US IP Law – A Look At The Year Ahead

In the coming year, one US Supreme Court case promises to dominate developments in America’s IP law. The upcoming decision in Oil States Energy Services v. Greene’s Energy Group could have major ramifications for patents, copyrights, trademarks, and the USPTO. But even as that case steals the limelight, 2018 could bring other significant changes to America’s IP law. Here are some of the key developments to watch for.

1) Oil States Energy Services v. Greene’s Energy Group. As detailed in a prior column, the stakes of this case are high. The Supreme Court will decide whether it is unconstitutional for the USPTO (US Patent and Trademark Office) to invalidate issued patents. “If it is unconstitutional, all challenges to patents will have to be brought in district courts, and that will be a huge hit for defendants in patent infringement suits. These defendants really like the [USPTO’s administrative tribunal] because they see it as a quick, easy and cheap way to challenge patent validity,” said Prof. Arti Rai of Duke Law School.

The USPTO’s administrative tribunal “has shown that a lot of bad patents have been issued,” said Prof. Rochelle C. Dreyfuss of New York University’s School of Law. She added, “Court challenges are not an efficient and cost-effective way to deal with those patents.”

If the Supreme Court finds the USPTO’s patent adjudications are unconstitutional, because patents are private property that can be attacked only in courts, the ramifications could stretch far beyond the realm of patents. The ruling’s logic could undermine the USPTO’s procedure to cancel trademark registrations and the Copyright Office’s power to set royalty rates for statutory licenses. It could even cast a shadow over much of the administrative state. “If patents and trademarks are private rights that can only be taken away by Article III courts, what about other government grants made by other government agencies to private individuals – such as FCC licenses or FDA drug approvals?” said Rai.

2) Clarifying TC Heartland LLC v. Kraft Foods Group. In May 2017, the US Supreme Court held [pdf] in Heartland that a US company can be sued for patent infringement only in those venues where the defendant is incorporated or where it has a regular course of business. The ruling made it significantly easier for accused infringers to defend themselves against patent trolls and other patentees (as discussed here), but the scope of the decision remains unclear.

“There are still a lot of questions about what constitutes a ‘regular course of business.’ Can one employee’s small home office suffice? Will one retail store in the area be enough?” said Ryan K. Yagura, a partner in the law firm of O’Melveny & Myers.

Courts will likely be wrestling with such questions this year.

3) Fallout from Matal v. Tam. The US Supreme Court, in June 2017, issued an apparently narrow ruling [pdf], striking down one statutory restriction on federal trademark registrations. The prohibition on disparaging marks violated the Constitution’s guarantee of free speech, the high court held.

Under the Court’s reasoning, other parts of the federal trademark statute also seem unconstitutional (as discussed here). Thus, few experts were surprised when, in December, an appellate court struck down the statute’s prohibition on immoral or scandalous marks.

2018 is likely to see more rulings of this nature, examining the constitutionality of various parts of federal trademark law. One provision in the crosshairs allows the owners of famous marks to sue those who diminish the distinctiveness of their marks by tarnishing the marks’ reputation. “If courts take the reasoning in Tam seriously, it is hard to see how tarnishment doesn’t go down,” said Prof. Mark McKenna of Notre Dame Law School.

4) No safe harbor? Over the years, the movie, television, and music industries have tried a variety of legal mechanisms to end online copyright infringement – with little success. But if they win a test case now before the 4th Circuit Court of Appeals, they will alter the balance of US copyright law and obtain a powerful new tool against alleged online infringement.

The plaintiffs in BMG Rights Management v. Cox Communications assert that online service providers (OSPs) must terminate the accounts of customers repeatedly accused of infringement by copyright owners. If an OSP fails to do this, the plaintiffs claim, that OSP loses its safe harbor protection under the Digital Millennium Copyright Act, and thus becomes secondarily liable for the alleged infringements. In this case, the plaintiffs claim that an internet service provider, Cox Communications, failed to terminate internet service to customers accused of repeated online infringements, so Cox is liable for millions in damages.

There’s a lot riding on the 4th Circuit’s decision – for copyright owners, online providers, and all those who use the internet. “Is it a big deal to cut somebody off from the internet? And must internet service providers cut someone off based on a mere accusation – when no court has found the customer committed infringement?” said Andrew P. Bridges, a partner in the Fenwick & West law firm. He added, “The 4th Circuit judges got how essential the internet is to modern life.”

5) New IP laws. There are good reasons why the US Congress might accomplish little in 2018. Political partisanship is fierce. The Republicans’ control of the Senate has been whittled down to a slim 51-49 majority. Much of Congress’ time and attention this year will be focused, not on legislating, but on November’s congressional elections.

Yet there are reasons to think that Congress might enact some significant IP legislation in 2018. IP issues often do not follow partisan fault lines, so bills in this area frequently can gather bipartisan support. Even when Congress is largely deadlocked, IP bills can sometimes be passed. Indeed, inactivity on other fronts can allow legislators time to work on new IP legislation.

And such legislation is sorely needed, according to many in the business and legal communities. So in 2018, Congress might attempt to clarify the scope of patentable subject matter. “There’s a lot of confusion and unhappiness about what is and isn’t patentable,” said Dreyfuss.

Congress is also under pressure to update federal copyright law. “Many people want a revision of the Copyright Act so it deals with online distribution, which the current statute doesn’t actually do,” said Dreyfuss. “There are a lot of questions that need answering, such as secondary liability for websites.”

Image Credits: Marco Verch