Publications / McDermott Newsletters / IP Update Vol. 6, No. 7, July 2003

IP Update Vol. 6, No. 7, July 2003

July 2003

IN THIS ISSUE

Patents / Biotechnology

FDA Exemption Limited to Information Gathering Activities for FDA Drug Approval
By David Gay, Ph.D. and Astrid Spain

In a case of first impression, the U.S. Court of Appeals for the Federal Circuit has affirmed a lower court’s finding of infringement for drug development activity directed to identifying improved compounds for clinical trials, finding that the U.S. Federal Drug Administration (FDA) exemption does not provide a general exception for biomedical experimentation. Integra Lifesciences, Ltd. v. Merck KGaA. Case Nos. 02-1052, -1065 (Fed. Cir. June 6, 2003). The Integra decision significantly clarifies the scope of the FDA exemption.

Integra sued Merck for infringement of five patents related to RGD-containing peptides, which can be used in medical devices and therapeutic treatments. Integra asserted that the acts of selecting the best of several candidates for clinical development constituted infringing activities. As part of its defense case, Merck argued that its drug development activities fell within the FDA exemption of the Hatch-Waxman Act, which provides a safe harbor for patent infringement for activity "solely for uses reasonably related to the development and submission of information" to the FDA. 35 U.S.C. §271(e)(1).

The issue decided by the Federal Circuit was whether pre-clinical research identifying the best drug candidate to subject to the FDA approval process was exempt from infringement under the provisions of 35 U.S.C. § 271(e). Interpreting the statutory language, the Court found that the exemption is limited to uses reasonably related to the development and submission of information for FDA safety and effectiveness approval processes. The Federal Circuit indicated that activities that do not "directly produce information for [the] FDA" strain the boundaries of this relationship and noted that the exemption should be confined to activity that "would contribute (relatively directly) to information the FDA considers in approving a drug." The Court held that Merck’s research activities fell outside of this relationship because identification of an improved drug candidate constitutes only general biomedical research. Affirming the district court’s finding that Merck infringed the Integra patents, the Court stated that the FDA has no interest in the hunt for drugs, and Merck’s research activities failed to result in clinical testing that provided information to the FDA.

Patents / Standing

Prior Dismissal for Lack of Standing Is Not "Adjudication on the Merits"—No Claim Preclusion
By Matthew Weil

The U.S. Court of Appeals for the Federal Circuit overturned a summary judgment that the suit by Media Technologies Licensing (Media) for patent infringement was barred by claim preclusion (also known as res judicata). Media Technologies Licensing, LLC v. Upper Deck Co., Case No. 02-1555 (Fed. Cir. July 11, 2003).

A previous action on the same patent (brought by Telepresence, an entity with common ownership to Media) had been dismissed with prejudice for lack of standing on a finding that Telepresence did not have sufficient ownership of the patent at the time the suit was filed to confer Article III standing. After that loss, the owner of Telepresence created the new entity, Media, and took steps to get all relevant patent rights into Media’s hands. He then caused Media to sue the same defendant. Based on purported privity between Media and Telepresence, the district court held the claim barred by the previous dismissal with prejudice.

Applying regional (Ninth Circuit) law, the Federal Circuit reversed, holding that the earlier dismissal was not "an adjudication on the merits," a necessary condition to the application of claim preclusion.

The Federal Circuit expressly rejected the get-you-coming-and-going reasoning of the district court. It pointed out that given the fact that the first action was dismissed because of a deficient assignment between the inventor and Telepresence it would hardly be just to dismiss the second action because of a virtual representation relationship between Telepresence and Media (not least because Media did not exist at the time of the first action). According to the Federal Circuit, a suit by Media is not the equivalent of Telepresence coming back for a second bite of the apple; rather, it is a suit by "the entity with all the interest in the [patent in suit] that was lacking before."

Patents / Interferences

Federal Circuit Finds the USPTO Has Discretion to Use the Two-Way Unpatentability Test for Interference
By Lawrence Cullen

The U.S. Court of Appeals for the Federal Circuit has confirmed that it is within the discretion of the U.S. Patent and Trademark Office (USPTO) to apply a two-way unpatentability test as a threshold for declaring an interference. Eli Lilly & Co. v. Board of Regents of The University of Washington, (Fed. Cir. July 3, 2003).

Eli Lilly successfully requested the USPTO to declare an interference between a reissue application of its U.S. Pat. Nos. 4,775,624 (the `624 patent) and 5,302,529 (the `529 patent) assigned to the University of Washington. The reissue application recited a species claim to a complementary deoxyribonucleic acid (cDNA) sequence that codes for human protein C. Lilly proposed a genus claim construction and a species claim construction for claim 1 of the `529 patent to the USPTO. Neither claim construction met the two-way test for declaring an interference, but the genus construction met the one-way test.

The U.S. Board of Patent Appeals and Interferences (Board) granted a motion by the University of Washington to dismiss due to no interference-in-fact. Relying on prior Board precedent (Winter v. Fujita) that § 1.601(n) to require a two-way unpatentability test, the Board held that regardless of whether the `529 patent was construed to have a genus claim or a species claim, the Lilly reissue application did not define the same patentable invention as required by 37 C.F.R. § 1.601(n) to declare an interference. In the 1999 Winter decision, the Board defined the two-way unpatentability test as satisfied when claim A is anticipated or rendered obvious by claim B if claim B were prior art to claim A and claim B is anticipated or rendered obvious by claim A if claim A were prior art to claim B. Lilly appealed.

On appeal, Lilly argued that although the USPTO has some discretion to determine when an interference should be declared under 35 U.S.C. § 135(a), that discretion is bridled by the statutory mandate under § 102(g) that only one patent to the first inventor may issue. Lilly argued that for claims involving a genus and a species, a one-way patentability test should be used since a prior claim to the species clearly anticipates a later claim to the genus.

The Federal Circuit affirmed the dismissal, finding that the USPTO has discretion to choose between the two-way unpatentability test and the one-way unpatentability test. The Court noted that the one-way unpatentability test is over-inclusive since, if the genus were ultimately determined to have priority over the species, separate patents could properly issue to each and the interference would have been in vain. The Court also noted that the two-way test is under-inclusive since it would prevent the canceling of genus claims that did not have priority to the species. However, the Court determined that neither test was inconsistent with § 1.601(n) and the USPTO could reasonably choose one over the other.

Judge Lourie dissented on the grounds that the two-way test is not consistent with the plain language of § 1.601(n). Judge Lourie noted that the Board decision in Winter, which established the two-way unpatentability test, is not binding on the Court and is also "unsupported by any reasoning." Judge Lourie reasoned that the mere fact that an interference may be conducted in vain, and the potential burden on the USPTO in doing so, should not permit the USPTO to shy away from its duty of determining priority to ensure only one patent issues to the first inventor. Judge Lourie also noted that the two-way test will simply shift the burden from the personnel at the USPTO with expertise in interference practice to the already overburdened district courts that do not have the expertise.

Patents / Damages

Federal Circuit Reverses Award of Attorneys’ Fees Finding District Court Misapprehended the Law
Contact Paul Devinsky

The U.S. Court of Appeals for the Federal Circuit reversed a district court’s award of attorneys’ fees imposed on plaintiffs for pursuing claims that, according to the district court, presented "no basis for recovery." The Federal Circuit found the district court sanctioned the plaintiffs based on its own misunderstanding of the governing law. Waymark Corp. et al v. Porta Systems Corp., Case No. 03-1012 (Fed. Cir. July 10, 2003).

Waymark and the Caravello Family Limited Partnership sued Porta Systems Corp. for the infringement of U.S. Pat. No. 5,705,929 (the `929 patent) as well as for the infringement of the trademark "Battscan." The complaint alleged the partnership was the owner of the `929 patent, and Waymark was the exclusive licensee. The district court granted summary judgment of non-infringement for Porta Systems on the patent count and dismissed the trademark and trade dress count for lack of standing. While that decision was on appeal to the Federal Circuit, the district court granted a motion by Porta Systems for attorneys’ fees. The Court based its sanction on its finding that there was no basis for the plaintiffs’ trademark infringement claim due to the fact the plaintiffs’ trademark had not been registered until more than a year after suit was filed. The district court further found that there was no written exclusive patent license agreement from the partnership to Waymark and, thus, Waymark did not have standing to file suit for patent infringement. Finally, the Court found the plaintiffs "provided a misleading response" to Porta Systems’ discovery request for and a copy of the written patent assignment to Waymark and the district court’s order to show cause as to the legal sufficiency of the oral license agreement. The district court found the case "exceptional" and held that "had [the p]laintiffs conducted a proper pre-filing investigation, [the d]efendant would not have incurred the substantial attorney[s’] fees and costs it now claims." The district court also based its sanction on 28 U.S.C. § 1927.

The Federal Circuit reversed, applying the law of the Eleventh Circuit to the sanction order. The Federal Circuit found that the district court erred in basing its sanction order on the fact the plaintiffs’ trademark was not registered at the time the action was filed. The Court explained that because the complaint sought relief under section 43(a) of the Lanham Act, which provides a remedy for infringement of both registered and unregistered trademarks, the district court’s award of sanctions was based on a misunderstanding of the governing law.

The Federal Circuit also found that the district court did not correctly state the law relating to the plaintiffs’ standing to bring their patent infringement claims, explaining that only assignments need be in writing; licenses may be oral. While a holder of an oral license can sue for patent infringement "only in extremely limited circumstances," the Court noted that one of the plaintiffs here claimed a written assignment of the patent and clearly had standing to sue.

Finally, the Court reversed the imposition of sanctions under 28 U.S.C. § 1927, explaining that § 1927 must be strictly construed, and sanctions under that statute are to only be assessed against counsel "who willfully abuse the judicial process by conduct tantamount to bad faith." The Court held that Porta Systems was required to show more than lack of merit to the plaintiffs’ claims to serve as a basis for sanctions under § 1927. The Court noted that the "defendant would have better spent its time in addressing the merits of the suit rather than pursuing an award of sanctions on untenable theories."

Patents / Claim Construction

Surrender of Claim Scope by Prosecution Statements Must Be "Clear and Unmistakable"
By Peter Huang 

The U.S. Court of Appeals for the Federal Circuit has held that the doctrine of prosecution disclaimer may not be used to narrow the ordinary meaning of a patent claim based on statements during prosecution, unless the allegedly disavowing statements or actions are "clear and unmistakable." Omega Engineering, Inc. v. Raytek Corp., Case No. 02-1478 (Fed. Cir. July 7, 2003).

Omega Engineering involved three patents that disclosed a laser sighting system used to target infrared thermometer scans. The district court’s claim construction analysis focused on language in the patents describing the use of lasers to outline a target energy zone. The district court read the means-plus-function claim language directed to this feature to exclude targeting that involved a laser beam that strikes inside the target energy zone. The district court’s claim construction rested heavily on the application of the doctrine of prosecution disclaimer. It found that the plaintiff had made numerous statements during the prosecution of the patents in suit that narrowed the scope of the disputed claims. Based on its claim construction, the district court granted summary judgment of non-infringement and, in the alternative, granted summary judgment invalidating two of the disputed claims.

The Federal Circuit reversed and remanded. In a panel decision authored by Judge Clevinger, the court noted the general rule that where "the patentee had unequivocally disavowed a certain meaning to obtain his patent, the doctrine of prosecution disclaimer attaches and narrows the ordinary meaning of the claim congruent with the scope of the surrender." However, the Court admonished that the doctrine of prosecution disclaimer does not apply "where the alleged disavowal of claim scope is ambiguous."

Rather, the Court explained that the doctrine of prosecution disclaimer requires that the defendant demonstrate a "clear and unmistakable disclaimer," reasoning that such a clear and unmistakable disclaimer is required in order to maintain the balance between the need for adequate public notice and the right to seek broad patent coverage. The Court noted in a footnote that "this is the same standard applicable, in the context of the doctrine of equivalents, to the doctrine of argument-based estoppel. ..."

The Federal Circuit then found that the district court had mistakenly used a number of ambiguous statements in the prosecution history to narrow the scope of the patents in suit. The Court also held that triable issues of material fact existed after the erroneous claims construction had been corrected and reversed and remanded for further proceedings.

Patents / Claim Construction

Breathe Deeply: The Ventilator Doesn’t Infringe
By Paul Devinsky

In reversing and remanding the district court ruling on summary judgment, the U. S. Court of Appeals for the Federal Circuit sorted through competing dictionary definitions to find the district court erred in its claim construction. Tehrani v. Hamilton Medical, Inc., Case Nos. 02-1177, -1178, -1227 (Fed. Cir. July 13, 2003).

The patent in suit (the `268 patent) relates to an apparatus and method for automatically controlling a respirator used for mechanical ventilation of a patient who needs assistance in breathing. The claimed apparatus controls the number of breaths delivered to the patient per minute (breath frequency) and the volume of gas delivered with each breath (tidal volume or ventilation) by calculating the proper breath frequency and tidal volume based on data representing at least five factors: air viscosity in the lungs, lung elastance, barometric pressure, oxygen level of the patient and carbon dioxide level of the patient.

The accused ventilator includes an Adaptive Support Ventilation (ASV) mode in which the device evaluates the patient’s breathing effort. If there is no detected breathing effort, the device provides full mechanical ventilation, but if there is some patient effort, the device supplements that effort to achieve the target ventilation. The target breathing pattern (tidal volume and rate) is calculated using an algorithm for calculating the tidal volume and frequency of breaths needed to provide proper gas exchange. The accused ventilator contains no sensor to measure the oxygen or carbon dioxide levels in the patient’s blood or expired gas. Rather, the operator of the device is expected to measure the patient’s levels of oxygen and carbon dioxide manually and then make corresponding settings on the ventilator.

The district court concluded that two of the operator settings corresponded to the claimed means for processing data representing measured levels of carbon dioxide and oxygen concentration respectively. As explained by the district court, "[A]lthough the [setting] may not represent the actual carbon dioxide level, carbon dioxide must be measured by some means for proper operation of the [ventilator] and the dial is adjusted accordingly." Similarly, the district court relied on an operator-controlled oxygen setting to satisfy the limitation regarding the processing of data representing the oxygen level of the patient.

Hamilton Medical appealed, arguing that the claims require the algorithm to use each of the five specified data values to calculate tidal volume and breath frequency. The Federal Circuit agreed that "the claims must be construed to require that the device first process the five data values and then use those data values to calculate tidal volume and breath frequency."

With regard to claim terms such as "representing" and "indicative" (in connection with the input data), both sides relied on dictionary definitions. Looking to the ordinary meaning of the term "representing," the Court noted that when a term has multiple dictionary definitions, the intrinsic record is used "to identify which of the different possible dictionary meanings of the claim terms in issue is the most consistent with the use of the words by the inventor." Here, the Court found that the ordinary meaning of "representing" includes "symbolizing" or "to stand for," but not the case in which the two items are related in some attenuated way. Rather, "[T]he first item must be directly related to and stand for, or be a reasonable proxy for, the latter item." The Court rejected Tehrani’s argument that the claim term "indicative of" is broader than "representing," noting that the `268 patent uses the terms interchangeably, and, therefore, they must be construed the same.

The Court construed the claimed "means for processing" to cover a microprocessor programmed to perform the disclosed algorithm, i.e., a software algorithm that operates upon the five pieces of input data and provides digital output data representing the amount and optimum frequency of ventilation required for the next breath. However, as the district court, in its claim construction, did not determine the algorithm that corresponds to the recited structure, and as the appellate record was not developed on the point, the Court remanded the case to determine whether the algorithm employed by the accused ventilator is identical or equivalent to the algorithm recited in the `268 patent.

Patents / Claim Construction

Webster Gets a Workout: Dictionary Definitions and the Plain Meaning Rule
By Stephen Scherrer

The U.S. Court of Appeals for the Federal Circuit reversed a finding non-infringement based on erroneous district court jury instructions relating to the construction of the claim term "non-diffusively bound." Abbott Laboratories v. Syntron Bioresearch, Inc., Case No. 02-1203, -1257 (Fed. Cir. July 10, 2003).

Abbott sued Syntron for infringement of specific claims in two patents relating to the detection and analysis of small amounts of chemical substances in biological fluids. Each of the asserted claims required a "non-diffusively bound reactant" on a medium for detecting an analyte (i.e., a substance to be detected).

The district court instructed the jury using the following definition of "non-diffusively bound": Non-diffusively bound means a reactant immobilized in the reaction zone so as to provide a detectable signal indicating the presence or absence of analyte in the solution, and the reactant is not capable of detaching from the medium, spreading out, and moving along the test strip. "…[A] reactant is non-diffusively bound only if it is found in such a manner that a sufficient and reproducible amount of reactant remains bound in the reactive zone or zones to conduct both quantitative and qualitative assays."

On appeal, Abbott argued that the jury’s finding of non-infringement, based on the failure to satisfy the claim term "non-diffusively bound," was not sustainable because the construction of the claim term "non-diffusively bound" should not have required quantitative analysis of the analyte. Abbott, instead, urged a claim construction that required only that the reactant be immobilized sufficiently to permit detection of the analyte.

The Federal Circuit, citing Texas Digital Sys. v. Telegenix, stated that the first step in the analysis was to determine the ordinary meaning of the claim terms and looked to the dictionary for evidence of a claim term’s ordinary meaning. Looking to Webster’s Dictionary, the Federal Circuit determined that the district court unduly narrowed the plain meaning of the term "non-diffusively bound" in requiring "quantitative analysis" of the analyte, not merely detection.

In addition, the Federal Circuit evaluated the disputed claim term in the context of the claims as a whole and found that the language of the disputed claim term in context, reinforced the plain meaning, i.e., that quantitative analysis should not be read as a requirement of the term "non-diffusively bound." Specifically, the Court noted that each of the asserted claims only required "detecting the presence of analyte," suggesting that this language was broad enough to encompass either qualitative or quantitative analysis, without specifically requiring quantitative analysis.

Patents / Claim Construction

IDS Disclosure Not "Effective" to Limit Claim Terms
By Margaret Duncan and Joy Ann Serauskas

The U.S. Court of Appeals for the Federal Circuit reversed a finding of non-infringement, finding it based on an improper claim interpretation relating to the construction of the terms "amount effective" and "amount sufficient." Abbott Laboratories v. Baxter Pharmaceuticals, Inc., Case No. 02-1400, 2003 U.S. App. LEXIS 13507 (Fed. Cir. July 10, 2003).

Abbott Laboratories (Abbott) accused the defendant, Baxter Pharmaceutical Products (Baxter), of infringement of U.S. Patent 5,990,176 (the `176 patent) directed to an anesthetic composition containing a sevoflurane and a Lewis acid inhibitor such as water in an amount effective to prevent degradation by a Lewis acid of the sevoflurane compound.

During prosecution of the `176 patent application, Abbott filed an Information Disclosure Statement (IDS) containing a reference indicating that at least one year before the filing date of the `176 patent, Abbott sold sevoflurane in glass bottles with a water content up to 131 ppm.

Based on that IDS "admission," Baxter asserted that its generic sevoflurane with a water content of no more than 130 ppm fell within the prior art and, therefore, did not infringe the `176 patent. The district court agreed and construed the claim terms "amount effective" and "amount sufficient" to mean amounts above 131 ppm of water. Based on this claim construction, the district court granted summary judgment of non-infringement, finding that the prior sale of sevoflurane by Abbott surrendered the subject matter of the sale.

The Federal Circuit reversed and remanded. The Federal Circuit stated that the fundamental issue was the construction of the term "effective amount," a term that the Court stated has a customary usage. Under this usage, the Court term construed this to mean "the amount of Lewis acid inhibitor that will prevent the degradation of sevoflurane by a Lewis acid." Moreover, the Federal Circuit reasoned that the `176 specification taught that an effective amount of any given Lewis acid inhibitor will vary depending upon the conditions to which sevoflurane is subjected.

As noted by the Court, the term "effective amount" was broadly described in the "Summary of the Invention" as an "effective stabilizing amount of Lewis Acid inhibitor" that "prevents the degradation of the fluoroether compound by a Lewis acid." Therefore, the Federal Circuit held that the `176 specification supported the concept that the amount of Lewis acid inhibitor depends on many environmental factors.

The Federal Circuit also found that the district court claim construction incorrectly limited the claims to the preferred embodiments of the `176 specification instead of considering the broader teachings of the specification.

Finally, the Federal Circuit found that the district court incorrectly viewed the IDS as a limitation on the term "effective amount." According to the Federal Circuit, simply disclosing the previous sale of sevoflurane in an IDS, without saying or doing more, did not disavow or relinquish all water concentrations below 131 ppm, since the patent disclosed that the effective amount of Lewis acid inhibitor depends on the specific storage conditions of the sevoflurane.

The Court stated that the mere submission of an IDS to the Patent Office does not constitute the patent applicant’s admission that any reference in the IDS is material prior art.

Trademarks / Publicity

Tiger Woods Unable to Swing Victory in Trademark/Publicity Case
By Jennifer Mikulina

The U.S. Court of Appeals for the Sixth Circuit has now held that artwork depicting an artist’s rendition of a high-profile sports figure in action, in this case Tiger Woods’ victory at the 1997 Masters, is protected under the First Amendment and does not constitute trademark infringement, trademark dilution, unfair competition, false advertising or a violation of the right of publicity. ETW Corporation v. Jireh Publishing, Inc., 2003 U.S. App. LEXIS 12488 (6th Cir. June 20, 2003).

Artist Rick Rush painted a montage of Masters-related images, including Woods in various poses, the Augusta National Clubhouse and famous golfers watching Woods. Woods’ licensing agent did not authorize Rush to use his image in the painting (or limited edition prints of the painting) or to use the TIGER WOODS registered trademark in the print materials accompanying prints of the artwork. Woods brought suit against Rush’s publisher for a series of federal and state trademark claims. Rush’s publisher defended on the grounds that the First Amendment protects Rush’s artwork and was granted summary judgment. Woods appealed.

The Sixth Circuit found that Rush’s use of Tiger Woods’ name and image constituted fair use under the First Amendment and, thus, was a complete defense to all of Woods’ claims. Woods’ fame was important to the court’s ruling. In particular, the court supported its decision by reasoning that "throughout their pervasive presence in the media, sports and entertainment celebrities have come to symbolize certain ideas and values in our society and have become a valuable means of expression in our culture." Further, as a general rule, the Sixth Circuit held that "a person’s image or likeness cannot function as a trademark."

Recognizing that Woods is one of the most photographed sports figures of his generation, and no single image or photograph of Woods has been consistently used on specific goods, the Sixth Circuit held that Woods cannot successfully claim trademark rights in every photograph or picture containing his image. Thus, the Sixth Circuit agreed with the lower court’s holding that Rush’s use of Woods’ image in the artwork does not constitute trademark infringement because the use is descriptive, and the painting "does have artistic relevance to the underlying work and does not explicitly mislead as to the source of the work."

The Sixth Circuit also criticized the likelihood of confusion test, which is typically applied to such Lanham Act claims, stating that it "does not give sufficient weight to the public interest in free expression." According to the Sixth Circuit, Lanham Act claims "should be applied to artistic works only where the public interest in avoiding confusion outweighs the public interest in free expression." Woods’ right of publicity claims also failed because the court found Rush’s artwork "has substantial informational and creative content which outweighs an adverse effect on [Woods’] market."

Practice Note: Based on the Sixth Circuit’s analysis, the artist’s First Amendment privilege would not necessarily be triggered if the print in question were used in an advertising campaign for a product other than the prints themselves.

Trademarks / Scope of Injunction

Party Accused of Infringing Common Law Trademark Did Not Waive Objection to Territorial Scope of Injunction
By George Hampton, IV

Absent evidence of the scope of a common law trademark holder’s use, the U.S. Court of Appeals for the Fourth Circuit vacated a district court’s entry of a nationwide injunction. The court also held that failure to plead the affirmative defense of "good faith remote user" did not preclude a later challenge to the scope of the injunction. Emergency One, Inc. v. American Fire Eagle Engine Co., Inc., Case No. 02-1483 (4th Cir. 2003).

Emergency One (E-One) and American Fire Eagle (AFE) manufacture fire and rescue vehicles. E-One sued AFE for trademark infringement for use of a mark depicting a bald eagle superimposed over an American flag. AFE counterclaimed, alleging E-One had abandoned any rights it may have had in the mark so its later resumed use of the mark constituted infringement of rights established by AFE in the interim. The parties agreed their respective marks were sufficiently similar to create a likelihood of confusion among potential customers.

Following a trial, an appeal and a re-trial, the district court entered judgment in favor AFE, based on the jury’s findings that E-One had abandoned the mark without an intent to resume use. Over E-One’s objection that the court should conduct an evidentiary hearing to establish the proper geographical scope of an injunction, the district court imposed a nationwide injunction against the use of the mark by E-One.

The Fourth Circuit vacated and remanded, noting that the Lanham Act’s presumption that the registered user of a trademark is entitled to use the registered mark throughout the United States does not extend it to users of unregistered, common law marks. Such users bear the burden of establishing the territory within which they have an exclusive right to use. Absent any evidence showing AFE’s use of the American Fire Eagle mark in the United States, it was an abuse of the district court’s discretion to issue a nationwide injunction.

The Fourth Circuit rejected AFE’s argument that E-One had waived any objection to a nationwide injunction by failing to raise the good faith remote user doctrine as an affirmative defense. The court held that although the good faith remote user defense is one that should be pled affirmatively, E-One’s objection was not a defense to liability, but went to the scope of the remedy and, therefore, need not be set forth affirmatively in the pleadings.

Trademarks / Scandalous Subject Matter

Designation of Term as "Vulgar" in Dictionaries May Prohibit Trademark Registration
By James E. Griffith

Where the vulgar significance of a mark is clear and unambiguous, an examiner may refuse registration based solely on the designation of the term as "vulgar" in widely referenced dictionaries. In re The Boulevard Entertainment, Inc., Case No. 02-1585 (Fed. Cir. July 9, 2003).

Boulevard provides adult-oriented entertainment services over the telephone and alleges that it receives more than 1.2 million telephone calls per year to its "JACK-OFF" brand telephone numbers. Citing multiple sources, including Webster’s Collegiate Dictionary, Forbidden American English, American Slang and Historical Dictionary of American Slang (that define the term "JACK-OFF" as a vulgar term for masturbation), the U.S. Court of Appeals for the Federal Circuit refused its registration on the grounds that the mark "was offensive to a substantial composite of the general public and thus precluded from registration under Section 1052(a)." Boulevard appealed.

The Federal Circuit upheld the denial of Boulevard’s applications for trademark registration holding that dictionary definitions alone can provide a sufficient basis for holding a particular mark to be scandalous when the evidence shows that the mark has only one pertinent meaning. Although the applicant objected that JACK-OFF has another meaning, namely "a stupid or incompetent person," the Court rejected this argument because there was no evidence that this alternative definition had any bearing on applicant’s use of the term as a trademark.

The Federal Circuit also rejected Boulevard’s arguments that the refusal violated the First Amendment and that the existence of a registration for "JACK OFF JILL" for "live performances by a musical group" was indicative of the registrability of "JACK-OFF." On the free speech issue, the Court held that the refusal to register did not implicate the First Amendment because the decision affected only the right to registration and not the applicant’s right to use the mark in question. On the second point, the Court reasoned that JACK OFF JILL was an acceptable "double entendre" referring to the "Jack and Jill" nursery rhyme. No consideration was given to the fact that the JACK OFF JILL mark is perhaps more offensive than JACK-OFF due to its incorporation of childhood imagery in connection with its vulgar reference.

Practice Note: Trademarks that consist of terms that are defined in dictionaries as unambiguously "vulgar" may be refused registration. However, marks that are ambiguous or have double-meanings will typically be granted the benefit of the doubt and permitted registration.

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