Intellectual Property Law Roundtable - What Businesses Need to Know | Los Angeles Business Journal

October 13, 2014 • An Advertising Supplement to the Los Angeles Business Journal

This special advertising supplement did not involve the reporting or editing staff of the Los Angeles Business Journal.

PATRICK A. FRAIOLI, JR.

Partner,

Ervin Cohen & Jessup LLP

AARON MOSS

Partner and Chair of the

Litigation Department,

Greenberg Glusker Fields

Claman & Machtinger LLP

ROLLIN RANSOM

Partner & Co-Chair of

Litigation Group,

Sidley Austin LLP

DAVID WEISS

Partner,

Knobbe Martens

INTELLECTUAL PROPERTY LAWROUNDTABLEWhat Businesses Need to Know

As the legal landscape continues to evolve in terms of intellectual prop-

erty law, the Los Angeles Business Journal once again turned to some

of the leading IP attorneys and experts in the region to get their assess-

ments regarding the current state of IP legislation, the new rules of

copyright protection, licensing and technology, and the various trends that they

have been observing, and in some cases, driving. Below is a series of questions the

Business Journal posed to these experts and the unique responses they provided –

offering a glimpse into the state of intellectual property law in 2014 – from the per-

spectives of those in the trenches of our region today.

➼

19 29_ip_law_roundtable.qxp 10/9/2014 3:58 PM Page 19

20 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL OCTOBER 13, 2014

◆ How has the intellectual property law land-scape changed over the last five years?

Weiss: As intellectual property, and patents in partic-ular, has become more critical to the economy, theSupreme Court has sought to limit the breadth ofpatent protection and Congress has made it easier tochallenge patents within the U.S. Patent Office. Inthe past term, the Court limited the eligibility forpatent protection of certain software inventions,which has made it more difficult to find a party libelfor indirect infringement, has made it easier to inval-idate patents for indefiniteness, and has made it easi-er for prevailing parties in patent litigation to beawarded attorney fees. The Federal Circuit has madeit more difficult for patent plaintiffs to collect hugeawards. Under the new procedures for challengingpatents in the U.S. Patent Office, a high percentageof patents that have undergone such procedureshave been invalidated.

Ransom: The digital revolution has led to great tech-nological and economic advances; at times, however,intellectual property law has struggled to keep up.Each new advance in how information is stored,communicated, or made available brings with it newopportunities for infringement or other rights viola-tions. Laws that were passed decades ago are notalways well suited to address these issues, andCongress has had difficulty reaching agreement onrevisions that balance the need to protect innovationwith the need to facilitate advances in the arts andsciences. The “solutions” often generate more dis-putes. Perhaps as a result, the Supreme Court hasrecently been more active in intellectual propertycases, a trend that is likely to continue. In areas notexclusively governed by federal law (for example,data breaches), state legislatures have been extremelyactive (or more accurately, reactive) in passing newlegislation; that trend is also likely to continue.

◆ Why has the Supreme Court been so activein IP cases in the past few terms, and whatdoes it portend for the future?

Ransom: There are a few things at work here. First,with respect to patent law, it seems clear that theSupreme Court has no confidence in the FederalCircuit Court of Appeals. Of the six patent casesheard in the most recent term, the Court unani-mously reversed the Federal Circuit in five of them,continuing a trend seen in recent years. Second, theCourt also seems intent on narrowing the scope ofpatent protection – among other things, its decisionstightened the requirements for patenting computersoftware (Alice Corp.) and proving induced infringe-ment (Limelight Networks) and relaxed the standardfor invalidating a patent based on indefiniteness(Nautilus). And finally, the number of IP cases of allvarieties that have been taken in recent years sug-

gests that the Court recognizes the fundamentalimportance of intellectual property issues to theAmerican economy, making it likely that theSupreme Court’s interest in these matters will contin-ue in coming years.

Weiss: Ten out of the 67 cases heard by the SupremeCourt in its last term were intellectual propertycases, including six patent cases. This reflects theSupreme Courts understanding of the increasingimportance that intellectual property plays intoday’s economy. The Court appears to be sensitiveto complaints that rather than encouraging innova-tion, patents, especially when asserted by non-prac-ticing entities, often hinder innovation. In response,the Court has sought to limit the breadth of patentprotection. The Court limited the eligibility forpatent protection of certain software inventions,which has made it more difficult to find a party libelfor indirect infringement, has made it easier toinvalidate patents for indefiniteness, and has madeit easier for prevailing parties in patent litigation tobe awarded attorney fees. We can expect to see theSupreme Court continue to weigh-in on intellectualproperty matters for the foreseeable future.

◆ What was the most surprising IP decisionthe Supreme Court issued last term?

Moss: Petrella v. MGM surprised me the most.Essentially, the Court ruled that the equitable doc-trine of laches could not be used to prevent a plain-tiff from suing for monetary damages in a copyrightinfringement suit – even if the defendant’s infringingconduct first began decades earlier and the plaintiffdelayed filing a lawsuit during that time. Even moresurprising, the Court explicitly endorsed the practiceof plaintiffs watching and waiting to see whether thealleged infringing motion picture or other product isgoing to make money before filing a complaint. Thisis going to make it more difficult for studios andother content creators to get long-delayed claims dis-missed early in litigation.

Ransom: I was surprised by the Court’s decision inPetrella v. MGM, in which the Court held that thedefense of laches (a plaintiff’s unreasonable delay inbringing suit, coupled with resulting prejudice to thedefendant) does not bar a claim for damages underthe Copyright Act, so long as the claim is broughtwithin the Copyright Act’s statute of limitations.Because of the way the copyright statute of limita-tions works, a claim is timely as long as any act ofinfringement has occurred within the three yearspreceding suit. The consequence of the Court’s rulingis that copyright infringement that commenceddecades ago is still actionable today, so long as therehas also been some recent act of infringement, even ifthe plaintiff has long known about the claim, unrea-sonably waited decades to assert it, and the defen-

dant was prejudiced by the delay (e.g., by the inter-vening death of a key witness). This raises theprospect of a new wave of “old” infringement claims,and reduces the ability of defendants to fight them.

◆ In light of recent Supreme Court decisionsin false advertising cases, do you see anylikely trends in false advertising litigation?

Ransom: Perhaps the most significant developmentin this space was in POM Wonderful LLC v. The Coca-Cola Company. The Supreme Court held that com-petitors can challenge food and beverage labelingclaims as false or misleading, even where the labelmeets the requirements of the federal Food, Drug,and Cosmetic Act. This ruling has the potential toexpand false advertising litigation in this industry. Ata minimum, it should prompt food and beveragecompanies to scrutinize their own product labeling,as well as that of their competitors, even more close-ly than they might have in the past. In certainrespects, the Court’s opinion appears to be limited inscope – language in the opinion suggests that itsrationale would not apply to state-law based con-sumer class actions, or to drug (rather than food andbeverage) labeling – but only time will tell.

◆ Is there pending new IP legislation comingsoon? If so, does this stand to help or hinderexisting businesses?

Moss: Among other things, there have been somevery preliminary discussions about amending theCopyright Act to address the Supreme Court’s rulinglast year in Kirtsaeng v. John Wiley & Sons, Inc., whichheld that the first sale doctrine applies to copyright-ed goods manufactured abroad and imported intothe United States. The first sale doctrine is whatallows people to sell DVDs on eBay and for librariesto lend books without needing permission from thecopyright owner. I litigated the foreign manufactureissue in the landmark Costco v. Omega case. A changein the law would allow manufacturers more controlover the distribution of their goods, but would giveretailers less control over the resale of those goods.

◆ What are some common copyright issuesthat small businesses face? How can theybest be addressed?

Ransom: The biggest issue is a lack of understandingof the fundamentals of copyright law. A commonmisconception is that if a photograph is availableonline, then it is free for the business to use. Orthat music or video may be used in a website with-out permission if credit is given to the copyrightowner. Or that third party works can be used andcopied so long as they are not sold or profit gener-ating. A related problem is a relative lack of internalcontrols over the conduct of employees (who may

INTELLECTUAL PROPERTY LAW ROUNDTABLE

‘The failure to encryptcovered data onmobile devices, andthe widespread, careless use of onepassword across all of a user’s devices, are common, tickingtime bombs.’


‘The digital revolution has led togreat technological and economicadvances; at times, however, intellec-tual property law has struggled tokeep up. Each new advance in howinformation is stored, communicat-ed, or made available brings with itnew opportunities for infringementor other rights violations.’

ROLLIN RANSOM

➼22


OCTOBER 13, 2014 AN ADVERTISING SUPPLEMENT TO THE LOS ANGELES BUSINESS JOURNAL 21

GreenbergGlusker.com

The Nexus ofEntertainmentand TechWe counsel emerging

companies and industry

leaders in intellectual

property-driven industries

on strategies to protect,

defend and exploit their

intellectual property.

Charles Shephard310.201.7494

[email protected]

Aaron Moss310.785.6814

[email protected]

Jesse Saivar310.201.7549

[email protected]


‘One common issue isthat businesses will oftenhire photographers ormarketing agencieswithout negotiating orfully understanding thecopyright ownership ofthe resulting photos and materials.’

AARON MOSS

‘A startup’s most important intellectu-al property is often created at the out-set. Indeed, startups are often foundedto commercialize an innovative idea.Therefore it is critical that a startupallocate a portion of its limitedresources to protect its most importantinventions via the patent process.’

DAVID WEISS


labor under some or all of these misconceptions) –no in-house lawyer, risk manager, or other mecha-nism in place to ensure compliance with copyrightlaw. Education is key – for example, a “copyrightbasics” presentation by an experienced attorney –coupled with regular review of business-generatedmaterials to ensure compliance.

Moss: One common issue is that businesses will oftenhire photographers or marketing agencies withoutnegotiating or fully understanding the copyrightownership of the resulting photos and materials.Without a written agreement, the photographer orother commissioned party will usually own the copy-right, so it’s important to spell out in advance theprecise scope of the hiring company’s license to usethe materials. The commissioning business will bebetter off obtaining full rights if this can be negotiat-ed, but the parties should at the very least come toan agreement in advance on the type, extent andduration of the company’s use – before disputes ariselater on.

◆ How real is the threat of injunctive relief incopyright and trademark actions? Is aninjunction likely to follow if there is a find-ing of liability?

Ransom: It used to be that injunctive relief was fairlyautomatic (or at least easier to obtain), because afinding of liability typically carried with it a pre-sumption of irreparable harm. However, in eBay v.MercExchange, the Supreme Court rejected a similarpresumption in the patent context, requiring a show-ing of irreparable harm to obtain an injunction.Since the eBay decision in 2006, several courts,including the Ninth Circuit, have extended its hold-ing to copyright and trademark infringement claimsas well. The impact of these rulings is that it will beharder for plaintiffs to obtain injunctions, evenwhere they have prevailed on the merits of theirclaims, as they will need to demonstrate that theywill suffer irreparable harm from the violation, ratherthan relying on a presumption of such harm.

◆ How “safe” is the safe harbor under theDigital Millennium Copyright Act?

Moss: The DMCA safe harbor completely immunizesa service provider from liability for copyrightinfringement claims if it implements particularnotice and takedown procedures. But uncertaintyarises from the requirement that the service providermust not have actual knowledge that the material inquestion is infringing or be aware of facts or circum-stances that make it apparent that there is infringingactivity. The question is how to define “knowledge.”There have been a number of circuit-level cases dis-cussing the issue, but no guidance from the SupremeCourt. In the Ninth Circuit, there is no safe harbor

when the provider is subjectively aware of facts thatwould have made the specific infringement “objec-tively” obvious to a reasonable person. I supposethat’s pretty safe, if you can figure out what it means.

Ransom: This is an ongoing battle between contentowners and online service providers. In the absenceof either actual or so-called “red flag” knowledge ofspecific acts infringement, and assuming compliancewith the other requirements of the statute, courtshave generally concluded that online serviceproviders are insulated from claims of copyrightinfringement occurring on their sites. However, thelevel of awareness necessary to satisfy actual or “redflag” knowledge – among other things – remainsactively in dispute. In the future, courts will be look-ing at that question from various angles, includingwhether viewing material online that contains all orvirtually all of another’s well-known copyrightedwork constitutes actual or “red flag” knowledge ofinfringement of that work, and whether an onlineservice provider’s “willful blindness” to infringementprevents it from taking advantage of the safe harbor.

◆ The Trademark Trial and Appeal Boardrecently cancelled several WashingtonRedskins trademark registrations, conclud-ing they were disparaging of NativeAmericans. How significant is the threat of a“disparaging mark” challenge to trademarkowners?

Moss: There’s a misconception that if a trademark iscancelled (or refused for registration) because it con-sists of “immoral, deceptive, or scandalous matter,”this means that the owner does not have the right touse or enforce the mark. The owner may still havecommon law rights that would prevent third partiesfrom infringing the mark. This being said, there are anumber of benefits offered by federal registration,including presumptions of ownership and nation-wide rights. Until the Redskins’ case is resolved onappeal, the mark continues to be registered and theowner retains the benefits of the federal registration.

Ransom: Although the TTAB decision received a greatdeal of news coverage, the practical impact for trade-mark owners is fairly modest. The standard for find-ing a registered mark disparaging was, and remains,whether the mark was disparaging when registered. Soeven if the meaning of mark changes over time, atrademark registration is not in jeopardy unless themark was disparaging at the time of the original reg-istration. Moreover, cancellation of a registration of adisparaging mark does not prevent enforcement ofcommon law rights in the mark, though there may,of course, be public relations consequences associat-ed with using and enforcing a disparaging mark.

◆ The news is full of stories about massive cor-

porate data breaches; what exposure do busi-nesses in California face from data breaches?

Fraioli: Well, there is a large company like Target,with approximately $150 million specifically result-ing from this breach, to date. Some analysts esti-mate that the total, future loss may reach $1 bil-lion. On the other hand, as Stan Stahl, President ofISSA-LA always reminds audiences, every yearapproximately 30% of all small to medium sizedbusinesses (250 employees are less) get hit with acyberattack; of that group, 60% are out of businessin less than 6 months. In IP litigation, we oftenspeak of “Bet the Company Lawsuits.” If you are aSmall to Medium Sized Business in California, thereis a good chance that a data breach will be a BetYour Company event.

Ransom: It is often said that it’s not whether yourbusiness will suffer a data breach, but when. Everybusiness in California faces potential harm from databreaches and should take measures to minimize boththe risks of a breach and the level of harm. Databreaches have both direct and indirect effects onbusiness. Not only does the business have to spendmoney –the reported average is over $5 million – toresolve a data breach and address the underlyingcause, but it must also deal with reputational harm,loss of customer loyalty, negative press, and, increas-ingly, litigation. The California legislature has alsobeen active in this area. Most recently, the legislatureamended the state’s data breach notification law toexpand the scope of businesses covered by data secu-rity requirements, among other measures.

◆ What advice would you give to an earlystage technology company with respect toprotecting its intellectual property assets?

Weiss: A startup’s most important intellectual proper-ty is often created at the outset. Indeed, startups areoften founded to commercialize an innovative idea.Therefore it is critical that a startup allocate a portionof its limited resources to protect its most importantinventions via the patent process. If a patent applica-tion is not timely filed, a startup may lose its abilityto later seek patent protection for its key inventions.Additionally, such key inventive ideas may havebeen created by a founder prior to the formation ofthe startup, and it is vital that such inventive ideasand other intellectual property are assigned to thestartup. If a startup is outsourcing work to contrac-tors, it is essential that appropriate assignments areexecuted to ensure that the startup has ownership ofthe work.

Fraioli: Protect the IP like it is the Crown Jewels.Identify the likely threats, make available signifi-cant corporate resources for IP protection; activelymanage a comprehensive IP Protection Program —

➼24

Continued from page 20




The ECJ IP Workgroup provides counsel and guidance so your IP brings home a

growing paycheck without worrying about bullies, patent trolls, or other

threats. We’re part tutor, part bodyguard,part business manager. When it comes to your pride and joy, depend on the IP

Workgroup at ECJ. We take your business as personally as you do.

9401 Wilshire Blvd., 9th Floor, Beverly Hills, CA 90212310.273.6333 www.ecjlaw.com

Your IP is like your child:It needs care and protection.And it needs to get a job.



put a C-Suite Executive in charge; constantly mon-itor for threats and take active steps to thwartthem, including cease-and-desist letters andactions for Declaratory Relief where warranted;regularly re-assess your strategy and tactics. At thesame time, you must monetize your IP. Be equallyaggressive in seeking licenses and other monetiza-tion opportunities. Focus; Execute; Re-assess; Re-focus. Rinse; Repeat.

◆ With all of the data breach incidents beingreported, do businesses need Cyber-insur-ance? What does it cover a business for, inthe event of a data breach? What if the busi-ness in question is a professional firm, andhas client information? Does that make a dif-ference?

Fraioli: According to the Ponemon Institute, theaverage cost of a data breach was approximately$3.5 million in 2013. Stuart Pardau, noted privacyexpert and Ponemon Institute Fellow, believes thecost is likely to continue to rise, especially if moreclass action attorneys are successful in having class-es certified, as in last year’s ComScore case, whichsettled for $14 million. Attorneys continue to investin these cases, and Pardau believes these trends willonly accelerate. Increasingly, professional firms arebeing targeted. They often hold essential subsets ofclient information (the wheat without all the chaff)and their security profile can be more lax. An issueto review before a breach is that a firm’s professionalliability policy may cover its client’s informationbut not the firm’s, and another policy may cover itsown information.

◆ What are the most important steps busi-nesses in Los Angeles can/should take before,during and after a data breach incident?

Ransom: The most important steps a business cantake are preventative. Good internal proceduresregarding safeguarding information – at time of col-lection, use and disposal – are crucial. Just as impor-tant is the establishment of data breach responseprotocols and a trained team. Businesses may alsoconsider purchasing cyber insurance to offset costsin the event of a data breach. Once a breach occurs,a business must immediately implement itsresponse protocols, including stopping further dataloss, hiring a forensics team, and beginning anyrequired notification process – to law enforcement,government entities, and customers. The businesswill also need a plan for making public announce-ments, particularly in the era of social media, wherebrand reputations can suffer quickly. A good planwill also address how to communicate with cus-tomers regarding the breach, risks they may face,steps to protect themselves, and the availability ofany credit monitoring or identity protection servic-es provided by the company.

Fraioli: Form a Data Governance Team today: RiskManagement/Insurance, Attorneys (In-House andOutside Counsel), IT/Security, CorporateCommunications. Build the Preparedness/ResponsePlan. Use it throughout your Security Event LifeCycle, the four stages of which are: Protect, Detect,Respond, Recover. It is critical to engage the C-Suiteand the Board: Cybersecurity is a risk managementissue, not an IT matter. You must always know (byregular reviews) what data you have, why you haveit, how you store it, how you secure it, andwhy/whether you still need to keep it. You cannotlose data that you don’t have. Risk cannot be man-aged only after a breach occurs – panic and confusionwill have set in — chaos and denial will infiltrateyour statements to the outside world. Clear, effectiveinquiries will lead to calm communication of facts,showing a company in control of itself, its systems,and the story.

◆ Increasingly, companies are choosing to lettheir employees “Bring Your Own Device”(BYOD), rather than buying everyone thesame device. What are the legal and practicalimplications of this policy in California today,when both mobile devices and data breachesare so prevalent?

Fraioli: The real paradigm shift wrought by mobiledevices has been in employee attitudes towards dataand connectivity. It is now more likely that a depart-ing employee will be able to obtain trade secret infor-mation by accessing the network from remote loca-tions, or sending or carrying information out.Similarly, that employee is more likely to use socialmedia on this device, bring work home on it, textcolleagues on it – and to do so casually and recklesslybecause it is a “personal” device. So, companies mustinvolve HR and employment counsel, not just IT, inMobile Device Management (MDM) and BYOD poli-cy. Many large data breaches were caused when lap-tops full of unencrypted PII were stolen from or for-gotten by employees. The failure to encrypt covereddata on mobile devices, and the widespread, carelessuse of one password across all of a user’s devices, arecommon, ticking time bombs.

◆ Over the past year, the House JudiciarySubcommittee on Courts, IntellectualProperty and the Internet has been undertak-ing comprehensive review of the CopyrightAct. What are some areas that need to beaddressed in a future legislative revision ofthe Act?

Moss: When the current Copyright Act was enacted,consumers bought physical books and musicalrecordings that could not be easily reproduced inviolation of the copyright owner’s exclusive rights.At the same time, particular copies could be lawful-ly resold or given away under the Act’s “first sale

doctrine.” Now that consumers obtain so muchentertainment media on digital sources, Congressshould discuss an appropriate compromise that willallow copyright holders to protect their rights toprevent duplicative copies, while at the same timegiving consumers some degree of property interestin the particular digital copy they’ve obtained.Notice I didn’t say “purchased,” because that’s real-ly the question we need to figure out. Is it a pur-chase or is it a license? And if it’s a license, do wewant to have a copyright law where nobody actual-ly owns anything?

◆ Do the Privacy & Data Security laws applyonly to electronic records? Where can theselaws be found? Are there one federal and oneCalifornia privacy & data breach law?

Fraioli: No. Take HIPAA, for example. The HIPAAPrivacy Rule covers Protected Health CareInformation (PHI); the Security Rule covers electroni-cally transmitted PHI (ePHI). Throwing a box ofpatient records in a dumpster can be a significantbreach under HIPAA. Federally, there are myriadother laws and agencies with their own statutes andsubject matter jurisdiction. The Federal TradeCommission (FTC) has jurisdiction to enforce multi-ple civil statutes; this is being challenged in theThird Circuit in the Wyndham Hotels v. FTC case.Currently, 47 states (and D.C.) have passed databreach notification laws. California was first; itrecently amended Civil Code section 1798.82 tospecify what disclosures must be made following abreach, and to require offering of “identity theft pre-vention and mitigation services.” Section 1798.82exempts entities covered by HIPAA, financial institu-tions, and any business “…regulated by state or fed-eral law providing greater protection to personalinformation…”

◆ It seems that schools have a lot of very per-sonal information about kids and their fami-lies. Does California or federal law allowschools to disclose a child’s personally identi-fiable information to third parties withoutthe parent’s consent?

Fraioli: The Family Educational Rights and PrivacyAct (FERPA) was enacted forty years ago to safeguardthe privacy of student data. With social media,schools can gather Personally IdentifiableInformation (PII) of students that may be leaked,stolen by hackers, or simply sold to advertisers byvendors to whom the school has outsourced func-tions. A loophole in FERPA protected these contrac-tors from liability, so California passed SOPIPA – theStudent Online Personal Information Protection Act.Under new Education Code section 49073.6, schoolsare prohibited from gathering such informationunless it pertains to school or student safety; stu-dents must be given access to it; parents must be

‘Now that consumers obtainso much entertainmentmedia on digital sources,Congress should discuss anappropriate compromise thatwill allow copyright holdersto protect their rights to prevent duplicative copies.’

AARON MOSS

‘A firm should help you pro-tect it from harm with an IPprotection program, but alsocan help you monetize it,with an effective licensingframework and tax-efficient corporate planning and litigation counseling.’






knobbe.com

For more than 50 years, Knobbe Martens has been devoted to the practice of IP law. Our specialization allows us to promote and protect innovation across a broad spectrum of technologies and industries. While elevating our clients to new levels ofsuccess and profitability. It’s one thing we’re good at. Because it’s the only thing that matters. Find out more at knobbe.com.

when ip law is your focus,the winning touch comes easily.

notified of the program; outsourced vendors towhom student data is provided are prohibited fromusing that data for any purpose other than the con-tracted purpose; and the information must bedestroyed within a year of the student turning 18 orno longer being enrolled.

◆ Should California companies that hirecoders to develop software for the companyalways use a “Work for Hire” Agreement, oris there another way of securing the rightsto the software?

Moss: Software rights can also be transferred byassignment, but because assignments are subject totermination under the Copyright Act, work for hireagreements are generally preferable. However,California businesses need to take into account statelabor and unemployment insurance laws that deemcreators of works made for hire “employees” for pur-pose of requiring employers to maintain workerscompensation and unemployment insurance forthese workers. One way around this is to enter intoagreements with contractor companies instead ofindividuals, but it’s an important decision that needsto be thought out carefully.

Weiss: If a company is employing an independentcontractor to code software, the company should usean assignment clause, instead of or in addition to, awork-for-hire clause, in order to ensure that the com-pany obtains ownership of the software. With respectto software, “Work for Hire” agreements are rarelyeffective in granting the company ownership in soft-ware developed by independent contractors. Even ifthe company and the independent contractor con-

tractually agree that the software is a “work-for-hire,”it may not qualify as such as software does not gen-erally fall into one of the eligible categories listed setforth in the copyright laws.

◆ If a company makes software for adults,does it still have to be concerned about liabili-ty under the Child Online Privacy ProtectionAct (COPPA)?

Fraioli: Yes. Just ask Yelp!. It is not a “kids’ site;” itsaudience frequents restaurants, bars and other adultactivities. The Children’s Online Privacy ProtectionAct (COPPA) – requires that companies collectinginformation about children under 13 clearly disclosehow the information is used directly to parents andseek verifiable parental consent before collecting anyinformation from children. Recently, the FTC filed aComplaint against Yelp! alleging that from 2009-2013, it collected personal information when suchchildren registered through its mobile app, providingrequired birthdates, name, email, location, et al.(Given the ubiquity of mobile devices, the FTC hasidentified geo-location information as PersonallyIdentifying Information.) The birthdates demonstrat-ed the kids were less than 13, but Yelp! collectedtheir information anyway without first notifying par-ents and obtaining consent, even though Yelp!’s web-site maintained a screen that prevented this fromoccurring there. Yelp! settled with the FTC and paid a$450,000 civil penalty.

◆ There is a lot in the news about Google andthe European Union’s “Right to Be Forgotten”law; does California have any law like thatabout which businesses need to be aware?

Fraioli: Yes, California’s controversial new “InternetEraser” law (B&P Code Sec. 22580-22582) will takeeffect as of January 1, 2015. It will allow any minor(user under 18) to allegedly “permanently erase”photos, tweets, status updates and ill-advised rantsby requiring “the operator of an Internet Web site,online service, online application or mobile applica-tion to permit a minor who is a registered user of theoperator’s Internet Web site, online service, onlineapplication, or mobile application, to remove, or toobtain and request removal of, content or informa-tion posted.” Thus, any business that is “connected”and allows sharing or posting by anyone who maybe under 18 must be aware of the contours of thisnew law. For example, the law requires that operatorshonor requests only from posters themselves. So, if ajerk posted a picture you wish you had never let himtake, and you ask the operator to erase it, the newlaw will not apply.

◆ What criteria should be used in decidingwhat inventions to patent?

Weiss: Companies should identify inventions that arecore to their business and revenue streams, ratherthan simply patent technically clever inventions thatmay not significantly enhance revenues or provide asignificant competitive advantage.

◆ What are the risks in filing provisionalpatent applications?

Weiss: Provisional patent applications are often filedto save on costs and to get something on file quickly.However, to gain the benefit of a provisional patentapplication, a non-provisional patent application

➼26




PROTECTING THE INTEGRITY OF INNOVATION

Sidley’s Intellectual Property practice provides tailored solutions for disputes involving patents, copyright infringement and theft of ideas, trademarks, false

advertising, trade secrets and unfair competition. As a fi rm with more than 1,800 lawyers in 18 offi ces worldwide,

we have built a reputation as an adviser for global business spanning every area of law.

TALENT. TEAMWORK. RESULTS.

Visit us:sidley.com/intellectual-property-litigation/

Follow us:PTO Trials blog (ptotrials.sidley.com/)

Twitter:@SidleyPTOTrials

555 West Fifth StreetLos Angeles, CA 90013213.896.6000

NAMED THE 2014 “TEAM OF THE YEAR”

FOR INTELLECTUAL PROPERTY LITIGATION

— CHAMBERS USA

Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One SouthDearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000. Sidley Austin refers to Sidley Austin LLP and affiliated partnerships as explained atwww.sidley.com/disclaimer. Prior results do not guarantee a similar outcome.

AMERICAS • ASIA PACIFIC • EUROPE

sidley.com

➼28

must be filed within 12 months, and thefiling date of the non-provisional patentapplication will then be deemed to bethe filing date of the earlier filed provi-sional patent application, but only withrespect to what was actually disclosed inthe provisional patent application.Failure to adequately describe importantfeatures in the provisional patent appli-cation may result in the loss of patentprotection for those features.

◆ What are the timing constraintsin filing a patent application?

Weiss: The United States now has a firstto file regime. Thus, the first inventorto file a patent application on aninvention will generally be entitled topatent protection over a second inven-tor who later files a patent application.This creates a rush to the patent office.Because generally the race goes to theswiftest it is imperative to be diligent intimely filing patent applications. In anycase, in the United States, inventorshave a one-year grace period after apublic disclosure of an invention bythe inventor to file a patent applicationdescribing their invention. However,disclosures by third parties who inde-pendently come up with the inventionprior to the inventor filing his/herapplication may destroy patentability.

◆ Should companies take advan-tage of the Track One PrioritizedExamination option to speed upthe examination of their patentapplications?

Weiss: For a relatively low fee ($2000 forsmall business entities, $4000 for largebusiness entities) PrioritizedExamination enables business to greatlyspeed up the process of obtaining apatent. The Patent Office will provide afinal disposition from the USPTO withintwelve months from the grant-priori-tized status. The average time from filingan application and obtaining PrioritizedExamination authorization to final dis-position (an allowance or finalRejection) is about eight months, ascompared to more than three years formany types of applications under regu-lar examination. Thus, companies thatcan benefit from quickly gaining patentprotection for their products or servicesshould seriously consider taking advan-tage of the Track One PrioritizedExamination option.

◆ Do patent trolls still present arisk to traditional businesses, andwhat is happening that may affectthe future of trolls?

Ransom: There has been a great deal ofactivity in this area. On the judicialfront, the Supreme Court has eased thestandard for a prevailing party to obtainfees in patent litigation. This may havesome deterrent effect on so-called“trolls,” given the substantial cost of liti-gation and the increased downside riskof unsuccessful prosecution. The FTChas also stepped into the action, con-ducting a study of the tactics and busi-ness models of patent assertion entitiesand investigating at least one allegedtroll for deceptive trade practices. Onthe legislative front, bills directed atcurbing abusive litigation practices havefailed to achieve sufficient support toadvance. Among other things, members






of Congress have disagreed on the fundamentalquestion of how to define “trolls,” including whetherand how to exempt universities and other researchinstitutes, garage inventors, and various other non-practicing entities.

Weiss: The number of patent suits instituted by non-practicing entities (sometimes referred to as patenttrolls) has continuously increased. Defending againstsuch suits consumes business’s financial resourcesand is a source of great distraction. Congress hasattempted, but failed multiple times to bring a meas-ure intended to curb non-practicing entities to avote. The courts have been more successful inaddressing the sometimes insubstantial cases broughtby certain non-practicing entities. In the past term,the Supreme Court limited the eligibility for patentprotection of certain software inventions, has madeit more difficult to find a party libel for indirectinfringement, has made it easier to invalidate patentsfor indefiniteness, and has made it easier for prevail-ing parties in patent litigation to be awarded attor-ney fees. The Federal Circuit has made it hard to col-lect huge damage awards. Under the new proceduresfor challenging patents in the U.S. Patent Office, ahigh percentage of patents that have been undergonesuch procedures have been invalidated.

◆ How should companies change their patentfiling strategies in view of the AmericanInvents Act first-to-file regime?

Weiss: The United States now has a first to fileregime. Thus, the first inventor to file a patent appli-cation on an invention will generally be entitled topatent protection over a second inventor who laterfiles a patent application. This creates a rush to thepatent office. Because generally the race goes to theswiftest, it is imperative to be diligent in filingpatent applications.

◆ How important is foreign patent protection?

Weiss: The foreign patent process can be very expen-sive. If foreign markets are critical to a business, thenit may be essential to invest in foreign patent protec-tion despite the costs. However, if a company doesnot realistically have the resources to market itsproducts in foreign markets, then it may make moresense to invest into expanding their patent protec-tion in their primary market, the United States. Inaddition, certain types of inventions, such as non-technical business method inventions, may not bepatentable in certain foreign markets, such as Europeand China.

◆ Are software inventions still patentable?

Weiss: The Supreme Court has delivered a blow tocertain types of software patents. In Alice Corp. Pty.Ltd. vs. CLS Bank Int’l, in finding the claims of a

software patent to be invalid, the Supreme Courtheld that “the claims at issue are drawn to theabstract idea … and that merely requiring genericcomputer implementation fails to transform thatabstract idea into a patent-eligible invention.”However, the court also stated that “there is nodispute that many computer-implemented claimsare formally addressed to patent-eligible subjectmatter.” The Patent Office continues to issuepatents for software-related inventions, taking theposition that certain software inventions are stilleligible for patenting. However, the boundaries ofpatent eligibility for software inventions areunclear, and it will take future court decision toclarify those boundaries.

◆ What is driving the popularity of patentgrant reviews of patents?

Weiss: Post-grant proceedings offer certain advan-tages for challenging the validity of a patent as com-pared to litigation in the courts because the burdenof proof on invalidity is lower in the Patent Officethan in district court (“preponderance of the evi-dence” rather than “clear and convincing”) and thePatent Office interprets patent claims more broadlythan the courts, making patent claims easier to inval-idate. In addition, many allege that the Patent Officereview process demonstrates an anti-patent bias andFederal Circuit Chief Judge Rader (now retired)labeled the Patent Office review board a patent“death squad.”

◆ What is a Business Associate Agreement,and are businesses in violation of any federalor California laws if they do not have one?

Fraioli: Under HIPAA, a Covered Entity (Health CareProvider, Health Plan or Clearing House) has directliability for violation of the accounting, privacy andsecurity provisions. Previously, Business Associates —those who receive Protected Health Information(PHI) from Covered Entities – (eg., transcription serv-ices, law firms) did not have direct liability. Instead,the Covered Entity was required to obtain from aBusiness Associate “documentation” providing “satis-factory assurances” it was safeguarding the PHI. TheHITECH Act has now made Business Associates direct-ly liable under HIPAA, whether or not they and theCovered Entity have entered into a BusinessAssociate Agreement, and expanded the definition ofBusiness Associate to include a Business Associate’ssubcontractors. Thus, to avoid direct liability,Business Associates now need a Business AsssociateAgreement with subcontractors that handle PHI.Penalties for knowing violation, or “willful neglect,”can be severe.

◆ What should a business look for whenselecting a law firm to represent their IPinterests?

Ransom: Clearly, identifying a firm with highlyqualified IP lawyers is key. But beyond that, it isessential that a law firm have both the ability andthe willingness to work as a strategic partner withthe client, and to understand how IP issues fit intothe client’s overall business and to respond accord-ingly. Finally, in an increasingly competitive legalenvironment, firms need to be nimble and flexiblein responding to clients’ needs for predictability inlegal fees, and to look for ways to add value to theclient above and beyond the raw provisioning oflegal services. Law firms should aim to exceed theirclients’ expectations.

Fraioli: Find a smart lawyer at a good firm who isexcited about your business. Not just getting yourbusiness, but your actual, underlying business.Coming from an immigrant family, I genuinelylike and admire people who make things. A com-pany thinks about its IP the way a family viewsits child. It wants to protect it, help it grow, andfind it a good-paying job. A firm should help youprotect it from harm with an IP protection pro-gram, but also can help you monetize it, with aneffective licensing framework and tax-efficientcorporate planning and litigation counseling.Your business, by necessity, is about more thanjust IP; your lawyers should help you see thewhole field from the start.

Moss: Because the lines between technology andentertainment are blurring so rapidly, I think thatany company in the content business, broadlydefined, would benefit from using a law firm thathas a strong entertainment/media presence in addi-tion to a strong IP presence. It doesn’t really matterwhether you’re streaming video, publishing a newsocial media app, or delivering advertisements inunique ways – you’re primarily dealing in content,not just technology. It’s also important to make sureyou understand and are comfortable with thelawyers who will actually be doing your work. Someclients hire a law firm because one of its lawyers hasa big name, which is fine – if that lawyer is actuallythe one who’s going to be doing your work. If not, Ithink prospective clients should interview the teamthat will actually be doing the work, not just thelead partner.

Weiss: Look for a firm that has a great reputation, anextensive practice in intellectual property, and thathas expertise in your particular area of interest.Intellectual property includes a large range of legalissues, including patent law, copyright law, trade-mark law, litigation, and entertainment law. Assessyour needs in selecting a law firm. If you are seekingpatent protection, look for a firm that has a deepbench of attorneys with a suitable technical back-ground. For example, someone with a mechanicalengineering background may not be suitable to han-dle an electrical engineering invention.

‘With respect to soft-ware, “Work for Hire”agreements are rarelyeffective in grantingthe company owner-ship in software devel-oped by independentcontractors.’

DAVID WEISS

‘Once a breach occurs, a businessmust immediately implement itsresponse protocols, including stopping further data loss, hiring aforensics team, and beginning anyrequired notification process – tolaw enforcement, government entities, and customers.’

ROLLIN RANSOM





2014

PRESENTING SPONSORS

GOLD SPONSORSProvidence Health & Services

UCLA Health

PLATINUM SPONSORS

PATRICK SOONSHIONG INNOVATION AWARDS

LOS ANGELES BUSINESS JOURNAL LOS ANGELES BUSINESS JOURNAL presentspresents

The Los Angeles Business Journal is excited to host the Inaugural Patrick Soon-Shiong Innovation Symposium and Awards.Building off of the success and popularity of the Patrick

Soon-Shiong Innovation Awards held for the past four years, this year the Business Journal will introduce a half-day symposium that will begin with breakfast and progress through a series of

nine guest speakers. Our attendees will have an opportunity to be inspired by local innovators sharing their expertise on innovation in California. The evening portion of the event will be highlighted

by the Patrick Soon-Shiong Innovation Awards dinner, where we honor and acknowledge the people and organizations that

continue to stretch the boundaries and have proven to be leaders in innovation. We are proud to have a partner in Dr. Soon-Shiong

who shares our vision and who himself, is a true innovator.

TUESDAY, NOVEMBER 18BREAKFAST SYMPOSIUM: 8:00 11:00AM

AWARDS DINNER: 6:00 9:30PM

BEVERLY WILSHIRE HOTEL at BEVERLY HILLS

For more information, contact Breanne Kamai at (323) 549-5225 ext. 203

or e-mail [email protected].

SAVE THE DATE

19 29_ip_law_roundtable.qxp 10/8/2014 11:55 AM Page 29

Documents

Intellectual Property Law Roundtable - What Businesses Need to Know | Los Angeles Business Journal