The Supreme Court year in review.
The Supreme Court gets, on average, 7,000-8,000 appeals from the lower federal courts each year. Of that amount, the justices only agree to hear and decide a small number of cases. Recently, it's been 70-90 cases a year. However, because of this small number, and because in our legal system, the court delivers the absolute and final word on the interpretation of U.S. law, its decisions carry a very high degree of significance and often go beyond the specific dispute or issue that it's dealing with.
Eight Decisions About IP Law
These facts have been notable in the area of intellectual property (IP) law, particularly in patent, copyright, and trademark law. Of the 70 decisions that the court issued in the 2016-2017 term (which ended on June 26), eight dealt with IP issues. At more than 10% of the court's decisions, this represents a higher than normal portion of its workload, suggesting that IP is an area of increasing importance to the court and the country. In addition, all of the court's decisions in this area were either unanimous or nearly so, indicating that the ideological issues that dominate public perception of the court are not in play in the IP space. Because of the significance of these decisions, a review of the court's work this past term is in order.
By far, the most prominent area of the court's IP work was patent law, with six decisions on a wide range of topics. The most anticipated of the year was in the case of TC Heartland LLC v. Kraft Foods Group Brands LLC, which the court decided on May 22, 2017. (All of the decisions can be found at supremecourt.gov.) This ruling altered the structure for determining where patent infringement cases are filed, and in so doing is seen as having a significant impact on patent lawsuits and the problem of patent trolls. The case involved a lawsuit by Kraft against TC Heartland over allegations of infringement of Kraft patents on flavored drink mixes. The substance of the suit is less important than where it was filed, which was not in Kraft's home state and was several hundred miles from Heartland's home in Indiana.
TC Heartland v. Kraft
Kraft filed under the prevailing rule that as long as the defendant (TC Heartland) has "minimum contacts" with a particular state (in this case, Delaware), it can be sued in that state. Minimum contacts can mean as little as having its products sold within the state. The result of this rule is that infringement cases are often filed in places where the plaintiffs think they can get a friendly court or jury. Patent trolls have used this technique to file cases in a remote federal court in eastern Texas, because it is perceived as friendly and unusually fast. This puts pressure on defendants to settle regardless of the merits of the case.
The Supreme Court held that the rule wasn't being applied correctly. It determined that a defendant can only be sued in the state where it "resides"--specifically, the state where it is incorporated. The defendant can also be sued in a state where it has a "regular and established place of business." While the court didn't specifically address what that means, other courts have held it to be some form of office presence, a manufacturing or distributing facility, or at least something more than where its products are being sold. This case will likely impact the balance of power in lawsuits by giving plaintiffs less freedom to pick and choose the venue for their suits, which may lead to more incentive to settle.
Impression v. Lexmark
Another significant ruling was for Impression Products, Inc. v. Lexmark International, Inc., decided on May 30, 2017. The case involved Lexmark toner cartridges, which were either sold free and clear or at a discount with the buyer's agreement to return them to Lexmark for reuse. Impression purchased cartridges from the buyers--both the free and clear ones and the discounted ones--and refilled and resold them. Lexmark sued, claiming that because Impression did not have the authority to refill the discounted cartridges, it was infringing on patents that Lexmark owned.
The Supreme Court found in favor of Impression, holding that once Lexmark sold the toner cartridge, its patent rights over that particular cartridge ended--a principle known as patent "exhaustion." Patent exhaustion is similar to copyright's first sale doctrine and is based on the idea that copyright and patent protection provide incentive to writers and inventors to create. By selling a particular writing or product, the creator has gained the reward and can't control what the buyer does with it. The court said that Lexmark could go after the discount buyers for breaching the agreement, but could not go after the reseller on patent grounds. This confirms the principle that once purchasers buy a particular product, they are free to use it as they wish without concern about patent or copyright.
Samsung v. Apple
The Supreme Court also weighed in on the long-standing Samsung v. Apple case over Apple's patents for the iPhone design. Apple sued Samsung, claiming that Samsung copied Apple's iPhone design (both the front face and shape, as well as the layout of the icons). Apple had won in the lower courts with an award of $399 million, representing Samsung's entire profit from the sale of its phones. The Supreme Court, however, held that because Samsung infringed only part of the iPhone, the award of profits should be based on only those parts. It sent the case back to a lower court to determine a final amount of damages. This case may go much further than Apple or Samsung, as it suggests that damages may be limited to only that part of the product that actually infringed, not the entire product.
Other Patent Cases
Other patent cases that the court addressed were Sandoz v. Amgen, Life Technologies v. Promega, and SCA Hygiene Products v. First Quality Baby Products. They primarily deal with technical areas of patent law--the production of biologic drugs, which are based on animal or plant matter rather than chemicals; the export of patented components of a multicomponent product; and the statute of limitations on patents, respectively. The SCA Hygiene case confirmed that the 6-year statute of limitations on patent infringement claims could not be shortened by a legal principle called "laches." Laches could apply when a plaintiff waits too long to file a suit without a valid reason. The court held that when the statute provides for a specific time frame to file, the plaintiff is entitled to that full period.
Is 'The Slants' OK?
Trademark cases are fairly rare for the court, with this term seeing only the third decision in the last 10 years, but it is turning out to be a potentially landmark case. Matal v. Tarn was an appeal of a U.S. Patent and Trademark Office (USPTO) decision to deny trademark registration to the band The Slants on the grounds that the name would "disparage" Asian-Americans. The band's leader, Simon Tam, selected the name in order to "'reclaim' the term and drain its denigrating force." The case was highly anticipated, as the same principle applied to a USPTO decision to revoke the registration of the Washington Redskins trademark.
The court held in favor of Tam and The Slants, finding that the rule against disparaging trademarks violates the First Amendment. It ruled that trademarks constitute speech in that they express ideas or opinions. Because they are speech, the court went on to hold that by denying the benefits of trademark registration due to ideas--even ideas that may offend--the statute violates the First Amendment's free speech clause.
The initial reaction was more focused on the decision's impact on the Washington Redskins than on The Slants, but it was seen as a win for freedom of expression. Already, however, some are expressing their freedom in similarly provocative ways. Reuters reports that since the Tam decision, the USPTO has received a number of trademark applications that include racist and Nazi-themed words and images. While some motives may be to prevent others from using the terms, and others may be similar to Tarn's intention to drain the terms of their "denigrating force," at least one commentator expressed concern about the slippery slope of creating acceptance of these terms.
Useful Articles and Dancing Babies
The court's sole copyright case, Star Athletica v. Varsity Brands, dealt with copyrights on functional "useful articles." It found that if a design is capable of existing separately from an article, it could be copyrighted. The court decided not to act on the "dancing baby" case involving a YouTube video that used portions of a song by Prince. A lower court's ruling that copyright owners must consider fair use before issuing takedown notices will consequently stand as the final decision.
With a fully staffed bench and a politically divided environment, the Supreme Court will likely remain on the public radar screen for the foreseeable future. But its routine work in IP and other areas remains important and merits attention from all industry stakeholders as the new court year begins in October.
George H. Pike is the director of the Pritzker Legal Research Center at Northwestern University School of Law. Send your comments about this article to firstname.lastname@example.org.
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|Author:||Pike, George H.|
|Date:||Sep 1, 2017|
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