Monday, September 8, 2014

Patent Trolls: Cultivating A Growing Distaste Among Attorneys General In The U.S.

The term “patent troll” is nothing new. Patent trolls (also referred to as “patent assertion entities” (PAEs) or “non-practicing entities” (NPEs)) are patent holders that generate revenue by sending demand letters to claimed infringers in an attempt to produce licensing opportunities. In order to be considered a patent troll the entity must not actually practice the patent themselves, instead relying on the threat of litigation as a revenue stream. 
Image by Stuart Miles
Much has been made of patent trolls and their practices. An article recently published on JDSupra detailed several individual efforts undertaken by legal officials in a number of American states to curb the practices of patent trolls within their respective jurisdictions. To give a few examples:

  •        In New York, Attorney General Eric Shneiderman investigated MPHJ Technology, an alleged patent troll. The investigation concluded with a settlement under which MPHJ agreed do desist from hundreds of threatened law suits against businesses in that state. Known as the “scanner troll”, MPJH claimed a patent on a process for scanning and emailing electronic documents. It sent demand letters asking businesses for $1,000 per employee to avoid having suit filed against them for patent infringement. The Attorney General of Vermont, Bill Sorrell has also taken up against MPHJ.
  •        The Oregon State Senate introduced a bill that would amend the State’s Unlawful Trade Practice Act to allow individuals to sue supposed patent trolls for sending a demand letter without identifying the patents at issue or how it was infringed.
  •          In early 2014, The Wisconsin State Legislature passed a bill that actually makes sending a demand letter a crime in certain instances. The bill requires that any demand letter relating to the assertion of patent rights must contain the patent’s registration number and a copy of the patent itself as well as the legal theory under which the complaining party asserts that the responding party infringed. The Law also prohibits a demand letter from containing “false, misleading, or deceptive information.” It enables the Attorney General to seek injunctions against alleged trolls and fine them up to “$50,000 for each violation or three times the aggregate amount of actual damages and costs and attorney fees awarded by the court, whichever is greater.”

These are but a few examples of actions taken by legislators and attorneys general in the U.S. against alleged patent trolls. The Wisconsin law is particularly ferocious, notwithstanding the fact that “misleading” and “deceptive” mean exactly the same thing. 

In addition to individual state efforts, the National Association of Attorneys General (NAAG) sent a letter to the U.S. Senate in February 2014 signed by 42 state attorneys general calling for a bi-partisan legislative amendment to the patent law aimed at addressing patent trolls. The only States that did not participate were California, Delaware, Georgia, Montana, North Dakota, Ohio, Oklahoma, South Dakota, and West Virginia.

In a 2006 case styled Ebay Inc. v. MercExchange, L.L.C., the U.S. Supreme Court had to decide whether injunctions should issue as a matter of course in patent infringement law suits. The Court found this not to be the case. Overturning the Court of Appeals for the Federal Circuit’s (CAFC) ruling that “the general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances”, the Supreme Court held 8-0 (Justice Alito did not participate) that because the injunction is an equitable remedy, the legal test for obtaining one and the equitable factors apply. 

This is relevant because the Plaintiff at trial, MercExchange, was an alleged patent troll. The District Court for the Fourth Circuit ruled that MercExchange was not entitled to an injunction because it does not practice the patent. The CAFC overturned. Without endorsing the District Court’s reasons, the Supreme Court disabused us of the notion that injunctions should issue (almost) as a matter of course- a point I incidentally found myself squarely on the other side of when I argued for exactly that interpretation in a Canadian IP moot completion in 2012. 

One of the concurrences in that case penned by Justice Kennedy (joined by Souter, Breyer and Stevens) pointed out that granting injunctions in cases where a non-practicing entity sues a company engaging in commerce may run counter to the public interest. They noted that often money damages are more fitting. If that is the case, the injunction is inappropriate as it should only be granted when there is no sufficient remedy at law. 

It will be interesting to see if the U.S. Congress acts on the recommendations of the NAAG. There has been no sign of movement on this matter and no indication that there will be any in the near future. As noted above, however, individual states are not waiting for the Federal government to join the party.

Tuesday, August 19, 2014

Gotta Catch ‘Em All: Nintendo Pulls The Plug On 3D Printed Pokémon Planters

Claudia Ng is obviously a big fan of Pokémon. So much so that she decided to design 3D printed planters in the shape of her “personal favourite starter Pokémon”, Bulbasaur. She posted and offered these ceramic planters for sale on Shapeways, an online marketplace for 3D printed items. According to a GameZone post, the original Shapeways page featuring the planters was pulled when the website got a takedown request from Nintendo saying that the planters infringed its copyright. Much like YouTube and Facebook, Shapeways has a copyright content policy and takedown procedure (outlined here) which allows copyright holders to address these issues quickly and effectively.
The adorable side of copyright infringement
According to Ms. Ng, Nintendo asked that the page be taken down and for all monies generated from products already shipped by Shapeways. It is unclear whether Nintendo will pursue any formal copyright infringement proceedings against Ms. Ng or the Shapeways website. Its recourse against the latter may be significantly curtailed depending on the forum of a potential suit. This is because many countries, including the U.S. and Canada, have enacted provisions in their respective copyright laws limiting the liability of internet intermediaries or ISPs.

3D printing technology promises to hold many challenges to IP rights holders. These challenges will extend beyond the copyright space to touch patents and trademarks as well. On the bright side, rights holders should be encouraged by Shapeways’ response to this claim and hope that other players in the 3D printing market follow suit. 

From the perspective of someone looking to create and sell content on these sites, takedown policies will always be a looming nuisance. There will invariably be frivolous claims and false claims of infringement made out of malice. It may sometimes prove difficult (and costly) to discern legitimate from illegitimate copyright claims. One need only look at YouTube’s copyright policy to get a notion of the major machinery involved in implementing a fair copyright takedown system.

 Google has developed a highly advanced ContentID system whereby rights holders may submit reference files to YouTube of their copyright protected audio and audiovisual works. YouTube compares all videos uploaded to its service to the content stored in this reference database to weed out infringing uploads. YouTube has created a manual copyright claim process for those uploads that are missed by this system. Instead of each claim resulting in an automatic takedown, the policy allows for a time period during which the uploader may make a “counter-claim”. The original claimant may also withdraw an erroneous claim during this period. 

Google has the funds and manpower to do this; smaller websites may not. Since national laws, such as the ISP safe harbour provisions in the American DMCA, often require that qualifying ISPs have a robust takedown procedure, websites like Shapeways are more likely to favour caution and adopt a policy of “when in doubt, take it down”. The hope is that this reality does not have a chilling effect on the productivity enabled by the exciting new technology that is 3D printing and the innovative services growing around it.

Thursday, August 7, 2014

Montreal Graffiti Artist Sues Radio-Canada For Breach Of Moral Rights

A Montreal graffiti artist named Alexandre Veilleux (a.k.a. Alex Scaner) is suing Radio-Canada, the CBC’s French language service, for $45,000 for breaching the moral rights in one of his tags. The tag in question features the words “30 VIES” (30 Lives) written in red paint. A Radio-Canada television show entitled 30 Vies uses an image of the tag in its opening credits.

The tag in question
Mr. Veilleux, who appears to be an internationally known graffiti artist, claims that Radio-Canada used the image without his consent. He contends that his moral rights have been infringed because the image was distorted or mutilated in such a way so as to cause damage to his honour or reputation.

The most interesting issue here is whether one can claim copyright infringement in a work that has been created in violation of the law. Mr. Veilleux did not get permission to tag the wall in question. The Copyright Act itself does not determine the subsistence of copyright based on whether the work was created legally or illegally; all that really matters is fixation and originality. There is, however, a long standing public policy rule in the Common Law that a person should not be allowed to profit from his or her own misdeed -nemo auditur propriam turpitudinem allegans. Under this principle, Veilleux should not be able to enforce the copyright in his work even if such copyright was valid and subsisting at the time of the alleged infringement. 

This would be a satisfactory analysis, except for the fact that Quebec is a Civil Law jurisdiction. Since Veilleux’s entitlement to compensation has to do with the law of remedies rather than copyright law, the Common Law should not apply in this case. The question then become whether the nemo auditur maxim applies in Quebec. The answer is yes and no.

A preliminary search of the case law shows applications of this principle both before and after the coming into force of the current Civil Code of Quebec (C.c.Q.). From my search, I was only able to find applications of this maxim in contractual matters where one party was prevented from receiving restitution when the contract was breached by the other party. In each of these cases, the moving party committed some act in bad faith to cause the breach entitling them to restitution. This is inspired by Article 1699 al. 2 C.c.Q.:

Art. 1699 - Restitution of prestations takes place where a person is bound by law to return to another person the property he has received, either unlawfully or in error, or under a juridical act which is subsequently annulled with retroactive effect or whose obligations become impossible to perform by reason of superior force.

The court may, exceptionally, refuse restitution where it would have the effect of according an undue advantage to one party, whether the debtor or the creditor, unless it considers it sufficient, in that case, to modify the scope or mode of the restitution instead.

Art. 1699 - La restitution des prestations a lieu chaque fois qu'une personne est, en vertu de la loi, tenue de rendre à une autre des biens qu'elle a reçus sans droit ou par erreur, ou encore en vertu d'un acte juridique qui est subséquemment anéanti de façon rétroactive ou dont les obligations deviennent impossibles à exécuter en raison d'une force majeure.

Le tribunal peut, exceptionnellement, refuser la restitution lorsqu'elle aurait pour effet d'accorder à l'une des parties, débiteur ou créancier, un avantage indu, à moins qu'il ne juge suffisant, dans ce cas, de modifier plutôt l'étendue ou les modalités de la restitution. (Emphasis added).

This Article is found in the part of the C.c.Q. dealing with obligations. It applies in two cases: 1) When an individual receives property to which he or she has no right; and 2) when a contract is “resolved” (“resolu”) - the parties are restored to their pre-contractual position as though the contract never happened. 

Copyright is a right in rem (note that Common Law and not Civilian principles of property law apply now because we are talking about copyright proper). Article 1699 C.c.Q. clearly does not apply in this case.

Given the opportunity, the Quebec Superior Court should take this chance to clarify whether the age old nemo auditor maxim applies to such cases in Quebec. Since Radio-Canada will likely submit case law from other Provinces showing application of this principle, it is an open question as to whether the courts in Quebec will choose to harmonize this point of law with the rest of the country or go its own root.