IP Law Bulletin

On May 22, 2012, the U.S. Patent and Trademark Office (USPTO) published final rules that: (1) expand the ability of the USPTO to obtain specimens or other information reasonably necessary for proper examination, (2) allow the USPTO to conduct a post-registration pilot program to assess the accuracy of the register, and (3) facilitate the USPTO with verifying the accuracy of identifications of goods/services on the register. The rules took effect on June 21, 2012.

The World Intellectual Property Organization (WIPO) recently introduced the Global Brand Database, a new search tool for internationally protected trademarks, appellations of origin and armorial bearings, flags and other state emblems, and the names, abbreviations and emblems of intergovernmental organizations. The tool allows free of charge, simultaneous brand-related searches across multiple collections.

What’s in a name, inquired the Immortal Bard, speaking through Ms. Capulet. Well, for one thing, sometimes there is a very valuable trademark, whether its intended use be to sell merchandise, BLUE IVY for cosmetics, clothing, toys, etc., or to advance a cause, JUSTICE FOR TRAYVON, or to offer a service, DEAR ABBY, or to invest in and await the judgment of history, OJ SIMPSON.

What is the key to keywords?

Let’s see if we can pick the lock (last play on words, I promise!) about whether and when it is OK for you to buy someone else’s trademark (or something close to it) as a keyword in order to attract eyeballs to your web site.

Can you even do this legally? Answer: probably yes, with one major proviso and one minor one. The minor one is that you should check with your lawyer because different courts around the country are still grappling with this issue and you might be living where the courts have taken no, or a dim, view of keyword-buying.

The major proviso is to make sure the purchased keyword does not appear misleadingly in the text of your sponsored link(s) (or your own web pages). In other words, “invisible” use of someone else’s trademark as a keyword is permissible, but the trademark cannot be visible in your sponsored link(s) yielded by the search. There’s a rationale for such a bright-line rule that permits use of a competitor’s trademark as a keyword but prohibits its use in your sponsored link. It derives from (a) human nature, and (b) modern technology.

As to human nature, we (humans) are lazy. We love shortcuts and abbreviations. How else do you explain the word “thingamajig?” If you want to buy a pocket-size telecommunication device that doubles, triples, quadruples, etc., as a camera, music player, GPS, television, calculator, etc., etc., you’re not going to fill in all the “etc.’s” and go looking for something that takes a paragraph to describe. Instead, your lazy mind is going to cast around for something much shorter…I’ve got it…iPHONE!

As for life in The Digital Millennium, you’re going to go shopping online and start with a search.

So into the search field goes “iPHONE” as your search term.

Steve Jobs already sells a lot of iPhones. Yeah, he’s a genius, and he’s entitled to the fruits of his labor. But let’s say all use by third parties of iPHONE (or any variant) as a keyword were illegal.

Then the lazy online shopper would land in a sponsored link universe that was all Apple Computer all the time. The average human shopper (this is based on this writer’s self-knowledge) would say, “OK, that’s it. I guess I’ll buy an iPhone.” Steve Jobs would quickly figure this out (remember, he’s a genius) and the price of an iPhone would move (I’ll let you figure out in which direction). In other words, the pro-competition, anti-monopoly, benefit of keyword-buying outweighs the burden on a trademark owner of the free and ephemeral “bask in reflected glory” that purchased keywords afford to the owner’s competitors.

Or at least it’s defensible to make this analysis and reach this conclusion. “Old law” and “new technology” can be ships that pass in, or ignorant armies that clash by, night. Why not try to reconcile the old and the new by the light of day?

Consider a homo sapiens (as opposed to digital) analogy. You walk into a Wal-Mart store looking for blue jeans and tell the greeter, “I need some Levi’s.” If you think of the greeter as your corporeal search engine, you’ve given him “Levi’s” as your keyword. Does this mean that the greeter has to take you directly to the shelves that display only LEVI STRAUSS & CO. dungarees, or, if Wal-Mart doesn’t carry Levi’s, that he has to escort you back out to the parking lot and tell you to look elsewhere?

Would he be barred from taking you down the aisles where jeans from LEE, WRANGLER, GUESS, EDDIE BAUER, etc., were on sale?

Good Lord, you could end up wearing khakis for the rest of your life!

For a recent example of these issues, see the District of Utah’s December, 2010 decision in 1-800 Contacts, Inc. v. Lens.com, Inc.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617.439.2000.

The start of a new year is always a time to reflect on the year that has passed before looking forward. To that end, below is a recap of some of the intellectual property news highlights from the year (in no particular order):

    Supreme Court Addresses Patent Eligibility of Business Methods in Bilski Case

In June, the Supreme Court handed down its long-awaited decision on “business method” patents in the case of Bilski v. Kappos. In a rare instance of unanimity, the justices agreed that Bilski’s method of hedging risks in commodity trading was not eligible for patent protection. The Court reached this determination by taking a simple approach—relying on long-standing precedent that one cannot patent an abstract idea. The Court affirmed the judgment of the Federal Circuit but rejected that court’s rationale. The Court refused to endorse the so-called “machine-or-transformation” test as the standard to determine patent eligible subject matter, though the Court did indicate that the test can provide a “useful and important clue” for such determinations. While a number of questions about the patentability of business methods remain, applicants desiring business method claims should draft claims that do not portray the inventive methods as abstract ideas. Applicants may further consider drafting claims that do pass the “machine-or-transformation” test as a possible safe harbor. For more information on this issue, see the discussion of the Federal Circuit’s Prometheus decision in this issue. More information on the Bilski decision can be found in Nutter’s July edition of the IP Bulletin.

The Court did divide on the issue of whether business method patents are categorically excluded from patent-eligibility. Justice Kennedy, writing for the majority, suggested that “…the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter…." In a separate opinion, Justice Stevens concluded that Congress never intended to make any methods of doing business patentable. According to him, “[t]he breadth of business methods, their omnipresence in our society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized.”

The Bilski decision leaves many questions unanswered. Following its time-honored traditions, the Court chose to avoid far-reaching pronouncements and let the law of patent-eligible subject matter evolve in due course. Those who seek business method patents in the future, however, will need to carefully consider their claims because Justice Stevens and the other three Justices who joined in his concurring opinion clearly share the view that business method patents are not authorized by U.S. Patent laws. Hence, in the short term, applicants seeking business method patents may want to draft their claims in a way that avoids their rejection as merely “abstract” ideas. Moreover, since both Kennedy and Stevens’ opinions agreed that the “machine-or transformation” test is, while not an exclusive test, nevertheless “a useful and important clue” for determining patent eligibility, applicants who draft claims to meet this test may well continue to have a safe harbor. This decision also suggests to applicants in the biotech and gene patenting world that diagnostic method patents will likely be patent eligible, and might serve as a useful alternative to isolated gene patents, which, in light of the Myriad decision discussed below, may be of questionable patent eligibility.

    Federal Circuit Confirms the Written Description Requirement for Patent Application

The May issue of Nutter’s IP Bulletin discussed the Federal Circuit’s en banc decision in Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co., holding that there was a “written description” requirement that is distinct from other requirements of the patent laws. The decision all but assures that the USPTO will continue its policy of heightened scrutiny for biotechnology patent applications.

Critics of the Ariad decision argue that finding a separate written description test in 35 U.S.C.  § 112 requires a strained grammatical reading of the statute, and that such a reading has no support in the legislative history of the patent act. Moreover, they note that Section 112 clearly requires that patent applicants must provide an “enabling disclosure” of their inventions and that this is a clearer test—and one that makes the written description requirement redundant.

The Ariad decision itself does not provide much useful guidance on how the separate “written description” test should be applied. The majority opinion states that the applicant must “possess” the claimed invention but fails to explain how this test should be applied in practice to “genus” claims. The opinion suggests that a written description of a genus requires either (1) a representative number of species falling within the genus, or (2) description of “structural features common to members of the genus so that one skilled in the art can ‘visualize or recognize’ members of the genus.” However, the opinion is not particularly enlightening on the status of species that fall within a claimed genus but are not specifically disclosed by the patentee. Moreover, the “visualize or recognize” test appears to bring the factual inquiry back to an enablement test.

The Federal Circuit’s opinion noted that “the level of detail required to satisfy the written description requirement varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology.” Thus, for predictable arts (e.g., mechanical inventions) the written description requirement may have little impact, but inventions in the fields of biotechnology and pharmacology are likely to be more strictly scrutinized for their level of detail in the written description.

The big winner in the Ariad case appears to be the USPTO because the opinion gives tacit approval to the government’s current strict approach to the examination of biotechnology inventions. Since 2001 the USPTO has had guidelines in place for examiners that assume the written description test is indeed a separate test and that it should be applied to all inventions in unpredictable arts. Critics of the USPTO training materials have suggested that the guidelines encourage examiners to question every aspect of the disclosure—including many aspects where one skilled in the art would recognize that a single example is indeed sufficient to possess many obvious alternatives. Practically speaking, these critics complain that biotechnology inventions are scrutinized for their concrete examples and examiners seek to limit the claims to cover only specific disclosed embodiments.

In the wake of the Ariad decision, it appears that applicants should expect this heightened scrutiny and challenges from examiners at every turn. Practitioners should also be aware that in Ariad the written description was used as a litigation tool to invalidate a patent. Therefore multiple examples, multiple species, and detailed characterization of the features of the invention should ideally be presented in an application whenever possible. Common features or structures between the species should also ideally be identified. The written description requirement may require further disclosure of numerous ranges bracketing the specific examples to provide fallback positions. For example, if the DNA sequence encoding a protein agonist is all that is known, it may be helpful to claim other sequences that have 70% identity, 80%, 90%, etc.

The problem presented in the Ariad case, however, will be difficult for applicants to overcome because the discovery of a new pathway may indeed be insufficient to claim methods of treatment by modulating the pathway. Unless a representative number of working examples of compounds that can actually perform the method are presented, the “written description” requirement may preclude patentability.

    Myriad’s Gene Patents

In March, the Southern District of New York decided Association for Molecular Pathology v. U.S. Patent and Trademark Office involving patent claims related to so-called “gene patents.” The plaintiffs asked the federal district court to invalidate several gene patents owned by the University of Utah and Myriad Genetics that are directed to two isolated gene sequences, BRCA1 and BRCA2, that researchers had discovered were correlated with a heightened susceptibility to breast cancer. In an important decision largely affecting research institutions and pharmaceutical companies (and seemingly ignoring Federal Circuit precedent), the court determined that various ones of the patents’ claims were invalid for encompassing non-statutory subject matter. For further discussion of this case, see the May issue of Nutter’s IP bulletin. As expected, the case has been appealed to the U.S. Court of Appeals for the Federal Circuit (Case No. 2010-1406).

On October 29, 2010, the U.S. Department of Justice (DOJ) filed an amicus brief in support of the S.D.N.Y. decision that isolated human genomic DNA is not patentable, a position counter to that of the USPTO. The DOJ drew a line between human-engineered DNA, which it believes are patent-eligible, and isolated, but otherwise unmodified DNA, which it believes are not patent eligible. Critics argue in support of the Myriad patents, stating that isolated genes are not merely products of nature and differ from naturally occurring genes.

While the case remains pending, prosecution strategies for DNA-related patents should be carefully considered. Recitation of “isolated” genes or DNA could raise potential issues. Emphasis should perhaps be placed on the non-naturally occurring aspects and associated human-effort, such as difficulties in, and inventive aspects of, isolating, purifying, and characterizing the gene. The use of genes in diagnostic assays might also be an effective strategy, given the Supreme Court’s Bilski decision (discussed above).

    Federal Circuit Expected to Clarify Inequitable Conduct Standards in Therasense Appeal

The March issue of Nutter’s IP Bulletin reported that a three judge panel of the Federal Circuit upheld a finding of inequitable conduct in Therasense, Inc. v. Becton, Dickinson and Co. The Federal Circuit holding was based on an applicant’s characterization of its own prior art reference in proceedings with the European Patent Office (EPO) that were deemed to directly contradict statements made to the USPTO by the applicant regarding the same reference. The statements made to the EPO regarding the reference were found to be material to patentability, and thus the failure to disclose such statements was ruled to be an appropriate basis for finding inequitable conduct. As reported in the May issue of Nutter’s IP Bulletin, on April 26, 2010, the Federal Circuit issued an order vacating the holding of the earlier three judge panel. The Federal Circuit decided to hear the appeal of the decision of the United States District Court for the Northern District of California en banc. In issuing its order vacating the previous opinion, the Federal Circuit presented six issues for the parties to consider for briefing; each of which relates to inequitable conduct. The doctrine of inequitable conduct allows a patent to be rendered unenforceable if it is found that a person associated with the filing and prosecution of a patent failed to disclose information to the USPTO that is material to the determination of patentability and withheld that information with intent to deceive the USPTO.

The six issues specified by the Federal Circuit order are:

1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands?  See Precision Instrument Mfg. Co. v. Auto Maint. Mach. Co.; Hazel-Atlas Glass Co. v. Hartford-Empire Co. (overruled on other grounds by Standard Oil Co. v. United States); Keystone Driller Co. v. Gen. Excavator Co. If so, what is the appropriate standard for fraud or unclean hands?
3. What is the proper standard for materiality? What role should the USPTO’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Holllister Inc.
5. Should the balancing inquiry (balancing materiality and intent) be abandoned?
6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

The Federal Circuit’s decision to rehear the appeal en banc has been well received, as many in the patent community believe that current rules related to inequitable conduct need to be changed. Many members of the patent community hope that the Federal Circuit will clarify the doctrine of inequitable conduct and, in doing so, help ease the growing burden on applicants that the current rules create with respect to the duty of disclosure. Several amicus briefs have been filed and oral arguments were heard from Plaintiff Abbott (i.e., Therasense), Defendant Becton, Dickinson, Defendant Nova, and the USPTO on November 9, 2010. The decision is expected to provide clarification on both the materiality and intent standard of inequitable conduct.

    Wyeth and the USPTO’s Miscalculation of Patent Term Adjustment

In January, the Federal Circuit decided Wyeth v. Kappos, affirming that the USPTO had been miscalculating, and typically under-calculating, Patent Term Adjustment (PTA). The case was first discussed in the January issue of Nutter’s IP Bulletin. The miscalculations occurred especially in cases where applications were pending for more than 3 years. A patent is valid for 20 years from its filing date; PTA extends the effective term of a patent due to delays in its issuance. Under 35 U.S.C. § 154(b), a patent can receive a term adjustment for, among other things, (a) delays caused by the USPTO in meeting certain examination deadlines and (b) each day that issuance of the patent is delayed longer than 3 years due to delays by the USPTO. These delays are subject to an “overlap limitation,” which says the “the period of any adjustment granted…shall not exceed the actual number of the days the issuance of the patent was delayed.” The dispute in this case centered on the interpretation of how to calculate the actual number of days the issuance of the patent was delayed in an overlap situation. The Federal Circuit sided against the USPTO’s method of calculation, and as a result the decision may give many patent holders an increase in patent term. Patent owners should consider reviewing any PTA calculations provided by the USPTO and compare the USPTO’s calculation to the post-Wyeth calculation method.

In response to this decision, the USPTO announced an interim procedure for requesting PTA recalculation and initiated an overhaul of the computer system used to calculate PTA. For more information on this program, see the March issue of Nutter’s IP Bulletin. As of March 2, 2010, PTA calculations should be calculated properly by the USPTO computer systems. Nevertheless, patent owners should continue to monitor their patents to confirm the accuracy of PTA calculations. Further, patent owners should particularly review patents that were issued between September 2, 2009 and March 1, 2010, which is the time period during which PTA calculations were likely not calculated correctly. For patents issued during this time period, applicants have 180 days to petition to correct the PTA. Unfortunately, there is no straightforward way to request PTA recalculation for patents in which more than 180 days have elapsed since the issue date. Applicants should also understand the measures they can take to correct any miscalculated PTA for patents that issue on or after March 2, 2010. Some patent owners are challenging the USPTO for older patents as well. For example, Novartis filed suit in the District of Columbia earlier this year challenging PTA on several patents with grant dates going as far back as 2003.

The spotlight now shining on PTA provides an opportune time to consider simple ways practitioners can limit any loss of PTA. As discussed in the March issue of Nutter’s IP Bulletin, many practitioners are unaware that the filing of an information disclosure statement (IDS) can result in up to a four month loss of PTA. PTA loss can occur when an IDS results in the mailing of a supplemental office action or notice of allowance. PTA loss can also occur in certain situations when an IDS is filed after a response to an office action, after a decision by the Board of Patent Appeals and Interferences (BPAI) or a federal court, or after a notice of allowance. However, any PTA loss that results from filing an IDS can be avoided if the IDS is filed in conjunction with filing a statement under 37 C.F.R. § 1.704(d), which affirms that any cited reference was first cited in any communication from a foreign patent office in a counterpart application and that such communication was not received by any individual designated in 37 C.F.R. § 1.56(c) more than thirty days prior to the filing of the IDS.

    Other IP Highlights During 2010:

• The USPTO initiated and extended the “Green Technology Pilot Program,” which allows for an applicant to petition for his or her application to be examined more quickly if the application pertains to the development of a renewable energy source or energy conservation, or the reduction of greenhouse gas emissions, discussed in both the January and November issues of Nutter’s IP Bulletin.
• The Board of Patent Appeals and Interferences clarified the standard of review for an examiner’s rejection in ex parte Frye, discussed in the May issue of Nutter’s IP Bulletin.
• The USPTO issued 2010 KSR Guidelines Update for the evaluation of obviousness, discussed in the November issue of Nutter’s IP Bulletin.

    Big IP News on the 2011 Horizon:

• The Supreme Court has agreed to hear Microsoft’s appeal in Microsoft Corp. v. i4i Ltd. Partnership, where it will decide whether clear and convincing evidence—or some lesser standard—should apply to evidence presented to a jury about a prior art reference that was not considered by a patent examiner during prosecution. Oral arguments will be heard early this year. For more information, see the discussion in this issue.
• The Supreme Court granted a writ of certiorari in Global-Tech Appliances Inc. v. SEB SA, a case where the Federal Circuit held that a potential infringer can have the necessary intent to commit induced infringement by acting with “deliberate indifference of a known risk.” This case was discussed in the March issue of Nutter’s IP Bulletin. 
• The Supreme Court also granted cert in a case related to patent ownership stemming from the Bayh-Dole Act. In Board of Trustees of the Leland Stanford Jr. Univ. v. Roche Molecular Sys. Inc., the Court will determine the ownership rights of universities in inventions derived from federally sponsored research. This case was also discussed in the March issue of Nutter’s IP Bulletin.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

Beware trademark creep! “Trademark creep” is a catchy term for one of the dangers that stalks any trademark (or service mark) that consists of only a design (as opposed to words) or of both word(s) and design elements.

For some immutable reason, the design elements of a trademark tend to evolve over time, and “creep” refers to the situation where such change is unintentional or unnoticed or both. An image file gets flipped over by mistake and the fish in the trademark that used to swim to the viewer’s right turned around and now swims to the left; words stacked vertically to begin their trademark life one day do not fit on a brochure so they get rearranged onto a horizontal line, and everyone likes the new look; colors get mixed up, the blue circle and the red square become the red circle and the blue square. Why does this happen? 

And why does it matter? It matters because while trademark registrations can last forever, they do so only if the owner makes the required periodic maintenance filings—“continuing use” after the first five years; renewal on every tenth anniversary of registration thereafter. And each one of these filings requires submission of a specimen of use, showing the mark as it is currently in use. This “maintenance” specimen must match the mark as originally registered. If it does not match, you can lose your registration, and this is a shame (as well as an economic loss) because the value of a trademark registration increases directly with time and ongoing use of the mark. The older your mark, the more protection the law gives it.

If your current maintenance specimen and your mark as it appears in the original certificate of registration are not a perfect match, you may be okay if the current specimen and original certificate “make the same commercial impression.” And you guessed it, the sameness of commercial impression is in the eye of the (examiner) beholder.

If you do miss a perfect match but keep your registration by virtue of “same commercial impression,” then you are well advised to prepare a filing to “amend the mark in registration.” This results in an amended certificate showing the current mark, but you retain the benefit of your original filing and registration dates.

One tip if you are adopting a words-and-design mark: you should consider applying to register in addition the words-only version of the mark in standard characters because a word mark registration protects XYZ, xyz, XyZ, Xyz, etc., i.e., you do not need to worry about consistency in the format of your words-only mark.

Trademark creep is international and venerable. The writer recently had occasion to visit the porcelain factory in the city of Meissen, Germany. There he saw a large display showing how Meissen’s crossed-swords trademark had evolved over time since the mid-18th century. An entire wall was devoted to about a dozen variations and the original crossed swords were barely evident in the company’s  current mark.

In any event, the guide said she was not sure how “trademark creep” could best be translated into German. 

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

In National Pork Bd. v. Supreme Lobster and Seafood Co., Opp. No. 91166701 (TTAB June 11, 2010) the pork industry successfully prevented an applicant from registering the mark “THE OTHER RED MEAT” for fresh and frozen salmon on the basis that granting this mark registration would dilute the fame of its own mark “THE OTHER WHITE MEAT.”

U.S. trademark owners, even those with famous marks, historically have had a hard time stopping people from adopting parodies of their trademarks on different goods. For example, a few years back, Louis Vuitton failed to stop the Haut Diggidy Dog company from selling dog treats under the mark “CHEWY VUITTON.”

In principle, the U.S. trademark laws have long offered protection to the owners of famous marks from dilution by others. However, the courts have been reluctant to put parody marketeers out of business because of a stringent test the U.S. Supreme Court announced in 2003. In the Moseley v. V Secret Catalogue case, the owners of the “VICTORIA’S SECRET” trademark for lingerie tried to stop Moseley from selling adult products under the “VICTOR’S SECRET” mark. The Supreme Court reversed the lower court decision and held that owner of the famous mark had to prove actual harm, not simply a likelihood of harm, to be entitled to relief under a “dilution by tarnishment” cause of action.

Following the Moseley decision, in 2006, Congress passed the Trademark Dilution Revision Act (TDRA), which revised the U.S. trademark laws to make it easier for trademark owners to stop free rides on the coattails of famous marks. Section 1125(c) now provides, in pertinent part:

Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner’s mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, of competition, or of actual economic injury.

(Emphasis added.) The TDRA, in essence, reversed the ruling in the Moseley case and lowered the bar by requiring only a showing of a likelihood of harm to obtain relief.

Section 1125(c) actually provides two causes of action: “dilution by tarnishment” or “dilution by blurring.” Tarnishment presumably addresses situations like the Moseley case, where the VICTORIA’S SECRET mark could be sullied by association with sex toys and the like. Blurring, on the other hand, addresses situations where use of the same or a similar mark on unrelated goods simply impairs the distinctiveness of the famous mark.

The TDRA also enumerates the factors that are to be taken into account when “dilution by blurring” is alleged:

In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:

(i) The degree of similarity between the mark or trade name and the famous mark.

(ii) The degree of inherent or acquired distinctiveness of the famous mark.

(iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.

(iv) The degree of recognition of the famous mark.

(v) Whether the user of the mark or trade name intended to create an association with the famous mark.

(vi) Any actual association between the mark or trade name and the famous mark.

Even with the new statutory rights provided by the TDRA, famous trademark owners have not had a easy time preventing dilution (as the 2007 “CHEWY VUITTON” case, mentioned above, demonstrates). Few cases have gone to trial to provide clear guidance on what type of evidence is needed to prove dilution, especially dilution by blurring.

A recent decision by the U.S. Trademark Trial and Appeal Board (TTAB), however, provides a detailed roadmap for proving dilution by blurring claims. (Although the TTAB lacks the injunctive powers of federal district courts, it follows the same standards in ruling on applications for registration.) National Pork Bd. v. Supreme Lobster and Seafood Co. involved a challenge by the pork industry to the attempt by an applicant to register the mark “THE OTHER RED MEAT” for fresh and frozen salmon.

The National Pork Board is a quasi-governmental agency formed by the Pork Promotional, Research and Consumer Information Act (a.k.a. the Pork Act) of 1985 to “promote consumption of pork and pork products.” It collects a fee on all hogs sold in the U.S. and has spend over 500 million dollars since 1987 on pork “demand enhancement activities.” It owns U.S. registrations on “THE OTHER WHITE MEAT” mark for “association services namely promoting the interests of the members of the pork industry,” as well as for cookbooks, brochures about pork, pens, pencils, crayons, bumper stickers, t-shirts, sweatshirts, aprons, jackets and hats, among other things.

The Supreme Lobster and Seafood Company, on the other hand, is a bantamweight distributor of seafood to supermarkets and restaurants in the greater Chicago area.

By seeking registration of the “THE OTHER RED MEAT” mark, Supreme Lobster essentially signed up for a cage fight with the Pork Board at the TTAB, where the proceedings follow the federal rules of civil procedure but all testimony is submitted in writing without any right to a trial by jury or opportunity to challenge live witnesses.

The National Pork Board mounted a case that one would have expected from a 900 pound gorilla. It presented testimonial depositions from its CEO, and its vice-presidents of operations, industry relations, and “demand enhancement,” as well as it former staff economist and its directors of brand strategy, retail marketing, consumer marketing, and culinary niche marketing.

Perhaps more importantly, the National Pork Board presented survey evidence that the the TTAB found persuasive on several issues. It presented a fame study conducted by Northwestern University in 2000 in which twenty-five slogans were compared in over a thousand telephone interviews. This survey concluded that “THE OTHER WHITE MEAT” slogan was the fifth most recognized slogan in the U.S. (recognized by over 80% of adult respondents) and allowed the TTAB to conclude that “THE OTHER WHITE MEAT” mark was not only famous but “part of the fabric of popular culture in the United States.”

The Pork Board also presented a dilution survey that it commissioned at the outset of the litigation in 2007. An independent survey company conducted interviews in which a screener played a recording of the Supreme Lobster slogan and then asked “Thinking about the slogan you just heard [The Other Red Meat], do any other advertising slogans or phrases come to mind?” Thirty-five percent responded with the Pork Board’s mark.

The TTAB also found the two marks were highly similar and noted that Supreme Lobster’s CEO admitted in his deposition that he knew of the Pork Board’s mark when he picked his slogan. Based on all of these factors, the TTAB concluded that the applicant’s mark, “The Other Red Meat,” was likely to dilute by blurring the Pork Board’s “THE OTHER WHITE MEAT” mark.

The TTAB decision provides very useful guidance for the owners of famous marks in terms of how to use survey evidence to prove the fame of their marks and likelihood of dilution (despite some criticism of the use of leading questions in the Pork Board’s dilution survey).

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

Intellectual property rights broadly encompass patents, trade secrets, know-how, proprietary data, registered designs, copyrights and trademarks, among other things. Most often, such rights originate with a commercial entity and the owner retains the rights throughout their lifetimes as legal leverage against competitors.

However, there are times when an owner of intellectual property (IP) may want to transfer some or all of its IP but an outright sale is not an attractive option. For example, the owner may be a non-practicing entity (NPE) – a term that encompasses (1) individual inventors who, for one reason or another, may not be able to commercialize their IP, (2) universities and other research institutions that seek to transfer technology as part of their mission, (3) commercial entities whose business plans change and find themselves with surplus IP or (4) so-called “trolls” that accumulate patents and other IP as middle-men and then seek to license the rights to the highest bidders.

Even when the owner practices the IP, there can be advantages to sharing IP with others, e.g., as part of a settlement of litigation or a cross-license that may resolve a stalemate where two or more parties may have mutually blocking IP.

Licensing, as opposed to complete transfer or assignment of IP, provides the owner with several advantages. By retaining ownership, the seller (licensor) retains title and typically has an easier time reversing the transfer of rights if the buyer (licensee) doesn’t live up to its end of the bargain. In many instances, the party seeking to acquire the IP rights does not have sufficient financial resources to pay the full value upfront – or may perceive the IP as highly speculative but be willing to pay more if the technology can be successfully commercialized. A well-drafted license agreement therefore not only gives the licensor an opportunity to more readily terminate the agreement if future payments are not made but also allows the parties to “share in the upside.” License agreements can also delineate the responsibilities of each party for maintaining or enforcing the patent rights.

Thus, licensing allows greater flexibility and reduces the risk that the IP will be over or undervalued. If the desired revenue strategy is a stream of income, i.e., royalties or contingent payments, then licensing is often the most appropriate choice.

What are the components of a license?

A typical patent license will specify the rights granted, the term of the grant, the consideration in exchange for the grant, records and reporting, representations and warranties regarding the patent, how infringement issues will be handled, tort liability for products or services covered by the license, and other factors.

Grant clause

The grant clause sets forth what patent rights are being conveyed. The grant can be exclusive (i.e., only the licensee has the right to exploit the patent rights) or non-exclusive (i.e., the licensor can grant similar rights to other parties). The grant can be limited by geography (such as U.S., worldwide), and field of use (such as for cellphones but not laptops).

Improvements

A patent license can also define each party’s rights to improvements of the patented technology. Depending on the negotiation, improvements might be solely owned by the licensor, licensee, or jointly owned by both. The party with more bargaining power often insists on controlling the rights to improvements.

Consideration

The payment of consideration can be structured in many ways. The license agreement typically requires a licensee to pay an upfront license fee as well as ongoing royalties based on a percentage of sales or on a per-unit basis. The license can also require minimum annual royalties or minimum annual product sales to be sure the licensee is diligently marketing the products or services covered in the patent. The license agreement can also require that the licensee provide reports to the licensor, e.g., of sales or revenue, to ensure accurate royalty payments.

Milestone payments are a particularly useful way to deal with the speculative nature of IP rights and ensure that the licensor shares in the success of commercialization. For example, milestone payments upon capitalization of the licensee or FDA approval of a product that embodies the IP are common provisions.

Shifting the financial responsibility for the ongoing pursuit of patent rights or maintenance of such rights is another form of consideration that a licensor may seek as part of the agreement.

Infringement

A patent license can also control each party’s responsibilities for enforcing the patent rights along with apportioning liability if the licensee is sued for infringement. Generally, each party wants to have control of any infringement litigation but also wants to avoid being required to defend or indemnify the other party.

Depending on the terms of the agreement, an exclusive licensee can have the right to sue for infringement. The license agreement can determine how the costs of litigation are apportioned between licensor and licensee. For example, the license can provide a licensee the right to withhold all or part of royalties to offset costs of litigation. The license agreement can also define how the proceeds of successful litigation are divided. Damages can first be allocated to cover litigation costs and then divided between the parties according to predetermined percentages, for example.

Due diligence

License agreements can require due diligence by the licensee to develop and/or commercialize the IP. Such terms are typical in university license agreements to ensure that the IP is used and not just put on the shelf. For example, the licensee can be required to use reasonable efforts to develop and commercialize products covered by the license. License agreements will also typically include milestones that must be met in order for the licensee to maintain the license. The license can also require submission of periodic reports regarding the licensee's activities related to the development and testing of the products covered by the licensed IP.

Indemnities and product liability

Licensors and licensees can provide various indemnifications to each other in a license agreement. The license can include representations and warranties concerning the IP and can require indemnification against any inaccuracy or loss arising from those representations and warranties. For example, the license can include representations by the licensor that they own clear title to the IP, that the IP is valid and enforceable, and/or that none of the products produced under the IP are known to infringe other IP held by third parties. In turn, the licensor can require the licensee’s compliance with applicable laws, such as export controls, tax codes, etc.

The license agreement can also include indemnification terms ensuring that liability for defective products produced by the licensee does not extend to the licensor, who likely has limited if any control over the actions of the licensee. Alternatively or in addition, the licensor can require that the licensee carry sufficient liability insurance.

Dispute resolution

License agreements can require the parties to provide notice of any breach of the agreement and can specify periods during which any such breach can be cured. The license agreement can also be drafted so as to provide in advance for arbitration or mediation of disputes. For example, the agreement can require binding arbitration rather than litigation.

Transferability

License agreements can provide the licensee a right to sublicense or assign the IP. The licensor can require approval of any such sublicense or assignment. For example, the licensor may wish to prevent a competitor from obtaining license to the IP. However, it can be important for the licensee to have the ability to assign the license without restriction as part of the transfer of the business.

Termination

License agreements can include negotiated provisions that establish how and for what reasons the agreement can be terminated. For example, the agreement can specifically provide for termination upon breach of certain terms of the agreement. Note, however, that clauses that provide for automatic termination of the license agreement if one or the other party seeks or is placed under bankruptcy protection may not be enforceable. On the other hand, clauses that provide for termination for failure to pay royalties may be enforceable regardless of bankruptcy.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

Some of our readers will remember the “Nigeria oil scam.”  An email came supposedly from a junior clerk in the Nigerian oil ministry who needed help in wiring $25 million in oil revenues out of the country to a U.S. bank. The email recipient would get 10 percent if he or she set up a joint bank account in the U.S. to receive the funds, but first the clerk needed $25,000 on her end in Lagos to set up her transferor account, pay fees, etc. The recipient would be asked to oblige with a $25,000 wire transfer to a specific individual in her country.

A similar scheme is now being attempted in the domain-name business in Shanghai, China.

It works this way:  the fraudster in China sees that someone owns a trademark registration (in China or elsewhere) and emails the owner that someone else is trying to register corresponding domain names or buy corresponding keywords in China. The unsolicited correspondent asks whether the owner of the overarching trademark wants to jump in ahead of the mysterious applicant and use his services. The trademark owner panics, and engages the correspondent to make pre-emptive purchases of . . . nothing. Victims of this scam send money and get domain name registrations they don’t need, or pay registration fees to someone who is not a registrar.

A better idea, if you get one of these emails from China, is to ignore it and not reply.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.