Intellectual Property Newsletter
March 2000, Vol. 39, No. 2

By Daniel Kegan. Kegan & Kegan, Ltd.

Floating in the mid-Pacific, the record-breaking Academy Award-winning film enlightens the dark deck of the cruise ship. Door prize merchandise multiplies the festive merriment--Tshirts, sunglasses, and towels all displaying the famous film trademark. But for intellectual property investigator, Mark Trade™, it was a dark and stormy night: the film and the merchandise were counterfeits, unauthorized by the copyright and trademark owners.

Infringement was clear, jurisdiction was murky. Intellectual property rights are generally territorial. In the United States trademark rights are based on use, with the first to use gaining priority. Obtaining a federal trademark registration creates constructive use as of the application filing date. In many foreign nations, trademark rights accrue to the first to file; if you have no national registration then few trademark rights are enforceable.

How to protect against intellectual property infringements on cruise ships, airplanes, and for the future-thinking, outer space? By looking at the developed admiralty law. (For a general overview see Grant Gilmore and Charles L Black, Jr., The Law of Admiralty, 2nd ed, 1975).

Early international law extended national jurisdiction about three miles into the ocean (some say related to cannonball range), thereafter national sovereignty ended. The Outer Continental Shelf Lands Act of 1953 (43 USC 1331-1356) defined the Outer Continental Shelf as all submerged lands lying seaward of State coastal waters (three miles offshore) which are under US jurisdiction, extending national jurisdiction for artificial structures to about 200 miles. Beyond 200 miles, the ship's law applies.

A ship is considered part of the nation for which the ship is registered. Just as many US businesses are incorporated in Delaware for its perceived favorable corporate laws, many ships serving the United States are registered in foreign nations, such as Liberia and Panama.

United States laws generally have no extra-territorial reach. However, if activity within the United States enables foreign infringement, US jurisdiction may ensue. Leatherman Tool Group Inc v Cooper Industries Inc, 47 USPQ2d 1045 (D OR 1997) . (Extra-territorial injunction granted where prior trade dress rights established and some effect on Commerce); Los Angeles News Service v Reuters Television International Ltd, 149 F3d 987, 47 USPQ2d 1349 (9th Cir. 1998) (Extraterritorial infringement, US defendants enabled foreign copyright infringement and are liable).

Demand and complaint can readily be served on the ship's US corporate representatives. But did an infringement of a US registered trademark occur on a foreign registered ship in international waters? Arguments could be made for each side. Another resolution is to obtain trademark registrations from the jurisdictions that often register cruise ships.

Fly me to the moon. Aircraft are nationally licensed. In the US, the Federal Aviation Administration regulates aircraft. Airplanes over the United States are generally subject to the state law below and pre-empting federal law. Consider the citizenship and medical malpractice issues for an assisted birth over diverse states and nations. Over international waters, choice of law and jurisdictional issues similar to ships apply.

Above about fifty miles, traditional admiralty principles shift into space law. (It would be very confusing for moon law to change as national perpendiculars slipped with rotating moon and earth.) The 1967 Outer Space Treaty provides that "[o]uter space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means." (Id., Article 2). Space objects are registered with the United Nations under The Convention on The Registration of Space Objects Launched into Outer Space, Open for Signature, January 14, 1975, 28 U.S.T. 695, T.I.A.S. No. 8480, 1023 U.N.T.S. 15. The space launch site may also have contributory liability. Imagine an in rem copyright infringement action against a communications satellite or a contributory infringement action against a launch site.

In rem actions. Admiralty law is also the home of in rem proceedings, against the offending property rather than the owning party. An early trademark case that established the admissibility of survey evidence was in rem. United States v 88 Cases, 187 F2d 967 (3rd Cir. 1950), cert. denied, 342 U.S. 861 (1951). Misbranding cases by the Food and Drug Administration, which may be in rem, have strong similarities to trademark confusion issues. Kegan & Lidman, United States Federal Food and Drug Administration May Consume Food Trademarks, 87 Trademark Reporter 199, March-April 1997. The Anticybersquatting Consumer Protection Act, effective November 29, 1999, now permits in rem actions against infringing or diluting Internet domain names. 15 USC 1125(d)(2)(A).

An in rem action against multiple offending Internet domain name registrations achieved initial but short-lived judicial approval. Porsche Cars North America Inc. v Porsch.com (ED VA 99-0006-A, June 9, 1999). Unlike other sections of the Lanham Act and the Tariff Act, which specifically authorize actions against goods imported in violation of the US trademark laws, the Federal Trademark Dilution Act only directly addresses remedies against persons. Citing Shaffer v Heitner, 433 US 186 (1977), the district court decided in rem jurisdiction without constitutionally-permissible in personam jurisdiction over persons with an interest in the res would be improper. Also see Sterling Consulting Corp. v Indian Motorcycle Trademark, 44 USPQ2d 1959 (D CO 1997) (In rem trademark complaint dismissed, due process jurisdiction also difficult).

Most of the Porsche-related domain name registrants in the case were known. The court held that due process required at a minimum some distinction between registrants who can be identified and those who cannot. See Mullane v Central Hanover Bank & Trust Co., 339 US 306 (1950). Plaintiff Porsche had not made such a showing. Since the currency and depth of Internet domain registrant identification varies with differing national domain registrars, a successful in rem action against a domain name registration may yet be decided.

Ahab is old, the Internet and space shuttles new. The Internet now dominates older fishnets. But investigator Mark Trade and his counsel Patrick Copee Wright™ may be ageless as they fight for truth, justice, and intellectual property rights.

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Acknowledgment. William H Theis (admiralty), Shellow Shellow & Glynn SC, 222 E Mason St, Milwaukee WI 53202 (414=271-8535; Fax 414=272-5441), Jeffrey G Liss (space law), 180 N LaSalle St #2401, Chicago IL 60601 (312=857-2000; Fax 312=782-4033; E@ JGLJGL@aol.com), Joe Bosco (aviation) Kaplan Begy & von Ohlen, One First National Plaza 51st Flr, Chicago IL 60603 (312=345-3000; Fax 312=345-3119) and Michael Sehr (aviation) CNA Insurance, CNA Plaza, Chicago IL (847=866-8715; Fax 630=719-6876; E@ michael.sehr @cna.com) assisted with the admiralty, space, and aviation perspectives.

New law affects patents, copyrights and the Internet

By John M. Augustyn, Leydig, Voit & Mayer, Ltd.

On November 29, 1999, President Clinton signed a bill (H.R. 3194, Pub. L. No. 106-113) containing changes affecting patents, copyrights and the Internet.

Patent changes

The principal patent provisions include:

1 A Prior User Defense has been added in cases involving patented methods of doing or conducting business. The defense is available on the date of enactment but does not apply to any action of infringement that is pending on that date;

2 Patent applications will be published 18 months after filing if the inventor also files a foreign patent application. Publication of domestic patent applications will become effective one year after enactment and will apply to all applications filed on or after that date;

3 Inter partes patent reexamination will be permitted for third-party requesters. Inter partes reexamination will become available on the date of enactment and will apply to any patent issued on or after that date;

4 Patent fees will be reduced and trademark fees may be increased. These changes will take effect 30 days after enactment; and

5 The PTO will be reorganized as a "performance based operation," with continued Commerce Department authority over policy, but greater PTO control over management and administration. This provision must be implemented four months after enactment.

Internet changes

The legislation also limits cybersquatters who register well-known marks and names of others as Internet domain names. The liabilities under the act apply to all domains registered on or after the date of enactment, but no damages are recoverable with respect to registration, trafficking or use of a domain name that occurs before the enactment date.

Copyright changes

1. Satellite TV licensing

The law creates a new compulsory license under the Copyright Act allowing satellite carriers to provide local broadcast signals. This provision is effective retroactively to July 1, 1999, however, "No satellite carrier shall be required to carry local television broadcast stations *** until January 1, 2002."

2. Work made for hire

Under section 101(1) of the Copyright Act, a work for hire is a work prepared by an employee within the scope of his or her employment. Under section 101(2), it is a work specially ordered or commissioned in writing as a work for hire, for use as one of several listed categories of work. The law adds "sound recordings" to the nine categories of works listed as eligible for work-for-hire treatment.

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Federal patent law preempts state law on inventorship

By John M. Augustyn, Leydig, Voit & Mayer, Ltd.

The U.S. Court of Appeals for the Federal Circuit ruled that federal patent law preempts state law standards for determining inventorship. University of Colorado Foundation, Inc. v. American Cyanamid Co., Fed. Cir. Nos. 97-1468 and 98-1113.

American Cyanamid improved a prenatal multivitamin supplement and applied for a patent on the reformulated product. The application named an American Cyanamid chemist, Mr. Ellenbogen, as the inventor, and issued as U.S. Patent 4,431,634.

The University and researchers at the University sued Cyanamid and Mr. Ellenbogen, claiming that the doctors invented the product and that they communicated the invention to Mr. Ellenbogen. The University alleged state law claims of fraudulent nondisclosure and unjust enrichment.

The trial court applied state law rather than federal patent law and found that the University researchers, not Mr. Ellenbogen, were the inventors of the product.

On appeal, the Federal Circuit first considered whether the state claims of fraudulent nondisclosure and unjust enrichment are preempted by federal patent law. After examining Colorado law, the court found no field preemption nor conflict preemption of the two causes of action.

However, the Federal Circuit ruled that federal patent law preempts the field for determining inventorship, explaining as follows:

An independent inventorship standard under state law would likely have different requirements and give rise to different remedies than federal patent law... The federal Patent Act leaves no room for states to supplement the national standard for inventorship. Title 35 contains explicit and detailed standards for inventorship.

The Federal Circuit vacated the district court's conclusion that the University researchers invented the claimed subject matter in the patent. On remand, the district court was directed to apply federal patent law principles to decide inventorship under the patent.

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A sales offer with product drawings did not establish
on-sale validity for method patent

By John M. Augustyn, Leydig, Voit & Mayer, Ltd.

Recently, the U.S. Court of Appeals for the Federal Circuit held that an offer to sell a device (which included drawings of the device but not drawings of the method) did not establish on-sale invalidity because the drawings did not reveal the claimed method. Tec Air Inc. v. Denso Mfg. Michigan Inc., Fed. Cir., No. 99-1011. According to the court, Pfaff v. Wells Electronics, Inc. did not remove the requirement that the subject matter of the commercial offer for sale "be something within the scope of the claims."

Tec Air is the owner of U.S. patents 4,047,692 and 4,107,257 on a method and device for making properly balanced injected-molded fans. In the past, the fans were balanced by placing deposits of plastic in appropriate locations on the fan. The patents disclose a method of inserting adjustable screws into the mold that is used to form the fan hub.

Tec Air sued Denso Mfg. Michigan Inc. for infringing the patents. Denso contended that Tec Air offered its invention for sale to customers more than one year before the filing date of the patent applications. Tec Air responded that its offers to customers did not specify the new balancing technique, and that Tec Air did not intend to use the new method when it made its offers to the customers.

The court was not persuaded by Denso's argument that the use of the drawings in the price quotation should invalidate the patent because the drawings did not reveal the method of making the fans. The court stated that "Pfaff did not remove the requirement that the subject matter of the commercial offer for sale 'be something within the scope of the claims.'"

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Member wins the 2000 Lincoln Award Legal Writing Contest

IP Council member Aaron Brooks <abrooks@holmstromkenneyd.com> of Holmstrom & Kennedy in Rockford, won the 2000 Lincoln Award Legal writing Contest with "The Cautious Interplay Between Trademarks and Internet Domain Names." 88 Illinois Bar Journal 74 (February 2000).

Abe-- A Better Essay

The Intellectual Property Section of the Illinois State Bar Association has established "A Better Essay" (Abe) Program, under which faculty at Illinois law schools may submit select articles by law students for consideration for publication in the section's newsletter, "Intellectual Property."

Leadership of the ISBA and its many sections receive the Intellectual Property newsletter, as well as intellectual property (IP) practitioners. IP-oriented articles may be targeted to general practitioners or to IP-oriented attorneys. Recent issues of the Intellectual Property newsletter are available on the ISBA's Website at <www.isba.org>.

With several law schools in Illinois, intellectual property faculty at each Illinois law school may select a few nominated essays for publication. The student author and faculty member are responsible for basic content and cite checking. Publication remains in the discretion of the Intellectual Property editor.

With a short submission-review-publication period, the newsletter brings recent developments and opinion to the Illinois Bar. Law review articles are inappropriate for the newsletter. Typical Abe articles will be about two to ten double-spaced pages, focusing on current issues and trends. We value clear, concise plain English writing with short sentences. We prefer the contemporary University of Chicago "Maroonbook" for citation style, and accept classic Harvard Blue Book citations. Case names in italics; abbreviations--including v for versus--do not require periods; decision year in parentheses after the cite; unreported cases identified by court, docket number, decision date. Common abbreviations include USPQ2d, Ill 2d, Ill App 3d, NE2d, Ill Dec, F2d, F Supp, S Ct, L Ed 2d, US.

By submitting an article, the author is granting a license for minor editing, for use of the article in the paper and Web newsletter, and for possible reprints in various media, including paper, computer disk, and online electronic versions.

A paper and computer disk (Macintosh or Windows; Microsoft Word, WordPerfect, or ASCII text) or email version should be submitted to: ISBA IP Newsletter Editor, Daniel Kegan, Kegan & Kegan, Ltd., 79 W Monroe St #1320, Chicago IL 60603-4969, <info@keganlaw.com>. Faculty may direct questions and comments to the editor, Daniel Kegan, at 312/782-06495, ext 21.

New IP fees

Some United States patent, trademark, and copyright fees have recently changed.

Trademark fees, Effective January 10, 2000 <www.uspto.gov>

$325 Application for Registration, per class

$150 Request for six-month Extension to File Use, per class

$400 Application for Renewal with Use, per class

$100 Section 8 (Use)

$200 Section 15 (Incontestability) Affidavit, per class

$300 Opposition Notice or Cancellation Petition, per class

$100 Six Month Grace fee, per class, per Use or Renewal

Patent fees, Effective December 29, 1999 & January 10, 2000 <www.uspto.gov>

$150 Provisional Application Filing fee (Non-small entity)

$ 75 Provisional Application filing fee (Small entity)

$690 Utility filing fee (Non-small entity)

$345 Utility filing fee (Small entity)

$310 Design filing fee (Non-small entity)

$480 Plant filing fee (Non-small entity)

$110 Extension for Response One Month (Non-small entity)

$2050 Extension for Response for Five Months (Non-small entity)

$690 Submission After Final Rejection $1210 Utility Issue fee (Non-small entity)

$430 Design Issue fee (Non-small entity)

$580 Plant Issue fee (Non-small entity)

$830 Maintenance fee, Due at 3.5 years (Non-small entity)

$1900 Maintenance fee, due at 7.5 years (Non-small entity)

$2910 Maintenance fee, due at 11.5 years (Non-small entity)

$130 Six Month Late Payment Surcharge (Non-small entity)

$690 Reissue fee (Non-small entity)

Copyright fees, Effective July 1, 1999 (Some fees may change in 2001) <www.loc.gov/copyright>

$30 Application for Registration

$75 Mask Work Application for Registration

- Vessel Hull Application for Registration (fee subject to change, see Website)

$45 Application for Renewal

$500 Special Handling for Registration of Qualified Copyright Claims

$200 Appeal fee

$50 Recordation of a document, for first title

$15 Recordation of additional one to 10 titles

Intellectual Property Newsletter March 2000, Vol. 39, No. 2

Intellectual Property Newsletter
March 2000, Vol. 39, No. 2