IP and Computer Law Update

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From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH and Aspen Publishers intellectual property and computer law publications.

If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to john.arden@wolterskluwer.com.

Claims Valid Even Though Registration Applications Were Pending

Even though applications to register a photographer's copyrights in 11 photographs were pending, but not yet approved, the federal district court in Philadelphia permitted the photographer to pursue claims that a publishing company unlawfully used the photographs in illustrating textbooks. Section 411(a) of the Copyright Act provides that a copyright infringement action cannot be maintained unless the copyright has been registered with the Copyright Office. Recently, in Reed Elsevier, Inc. v. Muchnick (CCH Copyright Law Decisions ¶29,914, IntelliConnect User Link), the U.S. Supreme Court held that the Section 411(a) precondition to filing a claim does not restrict a federal court's subject matter jurisdiction. However, the Court did not decide whether an action may be maintained if the copyright application is pending, but not yet approved. While the Third Circuit has not yet addressed the issue, the Ninth Circuit has ruled that allowing claims with pending registrations to proceed best serves the aims of the copyright laws. Persuaded by the reasoning of the Ninth Circuit, the district court denied the publishing company's motion (Degginger v. Houghton Mifflin Harcourt Publishing Co., EDPa, CCH Copyright Law Decisions ¶29,971, IntelliConnect User Link).

Compilation Registrations Did Not Cover Individual Photos

A photographer did not have a right to sue for copyright infringement of 150 of his individual photographs because they were not properly registered, the federal district court in Phoenix has held. Accordingly, the photographer's claim that a publisher infringed his copyrights by willfully exceeding licenses to use them was dismissed.

The photographer had transferred his ownership rights in the photographs to his licensing agent, and the agent registered six compilations of the images, each of which contained between 11,000 and 613,000 photographs. None of the registration documents mentioned the titles of any of the individual photographs, and only one document mentioned the photographer as an author. Thus, the 150 images were not individually registered in compliance with Section 409 of the Act, but rather were registered only as part of a compilation. The registrations of the compilations did not effect registration for the individual photographs in the compilations (Bean v. Houghton Mifflin Harcourt Publishing Co., DAriz, CCH Copyright Law Decisions ¶29,980, IntelliConnect User Link).

Findings on Materiality Needed to Reject “Cuban” Cigar Mark

The Trademark Trial and Appeal Board improperly sustained an opposition to an application to register the mark GUANTANAMERA for cigars (CCH Trademark Law Guide ¶61,208, IntelliConnect User Link) because it used an incorrect legal standard in determining that the mark was geographically deceptively misdescriptive under Sec. 2(e)(3) of the Lanham Act, according to the federal district court in Washington, D.C.

There was sufficient evidence that Cuba or Guantanamo, Cuba was the primary significance of GUANTANAMERA, and that the consuming public was likely to believe that the applicant's cigars originated from Cuba, when in fact they were made in Honduras. Thus, the mark was geographically misdescriptive, the court said. The TTAB erred as a matter of law, however, as to the element of materiality.

The TTAB did not make any findings regarding a "substantial proportion" of materially deceived consumers. More was required than a finding that Cuba had a reputation for high-quality cigars. The applicant's false claims on its packaging—the phrases "Guantanamo, Cuba" and "Genuine Cuban Tobacco"—did not demonstrate materiality. The applicant's subjective intent to deceive did not provide insight into the minds of consumers. Without objective findings as to why consumers purchased Guantanamera cigars, it would be difficult to make an accurate conclusion as to whether the geographic misdescription would deceive consumers into purchasing the cigars because of the false goods-place association, the court reasoned. The case was remanded to the TTAB for application of the proper legal standard (Guantanamera Cigar Co. v. Corporacion Habanos, SA, DDC, CCH Trademark Law Guide ¶61,680, IntelliConnect User Link).

Spanish Winery Barred From Using “Cristalino” on Cava

The mark CRISTALINO, as used on sparkling wine (cava) produced by a Spanish winemaker and imported into the United States by a consortium of Spanish wineries, was likely to be confused with a French winemaker's CRISTAL marks for champagne, the federal district court in Minneapolis has determined. The French winery had used CRISTAL in the United States to identify its champagne since at least 1937 and the mark was well-known among the general public.

The strength of the French winery’s common-law CRISTAL mark weighed in favor of a likelihood of confusion finding, the court held. The mark was suggestive rather than descriptive—"CRISTAL" did not have a meaning in English other than to identify CRISTAL champagne or as a proper name. Although the parties' products did not compete directly for sales—and the Spanish producer's cava was sold for considerably lower prices than the high-end CRISTAL champagne—there were similarities in their sales outlets, trade channels, and customers, the court noted. It would be reasonable for consumers to believe CRISTAL champagne and CRISTALINO cava were affiliated, the court said. The suffix "INO" was likely to suggest to consumers that "CRISTALINO" was a diminutive of the root word "CRISTAL." The parties' sold their products in bottles with the same shape, with labels that had several similar design elements, the court added.

The Spanish winery was permanently enjoined from using CRISTALINO for sparkling wine in a manner that was likely to cause confusion with the French winery's CRISTAL marks. However, it was unnecessary to completely bar use of the word "CRISTALINO" to prevent confusion, the court said. The Spanish winery could use the term "CRISTALINO" for cava or sparkling wine as part of the phrase "JAUME SERRA CRISTALINO," as long as it was accompanied by a prominent disclaimer stating that the wine was not affiliated with or connected to CRISTAL champagne or the French winery. The mark also had to be used on labels with fonts and other design elements that were dissimilar to CRISTAL's labels (Champagne Louis Roederer v. J. Garcia Carrión, S.A, D Minn., CCH Trademark Law Guide ¶61,681, IntelliConnect User Link).

“Delicious” Tank Top Could Infringe Shoe Designer’s Marks

A designer of footwear for young women under the mark DELICIOUS could pursue trademark infringement claims against intimate apparel retailer Victoria's Secret in connection with a promotion in which Victoria's Secret sold or gave away a hot pink tank top with the word "Delicious" written across the chest in a silver typescript, the U.S. Court of Appeals in San Francisco has held. The promotion was for Victoria's Secret's line of personal care products sold under the mark BEAUTY RUSH. The federal district court in Pasadena erred by granting Victoria's Secret's motion for summary judgment.

Disputed issues of material fact precluded deciding as a matter of law that consumers were unlikely to be confused as to the source of Victoria's Secret's tank top, the appellate court said. While there were differences in the marks' font, color, and size, and Victoria's Secret only distributed its tank top in its retail stores and in packaging bearing the BEAUTY RUSH marks, it was plausible that consumers in a post-purchase context could see the tank top and be confused as to who produced it, in the court’s view. The designer's sales success for its DELICIOUS-brand shoes was sufficient to make the commercial strength of the mark a jury question. A reasonable jury could find that the parties' goods were related, the appellate court said. Factual issues also existed with regard to purchaser sophistication, the similarity of the parties' marketing channels, the likelihood of expansion, and Victoria's Secret's intent.

With regard to the fair use defense, a reasonable jury could determine that Victoria's Secret used "Delicious" as a trademark, rather than in a merely descriptive sense. Victoria's Secret contended that the word was used to describe the flavorful attributes of its lip gloss and other cosmetic products in the BEAUTY RUSH line. There was evidence, however, that Victoria's Secret intended for the word to serve as a "playful self-descriptor," as if the wearer of the tank top was saying, "I'm delicious." Victoria's Secret's failure to investigate whether someone held a DELICIOUS trademark could support a jury finding that Victoria's Secret's carelessness in its use of the word "Delicious" rendered its use of the word objectively unfair, according to the court (Fortune Dynamic, Inc., v. Victoria's Secret Stores Brand Management, Inc., 9thCir, CCH Trademark Law Guide ¶61,679, IntelliConnect User Link).

Ninth Circuit Clarifies Software Owner Rights

An individual who purchased several used copies of software manufacturer Autodesk's AutoCAD Release 14 design software from an architectural firm did not acquire ownership rights because the architectural firm, as a licensee, had no right to sell or transfer its software copies, the U.S. Court of Appeals in San Francisco has ruled.

The federal district court in San Francisco erred in concluding that the individual's resales of the software on eBay were lawful because both the architectural firm and the individual acquired ownership in the physical copies of the software and, as owners, their actions were protected by the first sale doctrine and the essential step defense.

The key question, according to the appellate court, was whether Autodesk had sold and transferred ownership rights in copies of its AutoCAD design software Release 14, or whether it merely had licensed software copies to its customers. The appellate court set forth a three-part inquiry to clarify that a software user should be considered a licensee, rather than an owner of a copy of software, where the copyright owner: (1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions.

Autodesk had distributed Release 14 pursuant to a limited license agreement in which it reserved title to the software copies and imposed significant use and transfer restrictions on its customers. Furthermore, Autodesk's software license provided for termination of the license upon the licensee's unauthorized copying or failure to comply with other license restrictions. Therefore, Autodesk's direct customers were licensees of their copies of the software rather than owners.

The architectural firm and the individual infringed Autodesk's exclusive distribution rights by reselling the used software copies without Autodesk's authorization. As licensees, they were not entitled to invoke the first sale doctrine. In addition, persons who purchased the Release 14 software copies from the individual and installed them on their computers infringed Autodesk's exclusive reproduction rights. Such persons would not be protected by the essential step defense. The appeals court reversed the district court's declaration of noninfringement and remanded the case for further proceedings (Vernor v. Autodesk, Inc., 9thCir, CCH Computer Cases ¶50,026, IntelliConnect User Link).

Betting Website Operator Violated Washington Gambling Act

The operator of person-to-person betting website Betcha.com was engaged in unlawful "professional gambling" in violation of the Washington State Gambling Act, the Washington Supreme Court had ruled. A state appeals court decision (CCH Computer Cases ¶49,685, IntelliConnect User Link) was reversed, and a trial court's summary judgment in favor of the state of Washington was reinstated.

The Washington Gambling Act prohibits and criminalizes "professional gambling." Under the Act, "professional gambling" includes "bookmaking," which is defined as "accepting bets, upon the outcome of future contingent events, as a business or in which the bettor is charged a fee or ‘vigorish’ for the opportunity to place a bet." The plain language of the statute defines "bookmaking" as either accepting bets as a business or charging a fee for the opportunity to place a bet, the state high court held.

Betcha argued that it was not involved in illegal “gambling” because website users could reneg on losing bets. Within the statute's plain meaning, however, "bookmaking" included charging a fee for the opportunity to place a "bet." The term "bet" did not require that the bet be honored or betting losses be paid, the court noted. Betcha charged fees "for the opportunity to place a bet" and, therefore, was unambiguously engaged in "bookmaking" in violation of the Gambling Act (Internet Community & Entertainment Corp. v. Washington State Gambling Comm'n, WashSCt, CCH Computer Cases ¶50,019, IntelliConnect User Link).

Game Cheat Software Did Not Violate Game Owner’s Rights

The United Kingdom distributor of the popular interactive online role-playing game "Runescape" was not likely to succeed on its copyright infringement, Digital Millennium Copyright Act (DMCA), trademark infringement, or Computer Fraud and Abuse Act (CFAA) claims against the developers of "game cheat" software (bots) that permitted users to advance unfairly against other players, the federal district court in Boston has ruled. The game distributor's request for a preliminary injunction was accordingly denied.

The game distributor's copyright infringement claim failed because the distributor did not have a valid copyright interest in its game. Although it had obtained U.S. copyright registrations in certain "two-dimensional icons" that appeared in the game, it did not produce registrations for either its website or the game software. The bot developers already had removed the copyrighted icons from their website.

The game distributor's DMCA claim was unlikely to succeed because it failed to identify a specific "technological measure" that allegedly was circumvented by the bots. A technological measure usually is a password, encryption program, or other firewall device that regulates access to a protected work, the court noted. The game distributor's website generally was accessible to the public and it did not employ any measure to block access to copyrighted works.

The game distributor's trademark claim likely was moot because the bot distributors already had removed all potentially confusing references to "Runescape" from their websites by (1) disabling the website www.runescape.su, (2) changing the name of their active website from "Runescape Cheating Asylum" to "RS Cheating Asylum," and (3) censoring their customers' online discussions to automatically replace users’ use of the word "Runescape” with "RS." The fact that the game distributor owned a European Community trademark for "RS" did not make it likely to succeed on its U.S. infringement claim because the bot developers did not use the term "RS" in a manner that was likely to cause confusion among game users, according to the court.

The game distributor’s CFAA claim was unlikely to succeed because it failed to explain how the bot developers (as opposed to bots users) exceeded authorized access to the game's server, particularly where the bot developers were not alleged to have agreed to the game website's terms and conditions. The game distributors additionally failed to cite any authority to support their theory of contributory CFAA liability (Jagex, Ltd. v. Impulse Software, DMass, CCH Computer Cases ¶50,017, IntelliConnect User Link).

Wolters Kluwer Law & Business Publications

Biotechnology and Pharmaceutical Patents: Law and Practice by Marc S. Gross, S. Peter Ludwig, and Judy R. O’Sullivan

The 2011 Supplement for Biotechnology and Pharmaceutical Patents: Law and Practice is now available on the Intellectual Property/Computer and Internet Law tab of the CCH Internet Research Network and in the Intellectual Property practice area of Wolters Kluwer IntelliConnect. Biotechnology and Pharmaceutical Patents is a comprehensive, how-to guide for protecting BioPharma inventions, covering all stages of the process, from determining inventorship and institutional rights through drafting, prosecution, enforcement, and licensing, This practice-based resource provides specific strategies for protecting proprietary intellectual property, including patentable inventions, data exclusivity, trade secrets know-how, databases, data collection, and business plans. It covers the regulatory and enforcement regimes of major international jurisdictions and provides a multitude of primary source appendices, useful exhibits, and practical forms.

The 2011 supplement brings you up to date with the latest developments, including: (1) the Supreme Court's decision in Bilski v. Kappos addressing application of the Federal Circuit's "machine-or-transformation test"; (2) a landmark district court decision casting doubt on the validity of thousands of gene patents when it invalidated patents covering breast cancer genes; (3) new Federal Circuit cases on the "written description" requirement, which help clarify whether there is an independent written requirement or whether the written description standard is simply a part of the enablement requirement; (4) new cases on the link between "prior art" references and the ability of a person of ordinary skill in the art to make the claimed invention; (5) a Federal Circuit opinion agreeing to reconsider the standards for determining unenforceability due to inequitable conduct; (6) a Federal Circuit decision narrowing Abbreviated New Drug Application (ANDA) applicant counterclaims to correct or delete patent information listed in the Orange Book; (7) new cases on the close relationship between the enablement and the utility requirements; and more.

For more information on Biotechnology and Pharmaceutical Patents: Law and Practice, visit the Aspen Publishers Website.