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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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.

 

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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.

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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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Federal Circuit Strikes Down Federal Ban on Disparaging Marks as Unconstitutional

In a landmark ruling that departs from decades-old precedent, on December 22, 2015, the U.S. Court of Appeals for the Federal Circuit held that the Lanham Act’s prohibition of “disparaging marks” violates the First Amendment’s guarantee of free speech. In re Simon Shiao Tam, Case No. 2014-1203 (Fed. Cir. Dec. 22, 2015). The decision is sure to be discussed by the Court of Appeals for the Fourth Circuit next year when it decides whether it was lawful for the United States Patent and Trademark Office (USPTO) to cancel registration of the marks owned by the NFL’s Washington Redskins, on the basis that the REDSKINS mark is disparaging to Native Americans.

The decision by the Federal Circuit involved the USPTO’s denial of trademark registration to an “Asian-American dance-rock band,” for their band name, THE SLANTS, a name the band intended to “reclaim” and “take ownership” of Asian stereotypes. Reasoning that the proposed mark was “likely disparaging to ‘persons of Asian descent,’” the USPTO denied federal trademark registration under the disparagement provision found in § 2(a) of the Lanham Act. A panel of three Federal Circuit judges affirmed, citing Circuit precedent that had rejected the constitutional argument on the grounds that the USPTO’s “refusal to register a mark under § 2(a) does not bar the applicant from using the mark, and therefore does not implicate the First Amendment.”

Sitting en banc, a divided Federal Circuit vacated the panel’s holding, overruled its prior precedent, and invalidated the disparagement provision, holding that the restriction cannot survive any of the levels of scrutiny applied to different types of restrictions on private speech. Starting with the premise that § 2(a) is a content and viewpoint-discriminatory regulation of speech, the Federal Circuit rejected the government’s arguments why the provision should not be subjected to strict scrutiny, an exacting standard that the government conceded the provision could not survive.

Citing the Federal Circuit’s prior precedent, the government contended that strict scrutiny does not apply because the Lanham Act does not prohibit expressive speech, but rather regulates commercial speech since the putative registrant is “free to name his band as he wishes and use this name in commerce.” Rebuffing this argument, the Federal Circuit found that federal trademark registration “bestows truly significant and financially valuable benefits upon markholders,” such as the right of exclusive nationwide use and the ability to recover treble damages for willful infringement, the denial of which creates a “serious disincentive to adopt a mark which the government may deem offensive or disparaging,” thus chilling private speech.

If trademark registration constitutes regulation of commercial speech, the Court held, the restriction would then be subjected to intermediate scrutiny, and even under that less exacting standard, the disparagement provision is still unconstitutional because the only interest the government has in prohibiting disparaging trademarks is its “disapproval of the message,” an interest that is not “legitimate” for First Amendment purposes.

Going forward, In re Tam is likely to have an immediate effect on other Circuits’ decisions when faced with similar issues, such as the Fourth Circuit’s future decision in the REDSKINS case. Moreover, the Federal Circuit hinted in a footnote that the decision may affect the other provisions of the Lanham Act that regulate expressive speech, such as the provision that permits the government to deny registration of a mark determined to be “immoral” or “scandalous.” The Government will almost certainly ask the Supreme Court to review the decision, but until the Supreme Court takes up the case, the USPTO will be barred from rejecting marks determined to be “disparaging.”

For more information on the Lanham Act or implications of In re Simon Shiao Tam, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com.

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Supreme Court’s Opinion Reiterates Principle that Patent Holders Bear Burden of Proof in Infringement Actions

The Supreme Court, in a unanimous decision issued on January 22, 2014, held that the burden of proof in patent infringement actions falls upon the patentee, regardless of whether the patentee is the moving party in the infringement action.

In Medtronic Inc. v. Boston Scientific Corp., Medtronic, Inc., a designer and seller of medical devices, entered into a license agreement with Mirowski Family Ventures, LLC with respect to certain patents held by Mirowski. The license agreement permitted Medtronic to utilize certain patents held by Mirowski in exchange for royalty payments. In 2007, Mirowski provided Medtronic with a notice of infringement alleging that seven new Medtronic products violated two Mirowski patents. Medtronic responded by bringing a declaratory judgment action seeking a declaration that Medtronic’s products did not infringe Mirowski’s patents and that the patents were invalid.

The District Court held that the burden of proof in a declaratory judgment action falls on the patentee to prove that its patent rights have been infringed upon. The Court of Appeals for the Federal Circuit held that the burden should shift to the moving party because when a patentee is the defendant they are unable to bring an infringement action.

The Supreme Court reversed, specifically noting the extensive case law supporting the patentee’s burden of proof, stating that it was “well established that the burden of proving infringement generally rests upon the patentee”.

In addition, Justice Breyer noted that shifting the burden of proof away from the patentee could create “unnecessary complexity” and cause confusion as to what theory a patentee’s infringement claim lays upon because the patentee is best equipped to state how an alleged infringer has infringed on an existing patent, whereas the alleged infringer would need to “negate every conceivable infringement theory” as part of their proof that they did not violate the patent.

In addition, the Court stated that shifting the burden away from the patentee would move against the basic purpose of the Declaratory Judgment Act. The Court held that were it not for the declaratory judgment procedure, the alleged infringer would be forced to either continue the alleged breach, forcing the patent holder to bring an infringement action, or cease the alleged breach and cure.

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