PATENTS / DIVIDED INFRINGEMENT / CLAIM CONSTRUCTION
Infringement of Method Claim Still Requires Performance of Every Claimed Step
Addressing the issue of divided infringement, the US Court of Appeals for the Federal Circuit upheld the district court’s dismissal of patent owner’s claims of infringement because not all steps of the claim were performed, either directly by the defendant or by attribution. Medgraph, Inc. v. Medtronic, Inc., Case No. 15-2019 (Fed. Cir., Dec. 13, 2016) (Lourie, J).
The claims at issue are drawn to systems and methods for improving or facilitating diagnosis and treatment of patients, with steps of using a device to take medically relevant measurements from a patient, ensuring that the device is detached after measurement is complete, uploading the measurement data into a computer, and transmitting the data to a central storage device where physicians can then access the data. Medtronic makes and sells various systems for diabetes management in which a patient uploads data (e.g., blood sugar readings) to Medtronic’s central computer server. Patients can opt to share the data with their physicians through remote transmission.
Some of the claimed steps are performed by patients and doctors, not by Medtronic itself—resulting in so-called “divided infringement.” The case law on divided infringement has been developing since the Federal Circuit decided Akamai I in 2010 (IP Update, Vol. 14, No. 1). After four more rounds in the courts, the Federal Circuit issued a per curium en banc decision in 2015 (Akamai V) that clarified when acts of another may be attributed to an accused infringer in the context of divided infringement (IP Update, Vol. 18, No. 6). In Akamai V, the Court held that “attribution” is proper in either of two circumstances: (1) when a third party performs steps of the claim under the direction or control of the accused infringer, e.g., when a contractual obligation or agency relationship exists, or (2) “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance” (emphasis added).
Applying this standard to Medtronic’s accused systems, the Court found that Medtronic did not perform all of the claimed steps because the patient- and doctor-performed steps could not be properly attributed to Medtronic. Although Medtronic instructed its users to perform the claimed steps, that was not enough for attribution under Akamai V because the evidence “indisputably” showed that Medtronic does not condition the use of its systems on performance of the claimed steps. For example, Medtronic does not deny patients access to the accused systems if they do not remove the measurement device after the measurement is taken. In fact, the opposite is true: Medtronic’s patients actually benefit when its continuous glucose monitoring device is not removed from the body. Similarly, Medtronic does not deny any benefit to its users if they choose not to perform the step of synchronizing the measurement data to allow their physicians to access the data remotely. Instead of synchronization, patients can bring hard copy printouts of their measurements to the physician’s office, or data can be extracted locally from their devices while at the physician’s office.
The case also dealt with a second issue relating to proper construction of “and.” The Court acknowledged that there have been prior cases in which “and” was properly construed to mean “or,” but noted that all of those cases had “a common theme that distinguishes them from this case: the specification compels a disjunctive construction for ‘and’” (emphasis in original). In the present case, however, the Court concluded that the specification could be read as supporting either a disjunctive or a conjunctive meaning. As such, plain meaning controls: “and” means “and.”
PATENTS / AIA / IPR / MOTIVATION TO COMBINE
Remand to PTAB for Failure to Articulate Obviousness Rationale
Brian A. Jones
The US Court of Appeals for the Federal Circuit remanded a final decision of the Patent Trial and Appeal Board (PTAB) in an inter partes review (IPR) proceeding, criticizing the PTAB’s obviousness determination for failing to clearly articulate a reason why it would have been obvious to combine the references on which it relied. In re NuVasive, Inc., Case No. 12-1670 (Fed. Cir., Dec. 7, 2016) (Wallach, J).
The panel provided guidelines for how the PTAB must articulate a motivation to combine references. In the field of bone implants, NuVasive owns a patent directed to particularly placed radiopaque markers on bone implant structures. NuVasive’s patent was challenged in an IPR as obvious over an alleged combination of patent and non-patent references.
During the initial proceedings at the PTAB, NuVasive challenged the public accessibility of the non-patent references on which the petitioner relied. NuVasive later abandoned those arguments at the hearing and instead focused on the non-obviousness of the proffered combination.
Ultimately, the PTAB determined that the claims were obvious over the cited references, rejecting NuVasive’s arguments against such a combination because it “vastly underestimate[s]” the ordinary level of skill in the relevant field. The PTAB was not persuaded that it would have “confused” a person of ordinary skill in the art to make the alleged combination. NuVasive appealed.
The Federal Circuit faulted the PTAB for failing to make appropriate factual findings to support a motivation to combine. The PTAB’s reasoning merely dismissed NuVasive’s arguments as to why the two references were not combinable without stating explicit reasons why a person of ordinary skill in the art would have been motivated to make the combination. Without a record of explicit reasons, the Federal Circuit stated that it was unable to perform appellate review of the PTAB’s obviousness determination because it could not assess whether it was supported by substantial evidence.
The Federal Circuit went on to provide examples of how the PTAB’s prior decisions adequately articulated explicit reasons to combine and how other decisions fell short. Importantly, the Federal Circuit noted that “it is not adequate to summarize and reject arguments without explaining why the PTAB accepts the prevailing argument,” and that conclusory statements or mere “common knowledge or common sense” cannot serve as a substitute for the required reasoned analysis and underlying evidentiary support.
Practice Note: The panel decision echoes the Federal Circuit’s non-precedential decision in Cutsforth v. MotivePower remanding a final written decision for an explanation based on evidence as to obviousness. Similarly, in Nike v. Adidas, the Federal Circuit faulted the PTAB for failing to explain why the patent owner’s commercial success evidence presented to support the non-obviousness of proposed claims in a motion to amend were not discussed, and remanded the case back to the PTAB.
PATENTS / IPR PROCEEDINGS
Federal Circuit Overturns PTAB Decision Based on “Unreasonable” Claim Construction
Finding that the Patent Trial and Appeal Board’s (PTAB’s) claim construction was “unreasonable,” the US Court of Appeals for the Federal Circuit vacated two PTAB inter partes review decisions. D’Agostino v. Mastercard International, Inc., Case Nos. 16-1592; -1593 (Fed. Cir., Dec. 22, 2016) (Taranto, J).
This appeal concerns patents that describe processes for generating codes that customers provide to merchants when purchasing goods and services. The dispute centers on the PTAB’s interpretation of the “single merchant limitation” in the claims. The Federal Circuit found that this limitation requires that the authorizing entity, when asked for a transaction code, be told that the number of merchants to be covered by that code is one, and that the “particular merchant” be identified in a separate transaction. This interpretation is reinforced by the prosecution history and one of the embodiments in the written description. The Court found that the PTAB, despite properly applying the broadest reasonable interpretation standard to its claim construction, departed from the clear meaning of the claim term when it concluded that the claim limitation covers a situation in which the customer first seeks a transaction code for an identified “chain of stores” and later picks a specific store within that chain for the transaction. This scenario, the Court found, falls outside the single-merchant limitation as described by the claims and written description. Contrary to the PTAB’s construction, the “particular merchant” referred to in the claims is the particular “single merchant” and not a merchant that is later chosen from a potential group of merchants.
The Federal Circuit explained that in applying its erroneous claim construction, the PTAB found that the claimed scenario is disclosed by an earlier patent and, therefore, D’Agostino’s patent is anticipated and obvious. Because the PTAB’s claim interpretation was incorrect, the Court vacated and remanded the PTAB’s findings of anticipation and determinations of obvious for further proceedings.
Injunction Against Third Party Maintained Pending Remand
The US Court of Appeals for the Federal Circuit affirmed a district court’s ruling on infringement, invalidity and damages, but remanded the case to the district court to reconsider the breadth of the “injunctive” relief granted insofar as it enjoins conduct by a non-party to the case. Asetek Danmark A/S v. CMI USA Inc., FKA Cooler Master USA Inc., Cooler Master Co. Ltd., Case Nos. 16-1026; -1183 (Fed. Cir., Dec. 6, 2016) (Taranto, J) (Prost, CJ, dissenting in part).
Asetek sued two parties, CMI USA (a US corporation) and Cooler Master, a Taiwanese supplier of computer components, for patent infringement. CMI was Cooler Master’s exclusive distributor in the United States. Before trial commenced, Asetek dismissed its claims against the Taiwanese company. Asetek prevailed at trial and was awarded injunctive relief covering specific “Cooler Master” products found to infringe. The injunction was against both CMI and Cooler Master even though the latter was not a party to the suit. Cooler Master intervened and appealed.
On appeal, Cooler Master and CMI raised two arguments against the injunction. First, they argued that Cooler Master’s dismissal with prejudice from the case constituted adjudication with claim-preclusive effect. The Federal Circuit disagreed, explaining that preclusion does not bar relief as to future conduct, but only as to pre-dismissal conduct. The Court reasoned that the “claim” covered by the dismissal (Cooler Master’s pre-dismissal conduct) is not the same as a “claim” covering future conduct (Cooler Master’s post-injunction conduct). The Court noted that the time interval in question differentiates the claims so that they are not the same “claim” for claim-preclusion purposes.
Second, appellants asserted that the injunction was too broad in scope, as it reaches Cooler Master’s conduct beyond abetting a new violation by CMI, the only party adjudicated liable for infringement. The Federal Circuit explained that an injunction may not “make punishable the conduct of persons who act independently and whose rights have not been adjudged according to law.” However, the Court noted that in accordance with Fed. R. Civ. P. 65(d), an injunction may bind non-parties that are “in active concert or participation with” parties to the action or “legally identified with the liable party.”
In view of the relationship between the original defendants, the Federal Circuit also remarked that a non-party that sufficiently controls another’s litigation of a case “may be said to have had its day in court and on that ground be subject to the injunctive obligations,” noting that although Cooler Master possibly may be “legally identified” with CMI, that issue presents a fact-dependent determination that should be addressed by the district court. The Court remanded the case but did not vacate the injunction pending the remand determination.
Chief Judge Prost dissented, contending that the correct course of action would be to vacate the portions of the injunction that improperly reached Cooler Master. Prost pointed out that while the majority speculated about the relationship between Cooler Master and CMI, it provided no basis to justify the injunction against Cooler Master in its own capacity. Prost noted that the only exception to Rule 65(d) is Cooler Master aiding and abetting CMI’s acts of infringement.
PATENTS / INHERENT ANTICIPATION / INEQUITABLE CONDUCT
Factual Dispute Defeats Summary Judgment on Inherent Anticipation
Addressing inherent anticipation and inequitable conduct issues, the US Court of Appeals for the Federal Circuit vacated a summary judgment of inherent anticipation, finding that material facts remained in dispute, and affirmed in part the district court’s finding of no inequitable conduct. U.S. Water Servs., Inc. v. Novozymes A/S, Case Nos. 15-1950; -1967 (Fed. Cir., Dec. 15, 2016) (Wallach, J).
U.S. Water Services and Roy Johnson (collectively, Water Services) sued Novozymes for infringement of two patents related to the production of ethanol from a milled grain. Specifically, the patents disclose adding an enzyme known as phytase at various points during the ethanol production process to prevent fouling by converting the insoluble phytic acid or phytic salts (the unwanted byproduct) to soluble products. Fouling is a term used to describe the insoluble byproduct that deposits on or “fouls” the processing equipment.
The district court determined that two prior art references inherently anticipated the asserted claims by disclosing the addition of phytase, finding that all of the elements of the asserted claims were expressly disclosed in the prior art, except the element requiring reduction of the formation of insoluble deposits (fouls). The “critical issue” for the district court was whether the prior art inherently disclosed “adding phytase for the purpose of reducing deposits.” The district court noted that the asserted patents describe a specific method for using phytase in terms of ranges for dosage, temperature and pH, and that both prior art references disclosed the same method using overlapping and sometimes narrower parameters. According to the district court, because “deposit reduction [was] a natural result of the methods for adding phytase during ethanol production,” summary judgment was appropriate. Water Services appealed.
The Federal Circuit agreed that the question of inherent anticipation turned on whether the prior art inherently disclosed using phytase to reduce deposits in ethanol production. However, the Court reversed the summary judgment, noting that the record included expert testimony that raised a factual dispute as to whether adding phytase as described in the prior art would necessarily lead to a reduction of byproduct. The Court cautioned that the district court should not have “made credibility determinations and weighed conflicting evidence,” as such functions are reserved for jurors, not judges on summary judgment rulings.
The Federal Circuit next addressed Novozymes’ claim that Water Services committed inequitable conduct by taking allegedly contradictory positions before the US Patent and Trademark Office (PTO) and the courts, the latter during litigation of a related patent. Novozymes argued that the contradiction was not disclosed to the patent examiner. The Court, however, found that the examiner was fully aware of the differences between the pending claims of the patents-in-suit and the parent patent, and that therefore there was no genuine dispute as to whether Water Services withheld or misrepresented material information before the PTO. Having found no error under the materiality prong, the Court declined to address the issue of intent, since a party alleging inequitable conduct must prove both materiality and intent to deceive.
PATENTS / DEFAULT JUDGMENT
Default Judgment Affirmed for Unreasonable, Dilatory Discovery Conduct
Mandy H. Kim
Addressing default judgment and injunction issues, the US Court of Appeals for the Federal Circuit affirmed the district court’s grant of a default judgment and permanent injunction stemming from a series of delays, missed deadlines and other procedural missteps by the appellant. United Construction Prods., Inc. v. Tile Tech, Inc., Case No. 16-1392 (Fed. Cir., Dec. 15, 2016) (Wallach, J).
United Construction Products (UCP) sued Tile Tech for infringement of a patent relating to support pedestals used in elevated floors, decks and walkways, that included a specific anchoring washer. As is typical, UCP served Tile Tech with discovery requests. Following multiple missed deadlines and delays, Tile Tech served deficient responses. UCP requested to meet and confer, but Tile Tech again delayed and postponed. Even after the parties agreed to a date for supplemental responses, Tile Tech failed to provide them. UCP then filed a motion to compel a response. Tile Tech never responded. Instead, Tile Tech served supplemental responses that were still deficient.
The district court issued an order compelling responses and imposed monetary sanctions on Tile Tech, warning that it would enter a default judgment if Tile Tech failed to comply. Despite the Court’s warning, Tile Tech failed to respond to the order. UCP then filed a motion for default judgment, whereupon Tile Tech served another set of supplemental responses, in which it admitted the destruction of a previously undisclosed anchoring washer mold—a key component of the accused support pedestal. UCP sought sanctions for spoliation of evidence and amended its complaint to add a claim for unfair competition. When Tile Tech failed to respond, the district court entered default judgment for all of UCP’s claims and entered a permanent injunction. Tile Tech appealed.
Applying US Court of Appeals for the Ninth Circuit law, the Federal Circuit affirmed the district court’s entry of default judgment, finding that four of the five Ninth Circuit Malone factors favored dismissal of the case: (1) the public’s interest in expeditious resolution of litigation, (2) the court’s need to manage its docket, (3) the risk of prejudice to the other party, and (5) the availability of less drastic sanctions. Only the fourth factor, “(4) the public policy favoring disposition of cases on their merits,” favored non-dismissal. However, according to the Court, the district court’s “opinion demonstrate[d] its thorough consideration of the Malone factors leading to the ultimate decision not to impose lesser sanctions in this case . . . As the district court explained, ‘[w]here a party so damages the integrity of the discovery process that there can never be assurance of proceeding on the true facts, a case dispositive [remedy] may be appropriate.’”
The Federal Circuit also agreed with the scope of the permanent injunction entered by the district court. The injunction’s use of the term “substantially similar” was not erroneous because “[t]o the extent that sale, advertisement, marketing, or promotion of a substantially similar product to [UCP’s] would constitute infringement if evaluated under the test set forth in TiVo such actions would be prohibited.” The Court further found that the requirement to surrender the molds for washers was also appropriate because it was an acceptable means of preventing future infringement to UCP’s patents. With respect to the unfair competition language of the injunction, the Court clarified that the injunction would not cover any Tile Tech advertising that clearly distinguished its product from that of UCP’s in a comparative advertisement.
PATENTS / LIABILITY-DAMAGE BIFURCATION / INDUCEMENT / CLAIM CONSTRUCTION / DOCTRINE OF EQUIVALENTS
On Appeal, Infringement Ruling Gets the Jitters
Addressing multiple issues in the long-running litigation between competing power supply controller chip companies, the US Court of Appeals for the Federal Circuit affirmed in part, reversed in part and vacated in part the district court’s final judgment, ultimately reducing both parties’ liability for infringement. Power Integrations Inc. v. Fairchild Semiconductor Int’l, Inc., Case No. 15-1329 (Fed. Cir., Dec. 12, 2016) (Chen, J).
Power Integrations (PI) sued Fairchild Semiconductor International in 2008 alleging direct and indirect infringement of four patents. Fairchild counterclaimed that PI directly and indirectly infringed three patents. Both parties’ patents relate to different aspects of power supplies, including frequency jitter, which is the concept of varying the frequency of the controller chip’s oscillator, and current limiting, the concept of using a regulator to steadily increase the power supply’s current threshold. The jury returned a mixed verdict finding that both sides’ patents were valid and that each side infringed some (but not all) of the patents under various theories. The district court granted PI’s motion for a permanent injunction and denied Fairchild’s motion for permanent injunction. Both sides appealed.
Fairchild appealed the jury’s finding that it induced infringement of two frequency jitter patents, arguing that the jury instructions misstated the law on inducement. Specifically, the instructions stated that under a theory of induced infringement, the “infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.” The Federal Circuit agreed with Fairchild, finding that these instructions provided the jury with the improper understanding that a party could be liable for induced infringement without ever actually communicating with and inducing a third-party infringer. Instead, the term “induce,” as used in § 271(b) and explained by the Supreme Court of the United States, requires successful communication between the alleged inducer and the third-party infringer. Without actual inducement, there can be no finding of induced infringement. The Court vacated the jury’s inducement verdict but declined Fairchild’s request for judgment as a matter of law of no induced infringement, finding that the evidentiary record allowed more than one reasonable finding on the inducement issue and that PI presented significant evidence at trial to support a finding of inducement.
PI appealed the finding of infringement under the doctrine of equivalents. Specifically, at trial PI successfully argued that its product contained only a single feedback signal, rather than two distinct signals, and so it could not infringe. The jury found no literal infringement but found infringement under the doctrine of equivalents. On appeal, PI argued that the jury’s verdict could not be reconciled with the law, and the Federal Circuit agreed. Applying a claim vitiation analysis, the Court explained that, if a finding of infringement under the doctrine of equivalents would entirely vitiate a particular claimed element, the court should rule that there is no such infringement. Here, because the jury found no literal infringement, it must necessarily have found that PI’s products contained only a single feedback signal. Furthermore, any finding that the single feedback signal was equivalent to the two distinct feedback signals would vitiate the distinction required by the claims.
Turning to the permanent injunction question, the Federal Circuit found that because it had reversed the jury’s infringement verdict with respect to PI, Fairchild’s appeal regarding a permanent injunction was moot. The Court also vacated the permanent injunction against Fairchild, explaining that it had “significantly reduced the scope of Fairchild’s liability” by vacating the jury’s finding of induced infringement, among other rulings. The Court concluded that, given the changed circumstances, the district court is in the best position to determine in the first instance if a permanent injunction is appropriate.
PATENTS / LANHAM ACT / ANTITRUST
Fifth Circuit Rejects Patent Infringement, False Advertising as Grounds for Sherman Act § 2 Violation
Addressing whether antitrust liability may be premised on patent infringement or false advertising, the US Court of Appeals for the Fifth Circuit answered in the negative, affirming in part, reversing in part, and vacating and remanding in part a district court’s denial of judgment as a matter of law and related orders in a case involving the safety syringe market. Retractable Techs., Inc. v. Becton Dickinson & Co., Case No. 14-41384 (5th Cir., Dec. 2, 2016) (Jones, J).
The dispute between Retractable Technologies (RTI) and Becton Dickinson (BD) goes back several years. RTI owns a patent for its safety syringe technology, wherein the needle of the syringe automatically retracts into the body of the syringe after an injection in order to avoid accidental needlesticks. BD later entered the market with its own safety syringe with a retractable needle. In 2001, after RTI encountered initial difficulties in selling its retractable safety syringe to health care providers, RTI sued BD for antitrust violations and product disparagement. That lawsuit was settled in 2004, with BD and RTI agreeing to a mutual release of claims that accrued on or before the settlement. Three years later, RTI sued BD again, this time for patent infringement, antitrust violations and various common law claims. After bifurcating the case, the district court tried the patent claim first and held that certain sizes of BD’s safety syringe infringed upon RTI’s patents. On appeal (2011), the Federal Circuit affirmed the judgment with respect to one of those syringes (IP Update, Vol. 14, No. 7).
In further proceedings before the district court, RTI amended its complaint with additional antitrust claims and claims for false advertising under the Lanham Act. The jury returned a verdict rejecting all but one of RTI’s antitrust claims and awarding more than $100 million in “deception damages.” The district court denied BD’s motion for judgment as matter of law, trebled the jury’s award of antitrust damages and entered an injunction. BD appealed.
The Fifth Circuit first took on the district court’s denial of BD’s motion for judgment as a matter of law on RTI’s Sherman Act § 2 attempted monopolization claim. Because the jury rejected BD’s exclusionary contract practices as a basis for § 2 liability, RTI’s claim had to be premised on one of three “anticompetitive” actions by BD: patent infringement by BD’s retractable syringe, BD’s false advertising or RTI’s claim that BD “tainted the market.”
The Fifth Circuit observed that not all unfair conduct is anticompetitive or fits under the prohibition of § 2. By definition, patent infringement cannot give rise to § 2 liability—it invades the patentee’s monopolistic rights and thereby increases competition. The Court thus rejected patent infringement as a basis for § 2 liability. The Court also rejected BD’s false advertising as a basis for § 2 liability. BD advertised that its needles were the “world’s sharpest” and had “low waste space,” but BD’s own testing indicated that these statements were inaccurate as of 2003. The Court held that these statements, although false, did not give rise to § 2 liability. The Court expressly recognized the differing purposes of antitrust law (to protect competition) and Lanham Act claims (to protect competitors), noting that courts in other circuits also expressed much skepticism over the viability of such § 2 claims. The Court concluded that BD’s false advertising was not anticompetitive; the false claims were made to sophisticated parties, and there was no evidence at trial that BD’s statements actually harmed competition, as demonstrated by BD’s significant share of the safety syringe market. With no cognizable basis for a § 2 claim, the Court reversed.
With respect to RTI’s false advertising claims, the Court affirmed the district court’s rejection of BD’s res judicata and laches defenses, finding that BD made the statements at issue after the 2004 settlement agreement and that BD had failed to demonstrate that it was prejudiced by any delay in RTI bringing its claims. Because the district court had declined to award profits to RTI under the Lanham Act because of the sizable antitrust damages award, the Court remanded for the district court to consider whether and how much of BD’s profits it must disgorge to compensate RTI for its false advertising. The Court also vacated and remanded the district court’s injunction, which required BD to inform its customers that it had engaged in false advertising, because the injunction was tailored to remedy the now-reversed § 2 violation.
CERT ALERT / PATENTS / BIOSIMILARS
Supreme Court to Consider BPCIA Requirements for Biosimilars
The Supreme Court of the United States has granted certiorari in a case involving the Biologics Price Competition and Innovation Act of 2009 (BPCIA) in the context of a biosimilars dispute. Sandoz, Inc. v. Amgen Inc. and Amgen Inc. v. Sandoz, Inc., Case No. 15-1195 (Supr. Ct., Jan 13, 2017) (cert. granted). The Supreme Court is expected to decide whether notice of sale of biosimilars must be given after approval of the biosimilars (essentially extending the period of exclusivity), and whether the parties are obligated to disclose approval applications and intellectual-property-related information.
Each party had filed its own petition for Supreme Court review of the US Court of Appeals for the Federal Circuit’s 2015 interpretation of the BPCIA (IP Update, Vol. 18, No. 8). In its decision, the Federal Circuit concluded that the 180-day notice of sales under the BPCIA can only be given after a biosimilar is approved. That finding may effectively grant an innovator of a biologic an extra six months of exclusivity.
The questions presented are as follows:
Amgen v. Sandoz
(1) Is a biosimilar applicant required by 42 USC § 262(l)(2)(A) to provide the reference product sponsor with a copy of its biologics license application and related manufacturing information, which the statute says the applicant “shall provide”?
(2) Where an applicant fails to provide that required information, is the sponsor’s sole recourse to commence a declaratory judgment under 42 USC § 262(l)(9)(C) and/or a patent-infringement action under 35 USC § 271(e)(2)(C)(ii)?
Sandoz v. Amgen
(1) Can notice of commercial marketing given before Food and Drug Administration approval be effective?
(2) In any event, is it improper to treat § 262(l)(8)(A)—the BPCIA’s “notice of commercial marketing” provision, which states that a biosimilar applicant shall provide notice to the incumbent seller of the biological product “not later than 180 days before the date of the first commercial marketing of the biological product licensed under” an abbreviated pathway for biosimilars—as a stand-alone requirement and as creating an injunctive remedy that delays all biosimilars by 180 days after approval?
The acting US solicitor general recently urged the Supreme Court to take the case and sided with Sandoz. The ruling may decide how quickly lower cost biosimilars get to market in competition with relatively higher cost pioneer biosimilars.
Although the underlying dispute case involves Zarxio, the first biosimilar approved under the BPCIA, the case is relevant only for future biosimilars, as Zarxio has been on the market for more than a year.
Based on the question presented in the Amgen petition, the Supreme Court is also expected to review the Federal Circuit’s finding that biosimilar makers don’t have to participate in exchange of intellectual property information that starts with disclosure of an approval application.
En Banc Federal Circuit to Consider AIA Appeals Based on Time Bar Provision
In a September 2015 panel decision, Achates Reference Publishing v. Apple, the US Court of Appeals for the Federal Circuit ruled that under 35 USC 314(b), decisions of the Patent Trial and Appeal Board (PTAB) finding that an America Invents Act (AIA) petition is not time-barred cannot be appealed (IP Update, Vol. 18, No. 10). Soon after, the Supreme Court of the United States issued its decision in Cuozzo Speed Technologies v. Lee, which at least suggested that some aspects of AIA institution decisions can be appealed (IP Update, Vol. 19, No. 7).
Wi-Fi One petitioned for en banc review, arguing that Cuozzo threw the Federal Circuit’s rulings in Achates and Wi-Fi One into question. Wi-Fi One argued that in Cuozzo, the Supreme Court explained that while (under § 314(b)) most institution decisions cannot be appealed, in cases where the PTAB exceeds its statutory authority or violates due process, its decision may be reviewable.
The Federal Circuit has agreed to en banc review of the following question:
Should this court overrule Achates Reference Publishing v. Apple and hold that judicial review is available for a patent owner to challenge the US Patent and Trademark Office’s determination that the petitioner satisfied the timeliness requirement of 35 USC § 315(b) governing the filing of petitions for inter partes review?
Background on Wi-Fi One
Wi-Fi One filed suit against various customers of Broadcom, asserting the subject patent. After Broadcom challenged Wi-Fi One’s patent by petitioning for an AIA review, Wi-Fi One argued that the petition was time-barred under § 315 because, even though Broadcom was not itself sued under the patent, it worked with other companies that were sued more than a year before it filed its petition. The PTAB refused Wi-Fi One’s request to take discovery on that issue and ultimately invalidated the patent.
The Federal Circuit panel affirmed that decision, citing Achates in ruling that PTAB decisions on the time bar are part of the institution decision and are not appealable (IP Update, Vol. 19, No. 10). Wi-Fi One v. Broadcom, Case Nos. 15-1944; -1945; -1946 (Fed Cir, Jan 4, 2017) (per curium).
In a concurrence to that panel decision, Judge Reyna importuned that the issue should be reconsidered en banc because disallowing on appeal from a decision that an AIA petition was timely renders the time bar “toothless.” In another case dealing with the same issue, Click-to-Call Technologies v. Oracle Corporation (Nov. 17, 2016) (per curiam), Judges O’Malley and Taranto (concurring) also said that the Court should take up the question en banc (IP Update, Vol. 19, No. 12).
FTC and DOJ Issue Revised Guidelines for Licensing of Intellectual Property
Stefan M. Meisner
Since the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) first issued the Antitrust Guidelines for the Licensing of Intellectual Property (Guidelines) in 1995, both antitrust law and intellectual property law have evolved to adapt to modern technology and business relationships. Yet the guidance provided by the antitrust agencies had not been updated to reflect recent court precedent or enforcement policies.
On January 13, 2017, the FTC and the DOJ issued updated Guidelines following roughly six months of consideration and public comment. According to a statement by FTC Commissioner Maureen Ohlhausen, the new Guidelines “modestly update” the prior version and recognize that “IP issues are not a special case that requires a different competition jurisprudence.” Ohlhausen’s statement stressed the “commendable flexibility” of the 1995 Guidelines and applauded the update for reaffirming the agencies’ commitment to the basic principles of the original guidelines, including the following:
- The antitrust agencies will continue to “apply the same analysis to conduct involving intellectual property as to conduct involving other forms of property.”
- This analysis “do[es] not presume that intellectual property creates market power in the antitrust context.”
- The FTC and DOJ “recognize that intellectual property licensing . . . is generally procompetitive.”
The major change brought by this update was the inclusion of updated references to recent case law and statutes that have altered the agencies’ analysis over the last two decades. For example, the updated Guidelines state that the antitrust agencies “will apply a rule of reason analysis to price maintenance in intellectual property licensing agreement.” This statement reflects the Supreme Court of the United States’ 2007 decision in Leegin Creative Leather Products v. PSKS, which overruled long-standing precedent that resale price maintenance agreements were per se violations of the antitrust laws. Other major case law updates include Illinois Tool Works v. Independent Ink, where the Supreme Court held that a patent does not necessarily confer market power on its holder, and FTC v. Actavis (IP Update, Vol. 16, No. 7), where the Supreme Court discussed the elimination of a potential competitor by a drug manufacturer through a “pay-for-delay” scheme.
Practice Note: Missing from the update is more specific guidance on standard-essential patents; licensing on fair, reasonable and non-discriminatory (FRAND) terms; and patent assertion entities. Requests for guidance on these items were ubiquitous in the public comments, with 16 of the 24 comments referencing standard-essential patents or FRAND terms, and five comments discussing the evolving role of patent assertion entities. The FTC’s press release appeared to reference these comments and stated: “the agencies reiterate that the flexible effects-based enforcement framework set forth in the IP Licensing Guidelines remains applicable to all IP areas.”
America Invents Act
Final Written Decision Demonstrates Breadth of PGR Review
In a Final Written Decision (FWD) in a post-grant review (PGR), the Patent Trial and Appeal Board (PTAB) addressed post-grant review eligibility, enablement, written description and anticipation. US Endodontics, LLC v. Gold Standard Instruments, LLC, Case No. PGR2015-00019 (PTAB, Dec. 28, 2016) (Goodson, APJ).
Only patents that are subject to the American Invents Act (AIA) first-inventor-to-file provisions, i.e., maturing from an application that contains a claim having an effective filing date on or after March 16, 2013, are eligible for PGRs. Petitioners bear the burden of demonstrating that a patent is eligible and the challenged patent here claims priority to a series of continuations and divisionals dating back to June 7, 2005, as well as to a provisional application filed on June 8, 2004.
Petitioner argued that several of the challenged claims were not entitled to a filing date earlier than the actual filing date of the application that matured into the challenged patent, which was later than March 16, 2013. Petitioner argued that the challenged patent did not satisfy either the enablement or written description requirements for the challenged claims, notwithstanding that it shares the same specification as the priority applications. Thus, petitioner argued the claims were not entitled to claim priority to the earlier applications, and were therefore eligible for PGR. PTAB agreed.
As to enablement, Petitioner’s arguments focused on the disclosed range of temperatures at which the claimed heat treatment of the claimed endodontic instruments occurs. Petitioner argued the method is inoperative because heat testing results did not exhibit the claimed permanent deformation that should have resulted from using the claimed heat treatment parameters. PTAB agreed, finding that “the guidance the Specification provides regarding how to achieve the deformation characteristic recited in the ‘wherein’ clause is quite limited compared to the broad scope of [the] claims … .” Further, “the inclusion in a claim’s scope of inoperative species is a relevant consideration in the enablement analysis” and “the inability to achieve what is recited in the ‘wherein’ clause using heat-treatments within the scope of the claims contributes to the enablement problem.” PTAB also agreed that an artisan would require undue experimentation to practice the full scope of the challenged claims using the teachings of the specification as a guide.
As to written description, the Petitioner, citing the en banc Federal Circuit decision in Ariad (2010), argued that the challenged claims do not satisfy the § 112 written description requirement. The written description analysis looks at whether application reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date. Petitioner argued that under Ariad, use of functional language (i.e., the “wherein” clause) to define the boundaries of the claimed genus (i.e., to claim the desired permanent deformation result) was insufficient because the functional language simply claims a desired result without describing how to achieve that result. PTAB agreed concluding that the specification did not demonstrate possession of heat-treatment in the claimed range in order to achieve the claimed result.
PTAB also agreed with Petitioner that the challenged claims were anticipated by a 2008 published patent application. The patent owner’s only argument was that the published application post-dates the claimed priority date. However, due to its earlier determination regarding the effective filing date of the challenged claims, PTAB concluded the published application was prior art and anticipatory.
AIA / PGR / ANTICIPATION / PGR ELIGIBILITY
Evidence to Negate PGR Eligibility Based on Filing Date May Not Be Sufficient to Establish Filing Date for Purposes of Antedating Prior Art
Addressing for the first time the sufficiency of evidence needed to establish an earlier priority date for purposes of post-grant review (PGR) eligibility versus the evidence required to antedate a prior art reference, the Patent Trial and Appeal Board (PTAB) held that the patentee must show § 112 support for each claim limitation as of the earlier priority date in order to antedate a reference. Inguran, LLC v. Premium Genetics (UK) Ltd., Case No. PGR2015-00017 (PTAB, Dec. 20, 2016) (Droesch, APJ).
Inguran sought PGR of 14 claims of Premium Genetics’ patent. The PTAB instituted trial on all 14 claims. PGR is only available to patents that are subject to the first inventor to file provision of the America Invents Act (AIA), which applies to patents and applications that include a single claim having an effective filing date on or after March 16, 2013. The challenged patent issued from an application filed on January 31, 2014, and claimed priority to several provisional and non-provisional applications filed before March 16, 2013. Thus, Inguran could only establish standing by identifying at least one claim in the challenged patent that was not entitled to a pre-March 16, 2013 priority date.
In the initial petition, Inguran argued that claims 1 and 2 were not entitled to a pre-AIA priority date and pointed to specific limitations in each claim that Inguran alleged were not disclosed in any priority application. Premium Genetics argued that both claims were entitled to pre-AIA filing dates. The PTAB agreed with Premium Genetics as to claim 1 and Inguran as to claim 2.
Premium Genetics interpreted the PTAB’s decision with respect to claim 1 as an affirmative finding that claim 1 was entitled to an earlier priority date. As such, Premium Genetics argued that the § 102(a) art cited by Inguran was no longer applicable. The PTAB disagreed. In deciding that Inguran failed to establish that claim 1 was not entitled to an earlier filing date, the PTAB had not decided whether claim 1 was in fact actually entitled to earlier priority date. Rather, the PTAB left that question open.
In order to affirmatively establish that a particular claim is entitled to an earlier filing date, Premium Genetics must show that the earlier application contains sufficient § 112 support for each claim limitation. Because Premium Genetics only rebutted Inguran’s argument with respect to a single claim limitation, Premium Genetics’ evidence in rebuttal was insufficient to show that claim 1 was entitled to an earlier filing date.
Practice Note: Each and every claim limitation need not be analyzed when establishing standing for purposes of PGR eligibility, but the patent owner must show § 112 support for each claim limitation in order show that a particular claim is entitled to an earlier filing date.
AIA / CBM / INVENTIVE CONCEPT
“Inventive Concept” Requires Specific Use of Computer Components Beyond Their Generic Use
Addressing the “inventive concept” prong of a covered business method (CBM) patent review, the Patent Trial and Appeal Board (PTAB) instituted the CBM, finding that the challenged claims failed to recite an inventive concept where the claimed computer components performed anything more than their conventional generic functions. Plaid Technologies, Inc. v. Yodlee, Inc., Case No. CBM2016-00088 (PTAB, Dec. 7, 2016) (Kim, APJ).
Yodlee sued Plaid Technologies alleging infringement of a patent directed to a system that collects transactional information for a particular person or enterprise and categorizes the collected information based on the corresponding transactional description. Plaid Technologies filed a petition requesting a CBM review of the patent, challenging the patent eligibility of the claims under § 101.
In its CBM jurisdictional analysis, the PTAB found that the claims were directed to a financial product or service and proceeded to consider whether the claims qualified for the “technological invention” exception. Presaging its § 101 analysis, the PTAB concluded that the recited computer hardware components were “well known.”
In terms of § 101 analysis, the PTAB applied the two-step Alice inquiry. After finding that the claims were directed to an abstract idea, the PTAB addressed whether the claims recited an innovative concept that encompasses “significantly more” so as to transform the abstract idea into patent-eligible subject matter. The PTAB concluded that the challenged claims added nothing but the instruction to automate the claimed process using conventional, generic computer hardware, finding that the patent lacked any indication in the claims or specification that any of the recited computer hardware was used in a manner apart from its conventional generic use. The PTAB explained that the challenged claims failed to specify how the claimed probability algorithm and computer components were used in a non-conventional manner, further noting that the specification described the computer components as conventional and “typical in the art.”
The PTAB concluded that the challenged claims focused on generic conceptual categorization methodology, not improvements to the operation of computer components, dismissing the patent owner’s argument that the claimed “collection function” and “processing function” amounted to an inventive concept. The PTAB found the challenged claims distinguishable from those at issue in BASCOM (IP Update, Vol. 19, No. 8), noting that the patent owner’s reliance on BASCOM was misguided. In BASCOM, the requisite inventive concept was found in the non-conventional and non-generic arrangement of known, conventional pieces. By contrast, in this case, the claims were recited at a high level and did not include sufficient details as to how the computer components execute the recited functions so as to carve out a specific mechanism for using computer components.
AIA / IPR / SANCTIONS & FEE AWARDS
PTAB Sanctions Successful IPR Petitioner, Awards Fees to Patent Owner
Addressing the “real parties in interest” requirement and claim construction issues in an inter partes review (IPR), the Patent Trial and Appeal Board (PTAB) sanctioned the petitioner for failing to disclose a corporate merger that occurred during the trial, and clarified that while the Phillips district court standard is used to construe the claims of an expired patent in an IPR proceeding, those claims do not receive the presumption of validity under § 282. Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., Case No. IPR2015-00826 (PTAB, Dec. 6, 2016) (Boucher, APJ).
In a final written decision, the PTAB found all claims of Bennett Regulator’s patent to be unpatentable. Bennett Regulator requested rehearing and also sought sanctions against the petitioner, Atlanta Gas Light. According to the patent owner, because the petitioner had failed to alert the PTAB to a real party-in-interest resulting from a corporate merger occurring prior to issuance of the final written decision, the final written decision should be expunged and the petition dismissed with prejudice. The PTAB had terminated the same petitioner’s earlier IPR against the same challenged patent for failure to list all real parties-in-interest in the petition for that proceeding, in particular a corporate parent. In this case, the petitioner admitted merging with a subsidiary of The Southern Company but argued that The Southern Company is not a real party in interest because “it is an entirely separate corporate entity and has not controlled, funded, or had the opportunity to control or fund this IPR.” The PTAB disagreed, finding that the merger has meaningful effects that impose an obligation on the petitioner to apprise the PTAB of the merger. The PTAB also underscored the central nature of the petitioner’s corporate parent in the dismissal of the first IPR, ultimately deciding that sanctions, in the form of fees and costs subsequent to the final written decision, were warranted. However, the PTAB determined that expungement of the final written decision was not warranted because the petitioner’s failure had not harmed the patent owner.
In arguing for rehearing, the patent owner relied on Innolux Corp. (a non-precedential institution decision that issued soon after inception of the America Invents Act) for the proposition that, in an IPR, claims of an expired patent “are to be construed to preserve validity in the case of ambiguity.” The PTAB looked to the Federal Circuit’s 1985 explanation in In re Etter (en banc) that the district court presumption of validity, rooted in § 282, was inapposite for inter partes reexamination proceedings before the US Patent and Trademark Office (PTO). In Etter, the Federal Circuit explained that the idea that § 282 presumption must be applied to PTO proceedings “misconstrues the purposes for which that statute [was] enacted.” The PTAB next considered the Supreme Court of the United States’ analysis in Cuozzo (IP Update, Vol. 19, No. 7), in particular the statement that “[a]lthough Congress changed the name from ‘reexamination’ to ‘review,’ nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision.” The PTAB reasoned that because the Supreme Court had endorsed the broadest reasonable interpretation for unexpired patents, it logically followed that “the [PTO]’s use, in reexamination proceedings, of a claim construction standard similar to that used by district courts, but without the presumption of validity, applies to inter partes review proceedings.”
Regarding the proposed claim constructions, the PTAB observed that the patent owner sought to read in limitations not expressly recited in the claims. According to the PTAB, it is one thing to read a claim in light of the specification in order to interpret limitations explicitly recited in the claim, but it is quite a different thing to narrow the scope of the claim by reading in limitations from the specification that have no express basis in the claim.
Practice Note: The patent owner relied on a non-precedential institution decision from one of the earliest IPR trials for its contention that the presumption of validity applies for expired patents in IPR trials. Multiple later PTAB decisions, e.g., Square, Inc. v. eCharge Licensing LLC, have explained that the presumption of validity does not apply in IPR proceedings.
TRADEMARKS / PARODY DEFENSE TO DILUTION CLAIM
It’s in the Bag: True Parody Cannot Dilute Famous Mark
The US Court of Appeals for the Second Circuit upheld a grant of summary judgment that a canvas tote bag with a drawing of an iconic handbag printed on its side did not infringe or dilute the trademark of the iconic high-end handbag maker. Louis Vuitton Malletier, S.A. v. My Other Bag, Inc., Case No. 16-241 (2d Cir., Dec. 22, 2016) (per curium).
Louis Vuitton Malletier (LV), a manufacturer of luxury designer bags, brought suit against My Other Bag (MOB), a manufacturer of canvas-type tote bags, alleging trademark infringement and federal and state trademark dilution. The district court granted summary judgment to MOB as to all of the trademark causes of action on the grounds that MOB had properly made use of the parody defense. The accused MOB canvas tote bags have, on their sides, drawings of various luxury brand handbags, not just LV bags.
In a succinct decision, the Second Circuit agreed with the district court that there was no trademark infringement because of the district court’s proper analysis of the Polaroid factors, namely, that there were obvious differences in MOB’s “mimicking” of the LV mark (e.g., inserting the letters MOB in between the stylized flowers), the disparate channels of trade and lack of market proximity, and the unpersuasive and scant evidence of consumer confusion submitted by LV.
LV argued that the district court erred in holding that the MOB canvas totes met the requirements of a parody defense, based largely on a single section of testimony from MOB’s founder regarding her totes and the drawing of an LV product on the side of the MOB bags. LV argued that MOB could not use the parody defense because the deposition evidence showed that MOB used the LV marks as a “designation of source.” The Second Circuit, however, agreed with the district court that the comment only showed that MOB was referring to its founder’s view that there was no likelihood of confusion.
To refute a claim of trademark dilution using a parody defense, MOB had to show that it was conveying two simultaneous and contradictory messages: 1) that it is the original, and 2) that it is not the original, but is instead a parody. The district court agreed that the MOB bags called to mind the original LV products by using similar imagery and minor changes such as exchanging the MOB initials for the LV ones, but that the MOB canvas totes also were “a conscious departure” from the luxury leather goods of LV. In fact, the ads for the MOB products touted the fact that unlike LV bags, the MOB canvas totes could be used to carry dirty gym clothes or groceries. Accordingly, the Second Circuit concluded that the juxtaposition of the famous LV mark with the irreverent representation on the canvas totes was a proper parody.
Practice Note: To successfully use the parody defense, it is not enough to invoke the famous mark or create a play on words; there should be a clear and well-documented intent to make fun of, criticize or comment on the famous mark. LV has requested en banc review of the decision by the Second Circuit, arguing that the panel’s finding that MOB’s products “were obviously a joke” is based on an improper subjective finding.
TRADEMARKS / USE IN COMMERCE
Federal Circuit Instructs TTAB to Revisit Software Services as Evidence of Use
On appeal from the Trademark Trial and Appeal Board (TTAB), the US Court of Appeals for the Federal Circuit reviewed the issue of trademark use in commerce and, more specifically, the extent to which certain services can be rendered through related computer software services. The court examined whether the trademark owner used its trademarks in commerce in connection with “personnel placement and recruitment services,” or whether (as the TTAB held) the trademark owner failed to use the marks in connection with services because its use was only in connection with software offerings. In re JobDiva, Inc., Case No. 15-1960 (Fed. Cir., Dec. 12, 2016) (Stoll, J).
The appeal to the Federal Circuit followed the TTAB’s partial and full cancellation of two US trademark registrations for JOBDIVA owned by JobDiva, Inc., a company that provides employment application tracking and management solutions. After filing a cancellation action against a third-party’s trademark registrations for JOBVITE, which were registered for employment-related services, JobDiva found itself on the other end of Jobvite’s counterclaim for cancellation of the JOBDIVA trademarks. Jobvite alleged that JobDiva did not provide personnel “placement and recruitment services” and therefore had abandoned the use of its JOBDIVA marks in connection with those particular services.
Granting the counterclaim, the TTAB cancelled the JOBDIVA trademarks to the extent that the registrations covered personnel placement and recruiting services. The TTAB came to this conclusion after it examined JobDiva’s evidence of use of the JOBDIVA marks and found that the evidence made no reference to JobDiva’s performance of personnel placement or recruitment services other than providing software-as-a-service offerings, including employment application databases and resume analysis, to hiring managers and recruiters. The TTAB indicated that JobDiva would need to demonstrate that it was rendering “personnel placement and recruitment services separate and apart from” providing its software services and licensing. Thus, the TTAB cancelled the marks for “non-use,” since US trademark law provides for cancellation of a trademark when it has not been used for the goods or services listed in the US trademark registration for at least three years with no intent to resume use of the mark. JobDiva appealed.
On appeal, the Federal Circuit found that the TTAB erred in its understanding of the law when it required JobDiva to show that it was providing personnel placement and recruiting services in addition to its provision of software. The Court explained that “[e]ven though a service may be performed by a company’s software, the company may well be rendering a service,” citing a decision in which the court “at bottom . . . recognized that software may be used by companies to provide a service.”
The Federal Circuit further explained that the perception of the consumer is key to assessing whether a mark is used in connection with the services described in the registration. Here, the issue was whether the evidence demonstrated that a user would associate the JOBDIVA mark with placement and recruiting services, even though JobDiva’s software ultimately performs the necessary steps of the services.
The Federal Circuit vacated and remanded the TTAB’s decision to consider the factual question of whether purchasers would perceive JobDiva’s marks to identify “personnel placement and recruitment services.”
Practice Note: JobDiva found itself defending the validity of its own trademarks after filing a cancellation petition against a JOBVITE registration. This case is a reminder that right holders should be prepared to support and defend their own trademarks if they challenge another party’s application or registration.
TRADEMARKS / ACQUIRED DISTINCTIVENESS
No Family!Family! of Marks for Little Caesars
Eleanor B. Atkins
The Trademark Trial and Appeal Board (TTAB) explained that an applicant’s evidence of a family of marks can be used to help prove acquired distinctiveness for a new member of that family, but held that the applicant failed to provide sufficient evidence to do so. In re LC Trademarks, Inc., Serial No. 85890412 (TTAB, Dec. 29, 2016) (Heasley, ATJ).
LC Trademarks, owner of Little Caesars’ trademarks, sought to register DEEP!DEEP! DISH PIZZA (in standard characters with “DEEP DISH PIZZA” disclaimed) for pizza based on acquired distinctiveness pursuant to § 2(f) of the Trademark Act. The examining attorney refused registration on the ground that the mark is merely descriptive under § 2(e)(1) and has not acquired distinctiveness under § 2(f). LC Trademarks appealed to the TTAB.
The TTAB first stated that LC Trademarks bore a heavy burden to show that the DEEP!DEEP! DISH PIZZA mark had acquired distinctiveness because the mark was highly descriptive. The more descriptive the term seeking registration, the greater the applicant’s burden to establish acquired distinctiveness. In this case, the TTAB stated that the “repetitive use of DEEP! does not reduce descriptiveness; it merely serves as an intensifier, underscoring the highly descriptive nature of the term.”
LC Trademarks contended that the applied-for mark was a member of its family of “double word” marks and thus had acquired distinctiveness. A family of marks is a group of marks that all share a common characteristic that consumers recognize as an indication of source; one famous example is McDonald’s family of “Mc” marks. LC Trademarks owns numerous registrations for marks with a repeated word followed by an exclamation point (e.g., PIZZA!PIZZA! and CHEESER!CHEESER!) The examining attorney argued that evidence of a family of marks is inappropriate for an ex parte proceeding or as evidence of acquired distinctiveness. The TTAB disagreed, explaining that “[i]f an applicant had a well-established family of marks characterized by a common characteristic, and applied to register a mark with the same family characteristic, it could credibly argue that its prior family of marks would expedite the public’s recognition of [the] applied-for mark as a member of the family.”
To prove ownership of a family of marks, the TTAB required that LC Trademarks show (1) that its family of marks has a recognizable common characteristic, (2) that the common characteristic is distinctive and (3) that the common characteristic has been marketed so that the public recognizes it as indicative of the source of the goods. The TTAB found that LC Trademarks failed to satisfy all three requirements.
Declining to completely “foreclose the theoretical possibility that a structure [as opposed to a prefix or suffix] may satisfy the first required element in proving the existence of a family marks,” the TTAB found that, in this case, the structure of a descriptive word plus an exclamation point (followed by a repetition of the same) was “too abstract.” The TTAB reasoned that, if allowed, it “would effectively grant Applicant an exclusive proprietary right to an unbounded variety of merely descriptive double word marks.”
As for distinctiveness, the TTAB stated that, unlike “Mc,” which is a common characteristic already recognized by consumers as indicating source, the repetition of descriptive words followed by exclamation points was more likely to be taken as emphasis than a source identifier.
LC Trademarks likewise failed on the third element. Despite evidence of 3,500 Little Caesars franchise locations with sales just shy of $1.5 billion a year, as well as examples of advertising featuring the double word marks, the TTAB stated that the applicant’s evidence “demonstrate[d] the popularity of its product, not necessarily consumers’ recognition of its double word marks as source identifiers.” Accordingly, the TTAB affirmed the decision to refuse registration.
TRADEMARKS / BANKRUPTCY & LICENSE AGREEMENTS
Trademarks, Trade Names Not Protected by Bankruptcy Law, but Licensee Rights Prevail
Eleanor B. Atkins
Addressing a circuit split over a trademark licensee’s rights following a debtor/licensor’s bankruptcy, the US Bankruptcy Appellate Panel (BAP) for the First Circuit held that, although trademarks and trade names are not included in bankruptcy law’s definition of “intellectual property,” the licensee’s rights to use the licensor’s trademarks as set forth in the agreement were not terminated by the debtor’s rejection of the agreement. Mission Prod. Holdings, Inc. v. Tempnology LLC, Case No. 15-065 (BAP, 1st Cir., 2016) (Hoffman, J).
Tempnology and Mission Product Holdings were parties to an agreement granting Mission exclusive distribution rights for certain Tempnology products, a non-exclusive license for certain intellectual property (but not the trademarks), and a limited license to use certain trademarks during the term of the agreement. In September 2015, Tempnology filed for bankruptcy and shortly thereafter filed a motion asking the bankruptcy court to reject certain executory contracts, including the agreement with Mission, and allow Tempnology to sell its assets free and clear of liens, claims, encumbrances and other interests.
Under 11 USC § 365(a), a debtor may reject any executory contracts, subject to court approval. Section 365(n) protects intellectual property licensees by allowing them to elect to retain certain rights under the contract, despite the debtor’s rejection. In this case, the bankruptcy court ruled that Mission’s § 365(n) election did not protect its distribution rights or its right to use Tempnology’s trademarks. Further, it ruled that Tempnology was not required to bring an adversary proceeding against Mission to obtain relief. Mission appealed all three points.
On appeal, Mission argued that its exclusive product distribution rights were saved by its § 365(n) election because § 365(n) allows licensees to retain contractual rights, “including the right to enforce any exclusivity provision” and “any embodiment of such intellectual property.” The patented Tempnology products, Mission argued, were the embodiment of Tempnology’s intellectual property. The Court disagreed, stating, “Mission’s attempt to re-characterize its exclusive product distribution rights under the Agreement as an intellectual property license [is] unsupported by either the letter or the spirit of the Agreement.”
Turning to Tempnology’s trademarks, the Court stated that while the purpose of § 365(n) is to protect intellectual property licensees, bankruptcy law’s definition of “intellectual property” does not include trademarks or trade names. Courts are thus split as to whether § 365(n) protects trademark licensees. Some courts reason that equity allows bankruptcy courts to decide on a case-by-case basis whether trademark licensees may retain their rights, while other courts find that the omission of trademarks from the definition means that trademark licensees are not afforded any protection by § 365(n). Ultimately, the First Circuit BAP took a third approach, following the US Court of Appeals for the Seventh Circuit’s interpretation, holding that Mission’s rights to use the trademarks were not protected by its § 365(n) election, but that Tempnology’s rejection of the Agreement did not “vaporize Mission’s trademark rights under the Agreement.” As such, “[w]hatever post-rejection rights Mission retained in the Debtor’s trademark and logo are governed by the terms of the Agreement and applicable non-bankruptcy law.”
Last, Mission argued that the bankruptcy court should not have determined the § 365(n) motion without first requiring Tempnology to commence an adversary proceeding. The Court disagreed, explaining that because the dispute was over the scope of Mission’s rights, and not its ownership of certain property, the bankruptcy court did not err in deciding the motion without requiring an adversary proceeding.
Practice Note: This case indicates that a trademark license’s contractual provisions governing the licensee’s rights following a breach may also serve to protect the licensee when a licensor files for bankruptcy.