IP Update, Volume 8, No. 6, June 2005
June 2005
Patents / FDA
Supreme Court Broadens the FDA Exemption
By Bonnie Warren
In a unanimous decision, the U. S. Supreme Court held that the “safe harbor” provision under 35 U.S.C. §271(e)(1) exempts from infringement “all uses of patented inventions that are reasonably related to the development and submission of any information” under the Federal Food, Drug and Cosmetic Act, which “necessarily includes preclinical studies of patented compounds that are appropriate for submission” to the Food and Drug Administration (FDA). Merck KGAA v. Integra LifeSciences I, Ltd., Case No. 03-1237 (Jun. 13, 2005) (Scalia J.). Because the Supreme Court found the district court’s jury instruction was consistent with standard, the Supreme Court declined to reverse the judgment and instead remanded for a determination of whether sufficient evidence supported the jury’s verdict.
Integra LifeSciences I, Ltd., the Burnham Institute and Telios Pharmaceuticals, Inc. (collectively Integra) brought suit against Merck KGAA (Merck), The Scripps Research Institute and Dr. David A. Cheresh alleging infringement of certain patents related to the tripeptide sequence Arg-Gly-Asp, known as the “RGD peptide.” Merck answered, among other things, that its actions involving the RGD peptides did not infringe and, in any event, were protected by the safe harbor provision of §271(e)(1) (hereinafter “the FDA exemption”). At the close of trial, the district court instructed the jury on the legal standard as to the FDA exemption using the following instruction:
[t]o prevail on this defense, Merck must prove by a preponderance of the evidence that it would be objectively reasonable for a party in Merck’s and Scripps’ situation to believe that there was a decent prospect that the accused activities would contribute, relatively directly, to the generation of the kinds of information that are likely to be relevant in the process by which the FDA would decide whether to approve the product in question.
The jury found Merck liable for infringing the asserted patents. Applying the instructed legal standard, the jury found that Merck failed to show that its activities were protected by the FDA exemption and found for Integra. Merck filed a renewed motion for judgment as a matter of law (JMOL) under Federal Rule 50(b) with respect to the FDA exemption. The district court denied Merck’s motion, reasoning that “the evidence was sufficient to show that ‘any connection between the infringing Scripps experiments and FDA review was insufficiently direct to qualify for the [FDA exemption]’.” Merck appealed the district court’s JMOL decision. At the Federal Circuit, Merck did not challenge the district court’s findings on the sufficiency of the evidence.
Federal Circuit Affirms District Court Application of Knorr-Bremse Totality-of-Circumstances Rule
By Minn Chung
The U.S. Court of Appeals for the Federal Circuit affirmed a jury’s finding of willful infringement under the Knorr-Bremse totality-of-the-circumstances rule. Imonex Services, Inc. v. W. H. Munzprufer Dietmar Trenner GmbH, Case Nos. 04-1262,-1290 (Fed. Cir. May 23, 2005) (Rader, C.J.).
At a first trial, the jury decided that Imonex’s patents (directed to coin selectors like those found on coin-operated laundry machines) were valid, enforceable and willfully infringed and awarded damages of over $10 million. The district court denied the defendant’s judgment as a matter of law (JMOL) motions of non-infringement and non-willfulness but ordered a second trial on damages. The second jury awarded damages of just over $1 million to Imonex. Both sides appealed.
On the issue of willfulness, the Federal Circuit affirmed the district court finding that it properly applied the test set out in the en banc Knorr-Bremse v. Dana Corp. opinion. The defendants had argued that they discharged their duty of due care by obtaining opinions of counsel regarding infringement shortly after being served with the complaint. Imonex argued that the defendants should have obtained these opinions earlier, as soon as they learned of their possible infringement of the patents. The Federal Circuit reiterated its holding in Knorr-Bremse that it is no longer appropriate to draw an adverse inference with respect to willful infringement from failure to obtain legal advice. While early receipt of legal advice would have strengthened the defendants’ argument that they had not willfully infringed, failure to have solicited such advice should not be viewed as evidence of willfulness. Nevertheless, the Court held that the jury had sufficient evidence (even without such an inference) to find actual notice and willful infringement under the facts of the case.
On the issue of damages, the Court upheld the district court’s exclusion of the Imonex expert’s testimony on the entire market value. The entire-market-value rule allows calculation of damages based on the value of an entire apparatus containing several features when the patented feature is the “basis for customer demand.” Because Imonex proffered no evidence that the patented features were the basis for customer demand for the laundry machines as a whole, the Court found that the trial court properly excluded the expert testimony on the unsupported entire-market-value theory.
The Federal Circuit also upheld the district court’s decision to remit the first jury’s damages award. Applying the law of the Fifth Circuit for this issue, the Court found the district court was justified in remitting the original damage award based on the misleading and improper argument of Imonex’s lawyer during closing argument.
Federal Circuit Finds Inequitable Conduct Based on a Pattern of Misdirected Statements to the USPTO
By Cameron K. Weiffenbach
Applying Rule 56 as amended by the U.S. Patent and Trademark Office (USPTO) in 1992, the U.S. Court of Appeals for the Federal Circuit upheld the district court’s determination of inequitable conduct where the patentee intentionally failed to disclose the material fact that the alleged “surprising discovery” of the invention was based on inventor’s “insight” as opposed to actual experimental results. Purdue Pharma L.P. v. Endo Pharmaceuticals Inc., Case Nos. 04-1189, -1347 and -1357 (Fed. Cir. Jun. 7, 2005) (Plager, Sr. C.J.).
In the subject patent, the written description states that the inventors “surprisingly discovered” that using a four-fold range of dosages (e.g., between 10 mg and 40 mg) of oxycodone formulations could achieve the same clinical results as the prior art opioid formulations using an eight-fold range of dosages (e.g., between 10 mg and 80 mg). After the patent issued, one inventor, Dr. Kaiko, testified that it was his “insight,” as opposed to any clinical results or testing, that led to discovery of the reduced range. Purdue concedes that no clinical testing had ever been conducted to support the assertion made in the application specification but insists that, nevertheless, it did not misrepresent facts or fail to disclose material facts to the USPTO.
The trial court, citing to patent specification and prosecution history, held that the record clearly and convincingly established that Purdue repeatedly made arguments to the USPTO that implied clinical results had been obtained to support the “discovery” and that it consistently argued the “clinical significance” of the discovery to the USPTO. The district court cited to assertions made by the inventor, Dr. Kaiko, to the USPTO about his “surprising discovery” suggesting that the discovery was supported by clinical results. The district court held the patent to be unenforceable. Purdue appealed.
The Federal Circuit agreed that the prosecution history supported the trial court’s conclusion; the fact that Dr. Kaiko’s “insight” provided the only support for the surprising discovery was material under Rule 56. Citing Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., the Court stated that “we give deference to the USPTO’s formulation at the time an application is being prosecuted before an examiner of the standard of conduct it expects to be followed in proceedings in the Office.” Information is regarded as material under amended Rule 56 if, inter alia, it “refutes, or is inconsistent with, a position the applicant takes in …[a]sserting an argument of patentability.”
The Federal Circuit agreed with the trial court that Purdue should have disclosed the material fact that the “surprising discovery” was not based on clinical testing to the USPTO since the information was inconsistent with the “result obtained” and quantitative arguments for patentability it presented. While the Court agreed with Purdue that a discovery can be made by insight or by experiment, it noted that if the invention is made by “insight,” the patent applicant cannot argue patentability before the USPTO using language that would imply experimental results had been obtained.
The Federal Circuit also agreed with the trial court’s finding regarding the intent element of inequitable conduct. Purdue argued that it acted in good faith when asserting (during prosecution) its belief that it had discovered the oxycodone formulations of the invention were effective over a four-fold dosage range as compared to an eight-fold dosage range for other opioids. The Court noted that notwithstanding Purdue’s belief in those assertions, it intentionally withheld the material fact as to the source of the “surprising discovery,” and in the context of a pattern of misdirected statements Purdue made during prosecution which suggested that it had obtained clinical results, an intent to mislead could be inferred.
No Unexpected Results Where Prior Art Ranges Overlap Claims Ranges
By Cameron K. Weiffenbach
The U.S. Court of Appeals for the Federal Circuit affirmed a decision of the Board of Patent Appeals and Interferences (Board) of the U.S. Patent and Trademark Office that a patent applicant failed to show unexpected results where the ranges disclosed in the prior art overlapped the claimed ranges. In re Harris, Case No. 04-1370 (Fed. Cir. May 25, 2005) (Ruder, C.J.).
Harris claimed a nickel-based superalloy comprising nickel and twelve additional elements. The claims were rejected over prior art to Yoshinari, which disclosed a nickel-based alloy comprising the same elements. The concentration ranges of each of the twelve additional elements in the prior art overlapped with Harris’ claimed ranges. In fact, eleven of the ranges disclosed in the prior art completely encompassed Harris’ claimed ranges.
Harris relied on the Federal Circuit decision in In re Peterson to argue that “[the prior art] ranges are too broad to teach any specific alloy to the skilled artisan.” Neither the Board nor the Court found the argument persuasive because the prior art in issue here bounded each range recited in Harris’ claims.
Because the Court found the Board properly identified a prima facie case of obviousness (due to the overlapping ranges), the burden shifted to Harris to show unexpected results. To meet its burden, Harris compared one specific alloy to four commercial alloys in an attempt to demonstrate that the claimed alloy had a quantitative improvement in the “stress rupture life.” Harris identified one of the commercial alloys to be the “closest prior art” because it differed slightly from the claimed alloy in that the amounts of two elements in the prior art alloy were outside the claimed ranges of these elements. The Court disagreed, noting that the prior art alloy Harris chose for its comparison was no closer than other prior art. The Court held that where each embodiment of the invention was equally representative of the prior art, “a comparison cannot be said to establish” unexpectedly superior results over the prior art.
The Court acknowledged that even though the comparative results showed an improvement in the stress-rupture life, the showing did not represent a “difference in kind” as required to show unexpected results but merely a difference in degree from results obtained by the prior art. Since the prior art teaches that limiting the amount of two elements in the alloy improves “hot corrosion resistance” and “high temperature strength,” which are related to stress-rupture life, the evidence supported the Board conclusion that an increase in stress-rupture life was not unexpected.
Finally, the Court agreed with the Board that the showing of unexpected results by Harris was not commensurate in scope with the claimed ranges; Harris relied only on one specific alloy for the showing. According to the Court, “[w]hile Harris’s evidence may show a slight improvement over some alloys, the record does not show that the improved performance would result if the weight-percentages were varied within the claimed ranges.”
Intrinsic Evidence Shows Patentee Intended To Be Own Lexicographer
By David A. Spenard
The U.S. Court of Appeals for the Federal Circuit upheld a district court’s grant of a summary judgment motion of non-infringement. The Court agreed with the district court that the exception to the “ordinary meaning” claim construction rule applied because the patentee explicitly assigned a special meaning to the claim term “interrupt,” a meaning not consistent with everyday use. Using the patentee’s supplied meaning, there was no infringement. Boss Ctrl Inc. v Bombardier, Inc., Case Nos. 04-1437, -1438, -1471 (Fed. Cir., Jun. 8, 2005) (S. Prost, C.J.). The Court declined to consider infringement under the doctrine of equivalents because the defendant never presented that issue to the district court.
Boss is the owner of a patent that relates to a security power interrupt apparatus that prevents the unauthorized use of an electrically operated device. The invention disclosed differs from the prior art in that it is not simply an “on-off” device but instead uses an interrupt mode to selectively provide power to auxiliary equipment. When in the interrupt mode, the device is not completely shut off until and unless a preset electrical current is exceeded; for example, by turning on a component that draws a high current. Accused devices included snowmobiles and personal watercraft.
The dispute focused on the following language: “…wherein said controller is operative to interrupt power to the load responsive to said code-providing device being operatively disconnected from said controller.” Boss contended that the district court erred in construing the limitation, and the term “interrupt” should have been given its plain and ordinary meaning of “to break off” or “to shut or cut off.” Bombardier responded by arguing the inventors gave a special meaning to the term “interrupt” that does not involve a simple “on-off” control of electrical power. The Federal Circuit, citing to the specification, agreed with Bombardier, stating that “the specification…clearly gave the term ‘interrupt’ a special definition”:
In the context of the invention, interruption of power to an electrical device involves two stages: a first stage in which auxiliary functions remain operational so long as a combined current draw is less than a current threshold, and a second stage in which power to the device is completely disconnected in response to the current threshold being exceeded.
Thus, the district court found that the intrinsic evidence bound Boss to a definition that was narrower than the plain meaning of the claim term.
The Federal Circuit also agreed with the district court that Bombardier did not literally infringe because the accused devices did not use the claimed two-stage interrupt mode. Rather, in both accused devices, electrical current was completely shut off to the engine at the time of disconnection, and no interrupt mode using a threshold current was employed. Although power continued to be supplied to auxiliary lights and gauges in the case of the personal watercraft, it did not depend on current levels.
Boss also argued that the district court committed reversible error by not analyzing infringement under the doctrine of equivalents. The Federal Circuit again sided with the district court, noting that as Boss had failed to address the equivalents issue in its complaint or in its two summary judgment briefs, it waived the issue.
A Patent Office Printing Error Can Invalidate a Patent
By Elaine Heal
The U.S. Court of Appeals for the Federal Circuit recently affirmed a judgment of invalidity due to claim indefiniteness where necessary claim language was omitted during the printing of the patent by the U.S. Patent and Trademark Office (USPTO). Group One Ltd. v. Hallmark Cards, Inc, Case Nos. 04-1296, -1297 (Fed. Cir. May 16, 2005) (Whipple, C.J.).
The two patents at issue are directed to a ribbon curling device and method of curling ribbon. In the claims of one of the patents at issue, language was omitted as a result of a patent office error, rendering the claims indefinite as printed. While the prosecution history disclosed that the missing language was required as a condition for allowance, the specific missing language could not be determined from reading the patent. The plaintiff obtained a jury award of about $9 million. Subsequently, the district court found that one of the patents was invalid for indefiniteness due to the USPTO printing error and the district court could not correct the patent office printing error. Group One appealed.
The Federal Circuit, citing Novo Indus., LP v. Micro Molds Corp., affirmed the district court’s finding of invalidity, holding that a district court can only correct a patent if “(1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” Thus, while the district court did not have authority to correct the patent, the patentee could have, but in this case did not, seek a certificate of correction from the patent office. The Court noted that had the patentee corrected the claims, the correction would only apply to actions arising after the correction.
Among other USPTO-centric issues in the case, the Federal Circuit agreed with the district court that retroactive reinstatement of one of the patents, where there had been a failure to pay a maintenance fee, did not result in invalidity, and the district court committed no error in taking judicial notice of the reinstatement after the close of evidence.
Practice Note: Preferably upon issuance of a patent and always prior to filing any litigation, patent owners should carefully review the patent as issued for a possible certificate of correction.
Expert Testimony Is No Substitute for Disclosure of Structure Supporting a Means-Plus-Function Claim Element
By Michael S. Wilcox
In affirming the district court’s summary judgment of invalidity for indefiniteness, the U.S. Court of Appeals for the Federal Circuit held that structures corresponding to a means-plus-function element must be disclosed in the specification; an expert’s testimony concerning what unlisted structures one of ordinary skill would understand are present cannot substitute for this requirement. Default Proof Credit Card System, Inc. v. Home Depot, U.S.A., Inc., Case No. 05-1069 (Fed. Cir. Jun. 16, 2005) (Michel, C.J.).
Default’s patent-in-suit claims a machine allowing customers to purchase prepaid debit cards for use with participating merchants. The system consists of a “point-of-sale assembly” allowing the user to pay for the card, a “means for dispensing” a debit card having a unique identification number and a remote “clearing house assembly” that stores, processes and communicates the card information to the merchant. The claims contain multiple means-plus-function elements. The Federal Circuit noted that the specification is “not a model of clarity” and is limited to “two figures and three columns of text.”
Home Depot moved for summary judgment of indefiniteness arguing that the patent fails to disclose any structure corresponding to the “means for dispensing at least one credit card.” Default’s expert argued that the specification disclosed three alternative corresponding structures: (1) a kiosk associated with the point-of-sale terminal that sells prepaid cards; (2) a receipt printer attached to the point-of-sale terminal and (3) the display attached to the terminal operated by the merchant; the district court granted summary judgment, and Default appealed.
The Federal Circuit affirmed the district court’s rejection of Default’s arguments, noting that the structure disclosed in the specification must be clearly linked to the claimed function and neither the specification nor the file history clearly linked the means for dispensing with any of the argued structures. The Court noted that Default’s preferred structures appeared to include people, i.e., the merchant operating the display and the kiosk operator, and a human cannot constitute a “means” correspondence to a §112(b) claim element. As explained by the Court, such arguments “merely beg the question of what structure the human being operates to perform the function of distributing the prepaid debit cards.”
Finally, the Court found that none of the argued structures was actually described in the specification. Rather, Default’s expert argued that an ordinarily skilled artisan would have understood that such structures would be associated with the point-of-sale terminal. The Federal Circuit instructed that while the patentee need not disclose details of structures well known in the art, the specification must nonetheless disclose some structure: “The testimony of one of ordinary skill in the art cannot supplant the total absence of structure from the specification.”
“Teaching Away” Requires Clear Discouragement from Claimed Combination
By Astrid R. Spain
The U.S. Court of Appeals for the Federal Circuit found “clear error” in a district court ruling that a patent directed to an ophthalmic anti-inflammatory drug formulation, marketed by Allergan, Inc. (Allergan) under the brand name ACULAR®, was valid and not an obvious variation of earlier known compounds. Syntex (U.S.A.) LLC v. Apotex, Inc., Case No. 04-1252 (Fed. Cir. May 18, 2005) (Gajarsa C.J.; Prost, C.J. concurring).
Apotex, Inc. (Apotex) appealed from the final judgment of the district court, which, after a bench trial, held the patent owned by Syntex LLC (Syntex) not invalid, enforceable and infringed by Apotex's Abbreviated New Drug Application (ANDA). The patent claims a formulation for sterile, preserved eye drops to treat eye inflammation, such as that caused by conjunctivitis or eye surgery, and teaches combining a nonsteroidal anti-inflammatory drug (NSAID) such as ketoralac tromethamine (KT) and a quaternary ammonium preservative such as benzalkonium chloride (BAC) with a surfactant such as octoxynol 40. The surfactant serves to prevent the two active ingredients from reacting with each other to form undesirable complexes.
On appeal, the critical issue was whether the use of the surfactant octoxynol 40 in the claimed formulations is an obvious alteration of similar formulations taught in the prior art. The Federal Circuit found clear error in the trial court's finding that “[n]o pharmaceutical formulation other than ACULAR® has ever included Octoxynol 40,” particularly in view of a report that had issued five days after the priority date of the patent stating that octoxynol 40 was “well known . . . in pharmaceutical products.” Furthermore, the Federal Circuit held that the prior art references did not “teach away” from the patented invention, noting a statement that a particular combination is not a preferred embodiment does not teach away absent clear discouragement of that combination.
The Federal Circuit also found error in the finding of a failure of proof that there would have been any motivation by one of ordinary skill in the art to use octoxynol 40 in the claimed formulations. The Court pointed to the district court's failure to examine expert testimony on the question of whether one of ordinary skill in the art would have deemed the invention obvious and, as a subset of the overall obviousness question, whether octoxynol 40 produced the unexpected results asserted by Syntex. Based on the prosecution history of the relevant patents, the Federal Circuit found reason to doubt the final examiner’s conclusion that octoxynol 40 produced unexpected results sufficient to overcome a prima facie case of obviousness and pointed out that, in the parent application, a different examiner had been unconvinced by the same evidence. Finally, the Federal Circuit also said the lower court should reconsider the significance of Syntex’s commercial success in light of its recent Merck v. Teva decision.
Patents / Declaratory Judgments
Compliance with License Agreement Obviates Any Reasonable Apprehension of Lawsuit
By Patrick D. Richards
The U.S. Court of Appeals for the Federal Circuit affirmed dismissal of a patent licensee’s declaratory judgment action for lack of subject matter jurisdiction, finding that the licensee, MedImmune, failed to establish that an actual controversy existed between it and the licensor, Centocor. MedImmune, Inc. v. Centocor, Inc., Case No. 04-1499 (Fed. Cir. Jun. 1, 2005) (Schall, J.).
Centocor is the exclusive licensee of the `715 patent with rights to sublicense to others. After the `715 patent issued, Centocor offered to sublicense for MedImmune’s Synagis® product. Soon thereafter MedImmune responded, stating it did not agree that the product was covered by the `715 patent and refused the license. MedImmune later agreed to take a license and began paying royalties. After concluding the license agreement, MedImmune asserted to Centocor that it did not infringe the `715 patent and that the patent was invalid and/or unenforceable. However, MedImmune continued making royalty payments and otherwise adhered to its license obligations.
Sometime thereafter MedImmune filed a declaratory judgment suit seeking a declaration that it owed no royalties under the license and that the `715 patent was invalid and unenforceable. The district court granted Centocor’s motion to dismiss for lack of jurisdiction holding that MedImmune failed to establish an actual controversy existed as required under the Declaratory Judgment Act. MedImmune appealed.
As noted by the Federal Circuit, the Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction…[a court] may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” When a potential infringer seeks declaratory relief in the absence of a lawsuit by the patentee, there must be both (1) a reasonable apprehension on the part of the declaratory judgment plaintiff that it will face an infringement suit and (2) present activity by the declaratory judgment plaintiff which could constitute infringement or concrete steps taken with the intent to conduct such activity.
After analyzing both its precedent and that of the Supreme Court, the Federal Circuit held that the license, unless breached, obliterated any reasonable apprehension of a lawsuit. Once the license was in place and MedImmune was in compliance with the terms of the agreement, MedImmune could not be under a reasonable apprehension of facing an infringement suit.
State Law Unjust Enrichment Claim Is Preempted by the Federal Patent Laws
By Michael R. O’Neill
Addressing the issue of preemption, the U.S. Court of Appeals for the Federal Circuit held that the plaintiff could not proceed on a state law unjust enrichment claim based solely on the defendant’s use of publicly available information and where the plaintiff did not allege it provided the defendant with any incremental benefit unavailable to the general public. Ultra-Precision Mfg., Ltd. v. Ford Motor Company, Case No. 04-1329 (Fed. Cir. Jun. 15, 2005) (Linn, J.).
Ford met with Ultra-Precision and expressed an interest in a solution that would reduce the noise generated by its air conditioning compressor. With no written agreement between the parties, Ultra-Precision conceived of a solution that included using a tube, called a PD tube, which better rerouted and directionalized the flow of gasses through the compressor. Ultra-Precision filed for and was issued U.S. patents on its concept. Ford decided not to pursue the PD tube concept. Instead, Ford’s engineers conceived of a solution that involved modifying its compressor to include an “accurate transfer cavity” that made the travel length of all gases flowing through the compressor about the same. Ford filed for and was issued its own U.S. patent on its concept and later installed the redesigned compressor in some of its vehicles.
Ultra-Precision filed suit against Ford for unjust enrichment. Of note, Ultra-Precision did not allege that Ford’s redesigned compressors infringed the claims of Ultra-Precision’s patents, that Ford misappropriated any of Ultra-Precision’s confidential trade secrets or that Ford breached a contract with Ultra-Precision. Instead, Ultra-Precision argued that Ford unjustly benefited from the technical information that Ultra-Precision provided to Ford; information that was publicly disclosed in Ultra-Precision’s patents. The district court ruled that Ultra-Precision’s unjust enrichment claim was preempted by the federal patent laws. The Federal Circuit affirmed.
The Federal Circuit noted that federal law generally preempts state laws that offer “patent-like protection” to discoveries that are not protected under federal patent law. The Court also noted that state law claims based on breach of written contract or the misappropriation of confidential trade secrets generally are not preempted. However, the Court observed that Ultra-Precision’s unjust enrichment claim was based solely on Ford’s alleged use of and benefit from information that was publicly disclosed in Ultra-Precision’s patents. Ultra-Precision did not allege Ford obtained any incremental benefit, such as an unfair head start, over and above what the general public received through the issuance of Ultra-Precision’s patents. The Court held that because publicly available information provides the baseline of free competition on which the patent system’s incentives is based, federal patent laws preempted Ultra-Precision’s unjust enrichment claim.
Given Fair Opportunity to Present Case, Sua Sponte Grant of Summary Judgment Is Not a Violation of Due Process
By Stephanie L. Nagel
Addressing a sua sponte grant of summary judgment, the U.S. Court of Appeals for the Federal Circuit affirmed a party is not deprived of due process rights when provided a fair opportunity to present its case. Air Turbine Tech., Inc. v. Atlas Copco AB, Case No. 04-1387 (Fed. Cir. Jun. 7, 2005) (Schall, J.).
Two tool manufacturers, Air Turbine Technology (ATT) and ACTAB, a subsidiary of Atlas Copco AB (Atlas), entered into a private brand agreement (PBA). The PBA included the following clause: “AC[TAB] will not exploit ATT’s technology covered by ATT’s patents….This provision is valid for the life of the patent.” Until ATT terminated the PBA, Atlas sold its grinder tool (the model TSF06) under the agreement.
ATT subsequently acquired the `346 patent related to an “automatic braking mechanism” for grinders. In the meantime, Atlas had begun selling another grinder tool which it touted as having the same characteristics as the TSF06.
ATT sued Atlas and ACTAB for, inter alia, infringement of the `346 patent, false advertising and breach of contract. The district court granted Atlas’s motion for summary judgment as to the false advertising and breach of contract claims, but the patent infringement claim proceeded to trial. After a final judgment adverse to ATT, the district court denied ATT’s post-trial motion (based on exclusion of proffered expert testimony) for a new trial.
On appeal, ATT challenged the district court’s sua sponte grant of summary judgment on the false advertising claim as a denial of due process. The Federal Circuit, applying Eleventh Circuit law, found ATT had received due process. As the Court noted, in its summary judgment motion, Atlas had put ATT on notice of the critical deficiency, and ATT previously had a “fair opportunity” to present its case in briefs and at hearings. Furthermore, the Court noted ATT had failed to provide evidence establishing a necessary element of a false advertising claim. Thus, summary judgment was proper.
Regarding the grant of summary judgment as to breach of contract, ATT argued that ACTAB had “exploited” ATT’s technology in violation of the PBA by marketing the TSF07—all predicated on the allegation that the new tool infringed the `346 patent. The Federal Circuit noted, however, advertising is not an “exploitation of technology,” and the `346 patent could not form the basis of a breach of contract claim because the application for the patent had been filed after termination of the PBA.
Finally, the Court found no abuse of discretion by the trial court in failing to grant ATT a new trial, noting that exclusion of testimony not disclosed in ATT’s expert’s report and exclusion of “expert” testimony from a co-inventor were both proper. As to the latter, the Court noted that having knowledge of the claimed invention does not endow an inventor with “particularized knowledge and experience” of the accused device.
Shrink-wrap License Does Not Rise to Misbranding under the PVPA
By Simona Levi-Minzi, Ph.D.
In the context of a shrink-wrap license used to package soybean seeds, the U.S. Court of Appeals for the Federal Circuit upheld the district court’s dismissal of soybean farmer Showmaker’s false marking claim. Edward Showmaker v. ADVANTA USA, INC. Case No. 04-1502 (Fed. Cir. Jun. 14, 2005) (Rader, J.). The appeal arose from a final decision of the district court to dismiss the complaint for failure to state a claim upon which relief can be granted. Based on the finding that in its shrink-wrap licenses Advanta did not use either terms of art (or variations of the same) reserved by the Plant Variety Protection Act (PVPA), the Federal Circuit affirmed the lower court dismissal.
Edward Showmaker is a farmer who purchased certain seed variety from Advanta USA, Inc. (Advanta). The variety was neither patented nor certified under the PVPA. However, it was sold in bags marked with the following provisions regarding the seed: “genetics developed, licensed or owned by seller”; (b) the seller retains all rights to make, produce or sell seed products derived from the seed and (c) the buyer acknowledges ownership and agrees not “to resell or supply any of this seed to any other person or entity,” is “strictly prohibited from saving or selling, for seed purposes, any grain products from the seed” and agreed “not to alter, or permit the alteration of the seed …through either genetic engineering, conventional breeding activities or other techniques” (the “shrink-wrap license”). The shrink-wrap license did not contain any reference to the PVPA or to any PVPA certificate.
Subsequent to his purchase, Mr. Showmaker informed Advanta of his interest in saving the variety seeds for future crops. Advanta informed Mr. Showmaker that such an act would be considered a breach of contractual and/or intellectual property rights. Mr. Showmaker then filed suit on behalf of a class of farmers from 18 states that had also purchased seed from Advanta, asserting various state and federal claims. The parties eventually agreed to dismiss all claims except the false marking claim.
The Court’s decision emphasizes not only that Advanta failed to engage in those activities expressly prohibited under the PVPA (e.g., referencing the PVPA or any pending application for plant variety protection or issued PVPA certificates when not applicable) but also that Advanta did not engage in any “overt attempt to invoke the protections of federal law for seeds that do not qualify for that protection.” The Court found Advanta’s contractual language in no way conveyed PVPA protection nor used any term similar to the terms provided under the PVPA (e.g., “Unauthorized Propagation Prohibited” or “Unauthorized Seed Multiplication Prohibited”) in its shrink-wrap license. The Court reasoned that Advanta contractually prohibited buyers from “saving or selling, for seed purposes, any grain products from its seeds” or from altering the seed “through genetic engineering, conventional breeding, or other techniques.” Such limitations were found to be mere contractual restrictions which did not put potential purchasers or the public on notice of a plant variety owner’s rights. As such, these terms were found to be binding only on the parties and did not arise to false marking prohibited under the act.
Practice Note: Careful drafting of shrink-wrap provisions may provide crucial protection of seed varieties in addition or in the alternative to federal protections available under the PVPA.
Trademarks / Fair Use
Ninth Circuit Applies Supreme Court Precedent and Remands Fair Use Case for Further Proceedings
By Farah P. Bhatti
In a decision late last year, the Supreme Court vacated and remanded this trademark case to the Ninth Circuit, holding that an accused infringer should not be required to prove “no customer confusion” in order to establish a fair use defense. The Ninth Circuit has now held the district court’s grant of summary judgment to be improper under the standard articulated by the Supreme Court. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., Case No. 01-56055 (Fed. Cir. May 19, 2005) (Hug, J.).
K.P. Permanent used the term “micro colors” on packaging and brochures for its permanent make-up products. Lasting Impression is the owner of a registered trademark for a logo including the term “micro colors” for use on the same types of products. When Lasting Impression demanded that K.P. stop using the term “micro colors,” K.P. sued for a declaratory judgment that the “micro colors” mark was generic, and its use of the words was a fair one. Lasting counterclaimed, alleging infringement.
On cross motions for summary judgment, the district court held that the words “micro colors” were generic and incapable of trademark protection or, in the alternative, descriptive and protectable only upon a showing of secondary meaning (which it found lacking in this case). Accordingly, the district court granted summary judgment in K.P.’s favor.
The Ninth Circuit reversed, holding that K.P. had failed to show its use would not give rise to actual confusion. The Supreme Court, however, vacated and remanded, holding the Ninth Circuit improperly placed upon the accused infringer the burden of showing “no customer confusion” in order to make out a fair use defense.
In looking afresh at whether “micro colors” was protectable, the Ninth Circuit (applying the reasoning of the Supreme Court’s earlier Park ‘N Fly and Shakespeare Co. cases) held that, as the “most salient feature of [an incontestable] mark,” “micro colors” was presumed to have acquired secondary meaning. Therefore, the words were protectable as a trademark, and Lasting Impression’s mark is valid. The Court also held that K.P. had not sustained its burden of proving the mark was generic.
With regard to fair use, the Ninth Circuit remanded for the district court to apply the reasoning of the Supreme Court and determine whether a likelihood of confusion exists and whether K.P.’s use of the mark was a fair one.
Practice Note: The Supreme Court in this case held that, even where some confusion exists, fair use can still be raised as a successful defense. Where the mark at issue is descriptive, the owner of the mark must accept the risk that others will make a fair use of the descriptive mark. As such, use of a descriptive mark by another to accurately describe its goods may be considered fair, even though confusion may result. In light of these recent developments, therefore, someone choosing a mark should not underestimate the challenges of enforcing a mark which may be deemed descriptive.
Lanham Act / Standing
In Dog of Case, Ninth Circuit Declines to Extend Standing to Bring Lanham Act “False Advertising” Claim to Non-Competitors
By Tyler J. Woods
Addressing standing to bring a “false advertising” claim under §43(a) of the Lanham Act, the U.S. Court of Appeals for the Ninth Circuit has confirmed that a plaintiff must show: (1) a commercial injury based upon a misrepresentation about a product and (2) the injury is competitive or harmful to the plaintiff’s ability to compete with the defendant. Jack Russell Terrier Network v. American Kennel Club, Case No. 02-17264 (Ninth Cir. May 17, 2005) (Gould, J.).
Respondent Jack Russell Terrier Club of America (JRTCA) publishes True Grit, a national, bimonthly magazine dedicated to Jack Russell Terriers. Appellants Georgia Fisher and Claudia Sprague, former Jack Russell Terrier breeders, were “blacklisted” in True Grit for competing in JRTCA-sanctioned terrier trials after registering their dogs with the American Kennel Club, a direct violation of JRTCA rules and bylaws. The appellants allege, as a result, other Jack Russell Terrier owners and breeders would not associate with them, breed with their dogs or buy their puppies.
Appellants argued that the publication of their names as “blacklisted” was a false advertisement misrepresenting the quality of their Jack Russell Terriers. Inclusion on the blacklist falsely implied that JRTCA-only terriers are superior to all other Jack Russell Terriers and that those dogs excluded do not meet JRTCA standards. Appellants additionally argued that the ostracism experienced by those “blacklisted” results in economic harm because breeders depend on their dogs’ reputation for quality and on trial awards won at JRTCA events to sell and breed their dogs.
The Ninth Circuit did not bite.
Focusing on the language of §43(a), the Court held that the appellants could not allege they were a competitor of JRTCA that has suffered competitive injury, and, therefore, they had no standing to sue. Accordingly, the Court dismissed upheld the district court’s dismissal of the appellants’ claims against JRTCA.
Trademark Infringement / Summary Judgment
Ninth Circuit Case Imposes Stiff Pleading and Proof Standard on Trademark Owner
By Farah Bhatti and Matthew Weil
In an opinion that appears to raise the bar for mark owners pleading trademark infringement, while at the same time lowering the bar for accused infringers hoping to get out on summary judgment, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s ruling that the use of the mark SURVIVOR does not infringe the rights of the owner of the SURFVIVOR mark. Surfvivor Media, Inc v. Survivor Productions, Case No. 02-17064 (May 4, 2005) (Rawlinson,J.).
The plaintiff owns three federal trademark registrations for the mark SURFVIVOR, used on a variety of beach-themed goods–including t-shirts, sunscreen and surfboards–sold exclusively in Hawaii. The defendants, the producers of the popular “Survivor” television show, use their SURVIVOR mark and associated logo design on merchandise used to market the program (including t-shirts, shorts, hats and sunscreen).
In reviewing the district court’s grant of summary judgment, the Ninth Circuit first considered the plaintiff’s claim the district court improperly failed to consider evidence of “forward confusion” (that is, evidence that consumers purchased goods with the SURVIVOR mark thinking they came from the plaintiff). The plaintiff “may not proceed on this theory because he failed to reference it in his complaint,” the Court observed without further analysis.
As to the plaintiff’s claims of reverse confusion (that is, when consumers purchase goods with the SURFVIVOR mark thinking they came from the defendants), the Court applied the Sleekcraft factors. The Court found that at least some of the factors (in particular, the strength of the mark and both marketing channels and degree of customer case, at least as to some of the accused products) supported a finding of likelihood of confusion. The Court found that others (specifically, evidence of actual confusion, the defendants’ intent and the likelihood of expansion by the plaintiff) did not favor the plaintiff.
As to the remaining factor–relatedness of the goods–the Court found the factor favored the defendants because there was no evidence in the record that “customers are likely to associate the two products or conclude that the products come from the same source.” Citing the Dreamwoks case by way of contrast, the Court concluded: “The distribution of the Sleekcraft factors does not raise a material issue of fact regarding likelihood of confusion.”
Practice Note: This case is curious for two reasons. First, to the extent the Court is imposing a requirement to particularly plead the specific type of confusion the accused infringer is creating, this would appear to be a new rule. Prudence would dictate that plaintiffs expressly allege and plead both theories to the extent the facts allow. Second, it appears the Court in this case may have misapplied the Sleekcraft factor concerning relatedness of the goods. As the Ninth Circuit itself made clear in the Sleekcraft case, this factor should be a consideration of whether particular types of goods are likely to be confused with other types of goods. Cars and motorcycles might be considered related goods; lawnmowers and toothpaste are not. The touchstone of the analysis is whether the buying public might consider the products “to have come from the same source if sold under the same mark.” Since at least some of the products at issue in this case were identical (for example, sunscreen), its seems this factor should have favored the plaintiff.
Act Restoring Lapsed Copyright of Foreign Authors Constitutional
By Matthew F. Weil
The U.S. Court of Appeals for the District of Columbia has recently ruled that restoration of copyright by the Uruguay Round Agreements Act (URAA) for some works of foreign authors that had fallen into the public domain is not unconstitutional. Luck’s Music Library, Inc. v. Gonzales, Case No. 04-5240 (D.C. Cir. May 24, 2005) (Williams, J.).
Section 514 of the URAA establishes copyrights of foreign holders whose protected works fell into the public domain in the U.S. for various reasons (e.g., the United States failed to recognize copyrights of a particular nation, the copyright owner failed to comply with formalities of U.S. copyright law or, in the case of sound recordings “fixed” before February 15, 1972, federal copyright protection had been unavailable). According to the D.C. Circuit, the new act passes muster under the copyright and patent clause of the U.S. Constitution, in part because it provides an extra incentive for authors to create new works, consistent with the requirement that legislation must "promote the progress of science."
Using reasoning based on cases such as Eldred v. Ashcroft (in which the Supreme Court upheld extending copyright terms for protected works even though the extension might provide as little as seven cents total present value for authors working today), the court held that, even if indirect, the incentive provided by the URAA is sufficient to permit section 514 to pass constitutional scrutiny.
The Court reasoned (though not altogether persuasively) that there is no material distinction between extending a copyright term that is about to expire and providing copyright protection for a work that had it and lost it or never had it at all. In other words, there is no bright line rule that prohibits Congress from removing works from the public domain once they have fallen into it.
