IP Update, Vol. 10, No. 3, March 2007
March 2007
Patents / Written Description - An Invention’s Critical Elements Must Be Included in Patent Claims
Patents / Claim Construction - Federal Circuit Grants Interlocutory Review of Claim Construction
Patents / Inequitable Conduct - Long Live the Reasonable Examiner
Writ of Mandamus - Exercising Authority to Issue Writs of Mandamus
Patents / Litigation - Even “Harmless Error” Can Hurt
Patents / Infringement - Government Contractor Immunity Under 28 U.S.C. § 1498
Federal Court / Appellate Practice - Federal Circuit Enforces Finality and Timeliness Rules
Trademarks / Secondary Meaning - Lack of Secondary Meaning Leads to Non-Infringement
Trademarks / TTAB Practice - Dismissal of Opposition Does Not Render Counterclaim to Cancel Moot
Patents / Prosecution Disclaimer
Disclaimer in Parent Limits Scope of Continuation Unless Affirmatively Rescinded
By Matthew L. Jacobs
Addressing the issue of whether arguments limiting claim scope during prosecution of a parent application limit the scope of claims in a continuation, the U.S. Court of Appeals for the Federal Circuit upheld a decision that limited patent claims issued in a continuation application to the same scope as claims allowed in the parent application. Hakim v. Cannon Avent Group, PLC, Case No. 05-1398 (Fed. Cir., Feb. 23, 2007) (Newman, J.).
Hakim sued Cannon Avent Group for infringement of two his patents on spill-proof drinking cups. The district court granted Cannon summary judgment of non-infringement on the first patent. During prosecution of this patent, Hakim distinguished his invention from the prior art by emphasizing that his invention included a diaphragm with a “slit” that opens and closes. After receiving a notice of allowance, Hakim abandoned the original application in favor of a continuation which substituted the word “opening” for “slit” in the claims. The continuation claims were allowed without comment from the examiner. Cannon’s accused products had a diaphragm with an “opening,” but not a “slit.” Cannon thus argued that Hakim was limited by the disclaimer made during prosecution of the original application.
In affirming the grant of summary judgment, the Federal Circuit held that an applicant may not recapture claim scope that was previously disclaimed in an earlier application unless that disclaimer is rescinded. Furthermore, “the prosecution history must be sufficiently clear to inform the examiner that the previous disclaimer, and the prior art that it was made to avoid, may need to be re-visited.” Although Hakim had informed the examiner that he was broadening the claims in the continuation, he did not specifically point out that he no longer intended to be bound by the disclaimer. The Court held that merely informing the examiner that the new claims were broader was not sufficient to rescind the disclaimer.
Practice Note: Prosecutors and litigators alike should note that the scope of a patent claim will be limited by disclaimers made during prosecution of earlier, related applications unless those disclaimers are clearly rescinded during prosecution.
An Unwise but Deliberate Decision Is Not An “Error” For Purposes of Reissue
By Brock Wilson
In deciding whether reissue is a viable medium for perfecting a claim to priority where an applicant made an initial poor choice, the U. S. Court of Appeals for the Federal Circuit held that the conscious choice of patent counsel to sacrifice an early priority date in order to include omitted drawings was not the type of “error” contemplated by the reissue statute, 35 U.S.C. §251. In re Serenkin, Case No. 06-1242 (Fed. Cir., Mar. 6, 2007) (Lourie, J.).
Patentee Serenkin submitted a Patent Cooperation Treaty (PCT) application, omitting eight sheets of drawings, to the United States Receiving Office (USRO) on the last day to claim priority from a corresponding U.S. provisional application. After Serenkin subsequently sent the omitted drawings to the USRO, the USRO gave Serenkin the choice of either submitting the drawings and receiving a new international filing date (i.e., the date the drawings were received) or proceeding without the drawings and retaining the original filing date. Choosing the later meant losing the priority date of the provisional application. Despite this consequence, Serenkin’s patent counsel chose to submit the drawings and take the later filing date. Thereafter, Serenkin’s patent counsel filed a U.S. national phase application, based on the international application, and, subsequently, a U.S. patent issued. After acquiring new patent counsel, Serenkin sought to reissue the U.S. patent in order to claim the priority date of the provisional application. Serenkin claimed procedural error on the part of the previous counsel. The U. S. Patent and Trademark Office (USPTO) Board of Appeals denied the reissue, and Serenkin appealed to the Federal Circuit.
On appeal, Serenkin argued that his original patent counsel erred by making the wrong procedural choice of accepting the new priority date rather than adding the drawings at a later date and contending the drawings did not constitute new matter. Thus, Serenkin argued the requirements of §251 were satisfied; in particular, that through error and without deceptive intent, the patent was partly inoperative or invalid.
The Federal Circuit rejected this argument, holding that reissue could not be used to perfect priority because the purported “error” asserted by Serenkin is not the type of error contemplated by §251. The Court reasoned that Serenkin’s attorney made a conscious decision to choose the benefit of including the drawings over the benefit of the original filing date. The Court characterized the case as one not about the failure to perfect priority, but “about an applicant who intentionally and knowingly surrendered his right to a claim of priority, in exchange for a benefit, and is now unhappy with his choice.”
An Invention’s Critical Elements Must Be Included in Patent Claims
Contact: Paul Devinsky
The U.S. Court of Appeals for the Federal Circuit recently affirmed a decision of the United States Patent and Trademark Office Board of Patent Appeals and Interferences (the Board) that the introduction of claims that omit a critical element required by the specification was invalid for lack of written description. Mukherjee v. Chu, Case No. 06-1450 (Fed. Cir., Feb. 15, 2007) (Michel, C.J.).
A patent interference proceeding is a procedure conducted before the USPTO to determine which of two or more competing inventions is entitled to priority. In this case, Mukherjee, an inventor, filed an amendment to an application which provoked an interference with U.S. Patent No. 6,030,720, invented by Chu et al. Chu moved for a judgment that Mukherjee’s involved claims were unpatentable for failure to comply with the written description requirement of 35 U.S.C. § 112, ¶1, arguing that because the involved claims do not recite Electroactive Transition Metal Chalcogenide (ETMC) as part of the cathode component of a battery cell, the claims are broader than the specification on which they are based.
The Board agreed with Chu after it examined Mukherjee’s application and found that the inclusion of ETMC in the cathodes of an electrochemical cell was a distinguishing feature of the invention. However, Mukherjee’s claims did not include a requirement that the cathodes contain an ETMC. Mukherjee's application criticized non-ETMC cathodes in the prior art and specifically distinguished his invention over the prior art by disclosing that his ETMC cathodes overcame the drawbacks associated with the prior art. The Board cited one section of Mukherjee’s application that specifically stated that ETMC was a critical element in all cases. Chu presented an expert who testified that one of ordinary skill in the art would understand that Mukherjee’s invention was limited to ETMC cathodes, while Mukherjee presented an expert who testified that ETMC was optional since the battery cells would still work without the ETMC component. The Board credited the testimony of Chu’s expert since it was consistent with the written description.
On appeal Mukherjee argued that the Board did not consider all of his expert’s testimony and failed to consider one part of his application which allegedly disclosed a method of making a non-ETMC cathode. However, the Federal Circuit deferred to the Board’s discretion regarding the expert testimony. With regard to the alleged written description, the Court found that, contrary to Mukherjee’s assertion, the section in question disclosed only ETMC cathodes because the described protocol uses a slurry that contains ETMC. The Court also noted that Mukherjee’s application repeatedly stated that composite cathodes necessarily contain ETMC. The Court concluded that there was substantial evidence to support the Board’s determination that the Mukherjee application did not comply with the written description requirement.
Patents / Equivalents Infringement
Equivalents Infringement Requires Showing of Particularized Evidence
By Kevin Roddy
The U.S. Court of Appeals for the Federal Circuit recently held that a district court erred in finding the doctrine of equivalents barred by prosecution history estoppel and in relying on unclaimed features to find a lack of equivalents, but nevertheless affirmed a grant of summary judgment because the plaintiff did not satisfy its burden to present particularized evidence of equivalents in opposition to the motion for summary judgment. AquaTex Indus., Inc. v. Techniche Solutions, Case No. 06-1407, (Feb. 27, 2007) (Dyk, J.).
This matter was previously before the Court in AquaTex Indus., Inc. v. Techniche Solutions, 419 F.3d 1374 (Fed. Cir., 2005). There, the Court held that claims 1 and 9 of U.S. Patent No. 6,371,977 were not literally infringed, but did not foreclose a finding of infringement under the doctrine of equivalents. The Court remanded for the district court to consider “whether or not each limitation of the claims in dispute, or its equivalent, is present in the accused Techniche products.” On remand, the district court granted summary judgment of non-infringement, and AquaTex appealed.
AquaTex’s patent related to multi-layered, liquid-retaining material used in evaporative cooling garments. During prosecution, AquaTex had made narrowing amendments to the claims in order to distinguish its claims from a prior art patent. The Court found that the subject matter surrendered by the narrowing amendment was directed to a completely different claim limitation than the “fiberfill batting material” at issue. Thus, the Court concluded that AquaTex surrendered no claim scope to the characteristics of the “fiberfill batting material” during prosecution and was not barred from asserting equivalents to the limitation. The Court then noted that AquaTex, as the plaintiff, was required to prove infringement under the doctrine of equivalents by a preponderance of the evidence. In particular, the Court pointed out, AquaTex was required to provide particularized testimony and linking argument to show the equivalents. The Court stated that, when the patent holder relies on the doctrine of equivalents, evidence must be presented to the fact finder through the testimony of a person skilled in the art, “typically a qualified expert, who (on a limitation-by-limitation basis) describes the claim limitations and establishes that those skilled in the art would recognize the equivalents.” The only evidence presented by AquaTex was their CEO’s testimony, which merely explained how the accused product operated. Thus, AquaTex did not address the equivalence of Techniche’s product to the “patented method on a limitation-by-limitation basis,” or the insubstantiality of the differences between the claimed invention and the accused device or process or the “function, way, result test,” as required. The Court concluded that the AquaTex’s presentation of lawyer argument and generalized testimony about the accused product were insufficient to demonstrate a genuine issue of material fact that would prevent the grant of summary judgment.
Practice Note: For a patentee to win a summary judgment motion under the doctrine of equivalents, the patentee should use testimony from an expert or one skilled in the art to specifically address equivalents on a limitation-by-limitation basis, explain the insubstantiality of the differences between the claims of the patent and the accused product, or discuss the function, way, result test.
Federal Circuit Grants Interlocutory Review of Claim Construction
By John Gilmore, Ph.D.
The U.S. Court of Appeals for the Federal Circuit, in a somewhat unusual situation, granted a motion for interlocutory review of a district court claim construction order. The Regents of the University of California et. al., v. Dako North America, Inc. Case No. 07-1202 (Fed. Cir., Feb. 14, 2007) (Lourie, J.). Permission for such a review is rarely granted. Typically, the Federal Circuit reviews claim construction issues only on appeal from final judgment.
The plaintiffs alleged infringement of two patents relating to in situ DNA hybridization. As to an accused kit product, plaintiffs sought a preliminary injunction within three weeks of commencing the litigation. The district court denied the preliminary injunction of the kit product based on the plaintiff’s failure to show either a likelihood of success on the merits or a balance of hardships in its favor. The plaintiffs appealed the denial under 28 U.S.C. § 1292 (a) (1). The plaintiffs also appealed from a subsequent amended order that changed a basis for questioning the validity of a patent-in-suit from lack of novelty to the doctrine of non-statutory double patenting.
After the two pending appeals had been fully briefed, the plaintiffs sought a review of yet another order arising from a motion for summary judgment of non-infringement. In this order, several claim construction issues addressed in the prior orders were revisited by the court based on a more complete record (including the prosecution history). Because the order did not involve an injunction, plaintiffs petitioned for a discretionary interlocutory appeal under 28 U.S.C. § 1292 (b). The district court certified that the order relating to the motion for summary judgment involved a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation. The plaintiffs represented that defendants consented to the discretionary appeal.
The Federal Circuit granted the petition for interlocutory appeal of the third order on the grounds of efficient use of judicial resources. The Court explained that, unlike the situations in most petitions for interlocutory appeal, claim construction was already before the Federal Circuit by virtue of the two pending appeals stemming from the preliminary injunction orders. Accordingly, concerns of premature review, or subsequent review of the same issue, are not present. The Court noted that if it refused the petition, the panel in the pending appeals would review the first two district court orders based on a limited (preliminary injunction) record. Thus, the Court reasoned that hearing all three appeals at the same time would facilitate the resolution of all of the claim construction disputes.
Long Live the Reasonable Examiner
By Ed Garcia-Otero
Addressing the slippery issue of inequitable conduct, the U.S. Court of Appeals for Federal Circuit upheld the district court’s ruling that two patents for cooking oil were unenforceable due to inequitable conduct. The patent applicant failed to disclose experimental data which contradicted the claimed oxidation properties of canola cooking oil. Cargill, Inc. v. Canbra Foods, Ltd., Case Nos. 06-1265, -1302 (Fed. Cir., Feb. 14, 2007) (Jordan, J., 3rd Cir., sitting by designation).
To hold a patent unenforceable due to inequitable conduct, “there must be clear and convincing evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information and (2) intended to deceive the U.S. Patent and Trademark Office.”
The Court ruled that information is “material” if it meets the test of materiality either under new PTO Rule 56(b) (2006), or the “reasonable examiner” standard of Rule 56(a) (1991). Thus, the “reasonable examiner” materiality test remains the viable standard.
Under the “reasonable examiner” standard, “information is material where there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent.” The Court held that a reasonable examiner “would certainly want to consider test data that is directly related to an important issue of patentability.”
The Court quotes Critikon, saying “intent may be inferred where a patent applicant knew, or should have known that withheld information would be material to the PTO’s consideration of the patent application.” Thus, the intent to deceive may be inferred if a patent applicant should have known, even if they did not actually know, that information was material to a reasonable examiner.
In this case, five of the rejections in the prosecution involved oil oxidation properties of the claimed invention, and the Court noted “[a]n applicant should know information is material when the examiner repeatedly raises an issue to which the information relates.” Thus, information that might not have been consider material by an applicant when the application was filed, might become material after an examiner makes a rejection.
Practice Note: Compliance with the “reasonable examiner” standard of materiality and the “should have known” standard of intent may, especially “the context of an extended prosecution involving many office actions, be burdensome—but must nevertheless be met. Many patent attorneys, being conservative and cautious, simply disclose as much information as possible when filing a patent application (when access to the inventor is most likely available). Ideally however, all those who have a role in the duty of disclosure (from the inventor, to in-house counsel, to outside counsel) should each consider, in the face of any particular office action, whether information already known (but not yet cited) is material in view of the patentability issues raised by the examiner.
Patents / Litigation / Standing
State Court Decision of Patent Ownership Is Not Subject to District Court Review
By John R. Fuisz
The U.S. Court of Appeals for the Federal Circuit held that title to a patent obtained through a state court foreclosure action on a promissory note secured by the pending application could not be challenged as fraudulent under the guise of a challenge to standing. MyMail, Ltd. v. America Online, Inc., et al., Case Nos. 06-1147, -1172 (Fed. Cir., Feb. 20, 2007) (Bryson, J.).
MyMail obtained ownership of the patent-in-suit from Mr. Derby, who acquired the patent application by way of a state court foreclosure action on a promissory note secured by the application. MyMail later asserted the patent against America Online (AOL). AOL did not attempt to nullify the state court judgment but proceeded to challenge MyMail’s standing on the basis that the promissory note was fraudulently procured. The Federal Circuit held that the defendants could not collaterally attack the promissory note and affirmed the district court’s ruling that MyMail had standing to assert the patent-in-suit.
The defendants appealed, arguing that the underlying promissory note was fraudulent, which destroyed the chain of title and robbed MyMail of standing. The defendants asked the district court to inquire into the ownership issue, but did not identify who the alleged legal owner was.
The Federal Circuit reaffirmed that the “plaintiff must demonstrate legal title to the patent at the inception of the lawsuit to be entitled to sue for patent infringement.” Although standing is governed by federal law, state law governs the question of legal title. MyMail’s reliance on “an enforceable state court judgment that transferred title under Texas law,” was sufficient to prove ownership. The Court noted that the alleged infringers needed to nullify that state court judgment to establish a break in the title chain. The defendants argued that fraud could be raised at any time and justified an independent review. The Federal Circuit distinguished between fraud associated with the procurement of a patent and fraud relating to patent ownership. The Court noted “[s]tate law, not federal law, addresses such property ownership disputes.”
Exercising Authority to Issue Writs of Mandamus
By Anish R. Desai
The U. S. Court of Appeals for the Federal Circuit, in a rare exercise of its supervisory authority, issued a writ of mandamus directing a district court to stay its proceedings pursuant to 28 U.S.C. § 1659 until the parallel U.S. International Trade Commission (ITC) proceedings were no longer subject to judicial review. In re Princo Corp., Misc. Docket No. 841 (Fed. Cir., Mar. 1, 2007) (Dyk, J.).
The petitioner, Princo Corp., filed a petition for a writ of mandamus asking the Court to vacate the district court’s grant of summary judgment and stay the case pursuant to § 1659 until the related ITC proceedings were complete. The Court first determined that issues “properly before the Federal Circuit on appeal are no less within [the Court’s] jurisdiction when raised by extraordinary writ.” In the present case, the issue was interpretation of § 1659, and the Federal Circuit held that in the context of a patent infringement case, this substantive issue was to be determined as a matter of Federal Circuit law. The respondent, U.S. Philips Corp., argued that the issue on writ was a matter of procedure and not one of substantive patent law and that the Court should decline to exercise its supervisory authority. The Court disagreed, pointing to numerous cases illustrating its exercise of mandamus authority in a variety of contexts, some that did and some that did not directly implicate substantive patent law.
In issuing the writ of mandamus, the Court found that Princo met the heavy burden of demonstrating that its right to issuance of the writ is “clear and undisputable” and that “it lacks adequate alternative means to obtain the relief sought.” The Court began by answering the previously open question of the meaning of when an ITC determination “becomes final” as contemplated by § 1659. Citing various federal statutes using similar language, as well as the purpose of § 1659, i.e., to prevent separate proceedings on the same issues occurring at the same time, the Court concluded that § 1659 requires the stay of district court proceedings continue until the ITC proceedings are no longer subject to judicial review. Finally, the Court found that Princo’s right to issuance of the writ was clear and undisputable because its right to stay the district court proceeding could not be corrected on direct appeal, since § 1659 was designed to prevent the proceedings from occurring in the first place.
Even “Harmless Error” Can Hurt
By Eric Hinkes
Addressing the issue of whether a district court erred in granting a voluntary dismissal (in order to cure a standing issue) without first disposing of the pending counterclaims, the U.S. Court of Appeals for the Federal Circuit found that while the grant of dismissal was erroneous, it was “harmless error” and that making the dismissal without prejudice and without conditions was within the district court’s discretion. Walter Kidde Portable Equipment, Inc. v. Universal Security Instruments, Inc., Case No. 06-1420 (Fed. Cir., Mar. 2, 2007) (Jordan, J., 3rd Cir., sitting by designation).
Kidde initially brought suit against Universal Security Instruments (USI) alleging infringement of a patent relating to battery backup smoke detectors. The case proceeded to the stage of expert reports, even in the face of the defendants challenge to Kidde’s standing to assert the patent. Because Kidde’s expert reports were untimely, the district court granted USI’s motion to exclude the reports and declarations of Kidde’s three expert witnesses. However, because the district court had been concerned with a long-simmering standing issue raised by USI, challenging Kidde’s claim of ownership of the patent at the time the suit was filed, Kidde moved for voluntary dismissal, without prejudice or conditions, so that it could cure any standing defect (as it had long since perfected its claim to ownership of the subject patent). The motion was granted and the case was dismissed (Kidde I). Kidde then promptly filed a new action (Kidde II) on the same day in the same court. USI argued that the district court abused its discretion by granting Kidde’s motion to dismiss without prejudice or conditions.
Under Rule 41(a)(2) of the Federal Rules, courts have discretion to grant a plaintiff’s motion to voluntarily dismiss and to determine whether terms and conditions should be imposed when granting such a motion. Applying the law of the regional circuit to this procedural issue, the court noted that district court has discretion to grant a plaintiff’s motion for voluntary dismissal without prejudice, as long as there is no clear legal prejudice to the defendant. Factors indicative of prejudice include the opposing party’s effort and expense in preparing for trial, excessive delay and lack of diligence on the part of the movant, and insufficient explanation of the need for a voluntary dismissal and the present stage of litigation. An “abuse of discretion” standard is used when reviewing a district court’s decision to grant such a motion without prejudice or conditions. While the district court did not specify the grounds on which it granted Kidde’s motion to dismiss without resolving USI’s counterclaims, the Federal Circuit concluded that it was not an abuse of discretion to do so. The Federal Circuit explained that the dismissal of Kidde’s claims did not affect USI’s substantial rights, because USI would be able to reassert all of its counterclaims in Kidde II.
The Federal Circuit also noted that although the district court erred by not first determining whether it had subject matter jurisdiction over the counterclaims (i.e., were they asserted against the wrong party) before granting Kidde’s motion to voluntarily dismiss, the error was harmless. The Court reasoned that if the district court were to vacate the order granting voluntary dismissal, the parties would still arrive at the same position they are at now. In other words, had the district court determined that it had subject matter jurisdiction over the counterclaims, the court would still have had discretion to dismiss USI claims on motion and consolidate them with Kidde II, ultimately bringing the case to the same position. Thus, the Federal Circuit held the dismissal was harmless error since it did not affect a “substantial” right and that voiding of the in limine ruling that did not warrant a remand. Thus, even though the district court erred in dismissing the entire Kidde I suit (including USI counterclaims) and in failing to address the issue of standing prior to the dismissal, the Federal Circuit found, under the total of the circumstances, the error was “harmless”.
Improper Service Costs Patent Infringement Defendant Award of Attorney Fees
By Debra L. Dennett
The U.S. Court of Appeals for the Federal Circuit reversed a district court’s award of attorney fees to a defendant who filed and faxed its answer to a complaint for patent infringement. RFR Industries, Inc. v. Century Steps, Inc., Case Nos. 05-1610, 06-1285 (Fed. Cir., Feb. 16, 2007) (Prost J.).
In 1998, RFR sued Century for infringing two patents related to an embedded railway track system. As part of the settlement of the 1998 lawsuit, Century promised to purchase a certain amount of the patented product from RFR. In 2004, Century refused to pay for some of the product that it had ordered and received. RFR again filed suit, alleging infringement of the same two patents. In its answer to the complaint, Century admitted that it had withheld payment on at least one order of flangeway filler, but asserted that RFR’s claims were “barred by the doctrines of patent exhaustion and implied license.” Century faxed a copy of the answer to RFR’s attorney notwithstanding Fed. R. Civ. P. 5(b)(2), which permits service by fax only when it is “consented to in writing by the person served.” RFR had not consented to fax service.
RFR decided not to pursue the case and filed a document seeking dismissal of its claims without prejudice under Fed. R. Civ. P. 41(a)(1)(i), which provides that an action may be dismissed by plaintiff without court order “by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment.” The district court denied RFR’s motion to dismiss, deeming that Century had answered and that RFR therefore could not dismiss the case without prejudice absent an order from the court. The district court further granted Century’s motion for judgment on the pleadings and motion for attorney fees.
Applying the law of the Fifth Circuit, the Federal Circuit vacated the district court’s grant of judgment on the pleadings, finding it “both improper and without effect.” The Court held that RFR’s case was dismissed upon its filing of a notice of dismissal, noting that a defendant’s mere filing of an answer, without service on the plaintiff, is not enough to prevent a plaintiff from dismissing its action under Rule 41(a)(1)(i). Finally, because RFR’s voluntary dismissal without prejudice did not constitute a change in the legal relationship of the parties (RFR was free to re-file its case), Century was not a “prevailing party” under 35 U.S.C. § 285 and was not entitled to attorney fees.
Practice Note: This case illustrates the importance of reading, then re-reading, the Federal Rules of Civil Procedure. Many a litigant has learned to its dismay that what it thinks is acceptable under the Rules is, in fact, not.
Government Contractor Immunity Under 28 U.S.C. § 1498
By Kenneth L. Cage
In a decision addressing government contractor immunity, the U.S. Court of Appeals for the Federal Circuit held that a patent infringement case against a government contractor in the district court was barred by 28 U.S.C. § 1498. Sevenson Environmental Services, Inc. v. Shaw Environmental, Inc., Case Nos. 06-1391, -1408 (Fed. Cir., Feb. 21, 2007) (Linn, J.).
This case was born out of the cleanup of a lead-contaminated parcel of land near Colonie, New York (the Colonie site) owned by the federal government and managed by the Corps of Engineers (Corps). Shaw, a hazardous waste remediation firm, contracted with the Corps to engage in cleanup and remediation work at the Colonie site. Shaw’s contracts with the Corps contain an “authorization and consent” clause, based on § 1498(a), that authorized Shaw to use any invention described in and covered by a United States patent whose use “necessarily results from compliance” with the contract specifications. Shaw was the third contractor at the Colonie site, and based on a previous contractor’s recommendation, Shaw agreed to the contract specifications that required phosphoric acid for cleanup and remediation of the Colonie site.
Sevenson holds several patents regarding remediation work, including some that treat hazardous waste by applying phosphoric acid (Sevenson patents). In the district court, Sevenson alleged that Shaw’s cleanup and remediation work at the Colonie site infringed the Sevenson patents. Shaw moved for summary judgment on the ground that pursuant to its contracts and § 1498(a), the United States was the proper party and the suit should be dismissed. Under § 1498, the exclusive remedy for use of a patent without license or lawful right is by action against the United States in the Court of Claims. The district count granted Shaw’s motion.
On appeal, Sevenson argued that Shaw was not immune from suit in the district court because the contract use was not for the government, and it was not with the authorization and consent of the government.
The Federal Circuit noted that § 1498 imposes a requirement that use of a patent occur pursuant to a contract with the government and “for the benefit” of the government. In so doing, the Court distinguished Larson v. United States holding that infringing medical devices furnished by Medicare and Medicaid providers did not fall within § 1498 because the use of devices was not required by government, nor were the providers under government control. In contrast, the Federal Circuit held Shaw used the Sevenson patents as a government contractor for the benefit of the government.
The Federal Circuit also agreed with the district court that the government contracts granted Shaw its “authorization and consent” to use a United States patent that “necessarily results” from compliance with the “specifications” that are a part of the contract. According to the Federal Circuit, the contract “specifications” required Shaw to use the accused method of the Sevenson patents in order to comply with the contract. The Federal Circuit distinguished Carrier Corp. v. United States, which the court noted to be the only “on-point” binding precedent cited by the parties. In Carrier, the Court of Claims held that use of certain types of infringing equipment—the use of which became “operative after inspection and acceptance by the Contracting Officer” —was not necessary to comply with the contract specifications. According to the Federal Circuit, unlike the structure in Carrier, Shaw’s use of the accused method was “necessary” to meet the contract specifications. Therefore, under § 1498, Shaw was entitled to immunity from district court infringement suit.
Practice Note: The immunity from suit in district court under § 1498 is present only when contracts are for the benefit of the government and if the use of a United States patent is necessary to meet the contract requirements and contract specifications.
Federal Court / Appellate Practice
Federal Circuit Enforces Finality and Timeliness Rules
By Pamela A. Kayatta
The U.S. Court of Appeals for the Federal Circuit continues to strictly enforce rules of finality and timeliness, ordering that a final judgment must be rendered on all claims for relief before a party seeks to appeal and a notice of appeal must be filed within 30 days after judgment is entered or be dismissed as untimely. Whirlpool Corp. v. LG Electronics, Inc., Case No. 07-1088 (Fed. Cir., Mar. 1, 2007) (Radar, J.); Baychar, Inc. v. Salomon North America, Inc., Case No. 07-1105 (Fed. Cir., Mar. 1, 2007) (Radar, J.).
In Whirlpool, the defendant-appellee LG Electronics moved to dismiss an appeal filed by Whirlpool Corp. Whirlpool, the plaintiff-appellant, sued LG for infringement of two patents. LG filed counterclaims seeking declaratory judgments of non-infringement of both patents, declaratory judgments of invalidity of both patents on various grounds and a declaratory judgment of unenforceability of one of the patents. Several motions for summary judgment were filed, but LG did not file motions for summary judgment pertaining to every issue underlying the declaratory judgment counterclaims.
The district court granted summary judgment of non-infringement and invalidity for the first and second patent, respectively, but denied all other summary judgment motions as moot and entered judgment. On appeal, Whirlpool argued to no avail that although the district court failed to enter judgment dismissing or denying the defendant’s counterclaims, the district court’s intent to deny those counterclaims was evident. The Federal Circuit disagreed and noted that the defendant’s motions for summary judgment did not raise all of the issues that were raised by the counterclaims. By denying summary judgment only on the issues raised by the motions for summary judgment, the district court did not clearly decide on all of the relief sought by the counterclaimants. Because not all claims for relief were disposed of, the district court did not enter a final judgment. (See Fed. R. Civ. P. 54(b).) Thus, the Federal Circuit granted LG’s motion and dismissed the appeal as premature.
In Baychar, the Federal Circuit addressed the issue of timeliness. Salomon, the defendant-appellee, moved to dismiss Baychar’s appeal of the district court judgment. The plaintiff-appellant, Baychar, filed both its notice of appeal and a motion requesting an extension of time to file its notice of appeal 35 days after the district court entered judgment. After the district court denied the motion, Baychar filed a renewed motion for an enlargement of time. The Federal Circuit, citing Fed. R. App. P. 4(a)(1)(A), reiterated that a notice of appeal must be filed within 30 days after judgment is entered. The requirement of a timely notice of appeal is “mandatory and jurisdictional.” Any appeal not filed within that time must be dismissed. Finding Baychar’s notice of appeal untimely, the Federal Circuit dismissed the appeal for lack of jurisdiction.
Subsequently Amended Federal Trademark Dilution Act Applies to Injunctive Claim
By Christine Pepe
Vacating a district court’s judgment that Starbucks had failed to sustain its burden in proving trademark dilution, the U.S. Court of Appeals for the Second Circuit held that a post-decision, congressional amendment to the Federal Trademark Dilution Act (FTDA) required a remand for application of the amended statute to Starbucks’ injunctive relief claim. Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., No. 06-0435 (2nd Cir., Feb. 15, 2007) (Trager, J., Eastern District of New York, sitting by designation).
Starbucks brought suit against Wolfe’s alleging that Wolfe’s current sale of coffee under the name “Mister Charbucks” or “Mr. Charbucks” infringes and dilutes the “Starbucks” trademark for coffee. Following a bench trial, the district court concluded in December 2005 that Starbucks had failed to carry its burden of proving, inter alia, trademark dilution under the FTDA. Subsequent to the district court’s order, however, Congress amended the FTDA in response to the Supreme Court decision, Moseley v. V. Secret Catalogue, Inc., 537 U.S. 418 (2003), which construed the FTDA to require a showing of actual dilution. The FTDA, as amended, allows the owner of a famous, distinctive mark to an injunction against the user of a mark that is “likely to cause dilution” of the famous mark.
On appeal, the Second Circuit applied the principle that, when an intervening statute affects the propriety of prospective relief, application of the new provision is not retroactive. Accordingly, the panel held that the amended FTDA properly applied to this case to the extent that Starbucks has sought injunctive relief on the issue of dilution.
Analogous Use Confers Prior Rights Sufficient to Cancel Trademark Registrations
By Irina R. Kushner
In a recent precedential opinion, the U.S. Trademark Trial and Appeal Board (the Board) granted the petition to cancel two registrations for furniture polish and furniture on the ground of likelihood of confusion over Stickley’s use “analogous to trademark use” of ALS IK KAN for the same goods. L. & J.G. Stickley, Inc. v. Cosser, Cancellation No. 92040202 (Trademark Trial & Appeal Bd. Jan. 11, 2007) (Drost, ALJ).
The respondent, Cosser. was the owner of two registrations, one for furniture polish and the other for furniture. Both registrations were for the mark “THE CRAFTSMAN,” and included the Flemish phrase “ALS IK KAN,” which roughly translated means “as I can.” In December 2001, Stickley filed a petition to cancel Cosser’s registrations on the grounds that “Petitioner and its predecessors in interest have been using the mark THE CRAFTSMAN, ALS IK KAN … since at least as early as 1901.” Stickley further alleged that the mark was “unmistakably associated” with its predecessor in interest, Gustav Stickley. Gustav Stickley was a turn-of-the-century artisan who designed and sold “Mission” style furniture. Between 1901 and 1909, he registered the marks “CRAFTSMAN” and the “ALS IK KAN” mark (with compass design), but the registrations expired long ago, and the marks fell out of use for decades. In 1977, the petitioner, Stickley, founded by Gustav Stickley’s brothers, published a catalog in which the phrase “Als ik Kan: the pride of craftsmanship” appears at the top of one page and is said to be a trademark. The respondent, Cosser began using his mark on furniture polish in 1978. As to furniture, Cosser could rely only on his filing date of June 1997.
The “first key issue” was the question of priority. The Board found that Stickley had established by a preponderance of the evidence that it made use analogous to trademark use of the phrase ALS IK KAN and the woodworker’s compass in association with its furniture and furniture polish and that this use was established at least by the end of 1977 when its 1977 catalog was issued. In response to Cosser’s contention that Stickley had abandoned its marks, the Board noted that Stickley’s priority is based not on “petitioner’s use of the mark ... but rather as a result of petitioner’s use analogous to trademark use or trade name type use. We cannot say that there has been any abandonment of this type of use.” Having decided the question of priority in Stickley’s favor, the Board addressed other grounds upon which cancellation might be based. The Board concluded that Cosser had not used his mark on furniture prior to the filing date of his application for such goods and ordered this registration cancelled.
The Board then turned to the issue of likelihood of confusion. The Board reasoned that because the term “The Craftsman” would be “highly suggestive of furniture and furniture polish made by craftsman,” the term ALS IK KAN would likely have more “trademark significance to prospective purchasers.” Given the similarity of the parties’ marks and the overlapping nature of the goods, the Board determined that confusion was likely, and accordingly granted the petition to cancel.
Trademarks / Secondary Meaning
Lack of Secondary Meaning Leads to Non-Infringement
By Amol Parikh
Although a trademark had been registered with the U.S. Patent and Trademark Office, the United States Court of Appeals for the Seventh Circuit affirmed a district courts award of summary judgment for the accused infringer because the trademark was descriptive and had not yet achieved secondary meaning. Custom Vehicles, Inc. v. Forest River, Inc., 2007 U.S. App. LEXIS 2610 (7th Cir., Feb. 7, 2007) (Posner, J.).
Custom Vehicles created a van that it called “Work-N-Play.” The interior of the van could be converted from a mobile office to a camper so that the owner could “work out of it through the week” and be “playing out of it on the weekends.” In 2000, Custom Vehicles registered “Work-N-Play” with the U.S. Patent and Trademark Office as an “intent to use” trademark, meaning that it would have to be used in commerce within six months.
The following year, Forest River, a much larger company, built a towed van with a ramp door at the back and space inside for a repair shop so the van’s owner could both transport a motorcycle or snowmobile and repair it without taking it to a repair shop. Forest River called its product “Work and Play” and began selling the vans in 2002. By 2004, Forest River’s sales of the “Work and Play” van exceed $10 million in sales. On the other hand, Custom Vehicles sold only one “Work-N-Play” van—a demo model—to a family member for only 2.5 percent of the van’s normal sales price. Both Custom Vehicles and Forest River promoted their respective products at recreational-vehicle trade shows. Custom Vehicles sued Forest River for trademark infringement. The district court granted summary for Forest River and Custom Vehicles appealed.
On appeal, the Seventh Circuit noted that “Work-N-Play” was a descriptive mark because it describes a characteristic of the vans. Therefore, in order for “Work-N-Play” to be a legally protected trademark, it must achieve “secondary meaning.” Custom Vehicles argued that a registered trademark carries a presumption of validity and secondary meaning and is therefore enforceable against sellers that use the term or a confusingly similar variant. The court rejected Custom Vehicles’ argument and noted that the act of registration merely begins the process that leads to the presumption. The court pointed out that a registrant could not bank or warehouse trademarks unrelated to any product or service in hopes of extracting a license fee from sellers of products or services for which one of the trademarks might be apt. Instead, a registrant must certify that trademark is used in commerce within six months of filing the trademark application. Within the six months following the trademark registration, Custom Vehicles had sold only one van, and the trademark was not used in the sale. However, even if the trademark had been used in the sale, that would not have been sufficient to place the trademark in the ordinary course of trade because the sale was too obscure to alert a significant number of consumers that “Work-N-Play” had a definite referent. The Court held that the Work-N-Play trademark had not achieved secondary meaning and there was no basis for supposing that consumers would think Forest River’s van had been produced by Custom Vehicles instead.
Dismissal of Opposition Does Not Render Counterclaim to Cancel Moot
By Sarah Brown
The U.S. Court of Appeals for the Federal Circuit recently held that dismissal of an opposition by the U.S. Trademark Trial and Appeal Board (the Board) did not render an applicant’s counterclaim for cancellation moot and further upheld the Board’s holding on excusable neglect. FirstHealth of the Carolinas, Inc. v. CareFirst of Maryland, Inc., Case No. 06-1148 (Fed. Cir., Feb. 27, 2007) (Linn, J.).
CareFirst opposed FirstHealth’s applications to register “FIRSTCAROLINACARE” based upon likelihood of confusion with and dilution of the opposer’s registered “CAREFIRST” mark. FirstHealth counterclaimed for cancellation of CareFirst’s registrations on the ground of abandonment. FirstHealth moved to reopen its testimony period to introduce evidence critical to its abandonment claims. FirstHealth pleaded excusable neglect to explain its failure to introduce the evidence on time, citing the birth of its counsel’s son, the large amount of testimony it had taken, its counsel’s conflicts with unrelated matters and a docketing error by its counsel’s new paralegal. The Board found no excusable neglect and denied FirstHealth’s motion to reopen. Because FirstHealth’s primary evidence was not put on record, the Board dismissed the counterclaim for cancellation. The Board found no likelihood of confusion with or dilution of CareFirst’s marks and dismissed the opposition as well. Both parties appealed to the Federal Circuit, but CareFirst dismissed its appeal.
CareFirst argued that, because it was not appealing the Board’s dismissal of its opposition, FirstHealth’s appeal was moot. CareFirst argued that the Board’s rulings on likelihood of confusion and dilution would preclude CareFirst from asserting its marks against FirstHealth in the future, and thus there was no potential damage to FirstHealth to support a cancellation counterclaim. The Court disagreed, saying the Board only has the power to determine the right to register a mark, not the right to use it; nor can the Board determine broader issues of infringement or unfair competition. The Court said the Board’s decision did not bar CareFirst from using its mark or asserting it against FirstHealth in an infringement or unfair competition claim. Even if the Board’s decision precluded CareFirst from relitigating the issues of likelihood of confusion and dilution, CareFirst could still use its mark to cause damage by other means. The Court declined to decide whether the Board’s decision would in fact preclude future litigation on the issues of likelihood of confusion or dilution, but noted that the Second Circuit had found otherwise in at least one case.
Next, the Court reviewed the Board’s rejection of FirstHealth’s claim of excusable neglect. Applying an abuse of discretion standard, the Court stated that an agency’s interpretation of its own regulations is given controlling weight unless clearly erroneous or inconsistent. The Court noted that the Board adopted the Supreme Court’s Pioneer factors for determining whether a party’s neglect is excusable: the danger of prejudice to the other party; the length of the delay and its potential impact on the proceedings; the reason for the delay, including whether it was under the reasonable control of the movant; and whether the movant acted in good faith. The Board had held the third factor to be of “paramount importance.” The Court agreed with the Board that FirstHealth’s reasons for delay were entirely within its control. Two of the reasons given for the delay had already been accommodated by a two-month stipulated extension of FirstHealth’s testimony period. FirstHealth’s claim of a docketing error was belied by a reference to the deadline in an earlier filing by FirstHealth. Regardless, the Court noted that the Board has in the past been unsympathetic to delays caused by “sloppy practice or inattention to deadlines.” Finally, to the extent the delay was caused by counsel’s family matters, FirstHealth offered no reason why another attorney in the same firm could not have taken over the case. Accordingly, the Court agreed that the second and third factors weighed against excusable delay and held that the Board’s decision was not an abuse of discretion.
The Court also upheld the Board’s dismissal of FirstHealth’s counterclaim for cancellation. The Court noted that abandonment is a question of fact and said the Board’s findings should be sustained if supported by substantial evidence. The Board found that without the properly excluded evidence, FirstHealth had not proved by a preponderance of evidence that CareFirst had abandoned its marks. The Court held that the Board’s decision was supported by substantial evidence and thus affirmed.
