Standing Necessary To Appeal an Inter Partes Review Decision

Article III of the Constitution grants the federal judiciary the power to decide “cases and controversies.”[1] “Standing,” the legal concept ensuring that federal courts review only cases and controversies, focuses on the party bringing suit to analyze the appropriateness and constitutionality of judicial review. The court-limiting effects of standing help ensure that the separation of powers is maintained and that the courts refrain from issuing advisory opinions. In turn, this ensures that well-defined law develops from well-defined and thoroughly argued issues.

Standing is the determination of “whether a litigant is entitled to have the court decide the merits of a dispute or of particular issues,”[2] and the inquiry analyzes the sufficiency of a party’s concern regarding the issues to be litigated, rather than whether the legal issues are fit for litigation.[3] The standing doctrine helps conserve judicial resources, ensure zealous litigation, guard against unconstitutional advisory opinions, and promote fairness by ensuring that parties raise only their own rights in court.[4] To have constitutional standing, a plaintiff must have suffered a concrete injury-in-fact that is traceable to or caused by the defendant and is of such a nature that the courts are able to properly redress the issue.[5] Other so-called prudential considerations, which need not be satisfied but which courts often follow to help ensure the constitutionality of a court decision, are that (1) the plaintiff should generally assert his own legal rights rather than the rights of third parties, (2) the political branches – not federal courts – should adjudicate abstract questions that amount to generalized grievances, and (3) the plaintiff’s complaint should fall within the zone of interests to be protected or regulated by the statute or constitutional provision at issue.[6] The requirements of standing “must be met by persons seeking appellate review, just as [they] must be met by persons appearing in courts of first instance.”[7]

Inter partes review (IPR), a proceeding now familiar to patent litigants, allows any “person who is not the owner of a patent” to petition for cancellation of patent claims.[8] The Patent Trial and Appeal Board (PTAB), a tribunal of administrative patent judges who are “persons of competent legal knowledge and scientific ability,” hear IPRs.[9] Congress provided that appeals are heard by the Federal Circuit and that “any party to the inter partes review shall have the right to be a party to the appeal.”[10] Yet statutes cannot supersede the Constitution, so litigants considering IPR should consider the availability and importance of judicial review in the event of an adverse decision. Recent Federal Circuit decisions highlight the importance of standing.

In 2014, the Federal Circuit dismissed an appeal of an inter partes reexamination (a predecessor to IPR). Consumer Watchdog, a consumer-rights organization that, among other things, litigates perceived corporate and governmental fraud, filed for reexamination of an embryonic stem cell patent that it perceived to be asserted too aggressively. It did not engage in any stem-cell-related activities, nor did it intend to license the challenged patent. Consumer Watchdog was unsuccessful during reexamination and appealed. Two weeks before oral argument, the Federal Circuit panel questioned, sua sponte, whether Consumer Watchdog had standing to bring its appeal.

The Federal Circuit held that Consumer Watchdog lacked standing, as it was not engaged in any stem-cell activities and did not intend to begin stem-cell activities, and so could not be subject to an infringement suit.[11] While the panel recognized that Congress could create legal rights, the statute allowing appeal was purely procedural; it created no injury-in-fact, and Consumer Watchdog was unable to show that it had “a particularized, concrete stake in the outcome of the reexamination.”[12]

This year, the Federal Circuit dismissed an appeal of an IPR decision brought by General Electric (GE).[13] GE challenged a United Technologies Corp. (UTC) patent directed to an aircraft engine design. GE and UTC directly compete in the aircraft engine market. Evidence suggested that a GE customer requested design information for engines, including the type of engine allegedly covered by the challenged patent. GE submitted a declaration attesting to the long development cycle of aircraft engines, its fear in making the necessary investments to develop an engine that might infringe its competitor’s patent, and higher research and development costs triggered by designing around the patent. However, GE did not provide specific dollar amounts and made only generalized claims of injury.

GE argued that it possessed an injury-in-fact, including “statutory estoppel, economic loss, future threat of litigation, and competitive harm.”[14] UTC argued GE possessed no injury-in-fact because UTC had not sued or threatened suit on the challenged patent and GE presented no evidence that it developed or was developing an engine embodying the challenged patent.[15]

The Federal Circuit characterized GE’s alleged injuries as “too speculative to support constitutional standing.”[16] In the majority view, GE’s inability to show (1) a lost customer bid due to the challenged patent, (2) specific amounts of time and money lost to design around the challenged patent, or (3) customers requiring a design covered by the challenged patent rendered GE’s alleged injuries “speculative” rather than “concrete and imminent” as required by Article III.[17] The Federal Circuit also rejected arguments that the “competitor standing” doctrine applied and that being subject to estoppel in a possible future infringement suit granted standing.[18]

Yet the panel’s reasoning was not unanimous. Judge Hughes concurred in the judgment solely because he felt constrained by stare decisis. In Judge Hughes’ view, the competitor standing doctrine, which holds that government actions which alter the competitive landscape of a market creates an injury-in-fact based on probable economic injury, applied and GE should have been able to prosecute its appeal.[19] Judge Hughes criticized as overly narrow the Federal Circuit’s precedent as essentially requiring a showing of either a likely, imminent infringement suit or plans to infringe the challenged patent to satisfy the injury-in-fact requirement.[20] Judge Hughes would have held that government action – here, the allegedly incorrect decision finding claims patentable – caused GE competitive harm and granted UTC a competitive benefit sufficient and concrete enough to satisfy the injury-in-fact requirement.[21] Moreover, the concerns underpinning the injury-in-fact requirement, ensuring that the issues are thoroughly defined and litigated, would have been satisfied given GE’s and UTC’s status as fierce competitors in a narrow market where developments require large investments.

These cases should serve to remind patent litigants debating whether to file an IPR to consider whether appeal in the event of an adverse decision is important and, if so, whether they can show an injury-in-fact. This is particularly so for parties in the same position as GE, who had not been sued or threatened suit but presumably felt that the challenged patent restricted freedom in developing new products. Those similarly situated parties seeking to file an IPR should consider documenting as specifically as possible all harms the patent of concern is causing or is likely to cause, including any lost business, the desire to develop a product that might infringe the patent, and the amounts of time and money pursuing an alternative course would cost. Litigants should also balance these concerns with the risk of willfulness, in the event a future infringement suit occurs. Yet, given the panel split in GE, the exact metes and bounds of where an IPR petitioner has appellate standing may still be in flux.

[1] U.S. Const. art. III, § 2, cl. 1 (“The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;—to all Cases affecting Ambassadors, other public Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction;—to Controversies to which the United States shall be a Party;—to Controversies between two or more States;—between a State and Citizens of another State;—between Citizens of different States;—between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.”).
[2] Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts, Inc., 140 F.3d 478, 484 (3d Cir. 1998).
[3] See Flast v. Cohen, 392 U.S. 83, 95 (1968).
[4] Allen v. Wright, 468 U.S. 737, 751 (1984).
[5] E.g., Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). These three elements are often referred to as the (1) injury-in-fact, (2) causation and (3) redressability elements of the standing doctrine.
[6] Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 474-75 (1982).
[7] Arizonans for Official English v. Arizona, 520 U.S. 43, 65 (1997).
[8] 35 U.S.C. § 311.
[9] 35 U.S.C. § 6.
[10] Id. at §§ 141(c), 319.
[11] Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F.3d 1258, 1261 (Fed. Cir. 2014).
[12] Id. at 1262.
[13] General Electric Co. v. United Technologies Corp., 928 F.3d 1349 (Fed. Cir. 2019).
[14] Id. at 1352.
[15] Id.
[16] Id. at 1353.
[17] Id. at 1353-54.
[18] Id. at 1354-55.
[19] Id. at 1355.
[20] Id. at 1356-57.
[21] Id. at 1358-59.

Oh! Mega Liability for Landlords Under Second Circuit’s Recent Trademark Infringement Ruling in Omega SA v. 375 Canal LLC

In March 2019, after a seven-year-long legal battle, a Manhattan jury found defendant landlord 375 Canal LLC contributorily liable for trademark counterfeiting and infringement and awarded Omega SA statutory damages of $1.1 million ($275,000 for each mark infringed).[1] In the suit, plaintiff Omega claimed that the Canal Street landlords knew about, had reason to know about or acted with “willful blindness” toward the illegal activities of its tenants. Further, Omega contended that 375 Canal possessed the power and authority to exercise control over the use of its premises for the infringing sales and, upon notice of infringing activity, failed to properly exercise such control. Omega sought statutory damages against 375 Canal as a “willful infringer” under 15 U.S.C. §1117(c)(2). Omega’s claims survived both a motion to dismiss and a motion for summary judgment.

The outcome in Omega SA v. 375 Canal LLC[2] is notable for two reasons. First, it evidences a rare instance in which a trademark infringement claim progressed to trial and received adjudication by a jury; most infringement cases settle. Second and more importantly, it provides a road map for plaintiffs in counterfeiting cases to successfully recover damages under the theory of contributory liability. Rather than simply pursue traditional recovery from the sellers of counterfeit goods – many of whom are often judgment-proof[3]Omega suggests how a plaintiff can pursue monetary damages (not just injunctive relief) from additional deep-pocketed sources, such as a landlord who rents to someone selling counterfeits.

Putting Landlords on Notice

Under trademark infringement law, contributory liability is triggered when a potential defendant either (1) intentionally induces another to infringe or (2) supplies services to one she or he knows or has reason to know is engaging in infringing activities.[4] Here, actual knowledge of specific events or transactions is not required, but willful blindness may constitute infringement.[5] Therefore, providing a landlord with notice of potential infringing activity on his or her premises becomes the essential element for establishing liability. A landlord’s receipt of a trademark owner’s warning letter or law enforcement’s raids on the premises may constitute knowledge sufficient to meet that burden.

In Omega, the court found that the defendant (1) had been previously involved in three other lawsuits for the counterfeit sale of goods on the premises, (2) had received the plaintiff’s letter outlining multiple New York Police Department arrests for counterfeit activities on the premises, (3) had received correspondence from a different law firm warning of infringing counterfeit sales of other trademarks on the premises and (4) had been served with a private litigation complaint and a subsequent permanent injunction regarding counterfeit activities. These findings provided a basis for the court to hold that a reasonable juror could infer that 375 Canal had knowledge of or was willfully blind to ongoing illegal activity and for it to deny the defendant’s motion for summary judgment.[6]

In addition to the knowledge requirement, to receive statutory damages under 15 U.S.C. §1117(c)(2), a plaintiff must also show that the landlord exercised control over the premises such that the infringement of the mark is “willful.” In Omega, the court found that 375 Canal “possessed the power and authority to exercise control over the use of its premises.”[7] Since 375 Canal knew or had reason to know that the premises were being used for counterfeiting activities and continued to lease space to the infringing tenants, their infringement was deemed willful, liable to the trademark holder for up to $2 million per infringement.

Conclusion

As of this writing, defendant 375 Canal has appealed the lower court’s decision. It will be interesting to observe how any subsequent litigation plays out. If the jury’s verdict is upheld, it will provide a useful and viable precedent for luxury-good trademark holders to obtain significant financial relief from infringing counterfeit activity.

[1] As of April 12, 2019, the decision was being appealed.
[2] No. 1:12-cv-06979.
[3] See Guillermo Jimenez & Barbara Kolsun, Fashion Law: Cases and Materials 412 (Carolina Academic Press, 2016).
[4] See Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 844, 854 (1982).
[5] See Hardrock Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143, 1150 (7th Cir. 1992).
[6] See Omega SA v. 375 Canal, LLC, No. 12-cv- 6979, 2016 U.S. Dist. LEXIS 178147, 2016 WL 7439359 (S.D.N.Y. Dec. 22, 2016).
[7] See Omega SA v. 375 Canal, LLC, No. 12-cv-6979, Final Judgment (Mar. 3, 2019).

Federal Circuit Holds Lack of Efficacy Data Defeats ‘Substantial Evidence’ Showing of a Reasonable Expectation of Success Needed To Support PTAB’S Finding of Obviousness

In a precedential opinion, the Federal Circuit reversed a Patent Trial and Appeal Board (PTAB) finding of obviousness invalidating a patent’s method claims for administering a drug for treating non-small cell lung (NSCLC) cancer.[1] The PTAB found that it would have been obvious to combine pharmaceutical references. The Federal Circuit, however, noted that the “asserted references do not disclose any data or other information about the drug’s efficacy in treating NSCLC [the cancer].” (Emphasis in original.)[2] Without any preclinical animal data, human clinical data or even in vitro [test tube] results, success could not reasonably have been expected. To the contrary, the Federal Circuit noted that 99.5% of Stage II clinical trials for treating that particular type of cancer failed. Only “failure, not success,” could be expected.

The first prior art reference cited never discussed treating NSCLC, the particular type of cancer in issue.[3] The second prior art reference did not disclose any “data regarding the use of [the compound] to treat NSCLC.”[4] Neither did any of the references cited by the second reference. Similarly, the alternative combination reference, the patent holder’s Form 10-K, did not disclose any data regarding the compound’s effect upon NSCLC.[5] Without a factual substrate, the PTAB’s holding could not be supported. Continue Reading

Proving That a Negative Claim Limitation Is Disclosed by the Prior Art: Takeaways From Two Recent Federal Circuit Opinions

Occasionally, a patentee will seek to define its invention with claims that recite a negative claim limitation – a specialized category of claim element that recites an element that is expressly and deliberately excluded.[1]

By way of example, a claim directed to a stool with the limitation that the stool is “devoid of a backrest member” presents a negative claim limitation that is easy to understand. One seeking to challenge the patentability of such a claim would be expected to search for prior art that disclosed a backless stool. However, this raises a crucial question: What exactly must the challenger prove to show that the negative claim limitation is disclosed by the prior art? After all, the challenger bears the burden of proof with respect to each element of every challenged claim, and the patentee bears no burden of proving the opposite.[2] Conceptually, proving that the prior art discloses a positively recited limitation is easy to do; but how does a challenger prove the existence of something that is, by its very nature, expressly nonexistent? This year, the Federal Circuit has considered this issue in two nonprecedential[3] decisions, which provide some valuable guidance.

Earlier this year, in IBM v. Iancu,[4] the Federal Circuit considered whether the Patent Trial and Appeal Board (PTAB) erred in finding that silence in the prior art was adequate proof of disclosure of a negative claim limitation. In relevant part, the claim at issue recited a method for managing user authentication by “triggering a single-sign-on operation.” During the inter partes review proceeding, the PTAB found that the use of the word “single” was a negative claim limitation that excluded two or more operations, and that a prior art reference that disclosed “associating a meCard with an accessCard” met the claim’s negative claim limitation because the reference was “silent as to what information is included in the access card,” such that it was not clear whether a single or multiple “sign-on operations” occurred.[5]  Continue Reading

Director of PTO Requests Chevron Deference for Precedential Opinion Panel

The Federal Circuit recently asked the government to submit an amicus brief to address “what, if any, deference should be afforded to decisions of a Patent Trial and Appeal Board Precedential Opinion Panel (‘POP’), and specifically to the POP opinion in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38 (P.T.A.B. Mar. 13, 2019).” Order, Facebook, Inc. v. Windy City Innovations, LLC., No. 2018-1400 (Fed. Cir. Aug. 12, 2019).

In 2018, the Director of the Patent and Trademark Office created the Precedential Opinion Panel, which typically comprises the Director, the Commissioner for Patents, and the Chief Judge of the PTAB. The POP may be convened to rehear matters that are of exceptional importance, or to assist the Director in deciding whether a PTAB decision should be designated as precedential or informative.

The specific POP decision the Federal Circuit cited, Proppant Express, addressed “whether 35 U.S.C. § 315(c) permits a petition to be joined to [an IPR] proceeding in which it is already a party.” If an alleged infringer intends to seek IPR of the patent, it must file its petition within one year of being served with the complaint. After filing, Section 315(c) permits “the Director, in his or her discretion, [to] join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.” 35 U.S.C. § 315(c).

In Proppant Express, the PTAB POP held that Section 315(c) allowed the Director to join the petitioner itself as a party beyond the one-year deadline. In practice, that interpretation of 315(c) allows a petitioner to join issues that would otherwise be time-barred. Different PTAB panels had previously split on whether the petitioner could use “same party” joinder to add additional issues to the IPR. Also, the Federal Circuit had expressed doubt that “Congress intended that petitioners could employ the joinder provision to circumvent the time bar by adding time-barred issues to an otherwise timely proceeding.” Nidec Motor Corp. v. Zhongshan Broad Ocean Motor, 868 F.3d 1013, 1017 (Fed. Cir. 2017).

The government filed its amicus brief with the Federal Circuit on September 17, 2019, arguing that any POP decisions interpreting the America Invents Act (“AIA”) are entitled to Chevron deference. In United States v. Mead Corp., 533 U.S. 218, 227-29 (2011), the Supreme Court held that an agency is usually afforded Chevron deference when Congress delegates the authority for “rulemaking or adjudication.” According to the government, the AIA delegated authority to engage in both rulemaking and adjudication. First, the AIA authorized rulemaking by permitting the Director to enact regulations to establish and govern the IPR process. Second, the AIA authorized adjudication by enabling the Director to adjudicate the IPRs. Thus, according to the government, the Director is entitled to Chevron deference when interpreting statutory provisions of the AIA, including Section 315. The government further argued that the PTAB POP’s decision in Proppant Express should not be reversed under a Chevron deference review.

The Federal Circuit invited the parties to file a response to the government’s amicus brief, which are due October 1, 2019. The Federal Circuit’s resolution of the issue could have a profound effect on future review of all PTAB POP decisions.

Session not Season

When the Supreme Court opens its new session on Oct. 7, one of the cases it will determine, Romag Fasteners, Inc. v. Fossil, Inc., et al. Case No. 2018-2417, is expected to resolve a stark difference among circuits over when a trademark owner is entitled to disgorgement of an infringer’s profits due to an infringing use of a mark.

As a quasi property right, trademarks have long held the status of a distant relation in the intellectual property family. Litigants have the right to claim disgorgement of profits for violations of copyright, patent and trade secret rights, but the availability of the same remedy to trademark litigants has been curtailed by many courts based on the equitable nature of the Lanham Act.

Section 35(a) of the Lanham Act authorizes monetary relief in the form of awards of infringers’ profits, damages and costs “[w]hen a violation of any right of the registrant of a mark [under section 1114], … , a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established.” 15 U.S.C. § 1117(a) (emphasis added). However, such awards are “subject to the principles of equity.”

The First, Eighth, Ninth, Tenth, and District of Columbia Circuit courts have interpreted the statute’s “subject to the principles of equity” language to require that a litigant prove infringement under Section 1125(a) was willful prior to allowing disgorgement of profits. Awards of actual damages, because such damages are difficult to prove, are not subject to the willfulness requirement. By contrast, the Third, Fourth, Fifth, Seventh, and Eleventh circuits treat an infringer’s intent as merely one factor in an equitable decision to award disgorgement of profits.

The arguments center on the plain statutory language of Section 1117 and related Lanham Act provisions, which set forth circumstances under which willfulness is required to find certain violations or award relief. The absence of such language in Section 1117(a), petitioners (and amicus curiae American Bar Association) argue, demonstrates congressional intent not to condition disgorgement on a finding of willfulness. The Supreme Court’s preference for deciding questions based on statutory construction will likely make this argument appealing to the Court.

The Supreme Court’s decision will likely have a trickle-down effect in other areas. Some courts, including in the Ninth Circuit, have held that disgorgement of profits is not available at all in reverse confusion cases where the senior user of the mark is less known than the infringer’s mark, because there is no intent to exploit the goodwill of the senior user. In such cases, where actual damages are already difficult to prove, a trademark owner is left with the prospect of expensive litigation that will lead to injunctive relief at best, offering little deterrence to infringement under a reverse confusion scenario. If the willfulness requirement is removed, claimants relying on a reverse confusion theory will have an opportunity to argue that disgorgement of profits should be available in such circumstances.

Precedential Opinion Stressing That Design Patents Cover Articles of Manufacture

 

Curver Luxembourg, SARL v. Home Expressions Inc., No. 2018-2214 (Fed. Cir. Sept. 12, 2019)

In a case of first impression, the Federal Circuit held that “claim language can limit the scope of a design patent where the claim language supplies the only instance of an article of manufacture that appears nowhere in the figures.” Curver Luxembourg, SARL v. Home Expressions Inc., No. 2018-2214 (Fed. Cir. Sept. 12, 2019).

In the particular case, Curver Luxembourg, SARL (Curver), filed suit against Home Expressions Inc. (Home Expressions) in U.S. District Court for the District of New Jersey alleging infringement of U.S. design patent no. D677,946 (the ’946 patent) for making and selling baskets incorporating Carver’s claimed “Y” pattern. Defendant Home Expressions filed a Rule 12(b)(6) motion arguing noninfringement in view of the ’946 patent being limited to chairs. The district court agreed with the defendant and granted the motion to dismiss the complaint for failure to state a plausible claim of design patent infringement. Curver appealed to the Federal Circuit.

The ’946 patent is titled “Pattern for a Chair,” and the sole claim was amended during prosecution to recite an “ornamental design for a pattern for a chair.” Interestingly, however, none of the ’946 patent’s figures depict a pattern applied to a chair. On appeal, Curver argued the scope of the ’946 patent should be broadly construed based on what is illustrated in the drawings. And since the figures of the ’946 patent are devoid of any chair illustrations, Curver pressed the court to broadly construe the ’946 patent to cover any article of manufacture with its “Y” pattern.

The Federal Circuit rejected Curver’s arguments, relying on “long-standing precedent, unchallenged regulation and agency practice all consistently support[ing] the view that design patents are granted only for a design applied to an article of manufacture, and not a design per se.” Emphasis added. The court further explained that “tying the design pattern to a particular article provides more accurate and predictable notice about what is and is not protected by the design patent.” In view thereof, the court affirmed the district court’s decision.

This case offers up a good lesson to applicants seeking to secure design patent protection and enforce their rights against third parties. BakerHostetler routinely helps clients develop and execute effective strategies involving design patents along with other forms of intellectual property.

 

USPTO Proposes New Fee Schedule

On August 29, 2019, the Director of the USPTO notified the Trademark Public Advisory Committee (TPAC) of the Office’s intent to set or adjust trademark related fees and submitted a preliminary trademark fee proposal for comment. There are multiple timelines for public debate and comment on the proposed new fees, with a tentative implementation date of August 2020. While most proposed fee changes are relatively modest ($25 – $75 for new electronic filings, per class; $125 for Section 8&15 declarations, per class), many remain unchanged (such as Section 8&9 renewals). Nonetheless, the additional costs could be significant for companies with large portfolios. We will continue to keep you apprised of developments in this area including the exact date for implementation of the new fee schedule if/when the new fees are approved.

Federal Circuit Confirms the Value of Design Patents Covering Replacement Parts

On July 23, 2019, the Federal Circuit departed from its utility patent-focused docket to deliver a precedential opinion relating to design patents in Auto. Body Parts Ass’n v. Ford Global Techns., LLC. At issue were the validity and enforceability of design patents on automotive repair and replacement parts. The case arose from a filing by the Automotive Body Parts Association (ABPA) in the Eastern District of Michigan seeking declaratory judgment of invalidity and enforceability of two design patents relating to the hood and vehicle headlamp of the Ford F-150. The ABPA moved for summary judgment, but the District Court entered judgment sua sponte in favor of Ford. The case was taken up on appeal.

The crux of ABPA’s argument rested on the proposition that Ford’s design patents were directed to functional, and not ornamental, aspects of an article, and thus were invalid. Under the law, design patents are authorized if claiming “new, original and ornamental design[s] for an article of manufacture.” 35 U.S.C. § 171(a). Previously, the Federal Circuit has held that an “ornamental design” cannot be “primarily functional.” Sport Dimension, Inc. v. Coleman Co., 820 F.3d 1316, 1320 (Fed. Cir. 2016).

ABPA cited to Best Lock Corp. v. Ilco Unican Corp., 94 F.3d 1563 (Fed. Cir. 1996), in which designs for a blade of a key were determined to be functional based on the admitted fact that no alternatively designed blade would mechanically operate the corresponding lock. The ABPA attempted to analogize the cases, reasoning that because consumers considering F-150 truck replacement parts seek to restore the original appearance of the trucks, replacement parts would not be acceptable and there is a functional benefit to designs that are aesthetically compatible with the vehicles. Continue Reading

To Cajole to Threaten: How Best to Curb Online Counterfeiting

I. Introduction
The Trump administration, addressing efforts to curb online counterfeiting, has called for heightened collaboration, at times suggesting providing private parties with technological resources to help combat online counterfeiting. At the same time, the administration has bemoaned the lack of accountability among online third-party intermediaries and called for “clean[ing] up this Wild West of counterfeiting and trafficking.”[1]

The president’s Memorandum on Combating Trafficking in Counterfeit and Pirated Goods (“Memo”), issued in April of this year, echoes both these approaches.[2] The Memo has called for an interagency report (“Report”) to be completed by November 2019. In preparation for this Report, the Department of Commerce subsequently issued a Comment Request soliciting feedback from online third-party intermediaries, among others.[3]

II. Blueprint for the Upcoming Report: Both Descriptive and Prescriptive
The Memo calls for a comprehensive analysis of all available data that may shed light on the issue of online counterfeiting. Moreover, it calls for the identification of any market forces that may be facilitating online counterfeiting, as well as an evaluation of foreign strategies—namely those in France and Canada—in combating similar issues.[4]

The prescriptive measures are a bit more amorphous. While one portion of the Memo calls for “enhanced enforcement actions,” other portions call for further collaboration at three levels: among governmental agencies; between the government and third parties; and among third parties themselves. More specifically, the Memo emphasizes “suggestions for increasing the use of effective technologies.”[5] The recently released Comment Request by the Department of Commerce confirms the administration’s interest in utilizing technology to mitigate online counterfeiting in that it specifically solicits further recommendations about how “effective technologies” could be deployed to curb online counterfeiting.[6]

The Comment Request illuminates some of the “best practices” the administration is considering, including an advance vetting of potential sellers/vendors; establishing a “prohibited items” list to bar such goods from being sold in the marketplace; and a number of notification regimes requiring third-party intermediaries to alert customers, and possibly other marketplaces, to any identified counterfeit goods.[7] While some third-party marketplaces have already begun to adopt sophisticated technological systems of their own to curb online counterfeiting, such proposals suggest more burdensome notice requirements, so as to create a solidified front among all online marketplaces. Continue Reading

LexBlog