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Bar News - June 18, 2014


Intellectual Property Law: Recent US Supreme Court Decisions Tackle IP Questions

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The US Supreme Court recently addressed some important issues that can arise in intellectual property litigation, including the standard for awarding attorneys’ fees in patent infringement cases, laches and statute of limitations applicable to copyright infringement actions, and standing to assert a false advertising claim under the Lanham Act.
Patents
In a pair of unanimous decisions issued in late April, the Supreme Court lowered the standard for awarding attorneys’ fees in patent cases. The decisions were seen as undermining so-called “patent trolls” (companies whose sole purpose is to buy patents with the intent of enforcing their rights through frivolous litigation).

Federal courts rarely allowed prevailing parties in patent cases to recoup legal fees. Under 35 US.C § 285, the court in “exceptional cases may award reasonable attorney fees to the prevailing party.” The test for “exceptional cases,” as outlined in Brooks Furniture Manufacturing, Inc. v. Dutailier Int’l Inc., required the prevailing party to prove both that the litigation was brought in subjective bad faith and was objectively baseless. This test was so rigid that many companies chose to pay licensing fees because it was more cost-effective than litigation.

In the first case, Octane Fitness v. Icon Health & Fitness, the issue was whether the “exceptional case” standard for awarding attorneys’ fees was too high. Icon, a maker of exercise equipment, brought action against its smaller competitor, Octane, accusing it of patent infringement. Octane won after paying $1.3 million in legal fees and asked the lower court to order Icon to reimburse it.

Justice Sonia Sotomayor, writing for the Court, overturned the Brooks Furniture standard, finding that it was “unduly rigid” and held that “nothing in [Section] 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.”

In Highmark Inc. v. Allcare Management Systems Inc., the issue was whether a District Court’s award of attorneys’ fees under 35 USC § 285 was entitled to deference on appeal or should be reviewed de novo. The Court again rejected Brooks Furniture and overturned the standard of de novo review for § 285 motion, holding that, “decisions on ‘matters of discretion’ are ‘reviewable for abuse of discretion.’”
Copyrights
In Petrella v. Metro-Goldwyn-Mayer Inc., decided in early May, the issue was whether the equitable defense of laches is available in a copyright claim filed within the Copyright Act’s three-year statute of limitations.

Paula Petrella brought a copyright infringement suit against Metro-Goldwyn-Mayer Inc. (MGM) in 2009, as owner of the screenplay to the 1980 movie Raging Bull. Petrella alleged that MGM infringed her interest in the movie Raging Bull, for which her father wrote the screenplay in 1963. Petrella’s father died in 1981, but in 1991, she successfully renewed the copyright in the screenplay. Because her father died within 28 years of the original copyright, the renewal rights in the screenplay vested in his heirs, regardless of whether he assigned the renewal term of copyright to a third-party prior to his death.

Despite being aware of her claims at the time of the 1991 renewal, Petrella did not file a lawsuit until January 2009. However, because of the three-year statute of limitations prescribed by 17 USC § 507(b), Petrella claimed damages only for the copyright infringement occurring between 2006 and 2009.

Petrella argued that the equitable defense of laches did not apply because copyrights are entitled to a three-year statute of limitations. In a 6-3 decision, the Court held that the Ninth Circuit erred in holding that laches may be invoked as a bar to Petrella’s copyright claim for infringement occurring within the three-year limitations period.

The Court rejected the argument that it was incumbent on copyright owners to “sue soon, or forever hold your peace” and ruled that the three-year “look-back” limitations period itself takes account of delay and that laches cannot be invoked as a bar to Petrella’s pursuit of a claim for damages brought within the three-year window.
False Advertising/Trademarks
In Lexmark International Inc. v. Static Control Components Inc., decided in March, the Court issued a unanimous decision resolving a circuit split on the standing requirements under the Lanham Act for a false advertising claim. The issue was whether Static Control had standing under the Lanham Act to sue Lexmark for false advertising.

In rejecting the various circuit tests, the Court’s decision provides clear guidance on what constitutes standing for false advertising claims and eliminates unpredictability among the circuits.

To properly allege that its injury falls “within the zone of interests,” a plaintiff must claim injury to a commercial interest in reputation or sales and establish proximate cause, namely, that there is “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.”
Up Next
A decision is expected in late June for American Broadcasting Companies Inc. v. Aereo Inc., where the issue is whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to paid subscribers over the Internet.


Lisa N. Thompson, former trademark counsel at 3M Company, is an attorney with Hage Hodes, and focuses her practice on trademark and copyright matters. Contact her at lthompson@hagehodes.com.

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