Under the American Rule “each litigant pays his own expense, win or lose, unless a statute or contract provides otherwise.” But recently the United States Patent and Trademark Office (USPTO) has sought to flip the American Rule by seeking to recover its attorney’s fees even when it loses.

EXPENSES UNDER THE LANHAM ACT AND PATENT ACT

Parties seeking to register a trademark (symbols or words representing a company, product or service) or a patent (exclusive right to use of invention) must register their applications with the USPTO. If the USPTO rejects their applications, the parties can appeal to their local federal district court or the Federal Circuit Court of Appeals. The Lanham Act, which governs trademarks, provides that  “all the expenses of the proceeding shall be paid by the party bringing the case…” 15 U.S.C. 107(b)(3); The Patent Act, which governs patent applications, provides that “[a]ll the expenses of the proceedings shall be paid by the applicant. 35 U.S.C §145.

Historically, the USPTO only sought reimbursement of costs (travel, expert fees, etc.) borne from opposing these trademark or patent appeals, but in 2013, the USPTO began seeking reimbursement of its attorney’s fee as well.

WHEN YOU LOSE, YOU LOSE

In Nankwest, Inc. v. Matal,(E.D. Virginia 2016) 162 F. Supp.3d 540, the applicant challenged the USPTO’s decision rejecting its patent application.  The trial court partially accepted and partially rejected the challenge to the USPTO’s decision. The USPTO sought to recover its attorney’s fees along with its other costs, but the trial court rejected the USPTO’s request, finding that such fees are “authorized only when there is a specific and explicit provision for the allowance of attorney’s fees under the selected statute.” Id. at 543.

The USPTO appealed to the Federal Circuit, which reversed the trial court, Nankwest, Inc. v. Matal  (Fed. Cir. 2017) 860 F.3d. 1352., concluding that “Given the Supreme Court’s construction of ‘expenses,’ the guidance dictionary and treatises provide on the term, and the context in which Congress applied it, we conclude the term ‘expenses’ includes the USPTO’s attorney’s fees under § 145.” Id. at 1358.  Two months later the entire Federal Circuit vacated the panel’s decision and set the matter for en banc review. So stay tuned on the final word from the Federal Circuit.

EVEN WHEN YOU WIN, YOU LOSE

In August of this year, in Booking.com B.V. v. Matal (E.D. Virginia 2017) 2017 WL 3425167 a trademark applicant appealed the USPTO’s refusal to register four trademark applications. The Court granted summary judgement for the applicant for two of the four marks and remanded consideration as to the other two marks back to the USPTO. Despite “losing” the appeal, the USPTO filed a motion for expenses, including its attorney’s fees.  In October, the court granted the USPTO’s attorney’s fees, 2017 WL 4853755. The Court noted that the issue was subject to en banc review by the Federal Circuit, but held that it was bound by Fourth Circuit precedent that “compels the Court to find that [the USPTO’s] attorneys’ fees are recoverable under §1071(b)(3).”

Ultimately it appears the Supreme Court will need to determine whether the statutory term “expenses” includes the USPTO’s attorneys’ fees. Until then, to quote the Grateful Dead, trademark and patent applicants “can’t win for losing.”

On Halloween, the highest court in the land heard oral argument on whether cheerleader uniform designs are subject to copyright protection. Varsity Brand, Inc. (“Varsity”), the country’s largest maker of cheerleader uniforms, sued Star Athletica, LLC (“Star”), a chief competitor, alleging Star’s uniforms use design elements that infringe Varsity’s copyrights.

The Supreme Court sought to reexamine the question previously posed and answered by the Sixth Circuit: “Are cheerleading uniforms truly cheerleading uniforms without stripes, chevrons, zigzags, and color blocks?”

The Blurry Line Between Art & Function

The test of whether a design element is art (and worthy of copyright protection) or function (and unworthy) is called “separability.” A “useful article” like a chair, dress or uniform cannot be copyrighted, and its component features or elements cannot be copyrighted unless capable of being “identified separately from, and … existing independently of, the utilitarian aspects of the article.” (17 U.S.C. § 101). For example, one couldn’t copyright the functional aspects of a bed with four legs, a mattress, a headboard, etc., but one could probably copyright the waterbed/aquarium design from the James Bond movie Diamonds are Forever.

10 Separability Tests are 9 Tests Too Many

In granting certiorari, the Supreme Court noted that “Circuit courts, the Copyright Office, and academics have proposed at least nine different tests to analyze this separability [concept]. The Sixth Circuit rejected them all and created a tenth. The first question is: What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?”

Star’s Position — It’s Not a Cheerleader Uniform Without Designs

Star, supported with amicus briefs from consumer groups and costume hobbyists, argued that stripes, chevrons and zigzags are integral parts of a cheerleading uniform that serve core functional purpose of identifying the uniform as a cheerleader uniform and making cheerleaders appear taller and slimmer. The district court agreed with Star.

Varsity’s Position — Plain Vanilla Cheerleader Uniforms are Still Cheerleader Uniforms

Varsity, supported with amicus briefs from fashion designers, argued: (A) there are many design elements available, (B) Varsity owns the stripes, chevrons, zigzags and color blocks , and (C) “you can have a white cheerleading uniform worn by a cheerleader with the team name and team logo on it.” A split Sixth Circuit panel agreed with Varsity.

Wider Implications for the 3D Printing Industry

Major 3D printing companies filed amicus briefs  asking the Supreme Court to grant certiorari and provide “a single test for determining conceptual separability under copyright law” because  “the current circuit split surrounding conceptual separability is significant and chills innovation and creativity.”

Oral Argument at the Supreme Court

Justice Ginsburg appeared to back Varsity, describing the uniforms as “a two-dimensional artwork” and agreeing that “the pictorial graphic element is not part of the design of the cheerleader’s uniform. It’s superimposed on it.”

Chief Justice Roberts appeared to disagree: “The design on a lunchbox doesn’t make the lunchbox a lunchbox. It’s still a lunchbox. But the design on a cheerleader uniform is what makes it a cheerleading uniform, as opposed to a plain dress.”

Reading the Tea Leaves

There are dozens of ways to read the tea leaves. The Supreme Court granted certiorari, which could either mean it disagreed with the Sixth Circuit’s decision or that it wanted to clean up the messy situation with 10 tests for separability.

Maybe it’s just wishful thinking, but I’m hoping the Court rules for Star. Otherwise, Varsity will hold a monopoly on the design elements, and we will see  a lot of cheerleaders dressed like tennis players from the 1950’s.