From big brand battles to Supreme Court headlines, the year 2017 set a high bar for 2018 IP law. As we head into the second half of the year, we reflect on developments in trademark, copyright and patent law in the first half of 2018, and developments to watch over the next six months.
First They Came for Disparaging, Then They Came for Scandalous
In June 2017, the Supreme Court held in Matal v. Tam that the disparagement clause of the federal Lanham Act violates the Free Speech Clause of the First Amendment. As a result, marks such as THE SLANTS and WASHINGTON REDSKINS cannot be denied federal trademark registration on the grounds they are “offensive.” In January 2018, the Fourth Circuit finally vacated a lower court decision that canceled the Washington Redskins’ federal trademark registrations.
In the wake of Matal v. Tam, the Federal Circuit ruled that the Lanham Act’s ban on scandalous and immoral trademarks was unconstitutional, which reversed the United States Patent and Trademark Office’s decision to refuse registration for the trademark FUCT. In April 2018, the Federal Circuit denied reconsideration of its 2017 ruling.
Breakfast at Costco?
Several years ago, Tiffany & Co. discovered that Costco Wholesale Corp. was advertising and selling “Tiffany” engagement rings and slapped Costco with a trademark infringement lawsuit. Costco claimed it was using TIFFANY as a generic term to refer to a “Tiffany setting” style of ring. In 2015 a court found that Costco had willfully infringed Tiffany’s trademark rights, and a jury awarded Tiffany millions of dollars in profits and punitive damages. In August 2017, a judge reduced the jury’s award but awarded Tiffany treble damages for Costco’s willful infringement to the tune of $11.1 million in trebled profits and $8.25 million in punitive damages. Costco has appealed the $19 million damages award it owes Tiffany to the Second Circuit, and in 2018 we may see a ruling from the court reducing that award.
This case demonstrates the high cost of using another brand’s trademark to describe the same or similar goods or services. A purportedly “generic” use of the trademark could be willful infringement in the eyes of the trademark owner and a judge or jury. Even if the trademark has become common (e.g., Google, Kleenex), many trademark owners vigorously protect their trademarks from so-called “genericide.”
Driving a Wedge Between Kia and Allstate
In November 2017, a jury found that Kia’s DRIVE WiSE trademark infringed Allstate’s DRIVEWISE trademark. For more than seven years, Allstate had been using the mark DRIVEWISE in connection with a driver safety program. In 2017, Kia began using its DRIVE WiSE trademark in connection with driver safety features available in Kia vehicles. The jury found in favor of Allstate, but in early January 2018, a judge reversed the jury’s “advisory” verdict, finding no likelihood of confusion between the marks. Notably, the judge found that Allstate’s DRIVEWISE mark was weak, that the goods and services were not closely related, and that there was no evidence of actual consumer confusion. Allstate appealed. In February, the company filed an opposition proceeding before the Trademark Trial and Appeal Board against Kia’s application to register its DRIVE WiSE logo. The opposition proceeding was suspended pending final disposition in the civil case.
As this case shows, the test for trademark infringement – likelihood of consumer confusion – is extremely subjective and highly fact-specific. It is often difficult to predict whether a factfinder will believe confusion is likely and which factors will be most persuasive in making this determination.
2018: A Rocky Start for Fair Use
In February of this year, the Second Circuit issued an opinion on the long-running fair-use battle between Fox News and TVEyes, a search engine for broadcasted content. TVEyes recorded television and radio broadcasts 24/7 and allowed users who want to study and monitor broadcast media to search its database for clips. In 2013, Fox News sued TVEyes for copyright infringement. In two separate rulings, a district court judge said the service is fair use, but that specific features of the service, such as the ability to download and email clips, are not fair use. The Second Circuit overruled the district court’s ruling, finding no fair use. Although the Second Circuit found TVEyes’ service “transformative” under the first fair-use factor, other factors, which considered the amount of content copied and Fox’s opportunity for licensing its content, weighed against a finding of fair use.
In March, the Federal Circuit ruled that Google’s use of Oracle’s Java application programming interface (API) in its Android operating system is not fair use. The court found that Google’s use of the APIs was “overwhelmingly commercial,” and not “transformative,” as Google copied and moved the APIs from platform to platform without changes. The court acknowledged that elements of the APIs were functional but gave this factor little weight. As to the amount and substantiality of the APIs used, the court found this factor neutral. In considering the potential market harm to Oracle, the court found that the APIs had been used in mobile devices prior to Android’s release, and that Google’s use thwarted Oracle's licensing opportunities and “prevented Oracle from participating in developing markets.”
The four fair-use factors are: (1) the purpose and character of the use (“transformative use”); (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market or value of the copyrighted work. As these cases demonstrate, fair-use analyses are notoriously inconsistent and unpredictable. Generally, a fair-use defense should not be relied upon to excuse copyright infringement.
Is an Application a Registration?
The Supreme Court has not yet decided whether it will resolve a copyright law circuit court split over how to determine whether a work is “registered,” such that the owner could file a copyright infringement suit. Although the Copyright Act is clear that a work must be registered before an owner files a copyright infringement lawsuit, there are two approaches to determining registration: (1) the registration approach, and (2) the application approach. In jurisdictions following the registration approach, a copyright owner can only file a copyright infringement lawsuit once the Register of Copyrights has approved the application. In jurisdictions following the application approach, a copyright owner can file a copyright infringement lawsuit after the Copyright Office receives a completed application and the owner pays the required fee and deposits the work. Because the Copyright Office takes months or even up to a year to issue registrations, resolving this circuit split will provide better guidance on the timing and cost of filing a copyright infringement lawsuit. In January 2018, the Supreme Court invited the solicitor general to file a brief expressing the views of the United States on this issue, which suggests that the Supreme Court is interested in hearing the case.
As always, we encourage copyright owners to file copyright applications early to avoid any waiting period before filing a copyright infringement lawsuit and to take advantage of the Copyright Act’s statutory damages and attorneys’ fees provisions for a work registered either within three months of publication or prior to its infringement.
Pouring Oil on Troubled Waters … for Now
In a blow to patent owners that was widely anticipated by most observers (save for a stubborn faction of the patent bar locked in a never-ending policy battle with the Supreme Court), the Supreme Court upheld in Oil States Energy Services v. Greene’s Energy Group the constitutionality of the inter partes review process established in the America Invents Act, which went into effect in 2012. The inter partes review process has been colorfully likened by its critics to “death panels” or “death squads” due to the propensity of review panels to invalidate patents. Supporters of inter partes reviews, of course, view the matter differently, seeing these panels as an important shield against “junk patents,” which have been improperly granted by the Patent Office for a variety of reasons. Regardless of who has the better view, the Supreme Court ultimately deferred to the policy judgment of Congress (which largely aligns with the Court’s own sensibilities) and ruled that what the Patent Office giveth, the Patent Office may taketh away (under appropriate circumstances). The reasoning of the Court is somewhat convoluted, but the result of this 7–2 decision is clear: although the Court also expressly stated that the holding is narrow and listed a number of alternative bases for challenging inter partes reviews that were not at issue in the case decided (but which will likely be the subject of new litigation eventually).
Same Road, No Shortcuts
Since the introduction of inter partes reviews, the Patent Trial and Appeal Board has made its task simpler by only instituting review of claims for which the PTAB deems there is a reasonable likelihood that the petitioner would prevail. In SAS Institute Inc. v. Iancu, the Supreme Court, in a narrow 5–4 decision, deemed that this shortcut was not permitted under the text of the America Invents Act. It said that if the PTAB institutes inter partes review of any challenged claim, it must institute inter partes review for every claim that was challenged.
Shortly after that decision was rendered, the PTAB announced that it would not only institute all challenged claims, but would go a step further and that, if a trial was instituted, it would also institute on all challenged grounds or none – at least for the time being. Thus, while petitioners might get the benefit of pursuing all of their arguments before the PTAB, they also take the chance that the PTAB might now decline to review a petition it would have otherwise granted if it could have been more selective in reviewing only the most vulnerable claims on the most persuasive grounds. By bringing all grounds within the purview of the PTAB’s final decision, it also means that estoppel will more broadly apply to petitioners in co-pending district court litigation, where they were previously free to re-raise any grounds of invalidity not taken up by the PTAB. Additionally, because the PTAB will now be disposing of all grounds of invalidity, district courts may be more willing to grant a stay of those proceedings pending a final decision in the inter partes review because fewer issues are likely to be relitigated.
David Marcus practices in the McNees Intellectual Property and Patent Practice groups. He prepares and prosecutes patent applications and assists clients with asserting and defending patent and trademark claims in federal court. He also prepares freedom-to-operate opinions, and patent non-infringement and invalidity opinions. Reach him at [email protected]
Emily Hart practices in the McNees Intellectual Property Practice group. Her practice includes domestic and international trademark and copyright counseling and litigation. She reviews, drafts and negotiates franchise, licensing and technology agreements. She also advises clients on a wide variety of advertising and marketing issues. Reach her at [email protected]
Published June 6, 2018.