In its complaint, Under Armour seeks a list of remedies that would make most companies sit up and pay attention. In addition to injunctions stopping the use of ‘I will’, they are going for corrective advertising, profits and punitive damages.

(comparison between Under Armour advertising (left) and a Nike Facebook image for #MAKEITCOUNT(right). – Photo from: Under Armour, Inc v Nike, Inc complaint, filed 21/02/2013)

(comparison between Under Armour television commercial (left) and a frame from Nike’s YouTube video for #MAKEITCOUNT (right). Photo from: Under Armour, Inc v Nike, Inc complaint, filed 21/02/2013)

Nike denies all of Under Armour’s allegations, claiming that they have not used the noun-verb descriptive combination ‘I will’ as a ‘trade mark use’, the phrase has neither acquired distinctiveness nor secondary meaning as a trade mark, there is no likelihood of confusion with consumers, that it is “not a famous trade mark”, and (perhaps ironically) that Under Armour has abandoned its trademark rights because it has failed to adequately police the mark.

So, can a company trade mark everyday words such as ‘I will’ and stop others from using those words when advertising similar goods or services? The answer is yes – in some circumstances. A trade mark is essentially a sign used to distinguish goods or services provided in the course of trade. A key consideration for the trade mark registrar in Australia is how ‘distinctive’ a mark is. Marks that are not distinctive or are descriptive terms for the relevant goods and services are generally unregistrable. Some trade marks are inherently distinctive either because they are meaningless words such as ‘Telstra’ or ‘Reebok’ or because they are words used completely out of their usual context, such as ‘Apple’ in relation to computers. Non-inherently distinctive words can also become distinctive, if combined with a distinctive logo or stylised writing, e.g ‘surf shop’ or ‘the optical shop’. Words that are not inherently distinctive can also be registered, provided that (through factual evidence of use and public reputation) they do in fact distinguish those goods or services (brand slogans such as ‘Just do it’, ‘I’m lovin’ it’ and ‘A diamond is forever’ come to mind).

Has Nike infringed Under Armour’s trade mark? Australian courts would look at factors such as whether the sign in question has been used ‘as a trade mark’ (i.e. has it been used as a badge to indicate the trade origin of the goods or services?) and whether the sign is substantially identical with or deceptively similar to the trade mark in question.

A critical element for Under Amour to establish, should this proceed to trial, will be that Nike’s use of ‘I will’ has been used as ‘a trade mark’. Nike asserts in its response that its use of ‘I will’ in the #MAKEITCOUNT campaign advertising materials is not a trade mark use, but rather is used in its ordinary, plain-english meaning to describe activities, such as “I will train one hour each day” or “I will finish what I started”.

A further key consideration for the US Court, will be the issue of whether consumers are likely to be confused and think that the Nike campaign advertising materials are actually for Under Armour, or that they suggest some kind of affiliation or association with Under Armour. Nike has started to address this point in its submission by emphasising that the campaign advertising materials include “significant Nike imagery and other uses of the Nike trademarks” – thereby arguably lessening the likelihood of consumer confusion. In Australia, these issues would not be relevant as a defence in this case.

It will be interesting to see if the US Court, when looking at the campaign advertising materials as a whole, will find Nike’s arguable emphasis of ‘I will’ (via bolding and the phrase’s placement by itself on one line) as being a significant consideration when making its decision as to whether the phrase has been used as a trade mark, and on the likelihood of consumer confusion. See examples of the advertising here.

Under Armour’s other well-known trade mark is “Protect this House” – and based on Under Armour’s complaint against Nike, it certainly appears to be trying its very best to do so.

The post ‘I will’ protect this brand – will Under Armour Just do it? appeared first on IP Whiteboard | King & Wood Mallesons.

But 87 year old Harper Lee has instead found herself in court, in need of her own Atticus Finch. The author has filed a lawsuit in Manhattan against Samuel Pinkus (amongst others), the son-in-law of her former literary agent.

Lee alleges that when her agent fell ill in 2002, Pinkus transferred several of his father’s clients, including her, across to his own company, and became her literary agent.  Lee claims that in 2007, he induced her (by taking advantage of her declining physical health) into assigning the copyright (and associated termination rights) in her book, for no financial gain, to him and a company he controlled.* Although the copyright in To Kill A Mockingbird was re-assigned back to Lee following court action last year, she is suing Pinkus for royalties he’s allegedly still collecting.

Lee says she has no memory of agreeing to give up her rights or signing the agreement. With failing eyesight and hearing, she was living in an assisted living facility at the time after having suffered a stroke.

What exactly was she giving up?

Authors have an exclusive right to make and sell copies of their work, create derivative works, and the right to perform or display their works publicly.

An author can assign or grant an exclusive or non-exclusive licence over one or more of their exclusive rights in copyright.  An author can also choose to restrict the assignment or licence to particular place, or to a particular period of time. An assignment is a transfer of ownership and control of the copyright, in contrast to a licence which is merely permission to do acts that would otherwise infringe copyright.

WWAD? (What would Atticus do?)

Well, an assignment of copyright is a contract, much like any other.  In Australia, we’d be thinking about issues of:

1.   Capacity

Lack of capacity to contract may void an agreement.  There’s no evidence to suggest that Lee’s mental abilities were affected at the time of the purported assignment, although we don’t know the specifics of the circumstances.  Her apparent lack of recollection is something the court would test.

 2.   Absence of consideration

Since no apparent consideration passed from Pinkus to Lee, the assignment may be unenforceable from the outset.

3.   Vitiating factors precluding the formation of the contract such as:

Duress

The assignment may be unenforceable if Pinkus placed illegitimate pressure on Lee, amounting to a compulsion of her will. In determining whether there was illegitimate pressure placed on Lee, the nature of the pressure and the nature of the demand is considered.  The focus is on whether a person’s free consent has been overridden.

Undue Influence

The principal-agent relationship between Lee and Pinkus is a relationship that gives rise to a relationship of trust in equity. Pinkus had a duty to act in the best interests of Lee. This relationship gives rise to a rebuttable presumption that undue influence was exercised on Lee. It could be alternatively established that Pinkus in fact exercised a controlling influence over Lee.

Unconscionable dealing

Lee’s age and ill health might be considered a ‘special disability’. If this disability was so evident to Pinkus to make it unfair or unconscientious that Lee’s assent to the transaction be accepted, unconscionable dealing may be established.

A must-read

In 2006, British librarians ranked To Kill a Mockingbird ahead of the Bible as the one book every adult should read before they die. [Ed: It was the only book on the literature list at school I actually enjoyed]

Therefore, if the interest generated by the case leads to even more readers of this wonderful story, there will be an unintended positive benefit indeed.

* The complaint also alleges that Pinkus avoided paying royalties still owed to his father’s literary company and failed to promote Lee’s copyright in the US and overseas in breach of his fiduciary duties as her agent.

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On 1 May, Facebook filed a Form 10-Q with the United States’ Securities and Exchange Commission setting out its First Quarter results for 2013, including revenue of $1.46 Billion (of which more than 70% has come from advertising).  Facebook has made no secret of a range of new initiatives in the pipeline; which means its terms and conditions remain in a permanent state of flux.

While we’re on the topic of Facebook’s website terms and conditions, on or around 30 April 2013, Facebook totally reworked its Facebook Brand resources, creating a new site devoted to this at the domain name facebookbrand.com.  The site sets out the ways in which Facebook’s logos, buttons, plugins, screenshots and textual references to Facebook can and cannot be used.

Similar to many companies’ internal brand guidelines, Facebook’s are very strict, regulating issues such as surrounding text which must accompany a logo, the minimum amount of clear space to be kept free around a logo and when you need to ask Facebook for specific permission.

Reproducing a Facebook logo in breach of the guidelines may not only amount to a breach of contract if you are a Facebook user (given that by continuing to use the platform you accept all terms, even where these may change without notice to you), but also to copyright or trade mark infringement (depending on the circumstances in which it is used).

While many of the conditions featured on the facebookbrand.com site are no different to previous conditions, the most commonly used Facebook logo, the “f” logo has changed.  If you are using the “f” logo to refer to your presence on social media (and note, this is the only circumstance in which it should be used), you should ensure that you are using the up to date logo and that you comply with all of Facebook’s additional terms.  Failure to do so means you may want to prepare to face Facebook… in the Courtroom.

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Meanwhile (and more than 2000 miles away), on 30 April 2013 the United States District Court of the Northern District of California handed down a report and recommendation awarding Facebook more than US$2.8 million against 11 defendant ‘typosquatters’.  We think US$2.8 million might help soften the blow to the legal budget for using the term “timeline”.

‘Typosquatting’ is a form of cybersquatting which involves registering domain names based on common misspellings or misspellings based on typing errors, which Internet users may enter by accident when looking for an existing website.  Typosquatters might buy a typo domain in order to try and sell it back to the brand owner, to make pay-per-click revenues from mistaken navigations to its site, to redirect traffic to another site or to otherwise hijack the brand.

Facebook filed a complaint in July 2011 on the basis of 105 domains which included or misspelled “facebook.com”, including <facebobk.com>, <fqcebook.com>, <faxebook.com>, <facvebook.com>, <facebooj.com>, <facebookwelcome.com>, <faceboocklogin.com>, <wwwfacebookde.com> and <facebokcasino.com>.  Facebook filed for default judgment seeking injunctive relief, the transfer of all infringing domain names and statutory damages pursuant to the United States’ Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (ACPA).

A defendant will be liable under the ACPA if he or she registers, traffics in or uses a domain name that is identical or confusingly similar to a famous or distinctive mark owned by the plaintiff with a bad-faith intent to profit from the mark.  In determining bad faith under the ACPA, the Court may consider whether the mark is in fact famous or distinctive, and whether the defendant:

1. has any trade mark or other IP rights in the domain name;
2. has registered their own legal name or a name commonly used to identify them;
3. has used the domain name in connection with the bona fide offering of any goods or services;
4. has used the mark in a bona fide non-commercial or fair use way on the site itself (ie for the purposes of lawful criticism or review)
5. intends to divert consumers to a site that could harm the goodwill of the mark, either for commercial gain or with intent to tarnish or disparage the mark by creating a likelihood of confusion as to the site’s source;
6. offers to sell the domain to the rights holder without having used it (or a pattern of such conduct);
7. provided false contact information when applying to register the domain name; and
8. has registered or applied for multiple typesquatting domain names.

One of the defendants listed is “Reggie Bush”, who, according to the complaint, resides in California.  We do not know whether this is the same Reggie Bush as the running back for the Detroit Lions of the NFL, who once dated Kim Kardashian, and also manages to find time on the side to register typosquatting domains… or whether this might be an example of a registrant providing false contact information (see consideration (7) above).  The Magistrate also notes that another defendant is a serial cybersquatter who has been sued by other mark owners for virtually identical conduct.

None of the defendants formally appeared in the action nor responded to Facebook’s complaint or motion for default judgment.

The ACPA provides for statutory damages of $1000 – $100,000 per infringing domain name.  While Facebook sought the maximum statutory damages, totalling over $26 million, the Magistrate awarded between $5,000 and $1.34 million per defendant, a total of $2.8 million.

In its initial complaint, Facebook also claimed for trade mark infringement, false designation of origin, trademark dilution, breach of contract and tortious interference with prospective economic advantage.  It appears it decided to pursue default judgment only under the ACPA.  It’s breach of contract claim is interesting, based on some of the defendants being registered Facebook users, and having breached it Statement of Rights and Responsibilities by:

• misleading Facebook users;
• using Facebook’s marks or confusingly similar marks without Facebook’s permission;
• improperly collecting information from Facebook users; and
• registering, using and otherwise trafficking in typosquatter domain names.

Unfortunately, due to the default judgment based solely on aspects of the ACPA, we will not have a judgment to review which addresses the potential breach of Facebook’s terms and conditions.

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According to Facebook’s Form 10-Q (filed with the United States’ Securities and Exchange Commission on 1 May), it has settled with Timelines Inc, which runs the chronology website timelines.com.

Timelines Inc was founded in 2007, and has registered trade marks in the US in relation to “providing a website that gives users the ability to create a customized Web page featuring user-defined information about historical, current and upcoming events” for “Timelines”, “Timelines.com” and the Timelines logo.  Interestingly, the case did not deal with the Timelines logo itself, but we thought it definitely had some similarities to Facebook’s “f” logo.  Judge for yourself here.

As many of you will remember, in late 2011 Facebook generated a lot of hype around the fact that your Facebook “wall” would now be called Facebook “timeline”.  Given Timelines Inc’s existing legal rights, using the word “timeline” seems an interesting move from a company which values its own intellectual property highly, holds trade marks for the terms “face”, “wall” and “like”, and has sued other companies for using “book” in their name.

Timelines sued Facebook for trademark infringement to stop it from using the term “timeline”.  It also claimed that for at least a week after Facebook’s announcement, when users were looking for the Timelines.com Facebook page, Facebook hijacked the URL so that users were redirected to a page touting Facebook’s profile redesign.  Timelines requested damages in the amount of any advertising revenues Facebook generated on any of its timeline pages.  As indicated in Facebook’s recent Form-10Q, that amount would have been massive.

Facebook fired back, requesting summary judgment on that basis that its use of the term “timeline” was fair because the term was generic, and that the trade mark should be cancelled for that reason.

The United States District Court of the Northern District of Illinois held that Facebook had failed to show that the disputed trade marks were merely descriptive, and denied the motion for summary judgment.  Unfortunately for us IP geeks, the parties settled before trial, which means no judgment on the interesting hijacking issue.

We don’t know how much Facebook might have paid to keep using the term “timeline”, but according to its Form 10-Q it “was not material to [Facebook’s] business, financial condition or results of operations”.

The post Facebook status update (Part 1): The legal battle behind Facebook Timeline appeared first on IP Whiteboard | King & Wood Mallesons.

The world of television is changing.  No longer independently located in your living room, television is increasingly linked to the internet.  The right to make television content available online is valuable.  People are willing to pay to have live or delayed television streamed to their devices.  This content can also be a valuable source of advertising revenue.

So it is hardly surprising that internationally, there has been a recent flurry of copyright infringement cases about the streaming of free-to-air television programs over the internet.  Here’s a common scenario:

• Company X owns copyright in a television program.
• Company X licenses those rights to various networks or telecommunications carriers, sliced and diced as it sees fit (eg online rights might be differentiated from free to air).
• Network Y then broadcasts the program, making money via advertising and / or subscriptions.
• Along comes New Technology Guru which captures (a nice word for ‘copies’), say, the free to air TV broadcast, and then streams it (often on a delayed basis) to subscribers of their service.
• New Technology Guru also makes money via advertising and / or subscriptions.
• Company X and Network Y are unhappy because their rights deal (and the bargain struck for that deal) is undermined.  They decide: “Let’s litigate!”

Let’s take a short trip around the world and see whether the technology avoided copyright infringement, or not, having regard to:  Aero (US); TV Catchup (UK) and TV Now (Australia).

The technology

‘red_chip_circuit’ © 6 January 2010, Andrew Taylor, Flickr ‘used under a Creative Commons Attribution license

We should start with some background about the relevant New Technology Gurus.

The services had in common the objective of individualising the streaming of the content and/or its receipt by subscribers.  There were also geographic limitations imposed; if you didn’t reside in an area capable of receiving the original broadcast, you could not receive the program.

Here’s some more detail about how the services at issue worked:

• Aereo provides subscribers with live and recorded television to mobiles, computer and tablets for a monthly fee.  The Aereo infrastructure includes a tiny antenna for every single subscriber.  Aero makes individual copies of programs for Aereo users, using the transmission received on their individual antennae.  Subscribers can also watch a program live.  In this way, Aereo says that each subscriber is receiving their own “private” transmission.
• TV Catchup allowed members to watch live free-to-air television on their computers, iPhones and games consoles.  On the TV Catchup website, members selected a channel and received a flash stream of all the programming on that channel.  There was a slight delay, because TV Catchup first showed an advertisement.  The TV Catchup server streamed the live programming to the user.  A separate stream was created for each user and each packet of data sent from the server was addressed to an individual user.
• TV Now enabled a subscriber to select and have free to air television programs recorded as and when broadcast by the TV station.  The programs could then be played back at the time (or times) of the subscriber’s choosing on the subscriber’s mobile device or computer.  The programs could be played near-to-live or delayed.  The TV Now server copied and recorded a TV program if it had been selected by a subscriber.  Four copies (in different formats) were made for each subscriber who requested the program.  Only a user who had selected to record a TV program could request for it to be played back, at a time of the subscriber’s own choosing.

In this post, we’ll focus on whether or not these methods could be regarded as a “communication to the public”, or in the case of the US, whether there was a “public performance” of the work.  If you’re interested in more information about other questions that could be tested, such as: temporary copies on buffers, multiple copies, and the application of the test of ‘substantial part’, let us know and we’ll oblige.

The Aereo decisions

Does Aereo involve public performance?  Well, it depends whether you are in New York or in California!  The majority of the Second Circuit Court of Appeals in Aereo (decision here) said that there was not a public performance.  The US District Court for the Central District of California (in the Ninth Circuit) said that there was a public performance.

In deciding that Aereo did not involve a public performance, the majority of the Second Circuit Court of Appeals followed an earlier decision of the same court in Cablevision.  The Court said that they should look at the potential audience for a transmission, not the potential audience of the underlying work.  Looking at the technology, the majority said that since there was only ever one person who would receive the transmission, this could not be “the public”.  You couldn’t aggregate multiple transmissions of unique copies of the same work to say that there was a transmission to the public.  The Court said that the Aereo system had been designed to avoid copyright liability and that it was not the first to do so.  Judge Chin strongly dissented.

On the other hand, the US District Court for the Central District of California found that the Aerokiller service (relevantly similar to Aereo) was a public performance of a work.  The Court said that it did not have to follow Cablevision, as its precedent was not the same as the precedent in the Second Circuit  The Court said the Second Circuit’s focus on unique copies from which a transmission was sent was wrong.

The Aereo case is full of twists.  On 6 May 2012, Aereo filed a new case in the Second Circuit, seeking a declaratory judgment that the service doesn’t infringe copyright across all other US States.

The TV Catchup decision

What about the UK?  Was TV Catchup a communication to the public?  In short, yes.  The Court of Justice of the European Union (CJEU) (decision is available here) said that the transmission in question must have communicated the protected works to the public.

The CJEU said that the intervention by TV Catchup was different to that of the broadcasting organisations.  It was not just a technical means to maintain or improve the quality of transmission (which would have been an exception).  Here, there was a different means of transmission and it was irrelevant whether there was a one-to-one connection between subscribers and the service.  The technology used by TV Catchup did not prevent a large number of persons having access to the same work at the same time, which was a communication to the “public”.  It was not relevant to the question of whether something was a “communication to the public” whether TV Catchup was a profit-making venture or whether it was in direct competition with the TV stations.

TV Catchup was a case that had been referred to the by the UK High Court.  The CJEU answered questions of law on “communication to the public” for the High Court, so the case will now go back to the UK.

The TV Now decision

Did TV Now involve a communication to the public?  In short, this was not decided.

The main focus of the Full Federal Court decision was on the question of who was the “maker” of copies of the program selected by the subscriber (found to be Optus, or Optus and the subscriber).  The fact that copies were only made following a user request did result in the conclusion, in all the circumstances, that Optus itself did not make the copy.  The Full Court also found that Optus did not fit within the time-shifting exception, which applied to private copying by individuals.  (The Full Court decision is available here and the primary judge’s decision is available here.)  While an application was made to appeal the Full Court’s decision, the High Court refused special leave.

Sadly for lovers of copyright law (and for the purpose of this blog post), the Full Court did not delve into the question of whether there had been a “communication to the public”, stating that its reasons were sufficient to resolve the appeal.  The primary judge had concluded that the user was responsible for any communication to his or her device and that it was not a communication to the public.  Although the decision of the primary judge was not directly overturned on this aspect, the primary judge linked the conclusion on “communication to the public” with his Honour’s earlier finding (which was overturned) that it was the user, not Optus, that made the copy (see eg at [95] and at [105]).

Conclusion

It is definitely interesting to compare these four decisions and the technologies.  Why do they seem so different?  Of course, the copyright law that applied to each decision is not the same.  But we can make some very general observations:

• What is being transmitted/communicated?  The Californian Court and the CJEU looked at the underlying work, whereas the Second Circuit focused on the individual copies of the underlying work.
• Who is the “public”?  The Second Circuit looked at the audience of each single transmission, whereas the Californian Court aggregated the transmissions.  The CJEU agreed that whether there was a one-on-one transmission was irrelevant.
• Cablevision – good or bad law?  The Second Circuit certainly likes it, but the Ninth Circuit doesn’t.  The Full Court of the Federal Court didn’t follow Cablevision.  It noted the division between the US Circuits and the importance of the concept of “volitional conduct” in Cablevision, which would be a “gloss” on the Australian statute.

The tension between developments in technology and the rights of copyright holders has frequently been discussed in copyright law, all the way from the printing press, through to the VCR and to the new internet-based technologies.  The internet streaming of free-to-air broadcasts is one of the latest battlegrounds of copyright law and we are sure to see many more interesting decisions and policy debate in this area.

King & Wood Mallesons acted for the Australian Rugby Football League Limited and Telstra Corporation Limited in the TV Now case.

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Answer: There’s a fair chance they’re all orphans.

The term “orphan” is used to describe copyrighted material where the rights holder is not known or cannot be found after conducting a “diligent search”.  The UK has passed legislation which aims to enable publishers to use “orphan” works for commercial and non-commercial purposes.  The changes were introduced through the Enterprise and Regulatory Reform Act 2013 (Act), as amendments to the Copyright, Designs and Patents Act 1988 (UK).  The Act provides for the creation of a licensing organisation to grant non-exclusive licences, in respect of the orphan works, to do any act restricted by copyright that would otherwise require the consent of the missing owner.

The Act has been widely dubbed the “Instagram Act” – a reference to Instagram’s hugely unpopular attempt last year to commandeer the sub-licencing rights to Instagram users’ photos (read more here).

In support of the Act, the UK Intellectual Property Office (IPO) argues that, because the copyright owners cannot be found to ask their permission, there are many millions of orphan works, particularly in cultural institutions, that cannot be digitised for display to, and use by, the public.  For example, the Imperial War Museum has an estimated 2.2 million photographs where the rights holder has not been traced. This, they argue, is a restriction on both cultural and economic growth.

However, the reforms have inflamed many commentators.  More than 70 photography groups presented a joint briefing paper to the British government expressing concerns that the legislation will “reduce the ability of creators to make a living from their work; confiscate the property of British citizens and of those to whom the UK owes a duty of protection under international treaties; and diminish the UK’s current world-leading position as a home for the creative industries.”  Bolshy US writers and photographers have also promised that the reforms will be met with a “firestorm” of international litigation.

How could recent works by artists end up as orphans?  In the bustling pandemonium of cyberspace, millions of images become quickly orphaned online as they move from Instagram to Facebook to Twitter to Tumblr like a crowd surfer at Laneway Festival.  While many photographers may be unfazed by their photos being passed around by Tweeting teenagers, it’s a different kettle of fish when their images unexpectedly show up on the pages of British tabloids.  Of course, a party wishing to obtain rights to an orphan work would still have to perform a “diligent search” for the rights holder.  However, “diligent search” is not defined in the Act and, unfortunately, comprehensive image recognition services are not yet in place (compared with sound recognition services like Shazam).  Even images embedded with metadata can easily be stripped of that data, rendering those happy snaps exposed and ripe for abduction.

Similar orphan works reforms were introduced as part of the Digital Economy Bill 2010 (UK), and were subsequently dropped following a furious public backlash.  This time, the legislative changes are snuggly buried in the depths of the Enterprise and Regulatory Reform Act, which also deals with such broad topics as employment, agriculture and cartels.  The precise details of the reform are not yet known, as the Act is merely enabling legislation.  The nuts and bolts will come later in the form of a statutory instrument (secondary legislation).  Although parliament technically still needs to pass the statutory instrument, it has not voted down one of these instruments since 1979, so the parliamentary process from now is largely a formality.

There is no equivalent to these UK reforms in Australian copyright law.  Nothing allows the use of a work without permission merely because it is an orphan work.  There is one exception that allows the reproduction or publication of old (more than 50 years after the author has died) unpublished works held in libraries, provided it is done for the purpose of research or study.[1]

As with any responsible pet owner, there are things creators can do to make their works less likely to go walkabout.  These include:

• tagging your works with watermarks and metadata;
• including your contact details on your works and responding to any requests you receive promptly; and
• registering your work with government agencies.

Ultimately, time will tell whether this reform will result in hoards of stolen “orphans” and the prophesised “firestorm” of litigation.

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The Patents

The patents in suit, owned by the Australian company Alice Corporation Pty Ltd, related to the management of “settlement” risk in financial transactions – the risk that one party to a transaction will perform its obligations, whereas the other party won’t, thereby leaving the paying party at a significant disadvantage. Alice’s patents used a trusted third party to avoid this potential disadvantage. The claims were categorised into three groups:

• ‘Method claims’, reciting various methods for managing and exchanging obligations and/or financial data.
• ‘Computer readable medium claims’, which essentially covered computer storage media (such as disks or other computer storage devices) having computer programs stored on them, which could perform the above methods; and
• ‘Computer system claims’, which claimed computer systems having various (conventional) hardware components, configured to perform the above methods.

The Decision

The method claims did not specifically recite the use of a computer, but both parties agreed that these claims did require a computer implementation.  Nonetheless, despite significant dissent, a majority of the court found that this computer involvement was not enough to save the method claims – they were all found to essentially still be directed to ‘abstract ideas’. The inclusion of a computer was held to be generic and no more than “insignificant post-solution activity”. Therefore, these method claims were held not to cover patentable subject matter. Similar reasoning was applied to the computer readable medium claims, with a similar split in the court.

The computer system claims proved an even more difficult matter – the court was evenly split as to their patentability. One half found that “merely adding existing computer technology to abstract ideas – mental steps – does not as a matter of substance convert an abstract idea into a machine.” They warned “clever claim drafting” could not turn an essentially abstract idea into patentable subject matter. The other half of the court held that it was nonsensical to consider that a claim directed to a “computer system” could ever be a mere abstract idea – Chief Judge Rader stated that to label these claims as an abstract idea “wrenches all meaning from those words.”

Appeal to come?

The decision starts out by stating, “What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis—a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts”. On that ground, with no fewer than seven separate opinions, the decision was an abject failure– so much so that Chief Judge Rader (generally considered a pro-patent judge) was sufficiently disheartened to insert a separate, melancholic reflection on the state of US patent law. If ever a case was primed to go on appeal to the Supreme Court, this one is!

In the meantime, in Australia, we wait on our own decisions on this issue, with Research Affiliates v Commissioner of Patents, Dynamite Games v Aruze Gaming Australia, and RPL Central v Myall Australia all at various stages of appeal in our court system. There are certainly interesting times ahead in the patent world, for computer-implemented inventions.

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