Intellectual property issuesParis Convention
Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?
Yes to all three.Contesting validity
Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?
There is no distinction in this regard between domestic and foreign licensors. In 2007, the United States Supreme Court in MedImmune v Genentech, 549 US 118 (2007) held that a patent licensee can challenge the validity of a patent while still a licensee, thus preventing the patent licensor from counterclaiming for patent infringement, and thereby shifting the balance of power in a patent licence agreement towards a patent licensee. In order to recapture some of that power, patent licensors may attempt to receive greater compensation up front and may further include provisions that, when the validity of a licensed patent is challenged, provide for increased compensation for the licensor, include a right for the licensor to terminate the patent licence agreement, include a right to reduce the scope of a licence agreement (ie, an exclusive licence may be converted to a non-exclusive licence) or require the patent licensee to bear the costs of litigation. ‘No challenge clauses’ to a patent’s validity entered into prior to litigation have been held unenforceable. However, such ‘no challenge clauses’ included in an agreement settling litigation have been upheld, presumably because the parties had explored the merits of the patent’s validity prior to or as part of their settlement discussions; although, the PTAB has held in one instance that even such a contractual ‘no challenge’ clause is not effective to prevent the filing of an inter partes review (IPR) by a party to a settlement agreement. See, for example, IPR 2014-01197 (2015).Invalidity or expiry
What is the effect of the invalidity or expiry of registration of an intellectual property right on a related licence agreement in your jurisdiction? If the licence remains in effect, can royalties continue to be levied? If the licence does not remain in effect, can the licensee freely compete?
After a patent expires, the subject matter disclosed therein enters the public domain. As such, there can no longer be an exclusive right, licence or privilege to use the subject matter. In this regard, the United States Supreme Court has held that royalty agreements that extend beyond the expiration of the term of a licensed patent are unlawful per se (Brulotte v Thys, 379 US 29 (1964)). The United States Supreme Court reviewed this issue and affirmed the Brulotte decision, in Kimble v Marvel Entertainment, LLC, 135 SCt 2401 (2015), holding that a patentee’s use of a royalty agreement extending royalty payments beyond the expiration date of the patent is unlawful per se as noted in question 3. The United States Supreme Court, however, observed that careful licence drafters could work around Brulotte. ‘Brulotte poses no bar to business arrangements other than royalties - all kinds of joint ventures, for example - that enable parties to share the risks and rewards of commercializing an invention’ (Kimble, 135 S Ct at 2408).
Further, if a royalty agreement includes know-how, technology or trade secrets, in addition to a licensed patent, post-expiration royalties may be collected. Similarly, when multiple patents are lawfully and collectively licensed, royalties can be levied until the expiration of the term of the last patent.
In the United States, trademark rights derive from actual use in commerce. Therefore, trademark rights are valid as long as the mark is used in connection with the relevant goods or services, regardless of whether the mark is registered. Consequently, as long as the mark is used in the relevant territory, trademark rights may be licensed and levied. However, it is highly advisable to register and maintain trademark registrations in the United States Patent and Trademark Office (USPTO), as this provides, inter alia, nationwide notice to third parties as well as a presumption of validity in the event of a trademark dispute.
With regard to copyright registration in the United States, there are specified terms of a number of years following creation or publication to perfect an ownership in a registered US copyright, after which the work will fall into the public domain. For example, a work created on or after 1 January 1978 lasts for the life of the author and 70 years after the author’s death. For a joint work prepared by two or more authors for a work that is not a work made for hire, the copyright lasts for the life of the last surviving author and 70 years after the surviving author’s death. For works made for hire, the copyright lasts for 95 years from the year of its first publication, or 120 years from the year of its creation, whichever expires first. Therefore, once a copyright registration lapses, the work falls into the public domain and as such cannot continue to be levied.
When all intellectual property rights underlying the licence are found invalid or expired, there is no extant right to exclude others from practising the intellectual property requiring a licence. As such, a former licensee may freely compete with the former licensor at that point.Requirements specific to foreigners
Is an original registration or evidence of use in the jurisdiction of origin, or any other requirements unique to foreigners, necessary prior to the registration of intellectual property in your jurisdiction?
A US trademark application may be based upon actual use of the mark in US commerce, or a corresponding non-US (foreign) registration, if the applicant’s country of origin is a party to a treaty such as the Paris Convention for the Protection of Industrial Property 1883 or an agreement with the United States that provides for US applications based on ownership of a foreign registration and the applicant must be the owner of a trademark registration in the applicant’s country of origin. The Lanham Act defines the applicant’s country of origin as ‘the country in which he has a bona fide and effective industrial or commercial establishment, or if he has not such an establishment, the country in which he is domiciled, or if he has not a domicile in any of the countries described in paragraph (b) of this section, the country of which he is a national’ (15 USC 1126). The corresponding non-US registration must be for the same mark, for the same goods, and owned by the same owner.
For US applications based upon foreign registrations, although the original foreign registration is not required to be submitted with the application, a true copy of the corresponding foreign registration, along with a verified English translation, must be submitted to the USPTO before the US registration will be issued. Further, it is not necessary to demonstrate use in the United States prior to registration for applications based upon non-US registrations. Also, the USPTO will not require proof of use in the country of origin. However, in order to maintain the US trademark registration, the owner will be required to prove use of the mark in US commerce by submitting a declaration of use and specimen of use between years five and six following the US registration date and every 10 years thereafter from the registration date.
While an applicant may also file a US trademark application based on an intent-to-use the mark in US commerce pursuant to 15 USC section 1051(b), the intent-to-use basis does not provide a basis for trademark registration in the United States, which requires actual use of the mark in US commerce (or reliance on a foreign registration).
With regard to copyrights, the United States is a member of the Berne Convention for the Protection of Literary and Artistic Works 1886. Consequently, registration is not required for protection for non-US works created in other member countries. However, it has been held in US courts that statutory damages and attorneys’ fees are only available for works registered in the United States.
An original registration or evidence of use is not necessary to obtain a patent. However, if a patent application is filed in a foreign jurisdiction, an application must be filed in the United States within 12 months of the filing date in the foreign jurisdiction.Unregistered rights
Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?
Yes. In the United States, trademark rights derive from actual use in commerce. Therefore, trademark rights are valid as long as the mark is used in connection with the relevant goods or services, regardless of whether the mark is registered. However, the owner’s rights in an unregistered mark are limited to the geographical area within which it has been used or the areas into which it may be reasonably expected to expand. Therefore, the licensor may not license rights to use the mark beyond its scope of geographical use. Consequently, it is highly advisable to register and maintain trademark registrations in the USPTO since this provides the broadest protection, including nationwide notice to third parties as well as a presumption of validity in the event of a trademark dispute. In the United States, there is no legal requirement that a trademark licence be recorded.
In addition, a trademark may be registered at the state level in the United States. However, each state’s laws concerning trademark registration and rights differ, meaning that the protection provided by a trademark registration in one state may differ from that provided by another.
Likewise, copyright rights may be licensed without a registration. Under US law, an original work fixed in a tangible medium of expression is automatically protected upon creation. However, registering the work provides several legal benefits and registration is a prerequisite to filing a copyright infringement suit in a US federal court for works of US origin.Security interests
Are there particular requirements in your jurisdiction to take a security interest in intellectual property?
In the United States, a security interest in a patent, trademark or copyright must be recorded with the proper federal and/or state authorities in order to be ‘perfected’ and thus enforceable. In order to protect an ownership or security interest in intellectual property against subsequent purchasers and mortgagees for value, an assignment or other document should be recorded with either the USPTO or Copyright Office. See, for example, 35 USC 261. However, recording a security interest with the USPTO alone is not effective to perfect the security interest and in order to perfect a security interest in a patent or trademark against future lien creditors or owners, a filing should be made in the appropriate state jurisdiction in accordance with the law applicable in that state; often the Uniform Commercial Code (UCC). To perfect a security interest in a registered copyright, it should be recorded in the Copyright Office (In re Peregrine Entertainment Ltd, 116 Bankr 194 (CD Cal 1990)).Proceedings against third parties
Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?
Whether a foreign owner or licensor of intellectual property can bring proceedings in the United States must be answered by first determining which party has ‘standing’, namely, who may bring suit. A foreign owner or licensor of intellectual property has standing to institute a proceeding against a third party for infringement without joining the licensee provided that the foreign owner did not grant an exclusive licence of all rights in the intellectual property. Typically, all joint owners of the intellectual property are required to join together to institute proceedings against a third party for infringement.
A licensee can institute an action against an infringer without the consent of the licensor or owner only if the licensee is an exclusive licensee of all rights in the intellectual property, and has the right to sue for patent infringement. In this regard, a right-to-sue clause, taken alone, generally does not convey a non-exclusive licensee the right to sue. Further, an exclusive licensee can be denied the right to sue when that right, or any other right in the intellectual property, is retained by the owner or licensor, namely, the licence is not, in fact, ‘exclusive’ in that it is a transfer of less than all rights.
The Federal Circuit held, in Azure Networks LLC v CSR PLC, 771 F3d 1336 (Fed Cir 2014), vacated on different grounds, 135 SCt 1846, that, a patent owner lacked standing to join a suit for patent infringement brought by its licensee against an accused infringer even though the patent owner retained the right to royalties, right to practise the patent, right to terminate the agreement, and a future reversionary interest in the patent. In so holding, the court noted that the patent owner had transferred substantially all of its patent rights to the licensee and therefore lacked standing to join the patent-infringement suit. The court focused on the fact that the patent owner completely transferred control over litigation and licensing of the patent to the licensee in ruling that the patent owner lacked standing to join a patent-infringement suit. The Federal Circuit has also held, however, in Alps South, LLC v Ohio Willow Wood Co, 787 F3d 1379 (Fed Cir 2015), that an exclusive licensee in a field of use having the right to exclude, transfer and enforce the patents did not have standing to maintain an infringement action without the patent owner.
Under US trademark law, ‘any person who believes that he or she is or is likely to be damaged’ by the false or misleading use of a trademark, may bring an action under the Lanham Act, 15 USC 1125(a). Therefore, unless contractually prohibited, a trademark licensee may bring an action against an infringer under this section of the Lanham Act without the consent of the owner or licensor.Sub-licensing
Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?
Yes. However, under the Lanham Act, in the United States a trademark licensor must supervise and control the licensee’s use of its mark in order to protect the public’s expectation that all products sold under a particular mark are from a common source and of like quality. Where a licensor does not exercise reasonable quality control over a licensee, the mark may be deemed abandoned owing to the ‘naked licensing’. See:
- Tumblebus Inc v Cranmer, 399 F3d 754, 764-65 (6th Cir 2005); and
- Dawn Donut Co v Hart’s Food Stores, Inc, 267 F2d 358, 367 (2d Cir 1959).
Most US case law has held that a trademark licensee may not sub-license a mark to a third party without first obtaining the licensor’s express consent. Therefore, generally the right to sub-license must be granted contractually. See In re Trump Entm’t Resorts, Inc, 526 BR 116, 127 (Bankr D Del 2015). (The general prohibition against the assignment of trademark licences absent the licensor’s consent is equally applicable to both exclusive and non-exclusive trademark licences. A trademark licensor would have the same concerns with respect to the identity of the licensee and the quality of products bearing its trademark whether the trademark licence is exclusive or non-exclusive.)Jointly owned intellectual property
If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?
In the United States, each co-owner is free to deal with that intellectual property as it wishes without the consent of the other co-owners. We address trademarks, copyrights and patents in turn.
Unless prohibited by contract, a co-owner in a trademark is generally free to assign its trademark rights provided that the assignee is subject to all the obligations of such a co-owner, and that all goodwill is transferred. However, consumers may expect the source of the product or service to be the original co-owners and the transfer by one co-owner could lead to consumer confusion, particularly when the co-owner objects to the transfer. Therefore, in examining the ability of a co-owner to transfer a trademark, courts have employed a test balancing the parties’ contractual expectations with consumer expectations. Ligotti v Garofalo, 562 F Supp 2d 204, 222-23 (DNH 2008) (quoting T & T Mfg Co v A T Cross Co, 587 F2d 533, 538 (1st Cir 1978) (‘Courts have traditionally . . . weighed the public interest concerning trademarks against the interest in contract enforcement’); see also J Thomas McCarthy, McCarthy on Trademarks and Unfair Competition section 16:40, at 16-68-16-68.1 (4th ed 1992 & 2007 supp) (‘the determination of trademark joint ownership issues should be resolved by a balancing of these two policies’).
Further, the authors of a joint work are co-owners of copyright in the work (17 USC 201(a) - ownership of copyright provides: ‘the authors of a joint work are co-owners of copyright in the work’ and, as described in the House Report accompanying passage of the Copyright Act, are to ‘be treated generally as tenants in common, with each co-owner having an independent right to use or license the use of a work, subject to a duty of accounting to the other co-owners for any profits.’ Davis v Blige, 505 F3d 90, 98 (2d Cir 2007) (quoting HR Rep No. 94-1476, at 121 (1976)); see also Thomson v Larson, 147 F3d 195, 199 (2d Cir 1998) (‘joint authorship entitles the co-authors to equal undivided interests in the whole work - in other words, each joint author has the right to use or to license the work as he or she wishes, subject only to the obligation to account to the other joint owner for any profits that are made’).
The co-owning authors or collaborators may allocate the rights and duties of the work of authorship among themselves, and may contractually regulate, modify or otherwise limit the exploitation of the work.
Regarding patents, 35 USC 262 - Joint Owners provides: ‘in the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention within the United States, or import the patented invention into the United States, without the consent of and without accounting to the other owners.’ While co-owners of a patent may contractually limit or allocate such rights, the courts have interpreted this part of the statute to mean that, in the absence of an agreement to the contrary: ‘Each co-owner’s ownership rights carry with them the right to license others, a right that also does not require the consent of any other co-owner’ (Schering Corp v Roussel-UCLAF SA, 104 F3d 341 (Fed Cir 1997).First to file
Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?
The America Invents Act of 2011 changed the United States’ patent system from a first to invent to a first to file ‘plus’ system, which applies to all patent applications filed in the United States that have an earliest effective filing date on or after 16 March 2013. The Act created additional post-grant proceedings (inter partes review and post grant review) to challenge issued patents before the USPTO, and left ex parte re-examination as an option. Derivation proceedings were also created, in which the USPTO can decide if one inventor derived the invention in his or her application from another inventor. Post grant review applies to patents having an earliest effective filing date of 16 March 2013 or later; and inter partes review (which replaced inter partes re-examination) became effective 16 September 2012 and applies to all patents regardless of filing date. More than 10,700 such proceedings have been filed as of the end of October 2019, with a large number of patents being invalidated as a result of such proceedings; USPTO statistics currently show that a little over 60 per cent of requests for post-grant proceedings are granted, and in those proceedings where trial has been completed and a final written decision reached, 63 per cent all of the instituted claims were found unpatentable and in another 18 per cent of the instituted proceedings some of the instituted claims were found unpatentable.
Patent applications can be licensed in the United States. In this regard, since a patent application has not removed any property rights from the public domain, courts have found that a patent application does not provide as much leverage as a patent. Accordingly, courts have held that federal patent law does not pre-empt state contract law, and thus that the term of a patent licence agreement may continue if the patent application fails (see Aronson v Quick Point Pencil Co, 440 US 257 (1979)). Often, such licenses also include a transfer of technical information as well.Scope of patent protection
Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?
The United States Supreme Court has long held that the execution of a physical process, even when controlled by a computer program, is patent-eligible subject matter, but mathematical formulae and abstract ideas, in and of themselves, are not patentable. However, the mere presence of software does not render an otherwise patentable process unpatentable (Diamond v Diehr, 450 US 175 (1981)). In 2010, the United States Supreme Court reaffirmed that processes, such as business methods and software, are patentable (Bilski v Kappos, 561 US 593 (2010)). The Court held that a process is patent-eligible subject matter if it satisfies the ‘machine or transformation test’, namely, if it is tied to a particular machine or apparatus, or transforms a particular article into a different state or thing. The Court, however, rejected the machine or transformation test as the sole test for determining patent-eligible processes. In CLS Bank International v Alice Corp Pty Ltd, 573 US 2347 (2014) the United States Supreme Court held invalid computerised method and system claims directed to a method of reducing settlement risk via trading with a third party. The United States Supreme Court stated that because the claims at issue were drawn to the abstract idea of intermediated settlement, the inclusion of generic computer implementation (ie, a data storage unit, controller and processing system) did not make such an idea patentable.
The Federal Circuit court has rendered several decisions to reiterate that ‘[s]oftware can make non-abstract improvements to computer technology just as hardware improvements can’ (Enfish, LLC v Microsoft Corp, 822 F3d 1327 (Fed Cir 2016)). The Federal Circuit held that if claims at issue recite unconventional rules or specific processes that result in a specific technological improvement, the claims are non-abstract and patent eligible. See, for example, McRO, Inc v Bandai Namco Games Am Inc, 837 F3d 1299 (Fed Cir 2016) and Enfish v Microsoft. In contrast, claims are patent-ineligible if they recite a process ‘for which computers are invoked merely as a tool’. See, for example, Enfish v Microsoft and RecogniCorp, LLC v Nintendo Co, Ltd, 855 F3d 1322 (Fed Cir 2017). The Federal Circuit also held that even if claims are not directed to a specific improvement of technological operation or functionality, claims reciting an unconventional arrangement of claim elements to solve a technology-based problem are patent-eligible. See, for example, Bascom Global Internet Services, Inc v AT&T Mobility LLC, 827 F3d 1341 (Fed Cir 2016); Amdocs (Israel) Ltd v Openet Telecom, Inc, 841 F3d 1288 (Fed Cir 2016); and Thales Visionix, Inc v United States, 850 F3d 1343 (Fed Cir 2017). In these decisions, the Federal Circuit relied on the patent’s written description to identify the resulting technological improvement or solution in finding for patent-eligibility. See, for example, Amdocs v Openet; and Enfish v Microsoft. The Federal Circuit also relied on the manner and extent to which the resulting technological improvement or solution is claimed to determine an extent to which alternative improvements or solutions would be pre-empted. See, for example, McRo Inc v Bandai Namco Games America Inc, 837 F3d 1299 (Fed Cir 2016). In Ancora Techs v HTC Am, Inc, 908 F3d 1343 (Fed Cir 2018), the Federal Circuit reversed the district court’s dismissal of the case an unpatentable under section 101 finding that the claims at issue were not directed to ineligible subject matter, but instead the claimed advance was a concrete assignment of specified functions among a computer’s components to improve computer security, and the claimed improvement in computer functionality wad eligible for patenting, thus, not invalid under section 101. Similarly, in Koninklijke KPN NV v 2 Gemalto M2M GMBH, Appeal Nos. 2018-1863, 2018-1864, 2018-1865 (Fed Cir 15 November 2019), the Federal Circuit reversed a district court’s grant of a Rule 12(c) motion finding claims 2-4 ineligible for patenting under section 101 because the claims recited how reordering Information via permutation was used (ie, modifying the permutation applied to different data blocks), and this specific implementation was a key insight to enabling prior art error detection systems to catch previously undetectable systematic errors. Thus, the Federal Circuit concluded that the appealed claims were not directed to an abstract idea because they sufficiently capture the specific asserted improvement in detecting systematic errors contributed by the inventors.
The United States Supreme Court has further held that ‘anything under the sun that is made by man’, including a living, human-made organism, is patent-eligible subject matter (Diamond v Chakrabarty, 447 US 303 (1980)). However, naturally occurring organisms, other products of nature, and laws of nature are not patent-eligible. In Association for Molecular Pathology v Myriad Genetics, Inc, 569 US 576 (2013), the United States Supreme Court held that ‘isolated’ DNA molecules are products of nature and, thus, not eligible for patent protection, whereas some cDNA molecules are eligible. In Prometheus Laboratories, Inc v Mayo Collaborative Services, 566 US 66 (2012), the United States Supreme Court held invalid claims directed to administering a drug and determining the level of a metabolite. Both were considered to be directed to laws of nature and, thus, not patentable subject matter under 35 USC 101. In 2014 the Federal Circuit held that a genetic copy of a naturally occurring sheep is not patent-eligible because the cloned sheep did not possess markedly different characteristics from sheep found in nature. In re Roslin Institute (Edinburgh), 750 F3d 1333 (Fed Cir 2014). In INO Therapeutics LLC v Praxair Distrib Inc, 2019 US App LEXIS 25756 (Fed Cir 27 August 2019), the Federal Circuit found that the patent claim did no more than add an instruction to withhold iNO treatment from identified patients and did not recite giving any affirmative treatment for the iNO-excluded group, and accordingly, covered a method in which, for the iNO-excluded patients, the body’s natural processes are simply allowed to take place. Thus, the claim was directed to the natural phenomenon; the claim, apart from the natural phenomenon itself, involved only well-understood, routine, and conventional steps. However, in Athena Diagnostics, Inc v Mayo Collaborative Servs, 915 F3d 743 (Fed Cir 2019), a divided panel affirmed a decision by the district court holding the asserted claims invalid under section 101. Notably, the Federal Circuit subsequently denied Athena’s petition for rehearing en banc in an order containing 81 pages of eight separate concurrences and dissents. A petition for certiorari to the US Supreme Court was filed on 1 October 2019 asking: ‘Whether a new and specific method of diagnosing a medical condition is patent-eligible subject matter, when the method detects a molecule never previously linked to the condition using novel man-made molecules and a series of specific chemical steps never previously performed?’
The Supreme Court’s Alice and Mayo decisions provide the two-stage framework by which patent eligibility under section 101 is assessed. A patent claim falls outside section 101 where:
- it is directed to a patent ineligible concept (ie, a law of nature, natural phenomenon, or abstract idea); and
- if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application.
Section 33 of the America Invents Act of 2011 (see, eg, 35 USC 101 advisory notes) provides that no patent may be issued on a claim directed to or encompassing a human organism. This preclusion applies to any application for a patent that is pending on, or filed on or after, the date of the enactment of the Act, but does not affect the validity of any patent issued before the date of the enactment of the Act.
Additionally, section 14 of the America Invents Act of 2011 (see, eg, 35 USC 102 advisory notes) provides that tax strategies are deemed within the prior art, such that a strategy for reducing, avoiding or deferring tax liability, whether known or unknown at the time of the invention or application for the patent, shall be deemed insufficient to differentiate a claimed invention from the prior art. The section has two exceptions, such that the section does not apply to a method, apparatus, technology, computer program product or system, that is used solely for preparing a tax or information return or other tax filing, including one that records, transmits, transfers or organises data related to such filing or is used solely for financial management, to the extent that it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax adviser.
Further, although business methods remain patentable in the United States, section 18 of the America Invents Act of 2011 provides for a ‘transitional post-grant review proceeding’ to review the validity of covered business method patents. This review proceeding makes it easier to challenge business method patents as not satisfying 35 USC 101, and more than 420 covered business method petitions have been filed so far.
In January 2019, the USPTO announced revised guidance for subject matter eligibility under section 101 and also announced guidance on the application of 35 USC section 112 to computer-implemented inventions. The ‘2019 Revised Patent Subject Matter Eligibility Guidance’ makes two primary changes to how patent examiners apply the first step of the US Supreme Court’s Alice/Mayo test for patent eligible subject matter, which determines whether a claim is ‘directed to’ a judicial exception:
- in accordance with judicial precedent and in an effort to improve certainty and reliability, the revised guidance extracts and synthesises key concepts identified by the courts as abstract ideas to explain that the abstract idea exception includes certain groupings of subject matter: mathematical concepts, certain methods of organising human activity, and mental processes; and
- the revised guidance includes a two-prong inquiry for whether a claim is ‘directed to’ a judicial exception. In the first prong, examiners will evaluate whether the claim recites a judicial exception and if so, proceed to the second prong. In the second prong, examiners evaluate whether the claim recites additional elements that integrate the identified judicial exception into a practical application. If a claim both recites a judicial exception and fails to integrate that exception into a practical application, then the claim is ‘directed to’ a judicial exception. In such a case, further analysis pursuant to the second step of the Alice/Mayo test is required.
Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?
Yes. In the United States there is a Uniform Trade Secrets Act (UTSA), which has been enacted, in one form or another, by most, but not all, of the states, as well as the District of Columbia. The UTSA defines a trade secret as information, including a formula, pattern, compilation, programme, device, method, technique or process, that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The states that do not follow the UTSA generally follow the First Restatement of Torts, which considers the following factors to determine whether information is a trade secret:
- the extent to which the information is known outside the holder’s business;
- the extent to which it is known by employees and others within the business;
- the extent of the measures taken to guard the secrecy of the information;
- the value of the information to the holder and its competitors;
- the amount of effort or money expended in developing the information; and
- the ease or difficulty with which the information could be properly acquired or duplicated by others.
Generally, remedies for misappropriation of a trade secret include damages and injunctive relief. Under certain circumstances, the UTSA permits enhanced damages (up to two times actual damages) and attorneys’ fees.
Additionally, the Defend Trade Secrets Act (DTSA) was signed into law on 11 May 2016 and amends the Economic Espionage Act, 18 USC 1831 et seq. The DTSA creates a federal civil cause of action for trade secret misappropriation. While the DTSA does not replace the various state trade secret laws, it provides a uniform federal system for litigation of trade secret misappropriation or theft as an additional cause of action. The DTSA enables plaintiffs to seek an ex parte seizure order, permitting an aggrieved party to seek relief from the court to seize misappropriated trade secrets without providing prior notice to the alleged wrongdoer. A seizure order may only be issued in ‘extraordinary circumstances’ after a plaintiff establishes that other remedies, including an injunction, would be inadequate. To address concerns about abuse of seizure orders, the DTSA permits defendants to seek damages for a wrongful seizure.
In addition to issuance of an ex parte seizure order in extraordinary circumstances, the DTSA provides that a court may grant an injunction to prevent any actual or threatened misappropriation or award monetary damages or both. Further, the court may grant either:
- ‘damages for actual loss caused by the misappropriation of the trade secret’ and any additional ‘unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual lost’; or
- ‘a reasonable royalty for the misappropriation’s unauthorised disclosure or use of the trade secret’ (18 USC 1836(3)(B)).
The court may also award exemplary damages (up to double damages) and reasonable attorney’s fees.
Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the licence agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?
In the United States, generally, a licensor can restrict disclosure or use of trade secrets and know-how by the licensee or third parties both during and after the term of the licence agreement. Such terms are typical in a licence agreement relating to trade secrets and know-how. With respect to improvements, there is usually a contractual distinction between improvements and the underlying trade secret or know-how. As such, improvements and the underlying trade secret or know-how should be addressed separately in licensing agreements; however, it is not unusual for parties to agree to the same rights or obligations with respect to these items.Copyright
What constitutes copyright in your jurisdiction and how can it be protected?
Copyright protection automatically applies to ‘original works of authorship fixed in any tangible medium of expression’, 17 USC 102. Works of authorship include:
- literary works;
- musical works, including any accompanying words;
- dramatic works, including any accompanying music;
- pantomimes and choreographic works;
- pictorial, graphic, and sculptural works;
- motion pictures and other audiovisual works;
- sound recordings; and
- architectural works.
Copyright protection does not extend to any idea, procedure, process, system, method of operation, concept, principle or discovery, regardless of the form in which it is described, explained, illustrated or embodied in such work. Computer software code is subject to copyright protection as a literary work, whereas manifestations of the software, such as the visual display of the software, may be subject to copyright protection and registration as an audiovisual work.
Copyright protection also applies to compilations and derivative works, and restored works, but does not apply to any work of the US government. The exclusive rights in copyrighted works, and the limitations on the exclusive rights and scope of copyrights, are set forth in 17 USC 106-122.
Under US law, an original work fixed in a tangible medium of expression is automatically protected upon creation. However, registering the work provides several legal benefits. First, registration is a prerequisite to filing an infringement suit in US federal court for works of US origin. Registration also provides the opportunity to recover statutory damages and attorneys’ fees in court. Additionally, a work that is registered within five years of the date of first publication will constitute prima facie evidence in court that the copyright is valid.
On 4 March 2019, the US Supreme Court held that a registration certificate must be issued by the US Copyright Office before a lawsuit for copyright infringement may be filed. See Fourth Estate Public Benefit Corp v Wall-Street.com, 139 S Ct 881, 203 L Ed 2d 147 (2019).