KSR Obviousness and BMC Joint Infringement Revisited
By Paul Devinsky
Taking the opportunity to speak to a pair of patent doctrines that were the subject of “disruptive” opinions last year (and that are still in the process of being fully fleshed out), a panel of the U.S. Court of Appeals for the Federal Circuit reversed a jury verdict finding infringement and validity, rejecting the theory of joint infringement absent a single party exercising “control or direction” over the infringement and found claims directed to a method of using the internet to conduct a bond auction to be obvious under KSR. Muniauction, Inc. v. Thomson Corp., Case No. 07-1485 (Fed. Cir., July 14, 2008) (Gajarsa, J.).
The patent in suit was directed to electronic methods for conducting “original issuer auctions of financial instruments” over the internet, using a web browser. The claimed system provides an “integrated system on a single server” that allows issuers to run the auction and bidders to prepare and submit bids using a conventional web browser, without the use of other separate software. The system also allows issuers to monitor the progress of the auction and bidders to monitor their bid vis-à-vis the current best bid.
Prior to the critical date of the patent in suit, the defendant Thomson operated an auction system that worked with other bid calculation programs, but which used a proprietary network. Soon after Thomson modified its system to allow issuers to view bids over the internet using a web browser, Muniauction filed suit.
A jury found that the asserted claims were not obvious and that Muniauction was entitled to lost profits damages. The jury also found willful infringement. Thomson’s motions for judgment as a matter of law (JMOL) that the claims were obvious and that Thomson did not infringe the claims under the appropriate standard for joint infringement were both denied. After the Supreme Court issued its decision in KSR, the district court reconsidered the obviousness issue, but again denied Thomson’s motion and issued a final judgment, awarding enhanced damages for willful infringement and a permanent injunction. Thomson appealed.
While the appeal was pending, the Federal Circuit issued its opinions in Seagate (changing the standard of willful infringement from one akin to negligence to that of objective recklessness) and in BMC Resources (holding that where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer). The Federal Circuit granted Thomson’s motion for a stay of the injunction pending appeal, concluding that Thomson had shown a likelihood of success on the merits under BMC Resources.
Considering the obviousness issue as denial of a JMOL, the Federal Circuit reviewed the conclusion of obviousness de novo, but gave deference to the underlying fact finding using the substantial evidence standard. After concluding that Thomson’s prior bid/auction system (Parity®) met all of the method claim limitations as construed by the district court other than the use of a web browser, the court articulated the issue to resolve the legal conclusion of obviousness as “whether it would have been obvious to one of ordinary skill in the art to modify the Parity® system to incorporate conventional web browser functionality.” Citing KSR and posing the question as “whether the improvement is more than the predictable use of prior art elements according to their established functions,” the Federal Circuit concluded that claims in issue were obvious as a matter of law.
The Court noted that since, prior to the critical date, the use of web browsers was well known “the modification of Parity® to incorporate web browser functionality represents a combination of two well known prior art elements to a person of ordinary skill in the art,” especially since the record demonstrated the use of the internet and web browsers to conduct other types of electronic auctions, and quoting KSR for the proposition that “[w]hen a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one.”
The panel reinforced its conclusion, citing to its own post-KSR Leapfrog Enterprises case, “reasoning that ‘[a]pplying modern electronics to older mechanical devices has been commonplace in recent years.’ The record in this case demonstrates that adapting existing electronic processes to incorporate modern internet and web browser technology was similarly commonplace at the time the patent application was filed.”
The Court easily dismissed Muniauction’s argument that the incorporation of web browser functionality into existing electronic prior-art systems was beyond the ability of a person of ordinary skill in the art as of the critical date was filed. Noting that the prior art taught the use of a web browser both to communicate information associated with a bid over an electronic network and to display information associated with a bid, and that the Muniauction patent itself did not specifically teach how to implement the claimed method using a web browser, the Court saw the issue more as an enablement issue (vis-à-vis the patent in suit) then as an obviousness issue.
The Federal Circuit also disposed of Muniauction’s evidence regarding secondary considerations of non-obviousness purportedly directed to initial skepticism followed by praise, copying and commercial success. As to some factors, the Court noted a “lack the requisite nexus to the claims” and as to others that their relationship to the claims was simply too attenuated to overcome the strong prima facie case of obviousness, especially where the specific feature praised was already in the prior art.
The joint infringement issue presented was whether the actions of at least the bidder and the auctioneer may be combined so as to give rise to a finding of direct infringement by the auctioneer. After reminding us that direct infringement requires a single party to perform every step of a claimed method, the panel cast the issue of infringement in this case as turning on whether Thomson sufficiently controls or directs other parties (e.g., the bidder) such that Thomson itself can be said to have performed every step of the asserted claims. Conceding that the district court’s denial of Thomson’s JMOL motion occurred before BMC Resources issued, the Federal Circuit found the jury instruction on joint infringement to have been based on an interpretation of the Federal Circuit’s On Demand standard that was no longer viable and that under BMC Resources, the “control or direction” standard is only satisfied “where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.” Here, the Court concluded that “Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf, and Muniauction has identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders.”
No Inequitable Conduct When Inferences Can Be Drawn Against such Finding
Contact Paul Devinsky
Holding that the applicant is entitled to all reasonable inferences against the finding of inequitable conduct during patent prosecution, the U.S. Court of Appeals for the Federal Circuit reversed the finding of inequitable conduct and the judgment that related patents are unenforceable and vacated the attorneys’ fee award, but affirmed the district court’s findings of obviousness and non-infringement. The Court also affirmed the judgment invalidating all claims of the patents-in-suit given the stipulation between the parties that the case would be tried on a representative claim. Scanner Technologies Corp. v. ICOS Vision Systems Corp. N.V., Case No. 07-1399 (Fed. Cir., June 19, 2008) (Clevenger, Sr. J.).
Scanner Technologies Corp. (Scanner) owns several patents directed to processes to inspect electronic components in semiconductor technology. Scanner brought suit against its competitor ICOS Vision Systems Corp. (ICOS), alleging ICOS infringed the patents. Following an interlocutory appeal for term construction and a bench trial on infringement, validity and enforceability, the district court found the asserted patents unenforceable due to inequitable conduct because, while the applications were pending, Scanner submitted a Petition to Make Special to the U.S. Patent and Trademark Office (USPTO), claiming that actual infringement by ICOS entitled Scanner to expedited application review. The petition contained a statement from the prosecuting attorney that, based on a “rigid comparison” of the alleged method with the claims of the application, the method infringed some of the claims, although the attorney had not actually seen the ICOS device as the district court found the petition suggested. The petition also included statements from the applicant and the assignee regarding ICOS’s product, which the district court found were intended to mislead the USPTO. The USPTO granted Scanner’s petition and advanced the application process. The district court also held the patents invalid for obviousness and not infringed and ruled that related patents, derived from the same common patent were application, unenforceable. Scanner appealed.
The Federal Circuit reversed the finding of inequitable conduct and vacated the award of attorneys’ fees, but affirmed the findings of invalidity for obviousness and non-infringement. The Court stressed that to establish inequitable conduct it is necessary to show by clear and convincing evidence that the patent applicant “(1) either made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the U.S. Patent and Trademark Office.”
The Federal Circuit reiterated “as a matter of law that a false statement in a Petition to Make Special is material if … it succeeds in prompting expedited consideration of the application” and rejected Scanner’s view that inequitable conduct cannot be shown absent a misrepresentation that bears on the patentability of the claims in the application. However, the Federal Circuit held that whenever the evidence offered to show materiality or intent is susceptible to multiple reasonable inferences, it is an error to overlook one inference in favor of another equally reasonable inference. Here the Court concluded that a full review of the record shows that the district court failed to draw all reasonable inferences on the facts relied upon to show materiality. The Federal Circuit found that the record relied on by the district court did not establish by clear and convincing evidence that the statements in Scanner’s petition were misleading because an inferences of intended compliance with USPTO’s regulations could just as easily have been made. Because the Federal Circuit overturned the finding of materiality, the issue of intent to deceive the USPTO became moot, and the Court reversed the determination of inequitable conduct simply on the basis of materiality and thereupon vacated the attorneys’ fee award.
However, the Federal Circuit affirmed the district court’s judgment invalidating all claims in both patents-in-suit based on invalidity of the stipulated representative claim 1, noting that parties can stipulate to anything except jurisdiction.
Practice Note: An assertion of infringement based on a “rigid comparison” in a Petition to Make Special does not necessarily require a physical inspection of the accused product. In some instances a comparison with the accused product may be based entirely on product literature or analysis of source code. Stipulating that the case stands or falls on a representative claim (or, by analogy, on the independent claims) may result in the invalidation of even the narrower (dependent) claims.
Award of Attorneys’ Fees Against Patent Plaintiff Nilssen Was Not Dimmed
By Krista Vink Venegas, Ph.D.
The U.S. Court of Appeals for the Federal Circuit found there was no abuse of discretion in awarding attorneys’ fees to a defendant where the case was exceptional due to inequitable conduct, the frivolous nature of the lawsuit and litigation misconduct. Nilssen, et al. v. Osram Sylvania, Inc., et al., Case Nos. 07-1198, -1348 (Fed. Cir., June 17, 2008) (Lourie, J.; Newman, J., dissenting).
Nilssen sued Osram for patent infringement, originally asserting 26 patents for compact fluorescent light bulbs and ballasts for traditional fluorescent bulbs. Throughout the case, Nilssen added then withdrew several asserted patents. After a bench trial, the district court held the asserted patents unenforceable for improprieties that included misclaiming small entity status and improperly paying small entity maintenance fees, failing to disclose related litigation, misclaiming the priority of earlier filing dates, withholding material prior art and submitting misleading affidavits to the Patent and Trademark Office. Nilssen appealed.
In a split decision, the Court found the district court’s determination that this case was exceptional “supported by evidence, and not unreasonable,” emphasizing the standard of proof — “abuse of discretion.” The Court agreed with Nilssen that “there is no per se rule of exceptionality in cases involving inequitable conduct.” However, the Court disagreed that the inequitable conduct in this case was “benign.” The Court found that inequitable conduct alone can provide the basis for the award due to the intent requirement of the underlying offense, and that inequitable conduct is “per se not benign.” The Court indicated it was neither inclined nor obligated to reconsider the merits of Nilssen’s conduct. Absent evidence of error, the Court deferred to the district court’s determination that Nilssen’s litigation misconduct of providing incorrect and unsigned interrogatory responses, then objecting to their use at trial; failing to formally withdraw 16 patents from the suit until shortly before trial; failing to provide notice to Osram that it was going to waive privilege to defend the allegations of mispayment of fees; and producing documents for the first time at trial were more than simply, “[h]armless oversight of legal formalities or permissibly rough litigation tactics.” Finally, with regard to the grant of fees in this exceptional case, the Court found the “multiplicity [of the patentee’s flaws] indicates why the district judge ruled as he did,” and credited the finding that Nilssen’s testimony about his conduct was ultimately not credible.
In dissent, Judge Newman stated that, “the nature of ‘inequitable conduct’ is not a factor to be weighed in the attorney fee determination.” Given that the Court, in its prior opinion, stated that Nilssen’s conduct was, “not per se unreasonable,” Newman could not agree that the fee-shifting of 35 U.S.C. §285 should be applied.
Reverse Doctrine of Equivalents Remains Unsuccessful
Contact Paul Devinsky
Finding no error in the district court’s holding that the reverse doctrine of equivalents was inapplicable and that claim preclusion prohibited the defendant from raising other validity challenges, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s finding of patent validity and infringement. Roche Palo Alto, LLC v. Apotex, Inc., Case No. 08-1021 (Fed. Cir., July 9, 2008) (Prost, J.).
Acular® and Acular®LS are marketed by Roche Palo Alto, LLC (Roche) for the treatment of eye inflammation. Roche’s patent covering these drug formulations claims a non-steroidal anti-inflammatory drug (NSAID), a quaternary ammonium preservative and the nonionic surfactant octoxynol 40 (O40). The claims were allowed following Roche’s argument that the inclusion of O40 produced the unexpected result of a clear solution.
Apotex filed two Abbreviated New Drug Applications (ANDAs) directed to generic versions of Acular® (ANDA-1) and Acular® (ANDA-2). The concentration of O40 was reduced in the ANDA-2 formulation, but both formulations were within the claimed range of ingredients. Apotex was found to infringe and the patent was held valid during the ANDA-1 litigation. Roche sued based on the ANDA-2 formulation. Apotex asserted the defense of non-infringement under the reverse doctrine of equivalents and further argued that its invalidity arguments should not be barred under the doctrine of claim preclusion.
The Federal Circuit affirmed the lower court’s finding that the defendant failed to establish a prima facie case of non-infringement. Under the reverse doctrine of equivalents, an accused product falling within the literal scope of the claims can be found to not infringe where it is so far changed in principle such that it performs the same or similar function in a substantially different way. Apotex argued that its lower concentration of O40 changed the principle of the ANDA-2 formulation to provide stability in a substantially different way compared to the claimed formulation. The Court declined to consider this argument because Apotex relied exclusively on its expert witness instead of properly determining the principle of the invention from the specification, prosecution history and prior art. The Federal Circuit added that the reverse doctrine of equivalents is rarely applied (and that it has never affirmed a finding of non-infringement under the doctrine).
The Federal Circuit further agreed with the district court that Apotex’s invalidity claims were precluded by earlier litigation. The accused products in both the ANDA-1 and ANDA-2 litigations were encompassed by the claims of the patent, constituting the “same claim” for purposes of claim preclusion. Apotex also argued that, because of KSR, there should be a “change of law” exception to claim preclusion. The Federal Circuit disagreed, stating that although there may be rare exceptions in cases involving “momentous changes in important, fundamental constitutional rights,” KSR involved no such rights.
Federal Circuit Admonishes District Court for Ignoring Explicit Mandate in Original Remand
Contact Paul Devinsky
In a tersely worded opinion, the U.S. Court of Appeals for the Federal Circuit reversed a lower court’s decision to dismiss and remanded with instruction to permit the appellant patentee to proceed with its infringement claim. The panel admonished the lower court for ignoring its explicit instructions in the original remand. Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Solutions, Case No. 07-1575 (Fed. Cir., June 16, 2008) (Clevenger, J.).
Central Admixture Pharmacy Services, Inc. and Dr. Gerald D. Buckberg (together known as CAPS) brought a patent infringement suit against Advanced Cardiac Solutions and Charles Wall (together, ACS) in August 2000. On January 31, 2001, the United States Patent and Trademark Office(USPTO) issued a Certificate of Correction (COC), which effectively broadened the scope of the claim CAPS asserted against ACS. CAPS subsequently stipulated that “if the COC is held valid … Plaintiffs do not intend to pursue their claim for damages against Defendants for infringement of the … patent for any sales of the accused solutions made prior to issuance of the COC.” Thereafter the district court ruled that the COC was valid and entered a Pretrial Order stating that “Plaintiffs have withdrawn their claim that Defendants infringe the ’515 patent claims prior to issuance of the COC.” The district court then entered summary judgment for CAPS against ACS on the issue of infringement of the post-COC claims. ACS appealed the adverse summary judgment to this court.
In its initial reversal of the district court in April 2007, the Federal Circuit held that the COC was invalid and vacated the finding of infringement and remand for a re-determination of infringement under the patent’s original, uncorrected claims.” (See IP Update, Vol. 10, No. 4). On remand, the district court rejected CAPS’s argument that the decision mandated that CAPS be permitted to pursue its claim of infringement of the pre-COC claim by ACS and interpreted the Federal Circuit’s decision to require it to do no more than revisit the possibility of further proceedings under the original version of the claims. The district court held that it had broad discretion whether to amend its earlier pretrial order, which had eliminated the pre-COC infringement issue and concluded that CAPS failed to meet the requirements under Eleventh Circuit law to obtain amendment of the pretrial order. The district court thus dismissed CAPS’s suit with prejudice. CAPS appealed.
On appeal, the Federal Circuit noted that its prior decision and mandate were clear: on remand, the district court was to decide the merits of CAPS’s infringement claim under the pre-COC claims. The Court observed that the district court was not at liberty to “determine” the issue on procedural grounds and that CAPS was entitled to pursue its pre-COC infringement claim. In a tersely worded opinion, the Court added that, in three places in the prior opinion, it explicitly directed the lower court to decide the merits of CAPS’s infringement claim under the pre-COC claim, adding “and to boot we amplified our order in a long footnote enumerating issues related to CAPS’s infringement claim that remained for decision on remand.”
Three-Sentence Legal Conclusion Insufficient for Finding Case Exceptional
By Amanda E. Koenig
The U.S. Court of Appeals for the Federal Circuit issued a soft, but distinct, reprimand to a lower court, for failing in its duty to provide sufficient “reasoning for its determination that a case is exceptional” that the appellate court can “provide meaningful review.” The Federal Circuit also expounded on how a district court should conduct an “exceptional case” analysis when claim meaning is disputed. Innovation Technologies, Inc. v. Splash! Medical Devices, LLC., Case No. 06-CV-0647 (Fed. Cir., June 16, 2008) (Friedman, J.).
Innovation Technologies owns a patent relating to a method of irrigating wounds and sued a competitor, Splash! Medical Devices for infringement. Over a year later, Innovation “(1) executed a covenant not to sue Splash for infringement of the patent by the Splash device involved in [the] case and (2) moved to dismiss its suit with prejudice.” The district court granted the motion. Thereafter, Splash moved for attorneys’ fees under 35 U.S.C. § 285. The district court granted the motion and issued a one-paragraph order, the substance of which was contained in three-conclusory sentences. Innovation appealed.
The Federal Circuit vacated the district court’s order and remanded it “for that court to make additional findings … and, based on those findings, to re-determine the ‘exceptional case’ and ‘attorney fee’ issues.” The crux of the Court’s opinion centered around a trial court’s duty to provide enough findings for a reviewing court to provide a “meaningful review.” Although the parties had presented the district court with five issues that should be resolved in deciding whether exceptional fees were warranted, “[t]he district court made no findings on any of these issues.” The Court concluded, “[w]ithout such findings, we cannot perform our review function. Indeed, the district court did not even indicate, and we cannot tell, upon which of these bases the district court relied in finding this case ‘exceptional.’”
The Federal Circuit also criticized the district court for failing to engage in the underlying claim construction issue. It is interesting to note that claim construction enters the analysis as a corollary to determining the reasonableness of Innovation’s actions. Although a full-blown claim construction was not required, the Court concluded that the district court must “make a sufficient analysis of the claims’ probable meaning to enable it to determine whether Innovation’s proposed construction of the disputed language was sufficiently plausible to justify filing suit based upon that construction.”
How to Avoid Collateral Estoppel on Invalidity: Lose on Other Grounds
By Leigh J. Martinson
The U.S. Court of Appeals for the Federal Circuit allowed a patentee to avoid fatal damage to its pending cases against other defendants by removing the issue of invalidity from a pending appeal, permitting the parties on appeal to consent to a holding of implied license. Baychar, Inc. v. Salomon North America, Inc., Case No. 08-1052 (Fed. Cir., June 18, 2008) (per curiam)
In the latest installment from the Federal Circuit in this marathon litigation involving Baychar and Salomon, Baychar succeeded in keeping its patent valid, at least for now, by agreeing to a holding of non-liability against Salomon based on finding of implied license. This tactic allows Baychar to press its litigation efforts against different defendants in other cases.
After Baychar sued Salomon for patent infringement, the district court entered a judgment of non-liability based on finding that the liability for infringement was precluded on the ground of implied license / patent exhaustion. Additionally, the court held the asserted patent was invalid.
On appeal, Baychar did not contest the finding of implied license and the Federal Circuit affirmed the district court’s finding of non-liability on that ground. During oral argument in the appeal, defendant’s counsel advised the Court that Salomon agreed with Baychar that the court need not reach the issue of invalidity and that defendant agreed that the judgment of invalidity could appropriately be vacated. The Court agreed and vacated the district court’s judgment of invalidity.
Practice Note: The validity of the asserted claim is before the Court in another case, Baychar v. Burton. As a result, while Salomon is free from liability here, the validity of the patent in suit remains unresolved, there by allowing Baychar to continue the proceedings against other defendants.
Patent Rights Agreement Interpreted According to Patent—Not Contract—Law
Contact Paul Devinsky
In factually distinguishing years of Federal Circuit decisions that contracts assigning patent rights should be interpreted under state law, the U.S. Court of Appeals for the Ninth Circuit held that “patent law terms” in an employment contract should be interpreted according to patent law principles. Medtronic, Inc. and Los Angeles Biomedical Research Institute v. White, 526 F.3d 487 (9th Cir., May 15, 2008) (Trott, J.).
Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center is a non-profit medical research institute that allows visiting researchers to use its state-of-the-art equipment and facilities. Dr. Geoffrey White, an assistant professor of surgery at Harbor-UCLA Medical Center, signed a Patent and Copyright Agreement with L.A. Biomed in exchange for enjoying these researching privileges. The agreement read in part:
I understand and agree that every possibly patentable device, process, or product hereinafter referred to as “invention”, which I conceive and/or reduce to practice while employed by the Institute, or during the course of my utilization of any Institute research facilities, shall be examined by the Institute to determine rights and equities therein in accordance with the Institute’s Patent and Copyright Policy.
A dispute arose between the parties concerning whether L.A. Biomed had rights in an aorta graft attachment device invented and developed by Dr. White and his colleague Dr. Weiyun Yu. In particular, the parties disputed whether Dr. White “conceived” and “reduced to practice” the invention within the scope of his Patent and Copyright Agreement with L.A. Biomed.
As it happens, the contract terms “conceive” and “reduce to practice” are terms of art used in patent law. In particular, both of these terms encompass joint inventorship and, under certain circumstances, impute the conception or reduction to practice activities of one co-inventor to the other.
Dr. White’s defense in the district court included arguments that he did not “conceive” the invention or “reduce [it] to practice” during his time at L.A. Biomed, because part of the activities that led to the “conception” and “reduction to practice” of the invention were performed by Dr. Yu. His defense relied upon a contract law interpretation of “conceive” and “reduce to practice” requiring solo inventorship. Under patent law, however, Dr. Yu’s activities could be imputed to Dr. White, undermining his defense.
The district court adopted Dr. White’s proposed jury instructions regarding the meanings of these terms, which did not include the co-inventorship principles of patent law. In short, the jury was instructed that “conceive” and “reduce to practice” are solo activities. The jury found that L.A. Biomed failed to prove that Dr. White had conceived or reduced to practice the invention during his time at L.A. Biomed research facilities and returned a special verdict in favor of Dr. White.
On appeal, the Ninth Circuit considered whether the jury should have been informed of the law of conception and reduction to practice as it relates to patent law. In its analysis, the Court first acknowledged that California law requires agreements regarding patent rights to be interpreted according to standard contract law rather than patent law. However, the Court distinguished the facts of this case from that general principle, finding that the patent-rich language of L.A. Biomed contract “strongly indicates that the parties intended for patent law to be applied when determining patent ownership rights and equities.” For this reason, the Court concluded that the jury should have been instructed on the patent law meanings of the contract terms “conception” and “reduction to practice.” “[W]e conclude that it was clear error for the district court to … exclude the co-inventorship language proposed by L.A. Biomed.”
Intrinsic Evidence Forecloses Broad Claim Construction; Estoppel Forecloses Infringement
Please contact Paul Devinsky
Ruling that patent claims must be read in the context of the written description and the prosecution history, the U.S. Court of Appeals for the Federal Circuit affirmed a construction which limited a claim term to embodiments described in the patent’s specification. RealSource, Inc. v. Best Buy Co., et al., Case No. 07-1387 (Fed. Cir., June 23, 2008) (Young, Distr. J., sitting by designation) (non-precedential).
This case arose from the plaintiff’s appeal of a lower court’s construction of the patent claim term “ID information,” which plaintiff conceded “was dispositive of [the plaintiff’s] entire [infringement] case.” Specifically, the plaintiff appealed the lower court’s construction that the claim term “ID information” means “encrypted data, not including the card number, stored on the debit card in the form of merchant ID, store ID, or terminal ID.”
The patent in suit is directed to “gift cards,” which are issued in lieu of paper gift certificates and permit a card holder to charge purchases against the amount on the card. The plaintiff conceded that under the lower court’s construction, the defendants’ debit cards did not infringe the “ID information” limitation because none of the defendants’ cards were encoded with a merchant ID, store ID or terminal ID. Indeed, the defendants’ cards only contained a card number, data that was explicitly excluded in the lower court’s construction of the term.
On appeal, the Federal Circuit refused the plaintiff’s invitation to adopt a plain meaning construction of the disputed term, ruling that claims must be read in the context of the written description and the prosecution history (not in a vacuum. The Court found that these two sources make clear that plaintiff did not “regard its invention” to encompass cards containing only a card number.
In the prosecution history, the claims originally recited “ID property” rather than “ID information,” but the plaintiff amended the claim after objection from the patent examiner that “property” did not adequately describe something that could be stored electronically. Based on this amendment and the history of it, the Court concluded that “ID property” (as used in the patent specification) and “ID information” (as used in the claims) were interchangeable. After reviewing the specification, the Court concluded that a card number and ID property are not the same and that “a person of ordinary skill in the art would have understood card number to be excluded from the definition of ‘ID information [stored on the debit card].’”
The Court dismissed the plaintiff’s additional argument that claim differentiation compels a broader reading of “ID information.” The plaintiff argued that certain dependent claims, particularly claim “ID information,” is “selected from a group consisting of merchant ID, terminal ID, and store ID.” Thus, the plaintiff argued that the independent claims must be construed to encompass a broader category of “ID information.” The Court rebuffed that contention, ruling that “[i]f a patent’s specification make clear the scope of the claim language, claim differentiation cannot be used to broaden the claim’s scope.” The Court reasoned that “[w]hile claim differentiation may suggest that merchant ID, store ID, and terminal ID are not the only pieces of information that may qualify as “ID information,” it does not mandate that any specific piece of information -such as the card number- be included in the definition of the term.”
Dictionary Definition Cannot Save “Duck Tours” from Being Generic
By Leigh J. Martinson
The U.S. Court of Appeals for the First Circuit lifted a preliminary injunction against Super Duck Tours, finding the phrase “duck tour” was generic and ultimately that there was no likelihood of confusion between BOSTON DUCK TOURS and SUPER DUCK TOURS. Boston Duck Tours, LP. v. Super Duck Tours, LLC., Case Nos. 07-2078, -2246 (1st. Cir., June 18, 2008) (Lipez, J.).
Boston Duck Tours (BDT) began operating its amphibious vehicle tours in 1994 in Boston. BDT owns several state and federal trademark registrations for the composite word mark BOSTON DUCK TOURS and a composite design mark consisting of the company’s name and logo. BDT owns federal registrations on the Principal Register that are subject to disclaimers for the terms “duck” and “tours.”
Super Duck Tours (Super) began its operation in 2001 by offering tours in Portland, Maine. Super began operating in Boston in late 2007. Super has one federal registration for the word mark SUPER DUCK TOURS on the Supplemental Register. In its registration, Super disclaimed the phrase “duck tours,” apart from the mark.
BDT sued Super under the Lanham Act for trademark infringement of both their word mark and composite marks, along with a host of other federal and state law claims. As part of its suit, BDT sought a preliminary injunction against Super. The district court, as part of its Pignons analysis—see Pignons S.A. de Mecanique de Precision v. Polaroid Corp., (1st Cir., 1981)—relied heavily on a dictionary definition of “duck” which, not surprisingly, did not include any reference to amphibious vehicles. The district court thus concluded that the term “duck tours” was not generic in terms of the services in issue. After completing the rest of the eight-part likelihood of confusion analysis, the district court found BDT established a likelihood of success on the merits and enjoined Super from using “duck tours” and the term “duck” in a two-word or three-word trademark in conjunction with “Boston” or “tours.” Super appealed.
In reviewing the determination that “duck tours” was not generic, the First Circuit expressed its appreciation of the time pressure the court faced in ruling on BDT’s preliminary injunction motion, but nevertheless concluded that the district court failed to identify and apply the appropriate legal standard and that as a result, its factual conclusion as to whether “duck tours” was generic was erroneous. The district court was faulted for relying on a single dictionary definition of “duck” rather than the primary significance to the relevant public. Specifically, the First Circuit said district court wrongly overlooked relevant evidence in the record during its analysis of whether the term “duck tour” was generic in terms of the tour service in issue.
As explained by the First Circuit, the district court should have considered, as part of its determination, uses by the media and other third parties, uses within the industry generally and uses by BDT itself. With respect to the media and other third parties, the Court found ample evidence in the Boston media that support the position that the term “duck tours” is generic when referring to amphibious vehicle tours. As to the second type of use, the Court found 36 companies that provide a similar type of tour service, 32 of which use the word “duck” in their name and 10 of which use both “duck” and “tour(s)” in their trade name. Finally, focusing on articles provided by BDT to the district court for the purpose of establishing the fame (and its promotion) of the mark, the Court concluded that BDT’s evidence only proved that BDT itself used the phrase “duck tours” as a common phrase to describe amphibious sightseeing tours generally as opposed to uniquely identifying BDT’s service.
Although the Court went onto address the other Pignons factors, its finding of the phrase “duck tours” as generic essentially sounded the death knell for BDT. For example, turning to the similarity-of-marks inquiry, the Court found that when emphasis is properly placed on “Boston” and “Super” (disregarding the generic term “duck tours”) it is clear that the marks are substantially dissimilar. To the extent any similarity exists between the composite marks, that similarity is a result of each party’s decision to include in its respective marks a generic phrase that describes the service offered.
No "Answer" for Plaintiff Who Abandons a Trademark
By Jeremy T. Elman
The U.S. Court of Appeals for the Eleventh Circuit affirmed a district court’s grant of summary judgment in favor of SmithKline Beecham and GlaxoSmithKline Consumer Healthcare (collectively GSK), the maker of a smoking-cessation product named Commit Lozenges, and rejected trademark infringement and false advertising claims brought by Natural Answers. Natural Answers, Inc. v. SmithKline Beecham Corp., Case No. 06-15084 (11th Cir., June 13, 2008).
Plaintiff Natural Answers tried to enforce its HERBAQUIT LOZENGES mark against GSK's COMMIT LOZENGES mark. Natural Answers sold HERBAQUIT LOZENGES, designed to help satisfy cravings related to smoking, from 2000 to 2002. The lozenges were sold in drugstores, supermarkets, convenience stores and over the internet under the mark HERBAQUIT LOZENGES. In 1994 and 1995, Natural Answers filed unsuccessful federal trademark applications directed to HERBAQUIT LOZENGES. GSK began developing its Commit Lozenges as a stop-smoking aid in 1998 and begin advertising and selling them nationally in 2003 under the federally-registered COMMIT LOZENGES mark.
The Eleventh Circuit held that in order for Natural Answers to bring its trademark claim, as well as its claims for violations of Florida's common law and statutes, it had to own a “valid trademark.” Under the Lanham Act, a trademark is deemed abandoned, and thus no longer valid, “when its use has been discontinued with intent not to resume such use.” According to the Court, Natural Answers had not used its mark in commerce for well over three years, and thus GSK was entitled to a rebuttable presumption that Natural Answers did not intend to resume its use. The burden of production, although not the ultimate burden of persuasion, shifted to Natural Answers to produce evidence that it used the mark or intended to resume use. Natural Answers’ only response was its “bare assertion” by its CEO that it intended to resume use if it could find ample funding and that one company had requested more information about potential funding. The Court stated, “quite simply, that is not enough.” It noted that, if all a party had to do to avoid a finding of abandonment was to aver it never intended to abandon the trademark, then no trademark would ever be abandoned. The Court granted summary judgment on the basis of abandonment of the trademark and consequently granted summary judgment on all counts since they depended on the validity of the trademark, including unfair competition under both federal and Florida law.
Practice Note: Companies should be careful not to let otherwise valid marks become abandoned because they will bear the burden of proving an intent to resume use of the mark if it is not used regularly in commerce.
The Bubble Bursts for O2
By Dr. Amanda Easey and Justin Hill, Ph.D.
The European Court of Justice (the ECJ) ruled that O2 Holdings Limited and O2 (UK) Ltd. could not rely on their trademark rights to prevent the use of bubble imagery in a comparative advertisement by Hutchinson 3G UK Limited, as the advertisement was not misleading and did not cause confusion as to the origin of the services being offered. O2 Holdings Limited and O2 (UK) Ltd v. Hutchinson 3G UK Ltd., Case C-533/06 (ECJ, June 12, 2008).
Cell phone operator H3G’s television advertisement compared H3G’s charges to those of O2, used the name of O2 and contained a backdrop of moving bubbles. O2, which has registered a number of pictorial bubble trademarks, sued H3G in England for trademark infringement.
O2 lost the initial case and appealed. The Court of Appeal asked the ECJ to rule on whether H3G’s use of bubble imagery was an infringement of O2’s rights under European trademark and comparative advertising legislation.
The ECJ held that a trademark proprietor can only prevent the use of an identical or similar sign to a registered trademark under Article 5(1)(b) of the Trade Marks Directive where the following four conditions are satisfied: use is in the course of a trade, use is without consent, use is for goods or services that are identical with or similar to those for which the mark is registered and there is a likelihood that consumers will be confused as to the origin of the goods or services.
The ECJ considered that H3G’s advertisement met the first three of these conditions, but not the fourth. Considered as a whole, the advertisement did not give rise to any likelihood of confusion, was not misleading and did not suggest any form of commercial link between O2 and H3G.
In a press statement on its decision, the ECJ commented “the proprietor of a registered trademark is not entitled to rely on his trade mark rights to prevent the use, by a third party, in a comparative advertisement, of a sign similar to that mark in relation to goods or services identical with, or similar to, those for which that mark is registered where such use does not give rise to a likelihood of confusion on the part of the public.”
Practice Note: Trademark proprietors will be unable to claim infringement of their marks where they are used in honest and fair comparative advertising in Europe, so long as there is no likelihood of confusion by consumers regarding the origin of the goods or services being advertised. Such advertisements must, however, otherwise comply with European legislation on comparative advertising.
Digital Reproductions Have Potential to Receive Copyright Protection
By Sarah Simon
Addressing for the first time whether copyright principles would apply to digital modeling, the U.S. Court of Appeals for the Tenth Circuit affirmed the ruling of the lower court that the plaintiff’s digital models lacked sufficient originality to warrant copyright protection. However, the Court left open the possibility of copyright protection for digital models displaying sufficient originality. Meshwerks v. Toyota Motor Sales, Case No. 06-4222 (10th Cir., June 17, 2008) (Gorsuch, J.).
Meshwerks sued Toyota Motor Sales (Toyota) for copyright infringement alleging that Toyota reused and redistributed, in multiple advertisements and media, digital models of Toyota vehicles created by Meshwerks. Meshwerks had given permission to Toyota for only a single use of its models—as part of one Toyota television commercial.
Toyota moved for summary judgment, asserting that Meshwerks’ digital models lacked sufficient originality to be protected by copyright—specifically, that any original expression found in Meshwerks’ models was attributable to Toyota designers who had conceived of the vehicle designs. The district court agreed and granted summary judgment to Toyota. Meshwerks appealed.
The Tenth Circuit considered the issue of whether Meshwerks, which had received copyright registrations for its digital models, held valid copyrights (giving due regard to the presumption of validity). The Court analogized the digital models to photographs, a form of expression initially met with a degree of skepticism as to whether they meet the originality requirement (i.e., independent creation coupled with at least minimal creativity) to support copyright. Adopting a principle from the landmark Supreme Court’s photography case Burrow-Giles (1884), the Court determined that a digital model may lack originality (and therefore be per se not copyrightable) or may be copyrightable but only to the extent of its original depiction of the subject. The Court introduced a two-step approach to assess originality: first, objective assessment of the models in question; and second, purpose in creating the models. The Court found that Meshwerks’ models displayed no original material, but were merely digital copies of Toyota’s handiwork. Further, Meshwerks intent in developing the models was to copy Toyota’s vehicles, rather than to create or add original expression. The Court indicated that it would have been more likely to find originality had Meshwerks made creative decisions (like an art photographer) regarding lighting, shading, angle or background, instead of depicting unadorned images of Toyota’s vehicles.
While the Court found that Meshwerks held no valid copyright in its models due to insufficient originality, it was quick to note that this new digital medium, like photography, could be employed to create “vivid new expressions fully protectible in copyright law,” thus leaving open opportunity for future digital models to fall under the protection of copyright.
No Matter How You Dress It Up, Pre-Registration Infringement Does Not Justify Statutory Damages or Attorneys’ Fees
By Todd Hales
The U.S. Court of Appeals for the Ninth Circuit overturned an award of statutory copyright damages and attorneys’ fees, finding that since the alleged act of infringement commenced between the first publication and the effective date of copyright registration of the copyright in issue, neither was available to the copyright holder. Derek Andrew, Inc. v. Poof Apparel Corp., Case No. 07-35048 (9th Cir., June 11, 2008) (Wright, J.).
Derek Andrew, Inc’s clothing line (Twisted Heart) includes tags, first used in 2003, with artwork that was not registered with the U.S. Copyright Office until June 15, 2005. Poof sells clothing lines having tags that are nearly identical to the Twisted Heart tags; the difference being the word “Poof!” in place of the words “Twisted Heart.”
Prior to the plaintiff’s copyright registration, a garment bearing Poof’s infringing hangtag came into plaintiff’s possession, resulting in the filing of a complaint for copyright and trademark infringement. Poof failed to respond to the complaint, whereupon a default judgment was entered. In a bench trial for damages, the district court awarded, among other things, $15,000 in statutory damages and almost $300,0000 in attorneys’ fees.
The Ninth Circuit reversed both the damage and attorneys’ fee award, citing 17 U.S.C. § 412(2), which states, “no award of statutory damages or of attorney’s fees … shall be made for any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.” In deciding the issue, the Court reviewed de novo whether the infringement “commenced” before the copyright was registered.
Having never expressly addressed whether § 412 bars an award of statutory damages for post-registration infringements when the initial act of infringement occurred prior to the effective copyright registration date, the Court determined that resolution of this issue depends upon interpretation of the term “commenced” as used in § 412. Agreeing with its sister courts that have considered the issue, the Court held that, for purposes of § 412, infringement “commences” when the first act in a series of acts constituting continuing infringement occurs. In support of its conclusion, the Court cited two policy considerations in support of the statutory encouragement for early filing for registration: denial of statutory damages and attorneys’ fees where infringement takes place before registration, as well as potential infringers’ ability to check the Copyright Office database to avoid infringement.
The Court reversed the award of the statutory damages and remanded the case to the district court to determine to what extent the awarded attorneys’ fees were improperly based on the Copyright Act.
Unlike Inspector Clouseau, Pink Panther Heirs Fail to Stumble on Favorable Theory
By Han (Jason) Yu
The U.S. Court of Appeals for the Ninth Circuit recently affirmed a decision against the heirs of the man who created the Pink Panther and granted copyright ownership to Metro-Goldwyn-Mayer Pictures Inc. Richlin et al. v. Metro-Goldwyn-Mayer, et al., Case No. 06-55307 (9th Cir., June 19, 2008) (Wardlaw, J.).
In 1962, Maurice Richlin and Blake Edwards co-authored the treatment, The Pink Panther, a comedy story featuring the bumbling French police inspector Jacques Clouseau. Richlin and Edwards were subsequently contracted by the Mirisch Corporation on a “work for hire” basis to write the screenplay for the film, The Pink Panther, based on the treatment. Richlin and Edwards also assigned all of their rights in the treatment to Mirisch. The film, The Pink Panther, was released in 1963 and became a smash hit. The Pink Panther film franchise includes nine sequels and numerous other derivative works. Richlin and Edwards received screen credit in the Pink Panther film and many of its sequels. In 1964, Mirisch registered the Pink Panther film copyright with the U.S. Copyright Office; the copyright was renewed in 1991 by MGM as the successor-in-interest to Mirisch. Neither the treatment nor the screenplay for the Pink Panther film were ever separately published or registered with the Copyright Office.
Richlin died in 1990, and his heirs filed this lawsuit against MGM in 2004 claiming that, because Richlin co-authored the treatment that was incorporated into the Pink Panther film, he was also a co-author of the film and therefore a co-owner of the film copyright held by MGM. The district court granted summary judgment for MGM, determining that Richlin was not a co-author of the film because he had no control over the film and there was no evidence of intent—by contract or otherwise—that Richlin and Edwards would be coauthors of the film.
On appeal, the plaintiffs maintained that Richlin became a co-author of the film on account of his co-authorship of the underlying treatment. The Ninth Circuit began its analysis by noting that the 1909 Copyright Act governs the plaintiffs’ co-authorship claim and that, even though the 1909 Act does not expressly define joint work or co-authorship, case law defining joint authorship was well-established under the 1909 Act and was incorporated into and largely unchanged by the current 1976 Act. Accordingly, the Court deemed appropriate to look to the definition of “joint work” in the 1976 Act. Several factors, the Court observed, must be considered in determining co-authorship: whether there was an objective manifestation of a shared intent to be co-authors (a contract evidencing such intent or lack thereof is dispositive); whether the alleged co-author superintended or supervised the work by exercising control; and whether “the audience appeal of the work” can be attributed to both authors, as well as whether “the share of each in its success cannot be appraised.” Upon examining each of these factors, the Court found that no intent for co-authorship was expressed in the contracts between Richlin/Edwards and Mirisch, nor was there any evidence that Richlin had any supervisory powers over the creation of the film. The Court did find the “audience appeal” factor to favor the plaintiffs, but ruled that the two primary factors—intent and control—outweigh that factor. Accordingly, the Court affirmed the district court’s decision that Richlin was not a co-author of the film and had no renewal interest in the copyright of the film. The Court also rejected the plaintiffs’ claim that the securing and renewal of the statutory copyright in the film automatically results in the securing and renewal of the statutory copyright in the treatment. According to the Court, Richlin and Edwards never secured the statutory copyright in the treatment as an independent and separate work in the first place, and consequently there was no right to renew.
Practice Note: This decision reassures Hollywood studios and film producers that, absent clear evidence of intent and creative control, merely contributing a story or screenplay for a movie does not make the contributor a co-author or a joint copyright owner of that movie.
Copyright Infringed when Small Portion of Work Used if It Constitutes “Heart” of Work
By Jeremy T. Elman
Addressing a factually complex copyright dispute and a laches issue of first impression, the Eleventh Circuit affirmed in part and reversed in part a district court ruling that the Church of Scientology (the Church) did not infringe a salesman’s copyrighted book used in the Church’s seminars. Peter Letterese and Assoc., Inc. v. World Institute of Scientology Enterprises, et al., Case No. 05-15129, 2008 U.S. App. LEXIS 14496 (11th Cir., July 8, 2008) (Tjoflat, J.).
The copyrighted work in question is a book by Les Dane entitled Big League Sales Closing Techniques (Big League Sales), which pinpointed effective sales techniques. The book was properly copyrighted and eventually used by the Church of Scientology (the Church) in both public and private courses (respectively the Sales Course and the Church Course) with the permission of its author. The Sales Course materials were widely disseminated, while the Church Course was solely used by the Church in seminars and workshops.
Peter Letterese (an off-and-on member of the Church who at the time of the suit had been excommunicated from the Church) acquired the exclusive rights to Dane’s literary works through a written contract with Dane’s heirs in 1993. Letterese brought suit alleging that the Church was using the works in violation of its copyrights.
Pursuant to general established principles of copyright law, the court required that the plaintiff prove the two basic elements of a copyright infringement claim: a copyrightable work and copying of protected elements of the work. The court first held that although Big League Sales taught well-known sales techniques, any original expression used to describe those techniques falls squarely into the realm of copyright. The court then considered whether the Church copied Big League Sales, and concluded that it did, finding that the Church’s seminars and workshops used the chapter titles and section headings that were the “heart” of the book and that the copying was not de minimus, since the Church expressly taught the content of the book, even without extensive literal copying.
After establishing that there was sufficient evidence to preclude the lower court’s summary judgment of non-infringement, the court considered the Church’s various affirmative defenses, including that it was making a fair use of the work and alternatively, that Letterese’s claims were barred by laches. The court held that the unrestricted and widespread dissemination of the Sales Course—a use that is not transformative of the book and may be regarded as appropriating “the heart” of its expression—namely, the selection and structure of sales techniques and distinctive descriptions thereof, may well usurp the potential market for Big League Sales and derivative works and is not a “fair use.” However, since Letterese stipulated the Church course was not a potential market in competition with his own opportunity, the Church course was deemed a “fair use.”
Finally, in an issue of first impression, the court held that injunctive and prospective relief for copyright infringement was not barred by the equitable doctrine of laches even where the plaintiff “slept on its rights.” While laches could bar damages beyond the three-year statute of limitations, here, where plaintiff sought only prospective relief, it was not barred.
Practice Note: Copying even small portions of a copyrighted work can result in infringement when the infringing work impacts the potential market for the copyrighted work.
No Smoke, No Fire: Clock on Architectural Copyright Claims Tolled Absent a “Triggering” Event
Contact Paul Devinsky
In a recent decision addressing when the clock begins to run on the statute of limitations for actions to enforce copyrights in building designs, the U.S. Court of Appeals for the First Circuit held that public visibility of the structure may not be enough—there must be “smoke” on the horizon (or its equivalent) to recognize the fire. Warren Freedenfeld & Assoc. v. McTigue, Case Nos. 07-1602, -1603 (1st Cir., June 20, 2008) (Selya, Sr., J).
The defendant, a veterinarian, engaged the plaintiff, an architectural firm, to design and build a veterinary hospital. The agreement provided that the architect would remain the owner of the copyrights in all designs. After the relationship soured, the parties went their separate ways and the defendant retained a different firm to complete the hospital. A year later, the building opened its doors. Four more years passed uneventfully before the plaintiff saw a drawing of the hospital’s floor plan in a veterinary trade publication. The plaintiff thereupon obtained a copy of the building plans and filed suit for copyright infringement, now roughly five years after the hospital’s opening. After Freedenfeld filed suit, the defendant moved to dismiss on the grounds that the claim was barred by the three-year statute of limitations governing copyright claims. The district court agreed, holding that under the “discovery rule,” the statute of limitations begins to run when a reasonably diligent person would have learned of the claim; which in this case the district court considered to be no later than the hospital’s public opening five years before. Freedenfeld appealed
The First Circuit reversed. Under the “discovery rule,” it explained, a claim accrues “when a plaintiff knows or has sufficient reason to know” of the conduct giving rise to the claim. The “easy cases,” it observed, are those involving actual knowledge. The analysis becomes more difficult, however, when, as here, the only contention is that the plaintiff “should have known” of the claim. In such a case, the Court held, the question is whether some event sufficient to trigger a duty of diligence had occurred: “The familiar aphorism teaches that where there is smoke there is fire; but smoke, or something tantamount to it, is necessary to put a person on inquiry notice that a fire has started.” Here, the Court found while it was “plausible” that the failed business relationship, public access to the building plans, and the completion of the hospital triggered a duty of diligence, such a conclusion was “not compelled.” “Architects have no general, free-standing duty to comb through public records or to visit project sites in order to police their copyrights.” Thus, the court held “in the absence of some triggering event — some sign of storm clouds gathering on the horizon — [the plaintiff] cannot be charged as a matter of law with inquiry notice.”
Practice Note: While an architect (and, presumably, all similarly-situated copyright owners) has no general duty to review publicly accessible records, the Court reiterated that determining when a claim accrues is “a fact-sensitive enterprise” that turns on “the idiosyncratic circumstances of each individual case.” Copyright owners should thus continue to take reasonable efforts to investigate potential claims and file suit as early as practicable.