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Tune to the Right Channel: Disclosure Lacking Fraud Information Isn’t an FCA Qui Tam Bar

by Cecilia Choy, Ph.D. | Aug 17, 2023 | Patents

The US Court of Appeals for the Ninth Circuit reversed a district court’s decision to dismiss a qui tam action brought under the False Claims Act (FCA) after analyzing the public disclosure bar channels. The case required the Ninth Circuit to examine Congress’s 2010 amendments to the FCA public disclosure bar to determine whether the claims were substantially the same as information publicly disclosed in any one of three enumerated channels. Silbersher v. Valeant Pharm. Int’l, Inc., No. 20-16176 (9th Cir. Aug. 3, 2023) (Schroeder, Sanchez, Antoon, JJ.)

The FCA imposes civil liability on anyone who knowingly presents a fraudulent claim for payment to the federal government. The FCA includes a qui tam provision that allows private citizens (or “relators”) to bring fraud claims on behalf of the government. In 2010, Congress’s public disclosure bar precluded qui tam actions if substantially the same allegations or transactions were publicly disclosed in one of three channels:

In a federal criminal, civil or administrative hearing in which the government or its agent is a party
In a congressional, Government Accountability Office (GAO) or other Federal Report hearing, audit or investigation
From the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

Valeant owns the “Otterbeck patents” for its drug Apriso’s delayed-release formula. Valeant initiated an infringement action against Lupin, a generic drug manufacturer that attested in an abbreviated new drug application (ANDA) that the Otterbeck patents were invalid because of prior art that described a similar delayed-release formula. Thereafter, Valeant extended its monopoly by applying for and being granted a new patent that claimed a recent discovery that Apriso was effective when taken without food. GeneriCo then challenged the new patent in an inter partes review (IPR) proceeding, arguing that it was obvious that Apriso would be effective without food. GeneriCo presented two medical studies as support. The Patent Trial & Appeal Board agreed and invalidated the claims in the new patent.

Zachary Silbersher, GeneriCo’s IPR lawyer and a relator in another FCA suit in the same court, discovered that Valeant failed to disclose certain information to the US Patent &Trademark Office (PTO) during the IPR proceeding. Specifically, he discovered that three years before applying for the new patent, Valeant applied for another patent where it claimed it made an unexpected finding that taking Apriso’s active ingredient with food made the drug more effective. This claim was the opposite of the claim made in the new application that had been invalidated in the IPR proceeding.

Silbersher brought an FCA case seeking damages from Valeant, alleging that Valeant fraudulently obtained the Otterbeck and new patent to prolong its monopoly and charge an artificially high price for Apriso. The district court dismissed Silbersher’s qui tam action as precluded by the public disclosure bar because the IPR qualified as an “other Federal hearing” under channel two of the bar, as described above. Silbersher appealed.

The Ninth Circuit analyzed whether [...]

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Noncompulsory Counterclaims Don’t Confer Appellate Jurisdiction

by Kathleen Lynch | Aug 17, 2023 | Antitrust, Patents, Trade Secrets

The US Court of Appeals for the Federal Circuit determined that it does not have appellate jurisdiction to review noncompulsory patent counterclaims in a case otherwise unrelated to the originally asserted patents. Teradata Corp. v. SAP SE, Case No. 22-1286 (Fed. Cir. Aug. 1, 2023) (nonprecedential) (Lourie, Taranto, Hughes, JJ.)

Teradata makes and sells data warehouse systems and services. SAP develops and sells software. The two companies began collaborating while SAP was simultaneously developing its own database (HANA) and component software. SAP eventually informed Teradata that it would stop selling certain Teradata products. Teradata sued SAP, alleging misappropriation of trade secrets on the theory that SAP used Teradata’s proprietary information to create HANA. Teradata also alleged various antitrust violations, arguing that SAP “illegally tied” HANA and HANA’s supporting software. In response, SAP filed counterclaims against Teradata for allegedly infringing SAP patents related to database organization and optimization. On Teradata’s motion, the district court agreed to sever one of the four patent infringement claims but allowed the others to proceed. The district court reasoned that Teradata’s claims and SAP’s counterclaims all arose from “the same transaction or occurrence,” namely SAP’s development of HANA.

The district court granted summary judgment to SAP on Teradata’s antitrust and technical trade secret claims and stayed proceedings on Teradata’s business trade secret claim and to Teradata on SAP’s patent counterclaims. Teradata appealed to the Federal Circuit.

SAP moved to transfer the appeal to the Ninth Circuit. The Federal Circuit denied the motion but instructed the parties to address the jurisdictional issue in the merits brief. 28 U.S.C. § 1295(a)(1) grants the Federal Circuit exclusive appellate jurisdiction over final decisions in which a party claims or asserts a compulsory counterclaim related to patents. As it relates to this case, the issue was whether SAP’s patent infringement counterclaims were “compulsory,” meaning SAP would be unable to later sue on these patent infringement allegations “if it did not press them in this action.”

The Federal Circuit began by looking at Federal Rules of Civil Procedure 13(a), which states that a counterclaim is “compulsory” if it arises from the same transaction or occurrence as a plaintiff’s claim. The Court explained that it uses three tests to determine whether the transaction or occurrence is sufficiently related between the claim and counterclaim:

Whether the legal and factual issues are substantially the same
Whether the evidence will be substantially the same
Whether there is “a logical relationship between the claim and the counterclaim.”

Taken together, these tests essentially ask if there is substantial overlap between what the plaintiff and the defendant must establish to succeed on the claim and counterclaim, respectively.

The Federal Circuit found that the first two tests clearly weighed against SAP’s counterclaim being compulsory. While an understanding of the accused products and alleged trade secrets would be necessary for both the claim and the counterclaim, “same-field overlap” is not enough to make the issues or necessary evidence “substantially the same.”

As to the third test, the Federal Circuit found [...]

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New Claim Construction in Patent Owner’s Post-Initiation IPR Response? Sure, Charge Away

by Tessa Kroll | Aug 17, 2023 | Patents

Addressing the issue of new claim constructions presented by a patent owner after the institution of inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found that a petitioner is entitled to argue and present evidence under the new construction so long as it relies on the same prior art embodiments used in the petition. Axonics, Inc. v. Medtronic, Inc., Case No. 22-1532 (Fed. Cir. Aug. 7, 2023) (Dyk, Lourie, and Taranto, JJ.)

Medtronic owns two patents directed to the transcutaneous charging of implanted medical devices via inductive coupling between a primary coil in an external charger and a secondary coil in the implanted device. The relevant claims of each patent require the external charger’s power to be automatically varied based on “a value associated with the current passing through the internal power source” (the value limitation) and “a measured current associated with the current passing through the internal power source” (the measured current limitation).

Axonics filed two IPR petitions challenging Medtronic’s patents, arguing that the claims were anticipated by three prior art references. Axonics’s petitions did not propose any express claim constructions, but its claim charts stated that the measured current limitation simply narrows the “value” in the value limitation to “measured current” and does not require a separate measurement. Under this “one-input” construction, both limitations would be satisfied if the external power source automatically varied its power output based on the implanted device’s current. In its preliminary response, Medtronic agreed that while claim construction was not necessary, the prior art failed to anticipate the claimed device under the one-input construction. In its institutional decision, the Patent Trial & Appeal Board agreed that “no term requires express construction.”

In its patent owner response, Medtronic (for the first time) advanced a new claim construction, arguing that the value limitation and the measured current limitation required separate inputs (the two-input construction). In Axonics’ reply, it defended the one-input construction and further argued that the three prior art references also disclosed the claimed device under the two-input construction. In support of its reply, Axonics submitted a supplemental expert declaration citing additional disclosures in the prior art references pertaining to the same embodiments relied upon in the petition. Medtronic argued that it would be prejudicial for the Board to consider Axonics’ new reply arguments without providing Medtronic an opportunity to submit a supplemental expert declaration. Medtronic, however, did not seek leave to submit a new declaration.

In its final written decision, the Board adopted the two-input construction and declined to consider Axonics’ arguments and evidence under the new construction, considering them to be improper reply arguments. Axonics appealed.

The Federal Circuit acknowledged that a petition is required to identify “in writing and with particularity…the grounds on which the challenge to each claim is based, and the evidence that supports the grounds.” To that end, a petitioner may not submit new evidence or arguments in a reply that could have been raised earlier but may respond to new arguments [...]

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Copyright Office Issues New Rule

by Jodi Benassi | Aug 17, 2023 | Copyrights

Adopting its interim rule from December 2022, the US Copyright Office issued a final rule that governs district court referrals, proof of service forms, default proceedings and the appearance of law student representatives before the Copyright Claims Board (CCB).

District Court Referrals

CCB proceedings qualify as alternative dispute resolution processes under 28 U.S.C. § 651 for purposes of referral of eligible cases by US district courts upon consent of the parties. The CCB was created to resolve certain copyright claims more efficiently and at a lower cost than a district court. In furtherance of this objective, the CCB has the authority to adjust or suspend certain rules that would otherwise apply if doing so would be in the interest of efficiently resolving the dispute. The new rule excludes district court referrals from the limits on the number of proceedings a claim, attorney or law firm may file with the CCB and does not require a claimant to pay a filing fee for such a proceeding.

Proof of Service Forms

Claimants may file either the proof of service form provided on the CCB’s website or an alternative proof of service form that contains all of the information required by the CCB-provided form.

Evidence in Default Proceedings

Evidence presented by the parties in a default proceeding is not limited to materials exchanged during discovery, as a default proceeding may occur before discovery has begun.

Law Student Representatives

The final rule allows for law student representatives, provided that they qualify under the laws, court rules, or bar rules of the jurisdiction that allows, authorizes or permits them to practice law. The CCB’s regulations only govern law students who make a formal appearance in CCB proceedings, rather than those who provide legal assistance to parties in other capacities.

Should This Be an Alice Two-Step or a Section 112 Enablement Waltz?

by Katherine Pappas | Aug 10, 2023 | Patents

The US Court of Appeals for the Federal Circuit affirmed the dismissal of a lawsuit for lack of subject matter eligibility under 35 U.S.C. § 101 based on an Alice two-step analysis, with Judge Newman filing a sharp dissent focused on “the current law of § 101.” Realtime Data LLC v. Array Networks Inc., Case No. 2021-2251 (Fed. Cir. Aug. 2, 2023) (non-precedential) (Reyna, Taranto, JJ.) (Newman, J., dissenting).

From November 2017 through December 2018, Realtime brought suits against multiple defendant corporations asserting infringement of multiple Realtime patents related to methods and systems for digital data compression. In 2019, some defendants moved to dismiss for failure to state a claim, arguing that the asserted patent claims were patent ineligible under § 101. In an oral ruling from the bench, the district court granted the motion to dismiss. On appeal, the Federal Circuit found that the district court had provided too cursory a ruling to allow for meaningful appellate review, and therefore vacated and remanded for the district court to provide a more detailed § 101 analysis.

On remand in 2021, the district court issued a written opinion working through the two-step analysis laid down by the Supreme Court in Alice. Step 1 evaluates whether the asserted claims are directed to a patent-ineligible concept, such as an abstract idea, and Step 2 searches for an “inventive concept” by considering the claims to determine whether any elements “transform the nature of the claim” from ineligible subject matter into a patent-eligible application, which must amount to more than “well-understood, routine, or conventional activities.” The district court found the patents invalid under § 101 and granted the motions to dismiss Realtime’s complaints but gave Realtime the opportunity to file amended complaints. After Realtime did so, the defendants renewed their motions to dismiss. The district court again dismissed Realtime’s complaints based on § 101. In ruling so, the district court first found that there were no material differences between Realtime’s prior and amended complaints with respect to the § 101 analysis. Next, the court incorporated by reference its prior ruling’s legal analysis, reaffirmed its finding that the claims were invalid under § 101 and granted dismissal, this time without granting Realtime leave to file amended complaints. Realtime appealed.

This time the Federal Circuit affirmed the district court’s dismissal. In affirming, the Federal Circuit worked through the Alice two-step inquiry and agreed with the district court on each step. At Step 1, the Court agreed that “none of the claims at issue specifies any particular technique to carry out the compression of data” but instead were all “data manipulation claims that are recited at a high level of result-oriented generality and that lack sufficient recitation of how the purported inventions accomplish the results” (quoting Koninklijke). At Step 2, the Court agreed that the asserted patents “simply apply an abstract idea on generic computers with generic techniques,” thus failing to cross over into eligible subject matter. Accordingly, the Court held that the claims were directed to patent-ineligible subject matter and affirmed dismissal under § 101.

Judge [...]

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A Textbook Example: Single Online Sale Does Not a Minimum Contact Make

by Mike Baldwin | Aug 10, 2023 | Copyrights

The US Court of Appeals for the Eighth Circuit affirmed a district court’s grant of a motion to dismiss for lack of personal jurisdiction, finding that a single online sale did not establish minimum contacts to support personal jurisdiction. Kendall Hunt Publishing Company v. The Learning Tree Publishing Corporation, Case No. 22-1885 (8th Cir. July 24, 2023) (Smith, Wollman, Loken, JJ.)

Kendall Hunt Publishing filed a copyright infringement lawsuit against The Learning Tree Publishing in the District of Iowa. Before founding Learning Tree, Frank Forcier and John Coniglio worked remotely for Kendall Hunt from their homes in California. Both individuals traveled to Iowa for work, had regular contact with Iowa co-workers during their tenures and accessed files on an Iowa-based server. Nicholas Baiamonte teaches in California, where he wrote an online ethics textbook. Forcier negotiated with Baiamonte on behalf of Kendall Hunt from 2014 to 2016, and as a result, Baiamonte entered into contracts with Kendall Hunt to publish his textbook as Course Pack 4: Ethics. Baiamonte assigned publication rights to Kendall Hunt.

In 2019, Forcier and Coniglio incorporated Learning Tree in California to sell online textbooks to post-secondary students. Learning Tree targeted its advertising to California professors and educational institutions, as well as some limited sales to Colorado and Oklahoma. One of these textbooks was an ethics textbook that included some copyrighted portions of Baiamonte’s ethics textbook.

Kendall Hunt’s lawsuit alleged that a single purchase of the ethics textbook by an Iowa-based Kendall Hunt employee established the requisite minimum contacts with Iowa to support personal jurisdiction. Kendall Hunt also alleged that the prior contacts Forcier and Coniglio established with Iowa through their employment with Kendall Hunt should be attributed to Learning Tree. These contacts included Coniglio regularly traveling to Iowa from 1995 to 2006 and Forcier traveling to Iowa in 2005 and 2006. The district court rejected Kendall Hunt’s jurisdictional arguments and dismissed the complaint. Kendall Hunt appealed.

Reviewing de novo, the Eighth Circuit set out the factors to analyze Iowa’s long-arm statute, which is permissive up to the extent of due process. These factors include the nature and quality of Learning Tree’s contracts with Iowa, the quantity of the contacts, the relation of the cause of action to the contacts, the interest of the forum state and the convenience of the parties. They also include the additional factors for intentional torts: the intentionality of the acts; whether the contacts were uniquely or expressly aimed at the forum; and whether the contacts caused harm, or the defendant knew they were likely to cause harm, of which the majority occurred in the forum state.

The Eighth Circuit concluded that Learning Tree did not expressly aim at or target Iowa because it did not advertise in Iowa. The Court found that Kendall Hunt’s litigation-based purchase was the only sale, and the infringing conduct occurred in California. Based on this fact and the Court’s 2022 decision in Brothers & Sisters in Christ v. Zazzle, which was decided under similar facts, the Court [...]

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Remedies as Big as Your Bamba

by Thomas DaMario | Aug 10, 2023 | Trademarks

Following the district court’s finding of trademark infringement on summary judgment, the US Court of Appeals for the Sixth Circuit affirmed the district court’s subsequent award of profits, costs and attorneys’ fees in favor of the trademark holder. La Bamba Licensing, LLC v. La Bamba Authentic Mexican Cuisine, Inc., nka La Villa Rica Mexican Cuisine, Inc., Case No. 22-5853 (Gilman, Larsen, Nalbandian, JJ.)

La Bamba Licensing operates a series of Mexican restaurants in the Midwest under the name “La Bamba.” It obtained various federal trademark registrations in 1998. Almost 20 years later, La Bamba Authentic Mexican Cuisine (now known as La Villa Rica) opened a Mexican restaurant under the name “La Bamba Authentic Mexican Cuisine” with a single location in Lebanon, Kentucky. Shortly after learning of the La Villa Rica restaurant, La Bamba Licensing sent a cease-and-desist letter to La Villa Rica demanding that La Villa Rica cease use of the LA BAMBA mark. La Villa Rica responded but refused to alter its conduct because it did “not see any basis for [La Bamba Licensing’s] demands.” Three months after sending the cease-and-desist letter, La Bamba Licensing filed suit in the Western District of Kentucky alleging trademark infringement and unfair competition. More than one year later, La Villa Rica changed the name of its restaurant to “La Villa Rica Authentic Mexican Cuisine, Inc.”

The district court ultimately granted summary judgment in favor of La Bamba Licensing on all pending claims and permanently enjoined La Villa Rica from using the LA BAMBA mark. La Bamba Licensing subsequently filed a motion seeking profits, costs associated with bringing the action and attorneys’ fees. Following an evidentiary hearing, the district court granted La Bamba Licensing’s motion and awarded all three forms of relief. La Villa Rica appealed the district court’s decision to award profits and attorneys’ fees but did not appeal the award of costs or the district court’s calculation of either profits or attorneys’ fees.

The Sixth Circuit started its analysis of the profits award by identifying the factors courts should consider, including the defendant’s intent to deceive, whether sales were diverted, the adequacy of other remedies, any unreasonable delay by the plaintiff in asserting its rights, public interest in making the misconduct unprofitable and “palming off” (i.e., whether the defendant used its infringement of the plaintiff’s mark to sell its own products to the public through misrepresentation). The Sixth Circuit noted that the district court relied on two factors—the defendant’s intent and public interest in making the misconduct unprofitable—plus the defendant’s “willfulness” in determining that an award of profits was appropriate. The Sixth Circuit credited the district court’s reasoning, noting that “[e]ven after La Villa Rica received a cease-and-desist letter containing notice of La Bamba’s registered mark, and ‘in the face of [its] attorney’s advice that [it] might have a problem,’ La Villa Rica continued to use the LA BAMBA mark for a year and a half and ‘offered no legally sufficient explanation or support for its actions.’”

La Villa Rica argued that [...]

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Don’t Ruin Today’s CNS with Yesterday’s Problems

by Benjamin Ediger, Ph.D. | Aug 10, 2023 | Trademarks

The US Court of Appeals for the Fifth Circuit reversed a district court’s trademark invalidity finding based on lack of subject matter jurisdiction because a covenant not to sue (CNS) issued by the trademark owner precluded any reasonably expected future injury that the alleged infringer might incur. Nursery Decals & More, Inc. v. Neat Print, Inc., Case No. 22-10065 (5th Cir. Aug. 1, 2023) (Haynes, Engelhardt, JJ.; deGravelles, Dist. J., sitting by designation) (per curiam).

Neat Print and Nursery Decals sold novelty t-shirts on online marketplaces. In 2018, Neat Print notified one of the online marketplaces that Nursery Decals’ products allegedly infringed Neat Print’s trademarks. In response, the online marketplace sent Nursery Decals a final warning threatening a site ban for any future violations. Nursery Decals complied with the warning and also preemptively pulled its products from other online marketplaces.

Nursery Decals sued Neat Print in the Northern District of Texas. Most of Nursery Decals’ claims were directed to invalidating Neat Print’s trademarks or obtaining a noninfringement judgment. Nursery Decal also included three claims seeking damages. One was a federal claim for fraud on the US Patent & Trademark Office (PTO). The other two claims were Texas law claims based on tortious interference with an existing business relationship and a prospective business relationship. The district court ultimately granted summary judgment on all of the trademark-related claims, ordering the PTO to cancel all of the disputed trademarks.

Prior to the district court’s summary judgment grant, Neat Print tried to avoid summary judgment by filing a CNS along with a motion to dismiss for lack of subject matter jurisdiction. The district court denied the motion to dismiss, concluding that the CNS did not moot the case. The district court explained that Neat Print’s CNS did not address Nursery Decals’ past and potential future injuries (i.e., Nursery Decals’ damages claims). The district court also found that Neat Print’s CNS did not meet the high standard set forth in the Supreme Court’s 2013 decision in Already, reasoning that Neat Print’s CNS left the door open for future take-down notices based on the disputed trademarks.

Neat Print amended its CNS to address take-down notices. It then filed a motion to reconsider its motion to dismiss in light of the modified CNS. The district court orally denied the motion at the pretrial conference and ordered that the case proceed to trial. The jury ultimately found no liability on both claims. After the trial, the district court issued a written opinion explaining that it rejected Neat Print’s motion for reconsideration because Nursery Decals had a legally cognizable injury that supported subject matter jurisdiction. While Neat Print had defeated all of Nursery Decals’ damages claims, Neat Print appealed the district court’s judgment with respect to the trademark claims, arguing that the district court failed to properly evaluate subject matter jurisdiction on a claim-by-claim basis in view of Neat Print’s CNS.

The Fifth Circuit agreed with Neat Print, finding that the district court committed two errors. First, the district [...]

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Holy Pulmonary Hypertension, Batman: Method of Treatment Not Constrained by Safety and Efficacy

by Nitya Anand | Aug 3, 2023 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s holding that the asserted method of treatment patent was valid and infringed because safety and efficacy are not patent concerns. The Federal Circuit also affirmed the district court’s holding that certain claims of the product-by-process patent were invalid because the claimed product was in the prior art, regardless of the process by which it was made. United Therapeutics Corporation v. Liquidia Technologies, Inc., Case Nos. 22-2217; 23-1021 (Fed. Cir. July 24, 2023) (Lourie, Dyk, Stoll, JJ.)

United Therapeutics is the maker of Tyvaso®, a treprostinil formulation approved for treating pulmonary hypertension. United Therapeutics asserted two patents covering Tyvaso® against Liquidia’s § 505(b)(2) new drug application (NDA) on Yutrepia™. One patent was a method of treatment patent claiming to treat pulmonary hypertension by administering a “therapeutically effective” dose of a treprostinil formulation, and the other was a product-by-process patent claiming a treprostinil composition with lowered levels of impurities made by a specific salt formation process.

The district court found that United Therapeutics showed that a single administration of treprostinil improves a patient’s hemodynamics, establishing that administration of Liquidia’s Yutrepia, comprising treprostinil, would directly infringe the method of treatment claims. The district court also concluded that even though Yutrepia’s label did not provide hemodynamic data, the label’s instructions would inevitably lead to the administration of a therapeutically effective single event dose. The court thus concluded that Liquidia would induce infringement of the method of treatment claims.

The district court further found that the asserted claims were not invalid for lack of enablement or written description. The court reasoned that a skilled artisan would not need to engage in undue experimentation to practice the full scope of the claimed treatment of pulmonary hypertension, despite potential safety concerns in treating certain patients, since the claims did not require safety and efficacy. The court found that the claims were not invalid for lack of written description, finding that a skilled artisan would, based on the specification, understand that treprostinil would effectively vasodilate the pulmonary vasculature, improve hemodynamics and treat a patient’s elevated pulmonary blood pressure.

Liquidia appealed on five issues: claim construction of the term “treating pulmonary hypertension,” enablement, written description, induced infringement and infringement of the product by process claims. United Therapeutics cross-appealed on anticipation of the product by process claims and non-infringement of those claims.

First, regarding the construction of “treating pulmonary hypertension,” the Federal Circuit affirmed that the term encompassed all recognized groups of pulmonary hypertension but noted that the claim language “treating pulmonary hypertension” did not import any additional efficacy limitations or safety limitations, even those in a group that would not benefit from the treatment. The Court declined to read any safety or efficacy requirements into the claims, explaining that absent incorporation into the claims, the safety and efficacy of a claimed treatment are the purview of the US Food & Drug Administration (FDA), not patent law.

Regarding enablement and written description, Liquidia argued that the method [...]

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Burst That Bubble: Specific Knowledge Necessary to Prove Contributory Trademark Infringement

by Sarah Bro and Kathleen Lynch | Aug 3, 2023 | Trademarks

The US Court of Appeals for the Ninth Circuit addressed contributory trademark infringement for the first time, finding that specific knowledge is required for liability to attach. Y.Y.G.M. SA, DBA Brandy Melville v. Redbubble, Inc., Case Nos. 21-56150; -56236 (9th Cir. July 24, 2023) (Callahan, Nelson, Thomas, JJ.)

Brandy Melville manufactures clothing and home goods and owns multiple trademarks, including the Brandy Melville Heart and LA Lightning marks. Redbubble is an online marketplace where individual artists upload designs for printing on demand on various articles and Redbubble handles payment, manufacturing and shipping.

In 2018, on two consecutive days, Brandy Melville notified Redbubble of infringing products on its marketplace. Redbubble removed them. One year later, Brandy Melville sued Redbubble for trademark infringement. The district court granted summary judgment to Redbubble on several of its claims. The case then went to trial on Brandy Melville’s contributory infringement and counterfeiting claims. The jury found Redbubble liable for contributory counterfeiting of the Brandy Melville Heart and LA Lightning marks, contributory infringement of those marks and contributory infringement of various unregistered trademarks. However, the court granted Redbubble judgment as a matter of law (JMOL) as to the contributory counterfeiting claim for the Heart mark. Brandy Melville moved for a permanent injunction, attorneys’ fees and prejudgment interest. The district court denied each of Brandy Melville’s motions.

Redbubble appealed the denial of JMOL on contributory infringement claims and the finding of willful contributory counterfeiting of the LA Lightning mark. Brandy Melville appealed the grant of JMOL on contributory counterfeiting of the Brandy Melville Heart mark and the denial of permanent injunction, attorneys’ fees and prejudgment interest.

Addressing Redbubble’s appeal, the Ninth Circuit considered contributory infringement and contributory counterfeiting together. The issue of the applicable standard in questions of contributory liability was novel for the Ninth Circuit. The Lanham Act provides a cause of action when a party intentionally induces trademark infringement or when the party continues to supply products to a third party, despite knowing or having reason to know that the third party is engaging in trademark infringement. This case dealt with the latter.

In other contexts, the Ninth Circuit has applied the “knows or has reason to know” standard as satisfying the willful blindness (in lieu of actual knowledge) element. Willful blindness requires a subjective belief that infringement is likely occurring and deliberate actions were taken to avoid knowledge of that infringement. Redbubble argued that willful blindness requires specific knowledge, while Brandy Melville argued that there is a duty to take reasonable corrective action once a party obtains general knowledge of infringement. The Court noted that for contributory copyright infringement, specific knowledge is not required. In keeping with its sister circuits, the Court held that “willful blindness for contributory trademark liability requires the defendant to have specific knowledge of infringers or instances of infringement.” The Court, therefore, vacated and remanded for the district court to reconsider Redbubble’s JMOL motion under this standard for contributory trademark infringement.

The Ninth Circuit next considered Brandy Melville’s appeal, beginning [...]

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