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Earlier this month, prominent figures in the realm of college sports gathered on Capitol Hill to advocate for federal name, image, and likeness (NIL) legislation. Currently, one NIL bill has been introduced in the House, and there are multiple other draft bills circulating in both the House and Senate. For example, as previously discussed, one of the House draft bills proposes the establishment of a new regulatory agency to oversee college NIL activities. On the Senate side, Sens. Tommy Tuberville and Joe Manchin have drafted a bill that sheds light on the potential federal NIL rules. The draft Senate bill grants the NCAA greater authority in managing NIL instead of creating a new regulatory body.

While the draft Senate bill encompasses numerous changes, there are several key provisions that could significantly impact the NIL landscape. According to the draft bill, college athletes would be prohibited from entering into NIL deals until they are enrolled at the school and have completed at least one semester of coursework. Additionally, the draft bill introduces a reporting requirement for college athlete NIL deals. Under this provision, college athletes must disclose their contracts to their schools within 30 days of entering into an NIL agreement, including compensation amounts, contract duration, and other details.

The draft also proposes the creation of a trust funded by revenue-generating, college-level tournaments, such as the College Football Playoff and NCAA basketball tournament. This trust would cover travel expenses for athletes’ immediate family members and out-of-pocket medical costs related to injuries sustained during college sports. Managed by the NCAA, the trust would provide coverage for athletes for eight years after their eligibility expires or until they turn 28.

Regarding enforcement under the draft Senate bill, the responsibility primarily falls on the NCAA, which would investigate and ensure compliance. Certain NIL violations would be treated as unfair and deceptive acts under the Federal Trade Commission Act. The NCAA would possess the authority to investigate, audit, and impose penalties, including the revocation of licenses for participation in NIL. Additionally, the NCAA could refer violations to the FTC for further action. Failure by the NCAA to fulfill its obligations under the bill could result in the revocation of its tax-exempt status. Notably, the draft does not expressly categorize college athletes as students rather than employees. The issue of employment status for college athletes has become a highly debated topic, with California being at the forefront of the discussion.

It is important to note that the draft bill is not final and may undergo changes based on feedback from college leaders and other stakeholders. The true impact of this draft in comparison to previous lobbying efforts and other NIL bills remains uncertain, as none of the previous bills have reached full committee debate.

While the NCAA and college leaders continue to push Congress for a federal NIL bill, states are taking matters into their own hands by amending their own NIL laws to gain a competitive edge. Legislatures in Arkansas, Colorado, Missouri, Montana, New York, Texas, and Oklahoma have recently introduced or passed bills that aim to prevent the NCAA and conferences from investigating or penalizing schools for NIL rule violations. It is worth highlighting, that the Texas NIL bill was signed into law on June 10, 2023, and will go into effect on July 1. Given Texas’s influence, other states are likely to take steps to align their own NIL laws with Texas’s provisions, if they have not already done so. As the saying goes, everything is bigger in Texas, and its NIL law will likely have a domino effect on the actions of other states.

Most recently, New York passed an NIL bill that currently awaits the governor’s signature. The New York bill closely resembles the NIL bills passed in Oklahoma and Texas. It includes a provision that is becoming more common in state legislation, which the NCAA aims to quash with the enactment of a federal NIL law. Specifically, the New York bill states that athletic associations, conferences, or other entities with authority over intercollegiate athletics, including the NCAA, cannot hinder a college’s participation in intercollegiate athletics based on a student-athlete’s ability to earn compensation from the use of their name, image, or likeness. Moreover, they cannot take adverse actions against colleges for engaging in protected activities or for involvement in a student-athlete’s NIL. The bill also prevents penalization or prevention of a college’s participation in intercollegiate athletics due to violations of collegiate athletic association rules or regulations regarding a student-athlete’s NIL by individuals or entities supporting or benefiting the college or its athletic programs.

The competition within the NIL landscape is expected to intensify as more states pass their own laws and amendments, while the NCAA continues its pursuit for a federal bill. However, the prospects for a comprehensive federal NIL law gaining sufficient support in the current legislative climate remain uncertain. As the landscape evolves, college sports stakeholders will need to navigate through a complex web of state regulations and closely monitor the progress of any proposed federal legislation.

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Can you still have noncompete agreements with your employees? What if you explicitly state that the agreement protects trade secrets or other proprietary information? There has been a lot of buzz about this issue, and recently the general counsel of the National Labor Relations Board joined the conversation with a memorandum, GC 23-08, opining that noncompete and non-solicitation agreements violate the National Labor Relations Act. This continues a recent trend of government activity focused on noncompete and non-solicitation agreements. For more information on prior actions by the Federal Trade Commission (FTC) and other entities, please see Bradley’s prior coverage here.

This guidance is not a surprise. The NLRB’s General Counsel Jennifer Abruzzo previewed this position back in March, when she published GC 23-05 seeking to clarify the board’s decision in McLaren Macomb, which held that overly broad confidentiality and non-disparagement provisions violate the NLRA. At the end of GC 23-05, she noted that “non-compete clauses; no solicitation clauses; no poaching clauses” and other provisions in separation agreements interfere with employees’ exercise of rights provided under Section 7 of the NLRA. (This and other general counsel memorandums can be found here.) It is an unfair labor practice, in violation of Section 8 of the NLRA, “to interfere with, restrain, or coerce employees in the exercise of the rights” guaranteed in Section 7.

Is the Protection of Trade Secrets a “Legitimate Interest[]” That May Support Restrictive Covenant Obligations?

According to the general counsel, the (1) offer, (2) maintenance, and/or (3) enforcement of restrictive covenant obligations each constitute an unlawful labor practice under the NLRA unless they are “narrowly tailored to special circumstances justifying the infringement on employee rights.” 

While state laws certainly differ, many states permit individuals and entities in employment and other relationships to enter into mutually beneficial restrictive covenant agreements. These agreements can support a host of legitimate business interests. For example, a Georgia statute identifies various legitimate business interests, including, but expressly not limited to, (1) the protection of trade secrets; (2) the protection of valuable confidential information; (3) relationships with specific prospective or existing customers, patients, vendors, or clients; (4) customer, patient, or client good will associated with ongoing business practices, trade names, trademarks, service marks, or trade dress, specific geographic locations, specific marketing or trade areas; or (5) specialized training. The Alabama Code has a similar list of protectable interests.

The general counsel’s memorandum challenges what legitimate business interests might constitute sufficient “special circumstances” to justify post-employment restrictions. According to the general counsel, the mere desire to avoid competition is not a legitimate business interest, nor are “interests in retaining employees or protecting special investments in training employees” if there are less restrictive means to protect such interests. The general counsel seems to acknowledge that “protecting proprietary or trade secret information” is a legitimate business interest associated with restrictive covenant agreements but argues that they can be protected with certain unspecified “narrowly tailored workplace agreements that protect those interests.” Finally, the general counsel argues that an employer would be “unlikely” to establish a sufficient business interest if the provisions are imposed on “low-wage or middle-wage workers who lack access to trade secrets or other protectible interests, or in states where non-compete provisions are unenforceable.” The latter reference could be an indication that the NLRB might take the position that a provision that is made enforceable only through “blue penciling” a restrictive covenant agreement violates the NLRA.

Some states also require, and some businesses voluntarily offer, additional compensation or other consideration (including equity interests) in connection with entering into restrictive covenant agreements. The general counsel’s memorandum does not address this issue. Also, supervisors and owners are not protected by the NLRA, so restrictive covenant agreements with management employees and owners may be unaffected by this guidance. But be careful: The general counsel’s recent memorandum regarding McLaren Macomb (23-05) suggests that there may be retaliation circumstances where a supervisor would be protected. Accordingly, the NLRB might investigate or challenge restrictions in separation agreements or agreements executed after an individual is hired, even with supervisors.

Interagency Cooperation and Potential Damages Even Without Employer Enforcement

The memorandum recommends that investigators submit to the NLRB’s Division of Advice on any agreements “that are arguably unlawful under the analysis summarized herein” and seek make-whole relief for employees who miss out on employment opportunities “even absent additional conduct by the employer to enforce the provision.” So, even if you don’t seek to enforce the restrictive covenant, the NLRB may pursue this issue. The memorandum advises investigators to “seek evidence of the impact” of certain restrictions on employees to determine whether certain relief should be offered.

The general counsel also reiterated her commitment to interagency collaboration on workplace mobility issues, citing the memorandum of understanding that the NLRB entered into last year with the FTC and the Department of Justice’s Antitrust Division.

Review Agreements and Seek Assistance from Counsel

While employers that are already the subject of unfair labor practice investigations should have a heightened sensitivity to this new guidance, the NLRB and its active cooperation with other federal agencies means that all employers should be on guard. Whether you have a union in place or not, the NLRB applies to you, and you should assess the potential impact of this recent investigative focus. Bradley attorneys in the Labor and Employment and Intellectual Property practice groups are available to assist with any questions or concerns that you may have.

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Last week, the Federal Circuit issued another precedential decision on inventorship.  However, unlike in HIP, Inc. v. Hormel Foods Corporation (22-1696) where the appellate panel found the purported inventor’s contribution to be “insignificant in quality . . . [when] measured against dimension of the full invention,” the panel in Blue Gentian, LLC v. Tristar Products, Inc. (21-2136) found the inventorship to be in need of correction. So, what made this set of facts different? In short, contribution, corroboration, and collaboration, each of which is discussed in more detail below. 

First, a little background. Blue Gentian sued Tristar for infringement of six patents, all of which relate to an expandable hose and named a sole inventor Michael Berardi: U.S. Patent Nos. 8,291,941, 8,291,942, 8,479,776, 8,757,213, D722,681, and D724,186. Tristar counterclaimed to correct inventorship and, more specifically, to add Gary Ragner as a named inventor. The district court agreed that Ragner should be added as an inventor. 

As made clear in the appellate opinion, a single meeting in August 2011 was central to the district court’s inventorship holding and the basis for Blue Gentian’s appeal. In that meeting, Ragner and six others from Ragner Technology Corporation met with Berardi. The appellate panel sets the scene for the meeting discussing a) Ragner Tech’s interest in finding investors to help the company commercialize an expandable hose branded MicroHose, b) Ragner’s advanced degrees in physics and aerospace engineering and other expandable hose patents, c) Berardi’s sociology degree and lack of knowledge or experience in hose design, and d) Berardi’s claim of nebulous conception prior to the meeting. Many of the details of the discussion during the meeting were found to be corroborated by testimony from three of the six participants from Ragner Tech.

During the meeting, the manufacturing process and inner components of the MicroHose were shown to Berardi. For example, the document shared with Berardi described an inner “TPU Elastomer” layer and a reinforcement layer made of polyester yarn. In addition, Ragner presented a prototype of the MicroHose. While the prototype of the MicroHose had a yarn valley cord attached to the outside of the hose rather than the full fabric cover that Ragner Tech wanted to include on the commercial version, the prototype also had a vinyl inner tube for water to flow through and a wire coil spring that allowed the hose to return to a retracted state after expansion. According to Ragner, Berardi asked whether the wire spring could be replaced with elastic, to which Ragner responded affirmatively and described previous prototypes that employed surgical tubing to allow for the hose retraction. Berardi denies asking this question or having any discussion of prior prototypes and only vaguely remembered possibly hearing about elastomer from Ragner. The three testifying Ragner Tech participants were not able to confirm either of Ragner’s or Berardi’s accounts in this regard.

Berardi testified that he went to Home Depot a few hours after the Ragner Tech meeting and purchased materials to make his own expandable hose prototype where water flowed through an outer tube and an inner elastic tube was used for retraction. Three months later, Berardi filed his first expandable hose patent application (which was eventually issued as the ʼ941 patent). After several more patents issued, Blue Gentian (licensee of Berardi’s patents) sued Tristar (licensee of two of Ragner’s patents).

Corroboration

Since the named inventors of a patent are presumed correct, Tristar was required to show by clear and convincing evidence that Ragner should have also been named. Moreover, Ragner’s testimony needed to be sufficiently corroborated. On this front, the district court found the testimony to be sufficiently corroborated under the rule of reason test, i.e., where “all pertinent evidence is examined in order to determine whether the inventor’s story is credible” overall. The appellate court found no error in the lower court’s fact-finding. In particular, the opinion notes that corroboration is based on evaluation of the evidence as a whole and that no single piece of evidence alone was needed to establish the credibility of Ragner’s account of inventorship. In this aspect, the panel found no error in the lower court’s consideration of Ragner’s other expandable hose patent, the prototype, and other individual witness testimony to establish corroboration. To rub further salt in the wound, the panel also explained that Berardi’s first prototype (physical evidence created within a day of the meeting) provided a strong indication that Ragner’s story was credible.

Contribution

The panel opinion reminds us that, to be added as a joint inventor, the individual(s) must demonstrate that he or she “contributed significantly to the conception — the definite and permanent idea of the invention — or reduction to practice of at least one claim.” The appellate panel reiterated that “[t]he determination of whether a person is a joint inventor is fact specific, and no bright-line standard will suffice in every case.” However, this line seems to shine fairly brightly. Indeed, the panel found no error in the district court’s finding that Ragner disclosed three key elements of the hose to Berardi at the August 2011 meeting – i.e., (1) an inner and outer tubes attached only at the ends, (2) a fabric outer tube, and (3) an elastic inner tube that can provide force to retract the hose without a metal spring – and that these elements were a significant contribution to at least one claim in each of the six asserted patents. 

While the appellate panel seemed to suggest that the district court could have been more detailed about the presence of those contributions in the claims, it found this arguable error to be harmless. In addition, the panel explained that the elements identified by the district court to be Ragner’s contribution were significant at least by virtue of the use of these very elements to distinguish over the prior art during prosecution. In fact, “it follows that contributing such materially distinguishing features ‘is not insignificant in quality, when th[e] contribution is measured against the dimension of the full invention.’” In this aspect, the opinion clarifies that the same standard of contribution/inventorship applies to design patents as utility patents.

Furthermore, Blue Gentian attempts to persuade the court that the supposed error at least partially resided in the failure of the lower court to construe the claims before deciding on inventorship. In this vein, the opinion clarifies that a lower court is not required to define all claim terms in a patent before ruling on an inventorship dispute (unless there is a fundamental dispute as to certain terms). Simply put, the lower court “is not required to prospectively address hypothetical claim construction disputes.” While Blue Gentian had identified a claim term that should be construed – i.e., a flexible elongated inner[/outer] tube – it did make any attempt to explain to the lower court why/how it might benefit from the particular term’s construction to evaluate inventorship.

Collaboration

The panel also found Blue Gentian’s argument regarding lack of collaboration unpersuasive. In fact, the appellate panel discerned no error in the lower court’s finding of sufficient collaboration between Berardi and Ragner based on the information exchanged at the meeting. In this aspect and in response to Blue Gentian’s contention that Ragner’s contributions needed to be provided with the intent to invent the hose that was ultimately claimed, the opinion explains that

‘[p]eople may be joint inventors even though they do not physically work on the invention together or at the same time, and even though each does not make the same type or amount of contribution.’

. . .

‘The interplay between conception and collaboration requires that each co-inventor engage with the other co-inventors to contribute to a joint conception,’ . . . not that each co-inventor independently conceives of the entire invention ultimately claimed.  

As such, Ragner was not, as contended by Blue Gentian, required to be intent on inventing the full invention ultimately claimed before he started collaborating with Berardi at the August 2011 meeting. It was enough that i) Ragner shared with Berardi details about manufacturing plans and previous hoses that he had designed and provided verbal explanations of alternative designs, and ii) Berardi used those contributions to assemble prototypes that were ultimately claimed in the asserted patents.

Key Takeaway

Joint inventorship is a fact-specific question that requires a significant contribution to the invention, corroboration of that contribution, and collaboration. Since errors/omissions in inventorship may be corrected after issuance, patentees should carefully evaluate any potential attacks on inventorship before bringing an infringement suit. While hindsight is 20/20, it is puzzling that Blue Gentian chose to sue Tristar with such an uncertain claim to sole inventorship by Berardi.

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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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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.