An important federal appeals court has determined that a Connecticut court has jurisdiction over a Canadian citizen whose only act in Connecticut was accessing information on a computer server located in Connecticut.  In MacDermid, Inc. v. Deiter, 702 F.3d 72 (Dec. 26. 2012), a Connecticut-based company, MacDermid, Inc., sued its former employee, Deiter, a Canadian citizen who worked from Canada, in federal court in Connecticut for misappropriation of MacDermid’s trade secrets.  MacDermid alleged that Deiter sent confidential company information from her company email account to her personal email account.  The lower court dismissed the case, saying that Connecticut courts did not have jurisdiction over Deiter because she never set foot in Connecticut and only used a computer terminal in Canada.  MacDermid appealed.  The U.S. Court of Appeals for the Second Circuit, in New York, reversed, holding that it was proper for a Connecticut court to exercise personal jurisdiction over a Canadian employee of a Connecticut company because, even though she was located in Canada and physically interacted only with a computer in Canada, she “used” a server in Connecticut.

On February 20, 2013, department stores  J.C. Penney Inc. and Macy’s Inc. faced off in a new arena – a New YorkState courtroom.  The two retailers are going to trial over Martha Stewart.  Macy’s suit accuses J.C. Penney of attempting to convince Martha Stewart to break her company’s exclusive merchandise contract with the department store chain – a contract Macy’s says gives them the exclusive rights to sell certain Martha Stewart products until 2018.  Part of Macy’s lawsuit reads: “J.C. Penney want[s] to rob Macy’s of market share and destroy the competitive advantage that it enjoys as a result of its existing exclusive agreement with (Martha Stewart Living).”

J.C. Penney argues that Macy’s rights to the Martha Stewart merchandise are not nearly as broad as Macy’s claims.  According to J.C. Penney: “Macy’s should stop competing in the courtroom and start competing in the marketplace.”

The move to market the Martha Stewart line is one of several initiatives by J.C. Penney to revive its struggling business.  As part of its new plan, J.C. Penney acquired a 16.6% stake in Martha Stewart’s company in December of 2011, subsequently announcing its plan to open up Martha Stewart ‘mini shops’ in most of its stores.  In response, Macy’s immediately sued J.C. Penney and was granted a preliminary injunction prevent the sale of the Martha Stewart goods at J.C. Penney while the trial played out.

A central issue of the case is whether or not the court agrees that the mini-shops fall under the exclusivity clause of the Macy’s/Stewart agreement.

Macy’s, J.C. Penney go to court over Martha Stewart

As originally posted on February 22 at sportslawinsider.com

On Friday, August 24, a nine member jury entered a verdict in favor of Apple and awarded almost $1.05 billion in damages.  Apple filed suit against one of its largest competitors, Samsung Electronics, in April 2011, and alleged that Samsung’s Galaxy line of smartphones and tablets infringed seven of Apple’s patents covering the iPhone and iPod products.  In turn, Samsung countersued alleging that Apple infringed Samsung’s patents covering various wireless software components of its products.  After more than a year of highly contentious litigation and following a trial that began at the end of July and lasted the better part of August, the jury deliberated for less than three days before delivering the verdict in favor of Apple. 

Welcome one and all to something that will undoubtedly change both history and the world as we know it:  the first installment of what will hopefully be a regular publication which we have decided to call From the “What the…?”File.  Basically, I’ll be picking up on out-of-the-mainstream stuff which any of us could have lived without knowing, but it will at least be stuff that is both interesting and has a bit of a twist.  At least in theory, anyway.  So, without further ado, here goes the collector’s item first issue.  I can confidentially say that that when you’re done, you too will be saying “What the…?”

European Copyright – The Write Stuff?

OK, not many of us care about Euro Copyright issues – I fully admit that.  But this is actually kind of interesting (even if it is Euro-centric).  It seems that way back in 2006, a Hollywood-funded, Netherlands-based anti-piracy group (known as ‘BREIN’, and please don’t ask me what it stands for) asked a musician to compose music for an anti-piracy video. The video in question was to be shown at a local film festival, and under these strict conditions the composer accepted the job.

However, the anti-piracy ad was recycled for various other purposes apparently without the composer’s permission. When the composer bought a Harry Potter DVD early 2007 (presumably a licensed one), he noticed that the campaign video with his music was on it. According to the composer And this was no isolated incident. He is now claiming that his work has been used on tens of millions of Dutch DVDs, without him receiving any compensation for it. The total claimed lost revenue is roughly a million Euros (which is about $1.3 mil US). 

But wait -- there’s more.  You’d think that the guy would have received some collection support from local rights societies.  You’d think.  But soon after he discovered the unauthorized distribution and after contacting a local music royalty collection agency not only did he not receive any royalties, one of their Board members offered to help ONLY if the composer assigned all his rights to the organization AND gave the guy a third of what was collected.   Ultimately the board member resigned and the anti-piracy group denied it was their fault in the first place.  But what’s more shocking – that anti-pirates are pirates themselves, or that there is corruption in the music industry? Hmmm – tough question.

Yesterday, Bloomberg reported that the legal rift between Apple, Inc. and Samsung Electronics Co. widened when Apple filed a complaint seeking to block imports of Samsung Galaxy S mobile phones and Galaxy Tab computers for alleged patent infringement.  Apple claims that Samsung is infringing on seven of its patents related to the technology and design of the devices.  Apple filed its first complaint against Samsung in April, but the current salvo is a counter to a similar complaint filed last week by Samsung, who sought to ban imports of Apple’s iPhone and iPad.  The ferocity of the legal battle between the two companies is surprising given the fact that Samsung supplies computer chips for some Apple devices.  Although Apple does not normally license its intellectual property, analyst Brian Marshall, with Gleacher & Co. in San Francisco, feels that they may have no choice in this case because Samsung owns a number of patents that Apple may need. 

Analysts are not surprised at Apple’s litigation strategy, as the company continues its effort to hold on to what once was a dominant market share in the mobile-device arena.  Android is now the most popular mobile-device operating system, with 38.1 percent of the market share, ahead of Apple’s iOS, which accounts for 26.6 percent of the market.  In a similar trend, Samsung secured 4,518 patents last year, while Apple secured just 563.  The new civil case is currently pending in the U.S. District Court for the Northern District of California and although Apple requested a quick trial, Samsung countered by claiming that Apple is “attempting to create an emergency where none exists.”  Given the fierce competition in the mobile-based market and the rise of tablet-style devices from manufacturers such as Samsung and BlackBerry, the litigation associated with the intellectual property behind such devices is likely to increase.

On June 23, the House passed patent reform legislation that may significantly change the patent system in the United States.  By a vote of 304-117, the House passed the America Invents Act (H.R. 2149).  In March, the Senate passed its version of the bill. (S. 23)  Differences between the House and the Senate versions now need to be worked out before a final version can be sent to the White House.  President Obama has expressed support for the bill. 

Assuming the legislation is ultimately enacted close to its present form, it will change the patent system in the United States from “first to invent” to “first inventor to file.”  Currently, an inventor that can prove he or she was the first person to conceive of an invention and reduce it to practice is entitled to a patent, even if another person files an application for a patent to that invention first.  Disputes about priority of invention are now typically resolved by an interference proceeding in the Patent Office.  The legislation would do away with interference proceeding.  Instead, the first party to get its application on file is the one entitled to the invention regardless who was the first to invent.  This change harmonizes patent practice in the U.S. with most other countries.

Among other things the legislation also adds a post-grant review procedure, modifies judicial review of inter partes reexaminations, and adds a derivation proceeding where a party can challenge an earlier-filed patent application on the basis that the earlier-filed invention was derived from the party’s own work.

The House and Senate versions of the bill are very similar.  Perhaps the most significant issue to be worked out in conference is how fees collected by the PTO will be distributed.  Right now PTO fees go to the public fisc and the PTO’s budget is separately appropriated by Congress. By allowing the PTO to use the fees it collects, the Office will have more money available to hire examiners and speed the examination process.  Both versions of the bill provide a fund to hold the fees collected by the PTO for use in paying PTO operations expenses.  In the House version, in language added by a Manager’s Amendment, Congress must appropriate moneys from this fund to the PTO.  Under the Senate version, the PTO can use collected fees without prior appropriation but subject to congressional reporting and budgeting requirements.

The Federal Circuit issued another opinion yesterday reinforcing the standard for establishing joint infringement in method patent cases where more than one party performs the steps of an asserted method claim.  In McKesson Technologies, Inc., v. Epic Systems Corporation, Case No. 2010-1291, the Federal Circuit again held that in such situations, there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.

The patent at issue in McKesson is directed to an interactive electronic method of communication between healthcare providers and patients involving personalized web pages for doctors and their patients that, among other things, allows patients to access visit-specific content online following every doctor visit.

The first step of the asserted method claims requires “initiating a communication by one of the plurality of users to the provider for information wherein the provider has established a preexisting medical record for each user.”  The parties did not dispute that Epic’s customers, i.e., the healthcare providers, did not directly perform the first step of the asserted method claims.  Rather, the healthcare providers’ patients performed the first “initiating a communication step.”

The Federal Circuit, affirming the district court’s grant of summary judgment of non-infringement, reinforced that “[w]ithout an agency relationship or contractual obligation” the users’, i.e., the patients’, actions could not be attributed to the providers, i.e., the healthcare providers.  Because no one party performed each step of the claimed method, there was no direct infringement and consequently, no induced or indirect infringement, which required a direct infringer.

The Federal Circuit rejected McKesson’s invitation to depart from its precedents, explaining that ‘[p]atent law is a creature of statute and ‘expanding the rules governing direct infringement to reach independent conduct of multiple actors would subvert the statutory scheme for indirect infringement.”

Judge Bryson issued a concurring opinion, finding the court’s decision correct in light of the court’s precedent, but further commenting that “[w]hether those decisions are correct is another question, one that is close enough and important enough that it may warrant review by the en banc court in an appropriate case.”

Judge Newman issued a dissenting opinion, arguing that the court was departing from the “prior panel rule,” encouraging en banc resolution of the issue, and commenting that the court’s decision essentially “eliminates the patent incentive for such interactive procedures, rendering McKesson’s new method, and all such interactive methods, open for infringement without redress.”