In Doors Rock Band Dispute, Ninth Circuit Finds Insurer Duty to Defend Against Trademark Claims

Case: Manzarek v. St. Paul Fire & Marine Ins. Co., 9th Cir. No. 06-55936 (3/25/08)

The One Sentence Summary: District court erred in dismissing an advertising injury insurance coverage and bad faith lawsuit involving members of the rock band, The Doors, and claims of trademark infringement.



Ninth Circuit Holdings:

• Dismissal of plaintiff's complaint for insurance coverage for advertising injury and bodily injury was improper. A duty to defend existed due to a potential of coverage for claims alleging sale of trademarked merchandise and infliction of emotional distress. The "field of entertainment" exclusion relied upon by the defendant insurance company did not exclude all potential for coverage.
• The trial court should have allowed plaintiff an opportunity to amend his complaint.
  
  

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Patent Office Rule Changes Blocked by District Court's Permanent Injunction

Case: Tafas v. Dudas, Nos. 1:07cv846, 1:07cv1008 (E.D. Va. 4/1/08)

Judge James Cacheris of the United States District Court in Alexandria, Virginia issued a permanent injunction blocking the USPTO from implementing new rules for patent prosecution. The rules had been previously held up by a preliminary injunction issued on October 31, 2007.

In issuing the injunction, the court granted summary judgment to plaintiffs, holding that the rules were substantive rather than procedural, and that the USPTO did not have authority to issue the rules.

The litigation is likely not over because the ruling could be appealed to the Federal Circuit by the USPTO.

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Antisuit Injunction Not Available to Stop Litigation in China Despite Prior California Settlement

Case: TSMC North America v. Semiconductor Mfg. Int'l Corp., California Court of Appeal No. A117182, March 27, 20008

In Brief: After the parties settled an earlier patent infringement suit with a settlement agreement providing for California choice of law and submission to California courts for jurisdiction, disputes again arose causing one party to file litigation in California and the other to file a suit in the Peoples' Republic of China. The trial court denied a motion for an antisuit injunction barring further litigation of the case in China, citing concerns of international comity, and rejecting claims that the litigation in China would violate plaintiff's rights. The court of appeal affirmed.

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Use of Trademark in Keyword Search Caused Initial Interest Confusion

Case: Storus Corp. v. Aroa Mktg. Inc., N.D. Cal. C-06-2454 (Feb. 15, 2008)

The One Sentence Summary: Summary judgment of initial interest confusion under the Lanham Act was granted for plaintiff where defendant purchased keyword search advertisements using plaintiff's trademark and the advertisement displayed the trademark leading searchers to click on the advertisement.



District Court Holdings:

• SMART MONEY CLIP mark was a valid mark. Defendant failed to present any evidence that "smart money clip" was a general laudatory term.
• Applying the internet trinity of Sleekcraft confusion factors, (1) the similarity of the marks, (2) the relatedness of the goods or services, and (3) the parties’ simultaneous use of the Web as a marketing channel, the court found a likelihood of confusion due to initial interest confusion. Defendant's purchase of the trademark keywords "smart money clip" on Google AdSense leading to defendant's advertisement titled "Smart Money Clip" led to 1,374 clicks out of 36,164 displays. This diversion of potential customers was initial interest confusion under the Lanham Act.
• For a second defendant, summary judgment was denied in the absence of evidence that a search for the term "smart money clip" would lead to a page with that phrase advertising a competing product.
  
  

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Amounts Paid By Settling Copyright Defendants Reduces Judgment Against Non-Settling Defendants Under One-Satisfaction Rule

Case: Buc Int'l Corp. v. Int'l Yacht Council Ltd, 11th Cir. No. 05-16151 (2/25/08)

The One Sentence Summary: Defendants found liable for copyright infringement should have been allowed to reduce the judgment against them under Federal Rule of Civil Procedure 60(b)(5) by the amount paid by settling defendants because one satisfaction rule applies to copyright claims.

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Unfair Competition and Copyright Claims Against Karaoke Competitor Dismissed

Case: Sybersound v. UAV Corp., 9th Cir. No. 06-55221(2/27/08)

The One Sentence Summary: Claims that a competitor in the karaoke business infringed copyrights and competed unfairly were dismissed.



Ninth Circuit Holdings:

• Lanham Act 43(a) (15 U.S.C. § 1125(a)) claim for misrepresentations regarding copyright license status could not be brought by competitor who did not own copyrights, so dismissal of claim was proper.
  
• Co-owner of copyright could not assign exclusive right to sue for infringement of karaoke license.
• Dismissal of RICO claim under 18 U.S.C. § 1962 was proper because plaintiff could not show proximate cause of damage, and complicated questions as to multiple recoveries would arise.
• Dismissal of RICO claim was also proper because plaintiff could not show not show injury caused by reinvestment of RICO proceeds.
• State law claims for interference with contract and breach of California's Unfair Competition Law, Business & Professions Code section 17200, were preempted to the extent they were based on claims of copyright infringement. Claims that third parties were induced to enter contract by defendants' claims of copyright compliance could not be enforced by plaintiff who was not directly involved.
• Claim under Bus. & Prof. Code § 17043 for below cost sales were dismissed because there was no claim of a purpose to harm plaintiff.
  
  

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Attorneys' Fees for Bad Faith Trade Secret Claim Improper Where Complaint Did Not Allege Trade Secret Misappropriation

Case: CytoDyn, Inc. v. Amerimmune Pharm., Inc., No. B187661 (Cal. Court of Appeal, 2/20/08)

The One Sentence Summary: Complaint alleging unjust enrichment in taking of patents and trademarks did not allow award of attorneys' fees to defendants under California Trade Secrets Act despite erroneous claim for attorneys' fees under Trade Secrets Act in prayer for relief.

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Prototype Sewing Machine Sold to the Customer Created On-Sale Bar

Case: Atlanta Attachment Co. v. Leggett & Platt, Inc., No. 2007-1188 (Fed. Cir. 2/21/08)

The One Sentence Summary: Sale of a prototype sewing machine to a customer before the critical date created an on-sale bar making the patent invalid.


Federal Circuit Holdings:

• On-sale bar of 35 U.S.C. § 102(b) applied to sale of prototype sewing machine to customer before critical date. The fact that the inventor did not retain control of the prototype was dispositive in determining the use was not experimental despite the customer's experimentation with the invention.
• The prototype sold was a sufficient reduction to practice of the invention despite later improvement of the invention in a later version of the sewing machine.
• The sale of the third prototype was material for purposes of an inequitable conduct determination, but the district court on remand should consider whether there was intent to deceive.
  
  

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All Sleekcraft Factors Must Be Considered in Summary Judgment on Trademark Infringement Claims

Case: Jada Toys, Inc. v. Mattel, Inc., No. 05-55627 (9th Cir. 2/21/08)

The One Sentence Summary: The panel reversed summary judgment rulings by the district court on trademark infringement, dilution and copyright claims in a dispute between toy makers.



Ninth Circuit Holdings:

• Summary judgment for defendant Mattel on trademark infringement claim was improper when district court considered only dissimilarity of marks, and not the remaining Sleekcraft factors.
• Summary judgment against Mattel on its trademark dilution claim was improper where HOT RIGZ mark was nearly identical to famous HOT WHEELS mark.
• Copyright claim by Mattel presented issues of fact as to similarity of flame drawings.
  
  

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Trade Secret Claims Should Have Been Stayed During Arbitration of Related Contract Claims

Case: Heritage Provider Network, Inc. v. Superior Court, Cal. Court of Appeal, Second District B20129 (January 14, 2008)

The One Sentence Summary: In a California state court action alleging breach of contract, unfair competition and misappropriation of trade secrets arising out of canceled merger discussions between two physician groups, the trial court erred in not staying the case pending arbitration of the contract claims where the claims shared common factual issues.

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Injunction Prohibiting Use of Unidentified Trade Secrets Was Too Vague

Case: Patriot Homes, Inc. v. Forest River Housing, 7th Cir. No. 06-3012 (January 10, 2008)

A preliminary injunction in a trade secret and copyright case enjoined a defendant from "[u]sing, copying, disclosing, converting, appropriating, retaining, selling, transferring, or otherwise exploiting Patriot’s copyrights, confidential information, trade secrets, or computer files."

The Seventh Circuit held that this injunction was impermissibly vague and did not meet the requirements of Rule 65(d) of the Federal Rules of Civil Procedure that the injunction be specific in its terms and describe in reasonable detail the acts sought to be restrained.

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Patent Anticipated by Prior Art Paper That Shared Diagrams and Descriptions

Case: SRI Int'l, Inc. v. Internet Sec. Sys., Inc., Fed. Cir. No. 2007-1065 (January 8, 2008)

• On a patent for internet security techniques, a paper published more than one year before the patent was filed invalidated the patent due to anticipation. The panel rejected the argument that the paper was not enabling - shared language and diagrams between the paper and the specification established on summary judgment that the paper was enabling.
• A paper posted on an FTP site with an obscure file name was not a publication - it was not indexed so that one of skill in the art would look for it there.
  

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Foreign Corporation in Contested TTAB Proceeding Must Produce Corporate Designee Witness Pursuant to District Court Subpoena

Case: Rosenruist-Gestao E Servicos LDA v. Virgin Enters. Ltd., No. 06-1588 (4th Cir. December 27, 2007)

The One Sentence Summary: A Portugese company attempting to register a mark in contested proceedings before the TTAB could be compelled by a district court subpoena under 35 U.S.C. § 24 to produce a corporate designee Rule 30(b)(6) witness.

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Likelihood of Confusion Analysis Is Not Limited to the Goods or Services for Which Mark Was Registered

Case: Applied Information Sciences v. eBay, No. 05-56123, 05-56549 (9th Cir. Dec. 28, 2007)

The One Sentence Summary: In a trademark infringement claim, plaintiff can establish a protectable interest by showing it has a registered mark, but the likelihood of confusion analysis is not limited to the goods or services in which the mark was registered.


What They Were Fighting About: Plaintiff Applied Information Science had a registered mark for SMART SEARCH for computer software, and sued eBay for using the term for web search. The district court granted summary judgment for eBay.

Ninth Circuit Holdings:

• Plaintiff's federally registered mark for Smart Search established a protectable interest in the goods and services listed on its registration.
• The scope of validity of the mark is limited to the goods and services registered, but an infringement analysis can extend to any goods and services where confusion is likely to result.
  
• The district court erred in granting summary judgment for eBay on the theory that plaintiff's registered uses were different from eBay's uses. However, summary judgment was affirmed because plaintiff had not presented any admissible evidence of likelihood of confusion in opposing summary judgment.
• The district court did not err in denying attorneys' fees to eBay - the case was not exceptional and not vexatious.
  

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In Amended Opinion, Ninth Circuit Vacates Injunction Against Google But Directs Consideration of Ease of Stopping Infringement

Case: Perfect 10, Inc. v. Amazon.com, Inc., No. 06-55405 (9th Cir. 12/3/07)

Summary: In a copyright infringement case, the panel reversed a district court preliminary injunction stopping Google from displaying thumbnail images of plaintiff’s copyrighted nude photographs because Google was likely to prevail on its fair use defense. However, the panel remanded to the district court for consideration of factual questions as to whether Google could be contributorily liable for copyright infringement if it knew of specific infringing material but failed to take simple steps to prevent infringement. The district court was also to consider whether Google was entitled to a defense under the DMCA.



Ninth Circuit Holdings:

• Because the court had jurisdiction of the case due to plaintiff’s registration of some copyrighted works, the panel’s broad authority over remedies could extend to a preliminary injunction for non-registered copyrights as well.


• The district court erred in holding that plaintiff had the burden of proving that it would overcome Google’s fair use defense. On a preliminary injunction, the defendant had a burden of showing it was likely to succeed in proving fair use because defendant would bear that burden at trial.


• The panel affirmed the district court’s ruling that in-line framing of full size images by the Google browser did not violate the display, performance or distribution rights under copyright law. Google’s servers did not have a copy of the image, but rather used an HTML instruction to direct the browser to the web site publisher’s computer with the image.


• Plaintiff Perfect 10 established a prima facie case of copyright infringement of its display right for Google’s storage and display of thumbnail images in its image search feature.


• The fact that Google provided links to infringing web sites was not an abuse of good faith and fair dealing that would deprive Google of the ability to establish a fair use defense.


• The panel disagreed with the district court on the first fair use factor, the purpose and character of the use, holding that the factor weighed heavily in favor of Google. Google’s creation of a search index with the thumbnails was transformative, and outweighed the possibility that the thumbnails could supersede Perfect 10’s sale of cell phone downloads, and the minor commercial effect of Google’s use.


• The nature of the use factor favored Perfect 10 slightly. The images had been previously published, so were not entitled to the higher protection for unpublished images. The unretouched photographs of nude models were artistic and entitled to protection just as images of the American West were protected in Kelly v. Arriba Soft Corp., 336 F.3d 811, 816 (9th Cir. 2003).


• As in Kelly, the amount of use factor was neutral because Google’s search index of images needed to incorporate the entire image to be useful.


• On the fourth fair use factor, market harm, the potential that Google users could download thumbnails of the Perfect 10 images and hurt Perfect 10’s sales to cell phone users was hypothetical and not entitled to weight.


• In weighing all the factors, the panel concluded that Google’s thumbnails were a fair use, and reversed the district court’s granting of a preliminary injunction stopping use of the thumbnails.


• The district court properly refused to infer that Google users directly infringed by having infringing images stored on their local computers in the absence of any evidence from Perfect 10 on the issue.


• The local cache copy of an image made by a browser to allow Internet use was a fair use.


• The panel remanded for the district court to make factual findings as to the panel’s newly announced test:

  “[A] computer system operator can be held contributorily liable if it ‘has actual knowledge that specific infringing material is available using its system,’ Napster , 239 F.3d at 1022, and can ‘take simple measures to prevent further damage’ to copyrighted works, Netcom, 907 F. Supp. at 1375, yet continues to provide access to infringing works.”



• The district court properly found that Perfect 10 was not likely to succeed on its claim of vicarious liability for copyright infringement because Google lacked the right or ability to control the infringing acts of users who posted infringing images. Google did not have image analysis software that would allow it to screen infringing images.


• On remand, the district court should determine factual questions as to whether Google is entitled to protection under the notice and takedown provisions of the DMCA.


• On remand, the district court should resolve factual questions as to Amazon’s contributory liability and its DMCA defense.

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No Need To Engage In Likelihood Of Confusion Analysis Where Consumers Could Not Be Confused About A Product's Origin

Case: Top Tobacco, L.P. v. North Atlantic Operating Company, Inc., Case No. 07-1244 (7th Circuit Court of Appeals, December 4, 2007)

The One Sentence Summary: A picture is worth a thousand words: here, one glance is enough to decide that there is no probability of confusion.


Top Tobacco sued its competitor, North Atlantic Operating Company ("North Atlantic"), because North Atlantic re-designed its competing product with a label that included the phrase "Fresh-Top Canister." Top Tobacco claimed that North Atlantic could not use the word "top" as a trademark.

The Seventh Circuit Court of Appeals affirmed the district court's grant of summary judgment for North Atlantic, finding that "[i]t is next to impossible to believe that any consumer, however careless, would confuse these products." Under the circumstances, there is no need to analyze the "likelihood of confusion" factors because they are mere proxies for determining whether there is confusion. "If we know for sure that consumers are not confused about a product's origin, there is no need to consult even a single proxy."

Here is my favorite passage: "the word 'top' is too common, and too widely used to refer to the lids of packages - as well as parts of clothing ensembles, masts of ships, summits of mountains, bundles of wool used in spinning, half-innings of baseball, positions in appellate litigation (the top-side brief), and flavors of quark - to be appropriated by a single firm." In other words, please don't waste our time in the future.

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Ambiguous Prosecution History That Contradicted Specification Did Not Limit Claim Scope of Means Plus Function Claim

Case: Elbex Video, Ltd. v. Sensormatic Elecs. Corp., Fed. Cir. No. 2007-1097 (11/28/07)


Summary: In a suit involving closed circuit television camera control patents, the district court erred in granting summary judgment of noninfringement by construing the term "receiving means" as a monitor in light of ambiguous prosecution history statements.



The Federal Circuit held there was no clear surrender of claim scope. One of skill in the art would recognize the statements in the prosecution history were incorrect because they were not supported by the specification and would render the invention inoperable.

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Broad Non-Hire Clause Covering All Employees of Temp Agency Was Unenforceable Under California Law

Case: VL Systems, Inc. v. Unisen, Inc., 152 Cal. App. 4th 708 (2007)

Summary: A broad contract preventing an employer from hiring any former employee of the plaintiff temporary agency without paying a fee was an unenforceable non-compete under Business and Professions Code section 16600.




California Court of Appeal Holdings:

• California Business and Professions Code section 16600 which states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” rendered the contract unenforceable.
  


• The court distinguished cases allowing narrower non-compete agreements, and summarized its holding as follows:

  "Again, we take no position on whether a more narrowly drawn and limited no-hire provision would be permissible under California law. Paragraph 6, however, is in no sense narrowly drawn — it is a very broad provision covering not only solicitation by Star Trac, but all hiring, and it applies to all VLS employees, regardless of whether they worked for Star Trac or were even employed at the time. Such a broad provision is not necessary to protect VLS’s interests and is outweighed by the policy favoring freedom of mobility for employees. It is therefore unenforceable."

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California Adopts Model State Trademark Law

California’s Governor Arnold Schwarzenegger recently signed into law the Model State Trademark Law (MSTL), replacing California’s previous trademark laws in their entirety.

The MSTL:

• adopts the USPTO’s goods and services classification and allows a single application to include multiple classifications;

• expands the information required to be provided with an application for registration of a mark to a drawing of the mark and three specimens of that mark as it is actually used;

• requires that an application include a declaration of accuracy signed by a specified person and would subject that person to a civil penalty of not more than $10,000 for willfully stating as true in the declaration any material fact he or she knows to be false;

• reduces the registration period from 10 years to 5 years, and provides for successive 5-year renewal periods;

• requires the applicant to state whether the applicant previously attempted to register the mark with the USPTO and if such registration was refused, to state the reason for its rejection.

Article 12 of the MSTL states that the intent of the MSTL is “to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection . . .To that end, the construction given the federal act should be examined as nonbinding authority for interpreting and construing this chapter.” The MSTL will not affect any legal actions that are pending on January 1, 2008.

Several provisions of California’s previous trademark statutes regarding damages, anticounterfeiting, vicarious infringement and seizures are incorporated into the MSTL.

In adopting the MSTL, California joins more than 30 other states that have adopted some version of this law, which is the most current version of the International Trademark Association’s (INTA) Model State Trademark Law.

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Ninth Circuit Clarifies Test for Dilution, Finds that “PerfumeBay” Dilutes “eBay.”

Case: Perfumebay.com, Inc. v. eBay, Inc., Case No. 05-56794, Ninth Circuit Court of Appeals (November 5, 2007)

Summary: For trademark dilution, the similarity requirement may be less stringent in circumstances in which the senior mark is highly distinctive and the junior mark is used for a closely related product, as is the case here. Therefore, though PerfumeBay is not “nearly identical” to eBay, it does dilute eBay.

What They Were Fighting About: PerfumeBay’s founder began her business selling perfume on eBay. She later stopped selling on eBay and started her own web-based company, Perfumebay.com, Inc. She purchased keyword advertisements on Google and Yahoo! so that a search for the word “perfume” would pull up a sponsored link to perfumebay.com, whether or not the search also contained other terms, like “ebay.” In February 2004, eBay sued Perfumebay.com for trademark infringement and dilution. The district court found that Perfumebay.com’s use of the conjoined forms of “PerfumeBay,” was likely to cause confusion, but that nonconjoined uses were not. The district court found that neither form of Perfumebay.com caused dilution.

Ninth Circuit Holdings:

• For dilution, the similarity requirement may be less stringent in circumstances in which the senior mark is highly distinctive and the junior mark is used for a closely related product.
• “PerfumeBay” dilutes “eBay” for the following reasons: eBay is highly distinctive and famous, eBay is closely associated with its services, PerfumeBay contains the word “eBay,” and the parties sell the same product, perfume, in the same forum, the internet.
  
• Nonconjoined versions of “PerfumeBay,” for instance if “Perfume” and “Bay” were separated by a space or the image of a starfish, would also dilute “eBay.”
• “PerfumeBay” is likely to be confused with eBay, in part because it contains the entire "eBay" mark.
  
• Nonconjoined versions of PerfumeBay are not likely to cause confusion, in part they do not incorporate the entire “eBay” mark.
• The lower court properly issued an injunction barring the use of the domain names perfumebay.com and perfume-bay.com.
  

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Fourth Circuit Finds No Dilution in Chewy Vuiton Case

Case: Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, Case No. 06-2267, Fourth Circuit Court of Appeals (November 13, 2007)

The One Sentence Summary: The Fourt Circuit found no dilution by "Chewy Vuiton" of the famous LOUIS VUITTON mark, construing the Trademark Dilution Revision Act of 2006 (TDRA) to hold that parody may be considered in determining whether dilution by blurring has occurred.


What They Were Fighting About: Louis Vuitton Malletier (LVM) brought suit against Haute Diggity Dog (HDD), which manufactures and sells plush dog toys, including one called "Chewy Vuiton." The district court, on cross-motions for summary judgment, ruled in HDD's favor on claims of trademark infringement, trademark dilution, and copyright infringement.

Fourth Circuit Holdings:
The Court agreed with the district court that "Chewy Vuiton" neither infringed LVM's famous mark nor copyright. The Court also rejected LVM's claim for dilution by tarnishment, finding that the possibility that a dog could choke on a "Chewy Vuiton" toy to be insufficient.

The most interesting and important aspect of the Fourth Circuit's ruling, however, is its holding that HDD's use of "Chewy Vuiton" also did not result in dilution by blurring of the famous LOUIS VUITTON mark under the TDRA.

• As the Fourth Circuit observed, the plain language of the TDRA states that "parodying a famous mark is protected by the fair use defense only if the parody is not 'a designation of source for the person's own goods or services.'" (Emphasis in original, citing 15 U.S.C.A. 1125(c)(3)(A)(ii).)
  
• Here, "Chewy Vuiton" is a designation of source and thus does not qualify for protection under the fair use defense. Nonetheless, the Court held that the TDRA "does not require a court to ignore the existence of a parody that is used as a trademark, and it does not preclude a court from considering parody as part of the circumstances to be considered for determining whether the plaintiff has made out a claim for dilution by blurring."
  
• The Court found HDD's use of the mark as a parody to be relevant to the overall question of whether HDD's use is likely to impair the famous LOUIS VUITTON mark's distinctiveness.
  
• Instead of remanding the case to the district court, the Court then applied the TDRA dilution factors to the case to conclude that because HDD's "Chewy Vuiton" mark is a successful parody, it does not blur the distinctiveness of the LOUIS VUITTON mark. As the Court observed, "by making the famous mark an object of the parody, a successful parody might actually enhance the famous mark's distinctiveness by making it an icon."

It will be interesting to see if other circuits agree with the Fourth Circuit's reasoning in future dilution cases.

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Patent Did Not Adequately Incorporate Ancestor Patent to Avoid Anticipation

Case: Zenon Environmental, Inc. v. US Filter Corp., Fed. Cir. No. 2006-1266, 2006-1267 (11/7/07)

The One Sentence Summary: A water filter patent was invalid and anticipated where it was not entitled to the priority date of an ancestor patent when the intervening patents failed to incorporate by reference the necessary details of the ancestor patent.

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ICANN Defers Action on WHOIS Database

A controversial proposal to limit access to information about domain name owners was tabled by a committee of the Internet Corporation for Assigned Names and Numbers (ICANN). The committee voted on October 30, 2007 to defer implementing policy changes that could eliminate or otherwise limit access to some or all of the data on domain name owners that is currently available to the public on the WHOIS database. The committee voted instead to continue studying the proposed changes.

Privacy advocates are concerned that the WHOIS database does not adequately protect the privacy of individual registrants, while businesses and other owners of intellectual property argue that limiting the availability of WHOIS data will impair their ability to manage, police and protect their intellectual property rights. Click here for an AP article providing more details on the issues under debate.

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Doctrine of Equivalents Could Be Used to Expand Concentration Range in Patent Claims

Case: US Philips Corp. v. Iwasaki Elec. Co. Ltd., Fed. Cir. No. 2007-1117 11/2/07)

The One Sentence Summary: The doctrine of equivalents could allow a jury to determine that a concentration of halogens in a lamp was close enough to a concentration range stated in the claims.

Federal Circuit Holdings:

• A licensing demand letter that included a copy of the patent provided adequate notice of the identity of the owner under 35 U.S.C. § 287(a) to start patent damages.
• The district court correctly construed a range between 10 to the minus 6 and ten to minus four micromoles per cubic meter.
• The doctrine of equivalents could have been applied by a jury to determine that a concentration near a stated range was equivalent - this would not vitiate the limitations.
  
  

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Assertion of Patent with Defective Title Was Not an Exceptional Case for Award of Attorneys' Fees

Case: Digeo, Inc. v. Audible, Inc., Fed. Cir. No. 2007-1133 (11/1/07)


The One Sentence Summary: The district court did not err in refusing to grant an award of attorneys' fees under 35 U.S.C. section 285 where there was not clear and convincing evidence that the plaintiff should have known of the defects in title of the patent that it asserted, and district court did not need to allow discovery into the issue.

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Corporations Must Limit Distribution of Advice to Maintain Attorney-Client Privilege

In this post, guest blogger M. Kay Martin describes a recent California appellate court opinion illustrating what corporations must to do avoid waiving attorney client privilege.

The decision, Zurich American, holds that in order to avoid waiver, corporations should limit distribution of attorney advice, opinions and strategy to those who “need to know,” and recipients should be cautioned not to indiscriminately forward the document to others who may not fall within that description.

Case: Zurich American Ins. Co. v. Superior Court (Watts Industries, Inc.), Case No. B194793 (Cal. Ct. App. 10/11/07)

The One Sentence Summary: The attorney-client privilege applies to internal corporate communications that discuss legal advice and strategy even if the corporation’s attorneys are not directly involved in the communications, so long as the communications are shared only with persons present to further the interest of the client in the consultation or to whom disclosure is reasonably necessary to transmit the information or to accomplish the purpose for which the lawyer was consulted.

What They Were Fighting About: Watts Industries sued its insurer, Zurich American, for bad faith arising out of Zurich’s failure to defend and indemnity Watts in underlying litigation, and Zurich sought declaratory relief under the policies. Watts moved to compel production of documents from Zurich’s claims file, including documents related to loss reserves and reinsurance, that had been withheld based on attorney-client privilege and the attorney work product doctrine. The trial court ordered that the documents had to be produced, ruling that internal documents concerning reserves and reinsurance matters were not privileged, even though many of them discussed internal litigation plans and strategy, because the privilege was limited to direct communications between the client and attorney.

California Court of Appeal Holdings:
The Court of Appeal held that the trial court “used an overly restrictive standard for application of the attorney-client privilege” and directed the trial court to re-review the disputed documents applying the following principles:

First, the court must determine whether the document discusses legal advice, opinions or strategy of counsel. If so, the document is privileged.

Second, the court must then decide whether the privilege was waived by distributing the advice within the corporation. The privilege would be maintained so long as the document was shared only with those “present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted” and there is a showing that the document “was to be treated as confidential.”

Providing additional guidance, the Court of Appeal also noted that merely copying counsel on correspondence or memoranda does not confer a privilege; that relevant facts may not be withheld just because they are incorporated in a communication involving an attorney; and that the attorney-client privilege does not apply where the attorney is acting as a business agent, i.e., giving business advice or acting as a negotiator.

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Taking of Correspondence and Bid Information Needed for Time Sensitive Construction Projects Allows Trade Secret Claims to Proceed to Trial

Case: San Jose Construction, Inc. v. S.B.C.C., Inc., (Cal. App. 6th Distr. No. H031066 10/12/07)

The One Sentence Summary: A project manager's taking of binders of correspondence and bids for time sensitive construction projects created questions of fact requiring a trial on trade secret, interference with prospective economic advantage and unfair competition claims by the former employer against the new employer.



California Sixth Appellate District Holdings:

• The plaintiff had presented sufficient evidence to avoid summary judgment. The binders of correspondence and bids were more than just client lists and could be trade secrets with independent economic value. Even though much of the information in the binders came from third party subcontractors who were willing to submit new bids to another company, the compilation of work present in these binders was a "completed puzzle" that had independent economic value.
• Defendant's argument that the projects that moved with the former project manager would have moved simply due to the relationship with the project manager could not be accepted on summary judgment. Material questions of fact existed as to whether the need for the projects to proceed without delay would have allowed the former employer construction company to keep the projects absent the taking of project information that allowed the new employer to commence the projects without delay.
• There were fact questions as to whether the information in the binders could be recreated through "reverse engineering." There was evidence that the actual "reverse engineering" through the collection of new subcontractor bids was a slow process that took longer than the time available to meet the customer needs for proceeding without delay.
• Trade secret misappropriation claims could proceed despite claims that the new company did not use the binders because wrongful acquisition of a trade secret even without use can be misappropriation.
• Interference with prospective economic advantage and unfair competition claims should be tried in light of evidence that the customers would not have switched if the project manager had not taken the information necessary to start the jobs without delay.
  
  

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Trademark Trial and Appeal Board No Substitute for Federal Court When Infringement Action is Threatened

Case: Rhoades v. Avon Products, Inc., Case No. 05-56047 (9th Cir. 10/15/07)

The One Sentence Summary: Allegations of threats sufficient to create "reasonable apprehension" of an infringement suit stated an actual controversy for purposes of declaratory judgment jurisdiction and plaintiffs were not required to wait for the completion of Trademark Trial and Appeal Board (TTAB) proceedings before seeking declaratory relief.


What They Were Fighting About: Plaintiffs sought a declaration that their trademarks on skin-care products like DermaNew did not infringe Avon's trademarks on a skin-care product line called ANEW.

Ninth Circuit Holdings:

• In the Ninth Circuit, an action seeking a declaration that a patent or trademark is invalid, or that plaintiff is not infringing, presents a justiciable case or controversy if the plaintiff has a real and reasonable apprehension that he will be subject to liability. The Ninth Circuit takes a flexible approach and, unlike the Federal Circuit, does not require concrete or explicit threats by the patent or trademark owner. In this case, however, plaintiffs alleged that Avon made three concrete threats of infringement litigation and the court must accept that as true at the motion to dismiss stage.


• A letter in the settlement context promising that Avon will "initiate whatever additional proceedings or litigation is necessary" was admissible to satisfy the jurisdictional requirements of an action for declaratory relief because Federal Rule of Evidence 408 only precludes evidence from settlement negotiations when offered to "prove liability for, invalidity of, or amount of a claim . . . or to impeach."


• Whether a district court should defer, on primary jurisdiction grounds, a trademark declaratory relief action pending the completion of related TTAB proceedings was an issue of first impression in the Ninth Circuit. Adopting approaches from the First and Second Circuits, the Ninth Circuit reasoned that declining to hear a declaratory relief action on a primary jurisdiction rationale is sensible only if the agency is better equipped to handle the action. Where there is potential infringement litigation, federal courts are particularly well-suited to handle the claims. While the powers of the TTAB are limited to determining and deciding the respective rights of trademark registration, a federal district court may also determine infringement and grant damages and injunctive relief.


• Avon's evidence of plaintiffs' "bad faith"was irrelevant or de minimis and did not undermine the case and controversy established by the complaint. Avon's bad faith argument had three incorrect premises: 1) the assumption that Avon would prevail on the trademark dispute, 2) that DermaNew's years of participation in settlement talks evidenced bad faith, and 3) that DermaNew's action was an attempt to avoid TTAB discovery.
  
  

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Northern District of California Considering Changes to Its Local Patent Rules

At the Northern District of California's annual Patent Law Roundtable held on October 2, 2007, a panel including judges Marilyn Hall Patel, Ronald Whyte, Susan Illston, and Elizabeth Laporte discussed patent law developments.

One of the items discussed was an effort to revise the Northern District's local rules for patent cases. These rules guide the course of patent litigation in the court and have led other districts to adopt similar rules.

A draft version of the rule changes indicates that the committee is considering several changes, including consolidation of the preliminary and final infringement and invalidity contentions into a single filing which can be amended by order of the Court upon a timely showing of good cause.

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Northern District of California Adopts Revised Model Jury Instructions for Patent Cases

The Northern District of California has adopted revised model jury instructions for patent cases. The instructions reflect recent developments in patent cases including the changes in obviousness law from the Supreme Court's KSR decision.

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Summary Judgment of Noninfringement Reversed Where Defendants Challenged Only Precision, and Not Validity, of Testing Methods

Case: Warner-Lambert Co. v. Purepac Pharmaceutical Co., Case No. 2006-1572 (Fed. Cir. 9/21/07)

The One Sentence Summary: Summary judgment of noninfringement was reversed where the Federal Circuit, while affirming the district court's claim construction, rejected defendants' arguments which had focused on the precision of testing methods, rather than validity, to support findings of noninfringement.

What They Were Fighting About: The district court had granted summary judgment finding no infringement of plaintiff's patent for a process for producing an epilepsy drug. The Federal Circuit affirmed the district court's claim construction, but reversed summary judgment on infringement, finding material issues of fact as to whether defendants' products used the process claimed by Warner Lambert's patent.

Federal Circuit Holdings:

• The district court had found on summary judgment that Warner Lambert failed to meet its burden of showing defendants products used two key limitations which were part of the patent, and thus found no infringement. The Federal Circuit found genuine issues of material fact warranting reversal of that judgment
• The Federal Circuit focused on test results provided by Warner Lambert's expert, and the fact that Defendants had challenged only the precision of the testing method, not whether the test itself produced scientifically meaningful results.
• With respect to testing precision, the Federal Circuit noted that within the range of testing error, several test results showed that the sample met the claim limitation in the allegedly infringed patent, and thus these tests did not support granting summary judgment and finding no infringement.
• The Federal Circuit further rejected the argument that, because plaintiff had drafted its claim in quantitative terms (specifying "less than 20 ppm of an anion of a mineral acid"), proving infringement required a test that quantified the level of acidic chloride in the sample. The Court reasoned that the testing method used allowed an inference that the quantitative limitation was met, and defendants had waived any challenge to the validity of that test method.
• Defendants had also challenged the claim construction in arguing there was no infringement. First, the Federal Circuit agreed with the district court's construction that "anion of a mineral acid" meant "anion derived from a mineral acid," rather than any anion, because otherwise the phrase "of a mineral acid" added nothing to the claim. Second, the Federal Circuit concurred with other aspects of the claim construction, rejecting defendants' arguments.
  

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Former Employer Who Disclaimed Interest in Former Employee's Patent Was Not a Necessary Party

Case: IpVenture, Inc. v. Prostar Computer, Inc. (Fed. Cir. No. 2006-1012, 2006-1081 9/28/07)

The Two Sentence Summary: The district court erred in dismissing a former HP employee's patent claim where HP had disclaimed all interest in the patent despite an employee agreement requiring assignment of inventions. HP's retroactive disclaimer of interest meant that HP was not a necessary party and did not have rights under the patent even though the disclaimer was executed after commencement of the lawsuit.

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Claims for Mental Processes for Resolving Disputes by Arbitration Were Unpatentable

Case: In re Comiskey, No. 2006-1286 (Fed. Cir. 9/20/07)

The One Sentence Summary: Claims for a method of submitting disputes to arbitration were unpatentable subject matter under 35 U.S.C. § 101 when they were no more than mental processes, but the addition of a computer and communication devices to such claims was remanded to the PTO for whether the addition of these devices was obvious.

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Ninth Circuit Rejects “Trademark Disparagement” As A Cause of Action Under The Lanham Act

Case: Freecycle Network, Inc. v. Oey, No. 06-16219 (9th Cir. 9/26/07)

The One Sentence Summary: Plaintiff’s preliminary injunction preventing defendant “from making any comments that could be construed as to disparage upon [plaintiff's] possible trademark and logo” was vacated because defendant’s actions were not a “use in commerce,” created no likelihood of confusion, and did not disparage plaintiff’s products or services; and to the extent the injunction was based on a “trademark disparagement” claim under the Lanham Act, the district court abused its discretion because no such cause of action exists under the Act.

What They Were Fighting About: Plaintiff, a nonprofit corporation “dedicated to encouraging and coordinating the reusing, recycling, and gifting of goods,” sought to obtain trademark protection for its marks, “The Freecycle Network,” and “Freecycle.” The term “freecycle,” however, had previously been used to refer more generally to the act of recycling goods for free via the internet. Defendant made various statements on the internet that plaintiff lacked trademark rights in “freecycle” because it was a generic term, and he encouraged others to use the term in its generic sense and to write letters to the United States Patent and Trademark Office opposing plaintiff’s pending registration. Plaintiff sued, alleging that the defendant’s statements constituted contributory trademark infringement and trademark disparagement under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), as well as injurious falsehood, defamation, and intentional interference with a business relationship under Arizona law. The district court granted a preliminary injunction.

Ninth Circuit Holdings:

• Defendant’s actions were outside the scope of the Lanham Act because his actions likely did not constitute a “use in commerce” given that his internet postings were not made “to promote any competing service or reap any commercial benefit whatsoever.”
• Although plaintiff’s complaint alleged “trademark disparagement” under § 1125(a), no such claim exists under the Lanham Act. “That the Lanham Act’s text does not contemplate a trademark disparagement claim is borne out by the absolute dearth of precedent analyzing such a claim under the Act.”
• To the extent plaintiff argued that defendant should be prevented from using plaintiff’s claimed mark FREECYCLE in its generic sense, the court held that plaintiff’s “asserted mark — like all marks - is always at risk of becoming generic and thereby losing its ability to identify the trademark holder’s goods or services. . . . The Lanham Act itself, however, contains no provision preventing the use of a trademarked term in its generic sense.”

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Plaintiff Could Not Assert Patent Claims When It Received Only Limited Rights Under the Patent From a Bankruptcy

Case: Morrow v. Microsoft Corp., No. 2006-1512, 2006-1518, 2006-1537 (Fed. Cir. 9/19/07)

The One Sentence Summary: Plaintiff that had received the right in a bankruptcy to sue for patent infringement, but which had not received the right to license the patent, did not have constitutional standing to bring patent claim because it could not establish injury in fact.



Federal Circuit Holdings:

• Patent law rather than bankruptcy law determines whether a party can maintain a patent claim.
• The constitutional requirement of injury in fact was not met where the plaintiff had received the right in a bankruptcy to bring patent litigation but did not have the other rights under the patent including the right to license the invention.
  
  

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Literal Infringement Not Present Because An Outer Surface Is Not the Same as an Interior Surface

Case: Gillespie v. Dywidag Syst. Int'l, USA, 2006-1382 (Fed. Cir. 9/6/07)

The One Sentence Summary: The Federal Circuit found no literal infringement and reversed the district court's judgment, after modifying its claim construction, where the district court had effectively ignored a prosecution argument by the patentee which had illustrated how he understood the claim limitation, and had instead used a broader construction of the limitation under which there could be literal infringement.

What They Were Fighting About: Gillespie's patent for mine roof bolts included the limitation that the bolt have a "drive collar" and "an outer surface defining a drive head that accepts a driving mechanism", the only claim limitations the Dywidag bolt lacked. Gillespie's patent showed a hexagonal bolt, but the specifications stated a square or other-shaped bolt would do. The Dysidag bolt, however, was turned via a key socket, and so the question was whether literal infringement could be found. The parties stipulated that it could if the district court's claim construction were correct.

Federal Circuit Holdings:

• In reviewing the claim construction, the Federal Circuit noted that Gillespie had overcome a rejection of obviousness by distinguishing prior art that showed a bolt-like rock anchor having a head with a recess in the end, arguing it was impractical for engagement by a mine roof bolting machine. While the examiner did not cite this in his Reasons for Allowance, that was immaterial to the Federal Circuit's claim construction -- what was significant is that Gillespie argued this distinction, which showed what one of ordinary skill in the art would have understood the limitation to mean.


• The Federal Circuit disagreed with the district court's conclusion that a person of ordinary mechanical skill would read the specifications, drawings and claims to construe "outer surface" of the drive collar to include a collar whose interior, not exterior, accepts the drive tool. It observed that here the specifications and drawing showed a drive collar whose outer surface accepted the drive tool. While the outer surface need not be any particular shape, it must be outer to meet the claim limitation.


• By modifying the claim construction to require that a driving mechanism be applied to the outer surface, literal infringement did not exist, and the judgment was reversed.
  
  

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Lack of Enablement for the Full Claim Scope Dooms Patent

Case: Automotive Tech. Int'l v. BMW of North America, Inc., 2006-1013, 1037 (Fed. Cir. 9/6/07)

The One Sentence Summary: Affirming summary judgment finding of invalidity and noninfringement based on conclusion that the claims were invalid for lack of enablement, where the specification only described the manner and process of making one embodiment of the claimed invention.

What They Were Fighting About: Prior art sensors for side imp