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In what some perceive as a major shift from decades of precedent, the United States Supreme Court held last week that laches – unreasonable delay – is no longer a valid defense against a claim for patent infringement so long as the patent owner brings suit  within the 6-year look-back limitation period prescribed in 35 U.S.C. § 286.

In SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, SCA, held a patent concerning the manufacture and sale of certain adult incontinence products.  In October 2003, SCA sent a letter to First Quality asserting that First Quality was infringing SCA’s patent rights.  In response, First Quality maintained that the patent at issue was invalid and could not support an infringement claim.  SCA took no further action until July 2004 when, without notifying First Quality, asked the Patent and Trademark Office (PTO) to initiate a reexamination proceeding to determine whether the relevant patent was valid in light of certain pre-existing patents.  Three years later, in March 2007, the PTO issued a certificate confirming the validity of the relevant patent.

Over three years later, in August 2010, SCA filed a lawsuit for patent infringement against First Quality.  First Quality moved for summary judgment based on laches and equitable estoppel, and the District Court granted the motion on both grounds.  SCA appealed to the Federal Circuit, which affirmed the District Court’s holding that laches can be asserted to defeat a claim for damages incurred within the 6-year period set out in the patent statute.

On appeal, the Supreme Court reversed, in part, basing its decision on the plain language of the statute, which it found evinced a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim.  The Court went on to find that it “would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim.”  Thus, the Court held, that the doctrine of laches cannot bar an otherwise timely claim for damages under the patent statute.  The Supreme Court did note, however, that the doctrine of equitable estoppel can still provide protection against some of the problems that may arise when patentees induce potential targets of infringement suits to invest in the production of arguable infringing products.

In view of this decision, parties accused of patent infringement should be cognizant that they are potentially liable for six (6) years from the time of alleged infringement, regardless of how diligent the patent owner is in pursuing its claim.

Arguably one of the “most vexing” questions in all of copyright law will be answered this year.  Or at least that is what many in the furniture and fashion industry are hoping.

The question is what test should be used to determine when a feature of a “useful article” is protectable under the copyright laws.  As of now, ten different tests have been established by the different federal Circuit Courts of Appeals.  In Star Athletica, LLC v. Varsity Brands Inc., the US Supreme Court is expected to decide which of those tests is the right one, or it could choose another test altogether.

“Useful articles” include furnishings, fixtures, clothing, toys, and many other items including cheerleading uniforms, as presented in the Star Athletica case.  A useful article, in so far as its purely utilitarian features go, is not capable of copyright protection.   However, non-utilitarian features of such items can benefit from copyright protection, if that feature can be identified “separately” and exist “independently” from the useful aspect of the item.  How to determine this – whether the feature is separable in this way – is the question being decided by the Supreme Court.

The articles in the Star case are cheerleading uniforms, and the feature at issue is the two dimensional designs on those uniforms.

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Given the size of some of the industries involved, the Court’s decision could have huge consequences.  Spending on apparel was estimated at more than $250 billion annually in the US alone, and the value of the US furniture market has been estimated at nearly $100 billion.  By setting parameters on what features of useful articles can be protected, the decision could result in strategic shifts among industry participants engaged in creating, using or protecting unique designs.  Stay tuned!

Are you relying on your insurance policy to cover unauthorized or unintended electronic disclosure of confidential information?  If so, you may want to take a closer look at your policy with an eye towards objections to coverage raised by an insurance company in a recent Fourth Circuit case.

In Travelers Indemnity Co. of America v. Portal Healthcare Solutions LLC, the Fourth Circuit Court of Appeals affirmed the Eastern District of Virginia’s decision requiring the insurance company defend its insured against improper disclosure claims.¹  The case arose after a class-action lawsuit was filed in New York against the insured alleging failure to adequately safeguard confidential medical records.  According to the pleadings, patients of the hospital found their medical records available on the Internet upon Google searches of their names.  Portal Healthcare and Travelers disagreed over whether the insurance policies obligated Travelers to defend the class-action and filed cross-motions for summary judgment in the Eastern District of Virginia.

According to the Eastern District decision, the insurance policies covered “electronic publication of material that . . . gives unreasonable publicity to a person’s private life” or “discloses information about a person’s private life.”  Given that the insured stored confidential medical records, it doesn’t seem unreasonable that the insured would have thought it had coverage for data disclosure types of claims.  However, the insurance company took the position that defense of the insured was not required.

As grounds for not defending against the class action suit, Travelers asserted that there could be no publication as required under the policy because “the entire purpose of the services [the insured] provided was to keep the medical records private and confidential.”  According to the insurance company’s argument, the fact that the records ended up available on the Internet did not mean they were published. In a similar vein, the insurance company argued that the policies at issue would only provide coverage if the insured had taken steps intending to attract the public, and further that there was no publication (and therefore no coverage) because no third-party was alleged to have actually viewed the information.

Although Travelers’ arguments were rejected and the Court found defense required, engaging in these types of disputes over policy language has potential for undesirable consequences in the underlying action (e.g., an insured might end up having to argue that there was a publication of confidential information to get insurance coverage, when that might be one of the elements of the very claim against the insured).  The case goes to show how important it is to review your coverages for data disclosure and cybersecurity types of claims, lest you find yourself surprised to fighting two battles instead of one.

¹See Travelers Indemnity Co. of America v. Portal Healthcare Solutions, LLC, Case No. 14-1944 (4th Cir. April 11, 2016) at the District Court, 35 F.Supp.3d 765 (E.D. Va. 2014).

The Daily Fantasy Sports industry has been under siege over the past several months as several states’ Attorneys General seek to have online fantasy sports contests classified as “illegal gambling” and banned under state law. The two industry giants – FanDuel and DraftKings – are at the forefront of this ongoing battle. The fight over legitimacy, however, may prove to be only the tip of the iceberg of FanDuel’s and DraftKings’ legal issues.

On January 27, 2016, Akeem Daniel, a former college football player for Northern Illinois University, filed two proposed class actions against FanDuel and DraftKings in Illinois federal court. Daniel alleges that FanDuel and DraftKings knowingly exploited as many as 2,000 or more collegiate athletes whose names they “market and sell as ‘fantasy’ athletes available for sale to members of the general public.” According to Daniel, FanDuel and DraftKings “routinely use the names and likenesses of these college players to promote [their] commercial enterprise, amassing millions of dollars in revenue from entry fees, without the athletes’ authorization.” The complaints characterize FanDuel’s and DraftKings’ daily fantasy contests as a “virtual stock market” that rises and falls “in direct proportion with the [athletes]’ endeavors.” Both lawsuits assert claims for, among other things, violation of the Lanham Act and seek both treble damages under the statute, as well as an injunction prohibiting FanDuel and DraftKings from the future use of Daniel’s and the Class Member’s names and likenesses.

It is unclear whether other collegiate athletes will join Daniel or whether professional athletes will follow Daniel’s lead and file similar lawsuits. What is clear is that at least one athlete believes that these companies are improperly profiting from his athletic prowess. Considering both companies are valued at or close to $1 billion, expect more of these lawsuits to surface in the near future.

Google’s Library and Books Projects involve the digitization of complete copies of millions of print books without the authors’ or copyright owners’ permission. Google’s platform allows the public to search digital copies of the books and displays both titles and snippets of the works in the search results. On Friday, the Second Circuit Court of Appeals rejected several authors’ copyright infringement lawsuit against Google, finding the digitization of the books was protected as fair use. The Court’s decision, in Authors Guild v. Google, Inc., Docket No. 13-4829-cv, can be found here.

Google scans books submitted by major libraries and makes searchable files available to the public. The Second Circuit approved an aspect of this program on fair use grounds a year ago in Authors Guild, Inc. v. HathiTrust, discussed our June 12, 2014 blog posting. In HathiTrust, a digital repository of more than 80 libraries’ collections – digitized by Google – made the collections available to the public to search using keywords. The search results consisted of a list of responsive works along with the number of “hits” in each work. Google’s program takes the search a step further. It not only lists works containing keywords but also displays snippets from the works in the search results.

In Authors Guild v. Google, the Court extended its reasoning in HathiTrust to apply the fair use doctrine to Google’s Library and Books Projects. As is often the case, the Court focused on the “transformative” nature of Google’s program — the first prong of the statutory fair use analysis. The Court held that Google’s digitization of works to enable keyword searching, and its provision of snippets of the search results to allow the searcher to decide whether the work is within his or her scope of interest, were “highly transformative” and therefore weighed in favor of fair use. The Court also concluded that Google’s program would have a minimal impact on the commercial value of the works to their copyright owners, since Google’s program does not provide a substitute for the acquisition of the work as a whole. The Court used the case as an opportunity to address the common misconception that for-profit uses cannot be fair uses. Although the Court recognized that commercialism is a component of the analysis, for-profit motivation must be weighed against the transformative nature of the work, resulting in a sliding scale where the more transformative a work, the less significant other factors such as commercialism become. Applying that sliding scale to this case, the Court found the “highly convincing transformative purpose” of the project outweighed Google’ profit motivation.

It has often been noted that the fair use doctrine is one of the most fraught areas of copyright law. It is hard to escape the conclusion, however, that the foundation of the Second Circuit’s opinion is the conclusion that Google – notwithstanding its ultimate for-profit motivation – is providing a useful public service without inflicting any material damage on the copyright owner’s rights.