In High Point Design LLC v. Buyer's Direct, Inc., No. 12-1455 (Fed. Cir. Sept. 11, 2013), the Federal Circuit reversed the grant of SJ of patent invalidity based on obviousness and functionality, vacated the dismissal of trade dress claims, and remanded for further proceedings.
Buyer's Direct, Inc. ("BDI") is the owner of U.S. Design Patent No. D598,183 ("the '183 patent") and manufacturer of SNOOZIES® slippers, and High Point Design LLC ("High Point") manufactures and distributes FUZZY BABBA® slippers. After BDI sent a cease and desist letter to High Point asserting infringement of the '183 patent, High Point filed a DJ action alleging (1) that the manufacturing and sale of the accused slippers did not infringe the '183 patent, and (2) that the '183 patent was invalid and/or unenforceable. BDI counterclaimed for infringement of the '183 patent and the trade dress found in BDI's SNOOZIES® slippers. High Point moved for SJ of invalidity and noninfringement of the '183 patent and judgment on the pleadings with respect to BDI's trade dress claims. With its opposition to the motion, BDI included the declaration of an expert who opined that the '183 patent was not invalid because "tests for anticipation, functionality and obviousness have not been met." Slip op. at 6 (citation omitted).
The district court granted High Point's motion, finding that the '183 patent was obvious in light of the prior art, including two slipper models made by Woolrich ("Woolrich Prior Art"), and was primarily functional rather than ornamental. The district court rejected BDI's request to amend its pleadings and dismissed BDI's trade dress claims with prejudice, finding the trade dress claims inadequate as a matter of law for failure to sufficiently identify the trade dress at issue. BDI appealed.
On appeal, BDI challenged both the grant of SJ of invalidity and the dismissal with prejudice of its trade dress claims. Regarding obviousness, BDI contended that the district court erred by using the Woolrich Prior Art designs as primary references, because their design characteristics are not "basically the same as the claimed design," and by not identifying a motivation to modify the Woolrich Prior Art to achieve the "same overall visual appearance as the claimed design." Id. at 12 (quoting Durling v. Spectrum Furniture Co., 101 F.3d 100, 103 (Fed. Cir. 1996)).
"An inventor can, upon meeting all statutory requirements, obtain a design patent for 'any new, original and ornamental design for an article of manufacture . . . .' 35 U.S.C. § 171 (emphasis added). Based on this requirement, a design patent can be declared invalid if the claimed design is 'primarily functional' rather than 'primarily ornamental,' i.e., if 'the claimed design is dictated by the utilitarian purpose of the article.'" Slip op. at 18-19 (quoting L.A. Gear, Inc. v. Thom McAn Shoe Co., 988 F.2d 1117, 1123 (Fed. Cir. 1993) (internal quotation marks omitted)).
BDI also asserted that the district court failed to perform a proper obviousness analysis, because it (1) applied an "ordinary observer" standard rather than an "ordinary designer" standard; (2) failed to properly communicate its reasoning in either step of the obviousness analysis under Durling; and (3) did not address secondary considerations, including copying and commercial sales. First, the Court held that the district court erred in applying the ordinary observer standard rather than the ordinary designer standard, and in categorically disregarding BDI's expert declaration. The Court commented, "Although obviousness is assessed from the vantage point of an ordinary designer in the art, 'an expert's opinion on the legal conclusion of obviousness is neither necessary nor controlling.' That said, an expert's opinion may be relevant to the factual aspects of the analysis leading to that legal conclusion." Id. at 15-16 (quoting Avia Grp. Int'l, Inc. v. L.A. Gear Cal., Inc., 853 F.2d 1557, 1564 (Fed. Cir. 1988), abrogated on other grounds by Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc)).
The Court further held that the district court erred in its application of the two-step analysis set forth in Durling. Regarding the first part of the first step, the Court held that the district court erred by failing to translate the design of the '183 patent into a verbal description. The Court stated, "The closest to the necessary description was the [district] court's comment characterizing the design in the '183 patent as 'slippers with an opening for a foot that can contain a fuzzy (fleece) lining and have a smooth outer surface.'" Id. at 16 (citation omitted). The Court reasoned that this comment "represent[ed] 'too high a level of abstraction' by failing to focus 'on the distinctive visual appearances of the reference and the claimed design.'" Id. (quoting Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1331-32 (Fed. Cir. 2012)).
Regarding the second part of the first step, the Court held that the district court erred by failing to provide its reasoning, stating that absent such reasoning, it could discern how the district court concluded that the Woolrich Prior Art was "basically the same as the claimed design" such that either design could act as the primary reference. Id. at 17. The Court further held that there appeared to be genuine issues of material fact as to whether the Woolrich Prior Art designs were proper primary references. The Court noted that the district court did not address secondary considerations, and instructed that they should be addressed on remand. The Court reversed the grant of SJ of obviousness and remanded the case to the district court.
Regarding functionality, BDI argued that the district court erred by finding the claimed design invalid merely because the design contained elements that perform functions. The Court noted that in determining validity instead of assessing whether the claimed design was "primarily functional" or "primarily ornamental," the district court looked to whether the design's "primary features" can perform functions. Id. at 20. The Court held that the district court applied the incorrect standard and that a reasonable jury could, under the correct standard, find the '183 patent not invalid based on functionality. The Court thus reversed the district court's ruling that the '183 patent is invalid by reason of functionality. The Court reasoned, "[T]he fact that the article of manufacture serves a function is a prerequisite of design patentability, not a defeat thereof. The function of the article itself must not be confused with 'functionality' of the design of the article." Id. at 21 (alteration in original) (quoting Hupp v. Siroflex of Am., Inc., 122 F.3d 1456, 1460 (Fed. Cir. 1997)). Because the district court applied the incorrect standard and because a reasonable jury applying the correct standard could not find the '183 patent invalid based on functionality, the Federal Circuit reversed the district court's ruling.
With respect to the trade dress claims, BDI asserted that the district court improperly dismissed its trade dress claims because substantial discovery remained, and the amendments were neither futile nor prejudicial, and would not have delayed the procedural schedule. The Court noted that the parties focused on the standards they believed should apply to BDI's request to amend its pleadings, and agreed with High Point that the appropriate standard was the Rule 16(b) good cause requirement. The Court vacated and remanded for the district court to determine whether that standard could be satisfied given the "now-ongoing nature of this litigation." Id. at 24.
Judges: O'Malley, Schall (author), Wallach
[Appealed from S.D.N.Y., Judge Forrest]
This article previously appeared in Last Month at the Federal Circuit, October 2013.
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