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Exploring the Latest in Intellectual Property Law
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Exploring the Latest in Intellectual Property Law
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Show Your Work: PTO Director’s Procedure for Issuing Instructions Is Reviewable

By on Mar 23, 2023
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The US Court of Appeals for the Federal Circuit affirmed the district court’s finding under the Administrative Procedure Act (APA) that the substance of the US Patent & Trademark Office (PTO) Director’s instructions is unreviewable but reversed the finding that the cloak of unreviewability extended to the procedure used in issuing the instructions. Apple v. Vidal, Case No. 22-1249 (Fed. Cir. Mar. 13, 2023) (Lourie, Taranto, Stoll, JJ.)

The creation of the inter partes review (IPR) program opened new avenues for reviewing the validity of patents following issuance. Since the program’s inception, Congress has recognized that there is a possibility of parallel proceedings at the Patent Trial & Appeal Board and in the district court, that such proceedings could result in conflicting decisions and reduced efficiency in the system. However, Congress left it to the discretion of the two branches to work out such situations among themselves.

As one lever to overcome these issues, Congress provided the Director with unreviewable discretion in deciding whether to institute an IPR. Recently, the Director attempted to leverage this power to increase efficiencies and reduce gamesmanship by instructing the Board on what to consider when instituting an IPR.

Apple and four other companies challenged these instructions in the district court. Apple argued that the Director’s instructions violated the APA by being contrary to the IPR provisions, arbitrary and capricious, and issued without the notice-and-comment rulemaking required under the APA.

Following a motion to dismiss, the district court concluded that Apple’s challenges were directed at the Director’s actions, making them unreviewable by the court. Apple appealed.

On appeal, the Federal Circuit considered all three of Apple’s APA challenges to the instructions, along with whether Apple had standing to bring the suit. The Court agreed with the district court that the question of whether an instruction violates the APA by being contrary to the IPR provisions or by being arbitrary and capricious is directed to the substance of the Director’s action and is not reviewable: “§ 314(a) invests the Director with discretion on the question whether to institute review . . . : The determination by the Director whether to institute an inter partes review . . . shall be final and nonappealable.” As the Federal Circuit noted, this conclusion rests on the well-supported need for the PTO Director to give guidance to delegatees on how to make institution determinations.

The Federal Circuit disagreed that the announcement procedure the Director used for issuing the instructions to the Board was unreviewable, however. As the Court noted, the procedure employed by an agency to announce guidelines is “quite apart” from the substance of those guidelines. Given this distinction, the Court concluded that the procedure the Director used to announce the instructions was reviewable: “The government here has not shown that anything in § 314(d) or elsewhere in the IPR statute supplies clear and convincing evidence that there was to be no judicial review of the choice of announcement procedure, a matter for which generally applicable standards exist.”

The [...]

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No Standing to Invalidate Trademark without Threat of Infringement Suit

By on Feb 23, 2023
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The US Court of Appeals for the Ninth Circuit concluded that when a party obtains a declaratory relief finding that it does not infringe a trademark, it no longer has Article III standing to pursue invalidation of the mark. San Diego County Credit Union v. Citizens Equity First Credit Union, Case Nos. 21-55642; -55662; -56095; -56389 (9th Cir. Feb. 10, 2023) (Bea, Ikuta, Christen, JJ.)

Citizens Equity First Credit Union (CEFCU) registered a trademark for the term “CEFCU. NOT A BANK. BETTER,” and further claimed to own a nearly identical common-law trademark for “NOT A BANK. BETTER.” In 2014, San Diego County Credit Union (SDCCU) obtained a registration for “IT’S NOT BIG BANK BANKING. IT’S BETTER.” CEFCU petitioned the Trademark Trial & Appeal Board to cancel SDCCU’s registration, claiming that it covered a mark that was confusingly similar to CEFCU’s registered and alleged common-law marks.

SDCCU sought declaratory relief in the district court seeking a noninfringement finding of CEFCU’s registered and common-law marks, an invalidity finding of CEFCU’s registered and common-law marks, and a finding that CEFCU falsely or fraudulently registered its mark. CEFCU unsuccessfully filed motions to dismiss for lack of personal and subject matter jurisdiction. SDCCU persuaded the district court that during the course of the cancellation proceedings, it became apprehensive that CEFCU would sue SDCCU for trademark infringement. The district court granted SDCCU’s motion for summary judgment on noninfringement and CEFCU’s motion for summary judgment on SDCCU’s fraudulent registration claim. The parties agreed to dismiss the claim that CEFCU’s registered mark was invalid. The only issue remaining was SDCCU’s count seeking declaratory relief to invalidate CEFCU’s common-law mark. After a bench trial, the district court determined that CEFCU’s common-law mark was invalid, entered final judgment and awarded SDCCU attorneys’ fees. CEFCU appealed.

In an appeal that raised a “bevy of issues,” the Ninth Circuit concluded that the district court lacked Article III jurisdiction to invalidate CEFCU’s common-law mark following the grant of summary judgment in favor of SDCCU on its noninfringement claims. Citing the Supreme Court’s 2007 decision in MedImmune v. Genentech and Ninth Circuit precedent, the Ninth Circuit applied the “reasonable apprehension” test to determine whether a controversy exists in a declaratory judgment action regarding trademark infringement. Under this test, a party has standing to seek declaratory relief of noninfringement if the party demonstrates “a real and reasonable apprehension that [the party] will be subject to liability” if the party’s course of conduct continues. Concrete threats of a trademark infringement suit are not required to create live controversy to provide standing to seek declaratory relief action.

The Ninth Circuit concluded that justiciable controversy existed at the pleading stage, pointing to CEFCU’s cancellation petition, CEFCU’s testimony that it was just a “matter of time” before actual confusion occurred in California, and CEFCU’s affirmative refusal to stipulate that SDCCU was not infringing CEFCU’s marks. However, once the district court rendered its declaratory judgment of noninfringement, the record lacked any evidence that an ongoing threat of liability was causing [...]

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Don’t Stand for It—Collateral Estoppel and Standing

By on Nov 10, 2022
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In a series of related cases, the US Court of Appeals for the Federal Circuit affirmed two decisions from the US District Court for the District of Delaware regarding collateral estoppel on standing issues and reversed a decision from the US District Court for the Northern District of California regarding the effect of license termination on standing. Uniloc 2017 LLC v. Google LLC, Case No. 21-1498 (Fed. Cir. Nov. 4, 2022) (Lourie, Dyk, Hughes, JJ.); Uniloc USA, Inc. v. Motorola Mobility LLC, Case No. 21-1555 & Uniloc LLC v. Blackboard Inc., Case No. 21-1795 (Fed. Cir. Nov. 4, 2022) (Lourie, Dyk, Hughes, JJ.)

These actions arose out of a series of patent suits filed by various Uniloc entities against tech companies in the Eastern District of Texas, the Western District of Texas and the District of Delaware involving several different patents. The Eastern District of Texas case against Google was transferred to the Northern District of California, and the Western District of Texas case against Blackboard was transferred to the District of Delaware. All three cases were dismissed for lack of standing due to a prior license agreement.

In 2014, a Uniloc entity entered into a Revenue Sharing and Note and Warrant Purchase Agreement with Fortress regarding a loan Fortress made to Uniloc. Under the terms of this agreement, if Uniloc defaulted, Fortress would receive a royalty-free license with the ability to sublicense. Uniloc defaulted in March 2017. In May 2018, Uniloc and Fortress entered into a Payoff and Termination Agreement, which explicitly terminated the patent licenses.

Uniloc sued several companies, including Motorola, Blackboard and Apple, in the period between the default and the Termination Agreement. In the Apple case, the district court found Uniloc lacked standing because it had granted a royalty-free license with the ability to sublicense to Fortress. The cases involving Motorola and Blackboard were subsequently dismissed for lack of standing. Uniloc appealed the decision in the Apple case but later settled with Apple. The settlement did not address vacatur of the district court decision. When Uniloc appealed the Motorola and Blackboard decisions, Motorola and Blackboard raised collateral estoppel. Given the virtually identical factual circumstances, the Federal Circuit held that collateral estoppel applied and that Uniloc could not relitigate the standing issues.

Unlike the cases involving Motorola and Blackboard, Uniloc filed the action against Google after it entered into the Termination Agreement with Fortress. At the district court, Google argued that Uniloc lacked standing because the Termination Agreement could not terminate the irrevocable license provision and that as a consequence of the grant under the Termination Agreement Uniloc lacked standing. Applying New York law (as the law governing the contract), the district court held that the Termination Agreement could not terminate the irrevocable license and therefore dismissed the case for lack of standing. The Federal Circuit, reviewing the issue of law de novo, held that “irrevocable” referred to whether Uniloc could unilaterally terminate an agreement, and not to whether the parties could mutually agree to terminate the [...]

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Don’t Throw in the Towel: Retroactive Copyright Protects Fight Live Stream

By on Oct 6, 2022
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The US Court of Appeals for the Sixth Circuit reversed a district court’s summary judgment of noninfringement in a copyright dispute, finding that the transfer of ownership prior to the display of the copyrighted work conferred standing to sue for any alleged infringement. Joe Hand Promotions, Inc. v. Griffith, Case No. 21-6088 (6th Cir. Sept. 21, 2022) (Clay, Rogers, Stranch, JJ.)

On August 26, 2017, world-famous boxer Floyd Mayweather Jr. and famous mixed martial arts fighter Conor McGregor engaged in what became one of the most legendary fights of all time (Fight). Showtime produced the Fight, charging a $99.99 personal use license and more expensive commercial streaming licenses for public viewing in a commercial setting. Two months prior to the event, on June 20, 2017, Showtime entered into a distribution agreement with Mayweather Promotions granting an exclusive license “to exhibit and distribute, and authorize the exhibition and distribution” of the Fight in a defined territory via the internet. On August 1, 2017, Mayweather in turn entered into a Commercial Licensing Agreement with Joe Hand Promotions (JHP), a smaller distributor. The agreement granted “the sole and exclusive third party license … to distribute … and authorize the public exhibition of the [Fight]” in a designated area. JHP then promoted the event and sold commercial licenses authorizing live broadcast at bars and restaurants.

There was no copyright registration at the time the Fight aired. However, the Copyright Act allows registration of live events within three months, and Showtime applied for a copyright within two months. On November 21, 2017, Showtime signed a Copyright Agreement with JHP, granting JHP “the exclusive right to distribute and publicly perform the [Fight] live on August 26, 2017,” “the exclusive right … to take enforcement actions,” and “the right and standing, as exclusive assignee, to assert independent claims, solely in the name of [JHP], for copyright infringement.” Mayweather Promotions, although a nonparty, also signed.

JHP then sued several restaurants, including Griffith, which livestreamed the Fight in a public setting without paying the commercial license fee. Griffith had paid for a personal use license, but then used an HDMI cable to connect a personal device to a TV and broadcast the live show in the restaurant. Griffith also promoted the Fight on the restaurant’s Facebook page and charged a $6 entry fee for patrons to watch the Fight. Both parties filed cross-motions for summary judgment. The district court granted Griffith’s motion, finding no evidence of copyright ownership on the day of the Fight. The court found that because the Copyright Agreement granted rights retroactively, JHP was granted a mere right to sue, which was insufficient for ownership. JHP appealed.

Griffith argued on appeal that because there was no copyright registration at the time of the event, any exclusive rights granted by the Copyright Agreement were illusory and insufficient to establish ownership. In response, JHP argued that Showtime intended such retroactive grant of rights, as evidenced by the Commercial Licensing Agreement with Mayweather Promotions. The Sixth Circuit agreed with [...]

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Fifth Circuit Affirms Dismissal of Walker Process Claim, Disagrees with Federal Circuit Transfer of Action

By on Aug 25, 2022
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The US Court of Appeals for the Fifth Circuit affirmed a summary judgment order dismissing a Walker Process monopolization action brought by Ronald Chandler and his oilfield service company Chandler Manufacturing (collectively, Chandler). The Fifth Circuit affirmed the lower court’s tossing of the action, holding that the alleged claims lacked a nexus to antitrust injury and were time barred under the four-year statute of limitations. Ronald Chandler et al. v. Phoenix Services, LLC, Case No. 21-10626 (5th Cir. Aug. 15, 2022) (Wiener, Graves, Duncan, JJ.)

A Walker Process monopolization action involves antitrust claims regarding fraudulently obtained patents. Chandler alleged that even though Phoenix Services’ patent for fracking technology was declared unenforceable in separate federal litigation in 2018, Phoenix Services continued to enforce the patent to exclude competitors from the market (for example, by sending cease-and-desist letters to Chandler’s clients that attempted to utilize the technology). A Walker Process claim requires a showing of the following:

  • The defendant obtained its patent by “knowing and willful fraud on the patent office and maintained and enforced the patent with knowledge of the fraudulent procurement.”
  • The plaintiff can satisfy all other elements of a Sherman Act monopolization claim.

In the district court, a Texas federal judge granted summary judgment to Phoenix Services, finding that Chandler filed the lawsuit too late and that the defendants involved ultimately could not be held liable. Chandler appealed.

The Fifth Circuit first addressed its appellate jurisdiction. The Court made it clear that it did not agree with the Federal Circuit’s transfer of this Walker Process case (on the basis that it did “not present a substantial issue of patent law” since the underlying patent had already been declared unenforceable in earlier litigation), but that under the Supreme Court’s 1988 decision in Christianson v. Colt Indus. Operating Corp. it did not find the transfer “implausible.” It therefore accepted jurisdiction but noted that its acceptance did not mean that it found the Federal Circuit’s decision correct.

The Fifth Circuit acknowledged that unlike the situation in Xitronix v. KLA-Tencor, where it and the Federal Circuit debated the appellate jurisdiction issue of Walker Process claims, the patent involved here had already been declared unenforceable. However, the Fifth Circuit pointedly noted its position that Walker Process claims should fall under the appellate purview of the Federal Circuit.

On the merits, the Fifth Circuit agreed with the Texas district court that Chandler did not sufficiently demonstrate that its alleged lost profits were caused by Phoenix Services’ alleged antitrust behavior. The Court found that Chandler failed to present substantial evidence that the cease-and-desist letters materially harmed Chandler’s business.

Antitrust plaintiffs must show the following:

  • Injury-in-fact, e., an injury to the plaintiff proximately caused by the defendants’ conduct
  • Antitrust injury
  • Proper plaintiff status, which ensures that other parties are not better situated to bring suit.

Only injury-in-fact was analyzed in the appeal. Chandler argued that the cease-and-desist letter sent to its clients eventually drove the client out of business. However, the Fifth Circuit [...]

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Tableware Designer Gets Heavenly Results on Its Pearly Plates

By on Jul 21, 2022
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The US Court of Appeals for the Fifth Circuit reversed a district court decision, reversing the dismissal of a copyright claim based on lack of standing and finding ownership of the copyright in the claimant based on an assignment of that claim. The Fifth Circuit also found that the plaintiff had a protectible trade dress under the Lanham Act based on secondary meaning. Beatriz Ball, LLC v. Barbagallo Co., LLC, Case No. 21-30029 (5th Cir. July 12, 2022) (Jones, Haynes, Costa, JJ.) (per curiam).

Beatriz Ball, the founder of Beatriz Ball, LLC, alleged that Pampa Bay was marketing and distributing products that infringed on Ms. Ball’s registered copyrights and unregistered trade dress for its “Organic Pearl” line of tableware. Ms. Ball brought suit against Pampa Bay in Louisiana federal court, asserting claims for copyright infringement under the Copyright Act and unfair competition under § 43 of the Lanham Act.

Pampa Bay has marketed and distributed products similar to the Organic Pearl collection but made with cheaper materials since 2016. Ms. Ball alleged that Pampa Bay infringed upon her copyright and its unregistered trade dress because the products are confusingly similar and look and feel like the Organic Pearl trade dress in every way. The district court ruled against Ms. Ball, finding that it had not established that its unregistered trade dress acquired “secondary meaning” as is required for protection of an unregistered trade dress under the Lanham Act. The district court further held that Ms. Ball lacked standing to bring the copyright claims as a result of a lack of legal interest because when “Beatriz Ball Collection” transferred ownership in the copyrights to “Beatriz Ball, LLC,” the language of the assignment did not specifically transfer the right to a cause of action for prior infringements predating the assignment. The assignment clause in issue read:

Assignment. Assignor [Beatriz Ball and Beatriz Ball Collection] hereby irrevocably conveys, transfers, and assigns to Assignee [Beatriz Ball, LLC], and Assignee hereby accepts, all of Assignor’s right, title and interest in and to any and all copyrights, whether registered or not and whether or not applications have been filed with the United States Copyright Office or any other governmental body. This assignment expressly includes any and all rights associated with those copyrights.

The district court found that because the assignment did not specifically transfer the assignor’s right to causes of action for prior infringements, the LLC lacked standing to challenge infringements pre-dating the assignment. The district court therefore never reached the merits of the copyright claim.

On appeal, the Fifth Circuit first reviewed the standing issue to determine if the LLC owned the copyrights at the time of the alleged infringement or if the right to vindicate prior infringements had been effectively assigned to Ms. Ball. Reversing the district court’s ruling, the Court concluded that the LLC had standing to bring the suit as the actual copyright holder. The Court reasoned that § 411(b)(1), which provides that a registration with “inaccurate information” can support an infringement action [...]

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Employee Agreement of What “Shall Be” is Future Promise, Not Present Assignment

By on Aug 12, 2021
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The US Court of Appeals for the Federal Circuit concluded that university bylaws did not automatically effectuate a present automatic assignment of patent rights and affirmed the district court’s denial of a motion to dismiss for lack of standing by the transferee. Omni MedSci, Inc. v. Apple Inc., Case No. 20-1715 (Fed. Cir. Aug. 20, 2021) (Linn, J.) (Newman, J., dissenting).

Upon joining the faculty of the University of Michigan, Dr. Mohammed Islam executed an employment agreement assenting to abide by the university’s bylaws. The bylaws provide, in relevant part, that patents obtained by university staff that are supported directly or indirectly by university funds “shall be the property of the University.” In 2012, Dr. Islam took an unpaid leave of absence and filed several provisional patent applications. After he returned to the university in 2013, he filed non-provisional patent applications claiming priority to the 2012 provisional applications. Once those applications issued as patents, he assigned the patent rights to the plaintiff, Omni MedSci.

In 2018, Omni initiated a patent infringement action against Apple asserting certain patents, including one in the family of patents that Islam assigned to Omni. Apple moved to dismiss, arguing that Omni lacked standing to assert the patents-in-suit because the university—not Omni—owned the patents-in-suit. Apple argued that the university’s bylaws automatically transferred legal title to Dr. Islam’s patents to the university, leaving Dr. Islam with nothing to assign. Therefore, Omni had no standing to assert the patents.

The US District Court for the Eastern District of Texas denied the motion to dismiss and transferred the action to the Northern District of California. The California court certified the standing question to the Federal Circuit.

In this interlocutory appeal, the Federal Circuit considered whether the university bylaws automatically assigned the patent rights to the university. The Court explained that a patent assignment clause may presently assign a to-be-issued patent automatically—in which case no further acts to effectuate the assignment are necessary—or may merely promise to assign the patent in the future. The issue in the appeal was which type of assignment was intended by the “shall be the property of the University” language in the bylaws—i.e., whether it was “a statement of an intended outcome [or] a present assignment.” Analyzing the university bylaws, the Court agreed with the district court that the bylaws did not automatically assign the patent rights to the university and therefore did not negate Dr. Islam’s assignment of the patent rights to Omni.

The Federal Circuit concluded that the bylaw language “is most naturally read as a statement of intended disposition and a promise of a potential future assignment, not as a present automatic transfer. … It does not purport to effectuate the present transfer of a present or future right.”

In dissent, Judge Pauline Newman noted that at the district court, Dr. Islam only argued that he was not subject the bylaw obligation since the patent applications were filed without university support. However, the district court did not rule on that issue and [...]

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Can’t Camouflage Express Trademark Contract Terms

By on Mar 17, 2021
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Addressing a range of trademark licensing issues, including discretionary approval, exculpatory contract clauses and third party beneficiary standing, the US Court of Appeals for the Federal Circuit affirmed a lower court’s grant of summary judgment to the US Army, finding that the Army abided by the terms of a trademark licensing agreement with a brand management company that sold clothing bearing the Army logo. Authentic Apparel Grp., LLC v. United States, Case No. 20-1412 (Fed. Cir. Mar. 4, 2021) (Lourie, J.)

In a 2010 licensing agreement, the Army granted Authentic Apparel, a brand management company that licenses merchandise, a non-exclusive license to manufacture and sell clothing bearing the Army’s trademarks in exchange for royalties. The licensing agreement gave the Army sole and absolute discretion on whether to approve any products and marketing materials bearing the Army’s trademarks. The licensing agreement also included exculpatory clauses exempting the Army from liability for exercising this discretion. From 2011 to 2014, Authentic submitted 500 requests for product approval, and the Army disapproved of only 41. After a series of late or unpaid royalty payments, Authentic sent notice that it would not pay 2014 royalties. The Army then terminated the license to Authentic. In 2015, Authentic and its chairman, Ron Reuben, sued the US government for breach of contract of the licensing agreement. The alleged breaches included denial of the right to exploit the goodwill associated with the Army’s trademarks, refusal to permit Authentic to advertise its contribution to certain Army recreation programs, delay of approval for a financing agreement for a footwear line, and denial of approval for advertising featuring the actor Dwayne “The Rock” Johnson. The Court of Federal Claims granted summary judgment to the US government and dismissed Reuben as a co-plaintiff for lack of standing. Authentic appealed.

The two main issues on appeal were whether Authentic provided sufficient evidence to show there was a genuine dispute of material fact that the Army breached the terms of its contract or any implied duty of good faith, and whether Reuben was a third party beneficiary to have standing as a plaintiff to the suit.

As to the first issue, the Federal Circuit affirmed the lower court’s grant of summary judgment for the government because Authentic was unable to provide sufficient evidence that the Army breached the trademark licensing agreement. The Court found that:

The contracting parties contemplated the terms of the contract and voluntarily decided to include express language of broad discretionary approval and exculpatory clauses exempting liability for disapproval, and therefore they should be held to the express terms for which they bargained.

The Army did not act unreasonably or violate its duty of good faith and fair dealing in exercising its discretion because it did approve more than 90% of Authentic’s products.

Authentic’s argument that the Army’s discretion was too broad and restricted Authentic’s use of the trademarks to solely “decorative purposes” was without merit because (1) the Court was not evaluating the validity of the trademarks here, (2) Authentic still [...]

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Trademark Cancellation Is Appropriate Sanction for Misconduct

By on Nov 4, 2020
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In upholding a grocery store chain’s standing to petition for cancellation of a US trademark registration, the US Court of Appeals for the Federal Circuit affirmed the Trademark Trial and Appeal Board’s (TTAB’s) express authority to impose cancellation of a trademark by default judgment as a sanction in a TTAB proceeding. Corcamore, LLC v. SFM, LLC, Case No. 19-1526 (Fed. Cir. Oct. 27, 2020) (Reyna, J.).

SFM owns US federal trademark registrations for the mark SPROUTS for use in connection with its retail grocery store services. SFM filed a petition to cancel Corcamore’s US trademark registration for the mark SPROUT for use in connection with vending machine services, alleging a likelihood of consumer confusion with SFM’s prior trademark rights. The TTAB denied Corcamore’s motion to dismiss the cancellation petition for lack of standing. Relying on Empresa Cubana del Tabaco v. General Cigar Co., the TTAB confirmed SFM’s standing based on its “real interest” in the cancellation petition and a “reasonable belief of damage” caused by the continued registration of Corcamore’s SPROUT trademark.

Following the TTAB’s denial of its motion to dismiss, Corcamore undertook a series willful, bad-faith procedural maneuvers that resulted in two separate sanctions. When Corcamore’s further procedural misconduct violated both sanctions orders, the TTAB entered default judgment cancelling Corcamore’s SPROUT trademark registration. Corcamore appealed.

On appeal, Corcamore alleged that the TTAB (1) erred in applying Empresa Cubana rather than the Supreme Court of the United States’ Lexmark v. Static Control framework in affirming SFM’s standing, and (2) abused its discretion in granting default judgment as a sanction. On the issue of standing, the Federal Circuit rejected the TTAB’s “unduly narrow” conclusion that the Supreme Court’s Lexmark framework was inapplicable, since Lexmark related to a claim of false advertising under § 1125(a) of the Lanham Act, while Empresa Cubana addressed the right to bring a cancellation proceeding under § 1064. The Federal Circuit concluded that Lexmark applied to § 1064 and § 1125(a) because both are statutory causes of action. Nevertheless, the Court found no meaningful substantive difference between the analytical frameworks for standing expressed in Lexmark and Empresa Cubana, and found that the Lexmark “zone-of-interests” proximate cause analysis and the “real interest” and “reasonable belief of damage” requirements under Empresa Cubana similarly provided a right to bring a cause of action. As such, the Court ultimately agreed with the TTAB’s conclusion that SFM’s pleaded allegations of a likelihood of consumer confusion based on a similarity of the parties’ SPROUTS and SPROUT trademarks, and their respective goods and services, were sufficient to demonstrate a reasonable belief of damage under Empresa Cubana and thus supported the right to challenge Corcamore’s registered trademark via cancellation.

With regard to the TTAB’s grant of default judgment, Corcamore did not challenge the TTAB’s express authority to grant default judgment as a sanction under 37 CFR § 2.120(h) and Fed. R. Civ. P. 37(b)(2). Instead, Corcamore argued that the TTAB had no factual or legal basis to enter default judgment in the first [...]

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Define Frustration: Appealing from Decision in Suit Against Co-Owner’s Wholly Owned Subsidiary with Major Issues Still Undecided

By on Oct 22, 2020
Posted In

The US Court of Appeals for the Federal Circuit vacated a grant of summary judgment of non-infringement and remanded for resolution of numerous factual issues in a case addressing “extremely frustrating” issues involving the litigant’s failure to differentiate statutory prerequisites for bringing suit under 35 USC §262 and Article III standing, waiver of a co-owner’s right to refuse to join a patent enforcement action, and the existence of an express or implied license. AntennaSys, Inc. v. AQYR Techs., Inc., Case No. 19-2244 (Fed. Cir. Oct. 7, 2020) (O’Malley, J.).

AntennaSys and Windmill International are co-owners of the patent in suit. AntennaSys and Windmill entered into a license agreement pursuant to which Windmill acquired an exclusive license to AntennaSys’s one-half interest in the patent in two separate markets. In exchange, AntennaSys was entitled to a royalty of 3% of gross sales. Windmill was also required to create a wholly owned LLC, GBS Positioner, which would own both the license interest and Windmill’s ownership interest in the patent. In the event that Windmill failed to meet the minimum sales targets, the exclusive license became non-exclusive and either party was granted the right to commence a lawsuit against “third party” infringers.

Windmill did not meet its sales targets. AntennaSys subsequently brought suit against AQYR Technologies, a wholly owned subsidiary of Windmill, for patent infringement and several state-law claims. The suit named Windmill as a co-defendant. Following claim construction, AntennaSys conceded that it could not prevail on its patent infringement claim under the court’s construction of one of the claim terms. In an apparent attempt to moot the affirmative defenses of invalidity and unenforceability, AntennaSys sought summary judgment of non-infringement, which the district court granted. Additionally, after a hearing where AntennaSys admitted that its state law claims were dependent on the success of its patent infringement claim, the court entered judgment in favor of defendants on the state law claims. AntennaSys appealed.

AntennaSys challenged the district court’s claim construction. Windmill and AQYR countered that the Federal Circuit need not reach the merits because AntennaSys “lacks standing” to bring an infringement action in federal court absent joining co-owner Windmill as a co-plaintiff.

The Federal Circuit agreed that the need to join Windmill as a co-plaintiff was a threshold question, but stressed that the issue did not affect AntennaSys’s Article III standing. Instead the issue stemmed from AntennaSys’s ability to satisfy the statutory prerequisites for bringing an infringement action. Under 35 USC § 262, each joint owner of a patent may make, use, offer to sell, or sell the patented invention without the consent of, and without accounting to, the other owners. Furthermore, in order to bring an action for infringement, all co-owners must be joined as plaintiffs. The Court acknowledged two exceptions to this rule: (1) when any patent owner has granted an exclusive license, and (2) when a co-owner waives its right to refuse to join an infringement action.

As the license in this case had morphed into non-exclusive status, the question became whether [...]

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