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

Part 3: Companies Are Not Complying With the Safe Harbor Provision of the DMCA

Protection From Additional Liabilities
Once a company is found ineligible for DMCA safe harbor, it is vulnerable to be found liable for copyright infringement claims. Copyright holders may pursue secondary liabilities such as vicarious, contributory or induced infringement.

Secondary liabilities are sought when the user who posted the infringing materials is not available or cannot be found. To find a company vicariously liable, the copyright holder must prove 1) the defendant directly benefited financially from the infringing activity, 2) the defendant had the right and ability to supervise or control the infringing activity and 3) the defendant failed to exercise that right and ability.[i] To find a company contributorily liable, the copyright holder must prove 1) the defendant knew or had reason to know of the infringing activity and 2) the defendant intentionally induced or materially contributed to the user’s infringing behavior.[ii] In Joint Stock Co. “Channel One Russia Worldwide” v. Russian TV Co., the Southern District of New York found that plaintiff Joint Stock Co. satisfied the requirement that the defendant knew or had reason to know of infringing activity when it alleged Russian TV Co. provided unlicensed content at far lower prices to subscribers than it provided authorized content.[iii] Finally, a defendant may be liable for inducement of copyright infringement if it “distributes a device with the object of promoting its use to infringe copyright” and has taken affirmative steps to foster infringement.[iv] Courts evaluate four elements, called the Grokster III test, to determine whether inducement of copyright infringement applies: 1) distribution of a device or product (such as an internet platform), 2) acts of infringement, 3) object promoting use to infringe copyright and 4) causation.[v]

Individual liability is sought when copyright holders want to hold owners or employees of OSPs liable for the infringement. The Eleventh Circuit defines a liable individual as “a corporate officer who directs, controls, ratifies, [or] participates in … the infringing activity.”[vi] In Babbit Elecs., Inc. v. Dynascan Corp the Eleventh Circuit held the corporate officers jointly and personally liable for their participation in the corporation’s counterfeiting activities. Holding liable owners or employees who permit infringement or directly infringe on the copyright themselves effectively removes the corporate veil that usually protects individuals from personal affiliation with their legal entities.

An OSP that is found liable for copyright infringement in any manner will be penalized. Continue Reading

Part 2: Companies Are Not Complying With the Safe Harbor Provision of the DMCA

Compliance With Notice and Takedown Provisions of the DMCA
In 17 U.S.C. § 512, subsections (c) and (d), special notice and takedown provisions are outlined for OSPs that host copyrighted materials on their platform or contain links to copyrighted material on their platforms, respectively. If these particular OSPs comply with the notice and takedown provisions, then copyright holders’ claims will likely fail. The provisions include 1) not benefiting financially from the alleged infringement, 2) not having actual or red flag knowledge of infringements, 3) quickly removing known infringements, and 4) writing, adopting, posting on its website and reasonably implementing a repeat infringer policy.[i] Particularly, copyright holders find the most room for litigation on the second and fourth issues.

Knowledge
To receive safe harbor, a defendant must be unaware of any facts or circumstances that make it apparent that a user is using its system to infringe on copyrights. This means a defendant will need to show it lacked both actual and red flag knowledge of the infringement. Having actual knowledge turns on whether the provider subjectively knows of specific infringements, while having red flag knowledge “turns on whether the provider was subjectively aware of facts that would [make] specific infringement[s] ‘objectively’ obvious to a reasonable person.”[ii] Liability under this factor is limited in that OSPs are not required to monitor or affirmatively seek out infringing activity. Nor are they required to act on a general knowledge that rampant infringement takes place on their platform. Having a general knowledge of these activities will not disqualify an OSP from protection, whereas a specific knowledge with no remedial response will.

In Disney Enterprises, the court found that Hotfile had actual or red flag knowledge of the infringement. Thus, Hotfile was forced to assume vicarious copyright infringement liability. Likewise, in Columbia Pictures Industries, Inc. v. Fung, the court found that Fung had red flag knowledge of infringement. The court held that Columbia Pictures proved Fung’s inducement liability. 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

Part 1: Companies Are Not Complying With the Safe Harbor Provision of the DMCA

Introduction
The most recent changes to U.S. copyright rules driven by the Digital Millennium Copyright Act (DMCA) became effective on Dec. 1, 2016. However, a considerable time after the effective date, many companies have yet to fully comply with the rules outlined in 37 C.F.R. § 201.38 and 17 U.S.C. § 512. Companies should review the new and existing rules to ensure that they are in compliance.

Users of online service provider (OSP) platforms often post copyrighted materials to their accounts. There are rules that OSPs must follow in order to be shielded from liability when users post copyrighted material to the OSPs’ platforms. If OSPs comply with the rules, they can escape liability by relying on the safe harbor provision in the DMCA. While additional requirements for hosting OSPs (e.g., Facebook or YouTube) and linking OSPs (e.g., Google Search) include notice and takedown and designating a copyright agent, all OSPs need to comply with the following requirements: 1) have a policy for terminating repeat infringers, 2) inform subscribers and account holders of the policy and 3) reasonably implement the policy.

Three rules associated with these requirements are recurring issues not being addressed by OSPs:

  1. OSPs must provide the Copyright Office with their full legal name, physical street address and any alternate names affiliated with the platform.
  2. OSPs must register a designated agent to receive copyright infringement notices. The rules require that the agent’s full name, address, phone number and email be publicly accessible on the OSP’s website and that the identical information be provided to the Copyright Office for display in its DMCA directory.
  3. OSPs must write, post and implement a repeat infringer policy to govern the takedown process for users who recurrently post copyrighted materials.

As simple as these requirements are, many OSPs are not in compliance. Courts have found alternate OSP names inadequate. Moreover, contact information for designated agents is not identical on the OSP’s and Copyright Office’s websites. In some cases, the agent’s contact information provided by the OSP lacks any portion of the four requirements. In other cases, it is difficult to find the contact information for the designated agent at all on the OSP website. Some OSPs have simply not appointed an agent to the Copyright Office. Courts have found OSPs ineligible for safe harbor because of these discrepancies. 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

LexBlog