February 2018

USPTO Creates a Rule Expanding Privilege to Patent Agents

Takeaway: The USPTO has issued a rule that establishes confidentiality between patent agents and their clients.

On November 7, 2017, the United States Patent and Trademark Office released a new rule indicating that patent agents, as well as attorneys, will be covered by the privilege rule at the Patent Trial and Appeal Board.

In the past, the ability to shield communications under the privilege rule has been a gray area for patent agents who have not been admitted as attorneys in a state jurisdiction. This new rule allows them to keep information discussed with a client confidential in post-grant proceedings.

The difference between a patent agent and a patent attorney is that a patent agent has an engineering or science background and has successfully passed the patent bar exam, whereas a patent attorney has additionally gone to law school and passed a state bar exam. Patent agents are allowed to draft and prosecute patent applications and try cases at the Patent Trial and Appeal Board, but cannot practice in state or federal courts. They give legal advice on inventions, patent applications, patent prosecution, and post-grant patent proceedings.

This rule is important because if a patent agent is representing someone in a post-grant proceeding at the Patent Trial and Appeal Board, then they will need to be able to keep their client communications and work product confidential and not available to adversaries.

One area that is still unclear is communications with foreign associates.

Communications with a foreign non-attorney patent agent are still not covered by this rule, which could create yet another loophole in the privilege rule. This issue could arise where there is a PCT filing and a patent agent, or attorney for that matter, is working with foreign associates around the world. With that said, this is still a step in the right direction for keeping information confidential for clients at the Patent Trial and Appeal Board.

8 BIT Aleworks Appeal And Need to Seek Trademark Advice

Takeaway: This case highlights the importance of adequately preparing trademark applications and appeals. Always seek the assistance of an experienced intellectual property professional to deal with the USPTO.

The TTAB (Trademark Trial and Appeal Board) handed down its appellate decision concerning a rejected trademark application for “8-BIT ALEWORKS.” 8-Bit Brewing LLC, an Arizona craft beer company, applied for the standard character mark “8 BIT BREWING COMPANY” and was rejected due to a likelihood of confusion (15 U.S.C. §1052(d)) with existing trademarks registered in the same class. The TTAB affirmed the refusal because they determined that the marks were nearly identical and that a consent agreement between companies was not adequate to mitigate the likelihood for consumer confusion presented by this similarity.

The trademark that presented the highest likelihood of confusion was the standard character mark “8 BIT BREWING COMPANY.” (Reg. No. 4564603) The board found that the terms “8-BIT” and “8 BIT” are “virtually identical,” as they are both meant to evoke classic video games and the 8-bit architecture of classic gaming consoles. Additionally, the judges opined that “BREWING COMPANY” and “ALEWORKS” were highly descriptive and generic terms when used in association with beer. Therefore, these generic terms were mostly excluded from their analysis, leading them to conclude that the marks are nearly identical and present a strong likelihood of consumer confusion.

8-Bit Brewing LLC seemingly anticipated that the USPTO would deem that the marks present a likelihood of confusion, so they sought and came to an agreement with the owner of the similar mark to take steps to minimize the risk of consumer confusion. According to the judges, “consent agreements are frequently entitled to great weight,” but the TTAB held that in this instance the likelihood persists even in light of the agreement. In fact, the judges refer to portions of the consent agreement as “vague” and “ambiguous.”

Ultimately, as seen in the images above, the marks bear remarkable similarity and are likely to be confused by the average consumer. It seems that, if the applicant had presented an adequate consent agreement, the applicant may have been able to overcome the rejection.

Eat Right Foods Limited v. Whole Foods Market Services, Inc. – Don’t Delay in Bringing Trademark Suits

Takeaway: Do not delay in enforcing your intellectual property rights, as a delay in bringing legal action may lead to forfeiture of the right to seek equitable relief.

On January 29th, the Ninth Circuit Court of Appeals handed down its ruling on Eat Right Foods Ltd. v. Whole Foods Market, Inc. et al. The suit, filed in the Western District of Washington in late 2013, accused the defendant of infringing Eat Right Foods’ trademark as a part of its “Eat Right America” health and wellness campaign.

Eat Right Foods (ERF) allowed Whole Foods to use the “EATRIGHT” mark for four years before filing suit for trademark infringement. According to the district court, this constituted an unreasonable delay. The district court therefore granted Whole Foods’ motion for summary judgment on their affirmative defenses of laches and acquiescence.

Laches bars a claim if there was an unreasonable delay in bringing suit and the delay prejudiced the defendant. In this case, the district court determined that Whole Foods established expectations-based prejudice because Whole Foods “invested a significant amount of time and money in… [promoting] the ANDI® food-scoring system and Eat Right America diet and nutritional programs at its stores.” Additionally, the court rejected the plaintiff’s assertion that the delay arose from “actively seeking to resolve [the] matter out of court.” Instead, the court agreed with Whole Foods and found that the ERF’s delay was a result of an attempt to sell its brand to the larger company.

The circuit court vacated the summary judgment in favor of Whole Foods, holding that the district court improperly weighed the parties’ competing evidence by failing to resolve all factual disputes in favor of the non-moving party. Specifically, the panel of judges found that the district court did not credit ERF’s evidence that the delay was part of an attempt to resolve its claims against Whole Foods without litigation.

Concerning acquiescence, the circuit court ruled that the mistakes made by the district judge also affected its acquiescence analysis. Due to the district court’s flawed analyses, the circuit remanded the case for further proceedings.

For intellectual property owners, this case highlights the importance of monitoring usage of your intellectual property and enforcing your rights expeditiously. If immediate enforcement of your rights might jeopardize a business relationship or litigation is otherwise impractical, the intellectual property owner must take action to retain their rights of enforcement. If any delay or interruption arises in the enforcement of your IP rights, communicate to the infringer that the use of your intellectual property is unauthorized, and explain and document the reasoning behind the delay or interruption in enforcement. If done correctly, these actions will prevent the adverse party from claiming the affirmative defenses seen in this case.

Saint Regis Sovereign Immunity Pertaining to Patents

Takeaway: Fallout from the Restasis case could motivate Congress to alter patent law and may affect the legal status of Native American tribes.

The Saint Regis Mohawk Tribe, a Native American tribe involved in Allergan’s attempted IPR defense of patents protecting the dry-eye drug Restasis, said that its sovereign immunity persists even after its participation in the infringement litigation. The tribe admitted that the purpose of their collaboration with Allergan was to utilize their sovereign immunity in order to delay IPR proceedings to prevent the PTAB from invalidating Allergan’s patents.

Chief Judge David Ruschke of the Patent Trial and Appeal Board, along with six other members of the PTAB panel, ruled that although sovereign immunity applies to IPR proceedings, the protection “[is] essentially waived when an infringement lawsuit has been filed in district court…” This ruling was directed towards the University of Minnesota. But now Mylan, a party to the controversial Restasis case, argues that the PTAB should apply the same reasoning to conclude that the Saint Regis tribe has similarly relinquished its sovereign immunity by filing suit against the generic drug maker.

Naturally, the tribe maintains that the University of Minnesota case was improperly decided, and thus the tribe should not be stripped of its sovereign immunity protection. According to Reuters, the tribe said “it was eager to make similar deals… to generate much-needed revenue…” The aftermath of the headline-catching infringement case is not yet clear, but some members of Congress are concerned that the deal between Allergan and Saint Regis was a sham and that Allergan was “mock[ing]” Congress’s authority.

LegalZoom: Dangers of Utilizing Legal Services Provided by Non-Attorneys

Takeaway: There is no substitute for the advice of an attorney, and even LegalZoom recognizes the dangers of utilizing legal services provided by non-attorneys.

An antitrust suit was filed in a California district court concerning the ability for non-legal entities to offer legal services with fewer restrictions than lawyers. The plaintiff, a law firm, claims that the USPTO and several state bars violate the Sherman Act by enforcing trade regulations upon licensed lawyers, but not trademark filing services owned by non-attorneys.

Along with LegalZoom, the USPTO and several state bars are named as defendants in the case. Unlike Janson v. LegalZoom, which accused LegalZoom of unauthorized practice of law, the plaintiff in this case claims he does not have any moral complaint with regard to their offering legal services. Instead, the plaintiff seeks the “ability… to compete on the same playing field” as their non-lawyer competitors.

In the plaintiff’s view, the regulation of attorneys, at least in conjunction with the allowance of non-legal entities to offer legal services, presents a “double standard.” Of course, this raises the question of whether strict regulation of attorneys is unfairly anti-competitive or is justified by the nature of their work. In our opinion, the high standards imposed by bar associations are both necessary and proper for the functioning of our legal system.

The nature of the law requires that clients can entrust sensitive and important matters with the people who represent them in legal matters. Therefore, it is paramount that attorneys are ethical, competent, and held to standards that promote high-quality legal representation. Delegation of legal work to non-lawyers or lowering these standards risks compromising the integrity of legal representation and poses a risk of tremendous loss to clients due to incompetency.

This is not to say that we are insensitive to the drawbacks of proper legal representation; high-quality representation can often be expensive. At Cislo & Thomas, we recognize that clients want the best value for their money. Accordingly, we offer services like PatentFiler to provide low-cost, attorney-reviewed solutions for intellectual property needs. Please contact our office for more information, or visit Patentfiler.com.

Exmark v. Briggs And the Effect in Patent Damages

Takeaway: Reasonable royalty damages for patent infringement can be calculated as a percentage of a product’s sales price, but the damage award must be commensurate with the value of the improvement taught by the patent.

On January 12, the United States Court of Appeals for the Federal Circuit decided that a district court erred in its grant of summary judgment in Exmark Mfg. Co. v. Briggs & Stratton Power Prods. Grp., LLC. The case being appealed awarded over $48,000,000 to Exmark for the willful infringement of patent US5987863, which describes a lawn mower featuring “flow control baffles and removable mulching baffles.” The judges vacated this award and remanded to the district court for a new trial to determine damages.

The appellate judges objected to the procedure by which the district court came to the $48 million figure. The award amount was arrived at by doubling the $24 million that the jury reached in order to impose enhanced damages for willful infringement. The court found that the district court’s doubling did not align with the Supreme Court ruling in Halo, which requires that the jury determine willfulness.

Additionally, the appellant argued that the pre-doubled award was too high, because it was calculated using the value of the mower as a whole, rather than the value added to the mower by the addition of the baffles. In other words, the appellant felt that the damage calculation was contrary to the Ericson ruling that requires awards to “be based on the incremental value that the patented invention adds to the end product.”

Interestingly, because of the way the patent is written, the patented invention is the improved lawn mower with baffles, not just the baffles themselves. Even so, the appellant argued that damage awards should be calculated based only on the value apportioned to the innovative part of the patent—namely, the baffles. Briggs & Stratton claimed that using the sales price of the entire mower would be improper and would allow for exploitatively high damage rulings based on stylistic claim-drafting choices.

The court agreed in part with Briggs & Stratton, saying that the damage award must be apportioned properly to the value of the baffles, but that using the price of the entire mower does not indicate improper apportionment per se. Ultimately, the court explains that the process by which damages are calculated is flexible, but that damages must only be based on infringement of the improvement an invention has made.

WesternGeco v. ION and U.S. Patent Liability for Foreign Activity

Takeaway: An upcoming Supreme Court case will affect the extent to which international acts can create recoverable damages for U.S. patent holders.

On January 12, the U.S. Supreme Court granted certiorari to WesternGeco LLC v. ION Geophysical Corp., a case involving infringement of patents related to surveying technology used to detect oil. The particular technology in question here is the Q-Marine system that WesternGeco, a subsidiary of Schlumberger Limited, uses to search for oil below the ocean floor. Specifically, the system introduced “lateral steering”, which allows for more efficient surveys and higher-quality data. This patented system is manufactured domestically and was implemented to great success, allowing WesternGeco to capture 100% of the lateral-steering-enabled survey market between 2001 and late 2007.

ION, based in Houston, began selling and shipping components, including DigiFIN positioning devices and “lateral controllers”, to foreign surveying companies. According to WesternGeco, these components were later combined into surveying systems with similar functionality to the Q-Marine system. The creation of these surveying systems, as determined by jury at trial, caused WesternGeco to lose at least ten survey contracts. The district court found ION liable for infringement of WesternGeco’s patents, and ordered payment of $105.9 million to WesternGeco, comprised of $12.5 million for royalties and $93.4 million for lost profits.

On appeal, the court agreed that ION infringed WesternGeco’s patents, but decided to reverse the lost profits component of the award. The decision hinged on the concept of extraterritoriality, which limits the application of U.S. law outside of United States territory. The judges opined that the lost profits resulted from survey contracts “to be performed on the high seas, outside the jurisdictional reach of U.S. patent law,” and are therefore unrecoverable. In their brief in opposition, ION argues that the case was decided correctly, and that allowing extraterritorial acts to create recoverable damages would allow for foreign acts to infringe on U.S. patents, which is not permitted by the United States Code.

The grant of certiorari follows the filing of an amicus brief from the United States in favor of reviewing the case. The issue at hand concerns whether lost profits resulting from this are recoverable, even though the combinations occurred outside of the United States. The eventual decision of this case will create precedent that affects patent holders and will have important implications for international business. Follow this case on SCOTUSblog.