Recap of the 45th Annual Ip Institute

Mary Stone Ross, who helped co-author the California Consumer Privacy Act of 2018 (“CCPA”), and Loeb & Loeb LLP Partner Tanya Forsheit participated in the panel discussion Wading Through State Privacy Compliance: From CPRA and Beyond. Cooley LLP Partner Travis LeBlanc moderated the discussion.

Below is a list of topics discussed and the corresponding commentary from the panel.

On the Process of Drafting and Passing the CCPA and the Considerations That Went Into Crafting It

It is important to remember that the CCPA was an initiative because an initiative process is a political process rather than a legislative one. This informed what was and was not included in the CCPA, e.g., exempting non-businesses from compliance with the CCPA. It did take more than one week to draft and pass the CCPA.

Initially, business groups showed no interest in talking about it. However, when the Cambridge Analytica scandal broke out things changed dramatically. The first company that engaged in discussions was Apple, which is why there were two different versions of the initiative.

When drafting the CCPA, the creators faced the same questions as discussed on the national stage and in other states: what a good privacy law should look like, enforcement, private right of action, etc.

On How the Virginia and Colorado Privacy Laws Differ From the CCPA

Both the Virginia Consumer Data Protection Act (“VCDPA”) and the Colorado Privacy Act (“CPA”) have passed and have been signed into law by the respective governors. They both go into effect on January 1, 2023.  

Like the CCPA, the VCDPA and the CPA are based on notice and choice framework. All three privacy laws are opt-out. They provide the state residents the right to access, the right to delete, the right to correct, and the right to opt out of the sale of personal information.

Unlike the CCPA, where the private right of action is limited to data breaches, there is no private right of action in either the VCDPA or the CPA.

These privacy laws differ a lot in the definitions. The VCDPA’s definitions are much narrower; this is one of the reasons why it is considered a weaker law. The laws also differ with respect to enforcement. Both the VCDPA and the CPA allow enforcement by the attorney general. In addition, the CPA provides for enforcement by district attorneys. Although the initiative version of the CCPA allowed district attorneys, city attorneys and city prosecutors to enforce it, the legislature struck that down.

On the Likelihood of Congress Passing the Uniform Federal Privacy Law

This is unlikely, at least not until there is a state privacy law that would create a tipping point to pressure Congress to legislate. The biggest companies seem to be satisfied with the patchwork: their legal teams are big enough to afford to comply with multiple privacy laws on state level. There may be more movement in more narrowly focused topics, like Section 230 reform, children’s privacy and expanding COPPA, and antitrust.

On the Way the Companies Have Been Approaching Compliance While Managing the Patchwork of State Privacy Laws

One of the challenges is to determine if someone is a California, Virginia, or Colorado resident when consumers’ activities are concentrated online. It is possible for this concern to be eliminated in 2023, because at that time all three privacy laws will require that consumers are able to opt out of targeted advertising.

Another challenge is implementation: each law has different ways in which it needs to be implemented. Although harmonizing compliance efforts can prove difficult, it can be done if the focus shifts to ensuring that consumers can exercise their basic privacy rights.

The growth of regulatory activity related to consumer privacy at the local level is mostly due to the use of consumers’ sensitive data, such as face prints, voice prints, precise geolocation data, etc.

On the Role of the Federal Trade Commission (“FTC”) on the Privacy Front Given Its Rulemaking Power and the Associated Penalty Authority

The consensus among the privacy community is that with incoming new leadership the FTC will continue to grow more and more aggressive with enforcement actions. The FTC may receive $500 million—earmarked to be spent between 2022 and 2029—to create and operate a brand-new privacy bureau to accomplish its work related to unfair or deceptive acts or practices with respect to privacy. Historically, the FTC has not had first-time penalty authority. The infrastructure bill changes would now give the FTC new authority to seek penalties for first-time violations. Additionally, we are likely to see the FTC to start engaging in the rulemaking related to privacy.

Amy Cotton, who is Deputy Commissioner for Trademark Examination Policy for the United States Patent and Trademark Office (“USPTO”), joined the 45^th Annual IP Institute on November 9, 2021, to provide a detailed overview of the Trademark Modernization Act of 2020 (“TMA”).

Ms. Cotton touched upon three main topics in her presentation:

1. The underlying rationale for the TMA’s enactment.
2. The USPTO’s rulemaking process following the passage of the TMA.
3. An overview of the TMA’s provisions amending the Trademark Act of 1946.  

UNDERLYING RATIONALE

Ms. Cotton began her presentation highlighting the main concerns that started to emerge around 2009, and subsequent USPTO’s initiatives to address those concerns.

In 2009, the U.S. Court of Appeals for the Federal Circuit decided In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009). This decision made it more difficult to prove that a false statement of use should be considered fraudulent. It was feared at the time that the impact of the case would result in a significant increase in the false claims of use. The USPTO began to think about how to change the trademark system to improve the quality of the submissions and the resulting integrity of the trademark register, and to disincentivize inaccurate statements.

Ultimately, when the USPTO was facing a surge of suspicious filings in 2019, Congress stepped in to help. The USPTO outlined several suggestions to Congress. The suggestions encompassed the following areas:

• codifying the letter-of-protest procedure;
• receiving authority to shorten the six-month standard response period; and
• instituting nonuse cancellation proceedings that would be faster and cheaper than the proceedings at the Trademark Trial and Appeal Board (“TTAB”).

These suggestions stemmed from the two main goals:

1. to clear away unused registered trademarks from the federal trademark register; and
2. to move applications, particularly suspicious ones, through the system quicker to facilitate trademark clearance.

On December 27, 2020, Congress passed the TMA and gave the USPTO until December 27, 2021, to implement most of the proceedings dictated by the statute. 

Rulemaking Process

Because of the timing, the USPTO had to shortcut the rulemaking process .Instead of the customary request for comments, the USPTO conducted public roundtables in March 2021 to gather feedback from the stakeholders. The USPTO then used all the information it collected during this process to develop the Notice of Proposed Rulemaking, which issued in May 2021, and ultimately to draft the Final Rule, which, at the time of the presentation, was in the final stages of the interagency clearance.

The USPTO must issue the Final Rule 30 days before implementing the corresponding provisions. Ms. Cotton directed the public to consult the Final Rule as it will contain a detailed list of the provisions and the corresponding implementation dates.

TMA’s Provisions

Third-Party Submission of Evidence During Examination

The TMA codified the existing letter-of-protest procedure contained in the Trademark Manual of Examining Procedure (“TMEP”). The main purpose of this procedure is to allow third parties to provide evidence to the USPTO for consideration and entry into the record that bears on the

registrability of a mark. If the USPTO determines that the evidence is relevant, the evidence will be forwarded to the examining attorney to decide further action.

Although this codification did not result in any changes to the practice, it provided the USPTO with a leeway to charge a fee and to impose a two-month time limit for sending the relevant evidence to the examining attorney.

The USPTO completed the rulemaking pertaining to the letters of protest in January 2021, and it has already started enforcement of these rules. The Final Rule clarifies that letter-of-protest determinations are final and non-reviewable.

Flexible Response Periods

The USPTO never had any authority to change the six-month response period for office actions and examinations and in the post-registration phase. The USPTO asked for authority to shorten that period, and Congress allowed it. However, Congress stipulated that the period cannot be less than 2 months, and the USPTO must always allow for an extension of up to 6 months.

The USPTO offered 3 options in the Notice of Proposed Rulemaking and proposed a delayed implementation date of June 2022. Ms. Cotton recommended to consult the Final Rule to see which option prevailed.

The flexible response period will apply in the examination phase and the post-registration phase. It will not apply, however, to Section 66(a) of the U.S. Trademark Act (i.e., Madrid applications). The USPTO may change this in the future if the International Bureau were to transition from its current paper-based system to an all-electronic one.

New Grounds for Cancellation: Expungement and Reexamination

The USPTO has been discussing nonuse cancellation proceedings internally for many years.

Prior to the TMA, the only recourse for removing the registered marks that were not in use was to go to the TTAB. The USPTO wanted to provide an option that did not require that. In developing the solution, the USPTO drew from the model underlying Section 45 cancellation procedure with Canada.

In consultations with Congress and stakeholders, the USPTO developed two new ex parte proceedings: one for expungement and one for reexamination.

The expungement proceeding applies to Section 1, Section 44, and Section 66 registrations that have never been used on some or all the goods and/or services identified in the registration. It is an entirely new statutory basis for cancellation, which only looks at whether the mark was used on the challenged goods and services prior to the date of filing the expungement petition. Unlike abandonment, establishing the registrant’s intent not to resume use is not required during the expungement proceeding. The TMA allows any registration to be subject to an expungement, regardless how old it is, during the two years following the implementation.

The reexamination proceeding applies to Section 1 registrations that were not in use as of the relevant date. The “relevant date” has different meanings under Section 1(a) and Section 1(b).

Ms. Cotton spoke at length about the time periods during which a petitioner can request institution of expungement and reexamination proceeding, the petition requirements, establishing a prima facie case of nonuse, and the procedure.

The USPTO is preparing an examination guide that will be available before the implementation date. This document will lay out the procedures and processes to follow when filing a petition to request institution of a proceeding for reexamination and expungement. As the USPTO acquires more experience in expungement and reexamination proceedings, it will update and supplement the examination guide accordingly. In the meantime, Ms. Cotton urged the public to consult the TTAB proceedings on nonuse for guidance.

Additional resources

• Trademark Modernization Act of 2020 https://www.congress.gov/116/cprt/HPRT42770/CPRT-116HPRT42770.pdf#page=2606

• Notice of Proposed Rulemaking https://www.regulations.gov/document/PTO-T-2021-0008-0001

• Final Rule https://www.govinfo.gov/content/pkg/FR-2021-11-17/pdf/2021-24926.pdf

• Letter of Protest Practice Tip https://www.uspto.gov/trademarks/trademark-updates-and-announcements/letter-protest-practice-tip

• December 2, 2021 webinar Preparing an Effective Letter of Protest: registration https://www.uspto.gov/about-us/events/preparing-effective-letter-protest; the videorecording of the webinar can be accessed at https://www.uspto.gov/about-us/events/trademarks-webinar-series

Stephen Kong, partner at Winston & Strawn, moderated the discussion with speakers Dora Gruner, attorney at NantKwest, and Joe Yang, partner at PatentEsque Law Group. The panel provided an open discussion and overview of best practices for general and academic agreements and the treatment of IP rights in these.

IP transactions occur throughout the product lifecycle: research and development, commercialization, and mergers and acquisitions (M&A). The panel focused first on the academic-industry relationship.

To source new products or technologies, industry partners review developments by scientists within universities or private entities to check interest. Industry partners may reach out to universities to bring these technologies in-house or to form a new entity for further development where a founder will be brought in to consult.

Industry partners may also seek business deals with universities through sponsored research agreements. For these, typically the university will own the deliverables and intellectual property rights (if any) embodied therein, with a license to the industry partner. Data “ownership” is a hot topic. To perform some of the sponsored research, the university may need to incorporate some of its background technology into the deliverables, and an appropriate background IP rights license will need to be scoped and negotiated with the university. Mergers and acquisitions are robust within big pharma to supplement in-house research and development. A larger business will acquire a smaller entity and create new developments with the acquired technology.

Research is conducted in-house, within the university (as noted above), or within another specialized company. At this stage, different technologies may be tested and integrated.

Federally funded projects were discussed briefly. In these, the U.S. government, at the very least, will have a broad non-exclusive license to any inventions resulting from these projects, adding further complexity to the analysis.

Joint ownership was presented and discussed at length, primarily by Attorney Yang. Joint ownership can lead to waste. In the case of jointly owned patents, as an example, joint ownership allows both parties to freely use and otherwise exploit the jointly owned patent rights without the other’s consent, but it also requires the other parties’ consent to enforce the patent rights. Either joint owner can license the other owner’s competitors, leaving each party at the mercy of the other. Instead of joint ownership, parties can assign all IP rights to one party, with a license to the other party,  allocate rights on an item- by-item basis based on expertise or core technology, or create a separate entity and assign the rights to it.

When establishing a deal with a university, the typical financial structure manifests through royalties, upfront fees, annual fees, minimum royalties, equity interest, and milestone payments. Many universities post their model agreements online, and they are easily accessible. Annual fees usually increase over time. After first commercial sale, royalties become payable. The milestone payment can be tied to a diligence obligation or another milestone.

Attorney Yang presented the topic of IP rights and how they give you control. IP rights include trademarks, patents, trade secrets, and copyrights, and it is important to make the distinction between the technology and the rights embodied in that technology. He goes further and provides the example of licensing older software. A company may want to license older software, but the company will not want the licensee to become its competitor by independently creating its own software or making improvements on the software. The licensor can avoid this result by not conflating IP rights with technology and, more specifically, by providing a limited license to the licensee under the licensor’s copyrights embodied in the software to exercise specific permitted statutory rights with respect to the licensed software. This would, among other things, avoid an implied patent license. Conversely, if the licensed technology is defined as the software plus the patents covering that technology, without more, the practice of the licensed patents need not be limited to the licensed software. An additional flaw may arise through this definition error by providing a false assertion that the license and improvements made on the software do not infringe on third-party IP rights.

Work for hire is a topic that is only covered in U.S. copyright law. It has a very limited scope. Ownership of the copyrights arising from the work belongs to the employer (and not the employee). For other situations, the commissioned work must fall within nine narrow categories identified in the statute. It is important to create an assignment or get a license rather than relying on the work for hire doctrine. Also, as noted above, work for hire covers only copyrights; it does not address patent rights and other IP rights.

Finally, another common mistake under nonexclusive licensing is proper form. A proper form of an IP license grant uses specific language; otherwise, the license may not offer any rights to license or technology. The language needed include grant under licensed IP right to perform licensed acts with respect to licensed technology in a field of use. It is important to recognize the appropriate grant verbs from the applicable statute.

Ha Kung Wong, partner at Venable, brought high energy and humor to this panel as the moderator with speakers Christopher Morten, Columbia Law professor, and Jordan Jacobson, Assistant General Counsel at the Bill & Melinda Gates Foundation.

This panel began with a discussion on U.S. incentives for innovation and a discussion on patent rights and regulations. The first to file a patent has exclusive rights and knowing when a patent application can be initiated is an important step in the process. The USPTO allows time extensions on the 20 year exclusive rights due to delays seeking regulatory approval with the FDA through Patent Term Extensions (PTE). The average effective patent term is about 11 years with a PTE.

There is little government involvement in drug pricing. Drug companies negotiate prices and rebates with private insurance companies, and the U.S. government is not allowed to negotiate drug prices for Medicare.

There are two types of health insurance in the U.S.; public and private. Public health insurance is offered through Medicare and Medicaid. Medicare Part A pertains to hospital insurance while Part B is medical insurance. Medicare Part D covers prescriptions, which is funded by private insurers that receive subsidies from the government. Premiums in Part A are scaled by income. Private insurance is purchased individually or employer provided and is offered as Health Management Organizations (HMOs), where healthcare must be provided in network, or Preferred Provider Organizations (PPOs), a system in which in-network healthcare providers receive more coverage than out-of-network.

Manufacturers provide evidence dossiers that summarize key clinical economic evidence for a product. Healthcare decision makers review these documents and make decisions on what they want to reimburse, how much they want to reimburse, and where it should be placed on a formulary. For Medicare Part D, the Center for Medicaid and Medicare Services also uses these dossiers to determine the drug acquisition costs and potential budget impact to determine whether a drug should be placed on a formulary. Hospitals also choose which drugs to use for out-patient procedures from a formulary.

The drug manufacturer sets a wholesale acquisition cost (WAC). This price considers the cost of research and development, marketing costs, whether there is a pipeline of products, and market competition. A wholesaler will negotiate for rebates and discounts with the manufacturer for the average manufacturer price (AMP). The pharmacy purchases the drug from the wholesaler at the WAC price, and the wholesaler profits the difference between the WAC price and the AMP. Pharmacy Benefit Managers (PBM) also perform financial and clinical services for manufacturers and can negotiate better discounts because it negotiates in bulk for many drugs and on behalf of many health plans for pharmacies.

Pharmaceutical needs are not met through this concept, and Professor Morten recommends changing trade secret laws in order to better share information that can positively impact others. Current laws and policy fail to induce manufacturers to generate and disseminate high quality evidence that is needed to determine whether drugs and device technology are worth the price and whether the cost provides the therapeutic benefits needed for patients.

Attorney Jacobson discusses whether government appointed drug manufacturing through the Biomedical Advanced Research and Development Authority (BARDA) is a better incentive than our current system. BARDA provides financial information for a risk/reward profile in advance, and BARDA was used to implement the vaccine during the pandemic. A point of concern for BARDA is that manufacturing a drug does not create demand and creates a risk for market failure. Based on its funding and operational profile, The Gates Foundation can take risks that a manufacturer cannot such as researching neglected diseases and new technology while balancing affordability and availability. However, there also needs to be a sustainability break even point.

The pandemic presented the unique opportunity to view adaptable medicine. The emergence of mRNA vaccines significantly reduced the amount of time needed to bring a vaccine to market. The emergency use regulation helped streamline an efficient distribution model.

In 1995, the TRIPS Agreement established minimum standards of protection of intellectual property and contains language for compulsory licensing or governmental use of patents without authorization of the patent owner in situation of “national emergency or other circumstances of extreme emergency. In 2005, TRIPS Agreement identified public health concerns affecting developing and least-developed countries, and it incorporated the right to grant compulsory licenses to exclusively export medicine to countries that cannot produce the medicines themselves due to lack of technological capacity. In 2020, there was a request for a TRIPS waiver that would remove the requirement that the licensee try to first negotiate a license on reasonable commercial terms before a compulsory license would be granted.

Both panelists are optimistic that the waiver will be implemented. There is interest from other members in passing the waiver, and there may also be a compromise by limiting the waiver to vaccines and patents and not trade secrets.

Terri Seligman, Gabe Martinez, Tom Jirgal, and Jilana Miller gave an enlightening presentation discussing the more cost-effective forum to resolve competitive advertising disputes, the National Advertising Division (NAD) – the best kept secret in the world of advertising.

The NAD, created in 1971, independently monitors the truth and accuracy of national advertising. While the NAD’s jurisdiction is limited to national advertising, national advertising is defined broadly to include advertising that is distributed to a “substantial portion of the US.” The NAD includes any paid commercial message, in any medium, which includes labels, so long as it has the purpose of inducing a sale or other commercial transaction or persuading the audience of the value or usefulness of a company, product, or service.

The NAD has its own written rules of procedure. All proceedings and submissions to the NAD are confidential until the NAD publishes its decisions and issues a press release. Likewise, the rules of discovery and counterclaims differ, as the challenger can submit what they have in their possession but cannot obtain discovery from the opposing party. Also, the NAD places the burden of proof on the advertiser in order to substantiate his or her claim.

After a decision recommending that advertising be “modified or discontinued” is published, the NAD or the National Advertising Review Board (NARB), either on its own or at the request of a challenger or a third party, may request that the advertiser report back on the status of the advertising at issue and explain the steps it has taken to bring the advertising into compliance with the decision. After the NAD or NARB reviews the advertiser’s response, they can determine whether the advertiser has sufficiently complied with the request.

The NAD will not review advertising claims which are otherwise in its jurisdiction if they are permanently withdrawn from use prior to the date of the complaint and the advertiser commits in writing to not use the claim again. Likewise, the NAD refrains from reviewing legally mandated language in an ad or on product packaging or labels, political and issue advertising, and questions of taste and morality.

While the NAD provides a beneficial forum to handle disputes among competing companies, several options are still available to challenge a competitor’s advertising such as direct contact via a demand letter, direct contact with the media and networks, initiating litigation under the Lanham Act, filing a complaint with the Federal Trade Commission, filing a complaint with a state attorney general, or initiating a counter-campaign or public relations effort. However, the NAD resolves advertising disputes efficiently, requires no document discovery or depositions, no counterclaims, and is less costly than litigation which places the NAD as a great option to the alternatives.

Pam Mallari, Kara Bombach, Rob Maier, and Scott Bornstein gave an insightful presentation on geopolitical issues and their impact on intellectual property matters. Specifically, the discussion focused on the United States-China relationship from an intellectual property perspective.

Intellectual property and trade disputes with China have evolved. In 2012, China’s intellectual property system was ranked at the very bottom among nations; however, China has gradually strengthened and improved its intellectual property regime. Consequently, China improved its IP score by 18.34%, faster than any other country.

The China-United States trade war has been an ongoing conflict. Trade sanctions and sanctions and additional export controls have been imposed.  The U.S. set trade barriers on China in order to reduce intellectual property theft, such as cyber espionage, and to curb the unlawful acquisition of U.S. classified information and trade secrets. The United States Department of Justice’s China Initiative reflects the strategic priority of countering Chinese national security threats and reinforcing the United States strategy to counter nation-state threats to the United States such as trade secret theft, hacking, and economic espionage. The Department of Justice’s ultimate goal is to identify and prioritize trade secret theft cases, develop an enforcement strategy, and address supply chain threats.

In response to the U.S. trade measures, China has taken retaliatory action. For example, in December 2020, China introduced additional export controls. In addition, China has targeted Western clothing retailers, such as H&M and Nike. Xinjiang, China is one of the main producers of cotton; however, after a growing number of claims of forced labor camps in Xinjiang began to surface in 2019, China all but erased these products from the digital world.  In January 2021, cotton shirts began getting blocked, and some stores have vanished form digital maps in China.  Another market concern, but from the perspective of the U.S., has been the TikTok social media platform with issues such as influencer marketing, personal data, brand safety and reputation, and FTC disclosures.

The United States Innovation Competition Act of 2021, formerly known as the Endless Frontier Act, intends to strengthen the forces that have propelled decades of U.S. innovation, rather than trying to beat China at its own game. The Innovation and Competition Act empowers and funds the National Science Foundation (NSF) to award grants for certain technologies by authorizing $110 billion for basic and advanced technology research over a five-year period. There is widely-shared confidence that the United States can, and will, out-innovate China in the long run and the United States has taken important measures to preserve the integrity and ingenuity of the U.S. model of innovation.