Willful or Not; That Is the Question
Sale of Keyword Advertisements Is Actionable Under Lanham Act
Trademark Protection Limited Against Cybersquatters
Lanham Act Controls Unauthorized Product Resales
Geographic Misdescriptiveness Subject to Proof
Archiving Papers for Purpose of Evaluating Plagiarism Is Transformative Fair Use
Copyright Protection Does Not Extend to Idea of a Program to Improve Education
Illegal Use of a Copyrighted Work Does Not Jeopardize Copyright Protection
Copyright Protection Subsists For Original Plush-Toy Designs
House of Representatives Judiciary Committee Considers Patent Reform Act
Willful or Not; That Is the
Question
By Eric Garcia
Affirming a district court's claim that a limited finding of willfulness on an equitable issue was insufficient to support a finding of "willful infringement" for purposes of awarding attorney's fees under 35 U.S.C. § 285, the U.S. Court of Appeals for the Federal Circuit held that a finding of "willful infringement" must remain with the trier of fact and required considerations of intent, state of mind and culpability. Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., Case Nos. 08-1267, -1376 (Fed. Cir., April 29, 2009) (Michel, J.).
In 2002 Revolution Eyewear filed suit against Aspex Eyewear for patent infringement of a patent, which the district court later dismissed. Aspex, together with Contour Optik, Manhattan Design Studio & Asahi Optical (collectively "Contour) counterclaimed that Revolution infringed its patent. The patented invention related to eyewear featuring primary frames and magnetically attached auxiliary frames. On summary judgment, the district court found that Revolution infringed Contour's patent. The district court also granted in part Contour's motion for attorneys' fees, basing its award on Revolution's litigation misconduct.
On appeal, Contour argued that it was entitled to enhanced damages and attorneys' fees under Section 285 based on the district court's limited finding that Revolution "willfully infringed." Specifically, Contour relied on the district court's statement that: "Revolution had unclean hands. Revolution willfully infringed Contour's patent when it continued to sell the infringing frames after the Court granted Contour's motion for summary judgment on the issue of infringement." Contour thus claimed that there was no distinction between the district court's limited finding of willfulness and that needed in "exceptional cases" under Section 285.
The Federal Circuit determined that the district court erred in finding the case "exceptional" under Section 285. According the Court, there was not sufficient evidence to support such a determination because "a limited finding of willfulness ... was 'an insufficient basis on which to declare the entire five-year case as exceptional.'" The Court further claimed that liability for willful infringement turns on considerations of intent, state of mind and culpability, "[a]lthough fairness as between patentee and infringer is a consideration in the determination of whether illegal behavior warrants an enhanced penalty, the question does not thereby become 'equitable.' The issue of willful infringement remains with the trier of fact." Therefore, the Court held that, since the district court made its finding in the context of reviewing an equitable defense, its finding of willfulness was not a sufficient "clear and convincing" finding as to render this case as "exceptional" under Section 285.
Practice Note: A finding of willful infringement under Section 285 requires more than just a mere statement from a court that a party willfully infringed. For a case to be labeled as "exceptional," as required by Section 285, there must be clear and convincing evidence of some material, inappropriate conduct related to the matter in litigation.
Sale of Keyword Advertisements Is
Actionable Under Lanham Act
By Rita W. Siamas
Considering whether the sale of a trademark as a keyword that triggers an internet advertisement may constitute trademark infringement, the U.S. Court of Appeals for the Second Circuit vacated a district court's dismissal of an action against internet search engine Google, holding that a trademark owner's allegations that Google's recommendations and sale of its trademark to advertisers constituted sufficient "use in commerce" to state a claim under the Lanham Act. Rescuecom Corp. v. Google, Inc., Case No. 06-4881, 2009 WL 975447 (2nd Cir., April 3, 2009) (Leval, J.).
This decision is significant in that the Second Circuit clarified its holding in 1-800 Contacts v. When U.com, which district courts (outside of the Ninth Circuit) widely read as holding that internal computer use of a trademark was not actionable under the Lanham Act.
Computer service company Rescuecom sued Google, alleging that Google's sale of Rescuecom's RESCUECOM trademark to Rescuecom's competitors as a keyword to trigger their banner advertisements constituted trademark infringement, false designation of origin and trademark dilution in violation of the Lanham Act. Google moved to dismiss the action, arguing that Google's sale of the RESCUECOM mark did not qualify as trademark use within the meaning of the Lanham Act. Relying on the Second Circuit's 1-800 holding, the district court dismissed the action, finding that Google had not used the mark in commerce. In 1-800, the Second Circuit dismissed a Lanham Act action against an internet marketer, holding that its use of trademark terms in a software program generating "pop-up" advertisements did not constitute "use in commerce" under the Lanham Act. Rescuecom appealed.
The Second Circuit vacated the district court's dismissal, stating that the district court "misunderstood" the holding of 1-800 and held that Rescuecom's complaint adequately pled a use in commerce. In so doing, the Second Circuit found that the allegations in 1-800 were "materially different" than those at issue here. In 1-800, the defendant did not display the plaintiff's trademark in any manner, whereas the court found that Google, through its AdWords program, "displays, offers and sells Rescuecom's mark." Further, the 1-800 defendant did not sell trademarks as keywords and did not disclose to advertisers which keywords it used internally to generate pop-up advertisements, whereas Google actually encourages the purchase of the RESCUECOM mark through its Keyword Suggestion Tool. Thus, the Second Circuit concluded, "Google's utilization of Rescuecom's mark fits literally within the terms specified by [the Lanham Act]."
In rejecting an argument made by Google and its amici that the inclusion of a trademark in an internal computer directory cannot constitute actionable trademark use, the Court stated that "this over-reads the 1-800 decision" and explained that the 1-800 decision was never intended to stand for the proposition that the use of a trademark in an internal software or computer directory would always be absolved from trademark liability. Additionally, the Court noted that "Google's recommendation and sale of Rescuecom's mark to its advertising customers are not internal uses." The Court further noted that, "[i]f we were to adopt Google and its amici's argument," ... "the operators of search engines would be free to use trademarks in ways designed to deceive and cause consumer confusion. This is surely neither within the intention nor the letter of the Lanham Act." The Court also rejected Google's argument that its use of Rescuecom's trademark was akin to the use of product placement by retailers where a generic store-brand product is placed next to a trademarked product, stating that, "Google's argument misses the point," because "[i]t is not by reason of absence of use of a mark in commerce that benign product placement escapes liability; it escapes liability because it is a benign practice which does not cause a likelihood of confusion."
Practice Note: While Rescuecom must still prove a likelihood of consumer confusion before it may obtain relief under the Lanham Act, the Second Circuit's decision provides clarity to trademark owners as to when they may seek redress under the Lanham Act for sale of their trademarks as keywords to trigger internet advertisements. Just weeks after the Rescuecom decision, software company FirePond filed a federal class action lawsuit against Google, challenging Google's policies on behalf of all Texas trademark owners. Similarly, real estate investment company John Beck Amazing Profits, filed a federal class action lawsuit against Google in the same district court, seeking class action status for trademark owners nationwide.
Trademark Protection Limited Against
Cybersquatters
By Jeremy T. Elman
Addressing the issue of cybersquatting (or "typosquatting") versus the traditional standards of trademark infringement, the U.S. Court of Appeals for the Fifth Circuit vacated a preliminary injunction in favor of a trademark holder because the district court improperly applied the broader trademark infringement analysis to cybersquatting claims. Southern Co. v. Dauben Inc., Case No. 08-10248 (5th Cir., April 15, 2009) (per curiam).
Plaintiff Southern Company (Southern) provides energy-related services to consumers throughout the southern United States. It holds the federal, incontestable trademark "Southern Company" and is the registrant of the domain name southerncompany.com. Dauben Inc. (Dauben), a Texas corporation, is the listed registrant of nearly 635,000 domain names. The two challenged domain names, sotherncompany.com and southerncopany.com, are linked to a website that only provides pay-per-click advertising—when an internet user enters either domain name in her browser, she is directed to a webpage that lists links to the websites of paying advertisers.
Southern filed an action under the Uniform Domain Name Dispute Resolution Policy (UDRP) with a World Intellectual Property Organization (WIPO) arbitration panel, which found for Southern and ordered Dauben to transfer the registration of the websites. Dauben then filed a Texas state court action, which delayed the transfer, and Southern responded by filing a federal court action under the Anti-Cybersquatting Protection Act of 15 U.S.C. §1125(d) (ACPA). The district court granted Southern a preliminary injunction. Dauben appealed.
The Fifth Circuit vacated the preliminary injunction because the district court had failed to properly analyze whether Dauben's domain name registration was a fair use: "ACPA's safe harbor provides a narrow berth for fair use arguments, and, on the merits, Dauben's claims may or may not hold up." The Fifth Circuit also vacated the preliminary injunction because the district court erred by analyzing whether the use of the Southern name caused a "likelihood of confusion" under a trademark infringement analysis, rather than the "confusingly similar" standard used to evaluate cybersquatter allegations under §1125(d) of the ACPA. The Court stated that "the likelihood of confusion test of trademark infringement is more comprehensive than the identical or confusingly similar requirement of ACPA, as it requires considering factors beyond the facial similarity of the two marks."
The victory was pyrrhic however, as the district court had by this time considered the case on the merits, heard summary judgment motions and was ready to issue a permanent injunction. Thus, even though the preliminary injunction was vacated, no remand was necessary.
Practice Note: When considering action under the ACPA, trademark holders are well advised to carefully analyze their claims under stricter ACPA standards of Section 1125(d), rather than the more lenient trademark infringements standards.
Lanham Act Controls Unauthorized Product
Resales
By Philip Canelli
In a trademark infringement action the U.S. Court of Appeals for the Tenth Circuit upheld a preliminary injunction granted in favor of a manufacturer of electronics equipment against an internet reseller of its goods that sold products without the manufacturer's warranty. Beltronics USA, Inc. v. Midwest Inventory Distribution, LLC et al., Case No. 07-3340 (10th Cir., April 9, 2009) (Tacha, J.).
Beltronics sells after-market vehicle electronics, including radar detectors, to authorized distributors that in turn sell the products at retail at a specified minimum price. In violation of their distribution agreements, the distributors sold detectors to defendant Midwest, which in turn resold them as "new" on eBay. To prevent Beltronics from discovering this unauthorized distribution, the serial numbers on the radar detectors were either replaced with phony serial number labels or removed altogether.
It is Beltronics' policy to not provide any warranty services for products without legitimate serial numbers. Beltronics ultimately filed the underlying action after consumers sought services for detectors purchased from Midwest. Among other things, the complaint asserted trademark infringement and false designation of origin. Beltronics also sought a preliminary injunction.
Midwest's predominant theory of defense was that there is no likelihood of confusion concerning the source of the Beltronics radar detectors because it is undisputed that the company was selling genuine Beltronics products that were manufactured by Beltronics. Thus, Midwest contended that it was protected from Beltronics' claims under the "first sale" doctrine. Generally, a trademark owner's right to control distribution of its trademarked product does not extend beyond the first sale of the product. In other words, resale by the first purchaser of an original article under the trademark does not constitute infringement.
However, the first sale doctrine does not apply when an alleged infringer sells trademarked goods that are "materially different" than those sold by the trademark owner. A guiding principle in evaluating whether a difference between two products bearing the same trademark is material is whether the difference causes consumer confusion about the source and the quality of the trademarked product.
In rejecting Midwest's argument based on the first sale doctrine, the Tenth Circuit found that "material differences" are not limited to differences in the physical quality of the goods. Instead, the mere removal or alteration in warranty protection can constitute a "material difference" in the goods so as to render the goods in question non-genuine. Thus, the Tenth Circuit held that the first sale defense was not available to Midwest because it sold a materially different good without the manufacturer's warranty and without adequate disclosures to buyers about the differences in the products.
Practice Note: The Tenth Circuit's decision demonstrates the viability of trademark infringement lawsuits as a means of controlling the unauthorized resale of trademarked goods. However, the court also noted that resellers of unauthorized goods could potentially avoid trademark liability by taking steps to avoid confusing consumers and damaging the trademark owner's goodwill—such as by "sufficiently disclosing" how the product warranty differs from the original product.
Geographic Misdescriptiveness Subject to
Proof
By Amol Parikh
Finding that the Trademark Trial and Appeal Board (the "Board") had improperly defined the relevant customer for purposes of determining whether a trademark was geographically deceptively misdescriptive under the Lanham Act, the U.S. Court of Appeals for the Federal Circuit vacated and remanded the Board's decision. In re Spirits International, N.V., Case No. 08-1369 (Fed. Cir., April 29, 2009) (Dyk, J.).
Spirits International, N.V. (Spirits) filed a trademark application for use of the mark MOSKOVSKAYA for vodka. In its application, Spirits stated that the vodka would not be manufactured, produced or sold in Moscow and would not have any other connection with Moscow. Applying the doctrine of foreign equivalents, the Board found that in Russian, Spirits' mark means "of or from Moscow." After translating the mark, the Board analyzed the mark under § 1052(e)(3) of the Lanham Act, which prohibits the registration of marks that are primarily geographically deceptively misdescriptive of goods. A trademark is geographically deceptively misdescriptive of goods if the mark's primary significance is a generally known location, the relevant public would be likely to believe that the goods originated at the place named in the mark when in fact the goods did not come from that place and the deception is a material factor in the consumer's decision. Taking judicial notice that Russian is spoken by almost a million people in the United States, the trademark office refused registration of the mark concluding that it was geographically deceptively misdescriptive of goods because Russian speakers would believe the vodka was from Moscow, when in fact it was not. Spirits appealed.
On appeal, the Federal Circuit first addressed the doctrine of foreign equivalents, noting that under the doctrine, foreign words from common languages are translated into English so as to consider the meaning of the mark to non-English speakers of that language. The Federal Circuit also noted that as a threshold limitation on the application of the doctrine, the doctrine only applies in those situations in which the ordinary American consumer would stop and translate the mark into English. The Court went on to find that the ordinary American consumer includes all American purchasers, including those proficient in a non-English language who would ordinarily be expected to translate words into English.
The Court focused its attention on the materiality requirement under §1052(e)(3), which the Court found to be related to the common law doctrine of unclean hands as applied to deceptive trademarks. However, the Court also found that the doctrine of unclean hands did not apply in situations where only a relatively small number of customers were misled. Applying the common law doctrine to § 1052(e)(3), the Court found that the appropriate inquiry for materiality is whether a substantial portion of the intended audience is likely to be deceived, not whether any absolute number of a particular segment of the intended audience (such as foreign language speakers) is likely to be deceived.
Applying the materiality requirement to Spirit's mark, the Court found that although the trademark office may have found that an appreciable number of the intended audience (i.e., Russian speakers) might be deceived, the trademark office improperly rejected the concept of proportionality and failed to consider whether Russian speakers were a substantial portion of the intended audience. Without expressing any opinion as to ultimate question of whether the intended audience was materiality deceived, the Court noted that only 0.25 percent of the U.S. population speaks Russian and, if this is the only portion of the intended audience that is deceived, this would not be a substantial portion. However, the Court also noted that to the extent that the intended audience was Russian speakers and some portion of non-Russian speakers would understand that the mark to suggest that the vodka came from Russian, these groups could constitute a substantial portion. The Court vacated the trademark office's holding and remanded for further proceedings the factual question of whether a substantial portion of the intended audience would be deceived by the mark.
Archiving Papers for Purpose of
Evaluating Plagiarism Is Transformative Fair Use
By Sara E. Coury
The U.S. Court of Appeals for the Fourth Circuit affirmed a grant of summary judgment against the plaintiffs' (a group of high school students) copyright infringement claims. Their high schools required plaintiffs to submit written assignments via Turnitin.com, a service operated by iParadigms, LLC, which digitally compares submitted papers with various databases to generate an "Originality Report" showing the percentage of the paper, if any, that is not original. The students appealed. A.V. et al v. iParadigms, LLC, 562 F.3d 630 (4th Cir., April 16, 2009) (Traxler, J.).
After evaluating each of the fair use factors—purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for or value of the copyrighted work—the Fourth Circuit affirmed the district court's conclusion that defendant has established a fair-use defense.
In considering the first factor, the court found that the defendant's use of the students' work was transformative because digitally archiving papers for the purpose of detecting plagiarism is unrelated to the expressive content of the work. The Court further found that the transformative nature of the use outweighed its commercial nature. With regard to the second factor, the Court concluded the nature of the work was a factor that favored neither party. While plaintiffs' works were entitled to the highest level of protection as creative works, defendant's archiving of the papers was unrelated to the creative content of the papers. The Court also found that, despite the fact that the defendant copied the whole of plaintiffs' works, the third factor favored neither party. The extent of the copying was balanced by the transformative nature of the use. With regard to the fourth factor, once again the transformative nature of the use weighed in the defendant's favor. The Court found that defendant's use of the plaintiffs' work would only impair sales of unpublished papers to fellow students. Since the plaintiffs' testified they would never be a party to cheating by selling their papers to other students, the Court found that the defendant's use had no impact on the market for the plaintiffs' works, and, therefore, the fourth factor weighed in the defendant's favor.
Copyright Protection Does Not Extend to
Idea of a Program to Improve Education
By Peter Siavelis and Rita J. Yoon
The U.S. Court of Appeals for the Seventh Circuit has reminded us that it is not an idea, but the original expression for the implementation of an idea, that is entitled to copyright protection. Brooks-Ngwenya v. Indianapolis Public Schools, Case No. 08-1973 (7th Cir., April 15, 2009) (per curiam).
The plaintiff, a former classroom assistant, sued the Indianapolis Public Schools for copying an educational program or system that she developed while working for the school district. The program was a system of rewards and recognition for underachieving students to be implemented by the school. For example, the program included behavioral classes, reading classes and awarding of certificates to students. The plaintiff applied for copyright registration on the program, but the U.S. Copyright Office initially refused registration because the subject matter of her copyright claim was unclear. The plaintiff then filed an infringement action against the school district without overcoming the refusal of registration.
The district court granted summary judgment for the school district because the plaintiff failed to allege any work that would qualify for a valid copyright and the plaintiff lacked a copyright registration prior to filing suit. While the case was on appeal, the plaintiff renewed her application with the Copyright Office and ultimately obtained a copyright registration.
The Seventh Circuit affirmed the district court's decision, explaining that the plaintiff did not even try to prove that the school district, in implementing its program for encouraging students, copied any materials related to her ideas regarding a student improvement program. Instead, the plaintiff merely alleged that the school district copied her ideas for better educating students. For example, the plaintiff alleged that the school district copied her program by rewarding students with certificates and by conducting behavioral classes. The court stated, "It is not the idea that is protected, but rather the original expression of the idea." Thus, the plaintiff's infringement action was doomed because she failed to show that "the form of words in which she embodied her ideas was copied."
The court also raised two procedural issues that could preclude a copyright infringement claim. First, the court commented that the circuits are split on whether a plaintiff must apply for registration or actually receive a certificate of registration prior to bringing a copyright infringement claim. This question is currently pending before the Supreme Court in In re Literary Works in Electronic Databases Copyright Litigation. The court stated that "[c]ompliance with the registration requirements of 17 U.S.C. § 411(a) is not a condition of copyright protection but is a prerequisite to suing for infringement."
Second, the court concluded that applicants who are refused copyright registration must notify the Copyright Office of a copyright infringement claim before filing suit. "Even though nonjurisdictional, the notification requirement is a prerequisite to suit," to ensure that the Office could intervene and defend its refusal to register a work.
Practice Note: At least until (and unless) the Supreme Court rules otherwise, plaintiffs should continue to obtain a copyright registration before filing a copyright infringement action. If the Copyright Office has refused registration, plaintiffs should notify the Copyright Office of the suit by providing a copy of the complaint. Of course, authors should focus their claims for copyright on the original expression embodied in their work, not just the underlying idea.
Illegal Use of a Copyrighted Work Does
Not Jeopardize Copyright Protection
By Elisabeth (Bess) Malis
Addressing whether a copyright owner's illegal use or operation of a work affects copyright protection, the U.S. Court of Appeals for the Ninth Circuit held that illegally exploiting an otherwise copyrightable work neither removes the work's copyright protection nor prohibits a copyright owner from seeking actual or statutory damages in an infringement action. Dream Games of Arizona, Inc. v. PC Onsite, Case No. 07-15847 (9th Cir., Apr. 2, 2009) (Wardlaw, J.).
Dream Games is the developer and copyright owner of the electronic video bingo game "Fast Action Bingo" (the Game). Dream Games and PC Onsite entered into negotiations for PC Onsite to perform software upgrades to the Game. After the defendant created the upgrades, negotiations between the parties broke down. PC Onsite subsequently developed a competing game that exhibited the same type of upgrades and licensed its product to bingo parlors that featured the Game, in direct competition with Dream Games. Dream Games filed suit for copyright infringement and various contract claims. The jury awarded Dream Games $25,000 in statutory damages and the Court granted a permanent injunction against the defendant's use of the competing game.
On appeal, the Ninth Circuit rejected the defendant's arguments that Dream Games was not entitled to damages because it was operating the Game illegally in two states. The Ninth Circuit referenced its own decision in Belcher v. Tarbox, as well as the Fifth Circuit's decision in Mitchell Bros. Film Group v. Cinema Adult Theater, two cases in which copyright protection was upheld for works comprised of illegal content, to exemplify that courts rarely entertain defenses of illegality and unclean hands absent evidence that the plaintiff's conduct related directly to the infringement and such conduct directly injured the defendant. As PC Onsite was not directly injured by Dream Games' illegal operation of the Game, the Circuit affirmed the district court's ruling and held that illegal operation of a copyrighted work does not strip the work of copyright protection and is not a defense to infringement. Analogizing the "Mitchell/Belcher principle" to the case at hand, the Ninth Circuit reasoned that since copyright protection is afforded to works with illegal content, works that contain legal content, but which may be used or operated in an illegal manner, are "surely copyrightable." In addition, because the Game was only illegally operated in two out of 50 states, it would be "absurd" to deny copyright protection based on such limited illegality. The Court further held that any damages available under the Copyright Act are available to an injured copyright owner, notwithstanding evidence of illegal operation, provided that the illegal conduct did not directly injure the infringer.
Practice Note: The Court's holding conveys the strength of federal copyright protection; the manner in which a copyrighted work is exploited has no bearing on the nature of the copyright itself.
Copyright Protection Subsists For
Original Plush-Toy Designs
By Irina R. Kushner
The U.S. Court of Appeals for the First Circuit, reviewing a district court decision in which the defendants were preliminarily enjoined from producing plush-toy coqíes (or frogs) that infringed plaintiff's copyright, affirmed the injunction, concluding that the findings of the district court that the defendant had was access to the copyrighted work and that there was substantial similarity (the latter under the ordinary observer test) were supported by the record. Coquico, Inc. v. Rodriguez-Miranda, Case No. 07-2786 (1st Cir., Apr. 6, 2009) (Selya, J).
Plaintiff-appellee Coquico manufactures and distributes plush-toy dolls of various animals. One such line of plush toys features the coquí común, a small brown tree frog indigenous to Puerto Rico, for which Coquico secured a copyright registration in 2001. When Identiko, a company founded by a former employee of Coquico, began selling a plush-toy that strongly resembled Coquico's, the plaintiff sued for copyright infringement. Following an evidentiary hearing, the district court preliminary enjoined the defendants from continuing to market the firm's coquí. The defendants appealed.
To prevail on a copyright infringement claim, a party must prove a valid copyright and copying of original elements of the work by the alleged infringer. In this case, the defendants conceded that Coquico had a valid copyright. Thus, the appeal focused on the second requisite, or the copying of original elements. This requirement imposes on the copyright holder a two-part burden: to prove both that the infringer copied and that the works are substantially similar.
The defendants never disputed that Rodríguez, as a former employee of Coquico, had access to plaintiff's proprietary plush-toy frog design. The First Circuit easily found that "the combination of access to information concerning the design and production of [plaintiff's plush-toy frog] and the probative similarity between the two products adequately buttresses the district court's determination that Coquico had shown a likelihood of success on the issue of actual copying."
With respect to the substantial similarity factor, the defendants relied on the merger and scenes à faire doctrines, arguing that that because the coquí común is found in nature, the only "original" elements of plaintiff's plush-toy frog are its brass button and information hang tag. The First Circuit rejected the defendants' argument as "artificially narrow." The court held that, at a minimum, the Coquico's plush-toy frog's distinctive stitching pattern, its idiosyncratic color combination, pose and the placement of Puerto Rican flag on the underbelly, as well as the plush-toy's dimensions were all protectable as original expression of ideas. The defendants also challenged the district court's finding that "an ordinary observer would be disposed to overlook [any] disparities and conclude the wares were the same." In particular, defendants argued that Coquico's copyright was "not very robust," and thus, any shared qualities between the two toys did not rise to the level of substantial similarity. The First Circuit disagreed, reasoning that the stitching, color combination, posture, size and flag placements on the two products were virtually identical. As such, the district court had not erred in finding that Coquico would likely have prevailed on the substantially similarity issue.
House of Representatives Judiciary
Committee Considers Patent Reform Act
By Rita W. Siamas and Paul Devinsky
On April 30, 2009, the House Judiciary Committee held a hearing on the House's version of the Patent Reform Act of 2009, H.R. 1260. While the Senate Judiciary Committee passed an amended version of its patent reform bill on April 2nd, S. 515, House Judiciary Chairman John Conyers, Jr. (D-Mich.) stated that the House committee would consider the issues independently, stating that "[t]his body is not a rubber stamp for the Senate. Further, Conyers vowed that the committee would pass a bill that is "fair to all parties concerned—or as fair as we can get it."
Seven witnesses testified during the hearing and other interested groups submitted written statements to the committee. Not surprisingly, a majority of the testimony centered on the issue of apportionment of damages. Dean Kamen, inventor of the Segway, testified on behalf of inventors. Concerning the damages provision in H.R. 1260, Kamen testified that he was "somewhat encouraged" to learn of the Senate's most recent damages provision, which provides additional guidance to judges in determining damages but does not alter the current damage calculation standard. "[T]his may be a reasonable compromise," Kamen contended, "but anything that went beyond this to alter the standards for calculating damages could have serious consequences for our patent system and our economy." Jack Lasersohn, representing the National Venture Capital Association (NVCA), testified that his coalition also supports the Senate's "gatekeeper" compromise, which replaced the apportionment of damages provision in the Senate bill. Lasersohn explained, "the venture capital community believes that the current methodology for calculating damages is appropriate and working and that patentees are not systematically overcompensated."
Post-grant review was also a topic of interest during the hearing. Kamen spoke out against the provisions in the House bill, arguing that, "the expansion of post-grant reviews proposed by H.R. 1260 would add uncertainty to the value and validity of patents (in some instances many years after those patents were granted), create further disincentives for patent holders and investors, and may open the system up abuse by potential infringers." Lasersohn indicated that NVCA supports a limited, 12-month window for post-grant review, but cautioned that, "we must recognize the imbalance of power intrinsic in this situation and take care that the system limits the potential for abuse by larger firms seeking to harass smaller competitors." Further, NVCA opposes expanding inter partes re-examination to include the use of "prior public use or sale," language in H.R. 1260, which was removed from the Senate bill.
Biotechnology Industry Organization (BIO), a frequent contributor to patent reform discussions, submitted written testimony to the House committee. As it has stated on previous occasions, BIO stated that it opposes the post-grant review provisions in the House bill that would broaden the grounds upon which a patent may be administratively challenged, as well as the bill's apportionment of damages provision. BIO stated that with respect to these provisions, "it stands in good company, as [t]here is a broad consensus, among a variety of industries, universities, unions and other stakeholders across the spectrum of American society, against these proposed changes."
On the Senate side, on May 12, a group of labor and trade unions requested Senate Majority Leader Harry Reid (D-Nev.) to schedule a floor vote on S. 515, the Senate compromise version of the Patent Reform Bill, in the near future, clearly signaling their support for the bill. On that same date, Senator Patrick Leahy (D-Vt.), filed a report of the Senate Judiciary Committee on the bill, declaring it ready for Senate consideration. It is unclear what, if any impact, the removal of Senator Arlen Spector (D-Penn.) from his position as ranking Republican member of the committee (following his switch of party affiliation) will have on the bill. Senator Jeff Sessions (R-Ala.) will replace Senator Spector.
Chief Judge Michel of the Federal Circuit, speaking at the May 14 American Intellectual Property Law Association (AIPLA) meeting in San Diego, spoke out against damages apportionment legislation, stating that in reasonable royalty cases, the existing law on apportionment is fairly clear" and that the case law already circumscribes when the entire market value rule should be applied, i.e., only in cases in which the patented component is the reason for consumer demand According to Judge Michel, even the Senate compromise version on damages reform (i.e., imposing on trial judges a gatekeeper function to keep certain damages evidence out of the case) is not needed as courts already routinely perform this function.
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