How Does Bankruptcy Affect Patent Law and Intellectual Property?

We all have a basic understanding of these concepts: bankruptcy, patent law, and intellectual property rights. Boiled down, bankruptcy means a person or organization can no longer afford to pay their debts. Owning a patent means a person or organization owns the rights to a product or invention. Intellectual property means a person or organization owns the rights to an idea, art, or something else intangible. 

What most of us don’t realize, though, is how interconnected these concepts really are.

Big business bankruptcy is up by about 120 percent in the last eight months. Almost all of these big businesses hold a great number of assets, including intellectual property and patents. These are at least as important as physically assets like infrastructure and land. Section 365 of the US Bankruptcy Code guarantees a debtor the opportunity to perform its financial and service obligations both during and after a successful bankruptcy filings through something called an “executory contract.”

There are other options as well. A debtor might also choose to assign the executory contract to another party or reject such a contract outright. Should the debtor reject the contract, damages must be paid. Only when such a contract is assumed does the debtor need to provide proof to a bankruptcy court that obligations will continue. This is called the “adequate assurance of future performance.”

Chapter 11 bankruptcy therefore means that an organization has transformed into something else entirely, because now that organization will be “owned” by the bankruptcy court. This is important to acknowledge and understand when filing for bankruptcy when IP is held. That’s because there is often a distinction made between “owning” and “licensing” IP. If the owner of an IP licenses it to another party, and the other party becomes swallowed by debt, then the owner might not want to continue licensing to the debtor. This is why bankruptcy filings can cause contractual issues that need to be worked out first.

The court case Lubrizol Enters v. Richmond Metal Finishers, Inc. held that Richmond Metal had the right to reject a license previously made to Lubrizol — even though the license was a critical factor for Lubrizol’s continued business. 

This is one of the reasons why both parties — licensor and licensee — should understand the potential consequences should one party fall into a state of bankruptcy. Contractual obligations for this contingency should always be worked out ahead of time to prepare for potential pitfalls later. Although the aforementioned court case does provide a certain level of precedent, similar cases are almost always determined at the discretion of a judge based on the individual details relevant to that case. 

That means organizations with patents or IP should never assume they know exactly what will happen should a party be forced into bankruptcy. We can’t predict the future — unless it’s already written. That’s why the easiest way to avert disaster before it happens is to provide terms in contractual writing before those disasters are upon them.

China To Impose New Patent Law Amendment in 2021

Chinese legislators and authorities have amended the Patent Law of the People’s Republic of China in 1992, 2000, and 2008 after it was originally conceived in 1985. Now, a new amendment seeks to modernize the code of laws and is set to take effect on June 1, 2021. One country’s patent law tends to reverberate to other countries and the citizens of each, so it’s important to be aware of what these changes might portend if you have patents or intellectual property of your own.

First and foremost, statutory damages for related infractions to patent law will be increased. In addition, a person can now sue for punitive damages as well — which means that a judge can slam a person with additional (and steep) fines if this individual knowingly caused financial harm to the other party or did so through gross negligence. 

Organizations found guilty of violating Chinese patent laws have more to worry about because the China National Intellectual Property Administration can become involved with lawsuits or disputes impact national interests. Chinese intellectual properties are now protected for longer under the law. There are a few other details that won’t likely impact American individuals or companies, but a lawyer can help you sort them out if you feel you might be targeted by Chinese authorities for violating their laws, new or old.

Please take note: statutory damages and punitive damages are still made at the discretion of the courts, but statutory damages have been raised to about $750 U.S. per infraction. That can add up fast if multiple infractions are alleged by the accuser. Also, punitive damages can result in five times the amount of direct damages.

Perhaps the most important thing to keep in mind is this: the burden of proof has been lowered by the strengthening of these Chinese laws, which means an accuser won’t have to try as hard to take someone to court — or win once they get there.

When Is Sharing Files Illegal And How Many People Are Prosecuted?

Music and TV can be expensive. Before subscription services like Pandora, Spotify, Netflix, Hulu, and a dozen other popular providers, you had two options: pay up or download off the internet. Paying up meant spending at least a dollar for most songs — and for most of us the consequence of that was a very small library at very large cost. But downloading off the internet meant potentially breaking the law. Not everyone even knows what they’re doing is illegal. Believe it or not, the peer-to-peer sharing laws are relatively black and white. There’s not much space for interpretation in the law.

First and foremost, file sharing is legal in all fifty states. It’s only illegal when that shared material is under copyright law. Since most popular content is still under copyright law, obviously most of this activity is illegal. In most countries, downloading a movie, sharing copyrighted songs, or downloading copyrighted TV shows or programs would be considered illegal — so long as the person downloading or receiving doesn’t already own a legally purchased copy of the product in question.

Most people inquire whether or not the programs that allow people to share these files easily are legal. There’s nothing wrong with downloading or using programs like BitTorrent or the outdated Vuze. It’s how you use them that could land you in hot water.

Fines for an illegally downloaded, copied, or shared piece of copyrighted material can be steep. Considering most people who do this (and there are hundreds of millions of people who do this), that means getting caught and prosecuted can mean life-changing fines or civil liabilities. The worst case scenario is prison time, but this is extraordinarily rare.

For those caught and forced to pay the penalties, it can lead to bankruptcy. Even in the rare event it doesn’t completely financially ruin a person, they can expect wages to be garnished for years, possibly decades. A wage garnishment lawyer probably won’t be able to make a difference either, because the law is so black cut and dry (although it’s always worth a try).

The good news is this: prosecution for file sharing is rare. Once upon a time, companies would be more likely to prosecute or sue a person who was caught — but they’ve mostly realized two important facts: One, it won’t make a difference. Two, most people who grew up in the generation guilty of this crime are more likely to spend more on art anyway — which means it could actually hurt a company rather than help it. 

One of the last people to face prosecution was Jammie Thomas-Rasset, a Minnesota woman who faced a penalty of $1.5 million for sharing at least 1,700 music files. The action that cost her over a million dollars only concerned 24 of those songs. An appellate court eventually reduced the amount to $54,000 — which for most Americans would still be considered debilitating. 

Everything You Didn’t Know About Intellectual Property

Intellectual Property (or IP) is one of the most confusing arenas of law — and many of us violate those laws on an almost daily basis without even realizing it! This is because the simple sharing of a file online can be considered IP theft. How many times have you sent a purchased song or video to a friend or family member? How often have you received one? How often have you downloaded one? These are all examples of IP theft. Here are some other tidbits you might not know.

Here’s some bad news: even if you didn’t know you were violating IP law, you can still be prosecuted for it. This phenomenon is called “innocent” infringement and invites legal action the same as intentional infringement.

IP laws vary country by country, but IP rights are dependent on where the IP was established. For example, U.S. laws will only protect properties in the United States. If you own a specific IP and plan to sell it in more than one country, you need to know the laws in every single one! There are some politicians trying to create a worldwide standard to make it simpler to regulate and prosecute individuals accused of violating IP law.

Do you know the difference between an owner and an author? An owner is the one who legally owns and has the right to sell a specific IP. The author is the one who created it, so he or she usually owns it — but sometimes when an IP is worth millions, an author will be quick to sell it to a different owner.

Copyright protection expires 70 years after the original author passes away, even if there is a new owner. Patents are only valid for twenty years — which is why we generic versions of drugs, but only after two decades have passed. The only trademarks that live in perpetuity are those used commercially.

What Happens To IP Law If Biden Is Elected?

Many of our readers know that President Donald J. Trump has implemented a number of laws to tighten IP regulations — especially between the United States and China. The former accuses the latter of consistently stealing its intellectual property. Now, people wonder what a Biden win would look like internationally, especially since intellectual properties are becoming more and more important. That Biden win looks more likely than not because he’s dominating in the polls, so it’s a good question to ask: What happens to IP law if Biden is elected?

IP theft means that someone stole a creative idea. Sometimes, the theft occurs because of a third party’s negligence — think personal injury law, wherein someone’s negligence results in an injury to another party.

We might gather a little about what a President Biden would do from his campaign’s “Build Back Better” slogan, which ironically he’s been accused of plagiarizing from other big name campaigns, such as Boris Johnson’s when he sought to become England’s prime minister. It’s ironic because Building Back Better (BBB) was a United Nations program, but also a popular principle. What is that principle? Using a disaster — in this case Trump — to build a stronger nation or society than what was there before. He knew people on the other side of the aisle would call it plagiarism, but that was in part the point.

BBB might show us what Biden will do with IP law. We know that noncompete clauses and no-poach agreements reduce competition and weaken IP and trade protections. Biden wants to cut back on these types of deals. This will help him push IP laws that will have greater impact.

Biden has previously said he believes that file sharing is a crime. He explained, “We used to have a problem in [D.C.] saying this, but piracy is theft. Clean and simple. It’s smash and grab. It ain’t no different than smashing a window at Tiffany’s and grabbing [merchandise.]”

Although his beliefs don’t really reflect the nature of online piracy, they do shed light onto his administration’s potential thought process. The point is this: the vast majority of file-sharing websites operate outside of the United States (because we would arrest them). The Pirate Bay, for example, has operated for years — but has been consistently hunted and forced to move its servers from country to country repeatedly.

U.S. intellectual property enforcement coordinator Victoria Espinel said, “We have committed to putting you out of business. Help is on the way.”

CEO of Viacom Philippe Dauman said, “For the first time our government is bringing to bear its full powers to the critical mission of protecting intellectual property.

Biden added, “We want to make sure that these countries know we want these sites shut down. We are going to shine a light. If these sites are operating openly in a country that is not taking action….we can make it very public and shine a light on rogue actors. It’s the government’s responsibility to respond.”

It’s easy to go websites who conduct this sort of backyard business, but harder to go after the people — in part because so many millions participate in file sharing, and arresting them all wouldn’t be an easy feat. Biden certainly doesn’t believe Trump has done enough:


New Lawsuit Exposes Similarities Between Duke Caboom and Evel Knievel

One would normally presume that K&K Productions, the owners of Evel Knievel’s “likeness” wouldn’t waste time pestering a gargantuan company like Disney over Toy Story 4, but that’s exactly what’s happening — primarily because of Disney’s line of Duke Caboom toys, which K&K says are illegaling using the likeness of an Evel Knievel brand of toy released for public consumption decades ago. Evel Knievel died in 2007, so it’s not like we can ask what he might think. 

Apparently, the issue arises because of how the toys in question actually function. Both the old-school Evel Knievel toy and Duke Caboom toy that propel themselves forward on motorcycles. The Duke Caboom toy was released in partnership with LEGO, which means they could also be dragged into any future courtroom battles that develop.

This lawsuit could have catastrophic implications for Disney’s Toy Story movies and products in the future, because “Duke Caboom” is hardly the first time the movie franchise has included a character with similarities to another franchise because it could not obtain the rights. Most notably, “Combat Carl” was invented after the owners of G.I. Joe’s likeness told Disney there was no way they would hand over licensing rights. Toy Story includes Mr. Potato Head and Barbie because they successfully obtained the relevant rights.

What could happen to those other toys if this lawsuit is won? Well, we might not be seeing them in the future and Disney could be slammed with similar lawsuits in the future. 

To make matters worse for Disney, reports claim that movie producers specifically asked staff not to mention Evel Knievel when discussing Duke Caboom. This could make it much easier for a judge to side with the plaintiff if K&K can prove that the similarities are more than skin-deep. This kind of development incapacity could set Disney back when planning the next movies in the series.

But there’s no need to worry right this minute.

Copyright lawsuits are exceptionally difficult to prove in court and are subject to the opinion of the judge much more than in other branches of law. For example, Disney and Pixar were sued after they released the movie Onward due to a similarity between a van pictured in the movie and one that the studios had rented while they were developing the movie. These cases also tend to drag on in court for years and years, which ultimately makes a backdoor settlement more amenable to both parties. We might never even know what decisions are made.

Several facets of the Duke Caboom character might work to Disney’s favor should the case venture into a courtroom. In particular, Duke Caboom might share similarities to Evel Knievel, but he also shows large disparities, such as being from Canada or being literally terrified to perform the stunts that Evel Knievel seemed to perform with an air of elegance, confidence, and grace. 

Twitter Pulls Donald Trump Ad

Social media platforms like Twitter and Facebook have begun to target fake news or clips of real footage edited to tell a different story — and President Donald J. Trump seems to be the frontrunner in getting dinged for employing these edited clips or non factual data. One video recently posted by @TeamTrump using Twitter was removed for copyright-infringement purposes. The video in question took aim at the protests following the police killing of African American George Floyd.

The Tweet was subsequently replaced with a standard message: “This media has been disabled in response to a report by the copyright owner.”

According to Twitter representatives, a DMCA complaint was filed. It included a takedown request which Twitter decided to uphold. The issue stemmed from an image used in the video, but representatives decided to keep quiet on which image. The video can still be viewed on YouTube, and is called “Healing, Not Hatred.” Both Facebook and Instagram removed the video after receiving the same DMCA takedown request.

In response to the takedown, @realDonaldTrump tweeted: “Twitter Pulls Trump Campaign Video of President Showing Empathy for Peaceful Protesters … They are fighting hard for the Radical Left Democrats. A one sided battle. Illegal. Section 230.”

Of course, that’s not the truth. 

Trump officials were also forced to delete a recently posted YouTube video showcasing NASA-trained astronauts aboard the SpaceX flight last month because of advertising rule violations. The video had been titled “Make Space Great Again.” Subsequent complaints were almost immediately followed by retired astronaut Karen Nyberg, who is married to one of the astronauts aboard the SpaceX flight.

Nyberg said that the video was “political propaganda [used] without my knowledge or consent.”

There was also a petition filed to argue that the video that had been posted only served to exploit the mission’s members for “political showmanship.”

In reaction to Twitter’s notifications and takedown actions, Trump almost immediately issued an executive order that would combat legal protections for speech conveyed using the platform. Ironic, since Trump often calls out the mainstream media for spreading “fake news.” The executive order essentially changes “fake news” into protected free speech! Unsurprisingly, at least one law firm filed a lawsuit to fight the executive order — on the basis that it violates the First Amendment. We imagine that courtroom brawl will be fun to watch: “These notifications target my right to free speech!” “No, the fake videos target my right to free speech!”

Twitter has also started to apply warning labels to Tweets that violate its policies. Twitter flagged one such post of Trump’s on May 29. The Tweet referring to the recent spate of protests read: “Any difficulty and we will assume control but, when the looting starts, the shooting starts. Thank you!”


Are Copyright Lawsuits Inevitable If You’re Rich? The Twitch Dilemma

You know that old saying: you’re nobody until people are lining up to sue you. There are a couple of reasons that lawsuits become so common in direct proportion to the number of dollars in your bank account. One big one is that the biggest targets are sometimes the easiest. A lesser reason is because every tiny mistake a rich person makes is immediately taken advantage of by someone with something to gain.

That’s why copyright lawsuits are inevitable if you’re rich.

They are perfect tools for those who wish to gain an advantage over you or a company you own, in part because copyright lawsuits aren’t always objective when proved. These cases involve a lot of scrutiny over what constitutes a “fact” versus pure opinion. Fairness doesn’t always count for much.

“Rich” Twitch streamers have been hit with a barrage of takedown requests in the last few days from the Recording Industry Association of America (or RIAA) due to clips of old broadcasts, some of which are from years ago. Because Twitch makes it difficult to sift through and delete this type of content, it’s a giant headache for streamers. But that might be the point.

In this case, Twitch users can become permanently banned from broadcasting when hit with three cease-and-desist/takedown notices for infringing on copyright. Bide your time to hit a broadcaster with multiple infractions at once, and you can very easily ruin someone’s stay-at-home “business.” Again, it’s not always about being fair. These types of cease-and-desist notices can aggressively attack copyright infractions.

Twitch has hardly been helpful in supporting the people who make it work in this regard, because the platform has no choice but to comply, regardless of whether or not you can easily find and delete those videos. In this case, some of those takedown requests might better be handled in court rather than online.

Supreme Court Rulings Over Copyright

Not every courtroom case will make it to the Supreme Court — and, in fact, whether or not to hear a case at all is something determined by the justices who sit there, all of whom serve for life. That means they are extremely picky over which cases they rule upon. The arguments for or against a particular case must be seemingly flawless, even though only one side can win. That’s one reason why these cases almost always result in split decisions.

Supreme court cases become even trickier when they wade into the swamp that is copyright infringement law. There was a recent ruling regarding 19th century doctrine in order to determine copyright boundaries when an “annotated” state code is potentially infringed upon. 

A legal scuffle arose when the state of Georgia contracted a LexisNexis subsidiary (Matthew Bender & Co.) to help publish and distribute its own state codes. The contract outlined that LexisNexis itself was responsible for costs related to those tasks. But if that weren’t complicated enough, LexisNexis was provided with a license to sell that code on its own — even though that state of Georgia itself has copyright protections for the code, the sales of which are divided between the state and LexisNexis.

The problem lies not in the sales of the state codes, but in their free dissemination at libraries, schools, and colleges. Public.Resource.Org purchased the documents to post online. Georgia asked that they be removed from the website, but Public Resource said no. The first stage of the lawsuit began when the state of Georgia sued Public Resource for copyright infringement.

From there, rulings were made and reversed in almost cyclical fashion.

A federal judge said the annotations were indeed copyrighted. The 11th Circuit Court of Appeals said they were not (although it’s worth mentioning that the 11th Circuit relied on an old 19th century doctrine to make the case).

The Supreme Court took on the case and ruled 5-4 that people and organizations, including state and federal governments themselves, do not “own” the law, regardless of which government entities wrote the codes in the first place.

Chief Justice John Roberts wrote, “Under the government edicts doctrine, judges — and we now confirm, legislators — may not be considered the ‘authors’ of the works they produce in the course of their official duties as judges and legislators. That rule applies regardless of whether a given material carries the force of law. And it applies to the annotations here because they are authored by an arm of the legislature in the course of its official duties.”


Rock Band Led Zeppelin Finally Wins 2014 Copyright Infringement Case

Who said being famous was easy? Artists have always had to protect their work no matter the size of their following. But fame certainly carries a particular weight to it when it comes to the sheer number of thefts and lawsuits. Rock band Led Zeppelin has been on both ends of copyright cases, having fought against dozens of claims that their songs were ripped off all while making dozens of claims that their own songs had been ripped off by someone else.

A 2014 lawsuit alleged that Zeppelin’s popular song “Stairway to Heaven” too closely resembled another song called “Taurus,” which was performed by the rock band Spirit. 

Like most copyright infringement cases, it was long and arduous for both sides. Journalist Michael Skidmore, who was a co-trustee to the Randy Craige Wolfe Trust, filed the lawsuit on the trust’s behalf. The trust was named after Randy California, who was a member of Spirit. He died in 1997, which means he couldn’t exactly build the case himself. 

Skidmore’s case fell apart (the first time) in 2016 when a jury decided that “Stairway to Heaven” violated no copyright protections. But after an impartial panel decided that Judge Gary Klausner had failed to give the jury for that trial accurate instruction before they came to a verdict, the case was allowed a second trial in 2018. Oh well. Naturally, Zeppelin appealed the panel’s decisions, requesting that a super-sized panel hear the case instead. 

It worked.

The appeal was finally heard in 2019 by the super-sized 11-judge panel. They came to a 73-page decision. Judge Margaret McKeown wrote, “The trial and appeal process has been a long climb up the Stairway to Heaven.”

Skidmore’s attorney Francis Malofiy, who operates from a cloak and dagger law firm called Francis Alexander LLC, tried to play recordings from both songs for the jury during the first trial, but his request was denied by Judge Gary Klausner based on old copyright laws. “Taurus” was recorded when the Copyright Act of 1909 was still in effect, which only protected sheet music. The sound of the music didn’t become protected intellectual property (IP) until 1972.

In other words, the songs might actually sound alike — but that didn’t matter.

The 9th Circuit Court of Appeals described overturning the original court’s decision: “Although we are cautious in overruling precedent — as we should be — the constellation of problems and inconsistencies in the application of the inverse ratio rule prompts us to abrogate the rule.”

The inverse ratio rule was only applicable because of the accused party’s access to the other party’s music. It lowers the standard of proof required by the jury, but Judge Klausner forgot to mention these facts to the jury.

The 9th Circuit Court overturned the inverse ratio rule, handing Zeppelin the final victory: “By rejecting inverse ratio rule, we are not suggesting that access cannot serve as circumstantial evidence of actual copying in all cases,” the court said. “Access, however, in no way can prove substantial similarity.”

Compare the songs for yourself: