Wisconsin Insurance Case Provides Guidance to IP Owners in Preparing Infringement Complaints

Trademark and other IP owners who file lawsuits against infringers are the masters of the complaints that start the litigation.  One consideration often overlooked is insurance coverage; many defendants have commercial general liability insurance policies that might provide coverage on the claims. 

Sometimes having a defendant with coverage is desirable; insurance can be a source of funds to pay a settlement.  Other times, coverage will make the litigation more protracted. 

A recent decision of the Wisconsin Supreme Court, West Bend Mutual Insurance Co. v. Ixthus Medical Supply, Inc. (Wis. 2019) found coverage for an insured that had been sued for trademark infringement. 

The decision provides guidance to IP owners in points to include (or exclude) in an infringement complaint that would implicate insurance coverage for the target defendant.

Copyrighted Works Deemed “Published” When Shown to Potential Wholesale Purchasers in Salesmen’s Look Books

The Copyright Act protects both published and unpublished works, but there are a number of differences between them. 

One important difference is registration.  For many copyright owners, a collection of unpublished works can be registered as a unit, which generally cannot be done for published works. 

Registering works as a collection is a major cost efficiency for copyright owners having large numbers of works.

But a recent Ninth Circuit decision, Urban Textile, Inc.  v. Rue 21, Inc.  (9th Cir. 2019) highlights a trap for the unwary.  It held that inclusion of the claimed copyrighted fabric designs in a look book of fabrics used by the manufacturer to solicit orders from its customers constituted “publication” of the designs.  That invalidated the registrations and led to dismissal of the infringement claims on summary judgment.

This kind of “publication” is common in many industries, especially those involving fashion.Many companies will show their next season’s line to buyers well in advance of making them available for sale to the public.Such companies need to be aware that this kind of pre-showing can constitute a publication – and if copyright is important, the works should be registered before the showing

PTAB Issues First Derivation Proceeding Decision

The America Invents Act of 2011 (“AIA”) made a fundamental change in U.S. patent practice:  prior law awarded patent rights to the “first to invent,” while the AIA changed that to the “first to invent and file.”  

Now, someone who independently invents something after someone else, but files first get the patent rights.

To avoid someone taking someone else’s invention as his own, the AIA created a little-known procedure called a Derivation Proceeding.  If someone can show (a) that he conceived of the invention first; (b) that he communicated the invention to one of the inventors of the first-filed patent prior to its filing; and (c) that the first-filed patent was filed without his authorization, then that person will be deemed the true “inventor” and own the patent rights.  Such proceedings must be instituted within one year of the patent application being published.

The PTAB issued its first final decision in such a proceeding.  Andersen Corp. v. GED Integrated Solutions, Inc.  (PTAB 2019).  The decision provides some valuable lessons for would be patent owners to navigate the new AIA regime, which include (a) act quickly and diligently to file a patent application; (b) document both inventions and any communications about them meticulously; and (c) monitor competitor patents filings.

Partial Dismissal of Copyright Claims Teaches Additional Strategies to Deal with Trolls

We have previously written about strategies to defend against claims by copyright trolls, Copyright Case Teaches How to Deal with Trolls. A recent decision by a federal court in New York, Minden Pictures, Inc. v. Buzzfeed, Inc. (S.D.N.Y. 2019), teaches some further valuable strategies to deal with such claims.   

Minden Pictures is a wildlife and nature photo licensing agency that has filed 36 copyright infringement lawsuits since 2010.  In this case, Minden alleged that the copyrighted photographs were displayed on Buzzfeed’s website at various times since 2011.  Buzzfeed moved to dismiss, and the district court granted much of Buzzfeed’s various dismissal motions.

One key ruling was that the three-year statute of limitations applied to any pictures posted more than three-years prior to suit.  Minden tried to avoid the statute of limitations by invoking the Second Circuit’s “discovery rule.”  But the court ruled that as a sophisticated party that had brought numerous copyright suits, Minden was expected to exercise considerable diligence to protect its rights.  It could have discovered the infringements had it reviewed Buzzfeed’s site.

Other rulings include dismissal of conclusory allegations of willful infringement, barring of statutory damages (and attorney’s fees) for pictures that had not been registered before infringement, and limiting statutory damages to one award for an entire “collection” of works registered as such.

The overall strategy highlighted by the Minden decision is that, even if one cannot achieve full dismissal of a troll’s case, paring down the claims as much and as early as possible can be an effective and useful strategy.

Federal Circuit Disqualifies Firm for Conflict with Corporate Affiliate

A recent Federal Circuit decision, Falk Pharma GmbH v. Generico, LLC (2019), disqualified a large firm from prosecuting three appeals, because, at the same time, the firm was representing a corporate affiliate of the adversary. 

Key to the decision was the fact that the firm’s retainer agreement with the affiliate specified – when read together with the General Counsel’s operating guidelines which were incorporated into the retainer agreement – that the firm had an attorney-client relationship with all of the client’s affiliates. 

Apart from that, the Federal Circuit held that the two adversary affiliates were closely related to the third entity (the firm client) in terms of operations and financial dependence for the purpose of professional ethics to constitute one client.

Counsel for corporations with affiliates are well advised to consider adding language to retainer agreements that specify whether affiliates of the primary “client” also have the status of a client of the retained law firm.  The Falk Pharma case indicates that such will generally be honored and if a conflict arises may result in disqualification.

Fourth Circuit Upholds Finding That Booking.com Is Not Generic

It is a truism that generic terms cannot be protected as trademarks.  And usually when additional generic terms are added, the result is itself still generic.

But a recent Fourth Circuit ruling in Booking.com B.V. v. U.S. PTO (2019) upheld a district court finding that, taken as a whole, the mark BOOKING.COM for hotel reservation services was not generic.  Although each of the elements (BOOKING) and (.COM) by itself was generic, the mark, considered “as a whole” and given the survey evidence introduced, the district court found was not generic (rather it was found descriptive, and protectible with a showing of secondary meaning).

Counsel and parties dealing with trademarks should take into account that combinations of words, even generic words, might still be protectible, assuming that the public perceives the combination not as a generic term, but a descriptive one or a brand.  This could favor parties seeking protection for such marks. Conversely, parties against whom such combination marks are asserted should take this into account when such marks are asserted against them.  

Avvo Decision Raises Important Questions About Opinion-Fact Dichotomy in False Advertising Cases

Rating websites have become a popular means to review products and services – from restaurants and vacation spots,  ordinary consumer goods, to professionals like doctors, dentists and lawyers.  But rating sites can be a double-edged sword – good ratings can increase business and market share, but negative ones can hurt the bottom line.  

 What can companies do about negative ratings – especially when they believe they are the result of some flawed methodology or calculation?

Examining a recent decision of a New York federal court, dismissing false advertising claims against the attorney rating site Avvo.com, sheds light on what can and cannot be done legally to deal with what may be unfair or flawed ratings. 

 While ratings themselves are generally construed as non-actionable opinion, representations about how a site creates and calculates its rating are often factual and, if misrepresented, could form the basis of a legal claim.

Rolex Case Highlights Importance of Dilution Claim

When a trademark achieves fame and renown, free-riders and pirates are often not far behind. Usually the attempt to exploit someone else’s mark comes in the same or related competitive space, and a regular infringement charge will work. 

What happens, though, when someone uses the same mark in a totally different and unrelated field?  Trademarks generally only confer rights within a particular market for particular goods or services, and an infringement claim (requiring a likelihood of confusion) may be harder to prove. 

So what can the trademark owner do in that situation?  A recent suit filed by Rolex in federal court in Texas may shed light on this issue. If the mark is a very famous and renown mark, then there may be a claim for what is known as “dilution.”

 

Federal Circuit Bases Personal Jurisdiction on Enforcement Letter

A patent owner sends a cease and desist letter to a would be infringer in a remote location.  The recipient of the letter files a declaratory judgment claim of non-infringement in its home district; the patent owner’s only contact to the district is the enforcement letter.  Is that sufficient for jurisdiction? 

Since Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), the Federal Circuit has held that such letters, as a matter of policy, do not suffice to give rise to jurisdiction.

But in December, the Federal Circuit upheld jurisdiction in just such a situation.  Jack Henry & Assocs. v. Plano Encryption Techs. LLC, 910 F.3d 1199 (Fed. Cir. 2018).  Although it did attempt to distinguish Red Wing Shoe on the facts of the case, it is now unclear when an enforcement letter could lead to jurisdiction in a distant forum.

Patent owners for now must be more careful when sending out such letters and understand that they may be risking litigation in a distant forum.  Conversely, recipients of such letters, especially from non-practicing entities (often referred to as trolls) may have greater leverage to sue in their own forum.

Supreme Court Affirms that Secret Sales Can Trigger the On-Sale Bar

We previously wrote, Federal Circuit Interprets AIA “On-Sale” Bar to Include Confidential Sales, Leaves Open Issue of Completely Secret Sale, about a Federal Circuit decision, Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. (2018), which held that the patent on-sale bar is triggered by confidential sales of technology, even though the invention is not disclosed to the public, and that this law was not changed by the America Invents Act of 2011 (AIA). 

The Supreme Court has now affirmed that ruling, holding that the long-standing construction of “on-sale” in the statute was not changed by the AIA.

It often happens that parties enter into confidential agreements for the commercial exploitation of technology that is intended to be patented. These parties need to be aware that these agreements might well be deemed a “sale,” triggering the one-year clock for the on-sale bar.

Trademark Trial and Appeal Board Allows Consumer Standing to Oppose Trademark Registration

A recent TTAB decision, Curtin v. United Trademark Holdings, Inc. (TTAB 2018), allowed a consumer of the products at issue to assert standing to oppose the registration of the mark RAPUNZEL for dolls, based on the consumer’s allegations of consumer harm.  The TTAB held that there is no requirement that one has a commercial interest or be a competitor of the applicant for standing.

Companies who seek to register marks that arguably are descriptive or generic now may face expanded chances for opposition to their registration of such marks. 

Proposed Patent Office Rules Would Allow Many More Software and Business Patents

The Patent Office recently proposed (and requested comments on) a new set of rules designed to determine whether a patent application is directed to eligible subject matter.  This has been a hot issue ever since the Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank International.  Since that case, many software and business method patents have been held invalid.  However, in 2016 the Federal Circuit decided Enfish LLC v. Microsoft Corp, which carved a large exception from Alice.  Courts since have upheld more software patents.

The PTO’s proposed rules now incorporate the Enfish ruling and broadly permits many forms of software patents.  The key difference appears to be between algorithms that merely use generic computers to perform a task, and algorithms that make computers function better, such as more efficient database or more accessible graphical user interfaces.

For software developers, the proposed rules will likely make many more applications eligible for patent protection, provided they can be conformed to the new rules.  For many companies, however, it appears that in the future there is an increased possibility there will be targets of patent enforcement efforts. It has been estimated that 60 percent of patent troll cases involve software or other similar technology. 

Primary Importance of Secondary Meaning in Securing Powerful Trade Dress Protection

Two recent cases provide important insights in maximizing the chances of gaining trade dress protection.

Designs are a crucial element to fashion – a design that stands out from the crowd can both make a fashion statement and drive demand.  But a successful design is often quickly followed by copying and knockoffs that can dilute and even destroy the success of what was a fashion icon. 

Fashion companies look to intellectual property law to protect their designs.  Among the available legal protections is trade dress – where the design itself functions as a trademark, distinguishing the product as emanating from one designer or fashion house. 

While trade dress can be a powerful form of legal protection, it has rigorous legal requirements, and a company seeking such protection needs to exploit a smart strategy to gain and maintain such protection. 

One case, involving a unique design for bikinis, emphasizes the importance of the power of social media to generate recognition, and the importance of maintaining good records of such recognition.The other case, involving handbag designs, shows the importance of both survey evidence and maintaining exclusivity – controlling third party uses of the same or similar designs

Influencer Arrangements Generate Lawsuits and Legal Issues

As new commercial and business arrangements are introduced and become popular, the law struggles to keep up.  This has been particularly the case with regard to social media, which seems to be evolving at the speed of light.  The use of influencers is a popular and growing way to promote brands and products among luxury goods and fashion companies. 

On the surface, the process seems simple:  a brand contracts with an influencer(s) (celebrities or those who have large followings on social media) to create a particular number of promotional posts and/or to appear at promotional events. 

But two recent lawsuits between promoters and influencers show that the legal parameters of how to structure these arrangements are still being worked out.

Use of influencers can be a powerful tool to promote luxury and other fashion brands. But attention to the details of the influencer arrangement and the contract terms at the time of engagement can avoid significant problems and headaches later. As in many commercial relationships, an ounce of prevention can be worth a pound of cure.

Copyright Case Teaches How to Deal with Trolls

A recent decision dealt with a “copyright troll,” an attorney that had filed over 500 copyright cases in the Southern District of New York alone.  Pereira v. 3072541 Canada Inc.  Although the case denied attorney’s fees to the defendant, the history of the case recites several procedural steps that defense counsel used to thwart the plaintiff, who had sought a substantial settlement ($25,000) largely on the procedural burden of litigating the case.

The case teaches valuable lessons in how to effectively deal with a troll

Court Opinion Doubling $130 Million Jury Verdict Provides a Roadmap for What Not to Do When Accused of Patent Infringement

A recent decision in a patent infringement case from the Central District of California, Alfred E. Mann Foundation for Scientific Research v. Cochlear Corp. awarded enhanced damages for patent infringement, doubling a jury verdict of $130 Million.  The case (which involved cochlear implant technology used for the hearing impaired) reads like a primer of what not to do as a defendant in a patent case.

            While the court weighed a variety of factors to arrive at the decision to double the damages award, perhaps the most glaring was the defendant’s reaction after the jury verdict.  Its Annual Report stated that the jury’s verdict “will not disrupt Cochlear’s business or customers in the United States.”  Combined with the fact that the evidence indicated that the infringing products generated $1.8 billion in revenue (with gross profit margins of 75% to 92%), it was apparent that the defendant had not gotten the message. 

Honey Badger Case Shows Limits of First Amendment Protection in Trademark Cases

A recent Ninth Circuit decision, Gordon v. Drape Creative, Inc. (2018), involving two well-known “Honey Badger” trademarks, shows the limits of the First Amendment defense in trademark cases. 

Parties that seek to use trademarks in creative ways would be well advised to consider its facts when determining whether to proceed or risk legal exposure.

Federal courts have adopted a special set of rules for trademark infringement cases involving expressive content, which, for First Amendment reasons, makes it harder for a trademark owner to enforce its rights when the accused use involves expressive content, such as the title or content of movies, video games, etc.  The test originates in Rogers v. Grimaldi (2d Cir. 1989), but has most often been applied by the Ninth Circuit in a long line of cases. 

The Honey Badger case, however, involved very minimal creativity – the mark was used on greeting cards with virtually no embellishment, and it appears that there was a deliberate intent to exploit the mark.  The Ninth Circuit reversed a grant of summary judgment for the defendant, finding that there was an issue for trial as to whether the mark was used in a way that was “explicitly misleading as to [the] source or content” of the product. 

The Gordon opinion is helpful in understanding the limits of the First Amendment defense in these types of cases.

Getting into Trouble Again for Copying, Balenciaga This Time Gets Sued by a Car Freshener Company

Fashion companies depend on new designs and ideas to differentiate them from their competitors.  But allowing designers free creative rein without vetting the new designs for legal issues can get a company in trouble.  A recent case illustrates the point well.

We recently blogged about a copyright infringement suit by a New York souvenir company against Balenciaga for copying its designs.  Balenciaga has now gotten in trouble again – this time for copying the well-known design of a commonly used car freshener (shaped like a pine tree and usually hung from the rearview mirror). 

Although these items are far from being luxury items – a package of three sells for $3 at Target – their design is well known.  This is now the second time that Balenciaga has been sued (in New York’s Southern District court) for misappropriation of the design of an inexpensive product for use as a luxury product, in this case, a $275 key chain.

Second Circuit Recognizes Broad Trademark Priority Even for New Channels of Trade

In American trademark law, trademark rights are gained through use – use of the mark in connection with the goods and services.  A recent Second Circuit decision, Excelled Sheepskin & Leather Coat Corp. v. Oregon Brewing Company (2018), indicates that the rights gained through use can be broader than might have been previously supposed.

Specifically, the Second Circuit held, contrary to the district court’s decision, that a trademark owner had priority in certain types of goods (t-shirts, sweatshirts, hats and other apparel) over the defendant.  Although, at first, the plaintiff had only been using the mark for apparel as an adjunct to support its main business, beer, and even though it did not commence selling these products in clothing stores until after the defendant has already done so, it nevertheless had priority. It could therefore assert an infringement claim after it had begun distributing these products in clothing stores. 

The appellate court held that once the plaintiff established priority in these types of apparel, it has that with respect to any distribution channel for the same goods.

The takeaway is that when researching prior uses of a mark (for example, in clearing use of a mark), one must look to any uses of the mark in connection with the same or similar goods.  That another party might be marketing the goods in a different manner or a different purpose may not change the fact that it has prior rights.

Failure to Do Due Diligence in IP Acquisition Means Copyright Infringement Claim Is Barred

Companies which acquire IP rights must, of course, make efforts to ensure that ownership of what they are acquiring is secure. 

As one company learned in a recent copyright decision by the Second Circuit, Latin America Music Co. v. Spanish Broadcasting System (2018), failure to undertake proper due diligence as to the chain of title may mean the loss of the ability to enforce those rights. 

The takeaway, of course, is that any time rights are transferred (whether through a straight acquisition, merger, or corporate reorganization), the acquiring entity must make sure that no one else has claimed rights in the works at issue.Otherwise, it may discover that it has acquired an unenforceable and hence worthless right