Cyberlaw Cases

Bilski, Bilski, Bilski. You coulda been a contender.

When the Supreme Court granted cert on Bernard Bilski’s business method patent application for hedging risks in commodities trading, most commentators thought we would finally get some clarity on the future method patentability.  Some, like myself, hoped that the Court would draw a defining line, such as a rule that patentable methods must be technologically-based or, at a minimum, that human activities and business methods, by themselves, were unpatentable. Others wanted the Court to hand down a definitive ruling that method patenting was wide open, with the main constraints lying in other requirements under the Patent Act such as novelty, nonobviousness, and specificity.

What we got, however, was a mess – a mess of clues and hints as to what is patentable, but no clear line or test. While all nine members of the Court agreed that Bilski’s method was unpatentable and that the Federal Circuit’s exclusive “machine-or-transformation” test was too limited to determine the entire universe of patentable processes, the Court was deeply divided as to the right approach to the issue.

Justice Kennedy’s five-vote majority opinion – which reads more like a concurrence and is quite short (16 pages) for a case that took 231 days to decide – argues that Bilski’s application fails because it is an “abstract idea” and thus not allowed to be a “process” under Section 101 of the Patent Act. Yet Kennedy does not provide much explanation as to why the Patent Act prohibits abstract processes or how one tells the difference between an abstract process and a concrete process. For example, we leave the opinion without any sense of whether or not Judge Sotomayor’s famous “speed dating” example or Justice Breyer’s new method for teaching antitrust law are abstract or concrete. Instead, Kennedy merely states that “[c]oncerns about attempts to call any form of human activity a ‘process’ can be met by making sure the claim meets the requirements of §101” without explaining which requirements would do this or how.

Later, in a part of the plurality opinion that Justice Scalia did not join, Kennedy suggests that “i[f] a high enough bar is not set when considering patent applications for [business tasks], patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.” Kennedy then suggests that the “abstract idea” concept can establish a limiting principle on business method patents “if the Court of Appeals were to succeed in defining a narrower category or class of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas.” Again, ironically, Kennedy’s approach is rather abstract itself and offers little if any guidance.

So what can we take away from Bilski? Well, besides Justice Stevens’ 47-page tour-de-force concurrence arguing to uphold the historical exclusion of business method patents, here are my top four:

1)   State Street Bank’s “useful, concrete, and tangible result” test is dead.

In the 1998 State Street Bank v. Signature case, the Federal Circuit Court of Appeals opened the floodgates to an explosion of questionable patent applications by allowing patents to cover any subject matter as long as they produced a “useful, concrete, and tangible result.” This was far too broad and part of what lead to the Supreme Court taking Bilski in the first place. In the Bilski decision, four justices explicitly advocate against this standard and the majority opinion goes out of its way to state that nothing in its holding “should be read as endorsing” the State Street interpretation of Section 101: a clear message to the Federal Circuit that this test should go quietly into the history books.

2)   Abstract ideas likely include “basic concepts” and methods that can be reduced to a mathematical formula.

While most of the Bilski opinion is vague about how to define an abstract idea or the appropriate test to use, Justice Kennedy does provide a few more clues when he analyzes the Bilski claim directly. There, he describes the claims at issue as covering “the basic concept of hedging or protecting against risk” – “a fundamental economic practice.” He then writes: “The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea.” Thus, we are left with the suggestion that anything “conceptual” or that can be reduced to a mathematical formula is an unpatentable abstract idea. This may well be a defendant’s best argument when challenging a patent claim in court on these grounds.

3)   Parker v. Flook’s “field of use” and “postsolution activity” limitations are alive and well.

In 1978, Justice Stevens wrote Parker v. Flook, a case about a mathematical algorithm used to update alarm limits for a catalytic converter. In the case, the Court held this was unpatentable because an algorithm was a law of nature, even when the applicant attempted to limit it to a specific field of use or to add insignificant post-solution activity (such as triggering an alarm). In 1981, however, the Court decided Diamond v. Diehr, and called some of Flook’s holdings into question. Some commentators then speculated that Flook’s limitations on patentable subject matter were dead or at least diminished and that Diehr had essentially quietly overruled Flook.

While Kennedy cites to both Flook and Diehr in the Bilski opinion, he emphasized Flook much more heavily and suggests that its two major limitations could be among the most useful for the PTO or courtroom defendants who want to challenge patent claims as abstract ideas and especially those merely hitched to a concrete term here and there. So there is no question, Flook is alive, well, and good law.

4)   Expect more Section 101 challenges, especially at the early stages of patent litigation.

Under the State Street Bank test, very few patent litigation defendants had incentive to bring a challenge under Section 101 to a method claim, as it was almost impossible to prove that a patent had absolutely no “useful, concrete, and tangible result.” Now, even with the vague formulations offered by the Court’s opinion in Bilski, there will be more hope for patent litigation defendants to challenge broad method claims in court as abstract ideas. Two key reasons to do so are cost and timing. In patent litigation, defendants are often dragged through courts for years, even on bogus or bad patents, because proving a patent was obvious or that someone else had invented it first is expensive, time-consuming, and fact-intensive.

Arguing that a patent claim is an abstract idea, however, could be much simpler. While litigants might want to include some facts and expert testimony, others might simply want to challenge the patent claims as abstract on their very language. This is certainly how the Court in Bilski decided the abstractness question, and how the courts in Flook and Diehr did as well. Under this approach, defendants could even bring a motion to dismiss the case at the initial pleading stage, before any burdensome discovery and other litigation costs are incurred. This could also result in more decisions that interpret Bilski coming out at a relatively fast pace and providing the additional guidance litigants will need to navigate this new approach.

For others’ analysis, see here, here, here, and here.

One last note: As a result of the Supreme Court’s ruling, we will be moving this case off the Top Ten list. However, given that the Court left so many issues open and raised so many new questions, I still think the issue of method patentability for technologies such as software, medical diagnostics, and other information innovations is still very much up in the air and in play. We will be watching cases such as Prometheus v. Mayo to see how the Federal Circuit and other courts respond. But I anticipate this issue taking years to work out.

In today’s New York Times, there is an excellent article on the ongoing battle between companies and consumers over online criticism. In addition to discussing the various lawsuits that have been brought, the article also noted the following:

Recognizing that lawsuits can bring more unwanted attention, one organization has taken a different tack. The group Medical Justice, which helps protect doctors from meritless malpractice suits, advises its members to have patients sign an agreement that gives the doctor copyright over a Web posting if the patient mentions the doctor or practice.

Dr. Jeffrey Segal, chief executive of Medical Justice, said about half of the group’s 2,500 members use the agreement.

“I, like everyone else, like to hear two sides of the story,” he said. “The problem is that physicians are foreclosed from ever responding because of state and federal privacy laws. In the rare circumstance that a posting is false, fictional or fraudulent, the doctor now has the tool to get that post taken down.”

This so-called “agreement” strikes me as both legally and ethically suspect. Not only does copyright law generally require written assignments of copyright to be for some kind of payment (what is the payment here? The medical treatment? I thought that was what health insurance and co-pays were for?) but unless it is a work-for hire or some other kind of ongoing employment relationship, you generally can’t force people to assign their copyright in a web posting before it is written.

Moreover, such an agreement seems unethical under the American Medical Association Ethics Code. AMA Ethics Opinion 8.03 states:

Under no circumstances may physicians place their own financial interests above the welfare of their patients. The primary objective of the medical profession is to render service to humanity; reward or financial gain is a subordinate consideration. For a physician to unnecessarily hospitalize a patient, prescribe a drug, or conduct diagnostic tests for the physician’s financial benefit is unethical. If a conflict develops between the physician’s financial interest and the physician’s responsibilities to the patient, the conflict must be resolved to the patient’s benefit.

Since the main concern of Medical Justice appears to be preventing harm to the physician’s reputation (and thus financial interest), forcing patients to assign away their copyrights in exchange for medical care strikes me as close if not over this line. It certainly is not putting patients first. When a patient goes to see a doctor, they are often anxious, in pain, or worried and thus in a very psychologically vulnerable position, or what the law often calls a position of “duress” where they will often sign documents without giving them proper consideration. This hardly seems to me to be a fair time to demand they assign some unknown number of future copyrights to their doctor; instead it feels like a huge power grab by the physician.

Moreover, as Dr. Segal states in the article, these so-called “assignments” of copyright become a “tool” to take posts down from the Web. One can surmise that he intends for these doctors to invoke the notice-and-takedown provisions of Section 512 of the DMCA as a convenient way to censor criticism and cajole websites like Yelp! to remove the postings. However, this too strikes me as unethical and a potential abuse of the DMCA system. The DMCA takedown system was meant to allow copyright owners whose works were being posted online by others and costing them sales of copyrighted goods (e.g. movies and music) to enjoy an expedited process for stopping infringement and limiting economic harm to their content.

Here, it is clear that these web postings have no economic value as content to the physicians — rather they are, at best, potentially harmful to their reputations (note again, though, that this would likely be a violation of their ethical duty either way).

I should note that much of this is speculation on my part. I have not seen this so-called agreement and have not heard of any doctor taking things off the web based on it; but it does strike me as ironic that a group like Medical Justice, which proclaims its mission as “relentlessly protecting physicians from frivolous lawsuits” would embrace and endorse potentially frivolous, unethical, and abusive legal documents and actions to further its goals.

Case and Court:

American Booksellers Foundation For Free Expression v. Strickland, No. 07-4375 (6th Cir. Apr. 15, 2010).

See our prior coverage of this case in State Efforts to Regulate the Internet, coverage of the oral argument before the Supreme Court of Ohio, and when the Ohio Supreme Court adopted a narrow reading of this anti-dissemination statute.

On April 15, 2010, the Sixth Circuit, now working with the benefit of the Ohio Supreme Court’s narrow reading of Ohio’s anti-dissemination statute, upheld the constitutionality of Ohio Revised Code § 2907.31(D), reversing the district court.

You’ll recall that the statute prohibits providing material and performances with certain sexual content to juveniles, while exempting material and performances disseminated to a juvenile by a “method of mass distribution [which] does not provide the [sender] the ability to prevent a particular recipient from receiving the information.” O.R.C. § 2907.31(D)(2)(b). On certified questions from the Sixth Circuit, the Ohio Supreme Court limited the scope of the statute to personally-directed communications and not those communicated through generally accessible websites or public chatrooms where an individual cannot control whether a particular recipient is a juvenile. With the benefit of this narrow construction, the Sixth Circuit found that the statute was neither overbroad nor vague in violation of the First Amendment. The Court further held that the statute did not violate the dormant Commerce Clause as it it did not affect out-of-state actors differently than in-state actors.

Both sides are apparently declaring victory, and so long as the statute really is only applied narrowly to personally-directed communications, this is a fine result. However, it has been somewhat unsatisfying to watch both the Ohio Supreme Court and the Sixth Circuit dodge the most difficult questions posed by the broadly-worded portions of this statute. The Sixth Circuit merely tells us that

“in determining whether a new communication technology or device is covered under section 2907.31(D), future courts must determine whether that technology is more similar to ones which are personally directed, like an email, or those that are generally accessible, like postings on a public website.”

The problem is not that future courts that will have to determine how to apply this statute to new technologies, but rather that it remains less than clear how it applies to existing technologies, such as listservs, chat rooms or other web services where one arguably has the “ability” to limit one’s communications to a select group of individuals depending upon how “ability” is interpreted. Both the Ohio Supreme Court and the Sixth Circuit had the opportunity to definitively foreclose such applications of the statute by overzealous prosecutors, but failed to do so. I certainly think the better argument going forward is that the statute must be narrowly construed, but with these less-than-comprehensive rulings, there remains the slightest room for a prosecutor to attempt an overly broad reading in some remaining contexts, and then we will have to revisit these same arguments all over again.

See also:

• William Hershey, Anti-porn law ruled OK by court, Dayton Daily News (Apr. 16, 2010).

Case and Court:

Comcast Corp. v. FCC (D.C. Cir.)

See our prior coverage of this case: Comcast: Not-So-Brief Brief Roundup and Is the FCC Authorized to Promote Net Neutrality?

The DC Circuit issued its opinion in Comcast Corp. v. FCC today, holding that the Commission’s ancillary authority does not extend to its efforts to ensure network neutrality.

Having only skimmed the decision, it seems the court focused on the FCC’s effort to tie its Comcast adjudication to Congressional policy statements in the Telecommunications Act. Such policy statements, as opposed to affirmative delegations of regulatory authority, are simply incapable of empowering the Commission through ancillary authority according to the court.

The court appears to largely ignore what always struck me as the FCC’s strongest arguments – that it is entitled to regulate Comcast’s network management practices because of their impact on telephone carriers and broadcasters. By discriminating against competing voice and video service providers, Comcast’s actions affect industries clearly within the FCC’s regulatory ambit. The court suggests that the Commission waived those arguments by not relying on them in the underlying order.

The decision may leave the FCC some room to flex its net neutrality muscles again on a stronger record that more fully articulates the arguments not rejected here. The other options for effective neutrality regulation would now seem to require either wholesale reclassification of ISPs as common carriers or explicit Congressional delegation of authority to the FCC. No doubt all three of these options will be much discussed in the coming weeks.

See also:

• Mark Giangrande, FCC Loses Comcast Appeal on Net Regulation, Law Librarian Blog (Apr. 6, 2010).
• Nate Anderson, Court: FCC had no right to sanction Comcast for P2P blocking, Ars Technica (Apr. 6, 2010).

Case and Court:

• Commonwealth v. Interactive Media Ent’mt and Gaming Ass’n, Inc., No. 2009-SC-000043-MR (Ky. Mar. 18, 2010).

See our previous coverage of this case.

On March 18, 2010, the Kentucky Supreme Court held that the Interactive Media Entertainment and Gaming Association (iMEGA) and the Interactive Gaming Council (IGC) lacked standing to challenge the seizure of 141 internet domain names as illegal gambling devices.¹ These associations failed to particularly specify their membership and thus the Court believed that it could not conclude that any of the owners of the affected domains were represented by the associations. The Court noted that this does not foreclose the possibility of future relief and that those speaking for the seized domains made numerous compelling arguments that “may have merit.” However, the Court insisted that the domain names, as property, cannot themselves challenge their seizure and thus at least some of the owners of the domain names must come forward. The Court explained that such owners could re-file the writ petition with the Court of Appeals. The domain owners could then either proceed to the merits or file a motion for the Kentucky Supreme Court to accept transfer of the case, as its merits have already been briefed and argued. iMEGA has indicated it intends to file such a motion to satisfy the Court’s concerns about standing.²

It is hard not to see this decision by the Court as a “dodge” of the difficult questions presented by the case. While the Court’s language about the arguments made on behalf of the seized domains that “may have merit” is suggestive, it is not entirely clear whether this was an effort by the Court to tip its hand and thereby to encourage the Commonwealth to drop the matter. The Court’s language is circumspect enough that the Commonwealth may continue to pursue this puzzling and over-reaching effort to apply Kentucky’s gambling device seizure laws to these domain names. This ruling is an unsatisfying result either way. If the case is dropped, we will not have a clear ruling from the state’s highest court that this should not happen again. If the case is not dropped, we have to wait several more months to get a resolution.

See also:

• Dan Cypra, Kentucky Supreme Court Sides with State in Internet Gambling Case, Poker News Daily (Mar. 18, 2010).
• Stephen A. Murphy, Poker Domains in Jeopardy as Kentucky Supreme Court Reverses Earlier Decision, CardPlayer.com (Mar. 18, 2010).

Footnotes:

1. Commonwealth v. Interactive Media Ent’mt and Gaming Ass’n, Inc., No. 2009-SC-000043-MR (Ky. Mar. 18, 2010). [↩]
2. iMEGA, KY Supreme Court Questions Standing, Rules for State iMEGA (Mar. 18, 2010). [↩]

The Library Alliance has posted an infographic trying to explain all the possible outcomes of the GBS lawsuit. I’m not sure they’ve got them all down correctly, but it’s an interesting way to represent the situation. At the very least, it shows that the battle over the Settlement is far from over.

Judge Chin has released an order for the list of speakers at the Google Book Search settlement fairness hearing, scheduled for Feb. 18.

Speaking in Opposition:

1. Sarah Canzoneri, a member of the Children’s Book Guild
2. Scott E. Gant (author and class action specialist)
3. Microsoft
   
4. Amazon.com
5. Science Fiction & Fantasy Writers of America and the American Society of Journalists and Authors
6. Professor Pamela Samuelson, UC Berkeley
7. Cindy Cohn (EFF), on behalf of the Privacy Authors and Publishers
8. Yasuhiro Saito, on behalf of the Japanese P.E.N. Club et al.
9. The French Republic
10. The Federal Republic of Germany
11. The State of Connecticut
12. Questia Media
13. AT&T
14. Cynthia Arato, on behalf of the New Zealand Society of Authors
15. Consumer Watchdog
16. EPIC
17. Open Book Alliance
18. Andrew Devore, on behalf of Arlo Guthrie, Julia Wright, Catherine Ryan Hide, and Eugene Linden
19. Matthew Weiss, on behalf of Darlene Marshall
20. VG WORT

Speaking in Favor:

1. The Institute of Intellectual Property & Social Justice, Howard University School of Law
2. Sony Electronics
3. National Federation of the Blind
4. Paul N. Courant, University of Michigan Library
5. Center for Democracy & Technology

Each of the above parties will have only five minutes to make its case. After that, the DOJ speaks, then the parties. Should be quite a hearing!

Case and Court

• Am. Booksellers Found. for Free Expression v. Strickland (6th Cir.), on certified questions to Ohio Supreme Court as Cordray v. Am. Booksellers Found. for Free Expression.

On January 27, 2010 the Ohio Supreme Court issued its opinion in American Booksellers Foundation for Free Expression v. Cordray. We previously wrote about the oral argument in this case, and discussed this case with other state efforts to regulate the internet.

To recap, this case involved the Sixth Circuit’s certification of questions of state law for the Ohio Supreme Court to consider, particularly whether the Ohio Attorney General was correct to construe narrowly Ohio’s R.C. 2907.31, an anti-dissemination statute aimed at restricting material deemed harmful to minors, such that its application be limited to personally directed communications via instant messaging, person-to-person e-mails, and private chat rooms and not to material posted on generally accessible websites and in public chat rooms.

The Ohio Supreme Court agreed with the Attorney General’s narrow reading. The American Booksellers Foundation for Free Expression had instead urged the court to find the statute unconstitutional and leave the task of writing a constitutional statute to the Ohio state legislature.

In a very short opinion the Ohio Supreme Court believed the statute could be salvaged because the Ohio Attorney General claims “that a person who does not ‘know or have reason to believe that a particular recipient of the information or offer is a juvenile’ does not violate the statute upon transmitting harmful-to-juveniles material, even if a minor receives it.” Thus, the Court limited the scope of the statute to personally-directed communications and not those communicated through generally accessible websites or public chatrooms where an individual cannot control whether a particular recipient is a juvenile.

Particularly disappointing in this opinion was the Court’s avoidance of the tough hypothetical questions asked at oral argument. At oral argument the parties discussed email listservs where a sender might have knowledge or reason to believe that juveniles were subscribers but because of the nature of listserv technology a sender would lack the ability to restrict recipients. Any time one had reason to believe at least one juvenile were subscribed to a list, one would be forced to restrict one’s otherwise permissible adult-to-adult communications via that list or run afoul of this statute. As I wrote before, this may be the right policy result, but it is not what the statute says in section (D)(2)(b). The court fails to discuss listservs at all, leaving this question unresolved.

However, recall that this case had an odd posture in which both parties were essentially arguing for this same narrow reading of the statute. With the above-mentioned exception of greater clarity on listservs, mailing lists, and perhaps USENET groups that ABFFE desired, both ABFFE and the Attorney General can claim something of a victory here. The case now returns to the Sixth Circuit and we will see how they apply the Ohio Supreme Court’s interpretation of this statute.

See also:

• James Nash, State high court upholds Net law to protect kids, The Columbus Dispatch (Jan. 28, 2010).
• Laura A. Bischoff, Anti-predator porn law doesn’t apply to web sites, Dayton Daily News (Jan. 28, 2010).
• Julie Carr Smyth, Ohio high court narrowly interprets anti-porn law, BusinessWeek (Jan. 27, 2010).

Case and Court:

Jacobsen v. Katzer, (N.D. Cal.)

We recently covered the summary judgment arguments in the model railroad free software case. Just days later a decision from the court granted Jacobsen victories on virtually every issue suitable for resolution on summary judgment.

Summary judgment was granted in favor of Jacobsen on the Anticybersquatting Consumer Protection Act (ACPA) claim, on his copyright infringement claim, on Defendant’s counterclaim for copyright infringement, and partial summary judgment on the DMCA Copyright management information claim (on everything but the knowledge and intent elements).

We had previously highlighted the actual damages issue as particularly noteworthy, and while the court does not reach an award of damages in this ruling, the court wrote,

“[T]he Court may assume at this procedural stage that there is some value for the expenditure of time invested in the JMRI Project and that it therefore has some monetary value.”

and

“[T]he Court is unpersuaded that Plaintiff cannot prove damages.”

The parties are supposed to attend another settlement conference shortly and the writing is on the wall on this one, so if both parties adopt reasonable positions going in to that conference, they should come out with a resolution. Timing will be interesting, however, as the Federal Circuit appeal on irreparable harm is slated for oral argument on Jan. 4, 2010, and that appeal might not go forward if a settlement is finalized beforehand.

Earlier this week, Judge Gertner entered judgment to the tune of $675,000 in Sony BMG v. Tenenbaum. Nothing particularly surprising there. This was the number arrived at by the jury, based on a statutory damages calculation of $22,500 per infringed work.

The court also issued an injunction barring Joel Tenenbaum from infringing plaintiffs’ work in the future, and requiring him to destroy all infringing copies of plaintiffs’ works. Again, all pretty standard fare.  But a couple issues of note crop up in the court’s memorandum on the issue of injunctive relief. First, the court rightly refused the record labels’ effort to enjoin Tenenbaum from “promot[ing] … using the Internet or any online media distribution system to infringe copyrights,” recognizing the First Amendment implications of such an ambiguous prior restraint.

More troubling is the court’s treatment of the standard for injunctive relief. A permanent injunction requires a showing that the harm at issue is irreparable and that monetary damages are inadequate. If you are not a copyright litigator, you might wonder how plaintiffs who are to receive $675,000 in damages for sharing 30 songs could argue with a straight face that they have suffered irreparable harm for which money alone cannot possibly compensate.
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Case and Court:

Jacobsen v. Katzer, (N.D. Cal.)

Occasionally we will blog about “Other cases to watch” that are not on our Top 10 list.

On Friday, Dec. 4, 2009, I attended the oral argument in Jacobsen v. Katzer on the parties’ cross-motions for summary judgment. This case has made one trip to the Federal Circuit already and has oral argument in another appeal scheduled for Jan. 4, 2010. It seems to be less recognized that at least two interesting issues remain in the case at the district court level: 1) the alleged infringement of the selection and arrangement of certain data, and 2) the appropriate method of calculating actual damages to a free software project that, through failure to timely register its copyrights, is not eligible for statutory damages.

Background

In Jacobsen’s first appeal, the Federal Circuit vacated and remanded the denial of Jacobsen’s motion for a preliminary injunction premised on an allegation of copyright infringement. Jacobsen, a UC Berkeley physics professor, leads the Java Model Railroad Interface (JMRI) free software project which, at the time of this dispute, was provided under the Artistic license. The key issue on the first appeal was whether the alleged breach of a free software license, such as the Artistic License, provided JMRI with a cause of action for copyright infringement or merely for breach of contract.
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