IP Law Alert

IP Law Alert

Practical Perspectives on Intellectual Property Legal Developments

IRS’ Aggressive Position Challenging the Treatment of a License Agreement as a Sale of a Capital Asset Rejected on Summary Judgment

Posted in Patent

We previously reported that the Internal Revenue Service (the “IRS”) took an aggressive position in challenging the treatment of a license agreement as a sale of a capital asset in the Tax Court case Mylan Inc. & Subsidiaries v. Commissioner of Internal Revenue (Docket Nos. 16145-14 and 27086-14). Recently, Tax Court Judge Laro denied the IRS’s Motion for Summary Judgment in Mylan’s challenge of the IRS’s determination that Mylan’s 2008 amendment to the contract with Forest Labs was not a sale of its interest in rights to a certain drug product but merely an extension of the parties’ 2006 license agreement, giving rise to ordinary income to Mylan.

In its Tax Court petition, Mylan argued that it sold “all substantial rights” to a drug named Nebivolol and sought a redetermination of tax deficiencies related to proceeds from the sale which Mylan treated as capital gain. The IRS argued that Mylan had to treat the transaction as a license agreement generating ordinary income.

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Defend Trade Secrets Act of 2015 Passes House, Heads to President Obama’s Desk

Posted in E-Commerce, Privacy

On April 27, 2016, the Defend Trade Secrets Act (“DTSA”) passed the House of Representatives with a 410-2 vote. The two no votes were from Rep. Justin Amash (R-MI) and Rep. Thomas Massey (R-KY). Earlier this month, on April 4, the Senate passed the DTSA by a unanimous vote of 87-0. Now, the DTSA heads to President Obama’s desk for his signature.

As we previously reported, the DTSA will authorize a private civil action in federal court for the misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce. Trade secret misappropriation was formerly treated exclusively as a matter of state law, governed by versions of the Uniform Trade Secrets Act in most states. However, the Act was not enacted uniformly throughout all states. States adopted different definitions of trade secrets and different burdens of proof for misappropriation, resulting in a legal maze for one seeking to bring a trade secret misappropriation action impacting multiple jurisdictions.

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New Jersey Follows Federal Circuit in Finding Jurisdiction Over Hatch-Waxman Defendants

Posted in Patent, Pharmaceuticals

We recently reported on the Federal Circuit’s holdings in Acorda Therapeutics, Inc. v. Mylan Pharm. Inc. and AstraZeneca AB v. Mylan Pharm., Inc., where it held that Mylan was subject to jurisdiction in Delaware because “Mylan’s ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs.” Earlier this month, the first decision from the District of New Jersey District applying the Federal Circuits ruling was rendered. In Helsinn Healthcare S.A., et al. v. Hospira, Inc., No. 15-2077 (MLC), 2016 U.S. Dist. LEXIS 45826 (D.N.J. April 5, 2016), Judge Mary L. Cooper held that that Hospira’s filing of an ANDA seeking to market a generic version of Helsinn’s Aloxi® provided sufficient minimum contacts to establish specific jurisdiction particularly because, if approved, the marketing of the generic product will take place in New Jersey.

In supporting her decision, Judge Cooper emphasized the similarity of the facts in this case to those present in the Acorda case before the Federal Circuit:

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Alabama District Court Orders TTAB to Vacate Precedential Decision

Posted in Trademark, USPTO

Last year’s Supreme Court’s decision in B&B Hardware raised the stakes in opposition proceedings when it stated that TTAB rulings may have preclusive effects in subsequent federal district court litigation. As litigants and practitioners are still assessing the consequences of that landmark decision, an unexpected confrontation took place between the Board and the Federal District.

The quarrel happened only a few months after B&B Hardware, and stemmed from the TTAB’s refusal to uphold an order to vacate a previous decision of the Board, in response to a request submitted by the Board of Trustees of the University of Alabama (the “Alabama BOT”). The Alabama BOT’s request was filed pursuant to a final consent judgment entered by the Alabama District Court. The TTAB’s refusal to vacate its prior decision was not taken well.

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Interesting Trends in Establishing Personal Jurisdiction in Hatch-Waxman/ANDA Litigations

Posted in Patent, Pharmaceuticals

Last week the Federal Circuit handed down one of its more anticipated decisions regarding jurisdiction in cases brought under 35 U.S.C. § 271(e)(2) (aka Hatch-Waxman or ANDA litigation). In its holding, the Federal Circuit stated that a “[defendant’s] ANDA filings and its distribution channels” are enough to “establish that [the defendant’s] plans to market its proposed [ANDA product in the forum state]” are enough to meet the minimum-contacts requirement to establish jurisdiction. It further held “there is no substantial argument that considerations of unfairness override the minimum-contacts basis for [the forum state’s] exercise of specific personal jurisdiction over” the defendants. This holding is much broader than the underlying district court rulings and limited the analysis to specific jurisdiction without addressing the underlying general jurisdictional questions.

Stemming from the Supreme Court’s 2014 decision in Daimler AG v. Bauman in which held that “minimum contacts” and thus, general jurisdiction, required not merely “continuous and systematic” in-forum contacts, but “continuous and systematic” in-forum contacts so as to “render [it] essentially at home in the forum state,” generic drug manufacturers began challenging jurisdiction in Hatch-Waxman cases. The two underlying cases involved the same defendant, Mylan Pharmaceuticals, Inc. (“Mylan”), a West Virginia incorporated worldwide producer of generic pharmaceuticals, in the same District Court, Delaware. Chief Judge Stark, in Acorda Therapeutics, Inc. v. Mylan Pharm. Inc., 78 F. Supp. 3d 572, 583-92 (D. Del. 2015) held that compliance with a state’s registration statute and appointment of a registered agent for service of process constitutes consent to general personal jurisdiction. Judge Sleet, in AstraZeneca AB v. Mylan Pharm., Inc., 72 F. Supp. 3d 549, 558-60 (D. Del. 2014) found jurisdiction on the bases that Mylan sent its paragraph IV certification to the plaintiff in the forum state, Delaware. The panel’s decision did not rely on either of these bases to establish jurisdiction, but instead, found specific jurisdiction on the basis that “Mylan’s ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs.”

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Long Lost Wright Brothers’ Patent File Found

Posted in Patent

On Sunday, The Washington Post published an interesting article explaining how the long lost Wright brothers’ patent file for the “Flying Machine” was finally found in March. The government had been searching for this file for the last 16 years. The file, which was last seen in 1980, was thought to be stored in a vault at the National Archives. But, in 2000, when an official commemoration was being planned, they realized it was missing. Ultimately, they were able to locate it in a limestone storage cave in Lenexa, Kansas. Although there was concern that the important record was stolen, the conclusion now is that it was probably just misfiled. The article indicates that the National Archives was able to identify this file as a part of a larger effort to locate missing documents.

This episode certainly reinforces the appreciation practitioners have for the USPTO’s efforts to digitize and make its records available to the public.

Christopher H. Strate is a Director in the Gibbons Intellectual Property Department.

U.S. Copyright Office Seeks Public Comment and Holds Public Roundtables Concerning DMCA Safe Harbor Provisions

Posted in Copyright

The United States Copyright Office recently published a notice in the Federal Register (“the Notice”) seeking public comment in connection with a study it is conducting to evaluate the impact and effectiveness of the DMCA safe harbor provisions contained in 17 U.S.C. § 512 (“Section 512”). Comments, due on Friday April 1, 2016, could pave the way for a Congressional amendment to the DMCA and in particular, to the safe harbors relied upon by service providers to avoid liability for copyright infringement by users.

According to the Notice, Section 512 was enacted at a time when “less than 5% of the world’s population used the internet.” Yet today, according to the Notice, “nearly one-quarter of all internet bandwidth in North America, Europe, and Asia is devoted to hosting, sharing, and acquiring infringing material” and service providers receive over a million notices of alleged infringement on a daily basis. In light of these changed circumstances, the Copyright Office is evaluating the effectiveness of the current statutory requirements in section 512 and their impact on those who rely upon them. Among other topics of inquiry, the Copyright Office has sought comments on (i) the notice-and-takedown process under section 512(c)(3); (ii) the requirement for service providers to reasonably implement a repeat infringer policy under section 512(i); and (iii) counter-notifications under section 512(g)(3).

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Need to Construe “Plain and Ordinary Meaning”?

Posted in Patent, Pharmaceuticals

In 2005, the Federal Circuit established the framework for the construction of patent claim terms. In its landmark holding in Philips v. AWH Corp., the Federal Circuit stated that “words of a claim ‘are generally given their ordinary and customary meaning . . . [and] that the ordinary and customary meaning of a claim term is the meaning that the term would have to a person of ordinary skill in the art . . . .”

Since, practitioners have strategically employed the use of “ordinary and customary meaning” as proposed constructions of disputed claim terms. However, absent agreement between the parties, that may no longer be enough. In Sucampo, AG, et al. v. Dr. Reddy’s Laboratories, Inc., et al., Magistrate Judge Douglas E. Arpert ordered a party asserting “plain meaning” for the disputed claim terms to either confirm that the other party’s proposed construction falls within the “plain meaning” of the claim terms or provide what it contends the “plain meaning” of each term to be. Judge Arpert reasoned that “when a local rule requires a party to provide its contentions relating to claim constructions it is generally improper for a party to state generally that the ordinary meanings of the claim terms should govern and then refuse to set forth what it contends are those ordinary meanings.” Id. at 2 (internal quotations and citation omitted).

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PTAB “Broadest Reasonable Construction” for Connector Patents Deemed Unreasonable by CAFC

Posted in Patent, USPTO

In two related opinions (Docket Nos. 2015–1361, 2015–1369, 2015–1366, 2015–1368 and Docket No. 2015-1364) issued February 22, 2016 (each captioned PPC Broadband, Inc. v. Corning Optical Communications RF, LLC), the U.S. Court of Appeals for the Federal Circuit (“CAFC”) vacated and remanded portions of decisions rendered by the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent & Trademark Office (“USPTO”) in five separate inter partes review proceedings initiated by Corning Optical Communications RF, LLC (“Corning”) against PPC Broadband, Inc. (“PPC”). PPC is the owner of three patents at issue in the inter partes review proceedings (US 8,287,320, US 8,323,060, and US 8,313,353). The patents are related and directed to features of a coaxial cable connector. The CAFC decisions focus primarily on claim construction issues relating to the application of the PTAB’s “broadest reasonable construction” (“BRC”) claim construction standard and illustrate how the Court may evaluate the reasonableness of claim constructions in PTAB decisions on appeal.

Judge Kimberly Moore authored the two CAFC opinions, in which she was joined by CAFC Judges Kathleen O’Malley and Evan Wallach. In the first opinion, the Court examined the PTAB’s claim construction for the term “continuity member,” which appears in claims for each of the three patents. In these patents, the continuity member is claimed as an element of the coaxial connector designed to extend function of an electromagnetic interference shield provided in the sheath of an attached coaxial cable to the connector. The Court generally agreed with a PTAB construction that did not require that the continuity member to maintain a “continuous or consistent electrical connection.” However, for claims including additional language providing that the continuity member be “configured to maintain electrical continuity,” the Court applied a more restrictive construction requiring the continuity member to be construed as providing a continuous electrical connection.

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Federal Circuit Reaffirms its Patent Exhaustion Doctrine Decisions

Posted in Licensing, Patent

On February 12, 2016, the en banc Federal Circuit, in a 10-2 decision in Lexmark Int’l, Inc. v. Impression Prods., Inc., reaffirmed its long-standing rules that: (1) the exhaustion doctrine does not apply to patented articles sold subject to single-use/no-resale restrictions that were communicated to the buyer at the time of sale; and (2) the exhaustion doctrine does not apply to the sale of patented goods outside of the U.S.

This case addressed Lexmark’s patents covering sale of its ink cartridges, some abroad and some in the U.S., at a discount and subject to an express single-use/no-resale restriction. Defendant Impression would then acquire Lexmark’s empty cartridges at issue from buyers, both domestically and from abroad, in order to resell them in the U.S. – without Lexmark’s consent. Thus, Lexmark sued Impression for infringement under 35 U.S.C. § 251.

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