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Regulate High Frequency Trading?

The recent financial crisis has led to heightened scrutiny across the financial markets.  After the markets collapsed in 2008 there were calls for increased regulation of the financial markets, which led to the passage of the Dodd Frank Act.  Despite the increased scrutiny and regulation, not every aspect of the financial markets is sufficiently covered and grey areas exist where it is unclear how the law will affect certain practices. One such practice is that of high-frequency trading. High-frequency trading is the use of sophisticated technological tools and computer algorithms to rapidly trade securities.  High-frequency trading uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.  It is said that this form of trading benefits the markets by moving supply and demand among long-term investors quickly and efficiently thereby reducing volatility and increasing liquidity. However, opponents of high-frequency trading have identified numerous perceived problems associated with the practice.  One such problem is that securities exchanges have been selling access to market data to high-frequency traders in such a way that they have access to the information a very short period of time before other investors.  Opponents claim that high-frequency traders then use this information to improperly influence the financial markets – at the expense of other investors that lack this “earlier” access to the market data provided by the exchanges. The trouble in attempting to root out any potential violations associated with these problems lies in the current regulatory scheme governing the financial markets.  For example, the SEC has the power under §11A(c) of the Securities and Exchange Act...

CVSG Filed in Commil: Is This Yet Another “Fundamental Misunderstanding” of Patent Law by the Federal Circuit?

On June 2nd, the Supreme Court unanimously reversed the Federal Circuit’s decision in Limelight Networks, Inc. v. Akamai Technologies, Inc. The Court found a defendant could not be held liable for induced infringement of a patent under 35 U.S.C. §271(b) where there has been no infringement under §271(a). In the opinion, the Court had some harsh words for the Federal Circuit. The Court was uncertain why, despite the “simple truth” that liability for inducement must be predicated on direct infringement (to which all parties and the Federal Circuit agreed), the Federal Circuit nonetheless continued its analysis. Ultimately, the Court felt that “the Federal Circuit’s analysis fundamentally misunderstands” method patent infringement.  The amicus brief filed by the Government on October 16th in Cisco Systems, Inc. v. Commil USA, LLC suggests that if and when the Court considers the case, it might reject the Federal Circuit’s decision with comparable vigor. Commil alleged that Cisco both directly infringed and induced infringement of its method patent for hand-offs of mobile devices between base stations in a wireless network system. During the district court trial (the second, the first being reversed after an attempt to unfairly prejudice the jury by counsel for Cisco), the jury found for Commil on both issues and awarded $63.7 million in damages (with an additional $10.3 million awarded by the court for prejudgment interest and costs). On appeal, Cisco argued that the jury instruction on the claim of induced infringement used the language of negligence as opposed to instructing the jury on the higher scienter requirement the Court has adopted for induced infringement cases. Of greater importance, the Federal...

“We Don’t Care”? Maybe Kanye should…

140 characters may not seem like enough room to really say something of value. But if Kanye West is saying something, it can be worth a lot more than one may expect. Etsy seller “supervelma” has hand-stitched popular tweets from the rapper Kanye West onto fabric, framed them, and is currently selling them for $45 each on the online craft retailer Etsy. Understandably, West may be upset that someone else is profiting off of his hard-earned Twitter notoriety, but does he have a remedy? Copyright is the traditional form of protection for works of art. Having a registered copyright can prevent others from reproducing the work, making a derivative piece of art based on your original work, or further diluting the value of your work by displaying it. West could argue a claim of copyright infringement, however he may encounter difficulty proving that a tweet can actually receive copyright protection. Many tweets simply state facts—which cannot be protected by copyrights—or link to news articles, whose headlines are generally found to be insufficiently creative to warrant copyright protection. It is also debatable whether a tweet like, “Fur pillows are hard to actually sleep on” meets the de minimis requirement of creativity that a copyrighted work must have. Most copyright experts agree that there is not a bright line rule about whether tweets can gain copyright protection; a copyrightable tweet would certainly be the exception rather than the norm because of the observational nature of Twitter. West—a professional wordsmith—might be able to make a stronger argument than most that his tweets go beyond mere observations, and are artistic expressions that might...

The Broader Benefit of Benefit Corporations

Ello, an ad-free social network, recently closed another round of venture funding, raising $5.5M. Exciting right? Another social media start-up getting some Series A funding. While $5.5M is surely nothing to sneeze at, perhaps the more interesting feature of this next stage of Ello’s life is that it’s registered itself as a public benefit corporation, enshrining in its corporate charter as a “public benefit” that it will never show ads or sell user data. To date, 27 states have enacted legislation recognizing “Benefit corporations,” entities that give directors legal protection to pursue social and environmental goals over maximizing investor returns. According to benefitcorp.net, a defining characteristic of benefit corporations is that “they are required to create a material positive impact on society and the environment.” One of the largest early adopters of the benefit corporation form was outdoor clothing and gear company Patagonia. In doing so, Patagonia sought a structure that would prevent shareholders from suing it in the pursuit of costly environment initiatives, such as donations to environmental organizations and support of renewable energy sources, that allowed it to serve the welfare of the global community. Warby Parker, with its initiatives ranging from staying carbon neutral, to providing lost cost eyewear to those in need, and even sponsoring a local Little League team, similarly sought the insulation of its directors through the benefit corporation structure. In both examples, the benefit corporation produces a direct, measurable and concrete positive impact on their communities and the environment. Ello’s election to benefit corporation status brings with it a tweak to what we’ve seen so far. Even though Ello has registered as...

SOPIPA: A first step towards national standards for student data protection

In recent years, school districts have begun incorporating computers and tablets in the classroom to instantly deliver personalized content and interactive technologies to enhance student learning.  However, the increasing use of technology in classrooms coupled with the expanding market for targeted advertising has sparked major concerns over third-party collection and use of student data. Children are particularly vulnerable because, unlike adults who generally understand the implications of consumer privacy policies, children are unable to give any sort of meaningful consent to the type of collection scheme utilized by education technology companies.  While the federal law does offer some protection to the online privacy of children, these laws were written before the information era of smartphones and cloud storage. On Sept. 29, California became the first state to pass a sweeping law that protects the use of student educational data by third-party vendors.  The Student Online Personal Information Protection Act (SOPIPA) prohibits online education service companies from selling and/or using student data for purposes of targeted advertising.  Specifically, it prohibits the use of “information, including persistent unique identifiers, created or gathered by the operator’s site, service, or application, to amass a profile about a K-12 student, except in furtherance of K-12 school purposes.”  The law also requires online service providers to implement security procedures to protect student data and requires that these providers delete data at the request of a school. In response to SOPIPA, certain key industry players signed onto a pledge to adopt similar student data protections nationwide.  By signing the pledge, the participating companies publicly promise not to sell information or conduct targeted advertising using data obtained...

Is Electronic Dance Music Illegal?

Bad news for music fans: Girl Talk is illegal[1], according to language put forward by the Sixth Circuit. This language applies to all “mash-up” artists and “sample artists” that use clips from other artist’s songs without permission. According to a 2008 New York Times, “Girl Talk’s music is a lawsuit waiting to happen.” Yet, to this date, not even one of the hundreds of artists sampled by Girl Talk has brought a lawsuit against him. Meanwhile, Girl Talk is paid handsomely to tour all around the world and even has his own day named after him in Pittsburgh. Girl Talk takes different elements from many diverse styles and decades of music—for example, a Rolling Stones guitar riff, an 80’s electronic drum beat, and an early 2000’s rap verse—and mashes them all into his own modern symphony. A four-minute Girl Talk track may have over thirty different artists on it. Girl Talk has released six albums, all of which you can download for free off of http://illegal-art.net/girltalk/. As one site put it “Girl Talk’s album Feed the Animals, which uses over 300 samples, would have never been made if he felt the need to do it legally.” Requiring that mash-up acquire licenses for all of his sound clips would eliminate mash-ups as a style of music. This all begs the question—is Girl Talk legally obligated to pay for licensing fees for all of the artists he samples? Or morally obligated? The answer may be different for each of these questions, according to some legal scholars. Some agree that the law, as it currently stands, bans mash-ups, but advocate for an alternative system of licensing for...

Is Genius.com the Next Napster?

Back in 1999, two tech nerds named Shawn Fanning and Sean Parker upended the entire music industry with the launch of their peer-to-peer music sharing service Napster. All of a sudden, music consumers could get any song they desired for the price of “free.” In less than a year, Napster had over 20 million users. Napster obviously facilitated copyright infringement and the music industry responded strongly, fronted by the RIAA (Recording Industry Association of America) and high-profile artists such as Lars Ulrich from Metallica and Dr. Dre. By July of 2001, the RIAA’s lawsuit successfully shut down Napster. While the music industry may have won the Napster battle, it looks like it’s still losing the digital war over free distribution of copyrighted property. According to the RIAA, record sales in the US have dropped 47%, from $14.6 billion in 1999 to $7.7 billion in 2009. Some studies have found that music piracy worldwide accounts for an economic loss of $12.5 billion year. Other studies claim that economic loss to the music industry is beside the point of copyright protection. As the argument goes, copyright protection exists to incentivize the creation of new works, and according to some analysts, high quality musical creations are still produced at high volumes even since the “Napster Revolution.” While online piracy of digital music is a fairly obvious and high-profile example of intellectual property theft, artists and record labels stand to be highly compensated through means other than record sales. Whenever a bar plays a copyrighted song on a jukebox or a network covering a football game broadcasts a famous tune played by a marching band, royalties...

Technology Companies Fight Back Against Government Requests For User Data

In response to privacy concerns surrounding data transmission and disclosure of information, the federal government has enacted a couple of laws, most notably the Privacy Act of 1974 and the Health Insurance Portability and Accountability Act (“HIPAA”), in order to safeguard individuals’ private information. The Privacy Act of 1974 was enacted in reaction to the dawning age of information and was an attempt by the federal government to protect individuals’ privacy rights. The Act requires governmental agencies to do four things regarding the information they collect and store about private US citizens: 1) to, upon request, tell an individual what information they’ve collected about him or her, 2) to allow individuals to correct or amend that information, 3) to use certain principles when handling and using the information, and 4) to follow certain guidelines restricting how the individual’s information is shared with other agencies and people. HIPAA provides similar protections, specific to disclosures of personally identifiable information in the healthcare setting. However, despite the enactment of such federal laws, people like Steven Rambam, CEO of Pallorium, an international investigative agency, deliver lectures titled “Privacy is Dead – Get Over It”. The feeling that federal laws don’t protect individuals from unauthorized disclosures of private information is probably due in large part to the fact that neither the Privacy Act nor HIPAA, adequately protect consumers from US law enforcement agency requests for user information, such as requests from the National Security Agency.  Instead, providing safeguards from excessive government surveillance falls to the technology companies in possession of private individuals’ information. There has been a lot of push back from technology companies...

Yielding to FCC Pressure, Verizon Scraps Plan to Extend Data Throttling to 4G Customers

Last week, Verizon appeared to cave to FCC pressure when it shelved a new network management policy which would have extended the controversial practice of “data throttling” to 4G customers with unlimited data plans.  Verizon’s decision put an end to its two-month spat with the FCC over whether the new policy would have violated the FCC’s Open Internet Order. To provide some background: Verizon has “throttled” (i.e. slowed) data speeds for some customers on its 3G network since February 2011.  This practice only affects customers on “unlimited” data plans whose data usage ranked in the top 5%, and only lasts for the duration that they are connected to a “congested” cell site.  On July 25 of this year, Verizon announced that, starting in October, it would extend this network management policy to its 4G network. Luckily for 4G customers on unlimited data plans, the FCC was paying attention.  In a letter sent less than a week after Verizon’s announcement, FCC Chairman Tom Wheeler expressed doubts as to whether the new policy fit within the Open Internet Order’s definition of “reasonable network management.”  In particular, Mr. Wheeler found it “disturbing” that Verizon would “base its network management on distinctions among its customers’ data plans, rather than on network architecture or technology.”   Verizon responded swiftly to Mr. Wheeler’s criticism.  In a letter sent just two days later, Verizon explained that the policy targeted customers on unlimited data plans because they do not have an incentive to limit their data usage, which made them disproportionately responsible for network congestion.  On its face, this argument seems reasonable—after all, the FCC gives “mobile” broadband...

What will happen to biotech’s patent thickets after Myriad and Prometheus?

Changing patentable subject matter standards have been on the mind of biotech patent holders for the last few years. A wide range of biotech patents that were widely considered valid have been called into question by the decisions in Mayo v. Prometheus and AMP v. Myriad. Even if the number of patents that are actually ruled invalid proves to be low, the uncertainty could still dampen investment in new technologies. This uncertainty has been particularly acute in the area of personalized medicine, where the Myriad ruling left a large number of diagnostic patents in question. Since the ability to diagnose individuals based on genetic and other biological information are key to the idea of personalized medicine, the ability to patent tests for specific indicators is important for its long-term growth. Patent holders aren’t giving up without a fight, but the weakening of their patents gives them less leverage in their negotiations. While diagnostics may be struggling to maintain adequate patent protection, some areas of personalized medicine research have more protection than they need. A recent article in Nature Biotechnology explored the patent landscape that is forming around induced pluripotent stem cells (iPSCs). iPSCs were the basis of a Nobel prize in 2012, and are an exciting area with the potential to completely change the way that some areas of medicine are practiced. iPSCs could theoretically give scientists and doctors the ability to take a person’s existing cells and grow them into any cell type in the body, like new pancreatic cells for people with diabetes or new heart tissue for heart attack patients. Most of the patents on iPSCs...

Weighing Patent Versus Trade Secret Protection in the Prior User Rights Era

As part of the Leahy-Smith America Invents Act (AIA) signed into law on September 16, 2011, Congress expanded the Prior User Rights defense to patent infringement.  Initially only available for business method patents, the AIA expanded Prior User Rights to all classes of inventions, with the goal of harmonizing the US patent system with IP rights in the rest of the world.  Prior User Rights are defined in the Patent Act under 35 USC 273 and provide an affirmative defense to patent infringement.  In order to prevail on the defense, the accused party must prove that they were practicing commercial use of the invention at least one year before the patentee’s effective filing date.  Thus, Prior User Rights are not something that a company can apply for like a patent, but rather they are a defense available to parties who present evidence of prior use in a patent infringement suit.  The defense is generally unnecessary for parties that non-secretively practice an invention, since they may present their prior use as a form of prior art under 35 USC 102 to invalidate the patent.  However, parties that use an invention in secret (e.g., a “trade secreted” process) may not present their use as prior art, but rather under Prior User Rights may present evidence of prior use as an affirmative defense to infringement, thereby making Prior User Rights part of a combined IP strategy with trade secret protection. Many companies in industries and technologies where trade secret protection is a viable strategy must weigh the pros and cons of trade secret versus patent protection.  Patent protection offers the right to...

New iOS and Android Encryption Protections Spark Privacy Debate

On September 17, Apple updated its privacy policy to reflect privacy enhancements added to its most recent iteration of its iPhone mobile operating system, iOS 8. Notably, the update highlighted iOS 8’s new protection for user phone data: out-of-the-box passcode encryption that the company itself cannot bypass. Similarly, Google recently related to the Washington Post that Google’s latest mobile operating system offering, Android L, would also include default user-end passcode encryption that cannot not be circumvented by Google. ALCU technologist Christopher Soghoian and Center for Democracy & Technology technologist Joseph Lorenzo Hall applauded the moves to enhance consumer protections in the wake of increased government surveillance stoked by Edward Snowden’s leaks last summer. But not all are pleased with the announcements. Notably, Ronald H. Hosko, President of the Law Enforcement Legal Defense Fund and former Assistant Director of the FBI Criminal Investigative Division, criticized the moves in a recent op-ed as protecting “those who desperately need to be stopped from lawful, authorized, and entirely necessary safety and security efforts.” Hosko’s point indicates a possible shift in the legal landscape of digital privacy rights. In its recent Riley v. California opinion, the Supreme Court weighed in on the digital privacy debate, holding that authorities generally may not search digital information on a cell phone seized from an individual without a warrant. However, even upon obtaining a warrant for user data, police now face an additional difficulty, as they can no longer can lean on Google or Apple to procure this data. As Apple itself pointed out in its revamped privacy policy, with the addition of these new encryption protections, “…it’s...

Apple’s Canary Fails to Chirp

Recently, Apple updated the privacy section on its website. While this was likely part of their response to privacy concerns due to the recent iCloud controversy, and fortuitously timed with the release of the newest batch of phones from the company, it also contains the latest edition of their transparency report. This report is a collection of the requests made by governments around the world for information about Apple device users and account holders. Curiously though, the most controversial aspect of the report may be what is not included. As the Electronic Frontier Foundation reported Apple was one of the first major companies to make use of the device known as a warrant canary. A warrant canary is one of the methods that a company may use to alert the public of otherwise secret demands made by US government. Following the passage of the USA Patriot Act in 2001, the availability of secret subpoenas has been dramatically expanded, and may be used against anyone who may have information which the authorities consider relevant to their intelligence or terrorism investigations. Because of the nature of these subpoenas, criminal penalties may be assessed against individuals who reveal even the existence of the requests for information. To get around this, a company may publish a public statement that they have not received such a request. If that is no longer true, removing the statement, or refusing to make it again, signals the public that the government has asked for data. In the transparency report covering early 2013 Apple stated that it “has never received an order under Section 215 of the USA...

Who owns copyright in a selfie when it’s captured with one person’s phone but by another person’s finger? And what if that other person is actually a monkey? Or a Bradley Cooper?

Earlier this year, Ellen DeGeneres briefly “broke” Twitter after tweeting a selfie full of celebrities, captured while she was hosting the Oscars. In an attempt to beat the record for most re-tweets ever, she enlisted megastars like Meryl Streep, Julia Roberts, Lupita Nyong’o, Kevin Spacey, Brad Pitt, and Jennifer Lawrence. Shortly after, Ellen gave the Associated Press permission to reproduce her selfie in a news article. But some have argued that the reproduction right – a right reserved to the copyright owner of a work – wasn’t necessarily Ellen’s to give. Technically, Bradley Cooper was the one who pressed the shutter button, evidently because he had the longest arms. Copyright ownership vests in the author of a work, and in the case of photography the author is normally the person who literally creates the photograph by pressing the shutter. In some instances, however, the author is defined as the person directing the creative vision of the work, such as choosing the lighting, composition, costumes, and settings, without actually pressing the button. So why does it matter? For the most part, it doesn’t. The selfies that you or I take are probably not going to be published in magazines or newspapers, unless newspapers are suddenly interested in my new haircut or in what you look like in the bathroom mirror. But Ellen’s selfie was the most retweeted picture of all time, and it was certainly newsworthy, at least in the days following the Academy Awards ceremony. Another selfie has recently been the subject of some news as a wildlife photographer is claiming copyright ownership of a photograph technically taken by a monkey. In...

Bullies & Hackers: Cyberbullying lessons for revenge porn statutes

Another year, another batch of nude celebrity photos flooding headlines and the internet. This month, actress Jennifer Lawrence, model Kate Upton, and a handful of other female celebrities became the latest celebrity hack victims when an anonymous user on the online message board 4chan posted dozens of photos of the women nude. As with past leaks, the reaction has followed a similar pattern: the FBI looks for the poster and the media asks what can be done. Between the Computer Fraud and Abuse Act and the Electronic Communications Privacy Act, the answer is a lot. In 2012, federal prosecutors used both to convict Christopher Chaney after he hacked and posted personal photos of the actress Scarlett Johansson online. Chaney is serving a 10 year prison sentence, but the legislative landscape has changed since his trial, including the criminalization of revenge porn. This blog has covered these laws before, but to recap, revenge porn refers to distribution of sexually explicit media online without the consent of the pictured individual, for the purpose of humiliation. In the wake of this latest leak, there have been calls in the media to crack down on revenge porn posters and websites. To that effect, thirteen states have passed laws that make posting revenge porn a misdemeanor, while 27 more state legislatures have introduced similar bills in 2014. However, those calling for prosecutors to use revenge porn statutes against the celebrity hackers should pause to consider the challenge faced by another recent cyber speech proposal. That proposal involves cyber bullying and a statute criminalizing it in Albany County, New York. This past July the state’s...

Why Tesla Opened Its Patent Portfolio

On June 12, 2014, the CEO of Tesla Motors (Tesla), Elon Musk, posted an external memo entitled “All Our Patent Are Belong To You.”  In short, the memo details why Tesla is opening up its patent portfolio to the market.  The primary reason given for this drastic move seems to be a David versus Goliath mentality.  Musk wrote, “[o]ur true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” While most people know Tesla as an electric car manufacturer, it is really a successful battery company that has been focusing its efforts on building a market for its battery technology.  As of late June 2014, 120 of Tesla’s 172 issued patents related to battery and charging technologies.  While at first glance the decision by Tesla to open its patent portfolio seems altruistic and selfless, it is likely a power play to strengthen the electric vehicle market as a whole and increase Tesla’s potential market for its battery technology.  In 2013, less than 1% of all vehicles sold were electric, and Tesla accounted for approximately 25% of that 1%.   Musk would likely rather see Tesla make up a much smaller percentage of a much larger market. Musk seems eager to inject a bit of competition into the electric vehicle market in order to spur innovation, increase customer adoption, and share the load in convincing the public that electric vehicles are a viable option.  Tesla is at a stage in its life that not many businesses will ever see – Tesla is lobbying...

Googling “Search Bias”: The Efforts of Antitrust Agencies to Even the Playing Field.

Google has been a target of antitrust allegations for nearly as long as it has existed. In recent years, agencies domestic and abroad have accused the tech giant of “search bias.” The charge of search bias—levied against Google by competitors and watchdogs—asserts that the company designed search algorithms to promote its own targeted content at the expense of third-party content and advertising. Google is a slippery target: twice now escaping essentially unscathed from investigation by the FTC and European Commission. The latter of these settlements, however, may be altered or even undone in the course of the next few months. In January of 2013, Google satisfied FTC investigations into antitrust violations of search bias because there was no evidence that Google intentionally sought to hurt competition. Admittedly, the FTC conceded, Google’s play-to-win attitude led the company to strive to out-best its competitors.[1] But Beth Wilkinson, FTC’s outside counsel, publicly maintained that “the FTC’s mission is to protect competition, and not individual competitors.”[2] From Google’s side, the company made two concessions in order to avoid fines by the FTC.[3] First, the company agreed to desist from preventing competitors’ access to key technologies by way of patent blocking. In essence, Google has a history of scooping up smaller companies and their valuable patent portfolios. Later, the company files injunctions against competitors seeking to purchase a license to use the patented technologies in their own products. Tech companies generally commit to license appropriate patents under FRAND (“fair, reasonable, and non-discriminatory”) terms. Google, conceding that there might have been some slippage on those promises with the above patents, has re-committed to the FRAND...

Appellate Review of Markman Hearings

In Markman, the Supreme Court declared that determining the meaning of patent claims, i.e. “claim construction,” is a question to be decided by the court; the Seventh Amendment right to a jury trial does not apply. Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). Shortly thereafter, in Cybor, the Court of Appeals for the Federal Circuit held that de novo review applied when results from these newly-created ‘Markman hearings’ are appealed. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc).   Earlier this year, the Federal Circuit granted a rehearing en banc to determine if Cybor should be overruled, and what, if any, deference should be given to a District Court’s claim construction. Lighting Ballast Control LLC v. Philips Electronics N. Am. Corp., ___F.3d___, WL 667499 (Fed. Cir. Feb. 21, 2014) (en banc). The court considered three options: (1) reaffirm Cybor and maintain de novo review, (2) overrule Cybor and declare claim construction a question of fact, or (3) adopt a “hybrid” standard of review that affords deference to the District Court’s factual determinations but preserves de novo review of the “ultimate” conclusion. Amici from industrial and technological companies advocated reaffirming Cybor. Academics and practitioners generally favored either the hybrid approach or the overruling of Cybor. Relying on stare decisis, a 6-4 majority reaffirmed Cybor.   The majority pointed out that since Cybor was decided, Congress has not acted to overturn it while enacting other patent legislation during that time. They further explained that predictability and consistency favor maintaining the status quo. Consistency is a concern particularly relevant in patent law...

Akamai and the Question on Joint Infringement on Method Claims in the Supreme Court

On April 30, 2014, the Supreme Court of the United States will hear opening arguments [1] for a landmark case found in patent law casebooks, Akamai Technologies, Inc. v. Limelight Networks, Inc., whereby the Federal Circuit, sitting en banc, held in a 6-5 ruling that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) when no direct infringement occurred under 35 U.S.C. § 271(a). [2] 35 U.S.C. § 271 states: “(a) … whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. (b) Whoever actively induces infringement of a patent shall be liable as an infringer…” The Federal Circuit overruled its own precedence set in BMC Resources, Inc. v. Paymentech, L.P., which had previously held that induced infringement requires a single party to commit all steps of a method constituting direct infringement under § 271(a).  In Akamai, neither Limelight nor its customers performed all of the steps, but nevertheless Limelight was found liable because Akamai and its customers jointly performed all steps.  The court reasoned that a party who actually participates in performing the infringing method should be “more culpable than another one who does not perform any steps” but instead induces another to do so. [3] Arguments supporting Judge Newman’s 35-page dissent include imposing an unfair obligation on businesses to speculate on potential future uses by a third-party buyer or user, the increased discovery costs to an already expensive procedure, and the potential for erroneously imposing liability on supplying non-infringing products and services. [4] ...

Supreme Court to Rule on Patent Eligibility for Process Claims

Last month, the Supreme Court heard oral argument in Alice Corporation v. CLS Bank. Many hope the Court’s decision in this case will help clarify the patent eligibly standard for process claims – particularly those process claims that are computer implemented and/or involve business method patents. Patent eligibility is based on 35 U.S.C. § 101 which allows any “process, machine, manufacture, or composition of matter” to be eligible for patent protection. However, laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection. It is important to note that patent eligibility is distinct from patentability (novel, useful, definite, non-obvious, etc.). For example, a chemist who discovers a previously unknown element cannot patent that element because it is a natural phenomenon. It is ineligible for patent protection regardless of how new and useful it is. Traditionally, process claims were evaluated under the “machine-or-transformation test” which conferred patent eligibility on the process if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In the 1970s, broad claims to computer-implemented processes that utilized a mathematical algorithm or formula without meaningful limitations were held ineligible for patent protection under the abstract ideas exception despite requiring a computer in order to be performed. See Gottschalk v. Benson and Parker v. Flook. Four years ago, in Bilski v. Kappos, the Court affirmed the Federal Circuit’s ruling that the process of “hedging risk” in the commodities trading industry is also an abstract idea not eligible for patent protection. However, the Court went on to declare that the machine-or-transformation test...

Virtual Reality Technology Going Mainstream?

While the idea of virtual reality technology has been around for decades, it has yet to make any substantial progress. The roots for virtual reality reach back to the late 1950s when the idea emerged to use computers as tools for digital display rather than just fancy calculators. By the early 1960s, communications technology was intersecting with computing and graphics technology, and this laid the groundwork for computer graphics and eventually, virtual reality. Over the past three decades, virtual reality hasn’t made any particularly significant advances. It has always needed more computational power than was available on standard home computers, mobile phones, and gaming consoles. Because of this, it was not able to grow. The technology itself has also been slow at developing a high resolution, real life experience. However, in the last few years, technologists have been taking steps to find solutions to these issues, spurring discussions on virtual reality technology once again. Recently, Mark Zuckerberg, Facebook CEO, announced Facebook’s acquisition of Oculus VR for $2 billion, bringing virtual reality to the forefront of the news. Even with the strides being made in the technology, however, no one is ready to commit to a release date for a virtual reality platform. Jeremy Bailenson, director of Stanford University’s Virtual Human Interaction Lab, says the trade-off between performance and price may be partly to blame. Facebook is not the only major company anticipating a breakthrough in virtual reality technology. Sony made its own commitment to the technology with Project Morpheus at the Game Developer’s Conference (GDC) 2014. Richard Marks, head of the Magic Lab inside Sony PlayStation R&D, said the...

Obama administration takes first steps to limit NSA data collection but is it enough?

Last week, President Obama announced that the government would halt its bulk collection of telephone records under the controversial NSA program. Instead the data will remain with the phone companies and government investigators can request judicial approval to release the records. President Obama’s announcement comes almost a year after former NSA Contractor Edward Snowden leaked information to the press. Some privacy advocates such as the ACLU are heralding the decision as a crucial first step in replacing the NSA’s dragnet surveillance methods with a more targeted program. Although the President and a House committee support changes to the current system, the exact details remain to be finalized in Congress. However, at least one commentator has noted that the proposal may not have much significance to the NSA. Phone companies already routinely collect logs of incoming and outgoings numbers and call length. The proposal also looks strikingly similar to existing procedures in the law for obtaining electronic data. For example, the federal pen register statute allows the government to obtain a court order for logs of outgoing phone numbers or email headers. The government must show only that the information is likely relevant to an ongoing criminal investigation. Similarly, the Stored Communications Act permits the government to obtain records or subscriber data based on specific facts that show there is reasonable grounds to believe that the records would be relevant to an ongoing criminal investigation. Although these investigative techniques are used primarily in criminal matters, they can provide a guideline for national security issues. Even a “reasonable suspicion” standard that an individual may be connected to a national security risk or harm may...

IRS Ruling Declares Bitcoin Will Be Taxed As Property

On March 25, 2014, the Internal Revenue Service issued a ruling declaring that it will tax virtual currencies, such as Bitcoin, as property. This ruling could have significant effects on the way that consumers use Bitcoin. The implication of the ruling is that Bitcoin can no longer operate as an alternative form of currency because any transaction using Bitcoin as consideration will lead to a capital gain or loss for the person paying with Bitcoin. Bitcoin fluctuates drastically in value, which means that almost every transaction using Bitcoin will result in some sort of gain or loss which will now be taxable at capital gains rates. So, for example, if a person buys a Bitcoin for $10 and uses it to purchase an item for $15, he or she will be required to pay capital gains tax on the $5 increase in value. The extreme value fluctuation, however, also explains why the IRS’s ruling may not be as extreme as some commentators suggest. It is, in fact, this value fluctuation which has led consumers to use Bitcoin primarily as an investment medium, like gold, silver, and other commodities, rather than as actual currency. The rapidly changing value of Bitcoin provides plenty of room for investors to try to maximize value by betting on the increase or decrease of the technological commodity. There are also significant administrative restrictions which will make the IRS’s ruling difficult, if not impossible, to enforce, at least with respect to the average individual. In order to determine the amount of capital gains tax an individual owes to the U.S. government, he or she will have...

Should Regulations Adapt to New Technology, or the Other Way Around?

This past week, Texas Governor Rick Perry came out in favor of changing Texas’ so-called “antiquated” laws prohibiting automobile manufacturers from selling directly to consumers. [i] In states across the country, these laws have come into recent controversy because they effectively prohibit Tesla Motors from selling their vehicles: for a variety of reasons, Tesla does not sell through an automotive dealer and instead sells their vehicles directly. This situation presents a classic question that has arisen throughout the history of the regulatory state. Should regulations adapt to new technology, or should new technology adapt to regulations? For the developer of the new technology, the answer is of course the former. Tesla Motors CEO Elon Musk has discussed several barriers to Tesla being able to adjust its sales model to utilize dealerships. For example, Musk has noted that dealers would be incapable of adequately explaining Tesla’s technology to consumers. He has also argued that dealers selling both Tesla’s and gas powered vehicles would have a conflict of interest. The incentive for dealers would be to perpetuate reliance on gas-powered vehicles, since most of their fleet is comprised of those vehicles. Finally, Musk has stated that the failures of other electric vehicle manufacturers prove that the dealership sales model is impractical for emerging manufacturers. Because these regulatory barriers are practically insurmountable to Tesla, Musk argues that they should be removed. Competitors to an emerging technology company counter that changing a regulation to adjust to a new technology in a way that hurts established companies is unfair. They have played by the regulatory rules and are now possibly being put at a competitive...