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Supreme Court Revives Treble Damages: Halo

Jim Ruttler, Patent Attorney

Posted Tuesday, June 14, 2016 by Jim Ruttler

In a significant victory for innovators, the U.S. Supreme Court this week made it easier for patent owners to obtain treble damages for infringement. Since 2007, the Federal Circuit Appeals Court and the lower District Courts have been applying a strict standard for treble damages. Essentially, they required clear and convincing evidence of willful infringement without any reasonable defense. Of course, it was easy for most patent litigators to concoct some reasonable defense after the fact during trial, so even the most egregious willful infringement avoided treble damages.

However, the Supreme Court has laid this test to rest and changed the rule to permit the lower District Courts considerable discretion in determining whether to avoid penalizing treble damages. The new test requires only that the case be out of the ordinary considering the behavior and actions of the infringer at the time of infringement. The standard has been lowered to preponderance of evidence (more likely than not) and infringers can’t escape by producing some reasonable defense later during trial. Furthermore, the District Court’s decision to institute treble damages is entitled to significant deference during any appeal of the damage award.

In short, this is a significant pro-patent change in the law. Now, any infringer who knows about a patent and the existence of infringement will have the potential for a very heavy toll of 3 times the total damages and the possibility of attorneys fees.

We are currently waiting for the decision by the Supreme Court in Cuozzo, which will likely result in significant limitations on the inter partes review proceedings at the Patent Office, further increasing the strength of patents. Also, the Supreme Court should be deciding whether to take up Cooper and MCM to possibly declare the entire inter partes review proceedings as unconstitutional.

My expectation is that the Supreme Court will limit inter partes review proceedings to be mini-court proceedings which apply the same post-grant court standards. I think also that the inter partes review proceedings will be held constitutional, so long as all the parties consent to the Patent Office’s jurisdiction. This will effectively permit parties to choose whether to litigate via the Patent Office or the Courts, but will prevent patent owners from being drug into the Patent Office against their will.

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Using Twitter Is Not a Regsiterable Trademark for Online Community Service

Daniel Mills, Trademark Attorney

Posted Friday, May 20, 2016 by Daniel Mills

When a trademark applicant sets up a social media account on Twitter in order to advertise or promote its business via a social-networking website, is it the applicant or Twitter that is providing the service of “creating an on-line community for users” interested in the applicant’s business? The answer is Twitter!

Thus began a recent decision by the TTAB that upheld a refusal to register SAY IT YOUR WAY application by FTD for its Twitter account for “Creating an on-line community for registered users to participate in discussions, get feedback from their peers, form communities, and engage in social networking featuring information on flowers, floral products and gifts.” (International Class 042)

The decision cited a recent update to Section 1301.04(h)(iv)(C) of the Trademark Manual of Examining Procedure(“TMEP”)in April 2016. The section states:

Some applicants may mistakenly mischaracterize their services as ‘social networking’ because they assume that advertising or promoting their non-social-networking services via a social-networking website means they are providing social-networking services. For instance, an applicant may mistakenly file an application for ‘online social-networking services’ and provide a Facebook® webpage as a specimen when, in fact, they operate a pet store and are only using the Facebook® website to advertise the pet store and communicate information to and messages with actual and potential customers. Such a specimen is not acceptable for the social networking services since it does not demonstrate that the applicant is providing these services

FTD’s position was that it’s use of Twitter created a sub-community within the Twitter universe, but the Board was not convinced that this use constituted “creating on online community” and held that Twitter is creating the service of on online community, not FTD. the Board noted that FTD “does not provide a platform by which its followers can create a profile, establish a homepage, and attract further followers.” Furthermore the Board agreed with the examining attorney that FTD was Applicant “simply acting to further the sale of its flowers, floral products and gifts by using its Twitter account to engage with consumers and potential consumers and promote its retail services.”

So the lesson here is that simply using a social media site even if that use is detailed, voluminous, and integrated into a business’s marketing plan, is not the same as creating a separate online community that creates a registrable trademark for that service.

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Google, Apple, IBM, Microsoft, Facebook and many others buying patents

Jim Ruttler, Patent Attorney

Posted Wednesday, May 18, 2016 by Jim Ruttler

Some of the Worlds largest companies are interested in buying your patents for prices you set. The Industry Patent Purchase Program (IP3) is a new method to create a secondary market for patents. Google, Apple, IBM, Microsoft, Facebook, Adobe, Honda, Hyundai, Kia, Verizon, Cisco, and many others are pooling resources and accepting patents for sale through AST. If accepted, sellers will receive payment within a few months.

Google did this alone about a year ago and apparently was successful enough that now the whole industry wants in on the purchases. Patents were sold to Google under this program for between $3k and $250k each depending upon the invention and interest.

This new program plus some recent court developments are indications that the patent market is about to come back to life, and I believe in a bigger way than anytime before.

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Federal Circuit Confirms Software Patent Eligibility

Jim Ruttler, Patent Attorney

Posted Sunday, May 15, 2016 by Jim Ruttler

Ever since the Supreme Court Alice decision, the Patent Office and the lower level District Courts have been over-reaching and invalidating software related patents. Now for the second time, the Federal Circuit has taken the lower courts to task by confirming that software continues to be eligible.

In Enfish v. Microsoft, the Federal Circuit Court of Appeals reversed the lower district court’s finding that Enfish’s database claims were ineligible and invalid. Instead, the Appeals Court found that the self-referential database claimed in Enfish was clearly the type of subject matter that remains eligible as compared to business method type claims.

The Court reasoned that software that improves the functionality of a computing device is different than a business method that is implemented on a computer. Thus, the former types of inventions remain patentable, which is very good news for patent owners and inventors worried about the Alice decision.

Patent law is stabilizing with this decision and 2016 will likely mark a continued strengthening of patent rights for technical inventions.

http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1244.Opinion.5-10-2016.1.PDF

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What the New Defense of Trade Secrets Act Means for Your Business

Daniel Mills, Trademark Attorney

Posted Thursday, May 12, 2016 by Daniel Mills

Yesterday, President Obama signed the Defense of Trade Secrets Act (DTSA) into law. The DTSA is actually part of an existing set of laws known as the Economic Espionage Act of 1996 and the Economic Espionage Penalty Enhancement Act of 2012. What the DTSA adds to the existing statute is, among other things, it creates a private civil cause of action that allows any injured party the standing to sue for substantial damages for misappropriation of a trade secret.

In addition to the ability to bring a suit, it provides a mechanism for court ordered seizure of materials or items to prevent unlawful dissemination of a trade secret. This is an extremely powerful tool that companies can use to seize a laptop from a dishonest employee, for example. However, with great power, comes great responsibility and the law creates and a narrow scope of such power. More on that later.

To begin, the DTSA creates a criminal cause of action for theft of a trade secret and provides an increased penalty. Section 1832 states:

(a) Whoever, with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret,knowingly–

(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information;

(2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;

(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;

(4) attempts to commit any offense described in paragraphs (1) through (3); or

(5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.

(b) Any organization that commits any offense described in subsection (a) shall be fined not more than the greater of $5,000,000 or 3 times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.

So for corporate offenders, the damages start at $5M and only go up. It is not hard to imagine a trade secret that is the result of millions of dollars in R&D. These cost would be added to the amount that is 3X the value of the stolen secret.

WHISTLE BLOWER PROTECTION

The DTSA grants immunity to an individual who discloses a trade secret in confidence to a Federal, State, or local government official and solely for the purpose of reporting or investigating a suspected violation of law. Furthermore, employers must provide notice to all employees of this immunity in any contract or agreement that governs the use of a trade secret or other confidential information. Under the DTSA an employee includes any individual performing work as a contractor or consultant for an employer. An employer can be considered in compliance with the new notice provision if there is a reference to a policy document rather than including the entire immunity provisions in each agreement. Nowhere in the statute is there an exception for small businesses. When does this apply – Now! The notice requirement will “apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.” Therefore, because President Obama singed this into law yesterday, as of May 12, 2016 employers must begin providing notice under the law.

EX PARTE SEIZURE OF PROPERTY

One of the most powerful (and controversial) sections of the law grant the ability to have the government seize “property necessary to prevent the propagation or dissemination of the trade secret.” In order to get such an order, the damaged party must first show that another less drastic remedy, such as injunction, would be “inadequate to achieve the purpose… because the party …would evade, avoid, or otherwise not comply with” the less drastic remedy. In addition to this requirement, the statue also mandates that without the seizure, “immediate and irreparable injury will occur”, and the harm to the person or entity seeking the seizure “outweighs the harm to the legitimate interests” of the alleged thief, and “substantially outweighs the harm to any third party” that might be harmed by the seizure. Finally, the person or entity seeking he seizure must not publicize the requested seizure.

IMPORTANT DEFINITIONS

Another key of the DTSA is the codified definitions it contains. First, it does not materially change the definition of a trade secret that has been part of the Uniform Trade Secrets Act that has been adopted by most states. Even though it is not different it bears repeating here for context.

“Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public another person who can obtain economic value from the disclosure or use of the information.

“Misappropriation” means—(A) acquisition of a trade secret of another by a person who knows or has reason to know thatthe trade secret was acquired by improper means; or(B) disclosure or use of a trade secret of another without express or implied consent by a personwho—(i) used improper means to acquire knowledge of the trade secret;(ii) (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was—(I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or(III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or(iii) before a material change of the position of the person, knew or had reason to know that—(I) the trade secret was a trade secret; and(II) knowledge of the trade secret had been acquired by accident or mistake;

“Improper Means”(A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and(B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition.

The application and interpretation will take years to mature and test. In fact, the DTSA requires that within two years the Federal Judicial Center shall develop best practices for the seizure of information, the storage of seized information, and the securing of seized information.

If you have a business, and you have any kind of advantage over your competition, then you have trade secrets worth protecting. At Ruttler Mills, we offer provide practical legal advice and tools to help you establish, maintain, and enforce protection of your trade secrets.

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