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New Ideas, Methods and Products Series
Volume VI |
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Infringement and Litigation: Violation of
Intellectual Property Rights
INTRODUCTION
Infringement. The very
word can generate
reactions of fear, dread,
annoyance and confusion
-- no matter whether you
are the one making
the charge or you are the
accused infringer.
On the belief that a little
knowledge is
more comforting than a
great deal of ignorance,
the attempt here is to
explain simply what
constitutes infringement
of intellectual
property rights and the
typical course of
infringement litigation.
All infringement is based
on the violation
of some right. In the case
of patents that
is the exclusive right
to make, use, sell,
offer for sale or import
the patented invention.
Infringement of a trademark
occurs when an
unauthorized party uses
in commerce a similar
mark on similar goods so
as to cause a likelihood
of confusion. A copyright
is infringed when
the owner's exclusive right
to reproduce,
prepare derivative works,
distribute, perform
or display the copyrighted
work is done without
his authorization.
A trade secret right is
violated when a commercial
or technical business secret
is stolen by
theft or violation of a
confidential relationship.
Unfair competition occurs,
for example, when
trade dress rights are
violated by the copying
of the overall look or
impression of a product
or even of the look and
ambience of a restaurant's
decor.
PATENTS
Understanding patent infringement
begins
with precisely identifying
the patented invention.
The drawings and the description
of the drawings
in a patent do not define
the patented invention.
Rather, it is the claims:
the numbered paragraphs
at the end of the patent
that define the
scope of protection of
the patent. It is
claims that delineate the
zone of exclusivity
reserved to the patent
owner which if entered
by any other unauthorized
person constitutes
infringement of the patent.
In order to determine
whether a product or process
infringes a
patent one must read those
claims element
by element on the accused
device. Every element
in the claim as characterized
in the claim
language must be present
in the accused device
for there to be infringement.
Sometimes a
court will find infringement
even though
the claim is not literally
infringed if the
infringing device has the
same purpose, functions
in the same way and produces
the same results.
This is known as the doctrine
of equivalents.
Patent infringement can
take three different
forms. Direct infringement
occurs when the
infringer makes, uses,
sells, offers for
sale or imports a patented
device. Contributory
infringement occurs when
a party sells a
component of a patented
machine, manufacture,
combination or composition,
or sells a material
or apparatus for use in
practicing a patented
process which constitutes
a material part
of the invention. The contributory
infringer
must know that the thing
he sells is especially
made or especially adapted
for use in an
infringement of the patent
and not a staple
article or commodity of
commerce suitable
for substantial non-infringing
use. Inducing
infringement occurs simply
when one party
induces another to infringe
such as by supplying
instructions or materials
for producing the
patented invention. It
is also infringement
to import into or sell
in the United States
a product made elsewhere
by a process patented
in the U.S. during the
life of that process
patent.
A patent owner has the
right to sue an infringer
in federal court. Patent
suits cannot be
brought in state courts.
An accused infringer can
also bring suit.
If a patent owner is threatening
suit, causing
customers to desert the
accused infringer,
scaring suppliers, driving
away investors,
the accused infringer can
bring a Declaratory
Judgment suit first, asking
the court to
declare the patent invalid,
not infringed,
unenforceable or all three.
Any time a patent
owner brandishes the patent
there is the
risk that the accused infringer
will bring
suit first and in whatever
location he chooses
provided jurisdiction and
venue requirements
are met. That is why a
letter charging infringement
must be carefully drawn
and the patentee
must carefully weigh his
conduct. For if
the words or deeds of the
patent owner raise
a reasonable apprehension
of suit in the
accused infringer, the
infringer has the
right to file a Declaratory
Judgment action
first to attempt to put
an end to the harassment.
The law seeks to prevent
a patent owner from
profiting from the threat
without ever putting
the patent to the test.
In a patent infringement
suit a patent and
each and every one of its
patent claims is
presumed valid. That means
the infringer
has the burden of introducing
sufficient
evidence to overcome the
initial presumption
and prove invalidity. And
each claim stands
on its own: that one claim
is held invalid
does not necessarily invalidate
any other
claim of the patent. If
the accused infringer
is found to infringe even
a single claim
the patent is infringed.
An alleged infringer can
defend on a number
of grounds: the patent
is invalid; not infringed;
unenforceable because it
was misused, to
control unprotected goods
for example; the
invention was not novel;
was obvious; was
insufficiently disclosed
-- that is, the
patent did not explain
how to make and use
the invention sufficiently
for one skilled
in the art to understand;
and/or that the
inventor did not disclose
the best mode of
carrying out the invention.
There are powerful remedies
available against
infringers. An injunction
can be fashioned
by the court to stop the
infringer from making,
using and selling the patented
device to
preserve the patent owner's
exclusive right
to practice the invention.
Damages can be
and usually are awarded
-- Polaroid was awarded
nearly one billion dollars
in damages from
Kodak after trial. The
damages are to be
adequate to compensate
the owner for the
infringement. They will
be at least equivalent
to a reasonable royalty.
Interest and costs
can be added and the damages
can be increased
up to three times actual
damages, for example,
if the infringement was
willful. Embarking
on a course of infringement
without an opinion
of patent counsel that
the patent is not
infringed or is invalid,
unenforceable or
defective in some way can
be grounds for
charges of willful infringement.
While an
infringer's profits generally
cannot be recovered,
they can be considered
damages if those profits
are from sales that the
patent owner would
have made but for the infringement.
Attorney's
fees, which in many cases
are greater than
the damages, can be awarded
in exceptional
cases, e.g., willful infringement;
failure
to make proper, timely,
discovery; frivolous
claims; general obstreperous
behavior. Damages
can only be recovered for
a period of six
years prior to the filing
of the complaint
or counterclaim for infringement.
If the
patented product is not
marked with the notice
"patent" or "pat."
and
the patent number no damages
can be recovered
unless the infringer has
actual notice that
he is infringing such as
by letter or by
filing suit.
Between the time a suit
is instituted by
filing the complaint in
federal court and
the time the trial actually
begins, there
is a period during which
discovery is made
and various motions can
be filed. Both of
these activities can be
expensive, time consuming
and vexatious for the litigants
as well as
hectic for the attorneys.
This period generally
begins after the defendant
has filed and
served its answer to the
complaint.
However, a motion to dismiss
can be filed
before the filing of the
answer in an attempt
to end the case before
it begins. Grounds
for such a motion include:
lack of jurisdiction
of the court over the subject
matter or over
the defendant; improper
venue (wrong locale
of court); insufficient
process or service
of process (improper service
of the complaint
on the defendant for example);
failure to
state a proper legal claim;
or failure to
join a necessary party,
for example, the
patent owner.
If the case survives this first assault,
an answer will normally be filed and a schedule
for discovery will be set. During this time
each party can serve on the other party written
questions called interrogatories which must
be answered in a set time. Each party can
also serve on the other party requests for
admissions to save the time and cost of proving
facts which are undisputed or plainly obvious.
If a party denies those admissions and it
later appears that there was no real question
of those facts, the costs and attorney's
fees required to prove those facts can be
assessed against the party who refused to
make those admissions.
Each party can take the
deposition of the
other and of third party
witnesses and can
subpoena documents of third
parties as well.
Depositions are proceedings
whereby a sworn
witness is questioned by
one side's attorney,
then cross-examined by
the other's and all
the questions and answers
are recorded by
a certified court reporter.
This normally
takes place at one of the
attorneys' offices
or at the premises of one
of the parties
or anywhere else at the
agreement of the
parties. The recorded testimony
is later
submitted to the witness
for verification
and signature and can be
used in court at
trial. Each party can also
request the other
to produce all relevant
documents: "documents"
includes everything from
notes on napkins
to electronic media. In
all of these discovery
procedures there is wide
latitude as to the
subject mater. Unlike court
proceedings where
inquiries are generally
confined to eliciting
evidence relevant and material
to the issues
being tried, there is no
such limitation
during discovery. One can
pursue any discovery
paths which may lead to
relevant evidence.
This can be annoying to
litigants but it
is the procedure and should
be understood.
During this pretrial period
the court will
generally suggest or even
urge the parties
to settle. The court will
also require identification
of proposed witnesses and
of issues to be
explored during discovery
and will impose
a schedule for discovery
that must be adhered
to by the parties. Additional
motions may
be brought as new issues
arise or as new
evidence on old issues
is discovered. At
some point one or both
parties may bring
a Motion for Summary Judgment
in an attempt
to win the case without
having to go to trial.
This motion is submitted
based wholly on
"paper": deposition
transcripts,
answers to interrogatories,
admissions, documents
and affidavits but no live
testimony. The
moving party can win only
if it shows that
there is no genuine issue
as to any material
fact and that the moving
party is entitled
to judgment as a matter
of law. The opposing
party will try to show
to the contrary: that
there are material facts
in controversy.
One by-product of such
a motion is that both
parties pretty much reveal
the entire theory
of their case and all of
their proofs which
otherwise might not have
been disclosed until
trial.
Often one of the parties
feels a need for
instant redress and cannot
wait until after
discovery and trial. For
example, a patentee
may want the accused infringer
stopped now
before trial because the
infringer's shoddy
knock-offs are stealing
the patentee's limited
market for the patented
goods and souring
the buying public's taste
for the product
because of the poor quality
of the knock-offs.
Or the accused infringer
may seek such preliminary
relief because the patentee's
charges of
infringement have scared
off customers, suppliers,
potential strategic partners
or financial
investors.
In that case the aggrieved
party can move
for a preliminary injunction.
In that proceeding
after no or limited discovery,
based on documentary
evidence, transcripts of
deposition testimony
and a hearing in the nature
of a mini-trial
in court before a judge
or magistrate, the
moving party presents its
case and the other
party opposes.
To prevail on a motion
for preliminary injunction
the moving party must prove
not just that
he is likely to win after
a full trial on
the merits but that he
will be irreparably
harmed if he does not get
the injunction
now, that the other party
will not be unduly
harmed, and the public
will not be prejudiced.
Any decision to move for
a preliminary injunction
must be carefully weighed.
First, it requires
a complete disclosure of
the case in order
to show a strong likelihood
of ultimate success
after trial so you essentially
have to prove
your entire case now. Second,
in addition,
you must prove irreparable
harm, no unfair
prejudice to the opposing
party and careful
preservation of the public's
stake in the
affair. Third, it must
all be done in great
haste, sometimes before
all the facts and
theories are fully obtained
and considered.
Fourth, if the motion is
not granted, the
opposing party will be
elated, buoyed up,
feeling he "won"
the case when
all that really happened
was that the judge
saw no need for instant
redress. The judge
might have felt that the
movant had shown
a likelihood of success
on the merits but
was unconvinced that irreparable
harm would
result if an injunction
was not immediately
issued. But the opposer
will not always see
it that way, he will believe
it vindicates
him, validates his position
and it may inspire
him to fight all the harder.
On the other
hand, if the moving party
wins, it shows
that the court is already
convinced of the
soundness of his position
and is predicting
ultimate victory. That
can end the case quickly.
TRADEMARK
A trademark owner has the
exclusive right
to use his trademark on
his goods in commerce.
If the trademark is registered
in the U.S.
Patent and Trademark Office
then other additional
rights inher. A registration
extends the
owner's exclusive right
throughout the U.S.
even to locales where he
has not yet used
the mark. And it establishes
jurisdiction
over trademark infringement
suits in federal
court.
Federal registration also
allows the registrant
to give notice that the
mark is registered
with the words "Registered
in U.S. Patent
and Trademark Office"
or "Reg.
U.S. Pat. and Tm. Off."
or (r). However,
in an infringement suit,
if there has been
no such notice displayed
with the mark, then
no profits or damages can
be recovered unless
the infringer had actual
notice of the registration.
Certain exclusive rights
are bestowed by
federal registration. Any
person who uses
any reproduction, counterfeit,
copy or colorable
imitation of a registered
mark in connection
with the sale, offering
for sale, distribution
or advertising of any goods
or services which
are likely to cause confusion,
to cause mistake
or to deceive will be liable
as an infringer.
Also liable as an infringer
will be anyone
who reproduces, counterfeits,
copies or colorably
imitates a registered mark,
applies it to
labels, signs, prints,
packages, wrappers,
receptacles or advertisements
intended to
be used in commerce on
or in connection with
the sale, offering for
sale, distribution,
or advertising of goods
or services, if that
is likely to cause confusion,
mistake or
deception.
An infringer who is engaged
solely in the
business of printing the
mark for others
is only liable to an injunction.
Similarly,
where an infringement occurs
by virtue of
appearing as paid advertising
matter in a
newspaper, magazine or
electronic medium
the publisher will only
be liable to an injunction.
Even then an injunction
may not issue if
stopping further publication
of the infringing
mark delays the time of
publication or programming
beyond its normal time.
An infringer not in those
limited categories
listed above will be subject
to an injunction
against future infringing
activities as well
as the infringer's profits,
damages sustained
by the trademark owner
and the cost of the
action. The court can also
award treble damages
and attorney's fees. Further,
the court may
order that all labels,
signs, prints, packages,
wrappers, receptacles,
and advertisements
bearing the mark in the
possession of the
infringer and all plates,
molds, matrices
and other devices for making
them be delivered
up and destroyed without
any reimbursement
to the owner.
When a registered mark
is involved in litigation
the court may determine
the right of that
mark to a registration
or cancel it in whole
or in part, restore a cancelled
mark or take
any other action needed
to rectify the registration
and may order the U.S.
Patent and Trademark
Office to carry out the
action determined
by the court.
The remedies for counterfeit
marks are much
more stringent. In the
case of counterfeit
marks a court upon proper
showing may grant
an ex parte order to seize
the counterfeit
goods without previously
informing the alleged
counterfeiter. Such an
order can result in
the sealing of a warehouse
before the owner
even has notice that a
proceeding has been
filed against him. To obtain
such extraordinary
measures the moving party
must show that
if notice were given the
counterfeit goods
would be destroyed, moved,
hidden or otherwise
made inaccessible. The
court will take custody
of the goods and the moving
party must provide
adequate security, e.g.,
a bond sufficient
to cover any damages if
the seizure is later
adjudged to have been wrongful.
A party who
had his goods wrongfully
seized may recover
damages for lost profits,
cost of materials,
loss of good will, punitive
damages and attorney's
fees.
The discovery procedures,
including depositions,
interrogatories, requests
for production
of documents and requests
for admission,
are the same procedurally
as in patent cases.
The same procedural motions
are available
for trademarks as for patents:
motions to
dismiss, motions for preliminary
injunctions,
and motions for summary
judgment as well
as Declaratory Judgment
actions. But, the
evidence sought and the
proofs required are
different. Here the trademark
owner will
seek to prove infringement
by showing likelihood
of confusion, copying of
the mark by the
infringer, and the owner's
prior use, widespread
use and substantial advertising
and promotion
while the alleged infringer
will seek to
show no likelihood of confusion,
that the
mark has been misused in
violation of the
antitrust laws, or was
obtained wrongfully
or through fraud or that
the mark is descriptive
or generic. Considered
in determining likelihood
of confusion is similarity
of the appearance,
sound, impression, or meaning
of the marks,
similarity of the goods,
similarity of the
channels of trade in which
the goods move,
and similarity in the purchasers.
COPYRIGHT
Copyright protects original
works of authorship
fixed in a tangible medium
of expression,
e.g., print, film, phonograph
records, electronic
media. Note the protection
extends to "original"
works not just "novel"
works. That
is, as long as the work
is original with
the author that author
will have copyright
protection. Thus theoretically
if two people
using the same camera,
settings, and film
take the same picture of
the Washington Monument
and produce the identical
photographs, each
owns the copyright in his
photograph. Practically,
if such an event should
occur one of the
photographers will claim
the other copied
his work. To prove this
he must show his
photograph was made first
and the other photographer
had access to it. This
coupled with the similarity
of the photographs will
prove a prima facie
case of copyright infringement
which the
other party can defend
by showing no access
and independent creation.
Note also that
copyright protects the
form of the expression,
not the idea or concept
behind it. The copyright
owner cannot stop other
photographers from
taking the same picture
of the Washington
Monument. Lotus cannot
stop others from making
spreadsheets only from
making one similar
in look and feel to Lotus'
1-2-3.
In addition to the usual
definitions of fraud,
invalidity, non-infringement,
non-copyrightable
subject matter and misuse
theories, also
available under copyright
law is the defense
of fair use. Fair use arises
when the work
was copied for purposes
of criticism, comment,
news, teaching, scholarship
or research.
To determine whether a
fair use exemption
applies courts examine
the purpose and character
of the use (commercial
or non-profit); the
nature of the work; the
amount of the work
copied; and the effect
of the copying on
the market for the work.
Copyrightable works take
many forms: literary
works; musical works; dramatic
works; pantomime
and choreographic works;
pictorial, graphic
and sculptural works; motion
pictures, and
other audiovisual works;
sound recordings
and architectural works.
Copyright also covers
compilations and derivative
works but only
the new authorship contribution
not the underlying
preexisting material.
The copyright owner has
certain exclusive
rights which if violated
constitute infringement:
to reproduce the work;
to prepare derivative
works based on the copyrighted
work; to distribute
copies by sale, rental,
lease or lending;
to perform the works publicly;
and to display
the work publicly. In addition
the authors
of visual art works have
the rights of attribution
and integrity. The author
must be claimed
as the author of his work
and can prevent
the use of his name with
any work not authored
by him or any work authored
by him but substantially
changed. The author can
prevent any intentional
or grossly negligent destruction
of his work
and can prevent any intentional
distortion,
mutilation or modification
of the work.
While copyright notice
is no longer required
since the U.S. joined the
Berne Convention
in March 1989 and lack
of notice no longer
forfeits copyright protection,
it is still
prudent to apply the notice
to prevent the
defense of innocent infringement
in mitigation
of actual or statutory
damages.
While copyright registration
is not mandatory
no action for copyright
infringement of a
U.S. work can be brought
unless a registration
is obtained or has been
or will be applied
for. In addition, no statutory
damages or
attorney's fees can be
recovered for infringement
of an unpublished work
commenced before the
effective date of its registration
or for
infringement commenced
of a published work
after first publication
and before the effective
date of its registration
unless registration
is subsequently made within
three months
of the publication of the
work.
Copyright infringement
actions, like patent
infringement actions, can
only be brought
in federal court. At any
time during an action
for copyright infringement
the court may
order the impounding of
all copies made or
used in violation of the
copyright and of
all plates, molds, matrices,
masters, tape,
film negatives or other
articles by which
copies can be made. As
a part of a final
judgment the court can
further order the
destruction or other disposal
of those items.
A copyright infringer is
liable for actual
damages and profits or,
at the election of
the copyright owner, statutory
damages. Thus
the copyright owner can
recover the damages
suffered by him and any
profits of the infringer
attributable to the infringement.
The copyright
owner need only prove the
infringer's gross
revenue and the infringer
must prove his
deductible expenses and
profits attributable
to other factors.
Alternatively, the copyright
owner can elect
to recover statutory damages
of not less
than $500 or more than
$20,000 for all infringements
of a single work. If it
can be shown that
the infringement was willful,
the upper limit
can be extended to $100,000.
If it was innocent
it can be as low as $200.
The court can award
costs and attorney's fees.
Unlike for patent and trademark
violations,
copyright law provides
that any person who
willfully violates a copyright
for commerce
or financial gain can be
criminally liable
and infringing copies as
well as the means
for making them can be
forfeited or destroyed.
Further, a fine of up to
$2,500 can be imposed
for fraudulent removal
or alteration of a
copyright notice, fraudulent
giving of copyright
notice or false representation
of a material
fact in an application
for copyright registration.
The discovery procedures,
including depositions,
interrogatories, requests
for production
of documents and requests
for admission,
are the same procedurally
as in patent cases.
The same procedures are
available for copyright
as for patents and trademarks:
motions to
dismiss, motions for preliminary
injunctions,
and motions for summary
judgment as well
as Declaratory Judgment
actions.
Litigation progresses in
a similar manner
in cases involving trade
secrets and unfair
competition, trade dress,
false advertising
and similar issues except
that there is no
government "deed"
to the property
as there is with patents,
trademarks and
copyright: the existence
of the "property"
and its ownership must
be established by
external evidence.
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