In a case informative about appellate practice, the Court of Appeals for the Federal Circuit (“CAFC”) overturned-in-part the Patent Office’s conclusions that a communication system was not obvious. The CAFC found one claim obvious because a similar claim was found obvious, even though that argument had not been asserted by the challenger in its institution petition, and another claim obvious based on statements made by the patentee during oral argument. The CAFC upheld non-obviousness determinations for other claims where the issue of estoppel was not specifically raised.
Google appealed final written decisions from inter partes review (“IPR”) of six claims. In the IPR, the Patent Office concluded that these six claims were not obvious. Challenging this result, Google appealed on the grounds that one of the dependent claims (“the contested claim”) was obvious based on a final written decision that found a similar claim in a related patent obvious. The CAFC agreed that the patentee was collaterally estopped from challenging that finding, even though Google did not raise the issue when IPR proceedings started. As the decision on the related patent was not available at the time Google filed its initial petition for IPR, the CAFC explained that Google was not barred from arguing it on appeal. The parties also disputed whether the same “issue” was decided on the related patent to provide a preclusive effect. The CAFC agreed with Google that the patent language need not be identical for the issue to be the same. Therefore, collateral estoppel applied.
The CAFC then went a step further. During oral argument, the parties agreed that the independent claim from which the contested claim depended would be obvious if the contested claim was found obvious. Although the prior art used as the basis for invalidating the dependent claim was never asserted against the independent claim, the CAFC relied upon this agreement by the patentee during oral argument.
In another twist, there were four other invalid claims in the related patent that paralleled the other four claims at issue in the appeal. However, the CAFC refused to do find these claims unpatentable based on collateral estoppel as the same prior art was never asserted against these claims, Google failed to raise any collateral estoppel arguments for these claims, and significantly, there was no express admission by Hammond during oral argument that if the contested claim is invalid, then so too are these other dependent claims.
This case emphasizes the importance of carefully considering the grounds raised and arguments made during an appeal. Also, while an IPR is constrained by the petition grounds, the CAFC may be willing to permit additional grounds that did not exist at the time of the petition.
On November 9, 2022, the Federal Circuit (CAFC) affirmed a preliminary injunction in favor of SoClean, Inc. (“SoClean”) against Sunset Healthcare Solutions, Inc. (“Sunset”). SoClean sued Sunset for trademark infringement of its registered mark for replacement filters. Although the district believed that SoClean was likely to prevail on the merits, it determined that enjoining all of Sunset’s sales was unnecessary. Instead, the district court crafted a narrow injunction that prohibited Sunset from engaging in marketing practices that would result in consumer confusion such as marketing its filters using images of the filter cartridges alone and failing to prominently displaying its brand name on any images.
On appeal, Sunset argued that the district court abused its discretion by not adopting its argument that SoClean’s trade dress lacked secondary meaning because the district court afforded too much weight to the presumption of validity of SoClean’s registered trademark. Instead, Sunset argued that the district court should have reviewed what evidence the PTO considered during review of SoClean’s trademark application because the district court has the right to cancel registrations, and, thus, the ability to review the application as opposed to the registered mark itself.
The CAFC rejected Sunset’s argument. The CAFC first noted that because SoClean’s trademark is a product configuration trade dress for its filters, it is only protectable upon a showing of secondary meaning. Federal registration of a trade dress, however, is prima facie evidence of a mark’s validity. “The presumption of validity is not conditional; the statute provides that a certificate of registration “shall” result in the presumption, without specifying any exceptions. See 15 U.S.C. § 1057(b).” Sunset failed to identify any statutory or legal basis to withhold this presumption from a registration.
Because SoClean’s mark was registered, Sunset had the burden to introduce sufficient evidence to rebut the presumption of SoClean’s right to exclusive use. Although the district court applied the wrong evidentiary standard, the CAFC found it to be harmless error because Sunset did not provide any evidence that the trade dress lacked secondary meaning. Therefore, the district court acted within its discretion rejecting Sunset’s lack of secondary meaning argument.
This opinion demonstrates why it is important to register trademarks as a registered trademark shifts the burden away from the plaintiff toward the defendant to rebut a presumption of validity. Trademark registration is also beneficial because it provides nationwide notice to competitors so if they infringe on the trademark, they cannot claim adoption of the mark was used in “good faith.” Also, having a registered trademark can lead to the award of more damages for the registrant if someone infringes.
Following a nine-day jury trial, the district court granted the plaintiff’s request for a new trial on damages. The basis for the grant of a new trial on damages was the Federal Circuit’s (CAFC) decision in Omega Patents, LLC v. CalAmp Corp., 13 F.4th 1361 (Fed. Cir. 2021).
The CAFC, in its Omega decision, ultimately granted, inter alia, the defendant’s motion for a new trial on damages. The motion was granted for two reasons: (1) the district court’s refusal to permit the defendant’s expert to offer rebuttal testimony; and (2) in utilizing prior license agreements to support its damages theory, the plaintiff had not provided sufficient evidence addressing the similarities and differences between the instant hypothetical negotiation and the prior license agreements to allow the jury to use the prior license agreements as a basis for its damages award. Focusing on the second grounds, which was the basis for the district court’s decision in the Epistar case, the CAFC started with the principle that “the patentee must in every case give evidence tending to separate or apportion … the patentee’s damages between the patented feature and the unpatented feature.” 13 F.4th at 1376. That said, apportionment may not be necessary when a sufficiently comparable license is used as the basis for determining the appropriate royalty. The patentee has the burden to demonstrate that the prior license agreements are comparable. And the CAFC found that the patentee had not demonstrated that the licenses were comparable because the patentee did not account for any distinguishing facts when discussing the prior licenses.
Turning back to the Epistar case, the plaintiff sought a new trial on damages because the CAFC’s Omega decision did not issue until three years after plaintiff’s damages expert issued his report, and so the legal principles included therein could not have been considered. Plaintiff also argued that the defendant failed to raise its expert’s failure to comply with the principles of Omega until the fourth day of trial, after the damages experts’ had testified. The defendants argued that plaintiff waived the ability to introduce any new damages theories by not introducing them at trial. The defendant also argued that apportionment was always required and so the plaintiff should have used the apportionment principles outlined in Omega, even though the Omega decision did not issue until three years after plaintiff’s damages expert reports were issued.
The district court rejected the defendant’s arguments, finding that the defendant should have raised the Omega decision prior to the testimony of plaintiff’s damages expert. Further, the district court rejected defendant’s argument that Omega did not impact the law of apportionment, finding that “it provided clarity on what is required to prove a reasonable royalty based on a comparable licensing approach where apportionment is relevant. Accordingly, the district court granted a new trial on damages and order limited supplemental expert discovery including supplemental expert reports limited to the damages theories previously disclosed but with the ability to include how Omega impacted those theories.
Practitioners should remember that, when relying on a damages theory dependent on comparable licenses, the license rates therein must be properly apportioned to the value of the infringed patent. Otherwise, those license agreements will not provide a basis for a reasonable royalty. Further, merely identifying (rather than accounting for) differences in the license agreements and a hypothetical negotiation over a single-patent license to the infringed patent is insufficient to demonstrate built-in apportionment.
In a patent dispute between Allergan and Sandoz, the District Court of Colorado granted Plaintiff’s motion in limine excluding certain evidence the Defendant sought to rely upon to defend against the Plaintiff’s claim of willful infringement because reliance on that evidence would require waiver of attorney-client privilege when the defendant chose to not assert an advice of counsel defense and maintain privilege for those undisclosed communications.
Courts in the Tenth Circuit have adopted two approaches when deciding whether privilege is waived, a restrictive and an intermediate approach. The restrictive waiver approach only applies waiver when a party attempts to prove an asserted claim or defense by disclosing or describing an attorney client communication. The intermediate waiver approach explains that privilege is waived by implication when (1) the assertion of the privilege was a result of some affirmative act, (2) through that affirmative act the asserting party placed the protected information at issue, and (3) application of the privilege would deny the opposing party the opportunity to access information vital to the issue.
Here, the Defendant sought to introduce statements: (1) that the witness believed the Plaintiff had “thrown in the towel” after losing previous suits; (2) that the Defendant’s legal department had given the go-ahead to launch their product; and (3) regarding how previous cases brought by the Plaintiff concluded. The Court explained that a party “cannot avoid an implied waiver of the attorney-client privilege simply by avoiding the use of the words ‘advice of counsel.’” The court then determined the statements in the first two categories resulted from defendant’s executives forming their “business understanding” as a result of advice from legal counsel. Regarding the third category of testimony, the Court found that information regarding how the previous cases concluded, although potentially received from counsel, was publicly available information and therefore not advice of counsel. However, the Court also excluded this information from trial based on its ruling on another motion in limine to exclude evidence regarding the previous litigation. The court did note, however, that public information such as arguments on how their product differs and the fact that patents had been abandoned may certainly be introduced absent another independent reason to exclude them.
On September 30, 2022, Chief Judge DeGuisti of Western District of Oklahoma granted-in-part and denied-in-part defendants Netflix, Inc. and Royal Goode Productions, LLC’s motion for attorney’s fees as prevailing parties in a copyright infringement suit. The court significantly reduced the awarded amount, finding that the amount sought by defendants “exceed[ed] that which is reasonable and equitable, given the specific circumstances of this case.” Plaintiffs Whyte Monkee Productions, LLC and Timothy Sepi brought a copyright infringement action against defendants, alleging they unlawfully used clips from several videos plaintiffs claimed to own in the hit documentary series “Tiger King.” Defendants won summary judgment when the court found that several of the copyrights at issue were not owned by plaintiffs and defendants’ use of the one copyright owned by plaintiff was protected fair use. Defendants then moved for an award of attorney’s fees in the amount of $170,705 as the prevailing party under the Copyright Act. Notably, that amount was “only a fraction of the total fees incurred and reflected a reduced hourly rate” for defendants’ two lead attorneys.
Granting-in-part and denying-in-part the defendants’ motion, the court first found that plaintiffs relied on sham testimony to support their copyright ownership claim, indicating their claim was lacking in factual support and objectively unreasonable. Specifically, when giving deposition testimony in this suit, plaintiff Sepi first affirmed his prior testimony in an unrelated proceeding in which he testified that he performed videography work as part of his employment. Then later in this suit, Sepi denied his prior testimony and claimed that he had previously committed perjury. No explanation was given for Sepi’s change in testimony. The court next noted that with respect to the one copyright plaintiffs owned, all of the fair use factors tipped decidedly in defendants’ favor. Finally, the court discussed both the goals of awarding attorney fees as well as considering the relative financial strength of the parties when making such awards. The court agreed with the defendants’ arguments that, in this case, considerations of deterrence and compensation warrant an attorney fee award because defendants were required to spend significant time and financial resources litigating an objectively unreasonable lawsuit, and other potential plaintiffs need to be deterred from relying on sham testimony to advance unfounded claims. However, the court also recognized the need to consider whether a proposed attorney fee award is excessive in light of the plaintiffs’ resources. In view of the fact that Sepi’s estimated monthly expenses were $1,850 with a monthly income of $2,000, the court reduced the award amount from the requested $170,705 to $35,000, finding that lesser amount “sufficient to deter the pursuit of objectively unreasonable claims but will avoid imposing ‘an inequitable burden on an impecunious plaintiff.’”
For the third consecutive year, Irwin IP is honored to be named as a “Best Law Firm of the Year” in Intellectual Property Litigation and Patent Law by US News and World Report and Best Lawyers! Firms included in the “Best Law Firms” list are subject to a rigorous evaluation process and are recognized for professional excellence through client- and peer-evaluations and feedback. Irwin IP’s recognized combination of quality law practice, track record of success, and breadth of legal expertise all contributed to its receipt of this award.
This honorable award comes just months after seven of our attorneys were recognized by Best Lawyers in various categories. Reid Huefner, Lisa Holubar and Jason Keener were named Best Lawyers for the first time, Victoria Hanson and Daniel Sokoloff were awarded Ones to Watch for the first time, and while Barry Irwin was named a Best Lawyer again, for the 3rd year running, he was also named a Lawyer of the Year. We are so proud that our attorneys are receiving recognition for their hard work and outstanding efforts!
Irwin IP thanks all of those who were involved in the submission, evaluation, and review process!
In an unexpected decision, a jury in the Southern District of Illinois found that it was not fair use to reproduce the images of a WWE wrestler’s tattoos in a video game in order to accurately portray the wrestler’s likeness. The outcome of this case directly conflicts with Solid Oak Sketches, LLC v. 2K Games, Inc., 449 F.Supp.3d 333 (S.D.N.Y. 2020), wherein the same defendants were granted summary judgment when that court held that the video game company’s reproduction of the professional basketball players’ tattoos was both fair use and de minimis in nature.
Catherine Alexander inked the 5 tattoos at issue in this case on Randy Orton, a WWE professional wrestler. They include tribal tattoos on Orton’s forearm, a Bible verse on his arm, a dove, a rose, and a skull. To replicate Orton’s likeness in WWE 2K, a video game featuring a realistic depiction of WWE wrestling, Take-Two digitally reproduced Orton’s tattoos. Take-Two received a license from WWE to replicate Orton’s likeness. This license required WWE to review Orton’s tattoos to ensure accuracy to Orton’s likeness and reject Orton’s videogame persona if it was absent of tattoos or if they were different from Orton’s actual tattoos. In a motion for summary judgment mirroring the motion that the defendants filed in Solid Oak Sketches, Take-Two argued that Alexander impliedly licensed Orton to disseminate the tattoos as part of Orton’s likeness, the use of the tattoos is fair use, the use of the tattoos was de minimis, and that Alexander cannot show that she is entitled to damages or profits. Here, though, the district court denied Take-Two’s motion for summary judgment. After a five-day trial, the jury found that Take-Two failed to prove that its use of the tattoos constituted fair use and, instead, found Alexander entitled to $3,750 in actual losses as a result of Take-Two’s use of her work; but the jury did not find any of Take-Two’s profits attributable to the use of Alexander’s tattoos.
The Solid Oak Sketches court (located in the 2nd Circuit) had held that the videogame creator’s use of the copyrighted tattoos was sufficiently transformative to constitute fair use and was also de minimis use. That court determined that the purpose for which the tattoos were originally created was a form of self-expression but the purpose of the reproduction was to accurately depict the players’ likenesses and further noted the size of the tattoos is significantly reduced, the expressive value of the tattoos is minimized, the tattoos are an inconsequential portion of the game, and finally, the tattoos are indistinguishable during gameplay. But here, in Alexander, the court rejected Take-Two’s motion for summary judgment regarding fair use on the grounds that it was a question of fact and law for which summary judgment was improper. 489 F. Supp. 3d 812. In also denying summary judgment of de minimis use, the court questioned whether it was even a legitimate defense in the Seventh Circuit and noted it is more appropriate for when the copying is of “small and usually insignificant portions” of a work, not “wholesale copying” of the “entir[e work] as occurred here.” Id. at 823.
Given the small size of the damages award, it is an open question whether Take-Two will appeal this verdict to try to reconcile this Alexander decision in the 7th Circuit with the previously decided Solid Oak Sketches case in the 2nd Circuit. Alternatively, more light may be shed on this issue—and on “transformative use,” generally—when the Supreme Court releases its opinion this fall in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith.
On September 29, 2022, a jury in the Central District of California found that that Vital Pharmaceuticals Inc. willfully and deliberately violated the Lanham Act by falsely advertising a “Super Creatine” ingredient of a Bang energy drink and awarded Monster Energy Co. about $292 million in Lanham Act damages, possibly the largest Lanham Act jury trial award in U.S. history. Although Vital and its CEO touted the many health benefits of “Super Creatine,” Vital could not provide any evidence to support its claims.
In 2015, Vital, a performance beverage company, released and introduced its Bang energy drink with “Super Creatine,” which Vital and its CEO claimed could improve brain function and performance, and could also help with all forms of dementia, including Alzheimer’s, Parkinson’s and Huntington’s disease. Vital advertised “Super Creatine” and its benefits through social media as well as to retailers and distributors. With the success of Bang, Vital rose in popularity and became the No. 3 energy drink company in the United States, with $4 billion in sales, displacing some of Monster’s products and customers.
On September 5, 2018, Monster filed a lawsuit against Vital for falsely advertising Bang and “Super Creatine,” and for deceiving the public about Bang’s ingredients and benefits. Further, Monster alleged that Vital had interfered with the distribution of Monster’s energy drinks by gaining in-store shelf space at Monster’s expense and taking market share from Monster. While Vital and its CEO (who held no scientific degree) touted the many purported benefits of “Super Creatine” without studies or scientific evidence to support its claims, Vital also claimed that “Super Creatine” was unimportant to the success of the Bang beverages.
At trial, Monster presented evidence and testimony that creatine was not water-soluble and could not be put into a drink. Additionally, Monster conducted tests revealing that Bang did not even contain creatine. Monster also presented survey evidence that consumers were motivated to purchase Bang because of its “Super Creatine” ingredient. Vital, however, could not establish that the survey it relied on was conducted in accordance with generally accepted survey principles, so the court found that its survey evidence was inadmissible. As such, the jury reviewed only Monster’s survey evidence. The jury found the entire lost profits damages sought by Monster were appropriate and awarded them in full, along with an award based on state law claims, for total damages of $297 million.
This case demonstrates the seriousness and very expensive consequences of falsely advertising a product or ingredient such that it deceives consumers. Further, this case emphasizes the importance and power of surveys. Monster’s favorable survey and Vital’s inability to present its survey evidence resulted in the jury finding that Monster was entitled to the full amount of its lost profits.