No obviousness where hindsight argument relied upon “cherry-picked” data
WHDA Blogging Team | September 11, 2019
Sanofi-Aventis et al. v. Dr. Reddy’s Laboratories et al.
August 14, 2019
Lourie, Moore, Taranto. Opinion by Lourie
Summary
The CAFC upheld the nonobviousness of claims where the lead compound was known, but no cited art would have motivated the skilled artisan to arrive at the claimed compound. The claimed compound was a specific modification of the lead compound, and no analogous modification was found in the art. The CAFC rejected “cherry-picked” data which formed a “convoluted” obviousness argument, and stated that there is no per se rule that a compound is obvious where there is only a small change from a lead compound.
Details
Technical background
Sanofi owns U.S. Patent Nos. 5,847,170 and 8,927,592, which claim cabazitaxel (commercially known as Jevtana) and methods of use thereof. This drug is used to treat drug-resistant prostate cancers. Cabazitaxel is only the third taxane drug to obtain FDA approval, since the first being in 1992. Cabazitaxel is similar to docetaxel (approved in 1996) as shown below:
Rather than hydroxyl groups at the C7 and C10 positions, Cabazitaxel has methoxy groups.
Procedural background
The Defendants filed an ANDA alleging that the ‘592 and ‘170 patents are invalid as being obvious. While the district court case arising out of the ANDA litigation was pending, the PTAB instituted an IPR of the ‘592 patent. The PTAB found some claims 1-5 and 7-30 of the ‘592 patent unpatentable as being obvious and denied Sanofi’s motion to amend. Sanofi appealed the denial of the motion to amend (this has been remanded to PTAB in another CAFC case from earlier in 2019), but did not appeal the invalidity decision with respect to claims 7, 11, 14-16 and 26. Sanofi filed a statutory disclaimer with respect to these claims.
Back at the district court, even though the statutory disclaimer had been filed and the district court was notified, the court held that a case or controversy still existed with respect to the disclaimed claims, and held that they were obvious. The court also held that claims 1 and 2 of the ‘170 patent were not invalid as being obvious. Sanofi appealed the district court’s conclusion that a case or controversy exists with respect to the claims of the ‘592 patent, and some of the defendants appealed the district court’s decision regarding the lack of obviousness of claims 1 and 2 of the ‘170 patent.[1]
District Court
The defendants argued that cabazitaxel would have been obvious in view of docetaxel as a lead compound. The district court based its conclusion of non-obviousness on seven witnesses and 17 prior art references. The court found that a person skilled in the art would have been motivated to use docetaxel as a lead compound, but would not have been motivated to replace the C7 and C10 hydroxyl groups with methoxy groups to arrive at cabazitaxel.
The defendants alleged that it would have been obvious to modify docetaxel by increasing lipophilicity, in order to interfere with a protein called Pgp, which is involved in drug resistance. The defendants cited to two references, Hait and Lampidis.
In Hait, the authors studied phenothiazines, not taxanes. They showed that by increasing lipophilicity, the cancer cell would be more sensitive to the drug. However, this related to a different class of drugs, which are structurally very different from taxanes. Also, Hait only disclosed hypothetical binding models with respect to Pgp.
In Lampidis, the authors found that increasing the lipophilicity of a positively charged dye caused accumulation in drug resistant cells. But, Lampidis also never disclosed taxanes. Further, taxanes do not have a positive charge, unlike the dye of Lampidis.
Next, the district court considered a reference (Commercon) that identified the C2’, C3’, C7, C9 and C10 positions of paclitaxel as “flexible” and suitable for modification, in combination several other references regarding the activity of taxane analogs. Cumulatively, the district court found that the defendants had “cherry-picked” data from the references. The district court was persuaded by Sanofi’s expert who explained that taxane modifications had been considered at positions C2, C4, C5, C7, C8, C9, C10, C11, C12, C13, C14, C2’ and C3’, but that it would not have been obvious to modify just C7 and C10 to be methoxy groups.
The district court also found secondary considerations. Despite significant efforts by others, cabazitaxel was only the third taxane to get FDA approval. Furthermore, Jevtana achieved significant commercial success.
CAFC
At the CAFC, the defendants argued that that the district court erred, and that one skilled in the art (1) would have been motivated to modify docetaxel to decrease Pgp-related drug resistance, (2) knew that this could be done by increasing lipophilicity at the C7 and C10 positions, and (3) knew that the methoxy substitutions were the most conservative modifications.
However, the CAFC agreed with Sanofi that this obviousness theory is based on hindsight and said that it is “convoluted.” First, the CAFC indicated that Hait and Lampidis would not have provided a reason to make docetaxel more lipophilic, for the same reasons as the district court. But, even if there was a reason to make docetaxel more lipophilic, the cited art was highly varied in its suggested modifications of the lead compound. No single reference taught any type of simultaneous change at the C7 and C10 positions, and certainly not methoxy substitutions.
As to the Commercon reference, the defendants argued that C7, C9 and C10 are taught to be flexible, but that C3’ and C2’ were “crucial.” However, the text of the reference itself stated that C3’ is flexible and C2’ can be modified under certain conditions.
Finally, the defendants argued that even though no reference shows only the C7 and C10 methoxy substitutions, this would have been obvious because they are known to be small, conservative changes that increase lipophilicity. They pointed to a methylthiomethoxy substitution as also suggesting a methoxy substitution. The CAFC refuted this as hindsight, since there was no evidence that these two types of substitutions would behave similarly.
The defendants also argued that where there are a small number of changes to try, it is obvious to make a single change to a lead compound, particularly where the change is known to have desirable properties. Again, there was no showing of beneficial properties from methoxy substitutions of C7 and C10 in a taxane. The CAFC also stated that small changes are not prima facie obvious.
Finally, the CAFC found no clear error with the secondary considerations and affirmed the district court analysis of non-obviousness of the claims.
Takeaway
-If an obviousness argument relies on data that can be fairly characterized as “cherry picked,” odds are it is an unsuccessful hindsight argument.
-There
is no per se rule that a “small change” from a lead compound results in a
conclusion of obviousness.
[1] This decision also includes an extensive discussion of why the district court did not have authority to hold that there is a case or controversy regarding disclaimed claims. Discussion of that issue is omitted here.
Don’t raise issues for the first time before the CAFC unless it falls into one of the limited exceptions: the CAFC affirms the stylized letter “H” mark to be confusingly similar
WHDA Blogging Team | September 3, 2019
Hylete LLC v. Hybrid Athletics, LLC
August 1, 2019
Moore, Reyna, Wallach (Opinion by Reyna)
Summary
On appeal, Hylete LLC (“Hylete”) argued, for the first time, that the Board erred in its analysis by failing to compare its stylized “H” mark with “composite common law mark” of the Hybrid Athletics, LLC (“Hybrid”), comprising of the stylized letter “H” appearing above the phrase “Hybrid Athletics” and several dots underneath. By not presenting the argument during the opposition proceedings or at the request for reconsideration, the CAFC held that Hylete waived its argument, and upheld the decision of the Board.
Details
Hylete LLC applied to register a design mark for a stylized letter “H” in International Class 25 for “[a]thletic apparel, namely, shirts, pants, shorts, jackets, footwear, hats and caps.” Upon examination, the mark was approved for publication, and the mark published for opposition in the Trademark Official Gazette on June 18, 2013. After filing an extension of time to oppose, on October 16, 2013, Hybrid Athletics, LLC filed a Notice of Opposition on the grounds of likelihood of confusion with its mark under Section 2(d) of the Lanham Act. Hylete and Hybrid’s marks are as shown below:
Hybrid pleaded ownership in Application No. 86/000,809 for its design mark of a stylized “H” in connection with “conducting fitness classes; health club services, namely, providing instruction and equipment in the field of physical exercise; personal fitness training services and consultancy; physical fitness instruction” in International Class 41. Hybrid also pleaded common law rights arising from its use of the mark on “athletic apparel, including shirts, hats, shorts and socks” since August 1, 2008. The following images were submitted by Hybrid as evidence to show the use of the mark on athletic apparel:
All of the images showed the stylized “H” mark appearing above the phrase “Hybrid Athletics” and several dots underneath the phrase.
Hylete’s argument before the Board focused on the two stylized “H” designs having a different appearance, with each mark having its own distinct commercial impression. On December 15, 2016, the Board issued a final decision, sustaining Hybrid’s opposition, concluding that Hylete’s mark is likely to cause confusion with Hybrid’s mark. Hylete filed a request for reconsideration of the Board’s final decision, including an argument that “[t]here was no record evidence demonstrating that consumers would view [Hylete’s] mark as a stylized H” as a part of its commercial impression argument. The Board found that this argument is contrary to Hylete’s own characterization of the mark in its brief, as well as the testimony of its CEO, which admitted that both logos were Hs. The Board rejected Hylete’s argument and denied the request for rehearing. Hylete appealed the decision of the Board to the CAFC.
On appeal, Hylete argued that the Board erred in its analysis by failing to compare Hylete’s stylized “H” mark with Hybrid’s “composite common law mark,” comprising of the stylized letter “H” appearing above the phrase “Hybrid Athletics” and several dots underneath, as shown below:
In its appeal brief, Hylete stated as follows: “this appeal may be summarized into a single question: is Hylete’s mark sufficiently similar to [Hybrid’s] composite common law mark to be likely to cause confusion on the part of the ordinary consumer as to the source of the clothing items sold under those marks?”
In response, Hybrid stated that the “composite common law mark” arguments were never raised before the Board and are therefore waived.
The CAFC considers arguments made for the first time on appeal under the following limited circumstances:
- When new legislation is passed while an appeal is pending;
- When there is a change in the jurisprudence of the reviewing court or the Supreme Court after consideration of the case by the lower court;
- Even if the parties did not argue and the court below did not decide, when appellate court applies the correct law, if an issue is properly before the court; and
- Where a party appeared pro se.
Hylete did not dispute that the argument was not raised before the Board. Instead, Hylete contended that the argument has not been waived, because the Board “sua sponte” raised the issue of Hybrid’s common law rights in its final decision. The CAFC disagreed, stating that Hylete’s failure to raise the argument in the request for reconsideration negates its contention.
As Hylete could have raised the issue of Hybrid’s “composite common law mark” in the opposition proceedings or in the request for reconsideration, but did not do so, and as none of the exceptional circumstances in which the CAFC considers arguments made for the first time on appeals applies, the CAFC held that the issues raised by Hylete on appeal have been waived.
As the only issues Hylete raised on appeal concerned Hybrid’s “composite common law mark,” the CAFC affirmed the decision of the Board.
Takeaway
- Raise all possible arguments prior to appeal.
- It seems that the record before the Board lacked evidence that the letter H is conceptually weak or diluted in the context of the goods or in general – perhaps more evidence before the Board would have helped Hylete in this case. At the same time, perhaps presenting such evidence is not desirable to Hylete, as that would be an admission that its own mark is weak.
Arguments of “as a whole”, “high level of abstraction,” “novelty/nonobviousness,” “physicality” and “machine-or-transformation test” for subject matter eligibility were successful at the PTAB and the district court, but not at the Federal Circuit
WHDA Blogging Team | August 30, 2019
Solutran, Inc. v. Elavon, Inc. (Fed. Cir. 2019) (Case Nos. 2019-1345, 2019-1460)
July 30, 2019
Chen, Hughes, and Stoll, Circuit Judges. Court opinion by Chen.
Summary
The Federal Circuit reversed the district court’s denial of summary judgment of ineligibility regarding a patented claims titled “system and method for processing checks and check transactions,” by concluding that the asserted claims are not directed to patent-eligible subject matter under § 101 because, under the Alice two-step framework, the claims recited the abstract idea of using data from a check to credit a merchant’s account before scanning the check, and because the claims do not contain an inventive concept sufficient to transform this abstract idea into a patent-eligible application.
Details
I. background
1. The Patent
Solutran, Inc. (Solutran) owns U.S. Patent No. 8,311,945 (’945 patent), titled “System and method for processing checks and check transactions.” The proffered benefits include “improved funds availability” for merchants and allegedly “reliev[ing merchants] of the task, cost, and risk of scanning and destroying the paper checks themselves, relying instead on a secure, high-volume scanning operation to obtain digital images of the checks.” ’945 patent at col. 3, ll. 46–62.
Claim 1, the representative claim of the ’945 patent, recites as follows:
1. A method for processing paper checks, comprising:
a) electronically receiving a data file containing data captured at a merchant’s point of purchase, said data including an amount of a transaction associated with MICR [(Magnetic Ink Character Recognition)] information for each paper check, and said data file not including images of said checks;
b) after step a), crediting an account for the merchant;
c) after step b), receiving said paper checks and scanning said checks with a digital image scanner thereby creating digital images of said checks and, for each said check, associating said digital image with said check’s MICR information; and
d) comparing by a computer said digital images, with said data in the data file to find matches.
2. The Alice Two-Step Framework under 35 U.S.C. § 101
To determine whether a patent claims ineligible subject matter, the U.S. Supreme Court has established a two-step framework. In Step One, courts must determine whether the claims at issue are directed to a patent-ineligible concept such as an abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208, 217 (2014). In Step Two, if the claims are directed to an abstract idea, the courts must “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. To transform an abstract idea into a patent-eligible application, the claims must do “more than simply stat[e] the abstract idea while adding the words ‘apply it.’” Id. at 221. At each step, the claims are considered as a whole. See id. at 218 n.3, 225.
3. The Patent Trial and Appeal Board (PTAB)
Two months after the Supreme Court issued the decision in Alice, the PTAB issued an institution decision granting a petition of a covered business method (CBM) review by U.S. Bancorp as to the § 103 challenge (obviousness) but denying a petition as to the § 101 challenge (lack of subject matter eligibility), concluding that claim 1 of the ’945 patent was not directed to an abstract idea. U.S. Bancorp v. Solutran, Inc., No. CBM2014-00076, 2014 WL 3943913 (P.T.A.B. Aug. 7, 2014). The PTAB reasoned that “the basic, core concept of independent claim 1 is a method of processing paper checks, which is more akin to a physical process than an abstract idea.” Id. at *8. It is noted that the CBM post-grant review certificate was issued under 35 U.S.C. § 328(b) on February 14, 2018, reflecting the final results of CBM2014-00076 determining that claims 1-6 are found patentable.
3. The District Court
Solutran sued U.S. Bancorp and its affiliate Elavon, Inc. (collectively, U.S. Bank) in the United States District Court for the District of Minnesota, alleging infringement of claims 1-5 of the ’945 patent. U.S. Bank moved for summary judgment that the ’945 patent was invalid because the claims were directed to the “abstract idea of delaying and outsourcing the scanning of paper checks.”
On February 23, 2018, the district court entered summary judgment for Solutran finding that the ‘945 patent was patent eligible under 35 U.S.C. § 101 for following reasons:
· Step One: The district court found the previous CBM review of the ’945 patent by the PTAB persuasive, concluding that that the ’945 patent is directed to an improved technique for processing and transporting physical checks, rather than just handling data that had been scanned from the checks.
· Step Two: The district court concluded, in the alternative, that the asserted claims also recited an inventive concept under step two of Alice. The district court accepted Solutran’s assertion that “Claim 1’s elements describe a new combination of steps, in an ordered sequence, that was never found before in the prior art and has been found to be a nonobvious improvement over the prior art by both the USPTO examiner and the PTAB’s three-judge panel.” The district court also concluded that the claim passes the machine-or-transformation test because “the physical paper check is transformed into a different state or thing, namely into a digital image.”
U.S. Bank appeals, inter alia, the § 101 ruling. Solutran cross-appeals on the issue of willful infringement.
II. The Federal Circuit
The Federal Circuit reversed the summary judgment in favor of Solutran on the issue of the subject matter eligibility, concluding that, contrary to the views of the PTAB and the district court, the claims are not directed to patent-eligible subject matter under § 101 because the claims of the ’945 patent recite the abstract idea of using data from a check to credit a merchant’s account before scanning the check, and because the claims do not contain an inventive concept sufficient to transform this abstract idea into a patent-eligible application. The Federal Circuit thus did not review U.S. Bank’s alternative § 103 argument or Solutran’s cross-appeal relating to a potential willful infringement claim.
The unanimous court opinion by Circuit Judge Chen discussed each step of the two-step framework in detail.
1. Step One
The Federal Circuit concluded that the claims are directed to the abstract idea of crediting a merchant’s account as early as possible while electronically processing a check.
Comparison with Precedents
The Federal Circuit has a precedent as to the determination of “abstract idea” that the court finds it sufficient to compare claims at issue to those claims already found to be directed to an abstract idea in previous cases, instead of establishing a definitive rule to determine what constitutes an “abstract idea.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1334 (Fed. Cir. 2016).
The court opinion argued that “[a]side from the timing of the account crediting step, the ’945 patent claims recite elements similar to those in Content Extraction & Transmission LLC v. Wells Fargo Bank, National Ass’n, 776 F.3d 1343 (Fed. Cir. 2014)” where the Federal Circuit held that a method of extracting and then processing information from hard copy documents, including paper checks, was drawn to the abstract idea of collecting data, recognizing certain data within the collected data set, and storing that recognized data in a memory. As for the account crediting step, the court opinion stated that “[c]rediting a merchant’s account as early as possible while electronically processing a check is a concept similar to those determined to be abstract by the Supreme Court in Bilski v. Kappos, 561 U.S. 593 (2010) and Alice.”
In sum, the court opinion concluded that the claims at issue are similar to those claims already found to be directed to an abstract idea in previous cases.
As A Whole
Solutran argued that the claims “as a whole” are not directed to an abstract idea. The court opinion countered by pointing out that “[t]he only advance recited in the asserted claims is crediting the merchant’s account before the paper check is scanned,” and concluded that this is an abstract idea.
The court opinion distinguished this case from previous cases where claims were held patent-eligible by noting that this is not “a situation where the claims “are directed to a specific improvement to the way computers operate” and therefore not directed to an abstract idea, as in cases such as Enfish,” nor is it “a situation where the claims are “limited to rules with specific characteristics” to create a technical effect and therefore not directed to an abstract idea, as in McRO, Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299, 1313 (Fed. Cir. 2016).” The court opinion further stated that “[t]o the contrary, the claims are written at a distinctly high level of generality.”
High Level of Abstraction
The court opinion disagreed with Solutran that U.S. Bank “improperly construe[d] Claim 1 to ‘a high level of abstraction.’” While conceding that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 70, 71 (2012), the court opinion stressed “where, as here, the abstract idea tracks the claim language and accurately captures what the patent asserts to be the “focus of the claimed advance over the prior art,” Affinity Labs of Texas, LLC v. DIRECTV, LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016), characterizing the claim as being directed to an abstract idea is appropriate.”
Physicality of The Paper Checks Being Processed and Transported
The court opinion concluded that “the physicality of the paper checks being processed and transported is not by itself enough to exempt the claims from being directed to an abstract idea” by citing a precedent that “the abstract idea exception does not turn solely on whether the claimed invention comprises physical versus mental steps,” In re Marco Guldenaar Holding B.V., 911 F.3d 1157, 1161 (Fed. Cir. 2018),
2. Step Two
The court opinion disagreed with the district court’s holding that the ’945 patent claims “contain a sufficiently transformative inventive concept so as to be patent eligible.”
As A Whole
The court opinion stated that “[e]ven when viewed as a whole, these claims “do not, for example, purport to improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field” and that “[t]o the contrary, as the claims in [Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014)] did, the claims of the ’945 patent “simply instruct the practitioner to implement the abstract idea with routine, conventional activity.”” The court opinion further found any remaining elements in the claims, including use of a scanner and computer and “routine data-gathering steps” (i.e., receipt of the data file), as “hav[ing] been deemed insufficient by this court in the past to constitute an inventive concept” in the past precedents. Content Extraction, 776 F.3d at 1349 (conventional use of computers and scanners); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1363 (Fed. Cir. 2015) (routine data- gathering steps).
Novelty/Nonobviousness
In rejecting Solutran’s argument that these claims are patent-eligible because they are allegedly novel and nonobvious, the court opinion reiterated the precedent that “merely reciting an abstract idea by itself in a claim—even if the idea is novel and non-obvious—is not enough to save it from ineligibility.” See, e.g., Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) (“[A] claim for a new abstract idea is still an abstract idea.” (emphasis in original)).”
Machine-or-Transformation Test
In rejecting Solutran’s argument that its claims passed the machine-or-transformation test—i.e., “transformation and reduction of an article ‘to a different state or thing,’” the court opinion stated “[w]hile the Supreme Court has explained that the machine-or-trans- formation test can provide a “useful clue” in the second step of Alice, passing the test alone is insufficient to overcome Solutran’s above-described failings under step two. See DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256 (Fed. Cir. 2014) (“[I]n Mayo, the Supreme Court emphasized that satisfying the machine-or-transformation test, by itself, is not sufficient to render a claim patent-eligible, as not all transformations or machine implementations infuse an otherwise ineligible claim with an ‘inventive concept.’”).”
Takeaway
· The case demonstrates that courts still stick to the comparative approach in Alice step one, instead of defining or categorizing the “abstract idea.” This approach is notably in contrast with that of the U.S. Patent and Trademark Office, which follows the 2019 Revised Patent Subject Matter Eligibility Guidance on January 7, 2019, dividing Alice step one into two inquiries: (i) evaluate whether the claim recites a judicial exception; and (ii) evaluate whether the judicial exception is integrated into a practical application if the claim recites a judicial exception. The courts’ approach may give wider latitude to turn an issue of the subject matter eligibility in either direction for its less clarity of the standard.
· Physicality of subjects recited in a claim, novelty/nonobviousness of the claim, and passing of the machine-or-transformation test may not be enough to exempt the claim from being directed to an abstract idea.
“Built Tough”: Ford’s Design Patents Survive Creative Attacks by Accused Infringers
WHDA Blogging Team | August 21, 2019
Automotive Body Parts Association v. Ford Global Technologies, LLC
July 23, 2019
Before Hughes, Schall, and Stoll
Summary
The Federal Circuit is asked to decide two questions: what types of functionality invalidate a design patent, and whether the same rules of patent exhaustion and repair rights that apply to utility patents ought to also be applied to design patents. On the former, the Federal Circuit decides that “mechanical or utilitarian” functionality, rather than “aesthetic functionality”, invalidates a design patent. On the latter, however unique design patents are from utility patents, the Federal Circuit declines to apply the well-established rules of patent exhaustion and right to repairs differently between design and utility patents.
Details
Ford Motor Company introduced the F-150 pickup trucks in the 1970’s, and the trucks have become a mainstay of Ford’s lineup. The trucks’ popularity has endured, as the model is now in its thirteenth generation, with Ford claiming to have sold more than 1 million F-150 trucks in 2018.
Ford Global Technologies, LLC (“Ford”) is a subsidiary of Ford Motor Company, and manages the parent company’s intellectual property. Ford’s large patent portfolio includes numerous design patents covering different design elements of Ford vehicles. Among those design patents are U.S. Design Patent Nos. D489,299 and D501,685.
The D’299 patent is directed to an “exterior vehicle hood” having the following design:
The D’685 patent is directed to a “vehicle head lamp” having the following design:
The patented designs are found on the eleventh generation F-150 trucks, which were in production from 2004 to 2008:
Automotive Body Parts Association (“Automotive Body”) is an association of companies that distribute automotive body parts. The member companies serve predominantly the collision repair industry, selling replacement auto parts to collision repair shops or directly to vehicle owners.
Ford began asserting the D’299 and D’685 patents against Automotive Body in 2005, when Ford initiated a patent infringement action in the International Trade Commission. The ITC action was ultimately settled, followed by a few years of relative quiet until 2013, when tension grew after a member of Automotive Body began selling replacement parts covered by Ford’s two design patents.
In 2013, Automotive Body, together with the member company, initiated a declaratory judgment action in a district court, seeking to have the D’299 and D’685 patents declared invalid, or if valid, unenforceable. Automotive Body moved the district court for summary judgment of invalidity and unenforceability, but was denied. Automotive Body’s appeal of that denial of summary judgment leads us to this decision by the Federal Circuit.
Automotive Body’s arguments on appeal mirror those made in the district court.
- Invalidity
Automotive Body makes two main invalidity arguments. First, the designs of Ford’s two patents are “dictated by function”, and second, the two designs are not a “matter of concern”.
The “dictated by function” argument involves a basic design patent concept: if an article has to be designed a certain way for the article to function, then the design cannot be the subject of a design patent.
Design patents protect only “new, original and ornamental design[s] for an article of manufacture”. 35 U.S.C. 171(a). To be “ornamental”, a particular design must not be essential to the use of the article.
Automotive Body argues, rather creatively, that the designs of Ford’s headlamp and hood are functionally dictated not only by the physical fit on a F-150 truck, but also by the aesthetics of the surrounding body parts. Automotive Body’s position is that these commercial requirements for aesthetic continuity, driven by customer preferences, render Ford’s designs functional.
The Federal Circuit disagrees:
We hold that, even in this context of a consumer preference for a particular design to match other parts of a whole, the aesthetic appeal of a design to consumers is inadequate to render that design functional…If customers prefer the “peculiar or distinctive appearance” of Ford’s designs over that of other designs that perform the same mechanical or utilitarian functions, that is exactly the type of market advantage “manifestly contemplate[d]” by Congress in the laws authorizing design patents.
In other words, functionality that invalidates a design should be “mechanical or utilitarian”, and not aesthetical.
Particularly damaging to Automotive Body’s argument is Ford’s abundant evidence of “performance parts”, that is, alternative headlamp and hood designs that would also fit the F-150 trucks. As the Federal Circuit explains, “the existence of ‘several ways to achieve the function of an article of manufacture,’ though not dispositive, increases the likelihood that a design serves a primarily ornamental purpose.”
To bolster its functionality argument, Automotive Body attempts to borrow the doctrine of “aesthetic functionality” from trademark law.
Under that doctrine, trademark protection is unavailable to features that serve an aesthetic function that is independent and distinct from the function of source identification. For example, “John Deere green”, the color, may invoke an immediate association with John Deere, the brand, but the color itself also serves the significant nontrademark function of color-matching many farm equipment. As such, the color is not entitled to trademark protection.[1]
The Federal Circuit quickly disposes of Automotive Body’s “aesthetic functionality” argument, finding that the doctrine rooted in trademark law does not apply to patent law. The competitive considerations driving the “aesthetic functionality” doctrine of trademark law do not apply to the anticompetitive effects of design patents.
Automotive Body’s second invalidity argument is that the designs of Ford’s two patents are not a “matter of concern”.
The “matter of concern” argument involves the straightforward concept that, if no one cares about a particular design, then that design is not deserving of patent protection. Automotive Body argues that Ford’s patented headlamp and hood designs are not a “matter of concern”, because an F-150 owner in need of a replacement headlamp or hood would assess the replacement part simply for their aesthetic compatibility with the truck.
The Federal Circuit finds two faults with Automotive Body’s arguments. First, that an F-150 owner would assess the aesthetic of a headlamp or hood design means that, by definition, the designs are a matter of concern. Second, Automotive Body errs in temporally limiting the “matter of concern” inquiry to when a consumer is purchasing a replacement part. The proper inquiry is “whether at some point in the life of the article an occasion (or occasions) arises when the appearance of the article becomes a ‘matter of concern’”.
- Unenforceability
Automotive Body’s unenforceability arguments are also two-fold.
First, Automotive Body argues that under the doctrine of patent exhaustion, the authorized sale of an F-150 truck exhausts all design patents embodied in the truck. This exhaustion therefore permits the use of Ford’s designs on replacement parts intended for use with the truck.
The Federal Circuit disagrees that the doctrine of patent exhaustion should be so broadly applied.
The doctrine of patent exhaustion is triggered only if the sale is authorized, and conveys only with the article sold. Since Ford has not authorized Automotive Body’s sales of replacement headlamps and hood, and Automotive Body is not a purchaser of Ford’s F-150 trucks, the Federal Circuit easily concludes that Automotive Body cannot rely on patent exhaustion as a defense.
Automotive Body’s second argument is that an authorized sale of the F-150 truck also conveys to the owner the right to repair, so that the owner of the F-150 truck would be permitted to replace the headlamps or hood on the truck.
Here also, the Federal Circuit disagrees with Automotive Body’s broad application of the right to repair.
The right to repair allows an owner to repair the patented headlamps or hood on the truck, but does not allow the owner to make new copies of the patented designs.
A common premise of Automotive Body’s unenforceability arguments is their broad interpretation of the term “article of manufacture” as used in the statute. From Automotive Body’s perspective, the term includes not only the patented component, but also the larger product incorporating that component. By this interpretation, the sale of either the patented headlamps or hood, or the truck containing the patented headlamps or hood would totally exhaust Ford’s rights in the design patents.
The Federal Circuit rejects Automotive Body’s broad interpretation:
In our view, the breadth of the term “article of manufacture” simply means that Ford could properly have claimed its designs as applied to the entire F-150 or as applied to the hood and headlamp… Unfortunately for ABPA, Ford did not do so; the designs for Ford’s hood and headlamp are covered by distinct patents, and to make and use those designs without Ford’s authorization is to infringe.
Had Ford’s design patents covered the whole F-150 truck, the sale of the truck would have exhausted Ford’s rights in those patents. But, as it were, Ford’s patents cover only the designs of the headlamps and the hood, and not the design for the truck as a whole. As such, while the authorized sale of an F-150 truck permits the owner to use and repair the headlamps and the hood, the sale leaves untouched Ford’s ability to prevent the owner from making new copies of those designs.
It is not uncommon for aftermarket suppliers, especially those who supply parts intended to restore a vehicle to its original condition and aesthetics, to promise identity or near identity between its products and the OEM parts. This promise, however, would effectively be an admission that the products infringe any design patents covering the part. In this respect, this Federal Circuit decision may signal a tough road ahead for aftermarket suppliers.
Takeaway
- Use design patents not only to protect a product as a whole, but also to protect the smallest sellable component of the product.
[1] Interestingly, a district court recently determined that trademark protection extended to the combination of “John Deere green” and “John Deere yellow” as a color scheme.
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