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Old Dawg, New Tricks: Bankruptcy Successor Is Also Inter Partes Re-Exam Successor

by | Feb 18, 2021 |

Reversing the Patent Trial and Appeal Board, the US Court of Appeals for the Federal Circuit concluded that because a plaintiff was a successor in bankruptcy, it was a successor in an inter partes re-examination. The Court held that the plaintiff should be substituted for the original requestor following the sale of the original re-examination requestor’s right, title and interest in, to and under its assets to a holding company, which further assigned such assets and interests to the plaintiff. Mojave Desert Holdings, LLC v. Crocs, Inc., Case No. 20-1167 (Fed. Cir. Feb. 11, 2021) (Dyk, J.)

The dispute originated in 2012 when Crocs sued Dawgs for patent infringement. Dawgs responded by filing a third-party request for inter partes re-examination, which the US Patent & Trademark Office granted. The examiner rejected Crocs’ challenged patent claim as anticipated, and Crocs appealed to the Board.

While the appeal was pending, Dawgs filed a petition under chapter 11 of the Bankruptcy Code. Dawgs moved the bankruptcy court to approve the sale of all of its assets to a recently formed entity, Dawgs Holdings, free and clear of all liens, claims and encumbrances pursuant to Bankruptcy Code. The relevant provision of the Asset Purchase Agreement assigned Dawgs Holdings:

[a]ll of [Dawgs’] right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including intellectual property and goodwill) . . . .

The sale order carved out from the free and clear language “any Claims [Crocs] . . . may hold for patent infringement occurring post-Closing.” Shortly after the closing, Dawgs Holdings assigned all rights, including explicitly the claims asserted by Dawgs in the district court action and the inter partes re-examination, to Mojave.

Months later, Mojave moved the Board to change the real party-in-interest from Dawgs to Mojave. The Board dismissed and expunged the request because:

  • The sale from Dawgs to Dawgs Holdings was silent with respect to the inter partes re-examination.
  • Mojave was not a party to the inter partes re-examination proceeding.
  • Mojave did not have standing to update the real party-in-interest.
  • Mojave did not file its submission within 20 days of any change of the real party-in-interest as required by 37 CFR § 41.8(a).

Subsequently, the Board reversed the examiner’s rejection of Crocs’ patent claim, which decision Dawgs appealed to the Federal Circuit, while simultaneously filing a motion to substitute Mojave.

In granting the substitution motion, the Federal Circuit noted the broad language describing the sale of all of Dawgs’ assets to Dawgs Holdings. The Court distinguished the sale language from the sale language in other cases where a buyer in bankruptcy may only acquire “substantially all” of the assets of another entity. Because the language describing the transfer from Dawgs to Dawgs Holdings was so broad, the Federal Circuit concluded that the transfer from Dawgs Holdings to Mojave included the interests in Dawgs’ claims and its successor-in-interest requestor status in the inter [...]

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Attempts to Appeal Institution Decision Is SIPCOed

by | Feb 18, 2021 | ,

Reinforcing the impact of the Supreme Court of the United States’ 2019 decision in Thryv v. Click-to-Call, the US Court of Appeals for the Federal Circuit reiterated that the Patent Trial and Appeal Board’s threshold determination as to whether it will institute a proceeding under the America Invents Act (AIA), in this instance a Covered Business Method (CBM) review, is not appealable because it is closely tied to the institution decision. cxLoyalty, Inc. v. Maritz Holdings Inc., Case Nos. 20-1307, -1309 (Fed. Cir. Feb. 8, 2021) (Prost, C.J.)

cxLoyalty petitioned for CBM review of a patent owned by Maritz. The patent relates to a system and method for permitting a loyalty program customer to redeem loyalty points for rewards offered by vendors without human intervention. A participant (i.e., a customer) uses a graphical user interface (GUI) to communicate with a web-based vendor system (e.g., an airline reservation system). An application programming interface (API) facilitates information transfer between the GUI and the vendor system.

The Board instituted CBM review and concluded that the original claims in the patent were ineligible for patenting under 35 USC § 101, but that the proposed substitute claims were patent eligible. The Board found the original and substitute claims amounted “to a fundamental economic practice long prevalent in commerce” and therefore were directed to abstract ideas. However, the Board found that, unlike the original claims, the substitute claims contained an inventive concept. cxLoyalty appealed the Board’s ruling as to the substitute claims. Maritz cross-appealed the Board’s determination that the patent was eligible for CBM review and the Board’s ruling as to the original claims.

The Federal Circuit quickly disposed of Maritz’s challenge to the CBM-eligibility of the patent, citing to its 2020 SIPCO v. Emerson decision. In SIPCO, the Court held that Thryv made clear that the Board’s threshold determination as to whether a patent qualifies for CBM review is a non-appealable decision. Whether CBM review is an available mechanism is conditioned on whether the patent qualifies, since patents that are directed to “technological inventions” are excluded from CBM review. Because the determination of whether a patent qualifies for CBM review is inextricably tied to the decision to institute, it is not appealable. SIPCO was decided after briefing but before oral argument of this case. Indeed, Maritz’s counsel acknowledged during oral argument that SIPCO foreclosed Maritz’s CBM eligibility challenge.

As to the merits, the Federal Circuit agreed with the Board that both the original and substitute claims were directed to patent-ineligible subject matter under § 101. Maritz argued that the claim features of permitting a participant to redeem points for rewards “without knowing that the actual transaction is a currency transaction at less than the perceived price” saved the claims from being merely abstract ideas. The Court disagreed. After applying the Alice/Mayo two-step analysis, the Court found that 1) the claims were directed to abstract ideas, and 2) the claims merely recited generic and conventional computer components or functionality for carrying out the abstract [...]

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Patent Extension Requires Board or Court Reversal, Multiple Examiner Actions Not Enough

by | Feb 18, 2021 |

The US Court of Appeals for the Federal Circuit affirmed a grant of summary judgment for the Director of the US Patent and Trademark Office (PTO), holding that the statutory language authorizing so-called “C-delay” patent term adjustment requires an adverse patentability finding that is reversed by a court or the Patent Trial & Appeal Board. Chudik v. Hirshfeld, Case No. 20-1833 (Fed. Cir. Feb. 8, 2021) (Taranto, J.) C-delay adds to a patent’s term to account for delay experienced during appellate review of an adverse patentability finding. C-delay does not apply when the examiner reopens examination after final rejection (in this case, four times over an 11-year period) because appellate review is not triggered when an examiner, and not the Board or a court, undoes a final unpatentability decision by reopening examination.

Chudik filed a patent application, and the examiner rejected all pending claims as unpatentable. Chudik declined to appeal, instead filing a request for continued examination. Over the next eight years, the examiner issued four more final rejections. After each rejection, Chudik filed a notice of appeal and opening brief, and after each notice of appeal, the examiner reopened prosecution rather than answering the appeal. The patent finally issued more than 11 years after Chudik filed the application. The PTO added time to the term of the patent for A-delay (where the PTO fails to meet certain prescribed deadlines) and B-delay (each day that the patent application’s pendency extends beyond three years), but not C-delay.

The C-delay provision of the Patent Act provides for a patent term adjustment where the delay is due to “appellate review by the [Board] or by a Federal Court in a case in which the patent was issued under a decision in the review reversing an adverse determination of patentability.” Chudik challenged the PTO’s calculation of the patent extension, arguing that he was entitled to C-delay patent term adjustment for the time his four notices of appeal were pending in the PTO. Chudik argued that the C-delay provision’s “appellate review” included the examiner’s decision to undo her final action through a reopening of prosecution. The PTO rejected that argument, concluding that the C-delay provision did not apply because the Board’s jurisdiction over the appeals never attached and no Board or reviewing court reversed an adverse determination of patentability.

Chudik then sued the PTO director in federal district court, again arguing that “appellate review” referred to the Board’s entire review process, starting when the notice of appeal is filed. Chudik also argued that “a decision in the review reversing an adverse determination of patentability” covered an examiner’s own decision, through a reopening of prosecution. Although characterizing it as “based on a reasonable construction of statutory text,” the court rejected Chudik’s challenge. Applying Chevron, the district court held that the PTO’s position must be affirmed because that position was reasonable. Chudik appealed to the Federal Circuit.

The Federal Circuit affirmed the district court’s decision, finding that the PTO’s interpretation of the C-delay provision’s statutory language was [...]

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Stick to the Fax: Conflicting Statements Made During Prosecution Lead to Indefiniteness

by | Feb 18, 2021 |

In deciding whether use of the term “passive link” to define a connection between a computer terminal and a fax machine rendered a patent claim indefinite, the US Court of Appeals for the Federal Circuit affirmed the district court’s finding of invalidity based on conflicting statements made by the patent owner during prosecution. Infinity Computer Products, Inc. v. Oki Data Americas, Inc., Case No. 20-1189 (Fed. Cir. Feb. 10, 2021) (Prost, C.J.)

Infinity owns a patent directed to providing a circuit for interfacing a personal computer with a facsimile machine to enable the facsimile to be used as a scanner or a printer for a personal computer. The patent seeks to accomplish all of the objectives of a scanner or a printer in a simple, straightforward manner through the use of a circuit of highly simplified design and low cost. The patent claims recite that this functionality is accomplished “through a bi-directional direct connection via a passive link between the facsimile machine and the computer.” Infinity asserted the patent against Oki in district court.

The term “passive link” does not appear in the patent specification. Infinity introduced this term during prosecution to overcome rejections based on a prior art patent to Perkins. During prosecution, Infinity unsuccessfully argued that unlike Perkins, the claimed invention permits uninterrupted transfer of signals between the facsimile and the computer without the use of intervening circuitry. Infinity engaged in multiple rounds of amendment and response with the examiner before finally overcoming the rejections based on Perkins by arguing that the invention “creates a passive link between the facsimile machine and the computer [and] therefore does not require any intervening apparatus as does Perkins.” Perkins used a modem, characterized by Infinity as the “intervening apparatus,” internal to the computer. Infinity argued that the modem “should be regarded as a peripheral device to the computer which processes data before it is transmitted to the I/O bus of the computer,” effectively drawing the boundary of the “passive link” at the I/O bus of the computer.

After allowance, the patent was the subject of three ex parte re-examination proceedings. The patent was a continuation-in-part of a parent application, and in order to overcome a prior art reference asserted in the re-examination proceeding, Infinity argued that the claimed “passive link” element was entitled to the priority date of an earlier parent application. Infinity specifically noted that the patent’s description of “the RJ11 telephone cable and use thereof in communicating data between the fax machine 30 and the PC computer 40 meets the definition of ‘passive link.'” In doing so, Infinity pointed to certain figures in the parent application specification that disclosed fax modem circuitry internal to the computer, effectively drawing the boundary of the “passive link” at the computer’s external port—before the I/O bus.

The district court found that there was a discrepancy on the boundary of the “passive link” because during prosecution it was defined as at the I/O bus of the computer, but during the ex parte re-examination it [...]

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Fairness Is the Limit for Asserting False Advertising Claims

by | Feb 11, 2021 |

Addressing whether Lanham Act claims for false advertising or false association under § 43(a) (15 USC § 1125(a)) are subject to a statute of limitations, the US Court of Appeals for the Fourth Circuit concluded that the sole time limit on bringing such claims is the equitable doctrine of laches. Belmora LLC v. Bayer Consumer Care AG, Case No. 18-2183 (4th Cir. Feb. 2, 2021) (Floyd, J.)

The facts of the underlying dispute are straightforward. Bayer has sold the pain reliever naproxen as FLANAX in Mexico since 1972 and in the United States as ALEVE. Belmora began selling naproxen under the name FLANAX in the United States in 2004, where it used similar packaging and described the drug as one sold successfully in Mexico. Both companies tried to register the mark with the US Patent & Trademark Office, where proceedings unfolded. Ultimately, in April 2014, the Trademark Trial and Appeal Board cancelled Belmora’s trademark registration, finding that Belmora had blatantly misused FLANAX by drawing on the popularity of Bayer’s Mexican product. Two months later, Bayer brought claims against Belmora under § 43(a) of the Lanham Act and California unfair competition law in the US District Court for the Central District of California. The suit was transferred to the Eastern District of Virginia, where Belmora moved to dismiss, arguing that § 43(a) and state law claims were barred by the statute of limitations. Bayer replied that § 43(a) had no statute of limitations, and that the time to bring the state law claims had been tolled during the Board’s proceedings. The district court granted both of Belmora’s motions, and the appeal followed.

Because there is no express statute of limitations for a § 43(a) claim, the question before the Court was whether to assume that Congress intended that the most analogous state law statute of limitations apply, or to apply either the most analogous federal statute or common law laches doctrine. “Conclud[ing] that § 43(a) is one such federal law for which a state statute of limitations would be an unsatisfactory vehicle for enforcement,” the Court held that laches was more appropriate, for primarily two reasons. First, the statutory text provides that § 43(a) damages are subject to the principles of equity, which would include the doctrine of laches. Second, the Court found persuasive the law of the Third, Seventh and Ninth Circuits, which each apply laches as to restrict the timeliness of as § 43(a) action. That said, the Court emphasized that on remand, the district court should consider the period for bringing a similar state action as part of the laches analysis, especially because the Fourth Circuit employs a presumption that claims brought after the expiration of the most-analogous statute-of-limitations are barred by laches.

The Court noted that Bayer could overcome a presumption of laches, and cited three factors for the district court to consider:

  • Bayer’s knowledge (or lack thereof) of Belmora’s adverse use
  • Whether Bayer’s delay was inexcusable or unreasonable
  • Whether Belmora had been unduly prejudiced by [...]

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A Shoe-In? Fleet Feet Gives Injunction Appeal the Moot Boot

by | Feb 11, 2021 |

The US Court of Appeals for the Fourth Circuit dismissed a preliminary injunction as moot where the enjoined party had discontinued the use complained of and had no future plan to restart it. Fleet Feet, Inc. v. Nike, Inc., Case No. 19-2390 (4th Cir. Jan. 26, 2021) (Diaz, J.) The Court denied the enjoined party’s request that it vacate the district court’s order granting the preliminary injunction despite mootness due to an ongoing litigation.

Fleet Feet is a retailer selling products related to running, including Nike merchandise. It is also a Nike competitor since Nike sells its own products. Fleet Feet obtained two trademark registrations, having already used both for years: “Running Changes Everything” in 2020, and “Change Everything” in 2015. In July 2019, Nike launched an advertising campaign with the tagline “Sport Changes Everything” scheduled to end at the February 2020 Super Bowl. Fleet Feet sued Nike for trademark infringement. The district court granted a preliminary injunction against Nike and set a $1 million injunction bond. The preliminary injunction order prohibited Nike from any use of the phrase “Sport Changes Everything” or any other designation confusingly similar to the Fleet Feet’s marks when advertising or selling goods and services. Nike discontinued its campaign two months before the scheduled end and appealed the preliminary injunction order.

Nike argued that the district court erred in its preliminary injunction factor analyses. But on appeal, the Fourth Circuit decided as a threshold matter that the end of Nike’s “Sport Changes Everything” campaign and its representation that there were no plans to use the term after the campaign rendered Nike’s appeal of the preliminary injunction “designed to interrupt that very campaign” moot. A case becomes “moot” when the “issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” The Court found that Nike’s appeal of the preliminary injunction was nonjusticiable since there had been an event during the pendency of the appeal that made it impossible to grant effective relief to a prevailing party. Because of the conclusion of the 2020 Super Bowl and Nike’s representations that it did not plan to use the term afterwards, there was no possible relief to Nike based on the preliminary injunction’s interference with the campaign.

The Fourth Circuit disagreed with Nike that two issues remained live. First, Nike argued that the continued restraint on Nike’s speech due to the order’s prohibition of any confusingly similar designation to Fleet Feet continued to be a live issue. The Court explained that this was only a potential controversy, not a live controversy. Because Nike had not engaged in the speech barred by the order, had represented that it did not intend to do so in the future, and had not introduced any new slogans confusingly similar to Fleet Feet’s marks, no actual speech was threatened by the preliminary injunction.

Second, Nike argued that the potential recovery on the injunction bond was a live issue. Referring to the Supreme Court case Univ. of Tex. [...]

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$6 Million Verdict Vacated in Flooring Tech Trade Secrets Row

by | Feb 11, 2021 |

The US Court of Appeals for the 11th Circuit reversed a judgment of trade secret misappropriation because the plaintiff had not proved that the defendant’s duty to maintain the secret arose at the time it acquired the secret. AcryliCon USA, LLC v. Silikal GmbH, Case No. 17-15737 (11th Cir. Jan. 26, 2021) (Tjoflat, J.)

AcryliCon USA, LLC (AC-USA), AcryliCon International, Ltd. (AC-I) (collectively, AcryliCon), and Silikal are in the industrial flooring business. Hegstad is a chemical engineer who founded AC-I. In 1987, Hegstad invented, with Silikal’s help, a formula for a special industrial flooring material called 1061 SW. The formula belonged to Hegstad, and Silikal possessed the formula as the manufacturer of 1061 SW resin for Hegstad and AC-I. In 1997, AC-I and Silikal contractually established AC-I as the exclusive distributor of 1061 SW resin. In 2008, AC-USA was incorporated and entered into license agreements to obtain the right to import, market and sell 1061 SW (among other products) in the United States.

Thereafter, a dispute arose between AC-I and Silikal. The dispute was resolved by a 2010 global settlement agreement (GSA), which ended the prior agency relationship but provided (inter alia) that Silikal would preserve the secrecy of the formula and not sell 1061 SW resin to anyone but AcryliCon. The GSA also contained a forum selection provision stating that disputes arising from activities in the United States would be governed by Georgia law and waiving objections to personal jurisdiction in the Northern District of Georgia.

AC-USA sued Silikal in 2014 in the Northern District of Georgia, claiming that Silikal breached the GSA by manufacturing 1061 SW resin, selling it globally and taking credit for 1061 SW in its marketing. AC-USA’s complaint included several other causes of action, including misappropriation of trade secrets. Silikal moved to dismiss for lack of personal jurisdiction, contending that it had not sold 1061 SW to anyone other than AcryliCon in the United States. The district court denied the motion on evidence that such sales had occurred. AC-USA moved for partial summary judgment on its contract claim and sought a permanent injunction barring Silikal from producing or selling 1061 SW. The district court granted the motion and injunction because “previous counsel for Silikal admitted” that there had been sales of 1061 SW in violation of the GSA and Silikal did not dispute that there had been a breach of contract. After trial, the jury found for AC-USA, awarding $1.5 million on the misappropriation claim and $1.5 million on the contract claim. The district court added $3 million in punitive damages. Silikal moved for judgment as a matter of law (JMOL), arguing that the district court lacked personal jurisdiction, that AcryliCon had failed to prove misappropriation, and that AcryliCon had failed to prove cognizable damages on its contract claim. The district court denied the motion, awarded AC-USA attorneys’ fees and entered judgment for AC-USC. Silikal appealed.

The 11th Circuit held that Silikal waived its challenge to personal jurisdiction by appealing only the pre-trial jurisdiction ruling [...]

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If You Seek or Browse and Can Find, It’s Publicly Available, but Anticipation Isn’t Obvious and Requires Notice

by | Feb 11, 2021 | ,

The US Court of Appeals for the Federal Circuit found that facilitating browsing of documents on a website was sufficient to support public accessibility of prior art references, but that the Patent Trial and Appeal Board cannot sua sponte invalidate a claim as anticipated under § 102 unless that specific statutory ground had previously been noticed. M & K Holdings, Inc. v. Samsung Electronics Co., Ltd., Case No. 20-1160 (Fed. Cir. Feb. 1, 2021) (Bryson, J.)

In response to M & K Holdings’ suit for patent infringement, Samsung filed an inter partes review (IPR) petition seeking cancellation of all claims of the asserted patent as obvious. The patent is directed to an efficient method for compressing video files by “decoding a moving picture in inter prediction mode,” using a motion vector to quantify where “reference pictures are used to estimate motion of a current block” over the video duration. Samsung’s petition relied on references generated in connection with the Joint Collaborative Team on Video Coding (JCT-VC), which established industry standards for high-efficiency video coding (HEVC). All three prior art references were uploaded to JCT-VC’s website before the critical date.

After the Board held all claims of the patent unpatentable, M & K appealed, arguing that the Board erred by relying on references that do not qualify as prior art printed publications under 35 USC § 102, and by finding claim 3 anticipated when the petition for IPR asserted only obviousness as to that claim.

Public Accessibility and Printed Publications

M & K argued that a person of ordinary skill could not have located two of the three prior art references by exercising reasonable diligence, and therefore the Board’s holding that those references were publicly accessible was erroneous. Specifically, M & K argued that the structure and search capabilities of the JCT-VC website (requiring navigating to the JCT-VC landing page, clicking on the “All meetings” link and selecting a particular meeting in order to access documents, without any explanation that the “All meetings” label contains a document repository, and with no search functionality on the landing page or the “All meetings” page) meant that even if a user happened to navigate to a meeting page of the website, the user could not search documents by content, but could search only by date, title and number.

The Federal Circuit disagreed, explaining that public accessibility does not require a website’s landing page to have search functionality. Instead, “given the prominence of JCT-VC, the dispositive question is whether interested users of the JCT-VC website could have located [the references] through reasonable diligence.” The Court agreed that substantial evidence supported that interested users could have done so.

Regardless of whether the website described itself as a document repository, the Federal Circuit noted that a skilled artisan browsing the JCT-VC website would understand that it was structured to serve the JCT-VC’s purpose of developing HEVC standards through member meetings and communications. Therefore, a skilled artisan browsing the JCT-VC website would have realized that documents are hosted [...]

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Eight-Month Delay on Transfer Motion Ruling Is “Egregious,” Warrants Stay

by | Feb 11, 2021 |

The US Court of Appeals for the Federal Circuit issued a rare grant of a mandamus petition directing a district court to stay proceedings until ruling on a pending motion to transfer, stating that the district court’s eight-month delay in ruling on the motion while allowing substantive issues to proceed “amounted to egregious delay and blatant disregard for precedent.” In re SK hynix Inc., Case No. 21-113 (Fed. Cir. Feb. 1, 2021) (Moore, J.) (non-precedential). The district court denied the transfer request the following day, and the petitioner asked the Federal Circuit to again stay the proceedings until it completed briefing on a new mandamus petition to compel transfer, which the Federal Circuit denied without prejudice. In re SK hynix Inc., Case No. 21-113 (Fed. Cir. Feb. 3, 2021).

Netlist and SK hynix are competitors in the memory semiconductor space. Netlist sued SK hynix for patent infringement in the US District Court for the Western District of Texas. SK hynix moved to transfer the case to the US District Court for the Central District of California. The parties completed briefing on the transfer motion in May 2020. The district court ordered the parties to engage in extensive discovery and scheduled a Markman hearing for March 2021. On January 6, 2021, after SK hynix moved to stay proceedings pending the motion to transfer, the district court instructed the parties to proceed with all deadlines while jurisdictional issues were resolved in parallel. SK hynix then filed the mandamus petition seeking to direct the district court to transfer the case, or alternatively, to rule on SK hynix’s pending motion to transfer. The district court soon issued an order setting a hearing on the transfer motion for February 2, 2021.

On February 1, 2021, the Federal Circuit granted the mandamus petition and directed the district court to stay all proceedings concerning the substantive issues in the case, including discovery, until the district court issued a ruling on the transfer motion. In its Order, the Court recognized that mandamus may be used to correct an “arbitrary refusal to act” by a district court on a transfer request. Although a district court has discretion in handling its docket, a motion to transfer “should unquestionably take top priority.” The Court characterized the district court’s handling of the transfer motion as amounting to “egregious delay and blatant disregard for precedent,” finding that the motion “lingered unnecessarily on the docket” while the parties were instructed to proceed with the merits of the case.

The next day, the district court issued an order denying SK hynix’s transfer request. The district court’s order also moved up the trial date from December 6, 2021, to July 6, 2021, and the Markman hearing from March 19, 2021, to March 1, 2021. SK hynix immediately notified the Federal Circuit of the denial and its intention to file a new mandamus petition to compel transfer. In the interim, SK hynix requested that the Federal Circuit extend the stay of the district court proceedings until briefing [...]

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No Matter How Many Touched the Flowers, Single Infringement Begets Single Statutory Damages Award

by | Feb 11, 2021 |

In a dispute over the alleged infringement of a floral print textile design, the US Court of Appeals for the Ninth Circuit affirmed the plaintiff’s ownership of a valid copyright, but reversed and remanded for further proceedings on the issue of statutory damages, finding that the Copyright Act permits only a single award of statutory damages where multiple named defendants infringed one work. Desire, LLC v. Manna Textiles, Inc., et al., Case No. 17-56641 (9th Cir. Feb. 2, 2021) (Bennett, J.) (Wardlaw, J., concurring in part, dissenting in part). Judge Wardlaw’s dissent argued that the majority’s ruling limiting statutory damage awards was contrary to controlling Ninth Circuit precedent

Desire, a Los Angeles-based fabric supplier, sued Manna Textiles and several manufacturer and retail defendants for willful copyright infringement when Manna created a fabric design based on Desire’s two-dimensional floral print textile design, which Desire registered with the US Copyright Office in June 2015. Manna sold the copied floral textile design to the other defendants, which created and sold women’s garments made from the fabric.

After a jury trial, the jury found that Manna and two other defendants willfully infringed Desire’s textile design, and that two other defendants innocently infringed the design, and awarded statutory damages ranging from $10,000 to $150,000 against each defendant. The defendants appealed.

The Ninth Circuit readily affirmed the district court’s holding that Desire owned a valid copyright in its textile design, and noted that the district court was correct to extend broad copyright protection to the design. In particular, the Court confirmed that the Desire floral textile was sufficiently original and independently created, and that the originality of the stylized (rather than “lifelike”) flowers warranted broad protection.

The Ninth Circuit dedicated the majority of its opinion to its finding that the district court erred in permitting multiple awards of statutory damages. First, the Court determined that the district court correctly apportioned joint and several liability among the defendants by assessing which defendants were responsible for which acts of infringement based on the defendants’ distribution or sale of the fabric among one another or to end consumers. In short, based on a particular defendant’s upstream or downstream position in the distribution chain, and the “but for” cause of infringement within the chain, a defendant could be jointly and severally liable with certain other defendants, but not all defendants could be jointly and severally liable with all other defendants.

When statutory damages under 17 USC § 504(c)(1) (c)(1) are elected in lieu of actual damages and profits, ) the number of statutory damages awards available in a particular matter depends on the number of individual works infringed and the number of separate infringers. Here, the Ninth Circuit affirmed that there was only one work at issue (Desire’s floral print textile) and considered whether the Copyright Act authorizes multiple statutory damages awards where one infringer is jointly and severally liable with all other infringers, but the other infringers are not completely jointly and severally liable with one another. “No” was [...]

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