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Misidentifying Best Mode Did Not Warrant SJ and Trademark Counterclaims Met Case or Controversy Standard

September 29, 2010

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Last Month at the Federal Circuit - October 2010

Judges: Rader, Lourie (author), Bryson

[Appealed from: E.D. Mo., Magistrate Judge Adelman]

In Green Edge Enterprises, LLC v. Rubber Mulch Etc., LLC, Nos. 09-1455, -1479 (Fed. Cir. Sept. 7, 2010), the Federal Circuit held that the district court erred in invalidating U.S. Patent No. 5,910,514 (“the ’514 patent”) for failure to describe the best mode and dismissing Rubber Mulch Etc., LLC’s (“Rubber Mulch”) counterclaims for trademark noninfringement and invalidity.  The Court also held that the district court abused its discretion by excluding Rubber Resources, Ltd., LLP’s (“Rubber Resources”) evidence of damages for its unfair competition claim.  The Court concluded, however, that the district court did not err in dismissing Rubber Resources’ counterclaims for trademark invalidity and noninfringement.

Green Edge Enterprises, LLC (“Green Edge”) owns the ’514 patent, which claims a synthetic mulch that is colored with a “water based acrylic colorant” to imitate natural mulch.  The ’514 patent specification states that the colorant can be selected from a variety of different coloring systems as long as the colorant is available in earth-tone colors, adheres to rubber, and does not wash off when in contact with water.  The specification indicates that preferred colorants are water-based acrylic systems such as the colorant systems sold under the name “Visichrome” by Futura Coatings, Inc. (“Futura”).  Green Edge sued Rubber Mulch and Rubber Resources for patent infringement of the ’514 patent.

Green Edge also owns the trademark RUBBERIFIC MULCH, which had been assigned to International Mulch Company (“International Mulch”).  Green Edge claimed that Rubber Mulch had infringed its mark based on Rubber Mulch’s use of the word “Rubber Mulch,” which was printed on its products.  Rubber Mulch and Rubber Resources both counterclaimed for noninfringement and invalidity of the RUBBERIFIC MULCH mark.  Rubber Resources further asserted a counterclaim under the Lanham Act for unfair trade practices against Green Edge and International Mulch based on their assertion of the ’514 patent in bad faith.

The district court held that the ’514 patent failed to disclose the best mode of the invention because the specification referred to the use of the Visichrome colorant system by Futura, a product that the parties agreed did not exist.  Instead, Green Edge had used a Futura product sold under the produce code 24009.  Green Edge unsuccessfully argued that it believed the colorant system used to be called Visichrome based on a 1997 letter it received from Futura’s vice president referencing the name.  Nonetheless, the district court held that Green Edge did not disclose the best mode when it disclosed a nonexistent product, and furthermore had concealed the best mode by such disclosure of a product unavailable on the market.

The district court also granted SJ for International Mulch regarding Rubber Mulch and Rubber Resources’ trademark counterclaims of noninfringement and invalidity, finding no case or controversy.  After granting SJ for International Mulch, the district court ordered each party to submit a status report, to which Rubber Mulch did not reply.  As a result, all of Rubber Mulch’s counterclaims were dismissed. 

Finally, the district court dismissed Rubber Resources’ Lanham Act unfair competition counterclaim, holding that Rubber Resources was unable to show any damages, and thus was unable to establish a prima facie case of unfair competition.

In reversing the district court’s grant of SJ for invalidity of the ’514 patent, the Court evaluated whether Green Edge complied with the best mode requirement under a two-pronged inquiry:  (1) whether, at the time the patent application was filed, the inventor possessed a best mode of practicing the claimed invention; and (2) whether the inventor disclosed the best mode and whether such disclosure adequately enabled one of ordinary skill in the art to practice the best mode of the invention.  The first inquiry was not disputed.  At the time the application was filed, the inventors possessed a best mode of using Futura’s 24009 product as the claimed colorant.  As to the second inquiry, the Court analyzed the objective question of whether Green Edge adequately disclosed its best mode by disclosing a material by a name that did not exist (“Visichrome”) and not identifying the material it actually used (Product No. 24009).  The Court relied on a letter of Jeffrey Jarboe, Futura’s vice president, written months before the ’514 patent was filed, referencing the Visichrome colorant system.  Based on this letter, the Federal Circuit held that one skilled in the art could contact Futura to obtain the Visichrome colorant system and subsequently be directed by Futura to its 24009 product.  Thus, there was a genuine issue of material fact relating to whether the best mode was disclosed, warranting reversal of SJ.

The Court also held that the district court did not err in denying SJ of invalidity on the alternative grounds of anticipation, obviousness, indefiniteness, and nonenablement.  The record before the Court was insufficient to determine whether SJ was warranted.

The Court held that the district court erred by dismissing Rubber Mulch’s counterclaims of noninfringement and invalidity of Green Edge’s RUBBERIFIC MULCH mark for a lack of case or controversy, but did not err in dismissing Rubber Resources’ trademark counterclaims.

Rubber Mulch’s counterclaims satisfied the justiciable case or controversy requirement of the Declaratory Judgment Act because they were pleaded in response to Green Edge’s trademark infringement claims.  Having been sued by Green Edge, Rubber Mulch had more than an apprehension of suit and thus established DJ jurisdiction.  Similarly, Rubber Mulch also established DJ jurisdiction over its trademark counterclaims against International Mulch, the assignee of the RUBBERIFIC MULCH mark, because International Mulch had threatened suit in the form of a cease and desist letter sent to Rubber Mulch.  Not only had International Mulch threatened suit in its cease and desist letter, it was also a party to the action and could, if necessary, be substituted for Green Edge as the real party in interest in the trademark infringement claim.

The Court disagreed with International Mulch and Green Edge’s argument that Rubber Mulch had no standing to appeal because it had been dismissed by the district court for failure to respond to the district court’s order requesting a status report.  The Court held that, at the time Rubber Mulch’s claims were dismissed for failure to prosecute, its trademark claims were no longer in the case, having previously been dismissed for lack of case or controversy.  Rubber Mulch could not be punished for failure to pursue trademark claims that were no longer in the case.  Accordingly, Rubber Mulch had standing to appeal the district court’s dismissal of its trademark counterclaims.

Unlike Rubber Mulch, Rubber Resources’ counterclaims of trademark invalidity and noninfringement were properly dismissed for a lack of case or controversy.  Rubber Resources had neither been sued nor threatened with suit relating to its trademarks.  Rubber Resources’ sole argument in support of its satisfaction of the case or controversy requirement was that it, like Rubber Mulch, was using the term “Rubber Mulch.”  This attempt to establish a pattern of litigation for DJ jurisdiction, however, was unavailing.  This single suit did not create the necessary pattern of litigation sufficient to confer jurisdiction.  Moreover, had Green Edge intended to sue Rubber Resources for trademark infringement, it could have asserted a claim against Rubber Resources in this case.  For these reasons, the Court affirmed the district court’s dismissal of Rubber Resources’ counterclaims.

Reviewing the district court’s decision to exclude all of Rubber Resources’ evidence of damages for abuse of discretion, the Court held that Rubber Resources had enumerated categories of damages under the Lanham Act in its amended counterclaim.  Specifically, Rubber Resources sought relief in the form of its damages, Green Edge and International Mulch’s profits, and “exemplary damages.”  Despite seeking three theories of damages, Rubber Resources did not argue that it presented evidence of its damages and “exemplary damages.”  Thus, the Court only addressed whether Rubber Resources presented evidence of damages sufficient to entitle it to recover Green Edge’s profits.  Under the Lanham Act, Rubber Resources need only prove Green Edge’s sales to recover Green Edge’s profits.  Because Rubber Resources and Green Edge had stipulated to a calculation of Green Edge’s sales, Rubber Resources satisfied this requirement.  Accordingly, the district court erred in excluding all evidence of damages and subsequently dismissing Rubber Resources’ Lanham Act claim for inability to prove damages.


Summary authored by Katherine L. Staba, Esq.