IP UPDATE

Settlement wipes out exceptional-case fee award in exceptional fashion

by Dexter Hamilton | Sep 3, 2026 | Trademarks

The US Court of Appeals for the Third Circuit granted the parties’ joint motion to vacate a district court’s attorneys’ fee rulings after the parties settled while the second fee appeal was pending. The Court concluded that the case presented the rare “exceptional circumstances” warranting vacatur after mootness resulting from settlement. Lontex Corp. v. Nike, Inc., Case Nos. 24-3284; -3358 (3d Cir. Aug. 20, 2026) (Chagares, C.J.; Freeman, Bove, JJ.)

The appeals arose from fee proceedings following the Third Circuit’s earlier decision in Lontex v. Nike (2024). There, the Court addressed the standard for determining whether a trademark case is “exceptional” for purposes of awarding attorneys’ fees and remanded for further proceedings. On remand, the district court again found the case exceptional and awarded Lontex attorneys’ fees and costs. Nike appealed, and Lontex cross-appealed.

After oral argument and mediation, the parties settled and jointly sought vacatur of the district court’s fee rulings. The Third Circuit emphasized that settlement alone does not warrant vacatur. Because judicial decisions are presumptively correct and may have value beyond the immediate parties, vacatur following settlement remains an extraordinary equitable remedy requiring exceptional circumstances.

The Third Circuit found such exceptional circumstances in this case. Most importantly, the challenged decisions applied the legal standard established in the Third Circuit’s precedential 2024 decision in the case, which remains intact. The public therefore retained the benefit of the appellate decision establishing the governing legal principles, reducing the public interest in preserving the district court’s application of those principles on remand. Both parties also challenged the district court’s rulings, and the settlement (reached following court-encouraged mediation) conserved further judicial resources.

Balancing those considerations, the Third Circuit concluded that the benefits of settlement outweighed the remaining public interest in preserving the district court’s rulings. The case therefore presented the unusual circumstances in which vacatur following settlement is appropriate.

Now you know the limits on patent rights: Diversion of resources doesn’t establish standing

by Cecilia Choy, PhD | Sep 3, 2026 | Patents

Concluding that an organization cannot establish standing to seek prospective relief merely by alleging that it diverted resources in response to challenged conduct, the US Court of Appeals for the Federal Circuit affirmed dismissal of claims brought by inventor-advocacy organizations challenging language on the cover of issued patents because the organizations lacked both organizational and associational standing. US Inventor, Inc. v. Squires, Case No. 24-2378 (Fed. Cir. Aug. 21, 2026) (Moore, Cunningham, Kovner (sitting by designation), JJ.)

The cover of each newly issued patent includes language tracking the Patent Act, stating that the patent “grants to the persons having title to this patent the right to exclude others from making, using, offering for sale, or selling” the invention throughout the United States or importing the invention into the US. Three inventor advocacy organizations – US Inventor, Inventors Association of South Central Kansas, and Inventors Network of Minnesota – sued the United States Patent and Trademark Office (USPTO) and its acting director, alleging that this language was misleading in light of the Supreme Court’s 2006 decision in eBay v. MercExchange.

Plaintiffs contended that eBay eliminated any absolute right of a patent owner to exclude others because injunctive relief is no longer automatic upon a finding of infringement. They sought an order requiring the USPTO to change the patent cover language, an injunction prohibiting the USPTO from representing that patent owners possess an unequivocal right to exclude, and a declaration that the existing language is unlawful. The district court dismissed the complaint for lack of standing. Plaintiffs appealed.

The Federal Circuit affirmed, concluding that plaintiffs had not adequately alleged a real and immediate threat of future injury sufficient to support prospective injunctive or declaratory relief.

First, the Federal Circuit concluded that plaintiffs lacked organizational standing. An organization suing on its own behalf must satisfy the ordinary requirements of Article III standing, including demonstrating a concrete and imminent threat of future injury. Relying on the Supreme Court’s 2024 decision in FDA v. Alliance for Hippocratic Medicine, the Court explained that an organization does not suffer a cognizable injury merely because challenged conduct causes it to spend additional “time, energy, and resources on advocacy and education.”

Plaintiffs relied on a similar diversion-of-resources theory, alleging that the USPTO’s patent cover language required them to devote resources to educating inventors about the effect of eBay, thereby impairing their ability to pursue their organizational missions. The Federal Circuit found those allegations insufficient.

The Federal Circuit also rejected plaintiffs’ reliance on the Supreme Court’s 1982 decision in Havens Realty v. Coleman. In Havens, the challenged conduct directly interfered with the organization’s core activities because racial steering practices caused the organization to receive false housing information that it then passed along to home seekers. Here, by contrast, plaintiffs were aware of eBay and therefore were not themselves misled by the patent cover language. Their alleged injury instead arose from their decision to educate unidentified inventors who might misunderstand that language. Rather than alleging that the USPTO directly impeded their [...]

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Floored: Rule 41(a)(2) dismissal supports appellate jurisdiction

by Taylor MacDonald | Sep 3, 2026 | Copyrights

The US Court of Appeals for the Fifth Circuit affirmed dismissal of a plaintiff’s Digital Millennium Copyright Act (DMCA) claims while vacating dismissal of its copyright infringement claims involving architectural floorplans, concluding that the Court had appellate jurisdiction despite the plaintiff’s voluntary dismissal under Fed. R. Civ. P. 41(a)(2). Kipp Flores Architects, LLC v. AMH Creekside Development, LLC, Case No. 23-50750 (5th Cir. Aug. 21, 2026) (Willett, J.) (Haynes, J., concurring) (Oldham, J., dissenting).

Kipp Flores Architects (KFA) owned copyrights in architectural building plans and technical drawings that it licensed to defendants for use in constructing buildings. The licenses required defendants to include specified copyright management information (CMI) when displaying the copyrighted works. KFA and defendant American Housing Ventures (AHV) later worked with other companies to develop floorplans and technical documents for AHV’s construction projects. Those documents did not contain the required CMI. AHV subsequently provided the floorplans to the remaining defendants for use in developing another building, and those defendants used the floorplans, still without CMI, in online marketing materials.

KFA asserted claims for DMCA violations, copyright infringement, conversion, and specific performance. The district court dismissed all of KFA’s DMCA and conversion claims, along with some of its remaining claims against certain defendants. Seeking to appeal the dismissals, KFA moved under Rule 41(a)(2) to voluntarily dismiss its remaining claims, and the district court granted the motion. KFA then appealed.

The Fifth Circuit first considered whether the Rule 41(a)(2) dismissal created an appealable final judgment. Rule 41(a) permits dismissal of an action, not individual claims. The Court nevertheless concluded that the district court’s error in permitting dismissal of KFA’s remaining claims did not deprive the Fifth Circuit of appellate jurisdiction. The error was a “reversible error, not an unappealable nullity.”

The Fifth Circuit also distinguished its precedent involving Rule 41(a)(1). Unlike a Rule 41(a)(1) dismissal, which is self-effectuating, a Rule 41(a)(2) dismissal requires a court order. The district court’s order granting KFA’s motion therefore constituted a “legally operative act of dismissal” sufficient to create appellate jurisdiction.

Turning to the merits, the Fifth Circuit addressed KFA’s copyright infringement and DMCA claims. The Architectural Works Copyright Protection Act (AWCPA) protects architectural works while earlier copyright law separately protected architectural plans as pictorial, graphic, or sculptural (PGS) works. Section 120(a) of the Copyright Act creates a safe harbor for pictures or other pictorial representations of architectural works embodied in buildings located in or ordinarily visible from a public place. Although § 120(a) does not apply to rights arising solely from PGS works, the Court concluded that KFA’s floorplans could fall within the safe harbor as far as they depicted copyrighted architectural works. The Court also concluded that § 120(a) can apply to representations created before a building becomes publicly visible but distributed or displayed afterward.

The Fifth Circuit nevertheless determined that the district court erred in dismissing KFA’s infringement claim under § 120(a). KFA was not required to plead facts negating the safe harbor because § 120(a) operates as an affirmative defense. KFA’s [...]

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A prescription for liability: Injunction in gray-market drug case based on material differences

by Ian J. Howard | Aug 27, 2026 | Life Sciences, Trademarks

Affirming a preliminary injunction, the US Court of Appeals for the Fourth Circuit found that companies importing foreign-market pharmaceuticals for domestic patients were likely liable for trademark infringement, and that healthcare administrators and pharmacy benefit managers that continued facilitating those transactions despite reason to know of the infringement were likely liable for contributory infringement. Gilead Sciences, Inc. v. Meritain Health, Inc., Case No. 25-1828 (4th Cir. Aug. 13, 2026) (Agee, Harris, Keenan, JJ.)

Gilead sued a group of companies involved in filling US patient prescriptions for the HIV drug Biktarvy® with a Gilead-branded version of the drug intended for Turkey. Gilead alleged that the defendants’ importation and distribution of the Turkish-market product infringed its trademarks under the Lanham Act. In addition to suing companies directly involved in sourcing and supplying the prescriptions, Gilead sued Meritain Health, the third-party administrator of the relevant healthcare plan, and ProAct, a pharmacy benefit manager, for contributory infringement.

Shortly after filing suit, Gilead moved for a temporary restraining order and then a preliminary injunction enjoining the defendants from importing gray-market versions of Biktarvy®. The district court granted the requested relief, finding that Gilead had demonstrated a likelihood of success on its direct infringement claims against certain defendants and its contributory infringement claims against others. Meritain, ProAct, and the other defendants appealed.

The defendants first argued that the Federal Food, Drug, and Cosmetic Act (FDCA) precluded Gilead’s Lanham Act claims. Although the Turkish version of Biktarvy® was not US Food and Drug Administration approved, Gilead did not premise its trademark claims on that fact. The Fourth Circuit therefore concluded that adjudicating Gilead’s claims did not require enforcement or interpretation of the FDCA.

The defendants also challenged the district court’s likelihood-of-confusion finding, emphasizing that Gilead itself manufactured the Turkish version of Biktarvy® and that the product bore authentic Gilead trademarks. The Fourth Circuit disagreed, explaining that goods bearing a genuine trademark may nevertheless be considered nongenuine for trademark purposes if they materially differ from the authorized domestic product or are sold outside the trademark owner’s quality-control procedures.

Although the Turkish and US versions of Biktarvy® were chemically identical, the Fourth Circuit found material differences between them. Among other things, the Turkish product contained foreign-language labeling and lacked certain warnings and patient information provided with the US version. The Turkish product also was not transported through Gilead’s quality-control system. Those differences were sufficient to support the district court’s finding of material differences.

The Fourth Circuit also rejected Meritain and ProAct’s challenges to the contributory infringement ruling. The Court explained that contributory infringement does not require actual knowledge of another party’s infringement. Liability may arise where a defendant knew or should have known of the infringement and nevertheless continued supplying products or services that facilitated it.

The Fourth Circuit further rejected Meritain and ProAct’s argument that contributory infringement required proof that they exercised control over the direct infringers. In doing so, the Court declined to adopt the Ninth Circuit’s control requirement. The Fourth Circuit also concluded that even if [...]

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Off the mark: NPE licensees must comply with patent marking for pre-suit damages

by Keval Amin | Aug 27, 2026 | Patents

Affirming dismissal of a patent infringement complaint and an award of attorneys’ fees, the US Court of Appeals for the Federal Circuit reiterated that a nonpracticing entity (NPE) seeking pre-suit damages cannot disregard its licensees’ obligations under the patent marking statute, and that a pattern of abusive litigation conduct supports an exceptional case finding under 35 U.S.C. § 285. VDPP, LLC v. Volkswagen Group of America, Inc., Case No. 24-2226 (Fed. Cir. Aug. 19, 2026) (Moore, Lourie, Cunningham, JJ.)

VDPP, an NPE, sued an auto manufacturer for infringement of a patent directed to electrically controlled spectacles. The district court dismissed the complaint under Rule 12(b)(6) and denied leave to amend as futile. Because VDPP sought pre-suit damages, it was required to plead compliance with 35 U.S.C. § 287(a), including compliance by its licensees.

VDPP had entered into 11 settlement agreements that included patent licenses, but its proposed amended complaint did not allege that any licensee had marked its products. Instead, VDPP relied on its status as an NPE and asserted that it had no products of its own to mark. VDPP appealed the district court’s dismissal and fee award.

The Federal Circuit affirmed. Although a patentee that does not make or sell patented products may not have products of its own to mark, its licensees remain subject to § 287’s marking requirements. The Court rejected VDPP’s attempt to distinguish licenses granted through settlement agreements, explaining that a settlement license is no different for marking purposes from any other patent license. The Court noted that all 11 settlement agreements were structured as licenses and that one expressly stated that the licensee had no obligation to mark. Because VDPP could not plausibly allege that it made reasonable efforts to ensure compliance by its licensees, the Court affirmed the denial of leave to amend as futile.

The Federal Circuit also affirmed the district court’s exceptional case determination and fee award under § 285. The district court relied on several aspects of VDPP’s litigation conduct, including seeking future damages and injunctive relief on an expired patent, failing to disclose relevant settlement agreements despite being reminded of them, and advancing positions the district court characterized as frivolous.

The Federal Circuit rejected VDPP’s argument that conduct must independently satisfy Rule 11 before it may support an exceptional case finding. It also concluded that the district court properly considered VDPP’s broader pattern of filing patent infringement suits followed by low-value settlement demands, noting that such a pattern is relevant to an exceptional case determination where adequate evidence of an abusive litigation strategy is presented.

The Federal Circuit dismissed the appeal as to sanctions imposed on VDPP’s counsel for lack of jurisdiction. VDPP’s counsel’s notice of appeal listed only VDPP as the appellant, and the counsel’s name appeared only incidentally within a description of the orders being appealed. Corrected notices filed more than 90 days after entry of the orders came too late. The Court also rejected VDPP’s argument that it had standing to contest its own counsel’s [...]

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