IP CONNECTIONS CANADIAN & TECHNOLOGY LAW NEWSLETTER.

On the lookout for trolls May/June 2008 The phenomenon endangers Canadian companies that 1 On the lookout for do business in the United States. patent trolls We’ve all heard of trolls – hideous creatures colourful moniker “patent troll” has stuck and who hide under bridges, waylaying unwary has since been widely adopted in the travellers with extortionate demands for a intellectual property field to refer to 5 Parody and the law: when bridge-crossing toll. Surely trolls are mythical stereotypical patent holders having one or is it OK to poke fun? beasts, existing only in scary children’s stories. more of the following characteristics: But it seems that a species of this creature • No products or services of its own, does exist in the real world – the so-called making it easier to focus on litigation. patent troll. And while this creature is said to The troll’s only real assets may be the 6 Helping the environment live primarily in the United States, armed with used to demand licensing royalties through patent pledging patents possibly of questionable quality, it may from alleged infringers. Unlike an ordinary nevertheless waylay unwary Canadian company, the troll does not find litigation technology companies doing business in the to be disruptive to its primary business – United States, with extortionate demands for 7 Recent developments litigation is its primary business. However, royalties, even on technologies that the in brief because it does not produce products or Canadian companies believe they are free to services, the patent troll is immune to use, buy, or sell to others. counterclaims of or What is a patent troll? This term was first unfair trade practices, allowing it to be coined by an Intel attorney in 2001 to describe more aggressive in asserting its patents patent holders whose entire business model than a competitor in the same industry. was based on bringing dubious patent The patent troll has no need or desire to infringement claims against other companies to cross- a defendant’s technology. extract exorbitant settlements. Of course, the This reduces the defendant’s leverage in legitimacy of a patent enforcement strategy is negotiations. Yet the patent troll may gain often in the eye of the beholder, and thus tremendous leverage if it can plausibly some commentators have advocated using a threaten a court injunction to prevent the more neutral term to describe such plaintiffs, defendant from providing its technology for example, “non-practicing entity” (NPE), in the marketplace. When Canadian “patent licensing company”, “patent company Research in Motion faced a U.S. enforcement company”, “patent dealer”, or patent infringement lawsuit with the “patent aggregator”. Nevertheless, the more possibility of its U.S. Blackberry services 2

IP CONNECTIONS MAY/JUNE 2008 • is ariskthat the force ofthese arguments inapplicability orinvalidity inCourt, there arguments abouttheasserted patent’s have to theopportunity make technical covered by thepatent. While defendants about what kindoftechnologies are the patent troll to make outlandish claims as to theirscope ofprotection, allowing asserted patents are vague orambiguous excessively broad claims. Sometimes the even whenthey assertpatents with trolls may have asympathetic audience, in itsfindingofpatentability. Therefore, jury that thePatent Office was mistaken it can bedifficultto convince ajudge or practical matter, once apatent hasissued KSR InternationalCo. v. Teleflex Inc. of thisrationale initsrecent decisionin Supreme Court questionedthestrength and approve patent claims. While theU.S. ofthePatentexpertise Office to examine presumption isthesupposed special evidence. Therationale underlying the although thispresumption isrebuttable by an issued patent ispresumed to bevalid, excessively broad law, claims. UnderU.S. andconsequentlyart, issues patents with poor qualityoroverlooks thebestprior sometimes conducts anexamination of acknowledged that thePatent Office scope butdubiousvalidity. Buying upandasserting patents ofbroad over $600million. reportedly forced to thelawsuit settle for being shutdown by itwas aninjunction, It iswidely , asa • • many ofthecases arguably lack merit. out-of-court even settlements, though simply asastrategy for forcing multiple numbers ofdefendants for infringement certain patent holders are suinglarge have given rise to theperception that phenomenon, thesekindsofnews reports arguably beextreme examples ofthetroll to offer. While theabove two cases may thatsettlement thetroll isonly too eager cost ofdefending themselves incourt, a a suitoutofcourt for far less thanthe standpoint –may prefer instead to settle appear to bestrong from alegal defendants –even those whose cases extremely expensive, andmany case to trial.Why?Patent litigation is few years, buthasonly ever taken one sued around 400defendants over thelast also reports that anotheralleged troll has defendants simultaneously. Troll Tracker alleged patent troll has sued108 ofGeorgia District Northern inwhichan pointed outaremarkable case inthe (http://trolltracker.blogspot.com) has called Patent Troll Tracker multiple settlements. simultaneously to more easily collect Suing large numbersofdefendants to outofcourt. settle considerable, andthussoisthepressure law.U.S. Therisksfor defendants are treble have willfully infringed thepatent, upto as awhole. Ifthedefendant isfound to invention makes to theinfringingproduct economic contribution that thepatented can beway outofproportion to the especially inplaintiff-friendly jurisdictions, damages to plaintiffs. Juryawards, and even hundreds ofmillionsdollars in that have atrack record ofawarding tens and itssympathetic andgenerous juries judgments to dismiss dubiouslawsuits, cases, itsreluctance to grant summary unrelenting pace ofitsdocket inpatent much beloved by trolls dueto the Eastern ofTexas District isajurisdiction that To jurisdiction. take oneexample, the themselves) have noreal connection to defendants (and even thetrolls tactical advantage, even thoughthe plaintiff-friendly to jurisdictions obtaina Trolls are known to suedefendants in be biased infavor ofpatent holders. judicial jurisdictions that are believed to Filing patent infringement suitsincertain not technically trained. may belost onajudge orjurywhoare damages may beawarded under An internet blogger • Engaging in other questionable tactics. specific contribution over the prior art, and Certain trolls have spread out their permit third parties to submit prior art prior to portfolio of patents among dozens of issuance and also to initiate post-grant review different patent holding companies or proceedings within certain time limits, to shell corporations which then become the cancel the claims of a newly issued patent as plaintiffs in legal actions, thereby unpatentable. Due to opposition to some disguising their affiliation with the parent provisions in the Patent Reform Act, the troll and so avoiding scrutiny of their progress of the legislation in the Senate is tactics. Patent trolls have also been currently stalled. accused of suing defendants without How to fight back against the big, bad trolls. having given them proper notice that they Canadian companies that do business in the are considered to be infringing. Various United States can take some practical steps to other complaints have also been made avoid being waylaid by a patent troll. against trolls, including bullying and harassment tactics. • Beware of the friendly “Would you like to take a license?” letter. Patent trolls The backlash against Patent Trolls (“patent sometimes start by sending a company an reform”, etc.). This phenomenon has given rise innocuous letter offering to license their to vigorous debate and calls for patent reform, patents for a particular technology that especially in the United States where most of the company is involved in. The letter the troll activity appears to take place. identifies one or more specific patents In eBay Inc v. MercExchange, L.L.C., 547 U.S. owned by the troll. However, because the 388 (2006), the U.S. Supreme Court weakened letter contains no overt threats, it is often one of the most powerful weapons in the ignored – perhaps even thrown away. This patent troll’s arsenal: the injunction. Prior to is a mistake. The next letter may well be this case, a patent holder could almost always notice of a lawsuit, launched in the troll’s obtain a permanent injunction enjoining the favorite jurisdiction. The purpose of the defendant from practicing the invention if original letter was to put the defendant infringement was proved, regardless of whether on notice that they are infringing without the patent holder was itself practicing the alarming anyone. (Otherwise, the invention. This gave the patent holder defendant could initiate a preemptive tremendous negotiating leverage. However, in strike, for example, by seeking a the eBay case, apparently influenced by the declaratory judgment – in a jurisdiction fact that MercExchange did not actually favorable to the defendant – that the produce or practice its invention, the Supreme patent in question was invalid or not Court held that an injunction should not infringed.) Moreover, having given notice automatically issue based on a finding of to the defendant, the troll is now in a patent infringement. Instead, the court should better position to argue later that its weigh the four equitable factors that are patents are being willfully infringed by the traditionally used to determine whether an defendant – a claim which, if successful, injunction should issue. While an injunction is could lead up to treble damages being not precluded for a non-practicing entity awarded. (i.e., a patent holder who does not actually • Get prompt legal advice. Whether produce or practice its invention), it is no receiving a friendly licensing offer or a longer an assumed success as before. Many more threatening demand letter, it is commentators have remarked that the eBay essential to obtain appropriate legal case appears to be a judicial reaction to patent advice promptly. With such advice, it trolls. should become clearer whether the Similarly, the pending Patent Reform Act of patents cited pose a credible threat. The 2007 is a piece of U.S. legislation that appears risk of liability for infringement or an to be at least partially in reaction to patent adverse injunction being granted should trolls. On September 7, 2007, the House of be carefully evaluated. In some cases, it Representatives passed H.R. 1908, and an may be advisable to obtain a formal legal amended form of the legislation has been opinion from U.S. counsel that the under consideration by the U.S. Senate as defendant does not infringe the patent S. 1145. The proposed provisions in S. 1145 would and/or that the patent in question is affect the ability of patent trolls to arbitrarily invalid. Obtaining such an opinion may choose plaintiff-friendly jurisdictions for their help the defendant later avoid treble lawsuits, allow courts to reduce royalties so damages for willful infringement. In that they relate only to the claimed invention's addition to the specific patents asserted,

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IP CONNECTIONS • MAY/JUNE 2008 • • • to take action. appear to pose acredible threat, itistime quickly. Consider your optionsandtake action cases?). used withotherdefendants orinother What kindoftactics hasthispatent troll been involved inanyotherlitigation? be researched ( track record ofthepatent troll should also danger. Atthisstage, theactivities and or pendingapplications that may pose a patent troll may have anyotherpatents it isworth investigating whetherthe action provides thebestchance of preemptive strike intheform ofaDJ Ingeneral,infringement. a used to obtainadeclaration ofnon- infringement. Obtain adeclaration ofnon- choosing. ofthedefendant’sjurisdiction competent court inafavorable infringement by applying to a of invalidity ofthepatent orofnon- request adeclaratory judgment(DJ) option, asmentionedabove, isto never have beenissued. Asecond with legal requirements andshould claims ofthepatent donotcomply before thePatent Office that the in question.Thisinvolves arguing initiate areexamination ofthe patent technology isfound, oneoptionisto been granted. Ifsuchprior asserted patent should never have technology that may prove that the conducted to search for prior professional invalidity search It may beadvisable to have a Attack thevalidity ofthepatent. considered. insurance contracts should be for thealleged Finally, infringement. may even bear someresponsibility provide (or require) anindemnity, or consider may whetheranotherparty buyers should bereviewed to Agreements withsuppliers and with spoliation ofevidence. emails) to avoid later beingcharged evidence ( should betaken to preserve Inaddition,willful infringement. steps may besoughtto avoid aclaim for infringement andinvalidity opinions reduce Asstated risk. above, non- some basicsteps to evaluate and Control risk. If thepatents cited by thetroll e.g. e.g. It is important toIt isimportant take , hasthepatent troll , documents,files, A DJaction can alsobe [email protected] David Gileff, A. • • • request. potentially devastating reexamination defendant refraining from launching a amount inexchange for the willing to for settle anominal impeaching thetroll priorart, may be a well-organized collection of to thenegotiation table armedwith conducts avalidity search and comes suggests that ifadefendant first terms. However, experience also allow thedefendant to get better and confidential can settlement it mightsound,sometimesanearly Consider settling. willful infringement. sought to avoid thepossibility of However, legal advice should be product to avoid infringement. you may consider modifyingyour and would beeasy to circumvent, patented technology isnotcritical Consider designingaround. troll. information andresources against the other defendants to share possible to reach anagreement with itself may bequite high,itmay be any individualcompany defending against thetroll. While thecost of multiple can settlements beused of suingmultiple defendants to exact Consider joiningforces. chances may beimproved.) troll initiates litigation first, its context oflitigation. (Ifthepatent overcoming anasserted patent inthe Vancouver As unappealing as The strategy If the Parody and the law: when is it OK to poke fun?

In today’s era of pervasive technology, parodies Of course, if the public cannot determine the are everywhere. YouTube is a prime example – difference between the parody and the original the site is littered with video parodies of all trade-mark, trade-mark infringement may kinds. For example, a video parody of the occur. In the U.S., the registration of the James Blunt song “You’re Beautiful”, titled “She domain www.peta.org, used to direct Internet Was Beautiful…I Swear”, has received over two users to a web site called “People Eating Tasty million hits. Animals,” was not considered a parody of the trade-mark PETA owned by the well-known What makes a parody controversial, in the organization People for the Ethical Treatment intellectual property sense, is that in order to of Animals, because users entering the URL have a successful parody, enough of the www.peta.org into a browser would be original work must be taken so that the original unaware of the parody. is recognizable. This copying has obvious implications in both the trade-mark and Copyright law. Under copyright law, the topic copyright fields. of parody is often discussed in relation to music. Weird Al Yankovic has, for example, Trade-mark law. Under trade-mark law, made a career out of creating witty renditions infringement of a trade-mark by a parody mark of famous songs. The official Weird Al is difficult to prove. Consumers are normally Yankovic website indicates that “while the law aware that the parody is a “spoof” of the supports his ability to parody without original and source confusion is therefore permission”, Weird Al does obtain permission unlikely. As a result, trade-mark owners often from the original songwriters. It appears that in attempt to rely on the dilution provision of the the U.S. at least, Al is right: the law does Trade-marks Act claiming that the parody has support the ability to parody without depreciated the goodwill in the original trade- permission. mark. It is clear, however, that dilution does not occur unless the parody mark is used This was tested in a U.S. case involving the commercially. music group 2 Live Crew and the owner of the Roy Orbison song “Pretty Woman”. 2 Live Crew Take for example a case involving the tire was unable to obtain the consent of the owner company Michelin and its “bibendum” design to sell a parody of the Pretty Woman song. (a.k.a. the Michelin Man, or a “beaming Unfazed, 2 Live Crew released the song marshmallow-like rotund figure composed of containing lyrics such as “two timin’ woman tires”), a registered copyright and trade-mark. now I know the baby ain’t mine” and was sued The defendants, attempting to become for copyright infringement. It was ultimately bargaining agents for employees at a Michelin held that the song could be perceived as a plant, distributed leaflets to workers displaying criticism (apparently relating to the naiveté of the bibendum design. In the leaftlets, although the original version that ignored the ugliness of the bibendum sported his famous smile, his street life), and therefore the parody exception foot was raised in an attempt to crush an to copyright infringement applied. unsuspecting worker while a coworker stated “Bob, you better move Canadian courts appear to have less of a sense before he squashes you”. The of humour when it comes to a parody of Court held that because material that is the subject of copyright. In the trade-mark was fact, the courts have specifically held that not used in a parody does not fall under the infringement commercial sense, exception in the Copyright Act because it is dilution could not not considered criticism, prompting some to have occurred. question whether Parliament should create an exception under the Act. This case should be contrasted with an earlier case where a company Parodies will undoubtedly continue to was prevented from selling water proliferate on YouTube and other popular under the name “Pierre Eh!” (an Internet sites. Few people are aware of the admitted spoof on Pierre Trudeau) potential implications of a parody, and it is because it was confusing with and clear, particularly in terms of copyright, that depreciated the goodwill in the parody is no laughing matter. PERRIER trade-mark. Heather E. Robertson, Toronto [email protected]

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IP CONNECTIONS Pledgers are free to choose whichpatents they patents to jointheEco-Patent Commons. Any patent holder can pledge oneormore Commons becomes more widely known. in participatingand asthevirtue inthe implement environmentally-beneficial solutions businesses access thepledged patents to pledged patents willgrow over timeasmore Patent Commons that expect thenumberof and remote controls. Thefounders oftheEco- electronic devices suchasclocks,calculators, method for recycling old cell phonesinto new instead ofconventional packaging foam, anda a corrugated packing insertthat can beused process for treating noxious orpollutinggases, pledged patents cover, amongothers, a IBM inlaunching thisinitiative. Theinitially- Nokia andPitney Bowes, whichhave joined patents from IBMandfour patents from Sony, to theEco-Patent Commons, including27 patentsThirty-one have initially beenpledged consumption. that leads to reduced waste generation orfuel such asamanufacturing orbusiness process gas emissions, ormay bealess direct result, technology to treat polluted water orreduce purpose ofthepatented invention, suchasa The environmental benefitsmay beadirect substances, andrecycling abilityenhancement. environmentally-friendly materials or efficiency, pollutionprevention, useof benefits, suchasenergy conservation or are for inventions that provide environmental Patents pledged to theEco-Patent Commons already successfully metthat challenge. challenge may connect withothers having Also, those facing aparticular environmental being suedfor infringement ofthesepatents. technologies andprocesses withoutfear of implementing environmentally beneficial improve theenvironment by developing and patents that can befreely usedto protect or entrepreneurs and researchers have access to Through theEco-Patent Commons, companies, anyone. other patent holders andmade free to useby The patents willbepledged by companies and for inventions that protect theenvironment. an initiative to create acollection ofpatents (WBCSD), launched theEco-Patent Commons, Business Council for Sustainable Development companies, incollaboration withtheWorld On January14,2008,anIBM-led group ofmajor Helping theenvironment through patent pledging planet isnow beingextended to thesharingofpatented technology. The green movement hasbecome apowerful force. Thisinterest inour MAY/JUNE 2008 implementing apatented waste water Commons. For example, acompany patents notpledged to theEco-Patent inadvertently result ininfringement ofother technology, product orprocess doesnot implementation oruseofapledged patent’s should beexercised to ensure that the patented inventions. However, caution whether they can benefitfrom usingsomeof Commons ontheWBCSD’s website to see the listofpatents pledged to the Eco-Patent Companies, researchers andothers may consult invoked under certain conditions. defensive termination provision that can be rather retain thisabilityby way ofacontractual their abilityto assert thepledged patents, but other words, pledgers donotentirely relinquish asserting itsown patent against thepledger. In assert apledged patent against aparty enforce adefensive termination clause and a pledger, undersomecircumstances, to to thepublic,Eco-Patent Commons allows Furthermore, incontrast to dedicating patents collaborative development efforts. common interests to establishnew identify andconnect withcompanies having through theirpledge. Also,pledgers may contributing to protection oftheenvironment Commons benefitfrom globalrecognition for Pledgers ofpatents to theEco-Patent commercially to important them. provide environmental benefitsbutare not businesses, they may pledge patents that that represent key assets for theircore not pledge environmentally-beneficial patents classifications. While companies willtypically and are classified incertain patent inventions providing environmental benefits wish to pledge, aslongthepatents are for treatment process which is the subject of a the Eco-Patent Commons identified on the pledged patent should ensure that filtering or WBCSD’s website to express their interest; and other equipment designed to implement the examine their patent portfolio to identify one patented process does not violate patent or more patents that provide environmental rights that could be asserted against the benefits and that may have greater value if company. Such potential patent infringement made freely usable by the public. As it grows issues may be addressed by conducting a and becomes more widely known, it is hoped “freedom-to-operate” (FTO – also known as that the Eco-Patent Commons will achieve its “market clearance”) analysis to assess whether objective of enabling us to use patents to implementation or use of a particular protect our most important asset of all – our technology, product or process is likely to planet. infringe third-party patent rights. Martin Tremblay, Montreal Those interested in joining the Eco-Patent [email protected] Commons may: contact any representative of

Recent developments in brief

Leave sought to review ringtone case. Wikitravel travels back to print. Launched by In January of 2008, the Federal Court of Appeal Montreal residents Evan Prodromou and issued a decision whereby the authority of the Michele Ann Jenkins in 2003, Wikitravel adheres Society of Composers, Authors and Music to the same user-content formula as Wikipedia Publishers of Canada (SOCAN) to collect and has similarly met with huge success, with royalties from wireless carriers on the over 30,000 online travel guides now available transmission of ringtones was affirmed. The and over 10,000 enthusiastic contributors each transmission of ringtones to cell phone owners week. The Wikitravel founders have now in response to orders was considered to be a established Wikitravel Press, which provides a communication of a musical work “to the book version of the Wikitravel on-line content public by telecommunication”, and thus that can be purchased on the internet. qualified as a circumstance where SOCAN Borrowing from another successful Canadian, could collect a royalty. However, the Canadian Wikitravel Press uses print–on-demand Wireless Telecommunications Association is technology supplied by Lulu.com, a U.S. site asking the Supreme Court of Canada to review developed by Robert Young (who is also owner the decision on the basis that the transmission of the Hamilton Tiger-Cats). Seen as more user of material covered by copyright is not the friendly than the online information, the books same as copying or reproducing the material, are delivered within a few days of order and and should not be a situation where a royalty are revised monthly. While this move could be applies. Word as to whether the Supreme seen as a backward step from the advantages Court will agree to review the case is awaited of online content, it is actually a clever as technology continues to expand the application of new technology applied to boundaries of copyright law and outstrip the improve a centuries old and much-loved form capacity of current copyright legislation to of communication. provide guidance in situations that arise.

IP CONNECTIONS 7 OTTAWA Smart & Biggar/Fetherstonhaugh is pleased to announce that the firms 55 Metcalfe Street Suite 900 have been named both Trade-mark Prosecution Firm of the Year and PO Box 2999 Station D Trade-mark Contentious Firm of the Year for 2008 by U.K. publication Ottawa ON K1P 5Y6 Canada Managing Intellectual Property magazine (MIP). Smart & Biggar/ t. 613.232.2486 Fetherstonhaugh is the first to be awarded this honour in Canada in two f. 613.232.8440 of MIP’s five categories recognizing excellence in the field of Canadian [email protected] intellectual property law.

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