Publications / McDermott Newsletters / IP Update, Volume 5, No. 9, September 2002

IP Update, Volume 5, No. 9, September 2002

September 2002

IN THIS ISSUE

Trademarks / Surveys

Trademark Survey Demonstrating Actual Consumer Confusion May Be Sufficient to Prove a Likelihood of Confusion as a Matter of Law
By John Dabney

The U.S. Court of Appeals for the Ninth Circuit has held that a survey demonstrating actual consumer confusion may be sufficient to prove a likelihood of confusion as a matter of law. Thane International, Inc. v. Trek Bicycle Corp., 2002 U.S. App. LEXIS 18344 (9th Cir. Sept. 6, 2002).

The plaintiff owns the federally registered trademark TREK for bicycles. The defendant is using the mark ORBITREK for a stationary exercise machine. After the plaintiff sued the defendant for trademark infringement, the district court awarded summary judgment in favor of the defendant, reasoning that no reasonable jury could find a likelihood of confusion between the parties’ marks.

The Ninth Circuit reversed and remanded for trial. The court explained that "evidence of actual confusion constitutes persuasive proof that future confusion is likely." Here, the plaintiff had offered an "extensive survey evidence of actual confusion." According to the plaintiff’s survey, more than 25 percent of the relevant consumer group was confused into believing that the plaintiff was connected with the defendant on account of the defendant’s use of ORBITREK. Notwithstanding the defendant’s criticism of the survey, the court drew all inferences from the survey in favor of the plaintiff on the defendant’s summary judgment motion, holding that the survey alone could be sufficient evidence on which a jury could find a likelihood of confusion. "If a party produces evidence from which a reasonable jury could surmise that an appreciable number of people are confused about the source of the product, then it is entitled to a trial on the likelihood of confusion."

Patents / Inherency

Claimed Method for Selecting Sprouts Having Anti-Carcinogenic Characteristics Found to Be Anticipated—Ask Your Mother
By John Prince

When you were young, your parents told you that you should eat all your salad, including the sprouts, because eating your green leafy vegetables would help keep you healthy. If you didn’t listen to your parents, you should have. They apparently had a good understanding of the prior art issues in In re Cruciferous Sprout Litigation, Case No. 02-1031 (Fed. Cir., Aug. 21, 2002).

Scientists at Johns Hopkins University made an important nutritional discovery, which was that foods that are rich in a special class of sugars known as glucosinolates can induce high levels of Phase 2 enzymes in humans. Phase 2 enzymes are part of the your body’s mechanism for naturally detoxifying potential carcinogens. The scientist-inventors discovered that the Phase 2 enzyme-inducing glucosinolates are more highly concentrated in certain cruciferous sprouts (such as broccoli and cauliflower, but not cabbage, cress, mustard or radish) when the sprouts are harvested before the two-leaf stage, than they are in adult plants. A patent application was filed and the three patents that later issued were licensed to Brassica Protection Products, LLC. ("Brassica" is the Latin word for cabbage.) The issued patents claimed, for example, a "method of preparing a food product rich in glucosinolates" and a "method of increasing the chemoprotective amount of Phase 2 enzymes in a mammal" as well as a "method of reducing the level of carcinogens in a mammal."

As a result of cross motions for summary judgment on the issue of validity, the district court held the patents to be invalid as anticipated, finding the claims to be directed to an "unexpected benefit of a known process."

Brassica appealed, arguing that the district court wrongly construed the claims. Specifically, Brassica argued that the phrases "rich in glucosinolates" and "high Phase 2 enzyme-inducing potential" to require "at least 200,000 units per gram fresh weight of Phase 2 enzyme-inducing potential at 3-days following incubation under conditions in which cruciferous seeds germinate and grow."

The Federal Circuit affirmed the district court noting that Brassica’s proposed construction not only improperly imported limitations from the specification into the claims, but also (under the canon of claim differentiation) was inconsistent with dependent claims, which were of the scope Brassica urged for the independent claim.

The court then compared the claims to the voluminous prior art, which included references as far back as "2939 B.C. [where] the Emperor of China recorded the use of health giving sprouts." Brassica argued that "the prior art merely discusses growing and eating sprouts without mention of any glucosinolates or Phase 2 enzyme-inducing potential, and without specifying that particular sprouts having these beneficial characteristics should be assembled into a ‘food product.’" The Federal Circuit disagreed: "It is well settled that a prior art reference may anticipate when the claim limitations not expressly found in that reference are nonetheless inherent in it." The court found all of the limitations of the claims to be present in the prior art, even though the prior art may not evidence an understanding of the importance of glucosinolates as an inherent characteristic of the healthful sprouts. "Brassica does not claim to have invented a new kind of sprout, or a new way of growing or harvesting sprouts. Rather, Brassica recognized that some sprouts are rich in glucosinolates and high in Phase 2 enzyme-inducing activity while other sprouts are not." However, the discovery of a scientific principle or characteristic of the prior art is not a novel invention. The characteristics of the claimed sprouts "are inherent properties of the sprouts put there by nature, not by Brassica." The court continued: "The prior art teaches sprouting and harvesting the very same seeds that the patents recognize as producing sprouts rich in glucosinolates and having high Phase 2 enzyme-inducing potential."

Patents / Biotech

Best Mode Requirement Is Satisfied Despite Failure to Disclose a Method for Making a Preferred Unclaimed Starting Material
By Judith Toffenetti

Affirming the decision of the U.S. District Court for the District of New Jersey in a consolidated patent infringement suit in which Bayer AG sued four pharmaceutical companies for infringement of its patent covering a class of compounds including the antibiotic ciprofloxacin (Cipro), the U.S. Court of Appeals for the Federal Circuit found that the best mode requirement was satisfied despite Bayer’s failure to disclose a method of making a preferred unclaimed intermediate used for making the claimed compounds. Bayer AG v. Schein Pharmaceuticals, Inc. et al., Case No. 01-1286-1287 (August 9, 2002).

On cross-motions for summary judgement, the district court held that Bayer’s patent, U.S. 4,670,444 (the `444 patent), was entitled to the filing date of its parent application and, thus, was not invalid under 35 U.S.C § 102(d) over its own previously issued patents. On appeal, the defendants argued that the parent application was invalid for failure to disclose the best mode of carrying out the claimed invention contemplated by the inventor at the time of filing the application. The inventor of the `444 patent had discovered a way to increase antibiotic activity of a known compound. The general synthetic route to making the improved compound involves construction of an intermediate compound followed by further reaction of the intermediate. The inventor had difficulty constructing the intermediate compound and enlisted the help of another Bayer scientist who successfully synthesized a novel precursor of the intermediate compound (the Klauke compound). The `444 patent does not disclose the Klauke compound or its use in making the claimed final product (Cipro), but it does disclose a class of starting materials including the Klauke compound.

In reaching its decision, the district court had applied the two prong test for whether a disclosure satisfies the best mode requirement: determining first whether the inventor subjectively possessed a best mode of practicing his invention and, then, whether the parent application adequately disclosed that best mode. The district court determined that the scope of the claimed invention did not include any intermediate compounds but was limited to the end product, Cipro, and thereby disposed of the best mode allegation as outside the § 112, ¶1 reference to the "invention."

The Federal Circuit affirmed, using essentially the same analysis as the district court. As construed by the Federal Circuit, the invention consists of the final antibiotic products and not the starting materials. It was undisputed that at the time of filing the inventor had a preference for use of a starting material comprising a class of compounds including the Klauke compound, to make the intermediate product that was then reacted to form the claimed end product. However, the court disagreed with the defendants’ contention that Bayer’s failure to disclose the route to making the intermediate was a fatal flaw: "Not every preference constitutes a best mode of carrying out the invention." The court stated a rule that "unclaimed subject matter unrelated to the properties of the invention is not subject to the best mode disclosure requirement."

The court also disagreed with the defendants’ contention that disclosure of the intermediate is mandatory in this case because it is novel. The court noted that when a novel compound is necessary to practice the best mode, the best mode must be enabled. However, in the present case the court found the best mode to be enabled by the disclosure of the class of starting compounds, noting that since the inventor’s preferred method of making the intermediate does not materially affect carrying out the claimed invention, it need not be disclosed to comply with the best mode requirement.

In a concurring opinion, Judge Rader characterized the Federal Circuit’s opinion as "a new trap in the best mode minefield," but "[f]ortunately, . . . mostly dicta." Judge Rader strongly disagreed with the court’s use of an "effect on properties" test to identify best mode.

Patent / Claim Construction

Failure to Rely on Intrinsic Claim Construction Materials Constitutes "Abuse of Discretion"
By Paul Devinsky

In vacating and remanding the case to the district court, the U.S. Court of Appeals for the Federal Circuit found that the claim term "photocopy machine" was not properly construed in light of the specification and that such failure was an "abuse of discretion." Jack Guttman, Inc. v. Kopykake Enterprises, Inc., Case No. 02-1251 (Fed. Cir. August 30, 2002)

This case involves technology for creating intricately decorated baked goods, especially cakes, with the push of a button. Guttman is the assignee of U.S. Patent No. 6,319,530 (the `530 patent) directed toward a method of copying an image into an edible substrate sheet that can be placed directly on a cake. This allows a backer to produce, for example, a birthday cake decorated with an edible version of the birthday child’s photograph.

The inventor conceived of using a color photocopy machine to copy a picture and then print it, using edible ink, on an edible sheet. However, the edible sheet, which was developed for use in a silk-screening process, is delicate and heat-sensitive. Therefore, according to the conventional wisdom, it was unsuitable for use in a photocopy machine, which typically sends paper through one or more sharp turns during the copying process, which would cause the edible sheet to break apart. Further, photocopy machines also heat the paper to set the ink or toner, which degrades the edible sheet. The inventor solved the problem by using a copier with a manual feed path that sends the edible sheet on a path through the copy machine that does not involve any damaging bends. In addition, photocopy heaters are disabled to prevent heat-degradation of the edible sheet. In other respects, the inventive method resembles a conventional photocopy process, in which the image to be copied is placed on the scanner portion of the photocopy machine, an edible sheet is placed in the paper feed location, the user pushes a button and the machine scans the image and copies it—in edible ink—onto the edible sheet. The baker then places the edible sheet on the surface of the cake.

The day after the issuance of the `530 patent, Guttman sued Kopykake for infringing and inducing infringement of the `530 patent by marketing and selling its Kwik-Kopy machine.

Guttman moved for a preliminary injunction, which the court denied because it found that Guttman was unlikely to prove infringement, tentatively construing the claim term "tortuous bends" to mean a bend that "significantly deforms the line preceding it" and construing the term "photocopying machine" according to its ordinary meaning, i.e., a standard office photocopy machine. The court rejected Guttman’s argument that the patent explicitly defines "photocopying machine" to include a scanner working in tandem with a separate printer.

Guttman appealed. The Federal Circuit, declining the defendant’s invitation to rely on a dictionary definition (on the basis that it would render the term "bend" in the phase "tortuous bend" redundant) construed the term "tortuous bend" to mean one that, while "potentially curved, contains no curves sharp enough to sacrifice the survivability of the edible sheet." The court also declined to limit the term "non-tortuous copy path" to a substantially straight copy path in accordance with the disclosed embodiment. Rather, the court construed the term "non-tortuous copy path" to mean "a path that, while not necessarily straight, has no curves sharp enough to sacrifice the integrity of the edible substrate sheet."

As to the claim term "photocopy machine" the court looked to the specification and found that the description defined "‘photocopy machine’ to include a system with separate scanner and printing capabilities so long as the two parts function cooperatively with one-button operation to produce the effect of a plain paper photocopy machine."

Based upon its claim construction, the Federal Circuit further found the district court’s "failure to construe the claim terms in accordance with the definitions set forth by the patentee in the intrinsic evidence constituted an abuse of discretion," vacated the district court’s previous order and remanded the case to evaluate if patentee could make a clear showing of likelihood of success on the merits based on the proper claim construction.

Patents / Jurisdiction

Boldly Going Where No Court Has Gone Before?
By Todd Mobley

The U.S. Court of Appeals for the Federal Circuit has affirmed a ruling that a defendant contractually waived his Fifth Amendment due process right to challenge personal jurisdiction in an "agreed" forum by executing the plaintiff’s form agreement, which included a forum selection clause on the back. Monsanto Co. v. McFarling, No. 01-1390, 2002 U.S. App. LEXIS 17588 (Fed. Cir. August 23, 2002).

Monsanto licensed certain patented seed to manufacturers and to farmers pursuant to a "Technology Agreement" that contained, among various terms and conditions on its reverse, a forum selection clause. Monsanto filed suit in the U.S. District Court for the Eastern District of Missouri, charging the defendant, an individual farmer, with patent infringement and breach of the agreement. McFarling appeared to contest the Missouri court’s jurisdiction over him, arguing that he purchased, planted and harvested the seeds and executed the agreement in Mississippi. The district court denied McFarling’s motion to dismiss for lack of personal jurisdiction finding that by executing the agreement McFarling consented to the jurisdiction of the Missouri court.

On appeal, the defendant argued that he did not consent to jurisdiction because the forum selection clause was on the back of the technology agreement, which he stated he did not read and of which he was unaware. The Federal Circuit ruled that the forum selection clause was enforceable, the defendant having failed to demonstrate that the clause was invalid or that the selected forum was unreasonable or unjust, and that the defendant’s voluntary failure to read the clause did not render it ineffective.

Judge Clevenger issued a strong dissent arguing that the "Technology Agreement" was a one-side contract of adhesion because the goods or services were not available on alternative terms from another source. Judge Clevenger characterized the majority’s holding as allowing an accused infringer to "surrender his right to due process in advance by signing a contract of adhesion—regardless of whether that accused infringer knew that by so doing he abandoned his constitutional rights." Judge Clevenger noted that no court has gone so far as to hold that a contract of adhesion can subject a defendant to personal jurisdiction in a court that otherwise would have no power over him, and that if any court were to so hold, it should be the U.S. Supreme Court, not the Federal Circuit.

Copyright / Preemption

Shrink–Wrap Software Agreement Prohibiting Reverse Engineering Enforced by Federal Circuit
By Jennifer Yokoyama

The U.S. Court of Appeals for the Federal Circuit, applying First Circuit law, has now held that a breach of contract claim involving an agreement not to engage in reverse engineering is not preempted by the Copyright Act and that the district court properly dropped the copyright damages as duplicative of the contract damages. The Federal Circuit also reversed a jury verdict of patent infringement, stating that in suit and, as properly construed, no reasonable jury could have found infringement of the patent claims. Bowers v. Baystate Technologies, Inc., No. 01-11082002 U.S. App. LEXIS 17184, at (Fed. Cir. Aug. 20, 2002).

The technology involved in Bowers’ patent is a template to improve computer aided design (CAD) software. The developers of Geodraft software, which utilizes Bowers’ template, obtained a registered copyright covering their software and licensed it to Bowers. Bowers sold a software product using a shrink-wrap license that prohibited reverse engineering. The ensuing lawsuit involved claims for copyright infringement, patent infringement and breach of contract. The jury found for Bowers on all three claims and awarded damages specific to each violation. The district court upheld the jury’s findings, but dropped copyright damages as duplicative of the contract damages.

On appeal, Baystate argued that the Copyright Act preempts the prohibition of reverse engineering in the contract. The Federal Circuit disagreed, holding that the additional elements of proof within the state law claim for breach of contract, such as mutual assent and consideration, rendered that claim qualitatively different from a copyright claim. The Federal Circuit did agree, however, that the breach of contract damages in this case arose from the same copying and included the same lost sales that formed the basis for the copyright damages. As a result, the court upheld the district court’s decision to drop the copyright damages as duplicative of the contract damages.

On the patent counts, the court held that the district court had erred in its claim construction. Based on the intrinsic evidence, i.e., the written description and reexamination prosecution history, the court found the scope of the claim to be narrower than that found by the district court. Specifically, the court found that based on arguments made during a reexamination distinguishing over certain prior art, Bowers was precluded from asserting a broad, i.e., plain meaning, construction of the disputed term.

Although a change in claim construction at the appellate level generally necessitates a remand to the district court to consider new factual issues, the Federal Court found that under the correct construction, no reasonable jury could find that Baystate literally infringed the asserted patent. Because Bowers did not assert infringement under the doctrine of equivalents, the court simply reversed the finding of patent infringement.

Trademarks / Trade Dress

Sales Volume and Intentional Copying Alone May Be Sufficient to Demonstrate that a Trade Dress Is Valid as a Matter of Law
By John Dabney

The U.S. Court of Appeals for the Tenth Circuit has held that a trade dress may be valid as a matter of law upon proof of a large sales volume of products featuring the trade dress and that the defendant intentionally copied the trade dress. Sally Beauty Co., Inc. v. Beautyco, Inc., 2002 U.S. App. LEXIS 18139 (10th Cir. Sept. 3, 2002).

The plaintiff uses a trade dress for its beauty products that consists of, among others, a white bullet-shaped bottle with a flat, black cap. The defendant uses a similar-looking bottle for its beauty products. After the plaintiff sued for trade dress infringement, the district court awarded summary judgment in favor of the defendant, holding that the plaintiff’s trade dress was invalid as a matter of law.

The Tenth Circuit reversed and remanded for trial. The court explained that a trade dress is valid and, thus, protectable when it has acquired a secondary meaning. A trade dress has acquired a secondary meaning when "its primary significance in the minds of potential consumers is no longer as an indicator of something about the product but as an indicator of its source or brand." The plaintiff offered circumstantial evidence that its trade dress had acquired secondary meaning by showing a large sales volume of products featuring the trade dress (worth millions of dollars) and demonstrating that the defendant intentionally copied the trade dress. Because this evidence alone was a sufficient basis on which a reasonable jury could conclude that the plaintiff’s trade dress is valid, the court held that summary judgment was inappropriate.

Trademarks / Domain Names

Failure to Conduct Reasonable Investigation to Ensure Domain Name Is Not Infringing Is Evidence of Bad Faith
By Carrie Shufflebarger

A domain name registrant’s failure to conduct a reasonable investigation to ensure that its domain name does not infringe another’s trademarks rights constitutes evidence of bad faith under the Anticybersquatting Consumer Protection Act (ACPA). Eurotech, Inc. v. Cosmos European Travels Aktiengesellschaft, Civ. No. 01-1689-A, 2002 U.S. Dist. LEXIS 13615 (E.D. Va. July 24, 2002).

The defendant, Cosmos, owns numerous incontestable trademark registrations in several countries for the mark COSMOS for use in connection with travel services. The plaintiff, Eurotech, registered the domain name cosmos.com and began using the domain name in connection with a travel information website. Eurotech did not conduct a trademark search to determine whether the mark COSMOS already was registered or in use as a trademark or trade name. Cosmos filed a complaint pursuant to the Internet Corporation for Assigned Names and Numbers (ICANN) procedures with the World Intellectual Property Organization (WIPO), which ordered Eurotech to transfer the domain name to Cosmos. Eurotech appealed the holding by filing a declaratory judgment action in the U.S. District Court for the Eastern District of Virginia. Cosmos counterclaimed alleging trademark infringement, unfair competition and violation of the ACPA.

The U.S. District Court for the Eastern District of Virginia granted summary judgment to Cosmos and ordered Eurotech to transfer the domain name. In addition to finding the balance of the enumerated ACPA "bad faith" factors weighed in favor of its holding, the court also stressed the importance of examining whether the "larger picture" is consistent with a finding of bad faith. In this regard, the court held that Eurotech’s failure to conduct a reasonable investigation to ensure that the domain name was non-infringing further supported a finding of bad faith. Had Eurotech performed a simple trademark search, it easily would have ascertained that Cosmos had registered the mark COSMOS for use in connection with the travel industry and had spent millions of dollars promoting that mark.

Patents / Claim Construction

The Federal Circuit Overtures Jury Verdict Based On Modified Claim Construction
By Michael O'Neill

The U.S. Court of Appeals for the Federal Circuit after modifying the district court’s construction of the claim term "composition," vacated a jury verdict of infringement and remanded the case. PIN/NIP, Inc. v. Platte Chemical Co., 02-1056, 2002 U.S. App. LEXIS 18151 (Fed. Cir. 2002)

The plaintiff filed suit seeking a declaration that the defendant’s patent is invalid and not infringed. The defendant counterclaimed for infringement. The patent in issue was directed to a composition for inhibiting sprout growth in tubers, such as potatoes. The prior art included the chemical CIPC and the substances DMN and DIPN. The claimed invention required a combination of CIPC and either DMN or DIPN. The accused method consisted of using two chemicals separately in spaced, sequential applications.

The district court construed the claim term "composition" as meaning two chemicals, even if not physically mixed together. The court granted the defendant summary judgment that the patent was not anticipated by a thesis in which potatoes were accidentally treaded with CIPC and later treated with DMN. Based on the district court claim construction a jury returned a verdict of infringement.

The Federal Circuit modified the district court’s claim construction, holding that the term "composition" requires a physical mixture of substances. The court also noted that the intrinsic evidence, the patent specification, was limited to teaching only an actual mixture of two ingredients and that the application of substances separately was well known in the prior art.

Despite the modified claim construction, the Federal Circuit affirmed the grant of summary judgment of no anticipation, holding that the thesis was silent when the two substances were applied to the potatoes. Thus, there was no evidence that a "composition" of CIPC and DMN was ever formed.

However, based on the modified claim construction, the court vacated the jury verdict of infringement, finding there was no substantial evidence that the defendant’s method formed a "composition" of substances. Although the parties’ experts offered some testimony on that issue, the court concluded that the defendant should have the opportunity on remand to prove its infringement case under the proper claim construction.

Patent Applications Handbook
The Patent Application Handbook addresses the complete patent application process including exactly what must appear in an application; how information must be prepared and presented to the U.S. Patent and Trademark Office; procedures and tips for filing and prosecuting applications; fundamentals of preparing a disclosure and for drafting claims; the proper subject matter for an invention; and information regarding reexamination and reissue.

To purchase this book, contact West Group Publishing at 800/960-1220 or visit www.westgroup.com.

McDermott Will & Emery

McDermott Will and Emery