2015 Year-in-Review for Patent Law
Supreme Court Cases:
Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 574 U.S. __ (2015)
The Supreme Court held in Teva v. Sandoz that the Federal Circuit erred by applying a de novo standard of review, considering the question for the first time and disregarding the decisions below, rather than applying the “clear error” standard to the district court’s factual findings, giving district courts more deference. Rule 52(a) of the Federal Rule of Civil Procedure requires deferential “clear error” review over any findings of fact but the Federal Circuit has consistently reviewed claim construction as conclusions of law that are allowed for de novo review.
The Supreme Court vacated and remanded the Federal Circuit’s decision by a 7-2 vote. The Court explained that in its earlier decision Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), “the ultimate question of claim construction is for the judge” however “the appellate review of actual matters” still follows an ordinary rule for clear error. Therefore, when it comes to claim constructions based only on evidence intrinsic to the patent such as the claims, specifications, and prosecution history, the Federal Circuit may review de novo. However, extrinsic evidence, such as “background science or meaning of a term in the relevant art during the relevant time period,” must be reviewed for clear error on appeal.
Litigants may now try to shape their arguments in patent cases to either add extrinsic evidence or avoid extrinsic evidence in claim construction to affect their chances on any appeal.
Kimble v. Marvel Entertainment, LLC, 576 U.S. __, 135 S. Ct. 2401 (2015)
The Supreme Court upheld a long-standing precedent set in Brulotte v. Thys Co., a 1964 decision, which restricted the ability of a patent holder from charging a royalty beyond the term of the patent, in Kimble v. Marvel. The issue was that the parties failed to set an end date for the royalties and, apparently, contemplated that the royalties would continue for as long as the product was being sold.
The Supreme Court reasoned that “…when the patent expires, the patentee’s prerogatives expire too, and the right to make or use the article, free from all restriction, passes to the public.” Further, the Court acknowledged that it was sticking with Brulotte under the principle of stare decisis, which provides that the Court should generally stand by prior decisions.
Licensees of patents will want to include other intellectual property, such as trademarks and/or trade secrets, to be licensed and have a step down in the royalty rate upon expiration of patent(s).
Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920 (2015)
The Supreme Court held that a defendant’s good-faith belief that a patent is invalid is not a defense to a claim of induced infringement under 35 U.S.C. 271(b). Commil USA, LLC v. Cisco Systems, Inc. Accordingly, the long-held principle that a patent is presumptively valid outweighs and undermines any belief of invalidity by a defendant, even if it was in good faith.
The Court vacated the Federal Circuit decision, which held that evidence of a good-faith belief of invalidity might negate the intent requirement for induced infringement because a jury may find the defendant did not know that “the induced acts constitute patent infringement.” The Court focused on the difference between infringement and validity; “invalidity is not a defense to infringement, it is a defense to liability.”
Defendants will always want to have a written and competent opinion of counsel as to non-infringement to help defend a claim of willful patent infringement.
2014 International Patent Statistics for Patent Offices Worldwide
The top five technology fields for global patent applications last year were computer technology, electrical machinery, measurement, digital communication, and medical technology. 2.68 million patent applications were filed last year worldwide, a 4.5% increase from 2013, and 1.18 million patents were granted worldwide, a 0.3% increase from 2013. Further, there were 10.2 million patents enforced worldwide in 2014.
2015 Year-in-Review for Trademark Law
Supreme Court Cases:
Hana Financial, Inc. v. Hana Bank, 574 U.S. ___ (2015)
In a unanimous decision, the Supreme Court held in Hana Financial v. Hana Bank that the issue of whether two trademarks are “legal equivalents” as to “create a single, continuing commercial impression” and may be tacked together for determining priority of the marks as a whole is a question of fact and should be decided by a jury.
The Supreme Court held that when a test relies on what an ordinary consumer understands to be the impression that a mark conveys, the test “falls comfortably within the [purview] of the jury.” The Supreme Court clarified that judges may still make a tacking determination on a motion for summary judgment if the parties have chosen to try their case before a judge; otherwise, the tacking issue is property reserved for the jury.
In an ideal world a company will want to continue using the same trademark over time, but if the mark is modified there is now a greater chance that the earlier use of the mark will be respected.
B&B Hardware, Inc. v. Hargis Industries, Inc., 575 U.S. ____ (2015)
On March 24, 2015, the Supreme Court held that if the Trademark Trial and Appeal Board (“TTAB”) decides on a likelihood-of-confusion issue for purposes of registration, then it has issue preclusion effects in district courts regarding infringement if a mark owner uses its mark in ways that are materially the same as the usages included in the mark’s registration application.
The Supreme Court held that the “likelihood of confusion for purposes of registration is the same standard as likelihood of confusion for purposes of infringement.” The Court conceded that the TTAB and the district courts are concerned with different purposes; the TTAB is concerned with whether marks “resemble” each other, while the courts are concerned with “use in commerce” for infringement purposes.
TTAB Litigants must now be very careful in their handling of TTAB matters as the ultimate findings may have dramatic effects later in Federal Court. We expect that TTAB cases will be more hard fought or avoided altogether in favor of Federal Court.
2014 International Trademark Statistics from Trademark Offices Throughout the World:
The top five trademark offices that received trademark applications in 2014 were China, United States of America, OHIM (EU Office), France, and Japan. The top five industry sectors that received trademark applications were agriculture, research & technology, clothing, business, and health. Last year, the total number of trademark classes specified in applications reached 7.45 million, a 6% increase from 2013, and the total number of trademark classes specified in registrations reached 2.15, an 11.1% increase from 2013. Further, there were 33.1 million active trademark registrations enforce worldwide in 2014.
Cislo & Thomas LLP Presents at Annual Biotech Drug Association Event
On Friday, December 4, 2015, Cislo & Thomas LLP co-hosted an annual professional networking and speaking engagement with the Parenteral Drug Association entitled, “Quality, Regulatory and Intellectual Property.” The Parenteral Drug Association is the leading global provider of science, technology, and regulatory information for the pharmaceutical and biopharmaceutical community. This national think tank focuses on developments in the field of parenteral drugs, also known as therapeutics administered to patients via an intravenous rather than oral routes.
The event took place at Keck Graduate Institute, and featured a lecture by Cislo & Thomas Patent Associate Dr. Michael Anderson regarding patents and ecommerce in the field of pharmacology and biotechnology. Dr. Anderson spoke and fielded audience questions on the America Invents Act, the value of provisional patents in biotechnology, in addition to emerging popular ecommerce technologies like PatentFiler.com.
Other featured speakers included Dr. William Sietsema (Global Regulatory Liason for Caladrius Biosciences), who discussed next-generation developments in stem cell therapies, and Steve Speer (Director of the West Region, Propharma Group), who reviewed modern regulatory developments in the biopharmaceutical industry.
Cislo & Thomas LLP Supports Non-profit “Send Me A Penny” Homeless Charity
During the Thanksgiving season, Cislo & Thomas LLP endorsed the non-profit charitable group Send Me a Penny, which feeds the homeless in Venice Beach, CA. We participated in feeding, making, and handing out personal care packages on Thanksgiving Day in the morning. All involved felt humbled and blessed to be a part of this outreach in the community.
Amazon Not Liable For Being a Platform for Infringement But Court Pleads For Congressional Change
Judge Ricardo D. Martinez, a federal judge of the Western District of Washington, recently ruled that under the current patent laws, Amazon is not liable for patent infringement, even though it “enables and fosters a market place reaching millions of customers, where anyone can sell anything, while at the same time taking little responsibility for ‘offering to sell’ or ‘selling’ the products.” Milo & Gabby, LLC v. Amazon.com, Inc., W.D. Wash., No. 2:13-cv-01932-RSM, 11/3/15).
Patent infringement is defined under 35 U.S.C. 271(a) and includes, among other actions, “offers to sell” infringing goods during the term of the patent. Based on the jury’s factual findings, Amazon.com did not manifest intent of a willingness to enter into a bargain that another person would justifiably believe could be concluded through their acceptance.
By providing a platform for others to sell and offers to sell, Amazon.com appears to be engaging in the type of behavior that patent law drafters were trying to prevent by adding offers to sell into the infringement statues, which the court described as “generating interest in a potentially infringing products to the commercial detriment of the rightful patentee.”
Through Amazon’s platform, merchants sold knock-off versions that infringed the patented products of Milo & Gabby LLP, namely animal-themed children’s accessories. However, the jury concluded that under the current law, Amazon is not responsible for those actions of the merchants that utilized Amazon for their infringing actions.
However, the court seemed to sentimentally side with Milo & Gabby LLP, stating, “[t]here is no doubt that we now live in a time where the law lags behind technology. This case illustrates that point,” indicating that there may be a loophole in the possibly outdated law.
Should Sort of Organic Be Considered Organic? Apparently Not.
The California Supreme Court recently ruled that consumers can sue over “misrepresentations in labeling,” when products are misleadingly labeled as organic, overturning an appellate court’s ruling that the proposed class action was preempted by federal law regulating organic produce.
In the unanimous ruling, Michelle Quesada v. Herb Thyme Farms, Inc., the state’s seven justices stated that “[a] central purpose behind adopting a clear national definition of organic production was to permit consumers to rely on organic labels and curtail fraud…Accordingly, state lawsuits alleging intentional organic mislabeling promote, rather than hinder, Congress’s purposes and objectives.”
The class action sued Herb Thyme under California’s unfair competition and false advertising laws alleging that consumers were lead to believe that the herbs were 100 percent organic when they were not and consequently paid a premium.
Herb Thyme argued that the class action was preempted by federal rules on organic labeling, and that under the USDA, the authority of the Organic Foods Production Act of 1990, which regulates the labeling and marketing of organic products, the federal rules breaks organic labels into three categories, “100 percent organic,” “organic,” and “made with organic ingredients.”
However, the California Supreme Court stated that when it came to making sure the organic label was not fraudulently used and whether general consumer protection lawsuits could be used to enforce the regulations, “the text of the Organic Foods Act offers only silence.”
As California is not only one of America’s biggest consumer markets but also the country’s largest agricultural producing state, the implications of this holding will be far-reaching.
Produce sellers must be very careful when using the term “organic” on any labeling to make sure it complies not only with USDD rules, but also California State Law.
The Slants Trademark Win May Have Implications For Redskins Trademark
At United States Court of Appeals for the Federal Circuit, the Slants attained a big victory, based on the First Amendment, in its challenge of the U.S. Patent & Trademark Office’s (USPTO) refusal of a trademark registration. In attempting to register “The Slants” for a rock band, Simon Tam, an Asian-American, said he was attempting to “take ownership” of Asian stereotypes.
The Federal Circuit stated that the First Amendment “forbids government regulators to deny registration because they find the speech likely to offend others.” Under this holding, unless the U.S. Supreme Court decides to weigh in, it seems likely that the USPTO’s decision to cancel the registration of the “Washington Redskins” will also fail to survive constitutional scrutiny.
Federal Circuit Judge Kimberly Ann Moore held that “[i]t is a bedrock principle underlying the First Amendment that the government may not penalize private speech merely because it disapproves of the message it conveys… That principle governs even when the government’s message-discriminatory penalty is less than a prohibition.”
Moore continues by saying that words are powerful, and that “[t]he government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks.” Further, she adds:
It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional. Because the government has offered no legitimate interests justifying § 2(a), we conclude that it would also be unconstitutional under the intermediate scrutiny traditionally applied to regulation of the commercial aspects of speech.
Several judges concurred, and others offered dissenting views.
Judge Alan Lourie wrote that “[t]he refusal of the USPTO to register a trademark is not a denial of an applicant’s right of free speech.” He also stated:
The markholder may still generally use the mark as it wishes; without federal registration, it simply lacks access to certain federal statutory enforcement mechanisms for excluding others from confusingly similar uses of the mark. Mr. Tam may use his trademark as he likes, whether it be encouraging discussion on or taking ownership of racial slurs, or identifying goods and services with his band. In fact, it seems quite likely that Mr. Tam will continue to use his band name to make a statement regardless of federal registration — the expressive purpose of his mark undoubtedly overshadows the commercial considerations.
Hedge Fund Manager Kyle Bass Utilizes Inter Patent Partes Review for Unconventional and Controversial Purpose
J. Kyle Bass is known to many as the one of the few that made a fortune in the financial crisis when his hedge fund, Hayman Capital Management, bet big against subprime mortgages. Now Mr. Bass is betting against pharmaceutical companies that he deems to exploit the patent system by sending their patents to the test, through an inter partes review (IPR).
At the same time, on behalf of themselves and their investors, Mr. Bass and his partner, Erich Spangenberg, are short-sellers of shares in companies whose patents they consider vulnerable, while buying stock in companies whose patents, they believe, reflect true innovation. However, the United States Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB) shows no signs of concern pertaining to Bass’s legal maneuvers. Although, in a case brought by Celgene requesting sanctions against Bass’s review requests, the board sided with Bass, who did not deny he might profit from a resulting change in stock price but called it a “truthful irrelevancy.” A panel of judges ruled that “profit is at the heart of nearly every patent and nearly every inter partes review.”
Mr. Bass and Mr. Spangenberg say that their aim is to bring down drug prices that have artificially high prices based on dubious patents. They have even filed patent challenges on a pro bono basis.
“Some patents and extensions to patents represent an unreasonable use of government regulation to enshrine monopoly power to the detriment of the public at large,” Mr. Bass said. “This system must be fixed or we will continue to pay more and more for the same old drugs we’ve been buying for decades.”
Companies try to extend patents on products shortly before they expire, when the door is about to open to generic makers. This practice, called “evergreening” or “product-hopping,” is among the forces keeping drug prices high, experts say.
The two started the Coalition for Affordable Drugs, created to challenge pharma patents, and used the coalition as entity that challenges the allegedly dubious patents. Mr. Bass said the coalition would not strike a settlement deal in any of its patent challenges.
However, the coalition has so far seen mixed results, with the PTAB denying institution of several of the IPRs they filed. Consequently, the two filed as individuals for their latest two petitions, putting their own money behind the claims, for patents owned by companies that they do not have any stock in, hoping to see whether the PTAB will treat petitions differently when they do not come from a hedge fund.
It will be interesting to see what happens with the newly filed petitions and whether or not Spangerberg is right when he said “Without the noise about our lack of altruism raised by branded drug companies … we are curious if the PTAB will do its job.”
New patent owners not only have to watch out for infringers trying to invalidate their patents, but also Hedge fund managers trying to make a buck.
The United States Patent Office Releases Updated Manual of Examining Trademarks
According to the latest update in the Trademark Manual of Examining Procedure (TMEP), a trademark registration application that claims trade dress rights in product packaging “that is a mere refinement of packaging commonly used on the relevant goods” will be rejected.
Also, a purported trademark combining words and pictures will be deemed merely descriptive when it comes to descriptive words with an image that represents the goods “or that reinforces the descriptive meaning of the word.”
Further, with respect to geographical indications, if there is a governmental protection system, then the applicant must identify how the goods in question comply with the protection system.
In addition, services that test the goods or services of third parties with respect to an accreditation or certification will be recognized as services under federal trademark law.
Finally, for service marks, the service must now be actually offered to the public and used by the public. A website use of a service mark with any services being used by the public may no longer be “use in commerce.”
For the most up-to-date version of the TMEP, click here.
PTO Proposes Patent Challenge Fee Hikes
Fees for filing petitions to challenge issued patents before the Patent Trial and Appeal Board (PTAB) has risen significantly due to the USPTO newly-purposed fee schedule.
The request for inter partes review, which is a patent validity challenge that is popular among alleged infringers facing charges in litigation, will cost at least $14,000 compared to the previous $9,000. Covered business method challenges would rise from at least $12,000 to at least $16,000.
Because the American Invents Act of 2011 set up these reviews and challenges, the PTO is given, for the first time, authority to set its own fees rather than deferring to Congressional preferences.
Further, basic patent application fees as well as fees for excess claims will rise to $20 such that an application with five independent claims and 25 dependent claims would see a 16% increase in filing fees from $1,920 to $2,220. Additionally, the USPTO will increase its search and examinations fees by $100.
2016 INTELLECTUAL PROPERTY (“IP”) RESOLUTIONS CHECKLIST
The following is a checklist to help your company in the new year with intellectual property issues to investigate or protect. For additional information, please visit our website at www.cislo.com and use our IPSEARCH and IPNEWS tabs for links to numerous IP resources. If we can be of any assistance, please feel free to call us for an appointment to discuss your situation.
___ File for federal and/or state trademark registration for product names, packaging, slogans, and logos.
___ File for service mark registration of company name where possible.
___ Check to see that Affidavits of Use have been filed for any existing registrations.
___ Record existing trademarks with United States Customs to block importation of infringing goods.
___ Use the “®” symbol only with federally registered marks, and use “™” for unregistered marks or state trademark registrations.
___ Arrange for a trademark watch service to see if others are trying to register similar marks.
___ File provisional or utility applications to protect unique product designs, formulations, or technologies, file as early as possible to avoid filing deadlines that will bar the granting of a patent.
___ File design patent applications to protect ornamental designs of products.
___ Pay maintenance fees on existing patents.
__ Use “Pat. Pending” where applicable, and mark all patented products with Patent Number.
___ Have all employees and outside designers sign agreements assigning all patent rights for any inventions to the company.
___ File Fictitious Business Name Statement.
___ Check renewal date for existing Fictitious Business Name Statement.
___ Develop written trade secret policy to maintain secrecy, have employees read and sign.
__ Physically secure trade secret information and matters.
___ Have employees and vendors sign non-disclosure agreements.
___ File for copyright registration for any website, written works, graphics, design, or any other work that might need protection from direct copying.
___ Use the “©” symbol, author’s name, and date of the work on all original materials, including catalogs, advertisements, websites, unique product designs, graphics, etc.
___ Have all employees and outside designers assign their rights to any original works to the company, and affirm that that all such works are “works for hire.”
___ Register all company names and popular product names.
___ If feasible, register all variants and common mis-spellings of main domains.
___ Check renewal dates for existing registrations, and sign up for auto-renewal.
___ Conduct Internet searches to find possible competitors and competing products/services to determine if there are any potential infringement issues.
___ Perform patent searches for new and existing products and services offered for sale.
___ Perform trademark searches for all trade names and product names.
___ Register an agent with the Copyright Office for Online Service Providers to receive immunity for online copyright infringement.
___ Check your Comprehensive General Liability insurance policies to see if they cover infringement, consider obtaining an intellectual property insurance policy.