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Because Patent Owner Was Not Likely to Show That Its Patented Designs Were Primarily Ornamental

06-1169
November 17, 2006

Decision icon Decision

Last Month at the Federal Circuit - December 2006

Judges: Michel, Dyk, Prost (author)

[Appealed from: M.D. Tenn., Judge Echols]

In PHG Technologies, LLC v. St. John Cos., No. 06-1169 (Fed. Cir. Nov. 17, 2006), the Federal Circuit vacated the district court’s grant of a preliminary injunction because PHG Technologies, LLC (“PHG”) could not establish the first preliminary injunction factor, the likelihood of success on the merits.

PHG owns two design patents, U.S. Patent Nos. D496,405 (“the ’405 patent”) and D503,197 (“the ’197 patent”). Both the ’405 and ’197 patents claim ornamental designs for medical label sheets. The patented designs include eleven rows of labels, with each row containing three labels. The first nine rows contain three labels of equal size. That size is consistent with a standard medical chart label. Rows ten and eleven contain differently sized labels. The sizes of those labels correspond to the sizes of patient wristbands.

PHG sued St. John Companies, Inc. (“St. John”), alleging that St. John’s medical label sheet infringed the ’405 and ’197 patents. Afterfiling suit, PHG moved for a preliminary injunction against St. John’s continued sale of its medical label sheet. The district court found that PHG was likely to show that the patented designs were primarily ornamental. The district court concluded that PHG demonstrated a reasonable likelihood of success on the merits, established that it would be irreparably harmed if an injunction did not issue, and showed that the balance of hardships and the public interest weighed in favor of enjoining St. John from continuing to sell its medical label sheet.

On appeal, St. John argued that the district court erred in finding that the patented designs were primarily ornamental rather than merely a byproduct of functional considerations. St. John argued that statements made during prosecution showed that the designs were functional, and that therefore both the ’405 and ’197 patents were invalid. Specifically, St. John had presented evidence at the district court that the location of the labels for use on wristbands was functional because those labels are usually the first labels used when a patient is admitted to a medical center. The lower right-hand corner is the easiest location for a right-handed user to remove the label. Further, placing the labels for the wristbands at the bottom of the page facilitated the subsequent removal of additional labels adjacent to the removed label. St. John argued that the evidence presented in the district court constituted a clear and convincing showing of functionality, which raised a substantial question of validity concerning the ’405 and ’197 patents.

PHG argued that the district court correctly determined that St. John failed to raise a substantial question of validity regarding the functionality of the designs because the patented designs were not dictated by the use or purpose of the article of manufacture. PHG further argued that there are a multitude of ways to arrange different sizes of labels on a sheet, thus, the design is primarily ornamental. Finally, PHG argued that St. John’s analysis focused solely on the individual features of the designs rather than their overall appearance.

The Federal Circuit noted that if a patented design is primarily functional rather than ornamental, the patent is invalid. In determining whether a design is primarily functional, the Court noted that when there are several ways to achieve the function of an article of manufacture, the design of the article is more likely to serve a primarily ornamental purpose. Such an analysis of alternative designs includes a determination as to whether the alleged alternative designs would adversely affect the utility of the specified article, such that they are not truly alternatives.

The Court found that the evidence presented by St. John constituted evidence that alternative designs, where the wristband-sized labels were not placed at the bottom of the sheet, would adversely affect the utility of the medical label sheet. Further, the evidence presented by St. John directly pertained to the overall arrangement of the designs as a whole and indicated that the use and purpose of the medical label sheet dictated that the wristband-sized labels be located at the bottom of the sheet. The Federal Circuit concluded that St. John had satisfied its burden of raising a substantial question of validity, and the district court’s finding that PHG was likely to show that the patented designs were primarily ornamental was clearly erroneous.

Because St. John had satisfied its burden of raising a substantial question of validity, the Federal Circuit concluded that PHG had not established that it was likely to succeed on the merits. Consequently, the Court concluded that PHG had not established that at least the first preliminary injunction factor weighed in its favor, and, therefore, the district court abused its discretion in granting PHG’s motion for a preliminary injunction. Thus, the Federal Circuit vacated the district court’s grant of a preliminary injunction.