IP Update, Vol. 9, No. 8, August 2006
August 2006
Patents / Claim Construction - “Therapeutically Effective” Need Not Encompass Curing Disease
Patents / Litigation / FRCP 60(b)(6) - Bargainers Beware
Patents / § 112, ¶ 4 - Drafting Error Invalidates Patent Claim Covering World's Top Selling Drug
Patents / Plant Variety Protection Act - Failure to Provide Notice Dooms PVPA Action
Patents / Litigations / Procedure - Here Come Da (New) Judge
Trademark / Fair Use - Good Faith Is Predicate to Fair Use Trademark Defense
Trade Secrets / Misappropriation - Trade Secret Protection and the World Wide Web Don’t Mix
“Therapeutically Effective” Need Not Encompass Curing Disease
By Michelle Cai, Ph.D.
In a split decision based exclusively on the intrinsic evidence, the U.S. Court of Appeals for the Federal Circuit held, inter alia, that the claim term “therapeutically effective amount” in one patent did not limit the claim to products effective in curing disease and remanded to determine whether a prior art reference anticipated the claim. Amgen Inc. v. Hoechst Marion Roussel, Inc., Case No. 05-1157 (Fed. Cir. Aug. 3, 2006) (Schall, J.; Michel, C.J., dissenting in part).
Amgen is the owner of five U.S. patents directed to recombinant deoxyribonucleic acid (DNA) technology relating to the production of the hormone erythropoietin (EPO). All five patents share a common specification and descend from a single parent application. In 1997, Amgen brought a declaratory judgment action against Hoechst Marion Roussel, Inc. (now known as Aventis Pharmaceuticals Inc.) (HMR) and Transkaryotic Therapies, Inc. (TKT) (collectively, HMR/TKT) in the United States District Court for the District of Massachusetts, alleging that HMR/TKT'’s Investigational New Drug Application for an EPO product infringed the five patents. This case was back for the second time before the Court following proceedings on remand in which the district court construed the term “therapeutically effective amount” recited in one of the asserted patents’ claims and conducted a further bench trial.
On appeal, the panel majority considered intrinsic evidence only and relied almost exclusively on the patent specification, which indicates that the claimed invention is used in “therapy” to produce “any or all” of the following “effects”: stimulation of reticulocyte response, development of ferrokinetic effects, erythrocyte mass changes, stimulation of hemoglobin and increasing hematocrit levels. Based on this language, the panel majority concluded that increasing hematocrit is only one of the biological effects produced by the claimed invention and agreed with HMR/TKT that the district court misinterpreted this passage when it read it as limiting the claimed invention to products with “any or all” of the first four listed effects ascribed in vivo to EPO and also an increase in hematocrit. Concluding that the claim term “therapeutically effective amount” did not limit the claim to products effective in curing disease, the Court remanded the case to determine whether a prior art reference anticipated the claim.
Application of the doctrine of equivalents post-Festo was another dominant theme in this case. Here, the Court held that the district court erred in ruling that Amgen rebutted the presumption that, during prosecution, it surrendered coverage to EPO with a 165-amino acid sequence, which is the sequence of HMR/TKT’s product. The Court concluded that the amendment at issue, “EPO having the complete amino acid sequence shown in Figure 6,” which depicted a 166-amino acid sequence, may have been central to overcoming a double patenting rejection and, therefore, was likely more than tangentially related to the 165-amino acid equivalent.
In his dissenting opinion, Michel said he did not agree with the revised construction of “therapeutically effective.” The chief judge also voiced his frustration at the prolonging of this high-profile patent case, lamenting “[w]hen will it end? Ironically, the patents in dispute may expire before this litigation concludes.”
Patents / Litigation / FRCP 50, 51 & 59
Procedure Matters: Failure to Object May be Fatal to an Appeal
By Irina R. Kushner
In a decision that highlights the importance of knowing how and when to make objections in order to preserve issues for appeal, the U.S. Court of Appeals for the Federal Circuit upheld a district court’s judgment of no infringement pointing to the various objections the patentee failed to make in the proceedings that came back to haunt it on appeal. Serio-US Industries, Inc., v. Plastic Recovery Technologies Corp., Case Nos. 05-1106, -1143, -1306 (Fed. Cir. Aug. 10, 2006) (Rader, J.).
Serio-US Industries, the owner and exclusive licensee of patents directed to automatic locks for dumpsters, filed suit against Plastic Recovery Technologies (PRT), alleging infringement. PRT counter-claimed against Serio-US for tortious interference, unfair competition and certain Lanham Act violations. Following the verdict, the trial court granted PRT’s motion for judgment of law of non-infringement. The trial court, however, denied PRT’s motion for judgment as a matter of law (JMOL) on its counterclaims and its motion for attorney fees. Serio-US appealed and PRT cross-appealed.
Notably, Serio-US did not appeal the judgment of non-infringement entered by the trial court. Rather, on appeal, Serio-US asserted that the lower court improperly admitted evidence during the jury trial. Serio-US further asserted that the jury instructions contained claim construction errors. When claim construction requires review of jury instructions, failure to object to those instructions before the jury retires can limit appellate reversal to situations in which plain error has occurred, affecting substantial rights and resulting in a miscarriage of justice. After considering the jury charge, the Federal Circuit found “no plain error or miscarriage of justice.”
Notwithstanding the fact that it did not file a motion for JMOL or a new trial, Serio-US sought a remand, arguing that certain “evidentiary rulings led to a flawed claim construction.” Without a Rule 50 or 59 motion, a court will only vacate and remand if prejudicial legal error is found. The Federal Circuit rejected Serio-US’s argument, finding that the “trial court gave appropriate reliance to the intrinsic evidence on the meaning of the patent” and only consulted expert testimony to, inter alia, “provide background on the technology at issue.”
The Federal Circuit applied the law of the regional circuit in reviewing the denial of PRT’s JMOL of its counterclaims and its motion for attorney fees under patent code section 285, which provides for attorney fees when a case is “exceptional.” The Court said, “[a]bsent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless.” The Federal Circuit concluded the court did not abuse its discretion in denying attorney fees. Serio-US relied on the opinion of its patent counsel in initiating the action and attempted to communicate with PRT before filing suit.
Patents / Litigation / FRCP 60(b)(3)
(b)(2) or not (b)(2)? A Different Prejudice Standard Under Rule 60(b)(3) in the Sixth Circuit
By Terry W. Ahearn
Addressing whether, in the Sixth Circuit, the standard for prejudice under Federal Rule of Civil Procedure 60(b)(3) is different from the standard for prejudice under Rule 60(b)(2), the U.S. Court of Appeals for the Federal Circuit held that the standard for prejudice under the two subsections is “indeed different” in the Sixth Circuit and remanded the case for adjudication under the proper legal standard. Venture Industries Corp., et. al. v. Autoliv ASP, Inc., et. al., Case No. 05-1537 (Fed. Cir. Aug. 7, 2006) (Dyk J.).
This case, which included claims under the patent laws, was initially appealed to the Sixth Circuit. The Sixth Circuit transferred the appeal to the Federal Circuit. The Federal Circuit stayed the appeal to allow Autoliv to move for a new trial under Rule 60(b)(2) and (3) based on Venture Industries’ use at trial of falsified financial statements. The district court denied appellant's Rule 60(b) motion and Autoliv appealed to the Federal Circuit.
On appeal, Autoliv argued that the use of falsified information affected the outcome of the trial under Rule 60(b)(2) and constituted fraud during discovery and at trial under Rule 60(b)(3). The Federal Circuit upheld the district court’s finding that Autoliv failed to establish prejudice under Rule 60(b)(2) and upheld its finding that Venture Industries did not commit discovery misconduct under Rule 60(b)(3). The district did not address Autoliv’s claim of fraud at trial under Rule 60(b)(3).
The Federal Circuit held that the district court’s failure to address Autoliv’s Rule 60(b)(3) claim of fraud at trial constituted harmful error if the standard for prejudice under Rule 60(b)(2) is different from the standard for prejudice under Rule 60(b)(3).
In the Sixth Circuit, the moving party must show prejudice under Rule 60(b)(2), while under Rule 60(b)(3) an unpublished case held that, once the moving party has shown evidence of misbehavior, the burden shifts to the non-moving party to show that the misbehavior had no prejudicial effect on the outcome of the case. In the Sixth Circuit, “unpublished cases may be persuasive authority depending on their pertinence and depth of reasoning.”
Under the circumstances, the Federal Circuit held that relying on the unpublished case was appropriate. Thus, the Court concluded that “the standard for prejudice is indeed different under the two rules” and remanded the case to the district court for adjudication using the proper legal standard in the Sixth Circuit.
Practice Note
There is a general misconception about the use, or non-use, of unpublished cases in legal documents. As this case illustrates, it wise to both review unpublished cases and to understand the rules regarding unpublished cases in your jurisdiction.
Patents / Litigation / FRCP 60(b)(6)
Bargainers Beware
By Bonnie J. Warren
The U.S. Court of Appeals for the Federal Circuit affirmed a district court’s denial of the patentee’s motion for partial relief from the district court’s final judgment of non-infringement and underlying claim construction. Louisville Bedding Co. v. Pillowtex Corp., Case No. 05-1595 (Fed. Cir. July 25, 2006) (Lourie, J.).
In separate actions, Louisville Bedding filed suit against Pillowtex in 1994 and Perfect Fit Industries in 1998, accusing both of infringing the U.S. Patent No. 5,249,322 (“the `322 patent”). Both Pillowtex and Perfect Fit are competing manufacturers and sellers of mattress pads. Both cases were eventually terminated via settlement agreements, and the district court in each of the cases entered final judgment. Subsequent to its settlement with Louisville Bedding in 1998, Pillowtex went out of business. One ramification of Pillowtex’s dissolution was that Xymid, LLC, with whom Pillowtex originally had an exclusive supply agreement for the 4059 mattress pad skirt material used in the accused Pillowtex mattress pad (the “4059 mattress pad”), was no longer bound by its exclusive supply agreement with Pillowtex. Free from that agreement, Louisville Bedding asserts, Xymid began selling its 4059 mattress pad skirt material to other manufacturers of mattress pads, including Perfect Fit and National Sleep Products (NSP). Based on these events in the mattress pad industry after Pillowtex went out of business and what Louisville Bedding perceived to be a conflicting judgment that issued from its case against Perfect Fit, Louisville Bedding sought to reopen the Pillowtex case and have the district court in that case vacate a portion of its final judgment. In a summary order issued after a hearing, the court denied Louisville Bedding’s motion. Louisville Bedding appealed.
On appeal, Louisville Bedding argued that Pillowtex’s closure was an unforeseen event in the mattress marketplace, and when it agreed to have the district court enter a final judgment of non-infringement as to the 4059 mattress pad and thereby accept the underlying claim construction, Louisville Bedding had assumed that no other competitor would have access to Xymid’s 4059 mattress pad skirt material. Louisville Bedding also argued that it would be in the interest of justice to grant its motion due to conflicting judgments as to the infringement of certain claims of the `322 patent by mattress pads using Xymid’s 4059 skirt material. In particular, Louisville Bedding argued that the final judgment in the Pillowtex case determined that the 4059 mattress pad did not infringe claim 34 of the `322 patent, but the district court in the Perfect Fit case entered a judgment confirming an arbitrator’s determination that the Perfect Fit mattress pad would infringe claim 34 if it used Xymid’s 4059 skirt material. The Federal Circuit concluded that the district court did not abuse its discretion in denying Louisville Bedding’s motion because businesses fail every day, and that the failure of Pillowtex in this case was not an “exceptional or extraordinary circumstance.” In so doing, the Federal Circuit rejected Louisville Bedding’s request to nullify what Louisville Bedding conceded was a bargained-for provision in the settlement agreement. Citing Supreme Court precedent, the Court noted that “[p]ublic policy dictates that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties,” a concern even stronger when a case is ended by the deliberate choice of the parties.
Patents / Litigation / Eleventh Amendment Immunity
State University Immune from Patent Suit and University Officials Not Enjoined
By Astrid R. Spain
In a decision based largely on Supreme Court precedent, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s dismissal of both an original and an amended complaint based on the University of Arkansas’ Eleventh Amendment immunity and the lack of personal jurisdiction over the named University officials. Pennington Seed, Inc. v. Produce Exchange No. 299, Case No. 05-1440 (Fed. Cir. Aug. 9, 2006) (Gajarsa, J.).
Pennington is the licensee of U.S. Patent No. 6,111,170 (“the `170 patent”), which claims a non-toxic fescue grass that does not adversely affect livestock that graze upon it and which is marketed as MAX. Pennington brought suit and alleged in its original complaint and first amended complaint that the University of Arkansas and all four of the named resident university officials “are actively growing, marketing, offering for sale, promoting and selling a product containing” Pennington’s patented product. It further alleged that the university and university officials “infringed and continue to infringe … the claims of the ’170 patent.” In addition to the infringement allegations, the first amended complaint alleged a deprivation of federal patent rights against four university officials in their “capacity as employees of the University of Arkansas.” The district court dismissed the original complaint due to the University’s Eleventh Amendment immunity. The district court subsequently dismissed the First Amended Complaint based on Eleventh Amendment immunity and lack of personal jurisdiction. Pennington appealed the dismissal of both complaints.
Citing the Supreme Court’s decision in Florida Prepaid, the Federal Circuit agreed with the lower court that the University, a part of the Arkansas state government, has sovereign immunity from suit under the Eleventh Amendment. The panel noted that Florida Prepaid specifically states that it is the Congress, not the Federal Circuit, that can abrogate Eleventh Amendment sovereign immunity for patent infringement, pursuant to Section 5 of the Fourteenth Amendment, if there is a showing that state remedies were insufficient and violated due process. The Court concluded that Pennington had failed to allege or explain how Congress made the specific finding that the state procedures were so inadequate that it abrogated state sovereign immunity to allow a patent infringement claim to be filed in federal court. The Court concluded that, without such a finding, abrogation would be suspect under Florida Prepaid. With regard the three university officials, the Court found that Pennington had failed to show a sufficient nexus for an Ex Parte Young action by demonstrating the causal connection between the university officials who were responsible for overseeing the university’s patent policy and the patent infringement. Finally, with regard to personal jurisdiction, the panel agreed with the district court that Pennington had not shown sufficient minimum contacts with the forum state of Missouri to be subjected to the reach of the Missouri long-arm statute.
Practice Note
See IP Update, Vol. 9, No. 7 (July 2006) for analogous case (Intel Corp. v. CSIRO) with different result, arising under foreign sovereign immunities law.
Patents / Litigation / Eleventh Amendment Immunity
State University’s Filing of Own Patent Suit Does Not Waive Immunity Against Declaratory Judgment Action in Different Forum
By Astrid R. Spain
In its second Eleventh Amendment decision in as many days, the U. S. Court of Appeals for the Federal Circuit affirmed a district court’s dismissal of a declaratory judgment action against the Board of Regents of the University of Texas System. Tegic Communications Corp. v. Board of Regents of the University of Texas System, Case No. 05-1553 (Eleventh Cir. Aug. 10, 2006) (Newman, J.).
The University filed suit in the Western District of Texas, charging 48 cellular-telephone companies with infringement of U.S. Patent No. 4,674,112 (“the `112 patent”), directed to a method of inputting text into a device keyboard, wherein the device software recognizes the text and predicts the word the user intends to type. Tegic, a corporation of the state of Washington, sells and licenses text-input software, entitled “T9 Text Input,” to 39 of the 48 cellular-phone company defendants in the suit brought in Texas by the University. T9 Text Input was created for use in cellular phones and other mobile devices that have fewer keys than a standard computer keyboard and allows the user to tap each key only once, with the software ascertaining each intended word with greater than 95 percent accuracy. In view of the suit that the University had filed in Texas against Tegics customers and licensees, Tegic brought a declaratory suit against the University in the United States District Court for the Western District of Washington, seeking a declaration that the `112 patent is invalid and unenforceable and that the T9 software does not infringe, contribute to infringement or induce infringement of the `112 patent. The University replied that it, as an arm of the state of Texas, is not subject to the jurisdiction of the federal courts and is protected from Tegic’s suit by the immunity granted pursuant to the Eleventh Amendment to the Constitution. The University also moved for dismissal for lack of personal jurisdiction in Washington. The district court granted the motion to dismiss on the ground that the University is immune from suit in the federal courts pursuant to the Eleventh Amendment and had not waived its immunity as to Tegic’s declaratory judgment action. Tegic appealed.
The Federal Circuit rejected Tegic’s argument that the University explicitly waived its immunity when it brought suit for infringement. According to the Court, when the University sued the telephone companies in Texas it voluntarily invoked federal jurisdiction and waived any immunity with respect to the adjudication of its claims and any counterclaims asserted “in the same forum.” However, the Court agreed with the University that its filing of the Texas action did not establish waiver as to the separate declaratory judgment action brought by Tegic in the Western District of Washington. The panel also rejected Tegic’s argument that when the University invoked the jurisdiction of a federal court, it necessarily waived its immunity against not only the defenses and counterclaims of the parties sued in Texas, but also against a manufacturer who would be favored under the “customer suit exception” when the manufacturer is the real party in interest in the litigation brought by the University. As to Tegic’s argument that its lawsuit was “fully foreseeable,” the panel noted that Tegic may seek to intervene in Texas.
Drafting Error Invalidates Patent Claim Covering World's Top Selling Drug
By Deborah L. Cadena, Ph.D. and Astrid R. Spain
In a patent battle over the world’s top-selling drug, the U.S. Court of Appeals for the Federal Circuit affirmed a district court holding that a claim cannot be constructed contrary to the specification or construed to import a limitation from the specification. However, the Court reversed part of the district court decision, holding that in order to be valid, a claim must meet all statutory requirements, including § 112, ¶ 4. Pfizer Inc. v. Ranbaxy Laboratories Limited, Case No. 06-1179 (Fed. Cir. Aug. 2, 2006) (Michel, C.J.).
Pfizer's Lipitor® (atorvastatin) is a cholesterol-lowering drug with unrivaled sales of $13 billion projected for 2006. Ranbaxy filed an Abbreviated New Drug Application (ANDA) and was sued for infringement of U.S. Patent Nos. 4,681,893 (the `893 patent) and 5,273,995 (the `995 patent). The `893 patent was set to expire May 30, 2006, but Pfizer was granted a patent term extension (based on FDA regulatory delay) extending the term to September 24, 2009. The asserted claims of the `893 patent recite a compound having structural formula I, depicted as a specific stereoisomer. Stereoisomers have the same molecular formula or atomic composition, but different spatial arrangements. Enantiomers are a pair of stereoisomers that are non-superimposable mirror images of each other and often have distinct physical properties. A racemate (or racemic mixture) is an equal mixture of two enantiomers.
The Federal Circuit rejected Ranbaxy’s argument that the district court erred in construing structural formula I “to embrace all trans-form isomers” rather than just racemates. Although only an R-trans enantiomer is depicted in the ’893 patent, the specification expressly indicated that there are four possible isomers of the compounds of structural formula I and limited the invention to the trans-form. The Court also disagreed with Ranbaxy’s argument that, because the specification only provided examples of reaction sequences that produce racemates, the claims should be limited to racemates. Citing its 2005 en banc decision in Phillips, the Court noted that restricting claim 1 on this basis would improperly import limitations from the specification into the claims. The Federal Circuit further agreed with the district court’s conclusion that statements made during prosecution of foreign counterparts, in response to patentability requirements unique to foreign laws, were irrelevant to claim construction as were statements made during prosecution of a later, unrelated U.S. patent. The Court also rejected the argument that the patent term extension was invalid because it was based on Ranbaxy’s rejected claim construction.
With regard to inequitable conduct, the Court concluded that statements made during prosecution of related patents were not material and that Pfizer’s failure to disclose these statements during prosecution of the `893 patent did not amount to a material omission.
However, with respect to the `995 patent, the Federal Circuit reversed the district court, which had declined to invalidate an asserted claim for failure to comply with the requirements of § 112, ¶ 4 that a dependent claim must further limit the subject matter of the claim from which it depends. In so doing, the Court noted that the dependent claim in question fell completely outside the scope of the claim from which it depended. The Court noted that applicants for U.S. patents must satisfy all statutory requirements prior to obtaining a patent, even those that are mostly procedural or technical.
Practice Note
This decision serves as a stark reminder that claims are the fence that ultimately protects patented technology and that technical failures in drafting a claim properly can leave a gaping hole in this fence.
Patents / Plant Variety Protection Act
Failure to Provide Notice Dooms PVPA Action
By David A. Gay, Ph.D.
Concluding that the accused infringer lacked notice that the product sold for an unauthorized use was a variety protected under the Plant Variety Protection Act (PVPA), the U.S. Court of Appeals for the Federal Circuit reversed a district court’s denial of the accused infringer’s motion for judgment as a matter of law on both the PVPA and Lanham Act claims. Syngenta Seeds, Inc. v. Delta Cotton Co-Operative, Inc., Case No. No. 05-1507 (Fed. Cir. July 28, 2006) (Gajarsa, J.).
The PVPA provides a cause of action for infringement against any person who, inter alia, undertakes to “sell or market the protected variety,” multiply or propagate it “for growing purposes” or “dispense the variety to another, in a form which can be propagated, without notice as to being a protected variety under which it was received.” Damages are precluded where the authorized distribution of the protected variety is received without a label containing the words “Unauthorized Propagation Prohibited” or “Unauthorized Seed Multiplication Limited,” unless the recipient has actual notice or knowledge of the prohibition. Syngenta markets PVPA-certified Coker 9663 wheat in approved packaging containing the required PVPA marking. Delta Cotton Co-Operative operates a grain elevator and functions as a broker, seller and retailer of grain. Delta Cotton’s businesses sell “feed wheat” not intended to be propagated and PVPA-protected seed varieties, including Coker 9663. After a jury trial, the district court found Delta Cotton to be liable for the sale of three bags of feed wheat containing Coker 9663 seed.
On appeal, the Federal Circuit concluded the trial court erred in its construction and application of the statue by omitting the requirement that the dispenser have notice that the seed it dispensed was a protected variety. The Court further noted that, before liability for infringement can attach, the statute requires failure by the dispenser to provide notice to the recipient that the seed was a protected variety. The Court concluded that the evidence before the jury was insufficient as a matter of law to sustain a finding of infringement because Syngenta did not prove that Delta Cotton both had notice and failed to provide this notice to the recipient of the dispensed seeds. Turning to damages, the panel concluded that, where the alleged infringer received the protected seed without the statutory label, the plaintiff has the burden to prove and demonstrate “actual notice or knowledge that propagation is prohibited” or that the seed is a protected variety. Therefore, Delta Cotton was not required to plead and prove lack of knowledge as an affirmative defense. The alleged trademark violation under the Lanham Act also was overturned on appeal. The Court questioned whether a claim for “reverse passing off,” which stands for misrepresentation of someone else's goods or services as one’s own, is even cognizable when the re-branded product does not compete for the trademarked product because its use is for a different purpose, in this case as animal feed. The Court concluded there was insufficient evidence to support that Syngenta was involuntarily deprived of the advertising value of its name and the goodwill that otherwise would stem from public knowledge of the true source of the Coker seed.
Patents / Litigations / Procedure
Here Come Da (New) Judge
By Paul Devinsky
The U. S. Court of Appeals for the Federal Circuit, deferring to regional circuit law, reversed the district court’s denial of Microsoft’s Motion to reassign the case (on remand) to a new judge. Eolas Technologies, Inc. v. Microsoft Corp., Case No. 06-1238 (Fed. Cir. July 31, 2006) (Rader, J.).
In Eolas I, the Federal Circuit affirmed the district court’s claim construction and its damages analysis with respect to 35 U.S.C. § 271(f). See IP Update, Vol 8, No. 3 (March 2005). At the same time, the Court found that the district court erred in rejecting Microsoft’s defenses and vacated the district court’s judgment as a matter of law (JMOL) and the district court’s decision that excluded a prior art software product from its analysis and remanded the case. The decision in Eolas I did not mention reassignment to a different judge on remand.
After the case returned to the district court, Microsoft sought reassignment to a different judge. Microsoft did not assert any bias or misconduct on the part of the original judge, but instead urged that reassignment should occur automatically by operation of a local rule. The district court refused, explaining the local rule “has become a mostly dormant section.” The district court explained that application of the local rule to cases on remand from the Federal Circuit was “problematic” because the local rule does not mirror the Federal Circuit Rule and concluded that “the policy of the Federal Circuit is not at all like that of the Seventh Circuit.” Thus, the district court concluded that application of the Seventh Circuit rule would be inconsistent with “Federal Circuit policy.” Finally, the district court reasoned that reassignment was not required “because Eolas I indicated that the case should remain with the same judge.” The Federal Circuit granted Microsoft’s petition to appeal the denial of its reassignment motion.
After noting that “reassignment of a case to a new district court judge after remand is a procedural question that is not unique to this court’s exclusive jurisdiction,” the Court deferred to the law of the Seventh Circuit as the law controlling reassignment.
Looking at that law, the Court noted that the Seventh Circuit appears unique among the circuit courts of appeals because it sets forth its law on judicial reassignment in the form of a rule that makes reassignment the norm. “The purpose of [the rule] is to avoid, on retrial after reversal, any bias or mindset the judge may have developed during the first trial.” (Emphasis in original.)
The Court easily dismissed Eolas’s arguments that the Seventh Circuit rule only applies to remands from the Seventh Circuit itself, noting that “when the Federal Circuit follows the law of a regional circuit, it acts, as best it can, as that regional circuit would when confronted with the same issue.”
The Court also noted that the rule leaves “the Court free to permit the default rule to operate or to permit remand to the same judge or to require reassignment when the default rule would not otherwise operate.”
Trademark / Licensing / Laches
Hear the Band – Trademarks Also Move to the Beat of the “Sublicensing Rule”
By Linda A.O. Lamberson and Paul Devinsky
The U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s extension of the well-established “sublicensing rule” from copyright and patent law, i.e., that a licensee is not entitled to sublicense the licensed rights to a third party without permission from the licensor, to the area of trademark law and related publicity rights. In so doing, the Ninth Circuit rejected the licensee’s argument that it had independent rights in the mark GLENN MILLER ORCHESTRA based on its ownership of an incontestable trademark registration for the mark (rights that in turn were based on the licensed use). Miller v. Glenn Miller Productions, Inc. Case No. 04-55874 (Ninth Cir. July 19, 2006) (per curiam). However, because of a laches defense, the trademark licensor, the family of big band leader Glenn Miller, were held to be barred from taking legal action against the licensor, Glenn Miller Productions (GMP).
GMP was a longtime licensee of the GLENN MILLER mark. Even though GMP had, for 20 years, been forwarding Miller financial reports which indicated the existence of its sublicenses, Miller took no action until it acquired “actual” knowledge of GMP’s activities. When the Glenn Miller family sued GMP for trademark infringement, and the district court, notwithstanding its ruling that GMP sublicensing activities were improper, dismissed the cause of action as being barred by the doctrine of laches. Both parties appealed. Although the Ninth Circuit affirmed the dismissal of the action on appeal, it still addressed the merits of GMP’s cross-appeal of the district court’s determination that GMP had engaged in unauthorized trademark sublicensing.
GMP argued that it had established its own rights in the mark GLENN MILLER ORCHESTRA, separate and apart from the rights in the GLENN MILLER mark that GMP licensed, because GMP owned a federal registration for the GLENN MILLER ORCHESTRA mark that had become incontestable. In rejecting GMP’s argument, the Ninth Circuit relied on a basic rule of trademark law, that use of a trademark in commerce, and not the existence of a trademark registration, is what creates protectable rights in and ownership of the mark. Accordingly, as long as Glenn Miller’s family (or its licensees) continued to use the GLENN MILLER mark in the marketplace, the Glenn Miller family maintained rights in the mark. Neither GMP’s trademark registration, which was based on a licensed use, nor the incontestable status of the mark it obtained, could adversely affect the family’s rights in the GLENN MILLER mark. Accordingly, GMP, as a licensee, could not sublicense “its” registered mark to third parties without the express permission of the licensor.
Practice Note
A trademark owner can reduce the risk that its licensee will infringe or improperly sublicense the mark(s) at issue by ensuring any license grant is expressly non-transferable and prohibits licensees from adopting or creating any confusingly similar mark(s) or otherwise modifying the licensed mark(s).
Good Faith Is Predicate to Fair Use Trademark Defense
By Farah Bhatti
Addressing the issue of the good faith requirement as an element of fair use in a trademark infringement matter, the U.S. Court of Appeals for the Eleventh Circuit held that the standard of good faith is the same as in any other trademark infringement matter – specifically, whether the alleged infringer intended to confuse consumers as to the source or origin of the goods or services. International Stamp Art, Inc. v. United States Postal Service., Case No. 05-13492 (Eleventh Cir. July 18, 2006) (Birch, J. and Carnes, J.).
The plaintiff, International Stamp Art (ISA) was a licensee of the U.S. Postal Service and produced a line of cards, posters and prints. ISA incorporated a perforated design border meant to make each item look like an old postage stamp. The perforated border design was registered by ISA as a trademark with the U.S. Patent and Trademark Office. Both parties stipulated that the registration is incontestable.
Subsequent to ISA’s use, the U.S. Postal Service commenced production of its own line of cards which also featured the perforated design/border. The U.S. Postal Service owned the copyrights for some, but not all, of the stamps that were reproduced. In those instances where it did not own the copyright, use of the design was limited to an exact replication of the original stamp, including the perforated border design that was incorporated in the original. ISA brought an infringement action against the U.S. Postal Service claiming trademark infringement based on its prior use and registration of the perforated border design.
The U.S. Postal Service claimed that its use of the border was a fair use (and therefore not an infringement of ISA’s registration). The district court, ruling in favor of the U.S. Postal Service on summary judgment, found that the U.S. Postal Service’s use of the perforated design was a descriptive, not trademark, use and was done in good faith use. ISA appealed.
The Eleventh Circuit found that in order to establish a fair use defense, a defendant must show that its use of a mark is other than as a trademark, i.e., is a good faith, descriptive use. The court noted that the legal standard for good faith is the same as in other trademark infringement contexts, namely, whether the alleged infringed intended to create confusion among consumers as to the source or origin. The Court found that since the U.S. Postal Service merely produced exact replicates of its original stamps, including the perforated borders, its use was in good faith. In addition, the U.S. Postal Service included its own Eagle trademark on its products to identify the source of the goods and did not attempt to confuse consumers into thinking that its products originated from ISA. The Court noted the lack of probative evidence by ISA that the U.S. Postal Service confused consumers as to the source of the goods. Finally, the court found that the U.S. Postal Service had no other commercially viable option but than to use the perforated borders in many of its cards due to the restrictions on how it could use certain stamp designs for which it did not own the copyrights. As such, the Court affirmed the decision of the District Court and found that the U.S. Postal Service’s use of the perforated design border was a fair use.
Practice Note
Although a trademark may be incontestable, there are still circumstances in which a third party may assert a fair use defense to use of the trademark.
Trade Secrets / Misappropriation
Trade Secret Protection and the World Wide Web Don’t Mix
By Philip Canelli
In a rare decision focusing on trade secret law, a New York court held that a corporation providing online tax preparation services cannot receive trade secret protection for its online content because it is “publicly exhibited on the website and [thus] not secret.” Midsummer Financial Products, Inc. v. Rapid Filing Services LLC, Case 600425/06, (NY Sup. Ct. July 12, 2006) (Freedman, J.).
Midsummer Financial Products provides online tax preparation services. The company collects client data, processes and converts the data to tax forms using third-party software, and then electronically submits the tax returns to the IRS. Rapid Filing Services is a competing online tax preparation service established by a former employee of Midsummer who supervised Midsummer’s online tax program for seven months.
Midsummer sought a temporary restraining order against Rapid Filing Services, claiming that the defendants misappropriated the following trade secrets: (1) its specific style of asking questions to complete tax forms, (2) third-party software used to transfer data from the client’s online tax questionnaire to tax forms, (3) its advertising slogans, (4) the look and functionality of its website, and (5) its domain name, “24hourtaxrefund.com,” which Midsummer contended was virtually identical to Rapid’s domain name, “rapidtaxrefund.com.”
Under New York law, a trade secret is a formula, pattern, device or compilation of information which is used in one’s business and which provides an opportunity to obtain an advantage over competitors who do not know or use it. In order to receive trade secret protection, a plaintiff must allege that it employed precautionary measures to protect the allegedly exclusive knowledge of the process at issue.
In granting the defendant’s motion to dismiss, the court found that Midsummer’s tax preparation methods were not protectable as trade secrets. The court further held that to receive trade-secret protection, Midsummer must prove that “it employed precautionary measures to protect the allegedly exclusive knowledge of the process at issue.” In examining three of the five alleged trade secrets, the court noted that Midsummer”s “online content including the questions it asks customers, advertising slogans, and the website’s ‘general look and functionality’ are not trade secrets because they are publicly exhibited on the website and [thus] not secret.” The court also noted that Midsummer’s domain name was not infringed in any manner since the “domain names contain different terms, ‘24 hour’ and ‘rapid,’ and they are purely descriptive and thus not proprietary.” Even the corporation’s method for processing client data was not protectable because it used “publicly available third-party software for which it pays a license” the court stated, adding that the company could “not receive trade secret protection for software that it did not develop.”
The court vacated a temporary restraining order, denied a preliminary injunction and granted the defendant’s motion to dismiss the complaint, finding that Midsummer had provided no evidence to prove that the “defendants engaged in wrongful conduct or that the assets allegedly misappropriated constitute trade secrets.” The court also awarded the defendant actual expenses incurred from the dispute.
