DEVOTED to INTELLECTUAL PROPERTY LITIGATION & ENFORCEMENT Edited by Gregory J

NOVEMBER/DECEMBER 2014

VOLUME 20 NUMBER 6

DEVOTED TO INTELLECTUAL PROPERTY LITIGATION & ENFORCEMENT Edited by Gregory J. Battersby Litigatorand Charles W. Grimes FEATURES COLUMNS

Strategic Considerations in Litigating Praxis...... 23 Design-Arounds...... 1 Antitrust By G. Brian Busey, Josh Hartman, and Michelle Yang Discovery Court Finds That Adverse Markman Ruling False Advertising Does Not Automatically Establish Good Cause Practice Areas ...... 28 to Amend Contentions ...... 8 Copyright Litigation By Joseph E. Cwik Internet Litigation A Look at IP Rights under the New Patent Litigation Comprehensive Economic and Trade Agreement . . . 10 Technology Litigation By Nathan B. Fan Trade Dress Litigation Copyright and Performance Rights Trademark Litigation in an Online Video World...... 15 By Mark Sableman Proposed Changes to FRCP Likely to Lead to Heightened Pleading Standard in Patent Suits . . . . . 18 By Jason Stach and Jeff Watson Third Circuit Rejects Presumption of Irreparable Harm in Lanham Act Cases...... 20 By Meredith Wilkes, John Froemming, Jessica Bradley, and Candice Reder Executive Editors Gregory J. Battersby Charles W. Grimes Editor-in-Chief Michelle Houle Battersby Law Group, LLC, 25 Poplar Plain Road, Westport, CT 06880 (203) 454-9646 Advisory Board David Hill Mark S. Sommers United States Finnegan Henderson Farabow Finnegan Henderson Farabow Garrett & Dunner, LLP Garrett & Dunner, LLP Edward V. Anderson John Hornick John F. Sweeney Sheppard, Mullin, Richter & Hampton, LLP Finnegan Henderson Farabow Locke Lord, LLP Spiro Bereveskos Garrett & Dunner, LLP Rod Thompson Woodard Emhardt John C. Jarosz Farella Braun & Martel, LLP Bruce Bernstein Analysis Group Economics, Inc. Edward E. Vassallo Fitzpatrick Cella Harper & Scinto Bernstein, Litowitzm Berger & Paul R. Juhasz Grossmann, LLP Juhasz Law James Bikoff Jeffrey L. Laytin International Silverberg, Goldman and Bikoff Laytin Verner, LLP William H. Brewster Kilpatrick & Townsend Jeffery I. D. Lewis C.V. Chen Brian D. Coggio Patterson, Belknapp, Webb & Lee & Li Fish & Richardson Tyler, LLP Andros Chyrsiliou David G. Conlin Gregg Marrazzo Chrysiliou Moore Martin Edwards Wildman Estee Lauder Luis H. de Larramendi Dianne Elderkin Michael D. McCoy Elzaburu Akin, Gump, Strauss, Hauer & Alston & Bird Dedar Singh Gill Feld, LLP William T. McGrath Drew & Napier York Faulkner Davis McGrath, LLC Joaquim Goulart Finnegan Henderson Farabow George D. Medlock, Jr. Dannemann, Siemsen, Bigler & Garrett & Dunner, LLP Alston & Bird, LLP Ipanema Moreira Edmund J. Ferdinand, III Bruce C. Morris Min Han Ferdinand IP Beirne, Maynard & Parsons LLP Woo, Yun, Yang, Jeong & Han Edward V. Filardi Martin Köhler Russell L. Parr, CFA, ASA Skadden Arps Reimann Osterrieth Köhler Haft IP Metrics Thomas R. Fitzgerald Martin Köhler Christensen O’Connor Johnson Kindness Mark V. B. Partridge Dike Bronstein Roberts & Cushman Donald F. Frei Partridge IP Law Miguel B. O’Farrell Wood Herron & Evans Paul A. Ragusa Marval O’Farrell & Mairal James Galbraith Baker & Botts Anthony Prenol Kenyon & Kenyon Mark Schonfeld Blake Cassels & Graydon Laurence R. Hefter Gibson Dunn Jonathan Radcliffe Finnegan Henderson Farabow Neil Smith Nabarro Nathanson Garrett & Dunner, LLP Ropers, Majeski, Kohn & Bently, PC

Acquisitions Editor: Michelle Virzi Content Manager: Christine Vincent Managing Editor: Ravindran Santhanam

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G. Brian Busey is a partner and Josh Hartman This article explores strategic considerations in litigat- and Michelle Yang are associates in the IP ing potential design-arounds, such as how to meet the litigation practice of Morrison & Foerster LLP in Federal Circuit’s “more than colorable differences” test, Washington, DC. The views expressed in this article the benefits and risks of seeking and introducing design- are their own and do not represent the views of their around evidence during the proceedings, and the benefits firm or any of its clients. and risks of waiting until after a verdict or decision issues. It discusses these considerations in the context of district court litigation and in ITC and CBP proceedings, to highlight a few differences in strategy between the dif- Design-arounds are a well-recognized pathway for ferent forums. the public to benefit from the patent system. “One of the benefits of a patent system is its so-called ‘negative Federal Circuit Guidance incentive’ to ‘design around’ a competitor’s products, even when they are patented, thus bringing a steady flow on Design-Arounds of innovations to the marketplace.”1 Design-arounds are A common scenario for defendants is to attempt a therefore an example of how patents can spur innova- design-around after a finding of infringement and the tion, and thereby promote progress in the useful arts.2 issuance of a permanent injunction by a district court. Design-arounds, also known as “redesigns,” have This strategy, however, carries the risk of sanctions—the become an increasingly important and common element plaintiff can move the district court to find the defendant in patent litigation both in district court and before the in contempt of the court’s permanent injunction and US International Trade Commission (ITC). Potential award significant monetary penalties. In recent years, the design-arounds create strategic challenges for both plain- Federal Circuit has reaffirmed the “no more than color- tiffs and defendants relating to timing, discovery, claim ably different” standard. construction, and procedures. For example, in district Outside of the contempt proceeding context, attempted court litigation, plaintiffs must choose between broadly design-arounds also carry risks with respect to willful seeking discovery related to potential design-arounds infringement. Parties should be careful and consider the and risking a finding of noninfringement by those impact of evidence relating to attempted design-around design-arounds, or sitting back and attempting to pre- efforts that could be used to support willful infringement clude evidence regarding potential design-arounds. By allegations. contrast, defendants must choose between introducing potential design-arounds early in discovery and risking an adverse adjudication, or waiting until later on The “More Than Colorable in litigation and risking preclusion or other unwanted Differences” Test consequences.3 Prior to 2011, the district court would conduct a Similarly, in ITC proceedings, where the relief is lim- two-step inquiry in contempt proceedings relating to ited to a form of injunctive relief (i.e., an exclusion possible violation of a permanent injunction by an order) enforced primarily by US Customs and Border alleged design-around. First, the court would determine Protection (CBP), parties must consider whether (1) to whether a contempt hearing was an appropriate setting attempt to force the ITC to adjudicate potential design- for adjudicating infringement by the alleged design- arounds during the investigation or (2) to wait until after around, by considering whether there was “more than a any exclusion order issues from the ITC, fight over the colorable difference” between the alleged design-around scope of any exclusion order at the CBP and/or return and the infringing product based on the existence of to the ITC to seek an advisory opinion or enforcement “substantial open issues with respect to infringement.”4 order. Then, after determining that contempt proceedings were

NOVEMBER/DECEMBER 2014 IP Litigator 1 appropriate, the district court would determine whether address information.16 The Federal Circuit found that the redesigned products continued to infringe, thereby the patent owner never relied on the MAC address at violating the injunction.5 trial to prove infringement and therefore could not rely In Tivo Inc. v. Echostar Corporation, the Federal Circuit on that feature in contempt proceedings.17 rejected “the infringement-based understanding of the More recently, in Proveris Scientific Corporation v. colorably different test” and held that “the contempt Innovasystems, Inc.,18 the Federal Circuit explained that analysis must focus initially on the differences between removing an infringing feature is not sufficient to show the features relied upon to establish infringement and that a design-around is more than colorably different the modified features” of the alleged design-around.6 In from the previous infringing product. The defendant’s particular, the analysis should focus on those elements design-around removed a software feature that allowed of products that the patentee previously contended users to identify what range of images they wanted to and proved satisfied specific limitations of the asserted analyze. In the previous product, that feature met the “at claims.7 In considering the differences between the two a predetermined instant in time” element in the preamble products, courts must look to the relevant prior art, of an asserted claim, and defendant argued that removal to determine if the modifications in the design-around of this feature meant that the two products were more merely employs or combines elements already known than colorably different.19 in the prior art in an obvious manner.8 A nonobvious The Federal Circuit rejected defendant’s argument. modification may lead the district court to find that the Even if the removed features were a basis for the prior design-around is more than colorably different.9 finding of infringement, the district court was still If the differences between the old and new elements required to determine whether the modification was are significant, the alleged design-around is more than significant.20 The Federal Circuit compared the rede- colorably different from the previous infringing product, signed product’s user manual to the previous infringing and contempt proceedings are inappropriate, regardless product’s manual and found that the two products were of whether the alleged design-around infringes.10 On the functionally identical, thus agreeing with the district other hand, if the design-around is only colorably dif- court that the two products were not more than color- ferent, the patent owner then must prove by clear and ably different.21 convincing evidence that the design-around continues to By applying the “more than colorably different test” infringe the asserted claims, on a limitation-by-limitation in these recent cases, the Federal Circuit has high- basis, using any prior claim construction performed in lighted several considerations for defendants considering the case.11 a potential design-around. As the “more than colorably On appeal, the Federal Circuit reviews the district different” test focuses on infringing features that the pat- court’s findings on colorable differences and on infringe- ent owner relied on at trial, the design-around should ment for clear error. The Federal Circuit reviews the be directed to modifying those features. It may not be sanctions award, if any, for abuse of discretion.12 enough, however, to remove an infringing feature, if the product manuals or other evidence show that the modifi- Applying the “More Than cations left the products “functionally identical.” Colorably Different” Test The Federal Circuit has further clarified the “more than Risks to Design-Arounds colorably different” test in recent cases, which provide Design-arounds carry the risk of a finding of contempt guidance on how district courts should apply the test. and award of sanctions by the district court, even in the In Ncube Corp. v. SeaChange International Inc., the absence of intent to violate the injunction. In Tivo, for Federal Circuit explained that “the colorable-differences example, the Federal Circuit again made clear that “lack standard focuses on how the patentee in fact proved of intent to violate an injunction alone cannot save an infringement, not what the claims require.”13 The defen- infringer from a finding of contempt.”22 dant had modified its system so that an infringing feature Another risk to design-arounds relates to willful was now performed elsewhere in the redesigned system.14 infringement, which the patent owner may allege if it The district court found that modification was signifi- decides to litigate the design-around in a new action. cant and that the patent owner failed to prove that there The patent owner may more easily obtain a judgment were only colorable differences.15 On appeal, the Federal of willful infringement and enhanced damages based on Circuit affirmed the district court, rejecting the patent evidence about defendant’s need for a design-around. owner’s argument that any difference was insignificant In Applied Medical Resources Corporation v. U.S. because both the design-around and the previous infring- Surgical Corporation, for example, the Federal Circuit ing product were updated with the same 6-byte MAC affirmed a judgment of willful infringement and an

2 IP Litigator NOVEMBER/DECEMBER 2014 award of enhanced damages.23 In the first litigation are relevant not only to liability but also to the amount between the parties, the jury found that the defendant of damages. For instance, courts have concluded that willfully infringed the asserted patent with its Versaport I evidence that a defendant failed to pursue design- product.24 The defendant redesigned its product to create arounds or pursue any other remedial actions with the Versaport II, and, when the patent owner sued a sec- respect to patents that were found infringed by a jury ond time on the same patent, the district court granted was a factor supporting enhanced damages.30 Other summary judgment of infringement, and the Federal courts have held that a defendant’s failure to take any Circuit affirmed.25 remedial action in the form of modifying an infringing The district court held a jury trial on damages, and the product until after a patent infringement case was filed defendant moved to exclude all evidence relating to the weighs somewhat in favor of an award of enhanced prior litigation, including the finding of willful infringe- damages.31 ment. The Federal Circuit agreed with the district court Defendants sometimes seem to have more leeway on the admissibility of evidence from the first litigation. with introducing evidence of design-arounds that did The prior litigation was relevant to the defendant’s state not exist during discovery itself. In Airborne Athletics, of mind, particularly an in-house patent lawyer’s admis- Inc. v. Shoot-A-Way, Inc., the district court granted sion that defendant initiated and redoubled its design a four-month period of additional discovery, for a around efforts as a result of the first lawsuit.26 design-around product developed after the close of Likewise, the Federal Circuit affirmed the judgment of discovery.32 Plaintiff’s technical expert had opined in willful infringement because plaintiff provided evidence deposition that two design changes would lead to a that the defendant desperately needed the redesigned noninfringing product, and defendant immediately product to remain competitive in the market, that redesigned its accused product and put the new product defendant’s management did not properly oversee or on the market.33 Though plaintiff sought to exclude adequately participate in the development of the poten- evidence of the potential redesign from trial, the dis- tial design-around, and that defendant placed intense trict court found that the redesign was relevant to the time pressure on its engineers to create the potential lost profits analysis and that defendant disclosed the design-around.27 In particular, the Federal Circuit noted redesign within days of its development and release.34 that defendant’s former general counsel testified that Defendants can look to Airborne Athletics as a success defendant wanted “no gap” in the supply of its products, case for introducing a new design-around after the close from which the jury could infer that defendant was not of discovery. concerned about infringement and would have pro- However, defendants cannot count on the admissibil- ceeded with the design-around despite receiving outside ity of a late-produced, potential design-around. For legal opinions.28 example, in Hypertherm v. American Torch Tip, the court excluded evidence of defendant’s design-around when it was produced near the deadline for final pretrial fil- Design-Around ings and when new expert testimony would have been Considerations in Original required.35 Actions in District Court Design-arounds often are litigated in new litigation Markman Implications between the parties. In some cases, however, defendants Both plaintiffs and defendants may have to consider seek to introduce the design-around in the pending dis- potential design-arounds, and how to accuse them, trict court litigation. Plaintiffs, on the other hand, may while being uncertain about the claim construction that have an interest in obtaining discovery or excluding late- would apply to the products. In particular, jurisdictions produced evidence relating to design-arounds. without local patent rules may create more uncertainty, because they do not always hold early Markman hearings. Uncertainty regarding claim construction obviously Admissibility or Preclusion increases the risks of being wrong about the merits of an of Design-Around Evidence attempted design-around. The timing and admissibility of design-arounds can At the same time, the introduction of a design-around play critical roles in patent litigation. The admissibility can affect the district court’s claim construction. In of evidence regarding design-arounds may influence the K-TEC, Inc. v. Vita-Mix Corporation, the defendant scope of liability for infringement, as well as damages. introduced a redesign in which the accused “fifth wall” Plaintiffs frequently seek and obtain evidence of the of a blending jar was no longer flat, but curved.36 The defendant’s design-around activities.29 Such activities district court was not persuaded by this design-around

NOVEMBER/DECEMBER 2014 IP Litigator 3 and granted summary judgment of infringement by the Introduction to a Pending redesigned product.37 Before trial, the district court also Investigation construed the recited “fifth truncated wall” to cover curved walls.38 The Federal Circuit affirmed the district Respondents may seek to introduce design-arounds in a court’s grant of summary judgment and claim construc- pending ITC investigation, to obtain adjudication by the tion, finding that the district court properly clarified ALJ and the ITC. A threshold question will be whether its claim construction after rejecting defendant’s claim the ITC has jurisdiction over the redesigned product, construction arguments.39 Accordingly, the introduction based on either an actual importation or an imminent of an unsuccessful design-around can lock in a bad claim importation into the United States during the discovery construction for the rest of the case. period. In Certain Probe Card Assemblies, for example, respondent Phicom wanted its new design to receive Design-Around a ruling as to infringement, but complainant argued Considerations in the ITC that the ITC did not have jurisdiction over the new design, because there was no imminent importation.42 and before the CBP The Office of Unfair Import Investigations (OUII) The ITC enforces Section 337 of the Tariff Act of 1930, agreed with respondent and argued that the ITC had which prohibits the importation, sale for importation, jurisdiction despite an absence of evidence of actual or sale within the United States after importation of importation, “because Phicom stands ready and willing products that infringe intellectual property rights such as to sell its new probe cards to customers in the United patents. Unlike district courts, which must consider the States upon receipt of an order.”43 The ALJ and the four-factor eBay test to issue a permanent injunction, ITC agreed that the ITC possessed jurisdiction over remedies for violation of Section 337 include a general the new design and determined that the new design did or limited exclusion order, excluding defendant’s infring- not infringe.44 ing products from entry into the United States, and cease Even if a respondent were not willing or ready to and desist orders enforced within the domestic United introduce a design-around into the investigation, a States to bar the sale of previously imported, infringing complainant often seeks discovery of design-around products.40 efforts in Section 337 investigations. Section 337 inves- Furthermore, the ITC operates under a statutory man- tigations allow a broad scope of discovery, “generally date directing speedy resolution of Section 337 investiga- somewhat broader than the scope of the investigation tions.41 Once an investigation is instituted by the CBP, the itself.”45 The burden is on the party resisting discovery assigned Administrative Law Judge (ALJ) typically sets to prove that the requested information is clearly irrel- a target date of 15-16 months for the completion of the evant. Unlike district courts, the ALJ also may order investigation. This schedule usually requires a hearing broader discovery with respect to parties in foreign before the ALJ within seven to nine months of the insti- jurisdictions. Moreover, discovery is not limited to spe- tution of an investigation and an Initial Determination cific products identified in the complaint, but instead on the merits of the case around 12 months after the is governed by the broad terms of the ITC’s Notice of institution. Investigation. In light of the nature of the injunctive-like-remedy and the accelerated schedule in ITC Section 337 cases, potential design-arounds can become an important con- Informal Approval from Customs sideration early in the case. The respondent must decide Another option for a respondent is to wait for a find- whether to begin to design around the asserted patents ing of infringement and issuance of a general or limited earlier in the process, to import the redesign, and/or to exclusion order by the ITC, and then seek informal subject the design-around to the ITC’s broad discovery approval from the CBP for its redesigned products. and to adjudication before the ALJ. Alternatively, the The CBP enforces and oversees the administration respondent can wait for a possible infringement deter- of the exclusion order. Although a respondent can mination by the ITC and introduce the design-around continue to import infringing products under bond in proceedings before the CBP or, alternatively, return to during the 60-day Presidential review period, the CBP the ITC after an exclusion order issues for an advisory normally begins to enforce an exclusion order against opinion. The strategy of delaying adjudication of an respondents’ products shortly following issuance of an attempted design-around, however, risks enforcement of exclusion order. the ITC’s exclusion orders through separate enforcement In the past several years, the CBP has established a proceedings before the ITC initiated by the patent holder. number of Centers for Excellence and Expertise (CEEs)

4 IP Litigator NOVEMBER/DECEMBER 2014 that focus on CBP enforcement with respect to specific potential oral hearing of some type, before a decision industries. These CEEs are part of CBP’s mechanism is issued. for enforcing the ITC’s exclusion orders such as by per- In the current Part 177 ruling process the CBP gener- forming inspection and testing of potentially infringing ally attempts to complete its rulings within 90-120 days products and reviewing disclosures by importers. For after requests are filed; however, sometimes depending example, enforcement of exclusion orders relating to on the complexity of the patents and products it may consumer electronics such as smartphones and televi- take six months or longer. Thus, respondents that wish to sions is assigned to the CEE located at the port of Long continue importing and selling redesign products despite Beach, CA. an ITC exclusion order are incentivized to file a ruling One goal for the CEEs is to offer centralized pro- request (when necessary) as soon as possible after the cessing and advisory services for importers and to ITC issues its remedy orders. improve uniformity of enforcement across the over 300 A potential downside of the formal ruling approach US ports of entry. The CEEs offer a potential oppor- is that CBP rulings are not binding on the ITC, and the tunity for respondents to approach them and seek complainant patent holder may request that the ITC informal guidance regarding whether their products institute enforcement proceedings for violation of the are covered by an ITC exclusion order. Respondents exclusion order. In Certain Lens-Fitted Cameras, for may be able to demonstrate to the CEEs that their example, the CBP interpreted the exclusion order to design-arounds do not fall within the scope of an allow entry of certain camera products.47 The complain- exclusion order. This process is ex parte, informal ant, however, successfully sought the imposition of mon- and typically faster and cheaper than a formal rul- etary penalties for violation of the exclusion order from ing approach. However, depending on the complexity the ITC, notwithstanding CBP’s interpretation.48 of the design-around, the patents involved, and the Though CBP rulings on redesigns are not binding CBP’s administration, a respondent may be required on the ITC, they may still be an attractive alternative to seek a formal ruling request from the CBP’s because they typically are less expensive and faster than Intellectual Property Branch (IPR) within the Office of the ITC advisory opinion process. Rulings and Regulations at Customs headquarters in Washington, DC. ITC Advisory Opinions Under 19 C.F.R. § 210.79, a respondent may file a Formal Ruling from Customs request with the ITC for an advisory opinion proceeding. A respondent may seek a formal ruling that its design- To determine whether to issue an advisory opinion, the around products are outside the scope of a limited or ITC considers whether the issuance of such an advisory general exclusion order by filing a ruling request under 19 opinion would facilitate the enforcement of Section 337, C.F.R. § 177. Pursuant to Customs’ current regulations, would be in the public interest, would benefit consum- the ruling request involves an ex parte process in which ers and competitive conditions in the United States, and the patent holder is not notified of the respondent’s whether the requester has a compelling business need for or importer’s ruling request or the substances of the the advice and has framed its request as fully and accu- redesign. The patent holder normally only will become rately as possible.49 aware of the potential redesign after Customs publishes The typical schedule for an ITC advisory opinion its final ruling as to whether the redesign is infringing or process often is lengthier than the Customs process. noninfringing, and thus subject to the exclusion order or In Investigation No. 337-TA-650, for example, a non- beyond its reach. respondent filed a request on September 12, 2011. The Recently, there have been efforts within the Executive ITC directed the complainant and the OUII or the Staff Branch to improve the enforcement of ITC exclu- to submit their respective views on whether the request sion orders. In June 2013, the Intellectual Property should be granted and whether the matter should be Enforcement Coordinator (IPEC) within the White referred to an ALJ. Both the complainant and the Staff House identified improving CBP enforcement of ITC filed a response stating that referral to an ALJ was not exclusion orders as part of IPEC’s overall strategic necessary. On February 9, 2012, around five months plan.46 The CBP also has been internally developing after the original request, the ITC issued an advisory potential new regulations for handling ruling requests opinion. involving attempted redesigns. According to Customs Alternatively, the ITC may delegate a request for sources, these new potential rules would involve an advisory opinion to an ALJ, who can then conduct any inter partes procedure involving submissions by both proceedings deemed necessary. Thus, the advisory opin- the respondent and the patent holder, followed by a ion proceeding may expand to include the ALJ issuing

NOVEMBER/DECEMBER 2014 IP Litigator 5 a protective order, ordering discovery, holding hearings Key Considerations in and taking evidence. The ALJ can set a procedural schedule that closely resembles the procedural schedule Introducing Potential in an original Section 337 investigation. In Investigation Design-Arounds No. 337-TA-565, for example, two respondents jointly requested an advisory opinion on December 13, 2010, Design-arounds present important strategic choices and the complainants filed a petition to modify the for both plaintiffs and defendants in patent litigation in general exclusion order and the cease and desist order district court and the ITC. on February 3, 2011. The ITC instituted consolidated For plaintiffs, there can be benefits in seeking early proceedings on March 18, 2011 and directed the desig- discovery regarding potential design-arounds and accus- nation of an ALJ to issue an initial advisory opinion ing those products of infringement. In this scenario, 11 months after institution. The ALJ’s initial advisory it is important that the plaintiff obtain a claim con- opinion becomes the ITC’s final determination 60 struction that is broad enough to cover the attempted days after its issuance, unless the ITC determines to design-around and yet not weaken its validity position. review it. If the plaintiff can obtain coverage of the attempted Recently, the ITC assigned certain advisory opinion design-around, it could increase potential damages and proceedings to the OUII, in a process that required strengthen its settlement leverage. briefing but not a hearing.50 In Certain Kinesiotherapy However, plaintiffs also face significant risks when Devices, the OUII investigated the design-around devices accusing design-arounds in an existing case. If the and prepared a report, finding that the new devices were plaintiff has to argue for an excessively broad claim not covered by the general exclusion order and cease and construction to cover the potential design-around, it desist order against the petitioning respondent. Upon could provide an opportunity for a defendant to mount the issuance of the OUII’s report, the complainant and a stronger invalidity challenge. Also, if the district respondent filed comments and replies to comments. court reaches an adverse decision on the attempted After reviewing the OUII’s report and the parties’ sub- design-around’s infringement, then it likely will result missions, the ITC decided to adopt the report of the in lesser damages and lower settlement value. Further, OUII as its advisory opinion.51 if there is a no infringement determination on the A major disadvantage of the ITC’s advisory opinion design-around, it could result in a toothless injunction process is that such opinions are not appealable to the or ITC exclusion order that leaves the design-around in Federal Circuit, as they are not considered as final deter- the market. minations of the ITC.52 At the same time, the advisory For defendants, there also can be benefits in the opinions cannot be reviewed by any other federal court right circumstances from disclosing its potential design- under the Administrative Procedure Act.53 around during discovery and obtaining a favorable Advisory opinions have the benefit of being the ITC’s adjudication. If a defendant is able to obtain a judgment official interpretation of its exclusion orders. The respon- of noninfringement with respect to an attempted design- dent or nonparty seeking the advisory opinion, however, around, it may be able to limit the risk of a market bears the burden of proving noninfringement in an advi- foreclosure through a district court injunction or ITC sory opinion proceeding.54 Moreover, if the ITC finds exclusion order. Also, if a defendant can demonstrate that the proposed design-around violates an existing that a potential design-around was relatively quick and exclusion order, the ITC may modify the existing order easy to design and implement, it may limit damages for to reflect its advisory opinion.55 infringement that it may owe on older products that are The modified exclusion order could potentially remove found to infringe. any ambiguity about the attempted design-around prod- But there are numerous risks for defendants considering uct, and a complainant can request an enforcement potential design-arounds related to ongoing litigation. proceeding if the respondent attempts to import the Often, clients are highly sensitive to discovery of prod- redesigned product. By statute, the enforcement pro- ucts still under development, even when protective orders ceeding can impose civil penalties of up to the greater are in place. Also, there is the danger that the inclusion of twice the entered value of the products imported or of potential design-arounds in a pending case might be sold in violation of the consent order, or $100,000 per premature if claim construction has not yet issued, mak- violation each day an import occurs.56 Civil penalties are ing it difficult to analyze whether an attempted design- reviewed for abuse of discretion.57 The Federal Circuit, around might continue to infringe. By contrast, waiting however, has affirmed civil penalties as high as $11.11 to introduce potential design-arounds carries risks that million, rejecting arguments that such an amount was a the new products may not be found “colorably differ- punitive penalty.58 ent” from products found to infringe, and thus subject

6 IP Litigator NOVEMBER/DECEMBER 2014 to contempt proceedings in district court with potential within the scope of an exclusion order and thus subject monetary sanctions. In the ITC, there also is the risk that to an enforcement action and potential substantial mon- potential design-around products may be found to be etary penalties.

1. State Indus. Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed.Cir.1985). 33. Id. at *1-2. 2. See Slimfold Mfg. Co., Inc. v. Kinkead Industries, Inc., 932 F.2d 1453, 1457 34. Id. at *6. (Fed. Cir. 1991) (“Intentional ‘designing around’ the claims of a patent is not 35. Hypertherm Inc., 2009 WL 703271 at 1-2. by itself a wrong that must be compensated by invocation of the doctrine of 36. K-TEC, Inc. v. Vita-Mix Corp., 696 F.3d 1364, 1370 (Fed. Cir. 2012). equivalents. Designing around patents is, in fact, one of the ways in which the 37. Id. at 1371. patent system works to the advantage of the public in promoting progress in 38. Id. the useful arts, its constitutional purpose.”) 39. Id. at 1376. 3. See, e.g., TiVo Inc. v. EchoStar Corp., 646 F.3d 869 (Fed. Cir. 2011) (en banc) 40. Spansion v. USITC, 401 F.3d 1323, 1339 (Fed. Cir. 2010). (affirming finding of contempt and civil penalties). 41. Pursuant to 19 U.S.C. § 1337(b)(1), the ITC is directed to complete Section 4. Id. at 880-881. 337 investigations “at the earliest practicable time…” 5. Id. at 882. 42. Certain Probe Card Assemblies, Components Thereof, and Certain Tested 6. Id. DRAM and NAND Flash Memory Devices, and Products Containing 7. Id. Same, Inv. No. 337-TA-621, 2009 WL 2196921, Initial Determination, at *52 8. Id. at 882. (2009). 9. Id. at 882-883. 43. Id. at *9 (emphasis added). 10. Id. 44. Id. at *9, *52-54; Comm’n Op., 2009 WL 4757332, at *6. 11. Id. at 883. 45. Certain Electronic Digital Media Devices and Components Thereof, Inv. No. 12. Id. 337-TA-796, Order No. 14, at 5 (Feb. 14, 2012). 13. Ncube Corp. v. SeaChange Int’l Inc., 732 F.3d 1346, 1351 (Fed. Cir. 2013). 46. Office of the U.S. Intellectual Property Enforcement Coordinator, 14. Id. at 1349. “2013 Joint Strategic Plan on Intellectual Property Enforcement,” at 17 15. Id. at 1350. (June 2013). 16. Id. at 1351. 47. See Lens-Fitted Film Packages, HQ 471165 (CBP May 15, 2002). 17. Id. 48. See Lens-Fitted Film Packages, Inv. No. 337-TA-406, Comm’n Op. 18. Proveris Scientific Corp. v. Innovasystems, Inc., 739 F.3d 1367, 1371 (Fed. (Enforcement), at 19-21 (June 24, 2003). Cir. 2014). 49. 19 C.F.R. § 210.79. 19. Id. at 1370-1371. 50. See Certain Kinesiotherapy Devices and Components Thereof, Inv. No. 20. Id. at 1371. 337-TA-823, Comm’n Decision To Adopt A Report Issued By The Office 21. Id. at 1371. of Unfair Import Investigations as An Advisory Op., 79 Fed. Reg. 38330 22. Tivo, 646 F.3d at 880. (July 7, 2014); Certain Cases for Portable Electronic Devices, 79 Fed. Reg. 23. Applied Med. Res. Corp. v. U.S. Surgical Corp., 435 F.3d 1356, 1364-1365 64214-15 (Oct. 28, 2014) (instituting advisory opinion proceeding and refer- (Fed. Cir. 2006). ring to OUII for investigation and issuance of report within 90 days). 24. Id. at 1358. 51. Id. 25. Id. at 1359. 52. Certain Hardware Logic Emulation Systems and Components, Inv. No. 26. Id. at 1366. 337-TA-383, Initial Adv. Op. at 11-24 (Aug. 7, 2000), Not. Of Comm’n Non- 27. Id. at 1365. Review (Sept. 22, 2000). 28. Id. 53. Id. 29. See Hypertherm, Inc. v. American Torch Tip Co., 2009 WL 703271 (D. N.H. 54. Certain Sleep-Disordered Breathing Treatment Systems and Components March 16, 2009); Vistcon Global Technologies Inc. v. Garmin Int’l Inc., 903 Thereof, Inv. No. 337-TA-879, Advisory Op., at 11 (Aug. 11, 2014). F. Supp. 2d 521 (E.D. MI 2012) (compelling deposition of defendant’s in- 55. See Certain Ink Cartridges and Components, Inv. No. 337-TA-565, Comm’n house regarding design-around). Order at 2 (Mar. 18, 2011) (consolidating an advisory opinion proceeding 30. Funai Elec. Co. v. Daewoo Electronics Corp., 593 F. Supp. 2d 1088, 1116 and a modification proceeding). (N.D. Cal. 2009). 56. See 19 U.S.C. §1337(f)(2). 31. I-Flow Corp. v. Apex Med Techs, Inc., 2010 US DIST LEXIS 1021 at *9 57. See Genentech, Inc. v. U.S. Int’l Trade Comm’n, 122 F.3d 1409, 1414 (Fed. (S.D. Cal. Jan. 6, 2010). Cir. 1997). 32. Airborne Athletics, Inc. v. Shoot-A-Way, Inc., No. 10-3785, 2012 WL 58. See Ninestar Tech. Co. v. Int’l Trade Comm’n, No. 09-1549, Slip. Op. at 15 3612035, *1-2, 6 (D. Minn. Aug. 21, 2012). (Fed. Cir. 2012).

NOVEMBER/DECEMBER 2014 IP Litigator 7 Court Finds That Adverse Markman Ruling Does Not Automatically Establish Good Cause to Amend Contentions Joseph E. Cwik

Joseph Cwik is a partner at Husch Blackwell narrow view of what constitutes good cause in deciding LLP and concentrates his practice in the area of that a Markman ruling adopting the opposing party’s intellectual property litigation within the firm’s claim construction does not necessarily give rise to good Healthcare, Life Sciences & Pharmaceuticals cause to amend. Following the court’s Markman rul- team. A trial lawyer with significant civil litigation ing adopting plaintiff’s claim construction, the accused experience, he has represented numerous clients infringer amended its contentions to include new invalid- in disputes involving patents related to dietary ity arguments based on newly identified prior art in light supplements, nutraceuticals, pharmaceuticals, sound of the court’s construction. The defendant argued that virtualization, Internet banking, Internet trading, the good cause requirement was met due to the court’s and call-center computer systems. The author adoption of claim construction other than defendant’s. would like to thank Cameron Clawson, an associate Indeed, the District of Nevada’s Local Patent Rules at Husch Blackwell, for his assistance in writing identifies a court’s claim construction different from this article. that proposed by a party as an example of a circum- stance that may support a finding of good cause for that party to amend its contentions.4 However, Judge Pro noted that such a finding is not automatic, “particularly A key objective of many local patent rules is to encour- where the Court adopts the construction proposed by age parties to solidify their legal theories regarding the other party, as such a construction would not come infringement and invalidity at the outset of litigation. as a surprise to the party seeking to amend.”5 Judge Pro These rules save litigant and court resources by prevent- granted plaintiff’s motion to strike for lack of good cause ing the “shifting sands” approach to claim construction, those portions of defendant’s amended contentions that that is, it discourages parties from subsequently amend- were added based on the court’s claim construction. This ing their claim charts throughout the lawsuit, thereby order was based in part on the fact that the defendant making the opposition respond to a moving target of had sufficient notice that the court might construe the contentions. To this end, under their local patent rules, claims as it did, because that construction was proposed some courts will only allow for amendment of conten- by the plaintiff in its initial claim construction brief filed tions when these amendments are made for good cause nearly a year before the court’s construction order. Thus, and when the moving party acts diligently in amending according to the court, the defendant was aware of the based on newly discovered information. risk of such a construction being adopted and should Some districts already have held that good cause is have prepared accordingly, and that its subsequent lacking when a party moves to amend contentions based adoption did not constitute good cause for the amended on a Markman ruling in its favor.1 The local patent rules contentions. were “designed to require parties to crystallize their theo- The court’s order also was based in part on the defen- ries of the case early in the litigation and to adhere to dant’s lack of diligence in amending its contentions those theories once they have been disclosed.”2 following the Markman ruling. The defendant filed its amendments on the final day of fact discovery, nearly two months after the construction order. Therefore, the The Silver State Case court held, the plaintiff would be unfairly prejudiced In the case of Silver State Intellectual Technologies, Inc. v. by having to extend discovery and expend resources to Garmin International, Inc,3 Judge Pro took a similarly respond to the new contentions.

8 IP Litigator NOVEMBER/DECEMBER 2014 Conclusion claim construction. They should anticipate the possibility that the court will adopt the opposing party’s proposed Litigants should not assume that they will have automatic claim construction and should act diligently to conduct leave to amend their contentions following an adverse discovery and amend their contentions as necessary.

1. See, e.g., Thermapure v. Just Right Cleaning, No. CV–11–0431–RHW, 2013 2. O2 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1366 n. WL 3340494 (E.D. Was. Nov. 7, 2012), where Judge Whaley ruled that in 12 (Fed. Cir. 2006). contrast to the more liberal policy for amending pleadings, “the philosophy 3. Silver State Intellectual Technologies, Inc. v. Garmen Int’l, Inc., No. behind amending claim charts is decidedly conservative, and designed to pre- 2:11-CV-01578-PMP, 2014 WL 3687245 (D.Nev. July 24, 2014). vent the ‘shifting sands’ approach to claim construction.” LG Elecs. Inc. v. 4. D. Nev. R. 16.1-12. Q—Lity Computer Inc., 211 F.R.D. 360, 367 (N.D.Cal. 2002). 5. Silver State, 2014 WL 3687245, at *4.

NOVEMBER/DECEMBER 2014 IP Litigator 9 A Look at IP Rights under the New Comprehensive Economic and Trade Agreement Nathan B. Fan

Nathan B. Fan is a lawyer and trademark agent came into force on November 7, 2012, the CETA pro- practicing at Sim IP Practice in Toronto, Ontario. visions relating to copyright are reflected in Canada’s Mr. Fan provides a full range of services relating to current copyright regime, including compliance with intellectual property and related matters, including international treaties, term of protection, broadcasting, litigation, counseling, and trademark agency services. protection of technological measures, protection of He counsels clients on the effective acquisition, rights management information, and liability of interme- management, use, and enforcement of intellectual diary service providers. property rights and has represented clients in the Ontario and Federal Courts as well as the Canadian Trade-marks Opposition Board. Compliance with International Treaties CETA will require the parties to comply with various international IP treaties affecting copyright, including After several years of drawn-out negotiations, Canada the Berne Convention (1886, amended 1979), the WIPO and the European Union finally signed the Canadian-EU Copyright Treaty (1996), the WIPO Performances and Comprehensive Economic and Trade Agreement (CETA) Phonograms Treaty (1996), and the Rome Convention for on September 26, 2014, following an “agreement in prin- the Protection of Performers, Producers of Phonograms ciple” on October 18, 2013. The Canadian government and Broadcasting Organizations (1961). Canada is now has described CETA as a landmark trade agreement in compliance with all of these treaties as a result of the that is broader in scope and deeper in ambition than Copyright Modernization Act. NAFTA (North American Free Trade Agreement), boasting a predicted 20 percent boost in bilateral trade and a $12 billion increase in Canada’s gross domestic Copyright Term Extension product (GDP). The text of CETA covers a comprehen- Despite earlier reports of the European Union demand- sive range of trade and innovation-related issues and ing Canada extend the term of copyright protection, the seeks to effect several changes across the IP landscape CETA text does not require Canada to extend copyright in Canada. In particular, Chapter 22 covers Intellectual protection beyond the current term of life of the creator Property Rights (IPRs), and focuses on setting standards plus 50 years. for IPRs and enforcement measures. This section of CETA is meant to achieve two objectives: (1) to facilitate the production and commercialization of innovative and Broadcasting and Communication creative products, and the provision of services, between to the Public the Canada and the Europen Union; and (2) to achieve CETA will require the parties to provide performers an adequate and effective level of protection and enforce- with the right to authorize or prohibit the broadcast of ment of intellectual property rights. their works by wireless means and to ensure that appro- The following is a summary of the provisions in the priate remuneration is paid, all of which is reflected in IPR Chapter. Canada’s current laws. Despite earlier reports of the European Union demanding enhanced copyright protections for broadcasters, which would have required new Copyright and Related Rights restrictions on copying broadcast programs for personal As a result of the recent update to Canada’s copyright use or other fair dealing purposes, the CETA text is silent system via the Copyright Modernization Act, which on such enhanced copyright protections for broadcasters.

10 IP Litigator NOVEMBER/DECEMBER 2014 Protection of Technological the European Union, or a region or locality in that ter- Measures and Rights Management ritory, where a given quality, reputation or other char- Information acteristic of the product essentially is attributable to its geographical origin. Such protections include the legal CETA will require the parties to provide “adequate means for an interested person to prevent the use of legal protection” and “effective legal remedies” against the GI in certain circumstances, for example, in a man- the circumvention of technological protection measures ner that is false or misleading or otherwise constitutes (TPMs) and removal or alteration of rights manage- unfair competition. ment information (RMI). Canada’s new provisions in Attached to the CETA text as Annex I, Part A is a list the Copyright Act governing TPMs and RMIs (see of protected GIs for 173 European agricultural products Section 41) are consistent with CETA’s requirements. or foodstuffs. While Canadian law currently offers protection for certain GIs related to wine and spirits, the CETA Part A list greatly expands the number and types Liability of Intermediary Service of products protected by GIs. For example, Canadian Providers producers of Roquefort cheese would now need to re- CETA will require the parties to provide certain excep- label the product with a different name, as the term tions or limitations to the liability of intermediary service Roquefort is a listed GI for cheese produced in France. providers for copyright infringement taking place via However, the CETA text does provide several exceptions the communication network services that they provide. or limitations to protection afforded to certain listed GIs. Canada’s new provisions in the Copyright Act govern- For example, an exception is made for certain GIs relating exceptions to copyright infringement for Internet or ing to the use of specified English and French-language other digital network service providers (see Section 31.1) terms that commonly are employed in Canada, for exam- are consistent with CETA’s requirements. ple, Canadian producers can use “Black Forest Ham” or “Jambon Forêt Noire,” but not the German equivalent “Schwarzwälder Schinken.” The CETA text also pro- Trademarks vides for exceptions for certain GIs that are commonly CETA will require the parties to “make all reason- used in Canada (e.g., Asiago, Feta, Fontina, Gorgonzola, able efforts” to comply with the Singapore Treaty on Munster) when the use of such terms is accompanied by the Law of Trademarks (2006) and to accede to the qualifiers such as “kind,” “type,” “style,” “imitation,” etc. Madrid Protocol. Through the omnibus Bill C-31 Budget GIs for Canadian products and foodstuffs would be Implementation Act, which received royal assent on June listed in Annex I, Part B. However, Part B in the CETA 19, 2014, Canada will be amending its Trade-marks Act text is currently empty, suggesting that no Canadian to bring Canadian trademark law in compliance with products currently are protected. However, Article 7.7 the Madrid Protocol, the Singapore Treaty and the Nice provides that Annex I can be amended to add or remove Agreement. GIs by recommendation of the CETA Committee on CETA will also require the parties to provide a system Geographical Indications. for trademark registration that includes: (1) a system that allows applicants to contest and appeal refusals to register, (2) a process for filing oppositions against Industrial Designs trademark applications or trademark registrations, and CETA will require the parties to make “all reason- (3) a publicly available electronic database of trademark able efforts” to accede to the Geneva Act of the Hague applications and trademark registrations. The parties Agreement Concerning the International Registration of also must allow for the fair use of descriptive terms, Industrial Design (1999). including terms descriptive of geographical origin, as a Canada is not yet a party to the Geneva Act of limited exception to the rights conferred by a trademark. the Hague Agreement and Canada’s Industrial Design These requirements already are reflected in Canada’s Act has remained substantively unchanged since the current trademark system. 1985 amendments. The Canadian Intellectual Property Office (CIPO) has published a paper dated July 2013 entitled “Legal and Technical Implications of Canadian Geographical Indications Adherence to the Geneva Act of the Hague Agreement” CETA will require the parties to establish protections that suggests a number of substantive changes will have for a broad range of geographical indications (GIs), that to be made to Canada’s Industrial Design Act in order to is, an indication which identifies an agricultural product adhere to the Hague Agreement. For example, adherence or foodstuff as originating in the territory of Canada or to the Hague Agreement will require amendments:

NOVEMBER/DECEMBER 2014 IP Litigator 11 • To designate Canada’s Industrial Design Office This sui generis protection, which confers the same (CIDO) as the office for accepting international rights as conferred by the patent and is subject to the applications and to require CIDO to receive and same limitations and obligations, is essentially a patent send communications to the International Bureau term extension or restoration for some of the time lost of WIPO (the IB) regarding acceptance or refus- between the filing date of the patent application and als of international registrations within strict time the date when the pharmaceutical product was granted limits; market authorization. • To increase the total term of protection of industrial There are certain limitations or exceptions to the sui designs to at least 15 years from the filing date of the generis protection, for example: international registration; • To limit the period in which publication of an inter- 1. Only one sui generis term of protection is available national registration can be deferred to 30 months or per pharmaceutical product, even if the product is less (currently, Canada’s Industrial Design Act or its covered by multiple patents; Regulations do not contain any limits on how long 2. The sui generis protection extends only to the phar- publication of a registration can be deferred); maceutical product that is covered by the marketing • To provide an international registration designating authorization and the use of any such products Canada with the same effect as an application for approved before the expiry of the sui generis protec- registration filed pursuant to Section 4 of the current tion; and Industrial Design Act; 3. The sui generis protection can be revoked if the • To provide that an international registration des- applicable patent has been invalidated or no longer ignating Canada be treated as having met, on the covers the product approved for market, or where date of the international registration, the Canadian such market approval has been revoked. requirements for filing an application, that is, the technical requirements for filing and thereby estab- lishing the filing date will have to be relaxed to Patent Linkage Mechanisms accept the particulars provided in the international and Right of Appeal registration; and CETA will require the parties to provide “equivalent • To allow for the division of an international reg- and effective rights of appeal” for all litigants in proceed- istration (which can include up to 100 different ings that rely on “patent linkage” mechanisms, whereby designs belonging to the same class) into individual the granting of marketing authorizations for generic Canadian registrations (which are limited to a single pharmaceutical products is linked to the existence of design per application/registration). patent protection. The current system in place in Canada for marketing approval of generic pharmaceutical products relies on Patents, Pharmaceutical a patent linkage mechanism. The Patented Medicines Products and Data Protection (Notice of Compliance) Regulations (PM (NOC) Regulations) provide for a summary proceeding in which Sui Generis Protection for generic pharmaceutical companies address patent(s) owned by a brand-name manufacturer linked to a brand- Pharmaceuticals (Patent Term name drug by alleging invalidity or noninfringement Restoration/ Extension) of the linked patent(s). Only if the generic’s allegations prove successful can market approval (or a “Notice of CETA will require the parties to provide a period of Compliance”) be issued. “sui generis” protection to pharmaceutical patents to The current system does not provide brand-name man- cover the period between the filing date of the patent ufacturers with a right of appeal under the PM(NOC) application and the date on which the pharmaceutical Regulations. Brand-name manufacturers only can sue product was granted authorization to enter the market, the generic manufacturers for patent infringement sepa- reduced by a period of five years. The sui generis period rately in the regular court system, essentially creating may not exceed a period of two to five years, to be estab- a practice of “dual litigation.” While generic manufac- lished by each party. According to a previous summary turers do have a right of appeal under the PM(NOC) document released by the Canadian government, the Regulations, a generic’s success under the PM(NOC) period of protection offered by Canada will not exceed proceeding is no guarantee of similar success in a case of two years, while the cap on protection in the European a patent infringement litigation, as decisions under the Union will be five years. PM(NOC) proceeding regarding patent infringement or

12 IP Litigator NOVEMBER/DECEMBER 2014 validity are not necessarily binding on subsequent patent Canada and countries in the European Union already litigation decisions. are members of UPOV, but Canada is only party The CETA text is silent on how exactly the equivalent to the 1978 Act of UPOV and has not yet signed and effective rights of appeal must be implemented by onto the 1991 Act. In Canada, Bill C-18, entitled the the parties. However, according to a previous document Agricultural Growth Act, is an omnibus bill currently released by the Canadian government, it suggests that before Parliament that proposes amendments to the Canada will end the practice of “dual litigation.” Plant Breeders’ Rights Act that will bring Canada into compliance with the 1991 Act of UPOV. The amendments would include, for example: Data Protection CETA will require the parties to provide for protection • A one-year grace period for the sale of a plant vari- of undisclosed data relating to new, innovative pharma- ety in Canada prior to the filing date, which would ceutical products submitted by brand-name manufactur- otherwise be a bar to the registration of plant breeders for purposes of market approval by: (1) prohibiting ers’ rights; generic drug manufacturers from relying on such data in • An increase of the term of protection from 18 years its own market approval application for a period of six to 25 years in the case of a tree or vine and 20 years years and (2) prohibiting the parties from issuing market in any other case; approval within eight years of granting data protection. • An expanded scope of plant breeder’s rights In Canada, the Food and Drug Regulations provide respecting a variety, including the types of mate- market exclusivity to innovative drug manufacturers for rials to which that the expanded scope of rights innovative new drugs via eight years of data protection. applies; and Canada also imposes a six-year “no filing” data protec- • Exceptions for private and noncommercial purposes, tion period where generic companies cannot make use of experimental purposes, for the purpose of breeding the innovative drug manufacturer’s data in their applica- other plant varieties, and for “farmers’ privilege,” tions for market approval for a minimum of six years that is, allows for farmers to save and replant seeds (it generally takes another two years to obtain market of a protected variety on their own land for the pur- approval). The CETA text locks in Canada’s current poses of propagating that variety. allowance for a six/eight-year term of data protection. Enforcement of Intellectual Data Protection on Plant Property Rights Protection Products CETA requires the parties to generally provide proce- CETA will require the parties to provide protection, for dures for the enforcement of IPRs that are fair and equi- a period of at least 10 years, of data supporting the mar- table, not unnecessarily complicated or costly, and do not keting authorization of a new active ingredient that is a entail unreasonable time-limits or unwarranted delays. plant protection product and data supporting concurrent In particular, the CETA text requires a list of provi- registration of the end-use product containing the active sions applicable to civil enforcement, which includes the ingredient. The CETA text also provides for other provi- requirement that judicial authorities be given the author- sions to provide certainty for data protection for plant ity to order, in the context of civil proceedings relating to protection products. IPR infringement, the following: Canada’s laws appear to be consistent with the requirements of the CETA text. For example, the Pest Control 1. The production of relevant evidence and information; Products Regulations provide registrants of new active 2. The preservation of relevant evidence and information; ingredients that are pest control products, with the exclu- 3. Appropriate precautionary or preventive measures, sive use of test data filed in support of their registration, for example, injunctions, seizures of infringing for a period of 10 years following the date of registration goods/property, etc.; (see Section 17.5). 4. Other remedies such as the removal or destruction of infringing goods; 5. Monetary awards to IPR holders in the form of Plant Varieties damages, accounting of profits, or remuneration CETA will require the parties to cooperate to promote (e.g., royalties) to compensate for any infringement and reinforce the protection of plant varieties based on of IPRs; and the International Convention for the Protection of New 6. Compensation to the prevailing party by the losing Varieties of Plants (UPOV). party of legal costs and other expenses.

NOVEMBER/DECEMBER 2014 IP Litigator 13 Canada’s current legal system appears to meet all of Copyright Act and Trade-marks Act to add new civil and the requirements under the CETA text regarding the criminal remedies and new border measures in both Acts. enforcement of IPRs. Among other things, the proposed CCPA will enact new border enforcement measures enabling customs officers to detain goods that they suspect infringe copyright or Border Measures trademark rights. It allows rights owners to file a request CETA requires the parties to maintain or adopt pro- for assistance from customs officers and allows for infor- cedures with respect to import and export shipments mation to be shared between customs officers and rights that allow for the suspension or detainment of goods holders, which will allow rights holders an opportunity under suspicion of infringement of IPRs, either at the to pursue remedies in court. request of IPR holders or by competent authorities to The passage of the CCPA would update Canada’s act on their own initiative. In particular, the CETA text border and counterfeiting laws to bring Canada mostly calls for: in compliance with the requirements under CETA. However, the proposed amendments under the CCPA do 1. Appropriate procedures in place to allow IPR hold- not address any counterfeit GI goods, which is expressly ers to allow for applications, supported by adequate required under the CETA text. As such, further amend- evidence and relevant information, for suspension or ments to Canada’s laws will be required. detainment of goods suspected of infringing IPRs; 2. Adoption of procedures by which competent authorities may determine, within a reasonable period after Conclusion the suspension/detainment procedure has commenced, According to a disclaimer in the released CETA text, whether the suspected goods infringe IPRs; and the complete text will be subject to legal review and for- 3. Remedies, including the ordering of administrative matting before being finalized and will become binding penalties and the destruction of goods, or otherwise on the completion of the ratification process by both the removal of materials, found to be infringing Canada and the European Union. IPRs. There is enough flexibility in the CETA text that the precise implementation of all of Canada’s com- It is important to note that the IPRs covered under mitments under CETA’s IPR Chapter will be up for this article concern pirated copyright goods, counterfeit debate. However, it is apparent that the Canadian trademark goods, and counterfeit GI goods. Canada’s government has been busy effecting changes in the IP laws do not currently provide for such procedures. landscape while it was negotiating CETA. Several of However, Bill C-8, the Combatting Counterfeit Products these changes already have been formalized or will be Act (CCPA), is currently pending in Parliament (recently formalized shortly, but there will still be several new passed by the House of Commons, currently making changes to Canada’s IP laws to take form over the next its way through the Senate) and will amend Canada’s few years.

14 IP Litigator NOVEMBER/DECEMBER 2014 Copyright and Performance Rights in an Online Video World Mark Sableman

Mark Sableman is a partner with Thompson Coburn Millennium Copyright Act (DMCA), only copyright LLP in St. Louis, MO. Mr. Sableman focuses owners can demand takedown of a work. The film on intellectual property, media, technology, and was the producer’s copyrighted work, not hers. She Internet law. claimed, however, that in the unique circumstances of this film, she owned an independent copyright in her performance, as it was fixed in tangible form in the film. In a world of ubiquitous videos, will performance The trial judge rejected Garcia’s claim, but on appeal, rights become the next intellectual property frontier? a three-judge panel of the US Court of Appeals for People have been performing for one another for centu- the Ninth Circuit reversed in a 2-1 decision written by ries. But suddenly courts are grappling with performance Chief Judge Alex Kozinski, who has written many key copyright claims, including two quite unusual cases that decisions in Internet, intellectual property and entertain- led to decisions by two of the country’s most prominent ment law.1 (Rehearing en banc is currently pending.) judges. Judge Kozinski acknowledged that the case was Performances, at least live performances, generally fall unusual. Actors do not own copyrights in their perfor- outside of copyright protection. A copyrighted work mances in Hollywood films. But that is at least partly due must be fixed in a tangible medium of expression, and to the fact that film contracts, at least at major studios, live performances are dynamic and ephemeral, not fixed. clearly delineate the rights of each person and entity But there’s an Internet twist—everyone has video cam- involved, and include comprehensive grants of right by eras these days, and the resulting videos frequently end actors in favor of the studio. In Garcia’s case, there was up online. In this way, performances often are fixed (usu- no contract, and thus the unusual (“rarely litigated,” in ally by someone else’s video), and those videos often are Judge Kozinski’s words) issue arose as to whether she made widely available. owned a copyright in her performance. Under these circumstances, it is not surprising that two Before the 1976 Copyright Act, the copyright law speci- quite different cases recently reached federal appellate fied just what kinds of works qualified for copyright. The courts, alleging violations of performance rights. In both original Copyright Act of 1790, for example, was limited cases, it was the act of posting a video on the Internet to “books, charts, and maps.” But Section 102 of the that concerned the plaintiffs. 1976 act employed a new, wide-open definition, meant to embrace works of many different kinds; all that is required is “an original work of authorship fixed in any Garcia v. Google tangible means of expression, now known or later devel- The case that has received the most attention, and oped.” It is a broad definition, and it gave an opening for clearly the more serious of the two, concerned an ama- Garcia’s performance rights claim. teur actress, Cindy Lee Garcia. She agreed to perform Judge Kozinski held that there was a plausible case that a minor role in an historical adventure film. But the Garcia acted creatively, and that her acting contributed producer apparently misled her, for her scene was used to the film beyond the mere lines and directions in the in an anti-Islamic film titled “Innocence of Muslims,” script. He stated: and her brief performance was partly dubbed so that she appeared to be asking: “Is your Mohammed a [A]n actor does far more than speak words on child molester?” Not surprisingly, Islamic groups were a page; he must “live his part inwardly, and offended by the film. An Egyptian cleric even issued a then … give to his experience an external embodi- fatwa against everyone involved with the film. Garcia ment.” That embodiment includes body language, soon began receiving death threats. facial expression and reactions to other actors and The film had been posted on the Internet, and Garcia elements of a scene. Otherwise, “every shmuck … is sought to have it taken down. But under the Digital an actor because everyone … knows how to read.”

NOVEMBER/DECEMBER 2014 IP Litigator 15 An actor’s performance, when fixed, is copyright- of her own. He did not directly address, however, the able if it evinces “some minimal degree of creativ- suggestion in Aalmuhammed that movies were unitary ity … ‘no matter how crude, humble or obvious’ works, that is, that the final movie is the only copy- it might be.” Feist Publ’ns, Inc. v. Rural Tel. Serv. righted work, and all subsidiary contributions, such as Co., 499 U.S. 340, 345 (1991) (quoting 1 Nimmer the performances of actors, are subsumed within that on Copyright § 1.08[C][1]). That is true whether the final work. actor speaks, is dubbed over or, like Buster Keaton, performs without any words at all. Cf. 17 U.S.C. § 102(a)(4) (noting “pantomimes and choreographic The Issue of Consent works” are eligible for copyright protection). It’s Didn’t the producer at least have rights to use Garcia’s clear that Garcia’s performance meets these mini- filmed performance? Consent to use a copyrighted work mum requirements. (Most citations omitted). often is implied from circumstances, and by participating in the filming, Garcia clearly consented to some use of Additionally, because these independent creative her performance before the camera. But the unusual cir- actions were filmed, they were fixed in tangible form and cumstances of the case came into play here, and the court hence protectable as copyright. The court acknowledged found that while she clearly consented to the producer’s that it may be important who fixes the work in tangible use of her performance in the historical adventure film, form (“whether the author of a dramatic performance that consent doesn’t extend to the anti-Islamic diatribe, must personally fix his work in a tangible medium”), but which “differs so radically” from what she originally it did not address that issue because the parties had not understood to be her role. raised it. Putting together all of its conclusions—and acknowl- The court’s finding of a copyrightable performance is edging that they were tentative due to the nature of the the crux, and most controversial aspect, of the decision. preliminary injunction hearing record—the court con- (It should be noted, however, that the court stressed cluded that Garcia owned a copyright and could claim the preliminary injunction setting, and expressly stated, that its Internet distribution, distorted by being placed in “Nothing we say today precludes the district court “Innocence of Muslims,” was unauthorized. from concluding that Garcia doesn’t have a copyright- The ruling has sparked considerable criticism, and able interest, or that Google prevails on any of its the court revised its opinion, though not its outcome, defenses.”). Critics point to the somewhat cursory analy- in response. Judge N.R. Smith dissented, relying on sis (the assumption that the actresses’ acting contains standard copyright dogma that mere performances by creative content beyond the script she followed) and actors and actresses are not intended to be copyright- the lack precedential cases on copyrightability of acting able. He essentially identified the script to which Garcia performances. performed, and the resulting movie informed by cre- Having found a copyright in the performance, the ative decisions of the photographer and director, as the court went on to examine who owned the copyright relevant creative works, particularly given the minimal and who had rights to use it. Ownership inquiry in aspect of her performance compared to the entire work. copyright is relatively simple: the artist/creator owns it, unless it is a work for hire or is legally transferred. Implications of Garcia Here, the producer was not Garcia’s employer and had no written agreement with her, so the work-for-hire doc- The Garcia decision, scheduled for rehearing by the trine did not apply, and thus Garcia, not the producer, Ninth Circuit en banc on December 15, 2014, is clearly owned the performance copyright, the court held. There controversial, and raises many concerns, including dis- was no suggestion that she had transferred the copy- ruption to DMCA procedures if every participant in right, and under Section 204(a) of the Copyright Act, collective multimedia work has a right to demand it be a transfer would require a written agreement, of which taken down. The Garcia ruling cannot be separated from there was none. its unique facts, including the apparent deception in how In an earlier case, involving Spike Lee’s movie Malcolm Garcia’s performance was obtained, and the fatwa and X, the Ninth Circuit had rejected an individual consul- death threats that resulted from the posting of the video. tant’s copyright claim, and engaged in a lengthy analy- Perhaps most disappointing is the decision’s lack of full sis of copyright ownership with respect to movies. But discussion on the threshold issue of the copyrightability the analysis in that case, Aalmuhammed v. Lee,2 focused of performances. Generally plays and scripts are con- on joint works, and Judge Kozinski noted that just sidered creative works, and acting performances merely because Garcia was not a joint author with the movie representations of those works, not independently copy- producer didn’t mean that she didn’t have a copyright rightable works. Indeed, one of Judge Kozinski’s notable

16 IP Litigator NOVEMBER/DECEMBER 2014 prior opinions stressed that at least in traditional films, recording in tangible means must be done personally by when one purchases rights to a film, the images of the the author? The definition of fixation in Section 101 of actors and the actions in the film go with it. Identifying the Copyright Act requires that the fixation occur “by severable independently copyrightable performance or under the authority of the author,” and whether that copyrights is a big step that deserves full discussion. requirement is satisfied may depend on the facts. Further performance rights cases may have to directly Conrad v. AM Community address when “fixation” may be viewed as under the authority of the author. When, for example, does a profes- Credit Union sor’s lecture become fixed? Presumably not when students Far different circumstances were presented by Catherine record it secretly, but are student recordings sufficiently Conrad, a/k/a the “Banana Lady,” who puts on private made under the author’s authority when they make the performances while wearing a costume in the shape of a recordings with the professor’s implicit permission (by giant banana. placing recorders on the podium)? Or should copyright One of her cases, Conrad v. AM Community Credit protection arise only from fixations expressly authorized Union,3 reached the US Court of Appeals for the Seventh or conducted by the professor or his or her agent? Circuit. Conrad had performed at a credit union trade As in Garcia, contracts could have made a difference association event, and despite her desire to forbid photos for Conrad. Conrad alleged that the event organizer was and videos, videos of her performances were posted to contractually obligated to prohibit posting of videos of the Internet. She claimed that those videos infringed her her performance—but the record showed that the orga- performance. nizer did make that announcement, and therefore cannot The appeals court unanimously rejected her claim, in a be claimed to have induced any copyright violations. decision written by Judge Richard Posner, another intel- Finally, as in Garcia, the factual circumstances colored lectual property thought leader. Judge Posner held that Conrad’s case. Conrad had a record of making frivolous Conrad’s performance “was not copyrighted or even claims, so much so that the appeals court even suggested copyrightable,” since it was not fixed in a tangible medium. that trial courts should consider barring her from filing In fact, however, it was fixed in the tangible and ubiq- further cases until she pays the sanctions awarded to uitous media of today—cell phone videos. Without her adversaries in several previous cases. Also, no one directly addressing the issue, Judge Posner indicated was making death threats over silly “Banana Shake” that these videos did not matter. His thinking appears performances. to be that the videos portrayed nothing copyrightable. We know this because he addressed the ancillary point of whether the videos infringed Conrad’s rights; he Conclusion concluded they did not, because they merely portrayed Garcia and Conrad both suggest that in today’s world noncopyrightable material. of ubiquitous video, we are likely to see more claims of In this regard, the Court could have advanced the performance rights, especially if cases such as Garcia performance rights issue, particularly in light of the keep the door open to them, and if third-party videotap- questions raised by Garcia, by providing more analysis. ing can be found implicitly authorized by the author, Why didn’t the court find Conrad’s performance copy- thereby satisfying the fixation requirement. In these rightable? Too simple, too unscripted, too banana-silly? circumstances, both performers and producers of per- What about those emotions and creative expressions formances should take special care to use contracts to that Judge Kozinski found dispositive in Garcia? Did clarify the ownership of performance rights. Conrad’s banana suit hide them, did Judge Posner That, at least, is the primary lesson for performance rights. (who has expertise in art; he authored a book on art But Garcia and Conrad raise the broader concern that the and the law) find her expressions insufficiently cre- wide-open definition of copyright under Section 102 (any ative, or did the court simply view performances as work of “authorship” that is fixed in a current or future non-copyrightable? tangible medium) inevitably leads to creative copyright Finally, could the spectator videos provide the nec- claims. In a system where claims are made (and rejected) essary tangibility required for copyright? Or did the for copyright in transitory food creations,4 it is likely that court implicitly assume an affirmative answer to one even more creative (or outrageous, depending on your per- of the issues expressly left open in Garcia: Whether the spective) copyright theories will be forthcoming.

1. Garcia v. Google, Inc., 2014 WL 3377343, 111 U.S.P.Q.2d 1748 (9th Cir. 3. Conrad v. AM Community Credit Union, 750 F.3d 634 (7th Cir. 2014). July 11, 2014). 4. Kim Seng Co. v. J&A Importers, Inc., No. CV10-742 CAS (C.D.Cal. 2. Aalmuhammed v. Lee, 202 F.2d 1227 (9th Cir. 2000). Aug. 30, 2011).

NOVEMBER/DECEMBER 2014 IP Litigator 17 Proposed Changes to FRCP Likely to Lead to Heightened Pleading Standard in Patent Suits Jason Stach and Jeff Watson

Jason Stach is a partner at Finnegan in Atlanta, GA. the Advisory Committee’s view that the forms are seldom He focuses on litigation and contentious proceedings used.4 While an Advisory Committee memorandum pro- before the Patent Office, such as postgrant reviews vides substantial discussion of some of the amendments, and inter partes reexaminations. He can be reached it dedicates relatively little discussion to abrogating at 404-653-6428 or [email protected]. Rule 84 and the Appendix of Forms.5 For patent litigators, the biggest change will come from Jeff T. Watson is an associate at Finnegan in eliminating Form 18, which sets forth this sample com- Atlanta, GA. Mr. Watson focuses on patent plaint for patent infringement: prosecution and litigation, as well as client counseling. He can be reached at 404-653-6551 1. or [email protected]. 2. On , United States Letters Patent No. <______> were issued to the plaintiff for an invention in an electric motor. The plaintiff In September 2014, the Judicial Conference of the owned the patent throughout the period of the defen- United States approved several amendments to the dant’s infringing acts and still owns the patent. Federal Rules of Civil Procedure (FRCP). These amend- 3. The defendant has infringed and is still infringing ments seek to “improve early and active case management the Letters Patent by making, selling, and using elec- through amendments to Rules 4(m) and 16; enhance the tric motors that embody the patented invention, and means of keeping discovery proportional to the action the defendant will continue to do so unless enjoined through amendments to Rules 26, 30, 31, 33, 34, and by this court. 36; and encourage increased cooperation among the 4. The plaintiff has complied with the statutory require- parties through an amendment to Rule 1.”1 The Judicial ment of placing a notice of the Letters Patent on all Conference also approved amendments to Rule 37 electric motors it manufactures and sells and has given regarding the loss of Electronically Stored Information the defendant written notice of the infringement. (ESI) and Rule 55 about setting aside a default judgment. Additionally, in an amendment that will have a more Therefore, the plaintiff demands: significant impact on patent litigation than most other types of litigation, the Judicial Conference approved (a) a preliminary and final injunction against the abrogating Rule 84 and the Appendix of Forms, includ- continuing infringement; ing Form 18 that applies to patent litigation. (b) an accounting for damages; and The Appendix of Forms includes 36 forms for various (c) interest and costs. litigation documents, such as summonses, complaints, and answers. Rule 84 provides that the forms “suffice Form 18 sets a pleading standard that some argue falls under these rules and illustrate the simplicity and brevity below the standard set by the US Supreme Court in Bell that these rules contemplate.” According to the Advisory Atlantic Corp. v. Twombly6 and Ashcroft v. Iqbal.7 In those Committee on Federal Rules of Civil Procedure, many cases, the Court found that “[t]o survive a motion to dis- of the forms are out of date and amending the forms is miss, a complaint must contain sufficient factual matter, cumbersome.2 It believes the forms are used rarely and accepted as true, to ‘state a claim to relief that is plausible many alternative sources of civil forms are available.3 on its face.’ ”8 The Court clarified that “[a] claim has facial The Advisory Committee also observed that it received plausibility when the plaintiff pleads factual content that very few public comments on the proposed amendments allows the court to draw the reasonable inference that addressing the abrogation of Rule 84, which reinforced the defendant is liable for the misconduct alleged.”9

18 IP Litigator NOVEMBER/DECEMBER 2014 Form 18, however, appears to suggest that little factual careful scrutiny” has “proven to be an increasingly matter is needed to plead a case for patent infringement. expensive proposition for the parties and one that takes a For example, Form 18 does not require a plaintiff to tremendous toll on already strained judicial resources.”14 identify any asserted patent claim, nor does it require the According to the Advisory Committee, most of those plaintiff to identify any accused product by name. who submitted comments against abrogating Rule 84 When confronted with the question of whether com- and the Appendix of Forms asserted that eliminating plying with Form 18 is sufficient to survive a motion them “would be viewed as an indirect endorsement to dismiss in light of Twombly and Iqbal, the Court of of the Twombly and Iqbal pleading standards.”15 The Appeals for the Federal Circuit answered yes. In K-Tech American Intellectual Property Law Association was Telecommunications, Inc. v. Time Warner Cable, Inc., the in favor of the change, characterizing Form 18 as an Federal Circuit found that “a proper use of a form con- anachronism that “conflicts with evolving legal prec- tained in the Appendix of Forms effectively immunizes edent.”16 It believes that “elimination of the form would a claimant from attack regarding the sufficiency of the produce greater certainty and eliminate confusion.”17 pleading.”10 The court further explained that “to the The Intellectual Property Owners Association supports extent any conflict exists between Twombly (and its prog- retaining Form 18, but suggests modifying the form to eny) and the Forms regarding pleadings requirements, require “the identification of at least one patent claim the Forms control.”11 that is infringed, a statement explaining such infringe- With the abrogation of Form 18, however, the rea- ment, and a statement addressing indirect infringement, soning of K-Tech no longer applies, and some have if alleged.”18 In light of the comments both in favor questioned whether a complaint that includes only the of and opposed to abrogating the forms, the Advisory information in that form will suffice. Even under the Committee noted that it would continue “to review the current rules, not all judges agree that complying with effects of Twombly and Iqbal,” and, “if it decides action Form 18 saves a complaint from dismissal. In Macronix is needed in this area, the more direct approach will be to International Co. v. Spansion Inc., Judge Payne of the amend the rules, not the forms.”19 Eastern District of Virginia applied Fourth Circuit law If approved by the Supreme Court, the proposed to hold that Twombly and Iqbal impose a stricter plead- amendments will go into effect December 1, 2015, absent ing standard than embodied in Form 18.12 He found that intervention by Congress. Although it is difficult to pre- “before filing a complaint, counsel must ascertain exactly dict the precise impact that abrogating Form 18 would what claims should allege[ ] to be infringed and how they have on patent litigation, it appears likely that patent are infringed.”13 According to Judge Payne, “to file a infringement plaintiffs will need to provide more factual Form 18 complaint and then, using claim charts, prior detail supporting their infringement allegations than is art charts, discovery, and motions, to pare claims that currently required by that form and under the Federal ought not to have been brought or that cannot withstand Circuit’s K-Tech decision.

1. Judicial Conference of the United States, “Summary of the Report of 12. Macronix Int’l Co. v. Spansion Inc., No. 3:13-CV-00679, 2014 WL 934505, the Judicial Conference Committee on Rules of Practice and Procedure at *3-6 (E.D. Va. Mar. 10, 2014). 14,” (Sept. 2014), http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/ 13. Id. at *6. Reports/ST09-2014.pdf [hereinafter Summary]. 14. Id. 2. Id., Appendix B at 19. 15. Summary, supra n.1, Appendix B at 20. 3. Id. 16. American Intellectual Property Law Association, “Comments of 4. Id., Appendix B at 20. the American Intellectual Property Law Association on the Proposed 5. Id., Appendix B. Amendments to the Federal Rules of Civil Procedure at 9” (Feb. 18, 6. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). 2014), http://admin.aipla.org/advocacy/executive/Documents/AIPLA%20 7. Ashcroft v. Iqbal, 556 U.S. 662 (2009). Comments%20on%20FRCP%20Proposed%20Amendments-2-18-14.pdf. 8. Id. at 678 (citing Twombly, 550 U.S. at 570). 17. Id. 9. Id. (citing Twombly, 550 U.S. at 556). 18. Intellectual Property Owners Association, “Comments on Proposed Rules 10. K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, and Forms Amendments 3” (Feb. 14, 2014), http://www.ipo.org/wp-content/ 1283 (Fed. Cir. 2013). uploads/2014/02/IPO-Letter-to-Judicial-Conference-.pdf. 11. Id. 19. Summary, supra n.1, Appendix B at 20.

NOVEMBER/DECEMBER 2014 IP Litigator 19 Third Circuit Rejects Presumption of Irreparable Harm in Lanham Act Cases Meredith Wilkes, John Froemming, Jessica Bradley, and Candice Reder

Meredith Wilkes is a partner at Jones Day in infringement case earned a presumption of irreparable Cleveland, OH. John Froemming is a partner at harm upon a showing of likelihood of success on the Jones Day in Washington, DC. Ms. Wilkes and merits. The rebuttable evidentiary presumption arises Mr. Foemming are coleaders of the Trademark, from the premise that harms caused by false advertising Copyright and Unfair Competition Practice group and trademark violations are noneconomic and intan- focusing their practices on representing global brand gible. A trademark owner’s reputation, loss of control, owners in high-stakes litigation and counseling or goodwill-based injury is distinct from a copyright or matters. Jessica Bradley is a senior associate at patent owner’s economic injury. The Lanham Act pro- Jones Day in Washington, DC whose practice hibits a mere likelihood of confusion, and a trademark focuses on trademark and copyright enforcement owner’s injury cannot be readily measured by diverted and litigation. Candice Reder is an associate at sales or disgorgement of a defendant’s ill-gotten gain and Jones Day in Cleveland, OH. She works on a broad is inherently irreparable. By the time that actual injury spectrum of intellectual property related matters. to goodwill has occurred or the harm can be quantified, courts have found that it may be too late. Trademark cases are different because courts have held that in addition to the protection afforded to the In a precedential decision issued recently in the case of trademark owner, the presumption of irreparable harm Ferring Pharmaceuticals v. Watson Pharmaceuticals,1 the benefits the consuming public. A preliminary injunction US Court of Appeals for the Third Circuit joined the is seen by some as a way to correct misinformation in Ninth Circuit in rejecting the presumption of irreparable the market as quickly as possible, allowing the public harm for plaintiffs seeking a preliminary injunction in to accurately identify brands and distinguish among Lanham Act false advertising and trademark infringe- products. ment cases. While most courts have discarded the presumption of irreparable harm in patent or copyright Background and Procedural cases following the US Supreme Court’s decisions in eBay v. MercExchange,2 and Winter v. Natural Resources History of Ferring Defense Council,3 application of the presumption in the The dispute between Ferring and Watson, competing trademark context has been inconsistent—due in large pharmaceutical companies, arose from alleged false part to differences between trademark and other intel- statements made about Ferring’s product during a pre- lectual property rights. sentation hosted by Watson. Ferring filed a complaint In October 2014, the Supreme Court of the United asserting false advertising claims under the Lanham Act States denied a petition for certiorari regarding the and state law based on Watson’s statements. Ferring also Ninth Circuit’s decision on this issue, which means the sought a preliminary injunction to prevent Watson from evidentiary burden for Lanham Act plaintiffs seeking making further false statements about Ferring’s compet- preliminary injunctions will continue to vary by circuit. ing product, Endometrin®. Accordingly, trademark litigants in the Third Circuit Ferring presented evidence that the presenter had refer- need to be mindful of Ferring’s newly pronounced posi- enced a “Black Box” warning for Endometrin®, suggest- tion when determining strategy in Lanham Act cases. ing that Endometrin® carries a significant risk of serious or life-threatening effects even though the drug actually had no such warning. Ferring also alleged that the pre- The Presumption senter mischaracterized studies showing the effectiveness Before 2006, it was well established that a Lanham Act of Endometrin® in women over the age of 35, stating plaintiff seeking a preliminary injunction in a trademark that “the efficacy has not been demonstrated” when the

20 IP Litigator NOVEMBER/DECEMBER 2014 Endometrin® package insert actually stated that “[e]ffi- that there was no evidence that the allegedly false state- cacy in women 35 years of age and older has not been ments were still available to customers. Finally, the Third clearly established.” Finally, Ferring showed that the Circuit found “speculative” a declaration from a doctor presenter improperly presented patient survey data as if that he and other doctors would be less likely to prescribe it were a comparison of the two products, even though Ferring’s drug if it contained the Black Box warning that the survey did not actually compare patient preferences. Watson had asserted in its presentation. With respect to each statement, the presenter certified to the District Court that he would not repeat the statements in the future. The Circuit Split The District Court denied Ferring’s request for injunc- In Herb Reed Enterprises v. Florida Entertainment tive relief, finding that Ferring was not entitled to a Management,4 the Ninth Circuit became the first circuit presumption of irreparable harm and that without such to affirmatively state that the presumption of irreparable presumption, Ferring had failed to put forth sufficient harm was no longer valid in the trademark context. The evidence to demonstrate a likelihood of irreparable court in Herb Reed did acknowledge that “[e]vidence of harm. (Notably, the District Court avoided a decision loss of control over business reputation and damage to regarding likelihood of success on the merits by instead goodwill could constitute irreparable harm.”5 The Third finding that Ferring had failed to demonstrate irrepa- Circuit in Ferring agreed with the Ninth Circuit’s rejec- rable harm. Because Watson had put forth evidence tion of the presumption and its rationale on this issue. supporting its statements, the District Court commented In contrast, the Fifth Circuit in Abraham v. Alpha Chi that it was not clear that Watson’s allegedly false state- Omega,6 cited eBay and then determined that it was ments were “completely unsubstantiated” so as to be not erroneous for a lower court to grant a preliminary per se false under Third Circuit precedent and to support injunction in a trademark infringement case by presum- a finding of likelihood of success. The court stated that it ing irreparable injury once the plaintiff had shown a “need not make a determination as to the likelihood of likelihood of confusion.7 success of Ferring’s claims, because, as mentioned above, Other circuits have commented on the issue but have Ferring has failed to demonstrate irreparable harm.”) not yet made a determination one way or the other. On appeal, the US Court of Appeals for the Third For example, the Eleventh Circuit noted in dicta that Circuit found no clear error. The court acknowledged “a strong case can be made” that eBay’s holding would that it had permitted the presumption of irreparable extend to Lanham Act cases, but it “decline[d] to decide harm for Lanham Act trademark actions prior to whether the district court was correct in its holding that eBay and Winter, based on the fact that injuries in the nature of the trademark infringement gives rise to a the trademark context such as loss of control, reputa- presumption of irreparable injury.”8 tion, or goodwill were irreparable. However, there was no analogous Third Circuit precedent with respect to Lanham Act false advertising claimants. Nevertheless, Going Forward the court went on to hold that, based on the reasoning Given the Supreme Court’s recent denial of the petition of eBay and Winter, Lanham Act plaintiffs are no lon- for certiorari in Herb Reed, the state of the law regarding ger entitled to a presumption of irreparable harm when presumption of harm in trademark cases will continue seeking preliminary injunctive relief. The Third Circuit to be a circuit-by-circuit analysis and could very well reasoned that the Lanham Act’s injunctive relief provi- depend upon the type of Lanham Act claim brought. sion, like the Patent Act’s provision, is premised on tra- Trademark litigants need to be aware that the amount ditional principles of equity, and therefore the Lanham and type of evidence that will warrant injunctive relief Act should be interpreted in the same manner as the may vary greatly by jurisdiction. Patent Act in eBay. Accordingly, because traditional Lanham Act defendants will emphasize that evidence principles of equity require a movant to demonstrate as to likelihood of confusion should not lead to a pre- irreparable harm, allowing a presumption deviates from sumption of irreparable harm. Defendants in the Third these principles. Circuit might now also attempt to avoid a preliminary The Third Circuit went on to analyze Ferring’s evidence injunction by certifying that they will cease making the of irreparable harm and held that it was insufficient challenged statement. to warrant injunctive relief. The Third Circuit found it Lanham Act plaintiffs will argue that failure to retain significant that Watson’s Dr. Silverberg certified to the the presumption may present an insurmountable burden court that he would not make the statements in the future of proof because evidence of actual irreparable harm and that Watson had removed the statements from the can be difficult to show at early stages in litigation. webcast of the presentation. The Third Circuit noted Courts denying the presumption offer little guidance as

NOVEMBER/DECEMBER 2014 IP Litigator 21 to what evidence does support a finding of irreparable may include instances of actual confusion, a consumer harm. A plaintiff accordingly may find it beneficial to survey demonstrating confusion, loss of control, evi- bring Lanham Act claims in those jurisdictions that have dence of inferior goods offered under the infringing not applied eBay in the trademark context. Nevertheless, mark, decline in market share, loss of customers, lost a plaintiff will want to be prepared to present evidence sales attributable to alleged false statements or infringing to support a finding of irreparable harm. Such evidence trademarks, or reputational harm.

1. Ferring Pharmaceuticals v. Watson Pharmaceuticals, 765 F.3d 205 (3d Cir. 5. Id. at 2011. 2014) 6. Abraham v. Alpha Chi Omega, 708 F.3d 614 (5th Cir. 2013). 2. eBay v. MercExchange, 547 U.S. 388 (2006). 7. Id. at 627. 3. Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008). 8. N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1228 (11th Cir. 4. Herb Reed Enters. v. Florida Entertainment Mgmt., 736 F.3d 1239 (9th Cir. 2008). 2013).

22 IP Litigator NOVEMBER/DECEMBER 2014 be motivated by a desire to interfere Praxis directly with the business relation- ships of a competitor. In its decision, the Federal Circuit concluded that Tyco may not be immune from antitrust liability Antitrust because there are issues of factual dispute as to whether Tyco’s patent Amanda Abeln infringement claim was objectively baseless and whether the Citizen Petition was objectively baseless and intended to interfere with the Is Routine Patent ensure therapeutic equivalence of FDA approving Mutual’s applica- the generic drug to the brand name tion to manufacture and sell the Litigation Giving drug. Ultimately, the FDA approved drug. Rise to Antitrust Mutual’s application to manufacture So what does this mean for pat- Liability? and sell the generic drug and denied ent enforcement? There is concern Tyco’s Citizen Petition. that the Federal Circuit has inserted On August 6, in Tyco Healthcare Mutual moved for summary judg- antitrust liability into patent litiga- Group LP v. Mutual Pharm. Co. ment on its antitrust counterclaims tion, which could result in antitrust [Case No. 2013-1386], the Federal against Tyco, arguing Tyco was not penalties for routine patent enforce- Circuit looked at whether antitrust immune from liability. The district ment. Further, the case could have a liability can arise from routine patent court held Tyco was not liable for possible chilling effect on patentees’ litigation and suggested that a pat- antitrust violations as alleged by communications with administrative ent owner can face antitrust liabil- Mutual, however, on appeal, the agencies, such as the filing of a Citizen ity resulting from bringing patent Federal Circuit vacated the district Petition with the FDA. However, infringement claims and administra- court’s ruling in part and remanded because the Noerr-Pennington doc- tive petitions. it for further consideration as to trine continues to live, patentees are In Tyco, the patent owner of a whether Tyco’s patent infringement still protected unless the party alleg- drug, Tyco Healthcare Group, filed a claim and Citizen Petition were ing antitrust violations can present claim for patent infringement against shams. facts to show the litigation activity a generic drug manufacturer, Mutual Ordinarily, a party is exempt from was a sham. Pharmaceutical Co., after Mutual antitrust liability for bringing a law- filed an application with the Food suit against a competitor under the Amanda Abeln is an associate and Drug Administration (FDA) to Noerr-Pennington doctrine. This doc- with the Commercial Litigation, manufacture and sell a generic ver- trine is not limited to just lawsuits, Intellectual Property, Drug & sion of Tyco’s drug. In response, but also can apply to administra- Medical Device, Tort & Product Mutual filed antitrust counterclaims tive petitions. There is an exception Liability, and ERISA practice groups against Tyco. to immunity for sham litigation. In at Gordon Rees Scully Mansukhani, In 2009, the district court entered determining whether litigation is a LLP in San Diego, CA. Ms. Abeln’s a judgment of noninfringement “sham,” a court will look at objective practice includes the representation of and the following day, Tyco filed a and subjective elements: (1) the liti- corporate entities in a broad range of Citizen Petition with the FDA urg- gation must be objectively baseless in litigation matters, including contract ing the FDA to change the criteria the sense that no reasonable litigant disputes, trademarks, copyrights, for evaluating the bioequivalence could realistically expect success on products liability, and fraud and of the proposed generic product to the merits; and (2) the litigation must misrepresentation claims.

NOVEMBER/DECEMBER 2014 IP Litigator 23 patent owner’s position had merit, Discovery the fifth Garmin factor was largely relied on to deny the motion for David Emery additional discovery. [Paper No. 36 at p. 2, citing Garmin Int’l Inc. et al. v. Speed Techs. LLC, IPR2012-00001, Paper No. 26.] Because the witness was not under petitioner’s con- Motion for patent owner’s assertions that using a trol, lived in Japan and required a particular refrigerant would not have court subpoena, and/or invoked the Additional been obvious. [Paper No. 27 at p. 14.] Hague Convention, the patent owner Discovery: Because the declaration was not pre- request was deemed overly burden- pared for the Inter Partes Review some to answer. Attacking Third proceeding at hand, the declaration While the PTAB did not compel the Party Testimony was not considered new testimony petitioner to produce Dr. Shibanuma, prepared for this proceeding. Thus, the PTAB noted that if petitioner did In a recent Inter Partes Review cross-examination is not permitted not produce Dr. Shibanuma of their proceeding, patent owner Honeywell as routine discovery under Section own accord, the declaration would International Inc. failed in its 42.51(b)(1)(ii). be given little or no weight because attempt to obtain additional discov- Concerned that the declaration the patent owner had not been given ery under 37 C.F.R. § 42.51(b)(2). did not adequately address certain a fair opportunity to challenge his [Mexichem Amanco Holdings S.A. aspects of unsaturated refrigerants testimony. [Paper No. 36 at p. 3.] de C.V. v. Honeywell International, as compared to saturated refriger- Consequently, while the efforts Inc., IPR2013-00576, Paper No. 36, ants, the patent owner conferred taken by the patent owner failed Sept. 5, 2014).] However, the real out- with the PTAB and was permit- in obtaining a deposition of Dr. come of the Patent Trial and Appeal ted to file a motion for additional Shibanuma, all was not lost. To the Board’s (PTAB) decision denying discovery. [Paper No. 31 at p. 3.] contrary, using the motion for addi- the request for additional discov- Noting the petitioner did not present tional discovery, the patent owner ery proved to be in patent owner Dr. Shibanuma’s declaration until successfully raised issues with the Honeywell’s favor. While denying after the patent owner response, the third party declaration for consid- the request for additional discovery patent owner argued that a deposi- eration by the PTAB and garnered based on a third party declaration tion of Dr. Shibanuma is the “only positive comments regarding the prepared for another proceeding, the means to determine the foundation, weight ultimately given to this testi- PTAB asserted that the declaration contexts and facts underlying the mony. Although not getting the deci- would be afforded little or no weight statements in the Declaration, as sion to compel in its favor, the patent in the case because the patent owner well as the conviction and credibility owner effectively rebutted this third did not have a fair opportunity to of Dr. Shibanuma.” [Paper No. 32 at party testimony rendering it of little challenge the declaration testimony. pp. 4-5.] Further, the patent owner probative value. [Paper No. 36 at p. 3.] opined that the policy of allowing The declaration at issue was pre- a party to submit and rely on dec- David Emery is a partner at Sughrue pared for an inter partes reexamina- larations in “unrelated proceedings Mion, PLLC and practices in all tion proceeding in a different patent without cross-examination provides areas of patent law including: patent owned by a third party not involved improper incentives for parties to preparation and prosecution; patent in the Inter Partes Review. As such, purposefully engage in such conduct, litigation; patent reexamination (ex the declarant, Dr. Shibanuma, was a thereby circumventing the rules of parte and inter partes review); and third party. The petitioner first relied Inter Partes Review proceedings.” counseling clients on intellectual on the expert declaration in the peti- Ultimately, the PTAB denied the property matters. He also engages tioner response. The declaration was patent owner’s motion for additional in patent infringement, validity, and used by the petitioner to rebut the discovery. While conceding that the freedom to operate analysis/opinions.

24 IP Litigator NOVEMBER/DECEMBER 2014 The Guides also address price False Advertising comparisons in which the advertiser represents that he is selling below Kathyleen A. O’Brien, Lisa B. the prices being charged by oth- Kim, and Julianna D. Milberg ers in his geographic area for the same merchandise. When compar- ing his price with the prices charged by others for the same product, Rising Number surging popularity of outlet malls the advertiser should be “reason- may have fueled some deceptive ably certain that the higher price of Class Actions marketing practices, and urging he advertises does not apprecia- Targeting Outlet the FTC to use its authority under bly exceed the price at which sub- Stores Based on Section 5 of the FTC Act to “inves- stantial sales of the … [product] are tigate deceptive and unfair market- being made in the area.” [16 C.F.R. Claims of False ing practices at outlet stores” and to § 233.2(a).] and Deceptive “punish offenders.” In March, the Advertising trade groups also offer FTC published a blog piece offering recommendations on comparative Advertising tips on how shoppers can identify pricing. For example, in its Code of Plaintiffs’ class attorneys have a true bargains. Advertising, the Council of Better new target in sight and it is out- Business Bureaus (CBBB) recom- let shopping. In the past several mends that when advertisers offer a months, class action lawsuits have Are There Any price reduction or savings by com- been filed in California and New Guidelines for Making paring their selling price with their York against seven major retailers own former selling price, the former (Levi Strauss, Michael Kors, Neiman Comparative Pricing price “should be the actual price Marcus, Nordstrom, Ralph Lauren, Claims? at which the advertiser has been Saks, and The Gap) that operate out- Although the FTC has not promul- currently offering … the merchandise let stores, in addition to traditional gated any new regulations or guide- immediately preceding the sale, on retail stores in the state of California. lines that specifically deal with outlet a regular basis, and for a reason- In each lawsuit, the named plain- discount claims, the “FTC Guides ably substantial period of time.” tiff purports to represent a class of Against Deceptive Pricing” (the Additionally, “[i]n the event few or California consumers who have been Guides) offer general guidance on no sales were made at the advertised misled by allegedly false and decep- comparative pricing, which is help- comparative price, the advertiser tive advertising. More specifically, ful here. [16 C.F.R. §§ 233.1–233.5.] should make sure that the higher the lawsuits allege claims for false For example, the Guides address price does not exceed the advertiser’s advertising, unfair competition, and discount claims based on the adver- usual and customary retail markup violation of California’s Consumer tiser’s own former price for the same for similar merchandise … and is Legal Remedies Act based on the product. If the former price is the one at which the merchandise was assertions that the plaintiffs were “actual, bona fide price at which openly and actively offered for sale, led to believe that the products they the … [product] was offered to the for a reasonably substantial period purchased at the outlet stores were public on a regular basis for a rea- of time, in the recent, regular course steeply discounted from their “sug- sonably substantial period of time, it of business, honestly and in good gested” retail prices or “compared provides a legitimate basis for a price faith.” Finally, the CBBB recom- to” prices when, in reality, those comparison.” On the other hand, if mends that if a reduction is adver- products were never intended to be “the former price being advertised tised with the word “originally” and sold at the traditional retail stores, is not bona fide but fictitious … the the original price is not the last were created exclusively for the outlet ‘bargain’ being offered is a false one.” previous price, that fact should be stores, and were of inferior quality. [16 C.F.R. § 233.1(a).] In addition, disclosed by stating the last previ- This litigation comes just a few the Guides warn that the advertiser ous price. For example: “Originally, months after a group of congres- should avoid any implication that a $400, formerly $300, now $250” sional Democrats wrote a let- former price is a “selling price,” not or “originally $400, intermediate ter to Federal Trade Commission an “asking price,” unless “substan- markdowns taken, now $250.” [See (FTC) Chairwoman Edith Ramirez tial sales” at that price were actually Code of Advertising, Council of expressing their concerns that the made. [16 C.F.R. § 233.1(b).] Better Business Bureaus, available at

NOVEMBER/DECEMBER 2014 IP Litigator 25 http://www.bbb.org/council/for- • If Overstock.com uses an MSRP The FTC Guides, the CBBB Code businesses/code-of-advertising/, last as the ARP, then it also needs to of Advertising Recommendations, visited Oct. 16, 2014. disclose that practice. and the Overstock case all provide Similarly, the Better Business • If Overstock.com uses an retailers with guidance on how to Bureau advises that when an adver- unqualified term such as “Com- substantiate comparative pricing tiser makes a claim similar to “priced pare it,” then the ARP must claims. What is clear from all of elsewhere at $____,” he must be reflect a good faith effort to these sources is that retailers must “reasonably certain that the higher determine the “prevailing mar- be able to show that any adver- price ascribed is one at which sub- ket price” of the identical prod- tised price “savings” is based on real stantial sales are made in the rel- uct. The following criteria satisfy price comparisons, and to explain evant geographic area,” and that this standard: how that “savings” was calculated. phrases such as “valued elsewhere at — If ARP is represented as a Guesswork or reliance on fictitious $____ or sold retail at $____ require range of prices; for example, pricing is not sufficient. that the prices quoted should not it is common in the geo- In light of this request for FTC be from isolated and unrepresenta- graphic area for an item to action and the new wave of class tive sales while the bulk of sales are sell at $40 or $50, you could action litigation targeting compara- actually at lower prices.” [Id.] This list the ARP as $40-50. tive price advertising by outlet stores, is true whether the quoted price is — If ARP is a price from one it would be prudent for retailers to that of a competitor, or a suggested of the five largest Internet proactively review their compara- price such as the Manufacturer’s shopping sites as identified tive pricing claims, particularly with Suggested Retail Price (MSRP) or a by any third party/industry respect to outlet stores, and to con- “List Price.” source, and that method is sult with experienced counsel on how identified by a hyperlink best to substantiate those claims to to the ARP; for example, reduce legal risk. if you are selling a tennis The People v. racket, and a third-party Kate O’Brien is a partner in Reed Overstock Guidelines source has identified Ama- Smith’s Advertising and Media and A California case that came out ear- zon as one of the five largest Intellectual Property Groups. Her lier this year, People v. Overstock.com shopping sites, you could list practice focuses on advertising, [2014 WL 657195 (Feb. 19, 2014)], Amazon’s price for the same marketing, data collection and also addresses when an MSRP or tennis racket as the ARP. intellectual property issues. Kate “List Price” might be considered a — If ARP is a price from one defends companies in government fictitious price. In 2010, a group of of the three largest shop- investigations and litigation, with California district attorneys brought ping sites for the category a particular emphasis on consumer an action against Overstock.com of product being sold as class actions under various state alleging that its price comparisons identified by any third false advertising and unfair based on “Advertised Reference party/industry source, and competition statutes, the Telephone Prices” or “ARPs,” were false or that method was identified Consumer Protection Act, state misleading. According to the com- by a hyperlink to the ARP; telephone recording laws, and plaint, Overstock.com instructed its for example, if you are sell- various other statutes. She also employees to either choose the high- ing a tennis racket and a assists companies with a full range est price they could find as an ARP third-party source has iden- of advertising issues including ad or to construct ARPs using a formula tified the Sports Authority clearance, claim substantiation, that applied an arbitrary multiplier as one of the three larg- behavioral marketing, and to Overstock.com’s wholesale cost est shopping sites for ten- compliance with various advertising when making price comparisons. nis rackets, you could list and data privacy laws and agency The court held that Overstock.com’s the Sports Authority’s price guidelines including the FTC Guides practice was fraudulent and mis- as the ARP, along with on Deceptive Pricing and “Made in leading, and ordered that Overstock a hyperlink that explains USA” Claims. pay civil penalties in the amount of the methodology used by $6,828,000. the third party to determine Lisa Kim is a senior associate in Reed The court set forth the follow- that Sports Authority is one Smith’s Commercial Litigation Group ing guidelines in advertising price of the three largest shop- whose practice focuses primarily on discounts: ping sites for tennis rackets. defending businesses in litigation

26 IP Litigator NOVEMBER/DECEMBER 2014 involving the Song-Beverly Credit Light law, and California’s Do Not campaigns, intellectual property Card Act, the Telephone Consumer Track Disclosures. (including trademark, trade secret, Protection Act (TCPA), and other copyright and publicity issues), and related statutes. Lisa also advises Julie Milberg is an associate in Reed disputes within the entertainment, companies on compliance with Smith’s Commercial Litigation and advertising and gaming industries. various data privacy and advertising Advertising and Media Groups. Prior to joining Reed Smith, Ms. laws, including the TCPA, CAN- A substantial part of her practice Milberg worked in the entertainment SPAM, the Video Privacy Protection focuses on counseling clients on industry and produced four Act (VPPA), California’s Shine-the- advertising, marketing and branding independent films.

NOVEMBER/DECEMBER 2014 IP Litigator 27 Thus, the court decreed TVEyes’ Practice Areas use of Fox News broadcast content “transformative” in its discussion of the first fair use factor. It did then proceed to consider the other three factors, but it was clear Copyright Litigation that the transformativeness finding overshadowed the remaining factors. Lesley Grossberg The second and third factors were and Robert Welsh found to be neutral, and summarily disposed of. The fourth factor, the effect of the copied work on Another Step in TVEyes raised a fair use defense, the market for the original, received and both sides moved for summary closer inspection, but was resolved the Long March judgment. The court began with the in favor of TVEyes insofar as it: from Campbell v. proposition that “[t]ransformation (1) deleted all of the copied content almost always occurs when the new every 32 days; (2) experienced few Acuff-Rose work ‘does something more than instances of sequential playback by toward Fair Use repackage or republish the original subscribers of Fox News content, Free-for-All? copyrighted work.’ ” [ Id., Slip op. such that “no reasonable juror could at 13, citing Authors Guild, Inc. v. find that people are using TVEyes The fair use doctrine was recently HathiTrust, 755 F.3d 87 (2d Cir. as a substitute for watching Fox examined and applied in Fox 2014). ] News broadcasts on television”; and News Network, LLC v. TVEyes, The court noted that “there is a (3) benefitted the public by allowing Inc. [2014 WL 4444043 (S.D.N.Y. strong presumption in favor of fair subscribing entities to use the service Sept. 9, 2014).] TVEyes is a media- use for the defendant” when the for correction of misinformation, monitoring subscription service that copied work is being used for one regulatory compliance, reporting on “records the entire content of televi- of the purposes listed in Section and criticizing news broadcasts, and sion and radio broadcasts and creates 107, such as criticism, comment, ensuring national security, among a searchable database of that con- news reporting, teaching, scholar- other uses. The court already had tent.” This service allows subscribers ship, or research. It also observed rejected the notion that commer- to search keywords or phrases to that TVEyes’s service, by provid- ciality of the allegedly infringing determine and review an aggrega- ing “the actual images and sounds work could carry “presumptive force tion of instances of the search term depicted on television” as well against a finding of fairness” in its appearing in the media. Subscribers as “the news information itself,” discussion of the first factor. include businesses and governmental offered a “transformative” service As others have noted, including agencies such as the White House, “that no other content provider Judge Easterbrook in the Seventh United States Army, and local and provides.” The court found the Circuit’s recent decision in Kienitz v. state police departments; the service TVEyes service analogously “trans- Sconnie Nation, it is difficult to rec- is not available to members of the formative” to the searchable data- oncile the broad view of transforma- general public. Clips are limited to base of scanned books at issue in tiveness exemplified in cases such as 10 minutes in length, and a majority Authors Guild v. HathiTrust and TVEyes, Authors Guild v. Hathi Trust, of the clips are two minutes or less; thumbnail images shown in search and Cariou v. Prince with the text of users are required to agree to use the engine results as in Perfect 10 v. Section 106 of the Copyright Act, clips for internal purposes only. Amazon.com, but distinguished a which grants the copyright holder Fox News took issue with TVEyes’ rare recent case in which a court the “exclusive right” to “prepare commercialization of its copyrighted had found that the defendant, a derivative works,” and Section 101, broadcasts, and sued for infringement. news monitoring service for print which defines “derivative work” as It contended that TVEyes’ service news that aggregated content for any “form in which a [preexisting] would have a detrimental effect on subscribers based on keywords, had work may be recast, transformed, or the existing market for rebroadcasts failed to prove its fair use defense. adapted.” More broadly, decisions of its copyrighted content, which Fox [Associated Press v. Meltwater such as TVEyes suggest that courts News made available online and also U.S. Holdings, 931 F. Supp. 2d 537 are moving away from viewing fair licensed to third parties. (S.D.N.Y. 2013).] use as a narrowly-drawn exception

28 IP Litigator NOVEMBER/DECEMBER 2014 to copyright holders’ exclusive rights role of fair use continues to gain industries. Robert Welsh is Of in their works, to the view that fair traction in the federal courts. Counsel with BakerHostetler in use promotes the creation of trans- Los Angeles, CA and focuses his formative works and thus serves one Lesley Grossberg is with practice on intellectual property, of the goals of copyright law itself. BakerHostetler in Philadelphia, PA. entertainment and First Amendment The TVEyes opinion, which essen- She focuses her IP practice on patent, issues. Mr. Welsh crafts innovative tially presumed transformativeness trademark and copyright litigation, solutions to his clients’ cases using of the work at the outset of the fair advising clients in the e-commerce, his analytical background and depth use analysis, indicates that the trend financial services, social media, of experience with a fresh, unique toward this a broader view of the software, and telecommunications perspective.

Internet Litigation Member States shall also ensure that rightsholders are in a posi- Allan Poulter and William Smith tion to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right, without preju- UK High Court well-known luxury brands, including dice to Article 8(3) of the [Info- Cartier, Montblanc, and Richemont, Soc Directive]. Can Order ISPs to among others as part of a broad Block Web Sites portfolio of trademarks. The defen- Article 8(3) of the InfoSoc dants were five ISPs—Sky, BT, EE, Directive was implemented as That Infringe TalkTalk and Virgin—who together Section 97A CDPA, however the Trademarks had a market share of approximately United Kingdom took no steps to 95 percent of UK broadband users. implement the provision of Article The High Court of England and The claimants applied for injunc- 11 quoted above. Justice Arnold held Wales handed down its decision tions against the defendants requir- that Article 11 was intended to apply in Cartier International and Others v. ing them to block or impede access to all IP rights, rather than just copy- BSkyB and others [[2014] EWHC to a number of Web sites that adver- right and therefore the Court had 3354 (Ch) on October 17, 2014], tised and sold counterfeit goods the power to grant the injunction holding that trademark holders may under the claimants’ trademarks. sought pursuant to Section 37(1), as be granted site-blocking injunctions interpreted in accordance with the IP against Internet Service Providers Enforcement Directive. (ISPs). Site-blocking injunctions Judgment What conditions must be satis- pursuant to Section 97A of the Did the Court have jurisdiction fied for the Court to make such Copyright, Designs and Patents Act to make such an order? Absent an an order? Justice Arnold held that 1988 (CDPA) are now well estab- express statutory provision along the the conditions to be satisfied were lished in relation to online content lines of Section 97A, Justice Arnold effectively the same as those for that infringes copyright; however reviewed the Court’s general power blocking injunctions under Section this judgment could pave the way to grant injunctions as recognized by 97A CDPA, namely: (1) the ISPs for a similar regime with respect Section 37(1) of the Supreme Courts must be intermediaries; (2) the users to online trademark infringement, Act 1981 and held that, on a purely and/or operators of the website must notwithstanding the absence of an domestic interpretation of this sec- be infringing the claimant’s trade equivalent statutory provision. tion, the Court would have jurisdic- marks; (3) the users and/or opera- tion to make the order sought. tors must use the ISPs’ services to In the alternative, Justice Arnold do that; and (4) the ISPs must have Background of the Case also considered the correct inter- actual knowledge of this. The claimants in this case are all pretation of Section 37(1) in light Were the conditions met in this case companies within the Richemont of Article 11 of the IP Enforcement and, if so, what principles should be Group and the owners of many Directive which requires that: applied when deciding whether to

NOVEMBER/DECEMBER 2014 IP Litigator 29 make an order? Justice Arnold held Judge considered that ISPs now have other cases of trademark infringe- that the threshold conditions were the requisite technology and techni- ment, rather than counterfeiting, as met, however in order for the Court to cal capacity to implement the orders; the public interest in preventing the make the order sought the relief must: far more so than when such orders sale of counterfeit goods was a sig- were first made under Section 97A. nificant factor in the Court’s deter- 1. be necessary, On balance, Justice Arnold held mination when considering whether 2. be effective, that the costs to the ISPs were jus- to make the order in this case. 3. be dissuasive, tified by the likely efficacy of the 4. be not unnecessarily compli- blocking measures and the benefit to Allan Poulter has over 25 years’ cated or costly, the Claimants having regard to the experience in all aspects of 5. avoid barriers to legitimate trade, other measures available to them. The international brand protection. He, 6. be fair and equitable and strike a Court therefore granted orders sub- has been a barrister in Hong Kong “fair balance” between the appli- stantially in the form sought but with and a solicitor, trademark attorney cable fundamental rights, and two modifications: (1) a requirement and in-house at Interbrand within 7. be proportionate. that the notice on the blocked page the United Kingdom. He has advised should identify the party who applied some of the world’s leading brands Justice Arnold considered each of for it to be blocked; and (2) the orders including Google, Fox, Best Buy, these factors in turn and concluded should contain a “sunset clause” such TGI Friday’s, and Café Nero and that blocking orders should be made. that they cease to apply at the expiry has managed numerous international In particular, the Judge noted that of a defined period. portfolios. This experience has given the claimants had a legitimate inter- Mr. Paulter a deep understanding est in curtailing trademark infringe- of the challenges companies face in ment and that there also was a public Conclusion protecting brands, and of the best interest in preventing trademark This decision provides a new option ways to support them in addressing infringement, especially where coun- for trademark holders seeking to limit these challenges. terfeit goods were involved. Justice the online sale of counterfeit goods. Arnold considered expert evidence In particular, the Judge’s comments William Smith is an associate in on the efficacy of blocking measures about the effectiveness of alternative Bird & Bird’s Intellectual Property implemented pursuant to Section measures and the proportionality of Group based in London. He 97A orders and held that they have imposing the obligation on ISPs may has worked on a broad range of been reasonably effective in reducing well encourage rights holders to seek contentious intellectual property use of the web sites concerned. site-blocking injunctions. matters, concerning patents, copyright, Consideration was given to other It remains to be seen whether the and trademarks. He has worked measures available to the Claimants, ISPs will elect to challenge this deci- closely with Bird & Bird’s employment including takedown notices to hosts sion or if they will continue to oppose team advising on the protection of of the Web sites, however Justice future applications (decisions under business trade secrets and breach Arnold concluded that there were no Section 97A generally are dealt with of confidence actions involving alternative measures that would be on paper), given the additional costs former employees. Mr. Smith also equally effective but less burdensome. burden they could now face. has experience working for media The main effect on the ISPs would It will be interesting to see whether sector clients advising on privacy be additional operating costs, but the this principle can be extended to and defamation issues.

30 IP Litigator NOVEMBER/DECEMBER 2014 and adjudicated in the [Nissan] IPR Patent Litigation proceedings.]” The court examined the three rel- Greg Cordrey evant factors in determining whether a stay is appropriate. In addressing the first factor, that is, whether a stay would cause any undue prejudice to the plaintiff, the court held that the Stay of Litigation Patent). The plaintiff asserted claims plaintiff’s failure to respond to the 5 and 6 of the ’689 Patent, claims stay motion in a timely manner belies Granted Due to 1-6, 10, and 11 of the ’597 Patent, its contention that a delay in the liti- Patent Owner’s and claims 10, 12, and 51 of the ’555 gation would be prejudicial: Patent. The court noted that there Failure to Timely had been 10 petitions for postgrant Plaintiff did not respond to Respond review of the three patents asserted Defendant’s motion prior to by the plaintiff. In four of those the October 7, 2014 hearing. In Normal IP Holdings v. TP-Link proceedings, a total of 33 separate During the hearing Norman Technologies, Co., et al. [6:13-cv- claims from the asserted patents had argued that it would be unduly 00384, Doc. No. 220 (E.D. Tex. Oct. 8, been canceled. The remaining six prejudiced by a stay because 2014) (J. Love)], a patent case pend- proceedings were pending at the time the administrative proceedings ing in the Eastern District of Texas, of the filing. could cause a multiyear delay. the defendants moved to stay the In concurrent litigation, the plain- Norman argued that during litigation pending completion of an tiff alleged that Nissan North the stay evidence may be lost, inter partes review (IPR) involving America, Inc. (Nissan) infringed the witnesses may become unavail- some of the patents-in-suit. Notably, same asserted claims of the ’689 and able, memories may fade, and the plaintiff in this case did not file ’597 patents. Nissan filed a petition Norman’s experts may become an opposition to the defendants’ for IPR as to claim 6 of the ’597 unavailable. However, Nor- stay motion. Thereafter, the court patent and claims 5 and 6 of the man’s failure to respond to granted the motion and stayed the ’689 patent. On September 23, 2014, this motion in a timely man- litigation pending completion of the Patent Trial and Appeal Board ner belies its contention that the IPR involving the only claim (PTAB) granted Nissan’s petition for a delay in the litigation would of the asserted claims that had not IPR as to the asserted claims in the be prejudicial. Furthermore, been finally or preliminary rejected ’689 and ’597 patents. The court Defendant’s argument that by the US Patent and Trademark summarized the various reexamina- staying the proceeding would Office (PTO). tion and IPR proceedings as shown benefit both parties is convinc- The plaintiff’s complaint alleged in Exhibit 1. ing. At the time the motion was that defendant ADTRAN, the only During the October 7, 2014, hear- filed, litigation was in the early remaining defendant at the time ing on the motion to stay litiga- stages of pleading and discov- the court decided the stay motion, tion, ADTRAN agreed that, if the ery. Additionally, the PTO has infringed US Patent Nos. 5,502,689 court granted a stay of the present already issued final rejections (the ’689 Patent), 5,530,597 (the litigation, “[it would be estopped as to a number of the asserted ’597 Patent), and 5,592,555 (the ’555 as to invalidity contentions raised claims, several defendants have

Exhibit 1

Status of Claims Subject Asserted Claims to Reexamination Claims Subject to Pending IPR Petition ’597 Patent 1-6, 10, 11 Canceled: 1-5, 10, 11 6 (granted in IPR petition filled by Confirmed: 6 Nissan) ’689 Patent 5, 6 Final Rejection 5, 6 (granted in petition filed by Nissan) ’555 Patent 10, 12, 51 Non-Final Rejection: 10, 12 Final Rejection: 51

NOVEMBER/DECEMBER 2014 IP Litigator 31 been dismissed since the fil- of the asserted claims which will The court’s decision illustrates the ing of this motion, and all the determine whether some or all of the continuing uphill battle patent own- asserted claims are currently claims subject to reexamination or er’s face opposing a stay pending an undergoing reexamination, IPR IPR are invalid.” IPR, particularly when the motion is or are the subject of petitions Finally, regarding the status of the filed in the early stages of a case. To for IPR. Allowing reexamina- case, the court noted that when the make matters worse, in this case the tion and IPR to proceed will motion was filed, the parties had not patent owner did not timely oppose conserve the time and resources engaged in any substantive discov- the stay, which the court relied on of both parties. Limiting the ery, the parties’ claim construction in further support of its decision to stay to the culmination of the positions had not been submitted, stay the case. IPR proceedings will ensure and a Markman hearing was several that the stay is finite and not months away. Although a trial date Greg Cordrey is a partner in the Patent unduly prejudicial. has been set for April 15, 2016, it Litigation Group at Jeffer Mangels was over 21 months away at the time Butler & Mitchell LLP, where his Turning to consideration of of filing. practice focuses on patent litigation whether a stay would simplify the Based on its analysis of these fac- as well as litigation involving complex issues for trial, the court held that tors, the court determined that a stay technology. Mr. Cordrey practice s “a stay at is appropriate because was warranted “until the PTO has before the Federal Circuit and the reexamination and IPR of the three issued its final decisions on the inter United States Patent and Trademark patents-in-suit will likely simplify the partes review of claim 6 of the ’597 Office as a registered patent attorney. resolution of the case by narrow- Patent,” which was the only asserted In addition to speaking on the subject, ing or eliminating issues for trial. claim that had not been rejected by Mr. Cordrey blogs on patent litigation Furthermore, ADTRAN notes that the PTO at the time the motion was and PTO proceedings on JMBM’s the PTO has already rejected several filed. Patent Lawyer Blog.

Technology Litigation district court rejected the argument that the expert had to personally use Stan Gibson the product. “Whether Dr. Bambos should have based his expert opinion on personal use with the product, rather than source code and other materials, is fodder for cross- Motion to Strike of source code to review, and used examination, not a Daubert issue for the district court’s claim construc- this Court.” Expert Testimony tion to determine how the products The district court also rejected in Complex Case at issue worked. defendant’s argument that the expert Denied In analyzing the motion, the dis- should be excluded because he relied trict court noted that “Dr. Bambos too heavily on his expert report In a recent patent infringement never used the allegedly infringing during his deposition. “Defendant action, IPLearn, LLC v. Blackboard products, but his expert opinion was contends that, because Dr. Bambos Inc. [Case No. 11-876 (RGA) (D. Del. based on ‘thousands of pages of relied too heavily on his written Sept. 6, 2014)], the defendant moved technical manuals, source code, and report during the deposition, he is to exclude portions of the plaintiff’s depositions transcripts.’ ” The dis- unfamiliar with the products and expert testimony under Daubert v. trict court reasoned that Rule 702 too unreliable to appear before a Merrell Dow Pharmaceuticals requires that expert testimony be jury.” The defendant pointed out (Daubert) [509 U.S. 579 (1993)]. based on “sufficient facts or data” that Dr. Bambos had spent over 25 Defendant argued that the plaintiff’s but the expert did not need to use the minutes reading the report to find expert, Dr. Bambos, lacked famil- product if he had familiarized him- the answer to a particular ques- iarity with the infringing products, self with it in other ways and review- tion about the infringing products, relied too heavily on someone else to ing source code and other materials even continuing to read into his provide him with relevant segments can be sufficient. As a result, the lunch break. The district court

32 IP Litigator NOVEMBER/DECEMBER 2014 found that the deposition record source code. “Defendant argues his opinion, is an issue for cross- was more complicated. “The depo- that because Dr. Bambos reviewed examination and, possibly, contradic- sition record, however, reveals a selected pieces of source code pro- tory expert testimony by Defendant’s more complicated exchange, where vided by someone else, rather than expert. Ultimately, the jury will decide the witness was repeatedly told by the complete source code of the Dr. Bambos’ credibility.” both lawyers that he could take his products by himself, his testimony time, even though he spent consider- should be excluded. Even if Dr. Stan Gibson is an experienced trial able time reviewing the report while Bambos did not know the quali- lawyer, who has focused on high- answering questions.” fications of the individual who stakes cases involving complicated The defendant also pointed out sev- selected the pieces of source code, technology and bet-the-company eral other examples where the expert or whether there might be other rel- cases in the entertainment industry. had to rely on the report to answer evant segments of the source code, He is the Chairman of JMBM’s questions about the product, but the he was able to determine whether Patent Litigation Group and the district court did not believe that the sections of code related to the publisher of the Patent Lawyer Blog. this raised a Daubert issue. “In other elements relevant to infringement.” The media frequently calls upon words, Defendant says Dr. Bambos Accordingly, the district court found Stan to explain the significance of will be a poor witness, at least unless that the expert’s opinion was suffi- court decisions, and he has been he is better prepared for trial than ciently reliable and that the credibil- quoted by the Wall Street Journal, he was for deposition. Whether Dr. ity issues raised could be addressed Financial Times, Forbes, Bloomberg Bambos relied too heavily on his on cross-examination. “Therefore, his BusinessWeek, New York Times, report in his deposition does not, in expert opinion is based on sufficient Los Angeles Times, Thompson my opinion, raise a Daubert issue.” facts and reliable methods. Whether Reuters, American Lawyer, National Finally, the district court declined Dr. Bambos should have consulted the Law Journal, ABA Journal, Los to exclude the expert because he complete source code, and might have Angeles Daily Journal and other had only reviewed part of the missed something that would change publications.

seeking to capitalize on Deckers’ Trade Dress Litigation success. So, when Deckers noticed that large David M. Longo retailer J.C. Penney Company, Inc. (JC Penney) was selling a line of boots—some of which it believed were very similar to its patented Bailey On September 8, 2014, Judge Otis United States. According to Deckers, Button boots—it did not want to be D. Wright, II, U.S. Dist. Ct., C.D. its UGG® line of boots began a caught flat-footed. Deckers therefore Calif., issued an Order keeping alive a metaphorical ascent into the strato- laced up a five pronged Complaint claim for design patent infringement sphere after being featured on Oprah against JC Penney— complete with a while booting other asserted claims Winfrey’s television show in 2000, jury trial demand—and filed suit in in a Motion to Dismiss under Federal when Oprah supposedly “emphati- the Central District of California on Rules of Civil Procedure 12(b)(6). cally declared … how much she April 4, 2014. Specifically, Deckers’ [See Deckers Outdoor Corp. v. J.C. ‘LOOOOOVES her UGG boots.’ ” Complaint (and First Amended Penney Co., Inc., C.D. Cal., Case [See First Amended Complaint, Complaint of July 2, 2014) asserted No. 2:14-cv-02565-ODW(MANx) Doc. 18, ¶ 12.] This ascent contin- claims for relief based on: (1) trade (“Order Granting in Part Motion ued as many well-heeled celebrities dress infringement; (2) false designa- to Dismiss with Partial Leave to embraced the boots and were pho- tions of origin and false description; Amend,” Doc. 30, Sept. 8, 2014).] tographed wearing the boots. With (3) federal unfair competition; Deckers Outdoor Corporation such a stamp of fashion approval, (4) patent infringement (including (Deckers) is known for its famous one can easily understand that willful infringement); and (5) unfair UGG® sheepskin and suede boots, Deckers would do whatever it could competition under California com- among other products, sold online to protect its valuable image, brand, mon law. (Deckers similarly sued Wal- and at retail stores throughout the and products from harm by imitators Mart Stores, Inc., Sears Holdings

NOVEMBER/DECEMBER 2014 IP Litigator 33 Corp., and Dreams Footwear, Inc.— Figure 1 cases that have been consolidated by Judge Wright.) Presumably due to the presence of a claim for patent infringement, the lawsuit was transferred to the Central District of California Patent Pilot Program on April 9, 2014, and was assigned to Judge Wright in the Western Division. Notably, four of the six judges in the Patent Pilot Program are in the Western Division. In its allegations common to all claims for relief, Deckers asserted that JC Penney “has manufactured, designed, advertised, marketed, dis- tributed, offered for sale, and/or sold various styles of knock-off UGG boots, including those that infringe upon Plaintiff’s Bailey Button Boot Trade Dress and Bailey Button Design Patents,” namely U.S. Des. Pat. Nos. In other words, Deckers seeks to fact.” Catalina Lighting, Inc. v. 599,999 and 616,189. [First Amended chill competition and monopolize the Lamps Plus, Inc., 295 F.3d 1277, Complaint, Doc. 18, ¶ 19, see also marketplace for any boot that shares 1287 (Fed. Cir. 2002). It is there- ¶ 16. For reference, a comparison the same basic, functional design as fore improper in a situation like of Deckers’ design patents and the Deckers’ product.” [Memorandum, this one to contend that a plaintiff accused JC Penney products appears Doc. 25-1 at 1 (emphases added).] has failed to allege design-patent below, reproduced from Judge Wright’s JC Penney, however, omitted any infringement based on a com- Order. See Order, Doc. 30 at 8.] argument regarding Deckers’ U.S. parison of the subject designs, As to its trade dress, Deckers was Des. Pat. No. 599,999, other than to since the Court must accept all careful to note that “key elements allege that “Deckers simply lumps the factual allegations as true in thereof are non-functional.” [First D599,999 and ’189 patents together deciding a Rule 12(b)(6) motion. Amended Complaint, Doc. 18, ¶ 10.] and summarily alleges that” JC Penney Moreover, as depicted in Figure 1 As to its design patents, Deckers also infringes. [Memorandum, Doc. 25-1 [reproduced above], a comparison carefully noted that its “UGG® foot- at 9; see also Reply Memorandum, of the protected designs with the wear products, including products Doc. 29, in which there is no men- accused products demonstrates a embodying the Bailey Button Design tion of U.S. Des. Pat. No. 599,999.] sufficient visual similarity to at Patents, bear a label on the products In doing so, JC Penney essentially least render infringement of the themselves that gives notice to the limited its arguments to attempting to ’189 Patent plausible. Deckers public of its patent registration.” [Id., distinguish its accused boot designs had to do no more. [Order, Doc. ¶ 64.] Deckers asserted that JC Penney only over the tall, three-button, design 30 at 7 (emphasis added).] “copied Deckers’ Bailey Button Boot of U.S. Des. Pat. No. 616,189. Style in an effort to exploit Decker’s Judge Wright’s Order trampled on Judge Wright’s Order, however, reputation in the market.” [Id., ¶ 66.] JC Penney’s Motion to Dismiss as to noted that “JC Penney does not With its feet to the fire, JC Penney the design patent infringement claim attack Deckers’[ ] pleading with countered with a Memorandum in for relief. Specifically, Judge Wright respect to the ’999 Patent, so that support of its Motion to Dismiss stated: portion of the patent-infringement under Federal Rules of Civil claim is not subject to the Motion to Procedure 12(b)(6). JC Penney The Court finds that Deckers Dismiss.” [Id. at 6, FN4.] asserted that Deckers’ Complaint had properly pleaded JC Penney’s Regarding the willful infringe- no traction, because it simply wished alleged infringement of the ’189 ment component of the (4) patent “to prohibit the sale of footwear that Patent. The Federal Circuit has infringement claim, Judge Wright Deckers claims looks similar to its held that “[i]nfringement of a granted JC Penney’s motion, with self-described Bailey Button boot. design patent is a question of leave for Deckers to further amend

34 IP Litigator NOVEMBER/DECEMBER 2014 its Complaint. In particular, Judge knowledge—is the criterion. i4i motion on the (1) trade dress infringe- Wright took issue with Deckers’ cita- Ltd. P’ship v. Microsoft Corp., ment and the (3) federal unfair com- tions to case law, noting that “all but 598 F.3d 831, 860 (Fed. Cir. petition claims because “JC Penney one of these citations actually estab- 2010) (“Infringement is willful fails to address” these claims. [Id., lish the opposite of what Deckers when the infringer was aware of p. 4, FN2.] Judge Wright granted asserts.” [Id. at 9.] Judge Wright also the asserted patent … .”); Seoul JC Penney’s motion—without leave disagreed with Deckers’ “conten- Laser Dieboard Sys., 957 F. for Deckers to further amend its tion that the Bailey Button Boots’ Supp. 2d at 1196–97 (same). [Id. Complaint—on the (2) false designa- popularity and patent notice on the (emphasis added).] tions of origin and false description products themselves suffices to estab- and the (5) unfair competition under lish presuit knowledge.” [Id.] On this Curiously, JC Penney asserted in California common law claims. point, Judge Wright stated: a footnote that “Deckers does not plead that it complied with the mark- David M. Longo, PhD, is a patent Deckers has not alleged that ing requirements of 35 U.S.C. § 287.” attorney in Oblon Spivak’s Electrical JC Penney was actually aware [Reply Memorandum, Doc. 29 at Patent Prosecution practice group. of either of the patents-in-suit 7.] However, as mentioned above, His legal experience covers all aspects prior to producing and selling Deckers had stated that its prod- of client counseling, patent portfolio the accused products. Even if ucts “bear a label on the products development and management, the Bailey Button Boots have themselves that gives notice to the prosecution, reissue applications, garnered widespread popular- public of its patent registration.” reexamination proceedings, appeals, ity and are stamped with patent [First Amended Complaint, Doc. opinions of counsel, due diligence, notice, those allegations, stand- 18, ¶ 64. For further reference, see pre-litigation counseling, and license ing alone, do not establish that Patent Marking and Design Patents, negotiations. He works actively with JC Penney actually knew about by Andrew M. Ollis, July 9, 2014.)] international clients to develop and the ’189 and ’999 Patents. Actual On the remaining claims for relief, grow their utility and design patent knowledge—not constructive Judge Wright denied JC Penney’s portfolios.

usually focus on the following: Trademark Litigation (1) are the products complementary; (2) are the products sold to the same Nikki Siesel class of consumers; and (3) are the products similar in use and function. A close proximity of the goods is not necessarily required. In this Courts and beverages are considered related for case, both products are in the bever- purposes of a likelihood of confu- age industry. Thus, they have similar TTAB Trends in sion analysis. In this recent case, the use and function. Given that both Likelihood of court held that GALLO (for wines) products are beverages, there is a and EL GALLO (for energy drinks) reasonable inference that they utilize Confusion Claims were similar trademarks and that the similar marketing channels. Through in the Beverage products were related. There was not deposition testimony, Gallo Wines much evidence produced by the par- contended that it would market its Industry ties that showed use of the products in wine in convenience stores, super- A recent court case in the Eastern the marketplace. Therefore, the Court markets, liquor stores, restaurants, District of California, E. & J. Gallo relied on the similar spellings of the and bars. One of the plaintiff’s wit- Winery v. Grenade Beverage LLC [No. terms “Gallo” and “El Gallo” and nesses attested to the fact that energy 1:13-cv-00770 (E.D. Cal. Aug. 15, inferred that based on the spellings drinks and wines are sold in the same 2014)], seems to underscore a trend of of the terms, purchasers likely would aisle of the grocery store. Therefore, court decisions and Trademark Trial pronounce the marks in the same way. the court concluded that the market- and Appeal Board (TTAB) findings Regarding the analysis of the relating channels of the two products where alcoholic and non-alcoholic edness of the goods, the questions overlapped to a certain degree.

NOVEMBER/DECEMBER 2014 IP Litigator 35 The degree of care factor favored that “they have been shown to be also distribute both alcoholic bev- the plaintiff in this situation. The related, to move through the same erages and nonalcoholic drinks. In rationale is that the plaintiff’s wines channels of trade, and to be avail- addition, evidence was produced to cost between $5.99 and $9.99 a bot- able to the same classes of consum- demonstrate that the products them- tle. It has been held that consumers ers.” In this case, the opposer relied selves are marketed as a combined are likely to exercise less care when on third party registrations that drink. the goods are relatively inexpensive showed that water and wine products Further evidence was introduced and that confusion is more likely emanated from a single source. to demonstrate that the packaging when less care is employed. Several In another case, the TTAB again and labels of the two products often other factors also favored the plain- found a likelihood of confusion with resemble each other. Lastly, it was tiff. After reviewing all the evidence, an alcoholic beverage and a non- shown that there is a growing trend the Court granted plaintiff’s motion alcoholic beverage. [See In re Pigs in retail outlets, placing the products for summary judgment on all of its Eye Brewing Company LLC, Serial (energy drinks and alcoholic bever- claims. It issued a permanent injunc- No. 78711050 (February 14, 2008).] ages) near each other in the same tion against the use of EL GALLO Here, the applicant was seeking to sections of the store or in the same for energy drinks. register the mark PIT BULL (stan- aisle. Of course, if there is any doubt This case is in line with other recent dard characters) for malt liquor. regarding a likelihood of confusion, TTAB findings. For instance, in Joel The Examining Attorney refused it is resolved in favor of the registrant. Gott Wines, LLC v. Rehoboth Von the application under 2(d) of the In light of these recent findings, Gott, Inc. Opposition No. 91197659 Trademark Act, 15 U.S.C. §1052(d), trademark counsel with clients in (June 26, 2013) [citable as precedent], because he concluded that the appli- the beverage industry, should care- the TTAB sustained an opposition cant’s mark would cause a likelihood fully examine clearance reports. and refused to register the mark of confusion with the registered Trademarks of both alcoholic and GOTT LIGHT for water finding it mark PIT BULL ENERGY DRINK nonalcoholic products need to be would cause a likelihood of confu- (for nonalcoholic energy drinks). evaluated for purposes of a likeli- sion with the registrations GOTT The TTAB affirmed the refusal. hood of confusion analysis. and JOEL GOTT for wine. In this Some of the evidence relied on in case, the TTAB held that the appli- this case included Internet articles Nikki Siesel is a trademark attorney cant’s registration of the mark showing an overlap in the chan- at the Law Offices of Joseph C. GOTT LIGHT for various water nels of trade between energy drinks Messina in New York, whose practice beverages is likely to cause confusion and alcoholic drinks. For example, focuses on US and International with opposer’s previously used and Anheuser-Bush, which is known for trademark prosecutions and registered marks for wine, under the distributing alcoholic drinks, also trademark portfolio management. brands GOTT and JOEL GOTT. distributes energy drinks produced Ms. Siesel has been a valued firm It held that the dominant term in by their company and other com- member of several law practices over both marks was “Gott” and that the panies such as Hansen Natural the course of her 20 years in law. marks were similar in sound, spelling Corporation (seller of MONSTER Learn more about Nikki Siesel’s and overall commercial impression. ENERGY drinks). It was shown that practice by reading her blog at www. Regarding the goods, the TTAB held other companies (such as Seagram’s) newyorktrademarkattorneyblog.com.

36 IP Litigator NOVEMBER/DECEMBER 2014

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