NEWS FROM 1 FIRST STREET, N.E. – 23 MARCH 2017

10.04.2017

By Lawrence Hoffman

This week has seen U.S. Supreme Court decisions in two IP cases. One, Star Athletica v. Varsity Brands will be of interest to the apparel industry and to those who use brand-related icons and images on promotional devices and artistic designs on useful articles. The other, SCA Hygiene Products v. First Quality Baby Products, will be of interest to patent owners, and especially to those who ‘moil for gold’ in the fields of patent litigation. (If you are curious about the allusion and have a moment, look up the word ‘moil’ and Google the phrase.) To this observer, neither decision was a surprise, though both are controversial.

Latching the Door to Laches in Patent Cases:

In its 21 March 2017 decision in the SCA case, the Court held that the doctrine of laches does not apply to patent infringement litigation. According to the doctrine of laches, a plaintiff who unreasonably delayed asserting a cause of action would be barred from doing so if the delay caused harm to the defendant. Possible kinds of harm of concern included death of witnesses and/or loss of documents that might have provided a basis for defense.

By way of background, the doctrine of laches in the 15th Century was created in the equity courts of England. In very simple terms, the courts of equity provided an avenue for obtaining relief not available in the law courts, mainly injunctions directing a party to take or not take a certain action.

In the U.S. federal judicial system there were separate courts of law and equity from colonial times until 1938 when Congress merged the existing law and equity jurisprudence into a single Civil Action jurisprudence. Until then, even if both damages and injunctions were available under some statute, separate suits in law and equity were needed to obtain both remedies. That was the case under patent law.

On the equity side, the defense of laches was carried over largely intact from the law of England. Another ancient doctrine known as “equitable estoppel” operated to bar a plaintiff who misled the defendant to his detriment.

On the law side, statutes of limitations served a similar purpose to laches by automatically barring actions that were filed more than a specified time after occurrence of the injury (or sometimes, a certain time after the plaintiff became aware of the injury).

However, even before the unification in 1938, the line between equitable and legal remedies started to blur and a few courts in a few cases applied laches to damage claims.

Against the above background, in October 2003, SCA sent a letter to First Quality, alleging that First Quality was infringing a patent owned by SCA. First Quality responded that one of its patents covering the same subject matter antedated the SCA patent. About a year later, without notifying First Quality, SCA asked the Patent Office to initiate a reexamination proceeding to determine whether its patent was valid in light of the First Quality patent. Three years later, in March 2007, the PTO issued a certificate confirming the validity of the SCA patent.

In August 2010, SCA filed a patent infringement action against First Quality. First Quality responded by filing a motion for summary judgment based on laches and equitable estoppel. The motion was granted by the District Court and SCA appealed to the Federal Circuit.

While the appeal was pending, the Supreme Court decided Petrella v. MGM, in which it held that laches is not a defense applicable to copyright infringement cases. After considering Petrella, the Federal Circuit held that it did not apply to patent cases, and affirmed the decision of the trial court. The Supreme Court has now held that laches is also not a defense in patent cases.

In Petrella, plaintiff was surviving daughter of the author a screenplay on which the film Raging Bull had been based. The rights to the screenplay had been licensed to MGM’s predecessor. Under the law at the time, copyrights were subject to renewal, but the renewal rights belonged to the author or his heirs and not to the licensee. Petrella renewed the copyright in 1991 but waited 21 years before suing MGM for infringing the renewed copyright.

The decision in Petrella as described by the Court in SCA, was based on the principle of separation of powers and also on what the Court characterized as traditional role of laches in equity. According to the Court:

A statute of limitations reflects a congressional decision that timeliness is better judged by a hard and fast rule instead of a case-specific judicial determination. Applying laches within a limitations period specified by Congress would give judges a “legislation-overriding” role that exceeds the Judiciary’s power. Moreover, applying laches within a limitations period would clash with the gap-filling purpose for which the defense developed in the equity courts.

By “gap-filling purpose”, the Court was referring to situations in which there was no statute of limitation.

  • 507(b) of the Copyright Act includes a statute of limitations provision which states that “[n]o civil action shall be maintained under the [Act] unless it is commenced within three years after the claim accrued.”

Section 286 of the Patent Act also includes a statute of limitations provision but it is worded quite differently from the one in the copyright statute. The Patent Act provision states:

Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”

Despite the substantial difference in wording, both provisions are interpreted the same way. Because each instance of copyright or patent infringement is considered to be a separate event, both statutes of limitations run separately for each individual act. Thus, neither statute imposes a limit as to when an action may be brought, but instead, operates retrospectively to permit recovery only for the succession of infringements that occurred during the six years preceding the filing of the action in patent cases, and during the three years preceding the filing of the action in copyright cases.

Therefore, in SCA, the Court held that the reasoning in Petrella was directly applicable to patent cases. First Quality argued that Congress preserved laches as a defense when it codified patent law in 1952 by reference to “unenforceability” as a defense in §282 (b)(1) because it existed as a defense under pre-1952 law. The Court rejected this argument, saying:

Even assuming that §282(b)(1) incorporates a laches defense of some dimension, it does not necessarily follow that the defense may be invoked to bar a claim for damages incurred within the period set out in §286. Indeed, it would be exceedingly unusual, if not unprecedented, if Congress chose to include in the Patent Act both a statute of limitations for damages and a laches provision applicable to a damages claim. Neither the Federal Circuit, nor any party, has identified a single federal statute that provides such dual protection against untimely claims.

Continuing, the Court noted that:

the most prominent feature of the relevant legal landscape at that time was the well-established rule that laches cannot be invoked to bar a claim for damages incurred within a limitations period specified by Congress. In light of this rule, which Petrella confirmed and restated, nothing less than a broad and unambiguous consensus of lower court decisions could support the inference that §282(b)(1) codifies a very different patent-law-specific rule. (Internal citations omitted.)

The Court did not find such a broad and unambiguous consensus in the authority cited by First Quality.

Justice Breyer alone dissented, largely on the basis that the majority had misread the thrust of the pre-1952 case law. He argued that the statute of limitation did not fill the gap which the majority described as the purpose of the laches doctrine and that pre-1952 law did not exclude the possibility of a laches defense in cases where Congress had provided a statute of limitations.

One of the things that troubled Justice Breyer is the fact that the statute of limitations in patent cases does not set a time limit after which an action for infringement may not be brought. Instead, it operates only to limit recovery for infringing acts that took place during the six years preceding the filing of the suit. That, in his mind, creates a gap because:

a patentee might wait…while the infringer…invests heavily in the development of the infringing product…while evidence that the infringer might use to, say, show the patent is invalid disappears with time. Then, if the product is a success [and it is] difficult or impossible for the infringer to abandon its use of the patented invention…then the patentee can keep bringing lawsuits, say, in year 10 (collecting damages from years 4 through 10), in year 16 (collecting damages from years 10 through 16), and in year 20 (collecting any remaining damages).

Noting that Justice Breyer made a corresponding argument in his dissenting opinion in Petrella, the Court, in a footnote stated it had rejected that argument in Petrella, as it called for “precisely the kind of “legislation-overriding” judicial role that Petrella rightly disclaimed”.

Justice Breyer’s opinion also does not seem to take into account a likely consequence of allowing laches as a defense to delayed infringement actions. Traditionally, past infringement has been addressed by a damage award, and future infringement by an injunction. As a result of the 2006 Supreme Court decision in eBay Inc. v. MercExchange, however, the award of injunctions has been curtailed. Therefore, if the patentee cannot wait to bring a law suit until it is economically reasonable and cannot bring a succession of law suits as infringements continue, there may be no remedy at all for future infringements.

In short, if there is a gap, it is not in the statute of limitations and if harms the patent owner, not the alleged infringer.

In this observer’s view, what is bothering Justice Breyer is not a justification for application of laches as much as it is a call to provide a comprehensive structure (either statutory or otherwise) according to which the judgment of the trial court must provide an injunction against future infringement, or a reasonable royalty as compensation for future damages when an injunction is not justified according to eBay. The judgment could even provide for either party to seek review of the royalty rate to take account of changes in the value of the invention over the life of the patent.

I Can See It Clearly Now (But It’s All in the Eye of the Beholder):

The facts in Star Athletica are not complicated. Varsity and Star are competitors in the cheerleading uniforms market. Varsity owns over 200 U. S. copyright registrations for two-dimensional designs that appear on the surfaces of their uniforms. The parties describe these as primarily combinations, positionings, and arrangements of elements that include chevrons . . . , lines, curves, stripes, angles, diagonals, inverted [chevrons], coloring, and shapes. Five of these designs (illustrated in the Appendix to the opinion (see link above) were the subject a copyright infringement action brought by Varsity against Star.

The District Court granted summary judgment to Star on the ground that the designs did not qualify as protectable pictorial, graphic, or sculptural works. In its view, the designs served the useful, or “utilitarian,” function of identifying the garments as “cheerleading uniforms” and therefore could not be “physically or conceptually” separated under §101 “from the utilitarian function” of the uniform.

The Court of Appeals for the Sixth Circuit reversed, holding the “graphic designs” were “separately identifiable” from the designs of uniforms because they could be incorporated onto the surface of different types of garments, or hung on the wall and framed as art.

The Court, in a five-to-three decision, affirmed. The opinion, authored by Justice Thomas, begins by noting §101 of the Copyright Act provides protection for “pictorial, graphic, or sculptural features” of the “design of a useful article” only if those features “can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article. Justice Thomas further notes widespread disagreement over the proper test for implementing §101’s separate-identification and independent-existence requirements.

The option sets forth a test for application of §101 that generally follows the view of the Sixth Circuit:

We hold that a feature incorporated into the design of a useful article is eligible for copyright protection only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.

In its decision, the Court held that the test was satisfied in respect to the five designs.

The first step in the Court’s analysis was to determine if the “separability test” needed to be applied. Varsity argued that it did not because the designs were not the designs of the uniforms themselves, but only designs that appear on the uniforms. The Court rejected this approach saying that it is “inconsistent with the text of §101. The statute requires separability analysis for any “pictorial, graphic, or sculptural features” incorporated into the “design of a useful article”.

In her concurring opinion, Justice Ginsberg accepted Varsity’s argument. She noted that the designs here are fabric designs which are subject to copyright protection. They are on the uniforms, not of the uniforms, and therefore are not “incorporated into the “design of a useful article”. (As an aside, to this observer, Justice Ginsberg seems to have the better view. However, the Court seems to have been intent on clarifying the application of §101, and would have done so even if it had rejected the need to consider separability.)

The Court treated this as a case of strict statutory construction. Although it allowed for the possibility that §101 did not provide the whole answer, it looked to the statute as a whole as a basis for interpretation. In doing so, the Court compared §§101 and 113(a) which grants the copyright owner the “right to reproduce the [copyrighted] work in or on any kind of article, whether useful or otherwise.”

The two provisions, said the Court,

make clear that copyright protection extends to pictorial, graphic, and sculptural works regardless of whether they were created as freestanding art or as features of useful articles. The ultimate separability question, then, is whether the feature for which copyright protection is claimed would have been eligible for copyright protection as a pictorial, graphic, or sculptural work had it originally been fixed in some tangible medium other than a useful article before being applied to a useful article.

In applying its test for copyright eligibility of under §101, The Court stated, “a feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium”. What tipped the facts in Varsity’s favor appears to be that respondents have applied the designs in suit to other media of expression—different types of clothing—without replicating the uniform. The operative factor was that uniform was not replicated in the other media.

Note that the court did not address whether the designs exhibited sufficient originality or satisfied other requirements for protection. It decided only how §101 should be applied and that the designs in suit met the test enunciated. The other question was left for consideration on remand.

Justice Breyer filed a dissenting opinion, joined in by Justice Kennedy. In it, he did not criticize the §101 test as announced by the Court, but disagreed that the designs in question met the Court’s test. Mainly, he relied on the fact that the illustrations of the designs submitted with the copyright applications showed cheerleader’s uniforms. While that seemed important to Justice Breyer, it really confuses the medium with the message. He likely would have had the same objection if the illustrations showed the designs on a jacket. But what difference would it make if the designs were shown within a rectangular border, or within no border at all? In none of these cases would the illustrations replicate a useful article.

As a matter of perspective, it should be noted that Justice Breyer has long be opposed to expansive copyright protection. See, for example, The Uneasy Case for Copyright, published in the Harvard Law Review in 1970.

—–

These decisions have already generated controversy and I will finish this article by discussing two examples. First, a post in IP Watchdog (here) excoriates both the majority opinion and the dissent in Star Athletica for intellectual dishonesty and/or cluelessness. Criticism is focused on the Court as a whole in both cases (and on the majority opinions in both cases by implication), for paying lip service to the Court’s role as an “interpreter and not as a legislator”, and for proceeding to do just the opposite in patent cases. It also ridiculed Justice Breyer for likening copyright to a monopoly, accusing him of “perhaps [not understanding] that the existence of copyrights allows for creators to be able to create and then if the creation is desired in the market to make more and more content”.

A less vitriolic post by Techdirt (here) doesn’t question the value of a test for interpreting §101 but appears to worry that “even if the “artwork” is part of the utility of the object, it can still get the copyright”. It, too, emphasizes that the illustrations submitted with the copyright applications show cheerleader uniforms and it concurs in the views of Justice Breyer as to the significance of this,

The Techdirt post hints at an anti-copyright philosophy in referring to “one of our favorites, Lord Thomas Macauley, who warned of the dangers of expanding copyright into areas where it doesn’t belong”. It notes that “[y]ears ago Lord Macaulay drew attention to the problem when he described copyright in books as a “tax on readers for the purpose of giving a bounty to writers” and praises Justice Breyer for “harken[ing] back to this view. Both the majority opinion and the IP Watchdog post thoroughly discredit this unrealistic view.

The Techdirt post raises two issues that warrant discussion and which should not be dismissed as pure partisanship. First, is a concern that the decision has implications for the 3D printing industry. This is elaborated on in an amicus brief (here) filed by a group of open source advocates and companies in the 3D printing business. The latter group includes Shapeways, Inc., “a 3D printing marketplace and service company”, said to have “printed and sold millions of 3D printed objects through its [online] platform. It also includes several manufacturers of 3D printing equipment.

The brief does not propose or advocate a particular test for application of §101. What it does advocate instead, is:

that copyright in a useful article’s appearance ought to remain highly limited, wherein such appearance may be copyrighted only upon a clear showing of obvious separability and indisputable independence from the utilitarian aspects of the article.

The concern expressed in the brief is essentially that an expansive test would stifle creativity for useful products. Several examples are presented, including the home sewing industry and the 3D printing industry.

In the view of this observer, that confuses the message with the medium. What technique one uses to reproduce a design has no relevance as to whether the design should be protectable. §§106 and 113 effectively say this and make it clear that the medium is irrelevant whether it is the copyright owner doing the reproducing, or a licensee, or an infringer. Whatever medium you use to copy someone else’s protected design, it’s still an infringement.

The 3D printing industry certainly understands the value of protection for IP. A quick search indicates that at least several of those named in the brief have patents on their respective technologies. They would certainly not be happy if the law restricted the scope of their patents, or prohibited patents on their technology altogether, because their products could be used to infringe on the rights of those whose creativity is in the area of graphic arts.

The second point made by the Techdirt post and in a post by Shapeways referred to in the Techdirt post, relates to the Court’s holding stated that it doesn’t matter if separating out the artistic or graphic part destroys the utility of the article. As an example both posts refer to the so-called bird’s nest egg cup produced by Shapeways. A photo of the product is reproduced below.

 

 

The posts argue that the only artistic feature that can be extracted without destroying the utility is the bird and that independent protection of the nest would amount to protection of the design.

At first look, there may seem to some validity to this argument. However, the Court’s opinion puts any concern about this to rest. The opinion explains that the law does not require the functionality to remain intact after the artistic component is extracted. The focus of §101 is on protection of:

two-and three-dimensional “applied art.” §101. “Applied art” is art “employed in the decoration, design, or execution of useful objects,” Webster’s Third New International Dictionary 105 (1976) (emphasis added), or “those arts or crafts that have a primarily utilitarian function, or . . . the designs and decorations used in these arts,” Random House Dictionary 73 (1966) (emphasis added); see also 1 OED 576 (2d ed. 1989) (defining “applied” as “[p]ut to practical use”). An artistic feature that would be eligible for copyright protection on its own cannot lose that protection simply because it was first created as a feature of the design of a useful article, even if it makes that article more useful.

Another way to look at this is that artistic features dictated by the function of the article are not copyrightable, but function dictated by the artistic feature can be, as long as the artistic element can exist independently. In the view of this observer, the appearance of the egg cup should not be disqualified from copyright protection.

———

Overall, the effect of the SCA case will be immediate, but of limited application, especially if courts begin to provide for future damages more regularly as part of the judgments. Predictions about  the long-term effect of Star Athletica are much more difficult. Even the future of the case on remand, assuming it does not settle, is hard to predict. Overall, however, it remains to be seen if the new test expands the protection for designs of useful articles or if it just results in a more consistent evaluation among the district and appellate courts.

News & publications:
More Articles and Publications: