U.S. Decision in Omni Medsci Illustrates Continued Need for Proper Drafting When Attempting to Assign I.P.

A recent cases handed down by the United States Court of Appeals provides a good example that, even today, in an age where courts have largely abandoned formalism, yes, some legal documents still need to reflect precise words to express certain things and make certain things happen.

The case at issue, Omni Medsci, Inc. v. Apple Inc., stems from a lawsuit by a company called Omni Medsci, Inc. (“Omni”) against the Apple corporation, for patent infringement. Omni thus sought to avail itself of certain remedies that American patent law affords patent holders, when a third party uses their invention, once it’s been patented, without first obtaining a license to do so.

Unfortunately for Omni in this case, Apple was diligent about making its homework, and obtained a copy of the 1992 employment agreement of a university researcher. The rub? This agreement, which purported to transfer the invention (patent) rights of this inventor to the University of Michigan (the “University”), did so by using language which was, shall we say, less than ideal. Indeed, the clause of the employment agreement at issue supposed to transfer the intellectual property (“I.P.”) rights over the work of this employee (to the University), tried to do so by a somewhat ellipical sentence, to the effect that I.P. which resulted from research by this employee “shall be the property of the University,”. That’s right, no active verb, no present tense, just a statement of (apparent) fact that his work would (eventually) belong to the University. Oh ho.

The court of appeals agreed with Apple that this fell somewhat short of actually expressing an intent to assign I.P. rights right then and there, including because of the future tense and the fact that nowhere were the verbs “assigning” or “transferring” used in the key sentence. Rather than using usual phrasings like “assigns”, “agrees to assign” ou “does hereby grant title to…”, the University elected to use relatively convoluted and obscure language to express what could have been expressed plainly by using simple words that would adequately one’s intent to actually transfer I.P. on the spot. For the court, such language does NOT express an intent to transfer I.P., merely some sort of promise to eventually assign the signor’s rights, nothing more.

This being the case, the University did not possess the I.P. over the invention (patent) at issue when it purported to assign it to Omni. Classic case of: you can’t transfer something you don’t have. As a result, Omni is not the owner of the patent at issue and, thus, cannot legally sue Apple for infringement thereof. Checkmate.

Even though it may be a U.S. decision, this case nevertheless provides us with an excellent example of the fact that, yes, even in 2021, certain words DO matter, and should be used when attempting to effect certain things. Even though courts may, by and large, no longer get hang-up on formalities in legal documents, there remain certain essential things that will be required once you get in front of a judge. Eh, what do you know? Proper legal drafting is still important, who knew?

Federal Court Refuses to Consider Results of On-line Survey as to Trademark Confusion Analysis

The Federal Court recently handed a decision on an appeal of a trademark opposition, in the context of which a party unsuccessfully sought to introduce into evidence the results of
an on-line survey, in Tokai of Canada Ltd. v. Kingsford Products Company, LLC (2021
FC 782).

Though surveys may sometimes be used in trademark cases, for example, to help judges reach conclusions as to the likelihood of confusion between marks (i.e. as to the initial
impressions of typical consumers), the court in this case rejected the survey altogether, for a number of reasons.

For example, the very content of the questions asked by that survey was an issue that warranted against accepting the results of the survey as valid, as were certain data manipulations upon analysis the results and producing the final report. The way the survey was held was also a problem for the court, as the survey allowed participants unlimited time to answer, something that was simply not conducive to obtaining “initial impressions” of those who responded. At the other end of the spectrum, the survey’s results were also tweaked by arbitrarily rejecting questionnaires filled too quickly by certain participants. In short, the court found the survey essentially asked the wrong question, in the wrong manner.

As to this last point and the format of the survey, the court objected to the holding of the survey on-line, by having participants simply fill a questionnaire on-screen, at their leisure, without sufficiently timing their responses to attempt at obtaining an idea of what their initial impressions were, when presented with certain trademarks. On that point, the court also held that the very format of such an online questionnaire was ill-suited to presenting participants with an adequate simulation of the kinds of circumstances where they might meet the trademarks at issue, for example on products, on store shelves, in actual stores.

All in all, the Federal Court held in Tokai that on-line surveys may be problematic when attempting to ascertain the likelihood of confusion between trademarks, especially when the goods or services at issue are provided or sold in brick-and-mortar establishments.

The Federal Court Imports Copyright Infringement by Inducement into Canadian Law

The Federal Court recently provided us with an interesting copyright decision, in Bell Canada v. L3D Distributing Inc. (2021 FC 832), a case that dealt with devices called set-top boxes (“STB”) used to stream content on TVs. In that case, a group of Canadian companies was sued by content owners and licensees, to stop these defendants from continuing to market and sell their STB devices in Canada, and ideally also obtain some compensation based on infringement of copyrights.

To make a long story short, in 2016 the group of plaintiffs that included Bell and Videotron sued some Canadian businesses marketing STBs in Canada, based on fact that such devices were largely being used by purchasers to infringe copyrights as to pirated TV shows and movies. The plaintiffs basically argued that availability of STBs made it too easy for Canadian consumers, allowing them to find, download and watch pirated content on their TVs. Indeed, thanks to these devices and instructions provided by the defendants at issue, Canadians could too easily get round the usual predictions against availability of pirated content -hence the proceedings filed before the Federal court.

We should mention that the defendants at issue not only marketed STBs in Canada but did so by promotion and information that made it clear that the typical function and use of these devices was essentially to obtain access to pirated content. In short, there was nothing subtle about the fact that activities of the defendants relied heavily on benefiting from allowing consumers to infringe copyrights on pirated content placed online by third parties. Looking at the promotional and other materials produced by defendants, it was clear that the main use of the devices at issue was to secure access to pirated content, particularly once purchasers installed a third-party add-on recommended by the defendants to enable pirating.

The federal court started by concluding that the defendants had in fact infringed copyrights over thousands of series and movies, by essentially making them available by telecommunications to Canadians. For the court, lack of actual copying, uploading or downloading may be disregarded in a blatant case such as this, as the defendants basically made content available through their devices and activities. Even though the defendant did not actually do any of the specific acts reserved to copyright owners by the Canadian act, the court held that the defendants’ activities related to STBs basically amounted to making pirated content available, a conclusion which many now question, including it seems to go beyond the actual provisions of the Copyright Act.

Interestingly, the Federal court here also went as far as holding that these defendants infringed copyrights not only directly (by making pirated content available, as described above), but also by merely encouraging, or rather inducing, Canadian users who purchased STBs to seek, download and watch pirated content placed online by third-parties. This is new law for Canada, as the Canadian Copyright Act does not contain any provision dealing expressly with inducement as a basis for finding infringement, contrary to the Patent Act, for example. For the court, the fact that Canadian common law generally provides for inducement as a basis for liability justifies importing that legal concept into copyright law, notwithstanding the absence of such a concept in our piece of copyright legislation.

Based on these findings of infringement, the court granted injunctive relief (of course) and awarded the plaintiffs 31 million dollars in statutory damages, along with some punitive damages, for good measure. Ouch.

I should mention that, not too surprisingly, the decision at issue was the result of ex parte proceedings and was a default judgment. One may express doubts as to whether the result would have been the same had the defendants actually participated and made submissions.

At any rate, I guess we’ll just have to see whether Canadian jurisprudence does really continue to import here the concept of infringement by inducement in copyright matters.