Whatever else could be said of 2016, it was undeniably interesting. That’s likely to be true, too, for 2017. Even the staid area of US Intellectual Property Law may face dramatic changes. The most important of those changes could be:
1) TC Heartland v. Kraft Foods Group. This case, which will be argued before the US Supreme Court this term, is poised to dramatically reshape patent litigation in the US, by limiting where such lawsuits may be filed.
Patent owners currently can sue alleged infringers in any judicial district where the defendants do business – which means large corporate defendants can be sued almost anywhere in the US. Patentees have been taking advantage of this by filing in jurisdictions that favor patentees, such as the Eastern District of Texas. That rural area, with one percent of the country’s population, had over 40 percent of all US patent suits in 2015, according to a recent study by Profs. Colleen V. Chien and Michael Risch, Recalibrating Patent Venue.
This forum shopping may soon come to an end. “If the Supreme Court rules the way most people expect, that will preclude almost all filings in the Eastern District of Texas. A patent owner will have to sue where the defendant resides (the state of a company’s incorporation) or where the defendant has a regular, established place of business,” said Rudolph A. Telscher, a partner in the law firm of Harness Dickey.
That would be a huge blow to many patentees, particularly so-called patent trolls. “A 2010 study [Where to File Your Patent Case] found that the location in which a case is litigated makes a significant difference in the outcome,” noted Prof. Tyler T. Ochoa of Santa Clara Law School.
2) Impression Products, Inc. v. Lexmark International, Inc. This case, which will be argued before the US Supreme Court later this term, examines two important aspects of patent exhaustion. Under that doctrine, patent rights in an item end once that item is sold with the patentee’s authorization.
The first issue in the case is whether the authorized first sale of an item exhausts the patentee’s post-sale restrictions on how that item can be used. As discussed in more detail in a prior column, the Court’s ruling on this issue could have huge ramifications. If an authorized first sale does not exhaust post-sale restrictions, “you will see everyone put on post-sale conditions,” said Mauricio A. Uribe, a partner in the Knobbe Martens law firm. He added, “A lot of industries will be watching this very closely because it will affect how they do business and perhaps licensing.”
The second issue (discussed in more depth in another column) is whether the US has international patent exhaustion, i.e., whether an authorized first sale outside the US exhausts the patentee’s rights in the US. Because the Supreme Court has previously recognized international exhaustion for US copyrights, many experts anticipate the Court will reach a similar conclusion for patents. Should that occur, it will be difficult for many companies to continue using geographic segmentation – charging US consumers a much higher price than foreign consumers. For instance, noted Kevin E. Noonan, a partner in the law firm of McDonnell Boehnen Hulbert & Berghoff, “when drugs are priced much lower outside the US, drug companies may need to change their pricing strategy.”
3) Lee v. Tam. Argued before the US Supreme Court on 18 January, this case examines whether it is unconstitutional for the US government to deny federal trademark registration to marks that “disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”
Should the Court strike down this statutory restriction on trademark registration, “many other limits on trademark registration might not survive,” said Prof. Rebecca Tushnet of Georgetown Law School. It could become possible to register marks that are merely descriptive (e.g., CREAMY brand yogurt), marks that use a country’s flag, even marks that are deceptively similar to others’ marks, she noted. The latter would greatly undermine the purpose and effectiveness of US trademarks. For more discussion of this issue, see last April’s column.
4) Star Athletica v. Varsity Brands. Yet another contentious case to be decided by the US Supreme Court this term, this one concerns copyright law. Specifically, the Court is being asked to decide when non-utilitarian aspects of a useful article can be copyrighted. (Utilitarian items, such as a lamp, cannot be copyrighted. But the bas-relief of a horse running around the lamp base can be copyrighted.)
“The copyright statute says that you can only copyright separable features of utilitarian items. The question here is ‘what is utilitarian and what is separable?’ This is a very important issue because if you can get a copyright on an aspect of a useful article, you get 70 years of protection, instead of 15 years for a design patent,” said Ochoa.
As discussed in a prior column, this area of the law is a mess, with courts around the nation unable to agree on what legal standards to apply. There are, according to some experts’ count, ten different and conflicting tests for determining when copyright protects non-useful parts of utilitarian objects. “The Supreme Court has the potential to bring order to a very confused area of the law,” said Prof. Jessica Litman of University of Michigan Law School.
5) New Director of USPTO. The new US president, Donald Trump, has displayed a desire to put his stamp on federal agencies by replacing existing personnel with his own picks. Many thus expect Trump will replace the current USPTO chief, Michelle K. Lee. Observers, however, have no idea who will be chosen to run the USPTO. That decision could have a profound effect on US IP law.
“Trump, in general, has looked to industry for his appointments. So the big question here is what industry he borrows from. If he appoints an executive from an industry that prolifically licenses patents, the USPTO could make it easier to get patents. If the appointment is from an industry that deals with lots of suits from patent trolls, we may see a continuation of current USPTO policies to stop abusive patent litigation,” said Uribe. He added, “You could see a massive change of policy, and no one at this point can foresee what those changes will be.”
6) Samsung v. Apple. The US Supreme Court decided this case in December, but sidestepped a key issue. That issue will be addressed later this year by the Federal Circuit Court of Appeals (often called America’s “patent court”).
The Supreme Court held [pdf] that when an infringed design patent covers merely a component of product, the infringer is not always required to pay damages equal to all of its profits from the entire product. Sometimes the infringer need pay only its profits attributable to the infringed component. The Court, however, failed to specify any test for determining which level of damages should be applied (as discussed in this prior column). That was left to lower courts.
“In 2017, the Samsung case will go all the way down to the district court to make some findings, then back to the Federal Circuit. This will be an important case to watch. One way or another, we will get something from the Federal Circuit on how and when to apportion damages for design patent infringement,” said Prof. Mark McKenna of Notre Dame Law School.
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