Trust the
a publication of smith, gambrell & russell, llp
THE INTELLECTUAL
PROPERTY ISSUE
Summer 2013
SGRLAW.com
10TH
ANN
IVER
ISSU SARY
E
Trust the
THE INTELLECTUAL PROPERTY ISSUE
Summer 2013
3
Editor’s Letter
4
Legal Briefs
The latest news and views from the offices
of Smith, Gambrell & Russell.
6 A World of Uncertainty
in Biotechnology
The U.S. Supreme Court has issued landmark decisions
about what subject matter is patentable. We explain
the ramifications for the biotech industry.
10
Here Be Dragons!
We highlight the six key questions you need to
ask to ensure your marketing steers clear of the
perils of advertising law.
14
20
PROTECTING PROPRIETARY
SOFTWARE WITH
editor-in-chief
COPYRIGHT
Dana Richens
Trademarks and
Trademark Litigation
Guidelines on how to protect your brand names
and the key factors involved in trademark litigation.
26
Computer programs are protected under
copyright law as literary works. We reveal the key
things you need to know when registering your
software with the Copyright Office.
The Finish Line
We talk to Ed Pennington, a partner in SGR’s
Intellectual Property Practice, about current
IP litigation trends.
editorial advisory board
Joyce Klemmer
Brett Lockwood
Jim Monacell
Stacy Yeung
sgr marketing team
Smith,Gambrell
Russell, llp
&
Attorneys at Law
1230 Peachtree Street, N.E., Promenade, Suite 3100
Atlanta, GA 30309-3592 | editor@sgrlaw.com
The information contained herein has been obtained from sources
believed to be reliable. The content and information in this publication
do not constitute legal advice, do not in all cases reflect the opinions of
SGR or its attorneys and are not in all cases complete or current as of the
publication date. This publication is not intended to and does not create
an attorney-client relationship or provide legal advice or legal opinion.
Legal advice should be obtained from one’s legal counsel.
2
Kate Frost
Sarah Weikel
Beth Nieman
Jessica Chandler
Permission is granted to use and reproduce this publication in whole or in part for internal and
personal reference, provided that proper attribution of authorship is given. Except for material
in the public domain, this publication may not be further copied, modified, used or distributed,
in whole or in part, in any form or by any means without the written permission of Smith,
Gambrell & Russell, LLP. All other rights expressly reserved.
© 2013 Smith, Gambrell & Russell, LLP. Leaders used with permission of Leaders Magazine, Inc.
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
Trust the Leaders is designed
and published on behalf of
Smith, Gambrell & Russell, LLP
by Fourth Element Creative.
editor’s letter
Welcome
In this issue:
to this special issue of Trust the Leaders, which showcases
Smith, Gambrell & Russell, LLP’s Intellectual Property, or “IP,” Practice.
When I joined SGR in the early 1990s, our IP Practice consisted of a handful of skilled
attorneys in Atlanta primarily involved in trademark and copyright registration and litigation.
The past two decades have seen tremendous growth in SGR’s Intellectual Property
Practice. In addition to expanding the practice by adding exceptional individual practitioners,
suzannah k. sundby p. 6
Suzannah discusses the ramifications
to the biotech industry of recent
decisions by the U.S. Supreme Court
on patent subject matter eligibility.
in 1999, lawyers from the storied Beveridge, Degrandi, Weilacher & Young IP boutique in
Washington, D.C. joined SGR to form our Washington, D.C. office. The proximity of this office
to the U.S. Patent & Trademark Office (“USPTO”) has allowed SGR to respond more quickly
and efficiently to the needs of our clients in matters before the USPTO.
More recently, in the winter of 2012, SGR was pleased to welcome Ed Pennington,
Stephanie Scruggs, Sid Pandit and five other attorneys in our D.C. office to add further
depth to SGR’s patent litigation practice.
Today, SGR’s Intellectual Property Practice is comprised of attorneys in Atlanta, Washington,
D.C., Jacksonville and New York covering the entire gamut of intellectual property, including patent prosecution, trademarks, copyright, advertising law and IP litigation. Our attorneys
serve clients on the cutting edge of biotechnology, electronics, information technology,
marsha ajhar and
chris fitzpatrick p. 10
Marsha and Chris explain why a solid
understanding of advertising law is
crucial for companies launching and
branding new products.
mechanical engineering, pharmaceutical science and other industries.
The articles in this issue only scratch the surface of our IP Practice, but hopefully will give
you a feel for what this practice is all about – who our practitioners are, and the services they
provide to an incredible range of industries. It is fitting that we devote this, the 10th
anniversary issue of Trust the Leaders, to this essential component of our law firm.
Enjoy the issue!
Dana Richens
Editor-In-Chief
editor@sgrlaw.com
FOLLOW
ONLINE
joyce klemmer
p. 14
Joyce explains how proprietary
software enjoys the same level of
copyright protection as “traditional”
literary works.
jennifer feldman
p. 20
Jennifer’s article looks at the fundamental role that trademarks play in
enabling a business to protect and
brand its products or services.
BLOGS: sgrlaw.com/blog TWITTER: twitter.com/sgrlaw LINKEDIN: linkedin.com/companies/27889
SGR ATTORNEYS
MAKING HEADLINES
Atlanta real estate partner
Aasia Mustakeem received the 2012
Conscientious Service Award from the
Global Diversity Summit in Commercial Real Estate, Inc. for her dedication
and commitment to the organiza-
tion and the furtherance of the commercial real estate
industry. The Global Diversity Summit, an institution
focused on professional issues affecting ethnic minori-
LEGAL BRIEFS
ties in commercial real estate, aims to increase the com-
mercial real estate industry’s involvement in developing
and improving diverse communities across America.
Also, a 2013 Super Lawyers Magazine feature article
profiles Aasia’s legal career and community service
achievements. The article provides an insightful look
THE LATEST NEWS FROM OUR OFFICES
into her upbringing and how her understanding of
human interaction and the law has proven successful
throughout her 25-year career.
Marsha Ajhar, counsel in SGR’s Intellectual Property Practice
Suzannah K. Sundby, a partner in
in New York, has been appointed Secretary of the International
SGR’s Intellectual Property Practice,
Intellectual Property Society (“IIPS”). Based in New York, the IIPS is
spoke at the spring meeting of the
officially admitted as an Observer to the World Intellectual Prop-
American Intellectual Property Law
erty Organization and hosts monthly meetings with speakers ad-
Association in Seattle. In the session,
dressing a variety of current IP topics, such as advertising fair use,
entitled “An Evolving Patent Claim
Quagmire of Eligibility and Infringeability: Recent
trademark enforcement, patent eligibility and developments in patent design law.
Developments in Patent Claim Eligibility and Joint Infringement,” Suzannah discussed subject matter
eligibility jurisprudence regarding inventions in the
biotech and medical diagnostic fields.
In May, Suzannah spoke at the 16th Annual Meeting
of the American Society of Gene & Cell Therapy in
Salt Lake City on the topic of “Intellectual Property
Considerations for Successful Commercialization
of Your Cell and Gene Technologies.”
Rodgers Lunsford has been
Jim Monacell, who heads
World Trademark Review’s
Practice, has been appointed
named to the “WTR 1000”– the
listing of the world’s leading
trademark professionals – for
2013. Rodgers
is cited for “his
strong, wide-
ranging portfolio,
which places
an emphasis on
litigation.”
4
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
SGR’s Public Law and Bond
to the Board of Directors for
the Civic Affairs Foundation
of the Association County Commissioners of
Georgia. The Foundation performs, and pro-
vides grants and loans to perform, projects in
the areas of civic education, leadership training,
historic preservation, community improve-
ment and other related charitable purposes.
Jim will serve a two-year term on the Board.
interests and had purchased life insurance to
cover any debts that may have been associated with those businesses in the case of his
untimely death. The lower court held, and
the appellate court affirmed, that the trust’s
specific language requiring use of the trust
assets, including the insurance proceeds, to
pay the decedent’s funeral bill and last illness
expenses, as well as the expenses of adminis-
Are Life Insurance Proceeds Still
Protected From Creditors’ Claims?
tration, superseded any statutory protection
for the proceeds. The proceeds were therefore
available for the payment of Mr. Morey’s debts
and expenses. Had Mr. Morey’s trust merely
given discretionary authority to the trustee
SGR lawyers recently had an appellate victory in the Florida First District
Court of Appeal, affirming a trial court ruling in the client’s favor, and setting
new legal precedent in the area of trusts & estates and life insurance.
J
to use the trust property, including life insurance, for the payment of Mr. Morey’s debts
and expenses, the court probably would have
reached a different conclusion.
It is noteworthy that the trustee originally
acksonville lawyers David H. Peek (right)
or by improper beneficiary
argued in the trial court that the life insurance
and James H. Cummings (below) were
designation.
proceeds were statutorily exempt from credi-
counsel to a lender/creditor in a recently
Florida law generally ex-
tors’ claims under the trust language, as draft-
decided Florida case, Morey v. Everbank, 93
empts from creditors’ claims
ed, as a matter of law. After the trial court
So.3d 482 (Fla. Dist. Ct. App. 2012). This case
the amount of life insurance
ruled against the trustee on this purely legal
significantly affects the use of life insurance
proceeds payable on account
issue, the trustee then brought a reformation
in estate planning and has been the topic of
of the death of a Florida resi-
action in an attempt to reform the trust.
much local and international discussion.
dent as long as the proceeds
The trial court, after conducting an eviden-
are payable to a “person.”
tiary hearing on the issue of reformation, ruled
believed that life insurance proceeds were pro-
A person is defined as an
that the trustee did not meet the heightened
tected from creditors’ claims as long as the pro-
individual or, as in Morey,
burden of proof to demonstrate entitlement
ceeds were not paid directly to the decedent’s
a trust established by the
to reformation under Florida’s trust code. The
probate estate. Assets of a revocable trust, like
decedent. If the decedent names his estate as
trustee appealed both rulings, but the Florida
the one used by Mr. Morey, are not subject
the beneficiary of the insurance contract, the
First District Court of Appeal affirmed the trial
to probate and many estate planning lawyers
proceeds lose their exempt status by statute and
court’s rulings on these issues.
regularly use such trusts as vehicles for receiving
are available for the payment of claims made
life insurance benefits. But the court in Morey
against the decedent’s estate.
Prior to Morey, most Florida practitioners
held that life insurance proceeds may
In Morey, the proceeds were made payable
The impact of Morey requires that all
wills and trusts be reviewed to determine
if changes in the debt and expense provisions
be reached by creditors depending upon the
to the decedent’s trust, but the draftsman
should be made in the wake of this significant
language contained in the will or trust under
included language in the trust instrument
decision. And this review is not limited to
administration. The court essentially held that
directing the trustee to use all of the trust
just Florida trusts. Georgia and New York
the statutory exemptions available for life
assets (in this case, including the insurance
have similar laws that generally exempt
insurance proceeds can be waived, even
proceeds) to pay the enforceable debts of Mr.
insurance from the claims of creditors of a
inadvertently, by improper draftsmanship
Morey. Mr. Morey had significant business
resident decedent.
a world of uncertainty in
biotechnology
How recent decisions by
the U.S. Supreme Court
have created uncertainty
about what subject matter
is eligible to be patented.
BY SUZANNAH K. SUNDBY
AND JESSICA ZURLO
6
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
THE INTELLECTUAL PROPERTY ISSUE
patent eligibility in biotechnology
U.S. patent laws and rules of practice before the U.S. Patent & Trademark Office (USPTO)
are complex and constantly changing. Nevertheless, what was considered to be patent eligible
subject matter was seemingly clear and straightforward – that is, until the United States Supreme
Court rendered its decisions in Bilski v. Kappos1 and Mayo v. Prometheus.2
Now, in our courts, there are raging wars over what subject matter is patent eligible.
S
eligible because it was not a product of nature
and instead a product of human ingenuity “having
a distinctive name, character [and] use.”10
In view of the precedents set forth by the Court,
one would think the exceptions and rules of patent
eligibility would be easy to apply. Unfortunately, the
Court’s analysis and dicta in Mayo v. Prometheus11
have put the biotech industry and courts in a place
of uncertainty, where subject matter once believed
to be patentable might now be patent ineligible.
THE PATH TO UNCERTAINTY
In Bilski v. Kappos, the Court held that the
machine-or-transformation test is not the sole
test for determining the patent eligibility of a process, but rather “a useful and important clue, an
investigative tool” for determining whether some
claimed inventions are patent eligible processes.12
The Court then held that the claimed method was
not patentable subject matter as being directed to
an abstract idea. In view of its opinion, the Court
then granted judicial review, vacated and remanded two decisions, Classen Immunotherapies, Inc. v.
Biogen Idec13 and Mayo, by the Court of Appeals
for the Federal Circuit.
At issue in Classen were methods for optimizing
childhood immunization. On remand, the Federal
Circuit determined that method claims reciting an
active physical step of immunization, despite the inclusion of a mental step, were patent eligible as the
physical step was a specific tangible application.15
The court, however, held as patent ineligible other
claims that were merely directed to an abstract
principle that variation in immunization schedules
may have consequences for certain diseases.16
s
ection 101 of the Patent Act defines
patent eligible subject matter as “any new
and useful process, machine, manufacture,
or composition of matter, or any new and useful
improvement thereof.”3 Over the years, however,
the United States Supreme Court has carved
out certain exceptions and has held that laws of
nature, natural phenomena and abstract ideas are
not patent eligible,4 as they are the “basic tools of
scientific and technological work.”5 The Court has
precluded the patenting of mental processes6 and
products of nature.7 In addition, under Section
33(a) of the Leahy-Smith America Invents Act,
Congress has codified the long-standing exception
that a “human organism” is not patentable.
However, the Court has recognized that interpreting these exceptions too broadly could ultimately
“eviscerate patent law.”8 All inventions, at some level,
embody a law of nature, natural phenomenon or
abstract idea. Simply because an invention contains
a natural law or algorithm does not mean the invention is ineligible for patent protection. Thus, the
Court has held that applications of laws of nature,
natural phenomena and abstract ideas that provide
a new and useful end may be patent eligible if the
claimed application has enough of an “inventive
concept” to ensure that the patent amounts to
significantly more than a patent upon the natural
law itself.9
The Court has also allowed patents on compositions of matter that are man-made. The Court has
held that manufactures or compositions of matter
that are non-naturally occurring may be patent
eligible. In Diamond v. Chakrabarty, the Court held
that a man-made, living microorganism was patent
legal spotlight | Retirement Income
Over the years, the United States Supreme Court
has held that laws of nature, natural phenomena
and abstract ideas are not patent eligible.
FOOTNOTES
1. 130 S. Ct. 3218 (2010).
2. 132 S. Ct. 1289 (2012).
3. 35 U.S.C. §101.
4. Diamond v. Diehr, 450 U.S. 175, 185 (1981).
5. Gottschalk v. Benson, 409 U.S. 63, 67 (1972).
6. Id.
7. Diamond v. Chakrabarty, 447 U.S. 303, 313
(1980).
8. Mayo, 132 S. Ct. at 1289.
9. Parker v. Flook, 437 U.S. 584, 594 (1978);
Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S.
127, 130 (1948).
10. 447 U.S. at 309-10.
11. Mayo, 132 S. Ct. at 1289.
12. Bilski, 130 S. Ct. at 3227.
13. 659 F.3d 1057 (Fed. Cir. 2011).
14. Mayo, 132 S. Ct. at 1289.
15. Classen, 659 F.3d at 1057.
16. Id. at 1067.
17. See Mayo, 132 S. Ct. at 1295 (reproducing claim
1 of U.S. Patent No. 6,355,623).
18. Id. at 1297.
19. Id. at 1294 (quoting Diehr, 450 U.S. at 191-92).
20. Id. at 1297.
21. Id. at 1297-98.
22. Id. at 1302, 1305.
23. 689 F.3d 1303 (Fed. Cir. 2012).
24. 496 F. App’x 65 (Fed. Cir. 2012)
(non-precedential).
25. No. 2011-003312 (P.T.A.B. Jan. 31, 2013).
26. CLS Bank Int’l v. Alice Corp. Pty., No. 20111301, 2013 WL 1920941 (Fed. Cir. May 10, 2013)
(en banc).
8
The claims at issue in Mayo were directed to
methods of giving a thiopurine drug to a patient,
measuring metabolites of that thiopurine drug,
and determining whether to increase or decrease
the dosage of the thiopurine drug. The following
claim17 is representative of the claims at issue:
A method of optimizing therapeutic efficacy
for treatment of an immune-mediated gastrointestinal disorder, comprising:
Administering a drug providing 6-thioguanine
to a subject...
Determining the level of 6-thioguanine in said
subject... wherein the level of 6-thioguanine less
than about 230 pmol per 8 x 108 red blood cells indicates a need to increase the amount of said drug ...
and wherein the level of 6-thioguanine greater than
about 400 pmol per 8 x 108 red blood cells indicates
a need to decrease the amount of said drug... .
On remand, the Federal Circuit maintained its
position that the claims were directed to patent
eligible subject matter as the methods involved
two transformative steps, i.e., administering the
thiopurine drug and measuring the metabolites.
Mayo appealed again and the Supreme Court reversed the Federal Circuit and held that the claims
were not patent eligible.
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
The Court determined that the “administering”
step simply refers to the relevant audience, e.g.,
doctors who treat patients with certain diseases
with thiopurine drugs.18 The Court cited Bilski and
stated that the “prohibition against patenting abstract ideas ‘cannot be circumvented by attempting
to limit the use of the formula to a particular technological environment.”’19 The Court determined
that the “wherein” clauses simply tell one about the
relevant natural laws, and at most suggest that one
should consider such when treating a patient.20
The Court indicated that the “determining” step
tells the doctor to determine the level of the relevant
metabolites in the blood and that such a step is
simply pre-solution activity that is insufficient to
transform an unpatentable law of nature into a
patent eligible application of the law of nature.21
After holding the claims invalid for being patent
ineligible, the Court then made several troubling
statements in dicta, which include “[w]e need not,
and do not, now decide whether were the steps at
issue here less conventional, these features of the
claims would prove sufficient to invalidate them”
and “[w]e need not determine here whether, from a
policy perspective, increased protection for discoveries of diagnostic laws of nature is desirable.”22
UNCERTAINTY IN BIOTECH
The Supreme Court then vacated and remanded
Association for Molecular Pathology v. Myriad23 and
required the Federal Circuit to reconsider the patent
eligibility of claims to isolated DNA in view of Mayo.
On remand, the Federal Circuit again held that
Myriad’s claims to isolated DNA were patent eligible.
The court emphasized the holding in Chakrabarty
and determined that isolated DNA is not found in
nature and is instead man-made and the product
of human ingenuity. American Civil Liberties Union
(the opponent to isolated DNA being patent eligible)
appealed to the Supreme Court and the Court
granted certiorari to determine whether human
genes are patentable.
Those in favor of isolated DNA being patent
THE INTELLECTUAL PROPERTY ISSUE
patent eligibility in biotechnology
eligible subject matter argue that isolated DNA is not
naturally occurring in nature because it is “isolated”
and, as such, it has utility in diagnostics and personalized medicine it would not otherwise have, and a
significant amount of human ingenuity is involved in
determining which isolated segments will have utility. Those who oppose the patent eligibility of isolated
DNA essentially argue that isolated DNA is a product
of nature because it is not “markedly different” from
naturally occurring DNA since its informational
content is the same, and patents on isolated DNA
prevent access to personalized medicine.
Unfortunately, the misinformed incorrectly
believe that patents on isolated DNA prevent access
to personalized medicine. Personalized medicine is
based on the principle that medical treatments can
and should be tailored to an individual according
to the individual’s biochemical and genetic makeup
that is often different from the majority of those
afflicted. This necessarily means researching and
developing a variety of treatments for a plurality
of small subsets of the population. No company is
going to spend the millions of dollars required to
conduct the research and development and obtain
the necessary approval from the U.S. Food and Drug
Administration if it is unlikely to recoup its investment. In fact, the Mayo decision and upcoming
review of the patent eligibility of isolated DNA by
the Supreme Court is already having a destabilizing
effect on the biotech and pharmaceutical industry.
The Supreme Court heard oral arguments in
Myriad in April 2013, and its decision is expected in
June 2013. Many believe the Court will hold isolated
DNA, except for cDNA, to be patent ineligible and
that such a decision will further destabilize the
biotech and pharmaceutical industry.
ADVERSE APPLICATIONS OF MAYO
The U.S. courts and the USPTO’s Patent Trial &
Appeal Board (PTAB) are issuing numerous decisions
that are adverse to patentees and patent applicants.
Many courts have used Mayo to invalidate patents
by reasoning that the claimed inventions do not add
anything more than routine and conventional
pre- and post-solution activity.
As an example, in PerkinElmer, Inc. v. Intema Ltd.24
(non-precedential), the Federal Circuit determined
that claims to a prenatal diagnostic method for
Down’s syndrome, which is not invasive and thereby
avoids the risk of miscarriage, merely recite an ineligible mental step and natural law and that the remaining claim limitations are simply conventional pre- and
post-solution activity. Thus, the court held the claims
invalid for being directed to ineligible subject matter.
The PTAB used similar reasoning in Ex Parte
Kovatchev25 to affirm an examiner’s rejection of
claims directed to a method for evaluating the
glycosylated hemoglobin of a patient based on blood
glucose. The PTAB determined that the steps of
converting blood glucose data into an estimate and
electronically transforming the estimate into a visual
depiction were merely abstract ideas under Bilski
and that the steps of collecting the blood sample
and assaying the blood glucose therein were well
understood, routine, conventional activity that is preand post-solution activity that fails to convert the
abstract ideas into patent eligible subject matter.
The ramifications of Mayo will undoubtedly have a
destabilizing effect in other technology sectors, since
all inventions at their most basic level are based upon
or manipulate a law of nature, natural phenomenon or
abstract idea. In fact, a divided en banc Federal Circuit
recently held that claims directed to a system of devices
for carrying out a software-implemented method were
patent ineligible as the underlying principle of the
claimed invention is to perform an abstract idea.26
suzannah k. sundby
A partner in SGR’s Intellectual Property Practice,
Suzannah focuses on
patent preparation and
prosecution, licensing,
counseling and litigation.
ssundby@sgrlaw.com
MINIMIZING THE APPLICATION OF MAYO
The laws regarding patent eligibility can be complex
and convoluted, especially in the biotech, pharmaceutical and medical device fields. Patent applicants
should seek guidance from an experienced patent
attorney with extensive expertise in these fields who
will carefully consider how to obtain patent protection
while minimizing the risk that the patent claims will
be found to be patent ineligible. n
jessica zurlo
Jessica Zurlo is a recent
graduate of the University of New Hampshire
School of Law (formerly
Franklin Pierce Law
Center). Jessica will join
SGR as an associate in
September, 2013.
THE INTELLECTUAL PROPERTY ISSUE
advertising and marketing
Here Be Dragons!
Six Key Questions You Need To Ask When
Navigating the Perilous Seas of Advertising Law
BY MARSHA AJHAR AND CHRIS FITZPATRICK
T
he phrase “Here Be Dragons” harkens back
to the medieval practice of adding depictions
of dragons, sea serpents and other creatures
in uncharted areas of maps to denote dangerous
territory. The seas of advertising are also fraught
with peril – of the non-mythical type. Investigations conducted by the Federal Trade Commission
(FTC), complaints filed with the National Advertising Division (NAD)1 and false advertising/unfair
competition lawsuits loom and await the
unprepared and ill-informed.
Penalties for false or deceptive advertising
include injunctive orders, civil and monetary
penalties, consumer redress and corrective advertising and mandated disclosures in future ads.
Awareness of the key principles of advertising law
is a crucial part of rigorous self-review that may
steer you and your business away from the rocks –
and dragons!
1. Do you have prior substantiation
for your advertising claims?
Advertising substantiation is a vital requirement
for all advertisers. The FTC issued its Policy Statement Regarding Advertising Substantiation2 in
1984, which confirms its commitment to the
underlying legal requirement that all advertising
claims must have a reasonable basis before they
are disseminated to the public. Objective claims for
10
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
products or services represent – either explicitly or
by implication – that the advertiser has a reasonable basis to support its claims. An express claim is
literally made in the ad (“ABC mouthwash prevents
colds”), while an implied claim is made indirectly
or by inference (“ABC mouthwash kills the germs
that cause colds”).3
A “reasonable basis” means objective evidence
supports the claim, with the level of proof
depending on the nature of the claim. Ads that
make health or safety claims (to which the FTC
pays particularly close attention) must be
supported by “competent and reliable scientific
evidence.” Statements from customers usually are
insufficient to support a health or safety claim or,
for that matter, any other claim that requires
objective evaluation.
Failure by an advertiser to possess prior substantiation for its objective advertising claims constitutes
an unfair and deceptive act or practice in violation
of Section 5 of the FTC Act.
2. Are your advertising claims
“deceptive”?
According to the FTC’s Policy Statement on
Deception,4 an ad is deceptive if it contains a
statement or omits information that is likely
to mislead consumers acting reasonably under
the circumstances and also is material – that is,
When a product is sold, there is an implied
representation that the product is fit for the purpose
for which it is sold. When it isn’t, deception occurs.
are unlikely to deceive consumers acting
reasonably and so it generally will not bring
advertising cases based on subjective claims
(“Tastes great, less filling!”) or on correctly stated
opinion claims, if consumers understand the
source and limitations of the opinion. Cases
involving exaggerated or puffing representations
(“The best burger on the planet ever!”) also
generally will not be pursued.
s
important to a consumer’s decision to buy or
use a product or service. Most deception involves
written or oral misrepresentation or omission of
material information. The issue is whether the act
or practice is likely to mislead rather than whether
it causes actual deception.
Marketing and point-of-sale practices that are
likely to mislead consumers are also deceptive.
For example, in classic bait and switch cases, a
violation occurs when the product advertised is
not the product for sale. When a product is sold,
there is also an implied representation that
the product is fit for the purpose for which it
is sold. When it isn’t, deception occurs.
The FTC recognizes, however, that some practices
3. Are your sales practices “unfair”?
marsha ajhar
Counsel in SGR’s
Intellectual Property
Practice, Marsha covers
many IP areas, including
advertising clearance
and unfair competition
litigation.
majhar@sgrlaw.com
chris fitzpatrick
A partner in SGR’s Litigation Practice, Chris acts
as advertising litigation
and regulatory counsel
to marketers of healthcare, food and other
consumer products.
cfitzpatrick@sgrlaw.com
12
The concept of consumer “unfairness” is
difficult to precisely define. In the late
1970s, the U.S. Senate debated whether
to relieve the FTC of its power to regulate
“unfairness” other than in advertising.
In response, the FTC issued its Policy
Statement on Unfairness,5 which
delineated the boundaries of its
“consumer unfairness” jurisdiction.
That document synthesized
the decided cases and rules,
and three key factors emerged
that the FTC considers when applying
the prohibition against consumer unfairness: (1) whether the practice injures
consumers; (2) whether it violates established public policy; and (3) whether it
is unethical or unscrupulous.
Section 5 of the FTC Act prohibits,
in part, “unfair … acts or practices in or
affecting commerce.” The FTC Act amendments of 1994 further refined Section 5 to require
the Commission, prior to finding an act or practice
“unfair,” to first determine that the act or practice:
(1) causes or is likely to cause substantial injury to
consumers; (2) is not reasonably avoidable by consumers; and (3) is not outweighed by countervailing benefits to consumers or competitors.
4. Do your advertising claims meet the
NAD’s “truth and accuracy” standard?
The NAD is the investigative arm of the Better
Business Bureau charged with monitoring and
evaluating “truth and accuracy” in national advertising directed toward consumers over the age
of 12.6 The NAD is also a self-regulatory forum for
adjudication of disputes between companies over
their national advertising. Participants include virtually every major company that advertises products or services nationally to consumers or that
promotes products nationally to professionals. The
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
For a harmed competitor to
challenge an advertisement,
there must be real weakness
in the claim that can be
successfully attacked.
NAD is highly valued because it is a relatively
cost effective and more expedient alternative to
costly and arduous litigation in federal court.
The range of industries that bring disputes
before the NAD is as vast as the products and
services that companies advertise and sell. Companies that make comparative/parity/superiority
claims to attract buyers are often challenged by
the affected competitor, but non-comparative
THE INTELLECTUAL PROPERTY ISSUE
advertising and marketing
“monadic” claims can be challenged as false and
misleading as well. A party may file a complaint
with the NAD challenging the advertisement and
the claims, and the advertiser must formally reply.
After briefs are submitted by each party, the
NAD renders a decision, which is published in
its Case Reports archive. The NAD has the support
and backing of the FTC and other relevant
regulatory agencies if an advertiser refuses to
comply with a NAD decision.
5. Will your advertising withstand
the rigors of court scrutiny?
In addition to possible action by the FTC or before
the NAD, a false advertising dispute has the potential
to become the basis for formal legal action in court.
Under the plain language of Section 43(a) of the
Lanham Act (the primary federal trademark statute
in the United States7), any person or entity who
believes that he, she or it is, or is likely to be, damaged
by false or misleading representations in commercial
advertising or promotion may bring suit. To prevail
in a Lanham Act false advertising claim, the plaintiff
must prove that the challenged advertisement is
either literally or implicitly false and that the false or
misleading statement is material in having an effect
on consumers’ purchasing decisions.
For a harmed competitor to challenge an advertisement, there must be real weakness in the claim
that can be successfully attacked. If the substantiation for a claim is questionable, or the claim
goes too far, the harmed competitor can challenge
the advertisement through the various avenues,
including, in certain cases, injunctive relief under
the Lanham Act. Lanham Act litigation is inevitable
when the economic stakes are very high, and the
claim in dispute will cause significant competitive
harm with lost revenue to another party.
Unlike many other decisions on whether to
litigate, when the alternative to litigation is a
dramatic loss of millions of dollars in revenue to a
rival making an apparently unsubstantiated claim,
the choice is clear. Usually, injunctive relief is the
only solution.
Lanham Act false advertising litigation involves
furious digging and scrutiny by the challenging
party into alleged claim substantiation. Technical
experts attack the validity of scientific and other
technical claims. Extensive and artfully designed
consumer takeaway surveys are conducted by
survey experts who dissect the promotional claim
through intricate questionnaires to establish
how consumers would interpret the message.
A company considering a new claim in an
“inevitable litigation” context should seek to
impose similarly exacting litigation-type scrutiny
in the internal advertising review process. Only
if every possible weak point is questioned to the
fullest extent, and survives as true and defensible,
should the claim be cleared. With a rigorous selfreview that effectively mirrors the microscopic
scrutiny accompanying a federal court challenge,
Lanham Act litigation may be avoided by a
manufacturer or a challenge can be overcome.
6. Are there other concerns?
There are many, all of which require consideration.
For example, the advertising law(s) of individual
states may come into play. There are special advertising rules for certain types of goods and services,
including wool and textile products, jewelry,
telephone services, and energy savings and environmental claims. Global commerce is growing
exponentially and countries treat advertising
law issues in different ways. The significance
of new advertising and privacy laws affecting
e-commerce also cannot be overstated. Because
the FTC Act is not limited to any particular medium, the rules that apply to more “traditional”
forms of advertising also apply to electronic marketing. However, there are specialized guidelines
for online methods, such as keyword advertising
and behavioral marketing. Those topics, and
more, will be discussed in future issues. n
FOOTNOTES
1. The NAD is a private, self-regulatory
group affiliated with the Council of
Better Business Bureaus. It investigates
allegations of deceptive advertising and
provides a mechanism for advertisers to
resolve disputes voluntarily.
2. FTC Policy Statement Regarding
Advertising Substantiation, appended
to Thomson Med. Co., 104 F.T.C. 648,
839 (1984), aff’d, 791 F.2d 189 (D.C.
Cir. 1986).
3. Initially sold as a surgical antiseptic
in the 19th century, Listerine was the
first product marketed as a mouthwash
starting in 1914. In a landmark 1976
case, the FTC declared that the health
claims were bogus and forced WarnerLambert, its manufacturer at the time,
to spend $10 million on ads that read,
“Contrary to prior advertising, Listerine
will not help prevent colds or sore
throats or lessen their severity.” (The
D.C. Court of Appeals affirmed the
order but modified the requirement
that the disclosure state “contrary to
prior advertising.” Warner-Lambert Co.
v. FTC, 562 F.2d 749 (D.C. Cir. 1977)).
4. FTC Policy Statement on Deception,
appended to Cliffdale Assocs., Inc., 103
F.T.C. 110, 174 (1984).
5. FTC Policy Statement on Unfairness,
appended to Int’l Harvester Co., 104
F.T.C. 949, 1070 (1984). See 15 U.S.C.
§45(n).
6. The Children’s Advertising Review
Unit (CARU) promotes responsible
advertising and promotional matter in
all media directed at children 12 and
under. CARU performs a high level of
monitoring, including scrutinizing more
than 10,000 television commercials
and the review of advertisements in
print, radio and online media.
7. 15 U.S.C. §1051, et seq. Each state
also has its own laws against false
advertising, unfair competition and
consumer fraud and deception.
A
departing employee makes a copy of your
company’s proprietary software and you think
he intends to provide it to his new employer –
a competitor. Perhaps your business is software
development and you want “insurance” that your
customers will stop using your product if you
terminate their licenses. Maybe you paid an independent developer to create software for your business
and you want assurance that your competitors will
not be able to use the same program. For these
reasons and more, you want to own the copyright
14
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
to proprietary software and must register it with the
Copyright Office at the Library of Congress in
Washington, D.C., to get the protection you want.
A copyright is a property right that protects against
the copying of “original works of authorship fixed
in any tangible medium of expression.” These works
include “literary works,” which includes computer
programs. Copyright protection is available for both
published and unpublished works. So even if you
maintain proprietary software as a trade secret,
it can be registered.
THE INTELLECTUAL PROPERTY ISSUE
protecting proprietary software
1
EXCLUSIVE RIGHTS FOR DECADES
As the owner of the copyright to proprietary
software, you have exclusive rights, including:
REPRODUCTION – The right to make copies.
ADAPTATION – The right to prepare derivative works
based upon the copyrighted work. A derivative work
is a work that borrows substantially from a preexisting work.
PUBLIC DISTRIBUTION – This concept includes sale,
lease or other transfer. Except for sound recordings
and computer programs, a copyright owner loses this
right over a copy of the work that has been gifted or
sold to another.
The duration of protection afforded by copyright
is far longer than the useful life of any software
program. As a general rule, a work created after January 1, 1978, is protected by copyright for the life of the
author plus 70 years. The duration of “works made for
hire” and anonymous works is 95 years from publication or 120 years from creation, whichever is shorter.
2
WHO OWNS THE COPYRIGHT
IN SOFTWARE?
3
THE KEY BENEFITS OF REGISTRATION
Copyrights exist the instant a computer program
becomes fixed in any tangible medium. A work is considered “fixed” when it is in a form that is permanent or
stable enough to permit it to be perceived, reproduced
or otherwise communicated for a period of more than
transitory duration. Theoretically, this means that you
immediately own the copyright, and no one may copy,
distribute or make adaptations of the work without your
permission. Although registration is not a requirement
for protection, as a practical matter, it is. If you have not
applied for or obtained a registration, you cannot file
a lawsuit to stop an infringer. Although the registration
process can take a year or more, the registration will
date back to the date of application.
The copyright law accords several significant
advantages to those copyright owners who register
their works. These advantages include the following:
• Registration establishes a public record of the
copyright claim.
• In some jurisdictions, registration is a prerequisite for
bringing a suit for copyright infringement. Under 17
U.S.C. § 411(a), no action for infringement of the copyright in any United States work may be instituted until
a registration of the claim with the Copyright Office has
been made or refused.
• If registration is made within three months after first
publication of the work or prior to an infringement of
the work, statutory damages and attorney’s fees are
available to the copyright owner. Statutory damages
can range from $750 to $30,000 –“as the court considers just” – for each work infringed.
s
You can only register a copyright if you have ownership rights in the software. Copyright is the right of
the author of the work or his/her assignees. A “work
for hire” is a work generated by an employee within
the scope of his employment, and in that case, the
employer is deemed to be the author and it owns
the copyright. In the situation where an independent
software developer is hired to generate a computer
program, the work is generally not a “work for hire” and
the independent contractor is the owner of the work.
This is true even if you paid for the development and
even if the development contract says the program will
be a “work for hire.” Because of the legal requirements
associated with the work for hire doctrine as applied to
independent contractors, any reference in a software
development contract to a program being a “work for
hire” is illusory. Computer programs simply do not fall
under the nine categories of works recognized by the
copyright law as “works for hire.” Accordingly, just because the parties call it a “work for hire” does not make
it one. The simple solution is to get an assignment. An
assignment covers all bases, whether the developer is
an employee or an independent contractor, because
the assignment transfers ownership.
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4
HOW IS A
COPYRIGHT
REGISTERED?
Registration for copyright protection requires
a registration application, a
deposit of a copy of the work and a fee –
all of which are filed at the Copyright Office at the
Library of Congress. Once a copyright is registered,
there is no cost for maintaining it. This means there
are no maintenance fees or renewal fees, unlike
maintaining a patent or trademark.
There is a specific application for each of the
categories of works. Form TX is used for literary works,
including software. The copyright registration is
intended to make basic facts concerning a copyright
of public record. The deposit requirements vary for
particular works. For example, if the work is an unpublished or published computer program, the deposit
requirement is one visually perceptible copy in source
code of the first and last 25 pages of the program.
For a program of fewer than 50 pages, the deposit is
a copy of the entire program.
If the applicant is unable or unwilling to deposit
source code, he or she must state in writing that the
work, as deposited in object code, contains copyrightable authorship. A copyright registration for a computer program, in source or object code, will cover
all of the copyrightable expression embodied in the
16
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
5
computer
program,
including the
user interface and
screen displays. For
computer programs
containing or consisting of
trade secrets, specific deposit requirements exist to protect such programs.
IS THERE AN INTERNATIONAL
COPYRIGHT?
There is no such thing as “international copyright.”
Several multilateral treaties, however, have extended
copyright protection to U.S. authors in foreign countries. Perhaps the most significant of these treaties
is the Berne Convention for the Protection of Literary
and Artistic Works (“Berne Convention”), which the U.S.
signed on March 1, 1989. Currently, 166 nations have
signed some form of the Berne Convention.
The Berne Convention has two central principles.
The first is the rule of “national treatment.” Under
this rule, works either from foreign nationals of a
Berne Convention country or first published in a Berne
Convention country receive the same copyright protection that a country affords either its own nationals or
works first published in that country. Although foreign
copyright owners are entitled to the same treatment
that a nation gives its citizens, each Berne Convention
nation can individually determine the scope of
copyright protection it provides.
THE INTELLECTUAL PROPERTY ISSUE
protecting proprietary software
For example, computer software written in the
United States by a U.S. citizen would receive the
same copyright protection in France that a program
written by a French programmer in France would
receive. French law would determine the scope of
copyright protection, subject to some minimum
protections required by the Berne Convention.
Consequently, if France chose not to recognize
copyright protection for software written by its
citizens, then software from another Berne Convention
country would not receive protection either.
The second central principle is the rule of
“no formalities,” or that copyright protection should
not rest on formalities. Regardless of the level of
protection afforded by a Berne Convention country,
copyright protection will not depend on whether it
includes some formality, such as the presence or
absence of “© 2001 John Doe.”
6
DAMAGES AND ATTORNEY’S FEES IN
COPYRIGHT INFRINGEMENT LITIGATION
The CLS Bank Case
By Chadwick Jackson and Greg Kirsch
Section 101 of the U.S. patent laws (35
essentially states that to be patentable, a
U.S.C. §101) provides that “[w]hoever
process either must be implemented with
invents or discovers any new and useful
a particular machine, or must transform an
process, machine, manufacture, or com-
article from one state to another.
position of matter, or any new and useful
Since Bilski, whose claims were deemed
improvement thereof, may obtain a patent
to be patent ineligible because they de-
therefore, subject to the conditions and
fined merely abstract investment strategy
requirements of this title.” U.S. Supreme
techniques, many of the claims in chal-
Court precedent, however, carves out
lenged patents bear similarity to the claims
three specific exceptions to Section 101’s
in Bilski, yet some have been considered
broad patent-eligibility principles – specifi-
patent eligible and others patent ineligible
cally, “laws of nature, natural phenomena,
abstract ideas. For example, in Cybersource
and abstract ideas” are not patentable.
v. Retail Decisions, the Federal Circuit
Diamond v. Diehr. The U.S. Court of
considered a patent claiming a “method
Appeals for the Federal Circuit, which is
for verifying the validity of a credit card
the federal court that hears all appeals
transaction over the Internet.” The Federal
relating to patents, has faced challenges to
Circuit affirmed summary judgment; be-
patents directed to computer-implemented
cause “[a]ll of claim 3’s method steps can
inventions on each ground of the above
be performed in the human mind, or by a
judicially created exceptions to Section
human using a pen and paper,” the patent
101, although it has experienced more
merely covered a patent-ineligible abstract
difficultly in addressing challenges to
idea. In contrast, the Federal Circuit ruled,
computer-implemented inventions as
in Research Corp. Technologies, Inc. v.
abstract ideas. This is likely due to the fact
Microsoft Corp., that a claim can only be
that, while laws of nature and natural
found unpatentable under Section 101 if
phenomena are objectively identifiable
its abstractness “should exhibit itself so
and definable, abstract ideas are not; what
manifestly as to override the broad statu-
constitutes an abstract idea is inherently
tory categories of eligible subject matter.”
subjective in nature.
In Bilski v. Kappos, the Supreme Court in
This inconsistency has left the law unsettled on how to approach close questions
2010 held that while there is no definitive
regarding the patent eligibility of computer-
test for determining whether a process
implemented inventions that appear to
is patentable, the so-called “machine
involve what may be considered an abstract
or transformation” test set forth by the
idea. What is needed is a balanced view of
Federal Circuit is a useful starting point.
the patent eligibility standards set
The “machine or transformation” test
forth by 35 U.S.C. § 101 and the
s
s
Lawsuits for copyright infringement may only be
brought in federal court. Although there are some
criminal provisions for copyright infringement,
the vast majority of cases involve civil liability.
Injunctive relief – an order from a court requiring
a party to cease its infringing activity – is a remedy
afforded by the Copyright Act. If infringement is
proven, the copyright owner may elect between
“statutory damages” and the copyright owner’s
actual damages, and is awarded the defendant’s
profits attributable to the infringement.
Statutory damages, which range between $750
and $30,000 – “as the court considers just” – are only
available if the infringement occurred after the
copyright was registered or within three months
of the date of first publication. If the infringement
was willful, the copyright owner may be entitled
to damages of $150,000 per work.
Actual damages are the actual damages suffered
by the plaintiff copyright owner as a result of the
Evolving Standards for Protecting ComputerImplemented Inventions with Patents
Anybody who infringes the works
of another ought to be particularly
concerned about being sued for
infringement
because of the
threat that
attorney’s
fees may be
awarded.
joyce klemmer
A partner in SGR’s
Intellectual Property
Practice, Joyce focuses
on copyright, patent,
trade secret and
trademark litigation.
jklemmer@sgrlaw.com
18
infringement. For example, in the case of software,
actual damages could be based upon what the
software cost to develop. In addition, the copyright
owner can also be awarded the defendant’s profits
attributable to the infringement.
In proving a defendant’s profits, the copyright
owner need only present evidence of the defendant’s gross receipts from all activities related
to the infringement. This is a major advantage
for the copyright owner. For example, if a former
licensee, who is now an infringer, is using the software as a major component of his online travel
business, the copyright owner could claim all profits from travel bookings using the software.
There is a statutory presumption that an
infringer’s revenues are attributable to the
infringement. The copyright owner need only
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
prove all of the defendant’s gross revenues – information easily obtained in discovery. The defendant
must then prove all deductible expenses (for
example, the cost of servers or employees) and
elements of profit attributable to non-infringing
factors (for example, additional services provided by the travel business). Any doubt as to the
computation of costs, expenses or profits must
be resolved in favor of the copyright owner. Also,
damages for the infringement can be enhanced if
willful infringement is proven.
In addition to damages, anybody who infringes
the works of another ought to be particularly
concerned about being sued for infringement
because of the threat that attorney’s fees may be
awarded. The copyright law allows the prevailing
party to be awarded its attorney’s fees. Thus, even
THE INTELLECTUAL PROPERTY ISSUE
protecting proprietary software
s
if the monetary value of the infringement is
small in terms of statutory or actual damages,
the attorney’s fees awarded to the prevailing
party for having to enforce its rights in court
can amount to many times the amount of
damages awarded.
7
REGISTRATION: CHEAP INSURANCE
Not all the benefits of prompt registration relate to litigation. In fact, early registration
can help keep you out of court. An infringer who
knows that your work is registered also knows
that you can recover damages and, more importantly, your attorney’s fees if you prove infringement. As a result, the infringer should be more
willing to negotiate and settle out of court if
you have registered your work. Since registration
is a relatively simple process and provides
significant benefits, it is one of the greatest
insurance deals of all time.
8
MARKING YOUR COPYRIGHT
The CLS Bank Case
(Continued from page 17)
judicially created “abstract idea” exception –
program product, were drawn to mere
particularly as they relate to the patenting
abstract ideas. In a three-judge panel
of computer-implemented inventions, such
review, the Federal Circuit reversed the
as those implemented in software. In an
district court’s ruling and held that the
apparent desire to provide greater clarity
system, method and computer program
on this score, the Federal Circuit conducted
product claims at issue were not drawn
an “en banc” review (a full review where
to mere “abstract ideas,” but rather
all of the judges of the court participate) of
were directed to practical applications of
CLS Bank International v. Alice Corp. Pty.,
invention falling within the categories of
to decide the appropriate application of
patent-eligible subject matter defined by
35 U.S.C. § 101, particularly as it relates to
35 U.S.C. § 101.
the patenting of computer-implemented
inventions.
On May 10, 2013, a divided en banc
Federal Circuit affirmed the district court’s
The patents at issue in CLS Bank,
holding that the asserted system, method
which are owned by Alice Corporation,
and computer-readable media claims are
cover a computerized trading platform for
not directed to eligible subject matter
exchanging obligations in which a trusted
under 35 U.S.C. § 101. The court’s
third party settles obligations between a
holding demonstrates the need to
first and second party so as to eliminate
carefully draft patent claims that not
“settlement risk.” Settlement risk is the
only constitute a process, machine,
risk that only one party’s obligation will
manufacture, or composition of matter,
be paid, leaving the other party without
but also are not likely to preempt a
A copyright notice – the familiar © – is
not required on works first published on or after
March 1, 1989, but is highly recommended.
A notice can prevent a defendant from claiming
“innocent infringement.” If a defendant is successful in claiming innocent infringement, there may
be a reduction in damages. Further, notice may
deter potential infringers.
its principal. According to the claimed
fundamental concept.
The elements of a proper copyright notice are:
l The symbol © and/or the word “copyright” or the
abbreviation “copr.,” for the purpose of informing
the public that the work is protected by copyright.
l The year of first publication of the work.
l The name of the copyright owner.
The phrase “All Rights Reserved” should also
be placed in a copyright notice. This phrase is
unnecessary in the U.S., but is necessary for
protection under some international treaties. n
at issue were directed
invention, the trusted
third party eliminates
this risk by either (a)
exchanging both parties’ obligations or (b)
exchanging neither
obligation.
Some of the claims
to a system, others
to a method and yet
others to a computer
program product. The
district court ruled that
the claims at issue,
regardless of whether
they were for a method,
a system or a computer
chadwick jackson
Chadwick represents
clients in patent and
trademark prosecution, interferences, and
reexaminations before
the USPTO.
cjackson@sgrlaw.com
greg kirsch
The head of SGR’s Intellectual Property Practice,
Greg represents clients
ranging from multinational companies to
universities to start-ups.
gkirsch@sgrlaw.com
THE INTELLECTUAL PROPERTY ISSUE
trademarks and trademark litigation
trademarks and
trademark litigation
HOW TO PROTECT YOUR BRAND
If you are or will become a business person, knowledge of trademark basics will be extremely
valuable. A trademark serves three functions. First, it is an indication that all goods identified
by the mark come from or are sponsored by the same source. Second, the mark is a
guarantee of the uniform quality of the goods it identifies. Third, the mark serves as an
advertisement, for without trademarks there could be no advertising. Conducting availability
searches for trademarks before branding your products or adopting a business name could
result in the selection of a more protectable mark or name, and could avoid future claims of
infringement. Understanding that trademarks (i) identify and do not describe, (ii) are proper
adjectives not nouns, (iii) must remain distinctive, and (iv) must be properly designated
as marks, will assist you in protecting your marks well into the future.
ACQUIRING TRADEMARK RIGHTS
20
application is filed on a bona fide intent to
use, a registration issues only after the mark
has been used in commerce. Marks may also
be registered in each of the 50 states, and if a
mark is not used in interstate commerce, the
mark may only be registered in a state where
it is actually used. Marks that are in use but
that are not registered either federally or in a
state are referred to as common law marks.
One acquires rights in a mark that is not federally registered only in the geographic areas
where the mark is actually used or into which
such use is expected to naturally expand.
Federal registration of a trademark provides
protection under a federal law known as the
Lanham Act. Although federal registration of
a trademark is not required, federal registration provides benefits to the owner of a mark
and is generally recommended. These benefits
include notice to the public that one claims
rights to a mark; legal presumption that
one owns the mark; exclusive right to use
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
the mark nationally for the goods or services
listed in the registration; and a foundation
for registering the mark in foreign countries
and preventing the importation of foreign
products that infringe upon the mark. Federal
registration also grants the right to use the
symbol, which denotes federal registration of a trademark or service mark. Failure to
use the symbol for marks that are registered
potentially limits the recovery of damages and
profits under 15 U.S.C. § 1111.
State registration confers benefits in accordance with the state’s laws. One may use
the “TM” (trademark) or “SM” (service mark)
designations to signify a claim of ownership of a mark, but use of such designations
confers no legal rights.
®
PROPER TRADEMARK USAGE
Misuse of marks can result in loss of trademark rights. Examples of marks that have lost
trademark rights due to misuse are: aspirin,
escalator, nylon, yoyo, and linoleum. Abiding by
the following rules will help protect your marks
from such fate. First, always spell your mark
with an initial capital letter or in all capital
letters. One can also print a mark in italics or in
quotation marks. Second, follow the mark with
the common name of the product identified
by the mark, i.e., Kleenex® tissues. One may also
elect to follow a mark with the word “brand”
such as BAND-AID® brand adhesive bandages.
Third, use the appropriate symbol with your
marks, a for federally registered marks and
®
s
In the United States, one acquires rights in a
mark only by use, either actual or constructive. Actual use of trademarks results from
placing the mark on the goods, on containers
for the goods, on labels affixed to the goods or
their containers, on displays associated with
the goods, or, in certain circumstances, on
documents associated with the goods or their
sale. Actual use of service marks results from
use of a mark in the sale or advertising of the
services. Constructive use results from filing
a federal trademark application based on a
bona fide intent to use the mark.
One may obtain a federal registration of
a mark if the mark is used in the ordinary
course of trade, and, if a trademark, the goods
identified by the mark are sold or transported
in commerce regulated by Congress, or, if a
service mark, the services identified by the
mark are rendered in such commerce or are
rendered in more than one state. If the federal
BY JENNIFER FELDMAN
what is a trademark?
A trademark is a word, phrase, symbol, design or device
that identifies the source of a particular good.
Similarly, a “service mark” indicates the
source of a particular service.
For example, the phrase “Just Do It ®”
and the swoosh logo identify athletic
goods from Nike, Inc., and McDonald’s
golden arches are a service mark
for restaurant services.
Trademarks benefit consumers and
businesses. By indicating product quality
and helping consumers distinguish the
goods of one source from those of another,
trademarks aid consumers in making
purchasing decisions. Likewise, trademarks
enable businesses to readily identify their goods
in a sometimes confusing marketplace.
To be valid and legally protectable, a mark must be “distinctive.” In other words, the mark must be capable of identifying
the source of a particular product or service. Arbitrary, coined
and suggestive marks are inherently distinctive. A mark that is
coined or arbitrary does not have a logical relationship to its
associated product. Exxon ® is an example of a coined mark.
When adopted, the word “Apple” had no logical relationship
with computers and is arbitrary in that regard. A “suggestive”
mark hints, with some degree of imagination, at a feature of the
product, like At-A-Glance ® for calendars.
A descriptive mark describes, in a direct manner, a characteristic of its associated product. For example, All-Bran ® describes
a characteristic of Kellogg’s associated product, a breakfast
cereal. The primary meaning of a descriptive mark is to function
as a descriptor of a characteristic of the product it purports to
identify. To be eligible for protection or registration, the mark
must become distinctive, that is, acquire a “secondary meaning” as an identifier of a single source for the product. Secondary meanings are established by significant advertising efforts
and resulting significant sales volume of the product.
Descriptive marks can be used by third parties not as marks but
in their primary descriptive function to fairly describe a product.
Coined or arbitrary marks receive the highest level of
protection. Suggestive marks receive the next highest level of
protection, and descriptive marks receive protection only after
acquiring secondary meaning.
Generic designations belong to the public, can never be
exclusively appropriated, and, thus, can never function as a
mark. Generic designations are terms such as “refrigerator”
and “candy bar,” and tell what a product is, not where a
product comes from.
a TM or an SM for trademarks and service marks that are not
federally registered. Fourth, a trademark should never be used
as a noun or verb and thus should never be made into a plural,
a possessive or a gerund. For example, proper usage would
be “Oreo cookies” rather than “Oreos” and making a “Xerox
copy” rather than “Xeroxing.” Fifth, do not confuse a mark with
a trade name or business name. Although both marks and
trade and business names may include or be comprised of the
same word(s), trade and business names are nouns; marks are
proper adjectives. Finally, if your business does not have a style
manual that sets out the way in which the business’s marks
should be used and are not to be used, adopt one.
TRADEMARK LITIGATION
In trademark litigation, the three main claims are trademark
infringement, unfair competition and trademark dilution.
FEDERAL AND STATE COURTS
If a third party’s trademark infringement, unfair competition or trademark dilution occurs in or affects commerce, the
trademark owner may file suit in federal court to recover the
damages caused by such misconduct and to obtain injunctive
relief precluding future such misconduct. If the misconduct is
purely intrastate, such suits must be filed in state courts.
Alternatively, any owner of a trademark may file suit in state
court, where the court may adjudicate trademark rights under
federal or state statutory law and the common law.
trademark owners: take caution
Registration may be cancelled without bona fide intent to use
The United States District Court for the
Sandro Andy is a company that designs, manu-
tion, a foreign application or an international registra-
factures and sells clothing and accessories under the
tion for an extension of protection does not need
SANDRO trademark. The SANDRO trademark registra-
to actually use the mark in commerce in the United
tion identified more than 250 items associated with
States prior to obtaining a trademark registration). The
the mark. All trademark applications in the United
opposing party, Light, Inc., claimed that Sandro Andy
States must be based on use in commerce or an
lacked a bona fide intent to use the SANDRO mark in
intention to use the mark in commerce – even
commerce in connection with all of the goods listed in
ciation with the identified goods. The dispute
trademark applications based on foreign applications,
the trademark application.
concerned the use of the trademark SANDRO
foreign registrations or international registrations
by Sandro Andy, S.A. (“Sandro Andy”).
(although an applicant relying on a foreign registra-
Southern District of New York recently ruled
that an applicant must delete all goods from
its trademark registration where it could not
prove that it had a corresponding “bona fide
intent to use the mark in commerce” in asso-
22
By Scott Woldow
TRUST THE LEADERS | Summer
Spring 2013
2013| |SGRLAW.com
SGRLAW.com
The lack of a bona fide intent to use the mark
in commerce for some or all of the listed goods in
THE INTELLECTUAL PROPERTY ISSUE
trademarks and trademark litigation
TRADEMARK INFRINGEMENT AND
UNFAIR COMPETITION
TRADEMARK DILUTION
Under federal law, a claim for trademark dilution
may only be brought if the mark is “famous.”
In evaluating whether a mark is famous, courts
consider various factors, including the degree of distinctiveness and the level of recognition in trading areas.
Under some state laws, a mark does not need to be
famous to bring a dilution claim. Instead, a trademark
owner can assert a dilution claim if its mark is distinctive.
a trademark registration is a valid claim in a petition to
the goods is not necessarily a reason to deem the entire
cancel a registered mark. This claim arose because the
registration void. In other words, the lack of a bona fide
SANDRO trademark registration was overly broad. The
intent for some of the goods will not “infect” the remain-
registration listed hundreds of goods in several Interna-
ing goods where there was a bona fide intent and will
tional Classes. Sandro Andy conceded that it only used
not render the entire registration void. The registration
the mark in connection with Class 25, apparel. Sandro
was allowed to be maintained after the erroneous goods
Andy was required to make valid representations to the
not in use were deleted.
U.S. Patent and Trademark Office to obtain the registra-
Trademark owners are cautioned that an overly broad
application, registration or request for an extension of pro-
Sandro Andy faced significant penalties for misleading
tection increases the chances that an opposer can prove
the Trademark Office. As a result of these misrepresenta-
by a preponderance of the evidence that there was a lack
tions, the court directed Sandro Andy to amend its regis-
of bona fide intent to use the mark in commerce on or in
tration and delete those goods and classes that were not
association with all of the goods and services listed in the
in use in United States commerce. Fortunately for Sandro
trademark application. Applications and registrations with
Andy, a lack of bona fide intent associated with some of
pages of diverse goods in multiple classes raise suspicion
s
tion at issue. At each step of the registration process,
s
Trademark infringement occurs when use of a mark by
another would likely confuse consumers as to the source
of the goods or services. To establish infringement, the
owner must show that (1) it owns a valid and legally
protectable mark (as previously defined), and (2) the
alleged infringer’s use of the mark in commerce causes
a likelihood of confusion about the source of goods or
services. The primary focus of an infringement claim is
“likelihood of confusion.” In deciding whether likelihood
of confusion exists, courts typically consider the following factors: (1) the similarity of the marks in sound,
meaning and appearance; (2) the proximity of the goods;
(3) the strength of the owner’s mark; (4) the similarity
of marketing and advertising channels used; (5) how
careful the typical consumer is likely to be before making a purchase; (6) evidence of actual confusion; and
(7) the alleged infringer’s intent in choosing the mark.
Courts routinely state that all factors are equally important. However, if two marks are not similar in sound,
meaning and appearance, one need not reach the other
factors. Even identical marks, though, may not be considered confusingly similar if they identify completely
unrelated goods and services. An example is Delta®
for faucets and Delta® for transportation services. Two
of the remaining factors are also treated with greater
importance: actual confusion and the alleged infringer’s
intent. Evidence of actual confusion is not necessary to
prove infringement, but if such evidence exists, it is very
difficult to overcome. Additionally, if the marks are similar in sound, meaning and appearance, and the alleged
infringer intended to confuse consumers, courts will
often find the alleged infringer succeeded in creating a
likelihood of confusion. Evidence of actual confusion
and the alleged infringer’s intent, while often difficult
to find, may include testimony by those adopting an
infringing mark and testimony by consumers, business records showing instances of confusion, purchases
made by mistake, consumer complaints, and misdirected
deliveries or phone calls. In the absence of evidence
of actual confusion, trademark owners may use tools
such as survey evidence to show that consumers are
likely to be confused about the source of a good.
THE INTELLECTUAL PROPERTY ISSUE
trademarks and trademark litigation
Upon meeting the prerequisites for a
dilution claim, the owner of a mark can
challenge any use of that mark that “dilutes”
the mark’s distinctive quality. Dilution may
occur through blurring, the weakening of a
mark through identification with dissimilar
products (e.g., “Kodak” for bicycles weakens
the Kodak® mark for the film manufacturer).
Dilution may also occur through tarnishment – the casting of an unflattering light
on the mark, typically through an affiliation
with inferior or unbecoming products.
REMEDIES
Successful plaintiffs may obtain injunctions
against further trademark infringement,
unfair competition or trademark dilution.
In infringement, unfair competition and
intentional dilution cases, plaintiffs may
also be awarded monetary relief including
damages, profits and litigation costs.
Non-intentional dilution actions, however,
are typically limited to injunctive relief.
DEFENSES TO CLAIMS OF TRADEMARK
INFRINGEMENT, UNFAIR COMPETITION, AND TRADEMARK DILUTION
The most common defenses in trademark
infringement, unfair competition and
trademark dilution suits include descriptive fair use, nominative fair use, laches,
unclean hands and trademark misuse, fraud
in obtaining the registration, and application of the First Amendment. Descriptive fair
use is the use of a descriptive term to fairly
describe a product or service. Nominative
fair use is the use of a mark to refer to the
actual product identified by a mark, such
as newspaper references to entertainment
groups and sports teams. Laches is unreasonable delay by the trademark owner in
commencing suit. Because equitable relief
(injunctions) is the primary relief sought
in infringement, unfair competition and
dilution actions, courts require trademark
owners “to do equity to receive equity.” Improper conduct by the trademark owner can,
therefore, be an affirmative defense to suits
for infringement, unfair competition and
dilution. Intentional deceit by the applicant
A partner in SGR’s
Intellectual Property
Practice, Scott also leads
the Trademark Practice
Group in the firm’s
Washington, D.C. office.
swoldow@sgrlaw.com
24
CONSULT AN ATTORNEY
Competent legal counsel can greatly assist in
searching for existing trademarks, registering a
trademark, or helping a party assert or defend
itself against a claim for trademark infringement, unfair competition or trademark dilution.
Experienced counsel can help you navigate the
realm of trademark law and ensure you make
the best decisions for your business. n
at the very least, if not invite an opposition or cancella-
never or will never be used, anywhere. A foreign owner
tion claim. Applicants and registrants must take caution
may have a difficult time producing documentation or
only to list goods and services in trademark applications
other evidence that would substantiate its stated bona
and registrations that it is using in commerce or will
fide intention to use its mark in the United States.
reasonably use in commerce. All other goods and services
scott woldow
for a trademark registration constitutes
fraud in obtaining a registration and such
a finding likely will preclude the trademark
owner from obtaining relief. In certain
situations, the First Amendment will be
balanced against the rights of a trademark
owner. This defense provides a lesser degree
of protection to commercial speech than
noncommercial speech. In applying the First
Amendment, courts adopt balancing tests –
the most utilized of which holds that a mark
used in an expressive work is infringing if it
has no artistic relevance to the challenged
work, and, if there is artistic relevance, the
use of the mark explicitly misleads as to the
source of the challenged work.
What is a bona fide intent? “Bona fide” means a fair,
should and must be deleted. If the applicant or registrant
objective determination of the applicant’s intent based on
does not do so, the entire application or registration
all the circumstances. The applicant’s bona fide intention
could be vulnerable in a trademark opposition or trade-
must reflect the good faith circumstances surrounding
mark cancellation.
the intended use. The use should not be “token use” of
Foreign applicants are particularly vulnerable to a claim
a mark simply to provide a basis for an application. The
of a lack of bona fide intent. Foreign applicants often
determination of whether an applicant has a bona fide
base the United States application on foreign trademark
intention to use the mark in commerce is to be a fair,
applications or registrations where no use or intention
objective determination based on all the circumstances.
of use is required in the country of origin. These types of
An applicant’s mere statement of subjective intention,
applications and registrations often include long lists of
without more, would be insufficient to establish the appli-
goods and/or services for which the mark in question has
cant’s bona fide intention to use the mark in commerce.
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
jennifer feldman
An attorney in SGR’s
Intellectual Property
Practice, Jennifer serves
foreign and domestic
clients in intellectual
property litigation.
jfeldman@sgrlaw.com
If the goods are entirely
unrelated, courts may not
find infringement.
Examples indicative of objective circumstances that
may show a lack of bona fide intent:
l Applicant filing many intent-to-use applications to
register the same mark for many products
l An excessive number of intent-to-use applications to
register marks that ultimately were not actually used
l Applications unreasonably lacking in specificity in
describing the proposed goods.
l An excessive listing of goods, which may show a lack
of a reasonable intent to use the mark in association
Trademark owners should exercise caution to only
with all of the listed goods
identify goods and services where there is an associated
l Many intent-to-use applications for a variety of desirable
trademarks intended to be used on one product
l Trademark applications listing the entire
International Class heading
l Many intent-to-use applications incorporating
descriptive terms relating to one new product
bona fide intent to use the mark in commerce in
the United States. Whenever possible, these applications
should be supported by documentary evidence
supporting the goods and services.
This evidence should be maintained in the case file during
the prosecution of the trademark application. Moreover,
l Multiple trademark applications for the same mark filed
this information should be maintained after the trademark
in succession after the previous trademark application
registration issues so that it can be used in any subsequent
lapses because no timely declaration of use has been filed
trademark registration cancellation or infringement action. n
finish line | Meet the Leaders
INTERVIEW
Ed Pennington
TTL sits down with the new head of SGR’s Intellectual Property Litigation Practice
Trust The Leaders: What
attracted you to SGR, and what
are the advantages of being
part of an Atlanta-based firm?
ED PENNINGTON: SGR is the
perfect size for a law firm – not too
large and not too small. SGR has a
strong litigation practice and patent
prosecution practice, which I feel is an
essential component to supporting a
successful patent litigation program.
Culturally, it’s a nice connection, too.
I grew up in Virginia, so I have lots of
friends and relatives who have gone
to school with folks from Atlanta.
It is a nice fit all around.
TTL: What synergies have
emerged from joining your
practice with SGR?
EP: I have specialized in patent litigation for 29 years and, during that
time, have worked for several large
law firms either as the head of patent
litigation or as a managing partner. It is
my experience that the larger the firm,
the more difficult it is to work within
a budget that is attractive to clients.
Given the size of SGR, I am able to
litigate utilizing a billing structure that
is appealing to a broad base of clients.
TTL: What is the role of
patent prosecution experience
in patent litigation?
EP: Since it is a highly specialized
field, there are many philosophies
on how best to approach patent
26
litigation. Very often, it’s a choice between having general litigators with
good courtroom experience and
only a little technical background,or
specialist patent litigators who
possess strong technical expertise
but have less courtroom exposure.
Within that cross-section, good
patent litigators are rare.
I have a physics background and
I am a registered patent attorney.
I handled prosecution early in my
career so I have a more intimate
understanding of how a patent
comes to be and, therefore, how
to assert it, oppose it or kill it.
TTL: How do you see your practice
changing over the next five years?
EP: In my practice, there has always
been a mix of plaintiff’s work and
defense work. On the plaintiff’s side,
you’re going to see more and more
litigation being carried out on a
funded basis. Funding works in a similar way to venture capital. A funding
team will take on several IP litigation
cases with a view of spreading the
risk so that if they are successful in
one, the settlement fees will cover
expenses if they are unsuccessful
in the others. The funded option is
becoming increasingly appealing for
corporations because it doesn’t always make financial sense for patent
owners to risk their own capital in a
lawsuit. For example, if you spend
several million dollars trying to prove
that another company owes you
$10 million for infringement and you
lose your case, you’ve lost not only
the $10 million income, but also the
money you spent on legal fees.
In my opinion, from a plaintiff’s
patent litigation standpoint, the “pay
TRUST THE LEADERS | Summer 2013 | SGRLAW.com
as you go” model is cost prohibitive. It
is still viable for patent defense work,
however, and that market will become
increasingly competitive as law firms
get squeezed out of the plaintiff market if they’re not aligned with a funder
or willing to take the risk themselves.
To be attractive to defense clients, we
need to be able to maintain our rates
at a reasonable level, which is where
SGR is perfectly positioned.
TTL: What technologies or
sectors would you consider
to be SGR’s sweet spot?
EP: I’ve covered the full spectrum
of technologies, but in the last 10
years, much of my work has been in
telecommunications and software.
These days, practically anything you
put in your pocket is a computer
and any application you put on that
computer is potentially patented
and, thus, potentially infringed.
Right now, the bulk of our work
is in electronics.
TTL: Does your practice
extend beyond patents?
EP: We are highly experienced in
unfair competition, copyright and
trademark litigation, so our work expands well beyond the patent realm.
We also have a tremendous amount
of prosecution expertise to augment
what SGR already had in place prior
to my arrival. We also have done a
substantial amount of opinion work
for clients in the technology field,
as well as due diligence for clients
acquiring additional assets where IP
is a key focus. And since we’re based
in Washington, D.C., we are qualified
and positioned to handle all kinds
of United States Patent & Trademark
Office (“USPTO”) activity. With recent
amendments to the patent statute,
there will be more invalidity work
done at the USPTO, which is only
10 minutes from our office.
What cases have most
interested you personally?
EP: I’ve been fortunate to have
worked for 13 years with Acushnet –
the parent company of Titleist, the
company that makes golf equipment.
I’ve played golf all my life, so to be
able to see at close hand how golf
balls are made and to witness the
evolution from rubber band wound
balls to the modern solid balls has
been personally interesting.
TTL: During your career, what
are the most memorable patents
you have worked on?
EP: Well, that would be a subject
of a book that I should write! The
smartest man I ever met was a
contractor in the 1980s who helped
the Navy silence its submarines. The
electronic devices that he invented
for the subs could also be used
on buildings to prevent them from
shaking apart in earthquakes.
The nuttiest invention would probably have to be what we affectionately called the “toilet odor-sucker.”
It was a palm tree connected to a
fan that connected to a toilet seat.
As you probably guessed, it was
used to pull air from the vicinity of
the toilet to a charcoal den. Another
crazy invention from the 1980s was
the “Walk on Water Sandals.” The
inventor took bicycle inner tubes,
filled them with water and then tied
them in a U-shape and placed them
on the bottom of his sandals! n
Protecting Your Intellectual Property
Atlanta
New York
Elizabeth G. Borland [egborland@sgrlaw.com]
IP litigation, trademarks, copyrights, unfair
competition, domain names
John J. Lee [jlee@sgrlaw.com]
IP litigation, trademarks, copyrights, unfair
competition, trade secrets
Christopher A. Holland [caholland@sgrlaw.com]
patents (electrical, mechanical), trademarks,
technology, unfair competition
John G. McCarthy [jmccarthy@sgrlaw.com]
IP litigation, unfair competition, trade secrets
Gregory J. Kirsch [gkirsch@sgrlaw.com]
patents (electrical, medical technology,
computers, mechanical), licensing
Joyce B. Klemmer [jklemmer@sgrlaw.com]
IP litigation, trade secrets, unfair competition,
copyrights, trademarks
Dale Lischer [dlischer@sgrlaw.com]
IP litigation, patents (electrical, computers)
J. Rodgers Lunsford III [rlunsford@sgrlaw.com]
IP litigation, trademarks, unfair competition,
copyrights, trade secrets
Matthew P. Warenzak [mwarenzak@sgrlaw.com]
patents (mechanical, electrical), IP litigation,
trademarks, opinions
Marsha G. Ajhar [majhar@sgrlaw.com]
trademarks, copyrights, unfair competition, IP
litigation, domain names
Washington, D.C.
Michael A. Makuch [mmakuch@sgrlaw.com]
trademarks, patents (electrical, mechanical,
medical technology, computers)
Sid Pandit [spandit@sgrlaw.com]
IP litigation, patents (electrical)
Edward A. Pennington [epennington@sgrlaw.com]
IP litigation
Dennis C. Rodgers [drodgers@sgrlaw.com]
patents (mechanical)
Jacksonville
Stephanie D. Scruggs [sscruggs@sgrlaw.com]
IP litigation, opinions, patents (chemical,
mechanical), IP due diligence
Katharine F. Rowe [krowe@sgrlaw.com]
trademarks, copyrights, licensing, IP due
diligence, opinions
Suzannah K. Sundby [ssundby@sgrlaw.com]
patents (biotechnology, chemistry, medical
technology, pharmaceuticals), licensing
Scott D. Woldow [sdwoldow@sgrlaw.com]
trademarks, IP litigation
Chadwick A. Jackson [cjackson@sgrlaw.com]
IP litigation, trademarks, licensing, patents
(electrical, computers)
John P. Moy [jmoy@sgrlaw.com]
IP litigation
Michael A. Schwartz [mschwartz@sgrlaw.com]
IP litigation, patents (electrical, computers)
Thomas G. Wiseman [twiseman@sgrlaw.com]
patents (chemistry, biochemistry,
pharmaceuticals)
Jennifer L. Feldman [jfeldman@sgrlaw.com]
IP litigation
John Pennington* [jpennington@sgrlaw.com]
IP litigation, trademarks
Sean T.C. Phelan [sphelan@sgrlaw.com]
IP litigation, trademarks, unfair competition,
licensing, domain names
Ryan A. Varnum [rvarnum@sgrlaw.com]
patents (mechanical, medical technology,
computers), trademarks, IP litigation
Atlanta | Jacksonville | New York | Washington, D.C. | Frankfurt | www.sgrlaw.com | Follow us
*photo not available
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