Hall v. Bed Bath & Beyond, Inc., No. 2011-1165 (Fed Cir., Jan. 25, 2013).

http://caselaw.findlaw.com/us-federal-circuit/1621161.html

In Hall v. Bed Bath & Beyond, Inc., No. 2011-1165 (Jan. 25, 2013), the Federal Circuit reversed the district court’s sua sponte dismissal of a complaint alleging design patent infringement and unfair competition.

After filing a design patent application for his “Tote Towel” products, plaintiff Hall presented the products, marked “patent pending,” to defendant Bed, Bath & Beyond (BB&B). BB&B declined to work with Hall and instead arranged to make and sell its own copies of Hall’s products, which BB&B then described as having “performance that lasts the useful lifetime of the towel.” Once Hall’s patent issued, Hall sued BB&B for design patent infringement and for unfair competition.

The district court dismissed Hall’s complaint, asserting that the design patent infringement claim should have included answers to questions such as: "What is it about Plaintiff's towel that he claims is `new, original and ornamental,' meriting the protection of a design patent? What aspects of the '439 Patent does the West Point Home Towel infringe? How does the West Point Home Towel infringe these aspects? And how have Defendants .. . infringed, contributed to infringement, or otherwise offended a provision of the patent laws?"

The district court also dismissed Hall’s unfair competition claims under the Lanham Act and state law, on the ground that the challenged statements relating to performance of the BB&B towel were nonactionable puffery, that Hall had not shown any injury and that Hall had not met the requirements for an action of misappropriation of an idea. The Federal Circuit reversed, with Judge Lourie dissenting.

On the design patent infringement claim, the Federal Circuit held that the pleading requirements for design patent infringement were readily met by Hall’s complaint, which identified the patent, showed the patented design, and described the accused towel as follows:

¶27. The Counterfeit Towel is virtually identical in design to the Tote Towel. It [has] the same shape and almost the same dimensions — 50" × 9." The Counterfeit Towel also features the Tote Towel's unique zippered compartments and hanging loop. In fact, the inseam of the Counterfeit Towel, from one pocket to the other, is exactly the same length as that of the Tote Towel.

The district court erred in requiring that the complaint identify "new, original, and ornamental" aspects of the design, because Egyptian Goddess negated the "point of novelty" requirement for design patents and Richardson v. Stanley Works confirmed that "[t]he ordinary observer test similarly applies in cases where the patented design incorporates numerous functional elements." The complaint allegations were sufficient, as they showed “plausible entitlement to relief.”

Hall’s unfair competition allegations were also found to state plausible claims. Since Hall asserted that the BB&B towel was damaged after a single washing, BB&B’s advertising that its towel has “performance that lasts the useful lifetime” is plausibly false either literally or by necessary implication. Hall also sufficiently pleaded possible injury to his business through the sale of inferior but confusingly similar product to Hall’s customers. The allegations regarding Hall’s good faith provision of a sample and BB&B’s acting thereafter to Hall’s detriment by using the sample to produce its own product also stated a claim under New York misappropriation law.

The Federal Circuit affirmed the dismissal of claims against the BB&B’s executives in their personal capacity, applying state-law requirements for piercing the corporate veil, and also affirmed the dismissal of BB&B’s counterclaims. BB&B’s Rule 11 counterclaim sought to impose sanctions for failure to conduct pre-suit claim construction; the Federal Circuit noted that neither claim construction nor prior art is required to be including in pleadings. BB&B’s false advertising counterclaim sought to challenge Hall’s statement to BB&B that his product was “protected by my patent” when at the time of the statement Hall only had a pending application. The Federal Circuit, noting that the product samples provided by Hall were appropriately marked “patent pending,” found Hall’s statement not to be even plausibly misleading. BB&B’s false marking counterclaim attempted to find Hall liable under the qui tam statute for continued marking of a product as “patent pending” after the patent issued. The Federal Circuit noted that the qui tam statute was not directed to such claims and also that BB&B did not plead any competitive injury.

In his dissent, Judge Lourie found the district court’s requirement that the patentee identify characteristic aspects of its design was not sufficiently faulty to justify vacating the dismissal. Further, because plaintiff declined to replead its claim after invitation by the district court, this amounted to waiver. Judge Lourie also considered BB&B’s “performance” statement to be mere puffery amounting to “an untestable tautology: the towel lasts as long as it lasts,” such that the Lanham Act §43(a) claim was properly dismissed.