Wednesday, March 29, 2006

Third Circuit decision in family seed business trademark/trade secret dispute

The Third Circuit recently issued a long decision dealing primarily with a complicated dispute over trademark ownership rights in the context of a dispute between several entities that grew out of a successful family business. There was also an interesting question involving the intersection of trade secret rights and the Federal Seed Act.

I won’t even try to summarize the salient facts concerning the ownership and use of the Doebler family name in Doeblers’ Pennsylvania Hybrids, inc. v. Doebler, No. 04-3848 (March 23, 2006), but there were a couple of legal points discussed by the Third Circuit that bear mentioning. First, on the trademark side, one of the Doebler parties was on the manufacturing side, the other was on the marketing/sales side. Looking to Professor McCarthy’s treatise, the Third Circuit noted that in disputes where manufacturers and distributors are quarrelling over who owns the mark, McCarthy suggests that the courts first look to whether a contract takes care of the question. If not, McCarthy suggests that courts look to a multi-factor test to determine what a typical consumer of the goods would perceive about who owns the mark. The Third Circuit, while not rejecting this “consumer expectation” test (there was no contract dealing with the issue) in all circumstances, limited when it could be applied. It held that where, as in the Doebler case, it was clear that one of the parties started out owning the mark and the issue was whether subsequent events resulted in transfer or abandonment of rights, the “consumer expectation” test had no application. Because the party challenging the first owner was essentially saying that, through subsequent events, the original owner “forfeited” its rights in the mark, courts should strictly apply the traditional tests to determine whether there had been an assignment or abandonment, rather than use a “balancing test” to decide whether such a forfeiture of rights had occurred. (Ed. I find this to be pretty solid reasoning.)

On the trade secret side, the issue was whether the plaintiff’s brand names for different hybrid vegetable seed varietals could be “trade secrets.” I know, I know, how can a brand name be a trade secret?, you ask. Well, hybrids are the first generation of pure bred “inbred” varietals. Apparently, the hybrids’ brand names in this case uniquely corresponded to the two inbred varieties used to make them. It was the defendants’ knowledge of what inbreds made up each of the plaintiff’s hybrids that the plaintiff wanted the defendants to stop using. Under the trade secret claim, the plaintiffs had gotten an injunction at the district court prohibiting the defendants from selling any of the hybrids sold by the plaintiff or disclosing any of the pedigrees of those hybrids.

The Third Circuit reversed this aspect of the district court’s decision, primarily on the ground that the third-party “foundation” seed companies that sold inbred seeds to the parties (so they could make their hybrids) pretty much told all their customers for inbred seeds which inbred seed varieties to cross-breed in a given agricultural zone, and most customers followed this advice. So the combinations weren’t “secret” at all.

The Third Circuit was also concerned that considering the parentage of the plaintiff’s hybrids to be a trademark could potentially conflict with the Federal Seed Act (FSA). The FSA requires that seeds be sold under their varietal name. Regulations under the FSA require that hybrid designations are treated as varietal names, and that the first company to name a new varietal sets the varietal name that other companies must thereafter follow. So the defendants needed to be able to use their knowledge of the make-up of the plaintiffs’ varietals and the plaintiff’s varietal names to comply with the FSA and associated federal regulations.

Wednesday, March 08, 2006

Federal Circuit decision on copyright and design patent issues concerning furniture design

The Federal Circuit recently reversed a district court summary judgment ruling of no copyright infringement and no design patent infringement in a case involving competing furniture. Amini Innovation Corp. v. Anthony California, Inc., No. 05-1159 (Fed. Cir. March 3, 2006) concerned copyright registrations for "carved ornamental woodwork" on furniture items and a design patent on a bed frame.

On the copyright claim, the Federal Circuit (applying 9th Circuit precedent) noted that a plaintiff has to show ownership of a copyright and copying of protected expression. Since there was no evidence of literal copying, the court looked to the "access + substantial similarity" indirect way of showing copying. And in the 9th Circuit, the more access, the less a plaintiff needs to show on substantial similarity. Since there wasn't much evidence of access, the court required "striking" similarity. But only similarity in expression counts, and since purely utilitarian articles don't receive copyright protection, the court focused solely on the carvings themselves.

Under the 9th Circuit's two-part "extrinsic/intrinsic" test for substantial similarity, courts must first perform the "extrinsic" test: an "objective comparison of specific expressive elements," in which the court analytically dissects the work (and maybe takes expert testimony). If under this test the two works "share a similarity of ideas and expression as measured by external, objective criteria," courts are then to apply the "intrinsic" test, which asks whether an ordinary reasonable audience would find substantial similarity in the "total concept and feel of the works."

The Federal Circuit was OK with the district judge's performance of the extrinsic test, but held that the district judge went wrong when he performed the intrinsic test himself, deciding "the fact intensive question of the total concept and feel of the carvings in the furniture." The Federal Circuit believed that a reasonable jury could have determined that there was a substantial similarity in the total concept and feel of the works.

As to the design patent, the Federal Circuit held that the district court's claim construction focused too much on the details of the ornamentation rather than the overall design of the bed post. Further, the Federal Circuit found again that the district court had usurped the jury function in performing an element-by-element analysis in determining that no reasonable jury could have found that the accused product was substantially similar. Instead, the district court was supposed to have analyzed "the design as a whole from the perspective of an ordinary observer."

I don't know about you, but to me these types of cases are analytical minefields.