April 01, 2020 Decisions in Brief

Decisions in Brief

John C. Gatz

©2020. Published in Landslide, Vol. 12, No. 4, March/April 2020, 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

Case Remanded against Taylor Swift for Possible Copyright Infringement

Hall v. Swift, No. 18-55426, 2019 WL 6608746, 2019 U.S. App. LEXIS 36143 (9th Cir. Oct. 28, 2019). Sean Hall and Nathan Butler sued singer-songwriter Taylor Swift alleging that Swift’s chart-topper “Shake It Off” copied a six-word phrase and a four-part lyrical sequence from Hall’s “Playas Gon’ Play.” The district court dismissed the complaint because Hall’s and Butler’s work lacked originality. The Ninth Circuit disagreed with the district court’s decision and determined that the complaint plausibly alleged originality. The district court’s decision was reversed and remanded.

Mercedes Found to Have Plausible Claims against Detroit Muralists for Declaratory Relief

Mercedes Benz, USA, LLC v. Lewis, Nos. 19-10948, 19-10949, 2019 U.S.P.Q.2d 444096 (E.D. Mich. Sept. 11, 2019). Mercedes Benz brought three declaratory judgment actions against defendants who are street artists. Mercedes posted six photographs on Instagram that depict murals painted on public buildings in Detroit, Michigan, by the defendants. The defendants sent letters to Mercedes asserting that Mercedes’s use of the defendants’ works constitutes copyright infringement. In response, Mercedes sought declaratory relief.

The defendants moved to dismiss the actions by arguing that the complaints failed to state a claim on the basis that (1) the case is not ripe as the defendants do not have registered copyrights, and (2) Mercedes failed to state a claim under the Architectural Works Copyright Protection Act (AWCPA), 17 U.S.C. § 120(a). The motions were denied because Mercedes alleged a plausible claim for declaratory relief.

The district court held that a copyright registration is not a prerequisite for filing a declaratory judgment action. The court noted that the recent U.S. Supreme Court decision in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC clarified that a registration is required to bring an infringement suit, but it did not address an action seeking declaratory relief. Further, the district court determined that Mercedes properly asserted a claim under the AWCPA, which protects Mercedes’s right to photograph publicly visible buildings that depict the defendants’ murals.

Registration Is Required and Attorney Fees Awarded for Bringing a Claim without a Registration

Johnson v. Magnolia Pictures LLC, No. 7:18-cv-09337-VB, 2019 U.S.P.Q.2d 348285 (S.D.N.Y. Sept. 16, 2019). Hillary Johnson sued Magnolia Pictures claiming that she owned the copyright to audio recordings made with actress and comedian Gilda Radner in preparation for a book by Radner. These audio recordings were subsequently used in a film about Radner that was made by Magnolia. Magnolia filed a motion to dismiss.

The district court granted Magnolia’s motion to dismiss. The district court noted that to state a claim for copyright infringement, the plaintiff must allege that he or she owns a valid copyright, and that copying of the copyrighted work has occurred. Johnson did not have a registered copyright in the audio recordings since she did not have a copy of the audio recordings. The district court found that since Johnson did not have a copyright registration in the audio recordings, the copyright action must be dismissed. The district court similarly dismissed Johnson’s declaratory judgment action to access the audio recordings to register a copyright in the audio recordings, since a declaratory judgment action is not an independent substantive action. Finally, the district court granted Magnolia attorney fees, as Johnson admitted in her complaint that she lacked a registered copyright in the audio recordings, while admitting that having a registered copyright is a prerequisite for bringing a copyright action.

Zazzle’s Recklessness May Constitute Willful Infringement

Greg Young Publishing, Inc. v. Zazzle, Inc., No. 18-55522, 2019 U.S.P.Q.2d 446653 (9th Cir. Nov. 20, 2019). Greg Young sued Zazzle for using copyrighted images with the sale of items on Zazzle’s website. Zazzle conceded infringement at trial and contested only damages and whether the infringement was willful. The district court found that there was insufficient evidence to establish willful infringement and (1) entered, but later vacated, a permanent injunction; (2) denied Young’s motion for attorney fees; and (3) awarded costs to both parties. Young appealed.

The Ninth Circuit concluded that a reasonable jury could find willfulness based on the evidence presented before the district court and remanded the decision accordingly. The Ninth Circuit reasoned that recklessness can constitute willful infringement, and can be established by an infringer’s knowing reliance on obviously insufficient oversight mechanisms. Because Zazzle never changed or improved its oversight system throughout the two-year time period relevant to the case, despite repeatedly being notified of its ineffective policies, a jury could find Zazzle to have acted recklessly. The Ninth Circuit held that the district court did not abuse its discretion with respect to the other issues brought up on appeal and affirmed the district court’s decision regarding the same.

Patents

Analogous Art

Airbus S.A.S. v. Firepass Corp., 941 F.3d 1374, 2019 U.S.P.Q.2d 430083 (Fed. Cir. 2019). The Federal Circuit vacated the Patent Trial and Appeal Board’s (PTAB’s) reversal of the examiner’s rejection of certain new claims presented by Firepass and remanded for reconsideration. The Federal Circuit held that the PTAB erred in its analogous art analysis by declining to consider evidence relied on by Airbus to demonstrate the knowledge and perspective of a person skilled in the art at the time of the invention. The Federal Circuit instructed the PTAB to consider whether certain art is analogous in view of the four prior art references relied on by Airbus.

Anticipation

In re Fought, 941 F.3d 1175, 2019 U.S.P.Q.2d 422062 (Fed. Cir. 2019). The PTAB incorrectly construed the phrase “travel trailer” in affirming the examiner’s anticipatory rejection. The Federal Circuit held that the phrase “[a] travel trailer having . . .” was a preamble despite lacking the word “comprising,” reasoning that the term “having” performs the same role. The Federal Circuit also found that the phrase “travel trailer” was a structural limitation rather than merely an intended use.

Wilson v. Martin, No. 2018-1980, 2019 WL 5304173, 2019 U.S.P.Q.2d 401160 (Fed. Cir. Oct. 21, 2019). The Federal Circuit upheld the PTAB’s decision that certain claims were unpatentable as anticipated or obvious over the prior art. The Federal Circuit upheld the PTAB’s finding that the prior art disclosed ambient air, and not just forced oxygen. The specification disclosed figures and description describing air without using a gas tank.

Design Patent

Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc., 942 F.3d 1119, 2019 U.S.P.Q.2d 435057 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s invalidity determination, reversed the district court’s summary judgment of infringement, and remanded. The Federal Circuit found that the applied art references provided substantial evidence that supported the jury’s verdict of obviousness. The Federal Circuit also held that expert testimony was not required because the technology was easily understandable. The Federal Circuit found that the district court erred in granting summary judgment of infringement because the district court improperly declined to consider the effect of Seirus’s logo in its infringement analysis and used an incorrect standard in resolving disputed fact issues.

Foreign Publication

Telefonaktiebolaget LM Ericsson v. TCL Corp., 941 F.3d 1341, 2019 U.S.P.Q.2d 428076 (Fed. Cir. 2019). The Federal Circuit affirmed the PTAB’s decision (1) that a foreign publication was prior art, and (2) to invalidate the challenged claim as being obvious. The PTAB did not abuse its discretion by permitting the petitioner to submit a declaration from a German librarian with personal knowledge outside the normal time frame provided for in the PTAB rules.

Inter Partes Review (IPR)

Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320, 2019 U.S.P.Q.2d 418700 (Fed. Cir. 2019). The Federal Circuit held that the statutory scheme for appointing administrative patent judges (APJs) violated the appointments clause of the U.S. Constitution. The Federal Circuit found that the APJs were principal officers because they exercise significant authority when deciding IPRs, but the U.S. Patent and Trademark Office (USPTO) Director had no power to individually review, nullify, or reverse APJ panel decisions. Because the APJs were appointed by the secretary of commerce rather than the president with the advice and consent of the Senate, the structure violated the appointments clause. To remedy the constitutional problem, the Federal Circuit severed the portion of the Patent Act restricting removal of APJs, thereby making them inferior officers.

Motion to Dismiss

Fraunhofer-Gesellschaft Zur Förderung der angewandten Forschung E.V. v. Sirius XM Radio Inc., 940 F.3d 1372, 2019 U.S.P.Q.2d 397074 (Fed. Cir. 2019). The Federal Circuit vacated and remanded the district court’s grant of a motion to dismiss. The accused infringer moved to dismiss based on a claim that it had a license to the asserted patents. The Federal Circuit determined that whether a license had been properly terminated (and if so, if that terminated the sublicense to the alleged infringer) needed to be determined by the district court and was not appropriately decided by a motion to dismiss.

Nonenablement

Idenix Pharmaceuticals LLC v. Gilead Sciences Inc., 941 F.3d 1149, 2019 U.S.P.Q.2d 415844 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s finding that the patent was invalid for nonenablement. The Federal Circuit noted that there were many thousands of candidates, these quantities would need to be screened, as not all candidates would work, they would need to be synthesized, and the specification only provided narrow examples.

Noninfringement

Pharma Tech Solutions, Inc. v. LifeScan, Inc., 942 F.3d 1372, 2019 U.S.P.Q.2d 450572 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s summary judgment of noninfringement under the doctrine of equivalents (DOE). The Federal Circuit agreed with the district court that prosecution history estoppel precluded infringement under the DOE. Specifically, the patentee narrowed its claims during prosecution to avoid prior art and made various arguments regarding the applicability of the prior art to its claims.

Obviousness

Game & Technology Co. v. Wargaming Group Ltd., 942 F.3d 1343, 2019 U.S.P.Q.2d 443889 (Fed. Cir. 2019). The Federal Circuit affirmed the PTAB’s determination that the claims would have been obvious.

Obviousness/IPR

In re IPR Licensing, Inc., 942 F.3d 1363, 2019 U.S.P.Q.2d 450527 (Fed. Cir. 2019). In a second appeal of the same issue, the Federal Circuit reversed the PTAB’s finding of obviousness as to the claim at issue. The PTAB had previously found the claim obvious, but in the first appeal, the Federal Circuit disagreed after finding that the evidence the PTAB relied on failed to demonstrate that one skilled in the art would have been motivated to combine the applied references. Instead of reversing the PTAB’s finding, however, the Federal Circuit remanded the case to the PTAB because it could not be sure that the record was totally devoid of any possible motivation to combine. Following remand, the PTAB again found the claim obvious. In this second appeal, the Federal Circuit found that the only additional evidence the PTAB relied on to find motivation to combine was not properly part of the record. Thus, the Federal Circuit found that the PTAB’s obviousness finding was still unsupported and reversed.

TQ Delta, LLC v. Cisco Systems, Inc., 942 F.3d 1352, 2019 U.S.P.Q.2d 450563 (Fed. Cir. 2019). The Federal Circuit reversed the PTAB’s obviousness findings in two related IPR proceedings. The Federal Circuit found that the fact findings underlying the PTAB’s obviousness determinations were not supported by substantial evidence.

Subject Matter Patentability

Koninklijke KPN N.V. v. Gemalto M2M GmbH, 942 F.3d 1143, 2019 U.S.P.Q.2d 439585 (Fed. Cir. 2019). The Federal Circuit reversed the district court’s finding that the claims were no more than mere abstract data manipulation operations. The Federal Circuit determined that the claims recited a sufficiently specific implementation of an existing tool that improves the functioning of the overall technological process of detecting systematic errors in data transmissions. Because all the claims on appeal were not directed to an abstract idea at step one of Alice, the Federal Circuit did not need to proceed to step two.

Trade Secrets

Big Squid, Inc. v. Domo, Inc., No. 2:19-cv-193, 2019 WL 3555509, 2019 U.S. Dist. LEXIS 131094 (D. Utah Aug. 5, 2019). This case arose from a business relationship between two software companies. Beginning in 2015, plaintiff Big Squid and defendant Domo contracted to sell software and software-implementation services. The parties’ relationship soured, and Big Squid sued Domo for breach of contract and other causes of action including trade secret misappropriation. Domo moved to dismiss the trade secret misappropriation claim based on Utah’s economic loss rule, which provides that a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a contractual breach absent an independent duty of care under tort law. The district court rejected this argument because the Uniform Trade Secrets Act (UTSA) permits the plaintiff to assert a breach of contract claim and a trade secret misappropriation claim simultaneously. Utah’s economic loss rule should not be expanded from barring tort claims to barring Domo’s statutory claim under the Utah UTSA.

B&P Littleford, LLC v. Prescott Machinery, LLC, No. 18-11425, 2019 WL 4746743, 2019 U.S. Dist. LEXIS 168196 (E.D. Mich. Sept. 30, 2019). B&P manufactures a wide variety of highly engineered mixers, dryers, extruders, and other equipment for manufacturing applications. Ray Miller was employed at B&P in various capacities, including as a board member, president, and CEO. In 2008, Miller’s employment at B&P was terminated. Miller started another company (Prescott Machinery). In 2012, the plaintiff learned that Miller had misappropriated several of the plaintiff’s trade secrets. The plaintiff thereafter consulted with the FBI on several occasions in 2013, 2014, and 2015 regarding the plaintiff’s suspicions of Miller’s misappropriation of trade secrets. The FBI declined to pursue a criminal prosecution. The plaintiff later filed a civil complaint against Miller and Prescott Machinery in 2018. The defendants moved for summary judgment that the plaintiff’s trade secret misappropriation claims were time-barred by the three-year statute of limitations. The district court agreed. A continuing misappropriation constitutes a single claim. B&P had three years from when it could have discovered the trade secret misappropriation in 2012. The 2018 complaint for trade secret misappropriation was time-barred.

Genesys Telecommunications Laboratories, Inc. v. Morales, No. 1:19-cv-00695-TWP-DML, 2019 WL 5722225, 2019 U.S. Dist. LEXIS 191660 (S.D. Ind. Dec. 6, 2019). Genesys filed a trade secret misappropriation lawsuit against four former employees and their new employer (Talkdesk). Genesys then filed a Rule 65 motion for a preliminary injunction. The evidence showed that one of the former employees (Morales) downloaded over 700 documents and files on a flash drive. At the preliminary injunction hearing, the defendants argued that just marking “confidential” or “proprietary” on documents does not make the information a trade secret. The defendants introduced numerous exhibits and evidence that Genesys’s product details, architecture, and pricing information are publicly available from several sources on the internet. Based on this evidence, the district court denied the motion for preliminary injunction.

MGA Entertainment, Inc. v. Mattel, Inc., 41 Cal. App. 5th 554 (2019). MGA and Mattel litigation disputes regarding the ownership of the Bratz line of dolls dates back to 2004. In January 2011, MGA obtained a verdict on its trade secret misappropriation claim of $80 million, and the district court awarded an equal amount in punitive damages for willful and malicious misappropriation. The Ninth Circuit reversed and vacated the verdict and directed the district court to dismiss MGA’s trade secret misappropriation claim without prejudice. MGA then filed its complaint for trade secret misappropriation in California state court. There was no factual dispute about these dates: MGA served a trade secret misappropriation discovery request on August 3, 2007; MGA served an unclean hands defense on August 13, 2007; and MGA filed a trade secret misappropriation claim in federal court on August 16, 2010. An action for misappropriation of trade secrets must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. Upon a motion for summary judgment, the district court concluded that MGA was on notice of trade secret misappropriation when it served its unclean hands affirmative defense on August 13, 2007. The complaint for trade secret misappropriation was filed on August 16, 2010, three days after the expiration of the statute of limitations on August 13, 2010. Summary judgment was entered for Mattel and affirmed on appeal.

Revzip, LLC v. McDonnell, No. 3:19-cv-191, 2019 WL 6701835, 2019 U.S. Dist. LEXIS 211836 (W.D. Pa. Dec. 9, 2019). A trade secret is information that: (1) the owner has taken reasonable steps to keep secret; (2) derives independent economic value by virtue of its secrecy; (3) cannot be readily ascertained by proper means; and (4) those who cannot access would obtain economic value from knowledge or use of it. The evidence provided at the preliminary injunction hearing failed to clearly establish that Revzip took reasonable steps to keep the “Secret Recipes” secret. The employees were not required to sign confidentiality or nondisclosure agreements; there was nothing stopping the employee (familiar with the “Secret Recipes”) from leaving for a rival sandwich shop; and the “Secret Recipes” were posted in the sandwich separation room visible to all employees. Based on this evidence, the district court denied the plaintiff’s motion for a preliminary injunction.

Trademarks

Color Marks

Milwaukee Electric Tool Corp. v. Freud America, Inc., Nos. 92059634, 92059637, 2019 U.S.P.Q.2d 460354 (T.T.A.B. Dec. 2, 2019). Milwaukee Electric Tool initiated cancellation proceedings against two registrations owned by Freud for the color red for the surface of cutting tools (the ’769 registration) and saw blades (the ’314 registration). Milwaukee alleged that the color red for saw blades was generic, that the mark of the ’314 registration had not acquired distinctiveness, and that the ’769 registration was procured by fraud.

The PTAB applied a two-part analysis for determining genericness: (1) identifying the genus of goods or services at issue, and (2) considering whether the color sought to be registered is understood by the relevant public primarily as a type of trade dress for that genus. Here, the PTAB found the genus to be saw blades and that the extensive evidence of the use of the color red by Freud’s direct competitors showed that consumers of saw blades would be unlikely to differentiate between sources of the saw blades based on their red color. The PTAB further found that Freud’s efforts to police the manufacture of red saw blades by others did not change the fact that consumers had long been exposed to red saw blades offered by multiple entities. In view of such third-party use, Freud’s sales figures and marketing efforts could not demonstrate consumer recognition of the color red for saw blades exclusively designating Freud as their source. The PTAB noted that single color marks are never inherently distinctive and that the burden of proving distinctiveness thereof is substantial. The PTAB found that the earlier, extensive, and continued use of the color red by others undercut Freud’s evidence that its mark had acquired distinctiveness. Freud’s use of the color red on saw blades was not substantially exclusive at the time of registration or thereafter. Thus, Freud failed to meet its burden of proving acquired distinctiveness.

The PTAB found that Freud did not commit fraud on the USPTO. Thus, the PTAB granted the petition to cancel the ’314 registration and to amend the ’769 registration to delete saw blades therefrom. Freud’s motion to amend its registrations to exclude certain blades was denied.

Failure to Function/Informational Matter

In re Ocean Technology, Inc., Nos. 87405211, 87405233, 2019 U.S.P.Q.2d 450686 (T.T.A.B. Nov. 21, 2019). Ocean Technology sought to register two similar marks that included the wording ALL NATURAL 100% REAL CALLINECTES CRAB GOURMET CRABMEAT PASTEURIZED and a design in connection with crabmeat. The design consisted of an accurate image of a crab. The examining attorney refused the application for failing to function as a trademark. Specifically, the examining attorney argued that the mark would not be perceived as identifying and distinguishing the goods of Ocean Technology from others. Instead, the mark was presented in an informational manner where it consisted of terms that were commonly used in the trade or industry to denote qualities or characteristics of the goods. Moreover, the crab image also reinforced the informational nature of the mark where there was nothing stylized, fanciful, or abstract about the image, and which was identical to images of crabs used by others in the industry. The examining attorney also refused registration for failure to comply with a requirement to provide information.

Considering all the evidence, the Trademark Trial and Appeal Board (TTAB) agreed that the content of the marks and the way they were presented supported a determination that the marks were informational in nature rather than source-indicating. This was supported by third-party uses containing the same or similar wording and images to convey information about their products. Accordingly, the TTAB concluded that the marks would not be perceived as identifying a particular source of goods and affirmed the refusals.

Likelihood of Confusion/Related Goods and Services

In re Country Oven, Inc., No. 87354443, 2019 U.S.P.Q.2d 443903 (T.T.A.B. Nov. 18, 2019). Country Oven sought to register the mark COUNTRY OVEN for retail bakery shops (Class 35) and bakery services (Class 41). The application was refused based on a likelihood of confusion with a third-party registration for COUNTRY OVEN for bread buns. Considering the relevant DuPont factors, the TTAB found the respective marks to be identical in appearance, sound, connotation, and commercial impression, and that the respective goods and services were related, particularly in view of third-party registrations identifying both bakery services and goods that encompass bread buns under a single mark. Moreover, the Country Oven website also showed the applied-for mark in connection with bakery products. The TTAB further determined that the channels of trade and customers overlapped.

On the issue of Country Oven’s three prior registrations that consisted of or featured the wording COUNTRY OVEN that were not considered confusingly similar to the cited mark, the TTAB noted that the services were different (online retail store services featuring Indian gift items and restaurant services). Accordingly, Country Oven’s three prior registrations did not weigh against a finding of likelihood of confusion given that none of the services recited in the prior registrations overlapped with the applied-for services. Thus, the TTAB affirmed the refusal to register.

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John C. Gatz

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

 

Column contributors include the following writers: Copyrights: Jenni Psihoules, Nixon Peabody LLP; and Mark R. Anderson, Actuate Law LLC. Patents: Cynthia K. Barnett, Johnson & Johnson; R. Trevor Carter, Daniel M. Lechleiter, and Andrew M. McCoy, Faegre Drinker Biddle & Reath LLP; Robert W. (Bill) Mason, Southwest Research Institute; and Angelo Christopher, Nixon Peabody LLP. Trade Secrets: R. Mark Halligan, FisherBroyles LLP. Trademarks: Elizabeth W. Baio, Nixon Peabody LLP; and Amy L. Sierocki, Blumenfield & Shereff LLP.