Mary Siceloff

Just over two months ago, Sacramento’s beloved Firestone Public House was sued by multinational conglomerate Bridgestone Brands, LLC for trademark infringement, trademark dilution, and unfair competition based upon Firestone’s use of the FIRESTONE mark. I initially found this dispute to be quite interesting in light of what I appeared to be vastly different groups of consumers being served by the respective entities: tire consumers vis-à-vis food and beverage consumers. However, I subsequently learned that Bridgestone’s use of the FIRESTONE mark goes beyond tires and into the restaurant and bar industry, as reflected by its federally registered trademark.

The complaint includes allegations relating to the fact that the 16th and L Street location occupied by the Firestone Public House was previously occupied by a Firestone Tire location for 75 years, and is in fact known as the Firestone Building around Sacramento, giving rise to a greater likelihood of consumer confusion. Perhaps more importantly, as mentioned above, Bridgestone owns a federally registered trademark for restaurant and bar services, which according to the U.S. Patent and Trademark Office’s file, dates back to December 1954. In its answer and counterclaim, Firestone Public House seeks to cancel Bridgestone’s mark and contends that the mark was not registered until after Firestone Public House opened. That fact, however, may be of little consequence if Bridgestone has been using the mark in commerce since 1954. In fact, Firestone’s counterclaim is likely only a strategic action taken in an attempt to gain settlement leverage. Specifically, it seems Firestone is trying to force Bridgestone to have some skin in the game so that a more favorable settlement can be reached.

It is unlikely that we will ever see this case adjudicated on the merits. Firestone, although seemingly quite a successful venture, is not nearly as well funded as Bridgestone, so it seems unlikely that it will be as willing to throw money at litigation if it can reach some form of acceptable resolution. And while Bridgestone is flush with cash, it didn’t get that way from throwing money down the drain, and it will probably reach a deal with Firestone that it can live with. After all, it doesn’t seem likely that Firestone’s use of the mark will greatly impact Bridgestone’s reputation in the restaurant and bar industry, especially since most people are unaware of Bridgestone’s Firestone branded restaurants.

But with that said, it also remains possible that Bridgestone will refuse to play ball and negotiate with Firestone in good faith. It wouldn’t be the first time that a national conglomerate stepped in and tried to bully a successful, but significantly smaller company. In fact, perhaps we should expect that sort of behavior from a party who stepped in and sued a distantly located, single-location restaurant over its use of the trademark. It remains to be seen how this will shake out but we will be keeping an eye on this case, and if there are any significant developments, we will be sure to write about them.

For more Intellectual Property articles, visit our IP Law Blog here: http://www.theiplawblog.com.

In Eolas Technologies Incorporated v. Amazon.com, Inc., 3-17-cv-03022 (CAND August 24, 2017, Order) (Tigar, USDJ) the United States District Court for the Northern District of California recently denied plaintiff Eolas Technologies Incorporated’s (“Eolas”) motion to disqualify its former counsel, Latham and Watkins (“Latham”), as counsel for defendant Amazon.com (“Amazon”) because Eolas delayed filing its disqualification motion for over a year after it learned of the potentially conflicting representation.  The Court further found Eolas waived its disqualification argument because the delay substantially prejudiced Amazon in its defense of Eolas’ patent infringement action against Amazon.

On November 24, 2015, Eolas filed a patent infringement action in the Eastern District of Texas against Amazon, asserting infringement by Amazon of U.S. Patent No. 9,195,507 (the “’507 patent”).  The ‘507 Patent relates generally to manipulating data in a computer network, and specifically to retrieving, presenting and manipulating embedded program objects in distributed hypermedia systems.  After the case was filed, Amazon moved to transfer the case to the Northern District of California, and, on April 28, 2017, that case was transferred.

At some point between 1998 and 2006, Latham attorneys represented Eolas in some capacity, and although the exact scope and duration of that representation is contested, Eolas claimed that “Latham was privy to all of Eolas’ proprietary and confidential information relating to its technology, patents, patent applications, business, litigation and licensing strategies, particularly those relating to the ‘906” patent, which is the parent to the ‘507 patent-in-suit.  As a result, Eolas argued Latham must be disqualified from representing Amazon because “Amazon’s defense is predicated on attacking [the ‘906 patent,] the very patent that Latham once competed to assert and later defended, and about which Latham has acquired substantial confidential and strategic information.”

As a preliminary matter, the Court first had to decide whether Texas or California law governed.  As noted, the case was originally filed in the Eastern District of Texas, as was the motion to disqualify, but the case was transferred to the Northern District of California before a decision on the motion issued.  Amazon argued that Texas law still governed.  Eolas argued that California law now applies.  The Court held that it should apply Texas law when analyzing the motion to disqualify because when Latham agreed to represent Amazon, the case was pending in the Eastern District of Texas and Latham would have been correct to expect that Texas ethical codes would apply to any motion to disqualify.  The Court then reasoned that the same law should apply now because “[a] change of venue under § 1404(a) generally should be, with respect to state law, but a change of courtrooms.”  Thus, the Court applied Texas law to the motion to disqualify.

Moving on to the substance of the motion, the Court first noted that under Texas law, “[w]aiver of a motion for disqualification of counsel is proper where the delay in moving for a disqualification is for an extended period of time, or where it is done on the eve of trial.”  However, there was a factual disagreement about when Eolas discovered Latham’s alleged conflict.  Eolas claimed that, until January 6, 2017, “nobody at Eolas knew that Latham was representing Amazon.”  Amazon, on the other hand, asserted that Eolas had known that Latham represented Amazon a year earlier, by January 2016.

The Court sided with Amazon.  Specifically, the Court noted that Latham had appeared in the case for Amazon in January 2016, and that this appearance was recognized by Eolas’ counsel.  Under Texas law, an attorney’s knowledge is imputed to a client, in this case Eolas.  The Court also noted that Eolas knew that it had previously retained Latham, including for work related to the ‘906 patent.  Therefore, the Court found Eolas knew about the Latham conflict for a year before it decided to file its motion to disqualify, and that one year qualifies as an extended delay.

The Court also found that Amazon would face substantial prejudice from Latham’s disqualification.  The Court noted that in 2016 – the year during which Eolas knew of the alleged conflict but took no action – Latham billed over 3,400 hours to defend that action and prepare the matter for trial.  The Court found this large expenditure of time and resources weighed in favor of waiver.  Thus, the Court concluded that Eolas waived its right to seek disqualification by waiting one year after discovering Latham’s conflict to file its motion, and denied the motion to disqualify Amazon’s counsel.

This case is a good reminder to timely raise all issues and potential challenges.  Otherwise, if clients and their counsel delay to long after having been found to be aware of the issue or potential challenge, a court may find it to have been waived and/or unfairly prejudicial to the other party given the delay.

My last column was the first of two columns discussing some of the most common misconceptions or myths about patents.  Here is the second part, starting with number five on my list.

5. A Patent Does Not Give the Patent Owner the Right to Practice the Invention.

Inventors and patent owners often assume that a patent gives them rights to practice the patented invention, i.e., freedom from infringement.  Not true.

A patent is a grant to its owner of the right to exclude others from making, using, offering to sell, and selling the patented invention in the United States, or importing the invention into the United States.  These rights are called exclusionary rights.  A patent does not provide its owner with the rights to do these things.  An invention may be patentable but still infringe another person’s patent.  In such a case, the patent owner may have a patent on the invention but cannot make or use the invention unless they obtain a license from the owner of the patent that is infringed.

6. Patents Do Not Infringe Other Patents.

A patent cannot infringe another patent.  Only a machine, article of manufacture, composition of matter, or process can infringe a patent.

As stated above, a patent gives its owner the right to exclude others from making, using, offering to sell, selling, or importing the patented invention.  The patent is infringed if any of these acts are committed in the United States without the patent owner’s permission.  Thus, there is no infringement unless someone makes, uses, offers to sell, or sells the invention in the United States, or imports the invention into the United States.  An invention described in a patent may infringe another patent, but only if it is made, used, offered for sale, sold, or imported in the United States.  The patent itself is not an act of infringement.

7. Patentability and Patent Infringement are Not the Same Thing.

Inventors often think that if their invention is patentable, then it cannot infringe other patents.  Not so.  Patentability and patent infringement are two different things.  An invention may be both patentable and infringe an existing patent.  In both cases, the starting point of the analysis is the claims.

To determine if an invention is patentable, the invention, as it is claimed, is compared to what is known in the field (the prior art).  In general, prior art includes written documents (such as other patents, published articles, catalogs, and websites), as well as actions by the inventor and third parties, that exist before the patent application is filed.

The first requirement of patentability is that the claims must be novel (new or different) over the prior art.  The test for novelty is performed by looking at each element of the invention as claimed.  If all of the elements of the claimed invention are present in a single prior art reference, then the invention is not novel and is said to be anticipated by the prior art.  The invention is not patentable.

The second requirement of patentability is that the claims must be nonobvious over the prior art.  The invention is obvious if the differences between the invention and the prior art are such that the invention, as a whole, would have been obvious at the time it was made to a person with ordinary skill in the art.  Unlike the test for novelty, the test for obviousness is not limited to a single prior art reference – any number of references can be combined to render an invention obvious.  For obviousness to be found, every element of the claimed invention must be present or suggested in the prior art, although not necessarily in the same reference.

To determine if an invention infringes an existing, in force (not expired) patent, the claims of the patent in question are compared to the invention (in a patent infringement action, the district court first interprets or construes the claims to determine their meaning and scope).  If each element of a claim is present in the invention (literally, or in some cases, by an equivalent), that claim is infringed.  Only one claim need be infringed for the patent to be infringed.

Thus, although it sounds counter-intuitive, an invention can be patentable over a prior art patent and, at the same time, infringe the same patent.