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Litigation News and Analysis • Legislation • Regulation • Expert Commentary

INTELLECTUAL PROPERTYWestlaw Journal

41391930

VOLUME 20, ISSUE 4 / JUNE 12, 2013

CERTIORARI

9 Justices agree to hear Lexmark false-advertising case

Lexmark Int’l v. Static Control Components (U.S.)

COPYRIGHT INFRINGEMENT

10 Justin Bieber, Usher sued for $10 million for copyright infringement

Copeland v. Bieber (E.D. Va.)

11 Singer accuses country music stars of copyright infringement

Bowen v. Paisley (M.D. Tenn.)

PATENTS

12 Obama takes action to curb frivolous patent lawsuits

TRADEMARK INFRINGEMENT

13 Flea market owner must pay $5 million for contributory infringement

Coach Inc. v. Goodfellow (6th Cir.)

15 Philip Morris accuses Bronx delis of selling fake Marlboros

Philip Morris USA v. 3473 Quick Stop Inc. (S.D.N.Y.)

16 Trademark suit failed to show video game title infringed company name

Rebellion Dev. v. Stardock Entmt. (E.D. Mich.)

17 Reynolds says online e-cig vendor stole Eclipse trademark

Reynolds Innovations v. Snowcap Distrib. Corp. (M.D.N.C.)

TRADE SECRETS

18 Panel urges tougher U.S. response to trade secret theft

SEE PAGE 7

CONTINUED ON PAGE 19

COMMENTARY

International inconsistencies in patent prosecution: 5 ways to avoid inequitable conductAttorney Wesley Overson of Morrison & Foerster explains several steps that patent applicants can take to ensure that they do not face charges of inequitable conduct in the process of obtaining a patent.

SEE PAGE 3

REUTERS/Brendan McDermid

The U.S. Supreme Court is being asked to consider whether reverse payment settlements are lawful.

COMMENTARY

Reverse payments, generic and brand-name drugs, and consumer impactIntellectual property and patent attorney Kirby Drake of Klemchuk Kubasta LLP offers her perspective on the current state of “reverse payments” between drug companies. The payments are meant to keep generic competition away from name-brand originator drugs. Drake considers whether the U.S. Supreme Court may soon offer the final word on the legality of the practice.


Appeals court revives trademark claims against Oprah WinfreyBy Deborah Nathan, Senior Legal Editor

Media mogul Oprah Winfrey is once again facing allegations of trademark infringement now that a federal appeals court has reversed a judge’s decision to dismiss a motivational program owner’s claims against her.

Kelly-Brown et al. v. Winfrey et al., No. 12-1207-cv, 2013 WL 2360999 (2d Cir. May 31, 2013).

The 2nd U.S. Circuit Court of Appeals said it disagreed with the judge’s conclusion that Winfrey demonstrated fair use of the “Own

Your Power” mark claimed by plaintiff Simone Kelly-Brown.

“The biggest victory is one for the small-business owner,” Kelly-Brown’s attorney, Patricia

© 2013 Thomson Reuters2 | WESTLAW JOURNAL n INTELLECTUAL PROPERTY

TABLE OF CONTENTSWestlaw Journal Intellectual PropertyPublished since August 1989

Publisher: Mary Ellen Fox

Executive Editor: Donna M. Higgins

Managing Editor: Donna M. Higgins

Senior Attorney Editor: Deborah Nathan, [email protected]

Managing Desk Editor: Robert W. McSherry

Senior Desk Editor: Jennifer McCreary

Desk Editor: Sydney Pendleton

Westlaw Journal Intellectual Property (ISSN 2155-0913) is published biweekly by Thomson Reuters.

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How to Find Documents on WestlawThe Westlaw number of any opinion or trial filing is listed at the bottom of each article available. The numbers are configured like this: 2013 WL 000000. Sign in to Westlaw and on the “Welcome to Westlaw” page, type the Westlaw number into the box at the top left that says “Find this document by citation” and click on “Go.”

Trademark Infringement: Kelly-Brown v. WinfreyAppeals court revives trademark claims against Oprah Winfrey (2d Cir.) ........................................................1

Commentary: By Kirby Drake, Esq., Klemchuk Kubasta LLPReverse payments, generic and brand-name drugs, and consumer impact .................................................. 3

News in Brief ......................................................................................................................................................6

Commentary: By Wesley Overson, Esq., Morrison & FoersterInternational inconsistencies in patent prosecution: 5 ways to avoid inequitable conduct ........................... 7

Certiorari: Lexmark Int’l v. Static Control ComponentsJustices agree to hear Lexmark false-advertising case (U.S.) ..........................................................................9

Copyright Infringement: Copeland v. BieberJustin Bieber, Usher sued for $10 million for copyright infringement (E.D. Va.) ........................................... 10

Copyright Infringement: Bowen v. PaisleySinger accuses country music stars of copyright infringement (M.D. Tenn.) ..................................................11

PatentsObama takes action to curb frivolous patent lawsuits ....................................................................................12

Trademark Infringement: Coach Inc. v. GoodfellowFlea market owner must pay $5 million for contributory infringement (6th Cir.) ..........................................13

Trademark Infringement: Philip Morris USA v. 3473 Quick Stop Inc.Philip Morris accuses Bronx delis of selling fake Marlboros (S.D.N.Y.) ...........................................................15

Trademark Infringement: Rebellion Dev. v. Stardock Entmt.Trademark suit failed to show video game title infringed company name (E.D. Mich.) ................................16

Trademark Infringement: Reynolds Innovations v. Snowcap Distrib. Corp.Reynolds says online e-cig vendor stole Eclipse trademark (M.D.N.C.) ......................................................... 17

Trade SecretsPanel urges tougher U.S. response to trade secret theft ................................................................................18

Recently Filed Complaints from Westlaw Court Wire ................................................................................20

Case and Document Index ...............................................................................................................................21

JUNE 12, 2013 n VOLUME 20 n ISSUE 4 | 3© 2013 Thomson Reuters

COMMENTARY

Reverse payments, generic and brand-name drugs, and consumer impactBy Kirby Drake, Esq. Klemchuk Kubasta LLP

Kirby Drake, a partner with Klemchuk Kubasta LLP in Dallas, focuses on all aspects of intellectual property litigation and patent prosecution. Skilled in patent preparation with emphasis on chemical and computer-related matters, she is registered to practice before the U.S. Patent and Trademark Office. In addition to her law degree, Drake has a B.S. in chemistry from Duke University and is an active member of the American Chemical Society, where she serves in a number of leadership roles.

Patent, regulatory and antitrust issues may intersect when generic and brand-name drugs are both available on the market for consumers even when patent protection still attaches to the brand-name drug. This availability of both generic and brand-name drugs can sometimes arise based on reverse payment settlements.

Reverse payment settlements have been a source of controversy in the pharmaceutical industry as they arise when a brand-name-drug manufacturer makes a payment to a generic-drug company to postpone for a period of years any marketing or sale of the generic version of the brand-name drug.

In order to understand reverse payment settlements and the issues currently being addressed by the U.S. Supreme Court, some background on the regulations related to making both brand-name and generic drugs available on the market will be provided.

With a backdrop of what reverse payment settlements are, the arguments in favor of and against reverse payment settlements will be addressed. Finally, this commentary will provide some evaluations about the future of reverse payment settlements and the effects on the pharmaceutical industry and consumers.

THE NDA AND ANDA PROCESS

The Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 9, requires a manufacturer of a new drug to seek approval from the Food

and Drug Administration by filing a new drug application before placing the drug on the market. If the drug is approved, it is generally referred to as a “brand name” drug and will then be listed in the Approved Drug Products with Therapeutic Equivalence and Evaluations Book (aka the Orange Book).

When an applicant submits an NDA, it must submit information about the patents believed to cover the brand-name drug. If the FDA approves the brand-name drug, the manufacturer is granted exclusive marketing rights if the statutory requirements are met.1 This exclusivity was meant to promote a balance between new drug innovation and generic drug competition.

If a generic-drug maker wishes to make a generic version of a brand-name drug listed in the Orange Book, the Drug Price Competition and Patent Term Restoration Act, 21 U.S.C. § 355(b) (known as the Hatch-Waxman Act), provides that the generics maker can file an abbreviated new drug application to get its drug on the market before the expiration of the term of patents listed in the Orange Book as covering the brand-name drug.

The ANDA process was put into place to encourage earlier marketing of generic

drugs and, perhaps even more so, to give consumers the benefit of lower prices to obtain such generic drugs. The ANDA process essentially allows the generics maker to prepare its generic drug to be marketed without providing separate proof that the product is safe and effective for use (which a

The FTC contends that reverse payment settlements should be declared unlawful as a

general rule because they are anti-competitive.

brand-name drug maker must show to have its product included in the Orange Book).

Instead, the generics maker merely must show that the generic drug has the same active ingredients as the brand-name drug and will be “bioequivalent” (that is, will have the same effect on the human body as the brand-name drug).

In filing its ANDA, a generics maker must explain how its proposed drug can be marketed without infringing the patents listed in the Orange Book related to the brand-name drug. Generics makers generally elect to file a Paragraph IV certi-fication that alleges that one or more of the patents listed in the Orange Book related to the brand-name drug “is invalid or will not be infringed by the manufacture, use or sale of the [generic] drug.”2

If a generics maker files an ANDA making these types of certifications, this is considered to be a statutory act of patent infringement. When a Paragraph IV certification is made, the brand-name-drug maker holding the patents at issue has 45 days to file a patent infringement lawsuit against the generics maker.

If the generics maker is successful in the lawsuit, it may enter the market earlier than the term of the patent(s) at issue, but if it is unsuccessful, the generic drug must remain off the market until the patent expiration.

4 | WESTLAW JOURNAL n INTELLECTUAL PROPERTY © 2013 Thomson Reuters

RISKS AND REWARDS IN ANDA LITIGATION

ANDA litigation provides potential risks as well as rewards for both manufacturers of both brand-name and generic drugs. Although Hatch-Waxman was designed not to foment litigation for its own sake, but “to speed the introduction of low-cost generic drugs to market,”3 when a generics maker files an ANDA, it tends to result in protracted litigation.

This may be because the brand-name-drug maker is incentivized to attempt to keep the generic drug off the market until the patent expiration and can only do so through ANDA litigation when it is triggered. Further, if the brand-name-drug maker files a lawsuit, the FDA automatically stays its approval process with respect to the generic drug for 30 months. However, there are risks for the brand-name-drug maker in filing the lawsuit.

For example, it runs the risk that its patent(s) may be declared invalid or unenforceable during the litigation. If the patent is not infringed, valid or enforceable, there may be little or no bar for the generics maker to enter the market and compete against the brand-name drug. This risk is why some (such as the Federal Trade Commission) believe that brand-name-drug makers enter into reverse payment settlements.

If the generics maker loses the ANDA litigation, it could be kept out of the market for longer than a reverse payment settlement may provide because the generics maker that loses ANDA litigation cannot market its product until the patent expires.

In contrast, if a reverse payment settlement is reached, consumers may have access to the generic drug before the patent expires, thereby fostering competition even within the boundaries of the patent term. The risk-reward for a generics maker is particularly evident when considering that generics companies’ “win” rate in ANDA litigation is slightly less than 50 percent.4

REVERSE PAYMENT SETTLEMENT AGREEMENTS

Reverse payment patent settlements occur when the brand-name-drug maker (patent holder) agrees to make a payment to the generics maker to resolve ANDA litigation. In exchange for the payment, the generics maker may agree to not enter the market for a period of time and generally may agree not

to continue to challenge the scope, validity or enforceability of the patents.

It is a reverse payment because the payment is moving in the opposite direction than what is typically seen in patent infringement litigation (when an accused infringer pays the patent holder for a license to provide its product in the marketplace).

(about $19 million to $30 million per year), likely because Watson was the first to file an ANDA and would have been given a period of generic exclusivity if it had successfully challenged Solvay’s patent.

The parties reported the settlements to the FTC (as they are required to do), but the FTC objected, alleging the settlements

The FTC says these settlements directly restrict output and raise prices and are therefore

anti-competitive and harmful to consumers.

While there is an automatic 30-month stay of FDA approval of the generic drug when a brand-name-drug maker files an ANDA lawsuit, ANDA litigation can last for several years, sometimes beyond the length of the stay. As such, the brand-name-drug maker could run the risk that the FDA may approve the generic drug before the litigation resolves.

This FDA approval could occur regardless of whether the proposed generic drug infringes the patent that is the subject of the ANDA litigation or whether the patent is valid. To mitigate this risk, brand-name-drug makers may sometimes elect to enter into reverse payment settlement agreements before the expiration of the 30-month stay.

This was the case with ANDA litigation related to AndroGel, a testosterone replacement therapy offered by Solvay Pharmaceuticals (now known as AbbVie Products, a subsidiary of Abbott Laboratories).

CHALLENGES IN THE SUPREME COURT

Watson Pharmaceuticals Inc., Paddock Laboratories Inc. and Par Pharmaceuticals Co. each sought to introduce generic versions of AndroGel into the market. Each filed ANDAs and, in response, Solvay filed ANDA litigation.

After some time, the parties entered into a settlement to resolve the litigation. The generics makers agreed not to enter the market with generic AndroGel until Aug. 31, 2015, and in return, Solvay agreed to pay $10 million a year for six years and an additional $2 million a year for backup manufacturing assistance to Par/Paddock. Solvay agreed to share some of its profits with Watson through September 2015

were unlawful attempts to defer generic competition and allowed the parties to share monopoly profits at consumers’ expense. The U.S. Supreme Court is now being asked to consider in FTC v. Actavis Inc., No. 12-416, oral argument held (U.S. Mar. 25, 2013), whether these types of reverse payments made to end ANDA litigation are lawful.

THE FTC’S POSITION

The FTC contends that reverse payment settlements should be declared unlawful as a general rule because they are anti-competitive. The agency says that declaring these settlements unlawful will serve the purposes of patent law and competition law.

Specifically, the FTC claims these settlements directly restrict output and raise prices and are therefore anti-competitive and harmful to consumers. Further, the FTC argues that the patent laws do not give a patent holder the right to induce potential competitors to stay out of the market.

ARGUMENTS FOR REVERSE PAYMENT SETTLEMENTS

Some call reverse payment settlements “pay for delay,” but this is a somewhat unfair moniker insofar as generics makers often are able to enter the market through these types of settlements faster than they would have been able to do so if they had been unsuccessful in the ANDA litigation.

In fact, Hatch-Waxman explicitly recognizes settlement as a valid basis for a court to lift the patent-based restrictions that bar the FDA from approving a generic-drug application.5 Thus, the explicit terms of Hatch-Waxman recognize settlements as a valid basis for terminating the patent challenge and authorizing FDA approval of a generic drug prior to patent expiration.


Allowing the generic product to come to market before the patent expires therefore may provide a pro-competitive result, even if the generics maker is somehow compensated for agreeing to a compromise in its market entry date.

For example, Teva Pharmaceuticals, a generics maker, estimated in 2009 that in total, its reverse payment settlements had “removed 138 years of monopoly protection” and thereby provided $128 billion in savings to consumers through early generic entry.6

In another example, generic equivalents of Lipitor, the best-selling prescription medicine of all time, became available in November 2011 because of reverse payment settlements. If, instead of settling, the parties had proceeded with the patent litigation and the brand-name-drug maker had won, generic entry would not have occurred until early 2017. As such, this earlier entry of a lower-cost alternative is projected to save consumers as much as $4.5 billion per year by 2014.

Those in favor of allowing reverse payment settlements (both brand-name and generic-drug makers) generally counter the FTC’s position by arguing that the settlements should not be deemed unlawful unless “courts can predict with confidence that [a patent] would be invalidated in all or almost all instances under the rule of reason.”7

Those opposing the FTC’s position also allege that the declaring these agreements unlawful may lead to consumer harm in the form of fewer generic patent challenges and reduced innovation. They also contend that the FTC’s position seems to treat patents as though they are presumptively invalid even though the Patent Act provides that a patent is “presumed valid.”8

ARGUMENTS AGAINST REVERSE PAYMENT SETTLEMENTS

While many brand-name and generic-drug makers have taken the position that reverse settlement payments should be permitted, there are some that disagree, such as Apotex Inc., a prominent generics maker.

Apotex’s position focuses on the idea that the first generics maker to file an ANDA related to a given brand-name drug is likely to benefit the greatest from reverse payment settlements that may arise in ANDA litigation insofar as the first ANDA filer generally gets the benefit of market exclusivity for 180

days if it is successful in ANDA litigation. Apotex alleges that if a settlement is reached between the patent holder and the first filer, it presents a barrier to entry for later-filing generics makers because the likelihood is that the first filer maintains the 180-day exclusivity despite the settlement of the ANDA litigation. This window of exclusivity for the first filer may be worth millions of dollars.

Apotex also is troubled by reverse payment settlements providing that the settling generics maker may immediately enter the market if another generics maker is later successful in invalidating the patent. Apotex contends that this discourages other generics makers from challenging a patent that is subject to a reverse payment settlement. However, Apotex is a generics maker that has done so.

For example, in Apotex Inc. v. Cephalon Inc., the company challenged a patent that was subject to several reverse payment settlements.9 Apotex has alleged that there were unique incentives to challenge this patent, but regardless, generics makers still do make such challenges even when reverse payment settlements are in place.

Others question whether reverse payment settlements are merely a vehicle for brand-name and generics makers to share an increased pool of profits. Further, reverse payment settlements can be detrimental to consumers by allowing brand-name and generics makers to agree to keep lower-cost generic drugs off the market.

WHAT’S NEXT?

While consumers would like to see lower prices for drugs and more availability of drugs, it is hard to deny that drug development comes at a cost. The average drug takes 10 to 15 years to develop at a cost of more than $1.3 billion.

The patenting process and the NDA process have traditionally given brand-name-drug makers incentives to incur the time and cost to bring a drug to market. If reverse payment settlements are deemed unlawful, and the parties can only settle by agreeing

to a compromise generic entry date but no consideration may be provided to bridge the gap in opinions over the strength and coverage of the patent at issue, it may be increasingly unlikely that any settlements will be reached.

A patent grants the patent holder a limited monopoly, so reverse payment settlements raise the question of whether a patent holder should have the ability to enter into such agreements to enforce its monopoly. Patents by their very nature allow for exclusion of would-be competitors unless the Patent and Trademark Office or the courts fully and finally conclude otherwise.

Accordingly, the Supreme Court may indirectly consider whether brand-name-drug makers holding patents are being (or should be) afforded fewer rights under the patent laws because they are selling drugs when patent holders in other industries are not being similarly restricted by the FTC.

Another unresolved question is whether a reverse payment settlement should be viewed any differently from a patent license agreement. With a typical patent license agreement, the licensee wants to use the patented invention for a fee, while, with a

Patent laws do not give a patent holder the right to induce potential competitors to stay

out of the market, the FTC says.

reverse payment settlement, the alleged infringer (the generics maker) agrees not to use the patented invention for a fee.

Yet another question is whether the courts should really be considering this issue at all, as it appears to be more public-policy-related and therefore an issue that Congress should address. However, legislators have not taken action though having had several opportunities to do so.

For example, Congress enacted sweeping patent litigation in the past several years but elected not to address reverse payment settlements. Further, Congress has had a chance to address through other pieces of legislation, including the Preserve Access to Affordable Generics Act, which would have made it illegal for a branded pharmaceutical company to settle a claim in Hatch-Waxman litigation by giving anything of value to the generics company unless approved by the FTC.


However, this legislation did not pass, and has not passed, despite having been raised on numerous occasions since 2006.

Ultimately, it remains to be seen how the Supreme Court will resolve the question of whether reverse payment settlements should be permitted, but from what has been revealed from the court’s questioning, the justices appear to be conflicted on the issue, just like the pharmaceutical industry and the general public. The high court should issue its decision by early summer. WJ

NOTES1 21 C.F.R. § 314.108.

2 21 U.S.C. § 355(j)(2)(A)(vii)(IV).

3 Caraco Pharm. Labs. v. Novo Nordisk A/S, 132 S. Ct. 1670, 1676 (2012).

4 See Generic Pharmaceutical Association Amicus Curiae Brief, at 5, FTC v. Actavis Inc., No. 12-416, amicus brief filed (U.S. Feb. 28, 2013), available at http://sblog.s3.amazonaws.com/wp-content/uploads/2013/03/12-416-bsac-Generic-Pharmaceutical-Association1.pdf.

5 21 U.S.C. §§ 355(j)(5)(B)(iii)(I), (II).

6 See Press Release, Teva Pharms. USA, Teva Pharmaceuticals Issues Statement in Response to Federal Trade Commission Claims on Patent Settlements (June 24, 2009), available at http://tinyurl.com/TevaStatement.

7 Leather Prods. v. PSKS Inc., 551 U.S. 877 (2007).

8 35 U.S.C. § 282(a).

9 No. 2:06-cv-2768, 2011 WL 6090696 (E.D. Pa. Nov. 7, 2011), No. 12-1417, 500 Fed. Appx. 959 (Fed. Cir. Apr. 8, 2013).

NEWS IN BRIEF

LEGAL SOFTWARE COMPETITORS CONTINUE FIGHT IN FLORIDA

Finding that unresolved factual issues remain in law firm software provider Probill Inc.’s trade-secrets and unfair-competition lawsuit against competitor Cumbie Law Office Automation Consulting Inc. and its owners, a Florida federal judge has denied the defendants’ dismissal motion. According to the opinion, Cumbie and Probill sold competing software services to law firms until they merged in 2010. Two years later, the companies decided to go separate ways, purportedly agreeing to take the clients they brought to the joint venture, the judge said. Probill’s suit alleges, however, that the defendants sent a misleading marketing email to Probill’s client list, the judge said. Although the defendants argue the email was not false or misleading as a matter of law, the judge refused to dismiss the suit, saying it raises a “classic question of fact.”

Probill Inc. et al. v. Cumbie Law Office Automation Consulting Inc. et al., No. 12-80821-CIV, 2013 WL 2158431 (S.D. Fla. May 17, 2013).

Related Court Document:Opinion: 2013 WL 2158431

NEXIUM MAKER ACCUSED OF PAY-TO-DELAY CONSPIRACY

AstraZeneca, the maker of heartburn medication Nexium, has been accused of paying three generics manufacturers to delay creating generic copies of the drug. Supermarket chain Giant Eagle says in a lawsuit filed in the U.S. District Court for the Western District of Pennsylvania that the generics companies could have started making the drug in 2008 but have delayed production until next year. The plaintiff says it has been overpaying for the drug during this time period because it could have been buying generic versions if not for the companies’ conspiracy. The lawsuit accuses AstraZeneca and the generics companies of violating federal antitrust laws and seeks recovery of treble damages to be determined at trial.

Giant Eagle Inc. v. AstraZeneca LP et al., No. 13-cv-00658, complaint filed (W.D. Pa. May 8, 2013).

Related Court Document:Complaint: 2013 WL 1915796

SUIT: GOOGLE SELLS TRADEMARK TO ADVERTISERS

Parts.com LLC, which runs a website selling car parts and accessories, has sued Google in San Francisco federal court, saying the search engine’s advertising program infringes and dilutes its trademarked name. According to the suit, the car website trademarked “Parts.com” in 2008, but Google allows third parties to buy the name as a keyword through AdWords, its online advertising program. Using AdWords, companies can sponsor links that show up at the top of search results for certain keywords. Typing Parts.com into Google’s search engine retrieves sponsored links to competing websites or companies that have no affiliation with the brand, confusing consumers and diverting traffic away from the business, the complaint alleges. The suit also charges Google with unfair competition and deceptive trade practices. It seeks injunctive relief and damages.

Parts.com LLC v. Google Inc., No. 13-CV-1074, complaint filed (S.D. Cal. May 6, 2013).



COMMENTARY

International inconsistencies in patent prosecution: 5 ways to avoid inequitable conductBy Wesley Overson, Esq. Morrison & Foerster

not disclose to the U.S. examiner its prior position before the European Patent Office, even though its declarants knew what Abbott had said in Europe. The U.S. court found that this failure to disclose the prior inconsistent statements constituted inequitable conduct.

On appeal, in an en banc ruling, the U.S. Court of Appeals for the Federal Circuit established a more stringent standard for inequitable conduct, requiring a more rigorous showing of intent and proof of “but for” materiality. A party asserting

Wesley Overson is the head of the 160-attorney litigation department in Morrison & Foerster’s San Francisco office. His practice focuses on patent litigation and other commercial litigation involving complex issues. His clients include international pharmaceutical and biotechnology organizations, for which he has crafted winning strategies for both the courtroom and arbitration proceedings.

Patent applicants face different challenges in different jurisdictions. To address the varying concerns of local patent offices, creative prosecutors in different countries often take positions that may appear inconsistent regarding, for example, what the patent disclosure means, what the person of ordinary skill would know and what the prior art discloses. Should in-house counsel managing international prosecution be concerned about this? Even after Therasense,1 the answer is still yes. Failing to disclose inconsistent statements

The materiality prong was met because the patent would not have issued were it not for Abbott’s declarations regarding the earlier application. Essentially, the court found that the patent examiner would not have credited Abbott’s declarations if he had seen what Abbott had argued in Europe. The takeaway: In the context of inconsistent statements in different venues, inequitable conduct may be harder to prove, but it is not dead.

Under Therasense, the mere occurrence of inconsistent statements under your watch is not enough to get you into trouble. Indeed, Therasense confirmed that specific intent is required to prove inequitable conduct: “In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.”4 But what should you do if you become aware of inconsistent statements on material matters? Can intent be inferred if you stay silent? It could be, if the surrounding facts and circumstances suggest that is the most reasonable inference. Here are five ways to make that inference less likely to happen:

Disclose inconsistent statements — and better late than never. When inconsistencies happen, disclose them. Don’t be tempted not to disclose. In today’s electronic environment, inconsistencies are not that hard to find, and you should count on opposing counsel in litigation finding them. It’s not worth risking your intellectual property and your career. Simply disclose the statement and do your best to argue around it. Although it is best to disclose inconsistent statements during prosecution, under new provisions of the America Invents Act, you may disclose them much later — even after a patent issues.5

Watch your emails. Be aware of how your company’s communications will look later on. Train your people about the standards for inequitable conduct and educate them on how their informal, loosely worded emails might look to the court someday.

When inconsistencies happen, disclose them. Don’t be tempted not to disclose.

regarding material matters can still qualify as inequitable conduct. This commentary explains how that can happen and what you can do to avoid inequitable conduct if you discover that your company has taken arguably inconsistent positions in different jurisdictions.

In Therasense, the plaintiff Abbott Laboratories secured a European patent related to blood glucose testing by pointing out that its application did not require the use of a filter. Later, that same Abbott invention was cited as prior art against one of Abbott’s own U.S. patent applications. To get around its own prior art, Abbott submitted declarations stating that its prior invention in fact required the use of a filter. Abbott did

inequitable conduct must now prove specific intent to deceive the patent office and that the information withheld from the patent office would have prevented issuance if it had not been withheld. Many heralded this new standard as the end of the inequitable-conduct doctrine. Indeed, one of the five dissenters on the Federal Circuit said the new approach “does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether.”2

On remand in Therasense, however, the District Court applied the new standard and found inequitable conduct again. The intent prong was met because the decision not to submit was knowing and deliberate and intent was the “single most reasonable inference.”3


Don’t rely on the attorney-client privilege. There is no guarantee that the privilege will be upheld if you get into an inequitable-conduct trial. These trials are privilege minefields. There is a risk of the crime/fraud exception, and there are often unintentional waivers. And your counsel may want to waive the privilege if the record is clean, but may not be able to if there are problematic communications. Don’t assume that the attorney-client privilege will protect you from trouble.

Tell the truth. If people in your company are accused of having specific intent to deceive, your witnesses should not attempt to craft after-the-fact rationales. They should just be honest. If your witnesses do not remember the details of what happened, they should just stick to that. If the patent prosecutors knew of the withheld statements, but were busy and never managed to submit them, they shouldn’t try to hide that. Inequitable

conduct requires a deliberate decision to withhold information. “[C]arelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent” will not suffice. 1st Media LLC v. Elec. Arts, 694 F.3d 1367, 1374-1375 (Fed. Cir. 2012). The Therasense standard for intent will be hard to meet absent a witness who is perceived to be lying, so made-up explanations pose a much greater risk than truthful statements by a witness who was forgetful or negligent.

Take it seriously. Weak inequitable-conduct theories were included in so many cases that lawyers started treating the defense as just an annoying side show. While they were right most of the time, it is better to prepare your case with vigor than to find out at trial that you guessed wrong.

While inequitable conduct has become very difficult to prove, it has not gone away.

Inequitable conduct should still be in the back of your mind when prosecuting patents in multiple jurisdictions, and it should move to the front of your mind when you see that your company has taken conflicting positions in different venues on material issues. Hopefully, the five suggestions above will help you to steer clear of trouble. WJ

NOTES1 Therasense Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011).

2 Id. at 1304.

3 Therasense Inc. v. Becton, Dickinson & Co., 864 F. Supp. 2d 856, 867 (N.D. Cal. 2012).

4 Therasense, 649 F.3d at 1290 (quoting Molins Plc v. Textron Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995)).

5 See Leahy-Smith America Invents Act, 35 U.S.C. § 257 (2011) (providing for supplemental examination).

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CERTIORARI

Justices agree to hear Lexmark false-advertising case(Reuters) – The U.S. Supreme Court agreed June 3 to hear printer manufac-turer Lexmark International Inc.’s appeal of a long-running dispute with Static Control Components Inc. over replacement toner cartridges.

Lexmark International Inc. v. Static Control Components Inc., No. 12-873, cert. granted (U.S. June 3, 2013).

Lexmark asked the justices to review an appeals court ruling that said Static had standing to make false-advertising claims against it.

Static claims that Lexmark falsely advertised by advising customers that Static’s chips

infringed upon Lexmark’s intellectual property.

The two companies have been locked in litigation for over a decade. Lexmark, in an effort to prevent the practice of other companies selling refilled, already-used Lexmark cartridges, started adding microchips to its cartridges so that Lexmark printers would not work with cartridges without the technology.

Static was able to replicate the microchip technology and subsequently sold chips to companies that wanted to sell refilled cartridges for Lexmark printers.

Lexmark sued, alleging copyright violations. Static responded by filing its own suit alleging antitrust and false-advertising claims.

The only issue left in the case is the false-advertising question after a jury found that Static had not induced copyright

REUTERS/Jonathan Ernst

Lexmark International says Static Control Components does not have standing to make its claim because only direct

competitors can make false-advertising allegations.

infringement and the judge presiding over the case dismissed Static’s claims. Static Control Components v. Lexmark Int’l, 749 F. Supp. 2d 542 (E.D. Ky. 2010).

The Cincinnati-based 6th U.S. Circuit Court of Appeals upheld all the lower court’s decisions except for its dismissal of the false-advertising claims. Static Control Components v. Lexmark Int’l, 697 F.3d 387 (6th Cir. 2012).

Lexmark says Static does not have standing to make its claim because only direct competitors can make false-advertising allegations.

Oral arguments and a decision are due in the Supreme Court’s next term, which starts in October and ends in June 2014. WJ

(Reporting by Lawrence Hurley; editing by Howard Goller, James Dalgleish and Sofina Mirza-Reid)

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PRODUCTS LIABILITY

It’s a dangerous world out there, for both the

manufacturers and marketers of hundreds of

thousands of products and for the individuals who buy

and use those products trusting that they will be

safe. If your clients include manufacturers, distributors,

retailers and users of the many consumer products in the news today because of

unexpected deaths, injuries, or performance failures, you will find this reporter useful. You will find ongoing, detail coverage of cases involving

statutes of limitations, product liability insurance, the duty to warn, punitive damages, market share

liability, alternative design theories, and new items.



Justin Bieber, Usher sued for $10 million for copyright infringementTwo musical artists have filed a federal lawsuit alleging a popular song by Justin Bieber and Usher was “clearly copied” from a version the pair already recorded.

Copeland et al v. Bieber et al., No. 13-CV-00246, complaint filed (E.D. Va. May 2, 2013).

In a complaint filed in the U.S. District Court for the Eastern District of Virginia, Devin Copeland and Mareio Overton allege Justin Bieber’s hit single “Somebody to Love” was actually a song they wrote and recorded in 2008.

Copeland, who performs under the stage name De Rico, is an R&B singer who often collaborates with Overton, a songwriter, the complaint says.

Copeland and Overton seek $10 million in damages in the suit filed May 2. They claim to have written a song called “Somebody to Love” in March 2008 that is substantially similar to the single that Bieber and Usher released under the same title in 2010.

According to the complaint, in 2008 Copeland allegedly recorded an original album featuring songs written by Overton, including “Somebody to Love.” Copeland and Overton claim to own the rights to the song, and they obtained a copyright registration for the lyrics from the U.S. Copyright Office in October 2008.

The complaint says Copeland and Overton met a series of people who eventually introduced them to Usher’s mother, Jonetta Patton, whom the plaintiffs call Usher’s “on-again, off-again manager.” The two men claim they were told multiple times that their music, including the song “Somebody to Love,” had been given to Usher.

The plaintiffs allege Patton called them in January 2009 and told them that she and Usher had listened to their song and were interested in having Copeland re-record the track and go on tour with Usher. After that phone call, the pair never heard from Usher or his representatives again, according to the complaint.

In 2010, with the help of Usher, Bieber released his album “My World 2.0,” featuring the song “Somebody to Love.” Copeland and Overton

cite almost 20 congruencies between their version and the version released by Bieber and Usher. Among the similarities, they claim, both versions have “nearly identical” time values and opening lyrics.

Absent copying, the complaint says, it would be virtually impossible for the two songs to have so many technical similarities.

The plaintiffs seek monetary damages of $10 million and a permanent injunction against the defendants. WJ

Attorneys:Plaintiffs: Duncan G. Byers and Jeffrey D. Wilson, Byers Law Group, Norfolk, Va.


In the lawsuit, two plaintiffs cite almost 20 similarities between their version of the song “Somebody to Love” and the version released by Usher (L) and Justin Bieber (R).




Singer accuses country music stars of copyright infringementA singer/songwriter has filed a Tennessee federal court lawsuit accusing country music superstars Brad Paisley and Carrie Underwood of copyright infringement for allegedly reproducing her song “Remind Me.”

Bowen v. Paisley et al., No. 3:13-CV-00414, complaint filed (M.D. Tenn., Nashville Div. May 1, 2013)

Amy Elizabeth Connor Bowen, also known as Lizza Connor, says she wrote the song in 2007. Paisley and Underwood released it as a duet in 2011.

According to the complaint, filed May 1 in the U.S. District Court for the Middle District of Tennessee, Bowen obtained copyright

registrations for the song, music and lyrics in October 2008.

Bowen says she met songwriters Kelley Lovelace and Charles C. DuBois at a 14-week country music songwriting workshop she attended in 2008 in Nashville, Tenn. According to the complaint, Bowen performed her song “Remind Me” on multiple occasions at the workshop, including a live performance for Lovelace, who was her adviser during the workshop.

The suit lists 19 additional instances where Bowen purportedly played the song at performances in and around Nashville from 2008 to 2011.

The complaint alleges Paisley and Underwood recorded a version of “Remind Me,” substantially similar to the one written by Bowen, in February 2011 and released it that May. The released version allegedly attributes the writing of the song to DuBois and Lovelace, who are named as defendants in the suit.

The company alleges three counts of copyright infringement under the Copyright Act of 1976, 17 U.S.C. § 101.

Bowen seeks a declaratory judgment that she is the owner of the song “Remind Me” and an accounting of the profits made by Paisley, Underwood, DuBois and Lovelace, estimated to be more than $10 million, which Bowen says belong exclusively to her. WJ

Attorneys:Plaintiff: Kenneth L. Connor and C. Caleb Connor, Connor & Connor, Aiken, S.C.


Brad Paisley and Carrie Underwood perform “Remind Me” at the 45th Country Music Association Awards in Nashville, Tenn., in 2011. The song is at the center of a copyright infringement lawsuit.

REUTERS/Tami Chappell


“Stopping this drain on the American economy will require swift legislative

action, and we are encouraged by the attention

the issue is receiving in recent weeks,” White House spokesman Jay Carney said

in a statement.

PATENTS

Obama takes action to curb frivolous patent lawsuits(Reuters) – President Barack Obama took steps June 4 intended to curb lawsuits brought by companies, disparagingly called “patent trolls,” that make or sell nothing but specialize in suing others for infringement, and he asked for new federal regulations and action from Congress.

“Stopping this drain on the American economy will require swift legislative action, and we are encouraged by the attention the issue is receiving in recent weeks,” White House spokesman Jay Carney said in a statement.

Companies specializing in patent litigation filed 2,921 infringement lawsuits in 2011, the latest figures available, 62 percent of all such cases filed, Colleen Chien, who teaches patent law at Santa Clara University Law School, said in a blog post for PatentlyO.

Allowing judges to decide that certain lawsuits are abusive and requiring losers to pay the winners’ legal fees would be key steps toward killing frivolous lawsuits, said Ed Reines, a member of an advisory panel for the U.S. Court of Appeals for the Federal Circuit, which hears most patent appeals.

Another important step would be to reform the ITC so companies cannot get a sales injunction not available in district courts,

according to Reines, a lawyer with the firm Weil Gotshal & Manges.

Two companies often accused of being trolls are Eolas Technologies and Innovatio IP Ventures LLC. Both argued June 4 that allowing companies that specialize in legal strategy to handle infringement lawsuits makes sense.

“The idea that because you’re not actually making things, you shouldn’t be able to get a return on your investment, I think that’s wrong,” said chief executive Mark Swords of Eolas, which has sued companies ranging from Facebook to Walt Disney over patents for interactive technology.

Matthew McAndrews, who represents Innovatio, urged lawmakers to consider requiring companies that fight infringement lawsuits and lose to pay the plaintiff’s legal fees.

“Why shouldn’t there be a balanced provision that says in the case of a large entity willfully infringing a non-practicing entity that all of the fees should be shifted in that case?” McAndrews said. “Who gets to define an abusive patent litigation claim? It (Obama’s proposal) places way too much emphasis on non-practicing entity.”

LEGISLATION BREWING, COURTS AT WORK

Congress already is working on a variety of bills. The heads of the judiciary committees in the Senate and House of Representatives — Democratic Sen. Patrick Leahy of Vermont and Republican Rep. Robert Goodlatte of Virginia — have put forward a draft bill.

Their measure would improve access to information about who owns patents, reduce discovery burdens in lawsuits and make other changes to enable judges to identify abusive cases early in the process and, presumably, dismiss them.

The bipartisan proposal, once finalized, is considered to have a good chance to move through Congress.

The offensive — announced ahead of an Obama fundraising trip to Silicon Valley in California — came as U.S. lawmakers and courts also are looking for ways to reduce the number of unwarranted patent lawsuits.

Such lawsuits have ballooned in recent years, particularly in the technology sector, from companies that buy and license patents from others, including individual inventors.

Critics say those patent portfolios are assembled as a springboard to litigation; many firms argue they are providing a service to inventors, or protecting against the loss of licensing fees that users of the patents should pay.

Cisco Systems Inc., Apple Inc., Google Inc. and other big technology companies have been pushing for legislation that would reduce the number of times each year that they are sued for infringement.

Among other steps, the White House called on Congress to pass legislation to make it easier for a federal judge to award legal fees to the winner of a patent case if the judge deems the lawsuit abusive.

It also asked lawmakers to make it harder for companies to convince the U.S. International Trade Commission to ban sales of products made with technology that infringes on a patent. Currently, the ITC has a lower standard for ordering an injunction than does a U.S. district court.

The disparity has led to a tidal wave of patent infringement complaints filed at the ITC.

Obama asked lawmakers to require companies that sue for infringement to have updated ownership information on file with the U.S. Patent and Trademark Office. He also urged the patent office, part of the U.S. Department of Commerce, to write a similar regulation.

The actions were aimed at improving incentives for high-tech innovation, a major driver of economic growth, the White House said.

REUTERS/Jason Reed


Another bill — introduced by Reps. Peter DeFazio, an Oregon Democrat, and Jason Chaffetz, a Utah Republican — would require certain plaintiffs to pay all legal fees if they sue for patent infringement and lose.

And efforts are under way in the courts to rein in abuses.

Randall Rader, who has been on the U.S. Court of Appeals for the Federal Circuit since 1990 and became chief judge in 2010, has circulated a four-point plan to stem abusive patent litigation. The plan overlaps with some of the new White House proposals and some of the planned legislation.

“The litigation abuse comes when a company is asserting a patent with a minimal value … but they’re asserting it for billions of dollars,” Rader told Reuters in an interview. “That disproportionality is an abuse of the system.”

Rader’s plan calls for courts to restrict pretrial discovery — gathering evidence in a case — to key terms and key people and would limit the number of patents in each case.

It also calls for courts to evaluate the value of any infringement early on and dispatch smaller cases quickly, and to consider making plaintiffs pay the legal fees of defendants if

the judge concludes that the original lawsuit was unfounded.

The court within weeks will formally begin an effort to cut the number of patents in each case, Rader said. The other two issues are down the road, Rader added. WJ

(Reporting by Diane Bartz; additional reporting by Sarah McBride in San Francisco, and Mark Felsenthal and Roberta Rampton; editing by Ros Krasny, Will Dunham and Cynthia Osterman)


Flea market owner must pay $5 million for contributory infringementIn a case of first impression, the 6th U.S. Circuit Court of Appeals has affirmed that a Tennessee flea market operator must pay $5 million in damages and costs for contributory infringement of trademarks owned by high-end accessory designer Coach.

Coach Inc. et al. v. Goodfellow, No. 12- 5666, 2013 WL 2364091 (6th Cir. May 31, 2013).

A three-judge appellate panel affirmed the judgment on damages awarded by a jury in the U.S. District Court for the Western District of Tennessee against Frederick Goodfellow, owner of the Southwest Flea Market.

The jury also awarded Coach $187,000 in attorney fees and costs.

“We don’t feel that the 6th Circuit gave Mr. Goodfellow enough credit for doing the best he could to control a problem at his flea market with people who came in to sell items with criminal intent,” his attorney, Stephen Leffler of Memphis, Tenn., said in an email.

“Mr. Goodfellow went above and beyond what many store owners do to protect the public and yet those same store owners are absolved of negligence for a third party’s injury,” Leffler added. “He did everything he could to solve Coach’s problem with the limited resources he had on hand. Coach did nothing to work with him to solve the problem and the thanks he gets is a $5 million judgment for Coach.”

Leffler said no decision has been made about an appeal.

According to the appellate court’s opinion, Coach Inc. notified Goodfellow in January 2010 that counterfeit Coach products were being sold at his flea market and demanded that all sales of the fake goods cease.

The Shelby County district attorney’s office sent another letter two months later, advising Goodfellow that the counterfeit sales were continuing and warning him that he was willfully disregarding the law, the opinion says.

Law enforcement officers raided the flea market April 23, 2010, and seized counterfeit Coach products.

Coach sued Goodfellow that June. According to the opinion, an investigator hired by the company discovered that sales of counterfeit goods continued at the flea market even after the suit was filed.

Another raid in June 2011 resulted in the seizure of more than 4,600 counterfeit Coach products, and the flea market was closed, the opinion says.

In its complaint, Coach alleged that Goodfellow was liable for the sale of the counterfeit products at his flea market in violation of federal trademark law.

In February 2012 the District Court partially granted the company’s motion for summary judgment on the issue of liability, finding Goodfellow contributorily liable in the sale of the counterfeit products.

Following the establishment of liability, the court conducted a jury trial to determine damages.

The jury concluded that Goodfellow willfully infringed 21 of Coach’s marks, and awarded the company $240,000 in damages per infringed mark — more than $5 million.

The judge determined that the case was “exceptional,” because Goodfellow had not responded to Coach’s liability motion and the jury had found his infringement willful, entitling Coach to $187,000 in attorney fees.

Goodfellow appealed to the 6th Circuit, contending that the Lanham Act, 15 U.S.C. § 1114, does not provide for contributory liability for trademark infringement.

The appeals court noted that Goodfellow’s liability was established on the merits, which he never challenged.

Although the panel said it does not ordinarily address issues for the first time on appeal, it decided to take the opportunity to provide


guidance on contributory trademark infringement.

The 6th Circuit explained that contributory liability for trademark infringement is a form of secondary liability first recognized by the U.S. Supreme Court in Inwood Laboratories Inc. et al. v. Ives Laboratories et al., 456 U.S. 844 (1982).

In Inwood the Supreme Court said liability under the Lanham Act may be imposed on those who facilitate direct trademark infringement.

According to the 6th Circuit, courts have applied Inwood to flea market operators, holding them liable for contributory infringement, if they are “willfully blind” to infringement by deliberately failing to investigate suspected infringing activity and by allowing the infringing vendors to use flea market resources.

The appeals court said Goodfellow had actual knowledge of the infringing activity as early as January 2010, when he received the first letter from Coach, followed by the district attorney’s letter and the ensuing police raids.

According to the 6th Circuit’s opinion, Goodfellow did not dispute that he knew of the infringing activity, but argued that he took reasonable remedial measures by notifying vendors that selling counterfeit goods was prohibited.

Goodfellow’s argument failed to undermine the District Court’s conclusion that he engaged in “ostrich-like” practices, the panel said.

The appeals court held that Goodfellow was properly held liable for contributory trademark infringement because he knew or had reason to know of the infringing activities but continued to facilitate them.

It affirmed the attorney fee award, saying Goodfellow’s willful ignorance was sufficient to make it an exceptional case. WJ

Attorneys:Appellant: Stephen R. Leffler, Leffler Law Office, Memphis, Tenn.

Appellees: J. Britt Phillips, Sutter O’Connell Co., Franklin, Tenn.


See Document Section B (P. 42) for the opinion.

Coach Inc. notified defendant Frederick Goodfellow in January 2010 that counterfeit Coach products were being sold at his flea market and demanded that all sales of the fake goods cease. A Coach handbag is seen here.


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CLASS ACTION

This reporter covers the proliferation of the class

action lawsuit in numerous topic areas at the federal, state, and appeals court

levels. Topics covered include consumer fraud, securities fraud, products

liability, automotives, asbestos, pharmaceuticals,

tobacco, toxic chemicals and hazardous waste,

medical devices, aviation, and employment claims.

Also covered is legislation, such as the 2005 Class Action Fairness Act and California’s Proposition 64, and any new federal

and state legislative developments and the

effects these have on class action litigation.

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Philip Morris accuses Bronx delis of selling fake MarlborosPhilip Morris USA has accused a pair of New York City cigarette retailers of selling knockoff Marlboro-brand cigarettes in violation of federal and state trademark laws.

Philip Morris USA Inc. v. 3473 Quick Stop Inc. et al., No. 13 CIV 2667, complaint filed (S.D.N.Y. Apr. 23, 2013).

The suit, filed in the U.S. District Court for the Southern District of New York, says the fake cigarettes are of inferior quality and that their continued sale is likely to cause consumer confusion, deception and irreparable injury.

to or substantially indistinguishable from the Marlboro trademarks.”

Philip Morris has owned its Marlboro trademark for more than 100 years and has made a significant investment in advertising and promoting the brand, the suit says.

The company says it hired investigators in February to buy cigarettes from Quick Stop and G&J Deli. The cigarettes were determined to be counterfeit, the suit says.

The delis are still selling fake Marlboros, according to the suit.

Philip Morris maintains that people who purchase the counterfeit cigarettes “are likely to be confused and/or disappointed” because

Philip Morris says people who buy the counterfeit

cigarettes “are likely to be confused and/or

disappointed” because of the difference in quality.

Philip Morris sued two delis located in the Bronx: 3473 Quick Stop Inc., doing business as 3473 Quick Stop Deli, and Kamal Deli Grocery Corp., doing business as G&J Deli Grocery. The company says the two retailers “willfully sold cigarettes in packaging that bears spurious marks that are either identical

of the difference in quality. Consumers might also question whether Philip Morris is sponsoring or approving of the knockoff cigarettes, the complaint says.

Because of the defendants’ actions, Philip Morris is losing “the enormous goodwill” it has created in its Marlboro-brand products and losing profits from lost sales of authentic products, the suit says.

Philip Morris asserts claims for federal trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114, and unfair competition and trademark infringement under state law.

The company seeks injunctive relief barring the defendants from selling counterfeit Marlboro products, as well as an award of unspecified damages, costs and attorney fees. WJ

Attorney:Plaintiff: Laura W. Tejada, Arnold & Porter, New York


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Trademark suit failed to show video game title infringed company nameA federal judge in Michigan has ruled that British computer game company Rebellion Developments’ lawsuit alleging a video game’s use of the word “Rebellion” in the title infringed the company’s trademark failed to meet infringement standards for “expressive works.”

Rebellion Developments Ltd. et al. v. Stardock Entertainment Inc. et al., No. 12- 12805, 2013 WL 1944888 (E.D. Mich., S. Div. May 9, 2013)

U.S. District Judge Victoria A. Roberts of the Eastern District of Michigan dismissed the suit, finding the plaintiffs failed to show that the use of the word “rebellion” had “no artistic relevance” to the video game or that it “explicitly misleads” consumers as to the true source of the game.

The suit did not satisfy either of two tests that the 2nd U.S. Circuit Court of Appeals established in Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), the judge said.

Rebellion Developments and founders Jason and Christopher Kingsley sued video game developer Ironclad Games Corp. and distributor Stardock Entertainment Inc., alleging the companies violated the Lanham

Act, 15 U.S.C. § 1051, by using the word “rebellion” in the game title “Sins of a Solar Empire: Rebellion.”

Judge Roberts acknowledged that Rebellion Developments owns the mark for the word “rebellion” for use with entertainment and video games, but she said the suit cannot survive a motion to dismiss because the claims did not satisfy either of the two requirements established in Rogers.

According to the judge’s order, the plaintiffs argued that the court should follow the “likelihood of confusion” standard for showing trademark infringement that the 6th Circuit established in Wynn Oil Co. v. Thomas, 839 F.2d 1183 (6th Cir. 1988).

Rebellion Developments claimed that the defendants’ use of the word “rebellion” is likely to confuse consumers because the defendant companies filed an application to

trademark the video game title and they used the word on packaging and in advertisements to draw public attention to it.

Judge Roberts acknowledged there was some evidence of confusion between the video game title and the company Rebellion Developments, but she found Rogers to be the controlling law in this case because video games have been established as “expressive works” within the meaning of the Lanham Act.

The judge agreed with Stardock Entertainment’s and Ironclad Games’ argument that the standards for trademark infringement must be altered to provide First Amendment protection to titles of expressive work.

According to the order, the first prong of the Rogers test permits the use of a trademarked word in the title of an expressive work where it has artistic relevance to the underlying work. The plaintiffs failed to show there was no artistic relevance, the judge said.

Because the video game involves players choosing to be on the side of the “loyalists” or the “rebels,” the use of the word “rebellion” in the title is relevant to the work, the judge explained. The order notes the level of artistic relevance necessary under the Rogers test is very low, and other courts have found that it simply “must be above zero.”

The second prong of the Rogers test requires plaintiffs to show that a defendant willfully infringed a trademark in an attempt to capitalize on the trademark owner’s reputation.

Judge Roberts found no “overt misrepresentation” by Stardock or Ironclad.

Since Rebellion Developments did not satisfy either prong of the Rogers test, the judge said, the defendants were entitled to dismissal of all claims.

”Defendants’ use of rebellion is expressive speech and is protected under the First Amendment,” she said. WJ

Related Court Document:Order and opinion: 2013 WL 1944888

The lawsuit involves the video game “Sins of a Solar Empire: Rebellion.”Courtesy of www.sinsofasolarempire.com



Reynolds says online e-cig vendor stole Eclipse trademarkReynolds Innovations Inc. alleges in a federal lawsuit that a company selling electronic cigarettes online has ripped off its trademark for Eclipse-brand “low smoke” cigarettes.

Reynolds Innovations Inc. v. Snowcap Distributing Corp. et al., No. 1:13-cv-383, complaint filed (M.D.N.C. May 6, 2013).

The suit filed in the U.S. District Court for the Middle District of North Carolina accuses Snowcap Distributing Corp. of using trademarks identical to Reynolds’ Eclipse mark.

Snowcap is based in Issaquah, Wash., and sells electronic cigarettes and accessories www.vaporpro.com, the suit says.

Electronic cigarettes, or e-cigarettes, are an alternative to traditional tobacco cigarettes. They are powered by batteries and use vapors to deliver nicotine to smokers.

Reynolds says it started selling Eclipse cigarettes as early as 1996. The company markets the product as low-smoke cigarettes and says it owns the Eclipse registration and mark.

Because of Reynolds’ promotional efforts, “consumers of tobacco products recognize the Eclipse mark as a symbol of the highest quality of tobacco products and associate and identify the Eclipse mark with Reynolds or with a single source,” the complaint says.

the Lanham Act, 15 U.S.C. § 1114, and unfair and deceptive trade practices and common-law trademark infringement under North Carolina law.

Snowcap’s use of the Eclipse mark to sell its e-cigarette products is “likely to cause confusion, mistake or deception among consumers as to the source, origin or sponsorship of such products,” the suit says.

Reynolds asserts that Snowcap acted “intentionally” to benefit from the goodwill associated with the Eclipse mark.

The company seeks injunctive relief barring Snowcap from using the Eclipse mark, actual and punitive damages, and attorney fees. WJ

Attorney:Plaintiff: William M. Bryner, Kilpatrick Townsend & Stockton, Winston-Salem. N.C.


Reynolds says the defendant acted

intentionally to benefit from the goodwill associated

with its Eclipse mark.

The complaint stresses that Reynolds has not authorized Snowcap to use the Eclipse trademark.

The suit asserts causes of action for trademark infringement and unfair competition under

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TRADE SECRETS

Panel urges tougher U.S. response to trade secret theft(Reuters) – Theft of trade secrets, chiefly by China, costs the U.S. economy $300 billion a year and must be fought with sanctions as tough as those used against terrorism and drug trafficking, an advisory panel said May 22.

The Commission on the Theft of American Intellectual Property said U.S. responses so far, using the World Trade Organization and government talks, have not kept up with the fast growth of trade secret theft by cyber and traditional methods.

“The scope of the problem requires stronger action, involving swifter and more stringent penalties for IP theft,” said the nonpartisan commission’s report, compiled by former senior government, military and industry leaders.

The panel recommends making the president’s national security adviser the chief policy coordinator of an all-out U.S. drive to protect intellectual property and punish theft.

Intellectual property thieves should be hit with a mix of banking sanctions, bans on imports and blacklisting in financial markets, said the commission, which has shared its 89-page report with Congress and the Obama administration.

“The banking system has a very well-developed system of denying the ability to change money for companies and other organizations that either support terrorism or are involved in drug activities,” said former U.S. Director of National Intelligence Dennis Blair, a co-chairman of the commission.

“It’s a killer sanction for a company that’s attempting to go international,” he told reporters in Washington.

CHINA STANDS OUT

China accounts for between 50 percent and 80 percent of intellectual property theft, said the report, which also cites India and Russia as other problem countries, based on data from customs seizures and other trade figures.

“National industrial policy goals in China encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice,” it said.

President Barack Obama could help the issue “get traction” by raising it in his meeting with his Chinese counterpart, Xi Jinping, in California in early June, said former U.S. Ambassador to China Jon Huntsman, also a commission co-chairman.

as “the nuclear option” of authorizing counter attacks against hackers, citing legal questions and fear of collateral damage.

The report recommends committing more resources to investigating and prosecuting cyber-theft of trade secrets, but says intellectual property stolen via the Internet is only a portion of theft.

“Much of it occurs the old-fashioned way,” through copied or stolen hard drives, bribing or planting of employees, tapping of

Intellectual property thieves should be hit with a mix of banking sanctions, bans on imports and blacklisting

in financial markets, the commission said.

“The president sets the priorities for the U.S.-China relationship, and this clearly would have to be at the top of our economic agenda,” he said.

Leaving it to bilateral economic talks like July’s Strategic and Economic Dialogue would continue unproductive “jaw boning” while the problem gets worse, Huntsman added.

MOST THEFT HAPPENS INSIDE U.S.

Other recommended responses include immediate confiscation of goods containing stolen intellectual property and making respect for IP rights a condition for investing or listing shares in the United States.

The commission recommends beefed-up protections to make U.S. data less vulnerable to hackers, as well as enhanced measures such as “water marking” or “beaconing” that allow companies to identify stolen files and make them inoperable.

But it stops short of calling for what panel member Craig Barrett, former chairman and chief executive of Intel Corp., described

phones, pirating of software and the reverse engineering of products, it said.

While credible reports have emerged of Chinese army hackers raiding U.S. government and industry computers, the report said, “In reality, most IP theft is committed within American offices, factories, and even neighborhoods and homes.”

Beyond the $300 billion in economic losses, equal to the annual value of U.S. exports to Asia, the United States loses some 2.1 million jobs each year to IP theft, Huntsman said.

Intellectual property theft through actions ranging from software piracy to patent or trademark infringement to cyber-espionage also depresses research and development spending and stymies future innovation, the commission said. WJ

The report is available at http://www.ipcommission.org/report/IP_Commission_Report_052213.pdf.

(Reporting by Paul Eckert; editing by Philip Barbara)


Lawrence Kolaras of the PLK Law Group in Hillsborough, N.J., said in a statement.

“The fair-use defense cannot be used to undermine the value of small businesses’ federal trademark rights to the unfair advantage of large corporations,” she added.

Counsel for the defendants did not respond to a request for comment regarding the decision.

According to the appellate court’s opinion, Kelly-Brown owns Own Your Power Communications Inc., a multimedia motivational services business.

Kelly-Brown’s trademarked phrase constituted fair use.

U.S. District Judge Paul A. Crotty of the Southern District of New York granted the dismissal motion, concluding that the defendants used the phrase for the non-trademarked purpose of describing the contents of the magazine and the planned campaign’s theme.

Since the defendants were using the phrase in its descriptive sense, they could not be said to be using it in bad faith, Judge Crotty held.

Kelly-Brown appealed, and a three-judge panel of the 2nd Circuit concluded the defendants had not shown fair use of the mark.

The defendants had argued that it was implausible that someone as well-known as Winfrey would attempt to trade on someone as obscure as Kelly-Brown.

Kelly-Brown countered that she sufficiently pleaded facts to show that the defendants knew about her trademark and chose to move ahead with the “Own Your Power” campaign anyway.

Given the factual disputes, the appeals court said the District Court erred in holding that the defendants conclusively demonstrated good faith and were entitled to dismissal.

The 2nd Circuit vacated the judgment of dismissal and reinstated Kelly-Brown’s state law claims, but affirmed the lower court’s dismissal of her allegations of secondary trademark infringement and counterfeiting. WJ

Attorneys:Plaintiff-appellant: Patricia Lawrence Kolaras, PLK Law Group, Hillsborough, N.J.

Defendants-appellees: Jonathan R. Donnellan, Hearst Corp., New York; Charles L. Babcock, Jackson Walker LLP, Houston


See Document Section A (P. 25) for the opinion.

Oprah WinfreyCONTINUED FROM PAGE 1

REUTERS/Andrew Kelly

Simone Kelly-Brown sued Oprah Winfrey, shown here, and her companies in 2011 over their use of the phrase “Own Your Power” to promote a self-awareness and motivational campaign.

The lawsuit alleged that the prominence of the phrase “Own Your Power” in Oprah Winfrey’s magazine

was evidence that she and her partners were trying to link it to Winfrey’s own powerful brand.

She hosts a radio show, holds conferences and retreats, and writes a blog under her federally registered “Own Your Power” trademark.

Kelly-Brown sued Winfrey and her companies in July 2011 over their use of the phrase “Own Your Power” to promote a self-awareness and motivational campaign in large, bold letters on the cover of the October 2010 issue of Winfrey’s O magazine.

Magazine publisher Hearst Corp. and several corporate sponsors involved with an “Own Your Power” event held in September 2010, including Wells Fargo & Co., Estee Lauder, Clinique Laboratories and Chico’s, also were named as defendants.

Kelly-Brown said her registered trademark would have been evident had Winfrey searched the register of the U.S. Patent and Trademark Office. Kelly-Brown claimed she was irreparably harmed by Winfrey’s alleged infringement.

The lawsuit alleged that the prominence of the phrase in O magazine was evidence that Winfrey and her partners were trying to usurp Kelly-Brown’s trademark and link it to Winfrey’s own powerful brand.

The defendants moved to dismiss the complaint, asserting that their use of

According to the panel’s opinion, in order for the defendants to benefit from the fair-use defense, they had to prove three elements: that they used the “Own Your Power” phrase other than as a mark, in a descriptive sense and in good faith.

The appeals court said Kelly-Brown plausibly alleged that Winfrey was trying to build a new segment of her media empire around the theme of “Own Your Power.”

From the magazine to the “Own Your Power” event, referred to as the “first ever” of its kind, and through repetition across various forms of media, Kelly-Brown adequately showed that the defendants were trying to create an association between the phrase and Winfrey, the panel said.

The 2nd Circuit rejected the defendants’ contention that they were using the “Own Your Power” phrase in a descriptive manner.

The appeals court said the phrase did not describe the content of the magazine. Although the word “power” was repeatedly used on the cover and in some articles, the phrase itself was not used as a headline for a particular article or content.

To show a lack of good faith, the panel said, a plaintiff must show that a subsequent user intended to create confusion as to the source or sponsorship of the mark.


RECENTLY FILED COMPLAINTS FROM WESTLAW COURT WIRE*

*Westlaw Court Wire is a Thomson Reuters news service that provides notice of new complaints filed in state and federal courts nationwide, sometimes within minutes of the filing.

Westlaw Citation 2013 WL 2282868

Case Title Ackourey v. Nandwani’s, No. 13-2881 (E.D. Pa. May 23, 2013)

Case Description Other statutory actions

Factual Allegations

Defendant Nandwani’s infringed upon plaintiff Graphic Styles/Styles International’s registered copyrights by reproducing and displaying on its website at least 59 separate drawings of men’s and women’s fashion clothing styles, which were copied directly from plaintiff’s copyrighted stylebooks without authorization. Copyright numbers at issue: TX 2-240-703; TX 3-053-310; TX 3-446-818; TX 2-611-019; TX 5-037-124; TX 2-902-726; TX 731-329; A722732; TX 5-253-538; TX 4-621-545; TX 6-956-655; TX 6-956-762; TX 2-150-566; TX-3-229-071; TX 1-662-171; TX 1-838-271; TX 4-831-173; TX 1-067-384 and TX 1-378-891.

Damages Synopsis General, special, actual and statutory damages; disgorgement; injunctive relief; fees and costs


Case Title Thermolife International v. Redefine Nutrition, No. 13-3630 (C.D. Cal. May 21, 2013)

Case Description Patent

Factual AllegationsDefendant Redefine Nutrition infringed on plaintiff Thermolife International’s federally registered Amino Acid Compounds patent with Registration No. 8,034,836 by shipping, distributing and selling Max Pump branded dietary supplement products.

Damages Synopsis Compensatory and punitive damages, declaratory relief, injunction, accounting, interest, fees and costs


Case Title Chroma Makeup Studio LLC v. By Lee Tillett Inc., No. 13-3613 (C.D. Cal. May 20, 2013)

Case Description Trademark

Factual Allegations

Defendant By Lee Tillett infringed on Chroma Makeup Studio’s common law trademarks Chroma, Chroma Colour, Chroma Makeup Studio and Chroma Makeup Studio +C Design marks by developing and marketing high-end cosmetic and beauty products under a mark named Kroma with Registration No. 4079066. Plaintiff maintains that it had gained prominence both nationally and internationally and that defendant’s use of terms, names and symbols confusingly similar to that of plaintiff causes confusion and deception to relevant consumers, in violation of the Lanham Act.

Damages Synopsis Punitive and enhanced damages, order of cancellation of registration, destruction of infringing products, accounting, interest, fees and costs


CASE AND DOCUMENT INDEX

Bowen v. Paisley et al., No. 3:13-CV-00414, complaint filed (M.D. Tenn., Nashville Div. May 1, 2013) .............................................................................. 11

Coach Inc. et al. v. Goodfellow, No. 12-5666, 2013 WL 2364091 (6th Cir. May 31, 2013) ..................................................................................................13 Document Section B .....................................................................................................................................................................................................42

Copeland et al v. Bieber et al., No. 13-CV-00246, complaint filed (E.D. Va. May 2, 2013) ................................................................................................ 10

Giant Eagle Inc. v. AstraZeneca LP et al., No. 13-cv-00658, complaint filed (W.D. Pa. May 8, 2013) ................................................................................6

Kelly-Brown et al. v. Winfrey et al., No. 12-1207-cv, 2013 WL 2360999 (2d Cir. May 31, 2013) ............................................................................................1 Document Section A.....................................................................................................................................................................................................25

Lexmark International Inc. v. Static Control Components Inc., No. 12-873, cert. granted (U.S. June 3, 2013) ....................................................................9

Parts.com LLC v. Google Inc., No. 13-CV-1074, complaint filed (S.D. Cal. May 6, 2013) .....................................................................................................6

Philip Morris USA Inc. v. 3473 Quick Stop Inc. et al., No. 13 CIV 2667, complaint filed (S.D.N.Y. Apr. 23, 2013) .............................................................. 15

Probill Inc. et al. v. Cumbie Law Office Automation Consulting Inc. et al., No. 12-80821-CIV, 2013 WL 2158431 (S.D. Fla. May 17, 2013) .........................................................................................................................................................................................................6

Rebellion Developments Ltd. et al. v. Stardock Entertainment Inc. et al., No. 12-12805, 2013 WL 1944888 (E.D. Mich., S. Div. May 9, 2013) ......................................................................................................................................................................................... 16

Reynolds Innovations Inc. v. Snowcap Distributing Corp. et al., No. 1:13-cv-383, complaint filed (M.D.N.C. May 6, 2013) ..............................................17