The seminal Alice v. CLS Bank lawsuit provided an arsenal of invalidation weapons for patent defendants across the country. Alice was particularly relevant to software patents because it held a large swath of software patents to be invalid – particularly those that did no more than implement an abstract idea on a general purpose computer.

The defense bar pounced on this new opportunity. Following Alice, defendants filed motions to dismiss against nonpracticing entities and others who asserted software patents in patent litigation. Many of those motions were granted until courts eventually hesitated to grant relief in the earlier stages of the lawsuit—instead preferring to analyze patentable subject matter once the claims of the patent were construed.

1. Geocomply Case

The District of Delaware issued a pair of orders last week that shows the pendulum may be swinging back to the early post-Alice days. GeoComply Solutions, Inc. (which, to be clear, is not an NPE) recently found themselves on the losing end of a motion to dismiss by XPoint Services. The patent at issue determined a user’s geographic location and prevented users from making sports bets within a state where sports betting was illegal.

Judge Bryson sat on the case by designation. He found the claims to be invalid under Section 101 for lack of patentable subject matter and declined to wait until after Markman to make the determination. Bryson found the patent was directed to the abstract idea of “determining the location of a device based on geolocation information and programs present on the device,” and that the claims did not include any additional inventive concept.

2. Wireless Discovery Case

The same week, Judge Williams dismissed a complaint filed by an NPE named Wireless Discovery, LLC in the District of Delaware. Here, too, the claims were analyzed under Alice and found unpatentable as being directed to the abstract idea of “simply exchanging information about people based on their location and membership in an organization.” The Court found no inventive concept because “the computer components recited in the claims are used for their conventional purposes.”

These decisions represent a stark change from the more conventional practice of denying motions to dismiss until after Markman. The District of Delaware appears to be taking a “cut to the chase” approach to patent-eligibility and determining this critical gating issue in the early stages of litigation. It remains to be seen whether these two cases are outliers or indicative of a going-forward trend. But for now, defendants will find hope that their case may be resolved sooner rather than later, with an old friend providing the basis for invalidity.

A recent motion for preliminary approval of a class action settlement filed in federal court in Georgia will bring to a close claims asserted on behalf of a class of Porsche owners for a purportedly botched over-the-air (“OTA”) software update sent to their vehicles. But a recent decision by a California federal court suggests that manufacturers may be able to avoid claims for violation of the Computer Fraud and Abuse Act (“CFAA”) so long as they do not “blatantly misdescribe” the OTA updates they transmit to vehicle owners. Taken together, these cases signal the challenges automakers will face in defending software malfunction cases and the benefits of robust disclosure when transmitting OTA software updates.

Proposed Settlement in Bowen

In Bowen v. Porsche Cars, N.A., Inc., filed in the U.S. District Court for the Northern District of Georgia in January 2021, the owner of a 2011 Porsche vehicle filed suit based on a claim that a signal transmitted by Sirius XM Radio and “facilitated” by Porsche during a 2020 Memorial Day weekend promotional campaign caused a serious malfunction in the “infotainment” system of his vehicle. According to the complaint, an OTA software update to the Porsche Communications Management (“PCM”) unit in the vehicle caused the PCM to “continuously reboot,” causing a range of problems including malfunction of the system and draining the vehicle’s battery.

In a September 2021 order, the court granted Porsche’s motion to dismiss claims for negligence and unjust enrichment, but found that Porsche must answer the vehicle owner’s claims for violation of the CFAA and trespass to personality. The court found that “[t]he intent element under the CFAA requires merely that access to a computer system not be a careless or inadvertent mistake,” so that “either directly sending or facilitating the transmittal” of OTA updates could trigger liability.

The unopposed motion for preliminary approval, filed by plaintiff vehicle owners in the Bowen case in January 2023, calls for the certification of a class of “entities and individuals in the United States who, as of May 20, 2020, owned or leased . . . any Porsche vehicle equipped with an XM radio antenna and PCM 3.1 which is the sole PCM model to have been impacted by the rebooting at issue).” The proposed settlement requires Porsche to fund up to $7,500 in repairs per affected vehicle; provide compensation for class members who have already paid out-of-pocket for repairs; and give owners who have not yet been able to obtain satisfactory repairs the ability to do so for up to a year after approval of the settlement. Porsche also agreed to pay up to $1,975,000 in attorneys’ fees and another $75,000 in costs. In their motion for preliminary approval, the plaintiff vehicle owners argued that “this relief approaches—and in some ways may exceed—the level of compensation that realistically may have been obtainable after a successful trial.”

Other OEM Has More Success on Motion to Dismiss

Another major auto manufacturer recently faced a CFAA lawsuit based on faulty OTA software updates, but succeeded in disposing of the case on a motion to dismiss. In that case, a putative class action filed in the U.S. District Court for the Central District of California in January 2021, the plaintiff vehicle owners claimed that the manufacturer had manipulated their vehicle batteries through unauthorized software updates that resulted in diminished battery capacity in violation of the CFAA, as well as breach of warranty in violation of the federal Magnuson-Moss Warranty Act and California’s Song-Beverly Act.

In a May 12, 2022 order granting the manufacturer’s motion to dismiss, the court rejected the CFAA claim on several grounds. See Fish, 2022 WL 1552137 (C.D. Cal. May 12, 2022). First, the court held the vehicle owners failed to plead the requisite $5,000 in damages within the “narrow conception of loss” under the CFAA, which confines losses to the reasonable costs to restore a system to its condition prior to the offense. But the vehicle owners had alleged only that the manufacturers OTA update had purportedly diminished the value of the battery system, not that they actually incurred any costs in attempting to repair the alleged damage.

Second, the court addressed the meaning of “unauthorized access” in the context of the CFAA, and explained that the concept of exceeding authorized access “does not apply to individuals with improper motives who simply utilize access that is ‘otherwise available to them.’” Because the manufacturer had unfettered access to the vehicle owners’ media control units and batteries, “the fact that [the manufacturer] allegedly damaged these systems without [the owners’] consent is irrelevant.” The court left room for claims under the CFAA where a manufacturer is alleged to have “blatantly misdescribed the nature of the . . . updates,” but noted that the plaintiff vehicle owners in that case had failed to do so.

Key Takeaways

Both Bowen and Fish effectively were resolved at the pleading stage on motions to dismiss. In Bowen, the manufacturer settled after an unsuccessful loss on a motion to dismiss, presumably due to the cost of defense and risk of loss given the potential size of the putative class. But the Fish case suggests that manufacturers may be able to score early victories and avoid liability through robust disclosure to vehicle owners concerning OTA software updates prior to installation of those updates.

Utility patents are for functional inventions. Design patents protect the look of something functional, regardless of whether the functional aspects are new. Because of this, a popular use of design patents is to protect the outside of common consumer products. What’s more common than the written word?

Increasingly, companies are investing in designing unique and aesthetically pleasing typefaces. A typeface is sometimes referred to as a “font,” although these two concepts are slightly different (technically, a font is a typeface having a specific size). A basic typeface is a set of characters and numerals, e.g., each of the 26 letters and the numerals 1 through 10. A company can use a unique typeface to convey pretty much anything on any of its products, its advertising, its website, and any other place a company would publicly use the written word. Why would a company want to design a unique typeface? Perhaps they view the publicly available typefaces as boring. Or perhaps there’s a typeface that could align with the company’s ethos.

Design patent protection can be a strong enforcement tool. By statute, design patent owners can recover a form of “profit” earned by the infringer. Such damages are on top of equitable remedies that courts may order, such as injunctions. The broad scope of damages and remedies afforded to an owner of a typeface design patent is, in some ways, consistent with the relative “ease” of infringement. It can be relatively easy for an infringer, who mass produces a product, to instruct its manufacturer to print with a different typeface. Every single product would then contain an infringing typeface. Throw the book at them, Mr. Gutenberg!

Below are a couple examples of figures from design patents on typefaces:

Here, the design patent figures use solid lines for every character. This is important because the solid line defines the scope of protection and limits the design patent to the solid-lined illustrations. The patent owner could have used dotted lines for subject matter that was less important to the design and such lines would not have narrowed the scope of protection. It may not be necessary to protect every single part of the “glyph” but just the ones that are most important.

Finally, there could be disadvantages to protecting a typeface with a design patent. Namely, anything protected by a design patent will enter the public domain generally 15 years after the patent office issued the design patent. That means after those 15 years pass, then anyone can use the typeface as far as patent law is concerned. This could be problematic if a company is still heavily relying upon the typeface as a source of unique design for its brand. Moreover, protection under other forms of intellectual property could last far longer than a design patent. Recent law suggests that a unique typeface could function as a signifier of origin, or in other words, as a trademark. To allege trademark infringement, a typeface owner would need to allege a claim that a consumer is confused between two companies because one has used the others’ typeface. Of course, the typeface owner would also have to prove that consumers associate the typeface with the company that owns it.

It’s never an easy question for a company to decide whether to protect some aspect of its business through IP law, and then which form it should choose for that protection. But, for those investing in unique typefaces, at least the question can be somewhat narrowed to design patent protection, or unfair competition. Either way there’s a good chance at having the last word against an infringer.

The Super Bowl is one of the most highly anticipated events in the world of sports, attracting millions of fans, advertisers, and sponsors from around the globe. Because of this, Super Bowl advertisements are plentiful both before and during the game. However, keen observers may notice that, while some companies directly refer to the event in their ads (e.g. the “official soft drink of Super Bowl LVII”), others refer only vaguely to the “Big Game” without mentioning the teams or any other overt references to the Super Bowl. Of course, this is because the name SUPER BOWL is itself a registered trademark owned by NFL Properties, LLC (“NFL”).

Most trademarks are registered to one or, at most, a handful of commercial fields. But the NFL went a step further to expand its rights in the SUPER BOWL name. The SUPER BOWL mark is registered in connection with everything from entertainment and television broadcasting services to apparel, toys, jewelry, and cell phone covers, to name but a few. What is more, the NFL vigorously polices against unlicensed uses of its SUPER BOWL trademark, such as a soup company trying to register the name SOUPER BOWL. To put it simply, the NFL will do everything it can to prevent any unauthorized commercial use of the SUPER BOWL mark, regardless of the field.

Accordingly, companies considering running any Super Bowl (or “Big Game”) advertising should proceed with caution, or risk ending up in the red zone (and not in a good way).

Seyfarth earned high rankings in the 2023 World Trademark Review 1000, with nine lawyers and four firm offices singled out.

Lauren Gregory Leipold (Atlanta) gained recognition for the first time joining longtime honorees Joan Larkin (Los Angeles), Bart Lazar (Chicago), Ed Maluf (New York), Lisa Meyerhoff (Houston), Brian Michaelis (Boston), Jay Myers (Atlanta), Julia Sutherland (London and Chicago), and Ken Wilton (Los Angeles). All are being recognized for their prestigious work in IP/Trademark law.

Seyfarth’s Atlanta, Chicago, Los Angeles, and New York offices were recognized for their work in trademark law.

The WTR 1000 annually identifies the top trademark professionals in key jurisdictions around the globe.

This is the latest in the series titled “NPE Showcase,” where we discuss high-volume non-practicing entities (or as some call them, “patent trolls”). This installment will focus on a company named Sockeye Licensing TX, LLC.

Sockeye owns a pair of patents broadly related to controlling a “display device” with a mobile phone. In simple terms, Sockeye claims to own the patents directed to casting video from a smart phone onto a smart TV. Sockeye has alleged its patent against both the hardware and software stacks associated with this technology.

At first glance, Sockeye appears like any other high volume NPE. They sue in the Western District of Texas, use NPE law firm Rabicoff law, and their cases typically last approximately 3-5 months with some extending longer. Sockeye has sued approximately 80 defendants since it began its patent infringement campaigns in 2015.

What makes Sockeye different is they sued a handful of defendants more than once. For example, Sockeye sued a group of electronics companies in 2015 and sued the same defendants again in 2022 with at least some of the same patents. So what happened?

Settlement agreements are typically confidential so the exact arrangement is unclear. But what we do know is Sockeye cannot sue a defendant for activity that is already licensed. Obviously, that would violate the provisions of the licensing agreement entered into by the parties as part of the settlement. It is therefore interesting that Sockeye has asserted the same patents against the same defendants in some cases.

The most logical answer is that Sockeye entered into a limited license arrangement with the settling defendants. For example, the license could be limited to certain technologies in use at the time of licensing, but not newer technologies that emerge thereafter. Or the license could be limited to existing products but not new products that are substantially different from their current versions. The possibilities are endless.

These defendants are unfortunately not alone in the world of NPE lawsuits. NPEs are also known to limit their license when suing software companies. To explain via example, granting a broad license to a commercial software company would prevent the NPE from suing the various customers that use the licensed software. This situation usually results in the software company settling out with a limited license and the NPE suing the customers of the software company thereafter. More settlements means more money—so unless the NPE can secure a large settlement with the software company, they will normally limit that license and live to fight another day against the customers of the software company.

This is the latest in the series titled “NPE Showcase,” where we discuss high-volume non-practicing entities (or as some call them, “patent trolls”). This installment will focus on NPE litigation as a whole, and what to expect in 2023.

The vast majority of patent infringement cases are filed by nonpracticing entities, or “NPEs”. These companies acquire patents with the sole intention of monetizing the patents through litigation rather than selling products or services incorporating the patented technology. Often referred to as “patent trolls,”[1] NPEs buy patents that cover ubiquitous technology in use by some of the largest technology and retail outfits in the country. “Everyone infringes” is an NPE’s dream.

So where do things stand in 2023? The first few weeks have provided a glimpse into what is yet to come, and history provides helpful insight as well. On balance, there is a mixed bag of indicators that suggest a slight decline in NPE litigation with the same household names leading the charge.

I. The Correlation of Economic Conditions and Patent Litigation

Some have argued that NPE litigation will increase this year with the expectation of a recession. But is this recession different?

The prevailing view is that litigation generally increases during a recession. Big Law lawyers find reduced opportunities with cost-cutting corporations reducing their legal spend. In one recent example, the subprime mortgage crisis of 2008 resulted in mass layoffs for over 6,000 Big Law attorneys typically situated on the defendant’s side of the fence.[2] At least some of those lawyers shifted to the plaintiffs side of the courtroom and took cases on contingency to pay the bills.

This year may be similar given the large number of layoffs in the technology industry. According to Layoffs.fyi, more than 55,000 tech employees across 150 companies have been laid off in the first three weeks of 2023.[3] Tech lawyers are likely to find reduced fees from these same companies and may be forced to switch to the plaintiff’s side to stay afloat.

Operating companies are also known to divest patents during a recession in order to increase capital. Large tech companies take a close look at their patent portfolio to determine which dormant assets may be sold off without affecting company performance. For example, the 2008 recession saw a flood of patents hit the market and land in the hands of NPEs. The same recession spurred a boom in NPE litigation, causing NPE cases to outnumber competitor patent infringement lawsuits for the first time.[4] NPE cases became the norm, not the exception, during the last recession. Business was booming.

But is this the case now? Economists are once again predicting a recession in 2023. But this recession may yield a different outcome due to the nature of the recession and the changes in IP litigation over time. The 2023 recession will involve a healthy dose of inflation that will prevent the Federal Reserve from reducing interest rates and flooding the market with capital. A broad study on the subject found “increases in T-bill and real interest rates as well as increases in economy-wide financial risk are generally correlated with significant decreases in patent suits…”[5] That study considered 15 macroeconomic factors across 25 years and found the following:

Patent litigation rates tend to increase in  economic downturns characterized mostly by declines in investment and other measures of productivity, provided that credit remains freely available. Declines characterized by the converse situation…are associated with a decrease in litigation rates.[6]

Why is patent litigation so tied to the capital markets? The reason is simple—NPEs need money for two things: to purchase patents and to litigate patent lawsuits. A lack of capital may soften the patent brokerage market just as it would any other market. Fewer transactions mean fewer patents for NPEs to litigate.

A lack of capital may also prevent the funding of the lawsuits themselves. Patent litigation is an expensive endeavor with a full contingency arrangement being more rare now then in decades past. Many plaintiffs lawyers employ a mixed contingency arrangement to reduce risk. Others engage litigation finance firms to fund the lawsuit and take a cut of the damages award or settlement once the lawsuit is resolved. In fact, litigation finance provided $2.8 billion towards litigation in 2021, an increase of 11%. But a lack of capital prevents the funding of the lawsuit—be it from litigation finance or the bank account of the plaintiffs’ bar. Without capital, who is paying for the lawsuits?

The economy is sure to play a part in how NPEs operate in 2023. Will struggling tech firms divest their patents for much-needed capital and give NPEs the ammunition they need to launch swaths of lawsuits? Or will tightening credit arrangements prevent the funding of both the patent purchases and the lawsuits that would follow? The answer is likely a combination of the two, with at least a slight decline in NPE litigation due to the lack of funding to keep the lawsuits in motion.

II. The Major Players are Unlikely to Change

The household names of patent litigation are unlikely to change in 2023. Patent litigation filings were recently dominated by companies such as Cedar Lane Technologies, Bell Semiconductor, and entities owned by IP Edge and DynaIP. IP Edge has filed over 4,500 patent infringement lawsuits under one of its subsidiaries and usually resolves its lawsuits quickly.[7] Cedar Lane uses similar tactics and has filed more patent lawsuits than any other single entity over the past few years.[8]

These NPEs resolve matters quickly and rarely litigate through a Markman hearing. The shear volume of lawsuits is part of the business model—it’s all a numbers game. And there is no evidence to suggest another major player is entering the fray. There is simply not enough available capital for a significant new entrant.

Other NPEs seek larger damages awards with a smaller number of cases. Uniloc, the various Intellectual Ventures entities, some standard setting organizations, and patent-asserting universities fall under this category. These entities avoid the “nuisance lawsuit” tag and sue blue chip companies with high revenues. Here, too, there is no evidence to suggest the major players will change in 2023 in part because of the lack of available capital to bring a new entrant into the fray.

III. The Lawsuits are Likely to be Less Concentrated in W.D. Texas and D. Delaware

The busiest patent venues are likely to see some relief as plaintiffs begin to file their cases elsewhere. Two jurisdictions in particular should see a sharp decrease in volume based on recent actions of their respective chief judges.

A. The District of Delaware

The District of Delaware has long been a patent-heavy forum. In 2017, the Supreme Court’s TC Heartland case increased the District’s caseload even more by requiring plaintiffs to file in the defendant’s state of incorporation or where they have a “regular and established place of business.”[9] Many defendants are incorporated in Delaware so plaintiffs often file there to avoid a jurisdictional challenge. The District became overloaded with cases and was forced to take action to effectively adjudicate the cases.

Chief Judge Connolly issued a handful of standing orders meant to address the wave of patent cases hitting the District. One of those orders issued a rule meant to limit the burden of litigation finance discovery and required the disclosure of “The identity, address, and, if a legal entity, place of formation of the Third-Party Funder(s).”[10] At a recent hearing, Judge Connolly pressed Nimitz Technologies, LLC (“Nimitz”) for details regarding the source of funding and its ties to other NPE heavyweights such as IP Edge. Judge Connolly ordered the owner of Nimitz to appear in person and questioned him extensively on the origins of the plaintiff in the lawsuit. It was then revealed that the owner was not involved in naming the NPE, paid nothing for its patents, and only learned about settlements after the fact.[11] Nimitz later appealed the order requiring further disclosure of its origins, and the Federal Circuit quickly affirmed Judge Connolly’s order.[12]

Plaintiffs may not have the appetite to comply with Judge Connoly’s order and fully disclose the sources of finance that are driving the litigation. The Nimitz hearing was interpreted as Judge Connolly “sending a signal” to the plaintiff’s bar that financial shell games would not be tolerated. It remains to be seen whether litigants will file in the defendant’s “regular and established place of business” rather than their state of incorporation. But the Nimitz case certainly did not attract plaintiffs to Delaware.

B. The Western District of Texas

The Western District of Texas has been the busiest patent forum since the first quarter of 2020.[13] Plaintiffs have flocked to Judge Alan D. Albright’s courtroom due to his perception of favoring trials, avoiding stays, and denying jurisdictional challenges from defendants wishing to move the case to another forum. But a recent order from W.D. Texas Chief Judge Orlando L. Garcia established a new rule that came into effect in late 2022. Namely, all patent cases filed in the W.D. Texas will be randomly assigned to one of the district’s 12 judges.[14] The lack of an “Albright guarantee” has already caused a precipitous drop in patent cases filed within the Western District of Texas.[15]

IV. Conclusion

NPE litigation drives the overall patent litigation conversation. NPEs file a vast majority of all patent cases and receive significant damages awards or settlements. They have connections to litigation finance outfits who can fuel the enforcement of their patents and further connections to capital markets that fund the purchases of patents in the first place. But changing financial times and uncertain patent forums may cause NPEs to temper their enforcement efforts until market conditions become more predictable. That may result in a slight reduction of NPE activity across the country.

[1] It would be ill-informed to paint all NPEs with a broad brush and refer to each of them as “patent trolls.” Yes, a large number of patent cases are nuisance lawsuits brought by so-called “trolls” and such lawsuits are normally resolved with a modest settlement amount. Others, however, extend into the latter stages of litigation by demanding a larger payment to resolve the suit. Still other NPEs are public universities that aim to monetize the research of their professors. Not all NPEs are patent trolls.

[2] “What the 2009 Legal Layoffs Were Really Like,” https://abovethelaw.com/2016/09/what-the-2009-legal-layoffs-were-really-like/

[3] Layoffs.fyi website. https://layoffs.fyi/

[4] “What 15 Years of US Patent Litigation Data Reveal About the IP Market,” https://insight.rpxcorp.com/news/65081-what-15-years-of-us-patent-litigation-data-reveal-about-the-ip-market

[5] Marco, Alan C. and Miller, Shawn P. and Sichelman, Ted M., Do Economic Downturns Dampen Patent Litigation? (August 20, 2015). 12 Journal of Empirical Legal Studies 481 (2015).

[6] Id.

[7] RPX Insight – IP Edge. https://insight.rpxcorp.com/entity/1034412-ip-edge-llc

[8] RPX Insight – Cedar Lane. https://insight.rpxcorp.com/entity/1742191-cedar-lane-technologies-inc

[9] TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017)

[10] Judge Connolly Standing Order, https://www.ded.uscourts.gov/sites/ded/files/Standing%20Order%20Regarding%20Third-Party%20Litigation%20Funding.pdf

[11] “Judge Behind Litigation-Funding Probe Unloads After Forced Pause,” https://news.bloomberglaw.com/ip-law/judge-behind-litigation-funding-probe-unloads-after-forced-pause

[12] In re: Nimitz Technologies, LLC, Case No. 2023-103 (Fed. Cir. Dec, 8, 2022) (nonprecedential).

[13] “Judge Albright’s Place Atop the List of Busiest US Patent Judges Threatened by New West Texas Order,” https://insight.rpxcorp.com/news/71316-judge-albright-s-place-atop-the-list-of-busiest-us-patent-judges-threatened-by-new-west-texas-order

[14] Id.

[15] “2022 Patent Dispute Report: 3rd Quarter in Review,” https://www.unifiedpatents.com/insights/2022/10/3/2022-patent-dispute-report-3rd-quarter-in-review.

Seyfarth’s Commercial Litigation practice group is pleased to provide the third annual installment the Commercial Litigation Outlook, where our nationally-recognized team provides insights about litigation issues and trends to expect in 2023.

The continuing global tumult and increasing chances for a recession will weigh heavily on the litigation outlook for 2023. We expect an uneven year where some litigation booms, some busts. As was true last year, the trick to navigating the upcoming challenges will require clients and their counsel to be adaptive, creative, and proactive.

Trends covered in this edition include: Antitrust, Bankruptcy, Consumer Class Actions, Consumer Financial Services Litigation, eDiscovery & Innovation, ESG, Franchise & Distribution, Health Care Litigation, Insurance, International Dispute Resolution, Privacy, Real Estate Litigation, Securities Litigation, Trade Secrets, Computer Fraud & Non-Competes and the Trial Outlook.

Click here to download the 2023 Commercial Litigation Outlook


Please also join us for a three-part webinar series where members of our Commercial Litigation practice group will discuss the key trends outlined above. Dates and more details can be found below.

Part 1: Tuesday, February 7, 2023 at 1:00 p.m. Eastern

  • Consumer Class Actions
  • eDiscovery & Innovation
  • ESG
  • Trade Secrets, Computer Fraud & Non-Competes
  • Trial Outlook

Speakers: 

Kristine Argentine, Partner, Seyfarth Shaw

Jay Carle, Partner, Seyfarth Shaw

Rebecca Davis, Partner, Seyfarth Shaw

Dawn Mertineit, Partner, Seyfarth Shaw

Christopher Robertson, Partner, Seyfarth Shaw

Part 2: Wednesday, February 22, 2023 at 1:00 p.m. Eastern

  • Bankruptcy
  • Consumer Financial Services Litigation
  • Franchise & Distribution
  • Insurance
  • Real Estate Litigation

Speakers: 

David Bizar, Partner, Seyfarth Shaw

Alison Eggers, Partner, Seyfarth Shaw

Bill Hanlon, Partner, Seyfarth Shaw

Tom Locke, Partner, Seyfarth Shaw

Elizabeth Schrero, Partner, Seyfarth Shaw

Part 3: Wednesday, March 8, 2023 at 1:00 p.m. Eastern

  • Antitrust
  • Health Care
  • International Dispute Resolution
  • Securities & Fiduciary Duty 
  • Privacy

Speakers: 

Brandon Bigelow, Partner, Seyfarth Shaw

Jesse Coleman, Partner, Seyfarth Shaw

Sara Beiro Farabow, Partner, Seyfarth Shaw

Daphne Morduchowitz, Partner, Seyfarth Shaw

Jason Priebe, Partner, Seyfarth Shaw

Register for 2023 Commercial Litigation Outlook Webinar Series

BuzzFeed CEO Jonah Peretti recently announced a partnership with OpenAI’s ChatGPT artificial intelligence tool in a move he said would create a “new model for digital media.” Artificial intelligence would become “part of our core business” by “enhancing the quiz experience, informing our brainstorming, and personalizing our content for our audience.” In short, “the creative process will increasingly become AI-assisted and technology-enabled.” BuzzFeed’s stock soared over 200% on the news.

While Peretti cautioned against a “dystopian” outlook, that result does not seem far-fetched. BuzzFeed laid off 12% of its workforce last month, only to replace those workers with ChatGPT. One has to wonder if human creativity is being replaced by computer creativity. Will conventional art one day be created by computers from beginning to end? Will the Oscars have different awards for human versus AI-created content?

All of which is interesting, and perhaps a bit frightening. But how does this factor into the world of intellectual property?

A. Protection of AI-Generated Content

Content that is wholly created by AI is not copyrightable or patentable. Copyright law requires the authoring of a creative work that is fixed in a tangible medium. Many recall a famous 2014 case where monkeys got ahold of a photographer’s camera and snapped a number of selfies. The resulting photo became an overnight sensation, and for good reason!

In the end, nobody owned the copyrights on the photographs—not even the monkeys. This is because copyright law requires a human author in order to be eligible for protection. The U.S. Copyright Office put an end to every primate’s dream with a 2014 memo that read “only works created by a human can be copyrighted under United States law, which excludes photographs and artwork created by animals or by machines without human intervention.” Going a step further, and relevant to AI, the Copyright Office noted “[b]ecause copyright law is limited to ‘original intellectual conceptions of the author’, the [copyright] office will refuse to register a claim if it determines that a human being did not create the work.” (Emphasis ours).

The same is true for patent protection, where the 2022 case of Thaler v. Vidal held “We, too, conclude that the Patent Act requires an ‘inventor’ to be a natural person.” Content created entirely by artificial intelligence cannot be protected by a patent.

B. Protection of AI Programs Themselves

AI programs themselves are analyzed under a different lens. These programs are typically created by humans who wrote the underlying source code. And protecting these human-developed creations is critical—ChatGPT has been hailed as a revolutionary chatbot that has driven OpenAI’s market cap to $29 billion in just a few months. But how can OpenAI protect its most valuable asset?

i. Copyright/Trade Secrets Protection

For starters, the source code underlying artificial intelligence software can be protected under copyright and trade secret law. Source code is creative, original, and fixed in a tangible medium, and therefore can be registered as a copyright or enjoy common law protection at the moment it is stored in memory. This, of course, assumes the code was written by a human and not a bot (or a monkey).

A computer program can also be protected as a trade secret if it derives value from not being generally known to others, and if the owner uses reasonable efforts to protect its secrecy. ChatGPT is clearly valuable to OpenAI and presumably is kept under proverbial lock and key to protect its secrecy. OpenAI can claim trade secret protection as a result.

ii. Patent Protection

Patentability of software has been a hot topic for the better part of 50 years. The current rule is that software must be more than an “abstract idea” that is implemented in a general-purpose computer. This rule has been criticized by many as vague and inconsistently applied for software inventions generally. However, there appear to be three successful strategies for writing AI-based patent claims that comply with section 101. All are based on the concept that improving the machine learning model is considered a technical improvement eligible for patent protection.

A first strategy is to claim a new (non-conventional) input that improves the performance of the model. As an example, in-vehicle cameras may sense the driver’s attitude and then use the driver’s attitude as a new input to the model, which may improve the output of the navigation system. In such an example, angry drivers may be routed to a scenic route while calm drivers may be routed through the city. The specification should provide support showing that the use of the driver’s attitude results in improved navigation planning.

Another strategy is to claim an improvement to the architecture of the machine learning model. For example, an image recognition system may use a conventional encoder-decoder architecture. In such an example, an improvement to the encoder-decoder architecture (for example, using a new type of skip connection) or the use of a new type of architecture may avoid rejections under 35 U.S.C. § 101.

A third strategy is to claim an improvement to the training process of the machine learning model. The improvement may include generating or using a new type of training data and/or using a new training architecture. For example, autonomous vehicles may be trained by collecting data while navigating through real-world environments. The training process may be improved if synthetic data, such as data from a driving video game, may be used instead of real-world data. This type of improvement may be patentable if it can be shown that the synthetic data yields an improvement in the accuracy of the autonomous driving model, while also reducing the risks of an accident during training.

Dystopian or not, AI is here to stay and tech companies are no doubt formulating their own versions to target a customer’s preferences or otherwise improve their processes. Protecting these innovations will be critical for differentiating competing companies in an already competitive market.

christian-lue-8Yw6tsB8tnc-unsplash

This post was originally published on Seyfarth’s International Dispute Resolution Blog.

On 16 November 2022, EU Regulation 2022/2065, better known as the Digital Services Act (“DSA”), came into force. The DSA is a key development in the use of online services in the European Union (“EU”), with an impact on online services as significant as the one which the General Data Protection Regulation (“GDPR”) had upon the collection, use, transfer, and storage of data originating in the EU on 25 May 2018.

Ambit

The DSA sets out rules and obligations for digital services providers that act as intermediaries in their role of connecting consumers with goods, services, and content.

Its goal is to regulate and control the dissemination of illegal or harmful content online, provide more consumer protection in online marketplaces, and to introduce safeguards for internet users and users of digital services. It also introduces new obligations for major online platforms and search engines to prevent such platforms being abused.

The DSA applies to a wide range of providers of:

(a) Intermediary services offering network infrastructure such as internet access providers, domain name registrars, and other providers of what is described as ‘mere conduit’ or ‘caching’ services;

(b) Hosting services such as cloud and webhosting services;

(c) Online platforms bringing together sellers and consumers such as online marketplaces, app stores, collaborative economy platforms and social media platforms; and

(d) Very large online platforms and very large online search engines that are used to disseminate content and information.

The DSA applies in the EU, and to those providers outside the EU that offer their services in the EU. If a provider is not established in the EU, they will have to appoint a legal representative within the EU.

The DSA splits providers into tiers. The most heavily regulated tier covers Very Large Online Platforms (“VLOP”s) and Very Large Online Search Engines (“VLSE”s). The main criteria that will bring a provider under the scope of the DSA as a VLOP or VLSE is whether it operates a platform servicing more than 45 million monthly active end users located in the EU.

Continue Reading The EU Digital Services Act