Publications / McDermott Newsletters / IP Update, Volume 4, No. 1, January 2001

IP Update, Volume 4, No. 1, January 2001

January 2001

IN THIS ISSUE

Trademarks/Domain Names

Multiple Registrations of Famous Domain Names is Powerful Evidence of Bad Faith Under The Federal Anticybersquatting Consumer Protection Act
By John Dabney

The First Circuit has held that where a Defendant registers multiple domain names based on famous trademarks, that fact alone may be sufficient to support the finding of bad faith required in order to prevail on a claim under the federal Anticybersquatting Consumer Protection Act (ACPA). Northern Light Technology, Inc. v. Northern Lights Club, 2001 U.S. App. LEXIS 161 (1st Cir. Jan. 8, 2001).

The Plaintiff owned the federally registered trademark NORTHERN LIGHT for an Internet search engine. The Plaintiff also owned the domain name northernlight.com. The Defendants registered and were using the domain name northernlights.com for a website that allegedly brought together devotees of the aurora borealis, i.e., northern lights. The district court awarded a preliminary injunction in favor of the Plaintiff on its claim under the ACPA.

The First Circuit affirmed, holding that the district court did not commit clear error in determining that the Defendant had used the domain name northernlights.com in bad faith. Significantly, the Court reasoned that Defendants’ multiple registrations of the domain names based on the trademarks of other famous companies was sufficient to establish bad faith and was not overcome by other facts militating against a finding of bad faith, i.e., the Defendants had used northernlights.com as an e-mail domain name for several years prior to the dispute with the Plaintiff, and the Defendants had initially rebuffed the Plaintiff’s attempt to acquire the domain name. The Court also held that in view of Defendants' myriad explanations for the use of the northerlights.com site, e.g., as an experimental new business model, as a site for aurora borealis admirers and as a compilation of businesses that contained the phrase "Northern Lights," they were not entitled to a "fair use" defense. As the Court explained, Defendants’ "oft-changing explanations for the purpose of the northernlights.com website evince a lack of subjective belief in the domain name’s fair use."

Patents/Enablement and Indefiniteness

Federal Circuit Finds Patent Claims to Be Invalid Based on Indefiniteness and Enablement Grounds
By Paul Devinsky and Wesley L. Strickland

The Federal Circuit, in affirming a district court decision holding a patent invalid for indefiniteness and nonenablement, noted that the patent language did not support a specific, limited meaning for a claim term argued by the patent holder and that, while the patent describes the need to perform certain steps, the details of the computer program designed to perform these steps were kept as a trade secret. Union Pacific Resources Company (UPRC) v. Chesapeake Exploration Limited Partnership, Case No. 00-1053, -1059 (Fed. Cir., Jan. 5, 2001).

U.S. Pat. No. 5,311,951 claims a method of horizontal drilling for the exploration of oil and natural gas. The invention relates to a method in which data logs from a horizontal and an offset vertical borehole are compared to determine the orientation of the horizontal borehole in relation to surrounding strata. After a bench trial, the district court held the claims of the '951 patent invalid, finding that the patent did not enable one skilled in the art to perform the claimed step of "comparing" and "rescaling" certain data, and the scope of the claim term "comparing" was indefinite. The court determined that the '951 patent did not disclose the methods for correlating and rescaling the horizontal data log that plaintiffs testified to be the novel features of the claimed "comparing" step. Furthermore, plaintiff explained that correlating two data logs involves careful selection of bed dip angles. Nothing in the '951 patent specification described manipulating data logs by careful selection of bed dip angles.

The Federal Circuit upheld the finding that the inventors purposely excluded details from the patent computer programming that a patentee was using to perform the claimed method and that, without these details, one of ordinary skill would not understand how to "correlate" (i.e., compare and rescale) the data logs to determine the location of the horizontal borehole relative to the surrounding strata. Based on the trial testimony of patentees' expert witness, the Federal Circuit determined that the record suggests that one of ordinary skill could not achieve the claimed "correlation" merely by visually comparing two graphs, but that significant mathematical manipulation of data would be needed.

Furthermore, the Federal Circuit found that the claim term "comparing" could undoubtedly have meanings to one of ordinary skill other than the complex process of "stretching and squeezing" data logs as suggested (but not explained) by the written description. Noting that the patent does not indicate whether "comparing" is to be used in the dictionary sense or as a technical or scientific term having a particular meaning, the Federal Circuit upheld the district court’s finding that the "comparing" steps in the independent claims were indefinite.

Practice Hint: Particularly for inventions relating to computer implemented algorithms, the prudent patent drafter should pay close attention to whether a disclosure limited to a general description of an algorithm or a mere description of the results of an algorithm, rather than the details of at least one preferred embodiment, will provide an enabling disclosure, especially when all or part of the novelty of the invention is known to be in those details.

Practice Note: In a related development, and coincidentally also on January 5, 2001, the Patent and Trademark Office (PTO) issued new "Examiner Guidelines" on the written description requirement, updating a version of the guidelines issued in 1999. Under the guidelines, examiners are instructed to perform a four-step evaluation:

1. Read and evaluate each claim, including the preamble. The claim must recite sufficient structures, acts or functions to make clear the scope and meaning of the claim and the weight to be given to the preamble.

The examiner should review the claims and specification to understand what the applicant possesses and what he claims.

2. Determine whether there is a sufficient written description to inform a skilled artisan that the applicant was in possession of the claimed invention as a whole at the time the application was filed.

3. For each claim drawn to a single embodiment or species, the examiner should determine whether the application describes an actual reduction to practice. If not, the examiner should determine whether the invention is complete based on the drawings. If the application does not contain a reduction to practice or drawings, the examiner should determine whether the invention’s distinguishing characteristics have been identified by other descriptions detailed enough to show that the applicant was in possession of the claimed invention.

4. For each claim drawn to a genus, the applicant may satisfy the written description requirement by sufficiently describing a representative number of species by reduction to practice, drawings or by disclosure of identifying characteristics such as structure or other physical and/or chemical properties. The requirement may also be satisfied by disclosing functional characteristics coupled with a correlation between function and structure or by a combination of identifying characteristics that show the applicant was in possession of the claimed genus.

Trademarks/Trade Dress

Trademark Owner, Not Court, Denominates the Line of Products for Assessing "Consistent Overall Look" Required for Trade Dress Protection Under the Federal Lanham Act
By John Dabney

The Third Circuit has held that in order for a plaintiff to obtain trade dress protection for a line of products under the Federal Lanham Act, it must prove that the line, as defined by the plaintiff, has a "consistent overall look." Rose Art Indus., Inc. v. Swanson, 2000 U.S. App. LEXIS 31771 (3d Cir. Dec. 13, 2000).

The plaintiff sought trade dress protection for the overall appearance of three separate lines of product packaging for its crayons, markers and colored pencils. The district court denied the Plaintiff’s motion for a preliminary injunction, reasoning that the Plaintiff’s trade dress did not have a "consistent overall look." In so doing, the district court relied upon the trade dress of the Plaintiff’s products that were outside the product lines for which the Plaintiff sought trade dress protection.

On appeal, the Third Circuit reversed and made two significant rulings. First, the Court followed other jurisdictions in holding that where a plaintiff is seeking trade dress protection in a line of products, a threshold inquiry is whether the line has a "consistent overall look." As the Court put it, "[t]he 'consistent overall look' standard . . . is the appropriate threshold inquiry in a trade dress case where the plaintiff seeks protection for a series of line of products or packaging." That legal standard, the Court observed, does not require that the products that comprise Plaintiff’s alleged line of products be identical: "[A] party may have trade dress rights even though there are slight variations in its package design so long as the change does not alter the distinctive characteristics and the trade dress conveys a single and continuing commercial expression."

Second, the Court held that in applying the "consistent overall look" standard, the plaintiff — not the court — is the appropriate entity to specify the scope of the product line for which trade dress protection is sought. "In presenting a case for trade dress infringement, a plaintiff can group together any number of products in any way that it sees fit, as long as the products have a 'consistent overall look.'" The Court then reversed the district court, finding that by considering the trade dress of products that were outside the line of products for which the Plaintiff sought trade dress protection, the district court had misapplied the governing legal standard in holding that the plaintiff’s lines of trade dress did not achieve a "consistent overall look."

Patent Litigation/Damages

Contempt Proceedings and Treble Damages for Post-Injunction Sale of Infringing Product Proper When No "Substantial Open Issues" of Infringement Exist
By Michelle L. Vizurraga

The Federal Circuit recently held that contempt proceedings were appropriate to impress upon a defendant treble damages, reasonable royalties and attorney’s fees for willfulness based on the defendant’s post-injunction sale of a modified version of an infringing product. Stryker Corp. v. Davol Inc., 2000 U.S. App. LEXIS 31527 (Fed. Cir. Dec. 12, 2000).

Stryker and Davol both manufactured a battery-powered, surgical suction device. Stryker filed for suit against Davol for infringement of its patent. Davol countered, claiming Stryker infringed its patents. The district court granted summary judgment on the counterclaim, finding non-infringement by Stryker. On the original claim, a jury found that Davol had willfully infringed one of Stryker’s patents. The court awarded Stryker reasonable royalties and enhanced damages but denied recovery of attorney’s fees.

Before entry of judgment and based on Davol’s continued sale of the infringing products, Stryker moved for a permanent injunction and an award of double royalties and prejudgment interest. After entry of the injunction, Davol began selling a thinly modified version of the originally enjoined product. The court found Davol to be in contempt of the injunction and awarded Stryker costs, attorney’s fees and reasonable royalties. It then tripled the royalty award based on Davol’s willfulness.

The Federal Circuit affirmed the grant of summary judgment and jury verdict based on the substantial evidence supporting a finding of literal infringement of the plaintiff’s patents and because the defendant failed to prove error by clear and convincing evidence. Likewise, the Federal Circuit found that contempt was proper in this case where a defendant’s post-injunction infringement raised no "substantial open issue" of infringement. Contempt proceedings are appropriate when the difference between the original infringing product and the redesigned device fails to raise a "substantial open issue" of infringement. Based on the defendant’s willful contempt, the Federal Circuit found no abuse of discretion in awarding treble damages, attorney’s fees and costs to Stryker.

Patent Litigation/Discovery

Litigants Beware: Sanction of Default Judgment for Egregious Misconduct Held Not an Abuse of Discretion
By Michelle L. Vizurraga

The Federal Circuit, applying Seventh Circuit precedent, upheld a decision by the United States District Court for the Northern District of Illinois imposing a default judgment as a sanction for flagrant and repeated discovery abuses. Videojet Systems Int’l, Inc. v. Eagle Inks, Inc., 2000 U.S. App. LEXIS 31337 (Fed. Cir. Dec. 7, 2000) (not citable as precedent). The Federal Circuit found that such a sanction by the district court was not an abuse of discretion, and that no "warning shot" was required before imposing dismissal as a sanction in such cases.

In Videojet, the plaintiff sued for infringement of various patents relating to inkjet printing. During discovery, the defendant repeatedly destroyed documents and ink samples, submitted false affidavits, altered invoices substituting non-infringing products for the accused products, concealed the identities of customers with pertinent information and falsified ink samples. Plaintiff filed several dispositive motions for sanctions in response to the defendant’s repeated misconduct and the district court found that such conduct, taken in its entirety, was a resolute attempt to commit a fraud on the court by preventing plaintiff and the court from discovering that the defendant had manufactured and sold the accused product.

The district court considered less severe sanctions, such as entering a finding of infringement against the defendant, but this left open a defense of patent invalidity against the plaintiff thereby allowing the possibility of the defendant prevailing on the merits of the case. Given these circumstances, the district court determined that the only sanction sufficient to punish the defendant, deter future misconduct, and preserve judicial integrity was a default judgment.

The Federal Circuit agreed with the district court and found no abuse of discretion in its selection of such a harsh sanction because of the defendant’s repeated and egregious misconduct. Although public interest favors invalidation of patents failing to comply with the statute, the Federal Circuit found that allegations of possible invalidity cannot override a trial judge’s imposition of sanctions for litigation misconduct as the integrity of the judicial process is equally as important to the public interest as exposure of invalid patents.

Practice Note: The Federal Circuit’s decision was released as an unpublished opinion; consequently, it may not be "employed or cited as precedent." Fed. Cir. R. 47.6(b); see also Labat-Anderson, Inc. v. United States, 42 Fed. Cl. 806, 848 (1999).

Copyright/Counterfeiting/Domain Names

Sale of Counterfeit Software Over the Internat Results in Domain Name Forfeiture
By Paul Devinsky

In what may be the first case of its kind, the defendants in a counterfeiting case involving computer software sold over the Internet were subject to criminal forfeiture of their domain name on entry of their guilty pleas. U.S. v. Lirola et al., Case No. CR-00-20311 (N.D.Calif. 1/5/01).

The defendants admitted they made unauthorized copies of copyrighted computer software, offered the software for sale on the Internet at www.software-inc.com and on Internet auction sites as authorized copies. Between March 1998 and September 2000 they took in $900,000. The defendants were charged by federal prosecutors in a three-count information filed in San Jose, California, federal district court. In connection with the entry of their guilty pleas, the defendants agreed to forfeit the $900,000, a new convertible that Customs agents seized last fall, a large quantity of computer and other electronic components and the domain name that was registered to Software Inc. in the Bahamas but operated and managed by the defendants in Los Angeles.

While private investigators hired by the copyright owners whose software had been counterfeited were involved, the Computer Hacking and Intellectual Property Unit of the U.S. Attorney’s Office for Northern California prosecuted the case, which was officially invested by the U.S. Customs Service. The defendants were charged with criminal copyright infringement, conspiracy to commit wire fraud and criminal forfeiture.

McDermott Will & Emery

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