Intellectual Property Law - December 2016

by Manatt, Phelps & Phillips, LLP
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Manatt, Phelps & Phillips, LLP

In This Issue:
  • Design Patents—Supreme Court Decides Samsung v. Apple
  • Survey Says High Anxiety Over Corporate IP Cyber Theft
  • Ninth Circuit: Octane Fitness Governs Lanham Act Fee-Shifting
  • Federal Circuit and "Law of Nature" Patents
  • Supreme Court to Weigh in on Disparaging Trademarks

Design Patents—Supreme Court Decides Samsung v. Apple

Why it matters: On December 6, 2016, the Supreme Court decided Samsung v. Apple, holding that, for purposes of a "total profits" damages award for infringement of a design patent under Section 289 of the Patent Act, the relevant "article of manufacture" can be limited to one or more individual infringing components of a "multicomponent" end product, even where the individual components are not separately sold to ordinary purchasers.

Detailed discussion: On December 6, 2016, the Supreme Court handed down its decision in Samsung v. Apple, the first case involving design patents to come before it in over a century. The Court sided with Samsung, reversing the Federal Circuit's affirmance of the $399 million jury verdict won by Apple in the Northern District of California. The Court articulated a two-step analysis for determining the "total profits" damages award for infringement of a design patent under Section 289 of the Patent Act. First, identify the "article of manufacture" to which the infringed design has been applied. Second, calculate the infringer's total profit made on that article of manufacture. The Court held that, in the case of a "multicomponent" end product such as a smartphone, the relevant "article of manufacture" for reaching a "total profits" damages award for infringement of a design patent can be limited to one or more individual infringing components of that entire end product, even where the individual components are not separately sold to ordinary purchasers. We covered the Court's grant of certiorari in the case in our April 2016 newsletter under "The Supreme Court Agrees to Review Question of Design Patent Law."

Section 289 of the Patent Act

The statutory provision at issue in the case was Section 289 of the Patent Act, entitled "Additional remedy for infringement of design patent," which provides in relevant part that: "Whoever during the term of a patent for a design, without license of the owner … applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale … shall be liable to the owner to the extent of his total profit …." 35 U.S.C. § 289 (emphasis added).

Procedural History

To briefly review, Apple sued Samsung in the Northern District of California in 2011 alleging that certain Samsung smartphones infringed three of Apple's design patents covering the following specific, limited portions of the phone's design: (1) a particular black rectangular front face with rounded corners; (2) a substantially similar rectangular front face with rounded corners plus a surrounding rim or "bezel"; and (3) a particular colorful grid of 16 icons on a black screen. The federal jury found that several Samsung smartphones did infringe Apple's three design patents and awarded Apple $399 million in damages, which, in accordance with Section 289, amounted to the "total profit" Samsung made from its sales of the infringing smartphones.

The Federal Circuit affirmed the district court's damages award in 2015. While acknowledging arguments that "an award of a defendant's entire profits for design patent infringement makes no sense in the modern world," the Federal Circuit said that it was "bound by what the statute says, irrespective of policy arguments that may be made against it." Thus, under "the clear statutory language" of Section 289, the Federal Circuit said it was prevented from adopting a "causation" or apportionment rule because on the statute's face an "article of manufacture" constitutes the entirety of the product that is being sold (which in this case meant the entire smartphone as consumers could not purchase separate components thereof).

Samsung appealed to the Supreme Court, which, in March 2016, agreed to hear the case as to the following question presented: "Where a design patent is applied to only a component of a product, should an award of infringer's profits be limited to those profits attributable to the component?" Oral argument was held on October 11, 2016.

The Court's Holding

In a unanimous decision written by Justice Sonia Sotomayor, the Court reversed and remanded, rejecting the Federal Circuit's finding that "the entire smartphone [was] the only permissible 'article of manufacture' for the purpose of calculating §289 damages because consumers could not separately purchase components of the smartphones." The Court went on to hold that the Federal Circuit's reading was not consistent with Section 289.

The Court began its analysis by reviewing the language of Section 289 and stating that "[a]rriving at a damages award under § 289 thus involves two steps. First, identify the 'article of manufacture' to which the infringed design has been applied. Second, calculate the infringer's total profit made on that article of manufacture." The Court clarified that its opinion focused on the first step in the Section 289 analysis: "The only question we resolve today is whether, in the case of a multi-component product, the relevant 'article of manufacture' must always be the end product sold to the consumer or whether it can also be a component of that product."

In holding that an "article of manufacture" under Section 289 "encompasses both a product sold to a consumer and a component of that product," the Court said that "the text [of Section 289] resolves this case." After parsing the definitions of the individual words "article" and "manufacture," the Court concluded that "the term 'article of manufacture' is broad enough to encompass both a product sold to a consumer as well as a component of that product ... That a component may be integrated into a larger product, in other words, does not put it outside the category of articles of manufacture."

The Court justified its reading of Section 289 as being consistent with other provisions of the Patent Act, citing in particular to Section 171(a) (making eligible for design patent protection "new, original and ornamental design[s] for an article of manufacture") and Section 101 (making eligible for utility design protection "any new and useful … manufacture … or any new and useful improvement thereof") and ultimately concluded that "[t]he Federal Circuit's narrower reading of 'article of manufacture' cannot be squared with the text of §289."

The Court declined to go a step further and resolve whether, for each of the three design patents at issue in the case, the relevant "article of manufacture" was the entire smartphone or its individual components because "[d]oing so would require us to set out a test for identifying the relevant article of manufacture at the first step of the §289 damages inquiry and to parse the record to apply that test in this case … We decline to lay out [such] a test … Doing so is not necessary to resolve the question presented in this case, and the Federal Circuit may address any remaining issues on remand."

Survey Says High Anxiety Over Corporate IP Cyber Theft

Why it matters: An online poll recently conducted by Deloitte Advisory Cyber Risk Services reflects growing concern among IP professionals across all business sectors and industries about the security of their companies' IP assets in the face of an anticipated increase in cyber thefts. A majority of those surveyed believe that IP cyber theft incidents will increase over the next 12 months. Although IP can constitute upwards of 80% of a single company's value today, the poll results indicate that a significant portion of their companies had yet to fully secure their IP assets. In the face of a growing threat to some of their most valuable assets, companies would be well-served by proactively developing and having in place a comprehensive plan for securing their IP assets and, should it occur, for effectively dealing with IP cyber theft.

Detailed discussion: On October 25, 2016, Deloitte Advisory Cyber Risk Services released the results of an online poll of intellectual property (IP) professionals it had conducted on September 28, 2016, in conjunction with a webcast entitled "Cyberattackers and your intellectual property: Valuing and guarding prized business assets." The survey reflected a growing concern among IP professionals about the security of their companies' IP assets in the face of an anticipated increase in actual and attempted cyber thefts in the coming year. Notwithstanding this concern, the survey also reflected that, even though IP can constitute a large percentage (sometimes more than 80%) of a company's value, almost 50% of respondents said that their companies are either still in the building stages of their IP security plans or have not yet started putting one together.

Poll Breakdown

The nearly 3,000 poll respondents were IP professionals that came from a broad array of business sectors, including:

Banking and securities: 13.5%
Technology: 8.4%
Investment management: 6.1%
Travel, hospitality and services: 5.4%
Insurance: 5.1%
Retail, wholesale and distribution: 5.0%

Anxiety About Rise in Cyber Theft

The poll results showed that 58% of respondents across all business sectors expect the number of IP cyber theft incidents (defined as successful or attempted cyber theft of trade secrets, drawings and plans, or proprietary know-how) to increase over the next 12 months. Broken down by individual industries, the percentage of respondents who anticipate IP cyber theft incidents to increase is even higher:

Power and utilities: 68.8%
Telecom: 68.8%
Industrial products and services: 64.7%
Automotive: 63.9%

Company Insiders Seen as Main Cyber Theft Threat; Many Companies Not Prepared

The survey showed that 20.1% of respondents across all business sectors (higher when polled by individual industry) believe that the IP cyber theft will come from "employees and other insiders" at their organizations, followed by competitors (16.3%), activist groups (12%), third-party vendors (11.7%) and nation states (10.1%). Notwithstanding this, only 16.7% of respondents said that access to their companies' IP was "very limited, on a need-to-know basis only," while 36.1% said that their organizations' efforts to secure their IP were in the "building stage," and 12.1% said that their efforts were "lacking" and that they did not have a defined program to protect and monitor access to their IP. Given that a large number of those polled believe that IP cyber theft will come from insiders, it was suggested that companies create a specific "insider threat mitigation program" that includes both routine and random auditing and established policies and training for employees.

Perceived Major Challenges in the Event of Cyber Theft Incident

Even though IP can constitute a large percentage of a company's value, when asked about the biggest challenges their organizations would face in the event of an IP cyber theft incident, a combined 44.1% of poll respondents answered "assessing what IP had been stolen, or the impact of IP loss" and "managing investor and customer/client relationships." Suggested actions companies can take to mitigate these challenges include developing plans to identify key IP assets, assessing in advance the potential impact to the organization of their loss, and developing a concrete plan to secure them from both internal and external cyber theft because, in short, "[o]rganizations need to define their cyber risk, up front, in conjunction with their strategic priorities when making decisions on protecting their most critical assets because they recognize what the adverse consequences would be otherwise."

Ninth Circuit: Octane Fitness Governs Lanham Act Fee-Shifting

Why it matters: On October 16, 2016, the Ninth Circuit, sitting en banc, unanimously decided in SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd. to extend the "totality of the circumstances" fee-shifting test for attorney fee awards under the Patent Act—established by the Supreme Court in the 2014 case of Octane Fitness, LLC v. ICON Health & Fitness, Inc.—to trademark cases brought under the Lanham Act. In so doing, the Ninth Circuit followed the lead of a majority of the other circuits that had considered the issue and specifically overturned its precedent to the contrary. Read on for a recap.

Detailed discussion: On October 16, 2016, in the case of SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., the Ninth Circuit, sitting en banc, unanimously held that the "totality of the circumstances" test established by the Supreme Court in the 2014 case of Octane Fitness, LLC v. ICON Health & Fitness, Inc.—which related to attorney fee awards under the fee-shifting provisions of the Patent Act—applied equally to the "parallel and identical" fee-shifting provisions of the Lanham Act. In addition, the Ninth Circuit held that the "abuse of discretion" standard established by the Supreme Court in Highmark Inc. v. Allcare Health Mgmt. Sys., Inc.—another Patent Act fee-shifting case decided on the same day as Octane Fitness in 2014—is the appropriate standard for appellate review of district court decisions regarding fee-shifting. In so doing, the Ninth Circuit followed the lead of the majority of the other circuits that had considered the issue and specifically overturned its precedent to the contrary.

At the outset of its opinion, which was "suitable for decision without oral argument," the Ninth Circuit said that it had "voted to rehear this case en banc to reconsider [its] jurisprudence concerning fee awards in cases filed pursuant to the Lanham Act, 15 U.S.C. § 1051 et seq."

Lanham Act "Fee-shifting Provision" and Ninth Circuit Precedent

The Ninth Circuit began its analysis by identifying the fee-shifting provision of the Lanham Act at issue: "Section 35(a) of the Lanham Act provides that '[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.' 15 U.S.C. § 1117(a)."

The court next reviewed its precedent involving the interpretation of Section 35(a), explaining that "[h]istorically, we have reviewed de novo a district court's finding as to whether a defendant's infringement was 'exceptional' within the meaning of the Lanham Act's fee-shifting provision … We have required that a plaintiff show that a defendant engaged in 'malicious, fraudulent, deliberate or willful' infringement."

The Ninth Circuit further cited to its precedent to state that "[w]e interpret the fee-shifting provisions in the Patent Act, 35 U.S.C. § 285, and the Lanham Act in tandem" because the "fee-shifting provisions in both acts are 'parallel and identical.' " The court concluded that "[t]hus, we rely on an interpretation of the fee-shifting provision in one Act to guide our interpretation of the parallel provision in the other."

Octane Fitness and Highmark

The Ninth Circuit explained that, in Octane Fitness, the Supreme Court "clarified how courts should analyze fee requests under the Patent Act," holding that "a district court analyzing a request for fees under the Patent Act should look to the 'totality of the circumstances' to determine if the infringement was exceptional." Per the Ninth Circuit, the Supreme Court defined an "exceptional case" as "simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." The Ninth Circuit pointed out that the Supreme Court "eschewed a precise rule or formula for making these determinations and instructed that equitable discretion should be exercised in light of the considerations we have identified," citing to a "nonexclusive list of factors, including frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." (Internal quotations omitted.) In addition, the Ninth Circuit noted the Supreme Court's clarification that "the applicable burden of proof for fee entitlement was the preponderance of the evidence standard and not proof by 'clear and convincing evidence.' "

The Ninth Circuit also pointed out that in Highmark, decided on the same day in 2014, the Supreme Court held that "abuse of discretion" is the proper standard an appellate court should apply when reviewing a district court's award of fees under the fee-shifting provision of the Patent Act.

Extension of Octane Fitness and Highmark to Lanham Act Cases

The Ninth Circuit observed that, post-Octane Fitness, "the Third, Fourth, Fifth, and Sixth Circuits have recognized that Octane Fitness [also] changed the standard for fee-shifting under the Lanham Act" and that "[o]nly the Second and Seventh Circuits have applied earlier case law to Lanham Act fee disputes, and both did so without mentioning Octane Fitness or Highmark."

The Ninth Circuit thus held that "[w]e agree with the majority of our sister circuits and conclude that Octane Fitness and Highmark have altered the analysis of fee applications under the Lanham Act. Therefore, district courts analyzing a request for fees under the Lanham Act should examine the 'totality of the circumstances' to determine if the case was exceptional ... exercising equitable discretion in light of the nonexclusive factors identified in Octane Fitness … and using a preponderance of the evidence standard. Pursuant to Highmark, our review of the district court's decision on fees awarded under the Lanham Act is for abuse of discretion." Furthermore, the Ninth Circuit made clear that "[w]e overrule our precedent to the contrary."

With this "correction of the law," the Ninth Circuit remanded the case to the "three-judge panel for resolution of the remaining issues presented by the case."

Federal Circuit and "Law of Nature" Patents

Why it matters: On July 5, 2016, the Federal Circuit in Rapid Litigation Management Limited v. CellzDirect, Inc. held that a method of repeatedly freezing and thawing liver cells to retain their viability for medical procedures was patent-eligible. In so doing, the Court reversed a district court ruling that had held the method to be non-patentable under Section 101 of the Patent Act because its claims were drawn to a "law of nature." The CellzDirect decision was noteworthy because it was the first time the Federal Circuit had upheld patent claims relating to a "law of nature" or "natural phenomenon" invention since the Supreme Court's 2014 landmark decision in Alice Corp. v. CLS Bank. The Federal Circuit's decision in CellzDirect followed closely on the heels of the Supreme Court declining to review the Federal Circuit's 2015 decision in Sequenom, Inc. v. Ariosa Diagnostics, leaving in place the Federal Circuit's seemingly contradictory invalidation of a patent for a novel fetal diagnostics test on Section 101 "law of nature" grounds. All of this prompted the U.S. Patent and Trademark Office to issue a memo to its examiners on July 14, 2016, containing additional guidance on the patent eligibility of life sciences method claims in light of CellzDirect and the Supreme Court's denial of certiorari in Sequenom.

Detailed decision: Following is a recap of CellzDirect, Sequenom and the memo issued to examiners by the U.S. Patent and Trademark Office (USPTO) trying to make sense of it all.

Cellzdirect and Sequenom

On July 5, 2016, the Federal Circuit in Rapid Litigation Management Limited v. CellzDirect, Inc. held a method of freezing and thawing liver cells (hepatocytes) to retain their viability for medical procedures to be patent-eligible. This was noteworthy because it was the first time the Federal Circuit had upheld patent claims relating to a "law of nature" or "natural phenomenon" invention since the Supreme Court's 2014 landmark decision in Alice Corp. v. CLS Bank.

In its opinion, the Federal Circuit presented the two-step test to ascertain patent eligibility established in Alice as follows:

The Supreme Court has recently articulated a two-part test for distinguishing patents that claim one of the patent-ineligible exceptions from those that claim patent-eligible applications of those concepts… Step one asks whether the claim is "directed to one of [the] patent-ineligible concepts" [i.e., "judicial exceptions" developed by the courts including laws of nature, natural phenomena or abstract ideas] … If the answer is no, the inquiry is over: the claim falls within the ambit of § 101. If the answer is yes, the inquiry moves to step two, which asks whether, considered both individually and as an ordered combination, "the additional elements 'transform the nature of the claim' into a patent-eligible application." … Step two is described "as a search for an 'inventive concept' " … At step two, more is required than "well-understood, routine, conventional activity already engaged in by the scientific community," which fails to transform the claim into "significantly more than a patent upon the" ineligible concept itself.

The Federal Circuit noted that the case was on appeal from a grant of summary judgment by the district court, which had applied the two-step Alice test to the claimed process of repeatedly freezing/thawing liver cells to preserve them for future use and found that (i) under the first step, the claims were directed toward an ineligible "law of nature" and thus not patent-eligible under Section 101 of the Patent Act; and (ii) under the second step, the claimed process lacked the requisite "inventive concept" that would have served to override the conclusion in the first step.

The Federal Circuit reversed. With respect to the first step of the Alice test, the Court disagreed with the district court's conclusion that the claims were drawn to ineligible "law of nature" subject matter, making a distinction between the production method relating to the freezing/thawing of the cells and the "natural phenomenon" of the cells themselves: "It is enough in this case to recognize that the claims are simply not directed to the ability of hepatocytes to survive multiple freeze-thaw cycles. Rather, the claims of the '929 patent are directed to a new and useful laboratory technique for preserving hepatocytes. This type of constructive process, carried out by an artisan to achieve 'a new and useful end,' is precisely the type of claim that is eligible for patenting" under Alice.

Thus, for the court, with the answer to step one of Alice being "no" (i.e., the claims were not directed to patent-ineligible subject matter), the inquiry was over. Even assuming arguendo, however, that the claims were found to be patent-ineligible under the first step, the Court said that they would survive under step two of Alice because they "recite an improved process for preserving hepatocytes for later use … The claimed method is patent eligible because it applies the discovery that hepatocytes can be twice frozen to achieve a new and useful preservation process." The Court said that even though the individual steps in the claimed process (freezing, thawing) were well known in the prior art, Alice requires that they be considered as a whole in "ordered combination." Therefore, the Court found that "[h]ere, the claimed process involves freezing and thawing hepatocytes twice. The individual steps of freezing and thawing were well known, but a process of preserving hepatocytes by repeating those steps was itself far from routine and conventional."

The Federal Circuit opined that the claims in CellzDirect were "immediately distinguishable" from claims in other cases both before and after Alice, such as in the 2015 Sequenom case, that were found by the court to be patent-ineligible on "law of nature" or "natural phenomena" grounds because in those cases "we found claims 'directed to' a patent-ineligible concept when they amounted to nothing more than observing or identifying the ineligible concept itself." Specifically with respect to Sequenom, where the Court found claims for an arguably new and novel fetal diagnostics test to be patent-ineligible, the Court said that "the claims recited methods for detecting paternally inherited cffDNA in the blood or serum of a pregnant female … The existence and location of cffDNA is a natural phenomenon; identifying its presence was merely claiming the natural phenomena itself." The Federal Circuit further distinguished Sequenom by noting that it had found no "inventive concept" when applying step two of the Alice test to the facts of that case. When referencing Sequenom, the court cited to the Supreme Court's June 27, 2016, denial of certiorari in that case, which left its decision in Sequenom intact and perhaps explained the court's need to distinguish it from its seemingly contradictory holding in CellzDirect.

July 14, 2016, USPTO Memo to Examiners

With the seemingly "mixed messages" of the Federal Circuit's decision in Cellzdirect and the Supreme Court's denial of certiorari in Sequenom within the same week, Robert W. Bahr, the Deputy Commissioner for Patent Examination Quality for the USPTO, saw fit to issue a memo to examiners on July 14, 2016, containing additional guidance and clarifications on the subject of patent eligibility of life sciences method claims. Entitled "Recent Subject Matter Eligibility Rulings (Rapid Litigation Management v. CellzDirect and Sequenom v. Ariosa)," the memo began by referencing both the Federal Circuit's CellzDirect decision and the Supreme Court's denial of certiorari in Sequenom and assuring examiners that "[t]hese cases do not change the subject matter eligibility framework, and the USPTO's current subject matter eligibility guidance and training examples are consistent with these cases." Specifically with respect to Sequenom, the memo clarified that "[w]hile this panel decision is a precedential Federal Circuit panel decision, the denial of the petition for a writ of certiorari does not elevate its significance in this regard."

The memo went on to state that "[t]he decision in [CellzDirect] does, however, provide additional information and clarification on the inquiry for determining whether claims are directed to a judicial exception (Step 2A of the subject matter eligibility examination guidelines)." The memo summarized CellzDirect and pointed out that "the Federal Circuit highlighted several important points regarding the subject matter eligibility analysis, in particular regarding whether a claim is directed to law of nature (Step 2A)." These include the considerations that (i) "the 'directed to' analysis of a process claim [should be] more than 'merely identify[ing] a patent-ineligible concept underlying the claim' and instead requires an analysis of whether 'the end result of the process, the essence of the whole, was a patent-ineligible concept' "; and (ii) the claims in CellzDirect that "apply a law of nature" are distinguishable from the claims in Sequenom that were found to be directed to a patent-ineligible concept because the Sequenom claims "amounted to nothing more than observing or identifying the ineligible concept itself." The memo stated that the USPTO's current subject matter eligibility guidance, as recently updated in May 2016, and training examples "are consistent with these points."

The memo concluded, "[i]n summary, the USPTO's current subject matter eligibility guidance and training examples are consistent with the Federal Circuit's panel decisions in Rapid Litigation Management and Sequenom. Life sciences method claims should continue to be treated in accordance with the USPTO's subject matter eligibility guidance (most recently updated in May of 2016)."

Supreme Court to Weigh in on Disparaging Trademarks

Why it matters: On September 29, 2016, the Supreme Court granted certiorari in Lee v. Tam, where it will review the question of whether Section 2(a) of the Lanham Act—which bars the U.S. Patent and Trademark Office from registering "disparaging" trademarks—is an unconstitutional restriction on free speech. The trademark at issue in Tam is "The Slants," which an Asian rock band attempted to register but was denied because the proposed mark was considered "disparaging" to Asians under Section 2(a). The case is being closely watched by trademark practitioners, the government and the courts alike, not least of which is the Fourth Circuit with respect to the case involving the mark "Washington Redskins" currently pending before it.

Detailed discussion: On September 29, 2016, the Supreme Court granted certiorari in Lee v. Tam, where it will review the following question presented: "Whether the disparagement provision in 15 U.S.C. 1052(a) [Section 2(a) of the Lanham Act] is facially invalid under the Free Speech Clause of the First Amendment." The case is currently being briefed, including the filing of numerous amici briefs, and as of this writing, oral argument has not yet been scheduled.

The trademark at issue in Tam is the "The Slants," which an Asian rock band unsuccessfully attempted to register. In December 2015, the Federal Circuit, sitting en banc, held Section 2(a) to be an unconstitutional restriction on free speech. If upheld by the Supreme Court, the case will have a far-reaching impact on how the U.S. Patent and Trademark Office (PTO) registers trademarks going forward and on pending cases where a "disparaging" trademark is at issue. Perhaps the most high profile of these pending cases is Pro-Football, Inc. v. Blackhorse, currently before the Fourth Circuit involving variations of the mark "Washington Redskins" and which the Fourth Circuit recently put on hold pending the Supreme Court's decision in Tam.

In order to understand what got us to this point, a recap of the relevant statute and the procedural history of both Tam and Blackhorse follows.

Section 2(a) of the Lanham Act

The statute at issue in Tam is Section 2(a) of the Lanham Act, which provides in relevant part that "[n]o trademark … shall be refused registration … on account of its nature unless it—(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute ... "

Procedural History of Lee v. Tam

This case came up to the Supreme Court from the Federal Circuit, where on December 22, 2015, an en banc court held in In re Simon Shiao Tam that Section 2(a) of the Lanham Act is an unconstitutional restriction on free speech. We covered the Federal Circuit's en banc decision in Tam in our February 2016 Newsletter under "Federal Circuit: Disparaging Trademarks Are Free Speech."

To briefly review, the Tam case involved an individual by the name of Simon Shiao Tam (Tam), the "front man" for a dance-rock band, attempting to register the trademark "The Slants" (the band's proposed name) with the PTO in 2011. Tam's stated reason in the trademark application for wanting to name his band The Slants was "to 'reclaim' and 'take ownership' of Asian stereotypes." Citing Section 2(a) of the Lanham Act, the examiner refused to register the mark because he found it "disparaging to people of Asian descent" and felt that "a substantial composite" of Asians would find the mark offensive. The PTO's in-house Trademark Trial and Appeal Board (TTAB) affirmed, disqualifying the mark for registration under Section 2(a) because, among other things, " '[t]he dictionary definitions, reference works and all other evidence unanimously categorize the word "slant," when meaning a person of Asian descent, as disparaging,' and because there was record evidence of individuals and groups in the Asian community objecting to Mr. Tam's use of the word." Tam appealed the TTAB's ruling to the Federal Circuit.

In the first go-round before the Federal Circuit, the court found the mark "The Slants" to be disparaging and affirmed the TTAB's disqualification of the mark from registration. The Federal Circuit also held that its precedent foreclosed Tam from raising a First Amendment challenge to Section 2(a) because, even though the PTO would not register the mark "The Slants," nothing was stopping Tam from using the name for his band, and thus the First Amendment was not implicated. The Federal Circuit then sua sponte ordered rehearing en banc and asked the parties to brief the following issue: "Does the bar on registration of disparaging marks in 15 U.S.C. § 1052(a) violate the First Amendment?" In addition to the parties' briefs, ten amicus briefs were filed, and the en banc Federal Circuit heard oral argument on October 2, 2015.

In its December 22, 2015, opinion, a divided Federal Circuit began by agreeing up front that it found the mark "The Slants" to be disparaging and likely to cause offense. After considerable analysis, however, the panel held that "[t]he government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional."

Procedural History of Pro-Football, Inc. v. Blackhorse

To briefly review the latest iteration of this long-running litigation involving the mark "Washington Redskins," in July 2015 the Eastern District of Virginia upheld the TTAB's ruling cancelling the registrations of six Redskins trademarks on the grounds that they disparaged Native Americans in contravention of Section 2(a) of the Lanham Act. The court rejected the trademark registrant's arguments that Section 2(a) violates the First Amendment, basing its decision on two lines of reasoning, namely that (i) the First Amendment is not implicated by the operation of Section 2(a) and (ii) federal trademark registration constitutes government speech and is thus exempt from First Amendment scrutiny. Both lines of reasoning were later rejected by the Federal Circuit en banc in Tam.

In support of its "government speech" finding, the district court cited to the 2015 U.S. Supreme Court case of Walker v. Texas Division, Sons of Confederate Veterans involving the Texas Department of Motor Vehicles' rejection of a specialty license plate featuring a confederate flag design on the grounds that the design was "offensive to any member of the public." In that case, the Supreme Court held that license plates are a form of government speech, exempt from the First Amendment, and subject to content restrictions by the government. The en banc Federal Circuit in Tam differentiated Walker, finding that federal trademark registration is not the same as a state-run specialty license plate program and is therefore not government speech.

Pro-Football, Inc., appealed the case to the Fourth Circuit in October 2015. After the petition for certiorari was filed with the Supreme Court in Tam, Pro-Football, Inc., filed a rare "certiorari before judgment" petition with the Court which, if granted, would have allowed Blackhorse to be joined with Tam for Supreme Court consideration, even though the Fourth Circuit had not yet ruled in the case. The Supreme Court denied Pro-Football, Inc.'s petition on October 3, 2016, but on October 19, 2016, the Fourth Circuit agreed to postpone Blackhorse until after the Supreme Court's decision in Tam as the Tam decision could directly affect the outcome in Blackhorse.

We are awaiting the Supreme Court's decision in Tam with avid interest and will report back.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

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