It’s the claim preclusion stupid: Lucky Brand Dungarees v. Marcel Fashions

June 4, 2020

In Lucky Brand Dungarees, Inc., et al. v. Marcel Fashions Group, Inc., 590 U. S. ___ (2020) the United States Supreme Court [hereinafter the Court] held that new defenses could be raised in related litigation between the same parties if later claims were different from claims of an earlier proceeding. More specifically, the Court concluded that there was no common nucleus of operative facts when infringement claims from a proceeding lawsuit were directed at different trademarks at different times, although with identical parties.

A detailed knowledge of the litigation history is crucial to understanding the Court’s decision. During the 1980s Marcel Fashions [hereinafter Marcel] federally registered the trademark “Get Lucky” for clothing. In the 1990s Lucky Brand commenced using the mark “Get Lucky “as well as other marks including the word “Lucky” for these same products. In 2003 Marcel and Lucky Brand reached a trademark infringement settlement in which (i) Lucky Brand would refrain from using “Get Lucky” while (ii) Marcel would release Lucky Brand from infringement liability for Lucky Brand’s marks comprising the word “Lucky.”  In 2005 Lucky Brand commenced a second lawsuit in which Marcel counterclaimed that Lucky Brand continued to infringe Marcel’s mark “Get Lucky.” No other marks were at issue in these 2005 counterclaims for which judgement was entered in favor of Marcel.

In 2011, Marcel commenced a third lawsuit for trademark infringement by Lucky Brand. This time liability was based upon Lucky Brand’s marks comprising the word “Lucky,” but not for the phrase “Get Lucky.” Lucky Brand asserted as a defense that this claim was settled in 2003, and this settlement absolved Lucky Brand of infringement liability for marks comprising the word “Lucky.” Marcell contended that this defense should have been litigated in the second 2005 lawsuit, and because defendants failed to do so they could not raise it in the pending 2011 litigation.  Lucky Brand replied that the 2005 claims and 2011 claims differ from each other with respect to Lucky Brand’s conduct, timeline and theories of liability.  According to Lucky Brand, because Marcel raised a claim in 2005 only for “Get Lucky” then Lucky Brand could raise this settlement defense against a new claim for exclusively Lucky Brand’s remaining marks comprising the word ‘Lucky.’

The district court dismissed Marcel’s claims, but the U. S. Court of Appeals for the Second Circuit vacated and remanded based upon the doctrine of defense preclusion. The Court reversed and remanded the Second Circuit’s decision. The Court held that defense preclusion must satisfy the requirements for claim preclusion in this particular case.  Claim preclusion prevents parties from litigating issues which could have been raised and decided in a prior action.  Claim preclusion also requires that the claims in earlier and subsequent proceedings were identical to each other, or otherwise arose from the same nucleus of operative facts. In this instance, the 2005 claim was directed exclusively at trademark infringement of “Get Lucky.” In contrast, the 2011 lawsuit was directed exclusively to purported infringement by Lucky Brand’s marks comprising the work “Lucky,” but not including the term “Get Lucky.” Because these two lawsuits were directed to completely different marks and different conduct, there was no nucleus of operative facts between them. The Court also observed that claim preclusion generally does not bar claims which arise from events postdating the filing of an initial complaint, because these events often create new operative facts supporting a different claim.

© 2020 Adrienne B. Naumann, all rights reserved. Ms. Naumann does mot sponsor or endorse the advertisements at adriennebnaumann.wordpress.com


Peaches, peanuts and statutes oh my! Georgia v. Public. Resource

May 6, 2020

The United States Supreme Court [hereinafter ‘the Court’] recently held that annotations[1] to the official Georgia state statutes are not copyright eligible. As a result, Georgia, as well as other state government entities cannot prevent third persons from publishing government documents if these documents originated from a judge or a state legislature.[2]

This story began when Public.Resource.org [hereinafter ‘Public.Resource’] posted the official Georgia state statutes/code online to the public, along with code annotations. Georgia did not distribute the annotations to the public, although it did publish the official statutes without a fee. When Public.Resource publicly posted the annotations without Georgia’s permission, Georgia sued Public.Resource for infringement of the state’s copyright in the annotations. Public.Resource then sought a declaratory judgment that the entire Georgia official code, including the annotations, were not copyright eligible. The district court held that Georgia owned the copyright for the annotations because they were not enacted into law, and therefore Public.Resource had infringed this copyright. The Eleventh Circuit reversed and rejected the district court’s decision under the judicially created government edits doctrine.[3]

Before the Court, Georgia contended that under the government edits doctrine documents created by  government officials require force of law to be copyright ineligible.  However, in this case annotations to the official state statutes/code were written by private vendor LexisNexis Group under a work for hire agreement. Therefore, the annotations did not exhibit force of law, because they consisted largely of judicial decision summaries by a private vendor and not the judicial decisions themselves. Georgia further contended that under the Copyright Act the annotations comprise original works of authorship by LexisNexis Group, and therefore are copyright eligible. However, according to Public.Resource the correct question was whether the annotations were created by the state legislature and its commission in their capacities as government officials. Public.Resource also maintained that under the government edits doctrine, written works created by government officers during their duties are never copyright eligible.

The Court agreed with Public.Resource and affirmed the judgement of the Eleventh Circuit. The Court held that the correct inquiry under the government edits doctrine is whether the written work was created by a judge or legislator in the course of their government duties. The Court further held that its own precedent did not require that these written works exhibit force of law to be copyright ineligible.  Here a state commission comprised largely of legislators supervised the creation of the annotations. The state statutes, together with the commission’s annotations, are also prominently designated and otherwise referred to as Georgia’s official state code. Any other result would disadvantage citizens  whenever they need to know, for example, which published statutes are actually unconstitutional and unenforceable according to summarized judicial decisions.

©2020 Adrienne B. Naumann, Esq., all rights reserved. Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann.wordpress.com.

[1] These annotations include summaries of judicial opinions construing corresponding statutory provisions, summaries of state attorney general opinions and related legal reference materials.

[2]  Georgia et al. v. Public.Resource.org, Inc., 590 U.S. ____ (2020).

[3] The Court created the government edits doctrine, in part by holding that judges could not assert copyright in work created in their capacity as judges. See Wheaton v. Peters, 8 Pet. 591 (1834); Banks v. Manchester, 128 U.S. 244 (1888); Callaghan v. Meyers, 128 US. 617 (1888).


Beware of whom you hook up with: Romag Fasteners v. Fossil

April 30, 2020

In Romag Fasteners, Inc. v. Fossil Group, Inc. et al., 590 U. S. __ (2020) [hereinafter ‘Romag’ and ‘Fossil’], the United States Supreme Court [hereinafter ‘the Court’] held that trademark owners in infringement lawsuits may receive lost profits without establishing willful conduct by the infringer. The decision also held that the Lanham Act does not require willfulness for such an award, and that the alternative interpretation conflicts with explicit mental state requirements for other remedies under the Act.[1]

This story begins after Fossil licensed Romag’s snap fasteners to place in leather products at Fossil’s associated manufacturer in China. Although Fossil invested in protection against counterfeiting for other vendors, it failed to do so for Romag’s fasteners. As a result, the Chinese facility produced leather goods with counterfeit fasteners displaying Romag’s mark.   After Romag sued Fossil, the jury concluded that Fossil and associated retailers infringed Romag’s trademark. However, the jury also concluded that Fossil did not do so willfully, and therefore Romag would not receive Fossil’s profits from counterfeit products. Upon a second appeal by Romag, the United States Court of Appeals for the Federal Circuit affirmed the district court’s decision to decline an award of profits.

Before the Court, Fossil contended that (i) the Lanham Act at 35 U.S.C. section 1117(a) (i) requires  willfulness for profits based upon the phrase “according to the principles of equity,” and (ii) thereby this section ushers in pre-Lanham Act decisions which required willful behavior. However, Romag contended that section 1117(a) by its own terms does not require willfulness for an award of profits due to  infringement.[2]  In contrast and as an example, the Act explicitly requires willfulness where someone dilutes a famous trademark under section 1125(c).[3] As another example, section 1114(a) — causes of action for infringement of registered marks —- does not expressly include a mental state requirement. Furthermore, “principles of equity” in section 1117(a) does not incorporate pre-Lanham Act decisions, because these decisions did not demonstrate a willfulness requirement for a profits remedy in a uniform or well established manner.

The Court vacated and remanded the Federal Circuit’s decision. In so doing it held that although the Lanham Act requires willfulness for remedies under other statutory provisions, section 1117(a)[4] does not expressly require willfulness for a profits award. The Court based this conclusion upon the Act’s plain language as well as the requirements of specific mental states for liability and remedies in other provisions of the Act. The Court also disagreed with Fossil that the phrase “subject to the principles of equity” indirectly ushers a willfulness requirement into 1117(a). Instead, if Congress had included a willfulness requirement under section 1117(a), it would have done so directly and consistently with other explicit state mental state requirements in the Act. The Court also observed that, in any event, pre-Lanham Act decisions solely support the generic conclusion that mental state is relevant for award of an appropriate remedy.

© 2020 Adrienne B. Naumann, Esq., all rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.

[1] The Lanham Act is the federal trademark statute in the United States.

[2] 15 U.S.C. section 1117(a) reads in relevant part:

.  .  . when. . . a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c). .  . shall have been established. . . the plaintiff shall be entitled.  .  . and subject to the principles of equity, to recover (1) defendant’s profits.  .  .  .”

[3] Trademark dilution is use by another party that (i) lessens the association consumer have with a well-known mark or (ii) otherwise tarnishes this mark. 35 U. S. C. section 1125(c).

[4] 15 U.S.C. section 1117(a) also refers explicitly to section 1125(a) which reads in relevant part: (1) Any person who uses in commerce any word, term.  .   . (A) likely to cause confusion .  .  .  (B).  .   . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”


Thryv is thriving! Thryv v. Click to-Call Technologies, LP

April 23, 2020

The United States Supreme Court [hereinafter ‘the Court’] recently held that timeliness of initial petitions under the inter partes review provisions [hereinafter IPR][1] of the America Invents Act cannot be appealed to a judicial court. Thryv, Inc. v. Click-to-Call Technologies, LP. et al., 590 U.S. ___ (2020)[hereinafter ‘Thryv’ and ‘Click-to-Call’]. In so holding the Court emphasized that one purpose of IPR is a more cost-effective alternative to conventional litigation, and to allow appeals of a decision to  commence an IPR would jeopardize this purpose.

This case began when the United States Patent Trial and Appeal Board [hereinafter ‘the Board’] commenced an IPR where Thryv challenged Click-to-Call’s patent. Although Click-to-Call maintained that Thryv filed its petition after the statutory deadline, the Board proceeded and ultimately cancelled thirteen of Click to-Call’s claim sentences.[2] Click-to-Call appealed to the United States Court of Appeals for the Federal Circuit [hereinafter ‘Federal Circuit’] which, after a previous remand, treated the timeliness issue as judicially reviewable. The Federal Circuit then concluded that the petition was untimely, vacated the Board’s decision and remanded for dismissal of the IPR.

Before the Court, Thryv contended that the text of  35 U.S.C. section 314(d)[3], as well as Cuozzo Speed Technologies, LLC v. Lee, 579 U.S. ___, 136 S. Ct. 2131 (2016),[4] confirms that the Board’s decision whether  to commence an IPR,  and even for reasons arising under other statute provisions, is final and non-reviewable.  According to Cuozzo, in this instance the question of untimeliness was closely tied to the application and statutes related to the “institutional decision;” consequently the Board’s decision to commence IPR was non-reviewable. In contrast, Click-to-Call maintained that appeal of an IPR commencement is prohibited under section 314(d) only where the question is whether a petitioner has a reasonable chance to prevail under section 314(a).[5] Click-to-Call also contended that the text of section 314(d) supports its position, because this text refers to “this section” and “this section” refers exclusively to section 314.

The Court vacated and remanded this case to the Federal Circuit. In so doing, the Court stated that  section 314(d) prevents an appeal of timeliness under section 315(b), and in a manner similar to Cuozzo which also addressed application of a statute other than section 314(a). The Court also stated that  section 314(d) does not limit the appeal bar to section 314(a), because Congress would have used language such as ‘reviewable under section 314(a)’ instead of ‘this section.’ Furthermore, it is clear that Congress drafted the IPR statute to entrust the decision whether to commence an IPR to the patent office. This result is distinguishable from that of SAS Institute, Inc. v. Iancu, 584 U.S. ___,128 S. Ct. 1348 (2018), because SAS Institute addresses judicial review of IPR proceedings, and not whether IPR should have commenced in the first instance.

[1] An inter partes review is an administrative process by which a patent challenger asks the U.S. Patent and Trademark Office [hereinafter ‘patent office’] to reconsider the validity of a patent.  The patent office must first agree to institute review after the patent challenger submits a petition.

[2] Claims comprise sentences at the end of a patent which designate the subject matter to be protected, and they do so in varying degrees of specificity.

[3] 35 U.S.C. section 314(d) reads in relevant part that the patent office’s “determination… whether to institute an inter partes review under this section shall be final and non-appealable.”

[4] In Cuozzo, a party contended that the Board should have refused to institute IPR, because the opposing party’s petition did not meet section 312(a)(3) requirement for patent challenges be identified with particularity. The Court disagreed and held that section 314(d) was sufficiently clear to overcome the “strong presumption in favor of judicial review” quoting Mach Mining, LLC. v EEOC, 575 U.S. 480, 486 (2015).

[5] Section 314(a) reads in relevant part that” The Director may not authorize an inter partes review …unless… there is a reasonable likelihood that the petitioner would prevail.”


BOOK OF (GENERIC?) BUSINESS: USPTO v. Booking.com

April 20, 2020

The U. S. Supreme Court [hereinafter ‘the Court’] will soon resolve whether an undisputedly generic term, combined with a domain name locator, is entitled to trademark protection in the United States.  United States Patent & Trademark Office v. Booking.com B.V., _____ U. S. ___ cert. granted Docket No. 19-46 (2020) [hereinafter ‘PTO’ and ‘Booking.com’].  Under current PTO guidelines, a generic term combined with a domain name locator is never protectable as a trademark or service mark because the locator, such as .com, merely designates an internet address.

When Booking.com originally applied for federal trademark registration, the examiner denied registration for the term ‘Booking.com’ because this term is generic.  The trademark appellate court affirmed, and so Booking.com challenged this decision in federal district court. In contrast to the trademark tribunal, the court found that Booking.com was descriptive, not generic, had acquired secondary meaning,[1] and the Fourth Circuit affirmed the district court.

Now before the Court, the PTO relies upon Goodyear India Rubber Glove Manufacturing Co. v. Goodyear Rubber Co., 128 U.S. 598 (1888) to oppose trademark registration of Booking.com. In Goodyear, the Court held that addition of a business designation such as ‘Company’ or ‘Inc.,’ when combined with the generic word for an actual product or service, does not create a protectable mark. According to the PTO, this decision is dispositive because a domain locator such as .com is completely analogous to a business entity designation. As such, recombination of a domain locator and a generic term such as ‘booking’ does not create a non-generic term.

The PTO further contends that reliance upon Booking.com’s survey evidence is wrong, because consumer recognition cannot turn a generic mark into a protectable mark. Otherwise, a party could register a specific generic term plus a domain locator, because this party invested significantly in advertising and promotion. This monopoly on a generic term would be an unfair advantage over business competitors who then could not use this generic term to describe their own products and services.

Booking.com maintains that Goodyear is not dispositive because it is superseded by the Lantham Act, because the Lantham Act incorporates a ‘primary significance test’ to determine whether a term is generic. Under this test if consumers associate a term with a specific source, and do not merely recognize the term for a general class of goods or services, then the term is descriptive and not generic. If the term is descriptive then it may be registered if there is evidence of secondary meaning, and which is provided the survey in this case. According to Booking.com, these particular surveys have been recognized as the standard for determining consumer preferences and were properly considered strong evidence in this case for trademark protection. [2]

Oral argument is scheduled in May 2020.

©2020 Adrienne B. Naumann, Esq., all rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com.

[1] Under U.S. trademark law, a descriptive mark may obtain protection if there is evidence that consumers recognize that this   mark designates a source of goods and/or services. This recognition is known as secondary meaning and a descriptive mark describes a characteristic(s) of those goods and/or services.

 

[2] Booking.com also does not accept that the law of unfair competition is a commercially satisfactory alternative, because unfair competition law does not provide the substantial benefits of trademark and service mark protection.

 


Declarations of Independence? Google v. Oracle

April 13, 2020

In Google, LLC v. Oracle America, Inc., ___ U.S. ___ (2020), cert. granted Docket No. 18-956 (Nov. 15, 2019), the United States Supreme Court [hereinafter the Court] will resolve two commercially important questions. The first question is whether instructional source code known as declarations, as well as the organization of a computerized platform, in and of themselves are entitled to copyright protection. If they are so entitled, then the next question becomes whether copying of these features from the entire platform qualifies as fair use.[1] It is undisputed that Google copied declarations and organization of Oracle’s JAVA SE computer code into its own Android computer programs without a license.  Since then Android has become a commercially successful application in mobile phones.

In Oracle’s copyright infringement lawsuit, and after a remand from the Federal Circuit Court of Appeals [hereinafter ‘Federal Circuit’] the jury found that that there was fair use of Oracle’s declarations and computerized code organization. However, upon a second appeal the Federal Circuit reversed and concluded that there was no fair use as a matter of law, in large part because Google used these JAVA SE features for a commercial purpose in Oracle’s markets.

Now before the Court, Google provides several reasons why each of Oracle’s declarations and JAVA SE organization by themselves do not qualify for copyright protection. In part, Google contends that the declarations are merely “rote” instructions analogous to a short word or phrase in English, and therefore not copyright eligible. Google also contends that there is only one manner in which to write each declaration for a particular computerized function. Consequently, and as a matter of law, the tangible expression, i.e., Oracle’s declaration code, merges with the computer program function and does not qualify for copyright protection. Google also contended that the declarations comprised methods of operation and therefore were not eligible for protection under the copyright statute.

As for fair use, Google contends that the proper question is whether its new work transformed use of Oracle’s code, and that it did so because it became part of an entire new work, i.e., Android. Google further contends that it used only a small portion of Oracle’s work and created significantly more of its own new code for Android.

In part, Oracle’s copyright eligibility position is that there is no merger because the original authors selected from unlimited creative choices for (i) writing declaration code and (ii) organizing JAVA SE.  Furthermore, Google’s characterization of declarations as unprotected functional methods of operation is misplaced, because (i) the Copyright Act protects all computer code without exception, and (ii) even though computer code is always functional.  As to fair use because Google used Oracle’s declarations and JAVA SE organization to create a commercial superseding use in Oracle’s markets then this defense fails.  Oracle further observed that the amount of code Google copied is irrelevant, because this particular code was critical to Android’s success, and it was not merely a selection of trivial code without expressive value. Also significant is that Oracle found Google’s use non-transformative, because the copied code became part of Google’s Android product with the same purpose as in JAVA SE and with no modifications to the copied code.

Stay tuned for oral argument and the  Supreme Court decision!

[1] Fair use of a portion of an author’s original work comprises a defense to copyright infringement, and fair use generally applies to research or satirical works. One factor against finding fair use is whether a portion of a work is used for the copier’s commercial purpose in the original author’s or owner’s market.


Plain old run-of-the-mill threatened misappropriation

April 6, 2020

In a previous article I addressed judicial decisions which resolved threatened trade secret misappropriation under the inevitable disclosure doctrine. In this article I address decisions about threatened misappropriation generally. This category of misdeeds, unlike those under inevitable disclosure, is explicitly recognized as an actionable claim by the federal Defend Trade Secrets Act [hereinafter ‘the Act’].

One such case under for threatened misappropriation occurred in the procedural posture of a motion to dismiss. The Oneida Group, Inc. v. Steelite International USA, Inc. et al., 2017 U. S. Dist. Lexis 206717 (S. D. N. Y. December 15, 2017).  In this decision the court (i) denied a motion to dismiss a claim under the Act when the plaintiff provided numerous specific allegations of the defendant employee’s improper activities aimed at disclosure and use. In particular, the plaintiff alleged that the defendant former employee would not return his computer, retained access to plaintiff’s files after his departure, and was one of few persons with access to plaintiff’s confidential information such as customer-specific strategies. Furthermore, defendant Steelite began selling dishes with the plaintiff’s designs, often to plaintiff’s former customers, after the defendant employee left plaintiff’s employ for Steelite.

Not surprising however, many courts address threatened trade secret misappropriation exclusively in the context of a plaintiff’s preliminary injunction motion. In Executive Consulting Group LLC v. Baggot, 2018 WL 1942762 (D. CO. April 25, 2018), the court granted a preliminary junction to prevent trade secret use and disclosure by the plaintiff’s former employee who departed for plaintiff’s competitor.  The court concluded that the plaintiff was likely to establish threatened misappropriation on the merits where evidence showed that (i) the former employee forwarded confidential information to her personal e-mail account (ii) in breach of her employment agreement with the plaintiff. This confidential information included client lists, ongoing projects, and specific strategies for select clients.  The court also found irreparable harm where the full extent of damage to the former employer was impossible to ascertain.

In a factually similar case, the court granted a preliminary injunction where the defendant former employee had signed confidentiality provisions, but nevertheless downloaded plaintiff’s confidential profit and loss statements to his personal e-mail account. This same defendant resigned from plaintiff’s employ and opened his own competing business several days thereafter. Radiant Global Logistics, Inc. v. Furstenau, Jr. et al., 2019 WL 697004 (E. D. Mich. February 20, 2019.) (claims for threatened and actual misappropriation).

A significant win for former employers occurred at the appellate level In Fres-Co Systems USA, Inc. v. Hawkins et. al., 690 Fed. Appx. 72 (3d Cir. 2017). In this case, a former employee defendant appealed from an order granting a preliminary injunction to prevent disclosure and use of his former employer’s client list. The court held that there was irreparable harm from threatened misappropriation, because the employee’s previous and subsequent employment substantially overlapped in the same industry and same geographic area. However, because the record did not comprise information on the remaining preliminary injunction requirements, the appellate court remanded the case for resolving (i) likelihood of succeeding on the merits, (ii) balancing of equities and (iii) public interest.

© 2020 Adrienne B. Naumann. All rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com


Who’s the Pirate Here? Allan v. Cooper

April 2, 2020

In Allan et al. v.  Cooper et al., 589 U.S. ____ (2020), the United States Supreme Court [hereinafter ‘the Court’] held that Congress exceeded its constitutional authority when it enacted the Copyright Remedy Clarification Act [hereinafter ‘CRCA’].  The dispute focused upon the CRCA’s abrogation of sovereign immunity whenever private persons or entities sued a non-consenting state for copyright infringement. The Court unanimously held that there was no such abrogation, because the CRCA was not validly enacted under either Article I or the Fourteenth Amendment of the United States Constitution.

The litigation initially arose when Mr. Allan and the State of North Carolina entered into a venture where Mr. Allan videotaped and photographed the remains of what was originally a ship captured by a pirate named Bluebeard. Mr. Allan thereafter obtained copyright registrations for his videos and photos of the shipwreck. However, without his authorization North Carolina published portions of his registered works online, and despite a settlement agreement North Carolina continued to post and otherwise publish his works. North Carolina contended that it was protected by sovereign immunity from copyright infringement lawsuits by private parties.

However, the district court concluded that there was no sovereign immunity because the CRCA was a valid exercise of Congress’ power to protect property, such as, copyright registered works, under section 5 of the Fourteenth Amendment. The district court also held that the CRCA’s statutory abrogation of sovereign immunity was a proportional and congruent remedy for copyright infringement by a state. However, it also held that Congress had no authority to abrogate sovereign immunity under the intellectual property clause of Article 1.

On interlocutory appeal, the Federal Court of Appeals for the Fourth Circuit [hereinafter the “Fourth Circuit] reversed, because the record was unclear

  • whether Congress relied upon section 5of the Fourteenth Amendment, and
  • in any event the CRCA’s abrogation of sovereign immunity was not a congruent and proportional remedy for the asserted section 5 injury to property.

As a result, the CRCA was invalid and North Carolina was immune from copyright infringement liability.

The Court affirmed the Fourth Circuit, and in so doing it initially addressed sovereign immunity under the intellectual property clause of Article I. The Court stated that it previously resolved the same issue in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 626 (1999). In Florida Prepaid the Court held that Congress could not rely upon Article 1 to enact the Patent Remedy Act which also purported to eliminate sovereign immunity. It also distinguished Central Virginia Community College v. Katz, 546 U.S. 356 (2006) which held that the bankruptcy clause of Article 1 abrogated sovereign immunity. However, the Court distinguished this previous holding based upon the unique history of the bankruptcy clause.

The Court also relied upon Florida Prepaid to conclude that CRCA was unconstitutional under section 5 of the Fourteenth Amendment. As in Florida Prepaid, there was a sparse record of any pattern of intentional infringing conduct by states for works of private parties. Because of this sparse record, the remedy of completely eliminating sovereign immunity was not properly tailored to a limited abrogation which impinged upon the states in a less drastic and sweeping manner.

© 2020 Adrienne B. Naumann. Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann.wordpress.com.


Inevitable Disclosure under the Federal Defend Trade Secrets Act

March 31, 2020

The Defend Trade Secrets Act is almost four years old, and not surprisingly there are now numerous several informative decisions which intersect with employment. The Act explicitly recognizes threatened misappropriation, although some decisions have relied upon state law to interpret this claim. While the Act does not explicitly recognize a claim for inevitable disclosure by a defendant, several courts have concluded that the Act implicitly recognizes inevitable disclosure as a variety of threatened misappropriation. Consequently, the inevitable disclosure doctrine has surfaced under the federal Act where state law recognizes inevitable disclosure, and two such states are Illinois and Minnesota.

In Illinois a court dismissed a claim under the Act with leave to amend where the plaintiff alleged that the defendant former employee would inevitably disclose trade secrets to his new employer. However, the court held that similar employment with a competitor dos not establish that the employee would inevitably disclose the trade secrets. Instead, this former employee could simply refrain from (i) contacting the plaintiff’s customers, and (ii) using plaintiff’s proprietary designs. Industrial Packing Supplies, Inc. v. Channell et al., 2018 WL 2560993 (N. D. Ill. June 4, 2018).

More recently in Illinois, a court granted an employee’s dismissal of his former employer’s misappropriation claim, where the employee lawfully possessed the alleged trade secrets. The court also denied that former employer’s motion for a preliminary injunction to prevent disclosure and use of these trade secrets. In doing so, the court held that mere solicitation of the plaintiff’s customers is not evidence of wrongful use or disclosure. The same was true even if the customers did in fact leave plaintiff and ‘joined forces’ with the defendant former employee. Packaging Corporation of American v. Croner, 2020 U.S.  Dist. Lexis 1845 (N.D. Ill. January 3, 2020).

In Minnesota, two competitors were each in the business of administering prescription drug plans.  When a high ranking executive left plaintiff’s employ for the competitor, the plaintiff moved for a preliminary junction to prevent disclosure and use of its trade secrets. The court initially stated that the degree of competition, similarity of employment, and the new employer’s efforts to prevent disclosure and use were the proper criteria for establishing inevitable disclosure. The court then concluded that there was no inevitable disclosure in this instance and denied a preliminary injunction because

  • there was no evidence that the employee had improperly taken trade secrets; and
  • the subsequent employer affirmatively phased in new projects to that the former employer’s trade secrets would not be used or disclosed.

Prime Therapeutics LLC v. Beatty et al., 354 F. Supp. 3d 957 (D. Minn. 2018).

However, the reader should be aware of a decision under the Act and state law in a Texas federal district court. In this case the plaintiff moved for a temporary restraining order to prevent disclosure and use of its trade secrets by a former employer. The court held that under Texas law if an employee possessing trade secrets obtains employment with a competitor, then there is threatened misappropriation if the employee is in a position to use these trade secrets. The court then granted the temporary restraining order, because irreparable injury is presumed from the threatened misappropriation. TFC Partners, Inc. v. Stratton Amenities, LLC et al., 2019 369152 (S. D. Texas January 30, 2019.)

© 2020 Adrienne B Naumann, Esq. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumann.wordpress.com


Loose Lips Sink Ships

March 27, 2020

In Broad Institute, Inc. et al. v. Regents for the University of California et al., 903 F.3d 1286 (Fed. Cir. 2018) [hereinafter ‘Broad’ and ‘UC’] the United States Court of Appeals for the Federal Circuit [hereinafter ‘the Federal Circuit’] concluded that Broad’s bioengineered molecule was not obvious in view of another bioengineered molecule created by UC. Both UC and Broad were aware that this bioengineered molecule possesses a superior ability to rapidly sever genetic molecules. If successful in eukaryotic cells (i.e., plant and animal cells) this molecule also possesses enormous commercial potential for medical applications. Because of this high-stake financial implication, Broad and UC each claimed first inventor status of the bioengineered molecule that functions within animal cells.

If either UC or Broad is the first inventor of a single invention, then that entity is the rightful owner of United States patents and patent applications for this bioengineered severing molecule in animal and plant cells. The Federal Circuit affirmed the United States Patent Trial and Appeal Board’s conclusion [hereinafter ‘the Board’] that Broad’s molecule was not obvious, or unduly similar, to UC’s molecule. More importantly for commercial purposes, the Federal Circuit also concluded that because of this non-obviousness (i) UC’s bioengineered molecule that exclusively operates within a cell-free environment, and (ii) Broad’s bioengineered molecule that operates within plant and animal cells (iii) are separate and distinct inventions which each deserve their own patent(s).

  1. Background

Broad is a research entity formed by Harvard University and the Massachusetts Institute of Technology, while UC comprises the state university system in California. Broad owns patents and patent applications for a method in which the bioengineered molecule [hereinafter ‘CRISPR-Cas9’] successfully and most efficiently severs genetic molecules in animal and plant cells.[1] UC’s patent application also requested protection for a method of severing genetic molecules with CRISPR-Cas9. In so doing UC implicitly represented that its own CRISPR-Case9 functioned within plant and animal cells as well as within cell-free environments. However, UC’s patent application only discloses technical information for CRISPR-Cas9 that is operable in a cell free environment (i.e., in vitro).  Similarly, an earlier publication by one of the UC CRISPR-Cas9 inventors only disclosed CRISPR-Cas9 that (i) solely comprised bacterial components and (ii) demonstrated severing activity exclusively in vitro [hereinafter ‘2012 Jinek’].[2]

This litigation arose at UC’s request for an interference between UC and Broad, and for the purpose of resolving which entity was the first to invent the bioengineered severing molecule [hereinafter ‘CRISPR-Cas9’] that functions within plant and animal cells.  An interference is an administrative adjudication by the U.S. Patent & Trademark Office [hereinafter ‘Patent Office] that determines the first inventor of subject matter

(i)disclosed in a patent or patent application, and

(ii)for which protection is requested, and

(iii) that comprises the same invention as the invention of another party’s patent application(s) or patent(s).

If each inventor claims the same invention as the other inventor, then the interference resolves which person is the first inventor. This first person, or the entity which employees this person, then exclusively owns the disputed invention claimed in the applications and/or patents.[3]

  1. Interference proceedings

On April 13, 2015, UC requested the Board to declare an interference between UC and Broad, because both parties requested protection for a method of using CRISPR-Cas9 that is operable in plant and animal cells. Thereafter Broad moved to terminate the interference.  In so moving, Broad contended that Broad’s method of using CRISPR-Cas9 in plant and animal cells was sufficiently different from UC’s CRISPR-Cas9 in vitro use to merit patent protection for a separate invention.

UC maintained that Broad’s method of CRISPR-Cas9 use in plant and animal cells was too unduly similar to UC’s CRISPR-Cas9 to qualify as a different invention. In this context ‘undue similarity’ is known as obviousness, and wherein obviousness is patent law term of art.  One question in an obviousness analysis is always: Whether one of ordinary skill in the same technology would conclude that there was a reasonable likelihood of success for predictably achieving the disputed invention in view of previously existing technology. The parties agreed that the activity of CRISPR-Cas9 for selectively severing genetic molecules, such as DNA, is a significant improvement over previous biochemical systems for this purpose.

In this case, UC contended that Broad’s claims[4] to operable CRISPER-Cas9 systems in plant and animal cells were obvious in view of UC’s claims, because

(i)  one of average skill in this technology could routinely develop

(ii)  operable plant and animal cell CRISPR-Cas9 systems with a reasonable expectation of success based upon in vitro systems disclosed in (a) UC’s patent application and (b) Jinek 2012.

Broad responded that soon after the 2012 Jinek publication UC’s own scientists stated that achievement of functional CRISPR-Cas9 systems in plant and animal cells was uncertain, because (a) one of ordinary skill in the technology would not have reasonably expected success in plant and animal cells (b) without significant modifications to UC’s CRISPR-Cas9 in vitro assembly.

The Board concluded that UC’s molecular assembly and Broad’s molecular assembly  sufficiently differed from each other (i.e., Broad’s CRISPR-Cas9 was non-obvious in view of UC’s CRISPR-Cas9) to each merit recognition as separate inventions. The Board then terminated the interference because there was now no need to resolve the first (earliest) inventor of a SINGLE invention.  The Board based its decision in large part upon the following:

(i)Neither party disputed that UC’s patent application exclusively disclosed CRISPR-Cas9 comprising bacterial (prokaryotic) components, and not plant or animal cell components.[5]  Furthermore, at the time of UC’s 2012 Jinek  disclosure of in vitro CRISPR-Case9, UC’s own  inventors expressed uncertainty that this in vitro CRISPR-Cas9 could function within plant or animal cells.  Although UC’s scientists testified at the interference hearing that there were no impediments to achieving Broad’s system, their earlier statements made soon after 2012 Jinek expressed doubt for achieving a successful animal cell model. The Board gave these earlier statements more weight than the scientists’ statements prepared for the interference hearing.

(ii) Even if several researchers reported success in plant and animal cells soon after the publication of 2012 Jinek, unpublished experiments do not necessarily indicate whether an ordinary skilled bioengineer would have expected success prior to actual experimental results. Instead, any rush to achieve operability in animal cells evidenced motivation, but motivation did not comprise evidence of a reasonable expectation of success in plant and animal cells.

(iii)Obviousness depends on the specific nature of previously existing subject matter which is closely related to the disputed invention. For unpredictable technologies, specific instructions for achieving similar or identical subject matter may indicate a reasonable expectation of success. However, the availability of only generalized instructions, along with evidence of failures with similar subject matter, generally indicates non-obviousness. In this instance, Broad’s evidence demonstrated that success with selected prokaryotic molecules among thousands of prokaryotic systems would not provide a reasonable expectation of success. Broad also provided evidence of specific failed attempts at transferring other prokaryotic systems into eukaryotic cells.[6] Development of these systems enjoyed limited success and required years of research and specific developed strategies. Furthermore, UC did not offer any commonality or analogy between these previous strategies and development of a CRISPR-Cas9 that functions in plant and animal cells.

(iv) UC’s examples of successful gene editing systems of other scientists were not sufficiently analogous, because they incorporated components which naturally infect eukaryotic cells, while UC’s CRISPR-Cas9 components do not. Furthermore, the Board concluded that these same examples from UC supported Broad’s position, because UC’s examples each required a unique developmental protocol for even limited success.[7] Other prokaryotic systems cited by UC as analogous examples did not provide a reasonable expectation of success, because they were smaller and less complex than UC’s CRISPR-Cas9 system.

UC’s Appeal to Federal Circuit

According to UC, the Board applied an incorrect legal standard that (i) required previous references to comprise specific instructions for achieving an invention (ii) to support a finding of obviousness.  UC maintained that the law of obviousness does not require that specific instructions be present in prior publications for an invention to be obvious.  UC also contended that the Board improperly relied upon statements of UC’s inventors and professional witness made shortly after the 2012 Jinek publication. According to UC, these prior statements actually established that an ordinary scientist in this technology would have reasonably expected UC’s CRISPR-Cas9 to function in plant and animal cells. Consequently, the Board should have credited more weight to actual success of scientists shortly after Jinek 2012 was released, because this success evidenced the routine predictable nature of Broad’s CRISPR-Cas9 in plant and animal cells.

UC further contended that success by other scientists supported a finding of simultaneous invention.   According to UC soon after the publication of 2012 Jinek six independent research groups implemented UC’s operable CRISPR-Cas9 system

(i) within animal cells, and

(ii) within a few months of U.C.’s initial publication about this invention, and

(iii) by implementing conventional biochemical techniques.

According to UC this simultaneous invention evidenced undue similarity of Broad’s invention (i.e., obviousness)to UC’s CRISPR-Cas9.

UC also contended that Broad did not establish that it was entitled to December 12, 2012 as its earliest patent application submission date.  In support of this contention, UC observed that Broad relied upon a provisional United States patent application with a filing date of December 12, 2012.[8] According to UC, Broad had never established that its provisional application was entitled to this early date for the purpose of excluding earlier references from the obviousness analysis.[9]

Broad’s Response

Broad replied that under federal administrative law, the Board’s decision was sufficiently supported by substantial factual evidence that was credible, reliable and relevant.[10] Under this standard the Board found that the statements of UC’s own inventors  in 2012 clearly established that there was no reasonable expectation of success for UC’s CRISPR-Cas9 operation in plant or animal cells. These earlier spontaneous statements were not made in anticipation of litigation, and so the Board properly found them to comprise the more credible and reliable evidence. Also, according to Broad, UC’s own evidence demonstrated that a successful transfer of a bacterial system into an animal cell required extensive development and surmounting numerous technical pitfalls.

As to UC’s simultaneous invention contention, Broad’s position was that UC had forfeited this argument because it was not raised before the Board. In any event, the Board had already addressed the merits of simultaneous invention under its reasonable expectation of success analysis. Under this analysis the Board properly concluded that these unpublished reports resulted from motivation and not from a reasonable expectation of success.  This motivation to further develop was separate and distinct from a reasonable expectation of success that UC’s in vitro prokaryotic CRISPR-Cas9 would operate in plant and animal cells. 

The Federal Circuit Decision

The Federal Circuit affirmed the Board’s decision to terminate the interference, because Broad’s CRISPR-Cas9 which was operable in plant and animal cells was not obvious in view of UC’s prokaryotic CRISPR-Cas9 that operated exclusively in vitro. The court also agreed that there were two patently distinct inventions, and that there was no reasonable expectation of success that one of ordinary skill in this technology could predictably develop Broad’s molecular system from that of UC. In reaching its conclusions the court held that substantial evidence supported the Board’s decision. The court also found that this evidence comprising expert testimony,  statements of the UC inventors themselves, the 2012 Jinek publication and examples of prior art failures was credible, reliable and relevant.

The court observed that Broad’s expert had testified that biological differences between bacteria(prokaryotes) and plant/animal cells (eukaryotes) result in unpredictability as to whether UC’s prokaryotic CRISPR-Cas9 would operate successfully in plant or animal cells. The court also observed that in September 2012, UC’s own expert witness had recognized that these differences could result in difficulties implementing UC’s CRISPR-Cas9 within eukaryotic cells. Furthermore, according to her statements contemporaneously with the 2012 Jinek publication,  one of UC’s inventors had experienced numerous frustrations in adapting UC’s CRISPR-Cas9 to animal cells and expressed her doubts for achieving this adaptation.

The court also looked at UC’s evidence for what UC characterized as analogous examples of predictable development of earlier gene editing systems. As did the Board, the court concluded that at least two gene editing molecular assemblies relied upon by UC were not relevant, because they comprised plant or animal cell components while UC’s CRISPR-Cas9 exclusively comprises bacterial (prokaryotic) components.  The court also confirmed that Broad effectively discounted UC’s examples of successful transfer of bacterial technologies for gene editing because of (i) their limited efficacy and (ii) requirement for specific innovations to successfully operate in animal cells. Based upon this evidence the court then concluded that Broad had credibly established that successful transfer of bacterial systems to plant or animal cells remained extremely limited.

The court then addressed UC’s contention that the Board erred in adopting a ‘specific instruction in the prior art’ test to reach a conclusion of non-obviousness in view of UC’s CRISPR-Cas9. The court found that the Board had acknowledged that certainty in the art is not necessary, and that the Board had applied the correct legal standard.  The court also found that the Board did not find non-obviousness solely on absence of specific instructions in the art for an operable CRISPR-Cas9 in plant or animal cells.  Instead, the Board looked at other factors such as industry failures for transfers of other gene editing systems, as well as other prokaryotic molecular systems, to plant and animal cells.

Next, the court agreed with the Board that the degree of predictability, and therefore a reasonable expectation of success, is determined on a technology by technology basis.  In this instance, the prior technology offered as evidence by both UC and Broad established that gene editing results were highly unpredictable. As a result, more specific instructions, and not merely generalized instructions that might contain prior laboratory techniques, were necessary for a reasonable expectation of success in this particular biotechnology.

Although the court did not consider all of UC’s remaining arguments, it did address UC’s evidence of simultaneous invention.  The court found that the Board had considered this evidence under the reasonable expectation of success approach, and that its relevance was merely one factor in the totality of circumstances. It also found that the Board correctly regarded simultaneous invention as exclusively evidencing motivation to achieve a successful CRISPR-Cas9 in plant or animal cells. Even if it existed this motivation did not establish that scientists experienced a reasonable expectation of success prior to attaining their goals.

Discussion and Conclusions

There is a constant tension in university research communities between scientific collaboration and the proprietary nature of research results. This case is an example of how statements of university inventors seriously damaged UC’s professional and financial interests in an unanticipated manner. These statements, although not the only factor in the court’s decision, nevertheless comprised significant evidence on which both the Board and Federal Circuit relied.

In addition to statements of UC’s inventors prior to the proceedings, even more damaging was the 2012 Jinek publication which supported these statements. According to UC, subsequent success in plant and animal cells, including that of Broad, relied upon the bacterial CRISPR-Cas9 technical information disclosed within this publication. The question then becomes whether this UC article should have even been published prior to UC’s own success in plant and animal cells.  After all, the possibility clearly existed that third parties could use the  publication information to develop another CRISPR-Cas9 system and then submit its own patent applications.[11] It  appears therefore, that without the publicized nature of UC’s work, there may never have been any statements which defeated UC in the Federal Circuit.[12]

However, the reality is that most university faculty and research professionals rely upon traditional research publications and the significance thereof, to augment resumes, employment opportunities, tenure and promotions. As a result, any solution for avoiding UC’s outcome inevitably rests with the university or other institution by which the researchers are employed. The solution for preventing UC’s outcome in entities with substantial commercially oriented research activities is best addressed by a risk/financial resources analysis. For example, how does a university affirmatively yet effectively manage risk of multi-million dollars lost in licensing revenue because of ‘information leaks,’ but in a cost-effective manner?

Some faculty and university sponsored startups already rely upon privately retained outside attorneys for advice on these matters. However, this legal advice is expensive on a long-term basis and becomes problematic depending upon the finances of each research group or individual. If the university assumes the risk mitigation task, then ideally whenever a research article is to be publicly distributed, there would be a (i) a prior review of the article by the legal department and (ii) a memorandum from the university legal department about risks of technical disclosures to outside research entities. However, there may be too many articles and research projects for a truly comprehensive process, and publication of time sensitive articles could be delayed to the detriment of the authors.

Furthermore, even if such a comprehensive approach were possible, a university legal department cannot realistically predict or prevent all possible confidentiality breaches. The university attorneys also most likely do not possess all the technical expertise to recognize potential financial injuries.  A potential solution is that the university retain outside counsel with specific technical expertise sets for all its research facilities, but the cost could be prohibitively high.

Therefore, the author proposes a pro-active approach with an oversight significantly smaller in scale.  For example, the university could identify which of its departments historically has provided the most commercially successful inventions.   In these departments a two-step procedure would then be implemented by the university legal department.  The first step would be a periodic meeting with an intellectual property attorney together with the relevant research staff and/faculty. The researchers would then present the status of their work, as well as the existence of communications about their work with colleagues outside the university.  If there is a potential for commercial success, the researcher should be encouraged to provide reasons that particular product or method would be commercial successful.

The second step of the proposed risk mitigation comprises review of articles or other publications from these selected research departments. If a researcher reports the preparation of a technical article for publication during a meeting, then the researcher should submit the article for legal review prior to its publication. However, this two-step process should be included in employment agreements for new faculty and researchers, as well as an amendment to employee agreements of those previously engaged by the university. The process should also be included in a university’s official employee handbook so everyone is aware and all persons are aware of these requirements.

 

Footnotes

[1]  Humans are within the larger classification of living organisms known as eukaryotes. There are three classifications of living organisms: bacteria, eukaryotes and archaea. Bacteria and archaea are each also referred to as ‘prokaryotes.’ CRISPR systems occur naturally only in prokaryotes such as some bacteria and most archaea. The invention at issue here addresses Type II CRISPR systems, and which are also referenced as CRISPR-Cas9 systems. CRISPR-Cas9 occurs naturally in prokaryotes, but not in eukaryotes (i.e., plant and animal cells)

[2] In vitro data originates from experiments conducted in a cell free environment. The article published in 2012 was written by Dr. Martin Jinek, Ph.D. who is a co-inventor of the UC CRISPR-Case9 molecular assembly. The 2012 Jinek article disclosed the UC’s inventors’ CRISPR-Cas9 in vitro results which were achieved in collaboration with other institutions. Jinek, Martin et al. “A Programmable Dual-RNA-guided DNA Endonuclease in Adaptive Bacterial Immunity” Science Vol. 337:816-821 (August 17, 2012); Public Affairs, “UC now holds largest CRISPR-Cas9 patent portfolio” Berkeley News October 1, 2019 at https://news.berkeley.edu/2019/10/01/uc-now-holds-largest crispr-ca…

[3] The America Invents Act does not authorize interferences, because under the Act the ‘first person to invent’ is not entitled to a patent. Instead, the person entitled to the patent is now presumptively the first person to apply to the United States Patent Office. See University of California et al.  v. Broad Institute, Inc. et. al., supra at 903 F. 3d at 1291 n.2. The case which is the subject of this article proceeded under the earlier U. S. patent statute which awards first to invent, and not first to file.

[4] Claims are sentences at the end of a United States patent application or patent that describe the invention in varying degrees of specificity. These sentences thereby designate the scope of patent protection that the applicant requests with varying degrees of specificity. Generally, if a claim sentence is (i) longer in text and (ii)describes numerous invention features, then the scope of protection accorded to the invention will be smaller.

[5] However, Broad contended that the CRISPR-Cas9 genetic component that UC disclosed in 2012 Jinek was biochemically distinct from the CRISPR-Cas9 genetic component of Broad’s (i) January 2012 National Institutes of Health Proposal, and (ii) disclosure in Cong, L. et al., “Multiplex genome engineering using CRISPR/Cas systems.” Science 2013 Feb. 15:339 (*121): 819-23. Appellees’ Brief filed October 25, 2018 pp. 24-25.

[6] These three prokaryotic systems that contained variants of genetic molecules (RNA) and operated in vitro were ribozymes, riboswitches and Group II introns.

[7]  The molecular systems contain ZFN and TALENS proteins, and these proteins comprise hybrids between prokaryotic and eukaryotic cell components.

[8]  Inventors may submit a U.S. provisional patent application for an initial semblance of an early filing date for a subsequent utility application. Provisional applications are not examined on the merits by the patent office, require fewer non-attorney patent office fees and never become full-fledged patents. For the risks of relying upon the filing date of a provisional application  see New Railhead Mfg. LLC v. Vermeer Mfg. Co., 298 F.3d 1290, 1294 (Fed. Cir. 2002).

[9] Under U.S. patent law, both a full-fledged U.S. utility patent application and a provisional patent application must comply with U.S. patent law and thereby

  • enabled a person of average skill in this technology to replicate the invention without undue experimentation, and
  • provides sufficient technical detail to establish that the Broad inventor(s) possessed all invention’s features and design at the time the provisional application was filed.

 

[10] Substantial evidence is the standard of review for a federal administrative agency’s factual findings. Substantial evidence is evidence that a reasonable mind might accept as adequate to support a conclusion. Substantial evidence has also been defined as that which a reasonable mind would accept as sufficient to support a particular conclusion and consists of more than a mere scintilla, but it may also comprise somewhat less than a preponderance.  Black H.C., Black’s Law Dictionary 1281 [5th Ed. West Publishing Co.: St. Paul Minn. 1979].

[11] Currently, under the AIA the right to a patent presumptively belongs to the first person to file the application for a particular invention.  As a result, a third party could benefit from another’s published work and then submit a patent application for a closely related invention, or even the same invention, prior the original true inventor.

[12] According to UC “all researchers’ experiments— including Broad’s—took UC’s disclosures in 2012 Jinek as their jumping off point.” Brief for Appellants filed July 25, 2018, page 41, first full paragraph.