You are currently browsing the ISinIP weblog archives for August, 2006.
August 30, 2006 by thomason.
Perhaps what identifies a troll is where you find him/it. Trolls hide beneath a bridge; other ogres and miscreants are found elsewhere. What is a bridge – the shortest route over an obstacle. Thus, if the rocket docket in the E.D. Texas is the shortest route, then it serves as a bridge for patent litigants. Maybe that’s why many of the litigants who race to that bridge are identified as trolls. All elements of these standard scripts and stock characters are presented in four recently-filed suits over the Hill patents for e-catalogs.
Hill obtained three patents, for inventions with the stated object of “providing a customer at a remote location with accurate updated product information” when signed onto an “electronic catalog system.” An infringement suit was filed in Marshall, Texas by Hill against a group of well-known internet retailers, in late June. But before that, two retailers filed declaratory judgment suits that challenge the Hill patents in the Southern District of Indiana. What provoked these were letters demanding they take a license from Hill. A letter to another retailer (known to your wives) was under discussion, when on Aug. 23rd Hill named it in an Amended Complaint in the Texas case, but then on Aug. 25th, that retailer filed a third DJ action in Indiana, Zappos.com, Inc. v. Chas. E. Hill & Assoc., Inc., (06-CV-1282).
What more than forum-shopping is emblematic of patent litigation, well perhaps, motions challenging jurisdiction or venue. Hill moved to dismiss the first cases in Indiana, arguing that the letter seeking a license did not create a justiciable case or controversy. One must presume that the defendants joined in Texas will move to leave that forum, perhaps in favor of the first-filed case in Indiana. Often, the first act of combat is to force the troll far away from the comfort of his chosen bridge.
The Hill patents, or at least the last issued, remind me of the heady days at the close of Y2K, when business methods patents could be fully-pollinated, just months after filing. The allowability of Hill’s USP 6,029,142 was noted only fourteen months after filing, and six of those months were an extension of time to respond to the one office action. The application was passed to the Examiner in August 1998 and 100 days later that one office action issued. That timeframe amazes me, since the Hill `142 patent cites about 120 patent references, and about 70 publications as prior art.
That is about all that can be surmised now about the litigation landscape for the Hill e-catalog patents. Will the patents of Hill be heard by a jury of Hoosiers, or will the disputants have to move quickly across that bridge in Texas.
Posted in Patents - Federal Circuit | Comments Off
August 29, 2006 by thomason.
Through August 18th, the Federal Circuit sought comments on amendments to its Rule 47.6 and new local Rule 32.1. Debate over citation of nonprecedential rulings engendered this. The comments I filed addressed the lack of standards for deeming a ruling as nonprecedential. Rules in other Circuits articulate a basis for the nonprecedential designation, and so, why not the Federal Circuit rule. It says nonprecedential rulings are those “not adding significantly to the body of law.” That is a truism, not a standard. More preferably, an amended rule would give guidance, to which all panels would adhere, about why rulings are designated nonprecedential, or not.
Other Circuits deem precedential an opinion that “clarifies a rule of law previously announced by the court,” or that “calls attention to an existing rule of law that appears to have been generally overlooked,” or that “involves an issue of continuing public interest.” D.C. Circuit Rule 36(a)(2), IOP 47.5.1(a) (5th Cir.), Seventh Circuit Rule 53(c)(ii) and IOP 260(a)(3) (6th Cir.); see also N.J. Court R. 1:36-2(d) which sets seven “Guidelines For Publication”.
An amended rule with minimum standards for designating a decision as nonprecedential could mitigate some effects of unrestrained discretion. Scholars and petitioners for certiorari have noted that a panel may deviate from precedent, then cloak that with a nonprecedential designation. Also, the malleability of the language, and of the distinction between issues of law and fact, offer appellate panels tremendous leeway in rewriting around precedent.
A perceived aspect is the notion that big law firms and noted clients set the precedent of the patent Court. That perception required some research, since, unlike precedential rulings, the nonprecedential rulings of the Federal Circuit do not identify counsel of record. An unscientific study of Federal Circuit rulings in the first quarter of 2005, in which district court decisions were reviewed, disclosed that most all published, precedential opinions involve large law firms. Review of dockets for the nonprecedential rulings in March 2005 shows that most were argued by smaller, regional law firms. This promotes the perception that the way the Federal Circuit listens to, or treats, cases as involving precedential issues, or not, may vary depending on whether counsel has many patent appeals, or just one, before it.
Adding standards to the amended rule will defeat misperceptions about whether anomalous or atypical rulings are ‘buried’ with a nonprecedential designation, or about whether the issues in the case, or the counsel who argue it, set the precedent of this Court. I’ll be interested to see what the Circuit reports about the sum of the submitted comments.
Posted in Patents - Federal Circuit | Comments Off
August 28, 2006 by thomason.
The Leahy-Hatch bill, The Patent Reform Act of 2006, appropriately keeps the issue of patent enforceability in the courts. A string of failed legislative proposals had suggested adminstrative tribunals. The current bill achieves the threshold point of grounding the inequitable conduct defense in the patent statute. That essentially empowers district courts, and serves to minimize uncertainties about the contours of the defense that arise when courts grapple with the caselaw on inequitable conduct.
Before the issue can be pleaded, a court must have determined that the patent is “not invalid in whole and ..infringed.” The statutory test incorporates the well-known elements of “material” or “false” information, and “intent to deceive or mislead” the PTO. Also set out are indicia of “good faith” that can defeat a charge of inequitable conduct. Consistent with precedent, “clear and convincing” proof is needed before a patent can be deemed unenforceable.
The varied approaches in prior bills range from elimination of the defense, to eliminating it from the courts and creating ’star chamber’ panels at the Patent Office. These ideas were fostered by the NAS and FTC reports, which I have advocated against when working with professional organizations, commenting to Congressional panels, and at the 2005 “town hall” meetings. The best approach would conform the defense to the better caselaw principles and the best case managment practices, and doing that, would cut away the aspects that have been shown to be abused, or to cause delays, and excessive costs.
It would help if the bill’s sponsors had a better proofreader. It now provides that unenforceability can be found “only if the patent owner {sic} presents clear and convincing evidence” of inequitable conduct. No “patent owner” ever would prove that against its own patent.
The bill puts the issue where it needs to be, in the statute, and in the federal district courts.
Posted in Patents - Legislation | Comments Off
August 28, 2006 by thomason.
In respect to those lost in yesterday’s tragic airplane crash in Lexington, we pause to mourn Dr. Larry W. Turner, an Associate Dean of the UK College of Agriculture. Dr. Turner was author or co-author of over 225 journal articles, papers, etc. In my first really big products liability case, I consulted with him about developing a causation theory. Also, when my wife got her first job at the University, Dr. Turner was her boss. Prior to being named Associate Dean, Dr. Turner had chaired UK’s Biosystems and Agricultural Engineering Department. Larry was a fine man, husband and father, a hard-working engineer and professor, and friend to all who met him.
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August 23, 2006 by thomason.
What is the leading Circuit ruling on patent law in 2006, not authored by the Federal Circuit? Fuji Kogyo Co., Ltd. v. Pacific Bay Int’l. (6th Cir. 8/23/2006).The alleged infringement concerned the shape of guides on fishing poles, which after the utility patents expired, were registered as trademarks. The Circuit agreed with the finding after a bench trial that the configuration of the fishing line guides was functional, and so, not protectible under the Lanham Act. It affirmed “based solely on our understanding of patent law,” and the trademarks were cancelled, and the counts for unregistered trade dress were dismissed.Clearly, the 6th Circuit learned from Trafix Devices, where it gave little weight to expired patents that claimed the component later asserted as a trademark. The Supreme Court reversed, stating that a “utility patent is strong evidence” of functionality. 523 U.S. at 29-30. In Fuji Kogyo repeated mention is made, and substantial weight given to, the expired utility patents and to design patents that claim or show “nearly identical” guides. The decsion runs through the best mode, the two-step assessment for literal infringement, intrinsic evidence, and the doctrine of equivalents. (The doctrine of equivalents is alive, at least in the 6th Circuit.)The case turns on evidentiary standards, and the clearly erroneous rule. The parties offered conflicting evidence as to whether the “curved legs” of the guides were an arbitrary choice or a functional feature. The district court sided with functionality, and the 6th Circuit agreed, because that was not clearly erroneous.
While some other commentator can compare all the cases, I had doubts whether all Circuits agree with the 6th Circuit’s fundamental proposition in Fuji Kogyo, that the functionality defense is “a factual determination” and as such, is “reviewed only for clear error.” What earlier was meant when reviewing a district court ruling “that, as a matter of law, Antioch’s trade dress was functional,” in Antioch Co. v. Western Trimming, (6th Cir. 10/20/2003)? Consider too trade dress being “functional as a matter of law,” in Eppendorf-Netheler, Ritter, 289 F.3d 351 (5th Cir. 2002), or that “as a matter of law, that Tie Tech’s product configuration is functional,” in Tie Tech v. Kinedyne, 296 F.3d 778 (9th Cir. 2002), or that applying the “functionality doctrine to a trademark that is …incontestible …is a question of law,” in Wilhelm Pudenz GmbH v. Littlefuse, 177 F.3d 1204 (11th Cir. 1999).
Overall, the Circuit sticks with the leading concepts of patent law, using those as a foil to slice apart the claim for trademark protection.
Posted in Trademarks | Comments Off
August 22, 2006 by thomason.
Presenting your IP case to a mediator requires a mix of candor and strategy. Three approaches are typical in written statements sent to the mediator: (a) argumentative- clipped passages from legal briefs, but captioned as a mediation statement, (b) bold – insisting how great a case one has, or how the opponent better take this chance to settle, now or else, and (c) candid – why the case has not settled, why it can or cannot settle now, and what it will take for the case to settle.
My preference is the third of these, because the first two focus on the legal and factual strengths. The third approach spotlights settlement on each of the available pages in the mediation statement. In my experience, both as counsel and as a trained commercial mediator, a great amount of time spent during mediation discussing the case issues or strengths equates to a small probability of settlement. Conversely, the case is more likely to settle when more time is spent discussing how to settle it.
What goes in a mediation statement depends mainly on the willingness of the parties to seriously consider each of the settlement options, and to present their thinking to the mediator. When parties prefer not to settle, or are unwilling to face up to what settlement terms are worth elimination of what amount of risks, then the mediation statement tends to look a lot like a legal brief. Using the available pages to recite claim construction arguments is like saying – ‘My client has not or can not get down to the business of settling this case.’ Legal arguments usually cloak the message that the party is a no-pay or is demanding full value in settlement, or is proceeding thoughtlessly.
Some courts direct what a mediation statement should contain. Here is one example, an “honest discussion of the party’s claims and/or defenses, including the strengths and weaknesses,” an “assessment as to why settlement has not been reached,” and a detailed list of “attorneys’ fees and costs …incurred to date, with a fair estimate of …additional fees and expenses …if the matter is not settled.” By contrast, the ADR rules in the N.D. Calif. require that much of the content regard the issues and strengths. In my opinion, the only germane content required is to state the “history and current status of any settlement negotiations and provide any other information about any interests or considerations not described elsewhere in the statement that might be pertinent to settlement.” Other courts and private ADR providers are more free-form in regard to the content of the mediation statement.
A prime consideration is whether the statements go to the mediator only, or if the parties exchange statements. Each has pros and cons. Statements sent only to the mediator may contain exaggerated or incorrect assertions, which may influence the mediator’s neutral viewpoint. Still, ex parte statements enable a party to be entirely candid about settlement, which is an essential purpose of mediation. When pre-mediation statements are exchanged, the content and tenor tends to emphasize legal issues, which a mediator should not even attempt to evaluate.
When you want an outline for a mediation statement, start by hearing what your client wants or expects to settle the case, or what they think makes it worthwhile not to settle. Better to start there than by clipping and pasting sections out of your old motion briefs.
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August 21, 2006 by thomason.
Trademark infringement is something every layperson, and law student, thinks they can spot. An imitator cobbles together fenders and bodywork, then affixes the Chevrolet “bowtie” on the front, and puts it up for sale.
Infringement - right? Well, maybe, according to recent decisions that remand for “further proceedings consistent” therewith. Both involve after-market car parts bearing the famous logos of automakers. In GM v. Keystone Autom., (6th Cir. 6/30/2006), it was “replacement grilles” with “placeholders” or recesses shaped to accept the Chevy bowtie or the GMC logo. In Au-Tomotive Gold v. VW, (9th Cir. 8/11/2006), the items were “license plates, license plate frames and key chains” bearing the VW and Audi marks. Even with direct, intentional copying of the automakers well-known marks, proving trademark infringement was, well, not so easy. Both district courts granted summary judgment to the alleged infringers.
The eight-factor test for proving a likelihood of confusion is reviewed in both Circuit cases. Additionally, the 9th Circuit gave extensive treatment to the defensive doctrine of aesthetic functionality. Taken all together, the trademark owners faced a lot of turns through this maze of factors, defenses and doctrines.
In trademark litigation, one key battle is over who is the “public” which the mark may likely confuse. Is it wholesale purchasers, retail consumers, or the general public? The level of purchaser sophistication, etc., varies. In the 6th Circuit case, the ruling against the trademark owners was affirmed because “there is no likelihood of confusion ‘at the point of sale’ to body shops” who know they are purchasing aftermarket, replacement grilles.
The 6th Circuit segmented the purchasers into those collision repairs shops and their customers, and ”downstream” customers, who buy cars not knowing about the aftermarket grilles. It held that factual issues precluded summary judgment as to downstream confusion. The 9th Circuit collapsed the keychain and accessory market into one group of wholesale and retail buyers. Though “Auto Gold sells its products to the wholesale market, the ultimate consumers are the same.” Then it summed the confusion evidence from the entire market, and reversed the summary judgment. The 6th Circuit separated the direct and second-line purchasers, and set out six “principles” of “downstream confusion” that reflect how “knockoffs can harm the general public and the original manufacturer.” There was no “evidence of actual confusion” in the direct market. The 6th Circuit then used six principles to weigh the “potential fo downstream confusion.” The 9th Circuit merged the “downstream confusion” analysis into the larger factor of “actual confusion.” The “law in the Ninth Circuit is clear that ‘post-purchase confusion,’ i.e., ..[by] someone other than the purchaser who, for example, simply sees the item …can establish the required likelihood of confusion under the Lanham Act.”
Thus, in cases where the buyer markets are segmented, the trademark owner must make an eight factor showing for the direct market, then again, for the downstream market. Evidence of confusion may be split between these markets, which can reduce its effectiveness. A key example in these two cases was the disclaimers on the imitation products. The aftermarket grilles are received by the body shop with clear indications of origin, and of not being GM parts. That lead the courts to conclude that confusion was impossible. In the 9th Circuit case, the general rule was that in cases of “verbatim copying …plaintiff’s reputation and goodwill should not be rendered forever dependent on the effectiveness of fineprint disclaimers often ignored by consumers.” Still, both Circuits required that disclaimers be consistent and comprehensive. Should your street vendor clients be advised to work under a banner sign - ”These are not Vuitton purses.”
Overall, cases involving plain and intentional copying of famous trademarks must still get past the eight factor test of likelihood of confusion. To prevail, the trademark owner must prove the commercial realities of the desired market for the original and knockoff products, and who truly are the customers.
Posted in Trademarks | 1 Comment »
August 16, 2006 by thomason.
Copyright protects original works, as well as, those that derive therefrom. The “owner of a copyright …has the exclusive rights to …prepare derivative works based upon the copyrighted work.” 17 U.S.C. §106(2). A more recent provision gives authors “the right …to prevent any intentional distortion, multilation, or other modification of that work which would be prejudicial to his or her honor or reputation.” §106A(a)(3)(A).
My genuine enjoyment of the excellent exhibition, Andy Warhol/ Supernova: Stars, Deaths and Disasters, 1962-1964, at the Art Gallery of Ontario, was not lessened by my familiarity with these parts of the copyright laws. Warhol offers his unique and artistic vision of other people’s photographs. The provenance of his creations is with another person, artists with whom Warhol did not collaborate or share his profits. As I understand his technique, Warhol copied a photo from the news or from Hollywood, then he transferred that to a silkscreen, and he added color and arrangement. The resulting prints are considered the art works of Warhol. But, didn’t he take the work of another; did Warhol not appropriate the creation of another artist, a photographer?
Critics and commentators on art would agree that there never will be another body of work like that in the exhibit Andy Warhol …1962-1964. Their reasons for that shared conclusion may vary. My reasoning is that copyright laws would preclude Warhol from taking a copyrighted picture, such as he did of “Silver Liz” or Marilyn or Troy or “Race Riot,” and using that to make a derivative work. If he appropriated a picture from a movie poster or celebrity photo, or from the newspaper, and reprinted it, he would be a copyright infringer subject to treble damages. That Supernova of the Sixties has burned out.
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August 15, 2006 by thomason.
For those who care little about preseason NFL, NASCAR or the NL pennant race (STL is already in), our mental musings better are directed to recent antitrust litigation in the medical markets.
Imagine five roads coming together at an uncontrolled intersection – that’s the mental picture for these litigations. Competing are exclusivities granted by patents, by FDA approvals, as well as contractual and distribution restraints; but, coming from the other direction are profit-driven sellers of generic and unpatented substitutes, doctors who want a share of the profits, and patients who need a remedy which others will prescribe. Did I forget to mention the FTC, consumers rights organizations, attorneys general, and congressional subcommittees, and the anti-monopoly “rule of reason”? Yes, that’s an uncontrolled intersection – but, to act as traffic cop, we can enlist a federal judge with a liberal arts degree, or jurors who view all of the actors with suspicion.
Consider the recent monopolization suit that nine law firms filed as a purchaser class action against the companies that make the most “orthopedic implant devices sold” in the U.S., and have “over 75% of the worldwide market.” South Central, etc. v. Zimmer, et al, (S.D. Ind.). The essential allegations are agreements to “fix” prices. The complaint seems a quick follower to DOJ subpoenas to the defendant manufacturers, buoyed with a hope that DOJ will uncover the real evidence. That hope is implied from the complaint lacking allegations of specific agreements or meetings to fix prices. The suit is pleaded as a per se violation, because that can eliminate the more onerous burdens of proving an unreasonable restraint on the market. “[H]orizontal price-fixing is illegal per se without requiring a showing of actual or likely impact on the market.” Denny’s Marina, 8 F.3d 1217 (7th Cir.).
Some of the more intriguing defenses are whether an antitrust injury was pleaded, and defendants’ conscious parallelism since price matching in an oligopolistic market is not per se illegal. Reserve Supply, 971 F. 3d 37 (7th Cir.). I’ll have to check back later when the docket sheet is more developed.
On the threshold question of antitrust injury, a recent Sixth Circuit decision NicSand v. 3M (Aug. 8, 2006) helped me to understand it, but with negativing aspects. I view antitrust injury to arise when a defendant’s actions harm the market, and as a result of the marketplace harm, the plaintiff is injured. In other words, a direct nexus between defendant’s act and plaintiff’s injury need not be pleaded, but rather, harm to a competitive marketplace. The caselaw gets muddied by dicta describing what antitrust injury is not. My current favorite, from the NicSand decision, uses a quinta-negative to assess if the alleged injury has a predicate basis. “Not only was it not apparent from the complaint that this would have occurred in the absence of the exclusive agreement, but also it would have been unlikely for Kmart to take such a step – to refuse to even to hear a supplier’s offer – in the absence of a commitment that it do so.” Imagine putting that sentence is an opinion letter to a valued client.
Since clarity is not always required in antitrust pleadings, the complaint against the implant makers may get by initial motions. The larger issues offer an interesting blend of antitrust and patent issues, with unique products competing in a sophisticated market having inelastic demand. As the populace ages, demand for orthopedic implants is increasing, even though implant prices are increasing, perhaps 8% annually. A database search shows healthy patent portfolios for each named implant maker. For that, and other reasons, implants are not all the same, or substitutes. Surgeons may prefer one brand of implant, due to its functionality, and regardless of price differentials or patents. Also, the surgeon is paid the same without regard to what implant he prescribes, since most orthopedic implants patients are eligible for Medicare.
Without direct evidence of an express agreement to fix prices, proving an ability to fix prices in a highly-differentiated marketplace is difficult. Presumably, plaintiffs’ counsels hope those federal subpoenas will provide direct evidence of price fixing. Of course, not all investigative work by the government is made available to private-party class action plaintiffs. Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122, 1126-27 (7th Cir. 1997). For the present, the implant suit lacks the impressive allegations of fact in, for example, the FTC suits over settlements between big pharma companies to delay introduction of generics. Who can say, in five years, these cases may have worked there way through the district and appeal courts, and we can go back to watching summer sportscasts.
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August 15, 2006 by thomason.
This is where it starts; I can’t say how it will end. It reminds me of my first attempt at writing drama. All my thoughts were around the action, the adventure, the subplots, the drama! First question I was asked, when pitching my idea - how does it end? Having given that so little thought, my oblique reply was “I don’t want to spoil it for you.”
So if you care to read along, then I’ll try to lead with matters that stimulate current interest - leaving open, perhaps, where that will lead.
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