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This week in IP: Tax service sues Better Call Saul, plastic recycling patents on rise, and more

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Bob Odenkirk speaking at the 2018 San Diego Comic Con for Better Call Saul. Credit: Gage Skidmore

VLSI case halted in Delaware; Netflix sues Bridgerton rip-off; Ex-GSK scientist escapes damages; US Copyright Office debuts new software; Abbvie scores Humira patent thicket win; Russia tables bill on illegal blocking of copyrighted content

Law firm missing ‘plainly red flag’ are words that haunt

“It was plainly a red flag, and it should have been investigated.” These are not words a lawyer delights in reading in a court judgment describing his or her own actions (or lack of).

The line formed part of Mrs Justice Joanna Smith’s judgment in Cabo Concepts v MGA Entertainment, which came out of the England and Wales High Court last Friday, July 29.

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Other Managing IP stories published this week include:

UPC contenders reveal strategy ahead of crunch talks

Breaking: Tillis releases Section 101 bill

Senators' bill seeks to boost patent quality and examination

Spanish IP chief: IP not just a private sector issue

China first-to-file hurdles can be cleared with prep: counsel

Spun-off Russian IP firms look to bag Asian and local clients

Albright sideline dulls allure (and fear) of Texas court: in-house

Funders and sympathy: how counsel win David v Goliath battles

VLSI case halted in Delaware because of disclosures

Delaware chief judge Colm Connolly said VLSI’s patent case against Intel would be halted on Monday, August 4, until the non-practising entity complied with his standing order to reveal every party with an interest in it.

Connolly said VLSI CEO Michael Stolarski had stated that one of the LLCs that owned VLSI Holdings was wholly owned by a closed end investment fund family comprised of six individual funds. But Stolarski didn’t identify those six funds or say whether they were corporations.

Stolarski also said the other six LLCs and three partnerships that owned VLSI Holdings were investment funds, but didn’t identify the funds or their legal status, according to the order.

Connolly of the US District Court for the District of Delaware said questions had been raised over whether VLSI had complied with his order to disclose litigation funders.

The chief judge also criticised the discrepancies between Stolarski's declaration under seal and the redactions VLSI made to its proposed public version of the declaration.

He noted that VLSI had redacted the claim that the six funds that allegedly owned one of the LLC owners had a combined total net worth of approximately $1.8 billion as of June 30 2022.

The non-practising entity (NPE) had also redacted the declaration that the owners of that LLC were composed of pension and retirement funds, sovereign wealth funds, foundations, high net worth individuals, endowments and other institutional investors.

It had redacted the claim that the other nine owners of VLSI were managed on behalf of outside institutional investors.

Connolly stated that he could think of no reason to justify hiding this information from the public.

The Delaware chief judge issued his standing order requiring certain disclosures about litigation funders and requiring parties to disclose every entity with interest in them on April 18.

The patent litigation between VLSI and Intel has garnered a lot of attention, mostly as a result of the NPE winning $2.18 billion in damages from Intel at the District Court for the Western District of Texas in 2021.

Netflix sues unauthorised Bridgerton musical creators

Netflix sued the creators of fan work ‘The Unofficial Bridgerton Musical’ on Friday, July 29 for copyright and trademark infringement in the District Court for the District of Columbia.

The fan work came about after defendants Abigail Barlow and Emily Bear began posting songs based on Season 1 of Bridgerton on TikTok in early 2021. Their YouTube channel described their work as a “full concept album inspired by the hit Netflix show Bridgerton”.

The streaming service filed the suit after the creators of the musical staged a for-profit show at the Kennedy Center in Washington DC, with tickets pricing at up to $149, according to the complaint.

“Barlow and Bear’s conduct began on social media, but stretches ‘fan fiction’ well past its breaking point,” Netflix’s counsel wrote in the complaint.

“It is blatant infringement of intellectual property rights. The copyright and trademark laws do not allow Barlow and Bear to appropriate others’ creative work and goodwill to benefit themselves.”

The plaintiff claimed it had informed the defendants that their works were not authorised. It added that the defendants did not have a licence to use Bridgerton’s IP. Netflix claimed it had offered the defendants a licence that would have allowed them to proceed with their scheduled performances at the Kennedy Center and Royal Albert Hall, continue distributing their album, and perform their Bridgerton-inspired songs live.

Barlow and Bear reportedly refused.

The streaming company stated that it sought declaratory relief, preliminary and permanent injunctive relief, damages and attorneys’ fees.

Ex-GSK scientist escapes damages for trade secrets theft

A scientist who stole trade secrets from GlaxoSmithKline to set up a new company in China does not have to pay any damages, the US Court of Appeals for the Third Circuit ruled on Tuesday, August 2.

The court found no evidence that Yu Xue and co-conspirator Tao Li intended to cause any economic harm to the US pharma company when they stole more than 200 documents.

Xue and Li, two co-founders of the Chinese company Renopharma, pleaded guilty to trade secret theft in 2018 but did not agree they were liable for monetary damages.

The US Department of Justice claimed Xue and Li were liable for intended economic harm against GSK worth more than $1 billion.

The District Court for the Eastern District of Pennsylvania found no evidence that the defendants intended to cause economic harm to GSK, which prompted the government to appeal to the Third Circuit.

But a three-judge panel unanimously upheld the 2021 district court ruling this week, as it wasn’t clear Renopharma planned to develop any products using the stolen documents.

The government cited financial projections that Renopharma used to woo investors as evidence of the company’s intent to compete against GSK.

But the Third Circuit panel backed the district court’s finding that those statements were “mere puffery” and not proof of Renopharma’s expected gains from the trade secret theft.

Xue was represented by ArentFox Schiff (AFS) and Li by Post & Schell.

AFS associate Michael Dearington and John Joseph, principal at Post & Schell, successfully argued the case at an oral hearing in June.

US Copyright Office debuts first stage of software revolution

A new copyright ownership platform that could slash processing times at the US Copyright Office by months opened to the public on Monday, August 1.

The Copyright Recordation System is the first part of the new Enterprise Copyright System, which will eventually include similar tools for registration and licensing.

The recordation system allows members of the public to log information on the transfer of copyright ownership and make online payments.

Paper filings will still be accepted, although the office estimates these will take several months to process compared to just several weeks for submissions made online.

“Our intention for this launch is to continue to expand access to the copyright system to as many members of the public as possible,” said Denise Wofford, assistant register and director at the Office of Copyright Records.

Co-developed by the Library of Congress, the Enterprise Copyright System will integrate most of the services offered by the Copyright Office into a single platform.

The Library of Congress has embraced what it calls a digital-forward strategy, which included the creation of new digital services and IT modernisation.

This week’s recordation system launch was proof of return on that investment, said the library’s director of IT design and development, Jim Karamanis.

“The combination of the library’s seasoned development team, Copyright Office subject experts, and the latest in user-experience design practices guaranteed success,” Karamanis said.

A timetable for the Enterprise Copyright System suggests the office will continue development of other tools this year but doesn’t give a date for public launch.

Patents for plastic recycling on the rise

More than 2,000 patents directed to plastic recycling were applied for last year, according to figures published on Tuesday, August 2.

Law firm Mathys & Squire said 2,149 patents were filed during 2021. The figure, which outlined patents filed through WIPO’s Patent Cooperation Treaty, marked a 7% rise compared to 2020 and an eightfold increase on 2016.

Chinese companies led the way with 1,970 patents filed. That was 1,937 more than India, the runner up.

The figures demonstrate that global brands are searching for a source of recycled plastic due to consumer and regulatory pressure to reduce or even eliminate so-called virgin plastic. Coca-Cola and Pepsi have each pledged to use at least 50% recycled plastic by 2030.

The recycling industry is also competing to develop technology that will produce clear recycled plastic, the firm said. Currently, recycled plastic has a yellow or grey tinge – a far cry from the clear colour consumers expect in a premium product.

Mathys & Squire said the company that perfected a method for clear recycled plastic stood to generate large revenues from licensing.

Chris Hamer, partner at Mathys & Squire in London, said: “The race is on to develop the holy grail of cost-effective, clear recycled PET. That is the key driver behind the surge in innovation we have seen in this area.”

Abbvie scores Humira patent thicket win

The US Court of Appeals for the Seventh Circuit affirmed on Monday, August 1, that AbbVie did not unlawfully block competition by building up a patent thicket around its arthritis drug Humira.

AbbVie's 132 patents related to the drug did not violate competition law and a large number of patents owned by one company was not problematic, the court found.

The court also rejected claims by the plaintiffs, the mayor and city council of Baltimore, that the patents kept generic competitors off the market.

The original patent that covered Humira expired in 2016, but the last of the 132 other patents related to the drug does not expire until 2034.

The original case was filed at the District Court for the Northern District of Illinois in 2019.

That claim also alleged that AbbVie violated competition law due to its agreements to settle patent lawsuits with competitors in exchange for their promise not to introduce Humira biosimilars until 2023. The district court dismissed the case in 2020.

Seventh Circuit judge Frank Easterbrook was unconvinced by the argument on appeal as well the notion that 132 patents was too many for any one company or person to own. Easterbrook also dismissed the notion that a weak patent should not form part of a monopoly.

Russia tables bill on illegal blocking of copyrighted content

Russia’s Ministry of Economic Development has tabled a bill before the parliament that proposes to curb malicious takedown requests and punish offenders, it emerged this week.

“A person who illegally initiated the termination of access to intellectual property in the information and telecommunications network of the internet can be held civilly liable in the form of damages,” said an explanatory note on the Russian government’s website, according to TorrentFreak.

The proposal sought to amend articles 1301 and 1311 of the Russian Civil Code, which deal with liabilities for breach of the exclusive right to a work and infringement of the exclusive right to an object of allied rights respectively.

Under both provisions, offenders are required to pay compensation in the range of 10,000 to 5,000,000 rubles ($165 to $83,000) to rights owners.

If the draft bill is enacted, IP owners would have a similar right to claim compensation in wrongful takedown cases.

The draft law also proposed to ease intermediary liabilities.

Russian law currently requires websites to remove infringing content from their portals within 24 hours of receiving takedown notices.

The new bill proposed to hold the sender of a malicious notice liable in the event a website took down legal content based on their request.

In such a case, the injured party could claim compensation directly from the notice sender.

Tax service sues AMC for TM misuse in Better Call Saul

US-based accounting firm Liberty Tax Service sued AMC Networks and Sony Pictures before the US District Court for the Southern District of New York on Monday, August 1, for misusing its trademarks in an April episode of the hit TV series Better Call Saul.

The tax preparer also alleged trade dress infringement, dilution, defamation, disparagement, and injurious falsehoods in its suit.

The suit revolved around AMC’s depiction of a fictional Sweet Liberty Tax Services office, which fan-favourite characters Craig and Betsy Kettleman used to run an unethical business.

Before initiating the suit, the plaintiff had sent a cease-and-desist notice to AMC in April.

The accounting firm argued that AMC’s use of the Liberty Tax Service name and a Statue of Liberty logo violated its registered trademark rights and painted its business in a negative and disparaging light.

“Out of all the names defendants could have used, they decided not to be original at all, but instead rip off the famous Liberty Tax trademarks, which have been used for over 25 years,” plaintiff counsel wrote.

The defendants’ acts also resulted in the loss of reputation and goodwill, the tax firm alleged. It sought a permanent injunction, damages, accounting of profits, and attorneys’ fees as reliefs from the New York court.

Better Call Saul is a spin-off of the critically acclaimed TV show Breaking Bad. When AMC aired the controversial episode in April, it was seen by 1.4 million viewers.

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