Patent Baristas

An increasing awareness of the importance of intellectual property (IP) rights to business success has led to unprecedented growth and transformation in the IP sector in recent years, but where does the industry go now?

In IP Review’s State of the IP Industry 2009 survey, IP professionals revealed that they were coming under increasing pressure to reduce their IP management spend, while generating increased profits from their existing assets.

In this year’s survey, IP Review is tracking updates to that position and asking practitioners to set out their views on what is likely to happen moving forward.

Results will be released at this year’s INTA conference in Boston, Massachusetts and will be available at IP Review from May 24th.

To take part, visit here:  www.cpaglobal.com/survey.

If you enter by April 26th, you will also be entered into our free prize draw to win a Sony VAIO W Series mini notebook worth £500.

Trade secrets often represent the most valuable assets of certain companies.  The value of trade secrets continues to grow in our information-age economy as does the mobility of the work force. Both forces are increasing pressure on trade secrets.

The Uniform Trade Secrets Act (UTSA), defines trade secret to mean information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Trade secrets are easily stolen (or misappropriated) because they represent nothing more than information, which can be easily written down, e-mailed or copied onto some tangible medium and then quietly removed from company premises.

Courts considering cases involving trade secrets must deal with the inevitable competing interests.  That is, the rights of individuals to start competing businesses or to continue to work in their chosen occupations — even when this includes leaving an employer to accept a position with a competitor and the rights of the existing business to protect the confidential and proprietary information in which it has invested significant resources.

The accommodation of these often conflicting interests is involved in the resolution of disputes over trade secrets.  Two of the primary policy concerns of trade secret law are (1) encouragement of invention, and (2) enforcing ethics in business. Issues that often arise in this area of law that require careful analysis include, (a) what is the actual trade secret, (b) who owns the trade secret, (c) what are the remedies for misappropriation, (d) what efforts must be made to maintain secrecy, and (e) how does trade secret law interface with other laws, including patent, copyright, antitrust, fraud, civil theft, restraints on employment, including non-disclosure agreements, non-solicitation agreements, and non-compete agreements.

Therefore, it is critical to know how to protect trade secrets and how to recover damages if trade secrets are misappropriated by former employees or other individuals.

Authors Randall E. Kahnke, Kerry L. Bundy and the Faegre & Benson, LLP Trade Secret Practice Team have now published the definitive book on the subject in “The Secrets to Winning Trade Secret Cases” (West Legalworks; 476 pp., 2009).

This book focuses on all the nuts and bolts necessary in trade secret litigation. This is not a treatise that focus on the theory of the law and it is not a practice guide that focuses on protecting trade secrets. This book focuses on strategies to win current cases in litigation and to avoid future litigation and disputes.

Three components help to make the content easily accessible:

• Cases in Point summarizes facts and legal analysis from select cases;
• Secrets of the Trade sheds light on some of the decisions that rarely make their way into reported decisions; and
• Killer Crosses gives examples of short cross-examinations.

Killer Cross Example:

Question [by plaintiff’s attorney]: You were the project leader for this project, correct?
A: Yes, I was the project leader.
Q: You did not follow a clean room process for this project, right? A: What’s a “clean room process?”
Q: The plaintiff provided you a sample of its secret product on the condition that you mention it in confidence, right?
A: That’s right.
Q: And your team that developed your product had access to the plaintiff’s secret product, right?
A: Well, only a couple of them did.
Q: And your product works exactly like the plaintiff’s secret product? A: They seem to be substantially similar, yes.
Q: And none of your competitors have products that work like the plaintiff’s, right?
A: No, but I’m sure they’ve tried.
Q: No further questions.

Case Takeaway:

Clean rooms and the processes they involve may—and often will—be carefully examined by a judge or jury, especially in cases in which clean rooms play a key role. Make sure that your clean room is formed and operated in a manner that will withstand such scrutiny.

This hefty tome provides detailed analysis of every type of trade secret case and how to handle the specifics of each type.  The nice aspect of this guide is that it walks you through the process step-by-step from how to identify the issues, to how to begin the case to gaining competitive intelligence.  We highly recommend this excellent guide.

“The Secrets to Winning Trade Secret Cases” (West Legalworks; 476 pp., 2009) is available at Amazon.

In Ariad v. Eli Lilly & Co., the Court of Appeals for the Federal Circuit set out a split decision on a case addressing patent validity and enforceability issues where Lilly contends that the asserted claims of US 6,410,516 are invalid for including non-statutory subject matter, for being obtained through inequitable conduct, and are unenforceable due to prosecution laches.

Lilly argued, and of course Ariad disputed, that the claims cover unpatentable naturally-occurring phenomena, that Ariad withheld critical documents from the patent examiner not only to get the patent issued but to avoid the risk of losing 13 years of patent term.

Earlier, Eli Lilly lost in District Court after a jury decided that the ‘516 patent was valid and infringed by Lilly’s sale of Evista® and Xigris® and awarded Ariad approximately $65 million in back royalties and a 2.3 percent royalty on future U.S. sales of Evista and Xigris until the patent’s expiration in 2019.  Ariad Pharmaceuticals et al. v. Eli Lilly and Company.

Ariad petitioned for rehearing en banc, challenging the court’s interpretation of 35 U.S.C. § 112, first paragraph, as containing a separate written description requirement.  The en banc court looked at whether § 112, first paragraph, contains a written description requirement separate from the enablement requirement and, if so, the scope and purpose of that requirement.

The Federal Circuit has now reaffirmed that § 112, first paragraph, contains a written description requirement separate from enablement and held the asserted claims of the ’516 patent invalid for failure to meet the statutory written description requirement.  Ariad Pharma v. Eli Lilly (08-1248).

The ‘516 patent claims methods based on the discovery of a naturally-occurring biological pathway, the NF-kappaB pathway. While Ariad contends that the patent covers all means for modulating the NF-kappaB pathway, Lilly’s contention is that it discovered the drugs in question, Evista and Xigris and disclosed their medicinal properties years before the patentees’ scientists made their discovery.

This case raises the question of if a researcher discovers a drug without ever knowing the drug acts on a patented pathway or before the pathway is understood, does that constitute infringement? If the drug was acting on the pathway before the pathway was discovered, does the existence of the drug invalidate the patent on the pathway by rendering it not “new“? This could give rise to a number of conflicting patents.

The inventors of the ’516 patent discovered that if the transcription factor NF-κB’s activity could be reduced, it could ameliorate the symptoms of diseases that trigger NF-κB activation – similar to how aspirin can reduce a fever without actually treating the underlying infection.

The asserted claims include language for methods that include a single step comprising reducing NF-κB activity in cells. The district court determined that “reducing NF-κB activity” means “decreasing the function of NF-κB to act as an intracellular messenger that regulates transcription of particular genes, in response to certain stimuli.”

Ariad argued that § 112, first paragraph, does not contain a written description requirement separate from enablement. Ariad argued that the statute contains two description requirements: “Properly interpreted, the statute requires the specification to describe (i) what the invention is, and (ii) how to make and use it.” Thus, according to Ariad, in order to enable the invention, the specification must first identify “what the invention is, for otherwise it fails to inform a person of skill in the art what to make and use.” Yet Ariad argued that this first step of “identifying” the invention applies only in the context of priority (i.e., claims amended during prosecution; priority under 35 U.S.C. §§ 119, 120; and interferences) because original claims “constitute their own description.”

Lilly argued that two hundred years of precedent support the existence of a statutory written description requirement separate from enablement and that the statute requires, first, a written description of the invention and, second, a written description of how to make and use the invention so as to enable one of skill in the art to make and use it. Lilly claimed that this separate written description requirement applies to all claims—both original and amended—to ensure that inventors have actually invented the subject matter claimed.

Section 112, first paragraph, reads as follows:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

Ariad parses the statute as follows:

The specification shall contain:

[A] a written description of the invention, and of the manner and process of making and using it,

[B] in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same . . .

Ariad asserts that the written description requirement serves a single purpose: enablement.

Lilly disagreed, arguing that § 112, first paragraph, contains three separate requirements as follows:

“The specification shall contain a written description of the invention, and”

“The specification shall contain a written description . . . of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and”

“The specification . . . shall set forth the best mode contemplated by the inventor of carrying out the invention.”

The Federal Circuit took the separate route:

We agree with Lilly and read the statute to give effect to its language that the specification “shall contain a written description of the invention” and hold that § 112, first paragraph, contains two separate description requirements: a “written description [i] of the invention, and [ii] of the manner and process of making and using [the invention]. 35 U.S.C. § 112, ¶ 1 (emphasis added). On this point, we do not read Ariad’s position to be in disagreement as Ariad concedes the existence of a written description requirement. See Appellee Br. 2 (“Under a plain reading of the statute, a patent specification . . . must contain a description (i) of the invention, and (ii) of the manner and process of making and using it.”). Instead Ariad contends that the written description requirement exists, not for its own sake as an independent statutory requirement, but only to identify the invention that must comply with the enablement requirement.

Finally, a separate requirement to describe one’s invention is basic to patent law. Every patent must describe an invention. It is part of the quid pro quo of a patent; one describes an invention, and, if the law’s other requirements are met, one obtains a patent. The specification must then, of course, describe how to make and use the invention (i.e., enable it), but that is a different task. A description of the claimed invention allows the United States Patent and Trademark Office (“PTO”) to examine applications effectively; courts to understand the invention, determine compliance with the statute, and to construe the claims; and the public to understand and improve upon the invention and to avoid the claimed boundaries of the patentee’s exclusive rights.

Our Favorite Quote:

The term “possession,” however, has never been very enlightening. It implies that as long as one can produce records documenting a written description of a claimed invention, one can show possession. But the hallmark of written description is disclosure. Thus, “possession as shown in the disclosure” is a more complete formulation.

Everyone’s Two Cents:

Judge Newman added:

Basic scientific principles are not the subject matter of patents, while their application is the focus of this law of commercial incentive. The role of the patent system is to encourage and enable the practical applications of scientific advances, through investment and commerce.

Judge Gajarsa concurred:

Contrary to the representations of the Patent Office and the opinions of members of this court, I do not believe that this issue has a significant, practical impact. … The empirical evidence confirms my belief that written description serves little practical purpose as an independent invalidity device and better serves the goals of the Patent Act when confined to the priority context.

Judge Rader, with Judge Linn joining, dissented-in-part and concurred-in-part:

The Constitution of the United States gives Congress, not the courts, the power to promote the progress of the useful arts by securing exclusive rights to inventors for limited times. Art. I, § 8, cl. 8. Yet this court proclaims itself the body responsible for achieving the “right balance” between upstream and downstream innovation. … In rejecting that statutory balance in favor of an undefined “written description” doctrine, this court ignores the problems of standardless decision making and serious conflicts with other areas of patent law.

Judge Linn, with Judge Rader joining, dissented-in-part and concurred-in-part:

While the parties offer vigorous arguments about the grammar of § 112, paragraph 1, the only reasonable interpretation is the one offered by Ariad, both because it conforms to the long-recognized purpose of the statute in policing new matter violations and because it tethers the “written description of the invention” to an understood standard: “such full, clear, concise, and exact terms so as to enable.” Lilly remarks that statutes do not necessarily specify their own tests, and that “the legal standards for applying them are developed by courts over time.” Lilly’s Br. 28. Although this might be true generally, Congress did provide such a legal standard in this statute, and the majority’s creation of a separate, additional requirement—with a poorly defined standard—is unnecessary and ill advised.

The Becoming a Radiologist Technician blog has listed its 50 Best Blogs for Biotech Students list to keep biotechnologists well-informed about changes in the field. The list includes many friends we follow closely and some new (to us) blogs worth checking out.

The list includes many favorites like these:

1. Biotech Blog by Yali Friedman.

2. The California Biotech Law Blog by Kristie Prinz.

7. I Am Biotech with Margarita  Noriega.

8. BioLaw: Law and the Life Sciences.

16. Patently BIOtech with Margarita  Noriega.

18. Patent Docs with Donald Zuhn and Kevin Noonan.

22. Patent Baristas by Stephen Albainy-Jenei.

23. Theresa’s Biotech/Biomedical Blog with Theresa Phillips.

30. Pharmalot by Ed Silverman.

32. The Cross-Border Biotech Blog by Jeremy Grushcow and Dani Peters.

34. Medical Devices, Biotechnology, Bioengineering and the Like with Srihari Yamanoor.

41. Holman’s Biotech IP Blog with law professor Chris Holman.

44. In the Pipeline with Derek Lowe.

45. Pharma Blog Review with Chris Truelove.

See the whole list of 50 here.  If you have your own suggestions, let us know and we’ll add them on to our own list.

I received information from SyncIDS on their new, on-line service that provides patent practitioners with a prior art database for filing Information Disclosure Statements with the U.S. Patent Office. When new documents or matters are added to the database, SyncIDS automatically shows all of IDSs that need to be filed, and everything needed to file each IDS is automatically placed in a separate folder including a completed 1449 form and any non-U.S. PDFs

In a quick review of the site, it seems like the system is not totally ready for prime time with some broken links and incomplete information.  For now, SyncIDS is divided in to four sections. (1) The IDS section automatically generates IDSs that need to be filed. (2) The client section allows you to view and modify information for each client such as the default filer and prior art categories for that client. (3) The matter section allows you to view and modify information for each matter such as the first inventor‟s name and any related matters. (4) The document section includes all of the prior art for a matter.

From SyncIDS:

In a nutshell, SyncIDS is a web based prior art database. There is nothing to install. All of the software and data is hosted and backed up by SyncIDS. When new documents or matters are added to the database, SyncIDS automatically shows all of the IDSs that need to be filed, and everything needed to file each IDS is automatically placed in a separate folder including a completed 1449 form and any non-U.S. PDFs. It reduces the time it takes to prepare an IDS and greatly reduces the chance for errors.

For example, let’s say you get an Office Action in matter 100. Simply open matter 100 in SyncIDS, enter those documents, and check them off as already cited for that matter. If there are U.S. patents or publications, you don’t even need to enter the issue/publication date or first inventor’s name. SyncIDS will do that for you. Assuming you have previously told SyncIDS what matters are related to each other (or you have categorized your matters and references by subject matter), SyncIDS will instantly generate an IDS for every other matter that needs one. You don’t even need to open up those other matters. No manually checking files or filling out forms.

If you’ve used SyncIDS, place your thoughts in the comments section below.

A copy of the user’s manual is here.

Earlier, the International Trade Commission (ITC) ruled that the importation and sale of certain lysine feed products did not violate section 337 of the Tariff Act of 1930 as amended, 19 U.S.C. § 1337. The Commission found that (1) the asserted claims of Ajinomoto’s U.S. Patents 5,827,698 and 6,040,160 are invalid under 35 U.S.C. § 112 for failure to comply with the best mode requirement and (2) the ’698 patent is unenforceable due to inequitable conduct. The U.S. Court of Appeals for the Federal Circuit agreed.  Ajinomoto v. ITC (09-1081).

The ’698 and ’160 patents relate to improved methods of producing L-lysine (“lysine”) by cultivating Escherichia bacteria that have been genetically engineered to produce and accumulate greater quantities of lysine than naturally occurring (or wild- type) bacterial strains. Lysine is an essential amino acid, which means that most animals cannot synthesize it but must obtain it directly from their diets. Consequently, feed producers and farmers regularly add lysine as a necessary dietary supplement to low-protein grass feed for livestock. To supply lysine, the industry employs microorganisms such as Escherichia coli that can synthesize lysine from a carbon source (e.g., a sugar such as glucose) through a well- known biosynthetic pathway.

The patents involved in this case alter two mechanisms that contribute to E. coli’s limited lysine production. The first mechanism, known as “feedback inhibition,” is triggered by lysine itself. Specifically, when sufficient lysine is present to meet the organism’s needs, lysine inhibits its own production by inhibiting the activity of certain of its biosynthetic enzymes. At the same time, E. coli also employ enzymes, called lysine decarboxylases, which break down any extra lysine produced into a non-nutritious byproduct. Both mechanisms—feedback inhibition and lysine degradation—keep E. coli from accumulating excess lysine.

Scientists at Ajinomoto disrupted the lysine degradation limitation imposed on lysine production by engineering an E. coli with a mutant lysine decarboxylase gene. Specifically, the ’698 patent, entitled “Lysine Decarboxylase Gene and Method of Producing L-Lysine,” discloses the identification of the lysine decarboxylase gene ldc and the creation of an E. coli strain with mutations in ldc that reduce or eliminate lysine decarboxlyase activity. Asserted claim 15 of the ’698 patent covers a method of producing lysine by cultivating E. coli with mutant ldc and collecting the accumulated lysine:

A method for producing L-lysine, comprising:  cultivating an isolated microorganism belonging to the genus Escherichia, wherein the microorganism contains a [mutant lysine decarboxylase] in a liquid medium, thereby producing the L-lysine and accumulating the L-lysine in the liquid medium, and collecting the L-lysine produced and accumulated in step (a), wherein the microorganism belongs to the species Escherichia coli.

The’160 patent, entitled “Method of Producing L-Lysine by Fermentation,” discloses the creation of an E. coli strain with at least one of two mutations in dapA, the gene encoding the biosynthetic enzyme dihydrodipicolinate synthase (“DDPS”). The mutations release DDPS from the feedback inhibition imposed by excess lysine, and result in an E. coli strain that produces greater amounts of lysine than wild-type strains. Asserted claim 15 of the ’160 patent covers a method of producing lysine by cultivating E. coli that contain mutant dapA and collecting the accumulated lysine:

A method of producing L-lysine, comprising: cultivating a bacterium belonging [to] the genus Escherichia which is transformed with a DNA coding for a dihydrodipicolinate synthase originating from a bacterium belonging to the genus Escherichia and having mutation to desensitize feedback inhibition of L-lysine, wherein the mutation is selected from the group consisting of [a mutation to replace the alanine residue at the 81st position and/or a mutation to replace the histidine residue at the 118th position] in a suitable culture medium, producing and accumulating L- lysine in the culture thereof, and collecting L-lysine from the culture.

Both patents disclose certain E. coli host strains for practicing the claimed inventions. The ’698 patent describes a two-step process of producing a mutant ldc host strain. In contrast to the disclosure in the specification, it is undisputed that the actual strain used by the inventors had two additional genetic alterations made to it before the addition of mutant ldc. The inventors identified this strain as WC80.

Similarly, the ’160 patent discloses two host strains, B-399 and W3110(tyrA), into which the inventors introduced mutant dapA. Yet, before filing the Japanese application from which the ’160 patent claims priority, the inventors characterized a different strain, AE-70, as their best lysine producer.

After Ajinomoto filed a complaint at the ITC, the Administrative Law Judge (ALJ) found that the asserted claims were invalid for multiple violations of the best mode requirement of 35 U.S.C. § 112, first paragraph, and that both patents were unenforceable for inequitable conduct because of those best mode violations.

The ALJ concluded that the inventors had violated the best mode requirement by (1) concealing their preferred and only host strain, WC80-1 96S, via a misrepresentation of the steps actually performed to create a mutant ldc host strain; (2) concealing sucrose as their preferred carbon source, which materially affects achieving the claimed invention; and (3) submitting data associated with fictitious host strains in support of the best mode. Similarly, with regard to claim 15 of the ’160 patent, the ALJ concluded that the inventors had violated the best mode requirement by (1) concealing their preferred host strain, AE-70, and (2) submitting fictitious data in support of the best mode.

Section 112 of the Patent Act provides that the patent specification “shall set forth the best mode contemplated by the inventor of carrying out his invention.” Known as the best mode requirement, it comprises part of the quid pro quo of the patent grant, prohibiting inventors from receiving the benefit of the right to exclude while at the same time concealing from the public preferred embodiments of their inventions. To satisfy the best mode requirement, an inventor must disclose the preferred embodiment of his invention as well as preferences that materially affect the properties of the invention.

Determining compliance with the best mode requirement is a two-prong inquiry. First, the court must determine whether, at the time the patent application was filed, the inventor possessed a best mode of practicing the claimed invention. Second, if the inventor has a subjective preference for one mode over all others, the court must then determine whether the inventor “concealed” the preferred mode from the public.

The Federal Circuit held:

By defining the invention to include the host strains, we do not read the Commission’s decision as requiring the disclosure of any and all preferences related to the production of lysine, as Ajinomoto claims. The Commission simply defined the scope of the claimed invention to include “cultivating a bacterium” as recited by the asserted claims. Also, the Commission did not, as Ajinomoto asserts, require the disclosure of all subject matter having to do with the claim term “bacterium.” The Commission simply required the disclosure of the preferred and, for the ’698 patent, only bacterial strain that the inventors used to practice the claimed invention.

…

[W]e disagree with Ajinomoto’s interpretation of the Commission’s opinion and the law. First, the Commission’s opinion did not, as Ajinomoto contends, find that the inventors concealed the method of creating the host strain into which they later introduced an ldc mutation. Rather, the Commission found that the inventors concealed the identity of the preferred host strain, and specifically that other genetic alterations, including a lysC variant and sucrose utilization genes, had been introduced (by whatever method) into the only host strain used to practice the claimed invention. Cf. Ajinomoto Co. v. Archer-Daniels-Midland Co., 228 F.3d 1338, 1347 (Fed. Cir. 2000) (finding no best mode violation when one of skill in the art would know that the identified preferred host strain contained another genetic alteration).

Second, the best mode requirement cannot be satisfied by the deposit of a non- preferred strain. It is undisputed that the host strain deposited by Ajinomoto lacked the sucrose utilization genes and thus was not the host strain into which the inventors inserted an ldc mutation. Furthermore, while the deposited strain contained the lysC variant, the specification contains no disclosure of that fact, and one of skill in the art would not know that the strain had such an alteration. As such, the deposit failed to enable one of skill in the art to practice the inventors’ preferred embodiment and thus concealed the best mode.

Sen. Mary Landrieu (D-LA) is Chairwoman of the Senate Small Business Committee.  Sen. Landrieu has introduced The Small Business Patent Data Collection Act of 2010 after concerns about how the Senate patent reform bill will impact small businesses.  Small businesses represent 99.7 percent of all employers, employing 1/2 of the U.S. labor force.

The bill directs the Small Business Administration’s Office of Advocacy to conduct a study in consultation with the U.S. PTO to analyze how changes to the current system will impact the ability of small businesses to obtain patents, whether the change would create barriers, and how it will impact the costs and benefits to small businesses overall.

S. 3089

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. STUDY AND REPORT OF PATENT LAW CHANGES.

(a) Definitions.—In this section—

1. the term “Chief Counsel” means the Chief Counsel for Advocacy of the Small Business Administration; and
2. the term “small business concern” has the meaning given that term under section 3 of the Small Business Act (15 U.S.C. 632).

(b) Study.—

1. IN GENERAL.—The Chief Counsel, in consultation with the Director of the United States Patent and Trademark Office, shall conduct a study of the effects of changing from a first-to-invent to a first-to-file invention priority system under patent law under title 35 of the United States Code.
2. AREAS OF STUDY.—The study conducted under paragraph (1) shall include examination of the effects of changing from a first-to-invent to a first-to-file invention priority system, including examining—

(A) how the change would affect the ability of small business concerns to obtain patents;
(B) whether the change would create or exacerbate any disadvantage for applicants for patents that are small business concerns relative to applicants for patents that are not small business concerns; and
(C) the costs and benefits to small business concerns of the change.

(c) Report.—Not later than 18 months after the date of enactment of this Act, the Chief Counsel shall submit to the Committee on Small Business and Entrepreneurship and the Committee on the Judiciary of the Senate and the Committee on Small Business and the Committee on the Judiciary of the House of Representatives a report regarding the results of the study under subsection (b).

I have blogged in the past about non-traditional trademarks. However the recent case of North Face and South Butt begs the discussion of trade dress and hence a comparison of the case in question with the precedents is unavoidable to glean whether South Butt does infringe North Face’s trade dress amongst other issues.

Almost everybody in this part of the world- irrespective of whether they are hiking enthusiasts/outdoor buffs or not, is familiar with North Face Apparels. In December 2009, North Face filed a complaint in the U.S. District Court for the Eastern District of Missouri for trademark infringement and dilution. South Butt is owned and operated by Missouri University student James Winkelmann who started this apparel line in 2007 to mock North Face.

Early on, upon being threatened by North Face with an infringement suit, Winkelmann offered to sell his enterprise for US $ 1 million. But with the impending lawsuit, the sales for South Butt soared and subsequently Winkelmann withdrew his offer.

This lawsuit in addition to addressing trademark infringement, dilution and unfair competition under the Trademark Act of 1946, 15 U.S.C. §§ 1051 (also known as the Lanham Act), also has an interesting aspect of trade dress infringement.

Often times, litigators are so focused upon the “popular” intellectual property like patents, trademarks, copyrights that lesser known, but equally important intellectual property like trade dress gets the step-daughterly treatment. One does not often come across trade dress cases. But two cases where the United States Supreme Court granted certiorari are the Two Pesos case and the Qualitex case.

Section 43(a) of the Lanham Act states inter alia the following:

“Any person who in connection with any goods or services uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which is likely to cause confusion, or to cause mistake, or to deceive as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or .in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such an act.”

While the Lanham Act does not explicitly define trade dress, a perusal of the above definition makes it obvious that trade dress should be protected. (“in connection with goods or services”…”uses any…symbol or device”).

Drawing parallels between trademark and real property, where does the boundary of a trademark end? How does a second comer in the market get saddled with the label of an infringer? What does trade dress encompass? One looks to the precedents in order to shed some light on these and other related issues.

Two Pesos v. Taco Cabana

This was the first of the two precedents and the facts are as follows.

Respondents are the owners of a fast food chain in Texas and own six such restaurants in San Antonio.  In their words Taco Cabana has the following trade dress:

“a festive eating atmosphere having interior dining and patio areas decorated with artifacts, bright colors, paintings and murals. The patio includes interior and exterior areas with the interior patio capable of being sealed off from the outside patio by overhead garage doors. The stepped exterior of the building is a festive and vivid color scheme using top border paint and neon stripes. Bright awnings and umbrellas continue the theme.”

Two Pesos opened up their restaurant in Houston and adopted an ambiance similar to that of Taco Cabana’s but did not deign to open one in San Antonio. Taco Cabana expanded their market by opening up restaurants in cities where Two Pesos was open and sued Two Pesos for trade dress infringement in 1987 under § 43(a) of the Lanham Act.

Section 43(a) does not mention either trademarks or trade dress. Neither does it mention anything about secondary meaning. Therefore a trade dress need not have secondary meaning in order to be protected. Secondary meaning is only required for descriptive marks.

Trade dress then can be defined as the overall appearance or image of the business in question.

In Qualitex v Jacobson, (this was briefly discussed in my earlier blog post of non traditional trademarks) Qualitex sought protection over the green gold colour of their cleansing pads.

The Federal Court judgment held that no trademark protection can be conferred for mere color. The Federal Circuit at that point of time, was undecided over the issue of trademark protection for color.

There are a few other related cases which are summarized for the benefit of the readers.

• NutraSweet Co. v. Stadt Corp.: absolute prohibition against protection of color alone;
• In re Owens-Corning Fiberglas Corp.: allowed registration of color pink for fiberglass insulation; and
• Master Distributors, Inc. v. Pako Corp.: declined to establish per se prohibition against protecting color alone as a trademark.

The Supreme Court put to rest all debates on this issue by holding that color can be protected under the Lanham Act. Even though color by itself is not fanciful or arbitrary or suggestive, however, over time consumers can come to associate a product with the color on its label. (Think yellow “M” for McDonald, red and white label for Coca-Cola for example).

Coming back to the North Face-South Butt debate, it is obvious that South Butt was started as a joke, a parody if you will. The products of the two companies are the same (sports gear); the logo of South Butt is a mere rearrangement of that of North Face’s logo. South Butt may get off lightly on the offensiveness of the name (FCUK got off with no rap on their knuckles) but trade dress infringement definitely exists.

To small timers, the idea of pulling off a joke on major companies may seem like a lark. However, doing so results in a criminal wastage of time and resources which could be spent in developing newer technologies (in this case apparel!). More importantly, if not settled out of court, it is a burden on the justice system and speedy disposal and adjudication of more relevant and pertinent cases is prevented.

However, at this point of time there exists no major deterrent for such cases and one hopes future small time infringers will pay heed to precedents and perhaps abstain from petty infringements.

Today’s post is by Guest Barista Shalini Menezes of ::O.bi:t.er: D:ic.t:um.