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Monthly Archives: January 2014

3. The Federal Circuit Restricts Damages for Vicarious Patent Infringement

Back in 2012, the state of vicarious liability in patent cases received a major boost when the Federal Circuit held in Akamai v. Limelight that a method claim could be infringed even though no single entity practiced all elements of the claim.  However, what the Federal Circuit giveth, it also taketh away.  The latter came in the form of a new Federal Circuit decision that held that a good-faith invalidity position could negate any “intent,” which makes it even harder for patent plaintiffs to collect past damages when alleging induced infringement (and probably contributory infringement as well).  

In particular, in Commil v. Cisco, the Federal Circuit held that 1) mere negligence; i.e., “should have known,” is insufficient to establish actual knowledge, which is required to establish induced infringement, and 2) issues of validity should be considered by the jury to determine if a defendant had actual knowledge that it was inducing a valid patent.

In practice, this means that a good-faith invalidity position will shield a defendant from a finding of induced infringement, which will preclude past damages.  Obviously, once a patent is held to be valid and infringed, the plaintiff can pursue damages for induced infringement.

While the holding of Commil is restricted to induced infringement, the same logic would apply to contributory infringement.

BitTorrent Traffic Declines in the US / Grows in Europe

In response to yesterday’s post, a reader sent me a link to a BBC web post from November 2013 about a study of BitTorrent traffic in the United States and Europe.  The results of the study were a surprise – at least to me. In a nutshell, BitTorrent traffic has continued to grow in Europe, while it has declined 20% in the United States.

The study cites many possible reasons for why BitTorrent traffic is declining in the United States; i.e., the 6 strikes policy now followed by many ISPs, URLs of torrent sites being blocked by court order, the use of dark nets, such as “Tor,” and the use of anonymous encrypted lockers to share content.  All of this has some merit; however, I would expect the effects of all of these to be similar in the US and Europe with the exception of the US 6 strikes policy.  I admit that my knowledge of European copyright measures is somewhat lacking, but the article mentions a harsher measure presently in effect in France and a similar measure in the UK.  That gives us some reason to believe that European countries have been taking steps to rein in Internet Piracy as well.

One factor that the article does not mention that happens to be relatively unique to the United States is the deluge of torrent cases filed here in the US.  Unlike Europe, a file sharer in the United States has a real chance of being sued and forced to pay thousands, or, in rare cases, tens of thousands of dollars.  This study is real evidence that the copyright holders are winning – that the threat of lawsuit has actually changed consumer behavior with regards to file sharing in the United States.  There is no doubt that other factors contributed to the 20% drop – some very tech savvy consumers have shifted from BitTorrent to encrypted file lockers, and a few more have shifted from BitTorrent to dark nets, such as Tor or RetroShare.  But the reality is that BitTorrent is still the only file sharing service that is easy enough for almost anyone with a PC to use.  No ifs, ands or buts about it – a drop of 20% in BitTorrent use is a big win for the content companies.

I’ll be the first to admit that this goes contrary to what I have said in the past – probably in this blog.  Until seeing this, it was my opinion that these suits would have no effect at all Internet Piracy – the lure of “free stuff” is a strong one, and the remote possibility of getting sued for “thousands of dollars” seemed to ephemeral to me to make an impact.  But it seems that after suing tens of thousands – or maybe even hundreds of thousands – of person in 2013, the content companies are making an impact.  You can’t argue with results, and I do not dispute that.  Methods on the other hand…we’ll save that for another post.

4. BitTorrent Cases Exploded

BitTorrent cases ran wild all year. The first file sharing case was filed on January 4, 2013 (Vision Films). As of December 20, 2013, well over 300 hundred cases had been filed against thousands of Doe Defendants, and that does not count the “state court” cases that Chicago-based Prenda filed before it imploded. The pace of filings was way higher than in 2012, and even though one major copyright plaintiff switched from filing multi-Doe cases to single Doe cases, a lot more people were caught up in these cases in 2013 than in 2012.  In addition, as we discuss below, the tone of these cases shifted from nuisance to deadly serious.  Nonetheless, for a variety of reasons, the pace of filings may well be slowing.  So far this year, only two mass torrent cases have been filed, and prior to that, the last mass Doe filings had been in October.  While Malibu has been active, they consistently sue only a single Doe at a time.

One factor that may be behind the slowdown in torrent filings, and coincidentally, the biggest file sharing story of the year, is the destruction of Prenda Law and the other entities operated by its principals; i.e., John Steele / Paul Duffy / Paul Hansmeier .  These attorneys, who pioneered the extremely aggressive mass torrent lawsuits that have become so common, ran into a major obstacle in the form of a sanctions order from Judge Otis Wright of the Central District of California.  Until then, they had been one of the most active mass torrent plaintiffs (and probably the only one that more or less everyone agrees deserves the moniker “troll”).  They had even become known for using what some would call inventive (and others would term as clearly preempted and frivolous) State Court cases to uncover the identifying information of thousands of file shares, all of whom received letters seeking thousands of dollars in payment to avoid a lawsuit.  After the sanctions order, however, Prenda appears to have completely ceased its “enforcement efforts.”  Nonetheless, legal issues still linger for this Chicago firm – less than a week before retiring the well regarded Judge Murphy of the Southern District of Illinois found time to write another blistering sanctions order against the Prenda principals.

Another potential cause of the slowdown in filing may be that the courts are becoming less friendly to file sharing plaintiffs  For example, it appears to be the practice of Judge Guzman to immediately sever any mass torrent cases that are assigned to him.  Yet  another possible cause for the slowdown may be that the cases have become too unpopular – sites like dietrolldie.com and fightcopyrighttrolls.com keep a close eye on every transgression that torrent plaintiffs make, and quickly publicize every bad act (intentional or not) that such plaintiffs make.

However, the author believes that single biggest cause of the slowdown is that the economy is improving, and other, more profitable work is likely becoming available to some of the litigators that previously had been filing mass-torrent cases.  The author estimates that on average a  firm representing a standard “mass-Doe” plaintiff (i.e., not Malibu Media) that plays by the rules (i.e., not Prenda) in a case like this probably generates around $150 per hour; while this may seem like a lot of money, it is actually fairly low for intellectual property work.  As the economy improves, it can be expected that the attorneys who pursue torrent cases will be able to get more traditional IP work and make considerably more money with considerably less headaches – trying to collect settlements from working class file shares is difficult at best.  Plain and simple, an improving economy will make these cases a lot less attractive to competent IP attorneys.

On the other hand, even if some of the skilled attorneys presently representing plaintiffs in these cases can find other, more profitable work, the result may only be that other attorneys, perhaps with practices entirely outside of the IP space, will take over the filing of these cases.  To lawyers with family law or criminal law practices, these cases may look like easy money.  Furthermore, even if every other mass copyright plaintiff calls it quits, Malibu Media has shown that it will continue to pursue people who share its content no matter what.  And this is despite paying substantial filing fees (it only sues one defendant at a time), and employing a vast network of attorneys as well as IPP to support its enforcement effort.  The trends on these cases in 2014 will certainly be interesting.

5. Illinois Courts Clarify the Standard for Enforcing Non-Competition Agreements

In late 2011, the Illinois Supreme Court decided the Reliable Fire case, and upended long-standing case law surrounding the enforcement of restrictive covenants in Illinois.  In particular, while the Court reaffirmed that restrictive covenants, including noncompete agreements, are enforceable, and that they must be reasonable, meaning that they must be tied to a legitimate business interest of the employer.  However, the Court rejected that the legitimate business interest must be tied to a) confidential information, or b) near permanent customer relationships of the employer.  Rather, the Court embraced a “totality of the circumstances” test.  The language of the case makes clear that the limitations placed on an employee can be no greater than that which is necessary to protect the legitimate business interest of the employer.

The Reliable Fire case posed a lot of new questions.  If a legitimate business interest could encompass more than confidential information or near permanent customer relationships of the employer, what kinds of employees would be subject to a non-compete, and how far would courts go to enforce those non-competes?

Saddler’s Row v. Dainton, helped to answer both of those questions.  In particular, in this case, the 2nd District Appellate Court determined that a non-compete could be enforced against a Master Saddler to prevent him from working for a close by competitor based solely on his access to the customers of Saddler’s Row.  This determination was made even though Mr. Dainton did not acquire his “Master Saddler” through Saddler’s Row or at their expense.  Further, this decision was made was despite the trial court determining that the agreement was overreaching in claiming a 75 mile geographic radius from the employer.   Saddler’s Row will undoubtedly be cited by many employers in the future seeking to enforce restrictive covenant’s against other professionals, much as the Total Health Physicians case is presently cited.  It will also be cited as an example of an appellate court requiring a trial court to apply a “blue pencil” to modify an overbroad restrictive covenant.

Similarly, several cases illustrated that traditional defenses to non-competes are alive and well.  For example, Fisher/Unitech v. Computer Aided Technology demonstrated that generalized knowledge and experience acquired through employment – even if it was acquired solely through contact with the employer – cannot comprise confidential information sufficient to enforce a non-compete.

2013 A Review of Intellectual Property Litigation in Illinois

Another year gone – another year of motions to dismiss, depositions, discovery disputes, summary judgment motions and trials. And what a year it has been. There have been a number of very relevant developments that affect Intellectual Property litigation in Illinois Courts, and we have been privileged to bring them to you via this blog.  Over the course of the next few days we are going to be posting what we believe are the five most important Illinois Intellectual Property Litigation stories of 2013.    These stories run the gamut of our practice; i.e., patents, trademarks, trade secrets, copyrights, and employee non-compete issues.

We will posting our first story shortly, with the remainder following in due course.  

Countryman Nevada Sues 66 Does in the Northern District

Countryman Nevada has filed two lawsuits suing a total of 66 Doe Defendants who are accused of copying the movie “The Unnecessary Death of Charlie Countryman” using BitTorrent.

The cases are:

Countryman Nevada, LLC v. Does 1-32 : 2014-40

Countryman Nevada, LLC v. Does 1-34 : 2014-41

If you are identified by your ISP as a Doe Defendant in a file sharing lawsuit, you may want to review this article, which contains some helpful tips on how to deal with these kinds of suits:

http://ezinearticles.com/?The-5-Steps-You-Need-to-Take-When-You-Receive-an-ISP-Subpoena-Letter&id=7696216

Atty Ad:  The Law Offices of Konrad Sherinian, LLC with offices in Naperville and Chicago, has successfully defended numerous file sharing cases alleging the use of Bit Torrent to copy movies, music, software and other content other the Internet.  Call (630) 318-2606 or (312) 981-5004 today for a free consultation if you have received a subpoena letter from your ISP.