Post-Priority References Can Be Used in Context of Obviousness Analysis
In two opinions by the same panel concerning the same three patents, the US Court of Appeals for the Federal Circuit relied in part on post-priority evidence in affirming both the district court’s and the Patent Trial and Appeal Board’s (PTAB’s) holdings that claims directed to dosing regimens were obvious. Yeda Research & Dev. Co. v. Mylan Pharm. Inc., Case Nos. 17-1594, -1595, -1596 (Fed. Cir. Oct. 12, 2018) (Reyna, J); In re Copaxone Consol. Cases, Case No. 17-1575 (Fed. Cir. Oct. 12, 2018) (Reyna, J).
Yeda is the assignee (and Teva is the new drug application holder) of three patents concerning a dosing regimen for a prior art treatment for multiple sclerosis called Copaxone® (glatiramer acetate). The claims of the patents recite a method involving three subcutaneous injections of 40 mg of Copaxone over a period of seven days with at least one day in between each injection. The claims of the patents were found invalid by a district court during litigation and by the PTAB in an inter partes review proceeding. Yeda appealed.
The Federal Circuit affirmed both the district court and the PTAB decisions. In finding the claims invalid, both tribunals noted that it was well known that subcutaneous administration of Copaxone caused significant and uncomfortable injection site reactions that led to patient non-compliance. The prior art already described two different dosing regimens: 20 mg daily and 40 mg every other day. Both regimens were understood to be equally effective (perhaps because the overall weekly total dose is almost identical for both regimens), but patient compliance was significantly better for the less frequent dosing regimen.
The district court and the PTAB both noted that the only difference between the prior art 40 mg dosing regimen and the claimed regimen was one dose over a two-week time span (i.e., seven doses over two weeks in the prior art versus six doses over two weeks pursuant to the claims). Given the general motivation in the art to administer Copaxone less frequently, and expert testimony that Copaxone is “a forgiving drug,” it would have been obvious to try to remove one dose from the prior art regimen to arrive at the claimed regimen. Moreover, expert testimony indicated that a regimen of injections on pre-determined days of the week has better patient adherence than an every-other-day regimen, in which the particular injection days differ from week to week. Citing KSR, both tribunals noted that the “small field” of prior art “presented a finite and known pool of dose and frequency options easily traversed to show obviousness,” and that the universe of dosages and frequencies “represent[s] a limited number of discrete permutations.” The district court further explained that “the prior art . . . provided clear direction as to choices likely to be successful in reducing adverse side effects and increasing patient compliance.” The Federal Circuit found no error in the district court and the PTAB’s findings.
In finding obviousness, both tribunals also relied, in part, on a non-prior-art publication (Khan 2009) that was published three weeks after the priority date. Noting that the study reflected in Khan 2009 was commenced two years earlier, the district court and the PTAB both agreed that Khan 2009 was admissible “for the limited purpose of showing the state of the art at the time of the invention.” Crucially, the Khan 2009 study discussed the motivation in the art to reduce dosing frequency to improve patient compliance and suggested that alternate day administration of Copaxone could be as effective as daily administration. As explained by the PTAB, Khan 2009 is “probative of the fact that those skilled in the art were motivated to investigate dosing regimens of [Copaxone] with fewer injections to improve patient compliance.” The Federal Circuit agreed that Khan was admissible to show the state of the art at the time of the invention, and noted that even if reliance on Khan was improper, there was substantial evidence otherwise supporting the district court and the PTAB’s findings.
Practice Note: These decisions stand for the proposition that in both a district court and before the PTAB, non-statutory prior art may in fact be admissible in an obviousness analysis, as long as it is used for “considering the knowledge, motivations, and expectations of a POSITA regarding the prior art.”
Benefit of Earlier Filing Date or Gaining Patent Term? Patentee Can’t Have Its Cake and Eat It Too
Affirming a Patent Trial and Appeal Board (PTAB) priority determination invalidating a patent, the US Court of Appeals for the Federal Circuit found that amending the priority claim of a parent application to delete a reference to earlier-filed applications affected the priority claim of the child application, making the earlier applications prior art. Natural Alternatives International, Inc. v. Iancu, Case No. 17-1962 (Fed. Cir. Oct. 1, 2018) (Prost, CJ).
Natural Alternatives International (NAI) filed a chain of eight patent applications. In each continuing application, NAI claimed priority to the first application under 35 USC § 120 through the prior applications. During the pendency of the fourth application, NAI filed a new provisional application. When filing the fifth application in the chain—a continuation-in-part application—NAI claimed the benefit of both the first four continuing applications and the new provisional application. Shortly after filing its sixth application, NAI amended the priority of its fifth application by deleting its priority claim to the first through fourth applications and retained benefit only to the provisional application under 35 USC § 119(e). The priority claims of the sixth through eighth applications were not amended; these applications eventually issued, claiming priority to the first five applications and the provisional application. The patent at issue in this case is the eighth patent in the chain.
Woodbolt Distributors requested that the US Patent and Trademark Office (PTO) re-examine NAI’s eighth patent, alleging that the priority claim of the patent was defective. The PTO instituted inter partes re-examination, and the PTAB affirmed the examiner’s conclusion that the challenged claims of the eighth patent were anticipated or obvious over the cited prior art because the eighth patent was not entitled to the benefit of the first application’s filing date since NAI deliberately deleted the specific reference to the earlier applications in the fifth application. NAI appealed.
On appeal, NAI argued that:
- Priority to the first application “vested” with the sixth application once the sixth application met all the criteria of § 120.
- Waiver of priority is limited to the intervening application in which priority was waived (in this case the fifth application) and does not extend to subsequent applications.
- The PTAB erroneously viewed priority as a single growing chain rather than multiple fixed chains.
- The PTAB’s view of priority claims limits an applicant’s ability to amend a priority claim to gain patent term.
The Federal Circuit found that NAI’s “vesting” argument conflated properly claiming priority with demonstrating entitlement to priority, and noted that patent claims “are not entitled to an earlier priority date merely because the patentee claims priority.” Citing the Manual of Patent Examining Procedure (MPEP) § 201.11, the Court noted that, contrary to NAI’s argument, nothing in MPEP’s text limits the scope of a waiver of priority to only the instant application. The Court also declined to adopt NAI’s interpretation of chain of priority as multiple fixed chains, reasoning that the long-standing interpretation of priority has been viewed as a single chain, growing with each additional continuation.
Finally, the Federal Circuit noted that NAI’s final argument suggests that NAI does need not to trade the benefit of an earlier filing date in order to gain patent term. The Court found that under NAI’s theory, a patentee could gain patent term on its earlier application by deleting a priority claim while simultaneously shielding its subsequent child applications (e.g., the eighth application in NAI’s case) from the parents being cited as prior art. The Court concluded that a patentee cannot have it both ways.
Another Diagnostic Test Found Ineligible Under § 101
Addressing patent eligibility under 35 USC § 101 for gene-related patents, the US Court of Appeals for the Federal Circuit affirmed the district court’s grant of summary judgment of invalidity, finding that the primers used to determine the presence of the pathogenic bacteria were indistinguishable from naturally occurring DNA. Roche Molecular Systems, Inc. v. Cepheid, Case No. 17-1690 (Fed. Cir. Oct. 9, 2018) (Reyna, J) (O’Malley, J, concurring).
Roche owns a patent directed to a diagnostic test and methods of using the test to determine the presence of the pathogenic bacteria Mycobacterium tuberculosis (MTB). The underlying technology was based on a discovery by Roche scientists that MTB contains 11 “signature nucleotides” that could be used as a fingerprint identifier. The inventors subsequently developed a diagnostic test involving amplification by polymerase chain reaction (PCR) of a patient’s DNA sample to determine if any of the signature nucleotides are present. The resulting patent comprised two types of claims: (1) composition of matter claims for primers used in the PCR, and (2) method of detecting MTB using PCR.
Roche filed a patent infringement case against Cepheid based on its sale of Xpert® MTB/RIF Assay, an assay that can detect MTB in a biological sample and can identify rifampin-resistant MTB. Cepheid filed a motion for summary judgment, arguing that all of the asserted claims were directed to patent-ineligible subject matter under 35 USC § 101. The district court granted Cepheid’s motion, finding that the primer claims, which have genetic sequences identical to those found in nature, were indistinguishable from those held to be directed to non-patentable subject matter, and were thus invalid. The court also found that the method claims were invalid because the use of non-patentable primers to bind to newly identified naturally occurring signature nucleotides using the well-known, routine process of PCR in a conventional way does not transform the claimed methods into patent-eligible subject matter. Roche appealed.
The Federal Circuit affirmed. The Court found that the claimed primers were structurally identical to their corresponding nucleotide sequences on the MTB gene found in nature and were thus indistinguishable from those held to be non-patentable subject matter in the Supreme Court of the United States’ 2013 decision in Ass’n for Molecular Pathology v. Myriad Genetics, Inc. (IP Update, Vol. 17, No. 6) and the Federal Circuit’s 2014 decision in In re BRCA1 (IP Update, Vol. 18, No. 1). In BRCA1 the Court broadly held that DNA primers do not have a different structure from those found in nature and are thus not patent eligible. The Court found nothing that “transformed” the claimed naturally occurring phenomenon into patent-eligible subject matter. Judge O’Malley’s concurring opinion agreed that under the holding of BRCA1, the present claims were invalid; however, she proposed that the Court should revisit its holding in BRCA1 at least with respect to the primer claims since the issues raised on appeal were the result of an underdeveloped record.
Turning to the method claims, the Federal Circuit noted that Roche’s diagnostic test amounted to a valuable contribution to science, but nonetheless found that the method claims were invalid because they utilized well-known and conventional PCR primers to identify a naturally occurring phenomenon. The Court noted that the method claims assert that if an investigator detects a signature nucleotide from a sample, the investigator knows the sample contains MTB. This relationship exists in nature apart from any human action, meaning that the method claims are directed to a natural phenomenon. While Roche argued that it was unprecedented to use PCR in the detection of MTB, the Court responded that many groundbreaking discoveries had previously been held patent ineligible because they pertained to the discovery of a natural phenomenon. The Court equated Roche’s method claims to those diagnostic techniques held invalid in other cases, observing that claims must recite more than simply state a law of nature, simply adding words tantamount to “apply it”. The Court distinguished its 2018 decision in Vanda Pharma. v. West-Ward Pharma., Int’l Ltd. (IP Update, Vol. 21, No. 5), where method of treatment claims were found to be subject matter eligible. In Vanda, the inventors recognized the relationships between iloperidone, CYP2D6 metabolism and QTc prolongation, but that is not what they claimed. Instead, they claimed an application of that relationship requiring a treating doctor to administer iloperidone. The Court noted that these cases underscore the distinction between “method of treatment” claims and claims directed to a “diagnostic method.” Unlike the Vanda inventors, Roche did not claim a method of treatment based on the detection of MTB, but claimed the natural phenomenon itself.
Practice Note: Given the Federal Circuit’s propensity for invalidating diagnostic tests predicated on natural phenomena, it may be advisable to draft such claims as method of treatment claims. For instance, claims directed to a new method of treating tuberculosis, starting with a diagnostic test revealing the presence of the MTB bacteria and ending with a step requiring the doctor to administer the appropriate antibiotic, would likely have been found patentable under the Court’s analysis.
Formula for Abstract Ideas: Alice Applied to Spreadsheet Claims with Mixed Results
Addressing whether patent claims were directed to abstract ideas, the US Court of Appeals for the Federal Circuit found that a number of claims directed to organizing and presenting information in electronic spreadsheets were patent eligible while other claims were ineligible. Data Engine Techs. LLC v. Google LLC, Case No. 17-1135 (Fed. Cir. Oct. 9, 2018) (Stoll, J). The Court followed the now-familiar two-step Alice test for determining (1) whether the claims were directed to a patent-ineligible concept and (2) if so, whether the combination of elements transformed the nature of the claim into a patent-eligible application of the concept.
Multiple claims from four patents were at issue in the appeal, and the Federal Circuit discussed three representative claims. One representative claim related to navigating through three-dimensional electronic spreadsheets. A second representative claim related to creating a tabbed spreadsheet where the tabs can be named by the user to serve as the page’s unique identifier. A third representative claim related to tracking modifications across multiple sheets of a three-dimensional electronic spreadsheet.
The district court found that all of the claims were directed to the abstract ideas of “using notebook-type tabs to label and organize spreadsheets” or “collecting spreadsheet data, recognizing changes to spreadsheet data, and storing information about the changes.” The district court entered a judgment on the pleadings finding all of the asserted claims invalid.
On appeal and under a de novo review, the Federal Circuit characterized the first representative claim differently, finding that it was not directed to an abstract idea under Alice step 1. Instead, the Court determined that the claim was directed to a specific method for navigating through electronic spreadsheets that required a specific interface and a particular implementation. Relying on the specification description of the alleged benefits of the invention and on industry praise that had been submitted during prosecution, the Court determined that the claimed method solved a known technical problem in a particular way, and it analogized the claims to those it had found eligible in Core Wireless (IP Update, Vol. 21, No. 9) and Trading Technologies International, Inc. v. CQG, Inc. (IP Update, Vol. 20, No. 2).
As to the other two representative claims, the Federal Circuit determined that under Alice step 1, the claims were directed to abstract ideas because they were generic recitations of identifying/storing information in an electronic spreadsheet or tracking changes to an electronic spreadsheet—not limited to a specific technical solution as with the first representative claim. In the Alice step 2 part of the analysis, the Court found that the claims lacked any inventive concept and did little more than restate the abstract idea itself.
SEP Rights Holder Must License All Comers
A federal district court in California granted partial summary judgment for the Federal Trade Commission (FTC) and ordered a standard essential patent (SEP) holder to license its intellectual property for cellular communication standards to all willing applicants. FTC v. Qualcomm Inc., Case No. 17-cv-00220 (N.D. Cal. Nov. 6, 2018) (Koh, J).
The decision requires Qualcomm to license its alleged SEPs to all comers, regardless of whether they make component products or end-devices, and represents a significant victory for the FTC in enforcing its view of an SEP holder’s commitments to license patents on fair, reasonable and non-discriminatory (FRAND) terms.
The FTC sued Qualcomm in 2017, alleging that the company violated Section 5 of the FTC Act by refusing to license its alleged SEPs to other modem chip suppliers in violation of industry agreements, thus ensuring that customers had to rely on Qualcomm for their modem chip supply. Section 5 of the FTC Act prohibits “unfair methods of competition in or affecting commerce.” 15 USC § 45(a)(1). According to the FTC, Qualcomm then used its position as a “dominant supplier” of modem chips to require customers to license Qualcomm’s alleged SEPs for “elevated royalties.” In August 2018, the FTC filed a motion for partial summary judgment to determine whether two agreements with industry standard-setting organizations (SSOs) required Qualcomm to license its alleged SEPs to all comers on FRAND terms.
Qualcomm holds patents that facilitate cellular connectivity through networks that implement cellular communication standards and that are alleged as SEPs. Industry SSOs develop and manage these standards and often incorporate patented technology into the standards they adopt. To avoid conferring market power on the patent holder, SSOs have intellectual property rights (IPR) policies that require members to make assurances that any SEPs incorporated into industry standards will be licensed to all applicants on FRAND terms. Qualcomm is a member of two telecommunications SSOs, both of which maintain IPR policies. The parties did not dispute that Qualcomm made several commitments to license SEPs on FRAND terms and that those commitments constituted binding contracts. Rather, Qualcomm asserted that the policies only required it to license its SEPs to suppliers of end-devices—not those that manufactured components.
The court considered Qualcomm’s statements to the SSOs and the SSOs’ IPR policies. The court rejected Qualcomm’s contention that the policies contained limitations that did not require it to license its alleged SEPs to component manufacturers. Rather, the court found that the plain text of the policies required patent holders to license SEPs to “all applicants” or “any applicant” that commit(s) to paying a FRAND rate. The policies did not contain any limitations as to which entities could receive a license. Nor did the policies specify that only applicants that “practice” or “implement” whole standards could receive licenses. In fact, the policies contemplated that an applicant could receive a license to practice a portion of the standard or for the purpose of implementing a standard.
The court also analyzed companion guidelines that explained the intent behind the SSOs’ IPR policies. The guidelines for one SSO explained that an SEP holder’s FRAND commitments prevent an SEP holder from “securing a monopoly in any market” as a result of including patented technology in a standard. Thus, the court concluded that if a patent holder could discriminate against component suppliers, it could achieve a monopoly in the component market and limit competing implementations of those components. Moreover, the court found that Qualcomm had licensed its alleged SEPs to another component supplier and that Qualcomm itself had received licenses to supply components. Therefore, the SSO IPR policies required Qualcomm to license its alleged SEPs to component modem chip suppliers.
Practice Note: This decision may affect how SEP holders license their patents in the future. Going forward, SEP holders must review any FRAND commitment and ensure that they are adhering to their agreed willingness to license their SEPs to any potential implementer. The ruling may also affect royalty structures by restructuring licensing negotiations from the end-device (or integrator) level to the components level, resulting (subject to exhaustion, allocation and indirect infringement principles) in a proliferation of licenses from the SEP holder, i.e., throughout the supply chain. Subject to exhaustion principles, integrators and component manufacturers will both have to ensure that they have sufficient SEP license scope so that their products (i.e., either an integrated device or a component of it) will not be subject to attack by an SEP holder.
Burden Is on Trustee to Show Insolvency at Time of Transfer
The US Court of Appeals for the 11th Circuit affirmed the district court’s dismissal of a fraudulent conveyance claim for a “blocking right” and right of first refusal under a patent transfer agreement, addressing the district court’s proper exclusion of expert testimony on whether the debtor was insolvent at the time of the relevant transfer. In re: Teltronics, Inc., Case No. 16-16140 (11th Cir. Oct. 2, 2018) (Kaplan, J).
After defaulting on a promissory note for a patent portfolio purchase, Teltronics entered into a patent transfer agreement purportedly transferring the portfolio back to its original owner, Harris Corporation, in exchange for relief of the payments due under the promissory note and a non-exclusive license to the portfolio. Teltronics also retained a “blocking right” against Harris selling the portfolio to a third party until July 2010, and a right of first refusal after July 2010 in the event Harris desired to re-purchase the portfolio.
In 2008, Harris negotiated the sale of the portfolio to RPX. Upon realizing that it had to address Teltronics’ blocking right, Harris contacted Teltronics to renegotiate its rights without signaling its intent to sell the portfolio. The negotiation led to an alteration of the blocking right from July 2010 to April 16, 2009, and limited its applicability to Teltronics’ competitors. The right of first refusal now became effective in April 2009. Harris then transferred the patents to RPX on January 26, 2009. Teltronics subsequently filed for bankruptcy.
In district court, Teltronics’ trustee filed an adversary proceeding against Harris and RPX claiming that the transfers of the blocking right and the Teltronics right of first refusal were constructively fraudulent. The trustee challenged the admissibility of Harris’s expert opinion that Teltronics had been solvent at the time of the transfers on the ground that the expert did not perform any work to back up the opinion and did not verify the reliability of the materials to which he referred, including the expert’s opinion that three contracts should be valued as assets of Teltronics. In its opinion, the bankruptcy court had considered and disregarded the trustee’s counter-argument regarding these agreements as a failure to carry its burden of insolvency at the time of transfer, or that Teltronics received less than reasonably equivalent value in the transfer. After the district court affirmed the order from the bankruptcy court, the trustee appealed.
The 11th Circuit affirmed, emphasizing the deferential standards of review for evidentiary issues during bench trials and the fact that the trustee had the burden to prove insolvency. The Court noted that the trustee never objected to the opinion regarding the three contracts and, when considering the weight of trustee’s own opinion that the contracts did not qualify as assets, ruled that the trustee failed to carry its burden regarding insolvency.
Supreme Court to Address Whether Government Can Petition for AIA Post-Grant Review
The Supreme Court of the United States granted, in part, Return Mail’s petition for certiorari to address whether the federal government has standing to challenge patents using post-grant proceedings under the America Invents Act (AIA). Return Mail, Inc. v. United States Postal Serv., Case No. 17-1594 (Supr. Ct. Oct. 26, 2018). The question presented is:
Whether the government is a “person” who may petition to institute review proceedings under the AIA.
Return Mail owns a patent directed to processing mail that is undeliverable due to an inaccurate or obsolete address for the intended recipient. Return Mail sued the US Postal Service for patent infringement. The Postal Service subsequently filed a petition for covered business method review of the patent. Return Mail opposed, arguing that the Postal Service lacked standing because it was a government entity and not a person as required by the relevant statutory provisions. The Patent Trial and Appeal Board (PTAB) disagreed, finding that the Postal Service was not statutorily barred from filing the petition. On the merits, the PTAB determined that the challenged patent claims were directed to ineligible subject matter. Return Mail appealed, and the US Court of Appeals for the Federal Circuit affirmed the PTAB’s decision (IP Update, Vol. 20, No. 9). Return Mail appealed to the Supreme Court, which granted certiorari in part.
An All Star Trademark Opinion
Addressing core issues of trademark law, including evidentiary presumptions afforded to registered trademarks and considerations in determining whether trademarks have acquired secondary meaning, the US Court of Appeals for the Federal Circuit issued an important opinion vacating and remanding a US International Trade Commission (ITC) decision concerning trade dress for sneakers. Converse, Inc. v. International Trade Comm’n, Case No. 16-2497 (Fed. Cir. Oct. 30, 2018) (Dyk, J) (O’Malley, concurring in part, dissenting in part).
Converse filed a complaint with the ITC against various respondents for importing shoes that purported to infringe its trade dress in its All Star shoes. The trade dress at issue was the “mid-sole” of Converse’s shoe, consisting of the striped design, toe cap and diamond pattern on the toe bumper, among other elements (All Star Trade Dress). Converse’s claimed first use of this trade dress dated back decades, but Converse did not apply to register the All Star Trade Dress until 2012 and did not secure its registration until 2013. Many of the accused infringers had imported the products at issue before Converse secured its registration.
The ITC administrative law judge (ALJ) determined that the “registered” All Star Trade Dress (i.e., from September 8, 2013, forward) was valid and had been infringed, relying on the evidentiary presumption of secondary meaning afforded to registered marks under 15 USC § 1115(a), but held that Converse had failed to establish that its “unregistered” All Star Trade Dress (i.e., prior to September 8, 2013) had acquired secondary meaning and thus was entitled to trade dress protection.
In its final determination, the ITC reversed the ALJ’s finding and held that the registered All Star Trade Dress was invalid because the mark had not acquired secondary meaning. The ITC agreed with the ALJ, however, that Converse had failed to prove secondary meaning in the unregistered All Star Trade Dress. Converse appealed.
The Federal Circuit found the ITC’s final determination flawed in several respects, including its parsing of “registered” and “unregistered” All Star Trade Dress. As the Court observed, the trade dress is the same, with different rights attaching at different times.
The Federal Circuit found that the ITC erred by failing to distinguish between those who had begun infringing use before the All Star Trade Dress was registered and those who began after the registration. The trademark owner claiming infringement must show that its mark had acquired secondary meaning before the alleged infringer began use. For infringement after a mark has registered, the trademark owner has the benefit of a presumption that its mark has acquired secondary meaning. However, there is no presumption of secondary meaning afforded to registered marks before registration. Thus, when claiming infringement that began before registration, the trademark owner bears the burden of proving that its mark had acquired secondary meaning before the alleged infringer’s first use. Because the ITC erred in this analysis, the Court remanded for a determination of whether the All Star Trade Dress had acquired secondary meaning before each of the alleged infringers had begun use.
The Federal Circuit also found that the ITC had applied the wrong legal standard in determining whether the All Star Trade Dress had acquired secondary meaning. Using a multi-factor test, the ITC found that the All Star Trade Dress had not acquired secondary meaning because Converse had not shown exclusive use of the trade dress and there was no survey evidence demonstrating that the public associated the All Star Trade Dress with Converse. In its review, the Court clarified that a proper secondary meaning assessment should consider six factors:
- Association of the trade dress with a particular source by actual purchasers (usually shown by customer surveys)
- Length, degree and exclusivity of use
- Amount and manner of advertising
- Amount of sales and number of customers
- Intentional copying
- Unsolicited media coverage of the product embodying the mark
The Federal Circuit explained that exclusivity should not be considered in isolation, but rather together with the trademark owner’s length and degree of use. The Court concluded that the ITC had erred in finding that Converse had not made exclusive use of the All Star Trade Dress. Per the Court, the ITC placed too much weight on uses significantly predating the infringing uses at issue, and relied on products that were not substantially similar to the All Star Trade Dress. The Court suggested that exclusivity of use should be evaluated in the five years preceding the first infringing use, and should only consider use that was “substantially similar” to the owner’s claimed trade dress.
The Federal Circuit also faulted the ITC for relying too heavily on the 2015 survey submitted in support of the alleged infringers, which showed that only approximately 20 percent of respondents associated the All Star Trade Dress with a single source. That survey is only relevant to the extent it measured whether the All Star Trade Dress had acquired secondary meaning prior to the beginning of each alleged infringing use. Some of the alleged infringing uses took place almost 10 years before the survey. The Court observed that surveys conducted within five years of the first infringing use may be relevant in assessing secondary meaning.
While Judge O’Malley agreed with the panel’s application of the evidentiary presumption afforded to registered marks, she criticized the expansiveness of its opinion. Judge O’Malley reasoned that a decision on the validity of the All Star Trade Dress registration was unnecessary to resolve this case because either (1) certain of the infringers in the proceeding had defaulted and thus never challenged the validity of Converse’s trade dress, or (2) all other infringers had commenced use before the All Star Trade Dress was registered, meaning that they could not be liable for the infringement of a registered mark. In O’Malley’s opinion, the only relevant question was whether Converse could establish acquired distinctiveness as of each first alleged infringing use.
Practice Note: This opinion has wide-ranging implications for trademark law. Under the reasoning of this opinion, in trademark or trade dress infringement litigation, the owner of a registered trademark does not have the benefit of any of the evidentiary presumptions of a registration where the infringer’s use commenced before that registration. Thus, for example, a plaintiff would need to prove that its trade dress was not functional if the alleged infringement occurred before plaintiff secured a registration.
Eagle Mark Soars to Injunction Against Identical “Hawk” Logo
Addressing whether the district court correctly found a likelihood of confusion as a matter of law between two “identical” logos arranged around a stylized bird, the US Court of Appeals for the Fifth Circuit affirmed the district court’s grant of summary judgment and upheld as modified an injunction prohibiting use of the infringing logo. Alliance for Good Gov’t v. Coalition for Better Gov’t, Case No. 17-30859 (5th Cir. Aug. 22, 2018) (Duncan, J).
The Alliance for Good Government and the Coalition for Better Government are both nonprofit civic organizations that operate in New Orleans, Louisiana, and endorse candidates for office. In 1969, the Alliance created its logo, a design with its name in blue type on a rectangular white background arranged around an eagle. The Coalition’s logo, adopted decades later, features a design with the Coalition’s name in white type on a rectangular blue background arranged around a hawk. As the Fifth Circuit aptly recognized, “pictures are worth a thousand words”:
The Alliance registered its composite mark consisting of its logo in 2013. In 2017, the Alliance sued the Coalition for trademark infringement and moved for summary judgment. The district court granted the Alliance’s motion, finding that the Coalition’s use of its logo infringed the Alliance’s registered composite mark as a matter of law and permanently enjoining the Coalition from using both its name and logo. The Coalition appealed.
The Fifth Circuit affirmed the district court’s grant of summary judgment holding that the Coalition’s use of its logo infringed the Alliance’s registered composite mark as a matter of law. As a procedural matter, the Court refused to consider the Coalition’s argument that the Lanham Act could not apply to use of the logo because the Coalition uses it for “political speech,” not commerce, holding that the Coalition waived the argument by failing to press it before the district court.
Turning to the merits, the Fifth Circuit agreed with the district court that the Coalition failed to adduce any evidence demonstrating that the Alliance’s composite mark was invalid. The Court rejected the proposition that the Alliance committed fraud on the US Patent and Trademark Office during registration by representing that no one else had the “right” to use the mark because the Alliance had long believed that the Coalition had no right to use of the logo. The Court also held that the Coalition presented no evidence to rebut the presumption of inherent distinctiveness attendant the Alliance’s registered composite mark.
The Fifth Circuit further agreed with the district court that the Coalition’s logo created a likelihood of confusion with the Alliance’s composite mark as a matter of law. The Court found that the two marks “looked exactly alike,” and “cut to the chase” by finding that the “Alliance and Coalition have the same logo,” which they use in the same field, market and advertising channels, and to perform the same function. The Court made short work of the Coalition’s “most curious argument”—that the use of a different species of bird defeated a likelihood of confusion—rejecting the Coalition’s distinction between the Alliance’s “eagle” and the Coalition’s “hawk.” In a final procedural move, the Court modified the district court’s injunction, which had enjoined the Coalition from using both its name and logo, to more appropriately enjoin only the Coalition’s use of its infringing logo.
THINS – Not All They’re Crackered Up to Be
On appeal from two oppositions, the US Court of Appeals for the Federal Circuit affirmed a Trademark Trial and Appeal Board (TTAB) refusal to register marks for CORN THINS and RICE THINS for snack cakes, finding that the marks were highly descriptive and had not acquired distinctiveness. Real Foods Pty Ltd. v. Frito-Lay North Am., Inc., Case Nos. 17-1959, -2009 (Fed. Cir. Oct. 4, 2018) (Wallach). The Court also vacated the TTAB’s decision dismissing a claim that the marks were generic, and remanded the issue back to the TTAB to determine the proper genus of the snack cakes covered by the marks and to conduct a new genericness analysis in light of the proper genus.
Real Foods sought registration of two marks:
- CORN THINS, for “crispbread slices predominantly of corn, namely popped corn cakes”
- RICE THINS, for “crispbread slices primarily made of rice, namely rice cakes”
The popped corn cakes and rice cakes are shown below:
Frito-Lay opposed the registrations, arguing that the proposed marks should be refused as either generic or descriptive without having acquired distinctiveness. The TTAB refused registration of Real Foods’ applied-for marks, finding that the marks were “merely descriptive and have not acquired distinctiveness,” but dismissed Frito-Lay’s genericness claim. Both parties appealed.
The Federal Circuit found that substantial evidence supported the finding that the marks were descriptive because the main ingredients in Real Foods’ snack cakes are corn and rice. The Court found that Real Foods’ disclaimer of the right to use “corn” and “rice” apart from the marks further substantiated their descriptive nature. Noting that third parties used the word “thins” to describe their snack cakes, the Federal Circuit further found that “thins” described the physical appearance of Real Foods’ snack cakes, because they were thinner than other similar cakes. The Court also found that viewing the marks as composites (i.e., “CORN THINS” and “RICE THINS”) did not make them any less descriptive because they immediately conveyed a quality or characteristic of the snack cakes—the main ingredient and thickness. Finally, the Court found that the evidence showed that not only did Real Foods use the Marks to describe its snack cakes, but consumers also used “corn,” “rice” and “thins” to describe Real Foods’ snack cakes and not their source.
Real Foods argued that its marks were suggestive because they were really a “double entendre” conveying the low calorie and “diet friendly” characteristics of the snack cakes. The Federal Circuit found that the TTAB correctly rejected this argument given that the word “thins” is often used to describe snack products (such as cookies and chocolate covered pretzels) that are physically thin but not low in calories.
The Court also found that Real Foods failed to establish that the marks were protectable because they had acquired distinctiveness. The evidence showed that little money was spent on marketing and advertising the snack cakes, and the overall sales figures were not high. Moreover, research conducted on behalf of Real Foods found that consumers had little loyalty to CORN THINS and RICE THINS and a low preference for Real Foods’ snack cakes compared to those of its competitors. A Frito-Lay survey found that only 10 percent of consumers associated CORN THINS and RICE THINS with a particular source, and of those 10 percent, half associated the snack cakes with a source other than Real Foods. The Federal Circuit also acknowledged that while continuous use of a trademark for five years may establish acquired distinctiveness, Real Foods’ continuous use of the marks failed to do so because the marks were so highly descriptive.
Finally, the Federal Circuit addressed the TTAB’s dismissal of Frito-Lay’s claims that the Marks were generic. The Court found that the TTAB improperly relied on the amended and narrowed scope of goods for the Marks when determining that the genus for CORN THINS was popped corn cakes and for RICE THINS, rice cakes. Accordingly, the Court vacated the dismissal of Frito-Lay’s genericness claim and remanded the issue to the TTAB for a proper determination of the genus.
Perchville Trademark: Fishy or Fanciful?
The US Court of Appeals for the Sixth Circuit concluded that PERCHVILLE, the name of a winter festival, was inherently distinctive and protectable as a fanciful mark or at the very least as a suggestive mark. AuSable River Trading Post, LLC v. Dovetail Solutions, Inc. et al., Case No. 18-1368 (6th Cir. Aug. 29, 2018) (Sutton, J).
For several decades, the town of Tawas, Michigan, has held a Perchville winter festival. The founders created the Perchville name in 1949 for the sole purpose of identifying the festival. The Tawas Chamber of Commerce (TCC) organizes the yearly festival and owns a federal trademark registration for the PERCHVILLE mark for use on apparel and other goods. TCC dues-paying members may use the PERCHVILLE mark, but third parties are required to pay a $750 licensing fee. AuSable River Trading Post began selling T-shirts bearing the PERCHVILLE mark, but was not a TCC member and did not pay the licensing fee. The TCC sought and received a state court injunction against an AuSable employee for selling PERCHVILLE T-shirts. In response, AuSable sued the TCC to invalidate the PERCHVILLE registration. The district court granted the TCC’s motion for summary judgment, holding that the PERCHVILLE mark was inherently distinctive and protectable. AuSable appealed.
The Sixth Circuit affirmed the district court’s decision. Before reaching the merits of the case, the Court explained the different types of marks and their levels of protectability: inherently distinctive trademarks (fanciful, arbitrary and suggestive) are the most protectable, and generic marks are not protectable at all. The Court held that PERCHVILLE was “almost certainly” a fanciful mark and at the very least was a suggestive mark because it was coined to identify the festival, it does not have an independent meaning, and it cannot be found in the dictionary. Alternatively, the Court held that the combination of perch (referring to a fish) and -ville (referring to a fictitious place or concept with particular characteristics) to create PERCHVILLE may suggest a gathering of fisherman, but even that meaning requires imagination and perception—the hallmarks of a suggestive mark.
In support of its quest to invalidate the mark, AuSable argued that PERCHVILLE is an unprotectable generic mark because people associate the mark with the festival and not the TCC. The 1984 Amendment to the Lanham Act, however, precludes this argument: a mark cannot be generic simply because it is used as the name of, or to identify, a unique product or service.
AuSable next argued that PERCHVILLE was a generic word, like thermos or trampoline, because it was part of the general lexicon of Tawas residents. The Court rejected this analogy, holding that PERCHVILLE refers to a single event that has one source, unlike the word thermos, which refers to a general class of containers for holding hot beverages made by many different companies. AuSable also argued that PERCHVILLE is not fanciful because it consists of two words commonly found in the dictionary, which when combined, suggest a city with a certain type of fish. The Court found that by conceding that the mark suggests an imaginative city, AuSable defeated its own argument.
Finally, AuSable argued that the TCC abandoned the PERCHVILLE mark when it allowed others to use the mark and allowed the registration to lapse in 2013. The Court held that use of a trademark by others does not mean the trademark owner has abandoned the mark, especially when the owner licenses the mark and actually uses the PERCHVILLE mark on buttons, as here. Moreover, the Court found that the fact that the TCC accidentally let the PERCHVILLE registration lapse did not constitute abandonment because the TCC immediately filed a new application for the mark.
It’s More Than a Feeling: Boston Trademark Dispute Slips Away
In a dispute between two former members of a rock band, the US Court of Appeals for the First Circuit sustained a summary judgment in favor of the defendant, concluding that the plaintiff failed to establish a breach of contract relating to use of a co-owned trademark. Scholz. v. Goudreau, Case Nos. 17-1264, -1316 (1st Cir. Aug. 21, 2018) (Torruella, J).
Donald Scholz, a member of the rock band Boston, sued his former bandmate and guitarist Barry Goudreau for trademark infringement and breach of contract for allegedly making impermissible references relating to Goudreau’s former association with Boston. Goudreau counterclaimed with his own breach of contract and abuse of process claims. A prior settlement agreement between Scholz and Goudreau limited Goudreau’s use of the band’s name but permitted certain language use by Goudreau for biographical purposes. Scholz alleged that promotional materials featuring Goudreau used language other than that permitted by the settlement agreement, and therefore claimed breach of contract.
The district court granted summary judgment in favor of Goudreau because Scholz failed to show that Goudreau had drafted or approved the promotional language in question. The district court also granted in part and denied in part other motions for summary judgment by both parties. While the trial proceeded to a jury verdict in favor of the respective defendant on each of the remaining claims, both Scholz and Goudreau cross-appealed the district court’s summary judgment findings, evidentiary rulings and denials of various other motions.
The First Circuit affirmed the district court ruling on the breach of contract claim. The parties’ prior settlement agreement limited Goudreau’s use of the trademark “Boston” to a description of him as a “former” or “original” member of Boston in promotional copy. Some of the promotional material that Scholz found objectionable used terms such as “original founding member” or “Lead Guitarist Rock Legend from the Band BOSTON,” but Goudreau did not instruct the parties responsible for the promotions to use any language other than that permitted by the settlement agreement. Scholz thus did not show that Goudreau drafted or approved the language.
In his counterclaim, Goudreau alleged that the district court erred by entering summary judgment in Scholz’s favor on Goudreau’s abuse of process claim, asserting that there were genuine issues of material fact as to Scholz’s motives for bringing the underlying litigation. Goudreau claimed that the totality of the circumstances showed that Scholz’s true motives were to “litigate Goudreau into submission” in order to obtain all royalty and copyright rights to Boston’s first two albums and to obtain discovery from Goudreau and others to be used in other litigation. The First Circuit affirmed the district court’s dismissal of this counterclaim, however, noting that the counterclaim was based on the explicit motive stated in Scholz’s complaint: “When a plaintiff directly states his purpose in his complaint, ‘even a pure spite motive’ does not establish that there was an abuse of process if the process is used ‘only to accomplish the result for which it was created.’”
Goudreau also appealed the district court’s denial of his claim for attorneys’ fees. Again the First Circuit affirmed: “The district court was intimately familiar with the totality of the circumstances in this case, and reasonably found the case not to be an ‘exceptional’ one warranting the sought-after award. In its electronic order denying Goudreau’s motion, the district court not only cited the Octane Fitness factors but also thoughtfully analyzed each of those factors” and noted that deterrence was not a factor here since, as the district court observed, “a judgment on the merits at summary judgment itself precludes future litigation on the same set of facts.”
Supreme Court to Address Trademark Licensee Rights on Rejection of License Agreement During Bankruptcy Proceedings
The Supreme Court of the United States granted Mission Product Holdings’ petition for certiorari to determine whether a debtor-licensor can terminate the rights of trademark licensees by rejecting its trademark licensing agreements as part of its bankruptcy case. Mission Product Holdings, Inc. v. Tempnology LLC, Case No. 17-1657 (Supr. Ct. Oct. 26, 2018). The specific question presented is:
Whether, under § 365 of the Bankruptcy Code, a debtor-licensor’s “rejection” of a license agreement—which “constitutes a breach of such contract,” 11 USC § 365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.
US bankruptcy law gives a debtor the right to reject executory contracts to eliminate burdensome obligations. The bankruptcy law contains an exemption for licensing deals involving intellectual property, which the relevant provision defines as trade secret, patents, patent applications, plants and copyrights. Notably missing from the definition of intellectual property is trademarks. The issue is whether a debtor-licensor should be forced to continue to monitor and exercise control over how its trademark is being used by licensees, as the US Court of Appeals for the Seventh Circuit found in a 2012 case, or whether the debtor-licensor can terminate the license, as the US Court of Appeals for the First Circuit held in the underlying case (IP Update, Vol. 21, No. 2). The Supreme Court was asked to resolve this circuit split.
Required Reading: Appeals Court Instructs District Court for Second Time on Fair Use of Course Materials
The US Court of Appeals for the 11th Circuit vacated a district court’s judgment for a second time, finding that the lower court misinterpreted its instructions on remand and failed to give each excerpt of the copyrighted works the holistic analysis the Copyright Act demands. Cambridge University Press, et al. v. J.L. Albert, et al., Case No. 16-15726 (11th Cir. Oct. 19, 2018) (Pryor, J).
Cambridge University Press, Oxford University Press and Sage Publications publish academic works. Those works are marketed to university professors so that the professors will assign them as required reading in their courses. The publishers also license digital excerpts of their works and “permissions,” which allow users to photocopy and digitally reproduce portions of their works.
Georgia State University pays to use licensed excerpts in paper course packs that the University bookstore assembles and sells to students. The University also maintains servers that enable University personnel to upload digital copies of excerpts and allow students enrolled in courses to download the excerpts. The majority of course readings are made available in this manner. Neither the University nor the students pay for the use of the digital excerpts.
The publishers sued the University for direct, contributory and vicarious copyright infringement. After a bench trial, the district court ruled that the University infringed the copyrights of the publishers in only five instances. The court found that the publishers established a prima facie case of 48 instances of infringement, but ruled that the University established a fair-use defense for 43 of the excerpts. The Copyright Act enumerates four factors to be considered in finding fair use instead of infringement. The first factor relates to the purpose and character of the use, including whether the use is commercial or educational. The second factor is the nature of the work. The third factor relates to the amount and substantiality of the portion used in relation to the work as a whole. And the fourth factor is the effect of the use upon the potential market for, or value of, the copyrighted work. The publishers appealed the original district court decision.
The 11th Circuit reversed, vacated and remanded the judgment, finding that the district court erred in its analysis of the fair-use defense. The Court upheld the district court’s analysis of factors one and four, but instructed the lower court to correct its erroneous application of factors two and three and its error in weighing and balancing all four factors in its overall analysis. On remand, the district court adjusted all four factors, changed its method of balancing the four factors, and reached a similar result, finding fair use for each of the same 43 excerpts. The publishers appealed again.
In the second appeal, the 11th Circuit found that the district court misinterpreted its mandate and misapplied the test of fair use on remand. The Court determined that the district court erred when it changed the fourth factor, noting that the appellate court’s holding on the first appeal precluded the district court from revisiting the fourth factor. With respect to weighing and balancing the factors, the Court concluded that the district court’s “quantitative rubric was an improper substitute for a qualitative consideration of each instance of copying in light of its particular facts.” The Court found that the district court also erred in its analysis of the third factor when it considered the cost of licensing the excerpts, noting that “the Act does not direct courts to consider the price of the unpaid use.”
The 11th Circuit ordered the lower court to reinstate its earlier finding with respect to factor four and omit any consideration of price from its analysis of factor three. Additionally, the district court was ordered to “eschew a quantitative approach to the weighing and balancing of the fair-use factors and give each excerpt the holistic, qualitative, and individual analysis that the Copyright Act demands.”
“First Principles” Reaffirmed in Denial of Copyright Protection for Georgia Annotated Code
The US Court of Appeals for the 11th Circuit held that copyright law does not protect the research references and annotations contained in the official annotated compilation of Georgia statutes. Code Revision Commission v. Public.Resource.Org, Inc., Case No. 17-11589 (11th Cir. Oct. 19, 2018) (Marcus, J).
This case involves the Georgia state legislature’s asserted copyright in the Official Code of Georgia Annotated (OCGA). The OCGA is compiled and annotated with case notations, editor’s notes, excerpts from Law Review articles, and other research references by Lexis under a contract with the Georgia Revision Commission, an arm of the Georgia General Assembly. The contract specifies that the Commission owns the copyright to the OCGA and grants Lexis the exclusive right to publish copies of the OCGA. The nonprofit group Public.Resource.Org, Inc. (PRO), which is dedicated to providing free access to public documents, purchased a copy of the OCGA and distributed it via its free website. The Commission sued PRO for copyright infringement, and the district court ultimately granted the Commission’s motion for summary judgment. PRO appealed.
In reversing the district court and entering judgment for PRO, the 11th Circuit began by explaining that documents that have the “force of law”—for example, statutes and judicial opinions—are not copyrightable. The Court based its decision on the 1888 Supreme Court of the United States decision Banks v. Manchester, which held that state court judicial opinions were not copyrightable because judges cannot be considered “authors” as a matter of public policy. Expanding on the Supreme Court’s rationale and relying on “first principles” contained in sources as primal as the Declaration of Independence and the Federalist Papers, the Court explained that because the authority of government comes from the consent of the governed people, “the People are the constructive authors of those official legal promulgations of government that represent an exercise of sovereign authority.” The Court further reasoned that if all governed people are the authors of the law, documents that state the law are “intrinsically public domain material and, therefore, uncopyrightable.”
The 11th Circuit applied this rationale to the OCGA. While the parties agreed that the statutory portions of the OCGA are not protectable under Banks, the Commission argued that the compilation of annotations assembled by Lexis was copyrightable. The Court disagreed. The Court analyzed the preparation of the OCGA through three perspectives to determine whether the compilation had the force of law, thus barring it from copyright protection: “the identity of the public officials who created the work, the authoritativeness of the work, and the process by which the work was created.”
First, the 11th Circuit found that the Commission was the author of the OCGA. Although Lexis was tasked with creating and compiling the annotations, its contract with the Commission specified the sources to be included in the annotations. The Commission also closely supervised Lexis’s work in preparing the annotations and dictated their content. Finally, the Commission—as well as the Georgia General Assembly—had to approve the annotated compilation before it could be published. Because the Commission was the true author, and because the Commission was an arm of the Georgia General Assembly, the Court found that the legislative body itself was the “author” of the OCGA.
Next, the 11th Circuit found that the Georgia General Assembly had imbued the OCGA with an undeniable aura of authoritativeness by labeling it the “official” version of the Georgia statutes. The Court noted that the references and citations in the OCGA are considered the official interpretation of Georgia law, approved by the very legislators who had written that law. The Court found that state courts had characterized OCGA comments as “conclusive statements about statutory meaning and legislative intent,” and had cautioned Georgia lawyers against citing “unofficial” compilations of the code. This too supported a finding that the OCGA had the force of law, according to the Court.
Finally, the 11th Circuit considered whether the process by which the OCGA was approved by the Georgia General Assembly suggested that it had the force of law. The Court found that the key attributes of legislation in the United States are bicameralism and presentment, both of which are present each time the General Assembly reaffirms the OCGA’s status as the “official” codification.
As a result, the 11th Circuit found that all three factors pointed toward the OCGA having the force of law. The Court thus found that since the true author of the OCGA is “the people,” the OCGA is in the public domain and cannot be copyrighted.
Practice Note: In rejecting the Commission’s claims, the 11th Circuit relied heavily on the Commission’s own statements about the import of the OCGA, including its characterization of the OCGA and its annotations as the “official” version of the Georgia code. This reaffirms that a litigant’s own statements are often a Court’s sharpest weapons against it.
Lack of Clarity in Consent Decree Dooms Subsequent Injunction
The US Court of Appeals for the Second Circuit reversed an injunction based on a prior consent order, concluding that the order was insufficiently precise to support an injunction prohibiting conduct by defendants in preparing a movie script. Ronnie Van Zant, Inc. v. Cleopatra Records, Inc., Case No. 17-2849 (2nd Cir. Oct. 10, 2018) (per curiam) (Newman, J, concurring).
This case concerns a dispute over plans for a film relating to the rock band Lynyrd Skynyrd’s plane crash, titled Street Survivors: The True Story of the Lynyrd Skynyrd Plane Crash. Artimus Pyle, a Lynyrd Skynyrd band member and crash survivor, authored the script for the movie, which was produced by Cleopatra Records. The key issue in the case was whether a consent order entered into between Judith Van Zant Grondin (widow of Ronnie Van Zant) and the surviving members of Lynyrd Skynyrd, including Pyle, prevented Pyle and Cleopatra Records from releasing the film.
The district court found that the film violated the consent order because it was ultimately about Lynyrd Skynyrd, evoking the Lynyrd Skynyrd legacy and providing background history on the band. The district court therefore granted plaintiffs a permanent injunction, reasoning that Cleopatra Records was bound by the consent order despite being a non-signatory because it acted “in concert or participation” with Pyle, a signatory to the consent order, to produce the film. Cleopatra Records appealed.
The Second Circuit found the language of the consent order inconsistent or at least insufficiently specific to support an injunction, because it appeared to both permit and prohibit certain actions. For example, the consent order permitted Pyle to make a movie that describes his experiences with Lynyrd Skynyrd and to refer to the band, but prohibited making a movie that is a history of the band. The Court found these two provisions difficult to reconcile and noted that based on the film script, the plane crash is part of the “history” of the band while also being an “experience” Pyle had with the band.
Although it concluded that the district court’s grant of an injunction was not a First Amendment violation, the Second Circuit found that it did implicate free speech concerns, requiring a close look at the rationale underlying the injunction. The Court found that the injunction restricted the actions of an entity that was not a party to the contract alleged to be the source of the restriction—i.e., Cleopatra Records. Even though an injunction may be applied to an entity that acts “in active concert or participation” with anyone bound by the injunction pursuant to Rule 65(d)(2)(C) of the Federal Rules of Civil Procedure, this application is not appropriate in the context of an injunction applied to an entity that contracts with someone arguably bound by the injunction’s terms in order to prepare an expressive work such as a movie. Thus, the Court found that Pyle was permitted to tell his life story, including the Lynyrd Skynyrd plane crash from his perspective, and reversed the district court’s injunction.
Ramble on Back to Court: Led Zeppelin Can’t Shake “Stairway” Infringement Claims
In a dispute alleging that legendary rock band Led Zeppelin copied “Stairway to Heaven” from a song by a different band, the US Court of Appeals for the Ninth Circuit vacated in part a judgment in favor of Led Zeppelin, citing inadequate jury instructions on the substantive copyright issues of protectable musical elements and originality. Michael Skidmore. v. Led Zeppelin, et al., Case No. 16-56057 (9th Cir. Sept. 28, 2018) (Paez, J).
Years after the death of Randy Wolfe, a member of the US rock band Spirit and composer of the 1967 Spirit song “Taurus,” the trustee of Wolf’s estate, Michael Skidmore, brought a suit for copyright infringement against Led Zeppelin, as well as the band’s members, record labels and publishing company, alleging that the opening notes of the hit song “Stairway to Heaven” were copied from and are substantially similar to those in “Taurus.” The case proceeded to a trial in which the jury returned a verdict for the defendants, finding that the two songs were not substantially similar under the “extrinsic test,” which objectively compares the protected areas of a work.
Skidmore appealed, challenging (1) various jury instructions, (2) the district court’s ruling that substantial similarity must be proven using the copyright registration deposit copy, (3) the district court’s ruling that sound recordings could not be played to prove defendants’ access to the song “Taurus,” and (4) certain other evidentiary issues.
The Ninth Circuit began by discussing the copyright owner’s burden to prove copyright infringement and explained that since ownership of the copyright in “Taurus” was not contested, the analysis turned on the second element of infringement, i.e., whether the defendants copied protected aspects of the song’s expression through copying and unlawful appropriation. In cases where there is no direct evidence of copying, the plaintiff can attempt to establish, by circumstantial proof, that defendants had access to the plaintiff’s work and that the two works share substantial similarities with respect to aspects of the plaintiff’s work that are original and therefore protected by copyright.
The Ninth Circuit first addressed the issue of jury instructions and concluded that the district court erred by failing to instruct the jury that the selection and arrangement of unprotectable musical elements are, in fact, protectable. Noting that the extrinsic test for substantial similarity can be difficult to administer in the context of music, the Court concluded that the district court’s failure to instruct the jury that there can be copyright protection in an original combination of otherwise non-protectable music elements was prejudicial.
The Ninth Circuit also sided with Skidmore in his objection to the jury instructions on originality, noting that the district court’s instructions ran contrary to the Ninth Circuit’s 2004 decision in Swirsky, which held that a limited number of musical notes can be protected by copyright. Such an error on these jury instructions was deemed not to be harmless, as it undercut testimony by plaintiff’s expert that Led Zeppelin copied a chromatic scale that had been used in an original manner. Given the prejudice caused by the erroneous and misleading jury instructions on originality, selection and arrangement, the Court vacated the district court’s judgment and remanded for a new trial.
For the benefit of the district court and the parties, the Ninth Circuit also addressed several other evidentiary issues likely to arise again on remand. First, the Court concluded that there was no error in the district court’s holding that the deposit copy of “Taurus,” which consisted of sheet music rather than a sound recording, defined the scope of protectable copyright. Because the 1909 Copyright Act governed the scope of the 1967 copyright registration for “Taurus,” the Court agreed with the district court that Skidmore would have to rely on the sheet music deposit copy instead of a sound recording to prove substantial similarity between “Stairway to Heaven” and “Taurus.”
The Ninth Circuit also concluded that the district court abused its discretion by not allowing a recording of “Taurus” to be played for the purpose of demonstrating defendants’ access to the original work. Given the probative value of allowing the jury to observe band member Jimmy Page listening to the recordings and the relatively low risk of unfair prejudice, the Court found that the sound recording evidence should not have been excluded for the purpose of proving access.
Finally, the Ninth Circuit agreed that the district court was within its discretion not to exclude defendants’ expert testimony because of an alleged conflict of interest. There was no evidence that the expert, who was alleged to have “switched sides” in the dispute, had any confidential information from the first party for which the expert originally compared the “Taurus” and “Stairway to Heaven” recordings.
With these clarifying points, the Ninth Circuit vacated the district court judgment and remanded the case for a new trial.
Failure to Comply with Local Rules Risks Entry of Default Judgment
The US Court of Appeals for the Fifth Circuit upheld the entry of a default judgment against a copyright infringement and trade secrets defendant who ignored several district court orders and warnings regarding compliance with the district’s local rules. Sindhi v. Raina, Case No. 17-11388 (5th Cir. Sept. 25, 2018) (Stewart, J).
Salim Sindhi sued Kunal Raina, a former employee, for allegedly stealing source code information from Sindhi’s online newspaper content management system. In response to Sindhi’s complaint alleging copyright infringement and a violation of the Texas Uniform Trade Secrets Act, Raina filed a motion to dismiss for lack of personal jurisdiction. Raina is an Indian national and a permanent resident of India. In filing his motion, Raina did not comply with three local court rules:
- He did not file a statement of interested persons.
- His lawyer was not admitted to practice before the district court and did not apply for admission pro hac vice.
- He did not retain local counsel.
The district court gave Raina 21 days to comply with these local rules. When the 21 days elapsed without a response from Raina, the district court issued new orders warning Raina that if he did not respond within 14 days, the court would strike his responsive pleadings and enter a default judgment against him. Ultimately, the district court struck Raina’s motion to dismiss and entered an interlocutory default judgment and an interlocutory permanent injunction against Raina.
About five months later, Raina responded with a motion to set aside the entry of default judgment, arguing that it was void under Fed. R. Civ. P. 60(b)(4) because the district court lacked personal jurisdiction over him. The district court denied this motion, finding that Raina had minimum contacts with the forum state in the form of ongoing contractual relationships. The district court also denied Raina’s additional motion to set aside the default judgment under Rule 55(c), and entered a final judgment and corresponding permanent injunction against Raina. Raina appealed.
The Fifth Circuit explained that although entry of a default judgment and denial of motions to vacate default judgments are reviewed for “for abuse of discretion,” even the slightest abuse may justify reversal because of the seriousness of a default judgment.
Preliminarily, the Fifth Circuit rejected Sindhi’s argument that it lacked appellate jurisdiction, because three of the district court orders that Raina challenged were interlocutory. As the Court explained, “an appeal from a final judgment preserves all prior orders intertwined with the final judgment.” The Court found no prejudice to Sindhi in exercising appellate jurisdiction, regardless of whether Raina incorrectly designated the orders he sought to appeal.As to the merits, the Fifth Circuit affirmed the entry of default judgment (and subsequent denial of the motion to vacate it) based on the “well-settled principle” that a district court may enter default judgment due to a party’s failure to comply with local court procedural rules. As for denial of the motion to vacate, the Court affirmed because of Raina’s failure to provide facts in support any of the listed grounds for vacating a judgment under Rule 60(b)(1)-(6).
No Rehearing on No Copyrights for Digital Remasters
The US Court of Appeals for the Ninth Circuit denied a petition for a rehearing en banc, refusing to reconsider its decision that digitally remastered pre-1972 sound recordings are not new copyrighted songs. ABS Entertainment, Inc. v. CBS Corporation, et al., Case No. 16-55917 (9th Cir. Aug. 20 2018).
Since the initial panel decision (IP Update, Vol. 21, No. 19), the Music Modernization Act was signed into law on October 11, 2018. The new law requires streaming services, such as Pandora, to start paying royalties for pre-1972 recordings but does not apply to radio operators, such as CBS. The Court modified its original opinion, omitting several pages of its analysis and rejection of CBS’s argument, and replaced them with cites to the new law.