Sony, Microsoft, and the Erosion of the First Sale Doctrine

by Mark Humphrey

During the Sony Corp. keynote address at the Electronic Entertainment Expo (E3) in June, the electronics giant made waves with a video clip titled “Official Playstation Used Games Instructional Video.” Created to explain how sharing games would work on the company’s forthcoming Playstation 4 (PS4) video game console, the video appeared ready to show a multi-step process. But within 22 seconds, the clip was over and the message clear – sharing games with friends on the PS4 was as simple as handing a game disc from one person to another. The crowd exploded in cheers.

The clip was in response to missteps made by Microsoft, Sony’s chief competitor, in unveiling its Xbox One console that same week. Microsoft announced that once a consumer purchased a game and played it on his or her console, the same copy would not be playable on a different console because it ­­would be digitally identified with the original user’s machine. The machine would also require a persistent internet connection in order to “verify” the console every 24 hours. This was to prevent consumers from selling games back to stores like Gamestop, which would then sell them at marked up but still discounted prices to other consumers – a practice that generates billions in annual revenue for these stores.

Microsoft’s gambit was a disaster. Analysts crowed that Sony “won” E3 in part because of its used games position. Many media outlets declared Xbox One dead on arrival if it featured such technology. The situation became so dire that Microsoft quickly backpedaled and scrapped the technology. It remains to be seen how damaging this will prove in the long run.

Such a situation arose because companies like Microsoft have both more and less control over their intellectual property than ever before. On one hand, IP in digital formats can be easily pirated absent protective measures. But technological and legal changes simultaneously give companies a great deal of power to control their products that didn’t exist just a few years ago.

Traditionally, the first sale doctrine has allowed someone who obtains title to a copy of a work to sell, lend, or lease it however he or she wishes, without the original copyright owner’s permission. But when the doctrine was created in 1908, it was concerned with the idea that first sale protection did not kick in until someone had obtained ownership over a physical copy. This made sense for decades, because IP was embodied in objects ranging from books and cassettes to DVDs and video game cartridges.

Yet as IP has increasingly become digitized, considerations that made sense for decades have become somewhat irrelevant. Streaming media, for instance, does not implicate first sale at all, simply because no physical copies change hands. When a movie or song ends, the consumer turns off his or her device as if he or she just watched a broadcast or listened to the radio. Any concept of “ownership,” as it is popularly understood, is not relevant in a streaming context.

Conversely, in digital downloading, the reproduction right is necessarily implicated when transferring a digital copy. First sale rights thus inescapably conflict with one of the key rights granted by copyright law. This is a twist that could not have been anticipated when the first sale doctrine was created over 100 years ago – and one that has not been completely resolved despite decades of debate and analysis.

Attempts to use contract law to limit the scope of first sale rights have also affected the doctrine’s modern applicability. In cases like Vernor v. Autodesk, courts have found that content creators can easily place restrictions on purchased products that transform outright sales into limited licenses and inhibit the consumer’s ability to freely distribute or even use something he or she purchased.

In each scenario, the first sale doctrine has limited relevance at best. As time goes on and technologies like streaming become the norm, the doctrine may be infrequently invoked, at best. It is thus the attorney’s job to properly advise clients on how best to protect IP without antagonizing consumers and making the same mistakes that Microsoft made at E3.

Just because restrictive means of protecting IP exist, that doesn’t necessarily mean that it’s in a client’s best interest to use them. For instance, if a client is selling a physical video game, the Vernor v. Autodesk decision allows it to create licensing agreements using a simple “cookbook recipe.” This test asks whether (1) the copyright owner specifies that the user is a licensee; (2) the copyright owner significantly restricts the user’s ability to transfer the software; and (3) the copyright owner imposes notable use restrictions.

Using this checklist, an attorney could draft an agreement stating that users may only install software on one computer or play a game on one machine, or could perhaps create an agreement stating that users are unable to transfer the software to anyone else, even if they have a physical copy in hand. But even though this is a potential option, is such stringent content protection really in the client’s best interest?

Consumer expectations relating to use and ownership differ widely depending on the type of media implicated. Degrees of ownership can be viewed as a sliding scale – the more tangible the media, the more of an expectation the consumer has that he or she should be able to do what he or she wants with it.

For example, if a client sells digital downloads, the consumer will most likely be receiving a revocable license with some form of digital rights management in place.  The client will be able to control use of the copy and prevent possible piracy. The client may also be able to take punitive action against consumers violating licensing agreements and terms of service, perhaps by canceling accounts and remotely wiping purchased copies from consumer devices. Indeed, companies from Amazon to Apple have such provisions written into their licensing agreements, warning consumers that their content can be remotely deleted at the company’s behest. The few times that such action has been undertaken, however, public outcry has been swift and vicious. Clients risk using such measures at substantial cost to their reputations.

However, when the item in question is a physical copy, the consumer’s expectation of ownership is at its strongest. Harkening to the origin of the first sale doctrine, the consumer traditionally expects to be able to do what he or she wants with something held in hand. In this scenario, draconian licensing restrictions must be even more carefully considered. Perhaps it’s because the consumer is suddenly holding a partially or entirely useless object due to licensing restrictions, but regardless, consumers do not take kindly to being told that they cannot use their physical property how they wish. Consumers certainly realize they can’t do certain things, like make illegal copies. But it’s news to them when they’re told they can’t lend or sell something they purchased. Microsoft’s fiasco is the paramount example of this. Consequently, an attorney should counsel a client against implementing drastic or unprecedented protections when a physical copy is involved, or at the very least, encourage the client to consider the very real cost of alienating consumers.

As mentioned earlier, none of this is implicated with streaming. And really, this appears to be where IP is headed in the next decade. Traditional notions of “sharing” and “ownership” may completely fall away in the next decade. At that point, attorneys will have new issues to deal with. The public performance right, for instance, could even replace the reproduction right as the popularly viewed linchpin of copyright law.

In the meantime, copyright is in a strange transition period where physical IP, streaming media, and downloaded content coexist in the same ecosystem. Moreover, longstanding norms like the first sale doctrine no longer uniformly apply. Ultimately, technology and the law appear headed for a convergence, giving more power than ever to content creators and distributors. Attorneys would do well to counsel their clients, in the interim, to not overreact to change and risk alienating and losing consumers.

That is certainly something that Microsoft executives and attorneys, fresh off their own overreach, ruminate about as the Xbox One’s November 22 release date approaches.


Mark Humphrey is a recent graduate of Southwestern Law School.


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The Supreme Court’s Denial of Patent Protection for Human Genes

By Katie Podein

In a recent unanimous ruling, the U.S. Supreme Court held that human genes are not patentable… or at least not natural human genes.  Although all nine Justices said that naturally occurring, isolated biological material is not patentable, their ruling was still a compromise in that it allowed for the possibility of a patent on the synthetic version of the genetic material.

Back in 2009, a coalition of researchers, genetic counselors, cancer survivors, breast cancer support groups, and scientific associations filed suit against Myriad Genetics, a Utah biotechnology company, challenging the company’s patent of genes BRCA1 and BRCA2.  Myriad discovered and isolated the two genes, BRCA 1 and BRCA 2, which are highly associated with hereditary breast and ovarian cancer. Myriad patented its discovery, allowing the company a monopoly over the use, research, diagnostics and treatment of the genes.  Myriad was also the only company that could perform tests for potential abnormalities.  In April 2013, the Supreme Court began the trial on whether researchers and scientists are able to claim human DNA as their intellectual property.  Specially, the issue focused on whether “products of nature” can be treated the same as “human-made” inventions in order for the individuals and companies who have isolated the specific genes to have the exclusive intellectual property rights to these genes.

The Supreme Court found that Myriad did not create or invent anything for purposes of patent law. “Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes,” Justice Clarence Thomas said in writing for the Court.  “[Myriad] found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention,” Justice Thomas further clarified.  In the ruling, the Supreme Court also supported the Obama administration’s position that although DNA is not patentable by itself, Complementary DNA, or “cDNA” can be.  Complementary DNA is artificially synthesized from the genetic template and engineered to produce gene clones.  Justice Thomas stated that “cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments.”

This compromise ruling does not come as a shock to the public since the Justices have previously expressed their hesitance to allow for patents on human genes and have noted the profound impact it would have on pharmaceuticals and genetically modified crops.  However, one surprise in the ruling was that all but one Justice signed off on the ruling; Justice Anton Scalia wrote a separate opinion agreeing with all parts of the opinion except Part I-A, the paragraph that describes what genes are, what they do and how they’re created.  Scalia wrote, “I am unable to affirm those details on my own knowledge or even my own belief.”

Regardless of Scalia’s understanding or belief of genes, this ruling has already had a major impact on the medical community.  Immediately after the ruling, at least three companies and two university labs said that they would now begin offering genetic testing in the field of breast cancer.  In addition to the expected expansion of companies’ abilities to offer genetic testing, the patient costs of these tests are also expected to fall.  Dr. Harry Ostrer, a professor at Albert Einstein College of Medicine and director of genetic and genomic testing at Montefiore Medical Center in New York said, “I’m thrilled.  We can offer BRCA 1 and 2 testing to low-income women without concerns about how it will be paid for.”   Furthermore, scientists will be able to research the BRCA genes without fear of being sued.

Even Myriad found solace in the ruling. Peter D. Meldrum, president and chief executive officer of Myriad, said the company believed that the court “appropriately upheld our claims on cDNA.”  He also stated that the ruling “underscored the patent eligibility of our method claims, ensuring strong intellectual property protection for our BRACAnalysis test moving forward.”


Katie Podein is an associate attorney at Yang & Wang, P.C, practicing Intellectual Property and Business Law.  The firm’s practice includes patent; trademark; trade dress; trade secret; copyright; internet & new media; brand protection; and general corporate, organizational, and business law matters.

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How Brands Use Trademark Law to Gain Competitive Advantage Online

by David N. Sharifi

There is a virtual war taking place in the realm of online marketing – one fueled by search queries, big data, and unprecedented levels of interactive brand engagement.  But the theater for this war is not storefronts, print ads, and billboards – it is Google, Facebook, Twitter, Amazon, mobile app stores, and many other digital platforms where consumers find their favorite brands, and advertisers hunt shoppers.

Today’s brands use a variety of creative and technical tools to identify themselves on the web, and to target, speak to, and “connect with” their loyalists online.  In cases where these digital tools – typically consisting of product names, company names, slogans, domain names, QR Codes, social media handles, search keywords, and hashtags (collectively “Digital Marketing Insignia”) – fall under trademark subject matter, brand owners can control valuable digital real estate through trademark protection and gain competitive advantage on the web.

Trademark Infringement in Digital and Social Marketing

Trademarks provide the exclusive right to promote goods and services under distinguishable words, phrases, symbols, designs or a combination thereof.  Rooted in consumer protection law, a trademark is legally a source identifier, a shortcut that communicates the source of the goods and services being promoted.  In some cases Digital Marketing Insignia such as domain names, hashtags, or even stylized QR codes contain trademark subject matter, and that’s when trademark protection is a useful weapon to help monopolize key areas on the web when a consumer is searching or shopping online.

To bring a prima facie trademark infringement case, a plaintiff must prove:

  • Ownership of a valid trademark;
  • Priority;
  • Use in commerce in connection with the sale of goods or services; and
  • Likelihood of consumer confusion.

When brands use Digital Marketing Insignia to promote their products online, trademark law can help protect valuable digital real estate where competitors may piggyback on famous marks. Vigilant trademark monitoring and enforcement can help defend against these unfair and often illegal practices.

As an example, consider one of the most famous trademarks of McDonald’s Corporation, U.S. Registration No. 2035587  for BIG MAC filed under “sandwiches for consumption on or off premises” in international class 030.  As owner of the BIG MAC trademark,  McDonald’s Corp. may choose to promote its famous sandwich on the web at, or at, or under the social media handle @bigmac (Instagram and Twitter), or in search results under Google keyword: Big Mac, or in social media search results under hashtag: Big Mac (#bigmac).

Trademark Enforcement Online

If a competing restaurant promotes its products when a user searches the web for “Big Mac,” or if a competitor hosts a twitter party under #BigMacSucks (yes there is such a thing as twitter parties), or sets up a website under the domain name, do any of these uses of Digital Marketing Insignia constitute trademark infringement?  The answer depends on whether the brand owner can prove the four elements of trademark infringement (above).  Many courts have ruled, for example, that keyword triggering fulfills the use in commerce requirement of trademark infringement, and if the other elements can be proven (such as likelihood of consumer confusion), then infringement exists. (See Buying for the Home v. Humble Abode, 459 F. Supp 2d 310 (D.N.J. Oct. 20, 2006), Edina Realty v. The, 2006 WL 737064 (D. Minn. Mar. 20, 2006), Hearts on Fire Co. v. Blue Nile, Inc. 2009 WL 794482 (D. Mass., March 2009)).  Other courts have ruled to the contrary. (See Site Pro-1 v. Better Metal, 506 F. Supp 2d 123 (E.D.N.Y. May 9, 2007), and Tiffany v. eBay, 2008 WL 27557897 (S.D.N.Y. July 14, 2008)).

Therefore, at least in the area of keyword triggering, there is room for trademark enforcement, although the issue is far from settled.  From a practical standpoint, brand owners may have leverage to enforce trademark rights through a cease and desist letter and settlement agreement, avoiding costly litigation in a legal area that is currently unpredictable.  And aggressive marketers may be amenable to limiting their use of competitors’ trademarks in Digital Marketing Insignia, rather than defending their positions in costly litigation which may swing either way.  Presumably, the use of hashtags containing protected trademarks triggers a similar analysis to keyword search issues, which have been heavily litigated.  In addition, courts have long settled the issue of use of domain names containing protected trademarks in cybersquatting cases and the enactment of the Anticybersquatting Consumer Protection Act (ACPA) in the late 1990s.

Owners of registered trademarks can also work directly with websites that host infringing content.  Most popular online platforms from Google and Bing, to Twitter and YouTube, to Etsy and Amazon, have copyright and trademark complaint policies available for brand owners to pursue a take down action.  Brand owners have these options to force competitors to comply, but trademark ownership and registration is usually a necessary requisite.

Trademarks Provide Competitive Advantage Online

Today’s brands, whether on the cusp of launching their first assault, or fully engaged in the trenches of competitive warfare online, can use trademark law not only to police their marks in traditional ways, but also to monopolize an assortment of Digital Marketing Insignia and dominate the online real estate where consumers shop and engage with products.  Without having strategic trademark protection and enforcement as a major part of a marketer’s arsenal, a brand online would be fighting a losing battle.

David N. Sharifi is a Los Angeles based intellectual property and business attorney concentrating in digital media and advertising, trademarks law, startups and mobile publishing.  A version of this piece first appeared on David’s blog, The LA Tech & Media Law Blog

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Hart v. Electronic Arts and the Triumph of the Transformative Use Test

by Michael Lovitz

Recently, the 3rd Circuit issued a ruling concerning the interplay of the right of publicity and First Amendment rights.  The case, Ryan Hart v. Electronic Arts, No. 11-3570 (3d Cir., May 21, 2013), involved the inclusion by EA of Ryan Hart (Rutgers’ quarterback for 2002-2005) in its “NCAA Football 2006” video game.

The suit was initially dismissed when the District Court held that EA (which conceded that it had violated Hart’s right of publicity) was nonetheless entitled to dismissal on the grounds that the First Amendment shielded it from any right of publicity claims.  Hart v. Elec. Arts, Inc., 808 F. Supp. 2d 757 (D.N.J. 2011).

On appeal, the 3rd Circuit provided a detailed analysis of the balance between right of publicity and First Amendment protections.  The Court considered three modern-era balancing tests that have been employed by courts in the past, looking in turn at each test’s origins, scope of application, and possible limitations: (1) the commercial-interest-based Predominant Use Test (favored by EA); (2) the 2nd Circuit’s trademark-based Rogers Test; and (3) the Transformative Use Test, which was originated by the Supreme Court of California (a state where right of publicity is a matter of both state statutory law and common law).

The Court declined to adopt the Predominant Use Test, finding it to be “subjective at best, arbitrary at worst,” and “antithetical to our First Amendment precedent.”  The Rogers Test was found to be useful for trademark claims, but the Court was skeptical regarding whether it “applies to the general contents of a work when analyzing right of publicity claims,” as the right of publicity protects a broader swath of property interests than are protected under traditional trademark principles.  The Court determined that it needed “a broader, more nuanced test, which helps balance the interests at issue in cases such as the one at bar,” and ultimately found that in the Transformative Use Test.

The Transformative Use Test was crafted to address the fact that the right of publicity is applicable not only in the context of commercial speech, but also in instances where the speech is merely expressive.  Thus, while the right of publicity cannot be used to censor disagreeable portrayals, like copyright, it “nonetheless offers protection to a form of intellectual property that society deems to have social utility.”  The balance between these rights then turns on:

[w]hether the celebrity likeness is one of the “raw materials” from which an original work is synthesized, or whether the depiction or imitation of the celebrity is the very sum and substance of the work in question.  We ask, in other words, whether the product containing a celebrity’s likeness is so transformed that it has become primarily the defendant’s own expression rather than the celebrity’s likeness.  And when we use the word “expression,” we mean expression of something other than the likeness of the celebrity.

The Transformative Use Test had been used previously with respect to video games, most recently in the California case No Doubt v. Activision Publishing, Inc., 122 Cal. Rptr. 3d 397 (Cal. Ct. App. 2011), which centered on the game “Band Hero.”  The game allows players to simulate performing in a rock band by selecting avatars that are digital recreations of real-life musicians.  The members of the band No Doubt sued Activision after a contract dispute, claiming violation of their rights of publicity, and the court applied the Transformative Use Test.  The Court found that “the avatars perform rock songs, the same activity by which the band achieved and maintains its fame,” and the fact that the locations at which the performances occur could be changed “does not transform the avatars into anything other than the exact depictions of No Doubt’s members doing exactly what they do as celebrities.”  Thus, the court concluded that Activision’s use of No Doubt’s likenesses infringed the band’s right of publicity.

Once the Hart Court settled on the Transformative Use Test, it then went about applying the Test to the instant case to determine whether Hart’s identity is sufficiently transformed in the “NCAA Football” video game so as to avoid violating Hart’s right of publicity.  First, the Court found that the Hart avatar closely resembled the actual player, based on the combination of both the digital avatar’s appearance and the biographical and identifying information.  Next, the Court examined the context within which the avatar existed, and found that it provided little support for EA’s arguments:

The digital Ryan Hart does what the actual Ryan Hart did while at Rutgers; he plays college football, in digital recreations of college football stadiums, filled with all the trappings of a college football game.  This is not transformative; the various digitized sights and sounds in the video game do not alter or transform the Appellant’s identity in a significant way.

However, this was not the end of the Court’s analysis, as the game allowed for users to alter an avatar’s appearance, an ability that had accounted in large part for the District Court’s finding that EA satisfied the Transformative Use Test.  The Court held that the mere presence of this feature, without more, cannot satisfy the Test, explaining that:

[T[he balancing test in right of publicity cases does not look to whether a particular work loses First Amendment protection.  Rather, the balancing inquiry looks to see whether the interests protected by the right of publicity are sufficient to surmount the already-existing First Amendment protections. … As Zacchini [v. Scripps-Howard Broad. Co., 433 U.S. 562 (1977)] demonstrated, the right of publicity can triumph even when an essential element for First Amendment protection is present. … To hold, therefore, that a video game should satisfy the Transformative Use Test simply because it includes a particular interactive feature would lead to improper results. Interactivity cannot be an end onto itself.

Because Hart’s unaltered likeness was central to the core of the game and the user’s experience, the Court was disinclined to credit this ability to alter the digital avatar in applying the Transformative Use Test to the instant case.  Further, the Court did not credit any of the elements of the video game that did not, in some way, affect the use or meaning of Hart’s identify.  Ultimately, the Court held that the “NCAA Football” game did not sufficiently transform Hart’s identity so as to escape the right of publicity claim, and it reversed the District Court’s grant of summary judgment, remanding the case back to the District Court for further proceedings.


Michael Lovitz is the founding partner of Lovitz IP Law, where he practices all aspects of intellectual property law, including copyright, trademark, unfair competition, trade secrets, portfolio management, and licensing and transactional matters.



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Patent Exhaustion and the Curious Case of Bowman v. Monsanto

by Azita Mirzaian

For months, patent law scholars and biotech companies alike have awaited the U.S. Supreme Court’s decision in Bowman v. Monsanto, a case that arose from a dispute between an Indiana farmer and agribusiness giant Monsanto.  The Bowman decision was expected to addresses a very key question pertaining to patent law: whether or not “patent exhaustion” limits the rights of patent holders by eliminating the right to control or prohibit use of an invention after an authorized sale.  More specifically, the decision was expected to address “patent exhaustion” as it applies to self-replicating technologies such as seeds.

On May 13, 2013 the U.S. Supreme Court finally issued its much-anticipated decision, but ultimately tailored it so narrowly that the Court essentially just re-affirmed the doctrine of patent exhaustion as it currently stands.

The Doctrine of Patent Exhaustion

Patent exhaustion, a long-standing concept in patent law, can serve as a valid defense to patent infringement claims.  Patent exhaustion is the concept that if a patent-holder authorizes a first sale of a patented product or an article that embodies an invention, that authorized sale exhausts the patent-holder’s rights in the article sold.

In 1942, in United States v. Univis Lens Co., the U.S. Supreme Court held that patent exhaustion applies to authorized sales, notwithstanding any post-sale restrictions that the patent-holder wishes to place on end-purchasers.  In the 1992 case Mallinckrodt, Inc. v. Medipart, Inc., the Federal Circuit created a “conditional sale” exception to patent exhaustion, finding that exhaustion applies only to an authorized an unconditional sale – in other words, if a sale or license is expressly conditional, then patent exhaustion does not apply.  The Mallinckrodt case has been viewed by some as a questionable decision that is inconsistent with the U.S. Supreme Court’s precedent regarding patent exhaustion.

Monsanto’s Case against Bowman

In this case, Monsanto developed and patented (via several patents) a certain biotechnology whereby a gene was transferred into seeds in order to make the seeds resistant to an herbicide that Monsanto manufactures called Roundup.  These “Roundup-Ready” seeds can be planted and will produce crops that, when sprayed with the Roundup herbicide, will remain undamaged.  Monsanto authorizes sales of these Roundup-Ready seeds to farmers who agree to Monsanto’s Technology Agreement, which prohibits farmers from, among other things, using the seeds in more than one season, supplying the seeds to others for planting, and saving crops produced from the seeds for replanting.  Monsanto’s restrictions on the uses of the seeds are a direct result of the self-replicating nature of its patented biotechnology; Roundup resistance is not only displayed in the genetically-altered first-generation seeds, but in subsequent generations of seeds produced from the first-generation seeds.

In 2002, Indiana farmer Vernon Bowman purchased some of Monsanto’s Roundup-Ready soybean seeds for his first-crop harvest and signed a Technology Agreement that restricted his use of the seeds.  In accordance with the Technology Agreement that he signed, he did not save seeds from his first-crop harvest.  Around that same time, Bowman also purchased some considerably cheaper “commodity” seeds from a local grain elevator to use for his second-crop soybeans – these commodity seeds were a mixture of seeds from various sources, including Monsanto.  From year to year, Bowman saved seeds harvested from this second-crop harvest and replanted them, noticing that they were Roundup resistant.

Eventually, Monsanto accused Bowman of saving seeds in violation of the Technology Agreement that he had signed.  Bowman argued that he had only saved and replanted the commodity seeds from the grain elevator (an established and common practice among farmers), not the seeds from the first-crop harvest of Roundup-Ready seeds that were covered by the Technology Agreement.  Nonetheless, in 2007, Monsanto sued Bowman, alleging infringement of two of the patents that cover its Roundup-Ready seed technology.

In 2009, the District Court for the Southern District of Indiana granted Monsanto’s motion for summary judgment on patent infringement, stating that, “despite [Mr.] Bowman’s compelling policy arguments addressing the monopolizing effect of the introduction of patented genetic modifications to seed producing plants on an entire crop species, he has not overcome the patent law precedent which breaks in favor of Monsanto[.]”  The District Court awarded damages in the amount of $84,456 to Monsanto.

In 2011, the Court of Appeals for the Federal Circuit affirmed the District Court’s decision. The Court rejected the argument that patent exhaustion permitted Bowman to save and replant commodity seeds, holding that by using the commodity seeds for a natural and foreseeable purpose (planting), he “created a newly infringing article.”  Furthermore, the Court stated that the “fact that a patented technology can replicate itself does not give the purchaser the right to use replicated copies of the technology.”  The Court’s conclusion that farmers have “the right to use commodity seeds… for any other conceivable use, [but] they cannot ‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing” articles, is somewhat curious, given that the most obvious, primary thing to do with a seed is plant it.  The Court of Appeals’ decision was partially based on the “conditional sale” exception to patent exhaustion.

The Supreme Court’s Decision

The applicability of patent exhaustion to self-replicating patented technologies raised a novel question for the U.S. Supreme Court.  The Court’s grant of certiorari caught the attention of patent law scholars and biotech companies alike, who all wondered if the Court could potentially eliminate patent exhaustion as a viable defense to patent infringement claims pertaining to self-replicating technologies.

On May 13, 2013, the Supreme Court issued its decision in the case, which, while unanimous, was narrowly tailored enough that it didn’t have the sweeping effect on patent law that many were expecting.  The Court affirmed the decisions of the District Court and the Court of Appeals, ruling that Bowman infringed on Monsanto’s patents.  It rejected Bowman’s patent exhaustion argument, clarifying that in this case, because Bowman made copies of the patented technology (the seeds), the doctrine of patent exhaustion didn’t protect his actions; the doctrine of patent exhaustion only applies to the article that was lawfully purchased or obtained.

The Court raised the concern that “if the purchaser of [a sold] article could make and sell endless copies, the patent would effectively protect the invention for just a single sale,” thereby drastically reducing the value of patents and dis-incentivizing the research and development of new technologies.

The Court was not swayed by what it referred to as Bowman’s “blame the bean” defense – the argument that because beans self-replicate, a farmer does not control the reproduction of the patented article.   Ultimately, in addressing the self-replicating nature of seeds and the potential implications for other self-replicating technologies, the Court seemed to intentionally avoid making any sweeping decisions, stating, “We recognize that such inventions are becoming ever more prevalent, complex, and diverse.  In another case, the article’s self-replication might occur outside the purchaser’s control.  Or it might be a necessary but incidental step in using the item for another purpose…  We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances.”

Azita Mirzaian is an attorney at Pierce Law Group LLP, where she practices law with a focus on entertainment law, intellectual property law, and contractual disputes.  Her areas of interest include copyright matters, trademark matters, and right of publicity matters.  She also has a strong interest in food-related law.

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Supreme Court To Decide On The Patentability Of Human Genes

By Katie Podein & Tommy Wang

Should researchers and scientists be able to claim human DNA as their intellectual property? That is the question the U.S. Supreme Court must now decide after recently hearing oral arguments in the case of Association for Molecular Pathology v. Myriad Genetics. Robert Barnes of the Washington Post reported that the Justices expressed trepidation as they listened to the parties’ explanations of patent law and the complexities of biochemistry.  The overriding hesitation by the Supreme Court may be due to the fact that this decision not only has the potential to have profound impact on pharmaceuticals and genetically modified crops, but also has the potential shape the future of medical and genetic research.

In 2009, a coalition of researchers, genetic counselors, cancer survivors, breast cancer support groups, and scientific associations filed suit against Myriad Genetics, a Utah biotechnology company, challenging the company’s patent of genes known as BRCA1 and BRCA2.  Myriad discovered and isolated the two genes, which are highly associated with hereditary breast and ovarian cancer. Myriad patented its discovery and the company now has a twenty-year monopoly over the use, research, diagnostics, and treatment of the genes.

The general rule for registering for a patent with the USPTO is that the discovery or idea cannot be a product of nature or a law of nature. No matter how difficult or costly the discovery, a product of nature is ineligible for patent protection. However, to date, the USPTO has granted patents on at least 4,000 human genes to the companies, universities and researchers who have discovered and decoded them.

Despite the large number of patents for human genes, many in the medical profession do not favor patents on DNA.  The group of researchers and scientists who filed the Myriad Genetics lawsuit claim that Myriad’s patents claim rights to genes, which are a product of nature and therefore are not patentable.  Opponents also contend that patents, such as Myriad’s patents for BRCA1 and BRCA2, improperly put constraints on medical research and diagnostic testing.  They view patents for genes as an attempt to monopolize and block future exploration in the field of genetics and personalized medicine.

Myriad, on the other hand, supports the patents, arguing that the company has isolated these specific genes and thus they are a product of human ingenuity, not nature.  Myriad’s lawyer, Gregory Castanias, claims that without “the incentives offered by a strong and stable intellectual property system,” companies like Myriad may not receive the capital and support necessary to develop new treatments and introduce them to the medical field.

One possible resolution to the debate is to look to see how other countries handle the issue.  Most countries grant patents on genes but with specific exceptions to them, allowing researchers and diagnostic developers to use the genes freely.  Although this seems like a basic and logical solution, the process would be arduous for the Supreme Court, as they would have to enlist the help of Congress to change the current Patent Laws.

The Supreme Court’s decision will also determine the effect of patenting human DNA and generics has on scientific research and its patients.  Even the Justices verbalized the heavy burden of the decision during oral argument. In questioning whether the Court had to immediately decide on this issue, Justice Samuel A. Alito Jr. appropriately framed the question, “Why should we jump in … and decide the broadest question possible?”


Katie Podein is an associate attorney at Yang & Wang, P.C, practicing Intellectual Property and Business Law.  The firm’s practice includes patent; trademark; trade dress; trade secret; copyright; internet & new media; brand protection; and general corporate, organizational, and business law matters.

Tommy Wang is a registered patent attorney and partner at Yang & Wang, P.C.  He currently practices Intellectual Property Law, including Patent, Trademark, and Copyright,  and Business Law in Southern California and East Asia.  His patent practice specializes in securing patents in the medical device, biochemical sciences and life sciences field.

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A Comparison of Fair Use in the U.S. to Fair Use in the People’s Republic of China

by Brian Hong*

When it comes to copyright infringement cases, U.S. law provides for a specific list of factors that a court should consider when determining whether a fair use defense applies.  Because the U.S. relies on a common law system, one can typically make an educated guess as to how a court will interpret and apply a statute based on controlling or persuasive precedent.  In contrast, because the People’s Republic of China (“PRC”) relies on a civil law system, there have been unpredictable outcomes when it comes to the applicability of the fair use.  Furthermore, fair use in the PRC is based on enumerated exemptions to copyright protection, but because these exemptions are somewhat vague, some Chinese courts strictly apply the listed exemptions, while others have called for a multifactor analysis similar to the U.S.’s fair use analysis.

U.S. Fair Use

In section 107 of the Copyright Act, Congress expressly recognizes the fair use defense.  When determining whether or not a fair use defense applies in copyright infringement cases, U.S. courts must consider the following four factors: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect upon the plaintiff’s potential market.  However, Congress has not stated how much weight to afford to each factor.

The purpose and character of the use:  If the work is “transformed,” meaning that the defendant adds something or uses the work in a different manner than it was originally used, then this factor sways in favor of fair use.  Whether the work is used for a commercial purpose or for nonprofit or educational purposes is also considered.

The nature of the copyrighted work:  The second factor can refer to either the form or the content of the original work, the presumption being that some works are closer to the core intent of copyright protection than others.  For example, use of an original novel will weigh in favor of copyright protection, while use of a newscast will weigh in favor of fair use.

The amount and substantiality of the portion used:  The third factor requires a court to quantitatively and qualitatively analyze how much of the original work has been used (in relation to the copyrighted work as a whole) and whether it is reasonable.

The effect upon the plaintiff’s potential market:  For the fourth factor, the court considers whether a party’s use of a copyrighted work could cause a substantial adverse impact on the market for the original work.

Fair use has been a subject of debate in the realm of search engines that provide internet users with images of and links to original works.  In Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir. 2003), the defendant’s search engine created small “thumbnail” versions of plaintiff’s photographs on its database.  The 9th Circuit held that defendant’s use of plaintiff’s images was transformative given that they were small, lower-resolution images that were used to index images.  Further, they were not highly exploitative, given that when a user clicked on an image, it transported the user to the original webpage with the image.  The 9th Circuit reached a similar ruling in Perfect 10 v., Inc., 508 F.3d 1146 (9th Cir. 2007).

U.S. courts have mostly denied fair use as a defense in piracy cases.  In A&M Records v. Napster, 239 F.3d 1004 (9th Cir. 2001), the defendant claimed that users did not engage in direct infringement of works but rather that they engaged in personal use like sampling or space shifting.  In that case, the 9th Circuit found that the four fair use factors weighed against a finding of fair use.  Most notably, the existence of free copies of a plaintiff’s work could cause a substantial impact on the market for that work (factor 4).  In BMG Music v. Gonzalez, 430 F.3d 888 (7th Cir. 2005), the 7th Circuit likewise found that “sampling” of copyrighted music was not eligible for fair use because it served as a direct substitute for a purchased copy and caused a substantial impact on the market for the original work.

PRC Fair Use

Article 21 of the PRC’s Implementing Regulation of Copyright Law, which went into force on September 15, 2002, states that “according to relevant provisions of the Copyright Law, use of published works without authorization of the copyright holder shall not impair the normal exploitation of such work or unreasonably prejudice the legitimate interests of the copyright holder.”  In effect, this provision is an implementation of the three-step examination under Article 13 of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which is an international agreement administered by the World Trade Organization.

Under Article 22 of the PRC Copyright Law, fair use is limited to the exemptions.  Article 22 states: “In the following cases, a work may be exploited without the permission from, and without payment of remuneration to, the copyright owner, provided that the name of the author and the title of the work are mentioned and the other rights enjoyed by the copyright owner by virtue of this Law are not infringed upon.”  Article 22 provides the following list of exceptions:

1) Private use:  Allows for an individual to use a published work for one’s own private study, research, or personal entertainment.

2) Quotation:  Allows for an “appropriate” quotation from a published work for use in one’s own work.

3) Education and research:  Allows for the translation or reproduction of a work for use in classrooms or to aid in scientific research.

4) Official state use:  Allows for a state entity to utilize a work, provided that such use is for actual official use and does not interfere with the normal exploitation of the work.

5) Institute Display or Preservation:  Allows for libraries, archives, or museums to reproduce a work for display or preservation.

6) Translation into minority languages:  Allows for an original Han Chinese language work to be translated into the languages of minority nationalities for publication and dissemination.

7) Braille Transliteration:  Allows for the transliterations of published works into Braille.

8) News Reporting:  Allows for the reproduction of published works by newspapers, television shows, or other mass media for reporting on current events.

9) Re-disseminating News Articles and Speeches:  This exemption is related to the above exemption on news reporting in that it allows mass media to reproduce articles on economic, political, or religious topics already made publicly available.

10) Free Public Performance:  Allows for one to publicly perform a published work, provided that nothing is charged and no payment is made to the performers.

11) Artistic Works in Public Places:  Allows for one to reproduce, draw, photograph, or make a video recording of an artistic work on public display e.g. sculptures, paintings, and calligraphy.

12) Broadcasting of a Speech at a Public Gathering:  Provided that the author does preclude this type of publishing, Article 22 allows for the mass media to publish or broadcast a speech made at a public gathering.

As shown above, the listed exemptions do not provide much background.  For instance, what constitutes an “appropriate” quotation under exemption 2 is unclear.  Furthermore, because the PRC utilizes a civil law system, each court can come to its own understanding of the fair use standard.  This often leads to unpredictable outcomes.

In some cases, whether or not the fair use defense applies is clear.  For instance, in New Modern Chinese Dictionary v. Modern Chinese Dictionary, the defendant lifted thousands of sample sentences and numerous pages of text from the plaintiff’s copyrighted dictionary for use in its own published dictionary.  The Beijing Higher People’s Court held that the whole-scale copying of text constituted infringement and did not qualify for the education and quotation exemptions.  Obviously, such use was neither in the aid of research nor was it a “limited quotation.”

However, some courts have tweaked the standard.  For example, in Beijing Sanmian v. Hefei Bang Lue, the plaintiff sued for copyright infringement when the defendant published plaintiff’s article on mobile telephone trends in China.  The defendant argued for the news reporting exemption on current events.  The court held that in order to utilize the news reporting exception the event needed to be “timely sensitive” and “significant.”  The court ruled that although the article was timely, it was not significant enough to fall under the exemption.

Although deference is given to the listed exceptions, some courts have provided a more open-ended and detailed multifactor analysis.  In SARFT Movie Channel Production Center v. China Education TV Station, defendant CETV broadcasted plaintiff’s copyrighted film “Out to Amazon River.”  Defendant argued for fair use as a state-owned television station that broadcast the film for educational purposes.  The court first tackled the fair use exemption and held that the exemption was only limited to in-person classroom teaching and did not include remote broadcasting.  Despite the exemption, the court noted that fair use should “evolve to accommodate new development[s] and demand[s].”  The court conducted further analysis and considered: 1) the purpose of the use, and 2) the effect of the use on the market for the film, which is similar to the first and fourth factors considered under the U.S.’s fair use analysis.  Defendant inserted numerous advertisements during the broadcasting of plaintiff’s film, which the court found swayed in the plaintiff’s favor.  Because both the plaintiff and defendant were television stations with broadcasting rights the court found that the defendant’s broadcasting of plaintiff’s movie would negatively impact plaintiff’s ability to engage in normal exploitation of its work.  Like U.S. courts in online piracy cases, this particular Chinese court perceived the potential adverse impact in allowing defendant to broadcast plaintiff’s work.  As a result, the court found that the defendant had infringed upon the plaintiff’s work.

Closing Thoughts

When it comes to fair use, U.S. law is more open-ended with its multifactor analysis compared to Chinese courts’ strict deference to Article 22 exemptions.  However, as shown above, some Chinese courts have undertaken a multifactor analysis similar to U.S. courts.  Overall, with the rising in internet connectivity and technological advances, it seems that both Chinese and U.S. courts will continue to face challenges in adapting their factors and exemptions to remain relevant and applicable in this digital age.

Brian Hong is an associate attorney at Grassini & Wrinkle.  He also writes Legal Brainz, a legal blog focusing on video game developments throughout Asia. *A prior version of this piece was originally posted on Legal Brainz. 

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