MVS Filewrapper® Blog: Who May Bring a Federal False Advertising Suit?

     The Supreme Court's recent decision in Lexmark International, Inc. v. Static Control Components, Inc. prescribed the appropriate framework for determining whether a plaintiff has standing in a false advertising action under the 15 U.S.C. 1125(a).  Prior to this decision, there were three competing approaches to determining whether a plaintiff has standing to bring suit under the Lanham Act: 

 

·         The Third, Fifth, Eighth and Eleventh Circuits utilized an antitrust standing or a set of factors laid out in Associated General Contractors;

 

·         The Seventh, Ninth and Tenth Circuits used a categorical test which only permits actual competitors to bring false advertising suits under the Lanham Act; and lastly

 

·         The Second Circuit applied a "reasonable interest' approach," under which a Lanham Act plaintiff "has standing if the claimant can demonstrate '(1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising.'"

 

     In this case, the Sixth Circuit applied the Second Circuit's reasonable-interest test and concluded that Static Control had "standing because it 'alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that th[o]se interests were harmed by Lexmark's statements to the remanufacturers that Static Control was engaging in illegal conduct."  The Supreme Court held that in order to have standing, a plaintiff "ordinarily must show that its economic or reputational injury flows directly from the deception wrought by the defendant's advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff." Thus, direct application of a zone-of-interest test and proximate-cause requirement "supplies the relevant limits on who may sue under §1125(a)" and supplants the tests previously applied by the lower courts.   

New and Useful - January 23, 2013

·         In Wax v. Amazon Techs., the Federal Circuit upheld the TTAB’s denial of registration of the mark AMAZON VENTURES.  Applicant filed and intent-to-use application to register the mark for “investment management, raising venture capital for others, . . . and capital investment consultation.”  Amazon Technologies, Inc.—online retailer and owner of several AMAZON.COM marks—opposed the registration.  The TTAB concluded that Amazon Technologies, Inc. had priority in the AMAZON.COM marks, and that there was a likelihood of confusion between Amazon Technologies’ marks and those of the applicant.  The Applicant challenged the TTAB’s findings that (1) Amazon Technologies’ marks are famous, (2) the similarity of Amazon Technologies’ mark to AMAZON VENTURES, and (3) the similarity of the parties' services and channels of trade.  The Federal Circuit confirmed the TTAB’s findings, based in part on the wide latitude of protection afforded to Amazon Technologies’ on account of its fame within the buying public.  

·         The Eighth Circuit Court of Appeals affirmed a district court’s judgment and damages for Hallmark Cards, Inc. against a former employee for breach of contract and misappropriation of trade secrets.  The district court entered the jury’s award of damages in the amount of $860,000.  The Eight Circuit affirmed $735,000 of the damages as they related to breach of contract and disclosure of trade secrets, but overturned $125,000 the former employee earned in compensation from a competitor. 

·         The Federal Circuit has dismissed as moot an appeal from a patent infringement suit.  Allflex U.S.A., Inc. sued Avid Identification Systems, Inc. seeking a declaratory judgment that six of Avid’s patents were unenforceable due to inequitable conduct.  The district court granted partial summary judgment in favor of Allflex, at which time the parties entered into a settlement agreement that resolved all of the claims and issues between the parties upon payment of $6.55 million from Avid to Allflex, except for a provision that allowed Avid to appeal three specific issues.  The agreement further provided that Allflex could contest any appeal on the merits, but could not dispute the existence of a live case or controversy, and that if Avid were successful on any issue on appeal, the payment to Allflex would be reduced by $50,000.  The district court accepted the settlement agreement and entered a stipulated order of final judgment that stated the case was dismissed with prejudice with the exception of findings the court considered “final and ripe for appellate review.”  Avid then appealed to the Federal Circuit, but Allflex declined to file a brief defending the judgment of the district court. 

The Federal Circuit concluded that the appeal was moot.  Avid argued that, although the case would be moot if it were not for the $50,000 contingency payment, that payment ensured that there was a real controversy between the parties.  The court dismissed Avid’s argument, concluding that while the district court’s decision was effectively final and therefore appealable, Allflex no longer had a legally cognizable interest in any of the issues in the case, and the payment was insufficient to create any interest

·         The USPTO has announced the new fee schedule.  The changes, initiated under the Leahy-Smith America Invents Act, are set to take effect March 19, 2013.  Among the notable changes are:

o   A 75% reduction in most fees for micro entities, including Universities.

o   Increase in basic filing fee:  $1,600 (large entity); $800 (small entity); $400 (micro entity)

o   Increase in appeal fees, due in large part to a new “Appeal Forwarding Fee for Appeal in Examination or Ex Parte Reexamination Proceeding or Filing a Brief in Support of an Appeal in Inter Partes Reexamination”:  $2,800 (large entity); $1,400 (small entity); $700 (micro entity)

o   Decrease in issue fees:  $960 (large entity); $480 (small entity); $240 (micro entity)

o   Increase in maintenance fees:

§  First (3.5 years):  $1,600 (large entity); $800 (small entity); $400 (micro entity)

§  Second (7.5 years):  $3,600; $1,800; $900

§  Third (11.5 years):  $7,400; $3,700; $1,850

o   Decrease in supplemental examination fees:  $16,500 (large entity); $8,250 (small entity); $4,125 (micro entity)

The complete finalized rules are available here.

Explanation of prior art element in dependent claim insufficient to confer inventor status

In a decision Thursday, the Federal Circuit reversed a summary judgment of dismissal for lack of standing by the District Court for the Eastern District of Michigan.  The district court held that one of the defendant's employees was a coinventor of the patent-in-suit, and because he had not joined as a plaintiff, the plaintiffs did not have standing to sue. 

The Federal Circuit reversed, holding the allegedly missing coinventor was not actually a coinventor.  Specifically, the only contribution made to the invention by this individual was limited to a single dependent claim, and the limitation added by that claim was a feature well-known in the art.  However, an inventor "may use the services, ideas, and aid of others in the process of perfecting his invention without losing his right to a patent."  As such, the Federal Circuit held the alleged co-inventor's contribution to the invention was merely the "exercise of ordinary skill in the art," and therefore did not rise to the level of inventiveness.  As a result, the failure to join this individual as a plaintiff did not defeat standing.

More detail of Nartron Corp. v. Schukra U.S.A., Inc. after the jump.

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Ninth Circuit: Copyright owner's ambiguous reservation of rights clarified with extrinsic evidence

In a recent decision, the Ninth Circuit reversed a district court's grant of summary judgment that a copyright holder did not have standing to sue for copyright, trademark, unfair competition, and related declaratory judgment claims.  The case involved the film Gone in 60 Seconds, produced and directed in 1974 by H.B. "Toby" Halicki, and remade in 2000.  The key issue was the construction of a 1995 Agreement that provided an option to remake the movie, and assigned certain of Halicki's rights to Hollywood Pictures (a division of the Walt Disney Company and producer of the 2000 film), and more specifically what rights were reserved to Halicki's wife (who obtained Halicki's rights after his death).  Based on the district court's construction of the agreement, the Plaintiffs did not have standing because they assigned all relevant rights in the Agreement, and specifically the rights to the remake of the famed Ford Mustang "Eleanor." 

The Ninth Circuit reversed, holding the agreement between the parties lacked explicit details about what rights the plaintiff might have in a derivative work – namely a remake of Eleanor.  However, the court found that the agreement was "reasonably susceptible to the interpretation" that the plaintiff had retained rights to the remake of Eleanor.  When combined with other extrinsic evidence not considered by the district court, it was clear to the court that plaintiff owned the rights to remake Eleanor, and therefore reversed the district court's holding of no standing to bring the copyright claim.

The court also highlighted several errors by the district court regarding trademark standing.  First, the district court held the plaintiff did not have standing to claim infringement of the "Eleanor" mark because she did not own a registration in the mark.  This was the wrong legal standard, because a plaintiff may also have standing to claim infringement if they are the owner of an unregistered mark.  The district court also held that the plaintiff did not have standing to sue on the "Gone in 60 Seconds" mark because her registrations were for toy cars and baseball caps, while the alleged infringement was for use of the mark on actual cars.  The Ninth Circuit noted the district court confused the test for infringement with the test for standing:  to establish standing under the Lanham Act, a plaintiff must only demonstrate that they are the owner of a mark for any class of products.  Because the plaintiff owned a registration for the Gone in 60 Seconds mark (even for different goods), she had standing under the Lanham Act to bring an infringement claim against the defendant.

More on Halicki Films, LLC v. Sanderson Sales & Mktg. after the jump.

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Federal Circuit affirms district court's decision setting aside $1.5 billion infringement verdict

In a decision yesterday, the Federal Circuit affirmed a district court's grant of judgment as a matter of law based on lack of standing for one patent and non-infringement of a second patent.  A jury awarded $1,538,056,702 in damages for infringement, but, as a result of the JMOL, the district court set aside the damages award.

The Federal Circuit affirmed.  The court agreed with the district court that the jury lacked substantial evidence to find the claims of the first patent in suit encompassed work that was solely owned by the plaintiff based on a Joint Development Agreement.  Instead, the court held that, in accordance with the terms of the agreement, the patent-in-suit was jointly owned by the plaintiff and a third party not involved in the suit.  Thus, the plaintiff lacked standing to sue in the absence of the other joint owner.

The court likewise affirmed the district court's finding that there was insufficient evidence of direct infringement to support the jury's determination of inducing infringement of the second patent.  There was no evidence that the accused method had actually been practiced by the accused product, and the plaintiff's expert testimony was to speculative to support a conclusion that the accused product necessarily infringed.

More detail of Lucent Techs., Inc. v. Gateway, Inc. after the jump.

 

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Eleventh Circuit: Unsolicited proposals insufficient to show intent to resume use of trademark

In a decision Friday, the Eleventh Circuit affirmed a district court's grant of summary judgment in favor of the defendant, finding the plaintiff had abandoned its trademarks.  Although the complaint consisted of both federal and state common law claims, the analysis ultimately came down to whether a valid Lanham Act claim existed, as the remaining claims were based on the alleged § 1125 claims.  

The Eleventh Circuit held the trademarks in question were abandoned due to nonuse, and that mere hope that the company could get funding from an unknown source was not enough to show intent to resume use in the future.  As a result, the district court's grant of summary judgment on the issue was proper.  The court also held the plaintiff did not have prudential standing to bring a false advertising claim, given the defendant did not sell the allegedly infringing products while the plaintiff was selling products bearing its marks.  Because the Lanham Act claims failed, the remaining claims likewise failed, and the district court's grant of summary judgment was affirmed.

More concerning Natural Answers, Inc. v. SmithKline Beecham Corp. after the jump.

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Patent ownership may change by operation of law, including operation of foreign law

In a decision today, the Federal Circuit vacated a district court's dismissal of a case for lack of standing on the basis of insufficient evidence of patent ownership.  The inventor of the patent died intestate as the only owner of the patent.  While his two daughters executed transfers of ownership to the inventor's widow, the district court held that under 35 U.S.C. § 261, the executor of the estate had to first transfer the patent rights to the heirs, and without such a transfer, there was no standing to bring suit.

The Federal Circuit vacated, noting that while § 261 states that patents are assignable only in writing, previous decisions have held that state law controls the issue of patent ownership.  Further, ownership may transfer by operation of law, and when a patent owner dies, it is state probate law that determines to whom ownership passes.

The court held that this concept applied in this case, even though it would be Japanese law that would determine ownership rather than a state's law.  Because it was unclear from the record whether an administrator is required under Japanese law when a person dies intestate, the court remanded the case to make that determination, which would resolve the standing issue.

More detail of Akazawa v. Link New Tech. Int'l, Inc. after the jump.

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Ninth Circuit: "Exclusive" license from only one copyright co-owner really a nonexclusive license

In a decision last week, the Ninth Circuit affirmed a district court's dismissal of a copyright infringement claim for lack of standing, as well as several related claims.  The plaintiff obtained an "exclusive" license for one of the exclusive rights from a single co-owner of several copyrighted works.  However, because the plaintiff only obtained the license from one co-owner, and not from all co-owners, the license could not be exclusive, as one co-owner does not have the right to exclude other co-owners from exploiting the work.  Accordingly, as a nonexclusive licensee, the plaintiff did not have standing to assert the copyright infringement claims. 

More detail of Sybersound Records, Inc. v. UAV Corp. after the jump.

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Discovery needed to determine effect of employment agreement on patent ownership, but no jury trial

In a decision yesterday, the Federal Circuit remanded a case for further discovery, finding that the district court abused its discretion by denying jurisdictional discovery regarding patent ownership due to the "central relevance" of the information.  The patent ownership dispute arose from an employment contract between one of the two inventors and his employer that purportedly assigned all inventions "which relate in any way to" the business of the employer.  The infringement defendant seized upon this, and obtained an assignment and retroactive license from the employer of any rights it had in the inventions, and then moved to dismiss the case after the close of discovery on the grounds that it was now properly a co-owner of the patent.  Jurisdiction therefore depended on whether or not the inventor or the employer owned the patents in question.  

The district court, after allowing extremely limited discovery on the issue, found that the employer owned an interest the patents and dismissed the case for lack of subject matter jurisdiction.  The Federal Circuit held that the district court had abused its discretion as further discovery was required to fully evaluate the ownership issue, and remanded the case for jurisdictional discovery.  However, the court held that because it characterized the issue as jurisdictional, there was no right to a jury trial on the issue.

Judge Newman dissented in part, finding errors in several aspects of the majority's reasoning, including the conclusion that no jury trial on the underlying jurisdictional issues was necessary, what law applied to whether the contract at issue produced a duty to assign or resulted in an automatic assignment, and the availability of equitable defenses.

More detail of DDB Techs., L.L.C. v. MLB Advanced Media, L.P. after the jump.

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"Exclusive enterprise licensee" does not have standing to sue for infringement without patent owner

In a decision today, the Federal Circuit reversed a decision by a district court declining to dismiss a patent infringement case brought by a party possessing an "exclusive enterprise license" in the patent-in-suit.  The trial court certified the question of licensee standing to the court for interlocutory appeal.  
In reversing the district court's denial of the defendant's motion to dismiss, the Federal Circuit concluded that an exclusive enterprise licensee, like a field of use licensee, does not hold all substantial rights in the licensed patent within the licensed territory.  As a result, in order to have standing, the patent owner must also be joined in the suit, and the court reversed the denial of the motion to dismiss finding the licensee did not have standing to bring suit alone.

More detail of Int'l Gamco, Inc. v. Multimedia Games, Inc. after the jump.

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