Intellectual Property Today
RFC Express - New IP Lawsuits

Major Case Review for 2007





By Daniel Hampton and Thomas W. Brooke and Seth Milman of Holland & Knight LLP

2007 proved to be a major year for both patent and trademark practitioners.  Recent judicial decisions have worked a significant reshaping of the legal landscape.

Patent Cases 2007

Three major cases impacted patent law:  KSR Int'l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007); MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007); and In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007).

KSR and Obviousness

In KSR, a unanimous Supreme Court rejected a rigid application of the Federal Circuit's ("CAFC") teaching-suggestion-motivation ("TSM") test in favor of the more flexible framework laid out in Graham v. John Deere Co., 383 U.S. 1 (1966).  The Court found KSR's patent for an adjustable pedal assembly obvious where the patentee had combined elements in the prior art to create a new pedal assembly.  Although the pedal assembly's design had never before been implemented, the Court, applying the Graham analysis, determined it was not novel or inventive. 

The TSM test considers whether the prior art explicitly or implicitly teaches, suggests, or motivates one skilled in the art to create the invention.  If so, the invention is obvious.  The Court found the TSM test too restrictive, noting that an incremental improvement, if not mentioned in the prior art, could be a patentable improvement under that test.  It reiterated that the correct approach to obviousness is the Graham analysis, which looks beyond prior art.  Under Graham, a court faced with the question of obviousness must determine and apply: 1) the scope and content of the prior art, 2) the level of ordinary skill in the art, 3) the differences between the prior art, and 4) other factors including commercial success and long felt commercial need for the invention.  Although the Graham factors are difficult to apply, the Supreme Court noted that they are consistent with the purpose of the Patent Act: to create an incentive for innovation without impeding normal technological progress. 

Since KSR, the Federal Circuit and the district courts have applied the Graham analysis in the fields of electronics, mechanical engineering, biotechnology, pharmaceutical chemistry, software, and business methods. 

In one respect, KSR raised the bar for overcoming an allegation of obviousness.  Faced with an obviousness challenge, a patentee must prove there is no "apparent reason" to combine references or modify prior art to create the allegedly obvious invention.  From a patent holder's standpoint, KSR will reduce the value of an issued patent by making obviousness challenges more difficult to defend against.  From the inventor's standpoint, future patents may be more valuable if the decision results in the PTO raising the threshold of obviousness at the prosecution level.

MedImmune and Declaratory Judgment Jurisdiction

In MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), the Supreme Court lowered the bar for declaratory judgment ("DJ") jurisdiction.  Under a license agreement that had neither expired nor been held invalid, MedImmune was paying royalties for Genentech's patented technology.  Believing that Genentech's patent was invalid, yet wanting to avoid an injunction, MedImmune continued to pay royalties under protest and filed a DJ action seeking invalidity.  The district court dismissed the action for lack of jurisdiction because there was no "actual controversy" as required by the Declaratory Judgment Act.  The Federal Circuit affirmed.  Both courts relied on Gen-Probe Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004), where the Federal Circuit held that a licensee in good standing cannot bring an Article III case or controversy because the license agreement destroys any reasonable apprehension of suit.  The Supreme Court, however, reversed adopting a broad view of DJ jurisdiction. 

The Supreme Court held that MedImmune need not cease royalty payments in order to create a case or controversy.  Even without a monetary dispute, the legal question of validity was more than merely hypothetical because the parties' legal standing was at stake; Article III does not require MedImmune to risk an injunction and punitive damages by repudiating the license agreement  before bringing a DJ action. 

Following MedImmune, the Federal Circuit found jurisdiction over a DJ claim in Sony Electronics Inc. v. Guardian Media Technologies, Ltd., 497 F.3d 1271 (Fed. Cir. 2007),where the parties, after failed licensing negotiations, had not even entered a license agreement.  The parties' adverse standing in regard to patent validity created an Article III controversy.  But the Federal Circuit also criticized MedImmune as overly broad.  The concurring opinion in SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1384 (Fed. Cir. 2007) states that "the court's standard virtually any invitation to take a paid license . . . would give rise to an Article III case or controversy."

Indeed, MedImmune appears to have led to a decreased number of cease and desist letters.  Concerned that sending a letter, no matter how innocuous, might lead to being haled into court, more patent holders seem to be suing as a prelude to licensing discussions.  The decision has also fostered some concern that patent holders will be less willing to grant licenses, or will insist on new terms designed to reduce the potential negative impact of MedImmune.  Although it is too early to be certain, this decision certainly appears to shift the balance toward patent defendants and away from patent holders.

Seagate and Willful Infringement

In Re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), the Federal Circuit examined the intertwining issues of willful infringement, advice of counsel defense, and attorney client privilege.  Seagate was charged with willful infringement and asserted an advice of counsel defense.  During discovery, plaintiffs requested work product relating to the opinion letter, including the trial counsel's work product.  The district court determined that Seagate had completely waived the attorney client privilege by asserting the advice of counsel defense and issued an order to compel discovery.  Seagate petitioned for a writ of mandamus vacating the district court's order.

The Federal Circuit's decision overrules Underwater Devices, Inc. v. Morrison- Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), and sets out three points of law.  First, the court set an "objective recklessness" standard for willful infringement where a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions comprised infringement.  Second, the court held that a potential infringer does not have an affirmative duty to acquire an opinion letter.  Third, the court established that when an alleged infringer waives its attorney client privilege with respect to opinion counsel, waiver does not extend to trial counsel. 

Generally, a party cannot selectively waive the attorney client privilege; a waiver applies to all communications relating to the same subject matter.  This prevents a client from using the privilege as a sword and a shield.  The court stated that, because opinion counsel and trial counsel serve fundamentally different objectives, waiving the attorney client privilege only for opinion counsel does not bring up the sword and shield concerns.  Furthermore, the court found that willfulness depends on an infringer's pre-litigation conduct and, therefore, trial counsel's communications are not probative.

The court also extended its reasoning on attorney client privilege to the trial attorney's work product.  The purpose of the privilege is to protect the adversary trial process – if the waiver were extended to trial counsel it would undermine that purpose. 

Trademark Cases 2007

During 2007, not unexpectedly, several courts grappled with the recently revised Federal Trademark Dilution statute.  Other issues explored by the courts included the relevance of post sale confusion, the deference due a suggestive mark, parody marks, use of marks to comment on third party activities and standing to bring an Opposition proceeding at the Trademark Trial and Appeal Board.

Parody of a Strong Mark not Enjoined

In November, the Fourth Circuit affirmed a lower court ruling (Louis Vuitton Malletier S.A. v. Haute Diggity Dog LLC, 464 F.Supp.2d 495 (E.D. Va. 2006)) that low cost dog toys sold under the "CHEWY  VUITTON" mark neither infringed nor diluted the famous LOUIS VUITTON mark for luxury consumer goods including some pet products such as leashes and collar. Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 2007 WL 3348013 (4th Cir.).

Both courts held that despite the fact that LOUIS VUITTON is a strong, widely known mark it is unlikely that the public will confuse “CHEWY VUITTON,” an obvious parody, with LVM's mark under the trademark infringement claim.  The Fourth Circuit stated "[i]t is a matter of common sense that the strength of a famous mark allows consumers immediately to perceive the target of the parody, while simultaneously allowing them to recognize the changes to the mark that make the parody funny or biting."  The court found CHEWY VUITTON to be an obvious parody and therefore affirmed the lower court's ruling on trademark infringement.

The Court of Appeals affirmed the district court's ruling on dilution while providing a far more detailed analysis.  It began by "noting that parody is not automatically a complete defense to a claim of dilution by blurring where the defendant uses the parody as its own designation of source, i.e, as a trademark." (emphasis in original.)  The court went on to state, however, that it was not required to ignore the existence of a parody used as trademark.  "In sum, while a defendant's use of a parody as a mark does not support a 'fair use' defense, it may be considered in determining whether the plaintiff-owner of a famous mark has proved its claim that the defendant's use of a parody mark is likely to impair the distinctiveness of a famous mark."  Here, because Haute Diggity Dog merely mimicked the famous LOUIS VUITTON mark and "did not come so close as to destroy the success of its parody and, more importantly, to diminish the LVM marks' capacity to identify a single source," the court found that the LOUIS VUITTON mark was not diluted.

Apparently, a mark may be so strong that its owner could have a hard time enforcing rights against parodies under both the Trademark and Dilution statutes.

Non- Commercial Parody not Enjoined

The U.S. District Court for Utah also passed on the opportunity to issue an injunction in a trademark parody case involving one website that criticized the Mormon Church and another that responded to the criticisms.  Utah Lighthouse Ministry Inc. v. Discovery Computing Inc., 506 F.Supp.2d 889 (D.Utah 2007).  The plaintiff filed an action for trademark infringement against the operator of the rival website commenting on and parodying on the plaintiff's site. The court held that the parody site was non-commercial in nature, as were the domain names owned by the defendant.  The court went on to find that plaintiff's UTLM mark was unprotectable at the time the defendant had created its site and registered its domains.  The mark had not yet been registered and was not famous and therefore did not qualify for protection under the Lanham Act.

Application of the New Dilution Statute

Because of the change to "likelihood of dilution" in the Federal Statute, the Second Circuit vacated a lower court ruling and remanded a case brought by Starbucks to enjoin use of the mark CHARBUCKS by a rival coffee seller.  Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 477 F.3d 765 (2nd Cir. 2007).  The trial Court had applied the pre-amended version of the act which under Moseley v. V Secret Catalogue Inc., 537 U.S. 418 (2003) required a showing of actual dilution.

Revisions to the Dilution Statute also precluded claims based on niche market fame, leading to a ruling against the law firm Milbank Tweed Hadley & McCloy LLP, well known in legal circles, but not the general public as "Millbank."  Milbank Tweed Hadley & McCloy LLP v. Milbank Holding Corp. d/b/a Milbank Real Estate Services (C.D. Cal. 82 U.S.P.Q.2d 1583 2007).

Dilution and Trademark Infringement in a Post-Sale Context

In Pepsico, Inc. v. # 1 Wholesale, LLC, 2007 WL 2142294 (N.D. Ga. 2007) the Court ruled that using bottles and cans with visible registered PepsiCo. Inc. trademarks to create safes constituted trademark infringement and that the safe-makers also diluted the company's famous marks when they made and sold the products bearing the marks.  "Anyone who encounters the Infringing Safes post-sale is likely to believe they are legitimate PepsiCo products, or that the Infringing Safes are licensed or otherwise authorized by PepsiCo."

The post-sale analysis carried over into consideration of the dilution count of Pepsi's case.  Concluding that Pepsi's marks are "unquestionably famous" and that the defendants' "marketing and sale of Infringing Safes is likely to dilute and tarnish the PepsiCo marks because [Wholesale] uses the marks on goods commonly associated with the concealment of illicit narcotics," the court granted Pepsi judgment on its dilution claims.

Post Sale Confusion Relevant in Trade Dress Context

While joining several other circuits in adopting the post-sale confusion test in the context of the trade dress, the Tenth Circuit agreed that the district court correctly determined that GM had not met the heightened burden necessary to warrant preliminary injunctive relief in a case against a dealer of aftermarket parts, specifically grilles that resemble those found on GM's HUMMER vehicles. General Motors Corp. v. Urban Gorilla LLC, 500 F.3d 1222, (10th Cir., 2007).

GM argued that the district court erred by failing to consider the possibility of post- sale confusion, in addition to its consideration of the likelihood of confusion at the point of sale. Specifically, GM claimed that potential Hummer customers, upon seeing an assembled Urban Gorilla kit on the road, might falsely attribute any potential inferior quality displayed in the kit to the Hummer brand. To support this conclusion, GM relied on earlier decisions, including the Tenth Circuit's ruling in United States v. Foote, 413 F.3d 1240, 75 USPQ2d 1353 (10th Cir. 2005).

On this issue the court agreed.  Even so, the Court of Appeals concluded that the possibility of post-sale confusion must be considered, it also found GM's evidence insufficient to justify injunctive relief.

Suggestive Mark Given Additional Deference

In Synergistic Int'l LLC v. Korman, 470 F.3d 162 (4th Cir. 2006), the Fourth Circuit affirmed the District Court's ruling that Korman's mark, “THE WINDSHIELD DOCTOR,” infringed Synergistic's mark, “GLASS DOCTOR” in connection with installation of glass in buildings and vehicles.

The  court held that the mark GLASS DOCTOR is suggestive because the USPTO had not required the owner to demonstrate secondary meaning during the application process and because word DOCTOR relates to “healing” and it requires imagination to infer that “healing” applies to windshields and glass.   The court also ruled that a narrow limitation on the scope of goods is not appropriate because a suggestive mark is entitled to protection from a mark on the same or similar products and services. 

A Trademark Cannot be Disparaged

An organization claiming ownership of the mark FREECYCLE attempted to enjoin a former organization member from criticizing the mark itself and from encouraging others from using the mark generically.  The Freecycle Network, Inc. v. Oey, 2007 WL 2781902 (9th Cir. 2007).  In overturning the lower court's decision, the Court of Appeals held that there was no cause of action for "trademark disparagement" under the Lanham Act.  As in the Utah Lighthouse case, the Court held that the defendant was not using a mark in commerce by posting statements on the internet.

An Opposer must have a "Real Interest" to Oppose

The applicant organization sought to register the mark DYKES ON BIKES to promote lesbian, bisexual and transgender pride.  McDermott, the opposer, filed a complaint opposing the mark, claiming that, as a male citizen of the United States and San Francisco, registration of the mark would cause him harm because the group practices “Anti Male Hate” and because the term DYKE is disparaging to men, scandalous, and immoral.  McDermott v. San Francisco Women's Motorcycle Contingent, 81 USPQ.2d 1212 (2006). 

The TTAB found that McDermott has not stated a claim because he does not have valid grounds for opposing the mark.  Although Sec. 2(a) of the Lantham Act bars an “immoral, deceptive, or scandalous” mark, the mark itself must be immoral as opposed to the goods or services.  The Board found no immoral or scandalous content. 

The Board went on to examine whether McDermott had standing to oppose the mark and held that McDermott did not state a reasonable basis for his opposition because he did not prove that he was a dyke or lesbian and because he failed to show objective evidence his group (i.e. men) shared his belief that there had been damage. 



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