Decisions in Brief

Decisions in Brief

John C. Gatz

©2014. Published in Landslide, Vol. 7, No. 2, November/December 2014, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

COPYRIGHTS

Aereo’s Retransmissions of Broadcasts Are Public Performances

Am. Broad. Cos. v. Aereo, Inc., 134 S. Ct. 2498, 110 U.S.P.Q.2d 1961 (U.S. 2014).The Supreme Court held that defendant Aereo performs over-the-air television programs publicly, in violation of copyrights held by the defendants, comprised of television producers, marketers, distributors and broadcasters. Aereo sells a service that allows its subscribers to watch television programs over the Internet by selecting the show from a menu on Aereo’s website. Aereo’s system, which consists of thousands of small antennas and other equipment housed in a centralized warehouse, tunes an antenna that is dedicated to the use of one subscriber alone, transcodes the signals, and begins streaming the show.

The Court noted that Congress’ primary purpose in amending the Copyright Act in 1976 was to overturn the Supreme Court’s holdings that the activities of cable television providers fell outside the Act’s scope. The Act now clarifies that to perform an audiovisual work means “to show its images in any sequence or to make the sounds accompanying it audible.” Thus, both the broadcaster and the viewer perform because they both show a television program’s images and make audible the program’s sounds.

Failure to Identify Copyrightable Elements of Software Delivers Summary Judgment to Defendant

Automated Solutions Corp. v. Paragon Data Sys., 756 F.3d 504, 111 U.S.P.Q.2d 1527 (6th Cir. 2014). ASC and Paragon entered a contract to create and support computer software related to newspaper subscription and delivery called SCDS. ASC obtained the copyright registration for SCDS. After a few years, Paragon terminated the contract with ASC. Paragon subsequently developed a similar software product called DRACI. ASC sued Paragon, alleging that the DRACI software infringed the copyright for SCDS. Following some discovery disputes involving ESI preservation, both ASC and Paragon moved for summary judgment. The district court granted in part Paragon’s motion for summary judgment, based on ASC failing to identify which portions of the SCDS software were subject to copyright protection. ASC appealed.

The Sixth Circuit affirmed. The court began its de novo review of the grant of summary judgment to Paragon by noting that to establish copyright infringement, the plaintiff must show ownership of a valid copyright, and that the copying included original elements of the copyrighted work. This test requires the court to eliminate the portions of the copyrighted work that are not protectable, and then determine whether the allegedly infringing work is substantially similar to the remaining protectable elements of the copyrighted work. The Sixth Circuit found that since ASC did not identify the protectable elements of the SCDS software, there was no triable issue of fact regarding whether Paragon infringed the copyright. The Sixth Circuit rejected ASC’s argument that ASC’s expert’s declaration satisfied this element. The Sixth Circuit found that the declaration did not identify the portions of the software that are protectable or why those portions are protectable, but simply stated a conclusory opinion. Therefore, the Sixth Circuit affirmed the grant of summary judgment for Paragon.

Master Recordings Compensate for Legal Debts

Hendricks & Lewis PLLC v. Clinton., 755 F.3d 1077, 111 U.S.P.Q.2d 1379 (9th Cir., 2014). Musician George Clinton of Parliament-Funkadelic fame ran up over $3 million in legal fees with Hendricks & Lewis of Seattle. Clinton either paid or was excused from about $1.6 million of the fees, and H&L sought payment of about $1.8 million in arbitration. H&L won the arbitration. Confirming the arbitration award, the U.S. District Court for the Western District of Washington appointed a receiver for H&L, and determined that the judgment could be satisfied by granting the receiver copyright interests in four of Clinton’s recordings. The receiver was ordered to maximize the income stream from the sound recordings to satisfy the judgment in favor of H&L. The Ninth Circuit affirmed the district court’s decision. The Ninth Circuit noted that copyrights are alienable under 17 U.S.C. § 201(d)(1), but knew of “no federal statutory law directly addressing whether copyrights are subject to execution to satisfy a judgment.”

PATENTS

Anticipation

In re Rambus, Inc. 753 F.3d 1253, 111 U.S.P.Q.2d 1077 (Fed. Cir. 2014). The Federal Circuit reversed the PTAB’s decision of anticipation as being unsupported by substantial evidence. Specifically, it determined that the prior art reference did not disclose a particular feature. The Federal Circuit agreed with the patentee that the figures relied on from the prior art were simplified, hypothetical illustrations of how the prior art invention works in theory, and not schematics of how it actually functions.

Suffolk Techs., LLC v. AOL Inc., 752 F.3d 1358, 110 U.S.P.Q.2d 2034 (Fed. Cir. 2014). The Federal Circuit affirmed the district court’s summary judgment finding that claims were invalid for anticipation. The Federal Circuit upheld the district court’s claim construction, finding that the specification supported the district court’s construction. The Federal Circuit also found that the prior art reference to be a publication – the newsgroup was used by those skilled in the art and was sufficiently accessible to the public. It is not a requirement that the publication be easily searchable.

Appellate Review

In re Dominion Dealer Solutions, LLC, 749 F.3d 1379, 110 U.S.P.Q.2d 1780 (Fed. Cir. 2014). The Federal Circuit denied the patentee’s petition to force the PTO Director to withdraw orders instituting inter partes review. There is no indisputable right to immediate appellate review of such decisions and the case does not present interim irreparable harm to justify such review.

In re Procter & Gamble Co., 749 F.3d 1376, 110 U.S.P.Q.2d 1782 (Fed. Cir. 2014). The Federal Circuit denied the patentee’s petition to force the PTO director to withdraw orders instituting inter partes review. There is no indisputable right to immediate appellate review of such decisions, and the case does not present interim irreparable harm to justify such review.

St. Jude Med., Cardiology Div. v. Volcano Corp., 749 F.3d 1373, 110 U.S.P.Q.2d 1777 (Fed. Cir. 2014). The Federal Circuit held that it could not hear an appeal from the PTO director’s denial of a petition for inter partes review because appeals were only authorized from the final written decision of the Board under § 318(a). The director’s decision was not a final written decision by the Board. Furthermore, the statute addressing inter partes review includes no authorization to appeal a non-institution decision to the Federal Circuit.

Article III Case or Controversy

Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, 111 U.S.P.Q.2d 1241 (Fed. Cir. 2014). The Federal Circuit dismissed the appeal from the PTAB’s decision affirming the patentability of WARF’s patent claims. Consumer Watchdog did not establish an injury sufficient to confer Article III standing. A statutory grant of a procedural right did not eliminate the requirement that Consumer Watchdog have a particularized, concrete stake in the outcome of the reexamination, or any injury in fact flowing from the PTAB’s decision.

Claim Construction

GE Lighting Solutions, LLC v. AgiLight, Inc., 750 F.3d 1304, 110 U.S.P.Q.2d 1800 (Fed. Cir. 2014). The Federal Circuit reversed and remanded the district court’s ruling granting summary judgment of noninfringement with respect to three patents, and affirmed the district court’s ruling granting summary judgment of noninfringement as to the other patent. The Federal Circuit noted that the specification and prosecution history only compel departure from the plain meaning in two instances: lexicography and disavowal. There was no lexicography or disavowal in the first two patents. The Federal Circuit also found a genuine issue of material fact as to whether AgiLight’s accused devices included limitations in the claims in the third patent, and thus reversed and remanded. Under the proper claim construction, the Federal Circuit did not find a genuine issue of material fact with respect to the fourth patent and thus affirmed the summary judgment.

Claim Construction/Noninfringement/Invalidity

InTouch Techs., Inc. v. VGo Communications, Inc., 751 F.3d 1327, 110 U.S.P.Q.2d 1886 (Fed. Cir. 2014). The Federal Circuit affirmed the judgment of noninfringement for all three asserted patents, but reversed and remanded the district court’s invalidity findings. The Federal Circuit affirmed the district court’s construction of two specific claim limitations and, in doing so, held that substantial evidence existed to support the conclusion that the accused system lacked multiple limitations in each of the asserted claims. With respect to invalidity, however, the Federal Circuit reversed the jury verdict, finding that the defendant’s expert failed to (1) provide any motivation to combine references, (2) focus on the relevant time frame, and (3) properly consider objective evidence of nonobviousness.

Damages

Apple Inc. v. Motorola, Inc., 110 U.S.P.Q.2d 1695 (Fed. Cir. 2014). The Federal Circuit reversed and affirmed the district court’s claim constructions from several patents. The Federal Circuit also affirmed and vacated various grants of summary judgment of non-infringement and the parties’ requests for injunctions. Regarding damages, the Federal Circuit reversed the district court’s decision to exclude the parties’ expert evidence relating to damages. The Federal Circuit applied Seventh Circuit law that reviews de novo whether the district court applied the proper legal framework, but reviews decision whether to admit or exclude expert testimony under this framework for an abuse of discretion. The Federal Circuit determined that the district court’s damages analysis relied upon incorrect claim construction and did not consider the full scope of infringement. It was also unreasonable to exclude evidence simply because it relied on information from a technical expert.

Indefiniteness

Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 110 U.S.P.Q.2d 1688 (U.S. 2014). The Supreme Court vacated and remanded to the Federal Circuit following its earlier decision that a claim passes the § 112, ¶ 2 definiteness threshold so long as the claim is amendable to construction, and the claim as construed is not insolubly ambiguous. The Court held that a claim is invalid for indefiniteness if the claim, read in light of the specification and prosecution history, fails to inform those skilled in the art about the scope of the invention with reasonable certainty.

In re Packard, 751 F.3d 1307, 110 U.S.P.Q.2d 1785 (Fed. Cir. 2014). The Federal Circuit affirmed the PTAB’s rejection of Packard’s claims as indefinite. The Federal Circuit found that the PTAB properly applied the MPEP standard in its indefiniteness determination of Packard’s claims, and that the PTAB properly afforded Packard with the opportunity to bring clarity to the claim language. The Federal Circuit agreed with the PTAB in determining that Packard failed to adequately comply with the statutory requirements of § 112(b).

Infringement – Inducement

Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111, 110 U.S.P.Q.2d 1681 (U.S. 2014). The Supreme Court reversed the en banc Federal Circuit decision and held that a defendant is not liable for inducing infringement under § 271(b) when no one has directly infringed under § 271(a) or any other statutory provision. The Court stated liability for inducement must be predicated on direct infringement where performance of all claimed method steps is attributable to one person.

Interference

Tobinick v. Olmarker, 753 F.3d 1220, 110 U.S.P.Q.2d 1944 (Fed. Cir. 2014). The Federal Circuit reversed the PTAB’s dismissal of an interference for lack of written description support. The Federal Circuit affirmed the PTAB’s claim construction for the term “administered locally,” but reversed the PTAB’s decision regarding written description support for that term.

Inventorship

Gen. Electric Co. v. Wilkins, 750 F.3d 1324, 110 U.S.P.Q.2d 1937 (Fed. Cir. 2014). The Federal Circuit affirmed the district court’s declaratory judgment in favor of GE that Defendant Wilkins was not a co-inventor of one of GE’s patents. The Federal Circuit agreed that Wilkins failed to present any credible testimony that could be corroborated. Thus, Wilkins failed to prove by clear and convincing evidence that he was entitled to co-inventorship of the patent.

Jurisdiction

Krauser v. BioHorizons, Inc., 753 F.3d 1263, 110 U.S.P.Q.2d 2051 (Fed. Cir. 2014). The Federal Circuit held it did not have jurisdiction to hear the appeal and transferred the case to the Eleventh Circuit. The plaintiff withdrew inventorship claims and the second amended complaint did not contain any claims that depended upon resolution of a substantial question of federal patent law.

Means Plus Function

Triton Tech of Tex., LLC v. Nintendo of Am., Inc., 753 F.3d 1375, 111 U.S.P.Q.2d 1396 (Fed Cir. 2014). The Federal Circuit affirmed that the claims are indefinite because the specification does not disclose an algorithm for performing the claimed integrating function of the “integrator means” feature. While expressing the algorithm as a flow chart, series of specific steps, or mathematical formula may have sufficed, merely using the term “numerical integration” does not disclose an algorithm.

Obviousness

Bristol-Myers Squibb Co. v. Teva Pharm. USA, Inc., 752 F.3d 967, 111 U.S.P.Q.2d 1293 (Fed. Cir. 2014). The Federal Circuit affirmed the district court’s finding of obviousness. In affirming the obviousness judgment, the Federal Circuit noted that unexpected results by a compound do not per se defeat, or prevent, a finding of obviousness. As with secondary considerations, unexpected results come into play in the obviousness determination. The Federal Circuit also noted that the district court committed legal error regarding its unexpected results analysis in two ways: first, by comparing the compound-at-issue to another drug on the market instead of the closest prior art, and second by looking to what the inventor, instead of one of ordinary skill in the art, knew to determine what was expected. However, the Federal Circuit found that both errors were harmless.

K/S HIMPP v. Hear-Wear Techs., LLC, 751 F.3d 1362, 110 U.S.P.Q.2d 2027 (Fed. Cir. 2014). The Federal Circuit affirmed the PTAB’s decision refusing to reject certain claims as obvious. The Federal Circuit agreed with the PTAB’s finding that assertions of “known in the art” cannot substitute for the factual evidence required to conclude that a claim is obvious. The PTAB’s decision was correct because an assessment of basic knowledge and common sense as a replacement for documentary evidence for core factual findings lacks substantial evidence support. Accordingly, the PTAB’s holding was not inconsistent with KSR’s caution against the overemphasis on publications and patents for combining or modifying prior art already on the record.

Q.I. Press Controls, B.V. v. Lee, 752 F.3d 1371, 111 U.S.P.Q2d 1272 (Fed. Cir. 2014). In an appeal of an inter partes reexamination proceeding before the PTAB, the Federal Circuit vacated-in-part, affirmed-in-part, and remanded the PTAB’s findings with respect to the obviousness of certain claims. During the reexamination, the examiner rejected claims 1–17 and 19–72 as being obvious and found claims 14, 18, and 24 to be invalid for lacking adequate written description. The PTAB reversed all of the examiner’s findings except those with respect to claims 18 and 61–72. The parties then cross-appealed the PTAB’s findings. The Federal Circuit found that the Board erred in failing to consider the same obviousness rejection—a combination of two prior art references—for claims 61–72 as it had used in connection with the other claims, but did not otherwise err.

Priority/Obviousness

Allergan, Inc. v. Apotex Inc., 754 F.3d 952, 111 U.SP.Q.2d 1245 (Fed. Cir. 2014). The Federal Circuit reversed the district court’s ruling that the asserted patents were valid and infringed and, in so doing, vacated the injunction imposed against the defendants. There was no dispute that the inventors acted as their own lexicographer in defining the term “treating hair loss” as “arresting hair loss or reversing hair loss, or both, and promoting hair growth.” The Federal Circuit rejected the argument that the conjunction “and” in the above definition required arresting or reversing hair loss as well as the promotion of hair growth. The Federal Circuit concluded that the district court committed clear error in holding that one of the asserted patents was not invalid as obvious. This obviousness conclusion was reached by relying on implicit teachings of the prior art as motivation to combine two prior art references The district court’s conclusion that the second patent was entitled to an earlier priority date was reversed because there was insufficient corroborating evidence to support appellee’s arguments. The Federal Circuit found the asserted claims of the second patent to be obvious.

Reissue

In re Dinsmore, 111 U.S.P.Q.2d 1229 (Fed. Cir. 2014). The Federal Circuit affirmed the PTAB’s decision upholding the Examiner’s rejection of the reissue application. During prosecution, the applicants filed a terminal disclaimer in response to an obviousness-type double patenting rejection. In the reissue application, the applicants tried to modify the recorded terminal disclaimer to delete the common-ownership provision and to modify the claims that gave rise to the disclaimer, because the two patents are not and never have been commonly owned. The Federal Circuit held that because the applicants had not identified an “error” within the meaning of section 251, the PTAB’s decision was proper.

Rule 11 Sanctions

Source Vagabond Sys. Ltd. v. Hydrapak, Inc., 753 F.3d 1291, 111 U.S.P.Q.2d 1015 (Fed. Cir. 2014). The Federal Circuit affirmed Rule 11 sanctions for bringing a frivolous patent infringement suit. The Federal Circuit held that the district court did not abuse its discretion by imposing sanctions for plaintiff’s frivolous claim construction and infringement arguments.

Standing

STC. UNM v. Intel Corp., 754 F.3d 940, 111 U.S.P.Q.2d 1033 (Fed. Cir. 2014). The Federal Circuit affirmed the dismissal because the patent co-owner did not consent to join the patent infringement suit and cannot otherwise be involuntarily joined.

Vaillancourt v. Becton Dickinson & Co., 749 F.3d 1368, 110 U.S.P.Q.2d 1677 (Fed. Cir. 2014). The Federal Circuit rejected an appeal from the PTAB because the appellant was not the patent owner. During the interference proceeding and subsequent reexamination, the appellant assigned the patent to a company. After the PTAB affirmed the rejections, the appellant appealed. The Federal Circuit found that the appellant did not have standing since the appellant was no longer the patent owner.

U.S.C. Section 101

Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 110 U.S.P.Q.2d 1976 (U.S. 2014). The Supreme Court affirmed the en banc Federal Circuit’s holding that asserted claims were not directed to patentable subject matter. The Supreme Court found that the claims were directed to an abstract idea. Simply appending conventional steps to a method is not enough. The claims merely recite the concept of intermediated settlement as performed by a generic computer.

In re Roslin Inst. (Edinburgh), 750 F.3d 1333, 110 U.S.P.Q.2d 1668 (Fed. Cir. 2014). The Federal Circuit affirmed the PTAB’s rejection of claims under Section 101. The Federal Circuit found claims directed to products of somatic method of cloning mammals was not patentable under Section 101 since the cloned mammals did not possess markedly different characteristics from animals found in nature.

TRADE SECRETS

Advanced Fluid Sys., Inc. v. Huber, 2014 U.S. Dist. LEXIS 82562 (M.D. Pa. 2014). Plaintiff AFS alleged that defendants misappropriated its trade secrets including drawings, diagrams and documents. AFS sued for violating the Pennsylvania Uniform Trade Secrets Act (PUTSA) and the defendants moved to dismiss because AFS failed to allege or establish that AFS was the owner of the alleged trade secrets. The PUTSA does not literally require proof of ownership. In fact, there can be multiple owners of a single trade secret.

Breadmore v. Jacobson, 2014 U.S. Dist. LEXIS 97332 (S.D. Tex. 2014). The plaintiff provided the defendant with a graphic design of certain pictorial elements, a flow chart, certain software, drawings, and other information. The defendant then allegedly sold this IP to a third party. The plaintiff secured a copyright registration to support federal subject matter jurisdiction and sued for copyright infringement, trade secret misappropriation, and violation of the Texas Theft Liability Act. The district court dismissed the state law claims holding that the gravamen of the state-law claims at issue (theft, trade secret misappropriation, and conversion) involve the wrongful copying, reproduction, distribution, and transfer of copyrighted material and therefore these claims were preempted by the Federal Copyright Act.

Hallmark Cards, Inc. v. Monitor Clipper Partners, LLC, 2014 U.S. App. LEXIS 13398 (8th Cir. 2014). Hallmark hired Monitor Company Group, L.P. (Monitor), to compile research on the greeting cards market. Monitor transmitted confidential market research for Hallmark to a private equity firm called Monitor Clipper Partners, LLC (Clipper). Clipper used this information to purchase and subsequently manage a competitor of Hallmark’s called Recycled Paper Greetings, Inc. The jury’s verdict finding of trade secret misappropriation was affirmed. The value of a trade secret is not dependent on how much of the information is otherwise unavailable because the effort of compiling useful information is, of itself, entitled to protection even if the information is otherwise generally known.

Hansen v. Sentry Ins. Co., 2014 U.S. App. LEXIS 12092 (1st Cir. 2014). A former vice president (Hansen) defends trade secret misappropriation claims. The district court found no insurance coverage for alleged acts of trade secret misappropriation by the former vice president. Hansen’s coverage theory, however creative, was without merit. The insurance policy does not provide insurance coverage to Hansen when Wilcox—the company he served as a vice president—claims that it suffered damages as a result of Hansen’s harmful and intentional acts of trade secret misappropriation. These allegations, if proven, breach Hansen’s fiduciary duties to Wilcox and are beyond the scope of Hansen’s duties as an executive officer. Therefore, these acts fell outside the insurance policy coverage.

TRADEMARKS

Non-Registrable Subject Matter

In re Geller, 751 F.3d 1355, 110 U.S.P.Q.2d 1867 (Fed. Cir. 2014). The Federal Circuit affirmed the PTAB’s refusal to register the proposed mark in connection with the recited services. The PTAB found that the mark contained matter that may disparage a group of persons in violation of section 2(a) of the Trademark Act. The Federal Circuit found substantial evidence supporting the PTAB’s finding and, therefore, affirmed the decision.

Ownership

Conolty v. Conolty O’Connor NYC LLC, 111 U.S.P.Q.2d 1302 (T.T.A.B. 2014). Business partners Conolty and O’Connor disputed ownership over the mark FAIRWAY FOX for golf clothing. In 2008, Conolty (the opposer) and O’Connor began preparations to offer a new line of upscale, fashionable golf clothing. Conolty O’Connor NYC LLC (the applicant) was formed in 2011 with O’Connor as the sole shareholder. In January 2012, the applicant applied to register the mark FAIRWAY FOX for golf-related clothing. The parties stopped working together in May 2012. The opposer sold FAIRWAY FOX clothing on the “etsy.com” website, and the applicant sold FAIRWAY FOX clothing on the “fairwayfoxgolf.com” website. The opposer opposed registration, alleging prior use of an identical mark for identical goods and that the applicant’s mark would be likely to cause confusion with the opposer’s mark.

The PTAB found that, even if it was assumed that the opposer did not plead a claim of nonownership, such a claim was tried by implied consent. The PTAB found that the trademark application for FAIRWAY FOX was void ab initio because the applicant was not the sole owner of the mark, since the applicant had a joint interest in the FAIRWAY FOX mark with the opposer. The PTAB also found that the result would be effectively the same if the case was analyzed as a dispute over priority rather than ownership. Specifically, the PTAB found that the applicant was not entitled to register a mark identical to the partnership or joint venture’s mark for the same exact goods because the mark would likely create confusion in the minds of consumers who associate the mark with the opposer, on the one hand, and O’Connor or the applicant on the other.

Since the record was clear that the applicant was not the sole owner of the FAIRWAY FOX mark, the opposition was sustained and registration of the applicant’s mark was refused under Section 1(a) of the Trademark Act. The involved application was found to be void ab initio.

Preemption – Federal Statutes

POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 110 U.S.P.Q.2d 1877 (U.S. 2014). The Supreme Court reversed the lower court’s decisions granting partial summary judgment for Coca-Cola. The issue was whether the Federal Food, Drug and Cosmetic Act (FDCA) preempted a cause of action brought by POM for unfair competition under § 43 of the Lanham Act. POM alleged that Coca-Cola’s use of a label on its pomegranate blueberry juice blend was deceptive and misleading. Coca-Cola’s label displayed the words “pomegranate blueberry” with far more prominence than other words on the label, despite the product containing only 0.3% pomegranate juice and 0.2% blueberry juice.

The Supreme Court determined that the ruling that POM’s Lanham Act cause of action was precluded by the FDCA was incorrect. The Supreme Court found that there was no statutory text or interpretation that supported the contention that the FDCA preempts the Lanham Act. The Supreme Court pointed out that each act has its own scope, purpose and remedies, and whereas both acts touch on food and beverage labeling, the Lanham Act protects commercial interests while the FDCA protects public health and safety. Moreover, Congress did not enact specific provisions in the acts allowing one federal statute to preclude the other. Since the acts have coexisted for over 70 years, this was strong evidence that Congress did not intend for the FDCA to be the exclusive means of ensuring proper food and beverage labeling.

Standing

Empress Cubana Del Tabaco v. Gen. Cigar Co., 753 F.3d 1270, 111 U.S.P.Q.2d 1058 (Fed. Cir. 2014). Empresa Cubana Del Tabaco (Cubatabaco) challenged the TTAB’s grant of summary judgment to General Cigar on the basis that Cubatabaco lacked standing to seek cancellation of General Cigar’s two registrations for the trademark COHIBA for cigars. The Federal Circuit remanded, finding that Cubatabaco had a statutory cause of action to petition the TTAB to cancel the registrations, and that issue and claim preclusion did not bar its amended petition to cancel the registrations.

Cubatabaco is a Cuban entity that owns the COHIBA mark in Cuba and supplies cigars bearing the mark throughout the world. Although the Cuban Assets Control Regulations (CACR) prohibits Cubatabaco from selling cigars in the United States, Cubatabaco obtained a general license to attempt to register the COHIBA mark in the United States. Cubatabaco also filed a petition to cancel General Cigar’s COHIBA registrations, which the USPTO cited against Cubatabaco’s application in a likelihood of confusion rejection. Cubatabaco subsequently commenced litigation against General Cigar for its use of the COHIBA mark, and the TTAB suspended the cancellation proceedings pending the outcome of the district court litigation.

The district court cancelled the first of General Cigar’s registrations, finding that it had been abandoned during five years of non-use. It permanently enjoined General Cigar’s use of the COHIBA mark and cancelled the registrations, finding that Cubatabaco had acquired ownership of the mark between the period of abandonment of the first registration and the filing of the second registration. On appeal, the Second Circuit reversed, finding that the injunctive relief Cubatabaco sought would involve a prohibited transfer of property under the CACR, given that Cubatabaco would acquire ownership of the COHIBA mark. When the TTAB proceedings resumed, the TTAB found that Cubatabaco lacked standing and that issue and claim preclusion barred Cubatabaco’s amended petition.

The Federal Circuit found that because Cubatabaco sought registration for the COHIBA mark and General Cigar’s registrations blocked its application, Cubatabaco had a cause of action under the Lanham Act to seek cancellation of General Cigar’s registrations. The Federal Circuit found that neither the Second Circuit’s decision nor the CACR prohibited Cubatabaco from registering its mark. The Federal Circuit also found that neither issue nor claim preclusion barred Cubatabaco’s amended petition. Specifically, the Second Circuit never addressed or explicitly declined to reach the merits on certain issues that Cubatabaco raised in its amended petition, and other issues addressed by the Second Circuit were not identical to those raised in the amended petition. The Federal Circuit further found that claim preclusion did not bar Cubatabaco’s amended petition because the Second Circuit never issued a final judgment on the merits of Cubatabaco’s cancellation claims.

Thus, the Federal Circuit held that Cubatabaco had a cause of action under the Lanham Act to petition the TTAB for cancellation of the registrations blocking its trademark application, and issue and claim preclusion did not bar its amended petition. The Federal Circuit, therefore, vacated the TTAB’s decision and remanded for further proceedings.

John C. Gatz

John C. Gatz is a member of the firm Nixon Peabody LLP in Chicago.

Column Contributors include the following writers: Copyrights: Zachary J. Smolinski, Panduit Corporation; Michael N. Spink, Brinks, Gilson & Lione; Mark R. Anderson, Akerman LLP. Patents: Cynthia K. Barnett, Johnson & Johnson; R. Trevor Carter, Daniel M. Lechleiter, and Andrew M. McCoy, Faegre Baker Daniels LLP; Robert W. (Bill) Mason, Kinetic Concepts, Inc.; Peter J. Prommer, Nixon Peabody LLP. Trade Secrets: R. Mark Halligan, Nixon Peabody LLP. Trademarks: Janet M. Garetto and Elizabeth W. Baio, Nixon Peabody LLP; Amy L. Sierocki.