E-Commerce Law Week, Issue 438

Supreme Court Lets Patent Licensees Have Their Cake And Eat It Too

In Medimmune, Inc. v. Genentech, Inc., the Supreme Court found that a patent licensee is not required "to break or terminate its ... license agreement" before seeking "a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed."  In overturning Federal Circuit precedent, the Court's ruling makes clear that a patent licensee may continue to pay royalties for the use of a patent while challenging the validity of the patent in court.  If the Court had ruled the other way, patent licensees wishing to challenge patents would have first had to breach their license agreements, and thereby run the risk of losing an infringement suit, having to pay treble damages and attorneys' fees, and being enjoined from selling their product.  The Court's ruling could, in the near term, cause a significant spike in suits challenging the validity of patents.  It might also cause patent holders to restructure the terms of their licensing agreements to prevent licensees from having their cake and eating it too, or at least to charge them more for a slice of that cake.

Ninth Circuit's Balco Ruling "Pumps Up" Government's Electronic Search and Seizure Power

The Ninth Circuit's recent ruling in U.S. v. Comprehensive Drug Testing, Inc., a consolidated appeal of several cases related to the Balco steroids scandal, gives government agents the authority to seize broad swaths of electronic information when searching for specific digital evidence.  According to the court, "the government may seize intermingled data for off-site review to minimize intrusiveness of a computer search," but it "may not retain or use the evidence after proper objections are raised, unless a magistrate subsequently reviews and filters the evidence off-site."  The ruling suggests that where targeted records are interspersed among records that are not of interest, companies may have to surrender databases to government investigators in toto, potentially exposing company proprietary information as well as individuals' personal information without their knowledge or consent.

Court Upholds Use of Trademarked Search Terms and Meta Tags

Another court has found that the purchase and use of a competitor's mark as a keyword advertising trigger constitutes "use in commerce" within the meaning of the Lanham Act -- although it ultimately found no infringement.  In J.G. Wentworth, S.S.C. Limited Partnership v. Settlement Funding LLC, a federal court in Pennsylvania ruled that, while the defendant's use of the plaintiff's marks as a keyword in Google's AdWords program and as meta tags in its own website constituted use of a trademark in commerce, the fact that "the links to defendant's website always appear as independent and distinct links on the search results pages" precluded a finding of likelihood of confusion.  The court's ruling on "likelihood of confusion" thus may provide search engines and purchasers of trademarked keywords with a second line of defense in trademarked search term cases.  But since federal courts have reached conflicting rulings on both of these issues, both will continue to be litigated until the circuit courts come to a consensus or the Supreme Court steps in.

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