement letter incorporated by reference Valeant’s outside counsel guidelines, which in turn governed the relationship between outside counsel and Valeant, its subsidiaries and affiliates. Valeant and Salix thus argued that Katten’s representation of Mylan presented a concurrent conflict through the terms of the engagement letter itself and because Valeant and its subsidiaries are so interrelated that representation of one constitutes representation of all.

The Federal Circuit applied regional circuit law, under which the Model Rules of Professional Conduct apply to disqualification matters. The Court reasoned that Rule 1.7(a) establishes a concurrent conflict where “the representation of one client will be directly adverse to another client.” Although comments to the rule noted that representation of a corporation does not necessarily constitute representation of affiliated entities such as a parent or subsidiary, the comments also recognized that representation of affiliated entities would be barred where the circumstances warranted that the affiliate also be considered a client. The Court explained that such circumstances could arise either through the express language of the engagement letter or where the affiliates are so interrelated that representation of one constitutes representation of all.

In the case at hand, the Federal Circuit found that both the express terms of the engagement letter and the interrelatedness of the corporate entities supported disqualification. The Court reasoned that because the engagement letter expressly stated that it governed the general relationship between Katten and Valeant, the text on its face showed that the client relationship extended beyond Bausch & Lomb to at least its parent, Valeant. The Court also cited to the outside counsel guidelines, which included language defining the client relationship to include “subsidiaries and affiliates.” Even if the engagement letter was ambiguous, the Court reasoned that the entities were so interrelated as to constitute one client because the entities depended financially on one another and shared a common infrastructure. As to financial contribution, the Court found that Bausch & Lomb contributed significant revenues to Valeant. As to a common infrastructure, the Court noted that the two affiliate companies shared the same in-house legal department as the parent company, and the parent company provided support services such as accounting, cash management, employee benefits, finance, human resources, travel, computer systems, insurance and payroll services. Thus, the Court concluded that the entities were financially interdependent and shared a high degree of operational commonality. Under the circumstances, the court concluded that an ethical wall would be insufficient to overcome the concurrent conflict.

Practice Note: This case demonstrates that companies and counsel should be mindful of broad outside counsel guidelines that could extend a client relationship beyond the specific corporate entity that is the subject of the representation. Moreover, companies and counsel should be mindful that where affiliated corporate entities exist, they may create conflicts of interest in legal representation through either the express terms of the engagement or the interrelatedness of the affiliated entities.

Stick to the Pleading when Deciding Motion to Dismiss

The US Court of Appeals for the Federal Circuit reversed a dismissal of a complaint for failing to state a claim under FRCP 12(b)(6), finding error in the district court’s use of judicial notice to do fact-finding outside the pleadings. Coda Development S.R.O. v. Goodyear Tire & Rubber Co., Case No. 18-1028 (Fed. Cir. Feb. 22, 2019) (Prost, CJ).

František Hrabel, CEO of Coda Development, purportedly developed self-inflating tire (SIT) technology. In 2008, at the request of General Motors, Goodyear Tire contacted Coda, requesting a meeting to discuss and commercialize the technology. Before the meeting, the parties signed a nondisclosure agreement (NDA). The parties met twice in 2009, and during the second meeting, Goodyear representatives examined and photographed a functional prototype of Coda’s SIT. Goodyear then stopped communicating with Coda but secretly filed for, and obtained, a patent on an SIT. Coda learned of the Goodyear patent through a retired Goodyear employee in 2012. Between 2012 and 2015, 11 additional patents were issued to Goodyear, covering various components and devices for an SIT. None of these Goodyear patents named Hrabel as an inventor.

Coda sued to correct inventorship on the 12 Goodyear patents and for trade secret misappropriation. Goodyear moved to dismiss under FRCP 12(b)(6), arguing that Coda failed to plead facts supporting Hrabel’s conception of the claimed inventions. It further asserted that Coda’s misappropriation claim was time-barred. Coda opposed. In its response, Goodyear first referenced a 2008 article by Hrabel and argued that the article publicly disclosed everything that Coda asserted to be novel, proprietary and confidential. The district found that the Hrabel article was “judicially noticeable” as a “public-record fact” and denied Coda’s motion to strike. It further denied Coda’s request for leave to file sur-reply to address the Hrabel article.

Turning to Goodyear’s motion to dismiss, the district court determined that Coda had not plausibly demonstrated that Hrabel was a sole inventor or even a joint inventor on the Goodyear patents. The district court also dismissed Coda’s trade secret misappropriation claim as time-barred. Coda moved to amend the judgment under FRCP 59(e) and also for leave to file an amended complaint with additional factual details. The district court praised Coda’s amended complaint for its “amazing clarity” but denied both post-judgment motions, finding that the new facts should have been included in the original complaint. Coda appealed.

Construing the original complaint in the light most favorable to Coda, the Federal Circuit found that the facts pled made the correction of inventorship claims plausible. The Court also concluded that the district court’s reliance on materials outside the pleadings when granting the motion to dismiss, without converting that motion into a summary judgment motion, was procedurally erroneous because it denied Coda a reasonable opportunity to present all pertinent evidence. The Court also explained that since there was a reasonable dispute as to issues associated with the Hrabel article (such as scope of its disclosure compared to the scope of what proprietary technology was allegedly misappropriated), taking judicial notice of the article and relying on it to dispose of a FRCP 12(b)(6) motion was improper.

The Federal Circuit further concluded that dismissal of the trade secret misappropriation claim as time-barred during the pleading stage was improper given the fact-intensive nature of this inquiry. The Court also remarked that the district court should have freely afforded Coda an opportunity to amend its complaint and that its refusal to do so was “troubling.”

Mootness on Appeal from PTAB

The US Court of Appeals for the Federal Circuit dismissed an appeal of an inter partes review (IPR), finding that the challenger lacked appellate standing because it had terminated its attempts to develop the infringing product. Momenta Pharmaceuticals, Inc. v. Bristol-Myers Squibb Co., Case No. 17-1694 (Fed. Cir. Feb. 7, 2019) (Newman, J).

Momenta Pharmaceuticals filed a petition for IPR of a Bristol-Myers Squibb patent describing formulations of Orencia® after Momenta began to develop an Orencia® biosimilar. The Patent Trial and Appeal Board (PTAB) ultimately upheld the validity of the claims, and Momenta appealed to the Federal Circuit under 35 USC § 319.

Bristol-Myers moved to dismiss the appeal, arguing that Momenta did not have standing in federal court under the requirements of Article III of the Constitution. In support of its argument, Bristol-Myers noted that Momenta’s Phase 1 clinical trial of its Orencia® biosimilar was unsuccessful and the drug was not being pursued. Momenta later filed a letter with the Federal Circuit in accordance with FRAP 28(j) that contained a press release indicating that Momenta was in discussions with its collaborator, Mylan, about discontinuing development of the Orencia® biologic. Bristol-Myers subsequently filed a letter with the Court containing documents that evidenced Momenta had made the decision to terminate its joint efforts with Mylan to develop the Orencia® biologic. Bristol-Myers argued that this demonstrated Momenta had no injury to assert and therefore lacked standing.

In response, Momenta presented several arguments to show it had the requisite standing. Momenta asserted that AIA estoppel provisions qualified as its injury in fact. The Federal Circuit found this argument unpersuasive since Momenta was no longer engaged in conduct that could lead to infringement litigation. Momenta also argued that it had standing based on a potential future royalty from Mylan should Mylan develop an Orencia® biosimilar. The Court found this possible injury to be overly speculative and unsupported by precedent. Momenta further argued that since it was initially engaged in infringing activity, it had standing for the entire appeal. Again, the Court found the argument unpersuasive, explaining that “an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.”

The Federal Circuit also explained that there is precedent for the proposition that there is no standing when a party is not engaged in any potentially infringing activity or is merely asserting possible future economic interest, but noted that standing may exist where a product is not yet on the market but there are concrete future plans for it to be there that create “a substantial risk of future infringement.” The Court found that this was not the case with Momenta, since it had no concrete plans to develop a product.

The Federal Circuit also recognized that there are relaxed standards with regards to standing in cases of statutorily authorized rights of appeal, such as appeals under § 319. Specifically, the immediacy and redressability components of standing may be relaxed in these cases. However, the Court clarified that there still must be an injury in fact to meet the constitutional requirements for standing, finding that “Article III standing requires a concrete injury even in the context of a statutory violation.” Thus, the Court dismissed the appeal for lack of standing.

Same Claim, Different Petitioner: Second IPR Permitted During Pendency of First

Addressing discretionary denial of institution of a new inter partes review (IPR) petition where the challenged claim is already the subject of an instituted IPR proceeding, the Patent Trial and Appeal Board (PTAB) decided not to exercise its discretion to deny a new IPR petition because the already-instituted IPR proceeding involved a different entity relying on different prior art. Samsung Elecs. Co., Ltd. v. Iron Oak Techs., LLC, Case No. IPR2018-01554 (PTAB Feb. 13, 2019) (Peslak, APJ).

Iron Oak owns a patent directed to the automated selection of a communication path in mobile communications. Samsung filed a petition for IPR challenging a claim of Iron Oak’s patent. Iron Oak’s patent is the subject of numerous civil actions, and the challenged claim was the subject of an already-instituted IPR proceeding. In its preliminary responses, Iron Oak argued that the new IPR petition should be denied because institution of a second IPR on the same claim, even on different grounds, would not preserve the PTAB’s resources, and that a final written decision in favor of the patent owner could result in a resolution where a number of validity challenges continued to be raised, including challenges based on the identical art and arguments contained in the petition.

Interpreting Iron Oak’s argument as a request for the PTAB to exercise its discretion in denying institution, the PTAB applied the factors set forth in General Plastics for evaluating follow-on petitions. The PTAB found that because Samsung was a different entity than the petitioner in the already-instituted IPR and was relying on different prior art, these factors did not weigh in Iron Oak’s favor. In rejecting Iron Oak’s argument, the PTAB noted the potential prejudice to Samsung if institution was denied and the already-instituted IPR was later terminated. The PTAB also noted that the multiple petitions were a direct consequence of Iron Oak’s own litigation activity. Thus, the PTAB decided not to exercise its discretion to deny institution.

Shared Interest in Invalidating Asserted Claims Can Create Privity and RPI

Addressing the impact of Applications in Internet Time (IP Update, Vol. 21, No. 8) in an inter partes review (IPR) proceeding, the Patent Trial and Appeal Board (PTAB) determined that a petition was time barred because an unnamed real-party-in-interest (RPI) and privy of the petitioner had been served with a complaint more than one year earlier. Ventex Co., Ltd. v. Columbia Sportswear North America, Inc., Case No. IPR2017-00651 (PTAB Jan. 24, 2019) (Cocks, APJ). The PTAB determined that structured, pre-existing, contractual and well-established business dealings between entities can create an RPI relationship and made the unnamed party a privy of the petitioner.

Ventex manufactures a special “Heatwave” fabric, and Seirus creates consumer products using Ventex’s fabric. Columbia Sportswear filed a district court infringement action against Seirus’s products that used the Heatwave fabric supplied by Ventex. More than one year after Seirus was served with a complaint for infringement, Ventex filed an IPR challenging certain claims of Columbia’s patent. The PTAB instituted a trial. After oral argument—but before a final decision—the PTAB asked for additional briefing on how the US Court of Appeals for the Federal Circuit’s intervening decision in Applications in Internet Time affected whether Seirus should have been named in the petition as an RPI or privy of Ventex.

After reviewing the relationship between Ventex and Seirus, the PTAB determined that the totality of circumstances showed that Seirus was an RPI and privy of Ventex. The parties had done business together since 2103 under a supplier agreement that turned into an exclusive supply agreement in 2016. The agreement also required Ventex to indemnify Seirus. The PTAB found that Seirus was a clear beneficiary of Ventex’s IPR because the Ventex-supplied fabric was the very reason Seirus’s products had been accused of infringement. Combined with the parties’ long-standing and exclusive relationship, this meant that the parties shared a mutual interest in one another’s financial success and, therefore, the outcome of the IPR. As a result, it was reasonable to conclude that Ventex filed the IPR, at least in part, to benefit Seirus. Other evidence supported the PTAB’s finding. In particular, Ventex admitted that the IPR was filed to aid “its customers” and “prospective buyers” of its Heatwave fabric, who felt threatened by Columbia’s assertion of its patent.

The PTAB rejected petitioner’s argument that because the set of claims challenged in the IPR was not the same set asserted in district court, Ventex’s IPR did not represent Seirus’s interests. Although there was not perfect overlap between the sets of claims, Seirus would benefit from Ventex’s IPR for the subset of claims that did overlap.

Not only did the PTAB conclude that Seirus was an RPI, it also determined that Seirus was a privy of Ventex. In addition to the relationship discussed above, the PTAB cited to various payments Seirus made to Ventex. The PTAB found that the timing, structure and amounts of the payments suggested a correlation with the legal fees incurred by Ventex in connection with the dates associated with the preparation and filing of the IPR. As such, the PTAB found that Ventex was acting as proxy for Seirus and was therefore Ventex’s privy. Having found that Seirus was a privy and RPI of Ventex, the PTAB vacated its institution decision because the petition was time-barred under § 315(b).

Practice Note: A subsequent IPR panel interpreted Applications in Internet Time as maintaining the general rule that, absent other factors, a parent need not be named as an RPI in a subsidiary’s IPR. Puzhen Life USA, LLC v. ESIP Series 2, LLC, Case No. IPR2017-02197 (PTAB Feb. 27, 2019) (Kaiser, APJ). The decision recognized, however, the lack of a bright line test. The inquiry must determine whether the non-party is a clear beneficiary with a pre-existing relationship with the petitioner, where the relationship results in benefits that flow from the petitioner’s decision to file an IPR.

Ethical Duties to Former Client in Substantially Related Matters

The Patent Trial and Appeal Board (PTAB), acting under ethical rules 37 CFR 11.109 and 11.108, granted a patent owner discovery in relation to a potential disqualification motion in connection with several covered business method (CBM) patent reviews, notwithstanding the target law firm’s representation that it would not participate in the portion of the proceeding involving the patents it helped to prosecute. Miami International Holdings, Inc. v. NASDAQ ISE, LLC, Case Nos. CBM2018-00020, -00021, -00029, -00030, -00031, -00032 (PTAB Feb. 15, 2019) (Sawert, APJ).

NASDAQ sought discovery for purposes of bringing a motion under Rule 11.109, which prevents a practitioner from representing a party adverse to a former client in substantially similar proceedings, to disqualify Fish & Richardson from representing Miami International Holdings (MIAX) in the CBM proceedings MIAX brought against certain NASDAQ patents. In its motion, NASDAQ argued that the PTAB should adopt a magistrate judge’s finding in a related matter that the defense of MIAX, including the CBM reviews challenging the validity of the patents asserted against MIAX, was a collaborative effort with MIAX’s other law firm, Reed Smith.

From 1998 to 2011, Fish represented NASDAQ in intellectual property matters and prosecuted many patents relating to electronic trading technology on behalf of NASDAQ, including several patents involved in the CBM proceeding. With regard to the specific patents challenged in the case at hand, Fish represented MIAX against some of the patents, i.e., the ones that Fish did not prosecute (Fish CBMs), and Reed Smith represented MIAX against the others (Reed Smith CBMs).

The PTAB granted a rare reconsideration of an earlier ruling on discovery in order to clarify the ethics rules regarding former representation in substantially related matters. In partially granting patent owner’s motion, the PTAB rendered a tutorial on 37 CFR §§ 11.109(a) and 11.109(c). As the PTAB explained, § 11.109(a) provides that “[a] practitioner who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.” Section 11.109(c) provides that:

A practitioner who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:

(1) Use information relating to the representation to the disadvantage of the former client except as the USPTO Rules of Professional Conduct would permit or require with respect to a client, or when the information has become generally known; or

(2) Reveal information relating to the representation except as the USPTO Rules of Professional Conduct would permit or require with respect to a client.

The PTAB applied § 11.109(a) and ABA Model Rule 1.9 (the latter as to what constitutes a “substantially related” matter) in order to determine whether Fish’s representation of MIAX in the Fish CBMs qualified as “the same or a substantially related matter in which” MIAX’s “interests are materially adverse to the interests of” NASDAQ. The PTAB found that the Fish CBMs did not involve the “same transaction or legal dispute.”

In regards to the Reed Smith CBMs, the PTAB found that Fish’s alleged involvement did not implicate 37 CFR § 11.109(a) because Fish did not represent MIAX in the Reed Smith CBMs. The PTAB concluded that, at most, Fish’s alleged involvement would fall under 37 CFR § 11.109(c), which would prohibit Fish from using information related to its prosecution of NASDAQ’s patent to the disadvantage of NASDAQ or revealing information relating to the same. Thus, the PTAB allowed discovery it found pertinent to the question of whether Fish used or revealed information to Reed Smith relating to its prosecution of the NASDAQ patents.

Pilot Program for Motion to Amend Practice in PTAB Proceedings Under AIA

On March 15, 2019, The US Patent and Trademark Office (PTO) provided notice of a pilot program for motion to amend (MTA) practice and procedures in trial proceedings under the America Invents Act (AIA) before the Patent Trial and Appeal Board (PTAB). In particular, a patent owner that files an MTA will be able to choose how that motion will proceed before the PTAB, including whether to request preliminary guidance from the PTAB on the MTA and whether to file a revised MTA. The pilot program is applicable to all AIA trial proceedings instituted on or after the date of the notice, including post-grant review, inter partes review and covered business method review.

Under the program, a patent owner may choose either to receive preliminary guidance from the PTAB on its MTA, or to file a revised MTA after receiving petitioner’s opposition to the original MTA and/or after receiving the PTAB’s preliminary guidance.

The preliminary guidance will discuss whether there is a reasonable likelihood that the MTA meets statutory and regulatory requirements, and whether the petitioner (on the record before the PTO, including any opposition to the MTA and accompanying evidence) establishes a reasonable likelihood that the substitute claims are unpatentable. The preliminary guidance is not a decision by the PTAB, is not binding on the PTAB, and is not subject to a request for rehearing or judicial review.

As under the existing rules, in order to meet the statutory and regulatory requirements, an MTA must, among other things:

• Propose a reasonable number of substitute claims
• Propose substitute claims that do not enlarge the scope of the claims of the challenged patent or introduce new subject matter
• Respond to a ground of unpatentability involved in the trial
• Set forth written description support for each substitute claim

Alternatively, a patent owner may submit a revised MTA after receiving petitioner’s opposition to the original MTA and/or after receiving the preliminary guidance. A revised MTA includes one or more new proposed substitute claims in place of previously presented substitute claims. A revised MTA also may include substitute claims, arguments or evidence previously presented in the original MTA, but may not incorporate any material by reference from the original MTA. Amendments, arguments and/or evidence provided in a revised MTA must be responsive to issues raised in the preliminary guidance and/or petitioner’s opposition to the MTA.

If the patent owner chooses to file a revised MTA, the petitioner may file an opposition to the revised MTA and preliminary guidance. The patent owner may file a reply to the opposition, and petitioner may file a corresponding sur-reply. Upon the filing of a revised MTA, the PTAB will issue a new scheduling order to accommodate the above-noted briefing. The PTAB will maintain the 12-month statutory deadline for a final written decision, however.

The PTO is instituting the pilot program in response to comments from the public. As of January 2019, less than 10 percent of MTAs filed under the AIA were granted by the PTAB. Practitioners believe that participation in the pilot program will increase the number of MTAs granted. The PTO is planning to reassess the pilot program in about one year. The PTO may terminate, continue or modify the pilot program at any time.

Supreme Court to Address Whether Applicant Must Pay PTO “Personnel Expenses”

The Supreme Court of the United States granted the US Patent and Trademark Office (PTO) Director Iancu’s petition for a writ of certiorari to determine whether a party that files an appeal in the Eastern District of Virginia (E.D. Va.) from an adverse PTO decision under 35 USC § 145 must pay the PTO’s “personnel expenses,” win or lose. Iancu v. NantKwest, Inc., Case No. 18-801 (Mar. 4, 2019). The question presented is:

Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. 145 encompasses the personnel expenses the [PTO] incurs when its employees, including attorneys, defend the agency in Section 145 litigation.

As background, the Patent Act gives applicants two options for judicial review of an adverse PTO decision. The applicant may appeal directly to the US Court of Appeals for the Federal Circuit under 35 USC § 141, and “[the court] shall review the decision from which an appeal is taken on the record before the [PTO],” 35 USC § 144. Alternatively, the applicant may file a civil action against the director of the PTO in the E.D. Va. under 35 USC § 145, where the applicant may present additional evidence. If the applicant elects to bring such an action, § 145 provides that “[a]ll the expenses of the proceedings shall be paid by the applicant.”

The en banc Federal Circuit reversed a divided Federal Circuit panel decision and held that 35 USC § 145 does not require applicants appealing to the E.D. Va. to pay the PTO’s attorneys’ fees in the form of a pro rata share of the PTO personnel’s salaries (i.e., “personnel expenses”). NantKwest, Inc. v. Iancu, Case No. 16-1794 (Fed. Cir. July 27, 2018) (en banc) (Stoll, J, joined by Newman, Lourie, Moore, O’Malley, Wallach and Taranto, JJ) (Prost, CJ, dissenting, joined by Dyk, Reyna and Hughes, JJ) (IP Update, Vol. 21, No. 8).

In its en banc decision, the Federal Circuit found that “the American Rule prohibits courts from shifting attorneys’ fees from one party to another absent a ‘specific and explicit’ directive from Congress.” The Court held that the phrase “‘[a]ll the expenses of the proceedings’ falls short of this stringent standard.”

However, in a case interpreting a similar provision of the Lanham Act, 15 USC § 1071(b) (3) (relating to appeals to the E.D. Va. from a Trademark Trial and Appeal Board decision denying a trademark application), the US Court of Appeals for the Fourth Circuit held that § 1071(b) (3) does require a trademark applicant to pay the pro rata share of the PTO’s personnel expenses in defending the trademark action, win or lose. Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015). Thus, there is a circuit split regarding the meaning of similar phrases in two different, albeit similar, statutes.

Practice Note: The Fourth Circuit recently relied on Shammas to uphold an award of attorneys’ fees to the PTO (under § 1071(b) (3)). Both the district court and the Fourth Circuit found in favor of the applicant in an appeal from an adverse decision at the Trademark Trial and Appeal Board: Booking.com, v. Iancu, Case Nos. 17-2458, -2459 (4th Cir. Feb. 4, 2019) (IP Update, current issue). Earlier this month, in Rimini Street v. Oracle, Case No. 1625 (US Mar. 4, 2001), the Supreme Court, in denying a prevailing party in a copyright action litigation expenses such as expert witnesses, e-discovery and jury consulting, held that the term “full costs” in 17 USC § 505 of the Copyright Act has no special, expansive meaning, but rather is limited to the costs specified in the general costs statute codified at 28 USC §§ 1821 and 1920.

BOOKING.COM Is Not Generic: Fourth Circuit Addresses Protection for “.com” Trademarks

Affirming the district court’s summary judgment ruling on the protectability of the trademark BOOKING.COM, the US Court of Appeals for the Fourth Circuit weighed in on the somewhat controversial issue of the genericness of a trademark that contains a top-level domain such as “.com.” Booking.com B.V. v. The United States Patent and Trademark Office; Andrei Iancu, Case Nos. 17-2458, -2459 (4th Cir. Feb. 4, 2019) (Duncan, J) (Wynn, J, dissenting). The Court also affirmed the district court’s requirement that the trademark applicant, Booking.com, pay the US Patent and Trademark Office’s (PTO’s) attorneys’ fees incurred in the district court action under 15 USC § 1071(b)(3).

At the outset of its opinion, the Fourth Circuit provided a primer on the required distinctiveness of a trademark and explained the distinctiveness spectrum, which categorizes a proposed trademark as generic, descriptive, suggestive or arbitrary/fanciful. Generic terms are never distinctive, while descriptive trademarks may become distinctive with certain evidence of acquired distinctiveness. In this case, these two distinctiveness categories were at issue, with Booking.com arguing that its mark was descriptive, and the PTO arguing that BOOKING.COM was generic.

Booking.com provides online travel reservation services and has done so under the name BOOKING.COM since 2006. Between 2011 and 2012, the company filed US trademark applications to register BOOKING.COM. The PTO rejected the applications, finding the mark generic for online hotel reservation services. After the Trademark Trial and Appeal Board affirmed the examining attorney’s refusals of four BOOKING.COM applications, Booking.com appealed by filing a civil action in the Eastern District of Virginia. In the district court, the company submitted new evidence that BOOKING.COM was perceived by consumers as descriptive or suggestive. This evidence included a “Teflon survey”—the survey format most widely used to address the genericness issue.

The district court concluded that the company met its burden of demonstrating that the BOOKING.COM trademark had acquired secondary meaning and was thus protectable for hotel reservation services. The district court also granted the PTO’s motion for payment of its expenses totaling more than $76,000. Both parties appealed to the Fourth Circuit, with the PTO disputing the protectability of BOOKING.COM as a trademark and the applicant disputing the attorneys’ fee award.

On appeal, the PTO challenged only the determination that the BOOKING.COM mark was not generic and otherwise conceded that Booking.com had shown secondary meaning in the mark if the court ultimately found the mark to be descriptive. Considering this limited issue, the Fourth Circuit affirmed the district court and found BOOKING.COM to be a protectable trademark and not generic.

The Fourth Circuit explained that the PTO always has the burden of establishing that a proposed mark is generic under the three-step test, which requires (1) identification of the class of product or service to which use of the mark is relevant, (2) identification of the relevant consuming public, and (3) determination of whether the primary significance of the mark to the relevant public is an indication of the nature of the class of the product or services to which the mark relates (rather than as a brand), which suggests that the mark is generic. On appeal, only step three of the inquiry was in dispute.

Considering BOOKING.COM as a whole, rather than its component parts, the Fourth Circuit examined evidence of the public’s understanding of the mark and found that the PTO failed to satisfy its burden of proving that the relevant public understands BOOKING.COM, taken as a composite mark, to refer to general online hotel reservation services, rather than referring to the company as a brand. In arriving at its conclusion, the Court pointed to two pieces of evidence that weighed in favor of BOOKING.COM being non-generic: the PTO’s lack of evidence demonstrating that the public uses “booking.com” generically to refer to online hotel reservation services and Booking.com’s Teflon survey. The Court pointed out that consumer surveys are the preferred method of proving genericness, and the results of Booking.com’s survey showing that almost 75 percent of respondents identified BOOKING.COM as a brand name.

Finally, as it relates to the issue of genericness, the Fourth Circuit rejected a per se rule proposed by the PTO that adding “.com” to a generic term like “booking” is necessarily generic. Here, the Court again honed in on the importance of considering a mark in its whole, composite form, which may be protectable with sufficient evidence of acquired distinctiveness. In concluding that BOOKING.COM has the requisite acquired distinctiveness, the Court affirmed the lower court’s grant of summary judgment finding BOOKING.COM protectable as a trademark.

Turning to Booking.com’s appeal on the issue of paying the PTO’s attorneys’ fees, the Fourth Circuit noted the applicable statute, which requires that a trademark applicant pay “all of the expenses of the proceeding” if the applicant decides to challenge the PTO’s ruling in the district court. The court cited its 2015 precedent in Shammas, which qualified attorneys’ fees as applicable “expenses.” The Court acknowledged certain challenges to Shammas, but because the decision remains the law in the Fourth Circuit, the Court affirmed the district court’s grant of the PTO’s attorneys’ fees.

Judge Wynn issued dissent on the issue of genericness, classifying it as a “problem that Booking.com chose to bring upon itself by choosing a generic name for its online presence.” Wynn opined that the district court’s ruling should not be upheld, as being based on faulty legal reasoning, namely, that a generic term combined with the “.com” top-level domain is presumptively descriptive and thus protectable upon a showing of acquired distinctiveness. Wynn also cited a few other “.com” trademark cases where the decision on genericness went the other way.

“Full Costs” Under Copyright Act Means Those Specified in General Costs Statute

In a unanimous decision authored by Justice Kavanaugh, the Supreme Court of the United States held that the term “full costs” in 17 USC § 505 of the Copyright Act has no special, expansive meaning, but is limited to the costs specified in the general costs statute codified at 28 USC §§ 1821 and 1920. Rimini Street Inc. v. Oracle USA Inc., Case No. 1625 (US Mar. 4. 2001) (Kavanaugh, Justice). As Kavanaugh explained, the addition of the adjective “full” to the term “costs” (in the Copyright Act) is not enough to conclude that Congress intended additional costs beyond those set forth in the general costs statute.

Oracle develops and licenses software programs that manage data and operations for businesses and nonprofit organizations, and also offers software maintenance services for its customers. Rimini Street sells third-party software maintenance services to Oracle customers, thereby competing with Oracle’s software maintenance services. To obtain Oracle’s software, Rimini used automated downloading tools and copied the software from Oracle’s website.

Oracle sued Rimini for copyright infringement as well as claims under the California Comprehensive Data Access and Fraud Act and the Nevada Computer Crimes Law. A jury found against Rimini on the claims and awarded Oracle $124 million in damages, including $12.8 million for litigation expenses such as expert witnesses, e-discovery and jury consulting. About $36 million of the award was attributable to damages for copyright infringement. Rimini appealed to the US Court of Appeals for the Ninth Circuit.

Addressing the issue of copyright infringement, the Ninth Circuit affirmed the district court’s finding that Rimini infringed Oracle’s copyright by copying its software. The Ninth Circuit rejected Rimini’s argument that the licenses held by Oracle licensees gave Rimini the right to copy the software under the license of one customer for work done for other customers.

Based on its reversal of the award on the non-copyright claims, the Ninth Circuit reduced the damage award by approximately $50 million, but determined the $12.8 million for additional expenses was still appropriate because § 505 of the Copyright Act permits the award of “full costs,” a term the Ninth Circuit found was not confined to the six categories of allowable costs identified in 28 USC §§ 1821 & 1920.

Petition for Certiorari and Opinion

The question addressed by the Supreme Court was whether the statutory language “full costs,” as used in the Copyright Act, authorizes a court to award litigation expenses beyond the six categories of costs specified by Congress in the general costs statute. The Copyright Act provides that a district court, in a copyright case, may allow the recovery of “full costs” by or against any party other than the United States or an officer thereof. In its decision, the Supreme Court concluded that the term “full” does not expand the recoverable costs beyond those specified in the general costs statute, §§ 1821 and 1920.

Under 28 USC § 1920, Congress specified six categories of litigation expenses that a federal court may award as costs:

• Fees of the clerk and marshal
• Fees for printed or electronically recorded transcripts necessarily obtained for use in the case
• Fees and disbursements for printing and witnesses
• Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case
• Docket fees under § 1923
• Compensation of court appointed experts; compensation of interpreters; and salaries, fees, expenses and costs of special interpretation services under § 1828

In addition, § 1821 provides reimbursement rates for witnesses’ per diem and mileage expenses.

The Supreme Court explained that its cases “establish a clear rule” that “[a] statute awarding ‘costs’ will not be construed as authorizing an award of litigation expenses beyond the six categories listed in §§ 1821 and 1920, absent an explicit statutory instruction to that effect.” The Court explained that the term “full” used before “costs” merely serves to mean the complete measure of costs available pursuant to the appropriate statutes and does not expand the available costs under § 505.

The Supreme Court rejected Oracle’s argument that English copyright statutes awarding “full costs” allowed the transfer of all expenses of litigation, beyond what was specified in any costs schedule, and that Congress necessarily imported that meaning of the term “full costs” into the Copyright Act in 1831, explaining that “courts should not undertake extensive historical excavation to determine the meaning of costs statutes.”

Copyright Registration Is Entry Ticket to Federal Court

In a unanimous decision, the Supreme Court of the United States resolved a longstanding circuit split on whether a copyright claimant must have registered with US Copyright Office before filing an infringement action in federal court. The Supreme Court held that copyright registration occurs—and thus an infringement action can be brought—only after the Copyright Office registers the copyright. Fourth Estate v. Wall-Street.com, Case No. 17-571 (US March 4, 2019) (Ginsburg, Justice).

The Copyright Act states that “no civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made[.]” 17 USC § 411. Despite this straightforward language, courts have been divided on the interpretation of “registration.” Some courts, such as the 11th Circuit, held that the statute means that the Copyright Office must register the copyright before the copyright owner can commence a lawsuit. Other courts, such as the Ninth Circuit, adopted what is commonly referred to as the application approach, ruling that a copyright owner need only submit an application, deposit his or her work, and pay the necessary fees to the US Copyright Office before the copyright owner may file an infringement lawsuit. District courts outside of these circuits were similarly divided on this issue.

In this case, Fourth Estate sued Wall-Street.com and its owner, Jerrold Burden (collectively, Wall-Street), for copyright infringement based on Wall-Street’s failure to comply with the terms of the parties’ license agreement. Fourth Estate alleged that Wall-Street had failed to remove Fourth Estate’s articles from Wall-Street’s website, which the license agreement required Wall-Street to do after the license was cancelled. At the time it filed its lawsuit, Fourth Estate had filed applications to register its copyrights in these articles, but the Copyright Office had not yet registered them. The district court dismissed Fourth Estate’s complaint because of Fourth Estate’s failure to comply with § 411. Fourth Estate appealed to the 11th Circuit, which affirmed the district court’s decision. The Supreme Court accepted certiorari and affirmed the 11th Circuit’s decision.

The issue presented was whether “registration . . . has been made” when the copyright holder delivers the required application, deposit and fee to the Copyright Office, as the Ninth Circuit had held, or only once the Copyright Office registers the copyright, as the 11th Circuit had held. Reviewing the language of § 411, Justice Ginsburg explained that while an author has rights in his or her work immediately upon creation, and is entitled to recover for infringements both before and after registration, the author must satisfy the registration requirement of § 411 before instituting a copyright infringement action. The Court equated the need for registration to an “administrative exhaustion requirement.” Justice Ginsburg recognized that the Copyright Act does have limited exceptions to this rule, such as a copyright owner who is preparing to distribute a work of a type vulnerable to predistribution infringement or a live broadcast, but even under those exceptions, the Court reasoned, the author must eventually obtain registration of the copyright.

In resolving the circuit split, the Supreme Court found that the “registration approach” was the “only satisfactory reading of § 411(a)’s text.” The Court reasoned that the “application approach” would render language—namely, that a copyright owner could file an infringement lawsuit after registration had been refused—superfluous. “Registration” has the same meaning throughout the Copyright Act: action taken by the Register of Copyrights (i.e., the Copyright Office). The application approach is directly at odds with this meaning, effectively removing the Copyright Office from the equation.

Fourth Estate argued that “registration” meant “submission of a completed application,” based in part on the use of “make” (“make registration”) or “made” (“registration has been made”) in § 411(a). The use of “make” or “made” with “registration,” Fourth Estate contended, referred to actions taken by the applicant, not the Register. The Supreme Court disagreed, explaining that “registration” means “registration,” and noting that Congress has amended the Copyright Act several times since § 411(a) was enacted in 1976 and has rejected attempts to remove the registration requirement in this provision.

While Justice Ginsburg sympathized with the potential problems the registration approach may cause due to delays at the Copyright Office, she said that only “Congress can alleviate” those problems; it is not the job of the courts to try to “cure” them.

Practice Note: In the wake of this opinion, the Copyright Office likely will see an increase in the number of expedited applications and, given the current lag, will continue to struggle to promptly review applications unless further resources and more efficient processes become available.