Troy & Schwartz Attorneys-At-Law

Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Patent claims may be rejected on anticipatory grounds under 35 U.S.C § 102 and/or on obviousness grounds under 35 U.S.C. § 103.  This blog discusses the USPTO’s obligations when making rejections on obviousness grounds, an area of patent law that can be particularly confusing as a November 9, 2020 decision by the CAFC demonstrates.

Background

In order for a reference to be proper for use in an obviousness rejection, the reference must be analogous art to the claimed invention.   This does not require that the reference be from the same field of endeavor as the claimed invention, in light of the Supreme Court’s instruction that “[w]hen a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one.”  KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398, 402 (2007).  Rather, a reference is analogous art to the claimed invention if:  (1) the reference is from the same field of endeavor (even if it addresses a different problem); or (2) the reference is reasonably pertinent to the problem faced by the inventor (even if it is not in the same field of endeavor as the claimed invention).   However, in order for a reference to be “reasonably pertinent” to the problem, it must “logically have commended itself to an inventor’s attention in considering the problem.”  In re Icon Health and Fitness, Inc., 496 F.3d 1374, 1379-80 (Fed. Cir. 2007).

The Case

These requirements were re-visited by the U.S. Court of Appeals (CAFC) in its Nov. 9, 2020 decision in Donner Technology, LLC v. Pro Stage Gear, LLC.  Donner had petitioned the Patent Trial & Appeal Board (PTAB) for an inter partes review (IPR) of U.S.  patent no. 6,459,023 (the ‘023 patent), asserting that the various claims of the ‘023 patent were obvious under 35 U.S.C. § 103 in view of U.S. Patent No. 3,504,311 (Mullen).  The ‘023 patent is directed to guitar effects pedals, electronic devices that affect the amplified sound of a guitar.  The specification explained that there was a need for “ ‘an improved pedals effect board which  allows easy positioning and changing of the individual guitar effects while providing a confined and secured area for cable routing and placement.’ ”

The Mullen reference related to electrical relays where an “ ‘object of the invention is to provide an improved support for supporting one or more relay structures and for providing wiring-channel space for receiving wires that would be connected to the relay structures to connect the relay structures in various controlled structures.’ ”  Donner contended that figures in the Muller patent depict a structure that is analogous to the structure claimed in the ‘023 patent which includes surfaces for mounting relays, cable connection openings, and areas for accommodating routing cables.

The PTAB found in favor of Pro Stage Gear, finding that Donner had not shown that Mullen falls within the scope of analogous art under either of the two tests.  On appeal to the CAFC, the parties did not dispute that the 023 patent and Mullen were not from the same field of endeavor.  The only issue on appeal was whether Mullen was “reasonably pertinent to one or more particular problems to which the ‘023 patent relates.”

The CAFC found that the PTAB had failed to establish whether it had meaningfully considered all of the evidence Donner had put forth, including expert testimony, to try and establish that Mullen was reasonably pertinent to the problems faced by the 023 patent’s inventor.   Additionally, the PTAB also failed to “properly identify and compare the purposes to which Mullen and the ’23 patent relate.”

Proper analysis requires that the “problems to which the claimed invention and reference relate must be identified and compared from the perspective of a person having ordinary skill in the art.”  Making conclusory statements without more is insufficient to determine whether a reference is analogous art.  Here, the PTAB merely asserted that the ordinary skilled person would have a “relatively low level of skill and would have had “a poor understanding of Mullen’s relay technology.”  Interestingly, the PTAB had acknowledged that there may be “ ‘pertinent similarities between Mullen and the ‘023 patent but concluded that those similarities, even if credited, did ‘not establish why a person of ordinary skill would have considered a reference from a different technology and time.’ ”  The CAFC disagreed, explaining that such a person may consult a reference.  The issue is not whether the person would have understood every last detail of a reference but “whether she understood portions of the reference relevant to solving the problem well enough to glean useful information.”

The CAFC concluded that the PTAB had applied the wrong analogous art standard.  It declined to hold that “no reasonable fact finder could conclude under the reasonably pertinent standard, that Mullen is not analogous art.”  Instead, it vacated the PTAB’s decision and remanded for consideration of the proper standard for analogous art.

Conclusion

Here is a simple example of analogous art.  An inventor files a patent application for a collapsible ski pole and the examining attorney cites analogous prior art for a collapsible tent pole patent. Here the tent pole patent would likely be reasonably pertinent to the problem the ski pole inventor was trying to solve: to provide less unwieldy, more readily transported poles.   Whether or not the ski pole will qualify for patent protection will depend on structural differences between the two poles and whether any ski pole structure would have been obvious over the prior art.

The patents at issue in the Donner matter of course involve more complex structures than the ski pole/tent example.  Whether or not Mullen, an invention from the 1970s, is reasonably pertinent to the problem the guitar pedal effects patent was trying to solve will now be assessed by the PTAB using evidence and expert testimony.   If yes, then the PTAB will evaluate whether the ‘023 patent is obvious over the Mullen patent.   Unfair in this situation? Is it likely that the ‘023 patent inventor found and “used” what was shown in the Mullen patent for a structure related to improving guitar effects pedals? The PTAB’s first decision suggested that it was not “pleased” with this particular IPR.  The 023 invention must have value in the market place for Donner to have spent the money involved so far on legal fees to try and invalidate the ‘023 patent.   Stay tuned for an update on the PTAB’s new decision.

Take Home Points

Whether dealing with the prosecution of a patent application or an IPR proceeding involving an existing patent, the USPTO must apply the appropriate standards in considering analogous prior art. Failure of the USPTO to do so during patent application prosecution can provide the patent applicant with the opportunity to try and overcome the USPTO’s reliance on the cited analogous prior art.  In an IPR proceeding, failure of the PTAB to properly apply the two analogous art tests may well result in an appeal of the matter to the CAFC as in the Donner Technology, LLC v. Pro Stage Gear, LLC matter by the losing party in the IPR proceeding.   

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR   INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

Call us at (305) 279-4740 for a complimentary consultation on matters related to obtaining patent protection or handling a legal dispute before the PTAB or the CAFC.  

May you and your loved ones stay safe & be well during these challenging times.

© 2020 by Troy & Schwartz, LLC

Picking a company name that meets the above criteria is often easier said than done.   The last thing a new company needs is a legal dispute involving the alleged infringement of someone else’s trademark.  Anybody who has been involved in a lawsuit understands that they are costly, stressful, and can take on a life of their own.  A registered trademark owner may of course give you the chance to comply with an initial cease and desist letter.  However, your compliance will generally require you to stop using the mark, transfer any domain name rights, etc.  The upshot?  You’ll have to start over in branding your business.

Here are some tips on getting your company off and running with a viable name.

1. Do a Google search on the name to see what other companies may already using the same or a similar name.
2. Do a search of your state’s corporate or limited liability company records in the states where the company will do business to see if anyone is using the same or similar name. Also check the state’s registered trademark records since some companies do obtain state-registered marks.  For Florida, this information can be found here.
3. Do a search of the U.S. Patent & Trademark Office (USPTO) for federal trademark registrations of your proposed name. Do not think that merely changing a letter in your proposed name or reversing the order words in a multi-word work will save you from a legal dispute with the owner of the registered mark.  Additionally, if you plan to file a trademark registration application for your company name with the USPTO, you should select a name that has a solid chance of meeting the USPTO’s trademark registration requirements.  This means that your mark must not be confusedly similar to a registered mark.
4. Do a search of domain name registrar websites such as GoDaddy.com to see if the domain name you want is available. Not only are domain names a necessity in today’s e-commerce world, but domain names also may have associated trademark rights.  Therefore, a minor change in the registered domain name, e.g., by registering the plural form (sABC) of the registered domain name (ABC) could result in a trademark dispute.
5. The best company name is one that is distinctive and memorable for both branding purposes and obtaining valuable registered trademark rights.
6. Come up with at least three names you like and get the reactions of trusted individuals.
7. If you plan to have a logo designed, ensure that there is a contract in place assigning all of the creator’s intellectual property rights to your company.
8. If you are a non-US company planning to expand into the United States, note that US trademark law will apply to you.
9. Watch out for cultural implications involving your mark if you plan to register it in other countries.
10. Consider having an intellectual property law attorney do a professional trademark search.

We are proud of the legal services we provide to our business and entrepreneurial clients on all matters related to trademark law.  Contact us at 305-279-4740 to discuss your questions on trademark law matters.   Doing things right the first time in selecting a company name and building your brand could save you some real headaches and a lot of money down the road.  

Troy & Schwartz, LLC

Attorneys-at-Law

Miami, Florida

Where Legal Meets Entrepreneurship™

This blog is for informational purposes only and does not constitute legal advice.

 Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Have a question on specimens for your filed trademark application after reading this blog? We can help ensure the specimens you file will meet the USPTO’s requirements so that your registration will actually issue if the other requirements are met. Our trademark law legal services include: prosecuting trademark applications;  representing clients before the Trademark Trial and Appeal Board; and representing clients in trademark infringement lawsuits.

 Call us at 305-279-4740 (Miami, Florida) for a complimentary consultation.

So your proposed trademark has met the USPTO’s two threshold requirements for registration:  1) there is no likelihood of confusion with existing registered marks; and 2) the mark is not merely descriptive or generic.  Nevertheless, the examining attorney has refused registration because the applicant’s provided specimens, required for demonstrating usage of the mark in commerce, do not meet the USPTO’s requirements.   This commentator has previously blogged on this topic and is doing so again because there seems to be a lot of confusion over the importance of specimens to the trademark registration process.

Indeed, as a trademark attorney, I have found that specimens are often the most misunderstood requirement for obtaining a registered trademark.  That’s why our firm’s trademark legal services involve advising clients about specimen requirements from the get go.  At times, we have advised clients to modify their specimens before we submit them to the USPTO in a 1A application.  For intent-to-use applications where specimens are not filed with the application but will be required if the mark receives a Notice of Allowance (a preliminary approval of a pending specimen) we work with clients to ensure that they will have suitable specimens commensurate with USPTO requirements for “goods” marks and “services” marks when the Statement of Use is filed.  This may include reviewing the Client’s website and recommending layout changes so “specimen” screen shots will meet the USPTO’s specimen requirements.  Additionally, we ensure that all submitted specimens clearly identify the applicant as the provider of the goods/services, another essential specimen requirement.

The specimen requirement is no joke.  Between Sept. 17 and Sept. 23, 2020, the Trademark Trial and Appeal Board (“Board”) affirmed the decisions by three USPTO examining attorneys who had all refused registration on unacceptable specimen grounds for three different trademarks.  All three applicants ended up spending a lot on legal fees only to be denied registration of their marks upon appeal.  The following summarizes the three decisions and the commentator’s practice tips.

The case: In re Iguana Yachts.    Here the mark was a “goods” mark with following description: “Boats; amphibious vehicles; professional boats, and professional amphibious vehicles in the fields of security, military rescue, and transport of goods and people.”  The submitted specimens comprised a banner, a business card, and a website extract with a “custom build quote form.”   The Board concluded that there was no evidence that the banner or business card were displayed or distributed at tradeshow, i.e. the specimens were not actually used in interstate commerce as point-of-sale displays.  Likewise, there was no evidence as to how the quote form was used to actually place orders on the website for the specified goods.  In essence, the provided specimen were mere advertisements.  Advertisements may be suitable for service marks but are never suitable for goods marks.

Practice Tip.   Ensure that a specimen submitted for a good(s) is not mere advertising.  If the specimen represents a point-of-sale display, a customer must have either the ability to buy the good right there or to be able to place an order for the good associated with the mark.  That is, the specimen must show how the mark is being used in interstate commerce by the applicant.  The mark must also be displayed prominently to ensure that a potential customer identifies the mark with the good.   Here, perhaps the website could have been easily amended to provide for a website-related point of sale display before the specimen was ever submitted to the USPTO.   All specimens must also specify the applicant as the provider of the goods/services.  This requirement is in keeping the trademark law’s focus on the consumer – the consumer has the right to know who is providing the good/service under the mark.

The case:  In re Charlie’s EnterprisesEnergy, LLC.     Here the slogan mark was for food goods:  “Peas, fresh; Vegetables, fresh.”  The specimen consisted of “[a] picture of the proposed slogan in use on a semi-trailer wrap.”  Additionally, the mark presented in the application did not match the display on the truck.   The applicant argued that the wrap was a form of packaging.   Indeed, packaging can serve as a goods specimen as long as it shows the mark AND the source of the goods, generally the manufacturer or distributor.  Here the Board held that a trailer wrap is not a common packaging for vegetables even though a trailer wrap may be a common way of displaying the mark associated with bulk goods (such as lumber).

Practice Tip.  Ensure that the submitted specimen is the type commonly used for the particular good.  Additionally, ensure that the specimen’s mark and the mark shown in the application are equivalent.  All specimens must also show the source of the goods as the following decision again demonstrates.   Perhaps this registration could have been saved if the trailer wrap had at least showed the applied-for mark in its entirety.  However, if the goods being transported were sealed in packages for sale at, e.g., a grocery store, a photo showing the packaging with the required info would likely have been accepted.

The case: In re Systemax, Inc.    This case involved the situation where the specimens submitted for a service mark application failed to show an association between the mark and the application’s recited services. The specified services were for “holding company service, namely, providing business management, business administration, and human resource management services to subsidiaries and affiliates.”  The applicant submitted copies of annual reports and website screen shots which failed to show an association between the mark and the recited holding company services.   As such, the Board agreed with the examining attorney and the mark was not registered.  This commentator notes that any website screen shot being submitted as a service mark specimen should clearly show the mark on each and every page where a description of the service is presented.  Additionally, the applicant, as the service provider, should be readily discernable.  Annual reports, invoices, business plans, and the like are not specimens for trademark registration services.

Practice Tip.  This case is a perfect example of how any thorough trademark attorney will first carefully review the applicant’s website before submitting any screenshots as specimens.  If deficiencies are found, the attorney should advise the client to amend the layout of the website and/or the content before screen shots are submitted as specimens.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

May you and your loved ones stay safe & be well during these challenging times.

© 2020 by Troy & Schwartz, LLC

Posted by Susan Dierenfeldt-Troy, Esq.

Troy & Schwartz, LLC

Where Legal Meets Entrepreneurship™

Intellectual property assets may comprise as much as 70% of an average company’s value according to the Harvard Business Review.  Not surprisingly, businesses large and small are concerned about: 1) protecting their intellectual property from theft or infringement and potential creditors; and 2) reducing their income taxes as part of an overall IP asset management strategy.  Intellectual property holding companies (IPHCs) became a popular means through which companies sought to protect their IP assets and reduce taxes by establishing a wholly-owned subsidiary whose purpose was only to control and own IP assets such as patents, copyrights, trademarks, trade secrets, and other proprietary information in the 1990s.

The IPHC, established by the parent company, does not itself use the IP it owns (e.g., by manufacturing and distributing a patented product).   Instead, the holding company licenses its IP rights to affiliated operating companies that handle the day-to-day business activities but do not themselves own any of the IP assets.  The holding company as the licensor then receives royalties from its licensee(s).    For example, say ZYX, Inc. owns a U.S. patent for a product it manufactures and sells under a registered trademark.  It has decided to form a Delaware IPHC, CBA, Inc., for holding its patent and registered trademark.  CBA, Inc., now as the IPHC, licenses the patent and registered trademark to ZYC, Inc. in return for a two percent royalty on the patented and trademarked product’s sales.  For states such as Delaware which does not charge income tax on royalties, the tax savings can be substantial. Additionally, ZYX, Inc. can likely take the royalty payment as a tax expense write-off.

States eventually figured out that holding companies were costing them a lot of money and the majority of them have enacted different types of reporting requirements for IPHCs to recover tax monies:  a) mandatory combined reporting (requiring companies to file a single comprehensive tax return for all of their subsidiaries when they calculate their taxes); b) add back statues (requires companies to add back any tax deductions they have taken for royalties paid to their IPHC); and c) the economic nexus approach wherein courts are tasked with finding if an economic nexis (a/k/a/ the Geoffrey rule after a 1993 South Carolina case involving Geoffrey, Inc. as the IHPC for the Toys “R” Us trade name) exists.  As such, IPHCs are not used as much as they were over a decade as a tax “shelter.”  Delaware, however, still continues to be an IPHC tax haven.

What about Florida?  Florida does have a corporate income tax but remains one of a handful of “corporate income” tax states that hasn’t adopted an add-back or combined reporting statute to try and reclaim lost tax revenue attributable to Florida IPHCs.  Furthermore, Florida IPHC law is complicated by the fact that only mining companies, by statute, must count royalties when calculating their income taxes.  For an excellent discussion on the politics surrounding the issue of Florida IPHC taxation see Florida Tax Laws and Intellectual Property by Jason Garcia, Florida Trend Magazine.

Despite the fewer taxation benefits now afforded by most states to IPHCs, IPHCs can still offer IP asset-protection benefits, for example by allowing a company to quarantine its intellectual property from claims brought against the operating companies.  For instance, in the event the affiliated operating company is sued, the separation of IP assets from the affiliate to an IPHC may well protect that property from potential judgments in a lawsuit.

Any business entity, including an IPHC should be structured in a manner that best fits the business model.  All business entities, whether a C-Corp, S-Corp, or Limited Liability Company have their own considerations which should be discussed with in attorney knowledgeable in IP asset protection. Any such IP transfer needs to be in writing and is generally executed as an assignment of rights document.  The assignment of any issued patent and registered trademarks and copyrights should be recorded with the United States Patent and Trademark Office and/or the U.S. Copyright Office.

Anybody considering forming an IPHC should of course understand the taxation requirements of the state where the IPHC entity will be formed.  Additionally, any IPHC owner needs to understand that infringement actions involving the IP owned by an IPHC may result in unintended consequences for the unwary.  For example, whether or not a plaintiff has standing to sue is a threshold question in any lawsuit.  For a patent infringement action, only patent owners or exclusive licensees have standing to sue for infringement.  A typical exclusive licensing agreement may not be “exclusive” for patent infringement purposes. That is, absent a provision within the exclusive licensing agreement that the patent licensee has the right to sue, the exclusive licensee may be found to have no independent right to sue.

Why is this important to an IPHC?  Because the IPHC may be able to obtain an injunction as the patent owner, but will be limited in its ability to seek lost profits as damages.   For example, a patent-holding IPHC normally does not manufacture or sell a product itself.  The IPHC thus suffers no lost profits damages as a result of any infringement of its patent and any recovery will likely be limited to reasonable royalty damages which are generally substantially lower than lost profits.  Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1553 (Fed. Cir. 1995).

As for non-exclusive patent licenses, the IPHC cannot claim lost profits and will be limited to an award of reasonable royalty damages.  However, non-exclusive patent licenses may provide the IPHC with additional opportunities to exploit its IP beyond just one licensee.

In the context of trademark rights, the IPHC holding company must have sufficient quality control over the goods/services provided under the licensed trademarks.  Failure to exercise sufficient quality control may create what is known as “naked licensing”, resulting in potential cancellation of the registered marks.  Click here for a previous blog on the ramifications of naked licensing.

Take Home Points:

1. Before setting up an IPHC, understand the tax laws of the proposed entity-formation state by consulting with a knowledgeable CPA or tax attorney.
2. Before setting up an IPHC, determine the best type of business entity by consulting with a knowledgeable IP asset protection attorney.
3. Ensure that the assignment of IP assets to the IPHC is done via a formal assignment agreement.
4. Ensure that an exclusive patent licensing agreement includes appropriate provisions giving the exclusive licensee the right to sue for patent infringement. Utilize the services of a knowledgeable IP licensing attorney.
5. For trademark licensing, ensure that the licensing agreement includes appropriate provisions allowing the IPHC to monitor the quality and goodwill of the licensed marks. As with patent-licensing agreements, utilize the services of a knowledgeable IP licensing attorney.

THANK YOU FOR YOUR INTEREST IN THIS BLOG.  AS USUAL THE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT LEGAL ADVICE.

Call us for a complimentary consultation on IPHCs or IP-licensing or any of your IP legal needs at 305-279-4740.

May you and your loved ones stay safe & be well during these challenging times.

© 2020 by Troy & Schwartz, LLC