Intellectual Property

In Allergan, Inc. v. Teva Pharmaceuticals USA, Inc. et al, Case No. 2:15-cv-1455-WCB (EDTX October 16, 2017 Order), a Federal District Court recently invalidated several patents covering Allergan’s dry-eye drug Restasis.  The ruling is notable because these are the same six patents Allegan just weeks ago transferred to the Saint Regis Mohawk Native American tribe in an effort to shield them from review at the Patent Trial and Appeal Board (“PTAB”).  This controversial transfer in an attempt to protect the patents from inter partes review at the PTAB via the tribe’s sovereign immunity received sharp criticism from generic drug manufactures and some in Congress.  Sovereign immunity, however, was not argued in District Court action.

The District Court dispute is a Hatch-Waxman Act case that relates to a condition known as “dry eye” and a pharmaceutical product known as “Restasis” that is intended to address that condition.  Restasis is an emulsion consisting of various components, including the active ingredient cyclosporin A, an immunosuppressant, which is dissolved in castor oil, a fatty acid glyceride.  Restasis, which is manufactured by plaintiff Allergan, Inc., is protected by six related patents, “the Restasis patents.”  Generic drug manufacturers Teva Pharmaceuticals USA, Inc.; Akorn, Inc.; Mylan, Inc.; and Mylan Pharmaceuticals, Inc., that wish to manufacture and sell bioequivalent drugs having the same components as Restasis challenged that the patents asserted by Allergan are invalid in defense to a patent infringement suit filed by Allergan.

Since this was a Hatch-Waxman Act case, the case was tried to judge and not a jury.  Thus, it was up to the court to make the factual determination as to the validity of the patents.  In determining the validity of the patents, the court found “that the prior art does not describe the Restasis formulation with sufficient specificity to satisfy the test for anticipation,” meaning no single reference invalidated any of the patents.  However, the court also found that “in view of all the evidence, including the prior art, the evidence of unexpected results, the evidence of objective considerations, and the motivation to combine the prior art references of Sall and the Ding I and Ding II patents, the Court concludes that the defendants have satisfied their burden of showing by clear and convincing evidence that the asserted claims of the Restasis patents would have been obvious.”  In other words, the court found the patents invalid on obviousness grounds, meaning multiple pieces of prior art in combination – and with a motivation to combine them- disclosed all limitations of the asserted patent claims.

Viewed from a broader perspective, the Court summarized from the evidence from the case as follows: “There is no doubt that Allergan has invented a useful and successful pharmaceutical product. It has been richly rewarded for that invention in large measure because it was able to get patent protection for the invention in 1995 when the Ding I patent issued. Allergan had 20 years of patent protection for its invention and ultimately for Restasis, the commercial embodiment of that invention, which was clearly covered by Ding I.

Although Allergan kept continuation applications alive for some years after Restasis was approved by the FDA, it ultimately conceded to the PTO in 2009 that the claims of the continuation applications that were directed to the Restasis formulation would have been obvious in light of the Ding I patent. However, in 2013, a few months before the expiration date of the Ding I patent, Allergan returned to the PTO, withdrew its concession of obviousness, and renewed its effort to obtain further patent protection for Restasis. Allergan’s theory in prosecuting the new applications was that the Restasis formulation, although falling within the scope of the Ding I patent, surprisingly produced exceptionally good results, so much so that the particular formulation for Restasis was entitled to patent protection even though that formulation fell within the scope of the ranges of values disclosed and claimed in Ding I. Allergan persuaded the examiner to issue the patent by way of a presentation that was more advocacy than science. The presentation suggested that the Restasis formulation resulted in efficacy levels up to eight times as great as would be expected based on studies of the formulations disclosed in the Ding I patent. In fact, a closer examination of the results of the clinical studies on which Allergan relied makes it clear that the presentation to the PTO substantially overstated the difference between the clinical results obtained with the Ding formulations and the clinical results obtained with the Restasis formulation. The actual clinical results, interpreted properly, show no significant difference in efficacy between the Restasis formulation and the 0.1% formulation that was Example 1D of the Ding I patent.

At trial, Allergan presented essentially the same theory—that the Restasis formulation produced results that were unexpected in light of the prior art—albeit without urging upon the Court the evidence that Allergan had presented to the PTO. In so doing, Allergan has had to deal with the problem that a considerable amount of highly pertinent prior art had accumulated by the 2003 priority date of the Restasis patents. Not only does the Ding I patent pose a problem for Allergan, but the papers by Sall and Stevenson revealed a great deal of information about the studies on which Allergan relies to make its unexpected results case.”

Thus, in light of this evidence, the Court concluded that Allergan is not entitled to renewed patent rights for Restasis in the form of a second wave of patent protection based on the extensive amount of pertinent prior art and the Court’s factual assessment of Allergan’s showing of unexpected results.  The Court therefore held that while Allergan has proved by a preponderance of the evidence that the defendants have infringed the asserted claims of the Restasis patents, the defendants have proved by clear and convincing evidence that the asserted claims of the Restasis patents are invalid for obviousness.

In sum, and while Allegan may appeal this ruling from the district court, the outcome of which is hard to predict, for now its Restasis patents were found invalid even after all the hassle Allegan went to protect them by assigning them to the Saint Regis Mohawk tribe.

Just Google it. Can you Google the score? Have you Googled the restaurant’s reviews? These are all common phrases in today’s internet-reliant society, and it’s entirely due to the creation of Google and its widespread success. By all measures, this should be a good thing for Google. Its company’s primary trademark, Google, has become such an integral part of society that it is now ingrained in our everyday vocabulary as a verb, and even further ingrained in our everyday usage. But for a company with valuable intellectual property rights in its Google trademark, its everyday usage in a general sense, meaning to perform an internet-based search, whether through Google or another search engine, could prove disadvantageous at some point in the future.

In fact, Google recently is currently dealing with an appeal involving these issues after a pair of individuals registered more than 700 domain names incorporating the word Google, including googlejxholdings.com, googleadam.com, and googlekellyclarkson.com. In response to these filings, Google filed a complaint with the National Arbitration Forum, claiming likelihood of consumer confusion and cybersquatting. The arbitration panel agreed with Google and transferred the domain names to Google. In ruling on the dispute, the panel found the domains confusingly similar to Google’s federally registered trademarks, and stated that the registrant had no legitimate interest in the domains and had registered them in bad faith.

Shortly after the arbitration panel issued its ruling, an individual who co-owned some of the domain names that the above-mentioned registrant was required to transfer to Google filed a lawsuit against Google in the United States District Court for the District of Arizona, attempting to cancel Google’s marks on the ground that they have become generic due to everyday verb usage. The registrant eventually joined the lawsuit as a plaintiff.

The plaintiffs moved the District Court for summary judgment, claiming that it was indisputable that the public used the word Google as a verb and “verb use constitutes generic use as a matter of law.” The District Court found in favor of Google, determining that the Google mark was not generic. As an example of another legitimately registered trademark often used as a verb to describe a category of activity, Judge Stephen M. McNamee cited the Photoshop trademark. Judge McNamee discussed how, much like Google, people often use Photoshop to refer to something aside from Adobe’s trademarked product. Judge McNamee further remarked that “It cannot be understated that a mark is not rendered generic merely because the mark serves a synecdochian ‘dual function’ of identifying the genus of services to which the species belongs.”

Still unsatisfied, the plaintiffs petitioned the 9th Circuit for review. In an opinion written by Circuit Judge Richard Tallman, the 9th Circuit reiterated Judge McNamee’s findings and once again acknowledged that the mere use of a word as a verb is insufficient to show genericide. But apparently the opinions of Judge McNamee and Judge Tallman are still not enough for these plaintiffs. They have now petitioned the Supreme Court for review.

The petition for review calls the 9th Circuit’s decision “dangerous” for holding that the use of a trademark as a verb is irrelevant to the determination of whether it has become generic. It also states that the decision is in conflict with the opinions of various experts who have stated that trademarks are proper adjectives, which should not be used as verbs. According to the petition, “[u]nchecked indiscriminate verb usage of trademarks could, and will, lead to a reality where the public can no longer recall that the verb derives from a trademark, while simultaneously allowing the trademark to exist on the principal register in perpetuity[.]” Finally, the petition states that public appropriation of Photoshop, Xerox, and other marks is something to be encouraged, as it is an example of how language is a dynamic, living being, meeting the needs of speakers.

It would be interesting to see how the Supreme Court would rule on this matter, but given that the Supreme Court only grants review to a select number of cases, I suspect we will not find out. This is especially true given that neither the 9th Circuit nor the District Court stated that verb use is irrelevant to the analysis, as it is represented in the petition, but simply that verb use alone is insufficient to demonstrate genericide. However, stranger things have happened.

Until the U.S. Supreme Court’s May 22, 2017 ruling in TC Heartland v. Kraft Foods, the Court of Appeals for the Federal Circuit and the United States district courts had interpreted the patent venue statute, 28 U.S.C. §1400(b), to allow plaintiffs to bring a patent infringement case against a domestic corporation in any district court where there is personal jurisdiction over that corporate defendant.  The Supreme Court’s TC Heartland ruling, however, clarified that personal jurisdiction alone does not convey venue for patent cases under the patent venue statute.  But that clarification led to confusion as to how to interpret the venue statute itself.  The Federal Circuit just addressed that confusion in In re Cray Inc.

Specifically, the patent venue statute provides that “[a]ny civil action for patent infringement may be brought in either 1) “the judicial district where the defendant resides” or 2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  Prior to TC Heartland, courts had found that a domestic corporation resides in any judicial district where the corporation is subject to personal jurisdiction, and thus venue was proper in those districts.  In TC Heartland, the Supreme Court limited venue under the first prong explaining that a corporation only resides in its state of incorporation.  For plaintiffs wishing to sue corporations in judicial districts outside the defendant’s state of incorporation, the TC Heartland ruling shifted the focus to the second prong of the patent venue statute.  The second prong states that a domestic corporation can be sued for patent infringement “where the defendant has committed acts of infringement and has a regular and established place of business.”

Following TC Heartland, defendants filed a flurry of motions to dismiss for lack of venue or, in the alternative, to transfer cases.  Corporations argued they had been improperly sued in venues where they had no “regular and established place of business.”  But what is a “regular and established place of business”?  Prior to the TC Heartland ruling, venue was typically shown under the first prong based on where a corporation resides, so the courts had not really dealt with the requirements for a “regular and established place of business” under the second prong of the venue statute.  Now courts were forced to address this issue and different courts were coming to different conclusions, which led the Federal Circuit to address this issue in response to Cray’s petition for a writ of mandamus.

Cray’s petition arose from Judge Gilstrap’s venue ruling in Raytheon Co. v. Cray, Inc. (“Transfer Order”).  More specifically, Raytheon filed a patent infringement action against Cray in the Eastern District of Texas.  Cray is a Washington corporation.  Cray did not rent or own property in the Eastern District of Texas but allowed two employees to work remotely from their homes in that district.  One of those employees was a “sales executive” with sales in excess of $345 million over approximately seven years.  That employee received reimbursement for cell phone charges, internet fees, and mileage related to his work for Cray.  The employee, however, did not store products or product literature in his home.  Further, he was never paid for use of his home as a business office.  Cray moved to transfer the case for lack of venue arguing that it did not reside in the district and did not maintain a regular and established place of business in the district.

In his Transfer Order, Judge Gilstrap not only found venue proper in the Eastern District of Texas but also went on “‘[f]or the benefit of’ other litigants and counsel to set out four factors for inquiries into what constitutes a regular and established place[] of business ‘in the modern era,’ including physical presence, defendant’s representations, benefits received, and targeted interactions with the district.”

The Federal Circuit reversed stating that “[a]lthough the law was unclear and the error understandable, the district court abused its discretion by applying an incorrect legal standard, which we now clarify in this opinion.”  The Federal Circuit explained that its “analysis of the case law and statute reveal three general requirements” for whether a corporation has a “regular and established place of business” in a judicial district.  These requirements include:  “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.

The Federal Circuit further explained that while the “‘place’ need not be a ‘fixed physical presence in the sense of a formal office or store,” “there must still be a physical, geographical location in the district from which the business of the defendant is carried out.”  A test that encompasses virtual spaces or electronic communications would improperly expand the venue statute.  Further, “the mere fact that a defendant has advertised that it has a place of business or has even set up an office is not sufficient; the defendant must actually engage in business from that location.”  In addition, for a business to be “regular and established,” the activity cannot be sporadic or transient in nature.  Further, “[t]he defendant must establish or ratify the place of business.  It is not enough that the employee does so on his or her own.”  Therefore, an employee that merely works from home does not necessarily create venue in the district.

It is now clear that personal jurisdiction and venue or two separate requirements for patent infringement cases.  Further, in many instances, plaintiffs will have significantly fewer options for the districts where they can bring patent infringement cases against domestic corporations under the patent venue statute.

Brand litigation can be extreme in the consumer products space and even more so for alcoholic beverages (legal cannabis brand owners take note and start stockpiling your war chest).  It’s not uncommon for litigation to arise whenever an alcoholic beverage brand owner believes that another alcoholic beverage brand infringes.  Such was the case for Sazerac Company, the maker of the high quality bourbon BUFFALO TRACE.  Sazerac became concerned that Fetzer Vineyards’ use of a buffalo design and the word “bourbon” on a wine label would cause consumer confusion.

In its complaint Sazerac alleged that:

Fetzer Buffalo Design and Trade Dress are confusingly similar to Sazerac’s BUFFALO Marks and BUFFALO TRACE Trade Dress.  Each of the 1000 Stories’ bottles prominently features the Fetzer Buffalo Design, which is a sketched rendering of a standing, left-facing, fur-covered buffalo, similar to the Buffalo Logo and Buffalo Outline displayed on Sazerac’s BUFFALO TRACE product packaging.  In addition to this confusingly similar representation of a buffalo, the bottle text prominently reads “AGED IN BOURBON BARRELS,” and the website marketing specifically references the wine’s aging process in bourbon barrels from “famed distilleries,” tacitly suggesting an association with such distilleries.  It is readily apparent that Defendant chose the illustration and particular artistic stylization of a Buffalo to create a false association with Sazerac’s BUFFALO TRACE brand.

Sazerac alleged in its complaint that theirs and Fetzer’s wine would be sold in the same commercial channels – “Sazerac’s BUFFALO TRACE product and Defendant’s 1000 Stories product are competing, or will compete, in identical retail outlets – for example, wine and liquor stores, bars, restaurants, and online retail sites” – and be marketed to the same group of consumers – “Defendant, like Sazerac, markets its 1000 Stories product to adult consumers and adult purchasers of alcoholic beverage products.”

Sazerac’s claim of likelihood of confusion falls in line with the trend of the Trademark Trial and Appeals Board to find beer, wine and spirits related goods for the purposes of determining likelihood of confusion.  The TTAB has found support for this position based on third-party evidence showing manufacturers produce various types of alcoholic beverages under a single mark.  In re Uinta Brewing Company, the TTAB found persuasive eleven websites that showed breweries also selling wine; In re Sugarlands Distilling Company, LLC, the TTAB cited five examples of wineries also engaged in distillation and the sale of spirits; In re Sonoma Estate Vintners, LLC, the TTAB found persuasive fifteen registrations showing that various entities registered a single mark for wine and beer.  The TTAB also finds that alcoholic beverages are sold in the same channels of trade, such as liquor stores and restaurants, which means  that consumers will encounter multiple types of alcoholic beverages in the same stores.  The TTAB also commonly finds that consumers purchase alcohol without exercising great care.

Most often cases such as these settle.  This case, however, went all the way to a bench trial after which the judge rendered an opinion which began with the statement “In the final analysis, this case was not close.”

First the court found that Sazerac failed to establish a claim of trademark infringement.  The court noted that Sazerac relied on the “colorable imitation” theory of trademark infringement, but failed to present any evidence that Sazerac’s buffalo logo trademark creates the same commercial impression as Fetzer’s buffalo.  The court noted that Sazerac consistently argued that it was the combination of Fetzer’s buffalo and its reference to “bourbon” in “BOURBON BARREL AGED” that confused consumers as to the source of Fetzer’s wine.  This, the court noted, is a trade dress claim.

Trade dress involves the total image of a product and may include features such as size, shape, color, color combinations, texture, or graphics.  Trade dress protection is broader in scope than trademark protection, both because it protects aspects of packaging and product design that cannot be registered for trademark protection and because evaluation of trade dress infringement claims requires the court to focus on the plaintiff’s entire selling image, rather than the narrower single facet of trademark.  To establish a trade dress infringement claim, a plaintiff
must prove: “(1) the trade dress is inherently distinctive or has acquired distinctiveness through
secondary meaning; (2) there is a likelihood that the public will be confused by the infringing
use; and (3) the trade dress is nonfunctional.”

In reviewing these elements, the court found that Sazerac failed to establish that its trade dress is distinctive or that it had acquired secondary meaning.  Distinctive trade dress occurs when the trade dress is of such an unusual design that it automatically distinguishes itself from its competitors.  In finding Sazerac’s trade dress not distinctive, it found persuasive the “extensive evidence of other alcoholic beverages…that include buffalo image[s]” and that the Buffalo Trace brand has low brand recognition since it comprises only .5% of the whisky market.

Further, the court said that Sazerac failed to present evidence of direct consumer testimony or survey findings showing that its claimed trade dress had acquired secondary meaning.  While Sazerac relied on evidence showing significant marketing expenditures, the court said that Sazerac failed to demonstrate how its marketing efforts effectively created secondary meaning.

The court made quick work of analyzing the similarity of the trade dress.   While both use realistic sketched renderings of a buffalo and use the term “bourbon”, the court found that all of the other elements are different.  In the end, the court found that Sazerac failed to present any evidence that the overall appearance of Fetzer’s wine is so similar to its Buffalo Trace trade dress that it is likely to confuse consumers.

In addressing the trade channels, the court acknowledged that both bourbon and wine participate in the same general alcoholic beverage industry and are advertised and sold in overlapping channels.  However, the court found that wine and bourbon are “very distinct products” with “different alcohol contents and social uses” and they “occupy different sections of the stores where they are offered for sale.”  The court found that “the proximity or relatedness of these alcoholic beverage products may weigh slightly in Sazerac’s favor, but not significantly so.”

Lastly, the court noted that purchasers of premium alcoholic beverages tend to exercise a high degree of sophistication and care when making their purchasing decisions and cited to the 2005 Second Circuit case of Star Indus., Inc. v. Bacardi & Co. for the authority that “Unhurried consumers in the relaxed environment of the liquor store, making decisions about $12 to $24 purchases, may be expected to exhibit sufficient sophistication to distinguish between Star’s and Bacardi’s products, which are differently labeled.”  Given a $14 price point for Fetzer’s wine, the court found that “[p]urchasers of a premium red zinfandel, therefore, are expected to exercise a high degree of care and are not likely to make mistakes as to a product’s sponsorship or affiliation.

While the court’s finding of no infringement was “not close”, it will be interesting to see what effect, if any, the court’s reasoning may have on the USPTO or TTAB in refusals to register a brand for wine based on likelihood of confusion with a brand for spirits (or visa versa).  The court’s opinion guts two significant factors upon which the USPTO and TTAB have based refusals to register.

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.

California was the first state to legalize marijuana for medical use.  In 1996, California approved Proposition 215, the California Compassionate Use Act.  Two decades later, California voters approved  Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA).  Despite the fact that cannabis has been legal in California since 1996, you still can’t get a trademark in California for marijuana, medical or otherwise.  Why is that.

The problem results from a disconnect between California’s trademark statutes and the California laws governing legal cannabis use.  California Business and Professions Code Section 14272 provides as follows:

The intent of this chapter is to provide a system of state trademark registration and protection substantially consistent with the federal system of trademark registration and protection under the Trademark Act of 1946 (15 U.S.C. Sec. 1051 et seq.), as amended. To that end, the construction given the federal act should be examined as nonbinding authority for interpreting and construing this chapter.

The USPTO regularly rejects applications to register trademarks related to cannabis on the grounds that such use would not constitute “lawful use in commerce”.  The legal reasoning underlying such rejection goes as follows:  Under federal trademark law, the registration of a trademark requires use of that mark in connection with the goods or services in commerce.  Federal trademark law 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 in those situations, a mark covering such unlawful goods or services cannot be federally registered.

Cannabis and products that are primarily intended or designed for use in connection with cannabis are federally illegal under the Controlled Substances Act.  The federal trademark office has taken the position that if a mark covers a good or services that would be illegal under the CSA, lawful use in commerce is not possible, and as such, the mark cannot be federally registered.

The trademark examiners in Sacramento have gone further than taking USPTO reasoning as nonbinding authority; they have taken the USPTO reasoning as gospel in  rejecting state applications for cannabis.  However, California’s lawmakers are proposing an amendment to California’s trademark laws that will address this inconsistency.

AB 64 proposes to, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California

AB 64 intends to provide a statutory mechanism for allowing the registration of a California trademark for cannabis products.  The bill proposes two new classifications of goods and services may be used for trademark marks related to cannabis, including medicinal cannabis that are lawfully in commerce under state law in the State of California.  The proposed classes are:

(1) 500 for goods that are cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.

(2) 501 for services related to cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.

While AB 64 would appear to solve conflict at the California Secretary of State’s trademark department, the down side is that California state trademark registrations for cannabis products will not be available until January 1, 2018.