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U.S. Intellectual Property and New Media Law Update NEVER WAS A CUT-OFF SO DESERVED Micro Data Base Systems, Inc. v. Nellcor Puritan Bennett, Inc., et al. (Seventh Cir. - January 25, 1999) THE PAYMENT OF LICENSE FEES SIDE STEPPED Engel Industries, Inc. v. The Lockformer Company, et al. (Fed. Cir. - February 3, 1999) SOFT IN THE HEAD In re Cortright (Fed. Cir. - January 19, 1999) WHERE’S THAT PENGUIN TO DO HIS DRINKING Anheuser-Busch, Inc. v. Supreme International Corp. (Eighth Cir. -January 28, 1999) NEVER WAS A CUT-OFF SO DESERVED Micro Data Base Systems, Inc. v. Nellcor Puritan Bennett, Inc., et al. (Seventh Cir. - January 25, 1999) This case deals with the termination of a licensee from hell. Micro Data Base licensed its database for use in Licensor's program. The royalty rate varied depending on whether previously sold software was being updated or new software was being supplied. The license was directed to a Windows version. The Licensor did provide an OS/2 version for testing purposes only which it did not license for use. The Licensee essentially paid no royalties on some of the sales of the software, paid for new installations at the lower rate for updating and sold the unlicensed OS/2 version without payment of any royalties. When Plaintiff became aware of this conduct, it invoked the termination provision of the license agreement which allowed 45 days to cure. Somehow, the termination took the Licensee by surprise. The Licensee alleged that termination would destroy its business as it would take a year to integrate a new database into its software. In a motion steeped in legal chutzpah, the Licensee asked the Court to compel the Licensor to accept as sufficient under the agreement the royalties it proposed to tender and the District Court understood this as a request for an anti-termination injunction. The District Court denied the motion, ruling that Licensee is unlikely to prevail on the merits. The Licensee argued that the termination clause did not indicate who was to determine whether it had breached the agreement and, thus, Licensee should have 45 days after the judge made such determination in which to cure. The Court indicated that such interpretation would force a company to continue to license a unscrupulous licensee, implying that such a situation existed here. In any case, the Court found that while by great effort you could possibly read the Licensee's position into the agreement, it would not do so since the clear meaning was otherwise. Underlying the Licensee's position was that the injury from termination was so great it was entitled to interim relief even if it was likely to lose in the end. The formulation for interlocutory relief does allow the possibility of granting an injunction where injury from enforcement of the order is sufficiently great to warrant a conclusion to balance error in favor of the relief. The Court, however, looked to the Licensee's continued use of Plaintiff's software after termination, and after the District Court denied injunctive relief. Since Licensee continued to sell Plaintiff's software, the only purpose of Defendant's injunction would be to curtail the damages and potential criminal liability for Defendants' copyright infringement. These are simply not irreparable injuries. The decision can be reviewed at: http://caselaw.findlaw.com/cgi-bin/getcase.pl?court=7th&navby=case&no=982472 THE PAYMENT OF LICENSE FEES SIDE STEPPED Engel Industries, Inc. v. The Lockformer Company, et al. (Fed. Cir. - February 3, 1999) This is the fourth time up to the Federal Circuit for this patent case. The Plaintiff/Appellant had taken a license under the Defendants' patent, under protest, claiming that it did infringe the patent. Eventually this issue was taken to Court. The case proceeded through a number of decisions and appeals. After several trips up, the Federal Circuit found that Plaintiff did not infringe the patent, but that the patent was valid and the licensing agreement was also valid. The Plaintiff then asked the District Court for a refund of royalties paid. The Judge refused and the present appeal, Engel IV, ensued. It looked like the question before the Court was whether the rule of Lear v. Adkins, 395 U.S. 653, 162 USPQ 1 (1969) can be extended to instances in which the licensee proves that it has not infringed the claims of a valid patent. The Federal Circuit side stepped the issue by noting that its mandate in Engel III, Plaintiff had appealed from a judgment that its product infringed the '641 patent, and that Engel "must continue to make royalty payments" under the terms of the license agreement. Thus the issue of the Plaintiff's liability under the license agreement was plainly within the scope of the judgment appealed and, thus, the mandate of the Federal Circuit. While the Federal Circuit in Engel III found that the patent was not infringed and, thus, royalty payments did not have to be continued, there was no request on appeal with regard to past payments. Engel's liability under the license was, however, plainly within the scope of the Federal Circuit mandate in Engel III. Thus, clearly, since Engel did not choose to present a claim that it was entitled to a refund of payment under the license agreement, it was subsumed under the general finding with regard to future liability. In other words, because Engel appealed a judgment which obligated it to continue paying royalties pursuant to the license agreement, a judgment affirmed by the Court in Engel III, the District Court lacked jurisdiction to consider Engel's motion for a refund of royalty payments. The decision can be reviewed at: http://www.law.emory.edu/fedcircuit/feb99/98-1294.wp.html SOFT IN THE HEAD In re Cortright (Fed. Cir. - January 19, 1999) This is an appeal to the Federal Circuit of a Patent Examiner's rejection of a patent application. The patent application concerned a method of treating baldness by applying BAG BALM to the human scalp. Bag Balm is a commercially available product used to soften cow udders. Frankly, it looks as if the Patent Examiner just didn't believe the application. The Examiner demanded that the applicant prove that it worked. On appeal, they found this rejection was improper since such a request should only be made where the statements in the application are incredible, but it was apparent they didn't believe in Bag Balm either. The Board rejected the same claims first as insufficient as to how the Bag Balm should be used on the scalp. Then on a request for reconsideration, they came up with yet another different reason for rejecting the claims. The claims call for restoring hair growth, this meant to the Board complete restoration rather than just an increase in the amount of hair. The Federal Circuit noted that the PTO could not make a rejection unless it has reasonable doubt as to what the objective truth of the statements contained in the written description. Since hair restoration was now a fact of life, the Board had no basis for not accepting the applicant's statement as to ability. While the PTO must give claims the broadest reasonable interpretation, that interpretation must be consonant with that of one skilled in the art would reach. Looking at the cases, patents, and the MPEP, it is all clear that restoring hair does not mean restoration to a 20 year old's head of hair. The decision can be reviewed at: http://www.law.emory.edu/fedcircuit/jan99/98-1258.wp.html WHERE’S THAT PENGUIN TO DO HIS DRINKING Anheuser-Busch, Inc. v. Supreme International Corp. (Eighth Cir. -January 28, 1999) As some of us may know, and some of us not, Anheuser-Busch, in January 1996, began a national advertising campaign for BUD ICE beer using penguins. In September 1996, Supreme acquired rights in a penguin trademark held by Munsingwear, Inc., which had been using penguin designs on golf apparel since 1954. Supreme then began discussing with Anheuser about producing clothing with penguins on it for the BUD ICE campaign. At the same time, Supreme objected to Anheuser's use of the penguin design on BUD ICE apparel. Despite a good deal of negotiations, the talks broke down. On December 11, 1996, Supreme sent a letter to Anheuser demanding that it stop all use of the penguin design in its Bud Ice campaign or it would take action. Anheuser responded with a declaratory judgment action seeking a declaration that Anheuser's use of the penguin in the Bud Ice campaign was neither infringing nor diluting Supreme's right in the penguin trademarks. Within a week thereafter, Supreme filed its own action in the Southern District of Florida claiming trademark infringement, unfair competition and deceptive business practices. This second action was stayed by the Florida Court pending the Missouri Court's decision applying the first filed rule. That is where there are two suits over the same subject matter, the suit should be tried in the District first filed. Supreme filed a motion to dismiss, stay or transfer the Missouri action and the Missouri Court granted Supreme's motion dismissing the Missouri action under the compelling circumstances exception to the first filed rule. Anheuser appealed. The Florida action has since resumed, Anheuser having answered Supreme's complaint and both parties have been served with discovery. Here, the Eighth Circuit refused to overturn the first court's refusal to follow the first filed rule. Anheuser was on notice that Supreme was going to file suit and the action was for declaratory judgment. Further, less than two weeks passed in the time Supreme sent its cease and desist letter to Anheuser to the time Supreme filed the Florida action suggesting Anheuser raced to the Court House to usurp Supreme's forum choice. Decision can be viewed at: http://ls.wustl.edu/8th.cir/Opinions/990128/981816.P8 |
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