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Finding B&B's position meritorious, the majority held that “a court should give preclusive effect to TTAB decisions [on likelihood of confusion] if the ordinary elements of issue preclusion are met.” Id. at 2. In doing so, the Court clearly stated that administrative agency decisions may properly ground issue preclusion, since “the determination of a question directly involved in one action is conclusive as to that question in a second suit.” Id. at 8 (internal quotations and citations omitted). The opinion explained that “nothing in the Lanham Act bars the application of issue preclusion in [TTAB] cases,” thus indicating that “[i]ssue preclusion is available unless it is evident [ ] that Congress does not want it.” See, id. at 13, 14. To the contrary, “Congress' creation of this elaborate registration scheme, with so many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion.” Id. at 22.

Finally, the Court noted that although many trademark registrations may not satisfy the ordinary requirements of issue preclusion, that does not mean that none will. To temper its ruling, the Court cited guidance offered by Professor McCarthy's treatise on trademark law stating, “Ultimately, Board decisions on likelihood of confusion ' should be given preclusive effect on a case-by-case basis.” See, id. at 15 (internal quotations and citations omitted).

The dissent questioned the majority's decision to apply administrative preclusion in the context of the Lanham Act, arguing that there was “no justification” to allow agency findings to have preclusive effect in Article III courts. See generally, Dissent at 1, 7'9.

Federal Circuit: Actual Delay Not Required For Reducing Patent Term Adjustment

On Feb. 26, 2015, a Federal Circuit panel of Judges Dyk, Wallach, and Hughes issued a unanimous opinion, authored by Judge Wallach, in Gilead Sciences, Inc. v. Lee, Case No. 2014-1159. The panel affirmed a district court's grant of summary judgment upholding the United Stated Patent and Trademark Office's (PTO) calculation of a patent term adjustment (PTA) under 35 U.S.C. '154(b)(2)(C) for U.S. Patent No. 8,148,374 (the '374 patent), finding that PTAs may be applied regardless of whether there was actual delay. See, Slip op. at 2.

The appeal resulted from a dispute between Gilead Sciences, Inc. (Gilead), owner of the '374 patent covering the compound cobicistat, and the PTO over its 57-day reduction of Gilead's PTA under '154(b)(2)(C). The '374 patent covers the compound cobicistat, which is used in the treatment of HIV. During prosecution of Gilead's patent, the PTO issued a restriction requirement, dividing the claims into four groups of inventions. See, id. at 5. Gilead timely responded to the restriction requirement on Feb. 18, 2010 and selected one of the groups for further examination. Gilead later filed a supplemental information disclosure statement (IDS) on April 16, 2010, which disclosed two additional co-pending Gilead patent applications. Due to this supplemental submission, the PTO assessed a 57-day applicant delay for “failure to engage in a reasonable effort to conclude prosecution.” Id. at 6.

Gilead appealed to the district court, arguing the PTO's interpretation of '154(b) in reducing its PTA was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law and in excess of statutory jurisdiction, authority, or limitation.” Id. at 7 (internal quotations omitted). The parties filed cross-motions for summary judgment, which the district court granted in favor of the PTO. Gilead challenged the judgment contending that its supplemental IDS did not cause actual delay and, therefore, any reduction in PTA for the '374 patent was erroneous.

The Federal Circuit disagreed with Gilead and affirmed the district court's ruling. Applying a two-step framework under the U.S. Supreme Court's ruling in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the panel explained that nothing in the legislative history “suggests that Congress intended to restrict PTAs based on applicant conduct to actions causing actual delay.” Id. at 12. Rather, the court found that “a reasonable interpretation of the statute is that Congress intended to sanction not only applicant conduct or behavior that result in actual delay, but also those having the potential to result in delay irrespective of whether such delay actually occurred.” Id. at 14. “[B]ecause the filing of a supplemental IDS after an initial reply to a restriction requirement further adds to the list of documents the PTO must consider before responding to the restriction requirement,” the Court concluded that Gilead's supplemental IDS made it “increasingly difficult for the PTO to satisfy the statutorily-mandated time requirement stipulated in '154(b)(1)(A)(ii).” Id. at 16. Thus, the PTA reduction issued by the PTO was proper.

Federal Circuit: No Lost Profits for Related Unpatented Products

On March 2, 2015, a Federal Circuit panel of Judges Lourie, Dyk, and Reina issued a unanimous opinion, authored by Judge Dyk, in Warsaw Orthopedic, Inc. v. Nuvasive, Inc., Case Nos. 2013-1576, 1577. The panel affirmed-in-part the district court's findings of invalidity and infringement of the patents-in-suit, but vacated Warsaw Orthopedic's (Warsaw) damages award based on lost profits, and remanded for a new trial on damages limited solely to a reasonable royalty. See, Slip op. at 24.

After sustaining the district court's determinations with respect to liability findings for both parties, the panel turned to the damages issue. Warsaw argued inter alia that the district court erred in denying supplemental damages for Nuvasive's infringement of Warsaw's U.S. Patent Nos. 5,860,973 (the '973 patent) and 6,945,933 (the '933 patent). The technology disclosed by the '973 patent and the '933 patent covers implants and devices used in spinal surgeries.

The Federal Circuit held that Warsaw was not entitled to lost profits for three primary reasons. First, the panel rejected Warsaw's argument that it was eligible to recover lost profits for “conveyed sales” of related products, such as “fixations.” See, id. at 17. “Warsaw failed to prove a functional relationship necessary to support a jury verdict for conveyed sales,” because “Warsaw never presented testimony that the fixations it sold [ ] had no independent function ' that is, that they would not work as well in other surgeries not involved in the patented technologies.” Id. at 17'18. Second, Warsaw failed to prove that the alleged lost profits came “from the lost sales of a product or service that the patentee itself was selling,” as opposed to lost profits of Warsaw's related companies. Id. at 19. And third, the court denied Warsaw's recovery of any “true-up” payments as lost profits, finding that “Warsaw makes no effort to distinguish what percentage of the true-ups was attributable to those payments [for sales of the patented products] as opposed to payments on unrelated transactions '. [P]ricing policies indicate that the true-ups are established on a company-by-company, not a technology-by-technology or even a product-by-product, basis.” Id. at 20.

Regarding the remaining issues of whether Warsaw was entitled to recover: 1) a reasonable royalty sufficient to compensate it for the value of its patented technology; 2) supplemental damages; or 3) an ongoing royalty, the court remanded for a new trial on damages. See generally, id. at 21'22.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Brooke Hazan is an associate at the firm.

S. Ct.: Findings on Likelihood of Confusion by TTAB

On March 24, 2015, the United States Supreme Court issued a 7-2 opinion, authored by Justice Alito, in B&B Hardware, Inc. v. Hargis Indus., Inc., Case No. 13-352. The majority held that “[s]o long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB [Trademark Trial and Appeal Board] are materially the same as those before the district court, issue preclusion should apply.” Slip op. at 22. Justices Roberts, Kennedy, Ginsburg, Breyer, Sotomayor, and Kagen joined in the opinion. Justice Ginsburg filed a concurring opinion. Justice Thomas filed a dissenting opinion, in which Justice Scalia joined.

The case resulted from a nearly two-decade long dispute between B&B Hardware, Inc. (B&B) and Hargis Industries, Inc. (Hargis) regarding the federal courts' refusal to apply issue preclusion to the TTAB's decision that Hargis's SEALTITE mark is confusingly similar to B&B's SEALTIGHT. B&B argued in favor of issue preclusion, maintaining that the likelihood of confusion issue is the same before both the TTAB and federal courts. Hargis countered that registration proceedings and infringement actions resolve distinct issues and, therefore, prevent TTAB decisions from determining district court rulings. On writ of certiorari, the Supreme Court considered whether earlier findings by the TTAB on likelihood of confusion should be given preclusive effect in subsequent infringement litigation between the same parties, in which likelihood of confusion is an element.

Finding B&B's position meritorious, the majority held that “a court should give preclusive effect to TTAB decisions [on likelihood of confusion] if the ordinary elements of issue preclusion are met.” Id. at 2. In doing so, the Court clearly stated that administrative agency decisions may properly ground issue preclusion, since “the determination of a question directly involved in one action is conclusive as to that question in a second suit.” Id. at 8 (internal quotations and citations omitted). The opinion explained that “nothing in the Lanham Act bars the application of issue preclusion in [TTAB] cases,” thus indicating that “[i]ssue preclusion is available unless it is evident [ ] that Congress does not want it.” See, id. at 13, 14. To the contrary, “Congress' creation of this elaborate registration scheme, with so many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion.” Id. at 22.

Finally, the Court noted that although many trademark registrations may not satisfy the ordinary requirements of issue preclusion, that does not mean that none will. To temper its ruling, the Court cited guidance offered by Professor McCarthy's treatise on trademark law stating, “Ultimately, Board decisions on likelihood of confusion ' should be given preclusive effect on a case-by-case basis.” See, id. at 15 (internal quotations and citations omitted).

The dissent questioned the majority's decision to apply administrative preclusion in the context of the Lanham Act, arguing that there was “no justification” to allow agency findings to have preclusive effect in Article III courts. See generally, Dissent at 1, 7'9.

Federal Circuit: Actual Delay Not Required For Reducing Patent Term Adjustment

On Feb. 26, 2015, a Federal Circuit panel of Judges Dyk, Wallach, and Hughes issued a unanimous opinion, authored by Judge Wallach, in Gilead Sciences, Inc. v. Lee, Case No. 2014-1159. The panel affirmed a district court's grant of summary judgment upholding the United Stated Patent and Trademark Office's (PTO) calculation of a patent term adjustment (PTA) under 35 U.S.C. '154(b)(2)(C) for U.S. Patent No. 8,148,374 (the '374 patent), finding that PTAs may be applied regardless of whether there was actual delay. See, Slip op. at 2.

The appeal resulted from a dispute between Gilead Sciences, Inc. (Gilead), owner of the '374 patent covering the compound cobicistat, and the PTO over its 57-day reduction of Gilead's PTA under '154(b)(2)(C). The '374 patent covers the compound cobicistat, which is used in the treatment of HIV. During prosecution of Gilead's patent, the PTO issued a restriction requirement, dividing the claims into four groups of inventions. See, id. at 5. Gilead timely responded to the restriction requirement on Feb. 18, 2010 and selected one of the groups for further examination. Gilead later filed a supplemental information disclosure statement (IDS) on April 16, 2010, which disclosed two additional co-pending Gilead patent applications. Due to this supplemental submission, the PTO assessed a 57-day applicant delay for “failure to engage in a reasonable effort to conclude prosecution.” Id. at 6.

Gilead appealed to the district court, arguing the PTO's interpretation of '154(b) in reducing its PTA was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law and in excess of statutory jurisdiction, authority, or limitation.” Id. at 7 (internal quotations omitted). The parties filed cross-motions for summary judgment, which the district court granted in favor of the PTO. Gilead challenged the judgment contending that its supplemental IDS did not cause actual delay and, therefore, any reduction in PTA for the '374 patent was erroneous.

The Federal Circuit disagreed with Gilead and affirmed the district court's ruling. Applying a two-step framework under the U.S. Supreme Court's ruling in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the panel explained that nothing in the legislative history “suggests that Congress intended to restrict PTAs based on applicant conduct to actions causing actual delay.” Id . at 12. Rather, the court found that “a reasonable interpretation of the statute is that Congress intended to sanction not only applicant conduct or behavior that result in actual delay, but also those having the potential to result in delay irrespective of whether such delay actually occurred.” Id. at 14. “[B]ecause the filing of a supplemental IDS after an initial reply to a restriction requirement further adds to the list of documents the PTO must consider before responding to the restriction requirement,” the Court concluded that Gilead's supplemental IDS made it “increasingly difficult for the PTO to satisfy the statutorily-mandated time requirement stipulated in '154(b)(1)(A)(ii).” Id. at 16. Thus, the PTA reduction issued by the PTO was proper.

Federal Circuit: No Lost Profits for Related Unpatented Products

On March 2, 2015, a Federal Circuit panel of Judges Lourie, Dyk, and Reina issued a unanimous opinion, authored by Judge Dyk, in Warsaw Orthopedic, Inc. v. Nuvasive, Inc., Case Nos. 2013-1576, 1577. The panel affirmed-in-part the district court's findings of invalidity and infringement of the patents-in-suit, but vacated Warsaw Orthopedic's (Warsaw) damages award based on lost profits, and remanded for a new trial on damages limited solely to a reasonable royalty. See, Slip op. at 24.

After sustaining the district court's determinations with respect to liability findings for both parties, the panel turned to the damages issue. Warsaw argued inter alia that the district court erred in denying supplemental damages for Nuvasive's infringement of Warsaw's U.S. Patent Nos. 5,860,973 (the '973 patent) and 6,945,933 (the '933 patent). The technology disclosed by the '973 patent and the '933 patent covers implants and devices used in spinal surgeries.

The Federal Circuit held that Warsaw was not entitled to lost profits for three primary reasons. First, the panel rejected Warsaw's argument that it was eligible to recover lost profits for “conveyed sales” of related products, such as “fixations.” See, id. at 17. “Warsaw failed to prove a functional relationship necessary to support a jury verdict for conveyed sales,” because “Warsaw never presented testimony that the fixations it sold [ ] had no independent function ' that is, that they would not work as well in other surgeries not involved in the patented technologies.” Id. at 17'18. Second, Warsaw failed to prove that the alleged lost profits came “from the lost sales of a product or service that the patentee itself was selling,” as opposed to lost profits of Warsaw's related companies. Id. at 19. And third, the court denied Warsaw's recovery of any “true-up” payments as lost profits, finding that “Warsaw makes no effort to distinguish what percentage of the true-ups was attributable to those payments [for sales of the patented products] as opposed to payments on unrelated transactions '. [P]ricing policies indicate that the true-ups are established on a company-by-company, not a technology-by-technology or even a product-by-product, basis.” Id. at 20.

Regarding the remaining issues of whether Warsaw was entitled to recover: 1) a reasonable royalty sufficient to compensate it for the value of its patented technology; 2) supplemental damages; or 3) an ongoing royalty, the court remanded for a new trial on damages. See generally, id. at 21'22.

Howard J. Shire is Editor-in-Chief of this newsletter and a Partner in the New York office of Kenyon & Kenyon LLP. Brooke Hazan is an associate at the firm.