On April 24, 2018, the Supreme Court issued its ruling in SAS Institute, Inc. v. Iancu, which held that the Patent Trial and Appeal Board (“PTAB”) arm of the United States Patent and Trademark Office (“USPTO”) must issue a final written decision addressing each and every patent claim challenged in an Inter Partes Review (“IPR”) petition if review is granted.  In other words, if the PTAB is going to institute a review, it must address all the claims that are being challenged by the petition.  In the six weeks or so since the SAS Institute decision, the ruling has had repercussions not only for the PTAB, but also for federal courts.

For example, in Wi-LAN, Inc. et al v. LG Electronics, Inc. et al, the Southern District of California recently decided to issue a stay in a patent infringement case brought by WiLan, Inc. against LG Electronics, Inc. pending a decision on whether to institute an IPR proceeding against the at-issue patents.  While not dispositive, the Court did consider the SAS Insitute ruling in making its decision, reasoning “[w]hile review is not guaranteed … in light of the Supreme Court’s mandate to review all contested claims upon grant of [an IPR] and the complexity of this case, the court finds [the simplification of issues] weighs in favor of a limited stay of proceedings until the [PTAB] issues its decisions on whether to institute IPR.”

Next, in DermaFocus LLC v. Ulthera, Inc., the District of Delaware had to decide whether to lift an already issued stay when some but not all challenged claims had already been ruled on by the PTAB.  The Delaware District Court decided not to lift the stay because the circumstances warranting the entry of a stay in the first instance still persisted in light of SAS Institute.  Specifically, the Court reasoned that the “parties stipulated to stay the litigation ‘pending resolution by the PTAB of the patentability of all challenged claims in the pending IPR.’”  Although the PTAB denied institution of IPR proceedings with respect to some claims, and issued a final written decision on all remaining claims, the Supreme Court recently ruled that the PTAB must issue a final written decision “with respect to the patentability of any patent claim challenged,” and “in this context, as in so many others, ‘any’ means ‘every.’”  For this reason, the Federal Circuit remanded Ulthera’s appeal to the PTAB for issuance of a final decision regarding the patentability of all claims.  Consequently, the PTAB has yet to resolve the patentability of all challenged claims in the pending IPR proceeding, and the terms of the parties’ stipulation have not been satisfied.

Finally, in PGS Geophysical AS v. Iancu, the Federal Circuit held that it has jurisdiction to address appeals without first requiring the PTAB address the claims and grounds included in petitions for review but not previously included in final written decisions, i.e. the “non-instituted” claims and grounds.  In other words, the Federal Circuit held “that the existence of non-instituted claims and grounds does not deprive [it] of jurisdiction to decide appeals from final written decisions.”  The Federal Circuit reasoned that while the PTAB having only partially instituted review is now improper under SAS Institute, the PTAB’s final decisions on the validity of individual claims are nonetheless still final because the PTAB made a patentability determination.

Although there are still numerous issues and questions the PTAB and federal courts need to decide in implementing the SAS Institute ruling, the answers to some of these issues and questions are slowly taking shape.  However, there are many more that will require resolution in both the short and long term.

A few years ago, before the 76ers returned to playoff glory, the NBA’s Philadelphia 76ers’ ownership and front office began utilizing the phrase “Trust the Process” to represent their journey back to the top. Finally, after years of absolutely horrendous basketball, which enabled the 76ers to draft stars such as Joel Embiid and Ben Simmons, the 76ers finished third in their conference and returned to the playoffs for the first time in years. Evidently, the Process paid off.

Now, switching sports, after a season that ended with the Buffalo Bills being eliminated in the first round of the NFL playoffs and trading their once–prized quarterback Tyrod Taylor to the Cleveland Browns, the Bills have drafted rookie quarterback Josh Allen from the University of Wyoming. For some reason, despite making the playoffs and presumably being a trade or two away from going further into the playoffs, the Bills have opted to rebuild. In furtherance of that process, the Buffalo Bills recently filed a trademark application with the United States Patent and Trademark Office, seeking to register “Respect the Process.” The Bills intend to use the mark on cellphone cases, magnets, flags, towels, water bottles, door mats, and other similar goods. They do not, however, plan to print t-shirts reflecting the mark, as a company known as Made Me Tees registered that mark in early 2017 with respect to such clothing. In any event, it seems the Bills may have a larger problem looming.

Although the 76ers never registered “Trust the Process” or “The Process,” superstar Joel Embiid did. In 2016, Embiid, whose Twitter wallpaper features “The Process” in all caps, filed an application to register the mark, which is still, no pun intended, going through the trademark registration process, but seemingly on track for registration. So, this raises an issue: Can Embiid block the Buffalo Bills’ attempt to register “Respect the Process”? And better yet, if he can, will he?

The answer to the first question will depend greatly upon whether the USPTO’s examining attorney believes the marks are confusingly similar. Frankly, I’m not sure I think consumers are likely to confuse the two marks, but I haven’t researched similar cases and even if I had, the examining attorney could view the comparison differently than I do. As for the second question, it remains to be seen if Embiid would oppose the mark. He may not care in light of the different sports, or he may not find the marks all that similar. We won’t know until he acts, or fails to do so. In any event, given the parties involved, we will keep an eye on the situation and report subsequent developments.

adidas and Skechers are athletic shoe and apparel manufacturers who have a long history of litigation between them arising out of claims that Skechers has repeatedly infringed upon adidas’ trademarks.  In Adidas America, Inc. v. Skechers USA, Inc. (decided May 10, 2018), the Ninth Circuit once again had to weigh in on Skechers’ alleged infringement of adidas’ trademarks.

 

adidas is well known for its “three-stripe” mark, which it has featured on its shoes and clothes for decades as part of its branding strategy and for which it owns a federal trademark.  adidas claims that the mark is worth millions of dollars in sales and that it invests heavily to advertise the three-stripe mark in various media.  In past lawsuits with Skechers, Skechers has had to admit that adidas is “the exclusive owner” of the three-stripe mark and has agreed not to use it or any other protected mark, which may be “confusingly similar thereto.” 

 

In September 2015, adidas sued Skechers once again for trademark infringement, among other claims, arising out of the adidas Stan Smith shoe and the competing Skechers Onyx shoe (which this article will not discuss) as well as Skechers Relaxed Fit Cross Court TR shoe, which utilized a three-stripe mark similar to adidas trademark.  adidas successfully moved for a preliminary injunction in the trial court barring Skechers from manufacturing, distributing, advertising, selling or offering for sale the Cross Court shoe.  Skechers appealed that decision to the Ninth Circuit.

 

The Ninth Circuit began by recognizing that it reviews the issuance of a preliminary injunction for abuse of discretion which means that the Court’s “decision is based on either an erroneous legal standard or clearly erroneous factual findings ….”  To obtain an injunction, a plaintiff usually has to establish: (1) the likelihood of success on the merits of its claim(s); and (2) that it is likely to suffer irreparable harm in the absence of an injunction.

 

The Ninth Circuit, in reviewing the lower court’s issuance of the injunction as to Skechers’ Cross Court shoe, found that the trial court had properly determined that adidas had established a  likelihood of success on the merits of its claims.  To meet its burden of establishing trademark infringement, adidas had to show “among other things, ownership of its trademark and a likelihood of confusion between its and the defendant’s [Skechers] marks.”  Given that Skechers had essentially conceded adidas ownership of the three strip mark, the only issue was whether adidas had met its confusion element.

 

The Ninth Circuit found that the district court had properly applied the Sleekcraft factors to find that they favored adidas in finding a likelihood of trademark infringement. The Court found the following significant in reaching this determination: (1) both the cross court and adidas designs have three-stripes; (2) although there may have been slight differences in the three-stripes marks, they were attached to closely related products and the court could overlook any minor differences between them; (3) there was significant strength in adidas three-stripe mark given that it was “more likely … to be remembered and associated in the public mind with the marks’ owners”; and (4) Skechers having previously admitted the three-stripe mark belonged to adidas, could be construed as having adapted the mark similar to adidas’ to deceive the public.  Taken together, these factors weighed heavily in adidas favor and the Ninth Circuit found that the trial court had properly concluded that adidas had established the likelihood of success on the merits as to its trademark infringement claim.

 

Next, the Ninth Circuit turned to adidas’ trademark dilution claim.  Trademark dilution is “the lessening of the capacity of a famous mark to identify and distinguish goods or services regardless of the presence of or absence of: (1) competition between the owner of the famous mark and other parties; or (2) likelihood of confusion, mistake or deception.”  In order to establish dilution, a plaintiff must show several factors which are similar to the Sleekcraft factors.  In opposing adidas’ trademark dilution claim, Skechers relied on many of the same objections regarding the trademark infringement claim which the Ninth Circuit concluded had properly been overruled.  Skechers further argued that adidas failed to produce evidence of the degree of recognition of the three-stripe market, but the Court rejected this finding and concluded that there was significant evidence that “the three-stripe mark enjoyed a high degree of recognition.”  Like the trademark infringement claim, the Ninth Circuit affirmed the trial court’s finding as to adidas’ trademark dilution claim in support of the granting of the motion for preliminary injunction.

 

However, the Court found that the trial court had erred in finding that there was a likelihood of irreparable harm.  adidas had argued that Skechers, by selling the Cross Court shoe, had “harmed adidas’ ability to control its brand image because consumers who see others wearing Cross Court shoes, would associate the allegedly lesser quality Cross Courts with adidas and its three-stripes mark.”   The Ninth Circuit concluded that there was no evidence in the record to support this loss of control theory.

 

First, the Ninth Circuit recognized that this claim relied on the assumption that adidas is viewed by consumers as a premium brand while Skechers is viewed as a lower quality discount brand.  However, the only evidence offered by adidas in support of this position were statements made by adidas personnel.  The Ninth Circuit concluded that “Skechers’ reputation among the ranks of adidas employees does not indicate how the general consumer views it.”

 

Second, the Ninth Circuit rejected this loss of control theory on the ground that this theory of harm was contradictory to adidas’ theory of consumer confusion to establish its likelihood of success on the merits.  Essentially, adidas was arguing not that a Cross Court purchaser would believe that he or she was buying an adidas product, but that someone else seeing the wearer of a Cross Court shoe would somehow mistake it for an adidas.  The Court found it inconsistent as to how a supposed consumer viewing the Cross Court shoe from afar would somehow (1) mistake it for an Adidas; and (2) somehow be able to determine that it was in fact a lower quality shoe.  Drilling down a bit further, the Ninth Circuit said that if an observer was not close enough to be able to see the Skechers logos on the shoes that would distinguish from an adidas shoe, how could that observer reasonably assess the quality of the shoes?  Further, how could that observer determine that the shoe was a “discount” brand without knowing the price of the shoe or being able to determine it  was a Skecher shoe to begin with.  The Court found that this failure of proof on the part of adidas meant that the trial court should have denied the motion for preliminary injunction as to the cross Court shoe.

 

Circuit Judge Clifton dissented from the opinion and found that the Court should have upheld the preliminary injunction in its entirety.  Judge Clifton found that the Ninth Circuit should have been more deferential to the trial court’s factual findings and believed that there had been sufficient evidence under prior case law to establish irreparable injury.

 

Litigants in trademark infringement/dilution cases seeking injunctive relief need to remember that they bear the burden of establishing with admissible evidence both the likelihood of success on the merits and the danger of irreparable injury.  Merely relying on internal employee statements may not be sufficient to meet this burden.

 

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 www.theiplawblog.com. 

 

The United States International Trade Commission (“ITC”) is a Federal agency that deals with matters involving trade.  Among its many responsibilities, the ITC investigates a variety of issues related to trade including investigating and adjudicating cases involving imported products that allegedly infringe intellectual property rights.  These infringement investigations, called Section 337 investigations, may include allegations that imported goods infringe patents or trademarks.  For example, the ITC may investigate allegations by a complainant (plaintiff) that certain imported goods infringe utility or design patents or infringe registered or common law trademarks.  “Other forms of unfair competition involving imported products, such as infringement of registered copyrights, mask works or boat hull designs, misappropriation of trade secrets or trade dress, passing off, and false advertising, may also be asserted.” See https://www.usitc.gov/intellectual_property.htm for more details.

The ITC offers certain advantages over Federal district courts for patent owners seeking to enforce their patents against alleged infringers.  For example, some would say the ITC is the ultimate rocket docket.  Most investigations are completed within 12 to 15 months of institution whereas district courts may take several years.  Scheduled to take effect for investigations instituted after June 7, 2018, new rules announced by the ITC are intended to further “increase the efficiency of its section 337 investigations and reduce the burdens and costs on the parties and the agency.”  These new rules are part of a process that began in 2015 with the proposal of amendments to the Commission’s Rules of Practice and Procedure.

The new rules will allow the ITC to institute multiple investigations based on one complaint and will allow Administrative Law Judges (“ALJs”) to use their discretion to sever an investigation into two or more investigations within 30 days of institution.  Severing large investigations will ensure they proceed to completion according the Section 337 timelines and help ALJs better manage their dockets.  ALJs may be more likely to sever cases with multiple parties and/or multiple patents.  For example, where one party is only involved in a subset of the issues, the ALJ may server the investigation for efficiency.

The new ITC rules also formalize procedures of a previous, rarely-used pilot program for resolution of potentially dispositive issues within the first 100 days of an investigation.  The following rules apply to such 100-day proceedings:

  • an ALJ may hold expedited hearings on designated issues;
  • an ALJ may stay discovery on the remaining issues pending resolution of the 100-day proceeding;
  • within 100 days of institution of the investigation, an ALJ’s initial determination in a 100-day proceeding is due;
  • absent review, the initial determination on these issues becomes final within 30 days; and
  • a petition to review an initial determination in a 100-day proceeding is due within five business days after service of the initial determination, and the time for filing a response to a petition for review is five business days.

Additional rule changes will impact other aspect of Section 337 investigations. Specifically, a party may now serve objections to a subpoena or move to quash, which is more consistent with the Federal Rules of Civil Procedure.  Drafts of expert reports will be privileged.  More documents will be able to be filed online and electronically served.  Further, the ITC’s notice of investigation “will define the scope of the investigation in plain language so as to make explicit” the products that are at issue.  In general, these new rules are likely to ensure the ITC continues to provide a forum for quickly resolving patent infringement disputes involving imported goods.

In addition to the advantages already discussed, the ITC offers patent owners several other benefits over district courts when enforcing patent rights.  For example, the ITC does not stay proceedings pending inter partes review (“IPR”) of the validity of an asserted patent at the United States Patent and Trademark Office whereas district courts often stay cases while IPRs are pending.  Stays further lengthen district court cases relative to ITC investigations.  In addition, the Supreme Court in TC Heartland v. Kraft Foods greatly limited the proper venues for patent cases, but there are no venue restrictions in Section 337 investigations.  Further, the remedy in a Section 337 investigation is an exclusion order that prevents the importation of infringing products into the United States.  In contrast, the Supreme Court’s decision in eBay v. MercExchange has made it difficult to get an injunction, which some would consider a similar remedy to an ITC exclusion order.  If these advantages were not enough, patent owners should also know that ITC success rates for patent owners have been steadily increasing over the last few years for cases decided on the merits.  In fact, some have reported the success rate for patent owners was just short of 90% in 2017.

Given the advantages of adjudicating patent infringement matters at the ITC, why not always use that forum instead of district courts?  The answer, in part, is that for an investigation to be launched at the ITC, the complainant must be able to allege more than just patent infringement.  The complainant must be able to allege a domestic industry exists or is being established and be able to allege infringement by the importation, sale for importation, or sale after importation of the accused products.  In district court, a plaintiff need not make these additional allegations.  Further, due to the speed at which ITC investigations proceed, the cost of litigation must be absorbed over a shorter time period and can be higher.

In sum, patent owners should consider whether the ITC is the appropriate forum for litigating their patent infringement claims given that 1) the new ITC rules for patent cases are likely to further boost the speed and efficiency of this rocket docket; 2) the remedy of prohibiting importation of infringing products can lead to early, favorable settlements; and 3) patent owners have an enviable record of success in cases decided on the merits at the ITC.

Currently, the standard for claim construction is different in AIA reviews before the United States Patent and Trademark Office’s (“USPTO”) Patent Trial and Appeal Board (“PTAB) than in proceedings in federal district courts and the International Trade Commission (“ITC”).  The USPTO construes claims to have their broadest reasonable interpretation (“BRI”) while district courts and the ITC apply the Phillips standard.

Under the BRI standard, a claim term is given its broadest reasonable construction “in light of the specification as it would be interpreted by one of ordinary skill in the art.”  Under the Phillips standard, a claim term is given the “ordinary and customary meaning” it would have to “a person of ordinary skill in the art … at the time of the invention.”  The Federal Circuit has explained that the “broadest reasonable interpretation of a claim term may be the same as or broader than the construction of a term under the Phillips standard.  But it cannot be narrower.”  Thus the Phillips standard is generally considered narrower than the BRI standard.

Currently, the USPTO applies the BRI standard during prosecution of patents, in ex parte reexaminations, and in AIA reviews including inter partes reviews (“IPR”), post grant reviews (“PGR”), or covered business method (“CBM”) proceedings before the PTAB involving unexpired patents.  The PTAB applies the Phillips standard when interpreting expired patent claims.  Further, either side in an AIA review may request application of the Phillips standard for patents that will expire within 18 months of the petition’s filing date.  In contrast, district courts and the ITC always apply the Phillips standard for claim construction.

Many patent owners feel that alleged infringers have an unfair advantage under the current system that applies different claim construction standards for the different forums.  An alleged infringer can argue for a narrow claim construction under Phillips in district court to avoid a finding of infringement and simultaneously argue for a broad construction under the BRI standard before the PTAB in an attempt to invalidate the asserted patent claims.  Therefore, patent owners have repeatedly argued the PTAB should use the same claim construction standard as district courts.

On May 9, 2018, the USPTO issued a notice of proposed rulemaking in which it proposed to adopt the narrower Phillips standard for construing unexpired patent claims and proposed amended patent claims in PTAB trials under the AIA.  The proposal also would amend the rules to add that the PTAB will consider prior claim constructions in civil actions and ITC proceedings that are made of record in a timely manner in IPRs, PGRs, or CBMs.

The USPTO stated “[t]he goal is to implement a fair and balanced approach, providing greater predictability and certainty in the patent system” and increased judicial efficiency.  The USPTO acknowledged that one of the primary concerns of patent owners is that under the PTAB’s current BRI standard, a patent claim could theoretically be found invalid in an IPR, PGR, or CBM review based on a claim interpretation that the patent owner would not be able to apply in asserting infringement in a district court case.  Therefore, the proposed rule change will also alleviate this concern by harmonizing the standards across forums.

Most patent owners will see this proposed rule change as a sign more patent claims will be upheld by the PTAB in AIA reviews conducted under the narrower claim construction standard.  In most cases, however, those patent owners will likely be disappointed.  While the difference in claim construction standards has critically impacted a few decisions, in most instances, the BRI standard and the Phillips standard lead to the same result.  There may also be a downside for patent owners who are anxious for patent infringement litigation to quickly move forward against alleged infringers.  Given the Supreme Court’s recent ruling in SAS Institute v. Iancu requiring the PTAB to review all claims challenged in a petition if review is instituted and the proposed harmonization of the claim construction standard between district courts and the PTAB, district courts will be even more likely to grant stays of infringement cases pending IPRs, PGRs, and CBMs.  In sum, while patent owners were hoping the change in claim construction standards would make it harder to invalidate patent claims, that may not be the result and instead district courts are likely to decide it is judicially more efficient to let the PTAB conclude its AIA reviews before proceeding with infringement actions.

If the USPTO’s proposed rule change is implemented, there will also be a stronger basis for reliance on claim construction rulings across the forums.  But will PTAB claim construction rulings be binding on district courts?  It has been noted that in B&B Hardware v. Hargis Industries, the Supreme Court held that decisions of the Trademark Trial and Appeal Board can be considered binding in subsequent matters before federal courts considering the same questions.  One could argue that claim construction rulings by the PTAB could be similarly binding in subsequent district court infringement cases.

The USPTO has indicated that, if adopted, the proposed rule changes will apply to all IPR, PGR, and CBM proceedings, including those pending at the time the rule change takes effect.  This proposed change will not apply to claims during prosecution at the USPTO.  Further, it does not appear the change will apply to ex parte reexaminations, which could make that option more intriguing for those instances where the BRI standard is more likely to lead to invalidating claims than the narrower Phillips standard.

The USPTO is accepting comments on the proposed rule change for 60 days from its date of publication.  Therefore, the proposed change could go into effect as early as summer of 2018.