Patents/Claim Construction - Panel Strays from Plain Meaning Claim Construction Finding Patentee Acted as Lexicographer
Patents/Interference - Satisfaction of Two-Way Interference-In-Fact Test Is a Prerequisite for Jurisdiction Between Interfering Patents
Copyright/DMCA - DMCA Subpoena Power Does Not Extend to ISP Acting Solely as Conduit
Copyright/Trademark/Fair Use - Put Another Shrimp on the Barbie Without Fear of Infringing Mattel’s IP
Patent/Antitrust - Agreement to Defer Market Entry of Generic Drug in Exchange for Payment in Patent-Dispute Settlement Violates Antitrust Laws
Trademark Litigation/Attorney Fee Awards - In Ninth Circuit, Attorney Fees Available for Deliberate Infringement Without Any Showing of Bad Faith
Litigation/Jurisdiction - Holy International Shoe Batman!
Web Only - Trademark/Damages - Circuits Split Over Profits From Innocent Infringement, Gucci Left Holding the Bag
Web Only - Patent/Reexamination - USPTO Issues Final Rules Governing Inter Partes Reexamination
Web Only - Trademarks/Trade Dress/Functionality - “Incontestable” Trade Dress Not Immune from Challenge Based on Functionality
Panel Strays from Plain Meaning Claim Construction Finding Patentee Acted as Lexicographer
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In vacating a decision by a district court that granted summary judgment of non-infringement, the U.S. Court of Appeals for the Federal Circuit held that the prior art definition of the claim term “amorphous” was preferred over the dictionary definition. Kumar v. Ovonic Battery Co., Inc., et al., Case Nos. 02-1551, -1574, 03-1091 (Fed. Cir. Dec. 11, 2003).
The patent-in-suit is directed to a battery that employs a certain alloy to store hydrogen in a rechargeable battery, overcoming the inevitable fracturing associated with repeated recharging. The claimed alloy has a molecular structure that is less ordered than prior art materials, and thus more immune than highly ordered structures to material fracture caused by repeated recharging. The parties disputed the construction of the claim term “amorphous” and whether it should be construed to mean “completely amorphous,” i.e., no ordering of molecules, or, using a prior art definition, be constructed to cover partially crystalline alloys with a long range order less than 100nm. The district court had found that the specification and prosecution history supported the plain meaning of the term “amorphous,” and that the patentees had proposed a definition relying on a prior art reference that was “developed after his patent was filed, and therefore [could not] be taken to describe accurately what he sought to patent.”
On appeal (where the patent owner appeared pro se), the Federal Circuit reversed. In its analysis, the panel (citing Texas Digital) looked to a dictionary to ascertain the plain meaning of the disputed claim term but then considered the alternative definition found in a prior art reference that was cited and extensively discussed during prosecution. The Court reasoned that “although the dictionary can be an important tool in claim construction by providing a starting point for determining the ordinary meaning of a term to a person of skill in the art, ‘the intrinsic record’ can solve ambiguity in claim language or, where clear, trump an inconsistent dictionary definition.” The Court looked at the prior art cited in the patent as intrinsic evidence and further explained that “when prior art that sheds light on the meaning of a term is cited by the patentee, it can have particular value as a guide to the proper construction of the term, because it may indicate not only the meaning of the term to persons skilled in the art, but also that the patentee intended to adopt that meaning.”
The Federal Circuit also considered the patentee’s own lexicography in defining the term “amorphous.” After noting that its precedent will give significance to terms such as “completely” or “normally,” the Court found that in this case the specification and prosecution history did not clearly and deliberately define the term “amorphous” as completely amorphous, and, thus, did not support a construction of the disputed term contrary to the meaning established in the prior art reference. The Court noted that it would be inappropriate to limit a broad definition of a claim term based on prosecution history that is itself ambiguous.
In a concurring opinion, Justice Bryson agreed with the panel, but did so after considering “the totality of the evidence” and indicated that he would have expanded the scope of the remand to determine whether a person skilled in the field of amorphous solids would find the phrase “random atomic orientation” indicative of a particular class of structures, or whether the term is too indefinite to provide any significant guidance as to the bounds of the term “amorphous.”
Satisfaction of Two-Way Interference-In-Fact Test Is a Prerequisite for Jurisdiction Between Interfering Patents
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Reaffirming the two-way test for an interference-in-fact, the U.S. Court of Appeals for the Federal Circuit held that the standard for an interference between two patents, even in a district court § 291 proceedings, should mirror U.S. Patent and Trademark Office (USPTO) regulations. The Court vacated the district court’s priority determination to reconsider remanded proceedings and vacated the priority determination for failure to meet the jurisdictional limitation of interference-in-fact using the proper analysis. Medichem, S.A. v. Rolabo, S.L., Case Nos. 02-1461, 1480 (Fed. Cir. Dec. 23, 2003).
Medichem, S.A. (Medichem) and Rolabo, S.L. (Rolabo) are manufactures of Loratadine, the active antihistamine ingredient in Claritin®. Medichem appealed from a decision of no interference-in-fact under 35 U.S.C. § 291 between claimed inventions of Medichem’s U.S. Patent No. 6,084,100 (the `100 patent) and Rolabo’s 6,093,827 (the `827 patent). Both patents claim a process for the preparation of Loratadine. The claims in the `100 patent claimed the process in the presence of a tertiary amine. The claims in the `827 patent were silent as to this element, but were otherwise substantially the same. The lower court awarded priority to the `100 patent, but found the absence of a tertiary amine in the `827 patent claims to be not obvious over the `100 patent. Medichem appealed.
The Court held that the first step in any district court interference proceeding between two patents is the evaluation of whether an interference-in-fact exists. Establishing the existence of interference-in-fact between two patents is a jurisdictional limitation under § 291. Citing the recently decided case of Eli Lilly & Co. v. Bd of Regents of the Univ. of Wash., the Court reiterated that analyzing the existence of an interference-in-fact under the two-way test is a prerequisite for jurisdiction to make a priority determination. While the USPTO regulations do not bind a district court, the Court noted that a district court must nevertheless define the subject matter of an interference between two patents in the same manner as would the USPTO, which is to apply the two-way test. By USPTO regulation, the underlying analysis for the interference-in-fact inquiry is whether invention A is anticipated by (under § 102) or obviousness (under § 103) invention B, assuming invention B is prior art (step 1) and vice versa (step 2).
The Court held that, properly construed, the claims of the `827 patent could include additional steps, such as tertiary amines, because the claims use the transitional term “comprising.” Based on this claim construction, the Federal Circuit reversed the district court, holding that the species claims of the `100 patent fell within the scope of, and, therefore, anticipated (under § 102), the genus claims of the `827 patent. However, because the lower court made no findings regarding the second leg of the test, i.e., whether invention B is anticipated by or obvious in view of invention A, the court remanded for further determination on whether the genus claims of the `827 patent anticipated or rendered obvious the species claims of the `100 patent.
DMCA Subpoena Power Does Not Extend to ISP Acting Solely as Conduit
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The Digital Millennium Copyright Act (DMCA) does not authorize issuance of a subpoena to an internet service provider (ISP) acting merely as a conduit to allegedly infringing communications that are not stored on the ISP’s servers. Recording Industry Association of America v. Verizon Internet Services, Inc., Case Nos. 03-7015 and 03-7053, 2003 U.S. App. LEXIS 25735 (D.C. Cir. Dec. 19, 2003).
Section 512(h) of the DMCA permits a copyright owner to obtain subpoenas compelling ISPs to disclose the names of subscribers whom copyright owners allege are engaging in copyright infringement. To obtain a subpoena, the copyright owner must file a “notification of claimed infringement” that identifies the copyrighted works that were claimed to have been infringed and the infringing material or activity and providing information reasonably sufficient for the ISP to locate the material “to be removed or access to which is to be disabled” as set forth in Section 512(c)(3)(A)(iii).
The RIAA served subpoenas on Verizon pursuant to Section 512(h), seeking the identity of Verizon subscribers believed to be trading a large amount of copyrighted music via peer-to-peer (P2P) file sharing programs. Verizon refused to comply with the subpoenas, arguing, among other things, that Section 512(h) does not authorize the issuance of a subpoena to an ISP acting solely as a conduit for communications that do not reside on its servers. The district court disagreed and ordered Verizon to comply with the subpoenas and to disclose the identity of its subscribers.
The Court of Appeals reversed, holding that a subpoena may be issued only to an ISP engaged in storing on its servers material that is infringing or the subject of infringing activity. Here, the allegedly infringing content was not stored on Verizon’s servers, but rather resided solely on the subscribers’ computers. As a result, the RIAA could not satisfy the requirements of Section 512(c)(3)(A)(iii), since it was impossible for Verizon to “remove” or “disable access” to materials that did not reside on its servers. Thus, by its terms, Section 512(h) does not authorize the issuance of a subpoena to an ISP acting merely as a conduit for P2P communications not residing on the ISP’s servers.
COPYRIGHT / TRADEMARK / FAIR USE
Put Another Shrimp on the Barbie Without Fear of Infringing Mattel’s IP
By Daniel Foster
The U.S. Court of Appeals for the Ninth Circuit recently upheld a district court’s grant of summary judgment in favor of a photographer who produces and sells photographs containing Mattel’s “Barbie” doll, holding the photographer’s right to free expression and fair use trumped Mattel’s copyright and trademark rights. Mattel, Inc. v. Walking Mountain Prods., Case Nos. 01-56695, 01-57193 (9th Cir. Dec. 29, 2003).
Defendant photographer Tom Forsythe specializes in photographs with social and political overtones. Forsythe developed a series of photographs entitled “Food Chain Barbie,” in which he depicted Barbie in various absurd and often sexualized positions relating to food (including Malted Barbie, Fondue a la Barbie and Barbie Enchiladas). Forsythe considered his work a critique of the objectification of women, as exemplified by Barbie. Mattel did not agree, and sued Forsythe for, among other things, copyright and trademark infringement.
The district court granted Forsythe’s motion for summary judgment, holding the pictures to be a non-infringing “fair use.” In affirming, the Ninth Circuit balanced the four conventional fair use factors: the purpose and character of the use, including whether it is commercial or for nonprofit educational uses; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for, or value of, the copyrighted work.
Regarding the “purpose and character” of the use, the Court noted that Forsythe’s photographs turned Mattel’s image of Barbie as “the ideal American woman” on its head and, thus, qualified as both transformative in their own right and works of parody. (The Supreme Court has recognized that works of parody are, by their nature, sufficiently transformative to fit clearly under the fair use exception.)
Although the second factor, the nature of the copyrighted work, weighed against Forsythe because the copyrighted work was creative, the Court stated that this is a lesser factor in the balancing test.
The Court found that the third and fourth factors weighed in favor of Forsythe, as the extent of the Barbies used by Forsythe was justifiable, and Forsythe’s work was in the “market for adult-oriented artistic photographs of Barbie,” a market Mattel was not likely to enter. Finally, in holding for Forsythe, the Court noted the public benefits of allowing such use, including to encourage artistic freedom and expression and to promote the very creativity and criticism protected by the Copyright Act.
In finding no trademark infringement, the Court followed the rule set out by the Second Circuit in Rogers v. Grimaldi which requires courts to construe the Lanham Act “to apply to artistic works only where the public interest in avoiding consumer confusion outweighs the public interest in free expression.” Here, Forsythe’s use of the Barbie mark was clearly relevant to his work and did not explicitly mislead as to Mattel’s sponsorship of the works. Accordingly, the Ninth Circuit held that the public interest in free and artistic expression greatly outweighed its interest in potential consumer confusion about Mattel’s sponsorship of Forsythe’s works.
Agreement to Defer Market Entry of Generic Drug in Exchange for Payment in Patent-Dispute Settlement Violates Antitrust Laws
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In a case that raised significant policy issues at the intersection of patent and antitrust law, the U.S. Federal Trade Commission (FTC) issued a final order and opinion that agreements between Schering-Plough Corp. (Schering) and two potential generic competitors to settle patent disputes violated antitrust laws by delaying competition. In re Schering-Plough Corp., FTC, Dkt. No. 9297, Dec. 18, 2003.
According to the FTC, under agreements made in the 1990s to settle patent infringement litigation, Schering was paying Upsher-Smith Laboratories (Upsher) and American Home Products (AHP, now Wyeth) to delay the launch of generic versions of K-Dur 20®, a prescription potassium chloride supplement used to treat patients who have low blood potassium levels. Under the agreements, Upsher agreed not to market a generic version of K-Dur 20 until September 2001 and licensed six products to Schering for a total of $60 million, which the FTC staff charged was unrelated to the actual value of the licenses. In a similar agreement, AHP agreed not to market its generic version of K-Dur 20 until January 2004 and licensed two AHP products to Schering for $30 million, a payment also alleged to be unrelated to license value.
The commission focused its factual inquiry on whether Schering had paid $60 million to Upsher for licenses or for delay. After extensive review of the facts, the commission observed that, without “proof of other offsetting considerations, it is logical to conclude that the quid pro quo for the payment was an agreement by the generic to defer market entry beyond the date that represents an otherwise reasonable litigation compromise.” While acknowledging that the challenged agreements were ancillary to the pro-competitive objective of a patent dispute settlement, the commission nevertheless concluded that “the magnitude of the payment was not based on Schering’s evaluation of the Upsher licenses.” Based on the facts of the case the commission held that Schering did in fact pay Upsher for delayed entry, which constituted an unreasonable restrain of commerce.
The FTC’s final order in the case bars Schering and Upsher from participating in any patent-litigation settlement that provides for the company that filed the abbreviated new drug application (ANDA) to receive anything of value—arrangements known as “reverse payments” because the money flows in the opposite direction from royalty payments. Also, the parties may not participate in settlements in which the ANDA filer agrees to refrain from researching, developing, manufacturing, marketing or selling the ANDA product for any period of time. AHP is not subject to the order, based on a consent order to settle the matter. The order generally prohibits litigation settlements under which a generic manufacturer “receives anything of value” and agrees to defer its own research and development, production or sales activities. Carved out, however, is a specific exception for payments to the generic manufacturer that are linked to litigation costs of up to $2 million that are notified to the commission.
In Ninth Circuit, Attorney Fees Available for Deliberate Infringement Without Any Showing of Bad Faith
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The U.S. Court of Appeals for the Ninth Circuit has now held that a showing of bad faith is not necessary for a case to be considered “exceptional” within meaning of 15 U.S.C. § 1117(a), justifying an award of attorney fees. Earthquake Sound Corp. v. Bumper Industries, Case Nos. 00-16532, 01-15121 (9th Cir. Dec. 16, 2003).
Earthquake Sound and Bumper Industries compete in the business of selling car and audio equipment. Earthquake Sound began using the Earthquake mark in 1988. In 1990, Bumper—having learned of Earthquake Sound’s commercial success using the mark—began selling competing products using the mark “Carquake.” Earthquake Sound sued for trademark infringement. Following entry of summary judgment of infringement, the district court awarded Earthquake Sound attorney fees, noting that “Bumper willfully, deliberately, and knowingly infringed” the Earthquake mark.
On appeal, Bumper challenged the fee award, pointing out that there had been no express finding of bad faith and claiming that evidence of good faith should have precluded summary judgment. The evidence of good faith, according to Bumper, included (1) its subjective belief the apparent differences between the two marks would preclude a finding of infringement; and (2) its reliance on the decision by the U.S. Patent and Trademark Office to pass Bumper’s intent-to-use application for “Carquake” on to publication.
The Court largely sidestepped these arguments, noting along the way that the issue of infringement was not close and observing “Bumper only obtained approval to publish its application—there was no adversarial contest regarding infringement.” The Court simply held: “The issue is not necessarily one of bad faith: willful or deliberate infringement will suffice.” The Court focused on the recorded facts to find Bumper’s infringement willful and deliberate because
the “Earthquake” mark was strong and Bumper knew of it for many years before publishing its “Carquake” mark; the parties were in the same market; Bumper was aware of customer confusion; Earthquake Sound repeatedly notified Bumper of the infringement; and Bumper reneged on its agreement to stop using the mark.
In his concurring opinion, Judge Ferguson took pains to underscore his view that “willful and deliberate” in the context of an attorney fee award does not mean voluntary and intentional conduct. He would have made clear that something more than a voluntary act must be shown, such as a deliberate intent to deceive or bad faith.
Holy International Shoe Batman!
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The U.S. Court of Appeals for the Ninth Circuit recently held that a California court had specific personal jurisdiction over a non-U.S. defendant due to a patent infringement case that the defendant had filed in that forum more than 40 years ago. Mattel, Inc. v. Greiner Hausser, Case No. 02-56292 (9th Cir., Dec. 22, 2003).
This case involved the toy giant Mattel who was initially sued by a German company Greiner & Hausser GmbH (G&H) in California in 1961. In that case, G&H alleged that Mattel had discovered the original German Barbie doll (Bild-Lilli) in Switzerland while one of its co-founders was vacationing. G&H alleged that Mattel developed a similar doll named Barbie, now possibly the most famous toy in history. The complaint in that case alleged that Mattel violated G&H’s 1960 patent for the “doll hip joint” employed in the G&H Bild-Lilli doll. After the California lawsuit had been pending for one year the parties filed a stipulation of dismissal with the district court that stated that all claims “were dismissed with prejudice.” Subsequently, in 1964, Mattel and G&H entered into several agreements relating to Barbie and Bild-Lilli whereby Mattel purchased the patent rights to Bild-Lilli.
In May of 2001, G&H filed a lawsuit in Germany against Mattel alleging fraud in connection with the 1964 agreements. Mattel responded by initiating its own action for declaratory relief and injunctive relief in federal district court in California by asking the court to rule on the German matter. The district court held that it did not have personal jurisdiction over G&H and dismissed the suit. Mattel appealed.
In overturning the district court’s decision, the Ninth Circuit applied the three factors of the International Shoe analysis. The court held that the first factor, “purposeful availment,” was met because when G&H filed a lawsuit against Mattel in 1961 it purposefully “availed [itself] of the privilege of conducting [its] activities in California when [they] invoked the benefits and protections afforded by California law.”
The Court also found that the second factor, “relatedness” (the relationship between the claim and the forum related activities), was met under California’s “but for” test, i.e., but for the actions of G&H in the forum Mattel’s claim against G&H would not have arisen. The Court reasoned that even though G&H’s original suit occurred more than 40 years ago, G&H’s 2001 suit in Germany claiming that Mattel violated G&H’s intellectual property rights before the 1964 agreements was premised on the same claims made in the 1961 lawsuit in California. Additionally, the Court noted that if G&H is entitled to file a suit on the same issue it argued more than 40 years ago, there is no reason why that time period “should cost Mattel the ability to file its claim against G&H in California.”
Turning to the third factor, “reasonableness,” the Court articulated seven sub-factors applied in a balancing test to determine whether the exercise of personal jurisdiction over G&H was reasonable. Finding that four of the factors (G&H interjected itself into California by filing suit here in 1961; there was no real burden on G&H of defending in California since it had previously shown an ability to do so; the sovereignty of the United States and integrity of the federal courts in California have a stronger claim than German courts because this matter was first presented in California; and California’s interest in adjudicating the dispute is stronger because federal courts had issued an order of stipulation that was being disregarded by G&H in the German court) favored Mattel, the court determined that exercise of personal jurisdiction was reasonable.
Circuits Split Over Profits From Innocent Infringement, Gucci Left Holding the Bag
By Matthew F. Weil
The U.S. Court of Appeals for the Third Circuit recently split with the Fifth Circuit, holding that a trademark infringer cannot be forced to disgorge profits absent a showing of willful infringement. Gucci America, Inc. v. Daffy’s, Inc., Case No. 02-4046 (3d Cir., Dec. 31, 2003).
Daffy’s, a name-brands-for-less retailer, purchased what it believed to be a shipment of genuine Gucci bags from a reputable importer with whom it had prior dealings. Before Duffy began selling the bags, an employee verified their authenticity by taking one to a Gucci outlet, where she was assured the bag was genuine. Daffy’s also sent a damaged bag back to Gucci, which repaired and returned it.
After selling 588 bags (for a total profit of something less than $85,000), Daffy received a letter from counsel for Gucci informing it that the bags were counterfeit. Daffy responded that it believed the bags were genuine, but nevertheless immediately withdrew the handbags from its stores and adopted a policy of no longer selling Gucci goods.
Not placated, Gucci brought suit, seeking a forced recall of the counterfeit goods, an injunction against future sales, and an award of Daffy’s profits from the sale of the offending bags. The district court denied all three remedies and the Third Circuit affirmed.
In declining to award Daffy’s profits, the Court reaffirmed its own earlier precedent requiring a finding of willfulness before awarding a defendant’s profits under 15 U.S.C. § 1117. The Third Circuit expressly declined to follow the rule set out by the Fifth Circuit in its recent decision in Quick Technologies Inc. v. Sage Group PLC, in which willfulness was held not to be a prerequisite for the award of profits. The Fifth Circuit arrived at its conclusion in Quick Technologies based its reading of a 1999 revision of § 1117. Before the revision, the section permitted an award of profits for “a violation under section 43(a).” The revised statute permits an award for “a violation under section 43(a) or (d) … or a willful violation under section 43(c).”
Adhering to its own earlier, bright-line rule, the Third Circuit declined to infer from the addition of “willful” in § 43(c) that Congress intended to remove willfulness as a prerequisite to an award under § 43(a). Focusing instead on the punitive and deterrent intent behind the § 1117 award of profits and the language of the statute stating that an award of profits must be “subject to the principles of equity,” the Court held good faith an absolute defense to the award of profits.
USPTO Issues Final Rules Governing Inter Partes Reexamination
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Effective January 21, 2004, an inter partes reexamination third party requester has the right to appeal an adverse decision of the Board of Patent Appeals and Interferences (BPAI) to the U.S. Court of Appeals for the Federal Circuit (CAFC). (35 U.S.C. § 315(b)(1)). Also, the patent owner may be a party to an appeal taken by a third party requester and a third party requester may be a party to an appeal taken by the patent owner. (35 U.S.C. § 315(b)(2)).
Analysis of Rules Promulgated Relating to Inter Partes Reexamination Appeal
Rule 1.983(a) provides that “[t]he patent owner or third party requester in an inter partes reexamination proceeding who is a party to an appeal to the [BPAI] and who is dissatisfied with the decision of the [BPAI] may….appeal to the [CAFC].” Moreover, the patent owner or third party requester “may be a party to any appeal thereto taken from a reexamination decision of the [BPAI].”
Steps to Appeal
- Appellant must file notice of an appeal by two months of the date of the decision by the BPAI to the Director and to the Federal Circuit. (Rules 1.983(b)(1), 1.302(d), 1.304(a)(1)).
- Appellant must file a copy of the notice of appeal and pay the requisite fee as provided for in the rules of the Federal Circuit. (Rule 1.983(b)(2)).
- Appellant must serve a copy of the notice on every other party in the reexamination proceeding. (Rule 1.983(b)(3)).
After an appeal has been filed by the third party requester or the patent owner, the other party may file a cross appeal. Rule 1.983(c) covers cross appeals by third parties. Rule 1.983(d) covers cross appeals by the patent owner. The cross appeal must be filed within 14 days of service of the opposing party’s notice of appeal to the Federal Circuit or two months after the date of the decision of the BPAI, whichever is later.
Parties Electing to Participate in Appellant’s Appeal
Absent a cross appeal, the third party or patent owner may simply elect to participate in the appellant’s appeal in order to provide an argument supporting the decision of the BPAI. Rule 1.983(e) provides that a party may elect to participate in an appellant’s appeal within 14 days of service of notice of the appeal or service of notice of a cross appeal. The electing party must timely file a written notice electing to participate in the appellant’s appeal to the Federal Circuit. Rule 1.983(e)(1). Also, the electing party must timely file a copy of the notice at the Federal Circuit, and serve a copy of the notice on every other party in the reexamination proceedings. Rules 1.983(e)(2) and (3).
Defective Notice of Appeal to the BPAI
For a timely filed notice of appeal to be accepted by the Director, the appeal fee must be paid; the appealed claims must be identified; and the notice must be signed by the patent owner, third party requester, or their representative. Rules 1.959(a) through (c). If there is an “inadvertent” failure to comply with any of these requirements, the appellant will be notified and provided a non-extendable one-month period to comply.
Effective Date / Exclusions
In any reexamination proceedings commenced prior to November 2, 2002, the third party requester is precluded from appealing in any manner a decision of the BPAI, and is precluded from participating in any appeal to the Federal Circuit taken by the patent owner.
“Incontestable” Trade Dress Not Immune from Challenge Based on Functionality
By Carrie A. Shufflebarger
Trade dress that has achieved “incontestable” status under the Lanham Act is not immune from challenge based on functionality, even if it achieved such status prior to enactment of the functionality exception to incontestability. Eco Mfg. LLC v. Honeywell Int’l Inc., No. 03-2704, 2003 U.S. App. LEXIS 26430 (7th Cir. Dec. 31, 2003).
Honeywell’s round thermostat formerly was protected by a utility patent and a design patent. After expiration of those patents, Honeywell obtained a federal trademark registration for the trade dress embodied in its thermostat design, which became “incontestable” in 1996 under 15 U.S.C. § 1065.
Eco sought a declaratory judgment that its product did not infringe Honeywell’s trade dress in its round thermostat. Honeywell counterclaimed, seeking preliminary injunctive relief. The district court denied the preliminary injunction, concluding that Honeywell could not demonstrate a likelihood of success on the merits because its round thermostat is functional, thereby precluding trade dress protection.
Honeywell appealed, arguing that the functionality of its thermostat is inconsequential in light of the “incontestable” status of its trade dress. Although 15 U.S.C. § 1064(3) provides that even an “incontestable” mark may be challenged at any time if a mark is or becomes functional, Honeywell argued that this exception did not apply because § 1064(3) was not codified until 1998, and to apply a 1998 law to a trade dress that became incontestable in 1996 would be an impermissible retroactive application of law.
The Seventh Circuit disagreed, holding that while retroactive application of a law alters the legal consequences of completed acts, when an intervening statute authorizes prospective relief, application of the new law in that manner is not retroactive. Since Honeywell was not seeking damages or any remedy on account of conduct that predated enactment of Section 1064(3), but rather seeking prospective injunctive relief, application of the new provision was not retroactive. Thus, the district court did not abuse its discretion in denying Honeywell preliminary injunctive relief based on the alleged functionality of its trade dress.