The Year Ahead 2012: Top IP Legal Issues In The United States

This year could bring major changes in US intellectual property law. Congress and the nation’s courts will be confronting a variety of issues that have broad ramifications for copyrights, trademarks and patents. Here are some of the top developments to watch in 2012.

1) Mayo Collaborative Services v. Prometheus Laboratories. This is the US Supreme Court’s latest attempt to define what inventions are patentable.

In this case, Mayo is challenging two medical treatment patents, which claim a process for determining how much thiopurine medication a patient should receive in order to treat certain autoimmune diseases. The patented process is straightforward: administer the drug, determine the amount of the drug’s metabolites in the patient’s blood, and compare this with metabolite levels known to be ineffectively low or dangerously high. If the metabolite level is too low, increase the dosage of the medication. If the metabolite level is too high, reduce the dosage.

Mayo argues that these patents should be struck down because they cover only unpatentable natural phenomena – the correlation between thiopurine metabolite levels and the drug’s effects. These patents are so broad, according to Mayo, that they prevent any doctor from adjusting a patient’s thiopurine medication unless the doctor pays Prometheus to use the patents.

Prometheus argues that these medical treatment patents should be upheld because they cover man-made techniques that make use of natural phenomena. Determining the amount of metabolites in a patient’s blood, for instance, requires laboratory procedures that transform the blood sample. The patents do not claim any specific laboratory procedures for such blood tests, but some man-made transformation is called for.

If the US Supreme Court upholds this patent, many healthcare providers fear their ability to treat patients will be greatly hampered – and rendered far more expensive – by a plethora of similar medical treatment patents. On the other hand, if the court strikes down the patent, there will be no financial incentive to develop many new methods of treating illness, according to biotechnology and pharmaceutical firms.

The court’s ruling “will be important for lots of biotech patents, especially in the area of personalized medicine,” said Prof. Arti Rai of Duke Law School.

The Supreme Court heard oral argument in this case on 7 December. Its ruling is expected before the court ends its term in late June.

2) SOPA and the PROTECT IP Act. These two bills, which are now before Congress, would give the federal government and IP owners powerful new remedies against websites that distribute material which infringes US trademarks or copyrights. And both bills would apply these remedies to websites located anywhere in the world.

These bills would reach even websites that are located outside the United States and whose domain names are registered with non-US registries and registrars. To go after such foreign websites, the legislation would empower both the federal government and IP owners to bring in rem actions [targeting inanimate objects] against the websites’ domain names.

The Senate bill, the PROTECT IP Act, allows an aggrieved IP owner to file an in rem suit and to obtain a court order that prohibits US entities from providing internet advertising services or online financial transactions for the allegedly infringing foreign website. Cutting off such ad revenue and online payment processing can be extremely damaging to a website, as Wikileaks can attest.

If federal officials sue in rem, they can obtain the same remedies, as well as court orders mandating that the websites’ domain names be blacklisted by internet service providers (ISPs) and search engines operating in the US. The ISPs must alter their operations so that users who type in the websites’ domain names would not reach the websites. Search engines would have to remove the websites from their search results.

All these remedies are also authorised by the House of Representatives’ bill, the Stop Online Piracy Act (SOPA). The House bill, however, goes further. For instance, SOPA would allow its remedies to be imposed on any US-directed website whose operator deliberately avoids “confirming a high probability” that the site is used “to carry out” copyright infringement. To avoid liability, websites that host user generated content would have to actively police the material posted by their users and remove infringing items, according to many experts. This would impose massive new costs on legitimate websites such as YouTube, eBay, Facebook and Twitter, critics contend.

Proponents of the bills – including the US Chamber of Commerce, the recording industry and the film industry – argue that the legislation is needed to protect US IP owners against massive online infringement. But the bill is strongly opposed by many technology firms, online businesses (such as Google), civil rights groups and internet experts. They assert the legislation would be extremely harmful to legitimate online firms, censor the internet, and destabilize the internet’s domain name system.

The legislators who introduced the bills are fighting hard for them, but the final fate of this legislation is uncertain. “It is impossible to predict what Congress will do,” said Dan Winston, a partner in Choate, Hall & Stewart.

3) The New TLDs. When 2012 began, the internet had a limited number of top level domains (TLDs). That number may soon expand dramatically, to the consternation of many trademark owners.

The year started with 22 generic TLDs, such as .com and .org, and approximately 250 country code TLDs, such as .us or .jp. But from 12 January until 12 April, the Internet Corporation for Assigned Names and Numbers (ICANN) is accepting applications for new TLDs. Applicants can request that almost any word or phrase become a TLD, such as .shoes or .deloitte.

It will cost an applicant millions of dollars to obtain and operate a new TLD, according to experts, but plenty of entities seem prepared to take the plunge. “A person who testified [to the US Congress] on behalf of ICANN said there will be only about 500-1,000 applications for new TLDs, but I think there will be a lot more,” said Jeffrey Kaufman, a partner in Oblon, Spivak, McClelland, Maier & Neustadt.

Many of those applying for new TLDs may be doing so reluctantly. “Companies will act if only from a defensive standpoint,” said Kaufman. “If I’m Nissan, will I want a competitor to get .car or .auto? There will be a lot of pressure on companies to participate.”

Plenty of businesses are quite content with the current domain name system. They are upset by the prospect of spending millions of dollars in order to defensively purchase new TLDs and to police their marks in the hundreds of anticipated new TLDs. These businesses called on ICANN to stop the rollout of new TLDs. Many members of Congress have echoed these calls.

But ICANN has not backed off. “It appears this will go forward,” Kaufman said.

4) Viacom International, Inc. v. YouTube, Inc. In this case, a federal appellate court is tackling an issue of major importance for copyright owners, internet users, and websites that host user-generated content (such as YouTube, Twitter, Facebook and eBay). “It will help determine whether and under what circumstances websites get immunised against the conduct of users who upload infringing content,” said Aaron Moss, a partner in Greenberg Glusker Fields Claman & Machtinger.

Viacom is asserting that YouTube should be held liable for copyright infringement because it knew in general that some of its users were posting infringing clips from Viacom’s copyrighted works. However, the online service didn’t know which of the millions of posted clips were infringing. And whenever Viacom notified YouTube that a specific clip was infringing, the online service took down the clip.

The trial court found YouTube was not liable [pdf]. It held that, under the Digital Millennium Copyright Act (DMCA), a website or other internet service is not liable for infringing actions taken by its customers, unless the website was aware of specific infringements and refused to do anything about it.

Viacom appealed, and the parties argued their case in October before the Second Circuit Court of Appeals. Shortly thereafter, the court asked the parties to provide additional written briefs addressing two questions about the interpretation of the DMCA. Some observers interpret the tenor of these questions as foreshadowing bad news for YouTube. Meanwhile, copyright attorneys and internet firms are anxiously awaiting the court’s decision.

5) Golan v. Holder. In this case, the US Supreme Court will decide whether Congress acted unconstitutionally when it granted copyrights to millions of foreign works that were in the public domain in America.

Congress granted the copyright restoration in 1994, in order to comply with America’s obligations under the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). But opponents of the legislation assert that by removing works from the public domain, Congress exceeded “the traditional contours of copyright protection” and violated the free speech rights of those who were using (or wanted to use) the works.

At stake are the rights to millions of works by foreign authors, including well-known works by Pablo Picasso, J.R.R. Tolkien, Igor Stravinsky, Alfred Hitchcock, H.G. Wells, M.C. Escher, Virginia Woolf, Federico Fellini, and Sergei Rachmaninoff. Moreover, if the US Supreme Court strikes down the copyright restoration, the United States may find itself in violation of its obligations under TRIPS.

The Supreme Court heard oral argument for this case in October. The high court is expected to issue its opinion within the next several months.

6) ITC Injunctions. In recent years, businesses increasingly are using patent law to stifle their competitors around the world. Companies such as Apple, Samsung and HTC have filed a blizzard of patent infringement suits in order to keep rival products off the shelves. And when patentees want to bar competing products from the US market, they are, with increasing frequency, bringing their infringement claims to an unusual forum, the International Trade Commission.

The ITC offers two big advantages for patentees. First, this administrative agency renders its decisions far faster than do the courts. Second, it enjoins the sale of infringing products when the courts won’t. More specifically, the ITC can bar the import of products that infringe any US patent, and the agency has regularly stopped such imports even if the infringement concerns only a tiny aspect of the imported product. The US courts, by contrast, are most unlikely to enjoin the sale of a product if only a small aspect of it infringes.

The ITC’s willingness to grant injunctions, however, has come under fire lately from some businesses and legal experts. “It is not a sustainable situation. Getting an injunction when the patent constitutes a small piece of the [defendant’s] final product – that’s insupportable,” said Rai.

Now, the ITC’s practice may be changing. In late December, the ITC determined [pdf] that some of HTC’s smartphones violate one of Apple’s patents, but the agency did not immediately enjoin the import of the infringing phones. Instead, the agency gave HTC four months to design around the patent before enjoining further importation.

Businesses and patent experts will be watching the ITC in 2012 to see if this ruling is an outlier, or if it heralds a new, more lenient approach to patent infringement. If the latter, it will significantly weaken patentees’ ability to stop competitors from getting their products onto the US market.

7) Patent Trolls and the America Invents Act. Companies doing business in the United States have complained about being harassed by so-called “patent trolls” – entities whose sole purpose is to licence their patents and to sue those who fail to take out licences. But patent trolls may find it far more difficult and expensive to sue recalcitrant licensees, depending on how the courts interpret the America Invents Act (AIA).

Before the AIA went into effect in September 2011, a patent troll would routinely file a single infringement suit against many different companies. This provided trolls with economies of scale in litigation that helped make their business model profitable.

The AIA puts an end to this. It mandates that a plaintiff can no longer bring an infringement action against multiple defendants who all simply violated the same patent. In order to sue multiple defendants in one action, a plaintiff must allege that the defendants all participated in the same infringing transactions and that there are “questions of fact common to all defendants.”

“This won’t end patent trolls, but makes it more cost-prohibitive for patent trolls to sue multiple defendants,” said Winston. “It’s a lot harder to run 20 cases against 20 defendants than one case against 20 defendants.”

As a result, patent trolls are likely to bring fewer suits, against fewer defendants. “They will have to be more selective, because it will cost a lot more than it used to add another defendant,” said Winston.

But in 2012, the patent trolls will likely go to court and seek ways around the AIA provision – such as requesting that cases filed against different defendants be consolidated in one action. “It will be interesting to see what the courts will decide is factually related [and so can be encompassed in a single lawsuit] or whether the courts will allow cases to be consolidated to achieve same results,” said Winston.

Overall, 2012 promises some big developments in US intellectual property law. Said Rai: “I think it will be an interesting year.”