On appeal, the Federal Circuit cited 28 U.S.C. § 1498(b), which waives the United States’ sovereign immunity for copyright infringement, and provides for recovery of the “reasonable and entire compensation as damages for such infringement, including the minimum statutory damages.” The Federal Circuit held the appropriate measure of damages was compensatory damages (but not noncompensatory damages), using the existing methods for determining actual damages. Under those methods, when a plaintiff cannot show lost sales, lost opportunities to license, or diminution in the value, many circuits award actual damages based on the fair market value of a license using a hypothetical arm’s-length negotiation. The Federal Circuit noted that, while the USPS has not historically paid more than a $5,000 royalty, Gaylord had historically licensed rights to The Column for about a 10 percent royalty, and the USPS itself had licensed the stamp image to third parties for use on retail goods for an eight percent royalty. The Federal Circuit remanded the case.

Court Rejects Defendant’s Puzzling Copyright Infringement Defense

Tetris Holding, LLC v. Xio Interactive, Inc., 2012 WL 1949851 (D.N.J. 2012). Tetris owns the copyright to the familiar video game of the same name that involves placing a number of shaped puzzle pieces in an arrangement to complete horizontal rows before any puzzle piece extends above the game play area. Xio created an iPhone application that was virtually identical to Tetris. Tetris sued Xio for copyright infringement and trade dress infringement, and both sides moved for summary judgment. The district court granted Tetris’s motion for summary judgment for copyright infringement. The court determined that there were no disputed factual issues, and the only dispute between the parties involved what elements of the Tetris game are subject to copyright protection. Xio argued its copied elements were unprotectable under copyright as they involved the rules, function, and essential expression to the game, and therefore were excluded from copyright protection based on the doctrines of merger and scènes à faire. The court rejected Xio’s argument, based in part on statements made by Xio’s own expert that puzzle pieces for such a game could be made in a number of ways. The court also granted summary judgment to Tetris on the trade dress claim.

TRADEMARKS

Infringement

Rearden LLC v. Rearden Commerce Inc., 683 F.3d 1190, 103 U.S.P.Q.2d 1161 (9th Cir. 2012). Rearden LLC (Rearden) appealed the district court’s decision granting summary judgment in favor of Rearden Commerce Inc. (Rearden Commerce) on Rearden’s claims for trademark infringement, unfair competition, and cybersquatting. The Ninth Circuit found that because there were genuine issues of material fact regarding these claims, summary judgment was not proper. Several marks incorporating the “Rearden” name (the REARDEN marks) were disputed.

The Ninth Circuit found that there were genuine issues of material fact regarding use of the REARDEN marks, and in particular, the “use in commerce” requirement under the Lanham Act. Following the totality of the circumstances approach, the Ninth Circuit determined that nonsale activities, such as Rearden’s solicitation of potential customers, could be considered relevant as to whether the REARDEN marks had been used or displayed in the sale or advertising of services and whether the marks had been rendered in commerce. Under this approach, the nonsale activities must by sufficiently public in nature to identify the services in the relevant segment of the public as belonging to the owner. The Ninth Circuit found that Rearden generated a significant amount of publicity about its services and the REARDEN marks. This evidence provided some genuine issues of material fact to preclude summary judgment in favor of Rearden Commerce as to the “use in commerce” issue.

As to the issue of likelihood of confusion, the Ninth Circuit found that there were genuine issues of material fact regarding at least the strength of the mark, similarity of the marks, proximity of the goods, and evidence of actual confusion. Regarding the ACPA and cybersquatting claims, the Ninth Circuit found that a reasonable jury could find that certain factors weighed more heavily in favor of Rearden and that Rearden Commerce acted in bad faith in seeking to gain leverage in an ongoing trademark dispute by registering several domain names. Thus, the Ninth Circuit vacated the grant of summary judgment and remanded the case to the district court.

Likelihood of Confusion

Maker’s Mark Distillery Inc. v. Diageo North America Inc., 679 F.3d 410, 102 U.S.P.Q.2d 1693 (6th Cir. 2012). Maker’s Mark sued Diageo, alleging that Jose Cuervo infringed its red dripping wax seal trademark that was in a free-form irregular pattern. The district court concluded that the trademark was valid and infringed by Cuervo and permanently enjoined Cuervo from using the mark. The Sixth Circuit affirmed. In 1985, Maker’s Mark registered the trademark, which had been in use on Maker’s Mark bourbon bottles since 1958. In 1995, Cuervo began selling its premium tequila in a bottle having a straight-edged wax seal. By 2001, Cuervo began selling this tequila in bottles with a red dripping wax seal. After Maker’s Mark sued for trademark infringement and dilution in 2003, Cuervo reverted to the red straight-edged wax seal.

The Sixth Circuit rejected Cuervo’s claim that the red dripping wax seal was aesthetically functional and, thus, unenforceable, finding that the claim failed both the comparable alternatives test and the effective competition test. The Sixth Circuit then balanced the Frisch factors for determining the likelihood of consumer confusion. The Sixth Circuit relied most heavily on the strength factor, upholding the district court’s finding that the mark was extremely strong. Because a balancing of the factors compelled a finding of infringement, the district court’s verdict was affirmed. The Sixth Circuit also affirmed the district court’s award of some costs to Maker’s Mark.

PATENTS

Anticipation

In re Montgomery, 677 F.3d 1375, 102 U.S.P.Q.2d 1881 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s rejection of Montgomery’s patent claims as being anticipated. Montgomery’s application is directed to administering RAS inhibitors to patients in need of stroke treatment or prevention. The examiner rejected these claims as being anticipated by four prior art references, all of which described the administration of Ramipril to subjects at risk of stroke. The Board affirmed. While the Board did not rule directly on whether Montgomery’s claims require that the administration be effective at treating or preventing stroke, it appeared to assume such a requirement. The Board rejected Montgomery’s argument that none of the references demonstrated that Ramipril actually treats or prevents stroke, noting that Ramipril inherently treats or prevents stroke, and it did not matter that those of ordinary skill may not have recognized these inherent characteristics. Montgomery did not dispute that Ramipril is in fact effective at preventing or treating stroke, which the Federal Circuit found was the entire premise of his patent.

Wm. Wrigley Jr. Co. v. Cadbury Adams USA LLC, 683 F.3d 1356, 103 U.S.P.Q.2d 1130 (Fed. Cir. 2012). The Federal Circuit upheld the district court’s summary judgment that Wrigley’s patent was anticipated by the Shahidi reference. The patent is generally directed to chewing gum that provides a cooling sensation and, more specifically, claims a chewing gum that combines two coolants, methanol and WS-23. The Shahidi reference discloses a number of compositions including chewing gum but listed those ingredients as essential, optional, or preferred optional. Shahidi also listed cooling agents (or a combination of cooling agents) as preferred and listed both methanol and WS-23. Cadbury argued that while the Shahidi did disclose every element, it did not disclose them as recited in the claim. The Federal Circuit disagreed, distinguishing this case from Impax Labs, finding that the number of components and categories disclosed by Shahidi was not so large that the claimed combination was not immediately apparent to one of ordinary skill in the art.

Anticipation/On-Sale Bar

Leader Techs., Inc. v. Facebook, Inc., 678 F.3d 1300, 102 U.S.P.Q.2d 1743 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s final judgment that the asserted claims were invalid as being anticipated. The invalidity determination turned on whether a Leader prior product was publically used or on sale prior to the asserted patent’s critical date. Leader did not contest that a version of its product was on sale and in public use prior to the critical date, nor, for purposes of the on-sale bar, did Leader contest that the invention was ready for patenting prior to the critical date. Rather, Leader argued that its prior product at issue did not fall within the scope of the claims. The Federal Circuit agreed that the record supported the jury’s finding that Leader’s prior product is covered by the claims.

Claim Construction

Chicago Bd. Options Exch. Inc. v. Int’l Sec. Exch. LLC, 677 F.3d 1361, 102 U.S.P.Q.2d 1683 (Fed. Cir. 2012). The Federal Circuit affirmed in part, reversed in part, vacated in part, and remanded the district court’s final judgment. The Federal Circuit found the district court erred in its claim construction of various claim limitations. The Federal Circuit found that with respect to a storage memory, the district court applied too narrow of a construction, adding requirements to the function of the memory that were not included in the specification.

General Elec. Co. v. Int’l Trade Comm’n, ___ F.3d ___­­, 103 U.S.P.Q.2d 1261 (Fed. Cir. 2012). The Federal Circuit affirmed and reversed various issues decided by the ITC. The Federal Circuit reversed the Commission’s finding because the function of the circuit does not depend on whether it is entirely outside the inverter and the specification does not require separation of the inverter and circuit.

Contributory Infringement/Inducement to Infringe

In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323, 103 U.S.P.Q.2d 1045 (Fed. Cir. 2012). The Federal Circuit affirmed in part, reversed in part, and remanded the district court’s dismissal with prejudice of amended complaints and counterclaims. The district court dismissed the amended complaints because they failed to state a plausible claim to relief. The Federal Circuit found that there must be an underlying act of infringement to find inducement or contributory infringement. The Federal Circuit stated that for purposes of contributory infringement, the inquiry focuses on whether the accused products can be used for purposes other than infringement. Here, the products could be used for such other purposes. The amended complaint failed to state a claim on contributory infringement. The amended complaint, however, adequately stated a claim of induced infringement.

Hatch-Waxman Act

Dey Pharma LP v. Sunovion Pharms. Inc., 677 F.3d 1158, 102 U.S.P.Q.2d 1710 (Fed. Cir. 2012). The Federal Circuit upheld the district court’s finding of subject matter jurisdiction. In the district court, the patentee granted the accused infringer a covenant not to sue and then moved to dismiss the declaratory judgment action for lack of subject matter jurisdiction. The district court denied the motion to dismiss, stating the covenant not to sue did not defeat declaratory judgment jurisdiction. The Federal Circuit upheld the findings based on prior cases and the rules for generics under the Hatch-Waxman Act.

Indirect Infringement

Toshiba Corp. v. Imation Corp., 681 F.3d 1358, 103 U.S.P.Q.2d 1097 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s summary judgment of no contributory infringement, but reversed its summary judgment of no inducement to infringe. The patent is generally directed to how data is written to DVDs and the claims require that a test pattern be included in the writing process. Once a user records data on the DVD, the user may choose to finalize the DVD, which writes the test pattern onto the DVD. Prior to finalization, however, the DVD does not include the test pattern but such an unfinalized DVD is readable by the DVD player. Toshiba accused Imation of contributory infringement, but the district court determined that recording DVDs without finalizing them is a substantial noninfringing use and, thus, found no contributory infringement. The Federal Circuit agreed and stated that Toshiba did not provide evidence showing that the use of unfinalized DVDs was not substantial. The Federal Circuit, however, overturned the summary judgment of no inducement to infringe because the district court misapplied the law of inducement.

Interference Practice

Hollmer v. Harari, 681 F.3d 1351, 102 U.S.P.Q.2d 1958 (Fed. Cir. 2012). The Federal Circuit reversed and remanded the Board’s decision. The Board misinterpreted the Federal Circuit’s previous decision in the same case and incorrectly found that continuity was maintained in the chain of priority between the application involved in the interference and an original parent application filed by the same inventors. The primary issue was whether two intervening applications were properly incorporated by reference in the disclosure of a third application filed on the same date as the original parent application. The Federal Circuit held that the correct standard is whether a person of ordinary skill in the art would find that the disputed language in the intervening application identifies with detailed particularity what specific material it incorporates. The Federal Circuit found that the language was ambiguous and, thus, did not meet the foregoing standard.

Invalidity

In re Baxter Int’l, 678 F.3d 1357, 102 U.S.P.Q.2d 1925 (Fed. Cir. 2012). The Federal Circuit affirmed an invalidity finding by the Board for a patent that the Federal Circuit had previously found valid.

Mintz v. Dietz & Watson Inc., 679 F.3d 1372, 102 U.S.P.Q.2d 1897 (Fed. Cir. 2012). The Federal Circuit affirmed a noninfringement determination and vacated an invalidity holding. For the vacated invalidity holding, the district court relied on a common sense approach in finding obviousness based on obvious to try. The district court erred by merely invoking the words common sense without providing any record showing why a person skilled in the art had this common sense knowledge. The Federal Circuit also found the district court clearly erred by not fully weighing objective indicia evidence. The Federal Circuit found the patentee presented substantial evidence of unexpected results, expert skepticism, copying, commercial success, praise by others, failure by others, and long-felt need.

Obviousness

In re Cyclobenzaprine Hydrochloride Extended-Release Capsule Patent Litig., 676 F.3d 1063, 102 U.S.P.Q.2d 1760 (Fed. Cir. 2012). The Federal Circuit vacated the district court’s judgment that the patents were obvious. The patents generally relate to a modified release dosage form of skeletal muscle relaxants. The Federal Circuit held that the district court erred when it failed to consider the lack of a known pharmacokinetic/pharmacodynamic relationship for the claimed drug formulation when assessing the importance of the prior art. Because this relationship was not known, at the time of the invention, one of ordinary skill could not predict the claimed formulation and there is no indication that a person skilled in the art would have had reasonable expectation that such experiment would succeed in being therapeutically effective. The district court also improperly shifted the burden of disproving obvious to the patentee by considering the patentee’s objective considerations of nonobviousness after finding the patents were obvious.

In re Hyon, 679 F.3d 1363, 102 U.S.P.Q.2d 1889 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s rejection of reissue claims for obviousness. Hyon argued that one of ordinary skill in the art would not be motivated to combine the applied references because one was directed to artificial joints and the other was directed to films or sheets. The Federal Circuit disagreed, and found both references were directed to ultra high molecular weight polyethylene, and a person skilled in the art would have been motivated to combine the references.

In re Mouttet, ___ F.3d ___, 103 U.S.P.Q.2d 1219 (Fed. Cir. 2012). The Federal Circuit affirmed the Board’s conclusion that Mouttet’s claimed invention would have been obvious. The Federal Circuit found that the Board’s determination that eliminating the optical components of a prior art reference would not destroy its principle of operation was supported by substantial evidence. The Federal Circuit rejected Mouttet’s argument that the prior art reference teaches away from the claimed invention, because the mere disclosure of alternative designs, alone, does not teach away.

Obviousness-Type Double Patenting

Otsuka Pharm. Co. v. Sandoz Inc., 678 F.3d 1280, 102 U.S.P.Q.2d 1729 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s judgment sustaining the validity of the asserted claims under § 103 and under the doctrine of nonstatutory double patenting. Otsuka sued in response to the defendants’ submission of ANDA filings for approval of generic aripiprazole products. The defendants conceded literal infringement but argued invalidity for obviousness and obviousness-type double patenting. The Federal Circuit clarified the proper legal test for nonstatutory double patenting and explained there is a difference between it and a § 103 analysis. A double patenting of the obviousness-type rejection is analogous to a failure to meet the nonobviousness requirement of § 103, but important differences remain. The patent principally underlying the double-patenting rejection need not be prior art. Moreover, when analyzing obviousness-type double patenting involving claimed chemical compounds, the issue is not whether a skilled artisan would have selected the earlier compound as a lead compound. The analysis must focus on whether a person skilled in the art would have had reason or motivation to modify the earlier claimed compound to make the compound of the asserted claim with a reasonable expectation of success.

Patent Eligibility Under § 101

CLS Bank Int’l v. Alice Corp. Pty. Ltd., ­­­­685 F.3d 1341, 103 U.S.P.Q.2d 1297 (Fed. Cir. 2012). The Federal Circuit reversed the district court’s decision that certain claims of the four patents were not patentable under 35 U.S.C. § 101 because they were drawn to abstract ideas. The patents cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate settlement risk. Settlement risk is the risk that only one party’s obligation will be paid, leaving the other party without its principal. The trusted third party eliminates this risk by either: (1) exchanging both parties’ obligations, or (2) exchanging neither obligation. The claims include method, system, and software media claims. The district court granted summary judgment that the claims were invalid under § 101. The district court found that the claims were directed to abstract ideas and not sufficiently tied to a particular machine or apparatus. The Federal Circuit disagreed and noted that the Supreme Court has not directly addressed how to determine whether a claim is drawn to an abstract idea in the first instance. The Federal Circuit stated that the dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive. Patent eligibility must be evaluated based on what the claims recite, not merely on the ideas upon which they are premised. It is inappropriate to dissect the claim into old and new elements and then to ignore the presence of the old elements in the analysis. The Federal Circuit examined the claim limitations as a whole and found that they are directed to statutory subject matter under § 101.

Preliminary Injunction

Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 103 U.S.P.Q.2d 1250 (Fed. Cir. 2012). The Federal Circuit vacated the preliminary injunction and remanded for further proceedings. During patent prosecution, certain claims were rejected as obvious. The applicant cancelled a number of claims and rewrote a dependent claim into independent form, which the examiner had agreed to during an interview as being allowable. Despite cancelling the rejected claims, the applicant received a notice of allowance for the claims. The applicant contacted the USPTO and explained that the notice of allowance mistakenly allowed cancelled claims. The examiner issued a supplemental notice of allowance acknowledging the amendment removing the cancelled claims. Nevertheless, the patent issued contained the cancelled claims from the first notice of allowance. Lupin filed an ADNA seeking permission to sell a generic version of Fortamet, with which the patent was associated in the Orange Book. The patentee sued Lupin, wherein a preliminary injunction was granted, and the argument that the claims were improperly issued was rejected. The Federal Circuit noted that the presumption of validity attaches to all issued patents. Lupin’s obviousness arguments regarding the applied references, in light of the prosecution history and the correct standard of proof, raised a substantial question of invalidity. Therefore, the Federal Circuit vacated the preliminary injunction and remanded to the district court.

Preliminary Injunction/Design Patents

Apple Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 102 U.S.P.Q.2d 1633 (Fed. Cir. 2012). The Federal Circuit affirmed in part and vacated in part the district court’s denial of a preliminary injunction. Regarding one of the design patents, the Federal Circuit upheld the finding that the patentee must show a nexus between the infringement and the alleged harm. Regarding another design patent, the Federal Circuit found the district court erred in not considering the entire scope of the design patent when considering prior art. The Federal Circuit also disagreed with the findings of the district court that a different design patent was obvious.

Rehearing

General Elec. Co. v. Int’l Trade Comm’n, 685 F.3d 1034, 1­­03 U.S.P.Q.2d 1257 (Fed. Cir. 2012). The Federal Circuit granted, in part, the ITC’s request for rehearing. The grant was for the limited purpose of withdrawing Part III of the panel opinion in General Elec. Co. v. International Trade Comm’n, 670 F.3d 1206, 101 U.S.P.Q.2d 1790 (Fed. Cir. 2012). The Federal Circuit stated that, as a result of its order, the panel offers no decision on the questions raised in Part III of the aforementioned opinion, which may arise in a future case.

Reissue

In re Youman, 679 F.3d 1335, 102 U.S.P.Q.2d 1862 (Fed. Cir. 2012). The Federal Circuit vacated and remanded the Board’s decision upholding rejection of reissue claims for impermissible recapture of surrendered subject matter. The Federal Circuit found that the Board did not properly apply the recapture rule. To determine whether the reissue claims violate the recapture rule, the court applies a three-step analysis. Under the first step, the Federal Circuit agreed with the Board that the “changing” limitation in the reissue claim was broader than the “cycling” limitation of the patented claim. Under the second step, the Federal Circuit agreed with the Board that through argument and amendment, the applicants’ surrendered subject matter was broader than the cycling limitation of the patented claim. Under the third step, the Federal Circuit found that the Board failed to distinguish between instances where an added limitation was modified versus instances where an added limitation was eliminated in its entirety. Here, the limitation was broadened to changing, not eliminated.

Violation of Injunction

Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 103 U.S.P.Q.2d 1001 (Fed. Cir. 2012). The Federal Circuit affirmed the district court’s decision finding the defendant in contempt for violating a prior injunction. The Federal Circuit found that jurisdiction over the Indian company defendant was proper under Fed. R. Civ. Pro. 4(k)(2), which allows jurisdiction in any federal court under certain circumstances. The defendants also argued that the holding of contempt should be dismissed because the district court did not correctly apply the test for determining whether new products violate the previous injunction. The Federal Circuit found the district court had ample basis to conclude that the two products were not more than colorably different.

Willfulness

Bard Peripheral Vascular Inc. v. W.L. Gore & Assocs. Inc., 682 F.3d 1003, 103 U.S.P.Q.2d 1088 (Fed. Cir. 2012). The Federal Circuit panel initially found the district court to be correct in its findings regarding willfulness. The case was then heard en banc and was remanded back to the Federal Circuit panel for revisiting the issue of willfulness. The panel now holds that the threshold objective prong of the willfulness standard enunciated in Seagate is a question of law based on underlying mixed questions of law and fact and is subject to de novo review. The Federal Circuit remanded the issue of willfulness so that the district court may reconsider its denial of JMOL of no willful infringement in view of this holding.