Intellectual Property Outlook: Cases and Trends to Follow in 2020 – Part 1

Sheppard Mullin Richter & Hampton LLP

PART 1: IP ISSUES CURRENTLY PENDING BEFORE THE SUPREME COURT

In the first part of our series, we briefly summarize the intellectual property issues that the Supreme Court has already agreed to address in 2020. In particular, we provide a brief overview and key takeaways for the Supreme Court’s consideration of:

  • Whether adding “.com” to a generic mark creates a protectable trademark;
  • The scope of appeals from IPR proceedings;
  • The ability to copyright software interfaces;
  • Requirements for recovering an infringer’s profits in trademark cases;
  • State sovereign immunity from copyright infringement claims; and
  • Copyright protection for state law annotations.

1. Whether Adding “.com” to a Generic Mark Creates a Protectable Trademark

In USPTO v. Booking.com BV, No. 19-46, the Supreme Court will address whether adding “.com” to a generic term can result in a protectable trademark.

To register a trademark under the Lanham Act, the mark must be “distinctive” – i.e., capable of distinguishing the applicant’s goods from those of others. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992). Courts typically measure distinctiveness on an ascending scale: (1) generic; (2) descriptive; (3) suggestive; (4) arbitrary; and (5) fanciful. Id. Generic marks – those that refer to “the genus of which the particular product is a species” – cannot distinguish the goods of an applicant and therefore cannot be registered. Id.

In Booking.com, the United States Patent and Trademark Office (the “USPTO”) refused to register the mark “BOOKING.COM,” finding it generic. The Fourth Circuit disagreed, holding that “BOOKING.COM” must be assessed as a whole, rather than considering “booking” and “.com” separately. The court held that the USPTO failed to offer any evidence showing that “booking.com” is used to refer generically to online hotel reservation services. The court further held that the mark is not generic because the “primary significance” of “booking.com” to consumers – as evidenced by a consumer survey – is as a brand name, not as a category of services.

On November 8, 2019, the Supreme Court granted certiorari to consider whether “the addition by an online business of a generic top-level domain (‘.com’) to an otherwise generic term can create a protectable trademark.” The USPTO argues that “booking” is a generic term that cannot be transformed into a protectable trademark with the addition of “.com.” The USPTO reasons that “.com” is akin to entity designations, such as “Co.” or “Inc.,” which also cannot transform generic terms into protectable trademarks. See Goodyear’s India Rubber Clove Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888). Booking.com responds that the USPTO is attempting to create a per se category of generic marks, which the USPTO calls “generic.com” marks. According to Booking.com, such a per se approach is contrary to prior Supreme Court rulings that genericness is a factual determination that depends on the “primary significance” of a mark to consumers. See Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118 (1938).

Key Takeaway

The decision in Booking.com could have a significant impact on online commercial activities. The USPTO has argued that protecting “generic.com” marks will give companies holding those marks an unfair ability to prevent competitors from describing their services. For example, the USPTO argues that Booking.com could sue other online reservation companies to prevent them from using “booking” in their domain name (e.g., “ebooking.com,” “hotelbooking.com”). Conversely, if the Supreme Court holds that “generic.com” names cannot be registered, well-known domain names could lose protection and companies may reconsider the use of such names in the future. Booking.com provided several possible examples in its opposition to certiorari, including “weather.com,” “answers.com,” and “ancestry.com,” all of which the USPTO has previously registered.

The parties are scheduled to submit merits briefs in Booking.com in January and February 2020 and we expect oral argument later in the year.

2. The Scope of Appeals from IPR Proceedings

In Click-To-Call Technologies, LP, No. 18-916, the Supreme Court will address whether a patent owner can appeal a decision from the Patent Trial and Appeal Board (“PTAB”) concerning the timeliness of a petition for inter partes review (“IPR”). The Court’s decision in Click-to-Call is likely to clarify more broadly the type of issues that may be appealed from IPR proceedings.

Under 35 U.S.C. § 314(d), the “determination . . . whether to institute an inter partes review under this section shall be final and nonappealable.” While this language seems straight-forward, the scope of the appeal bar has been the subject of vigorous debate over the past few years.

In Click-to-Call, the patent owner opposed institution of an IPR proceeding under 35 U.S.C. § 315(b), which provides that IPR “may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.” The patent owner in Click-to-Call argued that the petitioner had been served with a complaint more than one year before filing the IPR petition. The PTAB disagreed, instituted IPR, and ultimately invalidated the challenged claims of the patent. On appeal, however, the Federal Circuit found that the petition was time-barred under § 315(b). The Federal Circuit thus vacated the PTAB’s final written decision.

The issue now before the Supreme Court is whether the Federal Circuit had authority to hear an appeal of the PTAB’s time-bar determination. The patent owner, Click-to-Call Technologies, L.P., argues that the Federal Circuit had authority because § 314(d) only bars appeal of the determination “under this section” – i.e., the determination under § 314(a) that “there is a reasonable likelihood that the petition would prevail with respect to at least 1 of the claims challenged.” Meanwhile, the petitioner from the IPR proceeding argues that § 314(d) more broadly bars consideration of questions that are closely tied to institution of an IPR proceeding, including whether a petition is time-barred. In support of this position, the IPR petitioner relies on the Supreme Court’s holding in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131, 2141 (2016), that there is no appeal of “questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.”

Key Takeaway

The Supreme Court held oral argument in the Click-to-Call case on December 9, 2019. During the argument, the justices expressed competing concerns. Justice Gorsuch asked, for example, whether broadly prohibiting appeals under § 314(b) would prevent judicial review of time-bar determinations that are made in bad faith. On the other hand, Justice Ginsburg commented that there would be “something unseemly” about nullifying a merits determination on appeal based on a misapplication of the time bar.

We expect a decision in the Click-to-Call case during the first quarter of 2020. The decision is likely to provide guidance on the scope of issues that may be appealed from IPR proceedings.

3. Ability to Copyright Software Interfaces

In Google LLC v. Oracle America, Inc., No. 18-956, the Supreme Court will wade into a long-running battle of goliaths to determine the copyrightability of software interfaces that allow computer programs to communicate with each other and with computer hardware.

The Google case concerns Java “application programming interfaces” (“APIs”), which are “pre-written Java source code programs” that perform certain computer functions. Oracle Am., Inc. v. Google LLC, slip op. (Fed. Cir. Mar. 27, 2018). These APIs allow programmers to use prewritten code for common functions rather than writing new code from scratch. Id. at 8. The Java APIs are comprised of two types of source code – “declaring code” that provides information about the function to be performed and “implementing code” that gives step-by-step instructions to the computer to perform the function. Id.

In developing the Android OS for mobile phones, Google wanted to encourage Java developers to build Android-compatible apps. Oracle Am., slip op. at 10. To facilitate development of these Java-based apps, Google copied declaring code for 37 Java API packages relevant to mobile devices (11,500 lines of code) as part of the Android platform. Id. While Google copied the Java API declaring code, it wrote its own implementing code. Id.

In 2010, Oracle accused Google of copyright infringement. After extensive proceedings – including two jury trials and two Federal Circuit appeals – the Federal Circuit held that the Java APIs are entitled to copyright protection and Google’s copying of those APIs for the Android OS did not amount to “fair use.” See Oracle Am., slip op.

In November 2019, the Supreme Court granted certiorari to consider two issues: (1) whether copyright protection extends to a software interface; and (2) whether Google’s copying of a software interface in the context of creating a new computer program constitutes fair use. Google has argued that software interfaces are “methods of operation” and therefore not copyrightable expression. Google further argues that there is a long history of freely copying software interfaces, which is necessary to ensure the interoperability of computer programs and hardware. According to Google, such copying transforms the software interfaces into new computer programs and qualifies as fair use.

Key Takeaway

Merits briefs in the Google case will be filed in January and February 2020 and the Supreme Court will hear oral argument later in the year. Given the wide-spread use of software interfaces and increasing demands for interoperability, the stakes in Google are quite high. If the Court confirms the copyrightability of software interfaces, companies could restrict the use of the interfaces or demand licensing fees for such use. Alternatively, if the Court finds that software interfaces are not copyrightable, companies such as Oracle will need to find new methods to monetize their products.

4. Requirements for Recovering an Infringer’s Profits in Trademark Cases

In Romag Fasteners, Inc. v. Fossil, Inc., No. 18-1233, the Supreme Court will address whether a trademark holder must establish willful infringement to qualify for an award of an infringer’s profits.

In Romag, a jury found that Fossil, Inc. had infringed trademarks associated with magnetic clasps on handbags. The jury awarded Romag Fasteners, Inc. $6.7 million in damages based on the profits Fossil earned from the infringing sales. The district court, however, vacated the damages award, finding that Romag failed to establish willful infringement of the trademarks. The Federal Circuit affirmed, holding that the Second Circuit requires proof of willful infringement as a prerequisite for an award of an infringer’s profits.

The Supreme Court granted certiorari and will now interpret the requirements of 15 U.S.C. § 1117(a), which provides that, “subject to the principles of equity,” a plaintiff may “recover . . . defendant’s profits” upon proving “a violation under section 1125(a) or (d) . . . or a willful violation under section 1125(c).” Romag argues that this provision only requires a “willful” violation in connection with § 1125(c) (trademark dilution), and not in connection with § 1125(a) (false designation of origin). Fossil, Inc. responds that “principles of equity” always require a showing of willful infringement, including with respect to § 1125(a).

Key Takeaway

Oral argument in the Romag case is scheduled for January 14, 2020. The Court’s decision will likely have a significant impact on the availability of damages for trademark infringement. Indeed, an infringer’s profits are often the most viable method for quantifying damages. If a trademark owner must show willfulness to recover profits, trademark owners may be left with no monetary remedy in many cases.

6. State Sovereign Immunity from Copyright Infringement Claims

In Allen v. Cooper, No. 18-877, the Supreme Court will consider the constitutionality of a federal law that purports to abrogate state sovereign immunity against claims of copyright infringement.

As a general matter, states have immunity from claims for violations of federal law. Congress, however, may abrogate state sovereign immunity under § 5 of the Fourteenth Amendment if Congress finds that there is a pattern of states violating the law that would justify suspension of immunity. See Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999). Congress also has authority to abrogate state sovereign immunity with respect to federal laws enacted pursuant to authority granted in Article I of the Constitution, at least in the case of bankruptcy laws. See Central Virginia Community College v. Katz, 546 U.S. 356 (2006). The scope of Congress’s authority to abrogate state sovereign immunity under Article I, however, is not entirely clear, as reflected by the decisions in Florida Prepaid and Katz.

In 1990, Congress passed the Copyright Remedy Clarification Act (“CRCA”), which sought to abrogate state sovereign immunity from claims of copyright infringement. In 2015, filmmaker Frederick Allen relied on the CRCA to sue the State of North Carolina for copyright infringement after North Carolina copied Allen’s footage of Blackbeard’s pirate ship, Queen Anne’s Revenge. The district court initially allowed the copyright claim to proceed, but the Fourth Circuit held that North Carolina was immune from suit. In so holding, the Fourth Circuit struck down the CRCA.

The Supreme Court granted certiorari to consider whether Congress validly abrogated state sovereign immunity from copyright infringement claims. Allen argues that the CRCA is valid because the Intellectual Property Clause of Article I of the U.S. Constitution expressly empowers Congress to pass copyright laws. Allen thus asserts that, consistent with the Supreme Court’s decision in Katz, Congress has the power to abrogate state sovereign immunity with respect to the copyright laws. North Carolina responds that Katz applies only in the context of the Bankruptcy Clause and that, pursuant to the decision in Florida Prepaid, the Intellectual Property Clause does not permit abrogation of state laws.

Allen also argues that the CRCA is proper under the Fourteenth Amendment because it was enacted based on studies showing that states are rampantly infringing copyrights. North Carolina responds that the evidence of states infringing copyrights is anecdotal and therefore insufficient to justify abrogation of state sovereign immunity.

Key Takeaway

On November 5, 2019, the Supreme Court heard oral argument in Allen. During the argument, the justices expressed some concern that states could infringe intellectual property rights with impunity if the CRCA is struck down. The justices also acknowledged Congress’s power to abrogate state sovereign immunity under the Fourteenth Amendment, but questioned the sufficiency of the studies that Congress relied upon in passing the CRCA. The decision in Allen is expected by late spring.

* * *

In the next installment of our four-part Intellectual Property Outlook series, we will delve into several possible developments in the law of patent eligibility that will be worth following in 2020.

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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