IP News

UMG argued on appeal that the DMCA safe harbor provision did not apply for three reasons: 1) the infringing activities were not within the plain meaning of “infringement of copyright by reason of the storage [of material] at the direction of a user”; 2) genuine issues of fact remained about whether Veoh had actual knowledge of infringement; and 3) UMG had presented sufficient evidence that Veoh received financial benefit directly attributable to infringing activity.” Id. at 14.

With respect to the first argument, the Ninth Circuit held that the statutory language “by reason of the storage at the direction of the user” is “meant to cover more than mere electronic storage lockers” and encompasses “the access-facilitating processes that automatically occur when a user uploads a video to Veoh.” Id. at 16.

Regarding the knowledge element, Veoh had shown at the district court that when it did acquire knowledge of allegedly infringing material, it expeditiously removed such material. Slip Op. at 23. UMG conceded that it never sent a DMCA notice to Veoh and had never identified to Veoh any specific infringing video available on Veoh's system. UMG also broadly argued that because Veoh hosted music on its site and had no license from any major music company, it must have known that its services were being used to host unauthorized material. The Ninth Circuit was not convinced, holding that specific knowledge of particular infringing activities is what the DMCA requires, and copyright holders are “better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.” Id. at 26.

Regarding UMG's final argument, the Ninth Circuit held that Veoh did not have the necessary right and ability to control the infringing activity for financial benefit, and thus remained eligible for safe harbor protection. Id. at 32.

Seven-Year Sentence for Trade Secret Theft

Kexue Huang, a Chinese national who worked for Dow AgroSciences LLC in Indianapolis was sentenced to seven years in prison for illegally sharing Dow's research on organic insecticides valued at $20 million with scientists in China and Germany. U.S. v. Huang, 10-cr-102 and 11-cr-163 (S.D. Ind. 2011). In the case, Huang pled guilty in October 2011. After being terminated by Dow, Huang “demonstrated a penchant for criminal activity ' by devising and executing a scheme to misappropriate trade secrets owned and protected by his new employer, Cargill Inc., and for the benefit of another” according to prosecutors' Dec. 12 sentencing memo. Huang had published confidential trade secrets in a paper through China-based Hunan Normal University and also asked the university to perform research based on Dow's trade secrets.

Tris Pharma Wins Summary Judgment of Non-Infringement

On Dec. 20, 2011, Judge Freda Wolfson of the U.S. District Court for the District of New Jersey issued an opinion in Reckitt Benckiser Inc. v. Tris Pharma, Inc., No. 09-3125, 2011 U.S. Dist. LEXIS 146658 (D.N.J. Dec. 20, 2011, granting Tris' motion for summary judgment of non-infringement, stating that Tris' differently formulated product could not have infringed plaintiffs' patent. Judge Wolfson, however, declined to dismiss plaintiffs' claims for theft of trade secrets and unfair competition. The decision will pave the way for Tris to market a generic version of plaintiffs' Delsym cough suppressant product. Judge Wolfson also declined to disturb a magistrate judge's order striking plaintiffs' expert report after the expert acknowledged in testimony that he had not personally analyzed data contained in his report but instead had been instructed by plaintiffs' attorneys as to what to say.

Apple-Android Smartphone Wars Continue in ITC

On Dec. 19, 2011, the U.S. International Trade Commission (“ITC”) found that smartphones imported into the United States by respondent HTC Corp. infringe one of Apple's patents. The case, In the Matter of Certain Personal Data and Mobile Communications Devices and Related Software, Investigation No. 337-TA-710, marks one of the first decisions in the latest round of smartphone patent wars.

Apple had asserted claims from four different patents in the investigation, but the final Investigation Determination of July 15, 2011 found that HTC's products infringe only two of those patents. The final Investigation Determination also concluded that HTC did not demonstrate invalidity of any of the patents.

After reviewing the ALJ's final Investigation Determination, the Commission determined that there was a violation of 19 U.S.C. ' 337 by reason of the importation and sale of HTC smartphones covered by two claims of one of Apple's patents, reversing the finding of infringement of the second Apple patent. The Commission issued a limited exclusion order barring the importation of HTC's infringing smartphones, but delaying the commencement of the Order until April 19, 2012, to “provide a transition period for U.S. [mobile communications] carriers.” Notice of Final Determination, at page 3.

The reversal of the ALJ's ruling by the Commission was a victory for both Apple and Google, the maker of Android operating system software, because the patent that was found infringed by the ALJ and not infringed by the Commission was directed toward the core operation of the Android software, while the patent that the Commission found infringed covers more peripheral features.

Microsoft Receives Initial Infringement Ruling in ITC Case Against Motorola Mobility

On Dec. 20, 2011, a U.S. International Trade Commission (“ITC”) judge issued an Initial Determination that Motorola Mobility, Inc.'s Android powered smartphones infringe one of Microsoft Corp.'s patents but do not infringe six others. The infringed patent, 6,370,566, covers the scheduling and generation of meeting requests from a mobile phone. The ruling is still subject to review by the Commission. The case is In the Matter of Certain Mobile Devices, Associated Software and Components, Investigation No. 337-TA-744, and there is also a related case in federal district court in Washington state which has been stayed pending the outcome of the ITC investigation.

Jeffrey S. Ginsberg is a partner and Joseph Mercadante is an associate in the New York office of Kenyon & Kenyon LLP.

Video Sharing Site Wins Ninth Circuit's Blessing

On Dec. 20, 2011, the Court of Appeals for the Ninth Circuit issued an opinion in UMG Recordings, et al. v. Veoh Networks, Inc., Docket No. 09-55902, holding that Veoh's activities were protected by a safe harbor provision in the Digital Millennium Copyright Act (“DMCA”) and thus could not infringe plaintiffs' copyrights.

Veoh operates a publicly accessible video sharing website, at which users could download music videos, including music videos owned by plaintiffs. Slip Op. at 1. The district court ruled that these activities were protected by the DMCA's “safe harbor” provision, which limits service providers' liability for “infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider.” 17 U.S.C. ' 512(c). Veoh had implemented several policies to prevent users from uploading infringing content, including a user agreement forbidding illegal activities and the application of filtering technologies that scan uploaded videos for matches with a database of copyrighted works. Slip Op. at 9.

UMG argued on appeal that the DMCA safe harbor provision did not apply for three reasons: 1) the infringing activities were not within the plain meaning of “infringement of copyright by reason of the storage [of material] at the direction of a user”; 2) genuine issues of fact remained about whether Veoh had actual knowledge of infringement; and 3) UMG had presented sufficient evidence that Veoh received financial benefit directly attributable to infringing activity.” Id. at 14.

With respect to the first argument, the Ninth Circuit held that the statutory language “by reason of the storage at the direction of the user” is “meant to cover more than mere electronic storage lockers” and encompasses “the access-facilitating processes that automatically occur when a user uploads a video to Veoh.” Id. at 16.

Regarding the knowledge element, Veoh had shown at the district court that when it did acquire knowledge of allegedly infringing material, it expeditiously removed such material. Slip Op. at 23. UMG conceded that it never sent a DMCA notice to Veoh and had never identified to Veoh any specific infringing video available on Veoh's system. UMG also broadly argued that because Veoh hosted music on its site and had no license from any major music company, it must have known that its services were being used to host unauthorized material. The Ninth Circuit was not convinced, holding that specific knowledge of particular infringing activities is what the DMCA requires, and copyright holders are “better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is copyrighted and what is not.” Id. at 26.

Regarding UMG's final argument, the Ninth Circuit held that Veoh did not have the necessary right and ability to control the infringing activity for financial benefit, and thus remained eligible for safe harbor protection. Id. at 32.

Seven-Year Sentence for Trade Secret Theft

Kexue Huang, a Chinese national who worked for Dow AgroSciences LLC in Indianapolis was sentenced to seven years in prison for illegally sharing Dow's research on organic insecticides valued at $20 million with scientists in China and Germany. U.S. v. Huang, 10-cr-102 and 11-cr-163 (S.D. Ind. 2011). In the case, Huang pled guilty in October 2011. After being terminated by Dow, Huang “demonstrated a penchant for criminal activity ' by devising and executing a scheme to misappropriate trade secrets owned and protected by his new employer, Cargill Inc., and for the benefit of another” according to prosecutors' Dec. 12 sentencing memo. Huang had published confidential trade secrets in a paper through China-based Hunan Normal University and also asked the university to perform research based on Dow's trade secrets.

Tris Pharma Wins Summary Judgment of Non-Infringement

On Dec. 20, 2011, Judge Freda Wolfson of the U.S. District Court for the District of New Jersey issued an opinion in Reckitt Benckiser Inc. v. Tris Pharma, Inc., No. 09-3125, 2011 U.S. Dist. LEXIS 146658 (D.N.J. Dec. 20, 2011, granting Tris' motion for summary judgment of non-infringement, stating that Tris' differently formulated product could not have infringed plaintiffs' patent. Judge Wolfson, however, declined to dismiss plaintiffs' claims for theft of trade secrets and unfair competition. The decision will pave the way for Tris to market a generic version of plaintiffs' Delsym cough suppressant product. Judge Wolfson also declined to disturb a magistrate judge's order striking plaintiffs' expert report after the expert acknowledged in testimony that he had not personally analyzed data contained in his report but instead had been instructed by plaintiffs' attorneys as to what to say.

Apple-Android Smartphone Wars Continue in ITC

On Dec. 19, 2011, the U.S. International Trade Commission (“ITC”) found that smartphones imported into the United States by respondent HTC Corp. infringe one of Apple's patents. The case, In the Matter of Certain Personal Data and Mobile Communications Devices and Related Software, Investigation No. 337-TA-710, marks one of the first decisions in the latest round of smartphone patent wars.

Apple had asserted claims from four different patents in the investigation, but the final Investigation Determination of July 15, 2011 found that HTC's products infringe only two of those patents. The final Investigation Determination also concluded that HTC did not demonstrate invalidity of any of the patents.

After reviewing the ALJ's final Investigation Determination, the Commission determined that there was a violation of 19 U.S.C. ' 337 by reason of the importation and sale of HTC smartphones covered by two claims of one of Apple's patents, reversing the finding of infringement of the second Apple patent. The Commission issued a limited exclusion order barring the importation of HTC's infringing smartphones, but delaying the commencement of the Order until April 19, 2012, to “provide a transition period for U.S. [mobile communications] carriers.” Notice of Final Determination, at page 3.

The reversal of the ALJ's ruling by the Commission was a victory for both Apple and Google, the maker of Android operating system software, because the patent that was found infringed by the ALJ and not infringed by the Commission was directed toward the core operation of the Android software, while the patent that the Commission found infringed covers more peripheral features.

Microsoft Receives Initial Infringement Ruling in ITC Case Against Motorola Mobility

On Dec. 20, 2011, a U.S. International Trade Commission (“ITC”) judge issued an Initial Determination that Motorola Mobility, Inc.'s Android powered smartphones infringe one of Microsoft Corp.'s patents but do not infringe six others. The infringed patent, 6,370,566, covers the scheduling and generation of meeting requests from a mobile phone. The ruling is still subject to review by the Commission. The case is In the Matter of Certain Mobile Devices, Associated Software and Components, Investigation No. 337-TA-744, and there is also a related case in federal district court in Washington state which has been stayed pending the outcome of the ITC investigation.

Jeffrey S. Ginsberg is a partner and Joseph Mercadante is an associate in the New York office of Kenyon & Kenyon LLP.