In March 2010, a U.S. district court’s ruling that isolated DNA and inventions that use isolated DNA are not eligible for patent protection sent shockwaves through the biotech and life sciences sector in Canada and the US. Association for Molecular Pathology v USPTO, 09 Civ. 4515 (Link courtesy of Genomics Law Report) resulted from a lawsuit against Myriad Genetics, a company that patented the BRAC1 and BRAC2 genes, genes associated with increased risk of breast cancer and ovarian cancer.  The court overturned the patents on the basis that inventions that use isolated DNA are not markedly different from “products of nature”.  The decision is currently under appeal to the US Federal Circuit and a decision is expected in 2011. 

BioBusiness Magazine has interviewed Richard Stobbe on this topic in its current issue: The Myriad Decision: What does the patent dispute mean to Canadian biotech? 

Calgary – 07:00 MST

 

We’ve all agreed to releases and waivers. We do it on paper, before bungee jumping, skiing or attending a kids’ birthday party. Or we agree online, before booking an event, ordering a product or downloading software. This is the fine print that essentially says that the operator or vendor has no liability or limited liability for any injury, damages or loss. Do these hold up in court?

In a recent case (Loychuk v. Cougar Mountain Adventures Ltd., 2011 BCSC 193) the BC Supreme Court had to consider this question in connection with an injury from ziplining. Prior to booking the activity online, the participants were advised on the website that a waiver of liability was required in order to participate in the activity. It was a one-pager entitled “RELEASE OF LIABILITY, WAIVER OF CLAIMS AND ASSUMPTION OF RISK AGREEMENT”. The participants signed a paper copy of the release before ziplining, and an injury occurred. The court dismissed the personal injury lawsuit on the basis of the release, confirming a long line of cases upholding such clauses.

Vendors and operators who wish to make use of such clauses in their online agreements should take care in drafting and implementing the terms. 

 

Calgary – 07:00 MST

 

 

Answer: Forum Selection.  The concept of “forum selection” can be summed up as follows: where 2 parties are entering into a contract and they are located in different jurisdictions (different countries, provinces or states), then they can choose the “forum” or the location where their disputes will be settled. This choice usually covers both law and location – for example, the law of Alberta and the courts located in Calgary. Or the law of B.C. and arbitration in Vancouver. These clauses are also referred to as “mandatory jurisdiction” or “choice of law” clauses. There are subtle differences between them, but generally they all serve the same purpose.  As an online consumer, you may have agreed to be bound by the laws of Washington State (Microsoft), California (Apple) and Ontario (BlackBerry).

In the US, forum selection clauses are respected by the courts: a recent decision (Evans v. Linden Research, Inc., E.D. Pa. Feb. 3, 2011) upheld the provisions of the Second Life online user agreement, confirming California as the proper venue pursuant to the forum selection clause.

In Canada, courts will generally hold the parties to their contract, which includes their choice of law and forum. So these clauses will be upheld, unless there is “strong cause” or convincing evidence to satisfy the court there is a really good reason not to uphold the forum selection clause. Sounds a bit circular – (courts will uphold the clause…unless they won’t) – but this gives Canadian courts the flexibility to weigh the surrounding circumstances. In the recent case of Hudye Farms Inc. V. Canadian Wheat Board, 2011 SKQB 29 (CanLII), an online sign-up process for a Canadian Wheat Board grain-handling contract incorporated certain standard terms. These standard terms specified that disputes would be governed by the courts of Manitoba and the application of Manitoba law.  Although no-one actually signed those terms, the court agreed that they were binding on the parties through a series of agreements and click-through screens.  The clause was upheld, and the lawsuit transferred to Manitoba.

Related Reading: E-Commerce & Internet Jurisdiction

Calgary – 07:00 MST

 

 

What do you get when you photograph someone else’s photograph? German photographer Michael Wolf received honorable mention in this year’s World Press Photo Contest for a series of images from Google Street View. He scrolled / strolled through Street View in different cities, and photographed scenes that he came upon. Let’s leave aside the question of whether this qualifies as art or photojournalism (maybe it’s both), and look at the copyright issue. Can a photograph of another image be protected by copyright or is it an infringement of the copyright in the original work?

The Quebec Superior Court in Ateliers Tango Argentin Inc. v. Festival d’Espagne et d’Amerique Latine Inc., (1997), 84 C. P. R. (3d) 56, dealt with a staged reproduction of a photo, rather than a photo of a photo. In that case, the defendant reproduced a photograph – same location, same angle, same layout of the same subject matter. The court decided that this infringed the copyright in the original photograph. Applying this reasoning, a photo of a photo could easily be an infringement.

In a 1999 US case, the court considered whether a copy of a photograph of a painting would infringe copyright.  Someone had taken photos that were exact replicas of paintings.  Copyright in the paintings had already expired at the time the photos were taken. The court decided that the photos are not themselves protected by copyright because they lack originality – an essential ingredient of copyright. So, copying those photos was not an infringement of copyright: Bridgeman Art Library v. Corel Corp., 36 F. Supp. 2d 191 (S.D.N.Y. 1999).

The image above? It’s not one of Mr. Wolf’s works – this one is my own image, snapped from Google Street View, right outside Field’s Calgary office. (If you look closely, you can see Google’s copyright notation on Calgary’s summer sky.)

Calgary – 07:00 MST

 

Is the use of a competitor’s name in keyword advertising considered trade-mark infringement? 

The short answer is that in Canada, we still don’t know. The closest decision we have is from a recent lawsuit which deals with competing career colleges in Vancouver. Vancouver Career College (VCC) had an aggressive policy of buying up the keywords of competitors. In Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc., 2011 BCCA 69, the BC Court of Appeal has upheld a lower court decision  that the keyword advertising program of VCC was not misleading advertising.  Unfortunately, this is not a trade-mark decision, so it provides little guidance on the topic for business, since the lawsuit involved interpretation of a subsection of the BC Private Career Training Institutions Act.  Here, in deciding that consumers were not likely to be deceived, the court noted that the nature of the “product” will be relevant. Consumers spending several thousand dollars on career training courses are not likely to make snap decisions based on sponsored links; they are more likely to weigh their options carefully after going through a lengthy review and admissions application procedure. 

We still have to wait for a decision based in Canadian trade-mark law to provide useful business guidance in this area.

Related Reading:

• Google Adwords Update (from the IP Group at Field Law) 
• Google AdWords: Can’t Beat ‘Em?

US Update:

• Google Suffers Surprising Preliminary Loss in Keyword Advertising Case–Jurin v. Google  

Calgary – 07:00 MST

In our earlier posts, we reviewed the recent Uniloc decision in the US that effectively disposed of the 25% Rule of calculating patent damages. Has this rule been used in Canada?

To a certain extent, yes. Here are 2 leading cases: In Alliedsignal Inc. v. du Pont Canada Inc., 1998 CanLII 7464 (F.C.), the Court stated that a reasonable royalty for patented technology was between 25% and 33% of the plaintiff’s profits and applied a series of 13 factors that could tend to increase or decrease the royalty within the range. For example, if the parties to the litigation were direct competitors, that would tend to increase the royalty rate.

In Jay-Lor International Inc. v. Penta Farm Systems Ltd., 2007 FC 358 (CanLII), the anticipated profits approach was used, and the court assessed the 13 factors that were used in Alliedsignal.  This analysis was used to determine where the royalty should fall within the range of 25% to 33% of profits. These are part of the “hypothetical negotiation” that courts construct to determine the appropriate royalty. The factors include things such as:

• Exclusivity - whether the license would have been exclusive or not
• Territorial restrictions – whether the license would have been restricted geographically
• Risk of market success of the patented invention, whether it was a proven technology
• R&D – whether the inventor incurred high research and development costs to bring the product to market

Courts in the US have looked at similar factors.  The Uniloc decision in the US is likely to impact Canadian assessments of patent damages, but will not cause a significant change in the court’s approach.  The factors used by Canadian courts allow a measured, flexible approach, which won’t be up-ended by the demise of the 25% Rule in the US. 

Related Event: March 17, 2011 -  Field Law is hosting the Licensing Executives Society on the topic of “IP Valuation in 2011” presented by Robert Doran, KPMG. Link to Register

Calgary – 07:00 MST

While the Canadian “business method patent” debate continues by means of the Amazon appeal, the debate is also continuing in the US. South of the border, courts are applying the US Supreme Court’s reasoning in the infamous Bilski case.  A recent court decision out of Texas (a popular jurisdiction for patent infringement lawsuits, including cases against Canadian companies) has interpreted another business method patent claim.

H&R Block Tax Services, Inc. v. Jackson Hewitt Tax Service, Inc.[PDF], 6-08-cv-00037 (E.D. Tex., February 2, 2011) involved a dispute over a patent for an abstract intellectual concept – the processing of collateralized loans. You may recall Bilski also involved a method patent for financial services – in that case it was a risk management tool and the invention was ultimately found to be unpatentable. In this case, the court upheld the patent, even though it failed the machine-or-transformation test. In the US, the Supreme Court was clear that the machine-or-transformation test is not the exclusive or determinative test for patentability. Here, the business method claims were subject to meaningful and reasonable limitations which convinced the court that the invention was patentable. 

Calgary – 07:00 MST

How do we value IP?

In a patent infringement case, a plaintiff (the patent holder, whose patent is infringed) can get 2 types of remedies: either damages or an accounting of profits.  If the plaintiff proves infringement, then it can elect only one of these 2 remedies. While the goal of each remedy is the same, the underlying principles are very different:

Damages seek to compensate the plaintiff for losses suffered by the plaintiff as a result of the infringement. Whether the infringing party actually earned any profits is irrelevant.

On the other hand, an accounting of profits aims to calculate the profits that the infringer made through the improper use of the patented technology. The infringer disgorges those profits on the basis that the money rightly belongs to the plaintiff. The infringer is only required to disgorge those profits earned from the infringement of the plaintiff’s patent.

It’s up to the plaintiff to prove damages. Where the patent owner actually sells its patented product (as opposed to licensing the patent), it is entitled to the profits on the sales it would have made if the infringing product had not been on the market. Otherwise, the plaintiff is entitled to a “reasonable royalty”.  Which brings us to the critical question: what is a “reasonable royalty”? Many courts in Canada have calculated a reasonable royalty according to what the infringer would have paid if it had entered into a legitimate licensing agreement with the patent holder. Put another way: what rate would result from negotiations between a willing licensor and a willing licensee. This is where the difficult task of IP valuation really gets tricky.  In the US, the “25% Rule” was often used as a guide for determining the royalty that two parties would have hypothetically negotiated. That rule has been tossed by the US Federal Court of Appeal. Is that rule used in Canada?

In Part 3, we’ll examine that question and look at one of the leading cases in Canada.

Calgary – 07:00 MST

 

A reminder: The Annual TEC VenturePrize Business Plan Competition is still open. The submission deadline for registration for the VenturePrize Fast Growth Competition is February 24, 2011, 4:00 p.m.

Field Law is a proud sponsor. See this link for details.

Calgary – 07:00 MST

What is intellectual property worth?

It is notoriously difficult to ascertain damages for patent infringement.  In the US, the “25% Rule” has been used as a rule of thumb in countless cases and negotiations, as a way of determining fair compensation for infringement of a patent. The 25% Rule suggests that a licensee should pay a royalty rate equal to 25% of its expected profits for use of the licensed IP.  As recently as September, an article was published proclaiming “The 25% Rule Lives On“, IP Law 360, Sept. 8, 2010. In a decision that sent waves through the patent litigation world on January 4, 2011, the US Court of Appeals for the Federal Circuit in Uniloc USA, Inc. et al v Microsoft Corporation [PDF], has thrown out this rule as a method of measuring patent damages:

This court now holds as a matter of Federal Circuit law that the 25 percent rule of thumb is a fundamentally flawed tool for determining a baseline royalty rate in a hypothetical negotiation. Evidence relying on the 25 percent rule of thumb is thus inadmissible under Daubert and the Federal Rules of Evidence, because it fails to tie a reasonable royalty base to the facts of the case at issue.

In Canada, a patent owner whose patent has been infringed may elect, as a remedy, either an accounting of profits or an award in damages. In next week’s post, we review this in more detail.

Related Event: March 17, 2011 -  The Licensing Executives Society – Meeting of the Calgary Chapter on the topic of “IP Valuation in 2011” presented by Robert Doran, KPMG. Link to Register

Calgary – 07:00 MST

Since 2009, developing countries (including Canada) have moved in the exact opposite direction – by fast-tracking cleantech patent applications to remain competitive in the international marketplace (See: Update: Green Technology Patents in Canada).

Prof. Guaragna argues that patent reform is unlikely to strip away patent rights in the near future, but “open-source” licensing can provide a solution that functions within the existing patent regime. Open source licensing is well known in the software industry, but is in its infancy in other fields such as climate change and life sciences.  Patent pooling can be used as an open source licensing tool:

• Patent pooling has been successful in commercial applications – for example the DVD licensing pool licenses the dozens of patents for DVD technology – DVD-ROM drives, players, decoders, and discs; a similar pool was established for RFID technology.  
• Patent pooling is typically voluntary but has also been put to effective use by the US government when it mandated pooling of aircraft patents in 1917 as the US entered the First World War.
• The Medicines Patent Pool has been established by the international community to deal with HIV treatment in the developing world.
• Can a CleanTech Patent Pool be next? The Eco-Patent Commons is the closest thing so far… but Canada is not a contributor.

Related Reading:

1. Open Source Resources
2. WIPO review of CleanTech patent pools [PDF]

This week, the Canadian Intellectual Property Office (CIPO) commenced a Patent Cooperation Treaty (PCT) – Patent Prosecution Highway (PPH) pilot project based on PCT work products established by CIPO as the International Searching Authority (ISA) and/or the International Preliminary Examining Authority (IPEA). The project formally began on January 31, 2011, and will run for a period of two years, ending on January 31, 2013.  The corresponding CIPO application must have entered national phase on or after January 31, 2011. During the pilot, CIPO will process PCT-PPH (CIPO ISA/IPEA) requests for advanced prosecution free of charge. For further information, contact the Field  IP Group.

Calgary – 07:00 MST

 

Who can get a monopoly on a particular word? Is it fair for someone to get a trade-mark for the word TEACHERS’? Under Canadian trade-mark law, there’s nothing stopping a company from obtaining a trade-mark over almost any word, as long as it meets the registration criteria. One of those criteria is that the word cannot be descriptive of the product or service that’s being provided. In Ontario Teachers’ Pension Plan Board v. Canada (Attorney General) 2011 FC 58, the Federal Court decided that the word TEACHERS’ is not registrable by the Ontario Teachers’ Pension Plan. The court decided that the word TEACHERS, describes an “intrinsic character of the administration, management and investment of a plan/fund for teachers” and so the word should be available for others to use. “Descriptive words,” the Court confirmed, “are the property of all and cannot be appropriated by one person for their exclusive use.” 

Lessons for business?

• Remember: This doesn’t mean that all adjectives are ineligible for registration. The word SWEET (TMA687821) is a registered trade-mark in Canada for “Plant nutrients and supplements namely plant food” because the word does not describe the character or quality of the product. However, the word SWEET for, say, candy or refined sugar would be clearly descriptive.
• If you are considering a new brand, get an advanced registrability search from a qualified trade-mark agent. They can advise on both the availaibility (whether someone else has an identical or similar mark) and registrability – including whether the mark is likely to be considered clearly descriptive or deceptively misdescriptive.

Related Reading: Generic Domain Names in Canada  

Calgary – 07:00 MST

The relationship between China and Canadian business is a complex one. Rising wages and a swelling Chinese middle class will fuel demand for Canadian products and commodities. However, rising wages in China’s manufacturing sector and increased fuel costs will also increase the price of Chinese imports for Canadian companies who have outsourced their manufacturing to one of Guangdong’s many factories.  That puts pressure on Canadian importers and retailers.

In either case – whether exporting consumer goods to China or outsourcing manufacturing to China – intellectual property rights (IPR) are critical for Canadian companies.  Recent reports suggest an encouraging trend:

The “Intellectual Property Tribunal” of the Supreme People’s Court of the P.R.C. has seen a surge in IPR cases in recent years. In 2010, over 1,000 foreign-related cases of IPR infringement were heard, but this number is a small fraction of the 40,000 IPR cases involving Chinese entities. IPR cases involving foreign companies appear to have success rates of about 50%. And 2010 statistics also show an increase in efficiency in handling IPR cases despite the surge in filings. All this is likely driven by the government’s high-profile campaign against IPR violations, including against online piracy. This suggests two things:

• The government (for its own purposes) is encouraging IPR enforcement, and domestic entities are taking advantage of the legal system in increasing numbers for IPR enforcement. Domestic entities wouldn’t be rushing to the local IP Tribunal unless they had some confidence that the process was worth pursuing. 
• Foreign entities don’t appear to be suffering any disadvantage or enjoying any advantage. Their claims are being processed along with those of their domestic counterparts – which is how a dispassionate legal system should work. 

IPR enforcement in China has come a long way, but it still has a long way to go. If you are doing business in China, get access to experienced legal counsel – in both Canada and the PRC – for trade-mark protection, trade-secret and patent protection, licensing agreements and manufacturing agreements.

Calgary – 07:00 MST

The Global Clean Energy Congress and Exhibition will be coming to Calgary from November 1 – 3, 2011.  This should be an excellent venue for showcasing local technologies in the cleantech sector. 

In related news, the Canadian Intellectual Property Office’s proposal to amend the patent rules to permit expedited examination of patent applications related to green technology is moving forward. The comment period is closed, and the draft rules (Rules Amending the Patent Rules – Canada Gazette I – October 2, 2010) are being reviewed. As argued by the Intellectual Property Institute of Canada (PDF), this proposed mechanism could be abused “by applicants wishing to accelerate examination of applications having only a dubious connection to green technology.” Further changes are expected before the program is implemented.

Related Reading: The National Post interviewed Richard Stobbe for an article on the plan to fast-track cleantech patent applications: “Canada plays catch-up on cleantech patents“

Calgary – 07:00 MST

My article on trade-marks and the Federal Court of Appeal decision in Jose Cuervo S.A. de C.V. v. Bacardi and Co., [2010] F.C.J. No. 1208  is published in the January 21, 2011 edition of the Lawyers Weekly: “Trade-mark owners must use it or lose it”.  This article reviews tips on dealing with Section 45 notices under the Canadian Trade-marks Act.

Calgary – 07:00 MST

 

 

We have compiled a few recent open-source software (OSS) stories:

• GPL in the App Store: A recent article on ZDNet reviews the differences in treatment of apps subject to the General Public License (GPL) in Apple’s App Store compared with Google’s Android Market. It argues that Apple’s closed system is incompatible with the GPL and so apps built from open-source kernels can’t be sold through Apple’s store, whereas the Google marketplace is compatible with GPL-licensed apps. When Apple pulled the VLC player last year, OSS enthusiasts complained that iPhone users would be deprived of OSS apps like GNU Go and the VLC media player (See: App Law Update – Part 2: Breach of GPL).  However, it’s worth remembering that the apps were pulled because of complaints from the OSS community, who levelled copyright infringement allegations at Apple. It was in response to those complaints that the apps were pulled.  It should be noted that the GPL is merely one of many species of OSS licenses, and other forms of OSS license will not necessarily be incompatible with Apple’s App Store terms.
• OSS and M&A: Lexology has a review of the OSS issues to consider in the context of mergers and acquisitions. In particular, when buying IT assets, business owners should work closely with legal counsel to review the software issues and the risks, and arrive at a practical way of mitigating those risks. Depending on the scope of the transaction, this may involve everything from simple representations and disclosure schedules in the asset purchase agreement, to detailed code-reviews by technical advisors. A “fear” of OSS need not kill an otherwise sensible transaction, as this article points out.
• Enforceability of the GPL: This story from the UK articulates an interesting argument about the enforceability of the GPL. It’s worth a read.

 

Calgary – 07:00 MST

 

When you apply for a bank loan, a credit check is one of the first steps taken by the bank. TransUnion is one of the two major national credit reporting agencies in Canada and when Calgarian Mirza Nammo applied to the Royal Bank (RBC) for a business loan, the RBC ran a credit check through TransUnion.  However, TransUnion had inaccurate information on file for Mr. Nammo; his credit profile was tainted with someone else’s information. RBC turned down his application because of this “bad credit” report. Mr. Nammo eventually determined the source of the problem – that his records were confused with someone else’s information – and launched a complaint based on a violation of Canada’s privacy laws.  The case finally landed in Federal Court and in December the court agreed that TransUnion had violated paragraph 4.6 of Schedule I to Canada’s Personal Information Protection and Electronic Documents Act – the obligation to maintain accurate information about the complainant.

The decision in Mirza Nammo v. TransUnion of Canada Inc. [PDF]    T-246-10 represents the first damage award under this legislation. Mr. Nammo was awarded $5,000 plus costs arising from TransUnion’s violation of the “accuracy principle”.  The court also made clear that a correction of the inaccurate information does not absolve an organization of the original violation of the accuracy principle.

Calgary – 07:00 MST

 

Here is the last case in our trio:

MLS Database – As a follow-up to our earlier post ( Data Mining Decision), you may recall the story of a real estate broker who tried to repackage the MLS listings controlled by the Toronto Real Estate Board (TREB).  The TREB controls the database for residential resale listings (the MLS database) for its approximately 25,000 member real estate agents and brokers.  Fraser Beach was one such broker who developed a workaround to pull the data from TREB’s database, and then redisplay it to the public through his own site.  The TREB cut off his access and Mr. Beach sued the TREB. The court agreed that the TREB was justified in terminating access since this “end-run” violated the authorized use terms that Mr. Beach had agreed to as a member of the TREB. In Fraser Beach v. Toronto Real Estate Board, 2010 ONCA 883, decided in December 2010, the Ontario Court of Appeal upheld this decision. 

Lessons for business? The TREB’s well-drafted Authorized User Agreement specified that use of the database was permitted “for the purposes expressly specified in this Agreement and for the exclusive and internal use by Authorized User“. This was critical to the court’s conclusion that Mr. Beach’s use was a violation of these terms. Companies in the business of licensing database access should take care to have their licenses and authorized use terms reviewed to keep up with technological advances and new methods of obtaining unauthorized access to the data.

Calgary – 07:00 MST

 

Here is the next case in our trio:

BlackBerry – Consider the problems faced by Canada’s world-leader in mobile devices. You open an app store to compete with Apple, so the little guys can develop interesting apps. The problem is, little guys keep developing interesting apps. In Research in Motion Ltd. v Kik Interactive Inc. [Statement of Claim available here], filed in November, RIM sued Kik, an upstart messaging service that had grown wildly popular in the previous several weeks (over 2 million Kik users reportedly signed up within the space of a month). In its suit, RIM alleges patent and trade-mark infringement as well as misuse of confidential information – (the principal of Kik is a former employee of RIM) – and privacy violations.  This shows the difficulty of controlling ex-employees and independent developers, and RIM is not alone. Apple has booted apps that mimic its own core services or threaten the bottom-line (most famously, Google’s VOIP apps). 

Moving to India, RIM faces another challenge in the form of Bharatberry, an app created by an independent Indian developer that provides an “India-compliant solution to the existing users of the BlackBerry® service in India”, and appears to piggy-back on BlackBerry hardware to run a parallel email and messaging service through its own servers, rather than through RIM servers.  This service was developed in the wake of concerns that the BlackBerry service would be disrupted in India if RIM did not solve the Indian government’s demands to have access to RIM’s encrypted e-mail traffic.

 

Calgary – 07:00 MST