On a Larger Scale

Case Outcome Affects Manufacturers, Importers and Distributors

On December 13, 2010, an evenly split Supreme Court affirmed a holding by the Ninth Circuit affecting manufacturers, importers, and distributors.  All organizations involved in trade at any of those levels should become aware of its impact.   It is another case showing that careful use of intellectual property in the design of distribution channels and due diligence of suppliers can add a great deal of value and reduce risk.

This new case adds to the interplay of trademark and copyright law on the manufacturing, distribution, and sale of products in international commerce.  Because of currency fluctuations and other market conditions, manufacturers may have different prices for the same device in various locations.  When the difference becomes large enough, resellers buy the products in the low-price location and resell in the high-price region.  That can upset the market for manufacturers whose strategy is to sell through "high-end" retailers.

In the recent case, Omega made watches in Switzerland that were sold outside the US.  Costco (a big-box low-cost operation) bought them and resold them in the US.  Omega sued, alleging infringement of US copyright in the watches.

Generally, a copyright owner cannot use copyright law to stop the resale of an object that the copyright owner authorized.  The theory is that the first sale of the object fully compensated the copyright owner and exhausted the copyright owner's monopoly right in that object.  The copyright owner can preclude copying of the item sold but cannot use copyright law to prevent its resale or distribution.  This is referred to as the "first sale" doctrine. When Omega sued, it said the doctrine did not apply, because the watches were not made in the US.  Omega read the US copyright statute as establishing a "first sale" defense only for those products made in the US. 

The Ninth Circuit agreed.  It held that there was no first sale defense if the particular copy was not made or sold in the US under the authority of the copyright holder.

Some may read the Omega case as giving a green light to copyright owners who manufacture overseas. However, the law is not quite so simple. The extent to which resellers can perform that arbitrage, and the extent to which a manufacturer can limit it, depends on a number of factors (e.g. location of manufacture, terms and conditions that go along with the physical device that is transferred, the nature of the transaction, and others). Patents, confidentiality agreements, and other contract terms also have an effect, making intellectual property strategy one of the most important considerations organizations need to address in international commerce.


Closer to Home

USPTO Extends Deadline
for Green Technology Petitions

In December of 2009, the United States Patent and Trademark Office (USPTO) launched a pilot program to accelerate the development and deployment of "green" technologies. Under the program, patent applications pertaining to certain technologies will be advanced out of turn for examination. The program was originally set to expire on December 8, 2010, but has now been extended to December 31, 2011.

The Director of the USPTO, David Kappos, attributes the extended deadline to the program's success. "We've seen great results so far for those applications in the Green Technology Pilot Program, so we want to extend it for another year and open the program to additional green inventions. By doing so, we hope to help stimulate investment in green technology, bring more green inventions to market, and create jobs," Kappos said.

Statistics have shown that applicants can obtain a patent much more quickly under the green technology pilot program than under the standard examination process. In several cases, patents have been issued within a year of the filing date. Since the Green Technology Pilot Program began, 790 petitions have been granted to applicants and 94 patents have been issued.

There have been no requirement changes. Under this pilot program, the agency will expedite examination for the first 3000 applications filed on or before December 31, 2011, in which a grantable petition for special status is filed. Petitions for expedited processing of a patent application must clearly state the application's relationship to the development of a renewable energy source or energy conservation, or the reduction of greenhouse gas emissions.

Greenhouse Gases and Emmisions

Additional information on the
Green Technology Pilot Program can be found HERE.

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