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No Harm, No Foul: No False Advertisement Where Trade Association Failed to Show Injury

by | Jun 30, 2022 |

The US Court of Appeals for the Tenth Circuit affirmed a district court’s grant of summary judgment in favor of a home inspector association on a false advertising claim brought by a competitor, finding no evidence of injury or harm and explaining that harm could not be presumed merely from the fact that the parties compete for members. Am. Soc’y of Home Inspectors, Inc. v. Int’l Ass’n of Certified Home Inspectors, Case No. 21-1087 (10th Cir. June 14, 2022) (Tymkovich, C.J.; Carson, Rossman, JJ.)

The International Association for Certified Home Inspectors (InterNACHI) and the American Society of Home Inspectors (ASHI) are competing national organizations that offer memberships with benefits such as advertising, online education and logo design to independent home inspectors. InterNACHI brought a false advertisement claim under the Lanham Act against ASHI, its sole national competitor, for featuring the slogan “American Society of Home Inspectors. Educated. Tested. Verified. Certified.” on its website. InterNACHI alleged that ASHI’s tagline was misleading because ASHI’s membership includes “novice” inspectors who are not trained or certified. These “novice” inspectors are promoted on ASHI’s online “find-an-inspector” tool, where home buyers can find a local inspector and view their contact information, qualifications and membership level (associate, inspector or certified inspector). According to InterNACHI, ASHI’s misleading slogan coupled with its public promotion of novice members as inspectors caused InterNACHI to lose potential members. The parties filed cross motions for summary judgment. The district court granted summary judgment in favor of ASHI, concluding that InterNACHI failed to show that it was injured by the tagline as required under the Lanham Act. InterNACHI appealed.

InterNACHI argued that the district court incorrectly concluded that no reasonable jury could find that InterNACHI was harmed by the slogan and improperly refused to presume harm from the parties’ relationship as direct competitors. The Tenth Circuit disagreed, explaining that a plaintiff claiming false advertising under the Lanham Act must plead “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” In support of its claim, InterNACHI offered the following:

  • A survey showing that consumers may be deceived by the slogan
  • Data showing an increase in ASHI associate membership following implementation of the slogan
  • A declaration by InterNACHI’s founder attesting to the harm caused to InterNACHI as a result of ASHI’s slogan.

The Tenth Circuit reasoned that consumer confusion does not bear on whether home inspectors are more likely to join ASHI instead of InterNACHI because of the slogan. The Court also declined to infer harm from ASHI’s increase in associate membership, which was likely attributable to other factors, such as the institution of reduced student membership fees or the closure of another national association for home inspectors around the time the slogan was introduced. The Court further noted that inspectors can join both organizations and that InterNACHI had not shown that its own membership levels decreased because of ASHI’s slogan. With respect to the declaration by InterNACHI’s founder that “use of th[e] slogan in connection [...]

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Claim Construction and Jurisdictional Discovery Are More Than Skin Deep

by | Jun 23, 2022 |

Referencing the use of antecedents from a “wherein” clause, the US Court of Appeals for the Federal Circuit reversed a district court’s claim construction and vacated its summary judgment ruling of indefiniteness that relied on that construction. University of Massachusetts v. L’Oréal S.A., Case No. 21-1969 (Fed. Cir. June 13, 2022) (Prost, Mayer, Taranto, JJ.) The Court also reversed the dismissal of a defendant based on personal jurisdiction, finding error in the district court’s refusal to permit jurisdictional discovery before granting a motion to dismiss on that basis.

This case involved two patents directed towards the topical treatment of skin with a composition of adenosine at a certain concentration, held by the University of Massachusetts (UMass). L’Oréal is French-based company (L’Oréal S.A.) and its US-based company (L’Oréal USA) were involved in the suit. L’Oréal S.A. moved to dismiss for lack of personal jurisdiction, and the district court granted the motion without an opportunity for UMass to conduct jurisdictional discovery. After the dismissal, the district court ruled on the construction of a claim limitation and subsequently wielded that construction to invalidate another limitation as indefinite. The district court entered a final judgment of invalidity on this basis. UMass appealed, challenging the claim construction and lack of jurisdictional discovery.

Construction Using “Wherein” Clause

The Federal Circuit explained that there are two steps in reviewing claim construction: determining whether there is a plain meaning of a disputed term and, as necessary, properly construing the term. After determining that there was no plain meaning of the claim term “concentration,” the Court addressed the construction of the phrase “topically applying to the skin a composition comprising a concentration of adenosine.” The Court found that the district court erred in its determination that the “concentration applied to the dermal cells” meant that the concentration must be measured by the concentration directly applied to the dermal cells beneath the skin, rather than the composition applied to the surface of the skin. The Patent Trial & Appeal Board had adopted the same interpretation in an inter partes review, and therefore “concentration applied to the dermal cells” required no further construction.

UMass challenged that the proper construction. The Federal Circuit, citing to support in the specification, stated that the concentration of adenosine found in the composition should be construed as that applied to the epidermis. Viewing the claim as a whole and use of antecedents, the Court explained that “applied” could relate to both direct and indirect application. The Court specifically noted the use of the word “the” in the wherein clause, and found that this read, for antecedent, as the concentration of the composition. In viewing the prosecution history, the Court determined there was no disavowal of indirect application, and the specification and dependent claims supported a read of the term “concentration” to mean the composition applied to the surface of the skin, rather than requiring testing of the concentration to which the dermal cells were actually exposed. The Court also noted that in the prosecution history, UMass [...]

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Lost and “Found”: Fourth Circuit Interpretation of Discovery in Support of Foreign Litigation Opens Circuit Split

by | Jun 23, 2022 |

The US Court of Appeals for the Fourth Circuit held that a corporation that is not physically present in a district is not “found” in the district for purposes of the federal statute that authorizes courts to order discovery for use in a foreign tribunal. In re Eli Lilly and Co., Case No. 22-1094 (4th Cir. 2022) (Niemeyer, Diaz, JJ.; Floyd, Sr. J.) The Court rejected the approach of the Second Circuit, which previously had held that a district court’s power to order discovery under 28 USC § 1782 was coextensive with the minimum contacts inquiry of specific jurisdiction.

After acquiring a patent portfolio related to the psoriasis drug Taltz, Novartis AG sued Eli Lilly for patent infringement in several European courts. Eli Lilly requested discovery from Novartis in the Eastern District of Virginia under § 1782, which authorizes a district court “of the district in which a person resides or is found” to “order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.” Novartis is based in Switzerland and has no offices or employees in the Eastern District of Virginia.

Following a magistrate judge’s grant of Eli Lilly’s ex parte application for a discovery subpoena, the district court vacated that order. The Fourth Circuit affirmed, substantially echoing the district court’s reasoning.

There was no dispute that Novartis did not “reside” in the district; the only issue was whether Novartis could be “found” there. The Fourth Circuit considered the plain meaning of “found,” Supreme Court precedent interpreting similar statutory language, and the legislative history of the statute, and held “that a corporation is found where it is physically present by its officers and agents carrying on the corporation’s business.”

The Fourth Circuit rejected Eli Lilly’s counterargument that the satisfaction of specific jurisdiction requirements was sufficient for a corporation to be “found” in a district, including Eli Lilly’s reliance on the 2019 Second Circuit decision in In re del Valle Ruiz, which held that a corporation was “found” wherever it could be subject to specific jurisdiction. The Fourth Circuit concluded that In re del Valle Ruiz failed to give “found” its plain meaning, incorrectly ignored Supreme Court precedent and did not give appropriate weight to the legislative history of § 1782.

Even if the Fourth Circuit had disagreed with the district court’s interpretation of § 1782, the Court would still have affirmed based on the deferential abuse-of-discretion standard. Because § 1782 permits, but does not require, an order of discovery, the Court found that the district court’s determination that to “request[ ] [ ] a substantial volume of data and materials located abroad [to] be brought into the United States for subsequent use in proceedings abroad, [would be] a nonsensical result” was well reasoned.

With this decision, the Fourth Circuit broke with the Second Circuit and created a circuit split in the interpretation of § 1782.

Ian Howard, a summer associate in the Washington, DC, office, also contributed [...]

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Faked It? Your Contract Won’t Make It

by | Jun 16, 2022 |

The US Court of Appeals for the Seventh Circuit affirmed a district court ruling denying a defendant’s motion to enforce an arbitration clause in a software license agreement that the defendant’s employee entered into using a fake company name at the defendant’s direction. CCC Intelligent Sols. Inc. v. Tractable Inc., Case No. 19-1997 (7th Cir. June 6, 2022) (Easterbrook, Brennan, St. Eve, JJ.)

CCC Intelligent Solutions and Tractable are competitors that provide customers, including insurance companies, with cost estimates to repair damaged cars and trucks. Both companies supply software that applies algorithms to data generated by body shops and other repair centers. CCC provides the software to customers under terms in a license agreement. The license prohibits disassembling the software code or incorporating it into other software, forbids assignment of the license without CCC’s consent and includes a representation that the customer is not acting as an agent of any third party. The license also includes an arbitration clause. A Tractable employee obtained a license to CCC’s software under a fake business name, “JA Appraisal,” using a false mailing address and email address. The employee gave the software to Tractable, which disassembled the software and incorporated CCC’s proprietary algorithms into its own product. CCC became aware of Tractable’s improper use of its software and filed a lawsuit in the district court.

Tractable moved to compel arbitration under the terms of the agreement, arguing that JA Appraisal was its agent and that Tractable was therefore a party to the license agreement. The district court denied Tractable’s motion. The district court found that a reasonable jury could find that CCC did not intend to grant Tractable a license, and that CCC could have reasonably believed it was doing business with JA Appraisal based on JA Appraisal’s representations and the agreement’s non-assignment provisions. Tractable appealed.

The Seventh Circuit addressed whether Tractable was a party to the contract. The Court first assessed whether it was publicly known that Tractable did business under the JA Appraisal name. The Court found (and Tractable’s counsel admitted) that it was not possible for CCC to discover that Tractable used that name. Tractable, based on a comment to § 163 of the Restatement of Contracts, argued that § 163 provides that a party’s acceptance of a contract is not effective if it was induced by a misrepresentation of an essential term of the contract by the other party. The cited comment provides an exception to this rule, stating that “the mere fact that a party is deceived as to the identity of the other party” does not bring a case within the auspices of § 163 “unless it affects the very nature of the contract.”

The Seventh Circuit rejected Tractable’s reliance on the comment. The Court found that JA Appraisal’s identity affected the very nature of the contract and therefore the exception recited in the comment did not apply. The Court explained that the exception to § 163 covers situations when a party failed to know the “full truth” [...]

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Can’t Hide Behind Minor Clerical Error to Escape Willful Infringement Verdict

by | Jun 9, 2022 |

The US Court of Appeals for the Federal Circuit affirmed a district court decision correcting a clerical error in a claim. Pavo Solutions LLC v. Kingston Technology Company, Inc., Case Nos. 21-1834 (Fed. Cir. June 3, 2022) (Lourie, Prost, Chen, JJ.)

The Pavo patent is generally directed to a “flash memory apparatus having a single body type rotary cover.” CATR Co., later substituted by Pavo, sued Kingston for infringing the Pavo patent. Supported by the patent specification and prosecution, the district court judicially corrected the claim language in its claim construction order to read “pivoting the cover with respect to the flash memory main body,” not “pivoting the case with respect to the flash memory main body” (change emphasized). Pavo’s damages expert, Bergman, presented a profit-based model of reasonable royalty damages, relying on an earlier settlement agreement between CATR and IPMedia to arrive at a profit split of 18.75%, amounting to 40 cents/unit for Kingston. The jury returned a verdict of willful infringement and awarded Pavo a 20% reasonable royalty.

Judicial Correction

The Federal Circuit addressed and affirmed three issues on appeal, the first being that the district court approximately corrected an obvious minor clerical error in the claims. Correction is appropriate “only if (1) the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” In deciding whether a particular correction is appropriate, a court “must consider how a potential correction would impact the scope of a claim and if the inventor is entitled to the resulting claim scope based on the written description of the patent.”

The Federal Circuit decided that the error was clear from the full context of the claim language, supported by the specification, and did not broaden the claim scope. Additionally, the correction was not subject to reasonable debate. Judicial correction “is merely giving to it the meaning which was intended by the applicant and understood by the examiner.” Kingston’s alternative correction would just reverse the order in which the structural components appear in the claim.

The prosecution history also did not suggest a different interpretation of the claim. The applicant and the examiner consistently characterized the claims as describing pivoting the case within the cover, which both the Patent Trial & Appeal Board (Board) and the court recognized. Each reviewing body understood the nature and scope of the invention consistent with correcting “case” to “cover.” Kingston argued that the Board denied the applicant’s request to correct the language, but the denial was on procedural grounds.

Willfulness

Second, the Federal Circuit determined that Kingston could form requisite intent to support a willful infringement verdict despite its arguments that it reasonably relied on not infringing the claims as originally written, and it could not anticipate that a court would later correct the claims. However, “reliance on an obvious minor clerical error in the claim language is not a defense to willful infringement.” By definition, [...]

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Drink Up, but Not with Lehman Brand

by | Jun 9, 2022 |

In the context of an opposition proceeding, the US Court of Appeals for the Federal Circuit upheld a Trademark Trial & Appeal Board (Board) refusal to register a trademark based on likelihood of confusion with a famous but expired mark, notwithstanding the applicant’s assertion of abandonment of the mark by the original registrant. Tiger Lily Ventures Ltd. v. Barclays Capital Inc., Case Nos. 21-1107;- 1228 (Fed. Cir. June 1, 2022) (Lourie, Bryson, Prost, JJ.)

Tiger Lily sought to register the word mark LEHMAN BROTHERS for beer and spirits and for bar services and restaurant services. Barclays, whose Lehman Brothers marks had expired, opposed the applications based on likelihood of confusion. Tiger Lily argued that Barclays had abandoned the mark and filed an opposition to Barclays’ application to register the work mark LEHMAN BROTHERS. The Board sustained Barclays’ oppositions on the grounds of likelihood of confusion and dismissed Tiger Lily’s opposition. Tiger Lily appealed.

Tiger Lily challenged the Board’s decision, arguing that the Board erred in its determination that Barclays did not abandon its rights in the LEHMAN BROTHERS mark and, relatedly, that Barclays established priority with respect to the LEHMAN BROTHERS mark in its own application. Tiger Lily also argued that the Board erred in finding that its proposed mark for beer and spirits and its proposed mark for bar services and restaurant services would cause a likelihood of confusion with Barclays’ LEHMAN BROTHERS mark.

Addressing the issue of abandonment, the Federal Circuit explained that “there are two elements to a claim for abandonment: (1) nonuse; and (2) intent not to resume use,” and “even limited use can be sufficient to avoid a finding that use of a mark has been ‘discontinued.’” The Court noted that Tiger Lily acknowledged that Barclays had used the mark “continuously in the course of winding up the affairs of at least one Lehman Brothers affiliated company” and thus failed to prove nonuse. Whether Lehman Brothers would exist after bankruptcy proceedings ended was immaterial.

On the issue of likelihood of confusion and the DuPont factors, the Federal Circuit found that “because the LEHMAN BROTHERS mark has achieved a high degree of fame, it is afforded a broad scope of protection.” Tiger Lily attempted to draw a distinction between “consumer recognition” as compared with “goodwill” as a factor and argued that it was actually trying to trade on the “bad will” associated with the mark. The Court found “no legal support for [this] subtle distinction.” The Court concluded that “Tiger Lily’s attempts to capitalize on the fame of the LEHMAN BROTHERS mark weighs in favor of finding a likelihood of confusion,” and that the Board’s findings on the remaining factors were supported by substantial evidence.



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Co-Authorship ≠ Co-Inventorship but Can Be Supportive of Inventive Contribution

by | Jun 9, 2022 |

The US Court of Appeals for the Federal Circuit vacated and remanded a Patent Trial & Appeal Board (Board) decision because it failed to resolve fundamental testimonial conflict relating to inventive contribution and complete the Duncan Parking analysis. Google LLC v. IPA Technologies Inc., Case Nos. 21-1179; -1180; -1185 (Fed. Cir. May 19, 2022) (Dyk, Schall, Taranto, JJ.)

Under Duncan Parking, analyzing whether a reference patent is “by another” requires the following three steps:

  1. Determining what portions were relied on as prior art to anticipate the claim limitations at issue
  2. Evaluating the degree to which those portions were conceived by another
  3. Deciding whether that other person’s contribution is significant enough to render them a joint inventor of the applied portions of the reference patent.

SRI International filed two patent applications in 1999 related to the software-based Open Agent Architecture (OAA) and listed Martin and Cheyer as the inventors. In March 1998, an academic paper describing the OAA project was published and named these inventors and Moran as co-authors (Martin reference). During prosecution, the examiner identified the Martin reference as prior art and rejected the claims. SRI asserted that the Martin reference was not prior art because it was made by the same inventive entity as the patents. The patents were granted and assigned to IPA.

Google petitioned the Board for inter partes review of the patent claims. Google argued obviousness in view of the Martin reference and asserted that since the authors of the Martin reference (Martin, Cheyer, Moran) were not the same as the named inventive entity (Martin, Cheyer), the Martin reference was prior art “by others.” The Board instituted review but decided that Google did not meet its burden to provide sufficient support in establishing the correct inventive entity of the claimed subject matter and concluded that Moran’s testimony was insufficiently corroborated. Google appealed.

First, the Federal Circuit discussed the differences between burdens of persuasion and production and responded to Google’s argument that the Board improperly imposed a burden of proof. The Court found no error in the Board requiring Google to establish that the Martin reference was prior art “by another” by showing that Moran made a significant-enough contribution to qualify as a joint inventor on the relevant portions of the Martin reference.

Second, the Federal Circuit explained that the issue in this case was not the lack of corroboration for Moran’s testimony but rather whether his testimony should be credited over Cheyer and Martin’s conflicting testimony. The Court explained that to address joint inventorship under Duncan Parking, Moran “must have made an inventive contribution to the portions of the reference relied on and relevant to establishing obviousness.” Moran’s testimony could support co-inventorship of portions in the Martin reference relied on by Google and relevant to the challenged claims.

The Federal Circuit explained that although most corroboration cases involve issued patents, corroboration is also required for testimony that an individual is an inventor of a potentially invalidating, non-patent prior art reference. The record contained “more [...]

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“Self-Similar” More Objective Than One Might Think

by | Jun 9, 2022 |

The US Court of Appeals for the Federal Circuit affirmed a Patent Trial & Appeal Board (Board) decision holding that the term “self-similar” was not indefinite and denying leave to file a sanctions motion. ClearOne, Inc. v. Shure Acquisition Holdings, Case No. 2021-1517 (Fed. Cir. June 1, 2022) (Moore, Newman, Hughes, JJ.)

Shure owns a patent relating to arrays of microphones and housings that can be fitted to a drop ceiling grid, providing “equivalent beamwidth performance at any given look angle.” During inter partes review, Shure moved to amend the claims to add a new claim reciting microphones “arranged in a self-similar configuration.” The Board granted that motion, holding that “self-similar” was not indefinite. The Board denied ClearOne’s motion for rehearing and separate motion for sanctions alleging a failure to disclose prior that Shure had asserted in a post-grant review initiated against one of ClearOne’s patents.

The Federal Circuit first reviewed the Board’s indefiniteness holding. Since “[d]efiniteness is a matter of claim construction,” the Court applied de novo review while reviewing underlying factual determinations for substantial evidence. The Court held that the intrinsic record alone supported the Board’s definiteness finding because it provided the scope of “self-similar” with reasonable certainty. The specification disclosed microphones arranged in a “self-similar or repeating configuration”; a “fractal, or self-similar, configuration surrounding a central microphone”; and arrangements in circular or other repeating shapes, such as “ovals, squares, rectangles, triangles, pentagons, or other polygons.” Thus, “self-similar,” when read in view of the specification, informed skilled artisans about the scope of the invention with reasonable certainty.

The Federal Circuit rejected ClearOne’s argument that “self-similar or fractal-like” and “self-similar or repeating” distinguished self-similar from other types of patterns, holding that in context, it was clear that the phrases equated, not juxtaposed, self-similar with those patterns. Reviewing the extrinsic evidence, the Court also rejected ClearOne’s arguments premised upon “a series of rhetorical questions to show [ClearOne’s] varying interpretations of the self-similar term.” The possibility of varying interpretations, the Court held, “does not render [a term] indefinite,” as otherwise nearly every term would be indefinite if susceptible to alternative plausible constructions.

The Federal Circuit also rejected ClearOne’s motion for leave to seek sanctions. The Board held that allowing the sanctions motion would lead to an inefficient proceeding because the sanctions motion raised the same arguments as the denied request for rehearing, a ruling that ClearOne conceded on appeal. The Board also found a lack of intent to breach a duty to disclose references. Without analysis and applying the abuse of discretion review standard, the Court found that these factual determinations sufficiently established that the Board did not abuse its discretion.



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PTO Re-Opens to Public

by | Jun 2, 2022 |

The US Patent & Trademark Office (PTO) re-opened to the public on May 25, 2022. Both the headquarters in Alexandria, Virginia, and the regional offices in Dallas, Texas; Denver, Colorado; Detroit, Michigan and San Jose, California, are now open. The offices had been closed to the public since March 16, 2020, because of the COVID-19 pandemic.

Visitors will be required to complete a health questionnaire and may be denied entry depending on the results of the questionnaire. Local COVID-19 infection rates will determine whether masks are required in each office.

Although the PTO is open to the public, oral hearings before the Patent Trial & Appeal Board and Trademark Trial & Appeal Board will still be conducted by video or telephone. In-person interviews with examiners are now possible, however.



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Oh Snap: Sufficient Reasoning Must Support Declaratory Judgment Dismissal

by | Jun 2, 2022 |

The US Court of Appeals for the Federal Circuit vacated and remanded the dismissal of a declaratory judgment action because the district court failed to sufficiently support its decision. Mitek Systems, Inc. v. United Services Automobile Association, Case No. 21-1989 (Fed. Cir. May 20, 2022) (Dyk, Taranto, Cunningham, JJ.)

United Services Automobile Association (USAA) owns four patents directed to using a mobile device to capture and transmit an image of a bank check for deposit. Mitek created software for mobile check capture called MiSnap™, which it licenses in the form of a software development kit to financial institutions. In 2017, USAA sent letters to Mitek’s customers, some with claim charts and patent lists. The customers subsequently demanded indemnification by Mitek. In 2018, USAA sued Wells Fargo, a Mitek customer, in the Eastern District of Texas. As the case progressed, USAA served a subpoena on Mitek seeking documents, source code and testimony about MiSnap™. The case went to trial on two of the four patents, and Mitek and its products were frequently mentioned.

Shortly thereafter, Mitek filed a complaint in California seeking declaratory judgment of no infringement as to all four USAA patents. To support jurisdiction for its declaratory judgment claim, Mitek alleged that there was real and substantial apprehension of imminent litigation between Mitek and USAA for infringement of the patents-in-suit. In response, USAA argued that there was no case or controversy as required by Article III of the Constitution, and thus the case should be dismissed under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction. USAA also argued that the California court should exercise discretion to decline to hear claims for declaratory relief. USAA requested alternatively that the action be transferred to the Eastern District of Texas.

The California court transferred the case to the Eastern District of Texas. The Texas court then dismissed the action for lack of a case or controversy and stated that the court would exercise discretion to decline to entertain the declaratory judgment action. Mitek appealed.

Addressing subject matter jurisdiction, the Federal Circuit explained that the question was “whether the facts alleged, under all the circumstances, show that there is substantial controversy, between parties having adverse legal interest, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Along these lines, a plaintiff must plead facts sufficient to establish jurisdiction at the time of the complaint, and a case or controversy must remain present throughout the course of the suit. The Court found that the Texas court’s decision provided insufficient reasoning for dismissal because it failed to identify first whether to treat the Rule 12(b)(1) motion as a facial or factual challenge, as required under Fifth Circuit precedent. The Federal Circuit instructed the district court on remand to explore any post-filing events that may have impacted jurisdiction, as well as similarities between Mitek’s relationships with Wells Fargo and other customers.

The Federal Circuit found that the district court’s case or controversy analysis was similarly inadequate. The Court explained [...]

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