Court Denies Stay Pending PTAB's Consideration of Petition to Institute IPR

In a March 3, 2016 ruling, Judge Katherine Polk Failla denied the defendant's motion for a stay of the plaintiff's patent infringement claims pending the PTAB's decision on whether to institute an IPR.  The deciding factor in the Court's ruling was the parties' relationship as competitors, leading the Court to conclude that "in spite of Defendants’ contention that Plaintiff is the more powerful entity, Plaintiff nonetheless faces prejudice as the current patent-holder."  Judge Failla concluded by noting that "if the PTO later institutes IPR proceedings, the Court may be in a better position to revisit a potential stay, and Defendants may renew their motion at that time."

Court Invalidates Patent As Claiming Patent-Ineligible Subject Matter

In a June 29, 2015 ruling, Judge Katherine Polk Failla invalidated U.S. Patent No. 7,885,887 under 35 U.S.C. § 101 as claiming ineligible subject matter. The Court summarized representative claim 1 as having the following “relevant limitations”:

(i) a computer operating either on the Internet or other network with access to a server; (ii) providing software tools with a suite of features allowing management of one or more creative projects; (iii) making certain types of offers associated with the project in exchange for funds for the project; (iv) facilitating the acceptance of offers by fans; (v) storing contact and marketing information of those who have accepted offers in exchange for funds in a database; and (vi) providing software tools that enable and control the exchange of information with a fan through the database.

In invalidating the patent, Judge Failla first noted that the “‘887 Patent’s claims are directed to the concept of a crowd-funding or fan-funding, i.e., raising funds for a project from interested individuals in exchange for incentives,” and concluded that these “claims are squarely about patronage – a concept that is ‘beyond question of ancient lineage.’” The Court then considered whether the claims in the ‘887 patent nevertheless had an “inventive concept,” and found that beyond “the abstract idea of patronage, the claims merely recite ‘well-understood, routine conventional activities or routine data-gathering steps.” Judge Failla thus concluded that “because the ‘887 Patent claims the abstract idea of incentive-based fan-funding and lacks an ‘inventive concept’ sufficient to ‘transform’ the claimed subject matter into a patent-eligible application of that idea, it is invalid under Section 101.”

Court Denies Attorneys’ Fees to Defendant Securing Stipulation of Dismissal With Prejudice

 In a January 26, 2015 ruling, Judge Katherine Polk Failla refused to award attorneys’ fees to a defendant in a copyright case who secured a stipulation of dismissal with prejudice early in the case. The Court did find that the defendant was a “prevailing party” under the Copyright Act fee provision, writing:

Here, the parties agreed to a stipulation of dismissal with prejudice pursuant to Rule 41(a)(1)(A)(ii), because Plaintiff’s opportunity to voluntarily dismiss unilaterally pursuant to Rule 41(a)(1)(A)(i) had expired upon [the defendant’s] filing of an answer. Such a dismissal “has the effect of a final adjudication on the merits favorable to defendant and bars future suits brought by plaintiff upon the same cause of action.” . . . Therefore, because the stipulation of dismissal “immunize[s] [the] defendant from the risk of further litigation on the merits,” . . . Defendant has prevailed.

Judge Failla nevertheless denied an award of fees on the merits, finding that the plaintiff’s claim neither was objectively baseless, frivolous nor brought in bad faith. In response to the defendant’s argument that the plaintiff should have known it was not a proper party, the Court noted the defendant’s tangled business affairs with those of its co-defendant, and wrote that the plaintiff had no factual basis by which to verify [the defendant’s] description of [its business] relationships.” Judge Failla further wrote that her ruling denying in part of a companion defendant’s motion to dismiss suggested that the plaintiff’s claims were not frivolous.

Court Dismisses Most of Copyright Licensee's Infringement Claims on Standing Grounds

In a February 21, 2014 ruling, Judge Katherine Polk Failla denied in part and granted in part the parties’ cross motions for summary judgment. Plaintiff John Wiley & Sons, Inc. started a declaratory judgment action against DRK Photo for a declaration that Wiley had not infringed DRK’s copyrights in certain stock photographs that DRK had previously licensed to Wiley as the representative for the photographers that originally took the photographs. DRK then counterclaimed for copyright infringement. After the completion of discovery, the parties cross-moved for summary judgment.

A threshold issue for DRK’s motion was its standing to assert copyright infringement claims. Judge Failla wrote that under 17 U.S.C. § 501(b), only legal or beneficial owners of a copyright have standing to sue, and that “the Second Circuit enforces Section 501(b) by holding that ‘[t]he Copyright Act authorizes only two types of claimants to sue for copyright infringement: [i] owners of copyrights, and [ii] persons who have been granted exclusive licenses by owners of copyrights.’” After analyzing the Representation Agreements under which DRK acquired the right to license the photographs at issue to Wiley, the Court concluded that the “record provides uncontroverted proof that the Representation Agreements are nonexclusive licenses.” Judge Failla premised her conclusion in part on the fact that “DRK admitted that the Representation Agreements are nonexclusive licenses.” Judge Failla also rejected DRK’s argument that was a beneficial owner of the copyrights at issue because it was entitled to one-half of the licensing revenue, noting that “the cases on which DRK relies in support do not prove otherwise.”