Posts in Recent Developments

Recent Federal Circuit Decision Applies Alice Test to Invalidate Patent

By Fritz Klantschi
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On November 13 the Federal Circuit Court of Appeals affirmed the district court’s ruling (Gaelco S.A. v. Arachnid 360, LLC, 293 F.Supp.3d 783 (N.D. Ill. 2017) (“Gaelco”)) that patent claims directed to a system and method for remotely refereeing dart games were invalid under the U.S. Supreme Court’s Alice test. The independent claims of U.S. Patent No. 7,361,083 (the “083 patent”) were directed to a remote monitoring or refereeing method for one or more dart machines where at least one refereeing center receives multimedia captured from the dart machines for evaluating whether a player complies with the rule of play and transmitting the results.  That is, the claims were directed to collecting information, analyzing the information and displaying the results.

The Alice test is a two-step process for determining whether claims recite patent-eligible subject matter, and is based upon a 2014 Supreme Court decision that had a dramatic effect on the validity of so-called software patents and business-method patents.  Hundreds of patents have been invalidated under Section 101 of the Patent Act.  The first step requires the court to determine whether the claims at issue are directed to a patent-ineligible concept. Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 at 2355, 189 L.Ed.2d 296 (2014).  “[C]ourts ‘compare claims at issue to those claims already found to be directed to an abstract idea in previous cases.’” Gaelco at *789 (citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016)). The District Court found that the ’083 patent claims (directed to collecting information, analyzing the information and displaying the results) to be abstract-idea processes under the first step of the Alice test. Gaelco at *790.

The second step of the Alice test requires the court to “examine the elements of the claim to determine whether it contains an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application.” Alice, 134 S.Ct. at 2357.  The District Court found that the ‘083 patent’s claims recited conventional uses of conventional technology (the Internet, cameras, dart machines and a display) and thus do not rise to an inventive concept. Gaelco at *794.  Further the steps of the ‘083 patent claims are recited in an ordinary order which similarly does not rise to an inventive concept. Id. at *795.  Still further, claiming improved speed or efficiency inherent with applying the abstract idea on a computer is not sufficient to provide an inventive concept. Id. at *796.  The District Court found that “the asserted claims do not contain an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application under § 101.” Id.

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.

TTAB Decision Offers Guidance on Trademark Consent Agreements

By Jason H. Kasner

A recent precedential decision of the Trademark Trial and Appeal Board (“TTAB”) sheds some light on how the TTAB evaluates consent agreements between parties with potentially conflicting trademarks. In the case In re American Cruise Lines, Inc., the TTAB held that the mark AMERICAN CONSTELLATION for cruise ship services was not likely to be confused with the prior registered mark CONSTELLATION for the same services. In Re Am. Cruise Lines, Inc., 128 U.S.P.Q.2d 1157 (T.T.A.B. Oct. 3, 2018).

What are consent agreements?

The U.S. Patent and Trademark Office’s Trademark Manual of Examining Procedure (“TMEP”) defines a consent agreement as “an agreement between parties in which one party (e.g., a prior registrant) consents to the registration of a mark by the other party (e.g., an applicant for registration of the same mark or a similar mark), or in which each party consents to the registration of an identical or similar mark by the other party.” TMEP §1207.01(d)(viii). These agreements are often presented as evidence in favor of registration of the junior user’s mark following a USPTO refusal to register based on a likelihood of confusion with the senior user’s registered mark. Consent agreements typically include provisions such as limitations on the goods and services to be offered under the respective marks, requirements for presenting the marks (i.e., in a particular font/style and/or with a design element), and the measures the parties will take to avoid confusion in the marketplace. The evidentiary weight and probative value of consent agreements are generally determined on a case-by-case basis, with some limited guidance offered in the TMEP. Id.

The TTAB decision: Do consent agreements need to include provisions for avoiding confusion?

The TTAB considered various consent agreements entered into between the applicant and the owner of the cited CONSTELLATION trademark registration. The USPTO Examining Attorney who had reviewed and rejected the application argued that the consent agreements were not probative on the question of likelihood of confusion since they contained no provision that the parties make efforts to prevent confusion or to cooperate and take steps to avoid any confusion that may arise in the future. The TTAB disagreed, holding that such provisions are not required.

Provisions of this nature are typically seen in trademark consent agreements, but this precedential decision clarified the TTAB’s position that while these provisions may render the agreement more probative in a likelihood of confusion analysis, they are not mandatory.

Consent agreements are a common tool for owners of potentially-conflicting trademarks to allow them to co-exist without causing confusion to consumers and obtain important protections of trademark registration. If your company’s trademark registration has been refused on the basis of a prior registration, we can assist with overcoming the refusal, which can include filing an appropriate consent agreement.

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