'; November 2019 Newsletter

November 2019 Newsletter

November 10, 2019

Trademark Owners Need to Prepare for Increased Likelihood of Post-Registration Audits

When filing a Section 8 or 71 Declaration of Use to maintain a trademark registration, the USPTO may require more evidence of use than in the past. On November 1, 2017, the United States Patent and Trademark Office (USPTO) launched an audit program to cancel registrations or delete from registrations goods and services that are not in use.

After a pilot program revealed that 51% of audited registrations failed to verify a previously claimed use of a mark for certain goods or services, the USPTO decided to make the program permanent. According to the USPTO, its analysis of audit results between November 1, 2017, and June 28, 2019, revealed high deletion rates (50.1%) and led the office to conclude, “The troubling statistics to date suggest a lack of care, lack of knowledge about what the law requires, or both by trademark owners and their counsel.”

The USPTO is now auditing approximately 10% of registrations for which Section 8 or 71 Declarations are filed, and the Office recently doubled the number of registrations it audits to 5,000 per year.

“The increasing likelihood of an audit is something all trademark owners should be prepared for,” says Tamara Miller, a shareholder in Leydig’s Chicago Office. “That preparation involves educating trademark owners about the audit program and proactively deleting goods and services that are not in use before submitting a declaration to the Trademark Office claiming use.”

A registration is subject to an audit after the filing of a Section 8 or 71 Declaration if the registration includes at least one class with four or more goods or services, or if it includes at least two classes with two or more goods or services.

If the USPTO audits a registration, the examining attorney will require proof of use for two goods or services for each audited class. For multiclass registrations with classes containing only one good or service, proof of use will only be required for a class if the specimen of record for that class is not acceptable.

If the owner provides proof of use for the audited goods or services, the USPTO will issue a Notice of Acceptance. If the response does not include acceptable proof of use, or if any of the audited goods or services are deleted in the response, the owner will then be required to provide proof of use for all of the remaining goods and services in the registration.

Ultimately, a failure to respond or provide required proof of use for any audited items can lead to the cancellation of a registration, warns Kyle Migliorini, an associate in Leydig’s Chicago office.

“As the USPTO becomes more aggressive in auditing registrations, trademark owners should be careful before submitting a Section 8 or 71 Declaration. The process to accumulate proof of use evidence for all claimed goods and services in a registration can be costly and time-consuming, so owners should be encouraged to delete goods and services that are not in use prior to receiving an audit.”

IP Issues Take Center Stage in the Supreme Court’s New Term

As the Supreme Court begins its fall term, intellectual property issues loom large on its docket. The Court granted certiorari earlier this year in several matters that will affect patent, copyright, and trademark litigation, and its decisions will bring clarity to these matters, resolve circuit splits, and guide parties in their strategic decision-making.

As the fall term unfolds, keep an eye on the following:

Appealability of PTAB time-bar rulings

Granting certiorari on June 24 in Dex Media, Inc. v. Click-To-Call Technologies, LP, the Court will decide whether a party in an inter partes review (IPR) proceeding may appeal a Patent Trial and Appeal Board (PTAB) time-bar decision that affects the Board’s determination as to whether or not to institute a proceeding.

Specifically, the Court agreed to review whether 35 U.S.C. § 314(d) permits appeal of the PTAB’s decision to institute an IPR after finding the one-year time-bar in § 315(b) did not apply. This is the same issue the Federal Circuit addressed in its 2018 en banc ruling in Wi-Fi One, LLC v. Broadcom Corp., when it concluded that a decision that the time-bar did apply is appealable.

The Court will also address the question of whether a patent infringement complaint voluntarily dismissed without prejudice triggers § 315(b)’s time-bar.

State immunity for copyright infringement

In a case involving the infamous pirate, Blackbeard, the Court will decide whether Congress exceeded its Article I powers when it abrogated state sovereign immunity in federal copyright infringement suits as part of the Copyright Remedy Clarification Act (CRCA).

In Allen v. Cooper, a media company that shot video of the submerged shipwreck of the Queen Anne’s Revenge, Blackbeard’s commandeered ship, sued the state of North Carolina for using that footage without permission. After the district court denied the state’s motion to dismiss, the Fourth Circuit reversed, holding that the CRCA’s elimination of sovereign immunity in such copyright suits was unconstitutional. The Court granted certiorari on June 3.

Copyright in legal texts

The U.S. Copyright Office’s guidelines and practices, as codified in 17 U.S.C. § 105, provides that official edicts of government, such as statutes, regulations, and court decisions, cannot be the subject of protectable copyrights. Granting certiorari on June 24 in the case of Georgia, et al. v. Public.Resource.Org, Inc., the Court agreed to review the scope and extent of this prohibition.

The state of Georgia sued, an open government group, for copyright infringement after it republished an annotated version of the state’s legal code without permission, claiming the annotated code constituted “commentary” and not an “edict of government.”

Reversing the district court’s decision that granted summary judgment in the state’s favor, the Eleventh Circuit held that even the annotated form of the state’s code was “inherently public domain material” and, accordingly, not subject to copyright.

Recovering profits in trademark infringement litigation

Is “willfulness” a requirement for the award of the defendant’s profits in trademark infringement litigation? Six circuits – the First, Second, Eighth, Ninth, Tenth and D.C. – say it is. Six others – the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits – say it is not.

The Court will resolve this split in Romag Fasteners, Inc. v. Fossil Inc., definitively establishing a plaintiff’s burden for obtaining profit-based damages.

Preclusion of defenses in trademark infringement cases

In Lucky Brands Dungarees, Inc. v. Marcel Fashion Group, Inc., the Court will decide whether federal preclusion principles bar a trademark infringement defendant from raising defenses that it could have asserted in a previous case between the same parties, even when the plaintiff brings new claims.

If the Court agrees with the Second Circuit that such defenses must be raised in the earlier action or be lost in a subsequent case, it would arguably require trademark defendants to assert defenses against unasserted claims to preserve those defenses in future litigation.


Federal Circuit Rejects Concept of “Aesthetic Functionality” for Design Patents

Consumer preference for the specific appearance of a product does not make that appearance “functional” such that it would invalidate a design patent, the United States Court of Appeals for the Federal Circuit ruled recently.

In its July decision in Automotive Body Parts Association (ABPA) v. Ford Global Technologies, LLC, the Federal Circuit rejected ABPA’s “invitation” to “hold that the aesthetic appeal – rather than any mechanical or utilitarian aspect – of a patented design may render it functional.”

While the court did not break new ground in its ruling, which involved replacement hoods and headlights for Ford’s F-150 trucks, the case is a reminder of the importance of seeking design patents, says John Augustyn, a shareholder in Leydig’s Chicago office.

“In the eyes of consumers, the value for many goods, like replacement automotive parts, is that they match the vehicle, even if some other part could perform the same function,” he notes. “By securing a design patent, a manufacturer can capture the service parts market for itself.”

While a utility patent must be based on a good’s functionality, a design patent protects a “new, original and ornamental design for an article of manufacture” under 35 U.S.C. § 171(a). An article of manufacture can have functional elements and still receive a design patent, but the ornamental design cannot be “primarily functional.”

In this case, ABPA argued that Ford’s design patents for its F-150 hood and headlights were invalid for lack of ornamentality, claiming their compatible appearance with the truck was, in fact, part of its “aesthetic functionality,” a concept ABPA borrowed from trademark law.

The Federal Circuit affirmed the district court’s grant of summary judgment in Ford’s favor, holding that “even in this context of a consumer preference for a particular design to match other parts of a whole, the aesthetic appeal of a design to consumers is inadequate to render that design functional.”

The court also noted that accepting ABPA’s argument would defeat the entire purpose of design patents.

“If customers prefer the ‘peculiar or distinctive appearance’ of Ford’s designs over that of other designs that perform the same mechanical or utilitarian functions, that is exactly the type of market advantage ‘manifestly contemplate[d]’ by Congress in the laws authorizing design patents,” the court wrote.

Elias Soupos, a shareholder in Leydig’s Chicago office, says that while companies may want to leverage “market advantage,” they may miss the opportunity to do so if they consider only a product’s functionality when making decisions about its patentability.

“Especially on a product that would not support a utility patent, a design patent is an excellent way to protect something that is otherwise unprotectable,” he says. “Looks may not be everything, but in this context, they are certainly worth a lot.”


Leydig Announces

  • Tony Sanny joins our Boulder office as a Member. He holds a Bachelor of Arts degree in Biological Sciences from the University of Chicago, a  Ph.D. in Cell and Molecular Biology from the Illinois Institute of Technology, and a law degree from the University of Colorado School of Law.
  • Keelin Bielski joins our Chicago office as an Associate. She holds a Bachelor of Science degree in Neuroscience from the University of Miami and a law degree from the University of Miami School of Law.
  • Joseph Carrafiello joins our Chicago office as an Associate. He holds a Bachelor of Science degree in Political Science from Miami University and a law degree from The Ohio State University Moritz College of Law.
  • Kevin Liu joins our Chicago office as an Associate. He holds a Bachelor of Science degree in Electrical Engineering from the University of Illinois at Urbana-Champaign and a law degree from the University of Illinois College of Law.
  • Hannah Liang joins our Walnut Creek office as a Patent Agent. She holds a Bachelor of Science degree in Opto-Information of Science and Technology from the Huazhong University of Science and Technology, a Master of Science degree in Electrical Engineering from Arizona State University, and a Ph.D. in Electrical Engineering from Arizona State University.