Patents

Post-Bilski Decision Regarding Patent Eligibility for Medical Treatment Claims Deferred

Finding of Inequitable Conduct Reversed on Intent Prong

Double Patenting Sinks Gemzar® Method of Use Claims

Absence of a Claim Limitation Avoids Infringement

Prior Art Unlocks Patents for Being Obvious

Quickie Divorce Decree Resolves Patent Ownership and Standing Issue

Federal Circuit Denies Caraco's Petition for Rehearing En Banc

USPTO Updates § 101 Examination Guidelines

Claimed Function Must Be Present in the Accused Product to Infringe

Trademarks

Ninth Circuit Overturns Mattel Victory in Bratz Case

Two Generics Do Not Make a Trademark

Burden of Proving Nominative Fair Use is on the Plaintiff

Extraterritorial Application of the Lanham Act Is California Dreamin'

In the Third Circuit, All Lapp Factors Must Be Accounted For

Likelihood of Confusion Depends on Evaluation of All Factors

No Attorney's Fees for Defendant Who Did Not Prevail on the Merits

General Cigar "Restored" as Rightful Owner of COHIBA Cigar Mark

This Bud's for Budvar

Copyright

Assignment of Cause of Action—Not!

An Attorney Who Does Not Personally Sign a Vexatious Filing Is Not Personally Liable

Trade Secrets

Executive Temporary Injunction Against New Employment May Be Needed to Prevent "Likely" Disclosure

Patents / Inherency

Post-Bilski Decision Regarding Patent Eligibility for Medical Treatment Claims Deferred
Tianxin (Cynthia) Chen, Ph.D.

The U.S. Court of Appeals for the Federal Circuit expressed its belief in the continued validity of its "machine-or-transformation" test in wake of the Supreme Court's Bilski decision, but left the fight for the patent eligibility of medical treatment claims for another day. King Pharmaceuticals, Inc. v. Eon Labs, Inc. Case Nos. 09-1437, 1438 (Fed. Cir., Aug. 2, 2010) (Gajarsa, J.).

King owned two patents based on the discovery that the bioavailability of metaxalone (a muscle relaxant) was increased when the drug was ingested with food. One claim was directed to a method of increasing the bioavailability of the drug by administering a therapeutically effective amount of metaxalone with food. A second claim was directed to a similar method but recited an additional step of "informing" the patient about the benefit of taking metaxalone with food. This step presumably had the benefits of increasing the likelihood that the patient would ingest the drug with food and any potential placebo effect.

Certain prior art references had suggested taking metaxalone with food to decrease nausea but had not suggested that this would increase bioavailability. The Federal Circuit affirmed the district court's holding that the increased bioavailability was an inherent result of the prior art methods. Although the prior art may not have recognized this particular benefit of administration with food, it necessarily occurred when metaxalone was so administered. Thus, the Court found the first claim anticipated under the doctrine of inherency.

With respect to the second claim, the district court found the claim invalid under §101 because the informing step did not meet the machine-or-transformation test. On appeal, the Federal Circuit held that this was error because any patentable subject matter analysis must focus on the claim as a whole and not on one specific limitation. Citing to its Prometheus decision, which held that that methods of treatment are "always transformative" when a defined group of drugs is administered to the body—a decision now (along with the Classen case) on remand from the Supreme Court in the wake of Bilski—the Federal Circuit expressed its belief in the continued validity of the "machine-or-transformation" test, noting that the Supreme Court's Bilski decision "rejected the exclusive nature of our test, but not the wisdom behind it."

Nonetheless, the Federal Circuit concluded that this case was not the proper vehicle to determine the patent eligibility of medical treatment claims. Instead, the Court found that even if the second claim satisfied §101, it did not meet the novelty requirement under §102. Because there was no "functional relationship" between the "informing" limitation and the increased bioavailability, the Court concluded that informing the patient of the benefits of the treatment regimen did not transform the process itself. That is, whether or not the patient was informed, the method remained the same. Drawing analogy to precedents that held a known product is not patentable by simply including "printed matter" describing the product, the Court concluded that the "informing" limitation did not impart patentability to an otherwise unpatentable claim.

Practice Note: Drafters of diagnostic or personalized medicine claims should be mindful of both §101 and §102 requirements. A prior art method cannot be rendered patentable (under §102) by simply adding an "informing" step that informs a patient of an inherent (but previously unknown) benefit or disease risk.

Patents / Inequitable Conduct

Finding of Inequitable Conduct Reversed on Intent Prong
Mary Boyle, Ph.D.

The U.S. Court of Appeals for the Federal Circuit reversed a finding of inequitable conduct that was based on alleged intent to deceive the U.S. Patent and Trademark Office (USPTO) regarding the content of two prior art references that were disclosed in the patent and prosecution history. Ring Plus, Inc. v. Cingular Wireless Corp., Case No. 09-1537 (Fed. Cir., Aug. 6, 2010) (Moore, J.). The panel also unanimously affirmed summary judgment of non-infringement.

The claims-in-suit were for a software-based algorithm and method for generating and delivering messages over a phone line while the phone is "ringing." This technology is generally used for delivering advertising or other sound content to a caller who is waiting on the line for a call to be answered.

The district court found inequitable conduct after a bench trial and declared the patent-in-suit unenforceable. The inequitable conduct allegations revolved around two prior art references, known as Sleevi and Strietzel. These references were disclosed in the "background" section of the patent application and also described in an amendment submitted during prosecution. The issue was whether statements made by the applicants to the effect that neither Sleevi nor Strietzel disclosed software (as opposed to hardware) to operate a telephone system were intentional misrepresentations. After the district court answered "yes" and found the patent unenforceable for inequitable conduct, Ring Plus appealed.

The Federal Circuit reversed. The Court agreed that the district court did not clearly err in finding that a person of ordinary skill in the art would have understood the references to disclose software-based algorithms and that the statement in the background of the application to the contrary was a misrepresentation. Because of the finding of a misrepresentation was upheld, the Court also concluded that a similar statement made in prosecution was outside the bounds of permissible attorney argument. Moreover, given the record evidence that these references were particularly relevant, the Federal Circuit also determined that the district court did not clearly err in finding that the misstatement was material.

However, the Federal Circuit rejected the district court's findings regarding intent. The district court relied heavily on its conclusion that the disclosures of software were unambiguous. The Federal Circuit disagreed and found no record evidence that the disclosures were unambiguous to a person of skill in the art. The prosecuting attorney testified that he believed during prosecution that Sleevi and Strietzel disclosed hardware, not software. He further testified to his belief that neither reference proposed software to operate the telephone systems. The defendant did not present any testimony in rebuttal. The Court concluded that the attorney's testimony supported the reasonable inference that the applicants believed that the ambiguous disclosures in the prior art references did not disclose software. Moreover, the Court concluded that other evidence, such as the applicants' statement that they examined the references "very carefully," did not establish intent. Therefore, the Federal Circuit held that the district court clearly erred in finding clear and convincing evidence of deceptive intent.

Patents / Double-Patenting

Double Patenting Sinks Gemzar® Method of Use Claims
Shon Lo

Affirming the district court, the U.S. Court of Appeals for the Federal Circuit reiterated its precedent that "a claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use" and confirmed that its holding "extends to any and all such uses disclosed in the specification of the earlier patent." Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co., Case No. 10-1105 (Fed.Cir., July 28, 2010) (Prost, J.).

Eli Lilly received a. patent in 1984 for the compound gemcitabine (marketed as the cancer treatment Gemzar®). The patent was a continuation-in-part (CIP) of an earlier application that described the utility of gemcitabine for antiviral purposes only. Part of the disclosure added by the CIP was a description of gemcitabine's utility as an anti-cancer agent. On the same day as the CIP was filed, Lilly filed a separate application with claims directed to a method of treating cancer with a class of compounds that included gemcitabine, which eventually issued as the patent in suit. Sun Pharmaceutical filed an action for a declaratory judgment that the method of treatment patent was invalid, and not infringed by Sun's generic version of Gemzar®. The district court granted partial summary judgment that the claims of the method of use patent are invalid for obviousness-type double patenting over the CIP patent. Lilly appealed.

In affirming, the Federal Circuit rejected Lilly's arguments that the Court's earlier decisions in Geneva Pharmaceuticals v. GlaxoSmithKline and Pfizer, Inc. v. Teva Pharmaceuticals should be limited to their specific facts, or at least to cases in which the earlier patent disclosed only a single use for the claimed compound. The Court also rejected Lilly's argument that the district court erred in considering the specification of the CIP, as opposed to the specification of an earlier application, to determine what uses for gemcitabine had been disclosed. The Court noted it had previously and expressly held that "where a patent claims a compound, a court performing and obviousness-type double patenting analysis should examine the specification to ascertain the coverage of the claim" and explained that "the specification that must be considered is that of the issued patent," as opposed to "earlier drafts of the patent disclosure and claims."

Patents / Claim Construction

Absence of a Claim Limitation Avoids Infringement
Aamer S. Ahmed

Reversing a ruling of infringement, the U.S. Court of Appeals for the Federal Circuit found the defendant's accused syringe devices lacked a structural element recited in the claims and the district court had incorrectly construed the patent claims. Becton, Dickinson and Company v. Tyco Healthcare Group, L.P., (now known as Covidien PLC) Case Nos. 09-1053, -1111 (Fed. Cir., July 29, 2010) (Mayer, J.) (Gajarsa, J., dissenting).

Becton, the assignee of the patent in suit directed to a safety shield needle device, filed suit against Tyco, alleging infringement. In its first set of interrogatories, Tyco called for an infringement claim chart explaining how each claim element was met by each accused Tyco product. In response, Becton identified hinges in Tyco's devices as satisfying the claimed "spring means" limitation. Becton's expert report explained how the hinges in the hinged arm of Tyco's devices functioned as springs. Tyco then moved for summary judgment, arguing that the spring means limitation required a spring separate from the hinged arm structure, which was another limitation recited in the claims. After the district court denied Tyco's motion, the jury found literal infringement. Tyco then moved for a new trial, arguing that Becton had improperly changed its theory of infringement during trial. The district court agreed and ordered a new trial. Prior to the start of the second trial, Tyco filed a reexamination for the patent based on a Dutch patent publication. During reexamination, the examiner found the term "spring means" was a means-plus-function limitation and required the spring means to be a separate structural element from the hinged arm. However, the district court denied Tyco's motion to adopt the U.S. Patent and Trademark Office's construction. The jury again found infringement and the district court denied Tyco's request for a judgment as a matter of law (JMOL). Tyco appealed.

The Federal Circuit reversed, agreeing with Tyco that its products did not literally infringe the patent because they lacked the required spring member. The Court concluded that Becton's argument that the spring means and the hinged arm can be the same structure "renders the asserted claim nonsensical," because the claim recites the spring means as being connected to the hinged arm.

Judge Gajarsa dissented, stating that the majority avoided the issue of whether 35 U.S.C. § 112, ¶ 6 governed the claim construction of the "spring means" limitation. In Judge Gajarsa's view, the use of two terms in a claim required that they connote a different meaning, but not necessarily a different structure, and that, in the absence of evidence requiring two structures, the claim language can be interpreted broadly to read upon an accused product containing the two claim terms, regardless of whether those elements are encompassed in one or two structures.

Patents / Obviousness

Prior Art Unlocks Patents for Being Obvious
Mark R. Anderson

Reversing a jury verdict that found three patents covering locks for trailer towing were not obvious in view of the prior art, the U.S. Court of Appeals for the Federal Circuit held that the prior art rendered the patents-in-suit obvious as a matter of law. Wyers v. Master Lock Co., Case No. 09-1412 (Fed. Cir., July 22, 2010) (Dyk, J.) (Linn, J., concurring).

Wyers brought a patent infringement action against Master Lock, asserting infringement of three patents relating to hitch pin locks that secure a draw bar to a hitch receiver of a vehicle for towing a trailer. A jury found that Master Lock failed to show the patents were obvious, and the district court declined to grant Master Lock's request for a judgment as a matter of law (JMOL) that the patents were obvious. Master Lock appealed.

Invoking the time honored Graham v. John Deere analysis, the Federal Circuit first looked to differences between the claimed inventions and the prior art. Two of the patents asserted claimed improvements in the form of a series of selectable sleeves to allow the hitch pin lock to be used with trailer hitch receivers that have different sized apertures, while the third asserted patent claimed an external seal to prevent foreign materials from entering the lock. During the trial, Wyers admitted that prior art hitch pin locks showed all of the limitations except for the selectable sleeves and the external seals. However, selectable sleeves and external seals were found in other (non-hitch-pin) prior art. Reiterating that prior art is analogous if it is from the same field or is reasonably pertinent to the problem the inventor is looking to solve, the Court determined that several prior art patents for locks or for tow hitches were pertinent prior art.

Next the Federal Circuit analyzed whether there was motivation to combine the teaching of the prior art references. Citing KSR, the panel found that summary judgment, or JMOL, can be appropriate for a determination of the motivation to combine references and that logic, judgment and common sense can replace the need for expert testimony for a motivation to combine references in some straightforward technologies. In this instance, the panel found that combining of the prior art references in a manner that would teach all of the limitations of the asserted patents "was a matter of common sense" and that a skilled artisan "would have perceived a reasonable expectation of success" in doing so.

Wyers argued that secondary considerations of non-obviousness supported the jury verdict. However, the Federal Circuit noted that a nexus is required between the commercial success and the claimed invention, and Wyers had not shown such a relationship. Wyers also did not establish copying, as the evidence did not show Master Lock was trying to replicate a specific product. Finally, the Federal Circuit noted that secondary considerations of non-obviousness can not overcome a strong prima facie case of obviousness.

In a concurring opinion Judge Linn noted that obviousness is a question of law based on underlying factual findings. When a jury is not given special interrogatories on obviousness, a court must presume certain findings of fact based on the jury's decision. Thus, the appellate court must first presume that the jury resolved factual disputes in favor of the winning party and accept those findings if supported by substantial evidence. As Judge Linn explained, the appellate court then performs a de novo review of the legal issues in light of the presumed factual findings.

Patents / Standing

Quickie Divorce Decree Resolves Patent Ownership and Standing Issue
Bryan James

The U.S. Court of Appeals for the Federal Circuit gave preclusive effect to a California divorce decree adjudicating ownership rights to the patents-in-suit and affirmed the district court's denial of a defendant's motion to dismiss the case for lack of standing. Enovsys LLC v. Nextel Communications, Inc., et al., Case No. 09-1167 (Fed. Cir., Aug. 3, 2010) (Prost, J.) (Newman, J., concurring-in-part, dissenting-in-part).

Mundi Fomukong is co-inventor of the two patents-in-suit covering systems for disclosing a mobile device's location only to authorized requests. He conceived the inventions and filed the patent applications while married to Fonda Whitfield in California. One of the patents had already issued when the couple filed for divorce in 2001, while the other issued several months after the divorce was finalized in October 2002.

In 2006, Fomukong and his co-inventor formed Enovsys and assigned ownership of the patents to the company. Enovsys subsequently filed a patent infringement suit against Sprint Nextel. Sprint Nextel moved to dismiss the case because Enovsys had failed to join Whitfield, who Sprint Nextel claimed still maintained an ownership interest in the patents-in-suit based on California's community property laws. Whitfield had also assigned her interest in the patents to Sprint Nextel. The district court denied Sprint Nextel's motion and concluded that Enovsys had full legal title to the patents. At trial, the jury found that Sprint Nextel infringed the patents in suit and that the patents were not invalid. Sprint Nextel appealed denial of its motion to dismiss for lack of standing, and denial of its post-verdict judgment as a matter of law (JMOL).

The Federal Circuit affirmed, including on the issue of ownership and standing. Fomukong and Whitfield divorced each other by way of summary dissolution—California's "quickie" divorce—in which there is no hearing or trial. Parties to summary dissolution must either affirm that they have no community property or sign a property settlement agreement listing all community assets and liabilities. Fomukong and Whitfield both checked the box on the petition stating they had no community property and failed to attach a property settlement agreement to their divorce petition. After a six-month waiting period, both parties signed the request to finalize the divorce.

Sprint Nextel argued that because the divorce decree did not expressly adjudicate community property rights, Whitfield maintained her ownership interest in the patents. The Federal Circuit disagreed, holding that the presumption that the patents were community property was overcome by the jointly filed divorce petition which affirmatively stated that Fomukong and Whitfield had no community property. The divorce decree, therefore, conclusively settled patent ownership in Fomukong's favor, even though silent on the issue. The Court further held that the state divorce decree is entitled to res judicata effect and rejected Sprint Nextel's attempt to relitigate Whitfield's property rights to the patents. Therefore, Whitfield retained no ownership interest, and Enovsys had standing to bring and maintain the suit.

Patents / Hatch-Waxman

Federal Circuit Denies Caraco's Petition for Rehearing En Banc
Clifford R. Lamar II (Dale)

In a closely watched case, the U.S. Court of Appeals for the Federal Circuit denied Caraco's petition to rehear en banc its dispute with Novo Nordisk over the statutory construction of the "counterclaim provision" of the Hatch-Waxman Act (HWA). Judge Dyk joined Judge Gajarsa in dissenting from the per curiam decision to deny the en banc rehearing. Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., Case No. 10-1001 (Fed. Cir., July 29, 2010) (per curiam) (Dyk, J. and Gajarsa, J., dissenting).

In the original majority opinion, Chief Judge Rader reasoned that Congress enacted the counterclaim provision, 21 U.S.C. § 355(j)(5)(C)(ii), in direct response to the Court's decision in Mylan Pharmaceuticals v. Thompson, which held that generic drug manufacturers did not have a cause of action under the HWA to force the U.S. Food and Drug Administration (FDA) to correct "patent information" listed in the Orange Book. Therefore, the majority construed that provision narrowly to only remedy the defect brought to light in Mylan. Judge Dyk, dissenting, argued for a broader construction that would have provided a remedy for any incorrect information, including "use codes."

Dissenting in the present denial of en banc review, Judge Gajarsa argued that Congressional intent demanded the broader interpretation as articulated in Judge Dyk's prior dissent. Although the dispute was over the construction of the counterclaim provision, Judge Gajarsa argued that the original panel opinion actually nullifies the "carve-out provision" of 21 U.S.C. § 355(j)(2)(A)(viii). Thus, Judge Gajarsa argued that the opinion effectively eliminated the careful balance struck by Congress between innovator and generic pharmaceutical companies in the marketplace. Judge Gajarsa further argued that the opinion invalidated the FDA's effort to define "patent information" to include use codes.

According to Judge Gajarsa, Novo will likely be able to delay competition for Prandin® until 2018 by its submission of an overly broad use code for publication in the Orange Book, despite the drug composition being currently off-patent. Judge Gajarsa argues that this is an extension of Novo's monopoly beyond the scope of its patented methods of use and beyond clear Congressional intent.

Practice Note: This case leaves in place the "ministerial" function of the FDA in publishing without policing the contents of the Orange Book. Despite the warning in the dissent Caraco's position was hindered by its stipulation of infringement of U.S. Pat. No. 6,677,358 during the course of the infringement litigation. Generic pharmaceutical manufacturers may now be more hesitant to submit stipulations of infringement for a patented method of use and will now likely seek agreements from innovator drug companies to not amend use codes in a manner that will negatively impact any negotiated dismissals in Paragraph IV litigation.

Patents / Patent-Eligible Subject Matter (§ 101)

USPTO Updates § 101 Examination Guidelines
Eric M. Shelton

In response to the Bilski decision recently rendered by the Supreme Court of the United States (see IP Update, Vol. 13, No. 7), the U.S. Patent and Trademark Office (USPTO) published interim guidelines for examination of patent claims under § 101 in the Federal Register. The interim guidelines supplement previous examination instructions issued on June 28, 2010 (the same day of the Bilski decision) and August 2009 (see IP Update, Vol. 12 No. 9). The above guidance, along with a "quick reference sheet," is available online at http://www.uspto.gov/patents/announce/bilski_guidance.jsp.

The interim guidelines return the USPTO to determining whether claims are directed to an abstract idea. In reaching this determination, examiners are instructed to consider a number of factors the USPTO considers to be indicators of eligibility or ineligibility, a number of which extend beyond the machine-or-transformation test. However, the guidelines reflect a view at the USPTO that the machine-or-transformation test remains the most useful tool for determining eligibility of method claims, even if it is not the "exclusive" test. For example, the memorandum provided to the patent examining corps indicates that it is "in some rare cases, factors beyond those relevant to machine-or-transformation may weigh for or against a finding that a claim is directed to an abstract idea."

Factors identified beyond the machine-or-transformation test include whether a claim is directed to a practical application of a law of nature and whether a claim is a "mere statement of a general concept." According to the guidelines, a claim is more than a general concept if it describes a particular solution to a problem, tangibly implements a concept or if its performance is observable and verifiable. Examples of what the USPTO suggests are ineligible general concepts include basic economic practices or theories (such as hedging, insurance, financial transactions and marketing), basic legal theories (such as contracts) and instructing how business should be conducted. Applicants may rebut an examiner's determination with arguments and evidence.

Included in the Federal Register Notice is a request for public comments. In particular, the USPTO is interested in identifying claims that demonstrate exceptions to the machine-or-transformation test and how a narrower category of ineligible subject matter related to business methods might be defined. Public comments on the USPTO's post-Bilski patentable subject matter guidelines are due November 9, 2010.

Patent / Biotech

Claimed Function Must Be Present in the Accused Product to Infringe
Matthew Jones

Addressing the interpretation and effect of Article 9 of Directive 98/44/EC on the legal protection of biotechnological inventions (OJ 1998 L 213, 13) (the Directive), the European Court of Justice (ECJ) has held, inter alia, that the protection provided by a patent relating to genetic information does not extend to cover that genetic information as contained in soy meal, where it does not perform the function for which it is patented, even though it did perform that function previously in the soy plant itself. Monsanto Technology LLC v. Cefetra BV, Cefetra Feed Service BV, Cefetra Futures BV and State of Argentina and Monsanto Technology LLC v. Vopak Agencies Rotterdam BV and Alfred C. Toepfer International GmbH (Case No. 428/08) (EU Ct. of Justice, Luxembourg).

Monsanto is the proprietor of a European patent relating to glyphosate tolerant 5-enolpyruvylshikimate-3-phosphate synthases. The patent describes certain enzymes that are not sensitive to the herbicide glyphosate (an ingredient in Roundup). Plants containing such enzymes survive exposure to glyphosate, whereas weeds are killed. Monsanto inserted genes for those enzymes into a soybean plant it called Roundup Ready (RR). RR soybean plants are resistant to Roundup.

Cefetra and Toepfer traded in soy meal prepared from RR soybean grown in Argentina, where there is no patent protection for the Monsanto invention. Monsanto applied for an injunction to the Court of the Hague to prevent what they argued was patent infringement. The Court of the Hague stayed the case and referred questions on the interpretation and effect of Article 9 of the Directive to the ECJ.

Article 9 of the Directive states "The protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material ... in which the product is incorporated and in which the genetic information is contained and performs its function."

In response to four specific questions referred to it by the Court of the Hague, the ECJ held as follows:

1. Article 9 of the Directive is to be interpreted as not conferring patent right protection in circumstances such as those of the case in the proceedings in question, in which the patented product is contained in the soy meal, where it does not perform the function for which it is patented, but did perform that function previously in the soy plant, of which the meal is a processed product, or would possibly again be able to perform that function after it had been extracted from the soy meal and inserted into the cell of a living organism.

2. Article 9 of the Directive effects exhaustive harmonization of the protection it confers, such that it precludes national patent legislation from offering absolute protection to the patented product as such, regardless of whether it performs its function in the material containing it.

3. Article 9 of the Directive precludes the holder of a patent issued prior to adoption of the Directive from relying on the absolute protection for the patented product accorded to it under the national legislation then applicable.

4. Articles 27 and 30 of the TRIPS Agreement do not affect the interpretation given of Article 9 of the Directive.

Trademarks

Trademarks / Copyrights

Ninth Circuit Overturns Mattel Victory in Bratz Case
Elisabeth (Bess) Malis

In a closely watched case having enormous financial implications, the U.S. Court of Appeals for the Ninth Circuit recently vacated all equitable relief awarded to a famed toy maker, finding that the district court abused its discretion by imposing an overbroad constructive trust and copyright injunction against the makers of the Bratz dolls. MGA Entertainment Inc. et al. v. Mattel, Inc. et al., Case No. 09-55673 (9th Cir., Jul. 22, 2010) (Kozinski, J.).

MGA Entertainment (MGA) and Mattel are competitors in the toy doll industry and have been embroiled in a long-running battle over ownership of the "Bratz" line of dolls. The Bratz were conceived and created by Carter Bryant, a former Mattel employee, who pitched the Bratz to MGA while still working for Mattel. Bryant created the concept of the dolls, the "Bratz" name and other character names (one of which MGA used), preliminary sketches and a sculpt (plastic doll body), all while employed by Mattel. Bryant later left Mattel and worked with MGA to develop the Bratz, which became a billion-dollar brand. When Mattel learned of Carter's involvement in the Bratz products, litigation ensued.

The district court bifurcated the trial into two phases, only the first of which has been tried. The first phase dealt solely with claims regarding ownership of the Bratz products. The jury ruled in favor of Mattel and awarded Mattel $10 million in damages. Based on the jury's findings, the district court imposed a constructive trust over all trademarks affiliated with the Bratz products. The district court also issued an injunction on the basis of copyright infringement, which prohibited MGA from producing or marketing any Bratz doll, or future dolls "substantially similar" to Bryant's sketches and sculpt. MGA appealed.

The Ninth Circuit reversed, finding that due to ambiguity in Bryant's employment agreement, the district court erred by holding that Bryant's ideas were clearly assigned to Mattel. In any event, the court also held that the constructive trust imposed by the district court was overbroad and an abuse of discretion, reasoning that it was inequitable to divest MGA of the entire Bratz trademark portfolio based on two names Bryant created while employed at Mattel. Rather, the Court found the portfolio's billion-dollar value was overwhelmingly the result of MGA's hard work.

As for Bryant's employment agreement with Mattel, the court found it was ambiguous as to whether it entitled Mattel to claim ownership of the copyrights to Bryant's sketches and sculpt, which were created during Bryant's personal time. The court found that the district court erred by granting summary judgment on this issue in favor of Mattel.

In addition, the Ninth Circuit disagreed with the district court's finding that the vast majority of Bratz dolls were "substantially similar" to Bryant's sculpt and preliminary sketches. Rather, the Court explained that the sculpt was entitled to only a "thin" copyright, as there are a limited ways of expressing a female doll body. Further, the Ninth Circuit noted that the district court failed to filter out unprotectable elements of Bryant's sketches when analyzing substantial similarity. The court stated that in order to prove copyright infringement, Mattel must show that the Bratz dollars are substantially similar to Bryant's sculpt and sketches, beyond similarities in unprotectable ideas.

Accordingly, the Ninth Circuit vacated the constructive trust and the copyright injunction and concluded that because most of the district court's errors appeared in the jury instructions, a significant portion of the jury verdict and damages award should be vacated as well. The case was remanded.

Trademarks / Generic Descriptive Marks

Two Generics Do Not Make a Trademark
Tyler J. Woods

The U.S. Court of Appeals for the Ninth Circuit vacated a preliminary injunction finding that the district court committed an error of law when it concluded that adding ".com" to the end of a generic term created a valid trademark worthy of a preliminary injunction. Advertise.com v. AOL Advertising, Inc., Case No. 10-55069 (9th Cir., Aug. 3, 2010) (Fletcher, J.).

In August 2009, AOL filed a complaint against Advertise.com alleging that Advertise.com infringed AOL's trademark registrations covering certain stylized representations of the mark ADVERTISING.COM. Upon motion by AOL, the district court enjoined Advertise.com from using "any design mark or logo that is confusingly similar to the stylized forms of AOL's ADVERTISING.COM marks" and from using the trade name ADVERTISE.COM or any other name confusingly similar to ADVERTISING.COM. The district court based its decision, in part, on the grounds that AOL was likely to show that the ADVERTISING.COM marks are descriptive (as opposed to generic) and therefore protectable under trademark law. Advertising.com appealed.

On appeal, AOL argued that the terms "advertising" and ".com," while generic independent of each other, were only descriptive when combined. The Ninth Circuit, analyzing the AOL mark by posing the questions "who-are-you/what-are-you" concluded that while ADVERTISING.COM did not indicate who ran the entity or where it came from, the name did indicate what the entity did. "When any online advertising company, including AOL's competitors, is asked the question 'what are you?' it would be entirely appropriate for the company to respond 'an advertising.com' or 'an advertising dot-com.'" The court also noted the use of "advertising" and ".com", as a combination in a dictionary to refer to internet advertising, as well as 32 separate domain names that used both "advertising" and ".com" (including "travel-advertising.com," "a-plusadvertising.com," and "domainadvertising.com") as evidence that the mark ADVERTISING.COM is generic. The Ninth Circuit cited to the Federal Circuit's decision In re Hotels.com (see IP Update, Vol. 12, No. 8) in support of a finding of genericness when the elements of the mark are highly generic, even in the face of substantial rebuttal.

The Court rebuffed AOL's argument that the addition of ".com" to "advertising" created a descriptive mark by noting that if the court were to adopt AOL's logic, it would be creating a per se rule that the addition of ".com" to the end of any word would result in a protectable mark.

Trademarks / Nominative Fair Use

Burden of Proving Nominative Fair Use is on the Plaintiff
Jonathon R. Campion

Addressing which party has the burden of establishing nominative fair use, the U.S. Court of Appeals for the Ninth Circuit reversed the district court and determined that the party charging trademark infringement has the burden to prove a likelihood of confusion. Toyota Motor Sales, U.S.A., Inc. v. Tabari., Case No. 07-55344 (9th. Cir., July 8, 2010) (Kozinski, C.J.)(Fernandez, J. concurring).

Toyota, owner of the Lexus brand, brought suit against two independent auto brokers alleging trademark infringement for their use of the Lexus mark. The two defendants operate an auto broker business that specializes in selling Lexus vehicles. They utilized two websites as part of their business: buy-a-lexus.com and buyorleaselexus.com. The district court, applying the eight-factor test for likelihood of confusion articulated by the Ninth Circuit in Sleekcraft Boats, found that the domain names infringed the Lexus trademark. The defendant, acting pro se, appealed.

On appeal, the court determined that the defendants had presented a nominative fair use defense to the district court. When the nominative fair use defense is raised, the court should use the three-factor test from New Kids. Under this test, the court must ask whether the product was "readily identifiable" without use of the mark; the defendant used more of the mark than necessary; or whether the defendant falsely suggested he was sponsored or endorsed by the trademark holder. If the nominative use satisfies all three factors, it does not infringe.

Toyota argued that defendants use of the word "lexus" in their domain name was both unnecessary, since the website could have used a different name; i.e., one without the Lexus mark, and the mark used suggested the website was endorsed by the trademark holder. The Ninth Circuit rejected these arguments, concluding that the defendants needed to communicate their specialty in Lexus vehicles. Noting that it is nearly impossible to let customers know that they are brokers of Lexus cars without mentioning the word Lexus, the court determined the use of the mark in their domain name was necessary to communicate their specialty. The court also rejected the argument that the defendant's website suggested endorsement by Lexus. In this case, the defendant's websites specifically disclaimed any endorsement from Lexus. The court accepted that domain names such as "trademark.com" or a domain name using a trademark combined with words such as "official" or "authorized" would likely suggest endorsement to customers. In this case, the court determined that a reasonable customer going to the defendants websites would be "agnostic" as to what she would find and, upon seeing the disclaimer would be disabused of any notion that the website is sponsored by Toyota.

The court also determined that its 2004 decision in KP Permanent Makeup notwithstanding, the district court incorrectly treated nominative fair use as an affirmative defense to be established by the defendants. Rather, the Ninth Circuit recognized that the Supreme Court, in Lasting Impression, has clearly instructed that the Lanham Act always places the burden of proving likelihood of confusion on the party charging infringement. A defendant seeking to assert nominative fair use as a defense need only show that it used the mark to refer to the trademarked good. The burden then reverts to the plaintiff to show a likelihood of confusion.

Trademarks / Extraterritorially

Extraterritorial Application of the Lanham Act Is California Dreamin'
 Rita Weeks

The U.S. Court of Appeals for the Ninth Circuit intervened in a battle between two "Beach Boys" involving Lanham Act claims and California right of publicity claims, concluding in a case in which the plaintiff alleged conduct occurring in Great Britain affected U.S. commerce. Love v. Sanctuary Records Group, Ltd., Case Nos. 07-56008, 07-56568 (9th Cir., July 8, 2010) (Thomas, J.).

Mike Love, a founder of The Beach Boys, owns the right to use the trademark THE BEACH BOYS in live performances in the United States. Love performs shows throughout the United States under the mark with a varying lineup of performers. In 2004, Brian Wilson, another founder of the band, released a solo album and began touring with a backup band to promote the album. To promote Wilson's album, a British newspaper distributed a compact disc entitled "Good Vibrations" with its Sunday newspapers. The CD contained Wilson's solo renditions of Beach Boys songs, Wilson's own songs and two video performances of Wilson's band. The CD cover featured a large photograph of Wilson with three smaller photographs showing The Beach Boys band, including Love. The majority of the 2.6 million copies of the paper featuring the Good Vibrations CD were distributed in the UK and Ireland. Approximately 425 copies of the paper were distributed in the United States without the CD, including 18 in California. Love filed suit in California against Wilson, the British newspaper and related defendants who participated in the promotional campaign, alleging that the use of the mark THE BEACH BOYS on and in connection with the promotion of the Good Vibrations CD infringed upon and diluted Love's rights in THE BEACH BOYS mark, violated Love's right of publicity and constituted unfair competition.

The district court dismissed the complaint against the British newspaper and the defendant who had licensed and recorded the Good Vibrations CD for lack of personal jurisdiction. The district court also dismissed the complaint against other defendants who owned the rights to the Wilson recordings, on the basis of their unopposed motion asserting that they did not having anything to do with the case. Ultimately, the district court dismissed the claims for violation of California's statutory and common law rights of publicity after holding that English law, which does not recognize a right of publicity, governed. Further, the court dismissed the Lanham Act claims after determining that the extra-territorial reach of the statute did not encompass the claims. Finally, the district court granted defendants' motion for attorneys' fees. During the district court proceedings, Love filed a declaration from an individual who asserted that he had purchased a copy of the Good Vibrations CD on eBay because he had thought it was a Beach Boys product. When the judge learned that the individual was a close associate of Love's attorney and had fabricated the allegations in the declaration, the court sanctioned Love's counsel. Love appealed.

The central issue on appeal concerned whether Love's U.S. federal and state claims could be maintained based upon conduct that only occurred in Great Britain. With respect to the right of publicity claims, the Ninth Circuit found that the district court correctly dismissed the claims under a choice of law analysis. The court noted that California applies the "governmental interest" analysis to conflicts issues, including those involving rights of publicity claims. Applying that standard, the court determined that although California recognizes right of publicity claims and England does not, California has no interest in applying its law to the conduct at issue so no true conflict existed. In making this determination, the court reasoned that none of the parties remaining in the suit were California citizens (Love himself was a Nevada resident). The court further held that the alleged injury to Love occurred almost exclusively in the UK and Ireland, as only a minimal amount of the newspapers were delivered in the United States, none of which contained the CD. Finally, the court determined that even if a California had an interest in protecting an individual with ties to California to exploit his image overseas, that interest was not as significant as English's interest in controlling the distribution of a British paper that is distributed primarily in the UK.

The court also determined that the district court correctly dismissed Love's Lanham Act claims. The defendants argued that the Lanham Act could not apply because the creation, promotion and distribution of the Good Vibrations CD all occurred in Europe. The court agreed with the defendants based upon its analysis of the three part test to determine whether extraterritorial application of the Lanham Act is proper. For the Lanham Act to apply extraterritorially, the alleged violations must create some effect on American foreign commerce, the effect must be sufficiently great to present a cognizable injury to the plaintiffs under the Lanham Act and the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority. The court noted that the first two prongs may be met even where the alleged conduct occurs outside of the United States and where the resulting injury is limited to deception of foreign consumers, so long as the American plaintiff suffers monetary injury in the United States. Love did not meet the test, however, because he failed to present any evidence that the alleged Lanham Act violations caused him any monetary injury in the United States. Thus, the Lanham Act could not apply extraterritorially to encompass defendants' conduct in the UK.

Finally, the Ninth Circuit found that the district court did not err in awarding defendants attorneys' fees under various statutory and contractual bases. Notably, the court affirmed the award of attorneys' fees as an "exceptional case" under the Lanham Act. The Ninth Circuit agreed with the district court that the case was exceptional as groundless and unreasonable, as Love did not present even "one item of evidence substantiating any U.S. effect," from defendants' alleged conduct other than a deceptive declaration filed by a close associate of Love's attorney.

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