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Well Amgen, that didn’t seem to go so well. 

As a follow up to our post last week, the Supreme Court heard oral arguments in Amgen, Inc. v. Sanofi (No. 21-757). While we obviously don’t have a crystal ball, the questions from the high court suggest that Amgen’s claims are about to be delivered a knock-out punch in this last round. 

As expected, many of the Court’s questions to Amgen centered around how many isolated monoclonal antibodies would actually be covered by the claims-at-issue in U.S. Patent No. 8,829,165 and U.S. Patent No. 8,859,741 given that such antibodies must (i) bind to the featured residues and (ii) block binding of PCSK9 to LDLR. The justices seemed really uncomfortable with the idea that any and all antibodies — known and unknown — that obtain the featured functional results would be covered. In fact, at one point, Justice Clarence Thomas said “I think I’m somewhat confused as to exactly what your invention is” and asked “[s]o what is it exactly?”  The Court also wrestled with the issue of how much experimentation would be required to reach the full scope of the claims. Amgen’s eventual admission during oral argument that its functional genus claims would cover millions of yet unidentified antibodies did not help matters. 

Sanofi and the U.S. government both capitalized on the Court’s noticeable skepticism toward Amgen’s arguments that its claims are enabled and valid despite the broad scope. Sanofi came out swinging and stated that “[t]hey’ve overclaimed, they’ve underenabled, their patent is invalid.” According to Sanofi’s counsel, “functional genus claims are terrible” and “[t]hey retard the science.” The government took its jabs too and contended that a genus claim is only proper if each and every embodiment within the genus has been enabled and suggested that the Court clarify that “you really do need to enable each of the different embodiments that you’re claiming [and] that you can’t say these ones don’t matter…” In this regard, the government told the Court that the 26 antibodies specifically disclosed in Amgen’s patents are all that is enabled.

Will the Court agree with the U.S. government that broad genus claims are “a danger to innovation and especially in the medical field” and deliver the fatal blow to Amgen’s claims? And, if it does, what will that mean for any issued claims with similar functional language? Or will the Court narrowly decide this issue in the context of antibody patents (or similarly unpredictable arts)? We will update you when the Supreme Court renders its decision.

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Patent owners worry about what they can and cannot publicly say about infringement of their patent rights. Accused infringers may believe that certain public statements by patent owners are actionable on the basis that such statements interfere with business, are defamatory, or both. Last month, the Federal Circuit clarified what can and cannot be said about patent rights and infringement when it vacated a preliminary injunction that restricted patent owner Lite-Netics, LLC, from speaking publicly about infringement of its magnetic holiday string lights patents by competitor Holiday Bright Lights (HBL). As a result, Lite-Netics (and other patent owners similarly situated) has the green light to speak publicly about infringing activity, and infringers provided that its patent-related speech is not objectively baseless.   

Background

A few months before bringing suit against HBL in the United States District Court for the District of Nebraska for infringement of U.S. Patent Nos. 7,549,779 and 8,128,264 for magnetic decorative lights (Lite Patents), Lite-Netics sent a first notice to its customers (some of which were shared customers with HBL) making them aware “of recent attempts by other companies to make and sell similar products” as claimed in the Lite Patents and stating its intention to go after these allegedly infringing competitors. Shortly after the suit against HBL was filed, Lite-Netics sent a second notice to its customers specifically identifying HBL as an infringer of the Lite Patents. The second notice included a copy of the first page of the complaint filed against HBL and also threatened suit against any company using or reselling HBL’s Magnetic Cord and Magnetic Clip string light products. In response to the complaint and Second Notice, HBL moved to dismiss the complaint, filed counterclaims based on federal and state-law unfair competition, as well as several other state-law torts, and moved for a temporary restraining order (TRO) and a preliminary injunction based on two of the state law counterclaims (i.e., tortious-interference and defamation) in an attempt to stop Lite-Netics from making accusatory statements about HBL.

Lower Court Decision

The district court initially granted the TRO for 14 days and then extended it for another 14 days. In deciding on the preliminary injunction motion, the district court evaluated the (1) HBL’s likelihood of success on the merits of its tortious-interference and defamation claims; (2) the likelihood of irreparable injury to HBL without the injunction; (3) the balance of equities; and (4) the public interest. With respect to the first factor, the district court acknowledged that state-law tort claims based on the communication of patent rights “are preempted by federal patent laws, unless the claimant can show that the patent holder acted in bad faith.” However, the court found that federal preemption did not apply because Lite-Netics’s infringement allegations lacked any merit and, as such, its assertions to its customers against HBL were made in bad faith.  On that basis, the court ruled that HBL would likely succeed on its tortious-interference and defamation claims and, because the other three factors favored issuance, granted the preliminary injunction.

The injunction ordered Lite-Netics (and its officers, directors, shareholders, and other agents) to refrain:

from making statements via letters, emails, Facebook, Twitter, or any other social media, mass media, direct marketing, robocalls, press releases, blogs, websites or otherwise suggesting “copying” by HBL, suggesting HBL customers will be burdened as additional defendants in this or any lawsuit, or suggesting that HBL is a patent infringer.

Lite-Netics appealed.

Appellate Reversal

While the Federal Circuit agreed that precedent dictated that HBL’s state-law claims could survive federal preemption if there was a showing of bad faith by Lite-Netics in asserting infringement, the panel disagreed with the lower court that there was such a bad-faith showing.  The appellate panel explained that (a) bad faith cannot be met in the absence of a showing that the claims asserted were objectively baseless and (b) an infringement allegation is objectively baseless only if no reasonable litigant could realistically expect success on the merits. In reviewing Lite-Netics’s infringement allegations, the panel found that there was an objectively reasonable basis for a number of those allegations at this stage of the litigation (i.e., before full claim-construction proceedings and/or expert reports). It thus held that the lower court abused its discretion in finding that Lite-Netics could not have “realistically expect[ed] success on the merits” and acted in bad faith.

Key Takeaway

The Federal Circuit noted here that “[t]he First Amendment principles are particularly significant when an injunction against speech is at issue” and previously explained that “[t]his is . . . an injunction against communication, a much more serious matter. . . that must be used with care and only in exceptional circumstances.” Those exceptional circumstances require a showing of bad faith, which requires a showing that the infringement allegations are objectively baseless.  A patent infringement allegation is objectively baseless only if “no reasonable litigant could realistically expect success on the merits.” To be clear, an incorrect allegation of patent infringement is not necessarily objectively baseless (even if claim construction ultimately goes in a direction that does not support the patent owner’s infringement allegations). In fact, a patent owner that is “acting in good faith on its belief as to the nature and scope of its rights, is fully permitted to press those rights ‘even though he may misconceive what those rights are.’”

Enjoining a patent owner’s communication of its patent rights is rare (even if that communication turns out to be incorrect). Patent owners have the green light to speak freely about their rights (and others infringing on those rights) but must do so in good faith. 

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On Wednesday, March 22, the Supreme Court heard a case for the dogs — and trademark law. Whiskey maker Jack Daniel’s Properties, Inc., sued dog toy parody company VIP Products LLC for trademark infringement and dilution over VIP’s Bad Spaniels dog toy, which is a plush toy resembling the Jack Daniel’s Old No. 7 Tennessee whiskey bottle.

The dog toy substitutes the branding that is normally depicted on the Jack Daniel’s bottle with pup-themed phrases, such as 43% POO BY VOL and 100% SMELLY. Further, the “Old No. 7 Brand Tennessee Sour Mash Whiskey” product name is spun into the “Old No. 2 On Your Tennessee Carpet” for a classic scatological joke.

Humorous or not, the issue involves the conflict between the Lanham Act’s grant of federal trademark rights and an individual’s right to free expression under the First Amendment. The district court found both infringement and dilution, finding that the VIP “Bad Spaniels” toy was likely to be confused with, and caused dilution by tarnishment of, Jack Daniel’s trade dress and trademarks in its well-known liquor bottles and labels. However, the Ninth Circuit reversed, finding that VIP’s dog toy was protected speech under the First Amendment.

The Arguments

The primary question presented before the Supreme Court is whether the Rogers test for First Amendment protection of expressive works applies to an artistic, or humorous, use of a trademark, which would trump the standard likelihood of confusion analysis. Secondly, at issue is whether VIP’s parodic use can qualify as “noncommercial” and, therefore, preclude a claim of dilution by tarnishment.

In the party’s brief preceding the oral arguments, VIP argued that this Bad Spaniels product only recreated enough elements from the famous whiskey bottle so “people would get the joke.” Further, it commented that Jack Daniel’s is lacking a “sense of humor.” Contrarily, Jack Daniel’s wrote in its petition for writ of certiorari that “VIP’s profit-motivated ‘joke’ confuses consumers by taking advantage of Jack Daniel’s hard-earned goodwill.” In essence, the case turns on whether the Bad Spaniels toy is a permissible parody, rather than a means of riding the goodwill associated with the Jack Daniel’s brand.

The parties took to the Supreme Court with their oral arguments on March 22, 2023. Jack Daniel’s, insisting that confusion is the cornerstone of trademark infringement, highlighted the consumer surveys that indicated consumers were confused by the dog toy. Further, Jack Daniel’s argued that the Bad Spaniels toy is inherently commercial because its primary purpose is to be bought and sold, subjecting it to a dilution claim.

On the other hand, VIP reinforced its stance that anything involving parody is an “easy case” and does not confuse consumers about source. In its view, poking fun at iconic brands is a form of expression, which should be protected by the First Amendment.

The justices seemed interested in narrowing the kind of confusion the Lanham Act governs. They also wrestled with whether the Rogers test should be thrown out entirely or reconfigured. Further, one of the miscellaneous concerns raised by the justices was an underlying desire for judicial efficiency and an avoidance of costly litigation.

The Implications

This case could have serious implications for the commercial landscape, as demonstrated by the variety of amicus briefs filed in the case from the likes of major brands (i.e., Campbell’s, Levi Strauss, and Nike) and the Biden administration in support of Jack Daniel’s on the one hand, and by a number of law professors in support of VIP. Popular brand owners hope to protect their hard-earned reputation and the goodwill associated with their intellectual property. The advocates of free expression want to flaunt their creativity through parodies, without fear of litigation. Both sides will have to await the Supreme Court’s decision as the justices weigh the issues, and we will update you when they do.

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The Supreme Court is set to hear oral arguments in Amgen, Inc. v. Sanofi (No. 21-757) on Monday, March 27, 2023. The highly contentious question before the high court focuses what an applicant must show to meet the enablement requirement of patent law. The specific issue at hand is: 

whether enablement is governed by the statutory requirement that the specification teach those skilled in the art to “make and use” the claimed invention, or whether it must instead enable those skilled in the art “to reach the full scope of claimed embodiments” without undue experimentation—i.e., to cumulatively identify and make all or nearly all embodiments of the invention without substantial “time and effort.”

The appeal comes from a February 2021 decision from the Federal Circuit that upheld the District of Delaware’s finding that Amgen’s asserted claims in U.S. Patent No. 8,829,165 and U.S. Patent No. 8,859,741 were invalid for lack of enablement. Amgen’s claims to isolated monoclonal antibodies that lower cholesterol levels (marketed as Repatha®) were initially found to be valid under 35 U.S.C. § 112. However, Judge Richard Andrews granted Sanofi’s JMOL motion based on the finding that Amgen’s claims are defined by their function (as opposed to structure) and the specification did not enable a skilled artisan to reach the full scope of the claims without undue experimentation. 

The Federal Circuit held that “[w]hether a claim satisfies the enablement requirement of [Section 112] is a question of law that we review without deference” and found no error by the lower court in its conclusion “that undue experimentation would be required to practice the full scope of these claims.” Amgen takes the position that the Federal Circuit’s full scope of the claimed embodiments test for enablement (Full Scope Test) improperly raises the bar above and beyond the text of § 112.  Sanofi’s argument is based on the purported overbreadth of the claims and the lack of enablement of every species in the claimed genus.

Some pundits have opined that the high court is poised to strike down the Full Scope Test. Indeed, since SCOTUS has taken issue with other tests used by the Federal Circuit for being too rigid, it may also deem the Full Scope Test as too stringent. Moreover, some commenters contend that the high court would not have granted certiorari simply to affirm the lower courts’ decisions. That said, SCOTUS will take the solicitor general’s support of Sanofi’s position very seriously when making its decision. 

Many believe that, if the high court decides in Amgen’s favor, the decision could change the patentability of pharmaceutical/life science inventions and have a disruptive effect on innovation in general. In addition, the decision may indicate whether and how the Supreme Court plans to address concerns related to the other prong of 35 U.S.C. § 112 — the written description requirement. In fact, the Federal Circuit has, in recent years, similarly required the written description to support the full scope of the claims. While the decision will likely not come out until summer 2023, we will post with updates. Stay tuned.

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Recently, Melissa Jefferson, known professionally as Lizzo, took on the USPTO in a battle to establish trademark rights to a popular lyric from her 2017, Billboard-topping song Truth Hurts. The phrase, “100% That B—h”, which Lizzo admitted was inspired by a tweet, was recently the subject of several lawsuits concerning the authorship of the work (see e.g., Jefferson v. Raisen et al., Case No. 2:19-cv-09107-DMG-MAA). Nonetheless, given the popularity of the song and phrase, Lizzo, through her company Lizzo LLC, filed Application Nos. 88466264 and 88466281 with the USPTO for use on various clothing items on June 10, 2019. The trademark-examining attorney (the “examiner”) refused each application stating that the phrase “is a commonplace expression widely used by a variety of sources to convey an ordinary, familiar, well-recognized sentiment.” After the examiner issued the final refusal, and denied Lizzo’s requests for reconsideration, Lizzo appealed to the Trademark Trial and Appeal Board (ttab). 

What Is a Source Identifier?

The Lanham Act defines a trademark as a mark used in commerce or registered with a bona fide intent to use in commerce. To receive protection under the Lanham Act, the mark must function as a trademark — that is, the mark must serve to distinguish the applicant’s goods from those sold or manufactured by others. Put simply, the mark must indicate the source of the goods — known or unknown. 

How the relevant public perceives the term sought to be registered is critical to determining whether a mark functions as a trademark. If a mark is perceived as “merely informational in nature” the mark is not registerable. Indeed, if a mark is a common term or phrase that the relevant public is accustomed to seeing used by various sources to convey “ordinary, familiar, or generally understood concepts or sentiments,” it is likely to fail to function as a trademark and is merely informational. One common issue, in the context of clothing, is an ornamental use rejection. Ornamental use is when a party uses a trademark in a decorative manner, or to enhance the image of the product, rather than as an identifying source of goods or services. Thus, where the evidence shows that the wording in the mark is commonly used in an informational and ornamental manner on clothing and other retail items produced and sold by others, the mark is likely to be seen for the meaning of its wording and not as a source indicator.

Examiner Arguments

In rejecting Lizzo’s applications, the examiner argued the mark was not source-identifying, and instead, the mark was a message of “self-confidence and female empowerment used by many different entities in a variety of settings” (In Re Lizzo LLC, No. 88466264, 2023 WL 1507238, at *4 (Feb. 2, 2023)). Additionally, the examiner argued that Lizzo’s admitted plagiarism of the famous line undercut her application as she merely “popularized” a commonly used phrase. In support of his arguments, the examiner cited Urban Dictionary, numerous articles, and dozens of screenshots of the phrase used on clothing items unrelated to the popstar. Notably, the examiner provided numerous screenshots of the phrase being used in an ornamental manner, including several from Lizzo’s website.

Lizzo’s Response

In response, Lizzo argued that the examiner failed to demonstrate that the phrase was commonplace or that the public was exposed to the phrase in a widespread manner that would undercut the ability of the mark to operate as a source-identifier. In support of registration, Lizzo submitted copies of additional applications using the phrase for entertainment services and musical sound recordings that the USPTO did not reject for failure to function. Lizzo also submitted copies of take-down requests to third parties using the phrase on merchandise, as well as the responses from merchants offering assistance in policing merchandise going forward. 

Conclusion

In reversing the examiner’s decision, the TTAB noted that the evidence cited by the examiner demonstrating ornamental use undercut his argument for refusal, as much of the evidence referenced Lizzo and her lyrics from the chart-topping single. Similarly, the remaining evidence reaffirmed the phrase’s close association with the singer, which weakened the weight of the evidence against registration. Further, the TTAB noted that the evidence did not convey a common social, political, patriotic, religious or other informational message, and when considered in the entirety of the record, found most consumers would perceive the phrase used on the goods in the application as associated with Lizzo rather than a commonplace expression. More importantly, the TTAB noted that while the term has become “widespread,” there is no evidence that the phrase was commonplace prior to Lizzo’s usage.

Commentary

While not heavily discussed in the opinion, the TTAB’s ruling offers insight on how an applicant’s popularity seemingly transcends traditional trademark law. Generally, the widespread use of a phrase by many, as noted by the examiner, precludes registration. However, despite acknowledging the phrase was not an original thought, Lizzo was entitled to protection largely due to her widespread popularity that, in turn, popularized the phrase through association with her. Needless to say, this opinion should serve as a reminder to less famous trademark applicants that early registration is the best practice in preserving their intellectual property. 

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The Federal Circuit’s recent decision in Minerva Surgical, Inc. v. Hologic, Inc. provides a timeline reminder to inventors and patent applicants: Do not bring your invention into public view before you have filed your patent application, and if you do, remember the one-year critical date for filing. Otherwise, your patent runs the risk of later invalidation.

A Little Background about Minerva Surgical

The invention in Minerva Surgical is a medical device for stopping or reducing abnormal uterine bleeding. In relevant part, the device has a frame with flexible outer elements in contact with a surface that is applied against the uterine lining, and flexible inner elements not in contact with the surface, “wherein the inner and outer elements have substantially dissimilar properties.” Such a frame allowed the device to maintain a small size for insertion but could expand to conform to the uterine wall to stop bleeding.

Minerva first began developing this device in 2008. By August 2009, Minerva lab notebooks demonstrated that a device having a frame with inner and outer elements having substantially dissimilar properties had been identified as a solution to the problem of being able to insert, apply, and remove the device during surgeries without deformation. Inventor testimony further confirmed that the key elements of the frame’s characteristics were known to Minerva’s research and development team by August 2009.

Unveiling the Device

In November 2009, Minerva brought the device to a major gynecological surgery conference held by the American Association of Gynecologic Laproscopists (AAGL). Fifteen fully functional devices were brought to the conference, which was well attended by doctors who would be potential customers. The Minerva booth gave demonstrations of how the device operated, and the chairman of Minerva’s medical advisory board gave a presentation featuring the device. The booth and the general literature highlighted the flexible frame. After the conference Minerva continued to develop the medical device and ultimately arrived at its full, final design.

The earliest patent application was filed on November 7, 2011 — nearly two years after the AAGL conference. A later filed patent application in the family was issued as U.S. Patent No. 9,186,208 (the ‘208 patent).  After Minerva sued Hologic for infringing the ‘208 patent, Hologic won on summary judgment for invalidity of the patent due to anticipation by the alleged 2009 public use of the device. Minerva then appealed.

On appeal, the Federal Circuit reviewed the law concerning public uses or sales under Section 102(b) of the pre-America Invents Act (AIA) patent law. A patent is deemed invalid where the invention was “in public use or on sale” more than one year before the date of applying for the invention in the United States. (While this case involved a patent issued under the laws in place before the AIA went into effect, the Federal Circuit has confirmed in other cases that the standard for finding a “public use or sale,” as the earlier statute was phrased, carried over without change to the AIA’s statutory language defining prior to include an invention “being in public use, on sale, or otherwise available to the public.”) The Federal Circuit applies a two-prong test for finding that the public use bar has been triggered. First, the invention must be “in public use” more than a year before the date of filing. Second, the invention must be “ready for patenting.”

Proving the “Public Use” Bar

To satisfy the first prong of public use, the party challenging the patent must show that the invention “was accessible to the public or was commercially exploited” by the inventor or applicant. Under this set of facts, the Federal Circuit found that the AAGL display and disclosures made the invention “accessible to the public.” The devices brought to the display were “fully functional” in a manner consistent with what was ultimately disclosed and claimed in the ‘208 patent. Minerva demonstrated the device at its booth using a transparent uterine model that made its operation visible to anybody watching and further provided a technical presentation on the device. Minerva tried to argue that a “mere display” of the device did not qualify as public use, but the Federal Circuit found that a “display” only applied to non-working mock-ups, not full demonstrations. The (disputed) fact that Minerva did not allow attendees to actually handle or operate the device did not matter, since in this case Minerva had made the device’s operation clearly visible to anyone walking past the booth. Finally, there were no confidentiality obligations imposed upon any of the doctors, potential investors, or others who visited the booth. The Federal Circuit held that there was no dispute that the device was “accessible to the public.”

Proving the Device “Ready for Patenting”

Turning to the second prong, the Federal Circuit also found no dispute that the device was “ready for patenting.” An invention is “ready for patenting” if it is reduced to practice or is otherwise sufficiently described in documentation to enable a person of ordinary skill to practice the invention. Although only one of these two tests needs to be satisfied, the court found that Minerva actually met both standards. Minerva claimed first that it had not reduced the invention to practice because it had continued to develop the device after 2009 and had not tested the device on live humans (a requirement for FDA approval.) The Federal Circuit dismissed both contentions. Continued developments were not dispositive, the court held, because “later refinements” and “fine tuning” of a claim element do not mean the device is not yet ready for patenting Here, the claim specifically covered the structures that Minerva’s inventors knew to be key to operation as early as August 2009. As to the lack of live human testing, the appellate court simply stated that the level of testing and knowledge for FDA approval is “beyond that required” for showing reduction of the invention to practice. The court also held that the inventor lab notebooks included sufficiently detailed information to allow another person of ordinary skill to follow them and reduce the invention to practice. Having found the invention both “in public use” and “ready for patenting,” the Federal Circuit affirmed the district court’s grant of summary judgment of invalidity.

Conclusion

While Minerva is a straightforward application of the public use bar to invalidate a patent, there are some key takeaways for inventors. First, the critical date is defined by the scope of the claim. If Minerva had a narrower claim, perhaps a dependent claim, that targeted only the later developments, such a narrower claim may have survived because it would not have been subject to the 2009 disclosure. Alternatively, if additional elements were later modified and developed (such as the compliant surface pressed against the uterine wall), including those elements in the claim may have also pushed the claim beyond what was disclosed in 2009. Of course, both of these options mean a narrower claim scope, which perhaps Hologic may not have infringed. But the biggest takeaway is a reminder to all inventors and applicants: Don’t start showing off your device until you have either filed a patent application or decided not to. And if you have displayed the device, make sure to file a patent application within one year from that display to avoid any potential application of the public use bar.

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Collaborative branding is a marketing strategy where two businesses collaborate to increase the value of their brands. This co-branding allows the partner companies to share the costs of the collaboration while also expanding into each other’s consumer audiences. An example of this collaborative model is the Nike/Tiffany shoe that merges the iconic Nike swoosh and the famed Tiffany & Co. blue. This new brand creates a product using the strengths of both parties to gain consumer interest and create excitement in a new consumer base. Despite all the benefits that can come from a collaborative partnership, businesses should take efforts to protect their current respective intellectual property rights. Equally important, the parties should consider the ownership rights of the new products created under the collaboration.

This is where a collaboration agreement can help. A collaboration agreement between the parties outlines the relationship of the two parties and involves the cross-licensing of IP rights for commercial activities. In any collaboration agreement, the parties will cross-license the IP they contribute, but the parties should plainly state the scope of the license and how the IP will be used in the collaborative partnership. Both parties also should lay out IP assets created prior to the collaboration. The allocation structure of the ownership of the newly created IP in the collaboration agreement can differ based on the parties’ interests. The agreement could create joint ownership in the new IP or perhaps one party owns the entirety of the newly created IP. If the parties decide on joint ownership of the newly created IP, the agreement should also contemplate which party is responsible for the protection and registration of the IP rights.  

Confidentiality of the intellectual property is another important consideration to take into account while drafting the collaboration agreement. Collaboration between the parties may include the exchange of confidential information, and the agreement should clearly lay out how that information is treated by both parties. While co-branding and collaboration can expand the business opportunities of the participants, a well-crafted collaboration agreement will increase the chances everyone benefits from the experience.

Why is this important to your business? No one goes into a collaboration thinking the relationship would be bad for business, but not all collaborations have positive results. For example, Peloton and lululemon had a successful collaboration that ended prior to a willful infringement lawsuit by lululemon against Peloton for infringement on several design patents. The best way to take full advantage of a possible collaboration is to protect your intellectual property from the beginning with the help of an experienced IP attorney.

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On February 16, 2023, Florida Gov. Ron DeSantis signed HB 7B, which makes several amendments to Florida’s name, image, and likeness (NIL) law, adding Florida to the growing list of states loosening prior state NIL restrictions. Florida was one of the first states to enact NIL legislation, which provided the state with guidance and rules once NIL became permissible under National Collegiate Athletic Association rules on July 1, 2021; however, as time passed, Florida, and other states, determined that its NIL law imposed unnecessary restrictions on NIL activities, potentially putting schools in Florida at a competitive disadvantage and unnecessarily harming college athletes. 

While falling short of repealing Florida’s NIL law in its entirety, the latest amendments remove many of the restrictions and rules surrounding NIL activities in the state of Florida. Among the most significant changes, the amendments remove:

  • Restrictions prohibiting schools, teams, and coaches from participating in or facilitating NIL deals for players;
  • Restrictions prohibiting schools from revoking or reducing a student athlete’s scholarship as a result of the student athlete earning NIL compensation or obtaining professional representation;
  • Restrictions preventing a student athlete from entering into an NIL contract that conflicts with the terms of a school’s team contract;
  • Requirement that a student athlete’s NIL compensation “be commensurate with the market value” of the authorized use of the student athlete’s NIL; and
  • Requirement that the duration of a contract for representation of a student athlete for use of their NIL not extend beyond their participation in an athletic program at a school.

The most notable change is the removal of the restriction on schools and coaches participating in or facilitating NIL deals for student athletes, which now allows Florida schools and coaches to actively participate in the NIL space and aligns Florida’s NIL laws with current NCAA NIL rules. Additionally, the amendment provides liability protection for schools and coaches from damages to a student athlete’s ability to earn NIL compensation resulting from “actions routinely taken in the course of intercollegiate athletics.”

Florida’s NIL law changes came just weeks before the NCAA issued its first ruling in an NIL infractions case – coincidentally against a school located in the state. On February 24, 2023, a case involving two women’s basketball players at the University of Miami and one prominent booster, John Ruiz, reached a negotiated resolution that resulted in a three-game suspension for University of Miami women’s basketball coach Katie Meier, which was served at the beginning of the 2022-2023 season. Most notably, Ruiz, who violated NCAA rules by contacting the players and providing an impermissible meal before their enrollment at the university, was not disassociated from the University of Miami program.

In addition to Meier’s three-game suspension, the NCAA issued the following penalties to the University of Miami women’s basketball program:

  • A one-year probation, which could result in harsher penalties if the program violates rules during the probationary period;
  • A $5,000 fine plus 1% of the women’s basketball budget;
  • A 7% reduction in the number of official visits during the 2022-2023 academic year;
  • A reduction of nine recruiting days in 2022-2023; and
  • A three-week probation on recruiting communication by staff members starting with the opening of the transfer portal on March 13.

Despite the relatively mild penalties levied by the NCAA, the University of Miami’s case is significant in that it is the first NCAA infractions ruling related to NIL. Had the University of Miami’s case been processed after the NCAA adopted a new presumption and evidentiary standard for NIL violations, which took effect January 1, 2023, the penalties might have been more severe. Under the new standard, NIL cases would, based on circumstantial evidence, be subject to a presumption that a violation has occurred. It would then be incumbent on the NCAA member institution to show that the alleged violation had not occurred. Increased NCAA investigations and NIL infractions are expected in the future as the NCAA attempts to reign in NIL. 

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Recently, the Federal Circuit affirmed a finding of non-obviousness from the Patent Trial and Appeal Board (PTAB) of a design patent owned by GM. While non-precedential, this decision is nonetheless a valuable read because the Federal Circuit scrutinized the obviousness standard applicable to design patents. In doing so, the appellate panel clarified that the obviousness formula set forth in the long-standing Durling and Rosen tests was not overruled implicitly by KSR International Co. v. Teleflex Inc.

LKQ, a company that generally sells repair parts for the majority of well-known vehicles, including parts for GM vehicles, challenged GM’s U.S. Patent No. D797,625 (the ʼ625 patent) at the PTAB. The PTAB ultimately upheld the patentability of the ʼ625 patent. In doing so, the PTAB determined that the front fender design claimed in the ʼ625 patent and the alleged primary reference that LKQ used in its obviousness challenge were not “basically the same.” More specifically, the PTAB found that, from the perspective of the ordinary observer, there were a number of differences between the claimed design and the primary reference. Applying the obviousness formula for design patents set forth by the Federal Circuit decades ago in Durling, the PTAB stopped its analysis there and confirmed the patentability of the ʼ625 patent. Briefly, Durling requires a two-step legal framework (applying the primary reference test set forth in In re Rosen) for evaluating obviousness of design patents:

Step 1 – Identify a primary (or Rosen) reference that is “basically the same as the claimed design[,]”

Step 2 – Decide whether an ordinary observer would have found it obvious to fill in the missing elements from so-called “secondary references.” 

In other words, if no primary (or Rosen) reference exists, the analysis ends. On the other hand, if a primary reference is found to exist, the obviousness analysis proceeds to Step 2 where the secondary references are reviewed to see if any or all fill the gaps left by the primary reference.

On appeal, LKQ first challenged the PTAB’s ordinary observer definition and ultimate finding of no anticipation based thereon. In this aspect, the PTAB determined that the ordinary observer included only retail consumers who purchase replacement fenders and commercial replacement part buyers (rather than the broader category of retail purchasers of the entire vehicle). The Federal Circuit did not find any error in the PTAB’s definition of the ordinary observer and explained that purchasers of the product embodying the fender design are interested in the part itself, not the vehicle as a whole. The panel then went on to affirm the PTAB’s holding that the design claimed in the ʼ625 patent was not anticipated by the prior art.

In addition, LKQ invited the Federal Circuit to reconsider the current obviousness formula for design patents that was relied on by the PTAB to reach its decision. In this vein, LKQ argued that the obviousness formula was inconsistent with KSR and the Supreme Court’s rejection of “a rigid rule that limits the obviousness inquiry.” More specifically, LKQ argued that the requirement to identify a primary (or Rosen) reference is exactly the type of approach that was rejected by the Supreme Court in KSR. In fact, LKQ took the position that, since most primary references would not qualify as “basically the same as the claimed design,” the formula under Durling requiring a Rosen reference is essentially a one-step analysis that is incompatible with KSR’s directive for flexibility when determining obviousness under 35 U.S.C. § 103. The Federal Circuit was not persuaded by LKQ’s arguments and held that Rosen and Durling remain good law. In this aspect, the majority opinion stated that the Federal Circuit was bound to continue to apply Rosen and Durling just as it had in the decades preceding “without a clear directive from the Supreme Court.” In an additional opinion crafted by Judge Alan Lourie, he rationalized that, because KSR did not involve design patents (which require a different obviousness analysis than utility patents) and KSR overruled a rigid obviousness standard that was different from the “flexible” Durling and Rosen tests, KSR did not overrule the current obviousness standard for design patents.

In applying the existing (and still-good) law, the Federal Circuit ultimately held that the PTAB’s obviousness determination was supported by substantial evidence. In sum, despite LKQ’s efforts, nothing has changed in the obviousness standard applicable to design patents. 

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Last week, in Personalized Media Communications, LLC v. Apple, Inc., the Federal Circuit left intact Judge Rodney Gilstrap’s ruling of unenforceability based on prosecution laches and deprived Personalized Media Communications, LLC — a nonpracticing entity — of a paycheck from Apple. At a high level, PMC appealed a final judgment of the U.S. District Court for the Eastern District of Texas that U.S. Patent No. 8,191,091 (the ʼ091 patent) is unenforceable based on prosecution laches. Unfortunately for PMC, the panel took no issue with Judge Gilstrap’s determination that PMC engaged in an inequitable scheme to extend its patent rights and affirmed his ruling with respect to the unenforceability of the ʼ091 patent. As a result, Apple was relieved of having to pay PMC over $308 million. 

While many will raise a toast to such an entity losing out on its damages award and quickly move on regardless of the reason, the financial investment, planning, and patience that must have been required by PMC is nonetheless intriguing and worth exploring. So, I invite you to join me in a story of a long con otherwise known as submarine patenting, or prosecution laches.

The Back Story

Before we dive into PMC’s conduct, we should spend a little time gaining an understanding of GATT and reviewing the Hyatt case since both play rather large roles in the district court’s ruling and appellate court’s affirmation. The Uruguay Round of the General Agreement on Tariff and Trade (GATT) provided a 17-year term from the date of issuance for any patent applications filed prior to June 8, 1995. Applications filed after June 8, 1995, are given a 20-year term from the date of the application from which the patent claims priority.  Since patent term for pre-June 8, 1995, applications were calculated from the date of issuance rather than the date of filing, certain patentees were incentivized to delay issuance by abandoning applications and filing continuing applications in their place to obtain patents at a more financially desirable or advantageous time (such as until the market developed). As such, GATT also prompted a slew of application filings leading up to June 8, 1995, known as the GATT-Bubble. 

In Hyatt v. Hirshfield, the Federal Circuit explained prosecution laches may render a patent unenforceable where a patentee’s conduct constitutes an egregious misuse of the statutory patent system and set forth the two required elements:

  1. the patentee’s delay in prosecution must be unreasonable and inexcusable under the totality of circumstances; and 
  2. the accused infringer must have suffered prejudice attributable to the delay.

Gilbert Hyatt was a major player in the GATT-Bubble: He filed almost 400 continuation applications right before the change. While other applicants did the same, Hyatt’s applications were already quite long in the tooth, i.e., the applications claimed priority back to filings from the 1970s and 1980s. In addition, the applications at issue in the Hyatt case were all lengthy and complex with hundreds of pages of text, over 60 pages of drawings, and an average of almost 400 claims per application. Moreover, many claims were added 10-20 years after their alleged priority dates. After the USPTO finally rejected claims in four of Hyatt’s applications, Hyatt sued under 35 U.S.C. § 145 in an effort to have a court order the USPTO to issue patents based on those applications. The district court ruled that prosecution laches did not bar issuance of those patents and the USPTO failed to take the actions necessary to advance the prosecution of Hyatt’s applications. The court then ordered the USPTO to issue patents for the rejected claims.  On appeal, the Federal Circuit found that the district court misapplied the legal standard for prosecution laches and explained that the doctrine is available to the PTO as a defense in a § 145 action.

A few months before the Federal Circuit vacated and remanded Hyatt, PMC won its sizable jury verdict for Apple’s infringement of PMC’s patents relating to digital rights management with its FairPlay technology, which is used to distribute encrypted content through iTunes, the App Store, and Apple Music. Following the verdict, but shortly after the Hyatt opinion was issued, the district court held a bench trial on the issue of prosecution laches and unenforceability. In finding that Apple met its burden on the first element of prosecution laches, the district court discussed a plethora of similarities between PMC’s conduct and Hyatt’s conduct. For example:

  • Hyatt had filed 381 GATT-Bubble applications; PMC had filed 382 GATT-Bubble applications;
  • Hyatt’s applications were identical to one of 11 earlier patent applications, and all of PMC’s applications derived from two earlier applications;
  • Like Hyatt, PMC’s applications “were ‘atypically long and complex,’ containing over 500 pages of text and over 22 pages of figures;”
  • PMC “filed each of its applications with a single claim, then subsequently amended the claims, sometimes to recite identical language across different applications;”
  • Like in Hyatt, PMC greatly increased the total number of claims in the range of 6,000 to 20,000 claims; and
  • Like Hyatt, PMC had significant delays in the prosecution, and “waited eight to fourteen years to file its patent applications and at least sixteen years to present the asserted claims for examination.”

In fact, the only significant difference between Hyatt and PMC is that Hyatt did not have a plan for distinguishing his applications, whereas PMC came to an agreement with the USPTO as to grouping of its numerous applications. The court found that the agreement between PMC and the USPTO did not shift the blame for the delay to the USPTO and explained that all of these factors made it “virtually impossible for the PTO to conduct double patenting, priority, or written description analyses.” In addition, the lower court found that documents from PMC’s production suggested a deliberate effort at creating submarine patents (i.e., to emerge into developed markets after “technology becomes so deeply embedded in commercial products that design around is not an option to infringers”).

With respect to prejudice, the lower court noted that PMC’s delay contributed to the prejudice to Apple. In particular, the ʼ091 patent issued nine years after Apple had begun developing its FairPlay technology and seven years after that technology matured into the accused product. Finding both elements of prosecution laches met, the district court thus held the ʼ091 patent unenforceable. 

The Unsuccessful Appeal

PMC appealed the lower court’s decision and tried to argue that its conduct “looks nothing like Hyatt.” The majority of the Federal Circuit panel disagreed, affirmed the lower court, and accused PMC of “expressly adopting and implementing dilatory prosecution strategies, specifically to ambush companies like Apple.” While Judge Stark agreed with the district court concerning PMC’s unreasonable delay, he explained in a lengthy dissenting opinion that he would have held that Apple failed to satisfy the legal standard for intervening rights and, thus, did not establish prejudice. 

The Takeaways

This fact pattern could be aptly described as a “long con,” i.e., an elaborate confidence game that develops in several stages over an extended period of time wherein the con man or swindler gains the victim’s trust, often bypassing small profits with the goal of reaping a much larger payout in the final maneuver. Given the reliance on long-dead rules regarding patent term, it is unlikely to recur again. In fact, like any seasoned con artist that makes money through deception, PMC took advantage of a loophole that allowed for an indefinite application process with the possibility of still being awarded a patent with a 17-year term. In this aspect, PMC filed hundreds of applications in the 1980s and 1990s, almost 400 of which were filed during the GATT-Bubble. Yet not a single patent was awarded to PMC until 2010. And at no point in the decades between when the patents were originally filed and granted did PMC actually attempt to use or commercialize the ideas. Indeed, PMC’s strategy was to merely lie in wait until the technology became widespread. While this involved impressive financial investment, planning, and patience by PMC, the gig appears to be up and procedurally gaming the system to the extent that PMC did is not something that we will likely see again.

That said, while filing continuation applications and amending claims during prosecution are generally acceptable under U.S. patent law, prosecution laches could still be an issue if there is an unreasonable and unexplained delay. Thus, it is important for an applicant (and counsel) to not only comply with statutory requirements and USPTO regulations, but also prosecute applications in a manner that steers clear of unreasonable, unexplained delays that could arguably prejudice others.