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Many of last year’s high-profile intellectual property casesfeatured familiar themes — such as the tension between the exclusive rights ofcopyright, trademark and patent holders and the offsetting rights of the publicto use intellectual property — set against the background of new technologies.Copyright holders won significant victories over Napster, a Web-based systemfor transferring music files, and over hackers who posted on the Internet aprogram for decrypting DVDs. On the other hand, the author of a novel that used thecharacters and much of the plot of “Gone with the Wind” was heldentitled to a fair-use defense. For its part, the U.S. Supreme Court issuedthree intellectual property opinions of significance, sustaining the copyrightclaims of free-lance authors in the Tasinicase, considering theinterplay between the patent and trademark laws in Traffixand upholdingbroad patent protection for plants in the J.E.M.case. COPYRIGHT CASES The emergence of new communications technologies — such asCDs and videocassettes — has often engendered litigation over rights toredistribute copyrighted material using new technology. The closely watched New York Times Co. Inc. v. Tasini , 121 S. Ct. 2381 (2001), is such a case. The Tasinicourt held that republication of the work of free-lance writers in computerdatabases such as Lexis/Nexis by publishers, including the New York Times,infringed the writers’ copyrights. The Court rejected the publishers’ claim that they wereentitled to claim a “privilege” under � 201(c) of the Copyright Actto reproduce copyrighted portions of a collective work as part of a”revision” of that work, finding that the databases are not”revisions” under the act. The databases are not revisions becausethey “present articles to users clear of the context provided either bythe original periodical editions or by any revision of those editions.”121 S. Ct. at 2390-91. Absent a settlement between free-lancers and databasepublishers, in the short term, Tasiniwill result in the removal fromdatabases of free-lance contributions — a process that has already begun. Goingforward, Tasiniwill have little impact because publishers now typicallyrequire that writers assign away electronic rights when the work is firstpublished. In a major victory for the recording industry, the 9th U.S.Circuit Court of Appeals largely affirmed a preliminary injunction againstNapster, a “peer-to-peer” music file-sharing service, finding Napsterwould likely be liable for contributory and vicarious copyright infringement. A&M Records Inc. v. Napster Inc. , 239 F.3d 1004 (9th Cir. 2001). Napster users –who totaled in the millions at the service’s peak — made music files on their owncomputers available for free download by other Napster users and were, in turn,able to download for free files others have made available. Napster’s softwareand computer servers allowed users to search an index of all music filesavailable for download. The 9th Circuit affirmed the district court’s determinationof likely contributory infringement, finding that Napster knew its users wereinfringing record company copyrights, and that its system materiallycontributed to that infringement. Napster was likely to be found a vicariousinfringer because it had the right and ability to supervise use of the serviceand because it benefitted financially from the infringing activity. The 9thCircuit nevertheless ordered that the injunction be modified to place theburden on the plaintiffs to notify Napster of copyrighted works available onthe Napster system before Napster has a duty to remove them. In the wake of theinjunction, use of Napster dropped precipitously, but other file-sharingservices have sprung up in its place. The movie industry’s effort to prevent copyrightinfringement met with similar success in Universal City Studios Inc. v. Corley , 273 F.3d 429 (2d Cir. 2001), in which the 2nd Circuit upheld theconstitutionality of the anti-circumvention and anti-trafficking provisions ofthe Digital Millennium Copyright Act (DMCA), codified at 17 U.S.C. 1201.Section 1201 prohibits circumvention of technological measures that controlaccess to or prevent copying of a copyrighted work, as well as trafficking intechnology or devices designed for such circumvention. Relying on the statute, the district court enjoined thedefendant, a computer hacker, from disseminating computer code designed todecode digital versatile disks (DVDs) distributed by the plaintiff moviestudios. 111 F. Supp. 2d 294 (S.D.N.Y. 2000). Tackling novel constitutionalquestions, the 2nd Circuit held that computer code is entitled to FirstAmendment protection but that such protection is limited because code combinesboth “nonspeech and speech elements, i.e., functional and expressiveelements.” The court found that the DMCA is concerned only with the”nonspeech” element of computer code, and is therefore content-neutralregulation. On that basis, it passes constitutional muster because it serves asubstantial governmental interest unrelated to the suppression of freeexpression and does not “burden substantially more speech than isnecessary to further that interest.” In another closely watched case, the 11th Circuit lifted aninjunction against publication of “The Wind Done Gone” (TWDG), anovel that tells the story of “Gone With the Wind” (GWTW) from theperspective of black slaves. Suntrust Bank v. Houghton Mifflin Co., 268F.3d 1257 (11th Cir. 2001). While agreeing with the district court (136 F.Supp. 2d 1357 (N.D. Ga. 2001)) that TWDG exploits the “copyrightedcharacters, story lines and settings” of GWTW, the court of appeals heldthat TWDG is a parody of GWTW, entitled to protection of the fair-use doctrineunder � 107 of the Copyright Act. It found that TWDG is “a criticalstatement that seeks to rebut and destroy the perspective, judgments andmythology” of GWTW and that, in view of the radically differentperspectives of the works, there was no evidence that TWDG would affect themarket for GWTW or licensed derivatives of it. 268 F.3d at 1269. PATENT CASES J.E.M. AG Supply Inc. v. Pioneer Hi-Bred International Inc. , 122 S. Ct. 593 (2001), resolved an issue of importance to theagribusiness industry — whether utility patents may be issued for plants under �101 of the Patent Act. In 1930, Congress enacted the Plant Patent Act (PPA),conferring patent protection on plants produced asexually (through grafting orbudding) but not through sexual reproduction. The Plant Variety Protection Act(PVPA), passed in 1970, extended protection to sexually reproduced plants butcontains exemptions for research and for allowing farmers to use seed producedby plants grown from patented seed. Utility patents under � 101, however, haveno such restrictions. Following Diamond v. Chakrabarty, 447 U.S. 303(1980), which emphasized the broad reach of � 101, the Supreme Court held thatutility patents can be granted for plants. It emphasized that, although thescope of exclusive rights under the PPA and PVPA is more limited than thatgranted by � 101, the PPA and PVPA have less stringent requirements forprotection. As the year began, we were in the midst of a furor over business-methodpatents, fueled by the decision of a Seattle district court to enforceAmazon.com’s “One-Click” patent against Barnes & Noble Inc. inthe middle of the 1999 Christmas season. 73 F. Supp. 2d 1228 (W.D. Wash. 1999).In February 2001, the Federal Circuit restored a measure of calm by reversingthe injunction. Amazon.com Inc. v. BarnesandNoble.com Inc. , 239 F.3d1343 (Fed. Cir. 2001). Amazon.com’s patent covers an ordering system by whichconsumers buy with a single action, rather than adding an item to a virtual”shopping cart” and purchasing it with an additional command. Although the Federal Circuit found that Amazon.com had madea clear case of infringement, it held that Barnes & Noble had raised asubstantial question of invalidity, on the basis of prior art that mayanticipate, or render obvious, the one-click patent. The injunction was vacatedand the case remanded for trial. During the year, the Patent Office alsoresponded to the business-method patent controversy, promising additional scrutinyfor business-method applications, and reporting a decline in the percentage ofsuch applications that are granted, to a rate significantly below that forfilings as a whole. In Group One Ltd. v. Hallmark Cards Inc. , 254 F.3d1041 (Fed. Cir. 2001), the Federal Circuit clarified the “on-salebar” of � 102(b) of the Patent Act, under which a patent is invalid if theclaimed invention was “on sale in this country” more than a yearbefore filing of the patent application. The court held that only an offer that”rises to the level of a commercial offer for sale,” within themeaning of the Uniform Commercial Code, will invoke the bar. To trigger thebar, an offer must be “one which the other party could make into a bindingcontract by simple acceptance.” In so doing, the court laid to rest its own dictum in RCACorp. v. Data General Corp., 887 F.2d 1056 (Fed. Cir. 1989), to the effectthat activity which “does not rise to the level of a formal ‘offer’ undercontract law principles” could nevertheless trigger the bar. The Group Oneholding will rationalize and simplify the important on-sale bar doctrine. TRADEMARK CASES Continuing a trend of narrowly construing trademark rightsin product design features, the Supreme Court rejected an attempt to assert thatfeatures claimed in an expired utility patent could constitute protectabletrade dress. Traffix Devices Inc. v. Marketing Displays Inc. , 532 U.S.23 (2001). Marketing Displays (MDI) obtained a utility patent on a dual-springdevice used in temporary road signs. After the patent expired, a competitorcopied the device. MDI brought a Lanham Act claim, asserting that its designwas trade dress that had acquired secondary meaning. The Supreme Court held that, having claimed the spring in autility patent, MDI could not meet its burden under the Lanham Act to show thatthe design was nonfunctional. Drawing a sharp distinction between trademark andpatent protection, the Court declared that the Lanham Act does not “rewardmanufacturers for their innovation in creating a particular device; that is thepurpose of the patent law and its period of exclusivity.” Since the Federal Trademark Dilution Act was passed in 1995,the federal courts have been struggling to define just what it means. In TCPIP Holding Co. Inc. v. Haar Communications Inc. , 244 F.3d 88 (2d Cir. 2001),the 2nd Circuit added to the confusion. Disagreeing with at least one othercircuit ( Times Mirror Magazines Inc. v. Las Vegas Sports News L.L.C.,212 F.3d 157 (3rd Cir. 2000)), the 2nd Circuit is the first to hold that no”descriptive” mark, including those that have acquired secondarymeaning, is protected under the Dilution Act, even if the mark has achieved thedegree of fame required under the act. The court drew a boundary between inherently distinctivemarks (such as “Chevrolet” or “Boeing”) and those that aredescriptive. While a traditional infringement action “serves the interestsof consumers, as well as sellers,” a dilution claim offers “nobenefits to the consumer public — only to the owner.” 244 F.3d at 95. The Haarcourt’s ruling effectively reads out of the statute hundreds of famousdescriptive marks, such as “Federal Express,” “The New YorkStock Exchange” or “Metropolitan Life.” It remains to be seenwhether any other court of appeals will follow it. LOOKING AHEAD What’s ahead for intellectual property litigation in 2002?The Supreme Court will issue its long-awaited decision in Festo Corp. v.Shoketsu Kinzoku Kogyo Kabushiki Co., 234 F.3d 558 (Fed. Cir. 2000),concerning the scope of equivalents for amended patent claims; the FederalTrade Commission will conduct hearings on antitrust and intellectual property,focusing on the increasing number of patents granted by the Patent Office andthe misuse of intellectual property; the courts will wrestle with issues oftrademark dilution and the validity under the copyright laws of”clickwrap” software-license agreements; and, as always, theunexpected and unpredictable will occur. Lewis R. Clayton is a litigation partner at New York’s Paul,Weiss, Rifkind, Wharton & Garrison and co-chair of the firm’s intellectualproperty litigation group. He can be reached at [email protected]. RobynSorid, an associate at the firm, assisted in the preparation of this article.The firm represented certain of the plaintiffs in the Napster case mentionedabove.

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