Letter from AmeriKat: US patent litigation boom, Netflix's Rovi win, Triumphant Tory and Ford trade secrets

The AmeriKat welcoming the rain after
a stormy summer season

There is nothing like a summer storm.  Late in July, the gloomy London clouds bend down to embrace the top of the City skyline causing the already crowded city streets to feel even more oppressive.  The air becomes thick and supple and the pedestrians' once frenetic march slows to a Mediterranean saunter. Then, after hours of build up, the temperature plummets and the first drops of rain glisten the street.  After anticipating rain all day today, the first drops finally fell on the AmeriKat's whiskers as she walked home.  Although the build up to the rain is often uncomfortable for the AmeriKat (you should see what the humidity does to her fur), the relief and release that the rain brings more than compensates. IP litigation is similar.  The build up and pressure of a case can be excruciating at times, but once you get to trial the pressure eases and the rain finally starts to fall. Whether that rain is a relief or an omen, of course depends on the outcome - as the litigants in this week's post found out.  

Boom to US Patent Litigation:  Last Tuesday, figures published by legal analysis firm Lex Machina showed that a record number of US patent actions have been filed in federal district courts in January-June 2015.  According to the report, 3,100 actions were filed of which 1,656 accounted for patent infringement actions filed in the second quarter of 2015.  This is the highest number of actions seen in a six-month period.  If the rate of filing continues, 2015 could be a blockbuster year beating 2013 with a record of 6,106.  These figures come at an opportune moment in US patent litigation reform.  The House could vote before the August break on draft legislation (H.R. 9 - Innovation Act) that would require patent owners to provide more information concerning the following (as summarized by the Congressional Research Service):

• each claim of each patent allegedly infringed; 
• for each claim of indirect infringement, the acts of the alleged indirect infringer that contribute to, or are inducing, a direct infringement;
•  the principal business of the party alleging infringement; 

• the authority of the party alleging infringement to assert each patent and the grounds for the court's jurisdiction; 
• each complaint filed that asserts any of the same patents; and 
• whether the patent is essential or has potential to become essential to a standard-setting body, as well as whether the United States or a foreign government has imposed any specific licensing requirements. 

The legislation would also institute a "loser pays" principle.  The likely vote follows after the Senate Judiciary Committee approved its own draft patent legislation (S.1137 - Patent Act).  This legislation has been welcomed by some tech companies who are often faced with fending off lawsuits from patent assertion entities.  However a coalition of universities, inventors and small businesses have opposed the legislation declaring that the current draft would "dramatically weaken intellectual property rights and undermine a patent system that is vital to incentivizing innovation and job creation in our country. The bill also fails to adequately address abusive practices against legitimate patent owners."

Netflix v Rovi dispute:  Last week Netflix was granted its summary judgment motion against Rovi in respect of five Rovi patents.  Rovi commenced patent infringement proceedings against Netflix in 2011 in respect of its patents relating to interactive program guides and multiple-device playback.  Judge Hamilton of the US District Court for the Northern District of California granted Netflix's motions holding that all five patents were invalid.  Rovi's EVP, Samir Armaly, stated that "While we are pleased that the court sided with Rovi on the key claim-construction issues, we are disappointed in, and strongly disagree with, the court’s decision finding the five patents invalid and plan to appeal that decision."  In reaching her decision, the judge cited last year's Supreme Court ruling in Alice Corp v CLS Bank stating that "while the very idea of allowing multiple-device playback may have been novel at the time of invention, the second step of the Alice/Mayo test requires more than a novel ideal - it requires a specific application of that idea, to ensure that all embodiments of the idea (even if novel) are not preempted."  In November 2013, the ITC held that Netflix did not infringe Rovi's parental control and program guide technology patents.  Following last week's decision, Rovi's stock fell 20%.

Tory's Big Trade Mark win:  Last Friday, US District Judge Cote awarded fashion designer Tory Burch $38.9 million in damages against Lin & J International Inc who copied the New York-based designer's trade marks and designs that normally adorn well-heeled Manhattanites.  The battle commenced in 2013 after Burch dispatched a representative to Lin & J's New York showroom where they were promptly shown "a variety of knockoffs and told the minimum order was $350".  Burch's design at issue was Burch's famous Isis Cross Design, so dubbed by virtue of similar examples chiseled by Coptic Christians into the walls of an ancient Egyptian temple to Isis.

Ford in hot water over alleged trade secret misuse:  Versata, a Texas-based software company, has commenced a $1 billion lawsuit alleging that Ford has misused its trade secrets to develop its own software.  The dispute follows a period of negotiation between the two companies in December 2014 regarding Versata's contract extension.  When the deal fell through, Versata alleges that two months later Ford had developed its own version of the software which included Versata's trade secrets that relate to compatibility of vehicle parts, obtained by reverse-engineering Versata's original source code. Versata reportedly learned of Ford's new software when the automaker issued a motion asking the federal court in Michigan to confirm that its software did not infringe Versata's intellectual property.  Versata's lawsuit, which was commenced in May, hit the news last week when Versata's lawyer held a press conference.  In a statement from Ford, the company said that "Versata's Texas case is a retaliatory attempt to avoid the lawsuit in Michigan, where Ford's software was developed and used.  Ford will move to dismiss or transfer the Texas case to Michigan."