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Fish Federal Circuit Summary Service: Issue # 301

June 4, 2007

Newsletters

Fish Federal Circuit Summary Service: Issue # 301

June 4, 2007

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On-Line Resources Can Be Very Important in Trademark Cases
In re Bayer Aktiengesellschaft In re Bayer Aktiengesellschaft
Date: May 24, 2007
Panel: Newman (dissent), Schall, Moore)
Author: Moore
District court: TTAB
Trial judge:
Summary: Fed Cir affirms rejection of ASPIRINA as descriptive for aspirin. In essence, the evidence showed both that the term ASPIRINA was used to reference Bayer’s trademarked aspirin in other countries, and as a Spanish equivalent to aspirin (which has long been generic in the U.S.). In addition, the two terms sound and look alike. As a result, the majority affirmed on the substantial evidence standard. Perhaps more important, the court made the following observations: (1) on-line dictionaries and translation tools are relevant to how Americans treat a term; (2) search result lists are less useful because they are so short, and thus have little context; (3) information on foreign websites that are accessible in the U.S. may be relevant (because of the growing availability and use of the internet, particularly for health information); and (4) registrations of ASPIRINA in foreign countries were “not legally or factually relevant to potential consumer perception of Bayer’s analgesic goods in the United States.” In dissent, Judge Newman noted that all of the evidence showed that ASPIRINA was a Bayer trademark, that it is a coined word, and foreign registrations must be taken into account because some level of comity in trademark law helps ensure the smooth flow of goods.

KEY WORDS: TRADEMARK (NO), DESCRIPTIVE (YES)

High Damage Award Was Supported By Substantial Evidence
Monsanto Co. v. McFarling Monsanto Co. v. McFarling
Date: May 24, 2007
Panel: Lourie, Rader, Bryson
Author: Bryson
District court: E.D. Mo.
Trial judge: Perry
Summary: Fed Cir affirms dismissal of misuse defense, jury award of damages, and refusal to enter broad injunction. First, Monsanto’s dropping of some patents from the suit did not suddenly make a misuse claim actionable. On damages, a reasonable royalty award of $40 per bag of corn was not out of line even though Monsanto only charges $6.50 per bag for legal licensed sales, given the “broad deference” applied to such an issue. Specifically, the total cost of a bag of seed is around $28, the marginal cost of seed is very low (so much of the cost is profit to Monsanto and to the companies licensed by Monsanto to use its genes), and Monsanto’s expert testified that the benefit of Monsanto’s RoundUp Ready technology to a farmer was around $30-60 per bag. Also, a rule capping the royalty at $6.50 per bag would give people like McFarling a windfall. In addition, the testimony of damages expert Mark Hoffman was properly admitted — any problems with his approach went to weight rather than admissibility. Finally, the district court did not abuse its discretion by refusing to enjoin McFarling from legally buying corn in the future — if Monsanto wants him blacklisted, it can do so. McFarling was represented by Stanford professor Mark Lemley.

KEY WORDS: DAMAGES (YES), EXPERT TESTIMONY (YES), INJUNCTION

Fed Cir Applies Dayco To Find Inequitable Conduct For Failure To Cross-Reference Cases Adequately
McKesson Information Solutions McKesson Information Solutions
Date: May 18, 2007
Panel: Newman (dissent), Clevenger, Bryson
Author: Clevenger
District court: E.D. Cal
Trial judge: Damrell
Summary: Fed Cir affirms finding of inequitable conduct based on three transgressions: (1) failure to disclose a reference cited in another case; (2) failure to give examiner#2 a rejection from examiner#1 in the other case; and (3) failure to disclose the existence of similar allowed claims (which is relevant to double patenting). Importantly, the applicant’s attorney (who was tagged with inequitable conduct) had initially disclosed the existence of the related case for points (1) and (2), and the same examiner was handling both cases for point (3) — but neither of those facts saved the prosecuting attorney. On point (1), McKesson was wrong that the art before the examiner was better than the non-disclosed art, and the district court properly relied on Bruno v. Acorn, rather than Akron Polymer. For intent, the prior art patent was not huge, so the attorney was on notice of the entire thing, the attorney had cancelled claims in acquiescence to the rejection that applied that patent, and it did not matter that he learned of the prior art patent after he had made an argument for patentability in his other case — the time difference was only 17 days, and he should have circled back. On point (2), the Fed Cir noted that “substantial similarity” between claims in two cases is sufficient, but not required, to establish materiality for failure to cross-cite an office action. For intent, the district court did consider the attorney’s initial cross-referencing of the cases, and the Fed Cir rejected the argument that the “new” law from Dayco could not apply to an old case (because the law in Dayco was applied to the patents in Dayco, and because the MPEP has long had a broad disclosure requirement). On point (3), McKesson was wrong that there could only be materiality if there was a substantial likelihood that a reasonable examiner would have issued a double patenting rejection. Also, the attorney “was not entitled to assume” that the examiner would remember his actions from months earlier (and the attorney said he never considered the fact that the examiner was the same in both cases, so the fact could not affect intent).

Note: Aside from the obvious hand wringing this case will create, the key lesson is the importance of establishing and maintaining credibility with the court — here as a witness and on appeal, but elsewhere as trial counsel too. It is pretty clear that some decent arguments suffered here because the courts were annoyed by weaker arguments.

KEY WORDS: INEQUITABLE CONDUCT (YES), MATERIALITY (YES), CUMULATIVE (NO), DECEPTIVE INTENT (YES)

Majority Finds Expert Testimony on Lost Profits To Be Conclusory; District Court Erred in Finding Inconsistent Verdicts
Wechsler v. Macke Int’l Trade, Inc. Wechsler v. Macke Int’l Trade, Inc.
Date: May 18, 2007
Panel: Mayer (dissent-in-part), Gajarsa, Prost
Author: Prost
District court: C.D. Cal.
Trial judge: Snyder
Summary: Fed Cir reverses grant of JMOL that owner was personally liable for inducing infringement and reverses award of lost profits, and affirms summary judgment that the company was not the owner’s alter ego. The jury had found the company and the owner to be willful infringers, but found the owner not personally liable for inducing infringement. The district court found him personally liable because the verdicts were inconsistent in the court’s view. Applying 9th Cir law, the Fed Cir noted that the verdicts were not necessarily inconsistent because an officer could negligently believe that a patent was invalid or not infringed, which could make the corporation a willful infringer, but not result in personal liability (because the willfulness and inducement standards are different). On lost profits, the district court should have granted JMOL of no lost profits because the patentee did not have a product until the defendant had withdrawn its product, and the patentee never connected the evidence of its ultimate ability to make a product to the time of the infringement (and the expert testimony on this point was thus unsupported). Also, the evidence that Macke’s sales preempted later sales by Wechsler was also conclusory, as was the evidence of price erosion. Finally, and applying 9th Cir law, summary judgment of no alter ego was properly granted, because Wechsler could establish only that Macke’s owner was the only owner and only employee, but nothing more. On bad faith, the proof was again run the of the mill (through characterized as evil by Wechsler).

Judge Mayer dissented from the lost profits ruling, reasoning that there was substantial evidence on the diverted sales and price erosion theories. Judge Mayer reasoned that proof of preparations to enter the market followed by entering the market is sufficient “as a matter of law” to establish lost profits (citing Rite Hite).

Note1: “[T]he availability of lost profits is a question of law” decided by the court, whereas the amount of lost profits is for the jury.

Note2: Mr. Wechsler is represented by the Wechsler & Wechsler law firm, of which he appears to be a member (with his son (?) who argued the appeal).

KEY WORDS: INDUCEMENT, WILLFULNESS, INCONSISTENT VERDICTS, CHOICE OF LAW (REGIONAL), LOST PROFITS (NO), EXPERT TESTIMONY (NO)

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