HRFM Today

The Future Is Now: Patenting Inventions Independently Invented by an AI system

By Lloyd J. Wilson for The Daily Record

The idea that machines, rather than humans, could invent something on their own is a concept that was once thought to be a futuristic fantasy. However, the U.S. patent office is now being confronted with patent applications listing an artificial intelligence (AI) system as the inventor. Existing U.S. patent laws seem inadequate to accommodate this new reality.

On July 31, 2019, Martin Coulter of the Financial Times reported that a team led by Ryan Abbot, a professor of law and health sciences at the University of Surry, recently submitted two patent applications listing an AI system called Dabus ("Device for the Autonomous Bootstrapping of Unified Sentience") as the inventor for each of the inventions. Abbot's team credits Dabus for inventing — without human input — a fractal-based food container and a lamp built to flicker in a pattern to attract attention.

Dabus is described as being distinct from typical AI systems that are designed to merely assist humans. Nancy Cohen of Tech Xplore reports that Dabus is a machine learning system that generates ideas by (1) altering interconnections of neural networks, (2) detecting consequences of the ideas, and (3) predicting novelty and salience of the ideas. Dabus can generate novel ideas by comparing ideas in a pre-existing database of existing technologies.

Shortly after Abbot's team filed patents listing Dabus as an inventor, the U.S. patent office released a Request for Comments (Due Date: Nov. 8, 2019) regarding the subject of patenting "AI inventions," the term being given to inventions invented by AI systems. 84 Fed. Reg. 166 (Aug. 27, 2019); 84 Fed. Reg. 189 (Sept. 30, 2019) The request includes 12 questions regarding the implications of AI inventions in the patent realm.

One question to resolve is this: Assuming an AI machine (e.g., Dabus) can invent something without human intervention, what patent protections are available, if any, for AI inventions? Existing U.S. patent law only allows an inventor or assignee of the inventor to apply for a patent.

The term "inventor" is statutorily defined under 35 U.S.C. § 100(f) as "the individual, or if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention." The term "individual" is interpreted as a natural person (i.e., human being) under existing U.S. patent law. Thus, under existing U.S. law, an AI machine would not be recognized as an inventor, would not be eligible to apply for a patent, and AI inventions would not be eligible for patent protection.

A follow-up question is whether, from a policy perspective, U.S. laws should be changed to address this scenario. A close examination of the purposes and rationales forming the foundation of current U.S. patent policy might be the most informative in determining whether a change is needed.

The U.S. patent system is based on the U.S. Constitution, and is intended "… to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Patents are thought to encourage innovation by granting patent owners a right to exclude others from making, using, offering for sale, or selling their invention.

However, if an AI machine is already trained and programmed to invent, the AI machine itself would need no incentive or additional motivation to invent anything; it would just perform its programmed function and continue to invent.

Conversely, if incentivizing technological advancement and promoting the progress of science are the purposes of granting patent rights, granting patent rights for AI inventions would likely incentivize companies and/or inventors to invest in AI machines like Dabus to expedite advances in technology.

Assuming that modifying U.S. patent laws to grant patent rights for AI inventions was determined to be necessary to incentivize technological advancement, giving credit for an invention to individuals who design the algorithms and train the AI machines seems like a logical approach. Companies could require employees who design and train the AI machines to sign contractual agreements assigning patent rights to any AI invention invented by these AI machines to the company that owns the AI machines. This would create an incentive to invest in AI machines to create AI inventions. At first, this approach seems simple.

However, this change to U.S. patent law would reward those who merely design and discover (rather than invent) algorithms for the AI machines, algorithms being a manipulated form of math rather than a physical invention. Currently, algorithms are not considered patent eligible subject matter and such a change to U.S. patent law could have far reaching implications. Under this approach, a patent for an algorithm could, theoretically, be obtained for discovering a use for an equation existing in nature such as, for example, E = MC². This could lead to unintended consequences of people committing patent infringement just for doing everyday tasks, which would, on its face, be unjust.

Perhaps a viable approach is to allow algorithms to be patentable only if they are computer-implemented. Existing U.S. patent law would require that a claim for a computer-implemented algorithm is sufficiently enabled and described. However, that may be insufficient, and granting someone a patent for a computer-implemented method to use E = MC² to perform functions A, B and C seems overly broad. Safeguards, some of which may already exist to some extent in U.S. patent law, might need to be further defined to narrow what would be a patent-eligible computer-implemented algorithm. Drafting patent laws to clarify what computer-implemented algorithms are acceptable and which ones are not would be a difficult balancing act, but at least it would provide some level of patent protection for AI inventions.

If the purpose of patent law is truly "to promote the progress of science," then granting patent rights to designers of algorithms for AI machines may be a viable option to incentivize investment in AI machines, but care needs to be taken to avoid unintended consequences and balance fundamental principles of justice.

Lloyd J. Wilson is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. specializing in patent preparation and prosecution. He has experience in developing and managing patent portfolios for businesses ranging in size from solo inventors to large corporations. Lloyd can be reached at (518) 452-5600 or at [email protected].

Patent Rights Issues Under Government R&D Contracts

By Stephen P. Scuderi for The Daily Record

This article will present an overview of some of the issues pertaining to the disposition of patent rights to inventions made under a government R&D contract. As will be seen, without careful adherence to the statutes and regulations governing such patent rights, it is possible for a contractor to unintentionally lose or waive these valuable rights.

In 1980, Congress implemented chapter 18 of 35 United States Code (USC), which is titled "Patent Rights in Inventions Made with Federal Assistance" (the Law). The Law originally applied only to small business firms and nonprofit organizations. However in 1983, President Ronald Reagan issued a "Memorandum on Government Patent Policy" extending the benefits of the Law to all R&D contractors, including large businesses and for-profit organizations.

Among the Law's main policy objectives listed in 35 USC § 200, are:

* "to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery" and

* "to ensure that the government obtains sufficient rights in federally supported inventions to meet the needs of the government and protect the public against nonuse or unreasonable use of inventions."

Since contractors and the government do not always have the same interests, these policy objectives sometimes conflict with each other.

To balance these objectives, the Law states that, under an R&D agreement funded in whole or in part by the federal government (a "funding agreement"), a contractor may elect to retain title to a subject invention, 35 USC § 202 (a). However, upon election of the right to retain title, the government acquires a worldwide, nonexclusive, irrevocable, paid-up (royalty free) license to practice the subject invention for its own purposes, 35 USC § 202 (c) (4).

The license gives the government the right to allow other contractors, including competitors to the contractor, to produce the subject invention for sale to the government. Therefore, potential contractors in a funding agreement must take care to evaluate the benefits of receiving such funds versus the potential loss of market share due to the non-exclusive license of the subject invention to the government.

It is important to note that a subject invention is defined under 35 USC § 201(e) as an invention that is "conceived or first actually reduced to practice" in performance of work under the funding agreement. The filing of a patent application is considered constructive reduction to practice and is not actual reduction to practice. Actual reduction to practice requires a showing of the invention in a physical or tangible form that shows every element of a claim in an application. Wetmore v. Quick, 536 F.2d 937, 942, 190 USPQ 223, 227 (CCPA 1976). See also MPEP 2138.05, titled: "Reduction to Practice."

As a practical matter, when a company is developing a new product, it is not uncommon for multiple patent applications to be filed, and even issued, on the initial concepts of an invention long before the invention is actually reduced to practice. Often, these patent applications are among the broadest in scope and protect the most important aspects of an invention. If the company later enters into a funding agreement with the government and the invention is actually reduced to practice in performance of that agreement, then the government will get a license in those earlier filed patent applications because they fall under the definition of "subject invention."

To enable the right to retain title, 35 USC § 202 (c) (1) requires that the contractor of a funding agreement must disclose each subject invention to the government within a reasonable time (usually two months) after it becomes known to contractor personnel responsible for the administration of patent matters (usually the contractor's patent counsel). Moreover, if the contractor does not disclose a subject invention within such reasonable time, then the government "may" obtain title to the subject invention.

The decision by the government to demand title to a subject invention after a contractor's failure to comply with the disclosure requirements of 35 USC § 202 (c) (1) is a discretionary matter. In a case of first impression on this point, the Federal Circuit held that a contractor's failure to timely identify a unique manufacturing process as a "subject invention" under the applicable patent rights clauses of the funding agreement enabled the government to acquire title to the invention. The Court also held that the decision to insist on forfeiture of title from the contractor was within the bounds of sound discretion, even though the contractor's failure to comply with the reporting requirements caused no harm to the government. Campbell Plastics Engineering & Mfg., Inc. v. Brownlee, 389 F.3d 1243 (Fed. Cir. 2004).

Therefore, it is critical that a contractor strictly comply with all disclosure requirements regarding a potential subject invention in a funding agreement. These disclosure requirements are typically provided by standard Federal Acquisition Regulation (FAR) clauses that are either inserted into the funding agreement or incorporated by reference. Failure to comply with such disclosure requirements means that a contractor risks forfeiting the right to retain title in a subject invention to the government. Further, in some cases, this could mean that a contractor risks forfeiting title to patent applications and/or issued patents that have been filed prior to the funding agreement but first actually reduced to practice during performance of the agreement.

Stephen P. Scuderi is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. His practice involves all phases of intellectual property law, including the drafting of hundreds of patents in the electrical and mechanical arts. Stephen can be reached at (518) 452-5600 or at [email protected].

The Difficulties of Protecting Cannabis and Related Intellectual Property

By Kristian E. Ziegler for The Daily Record

As more than half of the states in the U.S. have recently decriminalized cannabis/marijuana to some extent, the domestic cannabis business has been growing rapidly.

As of the date of this publication, marijuana is legal for medical use in 33 states and the District of Columbia, and for recreational use in 11 states and the District of Columbia. Full legalization of cannabis failed to pass in New York in June, but lawmakers settled on decriminalizing the possession of relatively small amounts of cannabis. However, cannabis and most cannabis-derived products remain federally illegal. Cannabis and most cannabinoids (the active chemicals in cannabis/marijuana) are currently classified as Schedule I controlled substance under the Controlled Substances Act of 1970 (CSA).

Like any business, companies selling cannabis and related goods invest in branding and product development. A company's brand and its innovative products can be protected by various forms of intellectual property schemes — such as trademarks to protect its branding and patents to protect its inventions. Unfortunately, the conflict between the federal government and states on the legality of cannabis and related goods has created great difficulties in using intellectual property to protect cannabis-related trademarks and inventions.

Patenting cannabis and related products and methods

U.S. patent law falls within the exclusive purview of the federal government, both statutorily and in the enforcement of patent rights. Unlike European patent law, which prohibits patents on inventions considered "contrary to public order or morality," U.S. patent law is amoral and nonjudgmental.

To receive letters patent in the U.S., an applicant must only demonstrate that their invention is useful, novel/new (i.e., not previously publicly known) and non-obvious (i.e., not an obvious modification or combination of that which is previously publicly known). U.S. patent law does not require the applicant to actually produce a real-world product or otherwise take any action to implement the invention (i.e., to use the claimed invention in commerce). The legality of the invention itself, and the use of the invention, is thus of no consequence in obtaining a patent.

The U.S. Patent and Trademark Office (USPTO) started awarding patents for cannabis-related products decades ago before the recent medical marijuana laws. But the number of cannabis-related patents has picked up remarkably since Colorado and Washington legalized cannabis for recreational use in 2012. The number of U.S. cannabis patent holders has nearly quadrupled since 2016. Last year, the USPTO issued 77 patents containing the word cannabis in a claim (and about 70 so far in 2019), while the USPTO only issued 29 such patents during 2017 and 14 during 2016. Dozens of patents related to cannabinoids and various strains of cannabis have recently issued, including patents directed to cannabis-laced toothpaste, coffee pods containing cannabis, frozen cubes of cannabis juice purée, and methods for making cannabis-spiked beverages. The U.S. government itself (specifically the Department of Health and Human Services) secured a patent to a method of "administering a therapeutically effective amount of a cannabinoid."

While an applicant may be able to obtain a patent for a cannabis-related product or method, enforcement of the patent is unlikely. Cannabis-related patent litigation is very rare. It appears that there have only been two cases which involve the enforcement of a cannabis patent; both were initiated last year and are still pending.

Under a long line of authorities going back to 1725, the illegality of cannabis and cannabis-related products as a Schedule I controlled substance probably creates an insurmountable barrier to the enforcement of most cannabis patents. For example, if a cannabis patent owner seeks damages in a patent infringement action, they would seek compensation in the amount of: 1) the royalty that the infringer should have paid to the patent owner; or 2) the profits that the patent owner would have made but lost because of the infringer. But under either damages theory, the patent owner would be seeking the profits that came from committing a crime under the CSA or the Federal Food, Drug, and Cosmetic Act (FFDCA). Cases from the U.S. federal courts send a clear message that they will not lend their aid to a criminal enterprise by adjudicating disputes over entitlement to the fruits of the criminal enterprise.

Trademarking cannabis and related products and services

The Lanham Act is the federal statute that governs trademarks, service marks, and unfair competition. Generally, the Lanham Act extends federal trademark protection only to marks associated with goods and services that are lawfully used interstate or foreign commerce, which may be registered with the USPTO. As the Trademark Manual of Examining Procedure (TMEP) used by the USPTO explains, a federal trademark application cannot relate to the shipment or production of an illegal drug. So as cannabis remains a Schedule I controlled substance under the CSA, trademark protection at the federal level is not available for marks relating to the production, sale, or distribution of cannabis and related products and services.

In May, the USPTO released Examination Guide 1-19 directed to the examination of marks for cannabis and cannabis-related goods and services after enactment of the 2018 Farm Bill. The Examination Guide identifies the CSA, the FFDCA and the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) as the federal authorities applicants and trademark examiners need to consult to make a determination of whether commerce involving cannabis and cannabis-related goods and services is lawful or not. The 2018 Farm Bill, which was signed into law in December 2018, excludes "hemp" from the CSA's definition of marijuana/cannabis. Hemp is defined as "the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis." Cannabis plants and derivatives such as CBD that contain no more than 0.3% THC on a dry-weight basis (i.e., hemp) are no longer illegal substances under the CSA.

However, even if CBD or hemp-derived products are legal under the CSA, not all such goods are fully federally lawful. For example, the use in foods or dietary supplements of a drug or substance undergoing clinical investigations, such as CBD, without approval of the U.S. Food and Drug Administration (FDA) violates the FFDCA. The 2018 Farm Bill in fact explicitly preserved the FDA's authority to regulate products containing cannabis or cannabis-derived compounds under the FFDCA. Registration of marks for any goods containing CBD will therefore still be refused as unlawful under the FFDCA, even if derived from hemp, as such goods may not be introduced lawfully into interstate commerce.

While some marks may not be federally registerable as being directed to illegal goods or services, each state has its own state laws protecting trademarks, and even maintains its own register of trademarks. Few registrants utilize state trademarks because they rarely give any additional protection over federal trademark law, as federal trademark law preempts state trademark laws. But a state trademark can be an effective way to use state law to prevent local competitors within the state (but not out-of-state competitors) from using the same or confusing similar marks. However, this approach will not provide companies with a cause of action against another company operating in another state.

While the intellectual property associated with cannabis and cannabis-related products may be a valuable part of a cannabis business, cannabis' classification as a federally illegal drug adds an additional level of complexity for business owners and investors. As a result, when considering an investment or strategy for developing a business in the cannabis field, it is important to work with an experienced advisor familiar with these issues.

Kristian E. Ziegler is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. His intellectual property law practice includes all aspects of patent, trademark and copyright law but is primarily directed to patent prosecution. He can be reached at (518) 452-5600 or [email protected].

New USPTO Rule Requires a U.S. Attorney Must Represent All Foreign Trademark Applicants and Registrants

Effective August 3, 2019, the United States Patent and Trademark Office (USPTO) will require all foreign-domiciled applicants, registrants and parties to be represented by a U.S.-licensed attorney in USPTO trademark proceedings.

Who does the new rule affect?
This rule applies to all foreign-domiciled applicants, registrants and parties. This means that an individual with a permanent legal residence outside the United States or its territories and/or an entity with its principal place of business outside the United States or its territories will need to be represented by a U.S.-licensed attorney. This includes all pending applications, new applications, and renewal filings.

What is the rationale for the new rule?
The new rule is intended to increase compliance with U.S. trademark law and USPTO regulations, while simultaneously improving the accuracy of trademark submissions to the USPTO. The USPTO has found that several foreign trademark applicants who file pro se are actually filing inaccurate and possibly fraudulent submissions that do not comply with U.S. trademark law or the USPTO's rules. Furthermore, these inaccurate submissions are often made with the assistance of foreign individuals or entities not authorized to represent applicants at the USPTO.

What does this mean in practice?
Starting August 3, 2019, the USPTO will require that a U.S.-licensed attorney file all new trademark filings. For pending applications filed prior to August 3, the USPTO will require that responses to Office Actions and Statements of Use filed after August 3 be filed by a U.S.-licensed attorney. In pending TTAB cases, the TTAB will suspend proceedings pending appointment of a U.S. attorney.

In particular, the new rule affects Canadian patent agents who will no longer be allowed to represent Canadian clients before the USPTO in trademark matters. The USPTO will recognize Canadian trademark attorneys and agents as additionally appointed practitioners before the USPTO, but a U.S.-licensed attorney will need to be appointed to file formal responses, as the USPTO will only communicate with an appointed U.S.-licensed attorney.

For international applications filed under the Madrid Protocol, until the Madrid Protocol system allows for the designation of a U.S.-licensed attorney, the requirement for a U.S.-licensed attorney will be waived up to publication. However, if a Madrid Protocol application does not comply with U.S. trademark law and USPTO rules, the USPTO will issue an Office Action and a U.S.-licensed attorney will need to be appointed in order to respond to the Office Action.

A link to the USPTO new rule can be found here. Please contact HRFM with any questions about this new rule and if you require assistance in the United States with trademark matters.

SCOTUS Invalidates Lanham Act's Prohibition on Immoral or Scandalous Trademarks

By Alexsandar Nikolic

On June 24, the Supreme Court of the United States (SCOTUS) provided its long-awaited decision in Iancu v. Brunetti, 588 U.S. ___ (2019) by invalidating the Lanham Act's prohibition on immoral or scandalous trademarks. In short, the Court held that the provision is unconstitutional because it conflicts with the First Amendment.

Before continuing with the case summary, a short distinction should be made between obtaining a trademark and registering a trademark with the United States Patent and Trademark Office (USPTO). A trademark identifies the source of a good or service and is obtained by virtue of the mark's use in commerce. Registration is a step which grants certain benefits to trademark holders, including a presumption of trademark validity, national public notice, limits on infringer defenses, and access to federal statutory damages.

The Lanham Act creates a trademark registration system with the USPTO as administrators. Under 15 U.S.C. 1052(a), a trademark may be denied registration if it "consists of … immoral or … scandalous matter." Designer and entrepreneur Erik Brunetti has a clothing line that uses the trademark FUCT, which he attempted to register with the USPTO. Mr. Brunetti indicates that the mark is pronounced as the four letters. However, the mark may also be interpreted as "'the equivalent of [the] past participle form of a well-known word of profanity.'" This latter interpretation prevented Mr. Brunetti from being able to register his trademark with the USPTO.

When Mr. Brunetti attempted to register his trademark with the USPTO, however, his application was denied. Both the USPTO examining attorney and the Trademark Trial and Appeal Board determined that the mark was immoral and scandalous, denying Mr. Brunetti registration for his trademark. Mr. Brunetti then appealed to the Court of Appeals for the Federal Circuit (CAFC), where the CAFC determined that the prohibition on immoral or scandalous trademarks was unconstitutional. The Supreme Court granted certiorari after the USPTO appealed.

The Lanham Act indicates that the USPTO may deny registration under certain conditions. Nonetheless, the Supreme Court determined that a denial for immoral or scandalous matter was unconstitutional because it touches on the First Amendment. In particular, the Court determined that speech based on ideas or opinions may not be curbed by the government. Thus, government discrimination based on viewpoint is unconstitutional.

In the decision in Matal v. Tam, 137 S.Ct. 1744 (2017) the Court decided that the prohibition on disparaging marks was unconstitutional because the prohibition was viewpoint based. With the Brunetti decision, the Court extended the scope of unconstitutional prohibitions to include immoral and scandalous marks.

The Supreme Court decision was written by Justice Kagan, and joined by Justices Thomas, Ginsburg, Gorsuch, Kavanaugh, and Alito, with Justice Alito providing a concurring opinion. Justices Roberts, Breyer, and Sotomayor each wrote an opinion that concurred in part and dissented in part.

All the justices agreed that the term "immoral" was overly broad and subjective. The justices also agreed that a more narrowly tailored statute may be created by Congress to prevent vulgarity without impinging on the expression of ideas.

The three Justices that dissented in part suggested that 15 U.S.C. 1052(a) should have been interpreted so that a narrower interpretation of the term "scandalous" could be applied to marks. Justice Roberts suggested that marks that offend because of the "mode of expression" could be denied while marks that offend because of the idea conveyed should be allowed. Justice Breyer suggested that the statute should be narrowly interpreted with a balance of harms versus justifications test applied when examining scandalous marks. Justice Sotomayor stated that the government should have some leeway to judge scandalous content in light of the dispute being over registration of the mark, not over the existence of a protected mark. Since registration conferred a benefit protected by the government, the government should have the power to regulate.

It appears as if it is up to Congress to make changes to 15 U.S.C. 1052(a) if it intends to prevent registration of marks that may be vulgar or lewd without offering or expressing ideas. As of now, it appears as if FUCT is on its way to becoming a registered mark.

Alexsandar Nikolic is an associate with Heslin Rothenberg Farley & Mesiti P.C. in its Rochester office. He can be reached at (585) 288-4832 or [email protected].

Toward Rebalancing Outcomes of Alice Patentable Subject Matter Inquiries — Part Two

By Wayne F. Reinke for The Daily Record

It has been about nine months since my last patentable subject matter (aka "Alice") update, tracking cases and other important information in the wake of the Alice Supreme Court decision. Things continue to improve at the Court of Appeals for the Federal Circuit and with examination at the U.S. Patent and Trademark Office.

The two-part Alice test for patentable subject matter starts by determining whether the claims are directed to a judicially recognized exception — namely, laws of nature, natural phenomena and abstract ideas. If an exception is present, it is then determined whether the elements of each claim, both individually and as an ordered combination, are sufficient to transform the nature of the claim into something patentable.

Finjan, Inc. v. Blue Coat Systems, Inc. (Fed. Cir. Jan. 10, 2018) involved a method and system for computer security involving attaching a security profile to an executable (downloadable application program). It is a behavior-based virus scanning technique. The Court found the claims not to be abstract, as they are employing a new type of file-enabling capability; in this case, scanning for previously unknown security threats.

Data Engine Technologies LLC v. Google LLC (Fed. Cir. Oct. 9, 2018). Data Engine Technologies involved four patents directed to spreadsheets; three of them concerning tabs for navigating through multiple spreadsheets conceptually "stacked" in a three-dimensional fashion. The tabbed spreadsheet patents saved the user from navigating through complicated spreadsheets and searching for applicable complicated (and proprietary) commands. The Court held patentable subject matter — not an abstract idea.

Ancora Techs. v. HTC Am. (Fed. Cir. Nov. 16, 2018) involved a method of restricting a computer's use of a program in accordance with a license using a verification structure stored in erasable non-volatile memory of the BIOS. As with the cases above, the claim was held not to be abstract, so there was no need to address step two of the Alice §101 inquiry.

IBG v. Trading Technologies (Fed. Cir. Feb. 13, 2019) (non-precedential) is not technically an Alice case, but in practice serves a similar purpose. IBG involved four patents directed to a Graphical User Interface (GUI) for a trading system including a dynamic display of market depth, which addresses price changes during the time between the trader reading the price and actually entering a trade order. The basis for determining eligibility is, in part, whether it solves a technical problem using a technical solution, similar to an Alice review. Relying on a prior Fed. Cir. Decision, the court concluded the invention was a specific improvement to computer operation, the GUI providing a specific solution to a specific problem with trading system software.

Endo Pharmaceuticals, Inc. v. Mallinckrodt LLC (Fed. Cir. March 28, 2019) involved a patent related to treating kidney-impaired patients for pain using oxymorphone. The district court had found the claims to fail the Alice test, finding them to be directed to a law of nature. The CAFC reversed, explaining the invention is a new way to treat such patients. Specifically, a lower dose could be used to achieve a similar level of oxymorphone in the blood, due to such patients more slowly metabolizing the drug because of their kidney impairment.

Ironworks v. Apple (D. Del. 2018) involved patents directed to the use of various tactile sensation patterns to convey information to a user. Think haptic feedback. The defendant characterized the invention as abstract without more, using a kind of vocabulary to convey information, analogizing to the Braille system. The court found the claimed device and mobile station not to preempt all vibration-based inventions and included tangible systems with specific components configured to perform specific functions in response to specific events. The district court admitted that the claims include the abstract idea of using a vocabulary to convey information, but that the claims in their entirety were directed to patentable subject matter.

In Ricipi Communications LLC v. JPS Interoperability Solutions, Inc. (D. Del., March 18, 2019), the district court held as patentable a system using two-way radios to communicate over a computer network or the internet. The court found the invention to be an improvement over prior art systems using telephone lines and the claims to be non-abstract. Further, the court opined that even if the claims were held to be abstract, the remaining parts impart enough to make them patentable.

The best news for patent applicants affected by Alice in the recent past is the January 2019 U.S. Patent and Trademark Office §101 Guidance for Patent Examiners. Under the Guidance, a claim of a patent application is not to be considered abstract, except in rare circumstances, unless it falls within one of three groupings of abstract ideas: mathematical concepts; mental processes; and certain methods of organizing human activity.

The category of mathematical concepts includes mathematical relationships, mathematical formulas or equations and mathematical calculations. Mental processes include concepts performed in the human mind (including an observation, evaluation, judgment, opinion). Although the mental processes group seems harmless enough at first glance, note that the USPTO will review a computer-implemented invention claim as if the computer were not present. In this exercise, if, for example, the steps of a method claim are found to include an abstract idea, the inquiry will include whether the steps (absent the programmed computer) could be performed in the human mind. If so, the claim will fail the Alice inquiry.

Finally, certain methods of organizing human activity include fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); and managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions).

While the new examination guidelines should make prosecuting previously §101-challenged applications easier with more certain outcomes, the guidelines are not law (statutory or judicial). Any patent issued under the guidelines that is challenged or enforced, will also need to survive application of §101 inquiry in practice at that time. In that regard, the Senate Judiciary Committee has hearings in June regarding a statutory fix to §101.

Wayne F. Reinke is a partner with the law firm of Heslin Rothenberg Farley & Mesiti P.C. in its Rochester office. His practice focuses on issues related to Internet-based inventions, software, business methods, semiconductor technologies, design patents, and nanotechnology. He can be reached at (585) 288-4832 or [email protected].

Freedom to Contract vs. Patent Misuse: An Analysis of Post-Expiration Patent Royalties

By Thomas L. Sica for The Daily Record 

Inherent within American contract law is the freedom to contract — i.e., the ability to negotiate and agree to any terms that the parties see fit for any given contract. Contract terms will only be deemed void under special circumstances, such as unconscionability, unenforceability or, in some cases, due to statutory restrictions. This freedom extends to all contracts, including patent licensing agreements. However, the Supreme Court has judicially restricted one key aspect of patent licenses: royalties.

In the 1964 case of Brulotte v. Thys Co., 379 U.S. 29, the Supreme Court held that "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se." In general, this doctrine makes sense. The United States Constitution provides that inventors may secure the exclusive right to their discoveries for a limited time. A patent registration creates a temporary monopoly over a certain invention, after which the public is free to use and enjoy the invention without restriction. The Brulotte court reasoned that, by allowing post-expiration patent royalties, the royalty agreement is unlawfully extending the patentee's monopoly period with respect to that invention and restricting the licensee's use of a public domain invention. The court feared that post-expiration patent royalties would open the door to patent misuse.

In the decades following Brulotte, nearly every court that has come across this rule has determined that Brulotte was wrongfully decided as an improper judicially-created restriction of the freedom to contract. For instance, the 9th Circuit found that Brulotte "runs counter to the usual task in a contract case — to interpret the terms agreed to by the parties." Zila, Inc. v. Tinnell, 502 F.3d 1014, 1019 (9th Cir. 2007). The 7th Circuit held that the Brulotte rule does not have the effect of extending the life of a patent, but rather serves to encourage higher royalty rates over a short period of time at the expense of the licensee. See, Scheiber v. Dolby Labs., Inc., 293 F.3d 1014, 1017 (7th Cir. 2002).

Despite this, these courts, often begrudgingly, follow this rule because they cannot overturn Supreme Court precedent. See, Zila, Inc., 502 F.3d at 1020 ("No matter how unconvincing Brulotte's foundation may be, however, we are bound to apply its holding if it applies to the case before us.") Even the Supreme Court itself has criticized the Brulotte rule in Kimble v. Marvel Entm’t, LLC, 135 S. Ct. 2401 (2015), but refused to overrule the decision due to the doctrine of stare decisis: "Respecting stare decisis means sticking to some wrong decisions." The Kimble court's majority could not find a "special justification" for overruling the Brulotte case, so they upheld it. The court further justified this decision by explaining that the Brulotte rule, while controversial, has proved workable and is easier to apply than the case-by-case analysis found in antitrust cases that the plaintiff in Kimble sought to impose.

Due to the widespread criticism of the bright-line post-expiration patent royalty restriction, most courts allow, and even encourage, a variety of exceptions and workarounds to the restriction. One such exception occurs when the royalty payments are not dependent upon the existence of the patent registration, such as when the license agreement expressly contemplates a lower royalty payment in the absence of a registration. See, Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979).

For example, a patentee and a licensee enter into a license agreement whereby the patentee will receive a royalty from the licensee on any sales of the patentee’s product. The royalty agreement states that the royalty rate is 20% for the length of the patent but lowers the rate to 15% if the patent either fails to issue or expires. Courts will generally allow this agreement, because the parties have explicitly acknowledged that the royalty is not based solely on the patent, but on the product itself. Going further, a contract may tie the royalty payments to non-patent rights, such as to that of a specific product, so long as the royalties are not expressed to be made for any patent rights. As the Supreme Court has found, "post-expiration royalties are allowable so long as tied to a non-patent right — even when closely related to a patent." Kimble, 135 S. Ct. at 2408.

One of the major criticisms of the Brulotte rule is that a restriction of post-expiration patent royalties leads to higher royalty rates due to the shortened period in which the royalties are imposed. To counter this concern, most courts will allow patent royalty payments to be made after the expiration date of the patent so long as the payments are for pre-expiration use. See, Scheiber, 293 F.3d at 1018 (7th Cir. 2002) ("charging royalties beyond the term of the patent does not lengthen the patentee's monopoly; it merely alters the timing of royalty payments.") This gives some flexibility to parties entering into license agreements.

The parties may delay royalty payments partially or entirely past the expiration date of the patent. Alternatively, this gives the opportunity for an amortized arrangement. For example, the licensing parties may agree to a 20% royalty rate covering the 20-year period that the patent is enforceable, but the payments may be made over a 40-year period, thus lowering by half the amount of each payment made.

There are still many other alternatives and workarounds that courts have implicitly or explicitly endorsed. For example, the Supreme Court has found that "parties have still more options when a licensing agreement covers either multiple patents or additional non-patent rights. Under Brulotte, royalties may run until the latest-running patent covered in the parties' agreement expires." Kimble, 135 S. Ct. at 2408. Or, the license agreement may require a lump sum, rather than royalty payments. Or, the parties may enter into a joint venture rather than a royalty arrangement so that they may fairly share the risks and rewards of the sale of the patented product.

In conclusion, while the general consensus is that the Brulotte rule regarding the restriction of post-expiration patent royalties is misguided, there are several ways to get around the rule. There are still a variety of options for patentees and licensees in entering into license agreements so long as the license agreement does not require patent-specific royalties to be paid after the patent has expired.

Thomas Sica is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. His experience includes litigation work, trademark prosecution, and general IP counseling. He can be reached at (518) 452-5600 or [email protected].

What’s On Sale? The Latest On the Patent Novelty Requirement

By Aleksandar Nikolic for The Daily Record

On Jan. 22, 2019, the Supreme Court provided its decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc.[1] Despite receiving little publicity outside the patent world, it nonetheless has implications for small businesses.

The decision provided clarification to the statutory changes made by the America Invents Act (AIA) to the novelty requirement, specifically the on-sale bar, under 35 U.S.C. 102(a). As the latest in a series of decisions limiting pre-patent application activity by expanding the meaning of "on sale," businesses should consider including patent filing with any supply, distribution or sales strategy.

One of the conditions for receiving a patent is that an invention must be for something new or novel. However, novelty is more than making sure that an invention is unique. Under 35 U.S.C. 102(a), "[a] person shall be entitled to a patent unless the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention." As long as these acts were committed one year or less before the "effective filing date" (e.g. in many but not all cases, the application filing date) of a patent application, then these disclosures should not be considered prior art. If a sale was made more than one year prior to filing a patent application, the on-sale bar will likely be triggered. The consequences of triggering the bar include application rejection or, if the patent issues, a finding that the patent is invalid.

The on-sale bar has existed in some form since the early 1800s. The bar was included in patent statutes because Congress did not want to allow inventors to make the knowledge associated with an invention available to the public and then withdraw access to that knowledge through a patent. Nor did Congress want to allow inventors to try to circumvent the patent term period. The patent statute prior to the AIA included language invalidating sales made within the United States more than one year prior to submitting a patent application, but the AIA extended the on-sale bar to include sales made anywhere. In doing so, the revised statutory language raised questions as to whether only public sales, and not private or "secret" sales, would be barred.

Over 20 years ago the Supreme Court, in Pfaff v. Wells Electronics, Inc.[2], stated that if there was a "commercial offer for sale" and the invention was "ready for patenting," then the invention was considered "on sale" under the pre-AIA statute. This analysis is still valid for determining whether a sale occurred within the meaning of the statute, post-AIA.

Thereafter, in multiple appeal cases involving The Medicines Co. v. Hospira, Inc. (2016, 2018)[3], the Court of Appeals for the Federal Circuit (CAFC) decided that a distribution agreement also may constitute an offer for sale. In the first case, a manufacturing agreement that used a process under the patent in dispute and provided a finished product to The Medicines Co. was not considered a commercial sale. The CAFC determined that an agreement with a third party to produce a product by the patented process was merely a contract for manufacturing services.

However, in the second case, a distribution agreement with a third party was considered a commercial sale. The CAFC stated that commercial agreements between a supplier or distributor and the patent holder were not considered exempt from the on-sale bar. The CAFC further determined that under a supplier or distributor agreement, if there is a change in title, then a sale has occurred.

For example, a title transfer may occur when the supplier received blanket authority to market or disclose the invention. Other factors for consideration include whether products made by a licensed process were sold, or whether there was a secrecy agreement between the parties in the use of a process or device. The CAFC indicated that no individual factor determined a sale and that each situation was fact-specific. The commercial nature of the transaction between parties was at the core of the analysis to determine whether there was a sale. The court's analysis further relied on agreement language as interpreted using the Uniform Commercial Code. The lesson of these decisions is that parties should be very careful in drafting their agreements and in the way that they act.

In addition, under the prior statutory regime, public use and the on-sale bar could be intertwined. For example, in 1984, in Kinzebaw v. Deere & Co.[4], the CAFC indicated that a use that is secret but results in exploiting the invention for commercial purposes is likely to trigger the on-sale bar. Thus, the definition of commercial use has generally been quite expansive. However, with the AIA, the language concerning public disclosure changed and brought with it questions about the meaning and extent of the on-sale bar.

The Helsinn decision focused on whether a secret or private sale was still a sale under the post-AIA "on sale bar" statute. Helsinn had entered into a licensing agreement and a supply and purchase agreement with MGI Pharma Inc. The agreements were publicly reported but the details, including details about the patented process, were kept secret. Both agreements were ultimately deemed to be sales by the Supreme Court.

Specifically, the court determined that a secret sale was nonetheless a sale under the post-AIA on-sale bar statute because Helsinn made the agreement more than one year prior to submitting a patent application. The Supreme Court reasoned that the surrounding language in Section 102(a), "…in public use, on sale, or otherwise available to the public," did not change the meaning of "on sale" to only require public sales of an invention. The court further stated that a sale or offer for sale does not need to make the invention available to the public to act as a bar, and there is no requirement that more than one item needs to be sold, since a single item can trigger the on-sale bar.

In conclusion, the Helsinn decision merges the new language back into the old interpretation of "on sale." The current state of affairs should make inventors and small companies wary. Large companies may be able to design, test and manufacture products in-house while smaller companies have to outsource and rely on outside suppliers and/or distributors. With startups, the ability to obtain funding for manufacturing, testing, or even the patent application, often rely on or result in invention sales.

Small companies and startup entrepreneurs should be particularly careful about timing their patent applications to ensure that they are made within the one-year grace period, so as not to trigger the on-sale bar. Manufacturing, distribution, and testing agreements invoking a potentially patentable invention should also be carefully worded and care should be taken to avoid activities that are considered commercial, especially if agreement performance extends beyond the one-year period. Ideally, a patent application should be submitted well before the end of the one-year grace period.

[1] 139 S.Ct. 628, 586 U. S. ____ (2019).
[2] 525 U.S. 55 (1998).
[3] 827 F.3d 1363 (Fed. Cir. 2016), and 881 F.3d 1347 (Fed. Cir. 2018).
[4] 741 F.2d 383 (Fed. Cir. 1984).

Aleksandar Nikolic is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. in its Rochester office. He can be reached at (585) 288-4832 or [email protected].

A Primer On the USPTO’s 2019 PEG

By Stephen P. Scuderi for The Daily Record

On January 7, the USPTO published its new "2019 Revised Patent Subject Matter Eligibility Guidance" (the 2019 PEG), which became "effective" on that same day. However, the 2019 PEG "applies to all applications, and to all patents resulting from applications, filed before, on or after January 7, 2019." Therefore, the 2019 PEG even applies to applications filed prior to that date.

This article will provide a review of the history leading to 2019 PEG, plus an overview of the revised guidelines. Additionally, it will point out some of the issues related to the 2019 PEG.

History

35 U.S.C. §101 defines patent eligible subject matter as:

"Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."

However, courts have long recognized the judicially created exceptions of "abstract ideas," "laws of nature" and "natural phenomena" as being non-patentable subject matter because they are the "basic tools of scientific and technological work." Gottschalk v. Benson 93 S. Ct. 253 (1972). As such, "there is a danger that granting patents that tie up their use will inhibit future innovation." Mayo v. Prometheous 132 S.Ct. 1289, 1292 (2012). Courts have also recognized that too broad an interpretation of this exclusionary principle could eviscerate patent law because "all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Id. at 1293. Finding the proper balance in applying this exclusionary principle has proven challenging.

The foundational analysis for patent eligibility was, and still is, one of pre-emption. More specifically, a patent claim was analyzed to determine whether or not the claim would "wholly pre-empt" the judicial exception recited in the claim and in practical effect would be a patent on the judicial exception itself. Gottschalk v. Benson, 409 US 63 at 72 (1972). Over the years, many different approaches were used by the courts to determine such pre-emption.

In 2012, the Supreme Court created a more structured approach to the analysis of patentability in what has come to be known as the Alice/Mayo test. Mayo v. Prometheus, 132 S. Ct. 1289 (2012). Mayo applied the test to just laws of nature. However in 2014, the Supreme Court made it clear that the Alice/Mayo test was to be applied to all judicial exceptions. Alice Corp. V. CLS Bank International, 34 S. Ct. 2347 (2014).

Alice/Mayo Test Prior to 2019 PEG

The Alice/Mayo test, as applied by the USPTO, has three basic steps. They are: step 1) the statutory categories test, step 2A) the judicial exceptions test, and step 2B) the inventive concept test.

In step 1, a claim must be analyzed to determine if the claim is to one of the statutory categories of a process, machine, manufacture or composition of matter.

In step 2A, the claim must be analyzed to determine whether the claim at issue is "directed to" a law of nature, a natural phenomenon or an abstract idea. The "directed to" inquiry must be considered in light of the specification, and based on whether the character of the claim as a whole is directed to a judicial exception. Enfish, LLC v. Microsoft Corp., 822 F. 3d. 1327, 1335 (2016).

In step 2B, the elements of the claim must be examined to determine whether they contain an "inventive concept" sufficient to transform the claimed judicial exception into a patent-eligible application. Specifically, a claim must include additional features to ensure that the claim is more than a drafting effort designed to monopolize the judicial exception. The courts have said that an inventive concept must do more than simply recite well-understood, routine, conventional (WURC) activity.

Problems Applying Alice/Mayo Consistently

Unfortunately, applying the Alice/Mayo test consistently has proven difficult for both the Federal Circuit and the USPTO. Some of the reasons for this are:

• Abstract ideas are not defined by the courts
• The "directed to" inquiry is a subjective test
• The courts have stated that WURC activity is a question of fact. Berkheimer v. HP Inc. 881 F.3d 1360 (2018)

2019 PEG – Revised Step 2A

The 2019 PEG changes step 2A (Revised Step 2A) into a two-prong inquiry.

In prong one, a claim must be evaluated as to whether the claim "recites" a judicial exception. Recited abstract ideas, specifically, must be identified from the group listed in Section I of the 2019 PEG.

In prong two, if the claim recites a judicial exception, then the claim must be further evaluated as to whether the claim recites additional elements that integrate the exception into a practical application of that exception. The 2019 PEG clarifies what is meant by a practical application when it states that:

"A claim that integrates a judicial exception into a practical application will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception."

Under 2019 PEG, revised Step 2A specifically excludes consideration of whether the additional elements represent well-understood, routine, conventional activity. The analysis of such WURC activity is relegate to step 2B, where the claims will be evaluated for an inventive concept.

Issues Related to 2019 PEG

The USPTO has taken the position that the determination of a "practical application" for a judicial exception is equivalent to the "directed to" inquiry for the original step 2A. It has done so in order to develop a guideline that will be easier to apply consistently by the more than 8,500 USPTO examiners and administrative patent judges that have to use these guidelines. Further, the USPTO has stated that 2019 PEG is "rooted in Supreme Court case law."

However, the 2019 PEG does not constitute substantive rulemaking and does not have the force and effect of law. It remains to be seen whether the courts will accept, reject or modify these guidelines.

Additionally, the test for a "practical application" in the revised step 2A is now very similar, if not essentially the same, as the test for an "inventive concept" in step 2B. That is, both a practical application in revised step 2A and an inventive concept in step 2B are to be determined by analyzing whether a claim includes additional features that impose meaningful limits on the judicial exception such that the claim is more than a drafting effort designed to monopolize the judicial exception.

The one major difference between the tests in revised step 2A and original step 2B, is that the determination of a practical application in revised step 2A can include the use of well-understood, routine and conventional activity. Such WURC activity is specifically exempted from the analysis of an inventive concept in step 2B.

This begs the question as to whether the scope of revised step 2A has been expanded to the point where step 2B is now a subset of it. Certainly, there is a lot of overlap between the two tests. However, if a practical application cannot be found in revised step 2A even with the use of WURC activity, it is hard to see how an inventive concept will be found without the use of such WURC activity in step 2B. Further, it is hard to see the utility of an inventive concept that is not a practical application.

Stephen P. Scuderi is an associate with the law firm of Heslin Rothenberg Farley & Mesiti P.C. His practice involves all phases of intellectual property law, including the drafting of hundreds of patents in the electrical and mechanical arts. Stephen can be reached at (518) 452-5600 or at [email protected].

Implementation of the Music Modernization Act: Copyright Office Issues Solicitation for Mechanical Licensing Collective

By Annette I. Kahler for The Daily Record

Signed into law on Oct. 11, 2018, the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (MMA) reforms U.S. Copyright law in significant ways that will affect the licensing of digital music.

Pursuant to pre-MMA copyright law, "mechanical" licenses for reproduction and distribution of musical works in phonorecords were obtained by licensees on a per-work, song-by-song basis. Under the MMA, Section 115 of the Copyright Act, which covers compulsory licenses for making and distributing phonorecords, has been modified to provide for a new blanket license for digital music providers — such as Spotify, Apple Music, Pandora, SiriusXM, Amazon Music, Google Play, TIDAL and others — to engage in specific covered activities.

What is a mechanical license? It is the means by which rights are granted to reproduce and/or distribute a song that is not yours. Pre-MMA, a digital music provider wishing to obtain a license to record and distribute a protected work had to either negotiate directly with the copyright owner to procure a voluntary license or obtain a compulsory license under 17 U.S.C. 115.

However, the compulsory license system was frequently criticized for being difficult to administer, unfair and undercompensating owners of musical compositions, as noted in a Congressional report on MMA bill prior to its enactment, "[t]he current statutory scheme applies inconsistent rules that place certain technologies at a disadvantage and result in inequitable compensation variances for music creators. These inconsistencies have drawn criticism that music copyright and licensing laws are too difficult to comply with and do not adequately reward the artists and professionals responsible for creating American music."’

Under Title I of the MMA, a broad blanket license to reproduce and distribute digital music through downloading or interactive streaming will be implemented. Licensing of music distribution via physical media such as CDs and vinyl will still operate on a per-work, individual song license, basis. It is envisioned that the new blanket license system will take approximately two years to implement, with a target license availability date of Jan. 1, 2021. A transition period will be established, allowing digital music providers to limit copyright infringement liability provided they engage in good-faith, commercially reasonable efforts to identify and pay musical work copyright owners.

The initial step in implementation of the MMA is the designation of a Mechanical Licensing Collective (MLC)—essentially a quasi-governmental agency—that will administer the new system. Among its duties, the MLC will collect and distribute royalties from digital music providers, establish a musical works database that will be publicly available and is expected to become the most comprehensive database in the music industry, and administer a system by which copyright owners can claim ownership of musical works and receive royalties they are due.

Once the blanket licensing model is put into effect, a licensee must report usage and pay royalties to the MLC on a monthly basis. The MLC will then distribute royalties to copyright owners that can be identified and located. For any royalties that cannot be distributed, the MLC will deposit the royalties into an interest-bearing account for "unclaimed accrued royalties." After a minimum period of three years, if a copyright owner who is due unclaimed accrued royalties cannot be identified and located, these royalties may be distributed on a pro rata share to other copyright owners receiving royalties through the mechanical licensing collective.

It is important to note that only digital mechanical licenses will be licensed by the MLC. Other types of license, such as synchronization licenses, public performance licenses, lyric licenses, derivative licenses and hybrid licenses will not be licensed by the MLC. In addition, digital music providers still have the option to obtain a voluntary license directly with a copyright owner or his/her representative; however, an administrative assessment fee may be due to MLC if the volume of such direct licenses is considered significant.

Details of the MLC requirements and a corresponding request for proposals was published by the U.S. Copyright Office in the Dec. 21, 2018 Federal Register. Under the MMA, the MLC should be a nonprofit entity governed by a board of directors that is created and endorsed by copyright owners in the relevant music industry and can demonstrate that it has the administrative and technological capabilities to perform the required functions under the statute.

In addition, the Register of Copyright is empowered to designate a digital license coordinator (DLC) to represent digital music providers in the administration of the new blanket mechanical license. Among the duties of the DLC will be to help locate and identify copyright owners who are due unclaimed accrued royalties and ensure proper payment to those parties.

Initial proposals for the MLC must be received by March 21, 2019, and the Register of Copyrights is directed to designate the MLC by July 8, 2019, or 270 days from the enactment of the statute.

In addition to music licensing modernization, Title II of the MMA, known as the "Compensating Legacy Artists for their Songs, Services & Important Contributions to Society" or "CLASSICS" Act changes the law with respect to pre-1972 sound recordings. Specifically, it means federal remedies for copyright infringement will be available to owners of sound recordings fixed before Feb. 15, 1972. Such remedies will be available for 95 years after first publication of the recording. In addition, a statutory licensing regime for pre-1972 sound recordings will be implemented to require that songwriters, performers and record labels will all be paid royalties when such sound recordings are played on digital radio, including internet radio, satellite radio and cable TV music services.

Title III of the MMA, the Allocation for Music Producers (AMP) Act provides an allocation of royalties for music producers of sound recordings that are used on digital radio.

As with all significant revisions to law, the devil is in the details, and the quality of the implementation of the MMA will greatly influence its success. Members of the public who wish to share information with the Register of Copyrights, or submit a suggestion or proposal for the MLC or DLC, are invited to do so.

Annette I. Kahler is of counsel at the law firm of Heslin Rothenberg Farley & Mesiti P.C. with experience in technology, law and business. Annette can be reached at (518) 452-5600 or at [email protected].