Manufacturers that Settle Trade Dress Claims May Still Be Liable for Design Patent Infringement on the Same Product

Abstract

A design patent owner who settled a litigation for trade dress infringement was not estopped from bringing a second litigation for design patent infringement. To succeed on a defense of equitable estoppel, infringers must prove the patent owner knew of the infringement and led them to reasonably believe that the patent rights would not be asserted.

Background

Deckers purchased the UGG footwear company in 1995 and obtained design patents corresponding to its “Bailey Button” boot and its “Bailey Button Triplet” boot.        

Deckers subsequently sued Romeo & Juliette, Inc. for trade dress infringement, alleging that a version of its BearPaw’s Victorian boot infringed the trade dress of the UGG Classic boot. According to Decker, Romeo’s BearPaw boot “imitated” Deckers’ Baily Button boot, which incorporates the UGG Classic boot design. Originally, the BearPaw Victorian boot had two buttons, one on each side, but according to Romeo, in December of 2010, the design changed to only have a single button.

Two years later, Deckers and Romeo entered into an agreement that settled the trade dress litigation. The agreement required that Romeo no longer use a rectangular license plate on the heel of their footwear, but gave Romeo the “unrestricted” right to sell all boots in inventory manufactured prior to January 1, 2013, that included a rectangular or square license plate logo. The agreement also expressly reserved Deckers’ right to protect all other intellectual property rights not raised in that litigation, including patent rights.

Deckers Decision

In 2015, Deckers sued Romeo─this time for infringement of its design patents based on Romeo’s one-button BearPaw Victorian boot. A jury issued an advisory verdict, finding the patent was not invalid. The court agreed, and also found Deckers was not equitably estopped from asserting its design patent infringement claims.

Equitable Estoppel

Under an equitable estoppel defense, Romeo had to prove (1) Deckers knew Romeo infringed the patents and (2) Deckers’ conduct misled Romeo to reasonably believe that Deckers did not intend to enforce its patent rights against Romeo.

Romeo argued that based on the prior litigation between the parties, Deckers was aware of the one-button BearPaw Victorian boot and that Romeo could reasonably infer from the prior settlement agreement that Deckers’ allowed Romeo to sell the infringing boots.

The court disagreed, stating that Deckers did not have an obligation in the prior litigation to settle claims that were not within the scope of that suit and that Deckers did not mislead Romeo when allowing it to sell potentially infringing boots. The settlement agreement clearly stated the parties only settled claims raised in the prior litigation and also reserved Deckers’ right to assert other intellectual property rights that were not at issue in the prior litigation.

Patent Invalidity

The court confirmed the jury’s finding that the patent was not invalid, noting that it must accept all implicit factual findings supporting the jury’s conclusion if those findings are supported by substantial evidence.

The jury considered (1) the scope and content of prior art; (2) the level of ordinary skill in the art; (3) the differences between the claims invention and the prior art; and (4) any objective indicia such as commercial success or long felt need. And, as a result, the court found substantial evidence supported the jury’s factual findings and conclusion that the  patent was not invalid.

Strategy and Conclusion

Prior litigations may exhaust future claims under doctrines of finality, such as res judicata or collateral estoppel, or under equitable doctrines, such as equitable estoppel. But settlement agreements may allow parties to determine what rights or claims, if any, should be resolved and what rights or claims, if any, should be reserved to be resolved in the future.

Further Information 

The Deckers Outdoor Corporation v. Romeo & Juliette, Inc. decision can be found here.

*Alissa Green is a law clerk at Finnegan.