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Developments in Intellectual Property Law

New Claim Construction Standard Should Reduce Inconsistency Between PTAB and Courts

By Fritz Klantschi
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On November 13, 2018 the USPTO Patent Trial and Appeal Board (“PTAB”) adopted a narrower standard for interpreting patent claims. This will now make the PTAB claim construction standard the same as that used by federal courts. Since 2012, the PTAB had used the “broadest reasonable interpretation” (“BRI”) claim construction in post-grant proceedings, which are proceedings that provide litigants a more cost-effective forum than the courts to resolve patent validity disputes.

Under the BRI standard, claim terms are given the broadest interpretation consistent with their plain meaning in light of the specification as understood by one of ordinary skill in the art. (In a patent, the claims section defines the matter for which protection is sought, and the specification is a written description of the invention.) Both the district courts and the U.S. International Trade Commission (“ITC”) used the so-called Phillips standard that required a patent claim to be given the “ordinary and customary meaning” to “a person of ordinary skill in the art . . .  at the time of the invention.” The Phillips standard was first articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) and further developed in subsequent cases.

Under the two-standard system, a party could argue two different claim constructions, one before the PTAB and the other before the district courts, which may cause different outcomes.  With this change, the Phillips standard now will apply to Inter Partes Review (“IPR”), Post Grant Reviews (“PGR”) and Covered Business Method (“CBM”) proceedings before the PTAB.

Currently over 85 percent of the patents that are in IPR are also being litigated in court. With the PTAB adopting the same claim construction standard as the district courts and the ITC, there will likely be fewer inconsistent opinions, and the change should reduce the prospect of parallel litigation over the same patent.

Trademark Considerations: When is a (Sur)Name More than Just a (Sur)Name?

By David Jones
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It is not uncommon for a business owner to name their business or a product after themselves. You can see examples every day nearly everywhere you look: FOLGERS® coffee, FORD® cars, GOODYEAR® tires, DISNEY®. . . everything.  However, registering your name as a trademark can actually be quite difficult.

As a starting point, the United States Patent and Trademark Office (USPTO) will not register a mark that is primarily merely a surname without a showing of acquired distinctiveness. 15 U.S.C. § 1052(e)(4).  This provision in the Trademark Act reflects the common law idea that exclusive rights in a surname cannot be established without evidence of long and exclusive use, with the idea being that such long-standing and recognizable use changes the significance to the public from the term being merely someone’s last name to being a trademark that identifies particular goods or services – hence, “acquired distinctiveness.”  But surnames are not always unique.  Can an individual stop someone else from using “their” surname?

The Schlafly case

The Federal Circuit most recently considered the issue in the matter of Schlafly v. Saint Louis Brewery, LLC, No. 2017-1468, 2018 WL 6168685, at *1 (Fed. Cir. Nov. 26, 2018).  In its opinion, the Court affirmed a ruling by the Trademark Trial and Appeal Board (TTAB) that the Saint Louis Brewery was entitled to register the mark SCHLAFLY for use in connection with beer and other related goods.  In so holding, the Court dismissed consolidated oppositions mounted by the successors of noted conservative political activist Phyllis Schlafly and other members of her family (including a son who used the Schlafly name in connection with his medical practice) in which they argued that allowing the brewery to register the mark would adversely impact their interest in the commercial value of the Schlafly name.

The Court declined to adopt a novel test proposed by the Schlafly camp (which opposers referred to as the “change in significance” test) under which they argued a surname could not be registered without the applicant showing that there was a change in significance to the consuming public that shifted the public’s perception of the proposed mark from a surname to a trademark associated and identified with specific goods and/or services.

The trademark owner’s evidence of acquired distinctiveness

In support of its position, the brewery presented evidence showing its considerable, continuous, wide-ranging use of the SCHLAFLY mark, including the sale of 75 million units of its 60 types of beer using the SCHLAFLY mark in 15 states and the District of Columbia, through 30 wholesalers and some 14,000 retail establishments, including several national restaurant chains between 2009 and 2014 alone. The brewery also presented evidence that these sales were supported by $1.1 million in advertising over the last five years, which featured the SCHLAFLY mark in advertisements and promotions in several media and at events.

Ultimately, both the TTAB and the Federal Circuit found the evidence presented by the brewery sufficient to show that the brewery’s use and promotion of the SCHLAFLY mark supported a finding of acquired distinctiveness. “No law or precedent suggests that surnames cannot be registered as trademarks if they have acquired distinctiveness in trademark use.” Id. at *5.  As you can see, however, obtaining a registration for your name as a trademark can be challenging, and anyone considering doing so should be sure to consult with an attorney before moving forward.

Powley & Gibson hosts event on medical device patenting and marketing

By Fritz Klantschi
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On November 14, 2018 Powley & Gibson, P.C. in partnership with Surgical Design Professionals (“SDP,” http://surgicaldesignprofessionals.com), hosted a group of physicians at Powley & Gibson’s offices at 304 Hudson Street, Suite 305, New York, NY for an evening discussion on the design, manufacture, patenting and marketing of surgical devices. Powley & Gibson is a full service IP law firm with extensive experience in all facets of establishing, maintaining and protecting comprehensive patent portfolios. Surgical Design Professionals guides the invention process for medical professionals, from concept to product, all while allowing the inventor to retain control and ownership of their invention. SDP has assembled a carefully vetted design and production team that includes medical professionals, as well as engineering, design and prototyping services. Together with the intellectual property expertise of the attorneys at Powley & Gibson, SDP aims to facilitate the invention process for medical professionals.

Dr. Kenneth McCulloch from SDP and Robert Powley introduced their respective companies to the attendees and provided an overview of the process by which ideas related to medical instruments can be turned into patented products. The introduction was followed by a robust question and answer session wherein the doctors in attendance spoke about their potential ideas for medical instruments that would improve surgical outcomes and minimize complications and SDP and Powley & Gibson advising how to bring such ideas to fruition by creation of a protectable, patentable design.

Supreme Court to Address Effect of Bankruptcy on Trademark Licenses

By David A. Jones
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The Supreme Court recently agreed to hear a case that bears monitoring, particularly if licensing the trademarks of another brand owner is a significant aspect of your business. The case is Mission Product Holdings, Inc. v. Tempnology, LLC, and the primary issue to be decided is whether or not a brand owner that files for bankruptcy can revoke the rights of its licensee to use a trademark.

By taking this case on, the Supreme Court is expected to settle a split amongst the circuit courts in how they interpret a certain provision of the Bankruptcy Code that permits a debtor to decline to perform future obligations under a contract if the cost of performance outweighs the benefit. A revision was made to this section of the bankruptcy laws in the mid-1980s specifically permitting a licensee to keep its rights to “intellectual property” in the event a debtor/licensor elected to reject a license agreement.  However, the Bankruptcy code does not specifically name trademarks within the statutory definition of “intellectual property,” although other types of intellectual property, such as patents and copyrights, are included.

As a result, circuit courts have been left to their own devices to determine what the absence of trademarks from the definition of “intellectual property” means, and whether a trademark licensee’s rights are protected or not. On one side are circuits such as the Seventh Circuit, which ruled that the rejection of a trademark license did not strip the licensee of its rights to use the mark.  In a 2012 ruling (Sunbeam Products, Inc. v. Chicago Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)), the Seventh Circuit Court ruled that rejection was merely a breach of the rejected contract, and that in cases of breach of contract, the “other party’s rights remain in place.” That is, the licensee could continue to use the bankrupt party’s trademarks.  Conversely, in the Mission Products case, the First Circuit took the opposite approach, holding that when Tempnology rejected its contract with Mission Products, Mission Products lost all rights granted to it under the agreement that were not expressly protected under the Bankruptcy code – which included trademark rights.

This is clearly an important question, and on the circuit split highlights a potential concern that licensees may lose the right to use the licensor’s trademarks when the licensor is in bankruptcy. Depending upon how the Supreme Court rules, it may continue to be a possibility that a company that contracts to use someone else’s trademarks could have the rug pulled from beneath them if that company files for bankruptcy.

Does “I agree” really mean “I agree”?

Considerations for user consent to website terms and conditions

By Patrick Monahan
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Companies designing or redesigning their websites may face uncertainty about the manner in which their terms & conditions should be presented to be considered enforceable in the event a user violates them. A recent decision in the United States District Court for the Eastern District of New York, applying a recently-established test for enforceability, may prove instructive in this regard.

 

In Adwar Casting Co., Ltd. v. Star Gems Inc. et al, 2018 WL 5084826 (E.D.N.Y. October 18, 2018), Civil Action No. 2:17-cv-06278-DRH-SIL, the Plaintiff (“Adwar”) accused Defendant Star Gems Inc. and its CEO Anish Desai (collectively, “Defendants”) of infringing Adwar’s copyrighted jewelry designs, images of which were posted to Adwar’s website. Defendants moved to dismiss the complaint, claiming the Court lacked personal jurisdiction over Defendants. One of the issues the court considered in deciding the motion was whether Defendants had consented to jurisdiction in New York federal court by acceptance of the terms and conditions on Adwar’s website, which were accessible using links located at the bottom of each page, purported to confer “exclusive jurisdiction of federal and/or state court located in New York to enforce this Agreement or for any other purpose in connection with this website.” Adwar at *6.

The Court reviewed the categories of electronic adhesion contracts examined by the courts and the four-part enforceability test detailed in a prior decision in the same district, Berkson v. Gogo LLC, 97 F.Supp.3d 359 (E.D.N.Y. 2015).

Types of Electronic Adhesion Contracts

  • 1. Browsewrap

Browsewrap refers to situations in which the website contains a notice that the user agrees to the site’s terms and conditions just by using the site, without any affirmative consent. Berkson at 395. These types of agreements are typically only enforced against “knowledgeable accessors”, such as corporations, and not against individuals. Id. at 396.

  • 2. Clickwrap

Clickwrap agreements “require a user to affirmatively click a box on the website acknowledging awareness of and agreement to the terms of service before he or she is allowed to proceed with further utilization of the website.” Berkson at 397 (internal citations omitted). Clickwrap agreements have generally been found enforceable when challenged. Id.

  • 3. Scrollwrap

Scrollwrap agreements are similar to clickwrap agreements in that they require the user to affirmatively acknowledge and agree to the terms and conditions of the site before permitting further use, but they go further in that they require the user to physically scroll through those terms and conditions before they are permitted to click the button or checkbox indicating agreement. Berkson at 398-99. These agreements have also traditionally been enforced.

  • 4. Sign-in Wrap

Sign-in wrap agreements notify the user of a site of the existence and applicability of that site’s terms of use as they proceed through the site’s sign-in or login process. Berkson at 399. These agreements have typically been enforced when a court determines the user had sufficient notice and access to the terms of use. Id. at 401-02.

Enforceability of Electronic Adhesion Contracts

If your company is considering how users should be required to accept your terms and conditions, the following questions should be considered:

    • – Aside from clicking the equivalent of sign-in (e.g., log-in, buy-now, purchase, etc.), will the user be aware that she was binding herself to more than an offer of services or goods in exchange for money?
    • – Does the design and content of the website, including the homepage, make the “terms of use” (i.e., the contract details) readily and obviously available to the user?
    • – Are important details of the contract obscured or minimized by the process of agreement required for a consumer to purchase or subscribe to a service or product? Or are they highlighted or otherwise featured, such as by boldface type?
    • – Do you clearly draw the consumer’s attention to material terms that would alter what a reasonable consumer would normally understand to be her rights in an online transaction? These rights may vary from state to state, but might include the rights to (a) not have a payment source charged without notice (i.e., automatic payment renewal); (b) bring a civil consumer protection action; and (c) participate in a class or collective action.

Berkson at 402.

In the Adwar case, the court determined that Adwar’s terms and conditions, accessible only if one clicked the links located at the bottom of each page, were browsewrap, because they did not require any act of affirmative assent from site visitors. In light of this classification, the Court further determined that because the user’s attention was not drawn to the jurisdiction consent provision, either by a font change, or a mechanism such as “***”, it could not be enforced against the Defendants. Adwar at *6.

This decision highlights the importance of giving the user sufficient notice of the terms, particularly terms that may affect their rights, such as consent to jurisdiction. When designing a website, service providers should consider including some form of affirmative assent, whether clickwrap, scrollwrap or sign-in wrap. The provider should also keep records of the user’s agreement if possible. Providers should also consider bolding or highlighting key provisions of their sites’ terms of use, including clauses relating to: mandatory arbitration; class actions; damages; and jurisdiction.

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