IP UPDATE
Exploring the Latest in Intellectual Property Law
IP UPDATE
Exploring the Latest in Intellectual Property Law
Sovereign Immunity
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A Maze-Like Path and Laundry List Don’t Provide Written Description

by | Mar 16, 2023 |

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board (Board) decision that there was insufficient written description in the asserted priority applications to support a genus claim because of a lack of ipsis verbis disclosure and insufficient blaze marks. The Court concluded that the priority applications did not support an early priority date. Regents of the University of Minnesota v. Gilead Sciences, Inc., Case No. 21-2168 (Fed. Cir. March 6, 2023) (Lourie, Dyk, Stoll, JJ.)

Gilead filed a petition for inter partes review (IPR) challenging Minnesota’s patent directed to phosphoramidate prodrugs preventing virus reproduction or cancerous tumor growth. Gilead’s US Food & Drug Administration-approved drug, sofosbuvir, is marketed by Gilead to treat chronic hepatitis C infections and falls within claim 1 of the patent.

The 2014 application that issued as the challenged patent claimed priority to four applications. In the IPR, Gilead argued that the claims were anticipated by a Gilead-owned patent publication (Sofia). The publications used in the decision are as follows:

NP3 and NP2 have the same disclosure. NP2 and P1 contain similar disclosures, which the Board called NP2-P1. The broader claim in NP2-P1 has a relationship of genus to the narrower subgenus claims in the patent at issue. There was no dispute that Sofia disclosed every limitation of each challenged claim. The Board held that NP2-P1 failed to provide a sufficient written description to support the asserted priority date of the challenged claims, which were therefore found to be anticipated by Sofia. Minnesota appealed.

Minnesota argued the following to the Federal Circuit:

  • The Board erred in holding that the NP2-P1 applications have insufficient written description.
  • The Board ran afoul of Administrative Procedure Act (APA) requirements.
  • Minnesota is a sovereign state entity immune from IPR.

35 U.S.C. § 120 sets forth requirements for a patent application to benefit from a filing date of an earlier application. Minnesota asserted that the NP2-P1 priority applications literally described or provided blaze marks to the challenged subgenus claims. The Federal Circuit disagreed, explaining that written description for a genus claim of chemical compounds raises “particular issues,” requiring a description of the outer limits of the genus and either a representative number of members or structural features common to the members of the genus. The Court found that the asserted priority applications (NP2-P1) did not provide such description and the challenged claims were not entitled to the filing dates of those applications.

The Federal Circuit found that the asserted priority applications did not provide ipsis verbis disclosure of the challenged subgenus claim. The Court quoted an oft-noted saying associated with Yogi Berra, a catcher for the New York Yankees some 50 years ago, about a notable failure to provide direction: “when one comes to a fork in the road, take it.” The Court also cited its 1996 decision in [...]

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Charter Schools Aren’t Immune from Trademark Suits

by | Mar 16, 2023 |

The US Court of Appeals for the Fifth Circuit affirmed a district court’s dismissal of a trademark suit against a charter school operator and public school district in Texas but explained that the charter school was not automatically immune from lawsuits based on sovereign immunity. Springboards to Education, Inc. v. McAllen Indep. School District, Case Nos. 21-40333; -40334 (5th Cir. Mar. 8, 2023) (Smith, Duncan, JJ.) (Oldham, J., concurring).

Springboards sells products to school districts in connection with its Read a Million Words Campaign. The campaign incentivizes school children to read books through promises of induction into the Millionaires’ Reading Club and access to rewards such as t-shirts, backpacks and fake money. Springboards’s goods typically bear any combination of trademarks that the company registered with the US Patent & Trademark Office, including “Read a Million Words,” “Million Dollar Reader,” “Millionaire Reader” and “Millionaires’ Reading Club.”

Springboards filed a complaint for trademark infringement, trademark counterfeiting and false designation of origin against McAllen Independent School District (MISD), a public school district in Texas, and IDEA Public Schools, a nonprofit organization operating charter schools in Texas. Both MISD an IDEA moved to dismiss for lack of subject matter jurisdiction, arguing that they were arms of the state and thus entitled to sovereign immunity. They also moved for summary judgment for lack of infringement. The district court ruled that only IDEA enjoyed sovereign immunity and accordingly granted IDEA’s motion to dismiss but denied MISD’s. The district court granted MISD’s motion for summary judgment after concluding that Springboards could not establish that MISD’s program was likely to cause confusion with Springboards’s trademarks. Springboards appealed.

The Fifth Circuit began with the jurisdictional issue of whether IDEA and MISD enjoyed sovereign immunity. The Court explained that determining whether an entity is an arm of the state is governed by the Clark factors, which were set forth in the Fifth Circuit’s 1986 decision in Clark v. Tarrant County. Those factors are as follows:

  1. Whether state statutes and case law view the entity as an arm of the state
  2. The source of the entity’s funding
  3. The entity’s degree of local autonomy
  4. Whether the entity is concerned primarily with local, as opposed to statewide, problems
  5. Whether the entity has the authority to sue and be sued in its own name
  6. Whether the entity has the right to hold and use property.

The Fifth Circuit analyzed each of the factors and concluded that IDEA was not an arm of the state. The Court found that factors 1 and 3 favored sovereign immunity while factors 2, 4, 5 and 6 did not. The Court’s decision focused heavily on factor 2, explaining that the inquiry under factor 2 has two parts: the state’s liability in the event there is a judgment against the defendant, and the state’s liability for the defendant’s general debts and obligations. The district court had concluded that factor 2 weighed in favor of immunity because 94% of IDEA’s funding came from the state and federal sources. The [...]

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Thee I Dismiss: No Love for Failure to Add Necessary Party

by | Sep 8, 2022 |

After concluding that a trademark owner’s case for failure to add a necessary party was untenable, the US Court of Appeals for the Fifth Circuit affirmed a district court’s dismissal of the case because the necessary party enjoyed sovereign immunity and could not be added. Lee et al. v. Anthony Lawrence Collection, L.L.C. et al., Case No. 20-30769 (5th Cir. Aug. 24, 2022) (Jolly, Elrod, Oldham. JJ.)

Curtis Bordenave and Paige Lee are in the business of owning trademarks. They petitioned the US Patent & Trademark Office (PTO) for a federal registration of the mark THEEILOVE. The phrase “Thee I Love” comes from Jackson State University, which has used the phrase for roughly 80 years. Collegiate Licensing Company is a licensing agent that handles the licensing of Jackson State’s trademarks to manufacturers that make and sell Jackson State merchandise.

Despite Jackson State’s decades-long use of the phrase, it never applied for a federal mark until after Bordenave and Lee had already done so. Jackson State did register a mark under Mississippi law in 2015 for use on vanity plates and in 2019 for use on other merchandise. It also claimed to have common-law rights to the mark under the Lanham Act.

Bordenave and Lee sued Collegiate Licensing Company and a few of the licensees in charge of producing and selling Jackson State’s merchandise for various claims related to their licensing, manufacturing and selling of “Thee I Love” merchandise, including trademark infringement and unfair competition under the Lanham Act. Bordenave and Lee sought damages, a permanent injunction barring the defendants from producing or selling any more “infringing” merchandise, and a declaration that defendants infringed Bordenave and Lee’s registered marks. The defendants moved to dismiss under Fed. R. Civ. Pro.12(b)(1) and (7), arguing that Jackson State was a required party, and because Jackson State enjoys sovereign immunity, Bordenave and Lee’s case should be dismissed. The district court dismissed the case without prejudice under Rule 12(b)(7). Bordenave and Lee appealed.

The Fifth Circuit affirmed the district court’s ruling. First, the Court determined that Jackson State was a required party, stating that Jackson State had an interest in the action that would be impaired or impeded if Jackson State was not joined in the suit. The Court reasoned that even if Jackson State remained free to challenge Bordenave and Lee’s ownership of THEEILOVE elsewhere, it could still face challenges protecting its interest if it was not joined in this action.

Next, because Jackson State has sovereign immunity, the Fifth Circuit considered whether the district court abused its discretion in dismissing the case rather than proceeding without Jackson State. Jackson State enjoys sovereign immunity as an arm of the State of Mississippi. Because Jackson State had a non-frivolous claim here, the Court found that dismissal was required because of the potential injury to Jackson State’s interest as an absent sovereign.

Finally, the Fifth Circuit considered the four factors under Rule 19(b) that determine whether an action should continue without the absent party or be dismissed. [...]

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Stormy Weather Ahead: Lack of Causation Evidence Rains Out Appeal

by | Jul 14, 2022 |

The US Court of Appeals for the Tenth Circuit found that a trade secret owner lacked “non-speculative and sufficiently probative evidence of a causal nexus between Defendants’ alleged bad acts and [the trade secret owner’s] asserted damages,” and upheld a lower court’s summary judgment ruling for defendants. GeoMetWatch Corp. v. Hall, et. al, Case No. 19-4130 (10th Cir. June 29, 2022) (Holmes, Kelly, Lucero, JJ.)

GeoMetWatch (GMW) alleged misappropriation of trade secrets and multiple other complaints against several different groups of defendants, including the Hall defendants, Utah University Advanced Weather Systems Foundation (AWSF) defendants, and Utah State University Research Foundation (USURF) defendants. The lower court granted summary judgment to all defendants based on lack of non-speculative causation relating to lost profits, to the USURF and AWSF defendants based on governmental immunity under Utah law, and to AWSF on its contractual counterclaim. GMW appealed.

Background

GMW launched a venture for a new satellite-based weather-detecting senor system developed by USURF. GMW entered into a cooperation agreement with AsiaSat, a foreign commercial satellite operator on which GMW relied to secure funding from Export-Import Bank. There were two conditions precedent before AsiaSat would seek the loan: a guarantee for the loan and a convertible note. The Hall defendants were brought in to possibly provide the guarantee, and with the understanding that Hall would maintain confidentiality of GMW’s information. After reviewing the confidential information, Hall entered into a nondisclosure agreement (NDA) with GMW. Despite the NDA, Hall launched a competing company and sent a series of inflammatory emails regarding the state of GMW to AsiaSat. These actions became the basis for GMW’s complaint of trade secret appropriation. After failing to make payments to AWSF for the construction of the senor, and despite finding a replacement manufacturer, GMW never satisfied either of the conditions precedent and AsiaSat never applied for the loan. GMW eventually ran out of money and filed the underlying suit.

GMW argued that its lost profits stemmed from its failure to secure a loan with AsiaSat and Export-Import Bank because of the defendants’ trade secrets misappropriation and other bad acts. GMW relied on evidence such as a series of inflammatory emails from Hall stating that “GMW is in Trouble,” along with an invitation to do business with a new company that the Hall defendants launched reviewing GMW’s confidential information. The lower court found that GMW had failed to provide more than speculative evidence that the defendants’ actions, with or without GMW’s confidential information, caused GMW’s lost profits.

The Tenth Circuit’s Ruling

At the Tenth Circuit, GMW argued that the lower court ignored “non-speculative” evidence from which it could be inferred that the defendants’ actions were the cause of lost profits. The Court noted that the district court found that none of GMW’s experts actually opined that any of the defendants’ actions caused the lost profits. Although one expert put forth a theory based on GMW losing its “first-mover advantage,” the Court found that no specific facts were offered to support this theory. The [...]

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Pardon My French: France Wins Trademark Dispute Using Sovereign Immunity

by | Apr 8, 2021 |

The US Court of Appeals for the Fourth Circuit reversed a district’s court denial of sovereign immunity under the Foreign Sovereign Immunity Act (FSIA) and remanded the case to be dismissed with prejudice, holding that France was immune from a trademark infringement claim in the United States brought by the former owner of the domain name France.com. France.com, Inc. v. The French Republic, Case No. 20-1016 (4th Cir. Mar. 25, 2021) (Motz, J.)

Jean-Noel Frydman and his company France.com, Inc. (collectively, Frydman) purchased and registered the domain name France.com and trademarked the name in the United States and in the European Union. In 2015, the Republic of France (RoF) intervened in an ongoing lawsuit between Frydman and a third party, asserting the exclusive right to the use of the term “France” commercially. The RoF also insisted that the use of “France” by a private enterprise infringed on its sovereignty. The Paris District Court agreed and ordered the transfer of the domain name to the RoF.

Frydman filed suit for trademark infringement, expropriation, cybersquatting and reverse domain name hijacking, and federal unfair competition in a Virginia district court against the RoF. The RoF moved to dismiss the claim based on the FSIA. The district court denied the motion, stating that the FSIA immunity defense would be best raised after discovery. The RoF appealed.

The Fourth Circuit first determined, based on Supreme Court precedent, that sovereign immunity was a threshold question to be addressed “as near to the outset of the case as is reasonably possible” and not to be postponed until after discovery.

The Court next considered whether the RoF was immune to suit. The FSIA provides a presumption of immunity for foreign states that can only be overcome if the complaint provides enough information to satisfy one of the specified exceptions. Frydman argued that the commercial activity and expropriation exceptions applied.

The commercial activity exception removes immunity where a foreign state has commercial activity in, or that has a direct effect in, the United States. Essentially, a court must determine whether the actions of the foreign state are those of a sovereign or those of a private party engaged in commerce. The Fourth Circuit first identified that the actual cause of the injury at issue to Frydman was the French court’s ruling that the domain name belonged to the RoF, and found that all claims of wrongdoing by the RoF flowed form the French court’s decision. Additionally, even if it was solely the transfer of the domain name that harmed Frydman, and not the French court’s judgment, the transfer was still based on the French court’s judgment that provided the basis for RoF to obtain the domain name. Because the cause of action was based on the powers of a sovereign nation (the foreign judgment) and not the actions of a private citizen in commerce, the Fourth Circuit found that the commercial activity exception did not apply.

The Fourth Circuit next rejected Frydman’s assertion of the expropriation exception. This exception [...]

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State University Challenges Board on Sovereign Immunity in Inter Partes Review

by | Jan 14, 2021 |

The US Court of Appeals for the Federal Circuit reiterated that “[s]overeign immunity does not apply to IPR proceedings when the patent owner is a state.” Board of Regents of the University of Texas System v. Baylor College of Medicine, Case No. 20-1469 (Fed. Cir. Dec. 10, 2020) (per curiam).

Baylor College of Medicine petitioned for inter partes review (IPR) of two patents owned by the Board of Regents of the University of Texas System (UT). UT moved to dismiss the petitions on state sovereign immunity grounds. The Patent Trial and Appeal Board denied the motion, citing Regents of the University of Minnesota v. LSI Corp. (IP Update, Vol. 22, No. 7).

UT appealed, arguing that University of Minnesota was wrongly decided, but admitted that the panel was bound by it. Predictably, the panel affirmed the Board.

Practice Note: UT’s strategy implies that it intends to use its case as a vehicle to seek en banc (and possibly Supreme Court) review of the University of Minnesota decision.



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Advertising Falls within Commercial Activity Exception to Sovereign Immunity

by | Jun 18, 2020 |

The US Court of Appeals for the Second Circuit affirmed a district court’s denial of a motion to dismiss a copyright infringement suit on the ground of sovereign immunity, holding that advertising activity in the United States on behalf of a sovereign government falls within the commercial activity exception to sovereign immunity. Pablo Star Ltd. v. Welsh Gov’t, Case No. 19-1262 (2d Cir. June 8, 2020) (Lynch, J.).

Pablo Star is a company registered under the laws of Ireland and the United Kingdom. The Welsh government is a political subdivision of the United Kingdom. Pablo Star sued the Welsh government, along with multiple New-York-based media companies working with the Welsh government, for copyright infringement. Pablo Star alleged infringement of its copyrights in photographs that the Welsh government used in online and printed materials advertising Welsh-themed events in New York and promoting tourism to Wales. The Welsh government moved to dismiss, asserting sovereign immunity under the Foreign Sovereign Immunities Act (FSIA), which provides for presumptive immunity of a foreign state in federal court. The district court denied the motion to dismiss, holding that the commercial activity exception to the FSIA applied because the acts of the Welsh government that resulted in Pablo Star’s claims constituted commercial activity, and the activity had substantial contact with the United States. The Welsh government sought an interlocutory appeal.

The Second Circuit affirmed, finding that the Welsh government abrogated its sovereign immunity by engaging in commercial activity that had substantial contact with the United States. On the commercial activity prong, the Court rejected the argument that the Welsh government’s conduct was governmental, rather than commercial, because it promoted tourism to Wales. The Court explained that an activity is deemed commercial based on its nature rather than its purpose. Activity is commercial if a foreign state performs the types of actions typical of a private party engaging in commerce. A state’s motives, including motives without profit or to fulfill sovereign objectives, are irrelevant. The Welsh government’s assertion that it acted as a sovereign government to promote Welsh culture and tourism conflated the act with its purpose. The broader characterization of promoting tourism also did not distinguish the activity from functions regularly undertaken by private entities because the profit motive was irrelevant. Because the publication of advertising materials is an activity regularly performed by private-sector businesses, the court affirmed the district court’s conclusion that the Welsh government engaged in commercial activity.

The Second Circuit also distinguished Pablo Star’s claims from those in cases where sovereign immunity applied. Claims dismissed on the ground of sovereign immunity lacked a sufficient nexus between a party’s injury and the governmental entity’s commercial activity. They instead stemmed from functions unique to government, such as detention and punishment or the employment of civil service personnel. Pablo Star’s copyright infringement claim, by contrast, directly resulted from the Welsh government’s commercial conduct, including its unauthorized use of photographs in advertising materials promoting Welsh culture and tourism.

On the substantial contact prong, the Second Circuit agreed that the [...]

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