IP at the Top: What the Supreme Court’s 2023 IP Rulings Mean for Practice

In 2023, the U.S. Supreme Court decided four intellectual property cases. The cases touched all of the major fields of intellectual property—two cases interpreted the federal trademark act (Jack Daniel’s and Abitron), one case involved patent enablement (Amgen), and one case explicated the federal copyright statutes (Goldsmith). The decisions were split along party lines, with two cases finding in favor of intellectual property owners (Jack Daniel’s and Goldsmith) and two cases in favor of the accused infringers (Abitron and Amgen).

Jack Daniel’s Properties, Inc. v. VIP Products LLC

The subject matter of Jack Daniel’s v. VIP Products—a squeaky dog toy that resembles the iconic whisky bottle and label, but with scatological puns in place of the original language on the bottle—was an improbable choice for the Supreme Court. However, the legal issues underlying the dispute are familiar territory: the Jack Daniel’s case is the third in a line of important cases concerning the relationship between the First Amendment and trademark law. (Matal v. Tam, 2017 and Iancu v. Brunetti, 2019 are its precursors).

VIP Products marketed a dog toy designed to imitate and parody Jack Daniel’s iconic whiskey bottle. The dog toy was shaped like the whiskey bottle and imitated the bottle’s arched, filigreed logo. Instead of Jack Daniels, the bottle was labeled Bad Spaniels. VIP also replaced the subtitle “Old No. 7 Brand Tennessee Sour Mash Whiskey” with “The Old No. 2 On Your Tennessee Carpet.” Jack Daniel’s claimed that the Bad Spaniels dog toy infringed Jack Daniel’s trademarks by causing consumer confusion with respect to the source of the toy and that the Bad Spaniels dog toy diluted Jack Daniel’s marks by associating its product with dog excrement. VIP Products argued that the dog toy was protected from the infringement and dilution claims because the dog toy is an expressive work, a parody that made noncommercial use of the mark.

At issue was the applicability of the Second Circuit’s Rogers test, which extends First Amendment protection to expressive works unless the challenged use either “has no artistic relevance to the underlying work” or “explicitly misleads as to the source or the content of the work.” The district court initially ruled in favor of Jack Daniel’s on the infringement issue, but the Ninth Circuit reversed holding that the district court failed to apply the threshold First Amendment analysis under Rogers to the Bad Spaniels toy. On remand, the district court found that Jack Daniel’s could not satisfy either prong of Rogers, and therefore granted summary judgment to VIP on infringement. The Ninth Circuit affirmed. As for the dilution claim, the Ninth Circuit held that the statutory exclusion for “noncommercial use” in dilution claims shielded VIP Products from liability.

In a unanimous ruling, the Supreme Court held that the Ninth Circuit erred on both issues. As for the infringement claim, the Court declined to address the merits of the Rogers test generally but held that the threshold First Amendment inquiry does not apply when, as here, an alleged infringer uses a trademark as a designation of source, even if it does so in order to mock or parody that source. In such cases, the likelihood of confusion analysis applies, even if the product has expressive content. While the Ninth Circuit thought that Rogers applies because the Bad Spaniels toy “communicates a humorous message,” the Supreme Court explained that, under such reasoning, the Rogers exception threatens to swallow the rule, as just about every trademark has expressive content. The only question left for the infringement claim, according to the Court, is whether there is likelihood of confusion for a product such as Bad Spaniels that ridicules the Jack Daniel’s marks. The Court recognized that a brand is unlikely to engage in self-mockery of this sort, and such considerations may inform a fact finder’s determination of whether consumers would be confused as to the source of the toy.

The Court also rejected the Ninth Circuit’s dilution analysis because that analysis misinterpreted the “noncommercial use” exclusion to include every parody, even those that function as a designation of source.

Based on Jack Daniels, if a parody of a trademark is itself used as a mark, that is, as a designation of source, then the First Amendment will not protect infringers from both infringement and dilution claims under the Lanham Act. The mere fact that a trademark is used in an expressive, parodic way will not be sufficient to shield infringers from liability on First Amendment grounds, nor is it sufficient to trigger the “noncommercial” fair use exception for dilution claims.

Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith

This opinion, which was closely watched by the artworld, clarifies how transformative a secondary use of an artwork must be for such use to constitute fair use. In 1984, Vanity Fair licensed one of Lynn Goldsmith’s iconic portrait photographs of Prince for a “one time” use to illustrate a story about him. The magazine hired Andy Warhol to make a silkscreen using the photo. Vanity Fair credited Goldsmith as the source and paid her $400. Unbeknownst to Goldsmith, however, Warhol also made 15 additional works based on Goldsmith’s photograph of Prince. In 2016, the Andy Warhol Foundation for the Visual Arts, Inc. (“AWF”) then licensed one of them, “Orange Prince,” to Condé Nast for $10,000. Goldsmith informed AWF that it had infringed her copyright. In response, AWF sought a declaratory judgement of noninfringement, or, in the alternative, fair use. The district court granted summary judgment to AWF on the grounds that Warhol’s work constituted “fair use” under 17 U.S.C. § 107. On appeal, the Second Circuit reversed, finding that all four of the fair use factors weighed in favor of Goldsmith.

The Supreme Court’s opinion was cabined in two respects. First, its opinion only applied to the work that AWF licensed to Condé Nast for its cover of a special edition of the magazine about Prince, and not the other works that Warhol made based on her photograph. Second, the Court only addressed the first of the four fair use factors under Section 107(1), “the purpose and character of the use.”

Judge Sonia Sotomayor, joined by six justices, held that the “purpose and character” of AWF’s use of Orange Prince in a commercial license to Condé Nast does not favor AWF’s fair use defense to copyright infringement of the Goldsmith photograph. This factor is often analyzed as a question of whether the secondary use has a different purpose or character that is said to be “transformative.” A key point for the Court, however, was that 17 U.S.C. § 106 also grants authors the right to prepare derivative works that recast, transform, or adapt the original. The question, then, is how to draw the line between the author’s right to transform their own work, and another’s right to transform the work of the author in accordance with the fair use defense.

Throughout its analysis, the Court pointed to its landmark decision Campbell v. Acuff-Rose, as a paradigmatic example of a transformative use that constituted fair use in the arts: 2 Live Crew’s parody of Roy Orbison’s classic song “Oh, Pretty Woman.” The vulgar parody constituted fair use because its imitation of the work was necessary to the parody’s mocking commentary of the work. The 2 Live Crew song did not simply copy the Orbison song word-for-word, but instead offered a new meaning or expression by making fun of the classic ballad.

AWF argued that Andy Warhol similarly transformed the Goldsmith photograph by applying his signature visual stylings to it, making the photograph an iconic “Warhol.” Moreover, he gave the portrait a different meaning—whereas Goldsmith’s image showed Prince in his humanity, the Warhol silkscreen flattens out the image such that it becomes a critique of celebrity. The Court conceded that Warhol’s version of the portrait may add a different meaning or expression but stated that “that difference must be evaluated in the context of the specific use at issue. The use is AWF’s commercial licensing of Orange Prince to appear on the cover of Condé Nast’s special commemorative edition. The purpose of that use is, still, to illustrate a magazine about Prince with a portrait of Prince. . . . AWF has offered no other persuasive justification for its unauthorized use of the photograph.”

The fair use exception in copyright law is a notoriously murky doctrine, and the first of the four factors has been the most difficult for courts to interpret. The Warhol decision makes clear that Courts should not give undue deference to “celebrity-plagiarists,” especially when the purpose of a purported fair use—in this case, providing a photo to accompany a magazine article—is essentially the same as the author’s original intended use for the work.

Amgen v. Sanofi

With Amgen v. Sanofi, the Court refused to bend the statutory constraints of patent law to accommodate new technologies.

Amgen sued Sanofi for infringement of its patented bad cholesterol-reducing drug therapy. Amgen’s drug was meant to resolve an unmet need by offering an effective antibody-based treatment to patients who cannot be treated using traditional bad cholesterol-reducing drugs, such as statins. The treatment works by having antibodies bind to certain receptors on the PCSK9 enzyme to inhibit processes in the body that slow the speed of cholesterol removal. In patenting its invention, Amgen claimed in pertinent part “an . . . antibody that binds to PCSK9.” Amgen included a list of 26 illustrative antibody embodiments in its specification as well as two methods by which practitioners of the patent could identify antibodies that would fall within the scope of the patent’s claim language.

Throughout the litigation, the parties disputed the quantity and quality of experimentation required to exhaust all the antibodies in Amgen’s claimed genus. The function of an antibody is dictated by its structure, but it is often unclear how changes to an antibody’s structure will affect its function. Thus, it is not an entirely straightforward task to work backwards from an antibody capable of binding to PCSK9 to derive every antibody that could bind to that enzyme.

Amgen came to the Supreme Court following two trips to the Federal Circuit, and two jury trials that found in favor of Amgen. In the more recent round of appeals, the Federal Circuit affirmed the district court judge’s grant of judgment as a matter of law predicated on the argument that Amgen’s asserted patent claims lacked enablement—a conclusion that the Supreme Court would ultimately agree with.

35 U.S.C § 112 requires that a patent’s specification enable a person to “make and use” the underlying invention. The rationale behind this requirement is that a patent offers inventors exclusivity for their inventions, but, in return, inventors must enrich the public’s store of knowledge by explaining how their inventions work. As the Supreme Court recognized in Amgen, this patent bargain would be an empty promise without the enablement standard.

Justice Neil Gorsuch, writing for a unanimous court, found that Amgen had failed to enable its patent claims. Because Amgen demarcated the scope of its claims based on the function of the antibodies and only provided a short list of 26 illustrative examples, Amgen’s patent merely provided to the public an invitation to experiment, rather than an invention that was fully enabled. The expansive scope of the claims, which the Court found included “potentially millions more antibodies,” was not commensurate with the patent’s disclosure. Thus, the Court found the patent invalid.

Among other policy arguments, Amgen argued that the Court’s decision would disincentivize breakthrough inventions and render the patenting of antibody technologies impracticable. After all, by changing one or two of the constituent amino acids in an antibody, a competitor could potentially circumvent patent protection of more narrowly claimed antibodies with only minimal impact—if any—on the efficacy of the new antibody compared to the patented one. The Court emphasized that the statutory scheme enacted by Congress must be adhered to despite these policy arguments.

After Amgen, patentees of antibody-based therapies must avoid claiming too broadly to ensure that their patents will be upheld. More broadly, Amgen demonstrates that the Supreme Court views patent law as unitary, not technology-dependent, and arguments that involve applying a different statutory standard without a different statutory directive are unlikely to prevail.

Abitron v. Hetronic

In a 5-4 decision, the Court upended 70 years of precedent to harmonize the extraterritoriality framework of trademark law with recent developments in the Court’s presumption against extraterritoriality jurisprudence.

Hetronic, a manufacturer of radio equipment for construction sites headquartered in the United States, sued Abitron, Hetronic’s former Austrian distributor, for trademark infringement. Abitron had reverse engineered Hetronic’s radio equipment and used Hetronic’s trademarks in selling that equipment without Hetronic’s authorization. Principally, Abitron marketed its knockoff Hetronic products in Europe, but Abitron did make some sales in the United States.

Hetronic alleged that Abitron had violated 15 U.S.C. § 1114(1)(a) and § 1125(a)(1) of the Lanham Act, which barred the “use in commerce” of registered and unregistered marks, respectively, where “such use is likely to cause confusion.” However, Hetronic did not limit itself to alleging violations of the Lanham Act for sales in the United States. Instead, Hetronic argued it was entitled to damages worldwide. In defense, Abitron asserted that the application of the Lanham Act provisions to conduct occurring outside the United States would amount to an impermissible extraterritorial application of that Act. Hetronic, the district court, and the Tenth Circuit disagreed. Abitron filed a petition for a writ of certiorari, and the Supreme Court took the case.

Based on the “well-established” two-step framework propounded in RJR Nabisco Inc. v. European Community, Justice Samuel Alito, delivering the opinion of the Court, held that the Tenth Circuit had failed to apply the proper test in determining whether this application of the Lanham Act overcame the presumption against extraterritoriality. According to the majority, the two-step framework requires: 1) determining whether “‘Congress has affirmatively and unmistakably instructed that’ the provision at issue should ‘apply to foreign conduct,’” and 2) identifying the statute’s focus and determining “whether the conduct relevant to that focus occurred in the United States territory.”

Hetronic argued that, because “commerce” was defined elsewhere in the Lanham Act as “all commerce which may lawfully be regulated by Congress,” Sections 1114(1)(a) and 1125(a)(1) evidenced a clear extraterritorial intent implicitly. Both Justice Alito and Justice Sonia Sotomayor, who concurred in the judgment, found this argument insufficient to overcome the presumption against extraterritoriality, where even an unmistakable mention of foreign commerce may not be enough under RJR Nabisco’s step one.

Justices Alito and Sotomayor disagreed, however, on the application of step two. Deploying deductive reasoning, Justice Alito determined that it was unnecessary to ascertain the focus of the statute because the conduct relevant to that focus must be an infringing “use in commerce” of a protected mark. Thus, according to Justice Alito, the Lanham Act cannot apply to purportedly infringing activity where “use in commerce” does not occur within the United States. To the contrary, Justice Sotomayor did identify the statute’s focus and found that the statute was directed to preventing consumer confusion. Based on this reading of the statute, suits for trademark infringement in which all the relevant conduct occurs abroad can still be cognizable under the Lanham Act if the infringement results in consumer confusion in the United States. In laying out this test, Justice Sotomayor chided the majority for essentially overturning its seventy-year-old decision Steele v. Bulova Watch Co., which had found at least one application of the Lanham Act to not be barred by the presumption against extraterritoriality where none of the defendants’ illegal conduct had occurred in the United States.

To avoid the prospect of no recovery in the case of trademark infringement abroad, trademark holders should ensure that they have undergone the necessary steps so that their trademarks are legally protected in each jurisdiction in which their trademarks may be infringed. Litigants will not be able to rely solely on the Lanham Act to vindicate their rights internationally, but instead may be required to sue under the trademark laws of the jurisdictions where their trademarks are infringed.

Image Source: Deposit Photos
Author: iofoto
Image ID: 9522064