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

“Original Patent” vs. Written Description — A New Reissue Gauntlet?

In two opinions issued in the past few weeks, the Federal Circuit has shaken up two requirements of the reissue statute that most practitioners don’t think about much. 35 USC 251(a) authorizes reissue of a patent “for the invention disclosed in the original patent.” 35 USC 251(c) provides that “[t]he provisions of this title relating to applications for patent shall be applicable to applications for reissue of a patent,” which includes the written description requirement of 35 USC 112(a). The “conventional” wisdom up to now has held that these requirements are more or less synonymous (and not considered arduous). Now, we aren’t so sure.

In Forum US, Inc. v. Flow Valve, LLC, ___ F.3d ____ 2019 U.S. App. LEXIS 18055 (Fed. Cir., June 17, 2019), the district court invalidated a reissue patent on summary judgment on the ground that the reissue claims did not comply with the “original patent” requirement of the reissue statute. The Federal Circuit affirmed, agreeing on the basis of long-standing precedent under the pre-1952 reissue statute[1] – which referred to the “same invention” as the original patent – that the broadened scope of the reissue claims was not apparent from the face of the original patent specification. Continue Reading

Exmark’s the Spot for Royalty Rate Apportionment

The language of the patent damages statute, 35 U.S.C. § 284, appears straightforward – “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer” (emphasis added). The common reasonable royalty calculation multiplies a royalty base by a royalty rate to yield a damages award. While the math seems simple, determination of a reasonable royalty in the context of devices that have hundreds, perhaps thousands, of components and functionalities is an endeavor ripe for chicanery. See Grain Processing Corp. v. Am. Maize–Products Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999) (“To prevent the hypothetical from lapsing into pure speculation, [the] court requires sound economic proof of the nature of the market and likely outcomes with infringement factored out of the economic picture.”).

The principle of apportionment is supposed to corral flimflam economic analysis from stampeding past a justified damages award. Garretson v. Clark, 111 U.S. 120 (1884) (requiring the patentee to provide “evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features”).

Continue Reading

China: New Trademark Law Will Come Into Effect on Nov. 1, 2019

On April 23, the Thirteenth Standing Committee of the National People’s Congress passed the fourth amendment to the Trademark Law of China. The new trademark law will come into effect Nov. 1, 2019. The revisions are designed to curb bad faith filings, willful infringements and counterfeit commodities. Businesses with brand interests in China will have stronger grounds to oppose and cancel bad faith applications and registrations under the new law; they will also be able to more effectively enforce their trademark rights in China. The most significant of the new revisions are described here. Continue Reading

New USPTO Rule Will Require Foreign Trademark Owners Be Represented by U.S.-Licensed Attorney

On Aug. 3, a new regulation promulgated by the U.S. Patent and Trademark Office (USPTO) will take effect and require all trademark applicants, registrants and parties to trademark proceedings that are domiciled outside the United States to be represented by an attorney who has a license to practice law in the U.S. Consequently, individuals and entities with a permanent legal address or a principal place of business (i.e., headquarters) located outside the United States or its territories, respectively, will no longer be permitted to file any trademark-related submissions with the USPTO, either without an attorney or through an attorney who is not licensed in good standing in the United States. Moreover, under the new rule, U.S.-licensed attorneys who represent someone in a trademark matter, regardless of where domiciled, will now need to provide their U.S. state bar membership information along with an attestation that they are active members in good standing of the bar. Continue Reading

Risks and Rewards of Digital Therapeutics in Treating Mental Disorders – Part III

Legislative Exclusions of Software (21st Century Cures Act)

The 21st Century Cures Act (Cures Act), signed into law on Dec. 13, 2016, was designed to accelerate medical product development and bring new innovations faster and more efficiently to patients who need them. Interesting aspects of the Cures Act include that it

  • streamlines FDA procedures to prioritize Breakthrough Devices;
  • reduces or eliminates review of medical devices deemed to be low risk; and
  • removes five categories of software from FDA review.

Under the Cures Act, the categories of software excluded from FDA review include:

  • Category A: Software for administrative support of healthcare facilities, e.g., processing and maintaining financial records, claims and billing information, appointment schedules.
  • Category B: “Healthy lifestyle” software that provides no diagnostic, prevention or treatment function.
  • Category C: Electronic patient records, but not intended to interpret or analyze patient records.
  • Category D: Software for transferring, storing, converting formats, or displaying test data lab tests or med device data, but not intended to interpret or analyze patient records.
  • Category E: Clinical Decision Support Software (CDSS), i.e., software that provides recommendations based on medical information (e.g., peer review). The software must enable independent review of the basis of the recommendations and does not include medical imaging or in vitro testing.

It should be noted that the FDA is authorized to bring Categories C, D and E back under regulation with a showing of likelihood and severity of patient harm, the extent to which the software function is intended to support clinical judgment, a reasonable opportunity for a healthcare professional to review the basis of the information, and the intended user and use environment.

Mobile Apps

The FDA website includes a page concerning Mobile Medical Applications and notes that mobile apps can help people manage their own health and wellness, promote healthy living, and gain access to useful information when and where they need it. The FDA issued the Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff on Sept. 25, 2013, which explains the agency’s oversight of mobile medical apps. The FDA defines three broad categories that are regulated:

  1. App controls a medical device – FDA considers it an accessory. Example: Software that controls an insulin pump.
  2. App that transforms the mobile device into a regulated device. May include attachment for standard mobile device. App may be labeled for medical-specific uses. Example: App that allows for control of attached transducer that converts a smartphone into a glucose meter.
  3. App that performs patient-specific analysis and provides patient-specific diagnosis or treatment recommendations. Example: App that calculates dosage or creates a dosage plan for radiation therapy.

The above discussion is intended to be a useful guide helping entrepreneurs and investors understand whether a given digital therapeutic approach is likely to require FDA review and approval. For obvious reasons, legal counsel should be consulted when needed.

Intellectual Property Protection

In the United States, a medical device invention (including a software-based medical device) can be protected by patent, provided the invention is novel and non-obvious (the conditions for patentability) and does not fall within an excluded category of subject matter. The excluded categories include natural phenomena and abstract ideas. A full discussion of the topic of patent eligibility is beyond the scope of this paper. For our purposes, it suffices to say that software-based inventions that simply diagnose but do not treat a patient are more difficult to patent. On the other hand, devices that include a treatment function are more clearly eligible for protection. The interested reader is invited to review the articles cited in the notes below.[1]

Reasons to Invest in Digital Therapeutics

The mental healthcare market is huge, and growing. It’s not an exaggeration to say that the market is proportional to the human population worldwide. Moreover, in the United States and other developed countries, it is becoming more common for mental health treatments to be reimbursed through employer-based health plans. At the same time, there is significant friction in the market, making it overly difficult and expensive for individuals to get the help they need. And the stigma associated with mental health issues acts as a further barrier to treatment.

Digital therapeutic approaches offer the promise to overcome all these problems in a highly scalable and profitable way. In addition, the FDA regulatory hurdles are relatively low compared to other medical device and pharmaceutical-based therapies. In today’s highly mobile society, digital therapies are more efficient than in-person or telephone counseling, and they offer opportunities for therapists to efficiently manage patients and gain insights from big data analytics and AI. The authors can envision a future (in the next five to 10 years) where hundreds of millions of users worldwide will have ready access to effective mental health therapies wherever and whenever they need them, through their smartphones.

[1] See, e.g., The Federal Circuit Deals Another Blow to Diagnostic Method Patents (April 11, 2019); Federal Circuit Holds That Claims Directed to Methods of Treating Pain in a Renally Impaired Patient Are Patent-Eligible Under Section 101 (March 29, 2019); The Federal Circuit Opens the Door Wider for the Subject Matter Eligibility of Methods of Treatment, Compositions and Methods of Manufacturing (March 18, 2019); Federal Circuit holds that claims directed to diagnosing neurotransmission or developmental disorders are invalid for failing to recite patent eligible subject matter (February 11, 2019); and, last but not least, The ‘Integrated Into a Practical Application’ Test of the 2019 Revised Patent Subject Matter Eligibility Guidance (January 7, 2019).

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