IP Happenings – December 2016-January 2017


By Lawrence Hoffman

The full article can be found  here:



Patent Eligibility:       There is always be something to say about this.

In Garfum.com Corp. v. Reflections by Ruth, the defendants argued lack of eligibility and the case ended with a covenant not to sue and a voluntarily dismissal.

When the defendant sought attorneys’ fees based on what they said was the lack of a legitimate basis to the plaintiff’s opposition to their eligibility arguments, the court said no. It charitably described the fallout from Alice Corp. v.CLS Bank, as “the uncertainty in this area of jurisprudence”. It’s hard to disagree with this. Except in the simplest cases, e.g., a claim to a well-known method executed on a general purpose computer, almost any argument for patent eligibility of a software implemented method is reasonable. Cases in this area of the law are simply not exceptional solely based solely on the arguments.

Then there’s In re Hiroyukiitagaki in which the Patent Trial and Appeal Board (PTAB) held that apparatus claims in an application for an MRI machine were directed to an abstract idea. Wow! That will make fun reading.

On the other hand, in Trading Techs. Int’l, Inc. v. Cqg, Inc., a district court got one right, and the CAFC affirmed. The issue before the district was eligibility of the claims of two patents related to computerized systems to assist securities and commodity traders to make their trades at the desired prices and quantities in a rapidly changing market. The patents teach creation of a user interface that displays bid and asked prices dynamically along a static display, and pairs orders with the static display of prices to prevent order entry at a changed price.

The district upheld eligibility under first step of the Alice test. It stated:

. . . rather than reciting a mathematical algorithm, a fundamental economic or longstanding commercial practice, or a challenge in business, the challenged patents solve problems. . . in the context of computerized trading relating to speed, accuracy and usability. . . in existing graphical user interface devices that have no pre-electronic trading analog, and recite more than setting, displaying, and selecting data or information that is visible on the [graphical user interface] device. . . [and] do not simply claim displaying information on a graphical user interface. The claims require a specific, structured graphical user interface paired with a prescribed functionality directly related to the graphical user interface’s structure that is addressed to and resolves a specifically identified problem in the prior state of the art.

The CAFC affirmed, stating, “[T]he district court’s rulings are in accord with precedent”. In support, the court noted that “specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter” and that “claimed process[es] us[ing] a combined order of specific rules that improved on existing technological processes were deemed patent-eligible”.

Cases like this give me some hope that the problems with Alice might just be a bad memory by the time I’m called to the great patent office in the sky.

The Great Water Balloon Fight:       For those of you from another planet, a water balloon is normally created by attaching the neck of a balloon to a water faucet and turning on the water. When the balloon is almost full, you turn off the water, squeeze the neck to keep the water from giving you a bath, remove the balloon and tie a knot at the top of the neck. When you throw it at your adversary, it makes a satisfying splash on contact.

Alas, you can only fill as many balloons at a time as there are sinks in the shower rooms. At least until Joshua Malone invented a device that let you fill a “Bunch O Balloons” (as he called it) from a single faucet. Talk about a WMD!

Malone filed a patent application, and U.S. patent 9,051,066 was granted in due course. Then another kind of water balloon fight began.

Telebrands Corporation had started selling a competitive product it called “Balloon Bonanza”. The day the ‘066 patent issued, Tinnus, the assignee of the patent, brought an infringement action against Telebrands and requested a preliminary injunction against sale of “Balloon Bonanza” during the litigation.

Telebrands responded it did not infringe and that the patent was invalid for various reasons. Despite these arguments, the injunction was granted.

While all this was going on, Telebrands filed a petition for a Post-Grant Review (PGR), one of the administrative proceedings established by the America Invents Act to allow patent validity to be determined without going to court. In its petition, Telebrands made the same invalidity arguments it made in opposing Tinnus’ motion, but here, it got lucky. The Patent Trial and Appeal Board (PTAB) instituted a PGR on the ground that the patent was probably invalid.

Of course, Telebrands appealed the grant of the preliminary injunction to the Federal Circuit but in an opinion issued January 24, 2017, the court affirmed. The court applied an abuse-of-discretion test to the trial judge’s decision, together with its large body of preliminary injunction jurisprudence to support its decision and observed that it was not bound by the PTAB ruling.

A quick search has not revealed a comparable case, so the Federal Circuit decision is noteworthy. Still, there is nothing to prevent Telebrands from requesting reconsideration in light of the PTAB ruling.

PAEs in the News:

Patent Assertion Entities (PAEs) – these are the fellows some people like love to hate, but like most other things, the PAEs don’t all wear black hats. When they do their jobs in respectable ways, they serve a valid purpose.

Sometimes inventors simply don’t have, or can’t get access to, start-up funds. For example, they have invented something that others mired in the mud of conventional thinking just can’t fathom.

Other times, a company has embarked on a research project that yielded good IP, but internal business factors derailed the project and the IP is languishing. Still, the IP is such that it has value to others in the industry. Nokia’s exit from the mobile phone market still owning a large portfolio of standard essential patents is a good example.

Selling such unused IP, sometimes on a profit-sharing basis, to a PAE can be a reasonable monetization strategy in many cases.

Sure, the patent trolls and their tactics of filing unfounded law suits to extort below-litigation-cost settlements give the whole PAE industry a bad name. Still, condemning the apple tree because of a few bad apples doesn’t solve the problem. As noted above, there are white hats among the black ones. There are also shades of grey.

From Canada, comes a good example of an almost black hat in the 4 January decision in Mediatube Corp. v. Bell Canada. Here, the court had to deal with what started out as a run-of-the mill infringement action brought by an admitted PAE. In the end, however, the most interesting and cautionary issues related to the court’s reasons for imposing enhanced costs on the plaintiff’s due to their litigation tactics.

The details of parties’ respective technologies aren’t important; it’s enough to say that the accused technology related to digital Internet Protocol Television services and the patents in suit related to analog systems. Plaintiffs’ argument that the claims covered digital systems was described by the court as “contorted”.

Legal fees are awarded to the successful party in Canada. In most cases, so-called “party-and-party costs” for legal fees are based on a schedule contained in Federal Courts Rules. Rejected settlement offers that are more generous that what is ultimately awarded by the courts can result in an increase in the compensation awarded from the date of the offer. (There is a similar mechanism called “offer of judgment” under the U.S. Federal Rules of Civil Procedure.)  Party-and-party awards in IP litigation are usually between about 20 and 40 per cent of the party’s actual legal fees. The successful party is also entitled to recover all reasonable disbursements, associated with the litigation other than lawyer’s fees.

“Solicitor-client costs”, are awarded when a party engaged in “reprehensible, scandalous or outrageous conduct”. This can sometimes result in full compensation of the winner’s legal fees. A variation, called “solicitor-and-client costs”, always results in full compensation in especially egregious situations.

Against this background, both parties sought elevated costs. The defendants got what they wanted but not the plaintiffs.

Would the result have been different if the plaintiffs were not PAEs? Perhaps not, but the plaintiffs’ objection to the “patent troll” reference certainly shows that, as in the U.S., PAEs are in the cross-hairs in Canada.

PAEs in China:

For a different view, a post on the heavily pro-patent blog IP Watchdog reports an intensive effort in China to grow and strengthen its domestic chip industry. The author, Erick Robinson, an American patent lawyer based in Shanghai, is also the author of a 28 December article in The Global Times. In the article, he convincingly argues that PAEs (Robinson calls them Non Practicing Entities) can serve a valid purpose in aiding China is in quest for chip independence due to their extensive experience in licensing and patent monetization strategy. He does say that the real patent trolls are largely gone from the U.S., which seems like wishful thinking, but otherwise, the good side of the PAE business comes through loud and clear.

Can a Patent-Owner Control What you Do With a Patented Product After You Buy It?

Big Brother has its eye on the printer cartridge business model. On 2 December, the U.S. Supreme Court agreed to consider if printer manufactures can use their patents to prevent third parties from refilling used printer cartridges.

In Impression Products, Inc. v. Lexmark International, Inc. the Court will review an en banc (full court) decision of the Court of Appeals for the Federal Circuit (CAFC) that affirmed limits on the patent exhaustion (or first sale) doctrine.

Long ago, the Gillette Safety Razor Company figured out that the best path to continuing profit was to sell the razors cheap and the blades not so cheap. The lesson was not lost on Lexmark. The company sells printers and toner cartridges for its printers. As described in the CAFC decision, Lexmark owns patents that cover its cartridges and their use. The cartridges are sold by Lexmark, both in the U.S. and abroad. The cartridges sold in the U.S., and some of those sold abroad are discounted, subject to an express single-use/no-resale restriction. It is not disputed that buyers are aware of the resale/reuse prohibition.

Enterprising third parties have reverse engineered microchips installed in the discounted cartridges to prevent reuse, and have created replacement microchips that fool the printer into allowing reuse.

Impression acquires cartridges containing the replacement microchips, refills them and resells them in the United States without authorization from Lexmark. Its conduct unquestionably constitutes infringement under § 271 of the Patent Act unless the initial sale by Lexmark effectively nullifies the resale/reuse restriction. CAFC precedent favors Lexmark. The decision affirmed the continuing validity of this precedent despite two arguably contrary recent Supreme Court decisions. The U.S. Supreme Court has agreed to review the CAFC decision.


Second Circuit Nicely tells Louis Vuitton to “Get a Life”:

Back in August, we reported a trademark infringement case brought by Louis Vuitton (LV), a notoriously aggressive enforcer of its trademark rights, against My Other Bag, Inc. (MOB). Briefly, MOB’s products are canvas tote bags. On one side are written the words “My Other Bag”. On the other side is a design that evokes – but does not copy the LV Toile Monogram design. MOB’s concept was inspired by novelty bumper stickers, which can sometimes be seen on inexpensive cars claiming that the driver’s “other car” is an expensive, luxury car, such as a Mercedes.

LV didn’t get the joke, but the courts did. Last January, a judge in the U.S. District Court in New York City granted summary judgment to MOB and dismissed the case. LV appealed and on 22 December, the U.S. Court of Appeals for the Second Circuit affirmed in a non-precedential decision.

In our August article, we noted that a group of law professors filed a brief with the Second Circuit in support of MOB in which they argued that LV’s attempt to suppress the activity of MOB would be an unconstitutional interference with the right of free speech. We correctly predicted that the appellate court would not even address this issue.

Will LV pursue this with a petition for certiorari italics to the Supreme Court? Most likely not. A trademark owner must be vigilant in protecting its marks and LV largely made its point – though a bit heavy-handedly – by suing MOB in the first place and in pursuing the appeal. The Second Circuit commands a pretty high level of respect by the Supreme Court so it would be surprising if it took the case in any event. And even if it did, the likelihood of reversal seems almost nil.

Trademark Protection in China:

In its December Report on IP in China, the CCPIT patent and Trademark Law Office reports a trademark opposition by Chrysler Group LLC against a local clothing manufacturer which sought to register the mark BATTLEFIELD JEEP in Chinese for clothing and bags. Chrysler’s opposition was based on its prior registrations of JEEP in English and Chinese for automobiles and of JEEP in English for clothing and bags, etc.

In a decision of the Beijing Higher People’s Court, it was held that the opposed trademark wholly contains JEEP in Chinese which corresponds Chrysler’s English registration of JEEP and thus constitutes a similar trademark used on similar goods. In view of Chrysler’s prior use and high reputation of JEEP (in English) on clothing and bags, there would likely be confusion among the consumers.

The Court further held that BATTLEFIELD JEEP is an imitation of Chrysler’s well-known JEEP trademark in Chinese for automobiles and is liable to mislead the relevant public and weaken and dilute the distinctiveness of Chrysler’s well-known trademarks.

In this case, the Court explicitly recognized that that adoption of the trademark BATTLEFIELD JEEP in Chinese was intended as an imitation of Chrysler’s English language JEEP mark and it showed no sympathy for the would-be registrant’s poaching on Chrysler’s good will despite the fact that Chrysler had not registered JEEP in Chinese for clothing and bags.

An excellent comprehensive discussion of selecting and protecting trademarks in China entitled Brand Transliteration-How to Translate and Protect Your Brand for the Chinese Market has just been published by the CCPIT Patent and Trademark Law Office. To this observer, it is recommended – almost required – reading for anyone entering the Chinese market.

The article makes the point that your mark should be registered in its original language, in Chinese characters and in Latin alphabet transliteration before use because China follows a first-to-file registration system. Early registration is essential not only if you want to sell in China, but also if you outsource manufacturing or assembly operations in China, since the owner of a registered mark that covers your product can prevent export.

What’s in a Name – What Did Michael Jordan Really Win:

It’s been widely reported that basketball superstar Michael Jordan came out a winner before the Supreme Peoples’ Court (SPC) of China in his battle with Qiaodan Sports Company over its use of the Mandarin transliteration of his name, the Pinyin version of which is Qiaodan (pronounced ‘chowdahn”). That may be correct, but it doesn’t tell the whole story.

Basketball is very popular in China and the U.S. National Basketball Association has been described as a national obsession. Jordan himself is extremely well known and enormously popular in China.

In its decision, the SPC explicitly found that Qiaodan acted with “malicious intent” and ruled that Mr. Jordan owns the legal rights to the Chinese character version of his name. The decision reversed previous administrative and lower-court rulings.

While Jordan expressed satisfaction with the result, the victory was far from complete. For one thing, the court found that Jordan had not established that Chinese consumers associated the Pinyin version with his name, which Qiaodan will still be able to use.

Chinese trademark practitioners, and even government representatives, reacted favorably to the decision, Many cautioned, however, that this decision should not be taken to mean that China’s notorious trademark piracy problem is at an end.

About the author: Larry Hoffman has a B.S. in Electrical Engineering and Comp. Sci. from the Massachusetts Institute of Technology and a J.D. from the George Washington University School of Law. He has been a lawyer since 1965 specializing in IP law and product liability defense. He is registered to practice before the U.S. PTO, the U.S. Court of Appeals for the Federal Circuit and the state and federal courts in New York, Maryland, and the District of Columbia. His work includes preparation and prosecution of patents in countries throughout the world, and counseling on IP and product safety matters. He has been involved in the trial of close to 100 lawsuits of various kinds. You can reach him at Lawrence@ipatent.co.il.


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