The IP Law Blog

Focusing on legal trends in data security, cloud computing, data privacy, and anything E

District Court Rules Certain Prior Art References Are Precluded Under IPR Estoppel

By Eric Caligiuri on Posted in Patent Law

On December 28, 2018, the Court in The California Institute of Technology v. Broadcom Limited et al., Case No. 2:16-cv-03714-GW-(AGRx), issued a Final Ruling on Plaintiff’s Motion for Partial Summary Judgment of Validity under 35 U.S.C. § 103 based on IPR Estoppel under 35 U.S.C. § 315(e)(2).  In the case, Plaintiff The California Institute of Technology alleges patent infringement against Defendants Broadcom Limited, Broadcom Corporation, Avago Technologies Limited, and Apple Inc. based on infringement from fifteen claims from three of its patents: (1) U.S. Patent No. 7,116,710 (“the ’710 Patent”); (2) U.S. Patent No. 7,421,032 (“the ’032 Patent”); and (3) U.S. Patent No. 7,916,781 (“the ’781 Patent”) (collectively, the “Asserted Patents”).

Plaintiff moved for partial summary judgment of no invalidity as to Claims 13 and 22 of the ’781 Patent and Claims 11 and 18 of the ’032 Patent, arguing that IPR estoppel precluded Defendants from raising each invalidity ground that was identified in Defendants’ invalidity contentions as to each of those claims in prior filed IPRs.  Section 315(e)(2) of the Patent Act states: “The petitioner in an inter partes review [IPR] of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  Here, the Court had to consider whether the statutory IPR estoppel provision reaches to invalidity grounds that a petitioner was aware of at the time it filed its IPR petition, but chose not to bring in the IPR proceeding.

The Defendants argued that if a prior art reference is included in an IPR petition and IPR is not instituted as to that prior art reference, the reference could not have been reasonably raised during IPR.  However, the Court reasoned that the “during IPR” language also should not be read in a vacuum.  The full phrase of § 315(e)(2) is whether the ground is one “that the petitioner raised or reasonably could have raised during that inter partes review.”  There is no reasonable basis by which a petitioner could raise a ground that has been explicitly rejected by the PTAB in making an IPR institution determination.  But in the context of non-petitioned grounds, the issue goes back to the choices made by the petitioner itself.  In other words, prior art references that a petitioner reasonably could have raised, but chose not to raise, in an IPR petition are also prior art references that reasonably could have been raised during actual IPR had the PTAB been given the opportunity (based on the petitioner’s raising them) to consider those references.

The choices of the petitioner – and the petitioner alone – in its initial decision regarding what grounds to bring before the PTAB dictate what grounds are raised (or reasonably could have been raised) “during IPR” and thus could result in estoppel if IPR results in a final written decision.  Thus, the Court found that statutory IPR estoppel applies to invalidity grounds that a petitioner “reasonably could have raised” in its IPR petition, which includes prior art that a “‘skilled searcher conducting a diligent search reasonably could have been expected to discover.’”

Next, and aside from their arguments regarding the scope of § 315(e)(2) estoppel, Defendants argue that they are now bringing certain prior art under pre-AIA § 102(a), i.e., not as “patents or printed publications,” but as information that was “known or used by others” before the patented invention.  As Defendants note, in IPR proceedings, the PTAB will only consider patents or printed publications as grounds for invalidity due to anticipation or obviousness.  Because, Defendants argue, they are relying on the “known or used” prong of pre-AIA § 102(a) for all but one of their prior art grounds (i.e., not on prior art patents or printed publications), the prior art could not have been raised during IPR proceedings and IPR estoppel does not apply.

Under pre-AIA, the juxtaposition between § 102(a) and § 102(b) effectively created a one-year grace period for a patent applicant to file a patent application even after the inventor disclosed information about an invention to the public as long as it was not done via a printed publication.  For example, the “known or used” prong of § 102(a) can come into play in the instance where a scientist gives a public presentation and shows slides, but does not distribute his/her slides or immediately publish a copy of them. The presentation itself (as, for instance, recollected through the scientist’s testimony) could still be considered prior art even if the presentation slides were not made “publicly available” at the same time as the presentation.

The Defendants also emphasized an analogy to a circumstance where a petitioner submits a product manual as printed publication prior art before the PTAB, but is not estopped from submitting a prior art product itself in district court litigation.  However, the Court reasoned that whether brought as a “printed publication” or under the “known or used” prong, the core element that forms the basis of Defendants’ prior art includes the same documents.  Although Defendants assert that there will be a “meaningful difference” in the invalidity presentation under the “known or used” prong, Defendants have not presented sufficient evidence to back that assertion.

Thus, after considering the unique facts of this case, including the specific prior art grounds Defendants seek to characterize, the Court was not persuaded by Defendants’ argument that it is shielded from statutory IPR estoppel by its references to the “known or used” prong of § 102(a). Accordingly, the Court found that statutory IPR estoppel applies to most of the obviousness combinations Defendants has raised, and granted Plaintiff’s motion.

This case is a strong reminder to carefully consider whether or not to file an IPR in defense of a patent infringement action, and if so, what the consequences can be if the IPR fails.  In addition, it is a strong reminder to carefully consider which arguments and prior to raise in any IPR.

Consumers Have Standing to Challenge Trademark Registrations

By Josh H. Escovedo on Posted in Trademark Law

The Trademark Trial and Appeals Board recently issued an interesting decision regarding standing to oppose the registration of trademark applications. United Trademark Holdings, Inc. filed for registration of the mark RAPUNZEL for use in conjunction with dolls and toy figures. However, after the USPTO’s examining attorney published the mark for opposition, a law professor filed a notice of opposition, alleging that Applicant’s mark failed to function as a trademark on the grounds that it is synonymous with the name of a well-known childhood fairytale character, which has long been in the public domain.

In response to the notice of opposition, the applicant filed a motion to dismiss claiming the opposer lacks standing because she is not a competitor and has not used the mark in connection with the manufacturer or sale of dolls. The TTAB disagreed, stating that “Consumers, like competitors, may have a real interest in keeping merely descriptive or generic words in the public domain.” Apparently, the TTAB was receptive to the opposer’s argument that “she has purchased and continues to purchase said goods and that registration of the applied-for mark by applicant would constrain the marketplace of such goods sold under the name ‘Rapunzel,’ raise prices of ‘Rapunzel’ dolls offered by other manufacturers.” Accepting this argument, the TTAB held the opposer’s allegations sufficient to establish that she has a direct and personal interest in the outcome of the proceeding, in accordance with the “liberal threshold” established in Ritchie v. Simpson, a precedential opinion issued by the U.S. Court of Appeals for the Federal Circuit.

The TTAB reiterated the Federal Circuit’s holding that, “In no case has this court ever held that one must have a specific commercial interest, not shared by the general public, in order to have standing as an opposer.” Instead, “the crux of the matter is not how many others share one’s belief that one will be damaged by the registration, but whether that belief is reasonable and reflects a real interest in the issue.” “Consumers, like competitors, may have a real interest in keeping merely descriptive or generic words in the public domain, (1) to prevent the owner of a mark from inhibiting competition in the sale of particular goods; and (2) to maintain freedom of the public to use the language involved, thus avoiding the possibility of harassing infringement suits by the registrant against others who use the mark when advertising or describing their own products.”

In light of the above, members of the consuming public may have a real interest in preventing exclusive appropriation of merely descriptive or generic terms by trademark owners. As such, consumers are entitled to challenge the registration of trademarks through opposition proceedings before the TTAB.

In-Game “Carlton Dance” Routine Triggers Lawsuit From Fresh Prince Actor Alfonso Ribeiro

By Scott Hervey on Posted in Copyright Law, Entertainment Law, Intellectual Property Litigation

Actors gain notoriety for different reasons.  For some, it’s due to a physical characteristic or an iconic character portrayal.  For Alfonso Ribeiro, it’s a dance.  The dance, which has become known worldwide as the “Carlton Dance,” is a corny dance number performed by Ribeiro’s character Carlton Banks on the 90’s sitcom “The Fresh Prince of Bel Air.”   That dance is now the center of a copyright infringement lawsuit Ribeiro filed against Epic Games and Take-Two Interactive.  Ribeiro claims that Epic Games incorporated the Carlton Dance in the hit fighting game  “Fortnite” and Take-Two did the same in the popular “NBA 2K16” basketball game.

To be fair, Ribeiro is not the only one claiming Take-Two and Epic Games infringed dance choreography; other plaintiffs include rapper Terrence Ferguson (known as 2 Milly) who claims that Epic Games infringed his “Milly Rock” routine, and Russell Horning, better known as Backpack Kid, who claims that Fortnite and NBA 2K16 characters were programmed to mimic moves from his routine, “The Floss.”

Dance routines are protectable under the Copyright Act.  Section 102(a)(4) of The Copyright Act provides copyright protection of  “pantomimes and choreographic works” created after January 1, 1978, and fixed in some tangible medium of expression.   Choreography is the composition and arrangement of a related series of dance movements and patterns organized into a coherent whole.  According to the Copyright Office’s Circular 52, a choreographic work or pantomime typically contain one or more of the following elements:

  • Rhythmic movements of one or more dancers’ bodies in a defined sequence and a defined spatial environment, such as a stage
  • A series of dance movements or patterns organized into an integrated, coherent, and expressive compositional whole
  • A story, theme, or abstract composition conveyed through movement
  • A presentation before an audience
  • A performance by skilled individuals
  • Musical or textual accompaniment

The Copyright Office does state that the presence or absence of a given element does not determine whether a particular work constitutes choreography or a pantomime.

However, individual movements or dance steps by themselves are not copyrightable.  Examples of non-protectable dance steps include the basic waltz step, the hustle step, the grapevine, or the second position in classical ballet. The U.S. Copyright Office cannot register short dance routines consisting of only a few movements or steps with minor linear or spatial variations, even if a routine is novel or distinctive. An example of a commonplace movement or gesture that does not qualify for registration as a choreographic work includes celebratory end zone dance move or athletic victory gesture.

Also not registrable are social dance steps and simple routines. Registrable choreographic works are typically intended to be executed by skilled performers before an audience. By contrast, uncopyrightable social dances are generally intended to be performed by members of the public for the enjoyment of the dancers themselves. Social dances, simple routines, and other uncopyrightable movements cannot be registered as separate and distinct works of authorship, even if they contain a substantial amount of creative expression.

This could be the first hurdle Ribeiro must overcome.  It seems fair to argue that the “Carlton Dance” is uncopyrightable due to its simple, uncomplicated nature.   The Carlton Dance consists of only a few or steps with minor linear or spatial variation.

Ribeiro credits the Carlton Dance to Eddie Murphy’s routine “White People Can’t Dance” from RAW.  In that routine, Eddie Murphy commented on the ubiquitous nature of the style of dance mimicked by Ribeiro.  While intended to be humorous (and it is), Murphy’s statement was an accurate generalization of the 90’s dance style.  As such, it would not be an unreasonable argument that the “Carlton Dance” is uncopyrightable basic dance step.

Even if the Carlton Dance were registrable, Ribeiro would have to establish that he owned the copyright and not NBC Productions, the studio that produced “The Fresh Prince of Bel Air.”  While this author has not seen Ribeiro’s performer contract, it is standard practice in the entertainment industry that all television performer contracts include a provision which vests the production company with all “right, title and interest, including copyright, in the results and proceeds” of a performer’s services.  As a result of this provision, Ribeiro’s performance as Carlton and all of the characteristics and attributes of the Carlton character would be owned by NBC Productions and not Ribeiro.  As its name implies, the Carlton Dance is an attribute of the character Carlton Banks and any copyright interest therein would likely be owned by NBC Productions.

The fact that the Carlton Dance is an attribute of the television character played by Ribeiro could be a factor in determining his right of publicity claim.  However, Ribeiro has essentially co-opted the “Carlton Dance” as his own by having performed it in numerous talk show and personal appearances.  The right of publicity can extend to various personal attributes such as name, nicknames, pseudonyms, voice, signature, likeness, photograph or other indicia of identity or persona.  An argument that the Carlton Dance has become synonymous with Ribeiro would support a claim that the Carlton Dance is part of his protectable persona.  If such argument is well received by the court, based on the holdings of White v. Samsung Electronics America, Inc., and Wendt v. Host International, the two video game companies could face substantial liability.

Federal Circuit Narrows Reach of Obviousness-Type Double Patenting

By Jo Dale Carothers on Posted in IP, Patent Law

Non-statutory, or obviousness-type, double patenting (“ODP”) is a judicially created doctrine that prohibits an inventor from effectively extending the monopoly on a patented invention by applying for a later patent with claims that are not “patentably distinct” from the claims in the earlier patent.  The core principle behind the doctrine is that “an inventor must fully disclose [the] invention and promise to permit free use of it at the end of [the] patent term.”  See Novartis Pharmaceuticals Corp. v. Breckenridge Pharmaceutical (“Breckenridge”).  “Prohibiting double patenting prevents a patentee from obtaining sequential patents on the same invention and obvious variants” to improperly extend patent protection beyond the “statutorily allowed patent term of that invention.”  Id.

In Gilead Sciences, Inc. v. Natco Pharma Ltd., the Federal Circuit previously held that the key to whether a patent is invalid due to ODP is found in the order in which the patents issued.  Only the last patent to issue could be invalid under the double-patenting doctrine.  However, in two decisions issued by the Federal Circuit on December 7, 2018, the Court further narrowed the applicability of this test thus limiting the cases where obviousness-type double patenting can be used to invalidate patents.

In Breckenridge, the Court addressed a “potential double-patenting situation in which the later-filed of two related patents, which share a common specification and effective filing date, expires before … the earlier-filed patent due to an intervening change in law.”  When the first patent was filed, a patent expired 17 years after the date the patent issued.  When the second patent was filed, the law had been changed under the Uruguay Round Agreements Act of 1994 (“URAA”) so a patent was set to expire 20 years after the patent’s earliest filing date.  This change in law caused the second patent to expire before the first patent.  Applying Gilead, the district court determined the second patent could invalidate the first patent under the obviousness-type double patenting doctrine because the second patent expired first.

In Breckenridge, the Federal Circuit reversed distinguishing Gilead.  In Gilead, both patents had been filed after the effective date of the URAA and claimed different priority dates.  In contrast, in Breckenridge, one patent was filed pre-URAA and one was filed post-URAA.  Thus, the Federal Circuit reasoned a change in patent term law should not truncate the term statutorily assigned to the pre-URAA patent, and therefore, the second patent is not a proper double-patenting reference for invalidating the first patent.

In the second decision, Novartis AG v. Ezra Ventures LLC (“Ezra”), the Federal Circuit addressed “the interplay between a patent term extension (PTE) granted pursuant to 35 U.S.C. §156 and the obviousness-type double patenting doctrine.”  Section 156 “was passed as part of the Hatch-Waxman Act, ‘establish[ing] a patent term extension for patents relating to certain products subject to regulatory delays that could not be marketed prior to regulatory approval.’”  However, “in no event shall more than one patent be extended … for the same regulatory review period for any product.

Ezra argued that, by extending the term of the ‘229 patent, Novartis effectively extended two patents because the ‘229 patent covers a compound necessary to practice the methods claimed by the ‘565 patent.  Therefore, Ezra argued Novartis violated §156 by effectively using the statute to extend the terms for two patents rather than one.  Further, this patent term extension raised the question as to “whether the ‘229 patent is invalid due to obviousness-type double patenting because the term extension it received causes the ‘229 patent to expire after Novartis’s allegedly patentably indistinct ‘565 patent.”

The Federal Circuit concluded that “a PTE pursuant to §156 is valid so long as the extended patent is otherwise valid without the extension.  Thus, the district court was correct in finding that the ‘565 patent is not a double patenting reference to the ‘229 patent and that the ‘229 patent is valid through the end of its PTE.”

Narrowing the applicability of the ruling in Gilead, these two decisions indicate that patents are not likely to fall prey to obviousness-type double patenting issues when there is a change in law or a statutorily permitted extension rather than gamesmanship on the part of a patent applicant.   However, these decisions do not explicitly address all open questions.  For example, given the difference in statutory wording, it is not certain how courts will treat patent term extensions resulting from delays at the patent office.  Will these extensions be treated the same as the §156 extension at issue in Ezra?  What if a patent’s term is first extended for delays in the patent office and then further extended under §156?  These questions are left for another day.

Royalties, Preemption and Attorney’s Fees

By James Kachmar on Posted in Copyright Law, IP

The Ninth Circuit recently was called upon to decide awarding attorney’s fees in a case where artists were suing for unpaid royalties under the California Resale Royalties Act (“CRRA”).  In the case, Close v. Sotheby’s, Inc. (decided December 3, 2018), the Ninth Circuit ordered that the Plaintiff-artists be required to pay attorney’s fees to the defendants (eBay and art auction houses) for successfully defending against claims for unpaid royalties resulting from art sales.  This conclusion required a discussion of the doctrine of preemption and a determination that defendants could still be awarded attorney’s fees under CRRA despite a finding that the bulk of Plaintiffs’ claims under the CRRA were preempted by the 1976 Copyright Act.

James Kachmar

Plaintiffs, including the well-known artist Chuck Close, brought an action claiming that they did not receive the appropriate royalties for the sale of their works under the CRRA, which had been enacted in California in 1976.  Under the CRRA, the seller of a work of fine art must withhold 5% of the sale price and remit that amount to the artist.  Artists who do not receive such payments can bring a claim under the CRRA, which also has a provision that the prevailing party in such an action “shall be entitled to reasonable attorney’s fees.”  The Plaintiffs essentially claimed that eBay, Sotheby’s and Christie’s had failed to remit them royalties under the CRRA for as far back as 1976.

At the district court level, the artists lost and their claims were dismissed.  The district court found that the CRRA, which had been enacted in 1976, was subsequently “preempted” by the 1976 Copyright Act that went into effect in 1978.  Preemption occurs where a Federal statute governs a subject matter so that it is the intent of Congress to “preempt” the state from enacting a contrary law.  In essence, the district court was finding that the sole remedy for the Plaintiff-artists for claiming royalties due them was under the1976 Copyright Act and not the California state CRRA.  After the Plaintiff-artists appealed the trial court’s decision to the Ninth Circuit, the Ninth Circuit affirmed the trial court for the most part but did remand some of the claims of Plaintiffs back to the trial court with regard to those sales that occurred between January 1, 1977 and January 1, 1978 (the enactment of the CRRA and the effective date of the Copyright Act).  After the Ninth Circuit’s ruling, the Defendants moved for an award of attorney’s fees claiming that they were the prevailing party under the CRRA.  The Plaintiff-artists opposed the request claiming that since their CRRA claims had been found to have been preempted by federal law, the defendants were not entitled to attorney’s fees under the CRRA for similar reasons.

The Ninth Circuit began by noting that the CRRA allows for an attorney’s fees award to the “prevailing party” and was mandatory because of the use of the language “shall be entitled.”  Nevertheless, because the attorney fee provision had only been added to the CRRA in 1982, the Court would limit its examination of an award of attorney’s fees to those claims pertaining to sales after that date.

Continue Reading

What’s New this Christmas?

By Audrey A Millemann on Posted in IP, IP Law Blog Lawyers In The News, Patent Law

Every year about this time, I search the PTO database for any new patents on inventions related to Christmas. This year turned up several. Interestingly, most of the ones I looked at issued at October and November of this year. (Maybe the PTO wanted to give the owners an early Christmas present!)

There are lots of patents for Christmas tree stands.  This year produced two worth mentioning.  The first is U.S. patent no. 10,117,537.  This tree stand has an inner container to hold the tree and the water, and an outer, cube-shaped container that fits around the inner container. The inner container has a spike at the bottom for the tree trunk and clamps around the top to hold the tree upright.  The outer cube is supposed to protect the floor from water leaks.  The patent says that the cube shape is intended to solve a problem of existing tree stands: people trip over the legs of the stand.  This doesn’t quite make sense to me, however, as it’s pretty hard to trip over the legs of a tree stand when the branches of the tree extend well past the stand. 

The second tree stand patent is U.S. patent no. 10,123,646.  This tree stand includes a tarp inside it so that the tree can be tipped out of the stand onto the tarp when the tree is ready to be discarded.  It’s a combination of a tree stand and a tarp, so it takes two perfectly useful things and turns them into one not so useful thing.  It looks way too complicated to be practical: it has a hinged, pivoting collar, spurs, a rotating wheel and cylinder, baffles, a cable, restraints, screws, a foot pedal, and a rolled-up tarp.  All of this makes the tree stand far more difficult than necessary. I think the simplest way to take down a Christmas tree is just to take it out of its stand and carry it outside.

Another patent that seems to take an ordinary task and make it more complicated is U.S. patent no. 10,121,127, entitled “System and Method for Processing Group Gift Cards.”  This is software that can be used to manage the purchase of a group gift.  For example, when you and your friends want to chip in to buy another friend a birthday present, someone collects the money from the others and buys the gift. I don’t know what is so time-consuming or complicated about this, and I don’t find it to be a problem.  But the inventors of this invention came up with a solution, so they must think there is a problem.  So, instead of using the old-fashioned method, you can use their software, which is shown in 30 figures and described in 78 columns of text.  Perfectly simple.

One more overly complicated patent is for a pie baking dish.  This is a pie plate that allows you to make a pie with horizontal layers instead of vertical layers.  Standard pie plates can be used to make a vertically layered pie, such as a cheesecake.  All you do is place one layer of ingredients on top of another layer.  A pie with horizontal layers is a pie with concentric circles of ingredients.  It is much harder to make this kind of pie.  Gravity works against horizontal layers.  I’m not sure I’ve ever seen a pie with horizontal layers.  But, in case you want to try making one, these inventors have designed a pie plate to help make it easier.  The pie plate has inner walls to keep the horizontal layers separate, and inner heating channels with vents to cook all of the layers evenly.  I’m not sure how many of us would use this kind of pie plate, but it might be fun to try.

There are some patents that do not describe complicated inventions.  One such patent is a design patent for an artificial Christmas tree.  I’m not a fan of artificial Christmas trees, unless they are used as decorations in addition to a real Christmas tree.  U.S. design patent no. D 832,133 shows a geometrical tree.   U.S. design patent no. D 832,133 shows a geometrical tree that has a central pole and layers of horizontal slats around the pole arranged as branches. The problem with this patent is that it would be fairly easy to design around, by changing the arrangement of the layers or the number of the slats.   Design patents only protect the specific design shown in the drawings; as such, they provide less protection than utility patents.  But, design patents can be very valuable if the specific design is likely to be copied.

Another patent covers a smart phone app connected to a toy telephone system.  The system allows a parent to set up a phone call to their child from Santa, an elf, a reindeer, or another Christmas character.  The app can be used all year long to send personal phone calls to the child. According to the patent, the system helps parents “create the illusion that Santa and his elves are watching [the children] from the North Pole.”  The system is described as a “behavior modification tool which will promote positive behavior in children.”  That sounds pretty serious for a toy telephone system!

I hope you find some fun and interesting gifts to buy this year!

Happy Holidays!

Court Finds No Personal Jurisdiction Over Foreign Defendant Based On U.S. Subsidiary Under Stream of Commerce and Agency Theories

By Eric Caligiuri on Posted in IP, IP Law Blog Lawyers In The News, Patent Law

In University of Massachusetts Medical School et al v. L’Oreal SA et al, 1-17-cv-00868 (DED 2018-11-13, Order) (Sherry R. Fallon), the magistrate judge recommended granting a foreign parent company defendant’s motion to dismiss plaintiffs’ patent infringement action for lack of personal jurisdiction where its American subsidiary introduced the alleged accused products into the stream of commerce and the foreign defendant’s corporate structure is not sufficient to establish personal jurisdiction because “mere ownership of a subsidiary does not justify the imposition of liability on the parent.”

The primary plaintiff in the case is the University of Massachusetts Medical School, a public institution of higher education in Massachusetts.  The University of Massachusetts is the assignee of the two patents-in-suit: U.S Patent Nos. 6,423,327 (the ‘327 patent) and 6,645,513 (the ‘513 patent).  Defendant L’Oreal USA is a wholly-owned subsidiary of Defendant L’Oreal S.A., a French corporation headquartered in France.  L’Oreal USA is Delaware Corporation with its principal place of business in New York, New York.  L’Oreal USA develops and manufactures hair care, skin care, cosmetics, and fragrances distributed globally.  L’Oreal S.A. filed a motion to dismiss for lack of personal jurisdiction, amongst other issues considered by the court.

Plaintiffs asserted that the court’s exercise of personal jurisdiction over L’Oreal S.A. comports with constitutional due process requirements under the stream of commerce and agency theories.  Under the stream of commerce theory, a foreign defendant can be subjected to a forum state’s jurisdiction if it “purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its law.”  Plaintiffs argue that personal jurisdiction is appropriate under this theory because L’Oreal S.A. intends for its products to be sold in the United States through its subsidiary L’Oreal USA.  L’Oreal S.A. does not dispute that the Accused Products are sold in Delaware and throughout the United States, but contends that it is not responsible for introducing the Accused Products, which are made and sold by L’Oreal USA in the United States, into the stream of commerce.

The Magistrate found the record does not support plaintiffs’ argument that L’Oreal S.A. introduced the Accused Products into the stream of commerce.  Instead, the court found that L’Oreal USA introduced the Accused Products into the stream of commerce, and L’Oreal S.A.’s corporate structure is not sufficient to establish personal jurisdiction under the stream of commerce theory because “mere ownership of a subsidiary does not justify the imposition of liability on the parent.”  The Magistrate reasoned Plaintiffs must present evidence showing that the parent company is responsible for introducing the Accused Products into the U.S. or Delaware markets.  And, here, the record does not indicate that L’Oreal S.A. had a role in the design, manufacture, marketing, or sale of the Accused Products.  Further, Plaintiffs do not specifically tie the development or sale of the Accused Products to L’Oreal S.A.  As such, the Magistrate found Plaintiffs cannot show that L’Oreal S.A. “placed–or otherwise influenced the placement of-the [ accused products] into either the United States market generally or the Delaware market specifically.”

Plaintiffs also contend that, by owning United States patents and suing to enforce its patents in this and other United States courts, L’Oreal S.A. has purposefully availed itself of the privilege of conducting activities in the forum state.  However, the Magistrate held that “ownership of a United States patent, without more, cannot support the assertion of personal jurisdiction over a foreign patentee in any state.” As such, the Magistrate found plaintiffs cannot prevail on their stream of commerce theory.

Plaintiffs also argued that L’Oreal S.A. is subject to the court’s jurisdiction under the agency theory as well.  Under this theory, a subsidiary corporation’s specific jurisdictional acts are imputed to its parent corporation to satisfy the jurisdictional requirements “where the subsidiary acts on the parent’s behalf or at the parent’s direction.”  The existence of an agency relationship depends on “the degree of control [ ] the parent exercises over the subsidiary.”  To determine whether the parent has the requisite control over the subsidiary to establish an agency relationship, a court will consider the following factors: “the extent of overlap of officers and directors, methods of financing, the division of responsibility for day-to-day management, and the process by which each corporation obtains its business.”

First, Plaintiffs contend that L’Oreal S.A. and its subsidiaries act as a “unified entity” because L’Oreal Group (the overarching entity consisting of L’Oreal S.A. and its subsidiaries) discloses the financial results of the entire Group in a consolidated report, which includes L’Oreal USA’s financial results. However, the Magistrate found “filings [by a parent corporation] presenting the assets, liabilities, and financial earnings of its subsidiaries as one indistinguishable whole do not prove agency.”

Next, Plaintiffs also argue that L’Oreal S.A. and L’Oreal USA “operate as a single entity, particularly for the purposes of designing, manufacturing, and selling the Accused Adenosine Products in the United States.”  However, the Magistrate found Plaintiffs failed to establish that L’Oreal S.A. had control over L’Oreal USA’s day-to-day management and matters of patent infringement.  Specifically, “L’Oreal USA maintains separate licensing and distribution contracts, manufactures and distributes its own products, has its own board of directors, issues separate financial statements, files separate tax returns, and maintains its own workforce from L’Oreal S.A.”  Moreover, L’Oreal USA’s marketing, advertising, customer relations, and “Research and Innovation” departments are separate from L’Oreal S.A.  Because plaintiffs’ allegation that L’Oreal S.A. and L’Oreal USA operate as a single entity controlled by L’Oreal S.A. is not supported by the record, the Magistrate found Plaintiffs’ agency theory also fails.  Thus, the Magistrate found Plaintiffs have failed to establish personal jurisdiction over L’Oreal S.A.

Finally, the Magistrate also found Plaintiffs have also failed to present sufficient factual allegations to justify jurisdictional discovery.  In order to justify jurisdictional discovery, the plaintiff must present “factual allegations that suggest with reasonable particularity the possible existence of the requisite contacts between [the defendant] and the forum state.”  Plaintiffs assert that jurisdiction over L’Oreal S.A. is proper under the stream of commerce and agency theories and based on L’Oreal S.A.’s own contacts with the forum.  But, the Magistrate already found Plaintiffs’ allegations fail to assert with reasonable particularity facts showing that L’Oreal S.A. might be subject to personal jurisdiction.  Therefore, the Magistrate recommended plaintiffs’ request for jurisdictional discovery also be denied.

Amarillo Natives Hold San Diego Padres’ Double A Affiliate Team Name Hostage

By Josh H. Escovedo on Posted in IP, IP Law Blog Lawyers In The News, Trademark Law

The San Diego Padres recently took control of the Amarillo minor league baseball organization. The organization will serve at the Padres’ Double A affiliate. In the spirit of new beginnings, the organization recently held a public naming contest to determine its new mascot. After the contest had concluded, the Sod Poodles were selected as the new mascot.

Unfortunately, it appears that Panhandle Baseball Club, Inc., the entity that owns and operates the Amarillo Sod Poodles, will not be able to obtain the exclusive right to use Amarillo Sod Poodles or Sod Poodles in commerce without a fight. It turns out that two Amarillo natives, Dusty and Nikki Green, both of whom had been critical of the team’s ownership, filed an intent-to-use (“ITU”) application with the United State Patent and Trademark Office on June 2, 2018, two days after the team name was announced and three days before Panhandle Baseball Club filed its ITU application for Sod Poodles on June 5, 2018, and over five months before Panhandle Baseball Club filed its ITU application for Amarillo Sod Poodles. So as far as filing prior is concerned, the Greens beat Panhandle Baseball Club to the punch.

According to Dusty Green, the team has made three offers to purchase the putative mark, but Green has rejected each of the offers and does not have an intent to sell. Truth be told, although Green seemingly has priority pursuant to his filing date, he does not have a federally registered trademark at this time. Although one must simply have a good faith intent to use the mark in commerce, an opposing party is free to challenge registration of the mark, and in doing so, challenge the initial registrant’s good faith intent to use the mark. Based upon statements issued by the Amarillo general manager Tony Ensor, it seems Panhandle Baseball Club will do exactly that.

“We are aware of this individual and we are following the trademark processes and procedures. We are not at all concerned and will let the process play out,” said Mr. Ensor to MyHighPlains.com. “We could not be more excited and confident about our name, this brand, and our logo! Sod Poodles is our brand and identity. We created it, and our community brought it to life. There is no way we are going to allow an outside individual who has nothing to do with our team try to take advantage of our team and this community.” I could be mistaken, but those sound like fighting words, and as a trademark practitioner, it is my belief that Panhandle Baseball Club will challenge the registration of Greens’ mark on the basis described above.

Practically speaking, it is likely that Panhandle Baseball Club will continue trying to acquire the Greens’ putative rights in the mark in order to avoid protracted and costly litigation. However, if the Greens are set on maintaining ownership of the mark, it seems that Panhandle Baseball Club is prepared for a fight. If I had to guess, I would say that the Greens will eventually sell their putative rights to Panhandle Baseball Club once they realize how expensive this nonsensical proceeding is. But for all I know, the Greens truly intend to utilize the mark in commerce and will stand their ground. Only time will tell, so stay tuned.

TTAB’s Refusal To Register Trademark Reveals Important Lesson For Trademark Attorneys

By Scott Hervey on Posted in IP, IP Law Blog Lawyers In The News, Trademark Law

The Trademark Trial and Appeals Board’s recent ruling in In re Productos Verde Valle, S.A. de C.V. upholding a trademark examiner’s refusal to register the mark SONIA for “sauces; chili sauce; hot sauce” holds a lesson for those of us that regularly advise clients on the registrability (and usability) of trademarks.  Assuming Verde Valle conducted a trademark search, it’s very likely (if not certain) that the word mark SONIA SONI LIFE IS A RECIPE for “spices, spice blends; spice rubs” would have come up.  If you were representing Verde Valle, would you advise them that this mark will absolutely prevent the registration of their mark?  Or, would you advise that SONIA SONI LIFE IS A RECIPE is likely to be raised by the trademark examiner, but based on the differences in appearance, sound and commercial impression between the two marks, and the difference in the goods covered by the two marks, registration should be possible?  These were the exact same arguments raised by Verde Valle in its appeal to the TTAB.  The Board affirmed the examiner’s refusal to register.

It is understandable that the TTAB found the goods covered by the two marks to be similar.  Both are food flavorings, sold in the same channels of trade (grocery stores) to the same group of consumers.  Plus, the trademark examiner had submitted a number of third-party registrations covering both spices and sauces.  And while Verde Valle argued that its spices were sold as Mexican food while the goods covered by the registered mark were sold as Indian spices, the TTAB pointed out (1) that no such restriction on the scope of the goods, channels of trade or classes of purchasers was included in either the registration or Verde Valle’s application; and (2) certain spices may be used in both Mexican and Indian cuisine.

The interesting part of the decision is the TTAB’s analysis of the two marks.  In support of its argument that the marks are different, Verde Valle relied on standard, well-established holdings:  that marks must be considered in their entireties and not dissected; that the determination of likelihood of confusion cannot be predicated on only part of a mark; that the commercial impression of a trademark is derived from it as a whole, not from its elements separated and considered in detail.   In reliance on these principals, Verde Valle argued the shared term SONI is not sufficient grounds on which to deny registration, and that the two marks are distinct in light of the additional terms.

In considering Verde Valle’s arguments, the TTAB acknowledged its obligation to consider the marks in their entireties but also noted that there is nothing “improper in stating that, for rational reasons, more or less weight has been given to a particular feature of the mark, provided the ultimate conclusion rests on a consideration of the marks in their entireties.”  The TTAB noted that the proper focus of any inquiry into likelihood of confusion “is on the recollection of the average customer, who retains a general rather than specific impression of the marks”  and here, “the average customer includes ordinary consumers seeking food flavorings in the nature of sauces and spices.”

In examining the two marks, the TTAB found the term SONIA to be the most prominent portion of the registered mark.  This should have been no surprise to Verde Valle as the first part of a mark – as long as it is distinctive — is most often (if not always) deemed to be the most prominent part of the mark.  The rationale behind this is that it is often the first part of a mark which is most likely to be impressed upon the mind of a purchaser and remembered.  What likely was a surprise to Verde Valle was the treatment given to the rest of the mark.  In examining its effect on the overall comparison of the marks, the TTAB said that the words LIFE IS A RECIPE “imparts a connotation that simply highlights use of the spices” and contends that consumers would simply ignore them (as well as the other distinctive word, SONI) and believe that Verde Valle’s mark is simply a shortened version of the registered mark, because of “the penchant of consumers to shorten marks.”  (In addressing the TTAB’s treatment of SONI, it stated “likelihood of confusion is not necessarily avoided between otherwise confusingly similar marks merely by adding or deleting other distinctive matter. If an important portion of both marks is the same, then the marks may be confusingly similar notwithstanding some differences.”)

The important lesson here for trademark attorneys who regularly review trademark search reports is to apply an even greater degree of caution when a report reveals a mark that shares an important portion of the searched mark.  In cases where the searched mark and a mark in a report share an exact same word, where this shared word in the first word in each mark, and where the goods are highly similar, it may be wise to caution the client that there is a good chance that registration may not be possible.

IP Challenges Again Take the Stage at the U.S. Supreme Court

By Jo Dale Carothers on Posted in IP, IP Law Blog Lawyers In The News

Intellectual property disputes will again take their place on stage at the U.S. Supreme Court this term when the court addresses at least two IP questions.  1.  Can the government challenge patents under the America Invents Act (“AIA”)?  2. Do trademark licenses survive Chapter 11 bankruptcy?  These questions are presented in two cases in which the U.S. Supreme Court just granted certiorari:  Return Mail, Inc. v. U.S. Postal Service, et al. and Mission Product Holdings, Inc. v. Tempnology, LLC.  In Return Mail, the Supreme Court is addressing whether the government is a “person” eligible to challenge the validity of patents under the AIA.  In Mission Products, the Court will determine the effect of bankruptcy on trademark licenses.

First, let’s look at the patent issue raised in Return Mail.  Patents are issued by the U.S. government and upon issuance are presumed valid and enforceable.  Return Mail essentially raises the question as to whether the U.S. government can challenge the validity of a patent it issued.  That is exactly what the U.S. government has done in Return Mail after the government was essentially accused of infringing a patent it issued.

Under the AIA, any “person” can petition the Patent Trial and Appeal Board (“PTAB”) for review of the validity of a patent.  Specifically, the AIA states that “a person who is not the owner of a patent” may petition for inter partes review (“IPR”), and any person sued for infringement may petition for covered business method (“CBM”) review.  Everyone from individuals to trade associations, nonprofits, and corporations have availed themselves of this right to challenge the validity of patents.  On a few prior occasions, even the U.S. government has petitioned for review of the validity of patents.

Return Mail, Inc., is the assignee, or owner, of U.S. Patent No. 6,826,548, which is a patent for more efficiently processing mail that is undeliverable and returned due to an inaccurate or obsolete address for the intended recipient.   After unsuccessfully trying to license its patent to the U.S. Postal Service, Return Mail brought suit against the U.S. Postal Service in the Court of Federal Claims under 28 U.S.C. §1498(a) alleging the Postal Service had “engage[d] in the unlicensed and unlawful use and infringement of the invention claimed in the ’548 patent.”  In response, the U.S. Postal Service challenged the validity of claims 39–44 of the patent under the AIA by filing a petition with the PTAB for CBM review.  The PTAB granted the petition and ultimately invalidated the challenged patent claims.

On appeal to the Federal Circuit, Judge Newman concluded in her dissent that the PTAB did not have jurisdiction to consider the government’s CBM petition because “[t]he general statutory definition is that a ‘person’ does not include the United States and its agencies unless expressly provided.”  In other words, Judge Newman concluded the government is not a “person” and therefore is not allowed to challenge the validity of patents under the AIA.  In contrast, Chief Judge Prost stated the majority was not persuaded that the government was excluded from bringing petitions under the AIA.  In support of the majority’s opinion, Judge Prost stated “[t]he AIA does not appear to use the term ‘person’ to exclude the government in other provisions.”

Capitalizing on Judge Newman’s argument in dissent, Return Mail took this dispute to the U.S. Supreme Court.  Return Mail relies on the argument that there is a “longstanding interpretative presumption that ‘person’ does not include the sovereign.”  In fact, Justice Scalia wrote that this presumption is overcome “only upon some affirmative showing of statutory intent to the contrary.”  Return Mail argues “the case is but the latest example of patent-law exceptionalism by the Federal Circuit” and that the Supreme Court has repeatedly reversed the Federal Circuit when it fails to heed the rule that “patent law is governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation.”  Return Mail further argues the Federal Circuit’s ruling “jeopardizes billions of dollars in investments in every sector of the economy” by “expand[ing] the [PTAB]’s authority to invalidate issued patents—property protected by the Due Process and Takings Clauses.”

In rebuttal, the U.S. government argues the statute itself demonstrates affirmative intent to include the government in the definition of “person” because Congress used “person” in other parts of the statute in such an inclusive manner.  For example, the patent statute uses the term “person” when referring to those who can obtain and be assigned, or own, patents.  Under §102, the statute states “[a] person shall be entitled to a patent,” and under §118, it states a “person to whom an inventor has assigned” an invention may apply for a patent.  Then under 35 U.S.C. §207(a)(1), Congress has authorized “[e]ach Federal agency” to “apply for, obtain, and maintain patents,” but the government is still subject to §102 and §118 in doing so. Thus, the government argues, it is a “person” in the context of patents and challenges of patents under the AIA.  In fact, the government has a vast portfolio of patents.  In addition, the government points out that when the same words are used in different parts of a statute, they are presumed to have the same meaning.

The government goes on to argue that public policy favors allowing the government to challenge weak patents asserted against it, stating “Congress’s interest in providing an efficient non-judicial mechanism for reconsidering the patent’s validity is no less implicated than when the patent is asserted against a private party.”

Not only does this case raise the question of whether the government can take on the roles of both the sovereign power (i.e., the United States Patent and Trademark Office as issuer of the patent and the USPTO’s PTAB as the tribunal for evaluating the validity of the challenged patent) and essentially a private party (i.e., the U.S. government and its U.S. Postal Service as patent challenger before the PTAB) in the same proceeding, but it also raises questions as to where the boundaries of the government will be drawn in such proceedings.  For example, in arguing that Return Mail is the wrong vehicle for the Court to decide this issue, the government has argued that the Postal Service is fundamentally different than other Federal agencies because it is more like a business than the other governmental agencies.  But the government did not distance itself from the Postal Service in the CBM petition challenging Return Mail’s patent.  In fact, the government specifically names both entities in the petition, captioning it The United States Postal Service (USPS) and The United States of America v. Return Mail, Inc.  Further, while the U.S. government has only filed a few petitions under the AIA, a ruling that the government is not eligible to file such petitions may raise further questions as to whether foreign governments, states, and/or entities affiliated with federal, state, or foreign governments are eligible to file petitions challenging the validity of patents.

In the second IP case currently before the Supreme Court, the Court will address trademark licensing issues in the context of bankruptcy in Mission Products.  In that case, Tempnology filed for bankruptcy protection and cancelled its licensing agreement with Mission Product Holdings (“MPH”).  MPH contested the cancellation arguing that under Bankruptcy Code §365(n), MPH was allowed to continue its use of the licensed trademark.  The Court of Appeals for the First Circuit, however, found that the trademark license did not survive Tempnology’s cancellation.  However, there is currently a split among the circuits on this issue.  While the Fourth Circuit has followed the First Circuit’s approach, the Seventh Circuit has taken the opposite approach.  Instead, the Seventh Circuit has found that a licensor’s cancellation of a trademark license in bankruptcy proceedings is a breach of contract by the licensor, rather than a termination of the licensee’s rights.  In its upcoming decision in Mission Products, we will soon know how the Supreme Court resolves this split among the circuits.