The Defend Trade Secrets Act (“DTSA”) went into effect on May 11, 2016. As the DTSA passes its half-year anniversary, we take a look at DTSA developments through the end of 2016 and what they tell us about the future of the DTSA.
President Trump has proposed a number of tax reforms that would significantly change the taxation of both personal and business income. In particular, the proposals would broaden the income base and create significant nominal rate reductions on the income of businesses and high-income individuals.
Much is lamented about the burden and costs that nuisance patent litigation imposes. Recently, with the Supreme Court agreeing to hear a case on restricting patent litigation venue, the problems of forum shopping by NPEs have come back into the spotlight. Limiting venue is one way that might reduce or discourage nuisance litigation by NPEs. But as some defendants quickly realize, even after successfully transferring venue out of so-called patent friendly jurisdictions, the fundamental problem of the lawsuit remains. You may now be in a court you think is favorable to you, but you still have to litigate what you may believe is a frivolous case.
On May 2, 2016, the U.S. Supreme Court granted review of the Sixth Circuit’s August 2015 ruling in Varsity Brands Inc. v. Star Athletica LLC[i] The Supreme Court will determine the proper test to assess whether Varsity’s two-dimensional cheerleading uniform designs are entitled to copyright protection. Notably, this is the first time the Supreme Court will address copyright protection in the context of useful articles and apparel. Thus, its decision bears the potential for a far-reaching impact on the apparel and fashion industries.
As the Supreme Court kicked off October Term 2016, it continues to show a strong interest in patent law, granting three petitions so far with more petitions to be considered.
On March 9, 2016, in Charge Injection Technologies, Inc. v. E.I. Dupont De Nemours & Company, C.A. No. 07C-12-134-JRL, the Superior Court of the State of Delaware issued a decision on a motion to dismiss for violating state champerty and maintenance laws. In 2008, plaintiff Charge Injection Technologies, Inc. (“CIT”) sued E.I. Dupont De Nemours & Company (“Dupont”) for various patent and trade secrets related infractions. During the course of the litigation, CIT entered into a litigation financing arrangement with Burford Capital LLC (“Burford”). Dupont sought to have the case dismissed, arguing in part that CIT was not the true owner of the claims and Burford was wielding de facto control over the lawsuit. The Court denied Dupont’s motion, finding that CIT had not assigned its claim to Burford, and Burford had no right to maintain, direct, control or settle the litigation. In denying the motion, the Court affirmed the propriety of litigation financing, and strongly dispelled many of the criticisms raised by those opposed to such arrangements.
Section 505 of the Copyright Act provides for recovery of attorneys’ fees by prevailing litigants. It states that a court, “in its discretion may allow the recovery of full costs.” However, no guidance has been provided on this language in more than 20 years. The last word from the High Court occurred in 1994, where the Court held that fees should be equally available to prevailing plaintiffs and defendants, but stated that “no precise rule or formula” existed for when they should be awarded. Four non-exclusive factors were articulated for courts to consider when determining whether attorneys’ fees should be awarded, including: (1) the frivolousness of the case, (2) the motivation of the loser, (3) the objective unreasonableness of the case, and (4) considerations of compensation and deterrence. Yet, the Court complicated matters, noting that the factors must be applied in a manner that is “faithful to the purposes of the Copyright Act.” From this decision sparked a circuit split – while some courts weighed the factors evenly, others focused mainly on serving the “purposes of the Copyright Act.” To confuse matters more, the Second Circuit placed a strong emphasis on the “objective unreasonableness” factor, at the expense of the other factors.
On June 20, 2016, the Supreme Court issued its decision in Cuozzo Speed Technologies, LLC v. Lee. One of the questions presented to the Court was the appropriate claim construction standard for inter partes review (IPR). The fundamental dispute, as framed by the Court, was the apparent intent of the Leahy-Smith America Invents Act (AIA) and the express rule-making authority it granted. Pursuant to the rule-making authority granted by the AIA, the Patent Office set forth the broadest reasonable interpretation (BRI) as the standard for construing claims under an IPR. This is the standard used during original examination of an application for a patent. The patent-owner argued that, since IPRs were intended to be an alternative to litigating validity in the courts, it should be subject to the same standard of claim construction used there, which is generally understood to be narrower. Ultimately, the Court held that the rule-making authority trumped any arguments about intent and consequences and affirmed the Patent Office’s application of the BRI standard.
Through its recent decision in Halo Elecs., Inc. v. Pulse Elecs., Inc., the Supreme Court discarded the mechanical two-part test governing enhanced damages fashioned by the Federal Circuit in Seagate, and gave district courts broad discretion to decide when to award enhanced damages in cases involving willful patent infringement. The Supreme Court also held that enhanced damages do not need to be proven by clear and convincing evidence, but only by a preponderance of the evidence. While this will make it easier for plaintiffs to obtain enhanced patent damages involving willful patent infringement, the high court made it clear that enhanced damages should still be reserved for cases involving egregious infringement behavior.
The Defend Trade Secrets Act of 2016 (“DTSA”) was signed into law by President Obama on Wednesday, May 11, 2016. This new act is the final piece of the federal law puzzle regarding intellectual property protections. Until now, IP owners enjoyed federal law protections over their patents, trademarks, and copyrights, but were left to their state courts to protect their trade secrets under various state laws. The DTSA is being hailed as an important and valuable tool for business owners, by providing greater predictability to trade secrets law.