Impact | Business Risk Management Blog

9th Circuit finds copyright holders must consider fair use or risk liability before issuing takedown notices under the DMCA.

In a matter of first impression, the 9th U.S. Circuit Court of Appeals ruled on Sept. 14, 2015, that copyright holders must consider fair use before issuing a takedown notice under the Digital Millennium Copyright Act (DMCA). The court also ruled that the question of whether a copyright holder properly considered fair use is a subjective test for the trier of fact. A copyright holder will incur liability if it lacked a subjective good faith belief that the challenged use did not constitute a fair use.

Woody Allen once said, “Showing up is 80 percent of life.” But this observation, while often apropos, is not applicable if one’s objective is to obtain insurance coverage for IP infringement claims.

Coverage can often be found for those claims if they are viewed through the right lens. But recent insurance coverage decisions highlight the nuance required to present such a claim in a way that brings it potentially within the coverage. The “potentially within the coverage” is magic that triggers the insurer’s duty to provide a defense in what can be expensive litigation. And even if a claim is potentially covered, coverage will be lost if the claim is not timely asserted. So showing up late may be no better than failing to show up at all.

Two recent appellate decisions¹, one in the Fifth Circuit and one in Illinois, highlight the value to policyholders from the aggressive pursuit of insurance coverage in claims arising from allegations of the infringement of intellectual property rights. In most insurance policies that afford advertising injury coverage, coverage is generally excluded for injuries “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” In other words, the policies, on their faces do not provide coverage for the infringement itself. However, this exclusion from coverage does not apply when the infringement is in the policyholder’s “advertisement.” In other words, a claim to coverage, both for the cost of defense and indemnification for settlement or judgment, can be developed to the extent that an argument can be made that the infringement at issue is actually found in the “advertising.” By taking expansive approaches to what constitutes an “advertisement,” the policyholders in Kipp Flores Architects and Creation Supply obtained insurance coverage for their infringement of intellectual property rights by pointing to the use of the infringement in the marketing of the product.

Today, at the conclusion of Women’s History Month, I received an email from the USPTO News containing a blog message by Michelle K. Lee, the first woman director of the USPTO. See, Blog by Under Secretary of Commerce for Intellectual Property and Director of the USPTO Michelle K. Lee. The Greensfelder IP Group joins Michelle K. Lee and the USPTO's celebration of "the generations of women who have helped shape America" in honor of Women's History Month.

Companies of all sizes seek to focus on business development rather than on patent proceedings. Patents and the implementation of patents are a fundamental part of the ordinary operations of many businesses outside of the pharma/tech industries. Development and implementation of patentable technologies drives the innovations that set these businesses apart from their counterparts. When these types of businesses are considering filing a patent infringement action, it is because they face actual current issues in the marketplace that threaten the success, the growth, and sometimes the lives of their business, their innovations, their brands, and their investments in R&D. Consequently, if there is to be patent “reform,” it is important to focus on the needs of businesses outside of the pharma/tech divide. Those businesses have broad investment in their innovations and in obtaining patent rights, and they need to be assured of their ability to rely on those rights. Current and proposed “reform” is preventing many of these businesses from enjoying any benefit from their patents.