IP Update, Vol. 16, No. 9, September 2013

by McDermott Will & Emery

In This Issue:


Preliminary Injunction Ordered Based on Appellate Claim Construction

Keeping it Out of the Supreme Court

Ambiguous Claim Terms May Soon Be Construed Against the Drafter

Broadened Scope of Claim Term on Appeal Results in Literal Infringement

Litigation Misconduct Alone Sufficient to Support Exceptional Case

Case Exceptional for Maintaining Suit After Adverse Claim Construction Ruling

USPTO, in Inter Partes Reexam, Did Not Construed Claims Too Narrowly

Avoiding Implicit Disavowal  *Web Only*

Election in Response to Ambiguous Restriction Requirement Does Not Relinquish Claim Scope  *Web Only*

ITC Claim Construction and Obviousness Analysis Critiqued

Supplier’s Offer to Make Commercial Embodiment for Patentee Before Critical Date Results in On-Sale Bar

Expert Testimony About New Testing Methodologies Inadmissible When Not Disclosed in Expert Report

Federal Circuit Protects Confidential Exhibits Despite Strong Media Interest  *Web Only*

ITC Upholds Its 100-Day Pilot Program


SINUSENSE and SINUCLEANSE Not Likely to Cause Consumer Confusion

State-Chartered Entity Lacks Standing to Sue over Russian-Federation-Owned Stoli Marks


Use of Third-Party Artwork in Video Backdrop Is Fair Use

X-Men, Incredible Hulk, Spider Man and Captain America Illustrator – Exceptionally Gifted Artist, but Not Copyright Owner

When Is Anything Really Final?

When Does a Copyright Claim Accrue?

Freedom of Use of Copyrighted Court Documents

Order in the Court—and in Copyright Registrations for Unpublished Collections

Hearsay Exceptions Apply in Copyright Dispute over Gospel Classic “I’ll Fly Away” **Web Only**

Trade Secrets

Federal Circuit Reverses Denial of Preliminary Injunctions for Trade Secret Theft

Patents/Preliminary Injunction

Preliminary Injunction Ordered Based on Appellate Claim Construction
Aria Diagnostics, Inc. v. Sequenom, Inc.
by Shane Smith

Addressing a preliminary injunction filed by a defendant in a declaratory judgment action, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a lower court’s denial of a preliminary injunction on claim construction grounds, stating that equitable factors needed to be addressed on remand.  Aria Diagnostics, Inc. v. Sequenom, Inc., Case No. 12-1531 (Fed. Cir. Aug. 9, 2013) (Rader, C.J.)

Aria sought a declaration that its fetal DNA diagnostic test did not infringe any claim of Sequenom’s exclusively licensed patent.  Sequenom counter-claimed for infringement and sought a preliminary injunction to prevent Aria from making, using or selling its test.  The asserted claim recited “[a] method for detecting a paternally inherited nucleic acid of fetal origin” in a pregnant woman’s blood.  The claimed method comprised the step of “amplifying” the paternally inherited nucleic acid.  After construing these and other claim terms, the district court found a substantial question of non-infringement and denied Sequenom’s motion for a preliminary injunction.

The Federal Circuit vacated the ruling, finding that the lower court read additional limitations into the claims without finding justification in the plain claim language or intrinsic evidence.  These errors were so apparent, the Federal Circuit indicated, that it need not address “flexibility” in case law setting out the proper standard of review for claim construction in the context of a preliminary injunction.  The Federal Circuit nonetheless acknowledged a difference in authority on the issue.

The Federal Circuit reasoned that the paternally inherited nucleic acid that forms the object of the patent’s independent claims need not be “known in advance,” as the district court had decided.  The patentee could have so limited the claims by adding those words to the claim language, yet it did not.  The Federal Circuit further explained that “it is ‘not enough that the only embodiments, or all of the embodiments, contain a particular limitation to limit a claim term beyond its ordinary meaning.’”

The Federal Circuit also reasoned that “amplifying” a paternally inherited nucleic acid—as that term arose in the claims—required only that the amount of the paternally inherited DNA increase.  The Federal Circuit found that the district court erred by defining “amplifying” to require an increase in the proportion of paternally inherited nucleic acid relative to other DNAs in a blood sample.  The Federal Circuit took a strict view of the requisite claim terms, noting that those terms did not specifically state that “amplif[ication]” affected the relative quantity of other DNAs present in the sample.  The Federal Circuit placed an emphasis on claim language primacy.

Finally, turning to the issues directly related to injunctive relief, the Federal Circuit took issue with the district court’s analysis of the Winter v. Natural Resources Defense Council balancing test.  That Supreme Court of the United States test considers whether, on balance, four factors weigh in favor of imposing a preliminary injunction: (i) the movant’s likelihood of success on the merits, (ii) the likelihood that the movant will suffer irreparable harm, (iii) the balance of equities, and (iv) the public interest.  Here the Federal Circuit dispensed the following remand instructions:

  • It rejected the lower court’s assumption that damages could compensate Sequenom for any loss of market share or price erosion as lacking supporting factual findings.  The Federal Circuit explained that, “[i]n the face of that kind of universal assumption, patents would lose their character as an exclusive right as articulated by the Constitution and become at best a judicially imposed and monitored compulsory license.”
  • On the relative importance of whether a preliminary injunction would put Aria Diagnostics out of business, the Federal Circuit demanded an equally sympathetic look at harms potentially visited on Sequenom: “this court has seen no comparison of difficulties or losses [Aria] might experience weighed against the harms Sequenom might suffer without protection of its legal exclusive rights.”
  • After taking judicial notice of a new fact tending to show that an injunction was not contrary to the public interest, the Federal Circuit instructed the district court on remand to consider “this and other evidence pertaining to the public interest anew.”


Keeping it Out of the Supreme Court
University of Utah v. Max-Planck-Gesellschaft Zur Forderung Der Weissenschaften E.V., et al.
by Melissa Nott Davis

Addressing issues of sovereign immunity and original jurisdiction, the U.S. Court of Appeals for the Federal Circuit upheld the determination that a case between one state university and employees of another state university was not a dispute between states subject to the Supreme Court of the United States’ exclusive jurisdiction.  University of Utah v. Max-Planck-Gesellschaft Zur Forderung Der Weissenschaften E.V., et al., Case Nos. 12-1540, -1541, -1661 (Fed. Cir. Aug. 19, 2013) (Reyna, J.) (Moore, J., dissenting).

Dr. Brenda Bass, a professor of biochemistry at the University of Utah (UUtah), focuses her research on RNA interference, a phenomenon in which RNA is involved in silencing expression of individual genes.  Dr. Thomas Tuschl is a University of Massachusetts (UMass) researcher active in RNA interference research.  Drs. Bass and Tuschl were familiar with each other’s work, and each presented papers at professional conferences attended by the other.  Dr. Tuschl was granted patents related to his work.  He assigned these patents to UMass.  UUtah, the potential assignee of Dr. Bass’ rights, believed that the Tuschl patents “disclosed and claimed [her] conception,” yet failed to name her as an inventor.  UUtah asked defendants to cooperate in a petition to correct inventorship.  Defendants refused.  UUtah sued in district court, naming UMass as a defendant.  UMass sought dismissal, arguing that the Supreme Court had exclusive original jurisdiction.  UUtah responded by amending its complaint to replace UMass with four UMass officials.  The UMass officials moved to dismiss, arguing that UMass (as the named defendant) was the real party in interest and the case was subject to the exclusive jurisdiction of the Supreme Court.  The defendants also claimed sovereign immunity.  The district court denied the motion, holding that the requested relief was prospective in nature and that moreover UUtah had elected to sue the officials, not the state itself.  It also reasoned that the inventorship case was not a “core sovereign interest sufficient to make this a dispute between States.”  UUtah appealed.

On appeal, the Federal Circuit noted that the appropriateness of original (Supreme Court) jurisdiction depends upon “the seriousness and dignity of the claim,” whether the “named parties” have another forum where relief may be had, and whether the case raises “serious and important federalism concerns.”  The Federal Circuit held that UUtah, in amending its complaint, decided to only bring a case against citizens of another state, not UMass.  The Federal Circuit went on to find that UMass was not a real party in interest, because the district court could grant UUtah the relief it sought by simply directing the U.S. Patent and Trademark Office to correct the inventorship of the Tuschl patents.  As such, there was no dispute between states and no exclusive jurisdiction.  Because UMass is not a party in the case or the real party in interest, the court similarly rejected the argument that the individually named defendants were entitled to immunity under the 11th Amendment.  Lastly, the Federal Circuit found that UMass’ interests were adequately protected by the named defendants—which included all the other owners of the Tuschl patents—and  ruled that UMass was not an indispensable party under FRCP 19.  The Federal Circuit acknowledged that the Rule 19 inquiry is fact intensive and that it was possible that the facts may change on remand, making UMass indispensable; however, that was best resolved by the district court.

Patents/Claim Construction

Ambiguous Claim Terms May Soon Be Construed Against the Drafter
3M Innovative Properties Co. v. Tredegar Corp.
by Mark Bentley

Addressing claim construction of a term with disputed grammar, the U.S. Court of Appeals for the Federal Circuit affirmed in part the district court’s construction and remanded the case, explaining that grammatical rules give way to the written description when construing claims.  3M Innovative Properties Co. v. Tredegar Corp., Case No. 12-1241 (Fed. Cir., August 6, 2013) (Reyna, J.) (Plager, J. concurring) (O’Malley, J. concurring-in-part, dissenting-in-part).

3M sued Tredegar Corp. for infringement of patents directed to multi-layer elastomeric laminates.  Such laminates may be found in the body-hugging areas of products such as the waistband or side tabs of disposable diapers.  Tredegar is a supplier of breathable and nonwoven film laminates for personal care products.

Resolution of the infringement issue turned on the meaning of the claimed phrase “continuous microtextured skin layer over substantially the entire laminate.”  After the district court, agreeing with Tredegar, found that the claim required the microtexturing to be continuous over the entire skin layer, the parties stipulated to non-infringement.  3M appealed.

On appeal, the parties disagreed as to whether “continuous” applied to the microtexturing, the skin layer or both.  3M, citing The Chicago Manual of Style, argued that if the applicant intended that the microtexturing be “continuous,” it would have used the adverb “continuously” instead of the adjective “continuous.”  Tredegar, also citing The Chicago Manual of Style, argued that adjectives separately modifying a noun are generally separated by a comma.

The Federal Circuit did not rely on this extrinsic evidence.  Instead, the Federal Circuit linked the “continuous microtextured skin layer” of the claims to the “unique continuous microtextured surfaces” of the written description and determined that the microtexturing is continuous, but not restricted to a single zone or region of the skin layer.

In a concurring opinion, Judge Plager also rejected 3M’s arguments regarding grammar, stating that “the nuances of comma usage, like 3M’s adverb argument, seem to me a tenuous foundation for an entire claim construction on which substantial liabilities may rest.”  However, Judge Plager did not agree that the written description provided sufficient clarity, pointing out that the phrase “continuous microtextured skin layer” does not appear anywhere in the specification.  Instead, Judge Plager proposed applying the contract drafting doctrine contra proferentem: “When a term is ambiguous, . . . the ambiguity should be construed against the draftsman.” Judge Plager proposed that, alternatively, claims introducing such ambiguities “should simply be invalidated as indefinite.”  Because the applicant “knew or should have known that the claim term . . . was highly relevant to the patented technology,” the applicant should have demonstrated this relevance in the disclosure.  Because the patent applicant has “the last clear chance” to avoid ambiguity in claim terms, the competitor “should not have the risk of guessing wrong about what a claim term could possibly mean.”

Dissenting-in-part, Judge O’Malley agreed with 3M that, based on “a natural reading of term, i.e., its plain and ordinary meaning,” the adjective “continuous” can only modify the “microtextured skin layer.”

Patents/Claim Construction

Broadened Scope of Claim Term on Appeal Results in Literal Infringement
Cheese Systems, Inc. v. Tetra Pak Cheese & Powder Systems, Inc.
by Qasim S. Jami

Addressing the issue of claim construction in the context of summary judgment, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s summary judgment of infringement in the course of reversing the district court’s finding that there was no literal infringement.  The Federal Circuit found that the district court unduly limited the scope of a disputed claim term.  Cheese Systems, Inc. v. Tetra Pak Cheese & Powder Systems, Inc., Case No. 12-1463, -1501 (Fed. Cir. Aug. 6, 2013) (Rader, C.J.)

This declaratory judgment suit between patentee Tetra Pak Cheese and Cheese Systems, Inc., (CSI) involved a patent directed to commercial cheese-making vats having agitator panels driven by long shafts.  Agitator panels have two faces, one side with sharp edges for cutting, and the other side with blunt edges for stirring.  The patent requires each face to be “disposed in a generally common . . . plane.”

The district court construed the “generally common plane” limitation to require panel faces to be “on the whole flat but include some degree of curvature.”  The cutting face of the CSI panels formed a concave surface while the stirring face formed a roughly parallel convex surface on the opposite side as demonstrated by photographs and design specifications in the record.  Holding that no reasonable jury could conclude that the CSI panels were “on the whole flat,” the district court denied Tetra Pak’s motion for summary judgment of literal infringement.  The district court concluded, however, that the curved panel faces operated in substantially the same way as flat panel faces, and granted summary judgment of infringement based on the doctrine of equivalents.  CSI appealed the district court’s finding of infringement based on the doctrine of equivalents. 

The Federal Circuit, however, did not reach the issue of equivalents.  Instead, based in part on its review of photographs of the accused product in the record, the Federal Circuit reversed the district court’s denial of summary judgment of no literal infringement.  The Federal Circuit held that the district court’s construction of “generally common plane” was too restrictive.  The Federal Circuit found that the limitation “d[id] not require the panel to have any particular shape.”  With its broader construction, the Federal Circuit concluded that CSI’s panel faces were “in the same plane” as required by the “generally common plane” limitation.

Practice Note: While information about an accused product is typically given no weight during claim construction, the Federal Circuit based its construction and finding of literal infringement ruling, at least in part, on photographs of the accused product.  Thus, even in the context of claim construction, it may be worth considering including information about the accused product to give the court context for its construction of a claim term and/or the infringement analysis.

Patents/Exceptional Case

Litigation Misconduct Alone Sufficient to Support Exceptional Case
Monolithic Power Systems, Inc. v. O2 Micro International Ltd.
by Bryan James

Addressing an award of attorneys’ fees for not only the underlying district court litigation but also a related U.S. International Trade Commission (ITC) investigation, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s exceptional case finding pursuant to 35 U.S.C. § 285 and the award of attorneys’ fees and costs in light of “vexatious litigation strategy, litigation misconduct and unprofessional behavior.”  Monolithic Power Systems, Inc. v. O2 Micro International Ltd., Case No. 12-1221 (Fed. Cir., Aug. 13, 2013) (Prost, J.)

O2 Micro International and Monolithic Power Systems (MPS) are competitors in the market for integrated circuit products related to LCD and LED lighting, and have a significant history of litigation.  In the case under appeal, MPS filed a declaratory judgment lawsuit asserting invalidity and non-infringement of four O2 Micro patents, and later added a fifth.  After the filing of that complaint, but before service, O2 Micro filed a complaint in the ITC asserting that MPS and one of its customers imported goods infringing four of those five patents.  O2 Micro later withdrew its assertions relating to all but one of the five patents and covenanted not to sue MPS or its customers.  The district court found that O2 Micro had committed litigation misconduct, concluded that the case was “exceptional” under § 285 and justified an award of attorneys’ fees to MPS.  O2 Micro appealed.

The Federal Circuit agreed with the district court that O2 Micro committed litigation misconduct.  In particular, to avoid prior art, O2 Micro provided evidence and testimony regarding the date of invention of the patent-in-suit, relying on a 1998 date stamped on certain schematics showing the claimed invention.  O2 Micro provided witnesses and declarations stating that the date was auto-generated by the schematics software, but MPS provided an expert report showing that the date was entered manually.  When confronted with this evidence, O2 Micro provided a convoluted response to an interrogatory that “obfuscated the fact that [the inventor] had added the date.”  O2 Micro also filed “baseless motions,” including a motion to strike MPS’s expert report and a motion for summary adjudication of the schematics’ authenticity and a 1998 conception date.

The Federal Circuit also agreed with the district court’s characterization of O2 Micro’s overall litigation strategy as vexatious.  In several instances, including the case at issue, O2 Micro had sued MPS customers, putting MPS in a position where it had to file a declaratory judgment lawsuit, only to have O2 Micro covenant not to sue and dismiss the case after substantial litigation had taken place.

The Federal Circuit noted that many forms of misconduct can support a district court’s finding that a case is exceptional under § 285.  Only in those situations where there is no finding of litigation misconduct or inequitable conduct before the U.S. Patent and Trademark Office are showings of both “bad faith” and “objectively baseless” litigation required.  In this case, the Federal Circuit agreed that O2 Micro’s litigation misconduct alone justified an award of attorneys’ fees for the entire litigation, including for the ITC investigation.  Thus, no inquiry into whether O2 Micro acted in bad faith or whether its positions were objectively baseless was required.

The Federal Circuit noted that the district court did not abuse its discretion in granting costs for discovery in the ITC proceedings reasonably related to the issues in the district court case because the parties agreed to make such discovery available for use in the district court case. 

Patents/Exceptional Case

Case Exceptional for Maintaining Suit After Adverse Claim Construction Ruling
Taurus IP, LLC v. DaimlerChrysler Corp.
by Ryan N. Phelan

Addressing appeals of two separate actions out of the same district court, the U.S. Court of Appeals for the Federal Circuit affirmed the vast majority of the lower court’s rulings in both cases, finding that the nature by which plaintiff conducted the litigations supported a finding of an exceptional case.  Taurus IP, LLC v. DaimlerChrysler Corp., Case Nos. 08-1462, -1463, -1464, -1465 (Fed. Cir. Aug. 9, 2013) (Schall, J.)

In two separate actions, Taurus accused defendants’ websites of infringing a patent directed to a graphical computer interface where “users” created hierarchical relationships between data in a database.  In one of those actions, the court issued a claim construction ruling favoring defendants, and then entered summary judgment of no infringement because everyday internet web surfers are not “users” capable of creating hierarchical relationships as required by the claims.  The district court also concluded that the asserted claims were invalid.  In view of these rulings, the parties to the second case stipulated to dismissal of all claims for purposes of appeal.

The first case also included counter-claims by defendants alleging Taurus and related entities, such as Orion IP, breached provisions of a prior settlement agreement involving Orion and defendants in the instant litigation.  The case proceeded to trial on those counter-claims.  Defendants argued that Orion violated a breach of warranty provision in an earlier 2006 licensing agreement, which resulted from a settlement of a prior 2004 litigation in Texas.  In the 2004 litigation, Orion had not asserted the same patent as this case (despite owning it at that time), but transferred the patent during that litigation to a related entity.  In the later (2006) agreement, Orion warranted that it had not transferred any patents “relating to the [2004] litigation.”

Taurus wound up with the patent-in-suit 10 days before filing the instant litigation.  At trial, defendants argued that Orion had breached the warranty provision when it transferred the patent during the 2004 litigation, because it was sufficiently “related to” the 2004 patents given that each patent was directed to the same technology.  The jury agreed, and the district court awarded attorneys’ fees and damages for breach of contract.

The district court also deemed the patent suit exceptional under 35 U.S.C. § 285 and awarded defendants more in fees.  The court found Taurus’ pre-filing investigation deficient and determined that Taurus improperly “prolonged the litigation in bad faith” after claim construction.  Moreover, the patent suit was carried out “vexatiously” because Taurus was established only for “jurisdictional reasons.”  Taurus appealed.

On appeal, the Federal Circuit affirmed all of the district court’s findings except for the damages awarded for breach of warranty.  As to the exceptional case finding, the Federal Circuit agreed that Taurus’ persistence in maintaining its tenuous infringement positions, even after an adverse claim construction, was alone sufficient to find the case exceptional.  No reasonable litigant in Taurus’ position could have expected a finding that a web surfer accessing the accused external websites satisfied the requirement for a user as required by the claim.  Moreover, Taurus’ claim construction positions were “unreasonably broad” and “objectively baseless” because they were “divorced from the written description.”  The Federal Circuit noted that “while an adverse claim construction generally cannot, alone, form the basis for an exceptional case finding, this court’s decisions . . . do not undermine the rule that a party cannot assert baseless infringement claims and must continually assess the soundness of pending infringement claims, especially after an adverse claim construction.”

As to the breach of warranty finding, the Federal Circuit agreed that a reasonable juror could have found that the asserted patent was related to the licensed patents, because the accused websites were the same or similar to that of the earlier litigation.  However, while the Federal Circuit affirmed the attorneys’ fee award, it reversed the damages award because defendants had failed to provide any evidence at trial of damages they suffered as a consequence of the breach, which was a required element for a breach of contract claim.  That the parties stipulated to provide evidence of damages after trial (in the event a breach was found) was of no consequence—defendants had the burden of proof of damages at trial, but failed to meet it.


USPTO, in Inter Partes Reexam, Did Not Construed Claims Too Narrowly
Leo Pharm. Prods., Ltd. v. Rea
by Charles J. Hawkins and Blake Wong

Addressing a finding of obviousness arising out of an inter partes re-examination from the Board of Patent Appeals and Interferences (Board) at the U.S. Patent and Trademark Office (USPTO), the U.S. Court of Appeals for the Federal Circuit reversed the Board’s claim construction and obviousness determination, finding the Board incorrectly construed a claim term and, in its obviousness analysis, gave too little weight to the objective indicia of non-obviousness.  Leo Pharm. Prods., Ltd. v. Rea, Case No. 12-1520 (Fed. Cir. Aug. 12, 2013) (Rader, C.J.)

The re-examined patent was directed to pharmaceutical compositions for the topical treatment of certain skin conditions—for example, psoriasis.  While the prior art disclosed treating psoriasis with a combination of vitamin D and a corticosteroid at different times, the re-examined patent taught using those treatment methods simultaneously.  Leo Pharmaceuticals argued that the prior art did not adequately teach using these treatment methods together with adequate storage stability.  During re-examination, Leo Pharmaceuticals amended and added claims to address the stability issue by adding “storage stable.”  After construction of that term using a test disclosed in the written description, the Board found the claims obvious.  Leo appealed.

The Federal Circuit explained that the USPTO failed to give the claims their broadest reasonable construction consistent with the specification by limiting the definition of the term to just one accelerated stability test disclosed in the specification.  The Federal Circuit found that the customary meaning of the term would include stability during a composition’s shelf life for its intended use, a broader reading. 

The Federal Circuit also reversed the Board’s obviousness determination.  The Federal Circuit found that the invention of the re-examined patent solved a storage-stability problem described in the prior art.  That prior art discouraged the combination of vitamin D and corticosteroids as a concurrent treatment method because of the storage-stability issues, and the patent solved that problem for certain formulations.

Other prior art taught a combination of vitamin D with corticosteroids but failed to recognize the storage-stability problems.  The Federal Circuit explained that the Board used impermissible hindsight when it combined that art with references solving the storage-stability problems.  Because the art did not even recognize the storage-stability problems, the Federal Circuit reasoned that a person of ordinary skill in the art would have had no reason to try to improve upon the art.  One of ordinary skill would not turn to prior art to solve an unknown problem.

The Federal Circuit further found that, based on the fact that one of the prior art references was published 22 years before the filing of the application for patent, one of ordinary skill would not have been motivated to make the invention.  If the invention had been obvious, a skilled artisan would have achieved the invention sooner.  The Federal Circuit also found that one of the pieces of prior art taught away from any of the combinations relied upon by the Board.

Finally, the Federal Circuit found that when the objective indicia were considered in concert with the entire obviousness analysis, there was a compelling case of non-obviousness.  The Federal Circuit emphasized that the objective indicia are part of the whole obviousness analysis, and not just an afterthought.  Here, the patent owner presented extensive evidence showing unexpected results, evidence of commercial success of an embodiment of the invention, and evidence establishing a long-felt but unresolved need for the invention due to the age of the prior art references.  The Federal Circuit found this evidence to be probative of non-obviousness.

Patents/Written Description

Avoiding Implicit Disavowal
SkinMedica, Inc. v. Histogen Inc.
by Mandy Kim

Addressing the issue of implicit disclaimer/redefinition, the U.S. Court of Appeals for the Federal Circuit upheld a district court’s grant of summary judgment of non-infringement, agreeing that the intrinsic record effected a clear and implicit disclaimer of culturing with beads as not being within the scope of the claimed invention, even though the written description never explicitly redefined the disputed claim phrase to exclude the use of beads.  SkinMedica, Inc. v. Histogen Inc., Case No. 12-1560 (Fed. Cir., August 23, 2013) (Prost, J.) (Rader, C.J., dissenting).

SkinMedica brought suit against Histogen for allegedly producing dermatological products according to methods covered by claims of two of its patents.  The claims of both patents include a limitation that the cell culture medium used in the inventions must be conditioned by “culturing . . . cells in three-dimensions.”  The district court construed the disputed phrase, using an exclusionary limitation, to mean “growing . . . cells in three dimensions (excluding growing in monolayers or on microcarrier beads).”  The exclusionary language was based on a finding of disclaimer.  Following claim construction, the district court granted summary judgment of non-infringement.  SkinMedica appealed.

The Federal Circuit affirmed the claim construction, while acknowledging that the ordinary meaning of “culturing . . . cells in three-dimensions” would include the use of beads.  The Federal Circuit, however, found that “[i]n the written description, the patentees plainly and repeatedly distinguished culturing with beads from culturing in three-dimensions.  They expressly defined the use of beads as culturing in two-dimensions.  And they avoided anticipatory prior art during prosecution by asserting that the conditioned medium produced by two-dimensional cultures was inferior and chemically distinct from the conditioned medium produced by three-dimensional cultures.”  To support its conclusion, the panel majority went into some detail as to four references to “beads” in the specification and statements made by the patentees during prosecution.  In particular, the majority noted the disjunctive use of “or” and “as opposed to,” and the use of “i.e.” as an intent to redefine/disclaim the use of beads. 

The Federal Circuit rebuffed SkinMedica’s arguments that there was no disclaimer.  The Federal Circuit dismissed a statement in the specification that was relied upon by SkinMedica as providing a broad definition of “three-dimensional framework” for failing to explicitly include beads, and found that a publication incorporated by reference was not adequate to overcome the clear implicit disclaimer in the intrinsic record.  The Federal Circuit gave little weight to extrinsic evidence, particularly expert testimony that discussed beads as a beneficial three-dimensional culturing technique, noting it was conclusory and appeared to be in conflict with the plain language of the written description.  The Federal Circuit concluded that “[i]t is therefore clear from the intrinsic record that, although the inventors never explicitly redefined ‘culturing . . . cells in three-dimensions’ to exclude the use of beads, they affected a clear implicit disclaimer of culturing with beads from the scope of their claimed invention.” 

In dissent, Chief Judge Rader argued that the four references to beads in the specification “do not amount to an unmistakable and unambiguous disavowal,” and further “do not meet the exacting standard imposed by this court’s precedent.”  Chief Judge Rader explained that the patentee’s disjunctive/redefining uses of “beads” could be understood as discounting two-dimensional bead usage without necessarily excluding three-dimensional bead usage.  He also found that the expert testimony, when viewed as a whole, deserved great weight and respect.

Patents/Disavowal of Claim Scope/Obviousness

Election in Response to Ambiguous Restriction Requirement Does Not Relinquish Claim Scope
Plantronics, Inc. v. Aliph, Inc.
by Bruce Yen

Addressing the disavowal of claim scope by an election in response to a restriction requirement where the examiner provided no guidance regarding the differences by which he distinguished the patentably distinct inventions, the U.S. Court of Appeals for the Federal Circuit overturned a district court’s summary judgment of no infringement, holding that an election in response to such a restriction requirement does not amount to a clear and unmistakable disavowal of claim scope.  Plantronics, Inc. v. Aliph, Inc., Case No. 12-1355 (Fed. Cir. July 31, 2013) (Wallach, J.)  The Federal Circuit also overturned the district court’s grant of summary judgment of obviousness, finding that the lower court improperly concluded the patent was invalid as obvious before considering objective indicia of non-obviousness.

The asserted patent is directed to a concha-style headset for transmitting sound to a user’s ear.  During prosecution, the U.S. Patent and Trademark Office (USPTO) imposed a restriction requirement, finding four patentably distinct inventions.  The USPTO directed the applicant to elect “a single disclosed species for prosecution on the merits to which the claims shall be restricted if no generic claim is finally held to be allowable.”  Plantronics, without traverse, elected and prosecuted one of the identified species, which eventually issued as the asserted patent.  Neither the USPTO nor Plantronics made any specific remark concerning the differences between what the USPTO found to be patentably distinct inventions.  The district court’s claim construction limited the claim scope to the elected invention, and, on summary judgment, the district court concluded that the claimed invention was invalid as obvious.  Plantronics appealed.

As to the district court’s finding of disavowal of claim scope, the Federal Circuit found that, unlike the fact patterns in LG Electronics and Acco Brands, the restriction requirement imposed here “did not clearly demarcate the actual differences among the species of inventions.”  Because the USPTO gave no reasons as to why the figures represented different species, the Federal Circuit found no guidance forming a basis to limit the broadly drafted claims.  As a result, there was no clear or unambiguous disavowal of claim scope.  Without direction as to what distinguished the four species of invention, and because the terms at issue were not structurally limited either by the claim language or the corresponding description in the specification, the Federal Circuit reversed the district court’s construction limiting the scope to structural aspects exhibited by the figures and vacated the finding of non-infringement.

The Federal Circuit also analyzed the district court’s grant of summary judgment of obviousness, explaining that secondary considerations of non-obviousness cannot be “relegated to ‘secondary status.’”  Rather, the Court explained that secondary considerations of non-obviousness must be considered prior to an obviousness determination as a check against hindsight bias.  The Federal Circuit explained that in finding that the patent owner’s evidence of secondary considerations “cannot overcome a strong prima facie case of obviousness,” the district court erred by engaging in a post hoc analysis of objective considerations of non-obviousness.  The Federal Circuit went on to reverse the lower court’s decision, finding that in light of Plantronics’ evidence of copying and commercial success, and of the “scant consideration of relevant objective evidence” by the lower court, and drawing all justifiable inferences in favor of Plantronics, it could not hold that the claims would have been obvious as a matter of law.

Patent/ITC/Claim Construction

ITC Claim Construction and Obviousness Analysis Critiqued
Apple Inc. v. U.S. ITC
by Richard B. Almon

Resurrecting Apple’s multi-touch patent U.S. International Trade Commission (ITC) complaint, the U.S. Court of Appeals for the Federal Circuit rebuked the ITC’s claim construction with regard to one of the patents in the case and faulted its obviousness analysis with regard to the other patent.  Apple Inc. v. U.S. ITC, Case No. 12-1338 (Fed. Cir. Aug. 7, 2013) (Moore, J.) (Reyna, J., dissenting).

The patents asserted by Apple in the appeal are directed to key features of a mobile device having a touchscreen.  The ITC found one of the Apple patents to be obvious (and therefore invalid) based on a combination of two references.  The Federal Circuit, in reversing the finding of obviousness, noted that the ITC analysis never mentioned, much less weighed, Apple’s “compelling” secondary consideration evidence.  The Federal Circuit explained that evidence relating to all four Graham factors—including objective evidence of secondary considerations—must be considered before determining whether the claimed invention would have been obvious to one of skill in the art at the time of invention.  In this case, Apple had presented evidence of secondary considerations in the form of industry praise, copying and commercial success.  The Federal Circuit remanded the case to the ITC to properly consider those Graham factors and instructed that “[t]he ultimate conclusion of obviousness is a legal conclusion to be reached after weighing all of the evidence on both sides.”  As for the claims found to be anticipated, the Federal Circuit affirmed the ITC decision.

For the other Apple patent in issue, the Federal Circuit focused on the ITC’s claim construction.  The administrative law judge (ALJ) construed the term “mathematically fitting an ellipse” to require the method to perform “a mathematical process” whereby first “an ellipse is actually fitted to the data,” and then, from that fitted ellipse, “various parameters can be calculated.”  Instead of the two-step process as construed by the ALJ, where parameters are calculated after an ellipse is fitted to the data, the Federal Circuit used the plain meaning of the terms, along with the prosecution history, to conclude that the contested term simply meant “calculating the mathematical parameters that define an ellipse.”


Supplier’s Offer to Make Commercial Embodiment for Patentee Before Critical Date Results in On-Sale Bar
Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc.
by Raymond M. Gabriel

Addressing the on-sale bar in relation to an offer to make a commercial embodiment by a supplier, the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s summary judgment ruling of invalidity, finding the asserted claims were anticipated by a supplier’s offer to make commercial embodiments of a slow-cooker covered by the patent.  Hamilton Beach Brands, Inc. v. Sunbeam Products, Inc., Case No. 12-1581 (Fed. Cir. Aug. 14, 2013) (O’Malley, J.) (Reyna, J. dissenting). 

Hamilton Beach and Sunbeam Products are direct competitors in the small kitchen appliance industry, both selling competing versions of “slow cookers.”  The patent-in-suit, having an effective filing date of March 1, 2006, was directed to slow cookers having clips used to seal a lid to the body of the cooker and limit leaks during transport.  Hamilton Beach’s commercial embodiment of its patented invention is called the Stay or Go® slow cooker.  Sunbeam’s competing slow cooker is called the Cook & Carry®.

After construing the claims, and on summary judgment, the district court found that there were invalidating commercial offers of the Stay or Go® slow cooker before the critical date.  Hamilton Beach appealed.

The Federal Circuit agreed that Hamilton Beach’s transaction with its foreign supplier to make the Stay or Go® slow cooker was an offer for sale of a product that anticipated the claims of the patent.  The Federal Circuit also found that the invention was ready for patenting before the critical date.

Anticipation of a patent by an on-sale bar requires that the claimed invention was the subject of a commercial offer for sale, and that the invention was ready for patenting before the critical date.  Importantly, there is no supplier exception to the on-sale bar; the commercial offer for sale may be made by the patentee’s own supplier. 

Here, Hamilton Beach contacted its supplier on February 8, 2005, to request that the supplier manufacture 2,000 Stay or Go® slow cookers.  The supplier responded on February 25, 2005, that it would begin production as soon as it received word from Hamilton Beach.  The Federal Circuit held that the supplier’s response, which occurred before the March 1, 2005, critical date, was a commercial offer for sale of the Stay or Go® slow cooker.  The Federal Circuit reasoned that the supplier’s offer was valid and that all Hamilton Beach need do was accept.  Thus, the first prong of the standard was met.

The Federal Circuit also found that the patent was ready for patenting based on Hamilton Beach’s presentation of detailed drawings of the Stay or Go® slow cooker to its retail customers’ buying agents, reasoning that the invention’s relative simplicity needed no more than descriptions and drawings to enable the patent.  The Federal Circuit held that a lower court need not conduct an element-by-element comparison of the product subject to the on-sale bar so long as the information disclosed is enabling. 

The Federal Circuit rejected Hamilton Beach’s argument that it was still fine-tuning the leak-proofness of the Stay or Go® slow cooker after the critical date.  Fine-tuning an invention after the critical date does not mean the invention was not ready for patenting.  In any event, there was evidence of a working prototype before the critical date that supported the Federal Circuit’s analysis.

In dissent, Judge Reyna criticized the majority for not analyzing whether the offer for sale was in fact commercial.  In Judge Reyna’s view, the Federal Circuit must evaluate whether the offer for sale was experimental in light of Hamilton Beach’s argument that it was still working out kinks in its product, arguing that the majority’s approach would render the experimental-use exception useless, especially for small innovators that cannot make their own prototypes.

Practice Note: The Federal Circuit’s decision in this case highlights the risk of requesting that suppliers manufacture products before a patent is filed and before a working prototype is created.  Companies should beware of filing patent applications more than one year after requesting that a supplier produce products intended to be covered by the patent.


Expert Testimony About New Testing Methodologies Inadmissible When Not Disclosed in Expert Report
Rembrandt Vision Technologies, L.P. v. Johnson & Johnson Vision Care, Inc.
by Jeremy T. Elman

Addressing the issue of whether a technical expert’s failure to disclose specific testing methodology was merely a “typo” or a previously non-disclosed opinion, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s judgment of non-infringement because the expert failed to support evidence of infringement.  Rembrandt Vision Technologies, L.P. v. Johnson & Johnson Vision Care, Inc., Case No. 12-1510 (Fed. Cir., Aug. 7, 2013) (Moore, J.)

Plaintiff Rembrandt Vision Technologies sued Johnson & Johnson Vision Care (JJVC) for patent infringement by JJVC’s Advance and Oasys contact lenses.  At issue was whether JJVC’s lenses were “soft gas permeable lenses.”  The parties agreed to a claim construction of this term as “a contact lens having a Hardness (Shore D) less than five.”

At trial, the plaintiff’s expert, Dr. Thomas Beebe, Jr., testified that the accused lenses had a Shore D Hardness less than five to demonstrate that the accused lenses were “soft.”  During direct examination, Dr. Beebe testified that his testing methodology showed infringement by stacking the accused lenses around a stainless steel ball to show a Shore D Hardness of less than five, as disclosed in his expert report.  JJVC moved to exclude that testing as not complying with industry-standard methodology that did not allow for the use of stainless steel balls.  During cross-examination, JJVC questioned how Dr. Beebe could have shown a Shore D Hardness of less than five using that methodology, and Dr. Beebe “suddenly changed course” by describing a Shore D Hardness test he performed on the accused lenses that was not disclosed in his expert report.  That test involved cutting and stacking the lenses and did not use a stainless steel ball.  Dr. Beebe claimed that there was a typo in his expert report, and that he intended to disclose the cutting and stacking methodology.

JJVC renewed its motion to exclude Dr. Beebe’s testimony and for judgment as a matter of law.  The district court granted the motions, and Rembrandt filed an appeal. 

The Federal Circuit affirmed, stating that Federal Rule of Civil Procedure 26 requires that an expert witness disclose a complete statement of all opinions, which Dr. Beebe failed to do with his newly described testing methodology.  The Federal Circuit held that an expert may not testify beyond the scope of the report unless the failure to include the information was “substantially justified or harmless.”  The Federal Circuit noted that Dr. Beebe had submitted his expert report nearly six months prior to trial and had given no indication that he would testify to a different type of testing methodology, so the lack of disclosure was not substantially justified.  The Federal Circuit also found that the non-disclosure was not harmless, because Dr. Beebe’s testing methodology was the subject of depositions and pre-trial motions, and was at issue at trial, substantially affecting JJVC’s non-infringement defense.  The Federal Circuit concluded that Rembrandt had made no attempt to supplement or revise the expert report. 

Practice Note: Expert witnesses must disclose all opinions and all testing methodology, and cannot proffer testimony that contradicts their opinions disclosed under Rule 26.


Federal Circuit Protects Confidential Exhibits Despite Strong Media Interest
Apple Inc. v. Samsung Electronics Co., Ltd.
by Philip Ou

In a unique appeal in which smartphone heavyweight opponents Apple and Samsung both advocated that the district court abused its discretion in refusing to seal certain confidential exhibits from both parties, the U.S. Court of Appeals for the Federal Circuit reversed and remanded a lower court’s order denying Samsung and Apple’s requests to seal various confidential exhibits attached to pre- and post-trial motions, finding that the lower court abused its discretion under its own compelling reason standard.  Apple Inc. v. Samsung Electronics Co., Ltd, Case Nos. 12-1600, -1606 and 13-1146 (Fed. Cir. Aug. 23, 2013) (Prost, J.)

Apple sued Samsung asserting patent and trade dress infringement against Samsung’s smartphones and tablets.  Samsung filed its own patent counterclaims, and the case was tried before a jury that returned a verdict in Apple’s favor for more than a billion dollars in damages.  The trial drew significant attention from the public and the media, leading the district court to rule that “the whole trial is going to be open.”  Therefore, despite each party’s non-opposition to the other’s administrative motions to seal confidential exhibits both pre- and post-trial, the district court took a stringent approach to granting these requests.  The district court denied-in-part the parties’ motions, refusing to seal confidential documents that disclosed the parties’ product-specific information, profit margins, unit sales, revenues and costs, as well as Apple’s own proprietary market research reports and customer surveys.  The parties subsequently appealed the district court’s orders.

While Apple and Samsung sought the same appellate relief on this issue, they were opposed by two media interest groups—the First Amendment Coalition and the Reporters Committee for Freedom of the Press—that were granted leave to file amicus curiae briefs.  The media groups supported the district court’s decision, arguing that “major media outlets were closely following ‘the case’s strategy impact on the companies, including the financial risk for shareholders.’”  The Federal Circuit disagreed, however, counterbalancing litigants’ confidentiality concerns for sensitive information, such as product-specific financial information and other types of documents the district court refused to seal.  The Federal Circuit reasoned that even under the district court’s “compelling reason” standard for justifying sealing the documents, the district court erred, given the confidential and sensitive nature of the information.

Practice Note: The precedential decision provides a guide for litigants dealing with sealing confidential exhibits in motion practice or preparation for trial.  With the Federal Circuit’s finding of an abuse of discretion, despite strong public and media interest, district courts may be more reluctant to deny such administrative motions and err on the side of caution in preserving the confidentiality of party information.


ITC Upholds Its 100-Day Pilot Program
Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof
by Roozbeh Gorgin

In addressing the issue of whether the 100-day domestic industry pilot program launched by the U.S. International Trade Commission (ITC) violates the Administrative Procedures Act (APA), the ITC ruled that the program is lawful and rebuffed dicta in an administrative law judge’s (ALJ’s) decision questioning the program’s legality.  Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof, Inv. No. 337-TA-874, Comm’n Op. (Sept. 23, 2013).

The 874 investigation was the first investigation where, at institution, the ITC ordered the ALJ to determine, within 100 days of institution, whether the complainant met the domestic industry requirements of § 337. (See , Vol. 16, No. 7).

Subsequent to the finding by the ALJ that the complainant failed to meet the economic prong of the domestic industry requirement (a decision that terminated the investigation), the complainant filed a petition for review, challenging the ITC’s order to the ALJ to issue an initial determination (ID) within the first 100 days of the investigation to determine whether the complainant had met the domestic industry requirement.  The complainant argued that the ITC’s 100-day order to the ALJ violated its constitutional right to due process, as well as the notice and rulemaking provisions of the APA. 

In rejecting both arguments, the ITC explained that the complainant’s constitutional argument lacked both constitutional support and governing precedent.  The ITC explained that “none of the [initial determination’s] citations stand for the proposition that the Constitution requires more process than was provided here.”  The ITC also rebuffed the APA-based arguments, explaining that “a Commission ALJ lacks the authority to conduct such an inquiry so as to repudiate or nullify the Commission’s own application of its procedural rules.”  Further, the ITC concluded that there was no conflict with its existing rules, but noted that even if there was, the ITC is able to alter or waive procedural rules because the APA’s notice and rulemaking provisions do not apply to “procedural rules.”  Finally, the ITC explained that, regardless of its basis for instituting the 100-day program, there was no substantial prejudice to the complainant because the complainant was able to obtain information from its licensees and take third-party discovery, and could have moved to extend the proceedings if necessary.  Thus, there was no substantial prejudice to the complainant and no violation of the APA. 

Trademark/Likelihood of Confusion

SINUSENSE and SINUCLEANSE Not Likely to Cause Consumer Confusion
Water Pik, Inc. v. Med-Systems, Inc.
by Ulrika E. Mattsson

The U.S. Court of Appeals for the 10th Circuit affirmed a grant of summary judgment that the use of the mark SINUSENSE was not likely to cause consumer confusion with the mark SINUCLEANSE because “overall, there is more than enough distinction between the two marks to prevent any likelihood of confusion.”  Water Pik, Inc. v. Med-Systems, Inc., Case No. 12-1065 (10th Cir. Aug. 12, 2013) (Hartz, J.)

Med-System sells products for cleaning sinus cavities under its federally registered trademark SINUCLEANSE.  Med-System has offered its product under the SINUCLEANSE mark since 1997, and the mark has been federally registered since 1998.  In 2008, Water Pik sought to market a new line of products for cleaning sinus cavities under the brand name SINUSENSE.  Med-System already had the same type of products on the market but under different brand names.

Water Pik brought an action against Med-Systems seeking a declaratory judgment that its use of the SINUSCLEANSE mark did not infringe any of Med-System’s trademarks.  Med-Systems filed a counter claim, asserting that Water Pik’s use of the SINUSCLEANSE mark infringed its SINUSENSE mark and constituted unfair competition under the Lanham Act. 

The district court found that Water Pik’s SINUSENSE mark was not likely to cause consumer confusion and awarded summary judgment to Water Pik.  Med-Systems appealed.

The 10th Circuit affirmed the finding that the SINUSENSE mark was not likely to cause confusion among consumers.  The 10th Circuit applied its six-factor test to evaluate the likelihood of confusion, namely, (i) evidence of actual confusion, (ii) the strength of the contesting mark, (iii) the degree of similarity between the competing marks, (iv) the intent of the alleged infringer in adopting the contested mark, (v) the degree of care that consumers are likely to exercise in purchasing the parties’ products, and (vi) the similarity of the parties’ products and the manner in which they market them.  Although the 10th Circuit agreed with the district court that products marketed under the SINUSENSE mark were not likely to cause consumer confusion with Med-Systems SINUCLEANSE products, it nevertheless concluded that the district court had erred in its analysis of the “intent” factor.  The district court found that the “intent” factor favored Med-Systems because Water Pik knew of Med-Systems’ SINUCLEANSE mark when it developed and marketed its SINUSENSE product line, and had earlier tried and failed to acquire Med-Systems.  However, the 10th Circuit stated that the analysis of the intent factor should focus on whether the alleged infringer intended to deceive customers about the source if its products by using a trademark similar to the other party’s trademark, rather than focusing on whether the alleged infringer intended to cause confusion by copying the other party’s products. 


State-Chartered Entity Lacks Standing to Sue over Russian-Federation-Owned Stoli Marks
Federal Treasury Enterprise Sojuzplodoimport v. SPI Spirits Ltd.
by Rose Whelan

Addressing standing under § 32(a) of the Lanham Act, the U.S. Court of Appeals for the Second Circuit upheld the dismissal of claims brought by a Russian state-chartered entity to enforce Stoli trademarks.  Federal Treasury Enterprise Sojuzplodoimport v. SPI Spirits Ltd., Case No. 11-4109 (2d Cir. Aug. 5, 2013) (Carney, J.)

Plaintiff-appellants Federal Treasury Enterprise Sojuzplodoimport (FTE) and Moscow Distillery Cristall appealed from a judgment dismissing their Lanham Act claims over the U.S.-registered trademarks related to Stolichnaya brand vodka (the Stoli marks) brought against defendants SPI Spirits Limited and other related defendants (collectively, SPI).  The Stoli marks were originally registered in the United States in 1969 by a Soviet entity.  After an initial failed claim to ownership of the Stoli marks by an SPI-related entity, the Russian Federation eventually became the successor in interest to the Stoli marks.  The Russian Federation created FTE through a charter and gave it certain rights through a series of decrees, in part for the purpose of exploiting the Stoli marks and prosecuting suits over the marks in foreign courts.

To have standing to sue under § 32(1) of the Lanham act, a party must be a “registrant,” which includes the registrant’s “legal representatives, predecessors, successors, and assigns.”  At the district court, and on appeal, FTE argued unsuccessfully that it was either an “assign” or a “legal representative” of the Stoli marks owner, the Russian Federation.

Looking at the issue of what law to apply, the Second Circuit determined that although Russian law may be relevant to determining the relationship between FTE and the Russian Federation vis-à-vis the Stoli marks, U.S. law must govern whether this relationship is sufficient for standing under the Lanham Act.

The Second Circuit next considered whether FTE was an “assign” authorized to sue under the Lanham Act.  To quality as an “assign” there must be an assignment duly executed in writing, and the assignment must transfer ownership interest in the marks at issue.  The Second Circuit concluded that FTE’s charter and the various decrees did not sufficiently identify the Stoli marks.  The Second Circuit also found that the charter and the decrees left the Russian Federation with too great an operational interest in the Stoli marks to effectuate an assignment.  The Second Circuit also rejected FTE’s related argument that even if it is not technically an “assign” of the marks (i.e., under the Lanham Act), its exclusive right to use the marks makes it an “exclusive licensee” and that this status is sufficient to support statutory standing.

The Second Circuit next considered the standard for a “legal representative” under the Lanham Act—a question of first impression in the U.S. courts of appeals.  The Second Circuit explained that a “legal representative” under the Lanham Act must have the authority to appear on behalf of the registrant with respect to the registrant’s legal interests, and the legal registrant must be unable or incapable of representing itself and enforcing its own rights.  The Second Circuit rejected FTE’s arguments that a registrant need not be unavailable.  Finally, the Second Circuit affirmed dismissal of Cristall’s claims, as its interest in the Stoli marks was entirely derivative of FTE’s. 

Copyright/Fair Use

Use of Third-Party Artwork in Video Backdrop Is Fair Use
Seltzer v. Green Day, Inc., et al
by Bess Morgan

The U.S. Court of Appeals for the Ninth Circuit affirmed that the unauthorized use of an artist’s illustration in a video backdrop featured in rock band Green Day’s stage show did not violate the Copyright Act, finding, in part, that the use was sufficiently transformative and did not affect the market value of the work.  Seltzer v. Green Day, Inc., et al, Case Nos. 11-56573, -57160 (9th Cir. Aug. 7, 2013) (O’Scannlain, J.)

Artist Derek Seltzer created Scream Icon, an illustration of a screaming, distorted human face, and sold posters and prints of the image, many of which were affixed to public walls and used as street art.  Defendant Green Day, a multi-platinum Grammy-Award-winning rock band, used various video backdrops during its live stage show tour in promotion of the band’s album 21st Century Breakdown.  The backdrop displayed during the song “East Jesus Nowhere” constituted a four-minute video featuring various graffiti and street art, including religious imagery, with Scream Icon prominently and centrally featured for the duration of the video.  The image of Scream Icon was altered with the addition of a red “spray-painted” cross over the middle of the face and featured different contrast and color than Seltzer’s illustration.  Seltzer registered Scream Icon with the U.S. Copyright Office and sued Green Day and the makers of the video backdrop for copyright infringement and violations under the Lanham Act.  The district court found that incorporating Seltzer’s illustration in the video backdrop was fair use under the Copyright Act and granted summary judgment to defendants on all claims.  The district court also awarded defendants $200,000 in attorneys’ fees on the grounds that plaintiff’s claims had been “objectively unreasonable.”  Seltzer appealed.

Applying the four factors of the fair use test under § 107 of the Copyright Act, the Ninth Circuit affirmed the district court’s fair use finding.  As for the first factor, the Ninth Circuit found that the band’s use of the Scream Icon illustration was sufficiently transformative.  Defendants used the Scream Icon as a component of “street-art focused music video about religion and especially about Christianity;” and a spray-painted cross was painted over the illustration and the imagery was displayed during the defendant’s song “East Jesus Nowhere,” which discussed religious hypocrisy.  Plaintiff acknowledged that the message and meaning of his original Scream Icon did not involve religion.  Although the Ninth Circuit concluded that the second fair use factor weighed slightly in favor of the plaintiff, because Scream Icon was a creative work entitled to strong protection, the Court reasoned that the third and fourth fair use factors favored defendants.  Although defendants copied substantially all of Scream Icon quantitatively and qualitatively, the illustration was not meaningfully divisible.  Lastly, the Ninth Circuit held that there was “no reasonable argument” that defendants’ use of Scream Icon could usurp the primary market for plaintiff’s art, because the illustration was never used on merchandise or albums and was featured for roughly four minutes of a three-hour stage show, and plaintiff repeatedly testified that the value of his work was unchanged despite defendants’ unauthorized use.  Therefore, the Ninth Circuit affirmed the district court’s grant of summary judgment as to plaintiff’s copyright claims.

The Ninth Circuit likewise affirmed the district court’s grant of summary judgment on Seltzer’s Lanham Act claims because there was insufficient evidence that Scream Icon functioned as a trademark.  However, the Court vacated the award of attorneys’ fees to defendants because Seltzer’s case was not “objectively unreasonable” and there was no reason to believe that Seltzer should have known that his case would not be successful.

Copyright/Work for Hire

X-Men, Incredible Hulk, Spider Man and Captain America Illustrator – Exceptionally Gifted Artist, but Not Copyright Owner
Marvel Characters, Inc. v. Lisa R. Kirby
by Sarika Singh, Ph.D.

Affirming a determination that certain comic book drawings were works made for hire and the artist had no rights to the work, the U.S. Court of Appeals for the Second Circuit upheld a summary judgment for the plaintiff publisher because the works were made at the publisher’s instance and expense, and the defendants, children of the artist, had failed to show an agreement to the contrary.  Marvel Characters, Inc. v. Lisa R. Kirby, Case No. 11-3333 (2d Cir. Aug. 8, 2013) (Sack, J.)

James Kirby, one of the most influential comic book artists of all time, worked as a freelance artist and produced certain drawings for publisher Marvel Comics between 1958 and 1963.  The children of the late James Kirby (the Kirbys) sent notices to Marvel purporting to terminate assignments in their father’s work pursuant to § 304 (c)(2) of the Copyright Act.  Marvel filed a lawsuit in response seeking declaratory relief that the Kirbys had no termination rights under § 304 (c)(2) on the basis that the work was “made for hire” within the definition of § 304 (c).  Copyright law deems the employer to be the author for purposes of copyright ownership where a work is “made for hire.”  The district court, relying on Second Circuit case law, applied an “instance and expense test” to determine that the works were “made for hire” under the version of the law in effect when the works were created (the 1909 Act), and concluded that they were.  The Kirbys appealed.

An independent contractor’s works are deemed to be works “made for hire” and the hiring party considered an employer and the contractor an employee for purposes of the 1909 Act if the work is made at the hiring party’s “instance and expense.”  If the hiring party satisfies the “instance and expense” test, it is presumed to be the author of the work.  The independent contractor can overcome the presumption by showing evidence of an agreement to the contrary.  The “instance” aspect of this test refers to the hiring party providing the impetus for, participating in, or having the power to supervise, the creation of the work.  Actual creative contributions or direction by the hiring party strongly suggest that the work is made at its instance.  The “expense” component refers to the resources the hiring party invests in the creation of the work.  Payment by the hiring party of a “sum certain” suggests a work-for-hire arrangement.

The Second Circuit agreed with the district court’s application of the “instance and expense test,” finding that Marvel’s right to supervise and its contribution to Kirby’s work were sufficient to establish that the work was produced at Marvel’s instance when Kirby created the work pursuant to Marvel’s assignment, and that Marvel had a right to reject Kirby’s work or require him to redo it or to alter it.  The Second Circuit also found that Marvel’s payment of a flat rate and its contribution of both creative and production value, in light of the parties’ relationship as a whole, was enough to satisfy the expense requirement.  According to the Second Circuit, the question of who created the characters was irrelevant to the issue because the hired party’s ingenuity and acumen are among the reasons for the hiring party enlisting the artist.

Copyright/Federal Rules of Civil Procedure

When Is Anything Really Final?
Yesh Music v. Lakewood Church
by Lauren Martin

Addressing for the first time the issue of whether a voluntary dismissal without prejudice is a “final proceeding” under Rule 60(b), the U.S. Court of Appeals for the Fifth Circuit upheld the district court order granting plaintiffs’ motion to vacate its voluntary dismissal without prejudice.  Yesh Music v. Lakewood Church, Case No. 12-20520 (5th Cir. Aug. 14, 2013) (Davis, J.) (Jolly, J. dissenting).

Plaintiffs (Yesh) are musicians who granted defendants (Lakewood, a Houston-based church) a limited license to use one of their songs in connection with Lakewood’s marketing.  Lakewood later used the song in one if its televised promotional programs.  Subsequently, Yesh sued Lakewood for copyright infringement in Texas district court, arguing that the limited license did not permit use of the song on television.  Six months later, Yesh voluntarily dismissed the Texas suit under Fed. R. Civ. P. 41(a)(1), and the next day filed the same lawsuit in New York district court.  Eventually, the parties agreed to litigate the case in Texas, and Yesh voluntarily dismissed the New York action under Fed. R. Civ. P. 41(a)(1).

Under Rule 41(a)(1)(B), because the Texas lawsuit had already been dismissed without prejudice, the New York action was dismissed with prejudice.  Accordingly, in order to reinstate the lawsuit in Texas district court, Yesh moved for relief from a final judgment under Rule 60(b).  In particular, Yesh requested that the court vacate its first voluntary dismissal and reinstate the original lawsuit.  Lakewood contested the motion, arguing that a voluntary dismissal under Rule 41(a) is not a “final decision” within the meaning of Rule 60(b).  Lakewood also argued that even if the district court could vacate the first dismissal, it would be an abuse of discretion to do so.  The district court rejected Lakewood’s arguments and instead granted Yesh’s motion to vacate.  Lakewood appealed.

Rule 60(b) provides that a court may relieve a party “from a final judgment, order or proceeding” for the specified reasons as well as “any other reason that justifies relief.”  Accordingly, the Fifth Circuit identified the question in the present case as whether a voluntary dismissal under Rule 41(a) could be a “final judgment, order or proceeding” within the meaning of Rule 60(b).  The Fifth Circuit determined that a “final judgment” includes voluntary dismissals under Rule 41(a) because such a dismissal “terminates, closes and ends [the] cause of action,” at least until such time as the plaintiff re-files the action.  The Fifth Circuit further held that a voluntary dismissal is a “proceeding” within the meaning of Rule 60(b).  Finally, the Fifth Circuit found that the district court acted within its discretion in granting the motion to vacate because the parties had agreed to litigate the case in Texas, and it would be “unfair to permit Lakewood to renege on its agreement because of the procedural path taken.”

Copyright/Statute of Limitations

When Does a Copyright Claim Accrue?
Copeland Cooper v. NCS Pearson
by Evan Boetticher

Addressing the issue of copyright claim accrual for the first time in the 10th Circuit, the U.S. Court of Appeals for the 10th Circuit upheld a district court’s dismissal of a 2010 copyright suit upon the grounds that the statute of limitations had run out three years after accrual of the claim.  Copeland Cooper v. NCS Pearson, Case No. 12-1096 (10th Cir. Aug. 19, 2013) (Seymour, J.)

Copeland Cooper co-created the psychological test Battery for Health Improvement (BHI) in the 1980-90s alongside two clinical psychologists.  In 1993, her co-creators signed over their rights to the test to the corporation Battery for Health and Illness, Inc., (BHI, Inc.) started by the three test creators.  Later that year, the corporation signed over publishing rights to National Computer Systems (NCS), NCS Pearson’s predecessor.  The assignments to BHI, Inc., and NCS both indicated that Copeland Cooper’s co-creators exclusively owned the intellectual property rights to the BHI test.  Copeland Cooper signed off on both agreements as the president of BHI, Inc.

In 1996, NCS first published the BHI test with a cover stating that the test was “by” Copeland Cooper’s co-creators with contributions by Copeland Cooper.  Copeland Cooper was aware of this accreditation and that all royalties were divided equally between her co-creators.  In 2002, NCS Pearson published new editions of the BHI test that did not accredit Copeland Cooper except in an appreciation paragraph.  Copeland Cooper became aware of this change in 2009 and filed suit against NCS Pearson in 2010 seeking a declaration that she was a one-third co-owner of the test, equal credit for the authorship and an accounting of her share of revenues.  After the district court granted a summary judgment to defendants based on statute of limitations, Copeland Cooper appealed.

The 10th Circuit first noted that the Copyright Act requires that suits commence within three years of accrual but does not define when accrual begins.  It thus relied upon the accepted rule that accrual in federal cases generally begins when the “plaintiff knows or has reason to know the existence and cause of the injury” that is the basis of the action.  The 10th Circuit found that the plain and express repudiation of Copeland Cooper’s co-ownership in the 1993 publishing agreement was sufficient notification of injury.  The BHI test’s publication in 1996 was also certainly notification, because Copeland Cooper was aware that she was not receiving equal attribution for the BHI test creation and not receiving any royalties—both of which are recognized as starting the statute of limitation running.  Either of these accrual dates placed Copeland Cooper’s 2010 copyright suit beyond the three-year statute of limitations.

In response to Copeland Cooper’s claims that she had been misinformed by one co-creator that she could not be officially listed as an author because she was not a clinical psychologist, the 10th Circuit noted that a fraud claim can toll the statute of limitations.  However, because Copeland Cooper was not asserting a fraud claim against the defendant, NCS Pearson, the 10th Circuit concluded that any such claims were immaterial in this case.

Copyrights/Litigation Documents

Freedom of Use of Copyrighted Court Documents
Unclaimed Property Recover Serv., Inc. v. Kaplan
by Hasan Rashid

Deciding a matter of first impression, the U.S. Court of Appeals for the Second Circuit narrowly held that the author of a copyrighted complaint cannot restrict the future use of the document in the litigation.  Unclaimed Property Recover Serv., Inc. v. Kaplan, Case No. 12-4030 (2d Cir. Aug. 20, 2013) (Katzmann, J.) 

Unclaimed Property Recovery Service (UPRS) and Bernard Gelb were members of a plaintiff class in a class action.  Gelb is not a lawyer but nevertheless prepared the complaint and 305 pages of exhibits.  Gelb registered his copyright in these court-filed documents.  Norman Kaplan was the class action plaintiffs’ lawyer who signed and filed the pleading.  The district court dismissed the suit as time-barred, and Kaplan appealed on behalf of all the plaintiffs.  Gelb and Kaplan had a falling out while the appeal was pending.  Using new counsel, UPRS and Gelb unilaterally moved to withdraw the appeal, which was granted for UPRS and Gelb only.  The case was remanded, and Kaplan filed an amended complaint and exhibits on behalf of the remaining plaintiffs. 

In re-filing the case, Kaplan naturally copied significant portions of the complaint Gelb prepared.  Gelb sued Kaplan for copyright infringement.  The district court dismissed this copyright action, holding that Kaplan had an implied license to use the copyrighted material in the case.  Gelb appealed.

The Second Circuit affirmed the dismissal, without resorting to principles of implied license.  The Court held that any party or counsel in the litigation, as well as the court, has irrevocable authority to use a copyrighted document after it is first introduced into a litigation with authorization.

The Second Circuit explained that litigation would be hobbled if parties could not freely use copyrighted documents first introduced with authorization.  Fair adjudication requires that parties be able to use any documents in the litigation.  Fairness would be lost if, in the midst of a case, a party lost the right to use documents already present in the litigation.  A contrary holding would give copyright holders—including lawyers who author litigation documents—unfair control over a case.

The Second Circuit explicitly limited its holding to the particular facts before it.  The Second Circuit did not suggest that authority is “inevitably needed to use a copyrighted document in litigation.”  It did not decide whether legal documents are subject to copyright law in the first instance, whether authority to use copyrighted material in one case may transfer to other cases, or whether the authority to use copyrighted material in the litigation may extend to use outside the litigation. 

Practice Note:  Once copyrighted material has been introduced into a case with authority from the copyright holder, the material may be freely used in the case by any party thereafter.  Although the Second Circuit’s tone indicates that it may expand its holding, the Court took care to limit its holding in this case.

Copyrights/Copyright Registration Requirements and Authorship

Order in the Court—and in Copyright Registrations for Unpublished Collections
Quincy Neri v. Melinda Monroe
by Jennifer Mikulina

The U.S. Court of Appeals for the Seventh Circuit vacated and remanded a district court decision that a submission was ineligible for copyright registration because it was not in an “orderly form.”  Quincy Neri v. Melinda Monroe, Case No. 12-3204 (7th Cir. Aug. 12, 2013) (Easterbrook, J.)

Quincy Neri designed a glass sculpture that was installed by a third party in the entryway to an individual’s residence.  After renovation of the entryway, the installer included photographs of the sculpture on its website, in a newsletter and in an award application.  Neri brought a lawsuit against the installer, photographer and lighting designer, claiming that these parties violated her copyright in the sculpture.

Copyright exists once a work is in a fixed form, but bringing litigation to enforce these rights requires a copyright registration.  The Copyright Office permits the registration of a “collection” of unpublished works under one registration if the collection has the following elements: “(1) The elements are assembled in an orderly form; (2) The combined elements bear a single title identifying the collection as a whole; (3) The copyright claimant in all of the elements, and in the collection as a whole, is the same; and (4) All of the elements are by the same author, or, if they are used by different authors, at least one of the authors has contributed copyrightable authorship to each element.”

Neri applied for copyright registration for a collection of her unpublished works, which allegedly included a photograph of the sculpture at issue. Although the Copyright Office issued the registration for the collection, the magistrate judge found that Neri’s collection could not be registered because her submission was not in an “orderly form.”  According to the magistrate judge, based on his review of deposition testimony, Neri’s submission consisted of “a booklet containing photographs of several sculptures, plus some loose photographs.”  (The Seventh Circuit was unable to verify this statement because Neri’s submission to the Copyright Office was not in the record.)  The magistrate judge concluded that the application was defective because the submission was disorderly, and he dismissed the case based on a lack of copyright registration in the work at issue.  Neri appealed.

The Seventh Circuit criticized the magistrate judge’s decision because he “did not rely on any legal authority that establishes how much order is required.”  In its decision, the Seventh Circuit focused on the purpose of a copyright registration—“to permit users and courts to pin down the ‘information’ on which copyright enforcement depends”—and held that “a district court should not set aside an agency’s application of its own regulations without a strong reason.”

Practice Note: The Seventh Circuit offered the following helpful advice regarding registrations for unpublished collections: “[a]ny organization that enables a court to associate a work underlying the suit with a work covered by a registration ought to do the trick.  If a booklet (or PDF file) with page numbers is orderly enough—as the magistrate judge thought—a sequence of loose but numbered or named photographs should be enough too.”


Hearsay Exceptions Apply in Copyright Dispute over Gospel Classic “I’ll Fly Away”
Brumley v. Albert E. Brumley & Sons, Inc.
by Blake Wong

Addressing hearsay exceptions in the context of a copyright dispute, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s admission of a conversation under the residual hearsay exception.  The Sixth Circuit also reversed the exclusion of two old newspaper articles and held that the articles should have been admitted under the ancient-documents exception.  Brumley v. Albert E. Brumley & Sons, Inc., Case No. 12-5386 (6th Cir. Aug. 15, 2013) (Martin, J.)

The Brumley siblings disputed who owned the copyright to their father’s famous gospel song “I’ll Fly Away,” which begins “Some glad morning when this life is o’er / I’ll fly away / To a home on God’s celestial shore / I’ll fly away.”  One group of siblings attempted to terminate an earlier copyright transfer to another sibling.  Because the Copyright Act’s termination provision does not apply to works made for hire, ownership turned on whether Brumley, Sr., composed the song under a work-made-for-hire agreement.  The Sixth Circuit appeal focused on the admission of two pieces of evidence: a recording and transcript of a conversation, and two old newspaper articles.

The Sixth Circuit first addressed the admissibility of the recording and transcript, which recorded a conversation between Brumley, Sr., and one of his children.  Although hearsay, the recording and transcript were found to be admissible under the residual hearsay exception, Fed. R. Evid. 807.  Much of the Sixth Circuit’s case law on the residual exception was inapplicable because the cases addressed the residual exception in the context of the Confrontation Clause.  Nevertheless, the Sixth Circuit determined that a variety of factors militated in favor of admitting the conversation under the residual exception, some of those factors being the formality of the conversation, the conversation’s clear and unambiguous nature, and that no evidence suggested that the interlocutors were incapacitated or untruthful, all of which led the Sixth Circuit to affirm the admission of the conversation.

The Sixth Circuit then addressed the admissibility of the two old newspaper articles, one published in April 1977 and the other in July 1986.  As with the recording and transcript, the admissibility of the two old newspaper articles turned on whether they fell within an exception to the hearsay rule.  The district court found that the newspaper articles fell within the ancient-documents exception, Fed. R. Evid. 803(16), because the articles were more than 20 years old.  However, the district court excluded the evidence under Fed. R. Evid. 403, which allows courts to exclude evidence “if its probative value is substantially outweighed by the danger of unfair prejudice.”  The district court reasoned that the articles were unreliable because the articles’ authors did not indicate how they acquired the information contained within their articles.

The Sixth Circuit reversed, explaining that the Circuit does not have such a requirement as a predicate to the ancient-documents exception.  Further, the court explained that the articles did in fact show how the authors obtained their information.  The context of the articles showed that the authors had interviewed Brumley, Sr.  One of the articles even listed its sources.  Thus, the documents were found to be admissible as evidence, subject to the evidentiary weight the articles might be given, which matter was left to the discretion of the jury.

Trade Secrets/Preliminary Injunctions

Federal Circuit Reverses Denial of Preliminary Injunctions for Trade Secret Theft
Core Laboratories LP v. Spectrum Tracer Services, LLC
by Gregory D. Yoder

Addressing the denial of an emergency request for preliminary injunction while a case was stayed pending appeal, the U.S. Court of Appeals for the Federal Circuit reversed a district court’s denial of a preliminary injunction, finding that the lower court erred in denying the injunction that would prevent the use of plaintiff’s proprietary software and customer lists.  Core Laboratories LP v. Spectrum Tracer Services, LLC, Case No. 2013-1263 (Fed. Cir. Aug. 7, 2013) (Newman, J.)

Plaintiff Core Labs and defendant Spectrum Tracer both provide services in the oilfield hydraulic well fracking industry.  Spectrum was founded by two former Core Labs employees, also named defendants.  Core Labs sued defendants for misappropriation of trade secrets for the alleged theft of customer lists and certain software related to fracking services.  After the case was transferred, Core Labs added patent infringement causes of action.  Core Labs then moved for a preliminary injunction seeking to prevent defendants’ use of Core Labs’ trade secrets.  The district court denied the motion, finding that Core Labs had not shown irreparable harm that could not be remedied monetarily.  The case was then stayed pending completion of a re-exam.

While the case was stayed, a Spectrum employee whistleblower notified Core Labs that she was given a copy of a Core Labs Excel spreadsheet that contained Core Labs’ proprietary information related to providing fracking services, and was asked by Spectrum to implement the proprietary information in a similar Spectrum spreadsheet.  In response, Core Labs filed an emergency motion requesting an injunction preventing Spectrum from using the Excel sheet.  The court denied the request, and Core Labs appealed.  

The Federal Circuit heard the appeal of the denial of the request based on trade secret theft because there were two patents being asserted in the case.

On appeal, the Federal Circuit ruled that Texas state law applied because the trade secret claims were originally brought in Texas.  Under Texas law, harm to a plaintiff is presumed when a defendant possesses trade secrets and is in a position to use them.  Further, the Supreme Court has found that the economic value of trade secrets lies in the competitive advantage over others that the trade secret holder enjoys by virtue of its exclusive access to the data, and disclosure or use of the data by others would destroy that competitive edge.

Core Labs argued that the newly discovered information from the whistleblower was a significant change in the case such that an emergency motion was warranted.  In addition, Core Labs rebutted the district court’s denial of the preliminary injunction for lack of irreparable harm by providing evidence that its business has been injured by defendants’ use of Core Labs’ proprietary information.  Core Labs showed it had lost nearly $1 million in business, and that Spectrum had successfully recruited some of Core Labs’ clients.  The Federal Circuit noted that Texas courts have found that these types of competitive injuries derived from misappropriated proprietary information warrant injunctive relief.  Considering the four factors for granting a preliminary injunction and the facts that supported Core Labs’ likelihood of success at trial, the Federal Circuit reversed the district court's denial of the preliminary injunction, and remanded to the district court to implement the injunction and to review the case to determine if the stay should be lifted for the non-patent claims.


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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