Blog: The IP Law Blog

In Lanard Toys Limited v. Toys “R” Us, Inc. et al, 3-15-cv-00849 (FLMD December 16, 2016, Order) (Barksdale, MJ), a patent infringement matter in Florida District Court, the court denied defendants’ motion to disqualify plaintiff’s new counsel for simultaneously representing defendant in an unrelated case.  Four months after lawyers with Gordon & Rees Scully Mansukhani LLP (“Gordon & Rees”) began representation of Lanard Toys Limited (“Lanard”) against Toys “R” Us-Delaware, Inc. (“TRU”), other lawyers with Gordon & Rees began representation of TRU in a California state case. Upon discovering the conflict of interest, Gordon Rees withdrew from representing TRU in the California matter.  However, Gordon Rees refused to withdraw from the Florida case, so TRU filed a motion seeking disqualification.

Gordon Rees asserted the dual representation was a result of an “inadvertent input error,” wherein the names of some of the parties where inadvertently omitted from the conflict tracking software during the conflicts check, and not because Gordon & Rees deliberately disregarded the duty of loyalty to a client.  Gordon Rees was only acting as local counsel to TRU in the California matter.  The only activity in which Gordon & Rees participated on behalf of TRU in the California Case was the finalization and filing of TRU’s answer to the complaint at the direction of the Palter Firm, who was TRU’s primary counsel in the California matter. According to the attorneys, Gordon & Rees and TRU never spoke with each other prior to TRU raising the conflict issue; there was no retention agreement entered into between the parties and no confidential information relevant to the Florida case was exchanged, nor was any confidential information relating to TRU’s strategic approach for defending against cases, in general, exchanged.  Gordon & Rees’s sole tasks with respect to TRU in the California Case during the time of the representation, according to them, were to propose edits to a draft Answer for TRU that was prepared by lead counsel, the Palter Firm, and to inform the Palter Firm that a TRU officer had to verify it.

In contrast, in the Florida matter, Gordon Rees is Lanard’s primary counsel, has spent hundreds of hours reviewing documents, has taken depositions in two states, and has represented Lanard in numerous prior cases.  Therefore, according to Lanard and Gordon Rees, it would take substantial effort and cost to bring new counsel up to speed on the Florida case.

In analyzing the issue and ruling on TRU’s disqualification motion, the Court first noted that because a litigant is presumptively entitled to counsel of its choosing, only a compelling reason will justify disqualification.  Disqualification is a “harsh sanction, often working substantial hardship on the client,” so it “should be resorted to sparingly.” And, because a disqualification motion may be used to harass or for tactical advantage, it should be viewed with caution. The Florida Court further noted disqualification is not mandatory, even if a court finds a lawyer is violating a conflict-of-interest rule.  Instead, a “court should be conscious of its responsibility to preserve a reasonable balance between the need to ensure ethical conduct on the part of lawyers appearing before it and other social interests, which include the litigant’s right to freely chosen counsel.”  In undertaking the balancing, pertinent factors may include the nature of the ethical violation, the age of the case, the prejudice to the parties, the effectiveness of counsel in light of the violation, the public’s perception of the profession, whether the attempt to disqualify is a tactical device or a means of harassment, and whether any screening measures have been implemented.

The Florida Court then found that by undertaking representation of TRU in the California case while simultaneously undertaking representation against TRU in the Florida case, Gordon & Rees did violate Florida’s conflict of interest laws.  However, it was an inadvertent input error—not a deliberate disregard of the duty of loyalty—that caused that violation.  In addition, the Florida Court also found Lanard would suffer a substantial hardship by having to retain new counsel to repeat or review work.  As to the California matter, the Florida Court found the Gordon & Rees lawyers did not directly communicate with TRU or, as stated in the declarations, receive any TRU confidences. With no sharing of TRU confidences and able counsel on both sides, the violation will not diminish counsel’s effectiveness.  And Gordon & Rees’s active representation of TRU lasted less than a month, during which it was not TRU’s primary counsel.  Thus, the Florida Court concluded “[b]alancing the interests and mindful that Lanard is presumptively entitled to counsel of its choosing and disqualification is a harsh sanction to be resorted to sparingly, disqualification is unwarranted.”

Although the court denied the disqualification motion, this case is still a strong cautionary warning to consider potential conflict issues when selecting counsel.  Otherwise, at best, a costly disqualification motion can result, and at worst, new counsel may need to be hired in the middle of litigation at substantial additional cost and effort.

With last weekend’s release of Rogue One: A Star Wars Story, Star Wars is once again living and thriving. Rogue One opened with a most impressive $155 million opening in North America, and $290 million worldwide, making it the 12th largest opening in United States History. Now, this isn’t really related to intellectual property, but in light of this opening,  we thought it would be appropriate to provide an article dealing with Star Wars intellectual property. Luckily for us, just one week ago, some very interesting Star Wars news surfaced.

If you’re an avid Star Wars fan, you are patiently, or not so patiently, awaiting the release of Episode VIII, the next installment in the Star Wars saga, which is due out in December 2017. And if you are awaiting the release of Episode VIII, you likely know that the film still lacks an official title. But a recent trademark filing in the European Union may have provided us with a pretty solid indication of what that title may be. On December 8, 2016, Lucasfilm applied for a European Union trademark for the term “STAR WARS FORCES OF DESTINY.” In the past, Lucasfilm took similar actions with regard to movies such as “Indiana Jones and the Kingdom of the Crystal Skull,” “Revenge of the Sith,” and “The Force Awakens.” So, if the past is any indication of the future, there is a strong argument that Star Wars Episode VIII will be entitled FORCES OF DESTINY.

However, although the trademark filing may be indicative of Episode VIII’s title, it is without certainty. Lucasfilm has taken similar actions in connection with trademarks that were not ultimately related to a feature film. For example, in 2002, Lucasfilm trademarked INDIANA JONES AND THE EMPEROR’S TOMB, which was not a working title for Indiana Jones and the Kingdom of the Crystal Skull, but rather, a videogame. So, Lucasfilm’s filing of a trademark application for FORCES OF DESTINY is not dispositive.

A closer examination of the trademark filing gives additional support to the argument that FORCES OF DESTINY will be Episode VIII’s title. The application contains multiple Nice classifications – an international classification of goods and services established by the 1957 Nice Agreement. These classifications indicate which types of products Lucasfilm will sell in conjunction with the mark. Here, Lucasfilm applied in the International Classes associated with various items, including without limitation, CDs, DVDs, clothing, leather goods, video games, and literary materials. So, it is clear that whatever Star Wars: Forces of Destiny turns out to be, Lucasfilm plans on distributing a wide range of related merchandise. Again, this is not a dispositive indication that FORCES OF DESTINY is the title for Episode VIII, but it seems to be strong evidence. Of course, with the movie just less than a year away, even if the FORCES OF DESTINY is the current working title for Episode VIII, there is plenty of time for Lucasfilm to change its mind. In the words of Master Yoda, “Always in motion is the future.” So for now, “Patience you must have my young padawan.”

The last time I checked (which was a couple of years ago), I found over 900 U.S. patents in the U.S. Patent and Trademark Office’s database that had the word “Christmas” in the title.  Every year at this time, I look at a few of the most interesting ones.

Here’s one I really like:  U.S. patent no. 5,523,741 for a “Santa Claus Detector.”  This patent covers a Christmas stocking that contains a light bulb or LED, a battery to power the light, and a hidden switch that turns on the light.  The switch is connected to a pull cord.  When the stocking is hung on the fireplace, the pull cord is positioned across the opening of the fireplace, forming a barrier across the fireplace opening.  After the stocking’s owner has gone to sleep on Christmas Eve, Santa Claus comes down the chimney with his bag of toys and triggers the cord, which turns on the light.  The next morning, the child will see the light on and know that Santa was there! (Or, as the patent describes, the parent can secretly pull the cord and turn on the light.)  The purpose of this invention, according to the inventors, is to reassure children that their good behavior was rewarded by Santa.

Another fun Christmas patent is the “Santa Claus Visit Kit,” U.S. patent no. 7,258,592.  This kit is for parents to use to prove to their doubting children that Santa Claus has actually visited.  The kit includes a stencil to leave boot prints on the floor, a letter from Santa, and a snack item for Santa.  The kit is intended to alleviate children’s fears that Santa Claus might not leave them any presents.

Some very practical inventors have patents for fire extinguishers incorporated into Christmas decorations.  One patent covers a fire extinguisher hidden inside the trunk of a synthetic Christmas tree that is activated by a heat sensor.  Another patent is for a Christmas tree ornament that contains a fire-retardant powder.  The ornament pops open when the temperature reaches a certain point, releasing the fire retardant powder and, hopefully, putting out the fire.

Have a wonderful holiday season!

Stay tuned for Part 5 of our Holiday Series

Fan films and fan fiction ordinarily don’t end up being the subject of a federal court lawsuit.  Most fan fiction are creative expressions reflecting adoration of a series, film or character and the majority of copyright owners take a permissive view of fan fiction.  However, Paramount Pictures, the owner of the Star Trek franchise, which in the past has not taken action against other fan fiction projects, is opposing the production of a full length film, Axanar, which has a production budget of over $1 million and has a professional crew and professional actors.

The Axanar project is the creative brain child of writer/producer and entrepreneur Alec Peters.  Peters wanted to tell the story of Garth of Izar, a Starfleet captain and Captain Kirk’s hero, who fought in the Battle of Axanar, a major clash between the Federation and the Klingons, which took place 21 years before the events of the first episode of the original Star Trek television show.  In 2014 Peters raised over $100,000 on kickstarter and produced a “proof of concept” thirty-minute film entitled “Prelude to Axanar.”  Prelude purports to be a documentary recounting the events surrounding the Battle of Axanar.   Prelude was well received and as a result, Peters raised over $1 million through Kickstarter and Indegogo in order to produce a full length, studio quality motion picture about the Garth of Izard and the battle of Axanar.  In addition to releasing Prelude on YouTube, Peters released on YouTube a short clip entitled “Vulcan Scene” (which features Ambassador Soval, a minor character from “Star Trek: Enterprise” and a new Vulcan character) and drafts of the script for the full length movie.

Paramount sued Peters and his production company Axanar Productions for copyright infringement, and last week Paramount and Axanar Productions traded shots in Federal Court last week over a motion to dismiss Paramount’s Complaint.  According to the Complaint, Peters and his production company infringed Star Trek’s copyright by utilizing various Star Trek elements including the concept of the Battle of Axanar, the Klingons, the Starfleet and characters, costumes and props that are unique to Star Trek.  According to Paramount, Axanar  is substantially similar to Star Trek precisely because it copied characters, settings, plot points, dialogue, themes, pace, mood, races, species, ships, and weapons in order to create an unlicensed, independent Star Trek film.

In its motion to dismiss, Peters contends that his works – Prelude to Axanar, the Vulcan Scene and drafts of the Axanar script – are transformative and therefore protected under fair use.  While Peters presents other arguments in support of his claim of non-infringement, the question of whether these works are transformative will be largely determinative of this issue.

A work is transformative when it adds something new to the work allegedly infringed, with a further purpose or different character, altering the original work with new expression, meaning, or message. A work is transformative if it does something more than repackage or republish the original copyrighted work. A transformative work is one that serves a new and different function from the original work and is not a substitute for it. As the Supreme Court noted in Campbell v. Acuff-Rose Music, Inc., “the more transformative the new work, the less will be the significance of other factors, … that may weigh against a finding of fair use.”

Peters claims that his works are transformative.  Although Prelude features Federation officers, Klingons and Starfleet ships, Peters argues that it does so in a first person narrative style, never before used by Paramount, featuring new characters and other elements, with its subject matter being a storyline that was only a footnote in the first episode of the original Star Trek television series.  This, Peters contends, makes Prelude transformative.  Peters claims that the Vulcan Scene is transformative because it incorporates original dialogue, new characters and is a continuation of the original story told in Prelude.

In its opposition to the motion to dismiss, Paramount takes the position that its copyright interest in Star Trek extends far beyond Captain Kirk and Spock.  While a small number of Vulcans and Federation Officers in Prelude and the Vulcan Scene were previously featured in previous Star Trek episodes or films, Paramount contends that what causes Prelude, the Vulcan Scene and the current draft of the Axanar script to be an infringement is the fact that they are populated with Klingons, Vulcans, Federation Officers, Starfleet ships in the shape of the Enterprise and Klingon battlecruisers and littered with references to warp drives, dilithium crystals, stardates and transporters.  All of these elements are protected by Paramount’s copyright interests and cause Peters’ works to be infringements.

Paramount argues that Prelude, the Vulcan Scene and the draft of the Axanar script are not transformative as they “were created to function as another Star Trek work, with a slightly different plot.”  Paramount argues that using copyrighted characters and elements and then placing those elements into a new story or timeline does not create a transformative work but rather an infringing derivative work.  And while that was the case for Catcher in the Rye protagonist Holden Caulfield as portrayed 60 years later in 60 Years  (see Salinger v. Colting), it was not the case for the story of Cynara, a slave owned by Scarlett O’Hara, as told in The Wind Done Gone  (see Suntrust v. Houghton Mifflin).  In Suntrust, the 11th Circuit found The Wind Done Gone was not an infringement of Gone with the Wind  and was protected under fair use.  The court found persuasive the fact that the The Wind Done Gone was told using a different format, featured new characters, elements and plot settings not found in Gone with the Wind. 

The determination of fair use is a balancing test that requires the Court to weigh numerous factors. While Peters’ works feature numerous factors the 11th Circuit found persuasive in the case of The Wind Done Gone, there are other factors that may weigh – possibly heavily – in the opposite direction.

On December 1, 2016, amendments to the Federal Rules of Civil Procedure (“FRCP”) and Federal Rules of Appellate Procedure (FRAP) took effect.  While at first glance, the changes may not seem dramatic, but changes such as shortening the time to respond and cutting word counts for briefs have a direct impact on our practices.  For example, this year’s changes include the following:

1. Eliminating the 3-day rule; and
2. Reducing word counts for certain appellate filings.

Under the previous 3-day rule, parties receiving a document by means other than personal delivery, which was considered immediate service, could add three days to the response time calculated from the date of service.  This included adding three days when served electronically, including service by email and the electronic case filing (ECF) notice system.  In other words, items served electronically were not treated as received immediately even though they often were received virtually instantaneously.  In the past, concerns related to reliability, transmission delay and incompatibility of systems led to the perception of a need for maintaining the 3-day rule for electronic service, but times have changed.  In addition, other rules have been changed in an attempt to simplify time computations by adopting periods that are multiples of 7 to allow for “day-of-the-week” counting.  The 3-day extension re-complicated the intended simplification and caused more dates to fall on weekends and holidays thus requiring further adjustments.

With advances in technology and skills of computer users and the desire to further simplify time computation, the 3-day rule has been eliminated for responses triggered by electronic service of a document.  This was accomplished by amending FRCP 6(d) and FRAP 26(c) to exclude electronic service from the modes of service that allow for three additional days to act or respond. It is important to note, however, that some courts have promulgated local rules that retain the 3-day extension.  For example, the Ninth Circuit will continue to provide three additional days for electronic service for deadlines based on service of another document.

The Committee Notes regarding the change to Rule 6 recognize that this amendment can effectively shorten the time to respond relative to current practice, particularly when documents are served late at night or just prior to, or during, a weekend or holiday.  Therefore, they noted that extensions may be warranted to prevent prejudice.  In practice, however, one cannot afford to take such extensions for granted, particularly if opposing counsel objects.

The Supreme Court ordered that the amendments to FRCP 6(d) and FRAP 26(c) govern in all federal civil and appellate cases, respectively, commenced after December 1, 2016 and “insofar as just and practicable, all proceedings then pending.”  But, it is not clear how courts will apply these amendments to pending cases.  For example, will amended Rule 6(d) apply to all papers served after December 1, 2016, even in cases pending prior to that date or will courts continue to apply the prior rule for service of papers in such cases?  Similar questions arise in the appellate context.  It will be critical to consult the specific rules applicable for each case to avoid missing deadlines!

In another amendment to the FRAP, word-count limits have been reduced for certain appellate filings and implemented in place of page limits for other filings.  For some time, parties did not have to comply with page limits for appellate briefs if they complied with certain word-count limits.  Page limits, however, were still imposed on other papers, such as motions and petitions.  In the most recent amendment to the FRAP, word-count limits have been instituted for, among other filings, motions, amicus briefs, and petitions for rehearing en banc.  Further, word counts for opening, response, and cross-appeal response and reply briefs have been reduced from 14,000 to 13,000 words.  For cross-appeal opening and response briefs, the word count was reduced from 16,500 to 15,300, and for reply briefs, the word count was reduced from 7000 to 6500.  You just thought the prior word counts were tight!  Now they are tighter.

These word-count changes took effect on December 1, 2016, but some circuits have opted out in favor of their own local rules.  For example, the Ninth Circuit has adopted a local rule that will maintain the current word count limits for briefs and will maintain the current page limits, rather than word counts, for motions and petitions.

In summary, while the new rules are now in effect, courts are varying in whether they are applying the new rules at all and, if so, how they are applying them to pending cases.  Therefore, it is more important than ever to compare the local rules with the federal rules to determine whether your cases are subject to these amendments.  If so, then be prepared to respond sooner and, in appellate cases, more concisely!

The holidays are upon us.  Given that everything seems to be protected by intellectual property rights, could someone protect Christmas?

The most likely candidate to try to patent Christmas would be Santa Claus.  But (assuming all other issues are addressed), could Santa Claus really patent Christmas? Assuming that Santa Claus invented Christmas, then perhaps he could! U.S. patent law provides patent protection for pretty much everything. Under the patent laws of the U.S. and most foreign countries, the first person to invent something may file a patent application seeking a patent for that invention. Unlike most foreign countries, however, U.S. law provides a one-year grace period in which a patent application can be filed after certain types of public disclosures by the inventor.

So, maybe Santa Claus could file a patent application in the U.S. if he was the first to invent something that has not been publicly disclosed in the last year.  Of course, there may be no one else claiming to have invented Christmas, so it might not be much of a problem. And, because Santa has been operating in secret for hundreds of years, there cannot have been any public disclosures.

Santa might even be able to patent the method he uses to deliver gifts to every child all around the world on Christmas Eve.  His method might be treated as a business method, which could make it more difficult to patent, even though it is not really a “business.”

What other kinds of Christmas inventions could someone patent?  The United States Patent and Trademark Office lists over 980 U.S. patents with the word “Christmas” in the title.  These patents cover items like Christmas lights, decorations, Christmas tree stands and turntables, antler apparatus, Christmas tree watering devices, fire extinguishers, and many other things.  My personal favorite is the “Apparatus to Prevent Pets Climbing a Christmas Tree.”  The need for this invention is obvious if you have ever had kittens or cats around your Christmas tree.  The patent states: “as is generally well known in the prior art, pets, such as cats, like to climb up the branches of a Christmas tree. Oftentimes this will result in knocking some of the ornaments off such tree.  These ornaments may be broken…”  The invention is basically a giant circular screen that clips under the lowest branches of the tree. Based on my experience, however, this device will have precisely the opposite of its intended effect. Any cat who sees the screen will climb up or jump onto it.  And, anyway, who really wants to stop cats from climbing Christmas trees?!  It’s too much fun to watch them perched on the branches and swatting ornaments (and to see their embarrassed looks when they land clumsily on the floor)!

What about a new type of Christmas tree?  Trees (and all plants) are patentable, as long as they are new and developed by humans, not discovered in nature.  In fact, a flying reindeer would be patentable (if it was created by humans), as living organisms can be patented.

How about a new nose for Rudolph — one that allows Santa to turn it on remotely from the sleigh?  The nose could be patentable, as could the software that runs it.

New designs for Christmas stockings and ornaments?  The designs for these objects (separate from the objects themselves) are patentable as design patents.  A design patent offers less protection than a utility patent and has a shorter lifespan, but it does protect against designs that are substantially the same as the patented design.

Maybe Santa could protect signature laugh (“Ho, Ho, Ho!”) or his red suit.  The phrase could be trademarked, just as business names and logos, as long as Santa uses it in commerce and was the first to use it.  The red suit might be protectable as a trademark or possibly as trade dress, or more likely as a design patent.  Unlike a patent that expires, however, a trademark has the advantage of lasting indefinitely.

What about your favorite Christmas carol?  The traditional carols are now in the public domain and belong to everyone, but any new song (lyrics and music) is protected by copyright as soon as it is created.  Unlike a trademark, copyright protection only lasts for the life of the author plus a specific number of years.

How about Christmas cookies?  Or that special eggnog recipe? Recipes can be protected and are usually best protected as trade secrets, provided that they are not easily reverse-engineered.  (Think how long Coca-Cola has been around, and it’s still a secret.)

Of course, the most important thing about Christmas is not what can be protected under the law, but the spirit of giving and sharing the holidays bring.  So, have a wonderful holiday season and may the New Year be filled with peace and joy!

Stay tuned for Part 2 of our Holiday Horror Series on December 2nd. 

The United States Supreme Court is considering whether the doctrine of laches will bar a patent infringement claim filed within the Patent Act’s six-year damage limitations period set forth in 35 U.S.C. §286.  The case before the Court is SCA Hygiene Products AB v. First Quality Baby Products LLC, 767 F.3d 1339 (Fed. Cir. 2014).

SCA owned a patent for adult incontinence products.  In 2003, SCA sent First Quality, a competitor, a cease and desist letter, accusing First Quality of infringement.  First Quality responded that it did not infringe SCA’s patent because the patent was invalid.  In 2004, SCA filed an ex parte reexamination of its patent.  The patent was confirmed in 2007.  SCA did not inform First Quality of the reexamination.  During this time, First Quality invested heavily in expanding its business.  In 2010, almost seven years after first notifying First Quality of its infringement, SCA filed an infringement suit against First Quality.  First Quality moved for summary judgment of non-infringement on the grounds that laches barred the claim.  The district court granted First Quality’s motion.

The defense of laches requires the defendant to prove an unreasonable and inexcusable delay by the plaintiff in filing suit and prejudice to the defendant.  In determining whether laches is a defense, a court must balance the equitable factors, including the length of the delay, the severity of the prejudice, the plaintiff’s excuses for the delay, and the defendant’s culpability.  A delay of more than six years establishes a presumption that the delay is unreasonable and inexcusable and caused prejudice to the defendant.  The burden the shifts to the plaintiff patent owner to produce evidence that the delay was excusable or not unreasonable, or that the defendant was not prejudiced.  If the plaintiff satisfies this burden, then the defendant must prove the elements of laches.

On appeal to the Federal Circuit, SCA argued that laches should not apply to a claim brought within the six-year limitations period for damages, and that the time that its patent was under reexamination (three years) should not count, meaning that its suit was filed only four years after SCA learned of First Quality’s infringement.

The Federal Circuit rejected SCA’s argument and affirmed the district court’s decision granting summary judgment for First Quality.  The court held that the presumption of laches was established because SCA’s delay exceeded six years.  The court further held that SCA had not met its burden to produce evidence of excusable or reasonable delay, or lack of prejudice to First Quality.  The court explained that it was not reasonable for SCA to delay almost three years after the reexamination concluded to file suit against First Quality – SCA should have sued First Quality earlier.  With respect to prejudice to First Quality, the court held that First Quality had suffered prejudice as a result of SCA’s delay because it had invested in expanding its product line during that period of time.

SCA’s petition for certiorari to the Supreme Court was granted on May 2, 2016.  SCA relied on a 2014 Supreme Court case (Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014)) that held that laches does not apply to copyright infringement cases brought within the three-year damage limitations period of the Copyright Act.  SCA argued that the rationale of Petrella should apply to patent infringement cases – laches should not apply during the six-year damage limitations period set forth in §286 of the Patent Act.  First Quality argued that the reasoning of Petrella should not apply.  First Quality contended that §286 is not a statute of limitations (which requires a plaintiff to file suit within a specific period of time after learning of its claim), but a merely a backwards limit on the recovery of damages.

On November 1, 2016, the Supreme Court held oral argument.  The justices were sympathetic to SCA’s position, asking First Quality why laches should remain a defense when the patent statutes do not specifically provide for the defense.  Based on the oral argument, those following the case predict that the Court will reverse the Federal Circuit’s decision and hold that laches does not apply to patent infringement suits brought within the six-year damage limitations period.

If voters in California  approve Proposition 64 which would legalize the possession and use of marijuana for recreational purposes, it is without question that the sunshine state will see a huge increase in the number of businesses within the cannabis industry. According to a November 7, 2016 Forbes article, the passage of Proposition 64 could add $8.38 billion in annual sales to an already robust medical market worth an estimated $2.83 billion.  Despite what happens at the voting polls on November 8, marijuana is still illegal under federal law and this makes branding marijuana strains,  paraphernalia or services related primarily to marijuana tricky.

One example of this is the recent problems a cannabis entrepreneur faced in seeking to register two trademarks.  JJ206, LLC sought to register the marks POWERED BY JUJU and JUJU JOINTS with the USPTO, for “smokeless cannabis vaporizing apparatus, namely, oral vaporizers for smoking purposes; vaporizing cannabis delivery device, namely, oral vaporizers for smoking purposes.” The Examining Attorney refused registration of the marks based upon lack of lawful use of the mark in commerce.

Under Section 1 of the Lanham Act (15 USC 1051),  the registration of a trademark requires use in commerce.  Section 45 of the Lanham Act (15 USC 1127) defines “commerce” as all commerce which may lawfully be regulated by Congress.  If the goods or services covered by a mark are unlawful, actual lawful use in commerce is not possible, and a refusal under Trademark Act Sections 1 and 45 will be made. But what about the situation where the goods or services are lawful under state law and illegal under federal law.

While vaporizing devices for cannabis may be legal in certain states, they are illegal under the federal Controlled Substances Act (CSA).  The CSA makes it unlawful to sell, offer for sale, or use any facility of interstate commerce to transport drug paraphernalia, defined as “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under [the CSA].”  Where goods or services in a trademark application are identified as primarily intended or designed for use in ingesting, inhaling, or otherwise introducing cannabis or marijuana into the human body, it constitutes unlawful drug paraphernalia under the CSA.

JJ206’s argument that it only intends to do business in states which allow for the sale and distribution of marijuana was not persuasive.  The TTAB noted that whether a product or service is lawful within a state is irrelevant to the question of federal registration when it is unlawful under federal law.  Because “commerce” is defined in the Trademark Act as commerce lawfully regulated by Congress, that which is illegal under federal law cannot be lawful “commerce” under the Trademark Act.  As such, any application to federally register any goods or services that are illegal under federal law will be refused, regardless if it is legal under state law.

So what’s a California cannabis entrepreneur to do?  One could rely on common law trademark rights.  Common law rights arise from actual use of a mark in commerce and no registration is required to establish common law rights.  However, enforcement can present the challenge of establishing proof of the date of first use.  Additionally, common law trademark rights are limited to the actual geographic scope of use established through evidence.

State trademark registration would be an improvement over common law rights.  In California registration is prima facie evidence of ownership of a valid mark and the exclusive right to use the mark for the covered goods or services within California.  Granted seeking registration in California and the other states in which marijuana is legal may not be as convenient or cost effective as a single federal registration and you can’t file based on intent to use, but it is still preferred over relying on common law rights.

Another strategy would be to seek registration for an ancillary product or service that does not violate the CSA.  The application could be filed based on either use in commerce or intent to use. If the mark is registered, the owner would be entitled to argue that the subsequent use by a third party would cause likelihood of confusion and infringe its trademark rights.

The America Invents Act provided several procedures for challenging the validity of patent claims, including inter partes review (“IPR”), post-grant review (“PGR”) and covered business method patent challenges (“CBM”).  An IPR, PGR, or CBM challenge begins with a petition filed by the challenging party that identifies each claim challenged and the grounds for each challenge.   Based on the petition and the patent owner’s optional preliminary response, the Patent Trial and Appeal Board (“PTAB”) determines whether to institute review of one or more of the challenged patent claims.  Under the America Invents Act, this determination whether to institute review is final and nonappealable, but the PTAB’s final decision on patentability of the claims is appealable.  Recently, decisions by the PTAB have raised questions as to where the line is between appealable and nonappealable decisions.

In its decision to institute review, the PTAB can choose to review all or some of the patent claims challenged in a petition and on all or some of the grounds of unpatentability asserted for each claim.  The statute states that those decisions are not appealable.  But, if the PTAB chooses to review claims on grounds not specifically raised in a petition, are those decisions appealable?  The Court of Appeals for the Federal Circuit has determined it lacks jurisdiction to review such cases because they are part of the determination to institute review and thus are not appealable.  Earlier this year, in Cuozzo Speed Technologies, LLC v. Lee, the U.S. Supreme Court also weighed in on this issue holding that the America Invents Act precludes appeal of decisions by the PTAB to institute review of challenged patent claims.  Arguably, however, the Court left the door open for potential exceptions, such as in cases that raise constitutional issues of due process or where the PTAB has exceeded its statutory authority.

In Cuozzo, the patent related to a speedometer that will show a driver when his or her car is exceeding the speed limit.  In 2012, Garmin filed a petition seeking inter partes review of the validity of the Cuozzo patent.  Garmin’s petition included an argument that claim 17 was invalid as obvious in light of three prior art patents, and the PTAB instituted review of claim 17.  While noting that Garmin had not expressly challenged claims 10 and 14 as obvious in light of these references, the PTAB also instituted review of those claims on the same obviousness grounds.  The PTAB explained that because claim 17 depends on claim 14 which depends on claim 10, Garmin had implicitly challenged claims 10 and 14.  Ultimately, the PTAB invalidated all three claims as obvious.

The owner of the Cuozzo patent appealed to the Federal Circuit arguing that the PTAB erred in instituting review of the two claims not expressly identified in the petition because the relevant statute requires that petitions must be pled with particularity.  But the Federal Circuit held that 35 U.S.C. §314(d) rendered the decision to institute inter partes review nonappealable.  The U.S. Supreme Court agreed holding that §314(d) precluded judicial review because it says that the “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable.”  Further, the Court stated that the logical linking of claims 10 and 14 to claim 17 precluded the need for the petition to “repeat the same argument expressly when it is so obviously implied.”  Therefore, the Court found that the “No Appeal” provision’s language must at least forbid an appeal in such circumstances.

The Supreme Court, however, emphasized that its interpretation only  applies to appeals where “the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.”  The Court went on to explain that it was not deciding the precise effect of §314(d) on appeals that “implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach … beyond ‘this section.’”  The Court also noted that it did “not categorically preclude review of a final decision where a petition fails to give ‘sufficient notice’ such that there is a due process problem with the entire proceeding, nor does the interpretation enable the agency to act outside its statutory limits ….”

When does a petition fail to give sufficient notice thus causing a due process problem? What constitutes the PTAB acting outside its statutory limits? Those are the questions SightSound Technologies is asking the U.S. Supreme Court to address and clarify in SightSound’s recently-filed petition for a writ of certiorari.

In 2011, SightSound sued Apple for allegedly infringing three SightSound patents related to the electronic sale and distribution of digital audio and video signals.  Apple challenged claims of two of the patents in petitions for CBM review asserting that the challenged claims were anticipated under 35 U.S.C. §102 by a CompuSonics system.  Apple submitted numerous references and a declaration in support of its §102 argument.  Apple did not challenge the claims as obvious under 35 U.S.C. §103.  The PTAB, however, decided to institute review of the claims under both §102 and §103 explaining that while Apple’s petitions did not assert obviousness explicitly, the petitions nevertheless supported such a ground based on the detailed explanation of the various CompuSonics references.

SightSound objected that the PTAB lacked authority to raise a ground of unpatentability (obviousness) that Apple had never asserted.  The PTAB granted SightSound additional time for argument and authorized it to file sur-replies and new declarations on the issue of obviousness “to ensure that Patent Owner has a full and fair opportunity to be heard on the issue of obviousness.”  Ultimately, the PTAB rejected Apple’s anticipation argument but instead invalidated the challenged claims as obvious under §103.

SightSound appealed to the Federal Circuit, which held that decisions relating to the institution of CBM review are not appealable under 35 USC §324(e), which mirrors the language in §314(d) for inter partes review.  In its petition to the U.S. Supreme Court, citing Cuozzo, SightSound argues that the PTAB’s decision to institute review based on obviousness is appealable because the PTAB exceeded the its statutory authority and deprived SightSound of due process protection.

First, SightSound argues the PTAB lacked statutory authority to conduct an obviousness review because Apple did not challenge the claims as obvious in its petition.  Second, SightSound explains that because a patent is a vested property right, it confers due process protection and patent owners are entitled to “notice and an opportunity to be heard by a disinterested decisionmaker” when the validity of their patent claims is challenged.  SightSound argues that it was not provided this notice because the PTAB did not articulate the specific combinations of the twelve “CompuSonics publications” or the motivation for combining those references until the PTAB’s final written decision.  SightSound alleges this “forced [SightSound] to shoot in the dark” as to which combination of references formed the basis for the PTAB’s obviousness arguments and prejudiced its ability to locate and submit contrary evidence.  Thus, according to SightSound, it was deprived of its due process protection because it was never given sufficient notice of the specific obviousness arguments so that it could fairly defend the validity of its patent claims.

We will have to wait to see whether the Supreme Court weighs in on whether the PTAB has exceeded its authority or deprived a patent owner of due process rights in granting review of patent claims on grounds not raised in a challenger’s petition.  For now, patent owners should assume that the PTAB may take a broad interpretation of a challenger’s petition when determining the scope of review.

To read more Intellectual Property blogs, visit our IP Law Blog at http://www.theiplawblog.com/

The Communications Decency Act (“CDA”) provides broad immunity for “providers of interactive computer services.”  In essence, if an internet service provider falls within certain parameters, it is entitled to immunity against certain claims of liability brought under state law.  Last month, the Ninth Circuit again considered the breadth of such immunity in the case, Kimzey v. Yelp!.

As many readers may know, Yelp is a website that allows customers to “rate” their experience with a particular store, restaurant or service provider.  The reviewing customer can also leave a detailed review in connection with their 1-5 star rating.  Yelp then aggregates all customer reviews into a single rating and this information may be found not only on Yelp’s website, but also on other search engine websites like Google.

The plaintiff, Douglas Kimzey, operated a locksmith shop in the Washington area.  The Ninth Circuit’s opinion relates that he was subject to a one-star review by a purported customer, “Sarah K,”  whose review began, “THIS WAS BY FAR THE WORST EXPERIENCE I HAVE EVER ENCOUNTERED WITH A LOCKSMITH.”  It did not get much better from there.

Rather than suing the customer for posting the offending review, Kimzey sued Yelp instead.  In an attempt to get around the immunity provisions set forth in the CDA, Kimzey alleged two novel theories: (1) that Yelp, by creating its review and star-rating system in effect “created the content” to subject it to liability;  and (2) by allegedly “republishing” the negative review through advertisements and/or search engines, Yelp was liable as the publisher of the negative review.  The District Court granted Yelp’s motion to dismiss on the ground that it was immune from such liability under the CDA.

The Ninth Circuit began by reviewing the immunity provision in the CDA, Section 230(c)(1), which provides protection from liability only to “(1) a provider or user of an interactive computer service; (2) whom a plaintiff seeks to treat under a state law cause of action as a publisher or speaker; (3) of information provided by another information content provider.”  The Ninth Circuit said that it was easy to conclude that Yelp was a provider of “an interactive computer service” given that such term should be interpreted “expansively” under the CDA.  In fact, the Ninth Circuit recognized that in today’s cyberworld, “the most common interactive computer services are websites,” such as Yelp.  The Ninth Circuit continued by finding that it was clear that Kimzey’s claims against Yelp were “premised on Yelp’s publication of Sarah K’s statements and start rating.”

In turning to the gist of Kimzey’s complaint, the Ninth Circuit reasoned that, “a careful reading of the complaint reveals that Kimzey never specifically alleged that Yelp authorized or created the content of the statements posted under the aegis of Sarah K, but rather that Yelp adopted them from another website and transformed them into its own stylized promotions on Yelp and Google.”  The Ninth Circuit found, without any difficulty, that such “threadbare allegations of fabrication of statements are implausible on their face and are insufficient to avoid immunity under the CDA.”  In essence, the Ninth Circuit found that such artful pleading as that engaged in by Kimzey would allow other plaintiffs to avoid the broad immunity protections provided by the CDA.

The Ninth Circuit reasoned that Congress in enabling immunity from liability wanted to protect the purpose of the internet which was to further the “free exchange of information and ideas.” Further, allowing a plaintiff to plead around the immunity statute would eviscerate Congress’ purpose in furthering this purpose.

Turning to the next part of Kimzey’s complaint, the Ninth Circuit noted that Kimzey alleged that Yelp designed and created the signature star-rating system and thereby served as the “author” of the one-star rating given by Sarah K.  He also alleged that Yelp had “republished” the allegedly offending statements on Google by way of advertisements. The Ninth Circuit recognized that there was no immunity under the CDA if the service provider “created” or “developed” the offending materials.  However, the service provider had to make “a material contribution to the creation of development of content” in order to lose immunity under the CDA.

The Ninth Circuit concluded that neither prong was satisfied by Kimzey.  The court ruled that “the rating system does absolutely nothing to enhance the defamatory sting of the message beyond the words offered by the user.”  Further, the Ninth Circuit had previously found in Carafano v. Metrosplash.com, Inc., 339 F.3d 1119 (9^th Cir. 2003), that the mere collection of responses to a particular question “does not transform [the service provider] into a developer of the underlying misinformation.”  Likewise, a California appellate court had previously rejected a claim based on eBay’s rating system and found that the system was “simply a representation of the amount of such positive information received by other users of eBay’s website.”  Gentry v. eBay, Inc., 121 Cal. Rptr.2d 703 (2002).

The Ninth Circuit, in relying on this precedence, reasoned that it was difficult “to see how Yelp’s rating system, which is based on rating inputs from third parties in which reduces this information into a single aggregate metric, is anything other than user generated data.” Furthermore, the Ninth Circuit rejected Kimzey’s argument that Yelp’s use of the user-generated information in advertisements subjected it to liability as a “republisher.”  The Ninth Circuit concluded that there was “[n]othing in the text of the CDA [that] indicated that immunity turns on how many times an interactive computer service publishes `information provided by another information content provider.’”   The Ninth Circuit ruled that “just as Yelp is immune from liability under the CDA for posting user generated content on its own website, Yelp is not liable for disseminating the same content in essentially the same format to a search engine as this action does not change the origin of the third party content.”  The Ninth Circuit affirmed the lower court’s dismissal of Kimzey’s complaint against Yelp.

The Kimzey case is a reminder of the broad protections provided to interactive computer service providers under the CDA when faced with state law lawsuits regarding the publication of information provided by a user.  Defendants in such cases should explore the possibility of immunity under the CDA in order to cut short such lawsuits by having them dismissed early, often prior to the expense of discovery.