The beginning point for answering these questions is the Lanham Act, and particularly 15 USC §1127.  A mark is deemed “abandoned” when “[i]ts use has been discontinued with intent not to resume such use.”

 The landmark case re: trademark abandonment is Saxlehner v. Eisner Mendelson Co., decided by the US Supreme Court in 1900.  US Trademark laws of abandonment, codified in 1987 in the above-referenced statute (15 USC §1127) largely adopted rules of the Saxlehner decision.

 What establishes discontinuation with “an intent not to resume use?

 For the purposes of abandonment, the Lanham Act defines “use” as “the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.”

 The Lanham Act directs that “[i]ntent not to resume [use] may be inferred from circumstances.” Id. Such an intent cannot be far-flung or indefinite; rather there must be an intent “to resume use within the reasonably foreseeable future,”  Note, however, the 9^th Circuit case Grocery Outlet, Inc. v. Albertson’s, Inc. (["i]ntent to resume use of the … mark within the reasonably foreseeable future during the short period of alleged nonuse” prevented the mark from being abandoned. “)

 Under the Lanham Act, nonuse of a mark for 3 consecutive years shall be prima facie evidence of abandonment.  Nonuse for 3 consecutive years creates a rebuttable presumption of intent not to resume use.   See, e.g., a 2008 case from the 11^th Circuit Court of Appeals, Natural Answers, Inc. v. SmithKline Beecham Corp. 

 In Natural Answers, the trademark defendant had not used its mark in commerce for well over three years and, thus, SmithKline had the benefit of the rebuttable presumption that Natural Answers did not have intent to resume its use. The burden of production, although not the ultimate burden of persuasion, then shifted to Natural Answers “to produce evidence that [it] either used the mark during the statutory period or intended to resume use.”  

 In today’s Internet age, use or non-use of an Internet website can be powerful evidence of use in commerce, or the lack thereof. 

 What happens when two competitors attempt to use an abandoned mark—who has priority?

 This question was addressed by the 9^th Circuit Court in a 1984 case, California Cedar Products v. Pine Mountain Corp.  The 9^th Circuit Court found the question of competing claims to an abandoned trademark easy to answer: which company first used the abandoned mark in commerce?

 The 9^th Circuit Court explained (with concurrence of both parties): “the first party to use an abandoned trademark in a commercially meaningful way after its abandonment is entitled to exclusive ownership and use of that trademark and trade dress.

 The “first party to use” an abandoned trademark is an issue of fact determined in the same way that first commercial use is established in the trademark application process.

 Abandoned marks present an opportunity for companies still in business—and a challenge for their counsel to navigate the abandonment issues carefully and accurately.

To address this area, I asked permission from Tim Negris to republish an excellent article he wrote on the subject.  Tim has a deep knowledge of the IT industry, having been (among other things) VP, Server Marketing at Oracle and VP, Software Sales and Marketing at IBM.  Tim is one of the best strategic thinkers I know, and gives great insight into the nuances of brands and branding.

Here is Tim’s Article, in full, as it appeared on the website: America’s Best Business Practices:

Brands and Branding Are Not the Same

Even if a business, big or small, has great branding – effective name, slogan, color scheme, etc. – they still might not have a great brand. In the language of marketing, branding is syntax (structure) and brand is semantics (meaning). A company’s “meaning” is its place in the marketplace and the customer’s business or life.

Ideally, a company should have a strong brand that is supported by strong branding, but many wildly successful companies have goofy names, ugly colors, and tortuous slogans, but they have great brands. That is, they do a great job of communicating their meaning – best quality, trend setter, most innovative, longest history, most locations, caring people, etc. In music, it is called a “hook”.

Small business start-ups especially need to think not just about who they are, what they look like, and what they do, but also what they want to mean to their customers, what is their hook. If they have a strong brand, the branding will often follow easily.When the 7-11 convenience store chain was just starting out, they were competing with suburban supermarkets and urban corner stores, both of which were typically open for the about the same hours as most people worked, 9-5. Their “hook” was the customer convenience of longer hours, 7am to 11pm, and that drove their branding. The name said it all. They didn’t need a slogan, the logo was the name, and the logo and colors were clear on a small lighted sign – a necessity before daylight and after dark.

When the other stores realized the power of convenience over selection, quality and other brand promises, and started keeping longer hours, so 7-11 went one better and commenced round the clock operation in most locations. Note, they did not change their name to 24-7; they didn’t need to because they already owned the convenience brand and everybody would quickly learn that they never closed. Then the other stores went to always open. The corner store was largely dead by then and the supermarkets asserted the “low price and selection at any time” brands. 7-11 countered this by actually promoting their smaller physical size in redefining convenience as “fast in and out”. This was especially effective once the supermarkets had to start competing with big box retailers by getting even bigger.

7-11′s success spawned myriad directly competitive imitators who echoed every one of 7-11′s brand promise, plus offered gasoline, which 7-11 was not yet selling. But, 7-11′s massive global reach and superior logistics enabled them to easily add gasoline to their product mix, to lower their prices and to offer fresh snacks and sandwich meals. The latter also allowed them to then compete with fast food take-out places and strengthen their brand by broadening the meaning of convenience to include faster, cheaper breakfast and lunch.

7-11 started out with strong branding. Their name/logo was easy to say, remember, and see on a small lighted sign, and their red and green color scheme carried the strong subliminal message of “stop and go”. But, they became and remain successful through strong branding, by staying current with the meaning of consumer convenience – always there, everywhere, low prices, known quality, fast, and thorough coverage of common urgent needs (gas, drinks, snacks, aspirin, tampons, etc.)

The lesson this should teach the start-up is to know and communicate what you want to mean to your customers. What it should teach established companies of all sizes is to learn and know how to change and extend your meaning to anticipate your customers’ changing needs and to stay ahead of the competition.

Good branding – valuable. Great brand – priceless.

In addition to the above article by Tim Negris, an excellent article on the subject by Mike Clough, also on the site America’s Best Business Practices, can be found here: “Branding is the Key to Differentiation.”

For lawyers who protect a client’s intellectual property, it is important to understand “branding” from the point of view of business people–our clients.

The case involved a trademark issued to Falls Media, entitled: “WOULD YOU RATHER…?”  Based on the issued trademark, Falls Media sued Zombonodo for trademark violation and related claims arising from Zombonondo’s popular board games that included the mark “WOULD YOU RATHER…?”

The Central District of California, Chief Judge Audrey B. Collins, ruled that (despite the statutory presumption of validity) the mark was “merely descriptive.”  Chief Judge Collins entered summary judgment, cancelling the mark from the federal trademark registry.

The Ninth Circuit Court of Appeals reversed and remanded for trial.  In its step-by-step analysis of trademark registration law, the Court started by explaining the following:

Five Categories of Marks

Marks are generally classified in one of five categories of increasing distinctiveness:

(1) generic, (2) descriptive, (3) suggestive, (4) arbitrary or (5) fanciful. Which category a mark belongs in is a question of fact.

Suggestive, arbitrary, and fanciful marks are considered “inherently distinctive” and are automatically entitled to federal trademark protection because “their intrinsic nature serves to identify a particular source of a product.”  

Generic marks are not eligible for trademark protection. 

Merely descriptive marks are somewhere in-between; although they are not inherently distinctive and are therefore not entitled to automatic trademark protection, a merely descriptive mark can become protectable if it has acquired distinctiveness “as used on or in connection with the applicant’s goods in commerce.”  This acquired distinctiveness is referred to as “secondary meaning.”

Is the Mark “Suggestive” or “Descriptive”

The dividing line between marks that are protected and those that are not protected is drawn between “suggestive marks” (protected) and “descriptive marks” (not protected, without proof of secondary meaning).

A suggestive mark is one for which “a consumer must use imagination or any type of multistage reasoning to understand the mark’s significance . . . the mark does not describe the product’s features, but suggests them.”  

By contrast, a merely descriptive mark describes the qualities or characteristics of a good or service.  It “define[s] qualities or characteristics of a product in a straightforward way that requires no exercise of the imagination to be understood.”

In distinguishing between suggestive and descriptive marks, “[d]eciding whether a mark is distinctive or merely descriptive is far from an exact science and is a tricky business at best.”

The Ninth Circuit Court has generally applied one or two “tests” to differentiate between suggestive and merely descriptive marks:

The “Imagination Test” for a Suggestive Mark

The first test (clearly the most-used) is known as the imagination test, which asks whether “imagination or a mental leap is required in order to reach a conclusion as to the nature of the product being referenced.”

The imagination test does not ask what information about the product could be derived from a mark, but rather whether “a mental leap is required“ to understand the mark’s relationship to the product.

For example, the mark “ENTREPRENEUR” as applied to a magazine was descriptive, not suggestive, because “an entirely unimaginative, literal-minded person would understand the significance of the reference.”  The “imagination test” is the Ninth Circuit’s primary criterion for evaluating distinctiveness.

The “Competitors’ Needs Test for a Suggestive Mark

The second test, known as the competitors’ needs test, focuses on the extent to which a mark is actually needed by competitors to identify their goods or services. 

If competitors have a great need to use a mark, the mark is probably descriptive; on the other hand, if “the suggestion made by the mark is so remote and subtle that it is really not likely to be needed by competitive sellers to describe their goods or services, this tends to indicate that the mark is merely suggestive.”

The competitors’ needs test is related to the imagination test, “because the more imagination that is required to associate a mark with a product or service, the less likely the words used will be needed by competitors to describe their products or services.”

Burden of Proof

Although the plaintiff in a trademark action bears the ultimate burden of proof that his or her mark is valid, federal registration provides “prima facie evidence” of the mark’s validity and entitles the plaintiff to a “strong presumption” that the mark is a protectable mark. Where the PTO issues a registration without requiring proof of secondary meaning, the presumption is that the mark is inherently distinctive.

If the plaintiff establishes that a mark has been properly registered, the burden shifts to the defendant to show by a preponderance of the evidence that the mark is not protectable.

With respect to a registered mark, the defendant’s burden is not simply to show that the mark describes a feature of the trademark holder’s product; rather, it must show that consumers regard the mark as merely descriptive of that product.”

Summary

A mark may be registered if it is fanciful, arbitrary or suggestive.   A mark may not be registered if it is generic.   In order for a descriptive mark to be registered, it must have acquired a secondary meaning in commerce. 

Evaluation of whether a mark is suggestive or descriptive is done under two tests: the “imagination test” (is the imagination or a mental leap required order to reach a conclusion as to the nature of the product) and the “competitors’ needs test” (the extent to which a mark is actually needed by competitors to identify their goods or services).

Prevailing Counsel in this case was Bobby A. Ghajar, Howery LLP, Los Angeles.

The Ninth Circuit panel included: Judge Ronald M. Gould, Judge Sandra S. Ikuta and Judge N. Randy Smith. 

The excellent and instructive opinion was authored by Judge Gould.

PhotoMedex, Inc. is a medical device manufacturer.  It competes against RA Medical Systems, Inc. 

 PhotoMedex had finished a new laser device for dermatological treatment.  Its competitor, RA Medical Systems, was also working on a completing product, but was late to market.  RA Medical Systems told its clients that its new laser device would be ready “in a few months.”  In fact, the laser device was not available for about 18 months.

 PhotoMedex brought Lanham Act claims against RA Systems for making “false and deceptive statements in a commercial advertisement” about the market readiness of its laser product.  RA Systems defended by claiming that its statements about the future readiness of the laser device was a matter of opinion, not reachable by Lanham Act claims.

The Southern District of California, Judge Janis Sammartino, agreed and issued summary judgment in favor of defendant.  The Ninth Circuit Court reversed, explaining that a statement of opinion may be actionable “if the speaker knew at the time the statement was made that it was false or did not have a good faith belief in the truth of what was said.”

On a related issue, the Ninth Circuit Court also held that the commercial depiction of a well-known device inventor, Mr. Irwin, as inventor of RA Systems’ laser was also actionable if misrepresented Mr. Irwin’s actual contribution to the invention.

PhotoMedex argued that Defendants knowingly misrepresented in March 2003 that the “Pharos” laser would be available that summer, within just a few months. Defendants admit they did not ship the first Pharos until September 2004, more than a year later, but argue that they were delayed in part by having to defend against PhotoMedex’s multiple lawsuits.

The district court interpreted the predictions of the Pharos’s release date to be mere statements of opinion regarding future events, which are generally not actionable. There is, however, a well-established exception — if “the speaker has knowledge of facts not warranting the opinion.”  

An honest or sincere statement of belief about a future event is not actionable, but a statement known at that time by the speaker to be false, or a statement by a speaker who lacks a good faith belief in the truth of the statement, may constitute an actionable misrepresentation.

PhotoMedex provided expert testimony that moving a medical laser from the beginning of design to production would typically require 12 to 18 months. The Ninth Circuit panel concluded that the expert evidence raised a genuine issue of material fact as to whether defendants intentionally misrepresented the Pharos’s release date. 

The potential motivation for and harm from such a misrepresentation was obvious: by telling prospective purchasers that the Pharos would be available soon, defendants might have persuaded them not to buy PhotoMedex’s device, which was already available, leaving them open to consider and possibly purchase defendants’ competing product later.

Defendants’ commercial depiction of Irwin as “inventor” of the system is actionable to the extent it misled consumers into believing that Irwin was the sole inventor or made more than his actual share of inventive contributions.

In an expansive reading of the Lanham Act, the Ninth Circuit Court explained: “a false advertising cause of action under the [Lanham] Act is not limited to literal falsehoods; it extends to false representations made by implication or innuendo.”

Prevailing lead counsel in the case was Thomas D. Warren, Baker & Hostetler, Cleveland.

The Ninth Circuit panel included: William A. Fletcher, Richard R. Clifton and Milan D. Smith, Jr., Circuit Judges.

Biliski involved a patent claim for hedging the risk of price fluctuations in the economy.  The patent examiner rejected the patent application, explaining it “‘is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.”

The examiner’s rejection was affirmed by the Board of Patent Appeals and by the Federal Circuit Court.  However, in its en banc decision (that produced 5 separate opinions), the Federal Circuit took the additional step of declaring that a method was only patent eligible if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a differentstate or thing.  This test is known as the “machine-or-transformation test.”

Because the vast majority of software applications are designed only for a “general purpose” computing machine, the question remained after the Federal Circuit’s Biliski opinion as to whether software patents were patentable at all.

The US Supreme Court affirmed the examiner’s rejection of this particular patent application, but rejected the “machine-or-transformation” test imposed by the Federal Circuit and, in its final opinion of the October, 2009 term, restored a degree of normalcy to patent practice in the United States.

The signature of this Supreme Court in the past 12 years of patent decisions has been to end the various “bright-line” tests for patentability established by the Federal Circuit Court of Appeals, in favor of “functional” tests that can only be determined in a courtroom, after input from expert witnesses on both sides of the patentability test.

This approach to patent law was continued in Biliski v. Kappos.  The majority opinion, authored by Justice Kennedy, used traditional rules of statutory construction to reach its opinion that the “machine-or-transformation” test was just one method for determining patentability of a business method patent–not the only method.

The majority reasoned that 35 U. S. C. §273(b)(1), in an infringement action, creates a prior-use defense against “a method in [a] patent;”  ipso facto §273 implies a broad definition of the statutory term “method.”  The Court explained:

For purposes of this defense alone, “method” is defined as “a method of doing or conducting business.” In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273’s definition of “method,” to be sure, cannot change the meaning of a prior-enacted statute. But what §273 does is clarify the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.

The majority opinion reasoned that if business methods are not patentable in any circumstances, §273 would be rendered meaningless.  “This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous.”

Thus, rather than adopting categorical rules that “might have wide-ranging and unforeseen impacts,” the Court resolved Biliski narrowly: (1) on the basis of standard statutory construction, and (2) on the basis of previous decisions (Parker v. Flook and Diamond v. Diehr) which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.

In a separate opinion concurring in the result, Justice Stevens (in his last written opinion on the Court) rejected the majority’s approach to statutory construction in patent cases.  A long-time opponent of software patents, Justice Stevens argued that:

[T]he Court at points appears to reject the well-settled proposition that the term“process” in §101 is not a “‘process’ in the ordinary sense of the word,” Flook, 437 U. S., at 588. Instead, the Court posits that the word “process” must be understood in light of its “ordinary, contemporary, common meaning.”  Although this is a fine approach to statutory interpretation in general, it is a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background. [Emphasis added.]

While there are many possibile interpretations of the Court’s opinion, I believe this focus is possibly the most instrucive to clients and counsel anticipating patent litigation: the Court will continue to decide patent cases according to standard rules of construction, while ignoring (for the most part) the complex terms of art developed against a particular historical background. Indeed, this has been the pattern of Court decisions for at least the past 12 years. See, The End of Bright-Line Tests in Patent Litigation.

General commercial litigation typically involves the standard rules of statutory construction applied by the US Supreme Court in Biliski.  However, historicially patent litigators have generally dealt with more constrained, concrete and predicatible rules of construction–more in keeping with the predicability desired by scientists and mathmeticians involved in the world of patenting. 

If there is an overriding lesson to take away from Biliski, I believe it is this: bright-line tests in patent litigation no longer exist (for the foreseeable future).  Going forward, patent litigation will require nuanced argument, with expert interpretation, similar to practice in general commercial litigation.  This will exponentially increase the cost burden associated with patent litigation.

The majority opinion was authored by Justice Anthony Kennedy; joined (except for sec. II) by Justice Scalia, and by the remainder of the conservative wing of the Court: Justice Thomas, Chief Justice Roberts and Justice Alito.   The makeup of this majority reflects the statutory-construction basis for the decision.

Mr. Justice Stevens’ concurring opinion was joined by the liberal wing of the Court: Justice Sotomayor, Justice Ginsberg and Justice Breyer.

 Background

 In the airline business, pilots start their careers flying small aircraft (at low wages) and gradually move to larger aircraft (and high wages) as union seniority increases.   Therefore, a pilot’s position on the union’s “seniority list” is a very valuable asset to him or her.  Seniority accounts for a difference of many thousands of dollars in income over the course of a pilot’s career.   But in spite of best-laid career plans, a problem can arise when one airline buys another—and the respective seniority lists of each airline’s pilots are merged.  

“Date of hire” is typically the beginning point for merging seniority lists, but other factors can play in important role as well.  Airline mergers usually happen when a financially stronger airline can buy a financially weaker airline.  In such cases, pilots from the stronger airline can jockey for higher seniority position based, in part, on the relative financial strength of the airline that employs them.

Against that background, US Airways bought America West Airlines in 2005.  The respective pilot seniority lists were then merged into a single, consolidated seniority list pursuant to arbitration sponsored by the union then representing pilots’ from both airlines—the Air Line Pilots Association (“ALPA”).   

In a twist of economic fates, the acquired airline, America West, was financially stronger than the acquiring airline—US Air.  The ALPA arbitration therefore merged the pilots’ seniority lists in a way that favored the 1,900 America West pilots over the 5,100 US Air pilots, based partly on the relative financial strength of America West airlines. 

 US Air Pilots’ Strategic Success

Unwilling to accept the ALPA arbitration results, US Air pilots reached for a novel legal strategy: decertify the union that had sponsored the arbitration before the new seniority list could be implemented.  According to the thinking of this strategy, if the pilots union (ALPA) no longer existed, the merged seniority list could never be implemented.

Because the US Air pilots outnumbered America West pilots by more than half, the US Air pilots successfully decertified ALPA as the collective bargaining agent for all pilots from both airlines.

After decertifying ALPA as the pilots’ union, US Air pilots then formed a new, independent union, with a new union constitution that mandated merger of the seniority lists based on date of hire.  The new union re-merged the seniority lists, with the result that US Air pilots would be favored over the America West pilots.

America West Pilots’ Strategic Mistake

Before the new consolidated seniority list was presented to the employer, US Airlines, the America West pilots sued the new union in federal court, alleging breach of the duty of fair representation (DFR) under federal labor law.  A jury trial was held in Arizona Federal District Court.  The jury held for the America West pilots and against the new union.  Notwithstanding the jury trial and verdict, the Ninth Circuit dismissed for lack of ripeness holding, in effect, that the case was premature.

A case is “ripe” for decision: (1) when the case can be decided without considering “contingent future events that may or may not occur; and (2) when direct and immediate” hardship” will occur if a decision is not rendered—and the hardship entails more than ”possible” financial loss.

Because the DFR suit was filed before the seniority list was implemented, the Ninth Circuit Court ruled that the America West pilots’ claims were contingent on actual implementation by US Air, and that the alleged financial loss of America West pilots was still theoretical, not actual, and therefore no actual “hardship” had been proven.

Thus, America West pilots’ counsel made a strategy mistake by not patiently playing out the merger process before filing suit, resulting in the Ninth Circuit’s ruling that the matter was still contingent, without actual hardship, and therefore not yet ripe for decision.  As a result, the case was returned to the district court with orders to dismiss.

This case underlies the fact that the proper legal strategy is critical to any litigation effort.  US Air pilots were represented by top-flight labor lawyer, Lee Seeham.  Lee undoubtedly learned many nuances of legal strategy from his father, the legendary labor lawyer Marty Seeham (now deceased). 

The lesson here is important: complex legal strategy is a chess game.  Diverse pieces are available on the chess board, only some of which involve litigation.  A reactionary rush to the courthouse is almost never the right first step in any legal dispute.

The Ninth Circuit opinion was authored by Judge A. Wallace Tashima, and joined by Judge Susan P. Graber.  A dissenting opinion was authored by Judge Jay S. Bybee.

Plaintiff argued that “common sense” suggested the possibility of attack on party-goers where:

• MySpace was used to promote an “unrestricted and widely broadcast party invitation” to the general public,
• the party was known to include music and alcohol consumption, dancing, live music, and DJ services;
• no attempt was made to control admission or provide security or protection for attendees.

Plaintiffs asserted that these conditions made it “highly likely and substantially certain” to attract gang members–and therefore resulting violence.  The Court of Appeals rejected plaintiff’s proposed standard of duty of “common sense,” ruling that:

Common sense is not the standard for determining duty. [Citation omitted.] Nor is hindsight. [Citation omitted.] Instead, the “analysis must focus on the foreseeability of harm occurring, not its probability, a more stringent standard.”

As provided by California statute: “Everyone is responsible, not only for the result of his or her willful acts, but also for an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person.”

The existence of a duty is a question of law for the court.

When analyzing duty in the context of third party acts, courts distinguish between “misfeasance” and “nonfeasance.” Misfeasance exists when the defendant is responsible for making the plaintiff’s position worse, i.e., defendant has created a risk. Conversely, nonfeasance is found when the defendant has failed to aid plaintiff through beneficial intervention.

Nonfeasance generally does not give rise to a legal duty. The underlying premise is that “a person should not be liable in failing to act as a “good Samaritan.‟  Thus, absent misfeasance, “as a general matter, there is no duty to act to protect others from the conduct of third parties.”

In the instant case, defendant merely invited people – including unknown individuals – to attend a party at his house. The Court explained: “to impose ordinary negligence liability on [a property owner who] has done nothing more than allow [his home] to be used for [a] party . . . would expand the concept of duty far beyond any current models.”

In determining whether a heightened standard of foreseeability has been established, the defendant’s knowledge is critical. “The emphasis must be on the specific, rather than more general, facts of which a defendant was or should have been aware.” In cases involving liability for third party criminal conduct, “the requisite degree of foreseeability rarely, if ever, can be proven in the absence of prior similar incidents.”

Prevailing counsel in this case was Andrew M. Lauderdale.

The Sixth District appellate panel included Justice Richard J. McAdams, Justice Patricia Bamattre-Manoukian and Justice Nathan D. Mihara.

Elsevier involved a class action copyright case.  A class of freelance journalists was certified by the district court (SDNY) to finalize a settlement agreement involving class copyright claims against online publishers and electronic databases.  The class included both journalists who had registered their work with the US Copyright Office under 17 USC 411(a), and journalists who had not registered their work.

On appeal, the Second Circuit Court of Appeals raised a subject matter jurisdictional challenge to composition of the class, sua sponte, refusing to recognize class certification.  The US Supreme Court reversed, affirming the class certification.

17 USC 411(a) provides, inter alia and with certain exceptions, that “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”  

The Court explained this precondition is part of the Copyright Act’s remedial scheme. “It establishes a condition—copyright registration—that plaintiffs ordinarily must satisfy before filing an infringement claim and invoking the Act’s remedial provisions.”

On the other hand, the term “jurisdiction” refers to a court’s adjudicatory authority. “Accordingly, the term ‘jurisdictional’ properly applies only to ‘prescriptions delineating the classes of cases (subject matter jurisdiction) and the persons (personal jurisdiction)’ implicating that authority.’”

While perhaps clear in theory, the distinction between jurisdictional conditions and claim-processing rules can be confusing in practice. Courts—including this Court—have sometimes mischaracterized claim-processing rules or elements of a cause of action as jurisdictional limitations, particularly when that characterization was not central to the case, and thus did not require close analysis.

In Arbaugh v. Y & H Corp., the US Supreme Court described the general approach to distinguish “jurisdictional conditions” from “claim-processing requirements” of a claim:

If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-jurisdictional in character.

The Court then considered whether §411(a) “clearly states” that its registration requirement is “jurisdictional;”  and ruled that it does not.

First, and most significantly, §411(a) expressly allows courts to adjudicate infringement claims involving unregistered works in three circumstances: where the work is not a U. S. work, where the infringement claim concerns rights of attribution and integrity under §106A, or where the holder attempted to register the work and registration was refused.

Separately, §411(c) permits courts to adjudicate infringement actions over certain kinds of unregistered works where the author “declare[s] an intention to secure copyright in the work” and “makes registration for the work, if required by subsection (a), within three months after [the work’s] first transmission.” 17 U. S. C. §§411(c)(1)–(2).

It would be at least unusual to ascribe jurisdictional significance to a condition subject to these sorts of exceptions.

In concluding that the District Court had jurisdiction to approve the settlement, the Supreme Court “expressed no opinion” on the settlement’s merits.  The Court also declined to address whether §411(a)’s registration requirement is a “mandatory precondition to suit.”

The Court’s opinion was delivered by Mr. Justice Clarence Thomas.  The Court’s other conservative members joined the opinion: Justice Roberts, Justice Scallia, and Justice Alito.  Justice Kennedy also joined the majority opinion.   Justice Ginsberg filed a concurring opinion that was joined by Justice Breyer and Justice Stevens.  Justice Sotomayor did not participate.

The Federal Circuit Court explained:

“Anticipation” [under 35 USC §102] is a patent defense that must be based on a single prior art reference.  For a claim to be anticipated, each claim element must be disclosed, either expressly or inherently, in a single prior art reference, and the claimed arrangement or combination of those elements must also be disclosed, either expressly or inherently, in that same prior art reference.

“Obviousness” [under 35 USC §103] is a patent defense that may be based on multiple prior art references. Determining obviousness requires considering whether two or more pieces of prior art could be combined, or a single piece of prior art could be modified, to produce the claimed invention. This analysis typically invokes the familiar teaching-suggestion-motivation (“TSM”) test, asking whether a person having ordinary skill in the art would have found some teaching, suggestion, or motivation to combine or modify the prior art references.

“Anticipation” requires only one step to prove, if a single prior art reference is available.  If a single document teaches all elements of a patent, in the same arrangement, the single prior art reference can invalidate the target patent. (Subject to a clear and convincing evidence standard for issued patents).

“Obviousness” requires two steps to prove.  Even though multiple patents can be used as prior art references, there must also be a “teaching” that suggests a “motivation” to combine the prior art references into a single new invention (the “TSM” test).  The “suggestion” to combine can be provided by the references themselves, through another document, or via affidavit or declaration testimony of a person of ordinary skill in the art of the invention.

In its landmark decision on patent obviousness, KSR International Co. v. Teleflex, Inc., the US Supreme Court emphasized that motivation may be present even if a combination just was obvious to try:

“[c]ommon sense teaches . . . that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.”

Thus, [w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under [35 U.S.C.] § 103.

In one of the two cases referenced above, Comaper v. Best Buy, a jury found that the main independent claims for a computer fan housing were not obvious; but the dependent claims were obvious.  On post-trial motions, counsel argued it was logically impossible for independent claims to be non-obvious while the claims upon which they depend to be obvious. 

The district court rejected these arguments under an analysis that seemed (to the Federal Circuit) to require a single prior art teaching in order to find obviousness.  Pointing out the district court’s legal and logic flaws, the Federal Circuit explained that the “single prior art” teaching governs anticipation, not obviousness.  The Federal Circuit then went on to find that the claimed invention was obvious as a matter of law once multiple available prior art references were considered from the vantage point of one of ordinary skill in the art.

In the other case referenced above, Theronese v. Beckton, the district court instructed the jury that “anticipation” could be found if a single reference taught one skilled in the art that “all of the claimed elements could have been arranged as in the claimed invention.”

The Federal Circuit Court rejected this instruction, again because of an inherent logical flaw: it was logically possible that individual claim elements “could have been arranged” in a way that is not itself described or depicted in the anticipatory reference.

The Federal Circuit Court explained:

Inherency may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.

For a claim to be anticipated, each claim element must be disclosed, either expressly or inherently, in a single prior art reference, and the claimed arrangement or combination of those elements must also be disclosed, either expressly or inherently, in that same prior art reference.

The defenses of “anticipation” and “obviousness” are related, but different.  And as the Federal Circuit Court’s opinions imply, a periodic refresher in the set theory analysis can also be useful to patent litigation practitioners.

See the related article: The End of Bright-Line Tests in Patent Litigation.

1. A lawsuit was filed by or at the direction of the defendant, and was pursued to a legal termination in plaintiff’s favor;
2. The prior lawsuit was brought without probable cause; and
3. The prior lawsuit was initiated with malice.

As an initial matter the Fourth District Court of Appeals, Division 3, explained:

Malicious prosecution is a disfavored action. “This is due to the principles that favor open access to the courts for the redress of grievances.” (Downey Venture v. LMI Ins. Co.) “[T]he elements of the [malicious prosecution] tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim.” (Sheldon Appel Co. v. Albert & Oliker).

The present case arose from a defamation lawsuit filed by a Mr. Young against Ms. Daniels. The defamation lawsuit was terminated when discovery sanctions were ordered against Mr. Young. The present case followed: Ms. Daniels sued the attorneys for Mr. Young alleging the attorneys had brought the underlying case against her without probable cause, and with malice.

Mr. Young’s attorneys countered with a motion to strike under California’s anti-SLAPP statute, arguing that Ms. Robbins could not prove malicious prosecution against them as a matter of law. The Superior Court granted the anti-SLAPP motion, dismissing Ms. Robbins claims against the opposing attorneys. In affirming the anti-SLAPP dismissal order, the Court of Appeals traversed the three elements of a malicious prosecution claim:

Termination in Plaintiff’s Favor

Termination of a lawsuit is ordinarily a straightforward matter—but what happens if the case is terminated as result of discovery sanctions?  This occurred in the present case.

It is clear that, at least in some circumstances, the dismissal of an underlying action as a result of discovery sanctions will satisfy the favorable termination element of a malicious prosecution claim. Favorable termination rulings (in California and elsewhere) have arisen from:

• Failure to appear for deposition
• Failure to answer interrogatories
• Failure to appear at final hearing
• Voluntary dismissal
• Dismissal for failure to prosecute
• Final judgment after trial

The underlying case brought by Mr. Young against Ms. Daniels was dismissed for failure to produce documents. Finding a prima facie case against Mr. Young’s attorneys for this discovery failure, the court explained:

[W]here the record from the underlying action is devoid of any attempt during discovery to substantiate allegations in the complaint, and the court’s dismissal is justified by plaintiff’s lack of evidence to submit the case to a jury at trial, a prima facie showing of facts sufficient to satisfy the “favorable termination” element of a malicious prosecution claim is established for purposes of an anti-SLAPP motion.

Without Probable Cause

Probable cause is lacking “when a prospective plaintiff and counsel do not have evidence sufficient to uphold a favorable judgment or information affording an inference that such evidence can be obtained for trial.”

In general, a lawyer is entitled to rely on information provided by the client. But if the lawyer discovers the client’s statements are false, the lawyer cannot rely on such statements in prosecuting an action. A letter from a litigation adversary merely suggesting it disagrees with the verity of the allegations in the lawsuit is not sufficient to put the lawyer on notice of the falsity of the client’s allegations.

With Malice

The “malice‟ element relates to the subjective intent or purpose with which the defendant acted in initiating the prior action.

The plaintiff must plead and prove actual ill will or some improper ulterior motive. Improper purposes can be established where, for instance:

• the person bringing the suit does not believe that the claim may be held valid;
• the proceeding is initiated primarily because of hostility or ill will;
• the proceeding is initiated solely for the purpose of depriving the opponent of a beneficial use of property; or
• the proceeding is initiated for the purpose of forcing a settlement bearing no relation to the merits of the claim.

If the prior action was not objectively tenable, the extent of an attorney’s investigation and research may be relevant to the further question of whether or not the attorney acted with malice. However, evidence of an attorney’s possible negligence in conducting factual research is not enough on its own to show malice. The Court explained: “only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit.”

In the instant case, finding nothing more than the possibility of negligence in conducting its factual research, there was no possibility of showing malice against the attorneys.

Prevailing counsel in the present case was Filomena E. Meyer.

The Fourth District Court panel included: Justice Raymond J. Ikola, Presiding Justice David G. Sills and Justice Richard D. Fybel.

The Orange County Superior Court judge was Judge Andrew P. Banks.