In the initial trial during February 2000, the Western District of Kentucky ruled in favor of the Moseleys on the issues of infringement and unfair competition, but granted summary judgment in favor of V Secret on the dilution claim. V Secret Catalogue Inc. v. Moseley, 54 USPQ2d 1092 (W.D. KY. 2000). The district court pointed out that “[c]ourts have frequently enjoined the ‘tarnishment’ of a mark through association with unsavory goods, persons, or services.” V Secret, 87 USPQ2d at 1243. The court saw the sale of adult videos and sex toys under a similar mark as tarnishing the Victoria’s Secret mark. The Moseleys appealed to the Sixth Circuit, who affirmed the grant of summary judgment. V Secret Catalogue Inc. v. Moseley, 59 USPQ2d 1650 (6th Cir. 2001). The Sixth Circuit discussed two issues unaddressed by the district court: distinctiveness and the requirement that dilution had actually occurred. The Sixth Circuit held that Victoria’s Secret was indeed a distinctive mark and that there was only a requirement of likelihood of dilution. In light of a split of authority on the question of actual dilution, the Moseleys sought and the United States Supreme Court granted certiorari to consider this issue.

In its ruling on March 4, 2003 in Moseley d/b/a Victor’s Little Secret v. V Secret Catalogue, Inc., 537 US 418, 65 USPQ2d 1801 (2003), the Supreme Court held that actual dilution was required to bring a claim under the Federal Trademark Dilution Act as it then existed. The case was remanded to the Sixth Circuit where it sat for 4 years before it was remanded back to the district court in July 2007.

In 2006, Congress reacted to the Supreme Court’s decision in Moseley by passing the Trademark Dilution Revision Act of 2006 (“TDRA”). Pub. L. No. 109-312, 120 Stat. 1730 (2006) (codified at 15 U.S.C. §1125(c)). This amendment had two major effects. First, it changed the language to reflect that dilution was only available for marks famous to the “general consuming public.” Second, Congress broadened the actual dilution requirement, stating that an alleged diluting use must only be likely to cause dilution, thereby negating the Supreme Court's interpretation that only actual dilution was actionable under 15 U.S.C. §1125(c).

Faced with this changed law and the case on remand, the district court held:

In light of this provision, we are faced with an order of the Court of Appeals remanding the case to us to apply law which has been superseded. The Sixth Circuit has held that the law of the case doctrine is inapplicable where a subsequent contrary view of the law by controlling authority occurs. United States v. Moored, 38 F.3d 1419, 1421 (6th Cir. 1994). We find that the Moseley “actual dilution” standard is thus no longer the law of the case.

As the sole issue appealed to the Supreme Court was the issue of actual dilution, the factual findings of the original district court proceedings remained viable, such as that Victoria’s Secret is a “famous” and “distinctive” mark. Moseley attempted to argue that the Supreme Court had found that there was no evidence of any dilution at all, but the district court quickly rejected this argument. Specifically, the district court found that the Supreme Court had merely found that actual dilution did not exist and had made no findings as to likelihood of dilution. V Secret, 87 USPQ2d at 1245-46.

While using some of the previous findings of fact, the court considered the case under the TDRA anew as the FTDA was old law. “However, the findings from both courts under the FTDA are so much flotsam and jetsam, having been jettisoned from the ship of the FTDA now sunk in the sea of new dilution law. Summary judgment was reversed. On remand, we have a dilution claim under the TDRA which must be analyzed without regard to the former findings.” Id.

Dilution under the Trademark Dilution Revision Act
The TDRA provides, in pertinent part:

Subject to the principles of equity, the owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owner's mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, or of actual economic injury.

… For purposes of paragraph (1), “dilution by blurring” is association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark. In determining whether a mark or trade name is likely to cause dilution by blurring, the court may consider all relevant factors, including the following:

1. The degree of similarity between the mark or trade name and the famous mark.
2. The degree of inherent or acquired distinctiveness of the famous mark.
3. The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark.
4. The degree of recognition of the famous mark.
5. Whether the user of the mark or trade name intended to create an association with the famous mark.
6. Any actual association between the mark or trade name and the famous mark.

15 U.S.C. §1125(c). Thus, in order to establish entitlement to injunctive relief, the district court found that a plaintiff must show that (1) its mark is famous; (2) its mark is distinctive; (3) Defendant began using the mark after Plaintiff's mark became famous; and (4) Defendant’s use of the mark is likely to cause dilution of Plaintiff's mark by blurring or by tarnishment of the mark. V Secret at 1247.

Fame
Trademark dilution exists to protect marks so famous that even non-infringing uses cause them to lose value. Typical trademark infringement actions are limited to the industry within which the mark is used. Trademark dilution, on the other hand, is a powerful form of protection because it allows one to reach outside of one’s industry to enjoin the use of a mark by another. Due to its powerful nature, claims of trademark dilution require that the asserted mark be famous to the “general consuming public of the United States.” 15 USC §1125(c)(2)(A).

In order to provide additional guidance, the TDRA states that in determining whether a mark possesses the requisite degree of recognition to be considered famous, the court may consider (1) the duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties; (2) the amount, volume, and geographic extent of sales of goods or services offered under the mark; (3) the extent of actual recognition of the mark; and (4) whether the mark was registered. 15 U.S.C. §1125(c)(2)(A). V Secret, 87 USPQ2d at 1248. Though the Moseleys did not challenge the fame of the Victoria’s Secret mark, the court discussed briefly how V Secret clearly possessed a famous mark.

One piece of evidence used to distinguish Victoria’s Secret as a famous mark was the existence of over 1,000 retail stores throughout the United States selling a wide range of products. Another fact used to establish the mark’s fame was the success of its online store. Victoria’s Secret was also ranked one of the top brands for women’s apparel in a study. Further evidence of fame was supported by sales numbers and advertising expenditures. V Secret, 87 USPQ2d at 1248.

Distinctiveness and Use
The court notes that “the Act defines dilution by blurring as an association arising from the similarity between a mark and a famous mark which impairs the distinctiveness of the famous mark. ‘There can be no dilution of a mark's distinctive quality unless the mark is distinctive.’” Id. (citing Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 216). However, the Moseleys did not contest the distinctiveness of the mark, so the issue was not carried further. There also was no question as to the use of the mark by plaintiffs prior to the Moseleys’ use.

Dilution by Blurring
The TRDA defines two ways a mark can be diluted: blurring and tarnishment. The TDRA defines “dilution by blurring” as an association arising from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark. 15 U.S.C. §1125(a)(2)(B). “Dilution by blurring occurs when consumers mistakenly associate a famous mark with goods and services of a junior mark, thereby diluting the power of the senior mark to identify and distinguish associated goods and services.” Ringling Bros. - Barnum & Bailey Combined Shows, Inc. v. Utah Division of Travel Dev., 955 F.Supp. 605, 615, 42 USPQ2d 1161 (E.D.Va. 1997), citing, Mead Data Cent., Inc. v. Toyota Motor Sales U.S.A., Inc., 875 F.2d 1026, 1031, 10 USPQ2d 1961 (2d Cir. 1989)).

The court recognized 5 factors relevant in determining the likelihood of dilution by blurring under the TDRA, each is discussed below. V Secret, 87 USPQ2d 1249. The first factor discussed by the court was the similarity between the marks in question. While not specified in the statute, courts have determined this requirement as meaning that the marks must be identical or substantially similar. Nike, Inc. v. Nikepal International, Inc., 2007 WL 2782030, *6 (E.D.Cal. 2007). “Victor’s Secret” and “Victoria’s Secret” were found to be substantially similar.

The second factor is the distinctiveness of the famous mark. Protecting a non-descript mark from dilution would likely be against the public interest. The law does not seek to grant users of generic marks exclusive rights to the term. “Victoria’s Secret” was found distinctive at the appellate court and the district court here deferred to the higher court’s decision.

The third factor is substantially exclusive use of the mark. As noted in Nikepal, “the law does not require that use of a famous mark be absolutely exclusive, but merely ‘substantially exclusive.’” Nikepal, 2007 WL 2782030 at *7. V Secret aggressively policed use of its mark and the Moseleys did not dispute plaintiff’s substantially exclusive use of the mark.

The fourth factor is consumer recognition of the mark. The court offered the commercial success of the retail stores, catalogs, and internet store as a measure of recognition of the brand. V Secret, 87 USPQ2d at 1251. The court also laid out some other examples of national recognition, including advertisements in national magazines, a televised fashion show, and television program appearances. Id. The court found that the mark had a high degree of recognition.

The fifth factor is an intent to associate with the famous mark. While the Moseleys denied ever having heard of “Victoria’s Secret,” claiming that the name came from the fact that Victor Moseley started the shop as a side job (a ‘secret’ from his employer), the court was not convinced. The similarity of the marks created a presumption of the Moseley’s knowledge of the senior mark. In addition, Victoria’s Secret branded shops and advertising were pervasive in the Louisville region where the Moseley’s conducted business. Further, it was revealed that Mr. Moseley was actually unemployed prior to opening the store. The court concluded that the Moseleys intended to associate with the famous mark.

While Victor’s Secret impinged on all the blurring factors noted above, likelihood of blurring was not found to exist. This is because the only evidence of blurring introduced by V Secret was the army colonel’s letter. The court found that the army colonel’s report was not evidence of blurring as the colonel was writing to inform plaintiff of use of a similar mark on tawdry goods. The colonel did not think that Victor’s Secret was a Victoria’s Secret shop, he was just offended by the association he saw defendants trying to create. This, to the court, actually was evidence of a lack of blurring. V Secret, 87 USPQ2d at 1252.

The evidence of the colonel’s reaction does not establish that defendant’s use of the mark served to hamper the distinctiveness of the famous mark. Victor’s Secret did not lessen the distinctive value of the Victoria’s Secret mark. “The offended colonel wrote to V Secret not to say ‘stop selling sex toys,’ but rather to alert them that their mark was being associated with an establishment selling such items in derogation of their name. Thus we have evidence not of blurring, but of tarnishment.” Id.

Dilution by Tarnishment
The TDRA states that “dilution by tarnishment” is an “association arising from the similarity between a mark … and a famous mark that harms the reputation of the famous mark.” 15 U.S.C. §1125(c)(2)(C). Dilution by tarnishment “generally arises when the plaintiff's trademark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner's product.” Diane Von Furstenberg Studio v. Snyder, 2007 WL 2688184 (E.D.Va. Sept. 10, 2007) at *4, quoting, Deere & Co. v. MTD Prods., 41 F.3d 39, 43 [32 USPQ2d 1936] (2d Cir. 1994).

“The army colonel's offended reaction to the use of ‘Victor's Secret,’ what he clearly believed to be a bastardization of the VICTORIA'S SECRET mark, for the promotion of ‘unwholesome, tawdry merchandise,’ suggests the likelihood that the reputation and standing of the VICTORIA'S SECRET mark would be tarnished.” V Secret, 87 USPQ2d at 1253. The evidence that defendant used the mark on generally unsavory products which plaintiff sought to avoid was clear evidence of tarnishment.

Having met the factors laid out in the statute as to fame and time of use, the court’s finding of dilution by tarnishment entitled V Secret to injunctive relief. The district court therefore granted summary judgment to V Secret and issued a permanent injunction barring the Moseley’s from using the mark.

Under Fifth Circuit law, four separate ethical cannons govern a disqualification motion: 1) the local rules of the district court in which the motion is filed; 2) the American Bar Association (“ABA”) Model Rules of Professional Conduct (“Model Rules”); 3) the ABA Model Code of Professional Responsibility (“the Model Code”); and 4) the rules of professional conduct employed by the bar of the state in which the court sits.

According to Rule 3.08(a) of the Texas Disciplinary Rules of Professional Conduct (“the Texas Rules”), a lawyer may not accept or continue employment “if the lawyer knows or believes that the lawyer is or may be a witness necessary to establish an essential fact on behalf of the lawyer’s client, unless [certain enumerated exceptions apply].” Tex. Disc. R. Prof. Conduct 3.08(a).

The Model Rules provide that a “lawyer shall not act as advocate at trial in which the lawyer is likely to be a necessary witness unless: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client.” Model Rules Of Prof'l Conduct R. 3.7(a).

Additionally, the Model Code provides that a “lawyer shall not accept or continue employment as an advocate before a tribunal . . . if the lawyer knows or believes that the lawyer is or may be a witness necessary to establish an essential fact on behalf of the lawyer’s client responsibility . . . .” Model Code of Prof’l Responsibility DR 5-101(b).

Lastly, the Local Rules of the Western District of Texas provide that lawyers shall “not conduct a trial when they know, prior thereto, that they will be necessary witnesses, other than as to merely formal matters . . .” Local Rule AT-5. These cannons correspondingly indicate that an attorney who is called to testify in trial may not serve as trial counsel.

However, the unanimity of these laws break down when another member of the firm is the witness called at trial. The Model Rules allow for other members of the firm to testify, while the Texas rules prohibit the same firm from having both trial attorneys and attorneys being called to witness absent a client’s informed consent. The Model Code treats members of the testifying firm the same as the testifying attorney for purposes of the prohibition on service as trial counsel. In reviewing the applicable rules, the District Court held that a strict prohibition on all members of Morgan & Finnegan serving as trial counsel is appropriate.

Specifically, the District Court noted that Crossroads indicated it will call Morgan & Finnegan's opinion counsel as witnesses, and will "attack the reasonableness of Dot Hill's reliance on the opinions. This reasonableness will also be dependent on facts communicated to opinion counsel. Thus, both the legal accuracy and the factual basis of the opinion will be at issue, which necessarily implicated the abilities of Morgan & Finnegan's attorneys who drafted the opinions.

Also, the trial attorneys would be placed in the awkward position of having to advocate for the credibility of their partners of their firm, and may be confronted with conflicts of interest between the client's interest and their firm's interest if the same firm's opinion attorneys were to testify adversely to Dot Hill’s interests. Any decision by Morgan & Finnegan's trial counsel not to call opinion counsel would be "immediately suspect" since there would be a suspicion that trial counsel refused to call the opinion counsel due to their divided loyalties, and there would be no assurance that Morgan & Finnegan would not have acted differently if the "capability and credibility of their partners were not in issue." The Court determined that the credibility of Morgan & Finnegan attorneys should not be an issue in the case, and would be if both trial and opinion counsel are in the same firm. Thus, based upon the totality of the issues raised, the District Court found that there were simply "too many potential rabbit trails and invitations to jury confusion" to allow Morgan & Finnegan also continue as trial counsel.

Lastly, because Dot Hill is already represented by two other law firms, the District Court found there was little evidence of prejudice on Dot Hill should Morgan & Finnegan be disqualified. On balance, the District Court disqualified Morgan & Finnegan as trial counsel due to their firm having also been opinion counsel since, "[u]nder these circumstances, it is far superior to require Dot Hill to bear the relatively minor cost of disqualifying one of the three firms that has appeared on its behalf than to confront the grave dangers posed by allowing Morgan & Finnegan to continue as trial counsel."

While conducting secret negotiations with Toshiba, Canon returned to Nano and obtained a non-exclusive, non-transferable right to use Nano’s FED patents. This Patent License Agreement prohibited sublicensing, but permitted Canon to share the technology with subsidiaries. The license agreement specifically defined a subsidiary as any company or entity which Canon "(a) owns or controls directly or indirectly more than fifty percent (50%) … of the outstanding stock conferring the right to vote at general meetings; or (b) has the right to elect the majority of the board of directors or its equivalent; or (c) has the right directly or indirectly to appoint or remove management." Nano was unaware at the time of the Patent License Agreement that Canon and Toshiba were close to finalizing their joint venture.

On June 13, 1999, Nano learned of the planned joint venture, and notified Toshiba that it would need a license to use Nano's FED patents.

In 2004, Canon-Toshiba formed SED as a joint venture, with Canon holding one more share of voting stock than Toshiba. Nano sued Canon in the Western District of Texas, alleging 1) fraudulent inducement, 2) fraudulent non-disclosure, and 3) breach of the covenant of good faith and fair dealing; 4) seeking a declaratory judgment that SED is not a subsidiary, and thus not covered by the licensing agreement, and 5) alleging breach of contract. Defendant Canon moved for summary judgment on claims three, four, and five, arguing that these claims must fail because SED is a subsidiary under the Canon-Nano license agreement, and its activities are therefore within the scope of the Patent License Agreement.

In forming SED, Inc., Canon and Toshiba agreed that each would select and nominate an equal number of directors. Also, both Canon and Toshiba agreed that both must consent to major business decisions made by SED Inc. Both parties also agreed that Canon will, at all times, own exactly one more share of SED’s common voting stock than Toshiba. As such, Canon theoretically had more than 50% of the “voting stock such that SED Inc. was a subsidiary.

The District Court found that SED was not a subsidiary of Canon. Specifically, although Canon owns more than 50% of the “voting stock,” Canon agreed not to vote against Toshiba’s interest in their Joint Venture Agreement. Under New York Law, Canon’s stock is therefore no longer “stock conferring the right to vote at general meetings” even if this change is not reflected in SED’s Charter of Incorporation. The Joint Venture Agreement also prevents Canon from electing a majority of the board and from controlling management. Thus the court found that SED. Inc. is not a subsidiary as defined by the Nano-Canon Patent License Agreement.

The District Court also recognized the broader equitable principle that corporate form will not be regarded when to do so would work fraud or injustice. In this instance, the Court found that Canon’s characterization of SED as a subsidiary “… simply can’t pass the smell test. Canon has bargained away its voting rights in SED. Dead fish don’t swim, dead dogs don’t hunt, and Canon’s dead voting rights don’t give it a “majority of the shares entitled to vote” in SED.”’

Because SED met none of the license’s definitions of a subsidiary, Canon’s motion for summary judgment was denied. A trial dateis set for March 2007.

The plaintiff operated Wild Willy’s Burgers as a family-style restaurant since 2001 in York Maine, and obtained federal registration of “Wild Willy’s Burgers” in 2003. The defendant operated Wild Willy’s Aleroom at the Shed, a bar and lounge. Plaintiff notified defendant of the trademark and requested that defendant cease using the name.

In assessing the likelihood of success on the merits, requisite for injunctive relief, the District court applied a Lanham analysis to determine the likelihood of confusion by defendant’s use of the same or similar mark as plaintiff. The court utilized the “Frisch factors.” The eight Frisch factors set forth in Frisch's Rests., Inc. v. Elby's Big Boy of Steubenville, Inc., 670 F.2d 642, 648, 214 USPQ 15 (6th Cir. 1982), cert. denied, 459 U.S. 916 (1982) are (1) strength of the plaintiff's mark, (2) relatedness of the goods or services, (3) similarity of the marks, (4) evidence of actual confusion, (5) marketing channels used, (6) likely degree of purchaser care, (7) the defendant's intent in selecting its mark, and (8) likelihood of expansion of the product lines.

In evaluating factor (3), the District Court held that the similarity of the marks is tested on sound, sight, and meaning. Other than one occasion of mistaken and unauthorized use of similar font type by defendant, the court noted no similarity between plaintiff’s advertising and defendant’s. However, the District Court found that there was identity in the sound of the respective names used and this similarity favored a finding of likelihood of confusion based upon factor (3).

With regard to similarity of goods (factor (2)), the District Court stated that there was a significant difference in plaintiff’s family-style restaurant and defendant’s bar/lounge, respecting menu options and bar attractions (darts, pool tables, etc.). Further, this difference in business approach (demographics) led the District Court to determine that there would be only a small chance of customer overlap between the two establishments. Thus, factor (2) favored the defendants.

There was no record of advertising channels/methods used by either party (factor (5), thus no indication of confusion was present based on those elements. However, the Court did find that the strength of mark (factor (1))favored the plaintiff given Williams’ licensing of the trademark (two other “Willy’s” had opened in New Hampshire and Massachusetts), restaurant success and critical praise from restaurant critics.

Ultimately, the fatal blow to plaintiff’s case came from absence of evidence of actual confusion (factor (4)). Plaintiff tried to cite several e-mails from unidentified parties claiming confusion over defendant’s advertising. The District Court did not allow these emails into evidence due to hearsay concerns. As there was insufficient evidence of actual confusion and since factor (2) favored the defendant, the District Court determined that the plaintiff had little chance of success on the merits, and denied the plaintiff's motion for preliminary injunctive relief.

Web Balance’s patent 6,128,279 (‘279 patent) described a method and apparatus for web site computer servers to handle incoming requests from client computers using URIs. URIs are essentially resources located on a particular server. Plaintiff’s “Weblogic” software performed similar, allegedly, infringing tasks. The case hinged on the usage and definitions of URI—Uniform Resource Identifiers, and URL—Uniform Resource Locators. Plaintiff’s software used a session ID to track a user’s interaction with a particular website. The session ID begins with a semicolon and is appended or inserted into the requested web address of the user—“http://www.zzz.com/app;jsessionid=1234.” The ‘279 patent claim 4 asserted a method for handling user requests, where the server handles the request or forwards it to a different computer for processing.

Plaintiff alleged Weblogic did not infringe claims 4, 6, or 8 of the ‘279 patent. Specifically, plaintiff cited 2nd embodiment of ‘279 in claiming that Web Balance considered the URI to be the discrete portion of a URL, “http://www.zzz.com/application”, where “/application” is the URI and “www.zzz.com” is the URL. Thus, Weblogic’s session ID could not be considered the URI. Web Balance countered that common usage of the terms URI and URL (as evidenced in Internet Request for Comments (RFC)) indicated that the entire string of characters in a web address constituted the URI, including both URL and session ID.

The court resorted to the analysis of Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) in concluding that, although the claims must be read in light of the specification, it is improper to confine such claims to any preferred embodiment. However, since the language of the patent did not adequately define URI, and the prosecution history was unrevealing, the court considered extrinsic evidence in the form of the parties’ expert testimony. Although both experts offered similar definitions of URI, the court concluded that the ‘279 patent language provided that a particular server would handle all the requests for a particular resource (URI). Weblogic’s system however allowed a particular server to handle all the requests from a specific user (session ID). Further, both systems would be recognized as performing their respective functions by those skilled in the art. Since the session ID did not specify a particular resource, rather only a specific user, it was fundamentally different than a URI. Hence, the court allowed plaintiff’s motion for summary judgment of non-infringement.

As there was no explicit waiver in the DMCA, the Court of Federal Claims reviewed the Tucker Act, 28 U.S.C. §1491, and found that this waiver only applies where the underlying cause of action creates a right to monetary damages against the Federal Government. As the DMCA did not contain a clear and unambiguous waiver of sovereign immunity and only vaguely imposes liability on "any party," the Tucker Act does not cure this omission.

Additionally, while 28 U.S.C. §1498(b) provides a waiver of sovereign immunity with regards to copyright infringement, the Court of Federal Claims found that the DMCA provides "a new violation and not merely a new subset of infringement." As such, 28 U.S.C. §1498(b) also does not afford relief for circumvention activities under the DMCA.

z4 Technologies owns patents 6,044,471 and 6,785,825, which are drawn to “product activation” methods which prevent the unauthorized use of computer software. At trial, z4 technologies asserted infringement of three claims (one from ‘471 and two from’825). The jury found infringement of all three claims by both defendants, and found Microsoft’s infringement willful. Hence, the jury awarded z4 $115 million from Microsoft and $18 million from Autodesk. z4 subsequently filed the motion denied in this decision, requesting a permanent injunction on defendants’ manufacture of sale of the infringing products

To deny the permanent injunction, the court relied on the recent Supreme Court result in eBay, Inc. v. Mercexchanges, LLC, 126 S.C. 1837 (2006). There the Supreme Court held that permanent injunctions in patent cases must meet the traditional four-factor test for equitable relief. To win, a plaintiff must show 1) irreparable injury, 2) that remedies at law (primarily damages) are inadequate compensation, 3) that, balancing the respective hardships of each party, equitable relief is warranted, and 4) that a permanent injunction would not disserve the public interest.

Irreparable Injury
z4 argued for a rebuttable presumption of irreparable injury, claiming that eBay incorporated the Federal Circuit presumption of irreparable injury when considering preliminary injunctions in patent cases. z4 also argued that the Federal Circuit’s presumption was incorporated from copyright law, and since eBay draws a parallel between patent and copyright law, a presumption is appropriate. The court rejected both these arguments for a presumption of injury, relying on the plain wording of the eBay case which “places the burden of proving irreparable injury on the plaintiff.” Id. at 4.

The court also rejected z4’s claims that its “tremendous efforts to commercialize” their invention failed due to Microsoft’s infringement and that Microsoft’s infringement will continue to damage z4’s efforts to market its invention. The court, finding that Microsoft does not sell, license, or distribute individually package product activation software, nor do Microsoft customers purchase MS products for their software activation functionality, could find no logical way in which Microsoft’s infringement damaged z4’s market.

Adequacy of Remedies Available at Law
The court rejected z4’s claim that monetary damages for future infringement were not sufficient to compensate for the loss of their right to exclude Microsoft’s use of z4’s patents. eBay, says the court, indicated that a violation of the right to exclude does not inevitably mean that the loss is beyond compensation. In cases where the infringer damages the market for the patent holders enterprise by saturation or damage to the patent holder’s reputation, monetary compensation may be inadequate due to the difficulty of calculating the loss of market share. The District Court distinguished such cases from this one because here the only loss of market share is lost sales to Microsoft itself. Monetary damages can be easily calculated for this loss.

The court also noted that Justice Kennedy’s eBay concurrence suggested that monetary damages are often sufficient when the infringing practice is “but a small component of the product” at issue. Since in this case product activation is a small feature of the Microsoft Windows and Office software, Justice Kennedy’s concurrence supports a conclusion that monetary damages are sufficient and an injunction may be against the public interest.

Finally, the court said that available legal remedies are sufficient because Microsoft plans on phasing out the infringing products with the next three years. The court reasoned that calculation of a royalty for this period should not be too difficult or indefinite. Also, the court found that there was is no credible issue with Microsoft’s ability to pay these future royalties.

For the above reasons, the court held that z4 had not show the insufficiency of monetary damages, and therefore the second prong of the factors for injunction weighed in Microsoft’s favor.

The Balance of Hardships
z4’s request for injunction, if granted, would have required Microsoft to 1) after a reasonable grace period, cease selling infringing versions of Windows and Office and 2) immediately deactivate Microsoft product activation servers. The court found that the hardship these two requirements would inflict on Microsoft could include the enormous expense of repairing versions of software that will soon be obsolete and the potential of rampant piracy once product activation servers were deactivated. In contrast, z4’s hardship is one that can be remedied with monetary damages. Therefore, the balance of hardships weighs in favor of Microsoft.

The Public Interest
The court noted that Microsoft products are incredibly popular, and while the actual effects of an injunction can only be hypothesized, even a small disruption in the availability of these products would likely be at least somewhat harmful to the public. Likewise, deactivation of Microsoft’s product activation servers may cause an increase in piracy and the potential of harm from illegitimate software. In contrast, denying the injunction at issue would seem to have no harmful effects on the general public. Thus, while the damage to the public is somewhat speculative, this prong also weighs against granting the injunction.

Conclusion
Thus, the court found that each of the four traditional equitable relief factors weighed against granting z4’s request for an injunction. Instead, the court issued an order severing z4’s claim of future damages and requested the filing of a new complaint. The court also ordered Microsoft to file quarterly reports on the number of Windows and Offices units shipped so as to facilitate the calculation of future damages. This straightforward application of the newly decided eBay case is likely only the first of many decisions to deny what used to be almost automatic injunctions against infringers.

Plaintiff argued that it had no product to mark; its website was simply a method to obtain a service provided using the patented system. For intangible inventions, the Supreme Court has said that marking can only be given in connection with a fabricated article; patentees who do not provide a fabricated article have no duty to mark. Wine Ry. Appliance Co. v. Enterprise Ry. Equipment Co, 297 U.S. 387 (1936). In the present case, the patented database and transaction servers are neither made nor offered for sale by IMX. In fact, customers never see the servers physically. Thus, according to the Plaintiff, marking the fabricated, tangible system would not serve the notice purpose of 35 U.S.C. 287(a) since the actual system itself is not before the relevant public.

In finding for the Defendant, the District Court interpreted the Federal Circuit as further explaining the holding of Wine Ry. Appliance Co. in American Medical Systems, Inc. v. Medical Engineering Corp., 6 F.3d 1523 (Fed. Cir. 1993). Under the standard in American Medical Systems, to the extent there is a tangible item to mark by which notice could be given, the party has a duty to do so in order to obtain the benefits of increased damages under 35 U.S.C. 287. The court held that the IMX website was a tangible item through which the patented system was accessed by the relevant public. Since the IMX website was intrinsic to the patented system, the website needed to be marked with an appropriate patent marking in accordance to 35 U,S,C, §287(a) in order to qualify for pre-notice damages.

Lastly, the Plaintiff asserted that, since the infringed patents were technically on its company website in the form of press releases, the website was marked for the purposes of 35 U.S.C. 287. However, the court found that that the existing descriptions on the website including mentions of a “patented process,” “patented system,” and a link to the patent were not sufficient to meet the requirements of 35 U.S.C. 287(a) since they did not obviously relate to the website through which customers would access the patented database and transaction servers.

The terminal disclaimer disclaimed any term of the ‘538 patent that would otherwise have extended beyond the ‘422 patent, which expired on June 23, 2003. The original termination date of the ‘422 patent was June 3, 2002 (17 years from its issue date) but, pursuant to 35 U.S.C. §154, this date was reset to June 23, 2003 (20 years from its filing date). The USPTO agreed that the ‘538 patent’s expiration date should be reset at June 23, 2003 as well since the term of the ‘538 patent was linked to the term of the ‘422 patent. Thus, based on the terminal disclaimer, the ‘538 patent had been scheduled to expire on June 23, 2003.

On June 4, 2003, pursuant to 35 U.S.C. §156, the PTO extended the term of the ‘538 patent for a period of 1810 days, running from June 23, 2003, based on FDA review. Teva submitted an ANDA to the FDA seeking approval to engage in the commercial manufacture, use, and sale of zaleplon, a generic product which is bioequivalent to King’s Sonata drug products. The crux of Teva’s argument is that the term of a terminally disclaimed patent may not be extended under 35 U.S.C. §156 and, therefore, the ‘538 patent expired on June 23, 2003.

On the issue of whether a terminally disclaimed patent is extended under 35 U.S.C. §156, the District Court held that a terminally disclaimed patent is eligible for extension under 35 U.S.C. §156. Specifically, the District Court held that 35 U.S.C. §156 is plain and unambiguous: a terminally disclaimed patent is not barred from receiving a 35 U.S.C.§156 extension. The only limitations on the provision of a 35 U.S.C.§156 patent term extension are those expressly enumerated at §156(a)(1)-(5). Nonexistence of a terminal disclaimer is not among those enumerated conditions, and, therefore, cannot be construed to be a condition for obtaining a 35 U.S.C. §156 patent term extension.

Additionally, the District Court compared 35 U.S.C. §156 and 35 U.S.C. §154(b) to show that unlike 35 U.S.C.§156, 35 U.S.C.§154(b) expressly refers to terminally disclaimed patents. Specifically, 35 U.S.C.§154(b) provides that "[n]o patent the term of which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.” As such, 35 U.S.C.§154 demonstrates that Congress knows how to draft a clear exception barring a terminally disclaimed patent from receiving a patent term extension.

Moreover, the District Court found that Congress amended both 35 U.S.C.§156 and 35 U.S.C.§154 in Pub. L. No. 103-465, §532 (1994), in which Congress initially enacted 35 U.S.C.§154’s exception for terminally disclaimed patents, and has amended both provisions several times since it enacted Pub. L. No. 103-465, §532 (1994). The Court thus presumed that Congress acted intentionally and purposely when it included an exception for terminally disclaimed patents in 35 U.S.C.§154 and omitted any exception for terminally disclaimed patents in §156.

Lastly, the District Court noted that the United States Patent and Trademark Office, in 37 C.F.R. §1.775(a), states that “[i]f a determination is made pursuant to §1.750 that a patent for a human drug, antibiotic drug or human biological product is eligible for extension, the term shall be extended by the time as calculated in days in the manner indicated by this section. The patent term extension will run from the original expiration date of the patent or any earlier date set by terminal disclaimer (§1.321).” Since the PTO promulgated §1.775(a), Congress amended §156 six times. However, Congress has never amended §156 to undermine the PTO’s interpretation of §156 or to change §156’s language to bar terminally disclaimed patents from receiving a §156 extension.

As a result, Medrad filed a second reissue application to remedy the problems of the ‘648 patent. The PTO issued the ‘602 patent, the only divergence from its immediate predecessor is that during the prosecution of the ‘602 patent, the missing supplemental reissue declarations were filed. The ‘602 patent does not differ from the ’648 patent in the specifications, drawings, or claims.

Tyco filed a motion for summary judgment of invalidity of the ‘602 patent, arguing that the reissue was defective under the reissue statute, 35 U.S.C. § 251. This statute provides that a reissue application can only be filed to correct one of four statutorily identified errors: a defect in the specification, a defect in the drawings, or an error in either overclaiming or underclaiming in the patent. Medrad contends that a reissue can correct any number of patent prosecution mistakes, including failure to file the appropriate declarations.

The District Court relied on the case law of the Court of Appeals for the Federal Circuit (CAFC), which does not establish any precedent of 35 U.S.C. § 251 being used to correct procedural errors made during prosecution. Rather, all of the CAFC cases identified by the court that address this issue begin their analysis by identifying which of the four statutorily identified errors the reissue applicant is trying to correct. That is, the courts have consistently interpreted the reissue statute to require that the mistake sought to be remedied be within the express terms of the statute. Therefore, the District Court granted Tyco’s motion for summary judgment of invalidity of the ‘602 patent since this reissue patent was not based upon an issue for which reissue can be sought under 35 U.S.C. § 251. As such, while reissue is generally available for a multitude of errors, reissue is not available for more procedural defects not within the scope of the reissue statute itself.

On the issue of whether the phrase "Frosty Treats" is a protectable trademark, the Eighth Circuit reviewed the factors of whether a mark is protectable. For a mark to be protectable, the mark must first be categorized as (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or fanciful. Court held that, while "Frosty Treats" as a mark is not generic, the mark is descriptive. Thus, the mark is only protectable to the extent the mark has acquired secondary meaning in the relevant market. Therefore, Frosty Treats needed to show that the mark had acquired a secondary meaning to identify its goods and distinguish them from those of others. According to the evidence of record, the evidence indicated that respondents to a survey conducted recognized the truck with the Frosty Treats phrase simply as a generic ice cream truck, thus failing to establish secondary meaning for the phrase "Frost Treats" on the ice cream. Although direct evidence such as consumer testimony or surveys are probative of secondary meaning, secondary meaning can also be proven by circumstantial evidence. However, the circumstantial evidence offered by Frosty failed to raise a genuine issue of material fact. Therefore, the Court concluded that the "Frosty Treats" phrase was not protectible under trademark law.

On the issue of whether the Safety Clown graphic is a protectable mark or a non-protectable functional graphic, the District Court held that because the Safety Clown graphic serves a purpose, the graphic is functional and therefore not protectible. The Eighth Circuit disagreed since District Court evaluated the issue using the colloquial meaning of "functional" rather than specialized meaning it has in trademark law. In trademark law, "a product feature is functional, and cannot serve as a trademark, if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." To be functional, the feature must be necessary to afford a competitor the means to compete effectively. There was no evidence that the exclusive use of the Safety Clown graphic would deny Frosty Treats' competitors the ability to compete effectively or place competitors at any non-reputational disadvantage. Therefore, whether the Safety Clown graphic is functional presents a factual issue not appropriate for resolution upon a motion for summary judgment.

However, even assuming that the Safety Clown graphic and the mark "Frosty Treats" are protectable as trademarks, the Eighth Circuit held that there was no likelihood of confusion. Specifically, the Eighth Circuit evaluated whether a likelihood of confusion exists with respect to the trade dress of the trucks and the Safety Clown in light of six criteria: (1) strength of owner's mark; (2) similarity between the owner's mark and the alleged infringer's mark; (3) degree to which the products compete with each other; (4) alleged infringer's intent to pass off its goods as those of the trademark owner; (5) incidents of actual confusion; and (6) type of product, its costs and conditions of purchase. For the first factor, the Eighth Circuit held that the Safety Clown mark and trade dress of Frosty Treats' truck are weak marks since the use of a clown on an ice cream trucks is hardly novel and Frosty Treats' vans resemble a generic ice cream truck and therefore lack distinctiveness within the marketplace. For the second factor, the Eighth Circuit held that the Safety Clown mark and trade dress of Frosty Treats vans are visually distinct from depictions in video games and no reasonable juror could find them similar. In regards to the third and fourth factors, the Eighth Circuit held that SCEA's products do not compete with Frosty Treats and no evidence was shown that SCEA intends to pass off Frosty Treat's mark as its own. For the fifth factor, Frosty Treats failed to provide any proof of actual confusion by a non-interested party, with the only evidence of actual confusion being the testimony of an interested person. Lastly, in deciding the sixth factor, the Eighth Circuit held that the sixth factor is more important in confusion-of-source cases where degree of care that a purchaser exercises in purchasing a product can eliminate confusion that might otherwise exist. In this case, Frosty Treats' action is based on confusion of sponsorship, and thus the customers' degree of care is of diminished importance. Accordingly, Frosty failed to present sufficient evidence to create a triable issue as to the likelihood of confusion between the trade dress of Frosty Treats' trucks or its Safety Clown.

Lastly, the Eighth Circuit held that Frosty Treats does not have actionable claims for trademark dilution under federal and Missouri law. Specifically, Frosty Treats failed to show that the marks and trade dress at issue are famous as required by 15 U.S.C. §1125(c). In addition, the Eighth Circuit held that Frosty Treats failed to show "likelihood of injury to business reputation or of dilution of the distinctive quality of mark….shall be ground for injunctive relief," since the marks and trade dress at issue are so dissimilar that it would be erroneous to hold that there was a likelihood of dilution. Frosty Treats v. Sony Computer Entertainment America (SCEA), 2005 U.S. App. LEXIS 15127, Civ. Case No. No. 04-2502 (8th Cir. July 25, 2005)

License Agreement: Patented cartridge inside sold subject to a Single Use Only restriction. It is a violation of this agreement and/or it is unlawful to resell, reuse, refill or remanufacture.

On motion for summary judgment, the District Court for the District of Northern California reviewed the law of patent exhaustion and found that, for exhaustion to attach, the patented article must have been sold without restrictions on the use. Further, if the sale was conditional, patent exhaustion does not apply. In analyzing the sale of the printer cartridge having the single use restriction, the District Court noted that the single use restriction was obviously placed and readily seen by the end user. The District Court further held that the restriction was included in a valid shrink wrap license and that the user is able reject the restriction by obtaining a more costly version of the cartridge from Lexmark, which was evidence that the end user received consideration for the restriction on the cartridge's use. As such, the District Court held that the restriction was valid and enforceable such that the sale was conditional. Since the sale of the cartridge was conditional, the patent was not exhausted. Therefore, the District Court granted summary judgment dismissing ACRA's claims of unfair trade practices, and found that Lexmark's use of the single use restriction was proper and "falls squarely within Lexmark's patent right." ACRA v. Lexmark Int'l Inc., Civ. No. 01-4626 (N.D. Cal. Sept. 29, 2003).

While the case is currently on appeal pending a decision by the Ninth Circuit, the District Court's decision is instructive in showing that, by placing a condition on the sale of the patented consumable, it is possible to preserve the patent rights for that patented consumable. Specifically, the use of end user license agreements would appear to directly prevent the end user from performing one or more tasks not required for the intended end use of the consumable (i.e., using the printer cartridge in the printer) while validly preventing the unauthorized use of the consumable (i.e., re-filling the printer cartridge).