Patents / Anticipation
Need to Establish Criticality of Claimed Range to Avoid Anticipation by Broader, Overlapping Range
Addressing anticipation under pre-AIA § 102 in the context of a claimed numerical range and prior art disclosing a broader, overlapping range, the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s summary judgment ruling of invalidity noting that the patent owner failed to raise a genuine question of fact about whether the claimed range was critical to the operability of the invention. Ineos USA LLC v. Berry Plastics Corp., Case No. 14-0540 (Fed. Cir., Apr. 16, 2015) (Moore, J.)
Ineos is the owner of a patent relating to polyethylene-based compositions used to form shape products, including screw caps for bottles. Prior art screw cap polyethylene compositions employed lubricants to enhance slip properties, but also imparted an odor issue and a flavor to contacted food products. The patent purportedly eliminated the odor and flavor problems, claiming specific amounts of polyethylene, lubricants and additives.
After Ineos sued Berry Plastics for infringement of certain claims of the patent, Berry Plastics moved for summary judgment that the asserted claims were invalid as anticipated by various prior art references. The patent claimed “0.05 to 0.5% by weight of at least one saturated fatty acid amide” lubricant. Berry Plastics asserted that the prior art reference was anticipatory because it disclosed the same class of lubricant in an overlapping range of “0.1 to 5 parts by weight.” The parties agreed that a measurement in “% by weight” was equivalent to one in “parts by weight.”
After the district court ruled in favor of Berry Plastics, finding that the prior art reference disclosed the same class of lubricant, as well as specific values in the broader range of 0.1 to 5 parts by weight, and that the prior art therefore anticipated the asserted patent. The district court further found that claims of the specific lubricant behenamide were anticipated by the prior art disclosure of saturated fatty acid amides having 12 to 35 carbons. Ineos appealed.
The Federal Circuit explained that when a patent claims a range, the claimed range is anticipated by a prior art reference disclosing a point within that range. On the other hand, if the prior art reference discloses a range, and not a specific point, the claimed range is anticipated only if the prior art range is described with sufficient specificity that a reasonable fact finder could conclude that there is no reasonable difference in how the invention operates over the ranges.
In applying this framework, the Federal Circuit concluded that while the district court erred in concluding that the prior reference disclosed specific values within 0.1 to 5 parts by weight range, the error was harmless. As the Court explained, the criticality of a claimed range must be established to avoid anticipation by a prior art reference disclosing a broader, overlapping range, and Ineos failed to raise a genuine question of fact about whether the claimed range was at all critical to the operability of the invention. In other words, Ineos failed to raise an issue of fact that the properties of the polyethylene composition would differ if the prior art range was substituted for the claimed range. The Court explained that evidence that the claimed range was critical to avoid unnecessary manufacturing costs and blemishes on the screw caps was not dispositive because such alleged benefits had no relation to the operability or functionality of the claimed invention.
Finally, the Federal Circuit agreed with the district court that the prior art disclosure of a saturated fatty acid amide lubricant having 12 to 35 carbon atoms anticipated the claimed lubricant behenamide, which contained 22 carbon atoms. As the Court explained, verbatim disclosure of a particular species is not necessarily required for anticipation, where disclosure of a small genus represents a disclosure of each species within the genus. Hence, the patent owner did not raise a genuine issue of material fact that behenamide did not fall within the prior art disclosed genus, or that behenamide was not a common lubricant within the genus.
Patents / Entire Market Value Rule / Pharmaceuticals
Applicability of the Entire Market Value Rule in Hatch-Waxman Cases
Addressing damages issues in the Hatch-Waxman context, the U.S. Court of Appeals for the Federal Circuit provided important guidance regarding the application of the entire market value rule to pharmaceutical sales, and the non-availability of patent damages during the period of pediatric exclusivity. AstraZeneca AB, et al. v. Apotex Corp., et al., Case No. 14-1221 (Fed. Cir., Apr. 7, 2015) (Bryson, J.)
The patents at issue relate to pharmaceutical formulations containing omeprazole, the active ingredient in AstraZeneca’s prescription drug Prilosec. Beginning in 1997, eight generic manufacturers filed Abbreviated New Drug Applications (ANDAs) to market and sell generic versions of omeprazole, and AstraZeneca responded by filing lawsuits against all eight manufacturers. In November 2003, while the litigation was pending, Apotex began selling its generic omeprazole product. In 2007, the district court entered judgment of infringement and an injunction against Apotex, which the Federal Circuit affirmed. The district court then conducted a bench trial to determine the appropriate damages resulting from Apotex’ sales. The parties agreed that a reasonable royalty was an appropriate measure of damages, and that a hypothetical negotiation would have taken place in November 2003. After hearing the evidence, the district court determined that AstraZeneca was entitled to 50 percent of Apotex’ profits from sales of omeprazole during the period of infringement. Apotex appealed.
At the Federal Circuit, Apotex challenged the damages ruling by claiming that (1) the 50 percent royalty rate was excessive in light of the record, (2) the district court improperly refused to apportion between the patented and unpatented features of the claims, and (3) the damages should have been discounted in light of available non-infringing alternatives. As to the first argument, Apotex claimed that the district court improperly discounted evidence that the market was “well on its way to genericization” by the time of Apotex’s entry, placed undue emphasis on AstraZeneca’s ability to keep Apotex off the market by failing to grant a license, and did not properly account for other AstraZeneca licenses with lower royalty rates. The Federal Circuit disagreed, concluding that the district court properly assessed the reasonable royalty based on what AstraZeneca would have insisted on as compensation, rather than taking a backward-looking assessment of what actually happened when Apotex launched at risk.
Apotex’s second argument relied on the entire market value rule. Here, Apotex claimed that the district court should have apportioned the relative contribution of value between the non-patented and patented elements of the product. The Federal Circuit clarified that although the entire market value rule was not “per se” inapplicable in the pharmaceutical context, it was inapplicable to the present case. Specifically, the Court explained that the entire market value rule was “designed to account for the contribution of the patented feature to the entire product,” and noted that here AstraZeneca’s patents covered three key elements of the product: the drug core, the enteric coating and the subcoating. Because the combination of these elements constituted the entire product that is the subject of the claims at issue, there were no non-infringing features in the product, and the entire market value rule did not apply.
As for Apotex’s third argument, the Federal Circuit disagreed that non-infringing alternatives were available, finding that the district court did not err in inferring that a competitor’s alternative formulation was not “available” to Apotex because it was covered by that competitor’s patents.
The district court also awarded AstraZeneca damages for sales of Apotex’s generic omeprazole during the “pediatric exclusivity” period of the asserted patents. The “pediatric exclusivity” period bars the FDA from approving ANDAs filed by competing drug manufacturers for six months following the patent’s expiration date. Here, all of the patents expired by 2007. However, the Federal Circuit reversed the district court and held that AstraZeneca could not recover a royalty for Apotex’s sales during the period of “pediatric exclusivity.” Specifically, the Federal Circuit explained that damages in a patent case may only be awarded for patent infringement, and there can be no infringement after a patent expires. The pediatric exclusivity period is granted by the U.S. Food and Drug Administration and is not an extension of the patent term. The fact that a generic might agree to pay for a license during the pediatric exclusivity period was not relevant, because Apotex did not infringe AstraZeneca’s patent during that period.
Patents / Exceptional Case
Cannot Deny Defendant's Attorneys' Fees Motion After Finding Case Exceptional Without Basis
Addressing the issue of attorneys’ fees, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a district court’s denial of fees, finding that it “cannot find a basis to support the court’s refusal to award fees” where plaintiff’s blatant litigation misconduct caused defendant to incur additional fees, and instructing the district court to reconsider its ruling in light of the Supreme Court of the United States’ Octane Fitness decision. Oplus Techs., Ltd. v. Vizio, Inc., Case No. 14-1297 (Fed. Cir., Apr. 10, 2015) (Moore, J.)
Plaintiff Oplus sued defendant Vizio for patent infringement. After Vizio eventually obtained a summary judgment of non-infringement, it moved to recover its attorneys’ and expert witness fees. The district court found that Oplus engaged in a variety of litigation misconduct, including ignoring necessary discovery, attempting to obtain damages information to which it was not entitled, presenting contradictory expert evidence and infringement contentions, and misrepresenting legal and factual support for its positions. However, the “greatest concern” noted by the district court was Oplus’s counsel’s subpoena for documents that counsel had accessed under a protective order in an unrelated litigation against Vizio. Based on this misconduct, the district court found the case exceptional under § 285 and found that Oplus and its counsel were vexatious litigants who had engaged in litigation misconduct. Nevertheless, the district court denied Vizio’s motion for fees, reasoning that both sides contributed to delays, that “each instance of motion practice occurred according to normal litigation practice,” and that Vizio would not have incurred significantly more attorneys’ or expert fees in the absence of Oplus’s vexation conduct.
In vacating and remanding the district court’s decision, the Federal Circuit noted that the district court applied the old Brooks Furniture standard for attorneys’ fees (requiring clear and convincing evidence that a case was exceptional), which has since been replaced by the Supreme Court’s Octane Fitness standard. Under the lower Octane Fitness standard, the district court is only required to determine whether the case stands out from others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated (IP Update, Vol. 17, No. 5).
As to the merits of the district court’s opinion, the Federal Circuit found that nothing in that opinion or in the record substantiated the court’s decision not to award fees. Specifically, the court found that plaintiff Oplus’s conduct would certainly have caused Vizio to incur additional fees, because “[t]he discovery abuses, unprofessionalism, and changing litigation positions described by the court had to have increased expense and frustration for all concerned.” The Federal Circuit further clarified that, although the decision to award fees lies squarely within the discretion of the district court, once “a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision.”
Patents / AIA Appellate Review
PTO Refusal to Terminate Ongoing Proceeding Is Not Immediately Reviewable
Alexander P. Ott
Addressing the U.S. Patent and Trademark Office’s (PTO’s) refusal to terminate four inter partes reexaminations after a corresponding district court action was terminated, the U.S. Court of Appeals for the Federal Circuit explained that the PTO’s refusal to terminate was not subject to review while the reexaminations were still in progress. Automated Merchandising Systems, Inc. v. Lee, Case No. 14-1728 (Fed. Cir., Apr. 10, 2015) (Taranto, J.)
Automated Merchandising Systems (AMS) filed a lawsuit against Crane Co. asserting infringement of four patents related to vending machines. Years into the case, Crane filed requests for inter partes reexamination against the asserted patents. The PTO granted the requests and initiated reexaminations. While they were pending, AMS and Crane settled the lawsuit, and the district court entered a judgment noting that the parties stipulated to the validity of the patents. AMS then asked the PTO to dismiss the reexaminations pursuant to the pre-America Invents Act version of 35 U.S.C. § 317(b), under which reexaminations were terminated if the requester failed to prove invalidity in a district court case. The PTO refused to terminate the proceedings and characterized its refusal as a “final agency action.”
AMS responded to the PTO’s refusal by filing a suit in district court premised on the Administrative Procedure Act (APA), along with the court’s mandamus authority, and the Declaratory Judgment Act. The PTO did not dispute that its denial was a final agency action subject to APA review. The district court proceeded to the merits and found that a stipulation to validity did not constitute a failure to prove invalidity. AMS appealed.
On appeal, the PTO switched gears and argued that its denial was not in fact a final agency action. The Federal Circuit considered this question to be jurisdictional and thus waived, but overlooked the waiver in order to address the question of whether a PTO refusal to terminate ongoing proceedings was immediately reviewable, which it considered to be a significant question of continuing public concern despite the fact that the particular proceedings at issue here, inter partes reexaminations, had been eliminated by the AIA. As to that question, the Federal Circuit answered that refusals to terminate were interlocutory in nature—akin to a denial of a motion to dismiss—and were not immediately reviewable, but rather only became subject to review at the end of the proceedings. The Court also rejected AMS’s mandamus and declaratory judgment grounds, and affirmed the district court’s denial of relief.
Patents / Obviousness / Standard of Review
Motivation to Combine Reviewable for Clear Error
Reviewing the district court’s framing of the obviousness inquiry and determination of no motivation to combine for clear error, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s determination upholding the patents-in-suit against an obviousness challenge. Insite Vision Inc. v. Sandoz, Inc., Case No. 14-1065 (Fed. Cir., Apr. 9, 2015) (Linn, J.)
Plaintiffs market an aqueous ophthalmic solution of the antibiotic azithromycin, which is useful in treating conjunctivitis and other bacterial infections of the eye, and which is covered by several U.S. patents. Sandoz filed an Abbreviated New Drug Application (ANDA) on a generic form of the solution, and plaintiffs brought suit for infringement. After claim construction, Sandoz stipulated to infringement but challenged the validity of the patents-in-suit on obviousness grounds. In the prior art, azithromycin was administered orally instead of topically, and it was thought that azithromycin was a poor candidate for use in aqueous solutions because of its poor solubility in water. However, ophthalmic solutions of other antibiotics structurally related to azithromycin were known. The parties disputed the proper framing of the obviousness question; plaintiffs argued that the proper inquiry was whether it would have been obvious to develop a topical ophthalmic formulation containing azithromycin, and Sandoz argued for the narrower question of whether it would have been obvious that topical azithromycin could be used to treat conjunctivitis.
The district court agreed with plaintiffs, finding no reason to limit the question to conjunctivitis, reasoning in part that persons of ordinary skill would have sought treatments effective against both conjunctival and corneal infections because conjunctival infections frequently spread to the cornea. Although the district court recognized that the prior art taught aqueous solutions of related antibiotics, such as erythromycin, it concluded that Sandoz had not carried its burden to show that the patents-in-suit were obvious, because Sandoz had not shown that the one of ordinary skill would have been motivated to substitute azithromycin into prior art solutions. Sandoz appealed.
On appeal, Sandoz argued that the district court had erred as a matter of law in improperly framing the question of obviousness and had further erred in failing to find a motivation to combine. Plaintiffs countered that the identification of the problem faced by persons of ordinary skill is a factual determination reviewable for clear error. The Federal Circuit, implicitly adopting the plaintiffs’ view, found that the district court had not clearly erred in its framing of the obviousness inquiry and further that the issue of motivation to combine is a question of fact. Finding no clear error in the district court’s analysis, the Federal Circuit affirmed the district court’s decision upholding the patents’ validity.
Practice Note: At the Federal Circuit, determinations underlying the legal determination of obviousness are factual and therefore reviewable for clear error. The Court appears increasingly reluctant to disturb obviousness determinations of the district courts. See Senju Pharm. Co v. Lupin Ltd. (IP Update, Vol. 18, No. 4) (deferentially reviewing a determination of obviousness in another case about ophthalmic antibiotic solutions).
Patents / Claim Construction / Validity
Claim Construction OK; but Still No Summary Judgment Where Material Facts Remain in Dispute
Addressing an appeal by a patent owner of a summary judgment of invalidity, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s claim construction and stipulated judgment of non-infringement, but reversed a grant of summary judgment of invalidity finding that genuine issues of material fact as to whether the asserted claims were enabled or supported by a sufficient written description remain. Vasudevan Software, Inc. v. MicroStrategy, Inc. et al., Case Nos. 14-1094; -1096 (Fed. Cir., Apr. 3, 2015) (Linn, J.)
Vasudevan Software (VSi) sued MicroStrategy and TIBCO Software, alleging infringement of its patents on database systems. On the key claim construction dispute, the district court sided with the defendants on the construction of the claim term “disparate databases.” As a consequence, VSi stipulated to non-infringement. In addition, the district court granted defendants’ motion for summary judgment of invalidity, concluding that the claimed “disparate databases” were not enabled and lacked written description support in the specification. VSi appealed.
The Federal Circuit reviewed the district court claim construction rulings based on intrinsic evidence de novo. The Court also took note of VSi’s claims that extrinsic evidence, in the form of the stipulated construction of the term from a previous litigation, as well as extrinsic marketing materials and expert testimony, supports its construction. However, without clearly articulating the review standard on which such evidence was considered, the Court concluded that even these materials left the meaning of the term “disparate databases” uncertain. In terms of claim construction, VSi argued that the term “disparate databases” should be given its plain and ordinary meaning of “incompatible databases having different schemas.” The Federal Circuit disagreed and concluded that the plain and ordinary meaning left open the question of how “disparate” or “incompatible” the databases must be. In particular, the specification provided no guidance as to what is meant by “disparate databases,” and VSi’s own expert conceded that the meaning was dependent on context and had no consistent usage in the field.
Thus the Court turned to the prosecution history and agreed with the district court that certain remarks made by the applicant during prosecution amounted to definitional language. In particular, the Federal Circuit found that the applicant’s use of the phrase “refers to” when describing the “disparate nature of the [databases]” indicated an intention to define the term “disparate databases.”
The Federal Circuit also affirmed the district court’s finding that VSi was estopped from arguing that another claim term, “incompatible database of a different types,” had a meaning different from “disparate databases,” because VSi consistently argued that “disparate databases” were synonymous with “incompatible databases” and never offered an independent construction for “incompatible databases.” The court noted, however, that under the circumstances, VSi’s failure to raise an issue distinguishing the two terms was more appropriately characterized as a waiver than estoppel.
On the issue of invalidity, the Federal Circuit found that there remained a genuine issue of fact as to whether the written description conveyed to a person of skill in the art that VSi had possession of a means for accessing “disparate databases” at the time of filing. VSi offered expert testimony that the patent specification showed how to access disparate databases, and defendants offered no contrary expert testimony. The district court dismissed the expert testimony as “conclusory.” The Federal Circuit, however, drawing all reasonable inferences in favor of VSi (as the non-movant), and after noting the operable “clear and convincing evidence” standard and that there is no need for in haec verba support of the claim term, found that the district court had summarily dismissed the testimony of VSi’s expert, which had at least raised a genuine issue of material fact regarding whether the patents at issue disclosed how to access disparate databases.
The Federal Circuit also concluded that on the issue of enablement, VSi had at least raised a genuine dispute of fact. In finding invalidity on summary judgment, the district court relied on evidence that it took the inventor three years from the time of filing the patent to build a functioning embodiment of the invention in addition to other evidence relating to the time it took the inventor to reduce the invention to practice. Thus, in the view of the district court, the claimed invention required undue experimentation to practice. The Federal Circuit disagreed, again drawing all reasonable inferences in favor of VSi. The Court concluded that the inventor’s efforts to reduce the invention to practice did not necessarily prove a lack of enablement. For example, the Court noted that the inventor spent the three years of development making a commercial-grade embodiment. In addition, VSi had introduced evidence that the experimentation period was not undue.
Although it was a close call on the merits, the Federal Circuit concluded that VSi’s evidence of enablement and written description raised issues of material fact sufficient to defeat summary judgment of invalidity.
Patents / Claim Construction
Implementation of Teva’s Hybrid Review Claim Construction
Addressing the issue of de novo versus differential claim construction review post-Teva, the Supreme Court of the United States remanded back to the U.S. Court of Appeals for the Federal Circuit a case where de novo review was applied to a disputed claim term. CSR PLC v. Azure Networks, LLC, Case No. 14-976 (Supr. Ct., Apr. 20, 2015).
In January 2015, the Supreme Court ruled in Teva v. Sandoz that the Federal Circuit must generally apply a “clear error” standard when reviewing a district court’s claim construction that is not based on intrinsic claim construction evidence (IP Update, Vol. 18, No. 1).
In the present case, the plaintiff Azure Networks sued CSR, alleging that the defendant’s products infringed Azure’s patent on Bluetooth technology. After the district court construed the patent term “MAC address,” the district court entered judgment in favor of CSR, finding non-infringement of the Azure patent. Azure appealed, and the Federal Circuit, in a split panel decision issued just two months prior to the Teva ruling, reversed the district court’s construction and found in favor of Azure IP Update, Vol. 17, No. 12).
CSR filed a petition for writ of certiorari to the Supreme Court, arguing that the Federal Circuit reviewed the district court’s construction under the de novo standard of review, contrary to the Supreme Court’s Teva decision. The petition highlighted the Federal Circuit’s use of “dictionaries not in the record” as “extrinsic evidence,” now subject to a clear error review. Specifically, CSR argued that the Federal Circuit made “factual findings contrary to those of the district court without identifying clear error.”
The question presented was as follows:
Did the United States Court of Appeals for the Federal Circuit err in using a de novo standard of review instead of a “clear error” standard of review in reviewing the factual findings made by the . . . District Court while construing the term “MAC Address” . . . ?
The Supreme Court issued a one-page order, remanding the case back to the Federal Circuit for further consideration in light of Teva.
Patents / Indefiniteness
No Substantial Change in Standard for Indefiniteness Under “Reasonable Certainty” Test
In an opinion addressing the standard for indefiniteness in view of the Supreme Court of the United States’ 2014 “reasonable certainty” test, the U.S. Court of Appeals for the Federal Circuit maintained its reversal of the district court’s determination that the asserted claims were indefinite. Biosig Instruments, Inc. v. Nautilus, Inc., Case No. 12-1289 (Fed. Cir., Apr. 27, 2015) (Wallach, J.)
Biosig sued Nautilus for patent infringement. The asserted patent is directed to a heart rate monitor that processes signals from which electromyogram (EMG) signals are substantially removed. Notably, certain asserted claims recite common and live electrodes being in “spaced relationship” with each other. The district court granted Nautilus’s motion for summary judgment, holding the “spaced relationship” term indefinite as a matter of law. Biosig appealed.
On appeal, the Federal Circuit reversed and remanded (IP Update, Vol. 16, No. 5). The majority, relying on a standard articulated in the 2005 Datamize case, stated that a claim is indefinite “only when it is ‘not amenable to construction’ or ‘insolubly ambiguous.’” The Federal Circuit panel majority found that the claims at issue were not indefinite because the claim language, specification and figures disclosed certain inherent parameters delineating the boundaries of the claims.
The Supreme Court granted certiorari (IP Update, Vol. 17, No. 1), and vacated and remanded. In so doing, the Supreme Court rejected the Federal Circuit’s “not amenable to construction or insolubly ambiguous” standard, and articulated a new standard to be applied: “[W]e hold that a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty those skilled in the art about the scope of the invention” (IP Update, Vol. 17, No. 6).
On remand, the Federal Circuit first addressed whether the Supreme Court had raised the standard for indefiniteness or had simply clarified the existing standard. The Federal Circuit noted that the Supreme Court had reframed the inquiry as an affirmative search for “reasonable certainty” rather than a rejection of insolubly ambiguous claims or those not amenable to construction.
Using the modified standard, the Federal Circuit found that the “spaced relationship” claim language informed skilled artisans with reasonable certainty regarding its scope. The Federal Circuit reaffirmed that the intrinsic evidence allowed a skilled artisan to determine the parameters of the claims. First, the common and live electrodes need to be separated from one another, and yet the distance between the two cannot be wider than the width of a user’s hands. Second, the claims include a whereby clause describing the spared electrode structure as functioning to substantially remove EMG signals. In the Federal Circuit’s view, the recitation of this function proved crucial, as a skilled artisan would understand the boundaries of the “spaced relationship” between the common and live electrodes based on the substantial removal of the EMG signals.
Patents / Claim Construction / Damages
Info-Hold Cases: De Novo Review Where Claim Construction Evidence Is Neither Intrinsic Nor Extrinsic and Expert Damages Testimony Unnecessary for Damages
In two decisions involving the same plaintiff and patent but different defendants, the U.S. Court of Appeals for the Federal Circuit applied de novo review after choosing not to classify evidence used below and reversed an award of zero damages despite a lack expert testimony. Info-Hold, Inc. v. Applied Media Techs. Corp., Case No. 13-1528 (Fed. Cir., Apr. 24, 2015) (Reyna, J.); Info-Hold, Inc. v. Muzak LLC, Case No. 14-1167 (Fed. Cir., Apr. 24, 2015) (Reyna, J.)
Info-Hold sued Applied Media Techs Corp. (AMTC) and Muzak for patent infringement in separate lawsuits. Info-Hold’s patent relates to playing music and advertisements through telephones and public speaker systems, including playing music for telephone callers who are on hold.
In AMTC’s case, the district court construed the claims to effectively require that communication between a server and playback device be initiated by the server. In so doing, the court expressed interest in a notice of allowance of an unrelated patent, where that unrelated patent was cited on the reexamination certificate of the asserted patent. In this notice of allowance, the examiner stated that prior art music-on-hold patents did not disclose communications initiated by a playback device. After the district court’s construction, Info-Hold stipulated to non-infringement and appealed the construction.
On appeal, the Federal Circuit rejected the construction below. The Court determined that the district court’s decision did not warrant clear error review, despite the district court’s reliance on the notice of allowance. The Court chose not to “classify” such a document as intrinsic or extrinsic evidence. The Court reasoned that such a classification is unnecessary for three reasons. First, the document is a matter of public record about which no factual dispute exists. Second, the lower court did not make any findings about it. Third, its significance, if any, would relate to claim construction, an issue of law. Accordingly, the Federal Circuit decided that a de novo standard of review was appropriate. Applying this standard, the Court concluded that the claimed communication between a server and playback device need not be initiated by a server—as it found no lexicography or disavowal in the intrinsic evidence warranted such a narrow construction.
In the Muzak case, the district court struck Info-Hold’s damages expert report. Info-Hold’s expert improperly relied on the entire market value rule and 25 percent rule of thumb. After striking the report, the court asked Info-Hold to show cause for maintaining the case, because of its inability to prove damages. Because the district court found that Info-Hold was unable to prove a measurable remedy, the court dismissed the case. Info-Hold appealed.
Although the Federal Circuit upheld the decision to strike Info-Hold’s damages expert report, the Court reversed the dismissal. Summary judgment of a zero damages award is only appropriate where there is no genuine issue of material fact that zero is the only reasonable amount of damages. Exclusion of a patentee’s damages evidence alone does not justify summary judgment. Because factual evidence was in the record that the district court could have used as a basis to find at least nominal damages, the Federal Circuit remanded the issue of damages.
Patents / False Marking
No Competitive Injury Without Intent and Action to Enter the Market
In a precedential case of first impression interpreting 35 U.S.C. § 292 of the America Invents Act (AIA), the new “False Marking Statute,” the U.S. Court of Appeals for the Federal Circuit explained that even potential competitors may suffer a competitive injury and thus be entitled to civil damages for a false marking violation, but only if they meet a two-prong test involving intent and activity. Applying the two-prong test, the Court affirmed a summary judgment ruling that a false marking plaintiff lacked standing because it failed to proffer evidence of both intent and action to enter the relevant market. Sukumar v. Nautilus, Inc., Case No. 14-1205 (Fed. Cir., May 4, 2015) (Prost, J.)
In 2010, Ponani Sukumar and his corporation, Southern California Stroke Rehabilitation Associates, Inc., (SCSRA) (collectively, Sukumar) sued Nautilus for false marking. Sukumar alleged that certain of Nautilus’ rehabilitation fitness equipment were falsely marked with patent information. Sukumar purported that the false marking deterred his entry into the market for selling rehabilitation fitness equipment.
Sukumar recognized a need for rehabilitation fitness equipment suitable for aging seniors. To satisfy this need, Sukumar ordered customized, modified equipment from Nautilus and, in 2004, founded SCSRA. The business of SCSRA was to open and run senior rehabilitation facilities employing the modified Nautilus equipment. According to Sukumar, SCSRA twice attempted to negotiate a license with Nautilus for the modified equipment. However, at the time of suit, SCSRA had no business plan, no employees other than Sukumar, no office space and no equipment prototype designs.
During the pendency of the suit, Sukumar moved for, and the district court granted, partial summary judgment that Nautilus’ equipment were falsely marked. In response, Sukumar ramped up SCSRA’s efforts, creating a business plan for selling rehabilitation equipment, designing initial prototypes of rehabilitation equipment, consulting with relevant engineers, and seeking to acquire land for offices and a manufacturing facility. In the interim, the AIA amended § 292 to eliminate qui tam false marking suits, permitting a private right of action only to a “person who has suffered a competitive injury as a result of a [false marking] violation.” Later the Federal Circuit, in a non-precedential opinion, held that the amendment to § 292 applied retroactively to a suit pending at the time the AIA was enacted.
Thereafter the district court permitted a second round of motions and cross-motions for summary judgment, and this time granted Nautilus motion for summary judgment on Sukumar’s false marking claim, finding that Sukumar had not suffered competitive injury and thus lacked standing to bring the claim.
On appeal, Nautilus argued that competitive injury under § 292 can only be suffered by a competitor actively selling products in the relevant market, and that Sukumar never sold any products in competition with Nautilus. Sukumar contended that a mere potential competitor may suffer competitive injury. The Federal Circuit, looking to the plain meaning of the term “competitive injury,” the legislative history to § 292, and similar terms in analogous areas of law, concluded that a potential competitor may suffer competitive injury only if it makes an attempt to enter the market and its competitive injury is caused by the false marking. Entry in the market requires a showing of (1) intent to enter with a reasonable possibility of success and (2) an action to enter.
Intent to Enter the Market
The Federal Circuit found that the evidence only showed that Sukumar placed orders for custom Nautilus equipment, and established no evidence of intent to competitively produce such designs. Sukumar testified that his intent was to develop and operate a series of rehabilitation and spa centers, and Nautilus’ failure to provide certain modified equipment prevented him from doing so. As to the latter argument, the Court explained that Sukumar could not rely on actions taken after he filed suit, since to do so would allow parties to manufacture evidence during litigation.
Action to Enter the Market
Consistent with the findings of the district court, the Federal Circuit found that even if Sukumar had intended to enter the market for selling rehabilitation fitness equipment, he failed to take sufficient action to manifest market entry. Sukumar had little engineering knowledge or business knowledge relating to such equipment, did not attempt to design a prototype, hired no employees and did not investigate manufacturing. The Court concluded Sukumar did not attempt to compete with Nautilus and thus suffered no competitive injury.
Accordingly, the Federal Circuit confirmed that Sukumar lacked standing to bring a claim for false marketing under § 292.
International Trade Commission
ITC / Domestic Industry
Quantify Versus Quality Determines Domestic Industry
The U.S. Court of Appeals for the Federal Circuit reversed a finding by the U.S. International Trade Commission (ITC) of a violation of § 337, concluding that the Commission’s use of a qualitative analysis could not meet the domestic industry requirement. LELO Inc. v. International Trade Commission, Case No. 13-1582 (Fed. Cir., May 11, 2015) (Reyna, J.)
The appeal arose from a complaint filed at the ITC by Standard Innovations, the marketer of a line of kinesiotherapy devices. Standard’s complaint alleged that several importers of competing kinesiotherapy devices, including appellant LELO, infringed a patent assigned to Standard. Certain Kinesiotherapy Devices and Components Thereof, Inv. No. 337-TA-823. Evidence at the hearing established that certain key components (the backbone material, rubber, microcontrollers and pigment) of Standard’s devices were manufactured in the United States, but their total cost was less than 5 percent of the total raw materials cost of the devices, and Standard manufactured the products overseas.
The administrative law judge’s (ALJ’s) initial determination found no violation, ruling that all of LELO’s accused products met at least one claim of the asserted patent, but that Standard had failed to prove a domestic industry, ruling that purchase of the key components in the United States could not establish a significant investment in plant and equipment or a substantial investment in the patent’s exploitation, under § 337(a)(3), parts (A) and (C). On review, the ITC reversed the ALJ’s finding of no domestic industry, found a violation of § 337 and issued an exclusion order. The Commission found that Standard had “established that the components were critical for [its devices], which the ALJ found to be protected by the patent,” and that while the purchases represented “a relatively modest portion of domestic content,” the “contribution of the components at issue from a qualitative standpoint is indeed significant.” LELO appealed, arguing that the ITC’s use of the qualitative factors was legal error.
The Federal Circuit agreed with LELO, finding that the domestic industry requirement of § 337 requires a quantitative analysis and that a qualitative analysis may not be substituted. The Court explained that the terms “significant” and “substantial” in the text of § 337 referred to a “benchmark in numbers,” and therefore a “significant investment in plant and equipment” or a “substantial investment in exploitation” required a quantitative analysis of Standard’s activities in the United States. The Court noted that the ITC itself had determined that Standard’s amounts of investment and employment were “modest,” which it took to mean not significant. Accordingly, the Court concluded that the ITC’s ruling contradicted the requirements of § 337 and reversed.
ITC / Infringement / Public Interest
ID on Infringement and Public Interest in Remand of InterDigital Investigation *Web Only*
In a long-running investigation brought by InterDigital concerning Nokia mobile phones, the administrative law judge (ALJ) on the remand hearing from the U.S. Court of Appeals for the Federal Circuit found that Nokia’s handsets infringed two InterDigital patents, and that the declaration of the patents to the European Telecommunications Standard Institute (ETSI) as essential did not bar an exclusion order. Certain 3G Mobile Handsets and Components Thereof, Inv. No. 337-TA-613, Initial Determination on Remand (ITC, Apr. 27, 2015) (Essex, ALJ).
In mid-2009, the late Chief ALJ Luckern issued a final initial determination finding Nokia’s products did not infringe two InterDigital patents that had been declared as part of the 3GPP standard to ETSI. The U.S. International Trade Commission (ITC) affirmed that determination, but the Federal Circuit later altered the ITC’s construction of two claim terms, reversed the finding of no violation and remanded. On remand, the ITC ordered the ALJ to determine whether 1) Nokia’s originally accused and current mobile phones infringed under the new constructions, 2) the public interest would be harmed by an exclusion order, 3) the standard-essential nature of the patents is contested, and 4) there has been patent hold-up by either party.
After finding that both Nokia’s originally accused and currently imported handsets infringed under the new claim constructions, the ALJ found that the public interest would not be harmed by an exclusion order. Rejecting the respondents’ argument that InterDigital’s obligation to ETSI limited it to acceptance of a license on FRAND terms, the ALJ found that ETSI’s standard FRAND declaration applied only to patents that were actually standard-essential, and neither InterDigital nor the respondents had offered any evidence that the asserted patents, if infringed, must be standard-essential. The ALJ further noted that, prior to the patents being declared to ETSI, ETSI had removed a bar against injunctive relief from its FRAND declaration, indicating that an exclusion order would not violate the agreement. Finally, the ALJ found that while there was no evidence InterDigital had engaged in patent holdup or failed to negotiate a FRAND license in good faith with the respondents, there was evidence of holdup by the respondents after the Federal Circuit decision reversing the earlier ITC rulings. In the ALJ’s view, after the reversal, “the respondents no longer had a decision in their favor, and should have realized they may have to take a license or face an exclusion order.” The ALJ found the respondents’ unwillingness to state what would be an acceptable FRAND rate was evidence of holdup on the part of the respondents.
Practice Note: In determining infringement, the ALJ noted that the construction of a claim term in the two patents at issue was inconsistent with the ITC’s construction of claim terms in related InterDigital patents that were asserted in two later investigations. However, the ALJ determined that resolution of this issue was beyond his authority. On review, the respondents will likely press the ITC to resolve this inconsistency, since the constructions in the later investigations were upheld by the Federal Circuit and resulted in a finding of no violation.
ITC / Attorneys' Fees
Divided Commission Upholds ALJ’s Default Sanction and Attorney Fee Award Against Respondent and its Law Firm *Web Only*
The U.S. International Trade Commission (ITC) upheld an administrative law judge’s (ALJ’s) ruling finding a respondent in default based on spoliation of evidence, and upholding a sanction of attorneys’ fees against both the respondent and its law firm, based on a sanctions motion directed solely to the respondent. Certain Opaque Polymers, Inv. No. 337-TA-883 (ITC, Apr. 30, 2015) (Schmidtlein, Comm’r, dissenting).
In Opaque Polymers, Dow Chemical accused Organik Kimya of importing products made using its trade secrets. After discovering that key evidence had been destroyed, lost or altered, Dow moved under Rule 210.33, the ITC’s analog to F. R. Civ. P. 37, for a default sanction and attorneys’ fees against Organik. After a hearing, the ALJ granted the motion, finding that the spoliation of evidence was done in bad faith, and that Organik’s acts justified a default sanction. The ALJ also found Organik and its law firm jointly liable for Dow’s attorneys’ fees, ruling the law firm had an independent duty to prevent spoliation and ensure information provided to the ALJ was accurate. Organik requested review of the default sanction, and the law firm separately intervened for review of its liability, arguing both that its conduct was not culpable and that because there was no notice it could potentially be liable, the ruling violated due process.
The ITC upheld the ALJ on review. First, the ITC found that Organik’s spoliation of evidence, including overwriting a laptop after the ALJ had ordered the laptop preserved, justified a sanction of default and attorneys’ fees. Next, a divided ITC, in an issue of first impression, found that Dow’s filing of a motion under Rule 210.33 was adequate notice to the law firm that it could be jointly sanctioned, noting that Dow’s motion pointed to a specific letter drafted by the law firm as support for sanctions. The ITC further found that even if the ALJ had not provide sufficient due process, the ITC’s review of his decision satisfied due process. The ITC rejected the firm’s arguments that its conduct could only be sanctioned under Rule 210.4, which provided additional procedural protection, and that bad faith was not necessary for sanctions. The ITC also rejected the argument that the firm’s duty of advocacy under ABA Model Rule 1.7 entitled it to specific notice, noting both that Fed. R. Civ. P. 37 does not require specific notice before leveling sanctions, and that the firm’s argument suggested it was obligated to withdraw as respondent’s counsel, which it had not done. Finally, the ITC found that the law firm’s failure to preserve evidence and check the veracity of statements explaining the loss of evidence was culpable conduct.
Commissioner Schmidtlein filed a dissent in which she argued that the question of the firm’s liability should be remanded to the ALJ because of a lack of due process. The commissioner noted that Dow’s sanctions motion sought sanctions solely against Organik, and disagreed that the mere filing of the sanctions motion under Rule 210.33(c) should be considered notice that counsel could be sanctioned. Commissioner Schmidtlein also noted that the ALJ had made statements that suggested to the law firm that its conduct was not at issue, negating any implicit notice and making an award on the current record unjust. Finally, Commissioner Schmidtlein dissented from the ITC’s opinion that its own review process constituted notice and an opportunity to be heard, noting that the ITC had explicitly barred the introduction of new evidence on review.
America Invents Act
AIA / CBM / Unpatentable Subject Matter
An Abstract Idea by Any Other Name
Addressing the issue of unpatentable subject matter in a post-Alice world, the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB) recently invalidated two patents under § 101 in separate covered business method (CBM) proceedings. Epicor Software Corp. v. Protegrity Corp., Case CBM2015-00006 (PTAB, Apr. 21, 2015) (Petravic, APJ); Google Inc. v. Unwired Planet, LLC, Case CBM2014-00004 (PTAB, Apr. 6, 2015) (Bisk, APJ).
In Epicor, petitioner filed a petition to institute a CBM review of a patent directed to protecting data against unauthorized access, asserting the subject matter was not patent eligible under § 101. Prior to analyzing the merits of the § 101 contentions, the PTAB addressed whether the patent was eligible for CBM review. A CBM patent claims “a financial product or service,” and “does not include patents for technological inventions.” The patent owner argued that the petition should be rejected because it fails to satisfy either prong. With respect to the first prong, the PTAB noted that legislative history indicates that “financial product or service” should be interpreted broadly, and concluded that the claimed “method for performing data processing or other operations that are at least incidental or complementary to the practice, administration, or management of a financial product or service qualified under the statute so the technological exception did not apply.” As to the second (technical) prong, the PTAB found that at least one claim did not recite a technological feature that is novel or unobvious over the prior art.
Next, the PTAB addressed the patent subject matter eligibility issue under Alice’s two-part test, clarifying that petitioners may raise § 101 challenges as part of CBM proceedings. The first step of the Alice test is to “determine whether the claims at issue are directed to one of [the] patent-ineligible concepts” of “laws of nature, natural phenomena, and abstract ideas.” If the claims are directed to a patent-ineligible concept, the second step is to “search for an inventive concept—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.”
Regarding the first step, petitioner argued that the claims were directed to an abstract idea of determining whether access to data should be granted based on rules. Patent owner argued that the claims were directed to a specific improvement in computing technologies to protect data in a database at the data element level. The PTAB disagreed with the patent owner, finding that its arguments were not commensurate with the scope of the claims.
As for the second step, petitioner argued that maintaining a database, maintaining a separate data protection table, receiving a request to access a data portion and granting access to a data portion were insignificant pre- and post-solution activity. Patent owner argued that the claims were directed toward data protection systems on the data element level, which required specific programming of a computer.
The PTAB concluded that “[t]o be limited meaningfully, the claim must contain more than mere field-of-use limitations, tangential references to technology, insignificant pre- or post-solution activity, ancillary data-gathering steps, or the like.” The PTAB found that maintaining a database and a separate data protection table were data gathering steps, that granting access was insignificant pre- and post-solution activity, and that determining whether to grant access based on rules did not require specific programming of the computer. Accordingly, the PTAB found that the claims were directed to unpatentable subject matter.
In Google, petitioner sought to institute a CBM review of a patent related to providing mobile services using short-range radio communication devices. Petitioner challenged the patent eligibility of the claimed subject matter under § 101, arguing that the patent is directed to the abstract idea of receiving information and providing services or advertisements based on that information.
In response, the patent owner argued that the underlying idea was not abstract because the claims included specific recitations regarding the type of information, how the information was acquired and use of the acquired information for authentication. The PTAB concluded that the details emphasized by patent owner are “characteristic of the invention’s implementation, rather than its general idea.” According to the PTAB, the claims recited an abstraction because the steps had “no particular concrete or tangible form” and were “devoid of a concrete or tangible application.”
The patent owner also argued that the claims were not abstract because they indicated the technical environment that the method operated in, overcame challenges previously identified in the technical environment and provided benefits not readily available prior to the patent. The PTAB found, however, that arguing novelty in implementation of the idea was a factor to be considered only in the second step of the Alice analysis. Nor was the PTAB persuaded by patent owner’s assertion that the claimed invention did not fall within Alice’s articulated examples of abstract ideas.
For the second step, the PTAB looked for additional elements that can “transform the nature of the claim” into a patent-eligible application of an abstract idea. Again, the PTAB was not persuaded that the involvement of mobile network and short-range radio communication technologies added meaningful and concrete limitations to the claimed subject matter. Instead, the PTAB found that patent owner “fail[ed] to identify any language in the claims or the specification demonstrating that the generic communication systems function in an unconventional manner.” The PTAB also concluded that “the claimed subject matter does not do anything more than simply instruct the practitioner to implement the abstract idea of gathering, authenticating, and transmitting data and services on generic technology.”
AIA / CBM / "Financial Product or Service" / Technological Invention
Technological Invention Exception Key to Foiling CBM
In four orders addressing the requirements for instituting a covered business method (CBM) review, the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB)) found the “financial product or service” requirement easily met, while more strictly examining the “technological inventions” exception. Bloomberg Finance LP v. Quest Licensing Corporation, Case No. CBM2015-00205 (PTAB, Apr. 7, 2015) (Giannetti, APJ); Apple Inc. v. Smartflash LLC, Case No. CBM2015-00015 (PTAB, Apr. 10, 2015) (Bisk, APJ); Apple Inc. v. Smartflash LLC, Case No. CBM2015-00009 (PTAB, Apr. 13, 2015) (Clements, APJ); Ally Bank v. Secure Axcess, LLC, Case No. CBM2015-00005 (PTAB, Mar. 27, 2015) (Benoit, APJ).
In order to qualify for CBM review, a petitioner must not only establish that a challenged claim is directed to a “financial product or service” under § 18(d)(1) of the AIA, but also that notwithstanding the financial aspects of the claimed invention, the claim as a whole does not meet the “technological exception,” i.e., does not address a technological problem and provide a technological solution.
In the Apple cases, the petitioner, Apple, sought to institute a CBM patent review of two patents directed to “a portable data carrier,” as well as corresponding methods and computer programs. The patent owner argued that both petitions should be rejected because the challenged patents were not directed to “financial product[s] or service[s]” and moreover fall within the exclusion for “technological inventions.”
The patent owner argued that the “financial product or service” requirement should be read narrowly as covering only technology limited specifically to the financial or banking industry. The PTAB, noting that the statutory language controls, explained that the phrase “financial product or service” simply means a patent that “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.” The PTAB explained that “[t]he AIA does not include as a prerequisite for covered business method patent review, a ‘nexus’ to a ‘financial business.’” Applying these principles to the patents-at-issue, the PTAB concluded that “[e]lectronic transfer of money is a financial activity, and providing for such a transfer amounts to a financial service.”
Turning to the “technological inventions” exception, the PTAB concluded that each of the challenged claims “as a whole does not recite a technological feature that is novel and unobvious over the prior art,” because the specifications disclose that the system “may be one that is already in use or otherwise commercially available” and indicate that claimed elements “were known.” For these reasons, the patents were found to be eligible for CBM patent review.
In the Ally Bank case (as in the Apple cases), the patent owner argued that the challenged patent was not a CBM patent “because (1) the claimed method and apparatus can be used by a business generally, and (2) the claim language is devoid of any financial or monetary terms.” The PTAB disagreed, explaining that the written description of the patent “discloses a need by financial institutions to ensure customers are confident that the financial institution’s web page is authentic” and that “alternative embodiments of the invention are disclosed as being used by financial institutions and used in commerce.” The PTAB also factored in the patent owner’s patent infringement lawsuits against approximately 50 financial institutions to find that the patent “claims a method or apparatus that at least is incidental to a financial activity.” On the technological exception prong, just as it did in the Apple cases, the PTAB found that “the technological features of the claimed steps are directed to using known technologies,” and therefore the exception did not apply. Thus, the PTAB found the patent to be eligible for a CBM patent review.
In Bloomberg, the patent owner did not dispute the petitioner’s contention that the specification and several claims “expressly reflect the financial aspect of the invention.” Instead, the patent owner focused on the technological inventions exclusion, explaining how the claims “address the existing problems and combine software and hardware to change the fundamental operation of data delivery systems.” The PTAB agreed, finding that the petitioner “has failed to assess the claims as a whole as required by 37 C.F.R. § 42.301(b), and has instead focused on certain individual elements.” Unlike in the Apple and Ally Bank cases, the PTAB here found that the “petitioner failed to carry its burden to establish standing by showing that the patent is not directed to a technological invention.” Thus, the PTAB found the challenged patent to be ineligible for a CBM patent review.
Practice Note: The “financial product or service” requirement for a CBM review is not limited to products or service of the financial services industry, but may also include patents claiming activities that are “financial in nature” or “incidental to a financial activity.” On the other hand, even claims that “expressly reflect the financial aspect of the invention” may not qualify for CBM review if the claims as a whole are shown to meet the statutory technological invention exclusion.
AIA / IPR / Estoppel
Backup Anticipation with Obviousness
Addressing the issue of estoppel and joinder, the U.S. Patent and Trademark Office Patent Trial and Appeal Board (PTAB) denied a petitioner’s challenge, finding the petitioner was estopped from requesting the additional review based on a previous decision. Dell Inc. v. Elecs. & Telecomms. Research Inst., Case No. IPR 2015-00549 (PTAB, Mar. 26, 2015) (Anderson, APJ). The PTAB designated this decision as representative, meaning it is intended to provide guidance to other litigants.
In January 2015, the petitioners requested an inter partes review (IPR), challenging claims of a patent directed to computer network systems. The patent owner waived its right to file a preliminary response and did not oppose a joinder of this proceeding with another proceeding challenging the same patent. In each proceeding, the petitioner argued the claims of the patent were obvious in view of two pieces of prior art.
The PTAB concluded the petitioner was estopped under 35 U.S.C. § 315(e)(1) from challenging certain of the claims through an IPR on the grounds that the challenge to those claims could have been raised during a prior proceeding. Previously, the same petitioner failed in challenging the patent using the same two pieces of prior art (IP Update, Vol. 18, No. 3). Although the petitioner presented different arguments in the current IPR, the PTAB explained that differences regarding how references are asserted have no weight on whether the grounds could have been raised in the previous IPR, and therefore the petitioner was estopped from a second attempt to challenge the patent.
As for the remaining claims, the PTAB concluded that § 315(e)(1) did not apply because these claims were not part of the original IPR. However, absent joinder to a pending proceeding, this challenge would be barred by § 315(b) because the petition was filed more than one year after the date on which the petitioner was served a complaint. The PTAB has discretion (under § 315(c)) as to whether to grant joinder. Notwithstanding that the patent owner did not oppose the joinder, the PTAB concluded the petitioner had not shown that joinder would be appropriate on the subset of remaining claims, and that such a partial joinder would unnecessarily complicate an IPR that had already been subject to a prior joinder. Therefore, joinder was denied, and the petition was barred under § 315(b).
Trademarks / Disparaging Marks / First Amendment
Federal Circuit Vacates Panel Decision on Disparaging Trademark and Orders En Banc Hearing
The U.S. Court of Appeals for the Federal Circuit issued a sua sponte order vacating its April 20, 2015, decision in In re Tam to consider the constitutionality of Section 2(a) of the Lanham Act, which provides that the U. S. Patent and Trademark Office (PTO) may refuse to register a trademark that “[c]onsists of or comprises . . . matter which may disparage . . . persons, living or dead, institutions, beliefs, or national symbols . . .” The en banc order appears likely to be the Court’s response to Judge Moore’s “additional views” that were appended to the Court’s April 20 panel decision, which affirmed the Trademark Trial and Appeal Board’s (TTAB’s) refusal to register the mark THE SLANTS, concluding it is disparaging to a substantial portion of people of Asian descent. In re Tam, Case No. 14-1203 (Fed. Cir., Apr. 20, 2015) (Moore, J.) The order requests that the parties file new briefs addressing the question of whether “. . . the bar on registration of disparaging marks in 15 U.S.C. § 1052(a) violates the First Amendment.”
The Panel Decision
Simon Shiao Tam is the lead singer of the Asian-American dance rock band The Slants. After the TTAB affirmed the PTO’s refusal of Mr. Tam’s trademark application for THE SLANTS covering live music performances, he appealed to the Federal Circuit. On appeal, Mr. Tam argued that the TTAB erred in finding THE SLANTS mark to be disparaging, and challenged the constitutionality of §2(a) of the Lanham Act.
The Federal Circuit panel noted the existing two-part test for determining whether a trademark is disparaging, which looks at (1) the likely meaning of the trademark in question, and (2) whether that meaning may be disparaging to a substantial composite of the group of people to which the trademark refers. In resolving these issues, the Court explained that the PTO may look to evidence outside of the trademark application to determine the meaning and manner of use of a trademark. In this regard, the Court found that the relevant evidence, such as dictionary definitions, cultural slang and known ethnic slurs, news articles, the band’s own Wikipedia page, and even past interviews with and statements by Mr. Tam indicate that THE SLANTS likely refers to people of Asian descent and is likely offensive to a “substantial composite” of people of Asian descent.
Turning to the constitutionality of §2(a) of the Lanham Act, the Federal Circuit cited its own precedent, In re McGinley, rejecting Mr. Tam’s argument that §2(a) conditions the benefit of trademark registration on the relinquishment of speech. Instead, the Court explained that the PTO’s refusal to register a mark does not affect an applicant’s right to use the mark, and therefore is not an abridgment of First Amendment rights. The Court further explained that §2(a) is not unconstitutionally vague and rejected Mr. Tam’s arguments based on due process and equal protection.
Judge Moore’s “Additional Views”
Despite the unanimous opinion of the panel, Judge Moore authored additional views in connection with the panel appeal, and presented arguments urging the Court to revisit McGinley. Judge Moore referenced the wide criticism that McGinley has received over the past 30 years and noted that the “unconstitutional conditions” doctrine and the protection afforded to commercial speech has evolved “significantly” since McGinley. Judge Moore acknowledged that trademarks are only protected speech under Supreme Court commercial speech jurisprudence, but further noted that, in context, Mr. Tam’s attempted registration of THE SLANTS was not only as a source-identifier (of the band’s services) for commercial purposes, but also for the purpose of political and cultural commentary. Indeed, Mr. Tam, who is of Asian descent, has stated that he selected THE SLANTS name to “reclaim” and “take ownership” of Asian stereotypes.
Although a trademark applicant is not barred from using a mark that has been refused under §2(a), Judge Moore explained that McGinley recognizes that the benefits of federal registration provided by the Lanham Act are “significant” and “enhance the value of a mark.” Benefits such as exclusive nationwide use of a trademark, incontestable status, certain statutory presumptions and treble damages, among others, are unavailable when registration is refused under §2(a). According to Judge Moore, the denial of federal trademark rights “severely burdens use of such marks.” Judge Moore also noted that no court, including McGinley, has analyzed §2(a) under the “unconstitutional conditions” doctrine, which holds that the government cannot deny access to a benefit because of the recipient’s exercise of constitutionally protected speech.
Practice Note: The Federal Circuit’s en banc decision in this case will likely have a significant impact on other cases, including the dispute involving various Washington Redskins trademarks and the TTAB’s recent cancellation under §2(a) of six registrations that included the term “REDSKINS.”
Litigants Challenging PTO Decisions in District Court Should Be Prepared to Pay PTO's Attorneys' Fees
Addressing the issue of attorneys’ fees in connection with a district court challenge of the U.S. Patent and Trademark Office’s (PTO’s) decision to reject a trademark registration, the U.S. Court of Appeals for the Fourth Circuit affirmed the district court’s decision and held that the trademark applicant will be liable for the PTO’s attorneys’ fees in defending that action, regardless of the evidence. Shammas v. Focarino, No. 14-1191 (4th Cir., 2015) (Niemeyer, J.)
Milo Shammas filed an application to register the trademark PROBIOTIC for fertilizer products. The PTO refused to register the trademark on the grounds that it was generic and descriptive. Under 15 U.S.C. § 1071, Shammas had two options to obtain judicial review: he could appeal to the Federal Circuit, or he could seek de novo review by a district court. Shammas chose the second option—filing a case at the district court. After the district court granted summary judgment to the PTO, it ordered Shammas to pay the PTO’s “expenses” under § 1071(b)(3), expenses that included the prorated salary of two lawyers and one paralegal from the PTO who defended the case. Shammas appealed, arguing that an award of attorneys’ fees was not authorized by the statute and contradicted the “American Rule,” which prohibits fee-shifting without explicit congressional authorization.
The Fourth Circuit affirmed the district court’s award of attorneys’ fees, holding that § 1071(b)(3) does not implicate the American Rule because it mandates the challenging litigant to pay the PTO’s expenses regardless of whether the litigant is successful in its challenge. Because the American Rule is not implicated, the court was entitled to rely on the plain meaning of the term “expenses” in determining whether Congress intended it to include attorneys’ fees.
The Fourth Circuit then found that the plain meaning of the term “expenses” in § 1071(b)(3) included attorneys’ fees, which it reasoned were the largest expense the PTO incurred in defending such proceedings. The Court explained that the alternatives that § 1071 provides to an applicant challenging the PTO’s decision—either filing an appeal to the U.S. Court of Appeals for the Federal Circuit or initiating a de novo proceeding in district court—supported its interpretation. Whereas an appeal to the Federal Circuit was limited to the record before the PTO and accorded deference to the PTO’s decision, a proceeding before a district court permitted the applicant to introduce new evidence and called for the court’s de novo review, thus putting an uncommonly large burden on the PTO. According to the Court, § 1071(b)(3) is “intended as a straightforward funding provision, designed to relieve the PTO of the financial burden that results from an applicant’s election to pursue the more expensive district court litigation.”
In dicta, the Fourth Circuit strongly suggested that it would interpret the analogous provision of the Patent Act, 35 U.S.C. § 145, the same way, and thus would require patent applicants who challenge the PTO’s decision in district court to compensate the PTO for attorneys’ fees incurred in that proceeding.
Practice Note: Although under the America Invents Act there are fewer situations where a patent appeal might end up in a district court, the Fourth Circuit’s decision still has significant implications for both trademark and patent applicants who wish to challenge the PTO’s decision in an ex parte proceeding (where such review is available), and is likely to lead to fewer district court challenges by disappointed applicants. The requirement of paying the PTO’s attorneys’ fees, win or lose, mitigates against a district court proceeding unless there is a pressing need to introduce additional evidence that was not in the record, and the trademark or patent registration sought is of significant importance.
Trademarks / Licensing Agreements
Pre-Arbitration Injunction May Only Preserve Status Quo
In the context of a dispute surrounding a breach of a trademark license agreement that provided for arbitration of certain disputes, the U.S. Court of Appeals for the Second Circuit concluded that it was inappropriate for a district court to use its injunction in aid of arbitration jurisdiction to issue an injunction that went to issues already properly before the arbitration panel. Benihana, Inc. v. Benihana of Tokyo, LLC, Case No. 14-841, (2d Cir., Apr. 28, 2015) (Lynch, J.) Rather, the district court’s aid of arbitration jurisdiction only extends to injunctions limited to maintaining the status quo between the parties.
The dispute arises out of a 1994 agreement between plaintiff Benihana America and defendant Benihana of Tokyo—two restaurant chains operating under the Benihana brand. Under the agreement, plaintiff received rights to use the Benihana trademarks and to operate Benihana restaurants in certain territories, including the United States, while defendant received the same rights in other territories. However, because defendant had a pre-existing Benihana restaurant in Honolulu, plaintiff granted defendant a license to continue operating that restaurant in Honolulu provided defendant abided by certain menu and advertising restrictions.
In 2013, plaintiff notified defendant that it was in breach because it was selling hamburgers, an unauthorized menu item, and using unapproved advertising at its Honolulu location. Although defendant assured plaintiff that it would cure the breach, defendant brought suit seeking an injunction to stay the running of the cure period pending arbitration of the issue of whether selling hamburgers violated the agreement. Notwithstanding its assurance, defendant continued selling hamburgers, prompting plaintiff to send a notice of termination of the agreement followed by a petition to the district court for injunctive relief that defendants (1) may not sell unauthorized food items in Hawaii, (2) may not use unapproved advertising and (3) may not argue to the arbitration panel that it should be permitted to cure any defaults. After the district court granted the injunction on all three issues, defendants appealed.
On appeal, the Second Circuit explained that the district court did not abuse its discretion when it granted injunctive relief as to the first two requests, finding likelihood of success on the merits, irreparable harm vis-à-vis plaintiff’s reputation and brand, and the license’s provision that control over menu and advertising using the Benihana trademarks in the Honolulu restaurant remains with the licensor.
However, the Second Circuit concluded that the district court did abuse its discretion when it enjoined defendant from arguing to the arbitral panel for an extended cure period after finding that plaintiff would be irreparably harmed if defendant were to “wrongly convince[ ] the arbitrators to grant” the extension, explaining that this was an improper ground for finding irreparable harm or for granting an injunction. If indeed there is no support in the agreement for such a remedy, there is no reason for the district court to presume that the arbitral panel will likely grant that remedy. Furthermore, the plain language of the agreement indicated the parties intended to grant the arbitrator the power to decide questions of arbitrability, including whether a remedy is within the scope of the agreement or whether defendant’s claim for an extended cure period in lieu of termination is even an arbitrable issue. The Second Circuit reiterated that once arbitrators have jurisdiction over a matter, “any subsequent construction of the contract and of the parties’ rights and obligations under it” is for the arbitrators to decide.
Finally, the Second Circuit explained that because the parties’ dispute had been submitted to arbitration, the district court should have confined itself to preserving the status quo pending arbitration rather than independently assessing the merits.
Practice Note: Broadly written arbitration provisions may grant broad authority to an arbitrator removing jurisdiction of issues from the courts, thus altering litigation strategies and expectations. As the Second Circuit noted, there is a “strong federal policy favoring arbitration as an alternative means of dispute resolution,” especially where such provisions are in negotiated contracts.
Trademarks / Descriptiveness
NOPALEA Mark Merely Descriptive of a Product Derived from Nopalea Cactus *Web Only*
The U.S. Court of Appeals for the Federal Circuit affirmed the Trademark Trial and Appeal Board’s (TTAB’s) decision that the trademark NOPALEA was descriptive of TriVita’s products, which contain juice from the nopal cactus. In Re TriVita, Inc., Case No. 14-1383 (Fed. Cir., Apr. 17, 2015) (Newman, J.)
TriVita applied for registration for NOPALEA for use in connection with “dietary and nutritional supplements . . . containing, in whole or in substantial part, nopal juice.” The examiner rejected TriVita’s registration of the application under § 2(e) of the Lanham Act, which provides that a term is not a registerable trademark when it “consists of a mark which when used on or in connection with the goods of the applicant is merely descriptive or deceptively misdescriptive of them.” The record showed that TriVita’s product contains nopal juice, which is derived from an extract of the nopalea plant. TriVita appealed the decision to the TTAB, arguing that the “nopalea plant is not a term used in the food industry, and that the term is not descriptive because TriVita’s products contain extracts from the Opunti genus of nopal cactus, not the Nopalea genus.” The TTAB affirmed the rejection because “the record indicates that nopalea is indeed a genus of cacti which is used for food and medicine, and which is commonly referred to as nopal,” and “consumers may well assume that, as a characteristic of nopal juice, TriVita’s goods derive from genus nopalea.”
TriVita appealed to the Federal Circuit, arguing that adding the letters “EA” to the word NOPAL made the mark NOPALEA substantially different from NOPAL. The Federal Circuit disagreed, stating that “nopalea is not a made-up word obtained by adding arbitrary letters. The record shows, and the [TTAB] found, that ‘nopalea’ is a genus of cacti from which nopal juice, the product at issue, is derived.”
TriVita also claimed that an ordinary purchaser of its products is of low botanical sophistication and will not immediately recognize the botanical meaning of the word “nopalea.” The Federal Circuit again disagreed noting “abundant evidence, scientific and non-scientific, of the words ‘nopalea’ and ‘nopal’ being used interchangeably,” largely in the context of discussion of the health benefits of this class of cactus. The Court also found that there was no factual showing of non-descriptive use by TriVita. In light of the record, the Court concluded that relevant consumers who knew that the goods contained nopal cactus juice would understand the mark NOPALEA to convey information that the goods contained ingredients from the Nopalea cactus.
Copyrights / Substantial Similarity Trademarks / Validity
Party Over for Claimed Mardi Gras Bead Dog Trademarks *Web Only*
Addressing issues of trademark validity and substantial similarity in a copyright infringement claim, the U.S. Court of Appeals for the Fifth Circuit upheld a district court’s grant of summary judgment that the challenged marks were not distinctive and thus unprotectable in a case involving the parties’ sale of goods relating to the Mardi Gras tradition of a “bead dog.” Nola Spice Designs, L.L.C. v. Haydel Enterprises, Inc., et. al., Case No. 13-30918 (5th Cir., Apr. 8, 2015) (Higginson, J.)
In Mardi Gras parades in New Orleans, parade participants throw strands of beads to onlookers. Onlookers in turn have traditionally created “bead dogs” by twisting the beads into the shape of a dog. In 2009, Haydel Enterprises, the owner of a New Orleans bakery, received trademark registrations for the word mark “MARDI GRAS BEAD DOG” and a bead dog design for king cakes, jewelry and clothing. Haydel later obtained a copyright registration in 2012 for its bead dog design. Haydel’s bead dog design included a collar formed by a series of spheres designed to look like Mardi Gras style beads. In 2012, Nola Spice began selling its own “bead dog” jewelry, made by twisting together beads and wire. After receiving a demand letter from Haydel to cease use of its “bead dog” design, Nola Spice sued Haydel for declaratory judgment that its use of the bead dog design did not violate the Lanham Act, and sought to cancel Haydel’s trademark registrations. Haydel asserted counterclaims for, inter alia, trademark infringement, unfair competition, trademark dilution and copyright infringement.
In reviewing the district court’s Lanham Act decision de novo, the Fifth Circuit concluded that Haydel’s trademark registrations for “MARDI GRAS BEAD DOG” and its bead dog design were invalid because they were not distinctive. The Court employed the “imagination test” to assess the descriptiveness of the mark, and concluded that the word mark was not inherently distinctive because it conveyed information about Haydel’s clothing, jewelry and king cake, and “no reasonable juror could find that imagination is required to link Haydel’s clothing, jewelry and king cake to the phrase ‘Mardi Gras Bead Dog.’” To further support its conclusion, the Court relied on the finding that competitors likely would need to use the phrase “Mardi Gras bead dog” to describe their own products. Concerning Haydel’s bead dog design mark, the Court found that its design was substantially similar to the traditional bead dogs constructed by Mardi Gras parade onlookers and also was not inherently distinctive.
Because Haydel’s trademarks were not inherently distinctive, Haydel needed to prove that its marks had acquired secondary meaning. The Court found Haydel had failed to raise an issue of material fact on this point and thus affirmed the cancellation of Haydel’s trademark registrations and the grant of summary judgment in favor of Nola Spice on Haydel’s unfair competition and trademark dilution claims.
The Fifth Circuit then analyzed Haydel’s copyright infringement claim. Disagreeing with the district court’s finding that Haydel’s copyright was not protectable under the merger doctrine, the Court nevertheless affirmed the district court’s grant of summary judgment because there was no substantial similarity between the protectable elements of Haydel’s registered copyright for its bead dog design and Nola Spice’s bead dog jewelry. The Court found that the only possible protectable element of Haydel’s bead dog design was the expression of the collar as a string of spheres to make a collar around the bead dog’s neck. Deeming this expression “minimal[ly] original,” the Court noted that the collar was “quantitatively and qualitatively insignificant in relation to Haydel’s work as a whole” and held that no reasonable juror could find substantial similarity with Nola Spice’s bead dog jewelry based solely on Haydel’s expression of a collar.
Copyrights / Preemption
Preemption of State-Law Tort Claims by the Copyright Act
Addressing the issue of the preemption of state-law claims by the Copyright Act, the U.S. Court of Appeals for the Eighth Circuit upheld the district court’s dismissal of several state-law tort claims because the claims are based solely on video recordings depicting the plaintiff in a “work of authorship,” which is plainly encompassed by copyright law. Ray v. ESPN, Case No. 14-2117 (8th Cir., Apr. 22, 2015) (per curiam).
Steve “Wild Thing” Ray brought suit against ESPN, asserting state-law tort claims for ESPN’s re-telecast of his wrestling performances. Ray alleged that although he had an agreement with the Universal Wrestling Federation that films of his matches would be “sold and used,” ESPN did not have his “consent to use [his] identity, likeness, name, nick name or personality to depict him in any way.” Although not alleging that ESPN obtained the films unlawfully, Ray asserted four claims under Missouri state law: (1) invasion of privacy, (2) misappropriation of name, (3) infringement of the right of publicity and (4) interference with prospective economic advantage. ESPN moved under F.R. Civ. Pro. 12(b)(6) to dismiss the case on the grounds that the Copyright Act preempts Ray’s claims. After the district court found preemption, Ray appealed.
The Eighth Circuit, citing National Car Rental System v. Computer Associates, adopted the following test: the Copyright Act preempts state law claims if (1) the work at issue is within the subject matter of copyright as defined in § 102 and 103 of the Copyright Act, and (2) the state-law-created right is equivalent to any of the exclusive rights within the general scope of copyright as specified in § 106 of the Copyright Act. With respect to the first prong of this test, the Court found that the subject films are clearly within the subject matter of copyright law because the filming of Ray’s wrestling performances generated an original work of authorship under § 102(a) that was “fixed in a tangible medium of expression” and could be “perceived, reproduced or otherwise communicated” under § 101. The Court found that ESPN did not use Ray’s likeness or name in an advertisement without his permission to promote its commercial products, and agreed with the district court that Ray’s “likeness could not be detached from the copyrighted performances that were contained in the films.”
Analyzing the second prong of the test, the court found that because, consistent with Ray’s allegations, state-law rights have been “infringed by the mere act of reproduction, performance, distribution or display” of his performances, his state-law rights are equivalent to the exclusive rights within the general scope of the copyright right.
Thus, finding both elements of the adopted test met, the Eighth Circuit affirmed the district court’s dismissal of Ray’s state-law claims as preempted under the Copyright Act.
Copyrights / Eligible Subject Matter
Wood Laminate Flooring Design "Not a Slavish Copy of Nature"
Addressing the copyrightability of a laminate flooring design depicting maple planks, the U.S. Court of Appeals for the 11th Circuit held that the design was copyright eligible and reversed the district court’s grant of summary judgment in favor of the alleged infringer. Home Legend, LLC v. Mannington Mills, Inc., Case No. 14-13440 (11th Cir., Apr. 29, 2015) (Carnes, J.)
Mannington Mills and Home Legend are competitors in the laminate flooring market. Mannington created the design at issue by envisioning what a wood floor might look like after decades of age and wear. The design process began with building prototype planks. Surface imperfections were made to dozens of raw planks; layers of stain were applied in different amounts to reflect greater wear in the center of each board; and streaks and other effects were added. Mannington chose 30 prototype planks to photograph, then made digital edits and selected 15 photographs to arrange into a single 120-by-100-inch photograph. This photograph became the “Glazed Maple” design, which was registered with the Copyright Office in 2010. The dispute arose when Home Legend began selling laminate flooring with designs “virtually identical in every respect” to the Glazed Maple design. After discovery closed, the district court granted Home Legend’s motion for summary judgment that the design was not copyrightable on three alternative grounds, but the 11th Circuit rejected all three.
First, the Court disagreed with the district court’s finding that the design merely “depict[ed] or cop[ied] elements found in nature—the look of a rustic, aged wooden floor” and thus was not sufficiently original for copyright protection. The Court found Mannington’s design was “the product of creativity, not a slavish copy of nature” and met Feist’s low bar for creativity, requiring only “some creative spark, no matter how crude, humble or obvious.” The design was also copyrightable as a compilation involving the artistic selection and arrangement of individual plank images.
The 11th Circuit also disagreed with the district court’s finding that the design was inseparable from the laminate flooring product, a “useful article” under 17 U.S.C. § 101, and therefore not copyrightable. The 11th Circuit rejected this finding not only because it was based on conjecture, but also because it was factually incorrect; the design was both physically and conceptually separable from the utilitarian aspects of the flooring. The Glazed Maple design was printed on décor paper that was applied to the flooring (demonstrating physical separability), and the design could very well be printed, framed and hung as art (demonstrating conceptual separability).
Finally, the Court rejected the district court’s finding that Mannington’s copyright was directed to an idea or process, as the copyright clearly protected the two-dimensional design.
The 11th Circuit reversed and remanded the case to the district court, but noted that Mannington’s copyright in the Glazed Maple design was not particularly strong and protected only the original elements. However, the copyright would protect Mannington from identical or near-identical copies of the design, including Home Legend’s allegedly infringing product.
Trade Secrets / Attorneys' Fees for Bad Faith Litigation
Attorney's Fees Awarded in "Nonsensical" Trade Secrets Case
Upholding an award of more than $180,000 in attorneys’ fees under the California Uniform Trade Secret Act (CUTSA) for bringing a bad faith misappropriation claim, the California Court of Appeal found that “Cypress filed a complaint that was . . . meritless on its face, based upon theories of liability that were not merely specious, but nonsensical. The apparent purpose of the lawsuit was to cow Maxim, and perhaps other competitors, into refraining from conduct in which . . . they had every right to engage.” Cypress Semiconductor Corp. v. Maxim Integrated Products, Inc., No. H038555, 2015 WL 1911121 (Cal. Ct. App., Apr. 28, 2015) (Rushing, J.
Cypress and Maxim compete in the area of touchscreen technologies. After written exchanges accusing Maxim of poaching Cypress’s employees, in 2011 Cypress filed suit against Maxim for misappropriation of trade secrets and unfair competition. The complaint alleged that “Maxim has used a headhunter to repeatedly target Cypress’s touchscreen employees, apparently using improperly obtained confidential information regarding Cypress touchscreen employees to do so.” After filing its complaint, Cypress sought a temporary restraining order barring Maxim from soliciting its touchscreen employees and seeking the return of any trade secrets. The parties ended up stipulating to not solicit each other’s employees for 30 days.
Pursuant to CUTSA, Maxim demanded identification of the specific trade secrets at issue. Cypress initially failed to respond, and Maxim filed a demurrer.
Undeterred, Cypress filed an amended complaint that differed little from the original and shortly thereafter identified its trade secrets as “1. A compilation or list of Cypress employees who worked with Cypress’s touchscreen technology and products area and their employee information, including contact information,” and “2. Cypress’s substantive confidential information regarding its proprietary touchscreen technology and high performance products.”
Maxim’s second demurrer followed. It attached a declaration showing that the identities of 93 Cypress touchscreen employees were publically known and available via web sites and patent office records. About a week later, Cypress filed a request to dismiss the case without prejudice.
Maxim moved for and was awarded attorneys’ fees pursuant to CUTSA, which provides that “[i]f a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees and costs to the prevailing party.” Cypress appealed, urging that Maxim was not the prevailing party and that Cypress had not acted in bad faith.
The California Court of Appeal, Sixth District, disagreed. Holding that Maxim was the prevailing party, the Court of Appeal rejected Cypress’s argument that it dismissed the case because Maxim had stopped soliciting its touchscreen employees and because it was not able to obtain third-party discovery from the headhunter Maxim had hired. Instead, the Court of Appeal found that “[t]he only plausible explanation for Cypress’s dismissal of the action is that it feared a determination on the merits. Had Maxim’s demurrer been heard, it would almost certainly have been sustained . . . . Maxim, in contrast, walked away with all of the rights it had when it was served with the complaint . . . .”
On the question of bad faith, the Court of Appeal reviewed the trial court’s findings for sufficiency of evidence under the “objectively specious standard,” a standard where a prevailing party need only “point to the absence of evidence of misappropriation in the record.” It found that Cypress’s complaint was “nonsensical” and unsupported by any evidence of misappropriation, adding “[i]t bears emphasis that despite the repeated references to ‘unfair’—not illegal—hiring practices, Cypress at no time pointed to any information whatever tending to show that Maxim was doing anything more than seek the most qualified candidates for openings in its own enterprise.”
The Court of Appeal also found that Cypress engaged in litigation misconduct from which dilatory and oppressive intent could be inferred, including filing an amended complaint that hardly differed from the original and doing so at the last minute.