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McNees 2016 In Review – Trademarks, Copyrights and Patents

January 30, 2017

The year 2016 saw interesting and diverse developments in trademark, copyright, trade secret, and patent law. Not only has intellectual property news been in the headlines, but these areas have made it to the Supreme Court. Let’s take a look back at some of the intellectual property law highlights of 2016.

There were several interesting trademark cases on battles between university names, genericism, and the international implications of U.S. trademark law. In 2017, the Supreme Court will decide whether the disparagement provision of the Lanham Act, which bars the registration of disparaging marks (e.g. WASHINGTON REDSKINS), is unconstitutional.

Higher Ed Battle of the Names
There were a few notable 2016 trademark cases involving universities as parties. First up was Florida International University Board of Trustees v. Florida National University Inc., where the defendant had recently changed its name from Florida National College to Florida National University. The 11th Circuit sided with the lower court in holding that there was no likelihood of confusion between Florida International University and Florida National University. Supporting its conclusion, the court noted that “potential students (and likely their parents too)…generally spend a substantial amount of time and energy learning about their options before choosing a school and are, therefore unlikely to be confused by similar names.”

Later in 2016, the U.S. District Court for the Southern District of Texas reached an opposite likelihood of confusion finding between University of Houston Law Center and Houston College of Law in The Board of Regents of the University of Houston System et al. v. South Texas College of Law. The defendant had recently changed its color scheme and name from South Texas College of Law to Houston College of Law, which the court found suggested an affiliation with the University of Houston.

Lastly, in November 2016, American InterContinental University (AIU) filed a preemptive lawsuit against American University, requesting that the U.S. District Court for the Northern District of Illinois declare that AIU’s name is non-infringing.

In light of the developing split among the courts on the likelihood of confusion between names in the higher education context, it will be interesting to see in 2017 if other courts weigh in.

In May of 2016, the Trademark Trial and Appeal Board (TTAB) rejected a challenge by Dr. Pepper Snapple Group Inc. to Coca-Cola Co.’s trademark registration for ZERO in Royal Crown Co. Inc. et al. v. The Coca-Cola Co. Armed with evidence of other soft drink companies using the term ZERO to describe their products, Dr. Pepper Snapple argued that ZERO had become generic in the context of soft drinks. However, the TTAB determined that through Coke’s extensive use and advertising of ZERO the term had acquired distinctiveness, permitting Coke to claim exclusive rights to the term as a trademark. Dr Pepper Snapple appealed to the Federal Circuit, which has agreed to decide the case.

In 2016, the Fourth Circuit decided Belmora LLC v. Bayer Consumer Care AG. This case considers the global reach of U.S. trademark law. Bayer manufactures Aleve under the brand name FLANAX in Mexico. Bayer opposed Belmora’s U.S. trademark registration for FLANAX even though Bayer never used or registered the mark FLANAX in the U.S. In 2016, the Fourth Circuit held that Bayer had standing to sue Belmora for its conduct under the Lanham Act’s unfair competition provision because Bayer was adversely affected in the U.S. by Belmora’s use of FLANAX in the U.S. The Supreme Court has not decided whether it will hear the case.

Live at the Supreme Court…The Slants!
The Supreme Court will deliver a highly anticipated decision in Lee v. Tam, which involves the disparagement provision of the Lanham Act and whether this provision clashes with the First Amendment. Simon Tam, founder of the Asian-American band “The Slants,” attempted to register THE SLANTS with the USPTO. The mark was refused registration for being disparaging to “persons of Asian descent,” even though Tam and The Slants maintain the name of their band is a deliberate “reappropriation” of a derogatory name for Asians. Eventually, the Federal Circuit deemed the disparagement provision unconstitutional, and the government appealed to the Supreme Court.

Oral arguments in front of the Supreme Court were held in January of 2017. The Supreme Court declined to hear a highly publicized, similar disparagement case involving the NFL Washington Redskins, so the Court’s decision in Lee v. Tam will undoubtedly impact a decision in that case.

In the area of copyright law, the Supreme Court heard and decided cases on attorneys’ fees and fair use. A case on design protection and functionality is slated for decision in 2017.

Fees, Sir, I Want Some More
The Copyright Act and other federal intellectual property protection laws are some of the few areas of U.S. law where a prevailing party in a lawsuit can recover attorneys’ fees, but even under these laws the ability to recover attorneys’ fees is limited. On June 16, 2016, the Supreme Court ruled on the Kirtsaeng v. John Wiley & Sons, Inc. case and clarified the Copyright Act’s fee-shifting provision, which permits the prevailing party to recover attorneys’ fees under certain circumstances. In this case, the prevailing defendant was twice denied attorneys’ fees, and the Supreme Court agreed to rule on whether the courts’ emphasis on the “objective reasonableness” factor to deny the award of attorneys’ fees was proper. This factor focuses on the reasonableness of the non-prevailing party’s position. The Supreme Court, in a unanimous decision held that “it is appropriate for a court to give substantial weight to the reasonableness of a losing party’s position when deciding whether to award attorney’s fees as long as ‘all other relevant factors’ are taken into account.” The Court sent the case back to the district court for a full consideration of all factors, including claim frivolity, motive of the losing party, and the losing party’s goal to deter conduct and receive compensation.

Awarding a prevailing party attorneys’ fees in a copyright case is never mandatory. This opinion provides lower courts with more guidance in determining whether awarding attorneys’ fees to the prevailing party is appropriate under the circumstances.

Let Me Google That for You
A May 2016 jury verdict in Oracle America, Inc. v. Google, Inc. put an end to an ongoing battle between Google and Oracle over Google’s use of Oracle’s copyrighted Java software in the Android mobile operating system. Back in 2012, a jury found Google liable for copying Oracle’s application programming interfaces (APIs), the building blocks of software applications, but the judge threw out the verdict. In 2016, a California jury had to decide whether the fair use defense justified Google’s use of the APIs.

A fair use analysis weighs four factors to determine whether an otherwise infringing use of a copyrighted work constitutes fair use. The four factors are: (1) the purpose and character of the use (“transformative use”); (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market or value of the copyrighted work.

In considering the fair use factors, the new 2016 jury found that because the factors weighed in Google’s favor, Google’s use of the APIs is protected by fair use. This finding allowed Google to dodge liability for up to $9 billion in damages that Oracle sought. As expected, Oracle appealed the jury verdict in October of 2016.

Despite the jury’s finding of fair use, it is important to keep in mind that fair use analyses are notoriously inconsistent and unpredictable. Generally, a fair use defense should not be relied upon to excuse copyright infringement.

C-O-P-Y-R-I-G-H-T, Copyright!
In 2017, the Supreme Court is set to decide the Star Athletica LLC v. Varsity Brands Inc. case involving designs on cheerleaders’ uniforms. The Justices heard oral arguments on the case in October of 2016. Copyright has long shied away from offering protection for fashion designs, primarily to avoid stifling creativity and competition in the industry. Typically clothing has been found to be functional, and thus not entitled to copyright protection. However, the Court agreed to take on the Star Athletica case to determine whether the cheerleaders’ uniforms are functional and therefore not protectable, or expressive and therefore protectable by copyright. Will the Court give a “rah, rah, sis, boom, bah” to copyright protection for the uniforms? It will be interesting to see what the Justices decide in 2017.

This past year, Congress passed the Defend Trade Secrets Act (DTSA), which provides federal protection for trade secrets in civil actions. Trade secret law had never been codified on a federal level; rather, plaintiffs alleging misappropriation of trade secrets have relied on state law. Interestingly, state law preempts the DTSA, so state trade secret laws still need to be considered. The law went into effect in May of 2016.

The DTSA defines “trade secret” and provides a standard for misappropriation. Contrary to state law, DTSA outlines a cause of action for international trade secret misappropriation. In one of the most controversial provisions, the DTSA sets forth a process for ex parte seizures of trade secrets.

For a more detailed analysis of the DTSA, take a look at our May client alert here.

The Supreme Court heard several patent cases in 2016. Quite a few focused on the issue of damages. In 2017, the Supreme Court will consider the issue of patent venue.

Enhanced Damages Standard Relaxed
In a unanimous decision, the Supreme Court rejected the Federal Circuit’s enhanced patent damages standard in Halo Electronics v. Pulse Electronics. The Court’s decision relaxes the standard by which a patent owner must prove they should receive up to treble damages from an infringer. The Federal Circuit standard, outlined in In re Seagate Technology, LLC, required the patent owner to demonstrate an infringer’s objective recklessness and knowledge of the risk of infringement by clear and convincing evidence. Despite its rejection of this standard, the Supreme Court cautioned that enhanced damages should be awarded with measured discretion and only in rare circumstances.

For a more detailed analysis of this decision, take a look at our June client alert here.

A Bruised Apple Wants Its Damages
In 2012, a smartphone infringement case brought by Apple against Samsung resulted in a $1 billion jury verdict, $399 million of which compensated Apple for infringement of its design patents. The design patents covered the Apple iPhone’s front face, bezel, and graphical user interface. Samsung argued that damages should be proportionate to the value attributable to the design patents. However, the Federal Circuit upheld the jury verdict, which was based on Samsung’s entire profits on the infringing smartphones. Samsung Electronics Co. v. Apple went to the Supreme Court for the Justices to decide how design patent damages should be determined. In a unanimous opinion, the Court held, “In the case of a multicomponent product, the relevant article of manufacture for arriving at a damages award under Section 289 of the Patent Act need not be the end product sold to the consumer but may be only a component of that product.” Ultimately, the Court sent the case back to the Federal Circuit to decide whether the relevant “article of manufacture” here is the entire smartphone or a particular component. The jury is still out on what effect, if any, the Supreme Court’s decision will have on the value and enforcement of design patents.

For a more detailed analysis of this decision, take a look at our December client alert here.

Up Next at the Supreme Court
On the Supreme Court’s 2017 docket is TC Heartland LLC v. Kraft Foods Group Brands LLC, a case involving where patent infringement actions can be filed. The Justices will consider whether federal corporate venue law impacts the federal patent venue statute such that a patent infringement action can be filed wherever a federal court would have personal jurisdiction over the corporation. A decision in this case may limit the jurisdictions where a patent owner can file a patent infringement action.

Highlights in trademark, copyright, trade secret, and patent law in 2016 have set the bar high for intellectual property law developments in 2017. We look forward to seeing how all of these cases and issues play out.

 This was a big year for the Intellectual Property Group at McNees with four new hires. The McNees IP Group enhanced the depth of its trademark and copyright practice by hiring Lois Duquette, who spent the last 18 years managing The Hershey Company’s trademark portfolio and Emily Hart, a graduate of Drexel University School of Law. Our Patent Division brought onboard as patent agents, Brett Crouse, a former Patent Office Examiner who also worked at DuPont and Robert Bosch, and Danny Kim, a former Patent Office Examiner. The new agents provide additional depth in the electrical and chemical areas.

© 2017 McNees Wallace & Nurick LLC
McNees Intellectual Property Alert is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.