Ninth Circuit Throws Summary Judgment in Trash Bin over Software Originally Written for Partsbin Auto Parts Website

U.S. Auto Parts Network, Inc. v. Parts Geek, LLC, 692 F.3d 1009, 104 U.S.P.Q.2d 1097 (9th Cir. 2012). U.S. Auto Parts (USAP) owns and operates an e-commerce website related to auto parts. Parts Geek also operates an auto parts website. The Parts Geek founders previously owned a parts website called Partsbin. Partsbin was purchased by USAP, and the sales agreement included all of the intellectual property of Partsbin. Partsbin had hired a software developer who had previously developed an e-commerce software program. The developer made numerous modifications to the software program while employed by Partsbin. These modifications allowed Partsbin to offer many more items for sale on its website. The software developer and the original founders of Partsbin resigned from USAP and founded Parts Geek. Parts Geek used a similar software program as USAP. USAP sued for copyright infringement. The district court granted summary judgment to Parts Geek, ruling that USAP did not own any copyright in the software. USAP appealed.

The Ninth Circuit reversed the grant of summary judgment in favor of Parts Geek. The court identified two issues: (1) whether the modifications to the initial e-commerce software made by the software developer at Partsbin was a work made for hire, and (2) whether the modifications to the initial e-commerce software made by the software developer at Partsbin could qualify as a derivative work entitled to copyright protection. On the work made for hire issue, the Ninth Circuit found that the software developer was an employee of Partsbin and that the modifications to the e-commerce software were tasks that a software developer performed for Partsbin. Thus, to the extent the modifications to the e-commerce software were copyrightable material, the copyright belonged to Partsbin as a work made for hire. Next, the Ninth Circuit turned to whether the modifications made by the software developer at Partsbin could be eligible for copyright protection as a derivative work of the initial e-commerce software. The Ninth Circuit adopted the Second Circuit’s Durham test that a derivative work is eligible for copyright if: (1) the original aspects of a derivative work are more than trivial, and (2) the original aspects of a derivative work reflect the degree to which it relies on preexisting material and do not in any way affect the scope of any copyright protection in that preexisting material. The Ninth Circuit reversed the finding of summary judgment for Parts Geek because a genuine issue of material fact existed on these points, as USAP would thus own a copyright to the derivate work.

TRADEMARKS

Descriptiveness

DuoProSS Meditech Corp. v. Inviro Medical Devices Ltd., 103 U.S.P.Q.2d 1753 (Fed. Cir. 2012). The Federal Circuit reversed the decision of the TTAB dismissing DuoProSS’s counterclaims for cancellation of two trademark registrations owned by Inviro for the marks SNAP! (with broken exclamation point design) and SNAP SIMPLY SAFER. DuoProSS argued that Inviro’s marks were descriptive for medical syringes and needles.

The TTAB declined to cancel Inviro’s marks because, while both of the marks contained the word “SNAP,” which was deemed to be descriptive, the TTAB found that the broken exclamation point in the SNAP! mark and the additional words “SIMPLY SAFER” rendered Inviro’s marks more than descriptive. With respect to the SNAP! design mark, the Federal Circuit found that the TTAB erred when it focused on only one portion of the SNAP! mark when it considered the mark’s commercial impression and improperly separated the SNAP! design mark into the literal element SNAP and the broken exclamation point. The Federal Circuit noted that while the TTAB could look at each of the components that make up the mark, the TTAB must consider the mark as a whole in the context of the goods and services at issue. With respect to Inviro’s SNAP SIMPLY SAFER mark, the Federal Circuit concluded that the TTAB failed to support its conclusion that the mark SNAP SIMPLY SAFER created a commercial impression that was more than merely descriptive. Moreover, the TTAB’s finding that the mark included a laudatory phrase or puffery and thus rendered the mark more than descriptive was at odds with precedent indicating that puffery was more likely to render a mark descriptive. Thus, the Federal Circuit reversed the TTAB’s decision and remanded with instructions to enter judgment in favor of DuoProSS and cancel Inviro’s registrations.

Likelihood of Confusion

Midwestern Pet Foods, Inc. v. Societe des Produits Nestle S.A., 685 F.3d 1046, 103 U.S.P.Q.2d 1435 (Fed. Cir. 2012). The Federal Circuit affirmed the decision of the TTAB denying registration of Midwestern’s application for the mark WAGGIN’ STRIPS for pet food and edible pet treats. The Federal Circuit found that the decision was supported by substantial evidence that Midwestern’s application for the mark WAGGIN’ STRIPS was likely to cause confusion with Nestle’s mark for BEGGIN’ STRIPS for pet treats. In reviewing the TTAB’s analysis of the relevant factors, the Federal Circuit determined that the TTAB’s finding of a likelihood of confusion was supported by substantial evidence as to the identity of the goods, the similarity in the channels of trade and types of consumers, and the similarity of the BEGGIN’ STRIPS and WAGGIN’ STRIPS marks themselves.

Use in Commerce

Lens.com Inc. v. 1-800 Contacts Inc., 686 F.3d 1376, 103 U.S.P.Q.2d 1672 (Fed. Cir. 2012). Lens.com appealed a TTAB decision granting 1-800 Contacts’ motion for summary judgment and ordering cancellation of Lens.com’s registration of the mark LENS in association with computer software. The Federal Circuit affirmed based on its finding that the TTAB applied the correct test for determining use in commerce and there was no genuine issue of material fact that Lens.com did not use the mark in connection with software. Lens.com argued that the TTAB erred in granting summary judgment because use in commerce does not require the actual sale of the goods and that there is no public awareness requirement to “use.” 1-800 Contacts countered that even if some applet or other software component were placed on customers’ computers to facilitate purchase of their contact lenses, the customers were completely unaware and, thus, could not possibly associate the LENS mark with a source of software. The Federal Circuit upheld the TTAB’s finding that the mark LENS was not in use in commerce in association with software because: (1) Lens.com’s software was merely a conduit through which it rendered its online retail services, (2) Lens.com’s software was so inextricably tied with the services as to have no viable existence apart therefrom, and (3) there was no evidence that Lens.com’s software had any independent value apart from the services. Furthermore, there was nothing in the record to indicate that Lens.com’s customers had any reason to be aware of any connection between the LENS mark and Lens.com’s software.

PATENTS

Anticipation

In re Rambus Inc., 103 U.S.P.Q.2d 1865 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s determination that Rambus’s patent claim was invalid as anticipated. The Federal Circuit found substantial evidence supporting the Board’s conclusion that the prior art memory module read directly on the patent’s memory device.

Attorney-Client Privilege

Wi-LAN Inc. v. LG Elecs. Inc., 684 F.3d 1364, 103 U.S.P.Q.2d 1406 (Fed. Cir. 2012). The Federal Circuit vacated the district court’s entry of contempt sanctions against the patentee’s law firm. At issue was whether a disclosure of an opinion letter protected by the attorney-client privilege waived the attorney-client privilege of other documents related to the opinion letter. The Federal Circuit followed Ninth Circuit precedent and found that the district court should perform a fairness balancing test in determining whether the attorney-client privilege was waived for the other material.

Claim Construction

Interdigital Comm. LLC v. ITC, 690 F.3d 1318, 103 U.S.P.Q.2d 1610 (Fed. Cir. 2012). The Federal Circuit reversed and remanded noninfringement findings by the ITC based on claim construction errors. The ITC construed the term “code” as limited to “spreading code or a portion of a spreading code.” The accused product used a scrambling code instead of a spreading code and, for that reason, the ITC found no infringement. The Federal Circuit found that the plain and ordinary meaning of code covers both a scrambling code and a spreading code and that the patentee did not provide a special definition for or disavow the ordinary scope of code. The Federal Circuit also pointed to a dependent claim defining the term code as spreading code.

Declaratory Judgment Jurisdiction; Patent Eligibility Under § 101

Association for Molecular Pathology v. USPTO, 689 F.3d 1303, 103 U.S.P.Q.2d 1681 (Fed. Cir. 2012). After the Supreme Court vacated and remanded the Federal Circuit’s prior decision in this case in light of Mayo Collaborative Services v. Prometheus, Inc., the Federal Circuit affirmed the district court’s decision that it had declaratory judgment jurisdiction over the plaintiffs’ § 101 challenge to various claims of the patentee’s “Myriad” patents. The patents relate to two “isolated” human genes (collectively, BRCA), and certain alterations, or mutations, in these genes associated with a predisposition to breast and ovarian cancers. Unlike the district court, however, the Federal Circuit found that only one of the plaintiffs, Dr. Ostrer, had standing. On the basis of Dr. Ostrer’s standing alone, the Federal Circuit agreed that the district court possessed the requisite jurisdiction to address the merits of the case. The Federal Circuit affirmed in part and reversed in part the district court’s decision on the merits, which held all 15 claims invalid under 35 U.S.C. § 101. The Federal Circuit reversed the district court and found: (1) Myriad’s composition claims to isolated DNA molecules are patent eligible under § 101 because each of the claimed molecules represents a non-naturally occurring composition of matter, and (2) Myriad’s method claim to screening potential cancer therapeutics via changes in cell growth rates of transformed cells is patent eligible under § 101. The Federal Circuit agreed with the district court that Myriad’s method claims directed to comparing or analyzing DNA sequences are patent ineligible, as they do not include any transformative steps and cover only patent-ineligible abstract, mental steps.

Discovery Sanctions

Rates Tech., Inc. v. Mediatrox Telecom Inc., 688 F.3d 742, 103 U.S.P.Q.2d 1471 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s discovery sanctions against the lead attorney for the patentee. The patentee was ordered on four separate occasions to respond to a specific contention interrogatory. A magistrate judge determined that the patentee never adequately responded to the interrogatory, despite the court’s repeated orders to do so, and that the failure to comply was willful. The patentee’s attorney argued that he should not have been sanctioned for failing to provide information not within his possession. The Federal Circuit rejected this argument.

Employment Agreement

Preston v. Marathon Oil Co., 684 F.3d 1276, 103 U.S.P.Q.2d 1353 (Fed. Cir. 2012). The Federal Circuit upheld the district court’s findings that the plaintiff was required to assign his rights in the patent to the defendant pursuant to his employment agreement. The district court found that the employment agreement is valid, even though it was signed after the plaintiff began his employment and there was no additional consideration. Under Wyoming law, additional consideration is not required in at-will agreements; continued employment is sufficient.

Enablement

In re Antor Media Corp., 689 F.3d 1282, 103 U.S.P.Q.2d 1555 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s decision rejecting claims for anticipation and obviousness. The question was whether the Board erred by holding that nonpatent publications applied by an examiner are presumptively enabling during prosecution. The Federal Circuit held that during patent prosecution an examiner can reject claims as anticipated by a prior art publication or patent without conducting an inquiry into whether that reference is enabling. As long as an examiner makes a proper prima facie case of anticipation by giving adequate notice under § 132, the burden shifts to the applicant to submit rebuttal evidence of nonenablement. Antor failed to show that undue experimentation would be required to perform the invention based on the teaching of the reference.

MagSil Corp. v. Hitachi Global Storage Techs., Inc., 687 F.3d 1377, 103 U.S.P.Q.2d 1769 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s summary judgment determination that the asserted claims were invalid for lack of enablement. The claim contained the following limitation: “causes a change in the resistance by at least 10% at room temperature.” The specification disclosed achieving a change in resistance of 11.8 percent. At the district court, the patentee successfully pursued a broad claim construction that effectively had no limit on the upper bound of the change in resistance; indeed, its expert testified that a 1,000 percent change was within the claim’s scope. Based on this broad claim construction, the Federal Circuit agreed that the entire scope of the claimed invention was not disclosed and, thus, the claim was not enabled.

Hatch-Waxman Safe Harbor

Momenta Pharms. Inc. v. Amphastar Pharms. Inc., 686 F.3d 1348, 103 U.S.P.Q.2d 1800 (Fed. Cir. 2012). The Federal Circuit vacated the district court’s preliminary injunction grant because of an improperly narrow interpretation of the Hatch-Waxman safe harbor, § 271(e)(1), which provides that it is not an act of infringement to make, use, or sell a patented invention solely for uses reasonably related to developing and submitting information pursuant to a federal law regulating manufacture, use, or sale of drugs. Momenta alleged its patent was infringed by Amphastar’s manufacture of generic Enoxaparin for commercial sale. The district court concluded that Amphastar’s activities fell outside the safe harbor because the allegedly infringing activities were conducted after Amphastar’s ANDA application was approved and did not lead to a submission of information as set forth in the statute. The Federal Circuit disagreed because § 271(e)(1) does not reference ANDA requirements and, thus, ANDA’s approval is not determinative. Regarding the submission element, the Federal Circuit did not interpret the statute to require that information actually be submitted. Here, Amphastar was required to conduct quality control testing and to maintain batch testing records for inspection by the FDA. The Federal Circuit held this requirement to maintain records for FDA inspection is effectively a submission under § 271(e)(1). The Federal Circuit vacated the preliminary injunction because, given the applicability of the safe harbor, Momenta was unlikely to succeed on the merits of its infringement claim.

Injunction

Novo Nordisk A/S v. Caraco Pharm. Labs. Ltd., 688 F.3d 766, 103 U.S.P.Q.2d 1575 (Fed. Cir. 2012). The Federal Circuit affirmed in part and modified in part the district court’s injunction. The case was remanded from the Supreme Court, which reversed the Federal Circuit’s earlier decision of summary judgment and vacated the injunction. On remand from the Supreme Court, the Federal Circuit found that the Supreme Court decision foreclosed any argument that Novo’s use code was correct. The Federal Circuit further concluded that while the district court was correct in issuing an injunction requiring correction of Novo’s use code listing for its patent, it abused its discretion in dictating the precise terms of the use code to be submitted to the FDA. The Federal Circuit thus modified the injunction to permit Novo to draft an appropriate use code in light of the guidance provided.

Interference

Loughlin v. Ling, 684 F.3d 1289, 103 U.S.P.Q.2d 1413 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s cancellation of Claim 1 of the application. The Federal Circuit found that an application claiming benefit to an earlier filed application was not barred by § 135(b)(2) as not being timely. The date of the earlier filing was to be used.

Invalidity

Alcon Research Ltd. v. Apotex Inc., 687 F.3d 1362, 103 U.S.P.Q.2d 1737 (Fed. Cir. 2012). The Federal Circuit reversed the district court’s decision holding that certain claims were not obvious and affirmed the district court’s holding that two claims were valid. In the invalidity determination, the Federal Circuit determined concentration amounts that constituted a therapeutically effective amount. The dependent claims recite different ranges for a therapeutically effective amount. Because some of the dependent claim ranges overlapped with prior art ranges, the Federal Circuit found that the therapeutically effective amount limitation was covered by the prior art. Two dependent claims set forth a concentration amount not expressly set forth in the prior art and the Federal Circuit found that the district court did not clearly err in its finding that a person of ordinary skill would not have a reasonable expectation of success in changing the prior art concentration to the concentration claimed in dependent claims. Secondary considerations also supported the nonobviousness finding as the valid dependent claim concentrations matched that of a commercial product that the district court found was an outstanding commercial success.

Obviousness

In re Applied Materials Inc., 692 F.3d 1289, 103 U.S.P.Q.2d 2000 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s rejections of claims being invalid in four separate ex parte reexaminations. In each case, the Board found the claims invalid due to obviousness. The prior art taught all of the limitations except dimensional variables. The Board found that the prior art disclosed dimensional variables overlapping the claimed variables. Also, the Board found the dimensional variables to be result-effective, rendering their optimization within the grasp of one of ordinary skill in the art.

Patentable Subject Matter

Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada (U.S.), 687 F.3d 1266, 103 U.S.P.Q.2d 1425 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s summary judgment determination that the asserted claims were invalid under § 101 as not being directed to patentable subject matter. The patent discloses a specific formula for determining the value required to manage a stable value protected life insurance policy, and includes method claims for managing a life insurance policy and computer readable medium claims for performing similar methods. The Federal Circuit determined that both the method claims and the computer readable medium claims cover no more than abstract ideas and, thus, did not recite patent eligible subject matter. The use of a computer, in an otherwise patent ineligible process, for no more than the basic function of making calculations or computations, does not render the process patent eligible.

Patentable Subject Matter/Declaratory Judgment Jurisdiction

Association for Molecular Pathology v. USPTO, 689 F.3d 1303, 103 U.S.P.Q.2d 1681 (Fed. Cir. 2012). After the Supreme Court vacated and remanded the Federal Circuit’s prior decision in this case in light of Mayo Collaborative Services v. Prometheus, Inc., the Federal Circuit affirmed the district court’s decision that it had declaratory judgment jurisdiction over the plaintiffs’ § 101 challenge to various claims of the patentee’s “Myriad” patents. The patents relate to two isolated human genes (collectively, BRCA), and certain alterations, or mutations, in these genes associated with a predisposition to breast and ovarian cancers. Unlike the district court, however, the Federal Circuit found that only one of the plaintiffs, Dr. Ostrer, had standing. On the basis of Dr. Ostrer’s standing alone, the Federal Circuit agreed that the district court possessed the requisite jurisdiction to address the merits of the case. The Federal Circuit affirmed in part and reversed in part the district court’s decision on the merits, which held all 15 claims invalid under 35 U.S.C. § 101. The Federal Circuit reversed the district court and found that: (1) Myriad’s composition claims to isolated DNA molecules are patent eligible under § 101 because each of the claimed molecules represents a non-naturally occurring composition of matter, and (2) Myriad’s method claim to screening potential cancer therapeutics via changes in cell growth rates of transformed cells is patent eligible under § 101. The Federal Circuit agreed with the district court that Myriad’s method claims directed to comparing or analyzing DNA sequences are patent ineligible, as they do not include any transformative steps and cover only patent ineligible abstract mental steps.

Pendent Jurisdiction

Orenshteyn v. Citrix Sys. Inc., 691 F.3d 1356, 103 U.S.P.Q.2d 1529 (Fed. Cir. 2012). The Federal Circuit granted Citrix’s motion to dismiss the appeal of the district court’s sanction order. The Federal Circuit found that there was no indication that the order granting sanctions was inextricably intertwined with or necessary to review the decision on the merits for summary judgment. The exercise of pendent jurisdiction is limited to exceptional circumstances, which the Federal Circuit did not find.

Plant Patents

In re Beineke, 690 F.3d 1344, 103 U.S.P.Q.2d 1872 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s decision to uphold the rejection of Beineke’s patent claims. The provisions of the original 1930 Act regarding plants, incorporated in the present plant patent statute, provide patent protection to only those plants (e.g., sports, mutants, and hybrids) that were created as a result of plant breeding or other agricultural and horticultural efforts by the inventor. Here, the Federal Circuit found that neither of these requirements was met with respect to the oak trees Beineke sought to patent. The Federal Circuit also found that the trees in question did not fall within the broadened protection of the 1954 amendments, as the trees were not newly-found seedlings.

Reissue

Greenliant Sys. Inc. v. Xicor LLC, 692 F.3d 1261, 103 U.S.P.Q.2d 1951 (Fed. Cir. 2012). The Federal Circuit upheld the district court’s finding that the patentee improperly broadened two claims in a reissue application. A patentee can broaden claims during a reissue application but not if the limitations were added during the prosecution history of the original application to overcome the prior art. The Federal Circuit found that during prosecution the patentee added a claim limitation and included that limitation in a declaration as to why the claim now overcame the prior art. Because this limitation was not included in the reissue, the reissued claims were improperly broadened.