Prepared by Cislo & Thomas LLP Attorney Mark D. Nielsen, Ph.D.
1. In an interesting case out of the Federal Circuit, the Court affirmed a dismissal of infringement claims on the pleadings, which is a bit unusual. Here, the plaintiff accused the defendant of infringing four (4) patents based on the doctrine of equivalents. The key limitation in the patents was essentially, “pharmaceutically acceptable fluid comprising a mixture of polyethylene glycol and propylene glycol,” which was literally missing from the accused product. The plaintiff argued that ethanol, which was present in defendant’s product, and disclosed in its specification for the patents, was the equivalent of propylene glycol. The defendant moved for judgment on the pleadings asserting that the patents disclosed, but did not claim, ethanol as an alternative to propylene glycol – i.e., the disclosure-dedication rule from the 2002 Johnson & Johnston (not a typo) case. The Federal Circuit thus found that the asserted patents sufficiently disclosed the ethanol as an alternative to propylene glycol for the disclosure-dedication rule to apply. The Federal Circuit also rejected a more procedural challenge by the plaintiff, who argued that there were factual issues that precluded granting the motion for judgment on the pleadings. The Federal Circuit found a declaration submitted by the plaintiff to be a manufactured effort to create a factual issue, and that because disclosure-dedication was a question of law, there was no problem with the Court granting the motion. The takeaway here is that this may open the door for more dismissals on issues, such as infringement, traditionally thought to be relatively immune from dismissal at the pleading stage.
2. In an unusual case for IP Takeaways, the bankruptcy of United Cannabis Corp. in bankruptcy court in Colorado is raising two interesting issues: (1) the distinction between legal hemp and illegal marijuana, and (2) whether license fees from patents directed to formulations including THC. In this bankruptcy proceeding, the trustee is seeking to have the bankruptcy dismissed because it does not believe that the debtor’s finances are derived solely from legal hemp as opposed to illegal marijuana. Bankruptcy courts typically do not permit companies engaging in federally illegal cannabis business to utilize the bankruptcy process. The first issue is a distinction that often comes up in federal trademark filings. The debtor is claiming that its revenues are derived solely from legal hemp/CBD. The second issue may indicate that, even if the debtor’s primary business is legal hemp/CBD, it may nonetheless be deriving revenues from companies operating in violation of federal law who happen to be the debtor’s patent licensees. These are important issues at the intersection (cheers!) of IP and bankruptcy because, with the explosion of cannabis businesses in the last several years, there will likely be bankruptcies of such companies. The COVID-19 shut downs may only exacerbate business woes of cannabis companies and their investors. Because of this complex and novel situation, cannabis companies contemplating bankruptcy (which may not be available to them depending on the type of business they do) should consult experienced bankruptcy counsel to consider their options.
3. In a recent opinion out of the Federal Circuit, the Court affirmed a ruling out of the Middle District of Florida touching on multiple aspects of intellectual property: (1) design patent, (2) copyright, and (3) trade dress. The plaintiff designed and sold a toy chalk holder made to appear like a No. 2 pencil. Shortly thereafter, the product was essentially copied, and the buyers of the plaintiff’s product stopped buying from plaintiff and began buying from the copyist. The lawsuit followed. The Middle District of Florida found non-infringement of the design patent, copyright invalidity, and no protectable trade dress. In reviewing the district court’s order, the Federal Circuit approved of all aspects of the district court’s analysis, going so far as to say that, “the district court followed our claim construction directives to a tee.” Slip Op. at 6. The Federal Circuit affirmed design patent non-infringement by finding that the similarities between the patented and accused products resided in the functional features and the features already in the prior art. Any other features were not substantially similar. In a sense, the Federal Circuit’s opinion on the design patent claim is a road map on how to make a good knock off product. The Federal Circuit also affirmed the district court in that the copyright was invalid because the utilitarian features and the article itself could not be separated. The Federal Circuit further affirmed the district court by finding that there was no secondary meaning shown for the asserted product design trade dress. In particular, the lack of trade dress protection was affirmed because the only evidence of secondary meaning was substantial sales, which may be probative of secondary meaning. The plaintiff, however, failed to show any evidence for how the relevant consuming public viewed the trade dress – as the product itself, or as a source identifier. I am proud to note that the Federal Circuit again cited its opinion in our firm’s case, Amini Innovation Corp. v. Anthony California, Inc..