International Seaway Trading Corp. v Walgreens Corp. 

F.3d -, 2009 WL 4842608, 2009 U.S. App. LEXIS 27648 

C.A.Fed. (Fla.),2009. 

December 17, 2009 

Facts and Procedural Posture: 

• Plaintiff-Appellant Seaway Trading Corporation (“Seaway”) holds the ‘263, ‘032, and ‘033 patents are for “clog” footwear. The ‘032 and ‘033 patents were continuations-in-part of the ‘263 patent: both are “substantially the same as the ‘263 design” except that the heel strap is in a forward position in the ‘032 patent and is unclaimed in the ‘033 patent.
  • The Patent Examiner issued Seaway’s ‘263 patent over various webpages and photographs depicting different Crocs clogs models. The Crocs ‘789 patent, which was issued during the course of the examination of the ‘263 patent, was not considered.
  • The ‘032 and ’333 patents were issued over the same references cited above and Crocs’ ‘789 patent.
• Seaway filed suit against Walgreens Corporation (“Walgreens”) and Touchsport Footwear USA, Inc. (“Touchsport”), claiming infringement of three of its patents (the ‘263 patent, the ‘032 patent, and the ‘033 patent).
  • Seaway alleges that Touchsport imported and continued to import shoes that infringed its ‘263, ‘032, and ‘033 patents.
  • Seaway alleges that Walgreens sold and continued to sell shoes that infringed its ‘263, ‘032, and ‘033 patents.
• Walgreens and Touchsport filed a motion for summary judgment, contending that Seaway’s patents were invalid as anticipated under 35 USC §102(a) and (e) or obvious under 35 USC §103 based on two of Crocs models “and/or” Crocs’ ‘789 patent.
• The district court granted summary judgment for the defendants on the basis that all three patents were invalid as anticipated under 35 USC §102 by a patent assigned to Crocs (the Crocs ‘789 patent). The court did not separately consider obviousness.
  • The district court also held that the Ordinary Observer Test was the sole test of patent invalidity under 35 USC §102.
  • The district court concluded that it need only compare the exteriors of the patents-in-suit, not the insoles, holding “that the law requires a court to consider only those portions of the product that are visible during normal use, regardless of whether those portions are visible during the point of sale.”
• On appeal, Seaway contends that the district court improperly determined invalidity (1) by solely using the ordinary observer test and (2) by failing to apply the point of novelty test.
• HELD:
  • District court was correct in not applying point of novelty test to Anticipation,
  • District court was correct that the ordinary observer test applies,
  • The exterior appearance of the patented products is similar to the eyes of an ordinary observer, thereby providing adequate grounds to affirm-in-part the district court’s assertion of invalidity by Anticipation,
  • HOWEVER, the district court’s failure to compare the insoles of the patents-in-suit with the prior art, from the perspective of an ordinary observer, was in error.
  • Therefore, the Federal Circuit affirms-in-part, reverses-in-part, and remands. The district court must compare the insoles of the patents-in-suit with the prior art, from the perspective of an ordinary observer, for purposes of both Anticipation and Obviousness.

Legal Changes and â€œGlosses”: 

• The “point of novelty” test should not be used for questions of Anticipation. The sole test used should that of the ordinary observer.
• The Ordinary Observer Test does require consideration of the design as a whole, however a district court on summary judgment can determine that individual features would be so insignificant to an ordinary observer that they should not be considered in the overall comparison.

Discussion/Reasoning: 

Legal Status of the Point of Novelty Test and the Ordinary Observer Test 

• Egyptian Goddess v. Swisa, 435 F.3d 665 (Fed. Cir. 2008), held that the “point of novelty” test should no longer be used to determine Infringement and that the sole test should be that of the Ordinary Observer. In light of Supreme Court precedent holding that the same tests apply to Infringement and Anticipation, the Federal Circuit here HOLDS that the same Ordinary Observer Test now applies to questions of invalidity under Anticipation. The district court was therefore correct in applying the Ordinary Observer Test as the sole test for design patent invalidity under 35 USC §102.

The Point of Novelty Test: 

• The point of novelty test for Infringement considered whether the accused design “appropriated” the points of novelty of a patented design as determined by comparing the patented design to the prior art.
• The point of novelty test for Anticipation compared the patented design with the alleged anticipatory reference to see if it “appropriated” the points of novelty of the prior art reference.
• The point of novelty test for Obviousness was applied in the same manner as Anticipation except that (1) the prior art references could be combined and (2) an earlier single reference could be interpreted from the level of knowledge of a person having ordinary skill in the art (“PHOSITA”).
• The point of novelty test is inconsistent ordinary observer test

The Ordinary Observer Test: 

• The ordinary observer is “deemed to view the differences between the patented design and the accused design in the context of the prior art,” meaning that “small differences . . . are likely to be important to the eye of the hypothetical ordinary observer.”

Benefits of the Change: 

• More consistent with Supreme Court precedent applying the same tests for Infringement and Anticipation.
• The Point of Novelty Test, with its need to “canvass the entire prior art” to find minor differences between the alleged anticipatory reference and the patented design, is equally difficult to apply in both Infringement and Anticipation contexts.
• Eliminating the Point of Novelty Test avoids the debate, for both Infringement and Anticipation, as to the “extent to which a combination of old design features can serve as a point of novelty under the point of novelty test.”

Application of the Ordinary Observer Test Here 

• The district court, relying on Contessa, held “that the law requires a court to consider only those portions of the product that are visible during normal use, regardless of whether those portions are visible during the point of sale.”
  • Contessa held that the infringement inquiry is not limited to those features visible at the time of sale. It instead applies to all features “visible at any time in the ‘normal use’ lifetime of the accused product.”
  • Here, the district court misconstrued Contessa: The point of sale of a clog occurs during party of its normal use lifetime, that is, post-manufacture and pre-destruction, and at that time the insole is visible to a potential purchaser. Furthermore, the insole is visible anytime the clog is removed from a wearer’s foot, and this too occurs during the “normal use” lifetime of the clog.
• Walgreens and Touchsport acknowledge that the district court’s interpretation of Contessa was erroneous, but constitutes merely Harmless Error for two reasons.
  • First, the insoles have only a minor effect on the overall appearance of a clog and “consumers buy shoes primarily for their exterior appearance.” The insoles would therefore contribute little to the overall shoe appearance from the perspective of an ordinary observer with knowledge in the art.
    • HELD, no. The alleged infringer must bear the burden of demonstrating, by clear and convincing evidence, that the patent is invalid. Here, Walgreens and Touchsport failed to provide sufficient evidence that consumers do not consider the insoles of shoes to be significant in their purchasing decisions.
  • Second, “the asserted differences between the insoles of the patents- -in-suit and the prior art ‘were at most slight variations of design elements already present in the Crocs prior art.’ ”
    • The dimpling patterns on the insoles: Crocs’ ‘789 patent contains a long, U-shaped dimpling pattern on the insole. In contrast, Seaways’ ‘263, ‘032, and ‘033 patents contain multiple short rows of dimples.
      • HELD: These difference cannot be deemed insignificant as a matter of law, therefore a genuine issue of material fact exists as to whether an ordinary observer, with knowledge of the prior art, would view the two designs as substantially similar.
    • Exterior features: Seaway argues that four exterior features—(1) the number and arrangement of the circular openings on the upper of the clog; (2) the number and position of the rectangular cut-outs in the lower portion of the upper of the clog; (3) the shape of the toe portion of the clog; and (4) the raised pattern of the outsole of the clog—common to all three of its ‘263, ‘032, and ‘033 patents, sufficiently differ from the prior art to bar granting summary judgment. The district court held that these differences were so minor that a reasonable jury, and an ordinary observer armed with knowledge of the prior art, would have to find that these variations were disclosed in Crocs’ ‘789 patent and that they do not change the overall impression of the shoe.
      • HELD: The Ordinary Observer Test does require consideration of the design as a whole, however a district court on summary judgment can determine that individual features would be so insignificant to an ordinary observer that they should not be considered in the overall comparison.
• Walgreens and Touchsport also argue that summary judgment should be affirmed because the patents-in-suit are invalid as Obvious under 35 USC §103. Although the district court did not consider this argument, Walgreens and Touchsport argue that it is a valid ground for appeal because it was raised below.
  • The district court’s Anticipation analysis was incomplete, and cannot be affirmed in its entirety, because it failed to compare the insoles of the patented designs to the prior art. That failure applies with equal force to a finding of Obviousness.