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Corporate Counsel Connect collection

December 2014 edition

Fees awarded to non-infringers; enforceability of browsewrap agreements; induced patent infringement

Fees awarded to non-infringers

Two recent circuit court decisions highlight the need for companies to clearly identify their intellectual property (IP) assets and retain records of updates and other IP modifications on an ongoing basis.

In InDyne, Inc. v. Abacus Tech. Corp., the Eleventh Circuit affirmed an award of attorneys' fees to the copyright defendants after the plaintiff failed to identify the versions of its software allegedly infringed. Similarly, in Fair Wind Sailing, Inc. v. Dempster, the plaintiff Fair Wind's inability to identify its allegedly infringed trade dress with reasonable specificity resulted in both:

  • The district court awarding attorneys' fees to the defendant on Fair Wind's unjust enrichment claim.
  • The Third Circuit remanding for the lower court to consider additional attorneys' fees against Fair Wind under its trade dress claim.

Although these decisions addressed diverse IP rights and considered fee awards under different standards, the decisive factor in each case was the plaintiff's failure to properly identify and produce the IP asset at the heart of its claims. This gives courts new precedent for censuring plaintiffs who inadequately identify their allegedly infringed IP.

Companies should therefore:

  • Be prepared to clearly describe the specific IP they profess to own or allege to have been infringed.
  • Maintain a version management system to record and retain all numbered versions and upgrades of their proprietary software, if applicable.

For more on proving copyright infringement, see Practice Notes, Copyright Infringement Claims, Remedies and Defenses and Copyright Litigation: Analyzing Substantial Similarity.

For more information on trade dress protection and enforcement, see Practice Note, Trade Dress Protection.

Enforceability of browsewrap agreements

Companies using online browsewrap agreements should evaluate the enforceability of these agreements, given a Ninth Circuit decision holding that the Terms of Use (TOU) presented in a browsewrap agreement did not establish a website user's unambiguous assent to the TOU's arbitration provision.

In Nguyen v. Barnes & Noble Inc., the plaintiff sued Barnes & Noble alleging deceptive business practices and false advertising when Barnes & Noble canceled orders for a handheld tablet after experiencing unexpected demand. Barnes & Noble unsuccessfully moved to compel arbitration, arguing that the plaintiff had constructive notice of, and was therefore bound by, its website TOU's arbitration provision. The plaintiff argued he was not bound because he had neither clicked on the TOU hyperlink nor read the TOU.

On appeal, the Ninth Circuit found that while a browsewrap agreement presenting terms through a hyperlink can create a binding contract, Barnes & Noble's TOU did not provide the actual or constructive notice needed to establish mutual assent. While Barnes & Noble posted the TOU hyperlink prominently on each web page, it did not:

  • Otherwise provide users with notice of the browsewrap agreement's terms, for example, through noticeable warnings that continued use of the site would bind users to the TOU.
  • Prompt website users to affirmatively express assent.

Companies using these agreements should:

  • Evaluate the notice they provide to users.
  • Consider means of obtaining affirmative assent, for example, by posting clickthrough agreements requiring users to click a button to show assent.

For a website terms of use template, see Standard Document, Website Terms of Use

Induced patent infringement

Patent owners should be aware of a recent US Supreme Court decision that significantly narrows the scope of induced patent infringement, particularly for software and business method patents.

In Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court held that liability for induced patent infringement under 35 U.S.C. § 271(b) only exists if there is direct infringement by a single entity under 35 U.S.C. § 271(a). The Supreme Court rejected the Federal Circuit's holding that inducement liability does not require direct infringement attributable to a single entity.

The Supreme Court left intact the direct infringement standard in Muniauction, Inc. v. Thomson Corp., where the Federal Circuit held that direct infringement of a patented method exists if a party either performs:

  • Every step of the claimed method.
  • Some (but not all) of the claimed steps and controls those who perform the remaining steps.

In Limelight, the Supreme Court found no induced infringement because Limelight failed to perform one method step and did not control its customers' performance of that step.

As a result of the Limelight decision:

  • It will be easier to defeat induced infringement claims, especially for software and business method patents.
  • Discovery concerning an accused infringer's control over other parties' performance of method steps will assume a key role in proving divided infringement.
  • Patent owners will draft patent claims that focus on the actions of a single entity so that they can allege direct infringement.

For more information on patent litigation and patent infringement claims and defenses, see Practice Note, Patent Infringement Claims and Defenses .

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