USPTO, Trademarks in Review

The Trademark Trial and Appeal Board ("TTAB") at the U.S. Patent and Trademark Office ("USPTO") had a busy year in 2007. Of the more notable accomplishments, changes to the TTAB Rules of Practice updated the rules to complement recent amendments to the discovery rules of the Federal Rules of Civil Procedure and amended other procedural rules that can easily catch the unknowing TTAB litigant off-guard. Fraud on the USPTO for statements made in trademark applications also reappeared on the TTAB's docket in 2007 as did defining a "bona fide intent to use" a trademark in commerce. The TTAB is also setting the groundwork for changes to treatment of trademarks comprising surnames.

1. Changes to TTAB Rules of Practice

The rules changes originally proposed in January, 2006, went into effect on November 1, 2007 (with the TTAB's standard Protective Order having been imposed in all cases without a protective order as of August 31, 2007). The initial proposal was widely chastised by law firms, individual practitioners, and intellectual property organizations as too drastic. Eventually, the USPTO and various intellectual property organizations met to discuss the proposed changes and the USPTO redrafted its rules package to reflect the comments and concerns of the trademark bar. The TTAB adopted the "disclosure model" of the Federal Rules of Civil Procedure with hopes of increasing the efficiency of commencing proceedings and the efficiency of discovery and pre-trial information exchange. In contrast to previous rule that did not require service of the original pleading on the defendant, plaintiffs must now attempt service of the original pleading on the defendant at the current address(es) listed in USPTO records. Parties now also have the option of submitting a pleaded registration in the form of photocopies of the registration and assignment history from the USPTO databases, as opposed to submitting a USPTO status-and-title copy. The key component to the "disclosure model" is the requirement that the parties engage in a discovery conference early in the proceeding. The TTAB's wrinkle to this requirement is that either party may request that a TTAB representative participates in the discovery conference, which may affect the demeanor and tone of the conference to prevent the TTAB representative, most often the TTAB attorney assigned to manage the matter, from holding one party in a negative light.

2. Fraud on the USPTO

The TTAB's decision in Hurley Int'l. LLC v. Volta returned the issue of fraud into the limelight. The TTAB has consistently sustained a charge of fraud when a trademark applicant or registrant falsely claims use of the mark in connection with the designated goods or services. This rule has been applied in a "strict liability" sense, without consideration of the actual subjective intent or innocence of the applicant or registrant. Hurley did not alter the TTAB's existing rule on fraud, but in a footnote suggested that if the identification of goods or services is corrected before publication of the application, a false statement regarding use is not fraud. This language appears to take the punch out of the idea of strict liability, but was mentioned in dicta in two additional TTAB cases decided in 2007, Hachette Filipacchi Presse v. Elle Belle and Kipling Apparel Corp. v. Rich.

3. Defining a Bona Fide Intent to Use

In Intel Corp. v. Emeny, the TTAB examined in an opposition proceeding whether the applicant had a bona fide intent to use the applied-for trademark at the time the application was filed. The TTAB confirmed that a bona fide intent should be an objective showing of "evidence in the form of real life facts measured by the actions of the applicant, not by the applicant's later arguments about his subjective state of mind." The applicant in this case produced no evidence of any business or marketing plans involving the mark, no evidence of any specific planning to use the mark, and no evidence of ever having promoted or sold any goods under the mark. Based on this lack of evidence, the TTAB concluded that the applicant failed to produce an "objective" showing of an intent to use the applied-for trademark. It is also likely that the applicant's admission that he filed the application to "make sure that nobody else [can] take advantage of those marks" weighed in the TTAB's decision.

4. Trademarks Comprising Surnames

When trademark examiners review marks that are also surnames, they take into account (i) the rareness of the name at issue, (ii) whether the name has any other meaning, (iii) whether anyone associated with the applicant has the surname; and (iv) whether the applied-for mark has the "look and feel" of a surname. In a rarely-seen concurring opinion, in In re Joint Stock Company "Baik" the relevance of the "look and feel" factor has been addressed. The opinion noted that "the purpose behind prohibiting registration of marks that are primarily merely surnames is not to protect the public from exposure to surnames ... [but] to keep surnames available for people who wish to use their own surnames in their businesses ..." The look and feel of a surname has nothing to do with the stated prohibition on registration of surnames. A concurring opinion in In re Marriott Int'l, Inc. further expanded on the concurring opinion in "Baik" by emphasizing that the "rareness" factor is of primary significance in the surname analysis and that the remaining factors come into play once the USPTO has established its prima facie case. Even focusing on the "rareness" factor would require additional jurisprudence establishing benchmarks for determining when this factor is met.

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2007 Year in Review for International Trademark Practice

The year 2007 has seen a number of developments in trademark practice worldwide, both administratively, and in the courts. A few notable events are:

Canada

The Canadian Trademarks Office will no longer require disclaimers of the majority of descriptive material. A voluntary disclaimer will still be accepted.

Canada has also enacted practice changes in Opposition proceedings. Among several administrative changes, there were significant increases of the time limits for filing counterstatements, and for filing and serving both the opponent's and applicant's evidence.

China

Earlier this year, the Beijing First Intermediate People's Court ruled that a manufacturer, retailer, and shopping center where infringing goods had been sold were all liable for infringement. The case was brought by the French company La Chemise Lacoste based on its mark LACOSTE and the crocodile image. The manufacturer in China had registered a similar crocodile image, accompanied by additional Chinese characters. When the garments were actually made, however, the wording was obscured by using a thread that was identical to the color of the garment, leaving only the crocodile mark visible. As a result of that modification, the court found that the trademark registrant/manufacturer was liable for infringement, along with the retailer and the shopping center in which the retailer was located, for failure to ensure the authenticity of goods being sold. While the LACOSTE mark has been deemed "well-known," the decision was made on the basis of the similarity of the subject mark to the infringer's mark, as it was used, and not necessarily on the basis of the extra protection provided for "well-known" trademarks.

European Union

Bulgaria and Romania have joined the European Union at the beginning of the year, and existing Community rights were automatically valid in the new member states.

The community trademarks office has instituted some procedural changes meant to streamline the opposition process. Admissibility checks now involve ensuring that the opposition is based on at least one valid trademark right. Formerly, if an opponent based the opposition on several rights, if just one was found to be insufficient, a deficiency letter would issue, delaying the proceedings significantly. A decision on costs will be automatically made unless the office is advised otherwise, which also allows for the disposition of files more promptly, while still allowing the parties to reach an agreement on costs, if they choose to do so. Finally, all second requests for a suspension of proceedings will be issued for one year, rather than for two months, with the option by either party to end the suspension.

India

India sought to strengthen customs enforcement at its borders with the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. The rules allow a right holder to record its rights with the relevant customs authorities, and enable an intellectual property right owner to request that customs officials temporarily hold suspected counterfeit goods. These new initiatives conform to the TRIPS Agreement.

Iraq

Trademark applicants that are seeking protection of rights in Iraq are no longer required to sign the boycott declaration to obtain registration. This change came into effect on July 22, 2007, and it is expected that many of the applications that have been pending for a number of years should now be processed.

Montenegro

Montenegro is now a separate jurisdiction from Serbia, for trademark registration purposes. International trademarks filed before June 3, 2006, the date of Montenegro's independence, required a request for continuation of protection to be filed though WIPO. Those registered between June 3, 2006, and December 4, 2006, require revalidation within 6 months from the date the Montenegro Trademark Office begins operations. National marks filed in Serbia, pending at the time the Montenegro office opens also require revalidation within six months. National rights that are already registered in Serbia will be automatically recognized as being valid in Montenegro, provided that they are still effective as of the inaugural date of the Montenegro Intellectual Property Office.

Singapore

Singapore has amended its filing system to accept multi-class applications.

United Kingdom

As of October 1, 2007, applications are only examined on absolute grounds. Any objections for relative grounds must be made by trademark owners during the opposition period. This new approach is similar to the examination procedure used for Community Trademarks, and should allow the examination process in the UK to become significantly faster.

Patents in 2007

The overriding theme on the US patent front is one of change. The US Supreme Court's involvement in the patent field has become even more prevalent, with two major decisions coming down that affect the practice of patent law in the US. In MedImmune v. Genentech, the US Supreme Court held that a licensee of a patent is not held to the doctrine previously know as "licensee estoppel" and could insulate itself from damages while simultaneously seeking a declaratory judgment of patent invalidity. Federal jurisdiction in a declaratory judgment action requires that the party seeking a ruling of patent invalidity have a reasonable apprehension of impending litigation, something that previous holding said was lacking when there was a license, and thus was prohibited by the actual-case-or-controversy requirement of the US Constitution. The decision has implications beyond the patent field, in that any licensee may now attack the underlying rights found in a contract or other license without jeopardizing its position in respect of an agreement made with the opposing party.

In another change in direction, the Supreme Court has revised the standard of obviousness, one of the criteria by which patents are judged worthy of grant. In KSR Int'l v. Teleflex, Inc., the Supreme Court rejected the rigid and formalistic analysis of the issue of obviousness, rejecting the requirement added in numerous decisions by the appellate court reviewing all patent cases, the US Court of Appeals for the Federal Circuit (CAFC). In order to combine references, KSR held that the U.S. Patent and Trademark Office (USPTO), and by implication defendants in a patent infringement litigation, need no longer rely on a reference or specific reasoning that provides a "teaching, suggestion or incentive" to combine references that show the invention, albeit in separate documents. The Supreme Court advocates that common sense should also guide the validity determination of a patent. As a result, patents can be more easily found to be obvious or invalid, thus accelerating the swing of the pendulum back toward a regime of more restrictive granting and enforcement of patents.

In this decision, and in the USPTO actions discussed below, the federal courts and agencies are succumbing to the general criticism that it is too easy to obtain a patent, and also to hold hostage an accused infringer, when the invention perhaps is not something which was patentable. To quote the opinion, "as progress beginning from higher levels of achievement is expected in the normal course, the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of the useful arts." (Slip opinion page 24).

Another major change was a proposal by the USPTO to implement several rule changes first promulgated by the USPTO in January of 2006. These proposed rules were viewed with trepidation by the patent bar, as they would have severely restricted the number of claims and continuation applications that patentees could rely on in prosecution of their applications, among other requirements. As a result of two lawsuits, The US District Court in the Northern District of Virginia issued an injunction to the USPTO enjoining the implementation of the entire proposed rule change package just prior to its November 1, 2007 effective date. The suits are still pending, and more guidance will be forthcoming from the Court in the next few months. Any final decision will certainly be appealed by the losing side to the CAFC, and perhaps to the Supreme Court.

On the foreign patent application prose¬cution front, the European Community has entered into a treaty (the London Agreement) that will permit grant of a European Patent in only one language, with only the claims requiring translation to make it effective in a particular member state. This should substantially reduce the costs of obtaining patent protection in the European Community for EPO applications filed after the effective date of the treaty, expected to transpire sometime in spring 2008.

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Domain Names 2007 Year in Review Highlights

As 2007 comes to a close, the increased use and misuse of domain names has been fodder for numerous news reports, lawsuits, and the need for vigilant protection of a company's valuable trademarks through registration and enforcement in the ever growing list of gTlds, country code domains, and IDNs. Some of the many highlights of domain name developments that occurred or were reported in 2007 include:

• Sunrise period for registration of .ASIA domain names begins for trademark owners.
• ICANN begins testing of Internationalized Domain Names (IDNs) for gTLDs, represented by local language characters using scripts beyond ASCII characters, for 11 languages: Arabic, Persian, Chinese (simplified and traditional), Russian, Hindi, Greek, Korean, Yiddish, Japanese and Tamil. Comments are currently being accepted regarding the possible introduction of ccTLDs as IDNs, i.e. for the two-letter country codes currently used on the Internet to be provided in a non-Western alphabet.
• The Generic Names Supporting Organization, a committee of ICANN, preserves the public access to WHOIS information, while agreeing to initiate further studies regarding the legitimate uses and abuses of WHOIS data.
• Dell files suit against registrars BelguimDomains, CapitalDomains, DomainDoorman, and various alleged shell-registrants acting as fronts for the registrars, in an attempt to curtail "tasting" of domain names that are similar to or typos of Dell trademarks. In a novel attack on the cybersquatting activity, Dell characterizes the activity as counterfeiting, thereby potentially exposing the registrars and registrants to damages of up to one million dollars per violation, rather than a maximum of $100,000 per domain under federal cybersquatting laws.
• The Public Interest Registry, which manages the .ORG top-level name, attempts to combat domain name tasting by imposing a five-cent surcharge for registrars that deleted or dropped more than 90 percent of their registered domains after the five-day grace period for payment of registration fees. The change in policy resulted in the percentage of .ORG registered domain names that were dropped after the five-day grace period decreasing from nearly 92 percent to less than 30 percent.
• The National Arbitration Forum (NAF), one of the two main forums for bringing a UDRP action, amends its supplemental rules to allow a complainant to make arguments and present evidence in a UDRP complaint, when the complainant has reason to believe that a number of domain names are registered to a single entity or person, but under different aliases. This will allow a complainant to proceed against more than one listed registrant in the same UDRP complaint, if the linking of the alleged aliases can be proven.
• ccTLDs continue to grow in numbers, accounting for 36% of global domain name registrations. The largest ccTLD remains .de (Germany) in terms of total base of domain name registrations, as it approaches 12 million registrations, with .cn (China) and .uk (United Kingdom) as the next largest ccTLDs. These three ccTLDs, combined, account for 45% of all ccTLDs. The top ccTLDs with the largest growth include .cn, .ru (Russia), .de, .uk, .nl (Netherlands) and .eu (European Union).

With the continued increase of domain name registrations in new gTLDs and IDNs, the increase in popularity of ccTLDs, along with the always changing landscape of cybersquatting activity, there will continue to be a strong need for companies to strategize their domain name registration activities, while vigilantly monitoring and protecting their brands from domain name abuse in 2008.

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Dell Trying to Take a Bite Out of Domain Name Tasting

In a recently-unsealed lawsuit relating to domain name tasting, Dell, Inc. has sued three registrars, along with other defendants, in Federal Court in Florida, alleging that the registrars, through various shell companies and individuals, have registered and profited from nearly 1,100 domain names that were "confusingly similar" to Dell's trademarks. The named registrars are Belguimdomains, Capitoldomains, and Domaindoorman. Dell has alleged that the registrars created numerous shell registrants who acted as fronts for the registrars, and registered various domain names that are similar to Dell's trademarks, along with domain names related to well-known trademarks of other corporations.

When "tasting" a domain name, a registrant is able to take advantage of the ICANN policy that allows the registrant to hold a domain name for up to five days before committing to purchase it. Many registrants who monetize the Internet by posting keyword-generated shopping-mall-type websites will test a domain name for its "click-through" value and return any domains that are not profitable within the five-day trial period. By registering thousands or millions of domains at a time, "tasting" has turned into big business for some registrants and registrars, and at the expense of many corporations who own valuable trademarks. Dell has alleged that the Defendants have perpetuated the "tasting" by cycling the infringing names from one registrar to the next, while holding onto the domains indefinitely and not having to pay for them.

Although lawsuits relating to cybersquatting or typosquatting of domain names are not new, what is unique about this suit is Dell's attempt to characterize the activity as "counterfeiting" of the trademarks. If successful on the counterfeiting count, Dell could recover damages up to one million dollars per violation, as opposed to a maximum of $100,000 per domain under federal cybersquatting laws.

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Coalition of French Auction Houses Take Action Against eBay

The regulatory authority for auction houses in France, the Council of Sales, has taken action against eBay.fr, arguing that it should be held to the same standards as traditional auction houses, to ensure that it does not enable the sale of counterfeit goods. This is one of the more recent examples of actions against eBay regarding counterfeits, the most high-profile of which may be the pending lawsuit by Tiffany & Company, accusing eBay of allowing the sale of counterfeit merchandise. Traditional French auction houses require a special permit to do business, and the Council of Sales is arguing that eBay should be held to the same requirements to protect consumers. EBay's position is that it is not a traditional auctioneer, but merely provides the platform to connect buyers and sellers, acting as an "auction broker."
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Design Infringement Is a Matter of Appearance

To determine whether an accused product infringes a design patent, a two-part test is applied. The two parts are the "ordinary observer" test and the "point of novelty" test. The tests have been treated as being complementary, so that if an ordinary observer would consider the two designs as essentially the same, the second test would be applied to determine whether the accused device appropriates the point of novelty that distinguishes the patented item from the prior art. This second test is somewhat in conflict with the general proposition that a claimed invention should be viewed taking into account all of the claim limitations together and focusing on the overall design, rather than on any particular element that may be considered "the invention."

This two-part test was applied in a recent case (Egyptian Goddess, Inc vs. Swisa, Inc.) by the U.S. Court of Appeals for the Federal Circuit (CAFC), sitting in as three-judge panel in Washington, D.C. (The CAFC has jurisdiction over all patent-related issues in cases that are brought in any U.S. District Court.) The CAFC affirmed the U.S. District Court for the Northern District of Texas ruling that granted summary judgment against the patent owner because of failure to meet the "point of novelty" test. The CAFC found that the combination of elements that was asserted as comprising the "point of novelty" did not rise to a non-trivial advance over the prior art, and that no reasonable jury could conclude that it did; and held the accused design did not infringe as a matter of law. In a strongly-worded dissenting opinion, Judge Dyk disagrees with the holding for several reasons, the most cogent being that the point of novelty, as applied, is directed to raising a "non-obviousness" issue in the "point of novelty" test in contravention of the statutory presumption of validity of a patent. There is also the inherent difficulty in making a determination in a design case of what constitutes a non-trivial advance over the prior art at the point of novelty.

In a per curiam order, the CAFC has granted a petition for rehearing by an en banc panel of all thirteen members of the CAFC. This procedural step by an appellate court is usually resorted to when the court intends to clarify a point of law in a decisive way. The case will be re-argued before the full court, and the CAFC has requested the parties, and any interested amicus curiae, to brief specific questions as follows:

1) Should "point of novelty" be a test for infringement of design patent?

2) If so,

(a) should the court adopt the non-trivial advance test adopted by the panel majority in this case;

(b) should the point of novelty test be part of the patentee's burden on infringement or should it be an available defense;

(c) should a design patentee, in defining a point of novelty, be permitted to divide closely-related or ornamentally-integrated features of the patented design to match features contained in an accused design;

(d) should it be permissible to find more than one "point of novelty" in a patented design; and

(e) should the overall appearance of a design be permitted to be a point of novelty?

3) Should claim construction apply to design patents, and, if so, what role should that construction play in the infringement analysis?...

The decision of the en banc panel is expected sometime in the new year. Whatever the outcome, the CAFC will advance the understanding of design patents and their enforcement.

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China Proposes Substantial Revision of its Trademark Law

A draft amendment to the PRC Trademark Law would do away with relative examination and recognize rights based exclusively on bona fide prior use. The first change would mean that the office would no longer examine new applications against conflicting prior rights so that the onus would now fall on trademark owners to keep the register free of overlapping unrelated third party rights by means of oppositions. The second change would result in China moving closer to the United States model, where a prior user could potentially trump a later applicant. While there is clearly some equity to this approach in that it may become harder for pirates to usurp a mark by winning out in foot race to the trademark office, it will also create some uncertainty as applicants will, to some extent, be at the mercy of unscrupulous opponents who may manufacture evidence of prior use for the purposes of winning priority contest.

Other changes will include facilitating the filing of multi-class applications, extending time frames for responding to official actions and filing oppositions, and doing away entirely with the obligation to record licenses. The new law is still at a preliminary stage and it remains to be seen how much actually makes it on the statue book.

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USPTO: Court Challenge to New Rules Delays Implementation

In a clear indication of the controversial nature of the new rules announced in August, the U.S. District Court for Northern Virginia issued a preliminary injunction enjoining the USPTO from implementing the new "final" rules just one day before they were to become effective on November 1, 2007.

The challenge to the new rules by SmithKline Beecham Corporation and Mr. Triantafyllos Tafas is primarily based on the argument that the USPTO has overstepped its rule-making authority and that the final rules cannot be implemented without a change in the US patent law by the US Congress. Other arguments allege that the retroactive effect of the new rules deprives applicants of the rights they had at the time of filing, and that the new rule changes are arbitrary and capricious.

In response, the USPTO asserts that the new rules do not eliminate any existing rights, but merely up the requirements for their assertion; and that the plaintiffs are not actually asserting any rights, but complaining about unmet expectations. The court held that the evidence did not show the USPTO rules to be arbitrary or capricious at this preliminary stage of the proceedings.

The preliminary injunction is meant to retain the status quo until the District Court has had time to hear and evaluate all the evidence, and make a final ruling on the issue. The USPTO may revise the final rules to remove the most egregious and controversial provisions; it may also appeal the preliminary injunction.

In accordance with the District Court ruling, the USPTO has directed its Examiners to follow the existing rules until further notice.

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Montenegro Update

Under the newly-announced transitional provisions, designs, patents and nationally-filed trademarks (not including International Registrations) already issued to registration in Serbia & Montenegro (or in the former Yugoslavia) will be automatically extended to Montenegro provided that they are still effective as of the inaugural date of the Montenegro Intellectual Property Office, which is expected to be in December of 2007. No formal revalidation will be required in these circumstances, and right holders would simply continue to renew or pay maintenance taxes on their rights in Montenegro in accordance with the existing schedule. The only rights that will need to be revalidated are International Registrations filed under the Madrid Agreement designating Serbia or Yugoslavia and all applications still pending as of inaugural date.
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Where's Leo? (Stoller that is)

Leo Stoller had made a name for himself in trademark circles as a self-proclaimed "intellectual property entrepreneur." Stoller, through his companies Rentamark.com, Stealth Industries Inc., S Industries, Inc., Sentra Sporting Goods U.S.A., and Central Mfg. Co. or in his own name, has claimed rights to an extensive catalog of allegedly famous trademarks and vigorously asserted those rights against people and companies that adopted similar or identical marks. Stoller's claimed inventory of marks included STEALTH, SENTRA, DARK STAR, AIR FRAME, TRIANA, STRADAVERIUS, HAVOC, CHESTNUT, TRILLIUM, FIRE POWER, LOVE YOUR BODY, and many others.

Stoller's modus operandi usually included sending a cease-and-desist letter, threatening infringement actions against those who did not license their use of the subject trademark. The cease-and-desist letter often appeared to be printed on generic letterhead with the trademark in which Stoller claimed rights inserted as appropriate. In later versions of his standard cease-and-desist letter, Stoller would brazenly write that settlement negotiations and pre-filing discovery or exchange of information was a fruitless exercise. In his eyes, license and litigation were the only choices. Stoller was able to maintain this business model because license fees are often far less than the cost of defending against the potential litigation.

Throughout his "intellectual property entrepreneur" career, Stoller managed to ruffle the feathers of not only the alleged trademark infringers he pursued, but the courts and administrative bodies before which he prosecuted his claim when he failed to secure a license. The weak link of Stoller's business model was that frequently, he had no interest or protectible rights in the trademarks he asserted against others, rendering his claims entirely baseless, vexatious and wasteful of time and money. Most if not all of his trademark registrations were supported by documents alleging use of these marks that were at best suspect and Stoller often prolonged litigation in bad faith to the ire of the litigants and courts. These activities got Stoller into much hot water. In recent years, the Trademark Trial & Appeal Board at the U.S. Trademark Office has vacated Stoller's pending requests for extensions of time to oppose published trademarks and prohibited Stoller from filing any additional extensions for a period of two (2) years extending until July 2008. Once this suspension is lifted, Stoller can only file extension through an attorney. The federal court for the Northern District of Illinois went a step further and precluded him from filing any further lawsuits without first obtaining leave from the Court.

So what is next for Leo? This past August, the bankruptcy court in the Northern District of Illinois approved the sale of Stoller's trademark assets, whatever they may be, to the Society for the Prevention of Trademark Abuse, LLC, an entity set up for the sole purpose of acquiring Stoller's assets and rescinding or modifying any license agreements based on unfounded claims. Stoller continues to fight, filing appeals where ever he can and posting notices on his blog to potential purchasers or licensors of marks from the SPTA, that title to these assets may be sufficiently clouded. So the battle rages on...

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The England and Wales Appellate Court casts doubt on "Miracle" in a bottle

L'Oreal SA & Ors. V. Bellure NV & Ors. [2007] EWCA Civ 968 (October 10, 2007)

The Court of Appeal (CA) responded unfavorably to trial court's pro-trademark decision in L'Oreal v. Bellure. The trial court Judge held that the use of L'Oreal's trademarks in comparison lists of L'Oreal's perfumes and inexpensive smell-alike fragrances constituted infringement. The trial court Judge further held that the similar packaging and containers of the smell-alike perfumes infringed L'Oreal's trademarks for the perfumes Miracle and Tresor. The Court of Appeal was critical of the trial court's holdings but stayed its holding pending the response to a series of questions submitted to the European Court of Justice (ECJ).

First, the CA questioned whether the lists comparing L'Oreal's perfumes to perfumes of smell-alike merchants infringed L'Oreal's trademarks if L'Oreal did not suffer any economic or reputation damage. The CA asked the ECJ to answer this question; the CA also expressed that it did not think this was infringement. The CA found that the comparison lists were essentially descriptive, providing an honest description of the smell-alikes. Additionally, as the CA put it, "consumers are not stupid," given the gaping disparity in pricing and different marketing channels, no consumer would buy a smell-alike fragrance expecting the quality of a L'Oreal fragrance.

The CA then had to determine whether smell-alike merchants' use of packaging and containers similar to those used by L'Oreal's was infringement. The CA questioned whether it is fair for smell-alike merchants to get a "free ride" on the extensive advertising and promotion of L'Oreal perfumes. This "free ride" is presumed when a purchase is influenced by customer's mental association of the smell-alike perfume with L'Oreal perfume.

The evidence indicated that smell-alikes packaged and bottled similarly to respective original perfumes sold for a slightly higher price, and the CA asked whether the smell-alike merchants were taking an "unfair advantage" proscribed by the statute, when they used packaging and containers that were similar to those used by L'Oreal, even if there was no harm to L'Oreal's sales and reputation. While the CA left this determination to the ECJ, the CA did not see this use as unfair if L'Oreal experienced no harm.

Although the answers by the ECJ could alter this outcome, the CA makes it clear that trademark owners will find it difficult to keep their marks off comparison lists absent a showing of injury to reputation or economic harm.

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Discovery Conferences Now Required by the TTAB

The Trademark Trial and Appeal Board, or TTAB for short, is the quasi-judicial branch at the U.S. Trademark Office that oversees, amongst other matters, all trademark opposition-, trademark cancellation-, and concurrent use proceedings. Recently, the TTAB has adopted amendments to its rules of practice that mirror the Federal Rules of Civil Procedure, particularly with respect to discovery issues. The changes come into effect on November 1, 2007.

Of significance, the TTAB rules will now require that the plaintiff and defendant in a TTAB proceeding partake in a discovery conference to map out a discovery plan, including the guidelines for taking discovery and timing of discovery activities for the proceeding, and engage in the exchange of mandatory initial disclosures, including an initial production of relevant documents and things, and identification of potential witnesses. These new provisions correlate directly to the Federal Rules. In adopting these changes, the TTAB reasoned that the earlier the parties sit down to discuss the dispute and the earlier they begin to exchange discovery, the earlier the parties will discuss settlement.

The new rules also provide that the TTAB's standard protective order is applicable for all cases before the TTAB. Accordingly, in the absence of a mutual agreement upon protective order, the standard protective order applies. This provision became effective on August 31, 2007.

Another amendment that addressed a subject of much commentary involves the former requirement that a trademark application or registration owner provide a certified copy of the application or registration showing current title and ownership. The USPTO's website makes all of this information available electronically, which begged the question, why make litigants provide a certified copy when the TTAB could take judicial notice of the information provided on the USPTO's website. The amended rule establishes that ownership and title information obtained from the USPTO's website may be submitted in lieu of a certified copy of an application or registration. This provision also came into effect on August 31, 2007.

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Design Patents Not Just Ornamental

In a recent decision, the International Trade Commission (ITC) ruled that the owner of a design patent could rely on it through Customs to block the importation of infringing products into the United States. In In re Certain Automotive Parts, Investigation No. 337-TA-557, 2007 WL 2021234 (ITS 2007), the ITC found that certain spare parts for Ford trucks being manufactured overseas without authorization infringed certain design patents owned by Ford. Pending the outcome of the appeal to the Court of Appeals for the Federal Circuit (CAFC), Ford vs. ITC, Docket No. 07-1357, Ford can take the ITC determination to the U.S. Customs Service, which must hold for inspection at the port of entry any spare parts that are covered by Ford's design patents. If the parts are considered to be infringing, they must be barred from entry into the U.S.

Design patents protect the ornamental appearance of a novel and non-obvious design. There is a non-statutory exception, the repair doctrine, which permits the lawful purchaser of a product to effect a repair. The accused importers in this case argued that the parts fell within this exception because they were to be used for repair purposes. The ITC disagreed, finding that the accused were importing complete replacement parts, which were themselves the subject matter of Ford's design patents.

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National Arbitration Forum to Permit Combining of Respondent Aliases

In a letter to ICANN, the National Arbitration Forum—one of two main forums for UDRP proceedings—has proposed updated Supplemental Rules for the UDRP, with an intended effective date of November 1, 2007. The proposed change with likely the greatest impact is one relating to allegations of Respondent aliases. In instances where a Complainant believes that a number of domain names are registered to a single entity or person, but under multiple aliases, the Complainant will be allowed to make arguments and present evidence in the UDRP Complaint, linking the alleged aliases. The determination of whether presented evidence is sufficient to link the alleged aliases will be made by the Panel, rather than by the service provider. Large-scale domain name registrants in the "pay-per-click" business often use multiple aliases to avoid being detected and perceived as "cybersquatters." This proposed rule change is also relevant in the context of domain names whose WHOIS information is shielded by the same privacy protection service.

Although there will be an increase in filing fees dependent on the number of domain names involved in the dispute, the proposed change will likely yield monetary savings for Complainants by allowing them to proceed under a single filing instead of having to pursue each of Respondent's multiple aliases separately. It should be noted, however, that if the Panel determines that Complainant's evidence is insufficient to link the alleged aliases, the domain names held by the unrelated registrants will not be subject to further consideration and no portion of the filing fee will be refunded.

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UK–Good-bye to Citations/Hello Oppositions

On October 1, 2007, the United Kingdom will reform its practices in the area of relative examination so that they are more closely aligned with the Community Trademark examination procedure. In particular, while Examiners will continue to cross-search new applications against earlier United Kingdom and Community trademarks, the results will be provided to the applicant on an informational basis and will not of themselves be a basis for refusing registration. It will fall to the owner of a prior right to lodge an Opposition if it wishes to block a later mark.

The change is being made in large part because it was considered unduly burdensome on applicants for United Kingdom marks to have their marks refused on the basis of earlier national and Community rights which themselves often overlapped due to the absence of relative examination at the Community level. This resulted in applicants for United Kingdom rights being at a substantially higher risk of encountering an objection than an applicant for a broader Community right.

Whether this change will devalue the perceived value of a United Kingdom national registration remains to be seen. Under the new practice, the owners of prior United Kingdom national rights will be notified of later-filed applications that may conflict with those rights while owners of Community and International rights extended to the United Kingdom can also opt-in for a fee so that they are notified of possibly conflicting United Kingdom national applications.

The change will mean that there will be a greater burden on the owners of United Kingdom national rights to police their marks and affirmatively assert these rights against later applicants by means of Oppositions and other enforcement measures.

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No Area Geographically Obscure to Wine Fans

OHIM's Cancellation Division has cancelled Community Trademark 2020832 TUPUNGATO that covered "alcoholic beverages (excluding beer)," on the basis that it is or may become descriptive of the geographical origin of the goods and on grounds of bad faith.

The evidence indicated that Tupungato was longstanding, although small wine growing region in Argentina, accounting for less than 1% of the country's wine output. Article 7(1)(c) CTMR provides for refusal of protection to marks that "consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service." The Board noted that the provision is not limited to marks that are currently associated with the category of goods in question, but also extends to marks that are capable of designating the geographical origin of the goods in the minds of the relevant consumers. Noting that a part of the wine-purchasing public is composed of "wine fans," who have a superior knowledge in the field, and that in wine shops, the customer is often assisted by an expert vendor, the Board found that it was "reasonable to assume that TUPUNGATO is a geographical name which is liable to be used in future by wine traders and producers as an indication of the geographical origin of their goods and is, in the mind of the targeted public, capable of designating the geographical origin of the category of goods in question."

The Board also found that the registrant has acted in bad faith because "even though the knowledge of the name TUPUNGATO as a wine producing area on behalf of the proprietor (had) not been proved by positive evidence…it seems extremely unlikely that the proprietor could have ignored the existing link between the name TUPUNGATO and the wine producing area having the same name and that it could consequently ignore that the sought monopoly over the name TUPUNGATO for alcoholic beverages, which include wines, would have been prejudicial to the interests of competitors producing and/or dealing with the import-export of wines from that area."

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The United States May Have Designs on Fashion

Much to the chagrin of most fashion designers, the United States is lacking a statutory scheme for protecting apparel designs, comparable to protection offered in Europe. Copyright law only offers protection for fabric patterns, trademark law protects logos on the apparel item, and prosecution time for a design patent ordinarily exceeds the lucrative first few months of a fashion design's lifespan. With advent of the Internet, photographs of new designs from fashion shows immediately make their way to overseas manufacturers who can produce a full line of knock-offs before the originals hit the market.

A bill is now circulating in the Senate that would amend U.S. copyright law to specifically provide protection to the overall appearance and ornamentation of apparel articles. Under this bill, entitled the Design Piracy Prohibition Act, "apparel" would be defined broadly to include: an article of men's, women's, or children's clothing, including undergarments, outer-wear, gloves, footwear, and headgear; handbags, purses and tote bags; belts; and eyeglass frames. Registrations on apparel designs would have a three-year registration term and infringement of the registration would be assessed under the same standard existing under current copyright laws, namely substantial similarity in overall appearance. Statutory damages awards for infringement of a registered original design would increase to the greater of an amount not exceeding $250,000 or $5 per infringing article.

The proposed legislation requires that the application for registration of the design is made no later than three months after the date on which the design was first made public.

As with most new bills, this one will likely go through many iterations and drafts as it proceeds through Congress on its way to becoming law.

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US Patent Office Drastically Revises Rules of Practice to Reduce Number of Claims and Continuations for One Invention

New rules of Practice before the US Patent Office, promulgated by the USPTO on August 22, 2007, will reduce the number of claims available to an applicant in any one patent application and eliminate the unfettered ability to file an unlimited number of continuations and requests for continued prosecution. New rules would allow the USPTO to object on formal grounds and refuse to examine any applications that have over 5 independent or 25 total claims. The USPTO was required to include provisions to enable examination of applications with a larger number of claims, so that the rule does not limit rights that are not so limited by the US patent laws, but the requirements that must be met in order to make use of these provisions are so onerous as to make them practically unavailable to all but the wealthiest of applicants. Two continuation applications, permitting an additional 25 claims each, will also be available, for a total of 75 claims (15 independent) for each invention. The original parent application and each of the continuation applications will be entitled to only one request for Continued Examination. The rule changes are set to become effective on November 1, 2007, but the continuation and claim provisions become effective for all applications filed after August 21, 2007. These rules have already been challenged in a federal district court—the plaintiffs are asserting that the rules are beyond the scope of USPTO regulatory authority and are contrary to the patent laws passed by the Congress.
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The High Cost of Faking It

While many consumers may have few qualms about purchasing a knock-off of their favorite designer handbag from a street vendor, it is questionable whether the same consumers would feel as comfortable at the thought of taking counterfeit pharmaceutical drugs, or trusting fake automotive parts in their cars. Indeed, the common perception of counterfeiting as a victimless crime is far from accurate.

The Organisation for Economic Co-operation and Development (OECD) has embarked on a major project to study the effect that the infringement of intellectual property rights has on economies, governments, right-holders and consumers. The project aims to study the economic effects of infringing activities and to address rising concerns over the health, safety and security threats posed by counterfeit products.

Recently-released Executive Summary of the findings of the project's first phase looks at the economic impact of counterfeiting and piracy. The report delves into the market analysis, notes the magnitude and scope of counterfeiting and piracy, assesses the effects of infringing activity, presents a framework for policy assessment, and suggests ways to improve enforcement and raise awareness.

The report suggests that the market for counterfeit and pirated products can be split into primary and secondary submarkets. In the primary market, consumers purchase fake goods believing the articles are genuine, while consumers in the secondary market are looking for what they believe to be bargains and knowingly purchase counterfeits. The degree to which consumers knowingly buy counterfeits varies depending on the nature of the product and the price difference between the genuine article and its imitation.

Most susceptible to counterfeiting and piracy are products where profit margins are high, taking into account the risks of detection, potential penalties, size of the markets that could be exploited and logistical challenges. The scope of products has broadened from luxury watches and designer apparel to include items that directly affect personal safety and health, including food, pharmaceuticals and automotive replacement parts.

Counterfeit and pirated products are produced and consumed in virtually every country in the world, with Asia emerging as the single largest producing region and China as the single largest producing economy. The lack of comprehensive cross-sector data makes it difficult to measure the magnitude of the problem accurately, but an analysis of international trade data based on the landed customs values of infringing goods suggests that up to $200 billion worth of counterfeit products were traded internationally in 2005. This figure is larger than the combined GDPs of about 150 of the world's economies, but still only represents a fraction of the true total. The report notes that the overall economic value of counterfeiting is likely to be several hundred billion dollars greater when domestic markets and internet sales are taken into account.

The effects of counterfeiting and piracy are wide and varied. These activities stifle economic growth, finance criminal networks, pollute the environment, and adversely affect employment opportunities. Countries where counterfeiting and piracy are widespread may experience further tolls, including lower foreign direct investment and lowered ability to export legitimate products where health and safety concerns could be high.

Rights holders experience lower sales volume, losing market share to pirates and counterfeiters. Brand value and goodwill are damaged when consumers in the primary market who believed they were buying a genuine article become dissatisfied with their purchase, not suspecting the item is a fake. Loss of royalties, diminished incentive to develop new products and processes, and expenditures to fight counterfeiting and piracy are some of the other costs borne by brand owners.

Governments have to bear the cost of anti-counterfeiting measures and forego tax revenues, particularly in sectors such as tobacco and alcohol, where excise duties are high and smuggling of counterfeit products is widespread.

Counterfeiting is also bad news for consumers who can be exposed to health and safety risks by substandard and unregulated products. Infringers have little interest in insuring the quality and safety of their products, particularly when a high return for little investment is a priority. Developing nations are particularly at risk due to lower levels of regulation, enforcement, and consumer awareness. In Central and Southern Africa in particular there exists a high prevalence of counterfeit pharmaceuticals, many of which are completely ineffective versions of drugs used to treat serious illnesses such as HIV/AIDS and malaria. Counterfeiting in the food and drink industry also carries potentially fatal consequences for consumers. Fake baby formula was responsible for the death due to malnutrition of over 50 infants in China in 2004. Counterfeit alcohol is a major problem in Russia, with reports of thousands of deaths in 2006 due to toxic poisoning from the consumption of contaminated spirits. Counterfeit automotive parts and electrical components also carry serious health risks for consumers.

Counterfeiting is a global issue that raises economic- and public-policy concerns. Although there is no one solution to the problem, it is clear that cooperation between governments, brand owners, and consumers is key to achieving results. The OECD report points out that one of the main challenges counterfeiters and pirates face is distribution of their products. Consequently, the importance of raising public awareness, both in helping the public to identify and avoid counterfeit goods, and in deterring consumers from deliberately seeking out "bargains" is self-evident. Effective authentication technologies are needed to assist consumers, retailers, and enforcement agents in identifying genuine goods. Brand owners should work on improving supply chain management by closely overseeing the movement of their products and actively encouraging distributors and retailers to be vigilant when acquiring items.

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By Jovi, that's my name!

Rock star Jon Bon Jovi has asked the makers of the energy drink Mijovi to change its name, finding it too similar to his famous moniker. He has also objected to the marketing slogans "itsmijovi" and "itsmilife," interpreting them as "It's My Jovi" and "It's My Life," the latter phrase being identical to the title of his well-known song. But the drink's creator, Marcos Carrington, says the drink is named after his girlfriend, whose name is Jovita, and not the 45-year-old singer. Carrington has agreed to stop using "itsmilife" on future cans, but plans to continue using the name Mijovi. The drink maker's trademark application for MIJOVI was published for opposition purposes on July 3 by the USPTO and will likely proceed to registration—as no oppositions appear to have been filed.
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Everything you wanted to know about Design Rights but were afraid to ask

When devising intellectual property protection strategy for an industrial product design, it is appropriate to explore trade dress protection, design patent protection, and utility patent protection. While it is well established that these forms of protection can peacefully coexist, statements made to secure one form of protection could in fact adversely affect the ability to secure another form of protection.

Trade dress protects the total image of an industrial product design, including features such as size, shape, color or color combinations, texture and graphics. The elements of the trade dress must act in a manner that identifies the source of the product incorporating the design. Once achieved, trade dress will provide protection to the industrial product design in perpetuity. However, the standard for achieving such protection is high. Consumers must view the primary significance of the trade dress as identifying the source of the product, namely the trade dress has achieved secondary meaning. Once a protectible trade dress is established, to prevail on a claim of trade dress infringement, a plaintiff must show that the similarity of the defendant's trade dress to plaintiff's trade dress is likely to cause confusion among consumers.

A design patent protects a novel, non-obvious and ornamental industrial product design. Design patent protection is limited to the non-functional aspects of the design. To be novel, the new design must be viewed by the average observer as different and not a modification of an already-existing design – a much lower standard than the one for achieving secondary meaning for trade dress. In contrast to trade dress protection, which may last in perpetuity, a design patent is subject to a fourteen (14) year term. The test for infringement of a design patent is determined by the potential for deception of an ordinary observer. If in the eye of the ordinary observer giving such attention as a purchaser usually gives, two designs are substantially the same if the resemblance is such to deceive the ordinary observer. The offending design must also appropriate the points of novelty of the patented design that distinguishes it from the prior art.

A utility patent covers the functional features of an article of manufacture. Accordingly, one could be precluded from claiming that a feature of an industrial design is non-functional or ornamental if it is described as having a function in a utility patent.

A carefully crafted protection strategy may enable the owner of the industrial product design to obtain trade dress and design patent protection on the non-functional features of the design and utility patent protection on the functional features of the product.

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Budejovicky Budvar left crying in its beer by Anheuser-Busch

The latest development in the ongoing Budweiser Trademark saga comes from a recent ruling of the European Court of First Instance (CFI). Czech Brewers Budejovicky Budvar ("Budvar") and American company Anheuser-Busch, Inc. have been engaged in a long-running trademark dispute surrounding the use of the mark BUDWEISER. Despite forming a landmark alliance earlier this year, in an agreement which gives Anheuser-Busch the right to import the Czech beer under the name "Czechvar," the two companies are still engaged in over 40 lawsuits around the world and have agreed that their importation agreement cannot be used to support either side in any trademark cases.

Between 1996 and 1998, Anheuser-Busch filed twelve Community trademark applications for BUDWEISER, BUD, and BUDWEISER Device for various products and services, including stationary, clothing, confectionery, education, and entertainment. Budvar opposed these applications, citing its international registrations BUDWEISER (R 238 203) and BUDWEISER Device (R 342 157), and protected appellations of origin BUDWEISER BIER, BUDWEISER BIER–BUDVAR and BUDWEISER BUDVAR registered with World Intellectual Property Organization (WIPO) in 1964 under the Lisbon Agreement.

The Office for Harmonization in the Internal Market (OHIM) accepted Budvar's opposition to Anheuser-Busch's application for BUDWEISER Device, objecting to the registration of the mark for "beer, ale, porter, malted alcoholic and non-alcoholic beverages," and Anheuser-Busch had since withdrawn the application and dropped its appeal.

OHIM rejected Budvar's other oppositions to Anheuser-Busch's applications because they were for the goods other than beer, and the Lisbon Agreement only offers protection to appellations of origin as against identical or similar products.

Budvar appealed to the CFI, relying heavily on International-, EU-, and French national law providing for the protection of appellations of origin: legislation most notable for safeguarding the Champagne industry in France. The French Code Rural offers greater protection to appellations of origin as it not only covers "similar products" but also offers protection against use of an appellation of origin on "any other product or service if that use is likely to misappropriate or weaken the reputation of the appellation of origin" (Article L. 641-2).

The CFI upheld the decision of OHIM, concluding that Budvar had not provided sufficient evidence to show that it enjoyed a reputation in France, and noting that even if such reputation existed, Budvar failed to demonstrate how the reputation of the appellations of origin would be misappropriated or weakened by Anheuser-Busch's trademarks.

Budvar has two months to lodge an appeal before the Court of Justice of the European Communities against the decision of the CFI. Budvar can also sue in France under the French Code Rural, as a lower standard of proof may apply there. As things stand, though, Budvar has prevented Anheuser-Busch from registering BUDWEISER as a Community trademark for beer, and Anheuser-Busch will have to continue to rely on its BUD mark in the countries where Budvar has secured international registrations for BUDWEISER.

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"That looks familiar," says YouTube

After several high-profile copyright disputes, including a lawsuit by Viacom, Inc. and a subpoena from 20th Century Fox for the unauthorized use of copyrighted material, YouTube will begin testing a new "video fingerprinting tool" that will enable the online video website to identify content that has been uploaded without the copyright owner's consent. This new technology, which has been developed by engineers at Google, Inc., will be tested in partnership with Time Warner Inc. and Walt Disney Co. Copyright owners would first be required to submit copies of their works to be cataloged by the program. The technology examines the video by analyzing it frame-by-frame and establishes a pattern and relationship among the frames that is specific to that video. The result is the "digital fingerprint," which can then be used to search for videos with matching content that have been posted on YouTube by other users. If a match is found, the registered copyright owner is advised and can determine whether the posting is unauthorized.

The technology is expected to recognize the copyrighted material even if it has been "disguised" with other material, because the tool is designed to analyze the whole video and to recognize catalogued content. If proven to work, the technology will allow media companies to identify whether their copyrighted works have been uploaded, letting the registered content owners determine whether or not they wish to have the content removed. If the testing is successful, YouTube plans to launch its new "video fingerprinting tool" later this year.

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US Supreme Court Strengthens Non-Obviousness Test for Patentability

In a long-awaited decision in the patent case KSR v. Teleflex, the U.S. Supreme Court refined the standard for determining whether an invention is "obvious" and therefore not patentable.

In a seminal decision Graham v. John Deere, 383 U.S. 1, 17-18, 148 USPQ 459, 467 (1966), the Supreme Court laid the foundation for an obviousness analysis under U.S. patent law by establishing a tripartite test. The three factual inquiries are (A) determining the scope and content of the prior art, (B) ascertaining the differences between the prior art and the claims at issue, and (C) resolving the level of ordinary skill in the pertinent art. In close cases, secondary considerations, such as long-felt but unsolved needs, or unsuccessful attempts by others to solve the problem, may be used in resolving obviousness.

To make the obviousness standard more objective, the U.S. Court of Appeals for the Federal Circuit (CAFC) had promulgated an additional test: the finding of obviousness must be supported by some "teaching, suggestion, or motivation that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed." ("TSM test") This additional test has now been partially overturned by the U.S. Supreme Court.

The Supreme Court in KSR, did not repudiate the CAFC requirement by completely eliminating the TSM test, since such a ruling would have profoundly and retroactively brought into question several tens, if not hundreds, of thousands of patents issued under the previous CAFC standard. The decision holds that the TSM test is not to be applied as a rigid, inflexible requirement. Although the TSM test may still be utilized in a determination to combine two or more references, a clear written teaching or suggestion in a reference is no longer required, and the general knowledge of a person having ordinary skill may be brought to bear on the obviousness issue.

The Supreme Court decision appears to reflect the view in the non-patent community that patents were being too easily granted by the USPTO. It has been said that USPTO grant of patents for only slight or inconsequential improvements was actually stifling the progress of science and useful arts, rather than promoting it, as mandated by the U.S. Constitution.

The USPTO lost no time in promulgating a Memorandum to the Patent Examining Corps, in which the KSR decision was analyzed. The direct guideline that concluded the memorandum was that "in formulating a rejection under 35 U.S.C. §103(a) [non-obviousness provision] based upon a combination of elements, it remains necessary to identify the reason why a person of ordinary skill in the art would have combined the prior art elements in the manner claimed." The reason need not be articulated or even suggested by a specific reference, and the general knowledge in the industry may be relied upon.

The practical effect of the KSR decision is that the USPTO Office Actions should continue to provide "reasons" for combining references. Arguments that a teaching, suggestion or motivation to combine references is lacking no longer can be counted on to provide a sure basis for overturning a rejection. This may make it harder to obtain allowance of pending claims, supporting the recent USPTO policy to apply more stringent requirements before allowing an application. A decrease in the allowance rate from about 70% to 54% was listed as one of the USPTO accomplishments in its fiscal 2006 report. In patent enforcement or litigation, the KSR decision will provide a stronger defense to accused infringers in an attack on patent validity, and is bound to increase patent litigation costs as the validity of a patent will gain prominence as a contested issue in more cases. These considerations, together with those brought by another Supreme Court decision directed to limitations on the Doctrine of Equivalents, make careful patent prosecution all the more important.

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Microsoft Corp. v. AT&T Corp.

The Supreme Court's recent interest in patent matters continued with its decision in Microsoft Corp. v. AT&T Corp. In a 7-1 decision, the Court held that Section 271(f) of the Patent Act does not extend to cover foreign duplication of software from a master copy supplied from the U.S. Because patent law is territorial—there is no such thing as a world-wide patent—a U.S. patent covers infringing acts occurring within the United States, but generally disregards allegedly-infringing acts occurring elsewhere in the world. The single exception to this principle is Section 271(f) of the Patent Act, which calls for infringement liability for the unauthorized supply of "components" of a patented invention for "combination" abroad.

In the present case, AT&T is the assignee of a patent on a computer to digitally encode and compress recorded speech. In the U.S., a computer installed with Microsoft WINDOWS infringes AT&T's patent—WINDOWS incorporates software code that, when installed, enables a computer to process speech in the manner claimed by the patent. For foreign-made computers sold abroad, Microsoft sends each manufacturer a master version of WINDOWS, either on a disk or via encrypted electronic transmission, which the foreign manufacturer uses to generate copies. The copies are then installed on the individual machines.

The Court framed the issue before it as: Does Microsoft's liability for patent infringement extend to computers made in another country when loaded with WINDOWS software copied abroad from a master disk or electronic transmission dispatched by Microsoft from the United States? To this, the Court answered "No."

The underlying questions the Court ultimately attempted answer in this decision concern: (1) defining and treatment of "abstract software," and (2) issues with the supply of software copies. Regarding abstract software, the Court stated: "Until it is expressed as a computer-readable "copy," e.g., on a CD-ROM, WINDOWS software, indeed any software, detached from an activating medium remains uncombinable…Abstract software code is an idea without physical embodiment, and as such, it does not match Section 271(f)'s categorization: "components" amenable to "combination." Concerning the supply of copies, the Court stated: "[T]he very components supplied from the United States, and not copies thereof, trigger Section 271(f) liability when combined abroad to form the patented invention at issue. Here, as we have repeatedly noted, the copies of WINDOWS actually installed on the foreign computers were not themselves supplied from the United States." Justice Stevens, in the lone dissenting opinion, stated that: "[I]f a disk with software inscribed on it is a "component," I find it difficult to understand why the most important ingredient of that component is not also a component."

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Bona Fide Intent to Use Requires Hard Facts, Not Merely Subjective State of Mind

In a recent non-precedential but citable decision, the Trademark Trial and Appeal Board (TTAB) sustained an opposition by Intel Corporation, against an intent-to-use (ITU) application for the mark IDEAS INSIDE. In Intel Corp. v. Emeny, Opposition No. 91123312, Applicant, Steven Emeny, filed an ITU application covering a broad listing of goods and services, including computer-related goods, along with more than two hundred items of apparel. Intel's initial opposition included claims of likelihood of confusion and dilution of Intel's INTEL INSIDE mark, but was subsequently limited to the assertion that applicant lacked a bona fide intent to use the mark in commerce at the time the application was filed.

When an applicant lacks a bona fide intent to use the mark in commerce at the time of filing an ITU-based application, the application is invalid. Therefore, such lack of intent is an appropriate ground for an opposition or cancellation proceeding. The TTAB opined that an applicant's intent must be shown by "objective" evidence in the form of "real life facts measured by the actions of the applicant," and not merely by the applicant's arguments about his subjective state of mind. Such objective evidence, which was lacking in this case, can include documentation showing plans to use the mark on the goods or services claimed, marketing plans, business plans, or licensing programs. Although it is difficult for a Trademark Examining Attorney to determine bona fide intent in an ex parte context, this case exemplifies that a trademark applicant should be prepared to objectively demonstrate its good faith, if tested in an inter partes opposition or cancellation proceeding.

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AstraZenica's Process Patent Claims for PRILOSEC® Invalidated on "Inherent Anticipation" Ground

Omeprazole, the generic name for the popular anti-heartburn drug PRILOSEC®, operates in a unique manner by transforming into its active ingredients in the acid-producing cells of the stomach lining and then inhibiting gastric acid production. Because omeprazole degrades in acidic and neutral environments, it must be protected while traveling to the acid-producing cells in the stomach by an enteric layer. AstraZenica's U.S. Patent No. 6,013,281 (the "'281 patent") claims a method for making an omeprazole formulation composed of a core containing the active, acid-inhibiting ingredient, a protective, enteric coating surrounding the core, and a water-soluble separating layer between the core and protective layer. Specifically, the patent recites a process for creating the separating layer by causing an in situ reaction involving the enteric-coating material and the core, producing an omeprazole formulation having three distinct layers.

In 2001, AstraZeneca filed suit for infringement of the '281 patent claims against several pharmaceutical companies seeking permission from the Food and Drug Administration to market generic versions of PRILOSEC®. The district court found that, while the '281 patent claims were infringed, the claims were invalid in view of a prior Korean patent application that recited or anticipated all of AstraZenica's claim limitations, either explicitly or inherently. In a 2-1 decision (Judge Rader filing the majority opinion with Judge Bryson concurring), the Court of Appeals for the Federal Circuit affirmed the district court decision holding that the in situ separation layer was formed when practicing the invention disclosed in the prior art. Therefore it was the natural result of practicing the invention and was inherent to the disclosure even though it was not explicitly disclosed in the Korean patent application.

Judge Rader's majority opinion and Judge Newman's concurring-in-part, dissenting-in-part opinion do differ in what is to be considered "inherent" in a disclosure and in how to evaluate and weigh the proof required to support such a finding. In the present case, questions arose as to whether following the process disclosed in the Korean patent application resulted in the formation of an in situ layer under all conditions or only under limited conditions. While this decision appears to have settled the issues present in this case, it certainly leaves room for further discussion of "inherent anticipation."

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SWEEPSTAKES AND CONTESTSa bonanza of brand awareness or a potential minefield for the unwary

Sweepstakes and contests are two common promotional games that can significantly increase brand awareness and can quickly create a "buzz" around a new product. However, there is a vast array of laws and regulations that pose numerous pitfalls to the unwary game promoter or sponsor. Putting on a sweepstakes or contest involves much more than simply announcing the promotion, collecting entries, and giving away prizes. All sweepstakes and contests will be subject to both federal and state laws which can vary widely in their complexity and the affirmative steps required of the promoter or sponsor prior to conducting the game. For a nationwide game that means compliance with federal laws and the laws of all 50 states.

The most important requirement that promoters and sponsors must keep in mind is that the game cannot be considered an illegal lottery. That is the game must not require "consideration" to play, hence the common buzz words "No purchase necessary." The definition of "consideration" varies by state and may include additional prohibitions on what a potential entrant may or may not be required to do or provide to participate in the game. Other potential pitfalls that game promoters and sponsors must be aware of include: (1) registration and bonding requirements (which may require up to 30 days advance registration of a game); (2) satisfying the "alternative means of entry" requirement; (3) requirements for running an "online" game; (4) the amount and detail of disclosure required in "rules" of the game; (5) eligibility of entrants; (6) advertising of sweepstakes; and (7) fulfillment and post-fulfillment issues, including posting a list or lists of winners or sending the winners list to the required state authority and obtaining the proper releases from the winners.

A successful sweepstake or contest will provide invaluable brand awareness, goodwill, and excitement. A promotional game that does not comply will all federal and state laws, however, can lead to civil liability, civil fines, and criminal penalties.

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The Muddle in Montenegro

Although almost a year has passed since Montenegro declared its independence from Serbia and became the 192nd member state of the United Nations, Montenegro IP Office (MIPO) has yet to be established and is not expected to open until September 2007 at the earliest. With no Trademark Act or similar legislation currently in place, the mechanics of protecting one's IP rights in Montenegro are far from certain. The transitional provisions were supposed to provide that the trademarks filed or registered in Serbia and Montenegro prior to Montenegro's independence (June 3, 2006) would be revalidated in Montenegro by means of a simple deposit procedure. Since MIPO has yet to become functional, however, the transitional rules have not been finalized.

WIPO has added Montenegro (ME) designation to its Madrid system in December 2006.

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Digital Radio on the Ropes

The Copyright Royalty Board (CRB) has announced its decision on Internet radio royalty rates, rejecting all of the arguments made by webcasters and adopting the "per performance" rate proposal put forth by SoundExchange (a group created by the RIAA to handle collection of royalties due to performers) instead. The rates will be enforced retroactively from the beginning of 2006, effectively bankrupting many small independent webcasters. CRB defines "performance" as a streaming of one song to one listener, so an Internet radio station with an average audience of 500 listeners would have to pay a royalty on each of the 500 "performances" for every song it plays. Under prior licensing scheme, the amount of royalty paid to a song's performers was based on a percentage of revenue; the newly-announced rates involve a predetermined per-song, per-listener fee that will increase annually at an average rate of 25% for the next four years.
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Traditional Stations Stiff George and Ringo

One aspect that emerged from the Copyright Royalty Board's decision on Internet royalty rates is the difference in treatment of traditional and digital radio stations. Traditional radio stations only pay royalties to composers of songs by purchasing blanket licenses from ASCAP and BMI. Digital radio stations pay these royalties as well, but must now also pay the performance royalty to SoundExchange that terrestrial stations do not pay. Thus, if a traditional radio station plays "Yellow Submarine," only John Lennon and Paul McCartney—the composers—are compensated; whereas if that same song is played via a webcast, George Harrison, Ringo Starr and Brian Jones would also be paid as performers (under this arrangement Lennon and McCartney would each receive a composer and a performer royalty.) The reasoning for the difference in treatment is two-fold. One is the belief held by performers that airtime translates into sales. Two stems from the Digital Performance Right in Sound Recordings Act of 1995 (DPRA), which removed the exemption from digital broadcasting under the guise that digital radio broadcasts were a perfect digital copy (with no degradation) of the original sound recording. (Even though in practice this is not true because all digital streams use "codecs" to compress the digital audio to lower bitrates. This process degrades the audio, and even though the change may not be perceptible to the ear, the result is certainly not a perfect digital copy of the original.)
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USPTO Proposes Changes for Reconsideration of Final Office Actions

The USPTO has recently proposed a rule change that would reduce the time frame for responding to a Final Office Action in trademark cases. In current practice, a request for reconsideration of an examining attorney's final refusal must be filed within six months of the mailing date of the final action. The proposed change to 37 CFR 2.64 would require that the request for reconsideration be filed within three months of the mailing of the final action. In addition, the request would need to be filed through the Trademark Electronic Application System ("TEAS"). The purpose of this amendment is to facilitate the likely disposition of an applicant's request for reconsideration prior to the six-month deadline for filing an appeal to the Trademark Trial and Appeal Board ("TTAB") or petition to the Director on the same final action. The intent is to obviate the need for some appeals or petitions, and to reduce the need for remands and transfers of applications on appeal. The requirement for using TEAS would expedite the examining attorney's notice of and access to the request. The request for reconsideration, however, would not extend the time for filing an appeal or petitioning the Director on that action. Applicants would also still have the opportunity to submit amendments for the full six-month period from the date of the final action. The USPTO expects that this rule change would relieve some of the burden on the TTAB, promote prompt and more efficient handling of the case, decrease applicant's costs, and reduce the pendancy of the case. Comments to the proposed rule change are being accepted by the Commissioner for Trademarks through April 16, 2007.
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USPTO Issues First Patent under New Accelerated Examination Procedure

The USPTO, to further combat the impression that it is slow in granting patents, has instituted an accelerated examination program (http://www.uspto.gov/web/patents/accelerated/) available to applicants who desire to have their applications examined within 12 months of their filing date. Generally, a Petition to Make Special has been available to accelerate examination in certain circumstances, for example, for an inventor who is over 65 or where the claims of a patent application are considered to be infringed. The new program was instituted in fall 2006. Grant of a Petition to Make Special under the Accelerated Examination Procedure makes USPTO treatment of such applications a priority. The first such patent, US Patent No. 7,188,939, issued to Brother Kogyo Kabushiki Kaisha of Nagoya, Japan, was filed on September 29, 2006 and issued in less than six-months on March 13, 2007. The patent claims improved ink cartridges.

The new procedure differs significantly from the previous Petition to Make Special. Several onerous requirements must be met for filing a Petition under the new procedure. Also, significant rights, available in normal examination, are waived and time deadlines are accelerated. Among the application requirements are electronic filing and prosecution, limitation of the number of claims to 3 independent and 20 total, limitation of claims to a single invention or acknowledgement that a restriction requirement response must include an election without traverse, agreement to an examiner interview, which may be conducted before examination starts, conducting a pre-examination search using both classification and word criteria, and filing of an accelerated examination support document that not only is complete, but also directs the examiner's attention to each disclosure in a cited reference where a claim limitation can be correlated, and a detailed explanation of how the claims are patentable over the prior art, among others. The intent of the procedure requirements is to be "analogous to the analysis an examiner uses when locating a relevant prior art reference" and determining its relevance. In effect, the procedure is calculated to certify that the Examiner's job has already been done and the only remaining step is approval and allowance.

Several drawbacks are immediately apparent to this new procedure. Granting special status to a number of recently filed applications will necessarily delay the examination of other pending applications. The recent experience of the Mexican Industrial Property Office (IMPI) apparently was not taken into account. By law, IMPI must examine new applications within a certain time period, but in complying with this section of the law, older pending applications have languished. Also, the procedures require meeting extensive mandatory steps, and may be subject to inadvertent (or not) discrepancies by the applicant or practitioner. The new procedures necessarily rely on the applicants' good will efforts to aid the examination process. Such reliance may lead to extra complications in later enforcement action by the patent owner, and leave an opening for an accused infringer to raise inadequacy of the search and inequitable conduct charges as possible defenses. Litigators will be pleased.

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Dot Asia Land Rush Expected

In October of 2006, ICANN announced the launch of a new regional ccTLD, .asia, intended to service entities and individuals with a presence in the 73 countries defined as being part of the Asia/Australia/Pacific region and expected to be very attractive to those doing business in the region. Registrations of the .asia domain name will most likely be rolled out on a "Sunrise" basis, somewhat similar to the procedure employed for the .eu domain. A draft of the rules has been released, with the final version expected sometime in March of 2007. The first sunrise period will be reserved for government entities, and the second will give trademark owners priority to register domains using their trademarks. Unlike the .eu registration process that had no "cut-off" date for recent registrations, leading to a flurry of applicants seeking to register their trademarks before sunrise began in order to be eligible for the first wave, the .asia procedure is expected to first allow trademark owners with "established marks"--those filed on or before March 16, 2004--to submit applications, followed by a period in which owners of a registered mark applied on or before December 6, 2006 will be given the opportunity. Rather than a "first come, first served" policy, conflicting successful applications for the same domain will be auctioned to the highest bidder, as it is thought that those applicants willing to pay a higher price will be more likely to actually use the domain.
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IP Australia Pitches In to Help USPTO

In its continuing effort to reduce the growing backlog of pending U.S. patent applications, the U.S. Patent and Trademark Office (USPTO) has extended its pilot project with IP Australia, whereby IP Australia will continue to provide search and examination services on international patent applications filed with the USPTO under provisions of the Patent Cooperation Treaty (PCT). In the next year of the project, starting March 12, 2007, IP Australia will process up to 1,200 PCT applications, covering a range of technologies. The USPTO receives about 50,000 international PCT applications annually.

The USPTO will review the work of IP Australia to ensure that it meets USPTO standards for quality and accuracy. IP Australia's Director General Ian Heath explained some of the benefits IP Australia will receive from the project, including moving closer to the vision of being an office of choice and for enhancing the international reputation of IP Australia.

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Digital Fingerprints on the iTunes

Gracenote digital fingerprint technology has exposed what appears to be a major case of musical plagiarism when it identified a recording of Liszt's 12 "Transcendental Études" attributed to late pianist Joyce Hatto as the work of a different artist. Further investigation confirmed the recordings were identical, and when other Hatto recordings came under scrutiny, many more were found to have been originally recorded by other artists. Some tracks had been tempered with, possibly to disguise their origin. In one instance the tempo was reduced by 15.112% to alter the tone. William Barrington-Coupe who runs Concert Artist label responsible for publishing the infringing works has initially denied any wrongdoing, saying the sound waves prove nothing. Sound engineers disagree, noting that even similar performances by the same artist hold detectable differences--variables such as the timber of the room, the type and placement of microphones and the noise inherent in the recording system make each recording unique. It remains to be seen whether major labels whose copyrights were violated will choose to pursue the matter in court.
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CAFC Holds That Foreign Company Only Needs "Use" in U.S. for 2(d) Opposition

The Court of Appeals for the Federal Circuit (CAFC) has reversed the Trademark Trial and Appeal Board (TTAB) ruling in First Niagara Ins. Brokers, Inc. v. First Niagara Financial Group, Inc. First Niagara Insurance Brokers, Inc. (FN-Canada) had sought to oppose registration of First Niagara Financial Group, Inc.'s (FN-US) intent-to-use trademark applications on the claim of priority under Section 2(d) of the Trademark Act, which requires only prior "use" in the U.S. FN-US had argued that FN-Canada, which has no physical presence or registered trademarks in the United States, did not establish the priority necessary to prevail on a likelihood-of-confusion claim because it had not used its marks "in commerce" in the U.S. In overturning the TTAB's agreement with FN-US, the CAFC ruled that the proper standard of Section 2(d) is that the mark or trade name must have been previously "used in the United States by another." The Court noted that the language of prior use "in commerce" was absent from the statute. It found that the privilege of an opposer claiming priority under Section 2(d) attaches to all opposers, regardless of whether they are foreign or domestic. The TTAB's decision was reversed and remanded for further proceedings, based on FN-Canada's ample use of its marks in the United States to satisfy the use requirements of Section 2(d). The implications of this case may be broad and far-reaching, if it is held that a foreign company has standing to bring a 2(d) opposition based on its "use" in the U.S. merely through its activities on the Internet.
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Medimmune v. Genentech

Until recently, patent licensees have been faced with Hobson's choice when they believed that the licensed patent was invalid or unenforceable or was not infringed by their product. On the one hand, the licensee could terminate or breach the license (creating a "case or controversy" required for federal jurisdiction and satisfying the "actual controversy" requirement of the federal Declaratory Judgment Act) and seek a court declaration regarding the status of the patent. This approach, however, poses the risk of significant monetary exposure-treble damages and licensor's attorney fees-and a potential injunction if the licensor prevails. On the other hand, the licensee could continue to abide by the terms of the license agreement; without a justifiable case or controversy, the courthouse door was closed to the licensee.

In Medimmune, Inc. v. Genentech, Inc., the Supreme Court addressed this dilemma, concluding that a licensee need not "bet the farm" by breaching the agreement in order to challenge the underlying patent. In a footnote, the Court explained how the constitutional case or controversy requirement is met by stating that a licensee who pays royalties either in fear of an injunction or for fear of treble damages is being coerced in a way that creates case or controversy-a clear departure from the existing law. The decision is worded broadly enough to cover all forms of intellectual property, not just patents. Case makes mention of but does not address contractual provisions that could be used to block claims by licensees in good standing.

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"Gmail" confusingly similar to "G-mail...und die Post geht richtig ab"

Last week's ruling from the Office for Harmonization in the Internal Market (OHIM) has set Google back in its fight for the right to use the Gmail name in Europe. Google's opponent is German-born 32-year-old venture capitalist Daniel Giersch who founded a same-day mail delivery service called G-mail (short for Giersch-mail) some six years ago. The service provides e-mail accounts ending in "gmail.de" and offers a "hybrid mail" option where electronically-sent documents are printed out by the company and physically delivered to local addresses. Empowered by earlier rulings in German district court ordering Google to remove all "Gmail" references from its German service and cease issuing gmail.com accounts to German residents, Giersch went on to oppose Google's CTM applications, citing his German registration for "G-mail...und die Post geht richtig ab" [translation: "G-mail...and the mail goes right off"] issued in 2000. Google has downplayed OHIM refusal to register its Gmail mark on a pan-European basis, saying it will not affect Google's current use of the mark in Europe.
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