IP UPDATE

No Supremacy Clause Preemption Where State Statute Doesn’t Conflict With Federal

by Lois D. Mermelstein | May 8, 2025 | Life Sciences

The US Court of Appeals for the Fifth Circuit explained that ordinarily, when state law contradicts with federal law, the state law may be preempted by the federal law under the US Constitution’s Supremacy Clause. However, under Supreme Court precedent, state unfair-competition laws that accurately mirror the relevant provisions of federal law are not subject to preemption. Zyla Life Sciences, LLC v. Wells Pharma of Houston, LLC, Case No. 23-20533 (5th Cir. April 10, 2025) (Oldham, Ho, Duncan, JJ.)

Under the federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq., no one may sell any new drug without prior approval from the US Food and Drug Administration (FDA). Because compounded drugs are not new but are merely remixed versions of existing drugs, registered compounding facilities are allowed to sell compounded drugs as long as they satisfy additional criteria specified in the FDCA. Six states mirror federal law by making it illegal to sell any new drug without FDA approval and provide for suit under traditional state unfair-competition law if a party sells drugs in violation of these state laws.

Zyla and Wells Pharma are competitors. Zyla sells FDA-approved suppositories containing indomethacin, a drug used to treat various ailments such as rheumatoid arthritis. Wells Pharma sells compounded indomethacin suppositories that are not FDA approved, but Wells Pharma is a registered compounding facility and thus satisfies at least one provision of the exemption. Zyla, seeking to enjoin Wells Pharma from manufacturing and selling its compounded suppositories in the six states mirroring the FDCA, filed suit under those states’ unfair-competition laws. Wells Pharma moved to dismiss under Fed. R. Civ. Pro. 12(b)(6), arguing that the state laws were preempted. After the district granted the motion, Zyla appealed.

The issue before the Fifth Circuit was whether the state laws conflict with the FDCA by incorporating it. As the Court explained, a state triggers implied “[o]bstacles-and-purposes preemption . . . when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Here, (quoting the California statute) the six state statutes at issue bar selling a “new drug” that has not been approved “under Section 505 of the [FDCA].” The Fifth Circuit, citing the 1949 Supreme Court decision in California v. Zook as controlling, concluded that where there is no conflict in statutory terms between the state and federal statutes, there is no preemption. Both a state and the federal government may regulate the same conduct – whether a state has provided an additional remedy in state law is irrelevant – and the FDCA itself permits states to regulate conduct related to drug safety and effectiveness concurrently with the federal government.

The Fifth Circuit reversed the district court’s order granting Wells Pharma’s motion to dismiss and remanded the case.

Paint It White: No Sovereign Immunity in Economic Espionage Case

by Hannah Hurley | May 8, 2025 | Trade Secrets

The US Court of Appeals for the Ninth Circuit affirmed a district court’s denial of foreign sovereign immunity to a Chinese company accused of stealing trade secrets related to the production of proprietary metallurgy technology. United States v. Pangang Grp. Co., Ltd., Case No. 22-10058 (9th Cir. Apr. 29, 2025) (Wardlaw, Collins, Bress, JJ.)

Pangang is a manufacturer of steel, vanadium, and titanium. E.I. du Pont de Nemours (DuPont) had a proprietary chloride-route technology used for producing TiO₂, a valuable white pigment used in paints, plastics, and paper. Pangang allegedly conspired with others to obtain DuPont’s trade secrets related to TiO₂ production through economic espionage in order to use the stolen information to start a titanium production plant in China. The US government filed a criminal lawsuit.

In defense, Pangang invoked the Foreign Sovereign Immunities Act (FSIA) and federal common law, arguing that it was entitled to foreign sovereign immunity from criminal prosecution in the United States because it was ultimately owned and controlled by the government of the People’s Republic of China (PRC). In a prior appeal, the Ninth Circuit had found that Pangang failed to make a prima facie showing that it fell within the FSIA’s domain of covered entities. On remand, the district court again rejected Pangang’s remaining claims of foreign sovereign immunity, including its claims based on federal common law.

While the appeal was pending, the Supreme Court’s 2023 decision in Turkiye Halk Bankasi v. United States clarified that common law, not the FSIA, governs whether foreign states and their instrumentalities are entitled to foreign sovereign immunity from criminal prosecution in US courts. This led to a rebriefing of the present appeal to focus on the now-controlling issues concerning the extent to which Pangang enjoys foreign sovereign immunity under federal common law. Under federal common law, an entity must satisfy two conditions to enjoy foreign sovereign immunity from suit:

It must be the kind of entity eligible for immunity.
Its conduct must fall within the scope of the immunity conferred.

The Ninth Circuit concluded that Pangang did not make a prima facie showing that it exercised functions comparable to those of an agency of the PRC and therefore was not eligible for foreign sovereign immunity from criminal prosecution. The Court also found that “[t]he mere fact that a foreign state owns and controls a corporation is not sufficient to bring the corporation within the ambit of [sovereign immunity].” Since Pangang’s commercial activities were not governmental functions, there was no evidence that sovereign immunity should be applied. Therefore, the Ninth Circuit affirmed the district court’s denial of the motion to dismiss based on sovereign immunity.

RAW Confusion? No Error Where Trial Court Declines to Clarify Agreed Jury Instruction

by Connor M. Larson | May 8, 2025 | Trademarks

The US Court of Appeals for the Seventh Circuit affirmed a district court’s jury verdict that found trade dress infringement and liability under state deceptive practices law, and the court’s order entering a nationwide permanent injunction. The Seventh Circuit found the district court’s agreed jury instruction accurate and determined that there was no error in refusing to further clarify the instruction for the jury. Republic Techs. (NA), LLC v. BBK Tobacco & Foods, LLP, Case No. 23-2973 (7th Cir. Apr. 25, 2025) (Hamilton, Scudder, Lee, JJ.)

Republic Technologies and BBK Tobacco are competitors in the business of organic, hemp-based rolling papers for cigarettes. Republic manufactures and markets its own papers under the name OCB, and BBK markets papers manufactured by others, including its house brand, RAW. After BBK formally requested that Republic change its OCB trade dress to avoid potential confusion with the RAW trade dress, Republic sued for a declaratory judgment of noninfringement, unfair competition, and deceptive advertisement under the federal Lanham Act, Illinois common law, and the Illinois Uniform Deceptive Trade Practices Act (IUDTPA). BBK filed a counterclaim for trade dress infringement and copyright infringement.

At trial, the parties agreed on the jury instruction for the Lanham Act false advertising claim. However, during deliberations, the jury asked for clarification on the definition of “consumer.” Over Republic’s objection, the district court answered the jury’s question by stating that “the answers are contained in the instructions,” and directed the jury “to refer to and review all the instructions.” The jury returned a mixed verdict, finding against Republic on the federal false advertising claims but finding for Republic on its common law and IUDTPA claims. Republic then sought, and the district court granted, a permanent injunction that set limitations on the statements BBK was permitted to make in its advertisements.

On BBK’s counterclaim of trade dress infringement, the jury found that Republic’s trade dress for its OCB papers infringed BBK’s trade dress for its RAW papers. Republic moved for judgment as a matter of law of noninfringement and for a new trial on its false advertising claim based on the disputed answer to the jury’s question. The court denied both motions. Both parties appealed.

On appeal, the Seventh Circuit affirmed on all issues. First, the Seventh Circuit ruled that the district court did not abuse its discretion in its response to the jury’s question or in denying the request for a new trial because a trial judge’s responsibility is to strike “a balance between giving the jury all it needs but without unnecessary detail” and the judge’s answer in this case did not result in the prejudice necessary for a reversal.

Second, the Seventh Circuit reviewed the evidence presented to the jury concerning the trade dress infringement claim and determined that substantial evidence supported the jury’s verdict and the verdict was not irrational. Republic argued that it was not reasonable to confuse the OCB packaging with the RAW packaging “given the prominent display of the brand names in great big letters [...]

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New Administration, Same Patent Reform Bill

by Amol Parikh | May 8, 2025 | Patents

A bipartisan group of senators and congressional representatives reintroduced the Patent Eligibility Restoration Act (PERA), which aims to reform the law of patent eligibility under 35 U.S.C. § 101. PERA seeks to address the challenges posed by recent Supreme Court decisions and restore clarity and predictability in the US patent system.

PERA preserves the existing categories of subject matter currently enumerated in § 101 but adds several categories of excluded subject matter. PERA proposes to eliminate all judicial exceptions to patent eligibility, specifying that certain categories, such as mathematical formulas that are not part of an invention, processes that a human could perform, mental processes, unmodified human genes, and unmodified natural material, are not eligible for patents.

A separate bipartisan group of senators and congressional representatives reintroduced the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act, which aims to protect and increase the value of US intellectual property rights by making significant reforms to the Patent Trial & Appeal Board.

PREVAIL seeks to limit Board challenges to entities that have been sued or threatened with a patent infringement lawsuit, close the statutory bar joinder loophole to prevent time-barred entities from joining instituted inter partes review (IPR) proceedings, and prevent serial petitions by applying estoppel at the time the challenge is filed instead of when the Board issues its final written decision.

No Green Light to Register Color Mark for Medical Gloves

by Eleanor B. Atkins | May 8, 2025 | Trademarks

Addressing for the first time the test for determining whether a color mark is generic, the US Court of Appeals for the Federal Circuit adopted the Trademark Trial & Appeal Board’s Milwaukee test as the appropriate standard, affirming the Board’s determination that a dark green color mark used on medical examination gloves was generic. In re PT Medisafe Technologies, Case No. 2023-1573 (Fed. Cir. Apr. 29, 2025) (Prost, Clevenger, Stark, JJ.)

PT Medisafe filed an application to register a dark green color mark for use in connection with medical examination gloves:

The US Patent & Trademark Office (PTO) examining attorney refused registration, alleging that the mark was not inherently distinctive and therefore required a showing of acquired distinctiveness. In response, Medisafe submitted evidence in support of acquired distinctiveness, including a declaration from a Medisafe vice president, promotional literature, and examples of competitive goods. The examining attorney was not swayed, issuing another office action stating that the mark had not acquired distinctiveness and was generic. Medisafe submitted additional evidence in support of acquired distinctiveness, including additional declarations, but the examining attorney ultimately issued a final office action refusing registration.

On appeal, the Board applied a two-step test to determine whether the applied-for color mark was generic:

What is the genus of the goods or services at issue?
Is the color “so common within the relevant genus that consumers would primarily associate it with the genus rather than as indicating a unique source of goods [or services] within the genus?”

This test, which was first articulated in the Board’s 2019 decision in Milwaukee Electric Tool v. Freud America, is a “slight variation” of the standard test for genericness set forth in the Federal Circuit’s 1986 decision in H. Marvin Ginn v. International Ass’n of Fire Chiefs, modified for use specifically with color marks.

The Board found that the appropriate genus was “all chloroprene medical examination gloves” and the relevant public included “all such people or businesses who do or may purchase chloroprene medical examination gloves.” The Board likewise agreed with the examining attorney that the color mark was generic because “it is so common in the chloroprene medical examination glove industry that it cannot identify a single source.”

The Board cited 25 examples of third parties using the same or a similar dark green color on medical examination gloves. Medisafe claimed that 15 of those 25 examples were Medisafe gloves, but the Board nonetheless affirmed the refusal, noting that “Medisafe made no such claim as to the other 10,” and “all 25 screenshots [are] probative of genericness because the relevant consumer – even including unspecified ‘authorized resellers’ – could be exposed to . . . gloves that appear under a large number of third-party marks without identifying [Medisafe] as the source or manufacturer.” Medisafe appealed to the Federal Circuit.

Medisafe argued that the Board applied the wrong standard in determining [...]

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