Monday, November 12, 2018

Ninth Circuit Holds Laches Defense Applies to Trademark Cancellation Actions


Pinkette Clothing v. Cosmetic Warriors

                In Pinkette Clothing, Inc. v. Cosmetic Warriors Limited, dba Lush Handmade Cosmetics (“CWL”), CWL filed a trademark infringement suit against Pinkette, seeking cancellation of its trademark registration because of the likelihood of confusion as to the use of the label “LUSH” on clothing.  The U.S. Ninth Circuit Court of Appeal affirmed the district court’s judgment in favor of Pinkette, and found that CWL waited too long to bring its case and that the unreasonable delay prejudiced its opponent.

                To understand the court’s holding, a brief procedural summary is essential.  Pinkette filed a trademark registration for the use of the “LUSH” mark on clothing (sold in major department stores and smaller fashion boutiques) in 2009.  CWL, who operates over 900 “LUSH Fresh Handmade Cosmetics” retail stores throughout the world, asserted that Pinkette’s use of “LUSH” was confusingly similar to that of CWL’s use of the “LUSH” mark (which has been used since 1995).  CWL claimed it was not aware of Pinkette’s LUSH mark until years after Pinkette’s mark was registered (while it did not oppose Pinkette’s registration of the LUSH mark in 2010, because Pinkette’s LUSH mark was registered, CWL was on constructive notice of Pinkette’s claim to ownership).  CWL claims to have no actual knowledge of Pinkette’s use of the LUSH mark until late 2014 and, shortly thereafter, it filed a petition to cancel Pinkette’s registration with the Trademark Trial and Appeal Board.  Pinkette also filed an action in federal court seeking declaratory judgment (regarding not infringing on CWL’s trademark rights or, alternatively, that laches bars CWL from asserting rights against Pinkette). 

                In affirming the district court’s ruling, the Ninth Circuit Court of Appeal found that the district court did not abuse its discretion in applying laches to bar CWL cancellation and infringement claims against Pinkette because CWL waited too long to bring its case after it “should have known about its claims.”  The Lanham Act contains no statute of limitations, and thus, courts apply a presumption in favor of the defense of laches if the plaintiff’s delay is longer than the most analogous state statute of limitations.   In trademark cases, even if the defense is asserted within the most analogous state limitations period, the laches defense may still apply - this is unlike with patents and copyrights which have a federal statute of limitations.  In this case, California’s analogous four-year statute of limitations for trademark infringement was the most analogous statute of limitations, and the court found that because the delay was beyond four years, a “strong presumption in favor of laches” applied.  The court further concluded that due to the laches defense, CWL can neither enforce its trademark rights against Pinkette’s use of LUSH on clothing nor cancel Pinkette’s registration for use of the mark on clothing.

                 This case sheds light on the often forgotten equitable defense of laches and reminds all that it still applies in trademark cases even though the Supreme Court has eliminated it in the last few years in copyright and patent cases.

Authored by Jennifer T. Poochigian

Monday, October 8, 2018

IS A VALID COPYRIGHT REGISTRATION REQUIRED BEFORE AN INFRINGEMENT SUIT? SCOTUS WILL DECIDE THIS TERM

U.S. Courts of Appeal are split as to whether copyright registration occurs once the copyright holder delivers the required application, deposit and fee to the Copyright Office, or whether registration occurs after the Copyright Office acts on an application by either registering or denying a copyright. As such, the Supreme Court will consider this issue in its current term through Fourth Estate Public Benefit Corp. v. Wall-Street.com, an eleventh Circuit case decided in May, 2017.

In Fourth Estate, the Eleventh Circuit Court affirmed the district court’s ruling which dismissed the lawsuit on grounds that the Copyright Act requires the Register of Copyrights to actually register (or deny) the copyright claim before the infringement suit could proceed. This "registration approach," which is also adopted by the Tenth Circuit, follows the plain language reading of the Copyright Act, which requires a valid copyright registration to be issued before the filing of an infringement suit. On the other hand, the Fifth and Ninth Circuit Courts have adopted the "application approach," which allows for an infringement suit to be maintained after an application is completed and filed. These courts reason that the application process is a mere formality, since every application results in a registration or rejection, and either will allow a plaintiff to proceed with an infringement action. Obtaining a copyright registration can take months unless the applicant pays a nonrefundable $800 fee for expedited handling when there is compelling need, such as prospective litigation. Forgoing the extra fees will make infringement actions more economically feasible, particularly for smaller companies or individual owners.

Once this split is resolved, copyright owners will know what is required prior to bringing an infringement suit. The decision will also end forum shopping and provide clarity and consistency in copyright litigation moving forward.

This post will be updated when the Supreme Court renders its decision.


Wednesday, July 18, 2018

Making America's Patent System Great Again


The Restoring American Leadership in Innovation Act of 2018 was recently introduced by a bipartisan group of members of the House. 

The Act reverses a lot of the damage that has been done to the US patent system in recent years as a result of restrictions on the value, scope, and enforceability of patents put in place nearly simultaneously on a judicial, legislative, and executive level.

The Act would:

(1) Undo the Supreme Court's decision in Oil States, a case that determined that patents are not private property (despite literally centuries of jurisprudence treating them as private property and a statutory provision stating that "patents shall have the attributes of private property."). 

(2) Restore the United States patent system to a "First to Invent" system.  With passage of the America Invents Act, the United States changed its patent system from one where the first person to invent something got the patent to one where the first person to file for a patent got the patent, regardless of whether they were the first person to invent.  The Act would reverse this change.

(3) Restore a one year grace period that lets an inventor test and improve their invention in full public view for a year before the clock runs out on filing for a patent.  This grace period allows inventors to improve the invention through experience, to gauge whether a market exists for the invention, and to find investors.

(4) Abolishes the post-grant review ("PGR") and inter-parties review ("IPR") processes.  The IPR system has been called a patent death squad by the former chief judge of the Federal Circuit Court of Appeals, and it is very likely that this change alone restores predictability and fairness to the US Patent system, again rendering it the preeminent IP system in the world.

(5) Without the PGR and IPR workload, the need for a Patent Trial and Appeal Board ("PTAB") goes away, and the bill would replace the PTAB by restoring the Board of Patent Appeals and Interferences (this is really a technical fix).

(6) Critically, the bill would eliminate fee diversion.  This issue seems like a nerdy, "inside baseball" kind of issue, but is actually crucial.  Currently, the USPTO is self-funded.  That means that users are charged hefty fees for almost every interaction with the USPTO, and those fees are used to pay for the USPTO.  In theory, the USPTO sets fees in order to minimize the cost of protection invention while making sure that the office is funded in a way that allows for timely, complete, and accurate review of patent applications.  In reality, every year Congress takes the opportunity to raid the USPTO's coffers, diverting to other government departments the USPTO user fees intended to pay for additional patent examiners.  Ending fee diversion will dramatically improve patent quality and the speed of patent issuance (or rejection).

(7) Clarifies that when Congress said "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title," it actually meant it.  Supreme Court decisions in recent years have carved out so many judicial exceptions that even federal judges and the head of the patent office are no longer sure what is patentable.  The statute lays out patentability in a very clear way by replacing wandering, inconsistent jurisprudence with a simple statement that an invention is ineligible only if it exists in nature independently of and prior to any human activity, or exists solely in the human mind.  I have long taken the position as an inventor that a clear rule -- even a bad clear rule -- would substantially improve on the existing state of confusion.  By abrogating the various Supreme Court decisions that created a confusing maze of eligibility issues, inventors will finally know whether to keep something a trade secret (because it isn't patentable) or to file for a patent.

(8) The standards for a patent rejection on the grounds that the invention isn't novel are clarified.

(9) Clarifies that patents may only be invalidated by a judicial proceeding unless the patent owner consents to an administrative procedure.

(10) Reverses the rule that (absent an express request for non-publication) patent applications are automatically published 18 months after the priority date.  The concern here is apparently that (1) publication rules can prevent an inventor from filing for an improvement on their own invention that didn't issue as a patent because the prior invention was published before the improvements were filed for after the publication of the earlier patent application, and (2) Publication at 18 months and a delay in patent issuance that can last years after publication allow foreign competitors to steal inventions.

(11) Restores the rule that patents are presumed to be valid.

(12) Prevents infringers from effectively running out the patent term by filing multiple validity challenges that effectively prevent the patent from being enforced before it expires.  This is accomplished by "tolling", or pausing, the running of a patent term during the pendency of a validity challenge.

(13) Reverses the Supreme Court's holding that patent owners are almost never able to obtain an injunction against infringers.

(14) Restores the "Best Mode" requirement -- a requirement that an inventor discloses the best mode to implement an invention.  This avoids the shady practice of describing hundreds of ways to do a thing in order to keep competitors from figuring out the best way to do it (presumably after the patent term ends).

The bill would likely restore the status of the United States patent system as the envy of the world.  As of now, the United States patent system may well be the most confusing and expensive in the world.

Unfortunately, the infringer lobby is likely to derail or massively amend the bill. If the bill makes it into law largely unscathed, however, it will keep the Trump Administration's promise to Make America Great Again -- at least with regard to a patent system that has suffered mightily over the past decade.


Tuesday, July 17, 2018

Contingency Planning and Patents


It was 2006.  RIM/Blackberry just settled a patent infringement case for $612.5 million.  US patent law had been largely stable for decades. The Chinese government was not all in on IP. The US government ran the world's best patent system, and "Designed in California, Manufactured in China" was the tagline on almost every Apple device. The RIM settlement was the canary in the coal mine: Infringers did not like the idea of having to pay this kind of money just to use somebody else's innovations.  They piled money and support into Obama's campaign, and soon enough Google's head of patents was promoted to head the US Patent and Trademark Office (causation v. correlation -- your call). The Supreme Court got involved an bought into the "patents are broken" line that the infringer lobby pushed -- and in response severely limited patents and patent rights. Congress got involved and created a system of post-grant review that has been called a "patent death squad".

Fast forward to 2018.  The U.S. Patent System dropped to 12th place in the U.S. Chamber of Commerce's global IP index, ranking below the new patent rights champion, Singapore, as well as France, Germany, Ireland, Japan, the Netherlands, South Korea, Spain, Switzerland, the UK, and Italy -- marking quite a fall for the previously top-ranked patent system.  China is rapidly moving to reinvent its own patent system that improves on the Western patent systemThe European Patent Office appears likely to survive Brexit, but the same forces that brought Brexit to electoral success -- and the US Administration's hostility to international trade agreements -- raise questions about whether the Patent Cooperation Treaty remains stable (for now, it is) and whether the EPO will continue to function (for now, it will).

Finally, the IP markets have entirely seized up for small businesses and independent inventors.  While big companies continue to wage billion-dollar court battles and reach 10 figure settlements, the introduction of the post-grant review ("PGR") regime and the inter-parties review ("IPR") category of PGR have raised the cost of asserting a patent by hundreds of thousands of dollars for each IPR filed (and some patents have seen double-digit numbers of IPR filings). 

Because of the uncertainty about what the US Supreme Court will do next and whether there will be a legislative fix for what the US Supreme Court did with the Alice and related decisions about patent eligibility, potential patent buyers are faced with a situation analogous to ... well, there really isn't a solid analogy. One that gets close is an owner of a house trying to sell it. Playing the role of IPR in this analogy is a prohibition on fire insurance and legalization of arson.  Sure, you can buy the house, but if a big enough company decides it wants to destroy the house, it can.  At will.  It becomes an impossible task to sell a house -- or a patent -- under those circumstances.

As a lawyer and a named inventor on over 200 issued patents, I have had plenty of opportunities to analyze the patent marketplace and consider how an independent inventor or small business should respond to these changes.  Of course, the best strategy for me may not work for a particular invention or business, so you should seek legal advice tailored to your situation.

As a general case, my recommended filing strategy is as follows:

(1) File a provisional patent application in the United States.  This preserves the filing date but does not start the clock running on the 20 year patent term (which runs from the date the first non-provisional application is filed).
(2) Before expiration of the provisional, file a Patent Cooperation Treaty application.  This is a place-holder (just like a provisional) but it allows you to file years later in almost every country in the world.
(3) Hope that the US patent system stabilizes before it is time to file a national phase application in the United States.
(4) Before the expiration of the PCT deadlines, file national phase in:
  (a) Germany (the EU's biggest economy).
  (b) China (the government is strongly backing growth in their patent system and -- if trends continue unchanged -- may well have a stronger patent system than the United States within a decade.
  (c) USA (the world's biggest economy).
  (d) Review the technology at issue and determine which other countries are good candidates.
(5) With regard to the US filing, one strategy is to buy time for the US patent system to stabilize by filing an application that has claims that should be allowable and putting the patent application into the appeals process if it is denied.  This will buy half a decade or more, much of which is ultimately tacked onto the patent term in the form of a patent term adjustment.
(6) File for foreign patents via a non-US entity.  This is a weird one, but there is increasing pressure on Canada and certain other former US trade allies to respond to the Trump Administration's trade policies by expropriating patents owned by US entities.  By having a non-US entity own your foreign patents, you have a better chance of avoiding seeing your patents fall victim to a trade war.

While the US system was still the preeminent patent system in the world, and while China's IP policy was at best neglected, the strategy was much simpler:  File for a utility patent in the United States and perhaps file abroad if you can make the business case for it.  Now the strategy is complex, but with a simple organizing principle:  IP law is in flux, and filing strategy needs to preserve the maximum amount of flexibility to respond to changes.

One example of the flux we're waiting out?  The United States is about to find out whether a patent is void (as a result of the on-sale bar) if the inventor shows the patent to a third party under a non-disclosure agreement.  Last year's flux?  Determining whether extraterritorial sales of patented items exhaust US patent rights. Before that? The legality of the IPR system. Before that? Subject matter eligibility.  The United States has made changes to the patent system such that baseline, critical questions remain unanswered -- and the answers are coming out at a snail's pace.

Tuesday, June 5, 2018

Even the Federal Circuit Court of Appeals Judges, USPTO head Can't Figure Out Patent Eligibility Rules


President Trump's new head of the United States Patent and Trademark Office, Andrei Iancu, recently noted that uncertainty about what kinds of innovation are patent-eligible is weakening investment, growth, and jobs in high tech industries:
 I do worry that the current state of Section 101 in patentable subject matter weakens the robustness of our IP system in the affected areas.  And if industry cannot predict in a relatively reliable way whether their investments will be protected from an intellectual property point of view I think that will result in less investment, less growth, fewer jobs created in the affected industries.  So I do think it is critically important for our economy.  And again whatever industry we’re talking about and whatever industry we want to grow it’s critically important to have a strong reliable and predictable intellectual property system.
Yesterday, two well respected and long-serving judges on the Federal Circuit Court of Appeals (the court designated to handle all patent appeals), Judges Lourie and Newman (with 66 years of experience hearing patent appeals on the Federal Circuit between them), echoed Director Iancu's concerns.  In a concurring opinion, they wrote separately to say that Congress needs to clarify the kinds of inventions that are patentable:
I concur in the court’s declining to rehear this case en
banc. There is plausibility to the panel holding that there
are fact issues potentially involved in this case concerning
the abstract idea exception to patent eligibility. And the
panel, and the court, are bound to follow the script that
the Supreme Court has written for us in § 101 cases.
However, I believe the law needs clarification by
higher authority, perhaps by Congress, to work its way
out of what so many in the innovation field consider are
§ 101 problems. Individual cases, whether heard by this
court or the Supreme Court, are imperfect vehicles for
enunciating broad principles because they are limited to
the facts presented. Section 101 issues certainly require
attention beyond the power of this court.
Director Iancu further indicated that the Trump Administration is interested in strengthening the patent system:
Still, we are at an inflection point with respect to the patent system. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path. This administration has a mission to create sustained economic growth, and innovation and IP protection are key goals in support of that mission.
Well respected commentators have been even more explicit in laying the blame for the weakened United States patent system at the feet of the Supreme Court

As an inventor, I have frequently spoken on the subject of innovation.  One point I have repeatedly made is that it would be far better to have bad rules than to be unsure of what the rules are.  Given the current state of confusion about which inventions are patent-eligible, it would be hard for even the most dysfunctional Congress to worsen the situation. The alarming uncertainty in the U.S. patent system seems to finally be getting the attention it badly needs.

While we await Congressional action that may or may not come, it is all the more critical that inventors turn to experienced patent lawyers capable of laying out the pros, cons, and unknowns about inventions.

Wednesday, May 30, 2018

US Patent Number 10,000,000 is set to issue in June, 2018


Inventors keep filing for patents, despite a fairly hostile judicial atmosphere for patents (such as declaring patents are no longer private property, adding new limitations on where patentees can bring suit against infringers, weakening the standard for invalidating patents in administrative proceedings, and of course the various decisions adding restrictions to what is patentable, most recently a decision holding that the magnitude, level of inventiveness and importance of an invention are irrelevant to whether it is patentable).

I've commented before on the staggering rate of invention, and it comes as no surprise that since that article, I've personally been granted 53 patents, for a total of 203 issued US patents.  It does come as a bit of a surprise that my first issued patent was number 6,756,879 -- meaning that approximately one-third of all issued US patents issued in the 14 years between my first issued patent (6,756,879 issued June 29, 2004) and today.

There are some strong indications that this rate of innovation is slowing under the weight of legislative and judicial changes substantially weakening patent protection in the United States.  Fewer lawsuits are being filed claiming infringement (though the way to count litigation "campaigns" -- where a single patent is asserted against many defendants -- can be manipulated to make the numbers go up or down).  International patent filings are slowing (the United States is such a huge market that a weakening system in the United States may well change the economics of getting patent protection as compared to keeping things as a trade secret).  US patent filings are slowing significantly more than international filings (compare the previous link with page 12 of the USPTO's filing here).

Perhaps most salient is that the U.S. patent system fell to the 12th ranked system in the world this year.  The United States was ranked #1 every year until 2017 when it dropped to #10.  This year, it is behind Singapore, France, Germany, Ireland, Japan, the Netherlands, South Korea, Spain, Sweden, Switzerland, and the United Kingdom (and tied with Italy).  This raises serious questions about whether the United States will continue to be viewed as a viable place to file for patent protection.

I can speak to my own experience filing for patents.  With each new Supreme Court decision, and with each year passing without a change to the post-grant review procedures, I have filed fewer patent applications. The economics of them have simply become harder to justify. However, I have adopted a new procedure that does support continued filing, so I expect my filings to return to their previous levels.  The procedure is:

(1) File a provisional application in the United States Patent and Trademark Office.  This costs very little and gives me a year to develop the invention.
(2) Before the year expires, file a "Patent Cooperation Treaty" ("PCT") application.  Like a provisional, a PCT filing will never issue as an enforceable patent -- it just keeps the door open to filing internationally.
(3) At or near the deadline for entering the national phase of various countries, examine their patent system and determine the cost/benefit of filing in that country.  China's system has strengthened and is positioned to become a premier forum for IP protection in the 21st Century.  India is diligently working on their system. Germany, Canada, Australia, and the UK all represent large markets and have mature patent systems.  So even if US patent law is too unpredictable or hostile to a given invention, it may still be worth pursuing in nations that are more innovation-friendly.

Patent 10,000,000 is indeed something to celebrate.  It is a testament to the millions of inventors who have made the United States the world's foundry for good ideas. The future of the patent system in the United States is uncertain, but we should all take pride in the system, decisions, and innovations that brought us to where we are.

Wednesday, May 23, 2018

Central Valley Profiled as a Great Place for VCs to Invest


The Central Valley is not just the agricultural center of California (and the country), and a great place to live and raise a family.  It is starting to become a center for tech.  It was recently highlighted as a place for VCs to consider investing in “Why You Should Invest in Fresno and the Central Valley” in Venture Beat.  Check it out at https://venturebeat.com/2018/05/19/why-you-should-invest-in-fresno-and-the-central-valley/