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August 28, 2019 |
USPTO Requests Public Comments on Patenting Artificial Intelligence Inventions

Click for PDF Following up on the release of eligibility guidelines for AI-related inventions earlier this year, the United States Patent and Trademark Office (Patent Office) published yesterday a request for public comments on a series of patent-related issues regarding AI inventions. Request for Comments on Patenting Artificial Intelligence Inventions, 84 Fed. Reg. 44889, 44889 (Aug. 27, 2019). The Patent Office hopes that with the input it receives in response to this request for comments from the innovation community and experts in AI, the Patent Office will be in a strong position to evaluate whether further patent examination guidance is needed to (1) “promote the reliability and predictability of patenting artificial intelligence inventions,” and (2) “ensure that appropriate patent protection incentives are in place to encourage further innovation.” Id. The office’s request poses twelve questions covering “a variety of topics from patent examination policy to whether new forms of intellectual property protection are needed.” Id. For example, the questions cover topics such as: Inventorship – Should current inventorship laws and regulations be revised to account for entities other than a natural person contributing to the conception of an invention? What are the different ways in which a natural person can contribute to the conception of an AI invention? Ownership – Who owns an AI invention? Is it the company who trains the AI process that creates the invention? Should entities other than a natural person or the company to which it is assigned be able to own an AI invention? And Patent Application Requirements – Does AI impact the level of a person of ordinary skill in the art? Are there disclosure-related considerations unique to AI inventions, such as written description? Are new forms of intellectual property protections needed for AI inventions? This is an important opportunity for individuals and companies active in AI technologies to provide their perspective on how U.S. intellectual property law and patent office procedures should address some of the unique issues raised by AI inventions. Written comments may be sent by email to AIPartnership@uspto.gov, and must be received on or before October 11, 2019. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Artificial Intelligence and Automated Systems or Intellectual Property practice groups, or the following authors: H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Jessica A. Hudak – Orange County (+1 949-451-3837, jhudak@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Artificial Intelligence and Automated Systems Group: H. Mark Lyon – Chair, Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) J. Alan Bannister – New York (+1 212-351-2310, abannister@gibsondunn.com) Lisa A. Fontenot – Palo Alto (+1 650-849-5327, lfontenot@gibsondunn.com) David H. Kennedy – Palo Alto (+1 650-849-5304, dkennedy@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com) Robson Lee – Singapore (+65 6507 3684, rlee@gibsondunn.com) Carrie M. LeRoy – Palo Alto (+1 650-849-5337, cleroy@gibsondunn.com) Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Eric D. Vandevelde – Los Angeles (+1 213-229-7186, evandevelde@gibsondunn.com) Michael Walther – Munich (+49 89 189 33 180, mwalther@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Co-Chair, Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – Co-Chair, New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Co-Chair, Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 15, 2019 |
Gibson Dunn Lawyers Recognized in the Best Lawyers in America® 2020

The Best Lawyers in America® 2020 has recognized 158 Gibson Dunn attorneys in 54 practice areas. Additionally, 48 lawyers were recognized in Best Lawyers International in Belgium, Brazil, France, Germany, Singapore, United Arab Emirates and United Kingdom.

August 13, 2019 |
Federal Circuit Update (August 2019)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update summarizes the Supreme Court’s recent decisions in cases appealed from the Federal Circuit as well as key filings for certiorari or en banc review. Recent Federal Circuit news and practice changes are also noted. Recent precedential decisions are also summarized concerning the Federal Circuit’s identification of a presumption of patent eligibility, narrowing of the doctrine of equivalents, rejection of Fifth Amendment and sovereign immunity challenges to IPRs, and clarification of time-bar restrictions on IPRs, of Article III standing to appeal, and of the scope of design patents. Federal Circuit News Supreme Court: In June and July, the Supreme Court issued decisions in both a patent and a trademark case as noted below. The Court also granted certiorari in two more patent cases and one trademark case. Case Status Issue Amicus Briefs Filed Peter v. NantKwest Inc., No. 18-801 Set for argument on October 7, 2019. Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. § 145 encompasses the personnel expenses the PTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation. 11 Dex Media Inc. v. Click-To-Call Techs., LP, No. 18-916 Petition for certiorari granted on June 24, 2019. Whether 35 U.S.C. § 314(d) permits appeal of the PTAB’s decision to institute an inter partes review upon finding that § 315(b)’s time bar did not apply. 3 Romag Fasteners Inc. v. Fossil Inc., No. 18-1233 Petition for certiorari granted on June 28, 2019. Whether, under Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a). 0 Recent Supreme Court Decisions: Return Mail Inc. v. United States Postal Service (No. 17-1594) (Vote: 6-3, Author: Justice Sotomayor): The Court’s majority held that the government is not a “person” capable of instituting AIA review proceedings. The Court reasoned that, absent an express definition in the statute, “longstanding interpretive presumption” directed that a “person” does not include the sovereign, and “thus excludes a federal agency like the Postal Service.” The majority rejected the government’s view that other references to “person” in the AIA “appear” to include the government or that Congress intended “person” to include the government due to its “longstanding history with the patent system.” Justice Breyer dissented, joined by Justices Ginsburg and Kagan. Iancu v. Brunetti, No. 18-302 (Vote: 6-3, Author: Justice Kagan): A Court’s majority affirmed the Federal Circuit’s holding that the Lanham Act’s prohibition on registration of immoral or scandalous trademarks violates the First Amendment. As the majority explained, the immoral or scandalous bar discriminates on the basis of viewpoint and thus collides with First Amendment doctrine. The majority reasoned that the Lanham Act permits marks “that champion society’s sense of rectitude and morality, but not marks [deemed immoral] that denigrate those concepts.” Likewise, it “allows registration of marks when their messages accord with … society’s sense of decency or propriety,” but not “scandalous” marks that “defy” that sense. Thus, the “facial viewpoint bias in the law results in viewpoint-discriminatory application.” Justice Alito concurred, with Justices Breyer, Sotomayor and Chief Justice Roberts each filing opinions concurring in part and dissenting in part that the “scandalous” portion of the provision could be instead susceptible to a narrower construction. Chief Justice Roberts wrote that “scandalous” could, for example, be read narrowly to bar only marks that are “obscene, vulgar, or profane.” Noteworthy Petitions for a Writ of Certiorari: Acorda Therapeutics, Inc. v. Roxane Labs., Inc. (No. 18-1280): Question presented: “whether objective indicia of nonobviousness may be partially or entirely discounted where the development of the invention was allegedly ‘blocked’ by the existence of a prior patent, and, if so, whether an ‘implicit finding’ that an invention was ‘blocked,’ without a finding of actual blocking, is sufficient to conclude that an infringer has met its burden of proof.” Acorda is represented by Ted Olson, Thomas Hungar, and Amir Tayrani of Gibson Dunn. HP Inc. v. Berkheimer (No. 18-415): Question presented: “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” On January 7, 2019, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States. Mark Perry of Gibson Dunn continues to serve as co-counsel for HP in this matter. Hikma Pharms. USA Inc. v. Vanda Pharms. Inc. (No. 18-817): Question presented: “whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.” On March 18, 2019, the Supreme Court invited the U.S. Solicitor General to express the views of the United States. Atlanta Gas Light Co. v. Bennett Regulator Guards Inc. (No. 18-999): Questions presented: (1) whether the Federal Circuit erred in concluding that it had jurisdiction to review the PTAB’s decision to institute IPR of a patent over the patent owner’s objection that it was time-barred; and (2) whether the Federal Circuit erred in rejecting the “longstanding principle that a dismissal without prejudice leaves the parties as if a suit had never been brought, splitting the circuits.” Federal Circuit En Banc Review: Athena Diagnostics, Inc. v. Mayo Collaborative Services, No. 17-2508 (Fed. Cir. July 3, 2019) (denying petition 7-5): Although Athena’s petition was denied, the Federal Circuit’s response is remarkable for its eight separate opinions, each calling for Supreme Court guidance or legislative intervention to clarify the application of § 101 to novel medical diagnostics. Athena’s disputed claim covered a diagnostic method directed to neurotransmission disorders by examining the presence of naturally occurring MuSK antibodies in bodily fluids. Following the Supreme Court’s ruling in Mayo Collaborative Servs. v. Prometheus Labs., Inc., the Federal Circuit held Athena’s claim to be ineligible because the correlation between MuSK and neurological disease was “a law of nature.” But, as the panel observed, the result may have been different if the claim had been drafted as a method of treatment instead: “claiming a new treatment for an ailment, albeit using a natural law, is not claiming the natural law.” As Judge Moore summarized, all 12 judges reviewing Athena’s en banc petition agreed that its diagnostic should be patent-eligible. The seven judges who voted to deny the petition (Lourie, Reyna, Chen, Hughes, Prost, Taranto, and Dyk) held that the Supreme Court’s decision in Mayo left no room for eligibility, but indicated that Mayo should be revisited by the Supreme Court or Congress. The five dissenting judges found the diagnostic distinguishable from that in Mayo. Other Federal Circuit News: The annual Federal Circuit Bench and Bar Conference took place June 12–15, 2019 at the Broadmoor in Colorado Springs, CO. Next year’s conference will take place in Puerto Rico. On July 30, 2019, former Chief Judges of the Federal Circuit, Paul Michel and Randall Rader, joined a letter with others, including academics and former USPTO officials, urging Congress to pass legislation reforming the “patent eligibility doctrine.” The jurists noted the “extreme uncertainty about how patent examiners or judges will apply the Alice-Mayo framework that was recently created by the Supreme Court.” This letter responded to a letter from the American Civil Liberties Union and other organizations that opposed legislative reform efforts. The retired jurists argued that the ACLU and other’s view was “profoundly mistaken and inaccurate” and that draft legislation, if enacted, would not “authorize patenting products and laws of nature, abstract ideas, and other general fields of knowledge.” The judges and their co-signees stated that such legislative reform would not “eliminate constitutional and statutory bars to patenting laws of nature, abstract ideas, and general fields of knowledge,” and instead “is vitally important to sustain U.S. global leadership in innovation, resulting in increased jobs, economic growth, and a flourishing society.” Federal Circuit Practice Update Change to Electronic Filing Procedures During Weather-Related Closures: The Federal Circuit has announced that, effective October 1, 2019, it will no longer automatically consider weather-related closures as legal holidays for the purposes of Federal Appellate Rule of Procedure 26. In the event of inclement weather closing the courthouse, the Clerk’s office will continue to accept and process electronic filings based on the original electronic filing deadlines. Paper filings due on the date of a weather-related closure would be deemed timely filed if received by the next day the Clerk’s Office is open. The Federal Circuit’s notice can be found here. Key Case Summaries (May 2019–July 2019) Cellspin v. Fitbit, Nos. 18-1817 et al. (Fed. Cir. Jun. 25, 2019): A presumption of patent eligibility exists, just as there is a presumption of validity. Cellspin sued Fitbit and others, asserting multiple patents reciting claims related to connecting digital cameras to mobile devices. Fitbit and other defendants moved to dismiss under Rule 12, alleging lack of patentable subject matter under § 101. The district court granted the motion. The Federal Circuit (O’Malley, J., joined by Lourie and Taranto, JJ) vacated and remanded. Although the panel agreed the patents were directed to an abstract idea, the court followed its precedent in Berkheimer v. HP and held that the district court failed to credit Cellspin’s factual allegations in its pleadings. “Accepting the allegations … as true, we cannot conclude that the asserted claims lack an inventive concept” under step two of the Alice inquiry. The court ruled that patents “are presumptively valid” under § 282, and that this presumption includes § 101, making this the first Federal Circuit precedent to acknowledge a presumption of eligibility. Amgen Inc. v. Sandoz Inc., Nos. 18-1551, -52 (Fed. Cir. May 8, 2019): The doctrine of equivalents applies “only in exceptional cases.” Amgen sued Sandoz under the Biologics Price Competition and Innovation Act, alleging that Sandoz’s biosimilar application infringed, inter alia, Amgen’s patent to a method of preparing purified biologics. Amgen’s U.S. Patent 8,940,878 required a three-step, three-solution process that included specifically “washing” and “eluting” the desired protein. Sandoz’s accused process, however, used only one step, without washing or eluting steps. The district court granted summary judgment of non-infringement. Amgen appealed, asserting among other arguments that infringement should have been found under the doctrine of equivalents. The Federal Circuit (Lourie, J., joined by O’Malley and Reyna, JJ.) affirmed, rejecting Amgen’s view that a one-step method could be “insubstantially different from a claimed three-step, three-solution process” even if it achieved “the same result (protein purification).” The panel held that Amgen’s patent recited a specific sequence of steps, which could not be avoided by equivalents. The panel declared that the doctrine of equivalents “applies only in exceptional cases,” a more restrictive view than previously articulated, suggesting potential future narrowing of the doctrine. Celgene Corp. v. Peter, Nos. 18-1167 et al. (Fed. Cir July 30, 2019): The retroactive application of IPR proceedings to pre-AIA patents is not a Fifth Amendment taking. Celgene sells thalidomide, an immunomodulatory drug that causes severe birth defects. In response to an IPR, the Board held certain of Celgene’s claims to systems for prescription safety to be unpatentable. In addition to appealing the Board’s determinations, Celgene asserted that the retroactive application of an IPR to pre-AIA patents constituted an unconstitutional taking. The Federal Circuit (Prost, CJ., joined by Bryson and Reyna, JJ.) disagreed. According to the panel, patentees always had the expectation that their patents’ validity could be challenged in district court. And, when Celgene filed for its patents, ex parte reexamination had existed for two decades. Inter partes reexamination was also available when Celgene filed for one of its patents. Celgene’s pre-AIA patents were thus granted subject to existing judicial and administrative avenues for reconsidering validity. The court concluded that IPR proceedings do not significantly differ substantively or procedurally from pre-AIA challenges to effect a taking. Regents of the Univ. of Minn. v. LSI Corp., Nos. 18-1559 et al. (Fed. Cir. June 14, 2019). State sovereign immunity does not protect state-owned patents from IPR challenges. The University of Minnesota sued LSI among others for patent infringement and LSI and others petitioned for IPR. Before institution, the patentee filed a motion to dismiss based on sovereign immunity. An expanded panel of the PTAB concluded that sovereign immunity did apply to IPR proceedings but that the patentee waived its immunity by filing suit against the petitioners. The Federal Circuit (Dyk, J., joined by Wallach and Hughes, JJ.) affirmed, but held that sovereign immunity does not apply to IPRs. This followed the Federal Circuit’s recent decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., holding that IPRs were not barred by tribal immunity. The panel concluded that “differences between tribal and state sovereign immunity [did] not warrant a departure from the reasoning in Saint Regis.” Parallel to the analysis in Saint Regis, the court concluded that an IPR is more like an agency enforcement action, where sovereign immunity is not implicated, than like a private civil suit. Power Integrations, Inc. v. Semiconductor Components Indus., LLC d/b/a ON Semiconductor, No. 18-1607 (Fed. Cir. June 13, 2019)—Real-party-in-interest relationships arising after filing but before institution are considered for the § 315(b) statutory time-bar. In 2009, Power Integrations sued Fairchild Semiconductor for infringement. In late 2015, ON entered an agreement to merge with Fairchild. In March 2016 while the merger was pending, ON filed for an IPR against the patent being litigated against Fairchild. The merger closed later that year and, shortly after, the Board instituted the IPR. In its institution decision, the Board focused its § 315(b) analysis on whether ON and Fairchild were in privity when the petition was filed, holding that the mere agreement to merge did not create privity for the purpose of § 315(b). On appeal, the Federal Circuit (Prost, CJ, joined by Reyna and Stoll, JJ) reversed, holding that the “decision under § 315(b) is whether to institute or not.” The statute “specifically precludes institution, not filing” when time-barred parties are in privity. Thus, “relationships that may arise after filing but before institution [are] relevant to the § 315(b) time-bar.” AVX Corp. v. Presidio Components, Inc., 18-1106 (Fed. Cir. May 13, 2019)—Competitor standing is insufficient for Article III standing to appeal an IPR decision. Presidio and AVX are competitors in the market for electronic capacitors, and Presidio has repeatedly sued AVX for patent infringement. AVX preemptively filed an IPR against one of Presidio’s patents, although AVX did not yet have plans for a potentially infringing product. The Board held some claims unpatentable, but found AVX failed to meet its burden on others. AVX appealed, but the Federal Circuit (Taranto, J, joined by Newman and O’Malley, JJ) dismissed for lack of standing. The panel rejected AVX’s argument that the Board’s decision “reduces AVX’s ability to compete with Presidio” because, without plans for a product covered by the disputed claims, AVX had no “present or nonspeculative interest” in practicing the patent. As such, the panel held that AVX lacked Article III standing to appeal the Board’s decision. Automotive Body Parts Ass’n v. Ford Global Techs., No. 18-1613 (Fed. Cir. July 23, 2019): Showing that a design’s “aesthetic appeal” pleases consumers does not render it functional. Ford asserted that members of the Automotive Body Parts Association infringed its design patents, and the Association brought a declaratory action, alleging that the designs are primarily functional. The Association argued that car owners seeking to repair Ford trucks would desire replacement parts that matched the original part’s design. The district court rejected the Association’s arguments as effectively seeking to “eliminate design patents on auto-body parts.” The Federal Circuit (Stoll, J., joined by Hughes and Schall, JJ) affirmed, rejecting that consumer preference for replacement “hoods and headlamps that restore [a vehicle’s] original appearance” itself is a functional benefit. The court refused to apply the “aesthetic functionality” doctrine of trademark law to design patents, holding that, even if there is a “consumer preference for a particular design,” that aesthetic appeal “is inadequate to render that design functional.” Upcoming Oral Argument Calendar For a list of upcoming arguments at the Federal Circuit, please click here. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert: Blaine H. Evanson – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: Appellate and Constitutional Law Group: Allyson N. Ho – Dallas (+1 214-698-3233, aho@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 24, 2019 |
Supreme Court Holds That A Federal Ban on “Immoral or Scandalous” Trademarks Violates the First Amendment

Click for PDF Decided June 24, 2019 Iancu v. Brunetti, No. 18-302 Today, the Supreme Court held 6-3 that the Lanham Act’s prohibition on the registration of “Immoral or Scandalous” trademarks infringes the First Amendment. Background: Two terms ago, in Matal v. Tam, 582 U.S. __ (2017), the Supreme Court declared unconstitutional the Lanham Act’s ban on registering trademarks that “disparage” any “person[], living or dead.”  15 U.S.C. § 1052(a).  The Court held that a viewpoint based ban on trademark registration is unconstitutional, and that the Lanham Act’s disparagement bar was viewpoint based (permitting registration of marks when their messages celebrate persons, but not when their messages are alleged to disparage).  Against that backdrop, Erik Brunetti, the owner of a streetwear brand whose name sounds like a form of the F-word, sought federal registration of the trademark FUCT.  The U.S. Patent and Trademark Office denied Brunetti’s application under a provision of the Lanham Act that prohibits registration of trademarks that “[c]onsist[] of or compromise[] immoral[] or scandalous matter.”  15 U.S.C. § 1052(a).  On Brunetti’s First Amendment challenge, the Federal Circuit invalidated this “Immoral or Scandalous” provision of the Lanham Act, on the basis that it impermissibly discriminated on the basis of viewpoint. Issue:  Does the Lanham Act’s prohibition on the federal registration of “Immoral or Scandalous” trademarks infringe the First Amendment right to freedom of speech? Court’s Holding:  Yes.  In an opinion authored by Justice Kagan on June 24, 2019, the Supreme Court held that the Lanham Act, which bans registration of “immoral … or scandalous matter,” violates the free speech rights guaranteed by the First Amendment because it discriminates on the basis of viewpoint. “If the ‘immoral or scandalous’ bar similarly discriminates on the basis of viewpoint, it must also collide with our First Amendment doctrine.” Justice Kagan, writing for the majority What It Means: The argument that the government advanced in this case—that speech is not restricted when you can call your brand or product anything you want even if you cannot get the benefit of federal trademark protection—will not save statutory bans on trademark registration that are viewpoint based. The Court made clear that its decision was based on the broad reach of the Lanham Act’s ban:  “[T]he ‘immoral or scandalous’ bar is substantially overbroad.  There are a great many immoral and scandalous ideas in the world (even more than there are swearwords), and the Lanham Act covers them all.”  In his concurring opinion, Justice Alito emphasized that the Court’s decision “does not prevent Congress from adopting a more carefully focused statute that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas,” thus leaving room for legislators to develop a more narrowly tailored alternative. Unless and until a new law is proposed and passed, however, the U.S. Patent and Trademark Office will have no statutory basis to refuse federal registration of potentially vulgar, profane, offensive, disreputable, or obscene words and images. As always, Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com Related Practice: Fashion, Retail and Consumer Products Howard S. Hogan +1 202.887.3640 hhogan@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 21, 2019 |
Gibson Dunn Recognized in 2019 Managing IP Handbook

The 2019 edition of Managing IP Handbook recognized Gibson Dunn among the top International Trade Commission (ITC) Litigation and Patent Contentious firms in the United States, and additionally recognized the firm’s California and New York practices for their Patent Contentious work. Based on recommendations from peers and clients, the guide also named nine partners to its 2019 IP Stars list: Dallas partner Mark Reiter; Los Angeles partners Wayne Barsky and Debra Wong Yang; New York partners Josh Krevitt, Jane Love and Daniel Thomasch; Palo Alto partner Shaalu Mehra; and Washington, D.C. partners Brian Buroker and Howard Hogan. Jane Love was also named to the Top 250 Women in IP 2019 list.

May 13, 2019 |
Federal Circuit Update (May 2019)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update summarizes key filings for certiorari or en banc review, as well as additional new Federal Circuit processes to address scheduling conflicts, for the period February through April 2019.  We also summarize recent Federal Circuit decisions concerning the patent eligibility of method of treatment claims, the impact of an inventor’s subjective views on the on-sale and prior use bars, and the constitutional and statutory standing requirements to appeal IPR decisions. Federal Circuit News Supreme Court: Decisions are pending from the Supreme Court for one patent case and one trademark case from the Federal Circuit.  In March, the Supreme Court also granted certiorari over an additional patent case from the Federal Circuit. Case Status Issue Amicus Briefs Filed Return Mail Inc. v. United States Postal Service, No. 17-1594 Argued on February 20, 2019. Whether the government is a “person” who may petition to institute review proceedings under the Leahy-Smith America Invents Act. 11 Iancu v. Brunetti, No. 18-302 Argued on April 15, 2019. Whether Section 2(a) of the Lanham Act’s prohibition on the federal registration of “immoral” or “scandalous” marks is facially invalid under the free speech clause of the First Amendment. 10 Iancu v. NantKwest Inc., No. 18-801 Petition for certiorari granted on March 4, 2019. Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. § 145 encompasses the personnel expenses the PTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation. – Noteworthy Petitions for a Writ of Certiorari: Acorda Therapeutics, Inc. v. Roxane Labs., Inc. (No. 18-1280):  Question presented:  “whether objective indicia of nonobviousness may be partially or entirely discounted where the development of the invention was allegedly ‘blocked’ by the existence of a prior patent, and, if so, whether an ‘implicit finding’ that an invention was ‘blocked,’ without a finding of actual blocking, is sufficient to conclude that an infringer has met its burden of proof.”  Acorda is represented by Ted Olson, Thomas Hungar, Amir Tayrani, and Jessica Wagner of Gibson Dunn. Ariosa Diagnostics Inc. v. Illumina Inc. (No. 18-109):  Question presented:  “Do unclaimed disclosures in a published patent application and an earlier application it relies on for priority enter the public domain and thus become prior art as of the earlier application’s filing date, or, as the Federal Circuit held, does the prior art date of the disclosures depend on whether the published application also claims subject matter from the earlier application?” RPX Corp. v. ChanBond LLC (No. 17-1686):  Question presented:  “Can the Federal Circuit refuse to hear an appeal by a petitioner from an adverse final decision in a Patent Office inter partes review on the basis of lack of a patent-inflicted injury in fact when Congress has (i) statutorily created the right to have the Director of the Patent Office cancel patent claims when the petitioner has met its burden to show unpatentability of those claims, (ii) statutorily created the right for parties dissatisfied with a final decision of the Patent Office to appeal to the Federal Circuit, and (iii) statutorily created an estoppel prohibiting the petitioner from again challenging the patent claims?” HP Inc. v. Berkheimer (No. 18-415):  Question presented:  “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.”  On January 7, 2019, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States.  Mark Perry of Gibson Dunn continues to serve as co-counsel for HP in this matter. Hikma Pharmaceuticals USA Inc. v. Vanda Pharmaceuticals Inc. (No. 18-817):  Question presented:  “whether patents that claim a method of medically treating a patient automatically satisfy Section 101 of the Patent Act, even if they apply a natural law using only routine and conventional steps.”  On March 18, 2019, the Supreme Court invited the U.S. Solicitor General to express the views of the United States. Other Federal Circuit News On March 22, 2019, the New York Intellectual Property Law Association held the 97th Annual Dinner in Honor of the Federal Judiciary.  The Honorable Kathleen O’Malley of the Federal Circuit was honored with the 17th Annual Outstanding Public Service Award. The annual Federal Circuit Bench and Bar Conference will take place June 12–15, 2019, at the Broadmoor in Colorado Springs, CO. Federal Circuit Practice Update New Process for Notifying Counsel of Accepted Scheduling Conflicts: On December 10, 2019, the Federal Circuit announced revisions to its process for advising it of scheduling conflicts.  Those changes were summarized in our January 2019 newsletter. The Federal Circuit has now issued a follow-up announcement, discussing the new process for notifying counsel of accepted scheduling conflicts: The Federal Circuit will continue to review Responses to Notice to Advise of Scheduling Conflicts to determine whether conflicts are accepted. Only accepted conflict dates will be indicated on the public docket.  Submitted conflict dates that are not accepted will not be listed on the public docket. The non-acceptance of a submitted conflict date does not mean that oral argument necessarily will be scheduled on that date. The Federal Circuit’s notice can be found here. Key Case Summaries (February 2019–April 2019) Natural Alternatives Int’l, Inc. v. Creative Compounds, LLC, No. 18-1295 (Fed. Cir. Mar. 15, 2019): Claims to treatment methods using existing products in new ways are patent eligible. Natural Alternatives’ patents relate to the use of the amino acid beta-alanine as a supplement to increase muscle capacity.  The district court granted judgment on the pleadings that the claims are ineligible as directed to the natural law that ingesting beta-alanine (a natural substance) will increase the carnosine concentration in human tissue and thereby increase muscle capacity. The Federal Circuit (Moore, J., joined by Wallach, J.; Reyna, J., dissenting in part) reversed.  The majority reasoned that the claims not only “embody” the “discovery” that administering certain quantities of beta-alanine alters a human’s natural state, but also require that an infringer actually administer the dosage claimed in the manner claimed to provide the described benefits.  Citing Vanda Pharms. Inc. v. West-Ward Pharms. Int’l Ltd. (Fed. Cir. 2018)—addressed in our January 2019 Update and pending petition for writ of certiorari—the majority reasoned that, because the claims specify a compound and dosages, they go “far beyond merely stating a law of nature, and instead set[] forth a particular method of treatment,” rendering them patent eligible at step one of the Alice inquiry.  The decision thus continues the Federal Circuit’s recent practice of distinguishing claims written as “methods of treatment” (held patent eligible) from those worded in “diagnostic” terms (held ineligible in Mayo).  The majority also ruled that “factual impediments” exist in analyzing step two of the Alice inquiry, such that disputed questions of eligibility “may not be made on a motion for judgment on the pleadings.”  This is challenged in the pending HP Inc. v. Berkheimer certiorari petition prepared by Gibson Dunn (see above). Endo Pharmaceuticals Inc. v. Teva Pharmaceuticals USA, Inc., Nos. 2017-1240, 1455-1887 (Fed. Cir. Mar. 28, 2019):  Claims to treatments relying on natural laws can be patent eligible. Two weeks after Natural Alternatives was decided, another Federal Circuit panel (Wallach, Clevenger, and Stoll, JJ.) continued the Court’s view that “methods of treatment” can avoid ineligibility under Mayo and Alice.  In Endo, the claims relied on the relationship between the body’s rate of clearing the metabolite creatine and the rate for clearing opioids.  The method required measuring a patient’s creatine clearance rate and then administering an opioid based on that rate.  Citing Vanda Pharmaceuticals, the panel reversed the district court’s finding of ineligibility.  As the panel reasoned, method of treatment claims like in Endo and Vanda can be distinguished from Mayo in that, while the claims in Mayo merely required “giving [a] drug to a patent with a certain disorder,” the claims in Endo and Vanda require giving a specific dose of the drug based on specific testing.  According to the panel, such claims are eligible because they are “directed to a specific method of treatment for specific patients using a specific compound at specific doses to achieve a specific outcome” whether or not steps are governed by natural laws. Barry v. Medtronic, Inc., No. 2017-2463 (Fed. Cir. Jan. 24, 2019):  An inventor’s subjective and unclaimed “intended purpose” for an invention can determine public use and on-sale bars. More than a year before filing, Dr. Barry successfully used his claimed surgical method on three patients.  He then saw each patent for follow-up appointments that he deemed necessary to determine if his method worked, with two of the appointments also falling outside the pre-AIA Section 102(b) grace period.  It was only after the third of these appointments, which was within the Section 102(b) grace period, that Dr. Barry felt confident that his invention functioned for its intended purpose.  Accordingly, the district court held that his earlier actions did not constitute invalidating public use or sales (i.e., that the invention was not “ready for patenting” earlier). The Federal Circuit majority (Taranto, J., joined by Moore, J.) affirmed that the invention was not “ready for patenting” before the critical date and that the surgeries fell in the experimental-use exception to “on sale” and “public use” bars.  The majority concluded that Dr. Barry did not reduce his invention to practice until the final postoperative follow-up because that follow up was “reasonably needed” to determine if the invention worked for its “intended purpose.” In dissent, Chief Judge Prost argued that the “ready for patenting” requirement that defines the statutory bars is distinct from “reduction to practice” and meant to answer whether the inventor could have obtained a patent.  According to the dissent, Dr. Barry’s method was ready to patent after the first two surgeries and follow-ups, if not after the first.  Dr. Barry charged his usual fee for the surgeries, and the patients were not told that the surgery was experimental.  The early surgeries worked, and no multiple surgery or follow up requirement or “purpose” was claimed. On April 29, 2019, Medtronic’s petition for panel rehearing and rehearing en banc was denied, leaving stand the panel majority decision that gives strong weight in determining Section 102 bars to the inventor’s subjective view of whether an invention works for its “intended purpose.” Mylan Pharms. Inc. v. Research Corp. Techs., Inc., Nos. 2017-2088, -2089, -2091 (Fed. Cir. Feb. 1, 2019):  Joined parties can appeal adverse IPR decision without initial petitioner. An initial Petitioner timely filed an IPR, but had not been threatened with infringement and thus lacked Article III standing to appeal.  Three days after the Board instituted the initial petition, three other companies filed for joinder under 35 U.S.C. § 315(c).  Each joining company had been sued for infringement more than a year earlier, and thus, absent joinder, their petitions were otherwise time barred.  After an adverse decision from the Board, the initial petitioner did not appeal, leaving only the joined parties to appeal.  The patentee objected that, absent the initial petitioner, the joined parties lacked standing and did not “fall within the zone of interests of 35 U.S.C. § 319”—i.e., absent the initial petitioner, their own petitions were allegedly time barred. The Federal Circuit (Lourie, Bryson, and Wallach, JJ.) disagreed.  As the panel explained, Section 315 allows entities to be joined “as a party” and Section 319 gives a “party” a right to appeal.  Thus, even absent the initial petitioner, the joined parties fell “within the zone of interests of § 319 and are not barred from appellate review.” Momenta Pharma v. Bristol-Myers Squibb Co., No. 2017-1694 (Fed. Cir. Feb. 7, 2019):  IPR petitioner lacked standing for appeal after it suspended plans for a competing product. Momenta petitioned for IPR of a patent covering the immunosuppressant Orencia.  At the time, Momenta was planning a biosimilar, which it had in clinical trials.  But by the time of appeal, Momenta had suspended its development plans after its competing product failed Phase 1 trials.  The Federal Circuit (Newman, Dyk, and Chen, JJ.) held that Momenta thus lacked the present “concrete and particularized” interest required for Article III standing.  The panel rejected the argument that the patent could impact future development, finding a generalized threat of harm fell short of an “impending” injury: “[T]he cessation of potential infringement means that Momenta no longer has the potential for injury, thereby mooting the inquiry.”  Taken with Mylan above, Momenta illustrates that, while statutory standing may be durable, constitutional standing for Article III courts must be preserved up to and through appeal. Upcoming Oral Argument Calendar For a list of upcoming arguments at the Federal Circuit, please click here. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert: Blaine H. Evanson – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: Appellate and Constitutional Law Group: Allyson N. Ho – Dallas (+1 214-698-3233, aho@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 17, 2019 |
Wayne Barsky Named a Top Intellectual Property Lawyer of 2019

The Daily Journal named Century City partner Wayne Barsky to its list of the Top Intellectual Property Lawyers of 2019.  Barsky was recognized for “patent litigation in the life science, pharmaceutical and medical device industries, representing high-profile clients in federal courts and before the U.S. International Trade Commission.” The feature was published on April 17, 2019. A Co-Chair of Gibson Dunn’s Intellectual Property Practice Group, Barsky focuses on patent litigation and has extensive trial and appellate experience in federal courts throughout the country.  Routinely called upon in high-profile cases, Barsky has represented clients in more than 100 patent infringement actions.

March 4, 2019 |
Supreme Court Holds Recovery Of “Full Costs” Under Copyright Act Is Limited To Those Costs Enumerated In The General Costs Statute

Click for PDF Decided March 4, 2019 Rimini Street, Inc. v. Oracle USA, Inc., No. 17-1625  Today, the Supreme Court unanimously held that a provision in the Copyright Act authorizing a prevailing party to recover “full costs” entitles that party to recover only those categories of costs enumerated in 28 U.S.C. §§ 1821 and 1920, and not all litigation expenses. Background: While the so-called “American rule” generally provides that each party in litigation must bear its own costs, federal law sets out six discrete and exclusive categories of costs which a court may, in its discretion, award a prevailing party.  28 U.S.C. §§ 1821, 1920.  Those categories include clerk and marshal fees, transcript fees, fees for printing and witnesses, certain fees for exemplification and copies, designated docket fees, and fees for court-appointed experts and interpreters.  Section 505 of the Copyright Act states, “In any civil action under [the Copyright Act], the court in its discretion may allow the recovery of full costs by or against any party . . . . [T]he court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.” 17 U.S.C. § 505. Oracle sued Rimini Street for infringing its copyright and prevailed in part. The district court awarded Oracle nearly $5 million in costs and nearly $12.8 million in additional expenses, including expert witness fees, jury consultant fees, and other expenditures not enumerated in Sections 1821 and 1920. The Ninth Circuit affirmed the award of these additional litigation expenses, holding that the phrase “full costs” in the Copyright Act authorizes an award of costs beyond those categories set forth in Sections 1821 and 1920. Issue:  Whether the Copyright Act provision permitting an award of “full costs” to the prevailing party authorizes an award of expert witness fees, e-discovery expenses, jury consulting fees, and other litigation expenses not authorized as costs under 28 U.S.C. §§ 1821 and 1920. Court’s Holding:  No. The term “full costs” in Section 505 of the Copyright Act refers to the specific categories of costs defined in 28 U.S.C. §§ 1821 and 1920, and a prevailing party may not recover litigation expenses outside those categories. “[T]he term ‘costs’ refers to the costs generally available under the federal costs statute—§§ 1821 and 1920. ‘Full costs’ are all the costs generally available under that statute.” Justice Kavanaugh, writing for the unanimous Court Gibson Dunn represented the winning parties: Rimini Street, Inc. and Seth Ravin What It Means: The Court’s opinion reaffirms that “costs” is a term of art that encompasses only the specific categories of costs enumerated in 28 U.S.C. §§ 1821 and 1920. A statute will not be interpreted as expanding the categories of recoverable costs unless Congress expressly so provides. A statutory provision authorizing the recovery of “full costs” does not expressly expand the categories of recoverable costs beyond those enumerated in 28 U.S.C. §§ 1821 and 1920.  “Full” is an adjective that describes the quantity or amount of the noun “costs,” and so the term “full costs” does not change the meaning of “costs”—the categories of expenses set forth in Sections 1821 and 1920—but instead simply permits an award of all costs otherwise recoverable under those provisions. The Court rejected Oracle’s argument that there was any historical justification for interpreting the term “full costs” to expand the categories of recoverable expenses. As Gibson Dunn successfully argued, none of the more than 800 copyright decisions awarding costs between 1831 and 1976 (when the Copyright Act was amended) awarded expenses other than those specified by state or federal law. The Court’s decision will prevent parties in Copyright Act cases from inflating their recoveries with broad, unbounded awards of litigation expenses, such as expert witness fees, e-discovery expenses, and jury consulting fees. Parties will instead be limited to recovering the specific categories of expenses explicitly authorized by Congress in Sections 1821 and 1920, along with attorneys’ fees. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com

March 4, 2019 |
Supreme Court Holds That Copyright Owners May Not Sue For Infringement Until Copyright Office Processes Registration

Click for PDF Decided March 4, 2019 Fourth Estate Public Benefit Corp. v. Wall-Street.com, No. 17-571  Today, the Supreme Court held 9-0 that the Copyright Act requires copyright owners to wait until the Copyright Office has approved or denied an application for registration before bringing an infringement action. Background: The Copyright Act allows the owner of a copyright claim to register the claim with the Copyright Office.  Section 411(a) of the Act provides that a suit for copyright infringement may not be filed “until preregistration or registration of the copyright claim has been made” or “refused.”  Petitioner Fourth Estate, a news organization, filed applications with the Copyright Office to register copyright claims for articles written by its journalists.  Before the Copyright Office acted on the applications, Fourth Estate sued Wall-street.com for copyright infringement for displaying the articles on its website without a license.  Wall-street.com moved to dismiss the suit as premature, arguing that Section 411(a) barred Fourth Estate from suing for infringement until the Copyright Office approved or denied its application for copyright registration. Issue:  Has a copyright claim been “regist[ered]” with the Copyright Office, so that the copyright owner can commence an infringement suit, when the copyright owner delivers the required application, deposit, and fee to the Copyright Office, or only once the Copyright Office acts on that application. Court’s Holding: A copyright claim is not “regist[ered]” with the Copyright Office, and the copyright owner may not file an infringement suit, until the Copyright Office has processed the application. “If infringement occurs before a copyright owner applies for registration, that owner may eventually recover damages for the past infringement, as well as the infringer’s profits. . . . She must simply apply for registration and receive the Copyright Office’s decision on her application before instituting suit.” Justice Ginsburg, writing for the unanimous Court What It Means: The Court acknowledged that waiting for the Copyright Office to process an application to register a copyright claim could take “many months,” delaying enforcement and allowing infringement to continue during the delay.  The Court attributed these delays to “staffing and budgetary shortages that Congress can alleviate, but courts cannot cure.” The Court nevertheless emphasized that copyright owners may obtain monetary relief to remedy any infringement that occurs before registration is complete.  That relief could include actual damages or the infringer’s profits.  But the Court did not address the effect of its decision on the more typical remedy, statutory damages.  Section 412 of the Copyright Act limits the availability of that remedy when infringement occurs before the copyright holder registers its copyright claim. To avoid delay, copyright owners now have a greater incentive to seek registration earlier, rather than waiting until litigation is imminent.  Copyright owners can also pay an $800 special-handling fee to expedite processing of their application for registration.  In addition, the Copyright Act provides carve-outs that allow owners of certain works “especially susceptible to prepublication infringement”—including movies, musical compositions, and live broadcasts—to sue for infringement before the Copyright Office has acted on an application. Prior to the decision, some circuits had allowed copyright owners to commence infringement suits while an application for registration was pending, without waiting for the Copyright Office to process the application.  The decision leaves uncertain the effect of the Court’s ruling on currently pending infringement suits in those circuits that would have been considered timely when filed. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com Related Practice: Media, Entertainment and Technology Scott A. Edelman +1 310.557.8061 sedelman@gibsondunn.com Kevin Masuda +1 213.229.7872 kmasuda@gibsondunn.com Orin Snyder +1 212.351.2400 osnyder@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 21, 2019 |
Media, Entertainment and Technology Group Outlook and Review – 2019

Click for PDF With an active end to 2018 and a quick start to 2019, we have had no shortage of material to report on for our semi-annual Media, Entertainment & Technology Practice Group Update.  From remasters (of pre-1972 recordings) to remand (“Stairway to Heaven”), and from Tweets (Stormy Daniels v. Trump) to retweets (Joy Reid).  There was M&A and the passage of the MMA—the Music Modernization Act, enacted to facilitate the accounting and payment of royalties in the digital streaming era.  Cert denials cemented notable rulings regarding California’s right of publicity, copyright fair use, and the DMCA.  And in trademark law, the Supreme Court’s 2017 ruling in Matal v. Tam continued to make waves.  Here, then, are the deals, rulings, and regulatory actions that capture current legal trends and will define future industry movement. I.    Transaction & Regulatory Overview A.    M&A 1.    Disney’s Acquisition of Twenty-First Century Fox Races to Completion On July 27, 2018, Disney and Fox shareholders voted to approve the acquisition of the majority of Twenty-First Century Fox, Inc. by The Walt Disney Company for $71.3 billion in cash and stock.[1]  The U.S. Department of Justice had already approved the arrangement between Disney and Fox, on June 27, 2018, with the stipulation that Disney must sell Fox’s regional sports networks.[2] Through the latter half of 2018, a number of foreign regulatory bodies evaluated the Disney-Fox merger.  The Competition Commission of India approved the merger of Star India and related assets (Fox Star Studios and National Geographic channels) in August 2018.[3]  The European Commission’s approval of Disney’s purchase of Twenty-First Century Fox assets followed in November 2018, subject to the condition that Disney discharge its A&E channels in Europe to address concerns that the deal with Fox would remove competition with respect to factual channels.[4]  China unconditionally approved the Disney-Fox deal in November 2018.[5]  Despite lingering approvals required from other regulators, approval from the United States, the European Union, and China were thought to be the most important obstacles to clear.[6] Brazil’s antitrust regulator Cade (Administrative Council for Economic Defense) noted on December 3, 2018 that the Disney-Fox deal raised concerns “about undermining competition in the cable television market,” specifically regarding concentration in the market of cable sports channels.[7]  Cade recommended remedial measures and has until March 2019 to issue a decision (which deadline can be extended for 90 days).[8]  On January 4, 2019, Bloomberg Law reported that Cade is expected to approve the proposed merger between Disney and Fox without asking for any asset sale.[9]  Disney and Fox were expected to present a proposal including offers to change behavior to facilitate approval of the deal.[10]  Regulators returned from year-end recess on January 30, 2019.[11]  Despite meetings between Bob Iger, Disney’s Chief Executive Officer, and representatives of CADE in early February 2019, Cade has not issued a decision as of February 12, 2019.[12]  Brazilian regulators remain divided on whether the deal can be approved without Disney’s sale of one of its two sports channels in the country (Fox Sports and ESPN), with reports that some Cade board members still view behavioral remedies as the path to approval.[13]  Bloomberg reports that the deadline for a decision from Cade is March 17, 2019, though an extension can be requested if the case isn’t discussed at Cade’s upcoming February 27 meeting.[14] At the end of 2018, Disney and Fox also awaited authorization of regulatory authorities in Mexico, with speculation of regulations due to the likelihood that this deal will monopolize sports TV and that Disney, after the acquisition, would own 28% of the content distribution market in Mexico.[15]  On January 31, 2019, Mexico’s Federal Economic Competition Commission approved the Disney-Fox merger after Disney agreed to sell its share of Walt Disney Studios Sony Pictures Releasing de México to Sony Pictures Releasing International Corporation.[16] Twenty-First Century Fox announced its filing of a registration statement for Fox Corporation, the new Fox entity to be spun off in connection with the merger, with the SEC on January 7, 2019.[17]  At the end of January 2019, as per a filing with the SEC, Disney expects the Disney-Fox deal to close by June 2019,[18] though other sources expect the deal to close in February or early March 2019.[19] 2.    Universal and Lionsgate Expand on Prior Collaborations On August 6, 2018, Universal Music Group (“UMG”) announced a multi-year, first-look television deal with Lionsgate.[20] Under the deal, Lionsgate and Polygram Entertainment, UMG’s film and television production and development division, will create original scripted and unscripted television projects drawn from UMG’s catalogue of music, labels, and artists.[21] David Blackman, the head of Polygram Entertainment, stated that “[w]ith this partnership, we’ll continue to expand the definition of music-driven stories—whether that means narratives set against entire scenes of eras of music, or projects driven by our artists’ catalogues.”[22] UMG will also produce soundtrack albums associated with the projects.[23] This deal builds on the companies’ past successful collaborations, which includes film scores and soundtracks to La Land, Hunger Games, and Divergent.[24] Additionally, the announcement came days after Universal Music Publishing Group executed an exclusive administration deal to represent Lionsgate’s music publishing properties and administer its music rights.[25] 3.    Sinclair and Tribune Sue Each Other Over Failed Merger In August 2018, Tribune Media Co. terminated its agreement to be acquired by Sinclair Broadcast Group and filed suit against Sinclair, seeking approximately $1 billion in damages for Sinclair’s alleged failure to fulfill its obligation under their merger agreement to use its reasonable best efforts to obtain regulatory approval.  The $3.9 billion deal, which was announced in May 2017, would have created a company that owned television stations in 108 markets, covering 72% of U.S. homes.[26]  Before the agreement was terminated, the U.S. Federal Communications Commission issued an order stating there were “substantial and material questions of fact” as to whether “Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission” and referred review of the acquisition to an administrative law judge.[27] Tribune alleged in its lawsuit that “in an effort to maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the [government] over regulatory requirements, refused to sell stations in the markets as required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay—all in derogation of Sinclair’s contractual obligations.”[28]  Sinclair has called the lawsuit meritless, saying that it fully complied with its obligations under the merger agreement and that Tribune is trying “to capitalize on an unfavorable and unexpected reaction from the Federal Communications Commission to capture a windfall.”[29]  Sinclair also filed a countersuit against Tribune, alleging Tribune breached its obligation under their merger agreement to use its reasonable best efforts to obtain regulatory approval by prioritizing its litigation strategy against Sinclair at the expense of its cooperation with Sinclair to try to close the merger.[30] 4.    Nexstar Agrees to Acquire Tribune A few months after the failure of its merger with Sinclair, Tribune found a new buyer. In December 2018, Tribune signed a deal to be acquired by Nexstar Media Group for $4.1 billion in cash.[31]  If completed, the deal, which is worth $6.4 billion including the assumption of Tribune’s debt, would make Nexstar the largest regional U.S. TV station operator.[32]  Tribune shareholders will receive an additional 30 cents per share per month in consideration (less any dividends paid by Tribune) if the merger does not close by August 31, 2019.[33]  In order to get U.S. Federal Communications Commission approval for the merger, Nexstar said it plans to divest some of the more than 200 television stations that would be owned by the combined company, including stations in 13 of the 15 markets in which both Tribune and Nexstar currently own stations.[34] 5.    Sky Auction Draws to a Close The nearly two-year battle to acquire the European pay-TV broadcaster Sky PLC drew to an end in September 2018, with Comcast prevailing over Twenty-First Century Fox (which was backed by Disney due to the Fox acquisition).[35]  Fox, which held a 39% stake in Sky, was the first to offer a bid in December 2016, but faced delays due to the prolonged regulatory review in the U.K.[36]  Comcast thereafter made its own offer, with each company making competing bids thereafter until they deadlocked at $34 billion.[37]  The stand-off exceeded the September 22, 2018 deadline imposed by U.K. regulators and triggered a rare blind auction to force the companies to disclose their best offers.[38]  The auction was a one-day bidding process that lasted three rounds and required sealed bids with cash-only offers.[39]  After the bidding closed, it would be left to the Sky shareholders to accept either offer.[40] In the final round in September 2018, Comcast outbid Fox by $3.6 billion, offering a total of $38.8 billion.[41]  Comcast officially acquired Sky on October 9, 2018, by purchasing more than 75% of the company’s shares, including the 39% stake that Fox previously owned.[42] 6.    Microsoft Studios Acquires Six Video Game Development Studios and Founds a Seventh in 2018 On November 10, 2018, Microsoft Studios announced its acquisition of two video game development studios, Obsidian Entertainment and inXile Entertainment, for undisclosed amounts.[43]  Both studios are known for their development of role-playing games (RPGs), such as Obsidian’s Fallout: New Vegas and Star Wars Knights of the Old Republic II: The Sith Lords and inXile’s Wasteland series.[44]  The acquisitions followed the June 2018 announcement of Microsoft’s founding of a new video game studio, The Initiative, and its acquisitions of four other gaming developers: Compulsion Games (We Happy Few), Ninja Theory (Hellblade: Senua’s Sacrifice), Undead Labs (State of Decay series), and Playground Games (Forza Horizon series).[45]  Microsoft now owns thirteen gaming development studios.[46] B.    SVOD Update 1.    Diversification, Even More Original Content, and Increased Competition In July 2018, Netflix collected 112 Emmy nominations (across 40 different shows),[47] further illustrating its prioritization of original content to propel growth and influence in the streaming video on demand (SVOD) industry.  By October, Netflix had spent over $8 billion on content in 2018, and announced plans to offer another $2 billion in senior notes on October 22, 2018 to be used “for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”[48] Hulu and Amazon have also positioned themselves for continued growth through expansion of original content in early 2019.  Following Disney’s acquisition of Fox, Disney will own a 60% stake in Hulu, and, along with the potential integration of additional Fox content, Disney plans to use its expanded influence to invest in more original content for Hulu and promote international expansion of the service.[49]  Additionally, a study by Ampere Analysis from September 2018 revealed that Amazon’s current plans for new original programming will almost double its original content, with over 100 upcoming projects that will supplement the 105 original programs currently on its roster.[50] In addition to these efforts to expand original content, the latter half of 2018 was marked by efforts to shake up the SVOD industry with numerous new entrants.  In October 2018, AT&T announced that it would be releasing a streaming service in late 2019;[51] in November 2018, Disney officially confirmed that its upcoming streaming service will be called Disney+ and will be launching in late 2019.[52] 2.    Katzenberg & Whitman Launch Short-Form Streamer Quibi Quibi, a new streaming service led by Jeffrey Katzenberg and Meg Whitman, plans to create a library of high-quality, short-form videos for viewing on mobile devices.  Named for the “quick bites” of entertainment it will broadcast, the service plans to launch at the end of 2019 with 5,000 unique pieces of content, each 10 minutes or less, specifically designed to be viewed on a phone.[53]  Despite being nearly a year away from its anticipated launch date, Quibi is already attracting top talent, including Oscar-winning director Guillermo del Toro, Twilight and Lords of Dogtown director Catherine Hardwicke and Spider-Man director Sam Raimi. Incubated at WndrCo, the consumer technology holding company and venture investor, Quibi raised $1 billion in August 2017 from major Hollywood studios, a number of independent television studios and major technology companies.  The aim of such investments, in part, is to allow Quibi to tap into the studios’ creative talent and resources and the technology companies’ innovations like 5G broadband, big data and analytics.  [Disclosure: Gibson Dunn represents WndrCo and Quibi.] C.    China Update 1.    Open Road Films Files for Chapter 11 Bankruptcy On September 6, 2018, Open Road Films LLC, the North American film distributor known for its release of independent films such as the Best Picture Academy Award-winning film Spotlight, and its affiliated entities filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, reporting approximately $141 million in liabilities.[54]  In August 2017, Tang Media Partners, the Shanghai and Los Angeles-based investment group, had acquired Open Road Films from AMC Entertainment and Regal Entertainment Group for approximately $28.8 million.[55]  This acquisition followed Tang Media Partners’ previous acquisition in summer 2016 of IM Global, a film finance and sales agency, and the related launch of a television joint venture, IM Global Television, with Chinese technology firm Tencent Holdings.[56]  Announcing its plans to combine Open Road Films, IM Global, and IM Global Television under one brand, Tang Media Partners launched Global Road Entertainment in October 2017 as a global content company with a particular focus on the development, production, and distribution of film and television content that would bridge the U.S. and China markets.[57]  In February 2018, Global Road announced a commitment of $1 billion to production finance over three years,[58] but the studio struggled to raise the capital needed to complete the Global Road restructure and suffered from poor box office performance.[59]  In July 2018, Tang Media Partners cut off additional funds to Open Road Films,[60] and shortly thereafter bank lenders froze its cash assets.[61] On December 19, 2018, the U.S. Bankruptcy Court for the District of Delaware approved the asset sale by Open Road, including its library of around 45 films, for approximately $87.5 million to stalking horse bidder Raven Capital Management.[62] 2.    Tencent’s China Literature Acquires New Classics Media for $2.25 Billion On August 13, 2018, China Literature, the publicly listed e-books company that was spun off by Tencent Holdings in November 2017, announced that it would wholly acquire the film and television production company New Classics Media for approximately $2.25 billion.[63] A prolific production company, New Classics Media is known for producing Chinese television series and blockbuster films, including Hello Mr. Billionaire,[64] which was one of last year’s five highest-grossing films at China’s box office, earning $367 million.[65] In March 2018, Tencent had previously purchased a 27 percent stake in New Classics Media from Beijing Enlight Media, an investment that was designed to unlock content for Tencent’s streaming-video platform, Tencent Video.[66] In announcing the buyout of the remaining equity interest in New Classics Media, Tencent cited its desire to join New Classics Media’s production expertise with China Literature’s extensive literary library, considering that a third of the top 50 films and a quarter of the top TV series in China are literary adaptations.[67] The acquisition marked yet another strategic investment in the entertainment sector by Tencent, which, in addition to its own film distribution and production unit, holds minority equity stakes in a number of entertainment companies, including the China-based studios Huayi Brothers Media and Bona Film Group and the U.S.-based entertainment companies Skydance Media and STX Entertainment.[68] 3.    Tencent Music Entertainment Raises $1.1 Billion in its U.S. IPO Following a delay of its planned IPO in October 2018, due to a downturn in technology stocks and a rise in global market volatility fueled, in part, by U.S.-China trade tensions, Tencent Music Entertainment, the online music division controlled by Tencent Holdings, raised $1.1 billion through its U.S. IPO last December, with an implied valuation of $21.3 billion.[69]  Tencent Holdings created Tencent Music after acquiring a controlling interest in China Music Corporation in 2016, which Tencent Holdings then combined with its own music streaming business.[70]  Tencent Music offers the largest music-streaming service in China, and the company focuses on three main offerings: music streaming, online karaoke, and live-streamed performances.  At the time of its IPO, Tencent Music reported over 800 million unique monthly active users,[71] but, unlike traditional subscription-based models, only a small percentage of these users are paying subscribers.[72]  In Q2 2018, the company earned over 70% of its revenue through in-app tipping, virtual gifts, and other music-related “social entertainment services.”[73] 4.    The Dalian Wanda Group Scales Back AMC Ownership As Chinese regulators continue their efforts to retrench Chinese companies’ foreign investments, it was announced on September 14, 2018 that the Dalian Wanda Group would be curtailing its equity interest in AMC Entertainment,[74] which Wanda acquired in 2012 for $2.6 billion.[75] AMC Entertainment repurchased around a third of the shares owned by Wanda and raised $600 million from private equity firm Silver Lake Partners through the issuance of unsecured convertible notes.[76] Following the transaction, Wanda owns around 50% of AMC shares; however, upon a full conversion of the notes, Wanda’s ownership stake in AMC would fall to around 38%.[77] II.    Legislative & Regulatory Updates A.    Music Modernization Act Enacted into Law In October 2018, the Music Modernization Act, the most sweeping update to copyright law in decades, was signed into law, introducing reforms that were designed to modernize copyright law for the digital streaming era.[78]  The bill unanimously passed both houses of Congress and had widespread support among record labels, musicians, and digital service providers.[79]  The act has three main pieces of legislation combined together: First, the Music Modernization Act creates a formalized non-profit agency, the Mechanical Licensing Collective, run by major music publishers, which creates a comprehensive database of recordings and then administers the mechanical license of recordings streamed on services like Spotify, Amazon Music, Google Play, and Tidal.  Rather than identifying who holds the mechanical license to a particular track, this agency will be responsible for establishing blanket royalty rates that would be used to pay the composers and songwriters for interactive streaming or digital downloads.  The legislation also revamps the rate court process when there are disputes over royalty rates by allowing disputes to be adjudicated by a randomly assigned district judge in the Southern District Court of New York, instead of being assigned to a single rate court judge. Second, the Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (“CLASSICS”) Act ensures that sound recordings made before 1972 are covered by federal copyright law until February 15, 2067.  Previously, sound recordings made prior to February 15, 1972 did not receive federal copyright law protection.  Because some state laws granted these recordings copyright protection and others did not, the CLASSICS Act is intended to address this patchwork of state laws.  Musicians will now have the opportunity to receive royalties for songs recorded before 1972.  The statute also ensures that older songs will enter the public domain.  Recordings made before 1923 will enter the public domain after a three-year period, with recordings from 1923 to 1956 entering within the next few decades. Finally, the Allocation for Music Producers (“AMP”) Act improves royalty payouts for producers, mixers, and sound engineers from SoundExchange, the non-profit organization established by Congress that distributes royalties on sound recordings, when their sound recordings are used on streaming services or digital downloads.  Notably, this is the first time that music producers have ever been mentioned in federal copyright law.[80] Regulations are currently being drafted to implement the provisions of the Music Modernization Act, and we will be watching closely to see how those regulations give effect to the Act, and how such provisions begin to be interpreted by the courts. B.    DOJ Opens Review of Paramount Consent Decrees In October 2018, the Department of Justice opened a review of the Paramount Consent Decrees that for over seventy years have regulated how certain movie studios distribute films to movie theaters.[81]  In 1938, the DOJ brought an antitrust suit against the major movie picture studios at the time (including Paramount, MGM, Universal, Columbia Pictures (now Sony), 20th Century Fox, United Artists, and Warner Brothers), alleging that they had conspired to control the industry through their ownership of film distribution and exhibition.  A decade later, the Supreme Court ruled in United States v. Paramount Pictures, Inc. that the studios had engaged in a widespread conspiracy and required that each studio enter into a consent decree with the DOJ, now known as the “Paramount Consent Decrees.”[82]  The studios were mandated to divest their distribution operations or movie theaters and, going forward, they were not permitted to both distribute movies and own theaters without prior court approval.  The decree also set limits on other practices such as circuit dealing and setting minimum pricing, and the practice of giving exclusive film licenses for certain geographic areas. The premise of the Department of Justice’s review is that the motion picture industry has changed considerably since the Paramount Consent Decrees were entered.[83]  For example, unlike the movie palaces seventy years ago that had one screen and showed one movie at a time, there are now multiplex theaters that have multiple screens showing movies from numerous different distributors at the same time.  Consumers today are also not limited to watching movies in theaters and have the ability to view movies on cable and broadcast television, DVDs, and over the Internet through streaming services.  The Department of Justice recently completed a thirty-day review period for public comment and is now determining whether these decrees should be modified or terminated altogether, which might lead to structural changes in the industry or encourage consolidation. C.    Supreme Court Declines Appeal Against Net Neutrality Laws On November 5, 2018, the Supreme Court denied a petition for writ of certiorari brought by the Trump administration and the telecommunications industry to overturn a D.C. Circuit ruling that had upheld Obama Administration-era net neutrality rules.[84]  Two years ago, the D.C. Circuit held that the Federal Communications Commission (“FCC”) had proper authority to reclassify broadband internet under Title II of the Telecommunications Act and could promulgate rules requiring internet service providers to offer equal access to all web content regardless of who build the facilities that allow that data to be disseminated.[85]  The Supreme Court’s refusal to take up the appeal does not affect a pending challenge to the 2017 repeal of net neutrality rules by the now Republican-led FCC.  The D.C. Circuit heard oral arguments in that case on February 1, 2019, with a decision expected by this summer.[86] In response to the FCC’s net neutrality repeal, some states have taken legislative action.  In September 2018, California passed a net neutrality bill seeking to restore internet access rules.  The Justice Department swiftly sued the state, alleging that Congress granted the federal government, through the FCC, the sole authority to create rules for internet service providers.[87]  A month later, California reached an agreement with the DOJ to stay the lawsuit until the D.C. Circuit issues its ruling on the pending challenge to the FCC’s 2017 repeal of federal net neutrality rules.[88] III.    Recent Litigation Highlights A.    Music Industry 1.    Ninth Circuit Holds Remasters Do Not Defeat Plaintiff’s Copyright Claims On August 20, 2018, the Ninth Circuit overturned the district court’s grant of summary judgment in favor of CBS Corporation in a state-law copyright infringement suit brought by Plaintiff ABS Entertainment, sending the case back to district court for further proceedings.[89]  On August 17, 2015, plaintiffs had filed a putative class action against CBS alleging violations of California state law that protects plaintiffs’ rights in pre-1972 sound recordings—recordings that precede amendments to federal copyright law that went into effect in 1972.  CBS moved for summary judgment, arguing that the digitally remastered recordings it broadcasted constituted derivative works that were themselves capable of federal copyright protection, thereby preempting plaintiffs’ state-law claims.  After excluding plaintiffs’ expert on the subject under FRE 702, the district court held that there was no dispute of material fact as to whether the remastered recordings constituted derivative works, and granted summary judgment in CBS’s favor. On appeal, the Ninth Circuit reversed both the grant of summary judgment and the exclusion of plaintiffs’ expert.  Applying the Durham test for determining whether a recording constitutes a “derivative work” as defined in the Copyright Act, the Ninth Circuit found that “the district court’s identification of ‘perceptible changes’ between the recordings in characteristics relating to ‘quality’ did not ensure that the remastered versions contained anything of consequence owing its origin to the remastering engineers.”[90]  The appellate court concluded that “[a]lthough we do not hold that a remastered sound recording cannot be eligible for a derivative work copyright, a digitally remastered sound recording made as a copy of the original analog sound recording will rarely exhibit the necessary originality to qualify for independent copyright protection.”[91] 2.    Royalty Streaming Disputes Two class action complaints against Sony Music Entertainment and Warner Music Group were filed at the end of 2018 on behalf of various musical artists alleging that the defendant distributors had failed to pay contractually owed royalties for the digital streaming of plaintiffs’ works abroad. In the Southern District of New York, The Rick Nelson Company, as a representative party of a similarly situated class of music artists, sued Sony Music Entertainment, alleging that Sony has been improperly assessing an “intercompany charge” on revenues collected from its wholly owned foreign affiliates that takes “up to 68% off the top of the international revenue earned from streaming sales” of plaintiffs’ artistic works.[92]  Sony has not yet responded to the complaint. In California, Leonard Williams filed a similar complaint against Warner Music Group in the Los Angeles County Superior Court, alleging that Warner was also assessing improper “intercompany charge[s]” in violation of existing agreements.[93]  Shortly thereafter, Warner Music Group removed to the District Court for the Central District of California and filed a motion to dismiss, arguing that there could be no breach of contract as a matter of law because the contract attached to the complaint “contains no provision for royalties to be paid based upon the digital streaming of sound recordings, let alone the foreign digital streaming of sound recordings,” instead limiting royalties to “sales” of “phonograph records” and “tape albums” by the distributor.[94] 3.    Ninth Circuit Walks “Stairway” Back to District Court In September 2018, the Ninth Circuit overturned a 2016 jury verdict in favor of Led Zeppelin and remanded for a new trial in a copyright infringement suit alleging that Led Zeppelin’s hit “Stairway to Heaven” was substantially similar to plaintiffs’ song “Taurus” (performed by the group Spirit).[95] Although at trial the jury found that plaintiff owns the copyright to “Taurus,” a finding not disputed on appeal, it also found that the two songs were not “substantially similar” under the extrinsic test for unlawful appropriation that requires the factfinder to determine similarity “by breaking the works down into their constituent elements, and comparing those elements.”[96]  On appeal, plaintiff Skidmore argued among other points that the court’s instructions to the jury failed to make clear that the selection and arrangement of unprotectable musical elements are themselves protectable by copyright.  The Ninth Circuit agreed, finding that the district court’s failure to include such an instruction, despite receiving such a proposed instruction from both parties, constituted an abuse of discretion. Defendants argued both that plaintiff had failed to preserve an objection to the exclusion of this instruction and that the error was otherwise harmless.  The panel disagreed, calling the waiver argument “baseless” and noting that the error was substantial in light of Skidmore’s heavy reliance at trial on the theory of selection and arrangement in arguing infringement.[97]  The Ninth Circuit similarly agreed with plaintiff that the court had erred in providing instructions to the jury that “copyright does not protect chromatic scales, arpeggios or short sequences of three notes” and that “any elements from prior works or the public domain are not considered original parts and not protected by copyright.”[98]  The panel noted that “[t]here is a low bar for originality in copyright” that can extend to “an arrangement of a limited number of notes.”[99] In remanding the case for retrial, although the panel confirmed that the scope of the protected copyright under the 1909 Act is defined by the deposit copy of the song, it found that the district court abused its discretion in refusing to allow recordings of “Taurus” to be played in the presence of the jury to prove that Led Zeppelin had access to the song for copying.[100]  The district court had found that, although probative, such recordings would be unduly prejudicial as they do not define the scope of the copyright in deciding whether copying occurred.  The Ninth Circuit held that “[l]imiting the probative value of observation was not proper here, as the risk of unfair prejudice or jury confusion was relatively small and could have been reduced further with a proper admonition.”[101]  A petition for rehearing en banc is currently being briefed, accompanied by several amici. 4.    Bluewater v. Spotify On October 4, 2018, the District Court for the Western District of Tennessee denied Spotify USA Inc.’s motion to dismiss a suit filed by Bluewater Music Services Corporation alleging willful copyright infringement of music compositions published by plaintiff and seeking the maximum $150,000 statutory damage award for each of 2,142 music compositions.[102]  Bluewater’s complaint alleged that Spotify failed to obtain licenses for works it streamed that are owned by Bluewater, including after Bluewater demanded proof of licensing and gave notice to Spotify terminating any rights defendant may have claimed to have.[103]  Spotify moved to dismiss the complaint, arguing that Bluewater had no standing as the mere administrator of the underlying copyrights and that Bluewater lacked copyright registrations for 23 of the music compositions in suit. Regarding standing, the court evaluated Bluewater’s administrative agreements and found that their grant of “the sole and exclusive right . . . to print, publish, sell, dramatize, use and license the use of the Compositions” was sufficient, despite another provision that prohibited Bluewater from executing any mechanical licenses except at the “full statutory rate without prior written consent.”[104]  Regarding the failure to obtain copyright registrations before filing suit, the court acknowledged that existing precedent requires such registration but also expressed judicial-efficiency concerns about the dismissal of only 23 works from the case.[105]  Ultimately, the court denied the motion to dismiss the unregistered works with leave to refile after the Supreme Court decides Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, LLC (No. 17-571), which the court expects will decide whether “a copyright infringement action may be taken after the creative work has been filed with the Copyright Office, but before registration is approved.”[106] 5.    Chris Brown Loses Case Against Philippine Church for Alleged Extortion On December 6, 2018, a Los Angeles Superior Court Judge dismissed all claims brought by the singer Chris Brown against Iglesia Ni Cristo (a Philippine church) and its general counsel for alleged extortion.  Brown had brought suit alleging that following a July 2015 concert he performed in Manila, he was detained at a hotel at the direction of the church, which controls an arena where Brown had previously canceled a New Year’s Eve concert.  Brown alleged that the church sought to extort a payment from him in connection with his release and departure from the Philippines and that Brown had suffered emotional distress as a result. In September 2018, Judge Patricia Nieto of the Superior Court granted defendants’ motion to dismiss Brown’s second amended complaint against the church’s California branch (which was named in the lawsuit in an effort to confer California jurisdiction).  The court found that Brown failed to plead an alter ego theory or single enterprise theory as a matter of law and denied Brown an opportunity to replead the theory.  Later that month, the Philippine parent church organization and its general counsel, as specially appearing defendants, brought a separate motion to quash Brown’s service of summons on these two Philippine defendants for lack of personal jurisdiction.  On December 6, 2018, Judge Nieto granted the motion to quash, finding that Brown had failed to provide competent evidence to confer jurisdiction and held that asserting jurisdiction would violate the Supreme Court’s and California’s governing precedents on general and specific jurisdiction.[107]  After filing a notice of appeal, Brown failed to timely pursue that appeal, which the California Court of Appeal dismissed, on February 6, 2019.  [Disclosure: Gibson Dunn represented Iglesia Ni Cristo, its general counsel, and Iglesia Ni Cristo’s California branch.] 6.    Viktor v. Top Dawg Entertainment LLC On October 24, 2018, Judge Engelmayer of the District Court for the Southern District of New York denied a partial motion for summary judgment that sought to bar the plaintiff Lina Iris Viktor from receiving certain damages in her suit alleging that defendant creators of the music video for the single All the Stars by Kendrick Lamar infringed her copyrights by including her paintings in the music video without permission.[108]  The suit seeks actual damages and indirect profits for infringement of Viktor’s unregistered copyrights in her paintings, which appear in a 19-second part of the music video released in connection with the album accompanying the Black Panther film. Because Viktor’s copyrights are unregistered and therefore not entitled to statutory damages, she bears a burden under the Copyright Act to “demonstrate a causal relationship between the infringement and the defendants’ revenues.”[109]  Defendants sought summary judgment on the basis that “no non-speculative evidence could possibly be mustered that would demonstrate a causal nexus between defendants’ profits and defendants’ alleged infringing use of Viktor’s artwork in the video.”[110]  However, the court found the motion to be premature as discovery had not yet concluded, finding that “a challenge by the defense to this claim for damages is properly resolved on a motion for partial summary judgment following the development of a full factual record.”  The court also deferred a decision as to whether Viktor would be entitled to prove damages for reputational harm, an injury not explicitly recognized in the Copyright Act.[111]  On December 21, the case was dismissed following an apparent settlement.[112] B.    Copyright Fair Use Developments 1.    Fox News Network, LLC v. TVEyes, Inc. Ending a legal battle that began in 2013, the Supreme Court denied the media-monitoring company TVEyes’s petition for certiorari, leaving in place the Second Circuit’s February 2018 decision that TVEyes’s media-monitoring service could not be justified as fair use because it “deprives Fox of revenue that properly belongs to the copyright holder.”[113]  TVEyes recorded television around the clock and provided a searchable database of real-time television clips for its subscribers (which include journalists, politicians, and companies), who pay a monthly fee.  In 2013, Fox News sued TVEyes for copyright infringement.[114] After a lengthy battle in the district court, in February 2018 the Second Circuit reversed the lower court’s ruling that the service was protected by the fair use doctrine.  While the video service was a useful tool, the Second Circuit said it was “not justifiable as fair use” because “at bottom, TVEyes is unlawfully profiting off the work of others by commercially redistributing all of that work that a viewer wishes to use, without payment or license.”[115]  TVEyes had argued that its function of allowing users to search the “vast corpus” of available news material rendered it transformative and thus protected by the fair use doctrine, much like Google’s unauthorized digitization of millions of books, the subject of the landmark decision Authors Guild, Inc. v. Google, Inc.[116]  The Second Circuit agreed that the searchability of the material did weigh in favor of fair use, but that the service “usurped a function for which Fox is entitled to demand compensation under a licensing agreement” by allowing excessive use of the recorded clips and thus defeated the defense of fair use.[117] TVEyes sought to overturn the ruling, writing in its petition for certiorari that the ruling would allow networks like Fox News to “wield copyright law as a shield” against criticism and that the fair use doctrine is the “key first Amendment safeguard to protect the public from such abuses.”[118]  Fox News urged the Supreme Court to pass on the case, accusing TVEyes of trying to “clothe itself in the mantle of media criticism” and emphasizing that the Second Circuit’s decision did not involve political speech or First Amendment issues, but rather was a simple case of “unauthorized distribution of copyrighted content.”[119]  Following denial of certiorari, the parties reached a settlement.[120] 2.    Prince/Warhol In a key case regarding artistic expression, a federal judge in New York City will determine whether Andy Warhol’s iconic colorized images are protected from copyright claims by the fair use doctrine.[121]  In April 2017, Warhol’s estate sued photographer Lynn Goldsmith, asking the court for a declaration that his 1984 paintings of Prince did not violate her copyright in the original photo because, although Warhol often used photographs as inspiration, his works were “entirely new creations.”[122]  Goldsmith filed a counterclaim for copyright infringement shortly afterwards, and dueling motions for summary judgment are currently before the court.[123] Goldsmith argues that the court should grant her copyright claim on summary judgment because Warhol’s work directly copied hers and is not eligible for protection under the fair use doctrine.  “In today’s digital world, anyone can easily modify a photograph on a computer to add high contrast, coloration and artifacts” and Warhol “did little more than that” in the works at issue, Goldsmith argues.[124]  If the court were to find these “superficial revisions” transformative, she says, this would give a “free pass to appropriation artists and destroy derivative licensing markets for commercial photographers whose works are used without permission.”[125] Warhol’s estate, on the other hand, argues that the substantial similarity requirement for copyright infringement centers on protectable elements like lighting, shading, and the “aesthetic effect”—precisely the elements that Warhol manipulates in his works.[126]  After Warhol’s artistic manipulations, Warhol’s estate argued, the only commonality remaining between Warhol’s Prince Series and Goldsmith’s photograph is “the rough outline of Prince’s face—which cannot be copyrightable as a matter of law.”[127]  In addition, Warhol’s estate pointed out that the market for Goldsmith’s work is not harmed by Warhol’s works—fine art collectors who buy Warhol’s work are not “rock-and-roll memorabilia collectors” who buy hers.[128]  Finally, Warhol’s estate’s attorneys warned that a contrary ruling would “create a torrent of doubt and dispute over artists long considered to be transformative” and “chill[] future creativity.”[129]  A ruling is expected sometime this year. 3.    Instagram Art Show Was Fair Use, Richard Prince Says Richard Prince, a famous “appropriation artist,” is pushing to end copyright litigation over his Instagram-themed art exhibit, arguing that he was allowed to display largely unaltered versions of other artists’ images because he utilized them in “a radically different aesthetic context.”[130]  Mr. Prince is facing two separate copyright infringement lawsuits from photographers whose works were featured in “New Portraits”—an installation of large images made to look like Instagram posts, with captions written by Mr. Prince.  He moved for summary judgment in both cases, saying that his use of the images was protected by the fair use doctrine.[131] In both instances, Mr. Prince took images of the artists’ works, blew them up, and placed them in art installations designed to look like Instagram posts.  He acknowledges that his copies do not “cut, mark, paint over, scratch or otherwise obscure” the original photograph, but that this was a feature of his fair use argument, not a problem with it.[132]  Mr. Prince argues that his intent was to “authentically replicate[] in the physical world the virtual world of social media,” and therefore that this is protected by the fair use doctrine.[133]  Rulings are expected sometime this year. C.    DMCA 1.    Supreme Court Denies Certiorari for Porn Copyright Case In late October, the Supreme Court rejected an invitation to clarify the scope of the Digital Millennium Copyright Act’s (“DMCA”) safe harbor provision,[134] which immunizes online service providers from liability for infringing material maintained “at the direction of a user . . . on a system or network controlled or operated by or for the service provider” under certain circumstances.[135] As reported in our 2018 Mid-Year Update, in Ventura Content Ltd. v. Motherless Inc., et al.,[136] the Ninth Circuit rejected an attempt to reverse a grant of summary judgment to Motherless, Inc., a website that allows users to upload pornographic videos for public viewing.  Appellant Ventura Content Ltd. argued that Motherless failed to remove material that it knew or should have known was copyright infringing, and that Motherless did not have a proper policy for removing users who repeatedly infringed copyright.  Relying on a case from the Second Circuit, Capitol Records, LLC v. Vimeo, LLC,[137] the panel rejected the notion that Motherless had actual or constructive knowledge of the infringing material, holding that “[t]he copyright owner must show knowledge” of the specific videos “that infringed its copyright and are the subject of its claim.”[138]  Moreover, the panel affirmed the district court’s determination that there was “no issue of triable fact” as to whether Motherless had “adopted and reasonably implemented” a policy of terminating users who repeatedly posted copyright-infringing materials.[139] After its loss, Ventura filed a petition for certiorari in the Supreme Court, but in November 2018 the Supreme Court rejected Ventura’s petition, leaving the Ninth Circuit ruling in place.[140] 2.    Cox Settles BMG Case, Faces New Claims from Labels and Publishers Just days before trial was set to begin, Cox Communications settled a case brought by BMG Rights Management seeking to hold Cox liable for Cox users’ illegal downloads of BMG’s copyright-protected material.  The suit, which began in 2014, alleged that Cox failed to implement a policy for terminating the service of users who repeatedly downloaded the material at issue, a so-called “repeat infringer” policy, thereby allowing offending users to continue to illegally download the material.  After U.S. District Judge Liam O’Grady ruled that Cox’s failure to enact or enforce such a policy deprived Cox of the shelter of the safe harbor provision,[141] the case went to trial, and in 2015 a jury found Cox liable and awarded BMG a multimillion dollar verdict. The Fourth Circuit reversed, holding that the district judge had given improper jury instructions, but the panel importantly also held that the district court had properly found that Cox had failed to enforce its repeat infringer policy.[142]  The case was remanded to the district court for further proceedings.[143] In late 2018, Cox and BMG reached a settlement, but the settlement does not end Cox’s legal woes.  A case brought against Cox by a number of major record labels, including Sony Music Entertainment, Universal Music Corp., and Warner Bros. Records, raises similar issues and is also being presided over by Judge O’Grady.  Given that the Fourth Circuit has already upheld the ruling stripping Cox of safe harbor protection,[144] and that Judge O’Grady recently denied a motion for transfer of venue,[145] the case warrants ongoing attention, given the potential impact it may have on the liability of internet service providers nationwide. D.    Trademark 1.    Lanham Act Ban on Immoral or Scandalous Matter Unconstitutional? In June 2017, the U.S. Supreme Court decided Matal v. Tam, invalidating the provision of the Lanham Act that permitted the USPTO to refuse registration of a trademark if it contained “disparaging” matter.  The Supreme Court held the provision unconstitutional under the First Amendment.[146]  In the wake of that landmark decision, in December 2017 the Federal Circuit also invalidated under the First Amendment a similar provision of the Lanham Act, which permitted the USPTO to refuse registration of a mark if it contained “immoral” or “scandalous” matter.[147]  In September 2018, the government filed a petition for writ of certiorari to the Supreme Court in that case, which is now captioned Iancu v. Brunetti.[148] The Brunetti case involves the clothing brand FUCT.  The USPTO had refused to register the FUCT mark under the immoral or scandalous provision of the Lanham Act because of its similarity to a popular swear word.[149]  In light of the Supreme Court’s decision in Tam, the Federal Circuit held that the immoral or scandalous provision, like the disparaging provision, violates the First Amendment.  Unlike Tam, which was decided on the basis of impermissible viewpoint discrimination, the Federal Circuit held that the immoral or scandalous provision is unconstitutional as impermissibly content discriminatory, without reaching whether the provision is also viewpoint discriminatory.[150] In its petition for a writ of certiorari, the government argues that Tam is not controlling on the immoral or scandalous provision at a minimum because of this distinction between viewpoint discrimination and the less egregious content discrimination, and it further emphasizes several doctrinal questions not fully decided by Tam, such as whether trademark registration could be viewed as either a government subsidy or commercial speech—either of which would lower the level of constitutional scrutiny that would be applied to the provision.  The Supreme Court granted certiorari on January 4, 2019.[151] 2.    Seattle’s Transit Restriction on Disparaging Bus Ads also Falls The Supreme Court’s Matal v. Tam decision has also found influence in the realm of advertising, as the Ninth Circuit recently cited the Tam decision in striking down Seattle’s law that had allowed the transit authority to reject advertisements to be displayed on public buses if those ads were “disparaging.”[152]  In September 2018, the Ninth Circuit held that Tam applied with “full force” to Seattle’s ban on disparaging bus ads.[153]  The decision was a victory for the far-right group American Freedom Defense Initiative, previously known as the Stop Islamization of America.  The group sued the city after the Metro rejected a proposed advertisement featuring the slogan “Faces of Global Terrorism,” which included mugshots of alleged terrorists primarily of Middle Eastern or Asian descent, on the basis that the ad was disparaging.[154]  In light of Tam, the Ninth Circuit struck down Seattle’s ban on disparaging advertising, holding that it too violated the First Amendment as impermissibly viewpoint discriminatory. 3.    San Diego Comic-Con Wins $4M Fee Award in Trademark Dispute In a suit filed in August 2014, the San Diego Comic Convention (“SDCC”) brought trademark infringement allegations against a rival Utah event called Salt Lake Comic Con.  SDCC, which holds trademarks for its logo and various permutations of the term “Comic-Con,” alleged that the Utah event was infringing its “Comic-Con” mark and capitalizing on SDCC’s many decades of brand building.[155]  In response, the Utah event argued that the mark had been diluted, arguing both that the mark was invalid by virtue of its prior generic use, and that the mark had in any event become generic through SDCC’s broad licensing and failure to police.[156]  The case was tried before a jury in December 2017, and the jury found that the Utah event had infringed SDCC’s trademarks, but the infringement was not willful.  The jury awarded $20,000 in corrective advertising damages.[157] On post-trial motions, U.S. District Judge Anthony Battaglia granted SDCC’s request for a permanent injunction barring the Utah event from using the phrase “Comic-Con” with or without the hyphen, as well as anything that sounds similar.  Judge Battaglia further awarded nearly $4 million in attorneys’ fees, citing the Utah event’s questionable litigation tactics and repeated disregard for court rules.[158]  The Utah event has appealed these post-trial rulings to the Ninth Circuit, where briefing is scheduled to be completed in February 2019. 4.    Coachella Settles Trademark Dispute with Filmchella In August 2017, Coachella sued Filmchella founder Trevor Simms, alleging, among other things, trademark infringement.  U.S. District Judge R. Gary Klausner entered a preliminary injunction barring Simms from using either “Filmchella” or “Filmchilla” for his independent Joshua Tree Film Festival, but Judge Klausner denied Coachella’s motion for summary judgment on the issue of trademark infringement, explaining that a reasonable jury could find no likelihood of confusion between Coachella and Filmchella due to the difference in the nature of the festivals.[159]  Trial was scheduled for October 2018, but the parties reached a resolution just before trial was to begin.  Under the settlement, Simms agreed to forgo use of the term Filmchella and to transfer the domain name to Coachella.[160]  The other terms of the settlement remain confidential. E.    1st Amendment 1.    Media Access a.    CNN & Jim Acosta Prevail Over White House On November 7, 2018, the White House revoked CNN chief White House correspondent Jim Acosta’s hard pass—a type of press pass held by regular White House reporters—after a press conference in which President Trump cut off Mr. Acosta’s questions, ordered him to be seated, and called him a “rude, terrible person” after a White House staffer attempted to take the microphone out of his hands.  The next week, CNN and Mr. Acosta filed a lawsuit, claiming First and Fifth Amendment violations. The United States District Court for the District of Columbia granted CNN and Mr. Acosta’s request for a temporary restraining order and ordered the White House to restore Mr. Acosta’s press pass immediately.  The district court found that CNN and Mr. Acosta had a “First Amendment liberty interest” in Mr. Acosta’s hard pass because the Government had opened the White House to reporters.[161]  The district court concluded that CNN and Mr. Acosta were likely to succeed in showing the White House violated CNN and Mr. Acosta’s Fifth Amendment Due Process rights: the White House’s original reason for the revocation was “likely untrue” and was based on “evidence of questionable accuracy,” the decision-making process regarding whether to revoke the hard pass was “shrouded in mystery,” and the White House failed to provide CNN and Mr. Acosta with adequate notice before taking away his hard pass.[162] Further, the district court held that Mr. Acosta and CNN were harmed “every day” they continued to have their constitutional rights infringed.  Finally, the district court decided the harm Mr. Acosta would suffer from losing his hard pass “outweighed” the Government’s interest in holding “respectful” press conferences, so restoring Mr. Acosta’s hard pass served the public interest.[163]  Following the district court’s order, the White House issued a final decision restoring his hard pass, and he returned to reporting news.  [Disclosure: Gibson Dunn represented CNN and Mr. Acosta.] b.    Gubarev v. BuzzFeed, Inc. On December 19, 2018, the District Court for the Southern District of Florida granted summary judgment to BuzzFeed, Inc., in a defamation lawsuit filed against it by a Cyprus tech CEO, Aleksej Gubarev.[164]  The lawsuit arose from BuzzFeed’s publication of an online article entitled These Reports Allege Trump Has Deep Ties to Russia, which contained a 35-page dossier that included statements about the plaintiffs, such as that Gubarev’s company “XBT/Webzilla and its affiliates had been using botnets and porn traffic to transmit viruses, plant bugs, steal data, and conduct ‘altering operations’ against the Democratic Party leadership.”[165]  The Court ruled that BuzzFeed’s decision to publish the dossier was protected by New York’s fair report privilege, which “exists to protect the media while they gather the information needed for the public to exercise effective oversight of the government . . . even when they report on official action that the government would like to keep secret.”[166]  The Court further held that BuzzFeed’s presentation was fair and true, as required by the fair report privilege, because it reproduced the dossier in full without editorializing. Notably, the ruling came one day after the district judge ruled that Gubarev is not a public figure because he had not involved himself in the ongoing public debate about Russian interference in the 2016 election.[167]  This meant that plaintiffs would have had to meet a lower standard for defamation against BuzzFeed, had the district court not granted summary judgment based on the fair report privilege.  Plaintiffs have filed an appeal of the district court’s fair report ruling in BuzzFeed’s favor. 2.    Right of Publicity a.    Supreme Court Declines to Take Up de Havilland’s Feud Against FX On October 5, 2018, the 102-year-old actress Olivia de Havilland filed a petition for writ of certiorari with the U.S. Supreme Court, asking the high court to take up the California Court of Appeal’s ruling in her lawsuit against FX Network.[168]  De Havilland sued FX in June 2017 over its depiction of her in the docudrama Feud: Bette and Joan, alleging misappropriation, violation of her right of publicity, false light, invasion of privacy, and unjust enrichment.[169]  In response, FX filed an anti-SLAPP motion, which the trial court denied in September 2017.  In March 2018, the California Court of Appeal reversed, rejecting de Havilland’s claims and finding that the First Amendment protects expressive works, regardless of whether they are fact, fiction, or a combination thereof.[170]  De Havilland petitioned the California Supreme Court for review, which it denied on July 11, 2018. In de Havilland’s petition for writ of certiorari before the U.S. Supreme Court, de Havilland argued that the California Court of Appeal’s rulings create “absolute First Amendment immunity for docudramas,” even those that include knowingly false statements.[171]  FX filed its brief in opposition to de Havilland’s petition on November 13, 2018, asserting that the Court of Appeal’s “decision rested on a straightforward application of well-established law” and “that there is nothing cert-worthy about this case.”[172]  On January 7, 2019, the Supreme Court denied de Havilland’s petition without explanation.[173] b.    Second Circuit Lifts Injunction Against Lynyrd Skynyrd Film The Second Circuit recently lifted a district court’s injunction against Street Survivor:  The True Story of the Lynyrd Skynyrd Plane Crash, a movie about the plane crash that killed Lynyrd Skynyrd band members Ronnie Van Zant and Steve Gaines as told through the eyes of surviving band member Artimus Pyle.[174]  After the crash, Van Zant’s widow and two of the three surviving band members, Gary Rossington and Allen Collins, entered into a “blood oath” to never use the name Lynyrd Skynyrd again.[175]  The oath remained intact for ten years, until the surviving band members embarked on a tribute tour in 1987 and Van Zant’s widow, Judith, objected to the band’s use of the Lynyrd Skynyrd name.[176]  Judith filed suit, which ended with the district court entering a consent order restricting how the parties to the suit, including Pyle, could use the name Lynyrd Skynyrd, biographical material of Van Zant, the history of the band, and more.[177] After Pyle and Cleopatra Records, Inc., entered into a deal to create the Street Survivor film, heirs of Van Zant and Gaines, as well as founding lead guitarist Gary Rossington, sued Cleopatra.  In August 2017, the District Court entered a permanent injunction prohibiting the film from being made, asserting that it violated the consent order because of Pyle’s participation in the project.[178]  The Second Circuit reversed.  Although the court stated that the district court’s order did not constitute a “prior restraint” because the injunction was imposed as a result of a private contract rather than government censorship, it held that the order “implicates free speech concerns.”[179]  Moreover, the court held that the injunction could not restrict the actions of Cleopatra, which was not a party to the consent order.[180]  Finally, the court examined the language of the consent order and found that it was insufficiently specific to prohibit the making of the film.[181]  The court therefore lifted the injunction. c.    Daniels v. FanDuel Inc. In October 2018, the Indiana Supreme Court held that the use of players’ names, pictures, and statistics in online fantasy sports contests do not violate Indiana’s right of publicity law.[182]  The decision arose as the result of a class action lawsuit filed by collegiate student-athletes against various fantasy sports website operators, including DraftKings, Inc. and FanDuel, Inc., for using the players’ likenesses without their consent.  The district court dismissed the lawsuit, concluding that two statutory exceptions to Indiana’s right of publicity law permit the companies to use players’ names, likenesses, and statistics without compensation.[183]  On appeal, the Seventh Circuit certified the question “[w]hether online fantasy-sports operators that condition entry on payment, and distribute cash prizes, need the consent of players whose names, pictures, and statistics are used in the contests, in advertising the contests, or both,” to the Illinois Supreme Court.[184]  The Illinois Supreme Court held that no consent was needed because the use of the players’ names, pictures, and statistics fell within the “newsworthy value” exception to Illinois’s right of publicity statute.[185]  Ultimately, the court concluded that the use at issue “bears resemblance to the publication of the same information in newspapers and websites across the nation.”[186] Following the Illinois Supreme Court’s decision, the plaintiffs requested that the Seventh Circuit remand the case to the District Court to address the separate question of whether the fantasy-sports games violate Indiana criminal law.[187]  In a decision written by Judge Easterbrook, the Seventh Circuit stated that it had “nothing to say on the question whether the business of FanDuel or DraftKings violates Indiana’s criminal laws,” ruling that “this civil suit is over.”[188] d.    Can LeBron James License His Own Tattoos? In a case that intertwines the issues of whether and when copyright issues arise following the grant of rights of publicity, Defendants 2K Games, Inc. and Take-Two Interactive Software, Inc. recently moved for summary judgment in a lawsuit filed against them by Solid Oak Sketches, LLC.  Sold Oak brought suit over defendants’ depiction of tattoos on several prominent professional basketball players, including LeBron James, who appear in the videogame NBA 2K16.[189]  Solid Oak had obtained copyright licenses for the tattoos for use in a clothing line that was never produced, and now claims that the use in the videogame constitutes copyright infringement.[190]  In their summary judgment motion, defendants argue, amongst other things, that their use of the tattoos constitutes “fair use.”[191]  In opposition to defendants’ motion, Solid Oak argues that while the professional basketball players granted their rights of publicity to the companies, that does not include the copyright to the artwork in their tattoos.[192]  As to defendants’ fair use argument, Solid Oak asserts that the defense must fail, as “it is clear that Defendants’ appropriated the fundamental essence of the tattoo artists’ works, the copyright attached to same being owned by Plaintiff.”[193]  Defendants filed their reply brief on October 12, 2018, and the motion remains pending. 3.    Defamation a.    Stephanie Clifford’s Defamation Lawsuit Against President Trump Dismissed On October 15, 2018, U.S. District Judge S. James Otero dismissed a defamation lawsuit brought by adult-film actress Stephanie Clifford’s (p/k/a Stormy Daniels) against President Trump.[194]  The basis for the lawsuit was a tweet the president posted on April 18, 2018 from his personal Twitter account, @realDonaldTrump, claiming that the composite sketch Clifford released of a man who had purportedly threatened her in Las Vegas in 2011 was a “total con job” and “about a nonexistent man.”[195] In dismissing Clifford’s suit under the Texas anti-SLAPP statute,[196] the district court agreed with the president that the statements he disseminated through Twitter were mere “rhetorical hyperbole.”  The court reached this conclusion in light of the president’s “incredulous tone” and the fact Clifford had publicly positioned herself “as a political adversary to the President.”[197]  The court also reasoned that if it were to conclude that the president’s tweet was actionable under a theory of defamation, “it would significantly hamper the office of the President” by making any “strongly-worded response” by a president to criticism espoused by another public figure potentially unlawful.[198]  The court also found significant the fact that the president’s tweet was a “one-off” comment and not a “sustained attack” on Clifford’s claims regarding the threatening incident.[199]  Clifford appealed the district court’s order the same day it issued.[200] On December 11, 2018, Clifford was ordered to pay the president approximately $292,000 in attorney’s fees.  The court also ordered Clifford to pay $1,000 in sanctions.[201] b.    Discovery Communications Not Liable to Co-Host of Dual Survival On November 2, 2018, a district court in Arizona granted summary judgment to Discovery Communications in a defamation lawsuit brought by Cody Lundin, one of the original co-hosts of the reality television series Dual Survival.[202]  In the suit, Lundin argued that Discovery edited an episode that depicted his departure from the show in a way that portrayed him in a false light and was defamatory.[203]  The district court disagreed.  It held that none of the eight individual scenes that Lundin contended falsely depicted him as “grossly incompetent” and mentally ill was actionable under either theory.  Specifically, each scene depicted Lundin’s character in a “substantially true” manner even if it contained a number of “minor inaccuracies.”[204] In dismissing Lundin’s defamation lawsuit, the district court also described as “significant” the fact that Dual Survival “more than just occasionally falsely depicted what was actually occurring.”[205]  In one scene, for example, Lundin and his co-host unexpectedly encountered a rattlesnake that had, in reality, been purchased and placed there by the film crew.  The court therefore viewed Lundin’s claims with some level of skepticism given that he was “happy to participate in the charade as long as he was portrayed in the manner he preferred.”[206]  In November 30, 2018, Lundin appealed the summary judgment order.  The appeal remains pending before the Ninth Circuit.[207] c.    Court of Appeals Revives Defamation Lawsuit Against Kylin Pictures On November 27, 2018, a California appeals court reversed the grant of an anti-SLAPP motion in a defamation suit Bliss Media and its CEO Wei Han brought against Kylin Pictures.[208]  The suit arose because Kylin’s CFO Leo Shi Young called Han a “swindler” and Bliss a “shell company” at a press conference in China.  Bliss and Kylin had previously worked together to produce various films, but relations between the two companies soured when Kylin sued Bliss over the acquisition rights to Birth of the Dragon, a movie about Bruce Lee.[209] Kylin filed an anti-SLAPP motion in early 2017, arguing that the allegedly defamatory statements were made in connection with an issue of public interest because the purpose of the press conference was to address a dispute about the production of the Chinese-language version of a separate, critically acclaimed film—Hacksaw Ridge.[210]  The trial court agreed, concluding that the dispute between Bliss and Kylin “concerned the production of a very public thing” and that there “is very little that is private about the movie business.”[211] The California Court of Appeal reversed.  It first noted that the fact the press conference was held to discuss a dispute about Hacksaw Ridge was immaterial, because the alleged defamatory comments were about the plaintiffs’ conduct “concerning financing and rights acquisitions” for two different films, Birth of the Dragon and The King’s Daughter.[212]  It also rejected the defendants’ argument that the public is “specifically interested” in these two films merely because Birth of the Dragon is about Bruce Lee and The King’s Daughter features two movie stars.[213]  Because the alleged defamatory statements “in no way mention[ed] or implicat[ed] Bruce Lee or the movie stars,” the defendants failed to draw “any connection” between the statements and what purportedly made the films at issue of interest to the public.[214]  The appeals court also concluded that Han was not, at the time the statements were made, in the “public eye” simply because she is active in the Chinese film industry and in Hollywood.[215] d.    Retweets and the Communications Decency Act of 1996 On September 25, 2018, Roslyn La Liberte sued MSNBC host Joy Reid in the Eastern District of New York, alleging that several of Reid’s posts on Twitter, Instagram, and Facebook are defamatory.[216]  La Liberte’s original complaint focused primarily on Reid’s retweet of a photograph of La Liberte wearing a “Make America Great Again” hat and seemingly yelling at a high school student.  This photo was accompanied by a caption stating that “[s]he . . . in her MAGA hat” called the student a “dirty Mexican” and warned him that he would “be the first deported.”[217] La Liberte’s complaint alleges that because she never made any racial slurs directed at the student, Reid’s retweet is defamatory.[218]  It also alleges that Reid’s subsequent posts on Facebook and Instagram of the photograph alongside an image dating from the Jim Crow era are defamatory.[219] The allegations in the original complaint raised the question of whether section 230 of the Communications Decency Act of 1996 shielded Reid from civil liability for her retweet.  Section 230 provides, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”[220]  However, La Liberte recently dropped the allegations from her complaint regarding Reid’s retweet.  Section 230 is therefore no longer at issue in the case.[221]  The remainder of the case remains pending before the district court. F.    Profit Participation/Royalties 1.    Back to the Future Royalties Dispute Dismissed In October 2018, after years of disputes between the parties, a New Jersey district judge ruled that John DeLorean’s estate will not be able to collect additional royalties regarding the famous Back to the Future DeLorean from the DeLorean Motor Company (“DMC”) arising out of DMC’s separate licensing agreement with Universal Pictures.[222]  In 2014, John DeLorean’s estate filed a suit alleging that DMC violated the estate’s trademark by designing and selling various items under the estate’s asserted trademarks and by licensing use of the marks to others.[223]  The parties settled the case in 2015, and in relevant part the estate agreed “not to sue [DMC] pertain[ing] to [DMC’s] use of the following words and trademarks: (i) the name DeLorean Motor Company, (ii) the DMC logo, and (iii) the stylized word ‘delorean.’”[224] In 2018, the estate brought another suit against DMC, claiming that DMC had improperly claimed a right to royalty payments arising from an agreement between the Mr. DeLorean and Universal.  That agreement between the estate and Universal gave Universal “the right to use (i) ‘[t]he appearance of the DeLorean automobile,’ (ii) ‘[t]he name ‘DeLorean,’’ and (iii) ‘[t]he logo ‘DMC’ as it appears on the radiator grille of the DeLorean automobile.’”[225]  The estate alleged that DMC had improperly represented to Universal that DMC was entitled to certain royalties arising from the Back to the Future DeLorean, and the estate sought to receive the payments from Universal instead. The court dismissed the estate’s case, finding that the two agreements covered “the same or similar terms” and holding that that because “both agreements pertained to the merchandizing of similar items associated with the DeLorean automobile’s image, brand and related trademarks,” the “Plaintiff’s claims under the Universal Agreement were incorporated in, and therefore barred by, the Settlement Agreement.”[226] 2.    Donald Glover Fights Label Over Royalties Donald Glover (who records and performs as Childish Gambino) is countersuing his music label, Glassnote Entertainment Group, in an ongoing dispute regarding royalties from non-interactive streaming of Glover’s albums Awaken, My Love!, Because the Internet, and Camp.  In 2011, Glover signed a license agreement with Glassnote in which he retained the rights to master recordings of up to three future albums but “granted to Glassnote the exclusive right to exploit the master recordings on those albums” in exchange for a royalty equal to fifty percent of net proceeds.[227]  The license expired in late 2017, at which time Glassnote alleges that Glover “took the position that he was entitled to the entirety of Glassnote’s []share of public performance royalties” and “that Glassnote was not entitled to any such royalty.”[228] In July 2018, Glassnote sued Glover seeking a declaration that it is entitled to 50% of all performance royalties from non-interactive streams on Pandora, Spotify, SiriusXM, and others.  The suit claims that, under the Copyright Act, “it is Glassnote—not Glover—which is ‘the copyright owner of the exclusive right [] to publically perform’ Glover’s sound recordings,” and the statutory royalties due to the copyright holder should therefore belong to Glassnote.[229] In September 2018, Glover countersued Glassnote, alleging that after an audit in 2017, Glover discovered “Glassnote’s multiple breaches under the License Agreement” and “significant amounts that [Glassnote] failed to account and pay to” Glover.[230]  According to Glover, Glassnote agreed “to pay [Glover] a royalty equal to 50% of the ‘Net Proceeds’ realized from the exploitation of each” licensed album.[231]  After a 2017 audit of Glassnote’s accountings and payments to Glover, Glover determined that Glassnote had breached the License Agreement by failing to pay Glover his “share of digital transmission royalties” and by failing to fully pay Glover the share of the “Net Proceeds” to which he was entitled under the License Agreement.[232]  In his countersuit, Glover is seeking a full payment of the royalties Glassnote is alleged to owe and seeking a full accounting from Glassnote that includes any further monies earned from Glover’s albums.[233]  The case remains pending.     [1]    Edmund Lee and Brooks Barnes, Disney and Fox Shareholders Approve Deal, Ending Corporate Duel, N.Y. Times (July 27, 2018), https://www.nytimes.com/2018/07/27/business/media/disney-fox-merger-vote.html.     [2]    Paul Bond, The DOJ said Disney must sell Fox’s regional sports networks, The Hollywood Reporter (June 27, 2018), https://www.hollywoodreporter.com/news/disney-fox-deal-approved-by-department-justice-1123614.     [3]    Urvi Malvania, Fox-Disney deal: CCI approves takeover of Murdoch’s company in India, SmartInvestor (Aug. 12, 2018), https://smartinvestor.business-standard.com/market/Compnews-539887-Compnewsdet-Fox_Disney_deal_CCI_approves_takeover_of_Murdochs_company_in_India.htm.     [4]    Stewart Clarke, E.U. Approves Disney-Fox Deal, With Conditions, Variety (Nov. 6, 2018), https://variety.com/2018/biz/news/eu-approves-walt-disney-21st-century-fox-deal-conditions-1203020918/.     [5]    Patrick Brzeski and Georg Szalai, Disney Gets China Approval for Fox Acquisition, The Hollywood Reporter (Nov. 19. 2018), https://www.hollywoodreporter.com/news/disney-gets-china-approval-fox-acquisition-1162571.     [6]    Jull Disis, Disney gets approval from China for Fox purchase, CNN Business (Nov. 19, 2018), https://www.cnn.com/2018/11/19/media/disney-fox-china-approval/index.html.     [7]    Alberto Alerigi and Lisa Richwine, Brazil antitrust body raises concerns over Disney-Fox deal, Reuters (Dec. 3, 2018), https://www.reuters.com/article/us-fox-m-a-walt-disney-brazil/brazil-antitrust-body-raises-concerns-over-disney-fox-deal-idUSKBN1O22LS.     [8]    Id.     [9]    Brazil Regulator Said to Pass Fox-Disney Deal Without Asset Sale, Bloomberg Law (Jan. 4, 2019), https://news.bloomberglaw.com/tech-and-telecom-law/brazil-regulator-said-to-pass-fox-disney-deal-without-asset-sale-1.     [10]    Id.; see also Jason Aycock, Bloomberg: Brazil expected to OK Fox-Disney deal without divestment, Seeking Alpha (Jan. 3, 2019), https://seekingalpha.com/news/3420509-bloomberg-brazil-expected-ok-fox-disney-deal-without-divestment.     [11]    Aycock, supra note 10.; Jason Aycock, MLex: Brazil decision on Disney/Fox now put off past January, Seeking Alpha (Jan. 23, 2019), https://seekingalpha.com/news/3425253-mlex-brazil-decision-disney-fox-now-put-past-january.     [12]    Mario Sergio Lima and Christopher Palmeri, Disney CEO Flies to Brazil to Seal Fox Deal, Leaves Empty-Handed, Bloomberg (Feb. 12, 2019), https://www.bloomberg.com/news/articles/2019-02-12/disney-s-brazil-meeting-is-said-to-end-without-fox-deal-accord.     [13]    Id.     [14]    Id.     [15]    Carla Martinez, Strict regulation needed for Disney-Fox merger in Mexico, El Universal (Dec. 14, 2018), https://www.eluniversal.com.mx/english/strict-regulation-needed-disney-fox-merger-in-mexico-0.     [16]    Press Release, Comisión Federal de Competencia Económica, Clarification on Disney/Fox Transaction (Feb. 6, 2019), https://www.cofece.mx/wp-content/uploads/2019/02/COFECE-009-2019-English.pdf.     [17]    Dawn C. Chmielewski, 21st Century Fox Files Registration Statement With SEC To Form ‘New’ Fox, Deadline Hollywood (Jan. 7, 2019), https://deadline.com/2019/01/21st-century-fox-files-registration-statement-sec-new-fox-1202530940/; see also Press Release, 21st Century Fox, 21st Century Fox Announces Filing of Registration Statement On Form 10 For Fox Corporation (Jan. 7, 2019), https://www.21cf.com/news/21st-century-fox/2019/21st-century-fox-announces-filing-of-registration-statement-on-form-10-for-fox-corporation/.     [18]    Hannah Shaw-Williams, Disney Now Expects To Complete Fox Purchase By June, ScreenRant (Jan. 31, 2019), https://screenrant.com/disney-fox-deal-complete-june-2019/.     [19]    Cynthia Littleton, Fox Confirms It Won’t Bid on Disney’s Regional Sports Networks, Variety (Jan. 11, 2019), https://variety.com/2019/biz/news/fox-disney-regional-sports-networks-bid-1203105421/.     [20]    Tim Ingham, Universal Music Group Is Making TV Shows in Tandem With Lionsgate, Music Business Worldwide (Aug. 6, 2018), https://www.musicbusinessworldwide.com/universal-signs-deal-to-make-tv-projects-with-lionsgate/.     [21]    Dade Hayes, Lionsgate and Universal Music Group Set First-Look TV Deal, Deadline (Aug. 6, 2018), https://deadline.com/2018/08/lionsgate-and-universal-music-group-set-first-look-tv-deal-1202440406/.     [22]    Id.     [23]    Etan Vlessing, Lionsgate Sets First-Look TV Deal With Universal Music Group, The Hollywood Reporter (Aug. 6, 2018), https://www.hollywoodreporter.com/news/lionsgate-universal-music-group-announce-tv-project-deal-1132308.     [24]    Hayes, supra note 21.     [25]    Lionsgate and Universal Music Publishing Group Sign Exclusive Multiyear Agreement, PR Newswire (Aug. 2, 2018), https://www.prnewswire.com/news-releases/lionsgate-and-universal-music-publishing-group-sign-exclusive-multiyear-agreement-300691060.html.     [26]    Mike Snider, $4 billion TV deal creates nation’s largest broadcaster, USA Today (May 8, 2017), https://www.usatoday.com/story/money/business/2017/05/07/sinclair-broadcasting-buy-tribune-media-4-billion-deal-reports-say/101409222/.     [27]    Hadas Gold, FCC calls out ‘lack of candor’ in Sinclair-Tribune deal, CNN (July 19, 2018), https://money.cnn.com/2018/07/19/media/fcc-hearing-order-sinclair/index.html.     [28]    Press Release, Tribune Media Company, Tribune Media Terminates Merger Agreement with Sinclair Broadcast Group, Inc.; Files Lawsuit For Breach of Contract (Aug. 9, 2018), http://investors.tribunemedia.com/2018-08-09-Tribune-Media-Terminates-Merger-Agreement-with-Sinclair-Broadcast-Group-Inc-Files-Lawsuit-For-Breach-of-Contract.     [29]    Press Release, Sinclair Broadcast Group, Inc., Sinclair Responds to Tribune Lawsuit in Delaware Court of Chancery (Aug. 29, 2018), https://www.prnewswire.com/news-releases/sinclair-responds-to-tribune-lawsuit-in-delaware-court-of-chancery-300704251.html.     [30]    Sinclair’s Answer, Affirmative Defenses, & Verified Countercl. to the Verified Compl., Tribune Media Company v. Sinclair Broadcast Group, Inc., No. 2018-0593-JTL, 2018 WL 4194628 (Del. Ch. Aug. 29, 2018).     [31]    Arjun Panchadar and Sonam Rai, U.S. broadcaster Nexstar to buy Tribune Media for $4.1 billion, Reuters (Dec. 3, 2018), https://www.reuters.com/article/us-tribune-media-m-a-nexstar-media/nexstar-to-buy-tribune-media-in-6-4-billion-deal-idUSKBN1O217Z.     [32]    Id.     [33]    Cynthia Littleton, Nexstar Media Group Vaults Into TV’s Big League With Tribune Media Acquisition, Variety (Dec. 3, 2018), https://variety.com/2018/tv/news/tribune-media-nexstar-acquisition-4-1-billion-1203078104/.     [34]    Id.     [35]    Jim Waterson, Comcast Outbids Rupert Murdoch’s Fox to Win Control of Sky, The Guardian (Sept. 22, 2018), https://www.theguardian.com/business/2018/sep/22/comcast-outbids-rupert-murdochs-fox-to-win-control-of-sky.     [36]    Ben Martin, Comcast and Fox Take $34 Billion Battle for Britain’s Sky to the Wire, Reuters (Sept. 21, 2018), https://www.reuters.com/article/us-sky-plc-m-a-auction/comcast-and-fox-take-34-billion-battle-for-britains-sky-to-the-wire-idUSKCN1M12CV.     [37]    Id.     [38]    Id.     [39]    Georgina Prodhan & Ben Martin, Factbox: How the Auction Process for Sky Will Work, Reuters (Sept. 20, 2018), https://www.reuters.com/article/us-sky-plc-m-a-auction-process-factbox/factbox-how-the-auction-process-for-sky-will-work-idUSKCN1M01RF.     [40]    Spiha Srivastava, et al., Comcast Outbids Fox in a $39 Billion Takeover of Sky, CNBC (Sept. 22, 2018), https://www.cnbc.com/2018/09/22/sky-comcast-fox-36-billion-takeover-auction.html.     [41]    Id.     [42]    Stu Woo & Ben Dummett, Sky Takeover Explained, The Wall Street Journal (Oct. 10, 2018), https://www.wsj.com/articles/sky-takeover-explained-1523539364.     [43]    Keza MacDonald, Microsoft Buys Two More Video Game Studios, The Guardian (Nov. 10, 2018), https://www.theguardian.com/games/2018/nov/10/microsoft-buys-two-new-video-game-studios.     [44]    Id.; see also Stefanie Fogel, Microsoft Acquires Obsidian Entertainment, Variety (Nov. 10, 2018), https://variety.com/2018/gaming/news/obsidian-entertainment-joins-microsoft-studios-1203024898/; Stefanie Fogel, Microsoft Acquires ‘The Bard’s Tale’ Developer inXile Entertainment, Variety (Nov. 10, 2018), https://variety.com/2018/gaming/news/microsoft-acquires-inxile-entertainment-1203024762/.     [45]    Paul Tassi, Microsoft Acquires Ninja Theory, Undead Labs, Playground Games And More For Xbox, Forbes (June 10, 2018), https://www.forbes.com/sites/insertcoin/2018/06/10/microsoft-has-acquired-ninja-theory-undead-labs-and-playground-games/#16aee068277c; see also Stefanie Fogel, Xbox E3 2018: The 10 Biggest Announcements, Variety (June 10, 2018), https://variety.com/2018/gaming/news/e3-2018-biggest-microsoft-announcements-1202839671/.     [46]    MacDonald, supra note 43.     [47]    Cynthia Littleton, Netflix’s Ascent in Emmy Nominations Reflects Broader TV Industry Shakeup, Variety (July 12, 2018), https://variety.com/2018/biz/news/emmys-2018-nominations-netflix-tv-shakeup-1202871387/.     [48]    Annlee Ellingson, Netflix Aims to Raise $2 Billion for More Content, L.A. Business Journal (Oct. 22, 2018), https://www.bizjournals.com/losangeles/news/2018/10/22/netflix-aims-to-raise-2-billion-for-more-content.html.     [49]    Sarah Perez, Disney to Invest In More Original Content for Hulu, Expand Service Internationally, Tech Crunch (Nov. 12, 218), https://techcrunch.com/2018/11/09/disney-to-invest-in-more-original-content-for-hulu-expand-service-internationally/.     [50]    Craig Elvy, Netflix & Amazon Planning to Double Amount of Original Content, Screen Rant (Sept. 26, 2018), https://screenrant.com/netflix-amazon-prime-original-content-movies-shows/.     [51]    Travis Clark, AT&T Will Jump Into the Streaming Bloodbath By Launching a Netflix Competitor Next Year, Business Insider (Oct. 10, 2018), https://www.businessinsider.com/att-launching-streaming-service-next-year-with-hbo-included-2018-10.     [52]    Sarah Toy, Disney’s Netflix Rival Now Has a Name: Disney+, Which Will Launch in 2019. MarketWatch (Nov. 10, 2018), https://www.marketwatch.com/story/disneys-netflix-rival-now-has-a-name-disney-2018-11-08.     [53]    Lizette Chapman & Anousha Sakoui, Jeffrey Katzenberg’s Investment Firm Takes a Risky Bet on Mobile Video, Bloomberg Business (Dec. 20, 2018), https://www.bloomberg.com/news/articles/2018-12-20/hollywood-makes-a-big-bet-on-jeffrey-katzenberg-s-quibi.     [54]    Eriq Gardner and Pamela McClintock, Global Road Files Chapter 11 Bankruptcy for Film Division, The Hollywood Reporter (Sept. 6, 2018), https://www.hollywoodreporter.com/thr-esq/global-road-files-bankruptcy-1140266; Andrew Scurria, Open Road Films Is Placed in Chapter 11 by New Owner, The Wall Street Journal (Sept. 6, 2018), https://www.wsj.com/articles/open-road-films-is-placed-in-chapter-11-by-new-owner-1536265087; Rose Krebs, ‘Spotlight’ Studio Open Road Hits Ch. 11 In Del. With Sale Plan, Law360 (Sept. 6, 2018), https://www.law360.com/articles/1080248/-spotlight-studio-open-road-hits-ch-11-in-del-with-sale-plan.     [55]    Pamela McClintock and Patrick Brzeski, Why Global Road’s Film Studio Is Collapsing Less Than a Year After Launch, The Hollywood Reporter (Aug. 24, 2018), https://www.hollywoodreporter.com/news/why-global-roads-film-studio-is-collapsing-a-year-launch-1137298.     [56]    Patrick Brzeski, IM Global Acquired by Tang Media Partners, Launches TV Joint Venture With Tencent, The Hollywood Reporter (June 2, 2016), https://www.hollywoodreporter.com/news/im-global-acquired-by-tang-898927.     [57]    Mila Galuppo, Tang Media Partners Rebrands as Global Road Entertainment, The Hollywood Reporter (Oct. 30, 2017), https://www.hollywoodreporter.com/news/tang-media-partners-rebrands-as-global-road-entertainment-1053053.     [58]    Patrick Frater, Berlin: Global Road Touts $1 Billion Production Spend, Variety (Feb. 15, 2018), https://variety.com/2018/film/news/berlin-global-road-touts-1-billion-production-spend-1202700062/.     [59]    Krebs, supra note 54.     [60]    Id.     [61]    Scurria, supra note 54.     [62]    Vince Sullivan, Open Road Settles Contract Issues To Get OK On Ch. 11 Sale, Law360 (Dec. 19, 2018), https://www.law360.com/articles/1111145/open-road-films-ch-11-sale-delayed-by-assumption-issue; Eriq Gardner, Open Road Bankruptcy: Auction Called Off; Raven Capital Set to Acquire ‘Spotlight’ Studio, The Hollywood Reporter (Nov. 6, 2018), https://www.hollywoodreporter.com/thr-esq/open-road-bankruptcy-auction-called-raven-capital-set-acquire-spotlight-studio-1158472.     [63]    Patrick Brzeski, China’s Tencent Buys Film Studio New Classics Media for $2.25B, The Hollywood Reporter (Aug. 13, 2018), https://www.hollywoodreporter.com/news/tencents-china-literature-acquires-film-studio-new-classics-media-225b-1134569.     [64]    Id.     [65]    Patrick Brzeski, China Box Office Growth Slows to 9 Percent in 2018, Ticket Sales Reach $8.9B, The Hollywood Reporter (Jan. 2, 2019), https://www.hollywoodreporter.com/news/china-box-office-total-revenue-2018-1172725.     [66]    Patrick Brzeski, Tencent Buys Stake in Chinese Production Company New Classics Media for $524M, The Hollywood Reporter (Mar. 12, 2018), https://www.hollywoodreporter.com/news/tencent-buys-stake-chinese-production-company-new-classics-media-524m-1094124.     [67]    Patrick Frater, Tencent Unit Buys New Classics Media for $2.25 Billion, Variety (Aug. 13, 2018), https://variety.com/2018/biz/asia/tencent-unit-buys-new-classics-media-1202904254/.     [68]    Brzeski, supra note 66.     [69]    Joshua Franklin and Julia Fioretti, China’s Tencent Music Raises Nearly $1.1 Billion in U.S. IPO, Reuters (December 11, 2018), https://www.reuters.com/article/us-tencent-music-ipo/chinas-tencent-music-raises-nearly-1-1-billion-in-u-s-ipo-idUSKBN1OA2GR; Sara Salinas, Tencent Music Ends its First Day of Trading Up 9 Percent, CNBC (December 12, 2018), https://www.cnbc.com/2018/12/12/tencent-music-ipo-tme-stock-starts-trading-on-the-nyse.html.     [70]    Corrie Driebusch and Maureen Farrell, Tencent Music Prices Its IPO at Bottom of Range, The Wall Street Journal (December 11, 2018), https://www.wsj.com/articles/tencent-music-readies-its-ipo-after-a-turbulent-process-11544558237.     [71]    Id.      [72]    Kevin Kelleher, What Tencent Music’s $1.1B IPO Says About China’s Market Downturn, Fortune (December 12, 2018), http://fortune.com/2018/12/11/tencent-musics-ipo-chinas-market-turndown/.     [73]    Cherie Hu, From Social Entertainment to Licensing & Data Challenges: What You Need to Know About Tencent Music’s IPO, Billboard (December 13, 2018), https://www.billboard.com/articles/business/8490089/tencent-music-ipo-analysis-streaming-china-data-trends.     [74]    Paul Bond, Dalian Wanda Scales Back AMC Investment, The Hollywood Reporter (September 14, 2018), https://www.hollywoodreporter.com/news/dalian-wanda-scales-back-amc-investment-1143481; Allison Prang, Chinese Conglomerate Trims Staprake in AMC Entertainment, The Wall Street Journal (September 14, 2018), https://www.wsj.com/articles/chinese-conglomerate-trims-stake-in-amc-entertainment-1536934377.     [75]    Michelle Kung and Aaron Back, Chinese Conglomerate Buys AMC Movie Chain in U.S., The Wall Street Journal (May 21, 2012), https://www.wsj.com/articles/SB10001424052702303610504577417073912636152.     [76]    Prang, supra note 74.     [77]    Id.     [78]    The Orrin G. Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551, 115th Cong. (2018).     [79]    Amy X. Wang, Music Modernization Act Passes, Despite Music Industry Infighting, Rolling Stone (Sept. 18, 2018), https://www.rollingstone.com/music/music-news/music-modernization-act-passes-despite-music-industry-726091/; The Music Modernization Act, SoundExchange, https://www.soundexchange.com/advocacy/music-modernization-act/.     [80]    Dani Deahl, The Music Modernization Act has been signed into law, The Verge (Oct. 11, 2018), https://www.theverge.com/2018/10/11/17963804/music-modernization-act-mma-copyright-law-bill-labels-congress.     [81]    Eriq Gardner, Justice Dept. Reviewing Movie Licensing Restrictions on the Books for Decades, The Hollywood Reporter (Aug. 2, 2018), https://www.hollywoodreporter.com/thr-esq/justice-dept-reviewing-movie-licensing-restrictions-books-decades-1131827; Dawn C. Chmielewski and Dade Hayes, DOJ To Review Paramount Consent Decrees Governing How Studios Distribute Movies to Theaters, Deadline (Aug. 2, 2018), https://deadline.com/2018/08/doj-to-review-paramount-consent-decrees-governing-how-studios-distribute-movies-to-theaters-1202439066/.     [82]    United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).     [83]    See U.S. Dep’t of Justice, Office of Public Affairs, Department of Justice Opens Review of Paramount Consent Decrees, US Dep’t of Justice (Aug. 2, 2018), https://www.justice.gov/opa/pr/department-justice-opens-review-paramount-consent-decrees.     [84]    Lawrence Hurley, U.S. Supreme Court ends fight over Obama-era net neutrality rules, Reuters (Nov. 5, 2018), https://www.reuters.com/article/us-usa-court-netneutrality/u-s-supreme-court-ends-fight-over-obama-era-net-neutrality-rules-idUSKCN1NA1UW.     [85]    Alina Selyukh, U.S. Appeals Court Upholds Net Neutrality Rules In Full, Nat’l Pub. Radio (June 14, 2016), https://www.npr.org/sections/thetwo-way/2016/06/14/471286113/u-s-appeals-court-holds-up-net-neutrality-rules-in-full.     [86]    Ted Johnson, Net Neutrality Back in Court: Takeaways From Marathon Oral Arguments, Variety (Feb. 1, 2019), https://variety.com/2019/politics/news/net-neutrality-marathon-oral-arguments-1203126249/.     [87]    Cecilia Kang, Justice Department Sues to Stop California Net Neutrality Law, N.Y. Times (Sept. 30, 2018), https://www.nytimes.com/2018/09/30/technology/net-neutrality-california.html.     [88]    Eriq Gardner, California Will Hold Off Enforcing State’s Net Neutrality Law, The Hollywood Reporter (Oct. 26, 2018), https://www.hollywoodreporter.com/thr-esq/california-will-hold-enforcement-states-net-neutrality-law-1155484.     [89]    ABS Entm’t, Inc. v. CBS Corp., 908 F.3d 405 (9th Cir. 2018).     [90]    Id. at 422.     [91]    Id. at 423.     [92]    The Rick Nelson Company, LLC v. Sony Music Entertainment, C.A. No. 1:18-cv-08791-LLS, D.I. 1 ¶ 2 (S.D.N.Y. Sept. 25, 2018).     [93]    Williams v. Warner Music Group Corp., C.A. No. 18STCV00006, 2018 WL 5078046 (Cal. Super. Ct. Oct. 4, 2018).     [94]    Williams v. Warner Music Group Corp., C.A. No 2:18-cv-09691-RGK-PJW, at 7–9 (C.D. Cal. Dec. 7, 2018).     [95]    Skidmore v. Led Zeppelin, et al., No. 16-56057 (9th Cir. Sept. 28. 2018).     [96]    Id., slip op. at 7, 13.     [97]    Id. at 16–18.     [98]    Id. at 18-19.     [99]    Id. at 20.     [100]    Id. at 33–34.     [101]    Id. at 34.     [102]    Bluewater Music Servs. Corp. v. Spotify USA Inc., No. 3:17-CV-01051-JPM, 2018 WL 4714812 (W.D. Tenn. Sept. 29, 2018).     [103]    Id. at *1.     [104]    Id. at *4.     [105]    Id. at *5.     [106]    Id. at *6.     [107]    Brown v. Giongco, et al., No. BC669532, Ruling Re: Motion to Quash Service of Summons for Lack of Personal Jurisdiction, or, in the Alternative, Motion to Dismiss or Stay the Action for Forum Non Conveniens by Specially Appearing Defendants Iglesia Ni Cristo and Glicerio P. Santos IV (LA Super. Ct. Dec. 6, 2018).     [108]    Viktor v. Top Dawg Entm’t LLC, No. 18 CIV. 1554 (PAE), 2018 WL 5282886 (S.D.N.Y. Oct. 24, 2018).     [109]    Id. at *1.     [110]    Id.     [111]    Id. at *4.     [112]    Viktor v. Top Dawg Entm’t LLC, No. 18 CIV. 1554 (PAE), D.I. 125 (S.D.N.Y. Dec. 21, 2018).     [113]    Tiffany Hu, Supreme Court Won’t Hear IP Appeals by TVEyes, DHL, Law360 (Dec. 3, 2018), https://www.law360.com/media/articles/1107209/supreme-court-won-t-hear-ip-appeals-by-tveyes-dhl.     [114]    Bill Donahue, Siding with Fox, 2nd Circ. Says TVEyes Is Not Fair Use, Law360 (Feb. 27, 2018), https://www.law360.com/articles/1016495.     [115]    Id.     [116]    Id.     [117]    Id.     [118]    Hu, supra note 113.     [119]    Id.     [120]    Eriq Gardner, TVEyes Will No Longer Carry Fox News in Negotiated End to Big Copyright Fight, The Hollywood Reporter (Jan. 21, 2019), https://www.hollywoodreporter.com/thr-esq/tveyes-will-no-longer-carry-fox-news-negotiated-end-big-copyright-fight-1177661.     [121]    Ashley Cullins, Photographer Suing Andy Warhol’s Estate Claims His Work Isn’t ‘Transformative’, The Hollywood Reporter (Oct. 15, 2018), https://www.hollywoodreporter.com/thr-esq/photographer-suing-andy-warhols-estate-claims-his-work-isnt-transformative-1152405.     [122]    Id.     [123]    Id.     [124]    Id.     [125]    Id.     [126]    Id.     [127]    Id.     [128]    Id.     [129]    Id.     [130]    Bill Donahue, Instagram Art Show Was Fair Use, Richard Prince Says, Law360 (Oct. 9, 2018), https://www.law360.com/media/articles/1090373/instagram-art-show-was-fair-use-richard-prince-says.     [131]    Id.     [132]    Id.     [133]    Id.     [134]    17 U.S.C. § 512(c).     [135]    Id.     [136]    885 F.3d 597 (9th Cir).     [137]    826 F.3d 78 (2d Cir. 2016).     [138]    885 F.3d at 565.     [139]    Id.     [140]    Denial of Writ of Certiorari, Ventura Content Ltd. v. Motherless Inc., (No. 18-235).     [141]    BMG Rights Mgmt. LLC v. Cox Commc’ns, Inc., 149 F. Supp. 3d 634, 655–56 (E.D. Va. 2015).     [142]    BMG Rights Mgmt. LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 303 (4th Cir. 2018).     [143]    Id.     [144]    Id.     [145]    Sony Music Entm’t v. Cox Commc’ns, Inc., No. 1:18-CV-950, 2018 WL 6059386 (E.D. Va. Nov. 19, 2018),     [146]    137 S. Ct. 1744 (2017).     [147]    See In re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017).     [148]    U.S. Supreme Court Case No. 18-302.     [149]    See Brian Iverson, Supreme Court Asked to Consider Immoral or Scandalous Trademarks, IP Watchdog (Oct. 11, 2018), https://www.ipwatchdog.com/2018/10/11/supreme-court-asked-to-consider-immoral-or-scandalous-trademarks/id=101815/.     [150]    See id.     [151]    Bill Donahue, Supreme Court Will Hear ‘Scandalous’ Trademark Case, Law360 (Jan. 4, 2019), https://www.law360.com/articles/1115566/supreme-court-will-hear-scandalous-trademark-case.     [152]    See Am. Freedom Defense Initiative, et al. v. King County, Case No. 17-35891 (9th Cir. Sep. 27, 2018).     [153]    See Bill Donahue, 9th Cir. Strikes Down Seattle Ban On ‘Disparaging’ Bus Ads, Law360 (Oct. 3, 2018), https://www.law360.com/media/articles/1088992/9th-circ-strikes-down-seattle-ban-on-disparaging-bus-ads.     [154]    See id.     [155]    See San Diego Comic Convention v. Dan Farr Prods. et al., Case No. 3:14-cv-01865 (S.D. Cal. Aug. 7, 2014).     [156]    See Shayna Posses, San Diego Comic-Con Wins TM Use Ban, $4M Fee Award, Law360 (Aug. 24, 2018), https://www.law360.com/media/articles/1076513/san-diego-comic-con-wins-tm-use-ban-4m-fee-award.     [157]    See id.     [158]    See id.     [159]    See Ashley Cullins, Hollywood Docket: Coachella Trademark Fight Settles, The Hollywood Reporter (Oct. 12, 2018), https://www.hollywoodreporter.com/thr-esq/hollywood-docket-coachella-trademark-fight-settles-1145285.     [160]    See id.     [161]    Cable News Network, Inc. et al. v. Trump et al., Case No. 1:18-cv-2610 (D.D.C Nov. 16, 2018) (Trans. of Mot. Hrg.).     [162]    Id.     [163]    Id.     [164]    Gubarev v. BuzzFeed, Inc., Case No. 1:17-cv-60426-UU, Dkt. No. 388 (S.D. Fla. Dec. 18, 2018).     [165]    Id.     [166]    Id.     [167]    Gubarev v. BuzzFeed, Inc., Case No. 1:17-cv-60426-UU, Dkt. No. 385 (S.D. Fla. Dec. 18, 2018).     [168]    Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [169]    de Havilland v. FX Networks, LLC, 21 Cal. App. 5th 845 (2018), review filed (May 4, 2018).     [170]    de Havilland, 21 Cal. App. 5th at 850.     [171]    Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [172]    Opposition to Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [173]    Dominic Patten, Olivia De Havilland Last Hope Petition Over ‘Feud’ Feud Denied By SCOTUS, Deadline (Jan. 7, 2019), https://deadline.com/2019/01/olivia-de-havilland-feud-us-supreme-court-petition-denied-ryan-murphy-1202530510/     [174]    Ronnie Van Zant, Inc. v. Cleopatra Records, Inc., 906 F.3d 253 (2d Cir. 2018).     [175]    Id. at 255.     [176]    Id.     [177]    Id.     [178]    Id. at 256.     [179]    Id. at 257.     [180]    Id.     [181]    Id. at 258.     [182]    Daniels v. FanDuel, Inc., 109 N.E.3d 390, 393 (Ind. 2018).     [183]    Daniels v. FanDuel, Inc., 884 F.3d 672, 674 (7th Cir. 2018).     [184]    Id.     [185]    Daniels, 109 N.E.3d at 394.     [186]    Id. at 396.     [187]    Daniels v. FanDuel, Inc., 909 F.3d 876, 877 (7th Cir. 2018).     [188]    Id. at 878.     [189]    Solid Oak Sketches, LLC v. Visual Concepts, LLC, Case No. 1:16-cv-00724-LTS-SDA, Dkt. 128.     [190]    Id.     [191]    Id.     [192]    Id., Dkt. 148.     [193]    Id.     [194]    Order Granting Defendant’s Special Motion to Dismiss/Strike at 1, Clifford v. Trump, No. 18-6893 (C.D. Cal. Oct. 15, 2018).     [195]    Id. at 1-2.     [196]    The district court applied Texas law to Clifford’s defamation claim and the Defendant’s Special Motion to Dismiss/Strike because Clifford is domiciled in Texas.  Id. at 4.     [197]    Id. at 9-11.     [198]    Id. at 11.     [199]    Id. at 12.     [200]    Notice of Appeal, Clifford v. Trump, No. 18-6893 (C.D. Cal. Oct. 15, 2018).     [201]    Matt Stevens, Stormy Daniels Ordered to Pay Trump $293,000 in Legal Fees, The N.Y. Times (Dec. 11, 2018), https://www.nytimes.com/2018/12/11/us/stormy-daniels-donald-trump.html.     [202]    Eriq Gardner, Discovery Beats Defamation Lawsuit as Judge Ponders What’s True in “Reality” Television, The Hollywood Reporter (Nov. 5, 2018), https://www.hollywoodreporter.com/thr-esq/discovery-beats-defamation-lawsuit-as-judge-ponders-whats-true-reality-television-1158089.     [203]    Order Granting Defendants’ Motion for Summary Judgment at 1, Lundin v. Discovery Commc’ns Inc., No. 16-cv-01568 (C.D. Cal. Nov. 2, 2018).     [204]    See, e.g., id. at 13-14.     [205]    Id. at 2.     [206]    Id.     [207]    Notice of Appeal, Lundin v. Discovery Commc’ns Inc., No. 2:16-cv-01568 (C.D. Cal. Nov. 2, 2018).     [208]    Ashley Cullins, Defamation Lawsuit Against ‘Hacksaw Ridge’ Financier Revived by Appeals Court, The Hollywood Reporter (Nov. 27, 2018), https://www.hollywoodreporter.com/thr-esq/defamation-lawsuit-hacksaw-ridge-financier-revived-by-appeals-court-1164328     [209]    Order at 3, Han v. Kylin Pictures, Inc., No. B282947 (Cal. Ct. App. Nov. 27, 2018).     [210]    Id. at 4.     [211]    Id.     [212]    Id. at 10.     [213]    Id. at 14.     [214]    Id.     [215]    Id. at 11-12.     [216]    Complaint at 12-13, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Sept. 25, 2018); see also Ashley Cullins, MSNBC’s Joy Reid at Center of Free-Speech Legal Fight Over Retweets, The Hollywood Reporter (Nov. 6, 2018), https://www.hollywoodreporter.com/thr-esq/msnbc-s-joy-reid-at-center-free-speech-legal-fight-retweets-1158266.     [217]    Complaint at 12-13, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Sept. 25, 2018).     [218]    Id.     [219]    Id. at 11.     [220]    47 U.S.C. § 230.     [221]    Amended Complaint, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Nov. 27, 2018); see also Eriq Gardner, MSNBC’s Joy Reid to Escape Libel Claim Over Retweet, The Hollywood Reporter (Nov. 14, 2018), https://www.hollywoodreporter.com/thr-esq/msnbcs-joy-reid-escape-libel-claim-retweet-1161090.     [222]    Delorean v. Delorean Motor Co., No. CV 18-8212 (JLL), 2018 WL 4941790 (D.N.J. Oct. 12, 2018).     [223]    Id.     [224]    Id. at *4 (cleaned up).     [225]    Id. at *2.     [226]    Id. at *4.     [227]    Compl., Glassnote Entertainment Group, LLC, v. MC DJ Recording et al., 2018 WL 3327743 (S.D.N.Y. July 6, 2018).     [228]    Id. ¶ 7.     [229]    Id. ¶ 38.     [230]    Countercompl. ¶  37, Glassnote Entertainment Group, LLC, v. MC DJ Recording et al., 1:18-cv-06167-LGS (Sept. 14, 2018).     [231]    Id. ¶ 20.     [232]    Id. ¶¶ 52–53.     [233]    Id. ¶¶ 34–35. The following Gibson Dunn lawyers assisted in the preparation of this client update: Scott Edelman, Howard Hogan, Benyamin Ross, Nathaniel Bach, Jillian London, Corey Singer, Aaron Frumkin, Andrew Blythe, Gatsby Miller, Sara Ciccolari-Micaldi, DeDe Mann, Brittany Schmeltz, Sarah M. Kushner, Aaron M. Smith, Brian Castelloe, Bree Love, and Harrison Korn. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Kevin Masuda – Co-Chair, Los Angeles (+1 213-229-7872, kmasuda@gibsondunn.com) Orin Snyder– Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com) Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com) Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com) Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) Nathaniel L. Bach – Los Angeles (+1 213-229-7241,nbach@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 7, 2019 |
WTR1000 Recognizes Gibson Dunn’s Trademark Work

The 2019 edition of the World Trademark Review 1000 recognized Gibson Dunn’s work in the area of trademarks, noting that the firm “utilises its resources across the country to encourage IP knowledge flow.”  Washington, D.C. partner Howard Hogan is also recognized as “a force to be reckoned with, combining top-flight skills with innovative thinking.”  The WTR1000 was published in February 2019.

January 31, 2019 |
Federal Circuit Update (January 2019)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update summarizes the Supreme Court’s on-sale bar decision as well as key filings for certiorari or en banc review.  The Update lists the Federal Circuit’s new guidelines to address scheduling conflicts.  We also summarize recent Federal Circuit decisions confirming the scope of required IPR review, deciding the impact of term changes on obvious-type double patenting, and reflecting differences in how infringement letters can give rise to personal jurisdiction for declaratory judgment claims. Federal Circuit News Supreme Court: Helsinn Healthcare S.A. v. Teva Pharm. USA, Inc. (No. 17-1229):  On January 22, 2019, the Supreme Court unanimously affirmed the Federal Circuit’s decision that a commercial sale to a third party may trigger the “on-sale bar” under 35 U.S.C. § 102(a), even if that third party is required to keep the sale confidential.  The Supreme Court explained that its pre-AIA precedent did not require a sale to be public for purposes of the bar.  Writing for the Court, Justice Thomas explained: “we presume that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.”  The AIA’s addition of the phrase “or otherwise available to the public” was insufficient to support a different conclusion. Helsinn stands to particularly impact companies where inventors need to raise capital before an invention, although sufficiently complete for a patent application, is ready to be commercialized.  Biotechnology and life sciences firms, for example, may need to consider earlier filings at the research and development stage or strategically review how capital acquisition is structured.  A summary of the decision from our Appellate and Constitutional Law Practice can be found here. There is one additional patent case from the Federal Circuit scheduled to be heard in 2019, and one trademark case for which certiorari was granted. Case Status Issue Amicus Briefs Filed Return Mail Inc. v. United States Postal Service, No. 17-1594 Argument scheduled February 19, 2019. Whether the government is a “person” who may petition to institute review proceedings under the Leahy-Smith America Invents Act 9 Iancu v. Brunetti, No. 18-302 Certiorari granted January 4, 2019. Whether Section 2(a) of the Lanham Act’s prohibition on registration of “immoral” or “scandalous” marks is facially invalid under the free speech clause of the First Amendment – Noteworthy Petitions for a Writ of Certiorari: HP Inc. v. Berkheimer (No. 18-415):  On September 28, 2018, HP filed for certiorari, presenting the question of “whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.”  HP argued that, based on Supreme Court precedent, including Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), patent eligibility is a question of law for the court. As we earlier reported, the Federal Circuit (Moore, Taranto, Stoll, JJ.) held that step two of the Alice patent-eligibility analysis—whether claims involve well-known, routine, or conventional activities—presents a question of fact.  Accordingly, the panel vacated in part and remanded a grant of summary judgment under Section 101, holding that a genuine issue of material fact existed.  HP petitioned for rehearing en banc, which the Federal Circuit denied.  Judge Reyna dissented from that denial, arguing that the decision is a “change in” the Federal Circuit’s law and “counter to guidance from the Supreme Court” in Alice.  As a practical matter, the decision limits accused infringers ability to obtain a dismissal on subject matter grounds before trial. Several amici have filed to support HP’s petition, including the Electronic Frontier Foundation, T-Mobile USA, Inc. and Sprint Spectrum L.P.  On January 7, 2019, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States on this issue. Mark Perry of Gibson Dunn serves as co-counsel for HP in this matter.  Mark, as well as Gibson Dunn attorneys Helgi Walker, Brian Buroker, and Alex Harris, also successfully represented CLS Bank in the Supreme Court Alice case. Hikma Pharmaceuticals USA Inc. v. Vanda Pharmaceuticals Inc. (No. 18-817):  On December 27, 2018, Hikma filed for certiorari, seeking review of “whether patents that claim a method of medically treating a patient automatically satisfy Section 101 … even if they apply a natural law using only routine and conventional steps.”  Hikma argues that the Federal Circuit’s decision “sharply breaks” from and “effectively overrules” Supreme Court precedent in Alice and Mayo. The Federal Circuit panel majority (Lourie, Hughes, JJ.) held that a method of treating schizophrenia with iloperidone, with dosage based on a patient’s genotype, is patent-eligible.  According to the ruling, the method “makes iloperidone safer” and requires a doctor to administer the drug in set amounts based on testing.  The claims are thus “directed to a specific method . . . using a specific compound at specific doses to achieve a specific outcome.” Chief Judge Prost dissented, arguing the claims were no more than an “optimization” of an existing treatment and that the specific dosage required added “nothing inventive . . . beyond [a] natural law.”  Adding to Judge Prost’s criticism, Hikma argues that, so long as claims are now drafted as methods of treatment, the Federal Circuit’s ruling no longer requires claims directed to natural laws to contain other inventive elements as Mayo dictates, with the PTO now using the challenged ruling to instruct examiners that “it is not necessary for ‘method of treatment’ claims that practically apply natural relationships to include nonroutine or unconventional steps.” Noteworthy Petitions for En Banc Review: Eli Lilly has petitioned for en banc review from the decision in Erfindergemeinschaft UroPep Gb v. Eli Lilly and Co. (No. 17-2603).  The petition asks as one of its two questions: Does a single-step therapeutic method claim violate the “written description” and “enablement” requirements of 35 U.S.C. § 112 under longstanding precedent of this Court and the Supreme Court where: a)      the sole limitation in the claim’s single step that potentially imparts patentability to the claim merely recites a function to be performed, b)      the claim preempts all future ways that might be discovered to perform the function recited in the claim, and c)      the specification fails to identify which, if any, of the embodiments disclosed in the specification actually perform the function to which the claim is directed. This petition could allow the Federal Circuit to clarify written description and enablement requirements for methods of medical treatment, particularly in light of decisions such as Mayo and Alice.  Coupled with the certiorari petition from Hikma, it also reflects further challenge to the Federal Circuit’s upholding method of treatment claims, albeit in the context of Section 112.  The Washington Legal Foundation and Eisai Co. have filed amicus briefs in support of Eli Lilly. Federal Circuit Practice Update Revision to Process for Advising of Scheduling Conflicts: On December 10, 2018, the Federal Circuit revised its process for advising it of scheduling conflicts: The court will only consider scheduling conflicts by arguing counsel; non-arguing counsel and client conflicts will no longer be considered when scheduling argument. Arguing counsel must provide an explanation, including a showing of good cause, for any submitted scheduling conflict. Arguing counsel will be limited to submitting only ten total days of unavailability during the six consecutive court weeks identified in the Notice to Advise of Scheduling Conflicts. The Federal Circuit also stated that “[c]onflicts submitted without a sufficient showing of good cause will not be considered by the court when scheduling argument.”  The Federal Circuit’s notice can be found here. Key Case Summaries (December 2018 – January 2019) AC Technologies S.A. v. Amazon.com Inc., No. 18-1433 (Fed. Cir. Jan. 9, 2019):  If the Board institutes an IPR, it must address all grounds of unpatentability raised by the petitioner. Amazon petitioned for review of one of AC’s patents relating to a data management system.  Although Amazon only identified one piece of prior art, it asserted three grounds depending on how a key term was construed.  The Board instituted the IPR on the basis of one construction.  Later, the Board construed the claim differently, finding that Amazon had failed to show invalidity on two of its three grounds.  Amazon moved for reconsideration, noting that the Board did not address its third ground.  The patentee argued that the third ground had never been instituted, but the Board evaluated it and invalidated the challenged claims on that basis. The Federal Circuit (Stoll, J.) affirmed, rejecting the patentee’s argument that the Board erred by addressing a ground of invalidity that was not expressly part of its institution decision.  The panel explained that the Board either institutes review, or does not, and it must render a final decision addressing all challenged claims.  Likewise, “if the Board institutes an IPR, it must similarly address all grounds of unpatentability raised by the petitioner” (emphasis added). Novartis AG v. Ezra Ventures LLC, No. 2017-2284 (Fed. Cir. Dec. 7, 2018) and Novartis Pharms. Corp. v. Breckenridge Pharm. Inc., Nos. 2017-2173, -2175, -2176, -2178, -2179, -2180, -2182, -2183, -2184 (Fed. Cir. Dec. 7, 2018): Term extensions do not give rise to obviousness-type double patenting (Novartis represented successfully by Gibson Dunn in Ezra). Obviousness-type double patenting (ODP) is a judicial doctrine that prevents patentees from obtaining sequential patents on the same invention, or obvious variants, that extend exclusivity beyond the original patent term.  In the two Novartis cases, the Federal Circuit addressed how to apply ODP if an earlier-filed patent obtains a later expiration than a later-filed patent due to a term extension or due to the term change in the 1995 Uruguay Round Agreements Act (URAA). In Ezra, the Federal Circuit considered ODP in the context of Section 156, which can extend term up to five years when an invention could not be commercialized without approval from a regulatory agency, such as the FDA.  Novartis’s first patent was to expire in 2014, and a second, related patent to expire in 2017.  But, based on an extension, the first patent’s term was extended to 2019—after expiration of the second, later-filed patent.  Ezra argued that the first patent was invalid or should be at least terminally disclaimed to the expiration of the later-filed patent. The Federal Circuit (Chen, J.) rejected Ezra’s positions.  According to the panel, Section 156 allows a patentee to choose one patent to extend, and “[a]s long as the requirements for a patent term extension recited in § 156(a) are met, the Director of the Patent and Trademark Office ‘shall’ grant a [patent term extension] on the patent of the patentee’s choice.”  ODP does not invalidate a patent with a validly-obtained patent term extension because holding otherwise “would mean a judge-made doctrine would cut off a statutorily-authorized time extension.” Breckenridge considered ODP in light of the 1995 change in patent term from 17 years after issuance to 20 years from the earliest effective filing date.  Novartis had two patents that both claimed the same priority date.  Because of the URAA’s change in term, the first, earlier-filed patent, a pre-URAA patent, was to expire later than the second post-URAA patent. The Federal Circuit (Chen, J.) held that the URAA change did not give rise to ODP.  Novartis had not tried to extend its patent term.  Rather, the difference was created by the URAA—indeed, it “truncated” the term of Novartis’s second-filed patent.  The panel held that a change in law “should not truncate the term statutorily assigned” to the first patent, and that holding otherwise “would abrogate Novartis’s right to enjoy one full patent term on its invention.” Jack Henry & Assoc., Inc. v. Plano Encryption Techs. LLC, No. 16-2700 (Fed. Cir. Dec. 7, 2018): Infringement letters can establish personal jurisdiction and venue in a declaratory action. Jack Henry brought a declaratory action against Plano in the Northern District of Texas.  Plano had sent enforcement letters to Jack Henry (which did business in the district) identifying Plano’s patents, stating its belief that infringement was occurring, and offering a license.  Thus, minimum contacts were met—the issue was whether exercising jurisdiction would be reasonable and fair.  The district court held that Plano’s contacts should not subject it to jurisdiction. The Federal Circuit (Newman, J., joined by Wallach and Stoll, JJ.) reversed, rejecting the view that infringement letters alone cannot provide a basis for personal jurisdiction in a declaratory action.  The panel noted that Plano did not contend that jurisdiction in the district would be inconvenient.  Plano was also subject to general jurisdiction in Texas and was registered to do business throughout the state.  Under these facts, personal jurisdiction and venue were satisfied. Maxchief Investments v. Wok & Pan, Indus., No. 18-1121 (Fed. Cir. Nov. 29, 2018): Infringement letters do not establish jurisdiction just because they are directed to the forum. Maxchief brought a declaratory judgment action against Wok & Pan in the Eastern District of Tennessee.  Wok & Pan had sent infringement notices to Maxchief’s attorney in the district, although Maxchief itself was a Kansas company that did not operate in Tennessee.  Maxchief also argued that a separate suit by Wok in California, which sought a broad injunction impacting Maxchief’s products, would have “effects” in Tennessee as one of its distributors operated there.  But the district court dismissed the suit, holding Maxchief failed to allege the minimum contacts. The Federal Circuit (Dyk, J., joined by Reyna, J., and Hughes, J.) affirmed, holding that personal jurisdiction based on enforcement activity requires intentional conduct “directed at the forum.”  “[I]t is not enough that Wok’s lawsuit might have ‘effects’ in Tennessee.”  As to infringement letters, the panel deemed the contact to be with Maxfield in Kansas, notwithstanding that the letter was sent to a lawyer in Tennessee.  Taken with Jack Henry above, this illustrates the fact-dependent nature of the personal jurisdiction inquiry for declaratory judgment actions. Upcoming Oral Argument Calendar For a list of upcoming arguments at the Federal Circuit, please click here. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert: Blaine H. Evanson – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: Appellate and Constitutional Law Group: Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, >mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 28, 2019 |
Peter Alexiadis Recognized in Who’s Who Legal Data

Who’s Who Legal has named Peter Alexiadis to its 2019 list of leading data lawyers. The list recognizes practitioners in the fields of IT, privacy and protection, security, and telecoms and media issues and was published in January 2019.

January 22, 2019 |
Supreme Court Holds That Confidential Licensing Agreements Can Trigger The America Invents Act’s “On-Sale” Bar

Click for PDF Decided January 22, 2019 Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA Inc., No. 17-1229 Today, the Supreme Court held that confidential licensing agreements can trigger the Leahy-Smith America Invents Act’s “on-sale” bar, which prohibits awarding patents to claimed inventions that have already been “in public use, on sale, or otherwise available to the public.” Background: In order to finance the development of a new pharmaceutical drug, Helsinn entered into a licensing agreement with another pharmaceutical company, MGI Pharma. Under the agreement, MGI Pharma received the right to purchase and eventually distribute the drug if it obtained the appropriate governmental approval. Although the existence of the licensing agreement was itself made public, MGI Pharma was required to keep confidential all proprietary information related to the drug. More than a year after entering into the licensing agreement with MGI Pharma, Helsinn applied to patent its new drug. The Leahy-Smith America Invents Act’s “on-sale” bar prohibits awarding patents for claimed inventions that were “in public use, on sale, or otherwise available to the public” for more than one year before a patent application is filed. Issue: Whether entering into a confidential licensing agreement can place the underlying invention “on sale” such that it triggers the Leahy-Smith America Invents Act’s “on-sale” bar. Court’s Holding: Yes. A commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under the Leahy-Smith America Invents Act. “In light of this settled pre-[America Invents Act (“AIA”)] precedent on the meaning of ‘on sale,’ we presume that when Congress reenacted the same language in the AIA, it adopted the earlier judicial construction of that phrase.” Justice Thomas, writing for the unanimous Court What It Means: The Court’s holding means that inventors have a reduced incentive to enter into “secret” sales of their invention, since both public and private sales can trigger the Leahy-Smith America Invents Act’s one-year time limit. The opinion highlights the interaction between new legislation and prior judicial precedent. Noting that “[e]very patent statute since 1836 has included an on-sale bar” which had not been interpreted to apply to public sales alone, the Court concluded that Congress did not signal an intent to alter the historical understanding of the term “on sale” when Congress added the catchall phrase “or otherwise available to the public” to the Leahy-Smith America Invents Act’s “on-sale” bar. The decision will particularly affect companies in the pharmaceutical industry, where inventors often need to raise capital early on in the research and development process. Pharmaceutical companies must now think even more strategically about when and how to best raise capital. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Intellectual Property Practice Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 22, 2019 |
Artificial Intelligence and Autonomous Systems Legal Update (4Q18)

Click for PDF We are pleased to provide the following update on recent legal developments in the areas of artificial intelligence, machine learning and autonomous systems (“AI”).  As AI technologies become increasingly commercially viable, one of the most interesting challenges lawmakers face in the governance of AI is determining which of its challenges can be safely left to ethics (appearing as informal guidance or voluntary standards), and which rules should be codified in law.[1]  Many of the recent updates we have chosen to highlight below illustrate how lawmakers and government agencies seek to develop AI strategies and policy with the aim of balancing the tension between protecting the public from the potentially harmful effects of AI technologies while encouraging positive innovation and competitiveness.[2]  For the most part, lawmakers continue to engage with a broad range of stakeholders on these issues, and there remains plenty of scope for companies operating in this space to participate in discussions around the legislative process and policymaking. __________________________ Table of Contents I.      Patent Eligibility for AI-Related Inventions II.    Federal Government Agencies Seek to Leverage the Benefit of AI and Innovative Technologies III.  Autonomous Vehicles IV.   Rising Concerns for AI’s Potential to Create Bias and Discrimination V.    Use of AI in Criminal Proceedings VI.   Legal Technology __________________________ I.   Patent Eligibility for AI-Related Inventions As the adoption of AI technologies progresses rapidly, AI-related patent applications have kept pace, blooming to over 154,000 worldwide since 2010.[3]  However, several U.S. court decisions in recent years have left technology and pharmaceutical companies unsure of whether their inventions are patentable under U.S. federal law.  One source of great unpredictability in the patent field is subject matter eligibility under 35. U.S.C. § 101—and in particular the abstract idea exception to patent eligibility—based primarily on the U.S. Supreme Court’s decision in Alice Corp. v. CLS Bank International,[4] resulting in well-documented frustration in the lower courts trying to make sense of the precedent[5] and ultimately running the risk of impeding innovation in the United States in AI and machine learning and the growth of commerce.[6] This confusion and unpredictability has prompted lawmakers to take action, inviting industry leaders and representatives of the American Bar Association’s IP law section as well as retired members of the judiciary to a closed-door roundtable discussion on December 12, 2018 to discuss potential legislation to rework 35 U.S.C. § 101 on patent eligibility.[7] Against this backdrop, on January 4, 2019 the United States Patent and Trademark Office (“USPTO”) guidance announced updated to help clarify the process that examiners should undertake when evaluating whether a pending claim is directed to an abstract idea under the Supreme Court’s two-step Alice test and thus not eligible for patent protection under 35 U.S.C. § 101.  The USPTO’s guidelines may arm applicants for AI-related inventions with a roadmap of how to avoid or overcome Section 101 rejections, but it remains to be seen how examiners interpret the guidelines.  For further details on the USPTO’s guidelines, please see our recent Client Alert on The Impact of the New USPTO Eligibility Guidelines on Artificial Intelligence-related Inventions. In November 2018, the European Patent Office (“EPO”) also issued new guidelines that set out patentability criteria for AI technologies and, in particular, provide a range of examples for what subject matter is exempt from patentability under Articles 52(1), (2) and (3) of the Convention on the Grant of European Patents.[8]  Under the EPO guidance, which was well-received by companies in the field,[9] an inventor of an AI technology must show that the claimed subject matter has a “technical character.”  While this approach does not deviate from the EPO’s long-held position on exclusions to patentability, the guidelines provide welcome clarity and specific examples.  For instance, the classification of digital images, videos, audio or speech signals based on low-level features (e.g., edges or pixel attributes for images) are typical technical applications of classification algorithms, but classifying text documents solely in respect of their textual content is not regarded to be per se a technical purpose but a linguistic one.  Notably, the guidelines also potentially open the door to patent protection for training methodologies and mechanisms for generating training datasets.  In sum, a claim to an AI algorithm based upon a mathematical or computational model on its own is likely to be considered non-technical.  Accordingly, careful drafting will be required to impart onto the AI or machine learning component a technical character by reference to a specific technical purpose and/or implementation, rather than describing it as an abstract entity.  AI or machine learning algorithms in the context of non-technical systems are not likely to be patentable. Much will depend on how the USPTO and the EPO enforce their new guidelines.  The EPO guidelines’ categorical exclusions of certain subject matter appears to stand in contrast to U.S. patent eligibility law (which may therefore prove more favorable to AI innovators seeking patent protection), but the EPO guidelines could offer a higher level of consistency and clarity as to what subject matter is exempt from patentability than the more fluid U.S. approach.  In the meantime, innovators in artificial intelligence and machine learning technologies should take note of these developments and exercise caution when making strategic decisions about which technologies should be patented and in which jurisdictions applications should be filed. II.   Federal Government Agencies Seek to Leverage the Benefit of AI and Innovative Technologies As noted in our Artificial Intelligence and Autonomous Systems Legal Update (3Q18), 2018 saw few notable legislative developments, but increasing federal government interest in AI technologies, a trend which has continued apace amid increasing appreciation by lawmakers of AI as a potent general purpose technology. A.   Future of Artificial Intelligence Act The legislative landscape has not been especially active in the AI sector this past quarter.  In December 2017, a group of senators and representatives introduced the Fundamentally Understanding the Usability and Realistic Evolution of Artificial Intelligence Act of 2017, also known as the FUTURE of Artificial Intelligence Act (the “Act”), which, if passed, will not regulate AI directly, but will instead form a Federal Advisory Committee on the Development and Implementation of Artificial Intelligence.[10]  The purpose of the Committee is to help inform the government’s response to the AI sector on several issues, including the competitiveness of the U.S. in regard to AI innovation, workforce issues including the possible effect of technological displacement of workers, education, ethics training, open sharing of data, and international cooperation.[11]  The Act’s definition of AI is broad and could encompass AI technologies in any number of fields and industries.  At present, the Act remains pending in Congress. B.   FDA Releases New Rules for Medical Devices Incorporating AI In early December 2018, the U.S. Food and Drug Administration (“FDA”) released a proposed rule that aimed to update the review process for certain medical devices before they enter the marketplace.  The proposed rule would clarify the applicable statutory language by establishing procedures and criteria for the so-called de novo pathway used to review the safety and effectiveness of innovative medical devices that do not have predicates, and would apply to certain medical devices incorporating AI.[12]  Back in April 2018, the FDA approved IDx_DR, a software program that uses an AI algorithm to detect eye damage from diabetes.[13]  Since then, the FDA has approved other AI devices at what appears to be an increasing rate.  If the rule is finalized, the FDA anticipates that companies developing novel medical devices will be able to take advantage of a more efficient process and clearer standards when seeking de novo classification. C.   IRS Invests in AI to Detect Criminal Activity More Efficiently Facing years of budget cuts and a declining number of employees, the IRS is increasingly investing in technology driven by AI to identify and prosecute tax fraud and rein in offshore tax evasion.  During an American Bar Association webcast in December 2018, Todd Egaas, Director of Technology, Operations and Investigative Services in the IRS’ Criminal Investigations office explained that, “We’ve been running thin on people lately and rich on data.  And so what we’ve been working on—and this is where we think data can help us—is how do we make the most use out of our people?”[14] Part of the IRS’ strategy is a recently signed seven-year, $99 million deal with Palantir Technologies to help the agency “connect the dot in millions of tax filings, bank transactions, phone records, and even social media posts.”[15]  Palantirs’ technology will be used to assist the IRS in determining which cases to investigate and prosecute with its more limited manpower.  Egaas and Benjamin Herndon, the IRS’ Chief Analytics Officer, offered some specific insights into how the IRS is using these advanced technologies.  Not only is the speed of processing data anticipated to increase to become near real-time, but machine learning algorithms and AI “identify patterns in graphs where noncompliance might be present” and “prove particularly helpful in combating identity thieves fraudulently applying for tax refunds.”[16] D.   Federal Agencies Urge Banks to Innovate The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”), the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the “Agencies”) are urging banks to use AI and other innovative technologies to combat money laundering and terrorist financing, according to a joint statement issued on December 3, 2018.[17] The Agencies are attempting to foster innovation by encouraging banks to identify “new ways of using existing tools or adopting new technologies” to help “identify and report money laundering, terrorist financing, and other illicit financial activity by enhancing the effectiveness and efficiency” of existing Bank Secrecy Act/anti-money laundering (“BSA/AML”) compliance programs.[18]  The Agencies have seen how experimentations with AI and digital identity technologies have strengthened banks’ compliance approaches and have enhanced transaction monitoring systems.[19] Companies in the financial sector considering the use of these innovative compliance programs should note the Agencies’ assurances that doing so “will not result in additional regulatory expectations,” and that banks “should not” be criticized if their efforts “ultimately prove unsuccessful,” nor will the agencies necessarily impose supervisory actions if innovative pilot programs “expose gaps” in a compliance program.[20]  Similarly, if “banks test or implement artificial intelligence-based transaction monitoring systems and identify suspicious activity that would not otherwise have been identified under existing processes, there will be no automatic assumption that the banks’ existing processes are deficient.”[21]  However, the Agencies clarified that banks must continue to meet their BSA/AML compliance obligations when developing and testing pilot programs.[22] E.   FTC Hearings Address Consumer Protection and Antitrust Issues Sparked by AI Over the course of 2018, the Federal Trade Commission held a series of hearings on “Competition and Consumer Protection in the 21st Century,” which provided a platform for industry leaders, academics, and regulators to discuss whether changes in the domestic and world economics and new technologies, among other developments, may require changes to competition and consumer protection law, enforcement priorities, and policy.[23]  On November 13-14, 2018, the conversation turned to algorithms, artificial intelligence, and predictive analytics.  The risk that AI and algorithms will perpetuate bias, discrimination, and existing socioeconomic disparities was a shared concern.[24]  And there was broad agreement that bias can be combatted at several different stages in the development and use of AI.  For example, panelists spoke about the need for good algorithmic design, high-quality data, rigorous design, and some degree of consumer understanding to help manage and combat bias. Panelists also debated whether existing laws are robust enough to address ethical issues posed by the use of AI, or whether an AI consumer protection law is warranted.  There appeared to be consensus that existing laws, i.e., the Fair Credit Reporting Act and anti-discrimination laws, and the regulatory powers of the FTC (though Section 5 of the FTC Act, which prohibits unfair methods of conduct in commerce), were sufficient and that caution was warranted before proposing new laws. Antitrust panelists addressed issues relating to competitors’ use of algorithms to set prices, suggesting that concerns about algorithmic collusion are overhyped: not only is it very difficult to program algorithms to respond optimally to actions generated by a competitors’ algorithm over a long period of time, but algorithms are typically designed to respond to changes in pricing—not achieve an economic competitive equilibrium.[25]  In addition, unilateral decisions to use price optimization algorithms may be lawful, regardless of the outcome—much like how conscious parallelism is permissible under existing law.  From an enforcement perspective, companies may wish to note that the panelists encouraged enforcers to study and then distinguish between algorithms that produce “follow the leader” programs and those that detect and punish other programs for failing to achieve a desired outcome, since only the latter behavior is indicative of unlawful collusion. III.   Autonomous Vehicles A.   Recent Developments The global self-driving vehicle market is estimated to reach $42 billion by 2025,[26] and companies working on self-driving cars continue to aggressively compete for new talent and new technology.  And, given the fast pace of developments, governments worldwide are facing the challenge of regulating this novel and complex industry without stifling innovation and global competitiveness—some making more progress than others. 2019 could prove a watershed year for the fledgling autonomous vehicle industry as virtually every major automaker launches its own self-driving vehicle and some developers inch towards releasing “level 4 autonomy” vehicles—”unsupervised” cars that can operate within a limited domain.[27]  However, truly autonomous—level 4 or 5—vehicles won’t be found on public roads anywhere until countries succeed in rolling out uniform regulations nationwide, something no country has yet done.  Likewise, as public sensitivity to crashes and malfunctions remains high,[28] automakers continue to wrestle with the technological challenges of making commercially viable fully autonomous vehicles that can operate in all conditions (including, for example, darkness or inclement weather) and without set geographical boundaries. For example, Audi has announced that it has plans to be the first company in the world to sell a Level 3 car directly to the public: an Audi A8 sedan with an autopilot option called Traffic Jam Pilot, which works only at speeds under 50 kilometers per hour (37 miles per hour), and requires the driver to be prepared to take back the wheel after a warning—the definition of Level 3.[29]  However, concern over the lack of clear federal regulations for autonomous driving technology means Audi will not offer this option in the U.S. market.[30]  Audi has said it does not envisage selling Level 4 cars for some time—perhaps well into the 2020s. Toyota has revealed plans to unveil its own experimental Level 4 car, called the Urban Teammate, at the 2020 Summer Olympics in Tokyo, a highly restricted environment.[31] B.   DoT Releases Updated Guidance: “Preparing for the Future of Transportation: Automated Vehicles 3.0” As outlined in our Artificial Intelligence and Autonomous Systems Legal Update (3Q18), the absence of a uniform federal regulatory regime in the U.S. means that companies testing and manufacturing autonomous vehicles (“AVs”) must comb through a complex patchwork of state rules that exist with limited federal oversight. The continued absence of federal regulation renders the U.S. Department of Transportation’s (“DoT”) informal guidance increasingly important to companies operating in this space.  On October 3, the DoT’s National Highway Traffic Safety Administration (“NHTSA”) released its most significant 2018 road map on the design, testing and deployment of driverless vehicles: “Preparing for the Future of Transportation: Automated Vehicles 3.0” (commonly referred to as “AV 3.0”).[32] While one of its core principles is to promote consistency among federal, state and local requirements in order to advance the integration of AVs in the national transportation system, the guidance also reinforces that federal officials are eager to take the wheel on safety standards and that any state laws on automated vehicle design and performance will be preempted.  State, local and tribal governments will be responsible for licensing human drivers, registering motor vehicles, enacting and enforcing traffic laws, conducting safety inspections, and regulating motor vehicle insurance and liability.  The guidance includes several best practices for states on adapting their policies and procedures for licensing and registering automated vehicles, assessing the readiness of their roads, and training their transportation workforces for the arrival of automated vehicles. As in the previous iterations of the DoT’s guidance, the thread running throughout AV 3.0 is the commitment to voluntary, consensus-based technical standards and the removal of unnecessary barriers to the innovation of AV technologies.  AV 3.0 “builds upon — but does not replace” the DOT’s last AV guidelines, “Automated Driving Systems 2.0: A Vision for Safety,” which were released on September 12, 2017.[33]  AV 3.0 expands the applicability of the DOT’s AV guidance to include commercial vehicles, on-road transit and the roadways on which they operate.  In parallel, various other DOT agencies are gathering input from industry stakeholders on what sort of infrastructure improvements and strategic planning will be required to accommodate and coordinate autonomous vehicles operating in a variety of different modes of transportation. Despite the lack of compliance requirements or enforcement mechanisms within the guidance, the DoT has proposed modernized regulations that specifically recognize that the “driver” and “operator” of a vehicle may include an automated system,[34] and highlighted that it would prepare proactively for automation through pilot programs, investments and other means, announcing a national pilot program to test and deploy autonomous vehicles.[35] However, NHTSA will not abandon the traditional self-certification scheme, meaning that manufacturers can continue to self-certify the compliance of their products by reference to applicable standards.  Moreover, NHTSA will issue a proposed rule seeking comment on changes to streamline and modernize its procedures for processing applications for exemptions from the Federal Motor Vehicle Safety Standards (“FMVSS”). AV 3.0 highlights the importance of cybersecurity and data privacy as AV technologies become increasingly integrated, and encourages a coordinated effort across the government and private sectors for a unified approach to cyber incidents and information sharing.  However, the guidance contains no firm rules on data sharing and privacy, leaving it up to state and local governments to determine standards and resources to counteract cybersecurity threats.[36] IV.   Rising Concerns for AI’s Potential to Create Bias and Discrimination One of AI’s most salient features is its ability to take noisy data sets and provide the targeted results by using criteria often beyond our anticipation or easy comprehension.  As noted above, there is a growing consensus that AI systems perpetuate and amplify bias, and that computational methods are not inherently neutral and objective.[37]  As AI models are deployed into politics, commerce and broader society, we face unprecedented challenges in understanding their disproportionate impacts and how to apply our existing ethical framework—concepts such as transparency, inequality and fairness—to apparently dispassionate technologies. While discussions about the ethics of AI remain largely in the policy realm, increasing public awareness has led to rising concerns among lawmakers for AI’s potential for create bias and discrimination, while companies making use of AI and machine learning systems have responded to increasing scrutiny with regard to the risks of inadvertently creating discriminatory processes and outcomes.[38] The AI Now Institute recently observed the potential for a number of ethics and bias concerns that AI stakeholders should be aware of.  In the group’s recent AI Now Report 2018, the AI Now Institute drew attention to AI’s potential to create bias and called for a renewed focus on the state of equity and diversity in the AI field as well as increased accountability of AI firms as a potential solution to these issues.[39]  Companies making use of AI should anticipate that lawmakers may agree and be willing to scrutinize AI systems for “algorithmic fairness.”  Indeed, in December 2018, Members of the House Judiciary Committee questioned Google CEO Sundar Pichai—albeit with varying degrees of technical accuracy—about the potential for bias in search results.[40]  AI stakeholders would be remiss to not take note, and consider approaches for eliminating or mitigating potential bias beginning early in the design process and throughout the life cycle of products and services. V.   Use of AI in Criminal Proceedings The potential use and abuse of AI in the judicial context is palpable, particularly as the use of forensic and risk assessment software in criminal proceedings is on the rise.  Transparency appears to be a key due process issue, as criminal defendants urge courts to permit their review of such software, yet courts have so far been reluctant to hear challenges on these grounds. In 2017, the United States Supreme Court declined to hear a case coming out of the Wisconsin Supreme Court[41] which challenged the use of algorithmic risk assessment technology in criminal sentencing due to concerns that the software harbored gender biases and was disclosed to neither the court nor the defendant.  The broader debate over the use of such software, however, was recently revived by two prominent law firm partners who held a mock trial at New York University School of Law based on the case.  The mock trial centered on the due process concerns that arise from lack of judicial and defendant access to and scrutiny of the underlying source code of risk assessment tools—needed to determine if the source code incorporate flaws or biases—due to the software’s proprietary nature.[42]  In civil cases, a party may be compelled to share a proprietary algorithm pursuant to a protective order.  But in a criminal case, it may be too costly for a defendant to seek such review.  (And, in Loomis, the court denied the defendant’s request to access the algorithm.). A related issue was presented to the Ninth Circuit in United States v. Joseph Nguyen, a case in which a defendant was connected to a certain IP address, and the government argued that it identified and isolated the IP address as the sole source for a download of illegal material using a forensic software program.[43]  The defendant sought to review the evidence against him, including the forensic software’s source code, in order to challenge the prosecution’s claim.  In an amicus brief, the Electronic Frontier Foundation, a civil liberties organization focusing on digital rights, urged that “[w]here the government seeks to use evidence generated by forensic software owned by a third party, disclosure of the software’s source code is required by the Constitution and by the strong public interest in the integrity of court proceedings.”[44]  The Ninth Circuit, however, denied the defendant’s petition for rehearing en banc.[45] While courts, so far, appear reluctant to require the production of proprietary source code or other trade secret information in the criminal context, it still behooves companies providing products and services in highly-visible and important contexts, such as governmental law enforcement, to consider what information they would be willing to provide to ensure sufficient operational transparency and accountability to garner and maintain public trust. VI.   Legal Technology The legal industry continues to expand its use of AI technology to assist it with various tasks.  For example, corporate tax departments are beginning to use AI to sift large volumes of contracts to determine if an entity qualifies for research and development tax credits as well as to analyze court decisions to predict potential outcomes of litigation.  Indeed, some of the large accounting firms in the U.S. have reported that they expect to make large investments in AI in connection with the tax function budget.[46] The USPTO entered the AI sector in late 2018 when it began to develop AI tools to improve the agency’s search capabilities and to make the patent prosecution process more efficient.[47]  When a patent application is examined, the patent examiners must search through a “complex and vast corpus of human knowledge.”  USPTO hopes that a system that incorporates AI will help expedite patent examinations by allowing examiners to review applications more quickly and effectively, as well as to fill in any gaps that might exist with regard to prior art searches.  In November 2018, the agency unveiled a beta test of new software called “Unity” which incorporates AI to help patent examiners with prior art searches and announced it continues to work on other initiatives designed to streamline the patent prosecution process.[48]     [1]    See, e.g., Paul Nemitz, Constitutional Democracy and Technology in the Age and Artificial Intelligence, Phil. Trans. R. Soc. A 376: 20180089 (Nov. 15, 2018), available at https://royalsocietypublishing.org/doi/full/10.1098/rsta.2018.0089.     [2]    See, e.g., the German government’s new AI strategy, published in November 2018, which promises an investment of €3 billion before 2025 with the aim of promoting AI research, protecting data privacy and digitalizing businesses (https://www.bundesregierung.de/breg-en/chancellor/ai-a-brand-for-germany-1551432); and the European Commission’s new Draft Ethics Guidelines For Trustworthy Artificial Intelligence (Dec. 18, 2019), available at https://ec.europa.eu/digital-single-market/en/news/draft-ethics-guidelines-trustworthy-ai.     [3]    Louis Columbus, Microsoft Leads The AI Patent Race Going Into 2019, Forbes (Jan. 6, 2019), available at https://www.forbes.com/sites/louiscolumbus/2019/01/06/microsoft-leads-the-ai-patent-race-going-into-2019/#765459af44de; Jeff John Roberts, IBM Tops 2018 Patent List as A.I. and Quantum Computing Gain Prominence, Fortune (Jan. 8, 2019), available at http://fortune.com/2019/01/07/ibm-tops-2018-patent-list-as-ai-and-quantum-computing-gain-prominence/.     [4]    See Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).     [5]    James Fussell, Alice Must Be Revisited In View Of Emerging Technologies, Law360 (Dec. 5, 2018), available at https://www.law360.com/articles/1107964/alice-must-be-revisited-in-view-of-emerging-technologies.     [6]    See id. (noting that although the number of AI patent applications has been growing dramatically in the past several years in the United States, the growth trajectory in Chinese applications spiked in 2014, the year of the Supreme Court’s Alice decision, and for the first time in 2016 surpassed U.S. filings).     [7]    Malathi Nayak, Google, Amazon Invited to Talk Patent Eligibility With Lawmakers, Bloomberg Law (Dec. 4, 2018), available at https://news.bloomberglaw.com/ip-law/google-amazon-invited-to-talk-patent-eligibility-with-lawmakers-1; one example of potential legislation is a bill introduced in June 2018 by Rep. Thomas Massie, R-Ky., and Marcy Kaptur, D-Ohio, which would amend Section 101 to “effectively abrogate[] Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) and its predecessors to ensure that life sciences discoveries, computer software, and similar inventions and discoveries are patentable, and that those patents are enforceable.” (H.R. 6264 (Sec. 7(b)(3))).     [8]    Eur. Patent Office, Guidelines for Examination in the European Patent Office (Nov. 2018), G-II, 3.3.1, available at https://www.epo.org/law-practice/legal-texts/html/guidelines2018/e/g_ii_3_3_1.htm.     [9]    Patrick Wingrove, EPO AI Guidelines “Give Clarity and Direction,” Say In-House Counsel, Managing Intellectual Property (Jan. 15, 2019), available at http://www.managingip.com/Blog/3853828/EPO-AI-guidelines-give-clarity-and-direction-say-in-house-counsel.html.     [10]    H.R. 4625.     [11]    In November 2018, the Little Hoover Commission—a bipartisan, independent California state oversight agency—also published a comprehensive report analyzing the economic impact of AI technologies on the state of California between now and 2030.  The report “Artificial Intelligence: A Roadmap for California” calls for immediate action by the governor and legislature to prepare strategically for and take advantage of AI, while minimizing its risks.  Among the Commission’s recommendations are the creation of an AI special advisor in state government, an AI commission and the promotion of apprenticeships and training opportunities for employees whose jobs may be displaced by AI technologies.  See Little Hoover Comm’n, “Artificial Intelligence: A Roadmap for California” (Nov. 2018), available at https://lhc.ca.gov/sites/lhc.ca.gov/files/Reports/245/Report245.pdf.     [12]    Emily Field, FDA Issues Proposed Rule For Novel Medical Devices, Law360 (Dec. 4, 2018), available at https://www.law360.com/articles/1107804/fda-issues-proposed-rule-for-novel-medical-devices     [13]    FDA Approves Marketing For First AI Device for Diabetic Retinopathy Detection, EyeWire News (Apr. 11, 2018), available at https://eyewire.news/articles/fda-permits-marketing-of-ai-based-device-to-detect-certain-diabetes-related-eye-problems/     [14]    Vidya Kauri, AI Helping IRS Detect Tax Crimes With Fewer Resources, Law360 (Dec. 5, 2018), available at https://www.law360.com/articles/1108419/ai-helping-irs-detect-tax-crimes-with-fewer-resources.     [15]    Siri Bulusu, Palantir Deal May Make IRS ‘Big Brother-ish’ While Chasing Cheats, Bloomberg Tax, (Nov. 15, 2018), available at https://news.bloombergtax.com/daily-tax-report/palantir-deal-may-make-irs-big-brother-ish-while-chasing-cheats?context=article-related.  Indeed, in 2018, the IRS Criminal Investigation division collected 1.67 petabytes—or 1 million gigabytes of data.  According to the IRS’ Strategy Plan for FY 2018-2022 (http://src.bna.com/C54), the agency is handling an influx of data that is 100 times larger than what it received a decade ago.     [16]    Vidya Kauri, AI Helping IRS Detect Tax Crimes With Fewer Resources, Law360 (Dec. 5, 2018), available at https://www.law360.com/articles/1108419/ai-helping-irs-detect-tax-crimes-with-fewer-resources.     [17]    Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Financial Crimes Enforcement Network, National Credit Union Administration, and Office of the Comptroller of the Currency, Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing (Dec. 3, 2018), available at https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20181203a1.pdf.     [18]    Id. at 1.     [19]    Id.     [20]    Id. at 2.     [21]    Id.     [22]    Id.     [23]    Fed. Trade Comm’n, Hearings on Competition and Consumer Protection in the 21st Century, available at https://www.ftc.gov/policy/hearings-competition-consumer-protection.     [24]    Kestenbaum, Reingold & Bradshaw, What We Heard At The FTC Hearings: Days 12 And 13, Law360 (Nov. 28, 2018), available at https://www.law360.com/articles/1105676/what-we-heard-at-the-ftc-hearings-days-12-and-13; see also infra at IV.     [25]    Id.     [26]    Jeff Green, Driverless-Car Global Market Seen Reaching $42 Billion by 2025, Bloomberg, Jan. 8, 2015, available at https://www.bloomberg.com/news/articles/2015-01-08/driverless-car-global-market-seen-reaching-42-billion-by-2025.     [27]    Philip E. Ross, In 2019, We’ll Have Taxis Without Drivers—or Steering Wheels, IEEE Spectrum (Jan. 3, 2019), available at https://spectrum.ieee.org/transportation/self-driving/in-2019-well-have-taxis-without-driversor-steering-wheels (On the SAE autonomy scale, a Level 0 car has no autonomous capability or driver aids, while a Level 5 car is fully autonomous, to the point that manual controls are unnecessary.  Level 3 cars allow human drivers to take their eyes off the road and their hands off the wheel in certain situations, but still require humans to take over at other times and when prompted.).     [28]    See, e.g., the MIT Moral Machine experiment, an online platform by the Massachusetts Institute of Technology where MIT Media Lab researchers publish results from its global survey on autonomous driving ethics.  The survey generated the largest dataset on public attitudes in artificial intelligence ethics—asking questions such as whether it is better, for example, to kill two passengers or five pedestrians.  The experiment is available at http://moralmachine.mit.edu/.     [29]    Audi Technology Portal, World Debut For Highly Automated Driving: The Audi AI Traffic Jam Pilot, available at https://www.audi-technology-portal.de/en/electrics-electronics/driver-assistant-systems/audi-a8-audi-ai-traffic-jam-pilot.     [30]    Stephen Edelstein, 2019 Audi A8 Won’t Get Traffic Jam Pilot Driver-Assist Tech In The U.S., Digital Trends (May 16, 2018), available at https://www.digitaltrends.com/cars/2019-audi-a8-traffic-jam-pilot-not-coming-to-us/.     [31]    Supra, n. 25.     [32]    U.S. Dept. of Transp., Preparing for the Future of Transportation: Automated Vehicles 3.0 (September 2017), available at https://www.transportation.gov/sites/dot.gov/files/docs/policy-initiatives/automated-vehicles/320711/preparing-future-transportation-automated-vehicle-30.pdf; see also https://www.law360.com/articles/1113438/how-av-3-0-changed-the-autonomous-vehicle-game-in-2018     [33]    For more information, please see our September 2017 Client Alert on Accelerating Progress Toward a Long-Awaited Federal Regulatory Framework for Autonomous Vehicles in the United States.     [34]    AV 3.0 recognizes that certain current FMVSS were drafted with human drivers in mind (in that they include requirements for a steering wheel, brakes, mirrors, etc.), creating an unintended barrier to the innovation of AV technologies, and notes that NHTSA will issue a proposed rule seeking comment on proposed changes to certain FMVSS to accommodate AV technology innovation.  FMVSS will also be tweaked to be “more flexible and responsive, technology-neutral, and performance-oriented to accommodate rapid technological innovation.”     [35]    The “Pilot Program for Collaborative Research on Motor Vehicles With High or Full Driving Automation” is designed to facilitate, monitor and learn from the testing and development of AV technology and prepare for the impact of highly automated and autonomous vehicles on the roads under a variety of driving conditions.  The comment period lasted through December 10, 2018, but the timing on a final decision regarding the pilot program remains open.  NHTSA intends to rely on its “Special Exemption” authority in 49 U.S.C. § 30114 to provide exemptions for manufacturers seeking to engage in research, testing and demonstration projects.     [36]    Linda Chiem, 3 Takeaways From DOT’s New Automated Vehicles Policy, Law360 (Oct. 10, 2018), available at https://www.law360.com/articles/1090829/3-takeaways-from-dot-s-new-automated-vehicles-policy.     [37]    Meredith Whittaker, Et Al., AI Now Report 2018, AI Now Institute, 2.2.1 (Dec., 2018), available at https://ainowinstitute.org/AI_Now_2018_Report.pdf.     [38]    The AI Now Report 2018 notes that several technology companies—including IBM, Google, Microsoft and Facebook—have begun operationalizing fairness definitions, metrics, and tools.  See supra, n. 35 at 2.2.     [39]    Id.     [40]    Russell Brandom, Congress Thinks Google Has a Bias Problem—Does It?, The Verge (Dec. 12, 2018), available at https://www.theverge.com/2018/12/12/18136619/google-bias-sundar-pichai-google-hearing.     [41]    State v. Loomis, 881 N.W.2d 749 (Wis. 2016).     [42]    Natalie Rodriguez, Loomis Look-Back Previews AI Sentencing Fights to Come, Law360 (Dec. 9, 2018), available at https://www.law360.com/articles/1108727/loomis-look-back-previews-ai-sentencing-fights-to-come.     [43]    U.S.A. v. Joseph Nguyen, No. 17-50062 (9th Cir.).     [44]    Id. at 2.     [45]    Order, U.S.A. v. Joseph Nguyen, No. 17-50062 (9th Cir. Dec. 20, 2018).     [46]    Vidya Kauri, Artificial Intelligence To Revolutionize Tax Planning, Law360 (Sept. 18, 2018), available at https://www.law360.com/articles/1083886/artificial-intelligence-to-revolutionize-tax-planning.     [47]    Suzanne Monyak, USPTO Seeks Help Building AI For Faster Prior Art Searches, Law360 (Sept. 17, 2018), available at https://www.law360.com/articles/1083487/uspto-seeks-help-building-ai-for-faster-prior-art-searches.     [48]    Jimmy Hoover, USPTO Testing AI Software To Help Examiners ID Prior Art, Law360 (Nov. 15, 2018), available at https://www.law360.com/articles/1095703/uspto-testing-ai-software-to-help-examiners-id-prior-art. The following Gibson Dunn lawyers prepared this client update: H. Mark Lyon, Frances A. Waldmann, Claudia M. Barrett, Tony Bedel and Haley S. Morrisson. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or any of the following lawyers in the firm’s Artificial Intelligence and Automated Systems Group: H. Mark Lyon – Chair, Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Lisa A. Fontenot – Palo Alto (+650-849-5327, lfontenot@gibsondunn.com) Frances A. Waldmann – Los Angeles (+1 213-229-7914,fwaldmann@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 16, 2019 |
2018 Trade Secrets Litigation Roundup

Click for PDF 2018 marked an exciting year of trade secret developments and demonstrated the federal government’s increased involvement in protecting trade secrets, a trend expected to continue in 2019. Courts continued to construe the Defend Trade Secrets Act (DTSA)—including first impression rulings under the whistleblower and attorneys’ fees provisions—and juries doled out significant damages awards in trade secrets cases. Massachusetts passed a new trade secrets bill. The Trump administration imposed tariffs on China in response to the alleged theft of trade secrets, and also charged nine Iranian nationals for a series of coordinated cyber intrusions. Jason Schwartz, Greta Williams, Mia Donnelly and Aaron Smith highlight these and other notable trade secrets developments from 2018 in their article “2018 Trade Secrets Litigation Roundup” published by BBNA. Reproduced with permission, January 15, 2019, from Copyright 2019 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com.  Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update.  Please contact the Gibson Dunn lawyer with whom you usually work or the following authors in the firm’s Washington, D.C. office: Jason C. Schwartz (+1 202-955-8242, jschwartz@gibsondunn.com) Greta B. Williams (+1 202-887-3745, gbwilliams@gibsondunn.com) Mia C. Donnelly (+1 202-887-3617, mdonnelly@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Labor and Employment Group: Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com) Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-557-8183, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-2490, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3360, mreiter@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Michael Sitzman – San Francisco (+1 415-393-8200, msitzman@gibsondunn.com) Privacy, Cybersecurity and Consumer Protection Group: Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 11, 2019 |
The Impact of the New USPTO Eligibility Guidelines on Artificial Intelligence-related Inventions

Click for PDF On January 4, 2019, the USPTO announced updated guidance to help clarify the process that examiners should undertake when evaluating whether a pending claim is directed to an abstract idea under the Supreme Court’s two-step Alice test and thus not eligible for patent protection under 35 U.S.C. § 101.  Specifically, for determining whether a claim recites an abstract idea, the USPTO defined three categories by extracting and synthesizing concepts identified by the courts:  (1) mathematical concepts, (2) certain methods of organizing human activity, and (3) mental processes.  If the examiner determines that the claim falls into one of these three categories, the examiner will continue to step two.  If not, the  claim should typically not be treated by the examiner as reciting an abstract idea, who should skip step two and instead deem the claim eligible under Section 101 for patenting.[1] As to step two, the USPTO split the inquiry into two separate inquiries for the examiner to undertake if the claim is found to recite an abstract idea.  First, the examiner should determine whether the abstract idea embodied in the claim is integrated into a practical application?  For this inquiry, the examiner looks to whether the claim, as a whole, integrates the abstract idea into a practical application that imposes “meaningful limits,” such that the claim is more than trying to monopolize the abstract idea.  For example, a claim may be a practical application if an additional element reflects an improvement in the functioning of a computer, or an improvement to other technology. Second, if the abstract idea underlying the claim is not integrated into a practical application, does the claim provide an inventive concept?  The USPTO explained that the Federal Circuit has held claims eligible when the additional elements recited in the claims provide “significantly more” than the abstract idea itself.  For example, a claim may be patent eligible if a specific limitation (or combination of limitations) is not well-understood, routine, conventional activity in the field. In essence, the USPTO’s guidance turns the Alice test into a three part test: 1.       Does the claim recite one of the categories the USPTO considers an abstract idea? 2.       If so: a.       is the abstract idea integrated into a practical application, or b.       does the claim provide an inventive concept? What is the Impact of the Guidance on AI-related Inventions? While it obviously remains to be seen what, if any, impact these new guidelines will have on the issuance of software patents generally, and artificial intelligence patents more specifically,  the key question going forward is whether the three categorical exceptions identified by the USPTO will be the exceptions that swallow the rule.  On one hand, by stating that rejections of artificial intelligence claims as abstract ideas should typically only arise if the claim falls into one of three enumerated categories, the USPTO does seem to be providing a more defined path for drafting claims that will avoid issues of patent eligibility.  If nothing else, at least the new guidelines add clarity into how examiners will apply Section 101 rejections and may give applicants a roadmap to overcoming any such rejection.  However, on the other hand, if the categorical exceptions such as the “mathematical concept” or “mental processes” categories are broadly construed by examiners in their application of the guidelines, many AI-related inventions may still be subject to eligibility rejections under Alice. As a result, at least until further experience with the manner in which examiners implement this guidance going forward, the eligibility of a software/AI-related claims likely still will come down to artful claim drafting.  However, there are a few additional takeaways from the guidelines that may be helpful to keep in mind specific to AI patents. Categories of Abstract Ideas Out of the USPTO’s three categories of abstract ideas, the one that, on its face, is most applicable to artificial intelligence is the mathematical concepts grouping.  After all, on some level, all software and AI are made up of a series of mathematical equations.  The USPTO guidance defines mathematical concepts as “mathematical relationships, mathematical formulas or equations, [and] mathematical calculations.”  This definition of mathematical concept is actually fairly narrow.  It does not seem to encompass algorithms more generally, and focuses instead on the actual formulas and calculations.  As a result, while caution is still warranted, by drafting a claim without including formulas and calculations, but instead focusing more on the structure of the algorithm, a patentee may be able to circumvent rejections due to falling into the mathematical concepts category. Drafting AI claims at too high a level can also cause the claims to implicate the USPTO’s other two categories.  The USPTO’s mental processes category—”concepts performed in the mind (including an observation, evaluation, judgment, opinion)”—may be implicated if AI claims are drafted too broadly.  Many of the applications for which we use AI are for concepts that would normally be performed in the human mind, that require observation, evaluation, judgment and opinion.  For example, an autonomous vehicle requires AI that observes obstacles, evaluates risks, and judges what to do next.  Automating human thought and judgment, such as in a car, may fall into this category if the claims are drafted by focusing too much on the function or result, and not enough on the structure or specifics of operation of the claimed invention. The third category, methods of organizing human activity, is defined by the guidance as “fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions(including agreements in the form of contract; legal obligations, advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions).”  Certain applications of AI may also implicate this category.  For example,  in-home assistants with voice recognition software may follow certain rules or instructions depending on the commands they are given.  As such, a broadly drafted claim covering a response to a verbal command may implicate this category. Step 2A:  Practical Application Even if a claim falls into one of the categories of abstract ideas identified in the guidance, the USPTO explains that practical applications of the abstract idea may still be patentable.  For the purposes of AI-related inventions, two examples in the USPTO’s guidelines are particularly important. First, the USPTO discloses that a claim may be eligible if “an additional element reflects an improvement in the functioning of a computer, or an improvement to other technology.”  The USPTO gives the example of modifying a hyperlink to dynamically produce a dual-source hybrid webpage.  Although it is unclear how this consideration will be applied in practice, this seems like an important consideration for AI-related claims.  AI-related software that improves the functioning of a computer, such as by optimizing multicore processors or voice recognition, may have a better chance of being eligible, if the claims are drafted in such a way as to highlight the specific steps or structure that provide this benefit and the specification clearly delineates those benefits.  It therefore behooves the applicant to specifically claim improvements to technology for certain inventions backed up with specification descriptions.  In addition, patent applicants should be very careful in describing any feature as conventional, even if that means providing a more robust and detailed description in the application.  Often, patent applicants describe components as conventional as a short-cut to avoid longer specifications.  The differences between what the AI is doing in the invention as compared to past uses should be described in detail and its impact on how that difference changes computer performance should be clear. Second, the USPTO explains that a claim may be eligible if “an additional element implements a judicial exception with, or uses a judicial exception in conjunction with, a particular machine or manufacture that is integral to the claim.”  The USPTO uses the example of a machine that uses gravity to improve speed.  This consideration seems to imply that software interacting with, or utilizing, hardware as a key element of the claimed invention will have an easier time being found eligible.  As such, applicants may choose to draft claims that tie their AI-related invention to specifically-required hardware to help show eligibility and include robust descriptions of that tie in the patent specification. Step 2B: Inventive Concept Finally, the “third” prong of the USPTO’s guidelines focuses on the “inventive concept” of the alleged invention.  The USPTO explains that the examiner should consider whether the claim “adds a specific limitation or combination of limitations that are not well-understood, routine, conventional activity in the field, which is indicative that  an inventive concept may be present.”  The impact of this inventive concept inquiry on AI-related claims is somewhat less clear because it is highly dependent on what the examiner considers conventional in the field of AI, or perhaps within specific types of AI-related inventions—e.g., there may well be differences based on application, such as facial recognition versus voice recognition versus autonomous vehicles.  In some cases, it may be possible to argue that particular limitations of the claim are not conventional steps or structures, and claim drafters should keep an eye out for ways to include non-conventional steps and structures in AI-related claims.  However, an applicant faced with a rejection based on this third prong may simply want to consider amending the claim to specifically recite an improvement to a technology or use of a machine to show there is a practical application, as many such inventions are often constructed based on otherwise conventional techniques. In sum, the clarity and specific examples provided in the USPTO’s guidelines may arm applicants for AI-related inventions with a roadmap of how to avoid or overcome Section 101 rejections, such as by avoiding mathematical formulas or tying the claim to a specific improvement or hardware.  Until we have experience with how examiners interpret the guidelines, however, applicants should continue to exercise caution and thoughtful claim drafting. [1] The guidance does note that, in rare cases, an examiner may determine that claims that fall outside of the three identified categories nevertheless recite an abstract idea.  In such cases, the examiner must further justify and explain the reasons for finding the claim to recite an abstract idea, and such determinations will require approval by the Technology Center Director. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors: Artificial Intelligence and Automated Systems Group: H. Mark Lyon – Chair, Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Brian M. Buroker– Washington, D.C. (+1 202-955-8541, bburoker@gibsondunn.com) Ryan K. Iwahashi – Palo Alto (+1 650-849-5367, riwahashi@gibsondunn.com) Please also feel free to contact any of the following practice group leaders: Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 11, 2019 |
2018 Year-End German Law Update

Click for PDF Looking back at the past year’s cacophony of voices in a world trying to negotiate a new balance of powers, it appeared that Germany was disturbingly silent, on both the global and European stage. Instead of helping shape the new global agenda that is in the making, German politics focused on sorting out the vacuum created by a Federal election result which left no clear winner other than a newly formed right wing nationalist populist party mostly comprised of so called Wutbürger (the new prong for “citizens in anger”) that managed to attract 12.6 % of the vote to become the third strongest party in the German Federal Parliament. The relaunching of the Grand-Coalition in March after months of agonizing coalition talks was followed by a bumpy start leading into another session of federal state elections in Bavaria and Hesse that created more distraction. When normal business was finally resumed in November, a year had passed by with few meaningful initiatives formed or significant business accomplished. In short, while the world was spinning, Germany allowed itself a year’s time-out from international affairs. The result is reflected in this year’s update, where the most meaningful legal developments were either triggered by European initiatives, such as the General Data Protection Regulation (“GDPR”) (see below section 4.1) or the New Transparency Rules for Listed German Companies (see below section 1.2), or as a result of landmark rulings of German or international higher and supreme courts (see below Corporate M&A sections 1.1 and 1.4; Tax – sections 2.1 and 2.2 and Labor and Employment – section 4.2). In fairness, shortly before the winter break at least a few other legal statutes have been rushed through parliament that are also covered by this update. Of the changes that are likely to have the most profound impact on the corporate world, as well as on the individual lives of the currently more than 500 million inhabitants of the EU-28, the GDPR, in our view, walks away with the first prize. The GDPR has created a unified legal system with bold concepts and strong mechanisms to protect individual rights to one’s personal data, combined with hefty fines in case of the violation of its rules. As such, the GDPR stands out as a glowing example for the EU’s aspiration to protect the civic rights of its citizens, but also has the potential to create a major exposure for EU-based companies processing and handling data globally, as well as for non EU-based companies doing business in Europe. On a more strategic scale, the GDPR also creates a challenge for Europe in the global race for supremacy in a AI-driven world fueled by unrestricted access to data – the gold of the digital age. The German government could not resist infection with the virus called protectionism, this time around coming in the form of greater scrutiny imposed on foreign direct investments into German companies being considered as “strategic” or “sensitive” (see below section 1.3 – Germany Tightens Rules on Foreign Takeovers Even Further). Protecting sensitive industries from “unwanted” foreign investors, at first glance, sounds like a laudable cause. However, for a country like Germany that derives most of its wealth and success from exporting its ideas, products and services, a more liberal approach to foreign investments would seem to be more appropriate, and it remains to be seen how the new rules will be enforced in practice going forward. The remarkable success of the German economy over the last twenty five years had its foundation in the abandoning of protectionism, the creation of an almost global market place for German products, and an increasing global adoption of the rule of law. All these building blocks of the recent German economic success have been under severe attack in the last year. This is definitely not the time for Germany to let another year go by idly. We use this opportunity to thank you for your trust and confidence in our ability to support you in your most complicated and important business decisions and to help you form your views and strategies to deal with sophisticated German legal issues. Without our daily interaction with your real-world questions and tasks, our expertise would be missing the focus and color to draw an accurate picture of the multifaceted world we are living in. In this respect, we thank you for making us better lawyers – every day. ________________________ TABLE OF CONTENTS 1.      Corporate, M&A 2.      Tax 3.      Financing and Restructuring 4.      Labor and Employment 5.      Real Estate 6.      Compliance 7.      Antitrust and Merger Control 8.      Litigation 9.      IP & Technology 10.    International Trade, Sanctions and Export Controls ________________________ 1.       Corporate, M&A 1.1       Further Development regarding D&O Liability of the Supervisory Board in a German Stock Corporation In its famous “ARAG/Garmenbeck”-decision in 1997, the German Federal Supreme Court (Bundesgerichtshof – BGH) first established the obligation of the supervisory board of a German Stock Corporation (Aktiengesellschaft) to pursue the company’s D&O liability claims in the name of the company against its own management board after having examined the existence and enforceability of such claims. Given the very limited discretion the court has granted to the supervisory board not to bring such a claim and the supervisory board’s own liability arising from inactivity, the number of claims brought by companies against their (former) management board members has risen significantly since this decision. In its recent decision dated September 18, 2018, the BGH ruled on the related follow-up question about when the statute of limitations should start to run with respect to compensation claims brought by the company against a supervisory board member who has failed to pursue the company’s D&O liability claims against the board of management within the statutory limitation period. The BGH clarified that the statute of limitation applicable to the company’s compensation claims against the inactive supervisory board member (namely ten years in case of a publicly listed company, otherwise five years) should not begin to run until the company’s compensation claims against the management board member have become time-barred themselves. With that decision, the court adopts the view that in cases of inactivity, the period of limitations should not start to run until the last chance for the filing of an underlying claim has passed. In addition, the BGH in its decision confirmed the supervisory board’s obligation to also pursue the company’s claims against the board of management in cases where the management board member’s misconduct is linked to the supervisory board’s own misconduct (e.g. through a violation of supervisory duties). Even in cases where the pursuit of claims against the board of management would force the supervisory board to disclose its own misconduct, such “self-incrimination” does not release the supervisory board from its duty to pursue the claims given the preponderance of the company’s interests in an effective supervisory board, the court reasoned. In practice, the recent decision will result in a significant extension of the D&O liability of supervisory board members. Against that backdrop, supervisory board members are well advised to examine the existence of the company’s compensation claims against the board of management in a timely fashion and to pursue the filing of such claims, if any, as soon as possible. If the board of management’s misconduct is linked to parallel misconduct of the supervisory board itself, the relevant supervisory board member – if not exceptionally released from pursuing such claim and depending on the relevant facts and circumstances – often finds her- or himself in a conflict of interest arising from such self-incrimination in connection with the pursuit of the claims. In such a situation, the supervisory board member might consider resigning from office in order to avoid a conflict of interest arising from such self-incrimination in connection with the pursuit of the claims. Back to Top 1.2       Upcoming New Transparency Rules for Listed German Companies as well as Institutional Investors, Asset Managers and Proxy Advisors In mid-October 2018, the German Federal Ministry of Justice finally presented the long-awaited draft for an act implementing the revised European Shareholders’ Rights Directive (Directive (EU) 2017/828). The Directive aims to encourage long-term shareholder engagement by facilitating the communication between shareholders and companies, in particular across borders, and will need to be implemented into German law by June 10, 2019 at the latest. The new rules primarily target listed German companies and provide some major changes with respect to the “say on pay” provisions, as well as additional approval and disclosure requirements for related party transactions, the transmission of information between a stock corporation and its shareholders and additional transparency and reporting requirements for institutional investors, asset managers and proxy advisors. “Say on pay” on directors’ remuneration: remuneration policy and remuneration report Under the current law, the shareholders determine the remuneration of the supervisory board members at a shareholder meeting, whereas the remuneration of the management board members is decided by the supervisory board. The law only provides for the possibility of an additional shareholder vote on the management board members’ remuneration if such vote is put on the agenda by the management and supervisory boards in their sole discretion. Even then, such vote has no legal effects whatsoever (“voluntary say on pay”). In the future, shareholders of German listed companies will have two options. First, the supervisory board will have to prepare a detailed remuneration policy for the management board, which must be submitted to the shareholders if there are major changes to the remuneration, and in any event at least once every four years (“mandatory say on pay”). That said, the result of the vote on the policy will continue to remain only advisory. However, if the supervisory board adopts a remuneration policy that has been rejected by the shareholders, it will then be required to submit a reviewed (not necessarily revised) remuneration policy to the shareholders at the next shareholders’ meeting. With respect to the remuneration of supervisory board members, the new rules require a shareholders vote at least once every four years. Second, at the annual shareholders’ meeting the shareholders will vote ex post on the remuneration report (which is also reviewed by the statutory auditor) which contains the remuneration granted to the present and former members of the management board and the supervisory board in the past financial year. Again, the shareholders’ vote, however, will only be advisory. Both the remuneration report including the audit report, as well as the remuneration policy will have to be made public on the company’s website for at least ten years. Related party transactions German stock corporation law already provides for various safeguard mechanisms to protect minority shareholders in cases of transactions with major shareholders or other related parties (e.g. the capital maintenance rules and the laws relating to groups of companies). In the future, in the case of listed companies, these mechanisms will be supplemented by a detailed set of approval and transparency requirements for transactions between the company and related parties. Material transactions exceeding certain thresholds will require prior supervisory board approval. A rejection by the supervisory board can be overcome by shareholder vote. Furthermore, a listed company must publicly disclose any such material related party transaction, without undue delay over media providing for a Europe-wide distribution. Identification of shareholders and facilitation of the exercise of shareholders’ rights Listed companies will have the right to request information on the identity of their shareholders, including the name and both a postal and electronic address, from depositary banks, thus allowing for a direct communication line, also with respect to bearer shares (“know-your-shareholder”). Furthermore, depositary banks and other intermediaries will be required to pass on important information from the company to the shareholders and vice versa, e.g. with respect to voting in shareholders’ meetings and the exercise of subscription rights. Where there is more than one intermediary in a chain, the intermediaries are required to pass on the respective information within the chain. In addition, companies will be required to confirm the votes cast at the request of the shareholders thus enabling them to be certain that their votes have been effectively cast, including in particular across borders. Transparency requirements for institutional investors, asset managers and proxy advisors German domestic institutional investors and asset managers with Germany as their home member state (as defined in the applicable sector-specific EU law) will be required (i) to disclose their engagement policy, including how they monitor, influence and communicate with the investee companies, exercise shareholders’ rights and manage actual and potential conflicts of interests, and (ii) to report annually on the implementation of their engagement policy and disclose how they have cast their votes in the general meetings of material investee companies. Institutional investors will further have to disclose (iii) consistency between the key elements of their investment strategy with the profile and duration of their liabilities and how they contribute to the medium to long-term performance of their assets, and, (iv) if asset managers are involved, to disclose the main aspects of their arrangement with the asset manager. The new disclosure and reporting requirements, however, only apply on a “comply or explain” basis. Thus, investors and asset managers may choose not to make the above disclosures, provided they give an explanation as to why this is the case. Proxy advisors will have to publicly disclose on an annual basis (i) whether and how they have applied their code of conduct based again on the “comply or explain” principle, and (ii) information on the essential features, methodologies and models they apply, their main information sources, the qualification of their staff, their voting policies for the different markets they operate in, their interaction with the companies and the stakeholders as well as how they manage conflicts of interests. These rules, however, do not apply to proxy advisors operating from a non-EEA state with no establishment in Germany. The present legislative draft is still under discussion and it is to be expected that there will still be some changes with respect to details before the act becomes effective in mid-2019. Due to transitional provisions, the new rules on “say on pay” will have no effect for the majority of listed companies in this year’s meeting season. Whether the new rules will actually promote a long-term engagement of shareholders and have the desired effect on the directors’ remuneration of listed companies will have to be seen. In any event, both listed companies as well as the other addressees of the new transparency rules should make sure that they are prepared for the new reporting and disclosure requirements. Back to Top 1.3       Germany Tightens Rules on Foreign Takeovers Even Further After the German government had imposed stricter rules on foreign direct investment in 2017 (see 2017 Year-End German Law Update under 1.5), it has now even further tightened its rules with respect to takeovers of German companies by foreign investors. The latest amendment of the rules under the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, “AWV“) enacted in 2018 was triggered, among other things, by the German government’s first-ever veto in August 2018 regarding the proposed acquisition of Leifeld Metal Spinning, a German manufacturer of metal forming machines used in the automotive, aerospace and nuclear industries, by Yantai Taihai Corporation, a privately-owned industry group from China, on the grounds of national security. Ultimately, Yantai withdrew its bid shortly after the German government had signaled that it would block the takeover. On December 29, 2018, the latest amendment of the Foreign Trade and Payments Ordinance came into force. The new rules provide for greater scrutiny of foreign direct investments by lowering the threshold for review of takeovers of German companies by foreign investors from the acquisition of 25% of the voting rights down to 10% in circumstances where the target operates a critical infrastructure or in sensitive security areas (defense and IT security industry). In addition, the amendment also expands the scope of the Foreign Trade and Payments Ordinance to also apply to certain media companies that contribute to shaping the public opinion by way of broadcasting, teleservices or printed materials and stand out due to their special relevance and broad impact. While the lowering of the review threshold as such will lead to an expansion of the existing reporting requirements, the broader scope is also aimed at preventing German mass media from being manipulated with disinformation by foreign investors or governments. There are no specific guidelines published by the German government as it wants the relevant parties to contact, and enter into a dialog with, the authorities about these matters. While the German government used to be rather liberal when it came to foreign investments in the past, the recent veto in the case of Leifeld as well as the new rules show that in certain circumstances, it will become more cumbersome for dealmakers to get a deal done. Finally, it is likely that the rules on foreign investment control will be tightened even further going forward in light of the contemplated EU legislative framework for screening foreign direct investment on a pan-European level. Back to Top 1.4       US Landmark Decision on MAE Clauses – Consequences for German M&A Deals Fresenius wrote legal history in the US with potential consequences also for German M&A deals in which “material adverse effect” (MAE) clauses are used. In December 2018, for the first time ever, the Supreme Court of Delaware allowed a purchaser to invoke the occurrence of an MAE and to terminate the affected merger agreement. The agreement included an MAE clause, which allocated certain business risks concerning the target (Akorn) for the time period between signing and closing to Akorn. Against the resistance of Akorn, Fresenius terminated the merger agreement based on the alleged MAE, arguing that the target’s EBITDA declined by 86%. The decision includes a very detailed analysis of an MAE clause by the Delaware courts and reaffirms that under Delaware law there is a very high bar to establishing an MAE. Such bar is based both on quantitative and qualitative parameters. The effects of any material adverse event need to be substantial as well as lasting. In most German deals, the parties agree to arbitrate. For this reason, there have been no German court rulings published on MAE clauses so far. Hence, all parties to an M&A deal face uncertainty about how German courts or arbitration tribunals would define “materiality” in the context of an MAE clause. In potential M&A litigation, sellers may use this ruling to support the argument that the bar for the exercise of the MAE right is in fact very high in line with the Delaware standard. It remains to be seen whether German judges will adopt the Delaware decision to interpret MAE clauses in German deals. Purchasers, who seek more certainty, may consider defining materiality in the MAE clause more concretely (e.g., by reference to the estimated impact of the event on the EBITDA of the company or any other financial parameter). Back to Top 1.5       Equivalence of Swiss Notarizations? The question whether the notarization of various German corporate matters may only be validly performed by German notaries or whether some or all of these measures may also be notarized validly by Swiss notaries has long since been the topic of legal debate. Since the last major reform of the German Limited Liability Companies Act (Gesetz betreffend Gesellschaften mit beschränkter Haftung – GmbHG) in 2008 the number of Swiss notarizations of German corporate measures has significantly decreased. A number of the newly introduced changes and provisions seemed to cast doubt on the equivalence and capacity of Swiss notaries to validly perform the duties of a German notary public who are not legally bound by the mandatory, non-negotiable German fee regime on notarial fees. As a consequence and a matter of prudence, German companies mostly stopped using Swiss notaries despite the potential for freely negotiated fee arrangements and the resulting significant costs savings in particular in high value matters. However, since 2008 there has been an increasing number of test cases that reach the higher German courts in which the permissibility of a Swiss notarization is the decisive issue. While the German Federal Supreme Court (Bundesgerichtshof – BGH) still has not had the opportunity to decide this question, in 2018 two such cases were decided by the Kammergericht (Higher District Court) in Berlin. In those cases, the court held that both the incorporation of a German limited liability company in the Swiss Canton of Berne (KG Berlin, 22 W 25/16 – January 24, 2018 = ZIP 2018, 323) and the notarization of a merger between two German GmbHs before a notary in the Swiss Canton of Basle (KG Berlin, 22 W 2/18 – July 26, 2018 = ZIP 2018, 1878) were valid notarizations under German law, because Swiss notaries were deemed to be generally equivalent to the qualifications and professional standards of German-based notaries. The reasons given in these decisions are reminiscent of the case law that existed prior to the 2008 corporate law reform and can be interpreted as indicative of a certain tendency by the courts to look favorably on Swiss notarizations as an alternative to German-based notarizations. Having said that and absent a determinative decision by the BGH, using German-based notaries remains the cautious default approach for German companies to take. This is definitely the case in any context where financing banks are involved (e.g. either where share pledges as loan security are concerned or in an acquisition financing context of GmbH share sales and transfers). On the other hand, in regions where such court precedents exist, the use of Swiss notaries for straightforward intercompany share transfers, mergers or conversions might be considered as an alternative on a case by case basis. Back to Top 1.6       Re-Enactment of the DCGK: Focus on Relevance, Function, Management Board’s Remuneration and Independence of Supervisory Board Members Sixteen years after it has first been enacted, the German Corporate Governance Code (Deutscher Corporate Governance Kodex, DCGK), which contains standards for good and responsible governance for German listed companies, is facing a major makeover. In November 2018, the competent German government commission published a first draft for a radically revised DCGK. While vast parts of the proposed changes are merely editorial and technical in nature, the draft contains a number of new recommendations, in particular with respect to the topics of management remuneration and independence of supervisory board members. With respect to the latter, the draft now provides a catalogue of criteria that shall act as guidance for the supervisory board as to when a shareholder representative shall no longer be regarded as independent. Furthermore, the draft also provides for more detailed specifications aiming for an increased transparency of the supervisory board’s work, including the recommendation to individually disclose the members’ attendance of meetings, and further tightens the recommendations regarding the maximum number of simultaneous mandates for supervisory board members. Moreover, in addition to the previous concept of “comply or explain”, the draft DCGK introduces a new “apply and explain” concept, recommending that listed companies also explain how they apply certain fundamental principles set forth in the DCGK as a new third category in addition to the previous two categories of recommendations and suggestions. The draft DCGK is currently under consultation and the interested public is invited to comment upon the proposed amendments until the end of January 2019. Since some of the proposed amendments provide for a rather fundamentally new approach to the current regime and would introduce additional administrative burdens, it remains to be seen whether all of the proposed amendments will actually come into force. According to the current plan, following a final consultancy of the Government Commission, the revised version of the DCGK shall be submitted for publication in April 2019 and would take effect shortly thereafter. Back to Top 2.         Tax On November 23, 2018, the German Federal Council (Bundesrat) approved the German Tax Reform Act 2018 (Jahressteuergesetz 2018, the “Act”), which had passed the German Federal Parliament (Bundestag) on November 8, 2018. Highlights of the Act are (i) the exemption of restructuring gains from German income tax, (ii) the partial abolition of and a restructuring exemption from the loss forfeiture rules in share transactions and (iii) the extension of the scope of taxation for non-German real estate investors investing in Germany. 2.1       Exemption of Restructuring Gains The Act puts an end to a long period of uncertainty – which has significantly impaired restructuring efforts – with respect to the tax implications resulting from debt waivers in restructuring scenarios (please see in this regard our 2017 Year-End German Law Update under 3.2). Under German tax law, the waiver of worthless creditor claims creates a balance sheet profit for the debtor in the amount of the nominal value of the payable. Such balance sheet profit is taxable and would – without any tax privileges for such profit – often outweigh the restructuring effect of the waiver. The Act now reinstates the tax exemption of debt waivers with retroactive effect for debt waivers after February 8, 2017; upon application debt waivers prior to February 8, 2017 can also be covered. Prior to this legislative change, a tax exemption of restructuring gains was based on a restructuring decree of the Federal Ministry of Finance, which has been applied by the tax authorities since 2003. In 2016, the German Federal Fiscal Court (Bundesfinanzgerichtshof) held that the restructuring decree by the Federal Ministry of Finance violates constitutional law since a tax exemption must be legislated by statute and cannot be based on an administrative decree. Legislation was then on hold pending confirmation from the EU Commission that a legislative tax exemption does not constitute illegal state aid under EU law. The EU Commission finally gave such confirmation by way of a comfort letter in August 2018. The Act is largely based on the conditions imposed by a restructuring decree issued by the Federal Ministry of Finance on the tax exemption of a restructuring gain. Under the Act, gains at the level of the debtor resulting from a full or partial debt relief are exempt from German income tax if the relief is granted to recapitalize and restructure an ailing business. The tax exemption only applies if at the time of the debt waiver (i) the business is in need of restructuring and (ii) capable of being restructured, (iii) the waiver results in a going-concern of the restructured business and (iv) the creditor waives the debt with the intention to restructure the business. The rules apply to German corporate income and trade tax and benefit individuals, partnerships and corporations alike. Any gains from the relief must first be reduced by all existing loss-offsetting potentials before the taxpayer can benefit from tax exemptions on restructuring measures. Back to Top 2.2       Partial Abolition of Loss Forfeiture Rules/Restructuring Exception Under the current Loss Forfeiture Rules, losses of a German corporation will be forfeited on a pro rata basis if within a period of five years more than 25% but not more than 50% of the shares in the German loss-making corporation are transferred (directly or indirectly) to a new shareholder or group of shareholders with aligned interests. If more than 50% are transferred, losses will be forfeited in total. There are exceptions to this rule for certain intragroup restructurings, built-in gains and business continuations, especially in the venture capital industry. On March 29, 2017, the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) ruled that the pro rata forfeiture of losses (a share transfer of more than 25% but not more than 50%) is incompatible with the constitution. The court has asked the German legislator to amend the Loss Forfeiture Rules retroactively for the period from January 1, 2008 until December 31, 2015 to bring them in line with the constitution. Somewhat surprisingly, the legislator has now decided to fully cancel the pro rata forfeiture of losses with retroactive effect and with no reference to a specific tax period. Currently pending before the German Federal Constitutional Court is the question whether the full forfeiture of losses is constitutional. A decision by the Federal Constitutional Court is expected for early 2019, which may then result in another legislative amendment of the Loss Forfeiture Rules. The Act has also reinstated a restructuring exception from the forfeiture rules – if the share transfer occurs in order to restructure the business of an ailing corporation. Similar to the exemption of restructuring gains, this legislation was on hold until the ECJ’s decision (European Court of Justice) on June 28, 2018 that the restructuring exception does not violate EU law. Existing losses will not cease to exist following a share transfer if the restructuring measures are appropriate to avoid or eliminate the illiquidity or the over-indebtedness of the corporation and to maintain its basic operational structure. The restructuring exception applies to share transfers after December 31, 2007. Back to Top 2.3       Investments in German Real Estate by Non-German Investors So far, capital gains from the disposal of shares in a non-German corporation holding German real estate were not subject to German tax. In a typical structure, in which German real estate is held via a Luxembourg or Dutch entity, a value appreciation in the asset could be realized by a share deal of the holding company without triggering German income taxes. Under the Act, the sale of shares in a non-German corporation is now taxable if, at some point within a period of one year prior to the sale of shares, 50 percent of the book value of the assets of the company consisted of German real estate and the seller held at least 1 percent of the shares within the last five years prior to the sale. The Act is now in line with many double tax treaties concluded by Germany, which allow Germany to tax capital gains in these cases. The new law applies for share transfers after December 31, 2018. Capital gains are only subject to German tax to the extent the value has been increased after December 31, 2018. Until 2018, a change in the value of assets and liabilities, which are economically connected to German real estate, was not subject to German tax. Therefore, for example, profits from a waiver of debt that was used to finance German real estate was not taxable in Germany whereas the interest paid on the debt was deductible for German tax purposes. That law has now changed and allows Germany to tax such profit from a debt waiver if the loan was used to finance German real estate. However, only the change in value that occurred after December 31, 2018 is taxable. Back to Top 3.         Financing and Restructuring – Test for Liquidity Status Tightened On December 19, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) handed down an important ruling which clarifies the debt and payable items that should be taken into account when determining the “liquidity” status of companies. According to the Court, the liquidity test now requires managing directors and (executive) board members to determine whether a liquidity gap exceeding 10% can be overcome by incoming liquidity within a period of three weeks taking into account all payables which will become due in those three weeks. Prior to the ruling, managing directors had often argued successfully that only those payables that were due at the time when the test is applied needed be taken into account while expected incoming payments within a three week term could be considered. This mismatch in favor of the managing directors has now been rectified by the Court to the disadvantage of the managing directors. If, for example, on June 1 the company liquidity status shows due payables amounting to EUR 100 and plausible incoming receivables in the three weeks thereafter amounting to EUR 101, no illiquidity existed under the old test. Under the new test confirmed by the Court, payables of EUR 50 becoming due in the three week period now also have to be taken into account and the company would be considered illiquid. For companies and their managing directors following a cautious approach, the implications of this ruling are minor. Going forward, however, even those willing to take higher risks will need to follow the court determined principles. Otherwise, delayed insolvency filings could ensue. This not only involves a managing directors and executive board members’ personal liability for payments made on behalf of the company while illiquid but also potential criminal liability for a delayed insolvency filing. Managing directors are thus well advised to properly undertake and also document the required test in order to avoid liability issues. Back to Top 4.         Labor and Employment 4.1       GDPR Has Tightened Workplace Privacy Rules The EU General Data Protection Regulation (“GDPR”) started to apply on May 25, 2018. It has introduced a number of stricter rules for EU countries with regard to data protection which also apply to employee personal data and employment relationships. In addition to higher sanctions, the regulation provides for extensive information, notification, deletion, and documentation obligations. While many of these data privacy rules had already been part of the previous German workplace privacy regime under the German Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG), the latter has also been amended and provides for specific rules applicable to employee data protection in Germany (e.g. in the context of internal investigations or with respect to employee co-determination). However, the most salient novelty is the enormous increase in potential sanctions under the GDPR. Fines for GDPR violations can reach up to the higher of EUR 20 million or 4% of the group’s worldwide turnover. Against this backdrop, employers are well-advised to handle employee personnel data particularly careful. This is also particularly noteworthy as the employer is under an obligation to prove compliance with the GDPR – which may result in a reversal of the burden of proof e.g. in employment-related litigation matters involving alleged GDPR violations. Back to Top 4.2       Job Adverts with Third Gender Following a landmark decision by the German Federal Constitutional Court in 2017, employers are gradually inserting a third gender into their job advertisements. The Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) decided on October 10, 2017 that citizens who do not identify as either male or female were to be registered as “diverse” in the birth register (1 BvR 2019/16). As a consequence of this court decision, many employers in Germany have broadened gender notations in job advertisements from previously “m/f” to “m/f/d”. While there is no compelling legal obligation to do so, employers tend to signal their open-mindedness by this step, but also mitigate the potential risk of liability for a discrimination claim. Currently, such liability risk does not appear alarming due to the relative rarity of persons identifying as neither male nor female and the lack of a statutory stipulation for such adverts. However, employers might be well-advised to follow this trend, particularly after Parliament confirmed the existence of a third gender option in birth registers in mid-December. Back to Top 4.3       Can Disclosure Obligation Reduce Gender Pay-Gap? In an attempt to weed out gender pay gaps, the German lawmaker has introduced the so-called Compensation Transparency Act in 2017. It obliges employers, inter alia, to disclose the median compensation of comparable colleagues of the opposite gender with comparable jobs within the company. The purpose is to give a potential claimant (usually a female employee) an impression of how much her comparable male colleagues earn in order for her to consider further steps, e.g. a claim for more money. However, the new law is widely perceived as pointless. First, the law itself and its processes are unduly complex. Second, even after making use of the law, the respective employee would still have to sue the company separately in order to achieve an increase in her compensation, bearing the burden of proof that the opposite-gender employee with higher compensation is comparable to her. Against this background, the law has hardly been used in practice and will likely have only minimal impact. Back to Top 4.4       Employers to Contribute 15% to Deferred Compensation Schemes In order to promote company pension schemes, employers are now obliged to financially support deferred compensation arrangements. So far, employer contributions to any company pension scheme had been voluntary. In the case of deferred compensation schemes, companies save money as a result of less social security charges. The flipside of this saving was a financial detriment to the employee’s statutory pension, as the latter depends on the salary actually paid to the employee (which is reduced as a result of the deferred compensation). To compensate the employee for this gap, the employer is now obliged to contribute up to 15% of the respective deferred compensation. The actual impact of this new rule should be limited, as many employers already actively support deferred compensation schemes. As such, the new obligatory contribution can be set off against existing employer contributions to the same pension scheme. Back to Top 5.         Real Estate – Notarization Requirement for Amendments to Real Estate Purchase Agreements Purchase agreements concerning German real estate require notarization in order to be effective. This notarization requirement relates not only to the purchase agreement as such but to all closely related (side) agreements. The transfer of title to the purchaser additionally requires an agreement in rem between the seller and the purchaser on the transfer (conveyance) and the subsequent registration of the transfer in the land register. To avoid additional notarial fees, parties usually include the conveyance in the notarial real estate purchase agreement. Amendment agreements to real estate purchase agreements are quite common (e.g., the parties subsequently agree on a purchase price adjustment or the purchaser has special requests in a real estate development scenario). Various Higher District Courts (Oberlandesgerichte), together with the prevailing opinion in literature, have held in the past that any amendments to real estate purchase agreements also require notarization unless such an amendment is designed to remove unforeseeable difficulties with the implementation of the agreement without significantly changing the parties’ mutual obligations. Any amendment agreement that does not meet the notarization requirement may render the entire purchase agreement (and not only the amendment agreement) null and void. With its decision on September 14, 2018, the German Federal Supreme Court (Bundesgerichtshof – BGH) added another exception to the notarization requirement and ruled that notarization of an amendment agreement is not required once the conveyance has become binding and the amendment does not change the existing real estate transfer obligations or create new ones. A conveyance becomes binding once it has been validly notarized. Before this new decision of the BGH, amendments to real estate purchase agreements were often notarized for the sake of precaution because it was difficult to determine whether the conditions for an exemption from the notarization requirement had been met. This new decision of the BGH gives the parties clear guidance as to when amendments to real estate purchase agreements require notarization. It should, however, be borne in mind that notarization is still required if the amendment provides for new transfer obligations concerning the real property or the conveyance has not become effective yet (e.g., because third party approval is still outstanding). Back to Top 6.         Compliance 6.1       Government Plans to Introduce Corporate Criminal Liability and Internal Investigations Act Plans of the Federal Government to introduce a new statute concerning corporate criminal liability and internal investigations are taking shape. Although a draft bill had already been announced for the end of 2018, pressure to respond to recent corporate scandals seems to be rising. With regard to the role and protection of work product generated during internal investigations, the highly disputed decisions of the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) in June 2018 (BVerfG, 2 BvR 1405/17, 2 BvR 1780/17 – June 27, 2018) (see 2017 Year-End German Law Update under 7.3) call for clearer statutory rules concerning the search of law firm premises and the seizure of documents collected in the course of an internal investigation. In its dismissal of complaints brought by Volkswagen and its lawyers from Jones Day, the Federal Constitutional Court made remarkable obiter dicta statements in which it emphasized the following: (1) the legal privilege enjoyed for the communication between the individual defendant (Beschuldigter) and its criminal defense counsel is limited to their communication only; (2) being considered a foreign corporate body, the court denied Jones Day standing in the proceedings, because the German constitution only grants rights to corporate bodies domiciled in Germany; and (3) a search of the offices of a law firm does not affect individual constitutional rights of the lawyers practicing in that office, because the office does not belong to the lawyers’ personal sphere, but only to their law firm. The decision and the additional exposure caused by it by making attorney work product created in the course of an internal investigation accessible was a major blow to German corporations’ efforts to foster internal investigations as a means to efficiently and effectively investigate serious compliance concerns. Because it does not appear likely that an entirely new statute concerning corporate criminal liability will materialize in the near future, the legal press expects the Federal Ministry of Justice to consider an approach in which the statutes dealing with questions around internal investigations and the protection of work product created in the course thereof will be clarified separately. In the meantime, the following measures are recommended to maximize the legal privilege for defense counsel (Verteidigerprivileg): (1) Establish clear instructions to an individual criminal defense lawyer setting forth the scope and purpose of the defense; (2) mark work product and communications that have been created in the course of the defense clearly as confidential correspondence with defense counsel (“Vertrauliche Verteidigerkorrespondenz”); and (3) clearly separate such correspondence from other correspondence with the same client in matters that are not clearly attributable to the criminal defense mandate. While none of these measures will guarantee that state prosecutors and courts will abstain from a search and seizure of such material, at least there are good and valid arguments to defend the legal privilege in any appeals process. However, with the guidance provided to courts by the recent constitutional decision, until new statutory provisions provide for clearer guidance, companies can expect this to become an up-hill battle. Back to Top 6.2       Update on the European Public Prosecutor’s Office and Proposed Cross-Border Electronic Evidence Rules Recently the European Union has started tightening its cooperation in the field of criminal procedure, which was previously viewed as a matter of national law under the sovereignty of the 28 EU member states. Two recent developments stand out that illustrate that remarkable new trend: (1) The introduction of the European Public Prosecutor’s Office (“EPPO”) that was given jurisdiction to conduct EU-wide investigations for certain matters independent of the prosecution of these matters under the national laws of the member states, and (2) the proposed EU-wide framework for cross-border access to electronically stored data (“e-evidence”) which has recently been introduced to the European Parliament. As reported previously (see 2017 Year-End German Law Update under 7.4), the European Prosecutor’s Office’s task is to independently investigate and prosecute severe crimes against the EU’s financial interests such as fraud against the EU budget or crimes related to EU subsidies. Corporations receiving funds from the EU may therefore be the first to be scrutinized by this new EU body. In 2018 two additional EU member states, the Netherlands and Malta, decided to join this initiative, extending the number of participating member states to 22. The EPPO will presumably begin its work by the end of 2020, because the start date may not be earlier than three years after the regulation’s entry into force. As a further measure to leverage multi-jurisdictional enforcement activities, in April 2018 the European Commission proposed a directive and a regulation that will significantly facilitate expedited cross-border access to e-evidence such as texts, emails or messaging apps by enforcement agencies and judicial authorities. The proposed framework would allow national enforcement authorities in accordance with their domestic procedure to request e-evidence directly from a service provider located in the jurisdiction of another EU member state. That other state’s authorities would not have the right to object to or to review the decision to search and seize the e-evidence sought by the national enforcement authority of the requesting EU member state. Companies refusing delivery risk a fine of up to 2% of their worldwide annual turnover. In addition, providers from a third country which operate in the EU are obliged to appoint a legal representative in the EU. The proposal has reached a majority vote in the Council of the EU and will now be negotiated in the European Parliament. Further controversial discussions between the European Parliament and the Commission took place on December 10, 2018. The Council of the EU aims at reaching an agreement between the three institutions by the end of term of the European Parliament in May 2019. Back to Top 7.         Antitrust and Merger Control 7.1       Antitrust and Merger Control Overview 2018 In 2018, Germany celebrated the 60th anniversary of both the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen -GWB) as well as the German federal cartel office (Bundeskartellamt) which were both established in 1958 and have since played a leading role in competition enforcement worldwide. The celebrations notwithstanding, the German antitrust watchdog has had a very active year in substantially all of its areas of competence. On the enforcement side, the Bundeskartellamt concluded a number of important cartel investigations. According to its annual review, the Bundeskartellamt carried out dawn raids at 51 companies and imposed fines totaling EUR 376 million against 22 companies or associations and 20 individuals from various industries including the steel, potato manufacturing, newspapers and rolled asphalt industries. Leniency applications remained an important source for the Bundeskartellamt‘s antitrust enforcement activities with a total of 21 leniency applications received in 2018 filling the pipeline for the next few months and years. On the merger control side, the Bundeskartellamt reviewed approximately 1,300 merger cases in 2018 – only 1% of which (i.e. 13 merger filings) required an in-depth phase 2 review. No mergers were prohibited but in one case only conditional clearance was granted and three filings were withdrawn in phase 2. In addition, the Bundeskartellamt had its first full year of additional responsibilities in the area of consumer protection, concluded a sector inquiry into internet comparison portals, and started a sector inquiry into the online marketing business as well as a joint project with the French competition authority CNIL regarding algorithms in the digital economy and their competitive effects. Back to Top 7.2       Cartel Damages Over the past few years, antitrust damages law has advanced in Germany and the European Union. One major legislative development was the EU Directive on actions for damages for infringements of competition law, which was implemented in Germany as part of the 9th amendment to the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen -GWB). In addition, there has also been some noteworthy case law concerning antitrust damages. To begin with, the German Federal Supreme Court (Bundesgerichtshof, BGH) strengthened the position of plaintiffs suing for antitrust damages in its decision Grauzementkartell II in 2018. The decision brought to an end an ongoing dispute between several Higher District Courts and District Courts, which had disagreed over whether a recently added provision of the GWB that suspends the statute of limitations in cases where antitrust authorities initiate investigations would also apply to claims that arose before the amendment entered into force (July 1, 2015). The Federal Supreme Court affirmed the suspension of the statute of limitations, basing its ruling on a well-established principle of German law regarding the intertemporal application of statutes of limitation. The decision concerns numerous antitrust damage suits, including several pending cases concerning trucks, rails tracks, and sugar cartels. Furthermore, recent case law shows that European domestic courts interpret arbitration agreements very broadly and also enforce them in cases involving antitrust damages. In 2017, the England and Wales High Court and the District Court Dortmund (Landgericht Dortmund) were presented with two antitrust disputes where the parties had agreed on an arbitration clause. Both courts denied jurisdiction because the antitrust damage claims were also covered by the arbitration agreements. They argued that the parties could have asserted claims for contractual damages instead, which would have been covered by the arbitration agreement. In the courts’ view, it would be unreasonable, however, if the choice between asserting a contractual or an antitrust claim would give the parties the opportunity to influence the jurisdiction of a court. As a consequence, the use of arbitration clauses (in particular if inconsistently used by suppliers or purchasers) may add significant complexity to antitrust damages litigation going forward. Thus, companies are well advised to examine their international supply agreements to determine whether included arbitration agreements will also apply to disputes about antitrust damages. Back to Top 7.3       Appeals against Fines Risky? In German antitrust proceedings, there is increasing pressure for enterprises to settle. Earlier this year, Radeberger, a producer of lager beer, withdrew its appeal against a significant fine of EUR 338 million, which the Bundeskartellamt had imposed on the company for its alleged participation in the so-called “beer cartel”. With this dramatic step, Radeberger paid heed to a worrisome development in German competition law. Repeatedly, enterprises have seen their cartel fines increased by staggering amounts on appeal (despite such appeals sometimes succeeding on some substantive legal issues). The reason for these “appeals for the worse” – as seen in the liquefied gas cartel (increase of fine from EUR 180 million to EUR 244 million), the sweets cartel (average increase of approx. 50%) and the wallpaper cartel (average increase of approx. 35%) – is the different approach taken by the Bundeskartellamt and the courts to calculating fines. As courts are not bound by the administrative practice of the Bundeskartellamt, many practitioners are calling for the legislator to step in and address the issue. Back to Top 7.4       Luxury Products on Amazon – The Coty Case In July 2018, the Frankfurt Higher District Court (Oberlandesgericht Frankfurt) delivered its judgement in the case Coty / Parfümerie Akzente, ruling that Coty, a luxury perfume producer, did not violate competition rules by imposing an obligation on its selected distributors to not sell on third-party platforms such as Amazon. The judgment followed an earlier decision of the Court of Justice of the European Union (ECJ) of December 2017, by which the ECJ had replied to the Frankfurt court’s referral. The ECJ had held that a vertical distribution agreement (such as the one in place between Coty and its distributor Parfümerie Akzente) did not as such violate Art. 101 of the Treaty on the Functioning of the European Union (TFEU) as long as the so-called Metro criteria were fulfilled. These criteria stipulate that distributors must be chosen on the basis of objective and qualitative criteria that are applied in a non-discriminatory fashion; that the characteristics of the product necessitate the use of a selective distribution network in order to preserve their quality; and, finally, that the criteria laid down do not go beyond what is necessary. Regarding the platform ban in question, the ECJ held that it was not disproportionate. Based on the ECJ’s interpretation of the law, the Frankfurt Higher District Court confirmed that the character of certain products may indeed necessitate a selective distribution system in order to preserve their prestigious reputation, which allowed consumers to distinguish them from similar goods, and that gaps in a selective distribution system (e.g. when products are sold by non-selected distributors) did not per se make the distribution system discriminatory. The Higher District Court also concluded that the platform ban in question was proportional. However, interestingly, it did not do so based on its own reasoning but based on the fact that the ECJ’s detailed analysis did not leave any scope for its own interpretation and, hence, precluded the Higher District Court from applying its own reasoning. Pointing to the European Commission’s E-Commerce Sector Inquiry, according to which sales platforms play a more important role in Germany than in other EU Member States, the Higher District Court, in fact, voiced doubts whether Coty’s sales ban could not have been imposed in a less interfering manner. Back to Top 8.         Litigation 8.1       The New German “Class Action” On November 1, 2018, a long anticipated amendment to the German Code of Civil Procedure (Zivilprozessordnung, ZPO) entered into force, introducing a new procedural remedy for consumers to enforce their rights in German courts: a collective action for declaratory relief. Although sometimes referred to as the new German “class action,” this new German action reveals distinct differences to the U.S.-American remedy. Foremost, the right to bring the collective action is limited to consumer protection organizations or other “qualified institutions” (qualifizierte Einrichtung) who can only represent “consumers” within the meaning of the German Code of Civil Procedure. In addition, affected consumers are not automatically included in the action as part of a class but must actively opt-in by registering their claims in a “claim index” (Klageregister). Furthermore, the collective action for declaratory relief does not grant any monetary relief to the plaintiffs which means that each consumer still has to enforce its claim in an individual suit to receive compensation from the defendant. Despite these differences, the essential and comparable element of the new legal remedy is its binding effect. Any other court which has to decide an individual dispute between the defendant and a registered consumer that is based on the same facts as the collective action is bound by the declaratory decision of the initial court. At the same time, any settlement reached by the parties has a binding effect on all registered consumers who did not decide to specifically opt-out. As a result, companies must be aware of the increased litigation risks arising from the introduction of the new collective action for declaratory relief. Even though its reach is not as extensive as the American class action, consumer protection organizations have already filed two proceedings against companies from the automotive and financial industry since the amendment has entered into force in November 2018, and will most likely continue to make comprehensive use of the new remedy in the future. Back to Top 8.2       The New 2018 DIS Arbitration Rules On March 1, 2018, the new 2018 DIS Arbitration Rules of the German Arbitration Institute (DIS) entered into force. The update aims to make Germany more attractive as a place for arbitration by adjusting the rules to international standards, promoting efficiency and thereby ensuring higher quality for arbitration proceedings. The majority of the updated provisions and rules are designed to accelerate the proceedings and thereby make arbitration more attractive and cost-effective for the parties. There are several new rules on time limitations and measures to enhance procedural efficiency, i.e. the possibility of expedited proceedings or the introduction of case management conferences. Furthermore, the rules now also allow for consolidation of several arbitrations and cover multi-party and multi-contract arbitration. Another major change is the introduction of the DIS Arbitration Council which, similar to the Arbitration Council of the ICC (International Chamber of Commerce), may decide upon challenges of an arbitrator and review arbitral awards for formal defects. This amendment shows that the influence of DIS on their arbitration proceedings has grown significantly. All in all, the modernized 2018 DIS Arbitration Rules resolve the deficiencies of their predecessor and strengthen the position of the German Institution of Arbitration among competing arbitration institutions. Back to Top 9.         IP & Technology – Draft Bill of German Trade Secret Act The EU Trade Secrets Directive (2016/943/EU) on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure has already been in effect since July 5, 2016. Even though it was supposed to be implemented into national law by June 9, 2018 to harmonize the protection of trade secrets in the EU, the German legislator has so far only prepared and published a draft of the proposed German Trade Secret Act. Arguably, the most important change in the draft bill to the existing rules on trade secrets in Germany will be a new and EU-wide definition of trade secrets. This proposed definition requires the holder of a trade secret to take reasonable measures to keep a trade secret confidential in order to benefit from its protection – e.g. by implementing technical, contractual and organizational measures that ensure secrecy. This requirement goes beyond the current standard pursuant to which a manifest interest in keeping an information secret may be sufficient. Furthermore, the draft bill provides for additional protection of trade secrets in litigation matters. Last but not least, the draft bill also provides for increased protection of whistleblowers by reducing the barriers for the disclosure of trade secrets in the public interest and to the media. As a consequence, companies would be advised to review their internal procedures and policies regarding the protection of trade secrets at this stage, and may want to adapt their existing whistleblowing and compliance-management-systems as appropriate. Back to Top 10.       International Trade, Sanctions and Export Controls – The Conflict between Complying with the Re-Imposed U.S. Iran Sanctions and the EU Blocking Statute On May 8, 2018, President Donald Trump announced his decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and re-impose U.S. nuclear-related sanctions. Under the JCPOA, General License H had permitted U.S.-owned or -controlled non-U.S. entities to engage in business with Iran. But with the end of the wind-down periods provided for in President Trump’s decision on November 5, 2018, such non-U.S. entities are now no longer broadly permitted to provide goods, services, or financing to Iranian counterparties, not even under agreements executed before the U.S. withdrawal from the JCPOA. In response to the May 8, 2018 decision, the EU amended the EU Blocking Statute on August 6, 2018. The effect of the amended EU Blocking Statute is to prohibit compliance by so-called EU operators with the re-imposed U.S. sanctions on Iran. Comparable and more generally drafted anti-blocking statutes had already existed in the EU and several of its member states which prohibited EU domiciled companies to commit to compliance with foreign boycott regulations. These competing obligations under EU and U.S. laws are a concern for U.S. companies that own or seek to acquire German companies that have a history of engagement with Iran – as well as for the German company itself and its management and the employees. But what does the EU prohibition against compliance with the re-imposed U.S. sanctions on Iran mean in practice? Most importantly, it must be noted that the EU Blocking Statute does not oblige EU operators to start or continue Iran related business. If, for example, an EU operator voluntarily decides, e.g. due to lack of profitability, to cease business operations in Iran and not to demonstrate compliance with the U.S. sanctions, the EU Blocking Statute does not apply. Obviously, such voluntary decision must be properly documented. Procedural aspects also remain challenging for companies: In the event a Germany subsidiary of a U.S. company were to decide to start or continue business with Iran, it would usually be required to reach out to the U.S. authorities to request a specific license for a particular transaction with Iran. Before doing so, however, EU operators must first contact the EU Commission directly (not the EU member state authorities) to request authorization to apply for such a U.S. special license. Likewise, if a Germany subsidiary were to decide not to start or to cease business with Iran for the sole reason of being compliant with the re-imposed U.S. Iran sanctions, it would have to apply for an exception from the EU Blocking Statute and would have to provide sufficient evidence that non-compliance would cause serious damage to at least one protected interest. The hurdles for an exception are high and difficult to predict. The EU Commission will e.g. consider, “(…) whether the applicant would face significant economic losses, which could for example threaten its viability or pose a serious risk of bankruptcy, or the security of supply of strategic goods or services within or to the Union or a Member State and the impact of any shortage or disruption therein.” As such, any company caught up in this conflict of interests between the re-imposed U.S. sanctions and the EU Blocking Statute should be aware of a heightened risk of litigation. Third parties, such as Iranian counterparties, might successfully sue for breach of contract with the support of the EU Blocking Regulation in cases of non-performance of contracts as a result of the re-imposed U.S. nuclear sanctions. Finally, EU operators are required to inform the EU Commission within 30 days from the date on which information is obtained that the economic and/or financial interests of the EU operator are affected, directly or indirectly, by the re-imposed U.S. Iran sanctions. If the EU operator is a legal person, this obligation is incumbent on its directors, managers and other persons with management responsibilities of such legal person. Back to Top The following Gibson Dunn lawyers assisted in preparing this client update:  Birgit Friedl, Marcus Geiss, Silke Beiter, Lutz Englisch, Daniel Gebauer, Kai Gesing, Maximilian Hoffmann, Philipp Mangini-Guidano, Jens-Olrik Murach, Markus Nauheim, Dirk Oberbracht, Richard Roeder, Martin Schmid, Annekatrin Schmoll, Jan Schubert, Benno Schwarz, Balthasar Strunz, Michael Walther, Finn Zeidler, Mark Zimmer, Stefanie Zirkel and Caroline Ziser Smith. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The two German offices of Gibson Dunn in Munich and Frankfurt bring together lawyers with extensive knowledge of corporate, tax, labor, real estate, antitrust, intellectual property law and extensive compliance / white collar crime experience. The German offices are comprised of seasoned lawyers with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. Our German lawyers work closely with the firm’s practice groups in other jurisdictions to provide cutting-edge legal advice and guidance in the most complex transactions and legal matters. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following members of the German offices: General Corporate, Corporate Transactions and Capital Markets Lutz Englisch (+49 89 189 33 150), lenglisch@gibsondunn.com) Markus Nauheim (+49 89 189 33 122, mnauheim@gibsondunn.com) Ferdinand Fromholzer (+49 89 189 33 121, ffromholzer@gibsondunn.com) Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com) Wilhelm Reinhardt (+49 69 247 411 520, wreinhardt@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Silke Beiter (+49 89 189 33 121, sbeiter@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Annekatrin Pelster (+49 69 247 411 521, apelster@gibsondunn.com Finance, Restructuring and Insolvency Sebastian Schoon (+49 89 189 33 160, sschoon@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Alexander Klein (+49 69 247 411 518, aklein@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Tax Hans Martin Schmid (+49 89 189 33 110, mschmid@gibsondunn.com) Labor Law Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Real Estate Peter Decker (+49 89 189 33 115, pdecker@gibsondunn.com) Daniel Gebauer (+49 89 189 33 115, dgebauer@gibsondunn.com) Technology Transactions / Intellectual Property / Data Privacy Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Corporate Compliance / White Collar Matters Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Antitrust Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Jens-Olrik Murach (+32 2 554 7240, jmurach@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Litigation Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) International Trade, Sanctions and Export Control Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Richard Roeder (+49 89 189 33 218, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 3, 2018 |
Federal Circuit Update (December 2018)

Click for PDF This edition of Gibson Dunn’s Federal Circuit Update notes the cases at the Supreme Court on certiorari from the Federal Circuit and summarizes new revisions to the Federal Circuit Rules of Practice.  The Update also summarizes recent Federal Circuit decisions ending assignor estoppel in IPRs, clarifying the role of preamble transitions in claim construction, explaining requirements for claiming priority through a chain of applications, and detailing how inventions can be shown to be non-abstract and patent eligible. Federal Circuit News On October 20, 2018, the American Inns of Court hosted its annual Celebration of Excellence dinner at the Supreme Court of the United States.  Judge Pauline Newman received the prestigious Lewis F. Powell, Jr. Award for Professionalism and Ethics.  This award is presented annually to a lawyer or judge who has rendered exemplary service in the areas of legal excellence, professionalism, and ethics.  It was presented by Chief Judge Barbara M. Lynn of the United States District Court for the Northern District of Texas. Among other things, Judge Newman spoke about the future of the law vis-à-vis artificial intelligence. Supreme Court:  Thus far, there are two patent cases from the Federal Circuit scheduled to be heard in the OT2018 Term. Case Status Issue Amicus Briefs Filed Helsinn Healthcare S.A. v. Teva Pharm. USA Inc., No. 17-1229 Argument on December 4, 2018 Whether, under the Leahy-Smith America Invents Act (“AIA”), the sale of an invention by the inventor to a third party qualifies as prior art if the sale was subject to confidentiality. 23 Return Mail Inc. v. United States Postal Service, No. 17-1594 Petition for certiorari granted on October 26, 2018 Whether the government is a “person” who may petition to institute review proceedings under the Leahy-Smith America Invents Act. 2 Of these, Helsinn has drawn substantial interest from multiple industries, with many pro-patentee groups arguing to overturn the Federal Circuit’s decision that a secret sale qualifies as prior art. For example, the Biotechnology Innovation Organization and Pharmaceutical Research and Manufacturers of America argue that Federal Circuit’s Helsinn decision calls into question large numbers of issued or pending patents.  U.S. Inventor (which represents 13,000 inventor and business members) argues that the Federal Circuit’s decision construing Section 102(a)(1) to include non-public prior art sales undermines Congress’ goal that the AIA harmonize U.S. Patent law with law from other countries.  Congressman Lamar Smith, a lead sponsor of the AIA, also argued that the Federal Circuit did not properly construe the statue in Helsinn.  On the other side of the argument, The Association for Accessible Medicines, as well as SPCM S.A. and the High Tech Inventors Alliance, argue that the Federal Circuit’s decision is correct. Federal Circuit Practice Update This month, we highlight new amendments to the Federal Circuit Rules of Practice (“FCRP”), which are effective as of December 1, 2018.  The revisions primarily relate to filing procedures and include a number of substantive and clerical edits.  Notable amendments include: FCRP 25:  Rule 25 is amended to require that most paper briefs be provided within five business days of the notice requesting paper copies.  Copies may not be submitted before the notice.  Previously, parties were required to submit paper copies within five business days of acceptance of electronic filing of the document.  A new Practice Note explains that in typical, non-expedited cases, the Clerk of Court will issue the notice “shortly after briefing concludes.”  But paper copies for petitions and briefs related to panel rehearing and en banc proceedings remain due as before.  Rule 25 now also enables the Clerk of the Court to require “the filing of a corrected copy of any submission that fails to comply with the court’s rules” or ECF procedure, and to strike a filing if the party does not take the requested corrective action. FCRP 31:  In cross-appeals, the cross appellant now has 21 days to file its reply after the appellant’s reply is served.  This increases the time allowed from 14 days under the prior rule. FCRP 32:  Rule 32 is also amended to no longer allow the Clerk of Court to refuse to file briefs that do not comply with Federal Rule of Appellate Procedure 32.  Instead, the Clerk of Court can require corrections and only thereafter strike a brief if the correction is not made. FRCP 44:  A new Practice Note is added to Rule 44. “Raising a constitutional question in a brief or motion. Inclusion of a constitutional challenge in a brief or motion is insufficient to satisfy the written notice requirements of Federal Rule of Appellate Procedure 44.  Parties must file a separate notice before the clerk of court will certify a matter to the Attorney General of the United States or the attorney general of a State.” The full rule amendments can be found here.  The Clerk of Court has also published a summary of the revisions and their impact on procedural changes in the filing process.  Of note: Immediate Docketing:  Non-confidential documents will be available on the docket immediately upon filing, versus being treated as tendered. Clerk’s Office Compliance Review:  After a brief or appendix is filed, the Clerk’s Office will review the filing to confirm compliance with FRAP and FCRP requirements. The Clerk of Court’s full summary is available here. Key Case Summaries (October – September 2018) Arista Networks, Inc. v. Cisco Sys., Inc., No. 17-1525, 17-1577 (Fed. Cir. Nov 9, 2018):   Assignor estoppel does not apply to petitions for Inter Partes Review. Arista filed an IPR petition challenging a patent owned by Cisco.  The named inventor was employed by Cisco when the purported inventive work was done and assigned his interests to Cisco.  Afterwards, the inventor left Cisco to found Arista.  Arista then sought to invalidate the patent.  Cisco argued that the doctrine of assignor estoppel should bar Arista from challenging the patent’s validity.  The Board, however, declined to apply the doctrine and instituted review. The Federal Circuit (Prost, C.J., joined by Schall, J., and Chen, J.) affirmed the decision to limit assignor estoppel.  As a predicate, the panel held that it had jurisdiction to review the Board’s refusal to apply estoppel despite the Supreme Court’s decision in Cuozzo Speed Technologies v. Lee, which held that the decision to institute an IPR is not subject to appeal.  As the panel reasoned, whether estoppel applies in IPRs stands in contrast to the statutory provision at issue in Cuozzo.  The panel concluded that the issue of estoppel is not “closely related to the preliminary patentability determination or the exercise of discretion not to institute,” and is thus reviewable. For the merits, the court looked to Section 311(a), which provides that “a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.”  According to the panel, this language left no room for assignor estoppel.  The court reasoned that this was consistent with Congress’s express incorporation of equitable doctrines in other contexts, such as before the ITC.  The court noted that allowing assignor estoppel in other forums while not allowing it in IPRs may invite forum shopping.  But the court dismissed this as an “intentional congressional choice.”  Thus, while assignor estoppel remains a viable defense in ITC and district court actions, it is not available before the Board to prevent institution of an IPR. Acceleration Bay, LLC v. Activision Blizzard, Inc., Nos. 17-2084, 17-2085, 17-2095 to -99, -17-2017, 17-2018 (Fed. Cir. Nov. 6, 2018):  Lack of transition language in claim preamble does not transform preamble into limitations. Acceleration appealed multiple Board decisions from various IPRs invalidating claims of its patents.  The Federal Circuit (Moore, J., joined by Prost, C.J., and Reyna, J.) affirmed.  Central to the dispute was an unusual issue of claim construction, as certain challenged claims lacked the traditional and nearly ubiquitous “transition” words that separate a claim’s preamble from its limitations.  In one patent, the claim began by reciting: “A computer network for providing an information delivery service.”  In another, the claim began: “A computer network for providing a game environment.”  Both claims, however, lacked transition phrases (e.g., “comprising” or “consisting of”).  Activision argued that, given the lack of transition phrasing, these terms are part of the body of the claims, and thus limiting, despite their location at the lead of the claim. The Federal Circuit panel, however, held that the phrases were preambles notwithstanding the lack of transition language.  As the court noted: “We see no beneficial purpose to be served by failing to include a transition word in a claim to clearly delineate the claim’s preamble from the body, and we caution patentees against doing so.”  But, the court also warned that “poor claim drafting will not be an excuse … to infuse confusion into its claim scope.”  The court held that, regardless of the lack of a transition, “game environment” and “information delivery service” are not claim limitations, because they do “not impart any structure into” and instead “merely describe intended uses for what is otherwise a structurally complete invention.” Natural Alternatives Int’l, Inc. v. Iancu, No. 17-1962 (Fed. Cir. Oct. 1, 2018):  Requirements to claim priority to earlier applications must be met on the face of each application in a chain. Natural Alternatives’ patent challenged in inter partes reexamination issued from the eighth application in a chain, and claimed priority back through that chain to the first application of 1997.  During prosecution, the fifth application in the chain, originally a continuation-in-part claiming priority back to the 1997 application, was amended to delete the claim of priority to the earlier four applications.  The petitioner argued that this “broke the chain of priority” for later applications asserting priority through that fifth application, such that patents issued from those later applications were only entitled to that fifth application’s priority (i.e., 2003 versus 1997). The examiner accepted this argument and rejected the claims over the prior art, including over the original 1997 parent application.  The Board affirmed, and the patentee appealed, arguing priority “vested” when the sixth application in the chain—filed days before amendment to the fifth application’s priority—met Section 120 criteria (namely, it was: (a) disclosed per Section 112(a); (b) filed by an inventor named in the previous application; (c) filed before the conclusion of the first application; and (d) it contained a specific reference to the earlier application). The Federal Circuit (Prost, C.J., joined by Moore, J., and Reyna, J.) rejected the “vesting” argument, holding that it “conflates properly claiming priority and demonstrating entitlement to priority.”  The panel reasoned that “examiners and adjudicators cannot be expected to scrutinize the prosecution history of an application and each parent application to determine whether the application would have met Section 120’s requirements at any point during its pendency.”  The court affirmed that, because the fifth application lacked priority to the first, the later application’s priority claim did not satisfy Section 120 and thus was “defective from the start.” Ancora Technologies, Inc. v. HTC America, Inc., No. 18-1404 (Fed. Cir. Nov. 16, 2018):  Claims that recite how an improvement is effectuated can pass muster under step one of Alice. Ancora sued HTC, alleging infringement of a patent for a purported method of restricting the operation of unauthorized software.  Although the patent acknowledged there were “numerous” prior art methods to limit unauthorized software, the patent stored the relevant key in read-only memory so it could not be removed or modified via attack.  HTC moved to dismiss arguing the patent is ineligible under Section 101.  The district court agreed and granted HTC’s motion. The Federal Circuit (Taranto, J., joined by Dyk, J., and Wallach, J.) reversed.  According to the panel, claims can constitute non-abstract improvements if they recite a specific technique that departs from earlier approaches.  In the court’s view, in such cases the determination of patent eligibility can be decided at step one of the Alice inquiry, without resorting to the second step.  Here, the court held that the claims for improving computer security passed muster at step one because the method specifically recites how the improvement is effectuated, including a structure for the key and a specific location in memory for storing that is less vulnerable to hacking. Upcoming Oral Argument Calendar For a list of upcoming arguments at the Federal Circuit, please click here. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert: Blaine H. Evanson – Orange County (+1 949-451-3805, bevanson@gibsondunn.com) Raymond A. LaMagna – Los Angeles (+1 213-229-7101, rlamagna@gibsondunn.com) Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: Appellate and Constitutional Law Group: Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 26, 2018 |
2017/2018 Federal Circuit Year in Review

We are pleased to present Gibson Dunn’s sixth “Federal Circuit Year In Review,” providing a statistical overview and substantive summaries of the 140 precedential patent opinions issued by the Federal Circuit over the 2017-2018 year.  This term was marked by four en banc decisions, as well as significant panel decisions in patent law jurisprudence with regard to subject matter eligibility (e.g., Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), and Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121 (Fed. Cir. 2018)); venue for patent cases (In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017)); and indefiniteness (MasterMine Software, Inc. v. Microsoft Corp., 874 F.3d 1307 (Fed. Cir. 2017)).  The issues most frequently addressed in precedential decisions by the Court over the last year were: obviousness (50 opinions); anticipation (27 opinions); claim construction (24 opinions); jurisdiction, venue, and standing (22 opinions); and infringement (20 opinions). Use the Federal Circuit Year In Review to find out: The easy-to-use Table of Contents is organized by substantive issue, so that the reader can easily identify all of the relevant cases bearing on the issue of choice. Which issues may have a better chance (or risk) on appeal based on the Federal Circuit’s history of affirming or reversing that issue in the past, including the real rate of affirmance on claim construction. The average length of time from issuance of a final decision in the district court and docketing at the Federal Circuit to issuance of a Federal Circuit opinion on appeal. What the success rate has been at the Federal Circuit if you are a patentee or the opponent based on the issue being appealed. The Federal Circuit’s history of affirming or reversing cases from a specific district court. How likely a particular panel may be to render a unanimous opinion or a fractured decision with a majority, concurrence, or dissent. The Federal Circuit’s affirmance/reversal rate in cases from the district court, ITC, and the PTO. The Year In Review provides statistical analyses of how the Federal Circuit has been deciding precedential patent cases, such as affirmance and reversal rates (overall, by issue, and by District Court), average time from lower tribunal decision to key milestones (oral argument, decision), win rate for patentee versus opponent (overall, by issue, and by District Court), decision rate by Judge (number of unanimous, majority, plurality, concurring, or dissenting opinions), and other helpful metrics. The Year In Review is an ideal resource for participants in intellectual property litigation seeking an objective report on the Court’s decisions. Gibson Dunn is nationally recognized for its premier practices in both Intellectual Property and Appellate litigation.  Our lawyers work seamlessly together on all aspects of patent litigation, including appeals to the Federal Circuit from both district courts and the agencies. Please click here to view the FEDERAL CIRCUIT YEAR IN REVIEW Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert: Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Michael Sitzman – San Francisco (+1 415-393-8200, msitzman@gibsondunn.com) Nathan R. Curtis – Dallas (+1 214-698-3423, ncurtis@gibsondunn.com) Please also feel free to contact any of the following practice group co-chairs or any member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups: Appellate and Constitutional Law Group: Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com) Intellectual Property Group: Wayne Barsky – Los Angeles (+1 310-552-8500, wbarsky@gibsondunn.com) Josh Krevitt – New York (+1 212-351-4000, jkrevitt@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3100, mreiter@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.