By Dinis Cheian on October 21, 2022

The following article by Dinis Cheian is an interesting analysis of patent extension calculation errors that Cheian claims to have found in the Patent Office’s software. I thought Chicago IP Blog readers would find it interesting.

The Patent Office’s software is miscalculating the expiration extensions of some patents. Typically, a patent expires twenty years after the filing of the underlying application. However, the Patent Office extends patent terms to compensate for certain delays in processing applications. This extension is known as PTA. By default, the PTA is automatically calculated by a computer program administered by the Patent Office. However, that program was not originally designed to compute PTA and, given the complex rules governing the calculation, it makes mistakes.

I discuss two types of these systematically observed mistakes at length in my paper. First, the program sometimes fails to detect the applicant’s delayed replies, which leads to a smaller applicant delay and an excessive PTA. I found this problem in 24,914 patents. 121 have been litigated as of 2016. Second, the dates of some correspondence between the applicant and the examiner appear backdated in the records used by the program to determine the PTA. For example, if the computer believes that an applicant’s late reply to a rejection was received earlier than it was, the computer will fail to detect the applicant’s delay. In turn, this will lead to a shorter applicant delay and a longer PTA than warranted. I observed this glitch in 2,618 patents, 21 of which have been litigated as of 2016. My list of the software’s errors is not exhaustive. I suspect there could be additional inaccuracies in the software’s calculations, impacting even more patents.

Patent prosecutors have little incentive to correct Patent Office’s mistakes when it favors their clients, if they are even aware of the errors. When a patent is awarded less PTA than it is entitled to, the applicant may challenge the Patent Office’s determination within two months after the date of the grant. Applicants routinely file such challenges as a longer patent life benefits them. In contrast, there are few incentives to correct the Patent Office when it errs in the opposite direction and awards more PTA. Under current regulations, there is no obligation to file a request to correct excessive PTA. In addition, when submitting a request to correct the PTA, even one to lower it, the applicant must pay a fee. It appears that the Patent Office sometimes refunds or does not charge the fee, but the regulation sets out the fee and does not guarantee it will be refunded. It is worth noting that requests to lower the PTA are nevertheless submitted by practitioners in some cases. Nevertheless, the incentives to submit such requests are lacking even when the applicant is aware that she was awarded excess PTA.

Until and unless the Patent Office improves its algorithms and/or changes the incentives, patent practitioners and especially patent litigators and lawyers should be on the lookout for inflated PTA. If the error is detected during litigation, defendants have options. Under 35 U.S.C. § 282(c)(2), “[i]nvalidity of the extension of a patent term . . . because of the material failure . . . by the Director [of the Patent Office] to comply with the requirements of [the patent statutes] shall be a defense in any action involving the infringement of a patent during the period of the extension of its term.” Thus, defendants in patent infringement lawsuits can raise the erroneously granted PTA as a defense to avoid paying damages during the excess period. Notably, however, there isn’t even a single case in which such a defense was raised in the almost forty years since that subsection was enacted. This lacuna suggests that patent litigators rarely double-check the PTA. However, other explanations are possible. For example, it may be the case that such defenses were raised in confidential communications between the parties or that plaintiffs do not assert patents with excessive PTA.

Another subset of patent practitioners that urgently needs to take note of these bugs is the group assisting pharmaceutical companies in registering generic drugs with the FDA. At the expiration of a patent covering a drug, entities that would like to sell generic versions of the drug need to register the generic with the FDA. The entity that files first for such a registration has the exclusive right to market the generic drug for 180 days. As part of the filing, the entity must certify that the patent covering the original drug is invalid. Therefore, lawyers on the lookout for PTA errors may discover that certain patents expire, and are thus invalid, earlier than it appears if one blindly relies on the Patent Office’s calculations. This realization would allow lawyers to file the generic registration earlier, thus securing the exclusive rights for their clients.

H-D USA, LLC v. Partnerships & Unincorporated Assocs., No. 21 C 496, Slip Op. (N.D. Ill. Mar. 14, 2022) (Tharp, J.).

Judge Tharp granted plaintiff Harley Davidson’s Fed. R. Civ. P. 12(b)(6) motion to dismiss defendant’s first counterlcaim and granted in part its motion to dismiss affirmative defenses in this trademark dispute involving HARLEY DAVIDSON marks.

Defendants’ counterclaims were a bare list of legal conclusions without any supporting facts. The Court, therefore, dismissed them. Similarly, defendants’ statute of limitations, laches, estoppel, and implied license affirmative defenses were bare recitations of the law. The Court, therefore, dismissed them. Defendants’ non-counterfeit and lack-of-willfulness defenses were not stricken  because they were not affirmative defenses, but instead directly attack plaintiff’s allegations.

Nulogy Corp. v. Menasha Packaging Co. LLC, No. 21 C 1164, Slip Op. (N.D. Ill. Mar. 10, 2022) (Rowland, J.).

Judge Rowland granted defendant Menasha’s motion to dismiss for forum non conveniens and denied defendant Deloitte’s as moot in this trade secret action involving supply chain software.

The parties Agreement had a forum selection clause mandating that Canadian law governed and that any action related to the Agreement be brought in Toronto. While Nulogy’s claims are based in trade secret, not upon the Agreement, the forum selection clause still governed. The Supreme Court requires that forum selection clauses be read broadly. And here Nulogy’s claim is supported by the Agreement.

The fact that Deloitte is not party to the Agreement does not avoid the forum selection clause. Nulogy originally sued both Menasha and Deloitte in Canada, but then voluntarily dismissed Deloitte and dropped its Canadian trade secret claims. A plaintiff cannot avoid forum selection clauses by selecting its claims and forums separately.

The Intellectual Property, Information & Privacy Law has announced the 2022 Don Dunner Leadership Award will be presented at its 66th annual IP Conference on Friday, November 11, 2022.  The inaugural 2020 Award was presented to Hon. Pauline Newman, U.S. Court of Appeals for the Federal Circuit. The 2021 Award was presented to Mr. David Kappos, former Under Secretary of Commerce and Director of the United States Patent and Trademark Office.  To be eligible for consideration, award nominations must be submitted online by Monday, October 10, 2022, using this link. And if you would like to hear my story of the time I worked for Don Dunner as a summer associate, send me a note or give me a call.

Donald R. Dunner
2016–2019 Chair,
IP Center Advisory Board
Learn More about Mr. Dunner

Viahart LLC v. Partnerships & Unincorporated Assocs. identified on schedule A, No. 19 C 8181, Slip Op. (N.D. I.. Apr. 4, 2022) (Alonso, J.).

Judge Alonso denied plaintiff Viahart’s Fed. R. Civ. P. 60(b)(6) motion to reopen its case and to permit limited jurisdictional discovery in this Doe case involving Amazon sales related to Viahart’s BRAIN FLAKES trademark.

The Court previously granted an ex parte temporary restraining order, granted Viahart’s request for service by alternate means and expedited discovery. The Court then granted a preliminary injunction followed by a default judgment. Thereafter defendant Liyunshop appeared and filed a motion to set aside the default judgment and to dismiss for lack of personal jurisdiction. The Court granted that motion, dismissing Viahart’s claim because Liyunshop lacked sufficient ties to Illinois.

Viahart’s jurisdiction argument was based upon eight Liyunshop sales to Illinois, and Liyunshop’s use of Amazon’s Fulfillment by Amazon program, which ships product to Amazon fulfillment centers around the country to allow for fast shipping.

The Court initially noted that relief pursuant to Rule 60(b)(6) was only appropriate where justified by “extraordinary circumstances.” Cases qualify for Rule 60(b)(6) consideration involve facts discovery after the judgment, and which could not have been earlier discovered. Viahart did not show that the facts it relied upon were not available before the judgment. Furthermore, Viahart made part of its argument for the first time on reply. The Court warned that “’[a] reply brief is for replying’—not sandbagging.” Quoting Hussein v. Oshkosh Motor Truck Co., 816 F.2d 348, 360 (7th Cir. 1987) (Posner, J., concurring).

Further, the Court was not convinced that jurisdictional discovery would uncover evidence supporting jurisdiction in Illinois. There was only evidence of a single sale of accused product, into Maryland. The eight sales Viahart relied upon were not relevant because they were not of accused product. And Fulfillment by Amazon did not create jurisdiction. Liyunshop utilizes the Amazon service, but has no control over where Amazon places any product, and does not own any of Amazon’s fulfillment centers, nor did Liyunshop ship directly to an Amazon fulfillment center.

Rebel Hospitality LLC v. Rebel Hospitality LLC, No. 21-cv-05132, Slip Op. (N.D. Ill. Mar. 16, 2022) (Guzman, J.).

Judge Guzman granted defendant Rebel Hospitality DE’s Fed. R.Civ. P. 12(c) motion to dismiss plaintiff Rebel Hospitality IL’s trademark infringement complaint for lack of personal jurisdiction in this case about REBEL HOSPITALITY marks.

As an initial matter, Rebel Hospitality IL waived any timeliness argument by not contesting the issue in its response brief. Rebel Hospitality DE answered the complaint and included a personal jurisdiction affirmative defense, but did not file a Rule 12(b)(2) motion at that time, as it technically should have and waited months to move to dismiss. The Court noted that, even if Rebel Hospitality IL had argued that Rebel Hospitality DE waived its jurisdictional argument, the Court would have decided the motion because it would promote form over substance to refuse to consider a jurisdictional argument in a Rule 12(c) motion filed after an answer that included personal jurisdiction as an affirmative defense.

Rebel Hospitality DE submitted an affidavit showing that it had no direct connection to Illinois. Rebel Hospitality IL focused its jurisdictional arguments on the fact that Rebel Hospitality DE’s harm was targeted at Rebel Hospitality IL in Illinois. The Court held that trademark infringement “directed” at the jurisdiction without more was not enough. The Court also noted that despite having some discovery, Rebel Hospitality IL failed to offer a competing affidavit showing any substantial connection between Rebel Hospitality DE, besides a nationally distributed interview by Rebel Hospitality DE personnel.

Finally, the Court denied Rebel Hospitality IL’s motion for jurisdictional discovery. In order to get jurisdictional discovery, Rebel Hospitality IL had an obligation to make a “colorable” showing of personal jurisdiction, which it had not done.

Benefit Cosmetics LLC, No. 20-cv-02552, Slip Op. (N.D. Ill. Mar. 28, 2022) (Wood, J.).

Judge Wood denied defendant Oxygen Ocean’s motion to set aside the parties’ settlement agreement in this trademark dispute involving plaintiff Benefit Cosmetics’

This was a Doe trademark case. Oxygen Ocean engaged with the Court and then was voluntarily dismissed allegedly based upon a settlement agreement. Oxygen Ocean, however, subsequently argued that it had not entered into the agreement alleging that the agreement was negotiated by counsel who lacked authority to settle the case or bind Oxygen Oceans. But the Court held that the agreement was valid and enforceable, refusing to set it aside:

  • The agreement is written, with definite terms and appears to be signed by both parties;
  • While Oxygen Oceans’ principle’s ID signature and agreement signature had “significant” differences, there were email exchanges that corroborated the principle’s knowledge of the agreement, its negotiations and its terms. While the principle claimed the email accounts were not his, that was belied by the fact that the principle used at least one of them to correspond with the Court’s deputy at the outset of the case.
  • While Illinois law requires that counsel have authority to settle in order for an agreement to be binding, not just the decision maker’s knowledge, that was not an issue here because of the principle’s signature on the agreement and post-execution indications of assent to the terms.

While the record did show that Oxygen Oceans lied to the Court to support its argument, the Court refused to award Benefit Cosmetics’ its fees because the lie was made after the briefing and before the fees motion. So, it was not causally connected to the fees in that it did not cause Benefit Cosmetics to incur additional fees. Additionally, as a pro se litigant, the Court felt it was more appropriate to admonish the principle for the false statement and close the case.

Art Akiane LLC v. Art & Soulworks LLC, No. 19-cv-02952, Slip Op. (N.D. Ill. Sep. 16, 2021) (Chang, J.).

Judge Chang ruled on the parties’ choice of law dispute between Colorado and Illinois law in this intellectual property dispute.

Federal courts apply the forum’s choice of law rules. Illinois uses the forum’s law, unless there is a conflict with another state’s law. Illinois also uses its own law for procedural issues. The party seeking a choice of law determination has the burden of proving that there is a conflict between the laws. Where there is a conflict, Illinois follows the Second Restatement, which holds that the state’s law that applies is the state with the most significant connection to the dispute and the parties.

Illinois generally applies its own statutes of limitation, except that if the other state’s statute would prevent filing the suit, but Illinois’s would not, the other state’s statute applies to avoid filing in Illinois to avoid other state’s statutes of limitation.

The Court reasoned that the choice of law decision was ripe for determination because knowing the state of law was required to shape discovery going forward.

Peng v. The Partnerships and Unincorporated Assocs. Identified on Schedule “A,” No. 21 C 1344, Slip Op. (N.D. Ill. Sep. 14, 2021) (Dow, J.).

Judge Dow converted the previously entered Temporary Restraining Order (TRO) into a Preliminary Injunction (PI) against the challenging defendants in this design patent dispute involving wireless earphone headbands.

As an initial matter, the Court noted that the Supreme Court’s eBay decision removed the presumption of irreparable harm where a plaintiff showed a likelihood of success as to proving patent infringement. But the Court also noted that removal of the presumption did not allow consideration of the patentholder’s right to exclude in determining whether defendant’s alleged infringement caused irreparable harm. Plaintiff showed irreparable harm because defendants’ sales of infringing product was likely to cause consumer confusion with genuine parts and harm plaintiff’s reputation. Plaintiff also raised the issue that because defendants reside in China, any monetary judgments were likely uncollectable. Plaintiff’s six month delay in filing suit and seeking an injunction did not prevent preliminary injunctive relief. During those six months, plaintiff also used Amazon’s patent dispute resolution program. Plaintiff filed this suit only a few months after instituting the Amazon action and sought a TRO and then conversion of the TRO to a PI shortly thereafter.

While defendants’ products did not have every design element of the claimed headband design, the overall look was sufficiently similar to the claimed design that “an ordinary observer could be induced to purchase Defendants’ product believing it to be Plaintiff’s.”

Defendants did not sufficiently prove that their alleged prior art was, in fact, prior art to plaintiff’s design patent. The balance of harm tilted in plaintiff’s favor because it is difficult to quantify the harm to a patentholder in terms of customer confusion over similar products in the marketplace.

The Court, therefore, granted plaintiff a PI as to the challenging defendants.

H-D U.S.A., LLC v. The Partnerships and Unincorporated Assocs. Identified on Schedule “A,” No. 21 C 3581, Slip Op. (N.D. Ill. Sep. 24, 2021) (Alonso, J.).

Judge Alonso granted plaintiff Harley-Davidson’s motion for preliminary injunction against defendant Amarzon-Automotive Parts (“AAP”) for allegedly selling counterfeit aftermarket chrome LED fog light projectors using Harley-Davidson’s HARLEY-DAVIDSON and DAYMAKER marks.

As an initial matter, the Court explained that the Seventh Circuit recently detailed how likely plaintiff’s success must be in Illinois Republican Party v. Pritzker, 973 F.3d 760, 762 (7th Cir. 2020):

It explained that a “possibility of success is not enough” and “[n]either is a better than negligible chance[,]” but the moving party “need not show that it definitely will win the case.” Id. at 762-763. “A strong showing” of a likelihood of success on the merits “normally includes a demonstration of how the applicant proposes to prove the key elements of its case.” Id. (internal citations and quotations omitted).

The parties agreed that Harley-Davidson proved the first element of both its Lanham Act claims — trademark infringement / counterfeiting and false designation of origin — because Harley-Davidson has federally registered trademarks for HARLEY-DAVIDSON and DAYMAKER.

Harley-Davidson made a sufficient showing of likelihood of success as to confusion. AAP called its product a Harley-Davidson Daymaker fog lamp. AAP’s claim that it was simply describing a generic motorcycle light was not credible. Additionally, AAP’s own name — including a slight misspelling of retailer Amazon — was suggestive of AAP’s intent to confuse.

The Court noted some disagreement as to whether the Seventh Circuit’s presumption of irreparable harm for trademark infringement claims survived the Supreme Court’s eBay decision. But whether that presumption survived or not, Harley-Davidson showed irreparable harm here in the form of risk to Harley-Davidson’s reputation from the sale of counterfeit product. The Court also noted that Harley-Davidson had spent considerable sums marketing and promoting its products using its trademarks.

The balance of harms also weighed in Harley-Davidson’s favor because of the public interest in avoiding consumer confusion. Finally, AAP did not show with sufficient particularity that freezing all of its assets was unwarranted. Despite AAP having the burden of showing that some of its assets were not related to the accused fog lamps, all AAP provided was a graph — not written in English or translated — which purportedly showed sales of different products. That was not sufficient to meet AAP’s burden.