Category: Intellectual Property

Reading the Supreme Court Tea Leaves in Dex Media Inc. v. Click-to-Call Technologies, LP

On June 24, 2019, the U.S. Supreme Court granted the petition for certiorari in Dex Media Inc. v. Click-to-Call Technologies, LP. Next term, the Court will determine whether 35 U.S.C. § 314(d) permits appeal of the U.S. Patent Trial and Appeal Board’s decision to institute inter partes review upon finding that 35 U.S.C. § 315(b)’s time bar did not apply.

The Dex Media case has traveled a long and tortuous path. Its journey began with the service of a complaint in 2001 which was dismissed without prejudice in 2003, and the filing of a new complaint in 2012. The petition for inter partes review was filed in May 2013, and a final written decision of the Board issued in October 2014 finding that the asserted claims are invalid. From there, the case visited the Federal Circuit twice, the Supreme Court once and is now on its way back for a second time. On appeal, the dispute has focused on whether the petition for inter partes review was time barred by § 315(b), and whether the Federal Circuit has jurisdiction to hear the appeal of that issue.

Facts of the Case

In 2001, Inforocket.com, Inc., an exclusive licensee to the patent-in-suit, filed a district court action against Keen, Inc. The complaint asserting infringement was served on September 14, 2001. While the case was pending, Keen acquired Inforocket as its wholly owned subsidiary and stipulated to a voluntary dismissal of the district court action without prejudice in 2003. Keen later changed its name to Ingenio. Click-to-Call subsequently acquired the patent-in-suit, and on May 29, 2012, filed patent infringement lawsuits against multiple parties, one of which was Ingenio.

On May 28, 2012, just under one year after being served with the complaint in the Click-to-Call action, Ingenio and two other defendants filed a petition for inter partes review (IPR) of the patent-in-suit. In its preliminary response, Click-to-Call contended, among other things, that § 315(b) statutorily barred institution of the IPR proceedings, noting that Ingenio’s predecessor-in-interest was served with a complaint alleging infringement of the patent-in-suit in 2001. Section 315(b) states, “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real part in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

The Board instituted the proceeding, and based on Federal Circuit precedent found that dismissal of an infringement suit without prejudice nullifies the effect of the service of the original complaint against Keen. Therefore, service of the 2001 complaint did not bar the petition. Click-to-Call again argued that the petition was time-barred in its patent owner response; and in its final written decision, the Board reaffirmed its earlier conclusion on that point and found that the challenged claims were invalid.

In the case being reviewed by the Supreme Court, the Federal Circuit first had to decide whether it had jurisdiction to hear an appeal of the § 315(b) time bar in light of § 314(d), which states, “No Appeal. – The determination by the Director whether to institute an inter partes review under this section shall be final and unappealable.” The Federal Circuit, relying upon its en banc ruling in Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018), held that time-bar determinations under § 315(b) are appealable.

In Wi-Fi One, the Federal Circuit based its finding on the rationale that the time-bar determination “is not akin to either the non-initiation or preliminary-only merits determinations for which unreviewability is common in the law,” and the fact that the time bar “sets limits on the Director’s statutory authority to institute.” Id. at 1373-74. Having decided the question of appealability, the Click-to-Call court then held en banc that the time-bar decision applies to bar institution of an IPR when a petitioner was served with a complaint for patent infringement more than one year before filing its petition, but the action was voluntarily dismissed without prejudice.

Predictions for the Supreme Court

Often, even without the presence of a circuit court split, the Supreme Court takes cases on appeal from the Federal Circuit to reign in and overrule the Appellate Court. In fact, the Supreme Court has reversed 70 percent of the Federal Circuit cases it has heard since 2007. There are two important factors to suggest that the Supreme Court will for a second time reverse the Federal Circuit in this case.

  • First, in a prior appeal of this case to the Federal Circuit in 2015, the Federal Circuit dismissed the appeal for lack of jurisdiction based on its prior precedent in Achates Reference Publishing, Inc. v. Apple Inc., which was subsequently overruled by Wi-Fi One. Click-to-Call petitioned the Supreme Court for review, and in June 2016, the Supreme Court granted cert, and vacated and remanded the case to the Federal Circuit to consider in light of the Supreme Court’s ruling in Cuozzo Speed Technologies, LLC v. Lee. This suggests that, at the time, the Supreme Court thought there was a clear path for the Federal Circuit to hold that § 315(b) rulings are appealable, as the Federal Circuit did in both Wi-Fi One and its ruling that is currently under review. Since then, the composition of the Supreme Court has changed, with Justice Kennedy’s retirement and the confirmation of Justices Gorsuch and Kavanaugh. It seems now that at least four of the justices of the newly constituted Court may believe that the Federal Circuit’s decision is not consistent with § 314(d).
  • This contention also is supported by the fact that the Supreme Court declined to review both of the questions presented by the petition for cert. Dex Media, Inc., the successor-in-interest to Ingenio, also requested that the Supreme Court decide whether § 315(b) bars institution of an inter partes review when the previously served patent infringement complaint, filed more than one year before the IPR petition, had been dismissed without prejudice. The Supreme Court declined to hear that issue. One might suppose that if the Supreme Court believes the time-bar question is appealable, the Court also would want to rule on whether a dismissal without prejudice negates the effect of service of the complaint under the time bar statute. It is entirely possible that the Court declined to make that determination because the question will be moot once the Court determines there is no appellate jurisdiction over the time-bar issue.

Implications of the Ruling

If the Supreme Court affirms the Federal Circuit’s ruling and finds that § 315(b) questions are appealable, the Federal Circuit’s jurisprudence regarding when the one-year period begins will remain binding, at least until the Supreme Court decides to hear that issue anew. This means that entities looking to file IPR petitions must be alert to the fact that a predecessor-in-interest may have been served with a complaint triggering the one-year time limit as well as whether to file a petition with other entities who (directly or through a predecessor-in-interest) may have been served with complaints that could bar the entire petition.

In contrast, what will happen if the Supreme Court reverses the Federal Circuit’s ruling and Orders dismissal of the appeal on the grounds that § 314(d) prohibits appeal of the time bar issue? Prior to the Federal Circuit’s ruling, the Board had consistently found, as they did in this case, that dismissal of a complaint without prejudice constituted a nullity in terms of the time-bar statute. If the Federal Circuit’s opinion in this case is overruled, its opinion would not be precedential and the Board could either interpret the statute as they had previously or alter the interpretation in view of the Federal Circuit’s opinion, though they would be under no obligation to do so. It also is possible that this becomes one of the many issues that are panel-dependent, forcing petitioners who were served with complaints that have been dismissed without prejudice to “roll the dice” on the issue.

PTAB practitioners should be watching the outcome of this case closely and consider all of the implications of the ruling before filing a petition for inter partes review. As the facts of this case highlight, they also should perform a thorough due diligence review of all “real parties in interest” related to the contemplated petitioner.

©2019 Drinker Biddle & Reath LLP. All Rights Reserved

Game Over: Obviousness Can Be Based on a Single Prior Art Reference

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial and Appeal Board (PTAB) obviousness decision, finding that obviousness can be based on a single prior art reference if modifying that prior art reference is found to be obvious. Game and Technology Co., Ltd. v. Activision Blizzard Inc., Case No. 18-1981 (Fed. Cir., June 21, 2019) (Wallach, J).

Game and Technology (GAT) owns a patent directed to a method for generating a “gamvatar” by combining game items with layers of an avatar in online games. Activision Blizzard and Riot Games sought and were granted inter partes review of the patent. During the proceeding, the PTAB construed the term “gamvatar” to be a combination of an avatar with a game item function, and construed the term “layers” to mean display regions. The PTAB issued a final written decision finding the challenged claims obvious based on a user manual for a video game called Diablo II. GAT appealed.

On appeal, GAT argued that the PTAB erred in construing the terms “gamvatar” and “layers,” and further argued that the PTAB erred in its determination that the claimed method would have been obvious over the Diablo II manual.

Addressing claim construction, GAT argued that the PTAB’s construction of “gamvatar” was broader than the broadest reasonable interpretation BRI, and argued that “gamvatar” should mean “concurrently usable online and in the game.” The Federal Circuit rejected GAT’s argument, finding that the PTAB did not err in construing the term “gamvatar” because the claims and specification both showed that “gamvatar” is a combination of an avatar with a game item function and is not limited to “concurrently useable online and in the game.” As to the term “layers,” GAT argued that the term should be construed as regions for displaying graphical objects where the layers are displayed on the avatar. The Court disagreed, finding that the claim and the specification supported the PTAB’s construction of the term “layers” to mean display regions.

Turning to obviousness, GAT argued that the PTAB erred in using the user manual to find obviousness because a “a single reference . . . cannot support obviousness.” The Federal Circuit rejected GAT’s argument as a matter of law, finding that a patent can be obvious based on a single prior art reference if it would have been obvious to modify the reference to arrive at the claims invention. Applying that standard here, the Federal Circuit found that the PTAB did not err in its obviousness decision because the PTAB’s finding that the Diablo II manual teaches the “gamvatar” and the “layers” limitations was supported by substantial evidence.

 

© 2019 McDermott Will & Emery
For more in PTAB cases, please see the Intellectual Property type of law page on the National Law Review.

Wide-Ranging Senate Bill Aims to Streamline Post-Grant Proceedings and Block Trolls

On Wednesday, Senator Coon—of 101 hearings fame—and five co-sponsors introduced the Stronger Patents Act in the Senate (“Support Technology & Research for Our Nation’s Growth and Economic Resilience”). About 22 of the bill’s 40 pages involve amendments to IPR, PGR and ex parte reexamination that limit appeals and clarify overlapping court and PTO actions. These provisions have been ably summarized by Joshua Rich in a post at PatentDocs, but there are other interesting amendments to 35 U.S.C. so I thought I would start toward the last half of the bill.

Section 106 of the bill, entitled “Restoration of Patents as Property Rights,” amends section 283 to require that a court that finds infringement to presume that further infringement would cause irreparable injury and that remedies available at law are inadequate to compensate for that injury. These are the circumstances that encourage the court to issue an injunction against the infringer.

Section 42 of 35 U.S.C. would be amended to end USPTO fee diversion into the general fund by providing that any fees collectable by the Director shall be “available to the Director” and used to operate the PTO. Remaining unobligated funds are to be maintained in the “USPTO Innovation Promotion Account.”

Section 123(d) would be amended to clarify that a mircoentity includes an applicant who receives the majority of his income for a institution of higher education, or applicant has, or is under an obligation to assign, grant or convey a license or other ownership interest to said institution or the applicant is the institution or the applicant is a 501(c)(3) “nonprofit organization” that holds title to the institution’s patents “for the purpose of facilitating commercialization of the technologies” of the IP.

The bill establishes a pilot program whereby no fewer than six district courts will receive one additional law clerk or secretary who is tasked, with the assistance of the Federal Judicial Center, with helping  the court “develop expertise in patent and PVPA cases”…”for the purpose of expanding the [patent cases pilot program] to address special issues raised in patent infringement suits against individuals or small business concerns.”

The bill introduces Title II—”Targeting Rouge and Opaque Letters” and defines “Unfair or Deceptive Acts or Practices in Connection with the Assertion of a United States Patent” (section 202). The bill makes it an “unfair or deceptive act or practice,” as defined by the ITC, to send written communications that the recipient is or was an infringer of “the patent” and bear liability or owe compensation to another, if the sender, in bad faith (high probability of deceit and intentional avoidance of the truth—defined in more detail in the bill—sends communications regarding 15 specific assertions regarding infringement, licensing and prior suits, or failure to identify the sender.

These bad acts or failures to act are a laundry list of the approaches patent trolls use to intimidate recipient targets or to mask their identities. Bad acts include falsely representing that sender has the right to enforce the patent, that a civil action has been filed against the recipient or other parties, that recipient will be sued, that third parties have taken licenses, including failure to disclose that the other licenses are not to the allegedly infringing acts, that recipient’s alleged infringement has been investigated by sender or that sender has filed an action that sender knew had failed.

A sender cannot seek compensation for infringement of a claim that has been held unenforceable or invalid, acts by recipient after the patent has expired or recipient’s acts that the sender knew were properly licensed.

A sender in bad faith, cannot fail to include the identity of the person asserting the right to license or to enforce the patent, including ultimate parent entities. The patent asserted to be infringed upon must be identified, as must the product or activity of the recipient alleged to be infringing. The name of a contact person must be given to the recipient.

While the sender can argue that any of these acts or failures to act was due to an honest mistake, enforcement is by the FTC and the fines can be as high as $5 million.

Section 204 preempts State laws regarding “transmission or contents of communication relating to the assertion of patent rights,” but does not preempt other State laws relating to state trespass, contract or tort law. The FTC can intervene in suits brought by States and, if the FTC has instituted a civil suit, the State cannot begin an action under section 202.

While I am sure that there are freedom of speech and commerce clause arguments to be made, this bill elevates its prohibitions to the level of shouting “fire!” in a crowded theater. Combined with the proposed traffic laws meant to limit the use of multiple IPR filings, and their associated appeals at every turn in the litigation road, this seems to be a reasonable attempt to untangle the tortuous relationship between district court litigation and post-grant PTO proceedings.

Senator Coons played an important role in the recent Senate subcommittee hearings on the misguided expansion of patent ineligibility under Section 101. He may have found this part of the Patent Statute to be easier to untangle than defining a “natural phenomenon” or an “abstract idea” but I hope that this issue remains on his IP to-do list.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.
For more on patent laws & legislation see the National Law Review Intellectual Property page.

Amazon Takes Aim at Patent Infringement in its Marketplace

Amazon CEO Jeff Bezos recently disclosed that gross merchandise sales in the Amazon Marketplace by independent third-party sellers (as opposed to sales made directly by Amazon itself) had grown to 58% of total sales. According to data company Statista, 73% of those sellers were small businesses with between 1-5 employees. For many of them, sales on Amazon comprise their entire revenue.

Discussion of the opportunity Amazon Marketplace represents for small business, however, is joined by the voices of many retailers complaining about sales of counterfeit and stolen goods. To better police its online sales, Amazon has launched initiatives such as Project Zero which allows owners of brands to delete counterfeit products.

The online retail giant’s latest enforcement effort—designed to combat patent infringement—has been dubbed the Utility Patent Neutral Evaluation Procedure (UPNEP). Under this new trial program, a company that believes certain products for sale on the Amazon Marketplace infringe its patents can request an evaluation by depositing $4,000. If the seller does not dispute the accusation, Amazon removes the infringing products from the marketplace, and refunds the deposit to the patent owner. If the seller decides to fight the claim, it also deposits $4,000. Amazon then assigns a lawyer with patent expertise to resolve the dispute. The patent owner submits an opening brief, the merchant files a response, and then the patent owner may submit a reply. The lawyer reviews the submissions, and decides whether the listing should be removed or maintained. The winner gets its money back, and the loser’s $4,000 gets paid to the lawyer. There is no discovery, and no appeal or request for reconsideration. The whole process takes just a few months from start to finish.

Many stakeholders in the Amazon ecosystem have applauded the UPNEP as providing both patent owners and Amazon merchants with a quick and cost-effective mechanism for resolving infringement disputes arising from third-party listings. While participation in the program does not prevent a patent owner from commencing a lawsuit, many sellers do not reside in the United States, and thus may not be subject to service of process in a U.S. federal court. Without UPNEP, patent owners would have little to no recourse in such cases.

Law firms with IP litigation expertise are already offering to represent both patent owners and accused sellers in connection with the program. One such firm told The Information that his client boosted sales by 700% after using UPNEP to remove listings that were knockoffs of the client’s patented product. Consultants who advise Amazon sellers are also positioning specialized services. One such consultant advised The Information that a cup manufacturer client had used UPNEP to remove 170 product listings that it believed were infringing its patents.

There are some detractors, however. Deriding the new initiative as “the District of Amazon Federal Court,” Paul Morinville of IP Watchdog says the new initiative is a symptom of a broken patent system. He questions, among other issues, whether the lawyers evaluating the claims will be impartial, or beholden to Amazon’s interests.

Expert Peter Kent, who has served as an expert in several Amazon-related cases, is monitoring developments closely. “A critical question in my mind about the UPNEP program,” explains Kent, “is whether it will be exploited by larger companies trying to knock out competitors using spurious patent claims. For instance, if a small merchant who can’t afford the $4,000 doesn’t respond, their product listings are automatically removed, regardless of the merits of the petitioning company’s patent claims.”

We’ll continue to monitor whether UPNEP—and the model it represents—becomes popular for resolving disputes between patent owners and merchants. With experience on more than 5,000 patent matters in the past decade, proprietary intelligence systems, and the best-in-class network of top experts from complex areas ranging from 5G, artificial intelligence, and virtual reality, IMS stand ready to connect you with the expert best-aligned for your needs.

© Copyright 2002-2019 IMS ExpertServices, All Rights Reserved.

Federal Circuit Uphold TTAB Ruling on Specimens of Use

Part of the trademark registration process is submitting a specimen of the mark as used in commerce (“specimen of use”). Recently, the U.S. Court of Appeals for the Federal Circuit (CAFC) upheld the decision of a split Trademark Trial and Appeal Board (TTAB) panel that refused to register the trademark “CASALANA” for “knit pile fabric made with wool for use as a textile in the manufacture of outerwear, gloves, apparel, and accessories,” stating that Siny Corp. (the applicant) did not submit an acceptable specimen of use. See In Re: Siny Corp. (Fed. Cir. Case. No. 18-1077).

Siny Corp. had submitted a specimen where the mark was not shown on images of the goods or on images of the packaging. Also, the Siny Corp. website did not allow direct ordering. Instead, it listed a phone number and e-mail “for sales information.” Nonetheless, Siny Corp. maintained that its website qualified as a display of goods at their point-of-sale because its web-page specimen had the phrasing “for sales information” (i.e., it was a “display associated with the goods” that should be considered a specimen of use sufficient to purchase those goods).

During prosecution the examining attorney disagreed with the reasoning of Siny Corp., stating that the phrasing “for sales information” was not enough to enable customers to make the sale. Rather, it was just a way to obtain more information and lacked details to complete the order – such as cost, quantity, payment and shipping.

The TTAB panel, in reviewing the determination of the examining attorney, found that even though Siny Corp. customers would need the support of sales staff because their goods were industrial materials for use in manufacturing, nearly all details needed to complete a transaction were not present on the website. Thus, the website could not be considered a display for point-of-sale.

On appeal to the CAFC, Siny Corp. maintained that its website specimen established a “display associated with the goods” and argued that the Board used “overly rigid requirements” in determining that the specimen did not qualify as a display associated with the goods.

The CAFC agreed with Siny Corp. about the Board holding of In re Sones, 590 F.3d 1282 (Fed. Cir. 2009), cautioning against bright-line rules in this context. However, it disagreed with Siny Corp. that the Board in the instant case had used improperly “rigid” requirements stating, in fact, that the TTAB had prudently considered the website specimen’s contents and ruled the specimen does not cross the line from advertising to suitable display associated with the goods.

In hindsight, the website could have been modified a few ways that may have been acceptable: (1) providing pricing information on the site; (2) providing an e-commerce option to purchase; (3) putting the mark on the images of the goods or on images of the packaging rather than just the surrounding website text; and/or (4) changing the general “for sales information” statement to “call to purchase, pricing available on request.” Alternatively, documentary evidence of the sales process may have been acceptable, showing that purchasing consumers saw the website, called the number, and in fact bought the goods. The foregoing are all considerations to keep in mind when presented with issues regarding specimens which claim use in commerce.

 

Copyright 2019 K & L Gates
Article by Stewart Mesher of K&L Gates.

Protecting Your Brand and Trademarks in the Cannabis Space Following the 2018 Farm Bill

The 2018 Farm Bill [1] relaxed restrictions covering hemp-based cannabis products, and it is causing a shift in business strategies in the industry. Instead of a full prohibition of trademark registrations covering cannabis goods or services, a narrow range of filings is now permitted, so long as they conform to the requirements of the Farm Bill and the latest USPTO guidelines. While the regulatory framework is still being developed, cannabis-related business owners who could not previously receive federal trademark protection are now reconsidering their trademark strategies.

The principal change from the 2018 Farm Bill is that while all cannabis products derived from marijuana are still prohibited by federal law under the Controlled Substances Act (CSA), those derived from hemp are now permitted, albeit still tightly regulated. Hemp-based cannabis products are defined as those that contain no more than 0.3 percent THC, the primary active ingredient in marijuana. Accordingly, certain products and services derived from hemp are now legal under federal law, and the USPTO has published guidelines that allow narrow federal trademark registrations covering them.

The USPTO had previously refused any trademark application that covered cannabis products or services. In response, many businesses have filed state-law trademark applications in jurisdictions in which marijuana has been legalized, although this provides only limited protection. Businesses have also tried to circumvent the federal prohibition by filing for goods and services tangentially related to marijuana or cannabis, such as apothecary or pharmacy services for medical marijuana, or services for the provision of information and/or advocacy for cannabis and its uses. The policy at the federal level is still to refuse these applications that cover goods and services that are legal on their face but are in fact related to marijuana. But that policy is now moot for certain hemp-related applications that conform to the new guidelines.

Even for applicants that have succeeded in registering trademarks for cannabis-based products under facially legal goods and services descriptions, attempts to enforce these marks can be hollow. During the course of litigation, it may become clear that the activities of the trademark owner are not permitted under federal law. These registrations are still valuable to block other filers as well as to signal that a business is adopting and is willing to enforce a particular mark, but the new USPTO regulations can provide substantially more protection to businesses that sell qualifying hemp-related products or services.

Under the new USPTO guidelines, marks covering hemp-based cannabis products and services are permitted to be registered as long as they contain no more than 0.3 percent THC and are otherwise legal under federal law. Accordingly, there are certain exceptions and requirements, which include the following:

  • The 2018 Farm Bill left jurisdictional responsibility for regulating certain products to the FDA. As of now, the FDA does not permit cannabidiol (CBD) to be sold in food or drug products. Accordingly, registrations for marks that cover “foods, beverages, dietary supplements, or pet treats containing CBD” are still prohibited. This restriction applies only to CBD at this point. Other non-CBD hemp-based food or drug products would be permitted registration so long as they conform to the applicable FDA guidelines. Also, CBD products that are not a food or drug may still be permitted registration as long as they do not fall under the FDA’s jurisdiction or are not otherwise prohibited by other federal laws.  See USPTO Examination Guide 1-19.
  • For marks covering cultivation and other services related to hemp-based products, applications will be examined not only for compliance with applicable USPTO requirements but also for compliance with the 2018 Farm Bill and applicable state laws. Applicants must show that they have an applicable state license to provide their services, as not all states follow the 2018 Farm Bill’s guidance for hemp products, and in many states, these products are still illegal for commercial purposes or highly restricted.[2]

The new guidelines also allow for applicants to amend pending applications covering cannabis products to conform to the new requirements. To do so, the applicant must limit the list of goods and services to products that contain no more than 0.3 percent THC and submit any required documents showing that the goods and services covered are legal. The application’s filing date would also be amended to coincide with the legalization of hemp-based products, and the USPTO would conduct a new search of the register for prior marks to account for the later filing date.

Under the new regulations, cannabis businesses should consult a trademark attorney to consider their options to protect their trademarks on a federal level. Although the law is in flux and uncertainty abounds, there are several points from a trademark-filing strategy perspective to keep in mind when considering filings under the new guidelines:

  • The new, narrow USPTO guidelines will not be helpful to every business operating in the cannabis space. Businesses that will be helped either already offer or are considering offering hemp-derived goods and services that contain less than 0.3 percent THC, goods that do not constitute food or drug products that contain CBD, and goods that are not otherwise in conflict with FDA or other federal laws or guidelines.
  • A large number of trademark applications will likely be filed for hemp-based products soon, regardless of their applicants’ qualifications. Businesses should explore their options and file quickly, and keep in mind that it will be difficult to show prior use to oppose a third-party filer, as any such use was likely illegal under federal law.
  • Because the USPTO can suspend applications for good cause, it is logical to expect the USPTO to grant suspensions of applications while applicants are in the process of obtaining a license to cultivate hemp-based products.
  • Creating even more uncertainty, the 2018 Farm Bill has directed the U.S. Department of Agriculture (USDA) to derive regulations for hemp-related activities that fall outside of the FDA’s jurisdiction. The USPTO is expected to quickly adopt new guidelines to conform to the USDA.
  • Narrowing an existing application to conform to the new requirements will significantly narrow the filing. After such an amendment, the application cannot be amended back to cover the previous broader range of goods and/or services. If an applicant anticipates a change in law and can draw out the application process to wait for such a change, it may be advisable to file a new application that conforms to the new guidelines rather than amending the old one. The applicant can then keep the broader application alive to preserve their options.
  • In some cases, existing registrations may have made it through the examination process, even if they cover goods and services that were prohibited under federal law at the time of filing. If this is a possibility, businesses should consider their options for re-filing based on the new guidelines which on their face do not apply to amending existing registrations.

The new marijuana legalization framework being put in place state by state, most recently in Illinois, has raised more questions than answers in the state-regulatory sphere. However, until now, the federal guidelines were clear, as all cannabis-related products were prohibited under federal law. After the passage of the 2018 Farm Bill, this is no longer the case. As the law in the cannabis sphere unfolds, businesses should work closely with a trademark attorney to explore options for protecting their valuable brands.

© 2019 Dinsmore & Shohl LLP. All rights reserved.
More on Cannabis & Marijuana law developments on the National Law Review Biotech, Food & Drug law page.

A Judge’s Tips for Keeping Trade Secrets “Secret”

Just because information is sufficiently sensitive and valuable that it can qualify as a “trade secret” does not mean that it will qualify unless the owner of the information takes adequate steps to protect its secrecy.

In a recent decision, Judge John J. Tharp, Jr., of the U.S. District Court for the Northern District of Illinois explained that “there are two basic elements to the analysis” of whether information qualifies as a “trade secret”: (1) the information “must have been sufficiently secret to impart economic value because of its relative secrecy” and (2) the owner “must have made reasonable efforts to maintain the secrecy of the information” (internal quotation marks omitted).[1]

According to Judge Tharp, some of those “reasonable efforts” that a company can take to maintain the secrecy of its information include:

  • using non-disclosure and confidentiality agreements with employees;
  • enacting a policy regarding the confidentiality of business information that is more detailed than a mere “vague, generalized admonition about not discussing [company] business outside of work”;
  • training “employees as to their obligation to keep certain categories of information confidential”;
  • asking departing employees whether they possess any confidential company information, and, if they do, instructing them to return or delete it;
  • adequately training IT personnel about data security practices;
  • restricting access to sensitive information on a need-to-know basis; and
  • as appropriate, labelling documents “proprietary” or “confidential.”

As Judge Tharp made clear, companies that fail to institute reasonable measures to protect sensitive information do so at their own peril.

[1] Abrasic 90 Inc. v. Weldcote Metals, Inc., No. 1:18-cv-05376 (N.D. Ill. Mar. 3, 2019) at 11.

 

©2019 Epstein Becker & Green, P.C. All rights reserved.
This article was written by Peter A. Steinmeyer and Erica McKinney from  Epstein Becker & Green, P.C.
For more on employer/employee relations see the National Law Review Labor & Employment page.

Ericsson Offers FRAND – District Court Endorses Comparable Licenses, Rejects SSPPU Royalty Rate

On May 23, 2019, the court issued a declaratory judgment in the case of HTC v. Ericsson, No. 18-cv-00243, pending in the United States District Court for the Eastern District of Texas (Judge Gilstrap). That judgment confirmed that Ericsson’s 4G standard-essential patents (“SEPs”) convey significant value to mobile handsets and held that Ericsson made an offer to HTC that complied with Ericsson’s obligations to license on fair, reasonable, and non-discriminatory (“FRAND”) terms. The decision, published on the heels of Judge Koh’s recent opinion in FTC v. Qualcomm, provides much-needed clarity to SEP owners by definitively rejecting the smallest-saleable patent practicing unit (“SSPPU”) royalty theory in favor of a real-world, market-based approach.

The Dispute

Ericsson owns a large portfolio of cellular patents essential to the 2G, 3G, and 4G standards that it licenses to handset makers worldwide. As a member of the ETSI standard setting organization, Ericsson agreed to license these patents on FRAND terms. Ericsson offered a license to HTC at a rate of $2.50 per 4G device, or 1% of the net device price with a $1 floor and $4 cap. HTC countered with a rate of $0.10 per 4G device. HTC sued Ericsson, claiming that Ericsson’s offered royalty rate was too high, and that Ericsson breached its FRAND commitment.

A jury trial was held in February 2019. HTC argued that a royalty base must be calculated based on the profit margin of the baseband processor (which HTC argued was the SSPPU) rather than the price of the device as a whole. Ericsson argued that HTC’s SSPPU approach dramatically undervalued 4G cellular technology and that Ericsson’s patents in particular were worth far more. After a five-day trial, the jury found that Ericsson’s offers did not breach Ericsson’s commitment to license on FRAND terms and conditions.

The Decision

Following the verdict, the district court also issued its findings of fact and conclusions of law in connection with ruling on Ericsson’s request for a declaratory judgment that it had complied with FRAND. This declaration reaffirmed the jury’s findings, while also addressing more fully some key questions.

First, the court stated unequivocally that the ETSI FRAND commitment does not require a company to license its SEPs based on the profit or cost of the baseband processor or SSPPU.The district court’s decision is consistent with Federal Circuit precedent, such as Ericsson v. D-Link, which holds that “courts must consider the facts of record when instructing the jury and should avoid rote reference to any particular damages formula.”

Second, the order went further to conclude that Ericsson’s 4G portfolio is worth significantly more than a royalty rate based on the profit margin or cost of the baseband processor in HTC’s phones (HTC’s “SSPPU”). Looking to industry-wide evidence, the court held that the value of cellular technology far exceeded a valuation based on the price or profit of a baseband processor. The court found that “Ericsson established, and HTC’s own experts conceded, that there are no examples in the industry of licenses that have been negotiated based on the profit margin, or even the cost, of a baseband processor” and that credible evidence supported a finding that “the profit margin, or even the cost, of the baseband processor is not reflective of the value conferred by Ericsson cellular essential patents.”

Third, the court determined that both of Ericsson’s offers to HTC—(1) $2.50 per 4G device or (2) 1% with a $1 floor and $4 cap—were fair, reasonable, and non-discriminatory. The court found that Ericsson’s “comparable licenses provide the best market-based evidence of the value of Ericsson’s SEPs and that Ericsson’s reliance on comparable licenses is a reliable method of establishing fair and reasonable royalty rates that is consistent with its FRAND commitment.” At trial, evidence was presented regarding Ericsson’s licenses with Apple, BLU, Coolpad, Doro, Fujitsu, Huawei, Kyocera, LG, Panasonic, Samsung, Sharp, Sony, and ZTE. The court noted that several of Ericsson’s licenses contained express terms that were “similar or substantially similar” to Ericsson’s offers to HTC and rejected the argument that Ericsson’s offers to HTC were discriminatory.

Why It Matters

Judge Gilstrap’s declaration represents an important development in FRAND case law that looks to industry practice and market evidence rather than untested licensing theories. It affirms that basing a rate on comparable licenses is an acceptable FRAND methodology.

The decision also rejects the SSPPU royalty theory. Some have read the recent FTC v. Qualcommopinion to suggest that a FRAND royalty must be structured as a percentage rate on a baseband processor. Judge Gilstrap’s declaration demonstrates why such a reading is incorrect.  First, the declaration explains that the ETSI FRAND commitment simply does not require a SSPPU royalty base. Second, even if one were to indulge the SSPPU approach, the SSPPU for many standard-essential patents is not limited to a baseband processor. Third, a wealth of market evidence shows that Ericsson’s patents (and standard-essential patents generally) are far more valuable than a baseband processor-based royalty would reflect.

© McKool Smith
This article was written by Nicholas Mathews from McKool Smith.

Immoral and Scandalous Trademarks Are Now Allowed According to Today’s U.S. Supreme Court Decision

On June 24, 2019, the Supreme Court handed down its decision in Iancu v. Brunetti, addressing whether, in light of its previous holding in Matal v. Tam, the Lanham (Trademark) Act’s prohibition on registration of “immoral” and “scandalous” trademarks represents a violation of the First Amendment.  Six justices joined the majority opinion, which held that both the immoral and the scandalous provisions of the Lanham Act do not square with the First Amendment and, thus, must be invalidated.

Respondent Erik Brunetti founded a clothing line that uses the trademark and brand name ‘FUCT’.  When Brunetti attempted to register his trademark with the United States Patent and Trademark Office (USPTO), the registration was denied on the grounds that the mark was “a total vulgar” and therefore could not be registered.  Brunetti appealed, arguing that, particularly in light of Tam (which held that the disparagement clause of the Lanham Act represented a First Amendment Violation), the Lanham Act’s exclusion of immoral and scandalous marks as eligible for federal registration by the USPTO also represented unconstitutional viewpoint discrimination.

The government argued that the ban on such marks was viewpoint-neutral, and, in any case, could be constructed in a limiting way such that the only prohibition would be to marks that are offensive or shocking due to their mode of expression, regardless of the views presented by the marks.  Doing this, according to the government, would result in only vulgar—lewd, sexually explicit, and profane—marks being refused registration, which would make the prohibition constitutional.

The Supreme Court disagreed, explaining that “the statute says something markedly different”.  The Lanham Act, as written “does not draw the line at lewd, sexually explicit, or profane marks…[or] refer only to marks whose “mode of expression,” independent of viewpoint, is particularly offensive.”  Moreover, the Supreme Court explained, while the Lanham Act clearly has a legitimate purpose, it is still not permitted to engage in viewpoint-based discrimination.  As an illustration, the Supreme Court pointed to several contradictions by the USPTO when it came to attempts to register a trademark (‘KO KANE’ rejected as a trademark for beverages while ‘SAY NO TO DRUGS—REALITY IS THE BEST TRIP IN LIFE’ registered; ‘BONG HITS 4 JESUS’ refused registration due to the belief that “Christians would be morally outraged” but ‘JESUS DIED FOR YOU’ allowed registration on clothing).

Between Tam and Brunetti, the Lanham Act has now lost its ability to exclude a wide swath of potential trademarks.  Previously, Examining Attorneys with the USPTO were permitted to refuse registration of a trademark, even if it was not phonetically equivalent to a curse word (as in the present case), if the Examining Attorney felt that the trademark was, or could potentially be, offensive or outside the “accepted” viewpoint.  This is why ‘BONG HITS 4 JESUS’ was refused registration but ‘JESUS DIED FOR YOU’ was allowed; as the Supreme Court opinion notes, one mark suggests irreverence while the other suggests religious faith and, while some may find the first mark offensive, it is not the place of the USPTO to police what is and is not objectionable.  Marks that are disparaging, explicit, immoral, and/or scandalous are now eligible for registration with the USPTO.  Brunetti should now be granted federal registration for his clothing brand and enjoy the additional protections that come from having the USPTO backing a trademark.

 

© 2019 Davis|Kuelthau, s.c. All Rights Reserved
This article was written by Erin E. Kaprelian of Davis Kuelthau.
Learn more about SCOTUS IP decisions on the National Law Review Intellectual Property page.

State Sovereignty 101: State Universities Not Immune to IPR Proceedings

School may be out for the summer, but public colleges and universities would do well to spend their break shoring up strategies and defenses against potential inter partes review (“IPR”) proceedings. Last week the Federal Circuit ruled that states and state agencies (including state affiliated colleges and universities) may not rely on a sovereign immunity defense in a patent IPR proceeding. This decision means that challenges against University of Minnesota patents will proceed at the Patent Trial and Appeals Board (“PTAB”), and that other state affiliated educational institutions also may be subject to such proceedings.

The June 14 decision could open the floodgates to other IPR challenges against patents held by public colleges, universities, and other state entities. State colleges and universities should plan on adjusting various intellectual property clauses of licenses, sponsored research, and other technology transfer and funding agreements in efforts to mitigate the risks associated with an IPR challenge. These institutions also should carefully evaluate and plan for this risk in any assertion or even licensing efforts where a risk of an IPR may arise. Further, public colleges and universities should develop internal strategic plans to reduce the risk of an IPR occurring and to have various strategic approaches to IPR situations should an IPR challenge, or even a threat of an IPR challenge, occur in the future.

In the dispute, Ericsson challenged multiple patents held by the University of Minnesota relating to wireless technologies. The University of Minnesota also faces separate patent challenges to a computer hardware patent and a university patent related to hepatitis C medication.

The Federal Circuit held that for purposes of IPRs, state sovereign immunity is essentially the same as tribal sovereign immunity held by Native American tribes. In 2018, the Federal Circuit ruled that Saint Regis Mohawk could not employ tribal sovereign immunity in a dispute before the PTAB.

“[An] IPR represents the sovereign’s reconsideration of the initial patent grant, and the differences between state and tribal sovereign immunity do not warrant a different result than Saint Regis. We therefore conclude that state sovereign immunity does not apply to IPR proceedings,” the Court wrote in the June 14 ruling. Regents of the Univ. of Minn. V. LSI Corp., No. 2018-1559, 27 (Fed. Cir. Jun. 14, 2019).

The Federal Circuit also wrote that IPR proceedings differ substantively from typical civil litigation, to which sovereign immunity would normally apply unless waived. Instead, the Court writes that IPR proceedings “are essentially agency reconsideration of a prior patent grant.”

In other words, IPRs are more akin to a government agency enforcement action than a civil suit. The PTAB’s primary focus is determining whether a previous patent grant was made in error, rather than resolving a dispute between two adversarial parties. The PTAB may issue a ruling even if the petitioner or patent owner decides not to participate, unlike in civil litigation.

A petition for certiorari was filed in Saint Regis but was denied by the U.S. Supreme Court, which effectively allowed the Federal Circuit decision to stand. It remains to be seen if the University of Minnesota will appeal this ruling or if certiorari would be granted, but if allowed to stand, it is fair to anticipate a significant increase in patent IPR challenges to public colleges and universities as well as to other state agencies.

Click here to read the full opinion from the US Court of Appeals for the Federal Circuit.

Copyright © 2019 Womble Bond Dickinson (US) LLP All Rights Reserved.
Read more about patent inter partes review proceedings on the National Law Review Intellectual Property page.