Colorado Bar Association INTELLECTUAL PROPERTY SECTION NEWSLETTER UPCOMING IP SECTION EVENTS August 2010 Perspectives of a Non-Practicing Entity September 16, 2010, 11:45 a.m. to 1:15 p.m. Location: The Denver Chop House, Large Banquet Room Speaker: Jonathan Taub, Vice President of Acacia Technologies Mr. Taub joined Acacia in July 2007 as Vice President. Prior to joining Acacia, he was Director of Strategic Alliances for Microsoft's Mobile and Embedded Devices division and Business Development Manager for Microsoft's Security Business Unit. Prior to joining Microsoft, Mr. Taub was Director of Business Development at Nortel Networks. He joined Nortel following the company's $450 million acquisition of software infrastructure developer Epicon, Inc., where he headed business development. He previously was an intellectual property and corporate law associate with Covington & Burling in Washington, D.C. and an analyst at Santander Investment in Madrid. Mr. Taub holds a B.S. from the Wharton School of Business, University of Pennsylvania and a J.D. from Harvard Law School. Cost: $35 for IP Section Members, $45 for the general public, and CU/DU Law students are free. Includes a catered lunch and valet parking. RSVP by calling (303) 860-1115 ext. 727 or by emailing lunches@cobar.org before Noon on Tuesday, September 14, 2010. Cancellations after Tuesday, September 14, 2010 and no-shows will be billed for the cost of the program. Checks can be sent to the Colorado Bar Association, 1900 Grant St., Suite 900, Denver, CO 80203. Also, please call or e-mail your RSVP when sending a check. Checks should be made payable to the CBA. If leaving a message, please spell your name, specify that you are attending the Intellectual Property Section July Luncheon, leave your phone number, and specify if you would prefer a vegetarian lunch. Save The Date: False Marking: a Case Law and Legislative Update October 14, 2010, 11:45 a.m. to 1:15 p.m.
Location: The Denver Chop House, Large Banquet Room Speaker: Jonathan Spivey, Partner, Foley & Lardner LLP SPECIAL ANNOUNCEMENT This is the inaugural year for the Colorado IP Inn of Court. American Inns of Courts are designed to improve the skills, professionalism and ethics of the bench and the bar. The Colorado IP Inn of Court intends on embracing those goals while providing the local IP practitioners with an opportunity to socialize with others in their core area of practice. A Colorado IP Inn of Court is a very exciting development for the Colorado IP community and more information will be available shortly. REPORT ON PAST IP SECTION EVENTS Marybeth Peters: Copyrights in the Age of Electronic Content: The Impact of Reed Elsevier and Google Books On July 15, 2010, Marybeth Peters, the United States Register of Copyrights, discussed the changing landscape of copyright law. In an age of e-books and other electronic content, copyrights are more relevant than ever. Ms. Peters discussed these changes, especially as affected by the recent copyright class actions such as Reed Elsevier v. Muchnick and the Google Book litigation. Ms. Peters has also served as acting general counsel of the Copyright Office and as chief of both the Examining and Information and Reference divisions. Peters is a frequent speaker on copyright issues; she is the author of The General Guide to the Copyright Act of 1976. She delivered the 2004 Brace Memorial Lecture (at New York University School of Law) and the 1996 Horace S. Manages Lecture at Columbia University School of Law. She serves on the Intellectual Property Advisory Committees of several law schools. Ms. Peters has received numerous awards for her work as Register of Copyrights. A special thanks goes out to the Copyright Society of the USA who co-sponsored this event. The Copyright Society of the U.S.A. is a center of the U.S. copyright community for business people, lawyers in private practice and in-house, law professors and law students who share a common interest in copyright and related intellectual property rights. Its website is found at www.csusa.org.
IP Section Blog The IP Section blog is at http://www.ipsectioncolorado.org/. You can find news from and links to other Colorado and national IP resources, connect with other IP Section members, provide input to Section Officers, and get up-to-date information about IP Section activities. Be sure to register to get the full benefit of the blog. Taped IP Section Luncheon Meetings CBA/CLE tapes the IP Section Luncheons for later access and CLE credit. The following IP Section meetings are now available online: Global IP Strategy: Using Data to Secure A First Win Emerging Trends and Strategies in Reexamination IP Due Diligence They can be found at: http://www.cobar.org/cle/onlineprograms.cfm?majorcat=intellectual%20prop%2e&id=20023 Call for Suggestions or Ideas The IP Section Officers are also soliciting your suggestions and ideas for topics and speakers for our Luncheon programs for 2010. Please forward any comments you may have to Michael Dulin at mdulin@hkh-law.com. IP Newsletter Subject to editorial discretion and review, the IP Section newsletter is open to the submission of short articles and columns on IP topics of interest. If you are interested in contributing, please contact Michael Dulin at mdulin@hkh-law.com. IP Section Website Don t forget to check out the Colorado Bar Association website. Please refer to it often for updates on news and events. http://www.cobar.org/group/index.cfm?entityid=patent The Colorado Bar Association has posted member directories for each practice section on-line. See ours at: http://www.cobar.org/directory/sections.cfm?section=patent Our contact at the Colorado Bar is Melissa Nicoletti, the Director of Sections and Committees. She can be reached at (303) 824-5321, or melissan@cobar.org. Recently Filed U.S.D.C. Colorado Cases
CAPTION TYPE CASE NO. JUDGE FILING ATTORNEY(S) Home Design Services, Inc. v. Precision Paving & Construction, Inc., et al. Copyright 10cv1619 Zita L. Weinshienk Anthony M. Lawhon Keith Boughton Hunter Douglas Inc., et al. v. Homesublime, LLC HealthOne of Denver, Inc., et al. v. UnitedHealth Group Incorporated Hunter Douglas Inc., et al. v. Global Custom Commerce, L.P. Chevron Intellectual Property, LLC, et al. v. Frausto, et al. Chevron Intellectual Property, LLC, et al. v. CLM Associates, LLC, et al. Trademark 10cv1632 Marcia S. Krieger Donald A. Degnan Nadya Claire Bosch Trademark 10cv1633 Wiley Y. Daniel Erin McAlpin Eiselein John Allen Francis Thomas P. Johnson Trademark 10cv1634 Christine M. Arguello Donald A. Degnan Nadya Claire Bosch Trademark 10cv1664 Kathleen M. Tafoya Annie Chu Haselfeld Donald A. Degnan Trademark 10cv1666 Richard P. Matsch Annie Chu Haselfeld Donald A. Degnan Go Manage, Inc. v. GKMI, Inc. Trademark 10cv1689 Wiley Y. Daniel Erik G. Fischer William W. Cochran Broadcast Music, Inc., et al. v. IVP, Inc., et al. Professional Bull Riders, Inc. v. Huffman Onset Pipe Products, Inc. v. Fernco, Inc. Reality Technology, Inc. v. Countertrade Products, Inc., et al. Viesti Associates, Inc. v. Houghton Mifflin Harcourt Publishing Company,et al. Focus 12, Inc. v. Kissler & Co., Inc. Copyright 10cv1694 Christine M. Arguello Ian L. Saffer Kevin Michael Bell Copyright 10cv1706 Christine M. Arguello Robert R. Brunelli Patent 10cv1757 Robert E. Blackburn Jon R. Trembath Trademark 10cv1791 Philip A. Brimmer Horace Anthony Lowe Copyright 10cv1802 Philip A. Brimmer Christopher Seidman Craig F. Wallace Maurice J. Harmon Trademark 10cv1815 Robert E. Blackburn William D. Meyer Digestor, LLC v. Powers, et al. Patent 10cv1841 Christine M. Arguello Spiro Bereveskos Spyderco, Inc. v. Cohen, et al. Trademark 10cv1851 Richard P. Matsch Robert R. Brunelli RadioShack Corporation, et al. v. Phone Shack, LLC, et al. Trademark 10cv1882 Marcia S. Krieger Brad W. Breslau
CAPTION TYPE CASE NO. JUDGE FILING ATTORNEY(S) AEG Live Rockey Mountains, Trademark 10cv1896 Wiley Y. Daniel Cara R. Burns LLC v. Does Please email Michael Dulin at mdulin@hkh-law.com with any interesting Colorado District Court IP decisions or IP news involving Colorado Companies. IP LAW DEVELOPMENTS FROM BNA Patents Common Sense Obviousness Brings Reversal Of Infringement Ruling Against Master Lock Improvement patents on trailer hitch locking mechanisms were obvious as a matter of common sense, the U.S. Court of Appeals for the Federal Circuit ruled July 22, overturning a jury and district court judge's finding to the contrary against major lock manufacturer Master Lock Co. (Wyers v. Master Lock Co., Fed. Cir., No. 2009-1412, 7/22/10). A concurring opinion stressed that obviousness is a mixed question of fact and law and distinguished the burden on the court in assessing general verdicts on obviousness, as was the case in the lower court, as opposed to special interrogatories that could separate the issues. Jury's General Verdict Finds Improvements Nonobvious Wyers Products Group Inc. owns three patents (6,672,115; 7,165,426; and 7,225,649) issued to inventor Philip W. Wyers and claiming two improvements in the technology related to hitch pin locks that secure trailers to cars and sport utility vehicles. The 115 and 426 patents share the same specification and claim locks with a removable sleeve, allowing adaptability to a number of varied size locking requirements. The 649 patent claims as an improvement an external seal designed to insulate the locking mechanism from contaminants. Wyers and his company sued Master Lock for patent infringement in April 2006. A jury trial in the U.S. District Court for the District of Colorado was held in March 2009. Senior Judge Lewis T. Babcock granted Wyers's motion for judgment as a matter of law on infringement at the close of evidence and the jury returned a verdict finding that the asserted claims were not obvious. The jury awarded $5.35 million in damages. Babcock granted Wyers's motion for a continuing injunction, assessed an ongoing royalty until the injunction took effect, and added $1.14 million in pre-judgment interest. Babcock further denied Master Lock's motion for judgment as a matter of law and upheld the jury verdict. Master Lock appealed. Lower Court Erred as to Relevant Prior Art Judge Timothy B. Dyk reversed the JMOL denial, concluding that prior art patents and products represented the elements of the asserted claims and that common sense would lead one to combine the elements as to both the sleeve and seal improvements. First, Dyk faulted the lower court for two decisions as to relevant prior art. The lower court had concluded that
the jury could implicitly find a 1976 Down patent (3,963,264) directed to a trailer-towing application outside the scope of the relevant art. But, Dyk said, the Down patent is clearly within the same field of endeavor as the sleeve patents. The district court also concluded that the jury could implicitly find that then-existing padlock seals were not relevant to hitch locks, but Dyk noted that the court's jury instruction was directed to the field of locksmithing. As such, padlocks should not be excluded as relevant prior art, he said. Even if they were presumed to be in another field of endeavor, prior art padlocks are clearly reasonably pertinent to the problem that the inventor was trying to solve, he added, citing the alternate criterion for relevant prior art, recently confirmed by the Federal Circuit in Comaper Corp. v. Antec Inc., 596 F.3d 1343, 1351, 93 USPQ2d 1873 (Fed. Cir. 2010) (40 PTD, 3/3/10). The district court thus erred in finding that the Down patent and padlock seals were not relevant prior art, Dyk concluded. Obviousness Judgment on JMOL Appropriate Dyk then reviewed the Federal Circuit's jurisprudence before and after the U.S. Supreme Court's decision in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 82 USPQ2d 1385 (2007) (83 PTD, 05/1/07). First, he said that the pre-ksr Federal Circuit treated motivation to combine prior art references as a question of fact, and KSR did not change that rule. But, KSR and our later cases establish that the question of motivation to combine may nonetheless be addressed on summary judgment or JMOL in appropriate circumstances, he added, citing four appellate cases, most recently Perfect Web Technologies Inc. v. InfoUSA Inc., 587 F.3d 1324, 1330, 92 USPQ2d 1849 (Fed. Cir. 2009). He also confirmed that expert testimony concerning motivation to combine may be unnecessary and, even if present, will not necessarily create a genuine issue of material fact. Consequently, quoting KSR, he emphasized, Where, as here, the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgment is appropriate. KSR and our later cases establish that the legal determination of obviousness may include recourse to logic, judgment, and common sense, in lieu of expert testimony, the court continued. Expert testimony would be sometimes essential, Dyk said in a footnote, only regarding matters beyond the comprehension of laypersons, quoting Centricut LLC v. Esab Group Inc., 390 F.3d 1361, 1369-70, 73 USPQ2d 1135 (Fed. Cir. 2004) (236 PTD, 12/9/04). Common Sense Is Motivation to Combine In the instant case, as to the sleeve patents, it was simply a matter of common sense to apply the teachings of the Down patent to address the known problem of different aperture sizes in standard hitch receivers, Dyk said. Similarly, as to the 649 patent adding an external sealing mechanism for the barbell-shaped locks claimed, Dyk said, It is a matter of common sense that a flat external seal used in the prior art padlocks could be combined with a barbellshaped hitch pin lock. As to both patent improvements, Wyers argued that Master Lock itself had submitted patent applications on similar technology without referencing either relevant prior art now being used against Wyers. But, the court said, Obviousness protects the public at large, not a particular
infringer, and one is not estopped from asserting the invalidity of a patent by the fact that one has previously made an attempt to procure a patent for substantially the same invention. Wyers also argued in both instances that a person of ordinary skill in the art would not have had a reasonable expectation of success, but the court rejected those arguments as well. As to the sleeve patents, the court noted that Wyers's argument was directed to a performance issue while the sole benefit of the sleeve described in the patent is its size adaptability. As to the seal patent, Dyk noted that Wyers identified anticipated problems only with one type of seal, while other seals that do not invoke the same problems also existed in the prior art. Thus, it was a matter of common sense to combine the prior art references in each case and one of ordinary skill in the art would have had a reasonable expectation of success in doing so, the court concluded. Secondary Considerations Inadequate The court finally rejected Wyers's arguments based on secondary considerations of the commercial success of Master Lock's alleged infringing products and copying by other competitors after the invention became known. Wyers failed to prove a nexus between the seal patent invention and evidence of commercial success and relied solely on the $20 million in sales of Master Lock's accused product as to the sleeve patents, Dyk noted. As to copying, Wyers introduced no evidence that would meet what the court's case law has recognized as adequate demonstrations internal company documents, direct evidence such as disassembling a patented prototype, photographing its features, and using the photograph as a blueprint to build a replica, or access to the patented product combined with substantial similarity to the patented product Dyk said, citing Iron Grip Barbell Co. v. USA Sports Inc., 392 F.3d 1317, 1325, 73 USPQ2d 1225 (Fed. Cir. 2004). The court concluded that the asserted claims of the three patents would have been obvious as a matter of law and reversed the district court's finding on that point. Judge Alan D. Lourie joined the opinion. Concurrence Clarifies General Verdict Review Standard I write to address concerns raised following the Supreme Court's decision in KSR with respect to general verdicts relating to obviousness, Judge Richard Linn said in a concurring opinion. Though KSR confirmed that the ultimate judgment of obviousness is a legal determination, This acknowledgement did not change longstanding precedent permitting the submission of obviousness questions to a jury for a general verdict, provided the jury has received proper instruction on the law, he said, citing Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1547, 220 USPQ 193 (Fed. Cir. 1983). To facilitate review and reveal more clearly the jury's underlying factual findings, this Court has encouraged trial court judges to provide juries with special interrogatories on obviousness, Linn said. But there is no hard and fast rule requiring special interrogatories, he said. In a case where a general verdict is given, the court must presume that the jury resolved the underlying factual disputes in favor of the verdict winner and leave those presumed findings undisturbed if they are supported by substantial evidence, he said, quoting from Jurgens v. McKasy, 927 F.2d 1552, 1557, 18 USPQ2d 1031 (Fed. Cir. 1991).
In the instant case, though, the majority examined the record and after considering the factual inferences concluded that support was lacking and that the claims at issue would have been obvious as a matter of law, he said. With both the analysis and the conclusion, I fully agree. Mark Lee Hogge of Greenberg Traurig, Washington, D.C., represented Wyers. Aldo Noto of Andrews Kurth, Washington, D.C., represented Master Lock. By Tony Dutra Trademarks Declaratory Judgment Dismissal Denied; MedImmune Test Applies to Trademarks The Supreme Court's ruling in MedImmune Inc. v. Genentech Inc. effectively overruled the First Circuit's reasonable anticipation test for subject matter jurisdiction in a declaratory judgment action, the U.S. District Court for the District of New Hampshire ruled July 19 in a trademark dispute involving retailer Nordstrom (Blue Athletic Inc. v. Nordstrom Inc., D. N.H., No. 10-cv-36-SM, 7/19/10). Denying Nordstrom's motion to dismiss, the court ruled that it had jurisdiction over the plaintiff's declaratory judgment claims that its denimrack marks did not infringe the Nordstrom Rack marks. The court also held that it could determine whether the denimrack mark was registrable, reasoning that the Patent and Trademark Office does not have exclusive jurisdiction over the registrability of trademarks. Mark Opposed, Declaratory Judgment Suit Filed Blue Athletic Inc. operates a retail clothing store and an online denim store, both named denimrack. It has operated its website, www.denimrack.com since 2006. Last year, it filed an application with the Patent and Trademark Office for federal trademark registration of the denimrack mark. Department store chain Nordstrom Inc., which also runs an off-price clearance store called Nordstrom Rack, asked Blue Athletic to discontinue its use of denimrack and its website and to withdraw its trademark application for denimrack. Nordstrom asserted that there was a likelihood of confusion between its marks and Blue Athletic's mark. Nordstrom eventually filed a notice of opposition to Blue Athletic's registration with the PTO. Blue Athletic then filed this action for declaratory judgment, asserting that its use of denimrack did not infringe any valid trademark rights Nordstrom may have in the Nordstrom Rack or Rack marks. Further, Blue Athletic asserted that, because denimrack did not infringe Nordstrom's marks, it is entitled to federal trademark registration for its denimrack mark. Nordstrom moved to dismiss Blue Athletic's petition in its entirety. MedImmune Standard Applies to Trademarks Nordstrom argued that because Blue Athletic's anticipation of an infringement action was not reasonable, its claims were not ripe for decision, and the court was, accordingly, without subject matter jurisdiction.
The First Circuit in PHC Inc. v. Pioneer Healthcare Inc., 75 F.3d 75, 37 USPQ2d 1652 (1st Cir. 1996), invoked the rule that reasonable anticipation of a claim under the Lanham Act is a settled requirement in a federal declaratory judgment action of this character, Chief Judge Steven J. McAuliffe acknowledged. However, what was a settled requirement at the time PHC was decided has since been set aside, the court said. In MedImmune Inc. v. Genentech Inc., 549 U.S. 118, 81 USPQ2d 1225 (2007) (6 PTD, 01/10/07), the Supreme Court held that a patent licensee was not required to break or terminate a license agreement and thus create the risk of a claim against it before seeking a declaratory judgment in federal court that the underlying patent was invalid, unenforceable, or not infringed. The court also noted that in Teva Pharmaceuticals USA Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330, 82 USPQ 1225 (Fed. Cir. 2007) (64 PTD, 04/4/07), the Federal Circuit recognized that MedImmune overruled the two-part reasonable-apprehension-of-suit test it had previously used to determine whether it had jurisdiction over declaratory judgment actions. In Surefoot LC. v. Sure Foot Corp., 531 F.3d 1236, 87 USPQ2d 1266 (10th Cir. 2008) (134 PTD, 7/14/08), the Tenth Circuit held in a trademark case that MedImmune displaced its previous jurisdictional test, which required a declaratory judgment petitioner to demonstrate a reasonable apprehension that an imminent suit for trademark infringement was forthcoming. McAuliffe said that, based on MedImmune and the case law mentioned above, it seems likely that the First Circuit, if presented with the question, would hold that MedImmune effectively overruled the reasonable anticipation test described in PHC. Nordstrom, however, argued that because MedImmune is a patent case, and patent law presents public policy considerations that do not apply to trademark law, MedImmune should not be applied to trademark cases. The court rejected this argument, stating that the Surefoot court rejected a similar argument. No federal court has declined to apply MedImmune to a trademark case, and no good reason for this court to do so has been presented, the court said. Claims Are Ripe; Court Has Jurisdiction Thus, the court said that, under the MedImmune standard, Blue Athletic's claims were ripe for decision because the controversy between the parties was substantial, the parties plainly had adverse interests, and the controversy was both immediate and real. Nordstrom countered, arguing that the parties in Surefoot shared a longer and richer history of disagreement over trademark issues than the parties in this case. However, the court here said that, although it may be so, the parties' history of disagreement here included Nordstrom's demand letters, which set out a prima facie case of trademark infringement, and a formal Trademark Trial and Appeal Board opposition which is based on a claim that Blue Athletic's mark would infringe on Nordstrom's marks. While there has been less history between the parties in this case the combination of [these factors] is sufficient to meet the MedImmune standard. Finally, the court said that this was not a case like those the court worried about in Surefoot, in which the only indicia of a live infringement controversy was the existence of a single TTAB
opposition proceeding or a single cease-and-desist letter. Thus, the court ruled that because Blue Athletic's claims were ripe for review, the court did not lack subject matter jurisdiction over them and it denied Nordstrom's motion to dismiss. Third Request for Relief Not Dismissed Relying on Merrick v. Sharp & Dohme Inc., 185 F.2d 713, 88 USPQ 145 (7th Cir. 1950), Nordstrom also moved to dismiss Blue Athletic's third request for relief a declaration that it is entitled to federal registration for its denimrack mark on the additional ground that exclusive jurisdiction to determine the registrability of the denimrack mark rests with the PTO until that agency renders a decision on Blue Athletic's application. Nordstrom further argued that, because Blue Athletic did not respond to that argument, the court should grant that portion of its motion as unopposed. However, he court said that it was not inclined to find that Blue Athletic waived or forfeited its third request for relief given Blue Athletic's vigorous objection to respondents' first argument, which pertains to all three requests for declaratory relief, and the absence of an express waiver. Turning to the merits, the court said that Nordstrom's reliance on Merrick was misplaced. The court said that the Merrick court did not decide whether the pendency of a trademark application bars a district court from determining the registrability of the mark at issue in the pending application and thus has no bearing on the issues presented in this case. After looking at case law from the U.S. District Court of the District of Columbia and the First Circuit, the court ruled that, because the TTAB does not have exclusive jurisdiction over the registrability of Blue Athletic's marks, Nordstrom was not entitled to dismissal of Blue Athletic's third request for declaratory relief. Blue Athletic was represented by Jack P. Crisp Jr. of Wiggin & Nourie, Manchester, N.H. Nordstrom was represented by Nathaniel E. Durrance of the Seed Intellectual Property Law Group, Seattle. By Nathan Pollard Copyrights Mattel's Ownership Rights in Bratz Doll; Copyright, Trademark Overturned on Appeal Barbie may be required to have another day in court in her fight against the Bratz dolls, as the U.S. Court of Appeals for the Ninth Circuit July 22 found multiple errors in the district court's judgments and jury instructions that led to a copyright infringement verdict in favor of and trademark transfer to Barbie-maker Mattel Inc. Mattel Inc. v. MGA Entertainment Inc., 9th Cir., No. 09-55673, 7/22/10). The appellate court vacated a copyright injunction against MGA Entertainment Inc.'s competitive Bratz dolls and a constructive trust transferring the Bratz trademarks to Mattel. Further, because many of the errors appeared in jury instructions, the court said it was likely that the case would have to be retried on remand.
America thrives on competition; Barbie, the all-american girl, will too, Chief Judge Alex Kozinski said in concluding an opinion rife with popular culture references. $100 Million Damages and Injunction The Bratz dolls have been the center of a copyright dispute between MGA and Mattel since 2004. Mattel sued the Bratz designer and former Mattel employee, Carter Bryant for copyright infringement, breach of contract, unjust enrichment, and conversion, alleging that Bryant had given to MGA the designs he had made for Mattel that led to the wildly successful Bratz line of dolls, The Girls With a Passion for Fashion! Mattel argued that Bryant conceived of the ideas for the design for Bratz dolls when working at Mattel and thus he had no rights to his designs based on the terms of his employment contract. Judge Stephen G. Larson of the U.S. District Court for the Central District of California found that Bryant's agreement assigned his ideas preliminary mock-ups to Mattel, and he instructed a jury accordingly. The jury awarded Mattel $100 million in damages from MGA. Larson issued a permanent injunction in December 2008 and further imposed a constructive trust over related Bratz trademarks for transfer to Mattel. The order was originally stayed until February 2008, and then further extended to the end of 2009 to give MGA more time to sell Bratz dolls before they are removed from the market. Meanwhile, MGA appealed, and the Ninth Circuit ordered that the stay remain in effect through the appeal. Ideas May Not Be Covered By Agreement Kozinski first found error in the lower court's pre-trial judgment that Bryant's employment agreement covered ideas, which would include the name Bratz for the dolls generally and the name Jade for one of the first generation of Bratz dolls. The agreement required Bryant to communicate to the Company as promptly and fully as practical all inventions, he noted, but in a subsequent description of inventions in the agreement did not include ideas in the list. Though Mattel argued that the list was merely illustrative and not exclusive, Kozinski said, Ideas are markedly different from most of the listed examples, some of which were concrete designs, processes, computer programs, and formulae while others were less tangible know-how and discoveries. We conclude that the agreement could be interpreted to cover ideas, but the text doesn't compel that reading, the court said. The district court thus erred in holding that the agreement, by its terms, clearly covered ideas. Regardless of whether Bryant's ideas should have been assigned to Mattel, the court held that the constructive trust was too broad. When the value of the property held in trust increases significantly because of a defendant's efforts, a constructive trust that passes on the profit of the defendant's labor to the plaintiff usually goes too far, Kozinski said. And in the instant case, The value added by MGA's hard work and creativity dwarfs the value of the original ideas Bryant brought with him, even recognizing the
significance of those ideas. The court thus held that the district court's imposition of the constructive trust was an abuse of discretion and must be vacated. Second Error in Interpretation of Agreement The mock-ups prepared by Bryant while he was still employed by Mattel included original Bratz drawings and a preliminary sculpt a mannequin-like plastic doll body without skin coloring, face paint, hair, or clothing. Those were clearly inventions as defined in the employment agreement, Kozinski said, but there was a question as to whether Bryant created them on his own time. Mattel argued and the lower court instructed the jury that the employment agreement covered inventions even if they were not made during working hours, but again the appellate court said the agreement was ambiguous as to that point. The agreement required assignment of inventions created at any time during [Bryant's] employment by the Company, which is ambiguous intrinsically, the court noted. Further, extrinsic evidence did not resolve the ambiguity as two other Mattel employee's testified to opposing interpretations of the term. The district court thus erred in deciding on summary judgment that the agreement clearly assigned works made outside the scope of Bryant's employment, the court concluded, adding that the error was sufficient to vacate the copyright injunction. Copyright Infringement Analysis Faulty Even assuming the agreement did assign the drawings and sculpt to Mattel, the court found error in the district court's analysis of whether the Bratz dolls infringed Mattel's copyright in those mock-ups. If the copyrights in those works covered only the bratty-doll idea, the court said, MGA was free to look at Bryant's sketches and say, Good idea! We want to create bratty dolls, too.' Applying the Ninth Circuit's two-part extrinsic/intrinsic test, per Apple Computer Inc. v. Microsoft Corp., 35 F.3d 1435, 1442, 32 USPQ2d 1086 (9th Cir. 1994), the court faulted the findings as to both the sculpt and the drawings. The extrinsic stage determines the breadth of possible expression of a work's ideas and other unprotectable elements, Kozinski said, granting broad protection to works with a wide range of expression and thin protection when there is only a narrow range of expression. That determination sets the standard for infringement, he added whether an ordinary, reasonable observer would consider the alleged infringing work substantially similar for a copyrighted work enjoying broad protection, or virtually identical when thin protection applies. The lower court first erred in finding that the sculpt enjoyed broad copyright protection, Kozinski said. Setting the task as filtering out unprotectable elements, he said: Producing small plastic dolls that resemble young females is a staple of the fashion doll market. To this basic concept, the Bratz dolls add exaggerated features, such as an oversized head and feet. But many fashion dolls have exaggerated features take the oversized heads of the Blythe dolls and My Scene Barbies as examples. Moreover, women have often been depicted with exaggerated proportions similar to those of the Bratz dolls from Betty Boop to characters in Japanese anime and Steve Madden ads. The
concept of depicting a young, fashion-forward female with exaggerated features, including an oversized head and feet, is therefore unoriginal as well as an unprotectable idea. The sculpt thus deserved only thin protection and infringement by the Bratz doll sculpts should have been assessed under the virtually identical standard, the court said. As to the drawings, the appellate court agreed that they did, in fact, deserve broad protection, but then questioned the lower court's application of the substantial similarity standard. The lower court failed to filter out all the unprotectable elements of Bryant's sketches, Kozinski said. The district court found protectable the Particularized, synergistic compilation and expression of the human form and anatomy that expresses a unique style and conveys a distinct look or attitude of the drawings. But, Kozinski said, Mattel can't claim a monopoly over fashion dolls with a bratty look or attitude, or dolls sporting trendy clothing these are all unprotectable ideas. Inasmuch as a finding of substantial similarity between two works can't be based on similarities in unprotectable elements, the lower court's error was significant, he said. He opined that some of the first generation of Bratz dolls might still be found to be substantially similar to the sketches. But we fail to see how the district court could have found the vast majority of Bratz dolls, such as Bratz Funk N' Glow Jade' or Bratz Wild Wild West Fianna,' substantially similar even though their fashions and hair styles are nothing like anything Bryant drew unless it was relying on similarities in ideas. Therefore, the court concluded, even if copyrights in the sculpt and drawings are determined to be assigned to Mattel, the company will have to show on remand and in a new trial that the Bratz sculpts are virtually identical to Bryant's preliminary sculpt or that the dolls are substantially similar to the sketches other than in unprotectable ideas. The court consequently vacated each equitable relief decision. 2010 The Bureau of National Affairs, Inc. CLASSIFIED ADVERTISING No advertisements this month. Subject to editorial review, classified advertisements are printed by the IP Section free of charge and will run for three months, unless we receive a request to drop or continue running the ad. Submit or resubmit your ad by e- mailing the proposed text to Michael Dulin at mdulin@hkh-law.com. IP Section Officer Contact Information Chair: John Posthumus, Esq. Sheridan Ross 1560 Broadway, Suite 1200 Denver, Colorado 80202 303.863.2963
jposthumus@sheridanross.com Vice-Chair: Nina Y. Wang, Esq. Faegre & Benson, LLP 3200 Wells Fargo Center 1700 Lincoln Street Denver, CO 80203 303.607.3500 nwang@faegre.com Secretary/Treasurer: Michael P. Dulin Hensley Kim & Holzer, LLC 1600 Lincoln Street Suite 3000 Denver, CO 80238 720-377-0727 mdulin@hkh-law.com All correspondence, phone calls, facsimiles and emails concerning this newsletter, as well as advertising submissions should be directed to Michael Dulin at mdulin@hkh-law.com.