Perfume, Proof, and Parallel Imports: How Coty’s Traceability System Won a Trade Mark War
Background
On 16 April 2025, the District Court of The Hague in the Netherlands handed down a decision relating to the complex issue of trade mark exhaustion in the context of parallel trade disputes.
The claimant, Coty Beauty Germany (Coty), is a global cosmetics company and exclusive licensee of several well-known trade marks, including Hugo Boss. Coty operates a selective distribution network for the products in the European Economic Area (EEA). The defendant, Easycosmetic Benelux (Easycosmetic), is an unauthorised wholesaler of perfumes and cosmetics that operates outside of Coty’s selective distribution network.
The dispute concerned a 200ml bottle of “Bottled Night” Hugo Boss perfume, which was being sold by Easycosmetic in the Netherlands. Coty claimed that this specific bottle had originally been shipped to South Africa and therefore had not been placed on the EEA market by Coty or with its consent.
Legal Framework
The case hinged on Article 15(1) of the EU Trade Mark Regulation (2017/1001), which states that a trade mark owner cannot oppose further commercialisation of goods once they have been lawfully placed on the EEA market by or with the trade mark owner’s consent. This principle is referred to as trade mark exhaustion.
However, the District Court of The Hague clarified the position on the burden of proof in trade mark exhaustion cases, which is nuanced. The trade mark holder, here Coty, must initially substantiate the claim of infringement. However, the burden of proving that the trade mark is exhausted—in this case, that the goods were lawfully placed on the EEA market—lies with the defendant, Easycosmetic.
However, the District Court of The Hague clarified the position on the burden of proof in trade mark exhaustion cases, which is nuanced. The trade mark holder, here Coty, must initially substantiate the claim of infringement. However, the burden of proving that the trade mark is exhausted—in this case, that the goods were lawfully placed on the EEA market—lies with the defendant, Easycosmetic.
The claimant operates a selective distribution system;
The goods do not clearly identify the intended market;
The trade mark owner refuses to share information about the disputed product’s intended destination; and
The defendant’s suppliers are not forthcoming about their own sources of supply.
In Coty v Easycosmetic, it was not necessary for the court to rule on whether the burden of proof had shifted, because Easycosmetic ceased to dispute that the perfume bottles were marketed for outside the EEA.
Still, this did not mean that Coty’s product traceability evidence went to waste.
The Role of Traceability in Coty’s Victory
A pivotal element in Coty’s success was its ability to trace the product’s origin and distribution path. Coty presented evidence from its internal product tracking system, which showed that the specific bottle in question had been manufactured for and shipped to a non-EEA market, specifically South Africa.
The traceability system allowed Coty to:
Identify the batch number and match it to a specific shipment;
Demonstrate the intended market for the product; and
Prove the lack of consent for EEAmarketing of the perfume bottle.
Traceability: A Legal Sword and Shield
The Coty v Easycosmetic ruling is a powerful reminder that traceability is not just a logistics tool, it is a legal asset. For companies looking to protect their brands, especially those operating a selective distribution system, investing in an effective product tracking system is essential for protecting brand reputation and trade marks in the EEA.
A traceability system is necessary to comply with certain government regulations, for example cosmetic distributors are already obliged under the EU Cosmetic Regulations (EC) No 1223/2009, which was retained by UK law as the UK’s Cosmetic Regulations, to maintain a traceability system.
A robust traceability system can serve as decisive evidence in legal disputes to thwart unauthorised parallel imports from outside the EEA. As this case proves, there are certain circumstances in which the court will instruct the trade mark owner to provide evidence of non-EEA origin. Therefore, a well-maintained product traceability system ensures that brand owners are able to provide convincing evidence in court.
A solid traceability system acts as a deterrent to unauthorised resellers who want to exploit a non-EEA bargain, and this case serves as a reminder to unauthorised resellers that they may find themselves defenceless and out of pocket in infringement lawsuits.
If products are traceable, the brand owner may be able to operate and enforce its selective distribution system with greater ease, as it allows it to identify sources of supply of unauthorised resellers and ensure such product leaks are appropriately dealt with (for instance, also against EEA partners that breach their selective distribution terms with the brand by selling outside the network).
Traceability can support efficient and compliant product recalls.
Product traceability can assist with verifying commercial warranty/repair claims from consumers, for instance where a commercial warranty from the brand is only available for products purchased from approved sources (permitted in most member states).
Finally, a suitably designed traceability system can also in principle be deployed to meet a brand’s digital product password obligations under legislation such as the EU’s Ecodesign for Sustainable Products Regulation.
Ultimately, a traceability system is a powerful legal and commercial resource for brands. Our team would be happy to assist your brand with establishing and maintaining a compliant and effective traceability system.
New York Expands Legal Protections to Models in the Fashion Industry
Effective June 2025, New York began implementing significant changes for the fashion industry with respect to the practices of model engagement under the provisions of the new Fashion Workers Act (FWA).1 While the name of the new law suggests applicability to a broad range of creative talent and labor across the fashion supply chain, the scope of FWA focuses exclusively on models.
FWA is the first U.S. law to introduce transparency requirements for model contracts, impose fiduciary duties on model management companies, and establish new workplace protections for models working in New York State. This article discusses the history of fashion regulation and the main requirements under FWA, and makes recommendations for how fashion businesses should address compliance with FWA.
History of Fashion Regulation
Generally, the fashion industry does not have any significant industry-specific regulation, at least not when it comes to engaging models or other creative talent. Fashion industry participants may instead be governed by a patchwork of more general laws pertaining to labor and employment, data privacy, advertising, environmental, trade and import/export, antitrust and competition, intellectual property (IP including those protecting trademarks, copyrights, and patents), and right of publicity, as well as emerging laws pertaining to generative AI technology that may be used to replicate models’ likenesses (often referred to as “Deep Fakes”).
Unlike talent agencies, modeling agencies have historically classified themselves as management companies under New York General Business Law § 171(8) and models as independent contractors instead of employees. This classification exempted modeling agencies from following New York’s labor protection requirements, such as minimum wage, overtime, or safety requirements. Individual model contracts would often include difficult to understand compensation and fee structures, unclear payment deadlines, and multi-year term durations that would tie the model to the agency. At the same time, models – typically young people that may lack legal and business experience or support structures – working in New York City would have to deal with high rents and costs of living. While lacking clarity on when and how much they would be paid, models were frequently required to work long hours without adequate breaks or overtime pay. This imbalance of power is further compounded by a possible requirement to pose nude and related safety issues; being asked to wear garments or pose in settings that may present a risk of physical injury; and the proliferation of the use AI-generated portraits of models for which the model may not be compensated.
Concerns about potential exploitation of young people working as models were increasingly brought to the attention of legislators by activists and consumers related to transparency and environmental, social, and governance (ESG) accountability in the fashion industry. New York’s new FWA, enacted in response to the concerns raised by members of the public, is a comprehensive novel framework in the fashion industry with which participants need to become familiar.
The Fashion Workers Act
The legislative justification memo accompanying FWA emphasizes New York’s central role in the U.S. fashion industry: it is home to world-renowned creative talent, leading production companies, and top fashion and design schools. The memo states that New York’s fashion industry employs 180,000 people, accounting for 6 percent of the New York City’s workforce, and generates a total of $10.9 billion in wages. A prime example of its significant economic impact is New York Fashion Week, a semiannual series of events where designers showcase their collections to buyers, the press, and the general public. The enterprise brings in nearly $600 million in income each year.
The legislative justification memo further states that despite the massive success of New York’s fashion industry, the creative workforce behind the industry’s success – specifically, models, influencers, and performing artists – are generally not afforded basic labor protections in New York. The new Act aims to address the persistent inequity in New York’s modeling sector, such as unfair contracts and payment practices, and create a system that imposes various requirements and prohibitions on model management companies and clients.
FWA defines the following terms:
“Client” means a retail store, a manufacturer, a clothing designer, an advertising agency, a photographer, a publishing company, or any other such person or entity that receives modeling services from a model, directly or through intermediaries.
“Model” means an individual, regardless of the individual’s status as an independent contractor or employee, who performs modeling services for a client and/or model management company or who provides showroom, parts, or fit modeling services.
“Model management company” means any person or entity, other than a person or entity licensed as an employment agency under article 11 of the general business law, that:
Is in the business of managing models participating in entertainments, exhibitions or performances
Procures or attempts to procure, for a fee, employment or engagements for persons seeking employment or engagements as models
Renders vocational guidance or counseling services to models for a fee.
FWA applies to model management companies that engage in business in New York or enter into any arrangement with a client or model for the purpose of providing services in New York. In other words, this Act applies to any entity using a fee-based structure to hire models in New York, including model management companies and fashion businesses working with them, as well those who engage models directly for photoshoots and other ad campaigns in New York.
Key requirements and prohibitions on model management companies (or agencies):
Starting December 21, 2025, and no later than June 19, 2026, agencies representing models and creatives will be required to register with the New York Department of Labor (NYDOL). The registration must be renewed every two years. Agencies with five or fewer employees must pay a $500 registration fee, and agencies with more than five employees must pay a $700 registration fee.
Agencies shall:
Be deemed to have fiduciary duties to act in good faith, with utmost honesty and in their models’ best interests. This fiduciary duty includes all aspects of the agency’s representation, such as negotiations, contracts, financial management, and the protection of the models’ legal and financial rights
Conduct due diligence to ensure that models are not at risk of unreasonable danger
Use best efforts to procure paid employment and other opportunities for their signed models
Ensure any work requiring nudity or sexually explicit material is voluntarily consented to by the model, in accordance with section 52-C (3) of the Civil Rights Law (which sets forth requirements for consent to the creation, disclosure, dissemination, or publication of sexually explicit material)
Prior to the start of a model’s engagement, provide the model with copies of a deal memo as well as the final agreement outlining terms of employment the agency negotiated for the model, which must include compensation terms
Specify any items that will be initially paid for by the agency, but ultimately deducted from the model’s compensation, itemizing how each charge shall be computed, as well as provide supporting documentation validating all charges on a quarterly basis
Disclose any financial relationship that may exist between the agency and the client
Notify models no longer represented by the agency if the agency is collecting any royalties that may be due to the model
Post a physical copy of the agency’s certificate of registration in the agency’s physical office and a digital copy on its website
Include the agency’s registration number in any advertisement for the purpose of soliciting models as well as in any contract with a model or a client
Obtain clear written consent, separate from the representation agreement, before agencies can use, license, or sell a model’s digital replica.2
Agencies shall not:
Require or collect any fee or deposit from a model for entering into an agency agreement
Procure an accommodation for which the model will have to pay without providing a written disclosure of the rate charged in advance of the model’s stay
Deduct or offset any fee or expense other than the agreed upon commission laid out in the contract or any other items advanced by the agency that were previously disclosed to and approved by the model
Advance the cost of travel or visa-related costs without the model’s informed consent
Require a model to sign an agency contract for a term greater than three years
Require a model to sign an agency contract that renews without the model’s affirmative written consent
Impose a commission fee greater than 20 percent of the model’s compensation
Engage in discrimination or harassment against a model because of any protected status
Retaliate against models filing complaints or declining to participate in castings or bookings based on reasonable, good faith concerns over ongoing FWA violations
Create, alter, or manipulate a model’s digital replica using artificial intelligence without clear written consent from the model.
Key requirements and prohibitions for clients:
Clients shall:
Pay models for overtime hours for any engagement exceeding 8 hours in a 24-hour period, at an hourly rate at least 50 percent higher than the contracted hourly rate
Provide at least one 30-minute meal break for any engagement exceeding 8 hours in a 24-hour period
Only offer employment to a model that does not pose an unreasonable risk of danger to the model
Ensure any employment involving nudity or sexually explicit material complies with section 52-C (3) of the Civil Rights Law
Permit the model to be accompanied by their agent, manager, chaperone, or other representative to any engagement
Provide liability insurance to cover and safeguard the health and safety of models
Obtain clear, prior written consent for any creation or use of a model’s digital replica.
NYDOL will be the primary enforcer of the FWA. Violators may be subject to a civil penalty for up to $3,000 for a first violation and $5,000 for a second or subsequent violation. Models have the right to file an action in court or a complaint with the NYDOL within six years of the alleged violations. The New York State Attorney General also will have a right to file an action to enforce FWA if there is a reasonable cause to believe that a model management company, a model management group, or a client has repeatedly engaged in illegal or fraudulent business practices.3
Impact of the Act
This Act will be a big change for models and modeling agencies in New York, holding agencies accountable and providing models with basic labor rights. Outside New York, no other U.S. state has adopted a fashion industry–specific law regulating agencies or protecting models in a similarly comprehensive way. Because New York is so influential in the fashion industry, it is likely that it will be a trailblazer for other states, such as California, to introduce similar protections for fashion workers in their states.
Conclusion
Agencies and fashion businesses should start preparing now in order to comply with the new law. Some key points of the law and issues to consider may include:
Agencies must register with the NYDOL starting December 21, 2025 (and must be registered by June 19, 2026).
Clients should consider confirming for themselves that agencies are properly registered before entering contracts.
Both agencies and clients should assess their existing policies and practices, and maintain ongoing compliance checks.
Agencies should review their standard agreements with models for compliance with the FWA framework, as many terms of existing contracts may violate FWA.
Agencies should itemize all deductions and fees that are going to be charged to the model up front.
Agencies should provide models with (1) deal memos listing total compensation and (2) final agreements negotiated with clients at least 24 hours before the model begins the engagement.
Agencies should establish and/or assess existing antiharassment policies and safe reporting mechanisms.
Clients should extend these protections to their sets and events, including training staff on workplace safety.
This is not an exhaustive list, nor does failing to comply with each point render the agency or client noncompliant with FWA. Every situation is different and action should be taken after consultation with a lawyer familiar with the industry.
1 FWA is available at https://legislation.nysenate.gov/pdf/bills/2023/s2477a.
2 The term “digital replica” is defined in FWA as “a significant, computer-generated or artificial intelligence-enhanced representation of a model’s likeliness, including but not limited to, their face, body or voice, which substantially replicates or replaces the model’s appearance or performance, excluding routine photographic edits such as color correction, minor retouching, or other standard post-production modifications.” Notably, if the AI enforcement moratorium that is currently part of the pending federal budget reconciliation bill ultimately passes – and it is poised to pass – enforcement of state law requirements pertaining to generative AI may be suspended for ten (10) years.
3 New York State Fashion Workers Act FAQ, available at https://dol.ny.gov/new-york-state-fashion-workers-act-faqs.
Courtside With Women’s Sports: NIL, Women’s Collegiate Athletes, And the Law
I’ve been listening to Deja Kelly’s fascinating podcast, NILosophy. Kelly is a lights-out women’s basketball player, and a talented broadcaster. She and her guests – often but not exclusively young women – discuss the changing college sports world under NIL. And many times during these interviews, I have been struck by how quickly these young athletes have to grow up, and the sophisticated adult decisions they are called upon to make.
Many of these decisions have legal implications, but very few collegiate athletes have any legal training. Therefore, I wanted to use this post to highlight some common scenarios where athletes may benefit from legal advice in a NIL collegiate world.
This is particularly true for female college athletes, since they are less likely to participate in direct revenue-sharing at high levels, and equally if not more likely to find outside NIL deals.
First, I’d like to note that traditional practicing lawyers are not agents (although many agents actually are lawyers, though often not actively practicing law). Sports agents typically focus on securing commercial opportunities for their athletes. Attorneys, on the other hand, protect and secure their clients’ legal rights.
Attorneys are also different from financial advisors, whose focus is generally on the strategic investment of client funds. However, attorneys can provide an independent check on agents and/or investment advisors, and have heightened confidentiality and fiduciary duties to their athlete clients. Moreover, most sports attorneys bill by the hour, rather than taking a percentage of their clients’ earnings. Consequently, a contract review or similar analysis can be accomplished in a short amount of time, confidentially, with maximum benefit to the client.
Below is a short list of issues that collegiate athletes may face, which might benefit from legal advice. In short, legal issues are often confronted any time a large amount of money comes in or goes out of an athlete’s portfolio, as follows:
NIL agreements – including fully understanding the athlete’s obligations and the meaning of potentially murky reputational or behavioral clauses;
Agent or investment advisor agreement review – including ensuring that the costs to the athlete are standard, market, and fair;
Transfer opportunities – including understanding their impact on existing revenue-sharing and NIL agreements;
IP branding, trademark, and other protections – including protecting words, logos, and phrases associated with the athlete;
Cease and desist letters – to curb unwanted or defamatory online activity;
Immigration issues – for athletes and their families, including ensuring that athletes can legally be compensated for play in the United States;
Business formation – athletes are businesspeople! Attorneys can assist with setting up business entities to maximize earnings and minimize potential liability;
Real estate purchases – these are inherently legal agreements; athletes should be well protected;
Other large purchases or sophisticated investments;
Gifts to family members, etc. – including making sure that they comply with applicable tax laws;
Charitable foundation formation, partnerships, and assets – athletes often want to give back to their communities, but need to be legally protected while doing so;
Sports camps – athletes often run sports camps for youth in their communities, but also need to ensure they are legally protected from accidents, etc.
Looks Like Estoppel, Sounds Like Estoppel … But It’s Just Director Discretion
The acting director of the US Patent & Trademark Office (PTO) granted a patent owner’s request for discretionary denial and denied institution of an inter partes review (IPR) proceeding, finding that the petitioner engaged in unfair dealings by challenging a patent on which its employees were the inventors. Tessell, Inc. v. Nutanix, Inc., IPR2025-00322 (PTAB June 12, 2025) (Stewart, Act. Dir.)
Four individuals were Nutanix employees when they invented the subject matter of the challenged patent. Two of the individuals left to form Tessell and later hired the other two. Tessell, which now includes nearly all of the inventors of the challenged patent, filed a petition for IPR arguing that the claims of the patent were unpatentable. Nutanix filed a request for discretionary denial, which Tessell opposed.
The doctrine of assignor estoppel generally prevents an inventor who has sold or assigned a patent from challenging the validity of the patent. Although assignor estoppel does not apply in IPR proceedings, the acting director explained that the PTO may consider unfair dealings as a factor when determining whether to exercise discretion to deny institution under 35 U.S.C. § 314(a). The acting director found that it was inappropriate for the inventors to have used PTO resources to obtain a patent only to later advocate for its unpatentability. The acting director therefore exercised discretion to deny institution.
When It Comes to Objective Criteria of Nonobviousness, Nexus Is Looser for License Evidence
The US Court of Appeals for the Federal Circuit partially reversed a decision by the Patent Trial & Appeal Board, effectively relaxing the nexus requirements for patent licenses pertaining to their usage as objective indicia of nonobviousness. Ancora Technologies, Inc. v. Roku, Inc. et. al., Case Nos. 23-1674; -1701 (Fed. Cir. June 16, 2025) (Lourie, Reyna, Hughes, JJ.) (per curium).
Ancora owns a patent directed to limiting software use on a computer through license verification. The patented technology centers on storing an “agent,” which is a license verification program, in a computer’s basic input/output system (BIOS) rather than in volatile memory. In 2021, Nintendo, Roku, and VIZIO separately filed petitions for inter partes review (IPR) challenging claims of Ancora’s patent. The Board consolidated the proceedings and ultimately found certain claims of the patent unpatentable as obvious over a combination of two prior art references: Hellman (which discloses storing license information in nonvolatile memory) and Chou (which discloses a BIOS-level security routine). Ancora appealed.
Ancora raised three issues on appeal:
That the Board erred in construing the claim term “agent”
That even if the Board correctly construed “agent,” it nonetheless erred in determining obviousness under 35 U.S.C. § 103 based on a combination of Hellman and Chou
That the Board erred in its analysis of secondary considerations of nonobviousness.
The Federal Circuit affirmed the Board’s construction of “agent” to mean “a software program or routine” with no further limitations. The Court disagreed with Ancora’s argument that “agent” was limited to use in software only, primarily because neither the patent nor prosecution history provided any disclaimer of hardware. For similar reasons, the Court also disagreed with Ancora’s argument that “agent” was limited to use at the operating-system level.
On the obviousness determination, the Federal Circuit upheld the Board’s conclusion that the combination of Hellman and Chou rendered the claims prima facie obvious. The Court rejected Ancora’s argument that the Hellman/Chou combination would not provide motivation to combine since they are redundant.
The Federal Circuit disagreed with the Board’s analysis of the objective indicia of nonobviousness, particularly the treatment of Ancora’s licensing evidence. The Board found that Ancora failed to establish a sufficient nexus between the claimed invention and evidence of two objective indicia of nonobviousness: industry praise and licensing.
The Federal Circuit agreed with the Board on industry lack of nexus for the alleged praise (where the Board found that praise for the invention in a press release and an agreement between Ancora and another company offering products using the patent was directed broadly to the patent and not specifically to the challenged claims). However, the Court found that the Board erred regarding the appropriate nexus as it relates to Ancora’s licensing evidence.
The Board found that Ancora failed to show a nexus between the challenged claims and two licenses it obtained through settlement agreements in other cases. The Federal Circuit disagreed, finding that the Board applied an overly stringent nexus standard inconsistent with precedent. While products may require detailed analysis to show a nexus because of the presence of unclaimed features, the Court explained that licenses, by their nature, are directly tied to the patented technology and do not require the same level of scrutiny. The Court also agreed with Ancora that the substantial license payments, the defendants’ awareness of relevant prior art, and the fact that the licenses covered all of the challenged claims supported a nexus. Additionally, the Court found that the Board misread one of the licenses and failed to properly evaluate its significance. Concluding that the Board erred in its analysis of secondary considerations, the Court remanded the case for reconsideration of the nexus issue as it pertains to Ancora’s licensing evidence.
Building a Sustainable Future: Understanding Permissible Repair Vs Impermissible Reconstruction In Support Of A Circular Economy
The circular economy invites us to fundamentally reconsider our relationship with resources and products. By moving away from the outdated “take-make-dispose” model, companies are embracing a more sustainable approach that prioritizes longevity, repairability, and eventual recycling. This thoughtful design philosophy creates and preserves value throughout a product’s entire lifecycle. Effective management of intellectual property (IP) rights serves as a cornerstone of this forward-thinking vision. Companies that skillfully balance robust IP protection with accessible repair rights position themselves to foster continued innovation while advancing sustainability goals. These businesses develop products with extended useful lifespans that significantly reduce unnecessary waste and conserve valuable resources for future generations.
Businesses stands to gain numerous advantages by embracing repair as part of their product lifecycle. Customers increasingly recognize and reward brands that demonstrate genuine environmental responsibility, building stronger loyalty and trust in the products. Products designed with repair in mind naturally create more resilient supply chains that can better withstand parts shortages or other disruptions. This approach also contributes to vibrant local repair economies, reducing transportation-related environmental impacts while creating jobs and economic opportunities in communities where customers live and work.
The legal landscape governing repair rights varies significantly between regions like the United States and European Union. A clear understanding of these different frameworks empowers businesses to make informed decisions about how customers can legally interact with products after purchase.
Here, we highlight significant court decisions, relevant statutes, and practical implications for businesses and consumers, specifically for authorized purchasers of an IP-protected product and the holder of those same IP right. This knowledge allows a company to develop strategies that protect their valuable intellectual property while simultaneously supporting broader sustainability objectives. By thoughtfully balancing potential revenue from repair services against the needs and expectations of the customers, a company can position its business for long-term success.
U.S. Legal Framework
The doctrine of patent exhaustion plays a central role in understanding the right to repair. Under this doctrine in U.S. law, once a patented product is sold, the IP Holder’s rights over that specific item are exhausted. This means the Product Owner is free to use, repair, or resell the item without infringing the patent. The Supreme Court’s ruling in Impression Products v. Lexmark International (2017) reaffirmed this principle, rejecting attempts by IP Holders to enforce post-sale restrictions through patent infringement lawsuits. Repair is an affirmative defense to a patent infringement claim; however, where the line between a permissible repair ends and impermissible reconstruction begins is not always clear.
Permissible Repair
Permissible repair in the US refers to actions taken to preserve the utility and operability of an IP-protected product, typically a patented product. This includes replacing individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively. The Supreme Court’s decision in Aro Mfg. Co. v. Convertible Top Replacement Co. (1961), Impression Products both established (and most recently reaffirmed in (2023)) that such repairs are lawful and do not constitute patent infringement under U.S. law.
Impermissible Reconstruction
Impermissible reconstruction involves actions that effectively create a new article from the IP-protected product or embodiment after it has become spent. Typically, the product is protected by patents and thus, reconstruction generally relates to patent infringement. The key distinction lies in whether the activity amounts to making a new article, rather than merely preserving the existing one.
Distinguishing Repairs from Reconstruction
While there is no definitive rule, courts assess multiple factors to determine whether a Product Owner has created a new article, thereby reconstructing the patented product. These factors include:
Extent of Replacement – Courts look at how much of the patented product has been replaced at one time. If the replacement involves a substantial portion of the product at the same time, it is more likely to be considered reconstruction. However, even if the Product Owner sequentially replaces all the worn-out parts of a patented combination, courts have found this sequential replacement does not constitute reconstruction.
Nature of the Parts Replaced – Replacing minor, unpatented parts is generally considered repair, while replacing essential, patented components can be seen as reconstruction.
Purpose of the Replacement – The intent behind the activity is considered. If the replacement is intended to extend the life of the product or restore it to its original condition, it is more likely to be considered repair. However, if the replacement effectively creates a new product, it is more likely to be reconstruction.
A pertinent example provided by the court in the Karl Storz case illustrates the application of many of the factors listed above. The court held that if a patent is granted for an automobile, the replacement of a spark plug constitutes permissible repair. Conversely, retaining the spark plug while replacing the entirety of the car in one action is more likely deemed reconstruction.
Right to Repair at the Federal Level
Recent national developments have significantly impacted the landscape of the right to repair in the U.S. Major players such as Apple Inc. have endorsed federal legislation, while the Federal Trade Commission (FTC) has intensified its enforcement against restrictive repair practices.
Apple Inc. has publicly supported federal right to repair legislation, marking a significant shift in the company’s stance on repairability. On October 24, 2023, Apple announced its backing of a federal right-to-repair bill, committing to provide access to tools and parts for customers nationwide.
The Federal Trade Commission (FTC) has taken significant steps to combat illegal repair restrictions and restore the right to repair for consumers, small businesses, and government entities. In July 2021, the FTC adopted a policy statement prioritizing investigations into unlawful repair practices under relevant statutes, including the Magnuson-Moss Warranty Act and Section 5 of the FTC Act. Targeting practices that raise repair costs, stifle innovation, and limit business opportunities for independent repair shops, the FTC aims to address antitrust and consumer protection violations.
Right to Repair at the State Level
As of 2025, right to repair legislation has been introduced in all 50 states. These bills generally aim to guarantee consumers’ rights to access replacement parts, repair manuals, diagnostic data, and appropriate tools necessary for maintenance. States such as New York, Minnesota, Colorado, California, and Oregon have already passed right to repair laws, setting a precedent for other states to follow. These laws empower consumers by providing tools and information for self-repair, reducing dependency on manufacturers. They support independent repair shops by ensuring access to parts and tools, fostering competition and innovation.
The most notable example is Oregon’s 2024 right to repair law, which requires manufacturers to provide parts, tools, and information for repairing consumer electronics. It also bans software that prevents technicians from fully installing spare parts, known as “parts pairing.”
EU LEGAL FRAMEWORK
In the EU, the principle of exhaustion of IP rights also plays a central role in understanding the right to repair. once a product has been placed on the market by the IP Holder or with their consent, the exclusive rights to that specific product are typically considered exhausted. This means consumers can use the product as intended, including repairing it. However, there are no specific guidelines that apply uniformly across all EU member states or the UK for distinguishing repair from reconstruction. Article 64(3) of the European Patent Convention (EPC), which also applies to the UK despite it not being an EU member, requires national courts to handle disputes about European patents using their own laws. The following is an analysis of the general principles and themes that countries under the EPC apply when differentiating between repair and reconstruction.
Permissible Repair
Permissible repair in the EU involves actions that maintain the functionality of a product without infringing on the patent. The Supreme Court in the UK provided guidance in Schütz v Werit (2013), outlining factors to consider when determining whether an activity constitutes repair or reconstruction. These factors include:
Subsidiary Nature of the Replaced Component – Courts assess whether the replaced component is a relatively minor part of the product. If the component is subsidiary and does not embody the inventive concept of the patent, its replacement is likely considered repair.
Life Expectancy – The life expectancy of the replaced component compared to other parts of the product is evaluated. If the component has a significantly shorter lifespan and is expected to be replaced periodically, its replacement is generally deemed repair.
Ease of Replacement – The physical ease of replacing the component and its practical perishability is considered. Components that are designed to be easily replaceable and are relatively perishable in practice are typically associated with repair.
Inventive Concept – Whether the replaced component includes any aspect of the inventive concept of the patent is a critical factor. If the component does not embody the inventive concept, its replacement is more likely to be seen as repair.
Independent Identity – Courts examine whether the replaced part has any independent identity from the product. If the part is integral to the product’s identity, its replacement may lean towards reconstruction.
Impermissible Reconstruction
Impermissible reconstruction in the EU is defined similarly to the U.S., where actions that effectively create a new product from the patented entity are considered patent infringement. Key factors held by countries applying the EPC that indicate impermissible reconstruction include:
Extent of Replacement – Replacing all claimed elements of a patented invention without reusing any parts is likely considered reconstruction. Extensive replacement that transforms the product into a new article falls under reconstruction.b. Creation of a New Article – Activities that result in the creation of a new article from the patented entity are deemed reconstruction. This includes refurbishing a totally worn or spent product to make it operable again.c. Impact on Patent Rights – Reconstruction activities that infringe on the patent rights by creating a new product are impermissible. This includes using patented replacement parts or refurbishment methods without authorization.
Distinguishing Repairs from Reconstruction
Differentiating between permissible repair and impermissible reconstruction requires a careful analysis of the factors outlined above. Courts subject to the EPC assess the nature, extent, and purpose of the activity to determine whether it constitutes repair or reconstruction. The EU’s Right to Repair Directive further clarifies these distinctions by mandating that manufacturers provide access to spare parts, repair manuals, and diagnostic tools for certain products.
EU Directive on Promoting Repair
The European Union has introduced a new directive aimed at promoting the repair of goods, amending existing regulations to enhance sustainable consumption and reduce waste. The directive, officially titled “Directive (EU) 2024/1799 of the European Parliament and of the Council on Common Rules Promoting the Repair of Goods,” was adopted on June 13, 2024, and entered into force on July 30, 20241. Member States are required to transpose it into national law by July 31, 2026.
Key aspects of the directive include:
Obligation to Repair – Manufacturers of products subject to reparability requirements in EU law must repair those products within a reasonable time and at a reasonable price. This obligation applies to products listed in Annex II of the directive, which includes items such as fridges, smartphones, and washing machines.
Prohibition of Repair Impediments – Manufacturers are prohibited from using contractual clauses, hardware, or software techniques that impede the repair of goods listed in Annex II, unless justified by legitimate and objective factors.
Access to Spare Parts and Repair Information – Manufacturers must provide access to spare parts at reasonable prices and make repair information available to consumers in an easily accessible manner. This includes publishing indicative prices for typical repairs on their websites.
Consumer Awareness – The directive mandates that manufacturers inform consumers about the availability of repair services and spare parts, enhancing transparency and encouraging repair over replacement.
CONCLUSION
For companies in the repair business, distinguishing between permissible repair and impermissible reconstruction is crucial. In the U.S., the doctrine of patent exhaustion and key court rulings support the rights of product owners to repair their IP-protected products. Similarly, the EU emphasizes the principle of exhaustion of IP rights, allowing consumers to repair products as intended. However, companies must ensure their repair activities do not cross into reconstruction, which could lead to legal challenges.
Recent legislation in both regions supports consumer rights and independent repair shops, offering significant opportunities for growth. Federal and state laws in the U.S., along with the EU’s directive promoting repair, aim to empower consumers and support independent repair shops by ensuring access to necessary parts, tools, and information.
Finding this equilibrium between IP protection and repair accessibility enables a company to flourish in the emerging circular economy while making a meaningful contribution to environmental sustainability
Apple’s Second Bite Is Successful: Federal Circuit Nixes Optis Verdict Involving Standard Essential Patents Due to Jury Instruction Error
Apple has escaped a $300 million patent infringement verdict after a three-judge panel of the United States Court of Appeals for the Federal Circuit vacated both the infringement and damages judgment because of faulty jury instructions and an improper verdict form underscoring how a seemingly small procedural error can upend a half-billion-dollar outcome. [1]
In 2020, a Texas jury found that Apple had infringed at least some of the Standard Essential Patents Otis alleged. A Standard Essential Patent (SEP) is a type of patent for which the rights would be licensed to anyone wanting to comply with the related standard. In exchange for a patent being included in a standard, the owner of a SEP makes the commitment to license it on the basis of “fair, reasonable and non-discriminatory” (FRAND) royalties, or royalty-free. The jury awarded just over $506 million as a reasonable royalty for past sales.
Apple sought a new trial arguing that the jury did not hear evidence of Optis’s obligation to license the patents FRAND terms. The district court granted a new trial only on damages. In the subsequent damages retrial, the jury awarded Optis the now overturned $300 million as a lump sum.
The Federal Circuit overturned the award and remanded the case for a new trial on both infringement and damages. The precedential opinion agreed with Apple’s argument that the verdict form was overly broad, improperly combining all asserted patents into a single infringement question and permitting the jury to find Apple liable for infringement regardless of whether all jurors agreed that Apple was infringing the same patent.
The appellate court found that the question asked deprived Apple of its Seventh Amendment right to a unanimous verdict on each legal claim against it related to infringement. Because all the patents were lumped into a single question, the Federal Circuit also found that the lump sum damages award was improper given that the scope of infringement was unknown.
Along with taking issue with the jury instructions, the panel also found that one of the patents in question was too abstract to be litigated as Optis proposed and that the district court erred in not properly analyzing a second patent to determine whether Optis’s claims were too indefinite to meet a “means-plus-function” claim.
[1] The case is Optis Cellular Tech. LLC v. Apple Inc, U.S. Court of Appeals for the Federal Circuit, No. 22-1925.
China’s National Intellectual Property Administration Releases Notice on the Pilot Program to Optimize the Business Environment in the Field of Intellectual Property
On June 23, 2025, China’s National Intellectual Property Administration (CNIPA) in conjunction with 5 other government departments, released the “Notice of the General Office (Office) of Six Departments including the China National Intellectual Property Administration on the Pilot Work of Optimizing Business Environment in the Field of Intellectual Property” (国家知识产权局等6部门办公厅（室）关于开展优化知识产权领域营商环境试点工作的通知). The pilot will be launched in six cities including Beijing, Shanghai, Chongqing, Hangzhou, Guangzhou and Shenzhen. The Notice includes a list of pilot tasks including:
Promote research on intellectual property protection rules in cutting-edge technology fields, and ensure intellectual property protection in emerging fields;
Further expand the pre-examination areas of local intellectual property protection centers based on regional development and local key industry needs; and
Deepen the agency quality monitoring and trigger-based supervision mechanism with the core of rectifying abnormal patent applications, so as to achieve precise crackdowns and targeted policy implementation.
A translation of the Notice and List of pilot tasks follows:
Notice of the General Office (Office) of Six Departments including the China National Intellectual Property Administration on the Pilot Work of Optimizing Business Environment in the Field of Intellectual Property
All provinces, autonomous regions, municipalities directly under the Central Government and Xinjiang Production and Construction Corps intellectual property bureaus, the Propaganda Department of the Party Committee, science and technology and market supervision departments, the supervision bureaus of the General Administration of Financial Supervision, and all units affiliated to the Chinese Academy of Sciences:In order to implement the Opinions of the China National Intellectual Property Administration and other departments on Further Optimizing the Business Environment in the Field of Intellectual Property, the China National Intellectual Property Administration, together with five departments, decided to carry out pilot work on optimizing the business environment in the field of intellectual property in six cities, namely Beijing, Shanghai, Chongqing, Hangzhou, Guangzhou, and Shenzhen, and studied and proposed a list of key pilot tasks (see Annex 1) to support the pilot cities to “one city, one policy” and try first. The relevant matters regarding the pilot work are hereby notified as follows:First, the provincial intellectual property bureaus in the provinces where the pilot cities are located are requested to strengthen overall planning, guide the intellectual property management departments in the pilot cities to establish work coordination with the Propaganda Department of the Party Committee, science and technology, market supervision departments, financial supervision bureaus, and various units affiliated to the Chinese Academy of Sciences, improve the working mechanism, and jointly promote the pilot work.Second, the intellectual property management departments of the pilot cities are invited to take the lead in forming the pilot implementation plan of “one city, one policy” (see Annex 2 for the template), refine the implementation measures, clarify the time arrangement, report to the provincial intellectual property office for review and confirmation, and submit it to the Public Service Department of the China National Intellectual Property Administration before July 15, in accordance with the needs of regional development, in combination with the actual work, and around the promotion of key pilot tasks.The third is to encourage and support provincial-level intellectual property bureaus, guide other cities with conditions, actively explore and innovate around the promotion of key pilot tasks, carry out pilot projects, form more typical experience and practices, and promote the continuous optimization of the business environment in the field of intellectual property.Attachment:
1. List of Key Pilot Tasks2. Pilot Implementation Plan (Template)
-China National Intellectual Property Administration-Office of the Propaganda Department of the Central Committee of the Communist Party of China-Office of the Ministry of Science and Technology-Office of the State Administration for Market Regulation-Office of the State Administration for Financial Regulation-General Office of the Chinese Academy of Sciences
List of Key Pilot Tasks
1、 Improve the market-oriented mechanism of intellectual property rights and help build a high standard market system（1） Expand the autonomy of universities and research institutes in disposing of intellectual property rights through transfer, licensing, or valuation investment.（2） Strengthen the standardized management of job-related inventions, deepen the reform of empowering job-related scientific and technological achievements, and select some eligible medical institutions to carry out pilot work on empowering job-related scientific and technological achievements and separately managing assets.（3） Support universities and research institutions to establish intellectual property management funds and operational funds.（4） Carry out internal evaluation pilot projects for bank intellectual property pledge financing, and guide financial institutions to improve their independent evaluation capabilities.（5） Encourage innovation in financial products such as intellectual property insurance and credit guarantees, and fully leverage the role of finance in supporting the transformation of intellectual property.2、 Strengthening the legal protection of intellectual property rights and better supporting comprehensive innovation（6） Promote research on intellectual property protection rules in cutting-edge technology fields, and do a good job in intellectual property protection in emerging fields.（7） Further expand the pre examination field of local intellectual property protection centers based on regional development and the needs of local key industries.（8） Deepen the agency quality monitoring and trigger based supervision mechanism centered on rectifying abnormal patent applications, and achieve precise crackdown and targeted policy implementation.3、 Enhance the internationalization level of intellectual property services and effectively promote opening up to the outside world（9） Support technology and innovation support centers (TISCs) with conditions to carry out international exchanges on intellectual property information public services.（10） Encourage localities to establish guidance stations for intellectual property work in countries and regions with intensive trade exchanges.（11） Relying on the Overseas Intellectual Property Dispute Response Guidance Center, we provide professional and efficient overseas dispute response guidance services for enterprises.（12） Organize and form a list of key export enterprises by industry, and increase efforts to protect rights and provide assistance.（13） Support insurance institutions to develop and launch more overseas intellectual property insurance products; Promote the establishment of an overseas intellectual property rights protection assistance fund to help enterprises reduce the cost of rights protection.4、 Promote the facilitation of intellectual property government services and enhance the efficiency of benefiting enterprises and the people（14） Relying on the resource aggregation advantages of regional government service centers and government service platforms, we will promote the “one form application, one set of materials, and one window acceptance” of enterprise registration item changes and trademark changes, explore the integration of intellectual property business with other departments’ businesses that are closely related to the entire life cycle of enterprises, and provide more “one-stop” services for enterprises and the public.（15） Explore the application of natural language models and other technologies to enhance the intent recognition and accurate response capabilities of online intelligent customer service, optimize intelligent Q&A, intelligent search, intelligent guidance and other services, and better guide enterprises and the public to handle affairs efficiently and conveniently.（16） Deepen the data sharing and business collaboration between intellectual property and fields such as economy, technology, administrative law enforcement, judicial protection, and market supervision.
（17） Support intellectual property public service institutions to establish service stations in key industrial parks and science and technology parks, achieving full coverage of intellectual property public service in key parks.（18） Strengthen public services for trademark brands and carry out trademark information analysis and utilization.
The original text is available here (Chinese only).
AI Wins Big on “Fair Use,” But Judge Slams Brakes on Piracy in Landmark Anthropic Copyright Ruling
A federal judge has handed the AI industry a massive victory. Still, it came with a crucial catch: innovation can’t be built on a foundation of theft, and AI systems must earn their authority through legitimate means.
In a closely watched case, a US District Judge ruled that AI company Anthropic’s use of copyrighted books to train its powerful AI model, Claude, was “exceedingly transformative” and qualified as a legal “fair use.” The decision is a game-changer for AI developers who argue that learning from vast datasets is essential for innovation.
However, the judge drew a sharp line in the sand, ruling that Anthropic’s separate act of downloading and storing millions of books from “pirate sites” was not a fair use and that the company will have to face a trial for it.
This nuanced decision strikes a balance in the high-stakes battle between copyright holders and the rapidly evolving world of artificial intelligence, reflecting a growing recognition that how AI systems acquire their capabilities matters as much as what they can do with them.
When AI models shape human understanding and decision-making at an unprecedented scale, the legitimacy of their knowledge sources becomes a question of technological integrity, not just legal compliance.
The Core of the Case: A Tale of Three Authors
A trio of authors brought the lawsuit:
Andrea Bartz, author of thrillers like The Lost Night and We Were Never Here
Charles Graeber, who penned the true-crime story The Good Nurse and the medical chronicle The Breakthrough
Kirk Wallace Johnson, author of nonfiction works including The Feather Thief and The Fishermen and the Dragon
The authors alleged that Anthropic, a multi-billion-dollar frontier large language model (LLM) backed by Amazon and Google, built its AI by infringing on their copyrights by feeding their books into Claude without permission or payment. Section 107 of the Copyright Act identifies four factors for determining whether a given use of a copyrighted work is a fair use: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.
The Ruling: A “Quintessentially Transformative” Use
Judge William Alsup of the Northern District of California sided with Anthropic on the most critical question — the use of copyrighted works to train an AI model. He reasoned that Anthropic’s approach to the books was not to replace them, but to learn from them to create something entirely new.
In a powerful analogy, Judge Alsup wrote that the process was “quintessentially transformative. Like any reader aspiring to be a writer, Anthropic’s LLMs trained upon works not to race ahead and replicate or supplant them — but to turn a hard corner and create something different.”
The court emphasized that the AI did not simply spit out copies of the authors’ work. The judge noted that Anthropic’s models “have not reproduced to the public a given work’s creative elements, nor even one author’s identifiable expressive style.” Because the final product didn’t compete with or replace the original books, the training process was deemed fair.
This part of the ruling is a significant relief for AI companies, who have long argued their training methods are a modern form of research and learning.
The Catch: “You Can’t Just Bless Yourself”
While the ruling on AI training was a clear win for Anthropic, the judge took a much dimmer view of how the company acquired a large portion of its data. The court found that before Anthropic began purchasing and scanning millions of physical books, it first downloaded over seven million books from known pirate libraries, such as LibGen.
Anthropic kept these books in a massive “central library” to use for “research,” retaining them “forever” even if they were never used for training. The court’s reasoning suggests that AI systems can legitimately “read” human cultural output to develop their capabilities, but only when that reading occurs through recognized channels of access and permission.
Judge Alsup rejected the idea that a future fair use can excuse initial theft. He quoted Anthropic’s own lawyer’s argument back at them in his decision: “You can’t just bless yourself by saying I have a research purpose and, therefore, go and take any textbook you want. That would destroy the academic publishing market if that were the case.”
The ruling implicitly acknowledges that AI systems do not operate in isolation — they function as intermediaries that shape how humans access and understand information. When these systems are built on illegitimately acquired content, they potentially perpetuate unauthorized appropriation at scale, influencing human choices based on improperly obtained knowledge.
The ruling was blunt about the piracy:
“This order doubts that any accused infringer could ever meet its burden of explaining why downloading source copies from pirate sites that it could have purchased or otherwise accessed lawfully was itself reasonably necessary to any subsequent fair use.”
For Anthropic, this means it will face a trial for damages. The judge scheduled a trial to determine the damages Anthropic may have to pay for the infringement. He concluded that a later purchase doesn’t erase the initial crime: “That Anthropic later bought a copy of a book it earlier stole off the internet will not absolve it of liability for the theft, but it may affect the extent of statutory damages.”
What This Means for AI and Authors
This landmark decision offers both sides a partial victory and sets a critical precedent.
For AI Companies: The ruling validates the core argument that training LLMs on copyrighted material can be a transformative fair use. This suggests a legal green light for the fundamental process that powers generative AI, provided the material is lawfully acquired. This creates a framework where AI systems can legitimately learn from human cultural expression while respecting the rights of creators. It also establishes, however, that the means of acquisition matter — AI systems that will increasingly mediate human access to information must themselves be developed through legitimate channels.
For Authors and Creators: The court proclaims that AI companies are not above the law. They cannot simply scrape content from pirate sites to build their models. This creates an incentive for AI developers to license content or find other legitimate ways to source their training data.
Looking Forward: Beyond Legal Compliance
This ruling arrives as AI systems become more sophisticated mediators of human knowledge and decision-making. The court’s emphasis on legitimate acquisition suggests a recognition that AI development practices have implications that extend beyond copyright law. When AI systems can influence human understanding through their responses, the integrity of their training processes becomes a matter of technological accountability.
The decision may also influence how courts approach other aspects of AI development, where the methods used to create AI capabilities affect their legitimacy as information intermediaries. As AI systems become more integrated into research, education, and professional decision-making, questions about the integrity of their development processes will likely extend beyond copyright to encompass broader concerns about technological transparency and accountability.
If upheld, the decision will stand for the notion that AI can read the world’s books to learn, but it first needs a library card. More broadly, it suggests that as AI systems become powerful mediators of human knowledge and choice, their authority must be earned through legitimate means. The future of AI will not be built on piracy — either of content or of the trust necessary for AI systems to serve as reliable partners in human decision-making.
Over time, Anthropic came to value most highly for its data mixes books like the ones Authors had written, and it valued them because of the creative expressions they contained. Claude’s customers wanted Claude to write as accurately and as compellingly as Authors. So, it was best to train the LLMs underlying Claude on works just like the ones Authors had written, with well-curated facts, well-organized analyses, and captivating fictional narratives — above all with “good writing” of the kind “an editor would approve of.” Opinion, p. 6
Another Bite at the Apple to Avoid $300 Million in Damages
Last week, the Federal Circuit vacated both the infringement and damages judgments against Apple in a patent case that involves standard-essential patents (SEPs) related to Long-Term Evolution (LTE) technology brought in the Eastern District of Texas by Optis Cellular Technology, LLC. In Optis Cellular Technology, LLC v. Apple Inc. (22-1925), a panel for the Federal Circuit found that a single infringement question covering multiple patents in a jury verdict form violated Apple’s right to a unanimous jury verdict and remanded the case for a new trial. In addition, the panel addressed several patent eligibility issues and procedural errors in the trial proceedings. As a result, Apple has a second bite at the apple to try to avoid damages.
Background
Optis sued Apple in the Eastern District of Texas alleging that various Apple products implementing the LTE standard infringed five of Optis’ SEPs. The jury initially found Apple infringed certain claims of the asserted patents and awarded $506.2 million in damages. Apple moved for a new trial, arguing that the jury did not have an opportunity to hear evidence regarding Optis’ obligation to license the asserted SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms. The district court granted a new trial on damages, which ultimately resulted in a reduced damages award to Optis of $300 million. Once its post-judgment motions were denied, Apple appealed to the Federal Circuit.
The Appeal
There is a lot to unpack here, but the core issues on appeal are summarized below:
Whether the single infringement question on the verdict form covering all the asserted SEPs violated Apple’s right to jury unanimity;
Whether claims 6 and 7 of U.S. Patent No. 8,019,332 (ʼ332 patent) are patent ineligible under 35 U.S.C. § 101;
Whether the district court erred in construing claim 8 of the U.S. Patent No. 8,102,833 (ʼ833 patent);
Whether the district court erred in finding claim 1 of U.S. Patent No. 8,411,557 (’557 patent) not indefinite under 35 U.S.C. § 112; and
Whether the district court erred in admitting certain damages-related evidence.
With respect to the verdict form, the panel held that the single infringement question on the verdict form, which covered all five asserted SEPs, violated Apple’s right to a unanimous verdict. While Optis argued that, because the $506.2 million damages award “corresponded exactly to the sum of the five numbers that Optis’s damages expert gave as the measure of damages for each patent,” it was clear that the jury was unanimous in finding all asserted claims were infringed, the panel disagreed and explained that each asserted SEP constitutes an independent cause of action requiring separate infringement questions for each patent to ensure a unanimous verdict.
With respect to patent eligibility, the panel reversed the district court’s finding that claims 6 and 7 of the ʼ332 patent were not directed to an abstract idea under 35 U.S.C. § 101. In particular, the panel concluded that these claims were directed to a mathematical formula, an abstract idea, and remanded for further analysis under the Alice/Mayo framework. The panel also reversed the district court’s finding that the term “selecting unit” in claim 1 of the ʼ557 patent did not invoke 35 U.S.C. § 112 ¶ 6. In this aspect, the panel determined that the term “unit” does not sufficiently connote structure and is similar to other terms that held to be nonce terms similar to “means” such that they invoke § 112 ¶ 6. Since the term was found to invoke § 112 ¶ 6, on remand, the district court will need to conduct the second step of the means-plus-function analysis and determine whether the specification discloses adequate corresponding structure. However, the Federal Circuit affirmed the district court’s construction of claim 8 of the ʼ833 patent, rejecting Apple’s argument that the claim required mapping to start from the last row of a matrix.
Finally, the Federal Circuit found that the district court abused its discretion by admitting a settlement agreement between Apple and Qualcomm, which did not involve any of the SEPs at issue in this case, and related expert testimony. Before the damages retrial before the district court, Apple had unsuccessfully argued the settlement agreement was irrelevant and should be excluded “because any alleged relevance is outweighed by the substantial risk of confusion and unfair prejudice to Apple.” While the panel did not deem the settlement to be irrelevant, it held that the probative value of the settlement agreement was substantially outweighed by the risk of unfair prejudice to Apple.
Takeaways
This decision underscores the importance of ensuring jury unanimity in patent cases involving multiple patents. While general verdict questions that apply to more than one asserted patent or patent claim may seem attractive to patent owners and, at least in this case, signed off on by the district court judge, this verdict format is going to cause problems on appeal. The decision also highlights the continued scrutiny applied to patent eligibility, as well as the admissibility of settlement agreements in determining reasonable royalties.
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How Intellectual Property Protection Fuels Growth in Tech Startups
Strategic protection of intellectual property (IP) is crucial for driving the growth and sustainability of high-tech startups, enabling them to secure their innovations, maintain a competitive edge, and strengthen their market position.
IP is a critical asset for tech startups, often representing the core value of the company. In highly competitive technology sectors driven by innovation and rapid technological advancements, such as artificial intelligence (AI) and fintech, protecting IP is essential to maintaining a competitive edge. For tech startups, IP can include patents, trademarks, copyrights, and trade secrets, each serving a unique role in safeguarding different aspects of the business. Patents protect inventions and technological processes, trademarks secure brand identity, copyrights cover original works of authorship, and trade secrets protect confidential business information. Together, these IP rights form a robust framework that supports the startup’s growth and market position.
The Role of Patents in Innovation
Patents are particularly vital for tech startups as they provide exclusive rights to new inventions, preventing others from making, using, or selling the patented technology without permission. This exclusivity is crucial in the tech industry, where innovations can be easily replicated. By securing patents, startups can protect their technological advancements, ensuring that they reap the benefits of their research and development efforts. Moreover, patents can enhance a startup’s credibility and attractiveness to investors, as they demonstrate a commitment to innovation and a clear path to market differentiation.
Attracting Investment and Partnerships
For tech startups, attracting investment is often a key priority, and a strong IP portfolio can be a significant factor in securing funding. Investors are more likely to invest in companies that have protected their innovations, as this reduces the risk of imitation and potential legal disputes. A well-managed IP strategy can also facilitate partnerships and collaborations, as it provides a clear framework for sharing technology and knowledge while protecting the startup’s interests. By demonstrating a proactive approach to IP protection, startups can build trust with investors and partners, paving the way for strategic growth opportunities.
Mitigating Legal Risks and Challenges
In the competitive tech landscape, legal challenges are not uncommon, and IP protection serves as a crucial defense mechanism. Without adequate IP protection, startups risk facing infringement claims from competitors, which can be costly and damaging to their reputation. By securing IP rights, startups can mitigate these risks, ensuring that they have the legal backing to defend their innovations. Additionally, having a strong IP portfolio can deter potential infringers, as it signals the startup’s readiness to enforce its rights and protect its market position.
Enhancing Market Position and Brand Value
Beyond legal protection, IP rights contribute to a startup’s market position and brand value. Trademarks, for example, help establish brand identity and consumer trust, which are essential for building a loyal customer base. Copyrights protect the creative aspects of a startup’s offerings, such as software code and digital content, ensuring that the startup maintains control over its unique contributions. By leveraging IP rights, startups can differentiate themselves from competitors, enhance their brand value, and create a sustainable competitive advantage in the market.
Strategic IP Management for Long-Term Success
For tech startups, strategic IP management is not just about protection, it is about leveraging IP as a tool for growth and innovation. This involves regularly assessing the IP landscape, identifying opportunities for new filings, and ensuring that existing IP rights are maintained and enforced. Startups may also consider the global nature of the tech industry, seeking IP protection in key international markets to maximize their reach and impact. By integrating IP strategy into their overall business plan, tech startups can secure their innovations, attract investment, and position themselves for long-term success in a dynamic and competitive industry.
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Trade Secret Law Evolution Podcast Episode 78: When Are Misappropriators Dangerous Enough to be Enjoined? [Podcast]
In this episode, Jordan discusses a recent case from the Southern District of New York where an injunction was partially granted on a breach of contract claim but not on the trade secret claim. The Court found the plaintiffs didn’t make a sufficient showing on irreparable harm, based on a lack of “danger” that the misappropriator would disclose the trade secrets to someone else.