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TMT Perspectives

Insight & Commentary on Business, Legal and Policy Developments Affecting the Telecom, Media, and Technology Sectors

U.S. Supreme Court Clarifies Standard of Review for Appeal of Patent Claim Construction

Posted in Intellectual Property, Lawsuits, Legal Developments, Patent

In a 7-2 decision handed down on January 20th, the U.S. Supreme Court held that while the ultimate determination of what a patent claim means is still a question of law subject to de novo review at the Federal Circuit, a district court’s resolution of subsidiary factual findings made during claim construction should be set aside only if those findings are clearly erroneous. This decision modifies long-standing Federal Circuit precedent requiring that all aspects of claim construction be reviewed de novo on appeal and may lead to heated battles between litigants over drawing the line between law and fact. The case is Teva Pharmaceuticals v. Sandoz, Inc.

Teva sued Sandoz for infringing a patent covering the manufacturing method for Copaxone, a drug used to treat multiple sclerosis. Sandoz argued that the patent was invalid because the term “molecular weight” appearing in the claims was indefinite. According to Sandoz, it was not clear which of several definitions of “molecular weight” the claims were referring to. Both Teva and Sandoz presented expert witnesses and evidence on this point. The district court sided with Teva’s expert. On appeal, the Federal Circuit reviewed the district court’s findings on claim construction de novo. The Supreme Court held that the district court’s finding as to the definition of “molecular weight” was a factual finding, and that the Federal Circuit should have accepted the district court’s finding unless it was clearly erroneous. For more information, please see our Client Alert.

Net Neutrality–FCC’s Pai Disdainful of Netflix

Posted in Companies, Competition Policy, FCC, Legal Developments, Net neutrality

Last Friday FCC Commissioner Ajit Pai issued a statement that is worth studying. Its context is net neutrality, though that term is not referenced.

In the short statement, Commissioner Pai describes “allegations” against Netflix (which frankly, we don’t fully understand) and notes that he met with Netflix about these allegations. Pai’s statement complains that Netflix would not provide him with certain information he requested.

But there is something more subtle going on. The reason for the statement is that Pai thinks he has caught Netflix acting hypocritically with regard to its support for net neutrality, and that in doing so, it is operating “in a manner that would secure a competitive advantage over its rivals.”

If this is Commissioner Pai’s position, it is an odd one. In a free market, every actor is compelled to act “in a manner that would secure a competitive advantage over its rivals,” the primary limitations being the need to act lawfully and the need to not upset one’s customers.

So, even if Netflix is not acting consistent with net neutrality principles, there is nothing particularly surprising given that they don’t apply (and Pai is clear that he does not want them to apply in the future).

In fact, Netflix’s behavior, if true, would be entirely consistent with Netflix advocating for formal net neutrality rules. One of the key reasons for adopting regulation is to ensure that all industry players know what the rules are and equally abide by them.

Pai opposes net neutrality because he thinks net neutrality principles are not necessary. He is wrong. Not because the telcos and cable companies are bad companies, but because capitalism demands that companies maximize their welfare and take competitive advantage of others. Thus, in order to serve their shareholders, absent net neutrality regulation, the telcos must seek to extract maximum profit from the fact that they have a monopoly over access to customers on their networks.

Net neutrality supporters have made a tactical error year in and year out. They keep saying that without net neutrality regulation, AT&T and Verizon will abuse consumers. Whether they do or not will be a business decision by them. What we do know is that they will endeavor to maximize their shareholders’ interest over those of their customers. That is their very purpose in life.

Smears don’t work.


Droning On: News Agencies Team with FAA to Spur Drone Regs

Posted in Administrative Law, Companies, Drones, Legal Developments, Media

As we wrote last month, with the FAA’s promised regulations still years away, don’t expect to see commercial drones zipping across the sky any time soon.  However, recent FAA actions indicate that American companies may not be completely grounded while the FAA develops its new regulations. The FAA has already issued a number of permits to companies in the agricultural, mining and entertainment industries, and developments this week indicate that the FAA is amenable to engaging the private sector in its rule making process.

News agencies are at the forefront of the push to open America’s skies for commercial drone use. However, since US news organizations can’t really fly their business off to Europe (like the Amazons of the world) if commercial drone use isn’t allowed to take off soon, they are trying a more collaborative tactic in hopes of helping the FAA accelerate the development and adoption of regulations. Continue Reading

Target Can’t Escape Cybersecurity Breach Litigation

Posted in Cybersecurity, Lawsuits, Privacy

Last week a United States District Court in Minnesota issued its second order this month thwarting Target’s efforts to dismiss litigation spawned by what has been reported to be the largest retail hack in U.S. history affecting as many as 110 million people.

The Breach: The breach is a tale of Eastern European hackers, HVAC contractors and missed opportunities. The plaintiffs allege that late last November Eastern European hackers stole Target’s network credentials from its HVAC contractors. With credentials in hand the hackers were able to gain access to Target’s computer network, upload card-stealing malicious software onto Target’s cash registers, and begin collecting and exfiltrating Targets’ customers’ credit and debit card information. Continue Reading

Droning On: FAA Delays Drone Regulations Until 2017

Posted in Administrative Law, Amazon, Companies, Drones, E-commerce, Legal Developments

The Federal Aviation Administration’s (FAA) recently-announced delay in implementing a policy to address the increasing popularity and availability of drones, or Unmanned Aircraft Systems (UAS), threatens to further hinder expansion of drones beyond hobbyists to commercial uses and to drive American companies’ UAS technology R&D overseas.

The FAA Modernization and Reform Act of 2012 contains language instructing the FAA to implement regulations that will safely integrate drones into the national airspace by 2015. However, at a Congressional hearing on December 10, 2014, Department of Transportation’s Assistant Inspector General for Aviation Audits Matthew Hampton stated that the FAA would not be able to meet that goal, citing “significant technological, regulatory, and management challenges.”

This delay does not come as a complete surprise, and a number of companies have expressed their frustration with the delays, threatening to take their research and technology overseas if the regulatory hurdles for commercial usage of drones are not streamlined and codified. Amazon is the most notable and outspoken American company voicing its concerns. Continue Reading

New York State Set To Examine Bank Cybersecurity Policies

Posted in Administrative Law, Cybersecurity, Cybersecurity Guidance, Technology

The New York State Department of Financial Service’s Banking Division supervises nearly 1,900 banking and other financial institutions with assets of more than $2.9 trillion.

On December 10th, Benjamin Lawsky, the Department Superintendent released a guidance letter outlining the Department’s plan to expand cybersecurity examination procedures of regulated institutions to focus more attention on cybersecurity.

The new plan includes three phases: a comprehensive risk assessment of each institution, a pre-examination First Day Letter, and a cybersecurity examination of the institution.
Continue Reading

Cybersecurity: Some Holiday Cheer for the Service and Retail Industry

Posted in Cybersecurity, Lawsuits, Privacy

Last week, from Chicago came a little bit of holiday cheer and good tidings for P.F. Chang’s China Bistro when the District Court dismissed two class action complaints arising out of a data breach.

The Breach: On June 12, 2014, P.F. Chang reported it had a data breach that began in October 2013 involving patrons’ credit and debit card information. The attacks have been attributed to hacking groups in Russia using the Backoff malware – the same malware used in attacks on other major retailers this year.  The malware, once installed, can collect credit card “track data” from a point of sale system’s (PoS) memory and return it to a centralized command server controlled by hackers.  Reports estimate that using this method the P.F. Chang hackers compromised nearly 7 million cards. Continue Reading

Update–Software as Crime: Federal Prosecutors Determine that Software Can Violate the WireTap Act

Posted in Cybersecurity, Privacy, Technology

In a prior post we noted a subtle but potentially far-reaching development in how federal prosecutors interpret the Electronic Communications Privacy Act. In that post we discussed the prosecution of Hammad Akbar for selling a software application that could be used to record file, text, or voice records on a mobile phone. The prosecution’s claim was that the software Akbar advertised and sold was a “device” under the Act. Previously, only physical devices (tape recorders, for instance) had been considered within the scope of the Act.

Of key importance to us in the case was the fact that one had to have total control of the phone in order to install the software app, meaning that the app was likely only installed by people who had a claim to owning or controlling the phone. The app was marketed as a way to spy on a cheating spouse.

This prosecution—and the novel interpretation of the Act it implies—caught our attention because if software is a “device” that can violate the wiretap laws, it is possible that cookies or similar common software installed quietly by third parties might also be interpreted to implicate the Act. In our mind, the software industry should be deeply disturbed by this new development. But, of course, it was always possible that the prosecutors would be rebuffed by the courts charged with interpreting the Act. Continue Reading

EU Legislators Vote To Break Up Google

Posted in Advertising, Antitrust, Companies, Competition Policy, Facebook, Intellectual Property, Legal Developments

The European Parliament has voted to break up Google. The resolution is non-binding. But even if the Commission does pursue a breakup, it’s unclear how the EU could affect the decision. Google is an American company, and the US antitrust authorities have declined to prosecute Google for monopolization under US antitrust laws. I doubt an American court would enforce such a foreign order in that environment.

The EU’s complaints appear to be based on the notion that Google has market power in search and is using that power to advantage its ancillary services. According to the complainants, Google displays its own ancillary services more prominently than competitors. Other complaints include Google copying content from other providers and providing that content in their own search results; not allowing other advertisers to sell advertising on Google’s platform; and restrictions limiting the ability of advertisers to move campaigns to other search engines.

The Economist faults the EU’s decision. They believe “internet monopolies” are inherently transient. Entry barriers are lower; there is little lock-in (consumers don’t “standardize” to search engines as they would with, say, an operating system); and history suggests that tech monopolies, like IBM and Microsoft, don’t truly last.

What the EU, the BBC and The Economist seem to take for granted is that Google is “dominant.” Continue Reading

Software Patents: What Software is Eligible for a Patent?

Posted in Intellectual Property, Lawsuits, Legal Developments, Patent

Note: This blog is largely for our friends in the legal community.

Increasingly, the court system is opposed to enforcing patents where the subject of the patent is an abstract idea. This has led to cases that undercut protections for software and “business method” patents.

One such decision was the Supreme Court’s June 2014 decision in Alice Corp. v CLS Bank. There the Court said that if a patent claim is directed toward an abstract idea or natural phenomena, the patent must also include something “significantly more” to be patentable.

What constitutes “significantly more” is the question lower courts will have to answer. My colleagues in Chadbourne’s Intellectual Property practice tell me that a California District Court decision from earlier this month goes a long way towards filling in that answer. If you are interested in reading their analysis, please visit our Client Alert.