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By Richard Stobbe

A few weeks ago, Jawbone, a fitness tracking hardware and software maker, sued its arch-rival Fitbit, alleging that Fitbit lured its employees away to obtain access Jawbone’s confidential information and product plans. How would this play out in Canada? In our earlier post (Competing After Employment (Part 1)) we considered a case in which the employer could not describe the confidential information with enough specificity and detail, and the employer was unable to get its injunction form the court.

In Brandt Engineering Products Ltd v Rockford Engineering Works Ltd., 2014 SKQB 339 (CanLII), the employer enjoyed a different result.

After several employees left BEPL to join a competitor, BEPL sued its competitor alleging that the former employees of BEPL each breached their fiduciary duties, breached confidence, and breached their employment contracts, among other things. BEPL sought an injunction to prevent the use of confidential information by the ex-employees and their new employer.

The court noted that “each of these individuals were either professionals or they were engaged in doing, assisting or supporting the work of the professional/design team at BEPL. I am satisfied from the evidence that each of them would have been aware of the confidential and proprietary nature of the designs, processes, customer and supplier lists and generally and specifically financial, organizational and technical information respecting BEPL and its operations. Whether by virtue of their employment contracts, their status as professionals, the confidentiality and proprietary notices which much of BEPL’s documentation contained, or the role that each of the individual defendants played as members of the design group at BEPL, each could not help but be aware of and recognize the confidential and proprietary nature and character of much of the information to which they had access and were privy.” (Emphasis added)

It was discovered during the course of the lawsuit that the ex-employees had downloaded or removed various confidential documents (“approximately 9,713 documents” burned onto discs and a “banker’s box of BEPL materials”) and provided some of this information to the new employer, BEPL’s competitor.

The court granted the injunction restricting the ex-employees and their new employer from using confidential information and upholding the non-solicitation covenants. The court made a few important points which bear repeating:

1. “Where employees have a non-competition clause in their contract of employment or they are determined to be employees having fiduciary obligations – the employee has a continuing duty to maintain confidences for a reasonable period of time and the employee is not permitted to actively solicit the former employer’s customers nor to use confidential information to the employee’s own employment advantage…”

2. “An interim injunction should not issue for the sole purpose of eliminating competition or effectively reducing it. In cases such as this, the purpose of the injunction is to constrain improper competition — that is to say the use or potential use by former employees of confidential and proprietary information, the property of and acquired from a previous employer to whom the employees owe a fiduciary duty of confidentiality, to compete with that employer.”

3. It is also worth noting that:
– the terms of the employment agreements as well as internal confidentiality notices helped bolster the argument that these ex-employees were aware of their confidentiality obligations, and
– the evidence of misappropriation of specific documents avoided the problem in the JTT Electronics case regarding the need to describe the confidential information with enough specificity and detail.

In summary, this case succeeded in enjoining improper competition by departing employees. Get advice on departing employees, restrictive covenants and intellectual property protection from experienced counsel.

Calgary – 07:00 MDT

By Richard Stobbe

A startup in the oil-and-gas service sector sought to improve downhole well stimulation technology. After a few years, differences between the three founders culminated in the ouster of Mr. Groves, one of the founders. Mr. Groves was removed as President and then his employment was terminated. The company had, during those few years, filed for patent protection on a number of inventions which were invented by Mr. Groves. After his termination, he promptly sued his former employer based on a claim of ownership of those inventions which were created during the course of his employment.

In the recent decision in Groves v Canasonics Inc., 2015 ABQB 314 (CanLII), the court noted that the employment agreement between Mr. Groves and Canasonics included the following condition:

“The Company shall own any and all Copyright and Intellectual Property created in the course of Employment. Further, in the event there is a period when the Employee might be considered an independent contractor, all Copyright created and any Intellectual Property created shall be owned by the Company.” The Court had no trouble in concluding that the inventions were patented in the U.S. and Canada by their inventor, Mr. Groves in his capacity as an employee, who then assigned the inventions to Canasonics as the employer pursuant to terms of the employment agreement.

The lesson for business in any industry is clear: ensure that your employment agreements – and by extension, independent contractor and consulting agreements – are clear. Intellectual property and ownership of inventions should be clearly addressed. Get advice from experienced counsel to ensure that the IP legal issues are covered – including confidentiality, consideration, invention ownership, IP assignment, non-competition and non-solicitation.

Calgary – 07:00 MDT

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By Richard Stobbe

Let’s say you provide web-based software in a SaaS subscription model. What if your reseller or strategic business partner works against you to redesign and reverse engineer your software so they can launch a competing product?

This is what happened to Warehouse Solutions (WSI) in the recent U.S. case Warehouse Solutions, Inc. v. Integrated Logistics, LLC (May 8, 2015, Fed. CA 11th Cir.). WSI developed and sold a web-based software product known as “Intelligent Audit” which interfaced with UPS and FedEx tracking systems to allow companies to track and manage packages. Integrated acted as a reseller of “Intelligent Audit”, but was also a competitor to WSI, in the sense that Integrated sold its own package-tracking software. The reseller relationship between WSI and Integrated, however, was never documented in a written agreement. The parties had verbal discussions about the confidential and proprietary nature of the “Intelligent Audit” software.

Although Integrated never had access to the source code for “Intelligent Audit”, it had high level administrator access rights to the software, and therefore had much broader insight into the features, functionality and structure of the software, compared to the typical end-user.

On the side, unknown to WSI, Integrated developed its own web-based package-tracking software product that was visually and functionally similar to “Intelligent Audit”. Integrated even went so far as to give its own software developer access to “Intelligent Audit”. Eventually, Integrated dropped “Intelligent Audit” and began selling its own competing product under the ShipLink brand name.

WSI then sued Integrated for reverse engineering and copying its software, and through various court proceedings, the claims came down to the issue of trade secrets. The court drew a distinction between a software program’s underlying source code, which may be a trade secret, and the program’s “look and feel” and “functionality,” which cannot be protected as a trade secret, since these features are readily apparent to any user. Since WSI did not enter into a written confidentiality agreement with Integrated, the trade secret claim failed, and WSI’s claim was dismissed.

Lessons for business?

1. It’s worth noting that this case turns largely on U.S. concepts of “trade secret” protection under the Trade Secrets Act, and there is no equivalent legislation in Canada. Canadian software vendors are frequently bound by local U.S. laws in their dealings with American customers, resellers and strategic partners, so this case is an important one for Canadian SaaS providers, even though it involves U.S. law.

2. There are situations – such as in AirWatch, LLC v. Mobile Iron, Inc., (Unpublished) No. 1:12-cv-3571 (N.D. Ga. Sept. 4, 2013) – where a software licensor can protect its software as a trade secret, where it uses written agreements to clearly preserve the secrecy of the program’s functions and specifications.

3. Overall, the message for software vendors and SaaS providers is that clear written agreements will always be preferable to handshake deals and verbal warnings about confidentiality.

Calgary – 07:00 MDT

By Richard Stobbe

As we noted in our earlier post (See: this link) the bill known as Economic Action Plan 2015 Act, No. 1 was tabled in the House of Commons on May 7, 2015. It passed Second Reading in the House of Commons on May 25th and is now with the House of Commons Standing Committee on Finance.

The bill proposes to amend the Copyright Act to extend the term of copyright protection for sound recordings and performances fixed in sound recordings.

Copyright in a sound recording currently subsists until the end of 50 years after the end of the calendar year in which the first fixation of the sound recording occurs. However, if the sound recording is published before the copyright expires, then copyright protection would be extended to the earlier of the end of 70 years after the end of the calendar year in which the first publication of the sound recording occurs and the end of 100 years after the end of the calendar year in which that first fixation occurs.

The bill is expected to pass. Stay tuned.

Calgary – 07:00 MDT

By Richard Stobbe

What, exactly, does industrial design protect? The recent decision Zero Spill Systems Inc. v. Heide, 2015 FCA 115, reviewed this question. In the trial level decision, Zero Spill sued a competitor for infringement of Canadian Industrial Design No. 86,793 (the ’793 Design), based on the competitor’s sales of a similar-looking tray. The ‘793 Design protected a fluid containment tray for use in oil field operations. The Federal Court decided that there was no infringement because many features of the ’793 Design were in some way functional, and were therefore unprotectable under the Industrial Design Act by virtue of section 5.1(a) of the Act. The court of appeal reversed in part and clarified:

1. First, the Court made it clear that the right to sue for industrial design infringement depends on registration. Without a registered industrial design, there can be no basis for infringement. With a registered design, the law recognizes a presumption of validity. In other words, a presumption that the registered industrial design complies with the Act.

2. Secondly, it is worth noting that this presumption favours the owner, and places the onus on the alleged infringer to plead invalidity. If invalidity is not raised in the defence, and evidence is not raised on the issue of invalidity, then the court cannot make a determination of invalidity.

3. Third, the Court said clearly that “functional features of an industrial design may be protected by the Industrial Design Act.” Looking at section 5.1(a) of the Act, it is clear that features that are dictated solely by a utilitarian function of the article are ineligible for protection. Therefore, “features may be simultaneously useful and visually appealing.” The Court went so far as to say that Industrial Design Act would serve no purpose if it did not protect functional features. Only those features whose form are dictated solely by function are not protected.

Talk to experienced IP counsel at Field Law for advice on exploring the possible advantages of industrial design protection for your products.

Calgary – 07:00 MDT

By Richard Stobbe

A recent decision of the US Federal Court (see: Apple, Inc. v. Samsung Electronics Co., Ltd. May 18, 2015) reviewed the jury decision in Apple’s famous infringement lawsuit against Samsung. You may recall that Apple’s 2011 lawsuit alleged that Samsung infringed Apple’s utility patent rights, design patents, and trade dress rights.

See our previous posts here Pinch and Zoom: Apple vs. Samsung and here Apple and Samsung: The Design Patent Wars Continue.

In the latest decision, the Federal Court left the design and utility patent verdicts untouched, but knocked down the finding of trade dress infringement, on the basis that trade dress cannot protect functional elements of the design.

The court observed that “Apple emphasizes a single aspect of its design, beauty, to imply the lack of other advantages. But the evidence showed that the iPhone’s design pursued more than just beauty.” In its conclusion, the court noted: “Apple has failed to show that there was substantial evidence in the record to support a jury finding in favor of non-functionality for the unregistered trade dress … Apple fails to rebut the evidence that the elements in the unregistered trade dress serve the functional purpose of improving usability. Rather, Apple focuses on the ‘beauty’ of its design, even though Apple pursued both ‘beauty’ and functionality in the design of the iPhone.” Accordingly, the court reversed the jury’s verdicts on the unregistered and registered trade dress claims.

Watch for our upcoming updates on Canadian industrial design law.

Calgary – 07:00 MDT

By Richard Stobbe

Although you might not think so, given the proliferation of litigation, courts are actually very particular about who can bring a lawsuit. In order for a plaintiff to file a lawsuit, it must have ‘standing’ or put another way, “A court may exercise jurisdiction only if a plaintiff has standing to sue on the date it files suit.” A recent US case examined when a patent licensee has standing to sue for patent infringement.

According to the US court in Luminara Worldwide, LLC v. Liown Electronics Co.: Even if the patent holder does not transfer formal legal title, the patent holder may effect a transfer of ownership for the purposes of standing in a lawsuit if it conveys “all substantial rights in the patent to the transferee.” One of those “substantial rights” must include an “exclusive license” to practice the patent in question. In the event that a licensee obtains an exclusive license and all substantial rights, then the licensee is effectively treated just like a patent owner, and has standing to sue for infringement in its own name.

When negotiating patent licenses, ensure that you pay attention to the grant of rights. Do you intend to grant rights to permit the licensee to sue in its own name, or should that right be reserved to the patent owner / licensor?

In Canada, compare the finding of the Federal Court in the copyright context in Milliken & Co. v. Interface Flooring Systems (Canada) Inc.(FC): “A non-exclusive licensee does not derive any right, title or interest in the copyright that could give it the standing to sue. It has no right to sue alone in a copyright infringement action.”

Calgary – 07:00 MST

By Richard Stobbe

As we reviewed in our previous post – Industrial Design as a Competitive Tool – the value of strategic industrial design protection (also called a “design patent” in the US) should not be underestimated.

Yesterday, the USPTO issued a registration for the Apple Watch, which provides protection for a term of 14 years in the US. US design patents which are registered based on applications filed after May 13, 2015 will have a 15-year term. That would be 10 years if registered in Canada, though this term is soon to increase to 15 years once the changes to the Canadian Industrial Design Act come into force. Remember, industrial design law in Canada protects the visual features of shape, configuration, pattern or ornamentation which are applied to a product. Functional elements are not protected. For protection, registration is required. While it is likely that Apple has filed a corresponding Canadian application, such a filing would most likely be based upon the US registration.

Will this be enforced against competitors? Probably – don’t forget that industrial design infringement formed the basis of successful recent claims by Blackberry (BlackBerry sued Typo Products LLC for infringement of U.S. Design Patent No. D685,775) and by Apple (Apple sued Samsung for infringement of Apple’s D504,889 design patent).

Talk to experienced IP counsel at Field Law for advice on exploring the possible advantages of industrial design protection for your products.

Calgary – 08:00 MST

It’s budget time… therefore, time for changes to Canada’s IP laws!

No, there is no logical connection between the two, but that seems to be how the government functions these days (the last budget brought in major changes to Canada’s patent and trademark laws without any consultation, but hey, who’s keeping track of these things anyway?). The Intellectual Property Institute of Canada has noted that the latest budget bill has introduced statutory privilege for communications between IP advisors and their clients.

“With this,” IPIC notes, “Canadian businesses are better assured that they can speak openly with their intellectual property advisors in order to obtain the best possible advice, knowing that these conversations will not be revealed to their competitors through a court process or litigation.”

Calgary – 07:00 MST

By Richard Stobbe

As a follow-up to our earlier post about Copyright in House Plans, an class action case is proceeding in Ontario on the subject of ownership of copyright in survey plans (See:  Ontario land surveyors can sue land registry managers for copyright infringement, court says).

In the course of their work, land surveyors in Ontario prepare a survey document, and that document is routinely scanned into the province’s land registry database. Copies of survey documents can be ordered from the registry for a fee. The Ontario Court of Appeal has certified a class action which permits the province’s land surveyors to continue their copyright lawsuit against Teranet Inc., the manager of the land registry system. The case is Keatley Surveying Ltd. v. Teranet (Case No. cv-10-414169).

Calgary – 07:00 MST

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By Richard Stobbe

The Canadian Intellectual Property Office has indicated that the amendments to the Trade-marks Regulations (and in particular the accession to international trademark treaties), the amendments to the Industrial Design Regulations and amendments to the Patent Rules will not be finalized until later 2016, and possibly as late as 2017.

A note on the CIPO website says that stakeholders will have the opportunity to comment when the proposed amendments/regulations are pre-published in Canada Gazette, Part 1 (expected late 2016). If the proposed regulations are published in late 2016, then the regulations will not be finalized until 2017 at the earliest.

 

Calgary – 07:00 MST

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By Richard Stobbe

When a copyright owner suspects online infringement, but lacks evidence of the identity of the alleged infringers, it can seek an order to disclose those details. Canadian law is clear that “A court order is required in every case as a condition precedent to the release of subscriber information.”

A Norwich order is a “litigation tool requiring non-parties to a litigation to be subject to discovery or being compelled to provide information.” In a recent case, Voltage Pictures LLC v. John Doe, 2014 FC 161, a decision released in February, 2015, this tool was used by the Plaintiff (Voltage) to obtain the names and addresses of some 2,000 subscribers of an ISP known TekSavvy Solutions Inc.

Teksavvy said it would only disclose subscriber information if Voltage obtained a court order compelling disclosure. Voltage did obtain its so-called Norwich order, and Teksavvy was compelled to release subscriber information to Voltage, with some controls.

Then Voltage and Teksavvy argued about who should bear the costs for correlating and compiling the subscriber info. The resulting court opinion in Voltage Pictures LLC v. Teksavvy Solutions Inc. 2015 FC 339, makes for interesting reading (if you’re into this sort of thing) regarding best practices for copyright owners and ISPs to manage costs:

• The copyright owner should first ascertain, in advance “with clarity and precision”, the method used by the ISP to correlate IP addresses with subscriber information, and the investment in time and costs based on a hypothetical number of IP addresses. In other words, the copyright owner should ask the ISP: “What methods do you use, how long would it take and how much would it cost if we wanted you to correlate 100 or 1000 IP addresses?”
• Next, the copyright owner and ISP should agree on these timelines and costs in advance (in writing if possible) before the copyright owner files and serves its motion for a Norwich order.
• For smaller ISPs, the copyright owner should not make the assumption that the smaller ISP will handle IP address and subscriber info in the same way as larger ISPs, where such processes are likely automated.

 

Calgary – 07:00 MST

 

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By Richard Stobbe

A key employee departs. The employer, worried that confidential information has leaked out of the company, scrambles to respond. After a frenzied period of preparation, the employer starts a lawsuit and seeks an injunction against the ex-employee.

In these two recent Canadian cases, those same basic facts apply but with very different results. First, let’s look at the BC case decided in December 2014 (JTT Electronics Ltd. v. Farmer, 2014 BCSC 2413). In that case, the employer sued the ex-employee and the employee countered with an argument that the employer could not actually identify the confidential info it sought to protect.

The Court agreed, noting: “The need to identify with some reasonable degree of specificity what a plaintiff asserts is confidential or proprietary serves three important and related functions.” To summarize:

1. It enables the ex-employee to respond to the lawsuit, and to bring into question whether the purported confidential information is actually confidential or whether it is information that is in the public domain.
2. If the employer can establish that specific information in its possession is confidential, and the remaining elements of an injunction are made out, the ex-employee can understand (by virtue of the court order) what it is that he or she can or cannot do.
3. Unless there is a “reasonable level of precision or definition”, it is difficult or impossible for the court to enforce the order.

Because the employer could not describe the confidential information with enough specificity and detail, the order was not granted.

Next, the non-solicitation and non-competition clauses which purportedly bound the ex-employee were, by the court’s analysis, “undefined”, “ambiguous”, “overly broad”, since they appeared to impose a worldwide ban which imposed a “blanket prohibition of unlimited geographic scope on any post-employment competition” by the ex-employee. On that basis, the Court refused to grant an order to enforce these restrictive covenants. 

Lessons for business?

• “Confidential information” is broadly understood to be “anything that is valuable because it is secret to the company.” But in the case of an injunction application, courts will require a clear, specific definition of what exactly constitutes confidential information in this case, as it relates to this company and this ex-employee. While the definition in the underlying agreement – for example, a confidentiality agreement, non-disclosure agreement, employment agreement or even a shareholders agreement – is likely to remain broad, the specificity must come into play at the point where the court order is sought.
• Ensure that non-competition restrictions are carefully drafted, are reasonable in their scope, and consistently use defined terms. For example, in this case, the defined term “Business” was given a particular meaning in one section, but the seemingly generic term “business” was used in another section. This caused the court to question why the two terms would be different, and merely added to the court’s finding of ambiguity.

 

Calgary – 07:00 MST

By Richard Stobbe 

In some cases, a franchise relationship ends after many years of business. At the point of termination, the parties must wrestle with a number of issues, including customers, inventory, and (as we reviewed in Part 1) the impact of any post-termination restrictive covenants.

In other cases, however, the franchise relationship barely gets off the ground. Remember, Section 13 of the Alberta Franchises Act states that, if a franchisor fails to give a prospective franchisee a complete “disclosure document,” then the franchisee may rescind (or cancel) the franchise agreement and end the relationship. However, the franchisee must send the cancellation within certain time limits: either 60 days after receiving the disclosure document, or within 2 years after the franchisee is granted the franchise, whichever occurs first.

A failure to give complete disclosure allows the franchisee to cancel. So what does it mean to give complete disclosure?

Under the Act, a franchisor must make a number of disclosures, including (but not limited to):

• Basic information about the name and address of the franchisor and the length of time the franchisor has operated the business;
• The names of the directors, general partners and officers of the franchisor who will have management responsibilities;
• Details on convictions for the previous 10 years relating to the franchisor and its associates, and any of the directors, general partners and officers of the franchisor;
• Lawsuits or pending lawsuits involving misrepresentation, and unfair or deceptive acts or practices;
• Details of any bankruptcy or insolvency proceedings, voluntary or otherwise;
• The names, mailing addresses and phone numbers of all existing franchisees presently operating an outlet in Alberta under the same trade name as the franchise being offered, and the addresses and phone numbers of those outlets; and
• Financial statements of the franchisor, among other information.

If proper disclosure is not made, a franchisee may cancel and recover any net losses incurred in acquiring, setting up and operating the franchised business.

In 1448244 Alberta Inc. v. Asian Concepts Franchising Corporation, 2013 ABQB 221 (CanLII), an Alberta court reviewed a franchisee’s claim that it did not receive proper disclosure. Specifically, the franchisee alleged that the disclosure document was deficient and therefore not ‘substantially complete’ within the meaning of the Act because the document was signed by only one director. The Regulations are clear that a disclosure document must include a certificate that is to be signed by at least two officers or directors of the franchisor. The fundamental question: Does the lack of two signatures to the disclosure document provided by the franchisor mean that it is not ‘substantially complete’ within the meaning of the Act?

Described another way: the substance of the disclosure document itself was not challenged in this case. The only complaint was that the certificate, which accompanies the disclosure document, was only signed by one, instead of two, directors.

The Alberta Court of Appeal reviewed this situation in 2008 in the Hi Hotel case. In that case, the certificate accompanying the disclosure document contained no signatures, and was therefore found not to be “substantially complete” within the requirements of the Act. In the Asian Concepts decision, the Court concluded that a disclosure document with only one signature was deficient, since it deprived the franchisee of a potential cause of action against a second signatory to the disclosure document. This finding opened the door for the franchisee to recover losses incurred in acquiring, setting up and operating the franchised business. The Court confirmed: “…the lack of misrepresentation, or the lack of reliance on representations, are irrelevant to the issue at hand. What matters is whether the disclosure document which was provided was substantially complete or not. And when the statute requires two signatories responsible for and liable for the required disclosure, yet only one is provided, the disclosure statement cannot be said to be ‘substantially complete.’ This is plain and obvious.”

What are the lessons? Franchisors in Alberta should take care to ensure that the disclosure document follows the strict requirements of the Act and Regulations, both as to form and substance. Seemingly minor gaps in compliance can result in serious consequences for the franchisor. Franchisees, on the other hand, will be reviewing compliance with a careful eye in situations where the franchisee wishes to extricate itself and end the relationship. Of course, both parties should always seek appropriate legal advice when entering into and concluding franchising relationships in Alberta.

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By Richard Stobbe

A year ago, BlackBerry sued Typo Products LLC for patent infringement, based on the design of a snap-on keyboard. Typo’s physical keyboard was designed to attach to an iPhone, in order to mimic a BlackBerry-style QWERTY keyboard. The design was, in BlackBerry’s view, imitation that went beyond flattery and into infringement of U.S. Design Patent No. D685,775 and U.S. Patent No. 7,629,964 (Our original post Can BlackBerry Patent a Keyboard? gives more details).

A California granted a preliminary injunction (See: Ok… so BlackBerry Can Patent a Keyboard!) which took effect in April, 2014. Typo, after the preliminary injunction took effect, flouted the injunction by selling products, providing warranty replacements, and promoting products which were subject to the court order. In a judgement yesterday, the same California judge ordered Typo to pay BlackBerry $860,600 in sanctions, plus attorneys’ fees and costs incurred in connection with Typo’s contempt of court. See: BlackBerry Limited v. Typo Products LLC, Case No. 14-cv-00023-WHO for the full court order.The broader infringement issues have yet to be decided, and the litigation continues.

The interesting part of this case is how it illustrates the competitive use of IP protection for incremental improvements – in this case, an improvement to a basic QWERTY design (a design which has been around since the 1800s). It also illustrates the value of IP analysis in the competitive response by Typo. Their designers (undoubtedly working closely with patent counsel), have designed a “Typo 2” product which is not caught by the original injunction.  

Calgary – 10:00 MST

By Richard Stobbe

For software vendors, open source software (OSS) should be treated like a compliance issue – in the same way that corporate, securities or environmental compliance is a concern for many companies. The failure to manage compliance can be costly - just like it would be if a company ignored its environmental or securities compliance obligations. An environmental remediation order or a cease-trade order might result from compliance failures in those other areas.

What does it look like in the case of OSS compliance failures?

We need look no further than the Versata litigation which has spawned no less than 5 cases in the US:

1. Versata Software Inc. f/k/a Trilogy Software, Inc. and Versata Development Group Inc. f/k/a Trilogy Development Group Inc. v. Ameriprise Financial Inc., Ameriprise Financial Services, Inc. and American Enterprise Investment Services, Inc., Case No. D-1-GN-12-003588; 53rd Judicial District Court of Travis County, Texas
2. Versata Software Inc. v. Infosys, Case No. 1:10cv792, U.S. District Court, Western District of Texas
3. Versata Software Inc. v. Ameriprise Financial Services Inc. et al., Case No. 1:14-cv-12, U.S. District Court, Western District of Texas, Case No. 1:14-cv-12, U.S. District Court, Western District of Texas
4. XimpleWare Corp. v. Versata Software Inc., Trilogy Development Group, Inc., Ameriprise Financial, Inc., Ameriprise Financial Services, Inc., Aurea Software, Inc., Case No. 3:13cv5160, U.S. District Court, Northern District of California
5. XimpleWare Corp. v. Versata Software Inc., Aurea Software Inc., Trilogy Development Group, Inc., Ameriprise Financial Services, Inc., Ameriprise Financial, Inc., United HealthCare Services, Inc., Waddell & Reed, Inc., Aviva USA Corporation, Metropolitan Life Insurance Company, Pacific Life Insurance Company, The Prudential Insurance Company of America, Inc., Wellmark, Inc., Case No. 5:13cv5161, U.S. District Court, Northern District of California (San Jose).

In a nutshell, the lawsuits centre around the use of an open source component in Versata’s Distribution Channel Management (DCM) software. Versata originally sued Ameriprise for breach of a software license agreement for the use of the DCM software. In the course of that litigation between Versata and Ameriprise, it became clear that there were significant underlying issues related to an XML-parsing component called VTD-XML, distributed by XimpleWare

While XimpleWare does offer VTD-XML under a “closed” commercial license, Versata had not obtained a commercial license for the component, and thus the component was governed by GPLv2, an open source license.  This in turn laid bare the gaps in Versata’s OSS compliance and raised questions of whether the DCM was a derivative, making the whole of Versata’s proprietary code subject to the GPLv2. XimpleWare, for its part sued Versata, Ameriprise and all of Versata’s DCM customers based on breach of the GPLv2 and patent infringement.

We will be watching whether any judicial guidance comes out of this US litigation. In the meantime, it serves as a cautionary tale for software vendors: OSS compliance must be addressed with the same attention and diligence as a regulatory compliance issue.

Our group can assist with compliance and risk mitigation, leaving software vendors to focus on their business.

Related Reading: Lawsuit threatens to break new ground on the GPL and software licensing issues 

Calgary – 07:00 MST

 

 

 

By Richard Stobbe

A recent Ontario court decision (Arctic Cat Inc. et al. v. Peter Watson, 2014 ONSC 6874 (CanLII)) dealt with a foreign letter of request, or “letter rogatory” in a cross-border patent infringement case involving the invention of snowmobile prototypes. This type of request is used where a foreign (usually an American) litigant wishes to compel evidence and testimony from a Canadian witness. In this case, the testimony of the Canadian inventor was needed in the US litigation, but the Canadian individual falls outside the jurisdiction of US courts. The letter of request bridges that gap by requesting a Canadian court to order the individual to be provide evidence.

These are the factors which guide the court in Canada on whether to enforce such letters of request:

1. the evidence sought must be relevant;
2. the evidence must be necessary for trial and will be adduced at trial, if admissible;
3. the evidence must not be otherwise obtainable;
4. the order sought is not contrary to public policy;
5. the documents are identified with reasonable specificity; and
6. the order sought is not unduly burdensome, bearing in mind what the witness would be required to do and produce if the lawsuit was in Canada. 

After reviewing these factors, the Ontario court granted the letter of request, compelling the inventor to provide testimony in the US patent litigation.

If you need assistance with enforcing letters of request in Alberta, contact our Intellectual Property & Technology Group.

Calgary – 07:00 MST

By Richard Stobbe

A recent report  shows interesting trends in US patent litigation:

• 5,002 patent infringement cases were filed in the US in 2014, up from 2,641 filed in 2010;
• Of those cases filed, the majority (61%) were commenced by NPEs (non-practicing entities), which is a neutral term to describe what are commonly referred to as ‘patent trolls’;
• Of those NPEs, the overwhelming majority (82%) are PAEs (patent assertion entities), which can be defined as “firms with a business model based primarily on buying patents and then attempting to generate revenue by asserting them against businesses that are already practicing the patented technologies;”
• Most of this activity (patent litigation by PAEs) took place in the high-tech sector; in that sector, 83% of the patent litigation was related to NPEs of one kind or another, and involved claims against large (non-SME) companies. This figure shows the extent to which IT and software patents have become a fixture in a kind of parallel patent infringement economy, in which patent battles are not fought between market competitors (such as Samsung and Apple) but are essentially rearguard actions by legitimate businesses against entities whose only function is to assert patent rights.

 

Calgary – 07:00 MST

By Richard Stobbe

Who can resist an announcement laced with nerdy acronyms? Last week, the Canadian Intellectual Property Office (CIPO) announced the launch of a Patent Prosecution Highway (PPH) pilot agreement with the European Patent Office (EPO). The initial pilot will run from January 6, 2015, to January 5, 2018.

Canadians can gain access to accelerated processing of patent applications, where the claims have been found to be patentable by either the EPO or CIPO, based on a WO-ISA (Written Opinion of the International Searching Authority) or a WO-IPEA (Written Opinion of the International Preliminary Examination Authority ) or even an IPRP (International Preliminary Report on Patentability). Applications filed after January 6, 2015 are eligible to participate in the pilot agreement.

Note that applicants should be prepared to move quickly, since the response periods are shortened and any requests for an extension of time can result in the application being shunted out of the PPH program, in which case the applicant is SOL.

If you want to participate in the CIPO-EPO PPH, contact our IP&T Group.

Calgary – 07:00 MST

By Richard Stobbe

In a recent interview with The Washington Post, Jay Walker, founder of Priceline.com, has proposed a kind of neutral private-sector utility for the licensing of patents.

He argues that “We have spent trillions of dollars inventing things and 95 to 98 percent of all patents have yet to make their first dollar of licensing revenue”.

Take a small or medium-sized business as an example, let’s call it SME Corp. SME Corp. would use this so-called patent utility to create a profile of the specifications of its own products and services. The utility would contain a complete database of the over 2 million active patents in the USPTO, and would then apply “Big Data algorithms” to measure the specifications of SME Corp.’s products and services against the patent database. This method (which would presumably be patented by Mr. Walker) would identify “statistical relevance” between the products and services of SME Corp. and the claims in the patent database. From Mr. Walker’s description, SME Corp. could learn about other relevant technologies, including potential joint venture partners. A patent holder could generate licensing revenue by charging SME Corp. a “relatively small amount” under a “no-fault” license for use of those patents which overlap with SME Corp.’s products and services. This royalty amount would presumably be more than the patent is currently earning outside the utility. By paying the licensing fee, SME Corp., for its part, would incur a lower cost relative to the costs of negotiating a formal patent license agreement outside the utility, while at the same time neutralizing the patent infringement risk.

Sound complicated? 

The idea is an interesting one. Of course there are inumerable legal pitfalls, but if nothing else it illustrates the need for a more practical application of the patent system for small and medium-sized business.

Related Article:  Our System Is So Broken, Almost No Patented Discoveries Ever Get Used

Related Site: The United States Patent Utility

Calgary – 07:00 MST