THE PTAB’S COMPREHENSIVE DESIGN PATENT ANALYSIS CANS THE FEDERAL CIRCUIT’S EARLIER RULING “Secondary Considerations” Carry the Day for Gamon and Terry Johnson against Campbell Soup

In an amazingly detailed and excellent analysis, the Patent Trial and Appeal Board, in two 77-page opinions (IPR2017-00091 and IPR2017-00094) rejected Campbell Soup’s challenge of two Gamon, Inc. design patents (D621,645 and D612,646, prepared and prosecuted by yours truly). Also to be congratulated is Terry Johnson, president of Gamon, Inc. and the main inventor of the challenged patents, whose doggedness has paid off (well, he still needs to collect total profit damages from Campbell, see the last paragraph of this blog).

The PTAB effectively neutered the Federal Circuit’s previous, highly questionable opinion in Campbell Soup Co. v. Gamon, Inc., 939 F.3d 1335 (2019), which I had previously written about in this space – see FEDERAL CIRCUIT KICKS THE CAMPBELL SOUP CAN DOWN THE ROAD.

Gamon’s two design patents were for the appearance of portions of a gravity-feed dispenser, specifically for soup cans. Both patents claimed the convex label area, and a cylindrical can at the bottom of the dispenser, ready for a consumer to take it. The two patents differed mainly in that the ‘646 patent claimed the “stops” or tabs that prevented a dispensed can from falling on the floor. The ‘645 patent did not claim the tabs. Since both decisions were in essence the same, I will refer to them as if they are one.

The main prior art reference relied upon by Campbell in its invalidity contentions based on obviousness was Linz (D405,622). Four secondary references were also relied upon.

In an earlier opinion, the PTAB in its obviousness analysis found Linz was not a proper primary or Rosen reference because, essentially, Linz did not disclose a can, and a can was claimed as part of Gamon’s design. The Federal Circuit on appeal was not impressed by the fact that Linz did not specifically disclose a can, and reversed the PTAB, saying: “Linz [was] for dispensing cans and … a can would be used in the system…. The parties do not dispute that Linz’s design is made to hold a cylindrical object in its display area.” There was a vigorous dissent by Judge Newman (who in my opinion knows design patent law better than her colleagues). She correctly stated: “… [T]he only claimed design elements are the label area and the cylindrical object ... the cylindrical object is a major design component. The absence from the primary reference of a major design component cannot be deemed insubstantial.” In my prior blog, I opined that the Court’s majority holding to be very disturbing, going against the weight of authority. The case was sent back to the PTAB, and the instant opinion resulted.

This time, the PTAB of course found that Linz was a proper Rosen reference, bowing to the Federal Circuit decision, as it must. And it also found that two secondary references were properly combined with Linz “to create a design that has the same overall visual appearance as the claimed design.”

Normally, that would end the analysis and Gamon’s claim would be found invalid for being obvious to a designer of ordinary skill. But Gamon, smartly, introduced a ton of so-called “secondary considerations” that swung the pendulum in its favor, away from a finding of obviousness.

One had a sense of where the decision was headed after the Board devoted six pages early in its opinion to describing the development of the design by Terry Johnson. It was an impressive recap, noting how Campbell Soup, Gamon’s customer, had bought $31 million of the gravity feed dispensers (dubbed “IQ Maximizer”), placed them in 2,800 stores, and touted the design to investors in its 2005 Annual Report: “[t]he strong performance of Campbell’s condensed soup business demonstrates the value of the IQ Maximizer, an innovative gravity-feed shelf system for merchandising soup…. making the soup aisle dramatically easier for consumers to shop.” Campbell’s 2006 Annual Report described the IQ Maximizer as now “available in 16,000 stores… [it] continues to be a powerful tool to merchandize Campbell’s condensed soups.” Campbell described the IQ Maximizer as a “tool to deliver impactful consumer messages at the point of purchase …. [and is] a breakthrough in soup merchandising.” The Board concluded the history lesson by noting that in late 2008, Campbell began purchasing gravity feed display racks from Petitioner Trinity, the manufacturer of the infringing racks, that “maintained the same ornamental design features as the Gamon racks.” This was the genesis of the current dispute. Gamon has sued Campbell for infringement in federal court, which stayed the proceedings while Campbell challenged Gamon’s patents.

The Board tellingly began its analysis by considering the “final Graham factor – objective indicia of nonobviousness.” Graham, of course, refers to the Supreme Court’s seminal decision Graham v. John Deere, 383 U.S. 1 (1966) that laid out four factors that must be taken into account in determining nonobviousness: (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the prior art and the claims at issue; and (4) secondary considerations. The latter factor, as stated by the Court in Graham, includes such things as commercial success, industry praise, copying by others, long felt need, and the like, that bear on whether the invention is nonobvious. The PTAB quoted the Federal Circuit from Apple v. Samsung:

“Indeed, evidence of secondary considerations may often be the most probative and cogent evidence in the record. It may often establish that an invention appearing to have been obvious in light of the prior art was not. It is to be considered as part of all the evidence, not just when the decision maker remains in doubt after reviewing the art.”

Significantly for Gamon, in connection with its anticipated recovery from Campbell of its total profit on sales (35 U.S.C. 289), the Board said that “Campbell’s internal documents and official public filings [are persuasive] that the claimed ornamental aspects of the commercial embodiment contributed to both the success of the sales of the display rack, and also to sales of soup cans displayed as part of the claimed design (emphasis added)”. This will factor into whether Gamon, in its suit against Campbell for infringement, can successfully claim Campbell’s total profit on sales of soup as damages under 35 U.S.C. 289, which will result in a very big number. Trinity, of course, will be liable to Gamon for its total profit on the sales of the dispensers, although it will have a “component” argument in view of the Supreme Court’s decision in Samsung v. Apple, which effectively allowed apportionment of total profit between a component of a product and the whole product.

The first hurdle for Gamon was to show the required “nexus” between the secondary considerations and the claimed design. A nexus is shown when there is a legally and factually sufficient connection between the evidence and the patented design. After taking into account that the most visible portions of the display rack when in use are the portions that are claimed, the Board concluded that the evidence of secondary considerations is the direct result of the unique characteristics of the claimed design, and therefore established nexus.

In discussing the secondary considerations, the Board found that the evidence established that the commercial success of Gamon’s display rack and an appreciable amount of Campbell’s increased soup sales from 2002-2009 is attributable to the claimed ornamental features of the patented design: “The final record establishes persuasively that the claimed ornamental design features, specifically the pronounced label area resembling the side of a can, as well as the cylindrical can lying on its side underneath the label area, attracted customers to the gravity feed display and allowed them to efficiently find and purchase soup products.” The Board said that the display “jumped out” and attracted soup customers.

The Board also noted that the proportionality [of the label area] in the claimed design was original and created a display that looked like a soup can, which contributed to the success of the patented display rack and also to increased soup sales. The Board found that Gamon’s ornamental design turned the soup can on its side, and that, as another secondary consideration (disbelief in the industry), the record demonstrated that Campbell originally believed that setting the can on its side would not work in commercial use, which the Board concluded indicated the originality of the design.

Suffice it to say, the evidence of commercial success was overwhelming, and the Board’s opinion is significant for that reason. It is the only case of which I am aware where a design patent – that otherwise would have been found obvious in view of the prior art – was “rescued” by secondary considerations. Rather than reciting further details of the opinion, I highly commend it to your reading. The PTAB, once again, has demonstrated a keen grasp of design patent law.

What will happen next? Campbell can further delay judgment day by appealing this decision to the Federal Circuit, but the evidence of secondary considerations is so great that it would have a difficult time getting the Board’s decision on obviousness reversed. Or the parties can trundle back to the district court which will lift its stay so that the infringement case can proceed, with Campbell perhaps raising other defenses (non-infringement is a non-issue). Or Campbell, after reviewing its potential damages liability by calculating its total profit on soup sales during the period in question, may come to the table to negotiate with Gamon. But profit on soup sales is such a large number that a settlement - especially given Campbell’s propensity to litigate - may be difficult to reach. And both Campbell and Trinity have had a tendency in this dispute to throw every roadblock they can in front of Gamon and Terry Johnson. Campbell should keep in mind that the can is a major visual component of the claimed design (besides the label, the rest of the dispenser is disclaimed) such that it would have a hard time, in this author’s opinion, avoiding a final judgment that it is liable for its total profit on soup sales.