Friday, September 12, 2014

Dastar and design patent

Deckers Outdoor Corp. v. J.C. Penney Co., No. 2:14-cv-02565 (C.D. Cal. Sept. 8, 2014)

This is going to sound bigger than it is: the court grants JCP’s motion to dismiss a false designation of origin claim under Dastar because JCP, and not Deckers, was actually the origin of the allegedly too-Ugg-like boots at issue. But the court doesn’t dismiss trade dress/unfair competition claims based on the same conduct. Mark McKenna has been talking about this Dastar issue for a while (avoiding Dastar by pleading that the content at issue has secondary meaning and thus causes confusion), but we haven’t really seen it in operation, and it only really becomes a problem when things like characters or whole works in the public domain are claimed to have secondary meaning.

Deckers makes Uggs and has two design patents on its Bailey Button design. Deckers sued JCP for trade dress infringement, unfair competition, and false designation of origin under the Lanham Act, as well as patent infringement and state-law unfair competition. “The Bailey Button boots are made of suede and feature overlapping front and rear panels, curved top edges on the overlapping panels, exposed fleece-type lining, and one or more buttons depending on the height of the boot placed on the lateral side of the boot shaft.”

JCP argued that, because it actually produced the goods at issue, there could be no false designation of origin under Dastar even if the goods allegedly embodied Deckers’ ideas or concepts. Deckers rejoined that it was bringing a passing-off claim, not a reverse passing-off claim. But that didn’t change the meaning of “origin,” on which Dastar turned; the Lanham Act can’t be used to create perpetual copyright or patent.

Deckers wasn’t alleging that JCP sold Uggs as its own products, but rather that JCP appropriated its trade dress and then caused consumer confusion as to the “origin” of JCP’s boots. “Regardless of whether Deckers accurately characterizes this scenario as passing off, it is crucial that the origin of the boots JC Penney has sold is JC Penney—not Deckers.” Trade dress misappropriation was immaterial, since Dastar made clear that “the phrase ‘origin of goods’ is . . . incapable of connoting the person or entity that originated the ideas or communications that ‘goods’ embody or contain.” Deckers couldn’t get a variety of perpetual patent protection from the Lanham Act. (Interesting effect of the design patent here: it apparently triggered the court’s caution about Deckers’ Lanham Act claims.)

As for design patent infringement, JCP argued that Deckers didn’t explain the alleged infringement and identified design differences. The court found that Deckers properly pleaded infringement, a question of fact. Comparison of the designs was improper. Plus, comparison of the designs with the accused products “demonstrates a sufficient visual similarity to at least render infringement of the ’189 Patent plausible.” That was enough.

As for willful infringement, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” The patentee must then show that the objective risk was either known or so obvious that it should have been known to the accused infringer.” California courts further hold that a plaintiff must plead presuit knowledge in order to adequately plead willful infringement.

JCP argued that Deckers only conclusorily alleged willfulness, but didn’t allege any supporting facts about JCP’s advance knowledge. Deckers only alleged widespread popularity and recognition of the Bailey Button boot style and the patent notice on the boots themselves. Deckers alleged that popularity plus patent notice on the products itself sufficed to show presuit knowledge. Not so. Deckers didn’t allege actual presuit awareness. Other cases involve allegations of actual knowledge, “not some form of bootstrapped constructive knowledge.” This claim was dismissed with leave to amend.

Finally, the court dismissed the California UCL claim as preempted, since there was no extra element that distinguished it from Deckers’ federal claims. Deckers alleged that its allegations of bad faith could avoid preemption, and that the UCL provided additional remedies such as punitive damages that weren’t available under the Lanham or Patent Acts. But alleging more elements or factual information than necessary isn’t enough; state claims must have an element not shared by the federal law. Deckers’ decision to plead bad faith didn’t make it an element of a UCL claim, since the UCL allows for liability in the absence of bad faith. And extra remedies are irrelevant (indeed, they may be a reason preemption is important if Congress has decided what the remedies for infringement should be).

Comment: Here too I think we’re seeing a side effect of the intervention of the design patent claim into what even a few years ago might’ve been just a Lanham Act claim. The Lanham Act, of course, doesn’t preempt most state laws, and trade dress confusion allegations should have distinguished the UCL claim from the patent infringement claim, but Deckers apparently didn’t argue that. Plus, it’s standard doctrine that bad faith isn’t an extra element that avoids preemption when the state claim is based on the acts that allegedly constitute infringement; bad faith narrows the set of copying/infringing activities that trigger state law, but that’s not enough.

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