Clients often call upon “soft-IP” practitioners to peer into their crystal balls and predict what the next year may offer.
Practitioners should pay attention to several developing areas—impact of two March Supreme Court decisions, intellectual property theft in China, and developments in Congress and the U.S. Copyright Office.
Statutory Damages, Costs in Copyright Cases
Two March 4 Supreme Court decisions could negatively impact the financial incentives for copyright holders to bring claims against infringers: Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC, No. 17-571 (U.S.), and Rimini Street, Inc. v. Oracle USA, Inc., No. 17-1625 (U.S.).
In Wall-Street.com, the court held that “registration” for purposes of 17 U.S.C. § 411(a) requires the Copyright Office to have registered the work before a plaintiff can sue, as opposed to requiring the submission of only a complete application for registration.
The court noted that this definition of “registration” should not make plaintiffs’ claims untimely under the three-year statute of limitations because the Copyright Office’s average processing time is seven months and plaintiffs can sue for copyright infringement occurring before registration.
The court suggested that plaintiffs fearing delay could seek expedited proceeding of their claim for an additional $800 fee or could preregister their works under 17 U.S.C. § 408(f). Time will tell whether plaintiffs heed this advice. For cases already pending, defendants may begin to seek dismissals because plaintiffs sued before registration was completed.
In Rimini Street, the court held that the Copyright Act’s authorization of “full costs” includes only traditionally taxable costs under 28 U.S.C. §§ 1821 and 1920, not expert fees, jury consultant fees, or electronic discovery fees.
This rejection of a broader category of costs limits possible recovery and may affect plaintiffs’ incentives to sue.
IP Theft in China
IP theft is one of the key issues underlying the current U.S.-China trade dispute, and recent and prospective developments in both countries may shift the landscape.
China bars non-Chinese companies from providing certain services in China. A Chinese company must own more than 50 percent of an entity providing such services because only a majority-Chinese-owned entity can receive the necessary license. In 2017, the U.S. Trade Representative reported that China uses foreign-ownership restrictions to compel American companies to switch technology to local firms.
The Trump administration responded by levying tariffs on Chinese imports, and in August 2018, President Trump signed into law the National Defense Authorization Act. This law contains the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which strengthened the Committee on Foreign Investment in the United States (CFIUS) by expanding its authority to restrict foreign investments on national security grounds.
CFIUS may now review a broader group of “covered” transactions to determine whether they should be prohibited or suspended. The new range of transactions includes certain minority foreign investments in “emerging and foundational technologies.” While that term remains to be defined through Commerce Department rulemaking, the Trump administration has already used this law to block deals.
Meanwhile, China is making its own moves. In December 2018, China announced that it would punish Chinese companies that engage in IP theft. And in January 2019, China announced that it would accelerate the passage of a new foreign-investment law to protect foreign companies’ IP and ease pressure on them to transfer technology. 2019 will show whether these announcements translate into action.
Developments in Congress, U.S. Copyright Office
Another question for copyright law in 2019 is whether Congress will extend the Sonny Bono Copyright Term Extension Act of 1998, which had extended copyright terms for an additional 20 years for works previously copyrighted. Now, many of those older works have lost their copyright protection.
Those holding rights in older works are searching for alternative means of protecting their works. They received a partial success with the Orrin G. Hatch–Bob Goodlatte Music Modernization Act, enacted on Oct. 11, 2018, which extended copyright protection for pre-1972 sound recordings. Meanwhile, non-rights holders are looking to exploit the opportunity created by a rapidly expanding public domain.
Additionally, the Copyright Office is modernizing its systems and processes. We anticipate that this effort will allow industries to register copyrights in new and emerging types of works that never previously received protection.
We also anticipate significant rulemakings from the Copyright Office over the next 18–24 months to implement the Music Modernization Act.
Trademark Licensing Agreements
One development to watch in trademark law is Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657 (U.S.). Mission Product, which was argued before the Supreme Court in February, asks whether the trustee for a bankrupt trademark owner may “reject” a previously entered licensing agreement or whether the licensing agreement must be assumed.
Congress passed a law in 1988 to limit the power of a trustee to reject such agreements; however, the law omitted trademarks when listing the types of covered licensing agreements.
Exemption 4 of FOIA
The Supreme Court’s docket also includes a key trade secrets case—Food Marketing Institute v. Argus Leader Media, No. 18-481 (U.S.)—which will be argued in April. The case concerns the scope of Exemption 4 of the Freedom of Information Act, which protects “confidential” private-sector “commercial or financial information” from disclosure.
Food Marketing asks whether Exemption 4 applies only if disclosure is likely to cause substantial harm to the competitive position of the source of the information.
The Supreme Court may grant certiorari in additional trade secrets cases, as we continue to see substantial growth in trade secrets litigation.
After the passage of the Defend Trade Secrets Act of 2016, the number of trade secret cases spiked 30 percent in 2018. We also saw Massachusetts enact a trade secrets act on Aug. 10, 2018, which leaves New York as the only state without a version of the model act.
Richard W. Smith is co-chair of the commercial litigation department of Wiley Rein LLP. He maintains a deep advisory and disputes resolution practice in areas of copyright, trademark, and trade secrets.
Douglas C. Dreier is an associate in the commercial litigation department of Wiley Rein LLP. He regularly represents and advises corporate clients engaged in commercial and international litigations involving intellectual property rights.
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