RPX: The Berkheimer/Aatrix Effect is Real

By R. David Donoghue on Posted in Legal News

My partner Anthony Fuga is providing excellent analysis on the latest Section 101 cases and issues at the Holland & Knight Section 101 Blog, which he edits and does a substantial amount of the writing for. His latest post provides valuable insight into how district courts are approaching Section 101 cases since the Federal Circuit’s Berkheimer and Aatrix decisions based upon a recent RPX study. It is reposted below, with permission and cross-posted on my Retail Patent Litigation blog:

RPX’s latest quarterly review provides a deep dive on the effects of Berkheimer and Aatrix. If you forget, the Federal Circuit found in those two 2018 cases that Section 101 motions – at the Rule 56 and Rule 12 stages, respectively – should not be granted if the plaintiff properly raised a factual dispute regarding whether the asserted patent contains an inventive concept. Now, more than a year later, we have the data to see the impact of those cases.

According to RPX’s analysis, “district courts have as a whole become less likely to grant Alice challenges: Since the Federal Circuit issued its opinion in Berkheimer, courts have invalidated at least some claims from around 46 percent of patents challenged and adjudicated under Alice, a significant drop—roughly 23 percent [down] from the pre-Berkheimer nationwide invalidation rate of 69 percent.”

RPX also provides a breakdown of those decisions by the procedural stage, looking at both motions to dismiss and motions for summary judgment. At the Rule 12 stage, “the invalidation rate for patents challenged and adjudicated under Rule 12 – where a court has invalidated at least some claims – has dropped from around 70 percent to 45 percent.”

RPX provides further analysis and helpful charts to dig deeper into the Berkheimer/Aatrix effect, along with discussing the uptick in non-practicing entity activity, a PTAB update, the patent marketplace and more.

The entire review is worth reading and can be found here.

Judge Lindberg Memorial Service

By R. David Donoghue on Posted in Legal News

The Northern District of Illinois is holding a memorial service in remembrance of the Honorable George W. Lindberg on Thursday, June 20, 2019, beginning at 3:00 p.m.

The service is being held in the James Benton Parsons Memorial Courtroom on the 29th floor of the Everett McKinley Dirksen Courthouse. The service will be followed by a reception on the 21st floor south alcove and an open house of the Court History Museum featuring an exhibit dedicated to Judge Lindberg.

Court Denies Leave to Add Substantively Identical Patent Claims to Suit

By R. David Donoghue on Posted in Pleading Requirements

Fellowes, Inc. v. Acco Brands Corp., No. 10 C 7587 & 11 C 8148, Slip Op. (N.D. Ill. Apr. 22, 2019) (Leinenweber, J.).

Judge Leinenweber granted in part plaintiff Fellowes’ motion to amend its complaint adding a new patent and addressing the results of Patent Office proceedings in this patent case involving improved paper shredding technology.

Of particular note, the Court held as follows:

  • The Court sua sponte lifted the stay pending the Patent Trial & Appeal Board proceedings.
  • The Court granted Fellowes’ leave to amend its complaint removing patents and claims it was no longer pursuing based upon the outcome of Patent Office proceedings. The Court also noted that for each asserted patent, Fellowes was required to identify the asserted claims.
  • As to Fellowes’ allegations regarding its newly issued ‘704 patent, those claims identical to claims already allowed by the Patent Office in the invalidity proceedings could be added to the suit. Similarly, the claims with new language were not made materially different by that new language. So, the Court denied leave to amend adding those claims.

Restriction of Trademark Class of Goods Requires Proof that the Restriction Avoids Confusion

By R. David Donoghue on Posted in Pleading Requirements, Summary Judgment

Easton v. Primal Wear, Inc., No. 17 C 6081, Slip Op. (N.D. Ill. Mar. 29, 2019) (Tharp, J.).

Judge Tharp denied the plaintiffs’ (collectively “Primal Mode”) Fed. R. Civ. P. 56 motion for summary judgment and defendant Primal Wear’s Fed. R. Civ. P. 12(b)(1) & (6) motion to dismiss in this Lanham Act trademark infringement and unfair competition case involving Primal Mode’s PRIMAL MODE marks and Primal Wear’s PRIMAL and PRIMAL WEAR marks.

Of particular note, the Court held as follows:

  • Primal Wear did not meet its burden of proving that Primal Mode abandoned its mark by not having sold shorts or pants for three or more years. The deposition testimony that Primal Wear relied upon was equivocal and Primal Mode’s deponent repeatedly said that his memory was imperfect and that the company’s business records were more reliable. And those business records did not establish a presumption of abandonment as they showed sales of shorts and pants during the prior three years.
  • Primal Wear did not sufficiently support its argument that restricting Primal Wear’s description of goods to exclude cycling wear would avoid likelihood of confusion. Conclusory statements were not sufficient.
  • Primal Wear’s admission before the Trademark Office that there was a likelihood of confusion between the parties’ marks was not case dispositive because: 1) the Court considers whether consumers are likely to be confused, not the parties’ respective belief as to likely confusion; and 2) because the Trademark Office never ruled upon the issue, so Primal Wear is not bound by the alleged admission.
  • Likelihood of confusion is a question of fact typically reserved for juries. As to the likelihood of confusion factors, the Court held as follows:
    1. The similarity of the marks “cut both ways,” but overall add some weight toward likelihood of confusion.
    2. The absence of actual confusion evidence ways in Primal Wear’s favor, but it is not absolute because, as the Seventh Circuit acknowledges, actual confusion is so difficult to identify that its absence only shows that the parties have not found any.
    3. While there are differences in the parties’ apparel bearing their respective marks, the clothing is similar enough to lean toward likelihood of confusion.
    4. Primal Wear’s marks were “quite strong.”
    5. The area and manner of concurrent use weighed against likelihood of confusion. Primal Wear advertised to large retailers and at major cycling events. Primal Mode advertised largely by word of mouth and internet.
  • Taken together, the likelihood of confusion factors were not so one-sided as to warrant summary judgment.
  • While Primal Wear may eventually be able to show that Primal Mode was aware of Primal Wear’s trademark use well before filing suit, warranting a laches finding, the facts were not there for summary judgment on laches.

Copyright First Sale Doctrine & Patent Exhaustion Prevent Equitable Estoppel Defenses

By R. David Donoghue on Posted in Summary Judgment

Quan v. Ty, Inc., No. 17 C 5683, Slip Op. (N.D. Ill. Mar. 20, 2019) (Kennelly, J.).

Judge Kennelly denied defendant Ty’s Fed. R. Civ. P. 56 motion for summary judgment as to equitable estoppel and abandonment regarding plaintiffs’ patent and copyright infringement claims regarding a plush seal that Ty marketed as “Wiggy.”

Of particular note, the Court held as follows:

  • The fact that Ty eventually learned of plaintiffs’ copyrights, at least when the Chinese government seized a shipment of Ty’s goods, does not mean that Ty knew about the alleged rights at the time of manufacture. The Court held that no reasonable jury could have found that Ty knew of plaintiffs’ alleged copyright interests during the relevant period.
  • Plaintiffs had a question of fact as to whether they had knowledge of the infringing conduct, which is required for equitable estoppel, because of the first sale doctrine. During the relevant period, Ty’s sales were protected by plaintiffs’ sale of the accused product to Ty.
  • While manufacturing the toys at issue and placing a tag on them with Ty’s copyright notice was “arguably consistent” with an intent to abandon plaintiffs’ copyrights, it was not the only consistent read. Plaintiffs’ argument that their limited English fluency limited their understanding of the legal implications of the copyright notice, was plausible and consistent with a lack of intent to abandon. Plaintiffs’ explanation that Ty’s copyright notice was added as a concession without any understanding of a loss of plaintiffs’ rights was also plausible.
  • While plaintiffs’ response addressed the equitable estoppel defense as to its patent claim in a single sentence referencing patent exhaustion, that was enough. As with the first sale doctrine, patent exhaustion protected Ty’s sales during the relevant period. As such, there could be no summary judgment of equitable estoppel as to the patent claims.

Court Strikes Allegations Regarding Previously Dismissed Lanham Act Claims

By R. David Donoghue on Posted in Pleading Requirements

VitalGo, Inc. v. Kreg Therapeutics, Inc., No. 16 C 5577, Slip Op. (N.D. Ill. Mar. 27, 2019) (Dow, J.).

Judge Dow granted in part defendant Kerg’s Fed. R. Civ. P. 12(b)(6) & 12(f) motion to strike portions of plaintiff VitalGo’s Second Amended Complaint (SAC) and to dismiss VitalGo’s claims with prejudice in this Lanham Act and copyright case related to Kreg’s Catalyst Lift Bed products.

Of particular note, the Court held as follows:

  • The Court struck those portions of VitalGo’s SAC that related to the Total Lift Bed, not Kreg’s Catalyst Lift Bed. The Court previously dismissed the claims related to the Total Lift Bed.
  • Res judicata did not bar claims regarding the Catalyst Lift Bed because Kreg did not begin selling that bed until 2014, after the first complaint was filed in 2011. Striking the portions of the SAC addressing the Total Lift Bed resolved any res judicata issues.
  • VitalGo’s 2011 knowledge that Kreg was developing a new bed coupled with VitalGo’s knowledge of Kreg’s marketing of VitalGo’s Total Lift Bed did not create bar claims about how Kreg marketed the new bed beginning in 2014.
  • Judicial estoppel did not bar VitalGo’s claims because VitalGo was not arguing that Kreg could not sell the Total Lift Beds. Instead, VitalGo argued that Kreg could not use VitalGo’s intellectual property to market Kreg’s Catalyst Bed.
  • VitalGo met its Rule 9(b) heightened pleading standard regarding its Lanham Act false designation claim by alleging that Kreg marketed its Catalyst Bed in a way that could lead consumers to believe it was the Total Lift Bed or related to that bed.
  • VitalGo’s fraud claim was insufficiently pled. VitalGo’s allegations that Kreg advertised that its Catalyst Bed had VitalGo’s patented features were “implausible.” Kreg’s Catalyst Bed did not have a required footboard scale or movable foot support, which were required by VitalGo’s patent claims.

Copyright Claims Not Preempted by Related Breach of Contract Claims

By R. David Donoghue on Posted in Uncategorized

Fair Isaac Corp. v. Trans Union, LLC, No. 17 C 8318, Slip Op. (N.D. Ill. Mar. 27, 2019) (Coleman, J.).

Judge Coleman granted in part defendant Trans Union’s Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff FICO’s amended complaint and denied Trans Union’s Fed. R. Civ. P. 12(e) alternative motion for a more definite statement in this antitrust, Lanham Act unfair trade practices and related state law claims involving FICO’s credit score algorithms

Of particular note, the Court held as follows:

  • FICO’s breach of contract claims survived because they identified a purported contractual duty and that Trans Union alleged violated the duty or obligation. And the claims did not require a more definite statement because they put Trans Union on sufficient notice of the allegations.
  • The Court dismissed FICO’s good faith and fair dealing claim to the extent it was based upon Illinois law because Illinois did not recognize the cause of action.
  • FICO’s copyright claim was not preempted by the breach of contract claims. Contracts are private rights, while copyrights are public rights. Furthermore, the Court could find no case law holding that a breach of contract claim could preempt copyright claims, even where the alleged facts were similar.
  • Because FICO did not allege that it had a right to immediate possession of the software, FICO’s conversation claim could not survive.
  • FICO’s unjust enrichment claim was allowed as alternative to its breach of contract claim.
  • The Court dismissed FICO’s false advertising claims to the extent they were based upon statements about the relative quality of credit scores as unactionable “mere puffery.” But the claims were not otherwise preempted by earlier claims FICO brought against Experian as those claims differed in time and the specific statements in the advertising.

Antitrust Claims Regarding Credit Scores Survive Motion to Dismiss

By R. David Donoghue on Posted in Pleading Requirements

Fair Isaac Corp. v. Trans Union, LLC, No. 17 C 8318, Slip Op. (N.D. Ill. Mar. 27, 2019) (Coleman, J.).

Judge Coleman granted in part plaintiff FICO’s Fed. R. Civ. P. 12(b)(6) motion to dismiss defendant Trans Union’s counterclaims in this antitrust, Lanham Act unfair trade practices and related state law claims involving FICO’s credit score algorithms.

Of particular note, the Court held as follows:

  • Trans Union sufficiently pled its antitrust claims. Trans Union alleged that FICO engaged in practices intended to drive out competition and that FICO’s exclusive dealings are allegedly unlawful attempts to maintain monopoly power.
  • The Court dismissed Trans Union’s unilateral mistake claim because Trans Union did not plead that the mistake was coupled with an fraud.

Patent’s Description of Technological Solutions to Prior Art Problems Overcomes Early §101 Invalidity

By R. David Donoghue on Posted in Pleading Requirements

Upaid Sys., Ltd. v. Card Concepts, Inc., No. 17 C 8150, Slip Op. (N.D. Ill. Mar. 25, 2019) (Feinerman, J.).

Judge Feinerman denied defendant Card Concepts’ (CCI) Fed. R. Civ. P. motion for judgment on the pleadings that the patent claims are invalid as unpatentable subject matter pursuant to §101 in this patent case involving systems for collecting payments across different networks, particularly for laundromat systems.

Citing Aatrix and looking to the patent’s specification and the complaint, the Court held that the patent and plaintiff Upaid’s complaint identified the development of the patented invention and the improvements over the prior art. They also explained how the patent enabled operation of advanced communications regardless of hardware limitations. In light of the statements in the patent and the complaint, the Court could not hold the patent invalid as unpatentable at the pleading stage.

Declaratory Judgement Claims in BitTorrent Porn Case Allowed to Balance the Playing Field

By R. David Donoghue on Posted in Pleading Requirements

Malibu Media, LLC v. Khan, No. 18 C 3028, Slip Op. (N.D. Ill. Mar. 27, 2019) (Leinenweber, J.).

Judge Leinenweber granted in part plaintiff Malibu Media’s Fed. R. Civ. P. 12(b)(6) motion to dismiss individual defendants’ declaratory judgment copyright and copyright misuse claims in this BitTorrent case involving use and sharing of pornographic video files.

The Court referenced the “deluge” of Malibu Media cases it has seen over the last several years against named and Doe individuals for allegedly using BitTorrent to download and share pornographic movies. The Court held that it would not dismiss defendant’s declaratory judgment copyright noninfringement claim. While a prevailing party in a copyright claim can seek its fees, to the extent Malibu Media were to dismiss its claim voluntarily, that could prevent defendant from seeking fees as a prevailing party. Allowing defendant to maintain the claim could help reduce some of the immense power imbalance in these claims because, should Malibu media voluntarily dismiss, defendant could still pursue its declaratory claim and seek fees. It also gives defendant an opportunity to clear defendant’s name, even if Malibu Media voluntarily dismisses.

Because defendant did not respond to Malibu Media’s challenge to the misuse claim, the Court dismissed that claim.

The Court dismissed defendant’s copyright misuse counterclaim, although left intact its copyright misuse affirmative defense. Malibu Media did not challenge the misuse affirmative defense and that was the appropriate posture for the argument.

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