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The Supreme Court unanimously sided with Jack Daniel’s in the much-anticipated trademark case pitting trademark protection against parodic products. However, SCOTUS did not reach a final conclusion on whether VIP Products’ Bad Spaniels dog toy will live to see another day as a parody of the Jack Daniel’s whiskey bottle. Instead, the Court focused on the legal framework used for analysis of parodic products and remanded the case back to the lower courts.

In particular, SCOTUS noted that a product that uses a trademark as a source-designating symbol is the “heartland” of the Lanham Act and should not be entitled to the First Amendment offramp of the Rogers test. The relevant inquiry should be the standard likelihood-of-confusion analysis, in which the parodic nature can be taken into account.

The Background

In March, we covered the oral arguments made by both parties and the government. The Bad Spaniels dog toy joined VIP Products’ line of Silly Squeakers toys in 2014. The squeaky bottle mimics the Jack Daniel’s Old No. 7 whiskey bottle in appearance, but it replaces key phrases with dog-themed scatological jokes. Jack Daniel’s claims that VIP Products has committed trademark infringement (based on a likelihood of consumer confusion) and trademark dilution (based on a harm to reputation).

The central question before the Supreme Court was whether the Rogers test for First Amendment protection of expressive works applies to an artistic/humorous trademark use, which would trump the standard likelihood-of-confusion analysis. Second, SCOTUS examined whether the parodic use qualified as “noncommercial” and, therefore, precluded a dilution by tarnishment claim.

The Opinion

In the unanimous opinion penned by Justice Elena Kagan, the Supreme Court emphasized that this was only a “narrow” decision. The Supreme Court concluded that the likelihood-of-confusion analysis (rather than the Rogers test) should apply to commercial products that use “trademarks as trademarks.” The dog toy is using “Bad Spaniels” as a source identifier, which is the definition of a trademark. Accordingly, the standard Lanham Act-based test should be used, rather than the Rogers test’s unique “shortcut to dismissal” that applies to expressive works. Similarly, the “noncommercial” exclusion to a dilution claim does not apply to marks that are source-identifying.

Although the Supreme Court agreed with Jack Daniel’s analysis of the law, it is not a total loss for VIP Products. Justice Kagan specifically wrote that Bad Spaniels’ parodic nature will still be considered in the likelihood-of-confusion, multi-factor analysis in the lower courts. The primary purpose of this opinion was not to decide on the underlying facts of Jack Daniel’s versus Bad Spaniels, but rather to prevent the Rogers test from expanding further and to clarify that a trademark being used in connection with a commercial product will be squarely governed by the Lanham Act instead of the First Amendment.

The Concurrences

In addition to the 9-0 opinion, two brief concurrences provide some additional insight into concerns of the justices going forward. Justices Sonia Sotomayor and Samuel Alito wrote a cautionary note about consumer surveys. Because Jack Daniel’s had relied heavily on the results of a survey that indicated consumer confusion, the concurrence warned lower courts to examine the methodology of these surveys with a keen eye. Without careful scrutiny, powerful brands could use surveys as a tool for “silencing a great many parodies.”

Next, Justices Neil Gorsuch, Clarence Thomas, and Amy Coney Barrett reiterated that the Rogers test is not overruled within its appropriately cabined context (that is, primarily expressive works or titles). Nevertheless, Justice Gorsuch indicated some discomfort with the Rogers test and recommended that the lower courts should handle it “with care.” 

The Implications

The narrow grounds of the Supreme Court’s opinion make it more difficult to anticipate whether this decision will drastically change the commercial landscape. While the big companies that wrote amicus briefs in favor of Jack Daniel’s may be celebrating this victory today, hope is not lost for parodists. Even though the Rogers test will no longer be an easy escape route to evade litigation for commercial products, parodists can take comfort that a likelihood-of-confusion analysis may still weigh in their favor. As long as parodic products are not committing trademark law’s “cardinal sin” of confusing customers as to source, then these products may remain on the shelves.

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A sneak peek into the potential future of federal name, image, and likeness (NIL) regulations has emerged with the release of a draft bill. This development marks the first significant step towards a federal NIL law since the 2022 election, following the congressional hearing on NIL held in March of this year. The circulation of draft bills indicates Congress’ interest in establishing more standardized laws surrounding NIL, aiming to supersede the increasingly complex web of state regulations and enforcement.

Although the bill has yet to be formally introduced, a draft of the Fairness Accountability and Integrity in Representation of College Sports Act, known as the “FAIR College Sports Act,” is now available for review. This proposed federal NIL bill outlines several key provisions designed to address the current challenges and concerns in collegiate NIL, including:

  1. Safeguarding student-athletes who have entered into NIL agreements from retaliation by institutions of higher education.
  2. Protecting athletes’ rights to earn compensation from NIL opportunities and sign with agents.
  3. Prohibiting boosters, collectives, and other third parties from enticing student-athletes with inducements to attend or transfer to specific schools, effectively banning pay-for-play practices.
  4. Requiring registration within 30 days for agents, boosters, and collectives involved in NIL deals.
  5. Allowing associations, conferences, and institutions to restrict NIL deals related to the promotion of gambling, tobacco, alcohol, controlled substances, lewd and lascivious behavior or material, or any other product or service inconsistent with an institution’s religious values. These entities would also have the authority to impose “reasonable” limits on the amount of time student-athletes can engage in endorsement activities tied to NIL agreements.
  6. Establishing a new regulatory body responsible for formulating and enforcing rules pertaining to collectives, boosters, and student-athlete NIL contracts.
  7. Preempting existing state laws.

Most notably, the bill proposes the creation of a new regulatory body, the United States Intercollegiate Athletics Committee to oversee the collegiate NIL landscape. It is worth noting that the acronym – USIAC – when pronounced, sounds oddly similar to “you suck.” This committee will be tasked with setting NIL rules, enforcing compliance, and providing guidance to athletes and collectives involved in the NIL process.

According to the draft, a booster is defined as an individual or entity that has made a sports-related donation to a school exceeding a specified annual amount (to be determined by the USIAC) within the past five years. Additionally, a booster would qualify if he/she/it has provided employment to at least one student-athlete during that period. Collectives are defined as organizations consisting of two or more boosters. Agents will be required to register with the USIAC, and student-athletes must report their NIL deals to the USIAC, providing certain information, including the compensation amount.

Any entity found to be in violation of the regulations outlined in the bill will face appropriate disciplinary actions. Enforcement of these regulations will fall under the purview of “existing agencies,” including state attorneys general, for matters concerning agents and third parties. It’s important to note that the NCAA will still retain oversight over athlete misconduct.

As the first federal NIL bill in the current Congress, this proposed legislation seeks to establish a unified framework for governing NIL rights in college sports. However, it is unlikely that this version of the bill will progress, as its sweeping NIL changes and establishment of a new regulatory body will almost certainly face opposition. Nevertheless, the release of the draft bill signifies an interest from lawmakers in attempting to provide some uniformity to the NIL landscape.

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Last week, the Federal Circuit issued a precedential decision affirming a Southern District of Texas denial of FMC Technologies, Inc.’s attorneys’ fees motion. The panel here (comprised of Moore, Clevenger, and Dyk) seems almost as disdainful of FMC’s arguments for exceptionality as a completely different panel did when it affirmed the denial of Pure Hemp’s motion for attorneys’ fees in United Cannabis, Corp. v. Pure Hemp Collective Inc., No. 22-1363 (Fed. Cir. May 8, 2023). As a quick recap from a previous post on Pure Hemp’s loss at the Federal Circuit earlier this month, the panel (made up of Lourie, Cunningham, and Stark) referred to Pure Hemp’s arguments as “extremely weak” and inclusive of “unsupported attacks” on UCANN’s prosecution counsel. In short, the Federal Circuit found “much on which to fault Pure Hemp.” Here, FMC’s primary argument for exceptionality under 35 U.S.C. § 285 was described to “wholly lack merit.” Let’s drill down a bit to find out why.

In 2015, FMC, who sells oil drilling equipment, was sued by competitor OneSubsea for patent infringement in the Eastern District of Texas. More specifically, OneSubsea alleged that FMC infringed 95 claims across 10 U.S. patents owned by OneSubsea. FMC, who also owned patents covering various structures for subsea drilling, countersued for patent infringement of two of those patents. FMC also successfully moved to transfer the case to the Southern District of Texas. The infringement dispute related to OneSubsea’s patents condensed down to whether fluid flows through FMC’s accused device as required by the patents. Based on the lower court’s construction of the term “divert” in a Markman ruling, FMC filed a motion for summary judgment of non-infringement, but the case was stayed (for three years due to IPRs) before the court ruled on FMC’s motion. In fact, while FMC tried to convince the district court to rule on its summary judgment motion instead of staying the case arguing that “ordinarily a stay of district court proceedings would be agreeable but was unnecessary in the light of the pending summary judgment  motion . . . [because] no reasonable jury could find infringement by FMC,” the district court declined to do as requested by FMC explaining that “it is unclear from the current record whether FMC’s dispositive motion would be granted.” When the case resumed in 2020, FMC renewed its summary judgment motion, which was granted by the court.

Shortly thereafter, FMC filed a motion for attorneys’ fees under 35 U.S.C. § 285, which argued that the case should be declared exceptional based on OneSubsea’s litigation misconduct and “the substantively weak infringement claims.” In support of these arguments, FMC contended that OneSubsea’s expert witness disregarded the district court’s claim constructions, OneSubsea’s choice of venue for the lawsuit was unreasonable, OneSubsea failed to timely provide final infringement contentions of infringement and made late-stage changes to its infringement theory, and OneSubsea ignored the significance of PTAB rulings (invalidating 76 claims of OneSubsea’s patents, none of which were asserted in the court case). The district court denied FMC’s motion explaining that “industry competitors zealously advocating their positions often results in resource- and time-intensive litigation. But that alone is insufficient to make a case ‘exceptional,’ and the prevailing competitor is not entitled to fees simply because it won the hard-fought case.”

On appeal, the Federal Circuit panel found no abuse in discretion by the district court in finding the case to be unexceptional and denying FMC’s fees motion. In fact, the appellate panel rejected FMC’s argument that OneSubsea’s case became entirely objectively baseless as soon as the Markman ruling was issued and that OneSubsea’s continued pursuit from that point on was litigation misconduct. Indeed, the panel described FMC’s primary argument to

wholly lack[] merit, because it fails to come to grips with the district court’s observation that FMC’s demand for a prompt favorable noninfringement judgment based only on the Markman Order was ‘unpersuasive’ because it was ‘unclear from the current record whether FMC’s dispositive motion would be granted.’

In short, an aggressive litigation strategy does not necessarily equate to the type of litigation misconduct typically required for a finding of exceptionality under § 285. Between this and the Pure Hemp decision, the Federal Circuit seems to be consistently making a clear distinction between persistent, but not unreasonable, lawyering and bad behavior. Moreover, we know from this latest decision that the type of “stand out,” objectively baseless case discussed in Octane Fitness and required for exceptionality under 35 U.S.C. § 285 is not a case where the court is “fully aware of the competing contentions of the parties, [but] declines to end the case on summary judgment and allows a plaintiff’s case to proceed.” Indeed, in that scenario,

the district court may have effectively determined that the position of the party opposing summary judgment is not objectively baseless, making it nearly impossible for the plaintiff’s case (on the issue that was the subject of the summary judgment motion) to “stand out” as lacking substance at that time.

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In June 2023, the European Union (EU) will introduce the European Unitary Patent. At the outset, the European Unitary Patent will be enforceable in the 17 States that have ratified the agreement between the EU and the EPO: Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Sweden. This type of patent is designed to reduce the complexity and cost of obtaining patent protection across multiple EU countries. Currently, obtaining patent protection in multiple EU countries requires separate applications and payments to each individual country’s patent office. The European Unitary Patent is seen as a significant development that will purportedly simplify the patenting process in the EU.

As more States ratify the agreement, the enforceability of the European Unitary Patent will expand. The European Unitary Patent will eventually be valid in 25 participating EU countries: Cypress, Czech Republic, Greece, Hungary, Ireland, Poland, Romania, Slovakia, and the 17 States listed above. This will enable patent holders to protect their inventions across multiple EU Member States with a single application and a single set of renewal fees. It is important to note that a Unitary Patent will only be valid in the EU countries that have ratified the agreement at the time of application. This system will also provide a single jurisdiction for litigation to challenge or defend the validity of a patent. Therefore, the European Unitary Patent is also expected to reduce the legal costs associated with patent disputes and create a more uniform legal framework for intellectual property rights in the EU.

The process for acquiring a unitary patent involves three steps. First, an applicant must file a European patent application at the European Patent Office (EPO). If the application is deemed to satisfy all requirements, the EPO will grant a European patent. After a European patent has been granted, the patent owner must request the unitary effect of the patent within one month from the grant of the European patent. Once the request for unitary effect has been submitted, the European Patent Office will register the unitary patent and publish a notice in the European Patent Bulletin.

The fees to file a European patent application vary depending on the complexity of the invention, the language in which the application is filed, and the size of the applicant’s company. This usually costs between 110 – 1260 EUR (approximately $121 – $1,385USD). The fees for the examination and grant of a European patent are usually between 580 EUR and 4000 EUR (approximately $638 – $4,397USD). Unitary patents will require the payment of annual renewal fees to maintain the validity of the patent. The renewal fees will have to be paid to the European Union Intellectual Property Office (EUIPO). The EPO states that, on average, an applicant will save almost $7,000 over the 20-year lifespan of the patent by filing a European Unitary Patent as compared to filing patents in four individual European countries.

Overall, the European Unitary Patent is an essential step towards a more integrated EU economy and a more unified patent protection system. As discussed above, this new system is expected to reduce the costs and complexity associated with obtaining patent protection across the EU, support innovation and the development of new technologies, foster economic growth within the region, and provide a single jurisdiction for patent-related litigation. As the EU continues to work towards a more harmonized patent system, the implementation of the European Unitary Patent is likely to have a significant impact on the competitiveness of European industries on the global stage.

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Dawn Jackson is a co-author of this post and is a Summer Associate at Bradley.

The Supreme Court ruled on May 18 that Andy Warhol’s “Orange Prince” work of pop art was not a fair use when licensed to Condé Nast in 2016. Although this landmark copyright decision is hot off the presses, the facts date back to 1981 when the underlying photograph was first shot. Photographer Lynn Goldsmith photographed Prince for Newsweek, when the now-iconic musician was still only an “up and comer.” Goldsmith’s photograph was then licensed to Vanity Fair in 1984 for $400 as a “one time” “artist reference for an illustration.” The artist was none other than Andy Warhol. Warhol created the print that was used in the 1984 Prince article in Vanity Fair, for which Goldsmith received her modest sum and artistic credit.

The Use

Upon Prince’s death in 2016, Condé Nast (the parent company of Vanity Fair) ran a commemorative feature on Prince and used another Warhol-based-on-Goldsmith work. Apparently, Warhol had created an entire series of 15 other works of pop art using Goldsmith’s initial photograph. The magazine cover used the “Orange Prince” work in the series, and Goldsmith contacted the Andy Warhol Foundation (AWF) because she had not received any further money or credit for this new 2016 licensing of another, previously unknown work in the Prince series. AWF proceeded to sue Goldsmith, seeking a declaratory judgment of noninfringement or fair use. Goldsmith countersued, claiming copyright infringement of her photograph.

The Question

Courts weigh the following four factors to determine if a use is fair, and therefore not copyright infringement: (1) the purpose and character of the new use, “including whether such use is of a commercial nature or is for nonprofit educational purposes,” (2) the nature of the copyrighted work, (3) the amount of the copyrighted work that is used in the new work, and (4) the effect of the new use on the copyrighted work’s market or value (17 U.S.C. § 107). Although lower courts disagreed on a number of factors, the sole issue before the Supreme Court was whether the first factor of copyright fair use analysis weighed in AWF’s favor.

The Opinion

The majority held that the first fair use factor did not weigh in AWF’s favor, affirming the Second Circuit decision that the licensing of Warhol’s Orange Prince was not a fair use. Tensions ran high in the 7-2 decision. The majority opinion, penned by Justice Sonia Sotomayor, emphasized that the decision was based on the foundation of previous fair use decisions such as Campbell and Harper & Row. In particular, the majority did not find that the Warhol work was “transformative” in the manner required by the fair use statute but was rather “supplanting” the original work. Crucially, the majority argued that for a “transformative use” to be a fair use required that it take on something more than a merely commercial use or exploitation. In this case, both Goldsmith’s photograph and Warhol’s art are representations of Prince. Warhol’s representation was based on and “transformed” Goldsmith’s photograph in a manner that made it a derivative work, and as such the right to create a derivative work such as the pop art and commercially license it should belong to Goldsmith, the copyright holder.

The Dissent

On the other hand, Justice Elena Kagan’s dissenting opinion (joined by Chief Justice John Roberts) detailed the “laborious” creative process that Warhol undertook to bring the work from photo to silkscreen, and the transformation in character that arose from his artistic vision. The dissent argued that the majority incorrectly disregarded this transformative character in favor of honing in on the commercial purpose aspect, obscuring the broader purpose of fair use as a copyright infringement “escape valve” for creatives. Further, the dissent focused on the dire implications of disavowing fair use in this case. Notably, Justice Kagan wrote that this outcome will “make our world poorer.” In essence, the dissent implied that this ruling will potentially disincentivize and dissuade creatives from making art that builds off of its predecessors, out of fear of litigation for copyright infringement.

One interesting note concerns the tenor of the opinions. While the case involves an important issue in copyright law and two famous artists, it was not expected to be one of the more controversial cases of the Supreme Court’s term. Nevertheless, Justice Sotomayor’s majority opinion contained several pages of long footnotes targeting the dissent in surprisingly blunt terms. Justice Kagan’s dissent responded with a half-page footnote taking issue with the majority’s footnotes and suggesting such footnotes themselves lacked logical rigor.

The Big Picture

The further tweaking of the fair use analysis from the majority may lead to confusion in lower courts as to how to handle cases with different fact patterns, such as when an underdog artist creates a vastly distinct new work from a famous reference point. The conflict of balancing the copyright holder’s right to create derivative works and the fair use right to create a transformative work remains murky and without a clear answer across contexts.

Because Warhol’s commercial power tinged the context here, this ruling against fair use may have unintended implications for the broader artistic community, as foreshadowed by the dissent. Whether the majority or the dissent got it right will be seen in the years to come, in future cases or even corrective legislation.

*Dawn Jackson is not a licensed attorney.

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The questions from the high court during oral argument at the end of March 2023 were fairly telling of the 9-0 ruling that came down yesterday in Amgen, Inc. v. Sanofi (No. 21-757). In fact, it did not come as much of a surprise when the Supreme Court left intact the lower courts’ invalidity ruling against Amgen and simultaneously affirmed a narrower-than-Amgen-wanted enablement requirement under 35 U.S.C. § 112. 

Just as a quick recap from our latest post on this case, Amgen had asked SCOTUS to find that the Federal Circuit applied too high of a bar under the enablement portion of § 112 by requiring that a patent explain how to make virtually every possible version of the claimed invention that could perform the claimed functions. Amgen fought for a less stringent enablement requirement and contended that a patent need not account for the full range of possible forms the invention might take, but only “enable skilled artisans to ‘make and use’ the invention.”

The opinion — authored by Associate Justice Neil Gorsuch — explains that the claims-at-issue in U.S. Patent No. 8,829,165 and U.S. Patent No. 8,859,741 (which cover Amgen’s PCSK9-inhibiting cholesterol drug marketed as Repatha) do indeed fail to provide enough information allowing a person of ordinary skill in the art to replicate the full scope of the invention without undue experimentation. More specifically, the Court explained that

[i]f a patent claims an entire class of processes, machines, manufactures, or compositions of matter, the patent’s specification must enable a person skilled in the art to make and use the entire class.

. . .

That is not to say a specification always must describe with particularity how to make and use every single embodiment within a claimed class.

. . .

a specification may call for a reasonable amount of experimentation to make and use a patented invention. What is reasonable in any case will depend on the nature of the invention and the underlying art.

The Court further warned that “the more a party claims, the broader the monopoly it demands, the more it must enable.” Recall that the asserted claims in the ʼ165 and ʼ741 patents were not limited to the particular antibody used in Repatha (or even the 26 antibodies identified in the ʼ165 and ʼ741 patents). Instead, the claims more broadly require an entire genus of known and unknown antibodies. Using this framework, the Court explained that it had no doubt that the 26 exemplary antibodies identified by their respective amino acid sequences in the specification of the ʼ165 and ʼ741 patents were enabled. But it found the specification lacking with respect to how to make and use every other undisclosed but functional antibody such that a person of ordinary skill in the art would be “forced to engage in ‘painstaking experimentation’ to see what works.” As a result, the Supreme Court justices held that “[t]he courts below correctly concluded that Amgen failed “to enable any person skilled in the art . . . to make and use the [invention]” as defined by the relevant claims.” 

While this marks the end of a nearly decade-old patent dispute, the case certainly provides a real-life example of the answer to the question frequently asked by clients:

“But, how can I be sued on my product when I have a patent that covers my product?”

Indeed, Sanofi (and Regeneron) has its own patents covering its PCKS9-inhibiting cholesterol drug (marketed as Praluent). In fact, while Praluent works similarly to Repatha in that the antibodies block PCSK9 (which inhibits the removal of bad cholesterol from the blood), it achieves the result with a different antibody having its own unique amino acid sequence. Regardless, a patent does not provide the right to make, use, sell or import an invention. Rather, it provides the right to exclude others from making, using, selling, or importing that invention. As such, Sanofi’s patent could not prevent Amgen from suing for infringement to enforce its rights under the ʼ165 and ʼ741 patents. Also, while many patents that are litigated are ultimately found to be invalid, these invalidity determinations typically come after a protracted, expensive battle in court (and possibly before the USPTO as well). After all, issued patents are presumed valid and the burden to overcome that presumption and prove invalidity is high. And, while not necessarily the case here, a patent can be granted on an improvement to an earlier invention that may still be covered by an enforceable patent in one or more countries. In short, Sanofi came out the victor in this fight, but it had to stay in the ring for quite a long time to knock Amgen out. 

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The Federal Circuit passed on Pure Hemp’s ask for attorney fees and sanctions in United Cannabis, Corp. v. Pure Hemp Collective Inc., No. 22-1363 (Fed. Cir. May 8, 2023). Agreeing with the district court, the appellate panel found Pure Hemp’s exceptionality arguments lacking (even referring to Pure Hemp’s appeal as “extremely weak”) and affirmed the district court’s denial of Pure Hemp’s motion for attorney fees.

Almost five years ago in 2018, UCANN filed suit against Pure Hemp in the U.S. District Court for the District of Colorado alleging infringement of U.S. Patent No. 9,730,911. The ʼ911 patent relates to the extraction of pharmaceutically active components and, more specifically, botanical drug substances (BDS), including cannabinoids obtained by extraction from cannabis. The case was stayed in April 2020 when UCANN filed for bankruptcy. Once the bankruptcy petition was dismissed, UCANN and Pure Hemp entered into a stipulation resulting in the dismissal of UCANN’s infringement claims against Pure Hemp. Notably, the stipulation did not address attorney fees, UCANN’s infringement claims were dismissed with prejudice, and Pure Hemp’s invalidity and inequitable conduct counterclaims were dismissed without prejudice.  

Pure Hemp then moved for attorney fees because 1) UCANN’s prosecution counsel had allegedly committed inequitable conduct and 2) UCANN’s litigation counsel took conflicting positions in its representation of UCANN and another client. The district court found that Pure Hemp failed to establish that it was a prevailing party under 35 U.S.C. § 285, that the case was “exceptional,” or that UCANN’s counsel acted unreasonably and noted that dismissal occurred before the record was developed to a point that would have supported an award of attorney fees.

On appeal, the appellate panel first explained that the district court erred in finding that Pure Hemp was not a prevailing party. This is important because only a prevailing party is eligible to be awarded attorney fees under § 285 (one of the three different legal authorities employed by Pure Hemp). In determining whether a party is a prevailing party under § 285, the panel “must consider whether the district court’s decision effects or rebuffs a plaintiff’s attempt to effect a material alteration in the legal relationship between the parties.” The panel explained that here, because UCANN’s claims were dismissed with prejudice, UCANN is prevented from asserting the ʼ911 patent against Pure Hemp in the future and, thus, Pure Hemp successfully “rebuffed” UCANN’s infringement claims. That said, the panel found this error by the district court to be harmless and further found that the district court did not abuse its discretion in finding this case unexceptional because Pure Hemp failed to establish that the case was exceptional (by virtue of the inequitable conduct allegation). In this vein, the panel “reject[ed] Pure Hemp’s invitation to invade the province of the district court and make [its] own findings of fact.” In fact, Pure Hemp voluntarily dismissed the inequitable conduct counterclaim before any findings were made, and it did not seek any further evidentiary proceedings.

So what makes a case exceptional under 35 U.S.C. § 285? How might a party get (and keep) those coveted attorney fees? As explained in Octane Fitness in 2014, the case must “stand out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Think frivolous, bad motivation, and objective unreasonableness (in both factual and legal components of the case). By way of example, the Federal Circuit took issue with the plaintiff’s litigation tactics in Electronic Communication Technologies, LLC v. Shopperschoice.com, LLC, characterizing them as abusive, for the sole purpose of forcing settlements, and evidence that ECT had no real intention of testing the strength of the patent or the infringement allegations, such that it vacated and remanded the denial of attorney fees by the lower court. That said, the high bar to obtain attorney fees is not one that the Federal Circuit takes lightly. For a more in-depth discussion of what the Federal Circuit looks for to affirm an award of attorney fees on never-adjudicated claims that are dismissed, please click here.   

 

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After years of uncertainty, the USPTO has finally provided insight on how it views applications for cannabis-related marks, suggesting that the use of such marks will be heavily scrutinized.   

In 2016, National Concession Group, Inc. (NCG) filed an application to register the mark “BAKKED” (Serial No. 87168058) and this stylized drop design mark

(Serial No. 87183434) for goods and services related to glass jars and essential oil dispensers. In support, NCG submitted a specimen displaying the respective marks on a device called “The Dabaratus,” which is commonly used for dispersing cannabis oil.

The examiner refused registration because the identified goods (The Dabaratus) were prohibited under Section 863 of the Controlled Substance Act (CSA), and thus could not be used in commerce as required by Sections 1 and 45 of the Trademark Act. On appeal to the TTAB, NCG argued that in addition to dispersing cannabis oil, the device could also be used for dispersing essential oils and, therefore, did not constitute paraphernalia under the CSA. Alternatively, NCG argued that even if it is considered paraphernalia under the CSA, the item was lawful under Colorado state law and registration was proper under Sections 863(f)(1) and 863(f)(2) of the CSA.

The TTAB affirmed the refusal to register in each of NCG’s applications based on extrinsic evidence highlighting that the marks and associated goods were intended or designed primarily for use in connection with inhaling or ingesting a prohibited controlled substance, which is illegal.  The TTAB emphasized the following points in its analysis:

Use in commerce must be lawful.

For every trademark seeking registration, the applicant must demonstrate use of the mark “in commerce” (see15 U.S.C.A. § 1051 (a)(1)). Section 45 of the act defines “use in commerce” as “the bona fide use of a mark in the ordinary course of trade” and encompasses “all commerce which may lawfully be regulated by Congress.” Put simply, “lawful use in commerce” is critical to registration, Gray v. Daffy Dan’s Bargaintown, 823 F.2d 522, 3 USPQ2d 1306, 1308 (Fed. Cir. 1987) (citing 15 U.S.C. § 1052(d)), and if a mark is used on goods that are illegal under federal law, it is ineligible for federal registration(see In re PharmaCann LLC, 123 USPQ2d 1122, 1124 (TTAB 2017)).

The CSA prohibits the sale or distribution of illegal controlled substances in interstate commerce.

The Controlled Substances Act is the federal U.S. drug policy governing the manufacture importation, possession, use, and distribution of certain substances. Section 863 of the CSA presents the most significant hurdle to registering cannabis-related marks because it explicitly prohibits the sale, use of the mail or any other facility of interstate commerce to transport, and the import or export of drug paraphernalia that is defined as “any equipment, product, or material that is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under [the CSA]” (21 U.S.C. § 863(d)). Sections 812(a) & (c) and 841 & 844 identify marijuana and marijuana-based products as controlled substances and prohibit the possession of each. Accordingly, the CSA considers equipment or products primarily intended or designed for use in ingesting, inhaling, or otherwise introducing marijuana into the human body to be drug paraphernalia and, thus, unlawful under the CSA. 

The TTAB pointed out that even though the identification of the goods and services (essential oil dispenser for domestic use) in NCG’s application did not identify an unlawful purpose, other extrinsic evidence, such as NCG’s website, unabashedly promoted the item as a “dabbing” tool for ingesting marijuana. NCG argued that the device was traditionally intended for use with tobacco products, but the TTAB found that none of the items submitted in support of NCG’s historical use resembled the product and that NCG was unable to show that the device was “traditionally” used for tobacco-based oils or substances. By contrast, the TTAB pointed to several articles identified by the examiner describing “dabbing” as a method for inhaling cannabis concentrates for a quicker high. Ultimately, the TTAB concluded that there was no evidence to support a finding that the item was intended for any use other than “dabbing” and the rejection under the CSA was proper. 

NCG also argued that registration of the marks was appropriate because the CSA contains an exception for items where the manufacture, possession or distribution is authorized by state law, as is the case in Colorado. The TTAB rejected application of that exception, noting that NCG’s rights would not be limited to Colorado but would extend beyond the state’s borders and thus run afoul of the CSA’s prohibitions and the requirements of the act.   

How to Weed Out Issues with Your Mark

The TTAB’s decision reaffirms the difficulty in registering a mark purely related to cannabis or cannabis-based products. However, the ruling does not completely preclude an applicant from obtaining trademark protection. The NCG opinion focused heavily on the applicant’s specimen and its marketed purposes, leaving open the possibility for registration under other goods and services that are permitted under federal law.

Often, clients underestimate the breadth of their mark usage and thus limit potential registration opportunities. It is imperative that clients consider registration in classes beyond their core business to maximize protection. 

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Efforts by HIP, Inc. to have David Howard added as an inventor to Hormel’s U.S. Patent No. 9,980,498 (Bacon Patent) were recently scorched by the Federal Circuit. More specifically, in HIP, Inc. v. Hormel Foods Corporation (22-1696), a unanimous panel reversed the District of Delaware’s finding that Howard was a joint inventor of the Bacon Patent and explained that Howard’s purported contribution — preheating with an infrared oven — was insignificant when viewed in the context of the invention as a whole.

A Little Precooking

Bacon is usually precooked before it hits the grocery store shelves. Hormel’s two-step precooking process includes a first cooking step that creates a layer of protective (melted) fat around the bacon to preserve salt and good flavor and a second cooking step that prevents charring. In 2007, Unitherm Food Systems (HIP’s predecessor) entered into a joint development agreement with Hormel to develop an oven that would be used in this two-step cooking process.  During the initial testing phase, HIP alleges that Howard disclosed the infrared preheating concept that appears in claim 5 of the Bacon Patent. More than a decade later in 2018, the Bacon Patent was issued naming four inventors that assigned rights to Hormel. Howard was not named.

In spring 2018, HIP sued Hormel in the District of Delaware alleging that Howard was a sole or joint inventor of the Bacon Patent. The district court found Howard to be a joint inventor based on his purported contribution to the infrared preheating concept. However, as noted by Hormel on appeal, the purported contribution is featured only once in a single claim of the Bacon Patent (independent claim 5) and, at that, in a Markush group including a microwave oven, an infrared oven, and hot air:

A method of making precooked meat pieces using a hybrid cooking system, comprising:

preheating meat pieces in a first cooking compartment using a preheating method selected from the group consisting of a microwave oven, an infrared oven, and hot air to a temperature of at least 140° F. to create preheated meat pieces, the preheating forming a barrier with melted fat around the preheated meat pieces and reducing an amount of condensation that forms on the preheated meat pieces when transferred to a second cooking compartment, the barrier preventing any condensation that forms from contacting the preheated meat pieces under the melted fat and diluting flavor in the preheated meat pieces;

transferring the preheated meat pieces to the second cooking compartment, the second cooking compartment heated with an external heating source, the external heating source being external to the second cooking compartment, the second cooking compartment including internal surfaces, the external heating source assisting in keeping the internal surfaces at a temperature below a smoke point of fat from the meat pieces thereby reducing off flavors during cooking in the second cooking compartment; and

cooking the preheated meat pieces in the second cooking compartment to a water activity level of 0.92 or less to create precooked meat pieces. (Col. 9, line 57 to Col. 10, line 17) 

Turning Up the Heat

As framed by the Federal Circuit, “[t]he burden of proving that an individual should have been added as an inventor to an issued patent is a ‘heavy one’” and requires clear and convincing evidence. Pannu v. Iolab Corp., a 1998 Federal Circuit case, articulates a three-part test that requires the inventor to have:

(1) contributed in some significant manner to the conception of the invention;

(2) made a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention; and

(3) [done] more than merely explain to the real inventors well-known concepts and/or the current state of the art.

A unanimous panel of the Federal Circuit found that Howard’s purported infrared heating contribution failed the second Pannu factor. In particular, the panel explained that Howard’s purported contribution — preheating with an infrared oven — to be lacking from the summary, examples, or figures. In fact, outside of claim 5, preheating with an infrared oven is mentioned one time in the Bacon Patent:

Preheating the sliced bacon with a microwave oven, or other suitable heating methods such as infrared or hot air, prior to fully cooking the sliced bacon in a superheated steam oven minimizes condensation on the sliced bacon surfaces. (Col. 5, lines 40-44)

In contrast, the panel found the written description, claims, and figures of the Bacon Patent to be replete with discussion and illustrations of microwave oven preheating disclosure. Accordingly, the panel found Howard’s purported contribution of using an infrared oven to be “insignificant in quality . . . [when] measured against dimension of the full invention.” As a result, the panel did not consider Hormel’s additional argument on the third Pannu factor, i.e., Howard’s purported contribution was well known and part of the state of the art, since failure of one Pannu factor is dispositive on the question of inventorship.

A Little Extra on the Plate

To compare and contrast, a few years ago in Dana-Farber Cancer Institute, Inc. v. Ono Pharmaceuticals Co., Ltd. (19-2050), a majority panel of the Federal Circuit found a significant contribution by two unnamed inventors. The six patents-at-issue (Honjo Patents) claim a method of treating cancer by administering antibodies targeting specific receptor-ligand interactions on T cells, i.e., stimulating a person’s immune system to attack cancer cells. Nobel Laureate Dr. Tasuku Honjo was the sole inventor originally named, and Ono Pharmaceutical Co., Ltd. was the assignee of the Honjo Patents. In 2015, Dana-Farber (potential assignee of rights to the Honjo Patents) brought suit alleging that Dr. Gordon Freeman, a researcher at Dana-Farber, and Dr. Clive Wood, a researcher at Genetics Institute, should be added as inventors in the Honjo Patents. The district court agreed and ordered the USPTO to add Drs. Freeman and Wood as joint inventors to the Honjo Patents.

Judge Lourie, who also wrote the HIP opinion discussed above, explained that “[e]ssential to this determination is a recounting of each researcher’s work and the nature of their collaboration.” In this aspect, Dr. Honjo discovered the PD-1 receptor in the early 1990s, isolated its DNA sequence and began working with the protein in mouse models. In September 1998, Dr. Honjo and Dr. Wood connected to find the PD-1 ligand. Dr. Wood believed that the PD-1 receptor could be a candidate for antibody therapy development. Soon thereafter, Dr. Wood and Dr. Freeman, a researcher at Dana-Farber, began working together to determine whether PD-1 binds to novel B7 ligands. For the next few years, the three scientists collaborated and published on their collective efforts. Somewhere along the way, it seems hurt feelings may have affected this collaboration (or at least recognition of the various contributions in the collaboration). Indeed, after Dr. Honjo became aware of a provisional patent application filed in 1999 by Drs. Wood and Freeman disclosing modulation of the immune response via activating or blocking the PD-1/PD-L1 pathway in 1999 (and not naming Dr. Honjo as an inventor), Dr. Honjo stopped sharing data with Drs. Wood and Freeman. In 2002, Dr. Honjo filed the patent application that eventually spawned the Honjo Patents and did not name Drs. Wood and Freeman.  

So, what was the difference here? Is preheating bacon with an infrared oven less important than methods of treating cancer? Well, sorry bacon lovers, but yes. In addition, the appellate panel undertook a lengthy review of invention timeline and purported contributions by each inventor and referenced the lower court’s 111-page opinion that “considered” Dana-Farber’s eight-point theory justifying Drs. Freeman and Wood’s inventorship reveal the complexity behind the decision. While inventorship is a question of law reviewed de novo, the district court’s underlying findings of fact are reviewed for clear error. Indeed, as stated in the opinion, “[u]ltimately, the decision here rested on the extensive factual determinations made by the district court relating to the work performed together by Drs. Wood and Freeman, and Dr. Honjo that were not clearly erroneous, and the court made no errors of law.”

Oh, and interestingly, when Dr. Honjo won the Nobel Prize in Physiology or Medicine in 2018 (pre-appeal), he credited Dr. Freeman in his acceptance speech as a major collaborator in his work. 

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The NIL arms race continues as states amend their name, image, and likeness (NIL) laws to gain a competitive advantage. The new trend is to allow colleges and universities within the state to be more involved in the NIL process and protect them from NCAA punishment. These moves come after the NCAA’s first NIL-related infractions ruling. However, the various state laws and bills would allow for colleges and universities to be directly involved with NIL deals while avoiding NCAA punishment, despite NCAA rules to the contrary.

Arkansas was the first state to make a move in this direction, with its governor signing an amended NIL bill into law on April 14, 2023. The new law authorizes colleges, universities, and their supporting foundations to “identify, create, facilitate, and otherwise enable opportunities” for student-athletes to earn compensation from the use of their NIL. The law also authorizes 501(c)(3) organizations within the state to compensate student-athletes for the use of their NIL, meaning NIL collectives affiliated with specific colleges and universities can enter into NIL deals.

On April 20, 2023, the Oklahoma Senate passed SB 840, which makes amendments to the state’s current NIL laws. However, on April 26, 2023, Oklahoma’s governor vetoed the bill. Not all hope is lost, as the governor’s veto was not based on any issues with the NIL bill itself, but instead based on unrelated policy issues. SB 840 passed in the Senate by a wide margin, and there is still the possibility for the Senate to override the governor’s veto.

SB 840 eliminates the need for licensed or registered representation and permits colleges to be compensated for the use of their logos or facilities in relation to NIL activities. The bill also permits colleges to establish agreements with third-party entities to facilitate NIL activities and require student-athletes to take courses in contracts and financial literacy. Colleges can also adopt reasonable time, place, and manner restrictions to prevent a student’s NIL activities from interfering with team activities and school operations. However, students are not allowed to use a school’s logo to obtain NIL compensation.

Oklahoma’s NIL bill also includes a provision that appears to prevent the NCAA from punishing a college or university if a student-athlete violates the NCAA’s NIL rules. Furthermore, the bill prohibits the NCAA from investigating or taking any other adverse action against a college or university that participates in any NIL activity protected under Oklahoma’s NIL law.

Texas’s bill, HB 2804, which passed the Texas House on April 26, 2023, is similar to other NIL laws enacted in other states. However, an amendment added on April 12, 2023, mirrors Oklahoma’s playbook. This amendment prevents any group or organization with authority over an intercollegiate athletic program from enforcing a contract term, rule, regulation, standard, or any other requirement that prohibits the institution from participating in intercollegiate athletics or otherwise penalizes the institution or its athletic program for performing, participating in, or allowing an activity required or authorized by the new law.

Coaches and NCAA leaders have voiced concerns that NIL could disguise “pay-for-play” deals orchestrated by collectives before student-athletes sign national letters of intent or enter the transfer portal. While boosters are not allowed to pay players directly or be part of the recruiting process, the NCAA is actively investigating multiple bad actors in the NIL space. The various state laws and bills could raise questions about the NCAA’s ability to enforce its own NIL rules and regulations in certain states.

While state laws attempting to protect colleges and universities from NCAA enforcement of NIL rules may strengthen the NCAA’s push for federal NIL legislation, the prospects for a federal NIL law in the near future seem bleak. A federal NIL bill has not been introduced in the current Congress, and past federal NIL bills have failed to progress through the legislature. However, as has been the trend with state NIL laws, it is likely that more states will introduce similar laws to those in Arkansas, Oklahoma and Texas. If that happens, Congress may then feel the need to step in with federal legislation to prevent the trend of one-upmanship from continuing.