Over the past several years the energy drink industry has proven to be wildly popular with consumers, boasting massive gains and a strong foothold in the marketplace.  

According to a recent report from Packaged Facts, in 2012, the total U.S. sales for the energy drinks/shots market totaled more than $12.5 billion and are anticipated to swell to $21.5 billion by the year 2017.  Although energy drink manufacturers have had little trouble establishing their product’s popularity, the industry as a whole has also faced increased legal and legislative scrutiny, particularly the safety of its products and its identification under the FDA as a dietary supplement.

Today, the United States Supreme Court unanimously ruled in Association for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398, that a naturally-occurring DNA segment (or gene) is not patent eligible even if it has been isolated from a genome (reversing the Federal Circuit). The Court also ruled that cDNA (complementary DNA) is patent eligible because it is not naturally occurring (affirming the Federal Circuit). Justice Thomas wrote the opinion for the unanimous Court, and Justice Scalia wrote a short concurrence. We have been following this case for some time (see here, here, and here).

On June 8, 2013, President Barack Obama and President Xi Jinping of China issued a joint statement announcing that the two countries have agreed to work together to phase down the consumption and production of hydrofluorocarbons (HFCs), a potent greenhouse gas used in refrigerators, air conditioners, and industrial applications.  While the two countries have (at least for now) sidestepped any collaborative measures to address the consumption and production of carbon dioxide (CO2) -- generally considered to be the most harmful of the anthropogenic greenhouse gases -- the Presidents’ statement asserts that a global phase down of HFCs could potentially reduce some 90 gigatons of CO2 equivalent by 2050, equal to roughly two years’ worth of current global greenhouse gas emissions.

The Baltimore Ravens and the National Football League are asking the Fourth Circuit Court of Appeals to reverse the December 2012 decision of a Maryland federal judge in a long-running copyright dispute with Franklin Bouchat.  The decision at issue entered an injunction that prevents the Ravens and the NFL from selling or showing clips in which the old “Flying B” logo is visible.  The injunction does allow the two entities to use the logo, but, if they do, they must first pay Bouchat royalties.  The judge set the royalties at a one-time fee of $721.65 for all future sales of highlight reels and $100 for each clip shown at future Ravens home games.

The Vermont House and Senate have approved a first-in-the-nation bill that provides a legal tool for Vermont companies who face extortionate claims of patent infringement from “patent trolls.”  In brief, the legislation gives Vermont companies the ability to bring a lawsuit against patent owners who – acting in bad faith — threaten to sue, or who actually sue a Vermont company.  Gov. Peter Shumlin signed the bill into law on May 22. The anti-patent trolling bill, as passed by the Vermont House and Senate, has the designation H.299.

In spite of the increasing number of spoliation claims crossing our desks, plaintiffs are not automatically entitled to sanctions every time a piece of evidence once in defendant’s control is no longer available. In Georgia, a party asserting that evidence has been spoliated must prove: (1) the destruction or failure to preserve evidence, and (2) that the evidence is necessary, (3) to contemplated or pending litigation, before they are entitled to the any sanctions against the spoliator. Baxley v. Hakiel Industries, Inc., et al., 282 Ga. 312, 313 (2007).

Many of you may be familiar with the famous confection known as the Kinder Surprise or Kinder Egg, a toy-filled chocolate that is touted as the single largest children’s candy category in the world. The treat is manufactured by the Italian company Ferrero and has risen to nearly cult status in certain countries. Kinder Eggs are sold worldwide; however, U.S. consumers have likely only tried the confection while traveling abroad or through some other surreptitious means. The candy has been banned in the United States for decades.

Attorneys who practice out of the “virtual” office are becoming more common. Perhaps it is the overhead costs deterring some from shelling out for a physical address, or the ease with which one can practice entirely online, or maybe a bit of both. Whatever the reason, more and more attorneys, especially new bar admitees, are opting for the virtual office. But can an attorney practice entirely online, maintaining the client’s file online, and communicating only with the client via e-mail, all through a secure third -party vendor (i.e. cloud computing) and still be in compliance with his or her ethical obligations? This was the recent issue put before the California State Bar Standing Committee on Professional Responsibility and Conduct in Formal Opinion no. 2012-184.

With the DC Circuit having invalidated President Obama’s recess appointments to the National Labor Relations Board, employers are finding increasingly more ways to challenge the Board’s authority to act.

In a unanimous decision, the Supreme Court affirmed both the lower court and Federal Circuit decisions rejecting Bowman’s patent exhaustion defense relating to his harvesting of second generation soybean seeds featuring Monsanto’s patented genetic trait.

Monsanto invented and patented a genetic alteration that allows soybean seeds to survive exposure to a certain herbicide.  Monsanto sold its patented seeds to farmers, subject to a licensing agreement that only allows farmers to plant the seed for a single growing season.  Thereafter, farmers have to purchase the patented seeds anew each year for planting.  While farmers may sell the crop for consumption or processing, they are not allowed to save any of the harvested soybeans for replanting.

Bowman, a farmer, purchased seeds from an authorized Monsanto affiliate, subject to the aforementioned license for his primary soybean crop.  However, in order to save money on a later season crop, Bowman purchased soybeans intended for consumption or processing from a grain elevator and replanted them, in the hopes that some contained the genetic trait of Monsanto’s patented seeds.  After spraying the late season crop with the herbicide, some of the seeds survived, confirming Bowman’s suspicions.  Bowman then harvested this second crop and replanted the resulting seeds with Monsanto’s patented genetic trait for eight subsequent late season plantings.  Monsanto sued Bowman for patent infringement.

Bowman raised the defense of patent exhaustion, arguing that the prior authorized sale of the soybeans from a farmer to the grain elevator exhausted Monsanto’s patent rights to control what Bowman did with the soybeans and their seeds thereafter.  The Federal Circuit, however, rejected this argument, holding that he had “created a newly infringing article” by replanting the progeny of Monsanto’s genetically altered seeds. 

On appeal, the Supreme Court affirmed, holding that “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.”  The Court confirmed its prior holding in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008) that under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item,” and reiterated that “the exhaustion doctrine is limited to the ‘particular item’ sold.” 

The Court also rejected Bowman’s arguments that he was only doing what farmers have done with seeds for years and that the soybeans’ natural ability to self-replicate or “sprout,” like any other seed, is what “made” the additional soybean replicas – not Bowman.  The Court held that Bowman’s actions in planting the seeds, spraying them with herbicide, and thereafter repeatedly harvesting them exerted control of the reproduction, constituting infringement.

Finally, the Court noted that its decision in this case is limited to the facts at hand, leaving open any further questions regarding the applicability of patent exhaustion to other self-replicating technologies. 

FORGET EXHAUSTION, ARE SELF-REPLICATING TECHNOLOGIES SUBJECT TO SECTION 101 SCRUTINY?

With the recent uncertainty over Section 101 patent eligibility requirements, one might ponder the interplay between Section 101 and self-replicating technologies. This is especially true considering last Friday’s, evenly-split Federal Circuit decision affirming that certain system, method, and media claims directed to computer software for minimizing risk in financial trades were patent ineligible (see CLS Bank International v. Alice Corporation Pty. Ltd., 2011-1301 (Fed. Cir., May 10, 2013).  But at the risk of causing even more tension over the issue, consider whether the progeny of Monsanto’s seeds should be susceptible to a Section 101 challenge. 

Specifically, should the “natural law” exception to patent eligible subject matter apply to any progeny seed carrying Monsanto’s genetic trait?  See e.g. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (holding that claims directed to a method for measuring the dosage of medication in patients fell under “natural law” and were thus patent ineligible).  In theory, Monsanto’s invention altering the genetics of the seed should be limited to just that – the alteration and subsequent first production of that very seed altered by humans.  Thereafter, the seed’s ability to self-replicate is a natural occurrence – the seed now exists in nature, forever able to replicate with all its genetic traits without further human alteration/intervention (think Bowman’s sprout argument) – a replication process that normally no one would argue is patentable.

The Court’s decision in Monsanto, however, seems to put to rest any such possibility, dismissing Bowman’s attempt to raise the issue as an unsuccessful “blame the seed” argument.  The Court further acknowledged the importance of incentivizing innovation in the field by protecting such technology.  Nevertheless, others inventing self-replicating technologies should be cognizant of the Court’s statement limiting its decision to the specific facts presented in Monsanto (though only related to the issue of exhaustion) in light of the apparent expansion of Section 101 applicability.

In the meantime, perhaps Monsanto will consider inventing seeds that do not self-replicate in such a manner (seedless grapes, anyone?). 

PATENT EXHAUSTION, GOING FORWARD

The Supreme Court’s recent decisions regarding intellectual property exhaustion, including Monsanto and an unrelated copyright case, shed light on the Court’s March 25, 2013 denial of a petition for certiorari requesting the Court address the extraterritorial reach of the patent exhaustion doctrine. 

In Ninestar Tech. Co. Ltd. v. ITC, 667 F.3d 1373 (Fed. Cir. 2012), cert. denied 133 S.Ct. 1656 (2013), alleged infringer Ninestar purchased used/spent Epson ink cartridges in China, refilled them with ink, and then shipped them to the U.S. for resale.  The ITC found Ninestar’s practice to be infringing upon Epson’s patents relating to the ink cartridges.

On appeal to the Federal Circuit, Ninestar asserted the defense of patent exhaustion, arguing that its purchase of the cartridges, even if overseas, exhausted Epson’s U.S. patent rights.  The Federal Circuit, however, rejected the defense, applying Federal Circuit precedent that patent exhaustion does not apply to foreign sales of patented goods.  Ninestar petitioned the high court seeking reversal and an expansion of the patent exhaustion doctrine extraterritorially. 

While awaiting a decision on Ninestar’s petition, however, the Supreme Court issued a decision explicitly expanding the doctrine of first sale/exhaustion with respect to copyrights outside U.S. boundaries in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013).  Kirtsaeng, a foreign student studying in the U.S., arranged for family members in Thailand to purchase English-language textbooks and ship them to him in the U.S. for resale.  The foreign printed textbooks were much cheaper, and Kirtsaeng’s sale of the books at U.S. prices resulted in profit.  The publisher of the books sued, asserting copyright infringement.

On appeal, Kirtsaeng successfully relied on the first sale doctrine, arguing that his family members’ authorized purchases of the textbooks exhausted any U.S. copyright restriction on their resale, use, and other enjoyment of the books.  Agreeing with Kirtsaeng, the Supreme Court explicitly held that neither Congress nor the common law expressed any intent that the first sale doctrine should not apply to foreign sales of copyrighted works.

Based on Kirtsaeng, many believed the Supreme Court might grant Ninestar’s petition to address the similar issue of whether patent exhaustion applies to sales or purchases made outside the U.S., or that the Court might at least remand the case in light of Kirstaeng.  But a mere six days after the release of its decision in Kirtsaeng, the Supreme Court denied Ninestar’s petition outright.

Comparing the facts in Ninestar to Monsanto and Kirtsaeng, however, perhaps the Court was hinting that patent exhaustion was not the correct issue presented.  Specifically, Ninestar’s purchase of the spent Epson cartridges and subsequent refilling of those cartridges before resale likely removed the products from any protection under the patent exhaustion or first sale doctrines.  The refurbished cartridges were thus no longer the “particular item” (see above discussion) sold by Epson and initially purchased by Ninestar.  In effect, Ninestar’s practice created a new instance of infringement, just like Bowman’s harvesting and reproduction of seeds constituted new infringement, or unauthorized copying of Monsanto’s patented seeds.  In contrast, Kirtsaeng’s U.S. sales were mere resale of the same “particular items” initially purchased – Kirtsaeng did not run to Kinko’s/Fed Ex, so to speak, and make numerous unauthorized copies of the textbooks to sell.

Accordingly, though the issue of whether patent exhaustion reaches beyond the boundaries of the U.S. still lingers, what appears to be clear is that exhaustion will not save one from infringement liability where the accused instrumentality is not the “particular item” initially purchased.