Category Archives: Analyses

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« For they have sown the wind, and they shall reap the whirlwind. »

Old Testament, Hosea 8, 7.

foreign lost profits
Photo by Claire Anderson on Unsplash

On 22 June 2018 an interesting decision was issued by the US Supreme Court (USSC) relating to an award of damages in WESTERNGECO LLC v. ION GEOPHYSICAL CORP.  Reversing the decision of the Federal District Court, the USSC decided to award damages for loss of profits which occurred outside the US. This was a reversal of the previous position held by US Courts where lost foreign sales were generally considered not recoverable through enforcement of a US patent.  In order not to over, or under, interpret this decision and its consequences, the facts of the case are important.  Here is the Supreme Court’s own summary:

Petitioner WesternGeco LLC owns four patents relating to a system that it developed for surveying the ocean floor. The system uses lateral-steering technology to produce higher quality data than previous survey systems. WesternGeco does not sell its technology or license it to competitors. Instead, it uses the technology itself, performing surveys for oil and gas companies. For several years, WesternGeco was the only surveyor that used such lateral-steering technology.

In late 2007 respondent ION Geophysical Corporation began selling a competing system. It manufactured the components for its competing system in the United States and then shipped them to companies abroad. Those com­panies combined the components to create a surveying system indistinguishable from WesternGeco’s and used the system to compete with WesternGeco.

WesternGeco sued for patent infringement under §§271(f)(1) and (f)(2). At trial, WesternGeco proved that it had lost 10 specific survey contracts due to ION’s in­fringement. The jury found ION liable and awarded WesternGeco damages of $12.5 million in royalties and $93.4 million in lost profits.” (Emphasis added).

§ 271(f)(1) of the U.S. Title 35 (Patents) addresses the act of exporting a substantial portion of an invention’s components from the US to a foreign destination. §271(f)(2) addresses the act of exporting components that are specially adapted for an invention, once again, from the US to a foreign destination.

ION filed an appeal and the Federal circuit reversed the decision regarding the lost profits award on the basis that lost foreign profits are not recoverable, in principle. Based on the 22 June 2018 decision of the USSC, this principle does not hold anymore: foreign lost profits ARE now recoverable, at least under specific conditions.

In a nutshell, the USSC decided that once domestic infringement is established, the overriding principle of award is to provide a remedy which is commensurate with the harm caused by the infringement. The fact that the lost profits arose from the loss of foreign contracts was not relevant to assess damages.

At first, anyone can see the fairness principle underlying this decision. The action of the infringer enabled the purchaser to dispense with the surveying services of the patentee.  The loss caused could have threatened the very existence of the company.

However, among the five Supreme Court judges, two dissented with this approach. One of the dissenting judges, Judge Gorsuch J, raised the issue that the infringer becomes suddenly liable for acts beyond its control and that it has no power to stop. Hence, once the supply of the components necessary to manufacture the surveying devices is carried out, the infringer cannot retract it.  It becomes thus potentially liable for all future “lost contracts” that can be established as being the direct consequence of the supply forbidden by §271(f)(1) and §271 (f)(2) (cf. supra).  Although such a proof is usually difficult to establish, this was one of the cases where it was successfully argued, because there were no other competing players in this specialised market than the litigants themselves.

If the acts of using the invention had been carried out in the US, the purchaser in this case would have become an infringer and could have been stopped. This is not the case if the purchaser is in fact using the invention outside of the US.  The liability of the US supplier/infringer mushrooms suddenly without clear limits.

However the USSC balanced this potential unknown liability with the principle that the patentee has to be commensurately compensated, and decided in favour of the latter.

This decision now stands as a strengthening of patent rights.  This will be pleasing to the owners of US patents and increase the value of their US portfolio.  However to be applicable the patentee had not only to establish a domestic infringing act of exporting abroad but also a clear and direct consequential link between the act and the loss of profits. In this case this was possible due to the combination of :

  • a particular business model where the patentee kept its patented technology for itself and offered only its services; and
  • a market where only one competitor existed, said competitor being the infringer.

This particular combination of facts is not likely to be very frequent. Nonetheless, there is no doubt that U.S. exporters as well as U.S. patentees will be keeping this decision very much in mind as a biblical warning against unforeseen consequences of unlawful conduct.

 

Article written by Sophie McDade from LLRLLR logo

Louboutin’s Shoes Or How To Learn Not To Be Walked Over

LouboutinIf you evoke Louboutin’s name, it will probably be associated by lots of people with red sole shoes, especially high heels.

Obviously, the famous luxury shoes designer Christian Louboutin has made red sole shoes his trademark since 1992 to the extent that this characteristic is even sometimes used to designate his creations rather than his name.

In order to protect himself from competition, Mr. Louboutin registered his red sole as a French figurative trademark on November 29, 2000.

Since a decision of the Court of Justice of the European Union dated May 6th, 2003[i], it is effectively possible to register a colour as a trademark, on the condition that the color constitutes a sign that can be graphically represented and capable to distinguish the products and services of the holder from those of other companies.

More precisely, the graphic representation must be “clear, precise, complete by itself, easily accessible, intelligible, durable and objective”, as listed by the CJUE in a 2002 case[ii].

The trademark in question filed by Mr. Louboutin was composed of a picture of a sole with the following description: “shoe sole of the colour red”, and was designating “Shoes” in class 25.

Louboutin trademark FR 003067674
Louboutin trademark FR 003067674

Further to several judicial cases Mr. Louboutin brought, in order to safeguard his rights from opponents using red soles, all lost, his French Trademark n°3067674 was finally canceled in 2011 during the C. Louboutin versus Zara France case.

Accusing Zara France of counterfeiting because the firm was commercializing red-soled shoes, Mr. Louboutin’s arguments were dismissed. The French Court of Appeal (Cour d’appel)[i] and Supreme Court (Cour de cassation)[ii] ruled that “neither the form, nor the colour of the sign has been determined with enough clarity, precision and correctness to confer distinctiveness to the sign permitting to identify the origin of the shoe”.

Indeed, the colour of the sole was just described as “red” and the picture did not enable to immediately identify a sole without reading the description.

Further to this failure and to the loss of his trademark, Mr. Louboutin decided to file a new French trademark application in 2011, but more precise, in order to avoid cancellation.

This time, he chose to file a sketch of a high heeled sandal in dotted line, except for the outline of the sole which was continuous.

Louboutin trademark FR 113869370
Louboutin trademark FR 113869370

The following description was added: “The trademark consists of the colour red (Pantone 18.1663TP) applied to the sole of a shoe as shown (the outline of the shoe is therefore not part of the trademark but serves to show the positioning of the trademark).” and the application was designating “High-heeled shoes (except orthopaedic footwear)” in class 25.

This new trademark has permitted to reverse the trend and Mr. Louboutin finally won a new case on the basis of counterfeit of his red sole against the French company Kesslord.

Indeed, the red colour applied to the sole has been considered as a tridimensional sign satisfying the graphic representation’s requirements and, therefore, constituting a valid trademark.

Facts

Kesslord is a French company specialized in leather goods (bags, shoes…).

It offers to its customers to personalize items by choosing colour and texture, and proposes notably red soles for shoes.

When Mr. Louboutin found this out, he sent a formal notice to Kesslord, asking to withdraw the red colour from its personalization catalogue.

As a conservation measure, Kesslord has withdrawn the red colour of its catalogue and, a short time afterwards, asked for cancellation of Mr. Louboutin’s French trademark n°3869370, arguing that it didn’t satisfy the trademark’s requirements of clarity, precision, accessibility, intelligibility and objectivity.

In fact, Kesslord considered that the sign was likely to vary depending on the type of shoes on which it was applied. Consequently, the exact extent of the protection was not determined.

Kesslord wanted the Court to reduce the protection solely to “red colour (Pantone code n° 18 1663TP) applied to the totality of the sole of a fine stiletto, doted of 10cm heels, the colour not being continued on the heel”.

On Mr. Louboutin’s side, he argued that the sign was a guarantee for the commercial origin of the shoes on which it was affixed and permitted to identify two concrete and immediately perceptible elements: the red colour defined with the Pantone Code and the location on the outside sole of the high heel which made of it a position trademark. The rest of the shoe, dotted on the sketch, was not part of the field of protection, in a manner that if the shoe varies, the sign would stay constant.

The First Instance Court of Paris (Tribunal de grande instance) ruled on March 16, 2017[1] that the figurative trademark was distinctive and able to be graphically represented, so valid according to CJCE case-law[2], and rejected the cancellation action.

As the graphic representation of the trademark comprised a defined form, which was a high heel‘s sole with a clear curve, and a distinctly identified colour with a Pantone code in the description, the criteria of clarity, precision, objectivity and consistency of the graphic representation required by the CJCE[3] were fulfilled.

Conclusion

This new decision marks a new era for Mr. Louboutin, who can finally defend his rights on the red sole.

But this saga is far from over: a new episode is coming up soon as an appeal was filed on April 3, 2017 against the First Instance Court’s decision.

We should therefore be informed in the near future if the French jurisdictions will consecrate a monopoly for the position trademark of the red sole shoes.

[1] Tribunal de grande instance de Paris, 3e ch., 1re sect., 16 mars 2017 (RG 2015/11131 ; M20170192)

[2] CJCE, 18 June 2002, Koninklijke Philips Electronics NV vs. Remington Consumer Products Ltd., C-299/99 and CJCE, 25 January 2007, Dyson Ltd. vs. Registrar of Trade Marks, C-321/03

[3] CJCE, 27 November 2003, Shield Mark BV vs. Joost Kist h.o.d.n. Memex, C-283/01

[i] Cour d’appel de Paris, pôle 5 – ch. 1, 22 juin 2011, n°09/00405

[ii] Cour de cassation, civile, ch. Commerciale, 30 mai 2012, 11-20.724

[i] CJCE, 6 May 2003, Libertel Groep vs Bureau Benelux Marques, C-104/01

[ii] CJCE, 12 December 2002, Ralf Sieckmann vs Deutsches Patente und Markenamt, C-273/00

 

Written by Gilles Escudier and Anne-Sophie Pillot from the firm LLR for ECTA Bulletin March 2018. Republished here with permission from ECTA. LLR logo

Privileged at last…

A new Rule at the U.S. Patent Office establishes that communications with foreign patent attorneys can be privileged.

Privileged information Since its coming into force on 7 December 2017, a new Rule (§ 42.57)[i] establishes that US patent agents, as well as foreign patent “practitioners”, who are qualified in their jurisdiction, will receive the same treatment as US attorneys on all issues affecting privilege or waiver. 82 Fed. Reg. 51570-75 (Nov. 7, 2017).

This clarification was long overdue as the status of a communication between a litigant and its domestic or foreign patent agent had been a hotly debated topic in the United States (US) for the last 50 years.

This is of real importance as patent litigations on an international level frequently involve the US, including challenges regarding the validity of patents which are heard before the US Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB).

Privileged information and the US discovery process

In the US, pre-trial steps will generally involve the dreaded “discovery” process[i].  In this process reciprocal demands will be made by the parties for production of documents, depositions of parties and potential witnesses, written interrogatories etc…. The theory underlying the US rights of discovery is that all parties will go to trial with as much knowledge as possible and that neither party should be able to keep secrets from the other (except for protection against self-incrimination). This common law pleading principle is mainly applied to civil disputes and is the object of some detailed dispositions[ii] at the Federal level.

Therefore some information may not have to be disclosed and may be kept secret. Such information is described as being “privileged”.  Legal advice provided by an attorney to her/his client can enter the category of privileged information upon very specific conditions[iii] and is generally referred to as being “client-attorney privileged”.

Litigation involving patents offers several very specific challenges when the parties come to the discovery step and have to determine if a communication is, or is not, privileged.  In particular this is due to fact of:

  • the nature of patent-related communications: they may comprise a great deal of highly sensitive technical information.
  • the legal status of the advisers: they are frequently not registered before a US court to practise law and therefore, strictly speaking, not “attorneys”.  They can be US patent agents, or in-house counsels. Even more difficult is the case of foreign patent practitioners, who can also be either independent or in-house advisers of the litigant.

The new provisions now clarify at least the issue of professional status before the USPTAB of qualified independent patent practitioners such as the French CPI (Conseil en propriété industrielle), German (Patentanwalt) and British CPA (Chartered Patent Attorneys).

It is however always worth keeping in mind that the “privilege” status is to be decided on a document-by-document basis.  The nature of the communication is as important as the person writing it in order to decide if the privilege can be asserted.  The communication must be confidential in nature and “reasonably necessary and incident to the scope of the practitioner’s authority”[iii].  Opinions relating, for example, to commercial matters are unlikely to qualify.  Likewise, results of a patent search, even if carried out by a qualified patent attorney, may not be privileged although a detailed patentabilty opinion based on said search should be.

Thus, the issue of privileged information will stay an exceptionally delicate matter for patent attorneys worldwide and should be considered most carefully before starting any litigations involving countries, like the US, which have discovery-like provisions.

[i] https://www.gpo.gov/fdsys/pkg/FR-2017-11…/2017-23048.pdf

[ii] Chapter V of Federal Rules of Civil Procedure

[iii] The standard set forth in United States v. United Shoe Machinery Corp. 1918 is often cited as “the” test for privilege:

“The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication is made (a) is a member of the bar of a court, or his subordinate and (b) in connection with the communication is acting as a lawyer; (3) the communication related to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) or legal services or (ii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.” (emphasis added).

https://supreme.justia.com/cases/federal/us/247/32/case.html

Article written by Sophie McDade from LLR Patent and Trademark Attorneys

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