Oct. 8 (Bloomberg) -- The U.S. Supreme Court agreed to consider how patent rules apply to self-replicating technologies, accepting an appeal from a farmer seeking to circumvent Monsanto Co.’s planting restrictions on its genetically modified seeds.
The justices said Oct. 5 they will review a federal appeals court decision that Vernon Hugh Bowman infringed Monsanto’s patents when he planted soybeans he had bought from a grain elevator. Those beans were the product of seeds covered by Monsanto’s patents, and the St. Louis-based company says its rights extend to the second-generation beans.
The case centers on a technology that has helped make Monsanto the world’s largest seed company, with $13.5 billion in annual revenue, while provoking fights with opponents of genetically modified food and some farmers. Monsanto’s Roundup Ready seeds are engineered to be tolerant of herbicides. Farmers have embraced the technology because it lets them kill weeds while leaving crops unscathed.
The legal issues stem from Monsanto’s efforts to ensure that farmers have to buy the genetically modified seeds every year, rather than planting part of the harvest from the previous season. Farmers who buy seeds from an authorized dealer must agree that they won’t use any harvested seeds for planting.
Bowman sought to get around that requirement from 1999 to 2007 by buying less expensive soybeans from a grain elevator. Because the elevator accepted harvests from farmers using Monsanto seeds, the second-generation beans proved to be herbicide-resistant. When Monsanto found out about the practice, the company sued Bowman.
The U.S. Court of Appeals for the Federal Circuit, which handles patent cases, sided with Monsanto. The panel rejected Bowman’s contention that Monsanto had “exhausted” its patent rights by the time he bought the seed. The appeals court said Bowman “created a newly infringing article” by growing a new generation of soybeans with the seed.
The Supreme Court took up the case against the advice of the Obama administration, which said the Federal Circuit reached the right conclusion in the case.
The case may undermine a legal doctrine the Federal Circuit has adopted to extend the rights of patent holders. Under the so-called conditional sale exemption, patent holders can enforce their rights even after making a sale of the covered product. The doctrine has given patent holders the power to enforce restrictions against downstream purchasers.
The Supreme Court called that doctrine into question in a 2008 ruling. The justices unanimously said LG Electronics Inc. couldn’t enforce its memory-technology patents against both Intel Corp. and the computer makers that install Intel’s chips in their machines.
The court will hear arguments and rule by June. The case is Bowman v. Monsanto, 11-796, U.S. Supreme Court (Washington).
Dow Chemical Sued by Akzo Over Paint-Making Process Patent
Dow Chemical Co., the biggest U.S. chemical company, was sued by a unit of Akzo Nobel NV, the world’s largest paintmaker, over a patent for a high-temperature coatings process.
Akzo, based in Amsterdam, contends Midland, Michigan-based Dow is wrongly using polymer extrusion technology patented in 2004, according to a complaint filed Oct. 4 in federal court in Wilmington, Delaware.
Akzo deserves “damages, along with permanent injunctive relief” following a jury trial, for Dow’s patent infringement, the plaintiff’s lawyers said in court papers.
The lawsuit targets Dow Chemical’s so-called Bluewave Process used to make paint, and glass, paper and textile coatings, Akzo lawyers said in court papers.
Dow spokeswoman Nancy Lamb said the company hasn’t been served with the complaint and had no immediate comment on the lawsuit.
In dispute is patent 6,767,956.
The case is Akzo Nobel Coatings Inc. v. Dow Chemical Co., 12-cv-1264, U.S. District Court, District of Delaware (Wilmington).
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Australia Tobacco Plain-Pack Law Valid as Country Didn’t Benefit
Australia, the first country to require cigarettes to be sold in uniform packages, won a legal challenge to the law because the government didn’t benefit from the removal of trademarks, the country’s top court said.
The seven-judge panel of the High Court of Australia on Oct. 5 released the reasons for its Aug. 15 ruling that dismissed claims by Japan Tobacco Inc., British American Tobacco Plc, Philip Morris International Inc. and Imperial Tobacco Group Plc that the government illegally seized their intellectual property by barring the display of trademarks on packs.
“On no view can it be said that the Commonwealth as a polity or by any authority or instrumentality has acquired any benefit,” Chief Justice Robert French wrote in his reasons for dismissing the claims.
Intellectual property law grants a “negative right,” French wrote, citing “The Modern Law of Copyright and Designs.” Someone owning a copyright on a film can stop others from showing it in public, but doesn’t have the positive right to show it himself, French wrote. Trademark law, as a result, prevents others from copying, he wrote. “
The Aug. 15 ruling is a victory for a government faced with A$31.5 billion ($32 billion) in annual health costs from smoking, a habit it estimates killed 900,000 Australians over six decades. New Zealand and the U.K. are among countries whose governments have indicated interest in implementing similar legislation, which takes effect in Australia Dec. 1.
The Australian law requires cigarettes to be sold in packs with no company logos and with the same font for all brands on a dark brown background. Graphic health warnings must cover 90 percent of the back of the package and 70 percent of the front.
Only Justice John Heydon dissented, writing that the government deprived the tobacco companies of control of their property and the law gave that control and the benefits to the Commonwealth.
‘‘The flame of the Commonwealth’s hatred for that beneficial constitutional guarantee may flicker, but it will not die’’ Heydon wrote, referring to protection from having property acquired by the state without just compensation. ‘‘That is why it is eternally important to ensure that that flame does not start a destructive blaze.’’
The case is British American Tobacco Australia Ltd. v the Commonwealth of Australia, S389/2011, High Court of Australia (Canberra).
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Vivendi Label Asks Judge to Shut Used-Music Service ReDigi
Vivendi SA’s Capitol Records told a federal judge that a new online music service that allows people to buy and sell used digital songs infringes its copyrights.
The music label argued Oct. 5 in Manhattan federal court that the service, ReDigi Inc., infringed copyrights by allowing unauthorized copying of digital music files and should be closed.
‘‘It is a reproduction and it is a violation of the reproduction right of the Copyright Act,’’ Richard Mandel, a lawyer for Capitol, told the judge, requesting a judgment without a trial.
U.S. District Judge Richard Sullivan said he would rule later on motions from Capitol and ReDigi, which asked him to dismiss the case. Sullivan denied Capitol an injunction in February that would have put ReDigi out of business.
‘‘There is no copy involved,’’ ReDigi’s lawyer Gary Adelman said in court. ‘‘The actual file is being transported. That’s how the technology works.”
ReDigi, based in Cambridge, Massachusetts, said it made no unauthorized copies of songs. The company said in court papers that it provides digital music storage and a marketplace for tracks legitimately bought from Apple Inc.’s iTunes.
Capitol said in its suit, filed in January, that ReDigi allows users to upload tracks to its site, where buyers can download them for about 79 cents each.
“ReDigi offers a service whose very economic survival depends on the unauthorized reproduction and distribution of copyrighted sound recordings,” Capitol said in its motion for summary judgment.
ITunes charges 99 cents for many tracks, and the music companies take about 70 cents from each transaction.
The labels receive no revenue from a ReDigi sale. ReDigi takes a fee of 5 percent to 15 percent of each download, according to the complaint.
ReDigi said in court papers that it is protected from liability by the first-sale doctrine, which allows an individual who has lawfully purchased music to sell it to whomever he wishes without being liable for copyright infringement.
The label argued that what is being bought is not an original track acquired on iTunes but rather a digital copy of it. Capitol is seeking statutory damages of as much as $150,000 for each track infringed. .
Vivendi is the owner of Universal Music Group, the world’s largest recording company. The French company last month received regulatory approval in the U.S. and Europe to buy Capitol’s parent, EMI Recorded Music.
The case is Capitol Records v. ReDigi, 1:12-cv-00095, U.S. District Court, Southern District of New York (Manhattan).
WIPO Defers Vote on Pirate Parties’ Observer Status
The World Intellectual Property Organization, a United Nations agency, deferred consideration of the Pirate Parties non-governmental organization’s application for observer-level membership, the TorrentFreak website reported.
Requests from the French, Swiss and American WIPO members caused the postponement of consideration of the anti-copyright group’s allocation until 2013, TorrentFreak reported.
TorrentFreak, which also opposes copyright laws, said that while other countries also supported postponement of the Pirate Parties group’s application, they were reluctant to go public, given the success of the Pirate Parties in their national elections.
The U.S. sought a hold until WIPO decides if political parties should be accredited observers, even though the Pirate Parties International is an association of political parties, rather than a political party itself, TorrentFreak reported.
Data Owner Allowed to Argue for Return of Megaupload Content
An Ohio resident will get a chance to argue for the return of his files seized by the government in the criminal copyright case against Kim Dotcom.
Kyle Goodwin used Dotcom’s Megaupload service to store data related to his OhioSportsNet business, which reports on high school sports events in his state. The files were seized when the government shut Megaupload in January, as part of proceedings against Dotcom, according to court papers.
Among the data Goodwin said he is missing is footage some players parents paid for to be submitted to colleges for recruiting purposes. Also among the data is the raw footage to be used for a full-length documentary on one school’s girls’ soccer team.
Goodwin filed a petition with the court in March, asking that court develop a mechanism for the return of non-infringing content to Megaupload users. He said in his pleadings that he was expressing no opinion on the legitimacy of the government’s case against Dotcom.
In an Oct. 2 order, U.S. District Judge Liam O’Grady said that the court didn’t have enough information to make a decision on his request. He said an evidentiary hearing would be required and gave both Goodwin and the government 14 days in which to submit a brief.
After the judge reads the briefs, he said he will designate a date for a hearing.
The case is U.S. v. Kim Dotcom, 1:12-cr-00003-LO, U.S. District Court, Eastern District of Virginia (Alexandra)
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Trade Secrets/Industrial Espionage
Huawei Poses Security Threat to U.S., Lawmakers Say After Probe
Huawei Technologies Co., China’s largest phone-equipment maker, poses a security threat to the U.S., leaders of the House Intelligence Committee said as the panel prepares to issue a report on its probe of the company.
U.S. companies considering purchases from Huawei should “find another vendor if you care about your intellectual property, if you care about your consumers’ privacy, and you care about the national security of the United States of America,” Representative Mike Rogers, the panel’s chairman, told CBS News’s “60 Minutes,” according to a CBS release about an interview set for an Oct. 7 airing.
Rogers, a Michigan Republican, and the committee’s top Democrat, C.A. “Dutch” Ruppersberger, of Maryland, have been investigating whether expansion in the U.S. by Huawei and ZTE Corp., another Chinese phone-equipment maker, enable Chinese government spying and economic espionage, and imperil the U.S. telecommunications infrastructure.
The intelligence committee is scheduled to release a report on its yearlong probe at a news conference today.
“Huawei is a globally trusted and respected company doing business in almost 150 markets with over 500 operator customers including nationwide carriers across every continent save Antarctica,” William Plummer, a Washington-based spokesman for Huawei, said in an e-mail. “The security and integrity of our products are world proven. Those are the facts today. Those will still be the facts next week, political agendas aside.”
Susan Phalen, a spokeswoman for the committee, didn’t immediately respond to a request for comment.
Executives for Huawei and ZTE, both based in Shenzhen, China, denied links to espionage during an intelligence committee hearing last month, telling lawmakers they aren’t controlled by the Chinese government.
The companies said they favor independent audits of technology vendors’ hardware and software as a way to ensure that devices and networks are secure.
The panel’s probe coincides with increased U.S. warnings about digital spying by China. U.S. counterintelligence officials called China the world’s biggest perpetrator of economic espionage in a report last November, saying the theft of sensitive data in cyberspace is accelerating and jeopardizing an estimated $398 billion in U.S. research spending.
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