Monthly Archives: February 2012

EULA-Look before You Leap!

Ever wondered what is the never ending excruciating agreement that pops up just before you are all set to make an e-mail account, install an application or download software? Apparently, all of us click the “I agree” option without paying much heed to what the agreement says. But, this seemingly impenetrable legal jargon is much more than just a worthless set of pages. End User Licensing Agreement or EULA as it is called is a legal contract between you and the software publisher that spells out the terms and conditions for using the software. It defines the relationship between the provider of software and the end user. Usually, the EULA delineates the amount of computers a user can use the software on,restricts the way a user can use software, such as prohibiting the redistribution of the software or reverse-engineering it andany legal rights that are given up by agreeing to the EULA. Accepting the terms of EULA might even expose a userto third-party monitoring, i.e. allowing other users to access parts of your computer.While the original purpose of EULA was to protect software developers and distributors from having their products unlawfully distributed, that goal has now unfortunately, fizzled out.

Research shows that the average time spent on the EULA by people is 6-8 seconds. Obviously, people don’t understand its implications and just blindly scroll down to save themselves from monotony. You might agree to the EULA’s terms by:

  • clicking an “I accept” button during the installation process
  • opening the shrink wrap software packaging
  • breaking the seal on the software CD
  • mailing a registration card to the software publisher
  • installing the application
  • using the application

You can refuse to accept the terms and conditions of the EULA, but then you can’t legally use the software! Many big names like Facebook, Microsoft, Adobe, Apple to name a few, have some preposterous terms and conditions. Facebook for instance, amended its Terms of Service in 2009 to claim broad rights to users’ content, such as photos and videos. Adobe tried to do the same with Photoshop Express in 2008. An extract from Facebook’s EULA reads, “You grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook.” Another one from AT& T reads, “You agree that, by entering into this Agreement, you and AT&T are each waiving the right to a trial by jury or to participate in a class action.”

In general the following points should be noted about EULA:

  • ELUA is legally binding.
  • EULA restricts how you can use the software.
  • EULA may force you to agree to certain conditions when using the software.
  • EULA can limit your ability to sue for damages.
  • ELUA might impose terms and conditions that affect your online security and privacy.
  • The software you purchase or download might be bundled with third-party software, i.e. EULA covering primary software might ask you install third-partysoftware bundled with it.

EULA is always drafted in a manner to afford maximum protection to the interests of the Licensor (or Software Developer). The following points are clearly set out in the agreement:

  • Product Specifications
  • Type of License – In case of multiple versions, specific version-wise licenses must be given
  • Duration of License – the exact time of commencement and termination
  • Grounds of termination – on what grounds can the Licensor terminate the license
  • Specifications of the Limited Warranty to be provided by the Licensor
  • Legal Jurisdiction

A sample EULA can be viewed here.Following are the most important four parts of an EULA:

  • Licensing: The usersare only being “licensed” to use the software and do not have any intellectual rights over the software installed.
  • Warranties: Contains a Disclaimer of Warranty.
  • Laws: What laws control or apply to the license agreement that the user agree to.
  • Liability: Limitation of Liability section that states the extent to which the licensor can be held financially responsible for any mishaps that might incur as a result of the use of the software.

In M.A. Mortenson Co. v. Timberline Software Corp. the plaintiff was a construction company, who used software from Timberline to prepare a bid only to discoverlater that the software led them to underbid by more than a million dollars.It was held that in case EULA seeks to reduce the liability of a company, even to the extent of the software itself being faulty, the company would not be responsible. The court affirmed an order of summary judgment, clearing Timberline of any damages.

Another important aspect to be understood is that download of software gives the user only a “license”to use that software and does not confer ownership, i.e., a software is never sold but the user merelypurchases the license to use it according to the terms and conditions attached with it. The software publisher retains all rights, including copyrights, to the software and accompanying media. The EULA document outlines the terms of the software license, enunciating all rights and restrictions relating to the ownership, use, distribution, and warranty of the software product. In Timothy S. Vernor v. Autodesk, Inc. Vernor was not allowed to sell some old copies of AutoCAD on eBay brought from an architect’s office. The US Court of Appeals for the Ninth Circuit held that the US “first sale” protections didn’t apply to Vernor, because he had not bought the software from a legitimate “owner”,since the architecture firm had only “licensed” the software, and that license could allow a software company to prevent resale, lending, etc. of the software.

Your way out:

  • Read EULA before you install the software.
  • Consider the software publisher.
  • Beware of firewall prompts when installing software.
  • Beware of “free” software, especially peer-to-peer (P2P) file sharing software.
  • Scrutinize and evaluate any EULA that requires you to allow monitoring of your online activity.

Conclusion:

Awareness and only awareness is the right way to be protected from this trap and the ambush that lies within. Even though the law surrounding EULA continues to evolve, the need of the hour is that the users of software contemplate what impact EULA might have on the security of their computer and personal information and make an informed decision. However irksome it might seem but skimming through the provisions of EULA might not after all be such a bad idea!

About the Author: Mr. Anirudh Sarin, Trade Mark Intern at Khurana & Khurana and can be reached at: Anirudh@khuranaandkhurana.com

Opposition against Monsanto’s European Patent on a virus resistant Melon Plant variety

Dr. Vandana Shiva, an Indian Environmental Activist has lent her support to “No Patent on Seeds”, a European coalition, in opposing the European Patent EP1962578 granted to Monsanto in May 2011. The Patent claims a melon variety having resistance to Curcurbit Yellow Stunting Disorder Virus (CYSDV) with virus resistance traits taken from melon varieties found in India.

The opponents seek complete revocation of the Patent and contend that the Monsanto invention uses conventional breeding methods of crossing and selection to create the new resistant varieties and further contend that this is “bio-piracy” and not invention. The Indian variety has long been registered in international seed banks (PI 313970). The Patent, if granted, could block access to breeding material which inherits genetic conditions that confer resistance.

Article 53(b) of the European Patent Convention (EPC) excludes patents on plant varieties and on essentially biological processes for the breeding of plants. The opponents allege that claim 1 falls under the exemption of Art 53(b) which excludes patents on breeding that are based on crossing and selection.

The opponents also cites the precedent set by EPO on interpretation of the Article 53(b): the two 2010 decisions G2/07 and G1/08 on Broccoli and Tomato varieties respectively, wherein it was decided that the biological processes for “breeding plants are only patentable under the EPC if they comprise steps which materially alter the breeding procedure such that the resulting plants are not obtained by simple recombination of the parent genomes”, in other words it was decided that the conventional breeding could not be patented.

The opponents further argue that the invention is not patentable under under Art 53(a) of the EPC, as being contrary to morality and public order. Dr. Vandana Shiva from Navdanya accuses the patent to violate the Biological Diversity Act and the Plant Variety Protection and Farmers Rights Act. Navdanya is a network of 500,000 seed keepers and organic farmers in India.

The Biological Diversity Act, 2002 was enacted pursuant to Convention on Biological Diversity (CBD) to which India is a signatory.

According to  Section 6 of the Biological Diversity Act, 2002 it is mandatory to seek permission from the National Biodiversity Authority (NBA) for applying for a patent in or out of India over an invention based on biological resources obtained from India. The Section 6(1) says,

6.(1) No person shall apply for any intellectual property right, by whatever name called, in or outside India for any invention based on any research or information on a biological resource obtained from India without obtaining the previous approval of the National Biodiversity Authority before making such application.
Provided that if a person applies for a patent, permission of the National Biodiversity Authority may be obtained after the acceptance of the patent but before the sealing of the patent by the patent authority concerned

Monsanto clearly did not seek approval from the NBA in using Indian melon varieties in developing the alleged new melon variety, and thus could be proven to be a case of bio-piracy under this Act. The opponents further stresses that the duty to implement such measures is already part of the CBD itself (Art. 15.7). Therefore they allege the patent to be against the public order.

The opponents further seek patent revocation on grounds of lack of inventiveness under Article 56 of the EPC and lack of sufficient disclosure and clarity under Article 83. They allege the patent does not describe successfully how to breed a new melon which is resistant to CYSDV.

The “No Patents on Seeds” coalition is supported globally by over 300 NGOs and farmers’ organisations, and has collected about 100000 signatures against patents on plants and animals. The coalition urges the institutions of the EU for revision of European Patent Law to exclude breeding material, plants and animals and food derived thereof from patentability.

The opponents rightly fear the blockage of the access to breeding material which inherits genetic conditions that confer resistance if the patent is not revoked. The breeders’ and farmers’ communities of India and the world eagerly wait for the decision of the EPO.

About the Author: Ms. Meenakshi Khurana, Patent Specialist at Khurana & Khurana and can be reached at: meenakshi@khuranaandkhurana.com

How to Best Protect Patents on New Synthetic Processes and Intermediates in United States: Understanding “Material Change” exception

Here I present another Practice Pointer series, useful for Indian API manufacturers (or to that matter for any country) who are innovating and patenting new and economical processes and novel intermediates thereof and want to capitalize on US Market. The Article will discuss the infringement under the United States Process Patent Legislation and judicial decisions with particular focus on “material change” clause post which brief practice pointer would be discussed to best protect and enforce the US process patents.

What is “Material Change” exception?

§ 271(g) of the Process Patent Amendment Act (PPAA) of United States says,

“Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent…….

A product which is made by a patented process will, for purposes of this title, not be considered to be so made after –

(1) it is materially changed by subsequent processes; or

(2) it becomes a trivial and nonessential component of another product”.

Thus § 271(g) provides that it is an infringement of a process patent if a product made outside of United States by using the patented process is imported into United States unless the product made by the patented process is “materially changed” by subsequent processes or it becomes a trivial and nonessential component of another product.

Legislative History of the statute

Now, with respect to § 271(g), whether a change is ‘material’ is a finding of fact based upon the circumstances of the case. For example, there may be a material change to the product in a strictly chemical sense but that change may be immaterial or trivial in the overall process for producing the API product. The legislative history of this statute has provided a two-pronged test wherein:

(1) “If the only way to have arrived at “Y” (the final product) is to have used the patented process at some step, for example, producing “X” as an intermediate, Y is infringing”.

(2) “If there is more than one way to have arrived at “Y”, but the patented process is the only commercially viable way to have done so, Y is infringing”.

“If there are commercially viable non-infringing processes to have arrived at “X”, the connection between the patented process for producing the intermediate “X” and the final product “Y”, is broken, and Y would be a non-infringing product having satisfied both phases of the test.”

“The patented process may be for the process of preparing a DNA molecule comprising a specific genetic sequence…. Even if a different organism was created by this biotech procedure, if it would not have been possible or commercially viable to make the different organism and product expressed therefrom but for the patented process, the [polypeptide] product will be considered to have been made by the patented process.”

US Courts interpretation of the Statue

There are two landmark CAFC Opinions interpreting the “materially changed” defense which are important to discuss here before we present few of the practice pointers for getting the best patent protection for API processes and intermediates in US.

One of these cases is Bio-Technology General v. Genentech. Genentech Corporation obtained a US Patent claiming a plasmid coding for its hGH product. An Israeli generic manufacture Bio-Technology General (BTG) used the plasmid outside US to make the human growth hormone product, and then imported the finished product into US. BTG argued that it did not import the plasmid but a polypeptide (hGH) produced using the plasmid. Relying on the legislative history of the statute as discussed above (last para of the preceding section), the Court concluded that the plasmid was an “essential part” of the process to make the polypeptide and thus infringed patent on plasmid.

The second case is Eli Lilly v. American Cyanamid where American Cynamid made a Cephalosporin Antibiotic , Ceflacor outside of US using the patented process patended vide US 4,160,085 (‘085 Patent) for preparing an intermediate (Compound 6) used in the process of making Ceflacor. The process used to prepare the cefaclor was a nine-step process and the patented process was used in the fifth step which produced an intermediate (Compound 6). In denying Eli Lilly’s request for a preliminary injunction, the court agreed that Eli Lilly’s patented process constituted the fifth step of the process for preparing Cefaclor, but considered the Compund 6 produced in step five of the overall process was “materially changed” by the subsequent process steps. The Federal Circuit first noted that the patented process had been used outside of the US to prepare the Cefaclor. However, since there are commercially viable non-infringing processes to produce Cefaclor the patent in suit was not a “bottleneck”.The Federal Circuit then noted the differences in the Chemical structures of the two Cephem compounds, that is Compound 6 and Ceflacor. The court also pointed out the differences between the biological properties and the uses of the two compounds- the Compound 6 has no antibiotic activity and can be used as an intermediate to prepare a variety of Cephem compounds while the Cefaclor has high antibiotic activity. The Federal Circuit concluded, based on the differences between the compounds, that the cefaclor that was imported into the US was materially changed from the intermediate and thus no infringement would be found.

Practice Pointers

Below can be some of the key-take aways for the API manufactures for best protection/enforcement of the Patented process and intermediates in US:

1. Economic Advantage of the patented process over other alternatives if any:

 

Generally, the APIs can be made by more than one synthetic routes. This is an important aspect as the legislative history as well as the courts’ interpretation suggest that the alleged imported product made by using the patented process, would infringe if the patented process is the only commercially viable process to make said product. Proving the “only commercially viable process” and the economic advantage of the process over other processes would become all the more important in case the final product is a generic product as it is likely that there would be a number of synthetic routes would be available. The commercial viability and the economic significance can be proved by a number of factors, including for example, less expensive reagents, requiring less purification of the resulting crude API or using less toxic solvents, among other factors.

2. Patentability of the process and intermediate including Skillful Claim Drafting

The patentable process should at least synthesize a unique intermediate product which can be proven to be an essential component in synthesizing the final product.

The Patent has to be drafted in such a way as to give the best possible protection through the claims. For example, in Eli Lily case as discussed above, Eli Lily in its ‘085 Patent failed to show the infringement claim against American Cynamid for using an intermediate for producing Cefaclor; Eli Lily had only a “method of producing an intermediate” claim not a “method of producing a product from intermediate” claim and “an intermediate compound itself” claim. One never knows what the verdict could be had these claims been included.

The process claim(s) thus should be drafted very skillfully. The claim for a simple synthesis process can be drafted for example:

1. A process for preparation of “Y”, comprising the steps of:

a. reacting a compound of Formula __-with a compound of Formula ___ in presence of __, to give “X”, and [e.g. a process step preparing an intermediate “X” ]

b. reacting “X”, as obtained in step (a), with a compound of Formula __ in presence of __, to give “Y”. [e.g. a process step preparing a final product “Y” from “X”]

Further we can include a claim only on the intermediate compound itself. For example, simply as: A compound “X” and/or including a claim for stronger protection which can be like, “A compound “X” for use as an intermediate in preparation of “Y”. This ways, this claim will give better protection in case someone makes this intermediate by circumventing the claim 1

Conclusion

US Market has been and is one of the most sought after markets for Indian API manufactures. who have been developing novel processes/intermediates for the manufacture of important APIs and patenting in US. However only patenting is not enough, it is how well the patent is protected and enforced against the infringers to reap out the best benefits from the US market. Thus understanding of the US Process Patent Legislation and the judicial decisions on “material change” exception is essential.

About the Author:

Meenakshi Khurana, Patent Specialist at Khurana & Khurana and can be reached at: meenakshi@khuranaandkhurana.com

Practice Pointer: Form 27 Requirement in India (Statement Regarding the Working/Non-Working of Issued Patents)

It is needless to say that one core mandate of protecting one’s intellectual property is to promote the progress of science for the benefit of humankind. At the same time, it is also important to ensure that a patentee’s right of excluding others from making, selling, using, offering to sell, and importing the protected subject matter is not misused and does not lead to non-practicing or non-commercialization of the IP by anyone, which would defeat the abovementioned purpose in entirety.

One such tool for the Indian Patent Office, to prevent misuse or rather non-use of patented inventions is to seek periodic information from the patentees as to the extent of commercialization done (also interchangeably referred to as working of the invention), wherein the extent includes informing the Patent Office of the number of licenses granted (if any), revenues/sales generated from the sale/license/commercialization of the patent, parties/stakeholders involved in or responsible for actual commercialization of the patent. Working of a Patent can include but not limited to manufacturing the products in India (either by the patentee or the license) for use in India or for export, importing the patented product in India, and licensing the patent rights.

The above information is covered under Section  146(2) of the Indian Patent Act, 1970, which states that “Every patentee and every licensee (whether exclusive or otherwise) shall furnish in such manner and form and  at such intervals (not being less than six months) as may be prescribed statements as to the extent to which the patented invention has been worked on a commercial scale in India” read with rule  131(1) of the Indian Patent Act 1970 which requires that this “information should be filed every calendar year, within three months of the end of each year.” The deadline for filing this information therefore is 31’st March of each year and is applicable only to Patented inventions. The statute specifies a provision for submission of information in Form 27 regarding the details of ‘working of a patent’ granted in India, which is a statutory requirement.

The information sought by the IPO in Form 27 can be summarized as follows:

A. For not ‘working of patent’: the reasons for not working and steps being taken for ‘working of the invention’ to be provided by the patentee.

B. In case of establishing ‘working of a patent’, the following yearly information needs to be provided:

i) The quantity and value of the invention worked; which includes both local manufacturing and importation.
ii) The details to be provided if any licenses and/or sub-licenses have been granted for the products during the year.
iii) A statement as to whether the public requirements have been met partly/adequately to the fullest extent at a reasonable price.

It would be noted herein that even if the patent is commercially not worked in India, the patentee or the licensee needs to explain the reasons for not working and steps being taken for working of the invention. Such information on commercialization of patented products/method, along with other provisions such as Compulsory Licensing, at least in principle, would make the Patentee prompted to work the invention at the earliest rather than merely having a negative mindset of waiting for third parties to use/work the patented subject matter and then subsequently sue them for infringement actions and claiming their accounts of profits.

The Patent Act has also provides that if any person refuses or fails to furnish information as required under Sections 100(5) and 146, he shall be punishable with imprisonment that may extend to 6 months or fine which may go up to rupees ten lakh (one million).

Gopanjali Singh, Patent Associate, IIPRD, Gopanjali@iiprd.com