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The Intersection of Trade Secrets and Patents

The Intersection of Trade Secrets and Patents

A federal court in New Orleans has allowed a trade secret claim to proceed to trial, even though the alleged trade secrets were disclosed in a patent application. Cajun Servs. Unlimited, LLC v. Benton Energy Serv. Co., No. 17-0491 (R. Doc. 241).

The lawsuit concerns Cajun’s patented elevator roller insert system (ERIS), which is a technology used in drilling for oil. Before filing its patent application, Cajun agreed to rent ERIS to Benton Energy. While renting ERIS, Benton Energy hired a third party to reverse engineer ERIS, using drawings and prototypes supplied with the rented system. Cajun eventually filed its patent application for ERIS while still renting the system to Denton Energy.

Cajun initially brought claims for trade secret theft and unfair trade practices. Once a patent was granted for ERIS, Cajun added a patent infringement claim against Benton Energy.

In response, Benton Energy filed a summary judgment motion on Cajun’s trade secret claims. Benton Energy attempted to argue that trade secret claims failed as a matter of law because Cajun publicly disclosed the ERIS technology in its patent application. That is, the information could not be a trade secret because it was no longer a “secret” since it was disclosed in the patent application.

The court disagreed. It noted that “publication of the ‘862 Patent application does not deprive Plaintiffs of a cause of action for misappropriation of trade secrets before the patent application was published.” In other words, the subsequent patent application did not absolve Benton Energy from liability for any misappropriation that occurred before the patent publication.

A non-provisional patent application in the U.S. is normally published eighteen months after its earliest priority date. A non-publication request may be made to prevent publication of the non-provisional application. This holding confirms that before publication, the information disclosed in a patent application may still be afforded trade secret protection.

Protecting Individual Replacement Parts

Protecting Individual Replacement Parts

In Automotive Body Parts Ass’n v. Ford Global Techs. (Fed. Cir. 2019), Ford accused the Automotive Body Parts Association (ABPA) of infringing Ford’s design patents that cover individual parts of Ford’s F-150 truck. The ABPA argued that the patented designs are functional. ABPA further argued the application of doctrines of exhaustion and repair to these patented designs.

The design patent D489,299, titled “Exterior of Vehicle Hood,” claims “[t]he ornamental design for exterior of vehicle hood,” as shown in Figure 1 below.

The design patent D501,685, titled “Vehicle Head Lamp,” claims “[t]he ornamental design for a vehicle headlamp, as shown below in Figures 1 and 2.

A design patent must be directed to an “ornamental design for an article of manufacture” and not one “dictated by function.” High Point Design LLC v. Buyers Direct, Inc., 730 F.3d 1301, 1315 (Fed. Cir. 2013) (interpreting 35 U.S.C. § 171(a)). Although the article of manufacture itself is typically functional, the protected design elements themselves may not be “primarily functional.”

As to functionality, ABPA states that consumers seeking replacement parts prefer hoods and headlamps that restore the original appearance of their vehicles. As such, ABPA concludes that there is a functional benefit to designs that are aesthetically compatible with those vehicles. Specifically, ABPA argues that Ford’s protected hood and headlamp designs are functional because they aesthetically match the F-150 truck.

The Court disagreed with the ABPA’s functionality arguments. Specifically, the Court held that even in the context of a consumer’s preference for a particular design to match other parts of a whole, the aesthetic appeal of a design to consumers is inadequate to render that design functional.

As to exhaustion, ABPA asserts that the sale of an F-150 truck exhausts any design patents embodied in the truck and permits use of Ford’s designs on replacement parts so long as those parts are intended for use with Ford’s trucks.

The Court declined to apply exhaustion to the protected hood and headlamp designs sold by a third party as replacement parts, the Court noting that exhaustion attaches only to items embodying the protected designs sold by, or with the authorization of, the patentee.

As to the right or repair, ABPA argues that purchasers of Ford’s F-150 trucks are licensed to repair those trucks using replacement parts that embody Ford’s hood and headlamp design patents.

The Court also rejected ABPA repair argument noting that the right of repair does not permit a complete reconstruction of a patented device or component. As such, a purchaser may replace “individual unpatented component” of the patented article but does not permit the purchaser to infringe other patents by manufacturing separate patented components of the purchased article. Accordingly, the new hoods and headlamps in question are subject to Ford’s design patents, and manufacturing new copies of those designs constitutes infringement.

This decision reinforces the use of design patents to protect the manufacturer of individual replacement parts to be used in a purchased article.

Predictability and Criticality as Factors in the Evaluation of a Patent Specification

Predictability and Criticality as Factors in the Evaluation of a Patent Specification

The Court of Appeals vacated the decision of the Patent Trial and Appeal Board in In Re Global IP Holdings (Fed. Cir. 2019), instructing the Board to include predictability and criticality as factors to consider in determining whether Global IP’s written description satisfies the proper legal standard.

Global IP filed a reissue application in U.S. Patent No. 8,690,233 to replace the term “thermoplastic” with “plastic” in three independent claims. In the reissue application, the inventor filed a declaration that, at the time of the invention, he was aware of the use of plastics other than thermoplastics for the formation of a sandwich-type composite panel with a cellular core.

The Examiner rejected Global’s reissue claims finding that “the specification only supports thermoplastics“ and that Global “cannot claim the full range of plastics, which would include thermosetting as well as thermoplastics” thereby introducing new matter. The Board affirmed the Examiner’s rejection explaining that “regardless of the predictability of results of substituting alternatives, or the actual criticality of thermoplastics in the overall invention, [Globla’s] Specification, as a whole, indicates to one skilled in the art that the inventors have possession only of the skins and core comprising specifically thermoplastics.”

The Court held that the Board was mistaken in its legal analysis of whether Global’s specification complies with the written description requirement. The Court stated that “the level of detail required to satisfy the written description requirement varies depending on the nature and scope of the claims and on the complexity and predictability of the relevant technology.” The Court further stated that, in addition to predictability, the criticality or importance of an unclaimed limitation to the invention can be relevant to the written description inquiry.

Accordingly, a variation that is predictable to a person of ordinary skill in the art is more likely to be covered by a specification. Moreover, variations of a non-critical component of the invention are more likely to be covered by the specification.

U.S. Licensed Attorney Requirement for Foreign Trademark Applicants and Registrants

U.S. Licensed Attorney Requirement for Foreign Trademark Applicants and Registrants

The USPTO has amended the Rules of Practice in Trademark Cases to require applicants, registrants, or parties to a trademark proceeding whose domicile is not located in the United States or its territories to be represented by an attorney who is in an active member in good standing of the bar of a state in the United States.

A stated purpose of the rule change is to instill greater confidence in the public that U.S. trademark registrations that issue to foreign applicants are not subject to invalidation for reasons such as improper signatures and use claims. Another stated purpose is to enable the USPTO to more effectively use available mechanisms to enforce foreign applicant compliance with statutory and regulatory requirements in trademark matters.

The rule change is effective on August 3, 2019.

Supreme Court Finds Bar on Scandalous and Immoral Trademarks Unconstitutional

Supreme Court Finds Bar on Scandalous and Immoral Trademarks Unconstitutional

The Supreme Court has upheld the Federal Circuit’s decision in In re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017) holding that the provision of the Lanham Act that bars the registration of “immoral or scandalous” trademarks violates the First Amendment. Iancu v. Brunetti, No. 18-302, 6/24/2019.

The trademark at issue is the mark “F U C T” which Brunetti uses for a clothing line. The Patent and Trademark Office (“PTO”) barred registration of this mark as being “immoral or scandalous” as required by the Lanham Act, categorizing “F U C T” as “a total vulgar,” “extremely offensive” and “therefore unregistrable” mark. Brunetti appealed the rejection.

In Matal v Tam (2017), a parallel provision of the Lanham Act that bars registration of disparaging marks was found unconstitutional as being viewpoint based. Similarly, the key question here is whether the “immoral or scandalous” provision is viewpoint neutral or viewpoint based.

The Court found the “immoral or scandalous” provision viewpoint based. Specifically, the Court noted that the Lanham Act “permits registration of marks that champion society’s sense of rectitude and morality, but not marks that denigrate those concepts” and that it “allows registration of marks when their messages accord with, but not when their messages defy, society’s sense of decency or propriety.” As such, the Court held that “put the pair of overlapping terms together and the statute, on its face, distinguishes between two opposed sets of ideas: those aligned with conventional moral standards and those hostile to them; those inducing societal nods of approval and those provoking offense and condemnation.”

As such, the Court ruled that the Lanham Act’s ban on federal registration of “immoral or scandalous” trademarks is unconstitutional under the First Amendment.

In a concurring opinion, Justice Alito noted that the Court’s “decision does not prevent Congress from adopting a more carefully focused statute that precludes the registration of marks containing vulgar terms that play no real part in the expression of ideas.”

John C. Laurence
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