Bakery’s Apple Pie Design is Functional and Ineligible for Trademark Protection, Third Circuit Affirms

The U.S. Court of Appeals for the Third Circuit recently affirmed a district court’s determination that the key element of a gourmet bakery’s registered pastry design was functional, and therefore ineligible for trademark protection, in Sweet Street Desserts, Inc. v. Chudleigh’s Ltd., Nos. 15-1445 & 15-1548.

In the mid-90’s, Chudleigh’s developed a single-serving apple pie, with a round shape and six overlapping folds of pastry encircling the pie filling. Chudleigh’s registered a trademark for its pie—the “Blossom Design”—and entered into discussions with Applebee’s from 2008-2010 to supply apple pies without reaching a deal. In 2010, Applebee’s asked Sweet Street Desserts, also a dessert manufacturer and restaurant supplier, to develop a single-serve apple pie. Sweet Street Desserts entered into a contract with Applebee’s to supply a “round ‘apple pocket’ that consisted of a unitary, pie-like bottom with an open top covered by six rectangular pieces of dough folded around the filling in a counter-clockwise spiral pattern ….” Sweet Street Desserts entered into discussions with Chudleigh’s to outsource the production of the product, but the parties did not reach an agreement and Sweet Street Desserts produced the dessert itself.

Chudleigh’s complained to Applebee’s that the Sweet Street Dessert’s apple pie infringed on Chudleigh’s “Blossom Design,” and featured the same “six-fold spiral pattern.” Sweet Street Desserts then filed a declaratory action in federal court, seeking a declaration that its product did not infringe on Chudleigh’s Blossom Design.

In its July 21, 2016 Opinion, the Third Circuit affirmed the district court’s grant of summary judgment to Sweet Street Desserts. Quoting the Supreme Court’s decision in TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23, 32 (2001), the Third Circuit reiterated that “a product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” Chudleigh’s Blossom Design was functional because the number of folds in a pie must be proportional to the size and amount of filling in the pastry. Indeed, Chudleigh’s owner testified that during his creation of the Blossom Design, the “single-serving size and round shape of the design were critical to minimizing the cost of the pastry and to filling the need in the restaurant industry to reduce waste and ease serving.” The Blossom Design was functional and the cancellation of Chudleigh’s trademark was affirmed.

Sweet Street stands as a reminder that product designs that are essential to the use of the item or go to the item’s cost or performance are the province of patent protection, not trademark. The decision also reminds businesses of the usefulness of declaratory judgment actions in protecting against allegations of infringement of intellectual property rights.

For more information on the Lanham Act or implications of Sweet Street Desserts, Inc. v. Chudleigh’s Ltd., please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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Third Circuit Lets Google Give Cookies to Kids

Rarely does whether a child has a cookie rise to the level of a federal question.  However, on June 27, 2016, in In re Nickelodeon Consumer Privacy Litigation, No. 15-1441, a panel of the Third Circuit Court of Appeals substantially affirmed the dismissal of a multi-district, class-action lawsuit against Viacom and Google alleging that the defendants unlawfully used internet site-tracking cookies to target advertisements at children who watched videos and played games at Nickelodeon’s website.  This decision substantially relied on a November 2015 decision from the same court, finding Google not liable under federal privacy laws for bypassing cookie-blockers on Apple’s Safari and Microsoft’s Internet Explorer web browsers.  The Nickelodeon Court did permit plaintiffs’ claim against Viacom for invasion of privacy under New Jersey law to proceed.

The plaintiff class—children under the age of 13—alleged that Viacom and Google tracked their web-browsing and video-watching habits by installing cookies on their computers through Viacom websites like Nick.com, and shared this information with Google.  Plaintiffs also alleged that Google used the cookies it installed to track users across any website on which Google displays ads.  Plaintiffs alleged that Viacom’s and Google’s conduct violated federal laws such as the Wiretap Act, the Stored Communications Act, and the Video Privacy Protection Act (VPPA), and also brought state statutory and common law claims.

After finding that the plaintiffs had standing, the Court dismissed plaintiffs’ Wiretap Act, Stored Communications Act, and state statutory claims based on the Court’s previous Google decision.  The Court also dismissed plaintiff’s claim for violation of the VPPA, holding the VPPA: (i) only prohibits the disclosure, not the receipt, of personally identifying information relating to viewers’ consumption of video-related services; and (ii) only prohibits the disclosure of information that would allow an ordinary person to identify a specific individual’s video-watching behavior, not disclosures of IP addresses, as occurred in Nickelodeon.  The Court revived one count against Viacom and remanded the case to the district court, finding that a reasonable jury could find Viacom liable for invasion of privacy, based on Viacom’s representation on Nick.com that it did not collect or share any personal information about its visitors.

For more information on internet privacy law or the implications of In re Nickelodeon, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

U.S. Supreme Court Clarifies Standard for Awarding Attorneys’ Fees to Successful Copyright Litigants.

On June 16, 2016, the U.S. Supreme Court in a unanimous decision, clarified the standard for awarding attorneys’ fees under the Copyright Act.

This is the second time the case of Kirtsaeng v. John Wiley & Sons, Inc, No. 15-375, has come before the Supreme Court.  Kitrsaeng was sued by respondent John Wiley & Sons, Inc., a textbook publisher. Kirtsaeng won the first Supreme Court appeal, which resulted in a clarification of the “first sale” doctrine.  Having prevailed, Kirtsaeng sought more than $2 million in attorney’s fees under § 505 of the Copyright Act.  The Second Circuit affirmed the district court’s denial of this request, finding that Wiley had taken reasonable positions throughout litigation, and awarding fees would not serve the Copyright Act’s underlying purpose—enriching the public through access to creative works.

Although the Copyright Act gives the district court discretion to award attorneys’ fees, the Supreme Court emphasized that the discretion must be exercised under set standards to increase the predictability of the result for both plaintiffs and defendants.

The Supreme Court noted that the Second Circuit appeared to focus solely on the objective reasonableness of the parties’ litigation positions, which is an important factor, but not the only factor to be considered.   By focusing too narrowly on the parties’ litigation positions, a court may lose sight of the goals of the Copyright Act. The Court acknowledged the fundamental nature of litigation, that “both plaintiffs and defendants can (and sometimes do) make unreasonable arguments,” a fact which “favors plaintiffs because a losing defendant will virtually always be found to have done something culpable.” Slip op. at 9 (emphasis in original).

In addition to the objective reasonableness of the parties’ litigation positions, the Supreme Court held that lower courts should address “a range of considerations,” including, frivolousness, motivation, objective reasonableness, and the need in particular circumstances to advance considerations of compensation and deterrence.  “Although objective reasonableness carries significant weight, courts must view all the circumstances of a case on their own terms, in light of the Copyright Act’s essential goals.” Slip op. at 11.

Because it was unclear if the Second Circuit (or district court) considered all of these factors, the Supreme Court vacated and remanded, emphasizing, however, that it was not suggesting that any different outcome would necessarily occur in this case.

For more information regarding the Copyright Act or Kirtsaeng v. John Wiley & Sons, Inc, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

 

Federal District Judges May Recall Discharged Civil Jury To Correct Errors, Supreme Court Holds

Eschewing an old common-law rule for practicality, the U.S. Supreme Court held today in Dietz v. Bouldin, No. 15-458, that federal district judges may recall a civil jury it has discharged to correct errors in certain circumstances.  In the case, an automobile accident trial in the federal district court in Montana, the jury was tasked with determining if the plaintiff was entitled to additional damages over the $10,136 in medical expenses the parties stipulated were reasonable.  The jury returned a verdict for $0 and the district judge discharged the jurors before realizing that the verdict was “legally impossible” because of the parties’ stipulation.  At common law, when jurors were always formally sequestered, once a court discharged the jury, its only option to correct an error was to call for a new trial.

This bright-line rule should give way to modern trial practice, the Supreme Court held in a 5-2 decision.  Writing for the Court, Justice Sotomayor noted that district judges have the inherent authority to control the proceedings before them, including the analogous ability to amend interlocutory orders at any time before final judgment.  Although judges should exercise their inherent authority cautiously, the recall of a discharged jury may be appropriate if the court is confident that the jurors were not “tainted” by outside influences.  Federal district judges should look to factors such as the length of time between discharge and recall, whether the jurors spoke to anyone about the verdict in person or on their smart phones, and the reaction to the verdict in the courtroom—a gasp or sob in the gallery might cause the jurors to question their decision and affect the jurors’ impartiality.  Finally, the majority limited its holding to civil juries.  The Court left the issue of whether the rule should extend to criminal juries for a different day because criminal jury practice raises different issues, such as whether double jeopardy would attach.

With respect to Dietz, the Court affirmed the district court’s decision to recall the discharged jury because the jurors had only left the courtroom minutes before and only one had left the building (to retrieve a hotel receipt).  When questioned, the jurors indicated that they had not spoken to anyone about the case.

“All judges make mistakes. (Even us.),” Justice Sotomayor quipped. Although district judges must exercise their authority cautiously, they should retain the ability to correct a civil jury verdict error even if the jury has already been discharged.

For more information regarding Dietz v. Bouldin, No. 15-458, or jury practice please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

NJ Appellate Division Decertifies Class in Suit Over TGI Friday’s Menus and Drink Prices

New Jersey bar patrons alleging that the chain restaurant, TGI Friday’s, Inc. (TGIF), violated consumer protection laws by omitting drink prices from its menus will have to proceed with their claims as individual plaintiffs after the New Jersey Appellate Division decertified their class.

The Panel reversed the trial court’s class certification in a lawsuit against TGIF that began more than six years ago, when a woman claimed that she was charged $2.00 for a beer at the restaurant’s bar and later charged $3.59 for the same beer at a table in the restaurant. The woman claimed that the price discrepancy and the fact that TGI Friday’s does not print drink prices on its menus were in violation of the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1, et seq., and the Truth in Consumer Contract Warranty and Notice Act (TCCWNA), N.J.S.A., 56:12-11, et seq.  Two additional plaintiffs joined the lawsuit and the trial judge granted class certification to anyone who ordered unpriced drinks at any corporate owned TGI Friday’s in New Jersey from 2004 through 2014.

The Panel’s decision to decertify the class relied on the requirement of New Jersey Court Rule 4:32-1(b)(3), the class action rule, which requires that “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.”  In a published decision dated March 24, 2016, the Panel held that the plaintiffs did not meet the “predominance” requirement for class action certification because “individualized inquiries” would be necessary to establish whether individual plaintiffs received a TGIF menu that violated the law and whether the lack of pricing on the menu caused plaintiffs’ damages.  Dugan v. TGI Fridays, Inc., 2016 WL 1136486, at *4 (N.J. Super. Ct. App. Div. Mar. 24, 2016).

With respect to the NJCFA claim, the Panel concluded that people who either were not given menus or did not ask for the price before ordering a drink could not prove causation, while those who relied upon the stated price could conceivably have claims. Therefore, claims for damages would necessarily involve inquiries to determine whether or not individual class members were provided a menu in order to determine whether each class member sustained a loss caused by the absence of prices on the menus.

Similarly, with respect to the TCCWNA claim—which  does not contain the NJCFA’s fee shifting or treble damages provisions but does provide for statutory and actual damages—each individual class member would be required to demonstrate that they were actually provided with a menu that contained technical violations of state or federal law.  Id. at *9-10.

Significantly, the Panel’s decision may slow the sudden rush of class actions brought under the TCCWNA by eliminating cases based on technical violations where consumers cannot actually prove that they received the material that forms the basis for thein violation.

For more information regarding the NJ Consumer Fraud Act, TCCWNA, or the Court’s decision in Dugan, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

 

U.S. Supreme Court Reaffirms that Only “Humans and Corporations,” Not Unincorporated Entities Like a Trust, May Assert Their Own Citizenship for Purposes of Federal Diversity Jurisdiction

In a unanimous March 7, 2016 opinion authored by Justice Sotomayor, Americold Realty Trust v. Congra Foods, Inc., et al., , the U.S. Supreme Court affirmed an oft-confused holding relating to diversity jurisdiction: the citizenship of any non-incorporated artificial entity is determined by considering all of the entity’s “members,” not of the state where the entity is formed.

Americold removed its lawsuit to the federal district court in Kansas, which resolved the lawsuit on its merits.  On appeal, however, after supplemental briefing ordered sua sponte by the Court, the Tenth Circuit found that Americold, as an unincorporated real estate investment trust, or REIT, was a citizen of the states of its members.   The Supreme Court granted certiorari to resolve a circuit split regarding the citizenship of unincorporated entities.

Affirming the Tenth Circuit, Supreme Court reiterated its “oft-repeated rule” that diversity jurisdiction in a suit by or against an entity depends on the citizenship of all of its members.  Individuals are citizens of the states in which they reside.  The Supreme Court created an early exception in the 19th century—one which was later codified by Congress:  based on the tradition of treating corporations as separate juridical “persons,” corporations are considered to be citizens of their state of incorporation, and, Congress later added, also of the state where it has its principal place of business. 28 U.S.C. § 1332(c).

This exception was never expanded to unincorporated entities, whose citizenship, the Court reaffirmed, is determined based on the citizenship of its “members.”   The Court previously identified the members of a joint-stock company (as its shareholders), the members of a partnership (as its partners), and the members of a union (as the workers affiliated with it).  With respect to a REIT, the Court found that because Americold is not a corporation, it possesses its members’ citizenship.  Looking at the law of the REIT’s state of organization, Maryland, the court held that, “for purposes of diversity jurisdiction, Americold’s members include its shareholders.”  The Court also found that the entity’s membership cannot be restricted to its trustees simply because the entity “happens to call itself a trust.”

Absent action by Congress, one must consider to look at the citizenship of the members of various unincorporated entities such as LLCs and Trusts, to determine the existence of federal diversity jurisdiction.

For more information regarding federal diversity jurisdiction or the Court’s decision in Americold, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

U.S. Supreme Court to Alabama: Full Faith and Credit Must Be Given to Out-of-State Adoption

In a unanimous, per curiam opinion in V.L. v. E.L., the U.S. Supreme Court has reversed the Supreme Court of Alabama’s refusal to enforce a Georgia adoption order.  V.L. and E.L., two women, were involved in a 25-year relationship. E.L. gave birth to three children over the course of several years. The couple rented a house in Georgia and formalized the relationship between the children by V.L. petitioning for an order of adoption.  A Georgia court entered a judgment of adoption and recognized that V.L. and E.L. were the legal parents of the children.

After V.L. and E.L. ended their relationship in 2011, V.L. sued in Alabama arguing that E.L. had denied her access to the children.  The Supreme Court of Alabama however, refused to recognize the Georgia judgment as valid, reasoning that Georgia law precluded Georgia’s courts from recognizing two legal parents after one parent consented to the adoption.  The case was decided in the context of a broader political controversy brewing over Alabama state courts’ refusal to grant marriage certificates to same-sex couples in the face of the U.S. Supreme Court’s ruling last year in Obergefell v. Hodges

After staying the Alabama Supreme Court’s judgment in December, the U.S. Supreme Court took three months and six pages to summarily reverse the judgment.  Although a state need not afford full faith and credit to another state’s judgment if that state’s courts did not have subject matter jurisdiction, the Supreme Court reasoned, “[t]hat jurisdictional inquiry . . . is a limited one.”  The state court must only look to see “[i]f the judgment on its face appears to be a record of a court of general jurisdiction, such jurisdiction over the cause and the parties is to be presumed unless disproved by extrinsic evidence, or by the record itself.” Slip. Op. at 3 (quotations and citations omitted).  Because under Georgia law, the state superior court has exclusive jurisdiction over adoption matters, the Supreme Court held, Alabama courts were required to enforce the Georgia judgment.  Whether the Georgia judge erred in applying Georgia adoption law did not strip that court of jurisdiction.

The unanimity of the Supreme Court’s decision is a reminder that the diverse views of the various “laboratories of democracy”  does not permit one state to ignore a valid court order entered in another.

For more information regarding the Full Faith and Credit Clause or the Court’s decision in V.L. v. E.L., please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

Federal Circuit Gives Samsung Another Victory Against Apple In The Smartphone Patent War

Update: On March 21, 2016, the U.S. Supreme Court granted Samsung’s certiorari petition regarding a separate patent (a design patent and related trade dress registration for the design elements of the iPhone).  The Court agreed to review a limited question regarding the types of damages available in such cases: “Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?”

In another twist of fortunes in the long-running smartphone patent war between Apple and Samsung, the U.S. Court of Appeals for the Federal Circuit has once again overturned Apple’s patent infringement jury verdict – this time for $119.6 Million – against Samsung. The Court left intact Samsung’s small $158,400 verdict against Apple.

The case was initially filed by Apple in February 2012, in the United States District Court for the Northern District of California, alleging that Samsung infringed eight of Apple’s patents used on the iPhone. Not to be outdone, Samsung countersued alleging that Apple had infringed eight of its patents used in Samsung’s Android smartphones.

After a series of trial rulings and appeals, the parties conducted a 13-day trial and the jury awarded $119.6 million to Apple based on a finding that Samsung had infringed Apple’s “structures,” “slide to unlock,” and “autocorrect” patents. Samsung was not nearly as successful, with the jury awarding it a mere $158,400 in damages for the infringement of its “camera systems” patent.

Though Apple won the trial court battle, on appeal, the Federal Circuit has granted ultimate victory to Samsung, finding that Apple’s “slide to unlock” and “autocorrect” patents were invalid (and therefore not patentable) because the evidence indicated that the inventions would have been “obvious” to a person having ordinary skill in the art, in light of the publically available information at the time the inventions were made. The Court also reversed the jury’s decision that Samsung had infringed Apple’s “structures” patent based on a technical finding that the patent required the use of a “analyzer server” and Apple failed to present sufficient evidence to allow a jury to conclude that the Samsung software met this “analyzer server” limitation. Apple has a small chance of turning the wheel of fortune back if an en banc Federal Circuit agrees to hear the case or if the U.S. Supreme Court agrees to grant certiorari.

As this case demonstrates, fortunes can be won and lost on appeal and, as such, it is critically important to evaluate the strengths and weaknesses of each case even after a jury verdict is rendered.

For more information regarding patent litigation and appeals or the Court’s Federal Circuit’s decision, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

New Jersey Legislature Looking At Changes to Consumer Contract Disputes

The New Jersey Assembly’s Consumer Affairs Committee recently advanced several bills that would increase consumer protections in arbitration disputes. If passed into law, these bills would change the landscape for consumer disputes in the State and require companies to revisit their standard consumer contracts and arbitration practices.

The bills would prohibit companies from inserting language in consumer contracts requiring arbitration outside of New Jersey; bar neutral arbitrators or arbitration companies from ordering a losing party to pay the legal fees of the prevailing party; and bar arbitrators that have a financial interest in either party from presiding over the parties’ arbitration. A separate bill would restrict the use of “payment assurance” devices on vehicles designed to disable the ignition if the owner falls behind on payments, which could significantly impact the car sales industry in New Jersey.

The bills have several steps in the legislative process before being enacted into law and are likely to be amended to address business concerns. However, companies doing business in New Jersey should be aware that lawmakers are scrutinizing consumer contracts and reconsider any such form contracts.

For more information regarding consumer contracts and the arbitration process, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

In-House Counsel May View “Outside Counsel Only” Documents

A federal magistrate judge in Trenton has allowed in-house counsel for a New Jersey corporation to view discovery documents designated for “outside counsel eyes only.” The ruling in Sanofi-Aventis U.S. LLC v. Breckenridge Pharmaceutical, Inc., Nos. 15-289 & 15-1836, relates to a pair of patent infringement lawsuits filed by Sanofi-Aventis against Breckenridge Pharmaceutical Inc. regarding a prostate cancer treatment drug.

The parties’ stipulated confidentiality order did not specify whether Breckenridge’s in-house litigation counsel, Robert Vroom, would be permitted to review discovery designated as “outside counsel eyes only.” Sanofi objected to permitting Vroom access to the documents, contending that Vroom, one of only four in-house attorneys at Breckenridge, reported to the company’s general counsel, who was also vice president of corporate strategy.

The Court disagreed with Sanofi after conducting a “case-by-case inquiry” to determine whether an in-house lawyer engages in competitive decision-making that could pose a risk of protected information being inadvertently disclosed, required by a 1984 decision from the Federal Circuit Court of Appeals, U.S. Steel v. United States. The Court held that sufficient measures were put in place to separate Vroom from his peers and competitive decision-making so as to entitle him to review the discovery items at issue.

The Court found significant Breckenridge’s decision to create the position of “litigation counsel” to permit in-house counsel to function as an outside attorney. Vroom, the Court concluded, did not engage in the decision-making process for pricing, product design, patent prosecution or deciding when to seek FDA approval for production of a drug and he does not have access to Breckenridge’s network drives, reducing the risk of inadvertent disclosure to the company.

The Court’s order included some protections to further ensure that competitively sensitive information is not disclosed to Breckenridge. Breckenridge was ordered to maintain separate computer facilities for Vroom, who is not permitted to review, store or access any information designated as “outside counsel eyes only” while at any Breckenridge facility.

For more information on discovery confidentiality orders or the implications of the decision in Sanofi-Aventis U.S. LLC v. Breckenridge Pharmaceutical, Inc., please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com

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