Credit: Federal Circuit (what it looks like to argue there)

One week ago, the Federal Circuit Court of Appeals issued its decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals, Inc., 18-1638 (Fed. Cir. July 20, 2018)–by all accounts, one of this decade’s most important decisions concerning the America Invents Act and the patent system. The primary issue in the case was whether the Saint Regis Mohawk Tribe (or any tribe, for that matter) is immune from the USPTO’s inter partes review (“IPR”) proceeding, which can result in cancellation of a patent. Allergan, a pharmaceutical company, had transferred title to certain patents to the Tribe after its competitor, Mylan, had instituted an IPR of the patents. The Tribe claimed that the USPTO could not review the patents due to sovereign immunity.

The Federal Circuit held that tribal sovereign immunity does not apply to IPR proceedings. It cited the Supreme Court’s recent Oil States decision (I wrote about the case earlier this year), which explained that IPRs arise “between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.” Thus, IPR is “simply a reconsideration of” the original patent grant by the federal Government. Although initiated by a private party, the Director of the USPTO must decide to institute the proceedings, and the USPTO acts “as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope.'” The federal Government being supreme, tribes cannot invoke sovereign immunity.

The Federal Circuit’s final reference to protecting the public interest resonated with me, as well as Judge Dyk’s concurring opinion, which provided insightful context about the importance of reviewing patents post-grant. Certainly no one expects that the USPTO will perfectly examine every patent application and grant patents without error, but striving to achieve perfection is vital–even if impossible under current circumstances. As Judge Dyk illuminated:

[T]he USPTO–then and now–is an agency with finite resources that sometimes issues patents in error. Currently, for instance, the USPTO receives over 600,000 applications a year. Patent examiners receive roughly 22 hours to review each application, an amount of time that 70% of examiners report as insufficient.  And the USPTO struggles to attract and retain examiners with the technical competence required to understand the inventions being reviewed and to perform sufficiently thorough prior art searches.

The USPTO “is under pressure to make speedy determinations on whether or not to grant patents.” As such, “pre-grant patent examination was–and still is–an imperfect way to separate the good patents from the bad. Resource constraints in the initial examination period inevitably result in erroneously granted patents.” A glut of bad patents–or the perception thereof–negatively affects the public’s view of the patent system’s fairness and credibility. Thus, Congress created IPRs to combat pre-grant examination constraints, creating a streamlined procedure to challenge patents, in the hopes of restoring trust in the patent system. As an initial matter, I’m not sure attempting to solve the effect of the USPTO’s constraints was better than solving its cause.

In a recent article, I wrote about similar concerns as those expressed by Judge Dyk:

The USPTO, as the agency tasked with examining patent applications, is the first line of defense against patent fraud. But some point to the USPTO’s examination policies as potentially inviting fraud. By way of background, the USPTO’s patent examiners (those who review applications) are evaluated on a quota system, which encourages them to examine as many applications as possible. Some commentators have questioned whether this policy has turned the USPTO into a rubber-stamp institution. In the meantime, the number of patent applications and grants since 2000 has almost tripled. This has led to an even greater need for the USPTO to quickly accept or reject patents so as not to fall behind. The cycle is further incentivized by the increasing economic and financial value of patents. And it is also enabled by the difficulty, high cost, and/or impossibility of investigating every representation made by patent applicants. The USPTO simply does not have the wherewithal to investigate every claim of inventorship, utility, novelty, and other issues related to patentability. Thus, along with the important interests at stake, the complexities of patent law and the USPTO’s current weaknesses combine to create a situation in which fraud is less likely to be identified and thwarted.

In the context of the Mohawk Tribe appeal, the overwhelming public interests in reviewing potentially-invalid patents were brought to bear against the amorphous concept of sovereign immunity. It was absolutely necessary that tribes be subject to IPRs, lest private parties be enabled to take advantage of the USPTO’s constraints and “rent” the protection of sovereign immunity. Indeed, in a recent article, another commentator argued that the Federal Circuit’s decision had an “inescapable wisdom” because, had the result been any different, “every holder of questionable U.S. patents would have been rushing to one Native American tribe or another seeking deals to shelter possibly bogus rights.”

Going further, though, one can imagine more than just deals between tribes and private parties, but also the emergence of an entirely new form of patent assertion entity, patent troll (which some, but not all, criticize), and perhaps even a hybrid form of “patent privateer.” A tribe could, itself, become a mass aggegator of patents with a huge advantage: that the avenues for challenging its patents are more limited than a traditional patent holder. And one can imagine patent alliances renting tribal sovereign immunity for large market players. Any of these could exacerbate the David-and-Goliath scenario some defendants find themselves in after being sued for infringement. But, if the Federal Circuit’s decision holds–and I predict it will, especially in view of Oil States–such possible negative effects will not come to pass. However, as Judge Dyk implied (and it bears repeating), the patent system is imperfect and still has a way to go.

Lee Corso (former coach and ESPN football analyst) frequently utters this famous sports media catchphrase on ESPN’s “College GameDay” program: “Not so fast, my friend!

The first three words of that phrase come to mind upon hearing that THRILLED Daniel Snyder (majority owner of the NFL football franchise nearest the Nation’s Capitol) is celebrating Simon Tam’s (and Tam’s talented lawyers’) recent victory at the Supreme Court.

Excluded are the last two words as inapplicable, as I’ve never met Mr. Snyder, so I can’t say he’s my friend, and if even a small fraction of what Rolling Stone says about him is true, friendship seems unlikely, unless of course, he engages the services of an expert to rebrand the franchise (without the racial slur), something I asked for eight years ago.

Yet, “not so fast,” as a week ago, the government filed a brief with the Court of Appeals for the Federal Circuit, asking the Federal Circuit to affirm the TTAB’s refusal to register FUCT based on the scandalous portion of Section 2(a) of the Lanham Act, despite Tam.

The Department of Justice further contends that the Supreme Court’s ruling in Tam does not implicate the First Amendment in terms of scandalous matter, because unlike the stricken disparagement portion of 2(a), the remaining scandalous portion is viewpoint neutral.

To the extent the Justice Department prevails and the current bar on registration of “scandalous” matter survives First Amendment scrutiny with the Federal Circuit’s review in the Brunetti case, this could impact Daniel Snyder’s currently suspended R-Word trademark applications (here, here, and here), and the NFL’s suspended Boston Redskins application.

While the decades-old R-Word registrations challenged in Harjo and Blackhorse appear safe from cancellation given the ruling in Tam, what stops others from opposing registration of any future R-Word applications (or any of the currently suspended applications, if published) as containing scandalous matter in violation of Section 2(a) of the Lanham Act?

If the scandalous bar to registration survives First Amendment scrutiny, opposers (unlike cancellation petitioners) would have the significant benefit of only needing to show (at the time of an opposition decision) that the current R-Word applications have scandalous matter.

It’s a question of the timing of proof necessary, in other words, no time machine would be required to determine how the relevant public perceived the R-Word marks back in the late 1960s when the first R-Word registration issued for the team; those would not be at issue.

It’s also a question of who comprises the relevant public. For disparaging matter, it was Native Americans. For scandalous matter, it would be the general public, although not necessarily a majority, but instead a “substantial composite of the general public.”

The Act’s present prohibition on the registration of scandalous matter reaches matter that is “shocking to the sense of propriety, offensive to the conscience or moral feelings or calling out for condemnation.” Wouldn’t unambiguous racial slurs qualify for this treatment?

Who’s ready to carry the next, but new flame, if needed, to oppose registration of any R-Word applications that publish for opposition, contending that a substantial composite of the general public finds the applied-for marks “shocking” to their sense of propriety and/or “offensive” to their conscience?

Even those who fought hard to undue the disparagement provision of Section 2(a) for Simon Tam, see Daniel Snyder’s team name in a very different light, and let’s also say, not a very sympathetic light. And, the general public today is not the public from 50 years ago.

Finally, given the vast public attention and support this issue has received over the last quarter century, it would be more than interesting to see what kind of a record could be developed on the scandalous ground for registration refusal, today, and not decades ago.

So, not so fast, let’s see what happens to the scandalous portion of Section 2(a) in Brunetti, before allowing Daniel Snyder to celebrate Tam too strongly, my friends.

UPDATE: The NFL’s Boston Redskins trademark application has been removed from suspension, reports Erik Pelton, so, who will oppose if published, and why hasn’t the USPTO issued a new refusal on scandalous grounds yet?

–Sharon Armstrong, Attorney

If there is any trademark case this year that has the media clamoring to create cute headlines, it may just be this one – In re Chippendales USA, Inc., decided by the Federal Circuit just six days ago. “Federal Circuit Leaves Chippendales Nearly Naked,” said The American Lawyer, “Judge ‘strips’ Chippendales of bid to beef up trademark,” stated the Boston Herald, and “Chippendales Can’t Trademark ‘Cuffs And Collar’ Costume,” noted Reuters (as republished by the Huffington Post).

       

Back here on Earth, however, it is plain that Chippendales already owns a trademark registration for its “collar and cuffs” trade dress and continues to be eligible to obtain additional federal protection in its trade dress.

So what does everyone have their collars and cuffs in a twist about?

The crux is that, in obtaining its existing trade dress registration, Chippendales argued that its trade dress had acquired distinctiveness over a long period of use, such that consumers have come to recognize the trade dress with Chippendales. The Supreme Court has held that certain types of trade dress can be inherently distinctive. In prosecuting the current applications that are the subject of the Federal Circuit opinion, Chippendales has maintained that its trade dress is actually inherently distinctive, such that it should be registered on the Trademark Office’s Principal Register without any accompanying evidence of long-term use. In short, Chippendales has been arguing that its trade dress is automatically capable of identifying a source of goods and services, in this case Chippendales.

The Federal Circuit, like the Trademark Trial and Appeal Board before it, concluded that Chippendales’ trade dress is not inherently distinctive, primarily because the collar-and-cuffs look is a type of “common basic shape design” that has been in use in connection with exotic dancing for quite some time. Specifically, the Court noted that the use of “collar and cuffs” outfits by Playboy bunnies constituted “substantial evidence supporting the Board’s determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive.”

Nevertheless, the Court also pointed out that Chippendales current registration has achieved incontestable status and that marks that obtain registration on the Principal Register due to acquired, rather than inherent, distinctiveness enjoy the same benefits as their inherently distinctive brethren.

Chippendales remains free and capable of obtaining the benefits of federal registration with the caveat that, at this point in time, they must claim acquired distinctiveness in their marks.

The Federal Circuit also addressed questions about the time at which to measure acquired distinctiveness and whether the existence of a registration obtained via acquired distinctiveness moots the inquiry into whether a new application for the same mark can claim inherent distinctiveness. You can read the opinion here.