Category Archives: United States Supreme Court

Supreme Court Reverses Federal Circuit Interpretation of Patent Venue: TC Heartland Holding Overturned

Posted by:  Henry M. Sneath, Esq. – Chair of the Intellectual Property Practice Group at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®). Mr. Sneath is also an Adjunct Professor of Law at the Duquesne University School of Law teaching Trade Secret Law, Trademark Law and the Law of Unfair Competition. He may be contacted at hsneath@psmn.com or 412-288-4013. See Website www.psmn.com .

The US Supreme Court overturned the Federal Circuit’s decision in TC Heartland v.  Kraft Foods and its longstanding interpretation of the patent venue statute and has reaffirmed that a corporation is a resident of the state in which it is incorporated. It had decided that question a long time ago, but the Federal Circuit and statutory changes to the general (non-patent) venue statutes had undermined the original decision of the Supreme Court in 1957 in Fourco Glass.  The court provided this analysis in TC Heartland:

“The patent venue statute,28 U. S. C. §1400(b), provides that ‘[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.’ In Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226 (1957), this Court concluded that for purposes of §1400(b) a domestic corporation “resides” only in its State of incorporation.” 
In overturning the Fed. Cir. decision, the Court rejected the argument that 28 U.S.C. §1400 (patent venue statute) incorporates the broader definition of corporate “residence” contained in the general venue statute 28 U.S.C. 1391 as has been allowed by the Federal Circuit for years. This changes the longstanding practice of the Federal Circuit to interpret “residence” as being any state in which a defendant corporation simply conducts business. This interpretation has allowed unfettered forum shopping which generally results in shopping and filing in the Eastern District of Texas.

“We conclude that the amendments to §1391 did not modify the meaning of §1400(b) as interpreted by Fourco. We therefore hold that a domestic corporation “resides” only in its State of incorporation for purposes of the patent venue statute.” Justice Thomas authored the court’s opinion.

The big question is whether this will indeed reduce or eliminate the monopoly held by Texas on patent cases and whether it will simply shift it to Delaware where many corporations are incorporated. The court may take additional action or so too may the US Congress to prevent that simple shifting of venues from Texas to Delaware.

See the Opinion in TC Heartland v. Kraft Foods here: https://www.supremecourt.gov/opinions/16pdf/16-341_8n59.pdf

Henry Sneath 412-288-4013 and hsneath@psmn.com

Supreme Court Kills Laches Defense to Patent Infringement

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

Supreme CourtOn March 21, 2017, the US Supreme Court, in a 7-1 decision in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, Case No. 15-927, held that the equitable defense of laches no longer can be used as a defense to a claim of patent infringement. Justice Alito delivered the majority opinion, with Justice Breyer dissenting.

Laches is an equitable doctrine that bars a patent owner’s claim for damages in a patent infringement lawsuit if the patent owner waits an unreasonable amount of time before bringing suit against the accused infringer and that delay prejudices the accused infringer’s defense. This defense has existed for decades and its contours were defined by the Federal Circuit in its A.C. Aukerman Co. v. R. L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc) decision.

However, with the Supreme Court’s decision in Petralla v. Metro-Goldwyn-Mayer, Inc., 572 U.S. ___ (2014) decision that held that laches cannot bar a claim for damages for copyright infringement within the 3-year statute of limitations, the Court decided to address whether laches can still be a defense to a claim for damages for patent infringement.

In considering this, the Court looked to the history of laches-type defenses, and concluded that they exist as a judicially-created defense by courts of equity when there were no statutes of limitation.  However, “[w]hen Congress enacts a statute of limitations, it speaks directly to the issue of timeliness and provides a rule for determining whether a claim is timely enough to permit relief.” Therefore, because Congress created a 6-year statute of limitations for patent infringement, courts cannot override that statute of limitations with an equitable laches defense. Accordingly, the Court held that the laches defense is no longer applicable in patent infringement lawsuits.

The dissent and appellee pointed out that the patent statute of limitations is unusual and warrants the continuance of the laches defense. The limitations period for a patent infringement claim does not begin to accrue from the point of infringement or the point at which a patent owner has a “complete and present cause of action.” Rather, the limitations period works backwards from the time of the filing of the lawsuit–it only limits a patent owner’s ability to collect damages to the period 6 years before the filing of the lawsuit. In other words, it does not matter if the patent owner knows of the infringement for a period longer than the limitations period (e.g., 10 years ago), but chooses not to file suit until today. Under the patent statute, the patent owner can still bring suit, but it will only be limited to damages occurring in the prior 6 years. This statute of limitations is unlike virtually every other statute of limitations, which would bar such an untimely claim. The majority rejected this distinction out of hand without a clear explanation.

The dissent also pointed out that the majority’s decision creates a significant disincentive for patent owners (especially ones that do not compete with the accused infringer) to act quickly upon learning of infringement. Without the laches defense, a patent owner can sit back and wait until the time at which the most damages have occurred and then file suit. Previously, such a tactic would have run a significant risk that a court might uphold a laches defense and bar any recovery.

The dissent also argued that the majority’s reliance on Petralla is not warranted because of the significant differences between copyright and patent law. With copyrights, the owner must prove copying, whereas patent infringement is a strict liability offense. Therefore, delay will tend to work to the disadvantage of a copyright owner because the evidence of copying may tend to fade with time. On the other hand, a patent owner does not have to prove copying, so the passage of time tends to work in the patent owner’s favor. For example, evidence of prior art or the state of the art at the time of the patent application may become lost with time, which would make it harder for an accused infringer to successfully argue that the patented invention was obvious or anticipated.

As a practical matter, the laches defense was not often successful for accused infringers, but it created an important check against patent owners and encouraged them to timely bring lawsuits when they believed that their patent rights were infringed. It will be interesting to see how patent owners behave now that this check has been eliminated.

SCOTUS Gives Guidance Regarding Attorney Fee Awards in Copyright Cases

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

SupremeCourtImage_1On June 16, 2016, the U.S. Supreme Court issued an opinion on awarding attorneys’ fees in copyright cases for the first time in two decades and issued the first copyright case in two years. The case is Kirtsaeng v. John Wiley & Sons Inc., case number 15-375.  Section 505 of the Copyright Act provides that a district court “may  . . . award a reasonable attorney’s fee to the prevailing  party.”  The issue presented to the Supreme Court was whether a court, in exercising that authority, should give substantial weight to the objective reasonableness of the losing party’s position.  The court held that it should but that courts must also give due consideration to all other circumstances relevant to granting fees.  It further held that the district courts retain discretion, in light of those factors, to make an award of attorneys’ fees even when the losing party advanced a reasonable claim or defense.

Kirtsaeng, who was from Thailand, came to the U.S. to go to Cornell University.  While there, he discovered John Wiley & Sons, an academic publishing company, sold virtually identical, English language textbooks in the U.S. and Thailand, but sold them at a much cheaper price in Thailand.  He had family and friends in Thailand buy the books, ship them to him in the U.S. and sold them at a profit.

Wiley sued Kirtsaeng for copyright infringement, claiming Kirtsaeng’s sale of the books violated its exclusive right to distribute its textbooks.  Kirtsaeng invoked the “first sale doctrine” as a defense, which enables the lawful owner of a book (or other work) to resell or otherwise dispose of it as he or she wishes.  Wiley countered that the first sale doctrine did not apply to books manufactured abroad.  The circuit courts were split on the issue, and the issue went up to the Supreme Court.  The Supreme Court agreed with Kirtsaeng and held that the first sale doctrine does allow the resale of foreign made books.

Kirtsaeng went back to the district court and sought $2 million in attorneys’ fees as the prevailing party pursuant to section 505.  The District Court denied the motion, relying on Second Circuit precedent that gave “substantial weight” to the “objective reasonableness” of Wiley’s infringement claim.  The rational for that approach was that the imposition of a fee award against a copyright holder with an objectively reasonable—although unsuccessful—litigation position will generally not promote the purposes of the Copyright Act.  The District Court and the Second Circuit, on appeal, agreed that Wiley’s position was reasonable.  They also found that the other factors to be considered did not outweigh the reasonableness finding.   These non-exclusive factors were set forth in Fogerty v. Fantasy Inc., 510 U.S. 517 (1994).  In that case, the Supreme Court identified the non-exclusive factors as the frivolousness of the case, the loser’s motivation, the objective unreasonableness of their case, and considerations of compensation and deterrence, all of which are to be applied in a manner that’s faithful to the purposes of the Copyright Act.

In Kirstaeng, the Supreme Court explained that objective reasonableness can be only an important factor in assessing fee applications—not the controlling one.  District courts must take into account a range of considerations beyond the reasonableness of litigating positions.  Thus, a court may award fees even though the losing party offered reasonable arguments.  The Supreme Court cited as an example the situation where a court orders fee-shifting because of a party’s litigation misconduct, or the court decides to deter repeated instances of copyright infringement (i.e. copyright infringement “trolls”).  “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals” (for instance—enriching the general public through access to creative works).

The Supreme Court concluded that the Kirstaeng matter should be remanded to the District Court because it appeared that the court had put too much emphasis on the “reasonableness” question.  Thus, the Supreme Court ordered the remand to ensure that the District Court evaluates the motion consistent with the analysis that it set forth—giving substantial weight to the reasonableness of Wiley’s litigating position, but also taking into account all other relevant factors.

Supreme Court Again Rewrites Patent Law on Enhanced Damages

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1In a continuing trend of rejecting bright-line rules and multi-faceted tests created by the Federal Circuit, the Supreme Court last week issued an opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc., (No. 14-1513) in which the Court unanimously vacated and remanded the Federal Circuit’s decision affirming the District Court’s decision not to award enhanced damages under the Federal Circuit’s precedent in In re Seagate Technology, LLC, 497 F.ed 1360 (Fed. Cir. 2007) (en banc). The Court found that the Seagate test was too rigid and did not give trial courts sufficient discretion to award enhanced damages under 35 U.S.C. § 284. Chief Justice Roberts wrote the decision for the Court.

Background

The Patent Act provides that the Court “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. In response to this language, the Federal Circuit has created various tests for courts and litigants to following, culminating with its most recent pronouncement in Seagate. Under the Seagate test, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,”without regard to “[t]he state of mind of the accused infringer.” This objective prong is not satisfied if the accused infringer later developed a reasonably defense at trial, even if that defense was not known or relied on during the time of the infringing conduct.

If the patentee can demonstrate objective recklessness, it must show by clear and convincing evidence that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” If the patentee meets this subjective prong, the court is entitled to award enhanced damages.

The Supreme Court Rejects this 2-step Process

While initially recognizing that “[t]he Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under § 284 only in egregious cases,” it found that the test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”

In particular, the Court was troubled by the fact that an accused infringer could avoid enhanced damages in cases where it intentionally ignored the patentee’s patent if its lawyers could later develop a reasonable defense during litigation that was never relied on previously. Under the Seagate test, a patentee could never get past the first objective prong.

Having said that, the Court also stressed that enhanced damages should still be the exception, and not the rule. It traced the history of enhanced damages and noted that they were typically reserved for egregious cases and were “vindictive or punitive” in nature. The Court cautioned that a trial court’s discretion to grant enhanced damages is not boundless and that the Federal Circuit is in a unique position to evaluate the exercise of that discretion based on its long history of dealing with patent cases.

Finally, the Court rejected a clear and convincing evidentiary standard for proving entitlement to enhanced damages. Under § 284, only a preponderance of the evidence is necessary to obtain enhanced damages.

The Court concluded by stating:

Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are “to be guided by [the] sound legal principles” developed over nearly two centuries of application and interpretation of the Patent Act. . . . Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement. The Seagate test, in contrast, unduly confines the ability of district courts to exercise the discretion conferred on them. Because both cases before us were decided under the Seagate framework, we vacate the judgments of the Federal Circuit and remand the cases for proceedings consistent with this opinion.

Justice Breyer’s Concurrence

While agreeing with the majority’s opinion, Justice Breyer wrote separately to caution that awards of enhanced damages should be made only in egregious circumstances.

He also noted that an award of enhanced damages requires conduct beyond simple knowledge of a patent by the infringer. Justice Breyer explained that there are several legitimate reasons why an infringer may be aware of a patent that do not rise to the level of willful misconduct required. He also noted that opinions of counsel of non-infringement or invalidity are not required to defeat a claim for enhanced damages. For one thing, they can be extremely expensive and can deter legitimate innovation or otherwise upset the proper balance between the patent laws and promoting the progress of the science and useful arts.

Finally, he noted that enhanced damages are not a mechanism for compensating patentees for litigation expenses or other infringement-related costs. There are difference statutory provisions that address those concerns.

Conclusion

This is yet another case in which the Supreme Court has struck down a bright-line rule or multi-faceted test developed by the Federal Circuit. The Federal Circuit has tended to create these rules and tests in an effort to provide more clarity and certainty in the patent arena, even if these rules and tests lack a strong statutory basis. In contrast, the Supreme Court seems less concerned about clarity and certainty, and is more concerned in treating the patent laws like any other area of the law. It has repeatedly rejected efforts by the Federal Circuit to treat the patent laws as somehow different than other laws or not bound by the same rules and procedures. The Halo decision is another decision that brings the patent laws closer to the rest of the law.

Supreme Court Upholds Brulotte Rule Preventing Post-Expiration Patent Royalties

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

In a 6-3 decision authored by Justice Kagan, the United States Supreme Court in Kimble v. Marvel Entertainment, LLC (No. 13-720) upheld the long-standing rule previously announced in Brulotte v. Thys Co., 379 U. S. 29 (1964), that patentees cannot charge royalties for the use of an invention after the patent covering the invention has expired. Justice Alito, joined by Chief Justice Roberts and Justice Thomas, dissented and would have abolished the rule announced in Brulotte.

We previously discussed the Ninth Circuit’s decision in this case here.

Background

Web BlasterIn 1990, Kimble developed a web-shooting toy that allowed children to shoot foam strings from their hands like Spider-Man. He obtained a patent (U.S. Pat. No. 5,072,856) on his invention and offered it to Marvel Entertainment. Marvel declined, but soon afterwards came out with a similar toy. Kimble sued Marvel for patent infringement, and the parties ultimately settled the case. As part of the settlement, the parties entered into a license agreement that provided an up-front lump sum payment to Kimble along with a perpetual 3% royalty.

Some time later, Marvel discovered the Brulotte decision, which neither side was aware of during the settlement discussions, and moved for a declaration that its obligation to pay royalties expired when the patent expired. The district court, citing Brulotte, sided with Marvel, as did the Ninth Circuit. The Ninth Circuit, however, criticized the rationale of Brulotte, and the Supreme Court took up the case.

Analysis

The patent statute provides that patent owners have exclusive rights to the use and sale of their inventions for a limited period of time. Once that time expires, the invention falls into the public domain and can be used freely by anyone in this country.

The rule in Brulotte was announced as a way of preventing patent owners from extending their exclusive rights beyond the lifetime of the patent. The concern was that patent owners could use license agreements to force others to pay royalties long after the patent expired, which would artificially extent the lifetime of the patent.

Recently, economists have challenged the anti-competitive basis for the Brulotte ruling and noted that in some instances, allowing post-expiration royalties allows the user to obtain lower royalty rates (albeit spread out of a longer time), which can be pro-competitive behavior.

Justice Kagan, writing for the majority, ultimately decided that the principle of stare decisis controlled the outcome of the case. Brulotte was decided back in 1964 and represented the Court’s interpretation of the patent statute. In the case of statutory construction issues, the Court is disinclined to reverse itself without a significant reason for doing so. She noted that in the more than 50 years since the decision, Congress has not chosen to use its legislative powers to overrule this decision. She also noted that the economic concerns were far from conclusive.

The majority also noted that there were several ways that parties can construct license agreements that meet the limitations of Brulotte. For instance, parties can agree to spread out payments after the expiration of the patent, as long as the use/sale giving rise to the royalty occurred before the patent expired. Parties can also create hybrid agreements that include royalties for other intellectual property (such as trade secrets) if the royalty amount decreases after expiration of the patent.

In the end, the majority felt that there was not a sufficient reason to overrule Brulotte. Therefore, it affirmed the lower court’s rulings that the post-expiration royalties were barred.

The Dissent

The dissent took a different view. They felt that the economic rationale behind Brulotte was flawed and did not deserve deference. They also questioned the notion that Brulotte was decided by construing the patent statute. Instead, they felt that the decision was improper policymaking that should be overruled.

With respect to the particulars of the this case, they were concerned that the parties negotiated a resolution being unaware of the Brulotte rule, only to have Marvel come in afterwards and upset the prior agreed arrangement once it learned of Brulotte. Had the parties been aware of Brulotte during negotiations, they might have reached a different arrangement.

Conclusion

The Kimble decision does not change the state of the law. In a rather unusual move for the Supreme Court in the patent arena, they have maintained the bright-line rule that patent royalties based on actions that occur after a patent expires are not enforceable. Practitioners should be aware of this rule when crafting royalty agreements to structure them in a way to avoid this issue.

No Good Faith Invalidity Defense to Induced Infringement, Supreme Court Holds

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1The Supreme Court issued another patent law opinion today; this time focusing on whether a good-faith belief that a patent is invalid can be a defense to a claim of induced infringement. In Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), the Court concluded in a 6-2 decision that the answer is no, reversing the Federal Circuit. Justice Kennedy delivered the opinion for the Court, and Justices Scalia and Roberts dissented. (Justice Breyer took no part in the decision.)

Background

Commil holds a patent relating to short-range wireless networks (Patent No. 6,430,395). It sued Cisco under direct and in6430395 Imageduced infringement theories, contending that Cisco directly infringed by making and using network equipment and induced others to infringe by selling them the network equipment that they used in an infringing manner. Eventually, after significant motion practice, a reexamination at the Patent Office, and multiple trials, Commil prevail on both theories. The Federal Circuit reversed on two grounds. First, it found an error in the jury instructions regarding induced infringement that would have allowed a finding in Commil’s favor based on negligence, instead of actual knowledge. And, second, it found that the district court improperly barred Cisco from arguing as a defense that it had a good-faith belief that the patent was invalid.

The first point was not at issue before the Supreme Court. Only the second issue, whether a good-faith (but ultimately incorrect) belief that a patent is invalid is a defense to a claim of induced infringement. The Supreme Court found that it is not a defense.

Holding

The Court first looked at the induced infringement statute, 35 U.S.C. § 271(b), which provides that “[w]hoever actively induces infringement of a patent
shall be liable as an infringer.” Citing its previous decision in Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. ___ (2011), the Court stated that to be liable for induced infringement, a patentee must show that the defendant knew both of the patent and that the induced acts constituted infringement of the patent.

Before considering the good-faith defense, the Court took time to specifically reject Commil and the government’s position that induced infringement only requires knowledge of the patent. Under Global-Tech, induced infringement requires both the knowledge of the patent and the knowledge that the induced acts infringe the patent. Therefore, a good-faith belief that there was not infringement can be a defense to induced infringement.

Having dispensed with that argument, the Court next turned to the heart of the matter–whether a good-faith belief that the patent is invalid can be a defense. The Court started with the language of the statute, which only is concerned with infringement, and it noted that patent infringement and invalidity are separate issues. It further considered the effect that allowing such a defense might have on patent owners. Under the Patent Act, all issued patents are presumed valid and to allow such a defense would undermine that presumption and its effect. The Court noted that an invalidity defense is not a defense to infringement; it is a defense to liability (although it did note the truism that an invalid patent cannot be infringed). Finally, the Court was concerned that allowing such a defense would only increase the burdens of litigation.

Taken together, it concluded that knowledge or intent regarding invalidity was not relevant to whether someone induced another to infringe.

Dissent

Justice Scalia, joined by Chief Justice Roberts, dissented. First, they agreed with the majority’s opinion relating to the Global-Tech decision and that induced infringement requires proof that the defendant knew of the patent and knew that the induced acts infringed the patent. They disagreed over the central issue in the case and would have found that a good-faith belief that the patent was invalid is a defense to a claim of induced infringement.

The dissent rejected the majority’s analysis based primarily on the truism that only valid patents can be infringed. If a defendant has a good-faith belief that the patent is invalid, then it would have a good-faith belief that the acts were not causing infringement of a valid patent.

Supreme Court Holds That Issue Preclusion Applies to Some TTAB Decisions

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1The Supreme Court handed down a decision today in B&B Hardware, Inc. v. Hargis Industries, Inc. (No. 13-352), in which it reversed an Eighth Circuit ruling regarding whether a decision by the Trademark Trial and Appeal Board (TTAB) during an opposition proceeding that there was a likelihood of confusion between two marks could have a preclusive effect in a subsequent trademark infringement lawsuit in a district court. In a 7-2 decision, authored by Justice Alito, the Supreme Court held that in certain circumstances, final decisions by the TTAB can preclude re-litigation of those issues in later forums. Justices Thomas and Scalia dissented, stating that they did not think that TTAB decisions should have preclusive effects.

Background

B&B Hardware registered its trademark “SEALTIGHT” with the USPTO in 1993, which was used with threaded and unthreaded metal fasteners and other related hardware. In 1996, Hargis sought to register its own mark, “SEALTITE” for self-piercing and self-drilling metal screws. B&B Hardware opposed the registration, contending that the marks were confusingly similar.

Although not described in detail, the Court noted that the parties had been involved in disputes before the USPTO and courts in the Eighth Circuit for the last twenty years, including three trips to the Eighth Circuit and two jury verdicts in infringement actions.

Relevant to this case, the parties were before the TTAB on an opposition proceeding brought by B&B Hardware. B&B Hardware successfully argued to the TTAB that the USPTO should not register the SEALTITE mark because it was confusingly similar to its SEALTIGHT mark. While the Lanham Act provides that a decision of the TTAB can be appealed to either a district court or the Federal Circuit, Hargis declined to seek any judicial review, and the decision of the TTAB to not allow registration of the SEALTITE mark became final.

While the opposition proceeding was occurring, B&B Hardware brought a trademark infringement action against Hargis in district court. Once the TTAB decision became final, B&B Hardware argued before the district court that Hargis could no longer contest the issue of likelihood of confusion based on the doctrine of issue preclusion. The district court disagreed, and a jury ultimately concluded that there was no likelihood of confusion. The Eighth Circuit affirmed.

The Supreme Court ultimately reversed both the Eighth Circuit and the district court.

The Supreme Court’s Decision

Issue preclusion is a doctrine that prohibits the redetermination of issues in a later action that have been finally decided in a prior action. In general, it applies “[w]hen an issue of law or fact is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”

In deciding whether issue preclusion could apply to a TTAB decision, the Court first concluded that issue preclusion is not limited to proceedings involving two courts. It is possible that agency decisions (such as a TTAB decision) can be given preclusive effects unless Congress clearly indicates otherwise. In this case, the Court found that Congress did not indicate in the Lanham Act that TTAB decisions should not be given preclusive effect, so it concluded that issue preclusion is potentially available.

Next, the Court considered whether the TTAB and the district court were, in fact, deciding the same issue in order for issue preclusion to be available. It reviewed the standards applied by both tribunals and concluded that the same likelihood-of-confusion standard applies to both the registration of marks and the question of infringement.

Hargis argued that issue preclusion should not apply because the TTAB considers whether the marks “resemble” each other, while the district court considers how the marks are used in commerce, and that these are different tests. The Court rejected that argument, stating that while the two tribunals may not consider the same usage of the marks, that did not mean that they applied different standards to the usage. It is at this point that the Court noted some important limitations on whether a TTAB decision could be given preclusive effect:

If a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation. By contrast, if a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue. Thus, if the TTAB does not consider the marketplace usage of the parties’ marks, the TTAB’s decision should “have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue.” 6 McCarthy §32:101, at 32–246.

In addition, the Court reiterated that if the TTAB considers a different mark than is at issue in the litigation or has decided a different issue than is before the district court, there can be no issue preclusion.

Because Hargis decided not to appeal the TTAB decision, it was a final judgment. And, because the likelihood of confusion issue was the same in both tribunals, the Court concluded that issue preclusion applied. Thus, the Court reversed the Eighth Circuit and remanded the case.

Issues not decided by the Supreme court

There were a couple of issues that the Court touched on, but did not rule because either the parties had not preserved the issues or they had not been adequately presented. In both instances, the majority noted that the constitutional issues were not before it, but it seems unlikely from what was said that they would have been successful even if they had been.

For instance, the Court noted that it has never had the occasion to determine whether issue preclusion from an agency decision violates the separation of powers in Article II and III of Constitution. In addition, the Court indicated that Hargis failed to preserve a Seventh Amendment challenge that giving preclusive effect to an non-jury, agency decision denied it a right to a jury.

It will be interesting to see if those challenges are raised with more care in future cases before the Court.

Conclusion

As seems to be typical in intellectual property cases before the Supreme Court, the Court did not set down a bright-line rule. The Court held that in some appropriate circumstances, decisions by the TTAB can be given preclusive effect in subsequent litigation in Article III courts. The Court caveated its determination, though, so litigants in the TTAB will need to carefully consider what the risks might be if they do not seek judicial review of a TTAB decision in either a district court or before the Federal Circuit. This uncertainty will likely give rise to more challenges to TTAB decisions, especially where there is a risk that those decisions have aspects that are similar to issues being raised in court (such as likelihood of confusion).

For further discussion of this case, the Likelihood of Confusion blog has some good coverage.

 

SCOTUS Decides That the Issue of Trademark “Tacking” Is One for a Jury

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

This week the United States Supreme Court determined that a jury should decide the issue of whether “tacking” can be used by a trademark holder to assert a priority position.

Hana Bank LogoIn Hana Financial, Inc. v. Hana Bank, No. 13-1211 (decided January 21, 2015), Hana Financial sued Hana Bank for trademark infringement. Hana Bank asserted the doctrine of tacking as a defense, claiming that its mark came first. This argument is relevant because under trademark law, rights in a trademark are determined by the date of the mark’s first use in commerce. In other words, the party who uses a mark in commerce first is given priority over other users. The doctrine of tacking arose from courts’ recognition that trademark users ought to be able to modify their marks over time without losing priority (for instance, think of the Aunt Jemima mark: The mark dates to 1893 but Aunt Jemima has changed her appearance over the years. Thanks to the tacking doctrine, the owner of the mark, currently Quaker Oats Company, keeps that 1893 priority date. Fun Fact: The Aunt Jemima mark actually changed trademark law in the United States. (See this article for details.)   A trademark holder may use “tacking” when the original and revised trademarks are “legal equivalents” in that they create the same, continuing commercial impression. In short, tacking applies when a consumer considers both marks to be the same despite a modification.

The Supreme Court, in an opinion delivered by Justice Sotomayor, concluded that because the tacking inquiry operates from the perspective of an ordinary purchaser or consumer, a jury should make the determination of whether the modified mark creates the same, continuing commercial impression. Prior to this ruling, there had been a split in the federal circuit courts as to whether tacking was a question for the jury or the court. The Supreme Court has now decided the issue. Note, that the Supreme Court did acknowledge that the issue of tacking could still be decided by a judge on a motion for judgment as a matter of law or on a motion summary judgment under the right set of facts.

So which bank won? Hana Bank. Hana Bank convinced a jury that the doctrine of tacking applied to its mark such that it had priority over Hana Financial. Based on the Supreme Court’s ruling, the jury verdict will stand.

Teva Pharmaceuticals v. Sandoz–Supreme Court Changes Appellate Review of Claim Constructions

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1Yesterday, the Supreme Court issued another opinion in the patent arena in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. (No. 13-854). In this decision, the Court  considered what deference, if any, that appellate courts should have when reviewing a district court’s claim construction. In a 7–2 opinion authored by Justice Breyer (Justices Thomas and Alito dissenting), the Court reaffirmed that appellate courts review claim constructions de novo, but held that underlying factual determinations made by a district court should be reviewed under a clear error standard. Thus, this is somewhat of a mixed bag decision whose practical importance is unclear.

Reasoning of the Court

The Court started off by reaffirming its determination in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) that claim construction is a question of law for the courts, even when it may require evidentiary determinations. The Court then noted that Federal Rule of Civil Procedure 52(a) sets the framework for an appellate court’s review of findings of fact made by a district court. Under Rule 52(a)(6), a court of appeals must not set aside a district court’s findings of fact unless they are clearly erroneous. Under the Court’s precedent, this standard applies to all types of factual findings made by a district court, including findings relating to subsidiary and ultimate facts. The Court then found that there was no exception to Rule 52(a) for patent cases, either by statute or based on its case law. Based on this determination, the Court concluded that appellate courts must review factual findings made by a district court during the claim construction process under a clear error standard of review, and not a de novo standard.

Unlike many Supreme Court decisions, the Court then went on and attempted to clarify how appellate courts should review claim constructions from district courts. When a court considers intrinsic evidence to the patent (the patent claims, specification, drawings, and prosecution history) when determining its construction, appellate courts are to review those determinations using a de novo standard of review. However, when a district court considers extrinsic evidence (such as expert testimony), any factual findings related to that extrinsic evidence must be reviewed on a clear error basis. Finally, the ultimate construction is still to be reviewed on a de novo basis, even if it contains issues of fact.

Consequences of the Decision

As with any decision, it is sometimes hard to predict the consequences immediately after the decision issues. But, there are some take-aways from this decision. First, district courts will likely have to do some more work, especially when they are making factual determinations relating to claim construction. District courts will now have to make those findings explicit if they expect the Federal Circuit to give the findings deference.

Second, parties will have to consider whether introducing more extrinsic types of evidence will be beneficial or harmful to their cases. It may be that in certain circumstances a party will feel so confident of its position before a district court that it will want as many factual determinations as possible to support its hoped-for ruling by the district court. On the other hand, if it ultimately loses on construction, those factual findings will make it harder for to argue for reversal. So, parties will need to be careful in thinking about what makes the most sense in their particular circumstance.

Third, it will be interesting to see what the Federal Circuit does. The Supreme Court confirmed that the ultimate decision is still made on a de novo basis. This means that the Federal Circuit may simply accentuate or minimize the factual findings as needed to affirm or reverse based on its own interpretation, which may make little practical difference in the outcomes of cases.

Many claim constructions do not turn on factual findings relating to extrinsic evidence, so this decision is unlikely to radically change how patents are litigated. In the margins, where factual determinations and understandings are truly important, it likely makes sense to give deference to the district court, especially when it had the chance to hear live testimony by experts on disputed issues and to weigh issues of credibility.

For some further initial impressions of the Court’s decision, check on this article on the Patently-O blog, in which Professor Crouch talked with a number of patent law experts for their impressions.

Ripple Effect from Alice and Mayo Cases Being Felt in Patent World

shutterstock_26396608By: Henry Sneath, Chair of the Intellectual Property practice at Picadio Sneath Miller & Norton, P.C. in Pittsburgh, Pa.  hsneath@psmn.com or 412-288-4013

Sharing a great post from Dennis Crouch and his tremendous blog: Patently-O

New Section 101 Decisions: Patents Invalid

The Supreme Court’s decisions from Alice and Mayo are beginning to really have their impact. A few examples:

  • Walker Digital v. Google (D. Del. September 2014) (data processing patent invalid under 101 as an abstract idea) (Judge Stark).
  • Genetic Tech v. LabCorp and 23AndMe (D. Del. September 2014) (method of predicting human performance based upon genetic testing invalid under 101 as a law of nature) (report and recommendation from Magistrate Judge to Judge Stark)
  • Ex parte Cote (P.T.A.B. August 2014) (computer method and hardware for ‘phase shifting’ design data invalid under 101)
  • Ex parte Jung (P.T.A.B. August 2014) (diagnostic method associated with epigenetic risk factors invalid under 101).” Patently-O.

To view the entire post – please visit Patently-O at this link: http://tinyurl.com/otj6v6n