Fair Use before Certification

Authors Guild Inc. v. Google Inc., 107 U.S.P.Q.2d 1361 (2d Cir. 2013). Google appealed the district court’s grant of class certification to plaintiff Authors Guild, who claims Google committed copyright infringement by copying and displaying snippets of millions of books in the Library Project of its Google Books search tool. The district court granted a motion to certify a proposed class of “[a]ll persons residing in the United States who hold a United States copyright interest in one or more Books reproduced by Google as part of its Library Project.”

Google argued that the plaintiff is unable to fairly and adequately protect the interests of the class because many members of the class benefit from the Library Project and oppose the plaintiff’s efforts. Google also argued that it intended to assert a fair use defense that would render the litigation moot if successful. While the Second Circuit noted the first argument carries some force, it set this aside in favor of the second argument. The Second Circuit found that the class certification was premature in the absence of a determination by the district court of the merits of Google’s fair use defense, and thus vacated the class certification.

Unintentional Implied License

Davis v. Tampa Bay Arena Ltd., 2013 WL 3285278 (M.D. Fla. 2013). Davis is a professional photographer who shot photos for the Tampa Bay Times Forum, the home of the NHL’s Tampa Bay Lightning. After working for years under a verbal agreement, Davis and the forum entered into a written agreement in 2000 giving the forum limited use of his photographs while preserving Davis’s ownership of copyrights in the photographs. Around 2010, the forum began to post Davis’s pictures on its Facebook page, to which Davis objected. Davis wanted the forum to post only low resolution versions of his photos on Facebook, and he set up a process to enable this. Davis also sent e-mails to staff at the forum indicating that he approved of their posting his photos on Facebook. However, Davis testified that the only reason he allowed this was that the forum indicated that a new agreement with Davis would be forthcoming. Davis stated that the new agreement proposed by the forum was a significant change from his earlier agreement. Davis’s attorney sent a letter to the forum alleging a breach of contract by the forum and Davis later sued the forum for copyright infringement and other causes of action. Davis argued that the forum’s posting of his images on Facebook was copyright infringement.

The district court granted summary judgment for the forum on the copyright infringement claim, noting that under copyright law, a nonexclusive license can be implied by conduct. Davis created the implied license by, among other acts, facilitating the forum’s uploading of his images to Facebook. Davis argued that the scope of this implied license was in dispute, but the court determined that this objection meant that Davis may have placed covenants on the implied license, but not conditions precedent to the license. Therefore, he might have a breach of contract claim, but not a copyright infringement claim.

PATENTS

Best Mode

Ateliers de la Haute-Garonne v. Broetje Automation USA Inc., 717 F.3d 1351, 106 U.S.P.Q.2d 1995 (Fed. Cir. 2013). The Federal Circuit reversed the district court’s summary judgment determination that the asserted claims of Ateliers’ patent were invalid for failing to disclose the best mode of carrying out the invention. Ateliers’ patent is generally directed to a process for dispensing rivets through a pressurized tube with grooves along its inner surface. The specification discloses a tube with three grooves, but did not express a preferred number of grooves. During a deposition, an inventor stated that an odd number of grooves performed better than a tube with an even number. At the time the patent application was filed, the inventors were mostly using three grooves, but sometimes used five grooves with longer rivets, and the commercial embodiment contained five grooves. The district court determined that the inventors failed to disclose the best mode because the specification did not express a preference for an odd number of grooves. The Federal Circuit disagreed and reversed. The best mode requirement is satisfied when the inventor includes the preferred mode in the specification. There is no requirement that an applicant must identify which of the embodiments is considered to be the best mode.

Claim Construction

Aventis Pharms. Inc. v. Amino Chems. Ltd., 715 F.3d 1363, 106 U.S.P.Q.2d 1861 (Fed. Cir. 2013). The Federal Circuit reversed and remanded the stipulated judgment of noninfringement entered into after a claim construction hearing. The district court found that the term “substantially pure” applied to both the end products and the intermediate. The Federal Circuit rejected the one-size-fits-all construction as it was construed separately from the very next word. The district court’s artificial truncation of the claim term for the expediency of a single interpretation across different contexts was in error. The Federal Circuit adopted Aventis’s proposed construction and remanded for further proceedings.

Douglas Dynamics LLC v. Buyers Prods. Co., 717 F.3d 1336, 107 U.S.P.Q.2d 1024 (Fed. Cir. 2013). The Federal Circuit reversed the district court’s finding of noninfringement and denial of a permanent injunction. The Federal Circuit found that the district court erred in its construction of the term “connecting.” The Federal Circuit found the term did not require the two connected parts be directly connected without any intervening parts. Regarding the permanent injunction, the district court found the patentee failed to show injury since the patentee’s sales actually increased. The Federal Circuit found that just because the patentee manages to obtain a profit in light of infringing activity does not automatically rebut a case for irreparable injury.

Declaratory Judgment

Organic Seed Growers and Trade Assoc. v. Monsanto Co., 718 F.3d 1350, 107 U.S.P.Q.2d 1067 (Fed. Cir. 2013). The Federal Circuit affirmed the district court’s dismissal of the case for lack of subject matter jurisdiction. The question in a declaratory action case is whether the facts alleged show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy to warrant judicial action. In patent cases, the question is whether the plaintiffs demonstrate a substantial risk that they will be sued for infringement. Here, although the defendant did not provide a covenant not to sue, it provided assurances that it would not sue under certain circumstances. Since the plaintiffs fell within those circumstances, there was no risk of suit and the case was dismissed.

Injunctive Relief

Sanofi-Aventis Deutschland GmbH v. Genentech Inc., 716 F.3d 586, 106 U.S.P.Q.2d 1835 (Fed. Cir. 2013). Applying Ninth Circuit law, the Federal Circuit affirmed the district court’s denial of an anti-suit injunction. Genentech and Sanofi entered into a license agreement that included a forum selection clause requiring foreign arbitration. After terminating the license, Genentech sought and received a declaration of noninfringement in 2012 with respect to Sanofi’s infringement claims for the drugs Rituxan and Avastin. Despite the noninfringement ruling, Sanofi continued pursuing a previously filed foreign arbitration against Genentech for breach of the license agreement. Genentech sought to enjoin Sanofi from continuing to pursue the foreign arbitration in light of the noninfringement ruling. The district court, however, refused to grant the injunction, and the Federal Circuit affirmed. The Federal Circuit concluded that the noninfringement judgment was not dispositive of the issues presented at the arbitration, which involved only Sanofi’s breach of contract claims. The Federal Circuit also determined that the strong interest in protecting forum selection clauses warranted denying Genentech’s anti-suit injunction request.

ITC Practice/Domestic Industry Requirement

Motiva LLC v. ITC, 716 F.3d 596, 106 U.S.P.Q.2d 1816 (Fed. Cir. 2013). The Federal Circuit affirmed the ITC’s finding that accused infringer Nintendo did not violate § 337 of the Tariff Act of 1930 by importing, selling for importation, or selling its Wii video game systems and interactive controllers because the patentee Motiva failed to satisfy § 337’s domestic industry requirement. Under § 337, prior to deciding an infringement issue, the ITC must, as a threshold matter, determine there is an industry in the United States relating to the articles protected by the patent or is in the process of being established. Motiva’s efforts to develop a domestic industry for its patents were limited to the litigation against Nintendo. Motiva argued that its investment in litigation satisfies the domestic industry requirement of § 337, because removing the Wii from the market through litigation was essential to developing a successful product-driven licensing business. The Federal Circuit found, however, that the presence of the Wii in the market had no impact on Motiva’s commercialization efforts or ability to encourage partners to invest in and adopt its patented technology. Motiva was not close to launching a product incorporating the patented technology. Rather, the evidence demonstrated that Motiva’s litigation was targeted at financial gains by the patents’ inventors.

Jurisdiction

Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305, 107 U.S.P.Q.2d 1113 (Fed. Cir. 2013) (en banc). The Federal Circuit sua sponte took this case en banc to answer two questions. First, does 28 U.S.C. § 1292(c)(2) confer jurisdiction on the Federal Circuit to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred? Second, does §1292(c)(2) confer jurisdiction on the Federal Circuit to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided? The Federal Circuit answered both questions in the affirmative.

Obviousness/Inequitable Conduct

Novo Nordisk A/S v. Caraco Pharm. Labs. Ltd., 719 F.3d 1346, 107 U.S.P.Q.2d 1210 (Fed. Cir. 2013). The Federal Circuit affirmed the district court’s determination that the claim was invalid as obvious, and reversed the district court’s determination that the patent was unenforceable due to inequitable conduct. The Federal Circuit found that the burden of persuasion was properly allocated, and that the evidence supported a conclusion of expected results. The Federal Circuit found that the district court’s materiality finding was clearly erroneous.

Patentable Subject Matter

Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 106 U.S.P.Q.2d 1972 (2013). The Supreme Court held that Myriad’s claims directed to isolated DNA sequences recite naturally occurring phenomena and, thus, are not drawn to patentable subject matter under § 101. However, the Supreme Court ruled that synthetically created DNA—known as complementary DNA (cDNA)—which contains the same protein-coding information found in a segment of nature DNA but omits portions within the DNA segment that do not code for proteins, is patent eligible because it is the result of an exons-only molecule that is not naturally occurring. The Supreme Court noted that if Myriad created an innovative method of manipulating genes while searching for certain genes, it could possibly have sought a method patent. The Supreme Court also noted that this case did not involve patents on new applications of knowledge involving certain genes.

CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 106 U.S.P.Q.2d 1696 (Fed. Cir. 2013) (en banc). The Federal Circuit affirmed the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. The district court found the claims were directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations to minimize risk.

Ultramercial Inc. v. Hulu LLC, 107 U.S.P.Q.2d 1193 (Fed. Cir. 2013). The Federal Circuit reversed and remanded the district court’s holding that the subject matter was not a process within the language and meaning of 35 U.S.C. § 101. The Federal Circuit found that the analysis under § 101, while ultimately a legal determination, is rife with underlying factual issues. The Federal Circuit ultimately found that the claimed invention was not so manifestly abstract as to override the statutory language of § 101, and reversed the district court’s dismissal of Ultramercial’s patent claims for lack of subject matter eligibility and remanded for further proceedings.

Prosecution Disclaimer

Regents of the Univ. of Minn. v. AGA Med. Corp., 717 F.3d 929, 106 U.S.P.Q.2d 1982 (Fed. Cir. 2013). The Federal Circuit affirmed the district court’s summary judgment that the asserted claims of the University’s ’281 patent were invalid as anticipated. The ’281 patent is generally directed to a medical device for repairing heart defects. During prosecution of an application that was a predecessor to the ’281 patent, the applicant disclaimed certain subject matter by arguing to the examiner that the prior art fell outside the scope of a claim limitation. Four divisional applications later, however, that particular claim limitation was no longer present. The ’281 patent instead used different language. Because the claim terms were different, the University’s prior disclaimer was not effective in connection with the prior art challenge to the ’281 patent. The Federal Circuit held that two patents must have the same or closely related claim limitation language for a disclosure made in a prior patent to apply to a subsequent patent.

Public Use

Dey LP v. Sunovion Pharms. Inc., 715 F.3d 1351, 106 U.S.P.Q.2d 1916 (Fed. Cir. 2013). The Federal Circuit reversed the grant of summary judgment for Sunovion. Sunovion and Dey were simultaneously developing pharmaceutical products to treat lung disease. Sunovion filed a patent application, followed by an application to test its products in human subjects. Sunovion received a patent and held clinical trials, all before ultimately releasing a commercial product. Dey filed its applications after Sunovion’s applications and Dey’s patents also issued after Sunovion’s patents. Dey sued Sunovion for infringement. The district court held that some of Dey’s patents were invalid because a Sunovion clinical trial in which Sunovion tested its own product constituted a prior public use of Dey’s inventions under § 102(b). The Federal Circuit found that the study, with all of its restrictions on the use of the drugs and information concerning the formulations, did not indisputably fall within the public use bar. Thus, there was not clear and convincing evidence that Dey’s inventions were accessible to the public more than a year before Dey sought to patent them.

Sanctions

Alexsam Inc. v. IDT Corp., 715 F.3d 1336, 106 U.S.P.Q.2d 1895 (Fed. Cir. 2013). The Federal Circuit affirmed the judgment of no invalidity, reversed the finding of infringement on selected IDT systems, affirmed the judgment of infringement with regard to IDT’s miscellaneous systems based on the district court’s discovery sanction, and affirmed the judgment of noninfringement with regard to other IDT systems based on the license defense. After IDT failed to disclose information suggesting that the miscellaneous systems infringed Alexsam’s patents, in violation of IDT’s discovery obligations, the district court granted Alexsam’s motion for sanctions and declared the miscellaneous systems as infringing. The Federal Circuit affirmed the district court’s finding that the plain terms of the agreement automatically sublicensed the alleged infringing activity.

Settlement Agreement

Federal Trade Comm’n v. Actavis Inc., 133 S. Ct. 2223, 106 U.S.P.Q.2d 1953 (2013). The Supreme Court reversed the Eleventh Circuit’s dismissal of an FTC complaint that a particular reverse-payment settlement agreement violated the antitrust laws. In settlement of a previous patent infringement action, the patentee Solvay and the alleged infringer Actavis agreed that Solvay would pay Actavis a certain amount of money to keep its generic pharmaceutical products off the market for a period of time. The Eleventh Circuit stated that a reverse-payment settlement agreement generally is immune from an antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patents. The Supreme Court reversed, reasoning that while reverse-payment settlement agreements are not presumptively illegal, the antitrust legality of such reverse-payment settlement agreements must be measured against procompetitive antitrust policy by applying the rule of reason, and not just a quick look at patent law policy alone.

Subject Matter Jurisdiction

Forrester Env’t Serv. Inc. v. Wheelabrator Techs. Inc., 715 F.3d 1329, 106 U.S.P.Q.2d 1842 (Fed. Cir. 2013). The Federal Circuit vacated the district court’s summary judgment regarding New Hampshire business tort claims and remanded with instructions for the state court. Applying the recent Gunn Supreme Court case, the Federal Circuit found that the federal court did not have federal patent law subject matter jurisdiction, because there was no prospect of a conflict, or inconsistent judgments, between state and federal courts. The use of the product in question was in Taiwan and the U.S. patents had expired.

Summary Judgment

Baron Services Inc. v. Media Weather Innovations LLC, 717 F.3d 907, 106 U.S.P.Q.2d 1686 (Fed. Cir. 2013). The Federal Circuit vacated and remanded the district court’s summary judgment of noninfringement. The Federal Circuit found that it was improper for the district court to grant summary judgment. The plaintiff was entitled to certain discovery and to depose witnesses whose affidavits the court relied upon in the summary judgment finding. The plaintiff repeatedly requested this discovery and stated it could not adequately respond to the summary judgment motion without it.

TRADE SECRETS

Attorneys’ Fees

Tradesman Int’l, Inc. v. Black, 2013 WL 3949020 (7th Cir. 2013). A prevailing party can recover attorneys’ fees under the Illinois Trade Secrets Act if “a claim of misappropriation is made in bad faith.” A claim is made in bad faith if it is initiated in bad faith, maintained in bad faith, or both.

Lack of Employer Policies

Dana, Ltd. v. Axle & Mtg. Holdings, 2013 U.S. Dist. LEXIS 116899 (W.D. Mich. 2013). The employer Dana had no policy against employees storing Dana information on their personal computers or personal storage devices. Thus, there was no misappropriation of trade secrets because there is no evidence that Dana’s alleged trade secret information was obtained by stealth, deception, or trickery.

Misappropriation of Information

Unisource Worldwide v. Swope, 2013 WL 4029170, 2013 U.S. Dist. LEXIS 112623 (D. Ariz. 2013). Claims based on misappropriation of information that fall short of the statutory definition of a trade secret under the Arizona Uniform Trade Secrets Act (AUTSA) are preempted. If the AUTSA only preempted torts concerning misappropriation of bona fide trade secrets, then the court would be forced to reanalyze the claim under various common law theories. The AUTSA preempts all common law tort claims based on misappropriation of information, whether or not it meets the statutory definition of a trade secret.

Nondisclosure Agreement

Convolve, Inc. v. Compaq Corp., 2013 WL 3285331, 2013 U.S. App. LEXIS 13612 (Fed. Cir. 2013). A written nondisclosure agreement (NDA) supplants any implied duty of confidentiality if the parties have contracted the limits of their confidential relationship regarding a particular subject matter. One party should not be able to circumvent its contractual obligations or impose new ones over the other via an implied duty of confidentiality. Convolve did not follow the procedures set forth in the NDA to protect the shared information so no duty ever arose to protect that information under the California Uniform Trade Secrets Act.

TRADEMARKS

Collateral Estoppel

Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 719 F.3d 1367, 107 U.S.P.Q.2d 1167 (Fed. Cir. 2013). Levi Strauss opposed Abercrombie’s application for registration of “mirror image stitching design” as a trademark for use on jackets and petitioned to cancel Abercrombie’s design for use on jeans, skirts, and pants. Levi appealed from summary judgment dismissing registration challenges on grounds of preclusion. The Federal Circuit reversed and remanded.

In 2005, Abercrombie sought to register a “mirror image stitching design” for use on clothing, such as jeans, skirts, pants, and jackets. The application was subsequently divided. The parent, covering jackets, sought registration on the principal register, and the child, covering the remaining categories of clothing, registered on the supplemental register. Levi opposed the parent application and sought to cancel the child registration, alleging that Abercrombie’s design was likely to cause confusion with Levi’s “Arcuate” design, which had been in use since 1873. Levi also sued Abercrombie in the Northern District of California alleging that Abercrombie’s design on its upscale “Ruehl” line of jeans was likely to dilute its Arcuate mark. In 2009, the jury returned a verdict in favor of Abercrombie on both counts. Levi appealed the judgment on dilution, and the Ninth Circuit reversed and remanded. Prior to remand, Abercrombie shut down its Ruehl brand and began using the design on a less expensive Gilley Hicks line. In 2011, the district court entered judgment against Levi and dismissed its claim for dilution. Back at the PTO, the Board granted summary judgment dismissing the cancellation and the opposition proceedings on the ground of issue preclusion, and Levi appealed.

The Federal Circuit held that the 2009 judgment on dilution could not support claim or issue preclusion because the judgment was reversed on appeal. The 2011 judgment on dilution was only a voluntary dismissal with prejudice and therefore had no issue-preclusive effect. Because the marks at issue in the PTO covered a much broader range of uses of the design than were subject to the 2009 judgment on infringement, the results of the district court case did not preclude Levi’s challenges in the PTO. Because the Federal Circuit found that the Board erred in ruling that issue preclusion barred Levi’s challenges in the related opposition and cancellation proceedings, and the result could not rest in the alternative on claim preclusion, it reversed and remanded.

Contributory Infringement

Coach Inc. v. Goodfellow, 717 F.3d 498, 106 U.S.P.Q.2d 2033 (6th Cir. 2013). The Sixth Circuit affirmed the district court’s grant of summary judgment for Coach on the issue of contributory infringement by Goodfellow. Goodfellow owned and operated a flea market where third party vendors sold counterfeit products bearing COACH marks. Goodfellow controlled the flea market and had the ultimate authority to allow and remove vendors who sold goods there.

The Sixth Circuit noted that a flea market operator who deliberately fails to investigate suspected infringing activity and allows use of flea market resources by vendors could be subject to contributory liability. Here, the Sixth Circuit determined that Goodfellow provided rental booths to vendors who he knew or had reason to know were engaging in trademark infringement. Goodfellow had received letters from Coach and the local district attorney general notifying Goodfellow of counterfeit sales. The Sixth Circuit recognized that Goodfellow had taken some remedial steps to address the infringing activities, but determined that those steps were not compelling evidence of a reasonable response. The Sixth Circuit found that Goodfellow had knowledge of and willful blindness toward ongoing infringing activities of vendors at the flea market, thereby facilitating those infringing activities. The Sixth Circuit also affirmed the entry of judgment on the jury’s damage award and the district court’s award of attorney’s fees and costs given the exceptional nature of the case.

Functional Marks

In re Florists’ Transworld Delivery Inc., 106 U.S.P.Q.2d 1784 (T.T.A.B. 2013). FTD appealed the refusal of registration of its color mark for flowers and live cut floral arrangements. FTD had filed a trademark application for “the color black as applied to a substantial portion of the outside surface of a box which services as a container or packaging for the goods and in part forms a background to design and literal elements applied thereto.” The TTAB affirmed the refusal of the color mark on the grounds that: (1) the mark was functional as applied to the packaging for floral arrangements, and (2) FTD had not established that the mark had acquired distinctiveness.

On the issue of functionality, the TTAB found that the mark was aesthetically functional based on the evidence provided by the examiner that, in the floral industry, the color black is associated with stylish or formal events such as weddings, that the color black provides an elegant, classical, or luxurious look, and in some contexts, the color black may connote grief or condolence, and is a critical color in Halloween displays. The TTAB also noted that when there is a strong competitive need for a color and when color use in an industry is dynamic and significant, color is likely unregistrable. Finding that the color black for boxes and live-cut floral arrangements serve a non-trademark purpose, and that its registration would hinder the ability of others to effectively compete, the TTAB agreed that the color black was functional.

Alternatively, the TTAB also agreed that FTD’s evidence of use, sales, and promotion of its mark failed to meet the heavy burden of showing that the color black had acquired distinctiveness and was perceived as a trademark for its goods.

Withdrawal of Surrender of Registration

Christiane E LLC v. Int’l Expedition Inc., 106 U.S.P.Q.2d 2042 (T.T.A.B. 2013). Christiane filed a petition seeking cancellation of respondent International Expedition’s trademark on the ground of abandonment. In lieu of filing an answer, the respondent filed a voluntary surrender of its registration without the petitioner’s consent pursuant to Trademark Rule 2.134(a). Prior to any action taken on the surrender, the respondent filed a motion to withdraw the earlier-filed surrender, arguing that, at the time of surrender, it did not know that the petitioner was formed by a founder of one of the registrant’s predecessors and that the petitioner has hired at least one of the registrant’s employees.

The TTAB found that In re Glaxo Group Ltd., 33 U.S.P.Q.2d 1535 (Comm’r 1993), which involved the abandonment of an application, could also be applied to the surrender of a registration. Like in Glaxo, the respondent’s relinquishment was made expressly and voluntarily, and was made part of the public record. As such, members of the public may have relied upon it to their detriment. The TTAB also found that the stated basis for the respondent’s motion to withdraw was not relevant to the proceeding and, thus, should not justify relieving respondent of its decision to surrender its registration. The TTAB thus denied the respondent’s motion. Because the petitioner’s written consent to the voluntary surrender was not of record, judgment was entered against the respondent, and the petition to cancel was granted.