Challenging IPR Institutions Following Federal Court Decision in In re: Power Integrations Inc.

Practitioners should be aware that challenging the PTAB’s decision to deny institution of an IPR got even harder after a recent Federal Circuit decision.  While the Supreme Court has already made clear that challenges to denial of an institution decision can only happen in very specific circumstances, the Federal Circuit’s recent precedential decision in In re: Power Integrations, Inc., 2018-144, 2018-145, 2018-146, 2018-147 (Fed. Cir. Aug. 16, 2018) gives Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) even more bite.

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False Food Advertising Claims Require Plausibility, Not Possibility

Earlier this year, in Is the “Food Court Closing, we reported indications of a change in the leanings of federal courts in California when viewing class action false advertising allegations regarding food and beverage products at the motion to dismiss stage.  For years, these courts were viewed as interpreting the sufficiency of the allegations in a manner favorable to plaintiffs.  During the past few years, however, these courts began viewing plaintiff’s pleadings more critically.  They have been applying a more stringent legal requirement of claim plausibility consistent with the United States Supreme Court’s. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (explaining that a pleading must “state a claim to relief that is plausible on its face”); Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009) (explaining that the claim must be “across the line from conceivable to plausible” citing Twombly, 550 U.S. at 570).  Under the Twombly and Iqbal interpretation of the plausibility requirement, the false advertising plaintiff’s pleadings must make plausible that a significant number of reasonable consumers acting reasonably would be deceived by the alleged false claim. See Ebner v. Fresh, Inc., 838 F.3d 958, 965 (9th Cir. 2016) quoting Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 508 (2003).

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When Can a Company Be Liable for Its Vendor’s Copyright or Patent Infringement?: Hollywood Studios’ IP Headache

The case of Rearden LLC et al. v. The Walt Disney Company et al., Nos. 3:17-cv-04006, 04191 & 04192 (N.D. Cal.), has been covered more in the Hollywood Reporter than in legal publications, but it is both a “Hollywood story” and a case with intellectual property issues that cover the spectrum of patent, copyright and (to a lesser extent) trademark law. The case revolves around a technology called MOVA Contour Reality Capture technology (“MOVA Contour”) that is used to create 3D animated characters that appear more human than ever, as used in movies such as Guardians of Galaxy and many others. Some of Hollywood’s biggest studios hired a vendor, DD3, which used this 3D technology as part of the process of creating 3D characters in the movies. Rather than suing DD3 for any IP violations, however, the plaintiff, Rearden, decided to sue those Hollywood Studios for alleged copyright, patent and trademark infringement. The case thus illustrates various issues and considerations as to when a party can be liable for the acts of a vendor it hires, if the vendor is (allegedly) committing copyright and patent infringement.

For example, on the copyright side, because the Studios created CG characters and movies that were allegedly derivative works of the DD3 software’s output files, one question is whether, and under what circumstances, copyright protection of computer software can extend to the output files created using that software. Other copyright issues presented in this case include determining under what circumstances a party can be vicariously liable when it contracts with another company that infringes a copyright, or when this relationship can result in contributory copyright infringement.

With respect to patent infringement, the case raises a question as to whether a system claim can be found to be directly infringed by a party entering into a contract with a vendor, even when the vendor possesses all the elements of the claim since it owns and uses the requisite hardware and software. If only an indirect infringement claim is plausible for this situation, can knowledge of the patents and that the services constituted infringement be sufficiently pled by pointing only to general IP due diligence performed by the defendant?

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Restoring America’s Leadership in Innovation Act of 2018

On June 28, 2018, Representatives Thomas Massie (R-KY-4), Marcy Kaptur (D-OH-9) and Dana Rohrabacher (R-CA-48) introduced H.R. 6264, the “Restoring America’s Leadership in Innovation Act of 2018.” The bill ambitiously seeks to curtail or repeal numerous provisions of the 2011 America Invents Act (“AIA”) as well as certain recent Supreme Court cases.

The bill calls for the explicit repeal of the AIA’s version of 35 U.S.C. § 102 and the AIA’s post-issuance review provisions.  Section 3 specifies that “a person shall be entitled to a patent where the inventor is first to conceive of the invention and diligently reduces the invention to practice” and that “a person shall be entitled to a one-year grace period before filing an application for a patent, as the grace period existed before the date of the enactment of the Leahy-Smith 24 America Invents Act under section 102 of title 35, United 25 States Code, and with the same meaning of the terms ‘in public use’ and ‘on sale in this country’ as interpreted before the enactment of the Leahy-Smith America Invents Act.”

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Motions to Disqualify Counsel in PTAB Proceedings

Practitioners may not realize that the Patent Trial and Appeal Board (“PTAB”) has a rule expressly providing the ability to disqualify counsel. See 37 C.F.R. § 42.10(d) (“A panel of the Board may disqualify counsel for cause after notice and opportunity for hearing. A decision to disqualify is not final for the purposes of judicial review until certified by the Chief Administrative Patent Judge.”).  That lack of knowledge is likely due to the fact that the PTAB has rarely even allowed a party to file such a motion, and has not yet disqualified counsel.  This contrasts sharply with district court litigation since the beginning of AIA Post-grant proceedings in 2012, where a total of seventeen (17) identified decisions have resulted in counsel disqualification.  The reasons for this trend are explained in more detail below, including a brief examination of the limited record of disqualification attempts at the PTAB.

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