IP Update, Vol. 11, No. 1, January 2008
January 2008
Patents / Prior Art - Is that Reference Publicly Accessible? Well, It Depends on the Facts
Trademarks / Infringement - Different Goods/Services Save eBay’s Day
Trademarks / Famous Marks - Foreign Fame Is Not Enough to Justify Trademark Protection in New York
Trademarks / TTAB Procedure - TTAB’s Long Arm May Reach Across the Ocean
Is that Reference Publicly Accessible? Well, It Depends on the Facts
By Sudip K. Kundu
Reiterating its precedent, the U.S. Court of Appeals for the Federal Circuit held that determining whether a reference constitutes a printed publication—therefore qualifying as prior art—is a fact -intensive inquiry approached on a case-by-case basis. SRI Int’l, Inc. v. Internet Sec. Sys., Inc., Case No. 07-1065 (Fed. Cir., Jan. 8, 2008) (Rader J.; Moore J. dissenting-in-part).
The technology in this case related to cyber-security. SRI asserted four patents, all of which originated from a single application. Each of the patents incorporated by reference a paper authored by the inventors called the “Live Traffic” paper. This paper, among others, was related to SRI’s publicized EMERALD project. More than one year before the filing date of the application that led to the asserted patents, one of the inventors posted the Live Traffic paper on SRI’s FTP server in a subdirectory along with other papers related to EMERALD. FTP is a protocol for exchanging files over computer networks such as the internet.
The Court held that posting the Live Traffic paper on the FTP server did not render it publicly accessible and, therefore, the paper did not constitute a printed publication. The Court reiterated that “public accessibility” is the “touchstone” in determining whether a reference constitutes a “printed publication” and that the determination is made on a case-by-case basis. According to the Court, the facts of this case pointed away from public accessibility. Specifically, the Court stated that the FTP server did not provide an index or catalogue or any way to meaningfully search for the Live Traffic paper. Furthermore, the record did not show that an anonymous user skilled in the art would have gained access to the FTP server and would have found the Live Traffic paper. Additionally, the record did not show that anyone accessed the paper via the FTP server during the time it was posted.
According to the Court, the record did show, however, seven instances in which one of the inventors previously directed people to the subdirectory containing papers related to the EMERALD project. The Court pointed out that, in every instance, the inventor directed people to a specific paper, which included in its filename the term “emerald” (i.e., the name of the publicized project). There was no specific direction with respect to the Live Traffic paper, which had a relatively obscure filename that did not include the term “emerald.” The Court, in finding against public accessibility, analogized posting of the Live Traffic paper on the FTP server to a poster at an unpublicized conference without a conference index of the location of the various poster presentations. In other words, the paper was not publicized or placed in front of the interested public and therefore could not constitute a printed publication.
Patents / Obviousness / Prosecution History Estoppel / Reexamination Practice
A Potpourri of Patent Perspectives
By Paul Devinsky
In a wide-ranging decision rendered in a case that had previously been before the U.S. Court of the Federal Circuit, the Court this time affirmed a pre-KSR jury instruction that a modification is not obvious unless the prior art suggests the desirability of the modification. The Federal Circuit also clarified the scope of its argument-based estoppel under the doctrine of equivalents and held that it was not improper for a product owner to add additional claims during re-examination for the specific purpose of covering a competitor’s device. Cordis Corp. v. Medtronic AVE, Inc. and Boston Scientific Corp., Case Nos. 06-1393, -1394, -1395, -1396, -1415, -1416 (Fed. Cir., Jan. 7, 2008) (Bryson, J.).
Jury Instruction on Obviousness
Although Medtronic AVE (AVE) agreed with the jury instruction on obviousness at trial (which took place prior to the Supreme Court decision in KSR), on appeal it challenged instruction to the jury on obviousness, arguing that it conflicted with KSR (see IP Update, Vol 9, No. 12). The jury was instructed that “a suggestion to combine references may also flow from the nature of the problem or from the ordinary knowledge of those skilled in the art that certain references are of special importance. If the prior art references as a whole do not teach, suggest or motivate that combination, then they may not be combined. The mere fact that the prior art can be modified does not make the modification obvious unless the prior art suggests the desirability of the modification.”
For purposes of appellate review, the Federal Circuit explained that the instruction either constituted “invited error” that is not reviewable at all or at most is subject to review under the “plain error” standard. Applying Third Circuit law (as it applies to instructional errors) the Court also found that even applying the “plain error” standard, AVE “must show, at a minimum, that any error in the obviousness instruction was ‘fundamental and highly prejudicial’ or that ‘the instructions are such that the jury [was] without adequate guidance on a fundamental question and our failure to consider the error would result in a miscarriage of justice.’”
As to invited error, AVE argued that it should not be penalized for requesting an instruction based on the state of the law before KSR, because KSR resulted in a significant change in the law. However, the Federal Circuit applying the plain error standard, noted that KSR states “[t]here is no necessary inconsistency between the idea underlying the TSM test and the Graham analysis.” Rather, the Court explained that the Federal Circuit error in KSR, was to “transform[] the general principle into a rigid rule that limit[ed] the obviousness inquiry.” The Federal Circuit concluded that AVE had not demonstrated that it was entitled to a new trial on obviousness.
Prosecution History Estoppel
In its appeal, Boston Scientific argued that it was entitled to a new trial on infringement arguing that the district court should have ruled that prosecution history estoppel bars orders from capturing equivalents of the “wall surface” limitation under the doctrine of equivalents.
Specifically, relying on Omega Engineering v. Raytek (see IP Update, Vol. 6, No. 7) limiting both claim scope and the scope of permissible equivalents based on statements made by the patentee in prosecution, Boston Scientific argued that Cordis narrowed both the claim scope and permissive equivalents with statements made during the reexamination of the patent in suit in response to a prior art rejection. Citing Cybor v. FAS Technologies, the Federal Circuit disagreed, noting that “for prosecution disclaimer to attach, our precedent requires that alleged disavowing actions or statements made during prosecution be both clear and unmistakable” and that “the same standard applies to the doctrine of argument-based estoppel.”
The Court also reminded us that in order to constitute a binding surrender of claim scope, “the statements in question must be such that ‘competitor would reasonable believe that the applicant had surrendered the relevant subject matter.’” Here, the Court found no broad disclaimer of claim scope, characterizing the statements made by Cordis as making “explicit the meaning of the term wall surface that was already implicit in the patent.”
As to Cordis’ prosecution argument as to why a particular reference (Ersek) did not satisfy the “wall surface” limitation, the Federal Circuit found that Cordis only disavowed devices such as the Ersek sleeve, but not devices like the Boston Scientific device that was found to be an equivalent for a different reason.
Adding Claims in Re-examinations
In its cross appeal, Cordis challenged the district court’s invalidation of claims under 35 U.S.C.§ 305, which provides that the owner of a patent that is in reexamination may “propose any amendment to his patent and a new claim or claims thereto, in order to distinguish the invention as claimed from the prior art cited under the provisions of § 301 of this title, or in response to a decision adverse to the patentability of a claim of a patent.” Section 305 is subject to the provision that “[n]o proposed amended or new claim enlarging the scope of a claim of the patent will be permitted in a reexamination proceeding.”
During the re-examination, Cordis added claims intended to capture competitor’s stents but stated in its response that the amendments were “[r]esponsive to the Office Action” and that the new claims were “narrower in scope than the original claims, and provide specific protection for aspects of the disclosed invention which have been incorporated into competitive products and methods.”
The district court found the new claims invalid because they were not added “to distinguish the invention as claimed from the prior art” or “in response to a decision adverse to the patentability of a claim of a patent” but “solely to cover competitors’ stents,” which is not permissible reason under § 305.
The Federal Circuit reversed, noting that “Cordis was free to include the new claims even apart from the office action if they were added to distinguish the invention from prior art cited under § 301,” so long as the new claims do not broaden the scope of coverage.
District Court Improperly Added Limitation Not Supported By the Specification
Contact: Paul Devinsky
Addressing the relationship between claim construction and a patent’s specification, the U.S. Court of Appeals for the Federal Circuit held that the district court erred by improperly adding a limitation not contained in the specification’s explicit definition of a claim term. Hyperphrase Technologies, LLC v. Google, Inc., Case Nos. 07-1125, -1176 (Fed. Cir., Dec. 26, 2007) (Michel C.J.).
Hyperphrase filed suit against Google, alleging that Google’s AutoLink and AdSense products infringed three of its patents. Google moved for summary judgment of non-infringement, which the district court granted. All but three of the asserted claims contained a limitation requiring a “reference” or “data reference,” which the parties agreed had the same meaning in each of the patents-in-suit. The district court held that the patentee defined “data reference” in the specification of one of the patents as “[a] unique phrase or word which may be used in a record to refer to another record or record segment.” The district court further held that a reference can refer to one and only one record. The district court then held that AutoLink does not infringe the asserted claims because it may link to any of multiple data records and not one and only one record.
The Federal Circuit agreed that the patentee had defined the term “data reference” in the specification, but it held that the district court erred in going beyond that explicit definition to add the “one and only” limitation. The Court noted that although the claim language recites “a” second record instead of “one or more” records, the use of the singular form “a” in conjunction with “comprising” and without narrowing language typically encompasses both singular and plural embodiments.
Furthermore, while the district court observed that “[e]very example in the preferred embodiments involves the use of data references … to identify a single medical record,” the Federal Circuit disagreed and described an embodiment showing the use of a data reference referring to multiple records. Since a claim construction that excludes an embodiment of the relevant claim(s) is typically incorrect, the Federal Circuit rejected the district court’s construction.
Having construed the claims, the Court turned to the judgment of non-infringement. The Court found that the district court’s error in claim construction was not harmless, but that there was insufficient evidence in the record to clarify whether the other limitations of two of the patents were met by AutoLink. The Court affirmed all findings of non-infringement.
For Example, Language in Specification Following “e.g.” Found to Be an Express Definition, Rather than an Example
Contact: Paul Devinsky
A divided panel of the U.S. Court of Appeals for the Federal Circuit reversed a claim construction ruling of the International Trade Commission (ITC), finding one sentence in a patent specification to be an express definition. Sinorgchem Co. v. U.S.I.T.C., Case No. 06-1633 (Fed. Cir., Dec. 21, 2007) (Dyk., J; Newman, J., dissenting).
Flexsys and Sinorgchem both produce a rubber antidegradant used in tires. Flexsys, the petitioner at the ITC, asserted that Sinorgchem infringed two Flexsys patents, which cover methods of producing the antidegradant and/or intermediate compounds. The two patents were related—one was a continuation-in-part of the other. After Flexsys prevailed before the ITC, Sinorgchem appealed.
Sinorgchem argued that the ITC’s construction of the claim term “controlled amount of protic material,” was error The common specification of the two patents stated that “[a] ‘controlled amount’ of protic material is an amount up to that which inhibits the reactions of aniline with nitrobenzene, e.g., up to about 4% [water] … when aniline is utilized as the solvent.” The specification also explained that the amount of protic material would vary based on different reaction conditions. The specification also contained an example that, when calculated using the information given, utilized over 10 percent water with aniline as a solvent.
Judge Dyk, writing for the majority, found that the specification had expressly defined a “controlled amount of protic material,” and that this express definition encompassed “up to about 4% [water] … when aniline is utilized as the solvent.” Accordingly, the majority limited the construed term in dispute (“controlled amount”) be limited to 4 percent.
Judge Newman dissented. She found no support for including the “up to about 4% water” in the claim construction of the term “controlled amount.” She accused the majority of improperly promoting “the number that is described for one condition, to a limit under all conditions, contrary to the specifications.” She noted that “the panel majority acknowledges that limits above 4% could be found in the specification … [but] discards this undisputed fact.”
Disclosure: The author of this case note represented Flexsys in this appeal.
Patents / Claim Construction / Obviousness / Willfulness
Narrow Claim Construction “Charged” By Specification and Prosecution History
By Paul Devinsky
In a case designated by the Court as nonprecedential, the U.S. Court of Appeals for the Federal Circuit reversed a broad claim construction arrived at by the district court, noting that claim differentiation “cannot serve to give a patent scope beyond the invention it discloses.” Black & Decker, Inc. v. Robert Bosch Tool Corp., Case Nos. 07-1243, -1244 (Fed. Cir., Jan.7, 2008) (Prost, J., non-precedential).
The patents-in-suit relate to a combination of a radio and a battery charger. Bosch appealed from a jury verdict, challenging the district court’s broad construction of the term “power conversion circuit.” Bosch contended that the proper construction should require a plurality of DC-to-DC converters that can convert an input DC voltage to a different output DC voltage, either higher or lower, in accordance with the multi-voltage battery charging function of the claim invention. Black & Decker (B&D) claimed that, by failing to object to the claim construction jury instructions and failing to argue claim construction in its motion for judgment as a matter of law (JMOL), Bosch had waived the ability to challenge those constructions.
Citing to the Seventh Circuit’s “futility exception” the Court found Bosch had not waived its right to contest the claim issue, noting that since Bosch proposed and argued for its construction at the Markman hearing, “[o]bjection under Rule 51 was not required to preserve the right to appeal the Markman ruling.”
On the substantive claim construction issue, the Federal Circuit found that the district court erred in applying the principle of claim differentiation. Rather, citing Phillips, the Court found that since the “power conversion circuit” must enable the battery to power the radio regardless of its voltage, “[a]ny presumption arising here from the dependent claims fails to override the proper construction of power conversion circuit provided by the claims, the specification, and the prosecution history.”
Looking for the required linguistic “hook” to tie the claim language to the function described in the specification, the Court focused on the term “conversion,” noting both the summary and preferred embodiment describe a circuit that adjusts voltage using a DC/DC converter to adjust (up or down) the power of the battery to allow it to power the radio. The Court also noted a remark (in the prosecution history) in which the applicant described the invention as including a power conversion circuit (PCC) that adjusts the voltage up and down.
As for obviousness, Bosch also argued that in view of KSR, the jury instructions regarding the standard for obviousness require a new trial or reversal of the jury’s verdict finding the claims non-obvious. Although the Court agreed that the pre-KSR obviousness instruction was “inconsistent with KSR,” the Court denied Bosch’s request since it failed “to identify evidence in the record that could support a jury’s verdict of obviousness even under the correct standard,” further noting that the Federal Circuit’s narrowed construction of the PCC claim term “does nothing to bolster Bosch’s invalidity arguments.”
The Federal Circuit also reversed the district court’s pre-Seagate finding of willfulness, noting that should the district court consider that issue again on remand, B&D must prove the “infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” The Federal Circuit broadly hinted that under this objective willfulness standard, both Bosch’s legitimate defenses to infringement claims and its credible invalidity arguments “demonstrate the lack of an objectively high likelihood that a party took actions constituting infringement of a valid patent.”
Practice Note: Apparently, the Federal Circuit will apply the “plain error” standard to those seeking a new trial based on a pre-KSR jury instruction or district court decision and will require a specific showing that post-KSR the original validity determination should be different.
Different Goods/Services Save eBay’s Day
By Paul Devinsky
The U. S. Court of Appeals for the Ninth Circuit in affirming a summary judgment of non-infringement, has clarified that a federally registered mark cannot prevail against a party that used the same mark on good or services different from those specified in the registration unless it establishes a likelihood of a confusion. Applied Information Sciences v. eBay, Case No. 05-56123, -56549 (9th Cir., Dec. 28, 2007) (Fisher, J.).
The U. S. Patent and Trademark Office (USPTO) issued AIS a registration for the mark “SmartSearch” for use in connection with “computer software and instruction manuals sold together which allow the user to retrieve information from on-line services via phone line in the fields of agriculture and nutrition, books, chemistry, computers and electronics, education, law, medicine and biosciences, news, science and technology, social sciences and humanities.” AIS marketed SmartSearch products.
In 2000, eBay began displaying the words “Smart Search” as a link on its homepage. Clicking this link would take a user to a page with advanced search options. AIS demanded that eBay either pay a license fee or stop using the term. eBay refused and a lawsuit followed. After both parties moved for summary judgment, the district court granted eBay’s motion on the ground that AIS does not have a valid, protected interest in the mark. AIS appealed.
AIS argued that on the basis of its federal registration alone, it established its rights in the “SmartSearch” mark. The Ninth Circuit agreed, noting that registration of a mark on the Principal Register constitutes prima facie evidence of the validity of the registered market and of AIS’ exclusive right to use the mark on the goods and services specified in the registration.
The Court went on to explain that AIS’s protectable interest is not limited to those goods or services described in its registration, noting that under 15 USC § 1114 the remedies available to a registration owner are not so strictly “circumscribed.” Rather, “a trademark owner may seek redress if another’s use of the mark on different goods or services is likely to cause confusion with the owner’s use of the mark in connection with its registered goods.”
In granting summary judgment for eBay, the district court relied upon the en banc 1985 Ninth Circuit decision in Levi Strauss & Co. v. Blue Bell for the proposition that AIS was required “to prove that eBay had used the SmartSearch mark on goods described in [AIS’s] registration” in order to make its threshold showing of a valid, protectable interest. The Ninth Circuit rejected this reading of the case, noting that in Levi Strauss, Strauss was attempting to extend its own use of its registered mark to goods not specified in its federal registration, i.e., from pants pocket tabs to clothing pocket tabs generally.
The Court explained that under a correct understanding of the Levi Strauss case, whether or not eBay ever used the SmartSearch mark in connection with the same goods on service specified in AIS’s registration is irrelevant to the question of whether AIS established a valid, protectable interest. The real issue is simply one of likelihood of confusion.
On that issue, the Ninth Circuit found that AIS failed to produce any admissible evidence tending to show a likelihood of confusion or even to address any of the Sleekcraft factors required for a likelihood of confusion analysis.
Trademarks / Likelihood of Confusion
The Color of Sweet Is Yellow: Likelihood of Confusion Is the Single Most Important Trade Dress Infringement Factor
Contact: Paul Devinsky
Addressing the issue of trade dress infringement, the U.S. Court of Appeals for the Third Circuit affirmed in part and reversed in part the district court’s decision denying a preliminary injunction against the sale of artificial sweetener in yellow packets. McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, et. al., 2007 U.S. App. LEXIS 29751 (Padova, J.).
The plaintiff, McNeil Nutritionals, is the maker and producer of an artificial sweetener, SplendaTM. McNeil’s SplendaTM sweeteners are sold in yellow packaging with the word “Splenda” written in italicized blue lettering. The defendant, Heartland Sweeteners, is the maker and producer of store-brand artificial sweeteners for grocery stores such as Heartland’s Ahold, Food Lion and Safeway products. Heartland’s Ahold, Food Lion and Safeway products are each sold in yellow packaging with the respective store names listed in blue writing on the product packaging.
McNeil filed suit alleging that the color schemes, graphics and package sizes infringed those of McNeil’s SplendaTM products, thereby causing consumer confusion. McNeil moved for a preliminary injunction to prevent Heartland from selling or distributing products in packaging resembling that of SplendaTM products. The district court denied the motion, holding that even though McNeil had established a close similarity in appearance between its product and the Heartland product, several remaining Lapp factors weighed against it. McNeil appealed.
The Third Circuit upheld the district court with respect to Heartland’s Safeway and Food Lion products. However, the Court held that the lower court did not correctly weigh the Lapp factors with respect to Heartland’s Ahold products. The Lapp decision held that “[t]he single most important factor in determining likelihood of confusion is [degree of] similarity.”
Specifically, the Third Circuit found that the district court “committed clear error” by not weighing the trade dress similarity factor—which it labeled “the single most important factor”—heavily enough. Based on its balancing of the Lapp factors, the Court determined that even the district court’s findings on the intent factor and evidence of actual confusion were insufficient to overcome the degree of similarity factor. On that basis, the Court reversed, explaining that when the similarity factor favors the plaintiff in a directly competing goods scenario the defendant “has a high hurdle to overcome.”
Practice Note: In holding that “[t]he single most important factor in determining likelihood of confusion is [degree of] similarity,” the McNeil case takes U.S. trade dress infringement precedent one step closer to that currently in place in the European Union.
Foreign Fame Is Not Enough to Justify Trademark Protection in New York
Contact Paul Devinsky
The United States Court of Appeals for the Second Circuit certified two questions to New York’s highest court regarding New York common law claims for unfair competition based on goodwill. In responding, the New York Court of Appeals concluded that while New York common law does recognize unfair competition claims, it does not do so based on the “famous” or “well-known” marks doctrine. ITC Ltd. v. Punchgini, Inc., USCDA 2 NO. 165, (N. Y. Ct. App., Dec. 13, 2007) (Renk, J.).
Since 1977, ITC has owned and operated a restaurant in New Delhi, “Bukhara.” In 2002 and 2003, Bukhara was named one of the 50 best restaurants in the world. In the three decades following the original restaurant’s opening, ITC franchised numerous Bukhara restaurants in various locations worldwide, including in the United States. Although ITC obtained a U. S. trademark for the Bukhara mark used in connection with its restaurant services, it subsequently abandoned the U.S. mark when it ceased its U.S.-based franchise operations.
Notwithstanding the abandonment of its U.S. mark in February 2003, ITC filed a lawsuit against numerous restaurateurs for trademark infringement and unfair competition for the unauthorized use of the mark Bukhara under the “well-known” or “famous” marks doctrine. The district court held that ITC could not pursue its federal trademark claim because it had abandoned the U.S. mark for Bukhara. With regard to ITC’s unfair competition claim, it was the district court’s opinion that while the very existence of the “well-known” or “famous” marks doctrine is controversial, even if the doctrine was valid in New York, ITC was not protected because it failed to establish the requisite level of U.S. recognition or goodwill for the mark to trigger the “well-known” or “famous” marks doctrine.
In March 2007, the Second Circuit affirmed the district court’s holdings on the federal trademark law issues, but certified two questions to the New York Court of Appeals regarding the New York common law claims.
The first certified question inquired whether “New York common law permits the owner of a famous mark or trade dress to assert property rights therein by virtue of the owner’s prior use of the mark or dress in a foreign country?” Although the New York Court of Appeals recognized the line of New York cases often cited as “famous marks doctrine cases,” it held that those cases did not explicitly adopt the “well-known” or “famous” marks doctrine. Rather, those cases simply applied unfair competition common law to find it is unfair to appropriate the results of the skill, expenditures and labor of a competitor. The court further held that it was reaffirming unfair competition case law that when a business possesses goodwill in New York, that is a form of property that the law will protect, whether the business is domestic or foreign.
The Second Circuit also questioned how famous must a foreign mark be in order to permit its owner to sue for unfair competition. In response, the New York Court of Appeals held protection from misappropriation of a famous foreign mark presupposes the existence of actual goodwill or recognition in New York. As explained by the New York Court of Appeals, if a foreign plaintiff has no goodwill in New York to appropriate, there can be no viable claim under New York’s common law theory of misappropriation.
Practice Note: Although this case does not address the difficulties of applying the “famous” or “well-known” marks exception to the U.S. use-based system, it does hold that New York will protect a famous foreign mark under the common law theory of misappropriation provided one can prove that New York consumers “primarily associate the mark with the foreign plaintiff.”
Trademark Owner’s Choice of Statutory Damages May Bar Recovery of Attorneys’ Fees
By Rita W. Siamas
Slashing a trademark owner’s award from $120,000 to $20,000, the U.S. Court of Appeals for the Ninth Circuit found that a plaintiff’s election to receive statutory damages for trademark counterfeiting under the Lanham Act, in lieu of actual damages, bars the plaintiff from also recovering attorneys’ fees. K & N Engineering, Inc. v. Bulat, 2007 WL 4394416 (9th Cir., Dec. 18, 2007) (Ikuta, J.).
The plaintiff, K& N Engineering, an aftermarket auto parts manufacturer, sued two individuals for selling unauthorized decals bearing its logo on eBay, alleging trademark infringement, trademark counterfeiting, and trademark dilution, as well as related state law and common law infringement. Instead of seeking actual damages under the Lanham Act, the plaintiff elected statutory damages. Presumably, the plaintiff chose statutory damages because the amount of actual damages was quite small—the defendants’ counterfeit sales totaled $267. When granting the plaintiff’s motion for summary judgment, the district court awarded the plaintiff $20,000 in statutory damages and $100,000 in attorneys’ fees.
The defendants appealed, arguing that electing to receive statutory damages under §35(c) of the Lanham Act barred the plaintiff from collecting attorneys’ fees under §35(b). Under §35(a), a plaintiff seeking actual damages for trademark infringement may only recover reasonable attorneys’ fees if the case is “exceptional.” In a case involving counterfeit marks, however, §35(b) allows a plaintiff to recover three times the actual damages plus reasonable attorney’s fees by default, except when “extenuating circumstances” exist. Alternatively, a plaintiff may opt for statutory damages instead of actual damages under §35(c), which are calculated using a defined range based on the amount of counterfeit marks.
Based solely on the language of §35, the Ninth Circuit held that by electing to receive statutory damages instead of actual damages, a plaintiff is precluded from recovering attorneys’ fees, since the attorneys’ fees allowed under §35(b) are provided “in assessing damages under subsection (a),” i.e., they do not apply to subsection (c), the statutory damages provision. Thus, the Ninth Circuit affirmed the district court’s grant of summary judgment on the infringement claims and upheld the statutory damages award of $20,000, but reversed the award of $100,000 in attorneys’ fees.
Practice Note: Choosing statutory damages may not bar the recovery of attorneys’ fees in all cases. The Court did not decide whether the choice of statutory damages precludes a plaintiff from seeking attorneys’ fees under the “exceptional case” standard of §35(a). A trademark case is considered exceptional when the district court finds that the defendant acted maliciously, fraudulently, deliberately or willfully.
TTAB’s Long Arm May Reach Across the Ocean
By Sarah Brown
In determining the extent of a district court’s subpoena power under 35 U.S.C. § 24, the U.S. Court of Appeals for the Fourth Circuit suggested that simply filing an intent to use trademark application (ITU) may subject foreign companies to a deposition in the Eastern District of Virginia in connection with an opposition proceeding. Rosenruist Gestao E Servicos LDA v. Virgin Enterprises Ltd., Case No. 06-1588 (4th Cir., Dec. 27, 2007) (Traxler, J.; Wilkinson, J. dissenting).
Rosenruist, a Portuguese company, filed an ITU with the U.S. Patent and Trademark Office (USPTO). Rosenruist had no presence and conducted no business in the United States. Virgin opposed Rosenruist’s application and attempted to take a testimonial deposition of Rosenruist under Fed. R. Civ. Pro. 30(b)(6). When Rosenruist refused to voluntarily appear in the United States for a deposition, Virgin moved to compel. The Trademark Trial and Appeal Board (TTAB) denied the motion, noting that under its rules of procedure, a party residing in a foreign country may be compelled to appear only by using The Hague Convention procedure or through issuance of letters rogatory to the appropriate Portuguese legal authority. Virgin then served a lawyer designated in Rosenruist’s application as its domestic representative with a subpoena requiring Rosenruist to appear in Virginia and produce a Rule 30(b)(6) witness. The subpoena was issued by the district court for the Eastern District of Virginia pursuant to § 24, which requires “the clerk of any United States court for the district wherein testimony is to be taken for use in any contested case in the [PTO] … to issue a subpoena for any witness residing or being with such district.” The district court denied Rosenruist’s motion to quash, rejecting the argument that § 24 did not give the court subpoena power over nonresident foreign corporations. Rosenruist refused to designate a representative, stating that there was no such person “residing or being” in the district. Virgin obtained sanctions against Rosenruist and moved to compel. The district court held concluded that “witness” as used in § 24, referred only to natural persons and that Rosenruist was not required to produce a Rule 30(b)(6) designee unless that designee was in the district. The decision was based on a holding. Virgin appealed.
The Fourth Circuit, after noting that Rosenruist was properly served with a valid subpoena and never appealed that order, found that Rosenruist could no longer question the validity of the subpoena and that the only question before the Court was whether Rosenruist itself was subject to the district court’s subpoena power or whether § 24 only extends to natural persons. The Fourth Circuit concluded that a “witness” subject to § 24 includes juridical entities such as Rosenruist. Therefore, because Rosenruist itself was the “witness,” Rosenruist could not avoid designating a Rule 30(b)(6) witness by stating that no appropriate individual was “residing or being” in the district.
Rosenruist argued that even if it did qualify as a “witness,” it still was not subject to § 24 because it was not “residing or being” in the district. Rosenruist pointed out that the designation of a domestic representative as party of a trademark application was not sufficient to subject it to the statute and argued that it did not have the “continuous and systematic contacts” in the district necessary to give the court personal jurisdiction. The Court concluded that, because the validity of the subpoena had already been determined by the district court in a ruling that was never appealed, the personal jurisdiction argument was not properly before it. Nevertheless, the Court suggested in dicta that “residing or being” in the district was less than the type of “continuous and systematic” contacts required for general jurisdiction: “were the issue before us … we would conclude that Rosenruist’s activities in this case were sufficient.”
Judge Wilkinson offered a spirited dissent, arguing that the Court’s decision improperly interpreted § 24, failed to apply canons of construction appropriate for decisions that potentially impact foreign relations and did not give appropriate deference to USPTO rules. While agreeing with the Court’s interpretation of the term “witness,” Judge Wilkinson took exception to the Court’s treatment of the statute’s “residing or being” language in dicta. He stated that by enforcing the subpoena issued by the district in which the USPTO sits, the Court created a standard under which foreign corporations that file ITUs that are opposed will be subject to subpoena, even if they have no other contact with the United States.
Suit for Share of Profits from the Sale of Copyright Protected Figurines Barred by Statute of Limitations
By Toby H. Kusmer
The U.S. Court of Appeals for the First Circuit affirmed dismissal of a lawsuit seeking a share of the profits from the past and future sale by Goebel of copyright protected Hummel figurines and images, on the ground that the claim is barred under the U.S. Copyright Law unless brought within three years of the accrual of that claim. Cambridge Literary Properties, Ltd v. W Goebel Porzellanfabrik GmbH & Co, et al., Case No. 06-2339 (1st Cir., Dec. 13, 2007) (Lynch, J.; Cyr, J., Sr., dissenting).
At issue was whether state law (which would not have barred the suit) or U.S. Copyright Law (which would bar the suit under its three-year statute of limitations) applied. Cambridge’s purported ownership rights were derived from two sets of heirs of a putative joint author (a contributor to a book containing poems and images of the figurines, from which the figurines were derived). Cambridge was therefore seeking an accounting and imposition of a trust on past and future profits from the defendant (who could establish a chain of title from the author and another contributor to the book) who manufactures the figurines. Cambridge’s ownership rights were clearly in dispute.
In this instance, in which the plaintiff did not seek a declaration of co-ownership of the U.S. copyright, the court held that the accounting and equitable trust claims created by state law were premature: “While such claims are governed by state law, they are not ripe and necessarily rest on Cambridge having met the antecedent showing that it had ownership rights under the Copyright Act.” While some issues of ownership of copyright may be governed by state law, the U. S. Copyright Law rights at issue were questions of authorship status and initial ownership of copyrights. As explained by the Court, the Congressional intent was to apply the Copyright Act’s limitations of a three-year statute of limitations to such claims of ownership. Thus, the Court noted that there was substantial federal interest in having the federal statute of limitations applied to these determinations and held that Plaintiff may not assert the state law claims for accounting or equitable trust without first establishing that it is a co-owner. In this case Cambridge and the heirs through which it claims its ownership rights were put on sufficient notice to result in accrual more that three-years before plaintiff instituted suit.
In a dissenting opinion, Sr. Judge Cyr stated that for jurisdictional purposes a plaintiff is normally a “master” of his complaint and, if he pleads a claim purely based in state law (as in the present case), the claims cannot be deemed to have “arise[n] under” federal law. According to Judge Cyr, the majority improperly held that the state-law cause of action, even though it potentially involves a threshold determination of the plaintiff’s copyright ownership, must be said to “arise under” the Copyright Act.
Copyright / Foreign Works Restoration
Foreign Work Published Simultaneously in the United States Not Eligible for Restoration
By Han (Jason) Yu
In an unpublished decision, the Court of Appeals for the Ninth Circuit held that the expired U.S. copyright in the board game “Strategy” is not eligible for restoration based on its Canadian copyright under § 104A of the Copyright Act (17 U.S.C. §104A). . Estate of Gunter S. Elkan v. Hasbro, Case No. 06-35027, 2007 WL 24261 (9th Cir., Dec. 5, 2007) (per curiam).
Section 104A was incorporated into the Copyright Act in accordance with the “Uruguay Round Agreements Act.” Effective January 1, 1996, § 104A restored copyright in certain foreign works that were then in the public domain in the United States but were protected by copyright in their source country. By allowing such restoration, the United States rendered itself compliant with the retroactivity requirements of the Berne Convention for the Protection of Literary and Artistic Works. To be eligible for restoration under § 104A, a work must have its origin outside of the United States and must not have been published in the United States during the 30-day period following publication in the source country.
Gunter S. Elkan, a Canadian citizen, copyrighted the board game “Strategy” in both the United States and Canada. His U.S. copyright expired in 1976, but his Canadian copyright continued. The Estate of Gunter Elkan sued Hasbro and its subsidiary Milton Bradley alleging that the defendants’ board game “Stratego” infringed the copyright in “Strategy.” After the district court granted Hasbro’s motion for summary judgment, the plaintiff appealed.
On appeal, the plaintiff did not dispute that Elkan’s U.S. copyright for “Strategy” expired in 1976, at which time the game passed into the public domain. However, the plaintiff argued that Elkan’s Canadian copyright provides independent protection under the Copyright Act and restored the U.S. copyright under § 104A. In rejecting the plaintiff’s argument, the Ninth Circuit made two observations. First, Elkan’s rights to “Strategy” were already protected (not just eligible for protection as required by the Act) in the United States when he obtained a U.S. copyright, and his Canadian copyright cannot expand such rights beyond those provided by the U.S. copyright. Second, in order for a foreign copyright to restore an expired U.S. copyright, the work must have been published first in the foreign country and “not published in the United States during the 30-day period following publication in such eligible country.” Because the Canadian copyright and U.S. copyright each lists the initial publication date for “Strategy” in its respective country on the same date, the Court ruled that those publication dates preclude restoration of the U.S. copyright under § 104A.
Legislative Update / Patent Reform
Patent Reform Efforts Revitalized with Release of Senate Judiciary Committee Report
By Rita W. Siamas and Paul Devinsky
Efforts to reform United States patent laws were revitalized on January 14, 2008, when the U.S. Senate Committee on the Judiciary issued its draft report about the proposed Patent Reform Act of 2007 (S. 1145), which urged the Senate to pass the bill. The 106-page report summarized the key features and goals of the bill, but did not introduce new proposals. The House of Representatives passed its version of the bill in September 2007.
The purpose of the Patent Reform Act of 2007, as reported by the Senate Judiciary Committee, is “to ensure that the patent system in the 21st century reflects the 18th century Constitutional imperative. Congress must promote innovation through the enticement of inventors of temporally limited monopolies on their inventions, and must do so for the ultimate benefit of the public.” While “the object of the patent law today must remain true to the constitutional command,” the report declares that, “its form needs to change, both to correct flaws in the system that have become unbearable, and to accommodate changes in the economy and the litigation practices in the patent realm.”
Supporters hope to bring the bill to a vote by February 2008, but it is unlikely to pass without substantive revisions. While the House Judiciary Committee passed the bill unanimously last year, it eliminated the controversial post-grant review provision during mark-up. Also, legislators, inventors and technology companies continue to debate over how best to protect innovation. Former Apple Computer engineer and QuickTime co-inventor Steve Perlman argues that proposed patent legislation as currently written would allow America’s dominant high-tech companies to largely control the pace of innovation. Perlman points to the American auto industry and cautions, “Detroit is a very clear example of what happens when you have large companies who have already established they’re the winners.”
Among its provisions, the Act would do the following: change to a “first-inventor-to-file” system; codify and clarify the “reasonable royalty” standard in calculating damages, as well as awards for willful infringement; create a relatively efficient and inexpensive system to resolve patent validity issues before the USPTO; provide for eventual publication of all applications and enhance the utility of third parties’ submissions of relevant information for filed applications; improve venue in patent cases and provide for claim construction appeals; allow the U.S. Patent and Trademark Office (USPTO) to set its fees; remove the Federal Circuit judge residency restriction; authorize the USPTO to require patent searches with explanations with patent applications; codify and improve the doctrine of inequitable conduct; limit patent liability for institutions implementing the “Check 21” program.
