IP News

Court Voids New Patent Office Rules

In Tafas v. Dudas, 07-846 (E.D. Va. April 1, 2008) the District Court for the Eastern District of Virginia granted plaintiffs' motion for summary judgment that new patent office rules, which placed limitations, among other things, on the number of claims and continuation applications an applicant could file as a matter of right, were void under the Administrative Procedure Act ('APA') as 'not in accordance with the law' and 'in excess of statutory jurisdiction and authority.'

On Jan. 3, 2006, the USPTO issued two separate notices of proposed rulemaking. The proposed rules outlined changes to the examination process that would limit the number of continuation applications, RCEs, and claims that an applicant could make as a matter of right.

After a comment period, the USPTO published the Final Rules on Aug. 21, 2007. The Final Rules permitted an applicant to file two continuation or continuation-in-part applications, plus one request for continued examination ('RCE'), after an initial application (the '2+1 rule'). The rules allowed for one additional application or RCE upon a petition and showing explaining why the amendment, argument, or evidence could not have been presented previously. The rules also allowed for a waiver of the same upon a petition and showing that injustice would otherwise result. Additionally, the Final Rules permitted an applicant to present a total of five independent claims or 25 total claims for examination without providing any further information about those claims (the '5/25 rule'). However, an applicant seeking to exceed those limitations was required to submit an 'examination support document' ('ESD') containing information about the claims that may assist the examiner in determining patentability of the claimed invention. Specifically, the Final Rules required an applicant to conduct a broad search of patents, patent applications, and literature, and provide, among other things, a 'detailed explanation' of 'how each of the independent claims is patentable over the cited references.' The Final Rules also effected several other changes to existing examination process aimed at preventing circumvention of the 2+1 rule and 5/25 rule.

Following publication of the Final Rules, plaintiffs Tafas and GlaxoSmithKline ('GSK') separately filed complaints seeking preliminary and permanent injunctions prohibiting the USPTO from implementing the Final Rules and a declaratory judgment that the Final Rules violated the Constitution, the Patent Act, the APA, and the Regulatory Flexibility Act. On Oct. 31, 2007 the court granted GSK's motion for a TRO and preliminary injunction, and the plaintiffs subsequently moved for summary judgment.

The district court granted plaintiffs' summary judgment motion and voided the Final Rules as 'otherwise not in accordance with law' and 'in excess of statutory jurisdiction [and] authority' under the APA. The court reasoned that while the patent office is empowered with broad authority to govern the conduct of proceedings before it, under Federal Circuit precedent, it is not vested with substantive rulemaking power. The court then determined that the Final Rules were substantive in nature and conflicted with existing law, since they effectively altered an applicant's established right to file unlimited continuation applications claiming the benefit of the initial application and to file more than one RCE. Further, the court reasoned that the 5/25 rule runs contrary to 35 U.S.C. '112, which allows an applicant to file 'one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.' The court opined that requiring applicants to file an ESD for claims in excess of the 5/25 rule conflicted with existing law that applicants have 'no duty to conduct a prior art search' and 'no duty to disclose art of which an applicant could have been aware.' Thus, the court concluded that by requiring applicants to perform prior art searches and by shifting the examination burden away from the USPTO, the ESD requirement manifestly changes existing law and alters applicants' rights.

Defendant's Use of Plaintiff's Trademark in Meta Tag

In N. Am. Med. Corp. v. Axiom Worldwide, 07-11574 (11th Cir. April 7, 2008), the Eleventh Circuit Court of Appeals affirmed the district court's finding that plaintiff was likely to succeed in its trademark infringement claim against defendant's use of plaintiff's trademark on its Web site within meta tags, but vacated the district court's grant of a preliminary injunction and remanded for a determination of whether plaintiff would suffer irreparable harm absent an injunction.

Plaintiff North American Medical Corp. ('NAM') owns two registered trademarks relating to physio-therapeutic spinal devices. Defendant Axiom, also a manufacturer of a physio-therapeutic device, included plaintiff's trademarks within meta tags on its Web site. However, plaintiff's trademarks or products were not displayed on Axiom's Web site. Rather, the inclusion in meta tags was done simply to influence Internet search engines. As such, Axiom argued that placing plaintiff's trademarks in meta tags was not a 'use in commerce' as required by the Lanham Act.

The court disagreed, holding that Axiom's use was within the plain meaning of the statute and constituted a use in commerce in connection with the advertising of goods. In so doing, the court questioned the analysis in the Second Circuit's 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005) decision, relied on by defendant, which held that a defendant did not 'use' a plaintiff's mark if it was not displayed on its Web site.

Axiom further argued that there was no likelihood of confusion because it did not display plaintiff's trademarks or products on its Web site. The court again disagreed, holding that actual source confusion existed because consumers who entered NAM's trademarks into a search engine not only saw Axiom's Web site displayed, but also a description of Axiom's Web site, which description included and highlighted NAM's trademarked terms. Accordingly, the court found it unnecessary to reach the question of whether mere use of trademarked meta-tags, without more, created 'initial interest confusion,' as had been held in several other jurisdictions.

Northern District of CA Applies Initial Interest Confusion Doctrine

Before the court in Storus Corp. v. Aroa Marketing, Inc., 06-2454 (N.D. Cal., Feb. 15, 2008), was plaintiff's motion for partial summary judgment that defendants infringed plaintiff's 'Smart Money Clip' trademark by creating 'initial interest confusion' through the use of the mark in connection with search engines. Specifically, defendant Aroa used the mark as part of Google's AdWords program whereby a consumer searching for plaintiff's trademark would see a link to defendant's Web site titled 'Smart Money Clip.' The court granted plaintiff's summary judgment motion against Aroa, holding that the marks were identical and Aroa offered no evidence showing a lack of 'initial interest confusion.'

However, the court denied plaintiff's summary judgment motion with respect to defendant Skymall, which sold Aroa money clips through its Web site. It was undisputed that in July 2005, Skymall's Web site offered an Aroa money clip with a product description that included the phrase 'smart money clip.' It was also undisputed that as of the date of the court's decision, a consumer who entered 'smart money clip' into Skymall's Web site would be directed to the Aroa product, albeit without a description including the words 'smart money clip.' Still, the court denied plaintiff's summary judgment motion. The court held that: 1) there was still a triable issue as to whether, in July 2005, a consumer entering 'smart money clip' in Skymall's internal search engine would actually be directed to the Aroa product, and 2) as of the date of the court's decision, it appeared that a consumer would be directed to the Aroa money clip simply by entering the phrase 'money clip,' irrespective of whether the consumer added the word 'smart.'

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.

Court Voids New Patent Office Rules

In Tafas v. Dudas, 07-846 (E.D. Va. April 1, 2008) the District Court for the Eastern District of Virginia granted plaintiffs' motion for summary judgment that new patent office rules, which placed limitations, among other things, on the number of claims and continuation applications an applicant could file as a matter of right, were void under the Administrative Procedure Act ('APA') as 'not in accordance with the law' and 'in excess of statutory jurisdiction and authority.'

On Jan. 3, 2006, the USPTO issued two separate notices of proposed rulemaking. The proposed rules outlined changes to the examination process that would limit the number of continuation applications, RCEs, and claims that an applicant could make as a matter of right.

After a comment period, the USPTO published the Final Rules on Aug. 21, 2007. The Final Rules permitted an applicant to file two continuation or continuation-in-part applications, plus one request for continued examination ('RCE'), after an initial application (the '2+1 rule'). The rules allowed for one additional application or RCE upon a petition and showing explaining why the amendment, argument, or evidence could not have been presented previously. The rules also allowed for a waiver of the same upon a petition and showing that injustice would otherwise result. Additionally, the Final Rules permitted an applicant to present a total of five independent claims or 25 total claims for examination without providing any further information about those claims (the '5/25 rule'). However, an applicant seeking to exceed those limitations was required to submit an 'examination support document' ('ESD') containing information about the claims that may assist the examiner in determining patentability of the claimed invention. Specifically, the Final Rules required an applicant to conduct a broad search of patents, patent applications, and literature, and provide, among other things, a 'detailed explanation' of 'how each of the independent claims is patentable over the cited references.' The Final Rules also effected several other changes to existing examination process aimed at preventing circumvention of the 2+1 rule and 5/25 rule.

Following publication of the Final Rules, plaintiffs Tafas and GlaxoSmithKline ('GSK') separately filed complaints seeking preliminary and permanent injunctions prohibiting the USPTO from implementing the Final Rules and a declaratory judgment that the Final Rules violated the Constitution, the Patent Act, the APA, and the Regulatory Flexibility Act. On Oct. 31, 2007 the court granted GSK's motion for a TRO and preliminary injunction, and the plaintiffs subsequently moved for summary judgment.

The district court granted plaintiffs' summary judgment motion and voided the Final Rules as 'otherwise not in accordance with law' and 'in excess of statutory jurisdiction [and] authority' under the APA. The court reasoned that while the patent office is empowered with broad authority to govern the conduct of proceedings before it, under Federal Circuit precedent, it is not vested with substantive rulemaking power. The court then determined that the Final Rules were substantive in nature and conflicted with existing law, since they effectively altered an applicant's established right to file unlimited continuation applications claiming the benefit of the initial application and to file more than one RCE. Further, the court reasoned that the 5/25 rule runs contrary to 35 U.S.C. '112, which allows an applicant to file 'one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.' The court opined that requiring applicants to file an ESD for claims in excess of the 5/25 rule conflicted with existing law that applicants have 'no duty to conduct a prior art search' and 'no duty to disclose art of which an applicant could have been aware.' Thus, the court concluded that by requiring applicants to perform prior art searches and by shifting the examination burden away from the USPTO, the ESD requirement manifestly changes existing law and alters applicants' rights.

Defendant's Use of Plaintiff's Trademark in Meta Tag

In N. Am. Med. Corp. v. Axiom Worldwide, 07-11574 (11th Cir. April 7, 2008), the Eleventh Circuit Court of Appeals affirmed the district court's finding that plaintiff was likely to succeed in its trademark infringement claim against defendant's use of plaintiff's trademark on its Web site within meta tags, but vacated the district court's grant of a preliminary injunction and remanded for a determination of whether plaintiff would suffer irreparable harm absent an injunction.

Plaintiff North American Medical Corp. ('NAM') owns two registered trademarks relating to physio-therapeutic spinal devices. Defendant Axiom, also a manufacturer of a physio-therapeutic device, included plaintiff's trademarks within meta tags on its Web site. However, plaintiff's trademarks or products were not displayed on Axiom's Web site. Rather, the inclusion in meta tags was done simply to influence Internet search engines. As such, Axiom argued that placing plaintiff's trademarks in meta tags was not a 'use in commerce' as required by the Lanham Act.

The court disagreed, holding that Axiom's use was within the plain meaning of the statute and constituted a use in commerce in connection with the advertising of goods. In so doing, the court questioned the analysis in the Second Circuit's 1-800 Contacts, Inc. v. WhenU.com, Inc. , 414 F.3d 400 (2d Cir. 2005) decision, relied on by defendant, which held that a defendant did not 'use' a plaintiff's mark if it was not displayed on its Web site.

Axiom further argued that there was no likelihood of confusion because it did not display plaintiff's trademarks or products on its Web site. The court again disagreed, holding that actual source confusion existed because consumers who entered NAM's trademarks into a search engine not only saw Axiom's Web site displayed, but also a description of Axiom's Web site, which description included and highlighted NAM's trademarked terms. Accordingly, the court found it unnecessary to reach the question of whether mere use of trademarked meta-tags, without more, created 'initial interest confusion,' as had been held in several other jurisdictions.

Northern District of CA Applies Initial Interest Confusion Doctrine

Before the court in Storus Corp. v. Aroa Marketing, Inc., 06-2454 (N.D. Cal., Feb. 15, 2008), was plaintiff's motion for partial summary judgment that defendants infringed plaintiff's 'Smart Money Clip' trademark by creating 'initial interest confusion' through the use of the mark in connection with search engines. Specifically, defendant Aroa used the mark as part of Google's AdWords program whereby a consumer searching for plaintiff's trademark would see a link to defendant's Web site titled 'Smart Money Clip.' The court granted plaintiff's summary judgment motion against Aroa, holding that the marks were identical and Aroa offered no evidence showing a lack of 'initial interest confusion.'

However, the court denied plaintiff's summary judgment motion with respect to defendant Skymall, which sold Aroa money clips through its Web site. It was undisputed that in July 2005, Skymall's Web site offered an Aroa money clip with a product description that included the phrase 'smart money clip.' It was also undisputed that as of the date of the court's decision, a consumer who entered 'smart money clip' into Skymall's Web site would be directed to the Aroa product, albeit without a description including the words 'smart money clip.' Still, the court denied plaintiff's summary judgment motion. The court held that: 1) there was still a triable issue as to whether, in July 2005, a consumer entering 'smart money clip' in Skymall's internal search engine would actually be directed to the Aroa product, and 2) as of the date of the court's decision, it appeared that a consumer would be directed to the Aroa money clip simply by entering the phrase 'money clip,' irrespective of whether the consumer added the word 'smart.'

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.