Monthly Archives: September 2013

Fed Circuit Excuses Late Payment of Maintenance Fee

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

The Federal Circuit issued an interesting decision this week in Network Signatures, Inc. v. State Farm Mut. Ins. Co., No. 2012-1492, that reversed a District Court’s finding of inequitable conduct based on a patentee’s late payment of a maintenance fee. The Court found that even though the patentee intentionally did not pay the maintenance fee, such a failure could be excused when the reason for not paying was based on an erroneous assumption that no one wanted to license the patent. Judge Newman wrote the opinion for the Court, joined by Judge Wallach. Judge Clevenger dissented.

Federal Circuit

Background

A scientist at the Naval Research Labs (NRL) obtained a patent relating to internet security. There did not appear to be any commercial interest in the patent, so NRL permitted the patent to lapse by not paying the 7.5-year maintenance fee. Unbeknownst to NRL, a company (Network Signatures) was interested in licensing the patent. The company attempted to contact NRL via phone and e-mail before the maintenance fee was due, but was unable to do so because NRL’s systems were not functioning properly. Network Signatures was finally able to reach NRL two weeks after the maintenance fee was due. At this point, NRL’s lawyer filed a petition with the PTO for delayed payment, asserting that the failure to pay was unintentional. The PTO granted the request, and NRL ultimately licensed the patent to Network Signatures.

Network Signatures sued State Farm for patent infringement. After discovery, State Farm moved for summary judgment on inequitable conduct, arguing that the failure to pay the maintenance fee was not unintentional. The District Court granted summary judgment, and Network Signatures appealed.

The Federal Circuit’s Decision

The Federal Circuit reversed. In doing so, it looked at the nature of the proceedings before the PTO. NRL’s lawyer submitted a standard form relating to late payments and checked a box indicating that the failure to pay was unintentional. The Court stated that “[w]e do not agree that this action constituted material misrepresentation with an intent to deceive.” The Court found no irregularities with NRL’s conduct after learning of Network Signatures’ desire to license the patent and that it was not improper to use the PTO’s forms (which did not require an explanation).

The dissent disagreed, and found that NRL intentionally allowed the patent to lapse. This was not the kind of unintentional delay that should be excused. While the dissent agreed with the District Court that State Farm had proven the first element of an inequitable conduct defense (material misrepresentation), the dissent found that the second element (specific intent to deceive) was a factual question that precluded summary judgment.

Conclusion

This is a rather odd decision. NRL clearly intended to allow its patent to lapse, but would not have done so but for a problem in communication. But, is this a “mistake of fact” that would excuse its abandonment? The majority failed to address the boundaries of the “mistake of fact” defense proffered by the patentee, and, instead, seems to have relied on the bare-bones nature of the PTO form used. This decision does not seem to provide much clarity as to what constitutes an “unintentional” abandonment of a patent.

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$1Billion Pittsburgh Verdict Against Marvell Upheld on Post Trial Motions

marvell_chipPosted by Henry M. Sneath, Esq., Chair of the Intellectual Property group at Pittsburgh law firm Picadio Sneath Miller & Norton, P.C.

hsneath@psmn.com or 412-288-4013

Following a December 2012 Patent verdict in favor of CMU against Marvell in the amount of just over $1 Billion, the trial Judge Nora Barry Fischer of the USDC for the Western District of Pa. has denied the post trial motions filed by Marvell. Carnegie Mellon University v. Marvell Technology Group, Ltd., Case No. 09-290 (W.D. Penn. Feb 28, 2013). She has also found that the infringement was willful, but has not determined yet whether to multiply the verdict as an enhanced award.  The lengthy opinion is attached for review. More analysis to come and we will follow what is surely to be an appeal to the CAFC by Marvell. Opinion available only on PACER at the moment but we will search for an independent copy to post.

UPDATE: The full decision of the Court is available here.

Western District Analyzes Trademark Issues: Use in Commerce; Abandonment; and Doctrine of Foreign Equivalents

By: Joe Carnicella, an intellectual property attorney with Picadio Sneath Miller & Norton, P.C.

On September 13, 2013, Judge Cercone of the Western District of Pennsylvania issued an opinion in Taza Systems, LLC v. Taza 21 Co., LLC, et al., No. 2:11-cv-073, 2013 U.S. Dist. LEXIS 130974 (W.D. Pa. September 13, 2013), covering various fundamental trademark topics.

Relevant Facts

Taza Systems is the owner of three service mark registrations on the Principal Register of the USPTO: (1) the word mark TAZA; (2) the word mark TAZA A LEBANESE GRILL; and (3) the design mark TAZA A LEBANESE GRILL.  These marks cover restaurant and bar services in International Class 43.  Taza Systems operates two restaurants in Woodmere, Ohio and Cleveland, Ohio.  In July 2008, Taza 21 opened a restaurant in Pittsburgh, Pennsylvania, under the names TAZA21, TAZA21 FRESH, and TAZA21 FRESH SHAWARMA CAFE.

Use in Commerce

Taza 21 asserted that Taza Systems’ registered marks were invalid and subject to cancellation because Taza Systems did not provide services in interstate commerce as required to justify registration under the Lanham Act.

According to the Lanham Act, 15 U.S.C. § 1051 et seq., a mark is used “in commerce” on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce.  Commerce is defined to mean “all commerce which may lawfully be regulated by Congress.”  Because Congress’ authority under the Commerce Clause extends even to purely intrastate activity if that activity substantially affects interstate commerce, the Lanham Act’s authority includes the same.  The court discussed the term “in commerce” as it applies to restaurants located in a single state.  Some factors that have been deemed to satisfy the interstate commerce requirement include location near interstate highways, servicing customers from other states, advertisements in out-of-state publications and purchasing ingredients from out-of-state vendors.

The court determined that Taza 21 would have the burden of proving at trial that Taza Systems did not use the registered service marks “in commerce”, and in doing so, Taza 21 would have to produce evidence to contradict and overcome the rebuttable presumption of validity and ownership of the marks afforded to Taza Systems because it holds registration certificates for all three service marks.  The court concluded that Taza 21 failed to adduce sufficient evidence that could establish at trial that the service marks are not used in commerce.

Abandonment

Taza 21 asserted that Taza Systems’ marks were invalid and subject to cancellation because Taza Systems failed to police third-party uses of confusingly similar marks.

Under 15 U.S.C. § 1127, if a trademark or service mark becomes generic, or otherwise loses its significance as an indicator of source due to the conduct of the owner, it can be deemed legally abandoned.  A mark can also be deemed legally abandoned if the owner discontinues use, with an intent not to resume it.  However, a party arguing for abandonment has a high burden of proof because abandonment, being in the nature of a forfeiture, must be strictly proved.  A “failure to police” a mark is one type of owner conduct that is commonly assumed to result in abandonment.  However, in order to prove this type of abandonment, the challenger must establish that the presence of third-party users in the marketplace resulted in what is described as a “loss of trade significance,” which is another way of saying that a mark is no longer distinctive because it fails to identify and distinguish the services of one person from the services of others and to indicate the source of the services.  As a reminder, the distinctiveness of a mark is evaluated by four categories: (1) arbitrary or fanciful; (2) suggestive; (3) descriptive; and (4) generic.  The first two categories are inherently distinctive and are afforded protection under the Lanham Act automatically; the third type of mark must acquire distinctiveness as an identifier of the source of goods or services before it can be eligible for protection; the fourth category of marks is never protected as a mark.

The court analyzed Taza 21’s evidence, which consisted of only a list compiled by counsel of 51 businesses that included TAZA in their name and an excerpt from a Thomson CompuMark Trademark Research Report issued to Taza Systems’ attorney seven years prior, and determined that such evidence did nothing to establish that Taza Systems’ marks lost their significance as an indicator of the source of its restaurant and bar services.  According to the court, the evidence did nothing more than establish that, at one point in time, various businesses across the United States may have used the word TAZA in their names and that those businesses ranged from coffee shops and restaurants to blown glass manufacturers and residential building contractors.  Moreover, the court applied the Dawn Donut Rule (see Dawn Donut Comp. v. Hart’s Food Stores, Inc., 267 F.2d 358 (2d Cir. 1959)) and concluded that, because these third parties use their marks in geographically “separate trading areas” and there was no evidence that Taza Systems had imminent plans to expand into the third-party user’s territory, no public confusion was likely.  The court ruled that Taza 21 failed to submit evidence sufficient to establish that the moniker TAZA had become generically descriptive of restaurant services as a result of Taza Systems’ failure to police the market.

Descriptiveness – Doctrine of Foreign Equivalents

Taza 21 asserted that Taza Systems’ marks were invalid and subject to cancellation because the marks were merely descriptive upon application of the doctrine of foreign equivalents.

Registration of a mark on the Principal Register constitutes prima facie evidence of the validity of a trademark and of the owner’s exclusive right to use it in commerce.  However, if a challenger comes forward with evidence to establish that the mark was erroneously registered, the registration can be cancelled or otherwise invalidated.  Under the doctrine of foreign equivalents, foreign words from common languages are translated into English to determine whether they are generic or descriptive.  However, this doctrine applies only if the ordinary American purchaser would stop and translate the mark into English.  When it it unlikely that an American buyer would translate the foreign mark, either because of unfamiliarity with the foreign word or association of the word with its foreign language through decor, the doctrine does not apply.

During prosecution of its marks, Taza Systems disclosed that the word “taza” translates from the Lebanese dialect of Arabic to English as “fresh,” and each of the registration certificates explicitly reflects this translation.  Taza 21 submitted as evidence printouts from various on-line dictionaries reflecting that “taza” translated from Hindi to English as “fresh” and “green,” that “taze” translated from Turkish to English as “fresh” and “youthful,” and “taza” translated from Persian to English as “fresh, young, new.”

The court analyzed this limited evidence and determined that Taza 21 failed to adduce any evidence that would allow a reasonable juror to overcome the presumption of validity afforded to Taza Systems by its federal registrations and to conclude that the ordinary American purchaser would deem the mark TAZA to be descriptive of “restaurant and bar services.”  The court opined that, because the mark TAZA appeared in the context of a restaurant that serves Lebanese food, plays Lebanese music and is decorated with Lebanese decor, a reasonable juror could find that the ordinary American purchaser would not be prompted to translate the mark TAZA, thereby making the doctrine of foreign equivalents inapplicable.  Moreover, even assuming that the doctrine of foreign equivalents might apply, the court determined that Taza 21 failed to produce evidence that the doctrine would invalidate the marks.  In making this decision, the court considered certain statistics, which demonstrated that only a very low percentage of the U.S. population speaks Arabic, and concluded that the ordinary American purchaser would not stop and translate the term TAZA into English.  The court also considered the pages from the various dictionaries submitted by Taza 21 and determined that such evidence would not invoke the doctrine because there are multiple translations and varying foreign spellings and pronunciations.  Finally, assuming arguendo that Taza 21 could establish that the ordinary American purchase would stop and translate “taza,” the court held that no reasonable juror could conclude that “fresh” is a word used to describe restaurant and bar services.  Although “fresh” could be suggestive of the type of products or ingredients used at a particular restaurant, as opposed to another, suggestive marks are inherently distinctive and entitled to trademark protection.  The court held that the Taza Systems’ registrations for “fresh” do not remove an inevitably descriptive or generic word for restaurant or bar services in a foreign language from public use in the United States.

The Battle Over the Seeds Continues

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

SeedsA coalition of famers, seed sellers, and agricultural organizations that challenged Monsanto’s patents on genetically-modified seeds is appealing a decision of the Federal Circuit on June 10, 2013 to the U.S. Supreme Court in Organic Seed Growers and Trade Asss’n v. Monsanto Co. (The petition for a writ of certiorari may be found here).  The plaintiffs filed a declaratory judgment action seeking a ruling of non-infringement and invalidity of Monsanto’s genetically modified seed patents. These are the same patents that Monsanto successfully enforced in Bowman v. Monsanto, which was decided by the U.S. Supreme Court on May 13, 2013. The Federal Circuit held that there was no justiciable case or controversy because Monsanto had made binding assurances that it would not take legal action against growers whose crops might inadvertently contain traces of Monsanto biotech genes, and the plaintiffs fell within this group.

Sharing a Publication at Work May Constitute Copyright Infringement

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

wd-pa-courthouseDo you work in an office that receives a single copy of a trade publication, which is passed around the office for multiple people to read?  Be careful because such use may constitute copyright infringement—at least that is what one publisher argues.

In Energy Intelligence Group, Inc. v. The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC (“USW”), Civ. Action. No. 11-00428, 2013 U.S. Dist. LEXIS 123080 (W.D. Pa. Aug. 29, 2013) (Judge Conti), Energy Intelligence Group, Inc. and Energy Intelligence Group (UK) Limited (collectively “EIG”) filed suit to seek damages from Defendant USW for sharing its single subscription to the “Oil Daily” with multiple USW employees.  USW, located in Pittsburgh, Pennsylvania, is a labor organization, which provides collective bargaining services to its union members.  USW subscribed to the Oil Daily, beginning in 1992.  From 1992 to 1999, the Oil Daily was sent in paper copy.  Starting in 1999, EIG began sending the Oil Daily in electronic form.  USW subscribed to the Oil Daily through a subscription agent, EBSCO Information Services (“EBSCO”).

EIG’s suit involves 2,880 issues of the Oil Daily, which were published from December 1999 to March 2011.  EIG owns valid U.S. copyright registrations for each of these publications and provides copyright notices on its website, articles, emails and publications, including on the Oil Daily itself.  In February 2006, EIG sent a letter to all subscribers informing them that single-user subscriptions were not to be shared by multiple readers.  This letter was not sent directly to USW but was sent to EBSCO.  However, the court determined that EBSCO was USW’s agent and this constituted notice to USW, as well as EBSCO.

Mary Dimoff, USW’s librarian, was the sole subscriber to the Oil Daily.  When she received the Oil Daily in hard copy, she maintained a list of USW recipients to receive the Oil Daily, and she routed the paper to these individuals over the course of three to four days.  When Ms. Dimoff started receiving the Oil Daily in electronic form, she forwarded it to the recipients via email.  Through various communications with EIG and EBSCO, Ms. Dimoff revealed to EIG that she was sharing her subscription, and EIG filed suit.

USW conceded that it copied and distributed the 2,880 issues of the Oil Daily.  However, USW asserted that it was permitted to do so based upon several different defenses including, implied license, equitable estoppel, fair use, and laches.  USW also argued that damages should be limited to the three-year period prior to the filing of the complaint.  The parties filed cross motions for summary judgment on the defenses and the damages issues.

The court held that factual issues precluded the entry of summary judgment on all but one issue which was the equitable estoppel defense.  The court concluded that it would be impossible for USW to prove that the equitable estoppel defense applied because it could not prove all four factors necessary to establish such a defense: (1) the plaintiff had actual or constructive knowledge of the defendant’s infringing conduct; (2) the plaintiff intended or expected that defendants would act on the plaintiff’s misrepresentations or concealments; (3) the defendant was ignorant of the true facts; and (4) the defendant relied on the plaintiff’s conduct to its injury.

The court found that USW had sufficient evidence to prove that EIG had at least constructive knowledge of the infringing conduct for approximately three years before filing suit and thus, met the first factor.  However, USW could not prove the last three factors.  As for the second factor, the court determined that EIG did not misrepresent or conceal its intent to assert its copyrights because it affixed its copyright notice on every edition of the Oil Daily.  With respect to the third factor, the court rejected USW’s argument that it acted innocently because it had the notice of the copyright on the Oil Daily and because USW never followed up with EBSCO or with EIG to confirm if its actions were permissible.  Finally, the court held that USW could not show that it relied on EIG’s conduct to its detriment because EIG provided the copyright notice directly on the Oil Daily and sent its terms and conditions to EBSCO.  Therefore, EIG made no misrepresentations and did not conceal its copyrights.

The Energy Intelligence Group case is an interesting copyright case.  For more details on the other defenses and the factual issues raised, you can read the entire case here.