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En Banc Federal Circuit Addresses Patent Misuse
Kevin M. Bolan and Stefan M. Meisner
The U.S. Court of Appeals for the Federal Circuit, sitting en banc, has determined that agreements between horizontal competitors to license potentially competing, patented technologies exclusively through a patent pool does not support a patent misuse defense. In its decision the Court concluded that even if the patent pool members refused to license their respective technologies separately, it would not support a patent misuse defense. Princo Corp. v. Int’l Trade Comm’n, Case No. 07-1386 (Fed. Cir. Aug. 30, 2010) (en banc) (Prost, J., concurring, joined by Mayer, J.) (Dyk, J., dissenting; joined by Gajarsa, J.).
The decision narrows the type of conduct that could constitute patent misuse and reaffirms the two elements the Federal Circuit requires an accused infringer to prove to establish the defense: the misuse conduct expands the patent’s physical or temporal scope and has an anticompetitive effect.
In the United States, Philips and Sony developed technology necessary to make recordable compact discs (CD-Rs) and rewritable compact discs (CD-RWs). Philips and Sony licensed this technology through a patent pool that became known as the “Orange Book.” Princo, a licensee, stopped paying its fees and thus invited an infringement suit. Philips, the patent pool’s administrator, subsequently filed suit at the International Trade Commission (ITC). The administrative law judge found that Princo infringed claims of the six patents Philips asserted. Subsequent proceedings before the ITC and the Federal Circuit have focused almost solely on Princo’s patent misuse defenses. Princo appealed.
A divided en banc panel rejected Princo’s patent misuse theory—that Philips (which developed the Raaymakers patents necessary to satisfy Orange Book standards) and Sony (which developed the Lagadec patent technology that was potentially competitive with Raaymakers) agreed not to license the Lagadec patent separately from the pool license to insulate the Raaymakers patents from competition.
In rejecting this patent misuse theory, the majority wrote, “Even if such an agreement [between horizontal competitors] were shown to exist, and even if it were shown to have anticompetitive effects, a horizontal agreement restricting the availability of Sony’s Lagadec patent would not constitute misuse of Philips’s Raaymakers patents or any of Philips’s other patents in suit.”
The majority decision relied on three separate concepts in reaching this result:
- Federal Circuit Precedent—The majority emphasized that the rationale for the patent misuse doctrine is to limit impermissible “leverage”—namely, using the statutory rights conferred by a patent to increase the patent-holder’s power to “obtain a market benefit beyond that which inheres in the statutory patent right.” According to the majority, promoting this principle requires consistent application of both prongs that the Federal Circuit announced in its 1986 Windsurfing decision to assess patent misuse allegations. An accused infringer can successfully invoke the patent misuse defense only by showing that the patent holder “ impermissibly broadened the ‘physical or temporal scope’ of the patent grant with  anticompetitive effect.” The majority concluded that there was no evidence to satisfy either of these standards.
- A “Judge-Made” Doctrine—The majority emphasized its reluctance to endorse Princo’s misuse theory, even if Princo had produced supporting evidence, for three reasons. First, the majority construed the defense narrowly as a “judge-made doctrine that is in derogation of statutory patent rights against infringement.” Second, the majority twice referred to Judge Posner’s 1982 decision in USM v. SPS Technologies, characterizing patent misuse as limited to “a handful of specific practices” and perhaps unnecessary given antitrust remedies for “every practice that could impair competition substantially.” Third, the majority cited 35 U.S.C. § 271(d)(5) as justification for shrinking the types of conduct supporting the patent misuse defense.
- Patent Pools as Pro-Competitive Joint Ventures—Finally, the majority compared patent pools to joint ventures, identifying the efficiencies expected of joint venture conduct and noting the pro-competitive characteristics of such ventures that typically justify imposing full blown, antitrust rule-of-reason analysis to any challenge that the joint venture has engaged in anticompetitive conduct. As a result, the majority concluded the same analytical framework should govern patent misuse claims.
Practice Note: Even if the Federal Circuit had embraced the theory Princo advocated, Princo lacked the evidence to prove it, either as a patent misuse defense or as an affirmative antitrust claim. An accused infringer with a more substantial factual record might be able to prove some enlargement of the patent scope and an anticompetitive effect under traditional rule-of-reason analysis based on conduct similar to that alleged here. This appears to be one reason why Judges Prost and Mayer concurred with the majority’s result, but not its reasoning.
Both the concurring and dissenting opinions criticized the en banc decision for assuming that conduct could support an affirmative antitrust claim, yet fail to constitute patent misuse. The debate among the majority, concurring and dissenting opinions is almost academic as applied to Princo, whose patent misuse claim failed as a matter of fact. However, other litigants might make this debate more concrete by litigating similar issues on more substantial factual records.
The issuance of three opinions in Princo underscores tension between the Federal Circuit and the Supreme Court about an accused infringer’s burden to prove patent misuse as well as the doctrine’s vitality. A majority of the Federal Circuit appears to be increasingly suspicious of the misuse doctrine’s vitality and will apparently require evidence on both of the elements of the patent misuse defense in every case. By contrast, several Supreme Court precedents (as well as decisions from other circuit courts) suggest standards to prove patent misuse are more relaxed than those necessary to prove affirmative antitrust violations.
Princo notwithstanding, participants in patent pools that want to minimize the risk of potential antitrust liability should offer to separately license patented technology even if they have focused their licensing efforts on pool licensing.
I’m from the Government and I’m Here to Help You
The U.S. Court of Appeals for the Federal Circuit reversed a district court ruling in a §292 false marking suit, finding that the plaintiff had standing to sue and that the federal government had a right of intervention. Raymond E. Stauffer v. Brooks Brothers Inc., Case Nos. 09-1428, -1430 and -1453 (Fed. Cir., Aug. 31, 2010) (Lourie, J.).
Stauffer, a patent attorney, purchased a bow tie made by Brooks Brothers and soon after, acting pro se, filed a qui tam action alleging that Brooks Brothers had falsely marked its bow ties with expired patent numbers. The district court dismissed the complaint, finding both lack of standing and failure to allege intent to deceive the public with sufficient specificity. In terms of standing, the district court explained that §292 operates as a statutory assignment of rights by the government; an aspect of standing requires that the government have suffered an injury in fact.
After the district court dismissed Stauffer’s complaint, the government sought to intervene, seeking to protect the constitutionality of §292 (which allows “any person” to sue for damages, so long as the damage award is apportioned between the qui tam claimant and the government). The district court rejected that request, insisting that “[t]he government has no basis to intervene as of right and makes an insufficient showing to warrant permissive intervention.” Stauffer appealed.
Reversing the district court, the Federal Circuit found since the government had standing to enforce §292; Stauffer, as the government’s statutory assignee, also had standing regardless of whether he (personally) suffered injury.
In terms of injury-in-fact, the Federal Circuit explained that under §292, standing does not depend on whether the alleged injury to the United States was proprietary or sovereign, as either would do, and relied on the test set forth in Vermont Agency, which requires a plaintiff to show that it has suffered an injury that is both “concrete and particularized” and “actual or imminent, not conjectural or hypothetical”; that there is a causal connection between the injury and the alleged misconduct; and that the injury will likely be redressed by a favorable decision.
The Federal Circuit also reversed the district court’s denial of the government’s motion to intervene, noting that the government’s interest are not necessarily adequately represented by Stauffer and that, should Stauffer lose, the government would be estopped from suing Brooks Brothers on the same cause. “Even though, as the district court noted, ‘the issue of the government’s ability to bring an action pursuant to §292’ in general was not presented ... the United States’ ability to protect its interest in this particular case would be impaired by disposing of this action without the government’s intervention.”
The case was remanded back to the district court.
Practice Note: On remand, the district court will now consider the merits of Brooks Brothers’ motion to dismiss for failure to state a claim on the basis that the complaint did not allege, with sufficient specificity, the statutorily required intent to deceive (scienter).
Prosecution History Estoppel Should Not Be Extended Beyond What Was Surrendered
Please contact Paul Devisnky
The U.S. Court of Appeals for the Federal Circuit reversed and remanded a declaratory judgment of non-infringement based on the errors in the district court’s claim construction and infringement analysis. Intervet, Inc. v. Merial Ltd., Case No. 09-1568 (Fed. Cir., Aug. 4, 2010) (Prost, J.) (Dyk, J., concurring-in-part, dissenting-in-part). In his dissenting opinion, Judge Dyk, sua sponte, raised the issue of patent eligibility for isolated DNA sequences.
Merial’s patent was directed to “Type II” porcine circovirus (PCV-2) strains that cause post-weaning multisystemic wasting syndrome in pigs. “Type I” (PCV-1) strains were previously known, but were found not to be pathogenic. The specification disclosed five PCV-2 strains. The complete nucleotide sequences of four of the five PCV-2 strains were disclosed and compared with a representative PCV-1 sequence.
The district court construed claims as being limited to the five disclosed strains. The Federal Circuit disagreed, noting that “[s]equences are representative of the scope of broader genus claims if they indicate that the patentee has invented species sufficient to constitute the genera.” The Federal Circuit held that, by disclosing five PCV-2 species and providing a PCV-1 counter-example that does not fall under the claims, Merial had properly defined the scope of the claimed PCV-2 genus.
The Federal Circuit also held that the district court had improperly applied prosecution history estoppel under the doctrine of equivalents. During prosecution, a claim directed to 13 open reading frames (ORFs) of PCV-2 was rejected on the grounds that it “could encompass ORFs from any organism.” Merial disagreed with the examiner, but nonetheless amended the claim by adding the limitation that the ORFs were “of porcine circovirus type II.” The district court determined that this narrowing amendment estopped Merial from asserting that the claim covered other non-claimed PCV-2 ORFs as equivalents. The Federal Circuit disagreed and held that “[s]uch a draconian preclusion would be beyond a fair interpretation of what was surrendered.” According to the Federal Circuit, the proper extent of the estoppel was that Merial was estopped from arguing that ORFs of circoviruses found in other organisms or ORFs of PCV-1 are equivalent to the claimed PCV-2 ORFs, but Merial was not estopped from asserting a non-claimed PCV-2 ORF as an equivalent.
Judge Dyk dissented in part and expressed his opinion that isolated DNA sequences are likely unpatentable subject matter under § 101. Judge Dyk noted that the claims were not limited to use of an isolated DNA in a vaccine or other applications, but were directed to an isolated DNA molecule itself. While the Federal Circuit has upheld the validity of gene patents before, Judge Dyk pointed out that none of the cases directly address the patent eligibility requirement under Section 101. Citing Bilski, Funk Bros., and Chakrabarty, Judge Dyk argued that in order for a product of nature to satisfy § 101, “it must be qualitatively different from the product occurring in nature, with ‘markedly different characteristics from any found in nature.’” Judge Dyk believed that “[i]t is far from clear that an ‘isolated’ DNA sequence is qualitatively different from the product occurring in nature” and that “allowing the patenting of naturally occurring substances” like DNA would “preempt the use by others of substances that should be freely available to the public.”
Location of Future Sale, Not Contract Negotiation, Determines Infringing Offer Under §271
Reversing a district court’s summary judgment of invalidity and non-infringement, the U.S. Court of Appeals for the Federal Circuit held that any objective evidence of nonobviousness must always be considered in evaluating obviousness under § 103(a). The Court further held that a contract between two United States companies for the sale of a patented invention with delivery and performance in the United States constitutes an offer for sale and sale within the meaning of 35 U.S.C. § 271(a). Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., Case No. 09-1556 (Fed. Cir., Aug. 18, 2010) (Moore, J.).
Transocean sued Maersk for infringement of three offshore drilling patents directed to a “dual-activity” rig that allows a single derrick with two advancing stations to perform parallel drilling operations. Maersk argued that the claims were invalid and that its activities did not fall within the scope of § 271(a).
The district court found that the asserted claims were obvious under Section 103(a), in light of two prior art references. Although the Federal Circuit agreed that the two prior art references established a prima facie case of obviousness, it held that the district court erred by failing to consider Transocean’s significant objective evidence of nonobviousness. Transocean presented evidence of industry skepticism, industry praise for Transocean’s dual activity rig, commercial success in its implementation of the dual activity invention and invention success, which caused others to copy it. The Federal Circuit stressed that a district court “must always consider any objective evidence of nonobviousness presented in a case.”
The district court also concluded that Maersk’s activities did not constitute either an offer for sale or sale within the United States under § 271(a) because contract negotiation and execution took place abroad, although the contract was between two U.S. companies and specified performance in the U.S. Gulf of Mexico. The Federal Circuit disagreed holding that an offer made between two U.S. companies to sell a product for delivery and use within the United States constitutes an offer to sell within the United States, regardless of whether it was negotiated or signed within the this country. The Federal Circuit stressed that “[t]he focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.”
Practice Note: To overcome an attack on validity under § 103(a), a party should consider presenting objective evidence of nonobviousness because the Federal Circuit has made clear that district courts must always consider this type of evidence in evaluating the obviousness of a claimed invention. For infringement purposes, companies should be aware that the location of a contemplated sale controls whether there is an offer to sell within the U.S., rather than the location of the contract negotiation or execution.
Indicia of Obviousness: “Simultaneous Invention” a Year After Reduction to Practice
Addressing secondary considerations in an obviousness challenge, the U.S. Court of Appeals for the Federal Circuit held that another invention was a “simultaneous invention” and supplied indicia of obviousness—even though it occurred a year after the earliest possible reduction-to-practice date of the claimed invention. Geo M. Martin Co. v. Alliance Mach. Sys. Int’l, LLC, Case No. 09-1132, -1151 (Fed. Cir., Aug. 20, 2010) (Rader, J.).
Following a trial that resulted in a hung jury, the district court ruled as a matter of law that the patent-in-suit is invalid based on obviousness. The Federal Circuit affirmed. The patent related to an improvement to a bundle breaker, a machine used to separate stacked sheets of corrugated board. Having concluded that the claimed improvement for simultaneously separating multiple stacks of different heights was minimal in view of the prior art machines, the Court turned to secondary considerations. Citing KSR, the Court reiterated that secondary considerations such as commercial success, long felt but unresolved needs and failure of others can shed light on the circumstances surrounding the origin of the subject matter sought to be patented. The Court added that, “[i]n some rare instances, the secondary consideration of simultaneous invention might also supply ‘indicia of obviousness.’”
Relying on the 1925 Supreme Court case of Concrete Appliances, the Court applied the standard that “[i]ndependently made, simultaneous inventions, occurring ‘within a comparatively short space of time,’ are persuasive evidence that the claimed apparatus ‘was the product only of ordinary mechanical or engineering skill.’” The Court, however, noted that it had previously recognized that the statutory patent law governing interferences contemplates “the possibility of near simultaneous invention by two or more equally talented inventors working independently” and that “that occurrence may or may not be an indication of obviousness when considered in light of all the circumstances.”
Here, the claimed invention was reduced to practice as early as 2001. The asserted “simultaneous invention,” the Tecasa machine, met every limitation of every asserted claim of the patent-in-suit and was first known in the United States in June 2002. Rejecting the argument that this timing could not constitute “contemporaneous” invention as a matter of law, the Court held that the inventions were “within a comparatively short space of time,” when compared to the dates of the closest prior art. Specifically, one of the two prior art machines was installed in 1998, while the other one was first sold in 1996. In light of the fact that the claimed invention was allegedly reduced to practice after approximately three and five years, respectively of the prior art machines, the Court found that the invention of the Tecasa machine a year later was “simultaneous.” Accordingly, the Court held that Tecasa machine, “though not determinative of statutory obviousness, [is] strong evidence of what constitutes the level of ordinary skill in the art.”
Intent to Deceive USPTO by Selective Disclosure Requires Actual Knowledge of Withheld Information
Mary Boyle, Ph.D.
In disposing of yet another inequitable conduct case in the lead up to the en banc Therasense case, the U.S. Court of Appeals for the Federal Circuit remanded for factual findings a case about whether a patent agent and an inventor read a brochure that contradicted their statements to the U.S. Patent and Trademark Office (USPTO) about the state of the art, where the brochure was listed in an IDS but the brochure itself was not submitted to the USPTO. Golden Hour Data Sys., Inc. v. emsCharts, Inc., Case No. 09-1306 (Fed. Cir., August 9, 2010) (Dyk, J.) (Newman, J., dissenting). The majority also affirmed a finding of no joint infringement on the grounds that neither defendant exerted the control or direction over the entire process, as required under Muniauction. On the latter issue, Judge Newman, in dissent, argued that Golden Hour effectively (and wrongly) holds that there is no infringement liability if two defendants collaborate to practice all steps of a claim but neither defendant by itself performs each and every step.
The technology-in-suit involved computerized information management for emergency medical transport services by helicopter. The claimed systems provide for integration of data for dispatch and tracking, clinical services and billing the patient.
The application for the patent-in-suit was filed in March 1998. The specification described the invention as the first fully integrated system of its kind. According to the specification, the older AeroMed system did not fully integrate flight information with clinical diagnosis, billing and administrative information. At some time before August 4, 1998, co-inventor Dr. Kevin Hutton (who was also Golden Hour’s chief executive office) provided an undated AeroMed brochure to prosecution counsel, who prepared and submitted an IDS. Hutton said he had obtained the brochure some weeks earlier at a trade show. The inside pages of the brochure—not provided to the USPTO—disclosed that the AeroMed system did in fact have integrated billing functions, contrary to representations made to the USPTO.
The district court found inequitable conduct for failure to disclose the information about billing capabilities in the AeroMed brochure. With respect to materiality, the district court found that the brochure disclosed integration of data and billing. The district court found that the inventive aspect of the patent was billing integration and that Golden Hour’s representations to the USPTO were clearly inconsistent with the information in the withheld brochure. Golden Hour appealed.
The Federal Circuit affirmed the finding of high materiality. However, with respect to intent, the Federal Circuit found that the district court failed to make essential factual findings. If Hutton and Michael Fuller, a senior patent agent working on behalf of Golden Hour, did not know what was in the brochure (even if they did not read the brochure so as to avoid learning the contents), that would merely be gross negligence, which does not satisfy the intent prong of inequitable conduct under Kingsdown. The Federal Circuit stated that the record before it did not compel a finding of intent, although there was ample evidence to support such a finding. However, the Court remanded the case for the district court to make findings as to crucial facts; most important, whether Hutton or Fuller read the brochure.
Judge Newman dissented, stating that the party with the burden of proof had simply failed to meet its burden to prove inequitable conduct, and the case should not be remanded for a second bite at the apple.
Recital of Numerical Range Does Not Preclude Application of Doctrine of Equivalents
Addressing infringement under the doctrine of equivalents, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a grant of summary judgment that the guaifenesin product described by Perrigo’s Abbreviated New Drug Application (ANDA) would not infringe the asserted claims. Adams Respiratory Therapeutics, Inc. v. Perrigo Co., Case No. 10-1246 (Fed. Cir., Aug. 5, 2010) (Moore, J).
Perrigo filed an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA) to market 600 mg guaifenesin extended-release tablets. During reexamination of its U.S. patent directed to extended release formulations of guaifenesin, the U.S. Patent and Trademark Office (USPTO) rejected a claim directed to an extended release product having a Cmax “equivalent” to the Cmax of an immediate release product when dosed as recited in the claim. The USPTO indicated that the claim term “equivalent” was not sufficiently defined under 35 U.S.C. § 112, paragraph 1. Adams indicated in a statement and a declaration that the claim term “equivalent” referred to the FDA’s bioequivalence guidelines.
Relying on Adams’ statements during the reexamination, the district court construed “equivalent” as “within 80% to 125% of the value with which it is being compared, at a 90% confidence interval” (emphasis added), and granted summary judgment of non-infringement to Perrigo. On appeal, the Federal Circuit addressed whether the lower court’s interpretation of the word “equivalent” was correct in encompassing both the FDA’s bioequivalence guidelines and the “confidence interval” that generics must demonstrate to secure FDA approval.
In vacating the district court’s summary judgment of non-infringement, the Federal Circuit construed “equivalent” to require a Cmax that is 80% to 125% of the value to which it is being compared. The panel noted that the range and the confidence interval are independent concepts, explaining that the range reflects a medical decision that a difference in the concentration of the active ingredient in blood will not be clinically significant, while the confidence interval reflects the FDA’s concern that a generic drug consistently match the performance of the branded drug.
The Federal Circuit held that patent infringement does not require bioequivalence and concluded that Adams did not import the 90% confidence interval into its claim. The Court explained that requiring a 90% confidence interval would inappropriately raise the bar for establishing infringement. Instead, Adams must show that it is more likely than not that Perrigo’s ANDA product will have a Cmax within the 80-125% range.
The Court also examined how availability of the doctrine of equivalents is affected by inclusion of the term “at least” in the claim element that the product has an AUCinf of “at least 3500 hr*ng/mL.” The Court noted that it is bound by precedential decisions holding that the doctrine of equivalents can apply to a range, i.e., a numerical limitation in a claim. The Court added that the mere existence of a numerical value or range in a claim, absent more limiting language in the intrinsic record, does not preclude application of the doctrine of equivalents.
Section 112, ¶ 6 Equivalent Must Achieve Function in Substantially the Same Way
Please contact Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit ruled on two companion cases originating out of the United States International Trade Commission (ITC), reversing some findings of infringement and affirming findings of non-infringement. General Protecht Group, Inc. v. Int’l Trade Comm’n, Case No. 09-1378 (Fed. Cir., Aug. 27, 2010) (Dyk, J.) (Newman, J., dissenting) (General Protecht) and Pass & Seymour, Inc. v. Int’l Trade Comm’n, Case No. 09-1338 (Fed. Cir., Aug. 27, 2010) (Prost, J.) (Newman, J., concurring) (Pass & Seymour).
The three patents-at-issue relate to ground fault circuit interrupters (GFCI) found in electrical receptacles commonly located in bathrooms and kitchens. The GFCI receptacles, which can be identified by the “test” and “reset” buttons positioned between the two electrical sockets, are designed to protect people from potentially fatal electrical shocks by cutting off the flow of electricity when the device detects a ground fault.
Pass & Seymour, owner of the three GFCI patents in issue, filed a complaint alleging infringement of its patents at the ITC, seeking to bar the importation into the United States of the allegedly infringing products. At the ITC the administrative law judge (ALJ) issued an initial determination finding violations of §337 relating to all three patents. General Protecht Group, Wenzhou Trimone Science and Technology Electric Co. and Shanghai ELE Manufacturing Corp. (the respondents) petitioned the full ITC for the review of the ALJ’s decision. The ITC upheld the ALJ’s findings in some respects and reversed others, resulting in findings of infringement and non-infringement. Both the respondents and the complainant appealed to the Federal Circuit, leading to the two companion cases.
In General Protecht, the respondents raised numerous issues challenging the ITC’s final determination of infringement. The Federal Circuit, considering the appeal under the standards of the Administrative Procedures Action (de novo for legal determinations and substantial evidence for factual findings), reversed an ITC finding that General Protecht products infringed complainant’s patents. With regard to one of the asserted patents, the Federal Circuit reversed the ITC’s claim construction, finding that the commission improperly relied upon expert testimony, resulting in overly broad claim scope. The Court found that expert testimony in the context of claim construction can be “useful in assisting a court ‘to establish that a particular term in the patent … has a particular meaning in the pertinent field,’” but “cautioned that ‘conclusory, unsupported assertions by experts as to the definition of a claim term are not useful to a court.’” The Federal Circuit found that the accused devices did not infringe under the revised, narrower claim construction.
Another of the asserted patents claimed a device including a “latching means,” which the specification described in mechanical terms. In contrast, one of the accused products used magnetic latches. Applying §112, ¶ 6, the Federal Circuit found that substantial evidence did not support the ITC’s conclusion that the function of the magnetic latch of the accused devices was performed in substantially the same way as the function of the claimed mechanical latch, and therefore the magnetic latch was not equivalent to the claimed latching means.
Judge Newman dissented, arguing the court erred in relying on a prior case involving mechanical and magnetic latches.
In Pass & Seymour, the Federal Circuit affirmed the ITC’s finding that complainant’s asserted patents were not infringed. In this case, one of the asserted patents included a claim term requiring that “the patented device must be configured to trip in response to a signal that the device is properly wired.” The ITC acknowledged that as drafted, the claim “was not perfectly logical and might have been a claim-drafting error.” The Federal Circuit agreed that the plain meaning controlled and the ITC’s interpretation was supported by the specification.
Claim Construction Ruling Cuts Off Biopsy Needle Litigation
Please contact Paul Devinsky
Affirming a grant of summary judgment that two patents covering automated biopsy instruments were not infringed, the U.S. Court of Appeals for the Federal Circuit held that a district court had properly construed the claims and that the properly construed claims did not read on the accused products. Baran v. Medical Device Techs., Inc., Case No. 10-1058 (Fed. Cir., Aug. 12, 2010) (Bryson, J.)
Baran brought a patent infringement action against Medical Devices Technologies, Inc. (MDTech), asserting infringement of two patents related to automated biopsy instruments. The district court construed the terms “detachable” and “releasably” of the first patent to require separation of components “without loss or damage.” The MDTech biopsy instruments were single-use instruments that would be damaged by separation of the components. The court construed the means-plus-function claim language of the second patent to require that a single component retain and release a biopsy guide, finding that the MDTech biopsy instruments used a structure that was substantially different than the structure disclosed in the patent.
The Federal Circuit began its analysis of the claim construction by looking at the language of specification of the first patent-in-suit. The Court noted that two distinct embodiments were present, a single-use device and a reusable device. The specification described the reusable device as having a stylet “detachable engaged” to a support rod in a way that it can be easily removed, and that the cannula is screwed onto a spring guide, so that it may also be easily removed. Conversely, the embodiment showing the single-use device described the stylet as being “adhesively bonded” within a recess of the support rod and the cannula as adhesively mounted within a recess of the spring guide.
Further, the first patent-in-suit only used the term “detachably” within the specification when describing the differences between the reusable embodiment and the single-use embodiment. Thus, the Court determined that the patentee’s use of “detachable” only in conjunction with the reusable embodiment leads to the conclusion that “detachable” requires the “without loss or damage” limitation as determined by the district court. The Federal Circuit also concluded that “releasably” and “detachable” have the same meaning, as the patentee used the terms interchangeably within the specification.
Turning to the second patent-in-suit, the Federal Circuit upheld the district court’s determination that the structure within MDTech’s biopsy instruments was not equivalent to the structure disclosed in the patent. The Federal Circuit ruled that the claim language requires both a release function and a retention function. Comparing how the structures disclosed in the patent and the accused MDTech biopsy instruments accomplish these tasks, the Court determined opposite principles were utilized. The patent-in-suit discloses a rigid lever that pivots on a fulcrum to activate the device, while the accused MDTech biopsy instruments have a tab that flexes to activate the device. Thus, the Court concluded that the structure in the accused biopsy instruments functions in an opposite manner as the structure in the second patent-in-suit and held that a reasonable juror could not find that the accused instruments had equivalent structure.
Practice Note: A claim term described in conjunction with only one of several embodiments disclosed within the specification may be interpreted in a manner that excludes the claim from reading on the other embodiments in the specification.
2010 KSR Examination Guidelines Update
Bernard P. Codd
The U.S. Patent and Trademark Office (USPTO) has now published its 2010 KSR Guidelines Update (Update). 75 Fed. Reg. 53,643 (Sept. 1, 2010). In view of Federal Circuit case law developments since the Supreme Court decision in KSR, the USPTO published the Update to supplement the Examination Guidelines for Determining Obviousness Under 35 U.S.C. 103 in View of the Supreme Court Decision in KSR International Co. V. Teleflex Inc., originally published in 2007. Under the 2007 Examination Guidelines, six rationales were identified for finding claims obvious under 35 U.S.C. § 103, in addition to the teaching-suggestion-motivation (TSM) test. The Update includes a discussion of specific Federal Circuit decisions to clarify when obviousness rejections are proper under the rationales of combining prior art elements according to known methods to yield predictable results, substitution of one known element for another to obtain predictable results and “obvious to try”—choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success. Additionally, the update provides guidance on the consideration of evidence of non-obviousness.
The Update reinforces that each application is to be decided on its own facts and that there is no generic, one size fits all, obviousness rejection. Indeed, the Update acknowledges that in view of KSR, “teaching away from the claimed invention by the prior art, lack of a reasonable expectation of success, and unexpected results … may have taken on added importance.” Regarding the use of common sense to support a conclusion of obviousness, the USPTO cannot resort to “common sense” merely to support an otherwise unsupported finding. Rather, the “common sense” must be explained with “sufficient reasoning.”
In situations where prior art elements are combined according to known methods to yield predictable results but the combined invention involves additional complexity, the Update instructs that the combination may be unobvious unless the examiner can articulate reasoning for including the added feature or steps. In addition, even if a combination is within the skill level of the ordinary artisan, the invention may be unobvious if the problem that suggested the combination was previously unknown.
With regard to substituting one known prior art element for another known prior art element, the Update explains that when determining whether a reference in a different field of endeavor may be used to support a case of obviousness, it is necessary to consider the problem to be solved. Further, while a teaching away is evidence of non-obviousness, if the reference does not teach that the combination is undesirable then it cannot be said to teach away.
Where there are various possible substitutions, the USPTO must have a reasonable expectation of success for trying the claimed substitute. Asserting “obvious to try” alone is not sufficient to maintain an obviousness rejection. In the following situations, merely asserting “obvious to try” is not sufficient: varying all parameters or trying each of numerous possible choices until one possibly arrives at a successful result and exploring a new technology or general approach that seemed to be a promising field of experimentation, where the prior art only gave general guidance as to the particular field of the invention. In addition, when asserting an “obvious to try” rationale, there must be a finite number of predictable solutions, where finite means “small or easily traversed” in the context of the art in question.
The Update also reminded examiners that all rebuttal evidence that is timely presented is to be considered when determining obviousness.
Practice Note: Some patent examiners have erroneously interpreted KSR as supporting obviousness rejections whenever the invention is a combination or substitution of known elements, notwithstanding evidence of non-obviousness. The Update, however, provides examples in which combinations of known prior art elements were held to be unobvious. A review of the factual situations leading to the holdings of nonobviousness would be very useful for rebutting rejections based on a KSR analysis.
Counterfeits Beyond Canal Street—Second Circuit Updates Personal Jurisdiction in the Internet Commerce Context
In a victory to trademark owners battling online counterfeiters, the U.S. Court of Appeals for the Second Circuit held that the sale and shipment into New York of one counterfeit product, coupled with defendant’s interactive website selling counterfeit goods, was sufficient to establish personal jurisdiction over the defendants in the trademark owner’s home state of New York. Chloé v. Queen Bee of Beverly Hills, LLC, Case No. 09-3361 (2d Cir., Aug. 5, 2010) (Hall, J.) In reversing the district court’s refusal to exercise jurisdiction over the defendant located in California, the 2d Circuit noted that its decision was “an update” to “jurisprudence on personal jurisdiction in the age of Internet commerce.”
Plaintiff Chloé is a French fashion house that sells, among other things, designer handbags and purses. Chloé owns the mark CHLOÉ for handbags. Plaintiff Chloé SA is the exclusive U.S. licensee of the CHLOÉ mark for all CHLOÉ-branded goods. After the plaintiff learned that defendant Queen Bee was selling counterfeit CHLOÉ-brand merchandise through Internet websites, an employee at the plaintiff’s law firm ordered an alleged CHLOÉ-brand purse through defendant’s website, which was determined to be counterfeit. The plaintiff sued Queen Bee and its principals in the Southern District of New York for trademark infringement and trademark counterfeiting.
Simone Ubaldelli, one of Queen Bee’s principals and a California resident, moved to dismiss the case against him on the basis that the court lacked personal jurisdiction. Ubaldelli argued that the lone sale and delivery of a counterfeit CHLOÉ purse to the plaintiff’s investigator was a “manufactured contact” that could not support personal jurisdiction in New York. The district court granted Ubaldelli’s motion. Although the evidence showed that Queen Bee had sold at least 52 separate products to New York customers, the court determined that personal jurisdiction did not exist because those products were sold under brands other than CHLOÉ, e.g., Gucci, Prada and Fendi. The court noted that the defendants’ sales of non-CHLOÉ brand merchandise constituted purposeful availment of New York for “some business activity,” but did not satisfy the minimum contacts requirement. The court explained that the defendants’ sales of non-CHLOÉ merchandise were insufficiently related to the plaintiff’s claims to exercise personal jurisdiction because those sales were not for the specific purpose of selling CHLOÉ-brand handbags, the activity upon which the plaintiffs’ complaint was based. Thus, the district court held that the defendants’ sale of a simple CHLOÉ-brand handbag to the plaintiffs’ investigator did not satisfy the minimum contacts required to exercise personal jurisdiction. The plaintiff appealed.
The Second Circuit reversed, finding that the district court had construed the nexus requirement for personal jurisdiction too narrowly when it determined that defendants’ relevant contacts with New York were limited to the single sale of a counterfeit CHLOÉ handbag. The Court explained that the nexus requirement “merely requires” a cause of action to “relate” to a defendant’s minimum contacts with the forum. Thus, the defendants’ sales of non CHLOÉ-brand merchandise to New York customers should have been considered as contacts. Further, the Court noted that the defendants’ sale of a counterfeit CHLOÉ handbag was not insignificant, as it showed “part of a larger business plan purposefully directed at New York consumers.”
Viewed in their totality, the Second Circuit found that the defendants’ “highly interactive” website that offered bags to New York customers and sales of more than 50 bags to New York customers constituted purposeful availment to satisfy the minimum contacts requirement of the constitution and the New York long-arm statute. The Second Circuit found jurisdiction to be appropriate in New York “because Queen Bee has developed and served a market for its products here.”
Recognizing that the defendants’ website was directed to consumers throughout the United States, the Court noted “that [although] Queen Bee’s business attempted to serve a nationwide market [that] does not diminish any purposeful contacts with Queen Bee’s New York consumers.”
Trademark Registration Cancelled Because of Functionality Rather than a Distinctive Appearance
Ulrika E. Mattsson
The U.S. Court of Appeals for the Seventh Circuit confirmed that the construction of a folding chair that was designed to optimize the chair’s strength-to-weight ratio, rather than create a distinctive appearance that would help consumers distinguish it from other folding chairs, was not a valid trademark. Specialized Seating, Inc. v. Greenwich Industries, LP, Case Nos. 07-1435 and 10-2670 (7th Cir., Aug. 11, 2010) (Easterbrook, J.)
Greenwich had a trademark registration for a folding chair configured in an X-frame profile. Specialized Seating competes in Greenwich market and also make folding chairs for venues that typically deploy many seats. Specialized Seating makes and sells a chair that appears very similar to Greenwich’s registered trademark.
Following a bench trial, the district court found Greenwich’s X-frame construction to be functional because it was designed to be an optimal tradeoff between a chair’s weight (and thus its cost, since lighter chairs use less steel) and its strength. The district court also found functionality in that an X-frame chair folds itself naturally when knocked over, as well as in that the flat channel at the seat’s edge, where the attachment to the frame slides so that the chair can fold, was designed for strength and for attaching hooks to link a chair with its nearest neighbor. Finally, the court found that the front and back crossbars contribute strength. Based upon these determinations, the district court concluded that Greenwich’s X-frame construction was functional and unprotectable and ordered Greenwich’s trademark registration canceled.
The district court also found that Greenwich had defrauded the U.S. Patent and Trademark Office (USPTO) by telling the examiner that the patent it held on an X-frame chair did not include all of the features in the mark’s design. However, Greenwich did not tell the examiner that it held three additional patents on X-frame designs, which covered every feature of the design submitted for a trademark. Greenwich appealed.
The Seventh Circuit agreed with the district court, holding that the trademark design was functional and that every important aspect of it was independently functional. The Court said that the chair “looks the way it does in order to be a better chair, not in order to be a better way of identifying who made it (the function of a trademark).” The mere availability of alternate designs is not enough to defeat a functionality claim, as one of the rationales of the functionality doctrine is to prevent firms from appropriating basic forms that go into many designs. Another goal of the functionality doctrine is to separate the spheres of patent and trademark law, as well as to ensure that the term of a patent is not extended beyond the period authorized by the legislature.
The Seventh Circuit also held that because the district court did not commit clear error in finding Greenwich’s design to be functional, it was not necessary to decide whether Greenwich committed fraud on the USPTO.
No Papering Over Competitor’s Towel Stuffing
The U.S. Court of Appeals for the Fourth Circuit agreed with the district court that a competing paper towel maker that induced its customers to fill a trademark owner’s trademark bearing towel dispensers with “inferior” paper towels may be liable as a contributory infringer where there is sufficient evidence for a jury to find a likelihood of confusion among restroom visitors as to the source of the paper toweling being dispensed. Georgia Pacific Consumer Products v. Von Drehle Corp.,Case No. 09-1942, (4th Cir., Sept. 10, 2010) (Hamilton, Sr. J.) (Wilson, J., concurring).
Georgia-Pacific Consumer Products (G-P) designs and manufactures paper products and dispensers. In 2002, G-P introduced its “enMotion” dispensers, a “touchless” paper towel dispenser designed to use G-P’s “fabric-like” toweling. The dispensers bear the G-P marks “enMotion,” “Georgia-Pacific” and a stylized “GP.” G-P leases the enMotion dispensers to distributors (who in turn sub-lease them to end users) through an agreement designating that only G-P branded towels should be used in the dispensers.
Von Drehle (VD) is a competitor of G-P. In 2004, VD began selling lower-quality toweling designed for use in enMotion dispensers. G-P sued VD, alleging contributory trademark infringement and unfair competition under the Lanham Act. VD counterclaimed, asserting deceptive trade practices under North Carolina law.
G-P argued that VD, by inducing and facilitating the end-user’s “stuffing” of enMotion dispensers with VD’s toweling, created post-purchase confusion as to the source of such toweling among restroom visitors, thus creating the potential to harm its reputation and goodwill. On cross motions for summary judgment, the district court granted summary judgment in favor of VD on G-P’s claims, but in favor G-P on VD’s counterclaims. Both parties appealed.
In its de novo review of the district court’s summary judgment decisions, the Fourth Circuit, quoting the following passage from the Supreme Court’s 1982 decision in Inwood Laboratories v. Ives Laboratories, vacated the district court’s summary judgment in favor of VD:
Liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another. Even if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances. Thus, if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.
On the issue of contributory infringement, the Court found that assuming that the stuffing of enMotion dispensers with VD’s toweling by end-user customers constitutes trademark infringement, the record contained sufficient evidence for a reasonable jury to find that VD was liable for contributory trademark infringement.
Then turning to the issue of whether the end-user stuffing constituted direct trademark infringement, the Fourth Circuit explained that to make its case, G-P needed to prove that it possessed a trademark, that an end-user customer used the trademark in commerce in connection with the sale, offering for sale, distribution or advertising of goods, as well as that an end-user did so in a manner likely to cause confusion among the relevant public.
Addressing each of the above elements of a prima facia case of trademark infringement, the Fourth Circuit concluded that by stuffing enMotion dispensers with VD’s toweling, end-user customers used one or more of the G-P marks in commerce in connection with the distribution of goods, leaving only the likelihood of confusion issue open for discussion.
Regarding confusion, the Fourth Circuit agreed with G-P that the district court erred in limiting its likelihood of confusion inquiry to distributors who purchased VD paper toweling and their respective end-user customers noting that “Fourth Circuit case law makes room for the factfinder to consider confusion among the non-purchasing public in the likelihood-of-confusion inquiry if it can ‘be shown that public confusion will adversely affect the plaintiff's ability to control his reputation among its laborers, lenders, investors, or other group with whom plaintiff interacts.’”
After noting that several of the likelihood of confusion factors, including the similarity of the two marks, were not relevant in the present situation, the Court concluded that G-P presented sufficient evidence for a reasonable jury to find “in favor of G-P with respect to each element of its contributory trademark infringement claims” and its common law unfair competitor claim.
Practice Note: In situations in which it is not practical to file suit against a direct trademark infringer, a trademark rights holder should consider contributory infringement and unfair competition claims.
Church’s Trademark Valid Even Though Religions Cannot Be Trademarked
Please contact Paul Devinsky
Addressing the issue of whether a church can claim trademark protection, the U.S. Court of Appeals for the Sixth Circuit affirmed a denial of a defendant pastor’s motion to dismiss and affirmed a partial summary judgment in favor of plaintiffs that the pastor’s use of the “Seventh Day Adventist” mark created a likelihood of confusion. General Conference Corporation of Seventh-day Adventists v. McGill (d/b/a Creation 7th Day Adventist Church), Case No. 09-5723 (6th Cir., Aug. 10, 2010) (Moore, J.)
The Plaintiff, General Conference Corporation of Seventh-day Adventists, was formed in 1863, marking the official organization of the Seventh-day Adventist Church. The name “Seventh-day Adventist” has been used as the church’s name since the official formation of the church, and the plaintiff owns the trademark to that name and related names. Defendant Walter McGill was a former member who broke away and founded his own church, but uses the plaintiff’s trademarked “Seventh-day Adventist” mark. McGill created many websites using the mark, including 7th-day-adventist.org. The plaintiff has not granted the defendant any licenses or permission to use their marks.
After the plaintiff filed a complaint and was issued a default judgment, the defendant appealed. The Sixth Circuit Court considered the defendant’s arguments despite the default.
The defendant claimed that enforcement of the plaintiff’s trademarks violate his Free Exercise rights of the First Amendment because his religion mandates him to call his church “Creation Seventh Day Adventist.” The defendant argued that strict scrutiny must be applied to a restraint on the Free Exercise clause because of the Religious Freedom Restoration Act of 1993 (RFRA). The Sixth Circuit, citing decisions from the Seventh and Ninth Circuits, concluded that the RFRA only applied in suits against the government and not in suits between private parties. Since strict scrutiny was not applied, the Free Exercise Clause did not relieve defendant of his duty to comply with valid and neutral laws of general applicability, such as trademark law.
The defendant also argued that “Seventh-day Adventism” refers to a religion and is therefore a generic term and cannot be trademarked. While the Sixth Circuit found the defendant’s argument “logical” and no found that no single party can prevent others from using the name of a religion, the Court found that the evidence presented at the summary judgment stage was insufficient to show that the public consider “Seventh-day Adventist” to refer to a religion. The defendant has not presented sufficient evidence to show that the relevant public, identified as Christians or even “Adventist Christians,” did not understand “Seventh-day Adventist” as referring to specific religious beliefs rather than to the plaintiff’s church.
The Court affirmed as to a likelihood of confusion, finding every factor of the applicable test weighed in the plaintiff’s favor since the relevant public would have been confused as to the source of the defendant’s published materials related to his church.
Tank Top Tussle – Britney Spears as an Indicator of DELICIOUS Confusion
In a decision highlighting the fact-intensive nature of trademark disputes, the U.S. Court of Appeals for the Ninth Circuit Court reversed a grant of summary judgment but acknowledged that it was “far from certain that consumers were likely to be confused” by defendant’s use of the word DELICIOUS. The decision was largely based on the “well-established principle” that summary judgment is generally disfavored in trademark cases. Fortune Dynamic, Inc. v. Victoria’s Secret Stores Brand Management, Inc., Case No. 08-56291 (9th Cir., Aug. 19, 2010) (Bybee, J.)
In 2007, Victoria’s Secret Stores Brand Management (VS) ran a one-month promotional campaign for its new line of “Beauty Rush” beauty products. As part of that promotion, VS gave away and sold pink tank tops with the word “Delicious” displayed across the chest in silver script to customers who purchased a “Beauty Rush” cosmetic product. The word “Yum” was written in much smaller lettering on the back of the tank top and the word “beauty rush” was printed on the inside of the back of the tank top.
Fortune Dynamic, owner of an incontestable trademark registration for the mark DELICIOUS for footwear, sued VS for trademark infringement. The plaintiff, who had sold 12 million pairs of young women’s shoes under the DELICIOUS mark since 1997, also moved for a preliminary injunction. The district court denied the plaintiff’s motion for preliminary injunction and granted VS’s motion for summary judgment, concluding that the likelihood of confusion factors weighed in VS’s favor. The court also determined that Fortune Dynamic’s claims were “entirely barred” by VS’s fair use defense. Through the proceedings, the district court excluded all of the plaintiff’s proffered expert evidence—including the results of a confusion survey and testimony from Fortune Dynamic’s marketing and advertising expert. Fortune Dynamic appealed.
In reversing and remanding the case, the Ninth Circuit analyzed the relevant likelihood of confusion factors and determined that a majority of the factors “could tip in either direction” such that the district court erred in granting VS summary judgment. For example, considering similarity of the marks, the court gave weight to VS’s argument that the similarity of the parties’ DELICIOUS marks was undercut by the differences in the parties’ retail channels. Because VS only sells VICTORIA’S SECRET brand merchandise in its VS stores, whereas the plaintiff sells its shoes in a variety of stores, the court agreed that it was unlikely that a knowledgeable customer would believe that Fortune Dynamic would be selling a tank top in a VS store. Nonetheless, the court determined that a jury could find that the similarity of marks factor weighed in the plaintiff’s favor because the evidence indicated the possibility of post-sale confusion. Notably, pop star Britney Spears had been photographed wearing the VS tank top in public, which indicated to the court that it was “at least plausible” that knowledgeable consumers could be confused as to the source of the tank top when it was viewed outside of a VS store.
On the issue of actual confusion, Fortune Dynamic’s survey expert had conducted an online survey among 300 young women who were asked to compare pictures of the plaintiff’s DELICIOUS shoes and VS’s “Delicious” tank top and provide answers about the companies that produced them. The district court had refused to admit the survey results on the grounds that it improperly compared the products side-by-side, failed to replicate real world conditions and was “highly suggestive.” The appellate court held that the district court abused its discretion in excluding the plaintiff’s survey by failing to apply Ninth Circuit precedent permitting the introduction of survey evidence so long as it is conducted according to accepted principles and is relevant and that the district court had incorrectly applied the principle of Levi Strauss & Co. v. Blue Bell. Acknowledging the alleged shortcomings of the plaintiff’s survey, including the fact that an internet survey fails to replicate real world conditions, the Court concluded that such critiques went to the weight of the survey, not its admissibility. The survey should have been admitted because it was conducted in accordance with accepted principles and its results were relevant as to whether consumers were likely to be confused.
The Ninth Circuit also found that VS’s fair use defense should be decided by a jury. To qualify for the classic fair use defense, one must use another’s mark “otherwise than as a mark,” “only to describe [its] goods or services” and “in good faith.” The district court found that fair use applied because it determined that VS did not use “Delicious” as a mark. The Ninth Circuit acknowledged that VS’s fair use defense had some merit, but found that genuine issues of material fact remained as to whether VS used “Delicious” as a trademark and only to describe its goods, as well as whether VS acted in bad faith. The court noted that a reasonable jury could find that DELICIOUS as applied to VS’s cosmetics was not descriptive and that VS did not use sufficient precautionary measures to indicate VS as the source, as the word “Delicious” was displayed prominently by itself on the front of the tank top.
It’s the Competition That’s Rotten
Michael J. Keller
In a case involving advertising claims by competitors in the wood preservative industry, the U.S. Court of Appeals for the Eleventh Circuit upheld a finding of infringement under the Lanham Act for false advertising. Osmose, Inc. v Viance, LLC, Case No. 09-15563 (11th Cir., July 30, 2010) (Anderson, J.).
Appellant Viance sought reversal of a preliminary injunction entered against it in a false advertising suit under § 43(a) of the Lanham Act. Viance, the owner of the ACQ process for wood preservation using copper, sought to discredit a new competing process called MCQ introduced by Osmose. Viance tested the Osmose product and concluded that the ACQ process resulted in higher copper concentrations in the wood than the MCQ process. These findings were presented at a research conference. Seeking long-term data, Viance conducted a field test with the MCQ product using an expert who concluded the MCQ stakes showed signs of decay in a preliminary evaluation but failed to conduct further review. Viance then conducted an extensive in-service survey of MCQ treated wood that found minimal premature decay. Despite the results of its investigation, Viance issued a pair of press releases containing statements relating to its testing and concerns about MCQ treated wood. In response, Osmose issued its own press releases criticizing the studies. Timber Products, the party that conducted the in service testing under Viance’s direction, also issued a press release clarifying the scope and limitations of the study and distanced itself from the Viance conclusions. Viance was also asked to abandon its advertising campaign by a group in the pressure treated wood community.
Osmose sued Viance under §43(a) of the Lanham Act and for false advertising under Georgia law, seeking injunctive relief prohibiting Viance from making false statements regarding MCQ. Following the grant of a temporary restraining order (TRO), Viance counterclaimed seeking to prevent Osmose from making false statements to bolster its MCQ products and also sought a TRO, which was denied. The court subsequently granted Osmose a preliminary injunction and denied Viance’s motion for the same. Viance appealed.
Viance challenged the lower court on four grounds: that its advertisements were not literally false, that the district court abused its discretion by not awarding Viance an injunction, that the district court abused its discretion in finding the balance factors favored Osmose and that the injunction violated Viance’s First Amendment rights because it was not limited to advertising or promotional activity.
To prevail on its false advertising claim. Osmose was required to show that Viance’s tests on MCQ did not support its conclusions. The court concluded Viance’s statements were unambiguous establishment claims, not unactionable opinion, and were not supported by investigation. As such, the Court concluded that the lower court did not clearly err in its findings. The Court went on to find that Viance had deceived consumers, that the deception was material to purchasing decisions involved interstate commerce and that Osmose was harmed by the deception. In considering the injunction, the Court upheld the findings that Osmose had a substantial likelihood of success on the merits, that Osmose would suffer irreparable harm, that the harm to Osmose if an injunction issued was less than that the harm to Viance if the injunction issued; and that the injunction did not disserve the public interest.
With respect to Viance’s First Amendment claim, the court found the injunction was overbroad in that it was not limited to advertising or promotional statements and remanded the case for consideration of the proper scope of the injunction.
Practice Note: This case makes it clear that the underlying basis for advertising claims should be carefully scrutinized, particularly when maligning a competitor’s product. The outcome of this case might have been very different if Viance had limited its statements to the facts established its investigation.
Eighth Circuit Finds Summer Camp’s Medieval Theme to be Scenes a Faire and Non-Infringing
Please contact Paul Devinsky
The U.S. Court of Appeals for the Eighth Circuit found that the characters and themes of a Kastleland, a medieval play created for a children’s YMCA camp, consisted of scenes a faire, and that the characters and scenes from Kastleland and the defendant’s medieval play, KnightQuest, were not substantially similar to the protected elements of the copyright. Frye v. YMCA Camp Kitaki and Russ Koos, Case No. 09-3010 (8th Cir., Aug. 20, 2010) (Hansen, J).
In 1986, plaintiff Tom Frye developed Kastleland, a medieval-themed adventure trail for use at YMCA’s Camp Kitaki. Campers gather around a campfire at the beginning of the trail, while stock medieval characters, such as a Robin Hood-like figure, a knight and a female character speak among themselves before the campers about impending danger from seven dragons. The campers agree to accompany these characters on a quest, during which they undertake challenges and gain a “word of power” upon the completion of each challenge. These “words of power”— love, courage, self-control and nobility—are then used to defeat the dragons and complete the quest. Frye ended his association with the YMCA in 1998 and a dispute immediately arose surrounding the YMCA’s right to continue its use of Kastleland at Camp Kitaki. In a settlement agreement and stipulated judgment, the YMCA agreed not to infringe Frye’s copyright in Kastleland.
In 2005, Camp Kitaki hired defendant Russ Koos, who wrote a medieval-themed adventure trail, KnightQuest and introduced the program in 2007. KnightQuest begins with a campfire scene, in which two siblings, a friend and a wizard character are confronted by an antagonist and four “shadow lords,” representing hate, lies, disrespect and irresponsibility. The wizard asks the campers assembled to join in a quest to become knights and defeat the shadow lords. During the trials that follow, the campers learn YMCA core values—responsibility, caring, respect and truthfulness—and upon completion of the trials, the campers are knighted. Upon learning of KnightQuest, Frye filed a complaint, alleging copyright infringement of Kastleland.
The district court found that the characters in Kastleland consisted of “medieval archetypes” and that the plot was composed of scenes a faire, “incidents, characters or settings which are as a practical matter indispensable, or at least standard, in the treatment of a given topic.” The characters, setting and themes found in Kastleland were of the kind typically found in a medieval-themed play or activity. Upon removing these unprotected elements, the court did not find substantial similarity between the protected expression of Kastleland and KnightQuest. Frey appealed.
On appeal, the Eighth Circuit reiterated the two-step analysis for determining substantial similarity: “first, similarity of ideas is analyzed extrinsically, focusing on objective similarities in the details of the works; second, if there is substantial similarity in ideas, similarity of expression is evaluated using an intrinsic test depending on the response of the ordinary, reasonable person to the forms of expression,” In comparing Kastleland and KnightQuest, the Court noted both are interactive plays, conducted at the same YMCA camp and employ a medieval theme. Both plays further engage campers in a “quest” that involves the teaching of values to defeat antagonists. However, the court dismissed these similarities, holding that the YMCA’s employment of this general idea could not form the basis of a copyright infringement claim and finding shared elements to be “required or at least standard to the plays’ shared hero-on-a-quest plot, medieval theme, and summer campfire setting.” As the Court explained, “[t]he challenges, acquisition of skills, and use of the skills to defeat evil characters are ever-present in the hero’s journey.” While those elements are not attributable to medieval scenes a faire, they were dictated by the summer camp setting. After removing these unprotected elements from the substantial similarity inquiry, the court found that remaining similarities of Kastleland and KnightQuest were insubstantial.
Practice Note: Even where two works appear to be substantially similar, elements defined as scenes a faire will not be considered in the court’s substantial similarity inquiry and may leave a plaintiff alleging copyright infringement—including one with a work with has been copied to a significant degree—with only a few insubstantial similarities on which to rest his or her case.
Right of Publicity v. Copyright
Please contact Paul Devinsky
Reversing a district court’s ruling on a motion for judgment as a matter of law on preemption and standing, the U.S. Court of Appeals for the Ninth Circuit found that an adult film star had standing to assert copyright claims but his right of publicity claim was preempted by federal copyright law. Jules Jordan Video, Inc. v. 144942 Canada, Inc., Case No. 08-55075 (9th Cir., March 2, 2010) (Gettleman, J.)
Adult movie actor Ashley Gasper and Jules Jordan Video (JJV) brought suit against several defendants for copyright infringement, unfair business practices, false and misleading advertising, as well as for violation of Gasper’s right of publicity. The suit was based on defendants’ copying and selling of thirteen copyrighted adult DVDs owned by either JJV or Gasper and featuring Gasper’s performances.
Gasper is the president and sole shareholder of JJV and the creator of the videos in which Gasper appears. The plaintiffs alleged that the defendants violated Gasper’s right of publicity and infringed its copyrights by the repeated unauthorized reproduction, counterfeiting and sale of the DVDs. After a lengthy trial, the jury found that defendants did indeed violate Gasper’s right of publicity and infringed its copyrights, awarding plaintiffs more than $5.4 million in damages. The district court thereafter granted the defendants’ motion for judgment as a matter of law in part, concluding that neither Gasper nor JJV had standing to assert the copyright infringement claims and denied defendants’ claim that Gasper’s right of publicity claim was preempted by federal copyright law. Both parties appealed.
In addressing the preemption issue, the Ninth Circuit applied its two-part test to determine whether California’s right of publicity action was preempted by federal copyright law. The test requires a court to first determine whether the subject matter of the state law claim falls within the subject matter of the Copyright Act and, if so, to determine whether the rights asserted under the state law are equivalent to the rights of copyright holders. The Court focused on the plaintiffs’ claims that the defendants misappropriated Gasper’s name, persona and dramatic performance by the repeated unauthorized reproduction of his performance on the DVDs. The Court reasoned that since the conduct alleged in violating Gasper’s right of publicity was the same conduct alleged for copyright infringement, the right of publicity claim was preempted. Specifically, the Court found that because the right of publicity claim relied on works of authorship fixed in a tangible medium of expression (the counterfeit DVDs), the subject matter prong of the test was satisfied. The Court glanced over the equivalent rights determination and declared the publicity right preempted.
Turning to the issue of standing, the Ninth Circuit noted that the copyright in the films was registered to Gasper, not JJV. The lower court had reasoned that because Gasper was employed by JJV, the films were “works for hire” under the Copyright Act, and thus JJV, not Gasper, was the author of the films. The lower court then concluded that JJV lacked standing because the registration was invalid (listing Gasper as the author). In appealing this ruling, plaintiff argued that only Gasper or JJV could possibly own the copyrights and both were plaintiffs in the action. The Ninth Circuit, noting that JJV was a “one man shop,” with Gasper as its sole officer, director and shareholder, explained that since “JJV was Gasper, JJV intended whatever Gasper intended, and if Gasper intended that his creative work be outside the scope of his employment with JJV, there was no one to disagree.” Since Gasper consistently testified that he and JJV intended that he be the owner of the copyrights, the Court found that the films were not “works for hire” but rather Gasper’s own work. Therefore, the Court held that Gasper had standing to assert his claims for copyright infringement and reversed the district court.
Practice Note: When the conduct alleged for claiming a violation of California’s right of publicity is of the same conduct alleged for copyright infringement, a court may likely find preemption.