Section 1201 exempts several activities from the anti-circumvention requirement.  The statutory exemptions include the use of certain tools for encryption research, security testing, and other activities.  In addition, every three years, the U.S. Copyright Office publishes a list of additional exemptions to the anti-circumvention requirement.  This week, the Copyright office published six exemptions for 2010.  The list includes two new exemptions:

1. Noncommercial DVD sampling:  for DVDs that are protected by content scrambling systems (CSS), the ruling allows circumvention of the CSS to use a short portion of the DVD content for (i) educational purposes by college and university professors or film studies students; (ii) documentary filmmaking; and (iii) noncommercial videos. 
2. “Jailbreaking”:  circumvention for the purpose of enabling interoperability of computer programs on a wireless telephone handset.

The jailbreaking exemption has received much attention, as it may permit the use of iPhone or other handset apps that haven’t been sanctioned by the device’s supplier.  However, although the process of “jailbreaking” no longer violates copyright law, the act may void the manufacturer’s warranty on the phone. 

The Copyright Office’s 2010 list also removed some exemptions that were present in 2006.  For example, an exemption governing sound recordings whose DRM created security flaws was not renewed in 2010.  The Copyright Office also declined to renew an exemption permitting access to software and videogames that were distributed in now-obsolete formats.

As Mr. Bennett states in the article, prior to the new decision:

the governing precedent was Grant v Commissioner of Patents [2006].  Grant stood for the proposition that a method must produce “a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation.” 

In the new case, the Australian Patent Office:

has qualified the “physical effect” requirement by now making it clear that the physical effect must be “central to the purpose or operation of the claimed process or otherwise arises…in a substantial way”.

For the full text of the article and more information, visit the Pizzeys Australian Patent Law Blog by clicking here.

Ordinarily, an assignment of intellectual property is just that — irrevocable unless the agreement says otherwise.  However, an exception exists for copyrights that were not made as “works for hire.” Section 203 and Section 304 of the Copyright Act permit a copyright owner (or his or her heirs) to terminate all licenses and or transfers of rights after a certain time period. 

Because of this, if a company acquired copyrights from founders, from consultants who did not sign work for hire clauses, or from others who were not employees at the time that the work was created, then that company may be at risk of copyright recapture at some point in the future. 

56-year and 35-year triggers

For transfers and licenses made prior to 1978, the termination right exists for five years beginning on the 56th year after the copyright was originally secured.  For transfers and licenses made in 1978 or later, in most cases the five-year termination right begins 35 years after the assignment or license was made.  Notice of the termination may be given between two and 10 years prior to the effective termination date.  For example, an assignment granted in 1980 may be terminated in 2015 if the author or his/her heirs give notice of the termination between the years of 2005 and 2013. 

Termination rights are only available to certain individuals, who must follow certain termination procedures.  However, when exercised, termination rights can be deadly for a company.  All rights to the original work revert to the author or his/her heirs.  If the company has developed derivative works from the original work, the company may continue to exploit those derivative works, but the company may not prepare additional derivative works that were based on the original.

Companies at risk? 

Copyright termination rights can place a variety of companies at risk of losing intellectual property rights.  For example, a writer who assigned rights in a musicial composition to a publisher during the year of 1978 may be able to recapture rights to the composition in 2013.   An author of a comic strip created in 1980 may be able to recapture rights in 2015.

Works such as musical compositions and books often have value that endures 35 years or more.  However, the risk is not limited to companies who acquire content such as music and books.  For example, third party software developers who were involved in development of key products circa 2000 may be able to recapture rights to the software in 2035.  While software rarely endures more than a few years before it is replaced by a new version, a company who acquired a copyright should consider that the recapture rights will also prevent the company from creating any additional derivative works.  This may require the company to perform substantial re-coding in order to continue future enhancements.

Diligence Tips; Protective Measures

When performing IP diligence on a potential acquisition target, companies should carefully review assignment agreements governing copyrights that were made by consultants or other third parties, especially if the copyrightable work may have value that endures for 35 years or more.  In the case of a non-employee creator, work for hire clauses can be critical to ensure that the creator cannot take advantage of termination rights in the future.

The Copyright Act’s transfer rights kick in even if the assignment agreement specifically says otherwise.   However, the Copyright Act does not necessarily void subsequent assignments after the original.  So, as a protective measure a company who received copyrighted works by assignment may consider whether an additional, later assignment from the author’s heirs may ensure that copyright termination rights will not arise in the future. 

For a very informative discussion about copyright termination (and for CLE credit in several states), check out the full Intellectual Property Colloquium podcast on the topic.

In Prometheus Laboratories, the Federal Circuit originally found the following claim to be patentable under the pre-Bilski “machine or transformation” test:

A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a)  adminstering a drug providing a 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b)  determining a level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder;

wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently adminstered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 indicates a need to decrease the amount of said drug subsequently adminstered to said subject.

After the Federal Circuit found claims such as the one above patentable, Mayo appealed to the U.S. Supreme Court.  After receiving the case on remand, the Federal Circuit will now have to review the case under the broader standard for patentable subject matter that the Supreme Court established in Bilski.

In contrast, in Classen, the Federal Circuit found that claims such as the following one did not satisfy the machine-or-transformation test:

A method of determining whether an immunization schedule affects the incidence or severity of a chronic immune-mediated disorder in a treatment group of mammals, relative to a control group of mammals, which comprises:

immunizing mammals in the treatment group of mammals with one or more doses of one or more immunogens, according to said immunization schedule, and

comparing the incidence, prevalence, frequency or severity of said chronic immune-mediated disorder or the level of a marker of such a disorder, in the treatment group, with that in the control group.

In Classen, the Federal Circuit will now need to determine whether claims such as this cover an “abstract idea”.  Alternatively, the Federal Circuit may develop a new test that is not strictly tied to the machine or transformation test. 

These cases show that medical methods and diagnostic testing are setting the stage for the next round of patent subject matter-eligibility caselaw.

The Supreme Court held that the so-called “machine or transformation” test  is useful, but not a strict requirement for patentability.  While holding that “attempts to patent abstract ideas” — and in particular the claims that Bilski sought — were not patentable, the Court’s opinion also said that business methods are not per se unpatentable subject matter.   However, the Court offered no guidance as to what specific types of business methods may or may not be patentable.  In fact, the Court’s opinion notes that the Federal Circuit may develop additional limiting tests.  In addition, several members of Congress have spoken out about adding limitations through amendments to the Patent Act — despite the slow movement associated with previous attempts to reform the Patent Act.

In a quickly-issued memorandum to its patent examiners regarding the Bilski decision, the USPTO signaled that Bilski is unlikely to change the way that it reviews business method patent applications.  The memorandum notes that methods that meet the machine-or-transformation test are likely patent-eligible.  However, the memo also notes that:

If a claimed method does not meet the machine-or-transformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea.

My colleagues Russ Barron, Mike Renaud, and Courtney Quish have published a more detailed analysis of the Bilski decision, available here.  In the meantime, the Court’s opinion may encourage software developers and business process inventors to continue seeking patent protection for their inventions.

The previous version of the backlog stimulus plan was limited to small entity applicants, and it was scheduled to end June 30, 2010.  The new version of the plan is not limited to small entities.  Instead, it will be limited to the first 10,000 applicants of any size, and it will last through at least December 31, 2010.

However, the Patent Act also imposes penalties on those who mark products with false or expired patent numbers.  These penalties have spawned a wave of false marking lawsuits by individuals who hope to collect from companies who mark products with incorrect patent numbers or numbers of expired patents.

This week, the Federal Circuit issued an opinion that gives some comfort to patent holders who involve counsel in their marking decisions.  In Pequignot v Solo Cup Company (No. 2009-1547, Fed. Cir. June 9, 2010), the Court reminded potential plaintiffs that the false marking statute requires that the marker apply the false patent number ”for the purpose of deceiving the public”.  35 U.S.C. 292(a).  In the case, the Court stated:

the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public . . . Although the presumption cannot be rebutted by ‘the mere assertion by a party that it did not intend to deceive’ . . . The bar for proving deceptive intent here is particularly high, given that the false marking statute is a criminal one. 

In the case, the defendant’s products were marked with expired patent numbers.  However, before the patents expired, Solo Cup consulted with its patent counsel.  Because the products were produced and labeled with molds with molds that would be expensive to replace, the counsel advised Solo Cup that it would not need to engage in wholesale replacement of the molds immediately upon patent expiration.  Instead, the attorneys advised Solo Cup that it could simply replace the molds (with proper patent markings) as they wore out or became damaged in the ordinary course of business.  The Federal Circuit found this fact to be “credible evidence that [Solo Cup's] purpose was not to deceive the public.” 

The Court’s decision suggests that patentees can help reduce their exposure to false marking liability by consulting with counsel prior to making decisions about when (and when not) to apply markings to their products.

• Track I (prioritized examination):  Applicants who pay an additional fee will receive a first office action within four months.  Final disposal (allowance or final rejection) will occur within twelve months.
• Track II (standard examination):  This option will involve standard fees and will proceed under current procedures.
• Track III (deferred examination):  Non-continuing applications that originate in the U.S. may have examination deferred for up to 30 months.  The examination fee — and possibly also the search fee — also may be deferred during this period.

In a telephone conference, USPTO Chief Communications Officer Peter Pappas explained that the additional processing fees for Track I are not yet set.  However, he hinted that the fees would be substantial enough so that “only the most important” applications seek Track I processing.  He also stated that the Track I fee may vary based on technology, and that the fee will not be reduced for small entities unless Congress amends the Patent Act to permit the fee reduction.

The USPTO does not intend this proposal to replace the USPTO’s existing accelerated examination, Patent Prosecution Highway, Project Exchange, Green Technology Pilot, or similar programs.  Instead, it will supplement those programs and give applicants an additional option to accelerate the process.  In addition, applicants who first file in foreign countries will not be eligible for the fast track of Tier I until after they receive an action in the country where the application was first filed. 

Conversely, the “slow track” of Tier III can benefit applicants with long product lead times — such as pharmaceuticual industry applicants –  by deferring costs and examination for up to 30 months.  The USPTO hopes that enough Tier III applications will ultimately be abandoned to offset the additional workload required to “fast track” the Tier I applications.

The USPTO will hold a public meeting to discuss the proposal on July 20, 2010 and the USPTO is accepting written public comments through August 20, 2010.  The full proposal is available in the July 4, 2010 edition of the Federal Register.

In the article, my colleagues Susan Lessack and Kali Wellington write:

The U.S. Department of Labor (DOL) has been and will continue to be more aggressive in policing violations of the Fair Labor Standards Act (FLSA), which requires the payment of minimum wage and overtime to covered, non-exempt employees. One exception to the FLSA’s minimum wage and overtime requirements is that a for-profit, private sector employer may hire individuals for internships or training programs without compensation if the internship is primarily for the interns’ educational benefit.

The article lists six criteria that must be met for the internship exception to apply.  The full article is available at this link on the Pepper Hamilton website.

The original guidelines for the Pilot Program, published in December 2009, limited the program’s benefits to patent applications filed before December 8, 2009 in certain categories, including:

• alternative energy production;
• energy conservation;
• environmentally friendly farming; and
• environmental purification, protection, or remediation.

So far, the program has had limited impact.  In the first five months of the program, the USPTO awarded special status to only 342 patent applications.  This may be because the program’s original technology classification requirement only covered technologies for which the wait time is generally not very long at the USPTO.  Thus, applications that achieved special status often received little actual benefit.  In addition, the program only covered already-filed applications.  It did not cover (and thus did nothing to encourage) new patent applications for “green” technologies.

Under the newly announced expansion of the program, the USPTO has eliminated any technology classification requirements.  Rather than limiting the program to specific technology areas, the program now simply requires the applicant to explain how the invention materially enhances the quality of the environment by contributing to the restoration or maintenance of life-sustaining elements.  The program is still limited to applications filed before December 8, 2009 — and thus it does not cover newly filed patent applications.  However, elimination of the technology classification requirement may encourage more applicants to participate in the Pilot Program, and thus spur extension of the program past its original pilot period.

The Pilot Program lasts through December 8, 2010 and is limited to the first 3,000 applicants.  More details are available on the USPTO website.