‘IP in the Cloud' Gets Top Billing At Annual IPO Meeting in Los Angeles

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LOS ANGELES—Cloud computing will require courts to deal with new issues and with old issues in a new context in all areas of intellectual property, according to panelists at the Sept. 12 opening session of the 2011 annual meeting of the Intellectual Property Owners Association.

Specialists provided a review of the limited case law available on IP issues in copyright, trademark, and patent disciplines to start off the organization's three-day meeting.

The first session dedicated to patent issues departed from its planned theme to review the patent reform bill passed by Congress Sept. 8 and likely to be signed into law by the president this week or next.

IP in the Cloud

Patrick A. Lujin of Shook, Hardy & Bacon, Kansas City, Mo., moderated the general session panel and set the stage by reviewing the business reason for companies—particularly smaller entities—to use cloud computing. “A small company, with cloud computing, can now compete more cost-effectively in the processing and display of large sets of data,” he said.

Scott Feldmann of Crowell & Moring, Irvine, Calif., presented the issues in cloud computing with respect to copyrights. He argued, for the most part, that the technology is new but that the issues are old: “Should record companies be able to control use by end-users of already licensed music? Should they be able to collect an extra royalty based on enhanced portability? Should cloud companies enable uploading of possibly pirated music? Are there substantial noninfringing uses?”

Feldman focused on two cases as providing some recent answers:

• In Capitol Records Inc. v. MP3tunes LLC, , No. 1:07-cv-09931-WHP-FM (S.D.N.Y. Aug 22. 2011) (165 PTD, 8/25/11), he said, the court ruled that the Digital Millennium Copyright Act's safe harbor protects a digital storage “locker” service for music online. However, the court also found that the service provider's “continuing relationship” with infringers trumps the “substantial noninfringing uses” defense, Feldman said.

• Three holdings are worth noting from the U.S. Court of Appeals for the Second Circuit's decision in Cartoon Services Network L.P. v. CSC Holdings Inc., 536 F.3d 121, 87 USPQ2d 1641 (2d Cir. 2008) (151 PTD, 8/6/08), he said: (1) that there is no liability for “transitory” copying performed by the service provider; (2) that Cablevision, the service provider, was not directly liable because its customers “made” the copies; and (3) that a single, unique copy to a single user is not a performance “to the public.”

Russell Pangborn of Microsoft Corp., Redmond, Wash., addressed trademark issues in the cloud, with a focus on advice for corporations with online applications.

He said that, to the greatest extent possible, companies should seek trademarks that use distinctive design elements adaptable to multiple screen sizes. They should also “create more flexible trademark guidelines to enable others to use logos and favicons and other elements in a non-confusing way,” and be diligent in their enforcement efforts.

As for enforcement, Pangborn said that the current litigation between Apple and Samsung—on copying iPhone and iPad design elements—is not specifically a cloud computing case, but has elements that are quite relevant to cloud services. Apple Inc. v. Samsung Electronics Co., No. 5:11-cv-01846-LHK (N.D. Cal., complaint filed April 15, 2011). Providers should follow the case closely, he said, to see “what types of [icon and button] elements will actually be worthy of trademark protection.”

Finally, issues related to patents infringed in cloud computing settings were handled by Theodore C. McCullough of Hewlett-Packard Co., Palo Alto, Calif.

McCullough focused on the two joint liability cases—cloud computing typically means both a client and the service provider are part of the infringing action—receiving en banc review by the U.S. Court of Appeals for the Federal Circuit in the coming months. Akamai Technologies Inc. v. Limelight Networks Inc., No. 2009-1372 (Fed. Cir. briefing Aug. 3, 2011); and McKesson Technologies Inc. v. Epic Systems Corp., No. 2010-1291 (Fed. Cir. briefing Aug. 3, 2011).

Showing that cloud computing typically involves a “cloud consumer”—the application provider—the cloud host for the application, and end users, McCullough asked first about existing patent holders, “Given my claims, who should I sue for infringement?” With the panel decisions in those two cases and their predecessors, “you should avoid a theory of vicarious liability,” he advised.

For those prosecuting patent applications currently, McCullough encouraged drafting claims that would read on the host, allowing direct infringement liability options, or to the end user, so that you can make a case for induced infringement.

Patent Reform: Recent Patent Case Law

When the schedule for the conference was announced, the patent session next on the agenda was billed as a review of recent case law developments. However, patent reform was on the minds of the attendees, and the panelists accommodated that interest. At least half the session covered changes in practice as a result of provisions in the bill expected to be signed by President Obama shortly.

In general, the panel had more questions than answers, though.

• Thomas L. Irving of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., noted that patent prosecutors, because of the move to first-inventor-to-file, are likely to have significant malpractice concerns since they are going to have to be operating under two different regimes for a long time. Every practitioner had better be aware of the effective dates of each of patent reform's provisions, he suggested.

Irving reviewed in detail the changes to prior art that will be reflected in a revamped 35 U.S.C. §102, pointing out as an example that public use and sales overseas will now matter. Put a copy of Section 102 on your bathroom mirror and memorize it every morning, he said.

Irving did, though, laud the new supplemental examination procedure, which allows patent applicants to enter documentation after the patent grant to create an estoppel against its use in an inequitable conduct defense. However, after noting that the U.S. House of Representatives added a “fraud exception,” Irving shrugged and said, “I don't know what it means.”

• Kevin H. Rhodes 3M Innovative Properties Co., St. Paul, Minn., talked about the bill's provision deleting the infringement defense based on the patentee's failure to disclose the best mode, even though the PTO's review still requires a best mode. He entertained but rejected the idea that lack of a best mode could still be raised in court to argue that the failure constituted inequitable conduct. Nevertheless, Rhodes still recommended that patent applicants disclose at least one operable mode to be sure. Under the new materiality standard in Therasense Inc. v. Becton Dickinson & Co., No. 08-1151, 99 USPQ2d 1065 (Fed. Cir. May 25, 2011) (102 PTD, 5/26/11), he said, you can always argue that the PTO would have issued the patent assuming that one mode was the best mode.

Rhodes also was pleased that qui tam lawsuits for false patent marking will end upon enactment of the bill. “Section 292 will return the sleepy statute to where it was before Forest Group,” he said, referring to the Federal Circuit case that said a plaintiff could seek damages for up to $500 per improperly marked item. Forest Group Inc. v. Bon Tool Co., 590 F.3d 1295, 93 USPQ2d 1097 (Fed. Cir. 2009) (1 PTD, 1/5/10).

Finally, Rhodes also cited the provision curtailing joinder of parties, which, he said, appeared to be directed to nonpracticing entities filing multi-party patent infringement lawsuits. The new rules will allow a party to be joined only if it is involved in the distribution chain of the product alleged to be infringing, he said. Forcing the NPE to file separate lawsuits, one for each alleged infringing product, “eliminates the economies of scale” of the litigation aspect of the NPE business model, Rhodes said.

• Wayne Sobon of Rambus Inc., Sunnyvale, Calif., looked at the new post-grant oppositions initiated by third parties—post-grant review and the revised inter partes review. With PGR in particular “leaving the realm of printed matter” by adding challenges such as the on-sale bar, he noted, the renamed Patent Trial and Appeals Board at the Patent and Trademark Office will now have to create rules for taking discovery and managing the discovery process.

However, Sobon ended the session with another of the panel's conclusions that one provision or another was so difficult to understand that only court cases will clarify its importance—the “transitional program” allowing special reexamination for business method patents. He read aloud the statutory provision and could only say it was perplexing that the PTO will be able to create exceptions for “patents for technological inventions.”

Charles M. Kinzig of GlaxoSmithKline, King of Prussia, Pa., moderated the panel.