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Are the Tides Turning for Motions to Amend Claims in IPR Proceedings?

Posted in Patent Law

The Patent Trial and Appeal Board (“PTAB”) has rarely allowed patent owners to replace or modify claims during inter partes review (“IPR”), covered business method review, or post-grant review.  In fact, in April 2016 the PTAB’s Motion to Amend Study reported that only 6 of 118, or about 5%, of such motions to amend claims had been granted.  We have not seen a substantial change since that report, but will that statistic be changing in light of recent events?  In particular, the PTAB just granted Shire’s motion to amend, and the Federal Circuit is considering en banc whether to shift the burden of proving patentability away from the patent owner, which could make it easier to amend claims.

In Amerigen Pharmaceuticals Ltd. v. Shire LLC, the PTAB instituted review of claims 18-21, 23 and 25 of Shire’s patent for the attention deficit and hyperactivity disorder medication known as Adderall XR.  In lieu of responding to the invalidity arguments, Shire filed a motion to amend that consisted of a request to cancel all of the claims under review and substitute a single, “new” claim in their place.  The PTAB granted Shire’s motion.

Does the Shire decision open the door for other patent owners hoping to amend claims during IPRs?  To answer that question, we need to look more closely at the facts in Shire.  Specifically, Shire requested cancellation of instituted claims 18-21 and 23, as well as non-instituted claims 22 and 24.  Shire also requested substitution of new claim 26 for instituted claim 25, which is a multiple dependent claim that recites:

  1. The pharmaceutical composition of any one of claims 2, 13 or 18 to 20 wherein the pharmaceutically active amphetamine salt in (a) and (b) comprises mixed amphetamine salts.

Proposed new claim 26 recites:

  1. The pharmaceutical composition of any one of claims 2 or 13 wherein the pharmaceutically active amphetamine salt in (a) and (b) comprises mixed amphetamine salts.

The PTAB’s ultimate decision relied on the fact that for these purposes a multiple dependent claim is treated in the same manner as if it were written as separate dependent claims.  In the case of claim 25, it is treated as if it had been written as five separate dependent claims with a separate claim depending from each of claims 2, 13, 18, 19, and 20.  Similarly, claim 26 is treated as two separate dependent claims with one depending from claim 2 and one from claim 13.   Effectively, claim 26 deletes three “claims” from claim 25, those that depended from claims 18-20, which were all claims under review by the PTAB.  Given that claims 2 and 13 were not under review, new claim 26 would not involve any claim under review.  Thus, Shire’s motion to replace claim 25 with claim 26 and cancel the other claims would leave no instituted claim under review by the PTAB.

Petitioner Amerigen opposed Shire’s motion to amend arguing that according to Idle Free Sys. v. Berstrom, Inc., a patent owner seeking to amend a claim has the burden “to show a patentable distinction over the prior art of record and also prior art known to the patent owner.”  The PTAB, however, explained that in Shire’s request “[e]ffectively, no claim is being amended, and claims are only being cancelled, because claims 18-24 are being removed, and proposed claim 26 removes three multiple dependent claims (claim 25 as it depends from claims 18-20)” and “[n]o other changes to the claims are being made.”  Therefore, the PTAB “agree[d] with Patent owner that ‘[t]here is no requirement for Shire to prove, after the Institution Decision, that original non-amended claims are patentable over all potential prior art, especially non-instituted claims.’”

While motions to substitute amended claims are rarely granted, motions to cancel claims are routinely granted.  Therefore, once the PTAB decided that Shire’s motion was merely canceling claims, the outcome was very predictable.  In other words, nothing really changed as a result of the Shire decision.

But, in In re Aqua, will the Federal Circuit turn the tide for amending claims?  Currently, a patent owner is allowed to file one motion to amend to (A) “cancel any challenged patent claim” and (B) “propose a reasonable number of substitute claims” that do not “enlarge the scope of the claims of the patent or introduce new matter.”  The patent owner has the burden of showing that the amended claims are patentable over the known prior art.  Then the petitioner may oppose the motion to amend and raise new arguments of unpatentability, cite new prior art against the proposed new claims, and file new expert declarations.  But in In re Aqua the Federal Circuit is currently considering en banc whether it is proper for the PTAB to put the burden on the patent owner to prove that the proposed substitute claims are patentable or whether the burden to show unpatentability should be shifted to the petitioner.

Under the current requirements, a patent owner must distinguish the proposed substitute claims over the material art in the prosecution history, the material art in the current proceeding, any material art in any other proceeding before the USPTO involving the patent, and any material art not of record but known to the patent owner.  In Shinn Fu v. The Tire Hanger, the PTAB found that, in instances where art is duplicative, a patent owner is not required to address each piece of art individually.  Instead, as long as the patent owner groups prior art references according to claim features and examines a representative reference from each group, the patent owner can satisfy its burden for purposes of a motion to amend.

As evidenced by the difficulty of succeeding on a motion to amend, the patent owner has a heavy burden.  Further, placing this burden on the patent owner differs from the traditional approach used during initial prosecution of a patent.  During prosecution, a patentee merely needs to respond to unpatentability positions offered by the examiner rather than affirmatively distinguishing the proposed claims from all known prior art.  If the Federal Circuit adopts a prosecution-like approach in In re Aqua, then the patent owner would likely still need to show the proposed new claims respond to a ground of patentability involved in the PTAB trial, do not broaden claim scope, and have written description support and do not introduce new matter.  The patent owner will also need to provide claim constructions for any new claim terms and show that the number of proposed substitute claims is reasonable. The petitioner, however, would then bear the burden of showing unpatentability.  In response, the patent owner would be given the opportunity to rebut the petitioner’s unpatentability arguments.

Shifting the burden to petitioners to show unpatentability could have a number of consequences.  For example, it may be easier to amend claims because it likely will be easier for a patent owner to rebut a petitioner’s specific unpatentability arguments for the substitute claims than to affirmatively show patentability.  Thus patent owners may be more likely to file motions to amend.  Further, if patent owners are more likely to succeed in amending claims, some petitioners may opt against an IPR petition and instead challenge validity in district court where amendment is not possible.

Even if amendments become easier to obtain, the patent owner will still need to consider the impact of amending claims on litigation strategy, particularly in ongoing litigation.  Amended claims give rise to intervening rights, which may relieve infringers of cancelled claims from liability during the period before the amended claims issue.  Further, amendments and arguments made to the PTAB may impact infringement and validity arguments in the district court proceeding.  Therefore, a successful claim amendment may dramatically impact infringement, validity, and damages arguments in co-pending district court litigation.

The Federal Circuit heard oral argument in In re Aqua on Friday, December 9, 2016.   Therefore, we will know soon whether there will be a shift that may favor patent owner amendments or whether amendments are destined to remain a rarity, at least for now.

The Fabric of Copyright Infringement: Obtaining Summary Judgment on Copying Element

Posted in Copyright Law

James-Kachmar-08_webGenerally, the issue of copyright infringement presents issues of fact to be decided by a jury.  However, when evidence that a design is so “substantially similar” to a copyrighted design, the trial court can find infringement as a matter of law and grant summary judgment to the copyright owner.  The Ninth Circuit recently approved of a district court doing exactly that in the case: Unicolors, Inc. v. Urban Outfitters, Inc., decided April 3, 2017.

Unicolors is a Los Angeles based company that designs and sells fabrics in the apparel markets.  It typically copyrights its fabric designs.  In September 2008, Unicolors obtained the rights to a floral design that it printed onto bolts of fabric.  A few months later, it registered the floral pattern with the Copyright Office and sold approximately 14,000 yards of fabric bearing that design over the next several years.

Urban Outfitters has over 500 stores worldwide and is a specialty retail company.  In 2010, Urban Outfitters developed and began selling a dress that had a floral fabric design that as very similar to that of Unicolors’ copyrighted design.  Unicolors sent a cease and desist letter to Urban Outfitters and later filed suit against it for copyright infringement.

Prior to trial, the district court granted summary judgment to Unicolors finding that Urban Outfitters’ floral dress infringed on Unicolors’ copyright for the floral design.  The case went to trial on other issues and Unicolors was awarded $164,000 in damages, and an additional $366,000 in attorney’s fees and costs.  Urban Outfitters appealed both the summary judgment and the jury verdict to the Ninth Circuit.  (This article will focus only on the lower court’s granting of summary judgment.)

To prevail on its infringement claim, Unicolors had to show that: (1) it owned the copyright in an infringed-upon work; and (2) the defendant was guilty of copying protected elements of the work.  With regard to the copying element, Unicolors was required to demonstrate either direct evidence of copying or, if no evidence existed, “that: (1) the defendant had access to the copyrighted work prior to the creation of defendant’s work; and (2) there was substantial similarity of the general ideas and expression between the copyrighted work and the defendant’s work.”  To establish the element of access, a plaintiff generally must show a “chain of events … between the plaintiff’s work and defendant’s access to that work;” or that plaintiff’s work has been widely disseminated.  In moving for summary judgment, Unicolors conceded that it could not show “a chain of events linking its design to Urban [Outfitters]” such as to establish the element of access.  However, prior Ninth Circuit cases have recognized that “if there is no evidence of access, a `striking similarity’ between the works may allow and inference of copying.”  To determine whether works are strikingly similar, the Ninth Circuit applies a two part analysis.  This analysis includes an extrinsic test requiring a plaintiff “to show overlap of `concrete elements based on objective criteria’ and an intrinsic test which focuses on whether the ordinary reasonable person would find `the total concept and feel of the works’ to be substantially similar.”  Although this issue is generally a question of fact for the jury, the Ninth Circuit has recognized that there will be rare cases “where works are so overwhelmingly identical that the possibility of independent creation is precluded.”  That is what the district court did in the Unicolors case in granting summary judgment.

The Ninth Circuit recognized that the trial court found that there was not sufficient evidence to show that Unicolors’ floral pattern had been widely disseminated, given that the lower court had focused its inquiry on whether the designs were strikingly similar.  In reaching its conclusion, the lower court found it significant that there was substantial similarity between the works including “the presentations of the petal groups, the overlays, shading and layout are all nearly identical.”  In fact, it appeared to the trial court that the only difference between the two designs had to do with the color palette selected.  In almost every other design element, the trial court found them to be nearly identical.

Urban Outfitters argued that it was error for the lower court to grant summary judgment and that application of the intrinsic test required that the issue be decided by a jury.  However, the Ninth Circuit rejected this argument, finding it contrary to its prior case law that recognized that “in exceptional cases, works may be so identical that summary judgment in favor of a plaintiff is warranted.”

The Ninth Circuit noted that the lower court had “detailed the various subjective factors and elements that [were] common between the subject design and the accused dress.”  The Ninth Circuit concluded that: “given the intricacy of the designs and the objective overlap between them, the district court properly concluded that the works are `so overwhelmingly identical that the possibility of independent creation is precluded’.”

Urban Outfitters sought to overturn the summary judgment by arguing another line of cases, L.A. Printex Industries, Inc. v. Aeropostale, Inc. and Funky Films, Inc. v. Time Warner Entm’t Co., L.P., where the courts had held that the issues of the similarities between the products at issue were questions of fact for the jury.  The Ninth Circuit rejected this argument because in neither of those cases were the works “virtually identical” as in the floral pattern as issue in the case before it.

The Ninth Circuit continued by recognizing that preventing a lower court from granting summary judgment in a case where the two designs were “so overwhelming identical” would dilute the summary judgment procedures in copyright infringement cases.  Thus, for the summary judgment procedures to have any impact in copyright infringement cases, the court should be empowered to grant summary judgment where the “overwhelming similarities” between the designs leave no other inference but that copying has occurred.

The Unicolor decision provides a copyright owner another weapon in its arsenal for prevailing on copyright infringement claims.  If a copyright owner who has filed suit cannot (or at least not without great difficulty) establish that the defendant had access to its copyrighted design, then presenting evidence to the court that the two designs are so overwhelmingly similar may allow the copyright owner to obtain summary judgment on the issue of infringement and avoid having to present that part of the case to the jury.

More Patent Invalidated as Abstract Ideas

Posted in Patent Law

Apple just escaped a $533 million jury verdict by invalidating the plaintiff’s patents on the grounds that the patents cover abstract ideas.

The case is Smartflash, LLC v. Apple Inc., decided by the Federal Circuit Court of Appeals on March 1, 2017.  Smartflash owned three patents for technology that limited Internet access to data (video, audio, text, and software) to users who had paid for access.  In 2013, Smartflash sued Apple in a Texas district court for infringement of the three patents.  In 2015, the jury returned a verdict of infringement against Apple, finding Apple liable to Smartflash for $533 million in damages.Audrey Millemann 03_web

Apple moved for judgment as a matter of law on the grounds that the patents were invalid under 35 U.S.C. §101 as directed to abstract ideas.  The district court denied Apple’s motion, and Apple appealed to the Federal Circuit.

On March 1, 2017, the Federal Circuit reversed the district court’s ruling and held the three patents invalid.  The Federal Circuit relied on the Supreme Court’s two-step test set forth in Alice Corp. v. CLS Bank International, 134 S.Ct. 2347 (2014) to determine the validity of the patents.

Under 35 U.S.C. §101, any new and useful process, machine, article of manufacture, or composition of matter is patent-eligible subject matter.  The Supreme Court has long held that there are three exceptions: laws of nature, natural phenomena, and abstract ideas.  These three categories of inventions are not patent-eligible.

In Alice, the Supreme Court established a two-step test to determine if a patent’s claims are patent-eligible.  In the first step, the court determines whether the claim is directed to one of the patent-ineligible exceptions (laws of nature, natural phenomena, or abstract ideas).  If the first step is met, then the court performs the second step, determining whether the claim elements add sufficient limitations to “transform the nature of the claim” into subject matter that is patent eligible.  In step two, the court must find more than routine or conventional activity that has already been practiced.

In applying step one of the Alice test, the Federal Circuit agreed with the district court that Smartflash’s patent’s claims pertained to “conditioning and controlling access to data based on payment.”  The court held that this was an abstract idea, basing its conclusion on Supreme Court decisions holding that “fundamental economic practices” are abstract ideas.  The court explained that claims directed to computer functionality must be analyzed to determine whether they relate to a “specific asserted improvement in computer capabilities” or to an abstract idea in which a computer is simply used as a tool.  The court found that, in this case, the claims were directed to limiting access to data based on the user’s payment.  Thus, the claims pertained to computers being used as tools to perform fundamental economic practices.  As such, the court held that the first step of the Alice test was met.

The court then considered the second step of the Alice test – whether the claims contained limitations that “transform the nature of the claim” into patent-eligible subject matter.  The district court had determined that the claims did contain limitations that transformed them into patent-eligible subject matter, finding that the claims described “specific ways of managing access to digital content data based on payment validation through storage and retrieval of use status data and use rules in distinct memory types.”  The Federal Circuit noted that the Supreme Court had long held that routine computer activities do not establish patent-eligibility.  The court held that storing, transmitting, retrieving, and writing data on a computer was not sufficient to transform Smartflash’s claims into something other than an abstract idea.  The court further found that Smartflash’s hardware components were generic computer components and did not transform the claims into patent-eligible subject matter.


U.S. Supreme Court Limits Laches Defense in Patent Cases

Posted in Patent Law

In SCA Hygiene Products AB et al. v. First Quality Baby Products LLC et al., the United States Supreme Court held that laches cannot be invoked as a defense against a claim for patent infringement damages brought within U.S.C §286’s 6-year limitations period.  The U.S. Court of Appeals for the Federal Circuit had previously held in a 6-5 en banc decision that laches should apply in patent cases because U.S.C. §282 of the Patent Act passed in 1952 codified a pre-1952 practice of permitting laches to be asserted against damages claims.  However, in a 2014 copyright decision, Petrella v. Metro-Goldwyn-Mayer Inc., the Supreme Court had previously held that laches cannot be used as a defense in a copyright infringement action brought within the Copyright Act’s three-year statute of limitations period.  Thus, prior to the Supreme Court’s SCA Hygiene Products decision there had been a variation between copyright and patent laws in terms of the availability of a copyright defense.

The patent-in-suit in SCA Hygiene Products is U.S. Patent Number 6,375,646, entitled “Absorbent pants-type diaper,” and relates an absorbent pants-type diaper intended for one-time use which lies sealingly against and shape conformingly to the wearer’s body, while enabling the diapers to support an absorbent pad even when the pad is full of liquid.  In 2004, plaintiff SCA sought reexamination of its patent in light of defendant First Quality’s patent, and in 2007, the Patent and Trademark Office confirmed the SCA patent’s validity.  SCA then sued First Quality for patent infringement in 2010. The District Court granted summary judgment to First Quality on the grounds of equitable estoppel and laches based on the six year delay in filing suit from 2004 to 2010. The Federal Circuit later affirmed the holding en banc, even in light of the Supreme Court’s Petrella’s laches holding for copyright law.  The Supreme Court then took the case on appeal.eric_caliguiri_web

In considering the issue, the Supreme Court first stated laches is “a defense developed by courts of equity” to protect defendants against “unreasonable, prejudicial delay in commencing suit.”  The “principal application” of laches “was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation.”  Laches “is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill.”

Moving to Section 286 of the Patent Act the Supreme Court noted the Statute provides: “Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”  Applying Petrella, the Court “infer[ed] that this provision represents a judgment by Congress that a patentee may recover damages for any infringement committed within six years of the filing of the claim.”  The Court continued reasoning “the enactment of a statute of limitations necessarily reflects a congressional decision that the timeliness of covered claims is better judged on the basis of a generally hard and fast rule rather than the sort of case-specific judicial determination that occurs when a laches defense is asserted.  Therefore, applying laches within a limitations period specified by Congress would give judges a legislation-overriding role that is beyond the judiciary’s power.”   Thus, the Court held “laches cannot be interposed as a defense against damages where the infringement occurred within the period prescribed by §286.”

In reaching its holding, the Court considered and rejected a number of arguments put forth by defendant First Quality, and some of the reasoning the Federal Circuit had previously used.  First, the Court rejected First Quality’s argument that §286 of the Patent Act is not a true statute of limitations because §286 “runs backward from the time of suit.”  The Court reasoned “Petrella cannot be dismissed as applicable only to what First Quality regards as true statutes of limitations.”  While some claims are subject to a “discovery rule” under which the limitations period begins when the plaintiff discovers or should have discovered the injury giving rise to the claim, that is not a universal feature of statutes of limitations.  Instead, “[a] claim ordinarily accrues when [a] plaintiff has a complete and present cause of action.”

Next, the Court considered the Federal Circuit’s reasoning that §282 creates an exception to §286 by codifying laches as a defense to all patent infringement claims, including claims for damages suffered within §286’s 6-year period.  However, the Court again rejected this position, reasoning §282 on its face does not specifically codify a laches defense.  Regardless, the Court continued, “it does not necessarily follow that [a laches] defense may be invoked to bar a claim for damages incurred within the period set out in” a different section of the Statute.  Moreover, the Court reasoned “it would be exceedingly unusual, if not unprecedented” to include both a statute of limitation for damages and a laches defense, and no single federal statute has been identified “that provides such dual protection against untimely claims.”

The Court then moved to the Federal Circuit’s conclusion, and similar argument put forth by First Quality, that by 1952 there was a well established practice of applying laches to such damages claims and that Congress, in adopting §282, must have chosen to codify such a defense.  The Court again rejected this position, finding the case law insufficient to support the suggested interpretation of the Patent Act.  Instead, the Court found the case law stood for “the well-established general rule, often repeated by this Court, that laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress.”

In a lone dissent, Justice Stephen Breyer disagreed, arguing the case law “shows with crystal clarity that Congress intended the statute to keep laches as a defense” and that the language of the statute suggests that as well.  The dissent was concerned that without a laches defense available “a patentee has considerable incentive to delay suit until the costs of switching—and accordingly the settlement value of a claim—are high.”  Justice Breyer also added that he “believe[s] that Petrella too was wrongly decided,” and that this case helps illustrate why he thinks “that Petrella started [the Court] down the wrong track.”

Is Marilyn Monroe Too Generic to Be Registered as a Trademark?

Posted in Trademark Law

I’ve written on numerous occasions in the past about celebrities who registered their own names as trademarks with the United States Patent and Trademark Office. Just the other week, I wrote about how UFC superstar Conor McGregor had filed an application to register his name as a trademark, and in that same article, I mentioned that undefeated Floyd “Money” Mayweather also has his name registered with the USPTO. Other celebrities who have trademarked their monikers include rapper 50 Cent, pop queen Kylie Minogue (whose trademark KYLIE resulted in Kylie Jenner being unable to register the mark herself), and reality television star Kim Kardashian West. It’s hardly uncommon for celebrities to protect their own names as intellectual property these days. With that said, a federal district court judge’s recent order on a motion to dismiss involving the Estate of Marilyn Monroe has sparked some panic in the media.transparent

On Monday, March 13, 2017, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York issued a ruling on the Estate of Marilyn Monroe’s motion to dismiss the counterclaim of AVELA (short for Art & Vintage Entertainment Licensing Agency) which attempts, in part, to cancel the Estate’s trademark rights in MARILYN MONROE. In issuing its ruling and permitting AVELA’s attempt to cancel the MARILYN MONROE trademark on the ground that it is generic, Judge Failla stated “To be clear, the court harbors serious doubts that V. International will be able to establish that the contested marks are generic….Reaching that conclusion at this state, however, would be premature.” Since Judge Failla issued this ruling, the web has been buzzing with articles and posts claiming that Judge Failla has left open the possibility that a celebrity name is too generic to register or enforce as a trademark. Unfortunately, while these articles may make for an interesting read, they fail to adequately explain the significance of the case’s procedural posture.

Judge Failla has issued her ruling in response to a motion to dismiss filed by the Estate of Marilyn Monroe. When such a motion is filed, the court is required to accept all properly pleaded facts as true. Then the court must ask itself, assuming all of the alleged facts are true, does the party state a claim to relief. Here, specifically, Judge Failla must ask herself if AVELA has stated an appropriate ground for cancellation of the Estate’s trademark assuming it can prove the facts it alleged. According to Judge Failla’s ruling, AVELA asserted a few facts to suggest that the Estate’s mark should be cancelled because it has become generic, and generic marks are never entitled to trademark protection. In order to be protectable as a trademark, a mark must have at least some level of distinctiveness. Thus, Judge Failla has permitted AVELA’s claim to go forward.

Now, what does this really mean? Not a lot. Although Judge Failla has stated that the possibility exists that the Estate’s mark has lost its distinctiveness, she was clear that the Court “harbors serious doubts” about AVELA’s ability to prove its claim, but that the law is clear that “whether a mark is, or has become, generic” is a decision for the finder of fact, and premature at this juncture. So, when you give the procedural aspect of this case due consideration, it is clear that Judge Failla’s ruling is not groundbreaking. It is highly unlikely that she will find the Estate’s mark to have lost its distinctiveness and enforceability, but the procedural posture and the fact that AVELA has stated facts that, if true, could result in a trier of fact declaring the mark generic and cancelling its registration, means that AVELA’s claim lives to fight another day. Beyond that, Judge Failla’s ruling does nothing more than refuse to prematurely foreclose AVELA’s claim. So, celebrities and their intellectual property consiglieres should not fear a shift in the law, their intellectual property rights are likely just as safe today as they ever have been.

Tavern on the Green Trademark Battle Round #2

Posted in Trademark Law

The City of New York has reignited the battle over the trademark TAVERN ON THE GREEN. Last month the City of New York filed a lawsuit for trademark infringement against Tavern on the Green International LLC, the successor-in-interest to Tavern on the Green operator, LeRoy Adventures, Inc. LeRoy Adventures operated Tavern on the Green from 1976 until approximately 2009 under a license from New York City.Scott-Hervey-10-web

In 1973 New York City and LeRoy entered into a license agreement for the operation of Tavern on the Green as a “restaurant and cabaret.” The license agreement provided that New York City had various rights over the operation of the facility, including approval of the manager, approval of employee uniforms, approval of use of signs or any other means of soliciting business, and the right to regulate the times and manner of operation. The City maintained the right of inspection at all times, and the City retained the right to terminate the license under numerous conditions, including unsatisfactory operations.

In 2009 when LeRoy and Tavern on the Green, LP lost a bid to renew the restaurant lease, they filed for bankruptcy protection and ceased operations. A fight over trademark rights quickly erupted. In 1978, LeRoy registered TAVERN ON THE GREEN with the United States Patent and Trademark Office for restaurant services. New York City filed suit seeking a declaration of its prior right under New York law to use the mark for its restaurant facility in Central Park, and to cancel LeRoy’s Federal trademark registration due to fraud on the USPTO.

In the lawsuit, the City established its own independent, common law right to the TAVERN ON THE GREEN trademark. Further, the City was able to show that LeRoy’s application to register the mark contained numerous misstatements and omissions of material facts, including the claim that 1973 was the date of first use when the City had used the mark for over three decades prior, and based thereon was able to cancel LeRoy’s registration on the grounds it was obtained fraudulently.

Ultimately, the City of New York, the bankruptcy trustee and Tavern on the Green International, LP entered into various agreements regarding the City’s ownership of the trademark and Federal registration and International’s right to use the mark. Specifically, the City and International entered into a “Use Agreement” in connection with International’s use of the mark for both products and restaurants outside of the City of New York. The Use Agreement restricted International’s use of the mark for restaurants within New York City and certain counties within the State of New Jersey. The Use Agreement included other restrictions on International’s use of the mark for products and services and included the requirement of a disclaimer.

On February 24, 2017 the City of New York sued International claiming that it breached the Use Agreement. Specifically, the City claimed that franchising material and other materials distributed by International failed “to use the disclaimers required by the [Use Agreement] on all products and promotional materials, by improperly trading on the goodwill associated with the City’s Tavern on the Green restaurant in direct violation of the [Use Agreement] and by falsely stating in promotional materials that it was a licensee of the City.” In the complaint, the City alleged trademark infringement and other related causes of action.

If the City can establish that International beached the Use Agreement, that such breach was not de minimis and the City complied with all applicable notice provisions, the City would be entitled to withdraw its consent to use the TAVERN ON THE GREEN trademark and pursue claims against International for infringement.

It is ironic that the impetus of the 2010 litigation is what provides the City with significant leverage in this current case. In the 2011 settlement with the bankruptcy trustee for Tavern on the Green LP, the City was assigned the Federal registration for TAVERN ON THE GREEN which was filed by LeRoy in 1978. With ownership of the Federal registration, the City has presumptive nationwide rights as of the date the application was filed in 1978. Had LeRoy not filed for Federal registration in 1978, the City’s trademark rights would have been based on common law and potentially geographically limited. As such, LeRoy or International’s use of TAVERN ON THE GREEN for a restaurant in Las Vegas might not be infringing.

One Is Not Enough for Patent Infringement Under 35 U.S.C. §271(f)(1)

Posted in Patent Law

Jo-Dale-Carothers-015_webIn Life Technologies v. Promega Corporation, the U.S. Supreme Court addressed whether supplying a single component from the United States of a multicomponent invention assembled abroad constitutes patent infringement under 35 U.S.C. §271(f)(1).    Under §271(f)(1), a party can be liable for patent infringement if it supplies from the United States “all or a substantial portion of the components of a patented invention.”  Interpreting this statute in Promega, the Court determined that supplying one component is not enough to constitute infringement of a multicomponent invention because a single component is not “a substantial portion” within the meaning of this statute.

In this case, Promega was the exclusive licensee of the Tautz patent, which claims a toolkit for genetic testing that can be used in law enforcement as well as in clinical and research work.   Promega sublicensed the Tautz patent to Life Technologies.  Under the sublicense, Life Technologies’ patent rights were limited to manufacturing and selling kits for use in certain law enforcement fields.  Life Technologies was not given a license to manufacture or sell kits for use in clinical or research work.

The patented kit consists of five components.   Life Technologies manufactured four of the five components in the United Kingdom.  It manufactured the fifth component, an enzyme called Taq polymerase, in the United States and shipped it to the United Kingdom where it was combined with the other four components to form the kit.

This dispute arose when Promega alleged that Life Technologies began selling these kits in the clinical and research markets, which was outside the scope of Life Technologies’ license.  As a result, Promega sued Life Technologies alleging patent infringement under §271(f)(1), which prohibits the supply from the United States of “all or a substantial portion of the components of a patented invention” for combination abroad.

The jury found that Life Technologies had infringed the patent, but the district court granted judgment as a matter of law for Life Technologies, holding that §271(f)(1)’s phrase “all or a substantial portion” did not encompass the supply of a single component of a multicomponent invention.  The Federal Circuit reversed finding that a single important component could constitute a “substantial portion” of the components of an invention and that the Taq polymerase met that standard.  The Supreme Court, however, reversed the Federal Circuit holding that the supply of a single component of a multicomponent invention assembled abroad does not constitute patent infringement under §271(f)(1) because a single component of a multicomponent invention cannot be a “substantial portion.”   The Court found that the importance of the single component is irrelevant.

In reaching its conclusion the Supreme Court considered 1) whether the term “substantial portion” refers to a qualitative or quantitative measure, 2) whether a single component can ever constitute a “substantial portion,” and 3) whether the history of §271(f) supports the Court’s conclusion.

The Court first had to determine whether “substantial portion” refers to a qualitative or quantitative measure.  The Court acknowledged that the term “substantial” in isolation is ambiguous because in some instances it “might refer to an important portion” whereas in other instances it might refer “to a large portion.”  Promega argued that a quantitative approach would be too narrow and invited the Court to adopt a “‘case-specific approach’ that would require a factfinder to decipher whether the components at issue are ‘a substantial portion’ under either a qualitative or quantitative test.” The Court, however, declined to adopt Promega’s approach noting that it would compound the ambiguity rather than resolve it.  Instead, the Court looked to the text of the statute, including the language surrounding the word “substantial,” for clarification.  The Court pointed out that the surrounding words “‘all’ and ‘portion’ convey a quantitative meaning” rather than relative importance.  Further, the phrase “substantial portion” is modified by the phrase “of the components of a patented invention,” which according to the Court would be an unnecessary phrase if the intent had been a qualitative rather than quantitative meaning.  Therefore, in the context of this statute, the Court determined that the term “substantial portion” should be interpreted as a quantitative measure.

Applying the quantitative measure, the Court next had to determine, as a matter of law, whether a single component can be “a substantial portion” of a multicomponent invention.  Looking again to the text of the statute, the Court noted that §271(f)(1) “consistently refers to ‘components’ in the plural.”  For example, the Court explained that additional language in §271(f)(1) shows the statute “is targeted toward the supply of all or a substantial portion ‘of the components,’ where ‘such components’ are uncombined, in a manner that actively induces the combination of ‘such components’ outside of the United States.”

The Court further noted that the overall “structure of §271(f) reinforces this reading.”  Section §271(f)(2), the companion provision to §271(f)(1), prohibits supplying from the United States “any component of a patented invention that is especially made or especially adapted for use in the invention.”  The Court noted that the two provisions work in tandem under the Court’s interpretation because a party would be liable under §271(f)(1) for supplying more than one component whereas a party would be liable under §271(f)(2) for providing a single component if it was especially made or adapted for use in the invention.  Therefore, the Court found that only supplying a single component from the United States of a multicomponent invention cannot infringe under §271(f)(1).

Finally, the Court stated that “[t]he history of §271(f) bolsters” its conclusion.  Congress enacted 35 U.S.C. §271(f) in response to the U.S. Supreme Court’s ruling in Deepsouth Packing Co. v. Laitram Corp.  Under the law applicable in Deepsouth, the Court determined that making or using a patented product outside of the United States did not constitute patent infringement.  But with the subsequent enactment of §271(f), Congress expanded patent protection to cover certain instances where components of a patented invention are made in the United States but assembled in another country.  The Court found that its ruling in Promega “comports with Congress’ intent” because “[a] supplier may be liable under §271(f)(1) for supplying from the United States all or a substantial portion of the components (plural) of the invention, even when the components are combined abroad” and liable under §271(f)(2) for supplying even a single component “if it is especially made or especially adapted for use in the invention.”  The Court was persuaded that when “all components but a single commodity [rather than especially made or adapted] article are supplied from abroad, this activity is outside the scope of the statute.”

The Court expressly declined to decide “how close to ‘all’ of the components ‘a substantial portion’ must be” but rather held “only that one component does not constitute ‘all or a substantial portion’ of a multicomponent invention under §271(f)(1).”  Thus the Court left several questions open.  For example, how do you determine how many components are in a claimed invention?  And once you determine the number of components, how many must be supplied from the United States to constitute infringement under §271(f)(1)?   Is it a percentage of the total number of components?  Will courts look to the relative importance of the various components or will it be purely a numbers-based analysis?  What if the invention only has two components?  In that instance, are the terms “all” and “a substantial portion” synonymous?  The only certainty is that these unanswered questions will give rise to future litigation disputes.

Unauthorized Downloading and Copyright Infringement

Posted in Copyright Law, Cyberspace Law, Web/Tech

Liability for copyright infringement can result when one downloads protected software without the copyright owner’s authorization.  The Ninth Circuit was recently tasked with exploring the scope and reach of copyright protection in such cases in Design Data Corp. v. Unigate Enterprise, Inc.

Design Data is the creator of a computer aided design (CAD) software program SDS/2.  SDS/2 is promoted by Design Data as offering a high quality steel in connection design and drawing production for 3D steel detailing. It uses building and engineering codes to produce detailed drawings and models of steel structural components for use in construction.  A user in creating a steel component design on SDS/2 would create what is called a “job file” that would contain all the information and files related to a particular project.

Unigate Enterprise is located in California and offers outsourced steel detailing services by marketing detailed CAD files created by contractors in China.  At least one of its Chinese contractors had used an unauthorized copy of SDS/2 and sent the resulting job files (“output”) to Unigate Enterprise.  Unigate Enterprise then sold those images to clients in the U.S.  Unigate Enterprise advertised on its website that it uses the SDS/2 program “if required;” however, it apparently never purchased a license to use SDS/2 from Design Data.

Unigate Enterprise also claimed that it had downloaded a free demo version of SDS/2.  Design Data does not offer a free demo of its software.  Design Data visited Unigate Enterprise’s California offices after it grew suspicious that Unigate Enterprise was using its SDS/2 software without a license.  Although there was no evidence that Unigate Enterprise had actually installed SDS/2 on the computers that Design Data were allowed to inspect; those computers did contain SDS/2 generated images and job files suggesting that the CAD program had been used in some fashion and that there were installation files for two versions of SDS/2 in addition to patch files that would allow a user to work around the software’s license protection on the Unigate Enterprise computers.

Based on this evidence, Design Data sued Unigate Enterprise for copyright infringement because of its alleged use of the SDS/2 software and its importation and distribution of SDS/2 generated images and files from outside the United States.  The trial court granted summary judgment to Unigate Enterprise on both of these claims and Design Data appealed this decision to the Ninth Circuit.

The Ninth Circuit began by noting that the unauthorized use of copyrighted software does not impose liability unless it is “significant enough to constitute infringement.”  The Ninth Circuit held that the lower court had erred in deciding that no infringement had occurred because the facts surrounding the alleged infringement were disputed.  For instance, Unigate Enterprise claimed that he had downloaded a “free demo” of the SDS/2 software but Design Data had offered evidence that it did not offer any such demos.  Design Gate further argued that the evidence that there had been SDS/2 generated files suggested that Unigate Enterprise had in fact put the SDS/2 software to use.

The Ninth Circuit found that there was a triable issue of fact as to whether infringement had occurred.  For instance, the evidence showed that Unigate Enterprise had intentionally downloaded a complete copy of SDS/2 and three patch files allowing it to circumvent the software’s licensing protection. Unigate Enterprise had also advertised that it would use SDS/2 software on client jobs “if required.”  Finally, there was evidence that Unigate Enterprise’s computers contained SDS/2 generated files and images.  The Ninth Circuit concluded that this evidence “raises a factual question whether [Unigate Enterprise’s] download was more than an ‘insignificant violation’ of Design Data’s copyright.”  Given that there had been numerous cases that have held upheld copyright infringement “under circumstances in which the use of the copyright work is of minimal consequence,” the Ninth Circuit concluded that it was error to grant summary judgment as to Design Data’s claim.

The Ninth Circuit however did affirm the granting of summary judgment as to Design Data’s importation and distribution claim.  The Ninth Circuit focused its inquiry here as to whether the copyright protection of the SDS/2 software program extended to the program’s output of images and job files.  The Ninth Circuit noted that there was a dispute among various courts as to how far the copyright protection should extend but noted that some authorities had suggested “that the copyright protection afforded a computer program may extend to the program’s output if the program `does the lion’s share of the work’ in creating the output and the user’s role is so `marginal’ that the output reflects the program’s contents.”  The Ninth Circuit decided to avoid having to resolve the split among authority because it concluded that, even assuming the most favorable legal authority applied, Design Data had not established that the SDS/2 program did the “lion’s share of the work” in creating the job files and images located on the Unigate Enterprise computers.  Given that, the Ninth Circuit affirmed the summary adjudication as to the importation and distribution claim brought by Design Data.

James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section.  He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes.  For additional articles on intellectual property issues, please visit Weintraub’s law blog at

Divided Infringement – Expanding Patent Infringement Liability

Posted in Patent Law, Web/Tech

By Audrey MillemannAudrey-Millemann-03_web

In 2015, the Federal Circuit Court of Appeals cast the net of patent infringement liability even more broadly, to cover direct infringement by “divided” (or “joint”) infringement.  Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (“Akamai V”).  In that case, the Federal Circuit established that a defendant can be liable for direct infringement of a method claim even when the defendant does not personally perform all of the steps of the method, as long as the steps performed by others are attributable to the defendant.  Id. at 1022.  The court held that the steps performed by another party are attributable to the defendant if: (1) the defendant “directs or controls” the other party’s performance; or (2) the parties form a joint enterprise.  Id.  The court further held that directing or controlling exists if two factors are met.  First, the defendant must “condition” the other party’s participation in an activity or receipt of a benefit on the other party’s performance of a step.  Second, the defendant must “establish the manner or timing” of the other party’s performance of the step.  Id. at 1023.  In Akamai V, the court emphasized that its new rule is flexible and that divided infringement may depend on the particular facts of a case.  Id.

In Eli Lilly & Co. v. Teva Parenteral Medicines, Inc., 845 F.3d 1357 (January 12, 2017), the Federal Circuit put into practice its rule of divided infringement, demonstrating just how broad this theory of liability is.

Eli Lilly owned a patent covering a method of treating cancer patients with a chemotherapy drug after pretreatment with doses of folic acid and vitamin B12.  Teva and several other drug manufacturers prepared to make and market generic versions of the chemotherapy drug.  Eli Lilly sued the drug manufacturers for inducing infringement of the patent.

Inducing infringement is a type of indirect infringement.  In order to be liable for inducing infringement, the defendant must have the intent to cause another party to infringe the patent, and the other party must be a direct infringer.  35 U.S.C. § 271(b).  For example, a party induces infringement if it instructs another how to perform the steps of a patented method.

Eli Lilly contended that the defendant drug manufacturers induced physicians to infringe the patent by instructing them, in their written materials provided with the chemotherapy drug, how to pre-treat cancer patients with the folic acid and vitamin B12, and then treat with the chemotherapy drug.  Eli Lilly further contended that the physicians directly infringed the patent.  Eli Lilly agreed with the defendants that no one person performed all of the steps of the claimed method, but argued that this was a case of divided infringement.  The physicians were the direct infringers because they performed the steps of administering vitamin B12 and the chemotherapy drug, and they directed the performance of the patients in administering the folic acid to themselves.

The case was tried to the district court, who ruled that the defendants had induced infringement of the patent, based upon the physicians’ direct infringement.

The Federal Circuit affirmed the decision.  The court found that the district court had correctly determined that the physicians directed or controlled the patients’ performance in administering the folic acid.  The first prong of the “directed or controlled” test was met.  The physicians conditioned the patients’ participation in the chemotherapy drug treatment on the patients taking the folic acid.  The evidence presented by Eli Lilly showed that the physicians would not go forward with the chemotherapy drug treatment unless the patient had properly taken the folic acid.

The court dismissed the defendants’ arguments that the physicians were merely guiding their patients or that the condition had to be a legal obligation imposed on the patients.  The court emphasized that the analysis of attribution is not so narrow, and is fact-specific.

The court held that the second prong of the “directed or controlled” test was also met.  The physicians specifically instructed the patients on the dose and timing of the folic acid.  The patients carried out the physicians’ instructions in taking the folic acid.

Because the steps performed by the patients were attributable to the physicians, the physicians had directly infringed the patent.  The court then addressed the question of inducement.  The court held that the defendants had the specific intent to induce infringement by the physicians.  The defendants had provided clear directions to the physicians on all of the steps of the claimed method (how the chemotherapy drug should be administered, and the pretreatment with vitamin B12 and folic acid).

This case demonstrates that the doctrine of divided infringement is a very strong tool for patent owners and an unexpected trap for would-be infringers.

Northern District of California Revises Local Patent Rules

Posted in Copyright Law, Legal Info, Patent Law

eric_caliguiri_web_testOn January 17, 2017, the United States District Court for the Northern District of California issued revisions to its Local Patent Rules requiring early disclosure of damages-related discovery and contentions. The revised rules are effective immediately in all patent cases pending in the Northern District.  Local Patent Rules are rules that apply to all civil actions filed in or transferred to the specific District Court which allege infringement of a utility patent or which seek a declaratory judgment that a utility patent is not infringed, is invalid or is unenforceable.  The Local Patent Rules govern the mandatory discovery disclosures that must be given relatively early in a patent case.  Many District Courts across the country have various versions of Local Patent Rules to help govern and streamline often vary complex patent cases.  The Local Patent Rules for the Northern District of California previously had detailed early disclosure requirements for infringement and invalidity positions, but generally not as to damages related issues.

Beginning under new Patent Local Rule 2-1(b)(5), the parties are now to provide the court at the Initial Case Management Conference – in addition to the prior requirements under Rule 2-1 which are still required and in place – with a “non-binding, good faith estimate of the damages range expected for the case along with an explanation for the estimates.”

Under Local Patent Rule 3-1, which relates to a patentee’s initial infringement contentions, patentees are now required to also disclose “the timing of the point of first infringement, the start of claimed damages, and the end of claimed damages,” with their initial contentions and in addition to the prior requirements.  Moreover, under Local Patent Rule 3-2, which governs the document production that must be made concurrent with the initial disclosures under Rule 3-1, the patentee must now also produce:

(1) all licenses and agreements “transferring any interest in any patent-in-suit;”

(2) all license agreements that are “comparable to a license that would result from a hypothetical reasonable royalty negotiation;”

(3) all documents and licenses “comprising or reflecting a F/RAND commitment or agreement with respect to the asserted patent(s);”

(4) documents sufficient to show “sales, revenues, costs and profits” of a patentee’s own products that it asserts practice the assert patent(s) in order “to preserve the right to recover lost profits based on such products;” and

(5) all other agreements that “otherwise may be used to support the party asserting infringement’s damages case.”

The patent’s initial infringement contentions and accompanying document production under Patent Local Rules 3.1 and 3.2 – including the damages related documents and disclosures just mentioned – must all be disclosed, identified, and produced fourteen days after the Initial Case Management Conference.

Local Patent Rule 3-4, governing an accused infringer’s document production accompanying its invalidity contentions, requires an accused infringer, 45 days after receiving the patentee’ initial infringement contentions and production, to now also produce:

  1. “all agreements that the party opposing infringement contends are comparable to a license that would result from a hypothetical reasonable royalty negotiation;
  2. documents sufficient to show the sales, revenue, cost, and profits for accused instrumentalities identified pursuant to Patent L.R. 3-1(b) for any period of alleged infringement; and
  3. all agreements that may be used to support the party denying infringement’s damages case.”

Brand new Local Patent Rule 3-8 requires patentees to then serve “damages contentions” 50 days after the accused infringer’s invalidity contentions and production. The damages contentions must “identify each of the categories of damages it is seeking for the asserted infringement, as well as its theories of recovery, factual support for those theories, and computations of damages within each category.”  The listed damages categories include: lost profits, price erosion, convoyed or collateral sales, reasonable royalty, and any other form of damages.

Under brand new Local Patent Rule 3-9, the accused infringer then must provide responsive damages contentions 30 days after the patentee’s damages contentions. The accused infringers responsive damages contentions must “identify specifically how and why it disagrees with” patentee’s damages contentions and “include the party’s affirmative position on each issue.”

The Northern District’s new Patent Local Rules represent a significant change that could help quicken and streamline litigation by requiring parties to put a definitive dollar figure on disputes early on in the litigation.  The new rules could  also streamline damages related discovery because the rules require parties to self-identify and produce damages documents, theories, and amounts early in the litigation, eliminating the need for later lengthy discussions amongst the parties and their attorneys about what needs to be produced and when it has to be produced.  However, the new rules will also mean more upfront work and cost for parties and their attorneys.  And, it will also require plaintiffs to conduct more damages related investigations before filing suit in ensure they are ready to meet their initial disclosure requirements.