The Amazing Spiderman Shot Down

Gen_Con_Indy_2008_-_costumes_171In Kimble et al. v. Marvel Entertainment, LLC, No. 13–720, decided June 22, 2015, the Supreme Court held that stare decisis requires the Court to adhere to the precedent set by Brulotte v. Thys Co., 379 U. S. 29 (1964), in which the Court held that a patent holder cannot charge royalties for the use of his invention after his patent term has expired. Stephen Kimble obtained a patent in 1990 for a toy that allows role-playing adults and children to get more into their character as “a spider person.” Kimble’s U.S. Patent No. 5,072,856 (‘856) covers a toy web-shooting glove that delivers a pressurized string foam from a hidden container through a valve incorporated into the glove. Kimble entered into an agreement with the predecessor of Marvel Entertainment that provided for their purchase of the ‘856 patent in exchange for a lump sum and a 3% royalty payment on future sales of Marvel’s Web Blaster toy and similar products. The parties set no end date for royalties. In negotiating the agreement, neither party was familiar with the Brulotte decision. Upon discovering Brulotte, Marvel sought a declaratory judgment confirming that the company could cease paying royalties at the end of Kimble’s patent term. The district court granted relief, and the Ninth Circuit affirmed. Kimble asked the Supreme Court to overrule Brulotte, but the Court declined under the principles of stare decisis, whilst observing “in this world, with great power there must also come—great responsibility.”

A matter of tack

Yellow_push_pinIn —Hana Financial, Inc. v. Hana Bank et al., 574 U.S. ___ (2015), the U.S. Supreme Court addressed a split between circuits on determination of whether the “tacking” doctrine is available in a given case. Plaintiff Hana Financial, Inc. sued defendant Hana Bank for trademark infringement. Hana Bank is a Korean entity that was founded in 1971 as the Korea Investment Financial Corporation. In 2002, they began operating in the United States as “Hana Bank.” Hana Financial incorporated in California in 1994 and obtained federal trademark registration of their name two years later. At trial, Hana Bank raised the tacking doctrine in defense and the jury returned a verdict in their favor that was subsequently affirmed by the Ninth Circuit Court of Appeals.

“Tacking” is a lower court doctrine holding that two marks may be tacked when they are considered to be “legal equivalents” that “create the same, continuing commercial impression” such that consumers “consider both as the same mark.” Writing for a unanimous court, Justice Sotomayer observed that when the relevant question is how an ordinary person or community would make an assessment, the jury is generally the decision maker that ought to provide the fact-intensive answer. Since “commercial impression” “must be viewed through the eyes of a consumer,” application of the “tacking” doctrine is a test that “falls comfortably within the ken of a jury.” Thus, when a jury trial has been requested (and the facts neither warrant a JMOL nor summary judgment), whether two trademarks may be tacked for purposes of determining priority will be a question for the jury.

Method inducement requires all steps

On June 2, 2014, in Limelight Networks, Inc. v. Akamai Technologies, Inc., et al., No. 12-768 (2014), the U.S. Supreme Court held that liability for inducement of infringement of a patented method must be predicated on direct infringement. Akamai maintains a global network of content delivery servers that invisibly redirects users of their customer’s Web sites to content cached on Akamai’s servers. Limelight is a competitor whom Akamai sued for direct infringement of U.S. Patent No. 6,108,703 (‘703) for a “Global Hosting System” under 35 U.S.C. § 271(a) and for inducement of infringement under 35 U.S.C. § 271(b). The method claims in the ‘703 patent recite tagging content in a customer’s Web site and serving the tagged content from caching servers. Limelight, however, requires their customers to do their own tagging.

The jury found direct infringement and awarded Akamai $41.5M in damages. Upon motion for reconsideration, the district court granted Limelight’s previously-denied JMOL in light of the Federal Circuit’s holding in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (C.A.F.C. 2008). In Muniauction, the Federal Circuit held that a defendant that does not perform all claimed steps is only liable for direct infringement when either an agency relationship or a contractual obligation exists with a third party who performs the claimed steps. A panel of the Federal Circuit initially affirmed the district court’s granting of the JMOL that Muniauction precluded a finding of direct infringement, but upon rehearing en banc, the Federal Circuit reversed and found that liability for induced infringement can arise when a defendant carries out some steps of a claimed method and “encourages” others to carry out the remaining steps.

A unanimous Supreme Court sharply rejected the en banc Federal Circuit’s holding, stating that “inducement liability may arise ‘if, but only if, [there is] . . . direct infringement.’” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961), accompanied by the terse observation that, “[o]ne might think that this simple truth is enough to dispose of this appeal.” They went on to blankly explain that, “[a] method patent claims a number of steps; . . . The patent is not infringed unless all of the steps are carried out. . . .There has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person.” (emphasis added).

A wonderful blend of juicy fruits

055-150x300On June 12, 2014, in POM Wonderful LLC. v. Coca-Cola Co., the U.S. Supreme Court held that a company may bring suit under the Lanham Act for unfair competition arising from false or misleading product descriptions, even though the Federal Food, Drug, and Cosmetic Act (FDCA) gives the Food & Drug Administration exclusive enforcement authority over misbranding of food and drink. Pom Wonderful LLC (“POM”) is a California business that grows pomegranates and distributes pomegranate juices, including a pomegranate-blueberry juice blend. POM sued The Coca-Cola Company (“Coca-Cola”) for unfair competition based on Coca-Cola’s sales of a pomegranate-blueberry juice blend through their Minute Maid subsidiary. While POM’s pomegranate-blueberry juice blend contained 85% pomegranate juice and 15% blueberry juice, Coca-Cola’s juice blend contained just 0.3 percent pomegranate juice, 0.2 percent blueberry juice, 0.1 percent raspberry juice, and 99.4 percent apple juice and was less expensive to produce and sell. (The pomegranate-blueberry component “amounts to a teaspoon in a half gallon.”) The Court applied established statutory interpretation rules to the Lanham Act and FDCA to find the acts to be complimentary, not preclusive. Although both acts concern food and beverage labeling, the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. As a result, competitors are free to bring Lanham Act claims for food and beverage labels that are also subject to regulation under the FDCA.