Achieving Section status from the MSBA in June 2007, the Intellectual Property Section made its transition to a “dues paying” Section in July 2009. The Section continues to provide quality benefits to its members, including Webinar programs on timely topics, publication of the Section’s newsletter and its Annual Law Update, and access to the Section’s searchable member database. The Section’s most recent Webinar focused on damages in intellectual property law cases, while the Section’s Annual Meeting program held this past Summer provided an overview of recent developments in intellectual property law.
We hope you continue your membership and encourage others to join our Section. If you would like to get involved or have any questions, please contact any of our officers listed below.
| Vasilios Peros
Chair-Elect of Section and
Publications Committee Chair
| Karen Maher Davis |
Membership Committee Chair
| Steven C. DeSmet
Communications Committee Chair
| Abby Bhattacharyya |
Programs Committee Chair
In this Fall 2009 Section newsletter, we explore several recent developments in intellectual property law. One article addresses the intersection of trademark licensing versus franchising law, and highlights when a business relationship becomes a franchise. Another article addresses recent changes to Federal Trade Commission rules regarding use of endorsements and testimonials in advertising, which expand coverage to include advertising messages in websites, blogs, and other social media. A third article discusses a recent decision regarding double patenting. A final article discusses copyright issues in connection with the dispute between the maker of the Barbie® dolls and the maker of the Bratz® dolls.
We will continue to facilitate publication opportunities for our members. To that end, we encourage you to submit topics that you would like to see discussed in future newsletters, and to let us know when you desire to write an article.
MSBA Intellectual Property Section
By: Cynthia Blake Sanders
Grass roots marketing just became a little less green. The Federal Trade Commission (FTC) issued the final updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (Guides). Effective December 1, 2009, the new Guides expand in scope to include advertising messages in websites, blogs, and other social media. Bloggers failing to follow the Guides could pay up to $11,000 per violation. Advertisers and agencies connected to a blogger’s post may share liability. It’s imperative that businesses review current marketing practices with the new Guides now. The FTC can challenge misleading and deceptive advertising anytime.
That’s because the new Guides do not change the law. The Guides were developed to help advertisers and agencies determine if their advertising is deceptive under Section 5 of the FTC Act. The Guides provide principles and examples demonstrating how the FTC determines if advertising is misleading. By following the old Guides, advertisers and ad agencies could steer clear of FTC enforcement actions and the class action lawsuits and state enforcement actions that often follow. The new Guides cast a broader net, and in uncharted waters. No, the new Guides do not provide an unambiguously safe path for blogging about products. But they do reveal the types of marketing activities the FTC is targeting.
Last revised in 1980, the new Guides present several major changes. Generally, Section 5 holds advertisers and their agents liable for misleading interpretations of their advertising messages. Advertisers cannot rely on a single non-deceptive interpretation of their messages to avoid liability from deceptive interpretations of its ad messages—even if it is the primary message. The FTC focuses on “consumer take-away,” so any message understood by reasonable consumers to be deceptive is actionable. This is constitutional— the First Amendment does not protect misleading speech. Advertisers must also adequately substantiate performance claims in ads with clinical studies and consumer surveys.
Reflecting the widespread public impression that blogs are a credible source of unbiased product information, the new Guides reflect the FTC’s increased scrutiny of product information published on the Internet. The most prominent change to the Guides is the focus on transparency in the sponsorship of advertising messages. Bloggers (including Friends, Connections, astro-turfers, or Tweeps) must disclose material relationships with advertisers whose products are discussed in their posts so consumers can detect and weigh a blogger’s bias. A connection or relationship is material if a blogger receives substantial (a “free car”) or repeated (a series of “free” inexpensive products) compensation from an advertiser or agent to write about products or services.
Bloggers must also substantiate performance claims in their posts (“I lost 100 pounds in 6 months using the Extreme Diet plan”) appearing in their posts, even if the blogger isn’t paid or hired by the advertiser. The blogger cannot make statements about products or services that the advertiser cannot support. Even if its relationship with a blogger is attenuated, an advertiser may be liable for a blogger’s misleading and deceptive messages. The new Guides similarly now hold celebrities responsible for misleading and deceptive messages they deliver. Although the FTC acknowledges celebrities are often unaware of information that would make an ad message misleading, both advertiser and celebrity are charged with fact-checking if a claim about a product seems too good to be true.
The old Guides permitted testimonials to sidestep the substantiation requirement with a “disclaimer of typicality.” The new Guides now require substantiation of testimonials containing performance claims, but if the advertised results are truthful but unsupported by substantiation, the testimonial must bear a disclaimer stating the actual results a consumer can expect in the same situation (“most women following the Extreme Diet plan for 6 or more months lost more than 15 pounds”).
Two main themes run through the new Guides— transparency and mutual responsibility of all participants in marketing activities to ensure advertising messages don’t deceive consumers. The new Guides continue to place primary responsibility for averting deceptive messages on advertisers. Whether or not an advertiser sustains liability for a blogger’s failure to follow the Guides’ disclosure and substantiation requirements depends on what steps the advertiser took to ensure that the blogger understood her responsibilities and what messages about a product were permissible. Advertisers can reduce exposure to FTC enforcement actions by taking a few steps to review and improve their situation: (1) assess current marketing practices in-house and by third parties— including unknown “voluntary” marketing partners; (2) audit present grass roots marketing efforts and prune efforts that fall outside of the recommendations of the new Guides; (3) establish policies and procedures for social media marketing that ensure appropriate disclosure and clearance of ad messages; and (4) establish a monitoring program to keep track of all marketing practices.
 Cynthia Blake Sanders is an associate at Ober Kaler.
By: Robert Y. Raheja
Based on the language of 35 U.S.C. §101, a person who invents any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor. Hence, the doctrine of double patenting prohibits an inventor from obtaining more than one patent for the same invention. The doctrine prevents an inventor from improperly extending the term of patent by successively filing multiple applications directed to the same patented invention, and it prevents harassment against an alleged infringer by multiple owners of patents having either the same inventive concept or the obvious variation thereof.
The doctrine of double patenting is usually invoked when another pending and related application, or prior patent, claims the same invention or the claims being rejected are obvious in view of the prior patent or application, there is at least one common inventor and/or a common owner, and the prior patent is not prior art under 35 U.S.C. §102(b). The obviousness rejection under this doctrine is normally based on a one-way test, which tests whether the application claims are obvious over the patent claims. However, in some instances, a two-way test, which also tests whether the patent claims are obvious over the application claims, is required.
In In re Fallaux, the United States Court of Appeals for the Federal Circuit (“CAFC”) was faced with an issue of whether the inventors were entitled to rely on the two-way test. The Fallaux family, , filed its first U.S. patent application, Serial No. 08/793,170 (the “ ‘170 Application”), that named Dr. Fallaux as one of the named inventors, on March 25, 1997. A U.S. Patent issued in connection with such patent application on November 30, 1999. Six years later, the fifth continuing application in the Fallaux family series was filed on July 11, 2003, claiming priority to ‘170 Application filed on March 25, 1997.
The reference patents for the double patenting rejection (the “Vogels Patents”), which were related to the fifth continuation application from the Fallaux family by way of a single common inventor, were filed for on June 12, 1998 and on July 21, 1999, and issued on July 2, 2002 and January 22, 2002, respectively.
The examiner rejected claims in the fifth continuation application by applying the one-way test in view of claims of the Vogels Patents. Dr. Fallaux attempted to overcome the rejection by arguing that the examiner should have applied the two-way test. The examiner maintained that Dr. Fallaux was not entitled to the two-way test. On appeal, the Board of Patent Appeals and Interferences (“BPAI”) agreed with the examiner. Dr. Fallaux appealed to the CAFC. The CAFC affirmed the BPAI decision that Dr. Fallaux is not entitled to the two-way test.
The issue on appeal was whether the one-way test or two-way test applies. As a general rule, the one-way test for obviousness type double patenting rejection is applied between an issued patent and an application filed on the same or a later date, and in which the U.S. Patent & Trademark Office (“PTO”) rejects the claims of the later-filed application based on claims of the issued patents. The two-way test is a narrow exception to the general rule of one-way test and is applied only in a limited situation, specifically, where (i) the claims of an earlier filed patent application are rejected based on claims of a later-filed but earlier issued patent, and (ii) the issuance of the later-filed claims prior to the claims of an earlier filed patent application was solely due to administrative delay on the part of the PTO. In affirming the BPAI decision, the CAFC considered at least the following.
First, the CAFC noted that Dr. Fallaux was not seeking an unjustified patent term extension because the claims in fifth continuing application had an effective filing date going back to the priority date of March 25, 1997. Second, the CAFC recognized that since the fifth continuation application from the Fallaux family and the Vogels Patents were not commonly owned even though they shared a single common inventor, the obviousness type rejection could not be overcome by filing a terminal disclaimer. Therefore, the CAFC indicated that the harassment by multiple owners was a concern because the owner of each patent could separately enforce its patent against an alleged infringer.
More importantly, the CAFC agreed with the BPAI because there was substantial evidence on the record that Dr. Fallaux was entirely responsible for the delay that caused the Vogels Patents to issue prior to the fifth continuation application. Specifically, the CAFC attributed the entire delay to Dr. Fallaux because the prosecution record indicated that Dr. Fallaux filed the fifth continuation application “to cover a potential product of a competitor” that he learned about during the prosecution of the other applications in the Fallaux family series. The CAFC found this argument significant because it reflected that the timing of the issuance of the patents was the result of Dr. Fallaux’s decisions, and not the PTO’s administrative delay.
In view of the foregoing, a two-way test for an obviousness type double patenting rejection is applicable only in a limited situation where the claims of a patent application are rejected based on claims of a later-filed but earlier issued patent, and the PTO (not the applicant) was solely responsible for the delay.
 Robert Y. Raheja is an associate at Westerman, Hattori, Daniels & Adrian, LLP.
By: Cheryl L. Slay
Bryant v. Mattel, CV 04-09049 (CA Dist. Ct., C.D. 2008) - currently pending in U.S. District Court in California and often referred to in the popular press as the Barbie v. Bratz cases - explores the contours of ownership of creative works developed as works made for hire. The contest is between well-known toymaker Mattel, Inc. (“Mattel”), manufacturer of the Barbie doll franchise, and MGA Entertainment (“MGA”), maker of rival Bratz fashion dolls, for ownership of the popular Bratz dolls and products.
The procedural history begins in California Superior Court in 2004, when Mattel filed suit against Carter Bryant, a former employee, for breach of contract, breach of fiduciary duty, and other claims alleging that he breached agreements with Mattel assigning all rights for inventions, concepts, and other intellectual property to Mattel while in its employ. A series of attempts by Bryant at removing the case to federal court ensued. Additionally, MGA intervened and was made a party to the case in 2004, whereby Mattel sued MGA for copyright infringement (and certain torts) and ownership of the Bratz dolls. MGA also filed its own copyright infringement suit alleging that Mattel had infringed the Bratz dolls by incorporating Bratz features in Mattel’s “My Scene” dolls. Ultimately, the case was moved to federal district court in California, and in 2006, Judge Stephen Larson ordered the consolidation of Bryant v. Mattel, Inc., CV 04-09049, Mattel, Inc. v. Bryant, CV-04-09059, and MGA Entertainment, Inc. v. Mattel, Inc., CV 05-02727, now consolidated as Bryant v. Mattel, CV 04-09049.
Bryant settled his case with Mattel for an undisclosed amount, leaving MGA and Isaac Larian, MGA’s chief executive officer, as co-defendants. Although no longer a party to the lawsuit, Bryant’s actions during his tenure as a Mattel employee largely form the basis for the infringement allegations against MGA.
Bryant was employed by Mattel as a product designer . As a condition of employment, he signed an Employee Confidential Information and Inventions Agreement, which prohibited him from “engaging in any employment or business other than for [Mattel], or invest[ing] or assist[ing] (in any manner) any business competitive with the business or future business plans of [Mattel].” Mattel v. Bryant, 441 F. Supp. 2d 1081, 1085 (CV 04-9059, C.D. Cal. 2005). In late 2003, Mattel learned that Bryant had entered into an agreement with a competitor, while employed with Mattel, to design products and receive royalties for the design of the competitor’s products. Mattel’s Complaint alleged that the nature of Bryant’s agreement with the competitor was that all such products created by Bryant would be considered works for hire for the competitor, i.e., MGA.
The dispute surrounds whether the work produced by Bryant for MGA, i.e., specific doll prototypes (as well as resultant products developed therefrom), are products actually owned by Mattel through the agreements Bryant signed, and as works for hire under copyright law. Mattel alleged that Bryant’s prototypes were developed on Mattel’s time, with Mattel’s resources and appropriately belong to Mattel. The dispute also alleges that the doll prototypes in question were copied by Bryant from an abandoned Mattel project known as Toon Teens, which Bryant allegedly learned of during his employment with Mattel.
Jury trial commenced in May 2008, and a verdict was returned in August 2008 awarding Mattel $100 million in damages, of which only $10 million was awarded for copyright infringement. The total award is substantially less than the nearly $2 billion sought by Mattel, but a significant award nonetheless. Moreover, the momentous victory for Mattel was handed down by the court in December 2008 in an order granting Mattel’s motion for a permanent injunction against MGA – to enjoin further sale and use of the Bratz product line. The injunction has been stayed through the end of 2009.
In granting the permanent injunction the court applied the standard two-pronged test for proving copyright infringement – (a) access to the infringed works, plus (b) substantial similarity between the copied and original works, and found that: