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Supreme Court Split Gives Boost to IP Cases

6 May 2016
The Recorder

For a short while, it appeared the U.S. Supreme Court was losing interest in intellectual property law. Following the blockbuster 2013-14 term that featured 10 IP decisions, the number dropped to five in 2014-15 and just three this term.

That downward trend appears almost guaranteed to reverse in 2016-17. With two cert grants this past week, IP already features in three of the 12 cases that the high court has scheduled for next term, and several more seen as cert-worthy are expected to hit the court's conference by this fall.

With intellectual property critical to the nation's economy, but not so controversial as to cause gridlock within the court, IP cases may have extra appeal while the justices await resolution on the Antonin Scalia vacancy, said Emory University School of Law professor Timothy Holbrook. With IP, "you can reach an outcome in important cases," he said.

Mayer Brown appellate specialist Andrew Pincus said he doesn't see the Scalia vacancy as a driving factor. While the court may indeed be avoiding cases that would likely split it 4-4, "I don't think that would mean they're going to grant cert in other cases that wouldn't otherwise be appropriate," he said.

Whatever the motivations, the court has reached for three IP cases since March. First it agreed to decide whether Samsung Electronics Co. must pay Apple Inc. all of its profits on smartphones and tablets that infringed design patents held by Apple. Then last week it agreed to determine when the designs of "useful objects" can be copyrighted, and whether laches is a proper defense in patent cases

Cheerleader uniforms and adult diapers are the products in dispute, respectively, in the copyright case, Star Athletica v. Varsity Brands, and the laches case, SCA Hygiene Products v. First Quality Baby Products. But both could have impact on the technology industry.

In Star Athletica, the high court agreed to decide what appellate courts have described as one of the most vexing issues in copyright law: whether pictorial, sculptural or graphic designs are conceptually separate from otherwise functional articles—such as clothing or furniture—and therefore copyrightable.

The cert grant revives a dispute between Varsity Brands Inc., a big player in cheerleading competition and apparel, and competing uniform maker Star Athletica LLC.

A Tennessee district judge ruled that Varsity could not copyright the chevrons, zigzags and color blocks on cheerleader uniforms because they are conceptually inseparable from the garment itself. The U.S. Court of Appeals for the Sixth Circuit catalogued nine different tests various judges and commentators have devised in trying to answer this type of question. It reversed in large part because Varsity didn't copyright the garments themselves, but designs sketched out in two dimensions, which it compared to designs for laminate flooring, which are copyrightable.

Judge David McKeague dissented. "Without stripes, braids, and chevrons, we are left with a blank white pleated skirt and crop top," which no one would associate with cheerleading, he wrote. "The law in this area is a mess—and it has been for a long time," he wrote.

In a glimpse of the potential implications beyond apparel, Stanford law professor Philip Malone filed an amicus curiae brief for three 3D printing companies urging the court to take up Star Athletica and resolve a messy dispute among appellate courts about when design can be considered "conceptually separate" from a useful object's functionality, and therefore copyrightable.

"3D-printed objects that are purely ornamental and nonfunctional, such as an exact replica of a sculpture or a complex jewelry design, are protectable by copyright; designs that are purely functional useful articles, such as a basic wrench or a replacement gear, are not," Malone wrote.

But the large area in between is murky, and "as the 3D printing industry expands, so will the number of copyright claims and disputes connected to physical objects that incorporate both creative and functional parts," Malone wrote on behalf of Formlabs Inc., Shapeways Inc. and Matter and Form Inc.

Malone has credited Stanford students Sydney Lakin and Bill Koch with drafting the brief.

Emory's Holbrook said the integration of design and function in items such as the iPhone underscore the challenge facing the court. "As design and function have merged, our ideas of where the drawing line should be have fallen apart," he said.

Few were surprised by the Supreme Court's cert grant in SCA Hygiene, which presents the court with an opportunity to upend the Federal Circuit's rules on the defense of laches—or unreasonable delay in bringing suit—in patent infringement cases.

Two years ago, the justices ruled that the defense of laches cannot bar a copyright claim and posited in a footnote that the same might be true for patent cases.

Given the opportunity to respond in SCA Hygiene, the en banc Federal Circuit voted, 6-5, to stick with its 24-year-old precedent A.C. Aukerman v. R.L Chaides Construction, pointing to differences between patent and copyright law. The five dissenters accused the majority of carving out a special rule for patent cases, a theme that has resonated loudly across the Supreme Court's patent jurisprudence in recent years.

Berkeley solo practitioner Andrew Dhuey, who is opposing a laches argument in a separate case before the Federal Circuit, said the writing is on the wall.

"The Supreme Court probably didn't take this up to say, 'Great job, Federal Circuit! Patent law is indeed very special.' " Technology and industrial companies argue that there are indeed important distinctions between patent and copyright law that justify a laches rule for patents. For one thing, they note that copyright violations require actual copying to be actionable. By contrast, companies can unknowingly stumble into infringement cases by adopting a technology that's arguably covered by one of many thousands of obscure patents.

Google Inc., Dell Inc., Intel Corp. and several other big tech players are likely to weigh in as amici curiae. The companies had urged the Federal Circuit to retain laches so that courts can dismiss patent cases that are brought with unreasonable delay. The defense is "particularly important to technology companies," they argued in their brief.

The Supreme Court probably isn't done with IP cases for the next term. The U.S. government petitioned for cert last month in Lee v. Tam, in which the Federal Circuit declared unconstitutional the Lanham Act's prohibition on disparaging trademarks. The case revolves around Simon Tam and his Asian dance band, The Slants, but has obvious implications for the Washington Redskins football team.

Impression Products Inc., a company in the business of recycling printer cartridges, is asking the high court to review Federal Circuit law on the "first sale" doctrine in patent cases, arguing it's inconsistent with the Supreme Court's 2013 decision on first-sale in copyright law. Also in the pipeline are a case on the extraterritorial application of U.S. patent law in which the Supreme Court has sought the solicitor general's recommendation; a dispute over the patentability of a fetal genetics test that is getting a big amicus push from the biotech industry; and the first decision interpreting the federal biosimilars law.

Daniel Volchok, a Wilmer Cutler Pickering Hale and Dorr partner who clerked for Justice David Souter, said one can only speculate as to the justices' motivation for taking cases. But he said it seemed reasonable to believe the court might be slightly more amenable to IP cases in the short term. "Certainly, IP cases seem to touch fewer of the points that divide the court along traditional ideological lines," he said.

He doesn't see it as a big difference-maker, though. "Any impact would be at the margins," he said. "But the margins are important when you're talking about the Supreme Court."

Reprinted with permission from the May 6, 2016 edition of The Recorder © 2016 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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