Be Aggressive, B-E Aggressive – Supreme Court Encourages IP Plaintiffs

Miller & Martin PLLC Alerts | March 27, 2017

by Jared Cohen, Eileen Rumfelt and Laura Ashby

Last week, the U.S. Supreme Court decided two much anticipated intellectual property cases.

Supreme Court Rejects Laches in Patent Infringement Cases

The first, SCA Hygiene Products Aktiebolag et al. v. First Quality Baby Products, LLC, et al., may prove to be a significant victory for patent holders. The issue in SCA was whether the equitable defense of laches is a viable defense to patent infringement when the patent infringement claim is brought within the six-year statute of limitations. The Court held in the negative. The Supreme Court's ruling follows its 2014 decision in Petrella v. Metro–Goldwyn–Mayer, Inc., a copyright case holding that laches "cannot be invoked to bar legal relief [i]n the face of a statute of limitations enacted by Congress."

The defendant in SCA contended that this case differed from Petrella because normally a statute of limitations runs forward from the date a cause of action accrues, whereas the patent infringement statute's limitations period runs backward from the filing of the complaint. And, because a lawsuit need only be brought any time after initial infringement as long as the infringement has occurred within the six-year period, the statute effectively allows a patent holder to lie in wait until potential damages are at their peak. Justice Breyer, the lone dissenter, raised such practical and policy concerns about eliminating laches in this context: "[t]hat means that a patentee, after learning of a possible infringement in year 1, might wait until year 10 or year 15 or year 20 to bring a lawsuit. And if he wins, he can collect damages for the preceding six years of infringement."

Last week's ruling is a blow to patent infringement defendants, particularly due to what Justice Breyer called the "lock-in problem." "Once a business chooses to rely on a particular technology, it can become expensive to switch, even if it would have been cheap to do so earlier." Further, the potential for repeated suits when an infringer is truly "locked-in" is ripe for capitalization. As Breyer states, "the patentee can keep bringing lawsuits, say, in year 10 (collecting damages from years 4 through 10), in year 16 (collecting damages from years 10 through 16), and in year 20 (collecting any remaining damages)." Equally concerning is the potential that evidence useful to certain patent infringement defenses may grow stale or disappear over time. In sum, this decision effectively provides patent holders with the potential to reap larger-than-expected rewards, with concerning policy implications in the era of patent trolling.

Supreme Court Finds Cheerleading Uniforms Are Copyrightable

The second ruling on copyright protections in Star Athletica, L.L.C. v. Varsity Brands, Inc. seemingly extended the limits of the copyrightable aspects of clothing.

Varsity Brands, a copyright holder of over 200 registered two-dimensional designs consisting of various lines and chevrons, sued Star Athletica for copyright infringement after Star reproduced similarly designed cheerleading uniforms. The issue before the Court was whether one could copyright designs incorporated into, and wholly part of, a useful article (e.g. clothes, cars or other useful real-world items). To satisfy the copyrightable requirement, the object must be able to stand alone, as its own pictorial, graphic or sculptural work, once imagined apart from the useful article. Thus, according to the Court, in order to qualify as a pictorial, graphic or sculptural work on its own, the feature cannot be a useful article or "[a]n article that is normally a part of a useful article."

The true test, the Court held, is whether, if separated from the useful object and applied in another medium, the feature would qualify as a two-dimensional work of art. The only feature of the cheerleading uniforms that was eligible for a copyright was the two-dimensional art design on the surface of the uniforms. The copyright holder may prohibit the reproduction only of the surface designs on the useful object or in any other medium of expression. The holder does not, however, have the right to restrict others from manufacturing the useful object, to which the design is applied. An artistic design that would normally be eligible for copyright protection on its own thus cannot lose its protection simply because it was initially created as a part of the design of a useful article.

In response to an argument that decorations cannot be copyrighted because, "even when extracted from the useful article, they retain the outline of a cheerleading uniform," the Court held that "[t]his is not a bar to copyright. Just as two-dimensional fine art corresponds to the shape of the canvas on which it is painted, two-dimensional applied art correlates to the contours of the article on which it is applied." Varsity Brands has changed the landscape of copyright protection for fashion creations and wearable articles.

Next up…the Supreme Court's decision on patent venue. Will the Eastern District of Texas remain a hotbed of patent litigation? The Court hears oral argument on this issue today.

If you have further questions on this topic, please contact Eileen Rumfelt, Laura Ashby or any other member of our Intellectual Property Law Practice Group.

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