Some readers may not
be familiar with Schedule A litigation in the United States. The two
leading scholars who write about it are Professors Sarah Fackrell and Eric
Goldman, whose work on the topic I recommend. Citing their work, however,
I did mention the phenomenon in my recent book Wrongful Patent
Assertion: A Comparative Law and Economics Analysis (Oxford Univ. Press 2026), where at page 103
n.160 I wrote that the majority of Schedule A cases
involve allegations of trademark or design patent
infringement, though some allege violations of copyrights or of utility
patents. The typical case involves an owner who files a complaint and a motion
for an ex parte temporary restraining order, often under seal, against
multiple, often foreign, defendants, who are identified in an accompanying list,
often referred to as “Schedule A.” The papers allege that the defendants are
offering allegedly infringing products for sale online. Over the past decade or
so, several U.S. judges have granted these motions, notwithstanding the
difficulties (especially in design and utility patent cases) of determining on
the basis of ex parte, preliminary evidence that the accused products infringe.
The orders are then forwarded to the online platforms on which the defendants
are offering merchandise for sale, after which the platforms typically make the
accused products,and sometimes all of a defendant’s products, unavailable,
sometimes for longer than the fourteen days that a temporary restraining order
is supposed to last. Judges also have issued asset-freezing orders, sometimes
in cases in which such orders are not permitted under U.S. law. . . . Given the
cost of litigation, the end result is often that defendants either settle or
default. Plaintiffs may voluntarily dismiss their claims against those who do
not settle or default, and those parties may be eligible for compensation in the
amount of the injunction bond; but they are not automatically awarded their
fees, and U.S. courts can be reluctant to award litigation sanctions.
Anyway, a
precedential decision handed down yesterday, Shenzhen Jisu Tech.
Co. v. The Entities and Individuals Identified in Annex A, is an
appeal from the dissolution of an earlier-granted preliminary injunction in one
such case (majority opinion by Judge Hughes, joined by Judge Prost; partial
dissent by Judge Stoll). The appellant Shenzhen owns U.S. Design Patent
No. D886,982, for a design for a foldable fan. Shenzhen asserted the
patent against several entities identified in a Schedule A and obtained a TRO;
but some of the defendants appeared to oppose converting the TRO into a
preliminary injunction, arguing that Shenzhen was unlikely to succeed on the
merits of proving infringement. The district court nevertheless granted
the preliminary injunction. The defendants thereafter moved for
reconsideration, pointing to the recent issuance to a third party of U.S.
Design Patent No. D1,046,104, for a foldable fan. Specifically, defendant
Zhouty argued that because novelty is a requirement for
patentability, the patent examiner must have concluded that the ’982 patent’s
design did not anticipate the ’104 patent’s design—otherwise, the ’104 patent
would not have issued. And, because the test for design patent infringement and
the test for anticipation are identical, the conclusion that the ’982 patent
does not anticipate the ’104 patent would suggest that products practicing the
’104 patent’s design do not infringe the ’982 patent. Together with the
representation that the ’104 patent protects the exact design of Zhouty’s
accused product, Zhouty argued that the ’104 patent’s issuance suggested there
is some material and patentable difference between the design of its accused
product and the design protected by the ’982 patent. Zhouty suggested that this
undermined the likelihood Shenzhen would succeed in its infringement action,
which in turn undercut its entitlement to a PI (pp. 4-5).
The district court
denied the motion for reconsideration, after which Shenzhen added some five
defendants to the litigation and moved for another TRO. The new
defendants appeared and made the same argument that Zhouty had made in its
motion for reconsideration. This time, the district court was persuaded,
and it dissolved the already-issued PI.
On appeal, Shenzhen
argues that collateral estoppel should have precluded the district court from
reconsidering the matter, but the Court of Appeals rejects that
argument to the ground that collateral estoppel does not apply to earlier,
nonfinal decisions within a continuing case (p.7). The court also rejects
the argument that the district court had applied a rule requiring the owner to
prove the invalidity of a relevant, later-issued patent; “[r]ather, we
understand the district court to have assessed the strength of Shenzhen’s
infringement claim via an analysis rooted in this court’s caselaw holding that
anticipation and infringement are the same inquiry for design patents”
(p.9). More specifically:
To assess the likelihood Shenzhen would succeed on its infringement
claim, the district court was required to preliminarily apply this court’s test
for design patent infringement—the ordinary observer test. This test asks
whether, “in the eye of an ordinary observer, giving such attention as a
purchaser usually gives, two designs are substantially the same.” Gorham,
81 U.S. at 528. As noted, the district court was correct when it observed that,
in the case of design patents, the test for anticipation and infringement are
the same. . . . Thus, if an ordinary observer would view two designs as
substantially the same, the later design is anticipated, and an accused product
practicing its design would infringe any patent claiming the earlier design.
See Peters v. Active Mfg. Co., 129 U.S. 530, 537 (1889) (“That which
infringes, if later, would anticipate, if earlier.”). By extension, when a
design patent issues over an earlier one, the presumption of patent validity suggests
that the later claimed design is not anticipated by—i.e., not substantially the
same as—the earlier patented design. . . . Indeed, by statute a patent is
presumed valid once issued, and included within that is a presumption that its
claimed design is novel and thus not obvious or anticipated. . . .
We see no abuse of discretion in the district court’s
application of these themes to the facts before it as an aid in estimating the likelihood
that Shenzhen would succeed in its claim for infringement. Because the accused
products were purported to be coextensive with the later-issued ’104 patent,
the district court was within its discretion to note that the ’104 patent’s
issuance may suggest that an ordinary observer would not find the accused
products substantially similar to the design claimed by Shenzhen’s ’982 patent
(p.10).
Judge Stoll dissents
on this last issue, writing that “the district court applied a shortcut to its analysis
by assuming that, because the relevant defendants asserted that their accused
product practices another, later-issued design patent (which is presumptively
valid), Shenzhen had failed to who a likelihood of infringement of its asserted
patent” (dissent p.3). Judge Stoll would vacate and remand for the lower
court to apply the three-way test “comparing the accused product, the patented
design, and the prior art” (id.).
