by Dennis Crouch

US Inventor Inc. v. Hirshfeld, No. 21-40601 (5th Cir. 2021)

In February 2021, US Inventor and others collectively sued the USPTO asking the court to order the USPTO to issue rulemaking regarding discretionary considerations at the institution stage of AIA Trials.  That case is now on appeal.

Standards for Discretionary Dismissals: The statute particularly requires the PTO Director to issue regulations “setting forth the standards for the showing of sufficient grounds to institute a review [and] shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office.” 35 U.S.C. 316.  Although the USPTO has issued regulations about what counts as “sufficient grounds” to institute, the regulations do not consider discretionary denials, a potentially key aspect of the institution decision.  Of course, the importance of discretion depends upon how discretion is wielded.  The PTO has declared a “standard operating procedure,” and the plaintiff here argues that the SOPs were illegal rulemakings (“promulgated without lawful adherence to the strictures of the Administrative Procedure Act.”).

Abuse of Discretion: Courts and administrators are often given discretionary authority to make decisions.  But, discretion still requires that the decision-maker make a non-arbitrary decision that at least has a rational basis after considering both the law and the evidence at hand.  Arbitrary decisions represent an abuse of discretion and are regularly overturned on appeal.  AIA Trial Institution decisions are problematic to that general scheme because institution decisions are not appealable. Administrative Procedure Act (APA) to the rescue with 5 U.S.C. 706 authorizing actions to compel agency to stop any behavior that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

Hurdle of Concrete Harm: Although the APA permits an action to compel agency action, the statute typically requires that the plaintiff be “a person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action.” 5 U.S.C. 702.  In addition to this statutory injury requirement the Supreme Court has also interpreted Article III of the U.S. Constitution to require that the plaintiff identify some concrete harm caused by the defendant’s action (or inaction).  The case must be dismissed for lack of standing absent that concrete harm.

In this case, the PTO argued (1) that the statute does not require rules on that discretionary aspect of institution. And, (2) even if it was supposed to put the rules in place, the plaintiffs here have not suffered any concrete harm due to the lack of regulations.

Case Dismissed: Judge Gilstrap dismissed the case in July 2021 — agreeing with the USPTO that the plaintiffs lacked standing. The court’s opinion suggests that a patentee might never have standing for such a challenge:

For patentees, the notion of a concrete interest in discretionary denials of AIA petitions is particularly tenuous. Although the institution decision is a step on the road to invalidation, there is no dispute that discretionary denials under §§ 314(a) and 324(a) necessarily occur in situations where the PTAB has proper authority to institute. There is also no apparent dispute that the PTAB can exercise that discretion, at least on a panel-by-panel basis. As a result, the factors considered in the challenged PTAB decisions are neither dispositive nor exclusive. In the case of a discretionary denial, there is no harm to patentees because the proceeding ends and the patent rights are unaffected; the status quo is maintained.

District Court Dismissal Order. I struggle to understand the court’s logic associated with panel-to-panel variance. If that variance is due to different standards being applied then the situation seems to be begging for agency regulation.  Judge Gilstrap’s decision is now on appeal.

Where to Appeal?: One quirk of the appeal is that it is not entirely clear whether the case should go to the Fifth Circuit or the Federal Circuit.  US Inventor’s attorney Robert Greenspoon decided to play-it-safe to make sure he preserved his right to appeal by filing a notice of appeal in both courts.  Greenspoon asked the Federal Circuit to then pause the appeal deadlines until the Fifth Circuit determines whether jurisdiction is appropriate. And, the Federal Circuit has granted that motion.

In the Fifth Circuit, the USPTO filed a motion to dismiss the appeal–arguing that the case arose under the patent laws and therefore should go to the Federal Circuit.  Rather than deciding that issue directly, the Fifth Circuit has announced that it will carry that motion to the merits oral arguments and decided it all together.

Section 1295 provides statutory guidance as to when an appeal is directed to the Federal Circuit.

(a)The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction—(1) of an appeal from a final decision of a district court of the United States … in any civil action arising under, or … in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or plant variety protection.

28 U.S.C. 1295 (Jurisdiction of the United States Court of Appeals for the Federal Circuit).

Arising under the Patent Laws: A key underlying issue in the case is the extent that the patent laws require the USPTO to issue certain regulations.  In other words, the patent laws are integral to the lawsuit.  At the same time, the actual cause of action does not stem from the patent laws but rather from the Administrative Procedure Act (APA).  The Supreme Court has explained that the first go-to for arising under jurisdiction is the cause of action. Nonetheless, a case may still arise under the patent laws if “plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law.” Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988).

The Federal Circuit has repeatedly held that APA cases such as the one here do arise under the patent laws–meaning that any appeals should be heard by the Federal Circuit.  See, for example, Helfgott & Karas v. Dickinson, 209 F.3d 1328 (Fed. Cir. 2000) and Star Fruits S.N.C. v. United States, 393 F.3d 1277 (Fed. Cir. 2005) (Because APA claim “involves the Director’s duties ‘[i]n the course of examining or treating a matter . . . in a reexamination proceeding,’ it raises a substantial question under the patent laws” over which the Federal Circuit has exclusive jurisdiction).  However, those decisions were released prior to the Supreme Court’s most recent statement on the issue. Gunn v. Minton, 568 U.S. 251 (2013).

Gunn was an attorney negligence case brought under Texas state law, but the case was depend upon whether the attorney erred in his application of federal patent law. The Federal Circuit had previously found that this type of case raised substantial patent law questions and therefore should be heard in Federal Court with appeals going to the Federal Circuit. In Gunn, the Supreme Court disagreed with that approach and explained instead that state-law based attorney malpractice “will rarely, if ever, arise under federal patent law.”  Gunn paralleled its analysis to that of a the prior non-patent arising under case Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005) and concluded that the patent issues at stake in the malpractice case were not “substantial” in the context of the patent system as a whole. Although the patent issues in the malpractice case may have been important to the parties involved, nothing from that case was going to make any difference to the patent laws or federal patent litigation.

The USPTO does not cite or mention the Gunn decision in its motion in the 5th Circuit appeal in US Inventor.  One reason perhaps is that Gunn focuses on a slightly different situation.

• Gunn: Whether the lawsuit “arises under” the patent laws and thus gives a Federal District Court original jurisdiction under 28 USC 1338.
• US Inventor: Whether the lawsuit “arises under” the patent laws and thus gives the Court of Appeals for the Federal Circuit appellate jurisdiction under 28 USC 1295.

Both Section 1338 and Section 1295 use the identical “arising under” language and nothing in the legislative history suggests to me that they should be interpreted differently. Both of these provisions channel patent cases into certain courts for the purpose of “the development of a uniform body of law.”  Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989). In Gunn, the court explained that:

Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit.

Gunn (referring to Section 1338 and Section 1295 respectively). Still, there is some tension between the two provisions that comes out of Gunn. In particular, the Supreme Court’s reticence to expansive federal jurisdiction was grounded in principles of federalism. The Court recognized that a local interest of states in having state courts decide cases arising from state law.  In order to deprive states of those cases, the patent issue must be substantial.   One outcome of Gunn is that state courts are now more often hearing patent law issues as they arise in various non-patent causes of action.

This state vs federal debate is only relevant in the context of original jurisdiction questions under Section 1338 where a case might be filed in state court or instead in federal court.  There are no such federalism concerns in US Inventor – rather the question is which of two federal appellate courts will hear the appeal. This difference offers one reason to interpret the two statutes a bit differently, perhaps requiring more substantiality in one situation than in the other. But, I would suggest that tweaking is not worth the candle and probably not what Congress intended. And, the Federal Circuit has agreed in post-Gunn decisions that the Gunn analysis impacts both Section 1295 and 1338.  Bottom line here is that the USPTO should not have simply relied upon its pre-Gunn APA decisions.

In his 2019 article, Prof. Paul Gugliuzza proposes a simple rule that is consistent with both statutes and the requirements of Gunn.

For a case that does not involve claims of patent infringement to nevertheless arise under patent law, it must present a dispute about the content of federal patent law or a question about the interpretation or validity of the federal patent statute; questions about the validity or scope of a particular patent are not sufficient.

Paul R. Gugliuzza, Rising Confusion About “Arising Under” Jurisdiction in Patent Cases, 69 Emory L.J. 459 (2019).  Although Gugliuzza’s proposal here is straightforward, the parties in US Inventor disagree as to the outcome of the test.

The 5th Circuit appeal is now in-briefing and we’ll will likely not see a decision in the case until 2022.

by Dennis Crouch

In Australia, the term “ugg boots” refers to a general style of sheepskin shoe with the fleece turned in for warmth.  It is a generic term, and not a trademark – in Australia.  And, there are dozens of companies that make and sell ugg boots in that country, including Australian Leather Pty. Ltd..  The original name “ugh” came from 1970s surfer Shane Stedman who has been quoted as saying “We called them Ughs because they were ugly.”

UGG is a registered trademark in the USA, now owned by Deckers Outdoor Corp. Back in 2016, Deckers learned that Australian Leather had imported 12 pairs boots labelled “ugg boots” into the USA and sued for trademark infringement.  The defendant argued that it should be able to import its boots to the US since the term is generic in Australia, but the district court sided with the plaintiff in rejecting that defense. On appeal, the Federal Circuit affirmed in a R.36 Judgment without any opinion (the original complaint included some design patents as well).

Australian Leather has now petitioned to the U.S. Supreme Court, asking two questions:

1. Whether a term that is generic in the English-speaking foreign country from which it originated is ineligible for trademark protection in the United States.

2. Whether and, if so, how the “primary significance to the relevant public” standard in 15 U.S.C. § 1064(3) for determining whether a registered trademark has “become” generic applies where a term originated as generic before registration.

[Petition]. This is an interesting new trademark petition that suggests some nuance from the Court’s 2020 decision in BOOKING.COM.

by Dennis Crouch

Infernal Tech LLC v. Sony Interactive Entertainment LLC (E.D.Tex. 2021)

Today’s jury verdict in E.D. Tex. favored the accused infringer Sony.  The patentee alleged that Sony’s Spider-Man and God of War games infringed its U.S. Patent Nos. 6,362,822 (claim 1) and 7,061,488 (claims 1, 27, and 50.  The jury found, however, that neither game infringed.

The more interesting part of the jury verdict was Question 2 where Judge Gilstrap asked the jury to opine on the factual underpinnings of Alice Step 2. In particular, the jury was asked whether Sony had proven “by clear and convincing evidence that the Asserted Claims only involve technologies and activities that were well-understood, routine, and conventional, from the perspective of a person of ordinary skill in the art, as of [the Filing Date].”   The jury sided with the defendant and answered “yes.”  The case will next go through some post-verdict motion practice (JNOV/New-Trial) and then will likely be appealed. However, barring some claim construction problem it will be difficult to overcome this non-infringement decision on appeal.

Claim 1 of the ”822:  A shadow rendering method for use in a computer system, the method comprising the steps of:

providing observer data of a simulated multi-dimensional scene;

providing lighting data associated with a plurality of simulated light sources arranged to illuminate said scene, said lighting data including light image data;

for each of said plurality of light sources, comparing at least a portion of said observer data with at least a portion of said lighting data to determine if a modeled point within said scene is illuminated by said light source and storing at least a portion of said light image data associated with said point and said light source in a light accumulation buffer; and

then combining at least a portion of said light accumulation buffer with said observer data; and

displaying resulting image data to a computer screen.

The plaintiffs in the case are represented by Buether Joe LLP out of Dallas and the Defendants by Erise IP out of Kansas City. 

by Dennis Crouch

Kannuu Pty. LTD v. Samsung Electronics Co., LTD (Fed. Cir. 2021)(KannuuSamsungDecision)

US Courts typically enforce choice-of-forum provisions found within contracts between two business entities.  Here, Kannuu and Samsung entered into a non-disclosure agreement as part of a potential deal, and the contract included a choice-of-forum provision that directed “any legal action” stemming from the agreement to courts located in New York City “and no other jurisdiction.”  The potential deal fell apart and Kannuu eventually sued Samsung for patent infringement.  Samsung responded with an inter partes review (IPR) petition. Kannuu then asked the USPTO to drop the petition based upon the forum-selection-clause and, failing that, also petitioned the district court for an order that Samsung drop the IPR.  The district court denied Kannuu’s motion for preliminary injunction and then appealed.

On appeal, the court centers-in on the issue:

The underlying question that this case presents is one of first impression: Does the forum selection clause in the non-disclosure agreement between the entities prohibit Samsung from petitioning for inter partes review of Kannuu’s patents at the Board?

Slip Op. Apart from the general legal question of whether such a clause can operate to keep the case out of IPR, Kannuu’s case has a more fundamental problem identified by the district court — “the plain meaning of the forum selection clause in the NDA [does] not encompass the inter partes review proceedings.” Slip Op.

The district court case is only at the preliminary injunction stage, and the appellate panel found no abuse of discretion in the district court’s finding that the IPR proceedings are not covered by the agreement since the agreement focuses on confidentiality rather than intellectual property rights.

On the bigger question of whether such a contract, if properly drafted, might be enforceable, the court explains that it “might” work:

Had Kannuu and Samsung entered a contract which applied to inter partes review proceedings, a forum selection clause in that hypothetical contract might permit Kannuu to avoid inter partes review and its inherent features. But, they did not enter such a contract.

Id.  The court has previously found such a clause enforceable to prevent a post-grant-review proceeding, but only in a non-precedential opinion. Dodocase VR, Inc. v. MerchSource, LLC, 767 F. App’x 930 (Fed. Cir. 2019).

The majority opinion was written by Judge Chen and joined by Judge Prost.

Writing in dissent, Judge Newman argued that “the forum selection clause is clear and unambiguous, and law and precedent require that it be respected and enforced.”

= = =

I should note that the patent at issue here has the auspicious title of “Process and apparatus for selecting an item from a database.” [Link]

by Dennis CrouchThe Federal Circuit has been tearing through mandamus petitions on the issue of inconvenient venue under Section 1404(a). The issue comes up in cases where venue is proper and the court has personal jurisdiction over the defendant, but for whatever reason the particular venue chosen by the plaintiff is inconvenient. Thus, the statute provides a district court with discretion to move venue “[f]or the convenience of parties and witnesses, in the interest of justice.” 28 U.S.C. § 1404.  Section 1404 appeals are traditionally quite rare. The issue comes up at the very beginning of the case, but there is no immediate right appeal the grant or denial of the transfer motion. By the time the district court reaches final judgment any harm due to litigating in an inconvenient forum is typically water-under-the-bridge leaving no cognizable harm for the appeal.  The shortcut then is to petition for mandamus as soon as the district court grants or denies a motion to transfer.

An oddity of patent litigation jurisprudence is that Section 1404 determinations are not deemed patent-law specific.  Thus, the district court is bound to follow the law of the regional circuit court. And, although patent-litigation mandamus petitions go to the Federal Circuit, the appellate court purports to apply the law of the relevant regional circuit court.  Since most of the transfer cases before the Federal Circuit are originally filed in Texas, the Federal Circuit regularly applies Fifth Circuit law.

The chart above comes from a simple Westlaw case search of appellate decisions referencing both Section 1404(a) and mandamus.  What you’ll notice is a relatively large number of decisions from the Federal Circuit, the vast majority of these out of the Fifth Circuit region.  Anyone following the cases will also know that the Federal Circuit has substantially advanced the doctrine over the past 4 years, even though during that time the FifthCircuit has not decided any Section 1404 cases.  By the time the Fifth Circuit hears another mandamus petition, I expect that the court may be a bit shocked to see where their doctrine has gone.

One note on this data – Prof. Jason Rantanen has written about missing appellate decisions, and mandamus decisions are right in the sweet-spot of  decisions that potentially don’t find their way into Westlaw.  So, bottom line is that these numbers are likely an undercount. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3927406

by Dennis Crouch

CosmoKey Solutions v. Duo Security (Fed. Cir. 2021)

Patentee wins this one–with the Federal Circuit reversing the district court and finding the claims on patent-eligibility under Alice step-two.  This is another case that serves as a data-point, but I struggle to differentiate it from similar cases finding claims ineligible.

CosmoKey’s U.S. Patent No. 9,246,903 is directed a low-complexity, high-security method of authenticating a user transaction. (2011 priority filing date).  The basic idea here is two-factor-authentication that uses a second communication channel (mobile phone) to authenticate a transaction.  This general idea was already in the prior art, but the claims add a couple of additional features:

• Authentication function is normally inactive on the mobile device but is activated by the user for the transaction; and when once the transaction is done the authentication function is automatically deactivated.  This on/off function is designed to both save power on the device and also help prevent hacking.
• As part of the authentication, there is a check on how long the user takes to respond (whether a predetermined time relation exists between the transmission of the user identification and a response from the second communication channel);

See ‘903 Patent Claim 1.

The district court found the claim ineligible under Section 101 after finding them closely parallel to the authentication method claims invalided in Prism Techs. LLC v. T-Mobile USA, Inc., 696 F. App’x 1014 (Fed. Cir. 2017) (nonprecedential opinion).  In particular, the district court found the claims directed to “the abstract idea of authentication—that is, the verification of identity to permit access to transactions”  (Alice Step 1) and that the claims recite generic computer functionality that were all well understood, routine, and conventional activities at the time of the invention (Alice Step 2).

On appeal, the Federal Circuit has reversed — holding that the patent “discloses a technical solution to a security problem in networks and computers.”  That statement suggests reversal on Alice Step 1; but the court actually leapt to Step 2 without a clear holding on Step 1.  Here, the court found that the claimed steps were (1) developed by the inventors; (2) not admitted prior art; and (3) yield advantages over the described prior art.  The court noted the difficulty with this case — the purpose of the invention was to “reduce significantly” “the complexity of the authentication function.”  But, simplification can quickly suggest abstraction.

Eligibility Jurisprudence: It has been quite difficult to nail down the meaning of “abstract idea.”  The Supreme Court suggested that we look back to prior cases to find the answer, and that is the same approach that has been followed by the lower courts as well as the USPTO.  Here, however, the Federal Circuit cautioned that analysis:

While prior cases can be helpful in analyzing eligibility, whether particular claim limitations are abstract or, as an ordered combination, involve an inventive concept that transforms the claim into patent eligible subject matter, must be decided on a case-by-case basis in light of the particular claim limitations, patent specification, and invention at issue. Here, the  claim limitations are more specific and recite an improved method for overcoming hacking by ensuring that the authentication function is normally inactive, activating only for a transaction, communicating the activation within a certain time window, and thereafter ensuring that the authentication function is automatically deactivated.

Slip Op.

The court’s opinion was written by Judge Stoll and joined by Judge O’Malley.  Judge Reyna penned a concurring opinion arguing that the two step Alice approach should be taken in-order:

The majority skips step one of the Alice inquiry and bases its decision on what it claims is step two. I believe this approach is extraordinary and contrary to Supreme Court precedent. It turns the Alice inquiry on its head.

Concurring Opinion. Judge Reyna goes on to explain how Step 2 should be seen as a “lifeline” that only comes into play to save claims that are directed toward abstract ideas.  But, we can’t know if there is “something more” without first answering the question “more than what.”

Step two is rendered superfluous and unworkable without step one. Without the benefit of a step-one analysis, we are hobbled at step two in reasonably determining whether additional elements transform the nature of the claim into a patent-eligible application of the abstract idea. And by skipping step one, we create a risk that claims that are not directed to an abstract idea might be deemed to “fail” at
step two.

Id.  Judge Reyna then goes on to conclude that the claims are not directed to an abstract idea. Id. Quoting the majority statement that “the claims and specification recite a specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity.”

The USPTO is seeking comments on “the state of patent eligibility jurisprudence” and how eligibility law impacts both innovation and investment-in-innovation.  The deadline for submissions is October 15, 2021..

• Due date for Submission: October 15, 2021.
• Submit a comment: https://www.regulations.gov/commenton/PTO-P-2021-0032-0004.
• Read the original request for comments: https://www.federalregister.gov/documents/2021/07/09/2021-14628/patent-eligibility-jurisprudence-study.
• Read the deadline extension documents: https://www.federalregister.gov/documents/2021/09/03/2021-19112/patent-eligibility-jurisprudence-study.

The USPTO is planning a report to Congress and the agency is hoping that these comments will serve as fundamental building blocks for the report.

(more…)

When you visit the website france.com, you’ll be quickly redirected to the French government’s explore-France travel site: france.fr.  But, the US-company France.com, Inc. believes that the country stole the .com site.  The case is now pending before the Supreme Court on petition for writ of certiorari is France.com v. The French Republic, Docket No. 21-448 (Supreme Court 2021).

Jean-Noel Frydman registered the domain back in 1994 and began using it to operate his commercial tourism business. Frydman eventually registered the domain as a trademark — primarily in the travel related field. During that time the French National Tourist Office lauded Frydman’s work and and website.

In 2016, France.com was pursuing a private trademark claim in a French-based court.  The French Government intervened in the lawsuit and was able to convince the French court to order the domain name to be transferred to the French Government.  The petitioner here calls that decision “in contravention of and hostile to United States law.”

Subsequently, France.Com filed the present lawsuit in U.S. Federal Court seeking an order transferring the domain name back.  Rather than delving into the merits, 4th Circuit ordered the case be dismissed. In particular, the district and appellate courts found the lawsuit barred by the Foreign Sovereign Immunities Act (FSIA). And, that the FSIA’s commercial activity exception to sovereign immunity did not apply.  The petition for writ of certiorari focuses on that question:

Whether the United States Court of Appeals for the Fourth Circuit and other lower federal courts have misapplied this Court’s decision in OBB Personenverkeher v. Sachs, 577 U.S. 27 (2015), as allowing courts to determine the gravamen of Foreign Sovereign Immunities Act “commercial activity” exception suits without analyzing distinct claims presented.

[Petition.]

= = = =

§ 1604. Immunity of a foreign state from jurisdiction

Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter.

§ 1605. General exceptions to the jurisdictional immunity of a foreign state

(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case — (2) in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States;

by Dennis Crouch

PersonalWeb Technologies, LLC v. Patreon, Inc., Docket No. 20-1394 (Supreme Court 2021).

This is a core civil procedure case pending before the Supreme Court.  Of course, procedure can and often does have a major impact on substantive rights.  The Supreme Court has now issued a Call for the Views of the Solicitor General (CVSG)–seeking the government’s input on whether to hear the case.  Although certiorari is certainly not guaranteed, CVSG is generally seen as a major step in that direction.

We know about issue preclusion and claim preclusion. This case is about a quirky intermediary known as the Kessler Doctrine. See, Kessler v. Eldred, 206 U.S. 285 (1907).

• Claim Preclusion (res judicata) prevents a party from re-litigating a claim once a court has issued a final judgment on that claim.  Claim preclusion is powerful, in part, because it does not require the claim to be actually litigated (just be subject to the final judgment).  Further, claim preclusion bars both those claims that were brought as well as claims stemming from the same transaction or occurrence that could have been brought in the earlier lawsuit.  However, claim preclusion is quite narrow because it does not apply in the non-mutual setting.
• Issue Preclusion (collateral estoppel) prevents a party from re-litigating an issue of fact or law that was already determined in a prior case.  Issue preclusion is powerful because it applies in non-mutual settings.  Issue preclusion can prevent a patentee from later arguing in a new lawsuit that its patent is valid after an earlier finding of invalidity, even if the new lawsuit is against a different party.  The major weakness of issue preclusion is that it requires that the issue have been actually decided in the prior lawsuit, with a full-and-fair opportunity to litigate, and be essential to the prior judgment (not just dicta). As an example, issue preclusion does not attach following a settlement.
• Kessler Doctrine is particular to patent law and falls somewhere in-between issue and claim preclusion–allowing preclusion in instances where it would not be traditionally available.  In particular, the doctrine bars a patent infringement lawsuit suit against the customer of a seller who had previously prevailed against a patentee in an earlier patent infringement suit. Kessler v. Eldred, 206 U.S. 285 (1907).  In that situation claim preclusion would not apply because of non-mutuality; and issue preclusion might not apply if the issues being barred were not actually litigated in the first case.

One justification for the Kessler doctrine back in 1907 was that issue preclusion generally did not apply to unrelated parties.  However the 20th century saw a great expansion of issue preclusion that culminated with the Supreme Court’s 1971 decision in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313 (1971) (“the principle of mutuality of estoppel … is today out of place”).  However, rather than relegating Kessler to a prior time, the Federal Circuit has recently substantially expanded the doctrine even beyond its usual bounds.  That revival began with the 2014 decision in Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014), but has subsequently been relied upon in a series of cases from the appellate court. SpeedTrack, Inc. v. Office Depot, Inc., 791 F.3d 1317, 1323-1329 (Fed. Cir. 2015), cert. denied, 577 U.S. 1063 (2016); SimpleAir, Inc. v. Google LLC, 884 F.3d 1160, 1169-1170 (Fed. Cir. 2018); Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1301 (Fed. Cir. 2017), cert. dismissed, 139 S. Ct. 44 (2018);  Xiaohua Huang v. Huawei Techs. Co., 787 F. App’x 723, 724 (Fed. Cir. 2019); In re PersonalWeb Techs. LLC, 961 F.3d 1365 (Fed. Cir. 2020); ABS Glob., Inc. v. Cytonome/ST, LLC, 984 F.3d 1017, 1022 (Fed. Cir. 2021).

The Supreme Court has repeatedly declined (in other situations) to expand preclusion beyond its traditional bounds without congressional intervention. See Lucky Brand Dungarees v. Marcel Fashions Grp., Inc., 140 S. Ct. 1589, 1594-95 (2020) (rejecting “defense preclusion” as a cognizable doctrine).  Likewise, the court has rejected patent-specific procedural rules.  Those lines of cases all suggest a good likelihood that the court cabin-in the doctrine.

Preclusion cases always involve two lawsuits, and the question is whether something that happened in the first lawsuit precludes a party from taking some action in the section lawsuit.   Here, PersonalWeb sued Amazon for patent infringement back in 2011 based upon Amazon’s use of its S3 cloud storage services. However, after a narrow claim construction, PersonalWeb stipulated to dismissal of its case with prejudice.  In 2018, PersonalWeb sued a number of Amazon customers for post-2011 activities.  The courts dismissed the case — holding that the action was barred by the Kessler Doctrine.

PersonalWeb’s petition for certiorari begins with a preamble and then asks two questions:

This Court has repeatedly held that, absent guidance from Congress, courts should not create special procedural rules for patent cases or devise novel preclusion doctrines that stray beyond the traditional bounds of claim and issue preclusion. Nonetheless, over the past seven years, the Federal Circuit has created and then repeatedly expanded a special, patent-specific preclusion doctrine that it attributes to this Court’s 114-year-old decision in Kessler v. Eldred, 206 U.S. 285 (1907)—a case this Court has not cited for almost 70 years. The Federal Circuit now routinely applies its so-called “Kessler doctrine” to reject suits like this one that would survive under ordinary preclusion principles.

The questions presented are:

1. Whether the Federal Circuit correctly interpreted Kessler to create a freestanding preclusion doctrine that may apply even when claim and issue preclusion do not.

2. Whether the Federal Circuit properly extended its Kessler doctrine to cases where the prior judgment was a voluntary dismissal.

[Petition for Certiorari]

In its responsive briefing, Amazon and its customers have rewritten the questions in slightly different form, emphasizing their arguments.

In Kessler v. Eldred, 206 U.S. 285 (1907), this Court held that a patent-infringement judgment establishing the right of a manufacturer to make and sell a product includes “the right to have others secure in buying that article, and in its use and resale.” Rubber Tire Wheel Co. v. Goodyear Tire & Rubber Co., 232 U.S. 413, 418 (1914). Accordingly, “a judgment in [the manufacturer’s] favor bars suits against his customers.” Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 185 (1952). The questions presented are:

(1) whether the Federal Circuit properly interpreted Kessler as a bar on suits against customers for use of the same articles that were the subject of the prior judgment, rather than a mere application of non-mutual issue preclusion;

(2) whether Kessler should be overruled, despite stare decisis, when Congress has never revised the Patent Act to overrule Kessler, and when its rule is necessary to prevent the kind of vexatious litigation in which the district court found Petitioner to have engaged; and

(3) whether Kessler applies to judgments of voluntary dismissal with prejudice, which this Court has long held to have the same preclusive effect as an adjudication on the merits of a claim.

[Brief in opposition].

Next stop in this case is input from the Biden Administration via the Solicitor General.  That brief probably won’t be submitted until Spring 2022.

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Note – Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 185 (1952) was decided prior to the Patent Act of 1952.

by Dennis Crouch

TBL Licensing, LLC v Hirshfeld, Docket No. 1:21-cv-00681 (E.D. Va. Jun 04,
2021)

I previously wrote about the TTAB decision denying TBL’s attempt to register the shape of its Timberland Boots as a protectable trade mark. Crouch, Iconic Timberland Boots–Trade Dress Worthy? Now, the company has filed a civil action in the Eastern District of Virginia seeking a court order that TBL is entitled to a registration. TBL provides its basic argument as follows:

The TTAB wrongly disregarded TBL’s potent evidence of secondary meaning, including extensive sales, advertising, and third-party recognition (with diverse examples of high-profile unsolicited media coverage and attention) that TBL amassed from over four decades of consistent and substantially exclusive use of the Timberland Boot Trade Dress. In so doing, the TTAB refused to register what has been deemed “one of the most recognizable shoes of all time.” The TTAB’s decision should thus be reversed and, because the Timberland Boot Trade Dress is not de jure functional, TBL’s application should be approved for publication. Alternatively, the case should be remanded for consideration of the issue of functionality.

TBL Complaint.

The TTAB gave little weight to the fact that the agency has issued registration certificates on many different shoe designs.  On the other hand, that same history-based argument will likely be more convincing to a district court judge.

There is no right to a jury trial in this type of case. To further save costs, the parties have agreed to waive a live trial completely and instead decide the case based upon the submitted record.

The parties have agreed to authorize the Court to adjudicate this matter on summary judgment and to resolve any disputes concerning material issues of fact on a submitted record.

This is apparently the same process used in other recent trademark civil actions. Booking.com B.V. v. Matal, 278 F. Supp. 3d 891, 900 (E.D. Va. 2017) (“The parties have ‘expressly agree[d] that if the Court determines after reviewing the briefs and evidence on summary judgment that any material issue of fact exists, the Court is authorized to resolve any such factual dispute.'”); Seacret Spa Intl. v. Lee, 1:15CV405(JCC/IDD), 2016 WL 880367, at *2 (E.D. Va. Mar. 8, 2016) (“The parties have agreed that . . . the Court may resolve those disputes on the basis of the record before it.”); Autodesk, Inc. v. Lee, 1:13-CV-1464 AJT/JFA, 2014 WL 5500799, at *1 (E.D. Va. Oct. 30, 2014) (parties “stipulated that the Court should resolve any material factual disputes without any further proceeding based on the summary judgment record.”).

I expect final briefing in February 2022 and a decision later in the spring.

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Iconic Timberland Boots — Trade Dress Worthy?

The House Judiciary Committee has voted in favor of H.R. 2891, the Preserve Access to Affordable Generics and Biosimilars Act.  The Bill was also referred to the House Energy & Commerce Committee and so may have a few more hurdles before it moves to the House Floor.

The key aspect of the proposal is to create a presumption of anticompetitive behavior anytime a generic ANDA/biosimilar filer “receives anything of value” while also agreeing to forgo any “research, development, manufacturing, marketing, or sales of the ANDA product or biosimilar biological product.”  The proposal appears to limit use of this presumption only to situations where the FTC brings an action, and not a private antitrust claim.

A parallel bill  proposed by Sen. Klobuchar is pending in the Senate.