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June 10, 2020 Decisions in Brief

Decisions in Brief

John C. Gatz

©2020. Published in Landslide, Vol. 12, No. 5, May/June 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

Comparison of Physical Embodiment of a Copyrighted Image Is Proper Infringement Analysis

LEGO A/S v. ZURU Inc., No. 2019-2122, 2020 WL 229874, 2020 U.S. App. LEXIS 1282 (Fed. Cir. Jan. 15, 2020). LEGO filed a complaint against ZURU alleging that ZURU’s MAX action figures and MAYKA Toy Block Tape product packaging infringe LEGO’s copyrights and other rights. LEGO also moved for a temporary restraining order and preliminary injunction to restrain ZURU from manufacturing and selling the alleged infringing products. The district court granted LEGO’s motion for preliminary injunction. ZURU appealed.

LEGO argued and the district court agreed that the ZURU action figures are substantially similar to LEGO’s iconic Minifigures. LEGO holds copyright registrations covering the 3D sculpture of certain LEGO Minifigures. On appeal, ZURU argued that the district court (1) improperly relied on LEGO’s comparisons of the alleged infringing ZURU action figures to LEGO Minifigures instead of to the images associated with the LEGO copyright registrations; and (2) even if such an approach were acceptable, made erroneous factual findings because the ZURU action figures are different from the LEGO Minifigures. The Federal Circuit disagreed with ZURU. The Federal Circuit found that the district court did not err in comparing the ZURU action figures to the LEGO Minifigures, because the LEGO Minifigures are physical embodiments of the copyrighted images. The Federal Circuit affirmed the district court’s conclusion that the product designs are substantially similar because they have a similar general concept and feel.

The Federal Circuit further found that the district court did not abuse its discretion in determining irreparable harm to LEGO and that the balance of hardships weighed in favor of LEGO with respect to the alleged infringing ZURU action figures. Thus, the Federal Circuit upheld the district court’s decision granting LEGO a preliminary injunction against the ZURU action figures.

With respect to the MAYKA packaging, LEGO contended and the district court agreed that ZURU incorporated an image on such packaging that is substantially similar to LEGO’s Friends series of Minifigures. As with the ZURU action figures, ZURU alleged on appeal that the district court erred because (1) it relied on references to the Friends Minifigures that are not the subject of a copyright registration; and (2) its conclusion that the products are substantially similar is an abuse of discretion. The Federal Circuit found that LEGO is likely to succeed on the merits of its copyright infringement claim, as the district court did not abuse its discretion in determining that the image incorporated in the MAYKA packaging and the Friends Minifigures are substantially similar for the same reasons as the ZURU action figures. However, the Federal Circuit held that the district court did abuse its discretion with respect to a finding of irreparable harm and balance of hardships and vacated the preliminary injunction with respect to the MAYKA packaging.

Maximum Statutory Damages Awarded over Destroyed Street Art

Castillo v. G&M Realty L.P., 950 F.3d 155, 2020 U.S.P.Q.2d 10057 (2d Cir. 2020). Wolkoff owned several warehouses collectively known as 5Pointz in New York City. In 2002, Wolkoff hired an aerosol artist to turn 5Pointz into an exhibition site for artists, and 5Pointz became a global hub for aerosol art and attracted thousands of visitors per day.

In 2013, Wolkoff sought approval to destroy 5Pointz and build apartments on the property. The artists sued under the Visual Artists Rights Act (VARA) to prevent the destruction of 5Pointz. The artists were granted a temporary restraining order (TRO) to prevent the destruction of the buildings, but were denied a preliminary injunction. When the TRO expired, Wolkoff banned the artists from 5Pointz and whitewashed the aerosol art. The district court found that Wolkoff willfully violated VARA with respect to 45 works and awarded the artists the maximum allowed statutory damages of $150,000 per work, for a total damages award of $6.75 million. Wolkoff appealed.

The Second Circuit affirmed. The Second Circuit initially determined whether the art possessed the recognized stature required under VARA. The Second Circuit found that the testimony supported that the works were of recognized stature. Wolkoff argued that many of the works were temporary and, therefore, not eligible for VARA protection. The Second Circuit disagreed in that VARA does not distinguish between permanent and temporary art.

The Second Circuit also found no clear error in damages when it was determined that Wolkoff willfully violated VARA. Wolkoff was aware that the artists were invoking their rights under VARA, and did not provide the artists with 90 days’ notice of the intention to destroy the art and give the artists a chance to remove their art. The Second Circuit found that this behavior showed that Wolkoff willfully violated VARA, and that an award of the maximum statutory damages was not an abuse of discretion.

Not All Characters Are Copyrightable

Daniels v. Walt Disney Co., 952 F.3d 1149, 2020 U.S.P.Q.2d 10178 (9th Cir. 2020). Denise Daniels developed a group of characters called the Moodsters. The Moodsters consisted of five color-coded anthropomorphic characters, each representing a different emotion: pink is love; yellow is happiness; blue is sadness; red is anger; and green is fear. Daniels created a pitchbook in association with the Moodsters and pitched the characters to a number of entertainment and media companies, including Walt Disney. Daniels alleged that she first began talking to Disney about the Moodsters in 2005.

In 2010, Disney began production of the children’s film Inside Out, which was eventually released in 2015. The film follows five anthropomorphized emotions—joy, fear, sadness, disgust, and anger—that live inside the mind of an 11-year-old girl named Riley. The screenplay was allegedly based on the director and cowriter of the film’s 11-year-old daughter’s manner with which she dealt with her emotions. Daniels (and her Moodsters Company) sued Disney for copyright infringement of both the individual Moodsters characters and the ensemble of characters as a whole, in addition to a contract-related claim. Disney moved to dismiss the complaint on the grounds that Daniels failed to establish that the Moodsters met the legal standard for copyright protection, among other allegations. The district court granted the motion to dismiss, concluding that the Moodsters were not protected by copyright. Daniels and the Moodsters Company appealed, and the Ninth Circuit affirmed.

The Ninth Circuit applied the test set forth in DC Comics v. Towle to determine that the Moodsters are not copyrightable. Towle decided that “[a] character is entitled to copyright protection if (1) the character has ‘physical as well as conceptual qualities,’ (2) the character is ‘sufficiently delineated to be recognizable as the same character whenever it appears’ and ‘display[s] consistent, identifiable character traits and attributes,’ and (3) the character is ‘especially distinctive’ and ‘contain[s] some unique elements of expression.’” 802 F.3d 1012, 1021 (9th Cir. 2015). The Ninth Circuit found that the Moodsters did not meet this test and in particular failed to satisfy the third prong. The Ninth Circuit also applied “the story being told” test set forth in Warner Bros. Pictures, Inc. v. Columbia Broadcasting System, Inc. for defining whether a character is copyrightable. The Ninth Circuit concluded that the Moodsters were just mere chessmen in the game of telling the story, as the evidence showed that there was little to no character development for the Moodsters in any of the materials produced.

Statutory Damages and Attorney Fees Require Copyright Registration before Infringement

Southern Credentialing Support Services, L.L.C. v. Hammond Surgical Hospital, L.L.C., 946 F.3d 780, 2020 U.S.P.Q.2d 6868 (5th Cir. 2020). Southern Credentialing provided health-care credentialing services to Hammond Surgical Hospital for several years. Southern created forms used for both initial credentialing and recredentialing of medical professionals. Hammond switched vendors, and used credentialing forms very similar to those created by Southern. Southern registered the copyright in its forms more than a year after Hammond started using the different vendor. Southern sued Hammond for copyright infringement and was granted summary judgment at the district court. An injunction was issued against Hammond to prevent it from using the Southern forms, and Southern was also awarded statutory damages and attorney fees. Hammond appealed.

The Fifth Circuit initially determined whether Southern had a valid copyright in its credentialing forms. Southern’s forms showed sufficient creativity to be eligible for copyright registration. The Fifth Circuit also found that Hammond had copied almost half of Southern’s forms while creating new credentialing forms. Therefore, Southern was entitled to a permanent injunction against Hammond for copyright infringement.

The Fifth Circuit overturned the district court’s award of attorney fees and statutory damages. The Fifth Circuit ruled that the Copyright Act requires that copyright registration must occur before any infringement takes place for statutory damages or attorney fees to be available to a plaintiff. The Fifth Circuit rejected Southern’s argument that statutory damages and attorney fees are available to a plaintiff if preregistration infringement and post-registration infringement violate different exclusive rights of the copyright holder. Instead, the Fifth Circuit ruled that § 412 of the Copyright Act bars statutory damages if a defendant violates any of the exclusive rights before copyright registration occurs.

U.S. Supreme Court Unanimously Rules That States Are Immune from Copyright Infringement Suits

Allen v. Cooper, 140 S. Ct. 994, 2020 U.S.P.Q.2d 10217 (2020). The Court held that the Copyright Remedy Clarification Act of 1990 (CRCA) abolishing states’ sovereign immunity against copyright infringement suits is invalid. Thus, the Court upheld that states are immune from infringement actions.

In 1996, Intersal discovered the wreck of Queen Anne’s Revenge off the coast of North Carolina, which belonged to the infamous pirate Blackbeard. North Carolina engaged Intersal to excavate the ship, and Intersal hired Frederick Allen to record the excavation. Allen registered copyrights in the videos and photos he recorded of the wreck. North Carolina published Allen’s works without his permission.

Allen sued the State of North Carolina for copyright infringement. North Carolina moved to dismiss the suit on the grounds of sovereign immunity under the Eleventh Amendment. Allen argued that Congress had abrogated the state’s sovereign immunity from copyright infringement pursuant to the CRCA, which provides that a state “shall not be immune, under the Eleventh Amendment [or] any other doctrine of sovereign immunity, from suit in Federal court” for copyright infringement. Siding with Allen, the district court denied the motion. North Carolina appealed. The Fourth Circuit reversed. The Supreme Court granted certiorari, and affirmed the Fourth Circuit’s decision.

Allen argued that abrogation of sovereign immunity from copyright infringement is supported by the intellectual property clause of the U.S. Constitution. But Florida Prepaid addressed this argument, finding that Congress could not use its Article I power with respect to patents to abrogate a state’s immunity. Applying this reasoning to copyright, the Court concluded that “the power to ‘secur[e]’ an intellectual property owner’s ‘exclusive Right’ under Article I stops when it runs into sovereign immunity.” The Court also considered the Fourteenth Amendment as a way to remove a state’s sovereign immunity. For a statute abrogating immunity to be allowed under the Fourteenth Amendment, it must be tailored to remedy or prevent conduct infringing the Fourteenth Amendment’s substantive prohibitions. The Supreme Court found that the CRCA failed to meet this test and is not proportional to the injury it aims to fix.

Patents

Attorney Fees

Blackbird Tech LLC v. Health in Motion LLC, 944 F.3d 910, 2019 U.S.P.Q.2d 479610 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s decision awarding attorney fees after the patentee dismissed the case with prejudice. The district court found the litigation claims to be meritless and frivolous and that the patentee litigated in an exceptional manner. The Federal Circuit agreed, stating that the district court was not obligated to put the patentee on notice and that the alleged infringer informed the patentee that it would seek attorney fees.

Intellectual Ventures I LLC v. Trend Micro Inc., 944 F.3d 1380, 2019 U.S.P.Q.2d 485383 (Fed. Cir. 2019). The Federal Circuit vacated the district court’s finding of exceptionality and its subsequent grant of attorney fees. The district court failed to determine whether the circumstances surrounding the expert’s changed opinion were such that, when considered as part of the totality of circumstances, made the case exceptional. The Federal Circuit remanded to analyze exceptionality under the proper legal standard.

Peter v. NantKwest, Inc., 140 S. Ct. 365, 2019 U.S.P.Q.2d 474054 (2019). The U.S. Supreme Court held that the U.S. Patent and Trademark Office  (USPTO) cannot recover its pro rata legal fees, including attorney and paralegal salaries, as expenses under 35 U.S.C. § 145. Starting with the American rule that each litigant pays its own attorney fees, the Federal Circuit found that the term “expenses” in the statute does not involve attorney fees.

Attorney Fees/Willfulness

Eko Brands, LLC v. Adrian Rivera Maynez Enterprises, Inc., 946 F.3d 1367, 2020 U.S.P.Q.2d 9576 (Fed. Cir. 2020). The Federal Circuit affirmed the award of attorney fees with respect to one patent, and affirmed the judgment of no willful infringement with respect to another patent. The two patents relate to single-serve beverage brewers and components thereof—one belonging to plaintiff Eko and the other belonging to defendant and cross-claimant Adrian Rivera Maynez Enterprises (ARM). With respect to the attorney fees award to Eko, the Federal Circuit rejected ARM’s suggestion that the district court’s denial of summary judgment as to the obviousness of ARM’s patent conclusively established the reasonableness of its litigation position. According to the Federal Circuit, the district court adequately accounted for this fact in its decision and carefully explained why it did not give its denial of summary judgment decisive weight in awarding attorney fees—namely, because it was not until trial was well underway that it became apparent that ARM was not seriously trying to defend the obviousness of its asserted claims.

Claim Construction

Techtronic Industries Co. v. International Trade Commission, 944 F.3d 901, 2019 U.S.P.Q.2d 475808 (Fed. Cir. 2019). The Federal Circuit reversed the International Trade Commission’s claim construction and vacated the order of infringement. The Federal Circuit found the patent disavowed a wall console lacking a passive infrared detector because the specification described moving the passive infrared detector to the console as an improvement over prior art systems.

Conflicting IPR and District Court Judgments

Personal Audio, LLC v. CBS Corp., 946 F.3d 1348, 2020 U.S.P.Q.2d 7975 (Fed. Cir. 2020). Following a jury verdict of infringement and validity, and later a Patent Trial and Appeal Board (PTAB) finding of unpatentability of the relevant claims affirmed by the Federal Circuit, the district court entered judgment in favor of an accused infringer. The Federal Circuit affirmed. At the district court, the parties agreed that prevailing law should result in a judgment in favor of the accused infringer. The Federal Circuit found that the patent owner’s challenges to the inter partes review (IPR) ruling should have been made in the appeal from the PTAB final written decision and that the patent owner, by agreeing that prevailing law resulted in the judgment for the accused infringer, forfeited any argument regarding whether district court cases must be terminated when a PTAB unpatentability ruling is affirmed on appeal.

Covenant Not to Sue

Molon Motor & Coil Corp. v. Nidec Motor Corp., 946 F.3d 1354, 2020 U.S.P.Q.2d 8110 (Fed. Cir. 2020). A split Federal Circuit panel affirmed the district court’s decision granting summary judgment, finding that the plaintiff was barred from asserting patent infringement pursuant to a covenant not to sue granted to the defendant’s predecessor in a 2006 agreement. The primary issue was whether the merger/integration clause in a subsequent 2007 license agreement effectively eliminated the covenant not to sue granted in the 2006 agreement. The merger/integration clause of the 2007 agreement was limited to prior agreements that “concerned the subject matter” of the 2007 agreement. Relying on Illinois contract law, the district court held that the 2006 agreement did not concern the subject matter of the 2007 agreement because, although both agreements related to the same patent (among other patents), there were various differences between the agreements.

Damages

TCL Communication Technology Holdings Ltd. v. Telefonaktiebolaget LM Ericsson, 943 F.3d 1360, 2019 U.S.P.Q.2d 465166 (Fed. Cir. 2019). In a dispute regarding royalty rates for standard essential patents for mobile communication standards, the district court held a bench trial to determine fair, reasonable, and nondiscriminatory (FRAND) rates. The district court held that Ericsson’s proposed licensing offers to TCL were FRAND. The district court then set prospective and retrospective FRAND rates for the license, including a release payment for past patent infringement. The Federal Circuit then held that the bench trial deprived Ericsson of its constitutional right to a jury trial because the release payment provided legal (as opposed to equitable) relief. The Federal Circuit vacated in part, reversed in part, and remanded.

Declaratory Judgments/Venue

Communications Test Design, Inc. v. Contec, LLC, 952 F.3d 1356, 2020 U.S.P.Q.2d 10163 (Fed. Cir. 2020). The district court did not abuse its discretion in dismissing the first-filed declaratory judgment complaint in Pennsylvania in favor of the later-filed patent infringement complaint in New York. The Federal Circuit reasoned that it was appropriate to depart from the first-to-file rule because the declaratory judgment was filed in anticipation of the infringement complaint during ongoing licensing negotiations between the parties, and because New York was a more convenient forum.

Design Patent Infringement

Hafco Foundry & Machine Co. v. GMS Mine Repair & Maintenance, Inc., 953 F.3d 745, 2020 U.S.P.Q.2d 10173 (Fed. Cir. 2020). The Federal Circuit affirmed a jury verdict finding willful design patent infringement over two objections to the jury instructions. First, the Federal Circuit found no error in a jury instruction defining the ordinary observer as “a person who buys and uses the product at issue.” Second, the Federal Circuit found that the lack of a jury instruction requiring the jury to evaluate differences between the accused design and prior art did not warrant a new trial because the accused infringer presented no evidence of prior art.

Indefiniteness

Samsung Electronics America, Inc. v. Prisua Engineering Corp., 948 F.3d 1342, 2020 U.S.P.Q.2d 37319 (Fed. Cir. 2020). The Federal Circuit affirmed in part, reversed in part, and remanded the PTAB’s finding of certain claims as indefinite and another one as being obvious. The Federal Circuit found that the PTAB does not have the authority to cancel claims for indefiniteness. The Federal Circuit also disagreed with the PTAB’s claim construction. With respect to the claim found invalid, the Federal Circuit affirmed the PTAB’s finding.

Infringement

Plastic Omnium Advanced Innovation & Research v. Donghee America, Inc., 943 F.3d 929, 2019 U.S.P.Q.2d 461287 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s finding of no infringement on summary judgment. In finding no literal infringement, the Federal Circuit correctly construed the term “parison” as departing from its conventional meaning because the patentee defined the term in the specification. As to the doctrine of equivalents, the features of the accused products offered an advantage relative to the claimed structure, which was not an insubstantial difference.

Infringement (ITC)

Comcast Corp. v. International Trade Commission, 951 F.3d 1301, 2020 U.S.P.Q.2d 10082 (Fed. Cir. 2020). The Federal Circuit affirmed an ITC exclusion order directed to Comcast and set-top boxes. The primary issues were whether the imported set-top boxes constituted “articles that infringe” and whether Comcast was an importer under 19 U.S.C. § 1337. With respect to the first issue, there was no dispute that Comcast’s customers directly infringed the asserted patents after importation when the set-top boxes were combined with Comcast’s domestic servers and customers’ mobile devices. The Federal Circuit found that § 1337 applied to Comcast’s articles that infringed after importation, as Comcast specifically designed its set-top boxes to be used in an infringing manner. With respect to the second issue, the Federal Circuit found that Comcast was an importer based on extensive evidence of Comcast’s control over its customers’ importation of the set-top boxes.

IPR/Claim Construction

Kaken Pharmaceutical Co. v. Iancu, 952 F.3d 1346, 2020 U.S.P.Q.2d 10164 (Fed. Cir. 2020). The Federal Circuit reversed the PTAB’s final written decision in an IPR because the PTAB’s finding of obviousness materially relied on an erroneous claim construction. The Federal Circuit found that certain definitions in the specification along with statements about the purpose of the invention did not support the PTAB’s construction. In addition, unambiguous exchanges between the applicant and examiner in the prosecution history also contradicted the PTAB’s construction.

Personalized Media Communications, LLC v. Apple Inc., 952 F.3d 1336, 2020 U.S.P.Q.2d 10165 (Fed. Cir. 2020). The Federal Circuit reversed the PTAB’s final written decision in an IPR because the PTAB’s anticipation and obviousness findings were predicated on an erroneous claim construction. Starting with the claim language and the specification, the Federal Circuit noted that the parties’ competing constructions were equally plausible. While certain statements in the prosecution history did not amount to clear and unmistakable disavowal, the Federal Circuit found that the statements still informed the claim construction and addressed the ambiguity in the claims.

Joinder/Obviousness

Facebook, Inc. v. Windy City Innovations, LLC, 953 F.3d 1313, 2020 U.S.P.Q.2d 10188 (Fed. Cir. 2020). The Federal Circuit affirmed in part and vacated in part the PTAB’s decisions. The Federal Circuit initially found that the statute regarding joinder (35 U.S.C. § 315(c)) did not allow a party to join itself and does not authorize the joinder of new issues. The Federal Circuit affirmed the PTAB’s finding of obviousness for certain claims.

Lay Witness Testimony

HVLPO2, LLC v. Oxygen Frog, LLC, 949 F.3d 685, 2020 U.S.P.Q.2d 39337 (Fed. Cir. 2020). The Federal Circuit reversed and remanded the district court’s decision to admit lay witness testimony regarding obviousness. The district court’s limiting instruction was insufficient to cure the substantial prejudice caused by admitting lay witness testimony regarding obviousness. Because the district court abused its discretion by denying the motion for a new trial, the Federal Circuit reversed and remanded.

Mandamus/Place of Business

In re Google LLC, 949 F.3d 1338, 2020 U.S.P.Q.2d 51960 (Fed. Cir. 2020). The Federal Circuit held that mandamus was warranted and ordered that the case either be dismissed or transferred. The Federal Circuit agreed with Google that a place of business generally requires an employee or agent of the defendant to be conducting business at that place. The Federal Circuit concluded that a regular and established place of business requires the regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the alleged place of business. The Eastern District of Texas was found not to be a proper venue.

Obviousness

Arctic Cat, Inc. v. Polaris Industries, Inc., No. 2019-1440, 2019 WL 7050133, 2019 U.S.P.Q.2d 490249 (Fed. Cir. 2019). The Federal Circuit affirmed the PTAB’s decision denying Arctic Cat’s motion for additional discovery and a decision holding the claims not obvious. Arctic Cat failed to meet its burden to show that additional discovery was in the interests of justice. Arctic Cat also failed to prove that there was a motivation to combine the prior art references.

Fox Factory, Inc. v. SRAM, LLC, 944 F.3d 1366, 2019 U.S.P.Q.2d 483355 (Fed. Cir. 2019). The Federal Circuit vacated the PTAB’s determination that Fox had not shown that the challenged claims would have been obvious. The Federal Circuit found that the PTAB applied the wrong standard for determining whether the patentee SRAM was entitled to a presumption of nexus between the challenged claims and SRAM’s evidence of secondary considerations. The Federal Circuit remanded the case to reevaluate the import of the evidence of secondary considerations with the burden of proving nexus placed on the correct party (the patentee).

Genentech, Inc. v. Hospira, Inc., 946 F.3d 1333, 2020 U.S.P.Q.2d 8029 (Fed. Cir. 2020). The Federal Circuit affirmed the PTAB’s finding that multiple claims of the challenged patent were unpatentable as anticipated or obvious in light of prior art that disclosed a temperature range that overlapped with the claimed range, and where the patentee failed to show that a particular temperature or range within the claimed range was critical to the operability of the invention.

Koninklijke Philips N.V. v. Google LLC, 948 F.3d 1330, 2020 U.S.P.Q.2d 32509 (Fed. Cir. 2020). The Federal Circuit affirmed the PTAB’s finding of certain claims as being obvious in view of the prior art. The Federal Circuit found that the PTAB could render claims invalid based on prior art in combination with general knowledge.

Merck Sharp & Dohme Corp. v. Wyeth LLC, Nos. 2018-2133, 2018-2134, 2019 WL 6320454, 2019 U.S.P.Q.2d 454882 (Fed. Cir. 2019). The Federal Circuit vacated the PTAB’s decision finding that one of the challenged claims in an IPR was not obvious and remanded for further proceedings. The PTAB failed to consider conflicting evidence, including conflicting expert testimony, as to the motivation and reasonable expectation of success in combining the references.

Persion Pharmaceuticals LLC v. Alvogen Malta Operations Ltd., 945 F.3d 1184, 2019 U.S.P.Q.2d 494084 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s finding that the asserted claims were obvious. The Federal Circuit concluded that the district court correctly applied inherency to find that the claimed limitations of the asserted claims added no patentable weight over the combination of prior art references.

On-Sale Bar/Inequitable Conduct

GS CleanTech Corp. v. Adkins Energy LLC, 951 F.3d 1310, 2020 U.S.P.Q.2d 10092 (Fed. Cir. 2020). The Federal Circuit upheld the invalidation of four CleanTech patents asserted in multidistrict infringement litigation, affirming a district court’s finding that CleanTech and its attorneys withheld information from the USPTO relating to the date that the patented system was first on sale. The district court concluded that the patented method and system were offered for sale over a year before the inventors filed a patent application. Because the offer for sale would have constituted a commercial contract under the Uniform Commercial Code, the district court found the on-sale bar had been violated and invalidated all the claims. The Federal Circuit also affirmed a finding of inequitable conduct based on the inventors’ intentional withholding of information about the proposal.

Patentability

Acoustic Technology, Inc. v. Itron Networked Solutions, Inc., 949 F.3d 1366, 2020 U.S.P.Q.2d 51873 (Fed. Cir. 2020). The Federal Circuit affirmed the PTAB’s unpatentability findings and found that Acoustic waived its time-bar argument. Acoustic failed to raise the issue regarding concealed involvement of interested, time-barred parties before the PTAB. As a result, the Federal Circuit declined to resolve whether Itron’s activities rendered it a real party in interest, or whether the PTAB had any authority or obligation to reevaluate 35 U.S.C. § 315(b) post-institution. The Federal Circuit found that substantial evidence supported the PTAB’s obviousness and anticipation determinations.

Patent Marking

Arctic Cat Inc. v. Bombardier Recreational Products Inc., 950 F.3d 860, 2020 U.S.P.Q.2d 10043 (Fed. Cir. 2020). The Federal Circuit affirmed the district court’s holding that 35 U.S.C. § 287 limits damages after a patentee or licensee ceases sales of unmarked products. The Federal Circuit also agreed with the district court that a finding of willful infringement, alone, does not establish actual notice as required under § 287 when constructive notice due to marking is absent. Accordingly, the Federal Circuit affirmed the district court’s judgment that the plaintiff was barred from recovering precomplaint damages from the defendant because the plaintiff’s licensee had failed to mark the licensed products.

PTAB

Chamberlain Group, Inc. v. One World Technologies, Inc., 944 F.3d 919, 2019 U.S.P.Q.2d 481302 (Fed. Cir. 2019). The Federal Circuit affirmed the PTAB’s finding that all of the challenged claims were invalid. The Federal Circuit upheld the PTAB’s finding that the issue related to “responsive to” language need not be heard because it was only raised at oral arguments.

Reply Arguments

Apple Inc. v. Andrea Electronics Corp., 949 F.3d 697, 2020 U.S.P.Q.2d 44318 (Fed. Cir. 2020). The Federal Circuit affirmed in part and vacated in part the PTAB’s conclusion regarding the two patents in the IPR. The Federal Circuit found that the PTAB’s decision to ignore responsive arguments to issues raised in the patent owner response was not supported as a matter of law. The conclusion that the reply brief constituted impermissible new matter was an abuse of discretion. For the second patent, the Federal Circuit found substantial evidence supported the PTAB’s conclusion that the references did not render obvious the claim limitation, and therefore affirmed the validity determination.

Safe Harbor

Amgen Inc. v. Hospira, Inc., 944 F.3d 1327, 2019 U.S.P.Q.2d 479631 (Fed. Cir. 2019). The Federal Circuit affirmed the district court’s findings that the patents were valid and infringed, certain allegedly infringing products did not fall under the safe harbor provision of 35 U.S.C. § 271(e)(1), and the patentee proved its damages amount.

Subject Matter Eligibility

Customedia Technologies, LLC v. Dish Network Corp., 951 F.3d 1359, 2020 U.S.P.Q.2d 10121 (Fed. Cir. 2020). The Federal Circuit affirmed the PTAB’s finding that claims were not patent eligible under 35 U.S.C. § 101. The claims were directed to a programmable local receiver unit, which included an “individually controlled and reserved advertising data storage section adapted specifically for storing the specifically identified advertising data.” The patent owner asserted that this reserved storage section “improve[d] the data delivery system’s ability to store advertising data, transfer data at improved speeds and efficiencies, and prevent system inoperability due to insufficient storage.” The Federal Circuit found the claims did not enable computers to operate more quickly or efficiently, or solve any technological problem. They merely recited reserving memory to ensure available storage space for advertising data. The Federal Circuit also noted that the specification was silent as to any specific structural or inventive improvements in computer functionality related to this claimed system.

Illumina, Inc. v. Ariosa Diagnostics, Inc., 952 F.3d 1367, 2020 U.S.P.Q.2d 10182 (Fed. Cir. 2020). The Federal Circuit reversed the district court’s finding that the claims were invalid under 35 U.S.C. § 101 as being directed to ineligible natural phenomenon. The claims were directed to a method of preparing a fraction of cell-free DNA. The Federal Circuit found this was patentable as it was not just describing the natural phenomena, but involved steps changing composition of the mixture.

Using Extrinsic Evidence to Prove Inherency

Hospira, Inc. v. Fresenius Kabi USA, LLC, 946 F.3d 1322, 2020 U.S.P.Q.2d 6227 (Fed. Cir. 2020). The Federal Circuit affirmed the district court’s determination that a claim for a sedative drug was obvious based on an inherent limitation requiring the concentration of the drug’s active ingredient to decrease by no more than about 2 percent after storage for five months. The patentee argued that the district court improperly relied on inherent properties of the drug reported in the patentee’s new drug application and the accused infringer’s abbreviated new drug application filings. The Federal Circuit found that the later evidence is not itself prior art; it only helps to elucidate what the prior art consisted of. Thus, the Federal Circuit determined that it was not clearly erroneous for the district court to find that the about 2 percent limitation was necessarily present in the prior art.

Trade Secrets

Brightview Group, LP v. Teeters, No. SAG-19-2774, 2020 U.S. Dist. LEXIS 34499, 2020 U.S.P.Q.2d 10080 (D. Md. Feb. 28, 2020). Brightview develops new senior living communities. Brightview keeps its proprietary underwritings that include its own data-specific formulas amassed over 25 years in business as confidential information. The defendants argued this information could not qualify as a trade secret because Brightview did not require its employees to sign employment agreements or covenants not to compete. The district court disagreed. The law only requires Brightview to take reasonable security measures, not the best security measures. Brightview has a confidentiality policy, and the evidence established that only a very small fraction of its employees has access to the proprietary underwritings. The plaintiff’s motion for its preliminary injunction was granted.

Cambria Co. LLC v. Schumann, No. 19-CV-3145, 2020 U.S. Dist. LEXIS 11373, 2020 U.S.P.Q.2d 24009 (D. Minn. Jan. 23, 2020). Cambria moved for the entry of a preliminary injunction against a former employee (Schumann) working for a direct competitor (Mohawk). The district court denied the preliminary injunction and the request for expedited discovery. Cambria and Mohawk are both quartz surface manufacturers. Cambria has been in the industry for over 20 years and has created over 150 designs based on its recipes. Cambria signed a two-year noncompete agreement with Schumann. Schumann did not work for Mohawk until the agreement expired. The district court acknowledged that Cambria has trade secrets, but the actual trade secrets are a shifting target. The district court also found that the identification of trade secrets was particularly important here because there was no allegation that Schumann took any physical information from Cambria and no evidence that Schumann behaved inappropriately in leaving Cambria. The district court rejected Cambria’s assertion of the inevitable disclosure doctrine. There must be a high probability of inevitable disclosure; mere knowledge of a trade secret is not enough. In short, the district court found no grounds for entering a preliminary injunction or expedited discovery. Schumann had fully complied with the agreement and Cambria had failed to establish evidence justifying application of the inevitable disclosure doctrine.

CleanFish, LLC v. Sims, No. 19-cv-03663-HSG, 2020 U.S. Dist. LEXIS 46191, 2020 U.S.P.Q.2d 10199 (N.D. Cal. Mar. 17, 2020). The plaintiff is a global seafood wholesaler and importer. The plaintiff filed a trade secret complaint describing the trade secrets as “customers’ purchasing data, customer sales figures, analysis and trends, and other information further identified in the Motion to Seal.” The district court found these descriptions of the trade secrets as indistinguishable from matters of general knowledge in the industry. A plaintiff need not spell out the details of a trade secret, but the plaintiff must describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade.

Independent Technologies, LLC v. Otodata Wireless Network, Inc., No. 3:20-cv-00072-RCJ-CLB, 2020 U.S. Dist. LEXIS 51810, 2020 WL 1433525 (D. Nev. Mar. 23, 2020). The defendants terminated their employment with the plaintiff and immediately joined a direct competitor. The evidence revealed that the defendants were accessing the plaintiff’s confidential information weeks before their departure, including a list of actual and potential clients and their contact information. There was also evidence that the defendants deleted files after the lawsuit was filed, resulting in a spoliation claim and granting the plaintiff an adverse inference under Federal Rule of Civil Procedure 37(e). A motion for a preliminary injunction under the Defend Trade Secrets Act (DTSA) and Uniform Trade Secrets Act (UTSA) was granted.

KCG Holdings, Inc. v. Khandekar, No. 17 Civ. 3533, 2020 U.S. Dist. LEXIS 44298, 2020 WL 1189302 (S.D.N.Y. Mar. 5, 2020). KCG is a financial services firm that utilizes proprietary trading algorithms and electronic market trading through exchanges. The defendant (Khandekar) argued that his access to proprietary data was not restricted or encrypted and thus his actions were not improper. The district court rejected this argument, citing the DTSA provision defining misappropriation to also include breaching a duty to maintain secrecy. The district court found that Khandekar had breached multiple provisions of his employment agreement, including the obligation to not use a code, access a file, or retrieve any stored communication. The district court granted summary judgment for KCG under the DTSA.

Moss Holding Co. v. Fuller, No. 20-cv-01043, 2020 U.S. Dist. LEXIS 39068, 2020 WL 1081730 (N.D. Ill. Mar. 6, 2020). Moss is a leading provider of custom fabricated item and décor elements for a variety of retail, architectural, and design firms. The defendants are two former Moss employees who are now working for a competitor. One issue before the district court was whether Moss’s client spreadsheets qualify as trade secrets. The district court held that the information contained in the “Moss Client Spreadsheets” is more than just a list of Moss’s customers. It is a compilation of customer names and corresponding 2018 total revenue, 2019 revenue forecast, revenue by category, description of fabrication, and other proprietary information. Citing established trade secret law, customer lists can constitute trade secrets where that information is maintained in confidence. In addition, compilations of confidential and financial information can be protected as a trade secret where the information cannot be easily duplicated without involving substantial time, effort, and expense.

Packaging Corp. of America, Inc. v. Croner, No. 19-CV-03286, 2020 WL 43011, 2020 U.S. Dist. LEXIS 1846 (N.D. Ill. Jan. 3, 2020). PCA sued a former employee (Croner), alleging breach of contract and violations of the DTSA and the Illinois Trade Secrets Act (ITSA) when he went to work for a competitor and solicited the same clients. PCA moved for the entry of a preliminary injunction for alleged trade secret misappropriation. The district court found that the level of specificity was sufficient for identifying the alleged trade secrets: customer purchase histories, pricing, and costing processes. However, the district court found that PCA failed to plausibly allege misappropriation against Croner. Croner still had PCA documents and information in his possession that he was given access to during the normal employment to perform his job duties. However, the failure to return lawfully acquired information does not constitute misappropriation of that information under the DTSA or the ITSA. The district court also rejected application of the inevitable disclosure doctrine. Both the DTSA and ITSA counts were dismissed by the district court with prejudice.

vPersonalize Inc. v. Magnetize Consultants Ltd., No. 2:18-cv-01836, 2020 WL 534505, 2020 U.S. Dist. LEXIS 18491 (W.D. Wash. Feb. 3, 2020). The DTSA provides that the owner of a trade secret that is misappropriated may bring a civil action for trade secret misappropriation if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. The defendant moved to dismiss the DTSA claim because it is a U.K.-based entity, arguing that the DTSA civil enforcement provision does not apply to foreign entities. Citing 18 U.S.C. § 1837, the district court concluded that the DTSA civil cause of action applies to conduct occurring outside the U.S. The argument that § 1837 should only apply to criminal offenses was rejected. The DTSA civil enforcement provision may be applied to a foreign entity.

Zirvi v. Flatley, No. 18-cv-7003, 2020 WL 208820, 2020 U.S. Dist. LEXIS 6403 (S.D.N.Y. Jan. 14, 2020). In a second amended complaint, the plaintiffs (scientists) alleged two acts of misappropriation, involving discoveries related to the encoding and decoding of DNA. One act of misappropriation occurred in 1994 when certain trade secrets were allegedly stolen from a confidential grant proposal, and one occurred in 1999 when trade secrets were allegedly misappropriated during confidential communications. Besides a DTSA claim, the plaintiffs filed a RICO claim too. Based on the allegations, the district court found that the alleged misappropriation by exercising reasonable diligence should have been discovered many years ago. There were multiple events that the plaintiffs themselves described in the complaint that triggered the statute of limitations. Whether the accrual date was in 1994, 1999, 2006, or 2010 (based on allegations in the complaint), the federal statute of limitations under the DTSA (three years) or the RICO statute (four years) had passed.

Trademarks

Concurrent Use

Hanscomb Consulting, Inc. v. Hanscomb Ltd., Concurrent Use No. 94002720, 2020 U.S.P.Q.2d 10085 (T.T.A.B. Feb. 26, 2020). Hanscomb Consulting Inc. (HCI) filed a trademark application seeking a concurrent use registration for the HANSCOMB CONSULTING and design mark in connection with business consulting services. Hanscomb Limited (HL) was the owner of a prior-filed application for HANSCOMB for identical services. HCI’s application sought registration throughout the U.S. except in geographical areas corresponding to HL’s use of the mark in the zip codes 60521 (Hinsdale, Illinois) and 90071 (Los Angeles, California).

Under the concurrent use provisions of Trademark Act section 2(d), HCI was required to show: (1) HCI made lawful use of the mark prior to the date HL filed its application, and (2) the concurrent use of the respective marks was not likely to cause confusion under the limitations as to the mode or place of use of the marks, as proposed by HCI.

Considering the evidence of record regarding HL’s use of its mark, the Trademark Trial and Appeal Board (TTAB) determined that HL’s use of its HANSCOMB mark in connection with its services was not confined to the two zip codes identified in HCI’s application. Rather, the TTAB found that HL had demonstrated use in many more locations in the U.S. such that its use was not limited to the two zip codes. Accordingly, as a claim of likelihood of confusion had already been decided in favor of HL in a prior opposition relating to the parties’ respective marks, HCI was not entitled to registration in the geographic areas it was seeking in its concurrent use application.

Descriptiveness/Acquired Distinctiveness

Spiritline Cruises LLC v. Tour Management Services, Inc., Opposition No. 91224000, 2020 U.S.P.Q.2d 48324 (T.T.A.B. Feb. 7, 2020). Tour Management filed a trademark application for registration of CHARLESTON HARBOR TOURS in connection with tour-related services in class 39. Spiritline Cruises, a competitor of Tour Management, opposed Tour Management’s application, alleging that CHARLESTON HARBOR TOURS was primarily geographically descriptive under section 2(e)(2) of the Trademark Act and that the mark had not acquired distinctiveness.

The TTAB initially determined that the record indicated that CHARLESTON HARBOR described a harbor in Charleston, South Carolina, and that Tour Management’s services emanated from Charleston and included tours of Charleston Harbor. Additionally, Charleston Harbor was a well-recognized location that was popular for tour-related services. The record included numerous examples of third parties that used the same wording to describe similar services. Accordingly, CHARLESTON HARBOR TOURS was highly geographically descriptive, and thus the standard for establishing that CHARLESTON HARBOR TOURS had acquired distinctiveness was high.

Tour Management introduced evidence of its continuous use of CHARLESTON HARBOR TOURS from 2003 to 2015, as well as advertising and sales data. Tour Management presented evidence using its mark in local TV and newspaper ads, magazines, rack cards, brochures, various tourism publications, and on its website and third-party websites. However, Spiritline Cruises introduced extensive evidence of third-party use of the mark, primarily via archived web pages from the Wayback Machine during the relevant time frame. Accordingly, the substantially nonexclusive use of CHARLESTON HARBOR TOURS did not support Tour Management’s claim that the public perceived the mark as an indicator of source.

Given the high degree of descriptiveness and the substantial evidence of third-party use of the same wording, Tour Management’s evidence was not persuasive, and the TTAB determined that consumers would view CHARLESTON HARBOR TOURS as a common geographic place. The opposition was therefore sustained based on a lack of acquired distinctiveness.

False Suggestion/Likelihood of Confusion/Collective Membership Marks

Pierce-Arrow Society v. Spintek Filtration, Inc., Opposition No. 91224343, 2019 U.S.P.Q.2d 471774 (T.T.A.B. Aug. 12, 2019). Spintek filed a trademark application for PIERCE-ARROW for automobiles. The Pierce-Arrow Society was founded in 1957 for preserving the heritage of Pierce-Arrow automobiles and for assisting members of its organization in restoring Pierce-Arrow automobiles. The Society opposed Spintek’s application and alleged false suggestion under Trademark Act § 2(a) and likelihood of confusion under § 2(d) in view of the Society’s trademark registrations for PIERCE-ARROW SOCIETY (word and design marks) for “indicating membership in a national organization whose aim is to foster and preserve interest in Pierce Arrow motor cars,” both collective membership marks.

The TTAB determined that Spintek’s PIERCE-ARROW mark was a close approximation of the Society’s name. However, the TTAB found that PIERCE-ARROW did not point uniquely and unmistakably to the Society. Moreover, the Society had not established a showing of fame or reputation under § 2(a). Accordingly, the § 2(a) claim of false suggestion was dismissed.

The TTAB explained that because the Society’s trademarks were collective membership marks, the proper test for determining a likelihood of confusion was whether relevant persons were likely to believe that Spintek’s automobiles were sponsored by or in some way affiliated with the Society. The TTAB determined that the relevant consumers for goods in connection with Spintek’s mark were prospective purchasers of new and used cars. The relevant consumers for the services of the Society were persons for whose benefit the membership mark is displayed.

Finding that the commercial impressions of Spintek’s PIERCE-ARROW mark and the Society’s PIERCE-ARROW SOCIETY mark were highly similar, the TTAB also found that the respective identifications reflected a clear and immediate relationship, particularly as the Society’s services were not restricted to historical vehicles. Considering the other DuPont factors, the TTAB found that while the trade channels differed, the consumers of the Society’s membership services and Spintek’s automobiles overlapped. Additionally, even if the relevant consumers were sophisticated in their purchasing decisions, there might still be source confusion arising from using very similar marks. Overall, the TTAB determined that relevant consumers would likely assume a connection or affiliation with or sponsorship by the Society if Spintek’s PIERCE-ARROW mark was used for automobiles. Consequently, the § 2(d) claim for likelihood of confusion was sustained, and registration of Spintek’s PIERCE-ARROW mark was refused.

Genericness/Supplemental Register

In re Haden, Serial No. 87169404, 2019 U.S.P.Q.2d 467424 (T.T.A.B. Dec. 4, 2019). Dr. James Haden (the applicant) sought to register the mark ALLERGY CARE plus design for medical treatment of allergies, asthma, immune disorders, and shortness of breath. The mark included a red, horizontal oval with a white and blue border and the words “ALLERGY CARE” stacked inside the oval in stylized letters with a white and blue outline. The examining attorney refused registration on the ground that the mark was generic and incapable of distinguishing the applicant’s services. The applicant appealed.

The TTAB applied a two-prong genericness test: (1) determining the genus of goods or services at issue; and (2) determining the relevant public’s understanding of the mark. The TTAB found that the applicant’s recitation of services adequately defined the services at issue. The TTAB also found that the relevant public—consumers seeking medical care services for allergies, asthma, immune disorders, and shortness of breath—would understand the phrase ALLERGY CARE to refer to health-care services related to diagnosing and treating allergies (i.e., the genus of services defined by the applicant’s recitation of services). Thus, the TTAB found that the term ALLERGY CARE was descriptive of the identified services.

The next inquiry was whether the mark was entitled to registration on the Supplemental Register, i.e., whether, in view of the background design, color, and stylization, the entire mark was capable of distinguishing the applicant’s services. The TTAB dismissed the examining attorney’s arguments that the mark was not inherently distinctive and had not acquired distinctiveness, finding that those inquiries were relevant to registration on the Principal Register, and that the test for registrability on the Supplemental Register is whether the mark is capable of serving as an indicator of source. The TTAB found that the applicant’s mark included a combination of colors, borders, and stylized generic wording that made it more than an ordinary geometric shape or stylization alone with no ability to indicate source.

Thus, the TTAB found that the entire mark, featuring a combination of colors, borders, and stylization, was entitled to registration on the Supplemental Register with a disclaimer of “ALLERGY CARE.” The TTAB gave the applicant 30 days to submit the required disclaimer, upon which the refusal to register would be set aside.

Ownership

Hole in 1 Drinks, Inc. v. Lajtay, Cancellation No. 92065860, 2020 U.S.P.Q.2d 10020 (T.T.A.B. Feb. 19, 2020). Hole in 1 Drinks (the petitioner) petitioned to cancel the mark HOLE IN ONE owned by Michael Lajtay (the respondent). The petition alleged that the registration was void ab initio because the respondent did not own the mark as of the date of filing the statement of use in the underlying application.

The respondent filed the underlying intent-to-use application for the HOLE IN ONE registration in his own name, even though he and the petitioner’s president had already agreed to form Hole-In-One Drinks LLC, the entity through which they intended to sell HOLE IN ONE branded beverages. The TTAB stated that, although there is no statutory requirement that the filer of an intent-to-use application be the owner of the mark at the time the application was filed, the petitioner could have asserted that the respondent did not have a bona fide intent to use the mark in commerce as of the filing date of the application. The TTAB found that this claim was tried by implied consent because the respondent had fair notice of the issue and actively defended itself on the merits.

Because the respondent and the petitioner’s president had a bona fide intention to use the HOLE IN ONE mark at the time the respondent filed the underlying application, the TTAB found that the application should have been filed in both of their names, as joint applicants. Additionally, the TTAB held that Hole-In-One Drinks LLC was the first and only user of the HOLE IN ONE mark, not the respondent. Thus, the TTAB granted the petition to cancel the HOLE IN ONE registration on the grounds that the underlying application was void ab initio because the respondent alone lacked the requisite intent to use the mark in commerce as of the filing date of the application.

Registrability

In re ADCO Industries-Technologies, L.P., Serial No. 87545258, 2020 U.S.P.Q.2d 53786 (T.T.A.B. Feb. 11, 2020). ADCO sought to register marks for utility knives. The marks consisted of the stylized wording “TRUMP-IT” with the top portion of the letter T in “TRUMP” stylized to resemble a wave of hair, star designs, the wording “MY PACKAGE OPENER,” and other elements.

The examining attorney rejected the marks based on the following grounds: (1) section 2(a) of the Trademark Act on the ground that the marks falsely suggest a connection with Donald Trump; (2) section 2(c) of the Trademark Act on the ground that the marks consist of or comprise a name, portrait, or signature identifying Donald Trump; and (3) Trademark Rule 2.61(b) for failing to comply with a request for information about whether the applicant has a connection or relationship with Donald Trump.

The TTAB reversed the refusal to register the marks under Trademark Rule 2.61(b) on the ground that ADCO failed to respond to the information request regarding the relationship, if any, between it and Donald Trump. However, the TTAB affirmed the refusals to register the marks under section 2(a) and 2(c) of the Trademark Act, namely, that the marks falsely suggested a connection with Trump because they are a close approximation of Trump’s name and identity. As further support of this finding, the TTAB noted that Donald Trump is associated with numerous goods and services, many of which are licensed. Furthermore, the TTAB found that the marks point uniquely and unmistakably to Trump, Trump has no connection with ADCO, and Trump’s name and identity are of sufficient fame and reputation that when ADCO’s marks are used on utility knives, a connection with Trump would be presumed.

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John C. Gatz

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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.