Legal Geek No. 186: Clash of Patent Validity Clans

Hi, and welcome back to Legal Geek.  This week, we cover the first decisions coming down in the massive legal battle over patents alleged to cover basic aspects of successful video game apps such as Clash of Clans.

https://archive.org/details/legalgeekep186 

A company called Gree holds various patents on video game improvements in Japan and the U.S., and they have started to assert such patents against successful game developers such as Supercell, the maker of Clash of Clans and Clash Royale among other titles.  This has launched a worldwide patent battle between Gree and Supercell that is reminiscent of other massive worldwide patent disputes, such as Apple vs. Samsung over mobile phones.

This legal battlefield includes a lawsuit pending in Japan between the companies as well as a series of validity challenges filed against Gree's patents by Supercell in the U.S. Patent Office.  Supercell filed 18 petitions for post grant review or inter parties review challenging that many Gree patents as invalid under U.S. Patent rules, and considering each PGR or IPR process can cost tens to hundreds of thousands of dollars per petition, this is clearly an early step in a multi-million dollar patent war.

The Patent Trial and Appeal Board, the administrative judges who handle such PGR's at the Patent Office, instituted trials on 10 of the 18 Supercell petitions, which means 10 Gree patents are going through the process of detailed validity review this year.  Most of them are challenged based on the Supreme Court's decision in Alice v. CLS Bank, which set standards for what Abstract ideas are not eligible for patent protection in the U.S.

While this battle between the parties may merit future updates, this segment reports on the first couple significant decisions occurring in these PGR proceedings which the Patent Trial and Appeal Board handed down this month.  

First, one of Gree's patents relating to "improving unexpectedness, dramatic impact, and taste when medals or game items are provided as a reward to a player" was stricken down as invalid because it was merely covering a patent-ineligible Abstract idea.  Gree had tried to distinguish their patent from the wagering game rules that have been deemed invalid Abstract ideas by Federal Circuit court opinions in recent years, but the Appeal Board did not find this distinction persuasive.  This is actually the second Gree patent to fall afoul of Alice rules so far, joining another one that tried to broadly cover a method for displaying a battle scene in a computer game.

Second, another Gree patent covering how to execute a battle in a video game was also indicated to be invalid as an Abstract idea by the Appeal Board in a separate proceeding, but the Appeal Board granted Gree the right to amend their claims to add in more detail that may help the claims be directed to patent-eligible subject matter.  Such requests to amend have only been granted by the Appeal Board in about 10% of PGR proceedings over the past few years, so this is a rare and significant win for Gree.  The key will now be for Gree's counsel to develop claim amendments that properly recite how the battle execution system improves the computer system by achieving reduced processing loads and quicker execution times, as these features have been deemed critical to showing that the Abstract idea of the claims is limited to a practical application, one of the ways you can achieve patent eligibility under the Alice rules.

The battle will go on between these two companies and it looks like it could help craft precedent that will define patent eligibility in the video game field for the next few years.

The Bottom Line is: Supercell is a highly profitable company and it makes sense to defend against broad-scale patent infringement claims and attacks to avoid losing all of that profit to Gree.  The Patent Trial and Appeal Board is continuing to apply the recent decisions I've been critical of that say game rules and mechanics by themselves are too Abstract for patent eligibility, so perhaps some of these cases could lead to an appeal of that issue to overturn what I personally believe to be bad precedent hurting all game designers in the tabletop and video game fields.  We will continue to monitor for such developments.

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Legal Geek No. 185: Grand Theft Tax Evasion

Hi, and welcome back to Legal Geek.  This week, we cover an investigative report recently released that indicates Rockstar North, the maker of the Grand Theft Auto video game series, has paid no tax in their home country for 10+ years. 

https://archive.org/details/legalgeekep185 

An investigative nonprofit called Tax Watch UK revealed 2 weeks ago that Rockstar has received over 52 million dollars of tax credits over the past three years.  Furthermore, this report indicated that Rockstar has not paid UK tax for 10 or more years running.  This is interesting because the company is based in Scotland and normally would be a tax boon for the UK.

Especially when you consider that the estimated operating profit of the company is about $5 billion dollars in the same time period, it begs the question, where did all the taxes go?  Perhaps this is a real life case of grand theft, but tax evasion instead of auto carjacking.

Rockstar does operate as a subsidiary of Take-Two Interactive, a U.S. company.  Take-Two believes it is reasonable to push all profits from intellectual properties developed in foreign subsidiaries into the U.S. parent company, thereby allocating these profits to be taxed under U.S. law.  These are done by an internal accounting process called internal royalties, which are paid to selected employees of the U.S. parent company to allow them to allegedly participate in the success of the software titles they help develop.  However, participation really just means moving all the profits to a tax-friendly jurisdiction, probably.  Take-Two has a history of this even with respect to US taxes, having used Bermuda to isolate profits from significant taxation in the 2000s.

The primary problem is that the grant of the tax credits to the Rockstar UK company are for the purposes of boosting growth and profits within the country so as to also increase the overall prosperity and tax base collectible from businesses in the country's economy.  So this nonprofit watch group is asking for a review of future tax credits based on this possible violation of so-called arms length principles that govern when multi-national companies can move profits between jurisdictions.

Generally speaking, arms length principles would not allow for what Rockstar and Take-Two are doing here because the IP is being made in Scotland and the marketing of the product and sales are also in Scotland.  There's nothing criminal about the practice, but the tax benefits may be withdrawn if Take-Two continues to funnel all profits away from Rockstar's home country.

The Bottom Line is: large multinational companies are just like individuals in that we all try our best to pay as little tax as possible.  That leads to stories like this where a home country does not receive any significant taxes sometimes for a decade or more, despite the wild success of a game maker like Rockstar with the GTA series.  International tax evasion may just be a good theme for the next GTA game as well.

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Legal Geek No. 184: "The" Ohio State Applies for a Controversial Trademark

Hi, and welcome back to Legal Geek.  This week, we cover an interesting bit of trademark news stemming from the alma mater of your truly, as The Ohio State University applies for a federal trademark on the word "the."

https://archive.org/details/legalgeekep184 

Based on a declaration by the State of Ohio about 100 years ago, the formal name of the university in Columbus home to Buckeyes is The Ohio State University. This has been marketed heavily by the university over the past 20-25 years and is something of a point of pride for the students, alumni, and university personnel.  While that in and of itself is pretty silly, this branding push has now extended to a controversial trademark application filed 2 weeks ago by OSU.

The application seeks to cover the word mark "The" in association with apparel.  This would cover any use of that word on apparel as a source identifier, as the application is not limited to just apparel associated with the university or its colors, nor is the application limited to a particular logo or graphic version of "The."  As the definite article "The" is the most commonly-used word in the English language, this application for trademark has been lampooned by many news outlets and legal scholars.  But does this application have a chance to succeed?

The short answer is: probably not.  That being said, this application is not as much of an overreach as some have played it to be, even coming from one of the most litigious university branding departments in the country.

The application will need to overcome some hurdles in examination before becoming an enforceable trademark registration.  First, the university may have to distinguish from the many prior trademarks in apparel that use "The" as part of the mark.  If any such prior mark is confusingly similar, OSU's registration may be blocked.  Even if such a challenge is not made by the Trademark Office Examiner, third parties can oppose this application if it gets initially allowed to protect their own rights in the word "The."  Oppositions can be difficult to overcome and are expensive, since they are basically mini litigations over who properly owns exclusive rights to a brand or mark.

Another hurdle is that OSU has only shown use on the front of a T-shirt as evidence in their application, but this is ornamental use rather than use as a brand.  OSU can likely overcome this issue by supplying new specimens showing "The" in use on tags and the like, but it's a sloppy mistake on the initial record of the application file that will need to be addressed.

Finally, trademarks cannot cover so-called generic and merely descriptive terms, as trademarks cannot be used to lock up words needed for others to fairly describe their goods and services.  With this word "The" being so common, it is unclear whether such a word mark can be distinctive enough to serve as a trademark in the consumer's mind.  If there's any chance of such a word overcoming this requirement, however, OSU and this long-term marketing of The associated with the university probably can provide proof of secondary meaning associating the term with the university as the source of goods.  But even then, the strength of such marks is inherently limited.

Again, this is not as big an overreach as the media is playing it out to be, as even a registered trademark would not allow OSU to block descriptive uses of this term in the apparel field that are not leading to consumer confusion.  It would be an uphill battle to challenge any competing use, which means the trademark is pragmatically of little commercial value other than as a potential deterrent.

The Bottom Line is: alumni of The Ohio State University will continue to be proud of our little definite article, but that and the associated branding efforts of the university will probably not result in a federal trademark registration on just this word "The."  A more narrowly tailored application may come in the future which will have a better chance of success, but for now, OSU is just going to have to keep taking all the PR hits brought on by such a bold legal filing strategy.  And I'd be remiss to end this segment without a quick Go Bucks for the upcoming college football season.

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Legal Geek No. 183: Spellchecking Patent allegedly infringed by Apple

Hi, and welcome back to Legal Geek.  This week, we cover a newly-filed patent lawsuit against Apple regarding aspects of automatic spellchecking. 

https://archive.org/details/legalgeekep183 

It seems like almost as long as we've had computer word processing software, we've had spellchecking capability.  As such, you may be surprised to learn that one of the most typical features of spellchecking is still potentially covered by two U.S. Patents, specifically the functionality of identifying spelling errors and potential corrections automatically for a user, which is done on Apple devices with the so-called Red Squiggly line underneath such errors.  Apple was sued by a company called Sentius International on these two patents this week.

The history of this case is actually pretty typical for patent disputes.  Apple previously partnered with Sentius to help develop a precursor to the modern version of the Red Squiggly line spellchecking functionality.  Thus, Apple and Sentius likely had a prior business agreement that sent some royalties or other money to Sentius for this assistance.

However, at some point Apple had further developed their software and functionality to an extent where it was believed Sentius no longer had to be paid for their contribution to the original version of the functionality.  When Apple stopped paying Sentius in about 2015, that was the first step that led to the lawsuit eventually filed against Apple.  Sentius has likely spent much of the past 4 years negotiating with Apple to try and re-negotiate terms of a license of their patented technology, but Apple refused to enter such a new agreement. 

That brings us to this week, where Sentius filed this lawsuit alleging that Apple's Red Squiggly line spellcheck infringes two of its patents.  Looking over the claims in these patents, the claims in one of the patents are worded broadly to cover linking of a remote database with several computers and reviewing terms in a document to associate data stored in the remote database with the term and then provide that information to the computer.  The other patent has been reissued with more specific claims covering systems for breaking down a text document into discrete pieces and using an external reference material to evaluate those discrete pieces. Both patents are expired or expiring soon, so the primary point of Sentius is to secure damages for the past infringements.

Such patent cases can lead to big damage awards when dealing with very commercially-successful defendants like Apple, so the leverage Sentius has here is to negotiate a favorable deal to gain some royalties or cash flow from Apple to perhaps settle this lawsuit.  If the lawsuit proceeds, I expect these patents to be challenged for invalidity, as broader functionality software patents are most ripe under current rules for validity attacks.  It's hard to determine at this early stage who has the upper hand, but we will continue to monitor the case in the event that spellcheck, of all things, becomes a very expensive infringement for Apple in this case.

The Bottom Line is: although patents only last for 20 years in most countries, sometimes companies like Apple can be surprised by how technology that seems like it's been around forever like automatic spellcheck can be covered by still-pending, older patents near the end of term. As many of us have been burned by mistakes made by the allegedly smart spellcheck and autocorrect options on our smart devices, seeing Apple be pursued for patent infringement on such technology is perhaps an ironic, enjoyable twist of fate in the tech legal landscape.  In any event, don't expect the infamous red squiggly to go away though, as even if covered by these patents, they are expired or expiring soon.

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Legal Geek No. 182: Activision Invokes Free Speech and GenCon is Here!

Hi, and welcome back to Legal Geek.  This week, we cover a lawsuit where Activision Blizzard is invoking free speech protection and remind you about the awesome events happening at GenCon this week.

https://archive.org/details/legalgeekep182 

As covered on The Instance and other news outlets, Blizzard co-founder Frank Pearce is leaving the company, so change is in the air at Activision Blizzard. But one thing that never changes is the fact that this company is always in interesting litigations, including the Warcraft-Diablo related patent case we covered last week. 

This week, we cover a different type of lawsuit, that being a trademark infringement lawsuit brought by AM General, the maker of Humvee vehicles, against Activision for showing these same vehicles in the Call of Duty game series. AM General filed this lawsuit in late 2017, claiming that the unauthorized use of images of their Humvee vehicles in Call of Duty games has allowed Activision to reap billions of dollars off the goodwill of their company.

While we have seen similar claims in recent segments on personality rights such as those related to iconic dance moves, in the trademark infringement context, these legal claims are much harder to win. This is in part because U.S. courts have used First Amendment concerns to hold that trademark owners cannot sue over use of their brands in creative works unless the marks are completely irrelevant to the work, or if the author expressly misleads consumers. This is an interesting use of First Amendment protections, as they do not normally apply between two private non-government parties.

So for example, it's easy to sue if you put a branded cereal box in a TV sitcom scene without authorization, as any old cereal box could have been used in most cases, but that is not the context here. AM General has supplied the US military with Humvees for nearly 40 years, and that has made the vehicle a fixture in war movies, telecasts, and news shows. So in this context of war video games, Activision is able to make the case that Humvees are artistically relevant to these games. So the first exception of the mark being completely irrelevant to the creative work does not apply. Plus the use of Humvees is minimal in the overall context of the game being reviewed, being on screen for 10 minutes out of about 35 hours of game play.

The other factor of consumer misleading is also likely not pertinent here, as Activision does not draw any association with AM General as the source of the games. So in this context, the Bottom Line is: AM General probably loses this trademark lawsuit based on First Amendment free speech protections, an interesting shield for a company like Activision in this circumstance. Never doubt the ability of Activision Blizzard to remain getting in interesting lawsuits, though. 

A final special note since this is GenCon week in Indianapolis. You can find the Legal Geek seminars on Thursday at 1 PM in the Crowne Plaza hotel and on Friday at 10 AM in the JW Marriott hotel. Friend of the show Justin Robert Young is also putting on a couple seminars, and you can check those out in the convention center on Friday at 8 PM and on Saturday at 10 AM. Please reach out on Twitter if you want to track us down this weekend. 

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Do you have a question? Send it in!

Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitzy