SoCal IP Law Group

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Monthly Archives: June 2011

SoCal IP Institute :: June 27, 2011 :: Franchise Protection Laws Applicable to the Girl Scouts and Naked Licensing

We will be discussing two 7th Circuit cases next week.  In the first, Judge Posner finds that a local Girl Scout chapter that was slated for combination with two other girl scout chapters by the national Girl Scout organization could oppose that combination on the basis of a Wisconsin fair-dealership law.  The second case involves abandonment of a trademark for failure to maintain control of the mark. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, June 27, 2011.  Brief synopses of the cases are presented below.

Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., No. 10-1986 (7th Cir. May 31, 2011) (attached).  In this case, the local Girl Scout chapter in Manitou, Wisconsin sued the national organization to stop the dissolution and combination of their chapter with two other nearby chapters.  It appears that the national Girl Scout organization was of the opinion that this would either aid in marketing efforts surrounding the sale of Girl Scout cookies by pooling resources or that it would aid in recruiting and maintaining more ethnically diverse Girl Scout chapters.  Judge Posner appeared to doubt that either reason was true.

The local chapter alleged that the attempted dissolution violated Wisconsin’s “fair-dealership” law that was seemingly desired to ensure that national organizations deal fairly with local franchises such as fast food restaurants and car dealerships.  The district court granted the national organization’s summary judgment motion because, it said, application of the law would violate the national organization’s free expression protections granted by the First Amendment in promoting ethnic diversity. The national Girl Scout organization accepted and argued this reasoning on appeal.  Judge Posner dismissed this basis as having no bearing on the combination (or non-combination) of multiple chapters.  The district court decision was reversed with an instruction to grant the local chapter’s motion for summary judgment that making the change violated the Wisconsin fair dealership law and affirmed the dismissal of several of the local chapter’s common law claims.

Eva’s Bridal LTD. v. Halanick Enterprises, Inc., No. 10-2863 (7th Cir. May 10, 2011) (attached). Eva’s Bridal was opened in 1966 by Said and Nancy Ghusein in Chicago. Over time, other locations were opened by relatives with the couple’s approval.  One location was sold to Nayef Ghusein for $10 and an agreement to pay $75,000 a year for the use of the “Eva’s Bridal” name and marks.  This agreement expird in 2002.  In 2007, Eva’s Bridal sued Nayef for use of the trademark without payment or a license.

The district court dismissed the case for “failure to exercise reasonable control over the nature and quality of the goods, services or business on which the mark is used by the licensee,” so-called “naked licensing” of the mark.  This resulted in abandonment of the mark.  On appeal, Eva’s Bridal argued that they never had any concern about the quality of the goods being sold under the mark.  Nayef utilized all the same designers and products that they had utilized in their own stores for years.  Judge Easterbrook pointed out that this demonstrates a failure to understand the term “quality” in the phrase “quality control”.  The relevant issue is consistency and the control required by the mark owner to maintain that consistency, not the actual quality of the products.  The required control is sufficient if it “insure[s] that the licensee’s goods or services would meet the expectations created by the presence of the trademark.”  That level of control must remain with the trademark owner or the mark will become abandoned.  The district court’s decision was affirmed.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, June 27, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

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SoCal IP Institute :: June 20, 2011 :: Induced Infringement and Means-Plus-Function Terms

We will be discussing two recent cases in the coming week’s SoCal IP Institute.  The first sets forth the standard for “willful blindness” in situations of induced infringement.  The second has to do with the application of 35 U.S.c. 112, paragraph 6 to claims. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, June 20, 2011.  Brief synopses of the cases are presented below.

Global-Tech Appliances, Inc. et al. v. SEB S.A., No. 10-6 (U.S. May 31, 2011) (attached).  SEB created a deep fryer and began selling the deep fryer in the U.S.  SEB obtained a patent on it’s fryer.  Pentalpha purchased an SEB fryer outside of the U.S., removed the cosmetic features of the fryer and asked an attorney to conduct a right-to-use investigation of their derivative fryer. Pentalpha is a wholly-owned subsidiary of Global-Tech.  The attorney did not find SEB’s patent during the search and Sunbeam began selling Pentalpha’s fryer in the U.S.  The jury found for SEB on an induced infringement theory saying that Pentalpha knew or should have known that their actions would induce actual infringement.  There was no evidence that Pentalpha knew of the SEB patent before it received notice of a suit by Sunbeam, there was adequate proof that it deliberately disregarded a known risk and that disregard is sufficient as “actual knowledge”.

The Supreme Court disagreed with the basis of the holding, but affirmed the result.  Pentalpha’s intentional avoidance of knowledge of critical facts is sufficient to constitute “actual knowledge” for induced patent infringement.  In particular, a defendant that subjectively believes there is a high likelihood that a fact exists and who takes deliberate actions to avoid learning of that fact are sufficient to support a finding of willful blindness surpassing recklessness and negligence.  The Federal Circuit’s opinion was not based upon this understanding of “willful blindness”, but the Supreme Court found that the evidence in the record nonetheless supported the the appropriate standard and affirmed.

Inventio AG v. ThyssenKrupp Elevator Americas Corp., No. 0210-1525 (Fed. Cir. June 15, 2011) (attached).  Inventio filed a patent suit asserting two patents related to a “modernized elevator system”.  In particular, as a user calls an elevator, the patent disclosed a system wherein the user could input the desired destination floor as well.  The district court granted ThyssenKrupp’s motion for summary judgment of invalidity on the basis that the limitations “modernizing devices” and “computing unit” in two asserted patents failed the written description requirement because they were means-plus-function limitations without corresponding structure in the specification.

The Federal Circuit disagreed with the characterization of these limitations are means-plus-function and reversed.  In particular, the “modernizing device” was disclosed in one of the figures of the patents including a number of elements such as a processor, a signal generator, a converter, memory and a signal receiver.  In addition, its capabilities were described in the specification.  All of these facts support the conclusion that the “modernizing device” was not merely a functional limitation, but that it was a physical element within the system described. Similarly, the physical structure and function of the “computing unit” were also described.  Accordingly, neither limitation was a means-plus-function term.  The decision was reversed and remanded to the district court for further proceedings.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, June 20, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

SoCal IP Institute :: June 13, 2011 :: i4i’s Presumption of Validity and The Bayh-Dole Act

We will be discussing two recent Supreme Court cases.  The first maintains the standard of proof that must be met by a defendant in seeking to invalidate a patent.  The second concerns the scope of the interest retained by an inventor in an invention subject to the Bayh-Dole Act. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, June 13, 2011.  Brief synopses of the cases are presented below.

Microsoft Corp. v. i4i Limited Partnership et al., No. 10-290 (U.S. June 9, 2011) (attached). Microsoft was accused of infringing i4i’s patent on an improved method of editing computer documents.  In response to this suit, Microsoft argued at trial that i4i sold a computer software called “S4” in the U.S. embodying the patent more than a year prior to the filing of the application that became the at-issue patent.  i4i disputed Microsoft’s assertion that S4 embodied the patent.

At trial, Microsoft sought a jury instruction that the invalidity defense may be proven by a preponderance of the evidence.  The district court rejected this proposed instruction.  The jury found that Microsoft willfully infringed and did not find the patent invalid.  Microsoft appealed and the Federal Circuit affirmed.  On appeal to the Supreme Court, the Federal Circuit decision was affirmed.  In essence, the majority opinion indicated that the Federal Circuit’s understanding of the burden required by 35 U.S.C. Section 282 has not changed in more than 100 years.  In the alternative, Microsoft argued that with regard to evidence not before the PTO during examination, the preponderance standard should apply.  The Court disagreed stating that there are no caveats to the presumption of validity in the statute and the Court will not impose them.  Finally, the Court indicated that it sees no reason to alter the standard and suggested that such requests are more appropriately within the purview of Congress.

Stanford Univ. v. Roche Molecular Systems, Inc. et al., No. 09-1159 (U.S. June 6, 2011) (attached).  Stanford worked with Cetus (later purchased by Roche) and Dr. Holodniy to conduct research pertaining to a procedure for measuring the amount of HIV present in a patient’s blood.  Eventually, Stanford obtained three patents on the commercialized embodiment of the procedure.  Portions of the research were funded by the National Institutes of Health.  As a result, the Bayh-Dole Act applied to grant the U.S. Government an interest in the resulting patents.  Stanford elected to retain the patents, notified the Government and granted it a license.

Stanford sued Roche when it began selling HIV kits that allegedly infringed its three patents.  Roche responded that Stanford lacked standing because Holodniy’s agreement to assign to Cetus (coexistent with an agreement to assign to Stanford) granted it co-ownership in the patents.  The District court agreed with Stanford,  the Federal Circuit reversed finding that Holodniy’s agreement with Cetus was valid, even if the Government still retained an interest in the patents.  Further, the Federal Circuit found that the Bayh-Dole Act did not void an inventor’s rights in a federally funded invention.  The Supreme Court agreed with the Federal Circuit.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, June 13, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

SoCal IP Law Institute :: June 6, 2011 :: Therasense – Inequitable Conduct

After a week away, we will be discussing the Therasense case and its impact on inequitable conduct in our weekly SoCal IP Institute meeting on Monday, June 6, 2011.  A brief synopsis of the case is presented below.

Therasense, Inc. v. Becton, Dickinson and Co., 2008-1511, -1512, -1513, -1514, -1595 (Fed. Cir. May 25, 2011) (attached).  Becton brought suit against Abbott seeking a declaratory judgment that it did not infringe two Abbott patents.  In response, Abbott countersued alleging infringement of the two patents and a third patent.  At the district court, all claims of two of the patents were found not to be infringed.  In addition, all claims of one of those patents was found to be anticipated.  Claims 1-4 of the third patent were found to be obvious in view of two prior art references.  Finally, the third patent was also found to be invalid due to inequitable conduct.  In particular, Abbott had made directly conflicting arguments to the USPTO and the EPO during prosecution of the patent and its European counterpart, but not disclosed the EPO arguments during prosecution of the U.S. application.  The Northern District of California found this sufficient basis to support the inequitable conduct defense and invalidated the patent on that basis.

In an en banc decision on appeal, the majority opinion by Chief Judge Rader and joined by Judges Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Moore, O’Malley and Reyna set forth a new standard for inequitable conduct determinations.  The impetus for this new test was based on (1) the propensity of patent defendants to allege inequitable conduct on the “slenderist grounds” and to thereby overtax limited judicial resources with unlikely-to-succeed claims and (2) the large volume of largely-irrelevant prior art submitted to the PTO during prosecution in view of the specter of inequitable conduct claims in the future.  In view of these two facts, the majority opinion tightened both the intent and materiality prongs of the inequitable conduct test.  First, to prevail on an inequitable conduct claim, the accused infringer must prove by clear and convincing evidence that the patentee acted with specific intent to deceive the PTO.  This requires a knowing and deliberate decision to withhold a known material reference.  Second, the allegedly-withheld reference must be “but for” material to the patent application process.  This means that at least one claim would not not been allowed if the patentee had disclosed the reference to the PTO.  A single exception to the materiality standard exists in cases of “affirmative egregious” misconduct, such as falsifying affidavits submitted to the PTO or to court.

In view of the changes to the standards on both prongs of the inequitable conduct test, the Federal Circuit vacated the district court’s opinion and requested further proceedings consistent with the opinion.

Judge O’Malley’s concurrence-in-part and dissent-in-part essentially agreed with the majority opinion, but wished to express the belief that the so-called “tests” of the majority opinion and dissenting opinion both fail to provide district court judges with sufficient flexibility in a matter of equity to conform to the flexibility that relief in equity should embody.  Judge O’Malley proposed a more flexible test based upon “guidance” to a district court, not a rigid test.

The dissenting opinion by Judges Bryson, Gajarsa, Dyk and Prost argued that the “but for” materiality test was too inflexible and provided too much room for potentially small-scale fraud with no effect.  As an example, the dissenting opinion offered the scenario in which a patentee fails to submit a reference that was material.  The patent may issue, but the potential invalidity of the patent for inequitable conduct is the same result as the patentee would have if the reference were submitted and the patent found to be anticipated.  The dissent also was concerned about the majority opinion’s refusal to base the inequitable conduct standard on the PTO’s Rule 56 disclosure requirements.  It pointed out, most notably, that the PTO itself did not agree with the change to the materiality standard.  The dissent would essentially retain the prior test and make reference to the PTO’s own Rule 56.

The Amicus Brief submitted in this case by Steven C. Sereboff, Mark A. Goldstein and M. Kala Sarvaiya of SoCal IP Law Group on behalf of the Conejo Valley Bar Association may be found here.

All are invited to join us in our discussion of this case during the SoCal IP Institute meeting on Monday, June 6, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.