The Federal Circuit is not off to an auspicious start in 2019 in terms of its opinions and decisions in patent cases.  Of the 20 patent decisions issued thus far, only 4 (20%) are precedential.  The majority (65%) are actually no-opinion judgments known as R.36 judgments with three more (15%) short non-precedential decisions added to the mix. Hopefully this trend will not continue.

For the whole of 2018, the stats are approximately as follows:

• 30% Precedential Opinions
• 30% Non-Precedential Opinions
• 40% R.36 Judgments without Any Opinion

In re Guild Mortgage Company (Fed. Cir. 2019)

Guild Mortgage’s above-pictured mark was refused registration was refused based upon a Trademark Trial & Appeal Board (TTAB) conclusion of a likelihood of confusion with the registered mark “GUILD INVESTMENT MANAGEMENT.”

On appeal, the Federal Circuit has vacated that decision — holding that the TTAB “failed to consider relevant argument and evidence directed to DuPont factor 8.”

Under Lanham Act § 2(d), the USPTO refuses to register marks that are likely to cause confusion or mistake based upon a resemblance to a prior used or registered mark.

No trademark … shall be refused registration on the principal register on account of its nature unless it—(d) Consists of or comprises a mark which so resembles a mark registered in the [USPTO], or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive.

15 U.S.C. § 1052(d). The Federal Circuit’s predecessor court – the CCPA – set out a series of factors in a case captioned In re E.I. DuPont DeNemours & Co., 476 F.2d 1357 (C.C.P.A. 1973) (defining the DuPont Factors).

Those factors are:

(1) The similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation and commercial impression.

(2) The similarity or dissimilarity and nature of the goods or services as described in an application or registration or in connection with which a prior mark is in use.

(3) The similarity or dissimilarity of established, likely-to-continue trade channels.

(4) The conditions under which and buyers to whom sales are made, i.e. “impulse” vs. careful, sophisticated purchasing.

(5) The fame of the prior mark (sales, advertising, length of use).

(6) The number and nature of similar marks in use on similar goods.

(7) The nature and extent of any actual confusion.

(8) The length of time during and conditions under which there has been concurrent use without evidence of actual confusion.

(9) The variety of goods on which a mark is or is not used (house mark, “family” mark, product mark).

(10) The market interface between applicant and the owner of a prior mark . . . .

(11) The extent to which applicant has a right to exclude others from use of its mark on its goods.

(12) The extent of potential confusion, i.e., whether de minimis or substantial.

(13) Any other established fact probative of the effect of use.

Stone Lion Capital Partners, LP v. Lion Capital LLP, 746
F.3d 1317, 1321 (Fed. Cir. 2014).

In this case – the particular factor being debated is Number 8 – longstanding “concurrent use without evidence of actual confusion.” Here, Guild Mortgage and Guild Investment have been using their marks concurrently in Southern California for more than 40 years without any evidence of confusion.  Guild Mortgage presented testimony from its CEO to the following :

Guild [Mortgage] has never received any communication from Guild Investment Management, Inc., or from any third party contending that Guild’s use of its mark has infringed upon Guild Investment Management Inc’s mark, or has caused confusion with regard to any other business which uses or incorporates the word “Guild” in its mark, in any way. Guild has no knowledge of ever receiving any inquiries from consumers regarding investment management services of any kind. Guild has never received any communication from consumers or any third party inquiring as to whether Guild was in any way affiliated with Guild Investment Management, Inc.

However, in its consideration of the DuPont factors, the TTAB did not address Factor 8 or the 40-year concurrent use. “The Board’s opinion does not mention factor 8, let alone address Guild’s argument and evidence directed to that factor. The Board erred in failing to consider Guild’s arguments and evidence.”

One factor here is whether the uncorroborated statement from Guild Mortgage’s CEO should be given any weight. Here, the Federal Circuit held that it should be given weight.

In this case, although Guild did not submit declarations from the owner of the registered mark or other parties testifying as to the absence of actual confusion, Guild nonetheless presented evidence of concurrent use of the two marks for a particularly long period of time—over 40 years—in which the two businesses operated in the same geographic market—southern California—without any evidence of actual confusion.

On remand, the TTAB will add-in its analysis of the 8th factor and then see whether its likelihood-of-confusion analysis sticks.

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Similar issue in my hometown of Pittsburg Kansas with 70+ years of next-door competition between Chicken Annie’s and Chicken Mary’s. Fried Chicken War.

by Dennis Crouch

WesternGeco LLC, v.  ION Geophysical Corp. (Supreme Court 2019) [Petition]

In 2018, WesternGeco seemingly won its international-patent-damages case against ION — with the court agreeing that lost-profit damages are available even for extra-territorial sales.  After winning its $100 million trial against ION, WesternGeco sued another competitor, Petroleum Geo-Services (PGS), for infringement.  PGS then challenged the asserted patents in an Inter Partes Review (IPR) proceeding that resulted in all of the claims being cancelled as obvious or anticipated.

35 U.S.C. §315(b) bars the Patent Office Director from instituting an IPR proceeding on a petition “filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  By the end of its infringement trial, ION was time-barred — however, PTO still allowed ION to join PGS’s case once instituted – but gave it “spectator status.” Still, ION (but not PGS) defended the Board’s decision on appeal.

The Federal Circuit affirmed the Board decision, finding that unpatentability findings supported by substantial evidence, and that the Section 315(b) time-bar didn’t apply since ION did not have any direct or indirect control PGS’s IPR filings and PGS had a separate legitimate reason to file the IPR other than protecting ION.

WesternGeco presented evidence that the two companies worked together to launch the infringing product, and that their agreement included an indemnity agreement — with ION making a “product assurance pledge” for products delivered by PGS.  The Federal Circuit, however, disregarded the evidence as insufficient to create the specific privity needed to trigger the Section 315(b) time-bar.

Now, WesternGeco is back before the Supreme Court asking for review on the real-party-in-interest question. Here is how WesternGeco frames the question:

ION worked closely for years with another company, PGS, as its “launch partner,” to develop a product found to willfully infringe WesternGeco’s patents. ION and PGS shared an indemnity relationship, with ION making a “product assurance pledge” regarding the accused product and the asserted patents. After ION lost at trial and was concededly time barred from pursuing IPRs, PGS filed petitions (which ION later joined), resulting in the invalidation of many of WesternGeco’s patents. The Patent Office not only denied WesternGeco discovery into details of the PGS-ION relationship, it prohibited WesternGeco from even filing a motion for such discovery because WesternGeco did not already have evidence that ION “controlled” these IPRs. The Federal Circuit applied a “control” test in affirming.

The questions presented are:

1. Whether the court of appeals and agency erred by holding that “real party in interest, or privy of the petitioner” refers only to others who “control” the petitioner’s litigation before the agency.

2. Whether the Patent Office. may deny discovery—or even leave to file a discovery motion—designed to meaningfully test whether that statutory prohibition applies, and then invalidate a patent.

I see this as a good case for the Supreme Court to take and hear – especially since the court is already familiar with the patents and parties in question.  I find it interesting how the Federal Circuit identified the indemnification provision as “fairly standard” and not specific enough to trigger the real-party-in-interest or privity clauses of 315(b).

One issue of importance in this area is the implied Warranty Against Infringement found in Article 2 of the Uniform Commercial Code.

Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

UCC 2-312(3).  Although the UCC does not apply to WesternGeco’s case, it likely applies in many others as a potential way to show sufficient privity to trigger the time-bar against against a supplier.

by Dennis Crouch

Absent a more creative solution, the current Federal Government shutdown will continue until a new appropriations law is passed by Congress and signed by the President (or veto-overridden).  The Patent Office (USPTO) is caught-up in this, but in a little bit of a quirky way.

The USPTO is a fee funded agency.  Generally, patent applicants pay the USPTO, and the USPTO uses that money to pay the examiners.  However, Congress has not provided USPTO with authority to simply spend whatever it collects. Rather Congress declares annual appropriation amounts that may be spent – if collected.  If the USPTO brings-in more funds than appropriated then it can put those funds in a “Patent and Trademark Fee Reserve Fund” held by the US Treasury.

And, under the Patent Act, the USPTO can only spend funds that have been appropriated to the Agency.  As a consequence, the USPTO cannot spend new-money coming in the door and it cannot spend money in the aforementioned Reserve Fund (that is empty anyway).

So, how is the USPTO Operating:  The USPTO has continued to operate for the past 25 days without much of any slowdown — paying its employees and contractors. Over the past several years, the PTO has begun placing some amount of appropriated spending into an “Operating Reserve” — treating the money as spent for the purposes of appropriations, even though it hasn’t really been spent.  The Administration has determined that it is proper to save that money on an annual basis and to spend the money now on operations despite the lack of an appropriations bill.  This same approach has been used in the recent prior shutdowns as well and is a primary justification for the fund in the first-place.

Although the Agency’s goal is to have three-months operating reserve, it only had about five-weeks set aside (~$320 million) at the start of the shutdown.  Funds have not yet run-out, but they are now dwindling.

The chart below comes from the 2018 PPAC Annual Report. In that report, the PPAC suggested that the optimal balance be boosted to $700 million+. Once the reserve reaches that amount, the PPAC would then consider suggesting reduction in fees.

When the Funds Run Out: The USPTO has indicated that once those funds are too-low, the PTO will shut down examination activity.  However, the Agency will keep a small-staff working (perhaps unpaid) “to receive new applications and any other examination, post-examination, post-issuance, and PTAB or TTAB filings; receive payments related to such filings; and maintain IT infrastructure, among other functions.”

Congratulations to the PPAC members, PTO Directors, and especially Tony Scardino (PTO Chief Financial Officer since 2010) for their forethought and dedication to this important issue that is now serving the patent community.

by Dennis Crouch

Realtime Data, LLC v. Iancu (Fed. Cir. 2019)

Interesting obviousness case here regarding motivation-to-combine.

The PTAB’s obviousness finding is based upon two prior art references. However, the references are not being combined so-to-speak. Rather, the Board found that the first reference (O’Brien) teaches all limitations of the lossless encoding scheme in Realtime’s claim 1.  The second reference (Nelson) was used essentially to show that the “string encoding” described in O’Brien was the same as the “dictionary-based encoding” in Realtime’s claims.

On appeal, Realtime argued a lack of “motivation to combine” the references — based upon longstanding precedent that a “factfinder must further consider the factual questions of whether a person of ordinary skill in the art would be motivated to combine those references.” Dome Patent L.P. v. Lee, 799 F.3d 1372 (Fed. Cir. 2015).

Here, however, the Federal Circuit ruled that motivation-to-combine was not necessary since the obviousness finding did not combine two different disclosures. Rather, the Board used the second reference to help explain the first reference.

We conclude that, in this case, the Board was not required to make any finding regarding a motivation to combine given its reliance on O’Brien alone. . . . HP relied on Nelson merely to explain that O’Brien’s encoder is a type of dictionary encoder. . . . Under these circumstances, the Board was free to come to the very conclusion it reached: that O’Brien alone disclosed every element of claims 1–4, 8, and 28. And because the Board did not rely on Nelson for the disclosure of a particular element or teaching, the Board had no obligation to find a motivation to combine O’Brien and Nelson.

The CAFC noted that an anticipation determination rather than obviousness may have been more appropriate since O’Brien taught all of the elements of Realtime’s claim.  However, the court concluded that obviousness still worked — since  “a disclosure that anticipates under § 102 also renders the claim invalid under § 103, for ‘anticipation is the epitome of obviousness.’” Connell v. Sears, Roebuck & Co., 722 F.2d 1542 (Fed. Cir. 1983) (quoting In re Fracalossi, 681 F.2d 792, (CCPA 1982)).

= = = = =

Patent at issue: U.S. Patent No. 6,597,812, covering lossless data compression and decompression. Realtime sued HP and others back in 2015 and that led to the responsive IPR filing that is the subject of this appeal.

by Dennis Crouch

Erik Brunetti’s “FUCT” line of apparel doesn’t have much appeal to my sense of style, but the clothing certainly seem to make a statement.  The USPTO refused to grant Brunetti’s application to register the mark — finding that the mark “comprises immoral * * * or scandalous matter” and thus cannot be registered under Section 2(a) of the Lanham Act.

On appeal, the Federal Circuit sided with Brunetti — holding the statute unconstitutional as contrary to the Free Speech provision of the First Amendment.  In its decision, the court followed the Supreme Court’s lead in Matal v. Tam, 137 S. Ct. 1744 (2017). In Tam, the Supreme Court addressed disparaging marks — also prohibited under Section 2(a) — finding that the prohibition on registration to be contrary to free speech rights.  The Government then petitioned the Supreme Court to review the case, and the court has now granted certiorari with the direct question:

Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is facially invalid under the Free Speech Clause of the First Amendment.

In an unusual turn of events, Brunetti did not oppose the petition, but instead agreed that the Supreme Court should weigh-in — and additionally address the following additional question:

Whether Section 1052(a)’s prohibition on the federal registration of “immoral” or “scandalous” marks is unconstitutionally vague under the First and Fifth Amendments.

In granting certiorari, the Supreme Court did not indicate whether the court is addressing both questions, or only the one proposed by the the Government.  Since Tam, the Supreme Court has changes somewhat — Justice Kennedy is gone and Justices Gorsuch and Kavanaugh are now on the court.

by Dennis Crouch

ZUP, LLC, Petitioner v.  Nash Manufacturing, Inc. is a nice teaching case because the invention is so simple.  Zup’s patent covers a wake-board with a particular handle configuration and a method of riding the board — using the handles to change positions. U.S. Patent No. 8,292,681.

In its decision, the Federal Circuit sided with the accused infringer Nash — affirming that the asserted claims are invalid as obvious.  In particular, the Federal Circuit agreed with the lower court ruling that Zup had simply combined well-known elements (handles & foot bindings, e.g.) to solve a longstanding watersport goal.  Zup presented evidence of secondary considerations of both long-felt but unresolved need and copying.  Zup explains its position:

Here, the defendant Nash had been in the field for over 50 years, obtaining numerous patents on water recreation devices similar to the ZUP Board. Nash had tried, but failed, to create a device that would allow broader participation in watersports like waterskiing. Nash praised the ZUP Board. Nash attempted to do business with ZUP, obtaining a ZUP Board from ZUP to analyze. Instead of partnering with ZUP, however, Nash decided to copy ZUP. The ZUP Board is nonobvious if Nash tried and failed to invent it for over 50 years and then copied it
after failing to partner with ZUP.

The appellate majority rejected Zup’s arguments and instead ruled that “The weak evidence of secondary considerations presented here simply cannot overcome the strong showing of obviousness.”  The majority was penned by Chief Judge Prost and joined by Judge Lourie.  Writing in Dissent, Judge Newman argued that the majority improperly treated secondary considerations as a rebuttal factor rather than an integral aspect of the obviousness analysis.

Now, Zup has petitioned the Supreme Court for writ of certiorari — asking whether secondary considerations are properly relegated to rebuttal evidence.

Read the new petition here. SCOTUS.

The Role of Objective Indicia in Non-Obviousness Doctrine

by Dennis Crouch

In re Marco Guldenaar Holdings B.V. (Fed. Cir. 2018)

Guldenaar is is seeking to patent his method of playing a dice game using specially marked dice.  U.S. App. No.  13/078,196.  The PTAB denied his patent on eligibility grounds and the Federal Circuit has now affirmed — holding that the method of game play is an abstract idea and the special markings on the dice represent unpatentable printed matter.  The decision here falls in line with In re Smith, 815 F.3d 816 (Fed. Cir. 2016) where the court held that the claimed method of playing and wagering-on a card game was an abstract idea. The patented method in Smith used a standard deck of cards, and the Federal Circuit noted that “shuffling and dealing a standard deck of cards are “purely conventional” activities. Citing Alice.

Guldenaar’s claim 1 is directed to a “method of playing a dice game” that begins with the provision of a set of three dice — each die having either one, two, or three identical marks. (See the figures above).  Someone then bets on whether or not the marks will appear face-up on the next role, and, after the roll, the bet is settled.  Pretty simple game. (Claim text below).

In applying Alice Step 1, the court found that the claims here are directed to the “rules for playing a dice game,” which is an abstract idea.  In the process, the court warned the PTO that its generalized approach to labeling “methods of organizing human activities” as abstract ideas, but found that this particular method fit the bill.

Under Alice Step 2, claims directed to an abstract idea can be patentable if the claims also include an “inventive concept” sufficient to transform the claimed abstract idea into a patent-eligible application.”  Here, one particular inventive concept appears to be the claimed set of dice that is arguably inventive, and at least not purely conventional.  On appeal, however, the Federal Circuit ruled that the die markings “constitute printed matter [that] fall outside the scope of § 101.”

In Smith, the claims were directed to a standard deck of cards and the court indicated that claims using an original deck of cards could survive Alice. “We could envisage, for example, claims directed to conducting a game using a new or original deck of cards potentially surviving step two of Alice.”   The panel here appears to reject that notion — holding instead that the the original set of dice cannot be seen as transformative since the original aspects

Judge Chen authored the majority opinion that was joined by Judge Bryson.  Judge Mayer filed a concurring opinion channeling Justice Stevens concurring opinion in Bilski.  In Bilski, Justice Stevens (joined by Justices Ginsburg, Breyer, and Sotomayor) argued for a categorical exclusion of business method patents. Here, Judge Mayer argues for a categorical exclusion to the patenting of games — “claims directed to dice, card, and board games can never meet the section 101 threshold because they endeavor to influence human behavior rather than effect technological change.”

= = = =

Claim 1:

1. A method of playing a dice game comprising:

placing at least one wager on at least one of the following: that the first die marking on the first die will appear face up, that the second die marking on the second die will appear face up, that the third die marking on the third die will appear face up, or any combination thereof;

rolling the set of dice; and

paying a payout amount if the at least one wager occurs.

The also PTO continues to save the world from claims to pure information by asking applicants to limit information storage to non-transitory storage mechanisms.

The USPTO has indicated that it “remains in normal operating status” despite the Federal Government funding crisis.

The USPTO remains open for business as normal. This is possible because the agency has access to prior-year fee collections, which enables the USPTO to continue normal operations for a few weeks. Should the USPTO exhaust these funds before a partial government shutdown comes to an end, the agency would have to shut down at that time, although a small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions.

The patent system may be helping with the Border Wall. Consider the following:

• U.S. Pub. No. 20180273288 — directed toward border wall or fence is constructed from a plurality of existing ISO steel shipping containers which are connected together both horizontally and vertically at their corners using conventional corner locks so as to present a continuous physical barrier of any selected length. (Note the 4th floor golf cart).
• U.S. Pub. No. 20180313200 — directed toward an underground wall that also detects “enemy” tunnels.