IP News

Supreme Court Rules Defendant Does Not Bear Burden to Prove Absence of Confusion in Fair Use Cases

On Dec. 8, 2004, the Supreme Court held that it is not a defendant's burden to negate a finding of consumer confusion when raising a “fair use” affirmative defense. In KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., No. 03-409, 2004 WL 2804921 (2004), the Court vacated a decision of the Ninth Circuit, which held that the Central District of California committed error when it concluded that KP had made out a fair use defense without addressing whether there was possible consumer confusion. The Ninth Circuit's ruling established a conflict with a Second Circuit decision, setting the stage for Supreme Court review.

In KP Permanent Make-Up, the dispute arose when Lasting sued KP, a rival make-up manufacturer, over use of the word “MICROCOLOR.” Lasting owns a federal registration for a stylized version of the words “MICRO COLORS” that became incontestable in 1999. The District Court granted summary judgment to KP on its fair use defense, finding that Lasting had conceded that KP used the term descriptively. The District Court also found that KP acted in good faith and employed the term “MICROCOLOR” before Lasting adopted the two-word version as a mark.

Justice David Souter, writing for a unanimous Court, first pointed out that the plaintiff always bears the burden to prove consumer confusion in infringement actions. Id. at *4. Considering the plaintiff's burden, Justice Souter then examined the statutory language of '1115(b)(4) and argued that it was “a long stretch to claim that a defense of fair use entails any burden to negate confusion.” Id.

The Court also rejected Lasting's argument that the phrase “used fairly” in '1115(b)(4) incorporates a likelihood-of-confusion test developed from the common law of unfair competition. The Court found that the “common law of unfair competition also tolerated some degree of confusion from a descriptive use of words contained in another person's trademark.” Id.

Next, the Court reasoned that the logistics of trademark infringement actions highlight the irrationality of placing a burden to show no confusion on the defendant: “[I]t would make no sense to give the defendant a defense of showing affirmatively that the plaintiff cannot succeed in proving some element (like confusion).” Id. at *5. The Court, however, did not completely eliminate an analysis of consumer confusion in fair use cases. Rather, the Court noted that even though “the mere risk of confusion will not rule out fair use,” its holding does not “foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant's use is fair.” Id. at *6.

District Judge Approves $75M Settlement in Relafen Antitrust Actions

Judge William G. Young of the U.S. District Court for the District of Massachusetts granted preliminary approval of a proposed settlement between GlaxoSmithKline (GSK) and a group of consumers and third-party payors, in an antitrust class action involving GSK's arthritis drug Relafen. The settlement requires GSK to pay $25 million into a fund to compensate individual consumers and $50 million to third-party payors such as health insurers. The class action lawsuit, which was comprised of several consolidated cases, alleged that GSK obtained a patent through inequitable conduct that allowed it to unlawfully enforce a monopoly over Relafen. The suit also alleged that GSK filed sham patent infringement suits against three generic drug manufacturers that had filed applications with the FDA to bring a generic version of Relafen to the marketplace. In the settlement agreement, GSK denied any wrongdoing.

USPTO to Re-examine Lipitor Patent

The U.S. Patent Office (USPTO) has granted a request for re-examination of U.S. Patent No. 5,969,156 (“the '156 patent”), which covers Pfizer, Inc.'s Lipitor', a cholesterol-lowering treatment. Lipitor is currently the world's best-selling drug.

The request for re-examination was filed by the Public Patent Foundation (PUBPAT), a small nonprofit organization located in New York. In its request, PUBPAT argued that the '156 patent was anticipated by U.S. Patent Nos. 5,273,995 and 5,686,104, both of which were not considered by the patent examiner during prosecution of the '156 patent. In granting PUBPAT's request, the USPTO found that a “substantial new question of patentability” was raised by the two prior art references. Third-party requests for re-examination in the USPTO typically take 21 months to complete, and are successful in having the subject matter narrowed or completely revoked 70% of the time.

Supreme Court Agrees to Hear File Swapping Case

On Dec. 10, 2004, the U.S. Supreme Court agreed to review the decision of the U.S. Court of Appeals for the Ninth Circuit in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 380 F.3d 1154 (9th Cir. 2004), which held that online file-sharing companies cannot be held liable for copyright infringement. In Grokster, numerous recording companies and movie studios (the “Industry”) sued the distributors of computer software that allowed users to share computer files for digitized music and movies. The Ninth Circuit affirmed partial summary judgment in favor of the distributors because the software also has substantial legal uses. Id. at 1161-62. The Ninth Circuit relied on the Supreme Court's decision in Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984), which held that “[t]he sale of copying equipment … does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses.” In its appeal, the Industry argued that the Ninth Circuit misread Sony by providing complete immunity to file-sharing companies if there was a substantial noninfringing use. The Industry argued that the Sony case is distinguishable, because there, the technology at issue was mainly used for legal purposes. Here, the Industry argued, online file-sharing software is mostly used for infringement purposes.

Oral arguments will likely be held in the spring of 2005, with a decision expected by the end of June 2005.

Federal Circuit Vacates Injunction but Affirms Finding of Infringement Against Blackberry Maker

In NTP, Inc. v. Research In Motion, Ltd., No. 03-1615, 2004 U.S. App. LEXIS 25767 (Dec. 14, 2004), the Federal Circuit affirmed-in-part, vacated-in-part, and remanded a decision of the U.S. District Court for the Eastern District of Virginia involving the sale of Blackberry devices by defendant Research in Motion Ltd. (RIM). After trial, a jury awarded $23.1 million in damages to NTP, which amount has since been increased to $53.7 million. The district court also issued an injunction preventing RIP from selling its Blackberrys. Subsequently, Judge James R. Spencer stayed the injunction pending appeal.

On appeal, the Federal Circuit found that the district court had erred by broadly construing the claim term “originating processor,” but had correctly construed all other terms. The Federal Circuit also affirmed the district court's decision that RIP had infringed under 35 U.S.C. '271(a). As a result, the Federal Circuit vacated the injunction against RIP and remanded to the district court for a determination whether the erroneous claim construction prejudiced the jury's verdict. If prejudice is found, the district court will have to set aside the verdict as to those claims.

Supreme Court Rules Defendant Does Not Bear Burden to Prove Absence of Confusion in Fair Use Cases

On Dec. 8, 2004, the Supreme Court held that it is not a defendant's burden to negate a finding of consumer confusion when raising a “fair use” affirmative defense. In KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., No. 03-409, 2004 WL 2804921 (2004), the Court vacated a decision of the Ninth Circuit, which held that the Central District of California committed error when it concluded that KP had made out a fair use defense without addressing whether there was possible consumer confusion. The Ninth Circuit's ruling established a conflict with a Second Circuit decision, setting the stage for Supreme Court review.

In KP Permanent Make-Up, the dispute arose when Lasting sued KP, a rival make-up manufacturer, over use of the word “MICROCOLOR.” Lasting owns a federal registration for a stylized version of the words “MICRO COLORS” that became incontestable in 1999. The District Court granted summary judgment to KP on its fair use defense, finding that Lasting had conceded that KP used the term descriptively. The District Court also found that KP acted in good faith and employed the term “MICROCOLOR” before Lasting adopted the two-word version as a mark.

Justice David Souter, writing for a unanimous Court, first pointed out that the plaintiff always bears the burden to prove consumer confusion in infringement actions. Id. at *4. Considering the plaintiff's burden, Justice Souter then examined the statutory language of '1115(b)(4) and argued that it was “a long stretch to claim that a defense of fair use entails any burden to negate confusion.” Id.

The Court also rejected Lasting's argument that the phrase “used fairly” in '1115(b)(4) incorporates a likelihood-of-confusion test developed from the common law of unfair competition. The Court found that the “common law of unfair competition also tolerated some degree of confusion from a descriptive use of words contained in another person's trademark.” Id.

Next, the Court reasoned that the logistics of trademark infringement actions highlight the irrationality of placing a burden to show no confusion on the defendant: “[I]t would make no sense to give the defendant a defense of showing affirmatively that the plaintiff cannot succeed in proving some element (like confusion).” Id. at *5. The Court, however, did not completely eliminate an analysis of consumer confusion in fair use cases. Rather, the Court noted that even though “the mere risk of confusion will not rule out fair use,” its holding does not “foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant's use is fair.” Id. at *6.

District Judge Approves $75M Settlement in Relafen Antitrust Actions

Judge William G. Young of the U.S. District Court for the District of Massachusetts granted preliminary approval of a proposed settlement between GlaxoSmithKline (GSK) and a group of consumers and third-party payors, in an antitrust class action involving GSK's arthritis drug Relafen. The settlement requires GSK to pay $25 million into a fund to compensate individual consumers and $50 million to third-party payors such as health insurers. The class action lawsuit, which was comprised of several consolidated cases, alleged that GSK obtained a patent through inequitable conduct that allowed it to unlawfully enforce a monopoly over Relafen. The suit also alleged that GSK filed sham patent infringement suits against three generic drug manufacturers that had filed applications with the FDA to bring a generic version of Relafen to the marketplace. In the settlement agreement, GSK denied any wrongdoing.

USPTO to Re-examine Lipitor Patent

The U.S. Patent Office (USPTO) has granted a request for re-examination of U.S. Patent No. 5,969,156 (“the '156 patent”), which covers Pfizer, Inc.'s Lipitor', a cholesterol-lowering treatment. Lipitor is currently the world's best-selling drug.

The request for re-examination was filed by the Public Patent Foundation (PUBPAT), a small nonprofit organization located in New York. In its request, PUBPAT argued that the '156 patent was anticipated by U.S. Patent Nos. 5,273,995 and 5,686,104, both of which were not considered by the patent examiner during prosecution of the '156 patent. In granting PUBPAT's request, the USPTO found that a “substantial new question of patentability” was raised by the two prior art references. Third-party requests for re-examination in the USPTO typically take 21 months to complete, and are successful in having the subject matter narrowed or completely revoked 70% of the time.

Supreme Court Agrees to Hear File Swapping Case

On Dec. 10, 2004, the U.S. Supreme Court agreed to review the decision of the U.S. Court of Appeals for the Ninth Circuit in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd. , 380 F.3d 1154 (9th Cir. 2004), which held that online file-sharing companies cannot be held liable for copyright infringement. In Grokster, numerous recording companies and movie studios (the “Industry”) sued the distributors of computer software that allowed users to share computer files for digitized music and movies. The Ninth Circuit affirmed partial summary judgment in favor of the distributors because the software also has substantial legal uses. Id. at 1161-62. The Ninth Circuit relied on the Supreme Court's decision in Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984), which held that “[t]he sale of copying equipment … does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial noninfringing uses.” In its appeal, the Industry argued that the Ninth Circuit misread Sony by providing complete immunity to file-sharing companies if there was a substantial noninfringing use. The Industry argued that the Sony case is distinguishable, because there, the technology at issue was mainly used for legal purposes. Here, the Industry argued, online file-sharing software is mostly used for infringement purposes.

Oral arguments will likely be held in the spring of 2005, with a decision expected by the end of June 2005.

Federal Circuit Vacates Injunction but Affirms Finding of Infringement Against Blackberry Maker

In NTP, Inc. v. Research In Motion, Ltd., No. 03-1615, 2004 U.S. App. LEXIS 25767 (Dec. 14, 2004), the Federal Circuit affirmed-in-part, vacated-in-part, and remanded a decision of the U.S. District Court for the Eastern District of Virginia involving the sale of Blackberry devices by defendant Research in Motion Ltd. (RIM). After trial, a jury awarded $23.1 million in damages to NTP, which amount has since been increased to $53.7 million. The district court also issued an injunction preventing RIP from selling its Blackberrys. Subsequently, Judge James R. Spencer stayed the injunction pending appeal.

On appeal, the Federal Circuit found that the district court had erred by broadly construing the claim term “originating processor,” but had correctly construed all other terms. The Federal Circuit also affirmed the district court's decision that RIP had infringed under 35 U.S.C. '271(a). As a result, the Federal Circuit vacated the injunction against RIP and remanded to the district court for a determination whether the erroneous claim construction prejudiced the jury's verdict. If prejudice is found, the district court will have to set aside the verdict as to those claims.