Tuesday, January 06, 2015

claims about patent might be misleading if on-sale bar clearly applied

Bern Unlimited, Inc. v. Burton Corp., 25 F. Supp. 3d 170 (D. Mass. 2014)
Bern, which sells sports helmets, sued six competing helmet makers.  It initially sued for design patent infringement, but dropped that claim and switched to trade dress infringement.  In their answers to the third amended complaint, defendants brought counterclaims, which Bern moved to strike as too late and futile.  The motion was granted in part and denied in part.
The complaint claimed the design elements the “rounded profile of the helmet, which is designed to follow the shape of the wearer’s head”; and “the distinctive visor.”  Bern allegedly began selling the initial version in December 2005, followed in January 2007 by a design patent application, which became a registration in 2008.  If you see an on-sale bar issue there, you’re not alone. Bern ultimately filed a statutory disclaimer of the patent.
In its marketing materials, Bern touted its patent protection, allegedly to discourage retailers from buying competitors’ helmets.  The patent itself appears in many of Bern’s advertising catalogs.  Ads also claim that Bern was the first to invent a helmet with a visor, and that its helmets were the “first visor helmet offering a protective visor cover in the front,” the “world’s first functional visor lid” (emphasis added because Bern probably now wishes it hadn’t said that), “the original,” and the “INDUSTRY’S FIRST VISOR.”
These statements were allegedly knowingly false and harmed competitors’ sales.  [I wonder if there’s not a different theory of falsity: the reference to “functional” implies a utility patent; consumers might’ve thought there were functional benefits unique to Bern’s product.]
As to the alleged “first” and “original” claims, these were nonactionable puffery, rather than being specific and measurable.  As to the allegedly false claims of patent coverage, however, defendants stated a counterclaim.  Bern argued that its statements weren’t false or misleading because patent was in fact issued and patents are presumed to be valid, and it didn’t accuse defendants of infringing.  But the presumption of validity can be overcome in a Lanham Act claim when the claimant shows objective and subjective bad faith.  If the allegations in the counterclaims were true, Bern couldn’t have reasonably believed the patent was valid due to the on-sale bar, which would show objective bad faith. 
Nor did statements have to refer directly to competitors to be actionable.  The counterclaims alleged that Bern characterized competing helmets as imitations in the same marketing materials that included references to the patent.  Defendants alleged that the combination of showing the first page of the patent with the statement, “Every single brand in the market now has a brim, but your customer wants the original!” would reasonably cause consumers to believe that competing helmets infringed.
The court characterized these allegations as “thin, at best.”  (I think it depends on how savvy/patent-aware the relevant consumers—here, the retailers—are.) But they were sufficient to survive a motion to dismiss.
Bern also alleged that the counterclaims failed to allege injury/proximate cause under Lexmark.  The court disagreed.  Defendants alleged that Bern’s false advertising deceived customers, which resulted in increased sales for plaintiff and decreased sales for defendants. That’s harm directly caused by plaintiff’s false advertising.
Nor was there undue delay and unfair prejudice. Some additional discovery might be necessary. Even if literal falsity justifies a presumption of confusion, a claimant seeking damages needs to show actual harm.  Plus, even with literal falsity, defendants would have to prove materiality with evidence.  Thus, allowing the counterclaims would cause some prejudice, but much of the necessary discovery had already been done, and it would waste resources to require defendants to file a new action.

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