Software Company [Rosetta Stone] Sues Google for Trademark Infringement [United States]

Rosetta Stone, maker of the popular foreign language software, filed a federal trademark suit against Google in Virginia Friday, alleging that one of the Web giant's major advertising programs allows companies to confuse consumers.

The suit, filed by Gibson, Dunn & Crutcher partner Terence Ross at the U.S. District Court for the Eastern District of Virginia, is just the latest to target Google for its AdWords program, which lets companies buy advertisements that run alongside its search engine results. The ads are triggered by certain keywords, and show up as "sponsored links."

According to the complaint, since 2004, Google has let companies attach their ads to trademarked keywords they do not own. So a search for Rosetta Stone might bring up the company's official Web site, as well several paid advertisements for its competitors. Google also allows companies to use those trademarked terms in the headlines of their ads.

Rosetta Stone's suit accuses Google of allowing companies to "free ride" on its brand and of "hijacking" consumers by confusing them into clicking on the wrong sites.
"Google either is misleading or will mislead consumers in innumerable different ways," the complaint states. "Accordingly, it is impossible for Rosetta Stone to cure this problem merely by pursuing remedies against Google's advertisers alone."

Google has been hit with a string of similar lawsuits over its AdWords program. In April, the 2nd U.S. Circuit Court of Appeals ruled that one of those suits could go forward after a lower court had dismissed it. The appeals court found that Google was using the trademarks in an act of commerce, giving the trademark owners the right to file a claim.

With that legal issue resolved, Gibson's Ross said that juries will have to decide whether Google's practice is likely to confuse consumers.
"There's not going to be any quick resolution of any of these" suits, he said. "You could get different outcomes from different juries over time."

Google itself appears to have expected the legal trouble. In its complaint, Rosetta Stone quotes from one the company's Securities and Exchange Commission filings from 2004, shortly after it adopted its current trademark policy.
"As a result of this change in policy, we may be subject to more trademark infringement lawsuits," the company stated. "Adverse results in these lawsuits may result in, or even compel, a change in this practice which could result in a loss of revenue for us, which could harm our business."

According to Ross, however, there seems to be no sign of Google backing down from the practice. He noted that the company started letting trademarked words into headlines, for instance, after the 2nd Circuit's ruling.

This article first appeared on The BLT: The Blog of Legal Times.

U.S. Copyright Office Offers Online Registrations

Beginning July 1, 2008, the Copyright Office is offering online registration of claims to copyright. Online registration through the electronic Copyright Office (eCO) is the preferred way to register basic claims for literary works; visual arts works; performing arts works, including motion pictures; sound recordings; and single serials. Advantages of online filing include a lower filing fee; the fastest processing time; online status tracking of your claim; secure payment by credit or debit card, electronic check, or Copyright Office deposit account; and the ability to upload certain categories of deposits directly into eCO as electronic files. To register your claim electronically, go to the Copyright Office website at http://www.copyright.gov/ and click on the eCO logo.

ITC, Punchgini and Bukhara: ITC prevails as Second Circuit Court applies Unfair Competition [United States]

In ITC Limited and ITC Hotels Limited v. Punchgini Inc. USCOA 2 No. 165 (N.Y. December 13, 2007), the Second Circuit court refused to apply the doctrine of famous marks to stop the infringement of an Indian trademark ‘Bukhara’. Nevertheless, the New York Court of Appeals applied the law of Unfair Competition to protect the trademark not specifically being used in the US at that point of time. The plaintiff was running a five star restaurant in New Delhi by the name ‘Bukhara’. It had acquired “some measure of reknown among those with an avid interest in fine cuisine.” Later, they decided to open nine restaurants in different parts of the world including US. However, the two Bukhara restaurants opened in US were closed down within a short span. Few former employees of Bukhara of New Delhi opened a Bukhara Grill and Bukhara II restaurants in Manhattan. They used the same logos, style, design, recipes and even the dresses of the waiters of the original Bukhara.

The Second Circuit refused to acknowledge trademark infringement because the plaintiff had abandoned the use of the trademark in the US, though they continued to operate in India.
The New York Court of Appeals later concluded that New York law "recognizes common law unfair competition claims, but not the ‘famous’ or ‘well-known’ marks doctrine."

Unfair Competition law prohibits use of another’s trademark or indication which is identical or similar to other persons goods that are widely recognized among users and thereby causing one's goods or business to be confounded with another person's business. Accordingly, “when a business, through reknown in New York, possesses goodwill constituting property or commercial advantage in this state, that goodwill is protected from misappropriation under New York unfair competition law. This is so whether the business is domestic or foreign.” Further, it was stated that the consumers of services provided by the defendants “must primarily associate the mark with the foreign plaintiff.” The court refused to exhaustively state the factors to determine this, stating that they would “vary with the facts of each case”. However, there has to be “evidence that the defendant intentionally associated its goods with those of the foreign plaintiff in the minds of the public, such as public statements or advertising stating or implying a connection with the foreign plaintiff; direct evidence, such as consumer surveys, indicating that consumers of defendant's goods or services believe them to be associated with the plaintiff; and evidence of actual overlap between customers of the New York defendant and the foreign plaintiff.”

The case is foundational in that it represents a paradigm shift in protection of foreign trademarks in the US. They now qualify for protection even though they may not be registered in the US, the underlying principle being that commercial unfairness should be restrained whenever there is misappropriation, for the benefit of the person who holds a legitimate property right.

U.S. Attorney General: Piracy Funds Terror [International]

Piracy funds terrorism, says U.S. Attorney General Michael Mukasey, and the Department of Justice is going to do something about it.

“While we celebrate the positive contributions of technology, we can't forget that there's a dark side to almost every innovation,” said Mukasey at the Tech Museum of Innovation in San Jose, “Every new technology we create can be abused – whether it's a common identity thief looking for a new way to steal your bank account information, or an international terrorist looking to advance a murderous plot.”

The Justice Department is committed to protecting the USA’s valuable intellectual property rights, said Mukasey, who promoted Deputy Attorney General and department official “number two” Mark Filip to the head of its IP Task Force, which is stepping up efforts in worldwide collaboration.

“International borders pose little hindrance to criminals, so we’ve been working to make sure those borders don’t pose an obstacle to effective enforcement,” he said.

Originally the domain of organized crime, terrorists are finding piracy – with its supposedly low level of risk – to be a tempting way to finance other, less aboveboard activities. “A primary goal of our IP enforcement mission is to show these criminals that they’re wrong.”

Those involved in piracy, counterfeiting, and identity theft certainly have something to worry about: 2007 saw a 33 percent increase in IP cases filed over 2005, a product of the Department’s ever-increasing international network, which now includes satellite offices in Bulgaria and Thailand to coordinate and train local enforcement efforts.

“One ongoing case resulted from years of diplomatic work with law enforcement in China, and an extensive investigation involving Chinese authorities and the FBI,” said Mukasey. “Last July, China’s Ministry of Public Security arrested 25 Chinese nationals and seized more than half a billion dollars worth of counterfeit software in the largest joint investigation ever conducted by the FBI and the People’s Republic of China.”

Historically, the Justice Department generally pursues criminal charges for IP theft where money changes hands, leaving file-sharing and the world of P2P to the graces of the content industry and its ongoing campaign of civil litigation. This comes despite frequent political efforts from content industry lobbyists, who have been trying for years to enact legislation that would essentially force the DoJ to pursue all forms of piracy – lumping Russian handbag counterfeiters and 15-year-old top-40 aficionados in the same boat.

Prior to the speech, Mukasey said he met privately with representatives from Hollywood, Adobe and Apple, but declined to say what was discussed.

US patent reform to benefit Indian firms [India]

Indian pharmaceutical firms, which make most of their revenues and profits from the manufacture of off-patent, or generic, drugs, are set to play a larger role in the US, the world’s biggest drug market.

That is, if a US plan to reform patent laws by including provisions for what is called post-grant opposition to patents and limiting avenues for extending patent protection for medicine companies becomes law.

The immediate impact of the law change will be to ease challenges on drug patents and also lower legal costs in such challenges.

The changes anticipated in the Patent Reforms Act, which has already been passed by the US House of Representatives in February, would allow opposing a patent after its grant in the US, as is possible in countries such as the UK, Germany and India, along with a general tightening of patentability rules in the US.

It would also, to a large extent, halt the tactics of research-based drug giants in the US to include all possible claims in the patent application by modifying it several times during the life of a patent through what is known as “ever-greening”.

With the reforms, the US patent office sought to limit the number of times to two that a patent applicant can file “continuations” of patents. Currently, there is no limit on the number of times that a patent holder can keep updating its patent claims through such filings. The draft law is now under consideration of the US Senate.

The patent reforms in the US are aimed at eliminating frivolous patents as also invalidating several existing patents that have received such protection through “continuation” filings based on simple modifications. This would help generic players to enter the market with more products as the legal expenses will go down.

Patent experts said that the reforms that the US has initiated are an attempt to harmonize its patent law with the rest of the world, which follows a comparatively higher threshold for patentability.

The new rules, for instance, will replace the current US system that grants patents to applicant who can prove “first-to-invent” status with a “first-to-file” regime in force in others countries.
With the provision of post-grant opposition, generics companies will get a new opportunity to argue against the unsubstantiated claims made by the patent holder without going to court of law or infringing the patent—both expensive options.

Bush Administration’s Annual IP Report: Intellectual Property Related Prosecutions Up, Focus on Health and Safety Redoubled

U.S. Coordinator for International Intellectual Property Enforcement Chris Israel released the administration’s Annual Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection today. The Annual Report conveys the yearly accomplishments and establishes priorities for the upcoming year for the federal agencies responsible for protecting and enforcing American intellectual property (IP) rights, both domestically and abroad.

“Creativity and innovation are the lifeblood of the American economy, and intellectual property protection is vital to ensure our economic health now and for the future,” said Commerce Secretary Carlos M. Gutierrez. “The Bush Administration recognizes the importance of IP rights and is dealing with counterfeiting and piracy through strong enforcement here at home and increased engagement abroad. We realize there’s more work to be done and will work to meet the goals outlined in the report.”

“The record increases in intellectual property enforcement carried out by U.S. law enforcement and other NIPLECC agencies during the past year prove the importance and effectiveness of our coordinated efforts," said Assistant Attorney General Alice S. Fisher. "The Department of Justice is committed to enhancing our already substantial efforts toaddress this growing problem.”

Highlights cited in the Annual Report include:
* Record increases in IP-related investigations and prosecutions. The Department of Justice reports substantial increases in federal investigations and prosecutions of IP violations. The Department filed 217 IP cases in FY2007, representing a 7% increase over cases reported in FY2006 (204), and a 33% increase over cases reported in FY2005 (169).
Also in FY2007, 287 defendants were sentenced for IP crimes, representing a 35% increase over FY2006 (213) and a 92% increase over FY2005 (149);
* Enhanced border enforcement. The Department of Homeland Security reports the estimated value of the goods seized by border agents continues to rise, this year, by approximately 27%, up to approximately $200 million;* Increased emphasis on the annual Special 301 Review, the USTR-led analysis of intellectual property protection within each country worldwide;
* Expanded engagement within the World Trade Organization (WTO) in an attempt to resolve IP-related trade disputes;
* The launch of a major multilateral anti-counterfeiting initiative, the Anti-Counterfeiting Trade Agreement;
* Deepened bilateral and multilateral relationships, such as the U.S.-EU Summit, G8, and Asia Pacific Economic Cooperation (APEC); and
* Redoubled focus by all agencies on the public health and safety implications of counterfeit goods.

“As this year's report underscores, the administration has a achieved a great deal with respect to protecting U.S. intellectual property--valued at more than $5 trillion," said Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO Margaret J.A. Peterlin. "This year, the USPTO completed our Global Intellectual Property Academy, which allowed us to train more than 700 foreign officials on how to strengthen their IP rights and enforcement, which will benefit American IP rights holders around the world.”

“This year’s report demonstrates the continued commitment of the Administration to protect intellectual property rights with a coordinated, results-driven approach,” said Israel. “The Administration has made IP enforcement a high priority through senior-level leadership and smarter coordination. While widespread counterfeiting and piracy remains a serious problem, we are improving the global marketplace for American rights holders.”

The Annual Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection is published by the Office of the U.S. Coordinator for International Intellectual Property Enforcement, which heads the National Intellectual Property Law Enforcement Coordination Council (NIPLECC). NIPLECC is composed of the five federal agencies involved in intellectual property enforcement, including the Departments of Commerce, Homeland Security, and Justice; the State Department; and the Office of the U.S. Trade Representative. The Annual Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection can be found online at www.stopfakes.gov

Recent patent/copyright infringement cases filed in U.S. District Courts

Beneficial Innovations Inc. vs. AOL LLC et al Beneficial Innovations alleges it owns the inventions claimed in U.S. Patent Nos. 6,712,702 for Method and System for Playing Games on a Network and 6,183,366 for Network Gaming System. The suit names AOL, The Dallas Morning News, Google, IGN Enterprises, Morris Communications, Tribune Interactive, Yahoo! and YouTube as defendants in a patent infringement suit. The original complaint states that defendants have infringed the patents through Web sites including www.aol.com; www.google.com; www.yahoo.com; www.youtube.com and others. "Plaintiff has been damaged by defendants' infringement of the patent and will suffer additional irreparable damage and impairment of the value of its patent rights unless defendants are enjoined from continuing infringement," the complaint states. The plaintiff is seeking compensatory damages, treble damages, fees, costs, interest and other relief as justice requires. Charles Ainsworth of Parker, Bunt & Ainsworth PC in Tyler is representing the plaintiff. The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham. Case No. 2:07-cv-555-TJW-CE Dec. 21 Paul Bennett et al vs. Alcoa Closure Sytems International et al Paul H. Bennett of California and Thom M. Perlmutter of Rhode Island allege they are co-inventors and co-owners of U.S. Patent No. RE39,867 for a Tamper-Evident Container Closure. The plaintiffs allege that Alcoa Closure Systems International, Bericap LLC, Blackhawk Molding Co., CG Roxane, Crystal Geyser Water, Erie County Plastics, International Plastics, Rexam Closure Systems and Seaquist Closures infringe the '867 Patent through manufacture, use and sales of tamper evident closures. Various push/pull, thumb pop and twist types of tamper-evident closures are named in the suit as infringing products. Plaintiffs are asking that defendants "account for and pay … all damages caused by the infringement of the '867 Patent, which by statute can be no less than a reasonable royalty." They are seeking enhanced damages from the defendants as a result of their willful infringement, interest, fees, costs and other just and proper relief. Edward W. Goldstein of Goldstein, Faucett & Prebeg LLP of Houston is representing the plaintiffs. The case has been assigned to U.S. District Judge T. John Ward. Case No. 2:07-cv-558-TJW Dec. 28 Parallel Networks LLC vs. Netflix Inc. et al Plaintiff Parallel Networks is a Texas limited liability company with its principal place of business in Dallas. It claims to have the rights to U.S. Patent Nos. 5,894,554 and 6,415,335 B1, which concern systems and methods for managing dynamic Web page generation requests. Parallel Networks alleges that Netflix, SkyMall, ATA Airlines, John Wiley & Sons, E*Trade Financial Corp. and The Finish Line make and/or use systems within the scope of one or more claims of the patents-in-suit. "Parallel Networks has suffered damage by reason of defendants' infringement and will continue to suffer additional damage until this court enjoins the infringing conduct," the original complaint states. Plaintiff alleges that the defendants' infringement is willful and deliberate, which entitles Parallel Networks to increased damages. The plaintiff also seeks an injunction, fees, costs and other just and proper relief. Larry D. Carlson of Baker Botts LLP in Dallas is lead attorney for the plaintiff. Attorneys from Ireland, Carroll & Kelley in Tyler; Brown McCarroll LLP in Longview; Jones & Jones of Marshall; and Ward & Smith Law Firm of Longview are also of counsel for the plaintiff. The case has been assigned to U.S. District Judge Leonard E. Davis. Case No. 2:07-cv-562-LED PACT XPP vs. Xilinx Inc. and Avnet Inc. PACT is a German corporation and claims it is the owner of eight patents at issue; including U.S. Patent No. 6,088,795 for a Process for Automatic Dynamic Reloading of Data Flow Processors and Units with Two- or Three-Dimensional Programmable Cell Architectures. PACT was assigned the eight patents by co-inventors Martin Vorbach and Robert Munch. "Defendants have infringed and continue to infringe the patents by the Virtex and Spartan lines of FPGAs," the original complaint states. "Defendants' acts of infringement have caused damage to PACT, and PACT is entitled to recover from defendants the damages sustained by PACT as a result of defendants' wrongful acts in an amount subject to proof at trial." The plaintiff alleges that the infringement is willful and deliberate, entitling PACT to increased damages, attorney fees and costs. The plaintiff is also seeking interest and other relief the court may deem just and proper. Robert Christopher Bunt of Parker, Bunt & Ainsworth PC in Tyler is representing the plaintiff. Attorneys from Susman Godfrey LLP and Jones & Jones of Marshall are also representing the plaintiff. The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham. Case No. 2:07-cv-563-TJW-CE Media Technologies Licensing LLC vs. Tristar Productions Inc. et al Plaintiff Media Technologies claims to own the inventions described in U.S. Patent Nos. 5,803,501 and 6,142,532 for a Memorabilia Card. The U.S. Patent and Trademark Office issued Ex Parte Reexamination Certificates for the '501 and '532 Patents in November 2007. Media Technologies alleges that defendants Tristar Production, Press Pass Inc., Ace Authentic, Bench Warmer International, Stellar Collectibles, SA-GE Collectibles and Razor Entertainment Group have infringed on the patents. The plaintiff is seeking a decree permanently enjoining defendants, compensatory damages, enhanced damages, attorney fees, court costs, interest and other relief as justice requires. S. Calvin Capshaw of Brown McCarroll LLP in Longview with attorneys from Parker, Bunt & Ainsworth in Tyler and Dovel & Luner LLP of Santa Monica, Calif., are representing the plaintiff. The case has been assigned to U.S. District Judge T. John Warner. Case No. 2:07-cv-564-TJW Dec. 31 Mondis Technology Ltd. vs. LG Electronics Inc. et al Mondis Technologies is a corporation organized under the laws of England with its principal place of business in London. The original complaint refers to seven patents, including U.S. Patent No. 6,057,812, for computer monitors and image display units. Mondis Technologies names LG Electronics, Hon Hai Precision Industry Co., FoxConn and Innolux Display Corp. as defendants in the patent infringement suit. "Mondis has been damaged by defendants' infringing activities," the complaint states. "Defendants will continue their infringing activities, and continue to damage Mondis, unless enjoined by this court. Mondis has no adequate remedy at law." Mondis is asking that the court enjoin defendants from further infringement of said patents, award damages sufficient to compensate it for the infringement, treble damages, interest, attorney fees, costs, expenses and other relief. Otis W. Carroll of Ireland, Carroll & Kelley PC in Tyler is representing the plaintiff with attorneys from Dechert LLP in Philadelphia, Pa., of counsel. The case has been assigned to U.S. District Judge T. John Ward and referred to Magistrate Charles Everingham. Case No. 2:07-cv-565-TJW-CE

Congress Proposes to Enhance IP Enforcement and Penalties

Just before the holiday recess, the U.S. House of Representatives introduced and held hearings on the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act, H.R. 4279. The proposed legislation would substantially increase criminal and civil penalties for copyright infringement, eliminate the registration requirement to pursue criminal penalties, and create a White House-level executive position to lead the fight to product U.S. intellectual property interests.

The proposal could be viewed either as an IP diamond in one’s holiday stocking or as a lump of coal. The analogy is fitting: Coal and diamonds are made of the same basic carbon material, and this bill offers proposals that could be beneficial or damaging depending on the final version and/or how the proposals are implemented.

The nearly 70-page bill (available at http://thomas.loc.gov/cgi-bin/bdquery/z?d108:H.R.4279:) was introduced with bipartisan support and was sent to the House Judiciary Committee’s Subcommittee on Courts, the Internet, and Intellectual Property, which held hearings on the bill on Dec. 13, 2007. Testifying at the hearings were representatives of the Justice Department, organized labor, the Coalition Against Counterfeiting and Piracy (CACP; www.thecacp.com), and Public Knowledge (www.publicknowledge.org), a digital rights advocacy organization.

The bill proposes a number of steps to strengthen the enforcement of copyright, trademark, and patent laws and to increase criminal and civil penalties for copyright infringement.

On the enforcement side, the bill would establish an "Office of the U.S. Intellectual Property Enforcement Representative" in the White House. This office would coordinate IP enforcement activities through a number of government and international agencies. This office would also be charged with developing a "Joint Strategic Plan" to identify, disrupt, and/or eliminate persons and businesses involved in trafficking of counterfeit and pirated goods and sharing information among relevant agencies. The plan would also work with other countries to strengthen IP enforcement and reduce the number of countries that fail to enforce anti-counterfeit and piracy laws.

The bill would also create an Intellectual Property Enforcement Division within the Justice Department and would appoint IP attachés to work with foreign governments on anti-piracy efforts.

Criminal penalties for copyright infringement would be enhanced through a number of methods. The bill would eliminate the requirement that copyrighted works be registered before they could be the subject of a criminal action against an infringer. It also strengthens the government’s ability to seize property that is "used or intended to be used" for copyright infringement, and it broadens the amount of property that can be seized. Finally, it would be easier for the courts to order seized property to be forfeited to the government and disposed of.

A controversial proposal would change the civil penalties for copyright infringement of compiled works. The current law recognizes a compiled work as a single act of infringement, even though there may be more than one work that was infringed in order to create the compilation. The proposal would penalize each separate act of infringement in a compiled work. For example, a website that infringed on five copyrighted works would be subject to five times the penalty than currently applies. Other proposals would double or treble the damages available in trademark counterfeiting cases.

At the Dec. 13 hearing, all of the committee members and witnesses supported the intention of the act to strengthen anti-copyright and anti-piracy efforts. It was noted that intellectual property infringement costs the U.S. economy as much as $600 billion a year and 750,000 jobs.

Richard Cotton, general counsel for NBC Universal and chairman of CACP, pointed out that counterfeiting and piracy do not just affect the media industries. Counterfeit pharmaceuticals, auto parts, consumer goods, aircraft parts, animal foods, and other products not only create economic damage but, in some cases, result in life-threatening situations. He complained that IP enforcement often "falls off the radar screen" of law enforcement agents who are tasked with many other priorities. He said that the PRO-IP bill represents a "declaration of war" against pirates and counterfeiters.

In its testimony, the Justice Department outlined recent efforts and successes in intellectual property enforcement. The department has created 25 "Computer Hacking and Intellectual Property" units around the country with more than 230 prosecutors. These units also provide assistance to prosecutors, judges, and investigators from 107 foreign countries. While the department supported the increased criminal penalties of the PRO-IP Act, it raised concerns that the creation of the White House IP executive position and the Justice Department IP Office might actually dilute enforcement efforts and unnecessarily increase bureaucratic and administrative costs.

Gigi Sohn, president of Public Knowledge, a public interest organization representing the interests of content users, raised a number of concerns. While affirming the need for the effective enforcement of intellectual property laws, she voiced concerns that the PRO-IP Act would ensnare "ordinary consumers" in overly broad laws.

Sohn raised particular concerns about the proposal to enhance damages for compilations. She pointed out the already high damages for copyright infringement, particularly when contrasted with proposals to reduce excessive damages for patent infringement which have been incorporated into the present patent reform proposals. More to the point, she argues that higher damages will chill legitimate uses of copyrighted materials, while having little deterrent effect.

She also argued that eliminating the copyright registration prior to criminal enforcement would reduce incentives for copyright registration. This in turn could lead to an even larger "orphan works" problem than already exists. (Sohn’s written testimony is available at www.publicknowledge.org/node/1306.)

While at least one commentator suggested that this bill may be more about politics and lobbying by media interests, the bipartisan sponsorship and support of both content and technology providers may indicate otherwise. Further action is not expected until later in spring, when the proposal comes up again for committee action. What will be particularly telling is whether later versions will change to reflect the concerns raised at the December hearings.

New Draft Law to toughen stand on counterfeit goods [United States]

The US Justice Department (DOJ) has sent to Congress the Intellectual Property Protection Act of 2007, the draft of a new law calling for stronger penalties for repeat offenders and would increase the maximum penalty for counterfeiting offenses if the defendant “knowingly and recklessly causes serious bodily injury or death.”

Announcing the move, US Attorney general Alberto Gonzales said, “Violations of intellectual property rights (IPR) not only deprive legitimate businesses of millions of dollars and undercut innovation but often pose serious threat to human safety and health.”To be considered by Congress, a draft bill sent by the Administration must be sponsored by one or more members of Congress. To become a law, identical versions of a bill must be passed by both chambers of Congress and signed by the president.At the same time, the Bush Administration also announced plans to expand its efforts to improve intellectual property enforcement in key countries. Many counterfeit goods, particularly pharmaceuticals, are imported from overseas markets.According to the draft bill, serious body injury could carry a penalty of 10 years to 20 years in prison, and up to life imprisonment if counterfeiting results in death, according to a senior US Justice Department official.

Although some may think violations of intellectual property rights have purely economic effects on so-called “faceless corporations,” the reality is much different, especially when medical and pharmaceutical products are concerned, the Attorney General said in comments made at the US Chamber of Commerce.

Replacement of Parts that Must Be Broken Not Impermissible Reconstruction [US]

In Fuji Photo Film Co., LTD. v. International Trade Commission (January 11, 2007) the Federal Circuit provided further guidance on the repair/reconstruction Doctine. On appeal in this case, the parties agreed that the eight step refurbishment discussed in an earlier decision involving the same facts, and a nineteen step refurbishment described in the Commission's exclusion order involved permissible repair. The narrow question on appeal was whether one additional action by Jazz, the addition of a new plastic back cover (to replace the existing covered that had to be broken in order to access the film), converted its activities from permissible repair into impermissible reconstruction.

The latest in this serires of opinions arose out of an enforcement proceeding instituted by the Commission to investigate Fuji’s allegation that Jazz, Benun, and Jazz’s then-president and Chief Executive Officer Anthony Cossentino violated the cease and desist order by importing and selling infringing LFFPs during the period after the Jazz I decision. The Commission had imposed a civil penalty of $13,675,000 on Jazz. It also imposed a $154,000 penalty on Cossentino and held Benun, as the more culpable of the two, jointly and severally liable for the entire $13 million penalty imposed on Jazz. Needless to say, the penalized parties were anxious to reduce their fines.

According to the opinion by Circuit Judge Dyk:

In Husky Injection Molding Systems Ltd. v. R & D Tool & Engineering Co., 291 F.3d 780 (Fed. Cir. 2002), we concluded that the replacement of a spent part was a fundamental example of a permissible repair. Id. at 785-86. Benun
contends that the back covers were spent parts and their replacement was permissible repair. This is so, he argues, because as a practical matter the backs had to be broken to remove the film, and once new film was inserted the
back covers could no longer serve their function of enclosing the camera and keeping light out. The backs therefore were spent and could properly be replaced. Although Fuji did not intend the LFFP to be refurbished, "the patentee’s unilateral intent, without more, does not bar reuse of the patented
article, or convert repair into reconstruction." Jazz I, 264 F.3d at 1106; Hewlett-Packard Co. v. Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445, 1453 (Fed. Cir. 1997).

Benun’s factual premise that the backs had to be broken to repair the film is not contested by the Commission on appeal. This court and other tribunals have repeatedly concluded that, in view of the continued utility of the shutter mechanism, lens, viewfinder, film advance mechanism, and other significant parts in the original camera, replacing the film is a permissible
repair and reattaching or replacing a part that must be removed or broken to replace the film also constitutes permissible repair. See Jazz I, 264 F.3d at 1106 (reattachment of the back cover); Fuji II, 249 F. Supp. 2d. 434, 446 (D. N.J. 2003), aff’d 394 F.3d 1368 (Fed. Cir. 2005) (removal of the film door that
was broken in removing the film); J.A. at 95 (refurbishment of the half backs). Significantly, there is no contention here that the extent of the refurbishment is disproportionate to the overall value of the parts that were not replaced. See Husky, 291 F.3d at 786-87; Jazz I, 264 F.3d at 1106.

In a variety of other contexts we have also held that replacement of a part that must be broken or removed to repair the device does not convert permissible repair into impermissible reconstruction. For example, in Bottom
Line Management, Inc. v. Pan Man, Inc., 228 F.3d 1352 (Fed. Cir. 2000), we found that "incidental repairs to minor damages" necessary to replace a spent part did not justify a finding of reconstruction. Id. at 1356 (internal quotation marks
omitted). In that case studs that held a spent part in place had to be broken in order to remove that part for replacement, and we concluded that replacement of these studs did not justify a finding of reconstruction. Id. at 1355. Similarly, in Everpure, Inc. v. Cuno, Inc., 875 F.2d 300, 303 (Fed. Cir. 1989), we held
that a patentee who designed a product so that the neck which connects a filtering cartridge to the base of the device had to be replaced in order to replace the worn-out cartridge itself could not claim impermissible reconstruction from the replacement of the neck. We concluded that "Everpure and Everpure alone made the business decision to sell disposable cartridges and to
render its filter irreplaceable without replacement of the entire cartridge." Id. Likewise, in this case, it would appear that Jazz’s actions in replacing the back covers, which must be broken in order to replace the spent film and film cartridge, does not justify a finding of impermissible reconstruction.

The Commission’s sole basis for reaching a contrary conclusion was its reliance on an erroneous repair-reconstruction test. The Commission found that by replacing the back cover, Jazz was completely replacing two horizontal ribs that satisfied the "means for exerting force" element of claim 5 of the ‘495
patent,16 as well as completely replacing two other elements of claim 5 (the film and the film cartridge) and partially replacing the fourth element (the light-tight film case). The Commission said, "if a component is integral to a specific patent claim, and it is replaced with a new part, such replacement could weigh heavily towards a finding of reconstruction."

The Supreme Court in Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961) rejected a test for repair/reconstruction that would look to whether an "essential" or "distinguishing" part of the patented combination had been replaced. Id. at 345. In doing so, the Court concluded "that the combination patent covers only the totality of the elements
in the claim and that no element, separately viewed, is within the grant" and "that there is no legally recognizable or protected ‘essential’ element, ‘gist’ or ‘heart’ of the invention in a combination patent." Id. at 344-45. We see no material difference between the Commission’s test that focused on whether an "integral" component has been replaced, and the tests previously rejected by the Supreme Court that focus on whether an "essential" or "distinguishing" part, or part that is at the "gist" or "heart" of the invention, has been replaced. , 448Publish
U.S. 176, 217 (1980))).

. . . Thus, we conclude that the Commission erred in holding that the cameras in which full backs were replaced were impermissibly reconstructed; we hold that the replacement of the full backs was part of a permissible repair. We accordingly remand to the Commission for the limited purpose of considering an appropriate adjustment in the amount of civil penalties in light of our holding that the 998,250 [of the 27 million] LFFPs refurbished by replacing the full backs were permissibly repaired.