- Patent / Inequitable Conduct - Erroneous Submission to USPTO Is Not "Good Enough" . . . It Is Inequitable Conduct
- Patents / § 271(a) - Get the Message—Using Offshore Components to Provide Blackberry Service May Avoid Infringing Process Claims, but Not System Claims
- Patents / Written Description - Written Description Requirement for Chimeric Genes
- Patents / Terminal Disclaimer / Inequitable Conduct - A Terminal Disclaimer Does Not Automatically Link Two Patents for Purposes of Inequitable Conduct
- Patents / On-Sale Bar - The On-Sale Bar Train Has Left the Station
- Patent / Federal Procedure / Licensing - The Dangers of the "Most Favored License" Provision
- Patent / Indefiniteness - Plastic Foam Constituents Given in Volume (Rather Than Density) Are Not Indefinite
- Patents / Appellate Jurisdiction - Unadjudicated Unenforceability Counterclaim Precludes Final Judgment
- Patents / Appealable Jurisdiction - Eight Circuit Hews Close to Federal Circuit Line in Deciding Patent Appeal
- Patents / Prosecution History Disclaimer - Federal Circuit Upholds Texas Court Invalidity Judgment
- Patents / Jurisdiction - Presence of a Patent Issue in a Case Based on State Law Does Not, Alone, Create Federal Circuit Jurisdiction
- Trademark / Lanham Act Jurisdiction - First Circuit Establishes Framework for Determining When the Lanham Act Applies Extraterritorially
- Trademarks / TLD Extensions - Generic or Descriptive? How to deal with TLD indicators in trademark applications
- Copyright / Willful Infringement - Summary Judgment Is Not Appropriate for Willful Infringement Where Jury Could Find Otherwise
Patent / Inequitable Conduct
Erroneous Submission to USPTO Is Not “Good Enough” . . . It Is Inequitable Conduct
Contact Paul Devinsky
Addressing the duty of candor imposed on patentees, the U.S. Court of Appeals for the Federal Circuit upheld an inequitable conduct decision based on submission of misleading information to the U.S. Patent and Trademark Office (USPTO) during prosecution of a patent application. Frazier, et al. v. Roessel Cine Photo Tech, Inc., et al., Case Nos. 04-1060, -1092 (Fed. Cir. Aug. 2, 2005) (Linn, J.).
Photographer and filmmaker James Frazier invented a special trick photography lens, which he named “the ‘Z’ lens.” Similar lenses known in the art included “AI” and “L-shaped” lenses. Frazier sought a patent for his “Z” lens on the basis it had superior depth-of-field characteristics.
The patent application encountered a series of rejections, which Frazier repeatedly addressed by arguing his “Z” lens increased the achievable depth of field. In response to the fourth such rejection, Frazier submitted a video “in the interests of demonstrating to the Examiner the features and uniqueness of the optical system of this patent application.” However, many of the demonstrative scenes depicted on the video were shot with the “IA” or “L-shaped” lens, not with the claimed “Z” lens. The district court held the video submission constituted inequitable conduct and held the patent unenforceable.
A holding that a patent is unenforceable due to inequitable conduct requires underlying findings of materiality and intent to deceive the USTPO. On appeal, Frazier challenged both prongs. As for the district court’s finding of materiality, he argued there was insufficient proof to show the examiner was misled by the video since the claimed “Z” lens was capable of producing the shots on the video even though a different type of lens had been used to actually produce the video. The court held that mere submission of the video depicting footage shot with lenses other than the claimed invention constituted a sufficiently material misrepresentation without regard to whether the claimed “Z” lens could have created the same shots.
As for the district court’s finding of intent, even though Frazier had not disclosed that portions of the video were not shot with the claimed lens, he argued he could not have intended to deceive unless he believed the claimed lens was incapable of achieving the depth of field of prior art lenses. Since he believed the claimed invention could have produced the scenes shown in the video, he essentially believed his video submission was “good enough” and was not deceptive. In other words, Frazier argued that a finding of intent would require proof he subjectively believed the video submission was deceptive.
The Federal Circuit roundly rejected Frazier’s argument, pointing out it has “repeatedly said that direct evidence of intent is unavailable in most cases and unnecessary in any event.” In this case, it was enough that Frazier allowed a video to be submitted to the USPTO in order to represent the capabilities of the claimed lens, knowing that portions of the video were shot with a different lens.
Importantly, the Court articulated that its holding does not embrace every instance of an erroneous submission of information to the USPTO with knowledge of the error. “Such conduct may sometimes be properly characterized as gross negligence, which ‘does not itself justify an inference of intent to deceive.’” However, where the false submission is made with knowledge and for the stated purpose of representing the capabilities of the claimed invention, the intent prong is satisfied.
Patents / § 271(a)
Get the Message—Using Offshore Components to Provide Blackberry Service May Avoid Infringing Process Claims, but Not System Claims
By Arlyn L. Alonzo
Withdrawing its December 14, 2004 opinion in this same case, the U.S. Court of Appeals for the Federal Circuit held that, while a process is not practiced “within” the United States unless all the steps are performed in this country, a system may infringe even though a component of the system is located outside the United States. NTP Inc. v. Research in Motion Ltd., Case No. 03-1615 (Fed. Cir. Aug. 2, 2005) (Linn, J.).
NTP Inc. is the owner of patents that integrate electronic mail with radio frequency wireless transmission. NTP sued Research in Motion (RIM), the Canadian maker of the ubiquitous BlackBerry, alleging that the elements of the BlackBerry system infringed its patents.
The district court issued a summary judgment of infringement and entered judgment for NTP, awarding damages totaling $54 million. On appeal, RIM contended it cannot, as a matter of law, be held liable for infringement because a key component of its BlackBerry system, the BlackBerry relay, is located in Canada. The Court was only partly persuaded.
With respect to the system claims, the Federal Circuit looked to the place at which the system as a whole was put into service, i.e., the location where the system is controlled and where there is beneficial use. The Court concluded that locating the BlackBerry relay in Canada did not preclude a finding that RIM infringed NTP’s system claims because RIM’s customers were located in the United States, control of the transmission of the originated information was from the United States and benefits of using the BlackBerry system were within the United States.
On the method claims, however, the Court held that a process is not used “within” the United States as required by § 271(a) unless each of the steps of the method claim is performed within the United States. For the BlackBerry system, one or more of the method steps could be satisfied only by the use of the BlackBerry relay which is located in Canada. Thus, the Federal Circuit concluded that as a matter of law, use of the BlackBerry system could not infringe the asserted method claims.
The Court also concluded that, as a matter of first impression, RIM could not be charged with infringement of the “offers to sell or sells” or “importation” language of § 271(a) insofar as the method claims are concerned because only use of the claimed process is protected.
Patents / Written Description
Written Description Requirement for Chimeric Genes Does Not Include Discussion of Known DNA Sequences Having a Known Function
By Paul Devinsky
In a case stemming from a patent interference between two parties each claiming chimeric cell surface receptors, the U.S. Court of Appeals for the Federal Circuit reversed the Board of Patent Appeals and Interferences (Board), holding there is no per se rule that in order to satisfy the written description requirement, known DNA sequences having known functions must be disclosed in the specification. Rather, the written description requirement must be considered in the context of the claimed invention and the state of knowledge in the relevant art. Capon et al. v. Eshhar et al., Case Nos 03-1480-1481 (Fed Cir. Aug. 12, 2005) (Newman, J.).
In the interference proceeding below, the Board held that neither party’s specification met the written description requirement of 35 U.S.C. §112, ¶1. The patent and application in interference were both directed to the production of chimeric genes designed to enhance the immune response. These genes provide cells with specific cell-surface antibodies in a form that can penetrate diseased sites, such as solid tumors, that were not previously reachable. The Board, citing University of California v. Eli Lilly, Amgen v. Chugai Pharma and Enzo Biochem v. Gen-Probe, held that neither party’s specification provided the requisite description of the full scope of the chimeric DNA or encoded proteins (by reference to knowledge in the art of the "structure, formula, chemical name, or physical properties" of the DNA or the proteins) and held all of the involved claims of both parties invalid. The Board stated that "controlling precedent" required inclusion in the specification of the complete nucleotide sequence of "at least one" chimeric gene and found the claims were broader than the specific examples. Both sides appealed.
The Federal Circuit noted that the specifications of each party described procedures for identifying and obtaining the desired immune-related DNA segments and linking them into the desired chimeric genes. Each party pointed (in its respective specification) to specific examples of chimeric DNA prepared using identified known procedures, along with citation to the scientific literature as to the steps of the preparative method. Moreover, each party argued that "persons experienced in this field would readily know the structure of a chimeric gene made of a first segment of DNA encoding the single-chain variable region of an antibody, and a second segment of DNA encoding an endogenous protein."
The Federal Circuit agreed, noting the "descriptive text needed to meet [the] requirements [of §112, ¶1] varies with the nature and scope of the invention at issue, and with the scientific and technologic knowledge already in existence. The law must be applied to each invention that enters the patent process for each patented advance is novel in relation to the state of the science." In terms of scope of each claim in issue, the Court struck down as "an inappropriate generalization." the Board’s rule that, even where the nucleotide sequences of the component DNA are known, the nucleotide sequences of the chimeric genes must be fully presented.
Rather, the Federal Circuit instructed that "when the prior art includes the nucleotide information, precedent does not set a per se rule that the information must be determined afresh." In terms of the particular claims in issue, the Court noted "the determination of what is needed to support generic claims to biological subject matter depends on a variety of factors, such as the existing knowledge in the particular field, the extent and content of the prior art, the maturity of the science or technology, the predictability of the aspect at issue, and other considerations appropriate to the subject matter." As explained by the Court:
[I]t is not necessary that every permutation within a generally operable invention be effective in order for an inventor to obtain a generic claim, provided that the effect is sufficiently demonstrated to characterize a generic invention.
On the issue of claim scope, the Court noted the Board wrongly rejected all the claims for lack of complete chimeric DNA sequence and remanded the case with instructions that the Board "explore the support for each of the claims of both parties, in view of the specific examples and general teachings in the specifications and the known science."
Patents / Terminal Disclaimer / Inequitable Conduct
A Terminal Disclaimer Does Not Automatically Link Two Patents for Purposes of Inequitable Conduct
By Judith L. Toffenetti, Ph.D.
The U.S. Court of Appeals for the Federal Circuit found that the filing of a terminal disclaimer in related patents does not bind the patents for purposes of unenforceability due to inequitable conduct. Pharmacia Corporation v. Par Pharmaceutical, Inc., Case No. 04-1478, (Fed. Cir. Aug. 10, 2005) (Rader, J.).
At trial, Par admitted infringement of two of Pharmacia’s patents, U.S. 5,422,368 and 5,296,504, and did not assert any invalidity defenses. Instead, Par asserted both patents were unenforceable due to inequitable conduct in one of the patents. During prosecution of the `368 patent and after the `504 patent had issued, Pharmacia filed a declaration in response to a rejection over a prior art disclosure of a genus of compounds that included Pharmacia’s claimed compound. The declaration included inaccurate statements the district court found highly material, which were also found to contradict the declarant’s own publication as well as two Japanese publications cited in the declarant’s publication. The district court found it significant that none of the contradictory publications had been brought to the U.S. Patent and Trademark Office’s (USPTO) attention. The district court found only the `368 patent to be unenforceable due to inequitable conduct. Because Par had admitted infringement of the `504 patent, the court entered judgment for Pharmacia on it and for Par on the `368 patent. Both parties appealed.
The issues on appeal were whether Pharmacia’s actions during prosecution of the `368 patent amounted to inequitable conduct and whether a finding of inequitable conduct in the `368 patent tainted its sibling, the `504 patent.
The Federal Circuit affirmed the finding of inequitable conduct in the `368 patent based on the conflict between the declarant’s statements in his declaration and his prior publication and supporting Japanese articles, which were never reported to the USPTO. The Federal Circuit then turned to the issue of whether the filing of a terminal disclaimer in the `504 patent bound the two patents so as to taint the `504 patent under an infectious unenforceability theory.
The Federal Circuit, noting the strong policies that dictated the creation of the doctrine of co-expiration and co-ownership of related patents, found that beyond their shared expiration date, two terminally disclaimed patents maintain their individuality and are still independently presumed valid. The Federal Circuit distinguished Kingsdown Med. Consultants, Ltd., where the occurrence of inequitable conduct in procuring some of the claims of a patent was held to render the entire patent unenforceable, noting Kingsdown applied only to claims in a single patent. The Court also distinguished Hewlett-Packard Co., where a reissue patent and all of the original claims were held unenforceable due to inequitable conduct that occurred during prosecution of the reissue application, pointing out that the original patent had been surrendered and only the reissue application remained.
The Federal Circuit found the linkage of patents through a terminal disclaimer does not extend inequitable conduct in one patent to another patent that was not also acquired through culpable conduct. The Court affirmed the district court’s finding that the `504 patent is enforceable and infringed by Par.
Patents / On-Sale Bar
The On-Sale Bar Train Has Left the Station
By D. Sean Trainor
The U.S. Court of Appeals for the Federal Circuit affirmed a finding of invalidity under the on-sale bar because the patentee did not control its customer’s field testing, and its customers were not aware they were participating in field testing. Electromotive Div. of General Motors Corp. v. Transportation Sys. Div. of General Elec. Co., Case No. 04-4412 (Fed. Cir. July 28, 2005) (Michel, C.J.).
The Electromotive Division of General Motors Corp. (EMD) developed two types of bearings. In each case, more than a year before filing a patent application, EMD contacted customers and requested the new compressor bearings be used in newly purchased locomotive turbochargers. None of the customers signed a confidentiality agreement, was provided with any design details or was restricted in the manner in which it could use the locomotives containing the patented bearings. EMD brought suit against the Transportation Systems Division of General Electric Co. and Daido Industrial Bearings, Ltd. alleging infringement of its bearings patents. The district court granted summary judgment that EMD’s patents were invalid under the on-sale bar of § 102(b).
Following the U.S. Supreme Court’s decision in Pfaff, the Federal Circuit applies a two-prong test to determine whether a patent claim is invalid due to an on-sale bar. First, the claimed invention must be the subject of a commercial sale. Second, the claimed inventions must be ready for patenting. EMD did not dispute that its bearing inventions were ready for patenting.
With respect to the first prong, the Court applied traditional contract law principles to determine that commercial sales of the patented inventions occurred prior to the critical date. Then, the Court engaged in the objective analysis that requires it to evaluate whether the circumstances of a pre-critical date sale show the sale was primarily for experimentation. The Court enumerated 13 objective indicia it may consider in determining whether a sale was primarily experimental, concluding that control and customer awareness ordinarily must be proven if experimentation is to be found. Here, the Court concluded EMD had not controlled the field testing because, among other things, it did not restrict the use of the test locomotives in any manner and did not attempt to monitor the conductions under which it customers ran the test locomotives. The Court also found criticality to the fact that EMD’s customers were not aware they were field testing the locomotive turbochargers or keeping records regarding the performance of the compressor bearings. In light of these findings, the Court affirmed summary judgment.
Practice Note: To minimize the risk of an on-sale bar, it is best to file a patent application before allowing customers to publicly test a patentable invention.
Patent / Federal Procedure / Licensing
The Dangers of the “Most Favored License” Provision
By Kori Anne Bagrowski
In an interesting turn of events, the U.S. Court of Appeals for the Federal Circuit, applying Fifth Circuit law, reversed a decision allowing a licensee to intervene in a terminated case that directly influenced its royalty payments. Ericsson, Inc. v Interdigital Communications Corporation, et al. v. Nokia Corporation, Case No. 04-1484 (Fed. Cir. Aug. 4, 2005) (Schall, J.).
InterDigital Communications appealed a decision from the district court granting leave to Nokia to intervene in proceedings relating to this previously settled lawsuit between Ericsson and InterDigital and granting Nokia’s motion to reinstate certain previously vacated rulings in the Ericsson-InterDigital suit. InterDigital appealed, and the Federal Circuit reversed.
Ericsson and InterDigital litigated over a group of patents relating to digital wireless telephony for more than a decade. Upon settlement, the parties filed a joint motion to vacate the claim construction and summary judgment orders and to maintain the record under seal. The district court granted the parties’ motion and dismissed the case with prejudice.
While the Ericsson and InterDigital suit was pending, Nokia negotiated a license agreement under the InterDigital patents. The license divided Nokia’s royalty payments into two time periods. In the first period Nokia paid a lump-sum royalty. In the second period, after 2002, Nokia’s royalty obligations were determined by a “most favored license” provision. Under this provision, Nokia agreed the amount owed to InterDigital for 2002 and thereafter would be calculated based on the financial terms of future licenses to InterDigital’s patents taken by certain third parties. In other words, Nokia agreed to pay InterDigital a royalty calculated, in part, on what competitors paid in royalties to InterDigital.
Upon the Ericsson and InterDigital settlement, Ericsson agreed to a license. Subsequently, InterDigital issued a press release announcing its settlement with Ericsson meant Nokia owed InterDigital between $100 and $120 million in royalties for the year 2002 under the InterDigital-Nokia license.
Nokia, under procedures in its license, initiated arbitration proceedings against InterDigital. After the Ericsson-InterDigital suit had been dismissed, Nokia sought to intervene in the case and obtain access to the sealed pleadings and orders. The district court granted Nokia’s request. Shortly thereafter, Nokia sought to reinstate the orders and rulings vacated upon the Ericsson-InterDigital settlement. Again, the district court granted the request, reasoning the rulings affected Nokia’s obligations to InterDigital.
On appeal the Federal Circuit reversed the decision. The Federal Circuit held that because the Ericsson-InterDigital litigation ended before Nokia sought to intervene, Nokia’s motion to intervene was untimely and failed to satisfy the Fifth Circuit requirement that there be an existing suit in which to intervene.
Practice Note: Licensees, beware of royalty obligations determined by a “most favored license” provision. If the licensor is involved in a suit that could directly affect royalty obligations, the licensee must intervene before the parties reach settlement, while there is still an existing suit in which to intervene.
Patent / Indefiniteness
Plastic Foam Constituents Given in Volume (Rather Than Density) Are Not Indefinite
By Paul Devinsky
Reversing a judgment of invalidity under 35 U.S.C. § 112, ¶ 2, the U.S. Court of Appeals for the Federal Circuit has now held that a patent claiming the ingredients for a plastic foam, given in volume, is not indefinite. Marley Mouldings Ltd. v. Mikron Industries, Inc., Case No. 04-1441 (Fed. Cir. Aug. 8, 2005) (Newman, J.).
Marley Mouldings held a patent claiming a material created by combining certain ingredients in proportions cited by “parts (volume).” Marley brought suit against Mikron claiming its process, in which the component substances were defined by weight, not volume. One of the ingredients was wood flour. The parties disagreed as to what density value should be assigned to wood flour in order to convert its measurement from weight to volume. The density was not specified in the patent. The district court ruled the patent was invalid for indefiniteness. Marley appealed.
The Federal Circuit distinguished the present case from those at issue in Honeywell International, noting in Honeywell persons of skill in the polymer chemistry art would be unable to supply the missing melting parameter for the polymeric yarn at issue, and the claims in the Honeywell case were therefore indefinite. Here, the Court found that persons of skill in the art would understand how to measure parts by volume and how to convert weight into volume from bulk density data. As explained by the Court, “§ 112 ¶ 2 is satisfied when the relevant values can be ‘calculated or measured.’”
In the appeal, Mikron further contended that Marley failed to conform to standard practice in the field of polymer processing in providing component measurements by volume not weight. The Court dismissed this contention noting “nonconformity is not of itself indefiniteness.”
Patents / Appellate Jurisdiction
Unadjudicated Unenforceability Counterclaim Precludes Final Judgment
By Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit dismissed the appeal of Enzo Biochem on the basis that since Jen-Probe’s unenforceability counterclaim remained unadjudicated, there was no final decision within the meaning of 28 U.S.C. § 1295(a)(1). Enzo Biochem, Inc. v. Jen-Probe Inc., Case No. 04-1570 (Fed. Cir. July 13, 2005) (Lourie, J.).
The present case arose from a 2002 remand from the Federal Circuit to the district court focusing on the written description requirement of 35 U.S.C. § 112. On remand, the Court considered Jen-Probe’s motion for summary judgment of invalidity on a different ground, the on-sale bar of § 102(b). The district court granted Jen-Probe’s motion for summary judgment on a ground and entered judgment that all the claims of the patent in suit were invalid. After Enzo filed its notice of appeal, Jen-Probe moved to dismiss the appeal, arguing its unadjudicated counterclaim of unenforceability rendered the district court judgment nonfinal.
On appeal, Enzo argued that not only did the district court believe it had finally adjudicated the case, but that when the parties were asked by the district court, in the context of the summary judgment hearings, whether any issues remained, counsel for Jen-Probe answered “no.” While the Federal Circuit found it “regrettable” that Jen-Probe misled the trial judge “with the impression that no claims remained in the case, we have no choice but to take cognizance of the nonfinality created by the unquestioned existence of that counterclaim.”
Patents / Appealable Jurisdiction
Eight Circuit Hews Close to Federal Circuit Line in Deciding Patent Appeal
By Matthew Weil and Louis Polidori*
Relying heavily on Federal Circuit patent law precedent, the U.S. Court of Appeals for the Eighth Circuit has decided one of the first—and, perhaps, one of the last—non-Federal Circuit appeals to address clearly substantive issues arising under the patent laws. Schinzing v. Mid-States Stainless, Inc., Case No. 04-2535 (8th Cir. July 27, 2005) (Wollman, J.).
The Schinzing case originally involved claims for breach of a license agreement. Mid-State counterclaimed for a declaratory judgment of patent invalidity and non-infringement. Because the “well-pleaded” complaint in the case did not raise substantial issues of patent law, Mid-State, following the dictates of the U.S. Supreme Court in Holmes v. Vornado, appealed to the Eighth Circuit Court.
The Eighth Circuit reversed the district court, holding it had failed to apply an element-by-element comparison of patent claims to the prior art references presented at trial, as required by Federal Circuit precedent. The opinion reads in most respects like a run-of-the-mill Federal Circuit opinion and does not appear to do violence to the uniformity of the patent laws, as critics of Vornado might have feared would be the case once the regional circuits began deciding patent appeals.
Although the Schinzing case has not itself borne out the fears of the critics of Vornado, the future of Vornado and non-Federal Circuit jurisdiction over patent appeals is at best uncertain. On June 16, 2005, H.R. 2955 was introduced to legislatively reverse the Vornado decision giving the Federal Circuit jurisdiction over all appeals implicating substantial issues of patent law, whether the issue arose in the “well-pleaded” complaint or in some subsequent pleading.
*Louis Polidori is a summer associate at McDermott Will & Emery LLP and is currently attending the Nova Southeastern University, where he will be receiving his JD in 2006.
Patents / Prosecution History Disclaimer
Federal Circuit Upholds Texas Court Invalidity Judgment
By Matthew Weil
Applying the reissue-recapture rule of § 251, the U. S. Court of Appeals for the Federal Circuit has agreed with the Texas district court of the northern, which held certain claims of a reissue patent were invalid because they sought to recapture subject matter surrendered during prosecution of the original patent application. North Am. Container, Inc. v. Plastipak Packaging, Inc., Case Nos. 04-1306, -1307 (Fed. Cir. July 14, 2005) (Lourie, J.).
North American Container sued Plastipak Packaging and other manufacturers and distributors of blow-molded plastic bottles in the Northern District of Texas for infringing its reissued patent.
The reissued patent issued from a series of continuation applications. During prosecution of the originally filed application, claims were rejected as obvious over prior art, which the patentee distinguished by pointing out that one disclosed a slightly concave base and the other a base “clearly concave in its entirety.” The district court held this statement to be a surrender of subject matter that is not “mostly convex,” thus limiting the construction of most claims. Applying that construction, the district court granted summary judgment of non-infringement in favor of most of the defendants on most claims. It also held certain of the reissue claims invalid for violating the rule against recapture of previously surrendered subject matter.
The Federal Circuit agreed. Applying the recapture rule (on a limitation-by-limitation basis) in a three-step process, the Federal Circuit held the reissue claims are broader in scope than the original patent claims, the broader aspects of the reissue claims relate to subject matter surrendered in the original prosecution, and the reissue claims were not materially narrowed in other respects, toward enlargement, and hence the recapture rule.
Upholding the district court’s claim construction, the Federal Circuit also found non-infringement of most of the claims by most of the defendants.
Patents / Jurisdiction
Presence of a Patent Issue in a Case Based on State Law Does Not, Alone, Create Federal Circuit Jurisdiction
By Karen Laub
The Federal Circuit has declined to exercise jurisdiction over a case where the fact of patent ownership may have had evidentiary significance, but the mere presence of the patent did not require resolution of a substantial question of U.S. patent law. Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., Case No. 04-1452, 2005 U.S. App. LEXIS 14083 (Fed. Cir. July 13, 3005) (Gajarsa, J.).
The University of Texas (UT) allowed a scientist from Nippon Telephone and Telegraph (NTT) to work in a UT facility with the understanding the fruits of his labors while at UT would be the exclusive property of the university. While at UT, the NTT scientist was involved in research on batteries, and UT later obtained a U.S. patent covering this battery research. NTT and its scientist, however, applied for patent protection in Japan themselves. UT sued NTT in state court in Texas, alleging the Japanese patent was based on the battery research performed at UT and that by seeking patent protection in Japan, NTT had misappropriated UT’s intellectual property and breached the agreement. NTT sought to remove the case to Federal District Court, alleging the district court had original jurisdiction under 28 U.S.C. § 1338(a) as the case arose under U.S. patent laws. The district court citing § 1338 denied the plantiff’s motion. The district court subsequently denied NTT’s motion to dismiss under the Foreign Sovereign Immunity Act, and NTT appealed that ruling to the Federal Circuit. The plaintiff sought remand back to the state court.
The issue before the Federal Circuit was whether UT’s state-law claim of tortious interference or the relief sought “necessarily depends on resolution of a substantial question of federal patent law” to give federal district courts jurisdiction over the claim pursuant to 28 U.S.C. § 1338(a), which grants district courts original jurisdiction over actions arising under U.S. patent laws.
The Federal Circuit found no jurisdiction. To prove tortious interference, UT had to establish that NTT’s alleged conduct—improperly claiming ownership of UT’s technology by filing the Japanese patent application—constituted a tort. While the ownership of the Japanese patent might be at issue, the Court found UT’s claim did not implicate any issue (e.g., inventorship, validity or claim construction) related to its U.S. patent. The Court held the mere fact that the U.S. patent could be evidence in support of UT’s allegations was insufficient to invoke the federal patent jurisdiction.
The Court also held that the relief sought—an injunction prohibiting NTT from disseminating information disclosed in UT’s U.S. patent—was not preempted by the patent laws and did not require resolution of a substantial question of U.S. patent law. The Court reasoned that UT’s filing of the U.S. patent application did not extinguish UT’s trade secret claim for misappropriation of property protected under state law at the time of its misappropriation. Accordingly, the Court held there was no federal jurisdiction over the case under § 1338(a).
Litigants planning to sue in federal court in a case that involves patents (e.g., breach of contract or tortious interference) should be careful to craft their claims for relief so U.S. patent law issues (e.g., inventorship, invalidity, infringement or enforceability of a U.S. patent) are essential to the resolution of the action.
Trademark / Lanham Act Jurisdiction
First Circuit Establishes Framework for Determining When the Lanham Act Applies Extraterritorially
By John J. Dabney and Francine Hochberg
Rejecting the approaches of the Courts of Appeals for the Second and Ninth Circuits, the U.S. Court of Appeals for the First Circuit, in a case of first impression, established a new framework for determining when the Lanham Act should be applied extraterritorially. The court held that federal courts will have subject matter jurisdiction under the Lanham Act over the foreign activities of foreign defendants only if the alleged infringing activities have a substantial effect on U. S. commerce when viewed in light of the purposes of the Lanham Act. McBee v. Delica Co., Ltd., Case No. 04-2733 (1st Cir. Aug. 2, 2005) (Lynch, J.).
Cecil McBee is an American citizen and jazz bassist who tours extensively, including in Japan, and has never licensed or authorized the use of his name. McBee sued Delica, a Japanese corporation that owns and operates retail clothing stores throughout Japan under the brand name “Cecil McBee,” alleging Delica violated the Lanham Act. Delica also operates Japanese language websites, which may be accessed internationally. Delica’s corporate policy is to decline orders from the United States, and Delica’s shipping company has never shipped “Cecil McBee” goods outside of Japan. Investigators hired by McBee, however, were able to purchase $2500 in goods from Delica and have the goods shipped directly to the United States.
McBee alleged claims for false endorsement and dilution under the Lanham Act and for injunctive relief, damages and attorneys’ fees. The district court held it lacked subject matter jurisdiction and dismissed all of McBee’s Lanham Act claims. McBee appealed, arguing his claims for an injunction against any sales by Delica and its broadcast of its website into the United States did not constitute extraterritorial applications of the Lanham Act. McBee conceded that U.S. courts lack jurisdiction over his Lanham Act claim for an injunction against Delica’s sales in Japan, but he contended that the district court had extraterritorial jurisdiction over damages claims against those same sales.
The First Circuit affirmed, relying on different reasoning. Determining Delica was not a U.S. citizen but a foreign entity, the court articulated a test for finding Lanham Act jurisdiction over foreign infringing activities by foreign defendants. Analyzing this situation to antitrust cases, the court held the Lanham Act grants subject matter jurisdiction over a Lanham Act claim against a foreign defendant if the plaintiff can show that the defendant’s conduct has a substantial effect on U.S. commerce. A substantial effect exists when there is evidence of economic impact within the U.S. and this impact is of a sufficient character and magnitude to give the United States a reasonably strong interest in the litigation. This “substantial effects” test must be applied in light of the purposes of the Lanham Act: to protect consumers in the U.S. from confusion and to ensure a trademark owner reaps the financial and reputational awards associated with having a desirable name or product.
The court clarified that this test is distinguishable from the Vanity Fair test used by other circuits in that it first considers whether the defendant is a U.S. citizen. If the defendant is a U.S. citizen, the court necessarily has subject matter jurisdiction because a separate constitutional basis for jurisdiction exists for control of activities, even the foreign activities, of a U.S. citizen. Similarly, if the Lanham Act plaintiff seeks to enjoin sales in the United States, there is no need to further engage in the extraterritoriality inquiry because the court has subject matter jurisdiction. But, if the defendant is a foreign national, then the court may proceed to the substantial effects analysis to determine jurisdiction.
The First Circuit’s test also is distinguishable from the Vanity Fair test because it explicitly rejects the notion that a comity analysis is a necessary part of the inquiry into subject matter jurisdiction. The court notes that comity considerations more properly determine whether a court should decline to exercise subject matter jurisdiction it already possesses. Only if the substantial effects test has been satisfied need a court consider issues of comity.
Applying this framework, the First Circuit held that because McBee could not show a substantial effect on U.S. commerce, the court lacked subject matter jurisdiction over McBee’s Lanham Act claims for an injunction against Delica’s postings on its website and for damages based on Delica’s Japanese sales. The court also held that, notwithstanding the fact the court had jurisdiction over McBee’s claims for an injunction against Delica’s sales to consumers inside the U.S., summary judgment properly was granted to Delica because there was no evidence of existing confusion or dilution. Delica’s only sales in the U.S. had been to McBee’s investigators, and there was no evidence Delica otherwise had sold or planned to sell its goods into the U.S. market.
Trademarks / TLD Extensions
Generic or Descriptive? How to deal with TLD indicators in trademark applications
By Jennifer M. Mikulina
The U.S. Court of Appeals for the Federal Circuit has provided guidance for identifying the rare circumstances when the addition of a “top-level domain” (TLD) indicator, such as “.com” or “.net,” can impact the distinctive nature of a trademark and has further refined the analysis of the genus of an applicant’s goods and services. In re Steelbuilding.com, Case No. 04-1447 (Fed. Cir. July 22, 2005) (Rader, J.).
Steelbuilding.com filed an application to register its STEELBUILDING.COM service mark for use in connection with the “sale of pre-engineered metal buildings and roofing systems.” The examining attorney initially refused to register the mark based on descriptiveness. In response, the applicant revised the specification of services to “computerized on-line retail services in the field of pre-engineered metal buildings and roofing systems” and submitted evidence of use of the mark along with evidence the mark had acquired distinctiveness through the applicant’s use. The examining attorney again refused registration, this time claiming the mark was generic and ineligible for registration based on acquired distinctiveness. On appeal, the U.S. Trademark Trial and Appeal Board affirmed the examining attorney’s refusal to register the mark, holding that STEELBUILDING.COM was either generic or highly descriptive, that use of the “.com” term did not provide source-identifying significance and that the applicant did not provide sufficient evidence to show acquired distinctiveness.
The Federal Circuit agreed the STEELBUILDING.COM mark was not eligible for registration on the Principal Register but held the mark was merely descriptive of the services specified in the application, rather than generic. In particular, the Federal Circuit criticized the Board for narrowly construing the genus of the applicant’s services and discounting the ambiguities and multiple meanings in the mark. Finally, the Federal Circuit also held the Board erroneously dismissed the addition of the TLD indicator, despite its expansion of the meaning of “STEELBUILDING.COM.”
The addition of a TLD indicator, such as “.com,” to a descriptive term can create a distinctive mark “only in rare instances,” according to the Federal Circuit. Here, in what the Federal Circuit considers an “unusual case,” use of “.com” in the mark “expanded the meaning of the mark to include goods and services beyond the mere sale of steel buildings. Specifically, the TLD expanded the mark to include internet services that include ‘building’ or designing steel structures on the web site and then calculating an appropriate price before order the unique structure.” Therefore, the Federal Circuit concluded STEELBUILDING.COM is not generic because “steelbuilding” did not define the genus of the applicant’s services, namely, “the building of steel structures,” and because the “.com” in STEELBUILDING.COM “describes a significant feature of applicant’s services, namely, the internet commerce connection.”
Practice Note: Do not discount the TLD indicators that appear in your trademarks. In rare cases, a TLD indicator may expand the meaning of the mark enough to overcome a refusal to register based on the arguably generic nature of the mark.
Copyright / Willful Infringement
Summary Judgment Is Not Appropriate for Willful Infringement Where Jury Could Find Otherwise
By Firasat M. Ali and Arturo E. Sandoval
The U.S. Court of Appeals for the Second Circuit has now held that even though Microsoft Corporation was entitled to summary judgment on its copyright infringement claims against an alleged counterfeiter, Island Software & Computer Services, a decision to grant the software giant $240,000 in statutory damages on grounds that the infringer acted “willfully” was inappropriate. Island Software & Computer Services v. Microsoft, Case No. 04-07744-cv (2nd Cir. June 28, 2005) (Calabresi, J.).
Island, a small software retailer, sold an alleged counterfeit copy of Windows software products to a Microsoft anti-piracy investigator. Microsoft sent Island a cease-and-desist letter. Subsequently, Island sought a declaration of non-infringement of Microsoft’s trademarks and copyrights, and Microsoft filed counterclaims for copyright and trademark infringement under the Copyright Act and the Lanham Act, respectively.
The district court granted Microsoft summary judgment on its copyright and trademark infringement claims and issued an injunction against Island. Based on statutory constraints and “Island’s behavior [which the district court found] amounted to reckless disregard or willful blindness,” the court also ordered $240,000 in damages be paid to Microsoft. Based on the evidence on the record, the Second Circuit affirmed the court’s summary judgment order as to infringement. However, the Second Circuit vacated all remedies awarded to Microsoft and remanded for further proceedings.
In order to prove willfulness under the Copyright Act the plaintiff must show the defendant was actually aware of the infringing activity, or the defendant’s actions were the result of “reckless disregard” for, or “willful blindness” to, the copyright-holder’s rights. Microsoft proffered testimony that Island’s owner, Michael Brunner, was suspicious of his supplier’s credibility as a legitimate provider of Microsoft software due to its inconsistent price fluctuations of merchandise; that Island’s owner had once received an anonymous call from a customer complaining about counterfeit merchandise but failed to investigate the matter; and that none of the products sold by Island were inspected for authenticity. The Second Circuit reasoned that although this might be enough circumstantial evidence to find willfulness, at the summary judgment stage all inferences must be drawn in favor of the non-moving party, Island.
The Second Circuit reasoned a jury could find other reasons existed for Brunner’s lamentation over his supplier’s price fluctuations or the lack of an investigation of an anonymous customer complaint could be discredited by a reasonable merchant. Moreover, the court noted a jury could find that hiring a person with the expertise to inspect all products for authenticity might be “beyond what could be expected of small companies. Thus, the case was remanded for further proceedings on the issue of willfulness.