IP News

Federal Circuit Upholds Diverting USPTO Fees to Government Programs

In Figueroa v. United States, No. 05-5144, 2006 WL 2879028 (Fed. Cir. Oct. 11, 2006), the U.S. Court of Appeals for the Federal Circuit upheld a decision of the U.S. Court of Federal Claims that a patent fee statute which generates revenue to fund federal programs other than the U.S. Patent & Trademark Office does not violate the U.S. Constitution. Michael Figueroa, an inventor, sued in August 2001 for a refund of fees that he contended was charged unlawfully. Specifically, he argued that excess fees violated article 1, section 8, clause 8 (the 'Patent Clause') and article 1, section 9, clause 4 (the 'Direct Tax Clause').

The Federal Circuit said the question was 'whether there is a rational relationship between the present level of patent fees and Congress's legitimate objectives under the Patent Clause.' Id. at *6. The court found that the fee structure had a rational basis for at least three reasons. First, it was rational for Congress to impose fees to fund the entire patent system. Second, Congress could have concluded rationally that increased patent fees were necessary to keep pace with the likely future costs of administering the patent system. Third, Congress could have rationally concluded that it was necessary to increase fees to deter the filing of certain types of patent applications.

With respect to the direct tax argument, that was based on the Supreme Court's decision in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), the Federal Circuit found that only general taxes on broad classes of personal property are impermissible. In this situation, the Federal Circuit found that the patent fees, to the extent they are a tax on patent rights, are an excise tax, and not a direct tax.

Award of Patent and Trademark Damages Arising from Same Facts Constitutes Double Recovery

In Aero Prods. Int'l, Inc. v. Intex Recreation Corp., No. 05-1283, 2006 WL 2796461 (Fed. Cir. Oct. 2, 2006), the Federal Circuit vacated an award to Aero of $1 million damages for trademark infringement because of impermissible double recovery. Aero sued Intex for infringement of U.S. Patent 5,367,726 (the ”726 patent') and for infringement of Aero's registered trademark 'ONE TOUCH.' The invention claimed in the '726 patent relates to a valve for inflating air mattresses. Intex introduced the accused mattresses in 2000 and used the phrase 'ONE TOUCH' on its Web site.

After a jury trial, the district court entered judgment of infringement and non-invalidity in favor of Aero with respect to both Aero's patent and trademark claims. Based on that judgment, the district court awarded Aero damages of $6.9 million; including $2.95 million for patent infringement damages (doubled because of a finding of willfulness) and $1 million for trademark damages.

On appeal, the Federal Circuit concluded that all of the damages awarded flowed from sales of the infringing Intex mattresses, and that Aero was fully compensated for defendant's patent infringement when it was awarded a reasonable royalty for sales of the infringing product. As such, the award of trademark damages would be an impermissible double recovery. The Federal Circuit suggested its own precedents are in conflict with the decision in Nintendo of America, Inc. v. Dragon Pacific Int'l, 40 F.3d 1007 (9^th Cir. 1994), in which Nintendo recovered trademark and copyright damages arising from sales of the same video game cartridges. The Federal Circuit said its rule is that 'even though damages are claimed based upon separate statutes or causes of action, when the claims arise out of the same set of operative facts, ' there may be only one recovery.' Aero, 2006 WL 2796461, at *15.

New Trademark Dilution Law Takes Effect

On Sept. 25, 2006, Congress approved a new bill to clarify trademark dilution laws for famous brands. The bill, entitled the 'Trademark Dilution Revision Act of 2006,' was signed by President George W. Bush on Oct. 6, 2006 and took effect immediately. The new law provides that the owner of a famous mark (defined as a mark that is 'widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner') that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction to prevent use of a junior mark that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark.

The law will make it easier for owners to prove dilution under federal law, and is a direct response to the Supreme Court's decision in Moseley v. V. Secret Catalogue, Inc., 537 U.S. 418 (2003). In Moseley, the Court held that in order have a claim under the Federal Trademark Dilution Act of 1995 ('FTDA'), trademark owners must show actual dilution, rather than just a likelihood of dilution. In addition, the Court, while recognizing dilution by 'blurring,' cast doubt on whether the FTDA also encompassed dilution by 'tarnishment.' In the new bill, 'dilution by blurring' is defined as the 'association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.' 'Dilution by tarnishment' is defined as the 'association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.']

Eric Agovino is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6858.

Federal Circuit Upholds Diverting USPTO Fees to Government Programs

In Figueroa v. United States, No. 05-5144, 2006 WL 2879028 (Fed. Cir. Oct. 11, 2006), the U.S. Court of Appeals for the Federal Circuit upheld a decision of the U.S. Court of Federal Claims that a patent fee statute which generates revenue to fund federal programs other than the U.S. Patent & Trademark Office does not violate the U.S. Constitution. Michael Figueroa, an inventor, sued in August 2001 for a refund of fees that he contended was charged unlawfully. Specifically, he argued that excess fees violated article 1, section 8, clause 8 (the 'Patent Clause') and article 1, section 9, clause 4 (the 'Direct Tax Clause').

The Federal Circuit said the question was 'whether there is a rational relationship between the present level of patent fees and Congress's legitimate objectives under the Patent Clause.' Id. at *6. The court found that the fee structure had a rational basis for at least three reasons. First, it was rational for Congress to impose fees to fund the entire patent system. Second, Congress could have concluded rationally that increased patent fees were necessary to keep pace with the likely future costs of administering the patent system. Third, Congress could have rationally concluded that it was necessary to increase fees to deter the filing of certain types of patent applications.

With respect to the direct tax argument, that was based on the Supreme Court's decision in Pollock v. Farmers' Loan & Trust Co. , 157 U.S. 429 (1895), the Federal Circuit found that only general taxes on broad classes of personal property are impermissible. In this situation, the Federal Circuit found that the patent fees, to the extent they are a tax on patent rights, are an excise tax, and not a direct tax.

Award of Patent and Trademark Damages Arising from Same Facts Constitutes Double Recovery

In Aero Prods. Int'l, Inc. v. Intex Recreation Corp., No. 05-1283, 2006 WL 2796461 (Fed. Cir. Oct. 2, 2006), the Federal Circuit vacated an award to Aero of $1 million damages for trademark infringement because of impermissible double recovery. Aero sued Intex for infringement of U.S. Patent 5,367,726 (the ”726 patent') and for infringement of Aero's registered trademark 'ONE TOUCH.' The invention claimed in the '726 patent relates to a valve for inflating air mattresses. Intex introduced the accused mattresses in 2000 and used the phrase 'ONE TOUCH' on its Web site.

After a jury trial, the district court entered judgment of infringement and non-invalidity in favor of Aero with respect to both Aero's patent and trademark claims. Based on that judgment, the district court awarded Aero damages of $6.9 million; including $2.95 million for patent infringement damages (doubled because of a finding of willfulness) and $1 million for trademark damages.

On appeal, the Federal Circuit concluded that all of the damages awarded flowed from sales of the infringing Intex mattresses, and that Aero was fully compensated for defendant's patent infringement when it was awarded a reasonable royalty for sales of the infringing product. As such, the award of trademark damages would be an impermissible double recovery. The Federal Circuit suggested its own precedents are in conflict with the decision in Nintendo of America, Inc. v. Dragon Pacific Int'l , 40 F.3d 1007 (9 th Cir. 1994), in which Nintendo recovered trademark and copyright damages arising from sales of the same video game cartridges. The Federal Circuit said its rule is that 'even though damages are claimed based upon separate statutes or causes of action, when the claims arise out of the same set of operative facts, ' there may be only one recovery.' Aero, 2006 WL 2796461, at *15.

New Trademark Dilution Law Takes Effect

On Sept. 25, 2006, Congress approved a new bill to clarify trademark dilution laws for famous brands. The bill, entitled the 'Trademark Dilution Revision Act of 2006,' was signed by President George W. Bush on Oct. 6, 2006 and took effect immediately. The new law provides that the owner of a famous mark (defined as a mark that is 'widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner') that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction to prevent use of a junior mark that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark.

The law will make it easier for owners to prove dilution under federal law, and is a direct response to the Supreme Court's decision in Moseley v. V. Secret Catalogue, Inc. , 537 U.S. 418 (2003). In Moseley, the Court held that in order have a claim under the Federal Trademark Dilution Act of 1995 ('FTDA'), trademark owners must show actual dilution, rather than just a likelihood of dilution. In addition, the Court, while recognizing dilution by 'blurring,' cast doubt on whether the FTDA also encompassed dilution by 'tarnishment.' In the new bill, 'dilution by blurring' is defined as the 'association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.' 'Dilution by tarnishment' is defined as the 'association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.']

Eric Agovino is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6858.