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Lanham Act Reaches Foreign Defendants’ Extraterritorial Conduct, but Worldwide Injunction Too Broad

by Paul Devinsky | Sep 2, 2021 | Trademarks

The US Court of Appeals for the Tenth Circuit upheld a district court’s injunction barring multiple foreign companies from directly or indirectly using a US remote control manufacturer’s trade dress based on the extraterritorial reach of the Lanham Act. However, the Court narrowed the scope of the worldwide injunction to countries where the US company currently markets or sells its products. Hetronic Int’l, Inc. v. Hetronic Germany GmbH, Case Nos. 20-6057, -6100 (10th Cir. Aug. 24, 2021) (Phillips, J.)

Hetronic International is a US company that manufactures radio remote controls for heavy-duty construction equipment. Hetronic Germany GmbH, Hydronic Steuersysteme GmbH, ABI Holding GmbH, Abitron Germany GmbH and Abitron Austria GmbH (collectively, the Distributers) are foreign companies that have distributed Hetronic’s products—mostly in Europe—for almost a decade. Based on an old research and development agreement between the parties, the Distributors concluded that they, not Hetronic, owned the rights to Hetronic’s trademarks and other intellectual property. The Distributors accordingly reverse-engineered Hetronic’s products and began manufacturing and selling their own copycat products, mostly in Europe. The copycat products were identical to Hetronic’s and were sold under the Hetronic brand and the same product names. Hetronic terminated the parties’ distribution agreements, but the Distributers continued to sell their copycat products. The Distributors attempted to break into the US market, selling several hundred thousand dollars’ worth of products before backing off after Hetronic sued. They then focused their efforts on Europe.

Hetronic sued the Distributors, along with their manager and owner Albert Fuchs, under the Lanham Act. The Distributors moved for summary judgment, arguing that the district court lacked subject matter jurisdiction to resolve the Lanham Act claims because the conduct at issue occurred overseas. The Distributors asserted that Hetronic’s claims had to be dismissed because the Lanham Act applied extraterritorially only if a defendant’s conduct had a substantial effect on US commerce, and the Distributors’ conduct did not. The district court rejected that argument and denied summary judgment.

In a separate proceeding initiated by the Distributors in the European Union, the EU Intellectual Property Office (EUIPO) concluded that Hetronic owned all of the disputed intellectual property. Based on the EUIPO proceeding, the district court applied the doctrine of issue preclusion and granted Hetronic summary judgment on the Distributors’ ownership defense. After an 11-day trial, a jury found that the Distributors had willfully infringed Hetronic’s trademarks and awarded Hetronic more than $100 million in damages, mostly for trademark infringement. The district court also entered a permanent injunction prohibiting the Distributors’ infringing activities worldwide. The Distributors appealed.

On appeal, the Distributors accepted that the Lanham Act can sometimes apply extraterritorially but argued that the Lanham Act did not reach their activity as foreign defendants making sales to foreign consumers. Specifically, the Distributors argued that:

The district court erroneously concluded that the Lanham Act applied extraterritorially.
The injunction lacked the specificity required by Fed. R. of Civ. Pro. 65.
The injunction’s worldwide reach was too broad.

The Distributors challenged the district court’s exercise of personal [...]

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PTO Seeks Comments on Proposed Rulemaking for Denying Patent Reviews

by McDermott Will & Schulte | Oct 29, 2020 | America Invents Act, Patents

The US Patent and Trademark Office (PTO) requested public comments on considerations for instituting trials under the Leahy-Smith America Invents Act (AIA). Comments are due by November 19, 2020.

Patent practitioners have grown accustomed to reviewing the PTO Patent Trial and Appeal Board (Board) administrative guide, precedential or informative opinions, and other published filings and decisions to discern best practices for filing petitions for and defending against inter partes review, post-grant review, covered business method and derivation proceedings before the Board. For example, the latest Board Consolidated Trial Practice Guide (Nov. 2019) (CTPG) is available here. The PTO is considering codifying or modifying its current policies and practices through formal rulemaking and wishes to gather public comments on its current approach and other approaches suggested by stakeholders.

PTO policies and Board decisions such as General Plastic, Valve Corp. I, Valve Corp. II, NHK Spring and Fintiv set forth factors for analyzing whether to institute an AIA proceeding (and particularly a follow-on or serial petition) or issue a discretionary denial due to the timeline for parallel district court proceedings. Many of these policies and cases are also discussed in the CTPG. The PTO already has received input from stakeholders on these policies that expand on the PTO director’s discretionary authority to institute an AIA trial. Most stakeholder comments suggested that the case-specific analysis outlined in precedential opinions and the CTPG achieves the appropriate balance and reduces gamesmanship—for example, by ensuring that AIA proceedings do not create excessive costs and uncertainty for the patent owner or the system, while allowing meritorious challenges to patents to be heard. However, some stakeholders have proposed that the PTO adopt brightline rules, regardless of the case-specific circumstances, to:

Use its discretion to preclude claims from being subject to more than one AIA proceeding
Permit more than one AIA proceeding only if the follow-on petitioner is unrelated to the prior petitioner
Place no limits on the number of petitions that can be filed or the number of AIA trials that can be instituted against the claims of a patent, so long as the petition complies with statutory timing requirements and the institution threshold of showing that at least one claim of the patent is unpatentable
Preclude institution of an AIA trial against challenged claims if the patent owner opposes institution and a related district court or US International Trade Commission (ITC) action (in which any of the challenged claims are or have been asserted against the petitioner, the petitioner’s real-party-in-interest or a privy of the petitioner) is unlikely to be stayed
Eliminate any consideration of the status of any district court or ITC actions involving the challenged patent, so long as the petition complies with statutory timing requirements and the institution threshold.

These contrasting views prompted the PTO to issue a request for comments on the factors that should be considered as part of a balanced assessment of the relevant circumstances when exercising its discretion to institute an AIA trial. The PTO [...]

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Eighth Circuit Cools Off Antitrust Claims Based on Alleged Patent Fraud

by Lisa P. Rumin | Aug 5, 2020 | Patents

The US Court of Appeals for the Eighth Circuit affirmed a grant of summary judgment dismissing antitrust and tortious interference claims based on fraudulent procurement of patents where the plaintiff failed to show a knowing and willful intent to deceive the US Patent and Trademark Office (PTO). Inline Packaging, LLC v. Graphic Packaging International, LLC, Case No. 18-3167 (8th Cir. June 18, 2020) (Smith, J.).

Inline Packaging and Graphic Packaging are manufacturers of susceptor packaging, a specialized food packaging used for microwaving frozen foods. Graphic developed the susceptor design in partnership with Nestlé in 2005. The packaging was redesigned from a prior patent obtained several years earlier. Although Graphic’s computer-aided design drafter was listed as the sole inventor of the redesigned packaging claimed in the asserted patent, Nestlé’s engineer provided feedback that was implemented into the design, including the addition and deletion of certain features of the packaging.

In 2014, Nestlé held an auction to select the next manufacturer of its susceptor packaging. Nestlé originally selected Inline as the supplier of its susceptor packaging, but later awarded 90% of the susceptor packaging business to Graphic after Graphic notified Nestlé that Inline would likely infringe on Graphic’s patents. In June 2015, Graphic initiated patent litigation against Inline. In July 2015, Inline brought an antitrust suit against Graphic alleging that Graphic monopolized the susceptor packaging market using anticompetitive practices in violation of federal and state antitrust laws. To support its antitrust claims, Inline alleged that Graphic fraudulently procured the asserted patents, made baseless litigation threats and engaged in predatory discount bundling through the use of multi-year supply agreements. At the time the lawsuit was initiated, Graphic was the dominant supplier of susceptor packaging, with an almost 95% share of the US market. The district court granted summary judgment in favor of Graphic, dismissing Inline’s claims. Inline appealed.

The Eighth Circuit reviews grants of summary judgment de novo to determine whether a genuine dispute of material fact exists and whether judgment is entitled as a matter of law. Here, all inferences were viewed in the light most favorable to Inline. Section 2 of the Sherman Act prohibits monopolizing, or attempting to monopolize, any part of the trade or commerce among the several states. To prove a violation of Section 2, a claimant must show that an entity possessed monopoly power in the relevant market and willfully acquired or maintained such monopoly power through anticompetitive conduct rather than as the result of fair competition (e.g., by means of a superior product or business acumen).

The Eighth Circuit first considered whether Graphic fraudulently procured the asserted patents. Patent fraud, also known as Walker Process fraud, can support a monopolization claim where the defendant procured the patent at issue by knowing and willful fraud on the PTO, or maintained and enforced the patent with knowledge of the fraudulent manner in which it was obtained. Knowing and willful fraud requires an intent to deceive or inequitable conduct. The Court reasoned that this standard requires clear and convincing [...]

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Munchkin Is Luv-n This Win

by Jodi Benassi | Jun 17, 2020 | Patents, Trademarks

Reversing an award of attorney’s fees, the US Court of Appeals for the Federal Circuit found that a district court abused its discretion in making an exceptional-case determination where patent and trademark infringement claims were reasonable. Munchkin, Inc. v. Luv N-Care, LTD., Admar International, Inc., Case No. 19-1454 (Fed. Cir. June 8, 2020) (Chen, J.).

Munchkin sued LNC for trademark infringement, unfair competition, trade dress infringement and patent infringement based on LNC’s no-spill drinking cups. LNC filed a petition for inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB). While the IPR was pending, Munchkin voluntarily dismissed all of its non-patent claims with prejudice. The PTAB subsequently found Munchkin’s patent was unpatentable. After the PTAB’s finding, Munchkin dismissed its patent infringement claim.

LNC filed a motion for attorney’s fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117(a), arguing that the trademark and trade dress infringement claims were substantively weak and that Munchkin should have been aware of the weakness of the patent’s validity. The district court agreed that the case was exceptional and granted LNC’s motion. Munchkin appealed.

The Patent Act and Lanham Act allow courts to award reasonable attorney’s fees to the prevailing party, but only in exceptional cases. The Federal Circuit reviewed the district court’s award for abuse of discretion under the Ninth Circuit standard for attorney’s fees as set forth in Octane Fitness LLC v. ICON Health & Fitness, Inc. (IP Update, Vol. 17, No. 5). The Supreme Court in Octane Fitness held that an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The Federal Circuit noted that the district court’s exceptional-case determination rested on issues that were not fully litigated before the court. Addressing the patent infringement claim, the Court first found that the district court’s claim construction ruling favored Munchkin, creating a serious hurdle for LNC’s invalidity challenge. However, to find the case exceptional, the district court dismissed its own Markman construction as merely a non-final interim order. The Court found that was not the right question, and instead, the relevant question was whether Munchkin’s validity position was reasonable—not whether there is a possibility of reconsideration of the claim construction.

LNC argued that Munchkin was unreasonable in maintaining its patent infringement lawsuit once the PTAB instituted the IPR because, based on the statistics, it was more likely than not that the patent would be found invalid. The Federal Circuit disagreed, stating clearly that IPR statistics combined with the merits outcome is not enough. What is required is a “fact-dependent, case-by-case” analysis. The Federal Circuit found nothing unreasonable about Munchkin’s patent infringement claim.

Addressing the trademark claims, the Federal Circuit determined that Munchkin cannot be faulted for litigating a claim it was granted permission to pursue. Since the district court allowed Munchkin to amend its complaint, finding no grounds for prejudice, bad faith [...]

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2019 IP Law Year in Review: Patents

by Paul Devinsky | Feb 20, 2020 | Patents

Executive Summary

2019 was another important year in intellectual property law that resulted in hundreds of decisions by the courts and Patent Trial and Appeal Board (PTAB) that may affect your company’s litigation, patent prosecution or business strategy. This special report on patents discusses some of the most important cases from 2019 from the US Supreme Court, the US Court of Appeal for the Federal Circuit and the PTAB.

On January 22, 2019, the Supreme Court addressed in Helsinn Healthcare S.A. v Teva Pharmaceuticals, USA, Inc. the question of whether, under the America Invents Act (AIA), an inventor’s sale of an invention to a third party that is obligated to keep the invention confidential qualifies as prior art for purposes of determining the patentability of the invention. In a unanimous decision authored by Justice Clarence Thomas, the Supreme Court concluded that such a sale qualifies as prior art.

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