Law & Entrepreneurship News

Archives: Patents & Technology

Court of Appeals Strikes Down the Broadcast Flag

In American Library Association v. Federal Communications Commission, the Court of Appeals for the District of Columbia ruled today that the FCC lacked authority to mandate the Broadcast Flag.   The Broadcast Flag provision of the FCC rules adopted in November of 2003 would have required that every device capable of receiving a digital video transmission also recognize an encoding within the transmission that would control the manner in which the content could be used.   The American Library Association and several individual consumers challenged the provision alleging that 1. The FCC lacked authority to enact the provision. 2. The provision directly conflicted with existing copyright laws.

Without reaching the question of how the Broadcast Flag rule conflicts with existing copyright laws, the court of appeals held that the FCC exceeded it's Congressionally delegated authority under the Communications Act of 1934. Because the Flag Rule did not directly regulate communication via video or wire, but rather attempted to control consumer electronics and the use of content after transmission the court concluded that the rule was not within the FCC's specific grant of statutory authority. 

Neither did the FCC have valid ancillary jurisdiction.  Ancillary jurisdiction is limited to circumstances where congress has delegated authority to regulate in a certain area, and the regulation proposed is reasonably related to the commissions statutory responsibilities.  Although the FCC has authority to regulate wire or radio communications, it has no delegated authority to regulate consumer electronics when they are not engaged in the receipt of a broadcast.

The Broadcast Flag Provision of the FCC rules was adopted in 2003 in response to concerns  of copyright owners that the nation's pending shift from analogue to digital television reception by December 31, 2005 created a "threat of mass indiscriminate distribution."    In adopting the provision, the FCC claimed that the threat was not imminent, but forthcoming and that a preemptive measure was needed to ensure the continued availability of high-value video content.

Opponents of the Flag Rule appear joyous and perhaps shocked by this victory.  However, everyone expects that this issue will be revisited in Congress before it is revisited in the courts. 

Hatch to Head IP Subcommittee

A new Senate subcommittee on intellectual property was created last week, with Senator Orrin G. Hatch (R-Utah) named as its head.  Hatch has been a vocal proponent of expanding copyright protections; some readers may recall that Hatch once suggested that those who download copyrighted materials from the Internet should have their computers automatically destroyed.  Although Hatch has not mentioned plans to pursue this response, he has said that the subcommittee will have an an "aggressive agenda."

USPTO Goes on Hiring Spree

The USPTO announces plans to hire close to 1,800 patent examiners over the next two years, a staff increase of nearly 50 percent. The hiring spree is in response to an expected year-end backlog of 580,000 applications.

EU Parliament Throws Out Software Patent Proposal

Faced with the onerous task of approving or rejecting the European Council proposed Patent Directive, protests, and several states that had already vowed to oppose the law, the European Parliament opted to send the Council back to the drawing board.  The directive, based on an agreement reached in May 2004 by the European Commission was designed to align the patent laws of the 25 member states and afford union-wide patent protection to computer implemented inventions.  Proponents of the law claimed uniform protection is essential to encouraging technological innovation. Opponents claimed that the bill would over-Americanize European Patent law by allowing patents not only on software inventions but also on computer implemented business methods such as the Amazon.com one-click shopping system.

PTO Declares Chimera Unpatentably Human

In Greek mythology, the Chimera was a beast with the head of a lion, the body of a goat, and the tail of a serpent.  Today, these anthropomorphic fantasies appear to be entering the laboratories at New York Medical College and with them comes a revival of the biological patents debate.  Although the USPTO finally denied Stuart Newman's patent application for the alleged invention of a part human-part animal creature, the decision draws few lines between patentable and unpatentable biological inventions. 

The decision states only that the proposed creature was "too human" to be patentable.  But, Deputy Patent Commissioner, John Doll says, "I don't think anyone knows in terms of crude percentages how to differentiate between humans and non-humans...It would be very helpful to have some guidance from congress and the courts."

In Diamond v. Chakrabarty, the Supreme Court declared that a patent may issue on "anything under the sun made by man," and overturned the patent office's rejection of a patent on a man-made bacteria capable of digesting oil spills.  Since then, patents have issued on several man-made life forms including a mouse with a human immune system.
Newman's proposed invention would, apparently, have resulted in a creature much more human than not.  And, Newman himself appears to consider the rejection a victory against "the privatization of the biological world."

UK Pushes Ahead While States Battle Over Stem Cell Funding

Today, as Massachusetts Senate Robert Travaglini was proposing yet another Stem Cell Research Bill, Scottish Scientist Ian Wilmut was granted the second UK license to conduct stem cell research.  Following the landslide passage of California's proposition 71 which promises three billion in funding for stem cell research over the next decade, many states are attempting to jump on the bandwagon before losing scientists to California.  Recently, New York announced legislation to commit 1 billion to stem cell research, while New Jersey Governor Richard J. Cody called for  380 million for stem cells.  Washington State is also considering legislation that would commit 1 billion to stem cell research.  These states are moving aggressively at a time when stem cell research is highly controversial and not funded by the federal government.

Embryonic stem cells are believed to be pluripotent,  having the potential to develop into any kind of cell in the human body.  In the context of the stem cell debate, cloning refers to somatic cell nuclear transfer during which the nucleus of an unfertilized embryo is replaced with the nucleus of an adult cell. Dolly the sheep, created by Dr. Ian Wilmut in 1998  was the first cloned mammal to survive to maturity.  Today, the UK government, the first to legalize embryonic stem cell research, awarded Dr. Wilmut it's second research license for embryonic stem cell research.  Dr. Wilmut plans to clone cells from patients suffering motor neuron disease and compare the evolution of cells in affected embryos against those in healthy embryos.  There is no intention of developing an embryo to maturity.

For more on stem cell research visit the National Institute of Health.

Read the text of the Presidents remarks on stem cell research, August, 9, 2001.

The United Nations will  take Up the proposition of a global stem cell treaty again in March.

The Failure of CAN-SPAM

The "Controlling the Assault of Non-Solicited Pornography and Marketing" Act of 2003 (CAN-SPAM) was widely publicized and highly approved when it became affective on January 1, 2004.  Yet, today SPAM makes up 88% of all incoming email and it is estimated that American workers spend a total of ten working days per year dealing with unwanted emails.  The cost of SPAM, in terms of lost productivity and network maintenance is estimated to be 50 billion dollars a year,17 billion in the United States.  SPAM has increased more than 20% since the passage of CAN-SPAM. 

CAN-SPAM empowers the Federal Trade Commission to enforce it's provisions, and creates a cause of action for Internet Service Providers (ISPs), but not individual SPAM receivers.  Microsoft  has filed suit gainst seven spammers alleging failure to label sexually explicit content in violation of the act's "brown paper bag provision."  AOL, YAHOO!, and Earthlink have tried similar approaches in addition to bringing claims under state law.  Verdicts against prolific spammers have reached as high as 1 billion dollars.  Yet spammers, who work in an industry where the cost of production is virtually zero and receive 25-50% commissions on any sales of products marketed through SPAM may be taking a "law and economics" approach to CAN-SPAM.  Is it a situation where as long as the profits significantly outweigh the costs the risk remains worth taking?

Other possible explanations for the continuing proliferation of SPAM are that CAN-SPAM is essentially  toothless.  SPAM remains legal under the act, and rather than enact an "opt-in" requirement similar to the European and Australian Anti-Spam Laws, Congress chose the "opt-out" approach placing the burden on the individual to let each spammer know that future messages are unwelcome.  Meanwhile, the FTC has filed only two CAN-SPAM claims against alleged spammers, claiming they are next to impossible to identify.  Thus far, the FTC is not using the provisions of the act which empower it to bring claims against companies employing Spammers.  While pithy commentators are calling CAN-SPAM the "Permission-to-Spam" Act,  Senators are divided on the potential efficacy of the act.

Trademark Application Files Available Online

The U.S. Patent and Trademark Office is making full files for trademark applications— including decisions made by examining attorneys— available online.

The Trademark Document Retrieval (TDR) system makes available, as downloadable and printable PDF files, over eight million document pages.  This represents the approximately 400,000 trademark files created since USPTO moved to the paper-free First Action System for Trademarks (FAST).  The remaining 1.2 million  pre-FAST trademark registrations will be converted and moved to TDR over the next five years.

USPTO's Jon Dudas explains, "The TDR system improves our ability to provide timely and useful information to business owners as they develop their marks and prepare to file trademark applications.”

Marlin and Digital Rights Management Dillemma

Attorneys reading today's news may hearken back to Universal City Studios Inc. v. Corely, and recall that this Digital Millennium Copyright Act case started when Norwegian Teenager, Jon Johanson, found himself unable to view a recently purchased DVD on his Linux platform computer.  Johanson diligently set about circumventing the DVDs content scramble system (CSS) to achieve compatibility.   Today, Sony, Phillips, Matsushita, and Samsung, among other hardware producers, have joined forces to create a "standard" Digital Rights Management (DRM) system that will enable consumers to play copyrighted digital products on the device of their choice.  The stated goal of Marlin Joint Development Association (MJDA) is to consolidate existing DRM systems and let consumers enjoy appropriately licensed products on the device of their choice.

DRM has been developed to counter advances in the copying art that enable consumers to make near perfect copies of digital works.  The rash of lawsuits between the RIAA and online music providers and individuals provides an example of how prolific this copying can be.  Two familiar DRM devices are Adobe, which enables the author or online publisher to determine whether or not to allow copying and how much copying to allow, and CSS, which scrambles the content of a DVD to prevent copying or playing in an incompatible player. 

Without a common standard, manufacturers of digital works under copyright can ensure that the goods play only on a device manufactured by a licensee of the DRM technology encoded in the work.  Music downloaded through a Microsoft System will not play on an IPod.  A DVD purchased in the U.S. will not play on a DVD player purchased abroad.  MJDA proposes to solve these interoperability problems, and promises a RAND license to interested manufacturers.  However, critics point to Microsoft's developing Coral platform and suggest that achieving total interoperability is unlikely and suggest that a device that will allow unlimited downloading and "enjoyment" of digital works may not offer the kind of copyright protection that DRM users are seeking.

The Standard Dilemma

A. Jose Cortina, of Daniels, Daniels & Verdonik, P.A., points out a dilemma facing technology companies when it comes to participating in standard-setting.  One the one hand, it is beneficial to any company to have it's patented technologies become part of a standard.  This ensures compatibility and requires consumers to purchase other proprietary components from the source company.  Cortina suggests that Microsoft has taken this approach. 

On the other hand, most standard setting organizations require disclosure of all patents existing or pending on technologies submitted for consideration.  Standard-setting organizations (SSO) also require a company whose technology becomes part of a standard to license that technology for a reasonable and non-discriminatory royalty (RAND License). The existence of a RAND license could trigger "most favored nations" clauses in private license agreements.  "Most favored nations" clauses require that the patentee provide the technology to the licensee on terms at least as favorable as the most favorable terms licensed to anyone else.  Meanwhile, Cortina suggests, even without a "most favored nations" clause, a court in an infringement suit may see the terms of a RAND license as a benchmark for damages in a non-standards suit.