Supreme Court says TTAB likelihood of confusion rulings can preclude court rulings
Are SEALTITE and SEALTIGHT confusingly similar? The Trademark Trial and Appeal Board (TTAB) says they are, and that ruling could have the power to preclude a later district court ruling on the same issue, according to the Supreme Court.
In March, the high court issued a decision in B&B Hardware v. Hargis Industries, Inc., finding that the TTAB’s ruling on the likelihood of confusion between trademarks can preclude a district court’s ruling in certain cases. This does not necessarily mean that preclusion will happen frequently going forward, however, according to Kevin C. Parks, a member of Leydig’s Chicago office.
“This is a very narrow decision,” he says. “It moves away from the bright-line rule that a TTAB ruling can never preclude a court ruling, but it certainly does not go to the other end of the spectrum, where preclusion will always or even often be the case.”
Stella M. Brown, an associate of Leydig’s Chicago office, says that the decision underscores the importance of TTAB proceedings.
“With the possibility of preclusion lingering, parties are well-advised to devote attention and resources to TTAB proceedings,” Brown says.
The Supreme Court decision is the latest chapter in a long battle between metal fastener manufacturers B&B Hardware and Hargis over their brands. When Hargis attempted to register SEALTITE, B&B opposed, and the TTAB ruled that the mark was confusingly similar to SEALTIGHT.
Later, B&B sued Hargis for trademark infringement in federal court and argued that the TTAB’s prior finding of likelihood of confusion should be binding in the litigation. The district court disagreed, and a jury returned a verdict of no infringement for Hargis.
B&B appealed to the 8th Circuit Court of Appeals, which found that the administrative ruling did not have a preclusive effect because the TTAB uses a more limited set of factors to evaluate likelihood of confusion.
In its opinion, the Supreme Court found a middle ground, reasoning that “when the uses adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply.”
While not every TTAB ruling will meet the standards for issue preclusion, the court said, some of them may. The Supreme Court reversed and remanded the case to the 8th Circuit for application of the proper standard.
After a decade with no trademark cases, this is the Supreme Court’s second trademark-related decision of the term. In January, the court decided Hana Financial v. Hana Bank, finding that juries are best suited for determining trademark “tacking” for purposes of priority.
Rethink joint development agreements to preserve patent enforcement rights
When multiple parties own a patented invention, each party has the right to use and license the invention. So is it surprising that each co-owner does not have unrestricted rights to enforce the patent to stop unauthorized use of the invention? In view of the U.S. Court of Appeals for the Federal Circuit’s decision in STC.UNM v. Intel Corp., if a patent co-owner refuses to join in an infringement suit, then that lawsuit cannot proceed, regardless of Rule 19(a) of the Federal Rules of Civil Procedure concerning involuntary joinder. Accordingly, joint development participants should decide who has the right to bring a patent infringement lawsuit before entering a joint development agreement.
In its opinion, the Federal Circuit held that when a first co-owner of a patent refuses to join in a patent infringement lawsuit brought by a second co-owner, the second co-owner lacks standing to bring the lawsuit. The case involved a patent co-owned by STC.UNM and Sandia. STC.UNM asserted the patent against Intel Corp, but Sandia refused to join the lawsuit. The district court granted Intel’s motion to dismiss based on a lack of standing to sue because Sandia would not join the suit, stating that “when a patent is co-owned, a co-owner seeking to enforce the patent must join all other co-owners as plaintiffs to establish standing.”
STC.UNM challenged the district court’s decision by asserting that it was contrary to Rule 19(a) of the Federal Rules of Civil Procedure, which suggests that there should be no bar to joining Sandia involuntarily in the lawsuit. In its decision, the Federal Circuit states “that the right of a patent co-owner to impede an infringement suit brought by another co-owner is a substantive right that trumps the procedural rule for involuntary joinder under Rule 19(a).”
The Federal Circuit notes two exceptions to this rule. First, when a patent owner grants an exclusive license, the patent owner has created a “relationship of trust” with its licensee, and the licensee can join the owner involuntarily to an infringement lawsuit. Second, when a co-owner has waived any right to refuse to join a lawsuit, the other co-owner(s) may involuntarily join the co-owner in the suit.
STC.UNM filed a writ of certiorari to the U.S. Supreme Court, but the court denied STC.UNM’s request, so the Federal Circuit’s decision stands.
This decision has broad implications for any joint development that yields co-owned patents, because if just one co-owner of a jointly owned patent refuses to join an infringement suit, the remaining owners would be barred from enforcing their patent rights. To safeguard against this pitfall, joint development participants should specify at the outset of the project the duties and obligations owed to one another in enforcing any co-owned patents. There are a number of ways to accomplish this.
One possible approach to avoid the STC.UNM rule is to grant an exclusive right to enforce the patent to one of the co-owners. An exclusive licensee of the right to enforce, as a co-owner, would have the right to make, use and sell, and via the license would have the exclusive right to enforce the patent against accused infringers. The exclusive licensee would then arguably have substantially all of the rights in the patent. Under Supreme Court and Federal Circuit precedents, this should be sufficient to permit the exclusive licensee to sue in its own name, and would preclude the risk noted by the Federal Circuit in its jurisprudence of multiple suits against an alleged infringer for a single act of infringement.
To implement this strategy, the parties could determine a single entity that will enforce any co-owned patents while negotiating the joint development agreement. A drawback to this approach is that it grants sole responsibility for asserting the co-owned patents to a single entity. This could be problematic, since the joint development participants may have different practical interests in the patents, but only a single party could sue.
Another possible approach is to have the joint development participants grant exclusive territorial licenses to one another. The various parties would receive licenses based on their interests in using the patents in a particular territory. This approach assumes that geographic limitations for manufacture, use and sale of the patented product can be agreed upon between the parties.
Yet another approach, and one that the STC.UNM opinion acknowledges, is to have all joint development participants waive their rights to refuse to join in a subsequent patent infringement lawsuit. If any party later refuses to join a suit as a plaintiff, then that party may be involuntarily joined because they waived their right to refuse. Not only does this approach circumvent the pitfalls created by the STC.UNM opinion, but it also has the benefit of not requiring the parties to determine upfront how to divide the patent rights.
- Overturning precedent set by the U.S. Court of Appeals for the Federal Circuit, the Supreme Court recently held in Commil USA, LLC vs. Cisco Systems, Inc. that a defendant’s belief regarding patent validity is not a defense to an induced infringement claim. The court explained that induced infringement and validity are separate issues and have separate defenses.
- Teva Pharmaceutical Industries, which owns Cephalon Inc., has agreed to pay $1.2 billion to resolve allegations that the company paid off four generic drug manufacturers to delay bringing their own versions of Cephalon’s drug Provigil to market. The settlement brings an end to the Federal Trade Commission’s seven-year lawsuit against Cephalon, marking a victory in the agency’s fight against “pay-for-delay” patent settlements. Watch for more information in the next Leydig newsletter..
“Exceptional case” fee shifting in patent litigation post-Octane
The Supreme Court’s landmark decisions in Octane v. Icon and Highmark v. Allcare dramatically altered the standard for attorney fee shifting in patent litigation. Since Octane, according to an April 13, 2015, letter from the president-elect of the Federal Circuit Bar Association to U.S. Senators Chuck Grassley and Patrick Leahy, the rate at which motions for attorney fees have been granted is nearly three times the rate prior to Octane. This shift underscores the importance of drawing lessons from fact patterns in recent cases that have triggered fee shifting based on a finding of an “exceptional case.”
Prior to Octane, courts predominantly applied the U.S. Court of Appeals for the Federal Circuit’s 2005 Brooks Furniture decision to determine whether a case is “exceptional.” Under this framework, the prevailing party must prove by clear and convincing evidence either material inappropriate conduct, such as willful infringement, fraud or inequitable conduct, or that the litigation was both brought in subjective bad faith and is objectively baseless.
In Octane, the Supreme Court loosened the requirements for fee shifting. Under the Octane standard, the prevailing party must prove by the preponderance of the evidence that the case “stands out” with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated, under the totality of the circumstances. The high court determined that the threshold of the “material inappropriate conduct” prong of Brooks Furniture was too high and asserted the “subjective bad faith and objectively baseless” prong was too restrictive.
In view of the shifting standard, the Supreme Court revised the standard of review in Highmark from the de novo review standard in Brooks Furniture to an abuse of discretion standard.
A number of cases decided since Octane provide clues into what might cause a district court to find a case exceptional. Yufa v. TSI Inc. and Chalumeau Power Systems LLC v. Alcatel-Lucent highlight the importance of thorough pre-filing investigations, while Lumen View Tech., LLC v. Findthebest.com, Inc. shows that courts may consider whether the litigation is predatory.
Various types of litigation misconduct, including improper behavior during discovery disputes, shifting positions during litigation, witness harassment and general unreasonableness, have resulted in attorney fee shifting. Courts also consider the substantive strength of the claims, such as in IPVX Patent Holdings, Inc. v. Voxernet LLC. When finding a case exceptional, Oplus Technologies v. Vizio, Inc. holds that district courts must state the reasons for their fee decisions, particularly if they deny fees.
Moving forward, plaintiffs and defendants should keep these fact patterns in mind when preparing for and participating in patent litigation.
Federal Circuit decision could bring biosimilars to market faster
In a decision that could significantly affect how quickly biosimilars come to market, the U.S. Court of Appeals for the Federal Circuit is considering whether biosimilar developers must follow the procedures in the Biologics Price Competition and Innovation Act of 2009 (BPCIA). The case comes on the heels of the U.S. Food and Drug Administration’s (FDA) first biosimilar approval this spring.
Biosimilars are pharmaceutical products that are similar to biologic compounds, or organism-derived medications, already approved by the FDA. The BPCIA lays out detailed procedures for biosimilar approval, including exchanging patent information with the reference product sponsor in a so-called “patent dance.”
In March, the FDA approved the first biosimilar, Zarxio, which is functionally similar to Neupogen. Neupogen’s manufacturer, Amgen, sued Zarxio’s manufacturer, Sandoz, claiming that Sandoz did not follow the BPCIA’s procedures regarding the patent dance and notice of commercial marketing. Sandoz argued that the BPCIA’s patent dance is not required by law. A district court agreed with Sandoz, and Amgen appealed to the Federal Circuit. At press time, the case was pending. Litigation is also pending against another biosimilar developer, Celltrion, who declined to follow portions of the BPCIA procedures for its proposed biosimilar to Janssen’s Remicade.
“Until Sandoz and Celltrion decided to opt out of all or part of the patent dance, many believed that every biosimilar company would go through the patent dance, as outlined in the BPCIA,” says John P. Snow, a member of Leydig’s Chicago office. “That’s one of the big issues to be resolved – is the BPCIA’s patent dance mandatory?”
According to John Kilyk, Jr., a member of Leydig’s Chicago office, the issue comes down to timing. Biosimilar developers want to have rulings on any relevant patents before they launch their products, he says, noting that Sandoz and Celltrion both sought declaratory judgments unsuccessfully on that issue. When a biosimilar developer declines to follow the BPCIA, it forces the reference product sponsor to sue for infringement sooner than if the patent dance had been completed, which could potentially resolve patent issues faster.
While biosimilar developers may see some benefits to the patent dance, such as narrowing the patents in dispute, most would probably prefer to skip the BPCIA steps, according to Kilyk.
“If the Federal Circuit rules that the BPCIA is optional, then biosimilars likely will be available in the marketplace sooner,” he says. “That is good news for the generic companies and not good news for the reference product sponsors.”
Acquisition International Magazine has named Leydig Best Trade Dress Specialist – Illinois in its 2015 Intellectual Property Awards.
Managing Intellectual Property has named Bruce M. Gagala, H. Michael Hartmann, Brett A. Hesterberg, John Kilyk, Jr., Charles H. Mottier, Wesley O. Mueller, Pamela J. Ruschau and Claudia W. Stangle as IP Stars.
Vault recognized Leydig in its 2015 Best Intellectual Property Boutique Law Firms.
California Super Lawyers has named Arthur J. Bobel a Rising Star in 2015.
The Intellectual Property Law Association of Chicago has chosen Paul J. Korniczky as its president-elect.
IAM Patent 1000: The World’s Leading Patent Professionals 2015 has recognized Leydig and members Bruce M. Gagala, H. Michael Hartmann, John Kilyk, Jr., John W. Kozak and Charles H. Mottier for prosecution, transactions and litigation.
Claudia W. Stangle was named a winner in Acquisition International’s 2015 Intellectual Property Awards.
Leydig welcomes to its Chicago office:
Sarah Aagaard holds a law degree from Chicago-Kent College of Law.
Ronak A. Patel holds a law degree from Chicago-Kent College of Law.
Steven Courtright holds a degree from Bradley University in environmental science/biology.
Idongesit Ebong holds a doctorate in electrical engineering from the University of Michigan.
Guy Watkins holds a doctorate from Vanderbilt University in pharmacology.
Andrew Weflen holds a doctorate in microbiology and immunology from the University of Illinois at Chicago.