BLIP: Blogging Patents

In an apparent retaliatory lawsuit, Chris Ohman has sued the Lance Armstrong Foundation ("LAF") for infringing a design patent to its "BARKSTRONG" dog collar design. In his complaint, filed in the Northern District of Oklahoma last week, Mr. Ohman claims to own patent rights to the use of the LAF's signature LIVESTRONG mark on pet collars , and accuses "LIVESTRONG" pet collars sold by the LAF of infringement. The lawsuit appears extremely questionable in light of the fact that the Patent Office expressly denied Mr. Ohman design patent protection for collars with the word "LIVESTRONG " printed on them because of prior art found on none other than LAF 's own website.

The dispute between Mr. Ohman and the LAF appears to have begun in June, 2005 when Mr. Ohman began selling yellow pet collars with the markings BARKSTRONG and PURRSTRONG. Last September, to prevent dilution of its Trademark, LAF filed suit against Ohman in the Western District of Texas. According to the Texas complaint filed by the LAF, Mr. Ohman approached the LAF in July of 2005, a few weeks after filing a design patent application that, if granted, would give Ohman a patent on the use of LAF's signature LIVESTRONG mark for dog collars. Mr. Ohman's tactic did not work, and no license was granted. Meanwhile, the Patent Office refused to grant Ohman a patent with the LIVESTRONG mark, and, as shown below, Ohman was forced to remove it from his proposed drawings.

Undeterred, Mr. Ohman filed a lawsuit that, when scrutinized by the Court, may well raise concerns. Stay tuned for the continuing battle to see whose collars are the strongest.

If you help your industry adopt your patented technology as a standard and then sue companies that use the standard, bad things can happen. You might lose your patent rights, be sued or prosecuted for antitrust violations, unfair competition, and fraud. Even if you ultimately win your case at trial ... or on appeal ... the cost of getting mired in allegations of abusing the standards process can be high. Rambus, a memory design and patent licensing company, presents a case study in how costly and time consuming standards-related patent disputes can be. The cost to the industry can be even higher, which is why some standards bodies have been reacting to the problem by changing their patent polices to require more disclosure of patents and licensing plans.

THE RAMBUS SAGA

Rambus is a licensing company that holds a number of patents relating to DRAM memory architecture. In the early 1990s, representatives from Rambus attended meetings of the JEDEC working group that was developing new standards for what became known as the double data rate, or "DDR" type of DRAM. During those meetings, Rambus did not disclose some of its patents and patent applications to the committee. The new technology was included in the standard, and became widely used.

Beginning in 1999, after the new standard was well established, Rambus informed many of the major players in the DRAM market that it held patent rights that covered the standard, and warned them that they'd better pay for licenses. Rambus extracted substantial license fees from Samsung and Toshiba, and increased the pressure on others by suing several industry participants. This led the FTC bring an antitrust lawsuit against Rambus in 2002, alleging unfair and deceptive acts or practices in violation of the FTC act, and unlawful monopolization in violation of the Sherman Antitrust Act. Meanwhile, Infineon, who Rambus accused of patent infringement, countersued Rambus for fraud due to its conduct before the JEDEC standards committee.

Both the FTC and a jury in the Eastern District of Virginia found that Rambus conduct was wrong, and that Rambus was liable for antitrust and fraud. However, both decisions were ultimately overturned because the then-prevailing language of JEDEC's patent policy was found to be less-than-clear, both results were ultimately overturned. The Federal Circuit Court of Appeals overturned the jury's finding of fraud in 2003 because the wording of JEDEC's patent policy was found not to create a clear duty for Rambus to have disclosed its patents. Rambus, Inc., v. Infineon Tech. AG, 318 F.3d 1081, 1098 (Fed. Cir. 2003). However, Rambus quickly settled its remaining patent dispute with Infineon after the Virginia trial court found Rambus guilty of spoliation of evidence. In a subsequent dispute with Samsung, Rambus dismissed its patent claims and agreed to pay Samsung's attorney's fees to avoid further adverse decisions. On Tuesday, the Federal Circuit found that by dismissing the dispute and offering to pay Samsung's attorney's fees, Rambus rendered all remaining disputes moot. See Rambus v. Samsung Decision. As for the FTC action, last week, the DC Court of Appeals overturned the judgment of the FTC because the FTC failed to prove that Rambus had injured competitors. See Rambus Inc. v. FTC, Slip Op. 07-1086, 4/22/2008.

IMPLICATIONS FOR STANDARD SETTING

The Rambus cases, and the allegations associated with them have been closely watched by standards organizations, and the companies that participate in standards efforts. While Rambus appears to have avoided disaster, some standard setting bodies are beginning to change their policies and procedures to make patent obligations, and positions more clear. Historically, this has been a sticky area for standards organizations. On the one hand, standards organizations and their members wish to avoid "hold up" situations like the Rambus case. On the other hand, standards organizations and their members do not wish to be accused of price fixing or other anti-competitive behavior by adopting coercive polices that are later found to injure competition.

Recently, two standards bodies have sought and obtained approval from the department of justice of patent policies that should lead to increased patent disclosure. The IEEE obtained approval from the Department of Justice to adopt a policy that requires participants in standard setting initiatives to take a definitive, binding position regarding their willingness to license patents, or to expressly refuse to provide assurance. IEEE Announcement Another standards organization, VITA, which creates standards for certain computer bus architectures, also obtained DOJ approval of its new standards policy requiring disclosure of patents and licensing terms by industry participants. VITA Letter from DOJ.

At the same time, three of the worlds largest standards organizations, namely the IEC, ISO, and ITU, have adopted patent policies that strongly encourage disclosure of patents that are necessary for standards, and require participants in the standard setting practice to make patent positions more clear. See IEC, ISO, and ITU press release.

As more standards organizations change their polices to favor increased disclosure and more transparent obligations on their members, "hold-up" situations, such as happened in Rambus, should become less common. However, the new policies are likely to increase the burden on participating organizations that find themselves under increased pressure to commit to licensing terms before they fully understand the value of their patents.

Tuesday, the U.S. Supreme Court issued a much awaited decision concerning arbitration agreements. Hall Street Associates LLC v. Mattel Inc. Full Opinion in PDF format While this case won't grab many headlines and is unlikely to be featured on the evening news, arbitration agreements are very common in high-tech, which means that changes to this area of the law can have far reaching effects.

Arbitration clauses are popular for several reasons: (1) they dictate where a future case will be heard, (2) they remove the risks of trying the case to a jury, (3) they lessen exposure to class action lawsuits, and (4) they tend to favor businesses rather than consumers. PayPal, eBay, and many other software and on-line service providers include arbitration clauses in their standard terms of use, as do airlines, cruise ships, and outdoor arenas (though there is some question concerning the enforceablity of arbitration provisions in one-sided contracts such as software "shrink-wrap" licenses wikipedia:"shrink wrap contract"). They are also frequently used in intellectual property license agreements. But there's a catch. The federal statute governing arbitration, the Federal Arbitration Act ("FAA"), also "makes contracts to arbitrate "valid, irrevocable, and enforceable,' so long as their subject involves 'commerce.'" Id. at 5. Specifically, unless you can prove the arbitration involved corruption, fraud, misconduct, exceeding authority, or evident miscalculation of the award, the courts cannot overturn an arbitration decision. See FAA Sec. 10, 11. In other words, once an arbitration decision is made, you're stuck with it.

To make arbitration a bit more flexible, lawyers often wrote the terms of the contract to expand judicial oversight of the process. In the Hall Street case, the arbitration agreement gave the court power to change any arbitration award if the arbitration panel made a legal error, giving the disappointed party what amounts to a do-over in Federal Court. The exact wording of their agreement was as follows:

"[t]he United States District Court for the District of Oregon may enter judgment upon any award, either by confirming the award or by vacating, modifying or correcting the award. The Court shall vacate, modify or correct any award: (i) where the arbitrator's findings of facts are not supported by substantial evidence, or (ii) where the arbitrator's conclusions of law are erroneous."

In other words, the parties agreed to make the binding arbitration a little less binding. Until this week, federal courts in eighteen states allowed this practice, courts in twenty-two states rejected it. Numerous organizations filed friend of the court briefs in support of one side or the other, some arguing the importance of finality in arbitrations, others predicting doom and gloom for arbitration if the courts were not allowed more oversight. Now the matter is settled. The wording of the statute governs, and parties can not obtain heightened judicial review by writing their arbitration agreement to allow it. In other words, absent a few narrow exceptions, you're stuck with the arbitrator's decision.

This doesn't mean that the parties cannot protect themselves from arbitrators who ignore the law. Arbitration agreements can, and often do, include requirements that specify the rules and procedures that must be followed. My prediction is that going forward, arbitration provisions will become a bit more detailed as to the legal procedures that must be followed, giving parties and their lawyers a few more things to argue about when drafting a contract.

Real guitar maker, Gibson Guitar Corporation, is accusing the simulated guitars used in popular video games like the "Guitar Hero" series and "Rock Band" of patent infringement.

On March 21, 2008, Gibson filed two lawsuits for patent infringement in Nashville. One of those lawsuits names Harmonix Music Systems, MTV Networks and Electronic Arts as defendants. Apparently, these are the companies that market and distribute the Rock Band game and at least some of the Guitar Hero titles. The other suit was filed against a number of major retailers like Amazon and Target who sell those video games.

Gibson's patent, U.S. Patent No. 5,990,405, is titled "System and method for generating and controlling a simulated musical concert experience." The abstract to Gibson's patent - which often, but not always, explains the gist of the invention - states as follows:

"A musician can simulate participation in a concert by playing a musical instrument and wearing a head-mounted 3D display that includes stereo speakers. Audio and video portions of a musical concert are pre-recorded, along with a separate sound track corresponding to the musical instrument played by the musician. Playback of the instrument sound track is controlled by signals generated in the musical instrument and transmitted to a system interface box connected to the audio-video play back device, an audio mixer, and the head-mounted display. An external bypass switch allows the musician to suppress the instrument sound track so that the sounds created by actual playing of the musical instrument are heard along with the pre-recorded audio and video portions."

There are, however, some differences between the system described in Gibson's patent and Guitar Hero. For instance, Gibson's patent - which was filed back in 1998 - describes an invention where "the video and sound portions of a musical performance or concert is pre-recorded on a video tape, digital disc, or other media containing audio and video tracks." A video game run on by a microprocessor is obviously different from a video tape. Indeed, Gibson's patent says that "[o]ne advantage of the system is that no computer is needed to operate or control it."

Another distinction may be the use of real-life "musical instruments" as opposed to a plastic, guitar-shaped video game controller. In fact, Gibson's patent goes so far as to refer to the user as a "musician." Now I've played Guitar Hero a few times, but I don't think I'd call myself a "musician." My virtual rock star skills have yet to translate into actual guitar-playing ability.

Of course, it's too early to tell whether any of these differences will mean "game over" for Gibson's infringement case. But it's a safe bet that the defendants are already preparing their defenses.