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Collaborations in Creativity & the Law

The USPTO Goes to Washington

Posted in Trademarks, TTAB, USPTO

Last week, the U.S. Senate Judiciary Committee held its oversight hearing regarding the U.S. Patent and Trademark Office (USPTO). New USPTO Director Andrei Iancu testified (see his written statement here), for the first time in his new official capacity. It was an interesting hearing–a video recording of the hearing is available here (starting at minute 16).

Director Andrei Iancu, U.S. Patent and Trademark Office

There was critical commentary at the hearing regarding post-grant proceedings at the Patent Trial and Appeal Board (PTAB) under the America Invents Act (AIA), which some argue results too frequently in invalidation of patents, and thereby creates an imbalanced system that does not sufficiently protect patent owners. Senator Coons stated: “In the past decade, there have been a variety of actions … which have had the cumulative effect of significantly weakening patent rights…. One cause is the impact of the new post-grant proceedings at the USPTO before the Patent Trial and Appeal Board …. [T]he current review system is systematically biased against patent owners based on statistics from its first five years.” Senator Coons also mentioned new legislation he had introduced, the STRONGER Patent Acts, which he describes as “aligning PTAB standards to district court standards, better accounting for the fact that issued patents have already gone through a significant examination by a governmental agency.”

Although much of the hearing focused on patents, there was also some discussion of trademarks, with some interesting facts and statistics about the Trademark Office. Last year, about 600,000 trademark applications were filed, an increase of about 12%. Historically, average annual increases in trademark applications are between 6-8%. But the rate of growth is predicted to significantly increase in the future. As of this month, filings have increased 15% since last year. And over the next eight years, annual growth is expected to average 10%. According to Director Iancu, the biggest driver of the increase has been a rise in filings from China, which currently represent 10% of new filings. By 2023, filings from China are expected to represent a third of all filings.

This heavy growth in trademark applications has required significant hiring increases at the Trademark Office, with 232 new Examining Attorneys hired in the past five years, resulting in a total of about 580 Examining Attorneys currently. If the expected growth trends continue over the next five years, Director Iancu anticipates over 300 new hires will be required, growing the number of Examining Attorneys to over 900.

Finally, Director Iancu noted that the Trademark Office met or exceeded all trademark pendency and quality targets last year. Most trademark applications are pending for less than the targeted goal of 12 months, from filing through registration (or other final action or abandonment), with the average being about 9.5 months. The Trademark Office is also meeting its target of issuing a first action on pending applications between 2.5 – 3.5 months after filing, with the average being 2.7 months. More interesting statistics and budgetary data are available here.

It is reassuring to hear the Trademark Office is exceeding its pendency targets (particularly in light of the staggering number of new applications last year–600,000–among 580 examiners). Sometimes it feels like things take longer than they should during prosecution, but in light of this heavy volume, one can develop a greater appreciation for how quickly things are able to move.

What did you think of this oversight hearing on either the topics of patents or trademarks? Any thoughts?

Game-maker Sues Lucasfilm over Han Solo Movie

Posted in Copyrights, Infringement, Television, Trademarks

You may have heard of a little movie called Star Wars. If you haven’t, well, I’ve got some movies for you to borrow. The film was released in 1977, and soon spawned a trilogy of movies that are among the most popular film franchises in the world. Fast forward forty years and eight of the nine triple-trilogy movies have been released, along with spin off movies such as Rogue One and the soon-to-be released Solo. However, the new Solo movie has created a spin-off of its own: a lawsuit filed by a U.K. gamemaker claiming that Lucasfilm’s movie and subsequent advertising infringes on his trademark rights in the mark SABACC.

The complaint was filed by Ren Ventures (“RV”) and its licensee Sabacc Creative Industries and the main issue involved is which party owns rights in the SABACC name and trademark. From the best I can tell, the name Sabacc was coined by George Lucas (the creator of Star Wars) or one of his co-writers at Lucasfilm. The game is mentioned in the original 1977 Star Wars movie and is referenced throughout the Star Wars universe of books and movies. For example, Han Solo “famously” won his spaceship the Millennium Falcon in a Sabacc game. That story likely plays out in the plot of the new Solo movie, which likely explains why Sabacc is prominently featured in advertising related to the movie, like this Denny’s commercial.

But does Lucasfilm’s use of SABACC as a fictional card game in movies and books create enforceable trademark rights? I haven’t seen any current use of SABACC with any specific goods or services, so there doesn’t appear to be any traditional trademark usage (affixed to goods or their packaging). However, Lucasfilms has sought and obtained registration for a number of similar features of the Star Wars universe, as you may recall from this Handy List of Star Wars References that Might Get You Sued. These registered marks include LIGHTSABER, THE FORCE, JEDI, and others. Of course, these marks are used with toys and other merchandise, making Lucasfilm’s claim to trademark rights a bit easier.

In fact, Lucasfilms distributed a licensed Sabacc card game in 1989. An image of the rules are below, but it appears this was a limited distribution.

Given that SABACC is a term coined by Lucasfilm and used only in the Star Wars universe, what type of Jedi mind tricks is RV using to assert its own rights in the SABACC name? Surprisingly, they’re relying on some ancient dark magic – a trademark registration. According to the complaint, RV sought to adopt a trademark for a game that mixed the rules of poker and blackjack. The complaint alleges that RV “searched the public domain for names” for such games, and the search revealed the names Pojack, 727, 727 Poker, Home Card, and Sabaac (ed note: one of these names is not like the other…). It’s unclear what RV meant by searching the “public domain,” as that phrase is normally used for copyright protected works that have lost their protection. Nonetheless, RV filed an application to register the SABACC mark for various computer game software and entertainment services. The application was published for opposition on June 7, 2016 and, after no third-party opposed, a registration issued on Aug. 23, 2016.

Although Lucasfilm actively enforces its rights at the U.S. Patent and Trademark Office, likely with the assistance of numerous watch services, its hard to fault Lucasfilm for not opposing. After all, even with all that Disney money, it might be difficult to justify a watch notice for each every made up element from the Star Wars universe. Regardless, Lucasfilm eventually learned of the registration and filed a Petition for Cancellation on May 1, 2017 with the Trademark Trial and Appeal Board (“TTAB”). Lucasfilm filed a Motion for Summary Judgment and, shortly thereafter, RV filed an infringement action and requested suspension of the cancellation proceeding at the TTAB.

RV has begun use of the SABACC game to promote online games, including at the iTunes store. A screenshot of the store is shown below:

You’ll notice that there are a number of word choices in the description that reference the Star Wars universe. This includes the reference to a “Cantina” (the Mos Eisley Cantina plays a major role in the original Star Wars movie), the word “galaxy” and the phrase “far, far away” (A reference to the films’ opening credits), and a reference to Cloud City, which plays a major role in the Empire Strikes Back. The use of a single one of these might not be concerning, but all of them in combination with Sabacc? Coincidence, I’m sure…

Setting aside Lucasfilm’s potential claims for trademark and copyright infringement, the facts strongly suggest that Luasfilm has a claim of unfair competition against RV. Based on all of these “coincidences,” the facts strongly suggest RV is attempting to capitalize on the goodwill and popularity of Star Wars. RV has essentially created the exact same game from the movies and books, is promoting the game utilizing similar imagery of robots, and utilizing words and phrasing uniquely associated with the Star Wars franchise to promote the game.

RV seems to be placing all of its eggs in the basket of “Lucasfilm didn’t use the mark in commerce and therefore we established valid trademark rights.” Unfortunately, there is at least one allegation in RV’s complaint that they might break a few of those eggs:

when consumers encounter Plaintiff’s pre-existing SABACC brand video playing-card game in the marketplace, they are likely to mistakenly believe that Defendants are the source of, and/or sponsor or endorse, Plaintiff’s SABACC brand video playing-card game, and/or that Defendants, the upcoming Solo Film, and/or Defendants’ Hand of Sabacc Commercial is/are otherwise associated or connected with Plaintiffs, Plaintiff RV’s SABACC Mark, and/or Plaintiff SCI’s pre-existing SABACC brand video playing-card game

The allegation arguably eliminates any need for Lucasfilm to establish use in commerce of the SABACC mark. The allegation suggests that the mere use of playing a Sabacc game in the movie or a in a commercial creates a likelihood of confusion with RV’s video game. If that’s all that it takes to create a likelihood of confusion, it makes it pretty easy for Lucasfilm to agree and simply gather the evidence of Lucasfilm’s use of Sabacc games in its films, moves, books, and related merchandise since 1977, and assert its counterclaim for infringement based on these prior rights.

With an upcoming premiere date of May 15 at the Cannes Film Festival, and a U.S. release date of May 25, there isn’t much time for the parties to work out a settlement. I’m not one with the Force and certainly can’t read minds, but I have a feeling this lawsuit won’t change Lucasfilm’s timeline.

Registration of a Very Personal Brand Name

Posted in Advertising, Articles, Branding, Marketing, Mixed Bag of Nuts, Search Engines, Social Media, Social Networking, Television, Trademarks, USPTO

How much do I believe in federal registration of trademarks and brand names? Well, this much:

I’ve always been a big fan of practicing what you preach. Actually walking the talk. Not just talk.

That mindset helps explain why we stuck with the suggestive name of this blog, even after the experts recommended against it several times, for SEO and other reasons. They do agree now.

Anyway, the registration issued in the nick of time, given my true fortune just two days earlier:

Seriously though, obtaining federal registration of a personal brand name can be a bit challenging.

A common refusal when personal names are involved is that they merely identify a person, and they fail to function as a mark, the very refusal the USPTO initially issued in my particular case:

“Registration is refused because the applied-for mark, as used on the specimen of record, is a personal name that identifies only the name of a specific individual; it does not function as a service mark to identify and distinguish applicant’s services from those of others and to indicate the source of applicant’s services.”

“In this case, the specimen shows the applied-for mark used only to identify the name of an individual and not as a service mark for applicant’s services because it is used to identify the author of blog posts, but does not separately indicate the source for any service. Applicant has applied for services including providing information in the field of law. The specimens shows the applied-for mark being used merely to name the author writing the posts, and to identify a particular individual and give information about him. The specimens include a short biography or “about the author” post with the name of the author or individual at the top, and several posts that show the applied-for mark included only as “By Steve Baird.” This shows the applied-for mark being used in a by-line, attributing authorship, but not identifying source. The applied-for mark is not used in association with the offering of any service in a way that would make it a service mark.”

Fortunately, I’m surrounded by really bright, passionate intellectual property and trademark attorneys, and in this case, our Tucker Chambers came to the rescue, with this winning response.

And, thankfully Tucker had some decent facts to work with, especially given kind commentary of some generous giants from both the legal and marketing fields, two of our core audiences.

Trust me, the irony has not escaped me, that one of these generous giants recently allowed the registration for his blog’s name to lapse, and the other giant likely prefers to Just TM It instead.

I’ve never professed to resemble a purple cow, but my mother and father did teach me to follow the beat of my own drum, after taking in a variety of different perspectives to settle on my beat.

So, if you have a personal brand name that truly functions beyond indentifcation to indicate the source of goods or services, my hope is that you will consider federal registration to help protect it.

Keep in mind, personal brands can go beyond an actual name to embody a non-verbal image too, where consent of the individual so identified is of record at the USPTO, hello Ralph Lauren:

Personal brands also may include nicknames, like Mr. Wonderful aka Kevin O’Leary from Shark Tank fame, who is seeking registration of Mr. Wonderful for roasted nuts, hello Wonderful:

 

So, I’m left thinking that Mr. Wonderful best get crackin’ on his anticipated response to the inevitable likelihood of confusion refusal that he’ll be experiencing in the not-to-distant future.

Tattoo Artists’ IP Rights Only Skin-Deep

Posted in Copyrights, Fair Use, Famous Marks, Infringement, Law Suits, Mixed Bag of Nuts

 

WWE wrestler Randy Orton has some unique ink on his arms and back, created by tattoo artist Catherine Alexander.  Orton—and his tattoos—are featured in the WWE 2K video games.  Alexander claims ownership of copyright in the tattoos, and is suing WWE and the makers of the video games for their depiction of the original tattoos.

This case is one in a string of lawsuits alleging copyright infringement based upon celebrity or athlete tattoos.  In 2017, tattoo artist James Hayden sued the makers of an NBA video game for depicting several tattoos he’d created for LeBron James.  And remember that Mike Tyson-like tattoo on Ed Helm’s face in The Hangover 2?  In 2011, tattoo artist S. Victor Whitmill brought a copyright infringement suit against Warner Brothers Entertainment in an attempt to block the release of the movie.

 

 

Nonetheless, the copyrightability of tattoos remains in question.  These cases frequently settle out of court, and thus we do not yet have a clear judicial determination of whether tattoos on skin constitute copyrightable works of art.

Much ink has been spilled over the legal merits of whether a tattoo is copyrightable.  But legal theory aside for a moment, should tattoos be copyrightable?  Do we want our copyright jurisprudence to venture down a path of allowing one person or entity to have a property right in another person’s skin?

The artistic nature of tattoos makes it difficult to square the tattoo artist’s creative rights with with the tattoo bearer’s bodily autonomy.  Under copyright law, the mere act of displaying a copyrighted work can be an infringement.

Nimmer on Copyright is likely the most widely used treatise on American copyright law.  David Nimmer himself submitted a lengthy declaration for the defendant in the Hangover case.  In his declaration, Nimmer described some of the bizarre outcomes we might see if we decide tattoos are indeed copyrightable:

  1. With particular respect to celebrity and athlete tattoos, magazines, TV networks, documentary film makers and others could be required to obtain licenses from tattoo artists behind the celebrity’s or athlete’s tattoos.  If those licenses are not obtained, the celebrity or athlete herself could be liable for contributory infringement.
  2. An adjacent or overlapping tattoo might constitute a derivative work, which could itself be an infringement of the original artist’s rights.  Nimmer suggests this could lead to a court order to have the offending work laser removed.
  3. The Visual Artists Rights Act allows certain works of art to be granted “recognized stature,” which allows an artist to prohibit intentional or grossly negligent destruction of a work.  Under this Act, if a tattoo were granted “recognized stature,” the artist could obtain a court order barring removal or destruction of the tattoo.
  4. Even if the tattooed person goes so far as to obtain an exclusive license of all rights from the artist, that does not necessarily solve the issues described above.  Some copyright licenses can be subject to an inalienable right of the artist to terminate the license 35 years after grant.  As Nimmer explained, “For example, a 20-year old actress might get a tattoo from X, subject to his agreement (negotiated by her counsel) to assign to her all copyright interests in the image and never to terminate the grant.  When she turned 55, she might nonetheless be shocked to learn that X now has the right to block merchandising of her image.”

These may be extreme examples, but they serve to illustrate the difficult intersection of tattoo artistry with existing copyright jurisprudence. Accordingly, Nimmer suggests the best solution might be legislative.  When courts could not square the realities of computer software with existing copyright laws, the Computer Software Copyright Act of 1980 was passed.

Eventually, a tattoo copyright case is bound to reach a court decision.  Until then, the uncertain legal grounds will continue to rest on selective enforcement and out of court settlements.

White Color Trademark Goes Up in Flames

Posted in Advertising, Almost Advice, Articles, Branding, Look-For Ads, Loss of Rights, Marketing, Non-Traditional Trademarks, Patents, Sight, Trademarks, TTAB, USPTO

A couple of years ago, our friend John Welch over at the TTABlog reported about a white color trademark that had acquired distinctiveness, according to a rare precedential TTAB decision:

No, that’s not a roll of toilet paper, it’s a preformed gunpowder charge for use in muzzleloading rifles. And the applied-for mark was described as “the color white applied to gunpowder.”

The application was filed almost five years ago. And after multiple responses over the years to various USPTO refusals, in 2015 the Applicant appealed the lack of acquired distinctiveness.

And, as John reported, the TTAB reversed the lack of distinctiveness refusal, instead being persuaded that Applicant’s look-for advertising and other evidence established distinctiveness:

But, that’s not the end of the story. Turns out there is a relevant utility patent, called White Propellant Compositions, which led to the filing of a weighty 50-page Notice of Opposition.

It spells out in dramatic detail the functionality of the color white for the gunpowder charges, among other grounds for registration refusal, and judgment has been entered against Applicant.

In case you’re wondering, yes, we were privileged to light the match on this one. Word to the wise, never forget the timeless ticking time bomb of functionality. It kills trademarks in its tracks.

Kaboom, but judge for yourself whether the claimed mark is looking more like toilet paper now.

SUMO CITRUS — Sign of Super-Sized Flavor?

Posted in Articles, Branding, Food, Trademarks

While many other places in the country are enjoying signs of spring, here in the Twin Cities, we’re hanging on to the white stuff, for a while longer; we shoveled 22 inches worth this past weekend!

There’s something about our long winter here that makes fresh fruit in the grocery store all the more appealing, interesting, and engaging, especially when it’s an ordeal to even get to the store:

So, it’s not exactly Buddha’s Hand, but the enormous SUMO Citrus displays have caught my attention and interest this winter. This time, the brand name is actually the largest wording:

SUMO as a brand of food, has the initial challenge of overcoming the frequent “you are what you eat” admonition, and any resulting fear of the mark describing the results of over-consumption.

And, the promotion as “the sweetest citrus you’ll ever eat,” perhaps reinforces the concern, but the silly rotund shape of the fruit itself and the informative tagline helps prove a different meaning.

The combination of those additional brand elements helped convince me of its overall cleverness and suggestiveness, especially after reading the SUMO Citrus story, and seeing the “top-knot”:

“It is the biggest mandarin you’ve ever seen. It has a distinctive shape with a prominent “top-knot.” The peel is bright orange, bumpy and loose so it peels effortlessly. The delicate sections separate easily. It’s seedless, juicy without being messy, and it is quite probably the sweetest citrus you’ll ever eat.”

SUMO kudos to the creative who saw the Japanese “knot-top” (a/k/a “man bun“) in the fruit.

Less kudos for the apparent decision to only seek registration of the composite SUMO CITRUS, and not the broader and stronger SUMO mark itself without the other generic wording or man bun.

Fuse – Next Big Design

Posted in Advertising, Branding, Marketing, Mixed Bag of Nuts, Product Packaging, Trademarks

I just got back from my yearly trip to hang out with creative people and learn about branding and design at FUSE. This year we traveled to the brand capital New York City.

On Monday, I participated in the FUSE Trenzwalk through Chelsea, Greenwich Village and the Meatpacking District in New York City. Earlier this week, you may have seen Steve Baird’s post inspired by this walk, What You Need to Un-Suspend a Trademark.

There were two places in Chelsea Market that caught my eye and have trademark registrations:

  1. KIKKERLAND®, and
  2. FAT WITCH®.

The KIKKERLAND® store sells various products such as personal grooming devices, sports spectacles, massage apparatus, electric lamps, electric light fixtures, chronometric instruments, stationery, furniture, household utensils, kitchen utensils, and briefcases.

The FAT WITCH® brand is associated with brownies, cookbooks and recipe cards. Although the brand name itself might not inspire consumers to come in to consume brownies and become “fat,” the cute design of the witch below does invite people into the store.

Day two of FUSE was devoted to presentations at the DREAM hotel. I attended the presentation entitled “The Augmented Body – Sustainable Fashion Futures for a Connected World,” by Dr. Amanda Parkes. We learned about a company that was using waste from oranges to make “Orange Fiber,” which is a sustainable silk fabric. The company partnered with famous designer Salvatore Ferragamo® for his Capsule Collection.

Adidas is also getting on the sustainability train by selling shoes and swimsuits made from ocean plastic. Specifically, the footwear giant partnered with the non-profit organization Parlay for the Oceans. The organization seeks to raise awareness about the precarious state of the world’s oceans and to work on projects to help protect and conserve the oceans.

ZOA™ was another sustainable fabric discussed in the presentation. The brand features biofabricated leather products made without animals. Modern Meadow filed a trademark application for the ZOA mark in connection with various bioleather products.

Has anyone been involved with the development of sustainable products, or bought any products made from them?

Update: Stone Brewing v. MillerCoors – Answer and Counterclaims

Posted in Branding, Infringement, Law Suits, Mixed Bag of Nuts, Trademarks

A couple months ago, I posted about the contentious trademark battle involving Stone Brewing Co., a craft brewery based in California, who filed a trademark infringement complaint against giant beer conglomerate MillerCoors LLC and Molson Coors Brewing Co. (“MillerCoors”). The complaint is based on the recent rebranding of the MillerCoors “Keystone” beer, which separates and places greater emphasis on the word “STONE.”  Stone Brewing alleged that this rebranded packaging infringed its registered trademark “STONE” mark for beer.

A couple days ago, MillerCoors submitted an 84-page filing for its answer and counterclaims. Typically, an answer is relatively short, consisting of concise admissions or denials. But the answer here consists of 50 pages, with numerous paragraphs providing narrative, argumentative retorts aimed at Stone Brewing. Additionally, MillerCoors alleged four counterclaims, seeking declaratory judgment: (1) of MillerCoors’ right to use STONE to advertise Keystone beer; (2) of the unenforceability of the STONE mark against MillerCoors due to laches; (3) of MillerCoors’ non-infringement; and (4) of MillerCoors’ exclusive right to use the STONE mark.

MillerCoors emphasizes that its rebranded packaging does not use or infringe Stone Brewing’s “STONE” mark; rather, the full “KEYSTONE” mark is always used, and Stone Brewing’s complaint relied on “misleading images” that “misrepresent the look of Keystone cans and outer packaging,” to unduly isolate the “STONE” portion of the mark.

Furthermore, MillerCoors alleges that it made prior use of “STONE” as a nickname for its Keystone beer in its advertising since at least 1995, whereas Stone Brewing did not begin selling its STONE-branded beer until 1996.

MillerCoors also contends that Stone Brewing should not be allowed to enforce its STONE mark against MillerCoors after unreasonably waiting eight years to file this lawsuit, following a demand letter sent by Stone Brewing back in 2010, after which Stone Brewing took no further action.

Beyond the relevant legal points, MillerCoors also offers several rhetorical attacks, in an attempt to counteract the big-beer vs. small-brewing narrative of the complaint. MillerCoors contends that Stone Brewing’s “grandiose” allegations are “misleading and ultimately meritless,” and that the lawsuit is merely a “publicity stunt and a platform to market its beer.” MillerCoors suggests that the lawsuit was really about “Stone Brewing’s struggle with its new identity as a global mega-craft beer manufacturer. Gone is the small Stone Brewing of old. Today, Stone Brewing is one of the largest breweries in the United States and its beer is sold on five continents…. What does a company that was built around its opposition to ‘Big Beer’ do when it becomes ‘Big Beer?’ Stone Brewing’s solution appears to be to file this meritless lawsuit against MillerCoors.”

That may sound harsh, but then again, this pushback shouldn’t be a surprise in light of the aggressive criticism throughout Stone Brewing’s complaint, as discussed in my previous post.

For all of MillerCoors’ attacks of Stone Brewing’s “publicity stunt,” the same label could be applied to the answer and counterclaims, which appear to focus on developing a counter-narrative and managing public perception, in light of the extensive rhetoric, some of which isn’t necessary or particularly relevant to the legal claims.

How do you think this one will turn out? With both sides so clearly invested in this lawsuit being about public relations, marketing, and/or a “publicity stunt,” I wouldn’t be surprised if this lawsuit settles without going very far, to avoid the significant risks of negative PR on both sides. Stay tuned for updates.

Patent Appeals to the District Court: Win or Lose, You Pay Attorneys’ Fees?

Posted in Articles, Law Suits, Mixed Bag of Nuts, Patents, Squirrelly Thoughts, Trademarks, USPTO

Recently, the Federal Circuit Court of Appeals (the federal appellate court that primarily hears appeals in patents cases) heard arguments in NantKwest Inc. v. Matal, No. 16-1794 on the issue of attorneys’ fees (a timely topic) in certain patent cases.

Credit: PatentlyO

Attorneys’ fees are a necessary and inescapable cost of enforcing one’s rights and, as often is the case, can be astronomical in intellectual property cases. Under what is known as the “American Rule,” parties to a case usually must shoulder their own attorneys’ fees and costs–even if they win. Some statutes alter this general rule, allowing those who win in court (known sometimes as “prevailing parties”) to recover fees and costs. But reimbursement is the exception, rather than the rule.

The issue on appeal in NantKwest is unique and far more exceptional than prevailing party statutes. As clearly explained in a recent Law360 article, the case has to do with a previously-neglected section of the Patent Act, which provides that parties who “appeal” USPTO decisions directly to a district court (as opposed directly to the Federal Circuit) must pay “all expenses” incurred by the USPTO, win or lose. The full language can be found in 35 U.S.C. § 145, which provides:

An applicant dissatisfied with the decision of the Patent Trial and Appeal Board…may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director in the United States District Court….The court may adjudge that such applicant is entitled to receive a patent for his invention….All the expenses of the proceedings shall be paid by the applicant.

For more than 100 years, the USPTO interpreted the “all expenses” language to apply only to travel expenses, expert fees, and miscellaneous costs. But in 2014, the USPTO argued that similar language in the Lanham Act (at 15 U.S.C. § 1071) entitled the USPTO to not only traditional costs, but also the USPTO’s attorneys’ fees. A district court agreed, and the Fourth Circuit Court of Appeals affirmed.

It wasn’t long until the similarly-worded language in the Patent Act came to bear on patent applicant NantKwest. Citing § 145, the USPTO argued that NantKwest should pay over $78,000 in attorneys’ fees. But the district court disagreed, stating that the word “expenses,” American Rule presumption, and over 100-year history of the Government’s position on this provision in the Patent Act, together required a narrow construction of the term. But the Federal Circuit reversed the district court in a 2-1 decision. Months later, the entire Federal Circuit agreed to hear the case en banc (to be considered by all of the judges, rather than a three-judge panel).

Numerous third-parties filed briefs with the Federal Circuit in anticipation of the rehearing. The American Bar Association is against an expansive interpretation, asserting that such would serve as a “roadblock to justice.” The International Trademark Association, which has interests given the similar language in the Lanham Act, and the American Intellectual Propertly Law Association agree.

The Federal Circuit recently heard oral argument in NantKwest and has not issued its opinion. But as I have chronicled before, the questions posed at oral argument may provide clues as to what may result. Here are some of the questions judges asked during the Government’s oral argument:

  • “[The USPTO] says there is no meaningful dispute with respect to whether ‘expenses’ covers attorneys fees or not. Isn’t there enough in the record to establish there is some ambiguity in terms of the coverage of ‘expenses’?”
  • “[The USPTO previously] hired independently counsel?” This references outside fee arrangements from the 1800s, perhaps establishing a factual basis for distinguishing attorneys’ fees from expenses.
  • “If it’s so clear, why did it take the PTO until the last couple years to tumble onto this supposedly unambiguous reading?”
  • “So, time out, [is the USPTO] saying that when the taxpayers were paying [the USPTO’s] fees, [the USPTO] had no obligation to seek them, but when the applicants would be paying [the USPTO’s] fees, now [the USPTO] suddenly need[s] to go seek them? You just said that [the USPTO] turned into a self-funded agency. Fefore that, who was paying the expenses of the agency?”
  • “So the statute has said for 170 years all expenses of the proceeding shall be paid by the applicant. That is not discretionary, correct? So the PTO did not have the discretion if the statute included attorneys’ fees…to not seek attorneys’ fees because the statute is mandatory, not discretionary?”
  • “Didn’t the agency become user-funded in the 80s?”
  • “Do you agree that since it wasn’t mandatory…the agency was in error for the last 170 years when it failed to seek attorneys’ fees?”
  • “What I don’t understand…if the AIA mandates that [the USPTO] be completely user-funded, why isn’t the cost of a patent examiner, or the cost of Xeroxing, or the cost of parking part of the fees pro-rata that [the USPTO is] seeking in this case?”
  • “Can you cite to any other provision…in which a loser can recoup its attorneys’ fees?”
  • “How are the salaries that are paid to the staff attorneys treated within the PTO budget? Are they an operating cost? Are they expensed out? Is there any profit margin factored into any of those costs?”
  • “Did counsel ever receive bonuses during a fiscal year? Counsel can get a bonus, isn’t that correct? Why aren’t they expensed in? Or in this particular instance?”
  • “Do you all keep detailed time sheets? Day-by-day, every [6] minute break? At the time that it is spent, or at the time in retrospect after the case is over? Are contemporaneous time sheets kept for every item that every lawyer works on?”
  • “What was the hourly rate?” The attorney for the USPTO responded that the value of USPTO attorney time is “roughly $100 per hour.”
  • “There’s no dispute in this case, at least, that expert fees are included in the statutory provision? And does the PTO contract with outside providers?”
  • “What about the access-to-courts issue?” This references a due process argument and the concern that requiring the payment of the USPTO’s attorneys’ fees would be prohibitive to small inventors and businesses.
  • “Is it your view that the expenses of this appeal should be payable, including the salaries of PTO employees who might be sitting here?”
  • “So you’re saying that the language in the statute that says ‘this proceeding,’ is not limited to the action in the district court, but also includes this appeal and maybe a Supreme Court appeal?” The USPTO responded yes, but that it wasn’t seeking such fees, prompting one judge to ask, “Why?…You don’t have discretion to request…or waive them.”
  • “Are you aware of any other statute that shifts the salaries of an agency’s attorneys onto the party who brought proceedings challenging the agency’s decision?”

Question to the other side, NantKwest:

  • “What is the purpose of the expense provision in section 145? Why did Congress adopt this unusual provision?” The answer? “We don’t know” because the legislative history doesn’t provide an answer.
  • “How are attorneys’ fees accounted for in a law firm? Are they profit? Income? Expense?”
  • “So your theory is that ‘expenses’ means traditional costs?”
  • “If you’re sitting there in Congress, and you’re trying to craft an unambiguous provision that would allow for the personnel expenses, would it be sufficient in this provision to say, ‘all of the expenses of the proceeding, including the personnel expenses’?” This spawned a great deal of back-and-forth about how Congress could have been more explicit without using the words “attorneys’ fees.”
  • “Is it your position that the ‘all expenses’ language is clear and doesn’t include attorneys’ fees? Or that it’s ambiguous, and, therefore, under Supreme Court precedent…doesn’t include attorneys’ fees?”
  • “My understanding is that nobody has identified any statute that uses generic language…without a parenthetical stating ‘including attorneys’ fees’ that has been interpreted to cover time for lawyers?”
  • “Are we really dealing with attorneys’ fees here?…In your experience as a practitioner…does that include a profit margin?”
  • “Do private law firms follow the government model? In which people who bill less hours…get to charge more per hour?” This was a somewhat lighthearted question.

On rebuttal:

  • “When did the Government determine that this provision included attorneys’ fees? For 170 years did [the USPTO] believe that it was entitled to seek them, but didn’t have to?”
  • “What about when the Government said that the possibility that the Government would try to seek fees was so remote that it could not be taken seriously?”

After listening to the oral argument, one is left with the distinct impression that the Federal Circuit was more critical of the Government’s newfound position and more accepting of NantKwest’s arguments. Yet, as shown above, the questions the judges asked the Government far exceeded those directed to NantKwest. As a recent Star Tribune article reported, if the case was being heard by the Supreme Court, this could suggest that the judges actually support the Government’s position. But given the entire tone of the oral argument–especially that of the rebuttal, in which the judges specifically asked the Government to address arguments raised by NantKwest–I cannot help but think the Federal Circuit will rule against the Government, creating a circuit split with the Fourth Circuit and ultimately setting up an appeal to the Supreme Court. Stay tuned!